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Equinix Inc (EQIX) Q3 2019 Earnings Call Transcript

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Equinix Inc (NASDAQ: EQIX)
Q3 2019 Earnings Call
Oct 30, 2019, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the Equinix Third Quarter Earnings Conference Call. [Operator Instructions]

I'd now like to turn the call over to Katrina Rymill, Vice President of Investor Relations. You may begin.

Katrina Rymill -- Vice President of Investor Relations

Thank you. Good afternoon and welcome to today's conference call. Before we get started, I'd like to remind everyone that some of the statements we'll be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-K filed on February 22, 2019, and 10-Q filed on August 2, 2019.

Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. In addition, in light of Regulation Fair Disclosure, it is Equinix's policy not to comment on its financial guidance during the quarter, unless it is done through an explicit public disclosure.

In addition, we will provide non-GAAP measures on today's conference call. We provide a reconciliation of those measures to the most directly comparable GAAP measures, and a list of the reasons why the company uses these measures is in today's press release on the Equinix IR page at www.equinix.com. We have made available, on the IR page of our website, a presentation designed to accompany this discussion, along with certain supplemental financial information and other data. We'd also like to remind you that we post important information about Equinix on the IR page from time to time, and encourage you to check our website regularly for the most current available information.

With us today are Charles Meyers, Equinix CEO and President, and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we'll be taking questions from sell-side analysts.

In the interest of wrapping this call to an hour, we'd like to ask these analysts to limit any follow-on questions to just one. At this time, I'll turn the call over to Charles.

Charles J. Meyers -- President and Chief Executive Officer

Thank you, Katrina. Good afternoon and welcome to our Third Quarter Earnings Call. We had our best ever third quarter bookings, reflecting strong execution of our strategy, and demonstrating our ability to deliver clear and quantifiable value to our customers, as they pursue their digital transformation agenda.

Our retail business continues to thrive, generating over 4,400 deals in the quarter across 3,100 customers, with the majority of our bookings comprised of small to midsized multi-metro deals, fueling one of the strongest interconnection quarters in our history.

We are executing effectively on our commitment to unlock the power of Platform Equinix for our customers, expanding our geographic reach, enhancing our market leading interconnection portfolio, and responding to evolving customer needs with the launch of new and innovative edge services offerings.

By focusing on driving enhanced operating leverage in the business, we're enabling investment across our traditional retail business, while layering in incremental capabilities, which together will drive higher attach rates, reduce churn and sustain and enhance covenant yields over the coming years, allowing us to continue to deliver industry-leading returns.

We are aggressively activating our channel, combining the value of Platform Equinix with partner solutions to accelerate our customers' journey to hybrid and multi-cloud as the clear architecture of choice. We outgrew the market globally, with notable momentum in EMEA, and Equinix now holds the number one position in 18 of the 25 countries in which we operate.

And we continue to extend our global reach, announcing our plans to enter Mexico, the second-largest economy in Latin America, with two new markets serving Mexico City and Monterrey.

In tandem with our strong operating performance, we're advancing a bold sustainability agenda, with meaningful progress across the environmental, social and governance aspects. We've made significant progress on our goal to use 100% clean and renewable energy for our data centers, with over 90% of our energy consumption today now covered by renewable sources.

We were recognized by the US EPA for our leading green power use, ranking number 4 on the EPA's National Top 100 Partners List, and receiving the Green Power Leadership Award for the third consecutive year, recognizing our contribution in advancing the development of the nation's voluntary green power market.

During the quarter, we also announced the addition of Sandra Rivera to our Board of Directors, and the hiring of Justin Dustzadeh as our new CTO. We are thrilled to add their deep and diverse experience as world-class technology leaders, as we continue to refine and expand our vision for the future of Platform Equinix.

Turning to the quarter, as depicted on Slide 3, revenues for Q3 were $1.397 billion, up 8% year over year. Adjusted EBITDA was up 9% year over year, and AFFO was ahead of our expectations, excluding FX and FX-related impacts.

Interconnection growth again outpace collocation revenues, growing 13% year over year, driven by solid traction across all interconnection products, and particularly strong momentum across our Cloud Exchange fabric. These growth rates are all on a normalized and constant currency basis.

In October, we closed our first hyperscale JV, a greater than $1 billion deal with GIC, the Singaporean Sovereign Wealth Fund. This is a strategic milestone for Equinix, enhancing our ability to respond to the rapidly expanding needs of the world's largest cloud and hyperscale companies, while strengthening our leadership in the cloud ecosystem. We look forward to launching similar JVs in other operating regions, and believe these efforts will continue to further differentiate Equinix as the trusted center of a cloud-first world.

We now have over 356,000 interconnections, adding more per quarter than our top 10 competitors combined. In Q3, we added an incremental 8,500 interconnections with high gross adds from both enterprise and network segments, accompanied by lower-than-expected churn. We also surpassed 20,000 virtual connections, more than 5% of our overall account, and we expect these connections, which are dynamic and operationally efficient, to accelerate as customers leverage the capabilities on our SDN-enabled ECX Fabric.

With over 1,800 customers now on ECX Fabric, we're seeing the strong ecosystem effects driven by expanding use cases, including WAN rearchitecture, distributed data, and rapid adoption of hybrid cloud across an increasingly rich range of cloud destinations. We also saw growth of our Internet Exchange in existing and new markets, with 27% year over year increase in IX provision capacity.

Our newly launched Network Edge product is generating strong market interest with a robust pipeline. This offer provides enterprises a faster and more efficient way to deploy virtual network services at Equinix, including routers, firewalls and load balancers from their technology providers of choice, including Cisco, Juniper and Palo Alto Networks.

Now let me cover highlights from our verticals. Our network vertical experienced record bookings, led by the major telcos subsegment and significant global MSP reseller activity, as we partner with global providers to evolve their architectures and serve rapidly expanding enterprise demand. New wins and expansions included Silicon Networks, a leading fiber optic provider, optimizing network to support growing customer demand; and Telia, in order to provide our extending coverage with regional edge deployments.

Our financial services vertical achieved robust bookings and strong new logo growth, with an uptick in the banking subsegment, as firms continue to embrace digital transformation. Key new wins included Sterling Bancorp, rearchitecting their network to securely connect to partners, and a US exchange start-up leveraging the depth and reach of our expansive electronic trading ecosystem.

Our content and digital media vertical produced solid bookings led by strong growth in publishing, advertising and video subsegments. New wins and expansions included a global social media firm, upgrading infrastructure to support their growing product line, as well as a leading global ad tech firm, transforming network topology to distribute and analyze data.

Our cloud and IT vertical continues to over-index with strength in the security subvertical, as well as a strong increase in ECX Fabric participants, as cloud consumers diversified toward hybrid and multi-cloud architectures. We continue to lead in cloud connectivity, with over three times as many metros with multi-cloud on-ramps as our nearest competitor.

Our enterprise vertical experienced diversified growth across professional services, retail, as well as notable strength in government. New wins included Pruitt Health, deploying on Platform Equinix to support its growing healthcare ecosystem. Steve Madden rearchitecting network and connecting to multi-cloud to better enable digital business; the Myers Briggs Company, optimizing network and interconnecting to business partners to support data management requirements; as well as further expansions from Walmart, deploying distributed infrastructure to support AI use cases.

And our channels team had another great quarter, accounting for more than 30% of bookings, with 60% of this activity going into our enterprise vertical, as we use the reach and relationships with our partners to efficiently expand our addressable market. We saw partner wins across all end user types, including insurance, federal government, banking, public utilities and pharma, with network optimization and hybrid multi-cloud as key use cases.

New channel wins this quarter included a multi-partner win with Presidio, F5, Microsoft, and Oracle, for a large US energy company, supporting their data center consolidation and implementations of hybrid and multi-cloud access.

Now let me turn the call over to Keith to cover the results for the quarter.

Keith D. Taylor -- Chief Financial Officer

Thanks, Charles, and good afternoon to everyone. Let me start my prepared remarks by saying, we remain very pleased with the performance of our business and how Platform Equinix is differentiating us from others in our space. We continue to successfully scale the core business, while simultaneously investing in our future, both as it relates to our operating structure and our new products and services. We continue to invest in sustainability, and diversity inclusion and belonging initiatives, two areas that are very dear to our communities, our customers, and our employees.

We had another solid quarter with our operating results consistent with our expectations, although impacted by FX and FX-related items. From a bookings perspective, we had our best-ever Q3 gross bookings performance, including very attractive deal mix and strong pricing.

Interconnection activity was very strong, both at the physical and the virtual level, and we're making good progress across our new edge services. Again, we had net positive pricing actions this quarter. As a result, our MRR per cabinet metric remained firm, both on an as-reported and FX-neutral basis.

In early October, we closed our first hyperscale joint venture in EMEA, and transferred two of our operating assets into the JV, London 10 and Paris 8. As a result, the joint venture distributed a net $355 million of cash to Equinix, and we expect an additional EUR60 million over the next four quarters, as certain contingent milestones are met.

We continue to expand our global platform with 28 projects under way across 21 metros in 16 different countries, another critical point of separation compared to other companies in our space.

Now let me cover the quarterly highlights, and know that all growth rates in this section are on a normalized and constant currency basis.

As depicted on Slide 4, global Q3 revenues were $1.397 billion, our 67th straight quarter of top line growth, up 8% over the same quarter last year, and at the midpoint in our guidance range on an FX-neutral basis. In the quarter, we experienced an unusually high level of FX volatility, largely derived from the Brexit implications to both the British pound and the euro. Also, the Brazilian real weakened considerably, a currency that is typically too expensive to hedge.

As previously guided, there were a number of one-off events that impacted the quarter-over-quarter revenue step-up, including lower tenant recoveries from a favorable tax decision in Q3 related to our Informart Dallas asset, and then lower-than-expected non-recurring revenues. Q3 revenues net of our FX hedges included an $8 million negative FX impact due to the stronger US dollar in the quarter, when compared to the prior guidance rates.

Global Q3 adjusted EBITDA was $675 million, up 9% over the same quarter last year, despite higher seasonal utility costs and the expansion drag. Q3 adjusted EBITDA was better than expected, primarily due to lower maintenance costs . Q3 adjusted EBITDA performance, net of our FX hedges, included a negative $4 million FX impact when compared to the prior guidance rates.

Global Q3 AFFO was $473 million, an 18% increase over the same quarter last year, above our expectations on a constant currency basis, while still absorbing the higher-than-anticipated increase in our recurring capex. Also, AFFO, on an as-reported basis, absorbs a net $16 million higher-than-planned income tax expense, attributed to FX-related tax gains from our hedging program. Based on the current FX exchange rate through October, we expect a significant portion of this tax expense to reverse in Q4, and accordingly has been reflected in our AFFO and AFFO per share guidance.

Q3 global MRR churn was 2.3%, consistent with our targeted range. For Q4, we expect MRR churn to remain in our guided range of 2% to 2.5%. Interconnection revenues increased significantly over the prior quarter, with momentum in each of our regions. Interconnection revenues now represent greater than 17% of our recurring revenues, a significant quarter-over-quarter step-up. Our interconnection portfolio grew at a healthy pace, driven by strong net adds from both the physical and virtual connections, while also provisioning significant incremental port capacity. The Americas and EMEA interconnection revenues stepped up to 24% and 10% of recurring revenues respectively, while APAC was 14%.

Turning to the regional highlights, whose full results are covered on Slides 5 through 7. APAC and EMEA were our fastest MRR growing regions at 13% and 12%, respectively, on a year-over-year normalized basis, followed by the Americas region at 4%. The Americas region saw continued strong bookings, with a high mix of small deals, healthy pricing, and strong new logo adds. Export bookings to the other two regions continues to remain at a high, as the Americas region does an excellent job of selling across our global platform.

Our new federal segment had a stellar quarter, and we remain very excited about the potential opportunities we see across this customer set.

Our EMEA region had another very strong quarter, led by our German and French businesses, including strong network service provider activity. EMEA had a robust increase in billable cabinets, firm deal pricing, while experiencing its best-ever net cross connect adds in the quarter. And we opened up capacity in three new markets in EMEA, Helsinki, London and Stockholm.

The Asia Pacific region showed continued momentum over the quarter, despite the US trade dispute with China, and the unrest that we see in Hong Kong. We enjoyed strong bookings in both our Hong Kong and Singapore businesses, and we opened our first data center in Seoul, South Korea, entering into one of the most vibrant digital economies in the world, our 25th country to operate from. To date, the Seoul business is tracking ahead of its bookings plan.

And now, looking at the capital structure , please refer to Slide 8. Our unrestricted cash balance is approximately $1.4 billion lower than the prior quarter, as the operating cash flow and proceeds from the ATM program were more than offset by our quarterly capital expenditures and our cash dividend.

Our net debt leverage ratio was 3.5 times our Q3 annualized adjusted EBITDA, up slightly due to the lower cash balance, yet still well within our targeted range. As a new investment grade rated company, and given the current interest rate environment, we expect to drive substantial interest rate savings through the refinancing of our currently outstanding debt, as well as enjoy a lower cost of borrow on any new incremental capital raised to fund our future initiatives. At the end of Q3, our liquidity position, alongside the strong balance sheet, continues to provide us a strategic and unmatched business advantage.

Turning to Slide 9, for the quarter, capital expenditures were approximately $557 million, including a recurring capex of $47 million. Q3 had six new expansion projects completed, adding 2,800 cabinets of capacity, including new IBXs in Helsinki and Seoul, and we continue to expand our land bank, acquiring land for development in Tokyo and Warsaw.

Our capital investments delivered strong returns as shown on Slide 10. Our 136 stabilized assets increased revenues 3% year over year on a constant currency basis, similar to last quarter. Our stabilized assets are collectively 85% utilized, and generate a 30% cash-on-cash return on the gross PP&E invested.

And now, please refer to Slides 11 through 15 for our updated summary of 2019 guidance and the bridges. For the full year of 2019, on a constant currency basis, we are maintaining our full-year revenue guidance, while raising our adjusted EBITDA guidance by $6 million, due to strong operating performance. This guidance applies implies a revenue growth rate of 9% over the prior year, and a healthy adjusted EBITDA margin of approximately 48%.

Also, we are reducing our 2019 integration costs to now be $9 million. Given the strong operating performance, we're also raising our 2019 AFFO by $8 million; where our growth rate will range between 13% and 14%, compared to the previous year on a normalized and constant currency basis. We do expect slightly lower net interest expense in Q4.

AFFO per share is expected to grow 8% including the dilutive impact of both our Q1 equity raise and the effects of the ATM program activity. We've assumed a weighted average 84.8 million common shares outstanding on a fully diluted basis.

And finally, we expect our 2019 cash dividend to now approximate $825 million, a 13% increase over the prior year, and reflects an 8% year-over-year increase on a per-share basis.

So with that, I'm going to stop, and I'm going to pass it back to Charles.

Charles J. Meyers -- President and Chief Executive Officer

Thanks, Keith. In closing, we had another great quarter, building on our unique sources of competitive advantage and demonstrating the underlying strength of our business. We continue to separate ourselves from the competition, using our diverse go-to-market channels and our expansive balance sheet as tools to extend the scope, scale and velocity of our flywheel business, while partnering with world-class players like GIC to enable us to simultaneously capture strategic footprints and deliver attractive returns in the hyperscale end market.

We also continue to build new capabilities that will allow us to achieve our vision for the future of Platform Equinix. A future that will allow our customers to reach everywhere, connect with everyone, and integrate everything on their digital transformation journey.

I am extremely pleased and privileged to work with our team of over 10,000, focused on building out our products and platform, and executing against an ambitious set of priorities in service to our customers. All while steadfastly ensuring that our culture continues to thrive, making sure that we have the right people, in the right roles, at the right time, building a company that is positively impacting our world, and where every employee can confidently say I'm safe, I belong, and I matter.

So let me stop there and open it up for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question is from Philip Cusick with JPMC. Your line is open.

Philip Cusick -- JPMC -- Analyst

Hey, guys. Thanks. A couple, if I can. First, maybe you can dig into the tax issue in the Infomart, and if that impacted the Americas co-lo revenue? And then second, what are the incremental costs, Keith, of the green initiatives that we should expect from here? Thanks very much.

Keith D. Taylor -- Chief Financial Officer

Philip, very astute question that you asked, vis-a-vis the tax implications. We've talked about two sort of currency or tax matters in our prepared remarks this quarter. First and foremost, as it relates to the revenue side of the equation, because when we bought Infomart, there was a, shall we say, a negotiation with the local taxing authorities on the value that gets ascribed to that building, and we came to a resolution in Q3.

But prior to that, there was a very large assessment that basically was charged, of course, to the tenants of the Infomart building, and so we absorbed at the cost, and the tenants absorbed, if you will, the pass-through of some of those costs.

In Q3, once we settled the arrangement with the tax authorities, there was a meaningful step down in the amount of taxes that we collectively were going to pay, and as a result, for those tenants that were part of Infomart, in effect, they are going to get a reduction of their taxes, and that affects us directly on our recoveries, if you will, the revenues attached to that.

But bottom line is, you've got to step back and say OK, the revenues come down, but economically, this was good for not only our tenants, but it was even better for Equinix, because we're, one, a large tenant in the facility and we also absorb a lot of the unused capacity, if you will, in that space and that tax gets burdened onto us. So, that was the first one.

The second matter I just want to raise because I think it's important just to make sure. That was the property tax issue, and it all is attached to recoveries. The second issue for us vis-a-vis tax is income tax attached to very favorable hedge gains that we had on our hedges. And as a result, our income tax provision went up in Q3, because of how weak both the sterling and euro were, relative to the US dollar. As you know, a lot of that is reversed already in Q4, but we had to book the provision in Q3, and that's why you see the effect of that in the bridge.

And then to go back then to your last question, really which was on the green initiatives, suffice it to say, Charles has made comments, as did I, we're very, very, very focused on ESG as a corporation and our green initiatives. Those green initiatives, of course, come in many different shapes and sizes, if you will, from how we procure our power, to offsets, to variable indirect power purchase arrangement.

But there is, I would tell you that somewhere, right now, we spend somewhere between $10 million and $20 million that we absorb to become 100% sort of, if you will, green oriented, and 100% focused on driving our power consumption through green initiatives. And so, we're highly focused on that. It is a $10 million to $20 million cost to the business, but we recognize that it's important to not only the constituents in the company, but certainly to our communities, and very important to our customers, given that we're in their supply chain.

Charles J. Meyers -- President and Chief Executive Officer

But important to note, Phil, is basically we've been doing that for a while, and so that's been kind of already baked into our operating results, and it's fully accommodated in our guide.

Philip Cusick -- JPMC -- Analyst

Yes, OK. I heard on the call, I thought I heard something that there was incremental cost to be absorbed there, but it sounds like that's mostly done?

Charles J. Meyers -- President and Chief Executive Officer

Yes.

Philip Cusick -- JPMC -- Analyst

Okay. And then just a follow up on the Infomart side, can you give us an idea of the net impact on revenue from that? Or, maybe what the sort of underlying trend of the business would have been without that?

Keith D. Taylor -- Chief Financial Officer

Yes. So basically, it would have taken us to the top end of our guidance range, on an FX-neutral and normalized basis. So basically, it was $4 million.

Philip Cusick -- JPMC -- Analyst

Good. Thanks, guys.

Operator

Our next question is from Simon Flannery with Morgan Stanley. Your line is open.

Simon Flannery -- Morgan Stanley -- Analyst

Thank you very much. Good afternoon. We obviously had a large acquisition merger in the industry last night. I was just wondering what your thoughts would be on how that might change the industry dynamics? Do you have any perspective on what the European market might look like after that?

Where does Equinix stand today in terms of looking at additional, either acquisitions or on the JVs? You've talked about doing those. Is that anything we'll see in the near term? Thank you.

Charles J. Meyers -- President and Chief Executive Officer

Sure. Yeah, we fully expected that question would surface, Simon. Obviously a big transaction in our industry, for sure. I'll start with this, that we've got tremendous respect for both of those companies. It's not too difficult, I think, to see why each of those parties might be interested in this combination. Interaction has always been a vigorous competitor of ours in Europe, and I'm sure they will remain as such. As for DLR, as I've said in many a public forum, it's my experience that the overlap between our business and DLR's business is actually fairly small. That will probably not be the case with our xScale joint venture, where we're likely to be more consistently head to head. But in our core retail business, we only see them sort of selectively as a competitor.

Just to put it into context, according to Synergy Research, DLR's entire retail business outside of Europe, in other words, what we would be appending from a retail perspective on to the interaction business, that entire retail business outside of Europe is about one-tenth the size of Equinix overall. So, in reality, I think the combination represents the bringing together of two very different businesses. A strong European retailer and a strong global wholesaler. So, I think there is probably merit in the deal and an industrial logic to it. I think it's a bit of a stretch to say that the combination really meaningfully closes a gap in terms of trying to replicate the scope, scale and value of Platform Equinix.

I would say, I think the challenges in combining those businesses, just mechanically, let alone operationally, financially and culturally, will certainly be non-trivial. Even if and when that's done successfully, I think what comes out the other end is a company we will feel pretty comfortable competing against, certainly in Europe, which we've been doing, obviously, for years, and in particular on a global basis. I think it's understandable, but I think we're going to continue to sell the strength of our value proposition globally and feel like we're going to have great success with our customers.

To answer the second question in terms of our own M&A, we've said that we're going to continue to be, we continue to believe that's an appropriate tool. At the same time, we're going to be pretty disciplined about that and we're not going to chase valuations if we think they don't make sense for the business.

Obviously, we feel really good about the transaction. We recently announced in Mexico, to enter that market. I feel like it was really sized right and priced right, and gives us a really nice entry strategy into a very important market for us. There's a few other markets that I think we would entertain as M&A opportunities to enter, but again, we're going to make sure that we do that on a disciplined basis. We feel like it's an appropriate tool in the bag, but one that we're going to use with real discipline.

Simon Flannery -- Morgan Stanley -- Analyst

And on the hyperscale JV timing for new markets?

Charles J. Meyers -- President and Chief Executive Officer

We haven't really -- we're actively working on that. As we had said previously, we're in engaged in Japan actively. The exact timing on those, just given the complexity of the transactions, is hard to fully predict. But I think if you look out over the next couple of years, we would expect to add several more JVs to the mix, in terms of being able to offer the xScale sort of portfolio in key markets around the world.

Simon Flannery -- Morgan Stanley -- Analyst

All right. Thanks for the color.

Charles J. Meyers -- President and Chief Executive Officer

You bet.

Operator

Our next question is from Jonathan Atkin with RBC. Your line is open.

Jonathan Atkin -- RBC -- Analyst

Thanks. So Charles, in your prepared remarks you talked about edge products, and it got me thinking about any sort of trends that you're seeing in your cabinet adds in the Americas, and the mix shift between Tier 1 markets and slightly smaller markets? Are you noticing any changes as you sort of develop new capabilities? And, could that maybe inform your appetite to enter into say minor league cities, rather than just major league cities?

Charles J. Meyers -- President and Chief Executive Officer

Yeah, we're not seeing any significant shifts in trends. Obviously our major metros continue to drive the lion's share of both cabinet adds and revenue growth. But we do see real health in our other markets. I would say that we're going to start by offering our edge services in probably the more logical major metros, but to the extent we see momentum, I do think it's a good with those will represent an opportunity for us to deploy infrastructure and drive cabinet yields into those markets as well.

And then, and again, depending on, I think, how use cases evolve, whether or not we would need to continue to look at expanding that reach beyond our current footprint, I think it's something we're actively looking at that. We have a team that we refer to as the evolving edge team, and we are actively looking at how we would do that.

But I would say right now, the bulk of the use cases that we see are well met by the current footprint that we have, and so being able to deploy our edge services, whether that be network edge or some of the others we might contemplate, into our very expansive, aggregated edge footprint today, we think meets most of their needs of the market and we'll just continue to adapt as use cases might dictate that.

Jonathan Atkin -- RBC -- Analyst

Okay. And then on Seoul, just interested. Are businesses going with you for the first time into that market? Or are they already in market, and then they are kind of using you for their expansion needs?

Charles J. Meyers -- President and Chief Executive Officer

It's more typically our existing customers wanting to extend their infrastructure into Seoul. Although we do have a team on the ground that is sort of cultivating local business as well. But we said that our bookings are ahead of plan thus far, and that's driven by the strength of a couple of key deals, where some of our cloud and IT service customers were looking to expand their footprint into that market, with a pretty significant deal that we landed in Seoul.

Jonathan Atkin -- RBC -- Analyst

And then lastly, just on churn, are there any differences you're seeing in what's driving it, and any reason to think that you would gravitate toward the low end or the high end of your traditional range going forward?

Charles J. Meyers -- President and Chief Executive Officer

No, it depends more on, I think it's more timing issues in terms of shifts between quarters, but no substantive shifts. As I said, we've talked about the fact that we are continuing to work through the last bits of the churn tail in the Verizon assets, and I think that we now feel like we're positioned to get back to growth in 2020 on those assets. But no meaningful shifts.

What we have seen is there is not a lot of -- our churn is driven mostly by frictional churn, and to some degree, by things like bankruptcies and those kind of things. We see the occasional shift in terms of moving selective workloads to the cloud, but that's typically churning a portion of an implementation rather than the whole thing, because again, what we're seeing is people are very much committed to sort of hybrid and multi-cloud, and so they're maintaining private infrastructure and then integrating that with cloud assets, public cloud assets. So no meaningful shifts that we're seeing right now from a churn perspective.

I will say over time though, I would hope that we're going to be able to -- one of the things that you are seeing in our bookings mix is a very clear discipline around these sort of sweet spot deals. Well interconnected, so you're seeing that show up in terms of volume of transactions and number of deals done, as well as levels of interconnection. Those are really encouraging signals for me in terms of execution of the strategy.

Over time, I actually think that will help us hopefully trend toward the lower end of our range in terms of churn. That is something, because as I've always said, the best defense against churn is getting the right deployments in to begin with. As we look at that, I think some of maybe larger footprints that were more susceptible to longer-term churn are things that we are not going to be doing. We would probably be pushing those, particularly very large footprints, into the XScale sort of entity, which is more equipped to deal with those dynamics. I do hope that will improve our churn position over time.

Operator

Our next question is from Frank Louthan with Raymond James, your line is open.

Frank Louthan -- Raymond James -- Analyst

Great. Thank you very much. Can you give us a little color on, you mentioned the multi-partner win with energy company. You were the only data center company on that deal, and what was, in particular, anything special about that? And then I've got a follow-up.

Charles J. Meyers -- President and Chief Executive Officer

Yes, we were, I believe the preferred, the only data center involved in that particular transaction. It was a data center consolidation activity, and then also sort of integrating into a hybrid cloud architecture. They were really utilizing Cloud Exchange Fabric as their mechanism to integrate both their network and their cloud connectivity with their private infrastructure. And so really good multi-partner win, and one we were really excited about in the quarter.

Frank Louthan -- Raymond James -- Analyst

Okay. And looking at Americas growth, just curious what you might be able to do to maybe accelerate that going forward? In particular, maybe give us an update on the additional land that was around the Infomart that you could expand? And then where you are in the Americas to be able to finish filling out that facility, and how that might help improve the growth in Americas?

Charles J. Meyers -- President and Chief Executive Officer

Yes, I think the Americas business continues to perform well, particularly in terms of mix of business. I think probably the biggest driver is going to be sort of getting us through the last of the churn activity that's been sort of above prior levels, which is creating a drag in terms of what was essentially a $500 million business, which has not had any growth. That impacts the overall Americas growth rate.

I think as that subsides, I think we'll start to see some growth there. I do think we have opportunities to add in some of our key markets. We've already added capacity, which we're filling at a nice rate in the Americas. The Dallas campus expansion is under way. Over time, we will probably add both large footprint capability there, as well as increasing retail. That will probably be an opportunity for us to get some additional growth from that market.

But I think the bigger things that I'm excited about longer term is us continuing to, one, continuing to drive additional quota-bearing headcount into the market, to capture the significant enterprise opportunity we see. Our gross bookings engine is performing very well in the Americas, and not only in terms of landing bookings in the Americas' assets, but also delivering those globally across the platform.

I think being able to continue to expand both our channel as well as our direct selling efforts in the region, and then over time, as we add new services, I think we're also going to be able to continue to enhance cabinet yields, but that's going to take some time for those new edge services to really mature.

Operator

Our next question is from Colby Synesael with Cowen and Company. Your line is open.

Colby Synesael -- Cowen and Company -- Analyst

Great, thank you. Maybe just following up on the growth. Stabilized growth, I think, was 3%, you said, in the quarter. I thought at least a few quarters ago, there was talk about getting that number back up to 5%. Just curious what you think the longer-term growth rate for stabilized growth should be, and what are the parts to potentially get us a bit higher? Maybe it's just the improvement in the Verizon asset that you mentioned?

And then secondly, I think in your previous guidance from last quarter, you had ascerned the JV, the GIC JV would close in I think it was August, and it ended up closing in October. Curious what the benefit to guidance is in terms of the update you just made for 2019 as a result of that delayed close? Thank you.

Charles J. Meyers -- President and Chief Executive Officer

Let me take the first one, and I'll ask Keith to address the timing of the GIC transaction. Relative to stabilized asset growth, yes, we've been kind of hovering around that 3% to 4% mark, Colby. I think the catalysts for getting back into that 5% kind of range would be one, as you noted, and as I noted in the commentary, getting the Verizon assets sort of through the knothole.

I do also think the 10 to 100 gig migrations have impacted those to some degree. We did see a good quarter in that. We actually saw a reduction in interconnection churn. I don't think we're all the way through that, though. I think it's going to sort of continue to go in waves, although the biggest thing, the biggest players who I think were going to make that change have largely made it in the Americas. But there probably will be some more of that, that I think will create some downdraft on the stabilized asset growth. We talked about there also being a few assets that we were actively migrating business out of, and those kind of impacted as well.

There is a variety of factors. I am encouraged by what we can do, both with our network edge offer as well as with what we see on the horizon in terms of some of the additional edge services, because we can deploy infrastructure, shared infrastructure, into some of those kind of facilities, and get meaningful returns on that, and maybe drive some additional growth in cabinet yields into those.

But I think that's going to be a longer-term proposition, and we'll probably really stay in that 3%, 4% range for a bit.

Keith D. Taylor -- Chief Financial Officer

And, Colby, as it relates to the second question, for Q3, there is really no meaningful movement, as you know, for the Q3 quarter. When we offered our prior guidance, it was really more about the influence that was going to take place in Q4.

And just to remind you and everybody else, on how this is going to get accounted for. Recognizing that there is fee income that will come with the joint ventures, and as we continue to scale them up, there's fees that get attached to it. The fees come in through the top line through revenue. The equity ownership, the 20% ownership effectively comes through below the line. It will be an AFFO, but below EBITDA, in the form of income from the affiliated entities. And so that's how it will present itself in our financials.

Suffice it to say this quarter, for Q4 in our guidance and implications on Q3 was negligible. Think about $2 million on either side. The reason for that is, it's all about timing. It's the timing of the costs, timing of the fees, timing of the income stream associated with how those customers install in the environment in those two assets that we have, and then as we continue to scale them.

So overall, what we'll try and do is continue to keep everybody fully abreast of not only this JV, but the ongoing JVs, on what, if you will, the fund flow is. But for this year, as we said, there is really never going to be any meaningful impact to our financial results, and for all intents and purposes, it is just being absorbed into the ongoing.

Colby Synesael -- Cowen and Company -- Analyst

Okay, thank you.

Operator

Our next question is from Michael Rollins with Citi. Your line is open.

Michael Rollins -- Citi -- Analyst

Hi, thanks. Two questions. First, just curious how you're looking at the opportunities to recycle capital for maybe some of the existing assets? Whether it's a market that you may not think of as core to the portfolio, or situations where there might be just opportunity to take advantage of the private market?

And then the second question is, just with the ATM program. Is there a framework or allocation strategy that investors should think about in terms of the timing, or ways you may access that program in the future? Thanks.

Keith D. Taylor -- Chief Financial Officer

So Charles and I are looking at each other, which one, who wants to answer that question. I think on the first one, let's just touch base on that, first and foremost. Overall, as you hear us continually say and talk about, we're really referring to Equinix as a platform. Periodically there are assets that would be disposed of.

Not so much because we're trying to recycle capital, but it's more because when you look at the strategic value of that asset relative to what we're doing with our platform and where we want to invest our dollars, we choose occasionally to turn down a site like we've recently done, or sell a small asset when it came with an acquisition, and we did that with Switch and Data. We just recently sold one of Verizon's small assets, we refer to it as our New York 12, and we sold or Istanbul 1 asset which was part of Telecity.

But it is not really about recycling. It's more about making sure we create the momentum and the right assets for ourselves. And again, I think it's really important, Michael, for you and for all the listeners on the call today, we sell across this platform, every asset is highly important to us. That's why we are not probably as traditional as some of the others in thinking about recycling, because it is the platform.

As we get then into the discussion around ATM, ATM, I think it ties into a much more broader discussion on how we will fund ourselves on a go-forward basis. If we all go back to the June 2018 Analyst Day, we talked about how we can grow the business over the five-year period in 2018 through 2022 and what that would mean from capital dollar spent, and if you will, the scale of the dividend and the like.

As a result, we knew at that point in time that there was going to be funding in the business. The funding needed for the business, and it was going to come in the form of both debt and equity. And so what I would tell you is that there is no, I wouldn't -- there is no perfect way to describe how we use the ATM, other than what we're trying to do is take advantage of it when it makes sense for the shareholder, and stay away from it when it doesn't make sense for the shareholder.

A perfect example would be in December of last year when we were at a 52-week low, we were not in the ATM program. When we're reaching some of our all-time highs, we occasionally pull down a little bit of equity to fund the business, because we know that between now and 2022, there is still some capital we will need to fund all that we have in front of us, including some of the M&A activities.

And I've said on the last call, you're going to see us do more and more of debt because one, I think the cost of debt is going down, but two, have brought some real balance into our capital structure. We've got our investment grade rating and we're at a point where we're well within our targeted leverage range.

So it's a long-winded way of saying that we're going to moderate. We'll do it wisely. It is a cheaper way to go to the equity markets than doing a follow-on offering. I think about 50 basis points versus something ranging from 1 basis point to 1.5 basis points, to do those transactions, and we do it at our discretion, based on market conditions and targets.

And so bottom line is, we'll continue to monitor it. Right now, we have roughly $300 million left on the program that we approved last December. We've got a lot of cash in our balance sheet, $1.4 billion, as I said, at the end of Q3, and then you heard me also say with the October closing of the JV, that brought in another $355 million. We're going to be really prudent about how we refinance our debt, how we raise new debt, and how we use our ATM on a go-forward basis, to make sure we maximize the return for our investors.

Charles, is there anything else that you want to add? Okay. Michael, anything else?

Michael Rollins -- Citi -- Analyst

Thank you.

Operator

Our next question is from Jordan Sadler with KeyBanc Capital Markets. Your line is open.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Thank you. Just moving back to sort of the drivers during the quarter, EMEA was called out as a powerful driver for the quarter. Can you give us a little bit of an update in terms of where we stand vis-a-vis the accelerated demand you're seeing in the region? Or, maybe the catch-up versus the Americas? And then I have a follow-up.

Charles J. Meyers -- President and Chief Executive Officer

Yes, I mean, I think we've seen relatively broad based sort of demand and strength in the European market. Honestly, our UK market continues to be strong, despite Brexit uncertainty, etc. I think that we have the luxury of a really broad-based business on the continent, and so I think it continues to perform very well.

I do think we are still seeing the movement of cloud providers into that market more comprehensively, and so that has driven both our direct business with us in terms of their network nodes and their private interconnection nodes, and I think now will fuel the JV's business in a significant way, associated with the large footprint. Then you're seeing the enterprise movement to hybrid and multi-cloud really start to catch up, I think, with where the Americas have been as well.

So overall, it's been a pretty broad-based, strong market for us, and I think the breadth of our business there is showing up nicely. I think the teams are doing a great job. We're seeing strong channel activity in that business as well. I would say both Europe and Asia were a little bit, sort of a little later in terms of the adoption of the channel, but we're seeing really strong channel uptake there as well.

I would not point to necessarily anything in particular about it, but definitely is a strong market overall.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

And the outlook continues to be good, right? It sounds like it still has legs?

Charles J. Meyers -- President and Chief Executive Officer

It does. Yes, we're definitely not seeing a softening there. We have the luxury of when we look at new projects and the fill rates that go with them, we have deep visibility into our pipeline, we have a really clear understanding about our fill rates have been, and so we're continuing to allocate capital.

We probably had a bit of a peak or a bubble of capital that came through over the last couple of years in Europe, but definitely there is sustained demand there, and so we'll continue to invest in that market as well.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Was there incremental hyperscale leasing volume during the quarter that you could speak to?

Charles J. Meyers -- President and Chief Executive Officer

No, we're still working through in churn, but I would say that we have a very strong pipeline, and so we're relatively fresh off closing the JV, and really getting our pipeline and forecasting and processes really refined, between ourselves and our partner. But I would say that we have had really productive discussions with the 12 or so companies that we see as the primary drivers of hyperscale demand, and so feel like we've got plenty of pipeline to support the JV aspirations.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

And then just lastly, if I may, maybe for Keith, I think you talked about overall best-ever bookings, deal mix and pricing. Can you elaborate on the pricing strength that you're seeing? Is that a function of sort of escalators, renewal spreads that you're seeing, or is this just -- what is it?

Keith D. Taylor -- Chief Financial Officer

Jordan, I just want to make sure, this was one of our top-performing quarters when we look at it across the whole year, but it was our best-ever Q3. There is always a little bit of seasonality that comes into play. No surprise, in our business.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

I did hear that correct. I'm sorry.

Keith D. Taylor -- Chief Financial Officer

Yes. But the real drivers buying that are threefold. Number one is, and you've heard Charles refer to it, is the deal mix is very, very positive. So the average deal size is a lot smaller, and that allows us to enjoy a better return on a per-cabinet basis then we'd otherwise see with a larger deal volume, no surprise.

Second, you've got to add to that the interconnection revenues and the opportunities that that presents itself, but we do a very good job and we have done a very good job of selling this platform. Then you add to that the ancillary services that clearly, they're just starting out, if you will. The attach rate that we would see to revenues on a go-forward basis could be very, very, very attractive. And again, Charles referred to that.

But the third piece is, and I hope it isn't lost on people, when we think about, like we're always having to live within the environment that we operate in and market conditions at times make it very competitive. But when we renegotiated with our customers and to the extent there are price adjustments downwards, I think what you should draw a great comfort for is that you keep on hearing us talk about positive pricing actions. That means those are the price escalators that are pushing pricing upwards.

We tend to be in a very net positive position, and so as a result, you've got three things that are working to your advantage and hence why you see the firmness across all three regions of the world, despite the currency impact that we're seeing, because we report all of this in USD, as you know.

But despite all of that you see very, very firm pricing and I think it's a reflection of who we are, what we do and where we're taking the business. You can't lose sight of the fact of what Charles and all of us believe. The right customer, with the right application, in the right data centers makes a huge difference. If we can mitigate some of that churn by all of the incremental services, you're going to continue to see, I would argue, very firm pricing on a go-forward basis.

Charles J. Meyers -- President and Chief Executive Officer

Yeah, I'd just reinforce that, Jordan, I think that when you look at it, that's one of the reasons why disciplined execution of the strategy. Even though it's hard to drive the growth with smaller deal sizes, it require significant volume and you've got to really drive the selling machine. It's the right thing to do, we think, in terms of generating long-term returns and value for our customers.

So we're really committed to that, and when we look at the broader industry in terms of what people are seeing in terms of release spreads, particularly people who are exposed to the wholesale, primarily the wholesale or even the hyperscale market, and what pricing looks like, current pricing versus what maybe the entry was and what therefore that implies for releasing spreads, I think it's not always a pretty picture.

And so luckily, I think we have limited exposure to that on a relative basis, for sure. And again, what we're seeing is essentially positive spreads because we're able to get the cumulative effect of PIs which we're very successful in implementing in our contract, across a huge number of contracts that are sort of rolling through the system. And even if that means that we do a price adjustment on a single contract, on a net basis in a quarter, we're continuing to actually deliver more than sort of an overall positive price action.

So that's a really important dynamic in our business that I think is quite unique.

Operator

Our next question is from Ari Klein with BMO Capital Markets. Your line is open.

Ari Klein -- BMO Capital Markets -- Analyst

Thanks. Maybe related to the channel strength, how broad-based is that geographically? Is there an opportunity to further build out those relationships in new markets?

And then separately, you are adding some meaningful new capacity next year in the Americas. Would you expect that to drive an acceleration in net cabinet adds in that market?

Charles J. Meyers -- President and Chief Executive Officer

Yeah, great questions. The answer to both is probably a simple yes, but let me give you a little more color. I think channel-wise, I do think we are able to continue to add both geographic coverage and coverage in terms of additional partner types, that I think are going to be able to give us both increased reach.

We, like many channel programs, see a bit of a sort of 80-20 rule, which is we see 20% of our partners delivering a big chunk of our bookings. Although, it's interesting. We're seeing greater productivity across the full base, so we're starting to really get more breadth in the channel. I do think both from a geographic standpoint and a partner-type standpoint, we're going to continue to add.

But our focus is less on adding new partners as it is making our existing partners more productive, and our team is really doing a great job of that. I am super excited about some of our key channel partners. If you look at two of the major partners here in the US, with AT&T and with Verizon both as really critical strategic partners of ours, and now, really they are leaning on our data center portfolio as the key way to deliver into their customers. We're super excited about that, and that's seen a lot of momentum.

And then also working with the hyperscalers themselves. Most of them are really seeing that their customers are saying yes, we want to continue to consume more and more your services, but we're doing it and we're integrating with private infrastructure, and we want that private infrastructure to be immediately proximated to the cloud. That's really driving joint selling with the hyperscalers.

Relative to your second question on the Americas, yes, I do think anytime you add new capacity, I think you tend to see a little bit of uplift. And so, hopefully, we'll see some. We typically contemplate some anchor customers inside of larger phases, and so you might see some lift there. But again, I do think that we'll be able to get a bit of lift on that. What you're seeing, I think, in terms of cabinet adds is really just the really tight discipline on the business, and then a really attractive mix profile.

Ari Klein -- BMO Capital Markets -- Analyst

Great. Thanks for the color.

Charles J. Meyers -- President and Chief Executive Officer

You bet.

Operator

Our last question is from Sami Badri with Credit Suisse. Your line is open.

Sami Badri -- Credit Suisse -- Analyst

Great, thank you. I just wanted to follow up on the prior question. If you could just rank the regions that contributed or basically had over the 30% hurdle rate that you guys reported this quarter from bookings? Which regions were above the 30%? Which ones were below? And then I have a follow-up.

Charles J. Meyers -- President and Chief Executive Officer

I don't know if I have that right off the top of my head. I expect that the Americas was meaningfully above that, and I'm not sure if the others were at or below the 30% in terms of their indexing. But I would say that from a trajectory standpoint, both APAC and Europe are really meaningfully increasing their percentage of bookings.

I would expect they probably were both lower than 30%, and that US was the over-indexed piece there, but I'd have to go back and confirm it. But I would tell you that I think all three regions continue to trend positively in terms of channel bookings as a percentage of overall.

Sami Badri -- Credit Suisse -- Analyst

Got it. And then, at what point do you think would be the limit or the ceiling to this contribution from this kind of sales motion? Would you throw out like 40%, 50% of bookings in a given quarter? Is that where this is going to top out? Maybe you could give me any kind of idea on where we could expect this thing to top out in the future?

Charles J. Meyers -- President and Chief Executive Officer

Yeah, I think it's going to depend a little bit on how our business mix and new product portfolio continues to perform. Over time, I think that we're delivering digitally enabled services in some cases, like network edge. If you look at that service, it is one that should be able to be consumed by our customers directly and via channel partners with relatively limited friction. I think that will enable us to increase the percentage of bookings that are done through our channel.

I would say that we are still, at this point, more of a sell with sort of motion in our channel. We're fine with that. We still get the expanded reach and relationship that those partners are giving us, and it is very attractive economics. But I think that over time, I think we'll have a combination where we're really getting sell-through activity on a broader portfolio.

I've said it in the past, there is no reason it can't be north of 50, for sure. I don't know what the timing of that is. I think it'll depend on a variety of factors. But we're really encouraged by the trajectory we're seeing there, because at the end of the day, the customer is trying to solve a problem, and very often, almost always, that problem means combining the value add of another player with the compelling value proposition of global reach ecosystems, interconnection and service excellence that Equinix brings to the table. Combining those and solving the needs of a customer is what fuels the business.

We're really excited about that. I think there is a lot of upside potential for it.

Sami Badri -- Credit Suisse -- Analyst

Great. Thank you. And then one last question, sorry to keep everybody on this call. On stock-based compensation, Keith, could you probably just give us a little bit more color on how come stock-based comp grew 34% year on year, and now makes up about 4.5% of revenues? Whereas the same time last year, it was more around 3.5% or a bit above that?

Could you just give any color on the recent increase in intensity? It's about the second quarter this happens, so just give us an idea for this quarter?

Keith D. Taylor -- Chief Financial Officer

Yeah, that's what a strong stock price does, as you can appreciate. I mean, think about where the stock was on December of last year and where it is today. It's strong. I think the most important part is we look at not only our competition committee, but certainly Charles and myself and Brandi who runs HR with us, we're always looking at base and the burn, and it is very important, number one, that we look at compensation, and we look at it on a relative basis to what we need to do to attract the right people into the organization. But we also look at the burn and how that affects our financial results. What I'm more referring to here is the AFFO on a per-share basis.

And so all of these things are considered as we figure out how to fund our business and drive value into the share. But no surprise to you, when the stock performs exceedingly well and you're growing a business, stock-based comp as a percent of revenue does go up. But that does not mean that we're diluting our stockholders any more, it's just a reflection of what takes place.

And as you look forward, of course, with the stock where it is, it's all about delivering value to an employee and all else being equal, you would issue less shares next year because of the value of the stock as it is, in its present form.

Those are the thoughts I have. Happy to take it offline with you a little bit further, but there should be no surprise that our stock-based comp has been going up.

Sami Badri -- Credit Suisse -- Analyst

Absolutely. Thank you.

Katrina Rymill -- Vice President of Investor Relations

Great. That concludes our Q3 call. Thank you for joining us.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Katrina Rymill -- Vice President of Investor Relations

Charles J. Meyers -- President and Chief Executive Officer

Keith D. Taylor -- Chief Financial Officer

Philip Cusick -- JPMC -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

Jonathan Atkin -- RBC -- Analyst

Frank Louthan -- Raymond James -- Analyst

Colby Synesael -- Cowen and Company -- Analyst

Michael Rollins -- Citi -- Analyst

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Ari Klein -- BMO Capital Markets -- Analyst

Sami Badri -- Credit Suisse -- Analyst

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