filings.toolsItem 1. Condensed Consolidated Financial Statements
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Item 1. Condensed Consolidated Financial Statements
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
| March 31, 2024 | December 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,527 | $ | 2,096 | |||||||
| Accounts receivable, net of allowance of $17 and $17 | 1,079 | 1,004 | |||||||||
| Other current assets | 561 | 468 | |||||||||
| Total current assets | 3,167 | 3,568 | |||||||||
| Property, plant and equipment, net | 18,511 | 18,601 | |||||||||
| Operating lease right-of-use assets | 1,395 | 1,449 | |||||||||
| Goodwill | 5,621 | 5,737 | |||||||||
| Intangible assets, net | 1,624 | 1,705 | |||||||||
| Other assets | 1,619 | 1,591 | |||||||||
| Total assets | $ | 31,937 | $ | 32,651 | |||||||
| Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 1,077 | $ | 1,187 | |||||||
| Accrued property, plant and equipment | 321 | 398 | |||||||||
| Current portion of operating lease liabilities | 136 | 131 | |||||||||
| Current portion of finance lease liabilities | 165 | 138 | |||||||||
| Current portion of mortgage and loans payable | 7 | 8 | |||||||||
| Current portion of senior notes | 999 | 998 | |||||||||
| Other current liabilities | 186 | 302 | |||||||||
| Total current liabilities | 2,891 | 3,162 | |||||||||
| Operating lease liabilities, less current portion | 1,280 | 1,331 | |||||||||
| Finance lease liabilities, less current portion | 2,058 | 2,123 | |||||||||
| Mortgage and loans payable, less current portion | 654 | 663 | |||||||||
| Senior notes, less current portion | 11,978 | 12,062 | |||||||||
| Other liabilities | 752 | 796 | |||||||||
| Total liabilities | 19,613 | 20,137 | |||||||||
| Commitments and contingencies (Note 9) | |||||||||||
| Redeemable non-controlling interest | 25 | 25 | |||||||||
| Common stockholders’ equity (shares in thousands): | |||||||||||
| Common stock, $0.001 par value per share: 300,000 shares authorized; 95,037 issued and 94,904 outstanding in 2024 and 94,630 issued and 94,479 outstanding in 2023 | — | — | |||||||||
| Additional paid-in capital | 18,779 | 18,596 | |||||||||
| Treasury stock, at cost; 133 shares in 2024 and 151 shares in 2023 | (50) | (56) | |||||||||
| Accumulated dividends | (9,097) | (8,695) | |||||||||
| Accumulated other comprehensive loss | (1,498) | (1,290) | |||||||||
| Retained earnings | 4,165 | 3,934 | |||||||||
| Total stockholders’ equity | 12,299 | 12,489 | |||||||||
| Total liabilities, redeemable non-controlling interest and stockholders’ equity | $ | 31,937 | $ | 32,651 |
See accompanying notes to condensed consolidated financial statements.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except share and per share data)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Revenues | $ | 2,127 | $ | 1,998 | |||||||||||||||||||
| Costs and operating expenses: | |||||||||||||||||||||||
| Cost of revenues | 1,091 | 1,006 | |||||||||||||||||||||
| Sales and marketing | 226 | 210 | |||||||||||||||||||||
| General and administrative | 444 | 395 | |||||||||||||||||||||
| Transaction costs | 2 | 2 | |||||||||||||||||||||
| Loss on asset sales | — | 1 | |||||||||||||||||||||
| Total costs and operating expenses | 1,763 | 1,614 | |||||||||||||||||||||
| Income from operations | 364 | 384 | |||||||||||||||||||||
| Interest income | 24 | 19 | |||||||||||||||||||||
| Interest expense | (104) | (97) | |||||||||||||||||||||
| Other income (expense) | (6) | 8 | |||||||||||||||||||||
| Loss on debt extinguishment | (1) | — | |||||||||||||||||||||
| Income before income taxes | 277 | 314 | |||||||||||||||||||||
| Income tax expense | (46) | (55) | |||||||||||||||||||||
| Net income | $ | 231 | $ | 259 | |||||||||||||||||||
| Earnings per share (“EPS”) attributable to common stockholders: | |||||||||||||||||||||||
| Basic EPS | $ | 2.44 | $ | 2.78 | |||||||||||||||||||
| Weighted-average shares for basic EPS (in thousands) | 94,665 | 92,971 | |||||||||||||||||||||
| Diluted EPS | $ | 2.43 | $ | 2.77 | |||||||||||||||||||
| Weighted-average shares for diluted EPS (in thousands) | 95,156 | 93,340 |
See accompanying notes to condensed consolidated financial statements.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Net income | $ | 231 | $ | 259 | |||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustment (“CTA”) gain (loss), net of tax effects of $0 and $0 | (358) | 157 | |||||||||||||||||||||
| Net investment hedge CTA gain (loss), net of tax effects of $0 and $0 | 130 | (40) | |||||||||||||||||||||
| Unrealized gain (loss) on cash flow hedges, net of tax effects of $(6) and $6 | 20 | (13) | |||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | (208) | 104 | |||||||||||||||||||||
| Comprehensive income, net of tax | $ | 23 | $ | 363 | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 231 | $ | 259 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation | 474 | 405 | |||||||||
| Stock-based compensation | 101 | 99 | |||||||||
| Amortization of intangible assets | 52 | 52 | |||||||||
| Amortization of debt issuance costs and debt discounts | 5 | 5 | |||||||||
| Provision for credit loss allowance | 1 | 3 | |||||||||
| Loss on asset sales | — | 1 | |||||||||
| Loss on debt extinguishment | 1 | — | |||||||||
| Other items | 4 | 4 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (85) | (54) | |||||||||
| Income taxes, net | (9) | 5 | |||||||||
| Other assets | (77) | — | |||||||||
| Operating lease right-of-use assets | 38 | 35 | |||||||||
| Operating lease liabilities | (32) | (34) | |||||||||
| Accounts payable and accrued expenses | (56) | (73) | |||||||||
| Other liabilities | (50) | (15) | |||||||||
| Net cash provided by operating activities | 598 | 692 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of investments | (3) | (24) | |||||||||
| Real estate acquisitions | (17) | (40) | |||||||||
| Purchases of other property, plant and equipment | (707) | (530) | |||||||||
| Proceeds from sale of assets, net of cash transferred | — | 72 | |||||||||
| Net cash used in investing activities | (727) | (522) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from employee equity programs | 48 | 45 | |||||||||
| Payment of dividends | (412) | (326) | |||||||||
| Proceeds from public offering of common stock, net of issuance costs | — | 301 | |||||||||
| Proceeds from senior notes, net of debt discounts | — | 565 | |||||||||
| Repayment of finance lease liabilities | (31) | (36) | |||||||||
| Repayment of mortgage and loans payable | (2) | (3) | |||||||||
| Debt issuance costs | — | (4) | |||||||||
| Net cash provided by (used in) financing activities | (397) | 542 | |||||||||
| Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash | (40) | 24 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (566) | 736 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 2,096 | 1,908 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 1,530 | $ | 2,644 | |||||||
| Cash and cash equivalents | $ | 1,527 | $ | 2,643 | |||||||
| Current portion of restricted cash included in other current assets | 3 | 1 | |||||||||
| Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows | $ | 1,530 | $ | 2,644 |
See accompanying notes to condensed consolidated financial statements.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared by Equinix, Inc. (collectively with its consolidated subsidiaries referred to as "Equinix," the "Company," "we," "our," or "us") and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the financial position and the results of operations for the interim periods presented.
Our condensed consolidated balance sheet data as of December 31, 2023 has been derived from audited consolidated financial statements as of that date. Our condensed consolidated financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission ("SEC"), but omit certain information and footnote disclosure necessary to present the statements in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP" or "GAAP"). For further information, refer to the Consolidated Financial Statements and Notes thereto included in our Form 10-K as filed with the SEC on February 16, 2024. Results for the interim periods are not necessarily indicative of results for the entire fiscal year.
All intercompany accounts and transactions have been eliminated in consolidation.
Income Taxes
We elected to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") beginning with our 2015 taxable year. As a result, we may deduct the dividends paid to our stockholders from taxable income generated by our REIT and qualified REIT subsidiaries ("QRSs"). Our dividends paid deduction generally eliminates the U.S. federal taxable income of our REIT and QRSs, resulting in no U.S. federal income tax due. However, our domestic taxable REIT subsidiaries ("TRSs") are subject to U.S. corporate income taxes on any taxable income generated by them. In addition, our foreign operations are subject to local income taxes regardless of whether the foreign operations are operated as QRSs or TRSs.
We accrue for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as our operating performance, tax law changes and future business acquisitions.
Our effective tax rates were 16.6% and 17.6% for the three months ended March 31, 2024 and 2023, respectively.
Changes to Prior Period
We converted presentation of disclosures from thousands to millions in the first quarter of 2024. Certain rounding adjustments have been made to prior period disclosed amounts.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting ("Topic 280"): Improvements to Reportable Segment Disclosure. The ASU is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and retrospective adoption required. We are currently evaluating the extent of the impact of this ASU on disclosures in our condensed consolidated financial statements.
In December 2023, FASB issued ASU 2023-09, Income Taxes ("Topic 740"): Improvements to Income Tax Disclosures. This ASU is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The ASU is effective for fiscal years beginning after December 15, 2024 and should be applied prospectively, with retrospective application and early adoption both permitted. We are currently evaluating the extent of the impact of this ASU on disclosures in our condensed consolidated financial statements.
Accounting Standards Adopted
Supplier Finance Programs
In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations". This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023. On January 1, 2023, we adopted this ASU and the adoption of this standard did not have an impact on our condensed consolidated financial statements.
Reference Rate Reform
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform ("Topic 848"): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In addition, FASB issued ASU 2021-01, Reference Rate Reform ("Topic 848"), which clarifies the scope of Topic 848. Collectively, the guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2021-01 is effective upon issuance and ASU 2020-04 was effective for all entities as of March 12, 2020, and together remained effective through December 31, 2022. In December 2022, FASB issued ASU 2022-06, Reference Rate Reform ("Topic 848"): Deferral of the Sunset Date of Topic 848. Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, the amendments in this update defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. We adopted these ASUs upon their respective issuances and resulted in no impact on our consolidated financial statements. We will evaluate our debt, derivative and lease contracts that may become eligible for modification relief and may apply the elections prospectively as needed.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
2. Revenue
Contract Balances
The following table summarizes the opening and closing balances of our accounts receivable, net; contract assets, current; contract assets, non-current; deferred revenue, current; and deferred revenue, non-current (in millions):
| Accounts receivable, net (1) | Contract assets, current | Contract assets, non-current | Deferred revenue, current | Deferred revenue, non-current | |||||||||||||||||||||||||
| Beginning balances as of January 1, 2024 | $ | 1,004 | $ | 52 | $ | 86 | $ | 125 | $ | 154 | |||||||||||||||||||
| Closing balances as of March 31, 2024 | 1,079 | 59 | 79 | 129 | 146 | ||||||||||||||||||||||||
| Increase (Decrease) | $ | 75 | $ | 7 | $ | (7) | $ | 4 | $ | (8) |
(1) The net change in our allowance for credit losses was insignificant during the three months ended March 31, 2024.
The difference between the opening and closing balances of our accounts receivable, net, contract assets and deferred revenues primarily results from revenue growth and the timing difference between the satisfaction of our performance obligation and the customer's payment. The amount of revenue recognized during the three months ended March 31, 2024 from the opening deferred revenue balance as of January 1, 2024 was $34 million.
Remaining performance obligations
As of March 31, 2024, approximately $10.0 billion of total revenues, including deferred installation revenues, are expected to be recognized in future periods. Most of our revenue contracts have an initial term varying from one to five years, and thereafter, automatically renew in one-year increments. Included in the remaining performance obligations are contracts that are either under the initial term or under one-year renewal periods. We expect to recognize approximately 70% of our remaining performance obligations as revenues over the next two years, with more revenues expected to be recognized in the first year due to the impact of contract renewals. The remainder of the balance is generally expected to be recognized over the next three to five years. We estimate our remaining performance obligations at a point in time. Actual amounts and timing of revenue recognition may differ from these estimates due to changes in actual deployments dates, contract modifications, renewals and/or terminations.
The remaining performance obligations do not include variable consideration related to unsatisfied performance obligations such as the usage of metered power, service fees from xScaleTM data centers that are based on future events or actual costs incurred in the future, or any contracts that could be terminated without any significant penalties including the majority of interconnection revenues. The remaining performance obligations above include revenues to be recognized in the future related to arrangements where we are considered the lessor.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share ("EPS") for the periods presented ($ in millions except per share data; share data in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net income | $ | 231 | $ | 259 | |||||||||||||||||||
| Weighted-average shares used to calculate basic EPS (in thousands) | 94,665 | 92,971 | |||||||||||||||||||||
| Effect of dilutive securities (in thousands): | |||||||||||||||||||||||
| Employee equity awards | 491 | 369 | |||||||||||||||||||||
| Weighted-average shares used to calculate diluted EPS (in thousands) | 95,156 | 93,340 | |||||||||||||||||||||
| EPS attributable to common stockholders: | |||||||||||||||||||||||
| Basic EPS | $ | 2.44 | $ | 2.78 | |||||||||||||||||||
| Diluted EPS | $ | 2.43 | $ | 2.77 |
We have excluded common stock related to employee equity awards in the diluted EPS calculation above of approximately 360 and 140 shares for the three months ended March 31, 2024 and 2023, respectively, because its effect would be anti-dilutive (in thousands).
4. Equity Method Investments
We hold various equity method investments, primarily joint venture partnership arrangements, in order to invest in certain entities that are in line with our business development objectives, including the development and operation of xScale data centers. Some of these xScale joint ventures are classified as Variable Interest Entities ("VIEs"). The following table summarizes our equity method investments, which were included in other assets on the condensed consolidated balance sheets (in millions):
| Investee | Ownership Percentage | March 31, 2024 | December 31, 2023 | |||||||||||||||||
| EMEA 1 Joint Venture | 20% | $ | 144 | $ | 150 | |||||||||||||||
| VIE Joint Ventures (1) | 20% | 300 | 308 | |||||||||||||||||
| Other | Various | 10 | 10 | |||||||||||||||||
| Total | $ | 454 | $ | 468 |
**(1)**Includes investments in xScale joint ventures in each of our three regions ("Asia-Pacific 1 Joint Venture", "Asia-Pacific 2 Joint Venture", "Asia-Pacific 3 Joint Venture", "EMEA 2 Joint Venture" and "AMER 1 Joint Venture"), which share a similar purpose, design and nature of assets.
Non-VIE Joint Venture
EMEA 1 Joint Venture
We invested in a joint venture in the form of a limited liability partnership to develop and operate xScale data centers in Europe (the "EMEA 1 Joint Venture"). The EMEA 1 Joint Venture is not a VIE given that both equity investors' interests have the characteristics of a controlling financial interest and it is sufficiently capitalized to sustain its operations, requiring additional funding from its partners only when expanding operations. Our share of income and losses of equity method investments from this joint venture was insignificant for the three months ended March 31, 2024 and 2023 and was included in other income (expense) on the condensed consolidated statement of operations.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
We committed to make future equity contributions to the EMEA 1 Joint Venture for funding its future development. As of March 31, 2024, we had future equity contribution commitments of $32 million.
VIE Joint Ventures
In March 2023, we invested in the AMER 1 Joint Venture. Upon formation of the joint venture, we sold the Mexico 3 ("MX3") data center in exchange for total consideration of $75 million. Consideration included $64 million of net cash proceeds, a 20% partnership interest in the AMER 1 Joint Venture with a fair value of $8 million, and $3 million of receivables. We recognized an insignificant loss on the sale of the MX3 data center.
The VIE Joint Ventures are considered VIEs because they do not have sufficient funds from operations to be self-sustaining. While we provide certain management services to their operations and earn fees for the performance of such services, the power to direct the activities of these joint ventures that most significantly impact economic performance is shared equally between us and our partners. These activities include data center construction and operations, sales and marketing, financing, and real estate purchases or sales. Decisions about these activities require the consent of both Equinix and our partners. We concluded that neither party is deemed to have predominant control over the VIE Joint Ventures and neither party is considered to be the primary beneficiary. Our share of losses of equity method investments from these joint ventures were insignificant for the three months ended March 31, 2024 and 2023, respectively. These amounts were included in other income (expense) on the condensed consolidated statement of operations.
The following table summarizes our maximum exposure to loss related to the VIE Joint Ventures as of March 31, 2024 (in millions):
| VIE Joint Ventures | ||||||||
| Equity Investment | $ | 300 | ||||||
| Outstanding Accounts Receivable | 44 | |||||||
| Contract Assets | 56 | |||||||
| Future Equity Contribution Commitments (1) | 42 | |||||||
| Maximum Future Payments under Debt Guarantees (2) | 205 | |||||||
| Total | $ | 647 |
(1)The joint ventures' partners are required to make additional equity contributions proportionately upon certain occurrences, such as a shortfall in capital necessary to complete certain construction phases or make interest payments on their outstanding debt.
(2)In connection with our 20% equity investment in the EMEA 2 Joint Venture, we provided the lenders with our guarantees covering 20% of all payments of principal and interest due under EMEA 2 Joint Venture's credit facility agreements. A portion of the guarantees related to our AMER 1 Joint Venture (see Note 9).
Joint Venture Related Party Transactions
We have lease arrangements and provide various services to the EMEA 1 Joint Venture and the VIE Joint Ventures (collectively, the "Joint Ventures") through multiple agreements, including sales and marketing, development management, facilities management, and asset management. These transactions are generally considered to have been negotiated at arm's length. The following table presents the revenues and expenses from these arrangements with the Joint Ventures in our condensed consolidated statements of operations (in millions):
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| Related Party | Nature of Transaction | 2024 | 2023 | |||||||||||||||||||||||||||||
| EMEA 1 Joint Venture | Revenues | $ | 6 | $ | 7 | |||||||||||||||||||||||||||
| EMEA 1 Joint Venture | Expenses (1) | 4 | 2 | |||||||||||||||||||||||||||||
| VIE Joint Ventures (2) | Revenues | 38 | 22 |
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(1)Balances primarily consist of rent expenses for a 15-year sub-lease agreement with the EMEA 1 Joint Venture for a London data center.
(2)Expenses from transactions with VIE Joint Ventures were insignificant for the three months ended March 31, 2024 and 2023.
We have also sold certain data center facilities to our Joint Ventures and recognized gains or losses on asset sales as described above.
The following table presents the assets and liabilities from related party transactions with the Joint Ventures in our condensed consolidated balance sheets (in millions):
| EMEA 1 Joint Venture | VIE Joint Ventures | |||||||||||||||||||||||||
| Balance Sheet | March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Accounts receivable, net | $ | 26 | $ | 19 | $ | 44 | $ | 23 | ||||||||||||||||||
| Other current assets (1) | 11 | 19 | 52 | 43 | ||||||||||||||||||||||
| Property, plant and equipment, net (2) | 94 | 97 | 90 | 72 | ||||||||||||||||||||||
| Operating lease right-of-use assets | 2 | 2 | 2 | 2 | ||||||||||||||||||||||
| Other assets (1) | — | — | 14 | 21 | ||||||||||||||||||||||
| Other current liabilities | 5 | 9 | 6 | 6 | ||||||||||||||||||||||
| Finance lease liabilities | 109 | 111 | 93 | 75 | ||||||||||||||||||||||
| Operating lease liabilities | 2 | 2 | 2 | 2 | ||||||||||||||||||||||
| Other liabilities (3) | 49 | 50 | — | — |
(1)The balance primarily relates to contract assets and other receivables.
(2)The balance relates to finance lease right-of-use assets.
(3)The balance primarily relates to the obligation to pay for future construction for certain sites sold as a part of the EMEA 1 Joint Venture transaction.
5. Derivatives and Hedging Instruments
Derivatives Designated as Hedging Instruments
Net Investment Hedges
Foreign Currency Debt. We are exposed to the impact of foreign exchange rate fluctuations on the value of investments in our foreign subsidiaries whose functional currencies are other than the U.S. Dollar. In order to mitigate the impact of foreign currency exchange rates, we have entered into various foreign currency debt obligations, which are designated as hedges against our net investments in foreign subsidiaries. As of March 31, 2024 and December 31, 2023, the total principal amounts of foreign currency debt obligations designated as net investment hedges were $423 million and $1.5 billion, respectively.
Foreign Currency Forward Contracts. From time to time, we use foreign currency forward contracts, which are designated as net investment hedges, to hedge against the effect of foreign exchange rate fluctuations on our net investment in our foreign subsidiaries.
Certain of our customer agreements that are priced in currencies different from the functional or local currencies of the parties involved are deemed to have foreign currency forward contracts embedded in them. These embedded derivatives are separated from their host contracts and carried on our balance sheet at their fair value. The majority of these embedded derivatives arise as a result of our foreign subsidiaries pricing their customer contracts in U.S. Dollars. We use these forward contracts embedded within our customer agreements to hedge against the effect of foreign exchange rate fluctuations on our net investment in our foreign subsidiaries.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Cross-currency Interest Rate Swaps. We also utilize cross-currency interest rate swaps, designated as net investment hedges, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt, to hedge the currency exposure associated with our net investment in our foreign subsidiaries.
The effect of net investment hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 was as follows (in millions):
| Amount of gain or (loss) recognized in accumulated other comprehensive income: | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||
| Foreign currency debt | $ | 29 | $ | (24) | |||||||||||||||||||||||||
| Foreign currency forward contracts (included component) (1) | 27 | (1) | |||||||||||||||||||||||||||
| Foreign currency forward contracts (excluded component) (2) | — | 1 | |||||||||||||||||||||||||||
| Cross-currency interest rate swaps (included component) (1) | 76 | (40) | |||||||||||||||||||||||||||
| Cross-currency interest rate swaps (excluded component) (3) | (2) | 24 | |||||||||||||||||||||||||||
| Total | $ | 130 | $ | (40) | |||||||||||||||||||||||||
| Amount of gain or (loss) recognized in earnings: | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| Location of gain (loss) | 2024 | 2023 | |||||||||||||||||||||||||||
| Foreign currency forward contracts (excluded component) (2) | Interest expense | $ | 2 | $ | — | ||||||||||||||||||||||||
| Cross-currency interest rate swaps (excluded component) (3) | Interest expense | 8 | 12 | ||||||||||||||||||||||||||
| Total | $ | 10 | $ | 12 | |||||||||||||||||||||||||
(1)Included component represents foreign exchange spot rates.
(2)Excluded component represents foreign currency forward points.
(3)Excluded component represents cross-currency basis spread and interest rates.
Cash Flow Hedges
Foreign Currency Forward and Option Contracts. We hedge our foreign currency transaction exposure for forecasted revenues and expenses in our EMEA region between the U.S. Dollar and foreign currencies, primarily the British Pound and the Euro. The foreign currency forward and option contracts that we use to hedge this exposure are designated as cash flow hedges.
We enter into intercompany hedging instruments ("intercompany derivatives") with our wholly-owned subsidiaries in order to hedge certain forecasted revenues and expenses denominated in currencies other than the U.S. Dollar. Simultaneously, we enter into derivative contracts with unrelated third parties to externally hedge the net exposure created by such intercompany derivatives.
As of March 31, 2024, our foreign currency cash flow hedge instruments had maturity dates ranging from April 2024 to December 2025 and we had a net gain of $10 million recorded within accumulated other comprehensive income (loss) to be reclassified to revenues and expenses for cash flow hedges that will mature in the next 12 months. As of December 31, 2023, our foreign currency cash flow hedge instruments had maturity dates ranging from January 2024 to December 2025 and we had a net loss of $7 million recorded within accumulated other comprehensive income (loss) to be reclassified to revenues and expenses for cash flow hedges that will mature in the next 12 months.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Cross-currency Interest Rate Swaps. We also use cross-currency swaps, which are designated as cash flow hedges, to manage the foreign currency exposure associated with a portion of our foreign currency-denominated debt.
Interest Rate Locks. We hedge the interest rate exposure created by anticipated fixed rate debt issuances through the use of treasury locks and swap locks (collectively, interest rate locks), which are designated as cash flow hedges. As of both March 31, 2024 and December 31, 2023, we had no interest rate locks outstanding. When interest rate locks are settled, any gain or loss from the transactions is deferred and included as a component of other comprehensive income (loss) and is amortized to interest expense over the term of the forecasted hedged transaction which is equivalent to the term of the interest rate locks. As of both March 31, 2024 and December 31, 2023, we had an insignificant net gain recorded within accumulated other comprehensive income (loss) to be reclassified to interest expense in the next 12 months for interest rate locks.
The effect of cash flow hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 was as follows (in millions):
| Amount of gain or (loss) recognized in accumulated other comprehensive income: | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||
| Foreign currency forward and option contracts (included component) (1) | $ | 27 | $ | (13) | |||||||||||||||||||||||||
| Cross-currency interest rate swaps | (2) | (2) | |||||||||||||||||||||||||||
| Interest rate locks | 1 | (4) | |||||||||||||||||||||||||||
| Total | $ | 26 | $ | (19) | |||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from accumulated other comprehensive income to income: | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| Location of gain (loss) | 2024 | 2023 | |||||||||||||||||||||||||||
| Foreign currency forward contracts | Revenues | $ | (3) | $ | 12 | ||||||||||||||||||||||||
| Foreign currency forward contracts | Costs and operating expenses | 2 | (3) | ||||||||||||||||||||||||||
| Total | $ | (1) | $ | 9 | |||||||||||||||||||||||||
(1)Included component represents foreign exchange spot rates.
Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. As described above, certain of our customer agreements that are priced in currencies different from the functional or local currencies of the parties involved are deemed to have foreign currency forward contracts embedded in them.
Economic Hedges of Embedded Derivatives. We use foreign currency forward contracts to manage the foreign exchange risk associated with our customer agreements that are priced in currencies different from the functional or local currencies of the parties involved ("economic hedges of embedded derivatives"). Foreign currency forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Foreign Currency Forward Contracts. We also use foreign currency forward contracts to manage the foreign exchange risk associated with certain foreign currency-denominated monetary assets and liabilities. As a result of foreign currency fluctuations, the U.S. Dollar equivalent values of our foreign currency-denominated monetary assets and liabilities change. Gains and losses on these contracts are included in other income (expense), on a net basis, along with the foreign currency gains and losses of the related foreign currency-denominated monetary assets and liabilities associated with these foreign currency forward contracts.
Cross-currency Interest Rate Swaps. We may, from time to time, elect to de-designate a portion of our cross-currency interest rate swaps previously designated as net investment hedges. Gains and losses subsequent to the de-designation will be recognized in earnings to offset remeasurement gains and losses from foreign currency monetary assets and liabilities.
The following table presents the effect of derivatives not designated as hedging instruments in our condensed consolidated statements of operations (in millions):
| Amount of gain or (loss) recognized in earnings: | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| Location of gain (loss) | 2024 | 2023 | |||||||||||||||||||||||||||
| Foreign currency forward contracts | Other income (expense) | 76 | 11 | ||||||||||||||||||||||||||
| Total | $ | 76 | $ | 11 |
Notional Amounts of Derivative Instruments
The notional amounts of our outstanding derivative instruments as of March 31, 2024 and December 31, 2023 were as follows (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Designated as hedging instruments: | |||||||||||
| Net investment hedges | |||||||||||
| Foreign currency forward contracts | $ | 1,004 | $ | 887 | |||||||
| Cross-currency interest rate swaps | 3,121 | 3,121 | |||||||||
| Cash flow hedges | |||||||||||
| Foreign currency forward and option contracts | 1,187 | 1,154 | |||||||||
| Cross-currency interest rate swaps | 280 | 280 | |||||||||
| Total designated as hedging | 5,592 | 5,442 | |||||||||
| Not designated as hedging instruments: | |||||||||||
| Foreign currency forward contracts | 2,736 | 3,053 | |||||||||
| Cross-currency interest rate swaps | 661 | 1,061 | |||||||||
| Total not designated as hedging | 3,397 | 4,114 | |||||||||
| Total Derivatives | $ | 8,989 | $ | 9,556 |
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Fair Value of Derivative Instruments
The following table presents the fair value of derivative instruments recognized in our condensed consolidated balance sheets, excluding accrued interest, as of March 31, 2024 and December 31, 2023 (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Assets (1) | Liabilities (2) | Assets (1) | Liabilities (2) | ||||||||||||||||||||
| Designated as hedging instruments: | |||||||||||||||||||||||
| Net investment hedges | |||||||||||||||||||||||
| Foreign currency forward contracts | $ | 19 | $ | 2 | $ | 3 | $ | 17 | |||||||||||||||
| Cross-currency interest rate swaps | 209 | — | 132 | — | |||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||
| Foreign currency forward and option contracts | 15 | 2 | 2 | 14 | |||||||||||||||||||
| Cross-currency interest rate swaps | 33 | — | 36 | — | |||||||||||||||||||
| Total designated as hedging | 276 | 4 | 173 | 31 | |||||||||||||||||||
| Not designated as hedging instruments: | |||||||||||||||||||||||
| Foreign currency forward contracts | 23 | 3 | 4 | 70 | |||||||||||||||||||
| Cross-currency interest rate swaps | 79 | 13 | 80 | — | |||||||||||||||||||
| Total not designated as hedging | 102 | 16 | 84 | 70 | |||||||||||||||||||
| Total Derivatives | $ | 378 | $ | 20 | $ | 257 | $ | 101 |
(1)As presented in our condensed consolidated balance sheets within other current assets and other assets.
(2)As presented in our condensed consolidated balance sheets within other current liabilities and other liabilities.
Offsetting Derivative Assets and Liabilities
We enter into master netting agreements with our counterparties for transactions other than embedded derivatives to mitigate credit risk exposure to any single counterparty. Master netting agreements allow for individual derivative contracts with a single counterparty to offset in the event of default. For presentation on the condensed consolidated balance sheets, we do not offset fair value amounts recognized for derivative instruments or the accrued interest related to cross-currency interest rate swaps under master netting arrangements. The following table presents information related to these offsetting arrangements, inclusive of accrued interest, as of March 31, 2024 and December 31, 2023 (in millions):
| Gross Amounts Offset in Condensed Consolidated Balance Sheets | |||||||||||||||||||||||||||||
| Gross Amounts | Gross Amounts Offset in the Balance Sheet | Net Amounts | Gross Amounts not Offset in the Balance Sheet | Net | |||||||||||||||||||||||||
| March 31, 2024 | |||||||||||||||||||||||||||||
| Derivative assets | $ | 394 | $ | — | $ | 394 | $ | (29) | $ | 365 | |||||||||||||||||||
| Derivative liabilities | 31 | — | 31 | (29) | 2 | ||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
| Derivative assets | $ | 282 | $ | — | $ | 282 | $ | (56) | $ | 226 | |||||||||||||||||||
| Derivative liabilities | 112 | — | 112 | (56) | 56 |
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
6. Fair Value Measurements
We perform fair value measurements in accordance with ASC 820, Fair Value Measurement, which establishes three levels of inputs that we use to measure fair value:
- Level 1: quoted prices in active markets for identical assets or liabilities.
*•*Level 2: observable inputs (e.g., spot rates and other data from the third-party pricing vendors for our derivative instruments, credit rating and current prices of similar debt instruments that are publicly traded for our debt instruments) other than quoted market prices included within Level 1 that are observable, either directly or indirectly, for the assets or liabilities.
- Level 3: unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.
The fair value of certain financial assets and liabilities as of March 31, 2024 and December 31, 2023 were as follows (in millions):
| March 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Fair Value | Fair Value Measurement Using | Fair Value | Fair Value Measurement Using | |||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 1 | Level 2 | |||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
| Money market and deposit accounts (1) | $ | 1,006 | $ | 1,006 | $ | — | $ | 1,604 | $ | 1,604 | $ | — | ||||||||||||||||||||||||||
| Derivative instruments (2) | 378 | — | 378 | 257 | — | 257 | ||||||||||||||||||||||||||||||||
| Total | $ | 1,384 | $ | 1,006 | $ | 378 | $ | 1,861 | $ | 1,604 | $ | 257 | ||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
| Derivative instruments (2) | $ | 20 | $ | — | $ | 20 | $ | 101 | $ | — | $ | 101 | ||||||||||||||||||||||||||
| Mortgage and loans payable (3) | 672 | — | 672 | 684 | — | 684 | ||||||||||||||||||||||||||||||||
| Senior notes (3) | 11,454 | 10,935 | 519 | 11,740 | 11,166 | 574 | ||||||||||||||||||||||||||||||||
| Total | $ | 12,146 | $ | 10,935 | $ | 1,211 | $ | 12,525 | $ | 11,166 | $ | 1,359 |
(1)Amounts are included within cash and cash equivalents in the condensed consolidated balance sheets, and are measured at fair value.
(2)Amounts are included within other current assets, other assets, other current liabilities and other liabilities in the condensed consolidated balance sheets, and are measured at fair value. Refer to Note 5.
(3)Amounts include current and non-current portions and are measured at amortized cost. Refer to Note 8.
We did not have any significant Level 3 financial assets or financial liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
7. Leases
There were no significant lease transactions during the three months ended March 31, 2024.
Lease Expenses
The components of lease expenses are as follows (in millions):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Finance lease cost | |||||||||||||||||||||||
| Amortization of right-of-use assets (1) | $ | 48 | $ | 43 | |||||||||||||||||||
| Interest on lease liabilities | 28 | 28 | |||||||||||||||||||||
| Total finance lease cost | 76 | 71 | |||||||||||||||||||||
| Operating lease cost | 56 | 53 | |||||||||||||||||||||
| Variable lease cost | 16 | 13 | |||||||||||||||||||||
| Total lease cost | $ | 148 | $ | 137 |
(1) Amortization of right-of-use assets is included within depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations.
Other Information
Other information related to leases is as follows (in millions, except years and percent):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from finance leases | $ | 26 | $ | 27 | |||||||
| Operating cash flows from operating leases | 50 | 52 | |||||||||
| Financing cash flows from finance leases | 31 | 36 | |||||||||
| Right-of-use assets obtained in exchange for lease obligations: (1) | |||||||||||
| Finance leases | $ | 30 | $ | — | |||||||
| Operating leases | 4 | 5 | |||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| Weighted-average remaining lease term - finance leases (2) | 14 years | 14 years | |||||||||
| Weighted-average remaining lease term - operating leases (2) | 12 years | 12 years | |||||||||
| Weighted-average discount rate - finance leases | 6 | % | 6 | % | |||||||
| Weighted-average discount rate - operating leases | 5 | % | 5 | % | |||||||
| Finance lease right-of-use assets (3) | $ | 2,136 | $ | 2,184 |
(1) Represents all non-cash changes in right-of-use assets.
(2) Includes lease renewal options that are reasonably certain to be exercised.
(3) As of March 31, 2024 and December 31, 2023, we recorded accumulated amortization of finance lease right-of-use assets of $889 million and $870 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Maturities of Lease Liabilities
Maturities of lease liabilities as of March 31, 2024 are as follows (in millions):
| Operating Leases | Finance Leases | Total | |||||||||||||||
| 2024 (9 months remaining) | $ | 143 | $ | 188 | $ | 331 | |||||||||||
| 2025 | 203 | 281 | 484 | ||||||||||||||
| 2026 | 195 | 245 | 440 | ||||||||||||||
| 2027 | 176 | 250 | 426 | ||||||||||||||
| 2028 | 150 | 238 | 388 | ||||||||||||||
| Thereafter | 1,075 | 2,077 | 3,152 | ||||||||||||||
| Total lease payments | 1,942 | 3,279 | 5,221 | ||||||||||||||
| Less imputed interest | (526) | (1,056) | (1,582) | ||||||||||||||
| Total | $ | 1,416 | $ | 2,223 | $ | 3,639 |
We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of March 31, 2024. These leases will commence between year 2024 and 2026, with lease terms of 3 to 33 years and total lease commitments of approximately $533 million.
8. Debt Facilities
Mortgage and Loans Payable
As of March 31, 2024 and December 31, 2023, our mortgage and loans payable consisted of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Term loans | $ | 635 | $ | 643 | |||||||
| Mortgage payable and other loans payable | 27 | 29 | |||||||||
| 662 | 672 | ||||||||||
| Less amount representing unamortized debt issuance costs and debt discounts | (1) | (1) | |||||||||
| 661 | 671 | ||||||||||
| Less current portion | (7) | (8) | |||||||||
| Total | $ | 654 | $ | 663 |
Senior Credit Facility and Refinancing
In 2022, we entered into a credit agreement (the "2022 Credit Agreement") with a group of lenders for a senior unsecured credit facility, comprised of a $4.0 billion senior unsecured multicurrency revolving credit facility (the "2022 Revolving Facility") and a £500 million senior unsecured term loan facility (the "2022 Term Loan Facility" and, together with the 2022 Revolving Facility, collectively, the "2022 Credit Facilities"). The total debt issuance costs for the 2022 Revolving Facility and 2022 Term Loan Facility are $7 million and $1 million, respectively. We borrowed the full £500 million available under the 2022 Term Loan Facility, or approximately $677 million at the exchange rate in effect on that date.
The 2022 Credit Facilities have a maturity date of January 7, 2027. We may borrow, repay and reborrow amounts under the 2022 Revolving Facility until the Maturity Date, at which time all amounts outstanding under the 2022 Revolving Facility must be repaid in full. The term loan made under the 2022 Term Loan Facility has no scheduled principal amortization and must be repaid in full on the maturity date. The 2022 Revolving Credit Facility provides for extensions of credit in U.S. Dollars as well as certain other foreign currencies. Borrowings under the 2022 Revolving Facility bear interest at a rate based on the daily Secured Overnight Financing Rate ("SOFR"), term SOFR, an alternative currency daily rate, or an alternative currency term rate plus a spread adjustment, plus a margin that can vary from 0.555% to 1.200%. Borrowings under the 2022 Term Loan Facility bear interest at a rate
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
based on the daily Sterling Overnight Index Average ("SONIA"), plus a spread adjustment, plus a margin that can vary from 0.625% to 1.450%. We are also required to pay a quarterly letter of credit fee on the face amount of each letter of credit, which fee is based on the same margin that applies from time to time to SOFR-indexed borrowings under the revolving credit line. The margin is dependent on either our consolidated net leverage ratio or our credit ratings. We are also required to pay a quarterly facility fee ranging from 0.07% to 0.25% per annum. The 2022 Credit Agreement contains customary covenants, including financial ratio covenants that are required to be maintained as of each quarter end.
As of March 31, 2024 and December 31, 2023, the total amounts outstanding under the 2022 Term Loan Facility, net of debt issuance costs, were $630 million and $636 million, respectively.
As of March 31, 2024, we had 45 irrevocable letters of credit totaling $82 million issued and outstanding under the 2022 Revolving Facility, with approximately $3.9 billion remaining available to borrow under the 2022 Revolving Facility. As of both March 31, 2024 and December 31, 2023, unamortized debt issuance costs for the 2022 Revolving Facility of $5 million were presented in other assets in the condensed consolidated balance sheets.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Senior Notes
As of March 31, 2024 and December 31, 2023, our senior notes consisted of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Amount | Effective Rate | Amount | Effective Rate | ||||||||||||||||||||
| 2.625% Senior Notes due 2024 | $ | 1,000 | 2.79 | % | $ | 1,000 | 2.79 | % | |||||||||||||||
| 1.250% Senior Notes due 2025 | 500 | 1.46 | % | 500 | 1.46 | % | |||||||||||||||||
| 1.000% Senior Notes due 2025 | 700 | 1.18 | % | 700 | 1.18 | % | |||||||||||||||||
| 2.900% Senior Notes due 2026 | 600 | 3.04 | % | 600 | 3.04 | % | |||||||||||||||||
| 1.450% Senior Notes due 2026 | 700 | 1.64 | % | 700 | 1.64 | % | |||||||||||||||||
| 0.250% Euro Senior Notes due 2027 | 540 | 0.45 | % | 552 | 0.45 | % | |||||||||||||||||
| 1.800% Senior Notes due 2027 | 500 | 1.96 | % | 500 | 1.96 | % | |||||||||||||||||
| 1.550% Senior Notes due 2028 | 650 | 1.67 | % | 650 | 1.67 | % | |||||||||||||||||
| 2.000% Senior Notes due 2028 | 400 | 2.21 | % | 400 | 2.21 | % | |||||||||||||||||
| 2.875% Swiss Franc Senior Notes due 2028 | 333 | 3.05 | % | 357 | 3.05 | % | |||||||||||||||||
| 3.200% Senior Notes due 2029 | 1,200 | 3.30 | % | 1,200 | 3.30 | % | |||||||||||||||||
| 2.150% Senior Notes due 2030 | 1,100 | 2.27 | % | 1,100 | 2.27 | % | |||||||||||||||||
| 2.500% Senior Notes due 2031 | 1,000 | 2.65 | % | 1,000 | 2.65 | % | |||||||||||||||||
| 3.900% Senior Notes due 2032 | 1,200 | 4.07 | % | 1,200 | 4.07 | % | |||||||||||||||||
| 1.000% Euro Senior Notes due 2033 | 646 | 1.18 | % | 662 | 1.18 | % | |||||||||||||||||
| 2.000% Japanese Yen Senior Notes Series A due 2035 | 249 | 2.07 | % | 267 | 2.07 | % | |||||||||||||||||
| 2.130% Japanese Yen Senior Notes Series C due 2035 | 98 | 2.20 | % | 105 | 2.20 | % | |||||||||||||||||
| 2.370% Japanese Yen Senior Notes Series B due 2043 | 68 | 2.42 | % | 72 | 2.42 | % | |||||||||||||||||
| 2.570% Japanese Yen Senior Notes Series D due 2043 | 30 | 2.62 | % | 32 | 2.62 | % | |||||||||||||||||
| 2.570% Japanese Yen Senior Notes Series E due 2043 | 66 | 2.62 | % | 71 | 2.62 | % | |||||||||||||||||
| 3.000% Senior Notes due 2050 | 500 | 3.09 | % | 500 | 3.09 | % | |||||||||||||||||
| 2.950% Senior Notes due 2051 | 500 | 3.00 | % | 500 | 3.00 | % | |||||||||||||||||
| 3.400% Senior Notes due 2052 | 500 | 3.50 | % | 500 | 3.50 | % | |||||||||||||||||
| 13,080 | 13,168 | ||||||||||||||||||||||
| Less amount representing unamortized debt issuance costs and debt discounts | (103) | (108) | |||||||||||||||||||||
| 12,977 | 13,060 | ||||||||||||||||||||||
| Less current portion | (999) | (998) | |||||||||||||||||||||
| Total | $ | 11,978 | $ | 12,062 |
2.000% Japanese Yen Senior Notes Series A due 2035, 2.370% Japanese Yen Senior Notes Series B due 2043, 2.130% Japanese Yen Senior Notes Series C due 2035, 2.570% Japanese Yen Senior Notes Series D due 2043 and 2.570% Japanese Yen Senior Notes Series E due 2043 (collectively, the "Japanese Yen Senior Notes")
On February 16, 2023, we issued ¥10.0 billion, or approximately $75 million in U.S. dollars, at the exchange rate in effect on that date, aggregate principal amount of 2.570% senior notes due March 8, 2043.
On March 8, 2023, and at the exchange rate in effect on that date, we issued ¥37.7 billion, or approximately $275 million in U.S. dollars, aggregate principal amount of 2.000% senior notes due March 8, 2035, ¥10.2 billion, or approximately $75 million in U.S. dollars, aggregate principal amount of 2.370% senior notes due March 8, 2043, ¥14.8 billion, or approximately $108 million in U.S. dollars, aggregate principal amount of 2.130% senior notes due March 8, 2035 and ¥4.6 billion, or approximately $34 million in U.S. dollars, aggregate principal amount of 2.570% senior notes due March 8, 2043.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Interest on the notes is payable semi-annually in arrears on March 8 and September 8 of each year, commencing on September 8, 2023. Total debt issuance costs related to the Japanese Yen Senior Notes were $4 million.
2.875% Swiss Franc Senior Notes due 2028
On September 12, 2023, we issued CHF300 million, or approximately $337 million in U.S. dollars, at the exchange rate in effect on that date, aggregate principal amount of 2.875% senior notes due September 12, 2028 (the "2028 CHF Notes"). Interest on the notes is payable annually in arrears on September 12 of each year, commencing on September 12, 2024. Total debt issuance costs related to the 2028 CHF Notes were $3 million.
Maturities of Debt Instruments
The following table sets forth maturities of our debt, including mortgage and loans payable, and senior notes, gross of debt issuance costs and debt discounts, as of March 31, 2024 (in millions):
| Years ending: | |||||
| 2024 (9 months remaining) | $ | 1,005 | |||
| 2025 | 1,206 | ||||
| 2026 | 1,306 | ||||
| 2027 | 1,675 | ||||
| 2028 | 1,387 | ||||
| Thereafter | 7,163 | ||||
| Total | $ | 13,742 |
Interest Charges
The following table sets forth total interest costs incurred, and total interest costs capitalized for the periods presented (in millions):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Interest expense | $ | 104 | $ | 97 | |||||||||||||||||||
| Interest capitalized | 9 | 6 | |||||||||||||||||||||
| Interest charges incurred | $ | 113 | $ | 103 |
Total interest paid in cash, net of capitalized interest, during the three months ended March 31, 2024 and 2023 was $92 million and $98 million, respectively.
9. Commitments and Contingencies
Purchase Commitments
As a result of our various IBX data center expansion projects, as of March 31, 2024, we were contractually committed for approximately $2.1 billion of unaccrued capital expenditures, primarily for IBX infrastructure equipment not yet delivered and labor not yet provided, in connection with the work necessary to open these IBX data centers and make them available to our customers for installation. We also had numerous other, non-capital purchase commitments in place as of March 31, 2024, such as commitments to purchase power in select locations through the remainder of 2024 and thereafter, and other open purchase orders for goods, or services to be delivered or provided during the remainder of 2024 and thereafter. Such other miscellaneous purchase commitments totaled approximately $1.7 billion as of March 31, 2024. For further information on our equity method investments contribution commitments and lease commitments, see Note 4 and Note 7, respectively, above.
Contingent Liabilities
We estimate our exposure on certain liabilities, such as indirect and property taxes, based on the best information available at the time of determination. With respect to real and personal property taxes, we record what
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
we can reasonably estimate based on prior payment history, assessed value by the assessor's office, current landlord estimates or estimates based on current or changing fixed asset values in each specific municipality, as applicable. However, there are circumstances beyond our control whereby the underlying value of the property or basis for which the tax is calculated on the property may change, such as a landlord selling the underlying property of one of our IBX data center leases or a municipality changing the assessment value in a jurisdiction and, as a result, our property tax obligations may vary from period to period. Based upon the most current facts and circumstances, we make the necessary property tax accruals for each of our reporting periods. However, revisions in our estimates of the potential or actual liability could materially impact our financial position, results of operations or cash flows.
Our indirect and property tax filings in various jurisdictions are subject to examination by local tax authorities. Although we believe that we have adequately assessed and accounted for our potential tax liabilities, and that our tax estimates are reasonable, there can be no certainty that additional taxes will not be due upon audit of our tax returns or as a result of further changes to the tax laws and interpretations thereof. For example, we are currently undergoing several indirect tax audits and appealing tentative assessments in Brazil. The final settlement of the audits and the outcomes of the appeals are uncertain and may not be resolved in our favor. We regularly assess the likelihood of adverse outcomes resulting from these examinations and appeals that would affect the adequacy of our tax accruals for each of the reporting periods. If any issues arising from the tax examinations and appeals are resolved in a manner inconsistent with our expectations, the revision of the estimates of the potential or actual liabilities could materially impact our financial position, results of operations, or cash flows.
From time to time, we may have certain contingent liabilities that arise in the ordinary course of our business activities. Contingent liabilities are accrued when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.
On March 20, 2024, the Company received a subpoena from the U.S. Attorney’s Office for the Northern District of California. On April 30, 2024, the Company received a subpoena from the Securities and Exchange Commission. The Company is cooperating fully with both government agencies.
On May 2, 2024, a putative stockholder class action was filed against the Company and certain of our officers in the United States District Court for the Northern District of California. The named plaintiff alleges violations of Section 10(b) of the Exchange Act and Securities and Exchange Commission Rule 10b-5, and Section 20(a) of the Exchange Act, on the basis that the defendants allegedly made false and misleading statements about our business, results, internal controls, and accounting practices between May 3, 2019 and March 24, 2024. The lawsuit seeks, among other relief, a determination that the alleged claims may be asserted on a class-wide basis, unspecified damages, attorneys' fees, other expenses and costs. We intend to defend the lawsuit.
These matters are subject to uncertainties, and we cannot predict the outcome, nor reasonably estimate a range of loss or penalties, if any, relating to these matters.
In the opinion of management, there are no other pending claims for which the outcome is expected to result in a material adverse effect in the financial position, results of operations or cash flows.
Employment Agreements
We have entered into a severance agreement with certain of our executive officers that provides for a severance payment equal to 100% of the executive officer's annual base salary and maximum bonus in the event his or her employment is terminated for any reason other than cause or he or she voluntarily resigns under certain circumstances as described in the agreement, or 200% of the executive officer's annual base salary and maximum bonus in the event this occurs after a change-in-control of our company. For certain other executive officers, these benefits are only triggered after a change-in-control of our company, in which case the officer is entitled to 200% of the executive officer's annual base salary and maximum bonus. In addition, under these agreements, the executive officer is entitled to the payment of his or her monthly health care premiums under the Consolidated Omnibus Budget Reconciliation Act for up to 24 months.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Indemnification and Guarantor Arrangements
As permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was serving, at our request in such capacity. The term of the indemnification period is for the officer's or director's lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, in the event of a legal action, we have purchased insurance that could limit our exposure, depending upon the details of the claim and the coverage provided. As a result, our estimated fair value of these indemnification agreements is minimal. We have no liabilities recorded for these agreements as of March 31, 2024.
We enter into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, we may agree to indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally a business partner or a customer, in connection with matters such as any U.S. patent, or any copyright or other intellectual property infringement claim by any third party with respect to our offerings; a breach of confidentiality obligations and certain other contractual warranties; our gross negligence, willful misconduct, fraud, misrepresentation, or violation of law; and/or if we cause tangible property damage, personal injury or death. The term of any such indemnification agreement is generally perpetual after execution of the agreement. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have never incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. In addition, in the event of a legal action, we have purchased insurance that could limit our exposure, depending upon the details of the claim and the coverage provided. As a result, our estimated fair value of these agreements is minimal. We do not have significant liabilities recorded for these agreements as of March 31, 2024.
We enter into arrangements with certain business partners, whereby the business partner agrees to provide services as a subcontractor for our installations. Accordingly, we enter into standard indemnification agreements with our customers, whereby we indemnify them for certain acts, such as personal property damage, by our subcontractors. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have never incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. In addition, in the event of a legal action, we have purchased insurance that could limit our exposure, depending upon the details of the claim and the coverage provided. As a result, our estimated fair value of these agreements is minimal. We do not have significant liabilities recorded for these agreements as of March 31, 2024.
We have service level commitment obligations to certain of our customers. As a result, service interruptions or significant equipment damage in our IBX data centers, whether or not within our control, could result in obligations to these customers. While we have purchased insurance that could limit our exposure, our liability insurance may not be adequate to cover those expenses. In addition, any loss of service, equipment damage or inability to meet our service level commitment obligations could reduce the confidence our customers have in us, and could consequently impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenues and our operating results. We generally have the ability to determine such service level credits prior to the associated revenue being recognized. We do not have significant liabilities in connection with service level credits as of March 31, 2024.
Concurrent with the closing of the EMEA 2 Joint Venture, the EMEA 2 Joint Venture entered into credit facility agreements with a group of lenders under which it could borrow up to approximately $1.4 billion in total at the exchange rate in effect on March 31, 2024, with such facilities maturing in 2025 and 2026. In connection with our 20% equity investment in the EMEA 2 Joint Venture, we provided the lenders with guarantees covering 20% of all payments of principal and interest due and payable by the EMEA 2 Joint Venture under these credit facilities, up to a limit of $295 million in total at the exchange rate in effect on March 31, 2024. As of March 31, 2024, the maximum potential amount of our future payments under these guarantees was approximately $205 million, at the exchange rates in effect on that date. We and our co-investor entered into an ancillary agreement to allocate funding under the credit facility agreement for use by our AMER 1 Joint Venture. As of March 31, 2024, $9 million of the guarantees related to the AMER 1 Joint Venture. Our estimated fair value of these guarantees is minimal as the likelihood of making a payout under the guarantees is remote.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
10. Stockholders' Equity
Stockholders' Equity Rollforward
The following tables provide a rollforward of our stockholders' equity for the three months ended March 31, 2024 and 2023 ($ in millions except per share data; share data in thousands):
| Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Dividends | AOCI (Loss) | Retained Earnings | Total Common Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | 94,630 | $ | — | (151) | $ | (56) | $ | 18,596 | $ | (8,695) | $ | (1,290) | $ | 3,934 | $ | 12,489 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | 231 | 231 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | (208) | — | (208) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and release of treasury stock for employee equity awards | 407 | — | 18 | 6 | 42 | — | — | — | 48 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend distribution on common stock, $4.26 per share | — | — | — | — | — | (402) | — | — | (402) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Settlement of accrued dividends on vested equity awards | — | — | — | — | — | (1) | — | — | (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued dividends on unvested equity awards | — | — | — | — | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of estimated forfeitures | — | — | — | — | 141 | — | — | — | 141 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | 95,037 | $ | — | (133) | $ | (50) | $ | 18,779 | $ | (9,097) | $ | (1,498) | $ | 4,165 | $ | 12,299 | |||||||||||||||||||||||||||||||||||||||||||||||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
| Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Dividends | AOCI (Loss) | Retained Earnings | Total Common Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | 92,814 | $ | — | (193) | $ | (72) | $ | 17,320 | $ | (7,318) | $ | (1,389) | $ | 2,965 | $ | 11,506 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | 259 | 259 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | 104 | — | 104 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and release of treasury stock for employee equity awards | 420 | — | 16 | 6 | 38 | — | — | — | 44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under ATM Program | 458 | — | — | — | 301 | — | — | — | 301 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend distribution on common stock, $3.41 per share | — | — | — | — | — | (319) | — | — | (319) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued dividends on unvested equity awards | — | — | — | — | — | (2) | — | — | (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of estimated forfeitures | — | — | — | — | 136 | — | — | — | 136 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | 93,692 | $ | — | (177) | $ | (66) | $ | 17,795 | $ | (7,639) | $ | (1,285) | $ | 3,224 | $ | 12,029 | |||||||||||||||||||||||||||||||||||||||||||||||||
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, by component are as follows (in millions):
| Balance as of December 31, 2023 | Net Change | Balance as of March 31, 2024 | ||||||||||||||||||||||||
| Foreign currency translation adjustment (“CTA”) loss | $ | (1,588) | $ | (358) | $ | (1,946) | ||||||||||||||||||||
| Unrealized gain on cash flow hedges (1) | 15 | 20 | 35 | |||||||||||||||||||||||
| Net investment hedge CTA gain (1) | 284 | 130 | 414 | |||||||||||||||||||||||
| Net actuarial loss on defined benefit plans (2) | (1) | — | (1) | |||||||||||||||||||||||
| Total accumulated other comprehensive loss | $ | (1,290) | $ | (208) | $ | (1,498) |
(1)Refer to Note 5 for a discussion of the amounts reclassified from accumulated other comprehensive loss to net income.
(2)We have two defined benefit pension plans covering all employees in two countries where such plans are mandated by law. We do not have any defined benefit plans in any other countries.
Changes in foreign currencies can have a significant impact to our condensed consolidated balance sheets (as evidenced above in our foreign currency translation loss), as well as its condensed consolidated results of operations, as amounts in foreign currencies are generally translated into more U.S. Dollars when the U.S. Dollar weakens or fewer U.S. Dollars when the U.S. Dollar strengthens. As of March 31, 2024, the U.S. Dollar was generally stronger relative to certain of the currencies of the foreign countries in which we operate as compared to December 31, 2023. Because of this, the U.S. Dollar had an overall unfavorable impact on our condensed consolidated financial position because the foreign denominations translated into fewer U.S. Dollars as evidenced by an increase in foreign currency translation loss for the three months ended March 31, 2024 as reflected in the above table. The volatility of the U.S. Dollar as compared to the other currencies in which we operate could have a significant impact on our condensed consolidated financial position and results of operations including the amount of revenue that we report in future periods.
Common Stock
In October 2020, we established an "at the market" equity offering program (the "2020 ATM Program"), under which we could, from time to time, offer and sell shares of our common stock to or through sales agents up to an aggregate of $1.5 billion. In February 2022, we entered into a forward sale amendment to the 2020 ATM Program, under which we could, from time to time, offer and sell shares under the equity distribution agreement pursuant to forward sale transactions (the "Equity Forward Amendment"). In November 2022, we established a successor ATM program, also with substantially the same terms as the Equity Forward Amendment noted above, under which we may, from time to time, offer and sell on a spot or forward basis up to an aggregate of $1.5 billion of our common stock to or through sales agents in "at the market" transactions (the "2022 ATM Program"). The forward sale agreements provide three settlement alternatives to us: physical settlement, cash settlement or net share settlement. In accordance with ASC 815, the forward sale agreements are classified as equity for balance sheet purposes.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Activity under the 2020 and 2022 ATM Programs is summarized as follows ($ in millions except per share data; shares in thousands):
| Contractual Maturity Dates | Execution Date | Number of Shares (1) | Weighted Average Price per Share (2) | Settlement Value (2) | |||||||||||||||||||||||||
| Outstanding, December 31, 2022 | February 2023 to November 2023 | 458 | $ | 657.75 | $ | 302 | |||||||||||||||||||||||
| Forward Sale Agreements Executed | February 2024 to December 2024 | May 2023 to December 2023 | 1,208 | 767.12 | 926 | ||||||||||||||||||||||||
| Forward Sale Shares Physically Settled | February 2023 to March 2024 | February 2023 to November 2023 | (1,023) | 718.59 | 735 | ||||||||||||||||||||||||
| Outstanding, December 31, 2023 | November 2024 | 643 | $ | 776.23 | $ | 499 | |||||||||||||||||||||||
| Outstanding, March 31, 2024 | November 2024 | 643 | $ | 781.33 | $ | 502 |
(1)For agreements settled, the amount represents the actual number of shares issued. For agreements executed and outstanding, the amount represents the number of shares that we would issue upon physical settlement. As of March 31, 2024, the maximum number of shares that could be required to be issued to net share settle the outstanding agreements was 1,287 (in thousands).
(2)For agreements settled, the value represents the actual weighted average settlement value, net of payment of commissions to sales agents and other offering expenses. For agreements executed and outstanding, the value represents the forward amount that we would receive upon physical settlement as of that date and will be subject to adjustments for a discount rate factor equal to a specified benchmark rate less a spread minus scheduled dividends during the terms of the agreements.
As of March 31, 2024, we had approximately $470 million of common stock available for sale under the 2022 ATM Program.
Stock-Based Compensation
For the three months ended March 31, 2024, the Talent, Culture and Compensation Committee and/or the Stock Award Committee of our Board of Directors, as the case may be, granted an aggregate of 681 restricted stock units ("RSUs") to certain employees, including executive officers (in thousands). These equity awards are subject to vesting provisions and have a weighted-average grant date fair value of $896.09 per share and a weighted-average requisite service period of 3.62 years. The valuation of RSUs with only a service condition or a service and performance condition require no significant assumptions as the fair value for these types of equity awards is based solely on the fair value of our stock price on the date of grant. We use revenues, adjusted funds from operations ("AFFO") per share and digital services revenues as the performance measurements in the RSUs with both service and performance conditions that were granted in the three months ended March 31, 2024.
We use a Monte Carlo simulation option-pricing model to determine the fair value of RSUs with a service and market condition. We used total stockholder return ("TSR") as the performance measurement in the RSUs with a service and market condition that were granted in the three months ended March 31, 2024. There were no significant changes in the assumptions used to determine the fair value of RSUs with a service and market condition that were granted in 2024 compared to the prior year.
The following table presents, by operating expense category, our stock-based compensation expense recognized in our condensed consolidated statements of operations (in millions):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Cost of revenues | $ | 13 | $ | 11 | |||||||||||||||||||
| Sales and marketing | 21 | 20 | |||||||||||||||||||||
| General and administrative | 67 | 68 | |||||||||||||||||||||
| Total | $ | 101 | $ | 99 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Redeemable Non-controlling Interest
On April 3, 2023, we issued additional shares in our Indonesian operating entity to a third party investor for $25 million, which resulted in the third party investor owning a 25% interest in the entity.
The Indonesian operating entity is a VIE because it does not have sufficient funds from its operations to be self-sustaining. We provide certain management services to the entity and earn fees for the performance of such services. We have the power to direct the activities that most significantly impact the economic performance of the entity and have concluded that we are its primary beneficiary.
Under the terms of the stockholders’ agreement, the investor may put its 25% ownership stake in the entity to us for a maximum exercise price of $25 million, subject to certain contingent conditions. Accordingly, we present the investor’s contingently redeemable non-controlling interest ("NCI") outside of permanent equity at the higher of its maximum redemption amount of $25 million and its balance after attribution of gains and losses in the condensed consolidated balance sheets. There were no changes in the carrying value of the redeemable NCI for the three months ended March 31, 2024.
As of March 31, 2024, the carrying value of the assets and liabilities of the Indonesian VIE, which were included in other assets and other liabilities on the condensed consolidated balance sheets were $34 million and $7 million, respectively.
The income and losses attributable to us as well as to the redeemable NCI from the Indonesian VIE were insignificant for the three months ended March 31, 2024.
11. Segment Information
While we have one primary line of business, which is the design, build-out and operation of IBX data centers, we have determined that we have three reportable segments comprised of our Americas, EMEA and Asia-Pacific geographic regions. Our chief operating decision-maker evaluates performance, makes operating decisions and allocates resources based on our revenues and adjusted EBITDA, both on a consolidated basis and based on these three reportable segments. Intercompany transactions between segments are excluded for management reporting purposes.
The following tables present revenue information disaggregated by product lines and geographic areas, (in millions):
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Americas | EMEA | Asia-Pacific | Total | ||||||||||||||||||||||||||||||||||||||||||||
| Colocation (1) | $ | 607 | $ | 549 | $ | 334 | $ | 1,490 | |||||||||||||||||||||||||||||||||||||||
| Interconnection | 215 | 83 | 70 | 368 | |||||||||||||||||||||||||||||||||||||||||||
| Managed infrastructure | 66 | 35 | 17 | 118 | |||||||||||||||||||||||||||||||||||||||||||
| Other (1) | 6 | 24 | 4 | 34 | |||||||||||||||||||||||||||||||||||||||||||
| Recurring revenues | 894 | 691 | 425 | 2,010 | |||||||||||||||||||||||||||||||||||||||||||
| Non-recurring revenues | 45 | 36 | 36 | 117 | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 939 | $ | 727 | $ | 461 | $ | 2,127 |
(1) Includes some leasing and hedging activities.
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Americas | EMEA | Asia-Pacific | Total | ||||||||||||||||||||||||||||||||||||||||||||
| Colocation (1) | $ | 573 | $ | 516 | $ | 319 | $ | 1,408 | |||||||||||||||||||||||||||||||||||||||
| Interconnection | 199 | 73 | 65 | 337 | |||||||||||||||||||||||||||||||||||||||||||
| Managed infrastructure | 61 | 31 | 19 | 111 | |||||||||||||||||||||||||||||||||||||||||||
| Other (1) | 5 | 25 | 4 | 34 | |||||||||||||||||||||||||||||||||||||||||||
| Recurring revenues | 838 | 645 | 407 | 1,890 | |||||||||||||||||||||||||||||||||||||||||||
| Non-recurring revenues | 44 | 46 | 18 | 108 | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 882 | $ | 691 | $ | 425 | $ | 1,998 |
(1) Includes some leasing and hedging activities.
Total revenues attributed to the U.S. were $795 million and $753 million during the three months ended March 31, 2024 and 2023. For the three months ended March 31, 2024, we derived revenues of $218 million from the United Kingdom, which is the only country outside of the U.S. from which we derived revenues that exceeded 10% of our total revenues. There was no country outside of the U.S. from which we derived revenues that exceeded 10% of revenues for the three months ended March 31, 2023. No single customer accounted for 10% or greater of our accounts receivable or revenues for the three months ended March 31, 2024 and 2023.
We define adjusted EBITDA as net income excluding income tax expense, interest income, interest expense, other income or expense, gain or loss on debt extinguishment, depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction costs and gain or loss on asset sales as presented below (in millions):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||||||
| Americas | $ | 409 | $ | 405 | |||||||||||||||||||
| EMEA | 328 | 327 | |||||||||||||||||||||
| Asia-Pacific | 255 | 213 | |||||||||||||||||||||
| Total adjusted EBITDA | 992 | 945 | |||||||||||||||||||||
| Depreciation, amortization and accretion expense | (525) | (459) | |||||||||||||||||||||
| Stock-based compensation expense | (101) | (99) | |||||||||||||||||||||
| Transaction costs | (2) | (2) | |||||||||||||||||||||
| Loss on asset sales | — | (1) | |||||||||||||||||||||
| Interest income | 24 | 19 | |||||||||||||||||||||
| Interest expense | (104) | (97) | |||||||||||||||||||||
| Other income (expense) | (6) | 8 | |||||||||||||||||||||
| Loss on debt extinguishment | (1) | — | |||||||||||||||||||||
| Income before income taxes | $ | 277 | $ | 314 |
EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
We also provide the following segment disclosures related to our operations as follows (in millions):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Depreciation and amortization: | |||||||||||||||||||||||
| Americas | $ | 307 | $ | 245 | |||||||||||||||||||
| EMEA | 132 | 124 | |||||||||||||||||||||
| Asia-Pacific | 87 | 88 | |||||||||||||||||||||
| Total | $ | 526 | $ | 457 | |||||||||||||||||||
| Capital expenditures: | |||||||||||||||||||||||
| Americas | $ | 425 | $ | 301 | |||||||||||||||||||
| EMEA | 191 | 146 | |||||||||||||||||||||
| Asia-Pacific | 91 | 83 | |||||||||||||||||||||
| Total | $ | 707 | $ | 530 |
Our long-lived assets, including property, plant and equipment, net and operating lease right-of-use assets, are located in the following geographic areas (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Americas | $ | 8,722 | $ | 8,611 | |||||||
| EMEA | 6,195 | 6,321 | |||||||||
| Asia-Pacific | 3,594 | 3,669 | |||||||||
| Total property, plant and equipment, net | $ | 18,511 | $ | 18,601 | |||||||
| Americas | $ | 409 | $ | 421 | |||||||
| EMEA | 353 | 368 | |||||||||
| Asia-Pacific | 633 | 660 | |||||||||
| Total operating lease right-of-use assets | $ | 1,395 | $ | 1,449 |
12. Subsequent Events
AMER 2 Joint Venture
On April 10, 2024, we executed an agreement to form a joint venture in the form of a limited liability partnership to develop and operate an xScale data center in the Americas region (the “AMER 2 Joint Venture”). At closing, our partner contributed $102 million of cash in exchange for an 80% partnership interest in the AMER 2 Joint Venture. We contributed the assets and liabilities of the Silicon Valley 12 (“SV12”) data center site in exchange for a 20% partnership interest in the AMER 2 Joint Venture and cash proceeds. In connection with the transaction, we also entered into a loan agreement with the AMER 2 Joint Venture, as a lender, with an aggregate commitment of $392 million of which $196 million was drawn at closing.
Declaration of dividends
On May 8, 2024, we declared a quarterly cash dividend of $4.26 per share, which is payable on June 19, 2024 to our common stockholders of record as of the close of business on May 22, 2024.
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