Equinix Inc at MoffettNathanson Media & Communications Summit Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. Terrific.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay. So let's kick it off. So Charles, you've been a part of the leadership team at Equinix for almost a decade now. How do you feel about the position of the business and the opportunities ahead of you relative to years past? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 15, 2019 / 3:00PM, EQIX - Equinix Inc at MoffettNathanson Media & Communications Summit

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Awesome. You've made clear that the biggest single opportunity out of the company is enterprise and specifically helping enterprises move towards the hybrid, multi cloud. I think you've kind of dimensioned that as about $10 billion in TAM, plus or minus, which you have a very small share today.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Yes. Plus. So what are the key use cases that are really prompting enterprises to deploy with Equinix and where your latency performance advantages really shine through that.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay, that's great. As fast as you're growing that piece of the business -- I'll [repeat] the question, why isn't it growing even faster? What have the gating factors been to enterprise deployments?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Sure. Now what about -- in terms of the go-to market strategy, how do you feel about the channel? I mean it seems you're relying on that as an important component of selling to these businesses. But it seems like most of the sales you've had for the channel to date are more kind of sell-with rather than sell-throughs. So what are you doing to help empower your channel partners?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay. Well, it sounds like a great lead in together.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : The cloud dynamic is interesting not only because of how it can draw in enterprise customers, but how the relationships that you have with the cloud providers themselves, right? How would you describe your negotiating position with the big CSPs? Because on one hand, you offer something without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 15, 2019 / 3:00PM, EQIX - Equinix Inc at MoffettNathanson Media & Communications Summit that they need to distribute their products. But on the other hand, they're a lot more concentrated than some of the [magnets] you've had in the past.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Good. Good. Now they've seeded your facilities with a large share of their on-ramps, 40% or something like that. Do you see any indications or have any concerns that they might try to diversify that to other providers or pushing other solutions to get onto their platforms?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : All right. Kind of continuing the theme of enterprise cloud adoption. ECX Fabric is a product you've developed and helped reduce some of the frictions on that front with enterprises and key target set. Do you view ECX Fabric as something that's going to be foundational to the business in future years? Or is it more of a nice to have...

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. Now right now, the ECX Fabric is set up so it's solely within your facilities.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Have you contemplated dropping nodes into partner facilities and markets where you don't have a presence and aren't really interested in setting up a presence?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. Have your network customers expressed any reservations about the product? Because it seems to nudge a bit closer towards what they've done.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : That's interesting. How should we think about the evolution of physical versus virtual cross-connects in the coming years? Is the current ratio kind of appropriate? Or do you think it's going to skew up?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. Makes sense. So I want to pivot to something that we were chatting about with Chuck before we got started, which is your reorganization. It seems like you've taken steps to kind of globalize how you're managing the business, move some folks around. One, is that a fair characterization? And two, how do you think about the benefits of operating the business more globally versus the potential risk that come from being overcentralized?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Good to hear. Sort of pivoting to growth, right? I mean I think one of the key concerns or question investors have about Equinix is your growth trajectory and particularly in the Americas. If you look back a few years, it was probably low teens rate. It's now about half that. Now there are obviously some idiosyncratic factors that are weighing on that. You bolted on the Verizon assets. Outside of those factors, is it simply a function of the business being a lot larger than it used to be? Or are there other things we should take into account?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : So you could paint a case where growth ticks up a couple of points even if it doesn't get to the levels of the past? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 15, 2019 / 3:00PM, EQIX - Equinix Inc at MoffettNathanson Media & Communications Summit

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay, makes sense. Let's turn to EMEA, which has been growing a bit faster. The amount of interconnection revenue you drive from Europe is lower than any other regions, primarily a function of, from my understanding, primarily a function of the IXs and the history on that front. But it seems like you've been taking some steps to try to improve monetization, as have some of your peers. How close do you think we are to the frontier of pricing in Europe? And how much -- how far do we have to go on that?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Do you -- are you seeing the incremental interconnection increasingly moving towards a private solution, like a cross-connect versus an IX? Because that would seem to bode well for that...

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay. Makes sense. So now you alluded to this before, but you recently launched your hyperscale initiative. How would you describe the level of interest that you're seeing from the target customers? And what sort of workloads do you envision putting into your large-scale facilities versus those that your competitors offer?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. Now you suggested earlier that this initiative was primarily customer driven. You're also suggesting the returns aren't as attractive as you'd like. What would have happened had you (technical difficulty) declined to participate in that market? Would it have been business as usual with those customers? Or would there have been some impact to your...

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay. Makes sense. Edge computing is a hot topic today. We hear about data centers at the base of cell towers and things like that. It always perplexes me a little bit because people tend to gloss over your position. I've oftentimes thought of you guys or some of your peers as being the edge. So to what degree do you envision the next generation of edge computing deployed in your facilities versus some of these other alternatives people talk about?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. I wanted to sort of pivot to margins. You've been talking about margins vanishing for some time, they have ticked up but probably not to the degree that you communicated in years past. You're targeting 50%. What's restrained your margin trajectory historically? And how should we get confident that there won't be similar factors that restrain it in the coming years?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. Another financial topic I wanted to hit on was nonrecurring revenue. You guys target 5%. I looked back through the model, I think it was 5 years ago when it was last at that level. When do we say that it's permanently at a higher level than what it was historically for whatever reason? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 15, 2019 / 3:00PM, EQIX - Equinix Inc at MoffettNathanson Media & Communications Summit

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay. That makes sense. Developing ecosystems. Enterprise cloud gets most of the attention, but there are other ones out there. Are there kind of nascent ecosystems that you think would be substantial enough to move the needle at a company the size of yours?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Okay. Now we've talked a lot about opportunities you guys have and the tailwinds to your business. I think we'd be remiss not to discuss risks. What sort of risks are you focused on managing or preparing for as CEO?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. We only have a minute or so left. I thought we'd close with a bit of a more open-ended question. As we're back on the stage a couple of years from now, what's something that you could envision happening with a reasonable high probability that most people are not paying attention to?

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : Got it. Well, I wish I could pick your brain for another hour, but the red light is blinking.

Question: Nicholas Ralph Del Deo - MoffettNathanson LLC - Analyst : All right. Thanks for the kind words, Charles.