Good afternoon and welcome to the Equinix Fourth Quarter Earnings Conference Call. All lines will be in a listen-only mode until we open for questions. Also today’s conference is being recorded. If anyone has any objections, please disconnect at this time. I will now turn the call over to your host, Ms. Katrina Rymill, Vice President of Investor Relations. You may begin.

Thank you and welcome to today’s conference call. Before we get started, I would like to remind everyone that some of the statements we will be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and maybe 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-K filed on February 26, 2018 and 10-Q filed on November 2, 2018. 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 is Equinix’s policy not to comment on its financial guidance during the quarter, unless it is done through an exclusive public disclosure. In addition, we will provide non-GAAP measures on today’s conference call. We 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 IR page at www.equinix.com. We have made available on the IR page of our website a presentation designed to accompany this discussion, along with certain supplemental financial information and other data. We would also like to remind you that we post important information about Equinix in the IR page from time-to-time and encourage you to check our website regularly for the most current available information. With us today are Charles Meyers, Equinix’s CEO and President and Keith Taylor, Chief Financial Officer. Following our prepared remarks, we will be taking questions from sell-side analysts. In the interest of wrapping this call within an hour, we would like to ask these analysts to limit any follow-up questions to just one. At this time, I will turn the call over to Charles.

Thanks, Kat. Good afternoon everybody and welcome to our fourth quarter earnings call. We had great end to the year delivering our 64th consecutive quarter of revenue growth and eclipsing a key milestone with over $5 billion in revenue for the year. The opportunity for Equinix is as compelling as ever as digital transformation is reshaping virtually every industry across the globe. Digital and the infrastructure that deals it have emerged as board level issues and this digital imperative is transcending the macroeconomic volatility we see in the market. Customers are thinking differently about how they interact with their customers in every element of their supply chain. And the major tech trends whether it be AI, IoT, big data or 5G are all amplifying this digital tailwind. In the wake of this digital transformation wave, a clear architecture of choice has emerged for our customers. That architecture is global, highly distributed, hybrid and multi-cloud. And for a variety of reasons, customers are increasingly looking to locate this infrastructure at Equinix, leveraging our interconnected digital edge to achieve performance, security, compliance, flexibility and total cost of ownership benefits that can only be supported by the physics of proximity and the economics of aggregation. These compelling advantages are translating into strong performance in the business and give us solid momentum as we enter 2019 and beyond. To build on this momentum, we are investing to expand our unmatched global reach with 36 projects across 25 markets adding new markets such as Hamburg, Muscat and Seoul. We are committed to designing, building and operating our data centers with high energy efficiency and environmental sustainability. In 2018, we sourced clean and renewable energy across 90% of our global platforms and we remain committed to our long-term goal of achieving 100%. We are extending our…

Great. Thanks, Charles. Good afternoon to everyone. As we have put a wrap on 2018, it’s great to end the year with our financial results beating guidance across every one of our core metrics. As Charles highlighted, revenues eclipsed another key threshold ending the year at greater than $5 billion, a 9% year-over-year growth rate. AFFO per share was $20.69, a great result showing how we are driving value at the share level and tracking ahead of our key operating metrics as we had said at the June 2018 Analyst Day. For the fourth quarter, we had extremely strong bookings across each of our regions, including a record in EMEA, while both America and APAC regions had their second best bookings performance to-date. Our bookings span across more than 3,000 customers with a quarter of them buying across multiple metros highlighting the unique diversity of our retail co-location business. Simply, we are seeing more cross-region and multi metro deals than at any other time in our history, a reflection of the strength of our platform and the scale of our global footprint. We had net positive pricing actions again this quarter highlighting the continued strength of a differentiated value proposition. Our sales pipeline remains high and we have a significant number of new Fortune 500 prospects. And we have a very active expansion pipeline with over 36 projects underway and we are expanding our interconnected digital edge to 55 metros by the end of 2019, effectively twice the number of metros compared to our next largest competitor. Next, I will cover the quarterly highlights. Note that all growth rates in this section are on a normalized and the constant currency basis. As depicted on Slide 4, global Q4 revenues were $1.31 billion, up 8% over the same quarter last year…

Thanks, Keith. In closing, we continue to build our market leadership and cement our position as the trusted center of the cloud-first world. Our reach, scale and innovative product portfolio puts us in a great position to build on a business model it is substantially and durably differentiated from our peers. The market remains in the early innings of the digital transformation journey and our accelerating ability to both land and expand customers along that journey make us confident that we are playing the best hand in the business. We are excited about the road ahead and we look forward to updating you on our progress throughout the year. So let me stop here and open it up for questions.

We will now begin our formal question-and-answer session. [Operator Instructions] The first question is coming from Philip Cusick, JPMorgan. Your line is open.

Hi. I just wanted to follow-up. It seems like a lot of your development – sorry, it’s Richard, a lot of your developments in EMEA and Asia with a big development in the Americas coming in Dallas in mid ‘20. It seems like in terms of your pipeline and commencements, can you give us a sense of do you feel like you have enough capacity in the United States right now and you want to focus on it and we can spend more capital in EMEA and Asia and kind of balanced that growth rate? And two, do you expect the Verizon assets to ramp through the year or will it be lumpy and kind of following along and kind of following along, with all this, your leverage is therefore 4 versus the 3 to 4 target, do you feel like you needed to use a new ATM to fund it or will it just – will you grow into it as the business expands? Thank you.

Okay. Why don’t we start with the development as part of the profile of our development portfolio? Actually, I think it’s pretty much what you are seeing is just the development profile is following the growth rates. And so we are in a period now some pretty significant build activity in EMEA have continued to see very strong bookings and growth out of the EMEA region. And so we are getting through I think sort of a lump of that investment, which will position us extremely well and we continue to extend our market leadership in EMEA. APAC continues to be a very important region for us in the world and I think you are going to see us continue to invest meaningfully there. In the Americas, as you noted, we are going to start the journey to building out Infomart as the campus and I think that’s going to be a big opportunity for us, but the growth rate is slower. We have made meaningful investments in some key assets in the Americas and feel very well positioned to continue that feed the bookings engine there. So I think what you are saying really is just a profile there that one, runs a little bit in waves and two just sort of maps to the sort of region to region growth profile of the business. Second piece was on Verizon, I think little tough to tell you, I think the business at some degree is always a little bit lumpy. I think we have now kind of worked our way through the bulk of the lumpier churn and I think we are seeing those assets stabilize. And when you add in the fact that we have added capacity into some of the critical new markets that where we believe there is strong demand like NOTA and Houston etcetera, Culpeper, we feel good about that returning to growth and we hope that, that will sort of progress positively throughout the year. And then the last piece was on leverage and so I will let Keith comment on that.

Yes. And you will know Richard on this over the last quarter we did bump up to 4.4x our annualized Q4 adjusted EBITDA. As we look forward again, our goal is to get within 3x to 4x net leverage range. We are going to accomplish that in many different ways. The most easiest way to do that is continue to drive growth on the top line with the strong operating leverage and just by share of growth it will naturally de-lever the business, simultaneous with that as we continue to look for ways to raise capital, we are always going to take a balanced view of course between the ATM program and whether or not we are trying to secure any incremental debt that’s also going to help us de-lever particularly as it relates to the ATM program. And then just overall collectively, I think it’s is important just to elaborate a little bit on, our quest has always been we have an aspiration to become an investment grade rated company. And just simply put, we think it’s worth 75 basis points to 90 basis points on the $10 billion of debt. And so I assume that’s just rounded up to $100 million of cash pre-tax when you put our multiple on to that. It’s a meaningful amount of value that we can create for our shareholders over a relatively short period of time if we work really well to grow the top line show the operating leverage and bring our debt balance into the target range, something that we would certainly share with the credit rating agencies and with many of our investors over the year. So it’s an area of high focus for us and we will continue to have aspirations to get investment grade and so we are going to work hard at doing that in 2019.

Got it. Thank you.

The next question is coming from Jordan Sadler, KeyBanc Capital Markets. Your line is open.

Thank you. First, can you provide a little bit of granularity on the 2019 revenue growth, I think interconnection revenue growth slowed to back 10% year-over-year the fourth quarter versus maybe 18% for the full year, do you expect this driver to stabilize in 4Q or at the 4Q pace in ‘19 or will it reaccelerate along side the increased cross connect volume you have booked in the fourth quarter. And then second what is the year end leverage target just following up on Richard’s question here that’s embedded in the 2019 guide, I kind of noticed that interest expense for the full year guide looks like it’s down somewhat from the full year 2018 interest expense and in the face of rising rates that seems like maybe you are getting some savings either from lower leverage in issuance or maybe from some other area, could you maybe shed some light? Thanks.

Thanks Jordan. I will let Keith take the second part of that. But as for the interconnection business, look we feel like this was really a tremendous quarter and demonstrates continued strength in the interconnection business. We are at the top end of our range in physical interconnections and now we have starting to report the virtual interconnections with another 1,800 on top of that. And so really feel terrific about the interconnection value proposition and about the value that our customers are getting for that. In terms of the growth rate, it was 10% as reported normalized to 12%. And so I think it moves around a little bit depending on some factors, but we feel like that that is going to continue to outpace co-location business and is obviously a very attractive business for us in terms of continuing to drive the overall financial performance. And there are two areas I think represent upside opportunities for us. One, I think we have kind of began the process of more I am sorry normalizing pricing in EMEA on interconnection which is something we have talked about since the Telecity transaction, so I think there is opportunity there. I think we are starting – we are continuing to see an evolution as – in terms of percentage of revenue that is interconnection based in the other two regions continuing to move positively. And again their performance in terms of volumes of interconnection in the Americas portfolio continues to be strong as well. So I am sorry to expect that that’s going to – that is again it’s not going to be at that previous 18% level, but I think we are going to see very strong interconnection growth in the business.

Okay. And then Jordan let me take the second part of the question. First and foremost in the prepared remarks one of the things that we have stated is we are highly focused on delivering growth on an AFFO per share basis. Irrespective of our financing, we are going to deliver at an AFFO per share growth of 8% or greater. Thanks. I wanted to highlight that number one. Number two, as I have said there is a lot of value in getting back into the investment grade window. We are working hard with our rating agencies and some of our advisors to execute against that strategy and we think there is no better place to create substantial one-off value right off the gate and getting to investment grades scenario of high focus for us. As it relates to your specific questions on what we want to target, let me just say that we are looking at all alternatives is of course very dependent on market conditions, our quantity, pricing, timing, source of capital and so suffice to say we as a company are going to look at all avenues to make sure that we can execute and maximize our shareholder value. As it relates specifically to the interest rate as it comes no surprise to you, we work very hard to drive down our interest rate costs. And over the years as you probably have noted that we have been able to take our average costs ex-leases sort of a $10 billion of debt is just – is a notch above 4% for a non-investment grade company, but we have also recently done across currency swap with one of our debt modes. And as a result that we are able to shave off some incremental cost into 2019 to the benefit of everybody and you can see that reflected in the net interest expense. So, again as a company, we are going to continue to drive down as much as possible our cost of capital. I was noting the other day I was thinking it’s worth noting when you look at the flatness of the yield curve whether you are 1 month out or you are 30 years out, you are dealing with a 50 basis point span. We are not overly concerned that interest rates are going to rise up significantly over the near-term and so we will continue to manage ourselves to maximize again the value that we can contribute to our shareholders.

The next question is coming from Jon Atkin of RBC. Your line is open.

Thanks. Question about hits and I wondered if you could share some parameters or thoughts around build costs now that you are kind of further along in the projects, so basically financing considerations aside, what you are thinking about in terms of build costs, any updated thoughts there, resiliency level, density versus other wholesale products on the market as well as pricing versus comparable products? And then I was interested in just on the network side you have got obviously a bump up in the Americas cost connect trends maybe elaborate a little bit more about what’s driving that? And then as you network your IBXs together and cities together even more so, anything you are seeing in terms of customer adoption? Thanks.

Sure. Thanks, Jonathan. Hit, again, we feel very good about the progress there making excellent progress against all legs of the stool, the demand side, the supply side and the financing side. In terms of build cost that’s going to vary significantly market by market. What I would tell you is we are very confident that we can build inline with the best in the market in terms of because of our sourcing leverage and our engineering capabilities etcetera. And so we think that, that is we are going to continue to be able to do that. Obviously I think that is going to be meaningfully below our sort of retail build cost just given the nature of those facilities, but we think that we are going to be very much at parity with others in terms of our ability to build at the right price points. In terms of pricing, we have seen fairly stable pricing across the market. So, we feel like supply and demand are still despite a lot of investment in the market, are relatively balanced across the globe. We tend to be focused on the high demand markets where we have visibility to pipeline and access to customers that we think is somewhat advantaged. So we continue to believe that we are going to be able to deliver kind of in line with or maybe slightly above market as we deliver a more sort of comprehensive value proposition for those customers. But as we have said we do believe that the hyperscale market is going to be very competitive. We think it’s going to generate attractive, but more challenged returns than our retail business, which is exactly why we are sort of pursuing it the way we are so that we can minimize our balance…

And then just on strategic products, your old job basically you have got the encryption products and can you maybe talk a little bit about how that’s trending and then other things that you feel like you are making progress on?

Sure. SmartKey is going – we have got a ton of customers in trial on that service as well as a number of new customers added over the last quarter. It’s not going to be a material differentiator and adder to the overall story, but it is – it was for us it was a way of demonstrating that we can continue to bring new value added products that really differentiate our position as the trusted party in assisting customers with their digital transformation, we do think it will be additive but to overall growth story. But we are – but again it’s not kind of a huge offering. But we do think there are others sort of around the corner in terms of continuing to expand the feature set and reach of our ECX Fabric which now is becoming meaningful contributor to our interconnection business as well as we have talked publicly about having our NFE marketplace product that’s not really a product name, but we are working towards sort of finalizing what the actual go to market things will be for these offerings. But they are already from a functional perspective in advance pilot stages with customers. And we think those things can be over time meaningful contributors as we get attached rate on top of cabinets that were already deployed and so that’s one example. And then there are others that we are working through that we will probably to begin to give you visibility to in the next few quarters.

Thank you.

You bet.

The next question is coming from Ari Klein, BMO Capital Markets. Your line is open.

Thank you. It seems like you are making a lot of good progress on HIT, but maybe related to JV search is taking a little bit longer than expected, can you maybe provide a little bit more color there. And then what kind of contribution from HIT are you embedding in 2019 guidance?

Sure. So it’s not the search itself, it’s taking long, believe me those folks found us pretty vast in terms of wanting to have a discussion about what we are doing. And so we have already had initial dialogues with those and began to sort of filter through the ones that we think are most philosophically aligned with Equinix’ partners. And what has taken a bit longer is just the complexity of this from the standpoint of tax and legal structuring and accounting and various other things. And so I think I have mentioned this last time those are I think some of the things that frankly perhaps we underestimate at some level in terms of our ability to get this thing finally executed and off the ground. The good news is the demand side of the business is progressing in terms of building pipeline sort of independent of that or in parallel with that I guess I should say. In addition, the supply side in terms of sourcing land and making sure that we are positioned for the JV to really be effective in ramping quickly once established are all moving in parallel. So the team has done a phenomenal job, our tax, accounting teams have literally been sort of just hedged down trying to get this done. I think we are – as I have said I think we are going to have this done in the coming months. We are going to shortlist down to a very small set of players that we think are most as I have said most philosophically aligned with us and have the kind of reach and capabilities that we would want to see in a partner. And we think that will happen in the next couple of months.

Got it. And then our same-store revenue growth was 2% this quarter, some of it’s the last quarter, can you maybe provide that number ex-Verizon and then what do you think that number will look like in 2019?

Sure. Yes. You are right, we are a little light again this quarter and as really dig into the metric and the underlying drivers we would really see a number of factors that one of them you mentioned which is Verizon and that’s having a meaningful sort of suppressing a fact on that metric. It is also a bit of a tough compare still so we are going to need to lap that compare. But the last – fourth quarter had some elevated NRR in our stabilized assets. And so we think that once you normalize for Verizon and some of that tough compare that you are probably looking at another maybe 150 bps to 200 bps, so a normalized same-store number would be in the 3.5% to 4% range. It’s also being impacted a little bit as I mentioned last time by us actively managing customer migrations out of a select set of sites that are in the stabilized portfolio. And so altogether we’re keeping a close eye on that, but we expect it will probably persist a bit towards the lower end of our historical range even on a normal – normalized basis for a period of time.

Thanks.

The next question is coming from Colby Synesael, Cowen and Company. Your line is open.

Great. Thank you. I guess, just following up on that last question, I think last quarter, there was an expectation that, that would improve as early as this quarter and that didn’t happen. And then when I look at your organic growth for 2019 you’re expecting 8% to 9% verse the 9% you just did in ‘18 that you are now expecting Verizon to be a growth driver, so, I think there was an expectations that could be the same, if not slightly higher, just hoping if you could dive a little bit more into that? And then on interconnect pricing, can you just talk about what your strategy is there particularly for some of your network partners and for those specifically who are potentially connecting customers from other data centers into your facility and what you could potentially do to help monetize that maybe in a more efficient way? Thanks.

Sure. On the growth picture, again, we provide that range. I think we’re going to continue to drive hard in terms of continuing to drive the business. I do think that the stabilized asset growth being kind of where it is somewhat of a contributor. I think that’s driven by not only those factors that we think are probably or temporarily [Technical Difficulty] with more of the sweet spot business. But I think what you’re seeing is really a continued transition phase of the business to really this trusted center of the cloud-first world kind of mindset in terms of the types of deployments, the level of interconnection that we’re going to see. Those are a bit longer sales cycles, but once landed, I think they tend to deliver very attractive cap yields and levels of interconnection. So, I think the growth profile of the business has continued upside opportunity both as some of the – some of those underlying headwinds subsist or subside. I do think that we’re trying to be appropriately conservative about the pace at which Verizon returns to growth throughout the year, but that’s I think the overall dynamic. We feel very good about the overall growth profile of the business and kind of what it – what it’s going to look like over the next – over the next several years. And we think as I said, I think particularly as we add new services and look at the potential to add attach rate to existing deployments, but I think that’s going to be a multi-year process. In terms of interconnection pricing, look the network providers continue to be major partners for us, and we are always in active engagement with them about how to make sure that our product meets their needs effectively. And I’m sure there’s always discussions about price points, but we’ve – we feel good about the value proposition that we deliver. We have been creative about trying to deliver sort of volume benefits to some of our customers, as well as give them greater degrees of flexibility in how to use the interconnection portfolio more comprehensively and creatively across their business. And so, I think that there is really good momentum with not only the network providers, but also the clouds and the other service providers and, of course, with the enterprise. Enterprise – actually enterprises are fastest growing segment, enterprise to cloud is our fastest growing interconnection segment. And I think again that’s a reflection of I think the strength of our value proposition in the cloud.

Okay, thanks.

The next question is coming from Sami Badri, Credit Suisse. Your line is open.

Hi, thank you for the question. And you gave us a good amount of context on your prepared remarks regarding virtual cross-connects and the traction you’re seeing there in your business. Could you just give us some color on how billing rates differ between the virtual connections and the physical connections, since you did make the comment that your, I guess, you’d say big customers are using physical connections are also opting into virtual connections. Could you just give us any color on how we should be thinking about that as you projectile your model?

Sure. Yes, it’s interesting, because we get the question a lot, and I think the way I write – summarize it all is actually the unit economics are not radically different between the two. The – because as we look at how people consume on the virtual fabric, typically, they buy a port, sometimes they can buy that as a full buy-out port or they can buy virtual circuits individually on to the port. And when we look at it in terms of our average unit price per connection from customers when you take into account, the port price as well as the virtual circuit price, which is on a unit basis is meaningfully lower than a cross-connect. But as you look at them right now, there’s not a huge gap. And both are good. The cost of goods on – on the – on a switched fabric is slightly higher for sure than it is just a basic physical cross-connect, which has very low cost of goods. But what we’re seeing is, is that the way we’re pricing them and the way customers are using them does not represent a dramatically different economic profile across those. And to your point, we are seeing them as very complementary. Generally, it is not, oh, I was using a physical cross-connect and now I’m going to use a virtual cross-connect, it is hey, I have a range of use cases, physical cross-connect is very appropriate for me in certain coincidences particularly with large and repeatable traffic flows, and then virtual cross-connects are really substantially better in an environment that is more dynamic where people need to be turning up and down capacity or moving workloads or traffic between endpoints. And so – and then, of course, you augment that with IX. And we have many of our more complex customers, who use across the entire portfolio, so they have a lot of Layer 3 traffic that they’re peering through the fabric, and then as they see it – as they see traffic being exchanged with peers in high volumes, they strip that off to cross-connects and then they – when they want a private interconnection to a cloud, for example, they might use a cross-connect and a direct connect way directly to Amazon or they would use the ECS fabric and ExpressRoute to get to Azure. So, it’s really a very diverse portfolio that tends to serve complex needs of customers extremely well. And again, there’s – we’re not seeing a dramatic difference in terms of the overall economic profile and return on capital that we see across the – across types of portfolio.

Got it. Thank you. Very good clarifications. And then the second question is what percentage of your revenues are currently coming in from the channel versus direct-to-customer?

Yes. We’d said that we’re about 20% of our bookings. We have not sized the actual revenue necessarily, but we did talk about that – I think we’ve had our third consecutive quarter of north of 20% of bookings. And – and/or by the way, it’s – it generates more than half of our total new logo volume. And so it just gives you a real insight into the fact that – look when we’ve talked about our one of the things that I think is really driving my optimism about the future of Equinix is what I think is a really massive increase in the total addressable market. I think it is meaningfully larger than what we provided in our last analyst day or our last couple of analyst days. And I think that is being driven by a really substantially larger enterprise market opportunity than we had previously given credit to. And I think that’s being fueled our optimism about – that is being fueled by real feedback from our customers and real implementation of use cases. These are not just theories. These are 4,000 deals that are flowing through the channel. And what you realize is that you this is – this opens up the addressable market into hundreds and hundreds of thousands of addressable customers. While we can’t get to them, we’re going to add – we’re going to add to our go-to-market engine this year, but let me tell you, we’re not going to reach all those customers. And so the way to reach them is really through the channel. And so we have now really gotten our sales teams heads wrapped around working with partners as a key way to reach those customers. And they’re really, I think they’ve gotten over the initial reluctance of thinking that somebody was about to steal their account and now they’re working very effectively with channel partners and we’re seeing great channel partners like AT&T, and Orange Business, and those kind of folks really driving significant volumes for us, Telstra. And then also sell with activity with our cloud partners, whether that’s Microsoft, Amazon, Google and others, where we’re seeing their customers say look we need a hybrid cloud solution. We want to engage with Equinix and we’re often being brought into those, Cisco is another one. Their secure agile exchange has really seen tremendous traction with large customers and we partnered with them on some very big enterprise wins. So super excited about what’s going on in the channel. And as I said, more than 20% of our bookings coming from that, I expect that number to go north from there.

Got it. Thank you.

The next question is coming from Erik Rasmussen of Stifel. Your line is open.

Yes, thanks for taking the questions. Maybe just circling back on Charles on the comments you just made and it was kind of what I was thinking. The enterprise segment, it sounds like you’re then seeing a change in behavior and there seems to be more of a sense of urgency, would you support that sort of commentary? And also does that then support their move towards implementing more of these hybrid architectures. Just want to get some further thoughts on that as you see that especially as we look into 2019 and do you see them moving more quickly?

Yes, absolutely. I would – well, I would say, yes, but – right, because, yes, I see a sense of urgency. Yes, I see a clear sense of consensus emerging around the architecture of choice being hybrid and multi cloud. But what I also see is a very deliberate sense of action and timing. And so these are careful people with jobs that require them to be careful. And so I think they are moving, they are figuring out which workloads they can use to sort of test that architecture. They are absolutely embracing cloud, but they are also embracing it in a very measured way. And so that’s why we’re seeing longer sales cycles for sure and we’re seeing average deal sizes being smaller. And so that’s why I think we would love it if these were translating immediately into substantial sort of inflection points or changes in slope on our growth rates. I don’t think that’s not yet happening, but I also think when you look at our land expand and expand activity as people get more comfortable and as they increase their pace of deployment in these hybrid architectures, I think that’s when we’re going to really bear the fruit from our efforts. And so I think the answer is yes, there is a sense of urgency, they increasingly see us as relevant to solving their problem. They’re engaging with us, but longer sales cycles, smaller deal sizes, and it’s – and so we’re having to work through that in terms of how that translates into our overall financials. But again, feel very good about the business and what the long-term opportunity looks like and about our ability to continue to really be relevant to them.

Thanks. And maybe this is my follow-up back to Verizon. You previously talked about building capacity in 5 markets, but in 2019, is there anything else that you would see that maybe you can make further investments that could potentially get some growth – turn that growth faster into Verizon or maybe see a better return on that investment?

Well, one, it’s been a damn good return on that investment. I think we’re super excited about the return that we saw in the level of value creation and accretion that came from the Verizon transaction, so super happy about that. I know it seems like our time here is over the last several quarters has been dominated more by the fact that we saw elevated churn and a flat growth from those. But again, we made the investments where we believe that the fill rates and the utilization levels warranted that. NAP of the Americas, I was just down at that facility recently, terrific group of people, very excited about serving customers as part of Equinix Culpeper. We think the Federal business has continued to be an opportunity. That’s an area where I would say investment I think could yield outsized results. And so we’re going to track that carefully, met with the team that’s doing that, an amazing group of people really energized about what they’re doing. We talked about Denver, Bogota. So we’re making those investments, where the fill rates and the capacity – and the utilization warranted will continue to invest in them. But I do think we’ve made the investments that we think are key to sort of driving the engine right now and we’re going to watch it carefully in the coming quarters.

Thank you.

The next question is coming from Mike Rollins of Citi. Your line is open.

Hi, thanks for taking the questions. Curious, if you could discuss the longer-term opportunity for margins? And if you can – if you give us a bridge in terms of how the company looks at building some operating leverage with the investments that have been made over the last few years?

You bet, Mike. Yes, I fully expect that we’d be talking about that on the call to some degree. I think, frankly I would have loved to have us on this call saying here’s our – here’s the margin expansion we’re going to deliver in ‘19, I realize we didn’t do that, and that’s disappointing at some level to you and probably to us – and to us as well. But I think it’s really important to put the guide into the appropriate context. At the Analyst Day, we talked about the – our long-term margin aspirations and shared our view that we could hit the 50% target sometime in that timeframe until – between now and 2023. And that was based on the assumption that we continue to drive operating leverage in the business, which I can assure you, we’re doing at a very meaningful level. It also took into account though our need to invest in key elements of the business and we’ve talked about that go-to-market expansion, continued product and service development investments, those are really the key areas, as well as overcoming some of the increased level of expansion drag. It should be no surprise to anybody when you look at the – if you just plot our profile of our CapEx spend over the last several years, it came up substantially and that turns into new projects and new cabinets that it takes time to fill. And in some cases, particularly, if those are first phases that creates sort of some meaningful expansion drag. And so, when you look at those factors, we believe we can do that and we still overcome those things and deliver in margin expansion, the sort of new things that came at us, where the 30 bps as we sized…

Mike, let me just add one other thing to what Charles said. The expansion drag in and out itself is, we track that every year and it’s not we recognize that we’re always in the business of expanding. But what was different this year and particularly relative to the prior year is the size and scale, which Charles and I referred to the fact, there’s 36 projects are underway of size and many other smaller projects around the world. But in addition, we’re going to a number of new markets, and as a result, the drag in and out itself just for expansion just 50 basis points this year. And so when you take that into context, you’re going to get the benefit of that further down the road, but you’ve got to absorb it this year and we’re going to bear – we’re going to bear fruit from these investments. The second thing I think it’s important to note is that as we guide to an EBITDA this year, there’s roughly 20 basis point delta. Charles referred to utilities as one example, that’s roughly 80 basis points, expansion drag is 50 basis points, the new lease accounting is 30 basis points. But as we look through the year, you should expect does all else being equal that margins will continue to improve throughout the year. Q1 is always seasonally soft because of some seasonal costs, but as we get to the back end of the year, I think you’d see us more exiting the year at a higher margin profile than what we exited in 2018.

Our last question is coming from Brett Feldman of Goldman Sachs. Your line is open.

Thanks for squeezing me in. During the discussion of the work you’re doing to form the JV, you made a point that once you have this in place, everyone will have a chance to see just how great this asset portfolio is or can be and I actually want to get some understanding of that statement. The way I heard is, it sounded like there might be some considerable degree of asset in the JV once it’s originally formed I know you have talked about maybe putting in some of your existing assets like Paris 8. I am curious maybe as you had discussions you realized or maybe more of your existing assets that would be appropriate for the venture. And also are the JV partners you are talking to are they really primarily passive financial partners or have you discovered that these partners may also have assets that they can contribute to this JV such that on day 1 it might be more of an operating vehicle and we would have guess and I will just throw in a third part to this question, which is once it’s up and running are you capitalizing this primarily to be a business that you grow organically or do you actually see it as an M&A vehicle meaning it could be assets in the past you wouldn’t have one to own, because they didn’t align with your IBX model, but maybe now there is a different approach you could take to M&A? Thanks.

Okay, a lot there. I will try to tackle some of them and Keith can jump in and help me. In terms of the assets that might go into the JV, I won’t go too far in terms of getting out over my skis, but we simply say that yes, there are assets that we believe are appropriate to include in the JV and those assets have some level of existing either pre-leasing and/or stabilization already making them very attractive parts of the portfolio. And so – and in fact we believe that, that might also represent an opportunity at some point during the year for us to repatriate capital back into Equinix system. And so we are excited about that. We think it’s a really compelling story. That is the feedback we are getting from partners. In terms of partner types, I would say simply that we want good financial partners who are philosophically aligned with what we want to accomplish. And once it understands strategically what we are trying to accomplish, understand that proximity to the Equinix ecosystem and interconnectedness to it, it is important and so we will be tackling – we will be attracting and working with those types of partners and then as to whether it’s a – whether the vehicle would in and itself act as something that would drive other transactions, I don’t know over time I think that’s something that’s certainly not on our radar right now. We are fully consumed with getting a JV structure agreed upon and how decision-making would proceed with the partner and what the assets would look like and how we can start meeting customer needs, because that’s what we are really focused on. And so I think that’s a little bit more color. Anything else in there to add, Keith?

One of the things I just want to highlight it’s really important for us as we have said before we want to keep this off balance sheet, so recognizing there is the partnership, there is the arrangement on the ownership, but there is also the fee structuring and so it was great, as Charles alluded to, there is a lot of complexity behind the organization of this JV structure. And this is the first of what we think could be many. And as a result, we have got to be mindful of avoiding consolidation simultaneously dealing with the complexity around tax. So, we are looking forward to spending more time talking to everybody about this. As you can tell by Charles’ tone, he is excited, we are excited, we are making great progress and stay tuned.

Thank you.

That concludes our Q4 call. Thank you for joining us.

This will conclude today’s conference. All parties may disconnect at this time.