eqix-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2022


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

For the transition period from to

Commission File Number 001-40205

EQUINIX, INC.

(Exact name of registrant as specified in its charter)


Delaware						77-0487526
(State of incorporation)						(I.R.S. Employer Identification No.)

One Lagoon Drive, Redwood City, California 94065

(Address of principal executive offices, including ZIP code)

(650) 598-6000

(Registrant's telephone number, including area code)

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.001

EQIX

The Nasdaq Stock Market LLC

0.250% Senior Notes due 2027

The Nasdaq Stock Market LLC

1.000% Senior Notes due 2033

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares outstanding of the registrant's Common Stock as of July 28, 2022 was 91,075,185.

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EQUINIX, INC.

INDEX


		Page No.

	Summary of Risk Factors	4

Part I - Financial Information

Item 1.	Condensed Consolidated Financial Statements (unaudited):	6

	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	6

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	7

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2022 and 2021	8

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	9

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64

Item 4.	Controls and Procedures	66

Part II - Other Information

Item 1.	Legal Proceedings	67

Item 1A.	Risk Factors	67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93

Item 3.	Defaults Upon Senior Securities	93

Item 4.	Mine Safety Disclosure	93

Item 5.	Other Information	93

Item 6.	Exhibits	94

Signatures		101

Index to Exhibits		102

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Summary of Risk Factors

Our business is subject to numerous risks and uncertainties that make an investment in our securities speculative or risky, any one of which could materially adversely affect our results of operations, financial condition or business. These risks include, but are not limited to, those listed below. This list is not complete, and should be read together with the section titled “Risk Factors” in this Quarterly Report on Form 10-Q, as well as the other information in this Quarterly Report on Form 10-Q and the other filings that we make with the U.S. Securities and Exchange Commission (the “SEC”).

Risks Related to Our Business and Our Operations

•Inflation in the global economy and adverse global economic conditions, like the ones we are currently experiencing, could negatively affect our business and financial condition.

•We are currently operating in a period of economic uncertainty and capital markets disruption, which has been the result of many global macro-economic factors including the ongoing military conflict between Russia and Ukraine. Our business, financial condition, and results of operations may be materially adversely affected by the negative impact on the global economy, supply chain and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

•The effects of the COVID-19 pandemic could have a negative effect on our business, results of operations and financial condition.

•Our business could be harmed by increased cost to procure power, prolonged power outages, shortages or capacity constraints.

•Fluctuations in foreign currency exchange rates in the markets in which we operate internationally could harm our results of operations.

•We experienced an information technology security breach in the past and may be vulnerable to future security breaches, which could disrupt our operations and have a material adverse effect on our business, results of operation and financial condition.

•Our offerings have a long sales cycle that may harm our revenue and results of operations.

•Any failure of our physical infrastructure or negative impact on our ability to meet our obligations to our customers, or damage to customer infrastructure within our IBX data centers, could lead to significant costs and disruptions that could reduce our revenue and harm our business reputation and financial condition.

•We are currently making significant investments in our back-office information technology systems and processes. Difficulties from or disruptions to these efforts may interrupt our normal operations and adversely affect our business and results of operations.

•The level of insurance coverage that we purchase may prove to be inadequate.

•If we are unable to implement our evolving organizational structure or if we are unable to recruit or retain key executives and qualified personnel, our business could be harmed.

•We may not be able to compete successfully against current and future competitors.

•If we cannot continue to develop, acquire, market and provide new offerings or enhancements to existing offerings that meet customer requirements and differentiate us from our competitors, our results of operations could suffer.

•Our results of operations may fluctuate.

•We may incur goodwill and other intangible asset impairment charges, or impairment charges to our property, plant and equipment, which could result in a significant reduction to our earnings.

•We have incurred substantial losses in the past and may incur additional losses in the future.

•The failure to obtain favorable terms when we renew our IBX data center leases, or the failure to renew such leases, could harm our business and results of operations.

•We depend on a number of third parties to provide internet connectivity to our IBX data centers; if connectivity is interrupted or terminated, our results of operations and cash flow could be materially and adversely affected.

•We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties.

•Because we depend on the development and growth of a balanced customer base, including key magnet customers, failure to attract, grow and retain this base of customers could harm our business and results of operations.

•Industry consolidation may have a negative impact on our business model.

•The use of high power density equipment may limit our ability to fully utilize our older IBX data centers.

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Risks Related to Our Expansion Plans

•Our construction of new IBX data centers or IBX data center expansions could involve significant risks to our business.

•Acquisitions present many risks, and we may not realize the financial or strategic goals that were contemplated at the time of any transaction.

•The anticipated benefits of our joint ventures may not be fully realized, or take longer to realize than expected.

•Joint venture investments could expose us to risks and liabilities in connection with the formation of the new joint ventures, the operation of such joint ventures without sole decision-making authority, and our reliance on joint venture partners who may have economic and business interests that are inconsistent with our business interests.

•If we cannot effectively manage our international operations, and successfully implement our international expansion plans, or comply with evolving laws and regulations, our revenues may not increase, our costs may increase and our business and results of operations would be harmed.

•We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future to realize expected returns on these investments.

Risks Related to Our Capital Needs and Capital Strategy

•Our substantial debt could adversely affect our cash flows and limit our flexibility to raise additional capital.

•Sales or issuances of shares of our common stock may adversely affect the market price of our common stock.

•If we are not able to generate sufficient operating cash flows or obtain external financing, our ability to fund incremental expansion plans may be limited.

•Our derivative transactions expose us to counterparty credit risk.

Risks Related to Environmental Laws and Climate Change Impacts

•Environmental regulations may impose upon us new or unexpected costs.

•Our business may be adversely affected by climate change and responses to it.

•We may fail to achieve our environmental goals which may adversely affect public perception of our business and affect our relationship with our customers, our stockholders and/or other stakeholders.

Risks Related to Certain Regulations and Laws, Including Tax Laws

•Changes in U.S. or foreign tax laws, regulations, or interpretations thereof, including changes to tax rates, may adversely affect our financial statements and cash taxes.

•Government regulation or failure to comply with laws and regulations may adversely affect our business.

Risks Related to Our Taxation as a REIT

•We have a number of risks related to our intended qualification as a real estate investment trust for federal income tax purposes ("REIT"), including the risk that we may not be able to maintain our qualification as a REIT which could expose us to substantial corporate income tax and have a materially adverse effect on our business, financial condition, and results of operations.

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PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,891,311	$	1,536,358

Accounts receivable, net of allowance of $13,914 and $11,635	812,769		681,809
Other current assets	514,313		462,739
Assets held for sale	71,554		276,195
Total current assets	3,289,947		2,957,101

Property, plant and equipment, net	15,455,180		15,445,775
Operating lease right-of-use assets	1,453,233		1,282,418
Goodwill	5,585,330		5,372,071
Intangible assets, net	1,982,434		1,935,267
Other assets	1,272,090		926,066
Total assets	$	29,038,214	$	27,918,698
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	841,473	$	879,144
Accrued property, plant and equipment	244,267		187,334
Current portion of operating lease liabilities	140,667		144,029
Current portion of finance lease liabilities	144,100		147,841
Current portion of mortgage and loans payable	34,086		33,087

Other current liabilities	204,351		214,519

Total current liabilities	1,608,944		1,605,954
Operating lease liabilities, less current portion	1,291,447		1,107,180
Finance lease liabilities, less current portion	1,985,498		1,989,668
Mortgage and loans payable, less current portion	655,331		586,577
Senior notes, less current portion	12,077,756		10,984,144
Other liabilities	789,644		763,411
Total liabilities	18,408,620		17,036,934
Commitments and contingencies (Note 11)
Equinix stockholders' equity
Common stock, $0.001 par value per share: 300,000,000 shares authorized; 91,340,481 issued and 91,075,115 outstanding in 2022 and 90,872,826 issued and 90,571,406 outstanding in 2021	91		91
Additional paid-in capital	16,259,311		15,984,597
Treasury stock, at cost; 265,366 shares in 2022 and 301,420 shares in 2021	(98,792)		(112,208)
Accumulated dividends	(6,736,338)		(6,165,140)
Accumulated other comprehensive loss	(1,418,756)		(1,085,751)
Retained earnings	2,624,268		2,260,493
Total Equinix stockholders' equity	10,629,784		10,882,082
Non-controlling interests	(190)		(318)
Total stockholders' equity	10,629,594		10,881,764
Total liabilities and stockholders' equity	$	29,038,214	$	27,918,698

See accompanying notes to condensed consolidated financial statements.

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EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Unaudited)
Revenues	$	1,817,154	$	1,657,919	$	3,551,601	$	3,253,983
Costs and operating expenses:
Cost of revenues	930,257		865,120		1,846,132		1,676,337
Sales and marketing	193,727		185,610		386,238		368,437
General and administrative	370,348		322,005		723,035		623,461
Transaction costs	5,063		6,985		9,303		8,167

(Gain) loss on asset sales	(94)		(455)		1,724		1,265
Total costs and operating expenses	1,499,301		1,379,265		2,966,432		2,677,667
Income from operations	317,853		278,654		585,169		576,316
Interest income	4,508		374		6,614		1,103
Interest expense	(90,826)		(87,231)		(170,791)		(176,912)
Other expense	(6,238)		(39,377)		(15,787)		(46,327)
Gain (loss) on debt extinguishment	(420)		(102,460)		109		(115,518)
Income before income taxes	224,877		49,960		405,314		238,662
Income tax (expense) benefit	(8,635)		18,527		(41,379)		(14,101)
Net income	216,242		68,487		363,935		224,561
Net (income) loss attributable to non-controlling interests	80		(148)		(160)		140
Net income attributable to Equinix	$	216,322	$	68,339	$	363,775	$	224,701
Earnings per share ("EPS") attributable to Equinix:
Basic EPS	$	2.38	$	0.76	$	4.00	$	2.51
Weighted-average shares for basic EPS	91,036		89,648		90,904		89,490
Diluted EPS	$	2.37	$	0.76	$	3.99	$	2.50
Weighted-average shares for diluted EPS	91,262		90,104		91,213		90,024

See accompanying notes to condensed consolidated financial statements.

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EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Unaudited)
Net income	$	216,242	$	68,487	$	363,935	$	224,561
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment ("CTA") gain (loss), net of tax effects of $0, $0, $0 and $0	(740,428)		110,466		(862,962)		(184,680)
Net investment hedge CTA gain (loss), net of tax effect of $0, $0, $0 and $0	353,953		(37,036)		445,311		133,139

Unrealized gain (loss) on cash flow hedges, net of tax effects of $(7,291), $(447), $(12,018) and $(8,339)	20,617		(5,700)		84,654		23,778
Net actuarial gain (loss) on defined benefit plans, net of tax effects of $5, $(3), $9 and $(8)	(19)		15		(40)		27
Total other comprehensive income (loss), net of tax	(365,877)		67,745		(333,037)		(27,736)
Comprehensive income, net of tax	(149,635)		136,232		30,898		196,825
Net (income) loss attributable to non-controlling interests	80		(148)		(160)		140
Other comprehensive (income) loss attributable to non-controlling interests	35		(11)		32		(10)
Comprehensive income attributable to Equinix	$	(149,520)	$	136,073	$	30,770	$	196,955

See accompanying notes to condensed consolidated financial statements.

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EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended June 30,
	2022		2021
	(Unaudited)
Cash flows from operating activities:
Net income	$	363,935	$	224,561
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	767,166		706,184
Stock-based compensation	194,634		172,685
Amortization of intangible assets	101,444		105,074
Amortization of debt issuance costs and debt discounts and premiums	8,740		8,370
Provision for credit loss allowance	4,198		5,751

Loss on asset sales	1,724		1,265

(Gain) loss on debt extinguishment	(109)		115,518
Other items	8,288		17,545
Changes in operating assets and liabilities:
Accounts receivable	(127,029)		(57,329)
Income taxes, net	(19,782)		(65,935)
Other assets	10,259		(57,280)
Operating lease right-of-use assets	74,239		61,775
Operating lease liabilities	(66,372)		(100,328)
Accounts payable and accrued expenses	(20,852)		(57,201)
Other liabilities	82,221		(90,300)
Net cash provided by operating activities	1,382,704		990,355
Cash flows from investing activities:
Purchases of investments	(87,022)		(25,001)
Sales of investments	22,073		4,057
Business acquisitions, net of cash and restricted cash acquired	(883,668)		—
Real estate acquisitions	(33,331)		(87,637)
Purchases of other property, plant and equipment	(897,348)		(1,255,830)
Proceeds from sale of assets, net of cash transferred	251,415		—
Net cash used in investing activities	(1,627,881)		(1,364,411)
Cash flows from financing activities:
Proceeds from employee equity awards	43,876		40,034
Payment of dividends	(572,717)		(521,092)
Proceeds from public offering of common stock, net of issuance costs	—		99,599
Proceeds from senior notes, net of debt discounts	1,193,688		3,878,662
Proceeds from mortgage and loans payable	676,850		—
Repayments of finance lease liabilities	(69,556)		(98,877)
Repayments of mortgage and loans payable	(561,032)		(696,059)
Repayment of senior notes	—		(1,990,650)
Debt extinguishment costs	—		(99,185)
Debt issuance costs	(17,731)		(25,102)

Net cash provided by financing activities	693,378		587,330
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash	(96,536)		(17,054)

Net increase in cash, cash equivalents and restricted cash	351,665		196,220
Cash, cash equivalents and restricted cash at beginning of period	1,549,454		1,625,695
Cash, cash equivalents and restricted cash at end of period	$	1,901,119	$	1,821,915

Cash and cash equivalents	$	1,891,311	$	1,799,727
Current portion of restricted cash included in other current assets	8,943		12,994
Non-current portion of restricted cash included in other assets	865		9,194
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows	$	1,901,119	$	1,821,915

See accompanying notes to condensed consolidated financial statements.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Equinix, Inc. (collectively with its consolidated subsidiaries referred to as "Equinix," the "Company," "we," "our," or "us") and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the financial position and the results of operations for the interim periods presented. In the preparation of our condensed consolidated financial statements, we have considered potential impacts of the COVID-19 pandemic on our critical and significant accounting estimates. There was no significant impact to our condensed consolidated financial statements. We will continue to evaluate the nature and extent of the potential impacts to our business and our condensed consolidated financial statements.

Our condensed consolidated balance sheet data as of December 31, 2021 has been derived from audited consolidated financial statements as of that date. Our condensed consolidated financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission ("SEC"), but omit certain information and footnote disclosure necessary to present the statements in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For further information, refer to the Consolidated Financial Statements and Notes thereto included in our Form 10-K as filed with the SEC on February 18, 2022. Results for the interim periods are not necessarily indicative of results for the entire fiscal year.

Consolidation

The accompanying unaudited condensed consolidated financial statements include the acquisitions of:

•Two data centers in Mumbai, India from the India operations of GPX Global Systems, Inc. ("GPX India") from September 1, 2021;

•Four data centers as well as a subsea cable and terrestrial fiber network in West Africa acquired from MainOne Cable Company ("MainOne") from April 1, 2022; and

•Four data centers in Chile acquired from Empresa Nacional De Telecomunicaciones S.A. ("Entel") from May 2, 2022.

All intercompany accounts and transactions have been eliminated in consolidation.

Income Taxes

We elected to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") beginning with our 2015 taxable year. As a result, we may deduct the dividends paid to our stockholders from taxable income generated by our REIT and qualified REIT subsidiaries ("QRSs"). Our dividends paid deduction generally eliminates the U.S. federal taxable income of our REIT and QRSs, resulting in no U.S. federal income tax due. However, our domestic taxable REIT subsidiaries ("TRSs") are subject to U.S. corporate income taxes on any taxable income generated by them. In addition, our foreign operations are subject to local income taxes regardless of whether the foreign operations are operated as QRSs or TRSs.

We accrue for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as our operating performance, tax law changes and future business acquisitions.

Our effective tax rates were 10.2% and 5.9% for the six months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate for the six months ended June 30, 2022 as compared to the same period in 2021 was primarily due to the reversal of uncertain tax positions of approximately $72.0 million in the prior period resulting from the settlement of various tax audits in the EMEA and Asia-Pacific regions. In the current period, we had a favorable resolution from the settlement of tax audits in the EMEA region, resulting in a tax benefit of approximately $41.4 million.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Of the unrecognized tax benefits realized in the prior period, approximately $33.6 million was related to the uncertain tax position inherited from the Metronode Acquisition in 2018. The uncertain tax position was covered by an indemnification agreement with the seller. The realization of the unrecognized tax benefits resulted in an impairment of the indemnification asset for the same amount, which was included in Other Income (Expense) on the Condensed Consolidated Statements of Operations.

Recent Accounting Pronouncements

Accounting Standards Adopted

Income Taxes

In December 2019, FASB issued ASU 2019-12, Income Taxes ("Topic 740"): Simplifying the Accounting for Income Taxes. The ASU simplifies accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The ASU also improves consistent application of and simplifies generally accepted accounting principles ("GAAP") for other areas of Topic 740 by clarifying and amending existing guidance. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted including adoption in any interim period for periods for which financial statements have not yet been issued. On January 1, 2021, we adopted this ASU on a prospective basis and the adoption of this standard did not have an impact on our condensed consolidated financial statements.

Debt with Conversion and Other Options

In August 2020, FASB issued ASU 2020-06: Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock and modifies the disclosure requirement for the convertible instruments. Additionally, this ASU improves the consistency of EPS calculations by eliminating the use of the treasury stock method to calculate diluted EPS for convertible instruments and clarifies certain areas under the current EPS guidance. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted at the beginning of the fiscal year after December 15, 2020. On January 1, 2022, we adopted this ASU on a prospective basis and the adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Business Combinations

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08 Business Combinations ("Topic 805"): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. On April 1, 2022, we early adopted this ASU and the adoption of this standard did not have a material impact on our condensed consolidated financial statements.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

2. Revenue

Contract Balances

The following table summarizes the opening and closing balances of our accounts receivable, net; contract assets, current; contract assets, non-current; deferred revenue, current; and deferred revenue, non-current (in thousands):


	Accounts receivable, net (1)		Contract assets, current		Contract assets, non-current		Deferred revenue, current		Deferred revenue, non-current
Beginning balances as of January 1, 2022	$	681,809	$	65,392	$	55,486	$	109,736	$	87,495
Closing balances as of June 30, 2022	812,769		66,693		61,290		128,461		162,024
Increase	$	130,960	$	1,301	$	5,804	$	18,725	$	74,529

(1) The net change in our allowance for credit losses was insignificant during the three months ended June 30, 2022.

The difference between the opening and closing balances of our accounts receivable, net, contract assets and deferred revenues primarily results from revenue growth, contract assets and liabilities acquired from the MainOne acquisition and the timing difference between the satisfaction of our performance obligation and the customer's payment. The amount of revenue recognized during the six months ended June 30, 2022 from the opening deferred revenue balance as of January 1, 2022 was $51.8 million.

Remaining performance obligations

As of June 30, 2022, approximately $9.5 billion of total revenues, including deferred installation revenues, are expected to be recognized in future periods. Most of our revenue contracts have an initial term varying from one to three years, and thereafter, automatically renew in one-year increments. Included in the remaining performance obligations are contracts that are either under the initial term or under one-year renewal periods. We expect to recognize approximately 70% of our remaining performance obligations as revenues over the next two years, with more revenues expected to be recognized in the first year due to the impact of contract renewals. The remainder of the balance is generally expected to be recognized over the next three to five years. We estimate our remaining performance obligations at a point in time. Actual amounts and timing of revenue recognition may differ from these estimates due to changes in actual deployments dates, contract modifications, renewals and/or terminations.

The remaining performance obligations do not include variable consideration related to unsatisfied performance obligations such as the usage of metered power, point-in-time services, service fees from xScaleTM data centers, which are calculated based on future events or actual costs incurred in the future, or any contracts that could be terminated without any significant penalties such as the majority of interconnection revenues. The remaining performance obligations above include revenues to be recognized in the future related to arrangements where we are considered the lessor.

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EQUINIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

3. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share ("EPS") for the periods presented (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	216,242	$	68,487	$	363,935	$	224,561
Net (income) loss attributable to non-controlling interests	80		(148)		(160)		140
Net income attributable to Equinix	$	216,322	$	68,339	$	363,775	$	224,701

Weighted-average shares used to calculate basic EPS	91,036		89,648		90,904		89,490
Effect of dilutive securities:
Employee equity awards	226		456		309		534
Weighted-average shares used to calculate diluted EPS	91,262		90,104		91,213		90,024

EPS attributable to Equinix:
Basic EPS	$	2.38	$	0.76	$	4.00	$	2.51
Diluted EPS	$	2.37	$	0.76	$	3.99	$	2.50

We have excluded common stock related to employee equity awards in the diluted EPS calculation above of approximately 409,000 shares and 248,000 shares for the three months ended June 30, 2022 and 2021, respectively, and approximately 393,000 and 199,000 shares for the six months ended June 30, 2022 and 2021, because their effect would be anti-dilutive.

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4. Acquisitions

Pending Acquisition

Acquisition of Entel Peru Data Center (the "Entel Peru Acquisition")

On April 27, 2022, we signed an agreement with Entel to acquire a data center in Peru for a purchase price of PEN270.8 million, or approximately $70.7 million at the exchange rate in effect on that date. The acquisition of the data center in Peru is expected to close in the third quarter of 2022, pending the achievement of certain closing conditions, and will be accounted for as a separate transaction. After close of the acquisition, the operating results of the acquired data center will be reported in the Americas region. The Entel Peru Acquisition further supports our ongoing expansion to meet customer demand in the Latin American market.

2022 Acquisitions

Acquisition of Entel Chile Data Centers (the "Entel Chile Acquisition")

On May 2, 2022, we further expanded in Latin America through an acquisition of four data centers from Entel, a leading Chilean telecommunications provider, for a total purchase consideration of $638.3 million at the exchange rate in effect on that date. The Entel Chile Acquisition supports our ongoing expansion to meet customer demand in the Latin American market.

Acquisition of MainOne (the "MainOne Acquisition")

On April 1, 2022, we completed the acquisition of all outstanding shares of MainOne, consisting of four data centers as well as a subsea cable and terrestrial fiber network. We acquired MainOne and its assets for a total purchase consideration of $278.4 million. The MainOne Acquisition supports our desire to meet customer demand in the West African market.

2021 Acquisition

Acquisition of GPX India (the "GPX India Acquisition")

On September 1, 2021, we completed the acquisition of GPX India, representing two data centers in Mumbai, India, for a total purchase consideration of approximately INR12.5 billion, or $170.5 million at the exchange rate in effect on that date. The GPX India Acquisition supports our desire to meet customer demand in the Indian market.

Purchase Price Allocation

Each of the acquisitions noted above constitute a business under the accounting standard for business combinations and, therefore, were accounted for as business combinations using the acquisition method of accounting. Under this method, the total purchase price is allocated to the assets acquired and liabilities assumed measured at fair value on the date of acquisition.

As of June 30, 2022, we had not completed the detailed valuation analysis to derive the fair value of assets acquired and liabilities assumed from the Entel Chile Acquisition and MainOne Acquisition, including property, plant and equipment, intangible assets and the related tax impacts; therefore, the purchase price allocation is based on provisional estimates and subject to continuing management analysis.

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A summary of the allocation of total purchase consideration is presented as follows (in thousands):


	GPX India		Entel Chile		MainOne
	Final		Provisional
Cash and cash equivalents	$	9,406	$	—	$	33,026
Accounts receivable	4,399		—		9,431
Other current assets	8,883		12,424		22,634
Property, plant and equipment	88,130		81,132		237,988
Operating lease right-of-use assets	62		—		—
Intangible assets	15,408		153,489		54,800
Goodwill	77,145		380,867		117,529
Deferred tax and other assets	20		12,090		4,060
Total assets acquired	203,453		640,002		479,468
Accounts payable and accrued liabilities	(1,566)		(195)		(19,790)
Other current liabilities (1)	(478)		—		(13,061)
Operating lease liabilities	(62)		—		—
Finance lease liabilities	(20,565)		—		—
Mortgage and loans payable	—		—		(25,944)
Deferred tax and other liabilities (1)	(10,317)		(1,463)		(142,323)
Net assets acquired	$	170,465	$	638,344	$	278,350

(1)For the MainOne Acquisition, other current liabilities includes $9.9 million of deferred revenue - current and the other liabilities includes $95.4 million of deferred revenue - non-current.

Property, plant and equipment - The fair values of property, plant and equipment acquired from these three acquisitions were estimated by applying the cost approach, with the exception of land, which we estimated by applying the market approach. The key assumptions of the cost approach include replacement cost new, physical deterioration, functional and economic obsolescence, economic useful life, remaining useful life, age and effective age.

Intangible assets - The following table presents certain information on the acquired intangible assets (in thousands):


Intangible Assets	Fair Value		Estimated Useful Lives (Years)	Weighted-average Estimated Useful Lives (Years)	Discount Rate
GPX India:
Customer relationships (1)	$	15,408	15.0	15.0	11.0	%
Entel Chile:
Customer relationships (1)	153,489		12.0 - 15.0	14.0	8.5% - 9.5%
MainOne:
Customer relationships (1)	51,500		10.0 - 15.0	14.0	11.5	%
Trade names (2)	3,300		5.0	5.0	11.5	%

(1)The fair value was estimated by calculating the present value of estimated future operating cash flows generated from existing customers less costs to realize the revenue. The rates reflect the nature of the assets as they relate to the risk and uncertainty of the estimated future operating cash flows, as well as the risk of the country within which the acquired business operates.

(2)The fair value of the MainOne trade name was estimated using the relief from royalty method under the income approach. We applied a relief from royalty rate of 1.0%.

Goodwill

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Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill is attributable to the workforce of the acquired business and the projected revenue increase expected to arise from future customers after the acquisition. Goodwill from the GPX India Acquisition is attributable to the Asia-Pacific region and is not deductible for local tax purposes. Goodwill from the Entel Chile Acquisition is attributable to the Americas region and is not expected to be amortizable for local tax purposes. Goodwill from the MainOne Acquisition is attributable to the EMEA region and is not deductible for local tax purposes except for the portion attributable to Ghana.

Revenues and net income and loss from operations

The operating results of the Entel Chile Acquisition are reported in the Americas region and the operating results of the MainOne Acquisition are reported in the EMEA region following the date of acquisition. During the three and six months ended June 30, 2022, our revenues were $27.0 million and our net income was insignificant from these acquisitions.

Transaction costs

During the three and six months ended June 30, 2022, the transaction costs for the MainOne Acquisition and Entel Chile Acquisition were insignificant.

5. Assets Held for Sale

In June 2021, we entered into an agreement to form another joint venture in the form of a limited liability partnership with GIC Private Limited, Singapore's sovereign wealth fund ("GIC"), to develop and operate additional xScale data centers in Europe and the Americas (the “EMEA 2 Joint Venture”). The transaction is structured to close in phases over the course of two years, pending regulatory approval and other closing conditions. The assets and liabilities of the Warsaw 4 ("WA4") data center site, which were included within our EMEA region, were classified as held for sale as of June 30, 2021. In June 2022, we sold the WA4 data center in exchange for a total consideration of $61.5 million. During the three months ended June 30, 2022, we recognized an insignificant gain on the sale of the WA4 data center.

In October 2021, we entered into an agreement to form a joint venture in the form of a limited liability partnership with PGIM Real Estate ("PGIM"), to develop and operate xScaleTM data centers in Asia-Pacific (the "Asia-Pacific 2 Joint Venture"). xScale data centers are engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments and also offer access to our comprehensive suite of interconnection and edge services. The assets and liabilities of the Sydney 9 ("SY9") data center site, which were included within our Asia-Pacific region, were classified as held for sale as of September 30, 2021. Upon closing the joint venture in March 2022, we sold the SY9 data center in exchange for a total consideration of $201.3 million, which is comprised of $165.6 million of net cash proceeds, a 20% partnership interest in the Asia-Pacific 2 Joint Venture with a fair value of $29.8 million, and $5.9 million of receivables. During the three months ended March 31, 2022, we recognized an insignificant loss on the sale of the SY9 data center.

In March 2022, we entered into an agreement to sell the Mexico 3 ("MX3") data center site in connection with the formation of a new joint venture with GIC (the "AMER 1 Joint Venture") to develop and operate xScale data centers in the Americas. Given that the key terms of the sale had been substantially agreed upon as of September 30, 2021, the assets and liabilities of the MX3 data center, which are currently included within our Americas region, were classified as held for sale as of September 30, 2021 and remained held for sale as of June 30, 2022.

All assets and liabilities classified as held for sale are reported at the lower of their carrying amounts or fair values less costs to sell. The following table summarizes the assets and liabilities that were classified as assets and liabilities held for sale in the condensed consolidated balance sheet as of June 30, 2022 (in thousands):

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	June 30, 2022

Operating lease right-of-use assets	$	1,976
Property, plant and equipment	66,440
Other assets	3,138
Total assets held for sale	$	71,554

Accounts payable and accrued expenses	$	290
Current portion of operating lease liabilities	1,353

Accrued property, plant and equipment	5,877
Total liabilities held for sale (1)	$	7,520

(1)Liabilities held for sale were included within other current liabilities on the condensed consolidated balance sheet.

6. Equity Method Investments

We hold various equity method investments, primarily joint venture or partnership arrangements, in order to invest in certain entities that are in line with our business development objectives, including the development and operation of xScale data centers. Some of these xScale joint ventures are classified as Variable Interest Entities ("VIEs"), as discussed further below. The Asia-Pacific 1, Asia-Pacific 2, Asia-Pacific 3 and EMEA 2 Joint Ventures (the "VIE Joint Ventures") share a similar purpose, design and nature of assets. The following table summarizes our equity method investments (in thousands), which were included in other assets on the condensed consolidated balance sheets:


Investee	Ownership Percentage	June 30, 2022		December 31, 2021
EMEA 1 Joint Venture with GIC	20%	$	127,008	$	131,516
VIE Joint Ventures	20%	156,307		95,052
Other	Various	18,634		18,481
Total		$	301,949	$	245,049

Non - VIE Joint Venture

EMEA 1 Joint Venture

In 2019, we entered into a joint venture in the form of a limited liability partnership with GIC (the "EMEA 1 Joint Venture"), to develop and operate xScale data centers in Europe. The EMEA 1 Joint Venture is not a VIE given that both equity investors' interests have the characteristics of a controlling financial interest and it is sufficiently capitalized to sustain its operations, requiring additional funding from its partners only when expanding operations. Our share of income and losses of equity method investments from this joint venture was insignificant for the three and six months ended June 30, 2022 and 2021 and was included in other income (expense) on the condensed consolidated statement of operations.

We committed to make future equity contributions to the EMEA 1 Joint Venture for funding its future development. As of June 30, 2022, we had future equity contribution commitments of $33.0 million.

VIE Joint Ventures

In 2020, we entered into a joint venture in the form of a limited liability partnership with GIC (the "Asia-Pacific 1 Joint Venture") to develop and operate xScale data centers in Asia-Pacific.

In 2021, we entered into the EMEA 2 Joint Venture with GIC to develop and operate additional xScale data centers in Europe and the Americas (see Note 5 above).

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On March 11, 2022, we entered into the Asia-Pacific 2 Joint Venture with PGIM to develop and operate additional xScale data centers in Asia-Pacific (see Note 5 above).

On April 6, 2022, we entered into a joint venture in the form of a limited liability partnership with GIC (the "Asia-Pacific 3 Joint Venture") to develop and operate additional xScale data centers in Seoul, Korea. Upon closing, we contributed $17.0 million in exchange for a 20% partnership interest in the joint venture.

The VIE Joint Ventures are considered VIEs because they do not have sufficient funds from operations to be self-sustaining. While we provide certain management services to their operations and earn fees for the performance of such services, the power to direct the activities of these joint ventures that most significantly impact economic performance is shared equally between us and either GIC or PGIM, as applicable. These activities include data center construction and operations, sales and marketing, financing, and real estate purchases or sales. Decisions about these activities require the consent of both Equinix and either GIC or PGIM, as applicable. We concluded that neither party is deemed to have predominant control over the VIE Joint Ventures and neither party is considered to be the primary beneficiary. During the three and six months ended June 30, 2022, our share of income and losses of equity method investments from these joint ventures was insignificant both individually and in aggregate, and was included in other income (expense) on the condensed consolidated statement of operations.

The following table summarizes our maximum exposure to loss related to the VIE Joint Ventures as of June 30, 2022 (in thousands):


	VIE Joint Ventures
Equity Investment	$	156,307
Outstanding Receivables	16,204
Future Equity Contribution Commitments (1)	71,357
Maximum Future Payments under Debt Guarantees (2)	55,433
Total	$	299,301

(1)The joint ventures' partners are required to make additional equity contributions proportionately upon certain occurrences, such as a shortfall in capital necessary to complete certain construction phases or make interest payments on their outstanding debt.

(2)In connection with our 20% equity investment in the EMEA 2 Joint Venture, we provided the lenders with our guarantees covering 20% of all payments of principal and interest due under EMEA 2 Joint Venture's credit facility agreements (see Note 11).

Other Related Party Transactions

We have lease arrangements and provide various services to the EMEA 1 Joint Venture and the VIE Joint Ventures (the "Joint Ventures") through multiple agreements, including sales and marketing, development management, facilities management, and asset management. These transactions are generally considered to have been negotiated at arm's length. The following table presents the revenues and expenses from these arrangements with the Joint Ventures in our condensed consolidated statements of operations (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
Related Party	Nature of Transaction	2022		2021		2022		2021
EMEA 1 Joint Venture	Revenues	$	18,880	$	13,230	$	25,182	$	18,849
EMEA 1 Joint Venture	Expenses (1)	(916)		2,101		3,412		4,604
VIE Joint Ventures	Revenues	13,185		12,187		20,187		14,445

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(1)We have a sub-lease agreement with the EMEA 1 Joint Venture to sub-lease a portion of London ("LD") 10-2 data center or former LD10 data center, for a total of 15 years. Balances primarily consist of rent expenses for the LD10-2 data center.

The following table presents the assets and liabilities from related party transactions with the Joint Ventures in our condensed consolidated balance sheets (in thousands):


Related Party	Balance Sheet Line Item	June 30, 2022		December 31, 2021
EMEA 1 Joint Venture	Receivables	$	33,399	$	32,077
	Contract Assets (1)	55,795		54,503
	Finance Lease Right of Use Assets	104,842		118,817
	Other Liabilities and Payables	2,277		2,483
	Other Liabilities and Payables - construction obligation (2)	35,936		39,382
	Deferred Revenue	15,563		16,886
	Finance Lease Right of Use Liabilities	110,829		124,918
VIE Joint Ventures	Receivables	16,204		29,077
	Contract Assets	5,050		1,492
	Payables	—		1,876

(1)A portion of the contract asset balance relates to commitments to complete a residual portion of the Paris 9 data center sold to the EMEA 1 Joint Venture, which is reimbursable in full upon completion.

(2)The balance primarily relates to the obligation to pay for future construction for certain sites sold as a part of the EMEA 1 Joint Venture transaction.

We received contingent consideration from separate sales of xScale data centers to the EMEA 1 Joint Venture, which become receivable upon completion of certain performance milestones, primarily contingent on the local regulatory approvals for certain sites. The contingent consideration are considered derivatives and are remeasured at fair value each reporting period using inputs such as probabilities of payment, discount rates, foreign currency forward rates and projected payment dates. The fair value measurements were based on significant inputs that are not observable in the market and thus represent Level 3 measurements. As of June 30, 2022 and December 31, 2021, the total fair value of the remaining contingent consideration which was included in other current assets on the condensed consolidated balance sheets was not significant. Changes in the fair value of the contingent consideration were recorded in gain (loss) on asset sales on the condensed consolidated statement of operations.

7. Derivatives and Hedging Activities

Derivatives Designated as Hedging Instruments

Net Investment Hedges. We are exposed to the impact of foreign exchange rate fluctuations on the value of investments in our foreign subsidiaries whose functional currencies are other than the U.S. Dollar. In order to mitigate the impact of foreign currency exchange rates, we have entered into various foreign currency debt obligations, which are designated as hedges against our net investments in foreign subsidiaries. As of June 30, 2022 and December 31, 2021, the total principal amounts of foreign currency debt obligations designated as net investment hedges was $1.8 billion and $1.5 billion, respectively.

We also use cross-currency interest rate swaps, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt, to hedge the currency exposure associated with our net investment in our foreign subsidiaries. As of June 30, 2022 and December 31, 2021, we had cross-currency interest rate swaps outstanding with notional amounts of $3.9 billion and $4.0 billion respectively, with maturity dates ranging through 2026.

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From time to time, we use foreign currency forward contracts to hedge against the effect of foreign exchange rate fluctuations on our net investment in our foreign subsidiaries. As of June 30, 2022 and December 31, 2021, the total notional amount of foreign currency forward contracts designated as net investment hedges were $373.4 million and $375.7&#