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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Equinix, Inc. (REIT)    EQIX

EQUINIX, INC. (REIT)

(EQIX)
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Equinix REIT : INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

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02/21/2020 | 03:02pm EDT
The following commentary should be read in conjunction with the financial
statements and related notes contained elsewhere in this Annual Report on Form
10-K. The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. For example, the words "believes,"
"anticipates," "plans," "expects," "intends" and similar expressions are
intended to identify forward-looking statements. Our actual results and the
timing of certain events may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such a discrepancy
include, but are not limited to, those discussed in "Liquidity and Capital
Resources" and "Risk Factors" elsewhere in this Annual Report on Form 10-K. All
forward-looking statements in this document are based on information available
to us as of the date hereof and we assume no obligation to update any such
forward-looking statements.
Item 7 of this Form 10-K focuses on discussion of 2019 and 2018 items as well as
2019 results as compared to 2018 results. For the discussion of 2017 items and
2018 results as compared to 2017 results, please refer to Item 7 of our 2018
Form 10-K as filed with the SEC on February 22, 2019.
Our management's discussion and analysis of financial condition and results of
operations is intended to assist readers in understanding our financial
information from our management's perspective and is presented as follows:
• Overview


• Results of Operations

• Non-GAAP Financial Measures

• Liquidity and Capital Resources

• Contractual Obligations and Off-Balance-Sheet Arrangements

• Critical Accounting Policies and Estimates

• Recent Accounting Pronouncements

Overview

                   [[Image Removed: picture1overviewa05.jpg]]
Equinix provides a global, vendor-neutral data center, interconnection and edge
services platform with offerings that aim to enable our customers to reach
everywhere, interconnect everyone and integrate everything. Global enterprises,
service providers and business ecosystems of industry partners rely on Equinix
IBX data centers and expertise around the world for the safe housing of their
critical IT equipment and to protect and connect the world's most valued
information assets. They also look to Platform Equinix® for the ability to
directly and securely interconnect

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to the networks, clouds and content that enable today's information-driven
global digital economy. Recent Equinix IBX data center openings and
acquisitions, as well as xScale data center investments, have expanded our total
global footprint to 210 IBX and xScale data centers across 55 markets around the
world. Equinix offers the following solutions:
• premium data center colocation;


• interconnection and data exchange solutions;

• edge services for deploying networking, security and hardware; and

• remote expert support and professional services.



Our interconnected data centers around the world allow our customers to increase
information and application delivery performance to users, and quickly access
distributed IT infrastructures and business and digital ecosystems, while
significantly reducing costs. The Equinix global platform and the quality of our
IBX data centers, interconnection offerings and edge services have enabled us to
establish a critical mass of customers. As more customers choose Platform
Equinix, for bandwidth cost and performance reasons it benefits their suppliers
and business partners to colocate in the same data centers. This adjacency
creates a "network effect" that enables our customers to capture the full
economic and performance benefits of our offerings. These partners, in turn,
pull in their business partners, creating a "marketplace" for their services.
Our global platform enables scalable, reliable and cost-effective
interconnection that increases data traffic exchange while lowering overall cost
and increasing flexibility. Our focused business model is built on our critical
mass of enterprise and service provider customers and the resulting
"marketplace" effect. This global platform, combined with our strong financial
position, continues to drive new customer growth and bookings.
Historically, our market was served by large telecommunications carriers who
have bundled their products and services with their colocation offerings. The
data center market landscape has evolved to include private and vendor-neutral
multitenant data center providers, hyperscale cloud providers, managed
infrastructure and application hosting providers, and systems integrators. It is
estimated that Equinix is one of more than 1,200 companies that provide MTDC
offerings around the world. Each of these data center solutions providers can
bundle various colocation, interconnection and network offerings and outsourced
IT infrastructure solutions. We are able to offer our customers a global
platform that reaches 26 countries with the industry's largest and most active
ecosystem of partners in our sites, proven operational reliability, improved
application performance and a highly scalable set of offerings.
The cabinet utilization rate represents the percentage of cabinet space billed
versus total cabinet capacity, which is used to measure how efficiently we are
managing our cabinet capacity. Our cabinet utilization rate varies from market
to market among our IBX data centers across the Americas, EMEA and Asia-Pacific
regions. Our cabinet utilization rates were approximately 79% and 81%,
respectively, as of December 31, 2019 and 2018. Excluding the impact of our IBX
data center expansion projects that have opened during the last 12 months, our
cabinet utilization rate would have increased to approximately 82% as
of December 31, 2019. We continue to monitor the available capacity in each of
our selected markets. To the extent we have limited capacity available in a
given market, it may limit our ability for growth in that market. We perform
demand studies on an ongoing basis to determine if future expansion is warranted
in a market. In addition, power and cooling requirements for most customers are
growing on a per unit basis. As a result, customers are consuming an increasing
amount of power per cabinet. Although we generally do not control the amount of
power our customers draw from installed circuits, we have negotiated power
consumption limitations with certain high power-demand customers. This increased
power consumption has driven us to build out our new IBX data centers to support
power and cooling needs twice that of previous IBX data centers. We could face
power limitations in our IBX data centers, even though we may have additional
physical cabinet capacity available within a specific IBX data center. This
could have a negative impact on the available utilization capacity of a given
IBX data center, which could have a negative impact on our ability to grow
revenues, affecting our financial performance, operating results and cash flows.
In 2019, we closed our Joint Venture with GIC to develop and operate xScale data
centers to serve the needs of the growing hyperscale data center market,
including the world's largest cloud service providers. Upon closing, the Joint
Venture acquired certain data center facilities in Europe, with the opportunity
to add additional facilities to the Joint Venture in the future.
Strategically, we will continue to look at attractive opportunities to grow our
market share and selectively improve our footprint and offerings. As was the
case with our recent expansions and acquisitions, our expansion criteria will be
dependent on a number of factors, including but not limited to demand from new
and existing customers, quality of the design, power capacity, access to
networks, clouds and software partners, capacity availability in the current
market location, amount of incremental investment required by us in the targeted
property, automation capabilities, developer

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talent pool, lead-time to break even on a free cash flow basis and in-place
customers. Like our recent expansions and acquisitions, the right combination of
these factors may be attractive to us. Depending on the circumstances, these
transactions may require additional capital expenditures funded by upfront cash
payments or through long-term financing arrangements in order to bring these
properties up to Equinix standards. Property expansion may be in the form of
purchases of real property, long-term leasing arrangements or acquisitions.
Future purchases, construction or acquisitions may be completed by us or with
partners or potential customers to minimize the outlay of cash, which can be
significant.
Revenue:
                  [[Image Removed: picture2recurringa04.jpg]]
Our business is based on a recurring revenue model comprised of colocation and
related interconnection and managed infrastructure offerings. We consider these
offerings recurring because our customers are generally billed on a fixed and
recurring basis each month for the duration of their contract, which is
generally one to three years in length. Our recurring revenues have comprised
more than 90% of our total revenues during the past three years. In addition,
during the past three years, more than 80% of our monthly recurring revenue
bookings came from existing customers, contributing to our revenue growth. Our
largest customer accounted for approximately 3% of our recurring revenues for
the years ended December 31, 2019, 2018 and 2017. Our 50 largest customers
accounted for approximately 39%, 38% and 37%, respectively, of our recurring
revenues for the years ended December 31, 2019, 2018 and 2017.
Our non-recurring revenues are primarily comprised of installation services
related to a customer's initial deployment and professional services we perform.
These services are considered to be non-recurring because they are billed
typically once, upon completion of the installation or the professional services
work performed. The majority of these non-recurring revenues are typically
billed on the first invoice distributed to the customer in connection with their
initial installation. However, revenues from installation services are deferred
and recognized ratably over the period of the contract term. Additionally,
revenue from contract settlements, when a customer wishes to terminate their
contract early, is generally treated as a contract modification and recognized
ratably over the remaining term of the contract, if any. As a percentage of
total revenues, we expect non-recurring revenues to represent less than 10% of
total revenues for the foreseeable future.
Operating Expenses:
Cost of Revenues. The largest components of our cost of revenues are
depreciation, rental payments related to our leased IBX data centers, utility
costs, including electricity, bandwidth access, IBX data center employees'
salaries and benefits, including stock-based compensation, repairs and
maintenance, supplies and equipment and security. A majority of our cost of
revenues is fixed in nature and should not vary significantly from period to
period, unless we expand our existing IBX data centers or open or acquire new
IBX data centers. However, there are certain costs that are considered more
variable in nature, including utilities and supplies that are directly related
to growth in our existing and new customer base. We expect the cost of our
utilities, specifically electricity, will generally increase in the future on a
per-unit or fixed basis, in addition to the variable increase related to the
growth in consumption by our customers. In addition, the cost of electricity is
generally higher in the summer months, as compared to other times of the year.
To the extent we incur increased utility costs, such increased costs could
materially impact our financial condition, results of operations and cash flows.
Furthermore, to the extent we incur increased electricity or other costs as a
result of either climate change policies or the physical effects of climate
change, such increased costs could materially impact our financial condition,
results of operations and cash flows.

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Sales and Marketing. Our sales and marketing expenses consist primarily of
compensation and related costs for sales and marketing personnel, including
stock-based compensation, amortization of contract costs, marketing programs,
public relations, promotional materials and travel, as well as bad debt expense
and amortization of customer relationship intangible assets.
General and Administrative. Our general and administrative expenses consist
primarily of salaries and related expenses, including stock-based compensation,
accounting, legal and other professional service fees, and other general
corporate expenses, such as our corporate regional headquarters office leases
and some depreciation expense on back office systems.
Taxation as a REIT
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning
with our 2015 taxable year. As of December 31, 2019, our REIT structure included
all of our data center operations in the U.S., Canada, Japan, Singapore and the
data center operations in EMEA with the exception of Bulgaria, the United Arab
Emirates, and the data center operations outside Amsterdam in the Netherlands.
Our data center operations in other jurisdictions are operated as TRSs. We
included our interest in the Joint Venture in our REIT structure.
As a REIT, we generally are permitted to deduct from our U.S. taxable income the
dividends we pay to our stockholders. The income represented by such dividends
is not subject to U.S. federal income taxes at the entity level but is taxed, if
at all, at the stockholder level. Nevertheless, the income of our TRSs which
hold our U.S. operations that may not be REIT compliant is subject to U.S.
corporate federal and state income taxes, as applicable. Likewise, our foreign
subsidiaries continue to be subject to foreign income taxes in jurisdictions in
which they hold assets or conduct operations, regardless of whether held or
conducted through TRSs or through QRSs. We are also subject to a separate U.S.
federal corporate income tax on any gain recognized from a sale of a REIT asset
where our basis in the asset is determined by reference to the basis of the
asset in the hands of a C corporation (such as an asset held by us or a QRS
following the liquidation or other conversion of a former TRS). This
built-in-gains tax is generally applicable to any disposition of such an asset
during the five-year period after the date we first owned the asset as a REIT
asset to the extent of the built-in-gain based on the fair market value of such
asset on the date we first held the asset as a REIT asset. If we fail to remain
qualified for U.S. federal income taxation as a REIT, we will be subject to U.S.
federal income taxes at regular corporate income tax rates. Even if we remain
qualified for U.S. federal income taxation as a REIT, we may be subject to some
federal, state, local and foreign taxes on our income and property in addition
to taxes owed with respect to our TRSs' operations. In particular, while state
income tax regimes often parallel the U.S. federal income tax regime for REITs,
many states do not completely follow federal rules, and some may not follow them
at all.
We continue to monitor our REIT compliance in order to maintain our
qualification for U.S. federal income taxation as a REIT. For this and other
reasons, as necessary, we may convert some of our data center operations in
other countries into the REIT structure in future periods. We converted our data
center operations in Singapore into the REIT structure effective September 30,
2019.
On each of March 20, June 19, September 18, and December 11, 2019, we paid
quarterly cash dividends of $2.46 per share. We expect these quarterly and other
applicable distributions to equal or exceed the REIT taxable income that we
recognized in 2019.
2019 Highlights:
•      In March, we issued and sold 2,985,575 shares of common stock for net

proceeds of approximately $1,213.4 million, after underwriting discounts,

commissions and offering expenses. See Note 12 within the Consolidated

       Financial Statements.


•      In April, we completed the acquisition of Switch Datacenters' AMS1 data
       center business in Amsterdam, Netherlands (the "AM11 data center"), for a

cash purchase price of approximately €30.6 million, or approximately $34.3

million. See Note 3 within the Consolidated Financial Statements.

• In October, we closed our Joint Venture with GIC to develop and operate

xScale data centers in Europe. Upon closing, we sold certain data center

facilities in Europe to the Joint Venture. See Note 5 and Note 6 within

       the Consolidated Financial Statements.


•      In November, we issued $2.8 billion in Senior Notes due 2024, 2026 and
       2029 with a weighted average interest rate of 2.93% and redeemed $1.9

billion in Senior Notes due 2022, 2023 and 2025 with a weighted average

interest rate of 5.47% in November and December 2019. See Note 11 within

       the Consolidated Financial Statements.



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• By the end of December, we had sold 903,555 shares of our common stock for

approximately $447.7 million in proceeds, net of payment of commissions

       and other offering expenses, under our current ATM program. See Note 12
       within the Consolidated Financial Statements.


Results of Operations
Our results of operations for the year ended December 31, 2019 include the
results of operations from the acquisition of the AM11 data center from April
18, 2019 within the EMEA region. Our results of operations for the year ended
December 31, 2018 include the results of operations from the acquisition of
Metronode from April 18, 2018 within the Asia-Pacific region and the acquisition
of Infomart Dallas from April 2, 2018 within the Americas region.
Our results of operations for the year ended December 31, 2019 reflect the
adoption of Topic 842, Leases, while the comparative information has not been
restated and continues to be reported under the lease accounting standard in
effect for those periods. See Note 1 within the Consolidated Financial
Statements for further discussion.
In order to provide a framework for assessing our performance excluding the
impact of foreign currency fluctuations, we supplement the year-over-year actual
change in operating results with comparative changes on a constant currency
basis. Presenting constant currency results of operations is a non-GAAP
financial measure. See "Non-GAAP Financial Measures" below for further
discussion.
Years ended December 31, 2019 and 2018
Revenues.  Our revenues for the years ended December 31, 2019 and 2018 were
generated from the following revenue classifications and geographic regions
(dollars in thousands):
                               Years Ended December 31,                     % Change
                           2019        %         2018        %     Actual   Constant Currency
Americas:
Recurring revenues     $ 2,456,368    44%    $ 2,357,326    46%      4%            5%

Non-recurring revenues 131,359 3% 127,408 3% 3%

       4%
                         2,587,727    47%      2,484,734    49%      4%            5%
EMEA:
Recurring revenues       1,680,746    30%      1,467,492    29%     15%            12%

Non-recurring revenues 125,698 2% 95,145 2% 32%

       39%
                         1,806,444    32%      1,562,637    31%     16%            14%
Asia-Pacific:
Recurring revenues       1,101,072    20%        951,684    19%     16%            17%

Non-recurring revenues 66,897 1% 72,599 1% (8)%

      (6)%
                         1,167,969    21%      1,024,283    20%     14%            16%
Total:
Recurring revenues       5,238,186    94%      4,776,502    94%     10%            10%

Non-recurring revenues 323,954 6% 295,152 6% 10%

       13%
                       $ 5,562,140    100%   $ 5,071,654    100%    10%            10%



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                                    Revenues
                             (dollars in thousands)

[[Image Removed: chart-b8073a27e85a7680e77.jpg]][[Image Removed: chart-c3df643c625c3f0469a.jpg]][[Image Removed: chart-12b091f7f943c177459.jpg]]

                        [[Image Removed: capture1.jpg]]
Americas Revenues. During the year ended December 31, 2019, Americas revenue
increased by 4% (5% on a constant currency basis). Growth in Americas revenues
was primarily due to:
•      approximately $10.6 million of incremental revenues from the Infomart

Dallas acquisition;

$52.6 million of incremental revenues generated from our recently-opened

IBX data centers or IBX data center expansions; and

• an increase in orders from both our existing customers and new customers

during the period.



EMEA Revenues.  During the year ended December 31, 2019, EMEA revenue increased
by 16% (14% on a constant currency basis). Growth in EMEA revenues was primarily
due to:
•      approximately $76.0 million of incremental revenues generated from our
       recently-opened IBX data centers or IBX data center expansions;

• an increase in orders from both our existing customers and new customers

       during the period; and


•      a net increase of $110.6 million of realized cash flow hedge gains from
       foreign currency forward contracts.


Asia-Pacific Revenues.  During the year ended December 31, 2019, Asia-Pacific
revenue increased by 14% (16% on a constant currency basis). Growth in
Asia-Pacific revenue was primarily due to:
•      approximately $16.6 million of incremental revenues from the Metronode
       acquisition;


•      approximately $35.4 million of incremental revenues generated from our
       recently-opened IBX data centers or IBX data center expansions; and

• an increase in orders from both our existing customers and new customers

       during the period.



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Cost of Revenues. Our cost of revenues for the years ended December 31, 2019 and 2018 were split among the following geographic regions (dollars in thousands):

                     Years Ended December 31,                     % Change
                 2019        %         2018        %     Actual   Constant Currency
Americas     $ 1,146,639    41%    $ 1,113,854    43%      3%            4%
EMEA           1,017,580    36%        916,751    35%     11%            12%
Asia-Pacific     645,965    23%        574,870    22%     12%            14%
Total        $ 2,810,184    100%   $ 2,605,475    100%     8%            9%


                                Cost of Revenues
    (dollars in thousands; percentages indicate expenses as a percentage of
                                   revenues)
[[Image Removed: chart-9e2b1bce652f89a8ee7a10.jpg]][[Image Removed: chart-1e4cc6a3f45c4362g08.jpg]][[Image Removed: chart-ee03119452bf33beef0a10.jpg]]
Americas Cost of Revenues. During the year ended December 31, 2019, Americas
cost of revenues increased by 3% (4% on a constant currency basis). The increase
in our Americas cost of revenues was primarily due to:
•      $11.3 million of higher utilities costs driven by IBX data center

expansions, increased utility usage and utility price increases;

$10.0 million of higher bandwidth costs in support of our business growth;


•      approximately $9.9 million of incremental cost of revenues from the
       Infomart Dallas acquisition;

$8.6 million of higher compensation costs, including salaries, bonuses,

and stock-based compensation; and

$7.2 million of higher depreciation expense primarily due to IBX expansion

activity.

This increase was partially offset by: • $8.9 million of reduced property tax expenses, primarily due to accrual

releases based on tax appeal settlements; and

$6.9 million of reduced office expenses.



EMEA Cost of Revenues. During the year ended December 31, 2019, EMEA cost of
revenues increased by 11% (12% on a constant currency basis). The increase in
our EMEA cost of revenues was primarily due to:
•      a net increase of $40.6 million of realized cash flow hedge losses from
       foreign currency forward contracts;

$30.5 million of higher utilities costs driven by increased utility usage

       to support IBX data center expansions and utility price increases,
       primarily in Germany, the Netherlands and the United Kingdom;

$21.3 million of higher costs from increased equipment resale activities,

       primarily in Germany and the United Kingdom;



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$7.9 million of higher depreciation expenses driven by IBX data center

expansions in London, Frankfurt and Amsterdam; and

$7.2 million of higher compensation costs, including salaries, bonuses,

stock-based compensation and headcount growth.



This increase was partially offset by:
• $5.9 million of reduced outside services consulting expenses.


Asia-Pacific Cost of Revenues. During the year ended December 31, 2019, Asia-Pacific cost of revenues increased by 12% (14% on a constant currency basis). The increase in our Asia-Pacific cost of revenues was primarily due to: • $45.3 million of higher rent and facility costs and utilities costs,

primarily driven by expansions and higher utility usage in Hong Kong,

Singapore, Australia and Japan;

$20.5 million of higher depreciation expense, primarily from IBX data

center expansions in Singapore, Japan, Australia and Hong Kong;

• approximately $11.2 million of incremental cost of revenues from the

Metronode acquisition; and

$4.3 million of higher outside services consulting expenses.

This increase was partially offset by: • $12.8 million of reduced costs due to lower equipment resale activities in

the current period as compared to the prior year.

We expect Americas, EMEA and Asia-Pacific cost of revenues to increase as we continue to grow our business, including from the impact of acquisitions.

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Sales and Marketing Expenses. Our sales and marketing expenses for the years ended December 31, 2019 and 2018 were split among the following geographic regions (dollars in thousands):

                   Years ended December 31,                   % Change
                2019       %        2018       %     Actual   Constant Currency
Americas     $ 401,034    62%    $ 391,386    62%      2%            3%
EMEA           157,718    24%      152,336    24%      4%            4%
Asia-Pacific    92,294    14%       89,980    14%      3%            4%
Total        $ 651,046    100%   $ 633,702    100%     3%            3%


                          Sales and Marketing Expenses
    (dollars in thousands; percentages indicate expenses as a percentage of
                                   revenues)
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Americas Sales and Marketing Expenses. During the year ended December 31, 2019,
Americas sales and marketing expenses increased by 2% (3% on a constant currency
basis). The increase in our Americas sales and marketing expenses was primarily
due to:
•      $7.4 million of higher compensation costs, including sales compensation,

salaries and stock-based compensation and headcount growth; and

$3.7 million of higher travel and entertainment expenses.



EMEA Sales and Marketing Expenses. During the year ended December 31, 2019, EMEA
sales and marketing increased by 4% (and also 4% on a constant currency basis).
The increase in our EMEA sales and marketing expenses was primarily due to:
•      a net increase of $7.2 million of realized cash flow hedge losses from
       foreign currency forward contracts; and

$5.6 million increase in compensation costs, including sales compensation,

salaries and stock-based compensation and headcount growth.

This increase was partially offset by: • $6.2 million of reduced amortization expense driven by certain intangibles

being fully amortized in the current year.



Asia-Pacific Sales and Marketing Expenses. Our Asia-Pacific sales and marketing
expense did not materially change during the year ended December 31, 2019 as
compared to the year ended December 31, 2018.

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We anticipate that we will continue to invest in Americas, EMEA and Asia-Pacific
sales and marketing initiatives and expect our Americas, EMEA and Asia-Pacific
sales and marketing expenses to increase as we grow our business. Additionally,
given that certain global sales and marketing functions are located within the
U.S., we expect Americas sales and marketing expenses as a percentage of
revenues to be higher than our other regions.
General and Administrative Expenses. Our general and administrative expenses for
the years ended December 31, 2019 and 2018 were split among the following
geographic regions (dollars in thousands):
                   Years Ended December 31,                   % Change
                2019       %        2018       %     Actual   Constant Currency
Americas     $ 641,261    69%    $ 554,169    67%     16%            16%
EMEA           198,892    21%      184,364    22%      8%            7%
Asia-Pacific    94,865    10%       88,161    11%      8%            9%
Total        $ 935,018    100%   $ 826,694    100%    13%            13%

                      General and Administrative Expenses
    (dollars in thousands; percentages indicate expenses as a percentage of
                                   revenues)
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Americas General and Administrative Expenses. During the year ended December 31,
2019, Americas general and administrative expenses increased by 16% (and also
16% on a constant currency basis). The increase in our Americas general and
administrative expenses was primarily due to:
•      $51.1 million of higher compensation costs, including salaries, bonuses,
       stock-based compensation, and headcount growth;


•      $22.3 million of higher depreciation expense associated with the

implementation of certain systems to support the integration and growth of

our business; and

$10.7 million of higher consulting expenses in support of our business growth.



EMEA General and Administrative Expenses. During the year ended December 31,
2019, EMEA general and administrative expenses increased by 8% (7% on a constant
currency basis). The increase in our EMEA general and administrative expenses
was primarily due to:
•      a net increase of $8.8 million of realized cash flow hedge losses from
       foreign currency forward contracts; and

$3.9 million of higher compensation costs, including salaries, bonuses,

       stock-based compensation and headcount growth.



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Asia-Pacific General and Administrative Expenses. During the year ended
December 31, 2019, Asia-Pacific general and administrative expenses increased by
8% (9% on a constant currency basis). The increase in our Asia-Pacific general
and administrative expense was primarily due to:
•      $3.8 million of higher compensation costs, including salaries, bonuses,

stock-based compensation and headcount growth.



Going forward, although we are carefully monitoring our spending, we expect
Americas, EMEA and Asia-Pacific general and administrative expenses to increase
as we continue to further scale our operations to support our growth, including
investments in our back office systems and investments to maintain our
qualification for taxation as a REIT and to integrate recent acquisitions.
Additionally, given that our corporate headquarters is located within the U.S.,
we expect Americas general and administrative expenses as a percentage of
revenues to be higher than our other regions.
Transaction Costs.  During the year ended December 31, 2019, we recorded
transaction costs totaling $24.8 million primarily related to costs incurred in
connection with the formation of the new Joint Venture in the EMEA region.
During the year ended December 31, 2018, we recorded transaction costs totaling
$34.4 million, primarily in the Asia-Pacific and Americas regions, due to our
acquisitions of Metronode and Infomart Dallas.
Impairment Charges.  During the year ended December 31, 2019, we recorded
impairment charges totaling $15.8 million in the Americas region primarily as a
result of the fair value adjustment for the New York 12 ("NY12") data center,
which was classified as a held for sale asset before it was sold in October
2019. We did not have impairment charges during the year ended December 31,
2018.
Gain on Asset Sales. During the year ended December 31, 2019, we recorded a gain
on asset sales of $44.3 million primarily relating to the sale of both
the London 10 and Paris 8 data centers, as well as certain construction
development and leases in London and Frankfurt, as part of the closing of the
Joint Venture. During the year ended December 31, 2018, we recorded gain on
asset sales of $6.0 million primarily relating to the sale of a data center in
Frankfurt.
Income from Operations. Our income from operations for the years ended
December 31, 2019 and 2018 was split among the following geographic regions
(dollars in thousands):
                    Years Ended December 31,                    % Change
                 2019        %        2018       %     Actual   Constant Currency
Americas     $   413,936    35%    $ 412,610    42%      -%            1%
EMEA             421,786    36%      312,163    32%     35%            24%
Asia-Pacific     333,909    29%      252,610    26%     32%            35%
Total        $ 1,169,631    100%   $ 977,383    100%    20%            17%


Americas Income from Operations. Our Americas income from operations did not
materially change during the year ended December 31, 2019 as compared to the
year ended December 31, 2018.
EMEA Income from Operations. During the year ended December 31, 2019, EMEA
income from operations increased by 35% (24% on a constant currency basis). The
increase in our EMEA income from operations was primarily due to higher revenues
as a result of our IBX data center expansion activity and organic growth, as
described above, as well as lower operating expenses as a percentage of
revenues.
Asia-Pacific Income from Operations. During the year ended December 31, 2019,
Asia-Pacific income from operations increased by 32% (35% on a constant currency
basis). The increase in our Asia-Pacific income from operations was primarily
due to higher revenues as a result of our IBX data center expansion activity,
acquisition and organic growth as described above, lower operating expenses as a
percentage of revenues and lower transaction costs in the current period as
compared to the prior year.
Interest Income. Interest income was $27.7 million and $14.5 million for the
years ended December 31, 2019 and 2018, respectively. The average yield for the
year ended December 31, 2019 was 1.85% versus 1.24% for the year ended
December 31, 2018.
Interest Expense.  Interest expense decreased to $479.7 million for the year
ended December 31, 2019 from $521.5 million for the year ended December 31,
2018, primarily attributable to the reduction in lease interest expense

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due to the conversion of certain build-to-suit leases to operating leases upon
the adoption of ASC 842 and the utilization of cross-currency interest rate
swaps in 2019. During the years ended December 31, 2019 and 2018, we capitalized
$32.2 million and $19.9 million, respectively, of interest expense to
construction in progress.
Other Income. We recorded net other income of $27.8 million and $14.0 million
for the years ended December 31, 2019 and 2018, respectively. Other income is
primarily comprised of foreign currency exchange gains and losses during the
periods.
Loss on Debt Extinguishment. During the year ended December 31, 2019, the
Company recorded $52.8 million of loss on debt extinguishment primarily related
to the loss on debt extinguishment from the redemption of the Senior Notes due
2022, 2023 and 2025.
During the year ended December 31, 2018, the Company recorded $51.4 million of
loss on debt extinguishment comprised of:
•      $17.1 million of loss on debt extinguishment as a result of amendments to
       leases impacting the related financing obligations;


•      $19.5 million of loss on debt extinguishment from the settlement of

financing obligations as a result of the Infomart Dallas acquisition;

$12.6 million of loss on debt extinguishment as a result of the settlement

of financing obligations for properties purchased; and

$2.2 million of loss on debt extinguishment as a result of the redemption

of the Japanese Yen Term Loan.



Income Taxes. We operate as a REIT for U.S. federal income tax purposes. As a
REIT, we are generally not subject to U.S. federal and state income taxes on our
taxable income distributed to stockholders. We intend to distribute or have
distributed the entire taxable income generated by the operations of our REIT
and QRSs for the tax years ended December 31, 2019 and 2018, respectively. As
such, other than tax attributable to built-in-gains recognized and withholding
taxes, no provision for U.S. federal income taxes for the REIT and QRSs has been
included in the accompanying consolidated financial statements for the years
ended December 31, 2019 and 2018.
We have made TRS elections for some of our subsidiaries in and outside the U.S.
In general, a TRS may provide services that would otherwise be considered
impermissible for REITs to provide and may hold assets that may not be REIT
compliant.
U.S. federal income taxes for the TRS entities located in the U.S. and foreign
income taxes for our foreign operations regardless of whether the foreign
operations are operated as QRSs or TRSs have been accrued, as necessary, for the
years ended December 31, 2019 and 2018.
For the years ended December 31, 2019 and 2018, we recorded $185.4 million and
$67.7 million of income tax expenses, respectively. Our effective tax rates were
26.8% and 15.6%, respectively, for the years ended December 31, 2019 and 2018.
The higher effective tax rate in 2019 as compared to 2018 is primarily due to a
release of valuation allowance in 2018 as a result of a legal entity
reorganization in our Americas region.
Adjusted EBITDA. Adjusted EBITDA is a key factor in how we assess the operating
performance of our segments and develop regional growth strategies such as IBX
data center expansion decisions. We define adjusted EBITDA as income or loss
from operations excluding depreciation, amortization, accretion, stock-based
compensation expense, restructuring charges, impairment charges, transaction
costs and gain on asset sales. See "Non-GAAP Financial Measures" below for more
information about adjusted EBITDA and a reconciliation of adjusted EBITDA to
income or loss from operations. Our adjusted EBITDA for the years ended
December 31, 2019 and 2018 was split among the following geographic regions
(dollars in thousands):
                      Years Ended December 31,                       % Change
                 2019         %         2018         %     Actual     Constant Currency
Americas     $ 1,237,622     46 %   $ 1,183,831     49 %       5 %              5 %
EMEA             827,980     31 %       698,280     29 %      19 %             17 %
Asia-Pacific     622,125     23 %       531,129     22 %      17 %             19 %
Total        $ 2,687,727    100 %   $ 2,413,240    100 %      11 %             12 %



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Americas Adjusted EBITDA. During the year ended December 31, 2019, Americas
adjusted EBITDA increased by 5% (and also 5% on a constant currency basis). The
increase in our Americas adjusted EBITDA was primarily due to higher revenues as
a result of our IBX data center expansion activity, acquisition and organic
growth as described above.
EMEA Adjusted EBITDA. During the year ended December 31, 2019, EMEA adjusted
EBITDA increased by 19% (17% on a constant currency basis). The increase in our
EMEA adjusted EBITDA was primarily due to higher revenues as a result of our IBX
data center expansion activity and organic growth, as described above, as well
as lower operating expenses as a percentage of revenues.
Asia-Pacific Adjusted EBITDA. During the year ended December 31, 2019,
Asia-Pacific adjusted EBITDA increased by 17% (19% on a constant currency
basis). The increase in our Asia-Pacific adjusted EBITDA was primarily due to
higher revenues as a result of our IBX data center expansion activity,
acquisition and organic growth as described above and lower operating expenses
as a percentage of revenues.
Non-GAAP Financial Measures
We provide all information required in accordance with GAAP, but we believe that
evaluating our ongoing operating results may be difficult if limited to
reviewing only GAAP financial measures. Accordingly, we use non-GAAP financial
measures to evaluate our operations.
Non-GAAP financial measures are not a substitute for financial information
prepared in accordance with GAAP. Non-GAAP financial measures should not be
considered in isolation, but should be considered together with the most
directly comparable GAAP financial measures and the reconciliation of the
non-GAAP financial measures to the most directly comparable GAAP financial
measures. We have presented such non-GAAP financial measures to provide
investors with an additional tool to evaluate our operating results in a manner
that focuses on what management believes to be our core, ongoing business
operations. We believe that the inclusion of these non-GAAP financial measures
provides consistency and comparability with past reports and provides a better
understanding of the overall performance of the business and ability to perform
in subsequent periods. We believe that if we did not provide such non-GAAP
financial information, investors would not have all the necessary data to
analyze Equinix effectively.
Investors should note that the non-GAAP financial measures used by us may not be
the same non-GAAP financial measures, and may not be calculated in the same
manner, as those of other companies. Investors should therefore exercise caution
when comparing non-GAAP financial measures used by us to similarly titled
non-GAAP financial measures of other companies.
Our primary non-GAAP financial measures, adjusted EBITDA and adjusted funds from
operations ("AFFO"), exclude depreciation expense as these charges primarily
relate to the initial construction costs of our IBX data centers and do not
reflect our current or future cash spending levels to support our business. Our
IBX data centers are long-lived assets and have an economic life greater than 10
years. The construction costs of an IBX data center do not recur with respect to
such data center, although we may incur initial construction costs in future
periods with respect to additional IBX data centers, and future capital
expenditures remain minor relative to our initial investment. This is a trend we
expect to continue. In addition, depreciation is also based on the estimated
useful lives of our IBX data centers. These estimates could vary from actual
performance of the asset, are based on historical costs incurred to build out
our IBX data centers and are not indicative of current or expected future
capital expenditures. Therefore, we exclude depreciation from our operating
results when evaluating our operations.

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In addition, in presenting adjusted EBITDA and AFFO, we exclude amortization
expense related to acquired intangible assets. Amortization expense is
significantly affected by the timing and magnitude of our acquisitions and these
charges may vary in amount from period to period. We exclude amortization
expense to facilitate a more meaningful evaluation of our current operating
performance and comparisons to our prior periods. We exclude accretion expense,
both as it relates to asset retirement obligations as well as accrued
restructuring charge liabilities, as these expenses represent costs which we
believe are not meaningful in evaluating our current operations. We exclude
stock-based compensation expense, as it can vary significantly from period to
period based on share price, the timing, size and nature of equity awards. As
such, we, and many investors and analysts, exclude stock-based compensation
expense to compare our operating results with those of other companies. We also
exclude restructuring charges. The restructuring charges relate to our decisions
to exit leases for excess space adjacent to several of our IBX data centers,
which we did not intend to build out, or our decision to reverse such
restructuring charges. We also exclude impairment charges related to certain
long-lived assets. The impairment charges are related to expense recognized
whenever events or changes in circumstances indicate that the carrying amount of
long-lived assets are not recoverable. We also exclude gain or loss on asset
sales as it represents profit or loss that is not meaningful in evaluating the
current or future operating performance. Finally, we exclude transaction costs
from AFFO and adjusted EBITDA to allow more comparable comparisons of our
financial results to our historical operations. The transaction costs relate to
costs we incur in connection with business combinations and the formation of
joint ventures, including advisory, legal, accounting, valuation, and other
professional or consulting fees. Such charges generally are not relevant to
assessing the long-term performance of the company. In addition, the frequency
and amount of such charges vary significantly based on the size and timing of
the transactions. Management believes items such as restructuring charges,
impairment charges, gain or loss on asset sales and transaction costs are
non-core transactions; however, these types of costs may occur in future
periods.
Adjusted EBITDA
We define adjusted EBITDA as income from operations excluding depreciation,
amortization, accretion, stock-based compensation expense, restructuring
charges, impairment charges, transaction costs, and gain on asset sales as
presented below (in thousands):
                                                            Years Ended December 31,
                                                      2019            2018            2017
Income from operations                            $ 1,169,631$   977,383$   809,014
Depreciation, amortization, and accretion expense   1,285,296       1,226,741       1,028,892
Stock-based compensation expense                      236,539         180,716         175,500
Transaction costs                                      24,781          34,413          38,635
Impairment charges                                     15,790               -               -
Gain on asset sales                                   (44,310 )        (6,013 )             -
Adjusted EBITDA                                   $ 2,687,727$ 2,413,240$ 2,052,041


Our adjusted EBITDA results have improved each year and in each region in total
dollars due to the improved operating results discussed earlier in "Results of
Operations", as well as the nature of our business model consisting of a
recurring revenue stream and a cost structure which has a large base that is
fixed in nature also discussed earlier in "Overview".
Funds from Operations ("FFO") and AFFO
We use FFO and AFFO, which are non-GAAP financial measures commonly used in the
REIT industry. FFO is calculated in accordance with the standards established by
the National Association of Real Estate Investment Trusts. FFO represents net
income (loss), excluding gain (loss) from the disposition of real estate assets,
depreciation and amortization on real estate assets and adjustments for
unconsolidated joint ventures' and non-controlling interests' share of these
items.
In presenting AFFO, we exclude certain items that we believe are not good
indicators of our current or future operating performance. AFFO represents FFO
excluding depreciation and amortization expense on non-real estate assets,
accretion, stock-based compensation, restructuring charges, impairment charges,
transaction costs, an installation revenue adjustment, a straight-line rent
expense adjustment, a contract cost adjustment, amortization of deferred
financing costs and debt discounts and premiums, gain (loss) on debt
extinguishment, an income tax expense adjustment, recurring capital
expenditures, net income (loss) from discontinued operations, net of tax, and
adjustments

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from FFO to AFFO for unconsolidated joint ventures' and noncontrolling
interests' share of these items. The adjustments for installation revenue,
straight-line rent expense and contract costs are intended to isolate the cash
activity included within the straight-lined or amortized results in the
consolidated statement of operations. We exclude the amortization of deferred
financing costs and debt discounts and premiums as these expenses relate to the
initial costs incurred in connection with debt financings that have no current
or future cash obligations. We exclude gain (loss) on debt extinguishment since
it generally represents the write-off of initial costs incurred in connection
with debt financings or a cost that is incurred to reduce future interest costs
and is not a good indicator of our current or future operating performance. We
include an income tax expense adjustment, which represents the non-cash tax
impact due to changes in valuation allowances, uncertain tax positions and
deferred taxes that do not relate to current period's operations. We deduct
recurring capital expenditures, which represent expenditures to extend the
useful life of its IBX data centers or other assets that are required to support
current revenues. We also exclude net income (loss) from discontinued
operations, net of tax, which represents results that may not recur and are not
a good indicator of our current future operating performance.
Our FFO and AFFO were as follows (in thousands):
                                                          Years Ended December 31,
                                                    2019            2018            2017
Net income                                      $   507,245$   365,359$  232,982
Net loss attributable to non-controlling
interests                                               205               -              -
Net income attributable to Equinix                  507,450         365,359 

232,982

Adjustments:

Real estate depreciation                            845,798         883,118 

754,351

(Gain) loss on disposition of real estate
property                                            (39,337 )         4,643 

4,945

Adjustments for FFO from unconsolidated joint
ventures                                                645               -             85
FFO                                             $ 1,314,556$ 1,253,120$  992,363


                                                          Years Ended December 31,
                                                    2019            2018            2017
FFO                                             $ 1,314,556$ 1,253,120$   992,363
Adjustments:
Installation revenue adjustment                      11,031          10,858 

24,496

Straight-line rent expense adjustment                 8,167           7,203 

8,925

Contract cost adjustment                            (40,861 )       (20,358 )             -
Amortization of deferred financing costs and
debt discounts and premiums                          13,042          13,618 

24,449

Stock-based compensation expense                    236,539         180,716 

175,500

Non-real estate depreciation expense                242,761         140,955 

111,121

Amortization expense                                196,278         203,416 

177,008

Accretion expense (adjustment)                          459            (748 )       (13,588 )
Recurring capital expenditures                     (186,002 )      (203,053 )      (167,995 )
Loss on debt extinguishment                          52,825          51,377          65,772
Transaction costs                                    24,781          34,413          38,635
Impairment charges                                   15,790               -               -
Income tax expense adjustment                        39,676         (12,420 )           371
Adjustments for AFFO from unconsolidated joint
ventures                                              2,080               -             (17 )
AFFO                                            $ 1,931,122$ 1,659,097$ 1,437,040


Our AFFO results have improved due to the improved operating results discussed
earlier in "Results of Operations," as well as due to the nature of our business
model which consists of a recurring revenue stream and a cost structure which
has a large base that is fixed in nature as discussed earlier in "Overview."

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Constant Currency Presentation
Our revenues and certain operating expenses (cost of revenues, sales and
marketing and general and administrative expenses) from our international
operations have represented and will continue to represent a significant portion
of our total revenues and certain operating expenses. As a result, our revenues
and certain operating expenses have been and will continue to be affected by
changes in the U.S. dollar against major international currencies. During the
year ended December 31, 2019 as compared to the same period in 2018, the U.S.
dollar was stronger relative to the Brazilian real, Euro, British Pound,
Singapore dollar and Australian dollar, which resulted in an unfavorable foreign
currency impact on revenue, operating income and adjusted EBITDA, and a
favorable foreign currency impact on operating expenses. In order to provide a
framework for assessing how each of our business segments performed excluding
the impact of foreign currency fluctuations, we present period-over-period
percentage changes in our revenues and certain operating expenses on a constant
currency basis in addition to the historical amounts as reported. Our constant
currency presentation excludes the impact of our foreign currency cash flow
hedging activities. Presenting constant currency results of operations is a
non-GAAP financial measure and is not meant to be considered in isolation or as
an alternative to GAAP results of operations. However, we have presented this
non-GAAP financial measure to provide investors with an additional tool to
evaluate our operating results. To present this information, our current period
revenues and certain operating expenses from entities reporting in currencies
other than the U.S. dollar are converted into U.S. dollars at constant exchange
rates rather than the actual exchange rates in effect during the respective
periods (i.e. average rates in effect for the year ended December 31, 2018 are
used as exchange rates for the year ended December 31, 2019 when comparing the
year ended December 31, 2019 with the year ended December 31, 2018).
Liquidity and Capital Resources
As of December 31, 2019, our total indebtedness was comprised of debt and lease
obligations totaling approximately $11.9 billion (gross of debt issuance cost,
debt discount, plus mortgage premium) consisting of:
• approximately $9,029.2 million of principal from our senior notes;


• approximately $1,506.1 million from our finance lease liabilities; and

$1,371.9 million of principal from our loans payable and mortgage.



We believe we have sufficient cash, coupled with anticipated cash generated from
operating activities, to meet our operating requirements, including repayment of
the current portion of our debt as it becomes due, payment of regular dividend
distributions and completion of our publicly-announced expansion projects.
During 2019, we completed the following significant financing activities:
• issued $2,800.0 million in Senior Notes due 2024, 2026 and 2029;


• redeemed $1,906.3 million of Senior Notes due 2022, 2023 and 2025;

• repaid $300.0 million of 5.0% Infomart Senior Notes according to their

repayment terms;

• issued and sold 2,985,575 shares of common stock in a public equity

offering and received net proceeds of approximately $1,213.4 million, net

of underwriting discounts, commissions and offering expenses; and

• issued and sold 903,555 shares of common stock under our ATM Program, for

proceeds of approximately $447.5 million, net of payment of commissions to

sales agents and other offering expenses.



As of December 31, 2019, we had $1,879.9 million of cash, cash equivalents and
short-term investments, of which approximately $1,456.8 million was held in the
U.S. In addition to our cash and investment portfolio, we had $1.9 billion of
additional liquidity available to us from our $2.0 billion revolving facility
and $300.0 million of shares issuance available for sale under our ATM Program.
Besides any further financing activity we may pursue, customer collections are
our primary source of cash. While we believe we have a strong customer base, and
have continued to experience relatively strong collections, if the current
market conditions were to deteriorate, some of our customers may have difficulty
paying us and we may experience increased churn in our customer base, including
reductions in their commitments to us, all of which could have a material
adverse effect on our liquidity. Additionally, we may pursue additional
expansion opportunities, primarily the build out of new IBX data centers, in
certain of our existing markets which are at or near capacity within the next
year, as well as potential acquisitions and joint ventures. While we expect to
fund these plans with our existing resources, additional financing, either debt
or equity, may be required, and if current market conditions were to
deteriorate, we

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may be unable to secure additional financing, or any such additional financing
may only be available to us on unfavorable terms. An inability to pursue
additional expansion opportunities will have a material adverse effect on our
ability to maintain our desired level of revenue growth in future periods.
Sources and Uses of Cash
                                             Years Ended December 31,
                                               2019            2018
                                                  (in thousands)

Net cash provided by operating activities $ 1,992,728$ 1,815,426 Net cash used in investing activities (1,944,567 ) (3,075,528 ) Net cash provided by financing activities 1,202,082 470,912



Operating Activities
Our cash provided by our operations is generated by colocation, interconnection,
managed infrastructure and other revenues. Our primary uses of cash from our
operating activities include compensation and related costs, interest payments,
other general corporate expenditures and taxes. The increase in net cash
provided by operating activities during 2019 compared to 2018 was primarily due
to improved operating results combined with the inclusion of full year operating
results of the acquisitions of Infomart Dallas and Metronode closed in April
2018, offset by increases in cash paid for cost of revenues, operating expenses,
interest expense and income taxes.
Investing Activities
The decrease in net cash used in investing activities during 2019 compared to
2018 was primarily due to the decrease in spending for business acquisitions of
approximately $795.5 million, primarily due to the Metronode and Infomart Dallas
acquisitions in 2018 combined with an increase in proceeds from asset sales of
approximately $346.6 million, primarily due to the sale of xScale data center
facilities in connection with the closing of the Joint Venture.
During 2020, we anticipate our IBX expansion construction activity will increase
from our 2019 levels. If the opportunity to expand is greater than planned and
we have sufficient funding to pursue such expansion opportunities, we may
further increase the level of capital expenditure to support this growth as well
as pursue additional business and real estate acquisitions or joint ventures.
Financing Activities
Net cash provided by financing activities during 2019 was primarily due to:
• the issuance of $2,800.0 million in Senior Notes due 2024, 2026 and 2029;


• the sale and issuance of 2,985,575 shares of common stock in a public

equity offering and receipt of net proceeds of approximately $1,213.4

million, net of underwriting discounts, commissions and offering expenses;


•      the sale of 903,555 shares under our ATM Program, for net proceeds of
       $447.5 million; and

• proceeds from employee awards of $52.0 million.

The proceeds were partially offset by: • the redemption of $1,906.3 million in Senior Notes due 2022, 2023 and 2025;

• the repayment of $300.0 million of 5.0% Infomart Senior Notes according to

the repayment terms;

• dividend distributions of $836.2 million;

• repayments of capital lease and other financing obligations totaling

$126.5 million;

• repayments of mortgage and loans payable totaling $73.2 million;

• payments of debt extinguishment costs of $43.3 million, primarily related

       to redemption premium paid related to the redemption of Senior Notes due
       2022, 2023 and 2025; and

• payments of debt issuance costs of $23.3 million.

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Net cash provided by financing activities during 2018 was primarily due to: • the issuance of €750.0 million 2.875% Euro Senior Notes due 2024, or

       approximately $929.9 million in U.S. dollars, at the exchange rate in
       effect on March 14, 2018;

• borrowing of the JPY Term Loan of ¥47.5 billion, or approximately $424.7

       million at the exchange rate effective on July 31, 2018;


•      the sale of 930,934 shares under our ATM Program, for net proceeds of
       $388.2 million; and

• proceeds from employee awards of $50.1 million.



The proceeds were partially offset by:
• dividend distributions of $738.6 million;


• repayments of capital lease and other financing obligations of $103.8 million;

• repayments of mortgage and loans payable of $447.5 million, primarily

related to the prepayment of the remaining principal of our existing

Japanese Yen Term Loan;

• payments of debt extinguishment costs of $20.6 million; and

• payments of debt issuance costs of $12.2 million.



Contractual Obligations and Off-Balance-Sheet Arrangements
We lease a majority of our IBX data centers and certain equipment under
long-term lease agreements. The following represents our debt maturities,
financings, leases and other contractual commitments as of December 31, 2019 (in
thousands):
                         2020            2021            2022           2023           2024          Thereafter         Total
Term loans and other
loans payable (1)    $    77,603$    77,654$ 1,180,017$   6,683$     6,214$     23,715$  1,371,886
Senior notes (1)         643,711         150,000               -             -       1,841,500        6,394,000        9,029,211
Interest (2)             359,383         333,710         327,222       303,722         291,496          574,633        2,190,166
Finance leases (3)       173,994         176,357         176,992       178,289         177,338        1,739,235        2,622,205
Operating leases (3)     193,663         191,954         183,908       168,353         156,502        1,106,944        2,001,324
Other contractual
commitments (4)        1,133,948         256,508          51,137        33,587          30,267          277,739        1,783,186
Asset retirement
obligations (5)            2,081           4,667          12,365         5,442           6,978           70,882          102,415
                     $ 2,584,383$ 1,190,850$ 1,931,641$ 696,076$ 2,510,295$ 10,187,148$ 19,100,393

(1) Represents principal of senior notes, term loans and other loans payable, as

well as premium on mortgage payable.

(2) Represents interest on mortgage payable, senior notes, term loan facilities

and other loans payable based on their approximate interest rates as of

December 31, 2019, as well as the credit facility fee for the revolving

credit facility.

(3) Represents lease payments under finance and operating lease arrangements,

including renewal options that are certain to be exercised.

(4) Represents unaccrued contractual commitments. Other contractual commitments

     are described below.


(5)  Represents liability, net of future accretion expense.


In connection with certain of our leases and other contracts requiring deposits,
we entered into 41 irrevocable letters of credit totaling $84.0 million under
the revolving credit facility. These letters of credit were provided in lieu of
cash deposits. If the landlords for these IBX leases decide to draw down on
these letters of credit triggered by an event of default under the lease, we
will be required to fund these letters of credit either through cash collateral
or borrowing under the revolving credit facility. These contingent commitments
are not reflected in the table above.
We had accrued liabilities related to uncertain tax positions totaling
approximately $132.2 million as of December 31, 2019. These liabilities, which
are reflected on our balance sheet, are not reflected in the table above since
it is unclear when these liabilities will be paid.
Primarily as a result of our various IBX data center expansion projects, as of
December 31, 2019, we were contractually committed for $795.0 million of
unaccrued capital expenditures, primarily for IBX equipment not yet delivered
and labor not

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yet provided in connection with the work necessary to complete construction and
open these IBX data centers prior to making them available to customers for
installation. This amount, which is expected to be paid during 2020 and
thereafter, is reflected in the table above as "other contractual commitments."
We had other non-capital purchase commitments in place as of December 31, 2019,
such as commitments to purchase power in select locations and other open
purchase orders, which contractually bind us for goods, services or arrangements
to be delivered or provided during 2020 and beyond. Such other purchase
commitments as of December 31, 2019, which total $988.2 million, are also
reflected in the table above as "other contractual commitments."
In connection with the Joint Venture which closed in October 2019, we agreed to
make future equity contributions to the Joint Venture of €17.6 million and £15.7
million, or $40.6 million in total at the exchange rate in effect on
December 31, 2019, to fund the Joint Venture's future development over the next
3 years, which are not reflected in the table above.
Additionally, we entered into lease agreements with various landlords primarily
for data center spaces and ground leases which have not yet commenced as of
December 31, 2019. These leases will commence between fiscal years 2020 and
2022, with lease terms of 10 to 49 years and total lease commitments of
approximately $608.1 million, which are not reflected in the table above.
Other Off-Balance-Sheet Arrangements
We have various guarantor arrangements with both our directors and officers and
third parties, including customers, vendors and business partners. As of
December 31, 2019, there were no significant liabilities recorded for these
arrangements. For additional information, see "Guarantor Arrangements" in Note
15 within the Consolidated Financial Statements.
Concurrent with the closing of the Joint Venture, the Joint Venture entered into
a credit agreement with a group of lenders for secured credit facilities
of €850.0 million, or $953.7 million in total at the exchange rate in effect on
December 31, 2019, consisting of two secured term loan facilities and a secured
revolving credit facility. The Joint Venture's debt is secured by net assets of
the Joint Venture, is without recourse to the partners, and does not represent a
liability of the partners. We do not provide any guarantees to make principle
payment to the lenders for the Joint Ventures' indebtedness. Under the Joint
Venture agreement, we and our joint venture partner GIC are also required to
make additional equity contribution proportionately to the Joint Venture upon
situations such as interest shortfall, cost-overrun or capital shortfall to
complete certain construction phases.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP.
The preparation of our financial statements requires management to make
estimates and assumptions about future events that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an ongoing basis,
management evaluates the accounting policies, assumptions, estimates and
judgments to ensure that our consolidated financial statements are presented
fairly and in accordance with GAAP. Management bases its assumptions, estimates
and judgments on historical experience, current trends and various other factors
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. However, because
future events and their effects cannot be determined with certainty, actual
results may differ from these assumptions and estimates, and such differences
could be material.
Our significant accounting policies are discussed in Note 1 to Consolidated
Financial Statements in Item 8 of this Annual Report on Form 10-K. Management
believes that the following critical accounting policies and estimates are the
most critical to aid in fully understanding and evaluating our consolidated
financial statements, and they require significant judgments, resulting from the
need to make estimates about the effect of matters that are inherently
uncertain:
• Accounting for income taxes;


• Accounting for business combinations;

• Accounting for impairment of goodwill;

• Accounting for property, plant and equipment; and


• Accounting for leases.



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                              Judgments and           Effect if Actual Results
      Description             Uncertainties           Differ from Assumptions
Accounting for Income   The valuation of deferred  As of December 31, 2019 and
Taxes.                  tax assets requires        2018, we had net total
                        judgment in assessing the  deferred tax liabilities of
Deferred tax assets and likely future tax          $211.4 million and $189.6
liabilities are         consequences of events     million, respectively. As of
recognized based on the that have been recognized  December 31, 2019 and 2018, we
future tax consequences in our financial           had a total valuation
attributable to         statements or tax returns. allowance of $57.8 million and
temporary differences   Our accounting for         $57.0 million, respectively.
that exist between the  deferred tax consequences  If and when we reduce our
financial statement     represents our best        remaining valuation
carrying value of       estimate of those future   allowances, it may have a
assets and liabilities  tax consequences.          favorable impact to our
and their respective                               financial position and 

results

tax bases, and          In assessing the need for  of operations in the periods
operating loss and tax  a valuation allowance, we  when such determinations are
credit carryforwards on consider both positive and made. We will continue to
a taxing jurisdiction   negative evidence related  assess the need for our
basis. We measure       to the likelihood of       valuation allowances, by
deferred tax assets and realization of the         jurisdiction, in the future.
liabilities using       deferred tax assets. If,
enacted tax rates that  based on the weight of     During the year ended December
will apply in the years that available evidence,   31, 2019, we released the full
in which we expect the  it is more likely than not valuation allowances against
temporary differences   the deferred tax assets    the deferred tax assets of one
to be recovered or      will not be realized, we   of our Brazilian legal
settled.                record a valuation         entities due to the evidence
                        allowance. The weight      of achieving sustainable
The accounting standard given to the positive and  profitability. For the
for income taxes        negative evidence is       Metronode Acquisition, we
requires a reduction of commensurate with the      increased the valuation
the carrying amounts of extent to which the        allowance that was assessed in
deferred tax assets by  evidence may be            prior year as a result 

of

recording a valuation objectively verified. finalizing the provisional allowance if, based on

                             estimates related to the
the available evidence, This assessment, which is  realizability of certain
it is more likely than  completed on a taxing      deferred tax assets.
not (defined by the     jurisdiction basis, takes
accounting standard as  into account a number of   During the year ended December
a likelihood of more    types of evidence,         31, 2018, we released the full
than 50%) that such     including the following:   or partial valuation
assets will not be      1) the nature, frequency   allowances against the
realized.               and severity of current    deferred tax assets in 

certain

                        and cumulative financial   jurisdictions in the 

Americas,

A tax benefit from an   reporting losses, 2)       Asia-Pacific and EMEA regions.
uncertain income tax    sources of future taxable  As part of the purchase
position may be         income and 3) tax planning accounting determination for
recognized in the       strategies.                the Metronode Acquisition, we
financial statements                               provided full valuation
only if it is more      In assessing the tax       allowance against certain
likely than not that    benefit from an uncertain  deferred tax assets in
the position is         income tax position, the   Australia that are not
sustainable, based      tax position that meets    expected to be realizable in
solely on its technical the more-likely-than-not   the foreseeable future.
merits and              recognition threshold is
consideration of the    initially and subsequently As of December 31, 2019 and
relevant taxing         measured as the largest    2018, we had unrecognized tax
authority's widely      amount of tax benefit that benefits of $173.7 million and
understood              is greater than 50% likely $150.9 million, respectively,
administrative          of being realized upon     exclusive of interest and
practices and           ultimate settlement with a penalties. During the year
precedents. The Company taxing authority that has  ended December 31, 2019, the
recognizes interest and full knowledge of all      unrecognized tax benefit
penalties related to    relevant information.      increased by $22.8 million
unrecognized tax                                   primarily due to 

integrations,

benefits within income  For purposes of the        which was partially offset by
tax benefit (expense)   quarterly REIT asset       the recognition of
in the consolidated     tests, we estimate the     unrecognized tax benefits
statements of           fair market value of       related to the Company's tax
operations.             assets within our QRSs and positions in France as a
                        TRSs using a discounted    result of a lapse in statutes
                        cash flow approach, by     of limitations and the partial
                        calculating the present    payment of the Metronode
                        value of forecasted future pre-acquisition tax audit
                        cash flows. We apply       assessment which was fully
                        discount rates based on    indemnified by the seller.
                        industry benchmarks        During the year ended December
                        relative to the market and 31, 2018, the unrecognized tax
                        forecasting risks. Other   benefits increased by $68.5
                        significant assumptions    million primarily due to the
                        used to estimate the fair  Metronode Acquisition and the
                        market value of assets in  reorganization of the Spanish
                        QRSs and TRSs include      entities from the Itconic
                        projected revenue growth,  acquisition. The unrecognized
                        projected operating        tax benefits of $173.7 million
                        margins and projected      as of December 31, 2019, if
                        capital expenditure. We    subsequently recognized, will
                        revisit significant        affect our effective tax rate
                        assumptions periodically   favorably at the time when
                        to reflect any changes due such a benefit is recognized,
                        to business or economic    of which $30.8 million is
                        environment.               subject to an indemnification
                                                   agreement.



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                              Judgments and           Effect if Actual Results
      Description             Uncertainties           Differ from Assumptions

Accounting for Business Our purchase price During the last three years, Combinations

            allocation methodology     we have completed a 

number of

                        contains uncertainties     business combinations,

In accordance with the because it requires including the acquisition of accounting standard for assumptions and

            Switch Datacenters' AMS1 

data

business combinations,  management's judgment to   center business in Amsterdam,
we allocate the         estimate the fair value of Netherlands in April 2019, the
purchase price of an    assets acquired and        Metronode Acquisition and the
acquired business to    liabilities assumed at the Infomart Dallas Acquisition in
its identifiable assets acquisition date. Key      April 2018, the Itconic
and liabilities based   judgments used to estimate Acquisition and the Zenium
on estimated fair       the fair value of          data center acquisition in
values. The excess of   intangible assets include  October 2017, the Verizon Data
the purchase price over projected revenue growth   Center Acquisition in May
the fair value of the   and operating margins,     2017, and the IO Acquisition
assets acquired and     discount rates, customer   in February 2017. The purchase
liabilities assumed, if attrition rates, as well   price allocation for these
any, is recorded as     as the estimated useful    acquisitions has been
goodwill.               life of intangible assets. finalized.
                        Management estimates the
We use all available    fair value of assets and   As of December 31, 2019 and
information to estimate liabilities based upon     2018, we had net intangible
fair values. We         quoted market prices, the  assets of $2.1 billion and
typically engage        carrying value of the      $2.3 billion, respectively. We
outside appraisal firms acquired assets and widely recorded amortization expense
to assist in            accepted valuation         for intangible assets of
determining the fair    techniques, including      $196.3 million, $203.4 million
value of identifiable   discounted cash flows and  and $177.0 million for the
intangible assets such  market multiple analyses.  years ended December 31, 2019,
as customer contracts,  Our estimates are          2018 and 2017, respectively.
leases and any other    inherently uncertain and
significant assets or   subject to refinement.     We do not believe there is a
liabilities and         Unanticipated events or    reasonable likelihood that
contingent              circumstances may occur    there will be a material
consideration, as well  which could affect the     change in the estimates or
as the estimated useful accuracy of our fair value assumptions we used to
life of intangible      estimates, including       complete the purchase price
assets. We adjust the   assumptions regarding      allocations and the fair value
preliminary purchase    industry economic factors  of assets acquired and
price allocation, as    and business strategies.   liabilities assumed. However,
necessary, up to one                               if actual results are not
year after the                                     consistent with our estimates
acquisition closing                                or assumptions, we may be
date if we obtain more                             exposed to losses or gains
information regarding                              that could be material, which
asset valuations and                               would be recorded in our
liabilities assumed.                               consolidated statements of
                                                   operations in 2019 or beyond.



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                              Judgments and           Effect if Actual Results
      Description             Uncertainties           Differ from Assumptions
Accounting for          To perform annual goodwill As of December 31, 2019,
Impairment of Goodwill  impairment assessment, we  goodwill attributable to the
and Other Intangible    elected to assess          Americas, the EMEA and the
Assets                  qualitative factors to     Asia-Pacific reporting units
                        determine whether it is    was $1.7 billion, $2.4 billion
In accordance with the  more likely than not that  and $0.6 billion,
accounting standard for the fair value of a        respectively.
goodwill and other      reporting unit is less
intangible assets, we   than its carrying value.   Future events, changing market
perform goodwill and    This analysis requires     conditions and any changes in
other intangible assets assumptions and estimates  key assumptions may result in
impairment reviews      before performing the      an impairment charge. While we
annually, or whenever   quantitative goodwill      have not recorded an
events or changes in    impairment test, where the impairment charge against our
circumstances indicate  assessment requires        goodwill to date, the
that the carrying value assumptions and estimates  development of adverse
of an asset may not be  derived from a review of   business conditions in our
recoverable.            our actual and forecasted  Americas, EMEA or 

Asia-Pacific

                        operating results,         reporting units, such as
We complete the annual  approved business plans,   higher than anticipated
goodwill impairment     future economic conditions customer churn
assessment for the      and other market data.     or significantly increased
Americas, EMEA and      There were no specific     operating costs, or
Asia-Pacific reporting  factors present in 2019 or significant deterioration of
units to determine if   2018 that indicated a      our market comparables that we
the fair values of the  potential goodwill         use in the market approach,
reporting units         impairment.                could result in an 

impairment

exceeded their carrying                            charge in future 

periods.

values.                 We performed our annual
                        review of other intangible The balance of our other
We perform a review of  assets by assessing if     intangible assets, net, for
other intangible assets there were events or       the year ended December 31,
for impairment by       changes in circumstances   2019 and 2018 was $2.1 billion
assessing events or     indicating that the        and $2.3 billion,
changes in              carrying amount of an      respectively. While we have
circumstances that      asset may not be           not recorded an impairment
indicate the carrying   recoverable, such as a     charge against our other
amount of an asset may  significant decrease in    intangible assets to date,
not be recoverable.     market price of an asset,  future events or changes in
                        a significant adverse      circumstances, such as a
                        change in the extent or    significant decrease in market
                        manner in which an asset   price of an asset, a
                        is being used, a           significant adverse change in
                        significant adverse change the extent or manner in which
                        in legal factors or        an asset is being used, a
                        business climate that      significant adverse change in
                        could affect the value of  legal factors or business
                        an asset or a continuous   climate, may result in an
                        deterioration of our       impairment charge in future
                        financial condition. This  periods.
                        assessment requires
                        assumptions and estimates  Any potential impairment
                        derived from a review of   charge against our goodwill
                        our actual and forecasted  and other intangible assets
                        operating results,         would not exceed the amounts
                        approved business plans,   recorded on our consolidated
                        future economic conditions balance sheets.
                        and other market data.
                        There were no specific
                        events in 2019 or 2018
                        that indicated a potential
                        impairment.



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                              Judgments and           Effect if Actual Results
      Description             Uncertainties           Differ from Assumptions
Accounting for          Judgments are required in  As of December 31, 2019 and
Property, Plant and     arriving at the estimated  2018, we had property, plant
Equipment               useful life of an asset    and equipment of $12.2 billion
                        and changes to these       and $11.0 billion,
We have a substantial   estimates would have       respectively. During the years
amount of property,     significant impact on our  ended December 31, 2019, 2018
plant and equipment     financial position and     and 2017, we recorded
recorded on our         results of operations.     depreciation expense of $1.1
consolidated balance    When we lease a property   billion, $1.0 billion, and
sheet. The vast         for our IBX data centers,  $0.9 billion, respectively.
majority of our         we generally enter into    While we evaluated the
property, plant and     long-term arrangements     appropriateness, we did not
equipment represent the with initial lease terms   revise the estimated useful
costs incurred to build of at least 8-10 years and lives of our property, plant
out or acquire our IBX  with renewal options       and equipment during the years
data centers. Our IBX   generally available to us. ended December 31, 2019, 2018
data centers are        In the next several years, and 2017. Further changes in
long-lived assets. We   a number of leases for our our estimated useful lives of
depreciate our          IBX data centers will come our property, plant and
property, plant and     up for renewal. As we      equipment could have a
equipment using the     start approaching the end  significant impact on our
straight-line method    of these initial lease     results of operations.
over the estimated      terms, we will need to
useful lives of the     reassess the estimated
respective assets       useful lives of our
(subject to the term of property, plant and
the lease in the case   equipment. In addition, we
of leased assets or     may find that our
leasehold improvements  estimates for the useful
and integral equipment  lives of non-leased assets
located in leased       may also need to be
properties).            revised periodically. We
                        periodically review the
Accounting for          estimated useful lives of
property, plant and     certain of our property,
equipment includes      plant and equipment and
determining the         changes in these estimates
appropriate period in   in the future are
which to depreciate     possible.
such assets, assessing
such assets for         The assessment of
potential impairment,   long-lived assets for
capitalizing interest   impairment requires
during periods of       assumptions and estimates
construction and        of undiscounted and
assessing the asset     discounted future cash
retirement obligations  flows. These assumptions
required for certain    and estimates require
leased properties that  significant judgment and
require us to return    are inherently uncertain.
the leased properties
back to their original
condition at the time
we decide to exit a
leased property.
Accounting for Leases   Determination of           As of December 31, 2019, 

we

                        accounting treatment,      recorded operating lease
A significant portion   including the result of    right-of-use assets of $1.5
of our data center      the lease classification   billion, finance lease assets
spaces, office spaces   test for each new lease or of $1.3 billion, operating
and equipment are       lease amendment, is        lease liabilities of $1.5
leased. Each time we    dependent on a variety of  billion, and finance lease
enter into a new lease  judgments, such as         liabilities of $1.5 billion.
or lease amendments, we identification of lease
analyze each lease or   and non-lease components,  Additionally, during the years
lease amendment for the allocation of total        ended December 31, 2019, 2018
proper accounting,      consideration between      and 2017, we recorded rent
including determining   lease and non-lease        expense of approximately
if an arrangement is or components, determination  $219.0 million, $185.4 million
contains a lease at     of lease term, including   and $157.9 million
inception and making    assessing the likelihood   respectively.
assessment of the       of lease renewals,
leased properties to    valuation of leased
determine if they are   property, and establishing
operating or finance    the incremental borrowing
leases.                 rate to calculate the
                        present value of the
                        minimum lease payment for
                        the lease test. The
                        judgments used in the
                        accounting for leases are
                        inherently subjective;
                        different assumptions or
                        estimates could result in
                        different accounting
                        treatment for a lease.

Recent Accounting Pronouncements See "Recent Accounting Pronouncements" in Note 1 within the Consolidated Financial Statements.

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