# EQUINIX INC (EQIX) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from EQUINIX INC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1101239/000162828023004039/eqix-20221231.htm
Accession: 0001628280-23-004039
Filing date: 2023-02-17
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/EQIX/
All MD&A years: /company/EQIX/mda/
Previous year: /company/EQIX/mda/fy2021/ (FY 2021)
Next year: /company/EQIX/mda/fy2023/ (FY 2023)

ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following commentary should be read in conjunction with the financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in "Liquidity and Capital Resources" and "Risk Factors" elsewhere in this Annual Report on Form 10-K. All forward-looking statements in this document are based on information available to us as of the date hereof and we assume no obligation to update any such forward-looking statements.

Item 7 of this Form 10-K focuses on discussion of 2022 and 2021 items as well as 2022 results as compared to 2021 results. For the discussion of 2020 items and 2021 results as compared to 2020 results, please refer to Item 7 of our 2021 Form 10-K as filed with the SEC on February 18, 2022.

Our management's discussion and analysis of financial condition and results of operations is intended to assist readers in understanding our financial information from our management's perspective and is presented as follows:

•Overview

•Results of Operations

•Non-GAAP Financial Measures

•Liquidity and Capital Resources

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

Overview

We provide a global, vendor-neutral data center, interconnection and edge solutions platform with offerings that aim to enable our customers to reach everywhere, interconnect everyone and integrate everything. Global enterprises, service providers and business ecosystems of industry partners rely on our IBX data centers and expertise around the world for the safe housing of their critical IT equipment and to protect and connect the world's most valued information assets. They also look to Platform Equinix® for the ability to directly and securely interconnect to the networks, clouds and content that enable today's information-driven global digital economy. Our

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recent IBX data center openings and acquisitions, as well as xScaleTM data center investments, have expanded our total global footprint to 248 data centers, including 11 xScale data centers and the MC1 data center that are held in unconsolidated joint ventures, across 71 markets around the world. We offer the following solutions:

•premium data center colocation;

•interconnection and data exchange solutions;

•edge solutions for deploying networking, security and hardware; and

•remote expert support and professional services.

Our interconnected data centers around the world allow our customers to increase information and application delivery performance to users, and quickly access distributed IT infrastructures and business and digital ecosystems, while significantly reducing costs. Our global platform and the quality of our IBX data centers, interconnection offerings and edge solutions have enabled us to establish a critical mass of customers. As more customers choose Platform Equinix for bandwidth cost and performance reasons, it benefits their suppliers and business partners to colocate in the same data centers. This adjacency creates a “network effect” that enables our customers to capture the full economic and performance benefits of our offerings. These partners, in turn, pull in their business partners, creating a "marketplace" for their services. Our global platform enables scalable, reliable and cost-effective interconnection that increases data traffic exchange while lowering overall cost and increasing flexibility. Our focused business model is built on our critical mass of enterprise and service provider customers and the resulting "marketplace" effect. This global platform, combined with our strong financial position, has continued to drive new customer growth and bookings.

Historically, our market was served by large telecommunications carriers who bundled their products and services with their colocation offerings. The data center market landscape has evolved to include private and vendor-neutral multi-tenant data center ("MTDC") providers, hyperscale cloud providers, managed infrastructure and application hosting providers, and systems integrators. It is estimated that Equinix is one of more than 2,200 companies that provide MTDC offerings around the world. Each of these data center solutions providers can bundle various colocation, interconnection and network offerings and outsourced IT infrastructure solutions. We are able to offer our customers a global platform that reaches 32 countries with the industry’s largest and most active ecosystem of partners in our sites, proven operational reliability, improved application performance and a highly scalable set of offerings.

Our cabinet utilization rate represents the percentage of cabinet space billed versus total cabinet capacity, which is used to measure how efficiently we are managing our cabinet capacity. Our cabinet utilization rate varies from market to market among our IBX data centers across our Americas, EMEA and Asia-Pacific regions. Our cabinet utilization rates were approximately 82% and 79%, as of December 31, 2022 and 2021, respectively. We continue to monitor the available capacity in each of our selected markets. To the extent we have limited capacity available in a given market, it may limit our ability for growth in that market. We perform demand studies on an ongoing basis to determine if future expansion is warranted in a market. In addition, power and cooling requirements for most customers are growing on a per unit basis. As a result, customers are consuming an increasing amount of power per cabinet. Although we generally do not control the amount of power our customers draw from installed circuits, we have negotiated power consumption limitations with certain high power-demand customers. This increased power consumption has driven us to build out our new IBX data centers to support power and cooling needs twice that of previous IBX data centers. We could face power limitations in our IBX data centers, even though we may have additional physical cabinet capacity available within a specific IBX data center. This could have a negative impact on our ability to grow revenues, affecting our financial performance, results of operations and cash flows.

To serve the needs of the growing hyperscale data center market, including the world's largest cloud service providers, we have entered into joint ventures to develop and operate xScale data centers. In the past two years, we have closed multiple joint ventures in the form of limited liability partnerships with GIC Private Limited, Singapore's sovereign wealth fund ("GIC") and an additional joint venture in the form of a limited liability partnership with PGIM Real Estate ("PGIM").

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Strategically, we will continue to look at attractive opportunities to grow our market share and selectively improve our footprint and offerings. As was the case with our recent expansions and acquisitions, our expansion criteria will be dependent on a number of factors, including but not limited to demand from new and existing customers, quality of the design, power capacity, access to networks, clouds and software partners, capacity availability in the current market location, amount of incremental investment required by us in the targeted property, automation capabilities, developer talent pool, lead-time to break even on a free cash flow basis and in-place customers. Like our recent expansions and acquisitions, the right combination of these factors may be attractive to us. Depending on the circumstances, these transactions may require additional capital expenditures funded by upfront cash payments or through long-term financing arrangements in order to bring these properties up to our standards. Property expansion may be in the form of purchases of real property, long-term leasing arrangements or acquisitions. Future purchases, construction or acquisitions may be completed by us or with partners or potential customers to minimize the outlay of cash, which can be significant.

Revenue:

Our business is based on a recurring revenue model comprised of colocation and related interconnection and managed infrastructure offerings. We consider these offerings recurring because our customers are generally billed on a fixed and recurring basis each month for the duration of their contract, which is generally one to three years in length, and thereafter automatically renews in one-year increments. Our recurring revenues have comprised more than 90% of our total revenues during the past three years. In addition, during the past three years, more than 90% of our monthly recurring revenue bookings came from existing customers, contributing to our revenue growth. Our largest customer accounted for approximately 3% of our recurring revenues for the years ended December 31, 2022, 2021 and 2020. Our 50 largest customers accounted for approximately 36% of our recurring revenues for the year ended December 31, 2022 and 39% of our recurring revenues for the years ended 2021 and 2020.

Our non-recurring revenues are primarily derived from fees charged from installations related to a customer's initial deployment and professional services we perform. These services are considered to be non-recurring because they are billed typically once, upon completion of the installation or the professional services work performed. The majority of these non-recurring revenues are typically billed on the first invoice distributed to the customer in connection with their initial installation. However, revenues from installations are deferred and recognized ratably over the period of the contract term. Additionally, revenue from contract settlements, when a customer wishes to terminate their contract early, is generally treated as a contract modification and recognized ratably over the remaining term of the contract, if any. As a percentage of total revenues, we expect non-recurring revenues to represent less than 10% of total revenues for the foreseeable future.

Operating Expenses:

Cost of Revenues. The largest components of our cost of revenues are depreciation, rental payments related to our leased IBX data centers, utility costs, including electricity, bandwidth access, IBX data center employees' salaries and benefits, including stock-based compensation, repairs and maintenance, supplies and equipment, and security. A majority of our cost of revenues is fixed in nature and should not vary significantly from period to period, unless we expand our existing IBX data centers or open or acquire new IBX data centers. However, there are certain costs that are considered more variable in nature, including utilities and supplies that are directly related to growth in our existing and new customer base. In addition, the cost of electricity is generally higher in the summer months, as compared to other times of the year. Our costs of electricity may also increase as a result of the physical

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effects of climate change, global energy supply constraints, increased regulations driving alternative electricity generation due to environmental considerations or as a result of our election to use renewable energy sources. To the extent we incur increased utility costs, such increased costs could materially impact our financial condition, results of operations and cash flows.

Sales and Marketing. Our sales and marketing expenses consist primarily of compensation and related costs for sales and marketing personnel, including stock-based compensation, amortization of contract costs, marketing programs, public relations, promotional materials and travel, as well as bad debt expense and amortization of customer relationship intangible assets.

General and Administrative. Our general and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, accounting, legal and other professional service fees; and other general corporate expenses, such as our corporate regional headquarters office leases and some depreciation expense on back office systems.

Taxation as a REIT

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 of December 31, 2022, our REIT structure included all of our data center operations in the U.S., Canada, Mexico, Chile, Japan, Singapore and the majority of our data centers in EMEA. Our data center operations in other jurisdictions are operated as taxable REIT subsidiaries ("TRSs"). We included our share of the assets in xScale joint ventures (with the exception of Korea) in our REIT structure.

As a REIT, we generally are permitted to deduct from our U.S. federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to U.S. federal income taxes at the entity level but is taxed, if at all, at the stockholder level. Nevertheless, the income of our TRSs which hold our U.S. operations that may not be REIT compliant is subject to U.S. federal and state corporate income taxes, as applicable. Likewise, our foreign subsidiaries continue to be subject to local income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through TRSs or through qualified REIT subsidiaries ("QRSs"). We are also subject to a separate U.S. federal corporate income tax on any gain recognized from a sale of a REIT asset where our basis in the asset is determined by reference to the basis of the asset in the hands of a C corporation (such as an asset held by us or a QRS following the liquidation or other conversion of a former TRS). This built-in-gains tax is generally applicable to any disposition of such an asset during the five-year period after the date we first owned the asset as a REIT asset to the extent of the built-in-gain based on the fair market value of such asset on the date we first held the asset as a REIT asset. In addition, should we recognize any net gain from "prohibited transactions," we will be subject to tax on this net gain at a 100% rate. "Prohibited transactions," for this purpose, are defined as dispositions, at a gain, of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors. If we fail to remain qualified for U.S. federal income taxation as a REIT, we will be subject to U.S. federal income taxes at regular corporate income tax rates. Even if we remain qualified for U.S. federal income taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRSs' operations. In particular, while state income tax regimes often parallel the U.S. federal income tax regime for REITs, many states do not completely follow federal rules, and some may not follow them at all.

We continue to monitor our REIT compliance in order to maintain our qualification for U.S. federal income taxation as a REIT. For this and other reasons, as necessary, we may convert some of our data center operations in other countries into the REIT structure in future periods.

On each of March 23, June 15, September 21, and December 14, 2022 we paid a quarterly cash dividend of $3.10 per share. We expect the amount of all our applicable quarterly dividend distributions and other applicable distributions to equal or exceed our REIT taxable income that we recognized in 2022.

The Impact of the Ongoing COVID-19 Pandemic on Our Results and Operations

We have continued to closely monitor the impact of the COVID-19 pandemic on our people and business. As of the time of this filing, our offices are open to employees and we have also resumed in-person events as local travel restrictions allow.

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For additional details regarding the impacts and risks to our results of operations from the ongoing COVID-19 pandemic, refer to "Results of Operations" section below and Part I, Item 1A. Risk Factors included elsewhere in this Annual Report on Form 10-K.

2022 Highlights:

•In February, we entered into an equity forward amendment to our existing "at the market" equity offering program (the "2020 ATM Program"), under which we could, from time to time, offer and sell shares under the equity distribution agreement pursuant to forward sale transactions (the "Equity Forward Amendment"). See Note 12 within the Consolidated Financial Statements.

•In March, we entered into a joint venture in the form of a limited liability partnership with PGIM to develop and operate additional xScale data centers in Asia-Pacific (the "Asia-Pacific 2 Joint Venture"). See Note 5 within the Consolidated Financial Statements.

•In March, 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, to develop and operate xScale data centers in the Americas (the "AMER 1 Joint Venture"). See Note 5 within the Consolidated Financial Statements.

•In April, we completed the acquisition of MainOne Cable Company Ltd. ("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. See Note 3 within the Consolidated Financial Statements.

•In April, we issued $1.2 billion aggregate principal amount of 3.900% Senior Notes due 2032 (the "2032 Notes"). See Note 11 within the Consolidated Financial Statements.

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

•In May, we completed the acquisition of four data centers in Chile from Empresa Nacional De Telecomunicaciones S.A. ("Entel") for a total purchase consideration of $638.3 million at the exchange rate in effect on May 2, 2022. See Note 3 within the Consolidated Financial Statements.

•In August, we completed the acquisition of a data center in Peru from Entel for a purchase consideration of $80.3 million at the exchange rate in effect on August 1, 2022. See Note 3 within the Consolidated Financial Statements.

•In August, we settled all five forward sale agreements under the Equity Forward Amendment and sold 579,873 shares of our common stock for approximately $393.6 million, net of payment of commissions to sales agents and other offering expenses, at an aggregate weighted-average forward sale price of $678.72 per share. See Note 12 within the Consolidated Financial Statements.

•In August, we sold an additional 580,833 shares, excluding the forward sale transactions noted above, under the 2020 ATM Program for approximately $403.6 million in proceeds, net of payment of commissions to sales agents and other offering expenses. See Note 12 within the Consolidated Financial Statements.

•In November, we established a successor ATM program (the "2022 ATM Program"), under which we may, from time to time, offer and sell on a spot or forward basis up to an aggregate of $1.5 billion of our common stock to or through sales agents in "at the market" transactions. See Note 12 within the Consolidated Financial Statements.

Results of Operations

Our results of operations for the year ended December 31, 2022 include the results of operations from a data center in Peru acquired from Entel from August 1, 2022, four data centers in Chile acquired from Entel from May 2, 2022, the acquisition of MainOne from April 1, 2022 and two data centers acquired from GPX India from September 1, 2021. See Note 3 within the Consolidated Financial Statements for further details.

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In order to provide a framework for assessing our performance excluding the impact of foreign currency fluctuations, we supplement the year-over-year actual change in results of operations with comparative changes on a constant currency basis. Presenting constant currency results of operations is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below for further discussion.

Years ended December 31, 2022 and 2021

Revenues. Our revenues for the years ended December 31, 2022 and 2021 were generated from the following revenue classifications and geographic regions (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","$ Change","","% Change"],["","2022","","%","","2021","","%","","Actual","","Actual","","Constant Currency"],["Americas:"],["Recurring revenues","$","3,183,191","","","44%","","$","2,861,937","","","43%","","$","321,254","","","11%","","11%"],["Non-recurring revenues","166,026","","","2%","","159,814","","","3%","","6,212","","","4%","","4%"],["","3,349,217","","","46%","","3,021,751","","","46%","","327,466","","","11%","","11%"],["EMEA:"],["Recurring revenues","2,207,329","","","30%","","2,001,931","","","30%","","205,398","","","10%","","13%"],["Non-recurring revenues","135,875","","","2%","","153,285","","","2%","","(17,410)","","","(11)%","","(1)%"],["","2,343,204","","","32%","","2,155,216","","","32%","","187,988","","","9%","","12%"],["Asia-Pacific:"],["Recurring revenues","1,480,767","","","21%","","1,356,617","","","21%","","124,150","","","9%","","18%"],["Non-recurring revenues","89,917","","","1%","","101,953","","","1%","","(12,036)","","","(12)%","","(3)%"],["","1,570,684","","","22%","","1,458,570","","","22%","","112,114","","","8%","","16%"],["Total:"],["Recurring revenues","6,871,287","","","95%","","6,220,485","","","94%","","650,802","","","10%","","13%"],["Non-recurring revenues","391,818","","","5%","","415,052","","","6%","","(23,234)","","","(6)%","","1%"],["","$","7,263,105","","","100%","","$","6,635,537","","","100%","","$","627,568","","","9%","","12%"]]
[[/GREPCENT_TABLE]]

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Revenues

(dollars in thousands)

Americas Revenues. During the year ended December 31, 2022, Americas revenue increased by $327.5 million or 11% (and also 11% on a constant currency basis). Growth in Americas revenues was primarily due to:

•approximately $30.3 million of incremental revenues generated from the Entel Chile and Entel Peru acquisitions;

•$44.6 million of incremental revenues generated from our IBX data center expansions; and

•an increase in orders from both our existing customers and new customers during the period.

EMEA Revenues. During the year ended December 31, 2022, EMEA revenue increased by $188.0 million or 9% (12% on a constant currency basis). Growth in EMEA revenues was primarily due to:

•$59.6 million of incremental revenues generated from the MainOne acquisition;

•approximately $32.0 million of incremental revenues generated from our IBX data center expansions;

•$9.3 million of incremental revenues from services provided to our joint ventures; and

•an increase in orders from both our existing customers and new customers during the period.

Asia-Pacific Revenues. During the year ended December 31, 2022, Asia-Pacific revenue increased by $112.1 million or 8% (16% on a constant currency basis). Growth in Asia-Pacific revenues was primarily due to:

•approximately $60.2 million of incremental revenues generated from our IBX data center expansions;

•$14.3 million incremental revenues generated from the GPX India acquisition; and

•incremental revenues generated from power price increases in Singapore in response to the increased cost of utilities as noted below.

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Cost of Revenues. Our cost of revenues for the years ended December 31, 2022 and 2021 were split among the following geographic regions (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","$ Change","","% Change"],["","2022","","%","","2021","","%","","Actual","","Actual","","Constant Currency"],["Americas","$","1,560,799","","","42%","","$","1,458,699","","","42%","","$","102,100","","","7%","","7%"],["EMEA","1,281,023","","","34%","","1,216,990","","","35%","","64,033","","","5%","","11%"],["Asia-Pacific","909,679","","","24%","","796,733","","","23%","","112,946","","","14%","","24%"],["Total","$","3,751,501","","","100%","","$","3,472,422","","","100%","","$","279,079","","","8%","","12%"]]
[[/GREPCENT_TABLE]]

Cost of Revenues

(dollars in thousands; percentages indicate expenses as a percentage of revenues)

Americas Cost of Revenues. During the year ended December 31, 2022, Americas cost of revenues increased by $102.1 million or 7% (and also 7% on a constant currency basis). The increase in our Americas cost of revenues was primarily due to:

•$48.5 million of higher utilities, primarily driven by comparatively lower costs in 2021 resulting from gains recognized from wind farm settlements in Texas and Oklahoma due to extreme weather conditions, current period increases in power costs, higher utility usage and IBX data center expansions;

•$20.1 million of higher compensation costs, including salaries, bonuses and stock-based compensation, primarily due to headcount growth;

•$15.2 million of incremental cost of revenues from the Entel Chile and Entel Peru acquisitions; and

•$10.9 million of higher depreciation expense driven by IBX data center expansions.

EMEA Cost of Revenues. During the year ended December 31, 2022, EMEA cost of revenues increased by $64.0 million or 5% (11% on a constant currency basis). The increase in our EMEA cost of revenues was primarily due to:

•$35.4 million of incremental cost of revenues from the MainOne Acquisition; and

•after accounting for changes in foreign currency rates and hedge loss allocations:

◦approximately $13 million in utilities costs, primarily driven by increases in power costs and higher utility usage in France and the United Kingdom;

◦approximately $11 million in depreciation expense driven by IBX data center expansions; and

◦approximately $7 million in compensation costs, including salaries, bonuses and stock-based compensation, primarily due to headcount growth.

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Asia-Pacific Cost of Revenues. During the year ended December 31, 2022, Asia-Pacific cost of revenues increased by $112.9 million or 14% (24% on a constant currency basis). The increase in our Asia-Pacific cost of revenues was primarily due to:

•$99.5 million of higher utilities primarily driven by increases in power cost and higher utility usage in Singapore;

•$11.4 million of incremental cost of revenues from the GPX India acquisition;

•$10.3 million of higher rent and facilities costs, primarily in Hong Kong; and

•$8.1 million of higher depreciation expense driven by IBX data center expansions in Singapore.

This increase was partially offset by $13.6 million of lower other cost of revenue, primarily due to decreased customer installations.

We expect Americas, EMEA and Asia-Pacific cost of revenues to increase in line with the growth of our business, including from the impacts of acquisitions.

Sales and Marketing Expenses. Our sales and marketing expenses for the years ended December 31, 2022 and 2021 were split among the following geographic regions (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Years ended December 31,","","$ Change","","% Change"],["","2022","","%","","2021","","%","","Actual","","Actual","","Constant Currency"],["Americas","$","501,943","","","64%","","$","470,985","","","64%","","$","30,958","","","7%","","7%"],["EMEA","183,754","","","23%","","172,930","","","23%","","10,824","","","6%","","11%"],["Asia-Pacific","100,863","","","13%","","97,317","","","13%","","3,546","","","4%","","11%"],["Total","$","786,560","","","100%","","$","741,232","","","100%","","$","45,328","","","6%","","8%"]]
[[/GREPCENT_TABLE]]

Sales and Marketing Expenses

(dollars in thousands; percentages indicate expenses as a percentage of revenues)

Americas Sales and Marketing Expenses. During the year ended December 31, 2022, Americas sales and marketing expenses increased by $31.0 million or 7% (and also 7% on a constant currency basis). The increase in our Americas sales and marketing expenses was primarily due to:

•$18.0 million of higher compensation costs, including sales compensation, salaries and stock-based compensation, partially due to additional compensation expenses incurred related to our recent acquisitions and headcount growth; and

•$8.0 million of higher travel and entertainment expenses due to the easing of COVID-19 travel restrictions.

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EMEA Sales and Marketing Expenses. During the year ended December 31, 2022, EMEA sales and marketing increased by $10.8 million or 6% (11% on a constant currency basis). The increase in our EMEA sales and marketing expenses was primarily due to higher compensation costs, including sales compensation, salaries and stock-based compensation, partially due to additional compensation expenses incurred related to our recent acquisitions and headcount growth.

Asia-Pacific Sales and Marketing Expenses. Our Asia-Pacific sales and marketing expense did not materially change during the year ended December 31, 2022 as compared to the year ended December 31, 2021.

We anticipate that we will continue to invest in sales and marketing initiatives across our three regions in line with the growth of our business. We expect our Americas sales and marketing expenses as a percentage of revenues to be higher than those of our other regions since certain global sales and marketing functions are located within the U.S.

General and Administrative Expenses. Our general and administrative expenses for the years ended December 31, 2022 and 2021 were split among the following geographic regions (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","$ Change","","% Change"],["","2022","","%","","2021","","%","","Actual","","Actual","","Constant Currency"],["Americas","$","980,589","","","66%","","$","902,037","","","69%","","$","78,552","","","9%","","9%"],["EMEA","301,317","","","20%","","248,295","","","19%","","53,022","","","21%","","27%"],["Asia-Pacific","216,795","","","14%","","151,465","","","12%","","65,330","","","43%","","51%"],["Total","$","1,498,701","","","100%","","$","1,301,797","","","100%","","$","196,904","","","15%","","17%"]]
[[/GREPCENT_TABLE]]

General and Administrative Expenses

(dollars in thousands; percentages indicate expenses as a percentage of revenues)

Americas General and Administrative Expenses. During the year ended December 31, 2022, Americas general and administrative expenses increased by $78.6 million or 9% (and also 9% on a constant currency basis). The increase in our Americas general and administrative expenses was primarily due to:

•$46.8 million of higher depreciation expense associated with back-office systems to support the growth of our business;

•$40.7 million of higher compensation costs, including salaries, bonuses, and stock-based compensation, primarily due to additional compensation expenses incurred related to our recent acquisitions and headcount growth;

•$24.0 million of higher office expenses primarily due to additional software and support services; and

•$10.4 million of higher travel and entertainment expenses due to the easing of COVID-19 travel restrictions.

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This increase was partially offset by $40.9 million of lower consulting costs driven by an increase in the conversion of contingent workers to full time employees.

EMEA General and Administrative Expenses. During the year ended December 31, 2022, EMEA general and administrative expenses increased by $53.0 million or 21% (27% on a constant currency basis). The increase in our EMEA general and administrative expenses was primarily due to:

•$34.0 million of higher compensation costs, including salaries, bonuses, and stock-based compensation, primarily due to headcount growth; and

•$10.0 million higher travel and entertainment expenses due to the easing of COVID-19 travel restrictions.

Asia-Pacific General and Administrative Expenses. During the year ended December 31, 2022, Asia-Pacific general and administrative expenses increased by $65.3 million or 43% (51% on a constant currency basis). The increase in our Asia-Pacific general and administrative expense was primarily due to:

•$39.5 million of higher compensation costs, including salaries, bonuses, and stock-based compensation, primarily due to headcount growth; and

•$28.5 million of higher consulting costs in support of our business growth and location strategy.

Going forward, although we are carefully monitoring our spending, we expect our general and administrative expenses to increase across all three regions as we continue to invest in our operations to support our growth, including investments to enhance our technology platform, and to integrate recent acquisitions. Additionally, given that our corporate headquarters is located in the U.S., we expect the Americas general and administrative expenses as a percentage of revenues to be higher than that of other regions.

Transaction Costs. During the year ended December 31, 2022, we recorded transaction costs totaling $21.8 million, primarily related to costs incurred in connection with the recent acquisitions and formation of the new joint ventures, see Notes 3, 5, and 6 within the Consolidated Financial Statements. During the year ended December 31, 2021, we recorded transaction costs totaling $22.8 million, primarily related to costs incurred in connection with the formation of the new joint ventures and the GPX India Acquisition.

Gain or Loss on Asset Sales. During the year ended December 31, 2022, we did not record a significant amount of loss on asset sales. During the year ended December 31, 2021, we recorded a gain of $10.8 million primarily related to the sale of the Dublin 5 ("DB5") data center.

Income from Operations. Our income from operations for the years ended December 31, 2022 and 2021 was split among the following geographic regions (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","$ Change","","% Change"],["","2022","","%","","2021","","%","","Actual","","Actual","","Constant Currency"],["Americas","$","283,975","","","24%","","$","165,380","","","15%","","$","118,595","","","72%","","71%"],["EMEA","575,331","","","48%","","530,888","","","48%","","44,443","","","8%","","3%"],["Asia-Pacific","341,222","","","28%","","411,894","","","37%","","(70,672)","","","(17)%","","(10)%"],["Total","$","1,200,528","","","100%","","$","1,108,162","","","100%","","$","92,366","","","8%","","8%"]]
[[/GREPCENT_TABLE]]

Americas Income from Operations. During the year ended December 31, 2022, Americas income from operations increased by $118.6 million or 72% (71% on a constant currency basis), primarily due to higher revenues as a result of our IBX data center expansion activity, the recent acquisitions and organic growth, as described above.

EMEA Income from Operations. During the year ended December 31, 2022, EMEA income from operations increased by $44.4 million or 8% (3% on a constant currency basis), primarily due to higher revenues as a result of our IBX data center expansion activity, the recent acquisition and organic growth, as described above.

Asia-Pacific Income from Operations. During the year ended December 31, 2022, Asia-Pacific income from operations decreased by $70.7 million or 17% (10% on a constant currency basis), primarily due to higher operating

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expenses as a percentage of revenues, which included higher utility costs, primarily driven by increases in power prices and higher utility usage, as described above.

Interest Income. Interest income was $36.3 million for the year ended December 31, 2022 and was not significant for the year ended December 31, 2021. The average yield for the year ended December 31, 2022 was 1.74% versus 0.17% for the year ended December 31, 2021.

Interest Expense. Interest expense increased to $356.3 million for the year ended December 31, 2022 from $336.1 million for the year ended December 31, 2021, primarily due to the issuance of the 3.900% Senior Notes due 2032. During the years ended December 31, 2022 and 2021, we capitalized $18.2 million and $24.5 million, respectively, of interest expense to construction in progress. See Note 11 within the Consolidated Financial Statements.

Other Expense. We recorded net other expense of $51.4 million for the year ended December 31, 2022, including $49.0 million in stock-based charitable contributions and foreign currency exchange gains and losses. For the year ended December 31, 2021, we recorded net other expense of $50.6 million, primarily due to an approximately $32.0 million impairment charge resulting from the settlement of a pre-acquisition uncertain tax position, refer to the "Income Taxes" section below for further information, as well as foreign currency exchange gains and losses.

Gain or Loss on Debt Extinguishment. We did not record a significant amount of gain on debt extinguishment during the year ended December 31, 2022. During the year ended December 31, 2021, we recorded $115.1 million of net loss on debt extinguishment primarily due to the redemption of 2.875% Euro Senior Notes due 2026 and the 5.375% Senior Notes due 2027.

Income Taxes. We operate as a REIT for U.S. federal income tax purposes. As a REIT, we are generally not subject to U.S. federal income taxes on our taxable income distributed to stockholders. We intend to distribute or have distributed the entire taxable income generated by the operations of our REIT and QRSs for the tax years ended December 31, 2022 and 2021, respectively. As such, other than state income taxes and foreign income and withholding taxes, no provision for income taxes has been included for our REIT and QRSs in the accompanying consolidated financial statements for the years ended December 31, 2022 and 2021.

We have made TRS elections for some of our subsidiaries in and outside the U.S. In general, a TRS may provide services that would otherwise be considered impermissible for REITs to provide and may hold assets that may not be REIT compliant.

U.S. income taxes for the TRS entities located in the U.S. and foreign income taxes for our foreign operations regardless of whether the foreign operations are operated as QRSs or TRSs have been accrued, as necessary, for the years ended December 31, 2022 and 2021.

For the years ended December 31, 2022 and 2021, we recorded $124.8 million and $109.2 million of income tax expenses, respectively. Our effective tax rates were 15.0% and 17.9%, respectively, for the years ended December 31, 2022 and 2021. The lower effective tax rate in 2022 as compared to 2021 is primarily driven by the higher U.S. QRS income that is not subject to U.S. corporate income taxes, partially offset by an increase in valuation allowances in the Americas region.

In the current period, we had a favorable resolution of uncertain tax positions of approximately $40.0 million resulting from the settlement of tax audits in the EMEA region. In the prior period, we had a favorable resolution of uncertain tax positions of approximately $70.0 million resulting from the settlement of various tax audits in the EMEA and Asia-Pacific regions. Of the unrecognized tax benefits realized in the prior period, approximately $32.0 million was related to the uncertain tax position inherited from the acquisition of Metronode 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 Consolidated Statements of Operations for the year ended December 31, 2021.

Adjusted EBITDA. Adjusted EBITDA is a key factor in how we assess the operating performance of our segments and develop regional growth strategies such as IBX data center expansion decisions. We define adjusted EBITDA as net income excluding income tax expense, interest income, interest expense, other income or expense, gain or loss on debt extinguishment, depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction costs, and gain or loss on asset sales. See "Non-GAAP Financial Measures" below for more information about adjusted EBITDA and a reconciliation of adjusted EBITDA to

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net income. Our adjusted EBITDA for the years ended December 31, 2022 and 2021 by geographic regions was as follows (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","$ Change","","% Change"],["","2022","","%","","2021","","%","","Actual","","Actual","","Constant Currency"],["Americas","$","1,521,775","","","45","%","","$","1,326,460","","","42","%","","$","195,315","","","15","%","","15","%"],["EMEA","1,109,502","","","33","%","","1,033,333","","","33","%","","76,169","","","7","%","","10","%"],["Asia-Pacific","738,423","","","22","%","","784,591","","","25","%","","(46,168)","","","(6)","%","","2","%"],["Total","$","3,369,700","","","100","%","","$","3,144,384","","","100","%","","$","225,316","","","7","%","","10","%"]]
[[/GREPCENT_TABLE]]

Americas Adjusted EBITDA. During the year ended December 31, 2022, Americas adjusted EBITDA increased by $195.3 million or 15% (and also 15% on a constant currency basis), primarily due to higher revenues as a result of our IBX data center expansion activity, the recent acquisitions and organic growth, as described above.

EMEA Adjusted EBITDA. During the year ended December 31, 2022, EMEA adjusted EBITDA increased by $76.2 million or 7% (10% on a constant currency basis), primarily due to higher revenues as a result of our IBX data center expansion activity, the recent acquisition and organic growth, as described above.

Asia-Pacific Adjusted EBITDA. During the year ended December 31, 2022, Asia-Pacific adjusted EBITDA decreased by $46.2 million or 6% (2% on a constant currency basis), primarily due to higher utility costs, as described above.

Non-GAAP Financial Measures

We provide all information required in accordance with GAAP, but we believe that evaluating our ongoing results of operations may be difficult if limited to reviewing only GAAP financial measures. Accordingly, we use non-GAAP financial measures to evaluate our operations.

Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. We have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our results of operations in a manner that focuses on what management believes to be our core, ongoing business operations. We believe that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and ability to perform in subsequent periods. We believe that if we did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze us effectively.

Investors should note that the non-GAAP financial measures used by us may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should therefore exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies.

Our primary non-GAAP financial measures, adjusted EBITDA and adjusted funds from operations ("AFFO"), exclude depreciation expense as these charges primarily relate to the initial construction costs of our IBX data centers and do not reflect our current or future cash spending levels to support our business. Our IBX data centers are long-lived assets and have an economic life greater than 10 years. The construction costs of an IBX data center do not recur with respect to such data center, although we may incur initial construction costs in future periods with respect to additional IBX data centers, and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our IBX data centers. These estimates could vary from actual performance of the asset, are based on historical costs incurred to build out our IBX data centers and are not indicative of current or expected future capital expenditures. Therefore, we exclude depreciation from our results of operations when evaluating our operations.

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In addition, in presenting adjusted EBITDA and AFFO, we exclude amortization expense related to acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of our acquisitions and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. We exclude accretion expense, both as it relates to asset retirement obligations as well as accrued restructuring charge liabilities, as these expenses represent costs which we believe are not meaningful in evaluating our current operations. We also exclude restructuring charges. Restructuring charges relate to our decisions to exit leases for excess space adjacent to several of our IBX data centers, which we did not intend to build out, or our decision to reverse such restructuring charges. We also exclude impairment charges generally related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of assets are not recoverable. We also exclude gain or loss on asset sales as it represents profit or loss that is not meaningful in evaluating the current or future operating performance. Additionally, we exclude transaction costs from AFFO and adjusted EBITDA to allow more comparable comparisons of our financial results to our historical operations. The transaction costs relate to costs we incur in connection with business combinations and the formation of joint ventures, including advisory, legal, accounting, valuation, and other professional or consulting fees. Such charges generally are not relevant to assessing our long-term performance. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the transactions. Management believes items such as restructuring charges, impairment charges, gain or loss on asset sales and transaction costs are non-core transactions; however, these types of costs may occur in future periods. Finally, we exclude stock-based compensation expense, as it can vary significantly from period to period based on share price, and the timing, size and nature of equity awards. As such, we, and many investors and analysts, exclude stock-based compensation expense to compare our results of operations with those of other companies.

Adjusted EBITDA

We define adjusted EBITDA as net income excluding income tax expense, interest income, interest expense, other income or expense, gain or loss on debt extinguishment, depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction costs, and gain or loss on asset sales as presented below (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","2020"],["Net income","$","704,577","","","$","499,728","","","$","370,074"],["Income tax expense","124,792","","","109,224","","","146,151"],["Interest income","(36,268)","","","(2,644)","","","(8,654)"],["Interest expense","356,337","","","336,082","","","406,466"],["Other (income) expense","51,417","","","50,647","","","(6,913)"],["(Gain) loss on debt extinguishment","(327)","","","115,125","","","145,804"],["Depreciation, amortization, and accretion expense","1,739,374","","","1,660,524","","","1,427,010"],["Stock-based compensation expense","403,983","","","363,774","","","311,020"],["Transaction costs","21,839","","","22,769","","","55,935"],["Impairment charges","\u2014","","","\u2014","","","7,306"],["(Gain) loss on asset sales","3,976","","","(10,845)","","","(1,301)"],["Adjusted EBITDA","$","3,369,700","","","$","3,144,384","","","$","2,852,898"]]
[[/GREPCENT_TABLE]]

Our adjusted EBITDA results have increased each year in total dollars due to the increase in our operating results, as discussed in "Results of Operations", as well as the nature of our business model consisting of a recurring revenue stream and a cost structure which has a large base that is fixed in nature, as also discussed in "Overview".

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Funds from Operations ("FFO") and AFFO

We use FFO and AFFO, which are non-GAAP financial measures commonly used in the REIT industry. FFO is calculated in accordance with the standards established by the National Association of Real Estate Investment Trusts. FFO represents net income (loss), excluding gain (loss) from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

In presenting AFFO, we exclude certain items that we believe are not good indicators of our current or future operating performance. AFFO represents FFO excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, stock-based charitable contributions, restructuring charges, impairment charges, transaction costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain (loss) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income (loss) from discontinued operations, net of tax, and adjustments from FFO to AFFO for unconsolidated joint ventures' and noncontrolling interests' share of these items. The adjustments for installation revenue, straight-line rent expense and contract costs are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. We exclude the amortization of deferred financing costs and debt discounts and premiums as these expenses relate to the initial costs incurred in connection with debt financings that have no current or future cash obligations. We exclude gain (loss) on debt extinguishment since it generally represents the write-off of initial costs incurred in connection with debt financings or a cost that is incurred to reduce future interest costs and is not a good indicator of our current or future operating performance. We include an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances, uncertain tax positions and deferred taxes that do not relate to current period's operations. We deduct recurring capital expenditures, which represent expenditures to extend the useful life of its IBX data centers or other assets that are required to support current revenues. We also exclude net income (loss) from discontinued operations, net of tax, which represents results that may not recur and are not a good indicator of our current future operating performance.

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Our FFO and AFFO were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","2020"],["Net income","$","704,577","","","$","499,728","","","$","370,074"],["Net (income) loss attributable to non-controlling interests","(232)","","","463","","","(297)"],["Net income attributable to Equinix","704,345","","","500,191","","","369,777"],["Adjustments:"],["Real estate depreciation","1,104,787","","","1,073,148","","","924,064"],["(Gain) loss on disposition of real estate property","7,134","","","(6,439)","","","4,063"],["Adjustments for FFO from unconsolidated joint ventures","10,068","","","6,097","","","2,726"],["FFO attributable to common shareholders","$","1,826,334","","","$","1,572,997","","","$","1,300,630"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","2020"],["FFO attributable to common shareholders","$","1,826,334","","","$","1,572,997","","","$","1,300,630"],["Adjustments:"],["Installation revenue adjustment","17,745","","","27,928","","","(125)"],["Straight-line rent expense adjustment","16,263","","","9,677","","","10,787"],["Contract cost adjustment","(52,888)","","","(63,064)","","","(35,675)"],["Amortization of deferred financing costs and debt discounts and premiums","17,826","","","17,135","","","15,739"],["Stock-based compensation expense","403,983","","","363,774","","","311,020"],["Stock-based charitable contributions","49,013","","","\u2014","","","\u2014"],["Non-real estate depreciation expense","426,666","","","377,658","","","300,258"],["Amortization expense","204,755","","","205,484","","","199,047"],["Accretion expense adjustment","3,166","","","4,234","","","3,641"],["Recurring capital expenditures","(188,885)","","","(199,089)","","","(160,637)"],["(Gain) loss on debt extinguishment","(327)","","","115,125","","","145,804"],["Transaction costs","21,839","","","22,769","","","55,935"],["Impairment charges(1)","1,815","","","31,847","","","7,306"],["Income tax expense (benefit) adjustment(1)","(31,165)","","","(38,505)","","","33,220"],["Adjustments for AFFO from unconsolidated joint ventures","(2,262)","","","3,259","","","2,195"],["AFFO attributable to common shareholders","$","2,713,878","","","$","2,451,229","","","$","2,189,145"]]
[[/GREPCENT_TABLE]]

(1)Impairment charges in 2022 and 2021 relate to the impairment of an indemnification asset resulting from the settlement of a pre-acquisition uncertain tax position, which was recorded as Other Income (Expense) on the Consolidated Statements of Operations. This impairment charge was offset by the recognition of tax benefits in the same amount, which was included within the Income tax expense (benefit) adjustment line on the table above.

Our AFFO results have improved due to the improved operating results discussed earlier in "Results of Operations," as well as due to the nature of our business model which consists of a recurring revenue stream and a cost structure which has a large base that is fixed in nature as discussed earlier in "Overview."

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Constant Currency Presentation

Our revenues and certain operating expenses (cost of revenues, sales and marketing and general and administrative expenses) from our international operations have represented and will continue to represent a significant portion of our total revenues and certain operating expenses. As a result, our revenues and certain operating expenses have been and will continue to be affected by changes in the U.S. dollar against major international currencies. During the year ended December 31, 2022 as compared to the same period in 2021, the U.S. dollar was stronger relative to the Australian dollar, British Pound, Euro, Japanese yen and Singapore dollar, which resulted in an unfavorable foreign currency impact on revenue, operating income and adjusted EBITDA, and a favorable foreign currency impact on operating expenses. During the year ended December 31, 2022 as compared to the same period in 2021, the U.S. dollar was weaker relative to the Brazilian real, which resulted in a favorable foreign currency impact on revenue, operating income and adjusted EBITDA, and an unfavorable foreign currency impact on operating expenses. In order to provide a framework for assessing how each of our business segments performed excluding the impact of foreign currency fluctuations, we present period-over-period percentage changes in our revenues and certain operating expenses on a constant currency basis in addition to the historical amounts as reported. Our constant currency presentation excludes the impact of our foreign currency cash flow hedging activities. Presenting constant currency results of operations is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, we have presented this non-GAAP financial measure to provide investors with an additional tool to evaluate our results of operations. To present this information, our current period revenues and certain operating expenses from entities reporting in currencies other than the U.S. dollar are converted into U.S. dollars at constant exchange rates rather than the actual exchange rates in effect during the respective periods (i.e. average rates in effect for the year ended December 31, 2021 are used as exchange rates for the year ended December 31, 2022 when comparing the year ended December 31, 2022 with the year ended December 31, 2021).

Liquidity and Capital Resources

Sources and Uses of Cash

Customer collections are our primary source of cash. We believe we have a strong customer base, and have continued to experience relatively strong collections. As of December 31, 2022, our principle sources of liquidity were $1.9 billion of cash and cash equivalents. In addition to our cash balance, we had $3.9 billion of additional liquidity available to us from our $4.0 billion revolving facility and general access to both public and private debt and the equity capital markets. We also have additional liquidity available to us from our 2022 ATM program, under which we may offer and sell from time to time our common stock in "at the market" transactions on either a spot or forward basis. As of December 31, 2022, we had $1.4 billion available for sale under the 2022 ATM Program.

We believe we have sufficient cash, coupled with anticipated cash generated from operating activities and external financing sources, to meet our operating requirements, including repayment of the current portion of our debt as it becomes due, distribution of dividends, completion of our publicly-announced acquisitions, ordinary costs to operate the business, and expansion projects.

As we continue to grow, we may pursue additional expansion opportunities, primarily the build out of new IBX data centers, in certain of our existing markets which are at or near capacity within the next year, as well as potential acquisitions and joint ventures. If the opportunity to expand is greater than planned we may further increase the level of capital expenditure to support this growth as well as pursue additional business and real estate acquisitions or joint ventures provided that we have or can access sufficient funding to pursue such expansion opportunities. We may elect to access the equity or debt markets from time to time opportunistically, particularly if financing is available on attractive terms. We will continue to evaluate our operating requirements and financial resources in light of future developments.

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Cash Flow

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","Change"],["","(in thousands)"],["Net cash provided by operating activities","$","2,963,182","","","$","2,547,206","","","$","415,976"],["Net cash used in investing activities","(3,362,953)","","","(3,006,738)","","","(356,215)"],["Net cash provided by financing activities","856,766","","","413,765","","","443,001"]]
[[/GREPCENT_TABLE]]

Operating Activities

Our cash provided by our operations is generated by colocation, interconnection, managed infrastructure and other revenues. Our primary uses of cash from our operating activities include compensation and related costs, interest payments, other general corporate expenditures and taxes. Net cash provided by operating activities increased by $416.0 million during the year ended December 31, 2022 as compared to December 31, 2021, primarily driven by improved results of operations partially offset by increases in cash paid for costs and operating expenses.

Investing Activities

Net cash used in investing activities increased by $356.2 million during the year ended December 31, 2022 as compared to December 31, 2021, primarily due to an increase of $805.5 million spent on the Entel Chile and Peru data center acquisitions and the MainOne acquisition, an increase of $46.4 million spent on real estate acquisitions and a $37.1 million increase in purchases of investments. This increase was partially offset by a $473.5 million decrease in capital expenditures, a $41.3 million increase in the proceeds from the sale of assets to our xScale Joint Ventures and an $18.0 million increase in proceeds from the sale of investments.

Financing Activities

Net cash provided by financing activities increased by $443.0 million for the year ended December 31, 2022 as compared to December 31, 2021, primarily driven by a $2.0 billion decrease in the repayment of senior notes, a $676.9 million increase in proceeds from term loan facilities, a $298.1 million increase in proceeds from the ATM program, a $129.1 million decrease in the repayment of mortgage and loans payable, a $99.2 million decrease in debt extinguishment costs, a $31.3 million decrease in repayments of finance lease liabilities, a $7.4 million decrease in debt issuance costs and a $3.9 million increase in proceeds from employee awards. This increase is partially offset by a $2.7 billion decrease in proceeds from senior notes and a $108.6 million increase in dividend distributions.

Material Cash Commitments

As of December 31, 2022, our principle commitments were primarily comprised of:

•approximately $12.2 billion of principal from our senior notes (gross of debt issuance cost and debt discount);

•approximately $3.0 billion of interest on mortgage payable, loans payable, senior notes and term loans, based on their respective interest rates and recognized over the life of these instruments, and the credit facility fee for the revolving credit facility;

•$653.6 million of principal from our term loans, mortgage and loans payable (gross of debt issuance cost, debt discount, plus mortgage premium);

•approximately $5.4 billion of total lease payments, which represents lease payments under finance and operating lease arrangements, including renewal options that are reasonably certain to be exercised;

•approximately $1.6 billion of unaccrued capital expenditure contractual commitments, primarily for IBX equipment not yet delivered and labor not yet provided in connection with the work necessary to complete construction and open IBX data center expansion projects prior to making them available to customers for installation, the majority of which is payable within the next 12 months; and

•approximately $1.8 billion of other non-capital purchase commitments, such as commitments to purchase power in select locations and other open purchase orders, which contractually bind us for goods, services

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or arrangements to be delivered or provided during 2023 and beyond, the majority of which is payable within the next two years.

We believe that our sources of liquidity, including our expected future operating cash flows, are sized to adequately meet both the near and long term material cash commitments for the foreseeable future. For further information on maturities of lease liabilities and debt instruments, see Notes 10 and 11, respectively, within the Consolidated Financial Statements.

Other Contractual Obligations

We have additional future equity contributions and commitments to the joint ventures with GIC and PGIM. For additional information, see the "Equity Method Investments" footnote within the Consolidated Financial Statements.

Additionally, we entered into lease agreements with various landlords primarily for data center spaces and ground leases which have not yet commenced as of December 31, 2022. For additional information, see “Maturities of Lease Liabilities” in Note 10 within the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements requires management to make estimates and assumptions about future events that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. Management bases its assumptions, estimates and judgments on historical experience, current trends and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, because future events and their effects cannot be determined with certainty, actual results may differ from these assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 1 to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K. Management believes that the following accounting policies and estimates are the most critical to aid in fully understanding and evaluating our consolidated financial statements, and they require significant judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain:

•    Accounting for income taxes;

•    Accounting for business combinations;

•    Accounting for impairment of goodwill and other intangible assets;

•    Accounting for property, plant and equipment; and

•    Accounting for leases.

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[[GREPCENT_TABLE]]
[["Description","Judgments and Uncertainties","Effect if Actual Results Differ from Assumptions"],["Accounting for Income Taxes. Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, as well as tax attributes such as operating loss, capital loss and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or settled. The accounting standard for income taxes requires a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined by the accounting standard as a likelihood of more than 50%) that such assets will not be realized. A tax benefit from an uncertain income tax position may be recognized in the financial statements only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authority's widely understood administrative practices and precedents. We recognize interest and penalties related to unrecognized tax benefits within income tax benefit (expense) in the consolidated statements of operations.","The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. Our accounting for deferred tax consequences represents our best estimate of those future tax consequences. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of that available evidence, it is more likely than not the deferred tax assets will not be realized, we record a valuation allowance. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following: 1) the nature, frequency and severity of current and cumulative financial reporting losses, 2) sources of future taxable income, 3) taxable income in carryback years permitted by the tax law, and 4) tax planning strategies. In assessing the tax benefit from an uncertain income tax position, the tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that is greater than a 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For purposes of the quarterly REIT asset tests, we estimate the fair market value of assets within our QRSs and TRSs using a discounted cash flow approach, by calculating the present value of forecasted future cash flows. We apply discount rates based on industry benchmarks relative to the market and forecasting risks. Other significant assumptions used to estimate the fair market value of assets in QRSs and TRSs include projected revenue growth, projected operating margins and projected capital expenditure. We revisit significant assumptions periodically to reflect any changes due to business or economic environment.","As of December 31, 2022 and 2021, we had net total deferred tax liabilities of $338.7 million and $280.5 million, respectively. As of December 31, 2022 and 2021, we had a total valuation allowance of $166.6 million and $100.7 million, respectively. If and when we increase or reduce our valuation allowances, it may have an unfavorable or favorable impact, respectively, to our financial position and results of operations in the periods when such determinations are made. We will continue to assess the need for our valuation allowances, by jurisdiction, in the future. During the year ended December 31, 2022, we established full valuation allowances against certain deferred tax assets in the Americas and EMEA regions, either as the assessment of the realization of such deferred tax assets or as part of the purchase accounting determination for the businesses we acquired during the year. We do not expect these deferred tax assets to be realizable in the foreseeable future. During the year ended December 31, 2021, we established full valuation allowances against certain deferred tax assets in the Americas and Asia-Pacific regions, as these deferred tax assets are not expected to be realizable in the foreseeable future. As of December 31, 2022 and 2021, we had unrecognized tax benefits of $89.2 million and $148.3 million, respectively, exclusive of interest and penalties. During the year ended December 31, 2022, the unrecognized tax benefit decreased by $59.1 million primarily due to the settlements of tax audits in the EMEA region. During the year ended December 31, 2021, the unrecognized tax benefit decreased by $59.5 million primarily due to the settlements of various tax audits in the EMEA and Asia-Pacific regions. The unrecognized tax benefits of $89.2 million as of December 31, 2022, if subsequently recognized, will affect our effective tax rate favorably at the time when such a benefit is recognized."]]
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[["Description","Judgments and Uncertainties","Effect if Actual Results Differ from Assumptions"],["Accounting for Business Combinations In accordance with the accounting standard for business combinations, we allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed, if any, is recorded as goodwill. We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in determining the fair value of identifiable intangible assets such as customer contracts, leases and any other significant assets or liabilities and contingent consideration, as well as the estimated useful life of intangible assets. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date if we obtain more information regarding asset valuations and liabilities assumed.","Our purchase price allocation methodology contains uncertainties because it requires assumptions and management's judgment to estimate the fair value of assets acquired and liabilities assumed at the acquisition date. Key judgments used to estimate the fair value of intangible assets include projected revenue growth and operating margins, discount rates, customer attrition rates, as well as the estimated useful life of intangible assets. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Our estimates are inherently uncertain and subject to refinement. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.","During the last three years, we have completed a number of business combinations, including the acquisition of Entel Peru data centers in the third quarter of 2022, MainOne in West Africa and Entel Chile data centers, both in the second quarter of 2022, GPX in India in the third quarter of 2021, Bell data centers in Canada in the fourth quarter of 2020, Packet in March 2020 and Axtel in Mexico in January 2020. The purchase price allocation for these acquisitions has been finalized, except for the MainOne, Entel Peru and Entel Chile acquisitions. As of both December 31, 2022 and 2021, we had net intangible assets of $1.9 billion, respectively. We recorded amortization expense for intangible assets of $204.8 million, $205.5 million and $199.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we used to complete the purchase price allocations and the fair value of assets acquired and liabilities assumed. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material, which would be recorded in our consolidated statements of operations in 2022 or beyond."]]
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[["Description","Judgments and Uncertainties","Effect if Actual Results Differ from Assumptions"],["Accounting for Impairment of Goodwill and Other Intangible Assets In accordance with the accounting standard for goodwill and other intangible assets, we perform goodwill and other intangible assets impairment reviews annually, or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We complete the annual goodwill impairment assessment for the Americas, EMEA and Asia-Pacific reporting units to determine if the fair values of the reporting units exceeded their carrying values. We perform a review of other intangible assets for impairment by assessing events or changes in circumstances that indicate the carrying amount of an asset may not be recoverable.","To perform annual goodwill impairment assessment, we elected to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This analysis requires assumptions and estimates before performing the quantitative goodwill impairment test, where the assessment requires assumptions and estimates derived from a review of our actual and forecasted operating results, approved business plans, future economic conditions and other market data. Additionally, we periodically review our assessment of our reporting units to determine if changes in facts and circumstances warrant changes to our conclusions. There were no specific factors present in 2022 or 2021 that indicated a potential goodwill impairment. We performed our annual review of other intangible assets by assessing if there were events or changes in circumstances indicating that the carrying amount of an asset may not be recoverable, such as a significant decrease in market price of an asset, a significant adverse change in the extent or manner in which an asset is being used, a significant adverse change in legal factors or business climate that could affect the value of an asset or a continuous deterioration of our financial condition. This assessment requires assumptions and estimates derived from a review of our actual and forecasted operating results, approved business plans, future economic conditions and other market data. There were no specific events in 2022 or 2021 that indicated a potential impairment.","As of December 31, 2022, goodwill attributable to the Americas, the EMEA and the Asia-Pacific reporting units was $2.6 billion, $2.4 billion and $0.6 billion, respectively. Future events, changing market conditions and any changes in key assumptions may result in an impairment charge. While we have not recorded an impairment charge against our goodwill to date, the development of adverse business conditions in our Americas, EMEA or Asia-Pacific reporting units, such as higher than anticipated customer churn or significantly increased operating costs, or significant deterioration of our market comparables that we use in the market approach, could result in an impairment charge in future periods. The balance of our other intangible assets, net, for both years ended December 31, 2022 and 2021 was $1.9 billion. While we have not recorded an impairment charge against our other intangible assets to date, future events or changes in circumstances, such as a significant decrease in market price of an asset, a significant adverse change in the extent or manner in which an asset is being used, a significant adverse change in legal factors or business climate, may result in an impairment charge in future periods."]]
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[["Description","Judgments and Uncertainties","Effect if Actual Results Differ from Assumptions"],["Accounting for Property, Plant and Equipment We have a substantial amount of property, plant and equipment recorded on our consolidated balance sheet. The vast majority of our property, plant and equipment represent the costs incurred to build out or acquire our IBX data centers. Our IBX data centers are long-lived assets. We depreciate our property, plant and equipment using the straight-line method over the estimated useful lives of the respective assets (subject to the term of the lease in the case of leased assets or leasehold improvements and integral equipment located in leased properties). Accounting for property, plant and equipment includes determining the appropriate period in which to depreciate such assets, assessing such assets for potential impairment, capitalizing interest during periods of construction and assessing the asset retirement obligations required for certain leased properties that require us to return the leased properties back to their original condition at the time we decide to exit a leased property.","Judgments are required in arriving at the estimated useful life of an asset and changes to these estimates would have significant impact on our financial position and results of operations. When we lease a property for our IBX data centers, we generally enter into long-term arrangements with renewal options generally available to us. In the next several years, a number of leases for our IBX data centers will come up for renewal. As we start approaching the end of these initial lease terms, we will need to reassess the estimated useful lives of our property, plant and equipment. In addition, we may find that our estimates for the useful lives of non-leased assets may also need to be revised periodically. We periodically review the estimated useful lives of certain of our property, plant and equipment and changes in these estimates in the future are possible. The assessment of long-lived assets for impairment requires assumptions and estimates of undiscounted and discounted future cash flows. These assumptions and estimates require significant judgment and are inherently uncertain.","As of December 31, 2022 and 2021, we had property, plant and equipment of $16.6 billion and $15.4 billion, respectively. During the years ended December 31, 2022, 2021 and 2020, we recorded depreciation expense of $1.5 billion, $1.5 billion, and $1.2 billion, respectively. While we evaluated the appropriateness, we did not revise the estimated useful lives of our property, plant and equipment during the years ended December 31, 2022, 2021 and 2020. Further changes in our estimated useful lives of our property, plant and equipment could have a significant impact on our results of operations."],["Accounting for Leases A significant portion of our data center spaces, office spaces and equipment are leased. Each time we enter into a new lease or lease amendments, we analyze each lease or lease amendment for the proper accounting, including determining if an arrangement is or contains a lease at inception and making assessment of the leased properties to determine if they are operating or finance leases.","Determination of accounting treatment, including the result of the lease classification test for each new lease or lease amendment, is dependent on a variety of judgments, such as identification of lease and non-lease components, allocation of total consideration between lease and non-lease components, determination of lease term, including assessing the likelihood of lease renewals, valuation of leased property, and establishing the incremental borrowing rate to calculate the present value of the minimum lease payment for the lease test. The judgments used in the accounting for leases are inherently subjective; different assumptions or estimates could result in different accounting treatment for a lease.","Lease assumptions and estimates are determined and applied at the inception of the leases or at the lease modification date. As of December 31, 2022 and 2021, operating right-of-use (\"ROU\") lease assets were at $1.4 billion and $1.3 billion, respectively, and operating lease liabilities were at $1.4 billion and $1.3 billion respectively. As of December 31, 2022 and 2021, finance ROU assets were $2.0 billion and $1.9 billion, respectively, and finance lease liabilities were $2.3 billion and $2.1 billion, respectively. For the years ended December 31, 2022, 2021 and 2020, we recorded the finance lease cost of $273.6 million, $275.0 million and $233.9 million , respectively, and recorded rent expense of approximately $213.6 million, $221.8 million and $217.3 million, respectively."]]
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Recent Accounting Pronouncements

See "Recent Accounting Pronouncements" in Note 1 within the Consolidated Financial Statements.

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