Equinix, Inc. (EQIX) Earnings Call Transcript & Summary

Okay. All right. We're going to go ahead and get started with our next session. We're very pleased to be joined by Equinix's Chief Accounting Officer, Simon Miller; as well as Katie Morgan from Investor Relations. Simon, Katie, welcome.

Thank you.

Thank you for having us.

So maybe just to start, if you could talk about some of the top priorities for Equinix in 2022?

Yes, sure. So not much has changed since our Analyst Day. We're looking at getting scale and leverage out of our go-to-market activities. We're looking to double and triple down on xScale, continue to invest behind our digital services pursuit and then really investing in a healthy foundation, which is things like diversity and inclusion training around the company, well-being programs for employee base as well in a post-COVID world.

Okay. I think 2021 was sort of hallmarked by really, really strong customer demand, very strong record bookings. What are you seeing in terms of the demand backdrop across your 3 operating regions?

Yes, yes. So oddly, we've had a lot of discussions today about similar things. When there's been points of inclination in the market, more macro trends going on, Equinix seems to perform pretty well on the other side of that. So if you look back at like 2001, 2008 -- 2007 and 2008, I think what we're seeing is maybe an unfair share of advantage in light of some interesting things going on, and it's showing up on the demand side for us. Whether it's COVID, I would say, advancing the drive of the enterprise to a digital service environment like they're getting pushed faster to absorb cloud resources. And we end up getting some collateral benefit out of that because we're part that dynamic solution for any CIO or any enterprise going on their digital transformation journey.

And so would you say -- I just want to follow up on that. Would you say, if we do sort of head into more of a macro downturn, how do I not open up the can of worms of recession? I'm no macroeconomist, but in theory...

Yes, don't say the R word.

Exactly. In theory, would that maybe be a little bit of a silver lining or sort of net benefit for you guys as enterprises think about maybe looking for more efficiencies and maybe moving more to a hybrid cloud-type environment?

Yes. Not to say that we wouldn't have our bumps and bruises across -- along the way. But generally speaking, an enterprise's response to something like that is to optimize their footprint. And if they optimize their footprint, that means that we're left with sellable space, more sellable space that we can sell and I would just -- not to be overly technical, but in a more dense environment. That's the way they make the economics work for them. If they're renting a, call it, a 4 kVA rack from us in 1 month, if they're able to get more servers into that single cab and all of a sudden, it's now up to 10 kVA per month but on a lower per KVA dollar value. And I can take these other cabinets that they've already been -- that they're giving back, and I can resell them and sell it at a higher density. It's going to cause us to push the envelope, I think, on power utilization. But overall, at the end of that process, we'll be better off. Equinix will be better off. That's kind of what I was referring to is at the end of those cycles, we end up with more than our fair share. Even though throughout that process, we might have taken back space a little bit faster than what we anticipated or before a contract insisted that we take it back. We get to take it back and then monetize it in a different way.

Got it. Got it. As we think about the outlook for 2022, I think the midpoint of guidance calls for roughly 9% top line growth for the year. It's actually at the upper end of the multiyear guidance given at the Analyst Day of 7% to 9%. Can you talk about some of the key factors driving the optimism there on top line growth?

Yes. I think it's a lot of the same stuff that we're seeing right now that I was just referring to, which is that I think enterprises are pushing their digital transformation strategies a little bit faster. Because of that, we're getting more inbound requests from enterprises. On the flip side of that, the service providers are trying to catch up to all of those needs, whether it's an Oracle or a Zoom or an AWS or a Microsoft. They're setting themselves up to deliver those services that are being consumed by the enterprise. And so we're getting a little bit of both. We're getting a little bit of both on that end.

Digital transformation is a term, I think, we hear very often, particularly from Charles, Keith on the calls. How is this sort of -- has it evolved at all? Are you seeing any sort of tapering or moderation, I guess, coming out of the pandemic?

No. And I'm seeing it speed up quite honestly. I would have said before the pandemic, we were still at the very early parts of that journey. There are definitely some bleeding edge companies that are further along, but the vast majority of enterprises are not where they would need or expect to be on that transformation journey. There's still a lot of applications that they're hosting in their basement, in their own data center facilities that are not -- I mean they're just not getting the most out of that in a fully -- well, I wouldn't say fully, but a hybrid cloud environment.

Yes, okay. Just in terms of demand, I know Europe has been an area of strength. I'm just wondering in light of the conflict that's going on overseas between Russia and Ukraine, has there been any sort of noticeable impact on demand or bookings just in light of what's been going on?

Yes. No, probably too soon to tell on that front. The initial reads is, no, we're not seeing any immediate downturn. I mean most of what we're focused on internally actually in response to everything is actually just making sure that our employees and our customers that are in bordering countries because we don't have operations in either the Ukraine or in Russia, but that they feel supported by Equinix during all of this kind of crazy time. But nothing specific coming out of our major flat countries like coming out of France, coming out of the U.K., coming out of Germany. No major repercussions thus far. But I'm sure that we'll be analyzing and thinking a lot about that over the next coming weeks as we prepare our guide for the rest of the year and as we look to plan for next year as well.

You mentioned sort of broad demand strength. I'm wondering, are there sort of specific verticals or industries where you tend to see outsized increases in demand? And I guess maybe conversely, are there sort of the laggard verticals where there may be a little bit behind in catching up?

Yes, no, really good question. No real laggards. I'd say the verticals that you would expect, content, financial, a lot of things going on in the world aren't really impacting them or have already been baked into their run rate based on other effects like more COVID-related factors than anything going on in the world right now. I would say probably cloud service providers and enterprises are ticking up. And it's really that double edge that I was referring to a moment ago where I think there is more of a thirst and hunger by enterprises to complete their digital transformation a little bit faster so that they can meet the needs of a diverse employee and customer work base and have a lot more optionality about where folks are doing business and how they're doing business in support of them. And then on the flip side, it's the cloud service providers trying to catch up and meet that demand as well and take advantage of really in what they're going to believe is a constrained world, taking down enough capacity to meet their needs for growth over the next, call it, 2 to 3 years.

Got it. Got it. On the topic of -- I don't want to call it current events, but power and energy costs have obviously been very, very topical of late.

Sure. Obviously.

Some of the -- I'm sure you've gotten a lot of questions on that so far.

None.

And obviously, some of the impacts are weighing on sort of the margin trajectory for this year. So can you talk about the headwinds that are baked in on a margin perspective into your '22 outlook? And then what gives the company confidence that there could be an inflection margin-wise in the second half of the year?

Yes. So most -- and I think anybody that would have listened to our earnings call and read our earnings release knows that most of our power concerns this year center around Singapore. And a lot of that has to do with the fact that we have certain hedges that are in place that guarantee a return to a portion of our power portfolio in Singapore, returning to what I would call more realistic rates in Q3 and Q4. So there's a piece of what we're forecasting that is in the bank that we know about. Based on what we locked in on those hedges in Q4 and very early in Q1, that is what gives us confidence that overall, the -- because we were able to lock in those hedges at a much lower rate than the current spot rate, that gives us comfort that this -- the intervening period between, call it, like half Q2 and part of Q3, that we'll be able to manage the cost down to the level that we've got in the forecast. So I mean, there's still things that need to happen around that. And certainly, if the hedging market doesn't open up as we anticipate for Q3 and Q4 -- by the way, we'll know a lot about this, I think, in the next 3 to 4 weeks and come back in our guide with a lot more information. We're doing a lot of work internally right now and with service providers externally to nail this down and get a little bit more clarity for the remainder of the year. But right now, all of those indicators lead us to believe that we're in a solid position, at least as it relates to Singapore, which is where a majority of our risk is coming from this year. When you look at Europe, we start to look at 2023 and beyond. We've got hedges in place in markets where -- deregulated markets where we're allowed to hedge. We feel like we maximize our position there. Well, that's going to start rolling off in '23. We don't look any different than anyone else in our space though. People hedge where they can and they don't where they can't. And so we're all going to kind of be in the same boat. And the way that we acquire those hedges is we do it in sort of a waterfall cascading so that we never have any one big thing rolling off in 1 quarter or period. We try to feather them through over like an 8-quarter period. So there's definitely risk out there for '23. However, we've got the remainder of this year to really suss that out and see how things transpire in Ukraine and Russia and see how the market responds to that and set up our customers for whatever we do in response. The reality is if power prices continue to escalate the way they look like they are based on spot rates well into 2023, we're going to start signaling to the market. We're going to signal to our customers that price increases are coming. And I would expect them to look at that and nod their head based on reading everything that's going on in the world, too.

Yes. I mean, I was going to ask, what's the receptivity been because we are obviously in an inflationary environment. I am getting -- I got a text from the landscaper today, just want to add an anecdote, just saying rates are going up 25%. I'm not going to get rid of it. But my point there is, when you think about passing on some of these rising input costs to customers, what's the sort of receptivity been? How do those discussions typically go?

Well, as Katie likes to say, no one ever sends you a thank you note for a price increase. I think that relative to other -- so I've been with Equinix for 10 years, and there's been a few other situations where we've intentionally and very mechanically gone in within given metros and lifted rates. And in some of those cases -- well, most of those cases, customers don't like it and they're very, very vocal about it, right? I think in this unique time period, some of those biggest customers that would be saber rattling around that, they're experiencing the exact same thing themselves for their own data centers where they have power commitments from local utilities on their own to measure us against, right? The most -- so it's not going to be pretty, and we're going to work with our customers on it and not try to gouge them. But we all have shareholders. We all have responsibilities to deliver returns to our shareholders. And as long as we're communicative, intentional and transparent with our customers, while it will probably be a painful discussion, they'll understand. And then what will end up happening after that is most likely, again, people optimizing their footprints to the extent that they possibly can. Because those that are with Equinix, they knowingly pay a premium right now to be there. And so they're with us because they need to be with us. And they'll need to be with us on the other end of that, unless they dramatically alter how they're going to market with their applications and how they're servicing them. But even if they dramatically alter that, the reality is that they're going to need us in some capacity. And it's just a discussion about how do we optimize their footprint with us in a way that they feel comfortable, that they feel like they have control, that meets the expectation of competition in the market, but also it doesn't leave Equinix hanging.

How about on the supply chain? I mean, that's been an area where it sounded like a lot of the larger companies in the comm infrastructure space maybe were -- hung in a little bit better, more immune, I'd say, given some of the forward-looking work they had done. But it sounds like at least from some other peers at the conference, there's a little bit more concern around supply chain impact hitting deployment schedules, I guess, at least for 2022. So any color you can share in terms of impacts from supply chain, how those have trended following some of the recent events in 1Q?

For sure. There's nothing incremental that we didn't already take into account, quite honestly, over the last 18 months. And when supplies constraints around the world really started to kick in, we leaned in on our commitment schedule with our key suppliers, quite honestly. And what we started to do is share longer-term forecast and purchase commitments with them to make them comfortable that one way or the other, we're going to show up and we're going to buy these materials and you do feel confident, so that you can deliver against this delivery schedule. So we're using our reputation. We're using our brand. We're using our balance sheet and leverage there to be able to give us -- the supply chain partners like comfort. We saw an initial pushback, certainly in delays and some scheduling. But quite honestly, it's -- I mean, there are issues around the supply chain, and we're going to manage that effectively. But we think that we've seen the biggest brunt of that. It's way more about managing inflation associated with those supply chain issues and managing pricing on a proactive basis with our customers around that as well.

Okay. You referenced inflation. One other area where this hits. And I know, obviously, you've been investing in people and adding new heads, particularly in the back half of last year. Wage inflation, that topic. How do we think about that in terms of another sort of incremental potential headwind to cost structure?

We're keeping an eye on it, but nothing that we've done in, say, this focal or budget cycle would suggest that what we have in the plan and have communicated to our employees this year isn't sustainable. We do have the added benefit of a bigger population -- a bigger group of -- bigger population of our employees gets to share in the [ RSC ] world as well. And so that's an added benefit of compensation that maybe a lot of our competition doesn't get, and we get to use that to our advantage. And it's a great motivator, by the way, to get employees to help solve problems around profitability, too. The inflationary side of things that we're seeing, though more on the labor side, isn't so much on our employees, but much more on the cost to build and through contracting. There's just so much more competition for those resources as well as supply constraints on the material side. That's probably where we're seeing the labor hit us. And maybe that's a canary in the coal mine, and 2023 will be a bigger issue for us on that end. But this year, it's mostly about the cost to build.

And is that, I guess, having any implicit or early impact on the yields on new builds?

From a modeling perspective, yes, we're sensitizing things a little bit more. We're digging into what we think could impact our returns, maybe a couple of layers deeper as we're going through project-level reviews. But the general response to that and the thing that will always keep us right is to get ahead of it on pricing with our customers and to pre-communicate that. So if in a given market, labor materials to build are going up, call it, like 7% or 8%, we're going to get ahead of that and any new deals that we price into that metro are going to get an uplift on that. And then as customers that are currently in term of a 3- to 5-year term of an agreement, when those renewals come up, we're going to start lifting them up as well. And then during that whole period of time, we have annual increases, price increases that range from 3% to 5% that are always part of the contract. We really kind of use -- look at those price increases as the last place to go, though, because they are not met by the customer very easily. It's just -- it's not a great conversation to have. So we'll always try to optimize our build first. We'll do design cost reductions into the plan. We'll combine phases a lot of times, which saves us some cost. We'll sweat the power infrastructure a little bit harder transparently in talking about that with our customers, so that they understand the risk, but the reward for them financially if we manage it good or better than we are right now. Those are the types of things that we'll undertake. It's not going to be something that hits us immediately. It's going to -- the cost will hit us and show up on the balance sheet immediately, but we'll mitigate it over a period of time with new deals and renewal deals. And as that entire footprint cycles out over, call it, a 3-year period, we'll all get lifted up to the newer rate.

And I was just going to add on to Simon's point. While we're sensitizing our analysis, we're still underwriting to a target yield of 30% on IRR.

Okay. Okay. So as we think about all these moving parts, obviously, at the Analyst Day, there was a target for 50% margins, EBITDA margins as laid out to 2025. What's sort of the visibility? With everything going on, how strong would you say the visibility is into achieving that target?

Yes. We're -- I mean, we're still on track. We have a path to get there. It's certainly a little bit more strained with all the dynamics going on in the world now, but we still keep a very close eye on our path to get there, and we continue to believe that the investments that we're making in projects like Horizon or Jarvis, which are very much about getting transactional scale out of the front side and the delivery side of the business, making investments in systems and processes that allow us to sell our digital services suite of products, which are slightly tangential to data center services in terms of how their customers want to transact the actual order, the legal entities and how we support it. They want that delivered to them slightly different than we do data center services. So we're making investments in those areas to streamline those businesses. We'll continue to do that. We've been doing it for the last couple of years. We think that that's putting us in a path not just with our digital services customers and data centers, but also our channel customers to really, really help grease the skids and create leverage there. On the digital services side, we've been making headcount investments over the last couple of years, hiring engineer product teams. I would call those like foundational investments that are -- it's just what it takes to get a business of that size and scale off the ground. But it's not like once we get into the power curve of selling those services like every marginal dollar of revenue is going to carry the marginal cost that got us here. So there's a certain amount of fixed investment that we feel like that coming out of this year will get us over the next couple of years. And so at the same time that we've been absorbing increasing power costs in Singapore this year, we're also making investments in our digital services and those will start to yield the fruits in the 2024 and 2025 time frame.

And so to think about the trajectory, and I'm not -- I'm going to steer clear of asking for '23 guidance or '24 guidance, but thinking about the cadence of this improvement. If you're taking, let's call it, one step back this year, going from 47% margins to 46%, how do we think about that path to 50%? Is it linear? Is it back-end weighted? Any sort of color you can give us in terms of how does things bode for you?

Yes. Well, without going into specifics, because I think a lot of this is going to rest on the timing with which a lot of these programs that I'm talking about go live, and in some cases, they're in the middle of feature development. In other cases, we're just putting pen to paper right now on what the requirements are going to need to be. I would just remind folks that this year is -- there's at least 100 basis points of margin in there related to the Singapore power item for us uniquely that is transitory that one way or another will get cleared out by 2023, which puts us really back in that 47-ish starting spot that we were originally in when we started giving the long-term guide in support of the Analyst Day. So we're looking at, okay, by 2025, we've got to improve from, call it, 47 margin points up to 50. As we layer in these process and system solutions, and I think -- and start to see the benefits of the investments that we've made in digital services, that's how we see it's going to happen. I think some quarters, you're going to have puts and takes, 1 year might be a year of investment. How that explicitly pans out and times itself out, not really comfortable sharing because I think we've got to go figure that out. But it'll -- we're still set on the 50%. It's going to be some give and take along the way, but most of it is going to come out of operational efficiency. And getting value out of the investments that we've made in the digital services space right now.

Okay. Let's talk a little bit about competition. What does the competitive landscape look like right now for Equinix across your 3 regions? And have you seen any sort of fluctuation or change in competitive intensity of late?

Yes. It's hard to say that anything is different. I mean I love our balance sheet, and I love our strength. And I would say it's not so much that we're seeing people react differently to what's going on. I think what we're seeing is a series of facts unfold in the marketplace that highlight our competitive advantage and highlight really our balance sheet strength. So ask me that question like 12 months from now when we're looking in the rearview mirror at what -- all of the interest rate rising, all the power inflation, cost to build inflation is doing to our competition and how they're reacting and what we're capable of doing given, I would say, the capacity on our balance sheet and the fact that we deliver a pretty unique service to people, especially when you layer in all the digital services like Network Edge, Fabric and Metal on top of that.

Okay. Yes, the balance sheet, I know it's something that we've heard a lot about.

Yes. Absolutely.

4x levered relative to some of your peers and smaller guys. International markets. Obviously, you have announced an acquisition of MainOne that I believe is going to close shortly. You've also done GPX in India. How do you think about just broadening the platform? We like to think about it typically as Americas, in the Asia Pac. But obviously, with some of these newer markets in the mix, how big of a role does expansion in these newer regions play into like the multiyear outlook?

Yes. I mean those plays were about planting seeds for 5 years down the road type of growth. I mean, the size of the businesses that we're buying, they don't individually move the needle. What they become is a beachhead for us to expand in. We -- when you look at MainOne, along with that acquisition, we're getting a very talented management team. The way that we're going to integrate that one is sort of akin to what we did when we entered Brazil, which is utilize a very talented management team to teach us how to do business in a place that we don't have a lot of experience. It's a very different place to do business in Nigeria versus doing business in Ashburn. We experienced the same thing when we acquired our way into Brazil. I expect us to do that a lot more just to gain momentum in places like India, in places like Africa. I think we're going to look at more places in Asia as Hong Kong sort of slows down, as power continues to be an issue in Singapore, looking for ways to expand the footprint in Asia, that's going to meet the customers' needs because they're going to look for a more distributed way to support their customers as well. I think everybody is a little bit concerned with there being so much focus on Hong Kong and Singapore. There was hope that maybe people would go into Tokyo, but Tokyo has a lot of constraint -- capacity constraints as well, both on the real estate and on the power side. So looking at other places in Asia, I think it's going to help out. We'll probably do it in a similar fashion where we look for people to partner with or acquire a management team that gives us local expertise and allows us a beachhead upon which to expand. All of our business cases when we do that are all about the expansion that we get. That's where it really makes sense. And that's where the promise to our customers allows us to deliver those returns because we can show to them that we're doing this initial acquisition, let's just say, it's a $200 million acquisition -- $300 million acquisition in the case of MainOne. It's not so much about, hey, we're just buying this to operate it today. It's about we're buying it today and we're getting with it a considerable amount of land bank, and we're committing to you the ability to expand in that market, right? And that's where the value comes in for them. I do think consolidation overall is probably, I mean, with obviously with interest rates doing what they're doing, there's been a lot of, say, private money getting into our space relative to maybe like 4 years ago, 5 years ago. I think the public companies are going to need to slow down because some of the valuations you've seen floated out there in the last round of acquisitions are really expensive relative to what's going on with rates right now and certainly, power cost. I expect it's going to take a little bit of time for the private firms to slow down, but eventually, they'll slow down too because they're using these more as financial vehicles. They're still levering them up quite a bit. And in their case, they're not getting synergies when they roll up these companies from combining operations. They're not really operators. They're more trading and buying assets. So it's a little bit of a different world.

And so I assume in such a dynamic, right, rising rate environment, you've got the flexibility on the balance sheet. It sounds like you're not necessarily seeing the opportunities materialize yet, but maybe 6 months from now, 6 to 12 months, typically.

Yes, we'll see. I mean that's -- I think there needs to be a market correction for sure. Valuations are sky high. Sky high in our space still. But the -- I mean, there's deals that we're happy. Like even though we're about to close MainOne and we've got to go fund that, the reality is we're super happy with the deal that we did there because even though we feel that valuations are somewhat inflated, we still got that at an EBITDA multiple that looks like a discount to our current operations which means that when we get in there, we integrate the company and we start more importantly, sending in our customers to take down data center space there, we're going to create value just simply out of executing, and we're going to look like we got it at a discount. Some other assets in other geographies aren't quite looking that way yet. But we do think over a period of time, we might find some more attractive opportunities to go take down. And I think separate from anyone in our space, we have a lot of capacity to go do that when those opportunities avail themselves.

Well, actually, it's a good segue into the discussion around balance sheet and capital allocation. So maybe just to start, can you sort of walk us through the top priorities in terms of uses of cash? Sort of dig into different areas.

Yes. Well, number one is to fund our expansion. We've got about a 2 -- I mean, given time this year, we're a little over $2 billion in organic expansion. I think in the Analyst Day, we gave a range of -- is it $2.3 billion, $2.5 billion?

$2.5 billion to $3 billion.

$2.5 billion to $3 billion. So most of our cash generation will go to fund that. Another piece will obviously go to fund our dividends as well. And when it comes to the organic expansion, it's very hard for me to sit here today and tell you like in 3 years where we're going to focus that activity. This year is a very big year in Europe. We had a really good couple of years there. We've kind of sold out most of the capacity in some of our key markets. And so this is a catch-up year, where we're creating additional capacity in critical markets there. A little bit slower for the Americas, but we're also doing -- we're doing better than anticipated on our internal plans in terms of the Americas as well. So next year might end up being a catch-up in the Americas.

Yes. On leverage, so you're at 4 turns right now. I know there have been a couple of rating agency upgrades in recent years. So you do have flexibility to flex up if -- you can go higher if you wanted to. What sort of optimal leverage -- I mean, the sense that I get from the commentary is you're comfortable being where you are and having that additional flexibility should opportunities materialize. Do you sense the need -- or just given what's available to you, do you sense an opportunity to take things higher?

I think we would like to, quite honestly. It's always that balance between pushing up our investment-grade rating and doing a bit of a dance with the rating agencies and making them feel comfortable in their business model. I'm not sure if a lot of people know this, but we're not looked at or viewed like a traditional REIT. They look at us much more like a technology company, and they put us in the category of carriers and folks like that. So just getting an S&P or a Moody's to get comfortable with a 5x leverage ratio is already a challenge. We're going to do our best to move them to the 6, to the 7 over the next several years because honestly, we view our ability to unleash our balance sheet power relative to our competitors as a very, very immense source of power here. And -- but it's a fine line, right, because we can't do it at the cost of inflated interest rates -- or excuse me, interest expense as well. And so we're doing that dance. We're doing that walk. We're continuing to put a ton of pressure on the rating agencies to put us into the mix that looks a little bit more like our traditional competitors. We're getting there. I wish -- I think we're doing a great job. I wish it would happen faster. But I'm actually looking forward to that date where we can pump up a few turns on debt because I know what it means for our shareholders. It's a ton of value rather than going out and using our ATM or doing equity offerings to support our growth, especially when you're talking about just going beyond our organic expansion but M&A, which is one of the big areas that we would be a consumer of our cash going forward.

How do you think about just in terms of funding expansion, people -- we typically rely on like traditional debt or equity. But in terms of JVs, your divestitures, is that something that's usually in the discussion in terms of other tools?

From time to time, we look at it. JVs, for sure, but that's more about a product strategy, like something like xScale when you look at it. There can be JVs when we're entering a market for the first time. We did that in Brazil. We thought about doing it in Africa, we couldn't find the right partner at the right time, and so we ended up investing in leadership at MainOne. There are benefits to doing a JV partner situation where people have boots on the ground, and they know how operations. If we're going into a new geography, a new country where we don't have legal entities set up, we're more likely to do a JV. But it's not something that we lead with. We do lead with it certainly on the xScale side of things because it's a really, really good way to develop our brand, to utilize what is a great customer Rolodex and our operational expertise to deliver for those customers, but without bringing down our balance sheet and profitability profile. So we'll continue to do JVs on the xScale side, for sure.

What -- maybe on the topic of xScale, maybe if you can share any updates in terms of the latest there? And I guess more specifically for Equinix, how has this structure benefited the company in terms of maintaining and enhancing your relationships with some of the larger cloud partners?

Yes. I mean, that program is ahead of schedule and continues to outperform, and we continue to double down and triple down where we can. Last year was a really big year for us. Look, the customer response has been what we expected, which is, can we get more? Can we get more? Can you guys go here? Can you go here? Can you go here? I'd certainly like to believe the vast majority of that is that, hey, we are a trusted partner of theirs, and they want to utilize our service delivery capabilities in risky or critical areas for themselves. The reality is there's very few global providers that can deliver for them and we're -- they now have supply alternatives in these markets as well, which gives them the ability to diversify their own supply chain, and they're not just looking at 1 or 2 players now and Equinix gets to show up. How we've shown up, by the way, allows us to be a little bit more picky and choosy. And that's kind of -- as I sit back and reflect on how we've done the xScale joint venture here or a series of joint ventures, it's that we kind of get to go in and dictate the terms a little bit more to our customers in this case, like they can come and ask us, but everything is somewhat incremental to what we've already planned. And I wouldn't say it's a favor, nothing's really a favor. These are all commercial transactions. But we did -- we set an expectation that's a little bit less than what we initially -- or excuse me, we set an expectation that's less than what we've delivered on. And so we're just -- we're kind of leveraging that and taking projects where we think it makes sense where it enhances our platform. A lot of this is -- we wouldn't do it if we didn't -- I mean obviously, it's to delight our customers. But overall, it's got to be close in the type of deployment that takes into account and leverages our platform. So we've got to have a really highly interconnected data center somewhere close that we know that they're offloading traffic to because that's what makes sense and makes the whole thing sticky for us as well.

In terms of making the platform sticky, so an interesting follow-up I want to ask is, when you think about newer opportunities for inorganic growth, we talked about the geographical dynamic, but -- are there opportunities to add more capabilities and functionality to the existing platform, so things like Equinix Metal and the like? Or are you may be more interested in adding scale and footprint within the core data center business?

Yes. So on the account, in the room -- so I'm going to prove, if you had a product up here...

[indiscernible]

They would say something totally different. I -- my personal belief is -- and this is part of our goal towards getting to 50% is we got to operationalize a lot of these new investments and new things that we've done. Keep in mind, Fabric was always sort of part of the wheelhouse of Equinix. But when you're talking about things like Edge Metal, Network Edge, xScale, these are all very different and new products than what the company had delivered for 25 years of its existence. And so figuring out a way to operationalize these things and do so in a way that provides scale and leverage is super important, and we got to go figure that out. So I am sure that the product teams will think of other products and solutions that we can stack on and pack in here. I think the prudent thing would be to evaluate our ability to actually develop and then deliver it relative to what we've already got on our plate. But those seem like the right ones. I mean they -- I mean, when you're talking about something like a Metal, it really gives our customers a lot of flexibility to be in a market like within a week and not -- like not have any operations there. That's a very powerful tool. We've got servers deployed across so many metros globally. I think it's somewhere around...

18 metros.

18 metros now globally where a customer can call us up, and it's like it's basically a data center on demand for them. And as long as they sign a long enough term with us on those servers, it's going to be a really rewarding relationship for them but for us financially as well. That's a very powerful tool. So if folks are going through their own digital transformation and they want to light up services and take advantage of something that's going on in a given market where they don't have operations, we can step in and deliver that for them and literally turn it on overnight. That's really powerful, and other people can't do that without very extensive partnerships that require a series of contractual arrangements that are back-to-back and very often don't include the customer priming with one person. And that's a lot harder to negotiate and set up and deliver against.

And I was just going to add on, when we think about our M&A strategy, we'll continue to look to expand our geographic scale and reach. But from a product side, we're really focusing on staying below the app level because there's many great companies that operate higher up in the stack. So we're really focusing on their digital infrastructure needs.

I think we're just about out of time, so we'll have to end it there.

Great.

Simon, Katie, thank you so much.

You bet. Thank you.

Thank you for having us.

Appreciate it. Thanks, Matt.