Katrina Rymill - Vice President-Investor Relations Stephen M. Smith - Chief Executive Officer & President Keith D.

Taylor - Chief Financial Officer Charles J. Meyers - Chief Operating Officer

Jonathan Schildkraut - Evercore Group LLC Paul B. Morgan - Canaccord Genuity, Inc.

Michael I. Rollins - Citigroup Global Markets, Inc.

(Broker) David William Barden - Bank of America Merrill Lynch Jonathan Atkin - RBC Capital Markets LLC Simon Flannery - Morgan Stanley & Co. LLC Mike L.

McCormack - Jefferies LLC Colby Synesael - Cowen & Co. LLC

Good afternoon and welcome to today's conference call. Before we get started, I'd like to remind everyone that some of the statements we'll be making today are forward-looking in nature and involve risks and uncertainties.

Actual results may vary significantly from those statements and may be affected by the risks we identified in today's press release and those identified in our filings with the SEC, including our most recent Form 10-Q filed on October 30, 2015. Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call.

In addition, in light of Regulation Fair Disclosure, it's Equinix's policy not to comment on its financial guidance during the quarter, unless it is done through an explicit public disclosure. In addition, we'll provide non-GAAP measures on today's conference call.

We'll provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today's press release on the Equinix's Investor Relations page at www.equinix.com. We would also like to remind you that we post important information about Equinix on the IR page of our website.

We encourage you to check our website regularly for the most current available information. With us today are Steve Smith, Equinix's CEO and President; Keith Taylor, Chief Financial Officer; and Charles Meyers, Chief Operating Officer.

Following our prepared remarks, we'll be taking questions from sell-side analysts. In the interest of wrapping this call within an hour, we'd like to ask these analysts to limit any follow-on questions to just one.

At this time, I'll turn the call over to Steve.

Okay. Thank you, Katrina.

Good afternoon and welcome to our fourth quarter earnings call. 2015 was a transformational year for Equinix.

We delivered accelerated growth, expanded our global platform with two strategic acquisitions, completed our first year operating as a REIT, and established ourselves as a foundation for the cloud ecosystem that continues to drive IT transformation. Our strong financial performance reflects our position as the global leader in retail colocation and interconnection, truly serving as the place where opportunity connects for leading networks, clouds, content providers and enterprises.

We continue to extend our market-leading network density attracting wireline, wireless and increasingly subsea carriers who are using Platform Equinix to efficiently interconnect and serve their end customers. Our data centers act as a powerful commerce center for the largest service providers to reach their customers and are positioning us to capture the enterprise as they implement next-generation IT architectures.

We will further leverage our leadership position through the integration of Telecity and Bit-isle and scale the business to drive even more value for our combined customers. Before I turn to the quarterly results, I'd like to reflect on a few of the meaningful milestones we achieved in 2015, starting with financial performance on slide three.

With another year of record bookings activity in 2015, we generated over $2.7 billion of revenue, up 16% year-over-year on a normalized and constant currency basis. We delivered over $1.27 billion of adjusted EBITDA or a 47% margin and over 100 basis point improvement over last year while continuing to invest in the business.

This drove AFFO growth of 25% on a normalized and constant currency basis, exceeding our prior guidance after adjusting for the Telecity transaction-related FX loss. Second, it was a phenomenal year for our interconnection solutions.

Interconnection revenue continues to outpace overall revenue, growing 20% year-over-year on a constant currency organic basis. That's over 171,000 cross-connects, 3,300 ports on our Internet Exchange, and dramatic growth on our Cloud Exchange we are benefiting from the strong secular trends that are driving businesses to become increasingly interconnected.

Third, we significantly expanded our global platform, both organically and inorganically. Equinix completed 20 major IBX expansions in 2015, creating the needed capacity to support strong fill rates in high demand markets.

Overall, our development activity continues to generate highly attractive returns and healthy yield on our sizeable base of stabilized assets. With the Telecity and Bit-isle acquisitions, we further expanded Platform Equinix, which now spans 145 data centers across 40 metros in 21 countries.

Combined, Equinix now operates over 14 million gross square feet of colocation space, enhancing our position as the largest retail data center footprint in the world. Fourth, we continue to establish Equinix as the home of the interconnected cloud, which in turn, is attracting enterprises that are adopting hybrid and multi-cloud as their IT architecture of choice.

Key cloud customers including Amazon, Cisco, IBM, Microsoft, and Oracle to mention a few, are all using Equinix to scale their infrastructure globally and are now deployed across an average of 17 markets. And finally, we successfully completed our first year operating as a REIT and returned $394 million back to our shareholders.

We were included in the S&P 500, the MSCI RMZ and the FTSE NAREIT indices, a reflection of our position as both a technology leader and as the largest data center REIT. We continue to strengthen our balance sheet raising $2.6 billion in debt and equity in the fourth quarter fortifying our capital structure while providing a strong liquidity position.

Now turning to the quarter, we had a great finish to the year delivering record bookings in the fourth quarter with particular strength in the Americas and robust metrics including our highest ever interconnection activity, and very firm yield per cabinet. We continue to take market share, capturing outsized portion of the new infrastructure deployments from both clouds and enterprises.

The quality and scale of our wins continues to increase and we are proud that over 140 of the Fortune 500 are Equinix customers. Our geographic reach remains critical to customers with over 55% of our revenue coming from customers deployed globally across all three regions, and over 84% from customers deployed across multiple metros.

Our global platform is increasingly defensible, durable and hard to replicate with regards to reaching capacity as well as performance. With the addition of the Telecity and Bit-isle acquisitions, we added 40 data centers and 1,100 people across Europe and Japan.

This scale positions us well to build market leadership, increase capacity, enhance cloud and network density and grow customer ecosystems for years to come. With Telecity, we've added seven new metro markets to our portfolio creating a large opportunity for current Equinix customers to expand further north and east across EMEA.

Additionally, there are over 500 customers of former Telecity that have business presence in another country where Platform Equinix resides, creating a potential for powerful cross-selling opportunities as we integrate. We are confident both these transactions will drive significant long-term value creation for our customers and our partners.

Now let me cover quarterly highlights from our industry verticals, starting with the network vertical. This customer base customer continues to grow as we enhance ecosystems in which networks and mobile providers can participate and grow their businesses.

Strong global bandwidth demand is driving a resurgence of subsea cable projects, creating new opportunities for Equinix. These service providers are accelerating returns by terminating cables directly into our IBXs where they can further benefit by gaining access to key business ecosystems.

In the content and digital media vertical, content customers are expanding across our global platform to meet the continued explosion of consumer demand for digital content and applications. The advertising sub segment remains the fastest growth driver in this vertical as digital advertising takes share from traditional channels.

Customers expanding this quarter include AppNexus which optimizes programmatic digital advertising; AudienceScience, a global advertising technology and services company; and Créteil, a French company specializing in performance marketing. Turning to the financial services vertical, in addition to our strong electronic trading ecosystem, we continue to diversify across sub-segments including insurance, wealth management, and banking which contributed to record bookings for the quarter.

New wins include a top 20 private wealth management firm initiating a multi-cloud strategy to speed to market. A Fortune 500 asset management company that is connecting to clouds over our Equinix Cloud Exchange and a partner-led deal with a top 10 insurance firm based in Europe.

In cloud and IT services, the cloud ecosystem delivered strong growth this quarter driven by key infrastructure-as-a-service providers such as AWS and Microsoft, as well as momentum with Software-as-a-Service providers who represent the fastest growing sub-segment of this vertical. SaaS customer expansions include ServiceNow, an IT service management provider; and Shape Security, an advanced application defense provider that offer security services for Cloud Exchange clients.

We continue to see momentum on our Cloud Exchange and have over 300 enterprises, clouds, IT service providers, and networks interconnecting using this solution. Turning to the enterprise.

The enterprise vertical delivered strong bookings as businesses seek to re-architect IT to adapt to rapidly changing business requirements. By leveraging an interconnection-oriented architecture, enterprises can address multiple IT challenges and solve for the cost, scaling and performance needs of today's digital world.

For the second quarter, enterprise was the largest source of new customer adds with particular traction in manufacturing and professional services. New wins include Polo Ralph Laurent, a premium clothing and lifestyle brand; Granite Construction, an S&P 500 civil general contractor and construction material producer; and Oriflame Cosmetics, a Swedish cosmetic manufacturer.

Over 300 customers have deployed our Performance Hub solution, which is an extremely attractive entry point for enterprise customers who seek to optimize network architectures, and also access the cloud and drive application performance, and we are already enjoying significant upsell and cross-sell traction with these customers. So let me stop here and turn it over to Keith to cover some more specifics for the quarter.

Thanks, Steve, and good afternoon to everyone on the call. Let me start by saying from so many points of view, Q4 was the best quarter we have experienced to date.

The momentum in our organic business combined with Telecity and Bit-isle sets us up nicely for 2016, as well as our initial look-through into 2017. And with my prepared remarks I'll first review our full year 2015 results.

Then I'll provide some commentary on key metrics for 2016 which have a number of moving parts. Finally I'll wrap up with some high level comments on the fourth quarter.

So, starting with revenues. We reported revenues of over $2.72 billion for 2015, a 16% year-over-year normalized and constant currency growth rate.

A clear demonstration of our ability to drive outsized growth as we benefit from the scale of our global platform, as well as enjoy record non-recurring revenue activity. And we believe this momentum will continue into 2016.

We expect to deliver normalized and constant currency growth of greater than 13% for our organic business and over $540 million of revenues from Telecity and Bit-isle at current exchange rates. We believe the Telecity business, net of the expected divestitures, will grow revenues between 8% and 9% in 2016, while Bit-isle's revenues will remain essentially flat year-over-year consistent with our expectations while we look to optimize this business over the next 24 months.

In 2015, we improved our organic adjusted EBITDA margin by over 100 basis points to 46.7%. And as we continue to scale the business, we expect to deliver another 100 basis points of improvement on the organic business in 2016 as we maintain discipline and focus on our spending initiatives.

Another key driver to our continued margin improvement is the healthy price yield derived from a disciplined pricing initiative and strong interconnection activity. For 2016, we expect our consolidated adjusted EBITDA margins to be greater than 47.3%, excluding integration costs, or 45.6% on an as-reported basis.

Our 2015 pro forma AFFO, which excludes the impact of the Telecity FX losses and the integration cost, was $905 million significantly higher than expected for the year. Looking forward on a normalized and constant currency basis, 2016 AFFO is expected to grow greater than 23% over the prior year.

With respect to the Telecity and Bit-isle acquisitions, we're very excited by these acquisitions and the ability to strengthen our market position. That said, I want to highlight a few areas recognizing we'll be incurring some costs that won't be part of the ongoing business, thereby allowing you to better understand the combined business on a go-forward basis.

So let me start with FX. We elected to hedge the cash portion of the Telecity purchase price.

In effect, we lock-in the dollar value of the sizable deal. This resulted in an FX loss of $61 million in 2015, with $49 million of the loss being recognized in Q4.

These losses impacted our AFFO metric for both Q3 and Q4, and for the year. For Q1, as we completed the purchase of the Telecity acquisition, we experience an incremental $50 million loss in the quarter.

Again, this loss will impact our Q1 and 2016 AFFO metric. Finally, it's important to note that the offset of the Telecity FX losses is a corresponding reduction to the purchase price of Telecity.

For both Telecity and Bit-isle, we've begun the integration process to combine the teams, the organizations, and the systems together. We expect to incur $58 million in integration cost in 2016 as anticipated in our investment models with an approximate $20 million of additional integration costs being spent in 2017.

These costs support system to work, of significance, employees cost including severance and retention, and substantial organizational restructuring in support of our REIT and other tax initiatives. We expect incremental revenue, cost and CapEx synergies from the acquisitions from Telecity and Bit-isle as we integrate these businesses.

Our current revenue guidance contemplates modest revenue synergy assumptions this year, which we expect to ramp up over time as both Equinix and Telecity customers leverage the expanded footprint, service portfolio, and rich ecosystems of the combined company. As we progress with our integration efforts, we also expect to achieve $30 million in annual cost savings with about 50% of these savings being realized before the end of this year and the rest coming in 2017.

For CapEx synergies, the available Bit-isle inventory has positioned us well in the Tokyo market, allowing us to defer significant capital spend to other projects, while the Telecity capacity in our overlapping markets allows us to free up capital to be deployed in other markets both in Europe and across the platform. And as previously announced, we need to divest eight assets from the combined Equinix-Telecity EMEA business with a target divestiture date of mid-2016.

In light of the current momentum in the business and the size of the market opportunity in front of us, it is our intention to reinvest the divestiture proceeds back into the business. We currently believe this is the highest and best use of our capital.

We believe this allows us to maximize both our short-term and longer-term shareholder value objectives while providing us the strategic and operational flexibility we've historically enjoyed, particularly during the volatile times. And these proceeds along with capital raised in November should allow us to self-fund the business for the foreseeable future despite our increased expansion activities and anticipated growing cash dividend.

From an AFFO perspective, the value of these acquisitions and our AFFO generating potential is better than our original assumptions. With a view towards 2017, we expect these acquisitions on a combined basis to be accretive to Equinix's AFFO per share for the 2017 reporting year excluding the integration costs.

So turning to the fourth quarter, it was another terrific quarter at Equinix. Our strategy continues to deliver better than expected results across the company.

At the global level, we had record gross and net bookings with particular strength in the financial services and enterprise verticals. Our interconnection metrics were again outstanding as we added 7,500 cross connects and 162 exchange for this quarter.

Our MRR per cab on FX-neutral basis was very firm and we remain well-positioned across each of our operating regions. As depicted on slide four, global Q4 revenues were $730.5 million; our 52nd consecutive quarter of top-line revenue growth, up 4% quarter-over-quarter and 17% of the same quarter last year on a normalized and constant currency basis.

Our as-reported revenues include $21.6 million of Bit-isle revenue for November and December, consistent with our expectations and the investment model. Q4 organic revenues net of our FX hedges absorbs an $8 million negative currency impact when compared to the average FX rates used last quarter, and a $4 million negative currency impact when compared to our FX guidance rates.

Currency volatility against the majority of our key operating currencies continue to cause significant FX headwinds. For 2016, the strengthening in U.S.

dollar increased a $51 million FX headwind against revenues and a $29 million headwind against adjusted EBITDA for our organic business when compared to the average FX rates used in 2015. For Europe, we've hedged over 85% of our Equinix organic business.

Given the growth of the international businesses including Telecity and Bit-isle acquisitions, we expect our revenue mix to shift such that greater than 50% of our revenues will be generated from outside the U.S. Global adjusted EBITDA was $333.1 million, up 4% over the prior quarter and 20% over the same quarter last year on a normalized and constant currency basis.

Our normalized adjusted EBITDA margin was 46.4% and includes $2.8 million in integration costs. Our Q4 organic adjusted EBITDA performance net of our FX hedges reflects a negative $5.4 million currency impact when compared to the average FX rates last quarter, and a $1.2 million negative impact when compared to our guidance rates.

Global AFFO was $178 million. Excluding the Telecity foreign currency loss and acquisition related cost, AFFO on a normalized and constant currency basis increased 4% over the prior quarter, above the top end of our guidance range by $13 million largely due to lower than expected cash taxes.

And finally moving to churn. Global MRR churn for Q4 was 2.3% consistent with our prior guidance and weighted towards the end of the quarter.

For 2016, we expect our quarterly MRR churn to remain in our targeted 2% to 2.5% quarterly range. Now, I'd like to provide some highlights on the regions whose full results were covered in slides five to seven.

All three regions delivered better than expected revenues with EMEA and Asia Pacific showing normalizing constant currency growth of 20% and 25% respectively, while the Americas region produced growth of 13% on its much larger base. The Americas region had a great quarter delivering record bookings driven by the financial and enterprise verticals, very firm yield per cabinet, and advanced interconnection quarter of all time.

EMEA delivered another strong quarter of bookings with particular strength in our French and German markets, while Asia Pacific continued its rapid growth as customers deploy across the region with gross bookings driven by cloud and IT services, enterprise, and network verticals. Interconnection revenues continue to outpace overall growth of the business with the Americas, EMEA, and Asia Pacific interconnection revenues now at 22%, 10%, and 13% respectively over the recurring revenues.

And now, looking to balance sheet, please refer to slide eight. Unrestricted cash and investments increased this quarter to $2.2 billion due to the successful financings in November, while our restricted cash balances totaled $490 million, largely due to the escrow funds related to the Telecity deal.

Our year-end net debt leverage ratio was 3.2 times our Q4 annualized adjusted EBITDA, although it steps up to greater than 4 times after funding the cash portion of the Telecity transaction. Given the favorable cash flow attributes of the business model, we expect the Equinix calculated leverage ratio to return to the higher end of our targeted 3 times to 4 times adjusted EBITDA over the next 12 months to 18 months.

Now, switching to AFFO and dividends on slide nine. For 2016, we expect our as-reported AFFO to be greater than $970 million, a 17% year-over-year increase.

On a normalized and constant currency basis, AFFO would be greater than $1.078 billion, or a 23% increase over the prior year. Turning to dividends.

Today, we announced our Q1 dividend of $1.75 a share, a 3.6% increase over the prior cash dividend per share. For 2016, our projected total cash dividends to be paid will increase approximately $500 million, a 27% increase over the prior year.

Our normalized AFFO payout ratio will approximate 52% in 2016. Our estimated share count for 2016 approximate 70.5 million shares including 6.9 million shares issued to Telecity shareholders, and 1.96 million shares expected to be issued in June 2016 to our convertible debt holders.

We continue to believe that both organic and inorganic growth will be the primary ingredient for a steadily growing cash dividend, and we've maintained the flexibility to move additional entities from the taxable restructure to the qualified restructure over time. Now, looking at capital expenditures, please refer to slide 10.

For the quarter, our capital expenditures were $281 million including recurring CapEx of $45 million, slightly higher than guidance due to the timing of cash payments to our contractors. We now have 14 announced expansion projects underway.

For 2016, we expect 95% of expansion capital to be allocated to campus or existing market builds and 5% for new market development. Given the strong performance in our key markets, we expect to move forward with additional expansion phases in Ashburn, Frankfort, Hong Kong, Silicon Valley, and a new flagship build in the Amsterdam Science Park, an interconnection hub.

Also given our high utilization rate of 81% and increasing, as well as strong development returns, we expect 2016 CapEx to range between $900 million and $1 billion, which contemplates several new first-phase IBX build on our core Equinox owned campuses, including Ashburn and Silicon Valley, as well as a number of non-U.S. campuses.

And finally, we've provided you a number of slides to bridge the normalized 2015 performance to our 2016 guidance, including slides for revenue and adjusted EBITDA. Please refer to slides 13 to 17.

These slides also include the contributions from Telecity and Bit-isle acquisitions. Steve?

Okay. Thanks, Keith.

Let me now cover our 2016 strategy on slide 12. Our strategic priorities remains centered on driving growth by pressing our competitive advantage and investing to capture significant opportunities such as the cloud-enabled enterprise.

We will allocate capital towards these high-value opportunities and internal strength in our economic model. In the near term, we will focus our energy on successfully integrating Telecity and Bit-isle and growing our market leadership globally.

Organically our efforts will be focused on capturing the enterprise through a series of initiatives to build cloud density, create and deploy innovative product solutions, generate demand in targeted segments, and provide professional services focused on enabling the adoption of hybrid and multi-cloud. We will also continue to ramp our channel program to enhance our reach into the enterprise through agents, resellers, systems integrators and key platform partners.

Over the longer term, interconnection will continue to be the essence of our advantage, and Equinix is well-positioned to become the intersection point between the Internet of Things, clouds, networks and the enterprises. We are making meaningful investments to foster new ecosystems to capture this opportunity.

And we'll continue to invest in scaling our systems and processes and evolving our capabilities in response to these customer needs. Based on what we see in the market and the steps we are taking at Equinix to capitalize on these opportunities, I continue to be very optimistic about our future.

And the last on slide 18, which summarizes our Q1 and full-year 2016 guidance including FX impacts. Let me cover a few thoughts on our 2016 outlook.

First, we continue to deliver another solid year of growth. For the full year of 2016, we expect revenues to be greater than $3.55 billion, a 30% growth on an as-reported basis, or a normalized and constant currency growth rate of greater than 13% year-over-year.

Second, our organic adjusted EBITDA margin continues to improve as we drive increased efficiency into the business and scale our operating model. For 2016, adjusted EBITDA is expected to be greater than $1.62 billion or 16% year-over-year growth on a normalized and constant currency basis.

This includes a 100-basis point adjusted EBITDA margin improvement for the Equinix Organic business. And the growth of our business is driving increased adjusted funds from operations, and ultimately, cash flow and dividends.

AFFO normalized for the Telecity transaction related FX loss is expected to be greater than $1.078 billion, a 23% growth year-over-year, demonstrating the health of the business model. And finally given our strong pipeline, firm yields and healthy returns, we continue to invest in our business and expect 2016 capital expenditures to range between $900 million and $1 billion for the year.

So in closing, the strength of our business is translating into solid revenue growth, firm yield and healthy margins, all of which combine to give us the financial fire power to continue to invest in our global platform and develop innovative solutions. Our fundamental growth continues to drive significant value creation for our shareholders, a reflection of the important role that we play in a rapidly evolving digital economy.

So let me stop here, and I'll turn it over to you, Sam, to open it up for questions.

Thank you for all the additional detail and taking the questions. I guess, Steve, if I could, I'd love to review a couple of the sort of big ticket items that you guys brought to the conversation last quarter, and see if we can get an update on them.

And I guess the three things that really stand out are; last quarter you talked about a second consecutive quarter of positive pricing actions; you talked about an accelerating TAM; and you talked about the beginning of the emergence of cloud-driven enterprise demand. And while you highlighted enterprise amongst the verticals that were strong, I'd certainly love to hear anything explicit as it applies to sort of, again, cloud-driven enterprise demand.

So just if you could sort of review us on those three points. Thanks.

Sure. Why don't I just start with a couple of comments, and Charles and Keith can chime in here.

Those are three good questions, Jonathan. The pricing actions continue to be favorable to us as we renew and move forward with existing customers that are extending in multiple markets with us.

So we're staying very disciplined with our activities and our actions and our deal reviews with our customers as they continue to grow into the global platform. And so that's showing up every quarter, and I would just tell you that's tied to the discipline of our deal reviews and how we manage that, and Charles can talk about that in a second because he sits on top of those.

The accelerating TAM, generally, is because we're prosecuting a dozen-plus other industry verticals that we refer to as the enterprise outside of our core five industry verticals that we've been focused on. And it goes to this hundreds of thousands of customers, prospects, I should say, that we are knocking on their door now via the channel or via the direct sales engine to talk to them about helping them enable them to get to the multi-cloud and get to the Hybrid Cloud environment.

So the cloud enterprise, the simple answer, the reason why we're a cloud enabling these data centers, is to replicate the network density that we achieved the first 16 years, 17 years of this company to make it easy for any CIO of an enterprise, to look inside these facilities and see that they can publically, privately move their traffic, certain applications that are mission critical, revenue facing, customer-focused applications that they can get them to the multi-cloud and get them to take advantage of the performance, the costs, and the IT transformation that's taking place. So we're seeing uplift across all three of these things generally because of the uptake in cloud.

And cloud is driving most of this. Charles, why don't you add a little bit of color here?

Yeah. Again, all three of these things continue – we continue positive pricing actions.

And as Steve said that's showing up in our yield continuing to be very firm across the board in terms of MRR per cab. The accelerating TAM is really absolutely linked to this enterprise phenomenon, and the building and the scaling of the cloud ecosystem both the cloud density, CSP side of that ecosystem, as well as the enterprise, and I think we've had – continue to have a number of big lighthouse wins.

And what I would tell you is that I think this is probably the eighth consecutive quarter that both cloud and enterprise has over indexed on a bookings basis relatively to their installed base. Meaning, that those who were continuing to see an evolution of the business, not because our mature ecosystems are waning, but rather because we're seeing an acceleration in the cloud ecosystem.

And this big addressable is really an artifact of people migrating to the cloud, adopting public cloud, using Equinix as a private access option to the public cloud, and really enabling – really selecting multi-cloud, Hybrid Cloud as the IT architecture of choice. And I think if you look at our core metrics, the business is really hitting on all cylinders against all three of those factors.

Great. I'll circle back.

Thanks, Jonathan.

Hi. Good afternoon.

Can you maybe just talk a little bit about the external growth opportunity that you're seeing? Obviously, there's a lot of chatter about the telco data center divestures out there.

And how you see your appetite for acquisitions, and whether you would consider different structures such as JVs and the like if the opportunity arises, and kind of how you might see that play out in 2016?

Guys, do you want me to start or do you want me...

Yeah. Go ahead.

Paul, this is Steve. Why don't I take that and let Keith and Charles add to what thoughts they may have here.

So, mostly all of you should be aware that publicly there are a couple of big telcos that are interested and trying to divest some assets, and these are both the big telcos that acquired cloud companies three years, four years, five years ago, and it includes those cloud data centers. It's public, they're positioning them, they're talking to several people.

We are one of them. And our position is there are certain assets in those portfolios that we would be interested in, obviously, where there's cloud network density and the power and location, but there's many of those assets that wouldn't make any sense for us.

So we're in the early stages, exploratory stages talking to these companies. Those are the two that are public.

There's other conversations going on. There's plenty of companies that are interested in getting out of the data center business.

So it's a very active market on top of the divestiture that Keith mentioned that we're doing in Europe. So there's a lot of activity, mostly pressured and driven by the big infrastructure-as-of-service companies who are going as fast as they are, AWS, Microsoft, Google, et cetera, and they're putting a lot of pressure on companies that decided to get into the infrastructure-as-of-service business, and now they're deciding to get out of it, and their data centers are going with it.

The telco is probably aimed – most of the cash that we collect on these will be aimed at, as you all know, aimed at spectrum and aimed at their mobile initiatives, and so it makes sense why they're looking at these. But as I said, there are specific assets that would make sense to us, but it's very early days in the dialog.

Charles, I don't know what else you'd add, you're in the middle of...

Well, I guess, I think you covered most of it. The only one point you've talked about in there, Paul, that might be worth touching on is whether we would consider JVs or other creative commercial structures.

I would say that, I think to the extent that there were structures that would allow us to potentially gain access to the assets that we see as most accretive to our strategy, and on point from a capital allocation standpoint for us, we would entertain those. But I think there are only a very select set of assets that really support our interconnection-rich ecosystem-based strategy, and so we would be focused on those, most likely.

And I think that to the extent we could be – there are other creative ways to get that to happen, we would consider those. But we also have a lot to say grace over right now in terms of getting the integrations done, and so we want to remain very focused on executing the business.

The only thing I'd add, Paul – this is Steve, just one last comment is, we'll remain proactive but highly selective in any potential M&A for this type of discussion. And as Charles said, it would have to pass through the filters.

It would extend our global platform. It would help enhance our interconnection or our network density.

It would help us capture the cloud enterprise discussion that we're having. If it passes those filters, we're going to take a close look at it.

Great. I mean, in Telecity's case, obviously, there's some non-core assets that you're planning to divest.

But I guess, in this case would it be fair to say that just because of the scale of what you would classify as non-core, that taking on major portfolios where a majority or a big chunk of the assets are, have to be pegged for sale is not kind of what you're looking for?

Paul, what I'd like to first say is that, unfortunately, the assets that we're selling they're not non-core. They're effectively mandated through our work with the European regulatory authority.

Clearly, to us, we would love to keep all of the assets in our portfolio. But that all said, it goes back to what Charles and Steve alluded to.

To the extent that we can acquire assets that are accretive to our overall strategy and they create value for our shareholders, those acquisitions or joint ventures, we absolutely will pursue them. But we are very much focused on, as Steve alluded to, driving investment decisions that support our cloud-enabled strategy, extend our global reach, and enhance our interconnection activities.

Great. Thanks.

Thanks. Just wondering if you'd give us a bit more of a look into the integration process for the two acquisitions that you've completed, and what are the major milestones that investors should be watching over.

Thanks.

I think we're going to have, Michael, Charles and I will take this one. Let me first start with Bit-isle because I think that's an important one, then Charles perhaps, you can take the Telecity one.

I think what's really important to understand about Bit-isle, as we said in our prepared remarks, revenues are essentially flat quarter-over-quarter. And I want certain investors to realize, certainly from a margin perspective, Bit-isle is dilutive to our margins today.

It is very clear to us given the inventory capacity they have in the Tokyo market specifically. This was an asset that we bought for sub-10 multiple to EBITDA.

We believe upon filling up our assets, we're going to be able to enjoy the ability to fill up their assets over a period of time, while at the same time assessing, if you will, the strategic landscape of the number of operating units that Bit-isle had. And so as a company, we fully intend over a reasonable period of time, it will not be over an 18-month or 24-month period.

But probably over the next three years to four years that we would be able to capture all the value associated with the Bit-isle acquisition, fill up their assets and get their margins up to, basically, where our Asia Pacific business is running today, which is in the 45% to 50% EBITDA margin basis. But we're being very disciplined about this acquisition.

Culturally, it's a meaningful acquisition for us, and we're very sensitive to the environment that we're operating in. But we recognize in the investment decision, that over the short-term we weren't going to see any meaningful uplift in the business model and all this will be accretive from day one because we use debt to buy the asset.

We're going to be very methodical about how we drive value into that acquisition. Charles, you want to...?

Yeah. In terms of process, Mike, I guess I'd make a couple of comments.

I think that these are obviously both somewhat localized assets with Telecity being a strictly European platform and Bit-isle really being contained to Japan. So our local teams, both in EMEA region and in Japan, have primary responsibility for driving the integration efforts.

That said, we did take an individual from my team who really has been my right hand for quite a while when I ran the Americas business and into my role as the COO who really understands our business deeply, has a deep network across the company. We've actually exported him to – and he's living in Amsterdam now with his family and is leading the integration effort for Telecity and sort of providing overall oversight to our integration activities in terms of aligning them, keeping them consistent in approach, identifying and applying best practices, et cetera.

So that's kind of how we're going about it. In terms of the metrics, I think, to watch, we're obviously watching them very closely and we will update you as appropriate on these, but I think they are; number one, how are we doing on integrating the sales teams and driving the upsell and the cross-sell activities.

And that's one we're probably not going to give a ton of granular insight into publicly, but it's not something that we obviously are watching very, very closely and feel very optimistic about. Secondly, the synergy capture.

We talked about what we expect in terms of synergies and we're driving the teams to those expectations to meet or exceed our synergy estimates from an expense synergy standpoint. And then we're aligning our capital planning processes to make sure that we are gaining the CapEx synergies where we can and ensuring that we continue to have the capacity to respond to the fill rates in high demand markets.

And then lastly, I think, probably keeping an eye on our progress on the divestiture and again we'll report our progress to you on that as we have it.

Thanks very much.

Hey, guys. Thanks for taking the questions.

I guess I have to ask kind of banal financial question. I guess, Keith, I think the market expectation was for AFFO number becoming probably $50 million or $60 million north of the $1.078 billion you kind of called out here.

I feel like that probably had a lot to do with people not expecting a lot of the assets just being moved into discontinued ops right away. Could you put a AFFO number alongside the $77 million EBITDA number that you pulled out of the guidance for those divested assets so we could kind of look at a pro forma more normalized number?

And any other moving parts in that would be great. And then second, again, along the same lines just to make sure so we're all on the same page.

In terms of the share count we want to be using now, so we're looking at an AFFO per share. I think that there's a lot of numbers on, I think, slide 38 in terms of the share count.

And if you could kind of tell us – or page 35 – which one of these is the one we're supposed to be using to look at valuation? Thanks.

Okay certainly, David. I think first and foremost, I think the page 35 clearly depicts the share count activity that you should be expecting both as we sit here at the end of 12/31/2015 and then certainly what you should expect on a go-forward basis, and so the numbers that I shared with you, roughly 6.9 million shares will be issued to the Telecity shareholders and then 1.96 million shares issued to convertible debt holders.

That all said, I think there's somewhat of – there appears to be some clarity over what piece the denominator is, which is the share count. And so a lot of the discussion then really has to go into what's sitting up in the numerator.

I think the most important thing as you've said I've alluded to David, the divestiture is certainly, it's a meaningful divestiture. There's eight assets as you can see.

As reflected in our bridge, you can see there's roughly $70 million of revenue that's been taken out – sorry, probably $70 million of EBITDA that has been taken out of the analysis and that's on slide 14 for those who are following along. A lot of that value recognizing, that's coming right out of the AFFO base.

There's nothing that that gets dragged along with that recognizing that, of course, there'll be some movement in maybe how we recognize the revenue or the deferred installation, but overall, that's almost a complete drop-through to the AFFO line. And as a result, when we step back and look at how was the business performing relative to our expectations, I think it's really important to note two things.

Number one is Equinix proper is driving more margin into the business. Not only did we do it this year, but we're setting ourselves up to do it next year, being 2016.

So that 100 basis points of improvement is certainly being realized. You can see that Telecity is coming in with the RemainCo assets, they're going to have a margin profile that's higher than Equinix proper, and then we're also going to continue to work on synergies in the business.

So that's going to get continue to add value to the go-forward valuation. And then as I said earlier on, Bit-isle, the one piece we recognized that it is relatively flat over a period of time, but we recognized that as we continue to synergize the business as Charles alluded to, and drive up the occupancy of their assets, that's going to drive more value into the top-line.

So I think the culmination of those three assets, the organic with the two acquisitions and knowing that we are growing faster certainly than we anticipated in 2015 and we think we've got a great growth rate coming into 2016 at this stage of the game at greater than 13% organically, we're optimistic that the numerator will drive a lot of value into the per share calculations. All that to say is, we got to get through 2016.

2016 is no different than 2015 when we convert it to a REIT. 2016, there's a lot of noise in the system, not only with the reconversion and all the other work that we still are doing, but also taking the Telecity asset and moving them into the structure.

And so the costs to do that are substantial but the benefit that we will realize from the Telecity acquisition that Steve's talked about. There's revenues, there's cost, there's CapEx, but there's also a much more efficient tax structure that we will operate in under our structure, if you will.

And all of that benefit you're really going to feel it more in 2017 than you are in 2016. And so you got to look through 2016 to recognize 2017 I think sets itself up well.

The currency issues should be gone. The integration cost will really – we expect them to have really been dialed down and the operating business should be accelerating as we've alluded to.

Great. Okay.

Thanks, Keith.

Thanks. A couple of quick ones, I wondered if you could talk a little bit about the churn expectations.

You gave it on a company-wide basis and if there's any regional variation to keep in mind. And then on the interconnects, I just wondered if you could discuss, in a little bit more detail, the growth in interconnect and how much of that is coming from Cloud Exchange versus the conventional cross connect?

And then Steve, in response to Jonathan's questions you alluded to the indirect channel and then maybe your or Charles can maybe comment on the portion of new bookings that you had ascribed to are indirect which is a relatively recent initiative of yours? Thanks.

You want to start with churn, Keith?

So why don't I take churn and then I'll past it on to Charles and Steve. I think one thing about churn, let me break down between the organic business or Equinix proper.

I would tell you our churn levels are at or near their best in a long, long time. That holds true also for 2016.

As I mentioned, churn in Q4 was 2.3%. We telegraphed that it would be slightly higher, it was attributed to a single customer in our UK business that we knew that would be relocating to their own specialty-built data center.

That said, as we look forward we see churn to be, again, at one of its lowest levels, I think, we've ever experienced as a company organically. As you then go into the two other assets, the Telecity asset and the Bit-isle asset, Telecity is going to be really no different than what you see at the Equinix level.

Where you're going to see slightly increased churn is really in Bit-isle. And a lot of reasons for – when you look at how Bit-isle did in 2014 relative to 2015 and what we're guiding to 2016, there's a number of factors.

Number one, they've got non-recurring activities that will not repeat themselves. They have an operating unit that has – where they build solar plants, and they've sold off some of those assets.

That was sitting in their 2014 results. It's not in 2015.

Equally so, they've suffered some substantial churn. They have done exactly what we choose not to do, which is effectively fill up a large portion of their inventory with some large customers.

And when those customers run into trouble, as you can appreciate, then there's a fairly meaningful churn event. That's what Bit-isle is suffering through not only in 2015, and that's why their value is so low, but also we're still going to feel some of that in 2016.

And so from my perspective, churn will be, I think, at a very strong level looking into 2016.

Yeah. And I'll hit the other parts.

I'll put a point on the churn and just say that, again, what we continue to see is just the discipline in the business and this commitment to the right customers, right applications, right assets continues to manifest itself, both in terms of the positive price actions, and correspondingly to the moderated churn levels. So I think it's absolutely a reflection of the strategy working as we would expect.

The other two topics were interconnection. I would say that interconnection obviously an incredibly strong quarter with 7,500 cross connection aggregate.

We track that at a very detailed level vertical, essentially on the from and to by every vertical. And every sell in that matrix is growing.

The fastest growing are the cloud-related, sort of the cloud ecosystem on a percentage basis, but the most – in absolute terms, the biggest contributor continues to be our mature network ecosystem. And the financial services ecosystem continues to contribute significantly, but on a percentage basis, cloud is over-indexing dramatically like 5X probably its installed base, and that's just a reflection of the early days of that and really starting to sort of take shape and scale as enterprises are adapting Hybrid Cloud.

I would also say a part of the driver in the network as on cross connect is these 300 customers that have adapted Performance Hub, many of whom are using that for WAN optimization strategies and therefore are driving significant cross connects to network providers. So that's a snapshot on interconnection.

And then lastly on channel, what I would tell you is that we, over the last couple of quarters, have seen a number of our lighthouse marquee deals in the enterprise come through partners. And I think that's a reflection of that many of those customers are finding that they need some combination of the infrastructure value delivered by Platform Equinix but desire a managed service element of that implementation and our partners are doing that very effectively.

And so, we won some very big deals as we referenced in the script from true partners with our enterprise lighthouse wins. And we are seeing in terms of allocation of the percentage of bookings coming through indirect, continue to grow steadily and we're really focusing on a set of high impact partners that we think will help us continue to drive that through 2016.

Thanks very much.

Great. Thanks very much.

You've talked a lot about the various regions and you really haven't brought up macro at all. We look at the market performance, we look at the headlines, and it really doesn't seem like – it's pretty tough out there particularly in some of the international markets.

So, are you seeing anything from your customers or are the secular trends still very healthy at this point? And perhaps you could just give us a little bit more color on the sale process.

I think you had said mid-year, what gives you confidence that it'll all be wrapped up by then. And are you likely to do one transaction or might this be multiple transactions?

Thanks.

Hey, Simon, this is Steve. I'll start out and then we'll triple team it here.

Okay.

In terms of the market's macro trends, I think we all saw IDC or Gartner tell us that the IT spend globally was slowing down at the end of last year. I think this goes back to what Charles said.

Because we're so focused on the type of application workload with our client base that is not considered discretionary and it's more mission-critical, even in volatile times, as Keith alluded to, we tend to perform better than the market because we are dealing with revenue, customer-facing, globally deployed type application workloads that are critical to run these businesses. So, because of our discipline and executing in that part of the application workload of our customer base, and that part of the – that's non-back office, non-server farm type workload, we tend to push right through this.

And the demand that we see from our customer base today is high, trying to figure out how to take advantage of the cloud computing model. And so our pipeline, if you were able to see into our pipeline, which you guys can't, you would see very good coverage ratios and you would see the strongest pipeline in the history of the company.

So the signals for us across all the regions emanate themselves in our pipeline and emanate themselves in our coverage ratios, and all I can tell you at this point is they are strong as they've ever been. And Charles I don't know what you would add to that.

Yeah. I guess just countering the macro IT spending environment, which is – I mean that environment is being impacted heavily by public cloud adoption and adoption of hybrid cloud, multi-cloud as the architecture of choice.

And so if you really look at the portion that we tend to play in and around, if you look at the growth of AWS, look at Microsoft's Azure revenues and their cloud participation, look at what Oracle is doing in terms of retooling their business into the cloud, those are all significant customers of ours. They're all scaling globally with us.

And then we are really leveraging that cloud density with that sort of core group, as well as a very long tail of SaaS to really attract the enterprise customer and seeing some momentum there. And it is an environment.

Although there's market volatility and pressure, I think, on CIOs to manage spending and reduce expense, et cetera, they're often coming to us as a way to achieve those means. And whether that's reducing network cost, adopting public cloud at an accelerated rate or implementing hybrid cloud and moving it out of their basement and avoiding spending that capital.

Those are all things that they can really use us for. So we feel well-positioned even though there's some choppiness in the overall macro environment.

That makes sense.

So, concluding your final question, Simon, was really about the timing of the asset divestiture in Europe. Clearly, there's an expectation as we worked alongside the EU regulators and Telecity, that we'd sell the assets over a certain period of time.

That timeframe would be in or around the midyear 2016. As Steve alluded to, we're very – well down the process, if you will, at selling the assets.

We have a number of interested buyers. And I think you just have to stay tuned, but we're very active and deep in the process right now and we're confident that we will conclude it before or near midyear.

Great. Thank you.

Thanks.

Hi, guys. Thanks.

Steve, maybe just a follow-up on the undersea piece, sounds like you guys are pretty excited about it. With respect to the sort of types of traffic and the government regulation, are you guys set up better to address that marketplace based upon the geographic locations of your data centers?

And then just secondly, maybe one for Keith, you identified some cost savings that are organic. Just trying to get a sense for a little more detail around where you're finding that.

Sure. Let me take the first piece, Mike.

There are a lot of new projects, mostly driven by the requirements to help support all this global cloud deployment that's going on around the world in the growth of international traffic. So there really hasn't been any new Transatlantic capacity been added in the last probably dozen years until one of the announcements that came late last year or middle of last year, Hibernia Express which went live at Equinix.

So there's a lot of focus out there, some private investment, partially funded by some of the big global – the global cloud providers. It's definitely being driven by cloud.

We're involved in many more conversations than we ever have in the future – or in the past, I should say. And the advancements in technology today is allowing these operators to bypass the traditional shore-based lending facilities and go all the way to terminating at a data center like Equinix.

So we're capturing that volume now. And there's been four to five public announcements that we've made of ones that we've participated in.

There's been a couple that had connected U.S., Japan, New York, London and so there's a whole bunch growing on now. We're probably involved in a dozen more projects today that are at different stages of assessment, development and construction.

So it is very active. It is driven by the cloud and by the bandwidth, amount of traffic around the world, and they can terminate these cables today very easily into data centers.

And so we're front and center on this topic.

Steve, how's the contract working. Are you directly dealing with undersea folks or is it the end user customers?

I think it's the undersea folks. Isn't it, Charles?

Yeah. Typically, the providers or a consortium of folks that are involved.

For the consortium, yeah.

Okay.

And then as it relates to basically the question of cost savings, I think what's most important to note Mike is, we're going in and cutting costs. What we're doing today is we're operating more efficiently.

And it's important to recognize over the last three to four years, we've made heavy investments across a number of different functional groups to scale the organization to be global, and one of the biggest investments we've made has been in our IT systems and platforms and the people that really continue to work very hard to make them run as efficiently as possible and then we build our processes and structures around them. That said, we've made those initial investments.

We've been investing in sale and sort of in customer-facing initiatives which, I would argue, is driving a lot of the value that we see today. We're also finding ways to reallocate our costs.

And part of our efforts today, not only as it related to 2015, but also as we look to 2016 is how do we run more efficiently and take resources that we're spending money in, run them more efficiently so we can put it back into the business differently. And in fact, there's roughly $24 million of costs that we reallocated in our organization to support our investments in 2016.

And so we feel very comfortable about that. But quite frankly, it's a work in progress.

We have to continue to lever off our systems, our processes and our people and that's something that you'll see in 2016, but you're also going to see us globalize as we bring in Telecity and we bring in Bit-isle over the next – through 2017, 2018 and 2019. We'll continue to make these investments that I would argue that can drive more value into the business.

Great. Thanks guys.

Great. I guess at the risk of Katrina not letting me back on the call again, I'm going to have three questions, but they're all modeling so hopefully you guys can bang out them pretty quickly.

The first one is on Telecity. I was curious what tax rate we should be thinking about for 2016?

My understanding is that they're still under the UK tax jurisdiction which is different than how you guys treat your European assets. And when is it that we might actually see Telecity shift from its current tax structure to that of the overall Equinix business?

The second one is on 2017. You mentioned that you thought that Telecity will be accretive to 2017 after integration cost.

You mentioned integration cost I think in 2017 will be $20 million. Will it be accretive even including those integration cost?

And then the third question is on Telecity and your FX hedge. I think you mentioned that you've hedged about 80% of your core business in Europe.

Do you plan on hedging any of the Telecity revenues at some point this year and perhaps how much would those be? Thanks.

Okay. Great questions, Colby.

I think first and foremost as it relates to the tax rate, probably a little bit premature for us to tell you what that's going to be, because part of the reason we're making such a substantial investment in integration cost in 2016 is to change the organizational structure to meet not only our REIT requirements but our commissionary requirements. And so suffice it to say, we feel that overall our global tax rate will continue to be in the 10% to 15% on a cash rate basis.

We as a company and certainly our European business pre-organically has a lower tax rate than that of our competitors and so we think we can benefit from that. So, stay tuned on that one.

Let us come back but there's a lot of work to deal with there. As it relates to Telecity on the FX side, I think it's important to note we have hedged 85% of the organic business.

We have yet to take a position on the Telecity business in Europe, primarily because their functional currency is not U.S. dollar.

Our functional currency in Europe is U.S. dollar.

And so the hedging strategies we would deploy are going to be different today, at least, for Equinix proper versus the Telecity assets. But suffice it to say, we're going to be looking very closely and trying not to destroy value with currency movement.

So again, stay tuned on that one and I'm sure I have numbers. The third one was...

Just 2017 accretion.

Yes. Pardon me.

The 2017 – yeah we – the combined business including integration is going to be accretive in 2017 relative to I'm not doing these transactions, so we're very – again we want you to look through 2016 to 2017. With those $20 million of costs, we will be accretive in 2017 on, if you want, a combined basis with their assets.

The one thing I certainly want to make – I'll leave you with is you have to recognize, by the time we start to go through the year and integrate these assets, as Charles alluded to, the assets are going to become fungible. And so whether we sell into a Telecity asset or a Bit-isle asset or an Equinix organic asset and how we move our people around, that's what we said.

We've got to look at it holistically in 2017, recognize there're going to be a lot of moving parts, there's going to be synergies, there's going to be integration costs. So holistically, I want you to walk away 2017 is an accretive year for us and we're very excited to work through this year, and over the next 10 months to get to where we need to be.

Great. Thank you.

Thank you. That concludes our Q4 call.

Thank you for joining us.