Charles Meyers: The short answer is absolutely. We’re going to continue to grow the overall platform on the xScale side and retail side, but I think clearly there is a ton of demand out there, and we think we have a very, very credible story. And I think, as you said, the leasing momentum that we have generated over the last several quarters is quite indicative of that. And so yeah, what we have left, we feel confident we’re going to be able to lease effectively and as I said in the script, we’re also excited to give you updates on what we have talked about pretty openly, and we’ve announced the SV12x asset, the first xScale in the Americas, but we also are deeply engaged in a set of conversations around how we’re going to expand our xScale platform in the US and the Americas more broadly.
And so we don’t have anything specific to share with you, but we will in the not-too-distant future, and we look forward to that conversation. In terms of — now we’re not yet prepared to sort of size that precisely, but I will say that when you look back at what we said when we first talked about xScale at the Analyst Day, I don’t know when that was, ’18 or something, and what we said was what we thought it was going to be. It’s certainly proven to be a lot more than that. And I think it continues to be a super exciting opportunity. Very proud of the team that continues to run that business for us, and they’re doing great things and we’re excited about the value that deliver for our customers.
Aryeh Klein: And then just separately, you noted some of the reasons that cabinet adds were soft in the quarter, and you talked about seeing better growth in the second half of the year. Can you just talk about what underpins that? And is that coming from backlog? Or is there an assumption in there around some of the longer sales cycle times moderating?
Charles Meyers: I mean, the billable cabs, it comes from a few different things. You’re right. We’ve always talked about the volatility in billable cabs based partially on timing of installs. It’s not so much a longer sales cycle. Sometimes, it is a bit of a longer install cycle, and so depending on the timing of installs and in fact the timing of churn, you can see volatility in any quarter. That’s why we’ve always sort of told people over the years to look at a rolling four-quarter metric, but even that has really been under pressure, and has been under pressure primarily because of power density, and I think that kind of makes sense to people, but we’re realizing, I think, that we really need to give people a bit more to hang their hat on relative to that particular metric.
So let me give you some of the math, I think, that will help people understand the billable cabs metric and how it plays here and what’s causing the bit of pressure on that. We guide the 2% to 2.5% churn rate on our recurring revenue each quarter. So we’re running today at an MRR run rate of about $667 million. So if you take 2% of that figure, at the low end of the range, so you’re at $13 million to $14 million in MRR churn in any given quarter. As we said, our MRR per cab is averaging right now at 2,258. So if you take that and divide those two together, you’d be churning roundabout 6,000 cabs in any given quarter. And more than that, if we’re churning cabs that are at a lower-than-average MRR per cab, which candidly we would hope to be doing, if you’re going to churn some cabs, it should be ones that are below the average, right?
And so in Q1, we were churning cabs that were at an average of 4.4 kilowatts. We were adding back cabs at an average of 5.8 kilowatts. And so when you do that math, all in, in terms of that relatively large gap in density, you’re looking at about a 1,500-cab hole that you’ve got to fill. So actually, staying flat on cabs is really a pretty significant win. The density increase that’s causing that sort of hole in the bucket on cab count though is a really important factor in driving the MRR per cab. So if you go and if you look at our year-over-year growth on billable cabs, Q1 to Q1, last year to this year, it’s softer for sure. It’s only up about 1%. But over that same time frame, our MRR per cab is up 6% across the estate, and so you add those two together and the composite gives you that 7% growth.
So long way of saying that, in other words that stable to slightly growing cab count is certainly a different dynamic than what we have seen. But the growth is coming. It’s just coming in a slightly different shape. And so we’re still driving the growth in the business and getting the economic returns that we were anticipating. So I think that, for us, rather than looking for a new indicator, I think, what we’re going to look to do is moderate expectations on the cab growth and say, look, we’re having to cover that whole quarter-over-quarter from a density standpoint, but it’s really driving the MRR per cab, and it’s the composite of those two things that really give you the solid growth model going forward.
Operator: The next question comes from David Barden of Bank of America.
David Barden: So Keith, just the first question would be, based on what Charles was just saying and the explanations that he’s been having to make about this interpretation of MRR per cabinet and power density and cabinet numbers, where are we on the creation of these new metrics that I think we’ve been talking about for six months? And the second question, if I could, would be, it’s great that the audit committee hired these independent advisors and it exonerated itself and the company and all the words that were used. But how much daylight is there between what you looked at and what the SEC and the DOJ are looking at and your comfort factor that we’ve buttoned this thing up, and in what time frame can we expect a resolution to that?
Charles Meyers: I’m trying to decide which order to take them in. We feel like we’ve got the metrics that we need and I think there’s a lot of complexity to introducing new metrics to the — and so I think that the MRR per cab, even though it’s probably going to have a slightly different growth profile than it has, combined with the MRR per cab are really the billable cab count and the MRR per cab. And the product of those two is really the metric that we continue to come back to. And so I think that rather than introduce a new metric, we’re going to really stick to those two and try to give you better visibility to what you should expect along the product of those two, which it really drives the growth. As it relates to the investigation, I would say that I think we can’t comment in detail on the specifics of the DOJ and the SEC subpoenas, but I would say that the investigation work conducted by the audit committee and by the independent advisors who I just talked about over the several weeks seems like an eternity, but it’s been the last several weeks and a lot of amazing work done really represents, I think, the foundation of what we believe is needed to address the matters in the DOJ and SEC subpoenas.
And it’s not unusual for I think, the sort of discussions with those parties, DOJ and SEC to lag and take a bit longer. But I feel like we’ve got our arms around that solidly, and we’ll provide an update on that in whatever time frame that requires. Unfortunately, I think that’s very hard for us to provide any specificity around. Keith, do you want to add that?
Keith Taylor: Just add one, as Charles said, and I think it’s important to understand that the level of work that was done since March 20th, so five, six weeks of work, was also included what was anticipated to be needed by the DOJ and the SEC. So a tremendous amount of work has been done, and it’s surrounded by what I would call the matters that relate to accounting irregularities. And I would expect, and I know this to be true, that they’re already in dialogue with the parties. They’re appropriately within dialogue with the parties. And again, this is going to be done independently as you would expect. Of course, they’re going to draw on the resources of the company where needed to answer to questions and queries. So I just think it takes a little bit of time, but getting to where we are that we filed the 10-Q yesterday should give you tremendous comfort on where we concluded.
And, again, there is no adjustments, no findings. And so as a result, I feel really good about where we are. And as Charles has said in his remarks, that related to both GAAP and non-GAAP, and I think that was really important. So again, it will take probably a little bit of time, but overall, again, I feel very comfortable that by the filing of our 10-Q, it’s a pretty good strong indication of where we are in the journey.
Charles Meyers: I think the shorter answer to your question probably would have been not a lot of light between those I think, and I think we feel confident that we’re going to be able to navigate those. Again, how timely I’m not sure, because I think those are probably not things that are frequently rapid, just due to the parties you’re dealing with. We’ll navigate them on as rapid a time frame as we can, or the audit committee and the independent investigators will, and then we’ll report that back to you as we know more.
Operator: The next question comes from Michael Rollins of Citi.
Michael Rollins: Charles, I want to wish you the best on the transition as well. Wanted to ask a question about some of the comments from earlier. You commented that 1Q was better, I think, on the net bookings, your budget and you had lower churn, and you maintained the outlook for constant-currency revenue growth ex PPI of 7% to 8%. And so I’m curious, has your view evolved on how you expect the second half in terms of organic year-over-year growth to ramp relative to the first half of the year? And are there other considerations that kept the organic constant-currency revenue guidance unchanged? And then I’ll have a second one if I could as well.
Charles Meyers: I would say that the second half guide or the second half, I think, outlook for us doesn’t look dramatically different. I think we had said that we’re clearly looking at some acceleration in the back half of the year from a bookings perspective. And again, we feel good about the pipeline. We had a strong Q1, and so we probably had a slightly better Q1, and that gives us a little running start at that back half of the year. But I also think we are seeing — although we saw lower churn than we had forecasted or expected in the prior guide, I do think we are continuing to see some level of churn in the system that I think we have to continue to navigate. And so I think there — not any big changes in the outlook and that’s why again, you saw us maintain that outlook overall.
Keith Taylor: And Mike, maybe just adding on to that, when you get to the second half of the year, you recognize that that, certainly it matters to the year, but it’s not as important because it really matters to the year following. So that’s one of the things that you have to look at. We had a pretty good idea of what we think we could do for the first half of the year, and as Charles just mentioned, we’re ahead of where we were. But offsetting some of that, of course, is some other things that have gone on inside the business, an example of metered power. And so you’re absorbing the fact that power costs have been down relative to where we were. We actually had a power price decrease, as you’re aware, from the fourth quarter earnings call.
And because of that, you’re diluting a little bit of the growth. So it’s a combination of power being a little bit lower and sort of diluting it. In the second half of the year, we still anticipate to deliver against the expectations. But I would maybe characterize this as maybe a parting remark that when we look at risks and opportunities, the opportunities both in the revenue line and the cost line are much greater than those in the risk line. And so where we are today, I just think that we’re taking a posture that is appropriate given where we are at this time of year and just all the noise that’s in the system.
Charles Meyers: And I mean, Mike, we’ve used this term on the last few calls as sort of crosscurrents, right, which is a sort of strange combination of a lot of interest in demand around digital transformation broadly speaking, around AI, in particular. I think we’re still seeing that. I think we’re seeing great interest in AI and in hybrid AI, private AI, sort of mixed with public cloud as a sort of preferred architecture for a lot of the AI workloads that we’re looking at. I think we’re seeing a lot of customers looking at where they want to place their data. And I think they are increasingly reaching the conclusion that sort of proximate to the cloud is the right answer, and I think we’re really well-positioned to benefit from that, and we’re seeing some demand there.
We’re seeing a nice pipeline on the managed DGX opportunity that we have out in the market with NVIDIA. And yet at the same time, we are also seeing, as I characterized in the script, some level of customer caution, some level of tightening and desire for optimization in a still somewhat uncertain macro environment. And so I think it’s all those things together that led us to say, hey, this guide is a good one. We feel like we’ve got opportunity to outperform against it, particularly, on the FFO line, but that’s kind of where we landed and sort of overall balance for the guide.
Michael Rollins: And just the second thing I want to hit was what you were just touching on, some of the use case examples for AI. So you gave some examples of how customers can use the Equinix platform. Can you just share in terms of — whether it was relative to the number of deals that you did in the quarter or relative to the pipeline, what you’re kind of seeing in terms of that interest or the realization of that interest so far? And are there any other additional learnings on the AI front that the market should be mindful of for Equinix?
