EDGAR 10-K Filing

Company CIK: 1101239
Filing Year: 2021
Filename: 1101239_10-K_2021_0001628280-21-002563.json

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ITEM 1. BUSINESS
ITEM 1. Business
Overview: Powering the World’s Digital Leaders
Equinix is a global digital infrastructure company. Digital leaders harness our trusted platform to bring together and interconnect the foundational infrastructure that powers their digital success. We enable our customers to access all the right places, partners and possibilities they need to accelerate their digital advantage. Platform Equinix® combines a global footprint of International Business Exchange™ ("IBX®") data centers in the Americas ("AMER"), Asia-Pacific ("APAC"), and Europe, the Middle East and Africa ("EMEA") regions, interconnection solutions, edge services, unique business and digital ecosystems and expert consulting and support. Equinix was incorporated on June 22, 1998 as a Delaware corporation and operates as a real estate investment trust for federal income tax purposes ("REIT").
Al Avery and Jay Adelson founded Equinix as a vendor-neutral multi-tenant data center ("MTDC") provider where competing networks could connect and share data traffic to help scale the rapid growth of the early internet. The company’s name, Equinix (composed from the words "equality", "neutrality" and "internet exchange"), reflects that vision. The founders also believed they not only had the opportunity but also the responsibility to create a company that would be the steward of some of the most important digital infrastructure assets in the world. Two decades later, we have expanded upon that vision to build Platform Equinix, with unmatched scale and reach.
Our interconnected data centers around the world allow our customers to bring together and interconnect the infrastructure they need to fast-track their digital advantage. With Equinix, they can scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value. We enable them to increase information and application delivery performance for users, and quickly deploy distributed IT infrastructures and access business and digital ecosystems, all while significantly reducing costs and latency. The Equinix global platform, and the quality of our IBX data centers, interconnection offerings and edge services, have enabled us to establish a critical mass of customers. As more customers choose Platform Equinix, for bandwidth cost and performance reasons it benefits their suppliers and business partners to colocate in the same data centers and connect directly with each other. This adjacency creates a “network effect” that attracts new customers and enables our existing customers to capture further economic and performance benefits from our offerings.
In 2020, we opened six new IBX data centers, invested in xScaleTM data centers, and added capacity in 14 markets resulting in an increase in our total number of IBX and xScaleTM data center facilities to more than 225, including our acquisition of 13 data centers in Canada. 2020 highlights include:
•New data center openings in 2020 included six new IBX sites in the following metros: Washington DC, Dallas, Warsaw, and Hamburg, with an opening in Muscat, Oman held in an unconsolidated entity and a new market entry announced for Bordeaux, France.
•We began construction on five additional xScaleTM sites in 2020. xScaleTM data centers serve the needs of the growing hyperscale data center market, including the world's largest cloud service providers, and are engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments. xScaleTM data centers also offer access to our comprehensive suite of interconnection and edge services that tie into the hyperscale companies' existing access points at Equinix, thereby increasing the speed of connectivity to their existing and future enterprise customers. In xScaleTM sites, hyperscale companies can consolidate core and access point deployments into one global provider to streamline and simplify their rapid growth.
•In the fourth quarter of 2020, we acquired 13 data centers from BCE Inc. ("Bell') in Canada (the "Bell Acquisition"), solidifying our position as a leading digital infrastructure provider in the country, with a total of 15 data centers that we now operate coast-to-coast across eight metros. The Bell Acquisition allows us to expand our reach with seven new metros in six provinces, adding more than 600 customer accounts from diverse sectors, including enterprise, cloud, IT, government, energy and financial services. In addition to adding new capacity in Toronto where we already operated two IBX data centers, we acquired data centers in Calgary, Kamloops, Saint John, Montreal, Ottawa, Vancouver and Winnipeg. The transaction opens key gateways from North America to Asia through Vancouver and North America to Europe through the submarine cable systems in the Saint John area in New Brunswick.
•In August 2020, we announced our intended expansion into India, a new market, entering into an agreement to purchase the India operations of GPX Global Systems, Inc. ("GPX India"). The acquisition, expected to close in Q2 2021 subject to regulatory approval, includes the two most interconnected data centers in India, with a well-established ecosystem in Mumbai that includes more than 200 interconnection-rich customers, international brands and key local players. India has the world’s second largest population and the second largest base of internet subscribers, fueling demand for data centers and colocation offerings. This planned acquisition underscores our goal to extend Platform Equinix to support our customers’ digital edge strategies.
•In March 2020, we completed our acquisition of leading bare metal automation company Packet Host, Inc. ("Packet") (the "Packet Acquisition"). Packet’s capabilities became Equinix MetalTM which adds direct integration to Equinix FabricTM and expands the services to new global locations. With Equinix Metal, enterprises, SaaS companies and digital service providers can provision interconnected bare metal resources in minutes instead of months, while reducing the capital expenditures and operational requirements of owning hardware. They can also reduce cloud costs while retaining the flexibility and operational expenditures of cloud services via on demand, reserved or spot market capacity in our global data centers using the Equinix Metal portal or DevOps-friendly APIs and integrations. An important piece of our Platform strategy, this acquisition advances our vision to deliver the most advanced solutions for customers to rapidly deploy digital infrastructure at global scale.
•In January 2020, we expanded into two new Mexico metros, with our acquisition of three data centers from Axtel S.A.B. de C.V. ("Axtel") that serve the Mexico City and Monterrey metro areas. This expansion, when combined with previous Equinix acquisitions of key regional traffic hubs in Dallas ("Infomart") and Miami (the NAP of the Americas), further strengthens our global platform by increasing interconnection between North, Central and South America. Mexico is the world's eleventh-largest economy and the second largest in Latin America. The country's telecommunications reform of 2013 has created opportunities for many businesses seeking to expand into Mexico, allowing for open competition by non-governmental entities and providing an opportunity for the growth of service provider and enterprise ecosystems that flourish within our network-neutral data centers globally.
Industry Trends: Taking Digital Business to the Edge
Digital transformation is changing where and how businesses deploy and deliver IT services to employees and is creating new digital business models for partners and customers. The convergence of these global trends and the impact of the ongoing COVID-19 pandemic have created additional pressure for many companies to transform. The collective influence of these trends is driving complexity and risk that must be addressed in multiple locations for companies to effectively compete in the global digital economy. These trends include:
•Digital business: As organizations transform their traditional lines of business, they are being asked to reduce costs and become more efficient while accelerating the development of new insights. This requires transforming network architecture while distributing digital infrastructure in strategic locations to support local interconnection between user services, data, clouds and ecosystem partners.
•Urbanization: This is driving an increase in population centers needing digital engagement; however, a more recent trend has been migration out of cities due to the ongoing COVID-19 pandemic. This is causing an expansion in the overall digital edge, which requires companies to locate digital services close to users to deliver great user experiences. These same concentrations of people provide an economy of scale which makes it cost effective to distribute applications, data, content and networking to serve these locations.
•Cybersecurity: A cybersecurity breach is one of the most serious risks facing companies today, and many of the most serious breaches occur via a penetration of a company’s business partners’ networks. To protect against this, businesses need to develop best practices to distribute their security controls and infrastructure out to digital exchanges where most traffic exchange is happening.
•Data volumes and compliance: Demand for local data analysis and data exchange to support digital workflows is outpacing organizations’ ability to classify, secure, privately transport and process data across regions. To meet new regulations and drive new strategic value, companies need to deploy distributed data storage, analytics and clouds within the same jurisdiction, and then replicate this across multiple global locations.
•Business ecosystems: Digital trade flows involve an increasing variety of customers, partners and employees. To enable this, companies deploy a digital presence in close physical proximity to an application exchange point and then connect to it directly to support real-time engagement. In the aggregate, these form a business ecosystem. These ecosystems are expanding in depth and number.
These trends are accelerating the need for companies like Equinix who can provide a secure, agile global business platform that leverages digital interconnection-or private data exchange-to deliver real-time interactions around the world.
As part of their digital transformation, businesses in most industries are shifting their centralized IT infrastructures to the edge to bring digital services closer to users for better performance, which has become a significant driver of digital business value. To realize the full potential of the edge, IT organizations require greater interconnection bandwidth. Interconnection bandwidth is defined as the total capacity provisioned to privately and directly exchange traffic, with a diverse set of partners and providers, at distributed IT exchange points inside carrier-neutral colocation data centers. Private interconnection capacity between businesses, as reported in the fourth annual Global Interconnection Index ("GXI"), a market study published by Equinix, is anticipated to grow at a compound annual growth rate of 45% by 2023, reaching 16,300+ terabits per second of data exchanged annually.
Worldwide Interconnection Bandwidth Capacity Growth (2018 - 2022) in Terabits per Second (Tbps)
Source: GXI Volume 4
Equinix Business Proposition: Bring together and interconnect the infrastructure you need to fast-track your digital advantage
In 2020, we continued to build new data center, interconnection and edge services capabilities that we intend will further our vision to power the world’s digital leaders. On Platform Equinix, digital leaders can bring together all the right places, partners and possibilities to create the foundational infrastructure they need to succeed. We offer a comprehensive, integrated suite of data center, interconnection and edge services and products to close to 10,000 enterprise and service provider customers worldwide.
The following are the leading revenue generating product and other offerings that collectively make up Platform Equinix:
Data Center Solutions
Our global, state-of-the-art data centers meet strict standards of security, reliability, certification and sustainability. Offerings in these data centers are typically billed based on the space and power a customer consumes, are delivered under a fixed duration contract and generate monthly recurring revenue ("MRR").
•IBX Data Centers consist of more than 220 IBX vendor-neutral colocation data centers worldwide, providing our customers with secure, reliable and robust environments (including space and power) that are necessary to aggregate and distribute information and connect digital and business ecosystems globally. IBX data centers provide access to vital ecosystems where enterprises, network, cloud and SaaS providers, and business partners directly and securely interconnect to each other.
•xScaleTM Data Centers are designed to serve the unique core workload deployment needs of a targeted group of hyperscale companies, which include the world's largest cloud service providers. With xScaleTM data centers, hyperscale customers add to their core hyperscale data center deployments and existing customer access points at Equinix, allowing streamlined expansion with a single global vendor.
•IBX SmartView is a fully integrated monitoring software which provides customers visibility into the operating data relevant to their specific Equinix footprint as if they were in-house. The software provides online access to real-time environmental and operating data through the Equinix Customer Portal or API integrations. With real-time alerts and configurable reporting, IBX SmartView allows customers to maintain their IBX operations and plan for future growth.
Interconnection Solutions
Our interconnection solutions connect businesses directly, securely and dynamically within and between our data centers across our global platform. Our interconnection services are typically billed based on the outbound connections from a customer and generate MRR.
•Equinix Fabric™ provides secure, on-demand, software-defined interconnection. Built specifically for digital infrastructure, Equinix Fabric enables businesses to connect globally to their choice of thousands of networking, storage, compute and application service providers in the industry’s largest infrastructure ecosystem. As the foundation of Platform Equinix’s interconnection capability, Equinix Fabric enables customers to quickly and easily connect their physical and virtual digital infrastructures.
•Cross Connects provide a point-to-point cable link between two Equinix customers in the same IBX data center. Cross Connects deliver fast, convenient, affordable and highly reliable connectivity and data exchange with business partners and service providers within the Equinix ecosystem.
•Equinix Internet Exchange™ enables networks, content providers and large enterprises to exchange internet traffic through the largest global peering solution. Service providers can aggregate traffic to multiple counterparties, called peers, on one physical port and handle multiple small peers while moving high-traffic peers to private interconnections. This reduces latency for end-users when accessing content and applications.
•Equinix Connect is an agile, scalable, resilient and high performing internet access solution. With at least two upstream ISPs in each market, Equinix Connect offers the resiliency that organizations demand and direct connections to major content destinations, resulting in superior performance. It provides the convenience of a one-stop shop and the flexibility required to connect to the internet as a primary or secondary access solution. Available globally in more than 40 markets, Equinix Connect allows businesses to grow as their needs grow with scalable bandwidth options to meet their emerging usage requirements.
Edge Services
Our edge services help businesses rapidly deploy as-a-service networking, security and hardware across our global data center footprint - as an alternative to buying, owning and managing the physical infrastructure. Our edge services are typically billed based on the number of instances and the capacity used by a customer and generate MRR.
•Network Edge allows customers to modernize networks within minutes, by deploying network functions virtualization ("NFV") from multiple vendors across Equinix metros. Companies can select, deploy and connect virtual network services at the edge quickly, with no additional hardware requirements.
•Equinix SmartKey™ helps customers simplify data protection across any cloud architecture via a global SaaS-based, hardware security module management and cryptography service that provides on-premises and hybrid multicloud encryption key management.
•Equinix Metal™ allows enterprises, SaaS companies and digital service providers to provision interconnected bare metal resources in minutes instead of months, while reducing the capital expenditures and operational requirements of owning hardware. They can also reduce cloud costs while retaining the flexibility and operational expenditures of cloud services via on demand, reserved or spot market capacity in Equinix’s global data centers using the Equinix Metal portal or DevOps-friendly APIs and integrations.
Colocation Offerings
Equinix offers a variety of colocation offerings designed to speed and streamline digital transformation and data center deployments for its customers. These services are typically billed based on consumption and generate non-recurring revenue ("NRR").
•Equinix Smart Hands provides around-the-clock, on-site, operational support service for remote management, installation and troubleshooting of customer data center equipment. Using Equinix IBX data
center technicians, Smart Hands allows customers to manage and outsource their business operations and maximize uptime whether from within an IBX data center or from a remote location. Providing remote management through Smart Hands has helped enable some customers to continue managing business operations in spite of the impact of the COVID-19 pandemic.
•Equinix Infrastructure Services (EIS) provides customers with a one-stop shop for data center installation, migration and equipment procurement. With proven practices developed over many years of successfully building, migrating and optimizing our customers’ data center needs, EIS services lend expertise to address larger, more complex data center jobs including installation and implementation of new builds, planned migrations, structured cabling, labelling and documentation, procurement recommendations and coordination, and secure de-installation.
Competition
While a large number of enterprises and service providers, such as hyperscale cloud service providers, own their own data centers, We believe the industry is shifting away from single-tenant solutions and outsourcing some or all of their IT housing and interconnection requirements to third party facilities, such as those operated by us.
Historically, that outsourcing market was served by large telecommunications carriers who bundled their products and services with their colocation offerings. The data center market landscape has evolved to include private and vendor-neutral MTDC providers, hyperscale cloud providers, managed infrastructure and application hosting providers, and systems integrators. It is estimated that Equinix is one of more than 1,200 companies that provide MTDC offerings around the world. The global MTDC market is highly fragmented. Each of these data center solutions providers can bundle various colocation, interconnection and network offerings and outsourced IT infrastructure solutions. We believe that this outsourcing trend is likely to accelerate in the coming years, especially in light of changes to digital business as a result of the ongoing COVID-19 pandemic.
Equinix is differentiated in this market by being able to offer customers a global platform that reaches 26 countries and contains the industry’s largest and most active ecosystem of partners in our sites. This ecosystem creates a “network effect” which improves performance and lowers cost for our customers and is a significant source of competitive advantage for Equinix.
Customers
Our customers include telecommunications carriers, mobile and other network services providers, cloud and IT services providers, digital media and content providers, financial services companies, and global enterprise ecosystems in various industries. We provide each company access to a choice of business partners and solutions based on their colocation, interconnection and managed IT service needs, and delivered 99.9999% operational uptime across our global data centers in 2020. As of December 31, 2020, we had over 10,000 customers worldwide. No one customer made up 10% or more of our total business revenues for the year ended December 31, 2020.
The following companies represent some of our leading customers and partners:
We serve our customers with a direct sales force and channel marketing program. We organize our sales force by customer type, as well as by establishing a sales presence in diverse geographic regions, which enables efficient
servicing of the customer base from a network of regional offices. We also support our customers with a global customer care organization.
Human Capital
As of December 31, 2020, we had 10,013 employees worldwide with 4,599 based in the Americas, 3,405 based in EMEA and 2,009 based in APAC. Of those employees, 4,436 employees were in engineering and operations, 1,911 employees were in sales and marketing and 3,666 employees were in management, finance and administration. We recognize that attracting, developing and retaining talent at all levels is vital to continuing our success and offer industry competitive compensation and benefits, along with development opportunities to help every employee achieve their full potential. In 2020, we expanded our portfolio of development programs for our employees. We have invested in a digital learning platform, providing access to on-demand learning to each of our employees. We have developed and rolled out several programs to help our leaders navigate the current environment. To ensure we are continuously improving employee experience and enabling our talent to thrive, we have enhanced our listening strategy, moving to more frequent surveys at several steps along an employee’s journey at Equinix.
At Equinix, we strive to build a culture where every employee, every day, can say “I’m Safe, I Belong and I Matter” and develop our workforce, at all levels, to better reflect and represent the communities in which we operate. Our objective is to continue to make our culture a critical competitive advantage, engaging every leader and every employee in the process. To ensure we are upholding our core corporate values and making progress toward our goals, we monitor our employee satisfaction through our quarterly survey, which is our listening mechanism. In 2020, employee satisfaction averaged 85%.
We are integrating a focus on diversity, inclusion and belonging ("DIB") into every aspect of how we run our business and have initiated a multi-year DIB strategy with governance through a DIB Council chaired by our CEO and CHRO, in partnership with our Sustainability Program Office, that oversees our progress on environment, social and governance ("ESG") matters. Our DIB strategy focuses on attracting, retaining and developing a diverse, global workforce; building leadership capability; and empowering our people to bring DIB to life. Equinix representatives have joined the G100 Talent Consortium Task Force on Racial Inequity in Business to consider core inequity issues, including anti-racism, bias, and hiring and promotability practices, in order to develop tangible best practices that companies can use as guide rails to increase representation and career mobility for black, indigenous and people of color ("BIPOC") employees. In 2020, we hosted a Days of Understanding event as part of an initiative of CEO ACT!ON, a pledge Equinix has taken along with hundreds of other companies to embrace difference in our organizations, educate our people and build more inclusive cultures inside and outside of our workplaces. We also have employee-led connection networks ("ECNs"), each representing an identity/community that is underrepresented at Equinix, has faced historical discrimination or shares unique challenges, integrated in our DIB strategy.
Our Community Impact program promotes connection and belonging, and enables employees to give back, with the support of Equinix, to the communities in which we work and live. In total, our Community Impact efforts in 2020 resulted in approximately $2.8 million in employee donations, corporate matching and grants, and more than 9,350 volunteer hours, to approximately 1,750 nonprofits worldwide.
We believe our commitment to the highest standards of honesty, integrity and ethical behavior differentiates our business as much as our technology. We promote these high standards through a number of policies including the Equinix Code of Business Conduct. All employees are required to complete trainings on ethics and the company’s anti-bribery and corruption policies. In addition, we maintain a confidential ethics helpline where employees are encouraged to speak up if they have any questions or concerns that our code is being violated. We have a zero-tolerance, non-retaliation policy that protects our employees when they speak up.
In a year disrupted by the unprecedented global pandemic caused by COVID-19, we implemented a number of precautionary measures in line with our business continuity and pandemic plans to minimize the risk of operational impacts and to protect the health and safety of employees, customers, partners and our communities. During the pandemic, we have offered a range of support to our employees including “work from home” policies, financial assistance and health and wellness resources. We also incurred one-time cash bonuses and compensation expense of $8.6 million for our IBX employees as well as other employees to support their work-from-home requirements during the first quarter of 2020. To ensure a careful, safe and responsible eventual return to office, we have developed a roadmap based on guidance from health experts and other leaders from around the world.
We believe that all of these programs and initiatives support our human capital goals, align with our company culture, and increase employee satisfaction.
Sustainability
Equinix is committed to protecting, connecting and powering a more sustainable digital world and to greening our customers' supply chains. Through our sustainability efforts, Equinix strives to protect our planet and climate, unleash our people's potential to be a force for good, and lead with purpose and integrity in everything we do. Our definition of business growth and success includes steadfastly adhering to best-in-class ESG practices.
Environmental Performance
Equinix was the first data center company to commit to a long-term goal of 100% renewable energy across our global portfolio. Equinix uses local renewable energy sources where possible, seeks new or recently built renewable sources and advocates for favorable renewable energy policies. In the U.S., Equinix purchases nearly 2.3 million megawatt-hours ("MWh") of green power annually from a portfolio of renewable energy projects, including 225 MW of wind power under long-term virtual power purchase agreements ("VPPAs") located in Texas and Oklahoma. In 2019, over 90% of Equinix's global electricity consumption, and 100% of U.S. electricity consumption was covered by renewable energy sources. Calendar year data for 2020 will become available Q2 2021 and will be published in our annual Corporate Sustainability Report.
We have won numerous awards for our leading sustainability practices and our significant contributions to the renewable energy market. In 2020, Equinix was named the Green Power Partner of the Year by the U.S. Environmental Protection Agency ("EPA"). The award recognizes Equinix's leadership and commitment to advancing the development of the nation's voluntary green power market.
Equinix is committed to transparently measuring and reporting our global carbon footprint across direct (Scope 1), indirect energy (Scope 2) and indirect value chain (Scope 3) emissions. Since 2015, we have achieved a 60% reduction in carbon emissions on an absolute basis (Scope 1 and Scope 2 market-based metric tons of carbon dioxide-equivalent (mtCO2e)), even as we doubled our footprint in both energy consumption and number of sites. In 2020, CDP, a global non-governmental organization ("NGO") dedicated to helping investors and companies measure and manage their climate risks, recognized our commitments, actions and progress on climate change. Equinix received an 'A-' CDP leadership score for climate action.
To support our ongoing sustainability initiatives, in 2020, we issued our first green bonds totaling $1.35 billion. An amount equal to the net proceeds of the green bonds will be allocated to finance or refinance, in whole or in part, ongoing and new projects in categories such as green buildings, renewable energy, energy efficiency, sustainable water and wastewater management, waste management and clean transportation, as outlined in our Green Finance Framework. Our Green Finance Framework aligns Equinix's sustainability commitments with our long-term financing needs and highlights our pipeline of green projects and data center innovations.
Sustainability Accounting Standards Board ("SASB") Disclosures
SASB published the Sustainability Accounting Standard ("Standard") for the Real Estate Industry in October 2018. Equinix has aligned its SASB disclosures with the Real Estate Standard to enhance corporate disclosure around ESG performance. In our comprehensive disclosures in our annual Corporate Sustainability Report we also document our progress against metrics as outlined in other frameworks such as the Global Reporting Initiative ("GRI"), UN Sustainable Development Goals ("SDGs") and the Task Force on Climate-related Financial Disclosures ("TCFD"). The following tables detail our energy metrics, aligned with the SASB Real Estate Standard. We intend to expand our reporting around the Real Estate Standard in the future.
The following metrics represent Equinix's colocation and hyperscale (xScaleTM) data center facilities' performance in the calendar years specified. Energy, renewable energy and greenhouse gas emissions are independently assured to ISO 14064-3:2006 standards for the quantification and reporting of greenhouse gas emissions. Calendar year data for 2020 is expected to become available Q2 2021.
Energy Management: Energy Consumption
Year Energy Consumption Data as a % of Floor Area Total Energy Consumed by Portfolio Area with Data Coverage (MWh)(1)
Like-for-Like Change in Energy Consumption of Portfolio Area with Data Coverage (MWh)(2)
Grid Electricity Consumption as a % of Energy Consumption Energy Consumption from Renewable Sources(3) (kWh)
Renewable Energy as a % of Energy Consumption Renewable Energy as a % of Electricity Consumption
2018(4)(5)
99.9% 5,162,000 N/A 95.3% 4,689,000 91% 92%
2019(6)(7)
94.9% 5,711,000 3.6% 94.4% 5,168,000 91% 91%
(1)The scope of energy consumed includes diesel, natural gas, purchased electricity, purchased chilled water and purchased electricity from fuel cells installed onsite. The only asset type included is data centers (Equinix’s 2019 sustainability report also included offices and the Infomart at DA99). The coverage is Whole Building.
(2)Like-for-like computed for stabilized asset list for the overlapping list of sites designated as stabilized in 2018 and 2019.
(3)Excludes renewable energy supplied in the standard generation mix from local utilities. Includes renewable energy certificates (through VPPAs, bundled supplier agreements, green tariffs and unbundled purchases).
(4)Excludes reseller sites (DA99, JK1, OS99, SH1).
(5)2018 portfolio coverage excludes xScaleTM sites: PA8x, LD13x.
(6)The 2019 10-K included recently constructed or acquired sites for which no utility data had been included within the greenhouse gas inventory boundary. This includes the following sites with no energy data reported within the SASB metrics for 2019: Data Centers: Asia-Pacific (ME2, SG4, SY5, TY11, SL1). Reseller sites are also excluded in the energy metrics (DA99, JK1, OS99, SH1). Equinix's Axtel Acquisition and Bell Acquisition sites from 2020 are also excluded.
(7)2019 portfolio coverage includes xScaleTM sites: PA8x, LD13x.
Energy Management: Green Building Ratings
Equinix's environmental efforts aim to deliver meaningful and measurable progress against sustainability goals that positively impact its customers, partners, investors and employees. Our data centers are designed to take advantage of local environmental conditions and to maximize operational efficiency. Equinix evaluates cost-efficient opportunities to enhance energy efficiency and bring renewable energy to the site for existing or acquired sites.
Equinix is protecting our planet's resources through green data center innovations and building and operating energy-efficient data centers around the world. Equinix's Energy Efficiency Center of Excellence is driving a global approach to cooling its existing data centers more efficiently. The program engages customers to manage their implementations more sustainably at Equinix's facilities, leading to overall improved site efficiencies.
Equinix certifies to numerous green buildings and energy management certifications and schemes. These include USGBC LEED green buildings certifications, ISO 14001:2015 Environmental Management Standard, ISO 50001:2011 Energy Management Standard, BCA Green Mark, U.S. EPA Energy Star for Data Centers and others.
Data centers receiving green building ratings in 2019 and 2020 totaled more than 1.3 million gross sq. ft. The following new sites received ratings in 2019 or 2020. Additional sites and phases are pending final submissions.
Data Center Metro Area Rating Scheme Level Achieved
DC15 Phase 1 Ashburn, Virginia Green Globes Three Globes
HK4 Phase 2 Hong Kong LEED Silver
ME2 Phase 1 Melbourne, Australia LEED Gold
SG4 Phase 1 Singapore BCA Green Mark GoldPlus
SH6 Partner Site Shanghai, China LEED Platinum
SY5 Phase 1 Sydney, Australia LEED Silver
TY11 Phase 1 Tokyo, Japan LEED Silver
In 2020, Equinix had 16.1 million gross sq. ft., or 72% of global footprint, in operation with green buildings and energy management certifications. Within the U.S., Equinix had 4.7 million gross sq. ft or 49% of its footprint under certification including 0.8 million of gross sq. ft., or 8% of U.S. footprint, having achieved U.S. EPA Energy Star for Data Centers.
Year Total Gross sq. ft. (million) Countries with Eligible Portfolio(1)
Area of Eligible Portfolio with Green Building Rating (million sq. ft.)(2
Eligible Portfolio with Green Building Rating (%)
Global Total through 2020 22.3 Americas: U.S., Canada, Columbia, Brazil
Asia-Pacific: Australia, China, Hong Kong, Japan, Singapore
EMEA: Bulgaria, Finland, France, Germany, Ireland, Italy, Netherlands, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, UAE, United Kingdom
16.1 72%
U.S. Total through 2020 9.5 Americas: U.S.
4.7 (LEED and Energy Star)
0.8 (Energy Star)(3)
49% (LEED and Energy Star)
8% (Energy Star)
(1)Countries excluded from metrics above: Americas (Mexico), Asia-Pacific (Indonesia, South Korea).
(2)Ratings included in our totals: ISO 50001 Energy Management, ISO 14001 Environmental Management, LEED green buildings certifications, U.S. Environmental Protection Agency Energy Star for Data Centers, BCA Green Mark, NABERS and Green Globes.
(3)Equinix is currently evaluating its approach to U.S. EPA Energy Star for Data Centers. In 2019 and 2020, five sites received Energy Star for Data Centers recognition, representing 8% of our U.S. portfolio. In contrast, Equinix's U.S. portfolio has 17 LEED-certified data centers or 41% of the U.S. portfolio by gross square footage.
Our Business Segment Financial Information
We currently operate in three reportable segments comprised of our Americas, EMEA and Asia-Pacific geographic regions. Information attributable to each of our reportable segments is set forth in Note 17 within the Consolidated Financial Statements.
Available Information
Equinix owns and maintains intellectual property in the form of trademarks, patents, application programming interfaces, customer portals and a variety of products and other offerings.
We were incorporated in Delaware in June 1998. We are required to file reports under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission ("SEC"). The SEC maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements and other information.
You may also obtain copies of our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K, and any amendments to such reports, free of charge by visiting the Investor Relations page on our website, www.equinix.com. These reports are available as soon as reasonably practical after we file them with the SEC. Information contained on or accessible through our website is not part of this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
ITEM 1A. Risk Factors
In addition to the other information contained in this report, the following risk factors should be considered carefully in evaluating our business:
Risk Factors
Risks Related to Our Business and Our Operations
The ongoing COVID-19 pandemic could have a negative effect on our business, results of operations and financial condition.
We have continuously monitored our global operations as the COVID-19 pandemic has spread across the globe and have implemented procedures focusing on the health and safety of our employees, customers, partners and communities, the continuity of our business offerings and compliance with governmental regulations and local public health guidance and ordinances. We have activated our business continuity and pandemic plans and while our business operations have continued without interruption and our IBX data centers have remained fully operational to date, we cannot guarantee our business operations or our IBX data centers will not be negatively impacted in the future. Our IBX data centers have been designated “essential businesses” or “critical infrastructure” for purposes of remaining open during the COVID-19 pandemic in all of the jurisdictions that have published these exemptions but not all jurisdictions have created such designations. Any change in these classifications could cause operational disruptions or closures of the affected IBX data centers.
We have implemented processes to limit and schedule access to certain IBX data centers as well as implemented social distancing and hygiene protocols in response to the growing number of suspected and confirmed COVID-19 cases. These proactive actions we have taken or may take in the future and any restrictions imposed by the government could result in business delays, operational disruption and customer dissatisfaction. Employee illnesses resulting from the pandemic could result in further inefficiencies or delays and a suspected or confirmed case in an IBX data center could require temporary closure of the affected IBX data center for cleaning or until local regulatory requirements are fulfilled. Any closure of an IBX data center or limitation of customer access could cause customer dissatisfaction if customers are unable to access their equipment within the IBX data center. We also have service level agreements which could be affected if we are required to close an IBX data center for any reason.
Preventative measures instituted by governments and businesses to mitigate the spread of COVID-19, including travel restrictions, social distancing requirements, shelter in place orders and quarantines, have negatively impacted the global economy and may adversely impact us, our customers and vendors. Some of our customers have been negatively impacted by the COVID-19 pandemic which could affect our revenues. Certain customers have requested revised payment terms and more customers could potentially request such terms. If such an increase in requests for revised payment terms occurs, some delays in accounts receivable collection would result. We also expect some customers are relying on the governmental support via various COVID-19 related stimulus packages. If these stimulus packages do not continue or if they are not sufficient to meet our customers' needs, we could experience more customer churn as a result. In general, a prolonged economic downturn could result in a larger customer churn than we currently anticipate and reduced demand for our services, in which case our revenues could be significantly impacted. Given the uncertainty around the duration and extent of the COVID-19 pandemic, we cannot accurately predict at this time how the pandemic will affect our business over time.
We do not expect the construction delays that we have experienced to have a material effect on the company at this time, but additional supply disruptions because of the ongoing COVID-19 pandemic could occur and cause construction delays that are significant in the future. Significant construction delays would interfere with our ability to meet commitments to customers who have contracted for space in new IBX data centers under construction and could have a material impact on our business. While we have received "essential business" permits for construction in some jurisdictions, these classifications may not extend to the construction of new IBX data centers in all of our jurisdictions. We are also reliant on third party construction labor to build and expand our IBX data centers, to which we may not have access due to the ongoing COVID-19 pandemic. We rely on materials, products and manufacturing from regions of the world which are impacted by the pandemic. It may not be possible to find replacement products or supplies and ongoing delays could affect our business and growth.
While the full extent and impact of the ongoing COVID-19 pandemic cannot be reasonably estimated at this time, it could have a material adverse impact on our business and financial condition. The extent to which the ongoing COVID-19 pandemic will impact our financial condition or results of operations will depend on many factors and future developments, including new information about the ongoing COVID-19 pandemic, additional surges in infection rates and any new government regulations which may emerge to contain the virus, among others.
We experienced an information technology security breach in the past and may be vulnerable to future security breaches, which could disrupt our operations and have a material adverse effect on our business results of operation and financial performance.
Despite our efforts to protect against cyber-attacks, we are not fully insulated from these types of security breaches, and such an attack could adversely impact our competitiveness and results of operations. In September 2020, we discovered ransomware on certain of our internal systems, encrypting files and holding them for ransom. Our teams responded quickly to address the incident and notified law enforcement, and after a thorough review of the incident by our management and experts retained to assist in this incident, the investigation was closed as of October 14, 2020. Our IBX data centers and our service offerings, including managed services, remained fully operational during the attack and the incident did not affect our ability to support our customers. We further believe that we were able to contain the incident and that the resolution will prevent the release of any data associated with this attack. While the event has been resolved and has not caused a material disruption to our systems nor resulted in any material costs to Equinix, our team is also working to protect against any future attacks. We will continue to face risks associated with unauthorized access to our computer systems, loss or destruction of data, computer viruses, ransomware, malware, distributed denial-of-service attacks or other malicious activities. These threats may result from human error, equipment failure or fraud or malice on the part of employees, vendors or third parties. As techniques used to breach security change frequently and are generally not recognized until launched against a target, we may not be able to promptly detect that a cyber breach has occurred, or implement security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented. Because of the ongoing COVID-19 pandemic, many of our non-IBX employees are working from home and could potentially be exposed to new security risks or attempted breaches because of these new work environments. A party who is able to compromise the security measures on our networks or the security of our infrastructure could misappropriate either our proprietary information or the personal information of our customers or our employees, or cause interruptions or malfunctions in our operations or our customers' operations. As we provide assurances to our customers that we provide a high level of security, such a compromise could be particularly harmful to our brand and reputation. We may be required to expend significant capital and resources to protect against such threats or to alleviate problems caused by breaches in security. Any breaches that may occur in the future could expose us to increased risk of lawsuits, regulatory penalties, loss of existing or potential customers, damage relating to loss of proprietary information, harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial performance and results of operations. We maintain insurance coverage for cyber risks, but such coverage may be unavailable or insufficient to cover our losses.
We offer professional services to our customers where we consult on data center solutions and assist with implementations. We also offer managed services in certain of our foreign jurisdictions outside of the U.S. where we manage the data center infrastructure for our customers. The access to our clients' networks and data, which is gained from these services, creates some risk that our clients' networks or data will be improperly accessed. We may also design our clients' cloud storage systems in such a way that exposes our clients to increased risk of data breach. If Equinix were held responsible for any such breach, it could result in a significant loss to Equinix, including damage to Equinix's client relationships, harm to our brand and reputation, and legal liability.
Terrorist activity, or violence stemming from the current climate of political and economic uncertainty, could adversely impact our business.
The continued threat of terrorist activity and other acts of war or hostility both domestically and abroad, along with violence stemming from political unrest, contribute to a climate of political and economic uncertainty. Due to existing or developing circumstances, we may need to incur additional costs in the future to provide enhanced security, including cyber security, which could have a material adverse effect on our business and results of operations. These circumstances may also adversely affect our ability to attract and retain customers and employees, our ability to raise capital and the operation and maintenance of our IBX data centers.
Our offerings have a long sales cycle that may harm our revenue and results of operations.
A customer's decision to purchase our offerings typically involves a significant commitment of resources. In addition, some customers will be reluctant to commit to locating in our IBX data centers until they are confident that the IBX data center has adequate carrier connections. As a result, we have a long sales cycle. Furthermore, we may devote significant time and resources to pursuing a particular sale or customer that does not result in revenues. We have also significantly expanded our sales force in recent years, and it will take time for these new hires to become fully productive. Delays may be further exacerbated by the ongoing COVID-19 pandemic.
Delays due to the length of our sales cycle may materially and adversely affect our revenues and results of operations, which could harm our ability to meet our forecasts and cause volatility in our stock price.
Any failure of our physical infrastructure or negative impact on our ability to meet our obligations to our customers, or damage to customer infrastructure within our IBX data centers, could lead to significant costs and disruptions that could reduce our revenue and harm our business reputation and financial results.
Our business depends on providing customers with highly reliable solutions. We must safehouse our customers' infrastructure and equipment located in our IBX data centers and ensure our IBX data centers and non-IBX offices remain operational at all times. We own certain of our IBX data centers, but others are leased by us, and we rely on the landlord for basic maintenance of our leased IBX data centers and office buildings. If such landlord has not maintained a leased property sufficiently, we may be forced into an early exit from the center which could be disruptive to our business. Furthermore, we continue to acquire IBX data centers not built by us. If we discover that these buildings and their infrastructure assets are not in the condition we expected when they were acquired, we may be required to incur substantial additional costs to repair or upgrade the IBX data centers. Newly acquired data centers also may not have the same power infrastructure and design in place as our own IBX data centers. These legacy designs could require upgrades in order to meet our standards and our customers’ expectations. Until the legacy systems are brought up to Equinix standards, customers in these legacy IBX data centers could be exposed to higher risks of unexpected power outages. We have experienced power outages because of these legacy design issues in the past and our customers could experience these in the future.
Problems at one or more of our IBX data centers or corporate offices, whether or not within our control, could result in service interruptions or significant infrastructure or equipment damage. These could result from numerous factors, including:
•human error;
•equipment failure;
•physical, electronic and cyber security breaches;
•fire, earthquake, hurricane, flood, tornado and other natural disasters;
•extreme temperatures;
•water damage;
•fiber cuts;
•power loss;
•terrorist acts;
•sabotage and vandalism;
•global pandemics such as the COVID-19 pandemic; and
•failure of business partners who provide our resale products.
We have service level commitment obligations to certain customers. As a result, service interruptions or significant equipment damage in our IBX data centers could result in difficulty maintaining service level commitments to these customers and potential claims related to such failures. Because our IBX data centers are critical to many of our customers' businesses, service interruptions or significant equipment damage in our IBX data centers could also result in lost profits or other indirect or consequential damages to our customers. We cannot guarantee that a court would enforce any contractual limitations on our liability in the event that one of our customers brings a lawsuit against us as a result of a problem at one of our IBX data centers and we may decide to reach settlements with affected customers irrespective of any such contractual limitations. Any such settlement may
result in a reduction of revenue under U.S. generally accepted accounting principles ("GAAP"). In addition, any loss of service, equipment damage or inability to meet our service level commitment obligations could reduce the confidence of our customers and could consequently impair our ability to obtain and retain customers, which would adversely affect both our ability to generate revenues and our results of operations.
Furthermore, we are dependent upon internet service providers, telecommunications carriers and other website operators in the Americas, Asia-Pacific and EMEA regions and elsewhere, some of which have experienced significant system failures and electrical outages in the past. Our customers may in the future experience difficulties due to system failures unrelated to our systems and offerings. If, for any reason, these providers fail to provide the required services, our business, financial condition and results of operations could be materially and adversely impacted.
We are currently making significant investments in our back-office information technology systems and processes. Difficulties from or disruptions to these efforts may interrupt our normal operations and adversely affect our business and results of operations.
We have been investing heavily in our back-office information technology systems and processes for a number of years and expect such investment to continue for the foreseeable future in support of our pursuit of global, scalable solutions across all geographies and functions that we operate in. These continuing investments include: 1) ongoing improvements to the customer experience from initial quote to customer billing and our revenue recognition process; 2) integration of recently-acquired operations onto our various information technology systems; and 3) implementation of new tools and technologies to either further streamline and automate processes, or to support our compliance with evolving U.S. GAAP. As a result of our continued work on these projects, we may experience difficulties with our systems, management distraction and significant business disruptions. For example, difficulties with our systems may interrupt our ability to accept and deliver customer orders and may adversely impact our overall financial operations, including our accounts payable, accounts receivables, general ledger, fixed assets, revenue recognition, close processes, internal financial controls and our ability to otherwise run and track our business. We may need to expend significant attention, time and resources to correct problems or find alternative sources for performing these functions. All of these changes to our financial systems also create an increased risk of deficiencies in our internal controls over financial reporting until such systems are stabilized. Such significant investments in our back-office systems may take longer to complete and cost more than originally planned. In addition, we may not realize the full benefits we hoped to achieve and there is a risk of an impairment charge if we decide that portions of these projects will not ultimately benefit the company or are de-scoped. Finally, the collective impact of these changes to our business has placed significant demands on impacted employees across multiple functions, increasing the risk of errors and control deficiencies in our financial statements, distraction from the effective operation of our business and difficulty in attracting and retaining employees. Any such difficulties or disruptions may adversely affect our business and results of operations.
The level of insurance coverage that we purchase may prove to be inadequate.
We carry liability, property, business interruption and other insurance policies to cover insurable risks to our company. We select the types of insurance, the limits and the deductibles based on our specific risk profile, the cost of the insurance coverage versus its perceived benefit and general industry standards. Our insurance policies contain industry standard exclusions for events such as war and nuclear reaction. We purchase earthquake insurance for certain of our IBX data centers, but for our IBX data centers in high-risk zones, including those in California and Japan, we have elected to self-insure. The earthquake and flood insurance that we do purchase would be subject to high deductibles. Any of the limits of insurance that we purchase, including those for cyber risks, could prove to be inadequate, which could materially and adversely impact our business, financial condition and results of operations.
We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future to realize expected returns on these investments.
We are considering the acquisition or lease of additional properties and the construction of new IBX data centers beyond those expansion projects already announced. We will be required to commit substantial operational and financial resources to these IBX data centers, generally 12 to 18 months in advance of securing customer contracts, and we may not have sufficient customer demand in those markets to support these IBX data centers once they are built. In addition, unanticipated technological changes could affect customer requirements for data
centers, and we may not have built such requirements into our new IBX data centers. Either of these contingencies, if they were to occur, could make it difficult for us to realize expected or reasonable returns on these investments.
The use of high power density equipment may limit our ability to fully utilize our older IBX data centers.
Some customers have increased their use of high power density equipment, such as blade servers, in our IBX data centers which has increased the demand for power on a per cabinet basis. Because many of our IBX data centers were built a number of years ago, the current demand for power may exceed the designed electrical capacity in these IBX data centers. As power, not space, is a limiting factor in many of our IBX data centers, our ability to fully utilize those IBX data centers may be impacted. The ability to increase the power capacity of an IBX data center, should we decide to, is dependent on several factors including, but not limited to, the local utility's ability to provide additional power; the length of time required to provide such power; and/or whether it is feasible to upgrade the electrical infrastructure of an IBX data center to deliver additional power to customers. Although we are currently designing and building to a higher power specification than that of many of our older IBX data centers, there is a risk that demand will continue to increase and our IBX data centers could become underutilized sooner than expected.
If we are unable to implement our evolving organizational structure or if we are unable to recruit or retain key executives and qualified personnel, our business could be harmed.
In connection with the evolving needs of our customers and our business, we undertook a review of our organizational architecture and have made, and will continue to make, changes as a result of that review. There can be no assurances that the changes won't result in attrition, that the significant amount of management and other employees' time and focus to implement the changes won't divert attention from operating and growing the business, or that any changes will result in increased organizational effectiveness. We must also continue to identify, hire, train and retain key personnel who maintain relationships with our customers and who can provide the technical, strategic and marketing skills required for our company's growth. There is a shortage of qualified personnel in these fields, and we compete with other companies for the limited pool of talent.
The failure to recruit and retain necessary key executives and personnel could cause disruption, harm our business and hamper our ability to grow our company.
We may not be able to compete successfully against current and future competitors.
The global multi-tenant data center market is highly fragmented. It is estimated that Equinix is one of more than 1,200 companies that provide these offerings around the world. Equinix competes with these firms which vary in terms of their data center offerings. We must continue to evolve our product strategy and be able to differentiate our IBX data centers and product offerings from those of our competitors.
Some of our competitors may adopt aggressive pricing policies, especially if they are not highly leveraged or have lower return thresholds than we do. As a result, we may suffer from pricing pressure that would adversely affect our ability to generate revenues. Some of these competitors may also provide our target customers with additional benefits, including bundled communication services or cloud services, and may do so in a manner that is more attractive to our potential customers than obtaining space in our IBX data centers. Similarly, with growing acceptance of cloud-based technologies, we are at risk of losing customers that may decide to fully leverage cloud infrastructure offerings instead of managing their own. Competitors could also operate more successfully or form alliances to acquire significant market share.
Failure to compete successfully may materially adversely affect our financial condition, cash flows and results of operations.
If we cannot continue to develop, acquire, market and provide new offerings or enhancements to existing offerings that meet customer requirements and differentiate us from our competitors, our results of operations could suffer.
As our customers evolve their IT strategies, we must remain flexible and evolve along with new technologies and industry and market shifts. Ineffective planning and execution in our cloud and product development strategies may cause difficulty in sustaining our competitive advantages.
The process of developing and acquiring new offerings and enhancing existing offerings is complex. If we fail to anticipate customers’ evolving needs and expectations or do not adapt to technological and IT trends, our results of operations could suffer. In order to adapt effectively, we sometimes must make long-term investments, develop, acquire or obtain certain intellectual property and commit significant resources before knowing whether our predictions will accurately reflect customer demand for the new offerings. If we misjudge customer needs in the future, our new offerings may not succeed, and our revenues and earnings may be harmed. Additionally, any delay in the development, acquisition, marketing or launch of a new offering could result in customer dissatisfaction or attrition. If we cannot continue adapting our products, or if our competitors can adapt their products more quickly than us, our business could be harmed.
We recently announced our Joint Ventures with GIC and are also in discussions with a targeted set of hyperscale customers to develop capacity to serve their larger footprint needs by leveraging existing capacity and dedicated hyperscale builds. We have announced our intention to seek additional joint venture partners for certain of our hyperscale builds. There can be no assurances that our joint ventures will be successful or that we find additional partners or that we are able to successfully meet the needs of these customers.
We also recently acquired Packet a bare metal automation company to facilitate a new product offering for Equinix. While we believe this new product offering will be desirable to our customers and will complement our other offerings on Platform Equinix, we cannot guarantee the success of this product or any other new product offering. Our company has not historically offered hardware solutions, and this is a new market area for us which can bring challenges and could harm our business if not executed in the time or manner that we expect.
Our results of operations may fluctuate.
We have experienced fluctuations in our results of operations on a quarterly and annual basis. The fluctuations in our results of operations may cause the market price of our common stock to be volatile. We may experience significant fluctuations in our results of operations in the foreseeable future due to a variety of factors, including, but not limited to:
•fluctuations of foreign currencies in the markets in which we operate;
•the timing and magnitude of depreciation and interest expense or other expenses related to the acquisition, purchase or construction of additional IBX data centers or the upgrade of existing IBX data centers;
•demand for space, power and solutions at our IBX data centers;
•changes in general economic conditions, such as from the COVID-19 pandemic or other economic downturns, or specific market conditions in the telecommunications and internet industries, any of which could have a material impact on us or on our customer base;
•charges to earnings resulting from past acquisitions due to, among other things, impairment of goodwill or intangible assets, reduction in the useful lives of intangible assets acquired, identification of additional assumed contingent liabilities or revised estimates to restructure an acquired company's operations;
•the duration of the sales cycle for our offerings and our ability to ramp our newly-hired sales persons to full productivity within the time period we have forecasted;
•additions and changes in product offerings and our ability to ramp up and integrate new products within the time period we have forecasted;
•restructuring charges or reversals of restructuring charges, which may be necessary due to revised sublease assumptions, changes in strategy or otherwise;
•acquisitions or dispositions we may make;
•the financial condition and credit risk of our customers;
•the provision of customer discounts and credits;
•the mix of current and proposed products and offerings and the gross margins associated with our products and offerings;
•the timing required for new and future IBX data centers to open or become fully utilized;
•competition in the markets in which we operate;
•conditions related to international operations;
•increasing repair and maintenance expenses in connection with aging IBX data centers;
•lack of available capacity in our existing IBX data centers to generate new revenue or delays in opening new or acquired IBX data centers that delay our ability to generate new revenue in markets which have otherwise reached capacity;
•changes in rent expense as we amend our IBX data center leases in connection with extending their lease terms when their initial lease term expiration dates approach or changes in shared operating costs in connection with our leases, which are commonly referred to as common area maintenance expenses;
•the timing and magnitude of other operating expenses, including taxes, expenses related to the expansion of sales, marketing, operations and acquisitions, if any, of complementary businesses and assets;
•the cost and availability of adequate public utilities, including electricity;
•changes in employee stock-based compensation;
•overall inflation;
•increasing interest expense due to any increases in interest rates and/or potential additional debt financings;
•changes in our tax planning strategies or failure to realize anticipated benefits from such strategies;
•changes in income tax benefit or expense; and
•changes in or new GAAP as periodically released by the Financial Accounting Standards Board ("FASB").
Any of the foregoing factors, or other factors discussed elsewhere in this report, could have a material adverse effect on our business, results of operations and financial condition. Although we have experienced growth in revenues in recent quarters, this growth rate is not necessarily indicative of future results of operations. Prior to 2008, we had generated net losses every fiscal year since inception. It is possible that we may not be able to generate net income on a quarterly or annual basis in the future. In addition, a relatively large portion of our expenses are fixed in the short-term, particularly with respect to lease and personnel expenses, depreciation and amortization and interest expenses. Therefore, our results of operations are particularly sensitive to fluctuations in revenues. As such, comparisons to prior reporting periods should not be relied upon as indications of our future performance. In addition, our results of operations results in one or more future quarters may fail to meet the expectations of securities analysts or investors.
Our DSO may be negatively impacted by process and system upgrades and acquisitions.
Our DSO may be negatively impacted by ongoing process and system upgrades which can impact our customers' experience in the short term, together with integrating recent acquisitions into our processes and systems, which may have a negative impact on our operating cash flows, liquidity and financial condition.
We may incur goodwill and other intangible asset impairment charges, or impairment charges to our property, plant and equipment, which could result in a significant reduction to our earnings.
In accordance with U.S. GAAP, we are required to assess our goodwill and other intangible assets annually, or more frequently whenever events or changes in circumstances indicate potential impairment, such as changing market conditions or any changes in key assumptions. If the testing performed indicates that an asset may not be recoverable, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the determination is made.
We also periodically monitor the remaining net book values of our property, plant and equipment, including at the individual IBX data center level. Although each individual IBX data center is currently performing in accordance with our expectations, the possibility that one or more IBX data centers could begin to under-perform relative to our expectations is possible and may also result in non-cash impairment charges.
These charges could be significant, which could have a material adverse effect on our business, results of operations or financial condition.
We have incurred substantial losses in the past and may incur additional losses in the future.
As of December 31, 2020, our retained earnings were $1.8 billion. Although we have generated net income for each fiscal year since 2008, except for the year ended December 31, 2014, we are currently investing heavily in our future growth through the build out of multiple additional IBX data centers, expansions of IBX data centers and acquisitions of complementary businesses. As a result, we will incur higher depreciation and other operating expenses, as well as transaction costs and interest expense, that may negatively impact our ability to sustain profitability in future periods unless and until these new IBX data centers generate enough revenue to exceed their operating costs and cover the additional overhead needed to scale our business for this anticipated growth. The current global financial uncertainty may also impact our ability to sustain profitability if we cannot generate sufficient revenue to offset the increased costs of our recently-opened IBX data centers or IBX data centers currently under construction. In addition, costs associated with the acquisition and integration of any acquired companies, as well as the additional interest expense associated with debt financing we have undertaken to fund our growth initiatives, may also negatively impact our ability to sustain profitability. Finally, given the competitive and evolving nature of the industry in which we operate, we may not be able to sustain or increase profitability on a quarterly or annual basis.
The failure to obtain favorable terms when we renew our IBX data center leases, or the failure to renew such leases, could harm our business and results of operations.
While we own certain of our IBX data centers, others are leased under long-term arrangements. These leased IBX data centers have all been subject to significant development by us in order to convert them from, in most cases, vacant buildings or warehouses into IBX data centers. Most of our IBX data center leases have renewal options available to us. However, many of these renewal options provide for the rent to be set at then-prevailing market rates. To the extent that then-prevailing market rates or negotiated rates are higher than present rates, these higher costs may adversely impact our business and results of operations, or we may decide against renewing the lease. In the event that an IBX data center lease does not have a renewal option, or we fail to exercise a renewal option in a timely fashion and lose our right to renew the lease, we may not be successful in negotiating a renewal of the lease with the landlord. A failure to renew a lease could force us to exit a building prematurely, which could disrupt our business, harm our customer relationships, expose us to liability under our customer contracts, cause us to take impairment charges and affect our results of operations negatively.
We depend on a number of third parties to provide internet connectivity to our IBX data centers; if connectivity is interrupted or terminated, our results of operations and cash flow could be materially and adversely affected.
The presence of diverse telecommunications carriers' fiber networks in our IBX data centers is critical to our ability to retain and attract new customers. We are not a telecommunications carrier, and as such, we rely on third parties to provide our customers with carrier services. We believe that the availability of carrier capacity will directly affect our ability to achieve our projected results. We rely primarily on revenue opportunities from the telecommunications carriers' customers to encourage them to invest the capital and operating resources required to connect from their data centers to our IBX data centers. Carriers will likely evaluate the revenue opportunity of an IBX data center based on the assumption that the environment will be highly competitive. We cannot provide assurance that each and every carrier will elect to offer its services within our IBX data centers or that once a carrier has decided to provide internet connectivity to our IBX data centers that it will continue to do so for any period of time.
Our new IBX data centers require construction and operation of a sophisticated redundant fiber network. The construction required to connect multiple carrier facilities to our IBX data centers is complex and involves factors outside of our control, including regulatory processes and the availability of construction resources. Any hardware or fiber failures on this network may result in significant loss of connectivity to our new IBX data center expansions. This could affect our ability to attract new customers to these IBX data centers or retain existing customers.
To date, the network neutrality of our IBX data centers and the variety of networks available to our customers has often been a competitive advantage for us. In certain of our acquired IBX data centers in the Asia-Pacific region, the limited number of carriers available reduces that advantage. As a result, we may need to adapt our key revenue-generating offerings and pricing to be competitive in those markets.
If the establishment of highly diverse internet connectivity to our IBX data centers does not occur, is materially delayed or is discontinued, or is subject to failure, our results of operations and financial condition will be adversely affected.
We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties.
We derive revenues from contracts with the U.S. government, state and local governments and foreign governments. Some of these customers may terminate all or part of their contracts at any time, without cause. There is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending. Some of our federal government contracts are subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts. Similarly, some of our contracts at the state and local levels are subject to government funding authorizations.
Additionally, government contracts often have unique terms and conditions, such as most favored customer obligations, and are generally subject to audits and investigations which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.
Because we depend on the development and growth of a balanced customer base, including key magnet customers, failure to attract, grow and retain this base of customers could harm our business and results of operations.
Our ability to maximize revenues depends on our ability to develop and grow a balanced customer base, consisting of a variety of companies, including enterprises, cloud, digital content and financial companies, and network service providers. We consider certain of these customers to be key magnets in that they draw in other customers. The more balanced the customer base within each IBX data center, the better we will be able to generate significant interconnection revenues, which in turn increases our overall revenues. Our ability to attract customers to our IBX data centers will depend on a variety of factors, including the presence of multiple carriers, the mix of our offerings, the overall mix of customers, the presence of key customers attracting business through vertical market ecosystems, the IBX data center's operating reliability and security and our ability to effectively market our offerings. However, some of our customers may face competitive pressures and may ultimately not be successful or may be consolidated through merger or acquisition. If these customers do not continue to use our IBX data centers it may be disruptive to our business. Finally, any uncertain global economic climate, including the one we are currently experiencing as a result of the ongoing COVID-19 pandemic, could harm our ability to attract and retain customers if customers slow spending, or delay decision-making on our offerings, or if customers begin to have difficulty paying us or seek bankruptcy protection and we experience increased churn in our customer base. Any of these factors may hinder the development, growth and retention of a balanced customer base and adversely affect our business, financial condition and results of operations.
Industry consolidation may have a negative impact on our business model.
If customers combine businesses, they may require less colocation space, which could lead to churn in our customer base. Regional competitors may also consolidate to become a global competitor. Consolidation of our customers and/or our competitors may present a risk to our business model and have a negative impact on our revenues.
Risks Related to Our Expansion
Our construction of additional new IBX data centers or IBX data center expansions could involve significant risks to our business.
In order to sustain our growth in certain of our existing and new markets, we may have to expand an existing data center, lease a new facility or acquire suitable land, with or without structures, to build new IBX data centers from the ground up. Expansions or new builds are currently underway, or being contemplated, in many of our markets. These construction projects expose us to many risks which could have an adverse effect on our results of operations and financial condition. As described above, the ongoing COVID-19 pandemic has exacerbated many of
these construction risks and has created additional risks for our business. Some of the risks associated with construction projects include:
•construction delays;
•lack of availability and delays for data center equipment, including items such as generators and switchgear;
•unexpected budget changes;
•increased prices for and delays in obtaining building supplies, raw materials and data center equipment;
•labor availability, labor disputes and work stoppages with contractors, subcontractors and other third parties, including interruptions in work due to the ongoing COVID-19 pandemic;
•unanticipated environmental issues and geological problems;
•delays related to permitting and approvals to open from public agencies and utility companies; and
•delays in site readiness leading to our failure to meet commitments made to customers planning to expand into a new build.
Construction projects are dependent on permitting from public agencies and utility companies. Any delay in permitting could affect our growth. We are currently experiencing permitting delays in most metros due to reduced production from labor availability and from other COVID-19 pandemic related permitting restrictions or stoppages. While we don't currently anticipate any material long-term negative impact to our business because of these construction delays, these types of delays and stoppages related to permitting from public agencies and utility companies could worsen and have an adverse effect on our bookings, revenue or growth.
Additionally, all construction related projects require us to carefully select and rely on the experience of one or more designers, general contractors, and associated subcontractors during the design and construction process. Should a designer, general contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns.
Site selection is also a critical factor in our expansion plans. There may not be suitable properties available in our markets with the necessary combination of high-power capacity and fiber connectivity, or selection may be limited. Thus, while we may prefer to locate new IBX data centers adjacent to our existing locations, it may not always be possible. In the event we decide to build new IBX data centers separate from our existing IBX data centers, we may provide metro connect solutions to connect these two IBX data centers. Should these solutions not provide the necessary reliability to sustain connection, this could result in lower interconnection revenue and lower margins and could have a negative impact on customer retention over time.
Acquisitions present many risks, and we may not realize the financial or strategic goals that were contemplated at the time of any transaction.
Over the last several years, we have completed numerous acquisitions, including most recently that of data centers from Bell in the fourth quarter of 2020, Packet in March 2020, and three data centers from Axtel in Mexico in January 2020. We expect to make additional acquisitions in the future, which may include (i) acquisitions of businesses, products, solutions or technologies that we believe to be complementary, (ii) acquisitions of new IBX data centers or real estate for development of new IBX data centers; (iii) acquisitions through investments in local data center operators; or (iv) acquisitions in new markets with higher risk profiles. We may pay for future acquisitions by using our existing cash resources (which may limit other potential uses of our cash), incurring additional debt (which may increase our interest expense, leverage and debt service requirements) and/or issuing shares (which may dilute our existing stockholders and have a negative effect on our earnings per share). Acquisitions expose us to potential risks, many of which could be exacerbated by the ongoing COVID-19 pandemic, including:
•the possible disruption of our ongoing business and diversion of management's attention by acquisition, transition and integration activities, particularly when multiple acquisitions and integrations are occurring at the same time;
•our potential inability to successfully pursue or realize some or all of the anticipated revenue opportunities associated with an acquisition or investment;
•the possibility that we may not be able to successfully integrate acquired businesses, or businesses in which we invest, or achieve anticipated operating efficiencies or cost savings;
•the possibility that announced acquisitions may not be completed, due to failure to satisfy the conditions to closing as a result of:
•an injunction, law or order that makes unlawful the consummation of the acquisition;
•inaccuracy or breach of the representations and warranties of, or the non-compliance with covenants by, either party;
•the nonreceipt of closing documents; or
•for other reasons;
•the possibility that there could be a delay in the completion of an acquisition, which could, among other things, result in additional transaction costs, loss of revenue or other adverse effects resulting from such uncertainty;
•the possibility that our projections about the success of an acquisition could be inaccurate and any such inaccuracies could have a material adverse effect on our financial projections;
•the dilution of our existing stockholders as a result of our issuing stock as consideration in a transaction or selling stock in order to fund the transaction;
•the possibility of customer dissatisfaction if we are unable to achieve levels of quality and stability on par with past practices;
•the possibility that we will be unable to retain relationships with key customers, landlords and/or suppliers of the acquired businesses, some of which may terminate their contracts with the acquired business as a result of the acquisition or which may attempt to negotiate changes in their current or future business relationships with us;
•the possibility that we could lose key employees from the acquired businesses;
•the possibility that we may be unable to integrate or migrate IT systems, which could create a risk of errors or performance problems and could affect our ability to meet customer service level obligations;
•the potential deterioration in our ability to access credit markets due to increased leverage;
•the possibility that our customers may not accept either the existing equipment infrastructure or the "look-and-feel" of a new or different IBX data center;
•the possibility that additional capital expenditures may be required or that transaction expenses associated with acquisitions may be higher than anticipated;
•the possibility that required financing to fund an acquisition may not be available on acceptable terms or at all;
•the possibility that we may be unable to obtain required approvals from governmental authorities under antitrust and competition laws on a timely basis or at all, which could, among other things, delay or prevent us from completing an acquisition, limit our ability to realize the expected financial or strategic benefits of an acquisition or have other adverse effects on our current business and operations;
•the possible loss or reduction in value of acquired businesses;
•the possibility that future acquisitions may present new complexities in deal structure, related complex accounting and coordination with new partners, particularly in light of our desire to maintain our qualification for taxation as a REIT;
•the possibility that we may not be able to prepare and issue our financial statements and other public filings in a timely and accurate manner, and/or maintain an effective control environment, due to the strain on the finance organization when multiple acquisitions and integrations are occurring at the same time;
•the possibility that future acquisitions may trigger property tax reassessments resulting in a substantial increase to our property taxes beyond that which we anticipated;
•the possibility that future acquisitions may be in geographies and regulatory environments to which we are unaccustomed and we may become subject to complex requirements and risks with which we have limited experience;
•the possibility that future acquisitions may appear less attractive due to fluctuations in foreign currency rates;
•the possibility that carriers may find it cost-prohibitive or impractical to bring fiber and networks into a new IBX data center;
•the possibility of litigation or other claims in connection with, or as a result of, an acquisition, including claims from terminated employees, customers, former stockholders or other third parties;
•the possibility that asset divestments may be required in order to obtain regulatory clearance for a transaction;
•the possibility of pre-existing undisclosed liabilities, including, but not limited to, lease or landlord related liability, tax liability, environmental liability or asbestos liability, for which insurance coverage may be insufficient or unavailable, or other issues not discovered in the diligence process;
•the possibility that we receive limited or incorrect information about the acquired business in the diligence process, particularly in light of the travel bans and other restrictions imposed due to the COVID-19 pandemic; and
•the possibility that we do not have full visibility into customer agreements and customer termination rights during the diligence process which could expose us to additional liabilities after completing the acquisition.
The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows. If an acquisition does not proceed or is materially delayed for any reason, the price of our common stock may be adversely impacted, and we will not recognize the anticipated benefits of the acquisition.
We cannot assure that the price of any future acquisitions of IBX data centers will be similar to prior IBX data center acquisitions. In fact, we expect costs required to build or render new IBX data centers operational to increase in the future. If our revenue does not keep pace with these potential acquisition and expansion costs, we may not be able to maintain our current or expected margins as we absorb these additional expenses. There is no assurance we would successfully overcome these risks, or any other problems encountered with these acquisitions.
The anticipated benefits of our Joint Ventures with GIC may not be fully realized, or take longer to realize than expected.
On October 8, 2019, we entered into a joint venture with GIC to develop and operate xScale™ data centers in Europe (the "EMEA Joint Venture"). We sold our London 10 and Paris 8 IBX data centers and certain construction development and leases in London and Frankfurt to the EMEA Joint Venture. The data centers and facilities are now owned by wholly-owned subsidiaries of EMEA Hyperscale 1 C.V., a Dutch limited partnership of which Equinix owns a 20% interest, GIC owns an 80% interest, and Equinix will operate the facilities. In December 2020, we also sold our Paris 9 IBX data center to EMEA Joint Venture.
On December 17, 2020, we entered into a second joint venture with GIC, to develop and operate xScale™ data centers in Asia-Pacific (the “Asia-Pacific Joint Venture” and together with the EMEA Joint Venture, the “Joint Ventures”). We sold 3 development sites in Japan to the Asia-Pacific Joint Venture upon closing. The sites are now held by a wholly-owned subsidiary of APAC 1 Hyperscale LP, a limited partnership formed and registered under the laws of Singapore, of which Equinix owns a 20% interest and GIC owns an 80% interest, and Equinix will develop the data centers and operate the facilities.
We are investing in developing certain sites with the intent of selling these assets to these Joint Ventures. The success of the these Joint Venture will depend, in part, on the successful development of the data center sites, and we may not realize all of the anticipated benefits. Such development may be more difficult, time-consuming or costly than expected and could result in increased costs, decreases in the amount of expected revenues and diversion of management's time and energy, which could materially impact our business, financial condition and results of operations. Additionally, if it is determined these sites are no longer desirable for the Joint Ventures, we would need to find a different buyer or invest in the sites in order to develop them for a different purpose.
We may not realize all of the anticipated benefits from either of the Joint Ventures. The success of these Joint Ventures will depend, in part, on the successful partnership between Equinix and GIC. Such a partnership is subject to risks as outlined below in our risk factor related to Joint Ventures under the General Risk Factors section, and
more generally, to the same types of business risks as would impact our IBX data center business. A failure to successfully partner, or a failure to realize our expectations for the Joint Ventures, could materially impact our business, financial condition and results of operations. These Joint Ventures could also be negatively impacted by development and construction delays, including those resulting from the ongoing COVID-19 pandemic.
Joint venture investments, such as our Joint Ventures with GIC, could expose us to risks and liabilities in connection with the formation of the new joint ventures, the operation of such joint ventures without sole decision-making authority, and our reliance on joint venture partners who may have economic and business interests that are inconsistent with our business interests.
In addition to our current and proposed Joint Ventures with GIC, we may co-invest with other third parties through partnerships, joint ventures or other entities in the future. These joint ventures could result in our acquisition of non-controlling interests in, or shared responsibility for, managing the affairs of a property or portfolio of properties, partnership, joint venture or other entity. We may be subject to additional risks, including:
•we may not have the right to exercise sole decision-making authority regarding the properties, partnership, joint venture or other entity;
•if our partners become bankrupt or fail to fund their share of required capital contributions, we may choose to or be required to contribute such capital;
•our partners may have economic, tax or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives;
•our joint venture partners may take actions that are not within our control, which could require us to dispose of the joint venture asset, transfer it to a TRS in order for Equinix to maintain its qualification for taxation as a REIT, or purchase the partner's interests or assets at an above-market price;
•our joint venture partners may take actions unrelated to our business agreement but which reflect poorly on Equinix because of our joint venture;
•disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our management from focusing their time and effort on our day-to-day business; and
•we may in certain circumstances be liable for the actions of our third-party partners or guarantee all or a portion of the joint venture's liabilities, which may require the company to pay an amount greater than its investment in the joint venture.
Each of these factors may result in returns on these investments being less than we expect or in losses, and our financial and results of operations may be adversely affected.
If we cannot effectively manage our international operations, and successfully implement our international expansion plans, or comply with evolving laws and regulations, our revenues may not increase, and our business and results of operations would be harmed.
For the years ended December 31, 2020, 2019 and 2018, we recognized approximately 59%, 58% and 55%, respectively, of our revenues outside the U.S. We currently operate outside of the U.S. in Canada, Mexico, Asia-Pacific, EMEA, and South America.
In addition, we are currently undergoing expansions or evaluating expansion opportunities outside of the U.S. Undertaking and managing expansions in foreign jurisdictions may present unanticipated challenges to us.
Our international operations are generally subject to a number of additional risks, including:
•the costs of customizing IBX data centers for foreign countries;
•protectionist laws and business practices favoring local competition;
•greater difficulty or delay in accounts receivable collection;
•difficulties in staffing and managing foreign operations, including negotiating with foreign labor unions or workers' councils;
•difficulties in managing across cultures and in foreign languages;
•political and economic instability;
•fluctuations in currency exchange rates;
•difficulties in repatriating funds from certain countries;
•our ability to obtain, transfer or maintain licenses required by governmental entities with respect to our business;
•unexpected changes in regulatory, tax and political environments such as the United Kingdom's withdrawal from the European Union ("Brexit"), the recent Hong Kong security law, and the current trade war between the U.S. and China;
•our ability to secure and maintain the necessary physical and telecommunications infrastructure;
•compliance with anti-bribery and corruption laws;
•compliance with economic and trade sanctions enforced by the Office of Foreign Assets Control of the U.S. Department of Treasury;
•compliance with evolving governmental regulation with which we have little experience; and
•compliance with evolving and varied regulations related to the ongoing COVID-19 pandemic.
Geo-political events, such as the ongoing COVID-19 pandemic, Brexit, political unrest in Hong Kong, the recent Hong Kong security law, and the trade war between the U.S. and China, may increase the likelihood of the listed risks to occur and could have a negative effect on our business in those regions. With respect to Brexit, it is possible that the level of economic activity in the United Kingdom and the rest of Europe will be adversely impacted and that we will face increased regulatory and legal complexities in these regions which could have an adverse impact on our business and employees in EMEA and could adversely affect our financial condition and results of operations. In addition, compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions. These laws and regulations include the General Data Protection Regulation ("GDPR") and other data privacy laws and requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export requirements, economic and trade sanctions, U.S. laws such as the Foreign Corrupt Practices Act and local laws which also prohibit corrupt payments to governmental officials. With respect to the current trade war between the U.S. and China, we have several customers in China named in restrictive executive orders by the previous U.S. administration that are currently covered by a freeze issued by the current U.S. administration or currently enjoined from enforcement subject to pending litigation. If Equinix is required to cease business with these companies, or additional companies in the future, our revenues could be adversely affected. Violations of any of these domestic or international laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our offerings in one or more countries, could delay or prevent potential acquisitions, and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and results of operations. Our success depends, in part, on our ability to anticipate and address these risks and manage these difficulties.
Risks Related to Our Capital Needs and Capital Strategy
Our substantial debt could adversely affect our cash flows and limit our flexibility to raise additional capital.
We have a significant amount of debt and may need to incur additional debt to support our growth. Additional debt may also be incurred to fund future acquisitions, any future special distributions, regular distributions or the other cash outlays associated with maintaining our qualification for taxation as a REIT. As of December 31, 2020, our total indebtedness (gross of debt issuance cost, debt discount, and debt premium) was approximately $12.6 billion, our stockholders' equity was $10.6 billion and our cash, cash equivalents, and investments totaled $1.6 billion. In addition, as of December 31, 2020, we had approximately $1.9 billion of additional liquidity available to us from our $2.0 billion revolving credit facility. In addition to our substantial debt, we lease many of our IBX data centers and certain equipment under lease agreements, some of which are accounted for as operating leases. As of December 31, 2020, we recorded operating lease liabilities of $1.5 billion, which represents our obligation to make lease payments under those lease arrangements.
Our substantial amount of debt and related covenants, and our off-balance sheet commitments, could have important consequences. For example, they could:
•require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt and in respect of other off-balance sheet arrangements, reducing the availability of
our cash flow to fund future capital expenditures, working capital, execution of our expansion strategy and other general corporate requirements;
•increase the likelihood of negative outlook from our credit rating agencies, or of a downgrade to our current rating;
•make it more difficult for us to satisfy our obligations under our various debt instruments;
•increase our cost of borrowing and even limit our ability to access additional debt to fund future growth;
•increase our vulnerability to general adverse economic and industry conditions and adverse changes in governmental regulations;
•limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a competitive disadvantage compared with our competitors;
•limit our operating flexibility through covenants with which we must comply;
•limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity, which would also limit our ability to further expand our business; and
•make us more vulnerable to increases in interest rates because of the variable interest rates on some of our borrowings to the extent we have not entirely hedged such variable rate debt.
The occurrence of any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition.
We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. These risks could materially adversely affect our financial condition, cash flows and results of operations.
The phase-out of the London Interbank Offered Rate (“LIBOR”), and uncertainty as to its replacement, may adversely affect our business.
On July 27, 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calibration of LIBOR after 2021 after which time it can no longer guarantee its availability. Although alternative reference rates have been proposed, it is unknown at this point which of these alternative reference rates will attain market acceptance as replacements for LIBOR.
Certain term loan borrowings under our Senior Credit Facility bear interest at rates that are calculated based on LIBOR. In addition, certain of our agreements, including financing, customer, vendor, leasing, intercompany, derivative and joint venture agreements, also make reference to LIBOR. To prepare for the phase out of LIBOR, we may need to renegotiate the Senior Credit Facility and other agreements and may not be able to do so on terms that are favorable to us. It is also currently unknown what impact any contract modification will have on our financial statements. Further, the financial markets may be disrupted as a result of the phase out of LIBOR if banks fail to execute a smooth transition to an alternate rate.
Disruption in the financial markets or the inability to renegotiate our agreements to remove and replace LIBOR on favorable terms, or a negative impact from any contract modifications, could have an adverse effect on our business, financial position, and results of operations.
Sales or issuances of shares of our common stock may adversely affect the market price of our common stock.
Future sales or issuances of common stock or other equity related securities may adversely affect the market price of our common stock, including any shares of our common stock issued to finance capital expenditures, finance acquisitions or repay debt. In October 2020, we established a new “at-the-market” (“ATM”) program in the amount of $1.5 billion under which we may, from time to time, issue and sell shares of our common stock to or through sales agents up to established limits; this new ATM program remained unused at the end of 2020. We expect to refresh our ATM program periodically, which could lead to additional dilution for our stockholders in the future. We may also seek authorization to sell additional shares of common stock through other means which could
lead to additional dilution for our stockholders. Please see Note 12 within the Consolidated Financial Statements of this Annual Report on Form 10-K for sales of our common stock under the ATM program.
If we are not able to generate sufficient operating cash flows or obtain external financing, our ability to fund incremental expansion plans may be limited.
Our capital expenditures, together with ongoing operating expenses, obligations to service our debt and the cash outlays associated with our REIT distribution requirements, are, and will continue to be, a substantial burden on our cash flow and may decrease our cash balances. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms. Our inability to obtain additional debt and/or equity financing or to generate sufficient cash from operations may require us to prioritize projects or curtail capital expenditures which could adversely affect our results of operations.
Fluctuations in foreign currency exchange rates in the markets in which we operate internationally could harm our results of operations.
We may experience gains and losses resulting from fluctuations in foreign currency exchange rates. To date, the majority of revenues and costs in our international operations are denominated in foreign currencies. Where our prices are denominated in U.S. Dollars, our sales and revenues could be adversely affected by declines in foreign currencies relative to the U.S. Dollar, thereby making our offerings more expensive in local currencies. We are also exposed to risks resulting from fluctuations in foreign currency exchange rates in connection with our international operations. To the extent we are paying contractors in foreign currencies, our operations could cost more than anticipated as a result of declines in the U.S. Dollar relative to foreign currencies. In addition, fluctuating foreign currency exchange rates have a direct impact on how our international results of operations translate into U.S. Dollars.
Although we currently undertake, and may decide in the future to further undertake, foreign exchange hedging transactions to reduce foreign currency transaction exposure, we do not currently intend to eliminate all foreign currency transaction exposure. In addition, REIT compliance rules may restrict our ability to enter into hedging transactions. Therefore, any weakness of the U.S. Dollar may have a positive impact on our consolidated results of operations because the currencies in the foreign countries in which we operate may translate into more U.S. Dollars. However, if the U.S. Dollar strengthens relative to the currencies of the foreign countries in which we operate, our consolidated financial position and results of operations may be negatively impacted as amounts in foreign currencies will generally translate into fewer U.S. Dollars. For additional information on foreign currency risks, refer to our discussion of foreign currency risk in "Quantitative and Qualitative Disclosures About Market Risk" included in Item 7A of this Annual Report on Form 10-K.
Our derivative transactions expose us to counterparty credit risk.
Our derivative transactions expose us to risk of financial loss if a counterparty fails to perform under a derivative contract. Disruptions in the financial markets could lead to sudden decreases in a counterparty's liquidity, which could make them unable to perform under the terms of their derivative contract and we may not be able to realize the benefit of the derivative contract.
Risks Related to Environmental Laws and Climate Change Impacts
Environmental regulations may impose upon us new or unexpected costs.
We are subject to various federal, state, local and international environmental and health and safety laws and regulations, including those relating to the generation, storage, handling and disposal of hazardous substances and wastes. Certain of these laws and regulations also impose joint and several liability, without regard to fault, for investigation and cleanup costs on current and former owners and operators of real property and persons who have disposed of or released hazardous substances into the environment. Our operations involve the use of hazardous substances and materials such as petroleum fuel for emergency generators, as well as batteries, cleaning solutions and other materials. In addition, we lease, own or operate real property at which hazardous substances and regulated materials have been used in the past. At some of our locations, hazardous substances or regulated materials are known to be present in soil or groundwater, and there may be additional unknown hazardous substances or regulated materials present at sites we own, operate or lease. At some of our locations, there are
land use restrictions in place relating to earlier environmental cleanups that do not materially limit our use of the sites. To the extent any hazardous substances or any other substance or material must be cleaned up or removed from our property, we may be responsible under applicable laws, permits or leases for the removal or cleanup of such substances or materials, the cost of which could be substantial.
We purchase significant amounts of electricity from generating facilities and utility companies that are subject to environmental laws, regulations and permit requirements. These environmental requirements are subject to material change, which could result in increases in our electricity suppliers' compliance costs that may be passed through to us. Regulations promulgated by the U.S. EPA or other international regulators could limit air emissions from fossil fuel-fired power plants, restrict discharges of cooling water, and otherwise impose new operational restraints on conventional power plants that could increase costs of electricity. Regulatory programs intended to promote increased generation of electricity from renewable sources may also increase our costs of procuring electricity. In addition, we are directly subject to environmental, health and safety laws regulating air emissions, storm water management and other issues arising in our business. For example, our emergency generators are subject to state and federal regulations governing air pollutants, which could limit the operation of those generators or require the installation of new pollution control technologies. While environmental regulations do not normally impose material costs upon our operations, unexpected events, equipment malfunctions, human error and changes in law or regulations, among other factors, can lead to additional capital requirements, limitations upon our operations and unexpected increased costs.
Regulation of greenhouse gas ("GHG") emissions could increase the cost of electricity by reducing amounts of electricity generated from fossil fuels, by requiring the use of more expensive generating methods or by imposing taxes or fees upon electricity generation or use. There has been interest in the U.S. Congress and in countries where we operate abroad in addressing climate change. In the U.S., with the new administration, there is a likelihood that new regulations or legislation will be proposed and potentially enacted that would seek to limit carbon dioxide emissions and the use of fossil fuels. Past legislative proposals to address climate change include measures ranging from "carbon taxes," to tax credits, to federally imposed limitations on GHG emissions. The course of future legislation and regulation in the U.S. and abroad remains difficult to predict and the potential increased costs associated with GHG regulation or taxes cannot be estimated at this time.
State regulations also have the potential to increase our costs of obtaining electricity. Certain states and countries in which we operate have issued or are considering and may enact environmental regulations that could materially affect our facilities and electricity costs. For example, California has limited GHG emissions from new and existing conventional power plants by imposing regulatory caps and by auctioning the rights to emission allowances. Washington, Oregon and Massachusetts have issued regulations to implement similar carbon cap and trade programs, and other states are considering proposals to limit carbon emissions through cap and trade programs, carbon pricing programs and other mechanisms. Some northeastern states adopted a multi-state program for limiting carbon emissions through the Regional Greenhouse Gas Initiative ("RGGI") cap and trade program. State and international programs have not had a material adverse effect on our electricity costs to date, but due to the market-driven nature of some of the programs, they could have a material adverse effect on electricity costs in the future.
Aside from regulatory requirements, we have separately undertaken efforts to procure energy from renewable energy projects in order to support new renewables development. The costs of procuring such energy may exceed the costs of procuring electricity from existing sources, such as existing utilities or electric service provided through conventional grids. These efforts to support and enhance renewable electricity generation may increase our costs of electricity above those that would be incurred through procurement of conventional electricity from existing sources.
Our business may be adversely affected by climate change and responses to it.
Severe weather events, such as droughts, heat waves, fires, hurricanes, and flooding, pose a threat to our IBX data centers and our customers' IT infrastructure through physical damage to facilities or equipment, power supply disruption, and long-term effects on the cost of electricity. The frequency and intensity of severe weather events are reportedly increasing locally and regionally as part of broader climate changes. Global weather pattern changes may also pose long-term risks of physical impacts to our business.
We maintain disaster recovery and business continuity plans that would be implemented in the event of severe weather events that interrupt our business or affect our customers' IT infrastructure. While these plans are designed
to allow us to recover from natural disasters or other events that can interrupt our business, we cannot be certain that our plans will protect us or our customers from all such disasters or events. Failure to prevent impact to customers from such events could adversely affect our business.
We are dedicated to sustainability and face pressures from our customers and stockholders, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. To address these goals and concerns, we pursue opportunities to improve energy efficiency and implement energy-saving retrofits. In addition, we have established a long-term goal of using 100% clean and renewable energy. As a result of these and other initiatives, we have made progress towards reducing our carbon footprint. It is possible, however, that our customers and investors might not be satisfied with our sustainability efforts or the speed of their adoption. If we do not meet our customers' or stockholders' expectations, our business and/or our share price could be harmed.
Concern about climate change in various jurisdictions may result in more stringent laws and regulatory requirements regarding emissions of carbon dioxide or other GHGs. As described elsewhere under "RISK FACTORS - Environmental regulations may impose upon us new or unexpected costs," restrictions on carbon dioxide or other GHG emissions could result in significant increases in operating or capital costs, including higher energy costs generally, and increased costs from carbon taxes, emission cap and trade programs and renewable portfolio standards that are imposed upon our electricity suppliers. These higher energy costs, and the cost of complying across our global platform, or of failing to comply with these and other climate change regulations, may have an adverse effect on our business and our results of operations.
Our business could be harmed by prolonged power outages, shortages or capacity constraints.
Any power outages, shortages or capacity constraints may have an adverse effect on our business and our results of operations.
In each of our markets, we rely on third parties, and their infrastructure, to provide a sufficient amount of power for current and future customers. At the same time, power and cooling requirements are increasing per unit of equipment. As a result, some customers are consuming an increasing amount of power per cabinet. We generally do not control the amount of power our customers draw from their installed circuits, which can result in growth in the aggregate power consumption of our facilities beyond our original plan and expectations. This means that limitations on the capacity of our electrical delivery systems and equipment could limit customer utilization of our IBX data centers. These limitations could have a negative impact on the effective available capacity of a given center and limit our ability to grow our business, which could have a negative impact on our financial performance, results of operations and cash flows.
Our IBX data centers are affected by problems accessing electricity sources, such as planned or unplanned power outages and limitations on transmission or distribution. Unplanned power outages, including, but not limited to those relating to large storms, earthquakes, fires, tsunamis, cyberattacks, and any failures of electrical power grids more generally, and planned power outages by public utilities, such as those related to Pacific Gas and Electric Company's ("PG&E") planned outages in California to minimize fire risks, could harm our customers and our business. While many of our offices are closed because of the ongoing COVID-19 pandemic, our employees in California may be subjected to planned power outages at home which could be difficult to track and could affect our day to day operations of our non-IBX employees. Our international operations are sometimes located outside of developed, reliable electricity markets, where we are exposed to some insecurity in supply associated with technical and regulatory problems, as well as transmission constraints. Some of our IBX data centers are located in leased buildings where, depending upon the lease requirements and number of tenants involved, we may or may not control some or all of the infrastructure including generators and fuel tanks. As a result, in the event of a power outage, we may be dependent upon the landlord, as well as the utility company, to restore the power. We attempt to limit our exposure to system downtime by using backup generators and alternative power supplies, but these measures may not always prevent downtime, which can adversely affect customer experience and revenues.
Each new facility requires access to significant quantities of electricity. Limitations on generation, transmission and distribution may limit our ability to obtain sufficient power capacity for potential expansion sites in new or existing markets. We may experience significant delays and substantial increased costs demanded by the utilities to provide the level of electrical service required by our current IBX data center designs.
Risks Related to Certain Regulations and Laws including Tax Laws
Changes in U.S. or foreign tax laws, regulations, or interpretations thereof, including changes to tax rates, may adversely affect our financial statements and cash taxes.
We are a U.S. company with global subsidiaries and are subject to income and other taxes in the U.S. (although currently limited due to our taxation as a REIT) and many foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income and other taxes. 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 changes to the tax laws and interpretations thereof. For example, we are currently undergoing audits and appealing the tentative assessments in a number of jurisdictions where we operate. The final results of these audits and the outcomes of the appeals are uncertain and may not be resolved in our favor.
The Organisation for Economic Co-operation and Development ("OECD") is an international association made up of 37 countries including the U.S. The OECD has proposed and made numerous changes to long-standing tax principles, which, if adopted by the member countries, could have a materially adverse effect on our tax liabilities. For example, various jurisdictions are starting to explore the taxation of digital service through the adoption of tax principles which could have a negative effect on Equinix’s tax liability.
The ongoing COVID-19 pandemic has led to increased spending by many governments. Because of this, there could be pressure to increase taxes in the future to pay back debts and generate revenues. The nature and timing of any future changes to each jurisdiction's tax laws and the impact on our future tax liabilities because of the COVID-19 pandemic or for any other reason cannot be predicted with any accuracy but could materially and adversely impact our results of operations and financial position or cash flows.
Government regulation may adversely affect our business.
Various laws and governmental regulations, both in the U.S. and abroad, governing internet-related services, related communications services and information technologies remain largely unsettled, even in areas where there has been some legislative action. For example, the Federal Communications Commission ("FCC") recently overturned network neutrality rules, which may result in material changes in the regulations and contribution regime affecting us and our customers. Furthermore, the U.S. Congress and state legislatures are reviewing and considering changes to the new FCC rules making the future of network neutrality uncertain. Changes could have a material adverse effect on us and our customers. There may also be forthcoming regulation in the U.S. on a federal or state level in the areas of cybersecurity, data privacy, taxation and data security, any of which could impact Equinix and our customers. Similarly, data privacy regulations continue to evolve and must be addressed by Equinix as a global company.
We remain focused on whether and how existing and changing laws, such as those governing intellectual property, privacy, libel, telecommunications services, data flows/data localization, carbon emissions impact, and taxation apply to the internet and to related offerings such as ours and those which might have a material effect on our customers’ decisions to purchase our services. Substantial resources may be required to comply with regulations or bring any non-compliant business practices into compliance with such regulations. In addition, the continuing development of the market for online commerce and the displacement of traditional telephony service by the internet and related communications services may prompt an increased call for more stringent consumer protection laws or other regulation both in the U.S. and abroad that may impose additional burdens on companies conducting business online and their service providers.
While our business and IBX data centers are currently all operational and have been designated "critical infrastructure" or "essential services" in order to remain open in many jurisdictions during the ongoing COVID-19 pandemic, any regulations restricting our ability to operate our business due to the COVID-19 pandemic could have a material adverse effect on our business. Additionally, the "essential services" and "critical infrastructure" designations we have experienced could lead countries or local regulators to impose additional regulations on the data center industry due to the COVID-19 pandemic in order to have better visibility and control over our industry for future events.
The adoption, or modification of laws or regulations relating to the internet and our business, or interpretations of existing laws, could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Taxation as a REIT
We may not remain qualified for taxation as a REIT.
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our 2015 taxable year. We believe that our organization and method of operation comply with the rules and regulations promulgated under the Internal Revenue Code of 1986, as amended (the "Code"), such that we will continue to qualify for taxation as a REIT. However, we cannot assure you that we have qualified for taxation as a REIT or that we will remain so qualified. Qualification for taxation as a REIT involves the application of highly technical and complex provisions of the Code to our operations as well as various factual determinations concerning matters and circumstances not entirely within our control. There are limited judicial or administrative interpretations of applicable REIT provisions of the Code.
If, in any taxable year, we fail to remain qualified for taxation as a REIT and are not entitled to relief under the Code:
•we will not be allowed a deduction for distributions to stockholders in computing our taxable income;
•we will be subject to U.S. federal and state income tax on our taxable income at regular corporate income tax rates; and
•we would not be eligible to elect REIT status again until the fifth taxable year that begins after the first year for which we failed to qualify for taxation as a REIT.
Any such corporate tax liability could be substantial and would reduce the amount of cash available for other purposes. If we fail to remain qualified for taxation as a REIT, we may need to borrow additional funds or liquidate some investments to pay any additional tax liability. Accordingly, funds available for investment and distributions to stockholders could be reduced.
As a REIT, failure to make required distributions would subject us to federal corporate income tax.
We paid quarterly distributions in every quarter of 2020 and have declared a quarterly distribution to be paid on March 17, 2021. The amount, timing and form of any future distributions will be determined, and will be subject to adjustment, by our Board of Directors. To remain qualified for taxation as a REIT, we are generally required to distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain) each year, or in limited circumstances, the following year, to our stockholders. Generally, we expect to distribute all or substantially all of our REIT taxable income. If our cash available for distribution falls short of our estimates, we may be unable to maintain distributions that approximate our REIT taxable income and may fail to remain qualified for taxation as a REIT. In addition, our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the payment of expenses and the recognition of income and expenses for federal income tax purposes, or the effect of nondeductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies a deduction, interest expense deductions limited by Section 163(j) of the Code, the creation of reserves or required debt service or amortization payments.
To the extent that we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax on our undistributed taxable income if the actual amount that we distribute to our stockholders for a calendar year is less than the minimum amount specified under the Code.
We may be required to borrow funds, sell assets or raise equity to satisfy our REIT distribution requirements.
Due to the size and timing of future distributions, including any distributions made to satisfy REIT distribution requirements, we may need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions are not favorable for these borrowings, sales or offerings.
Any insufficiency of our cash flows to cover our REIT distribution requirements could adversely impact our ability to raise short- and long-term debt, to sell assets, or to offer equity securities in order to fund distributions
required to maintain our qualification and taxation as a REIT. Furthermore, the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth and expansion initiatives. This would increase our indebtedness. A significant increase in our outstanding debt could lead to a downgrade of our credit rating. A downgrade of our credit rating could negatively impact our ability to access credit markets. Further, certain of our current debt instruments limit the amount of indebtedness we and our subsidiaries may incur. Significantly more financing, therefore, may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness. For a discussion of risks related to our substantial level of indebtedness, see other risks described elsewhere in this Form 10-K.
Whether we issue equity, at what price and the amount and other terms of any such issuances will depend on many factors, including alternative sources of capital, our then-existing leverage, our need for additional capital, market conditions and other factors beyond our control. If we raise additional funds through the issuance of equity securities or debt convertible into equity securities, the percentage of stock ownership by our existing stockholders may be reduced. In addition, new equity securities or convertible debt securities could have rights, preferences and privileges senior to those of our current stockholders, which could substantially decrease the value of our securities owned by them. Depending on the share price we are able to obtain, we may have to sell a significant number of shares in order to raise the capital we deem necessary to execute our long-term strategy, and our stockholders may experience dilution in the value of their shares as a result.
Complying with REIT requirements may limit our flexibility or cause us to forgo otherwise attractive opportunities.
To remain qualified for taxation as a REIT for U.S. federal income tax purposes, we must satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets and the amounts we distribute to our stockholders. For example, under the Code, no more than 20% of the value of the assets of a REIT may be represented by securities of one or more taxable REIT subsidiaries ("TRSs"). Similar rules apply to other nonqualifying assets. These limitations may affect our ability to make large investments in other non-REIT qualifying operations or assets. In addition, in order to maintain our qualification for taxation as a REIT, we must distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. Even if we maintain our qualification for taxation as a REIT, we will be subject to U.S. federal income tax at regular corporate income tax rates for our undistributed REIT taxable income, as well as U.S. federal income tax at regular corporate income tax rates for income recognized by our TRSs; we also pay taxes in the foreign jurisdictions in which our international assets and operations are held and conducted regardless of our qualification for taxation as a REIT. Because of these distribution requirements, we will likely not be able to fund future capital needs and investments from operating cash flow. As such, compliance with REIT tests may hinder our ability to make certain attractive investments, including the purchase of significant nonqualifying assets and the material expansion of non-real estate activities.
Our ability to fully deduct our interest expense may be limited, or we may be required to adjust the tax depreciation of our real property in order to maintain the full deductibility of our interest expense.
The Code limits interest deductions for businesses, whether in corporate or passthrough form, to the sum of the taxpayer's business interest income for the tax year and 50% (30% for tax years after 2020) of the taxpayer's adjusted taxable income for that tax year. This limitation does not apply to an "electing real property trade or business". Although REITs are permitted to make such an election, we do not currently intend to do so. If we so elect in the future, depreciable real property that we hold (including specified improvements) would be required to be depreciated for U.S. federal income tax purposes under the alternative depreciation system of the Code, which generally imposes a class life for depreciable real property as long as 40 years.
As a REIT, we are limited in our ability to fund distribution payments using cash generated through our TRSs.
Our ability to receive distributions from our TRSs is limited by the rules with which we must comply to maintain our qualification for taxation as a REIT. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from real estate. Consequently, no more than 25% of our gross income may consist of dividend income from our TRSs and other nonqualifying types of income. Thus, our ability to receive distributions from our TRSs may be limited and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs. Specifically, if our TRSs become highly profitable, we might become limited in our ability to receive
net income from our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability.
In addition, a significant amount of our income and cash flows from our TRSs is generated from our international operations. In many cases, there are local withholding taxes and currency controls that may impact our ability or willingness to repatriate funds to the United States to help satisfy REIT distribution requirements.
Our extensive use of TRSs, including for certain of our international operations, may cause us to fail to remain qualified for taxation as a REIT.
Our operations include an extensive use of TRSs. The net income of our TRSs is not required to be distributed to us, and income that is not distributed to us generally is not subject to the REIT income distribution requirement. However, there may be limitations on our ability to accumulate earnings in our TRSs and the accumulation or reinvestment of significant earnings in our TRSs could result in adverse tax treatment. In particular, if the accumulation of cash in our TRSs causes (1) the fair market value of our securities in our TRSs to exceed 20% of the fair market value of our assets or (2) the fair market value of our securities in our TRSs and other nonqualifying assets to exceed 25% of the fair market value of our assets, then we will fail to remain qualified for taxation as a REIT. Further, a substantial portion of our TRSs are overseas, and a material change in foreign currency rates could also negatively impact our ability to remain qualified for taxation as a REIT.
The Code imposes limitations on the ability of our TRSs to utilize specified income tax deductions, including limits on the use of net operating losses and limits on the deductibility of interest expense.
Our cash distributions are not guaranteed and may fluctuate.
A REIT generally is required to distribute at least 90% of its REIT taxable income to its stockholders.
Our Board of Directors, in its sole discretion, will determine on a quarterly basis the amount of cash to be distributed to our stockholders based on a number of factors including, but not limited to, our results of operations, cash flow and capital requirements, economic conditions, tax considerations, borrowing capacity and other factors, including debt covenant restrictions that may impose limitations on cash payments, future acquisitions and divestitures and any stock repurchase program. Consequently, our distribution levels may fluctuate.
Even if we remain qualified for taxation as a REIT, some of our business activities are subject to corporate level income tax and foreign taxes, which will continue to reduce our cash flows, and we will have potential deferred and contingent tax liabilities.
Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes, including taxes on any undistributed income, and state, local or foreign income, franchise, property and transfer taxes. In addition, we could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in respect of dealer property income or in order to utilize one or more relief provisions under the Code to maintain our qualification for taxation as a REIT.
A portion of our business is conducted through wholly-owned TRSs because certain of our business activities could generate nonqualifying REIT income as currently structured and operated. The income of our U.S. TRSs will continue to be subject to federal and state corporate income taxes. In addition, our international assets and operations will continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted. Any of these taxes would decrease our earnings and our available cash.
We will also be subject to a U.S. federal corporate level income tax at the highest regular corporate income tax rate (currently 21%) on gain recognized from a sale of a REIT asset where our basis in the asset is determined by reference to the basis of the asset in the hands of a C corporation (such as an asset that we or our qualified REIT subsidiaries ("QRSs") hold following the liquidation or other conversion of a former TRS). This 21% tax is generally applicable to any disposition of such an asset during the five-year period after the date we first owned the asset as a REIT asset, to the extent of the built-in-gain based on the fair market value of such asset on the date we first held the asset as a REIT asset.
Complying with REIT requirements may limit our ability to hedge effectively and increase the cost of our hedging and may cause us to incur tax liabilities.
The REIT provisions of the Code limit our ability to hedge assets, liabilities, revenues and expenses. Generally, income from hedging transactions that we enter into to manage risk of interest rate changes or fluctuations with respect to borrowings made or to be made by us to acquire or carry real estate assets and income from certain currency hedging transactions related to our non-U.S. operations, as well as income from qualifying counteracting hedges, do not constitute "gross income" for purposes of the REIT gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions may be treated as nonqualifying income for purposes of the REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through our TRSs. This increases the cost of our hedging activities because our TRSs are subject to tax on income or gains resulting from hedges entered into by them and may expose us to greater risks associated with changes in interest rates or exchange rates than we would otherwise want to bear. In addition, hedging losses in any of our TRSs may not provide any tax benefit, except for being carried forward for possible use against future income or gain in the TRSs. As a result, our financial performance, including our adjusted funds from operations ("AFFO"), may also fluctuate.
Distributions payable by REITs generally do not qualify for preferential tax rates.
Dividends payable by U.S. corporations to noncorporate stockholders, such as individuals, trusts and estates, are generally eligible for reduced U.S. federal income tax rates applicable to "qualified dividends." Distributions paid by REITs generally are not treated as "qualified dividends" under the Code, and the reduced rates applicable to such dividends do not generally apply. However, for tax years beginning before 2026, REIT dividends paid to noncorporate stockholders that meet specified holding period requirements are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the Code for specified forms of income from passthrough entities. More favorable rates will nevertheless continue to apply to regular corporate "qualified" dividends, which may cause some investors to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market price of our common stock.
Our certificate of incorporation contains restrictions on the ownership and transfer of our stock, though they may not be successful in preserving our qualification for taxation as a REIT.
In order for us to remain qualified for taxation as a REIT, no more than 50% of the value of outstanding shares of our stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year. In addition, rents from "affiliated tenants" will not qualify as qualifying REIT income if we own 10% or more by vote or value of the customer, whether directly or after application of attribution rules under the Code. Subject to certain exceptions, our certificate of incorporation prohibits any stockholder from owning, beneficially or constructively, more than (i) 9.8% in value of the outstanding shares of all classes or series of our capital stock or (ii) 9.8% in value or number, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock. We refer to these restrictions collectively as the "ownership limits" and we included them in our certificate of incorporation to facilitate our compliance with REIT tax rules. The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our outstanding common stock (or the outstanding shares of any class or series of our stock) by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits. Any attempt to own or transfer shares of our common stock or of any of our other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. Even though our certificate of incorporation contains the ownership limits, there can be no assurance that these provisions will be effective to prevent our qualification for taxation as a REIT from being jeopardized, including under the affiliated tenant rule. Furthermore, there can be no assurance that we will be able to monitor and enforce the ownership limits. If the restrictions in our certificate of incorporation are not effective and, as a result, we fail to satisfy the REIT tax rules described above, then absent an applicable relief provision, we will fail to remain qualified for taxation as a REIT.
In addition, the ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stock or otherwise be in the best interest of our stockholders. As a
result, the overall effect of the ownership and transfer restrictions may be to render more difficult or discourage any attempt to acquire us, even if such acquisition may be favorable to the interests of our stockholders.
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders.
At any time, the U.S. federal or state income tax laws governing REITs, or the administrative interpretations of those laws, may be amended. U.S. federal and state tax laws are constantly under review by persons involved in the legislative process, the Internal Revenue Service, the U.S. Department of the Treasury and state taxing authorities. Changes to the tax laws, regulations and administrative interpretations, which may have retroactive application, could adversely affect us. In addition, some of these changes could have a more significant impact on us as compared to other REITs due to the nature of our business and our substantial use of TRSs, particularly non-U.S. TRSs.
We could incur adverse tax consequences if we fail to integrate an acquisition target in compliance with the requirements to qualify for taxation as a REIT.
We periodically explore and occasionally consummate merger and acquisition transactions. When we consummate these transactions, we structure the acquisition to successfully manage the REIT income, asset, and distribution tests that we must satisfy. We believe that we have and will in the future successfully integrate our acquisition targets in a manner that has and will allow us to timely satisfy the REIT tests applicable to us, but if we failed or in the future fail to do so, then we could jeopardize or lose our qualification for taxation as a REIT, particularly if we were not eligible to utilize relief provisions set forth in the Code.
General Risk Factors
Adverse global economic conditions, like the ones we are currently experiencing during the COVID-19 pandemic, could adversely impact our business and financial condition.
Adverse global economic conditions like the ones we are currently experiencing because of the COVID-19 pandemic and uncertain conditions in the credit markets have created, and in the future may increase risk to our financial outlook. The uncertain global economy could also result in material churn in our customer base, reductions in revenues from our offerings, adverse effects to our DSO, longer sales cycles, slower adoption of new technologies and increased price competition, which could adversely affect our liquidity. Customers and vendors filing for bankruptcy could also lead to costly and time-intensive actions with adverse effects, including greater difficulty or delay in accounts receivable collection. The uncertain economic environment could also have an impact on our foreign exchange forward contracts if our counterparties' credit deteriorates or if they are otherwise unable to perform their obligations. Finally, volatility in the financial markets like we are currently experiencing could affect our ability to access the capital markets at a time when we desire, or need, to do so which could have an impact on our flexibility to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.
The market price of our stock may continue to be highly volatile, and the value of an investment in our common stock may decline.
The market price of the shares of our common stock has recently been and may continue to be highly volatile. General economic and market conditions, like the current instability due to the COVID-19 pandemic, and market conditions for telecommunications and real estate investment trust stocks in general, may affect the market price of our common stock.
Announcements by us or others, or speculations about our future plans, may also have a significant impact on the market price of our common stock. These may relate to:
•news or regulations regarding the ongoing COVID-19 pandemic;
•our results of operations or forecasts;
•new issuances of equity, debt or convertible debt by us, including issuances through our 2020 ATM Program;
•increases in market interest rates and changes in other general market and economic conditions, including inflationary concerns;
•changes to our capital allocation, tax planning or business strategy;
•our qualification for taxation as a REIT and our declaration of distributions to our stockholders;
•changes in U.S. or foreign tax laws;
•changes in management or key personnel;
•developments in our relationships with customers;
•announcements by our customers or competitors;
•changes in regulatory policy or interpretation;
•governmental investigations;
•changes in the ratings of our debt or stock by rating agencies or securities analysts;
•our purchase or development of real estate and/or additional IBX data centers;
•our acquisitions of complementary businesses; or
•the operational performance of our IBX data centers.
The stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for telecommunications companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock. One of the factors that investors may consider in deciding whether to buy or sell our common stock is our distribution rate as a percentage of our stock price relative to market interest rates. If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and conditions in the capital markets may affect the market value of our common stock. Furthermore, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and/or damages, and divert management's attention from other business concerns, which could seriously harm our business.
Inadequate or inaccurate external and internal information, including budget and planning data, could lead to inaccurate financial forecasts and inappropriate financial decisions.
Our financial forecasts are dependent on estimates and assumptions regarding budget and planning data, market growth, foreign exchange rates, our ability to remain qualified for taxation as a REIT, and our ability to generate sufficient cash flow to reinvest in the business, fund internal growth, make acquisitions, pay dividends and meet our debt obligations. Our financial projections are based on historical experience and on various other assumptions that our management believes to be reasonable under the circumstances and at the time they are made.
The ongoing COVID-19 pandemic is expected have a material effect on many aspects of the economy, but the extent of its impact on Equinix is difficult to predict at this time. We continue to evolve our forecasting models as the situation unfolds but if our predictions are inaccurate and our results differ materially from our forecasts, we could make inappropriate financial decisions. Additionally, inaccuracies in our models could adversely impact our compliance with REIT asset tests, future profitability, stock price and/or stockholder confidence.
If our internal controls are found to be ineffective, our financial results or our stock price may be adversely affected.
Our most recent evaluation of our controls resulted in our conclusion that, as of December 31, 2020, in compliance with Section 404 of the Sarbanes-Oxley Act of 2002, our internal controls over financial reporting were effective. Our ability to manage our operations and growth through, for example, the integration of recently acquired businesses, the adoption of new accounting principles and tax laws, and our overhaul of our back office systems that, for example, support the customer experience from initial quote to customer billing and our revenue recognition process, will require us to further develop our controls and reporting systems and implement or amend new or existing controls and reporting systems in those areas where the implementation and integration is still ongoing. All of these changes to our financial systems and the implementation and integration of acquisitions create an increased risk of deficiencies in our internal controls over financial reporting. If, in the future, our internal control over
financial reporting is found to be ineffective, or if a material weakness is identified in our controls over financial reporting, our financial results may be adversely affected. Investors may also lose confidence in the reliability of our financial statements which could adversely affect our stock price.
We may be subject to securities class action and other litigation, which may harm our business and results of operations.
We may be subject to securities class action or other litigation. For example, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. Litigation can be lengthy, expensive, and divert management's attention and resources. Results cannot be predicted with certainty and an adverse outcome in litigation could result in monetary damages or injunctive relief. Further, any payments made in settlement may directly reduce our revenue under U.S. GAAP and could negatively impact our results of operations for the period. For all of these reasons, litigation could seriously harm our business, results of operations, financial condition or cash flows.
We may not be able to protect our intellectual property rights.
We cannot make assurances that the steps taken by us to protect our intellectual property rights will be adequate to deter misappropriation of proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. We also are subject to the risk of litigation alleging infringement of third-party intellectual property rights. Any such claims could require us to spend significant sums in litigation, pay damages, develop non-infringing intellectual property or acquire licenses to the intellectual property that is the subject of the alleged infringement.
We have various mechanisms in place that may discourage takeover attempts.
Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a third party from acquiring control of us in a merger, acquisition or similar transaction that a stockholder may consider favorable. Such provisions include:
•ownership limitations and transfer restrictions relating to our stock that are intended to facilitate our compliance with certain REIT rules relating to share ownership;
•authorization for the issuance of "blank check" preferred stock;
•the prohibition of cumulative voting in the election of directors;
•limits on the persons who may call special meetings of stockholders;
•limits on stockholder action by written consent; and
•advance notice requirements for nominations to the Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law, which restricts certain business combinations with interested stockholders in certain situations, may also discourage, delay or prevent someone from acquiring or merging with us.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. Unresolved Staff Comments
There is no disclosure to report pursuant to Item 1B.

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ITEM 2. PROPERTIES
ITEM 2. Properties
Our executive offices are located in Redwood City, California, with sales offices in several cities throughout the U.S. Our Asia-Pacific headquarters office is located in Hong Kong and we also have sales offices in several cities throughout Asia-Pacific. Our EMEA headquarters office is located in Amsterdam, the Netherlands and our regional sales offices in EMEA are based in our IBX data centers in EMEA.
The following tables present the locations of our leased and owned IBX data centers and xScaleTM data centers investments as of December 31, 2020.
AMERICAS
Metro Leased (1)
Owned (1) (2)
Atlanta ● ●
Bogota ●
Boston ● ●
Calgary ● ●
Chicago ● ●
Culpeper ●
Dallas ● ●
Washington DC/Ashburn ● ●
Denver ● ●
Houston ●
Kamloops ●
Los Angeles ● ●
Mexico City ●
Miami ● ●
Monterrey ●
Montreal ●
New York ● ●
Ottawa ●
Philadelphia ●
Rio de Janeiro ● ●
Saint John ●
Sao Paulo ● ●
Seattle ● ●
Silicon Valley ● ●
Toronto ● ●
Vancouver ●
Winnipeg ●
EMEA
Metro Leased (1)
Owned (1) (2)
Abu Dhabi ●
Amsterdam ● ●
Barcelona ●
Dubai ●
Dublin ● ●
Dusseldorf ●
East Netherlands ●
Frankfurt ● ●
Geneva ●
Hamburg ●
Helsinki ● ●
Istanbul ●
Lisbon ●
London ● ●
Madrid ●
Manchester ●
Milan ● ●
Munich ●
Muscat ●
Paris ● ●
Seville ●
Sofia ●
Stockholm ● ●
Warsaw ● ●
Zurich ● ●
Asia-Pacific
Metro Leased (1)
Owned (1) (2)
Adelaide ●
Brisbane ●
Canberra ●
Hong Kong ●
Melbourne ●
Osaka ●
Perth ●
Seoul ●
Singapore ●
Shanghai ● ●
Sydney ● ●
Tokyo ● ●
(1)"●" denotes locations with one or more data centers.
(2)Owned sites include IBX data centers subject to long-term ground leases.
The following table presents an overview of our portfolio of IBX data centers as of December 31, 2020:
# of IBXs (1)
Total Cabinet Capacity (1)(2)
Cabinets Billed(1)
Cabinet Utilization % (1)(3)
MRR per Cabinet (1)(4)
Americas 104 119,400 86,800 73 % $ 2,415
EMEA 75 125,000 104,400 84 % 1,530
Asia-Pacific 45 66,100 54,600 83 % 1,901
Total 224 310,500 245,800
(1)Excludes three unconsolidated entities (two xScaleTM IBX data centers and the MC1 IBX data center)
(2)Cabinets represent a specific amount of space within an IBX data center. Customers can combine and use multiple adjacent cabinets within an IBX data center, depending on their space requirements.
(3)The cabinet utilization rate represents the percentage of cabinet space billed versus total cabinet capacity, taking into consideration power limitations.
(4)MRR per cabinet represents average monthly recurring revenue recognized divided by the average number of cabinets billing during the fourth quarter of the year. Americas MRR per cabinet excludes Brazil, Columbia and Infomart non-IBX tenant income and Asia-Pacific MRR per Cabinet excludes Bit-isle MIS.
The following table presents a summary of our significant IBX data center expansion projects under construction as of December 31, 2020:
Property Property Location Target Open Date Sellable Cabinets Total Capex
(in Millions) (1)
Americas:
SP3 phase III São Paulo Q1 2021 1,050 $ 25
LA7 phase II Los Angeles Q2 2021 750 54
SV11 phase I Silicon Valley Q2 2021 1,450 142
MX2 phase II Mexico City Q4 2021 1,075 54
NY6 phase II New York Q4 2021 525 28
4,850 303
EMEA:
AM7 phase III Amsterdam Q1 2021 1,425 63
LD7 phase IB London Q1 2021 875 30
ML5 phase I Milan Q1 2021 500 51
BX1 phase I Bordeaux Q2 2021 225 28
HE7 phase II Helsinki Q2 2021 600 28
IL2 phase II Istanbul Q2 2021 400 25
LD8 phase IV London Q2 2021 550 36
SK2 phase VII Stockholm Q2 2021 250 6
FR8 phase I Frankfurt Q3 2021 1,675 109
MU4 phase I Munich Q3 2021 825 69
WA3 phase II Warsaw Q3 2021 475 29
ZH5 phase IV Zurich Q3 2021 250 42
GV2 phase III Geneva Q4 2021 300 22
GN1 phase I Genoa Q4 2021 150 21
ML5 phase II Milan Q4 2021 1,025 29
DX3 phase I Dubai Q1 2022 900 61
MD2 phase IV Madrid Q1 2022 375 16
MC1 phase II Muscat Q1 2022 475 19
LD7 phase II London Q2 2022 2,275 111
MA5 phase I Manchester Q2 2022 1,025 78
PA10 phase I Paris Q2 2022 2,250 163
16,825 1,036
Asia-Pacific:
SG4 phase II Singapore Q1 2021 1,400 49
TY11 phase II Tokyo Q1 2021 1,225 58
SH6 phase II Shanghai Q2 2021 575 18
SG5 phase I Singapore Q2 2021 1,300 144
HK1 phase XIII-A Hong Kong Q3 2021 525 30
SG1 phase XV Singapore Q3 2021 300 22
SY5 phase II Sydney Q3 2021 2,150 49
OS3 phase I Osaka Q4 2021 900 55
PE3 phase I Perth Q4 2021 650 54
SG5 phase II Singapore Q4 2021 1,525 75
10,550 554
Total 32,225 $ 1,893
(1)Capital expenditures are approximate and may change based on final construction details.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. Legal Proceedings
The following is a description of reportable legal proceedings, including those involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment.
In March 2019, charges were brought by the Public Prosecutor in Milan, Italy against Equinix (Italia) S.r.l. and Eric Schwartz, at that time one of the directors of Equinix (Italia) S.r.l., following the discovery of levels of copper in ground water in excess of those permitted by law and alleged to have been released by Equinix into the water supply. We determined that the copper levels detected had been misinterpreted by the Public Prosecutor's office, which had multiplied the findings tenfold. On March 13, 2019, we asked for an initial extension to file our defense and requested that the charges against both Equinix and Mr. Schwartz be dropped on the grounds that the levels of copper found were in fact less than double the permitted amounts. The Public Prosecutor accepted that the number it originally used was incorrect, but did not agree to drop the charges and requested a trial date. Our defense was filed April 15, 2019. A trial date was set for March 6, 2020, but the hearing was postponed due to the COVID-19 pandemic. The prosecutor has agreed to a plea bargain for Mr. Schwartz comprising of payment of an amount between €12,700 and €25,000, plus a fine of €2,700. This arrangement must be approved by the Court. In a hearing on December 17, 2020, the presiding judge decided that there was insufficient evidence of a crime and acquitted Equinix. The Public Prosecutor has until February 24, 2021 to issue an appeal.
We have recently completed adoption of a formal compliance program pursuant to Italian Legislative Decree No. 231/2001 ("Decree 231"), which we expect will reduce our exposure to fines and penalties in any Court verdict by 50%. After adoption of Decree 231, the exposure for Equinix would be effectively reduced to €175,000.
While it is not possible to accurately predict whether the Public Prosecutor will appeal this decision, if an appeal is lodged and any subsequent final outcome of this pending Court proceeding is decided adversely to Equinix, we expect there would be no material effect on our consolidated financial position. Nevertheless, this proceeding is reported pursuant to Securities and Exchange Commission regulations in effect at the inception of this proceeding.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. Mine Safety Disclosure
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is quoted on the NASDAQ Global Select Market under the symbol of "EQIX." Our common stock began trading in August 2000. As of January 31, 2021, we had 89,184,799 shares of our common stock outstanding held by approximately 329 registered holders. During the years ended December 31, 2020 and 2019, we did not issue or sell any securities on an unregistered basis.
Stock Performance Graph
The graph set forth below compares the cumulative total stockholder return on Equinix's common stock between December 31, 2015 and December 31, 2020 with the cumulative total return of:
•the S&P 500 Index;
•the NASDAQ Composite Index; and
•the FTSE NAREIT All REITs Index.
The graph assumes the investment of $100.00 on December 31, 2015 in Equinix's common stock and in each index, and assumes the reinvestment of dividends, if any.
Equinix cautions that the stock price performance shown in the graph below is not indicative of, nor intended to forecast, the potential future performance of Equinix's common stock.
Notwithstanding anything to the contrary set forth in any of Equinix's previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Annual Report on Form 10-K or future filings made by Equinix under those statutes, the stock performance graph shall not be deemed filed with the Securities and Exchange Commission and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by Equinix under those statutes.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
*$100 invested on 12/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. Selected Financial Data
The following consolidated statement of operations data for the five years ended December 31, 2020 and the consolidated balance sheet data as of December 31, 2020, 2019, 2018, 2017, and 2016 have been derived from our audited consolidated financial statements and the related notes. Our historical results are not necessarily indicative of the results to be expected for future periods. The following selected consolidated financial data for the five years ended December 31, 2020 and as of December 31, 2020, 2019, 2018, 2017, and 2016, should be read in conjunction with our audited consolidated financial statements and the related notes in Item 8 of this Annual Report on Form 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Annual Report on Form 10-K. We completed acquisitions of certain data centers from Bell in Canada in October 2020, Packet bare metal automation platform in March 2020, Axtel data center business in Mexico in January 2020, Switch Datacenters' AMS1 data center business in Amsterdam, Netherlands in April 2019, Metronode and Infomart Dallas in April, 2018, the Zenium data center business in Istanbul and Itconic in October 2017, certain colocation business from Verizon in May 2017, IO UK's data center operating business in Slough, United Kingdom in February 2017 (the "IO Acquisition), certain Paris IBX data centers in August 2016 (the "Paris IBX Data Center Acquisition"), and Telecity Group plc in January 2016. In December 2020, we sold three Japan development sites, Osaka 2, Tokyo 12, and Tokyo 14 in the Asia-Pacific region to the Asia-Pacific Joint Venture with GIC. In December 2020, we sold Paris 9 to the EMEA Joint Venture and in October 2019, we sold our London 10 and Paris 8 data centers, as well as certain data center sites in Europe to the EMEA Joint Venture. In addition, we sold our New York 12 data center in October 2019, solar power assets of Bit-isle in November 2016 and eight of our IBX data centers located in the U.K., the Netherlands and Germany in July 2016. For further information on our acquisitions and divestitures during the three years ended December 31, 2020, see Note 3 and Note 5 within the Consolidated Financial Statements.
On January 1, 2019 and 2018, we adopted Topic 842, Leases, and Topic 606, Revenue from Contracts with Customers, respectively. The consolidated statement of operations is presented under the new accounting standards from the periods when accounting standards were adopted, while the prior period financial statements have not been restated and continue to be reported under accounting standards in effect for those periods. See Note 1 within the Consolidated Financial Statements for further discussion.
Years Ended December 31,
2020 2019 2018 2017 2016
(dollars in thousands, except per share data)
Revenues $ 5,998,545 $ 5,562,140 $ 5,071,654 $ 4,368,428 $ 3,611,989
Costs and operating expenses:
Cost of revenues 3,074,340 2,810,184 2,605,475 2,193,149 1,820,870
Sales and marketing 718,356 651,046 633,702 581,724 438,742
General and administrative 1,090,981 935,018 826,694 745,906 694,561
Transaction costs 55,935 24,781 34,413 38,635 64,195
Impairment charges 7,306 15,790 - - 7,698
Gain on asset sales (1,301) (44,310) (6,013) - (32,816)
Total costs and operating expenses 4,945,617 4,392,509 4,094,271 3,559,414 2,993,250
Income from operations 1,052,928 1,169,631 977,383 809,014 618,739
Interest income 8,654 27,697 14,482 13,075 3,476
Interest expense (406,466) (479,684) (521,494) (478,698) (392,156)
Other income (expense) 6,913 27,778 14,044 9,213 (57,924)
Loss on debt extinguishment (145,804) (52,825) (51,377) (65,772) (12,276)
Income from continuing operations before income taxes
516,225 692,597 433,038 286,832 159,859
Income tax expense (146,151) (185,352) (67,679) (53,850) (45,451)
Net income from continuing operations 370,074 507,245 365,359 232,982 114,408
Net income from discontinued operations, net of tax
- - - - 12,392
Net income 370,074 507,245 365,359 232,982 126,800
Net (income) loss attributable to non-controlling interest (297) 205 - - -
Net income attributable to Equinix $ 369,777 $ 507,450 $ 365,359 $ 232,982 $ 126,800
Earnings per share ("EPS") attributable to Equinix:
Basic EPS from continuing operations
$ 4.22 $ 6.03 $ 4.58 $ 3.03 $ 1.63
Basic EPS from discontinued operations
- - - - 0.18
Basic EPS $ 4.22 $ 6.03 $ 4.58 $ 3.03 $ 1.81
Weighted-average shares for basic EPS 87,700 84,140 79,779 76,854 70,117
Diluted EPS from continuing operations
$ 4.18 $ 5.99 $ 4.56 $ 3.00 $ 1.62
Diluted EPS from discontinued operations
- - - - 0.17
Diluted EPS $ 4.18 $ 5.99 $ 4.56 $ 3.00 $ 1.79
Weighted-average shares for diluted EPS 88,410 84,679 80,197 77,535 70,816
Dividends per share $ 10.64 $ 9.84 $ 9.12 $ 8.00 $ 7.00
As of December 31,
2020 2019 2018 2017 2016
Consolidated Balance Sheet Data: (in thousands)
Cash, cash equivalents and short-term and long-term investments
$ 1,609,401 $ 1,879,939 $ 610,706 $ 1,450,031 $ 761,927
Accounts receivable, net 676,738 689,134 630,119 576,313 396,245
Property, plant and equipment, net 14,503,084 12,152,597 11,026,020 9,394,602 7,199,210
Total assets 27,006,841 23,965,615 20,244,638 18,691,457 12,608,371
Operating lease liabilities, less current portion 1,308,627 1,315,656 - - -
Finance lease liabilities, less current portion
1,784,816 1,430,882 1,441,077 1,620,256 1,410,742
Mortgage and loans payable, less current portion
1,287,254 1,289,434 1,310,663 1,393,118 1,369,087
Senior notes, less current portion 9,018,277 8,309,673 8,128,785 6,923,849 3,810,770
Total stockholders' equity 10,634,118 8,840,382 7,219,279 6,849,790 4,365,829

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following commentary should be read in conjunction with the financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in "Liquidity and Capital Resources" and "Risk Factors" elsewhere in this Annual Report on Form 10-K. All forward-looking statements in this document are based on information available to us as of the date hereof and we assume no obligation to update any such forward-looking statements.
Item 7 of this Form 10-K focuses on discussion of 2020 and 2019 items as well as 2020 results as compared to 2019 results. For the discussion of 2018 items and 2019 results as compared to 2018 results, please refer to Item 7 of our 2019 Form 10-K as filed with the SEC on February 21, 2020.
Our management's discussion and analysis of financial condition and results of operations is intended to assist readers in understanding our financial information from our management's perspective and is presented as follows:
•Overview
•Results of Operations
•Non-GAAP Financial Measures
•Liquidity and Capital Resources
•Contractual Obligations and Off-Balance-Sheet Arrangements
•Critical Accounting Policies and Estimates
•Recent Accounting Pronouncements
Overview
Equinix is a global digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. Equinix enables today’s businesses to access all the right places, partners and possibilities they need to accelerate their advantage. Global enterprises, service providers and business ecosystems of industry partners rely on Equinix IBX data centers and
expertise around the world for the safe housing of their critical IT equipment and to protect and connect the world's most valued information assets. They also look to Platform Equinix® for the ability to directly and securely interconnect to the networks, clouds and content that enable today's information-driven global digital economy. Recent Equinix IBX data center openings and acquisitions, as well as xScaleTM data center investments, have expanded our total global footprint to 227 IBXs, including two xScaleTM data centers and the MC1 data center that were held in unconsolidated joint ventures, across 63 markets around the world. Equinix offers the following solutions:
•premium data center colocation;
•interconnection and data exchange solutions;
•edge services for deploying networking, security and hardware; and
•remote expert support and professional services.
Our interconnected data centers around the world allow our customers to increase information and application delivery performance to users, and quickly access distributed IT infrastructures and business and digital ecosystems, while significantly reducing costs. The Equinix global platform and the quality of our IBX data centers, interconnection offerings and edge services have enabled us to establish a critical mass of customers. As more customers choose Platform Equinix, for bandwidth cost and performance reasons it benefits their suppliers and business partners to colocate in the same data centers. This adjacency creates a “network effect” that enables our customers to capture the full economic and performance benefits of our offerings. These partners, in turn, pull in their business partners, creating a "marketplace" for their services. Our global platform enables scalable, reliable and cost-effective interconnection that increases data traffic exchange while lowering overall cost and increasing flexibility. Our focused business model is built on our critical mass of enterprise and service provider customers and the resulting "marketplace" effect. This global platform, combined with our strong financial position, continues to drive new customer growth and bookings.
Historically, our market was served by large telecommunications carriers who have bundled their products and services with their colocation offerings. The data center market landscape has evolved to include private and vendor-neutral MTDC providers, hyperscale cloud providers, managed infrastructure and application hosting providers, and systems integrators. It is estimated that Equinix is one of more than 1,200 companies that provide MTDC offerings around the world. Each of these data center solutions providers can bundle various colocation, interconnection and network offerings and outsourced IT infrastructure solutions. We are able to offer our customers a global platform that reaches 26 countries with the industry’s largest and most active ecosystem of partners in our sites, proven operational reliability, improved application performance and a highly scalable set of offerings.
The cabinet utilization rate represents the percentage of cabinet space billed versus total cabinet capacity, which is used to measure how efficiently we are managing our cabinet capacity. Our cabinet utilization rate varies from market to market among our IBX data centers across the Americas, EMEA and Asia-Pacific regions. Our cabinet utilization rates were approximately 79%, as of December 31, 2020 and 2019. Excluding the impact of our IBX data center expansion projects that have opened during the last 12 months, our cabinet utilization rate would have increased to approximately 80% as of December 31, 2020. We continue to monitor the available capacity in each of our selected markets. To the extent we have limited capacity available in a given market, it may limit our ability for growth in that market. We perform demand studies on an ongoing basis to determine if future expansion is warranted in a market. In addition, power and cooling requirements for most customers are growing on a per unit basis. As a result, customers are consuming an increasing amount of power per cabinet. Although we generally do not control the amount of power our customers draw from installed circuits, we have negotiated power consumption limitations with certain high power-demand customers. This increased power consumption has driven us to build out our new IBX data centers to support power and cooling needs twice that of previous IBX data centers. We could face power limitations in our IBX data centers, even though we may have additional physical cabinet capacity available within a specific IBX data center. This could have a negative impact on the available utilization capacity of a given IBX data center, which could have a negative impact on our ability to grow revenues, affecting our financial performance, results of operations and cash flows.
In 2019, we closed our EMEA Joint Venture with GIC to develop and operate xScaleTM data centers to serve the needs of the growing hyperscale data center market, including the world's largest cloud service providers. Upon closing, the EMEA Joint Venture acquired certain data center sites, including the London 10 data center, Paris 8 data center and few data center sites in London and Frankfurt, with the opportunity to add additional facilities in the future. In 2020, we sold the Paris 9 data center to the EMEA Joint Venture. In addition, we closed our Asia-Pacific Joint Venture with GIC in APAC to develop and operate xScaleTM data centers. Upon closing, the Asia-Pacific Joint
Venture acquired Osaka 2, Tokyo 12, and Tokyo 14 data center development sites in the APAC region, with the opportunity to add additional facilities in the future.
Strategically, we will continue to look at attractive opportunities to grow our market share and selectively improve our footprint and offerings. As was the case with our recent expansions and acquisitions, our expansion criteria will be dependent on a number of factors, including but not limited to demand from new and existing customers, quality of the design, power capacity, access to networks, clouds and software partners, capacity availability in the current market location, amount of incremental investment required by us in the targeted property, automation capabilities, developer talent pool, lead-time to break even on a free cash flow basis and in-place customers. Like our recent expansions and acquisitions, the right combination of these factors may be attractive to us. Depending on the circumstances, these transactions may require additional capital expenditures funded by upfront cash payments or through long-term financing arrangements in order to bring these properties up to Equinix standards. Property expansion may be in the form of purchases of real property, long-term leasing arrangements or acquisitions. Future purchases, construction or acquisitions may be completed by us or with partners or potential customers to minimize the outlay of cash, which can be significant.
Revenue:
Our business is based on a recurring revenue model comprised of colocation and related interconnection and managed infrastructure offerings. We consider these offerings recurring because our customers are generally billed on a fixed and recurring basis each month for the duration of their contract, which is generally one to three years in length. Our recurring revenues have comprised more than 90% of our total revenues during the past three years. In addition, during the past three years, more than 80% of our monthly recurring revenue bookings came from existing customers, contributing to our revenue growth. Our largest customer accounted for approximately 3% of our recurring revenues for the years ended December 31, 2020, 2019 and 2018. Our 50 largest customers accounted for approximately 39%, 39% and 38%, respectively, of our recurring revenues for the years ended December 31, 2020, 2019 and 2018.
Our non-recurring revenues are primarily comprised of installation services related to a customer's initial deployment and professional services we perform. These services are considered to be non-recurring because they are billed typically once, upon completion of the installation or the professional services work performed. The majority of these non-recurring revenues are typically billed on the first invoice distributed to the customer in connection with their initial installation. However, revenues from installation services are deferred and recognized ratably over the period of the contract term. Additionally, revenue from contract settlements, when a customer wishes to terminate their contract early, is generally treated as a contract modification and recognized ratably over the remaining term of the contract, if any. As a percentage of total revenues, we expect non-recurring revenues to represent less than 10% of total revenues for the foreseeable future.
Operating Expenses:
Cost of Revenues. The largest components of our cost of revenues are depreciation, rental payments related to our leased IBX data centers, utility costs, including electricity, bandwidth access, IBX data center employees' salaries and benefits, including stock-based compensation, repairs and maintenance, supplies and equipment and security. A majority of our cost of revenues is fixed in nature and should not vary significantly from period to period,
unless we expand our existing IBX data centers or open or acquire new IBX data centers. However, there are certain costs that are considered more variable in nature, including utilities and supplies that are directly related to growth in our existing and new customer base. We expect the cost of our utilities, specifically electricity, will generally increase in the future on a per-unit or fixed basis, in addition to the variable increase related to the growth in consumption by our customers. In addition, the cost of electricity is generally higher in the summer months, as compared to other times of the year. To the extent we incur increased utility costs, such increased costs could materially impact our financial condition, results of operations and cash flows. Furthermore, to the extent we incur increased electricity or other costs as a result of either climate change policies or the physical effects of climate change, such increased costs could materially impact our financial condition, results of operations and cash flows.
Sales and Marketing. Our sales and marketing expenses consist primarily of compensation and related costs for sales and marketing personnel, including stock-based compensation, amortization of contract costs, marketing programs, public relations, promotional materials and travel, as well as bad debt expense and amortization of customer relationship intangible assets.
General and Administrative. Our general and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, accounting, legal and other professional service fees, and other general corporate expenses, such as our corporate regional headquarters office leases and some depreciation expense on back office systems.
Taxation as a REIT
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our 2015 taxable year. As of December 31, 2020, our REIT structure included all of our data center operations in the U.S., Canada (with the exception of our data center in Ottawa), Mexico, Japan, Singapore and the data center operations in EMEA with the exception of Bulgaria, the United Arab Emirates, and the data center operations outside Amsterdam in the Netherlands. Our data center operations in other jurisdictions are operated as TRSs. We included our investment interest in the EMEA and Asia-Pacific Joint Ventures in our REIT structure.
As a REIT, we generally are permitted to deduct from our U.S. federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to U.S. federal income taxes at the entity level but is taxed, if at all, at the stockholder level. Nevertheless, the income of our TRSs which hold our U.S. operations that may not be REIT compliant is subject to U.S. corporate federal and state income taxes, as applicable. Likewise, our foreign subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through TRSs or through QRSs. We are also subject to a separate U.S. federal corporate income tax on any gain recognized from a sale of a REIT asset where our basis in the asset is determined by reference to the basis of the asset in the hands of a C corporation (such as an asset held by us or a QRS following the liquidation or other conversion of a former TRS). This built-in-gains tax is generally applicable to any disposition of such an asset during the five-year period after the date we first owned the asset as a REIT asset to the extent of the built-in-gain based on the fair market value of such asset on the date we first held the asset as a REIT asset. If we fail to remain qualified for U.S. federal income taxation as a REIT, we will be subject to U.S. federal income taxes at regular corporate income tax rates. In addition, should we have net income from "prohibited transactions," we will be subject to tax on this income at a 100% rate. "Prohibited transactions," for this purpose, are defined as dispositions, at a gain, of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors. Even if we remain qualified for U.S. federal income taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRSs' operations. In particular, while state income tax regimes often parallel the U.S. federal income tax regime for REITs, many states do not completely follow federal rules, and some may not follow them at all.
We continue to monitor our REIT compliance in order to maintain our qualification for U.S. federal income taxation as a REIT. For this and other reasons, as necessary, we may convert some of our data center operations in other countries into the REIT structure in future periods.
On each of March 18, June 17, September 23, and December 9, 2020 we paid quarterly cash dividends of $2.66 per share. We expect the amount of our applicable dividends and other applicable distributions to equal or exceed the REIT taxable income that we recognized in 2020.
The Impact of the ongoing COVID-19 pandemic on Our Results and Operations
In December 2019, a novel strain of coronavirus, referred to as Coronavirus disease 2019, or COVID-19, emerged. In February 2020, the World Health Organization (WHO) raised the COVID-19 threat from high to very high, and in March 2020, the WHO characterized COVID-19 as a global pandemic. The global pandemic and the efforts implemented to address the pandemic, including the issuance of “shelter-in-place” orders and social distancing guidelines, have impacted major economic and financial markets globally.
Many of our IBX data centers have been identified as "essential businesses" or "critical infrastructure" by local governments for purposes of remaining open during the COVID-19 pandemic. All of our IBX data centers remain operational at the time of filing of this Annual Report on Form 10-K. We have activated our business continuity plans globally with the goal of providing seamless operations throughout our facilities, including provisions for ensuring all data centers remain staffed and fully operational and that our IBXs are equipped with the necessary equipment and supplies. We have implemented precautionary measures to minimize the risk of operational impact and to protect the health and safety of our employees, customers, partners and communities. These include implementing tools such as an appointment-based system to control timing and frequency of visits while also encouraging our customers to leverage our IBX technicians via Smart Hands, our remote operational support service, in order to restrict visits and minimize the number of people and the amount of time spent in our IBX facilities.
Most of our corporate offices remain closed as a result of the pandemic and we instructed our non-IBX employees in these offices to work from home until further notice. We have announced a phased plan for return-to-office for non-IBX attached sites and have been following this plan to open certain offices with occupancy limits as local conditions allow. Additionally, we have decided to continue to limit employee travel and postpone or virtualize global events in response to the COVID-19 pandemic.
We are experiencing some construction delays, however, to date, the construction delays and additional costs are insignificant relative to the overall project duration and budget. Equipment for construction projects which are scheduled to be placed in the near future has been ordered, and is currently being manufactured or delivered with minimal delays. We are actively monitoring our vendors and suppliers to evaluate any anticipated changes in equipment availability or delivery timetables. We have redundancies built into our supply chain of vendors and, to the best of our ability, we keep a stock of critical items on site to ensure repairs can be completed. To date, we have not observed any significant disruption to our IBX data center operations due to supply chain impacts from the COVID-19 pandemic.
During the year ended December 31, 2020, the COVID-19 pandemic did not have a material impact on our results of operations. The majority of our revenue is derived from large companies across a diverse set of industries. Customers operating in sectors more drastically impacted by the COVID-19 pandemic, such as retail, travel, and energy, made up an insignificant percentage of our revenue. Smart Hands service revenues declined during the year ended December 31, 2020, as we waived Smart Hands service fees from the affected customers in certain circumstances during the first few months of the pandemic. We ceased to waive Smart Hands service fees for most customers as of June 30, 2020. We assessed realized and potential credit deterioration of our customers due to changes in the macroeconomic environment, considered the potential for payment term revision requests, and as a result, increased our allowance for credit losses for accounts receivable by an insignificant amount for the year ended December 31, 2020. We also incurred one-time cash bonuses and compensation expense of $8.6 million for our IBX employees as well as other employees to support their work-from-home requirements during the first quarter of 2020. We have experienced some travel expense savings during the year ended December 31, 2020 resulting from travel restrictions imposed in response to the COVID-19 pandemic.
Looking ahead, the full impact of the ongoing COVID-19 pandemic on our future financial condition or results of operations remains uncertain and will depend on a number of factors, including the duration and potential cyclicity of the health crisis and further public policy actions to be taken in response, as well as the continued impact of the pandemic on the global economy and our customers and vendors. Our past results may not be indicative of our future performance and historical trends may differ materially.
For additional details regarding the risks to our business from the ongoing COVID-19 pandemic, refer to Part I, Item 1A. Risk Factors included elsewhere in this Annual Report on Form 10-K.
2020 Highlights:
•In January, we redeemed the remaining $343.7 million principal amount of the 5.375% Senior Notes due 2022. See Note 11 within the Consolidated Financial Statements.
•In January, we completed the acquisition of three data centers in Mexico from Axtel for a total purchase consideration of approximately $189.0 million. See Note 3 within the Consolidated Financial Statements.
•In March, we completed the Packet Acquisition, a leading bare metal automation platform for a total purchase consideration of approximately $290.3 million. See Note 3 within the Consolidated Financial Statements.
•In March, we borrowed a total of $250.0 million under our Revolving Facility, which was fully repaid in May. As of December 31, 2020, the amount available to borrow under the Revolving Facility was approximately $1.9 billion. See Note 11 within the Consolidated Financial Statements.
•In April, we entered into a credit agreement which provided for senior unsecured 364-day term loan facilities in an aggregate principal amount of $750.0 million. On April 15, 2020, we borrowed $391.0 million, as well as €100.0 million or $109.8 million at the exchange rate in effect on that date. In May and June, we repaid all amounts outstanding under the 364-day term loan facilities. See Note 11 within the Consolidated Financial Statements.
•In April, we entered into an agreement to form a second joint venture in the form of a limited liability partnership with GIC to develop and operate xScaleTM data centers in APAC. In the third quarter of 2020, we recorded an impairment charge of $7.3 million, reducing the carrying value of the three Japan development sites to be sold, Osaka 2, Tokyo 12, and Tokyo 14, to the estimated fair value less cost to sell. On December 17, 2020, we closed the Asia-Pacific Joint Venture transaction which included the sale of the three development sites in exchange for $209.8 million of cash proceeds and $15.6 million of receivables. We recognized an insignificant gain on the sale of these xScaleTM data center facilities to the Asia-Pacific Joint Venture. See Note 5 and Note 6 within the Consolidated Financial Statements.
•In May, we issued and sold 2,587,500 shares of common stock in a public offering for net proceeds of approximately $1,683.1 million, after deducting underwriting discounts, commissions and offering expenses. See Note 12 within the Consolidated Financial Statements.
•In June, we issued $2.6 billion in Senior Notes due 2025, 2027, 2030 and 2050. In July, using a portion of the proceeds, we redeemed all of our outstanding €750.0 million 2.875% Senior Notes due 2024 and $1.1 billion 5.875% Senior Notes due 2026. See Note 11 within the Consolidated Financial Statements.
•In August, we entered into an agreement to purchase the India operations of GPX Global Systems, Inc. ("GPX India"), representing two data centers in Mumbai, India, for approximately $161.0 million in an all-cash transaction (the “GPX India Acquisition”). The GPX India Acquisition is expected to close in the second quarter of 2021, subject to customary closing conditions including regulatory approval. See Note 3 within the Consolidated Financial Statements.
•In the fourth quarter, we completed the acquisition of 13 data center sites in Canada, and their operations from Bell, for a total combined purchase consideration of approximately C$931.7 million, or $702.0 million at the exchange rates in effect on the transaction dates. See Note 3 within the Consolidated Financial Statements.
•In October, we issued $1.85 billion in Senior Notes due in 2025, 2028 and 2051. On October 23, 2020, using a portion of the net proceeds, we redeemed all of our outstanding €1.0 billion aggregate principal amount 2.875% Senior Notes due 2025, as well as €0.5 billion of our outstanding €1.0 billion aggregate principal amount 2.875% Senior Notes due 2026. See Note 11 within the Consolidated Financial Statements.
•In September, we entered into an agreement to sell the Paris 9 ("PA9") data center to the EMEA Joint Venture. The assets and liabilities of the data center, which was included within our EMEA region, were classified as held for sale as of September 30, 2020. The transaction was completed on December 15, 2020 for a total consideration of $131.5 million, which is comprised of net cash proceeds of $124.6 million, a contract asset with a fair value of $5.6 million and an insignificant amount of contingent consideration that is receivable upon completion of certain performance milestones. See Note 5 and Note 6 within the Consolidated Financial Statements.
•During 2020, we had sold 415,512 shares of our common stock for approximately $298.3 million in proceeds, net of payment of commissions and other offering expenses under the 2018 ATM Program, reaching the capacity of this program and subsequently closed. In October, we launched a new ATM program, under which we may offer and sell from time to time up to an aggregate of $1.5 billion of our common stock in "at the market" transactions (the "2020 ATM Program"). As of December 31, 2020 we had not sold any shares under the 2020 ATM Program. See Note 12 within the Consolidated Financial Statements.
Results of Operations
Our results of operations for the year ended December 31, 2020 include the results of operations from the acquisitions of 12 data center sites across Canada from Bell from October 1, 2020 and one additional data center acquired from Bell from November 2, 2020, Packet from March 2, 2020 and three data centers in Mexico from Axtel from January 8, 2020. Our results of operations for the year ended December 31, 2019 include the results of operations from the acquisition of the AM11 data center from April 18, 2019 within the EMEA region.
In order to provide a framework for assessing our performance excluding the impact of foreign currency fluctuations, we supplement the year-over-year actual change in results of operations with comparative changes on a constant currency basis. Presenting constant currency results of operations is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below for further discussion.
Years ended December 31, 2020 and 2019
Revenues. Our revenues for the years ended December 31, 2020 and 2019 were generated from the following revenue classifications and geographic regions (dollars in thousands):
Years Ended December 31, % Change
2020 % 2019 % Actual Constant Currency
Americas:
Recurring revenues $ 2,582,800 43% $ 2,456,368 44% 5% 7%
Non-recurring revenues 124,958 2% 131,359 3% (5)% (4)%
2,707,758 45% 2,587,727 47% 5% 6%
EMEA:
Recurring revenues 1,864,720 31% 1,680,746 30% 11% 12%
Non-recurring revenues 131,669 2% 125,698 2% 5% 3%
1,996,389 33% 1,806,444 32% 11% 12%
Asia-Pacific:
Recurring revenues 1,210,510 20% 1,101,072 20% 10% 10%
Non-recurring revenues 83,888 2% 66,897 1% 25% 24%
1,294,398 22% 1,167,969 21% 11% 10%
Total:
Recurring revenues 5,658,030 94% 5,238,186 94% 8% 9%
Non-recurring revenues 340,515 6% 323,954 6% 5% 4%
$ 5,998,545 100% $ 5,562,140 100% 8% 9%
Revenues
(dollars in thousands)
Americas Revenues. During the year ended December 31, 2020, Americas revenue increased by 5% (6% on a constant currency basis). Growth in Americas revenues was primarily due to:
•approximately $78.0 million of incremental revenues from the Bell, Packet, and Axtel acquisitions;
•$21.0 million of incremental revenues generated from our recently-opened IBX data centers or IBX data center expansions; and
•an increase in orders from both our existing customers and new customers during the period.
The increase was partially offset by lower non-recurring revenues, primarily due to decreases in EIS products sales and lower revenues from Smart Hands products in 2020 as we restricted visits to our IBX facilities and waived certain Smart Hands service fees from the affected customers during the COVID-19 pandemic.
EMEA Revenues. During the year ended December 31, 2020, EMEA revenue increased by 11% (12% on a constant currency basis). Growth in EMEA revenues was primarily due to:
•approximately $26.9 million of incremental revenues generated from our recently-opened IBX data centers or IBX data center expansions; and
•an increase in orders from both our existing customers and new customers during the period.
The increase was partially offset by:
•a net decrease of $43.5 million of realized cash flow hedge gains from foreign currency forward contracts.
Asia-Pacific Revenues. During the year ended December 31, 2020, Asia-Pacific revenue increased by 11% (10% on a constant currency basis). Growth in Asia-Pacific revenue was primarily due to:
•approximately $19.8 million of incremental revenues generated from our recently-opened IBX data centers or IBX data center expansions;
•higher non-recurring revenues, primarily due to increases in EIS products sales; and
•an increase in orders from both our existing customers and new customers during the period.
Cost of Revenues. Our cost of revenues for the years ended December 31, 2020 and 2019 were split among the following geographic regions (dollars in thousands):
Years Ended December 31, % Change
2020 % 2019 % Actual Constant Currency
Americas $ 1,248,141 41% $ 1,146,639 41% 9% 11%
EMEA 1,094,335 36% 1,017,580 36% 8% 8%
Asia-Pacific 731,864 23% 645,965 23% 13% 13%
Total $ 3,074,340 100% $ 2,810,184 100% 9% 10%
Cost of Revenues
(dollars in thousands; percentages indicate expenses as a percentage of revenues)
Americas Cost of Revenues. During the year ended December 31, 2020, Americas cost of revenues increased by 9% (11% on a constant currency basis). The increase in our Americas cost of revenues was primarily due to:
•approximately $64.4 million of incremental cost of revenues from the Bell, Packet, and Axtel acquisitions;
•$9.8 million of higher utilities cost driven by IBX data center expansions and integration, primarily in U.S.;
•$9.6 million of higher compensation costs, including salaries, bonuses and stock-based compensation, primarily due to headcount growth and additional bonuses paid to IBX employees for supporting our business during the COVID-19 pandemic;
•$7.9 million of higher property tax costs driven by IBX data center expansions;
•$5.8 million of higher accretion and depreciation costs driven by IBX data center expansions; and
•$5.2 million of higher consulting services and office expense, primarily due to project integration and additional spending on personal protective equipment for our IBX employees in response to the COVID-19 pandemic.
EMEA Cost of Revenues. During the year ended December 31, 2020, EMEA cost of revenues increased by 8% (and also 8% on a constant currency basis). The increase in our EMEA cost of revenues was primarily due to:
•$42.8 million of higher depreciation expenses driven by IBX data center expansions in Germany, the United Kingdom, the Netherlands, United Arab Emirates, and France;
•$25.9 million of higher compensation costs, including salaries, bonuses and stock-based compensation, primarily due to headcount growth and additional bonuses to IBX employees for supporting our business during the COVID-19 pandemic;
•$17.7 million of higher utilities costs driven by increased utility usage to support IBX data center expansions and utility price increases, primarily in Germany and France;
•$12.3 million of higher consulting services and office expense, primarily due to project integration and additional spending on personal protective equipment for our IBX employees in response to the COVID-19 pandemic; and
•$9.4 million of higher rent and facilities costs and repairs and maintenance expense, primarily in the United Kingdom, Germany, France, and the Netherlands.
This increase was partially offset by:
•$15.5 million decrease in realized cash flow hedge losses from foreign currency forward contracts;
•$8.8 million of lower other expenses, as there was a general contractor bankruptcy during the year ended December 31, 2019, which resulted in incremental legal claim charges in the prior year; and
•$8.3 million of net decrease in other cost of revenue, primarily due to lower costs related to decreased EIS revenues in Germany and the United Kingdom.
Asia-Pacific Cost of Revenues. During the year ended December 31, 2020, Asia-Pacific cost of revenues increased by 13% (and also 13% on a constant currency basis). The increase in our Asia-Pacific cost of revenues was primarily due to:
•$42.0 million of higher depreciation expense, primarily from IBX data center expansions in Australia, Singapore, Japan, and Hong Kong;
•$14.6 million of higher utilities costs, primarily driven by expansions and higher utility usage in Hong Kong, Japan, and Singapore;
•$9.0 million of higher costs from increased EIS revenues, primarily in Japan;
•$8.4 million of higher compensation costs, including salaries, bonuses and stock-based compensation, primarily due to headcount growth and additional bonuses to IBX employees for supporting our business during the COVID-19 pandemic;
•$6.6 million of higher taxes, licenses, and insurance, primarily driven by IBX data center expansions in Singapore, Australia, and Japan; and
•$5.3 million of repairs and maintenance, primarily due to increases of maintenance projects in Japan and Australia.
This increase was partially offset by:
•$4.8 million of lower office, rent and facility expenses due to lower computer hardware costs and lower equipment lease activity in Japan.
We expect Americas, EMEA and Asia-Pacific cost of revenues to increase in line with the growth of our business, including from the impacts of acquisitions.
Sales and Marketing Expenses. Our sales and marketing expenses for the years ended December 31, 2020 and 2019 were split among the following geographic regions (dollars in thousands):
Years ended December 31, % Change
2020 % 2019 % Actual Constant Currency
Americas $ 457,551 64% $ 401,034 62% 14% 15%
EMEA 162,365 23% 157,718 24% 3% 4%
Asia-Pacific 98,440 13% 92,294 14% 7% 6%
Total $ 718,356 100% $ 651,046 100% 10% 11%
Sales and Marketing Expenses
(dollars in thousands; percentages indicate expenses as a percentage of revenues)
Americas Sales and Marketing Expenses. During the year ended December 31, 2020, Americas sales and marketing expenses increased by 14% (15% on a constant currency basis). The increase in our Americas sales and marketing expenses was primarily due to:
•$42.9 million of higher compensation costs, including sales compensation, salaries and stock-based compensation, partially due to additional compensation expenses incurred related to our recent acquisitions and headcount growth;
•$10.6 million of higher advertising and promotions expenses primarily due to higher spending in online advertising, digital marketing strategies and digital consultancy;
•$5.4 million of higher consulting services primarily due to higher fees and an increase in business deals; and
•$5.1 million of higher amortization expenses related to customer relationship intangibles acquired from our recent acquisitions.
This increase was partially offset by:
•$6.4 million decrease in travel and entertainment expenses resulting from travel restrictions imposed in response to the COVID-19 pandemic.
EMEA Sales and Marketing Expenses. During the year ended December 31, 2020, EMEA sales and marketing increased by 3% (4% on a constant currency basis). The increase in our EMEA sales and marketing expenses was primarily due to:
•$16.1 million of higher compensation costs, including sales compensation, salaries and stock-based compensation, partially due to additional compensation expenses incurred related to headcount growth.
This increase was partially offset by:
•$4.7 million decrease in amortization expense driven by certain intangibles being fully amortized in the current year;
•$4.1 million decrease in travel and entertainment expenses resulting from travel restrictions imposed in response to the COVID-19 pandemic; and
•$2.7 million decrease of realized cash flow hedge losses from foreign currency forward contracts.
Asia-Pacific Sales and Marketing Expenses. During the year ended December 31, 2020, Asia-Pacific sales and marketing increased by 7% (6% on a constant currency basis). The increase in our Asia-Pacific sales and marketing expenses was primarily due to:
•$9.8 million increase in compensation costs, including sales compensation, salaries and stock-based compensation and headcount growth.
This increase was partially offset by:
•$3.5 million decrease in travel and entertainment expenses resulting from travel restrictions imposed in response to the COVID-19 pandemic.
We anticipate that we will continue to invest in Americas, EMEA and Asia-Pacific sales and marketing initiatives and expect our Americas, EMEA and Asia-Pacific sales and marketing expenses to increase in line with the growth of our business. We also expect travel and entertainment expenses to increase once travel restrictions that were imposed in response to the COVID-19 pandemic are reduced. Additionally, given that certain global sales and marketing functions are located within the U.S., we expect Americas sales and marketing expenses as a percentage of revenues to be higher than our other regions.
General and Administrative Expenses. Our general and administrative expenses for the years ended December 31, 2020 and 2019 were split among the following geographic regions (dollars in thousands):
Years Ended December 31, % Change
2020 % 2019 % Actual Constant Currency
Americas $ 782,038 72% $ 641,261 69% 22% 23%
EMEA 203,619 19% 198,892 21% 2% 3%
Asia-Pacific 105,324 9% 94,865 10% 11% 11%
Total $ 1,090,981 100% $ 935,018 100% 17% 17%
General and Administrative Expenses
(dollars in thousands; percentages indicate expenses as a percentage of revenues)
Americas General and Administrative Expenses. During the year ended December 31, 2020, Americas general and administrative expenses increased by 22% (23% on a constant currency basis). The increase in our Americas general and administrative expenses was primarily due to:
•$80.3 million of higher compensation costs, including salaries, bonuses, and stock-based compensation related to recent acquisitions and headcount growth;
•$25.2 million of higher depreciation expense associated with the Axtel and Packet acquisitions and the implementation of certain systems to support the integration and growth of our business;
•$20.2 million of higher consulting expenses in support of our business growth;
•$16.9 million of higher office expenses due to additional computer software, hardware, and support services;
•$4.6 million of higher third party services and other operating expenses due to higher project costs; and
•$3.4 million of higher taxes, licenses, and insurance, primarily due to the Axtel and Packet acquisitions.
This increase was partially offset by:
•$12.1 million net decrease due to lower travel and entertainment expenses resulting from travel restrictions imposed in response to the COVID-19 pandemic.
EMEA General and Administrative Expenses. During the year ended December 31, 2020, EMEA general and administrative expenses increased by 2% (3% on a constant currency basis). The increase in our EMEA general and administrative expenses was primarily due to:
•$24.4 million of higher compensation costs, including salaries, bonuses, and stock-based compensation, primarily due to headcount growth.
This increase was partially offset by:
•$6.0 million of lower travel and entertainment, resulting from travel restrictions imposed in response to the COVID-19 pandemic;
•$5.5 million of lower other operating expenses, primarily due to the favorable determination of a legal claim;
•$3.4 million of lower consulting expenses primarily related to lower accounting and tax fees; and
•$3.2 million decrease of realized cash flow hedge losses from foreign currency forward contracts.
Asia-Pacific General and Administrative Expenses. During the year ended December 31, 2020, Asia-Pacific general and administrative expenses increased by 11% (and also 11% on a constant currency basis). The increase in our Asia-Pacific general and administrative expense was primarily due to:
•$5.7 million of higher compensation costs, including salaries, bonuses, and stock-based compensation, primarily due to headcount growth;
•$3.8 million of higher rent and facility costs, primarily due to additional rent expenses in Singapore; and
•$3.5 million of higher office and consulting costs, primarily due to increase in hardware, software, supplies and fees resulting from the response to the COVID-19 pandemic.
This increase was partially offset by:
•$3.6 million of lower travel and entertainment expenses resulting from travel restrictions imposed in response to the COVID-19 pandemic.
Going forward, although we are carefully monitoring our spending, we expect Americas, EMEA and Asia-Pacific general and administrative expenses to increase as we continue to further scale our operations to support our growth, including investments in our back office systems and investments to maintain our qualification for taxation as a REIT and to integrate recent acquisitions. We also expect travel and entertainment expenses to increase once travel restrictions that were imposed in response to the COVID-19 pandemic are reduced. Additionally, given that our corporate headquarters is located within the U.S., we expect Americas general and administrative expenses as a percentage of revenues to continue to be higher than our other regions.
Transaction Costs. During the year ended December 31, 2020, we recorded transaction costs totaling $55.9 million primarily related to costs incurred in connection with the acquisitions of Bell, Packet, and Axtel, as well as the costs incurred in connection with the formation of the Asia-Pacific Joint Venture. During the year ended December 31, 2019, we recorded transaction costs totaling $24.8 million, primarily related to costs incurred in connection with the formation of the new EMEA Joint Venture.
Impairment Charges. During the year ended December 31, 2020, we recorded impairment charges totaling $7.3 million in the Asia-Pacific region as a result of the fair value adjustment of the Asia-Pacific Joint venture xScaleTM data centers, which were classified as held for sale assets before they were sold on December 17, 2020. During the year ended December 31, 2019, we recorded impairment charges totaling $15.8 million in the Americas region primarily as a result of the fair value adjustment for the New York 12 ("NY12") data center, which was classified as a held for sale asset before it was sold in October 2019.
Gain on Asset Sales. During the year ended December 31, 2020, we did not record a significant amount of gain on asset sales. During the year ended December 31, 2019, we recorded gain on asset sales of $44.3 million primarily relating to the sale of both the London 10 and Paris 8 data centers, as well as certain construction development and leases in London and Frankfurt, as part of the closing of the EMEA Joint Venture.
Income from Operations. Our income from operations for the years ended December 31, 2020 and 2019 was split among the following geographic regions (dollars in thousands):
Years Ended December 31, % Change
2020 % 2019 % Actual Constant Currency
Americas $ 178,454 17% $ 413,936 35% (57)% (54)%
EMEA 531,530 50% 421,786 36% 26% 32%
Asia-Pacific 342,944 33% 333,909 29% 3% 5%
Total $ 1,052,928 100% $ 1,169,631 100% (10)% (8)%
Americas Income from Operations. During the year ended December 31, 2020, Americas income from operations decreased by 57% (54% on a constant currency basis). The decrease in our Americas income from operations was primarily due to higher operating expenses as a percentage of revenues and higher transaction costs in connection with the recent acquisitions. Namely, a large increase in general and administrative expenses was primarily driven by higher compensation costs and consulting expenses, which were in part related to recent acquisitions, higher office expenses and depreciation expense, and payments made in response to the COVID-19 pandemic.
EMEA Income from Operations. During the year ended December 31, 2020, EMEA income from operations increased by 26% (32% on a constant currency basis). The increase in our EMEA income from operations was
primarily due to higher revenues as a result of our IBX data center expansion activity and organic growth, as described above, as well as lower operating expenses as a percentage of revenues.
Asia-Pacific Income from Operations. During the year ended December 31, 2020, Asia-Pacific income from operations increased by 3% (5% on a constant currency basis). The increase in our Asia-Pacific income from operations was primarily due to higher revenues as a result of our IBX data center expansion activity, acquisition and organic growth as described above.
Interest Income. Interest income was $8.7 million and $27.7 million for the years ended December 31, 2020 and 2019, respectively. The average yield for the year ended December 31, 2020 was 0.43% versus 1.85% for the year ended December 31, 2019.
Interest Expense. Interest expense decreased to $406.5 million for the year ended December 31, 2020 from $479.7 million for the year ended December 31, 2019, primarily attributable to the redemption of legacy high yield Senior Notes due 2022, 2024, 2025, and 2026, partially offset by the issuance of new Senior Notes due 2025, 2027, 2028, 2030, 2050 and 2051. Due to the issuance and redemption of debt for the year ended December 31, 2020, the effective interest rate decreased from December 31, 2019. During the years ended December 31, 2020 and 2019, we capitalized $26.8 million and $32.2 million, respectively, of interest expense to construction in progress.
Other Income. We recorded net other income of $6.9 million and $27.8 million for the years ended December 31, 2020 and 2019, respectively. Other income is primarily comprised of foreign currency exchange gains and losses during the periods.
Loss on Debt Extinguishment. During the year ended December 31, 2020, we recorded $145.8 million of loss on debt extinguishment primarily related to the redemption of the Senior Notes due 2022, 2024, 2025, and 2026.
During the year ended December 31, 2019, we recorded $52.8 million of loss on debt extinguishment primarily related to the redemption of the Senior Notes due 2022, 2023 and 2025.
Income Taxes We operate as a REIT for U.S. federal income tax purposes. As a REIT, we are generally not subject to U.S. federal income taxes on our taxable income distributed to stockholders. We intend to distribute or have distributed the entire taxable income generated by the operations of our REIT and QRSs for the tax years ended December 31, 2020 and 2019, respectively. As such, other than tax attributable to built-in-gains recognized, state income taxes, and foreign income and withholding taxes, no provision for income taxes has been included for the REIT and its QRSs in the accompanying consolidated financial statements for the years ended December 31, 2020 and 2019.
We have made TRS elections for some of our subsidiaries in and outside the U.S. In general, a TRS may provide services that would otherwise be considered impermissible for REITs to provide and may hold assets that may not be REIT compliant.
U.S. income taxes for the TRS entities located in the U.S. and foreign income taxes for our foreign operations regardless of whether the foreign operations are operated as QRSs or TRSs have been accrued, as necessary, for the years ended December 31, 2020 and 2019.
For the years ended December 31, 2020 and 2019, we recorded $146.2 million and $185.4 million of income tax expenses, respectively. Our effective tax rates were 28.3% and 26.8%, respectively, for the years ended December 31, 2020 and 2019.
Adjusted EBITDA. Adjusted EBITDA is a key factor in how we assess the operating performance of our segments and develop regional growth strategies such as IBX data center expansion decisions. We define adjusted EBITDA as income or loss from operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction costs and gain on asset sales. See "Non-GAAP Financial Measures" below for more information about adjusted EBITDA and a reconciliation of adjusted EBITDA to income or loss from operations. Our adjusted EBITDA for the years ended December 31, 2020 and 2019 was split among the following geographic regions (dollars in thousands):
Years Ended December 31, % Change
2020 % 2019 % Actual Constant Currency
Americas $ 1,186,022 42 % $ 1,237,622 46 % (4) % (3) %
EMEA 974,246 34 % 827,980 31 % 18 % 19 %
Asia-Pacific 692,630 24 % 622,125 23 % 11 % 11 %
Total $ 2,852,898 100 % $ 2,687,727 100 % 6 % 7 %
Americas Adjusted EBITDA. During the year ended December 31, 2020, Americas adjusted EBITDA decreased by 4% (3% on a constant currency basis). The decrease in our Americas adjusted EBITDA was primarily due to the increase in compensation expenses, consulting expenses and office expenses.
EMEA Adjusted EBITDA. During the year ended December 31, 2020, EMEA adjusted EBITDA increased by 18% (19% on a constant currency basis). The increase in our EMEA adjusted EBITDA was primarily due to higher revenues as a result of our IBX data center expansion activity and organic growth, as described above.
Asia-Pacific Adjusted EBITDA. During the year ended December 31, 2020, Asia-Pacific adjusted EBITDA increased by 11% (and also 11% on a constant currency basis). The increase in our Asia-Pacific adjusted EBITDA was primarily due to higher revenues as a result of our IBX data center expansion activity and organic growth as described above.
Non-GAAP Financial Measures
We provide all information required in accordance with GAAP, but we believe that evaluating our ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, we use non-GAAP financial measures to evaluate our operations.
Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. We have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our results of operations in a manner that focuses on what management believes to be our core, ongoing business operations. We believe that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and ability to perform in subsequent periods. We believe that if we did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.
Investors should note that the non-GAAP financial measures used by us may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should therefore exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies.
Our primary non-GAAP financial measures, adjusted EBITDA and adjusted funds from operations ("AFFO"), exclude depreciation expense as these charges primarily relate to the initial construction costs of our IBX data centers and do not reflect our current or future cash spending levels to support our business. Our IBX data centers are long-lived assets and have an economic life greater than 10 years. The construction costs of an IBX data center do not recur with respect to such data center, although we may incur initial construction costs in future periods with respect to additional IBX data centers, and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our IBX data centers. These estimates could vary from actual performance of the asset, are based on historical costs incurred to build out our IBX data centers and are not indicative of current or expected future capital expenditures. Therefore, we exclude depreciation from our results of operations when evaluating our operations.
In addition, in presenting adjusted EBITDA and AFFO, we exclude amortization expense related to acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of our acquisitions and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. We exclude accretion expense, both as it relates to asset retirement obligations as well as accrued restructuring charge liabilities, as these expenses represent costs which we believe are not meaningful in evaluating our current operations. We exclude stock-based compensation expense, as it can vary significantly from period to period based on share price, the timing, size and nature of equity awards. As such, we, and many investors and analysts, exclude stock-based compensation expense to compare our results of operations with those of other companies. We also exclude restructuring charges. The restructuring charges relate to our decisions to exit leases for excess space adjacent to several of our IBX data centers, which we did not intend to build out, or our decision to reverse such restructuring charges. We also exclude impairment charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. We also exclude gain or loss on asset sales as it represents profit or loss that is not meaningful in evaluating the current or future operating performance. Finally, we exclude transaction costs from AFFO and adjusted EBITDA to allow more comparable comparisons of our financial results to our historical operations. The transaction costs relate to costs we incur in connection with business combinations and the formation of joint ventures, including advisory, legal, accounting, valuation, and other professional or consulting fees. Such charges generally are not relevant to assessing the long-term performance of the company. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the transactions. Management believes items such as restructuring charges, impairment charges, gain or loss on asset sales and transaction costs are non-core transactions; however, these types of costs may occur in future periods.
Adjusted EBITDA
The following table shows the reconciliation from income from operations to adjusted EBITDA (in thousands):
Years Ended December 31,
2020 2019 2018
Income from operations $ 1,052,928 $ 1,169,631 $ 977,383
Depreciation, amortization, and accretion expense 1,427,010 1,285,296 1,226,741
Stock-based compensation expense 311,020 236,539 180,716
Transaction costs 55,935 24,781 34,413
Impairment charges 7,306 15,790 -
Gain on asset sales (1,301) (44,310) (6,013)
Adjusted EBITDA $ 2,852,898 $ 2,687,727 $ 2,413,240
Our adjusted EBITDA results have improved each year in the EMEA and Asia-Pacific regions in total dollars due to the improved operating results discussed earlier in "Results of Operations", as well as the nature of our business model consisting of a recurring revenue stream. The increases in adjusted EBITDA results for the EMEA and Asia-Pacific regions were partially offset by the decrease in the AMER region, as noted above.
Funds from Operations ("FFO") and AFFO
We use FFO and AFFO, which are non-GAAP financial measures commonly used in the REIT industry. FFO is calculated in accordance with the standards established by the National Association of Real Estate Investment Trusts. FFO represents net income (loss), excluding gain (loss) from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.
In presenting AFFO, we exclude certain items that we believe are not good indicators of our current or future operating performance. AFFO represents FFO excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, transaction costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain (loss) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income (loss) from discontinued operations, net of tax, and adjustments from FFO to AFFO for unconsolidated joint ventures' and noncontrolling interests' share of these items. The adjustments for installation revenue, straight-line rent expense and contract costs are intended to isolate the
cash activity included within the straight-lined or amortized results in the consolidated statement of operations. We exclude the amortization of deferred financing costs and debt discounts and premiums as these expenses relate to the initial costs incurred in connection with debt financings that have no current or future cash obligations. We exclude gain (loss) on debt extinguishment since it generally represents the write-off of initial costs incurred in connection with debt financings or a cost that is incurred to reduce future interest costs and is not a good indicator of our current or future operating performance. We include an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances, uncertain tax positions and deferred taxes that do not relate to current period's operations. We deduct recurring capital expenditures, which represent expenditures to extend the useful life of its IBX data centers or other assets that are required to support current revenues. We also exclude net income (loss) from discontinued operations, net of tax, which represents results that may not recur and are not a good indicator of our current future operating performance.
Our FFO and AFFO were as follows (in thousands):
Years Ended December 31,
2020 2019 2018
Net income $ 370,074 $ 507,245 $ 365,359
Net gain (loss) attributable to non-controlling interests (297) 205 -
Net income attributable to Equinix 369,777 507,450 365,359
Adjustments:
Real estate depreciation 924,064 845,798 883,118
(Gain) loss on disposition of real estate property 4,063 (39,337) 4,643
Adjustments for FFO from unconsolidated joint ventures 2,726 645 -
FFO $ 1,300,630 $ 1,314,556 $ 1,253,120
Years Ended December 31,
2020 2019 2018
FFO $ 1,300,630 $ 1,314,556 $ 1,253,120
Adjustments:
Installation revenue adjustment (125) 11,031 10,858
Straight-line rent expense adjustment 10,787 8,167 7,203
Contract cost adjustment (35,675) (40,861) (20,358)
Amortization of deferred financing costs and debt discounts and premiums
15,739 13,042 13,618
Stock-based compensation expense 311,020 236,539 180,716
Non-real estate depreciation expense 300,258 242,761 140,955
Amortization expense 199,047 196,278 203,416
Accretion expense (adjustment) 3,641 459 (748)
Recurring capital expenditures (160,637) (186,002) (203,053)
Loss on debt extinguishment 145,804 52,825 51,377
Transaction costs 55,935 24,781 34,413
Impairment charges 7,306 15,790 -
Income tax expense adjustment 33,220 39,676 (12,420)
Adjustments for AFFO from unconsolidated joint ventures 2,195 2,080 -
AFFO $ 2,189,145 $ 1,931,122 $ 1,659,097
Our AFFO results have improved due to the improved operating results discussed earlier in "Results of Operations," as well as due to the nature of our business model which consists of a recurring revenue stream and a cost structure which has a large base that is fixed in nature as discussed earlier in "Overview."
Constant Currency Presentation
Our revenues and certain operating expenses (cost of revenues, sales and marketing and general and administrative expenses) from our international operations have represented and will continue to represent a significant portion of our total revenues and certain operating expenses. As a result, our revenues and certain operating expenses have been and will continue to be affected by changes in the U.S. dollar against major international currencies. During the year ended December 31, 2020 as compared to the same period in 2019, the U.S. dollar was stronger relative to the Brazilian real, Singapore dollar and Australian dollar, which resulted in an unfavorable foreign currency impact on revenue, operating income and adjusted EBITDA, and a favorable foreign currency impact on operating expenses. During the year ended December 31, 2020 as compared to the same period in 2019, the U.S. dollar was weaker relative to the Japanese yen, Hong Kong dollar, Euro, and British pound, which resulted in a favorable foreign currency impact on revenue, operating income and adjusted EBITDA, and an unfavorable foreign currency impact on operating expenses. In order to provide a framework for assessing how each of our business segments performed excluding the impact of foreign currency fluctuations, we present period-over-period percentage changes in our revenues and certain operating expenses on a constant currency basis in addition to the historical amounts as reported. Our constant currency presentation excludes the impact of our foreign currency cash flow hedging activities. Presenting constant currency results of operations is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, we have presented this non-GAAP financial measure to provide investors with an additional tool to evaluate our results of operations. To present this information, our current period revenues and certain operating expenses from entities reporting in currencies other than the U.S. dollar are converted into U.S. dollars at constant exchange rates rather than the actual exchange rates in effect during the respective periods (i.e. average rates in effect for the year ended December 31, 2019 are used as exchange rates for the year ended December 31, 2020 when comparing the year ended December 31, 2020 with the year ended December 31, 2019).
Liquidity and Capital Resources
As of December 31, 2020, our total indebtedness was comprised of debt and lease obligations totaling approximately $12.6 billion (gross of debt issuance cost, debt discount, plus mortgage premium) consisting of:
•approximately $9.3 billion of principal from our senior notes;
•approximately $1.9 billion from our finance lease liabilities; and
•$1.4 billion of principal from our loans payable and mortgage.
During 2020, we completed the following significant financing activities:
•issued and sold 415,512 shares of common stock under our ATM Program, for proceeds of approximately $298.3 million, net of payment of commissions and other offering expenses;
•issued and sold 2,587,500 shares of common stock for net proceeds of approximately $1.7 billion;
•borrowed and repaid $0.8 billion under our revolving credit facility and the 364-day term loan facilities; and
•issued $4.4 billion of our Senior Notes, net of debt discounts, and repaid $4.1 billion of legacy high yield Senior Notes and $300.0 million of Infomart Senior Notes.
As of December 31, 2020, we had $1.6 billion of cash, cash equivalents and short-term investments. In addition to our cash and investment portfolio, we had $1.9 billion of additional liquidity available to us from our $2.0 billion revolving facility and general access to both public and private debt and the equity capital markets. We also have additional liquidity available to us from our ATM programs, under which we may offer and sell from time to time our common stock in "at the market" transactions. As of December 31, 2020, we had completed sales under the ATM program that was previously launched in December 2018. On October 30, 2020, we launched a new ATM program allowing for aggregate sales of up to $1.5 billion (the "2020 ATM Program"). No sales have been made under the 2020 ATM Program to date.
Besides any further financing activity we may pursue, customer collections are our primary source of cash. We believe we have a strong customer base, and have continued to experience relatively strong collections. We believe we have sufficient cash, coupled with anticipated cash generated from operating activities and external financing sources, to meet our operating requirements, including repayment of the current portion of our debt as it becomes due, distribution of dividends and completion of our publicly-announced acquisition and expansion projects. We also believe that our financial resources will allow us to manage future possible impact of the ongoing COVID-19
pandemic on our business operations for the foreseeable future, which could include reductions in revenue and delays in payments from customers and partners.
As we continue to grow, we may pursue additional expansion opportunities, primarily the build out of new IBX data centers, in certain of our existing markets which are at or near capacity within the next year, as well as potential acquisitions and joint ventures. We may elect to access the equity or debt markets from time to time opportunistically, particularly if financing is available on attractive terms. We will continue to evaluate our operating requirements and financial resources in light of future developments, including those relating to the ongoing COVID-19 pandemic.
Sources and Uses of Cash
Years Ended December 31,
2020 2019
(in thousands)
Net cash provided by operating activities $ 2,309,826 $ 1,992,728
Net cash used in investing activities (3,426,972) (1,944,567)
Net cash provided by financing activities 815,526 1,202,082
Operating Activities
Our cash provided by our operations is generated by colocation, interconnection, managed infrastructure and other revenues. Our primary uses of cash from our operating activities include compensation and related costs, interest payments, other general corporate expenditures and taxes. The increase in net cash provided by operating activities during 2020 compared to 2019 was primarily due to improved results of operations offset by increases in cash paid for cost of revenues and operating expenses.
Investing Activities
The net cash used in investing activities for the year ended December 31, 2020 was primarily due to capital expenditures of $2.3 billion as a result of our expansion activity, purchases of real estate of $200.2 million, business acquisitions of Bell, Packet and Axtel for $1.2 billion, and purchases of investments of $127.8 million, partially offset by proceeds from the sale of assets to the Asia-Pacific and EMEA Joint Ventures of $334.4 million and proceeds from sales of investments of $29.4 million. The net cash used in investing activities for the year ended December 31, 2019 was primarily due to capital expenditures of $2.1 billion as a result of our expansion activity, purchases of real estate of $169.2 million, the AM11 data center acquisition of $34.1 million, and purchases of investments of $60.9 million, partially offset by proceeds from the sale of assets, primarily due to the sale of assets to the EMEA Joint Venture, of $358.8 million and proceeds from sales of investments of $40.4 million.
We anticipate our IBX data center expansion construction activity will be similar or increase from our 2020 levels. If the opportunity to expand is greater than planned and we have sufficient funding to pursue such expansion opportunities, we may further increase the level of capital expenditure to support this growth as well as pursue additional business and real estate acquisitions or joint ventures.
Financing Activities
Net cash provided by financing activities during 2020 was primarily due to:
•the issuance of $4.4 billion in Senior Notes due 2025, 2027, 2028, 2030, 2050 and 2051;
•the sale and issuance of 2,587,500 shares of common stock in a public offering for net proceeds of approximately $1.7 billion, net of underwriting discounts, commissions and offering expenses;
•borrowings under the revolving credit facility of $250.0 million and the 364-Day term loan facilities of $500.8 million;
•the sale of 415,512 shares of common stock under the ATM Program, for net proceeds of $298.3 million; and
•proceeds from employee awards of $62.1 million.
The proceeds were partially offset by:
•the redemption of $4.1 billion in Senior Notes due 2022, 2024, 2025 and 2026;
•the repayment of $300.0 million of 5.0% Infomart Senior Notes according to the repayment terms;
•dividend distributions of $947.9 million;
•repayments of finance lease liabilities totaling $115.3 million;
•repayments of mortgage and loans payable totaling $829.5 million, primarily from the repayments of the revolving credit facility and the 364-Day term loan facilities;
•payments of debt extinguishment costs of $111.7 million, primarily related to redemption premium paid to redeem legacy high yield Senior Notes due 2022, 2024, 2025 and 2026; and
•payments of debt issuance costs of $42.2 million.
Net cash provided by financing activities during 2019 was primarily due to:
•the issuance of $2.8 billion in Senior Notes due 2024, 2026 and 2029;
•the sale and issuance of 2,985,575 shares of common stock in a public equity offering and receipt of net proceeds of approximately $1.2 billion, net of underwriting discounts, commissions and offering expenses;
•the sale of 903,555 shares under our ATM Program, for net proceeds of $447.5 million; and
•proceeds from employee awards of $52.0 million.
The proceeds were partially offset by:
•the redemption of $1.9 billion in Senior Notes due 2022, 2023 and 2025;
•the repayment of $300.0 million of 5.0% Infomart Senior Notes according to the repayment terms;
•dividend distributions of $836.2 million;
•repayments of finance lease liabilities of $126.5 million;
•repayments of mortgage and loans payable of $73.2 million;
•payments of debt extinguishment costs of $43.3 million, primarily related to redemption premium paid to redeem Senior Notes due 2022, 2023 and 2025; and
•payments of debt issuance costs of $23.3 million.
Contractual Obligations and Off-Balance-Sheet Arrangements
We lease a majority of our IBX data centers and certain equipment under long-term lease agreements. The following represents our debt maturities, financings, leases and other contractual commitments as of December 31, 2020 (in thousands):
2021 2022 2023 2024 2025 Thereafter Total
Term loans and other loans payable (1)
$ 82,289 $ 1,253,106 $ 6,896 $ 6,395 $ 4,605 $ 19,540 $ 1,372,831
Senior notes (1)
150,000 - - 1,000,000 1,200,000 6,911,050 9,261,050
Interest (2)
282,022 274,769 253,705 253,503 227,073 1,201,943 2,493,015
Finance leases (3)
232,415 221,058 215,909 213,186 209,424 1,928,094 3,020,086
Operating leases (3)
199,291 205,411 188,724 176,626 165,437 1,032,186 1,967,675
Other contractual commitments (4)
1,635,300 213,610 95,809 48,843 41,395 362,031 2,396,988
Asset retirement obligations (5)
3,993 14,013 5,986 7,436 8,243 74,098 113,769
$ 2,585,310 $ 2,181,967 $ 767,029 $ 1,705,989 $ 1,856,177 $ 11,528,942 $ 20,625,414
(1)Represents principal and unamortized mortgage premium only.
(2)Represents interest on mortgage payable, loans payable, senior notes and term loans based on their respective interest rates as of December 31, 2020, as well as the credit facility fee for the revolving credit facility.
(3)Represents lease payments under finance and operating lease arrangements, including renewal options that are certain to be exercised.
(4)Represents off-balance sheet arrangements. Other contractual commitments are described below.
(5)Represents liability, net of future accretion expense.
As of December 31, 2020, we were contractually committed for $1.1 billion of unaccrued capital expenditures, primarily for IBX equipment not yet delivered and labor not yet provided in connection with the work necessary to complete construction and open IBX data center expansion projects prior to making them available to customers for installation. This amount, which is expected to be paid during 2021 and thereafter, is reflected in the table above as "other contractual commitments."
We had other non-capital purchase commitments in place as of December 31, 2020, such as commitments to purchase power in select locations and other open purchase orders, which contractually bind us for goods, services or arrangements to be delivered or provided during 2021 and beyond. Such other purchase commitments as of December 31, 2020, which total $1.3 billion, are also reflected in the table above as "other contractual commitments."
Other commitments
In connection with certain of our leases and other contracts requiring deposits, we entered into 37 irrevocable letters of credit totaling $74.6 million under the revolving credit facility. These letters of credit were provided in lieu of cash deposits. If the landlords for these IBX leases decide to draw down on these letters of credit triggered by an event of default under the lease, we will be required to fund these letters of credit either through cash collateral or borrowing under the revolving credit facility. These contingent commitments are not reflected in the table above.
We had accrued liabilities related to uncertain tax positions totaling approximately $169.7 million as of December 31, 2020. These liabilities, which are reflected on our balance sheet, are not reflected in the table above since it is unclear when these liabilities will be paid.
In connection with the EMEA Joint Venture which closed in October 2019, we committed to make future equity contributions to the EMEA Joint Venture of €13.8 million and £6.6 million, or $25.8 million in total at the exchange rate in effect on December 31, 2020, to fund the EMEA Joint Venture’s future development until 2022, which are not reflected in the table above.
In connection with the sale of the PA9 data center, which closed in December 2020, we also has a commitment to the EMEA Joint Venture to complete a residual portion of the PA9 center for an estimated cost of €14.5 million or $17.7 million in total at the exchange rate in effect on December 31, 2020, which is reimbursable upon completion and is not reflected in the table above.
We also committed to make future equity contributions to the Asia-Pacific Joint Venture, which was closed on December 17, 2020. As of December 31, 2020, we had future equity contribution commitments of ¥6.3 billion, or $60.7 million in total at the exchange rate in effect on December 31, 2020, which is not reflected in the table above.
Additionally, we entered into lease agreements with various landlords primarily for data center spaces and ground leases which have not yet commenced as of December 31, 2020. These leases will commence between fiscal years 2021 and 2022 with lease terms of 10 to 49 years and a total lease commitment of approximately $684.1 million, which is not reflected in the table above.
Other Off-Balance-Sheet Arrangements
We have various guarantor arrangements with both our directors and officers and third parties, including customers, vendors and business partners. As of December 31, 2020, there were no significant liabilities recorded for these arrangements. For additional information, see "Guarantor Arrangements" in Note 15 within the Consolidated Financial Statements.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements requires management to make estimates and assumptions about future events that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. Management bases its
assumptions, estimates and judgments on historical experience, current trends and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, because future events and their effects cannot be determined with certainty, actual results may differ from these assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 1 to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K. Management believes that the following accounting policies and estimates are the most critical to aid in fully understanding and evaluating our consolidated financial statements, and they require significant judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain:
• Accounting for income taxes;
• Accounting for business combinations;
• Accounting for impairment of goodwill;
• Accounting for property, plant and equipment; and
• Accounting for leases.
Description
Judgments and Uncertainties Effect if Actual Results Differ from Assumptions
Accounting for Income Taxes.
Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and tax attributes such as operating loss, capital loss and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or settled.
The accounting standard for income taxes requires a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined by the accounting standard as a likelihood of more than 50%) that such assets will not be realized.
A tax benefit from an uncertain income tax position may be recognized in the financial statements only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authority's widely understood administrative practices and precedents. We recognize interest and penalties related to unrecognized tax benefits within income tax benefit (expense) in the consolidated statements of operations.
The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. Our accounting for deferred tax consequences represents our best estimate of those future tax consequences.
In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of that available evidence, it is more likely than not the deferred tax assets will not be realized, we record a valuation allowance. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.
This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following: 1) the nature, frequency and severity of current and cumulative financial reporting losses, 2) sources of future taxable income and 3) tax planning strategies.
In assessing the tax benefit from an uncertain income tax position, the tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that is greater than a 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
For purposes of the quarterly REIT asset tests, we estimate the fair market value of assets within our QRSs and TRSs using a discounted cash flow approach, by calculating the present value of forecasted future cash flows. We apply discount rates based on industry benchmarks relative to the market and forecasting risks. Other significant assumptions used to estimate the fair market value of assets in QRSs and TRSs include projected revenue growth, projected operating margins and projected capital expenditure. We revisit significant assumptions periodically to reflect any changes due to business or economic environment.
As of December 31, 2020 and 2019, we had net total deferred tax liabilities of $224.0 million and $211.4 million, respectively. As of December 31, 2020 and 2019, we had a total valuation allowance of $82.3 million and $57.8 million, respectively. If and when we increase or reduce our valuation allowances, it may have an unfavorable or favorable impact, respectively, to our financial position and results of operations in the periods when such determinations are made. We will continue to assess the need for our valuation allowances, by jurisdiction, in the future.
During the year ended December 31, 2020, we provided full valuation allowances against certain deferred tax assets acquired in Canada and the Netherlands that are not expected to be realizable in the foreseeable future.
During the year ended December 31, 2019, we released the full valuation allowances against the deferred tax assets of one of our Brazilian legal entities due to the evidence of achieving sustainable profitability. For the Metronode Acquisition, we increased the valuation allowance that was assessed in prior year as a result of finalizing the provisional estimates related to the realizability of certain deferred tax assets.
As of December 31, 2020 and 2019, we had unrecognized tax benefits of $207.8 million and $173.7 million, respectively, exclusive of interest and penalties. During the year ended December 31, 2020, the unrecognized tax benefit increased by $34.1 million primarily due to integrations in the EMEA region, which was partially offset by the recognition of unrecognized tax benefits related to our tax positions in a few countries as a result of a lapse in statutes of limitations and the partial payment related to the UK integration. During the year ended December 31, 2019, the unrecognized tax benefit increased by $22.8 million primarily due to integrations, which was partially offset by the recognition of unrecognized tax benefits related to our tax positions in France as a result of a lapse in statutes of limitations and the partial payment of the Metronode pre-acquisition tax audit assessment which was fully indemnified by the seller. The unrecognized tax benefits of $207.8 million as of December 31, 2020, of which $33.8 million is subject to an indemnification agreement, if subsequently recognized, will affect our effective tax rate favorably at the time when such a benefit is recognized.
Description
Judgments and Uncertainties Effect if Actual Results Differ from Assumptions
Accounting for Business Combinations
In accordance with the accounting standard for business combinations, we allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed, if any, is recorded as goodwill.
We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in determining the fair value of identifiable intangible assets such as customer contracts, leases and any other significant assets or liabilities and contingent consideration, as well as the estimated useful life of intangible assets. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date if we obtain more information regarding asset valuations and liabilities assumed.
Our purchase price allocation methodology contains uncertainties because it requires assumptions and management's judgment to estimate the fair value of assets acquired and liabilities assumed at the acquisition date. Key judgments used to estimate the fair value of intangible assets include projected revenue growth and operating margins, discount rates, customer attrition rates, as well as the estimated useful life of intangible assets. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Our estimates are inherently uncertain and subject to refinement. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.
During the last three years, we have completed a number of business combinations, including the acquisition of Bell Data Centers in Canada in the fourth quarter of 2020, Packet in March 2020, Axtel in Mexico in January 2020, Switch Datacenters' AMS1 data center business in Amsterdam, Netherlands in April 2019, and the Metronode Acquisition and the Infomart Dallas Acquisition in April 2018. The purchase price allocation for these acquisitions has been finalized, except for the Bell acquisition.
As of December 31, 2020 and 2019, we had net intangible assets of $2.2 billion and $2.1 billion, respectively. We recorded amortization expense for intangible assets of $199.0 million, $196.3 million and $203.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we used to complete the purchase price allocations and the fair value of assets acquired and liabilities assumed. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material, which would be recorded in our consolidated statements of operations in 2020 or beyond.
Description
Judgments and Uncertainties Effect if Actual Results Differ from Assumptions
Accounting for Impairment of Goodwill and Other Intangible Assets
In accordance with the accounting standard for goodwill and other intangible assets, we perform goodwill and other intangible assets impairment reviews annually, or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
We complete the annual goodwill impairment assessment for the Americas, EMEA and Asia-Pacific reporting units to determine if the fair values of the reporting units exceeded their carrying values.
We perform a review of other intangible assets for impairment by assessing events or changes in circumstances that indicate the carrying amount of an asset may not be recoverable.
To perform annual goodwill impairment assessment, we elected to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This analysis requires assumptions and estimates before performing the quantitative goodwill impairment test, where the assessment requires assumptions and estimates derived from a review of our actual and forecasted operating results, approved business plans, future economic conditions and other market data. Additionally, we periodically review our assessment of our reporting units to determine if changes in facts and circumstances warrant changes to our conclusions. There were no specific factors present in 2020 or 2019 that indicated a potential goodwill impairment.
We performed our annual review of other intangible assets by assessing if there were events or changes in circumstances indicating that the carrying amount of an asset may not be recoverable, such as a significant decrease in market price of an asset, a significant adverse change in the extent or manner in which an asset is being used, a significant adverse change in legal factors or business climate that could affect the value of an asset or a continuous deterioration of our financial condition. This assessment requires assumptions and estimates derived from a review of our actual and forecasted operating results, approved business plans, future economic conditions and other market data. There were no specific events in 2020 or 2019 that indicated a potential impairment.
As of December 31, 2020, goodwill attributable to the Americas, the EMEA and the Asia-Pacific reporting units was $2.2 billion, $2.6 billion and $0.6 billion, respectively.
Future events, changing market conditions and any changes in key assumptions may result in an impairment charge. While we have not recorded an impairment charge against our goodwill to date, the development of adverse business conditions in our Americas, EMEA or Asia-Pacific reporting units, such as higher than anticipated customer churn or significantly increased operating costs, or significant deterioration of our market comparables that we use in the market approach, could result in an impairment charge in future periods.
The balance of our other intangible assets, net, for the year ended December 31, 2020 and 2019 was $2.2 billion and $2.1 billion, respectively. While we have not recorded an impairment charge against our other intangible assets to date, future events or changes in circumstances, such as a significant decrease in market price of an asset, a significant adverse change in the extent or manner in which an asset is being used, a significant adverse change in legal factors or business climate, may result in an impairment charge in future periods.
Any potential impairment charge against our goodwill and other intangible assets would not exceed the amounts recorded on our consolidated balance sheets.
Description
Judgments and Uncertainties Effect if Actual Results Differ from Assumptions
Accounting for Property, Plant and Equipment
We have a substantial amount of property, plant and equipment recorded on our consolidated balance sheet. The vast majority of our property, plant and equipment represent the costs incurred to build out or acquire our IBX data centers. Our IBX data centers are long-lived assets. We depreciate our property, plant and equipment using the straight-line method over the estimated useful lives of the respective assets (subject to the term of the lease in the case of leased assets or leasehold improvements and integral equipment located in leased properties).
Accounting for property, plant and equipment includes determining the appropriate period in which to depreciate such assets, assessing such assets for potential impairment, capitalizing interest during periods of construction and assessing the asset retirement obligations required for certain leased properties that require us to return the leased properties back to their original condition at the time we decide to exit a leased property.
Judgments are required in arriving at the estimated useful life of an asset and changes to these estimates would have significant impact on our financial position and results of operations. When we lease a property for our IBX data centers, we generally enter into long-term arrangements with initial lease terms of at least 8-10 years and with renewal options generally available to us. In the next several years, a number of leases for our IBX data centers will come up for renewal. As we start approaching the end of these initial lease terms, we will need to reassess the estimated useful lives of our property, plant and equipment. In addition, we may find that our estimates for the useful lives of non-leased assets may also need to be revised periodically. We periodically review the estimated useful lives of certain of our property, plant and equipment and changes in these estimates in the future are possible.
The assessment of long-lived assets for impairment requires assumptions and estimates of undiscounted and discounted future cash flows. These assumptions and estimates require significant judgment and are inherently uncertain.
As of December 31, 2020 and 2019, we had property, plant and equipment of $14.5 billion and $12.2 billion, respectively. During the years ended December 31, 2020, 2019 and 2018, we recorded depreciation expense of $1.2 billion, $1.1 billion, and $1.0 billion, respectively. While we evaluated the appropriateness, we did not revise the estimated useful lives of our property, plant and equipment during the years ended December 31, 2020, 2019 and 2018. Further changes in our estimated useful lives of our property, plant and equipment could have a significant impact on our results of operations.
Accounting for Leases
A significant portion of our data center spaces, office spaces and equipment are leased. Each time we enter into a new lease or lease amendments, we analyze each lease or lease amendment for the proper accounting, including determining if an arrangement is or contains a lease at inception and making assessment of the leased properties to determine if they are operating or finance leases.
Determination of accounting treatment, including the result of the lease classification test for each new lease or lease amendment, is dependent on a variety of judgments, such as identification of lease and non-lease components, allocation of total consideration between lease and non-lease components, determination of lease term, including assessing the likelihood of lease renewals, valuation of leased property, and establishing the incremental borrowing rate to calculate the present value of the minimum lease payment for the lease test. The judgments used in the accounting for leases are inherently subjective; different assumptions or estimates could result in different accounting treatment for a lease.
Lease assumptions and estimates are determined and applied at the inception of the leases or at the lease modification date. As of both December 31, 2020 and 2019, operating right-of-use ("ROU") lease assets were at $1.5 billion and operating lease liabilities were at $1.5 billion . As of December 31, 2020 and 2019, finance ROU assets were $1.7 billion and $1.3 billion, respectively, and finance lease liabilities were $1.9 billion and $1.5 billion, respectively. For the years ended December 31, 2020, 2019 and 2018, we recorded the finance lease cost of $233.9 million and $193.6 million, respectively, and recorded rent expense of approximately $217.3 million, $219.0 million and $185.4 million, respectively.
Recent Accounting Pronouncements
See "Recent Accounting Pronouncements" in Note 1 within the Consolidated Financial Statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
The following discussion about market risk involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We may be exposed to market risks related to changes in interest rates and foreign currency exchange rates and fluctuations in the prices of certain commodities, primarily electricity.
The uncertainty that exists with respect to the economic impact of the ongoing COVID-19 pandemic introduced significant volatility in the financial markets. See Part I, Item 1A. Risk Factors for additional information regarding potential risks to our business, financial condition and results of operations related to the ongoing COVID-19 pandemic.
We employ foreign currency forward and option contracts, cross-currency interest rate swaps and interest rate locks for the purpose of hedging certain specifically identified exposures. The use of these financial instruments is intended to mitigate some of the risks associated with fluctuations in currency exchange and interest rates, but does not eliminate such risks. We do not use financial instruments for trading or speculative purposes.
Investment Portfolio Risk
We maintain an investment portfolio of various holdings, types, and maturities that is prioritized on meeting REIT asset requirements. All of our marketable securities are recorded on our consolidated balance sheets at fair value with changes in fair values recognized in net income. We consider various factors in determining whether we should recognize an impairment charge for our securities, including the length of time and extent to which the fair value has been less than our cost basis and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery. We anticipate that we will recover the entire cost basis of these securities and have determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the year ended December 31, 2020.
As of December 31, 2020, our investment portfolio of cash equivalents and marketable securities consisted of money market funds, certificates of deposits and publicly traded equity securities. The amount in our investment portfolio that could be susceptible to market risk totaled $615.6 million.
Interest Rate Risk
We are exposed to interest rate risk related to our outstanding debt. An immediate 10% increase or decrease in current interest rates from their position as of December 31, 2020 would not have a material impact on our interest expense due to the fixed coupon rate on the majority of our debt obligations. However, the interest expense associated with our senior credit facility and term loans, that bear interest at variable rates, could be affected. For every 100 basis point change in interest rates, our annual interest expense could increase by a total of approximately $10.9 million or decrease by a total of approximately $0.2 million based on the total balance of our primary borrowings under the Term Loan Facility as of December 31, 2020. As of December 31, 2020, we had no outstanding interest rate derivative hedges against our debt obligations. However, we may enter into interest rate hedging agreements in the future to mitigate our exposure to interest rate risk.
The fair value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. These interest rate changes may affect the fair value of the fixed interest rate debt but do not impact our earnings or cash flows. The fair value of our mortgage and loans payable and 5.000% Infomart Senior Notes, which are not traded in the market, is estimated by considering our credit rating, current rates available to us for debt of the same remaining maturities and the terms of the debt. The fair value of our other senior notes, which are traded in the market, was based on quoted market prices. The following table represents the carrying value and estimated fair value of our mortgage and loans payable and senior notes as of (in thousands):
December 31, 2020 December 31, 2019
Carrying
Value (1)
Fair Value Carrying
Value (1)
Fair Value
Mortgage and loans payable $ 1,370,970 $ 1,379,129 $ 1,370,118 $ 1,378,429
Senior notes 9,261,050 9,705,486 9,029,211 9,339,497
(1)The carrying value is gross of debt issuance cost, debt discount and debt premium.
Foreign Currency Risk
A significant portion of our revenue is denominated in U.S. dollars, however, approximately 59% of our revenues and 53% of our operating costs are attributable to Brazil, Mexico, Canada, Colombia and the EMEA and Asia-Pacific regions, and a large portion of those revenues and costs are denominated in a currency other than the U.S. dollar, primarily the Euro, British pound, Japanese yen, Singapore dollar, Hong Kong dollar, Australian dollar and Brazilian real. To help manage the exposure to foreign currency exchange rate fluctuations, we have implemented a number of hedging programs, in particular:
•a cash flow hedging program to hedge the forecasted revenues and expenses in our EMEA region;
•a balance sheet hedging program to hedge the remeasurement of monetary assets and liabilities denominated in foreign currencies; and
•a net investment hedging program to hedge the long term investments in our foreign subsidiaries.
Our hedging programs reduce, but do not entirely eliminate, the impact of currency exchange rate movements on our consolidated balance sheets, statements of operations and statements of cash flows.
We have entered into various foreign currency debt obligations. As of December 31, 2020, the total principal amount of foreign currency debt obligations was $1.9 billion, including $611.1 million denominated in Euro, $589.7 million denominated in British Pound, $408.5 million denominated in Japanese Yen and $293.9 million denominated in Swedish Krona. As of December 31, 2020, we have designated $1.9 billion of the total principal amount of foreign currency debt obligations as net investment hedges against our net investments in foreign subsidiaries. For a net investment hedge, changes in the fair value of the hedging instrument designated as a net investment hedge are recorded as a component of other comprehensive income (loss) in the consolidated balance sheets. Fluctuations in the exchange rates between these foreign currencies and the U.S. Dollar will impact the amount of U.S. Dollars that we will require to settle the foreign currency debt obligations at maturity. If the U.S. Dollar would have been weaker or stronger by 10% in comparison to these foreign currencies as of December 31, 2020, we estimate our obligation to cash settle the principal of these foreign currency debt obligations in U.S. Dollars would have increased or decreased by approximately $211.5 million and $173.0 million, respectively.
We also entered into cross-currency interest rate swaps where we receive a fixed amount of U.S. Dollars and pay a fixed amount of Euros. As of December 31, 2020 and 2019, the total notional amounts of U.S. Dollar to Euro cross-currency interest rate swap contracts were $3.3 billion and $750.0 million, respectively. The cross-currency interest rate swaps are designated as hedges of our net investment in European operations and changes in the fair value of these swaps are recorded as a component of accumulated other comprehensive income (loss) in the consolidated balance sheet. If the U.S. Dollar weakened or strengthened by 10% in comparison to Euro, we would have recorded an additional loss of $409.6 million or gain of $337.3 million, respectively, within accumulated other comprehensive income (loss) as of December 31, 2020.
The U.S. Dollar weakened relative to certain of the currencies of the foreign countries in which we operate during the year ended December 31, 2020. This has impacted our consolidated financial position and results of operations during this period, including the amount of revenues that we reported. Continued strengthening or weakening of the U.S. Dollar will continue to impact us in future periods.
With the existing cash flow hedges in place, a hypothetical additional 10% strengthening of the U.S. dollar during the year ended December 31, 2020 would have resulted in a reduction of our revenues and operating expenses, including depreciation and amortization expenses, by approximately $171.1 million and $169.7 million, respectively.
With the existing cash flow hedges in place, a hypothetical additional 10% weakening of the U.S. dollar during the year ended December 31, 2020 would have resulted in an increase of our revenues and operating expenses, including depreciation and amortization expenses, by approximately $209.2 million and $207.4 million, respectively.
We may enter into additional hedging activities in the future to mitigate our exposure to foreign currency risk as our exposure to foreign currency risk continues to increase due to our growing foreign operations; however, we do not currently intend to eliminate all foreign currency transaction exposure.
Commodity Price Risk
Certain operating costs incurred by us are subject to price fluctuations caused by the volatility of underlying commodity prices. The commodities most likely to have an impact on our results of operations in the event of price changes are electricity, supplies and equipment used in our IBX data centers. We closely monitor the cost of electricity at all of our locations. We have entered into several power contracts to purchase power at fixed prices in certain locations in the Australia, Brazil, Bulgaria, Canada, China, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the U.S..
In addition, as we are building new, or expanding existing, IBX data centers, we are subject to commodity price risk for building materials related to the construction of these IBX data centers, such as steel and copper. In addition, the lead-time to procure certain pieces of equipment, such as generators, is substantial. Any delays in procuring the necessary pieces of equipment for the construction of our IBX data centers could delay the anticipated openings of these new IBX data centers and, as a result, increase the cost of these projects.
We do not currently employ forward contracts or other financial instruments to address commodity price risk other than the power contracts discussed above.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. Financial Statements and Supplementary Data
The financial statements and supplementary data required by this Item 8 are listed in Item 15(a)(1) and begin at page of this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
There is no disclosure to report pursuant to Item 9.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on our evaluation under the framework in Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein on page of this Annual Report on Form 10-K.
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed and operated to be effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
There was no change in our internal controls over financial reporting during the fourth quarter of fiscal 2020 that has materially affected, or is reasonable likely to affect, our internal controls over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. Other Information
There is no disclosure to report pursuant to Item 9B.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2020 pursuant to Regulation 14A.
We have adopted a Code of Ethics applicable for the Chief Executive Officer and Senior Financial Officers and a Code of Business Conduct, which are both "Code(s) of Ethics for Senior Financial Officers" as defined by applicable rules of the SEC. This information is incorporated by reference to the Equinix proxy statement for the 2021 Annual Meeting of Stockholders and is also available on our website, www.equinix.com.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. Executive Compensation
The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2020 pursuant to Regulation 14A.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item is incorporated by reference to the Equinix proxy statement for the 2021 Annual Meeting of Stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2020 pursuant to Regulation 14A.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2020 pursuant to Regulation 14A.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Stockholders' Equity and Other Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
(a)(2) Financial statements and schedule:
Schedule III- Schedule of Real Estate and Accumulated Depreciation at December 31, 2020 with reconciliations for the years ended December 31, 2020, 2019 and 2018
(a)(3) Exhibits:
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date/
Period End Date Exhibit Filed
Herewith
2.1
Rule 2.7 Announcement, dated as May 29, 2015. Recommended Cash and Share Offer for Telecity Group plc by Equinix, Inc.
8-K
5/29/2015
2.1
2.2
Cooperation Agreement, dated as of May 29, 2015, by and between Equinix, Inc. and Telecity Group plc.
8-K
5/29/2015
2.2
2.3
Amendment to Cooperation Agreement, dated as of November 24, 2015, by and between Equinix, Inc. and Telecity Group plc.
10-K
12/31/2015
2.3
2.4
Transaction Agreement, dated as of December 6, 2016, by and between Verizon Communications Inc. and Equinix, Inc.
8-K
12/6/2016
2.1
2.5
Amendment No. 1 to the Transaction Agreement, dated February 23, 2017, by and between Verizon Communications Inc. and Equinix, Inc.
10-K
12/31/2016
2.5
2.6
Amendment No.2 to the Transaction Agreement, dated April 30, 2017, by and between Verizon Communications Inc. and Equinix, Inc.
8-K
5/1/2017
2.1
2.7
Amendment No.3 to the Transaction Agreement, dated June 29, 2018, by and between Verizon Communications Inc. and Equinix, Inc.
10-Q
8/8/2018
2.7
3.1
Amended and Restated Certificate of Incorporation of the Registrant, as amended to date.
10-K/A
12/31/2002
3.1
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date/
Period End Date Exhibit Filed
Herewith
3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant.
8-K
6/14/2011
3.1
3.3
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant.
8-K
6/11/2013
3.1
3.4
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant.
10-Q
6/30/2014
3.4
3.5
Certificate of Designation of Series A and Series A-1 Convertible Preferred Stock.
10-K/A
12/31/2002
3.3
3.6
Amended and Restated Bylaws of the Registrant.
8-K
3/29/2016
3.1
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6.
4.2
Indenture, dated as of November 20, 2014, between Equinix, Inc. and U.S. Bank National Association as trustee.
8-K
11/20/2014
4.1
4.3
Fourth Supplemental Indenture, dated as of March 22, 2017 between Equinix, Inc. and U.S. Bank National Association, as trustee.
8-K
3/22/2017
4.2
4.4 Form of 5.375% Senior Notes due 2027 (see Exhibit 4.3).
4.5
Fifth Supplemental Indenture, dated as of September 20, 2017 among Equinix, Inc. and U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent.
8-K
9/20/2017
4.2
4.6
Indenture, dated as of December 12, 2017, between Equinix, Inc. and U.S. Bank National Association, as trustee.
8-K
12/5/2017
4.1
4.7
Supplemental Indenture, dated as of December 12, 2017, among Equinix, Inc. and U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent.
8-K
12/5/2017
4.2
4.8 Form of 2.875% Senior Notes due 2026 (see Exhibit 4.8).
4.9
Third Supplemental Indenture, dated as of April 2, 2018, among Equinix, Inc. and U.S. Bank National Association, as trustee.
8-K
4/3/2018
4.2
4.10 Form of 5.00% Senior Notes due October 2020 (see Exhibit 4.10).
4.11 Form of 5.00% Senior Notes due April 2021 (see Exhibit 4.10).
4.12
Fourth Supplemental Indenture, dated as of November 18,2019, among Equinix, Inc and U.S. Bank National Association, as trustee.
8-K
11/18/2019
4.2
4.13 Form of 2.625% Senior Notes due 2024 (See Exhibit 4.13).
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date/
Period End Date Exhibit Filed
Herewith
4.14
Fifth Supplemental Indenture, dated as of November 18, 2019, among Equinix, Inc. and U.S. Bank National Association, as trustee.
8-K
11/18/2019
4.4
4.15 Form of 2.900% Senior Notes due 2026 (See Exhibit 4.15).
4.16
Sixth Supplemental Indenture, dated as of November 18, 2019, among Equinix, Inc. and U.S. Bank National Association, as trustee.
8-K
11/18/2019
4.6
4.17 Form of 3.200% Senior Notes due 2029 (See Exhibit 4.17) 8-K
6/22/2020
4.18
Seventh Supplemental Indenture, dated as of June 22, 2020, among Equinix, Inc. and U.S. Bank National Association, as trustee
8-K
6/22/2020
4.2
4.19 Form of 1.250% Senior Note due 2025 (See Exhibit 4.19) 8-K
6/22/2020
4.3
4.20
Eighth Supplemental Indenture, dated as of June 22, 2020, among Equinix, Inc. and U.S. Bank National Association, as trustee
8-K
6/22/2020
4.4
4.21 Form of 1.800% Senior Note due 2027 (See Exhibit 4.21) 8-K
6/22/2020
4.5
4.22
Ninth Supplemental Indenture, dated as of June 22, 2020, among Equinix, Inc. and U.S. Bank National Association, as trustee
8-K
6/22/2020
4.6
4.23 Form of 2.150% Senior Note due 2030 (see Exhibit 4.23) 8-K
6/22/2020
4.7
4.24
Tenth Supplemental Indenture, dated as of June 22, 2020, among Equinix, Inc. and U.S. Bank National Association, as trustee
8-K
6/22/2020
4.8
4.25 Form of 3.000% Senior Note due 2050 (See Exhibit 4.25) 8-K
6/22/2020
4.9
4.26
Eleventh Supplemental Indenture, dated as of October 7, 2020, among Equinix, Inc. and U.S. Bank National Association, as trustee
8-K 10/7/2020 4.2
4.27 Form of 1.000% Senior Note due 2025 (included in Exhibit 4.27)
8-K 10/7/2020 4.3
4.28
Twelfth Supplemental Indenture, dated as of October 7, 2020, among Equinix, Inc. and U.S. Bank National Association, as trustee
8-K 10/7/2020 4.4
4.29 Form of 1.550% Senior Note due 2028 (included in Exhibit 4.29) 8-K 10/7/2020 4.5
4.30
Thirteenth Supplemental Indenture, dated as of October 7, 2020, among Equinix, Inc. and U.S. Bank National Association, as trustee
8-K 10/7/2020 4.6
4.31 Form of 2.950% Senior Note due 2051 (included in Exhibit 4.31) 8-K 10/7/2020 4.7
4.32
Form of Registrant's Common Stock Certificate.
10-K
12/31/2014
4.13
4.33
Description of Securities.
X
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date/
Period End Date Exhibit Filed
Herewith
10.1**
Form of Indemnification Agreement between the Registrant and each of its officers and directors.
S-4 (File No. 333-93749)
12/29/1999
10.5
10.2**
2000 Equity Incentive Plan, as amended.
10-K
12/31/2016
10.2
10.3**
2000 Director Option Plan, as amended.
10-K
12/31/2016
10.3
10.4**
2001 Supplemental Stock Plan, as amended.
10-K
12/31/2016
10.4
10.5**
2020 Equity Incentive Plan
DEF14A
4/27/2020
Appendix A
10.6**
Equinix, Inc. 2004 Employee Stock Purchase Plan, as amended.
10-Q
6/30/2014
10.5
10.7**
Switch & Data 2007 Stock Incentive Plan.
S-1/A
(File No. 333-137607) filed by Switch & Data Facilities Company 2/5/2007
10.9
10.8**
2018 Form of Revenue/AFFO Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2018
10.31
10.9**
2018 Form of TSR Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2018
10.32
10.10**
2018 Form of Time-Based Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2018
10.33
10.11**
2019 Form of Revenue/AFFO per Share Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2019
10.29
10.12**
2019 Form of TSR Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2019
10.30
10.13**
2019 Form of Time-Based Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2019
10.31
10.14**
2020 Equinix, Inc. Annual Incentive Plan.
10-Q
3/31/2020
10.18
10.15**
2020 Form of Revenue/AFFO per Share Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2020
10.19
10.16**
2020 Form of TSR Restricted Stock Unit Agreement for Executives.
10-Q
3/31/2020
10.20
10.17**
2020 Form of Time-Based Restricted Stock Agreement for Executives.
10-Q
3/31/2020
10.21
10.18
Agreement for Purchase and Sale of Shares Among RW Brasil Fundo de Investimentos em Participação, Antônio Eduardo Zago De Carvalho and Sidney Victor da Costa Breyer, as Sellers, and Equinix Brasil Participaçãoes Ltda., as Purchaser, and Equinix South America Holdings LLC., as a Party for Limited Purposes and ALOG Soluções de Tecnologia em Informática S.A. as Intervening Consenting Party dated July 18, 2014.
10-Q
9/30/2014
10.67
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date/
Period End Date Exhibit Filed
Herewith
10.19
Share Purchase Agreement with Digital Realty Trust, L.P., relating to the sale and purchase of shares in TelecityGroup UK LON Limited, Telecity Netherlands AMS01 AMS04 BV, Equinix Real Estate (TCY AMS04) B.V. and TelecityGroup Germany Fra2 GmbH, dated May 14, 2016.
10-Q
6/30/2016
10.55
10.20
Credit Agreement dated as of December 12, 2017 among Equinix, Inc. as Borrower, The Guarantors Parties (defined therein), Bank of America, N.A., as Administrative Agent, Lender and L/C issuer, Barclays Bank PLS, Goldman Sachs Bank USA, HSBC Securities (USA) Inc. ING Capital LLC, TD Securities (USA) LLC, and Wells Fargo Bank, National Association as Co-Documentation Agents, the Other Lenders Party (defined therein) and Bank of America, N.A., Citibank, N.A., JPMorgan Chase Bank, N.A., MUFG, and RBC Capital Markets as Joint Lead Arrangers and Joint Book Runners.
10-K 12/31/2017 10.40
10.21
Consent and First Amendment to Credit Agreement, dated as of June 28, 2018 by and among Equinix, Inc. as Borrower, the Guarantors (defined therein), the Lenders (as such term is defined in the Credit Agreement referred to therein), and BANK OF AMERICA, N.A., as Administrative Agent.
10-Q 8/8/2018 10.35
10.22
Second Amendment to Credit Agreement, dated as of July 26, 2018, by and between Equinix, Inc. as Borrower, the financial institutions defined therein, MUFG Bank, Ltd., as Technical Agent and Bank of America, N.A. as Administrative Agent, under that certain Credit Agreement dated December 12, 2017.
10-Q 8/8/2018 10.36
10.23
Third Amendment to Credit Agreement, dated as of April 26, 2019, by and among Equinix, Inc., Delaware corporation ("Equinix" or the "Borrower"), each "Lender" (as such term is defined in the Credit Agreement referred to therein) party hereto, and BANK OF AMERICA, N.A., as Administrative Agent, under that certain Credit Agreement dated December 12, 2017.
10-Q 6/30/2019 10.34
10.24
Credit Agreement dated April 15, 2020, by and among Equinix, as borrower, a syndicate of financial institutions, as lenders, MUFG Bank, Ltd.as administrative agent, and MUFG Union Bank, N.A., Sumitomo, Mitsui Banking Corporation, TD Securities (USA) LLC and Mizuho Bank, Ltd., as joint lead arrangers.
10-Q 6/30/2020 10.25
10.25**
Relocation Letter Agreement by and between Equinix, Inc. and Charles Meyers dated October 12, 2018.
10-K 2/22/2019 10.37
10.26**
Change in Control Severance Agreement between Equinix, Inc and Mike Campbell dated October 3, 2019.
10-Q
9/30/2019 10.25
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date/
Period End Date Exhibit Filed
Herewith
10.27**
Change in Control Severance Agreement between Equinix, Inc and Brandi Galvin Morandi dated October 3, 2019.
10-Q
9/30/2019
10.26
10.28**
Change in Control Severance Agreement between Equinix, Inc and Karl Strohmeyer dated October 3, 2019.
10-Q
9/30/2019
10.27
10.29**
Change in Control Severance Agreement between Equinix, Inc and Peter Van Camp dated October 3, 2019.
10-Q
9/30/2019
10.28
10.30**
Change in Control Severance Agreement between Equinix, Inc and Charles Meyers dated October 4, 2019.
10-Q
9/30/2019
10.29
10.31**
Change in Control Severance Agreement between Equinix, Inc and Keith Taylor dated October 3, 2019.
10-Q
9/30/2019
10.31
10.32**
Change in Control Severance Agreement between Equinix, Inc and Sara Baack dated October 3, 2019.
10-Q
9/30/2019
10.32
10.33**
Side Letter Agreement Regarding RSUs between Equinix, Inc. and Sara Baack dated October 3, 2019.
10-Q
9/30/2019
10.33
10.34**
Side Letter Agreement Regarding RSUs between Equinix, Inc. and Charles Meyers dated October 4, 2019.
10-Q
9/30/2019
10.34
10.35**
Side Letter Agreement Regarding RSUs between Equinix, Inc. and Keith Taylor dated October 3, 2019.
10-Q
9/30/2019
10.36
10.36**
Side Letter Agreement Regarding RSUs between Equinix, Inc. and Mike Campbell dated October 3, 2019.
10-Q
9/30/2019
10.37
10.37**
Side Letter Agreement Regarding RSUs between Equinix, Inc. and Brandi Galvin Morandi dated October 3, 2019.
10-Q
9/30/2019
10.38
10.38**
Side Letter Agreement Regarding RSUs between Equinix, Inc. and Karl Strohmeyer dated October 3, 2019.
10-Q
9/30/2019
10.39
10.39**
Side Letter Agreement Regarding RSUs between Equinix, Inc. and Peter Van Camp dated October 3, 2019.
10-Q
9/30/2019
10.40
21.1
Subsidiaries of Equinix, Inc.
X
23.1
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
X
31.1
Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date/
Period End Date Exhibit Filed
Herewith
32.1
Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2
Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
X
101.SCH Inline XBRL Taxonomy Extension Schema Document.
X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
X
104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X
** Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
(b)Exhibits.
See (a) (3) above.
(c)Financial Statement Schedule.
See (a) (2) above.