Equinix Inc (EQIX) 2004 Q2 法說會逐字稿

Hello, and welcome to the Second Quarter Results Conference Call. This call is being recorded for replay purposes.

Today's presentation will be in a listen-only format. Following the presentation there will be a question and answer session. Instructions will be given if you would like to ask a question at that time.

I would now like to introduce the host of today's conference, Mr. Jason Starr, Director of Investor Relations. Sir, you may begin.

Good afternoon, and welcome to Equinix's Second Quarter Results Conference Call.

Before we get started, I'd like to remind everyone that some of the statements that we'll be making today are forward-looking in nature and involve risks and uncertainties. Actual results may vary significantly from those statements and may be affected by the risks we identified in today's press release and those identified in our filings with the SEC, including our quarterly report as Form 10Q filed on May 6, 2004.

In addition, we will provide non-GAAP measures on today's conference call. We provide a reconciliation of these measures to the most directly comparable GAAP measures and a list of the reasons why the Company uses these measures in today's press release and on the Equinix investor relations page at www.equinix.com.

With us today are Peter Van Camp, Equinix's Chief Executive Officer; Renee Lanam, Equinix's Chief Financial Officer; and Keith Taylor, Equinix's Vice President of Finance and Chief Accounting Officer. At this time I'll turn the call over to Peter.

Thanks, Jason. Welcome, everybody.

Let me begin by saying that we're quite pleased with second quarter results and where this puts us at the midpoint of '04. Of course, most of you know by the recurring revenue nature of our model, we have strong visibility into future performance. With two quarters behind us, and as you saw in today's press release, we've gotten more specific about our total year expectations while increasing the range for our revenues to be between $160 and $163m.

Let me hit some of the highlights from the second quarter contributing to this. Total revenue came in above our anticipated range at $39.4m. This represents a 39% increase over same quarter last year and a 7% increase over Q1. EBITDA, at just over $7.5m, was correspondingly above our stated expectation, and compares with a breakeven result in same quarter last year and a 33% improvement sequentially. This represents a 72% flow-through on incremental revenues.

Supporting the EBITDA result, our cash gross margins continued to climb. For the quarter, cash gross margins had a sizable increase to 48%, above our expectation of 45 to 46%. Creating a broader foundation for future growth, Equinix closed 86 new customers within a great bookings quarter. This includes orders from approximately 50% of our existing customers. Of note, over 70% of our new bookings were expansion orders by our installed base. This continues to be a very healthy sign about the business model and our importance to our customers.

Now, let me take a minute to expand on some of these new customer wins. As we noted on the last call, we continue to see strong growth in new enterprise applications and customers outsourcing for the first time. Consistent with our results last quarter, we saw 65% of our new customer bookings come from these opportunities. Again, as we said last quarter, our growth in '03 came primarily from share shift, where in '04 we continue to see a trend of new application outsourcing. Many of our wins in the enterprise sector highlight this. Some of the new customer wins include SAP Asia, AT Kearney, Buena Vista, Patagonia, Watson Wyatt, General Mills, Standard Life Investments, and Washington Mutual.

Now, as we've shared before, we've really had a focus on two specific verticals in recent quarters, financial services and the government. We've made some good progress here, so I want to give you a quick snapshot.

From a financial services standpoint, our FX service for the financial exchange added four new customers in the quarter, which includes Washington Mutual. All in, we've gained 29 customers in this vertical over the past year. In the government sector we're now working across a number of agencies, including a sizable new expansion currently being [indiscernible] in one of these. As I look at how our efforts in these verticals have benefited our growth, these customers, once fully installed, represent approximately $10m in annual recurring revenue, which we do expect to continue to grow.

Now again, as I noted on last quarter's call, continued outsourcing growth and our success in these verticals suggest that we may be seeing some market expansion. But at a minimum, it's clear that we continue to win more of our fair share of any published market growth rate as our results outpace these numbers by 3 to 4 times.

Now, of course, all this success originates from the direct efforts of our sales and support teams. However, beyond this, our marketing efforts have included some other interesting moves to benefit our future growth. One, we recently completed a channel agreement for resale and referral with Sprint. As they now focus on their core network business, they continue to recognize that collocation services are an important requirement for their customers. As their network is available in all our core markets in the US, as well as Singapore, we became a logical partner to address their customer requirements. More and more, I'm convinced that our neutral [indiscernible] collocation play wins in this market. Our complementary position to the major networks points to an opportunity to do more Sprint-like deals. I really feel that the smart players will recognize our value and augment their strategies accordingly.

Another interesting initiative you will see announced shortly: Equinix has extended its GigE Exchange service onto the island of Manhattan. 111 Eighth is a well-known address to telecom insiders, as it's one of the most important telco hotels in the country. Linking 111 Eighth with our New Jersey IBXs is significant, as it's the first time we've offered our interconnection services outside of an IBX. We're launching this service in an exclusive relationship with NYC Connect, the building sanction to Meet Me Room provider in 111 Eighth. They recognize the value of our brand and skill set as the only company that should operate the peering offering in their facility. With this move, we've now expanded our target set of customers in the New York market, adding to our critical mass of interconnection there. Again this is a first-time event for us and it made a lot of sense in the New York market, and it certainly leaves open the possibility of doing more as we measure its success.

Stepping back from developments in the quarter, I thought we might spend a little time on Asia. In speaking to a number of you, there's been interest in getting a better sense of that opportunity and really sizing it within Equinix long-term. Asia currently represents 14% of our revenue while, as noted in the past, we're targeting an EBITA breakeven by the end of the year, with positive contribution taking place in '05. If you've been following our efforts there, we've seen good progress towards this as our EBITDA loss saw a 70% improvement over same quarter last year.

Now, let me outline what that business looks like over time. First, let's size it from a capability standpoint. Asia represents approximately 20% of the sellable footprint. Based on price points in the Asian market and current service mix, we expect Asia to contribute $40m to our long-term revenue model. Just to remind you, we've outlined this for the total company to be approximately $300m, and this is based on an 80% utilization of our current capacity.

Now, as you follow our Asian new business past its breakeven point, you can expect the flow-through of EBITDA margins on incremental revenues to be in the range of 50 to 60%. So in the long-term view, this translates into a 25% EBITDA contribution, or about $10m a year. Now, we feel this is a solid return from our Asian operations, and this is particularly true when you consider the value paid for a fully-built out footprint of centers as we entered this region. So I hope this helps provide a sense of Asia's position within the broader view of the company.

So let me stop there. And to get to the specifics underlying our results for the quarter, I'd like to turn it over to Renee Lanam. We'll then return to provide financial guidance for the third quarter and the rest of the year.

Thanks, Peter.

In going through our results, as I've done in the past, I'll provide our results on both a cash and a non-cash basis. As a reminder, our non-cash costs include depreciation, amortization, accretion, stock-based comp, and non-cash interest expense. Attached to our press release and posted on our website behind our GAAP P&L statement is a non-GAAP, cash-based statement.

Starting with revenues, Q2 revenue was $39.4m, up 7% over the previous quarter and up 39% over the same quarter last year. A part of our business, our recurring revenues, was $37.3m, a sequential 8% increase from the previous quarter and a 43% increase over the same quarter last year. Recurring revenues, meaning revenues for collocation, interconnection and managed services that we collect every month as a result of customer contracts that are generally 1 to 3 years in term, represented 95% of our total revenues for the quarter. Non-recurring revenues for the quarter were $2.1m, which are derived solely from installation fees and professional services. This compared with $2.3m the previous quarter, which, as I mentioned on the last call, included $700,000 of one-time settlements.

Now, breaking out the revenues between US and Asia, 86% of our revenues came from our US centers, while the remaining 14% was derived from our Asia Pacific centers. Revenues from our US centers were $34.1m, up 6% from last quarter. Recurring revenues from our US centers were $32.3m, up 7% from last quarter. Revenues from our Asia Pacific centers were $5.3m, up 11% quarter over quarter. Recurring revenues from our Asia Pacific centers were $5m, up 18% from last quarter. We continue to be very pleased with the traction we are seeing in these centers as our US customers continue to deploy their core infrastructure into our Asia centers and our existing Asia Pacific customer base continues to expand.

One customer, IBM, represented 14% of our Q2 revenues, up from 13% last quarter. This small increase is a result of the first full quarter of IBM's deployment in Singapore. Looking ahead, while IBM continues to be a strong partner, we expect IBM revenues to decrease as a percentage of our total revenues as the remainder of our business continues to grow at an accelerated rate versus our IBM business. This is a trend we've anticipated and continue to view as favorable from a customer diversification standpoint.

Once again, no other customer accounted for more than 5% of our revenues.

Moving on to churn, as a reminder, we calculate churn based on the number of cabinets returned to us by our customers in the quarter as a percentage of the total cabinets booked at the beginning of the quarter. We are very pleased to report just 2.1% churn in the quarter. This churn, once again, is almost exclusively customers having financial problems, as we just don't see customers leaving our centers to go to competitors. We continue to expect churn to be approximately 3% a quarter.

[Indiscernible] apart from cabinet churn, if we were to look at churn based on the amount of monthly recurring revenue or MRR, churn in the quarter, our MRR churn was 2%. This number includes about $130,000 of MRR attributed to low-margin bandwidth business that Equinix has proactively terminated in the US over the past quarter, although a good business decision from a margin standpoint is bandwidth churn, which is now largely behind us, has a direct impact on our overall MRR per cabinet, as I will discuss in a minute.

Moving on to cash gross margins, for the quarter our cash gross margins were higher than anticipated, increasing to 48%. This is an increase from the 45% level last quarter and up from 39% for the same quarter last year. This increase is a direct result of not only the flow-through effect of incremental revenue, but, as I mentioned earlier, from our decision to move out of straight bandwidth deals, which were generally low-margin deals as compared to the rest of our business. Just to remind you, we expect our long-term model to deliver cash gross margins of 65 to 75%. We continue to believe we are well on track to hit this range as we continue to see flow-through margins in excess of 70% on incremental revenues.

One other note on our cash gross margin, our US cash gross margin reached an important milestone in Q2. We broke through the 50% cash gross margin level for the first time, finishing the quarter at 51% cash gross margin.

On utilization rates. At the end of Q2 we had approximately 24,500 cabinets available for sale, including the cabinets in our new building in the Washington, DC area. As noted in last quarter's call, following the acquisition of this building, approximately 80% of our cabinets are in the US, with the remaining 20% in Asia Pacific. At the end of Q2, approximately 10,100 cabinets, or about 41.4% of our total cabinets, we're billing. This compares to 9,400 cabinets that we're billing at the end of the previous quarter. Excluding the capacity from our new DC center, our billing utilization would have been 46%, as compared to 41% last quarter.

On a regional basis and at the end of the quarter, we had approximately 7,800 cabinets, or 40% of available cabinets, billing in our US centers, and 2,300, or 46% of available cabinets, billing in our Asia Pacific centers. If you are still tracking our average revenue per cabinet by simply dividing the recurring revenues for the quarter by the number of cabinets billing at the end of the quarter, you will see an increase in the total average monthly recurring revenue, quarter over quarter, from $1,210 to $1,241.

Breaking out utilization on a weighted average basis, meaning calculating the utilization rate, taking into account when in the quarter a cabinet started billing, our utilization rate was 40.8%, or 9,900 cabinets billing.

Looking at average revenue per cabinet on a weighted average basis for the quarter, our average monthly recurring revenue per cabinet was $1,254. Although this decline compared to last quarter's number of $1,291, it is better than anticipated as we churned additional low-margin bandwidth deals in the US and absorbed a full quarter of the IBM Singapore wholesale deal. Excluding the IBM Singapore deal, which we outlined as a large dedicated deployment last quarter, this number would have been $1,345.

On a regional basis, revenue per cabinet on a weighted average basis in the US was $1,411, and in Asia it was $727. These numbers are consistent with the long-term model Peter reviewed earlier on the call.

As an aside for investors analysts wishing for historical numbers for both weighted average MRR per cabinet and end-of-quarter method, we will be posting these later today on the Equinix investor relations website under the investor resources link. We will also provide historical metrics that break out our core recurring revenues from our straight bandwidth reselling and our IBM Singapore deployment.

With respect to pricing overall, we want to once again be very clear. We believe, and we are hearing other providers in our industry confirm, that prices have stabilized. In fact, last quarter we sent out notices to a number of our customers increasing their prices for our services. While these increases are generally modest, we are pleased that customers are accepting that prices are moving up, and we have not had one customer leave because of this increase.

Moving on to other metrics, for those of you tracking us on an EBITDA basis, we are $7.5m EBITDA positive for the quarter, a 33% increase over the previous quarter and a $7.2m improvement over the same quarter last year. This consistent increase in EBITDA demonstrates the powerful flow-through story of this business on incremental revenues. The Q2 flow-through percentage on incremental revenues in the quarter was 72%.

On a regional basis for the quarter, the US operations were EBITDA positive, $8.4m, up from $6.7m positive last quarter, or an increase of 25%. Asia Pacific was negative $830,000, an improvement of 18% over the previous quarter. Our net loss for the quarter on a total company basis was $9.2m or 51 cents a share. This represents a 75% quarter-over-quarter improvement and a nearly 80% decrease over the same quarter last year.

On a cash basis, we had cash net income of $7.2m, a $5.5m improvement over the previous quarter.

Turning to our balance sheet, as of June 30th we had $92.4m of cash, cash equivalents and short-term investments. This is a $3.8m increase over the previous quarter. Our company-wide DSOs were once again below the 30-day level for the quarter, as we continue to experience extremely strong cash collections. CapEX for the quarter was $4.3m.

Consistent with our discussions in the prior quarter, we started to break out our CapEX into two buckets. Again, these two buckets are capital deployed for normal ongoing CapEX at our existing centers and corporate headquarters, what we call ongoing CapEX, and capital required for expanding our cabinet capacity, what we call expansion CapEX. With respect to the first bucket, ongoing CapEX, these are expenditures incurred in maintaining our existing business, such as replacing batteries for circuit panels at our centers, purchasing cabinet-encased material to support customer installations, and capital to support corporate needs. During the quarter, our ongoing CapEX was $3.3m. As a reminder, a portion of this CapEX is fully paid for up-front by our customers in the form of non-recurring installation fees.

The second bucket of CapEX, expansion CapEX, includes traditional capital required to expand our cabinet capacity, either for a new center or for expansion of an existing center, in order to increase our total number of available cabinets. During the quarter our expansion CapEX was $1m.

Next, moving on to our statement of cash flows, our net cash generated from operating activities was $8.9m. This represents a quarter-over-quarter increase of $2.4m, or a 37% improvement over the previous quarter. Net cash used in investing activities for the quarter was $5.6m, primarily related to $4.3m of CapEX in the quarter plus the reduction of $1.3M in our accrued property and equipment balance as we completed our new Santa Clara (ph) center.

Our net cash generated from financing activities in the quarter was $530,000. In the quarter we generated $3.3m of free cash flow. This represents a $1.9m, or 140%, improvement over the previous quarter. This was the fourth straight quarter Equinix was free cash flow positive.

Finally, with respect to our equity capital structure, as of June 30th we had 18.2m shares of common stock outstanding. Assuming conversion of our preferred stock as well as the outstanding convertible notes held by STT (ph) and the warrants associated with those notes, we would have had just under 25m shares outstanding.

This concludesmy prepared remarks. Let me turn the call back over to Peter.

Thanks, Renee.

Now let me offer a view on the outlook for the total Company for the remainder of '04, and the third quarter as well.

We're raising our full-year revenue guidance to a range of $160 to $163m, which raises the mid-point of our range by $2.5m. Our cash gross margins for the full year are expected to range between 47 and 49%. Cash SG&A expenses are expected to be in the range of $43.5m to $44.5m. We expect EBITDA to be between $32 and $35m for the year, which increases the mid-point of our guidance by $1m. CapEX for the year is expected to be $22 to $23m. This includes approximately $10m for expansion CapEX, and now also includes $2m of CapEX to expand an existing US Government project which will be billed directly to the customer within their installation charges. The remaining amount represents ongoing CapEX.

Year-to-date capital expenditures have totaled $9.2m. We expect the remaining CapEX for the year to be spread across the remaining two quarters and be based on timing of our expansion projects.

For Q3, we expect to see revenues in the range of $41.5m to $42.5m. Cash gross margins are expected to be in the range of 49 to 50%. Cash SG&A expenses are expected to be approximately $11m. We expect EBITDA in the third quarter to be in the range of $9 to $10m. Of course, this guidance for the third quarter as well as the full year represents continued strong performance at Equinix. As a team, we've very pleased with these results, and if you were to look back over the past six quarters that followed the significant improvements we made to the balance sheet on our entry into the Asian region, you would see that Q2 of '04 was just one more quarter of strong execution and consistent performance by the company. Personally, I'm quite proud of what this team continues to deliver. This is particularly true in light of the mixed results we're all seeing this earning season.

So Operator, let me stop there, and why don't we turn it over to questions.

Thank you. At this time, if you have a question, you may press star 1 on your touch-tone phone. If you're using speaker equipment, you may need to pick up your handset before pressing star 1. If you wish to cancel your question, you may press star 2.

Once again, that is star 1 if you have a question and star 2 to cancel.

One moment.

Our first question comes from Tom Watts with SG Cowen.

Two quick questions. One, by your guidance, that implies no expansion CapEX until 2005. Is that right? And is that -- I've heard that Chicago is likely to be the next site. And in parallel, under what circumstances might you consider reentering Europe, and what might that timing be?

Well, first, it doesn't imply no more CapEX expansion in that form. I think the one twist on this call is with this large installation for a customer, actually the US government. But we feel good about the guidance for the full year there, Tom. And circumstances in Europe -- we continue to watch it closely. We do see some pretty good deal flow through our partner relationship there, so we're serving our customer needs well. But we're still watching just as that market solidifies and pricing, et cetera, stabilizes, and really nothing to report substantive at this time on Europe.

Okay, thanks very much.

Thank you.

As a reminder, it is star 1 to ask a question.

Our next question comes from Andrew Schaffer(ph) with Tier One.

Thanks, you almost said it correctly. It's great. Hi guys.

Hi, Andrew.

[Indiscernible]. Phenomenal results, by the way.

Thank you.

Let's see, on the customer mix, can you give a breakdown between US and Asia?

A breakout between new customers in Europe and Asia?

If you could, that would be good as well, but just break the 830 down between the US and Asia.

[Indiscernible] 550 customers are in the US and about 290 are in Asia.

Okay. Thanks, Keith. In Asia you're putting up some pretty nice names on there. And by the way, I haven't seen a US company be able to crack that code yet, so congratulations again to the Asia team. But are the orders you're getting in Asia from some of these big names -- are they giving you start on orders or are they booking for some meaningful amounts right off the bat?

Well, it will vary. I wouldn't say that they're just any significant 100-cabinet deals that we've been closing, but they've, you know, been good solid installations in a number of cases where people are just deploying, you know, web-enabled enterprise applications or VPN locations as they -- you know, sort of remote users in Asia.

Okay. On IBM, are you growing with them more so from a lot of small customers or are you growing from them by larger outsourcing engagements that they're putting in your sites?

As the larger -- well, the one large outsourcing engagement that had an impact on this Singapore deployment was an instance of what you're suggesting there. But then largely it's general mid-range customers that they just continued on board.

Excellent. And then kudos on going into downtown Manhattan. You won't give us any more strategic thoughts on how you kind of -- whether customers drove you there or whether you thought it was something -- you're betting that customers are going to like -- that both would be true? But if you could just expand on the strategic thoughts there, and maybe how quickly you might be looking to roll out another market?

Well, to your comment, I would say that, yeah, both would be true. A number of customers have seen us on -- there and -- well, have asked that we be there. Really we've extended our IBXs into that building, which enables a number of the networks there to more easily become a part of our mix. The other thing we're seeing is even content guys within the building who now see an opportunity to take advantage of the peering but not have to do major backhauls over or reinstallations into New Jersey. So I think it supports both and makes a lot of sense to the growth in that interconnection business.

On a broader sense, as this is the first time we're doing this, we will measure its success and be smart about it. But, you know, clearly there are other significant Telco hotels that are network-rich and even having content companies within them where it might make sense to do another market.

Excellent. On the Sprint wholesale deal and with this one, I don't even know where to start with understanding why Sprint got out of the colo (ph) part of their business it's something they should have kept, but at least applaud them for doing this. How much was there that there was opportunity already and you turned it into a formal agreement, or is it that now they're going to be going to market and hopefully driving net new business?

I think it's net new business. Largely our relationship with Sprint began -- well, it began some time ago because of their network being available in all our centers. But it got deeper as we worked on the acquisition of the Santa Clara facility, and clearly at that time it was evident to them through all their sales force input that they're going to continue to need collocation. So we worked closely with them in defining a relationship around their ability to sell our services, and we've seen some nice deal flow from that so far. Actually we've even seen a nice win in the government sector that Sprint has brought to us, too.

Excellent. And do they have any remaining space left for sale that you guys might be interested in?

Certainly not that we're pursuing. I believe they've drawn closer to all of their sites, but I don't know for sure if that's the case. But we're not in any discussions with them for any expansion.

Got you. Again, congratulations. It's awesome work.

Thank you, Andy.

Thank you.

Our next question comes from Vic Grover with Needham & Company.

Hi, Vic.

Hey, guys, how you doing?

Good.

Good numbers. A lot of the questions have already been asked. But I guess I had a question about the peering fabric -- the GigE Exchange. You've got 292 ports, and I guess you've got a couple hundred carriers across all of the IBXs in various flavors. How many carriers have actually purchased a port on the GigE Exchange, I'm trying to back into the average number of ports per carrier and where this could go?

I'm looking for some input for the answer. Just a second.

And while you look for that, I guess the other question I would have is, you know, if you look at Switch and Data's (ph) numbers or even some of the success [indiscernible] is having down in Miami, you know, it seems like you have a lot of head room still for growth [indiscernible] per customer. What are you assuming long term and how should we think about that, because it seems like you still can increase the stickiness of your product and increase this kind of web of interconnection between your customers? Two similar questions with different pieces of the business.

Okay. Well, just a -- I'll take them in order. You know, from a network standpoint, on the GigE Exchange we're actually North of a hundred networks. Now, you actually asked the question under the term carrier. I apologize, I don't have a qualification. Obviously you could differentiate a carrier maybe from a cable network and others. But from a total network standpoint, we've got a hundred different networks. I can get back to you maybe with a more granular answer and how you'd want to, quote, classify a carrier in that response, but certainly a lot of networks that are GigE customers.

And then second, I agree. I do see the opportunity to continue to grow that business. Certainly growth in even broadband utilization -- just as we see more media-rich applications, that's going to drive the value of peering for our customers, bringing on more ports or cross-connects in the current customer set, but then also bringing that value to more content companies that we sign, too. So I would expect that to continue to grow.

You know, another interesting one -- and we'll continue to look for verticals in it -- but our FX service up in Chicago has been a new vein of interconnection revenue for us. And it is -- you know, that financial vertical has done very well in Chicago as the futures platforms and the actual exchanges themselves have brought in their electronic-based platforms to better interconnect with each other. So certainly that helps in that regard anyway.

So -- but if you go back, you look at our long-term operating model, we've kind of guided folks that over the long term you'd see, you know, the cross-connect or the overall interconnection component of our business to be in the 25% range in the long-term model. So, you know, again, that's -- that is not guidance (ph) -- it's a good estimate, but we are obviously seeing this as a new component and our business model is somewhat unique. So obviously that is an estimated number, but I think you can feel comfortable modeling around that number.

Okay, and I guess one last follow-up. Going back to -- Tom asked about international expansion. But just expansion in general -- I mean, if you're at a 41% utilization, it seems like it's going to be critical for you to really continue expanding your capacity to show the street that there's the opportunity for additional growth and to grow into this valuation. I mean, it seems like Europe is already stabilizing, from what I gathered in a recent trip out there. So I'm wondering what you're really waiting for. It seems like that's a no-brainer to move over there. Or in the US, you know, how many other centers are you looking at? I mean, can you give us any kind of -- without obviously saying names -- but are you looking at a range of centers in other markets or --

You want to hit me with all the tough questions, right, Vic? You know, clearly as you've seen before, we're going to look at our utilization and -- you know, focusing on the US first. And I think Tom may have already noted Chicago in his comments. There's a market where, over time, we'll look to have capacity in that market. Don't expect CapEX this year around that. But we'll focus on the key markets to continue to make sure we've got head room for growth.

Europe -- obviously difficult to comment on any strategic plans over there beyond what we've already given.

Just a side note as well. We've had our long-term operating model kind of out there for everybody to just understand the business trajectory that we have, and we've kind of penciled that at $300m in revenue as we mature towards that 80% capacity. You know, the reality is is the head room's already bigger than that. We just haven't factored in, as I, you know, made my comments earlier, the addition of the Ashburn (ph) space as yet. Well, we've got obviously a number of conferences coming up in the fall here, and we'll certainly have a number for everybody by then. But we're also looking at putting an anchor tenant into Ashburn. But, you know, with what we've already done, we've expanded some head room for growth, and you can expect to see us continue to grow.

Vic Grover. Okay. Thanks a lot, guys.

Great.

Thank you.

Our next question comes from Tom Watts with SG Cowen.

Peter, just a follow-up. Another company [indiscernible] in your sector yesterday gave a -- essentially a warning on the outlook for later in the year based on reduced IT spending. Have you seen any signs of that? And how closely is your business linked to IT spending, do you believe?

Well, I guess you'd have to say it's linked to IT spending. You couldn't distance it from that. But, you know, ultimately as a -- because of the visibility in the model, what we booked already this quarter, and really what I see in our pipeline, continues as strong as it's been. I don't see the slowdown in the second half of the year that maybe others have commented on. I will say, just even in my comments, Tom, as I mentioned, we saw 65% of our new customer bookings really be either new applications or first-time outsourcing. So that flies kind of contrary to reduced IT spend. But, you know, I also didn't say that this is market expansion. I said it would indicate that maybe something's happening here. But I'm very hesitant to do that when I've seen some other company performances. So, you know, the net of it again is I just think our business model's the right one. And of the level of spend that's out there and whatever market growth rate exists, we're going to get more than our fair share.

And is there any pattern in the types of applications that are coming? And [indiscernible] a lot of financial ones. But are these all new customer facing applications that are, you know, online banking, or can you generalize at all?

No, I think -- well, I think there are definitely customer basing applications, and even in the financial sector that makes a lot of sense. But maybe some of the more interesting ones from an enterprise standpoint, and I've even noted these before in prior -- either calls or investor conversations -- that we're seeing a move towards IT in some of these either network deployments or just remote information resources to remote constituencies within an enterprise. It's not necessarily outside of an enterprise. So -- well, the one I talked about on the last -- just to stay with public information, the one I talked about on last quarter's call, was a manufacturing application that really -- it was Boeing supporting their remote service centers in Asia. And so this is parts inventory, applications associated with their maintenance and service hubs that were deployed for remote access to various regions of Asia.

So it just shows that there's broader access to enterprise applications being enabled there. And that's, I think, the nature of what we're seeing.

Okay, great. Thanks again.

Sure thing.

Thank you. We have time for one more question.

Our next question comes from Christopher [indiscernible] with Morgan Stanley.

Here we go.

Hi, Chris.

Hey, gentlemen, how are you? I should say ladies and gentlemen, how are you?

Everybody's great.

I can understand why.

Quick question -- actually 2, if you don't mind. Of the expansions that occurred this quarter, I don't think you've gone over this. If you have, I apologize. Is it fair to ask what percent of that revenue came from additional cabinets or space, versus what came from cross connects or other services?

No, I mean, the additional cabinets that come on board are there as head room to grow into.

Right.

So I think effectively that means none of it came from the expansion as we grow into them, with the exception of the Sprint Santa Clara building. It's also -- has already seen some growth in it for sure, but I don't have a percentage breakout for you. But certainly the Ashburn building isn't online yet. We -- the acquisition is done and it's in place, but we haven't unaborted (ph) customers there yet.

And secondly, have you done any work in determining, of the average new customer, how often or how -- what percentage of them bring on either suppliers or business partners, in essence doing the selling for you?

Oh, that's an interesting question. It's a good one. I haven't quantified it in that form before. You know, obviously, like the Sprint deal and they being the customer, they're bringing new customers to us now for sure, so there's a lot of relevancy to the question. Certainly as the exchange platforms and our GigE services expand, that creates value for more content guys to put their content onto the networks that are there, so there's an indirect impact in our growth there as well. So certainly your question's all about the network effect, but I don't have a hard, specific way of answering that in, you know, granular metrics for you.

It sounds like the sales force is doing their job anyway. Congratulations.

Yeah, they are. Thank you, Chris.

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