Equinix Annual Report 2020

[Pages:10]Equinix Annual Report 2020

Form 10-K (NASDAQ:EQIX)

Published: February 21st, 2020

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019 OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________ Commission file number 000-31293

______________________

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EQUINIX, INC.

(Exact name of registrant as specified in its charter)

Delaware (State of incorporation)

77-0487526 (IRS Employer Identification No.)

One Lagoon Drive, Redwood City, California 94065 (Address of principal executive offices, including ZIP code)

(650) 598-6000 (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, $0.001

Trading Symbol

EQIX

Name of each exchange on which registered

The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing

requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation S-T (? 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post

such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any

new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last business day of the registrant's most recently completed second fiscal quarter was approximately $42.8 billion. As of February 20, 2020, a total of 85,443,883 shares of the registrant's common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III ? Portions of the registrant's definitive proxy statement to be issued in conjunction with the registrant's 2020 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the registrant's fiscal year ended December 31, 2019. Except as expressly incorporated by reference, the registrant's proxy statement shall not be deemed to be a part of this report on Form 10-K.

TABLE OF CONTENTS

EQUINIX, INC. FORM 10-K

DECEMBER 31, 2019

Item

1. Business 1A. Risk Factors 1B. Unresolved Staff Comments 2. Properties 3. Legal Proceedings 4. Mine Safety Disclosure

PART I

PART II

5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 6. Selected Financial Data 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7A. Quantitative and Qualitative Disclosures About Market Risk 8. Financial Statements and Supplementary Data 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 9A. Controls and Procedures 9B. Other Information

PART III

10. Directors, Executive Officers and Corporate Governance 11. Executive Compensation 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 13. Certain Relationships and Related Transactions, and Director Independence 14. Principal Accounting Fees and Services

15. Exhibits, Financial Statement Schedules 16. Form 10-K Summary

Signatures Index to Exhibits

PART IV

Page No. 3 9 31 31 34 35

36 38 41 64 66 66 66 67

67 67 67 68 68

69 75 76 78

PART I

ITEM 1. Business

The words "Equinix", "we", "our", "ours", "us" and the "Company" refer to Equinix, Inc. All statements in this discussion that are not historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding Equinix's "expectations", "beliefs", "intentions", "strategies", "forecasts", "predictions", "plans" or the like. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Equinix cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the risk factors discussed in this Annual Report on Form 10-K. Equinix expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in Equinix's expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based.

Overview: Where Opportunity Connects

Equinix, Inc. connects enterprises and service providers directly to their customers and partners across the world's most interconnected data center and interconnection platform in the Americas, Asia-Pacific, and Europe, the Middle East and Africa ("EMEA"). Platform Equinix? combines a global footprint of state-of-the-art International Business ExchangeTM ("IBX?") data centers, 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 (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 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. 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.

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In 2019, Equinix entered into a joint venture in the form of a limited liability partnership with GIC Private Limited, Singapore's sovereign wealth fund ("GIC") (the "Joint Venture"), to develop and operate xScaleTM data centers in Europe to serve the needs of the growing hyperscale data center market, including the world's largest cloud service providers. xScale data centers are engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments and also offer access to Equinix's comprehensive suite of interconnection and edge services. These services will tie into the hyperscale companies' existing access points at Equinix, thereby increasing the speed of connectivity to their existing and future enterprise customers. This will enable hyperscale companies to consolidate core and access point deployments into one global provider to streamline and simplify their rapid growth.

In 2019, Equinix opened ten new data centers, invested in two xScale data centers, added capacity in 22 markets and expanded the total number of IBX and xScale data center facilities to 210, including our acquisition of three data centers in Mexico from Axtel S.A.B. de C.V. in early 2020. 2019 and early 2020 highlights include:

? Equinix formed the Joint Venture with GIC to develop and operate xScale data centers in Europe. ? Data center expansions included five new IBX sites in the following metros: Seoul, Singapore, Sydney, Tokyo and Helsinki, with an additional

new market entry announced in Muscat, Oman. ? Equinix closed transactions that will broaden its Europe and Latin America markets:

? One data center in Amsterdam acquired from Switch Datacenters (closed in April 2019), bringing Equinix's Amsterdam footprint to a total of eight Amsterdam facilities to serve European markets.

? Three data centers in Mexico acquired from Axtel S.A.B. de C.V. on January 8, 2020, bringing Equinix's Latin America footprint to ten data centers.

? Equinix announced an agreement to acquire leading bare metal automation company Packet Host, Inc. on January 14, 2020. After the closing of this acquisition, which is expected in 2020, bare metal as a service will allow enterprises and services providers to avoid the capital expenditures and operational requirements of owning hardware by accessing bare metal servers on demand in Equinix's global data centers.

In support of our growing business, we've added technology leaders to the Equinix team. In September 2019, Dr. Justin Dustzadeh joined us as Chief Technology Officer and, in October 2019 and January 2020, respectively, we expanded the expertise of the Equinix Board of Directors (now 11 members) with the appointment of Sandra Rivera of Intel Corporation and Adaire Fox-Martin of SAP.

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. At the same time, macroeconomic, technology and regulatory trends are 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 transformation: Real-time interactions between people, things, locations, clouds and data require proximity and direct connections.

? Urbanization: This is creating large, global population centers which require 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 distributing applications, data, content and networking to serve these locations cost effective.

? Cybersecurity: A cybersecurity breach is one of the most serious risks facing companies today, and many of the most serious breaches actually occur via a penetration of a company's business partners' networks. To protect against this, businesses need to distribute their security controls out to the edge where most traffic exchange is happening.

? Data compliance: To meet new regulations, companies need to deploy 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 industry exchange point and then connect to it directly. In the aggregate, these form a business ecosystem. These ecosystems are expanding in depth and number.

These trends are accelerating the need for a secure, compliant and responsive global business platform that enables the private interconnection of people, locations, clouds, data and things in multiple locations to deliver real-time interactions and data exchange 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 exchanged 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 third annual Global Interconnection Index ("GXI"), a market study published by Equinix, is anticipated to grow by 51% between 2018 and 2022, reaching 13,300+ terabits per second, which is double the projected peak of global internet traffic and could be more than 13 times the volume of global internet traffic, or 53 zettabytes annually.

Worldwide Interconnection Bandwidth Capacity Growth (2018 - 2022) in Terabits per Second (Tbps)

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Source: GXI Volume 3

Equinix Business Proposition: Reach Everywhere, Connect Everyone, Integrate Everything In 2019, we continued to build new data center, interconnection and edge services capabilities that will further our vision for the future of Platform

Equinix, a future that will provide our customers with the ability to reach everywhere, connect with everyone and integrate everything on their digital transformation journey. Equinix offers a comprehensive, integrated suite of data center, interconnection and edge services and products to more than 9,700 enterprise and service provider customers worldwide.

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The following are the leading revenue generating product and other offerings that collectively make up Platform Equinix:

Data Centers 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 - The more than 200 IBX vendor-neutral colocation data centers worldwide provide our customers with secure, reliable and robust environments 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.

? xScale Data Centers - xScale 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 xScale 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.

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.

? Cross Connects - Provide a point-to-point cable link between two customers in the same IBX data center. They deliver fast, convenient, affordable and highly reliable connectivity and data exchange with business partners and service providers within the Equinix ecosystem.

? Equinix Cloud Exchange FabricTM ("ECX FabricTM") - Directly, securely and dynamically connects distributed infrastructure and ecosystems across Equinix data centers globally using software-defined interconnection. Customers can establish data center-to-data center network connections on demand between any two ECX Fabric locations within a metro or globally and move information within a dense digital and business ecosystem.

? Equinix Internet ExchangeTM - 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.

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 quickly, 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 SmartKeyTM - 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 cloud encryption key management.

? Bare Metal - Equinix's announced acquisition of Packet on January 14, 2020, once completed, and our own organic bare metal service also in development, are expected to help enterprises more seamlessly deploy hybrid multicloud architectures on Platform Equinix. Enterprises and services providers will be able to avoid the capital expenditures and operational requirements of owning hardware by accessing bare metal servers on demand in Equinix's global data centers.

Enablement Offerings

Equinix offers a number of remote support and professional services 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 Infrastructure Services - Combines Equinix data center expertise with the skills and scale of certified technology partners worldwide. Our colocation expertise helps customers achieve an efficient data center deployment design that optimizes space and enables easy service access.

? Equinix Professional Services - Helps enterprises and service providers design and deploy IT solutions. Our global teams of network transformation, hybrid multicloud and digital edge solution experts help companies design and manage technology solutions which are deployed on our global platform.

Competition

While a large number of enterprises and service providers, such as hyperscale cloud service providers, own their own data centers, many others outsource some or all of their IT housing and interconnection requirements in third party facilities, such as those operated by Equinix.

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.

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 and Partners

Equinix 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 2019. As of December 31, 2019, we had more than 9,700 customers worldwide. No one customer made up 10% or more of our total business revenues in the year ended December 31, 2019.

The following companies represent some of our leading customers and partners:

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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.

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