Equinix Reports Fourth Quarter And Full Year 2015 Results

Company Delivers 52nd Consecutive Quarter of Growth; Annual Revenues Increase 12% Year-over-Year

Feb 18, 2016, 16:01 ET from Equinix, Inc.

REDWOOD CITY, Calif., Feb. 18, 2016 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended December 31, 2015.  The Company uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements.

2015 Results Summary

  • Revenues
    • $2,725.9 million, a 12% increase over the previous year
    • Includes $21.6 million of revenues from Bit-isle
  • Operating Income
    • $567.3 million, an 11% increase over the previous year
  • Adjusted EBITDA
    • $1,271.6 million, a 47% adjusted EBITDA margin
    • Over 100 basis point YoY improvement in adjusted EBITDA
    • Includes $5.2 million of adjusted EBITDA from Bit-isle
    • Includes $2.8 million of integration costs
  • Net Income
    • $187.8 million, a 7% net margin
  • AFFO
    • $831.8 million, a 9% increase over the previous year
    • Includes $60.7 million of foreign currency losses related to the Telecity transaction
    • Includes $3.4 million of AFFO from Bit-isle

2016 Annual Guidance Summary

  • Revenues
    • >$3,550.0 million, a >30% increase over the previous year; organic growth rate of  greater than 13%
    • Assumes $548.0 million in revenues from Telecity and Bit-isle
  • Adjusted EBITDA
    • > $1,620.0 million or a 45.6% adjusted EBITDA margin
    • Assumes 100 basis point YoY improvement in adjusted EBITDA of Equinix organic business
    • Assumes $245.0 million of adjusted EBITDA from Telecity and Bit-isle
    • Assumes $58.0 million of integration costs for acquisitions
  • AFFO
    • > $970.0 million, a 17% increase over the previous year
    • Assumes a $50.0 million foreign currency loss related to the Telecity closing
    • Assumes $58.0 million of integration costs for acquisitions

Revenues were $730.5 million for the fourth quarter, a 6% increase over the previous quarter and a 14% increase over the same quarter last year. Revenues included $21.6 million of revenues from the acquisition of Bit-isle, which closed on November 2, 2015. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $686.1 million for the fourth quarter, a 6% increase over the previous quarter and a 13% increase over the same quarter last year.  Non-recurring revenues were $44.4 million in the quarter.  MRR churn for the fourth quarter was 2.3% as compared to 2.0% in the previous quarter.

"2015 was a transformational year for Equinix.  We delivered accelerated growth, expanded our global platform with two strategic acquisitions, completed our first year operating as a REIT, and established ourselves as the foundation for the cloud ecosystem that continues to drive IT transformation," said Steve Smith, president and CEO of Equinix.  "The strength of our business is translating into solid revenue growth, firm yield and healthy margins, all of which combine to give us the financial firepower to continue to invest in our global platform, develop innovative solutions, and continue to deliver significant value to our shareholders."

Cost of revenues were $352.0 million for the fourth quarter, an 8% increase from the previous quarter and a 12% increase from the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $124.0 million for the quarter, which we refer to as cash cost of revenues, were $228.0 million for the quarter, an 8% increase over the previous quarter and a 16% increase over the same quarter last year.  Gross margins for the quarter were 52%, as compared to 53% for the previous quarter and 51% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, were 69% for the quarter, the previous quarter and for the same quarter last year. 

Selling, general and administrative expenses were $225.3 million for the fourth quarter, a 9% increase over the previous quarter and a 16% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $55.9 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $169.4 million for the quarter, a 10% increase from the previous quarter and a 15% increase over the same quarter last year. 

Interest expense was $79.5 million for the fourth quarter, a 4% increase from the previous quarter and a 12% increase from the same quarter last year, primarily due to the incremental debt financing in November 2015. 

The Company recorded an income tax benefit of $2.1 million for the fourth quarter as compared to income tax expense of $11.6 million for the previous quarter and $303.3 million for the same quarter last year.

Net income was $10.7 million for the fourth quarter. This represents a basic net income per share of $0.18 for the fourth quarter based on a weighted average share count of 60.4 million shares and a diluted net income per share of $0.18 for the fourth quarter based on a weighted average diluted share count of 60.9 million shares.

Income from operations was $135.9 million for the fourth quarter, a 4% decrease from the previous quarter and a 6% increase over the same quarter last year.  Adjusted EBITDA, as defined below, for the fourth quarter was $333.1 million, a 4% increase over the previous quarter and a 13% increase over the same quarter last year. Adjusted EBITDA includes $5.2 million from the acquisition of Bit-isle, which closed on November 2, 2015

Adjusted funds from operations ("AFFO"), as defined below, were $178.3 million for the fourth quarter, a 15% decrease from the previous quarter and an 8% decrease over the same quarter last year.  AFFO includes $3.4 million of AFFO from the acquisition of Bit-isle, which closed on November 2, 2015. This represents a basic AFFO per share attributable to the Company of $2.95 for the fourth quarter and a diluted AFFO per share attributable to the Company of $2.85 for the fourth quarter. AFFO for the fourth quarter includes a foreign currency exchange loss of $49.0 million primarily attributed to foreign currency losses related to the Telecity purchase price.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the fourth quarter, were $280.6 million, as compared to capital expenditures of $216.0 million for the previous quarter and $238.5 million for the same quarter last year.

The Company generated cash from operating activities of $235.1 million for the fourth quarter, a 10% increase over the previous quarter and a 16% increase over the same quarter last year. Cash used in investing activities was $529.0 million in the fourth quarter as compared to cash used in investing activities of $107.6 million in the previous quarter. Cash provided by financing activities was $2.2 billion for the fourth quarter as compared to cash used in financing activities of $101.4 million in the previous quarter.

As of December 31, 2015, the Company's cash, cash equivalents and investments were $2,246.3 million, as compared to $1,140.8 million as of December 31, 2014. 

Business Outlook

Equinix guidance includes forecasted results for Telecity from January 15, 2016 and Bit-isle for the full year of 2016.  As previously announced, Equinix expects to divest eight assets, seven from Telecity along with Equinix's London 2 data center (LD2), as part of regulatory clearance for the transaction received on November 13, 2015. The Company expects to complete these divestitures mid-2016.  The Company's guidance does not include the seven Telecity assets, which will be treated as discontinued operations, but does assume 6 months, or $6 million in revenue, from LD2, which is under a different accounting treatment that requires results to be reported until completion of the sale. 

For the first quarter of 2016, the Company expects revenues to range between $838.0 and $842.0 million, or a normalized and constant currency growth rate of 2.6% quarter over quarter.  This guidance includes a negative foreign currency impact of $3.7 million when compared to the average FX rates in Q4 2015, and includes an expected $117.0 million in revenues from the Telecity and Bit-isle acquisitions.  Cash gross margins are expected to approximate 67-68%.  Cash selling, general and administrative expenses are expected to range between $196.0 and $200.0 million.  Adjusted EBITDA is expected to range between $368.0 and $372.0 million, which includes a $1.1 million negative foreign currency impact when compared to the average FX rates in Q4 2015 and $17.0 million in integration costs from the two acquisitions. This guidance includes an expected $49.0 million in adjusted EBITDA from Telecity and Bit-isle.  Capital expenditures are expected to range between $235.0 and $255.0 million, which includes approximately $30.0 million of recurring capital expenditures and $205.0 to $225.0 million of non-recurring capital expenditures.

For the full year of 2016, total revenues are expected to be greater than $3,550.0 million, a normalized and constant currency growth rate of greater than 13% year over year.  This guidance includes a negative foreign currency impact of $52.7 million on organic revenues when compared to prior Equinix guidance rates, and includes an expected $548.0 million in revenues from the Telecity and Bit-isle acquisitions.  Total year cash gross margins are expected to approximate 67-68%.  Cash selling, general and administrative expenses are expected to range between $770.0 and $790.0 million.  Adjusted EBITDA is expected to be greater than $1,620.0 million, or 16% year over year on a normalized and constant currency growth rate.  This guidance includes $28.0 million of negative foreign currency impact on organic adjusted EBITDA when compared to prior Equinix guidance rates, an expected $245.0 million in adjusted EBITDA from the Telecity and Bit-isle acquisitions, as well as $58.0 million in integration costs for these two acquisitions.  AFFO is expected to be greater than $970.0 million, and includes $50.0 million of expected foreign currency loss associated with the Telecity closing.  Capital expenditures are expected to range between $900.0 and $1,000.0 million, including approximately $140.0 million of recurring capital expenditures and $760.0 to $860.0 million of non-recurring capital expenditures.   

The U.S. dollar exchange rates used for 2016 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.11 to the Euro, $1.49 to the Pound, S$1.43 to the U.S. dollar,  ¥117.65 to the U.S. dollar and R$4.03 to the U.S. dollar. The 2016 global revenue breakdown by currency for the Euro, Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 18%, 11%, 7%, 6% and 2%, respectively.

The guidance provided above is forward-looking and includes the impact of the Company's acquisition of Telecity, which closed on January 15, 2016.  The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses.  The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q4 Results Conference Call and Replay Information

The Company will discuss its quarterly results for the period ended December 31, 2015, along with its future outlook, in its quarterly conference call on Thursday, February 18, 2016, at 5:30 p.m. ET (2:30 p.m. PT).  A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-210-234-8004 (domestic and international) and reference the passcode EQIX.   

A replay of the call will be available one hour after the call, through Thursday, May 19, 2016, by dialing 1-203-369-0717 and referencing the passcode 2016.  In addition, the webcast will be available at www.equinix.com/investors.  No password is required for the webcast.

Investor Presentation and Supplemental Financial Information

The Company has made available on its website a presentation designed to accompany the discussion of the Company's results and future outlook, along with certain supplemental financial information and other data. Interested parties may access this information through the Company's Investor Relations website at www.equinix.com/investors.

Additional Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most interconnected data centers. In 40 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies.

Non-GAAP Financial Measures

The Company provides all information required in accordance with generally accepted accounting principles ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures.  Accordingly, the Company uses non-GAAP financial measures to evaluate its operations.

In presenting non-GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow and adjusted free cash flow, the Company excludes certain items that it believes are not good indicators of the Company's current or future operating performance.  These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges and acquisition costs.  The Company excludes these items in order for its lenders, investors, and the industry analysts who review and report on the Company to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitors.

The Company excludes depreciation expense as these charges primarily relate to the initial construction costs of an IBX center, and do not reflect its current or future cash spending levels to support its business.  Its IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX center do not recur with respect to such data center, although the Company may incur initial construction costs in future periods with respect to additional IBX centers, and future capital expenditures remain minor relative to the initial investment.  This is a trend it expects to continue.  In addition, depreciation is also based on the estimated useful lives of the IBX centers.  These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers, and are not indicative of current or expected future capital expenditures.  Therefore, the Company excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, the Company also excludes amortization expense related to certain intangible assets, as it is not meaningful in evaluating the Company's current or future operating performance.  The Company excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which the Company also believes are not meaningful in evaluating the Company's current operations.  The Company excludes stock-based compensation expense as it represents expense attributed to equity awards that have no current or future cash obligations.  As such, the Company, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations.  The Company excludes restructuring charges from its non-GAAP financial measures.  The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges.  The Company also excludes impairment charges 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 long-lived assets are not recoverable. Finally, the Company excludes acquisition costs from its non-GAAP financial measures.  The acquisition costs relate to costs the Company incurs in connection with business combinations.  Management believes items such as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of costs may occur in future periods.

The Company also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), which are non-GAAP financial measures commonly used in the REIT industry.  FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT").  FFO represents net income (loss), excluding gains (losses) 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.  AFFO represents FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and acquisition charges for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above. 

The Company includes an adjustment for revenue from installation fees, since installation fees are deferred and recognized ratably over the expected life of the installation, although the fees are generally paid in a lump sum upon installation. The Company includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term.  The adjustments for both installation revenue and straight-line rent expense are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. The Company excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations.  The Company excludes gains (losses) on debt extinguishment since it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance. The Company includes an income tax expense adjustment, which represents changes in its income tax reserves and valuation allowances that may not recur or may not relate to the current year's operations. The Company also excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX centers or other assets that are required to support current revenues.

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.  The Company presents such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be its core, ongoing business operations.  Management believes 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 its ability to perform in subsequent periods. The Company believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze the Company effectively.

Investors should note that the non-GAAP financial measures used by the Company 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. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data. The Company intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenue from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.

Equinix and IBX are registered trademarks of Equinix, Inc. International Business Exchange is a trademark of Equinix, Inc. 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2015

2015

2014

2015

2014

Recurring revenues

$       686,072

$        646,721

$       605,492

$    2,569,141

$    2,317,790

Non-recurring revenues

44,390

39,928

32,629

156,726

125,986

Revenues

730,462

686,649

638,121

2,725,867

2,443,776

Cost of revenues

351,968

325,468

313,449

1,291,506

1,197,885

Gross profit

378,494

361,181

324,672

1,434,361

1,245,891

Operating expenses:

Sales and marketing

88,439

83,709

81,236

332,012

296,103

General and administrative

136,829

123,237

113,684

493,284

438,016

Acquisition costs

17,349

13,352

1,926

41,723

2,506

Total operating expenses

242,617

220,298

196,846

867,019

736,625

Income from operations

135,877

140,883

127,826

567,342

509,266

Interest and other income (expense):

Interest income

1,206

934

357

3,581

2,891

Interest expense

(79,499)

(76,269)

(71,103)

(299,055)

(270,553)

Loss on debt extinguishment 

(289)

-

(105,807)

(289)

(156,990)

Other income (expense)

(48,617)

(12,836)

(3,051)

(60,581)

119

Total interest and other, net

(127,199)

(88,171)

(179,604)

(356,344)

(424,533)

Income (loss) before income taxes

8,678

52,712

(51,778)

210,998

84,733

Income tax benefit (expense)

2,053

(11,580)

(303,325)

(23,224)

(345,459)

Net income (loss)

10,731

41,132

(355,103)

187,774

(260,726)

Net loss attributable to redeemable non-controlling interests

-

-

-

-

1,179

Net income (loss) attributable to Equinix

$         10,731

$          41,132

$      (355,103)

$       187,774

$      (259,547)

Net income (loss) per share attributable to Equinix:

Basic net income (loss) per share

$            0.18

$             0.72

$           (6.42)

$            3.25

$           (4.96)

Diluted net income (loss) per share

$            0.18

$             0.71

$           (6.42)

$            3.21

$           (4.96)

Shares used in computing basic net income (loss) per share

60,393

57,082

55,295

57,790

52,359

Shares used in computing diluted net income (loss) per share

60,943

57,708

55,295

58,483

52,359

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2015

2015

2014

2015

2014

Net income (loss)

$         10,731

$          41,132

$      (355,103)

$       187,774

$      (260,726)

Other comprehensive loss, net of tax:

 Foreign currency translation adjustment ("CTA") loss 

(37,217)

(72,677)

(97,123)

(186,763)

(204,065)

 Unrealized gain (loss) on available-for-sale securities 

(139)

(21)

135

(40)

(279)

 Unrealized gain on cash flow hedges 

4,975

3,309

4,026

4,550

8,790

 Net investment hedge CTA gain 

10,447

4,426

-

4,484

-

 Net actuarial gain (loss) on defined benefit plans 

887

124

(2,001)

1,153

(2,001)

 Other comprehensive loss, net of tax: 

(21,047)

(64,839)

(94,963)

(176,616)

(197,555)

 Comprehensive income (loss), net of tax 

(10,316)

(23,707)

(450,066)

11,158

(458,281)

 Net loss attributable to redeemable non-controlling interests 

-

-

-

-

1,179

 Other comprehensive income attributable to redeemable non-controlling interests 

-

-

-

-

(1,810)

 Comprehensive income (loss) attributable to Equinix, net of tax 

$        (10,316)

$         (23,707)

$      (450,066)

$         11,158

$      (458,912)

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

Assets

December 31,

 December 31, 

2015

2014

Cash and cash equivalents

$    2,228,838

$         610,917

Short-term investments

12,875

529,395

Accounts receivable, net

291,964

262,570

Current portion of restricted cash

479,417

3,057

Other current assets

212,929

85,004

Assets held for sale

33,257

-

Total current assets

3,259,280

1,490,943

Long-term investments

4,584

439

Property, plant and equipment, net

5,606,436

4,998,270

Goodwill

1,063,200

1,002,129

Intangible assets, net

224,565

147,527

Restricted cash, less current portion

10,172

14,060

Other assets

188,458

128,610

Total assets

$  10,356,695

$      7,781,978

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses

$       402,776

$         285,796

Accrued property and equipment

103,107

114,469

Current portion of capital lease and other financing obligations

40,121

21,362

Current portion of mortgage and loans payable

768,408

59,466

Current portion of convertible debt

146,121

-

Other current liabilities

192,286

162,664

Liabilities held for sale

3,535

-

Total current liabilities

1,656,354

643,757

Capital lease and other financing obligations, less current portion

1,287,139

1,168,042

Mortgage and loans payable, less current portion

457,276

532,809

Senior notes

3,804,634

2,717,046

Convertible debt,  less current portion

-

145,229

Other liabilities

405,906

304,964

Total liabilities

7,611,309

5,511,847

Common stock

62

57

Additional paid-in capital

4,838,444

3,334,305

Treasury stock

(7,373)

(11,411)

Accumulated dividends

(1,468,472)

(424,387)

Accumulated other comprehensive loss

(509,059)

(332,443)

Accumulated deficit

(108,216)

(295,990)

Total stockholders' equity

2,745,386

2,270,131

Total liabilities and stockholders' equity

$  10,356,695

$      7,781,978

Ending headcount by geographic region is as follows:

Americas headcount

2,329

2,122

EMEA headcount

1,188

1,023

Asia-Pacific headcount

1,525

721

Total headcount

5,042

3,866

EQUINIX, INC.

SUMMARY OF DEBT PRINCIPAL OUTSTANDING

(in thousands)

(unaudited)

December 31,

December 31,

2015

2014

Capital lease and other financing obligations

$    1,327,260

$    1,189,404

Term loan, net of debt discount and debt issuance costs

454,503

497,044

Brazil financings, net of debt issuance costs

26,668

56,342

Mortgage payable and other loans payable, net of premium

418,891

38,889

Revolving credit facility borrowings

325,622

-

Plus: debt discount, debt issuance costs and premium, net

694

1,196

Total mortgage and loans payable principal

1,226,378

593,471

Senior notes, net of debt issuance costs

3,804,634

2,717,046

Plus: debt issuance costs

45,366

32,954

Total senior notes principal

3,850,000

2,750,000

Convertible debt, net of debt discount and debt issuance costs

146,121

145,229

Plus: debt discount and debt issuance costs

3,961

12,656

Total convertible debt principal

150,082

157,885

Total debt principal outstanding

$    6,553,720

$    4,690,760

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2015

2015

2014

2015

2014

Cash flows from operating activities:

Net income (loss)

$         10,731

$          41,132

$      (355,103)

$       187,774

$      (260,726)

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:

Depreciation, amortization and accretion

144,861

133,268

133,096

528,929

484,129

Stock-based compensation

33,868

33,969

31,517

132,443

117,990

Amortization of debt issuance costs and debt discounts

4,493

3,972

3,827

16,050

18,667

Loss on debt extinguishment 

289

-

105,807

289

156,990

Excess tax benefits from employee equity awards

1,633

(732)

(2,125)

(30)

(19,582)

Other items

3,819

4,321

5,863

18,178

24,567

Changes in operating assets and liabilities:

Accounts receivable

(2,581)

(220)

2,428

(44,583)

(101,966)

Income taxes, net

(25,056)

(18,376)

295,947

(109,579)

226,774

Accounts payable and accrued expenses

33,906

25,926

(16,429)

109,125

4,177

Other assets and liabilities

29,155

(8,858)

(2,531)

56,197

38,400

Net cash provided by operating activities

235,118

214,402

202,297

894,793

689,420

Cash flows from investing activities:

Purchases, sales and maturities of investments, net

(9,369)

94,217

(381,629)

514,108

239,551

Business acquisitions, net of cash acquired

(235,306)

-

-

(245,553)

-

Purchases of real estate

-

-

-

(38,282)

(16,791)

Purchases of other property, plant and equipment

(280,612)

(216,046)

(238,477)

(868,120)

(660,203)

Other investing activities

(3,709)

14,274

195

(497,080)

1,604

Net cash used in investing activities

(528,996)

(107,555)

(619,911)

(1,134,927)

(435,839)

Cash flows from financing activities:

Purchases of treasury stock

-

-

-

-

(297,958)

Proceeds from employee equity awards

185

13,290

1,137

30,040

29,320

Purchase of redeemable non-controlling interests

-

-

-

-

(226,276)

Payment of dividend distributions

(230,452)

(98,041)

(83,266)

(521,461)

(83,266)

Proceeds from public offering of common stock, net of issuance costs

829,496

-

-

829,496

-

Proceeds from loans payable

707,108

-

500,000

1,197,108

508,826

Proceeds from senior notes

1,100,000

-

1,250,000

1,100,000

1,250,000

Repayment of capital lease and other financing obligations

(8,450)

(6,576)

(4,890)

(28,663)

(18,030)

Repayment of mortgage and loans payable

(185,823)

(10,818)

(5,963)

(715,270)

(43,473)

Repayment of senior notes

-

-

(750,000)

-

(750,000)

Repayment of term loan

-

-

(110,000)

-

(110,000)

Repayment of convertible debt

-

-

(34)

-

(29,513)

Debt extinguishment costs

-

-

(93,965)

-

(116,517)

Excess tax benefits from employee equity awards

(1,633)

732

2,125

30

19,582

Debt issuance costs

(17,481)

-

(25,294)

(18,098)

(25,294)

Net cash provided by (used in) financing activities

2,192,950

(101,413)

679,850

1,873,182

107,401

Effect of foreign currency exchange rates on cash and cash equivalents

(5,703)

(6,098)

(5,500)

(15,127)

(11,959)

Net increase (decrease) in cash and cash equivalents

1,893,369

(664)

256,736

1,617,921

349,023

Cash and cash equivalents at beginning of period

335,469

336,133

354,181

610,917

261,894

Cash and cash equivalents at end of period

$    2,228,838

$        335,469

$       610,917

$    2,228,838

$       610,917

Supplemental cash flow information:

Cash paid for taxes

$         29,165

$          28,333

$          6,407

$       132,302

$       117,197

Cash paid for interest

$         73,044

$          68,568

$         94,283

$       237,410

$       262,018

Free cash flow (1)

$      (284,509)

$          12,630

$        (35,985)

$      (754,242)

$         14,030

Adjusted free cash flow (2)

$        (33,081)

$          34,035

$        (29,881)

$      (385,543)

$       160,425

(1)

We define free cash flow as net cash provided by operating activities plus net cash provided by (used in) investing activities (excluding the net purchases, sales and maturities of investments) as presented below:

Net cash provided by operating activities as presented above

$       235,118

$        214,402

$       202,297

$       894,793

$       689,420

Net cash used in investing activities as presented above

(528,996)

(107,555)

(619,911)

(1,134,927)

(435,839)

Purchases, sales and maturities of investments, net

9,369

(94,217)

381,629

(514,108)

(239,551)

Free cash flow (negative free cash flow)

$      (284,509)

$          12,630

$        (35,985)

$      (754,242)

$         14,030

(2)

We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate, acquisitions, any excess tax benefits from employee equity awards, cash paid for taxes associated with reclassifying our assets for tax purposes triggered by our conversion into a real estate investment trust ("REIT") and costs related to the REIT conversion, as presented below:

Free cash flow (as defined above)

$      (284,509)

$          12,630

$        (35,985)

$      (754,242)

$         14,030

Less business acquisitions, net of cash

235,306

-

-

245,553

-

Less purchases of real estate

-

-

-

38,282

16,791

Less excess tax benefits from employee equity awards

(1,633)

732

2,125

30

19,582

Less cash paid for taxes resulting from the REIT conversion 

17,306

20,033

189

82,452

80,867

Less costs related to the REIT conversion

449

640

3,790

2,382

29,155

Adjusted free cash flow

$        (33,081)

$          34,035

$        (29,881)

$      (385,543)

$       160,425

We categorize our cash paid for taxes into cash paid for taxes resulting from the REIT conversion (as defined above) and other cash taxes paid.

Cash paid for taxes resulting from the REIT conversion

$         17,306

$          20,033

$             189

$         82,452

$         80,867

Other cash taxes paid

11,859

8,300

6,218

49,850

36,330

Total cash paid for taxes

$         29,165

$          28,333

$          6,407

$       132,302

$       117,197

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION

(in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2015

2015

2014

2015

2014

Recurring revenues

$       686,072

$         646,721

$       605,492

$    2,569,141

$    2,317,790

Non-recurring revenues

44,390

39,928

32,629

156,726

125,986

Revenues (1)

730,462

686,649

638,121

2,725,867

2,443,776

Cash cost of revenues (2)

227,956

211,617

195,945

836,439

767,552

Cash gross profit (3)

502,506

475,032

442,176

1,889,428

1,676,224

Cash operating expenses (4):

Cash sales and marketing expenses (5)

72,069

68,323

67,036

269,270

240,054

Cash general and administrative expenses (6)

97,292

85,237

80,775

348,531

322,279

Total cash operating expenses (7)

169,361

153,560

147,811

617,801

562,333

Adjusted EBITDA (8)

$       333,145

$         321,472

$       294,365

$    1,271,627

$    1,113,891

Cash gross margins (9)

69%

69%

69%

69%

69%

Adjusted EBITDA margins (10)

46%

47%

46%

47%

46%

Adjusted EBITDA flow-through rate (11)

27%

48%

59%

56%

39%

FFO (12)

$       131,483

$         151,197

$      (241,338)

$       629,238

$       153,266

AFFO (13)

$       178,293

$         210,361

$       194,506

$       831,798

$       761,679

Basic FFO per share (14)

$            2.18

$              2.65

$           (4.36)

$          10.89

$            2.93

Diluted FFO per share (14)

$            2.14

$              2.59

$           (4.36)

$          10.63

$            2.89

Basic AFFO per share (15)

$            2.95

$              3.69

$            3.52

$          14.39

$          14.55

Diluted AFFO per share (15)

$            2.85

$              3.55

$            3.39

$          13.86

$          13.81

(1)

The geographic split of our revenues on a services basis is presented below:

Americas Revenues:

Colocation

$       275,779

$         268,156

$       254,037

$    1,064,801

$       978,503

Interconnection

83,168

79,902

71,992

315,258

272,257

Managed infrastructure

10,974

11,788

13,860

48,894

57,071

Other

817

841

814

3,131

3,687

Recurring revenues

370,738

360,687

340,703

1,432,084

1,311,518

Non-recurring revenues

23,751

21,943

15,699

80,451

64,585

Revenues

394,489

382,630

356,402

1,512,535

1,376,103

EMEA Revenues:

Colocation

146,879

143,721

134,816

562,817

514,997

Interconnection

16,775

15,227

13,484

58,490

50,342

Managed infrastructure

7,619

5,875

5,487

25,196

26,965

Other

862

1,333

1,613

5,275

6,649

Recurring revenues

172,135

166,156

155,400

651,778

598,953

Non-recurring revenues

10,519

11,407

11,693

47,029

38,312

Revenues

182,654

177,563

167,093

698,807

637,265

Asia-Pacific Revenues:

Colocation

112,498

99,775

91,211

397,345

336,312

Interconnection

18,979

15,439

13,231

62,061

49,751

Managed infrastructure

9,447

4,664

4,947

23,598

21,256

Other

2,275

-

-

2,275

-

Recurring revenues

143,199

119,878

109,389

485,279

407,319

Non-recurring revenues

10,120

6,578

5,237

29,246

23,089

Revenues

153,319

126,456

114,626

514,525

430,408

Worldwide Revenues:

Colocation

535,156

511,652

480,064

2,024,963

1,829,812

Interconnection

118,922

110,568

98,707

435,809

372,350

Managed infrastructure

28,040

22,327

24,294

97,688

105,292

Other

3,954

2,174

2,427

10,681

10,336

Recurring revenues

686,072

646,721

605,492

2,569,141

2,317,790

Non-recurring revenues

44,390

39,928

32,629

156,726

125,986

Revenues

$       730,462

$         686,649

$       638,121

$    2,725,867

$    2,443,776

(2)

We define cash cost of revenues as cost of revenues less depreciation, amortization, accretion and stock-based compensation as presented below:

Cost of revenues

$       351,968

$         325,468

$       313,449

$    1,291,506

$    1,197,885

Depreciation, amortization and accretion expense

(121,505)

(111,337)

(115,236)

(445,189)

(421,822)

Stock-based compensation expense

(2,507)

(2,514)

(2,268)

(9,878)

(8,511)

Cash cost of revenues

$       227,956

$         211,617

$       195,945

$       836,439

$       767,552

The geographic split of our cash cost of revenues is presented below:

Americas cash cost of revenues

$       107,640

$         105,864

$         97,396

$       410,915

$       380,892

EMEA cash cost of revenues

64,089

64,443

59,987

249,457

236,423

Asia-Pacific cash cost of revenues

56,227

41,310

38,562

176,067

150,237

Cash cost of revenues

$       227,956

$         211,617

$       195,945

$       836,439

$       767,552

(3)

We define cash gross profit as revenues less cash cost of revenues (as defined above).

(4)

We define cash operating expenses as operating expenses less depreciation, amortization, stock-based compensation and acquisition costs.  We also refer to cash operating expenses as cash selling, general and administrative expenses or "cash SG&A".

(5)

We define cash sales and marketing expenses as sales and marketing expenses less depreciation, amortization and stock-based compensation as presented below:

Sales and marketing expenses

$         88,439

$           83,709

$         81,236

$       332,012

$       296,103

Depreciation and amortization expense

(7,329)

(6,213)

(6,315)

(25,895)

(25,965)

Stock-based compensation expense

(9,041)

(9,173)

(7,885)

(36,847)

(30,084)

Cash sales and marketing expenses

$         72,069

$           68,323

$         67,036

$       269,270

$       240,054

(6)

We define cash general and administrative expenses as general and administrative expenses less depreciation, amortization and stock-based compensation as presented below:

General and administrative expenses

$       136,829

$         123,237

$       113,684

$       493,284

$       438,016

Depreciation and amortization expense

(16,027)

(15,718)

(11,545)

(57,845)

(36,342)

Stock-based compensation expense

(23,510)

(22,282)

(21,364)

(86,908)

(79,395)

Cash general and administrative expenses

$         97,292

$           85,237

$         80,775

$       348,531

$       322,279

(7)

Our cash operating expenses, or cash SG&A, as defined above, is presented below:

Cash sales and marketing expenses

$         72,069

$           68,323

$         67,036

$       269,270

$       240,054

Cash general and administrative expenses

97,292

85,237

80,775

348,531

322,279

Cash SG&A

$       169,361

$         153,560

$       147,811

$       617,801

$       562,333

The geographic split of our cash operating expenses, or cash SG&A, is presented below:

Americas cash SG&A

$       106,035

$         102,596

$         91,762

$       403,016

$       360,204

EMEA cash SG&A

36,971

31,717

36,226

130,789

131,620

Asia-Pacific cash SG&A

26,355

19,247

19,823

83,996

70,509

Cash SG&A

$       169,361

$         153,560

$       147,811

$       617,801

$       562,333

(8)

We define adjusted EBITDA as income from operations plus depreciation, amortization, accretion, stock-based compensation expense and acquisition costs as presented below:

Income from operations

$       135,877

$         140,883

$       127,826

$       567,342

$       509,266

Depreciation, amortization and accretion expense

144,861

133,268

133,096

528,929

484,129

Stock-based compensation expense

35,058

33,969

31,517

133,633

117,990

Acquisition costs

17,349

13,352

1,926

41,723

2,506

Adjusted EBITDA

$       333,145

$         321,472

$       294,365

$    1,271,627

$    1,113,891

The geographic split of our adjusted EBITDA is presented below:

Americas income from operations

$         83,425

$           81,914

$         70,131

$       324,458

$       282,219

Americas depreciation, amortization and accretion expense

73,023

70,118

72,408

278,644

260,416

Americas stock-based compensation expense

25,576

25,810

24,351

100,760

91,469

Americas acquisition costs

(1,210)

(3,672)

354

(5,258)

903

Americas adjusted EBITDA

180,814

174,170

167,244

698,604

635,007

EMEA income from operations

34,011

29,865

35,867

145,527

138,685

EMEA depreciation, amortization and accretion expense

30,434

33,055

29,770

118,008

115,223

EMEA stock-based compensation expense

4,348

4,338

3,671

16,690

13,661

EMEA acquisition costs

12,801

14,145

1,572

38,336

1,653

EMEA adjusted EBITDA

81,594

81,403

70,880

318,561

269,222

Asia-Pacific income from operations

18,441

29,104

21,828

97,357

88,362

Asia-Pacific depreciation, amortization and accretion expense

41,404

30,095

30,918

132,277

108,490

Asia-Pacific stock-based compensation expense

5,134

3,821

3,495

16,183

12,860

Asia-Pacific acquisition costs

5,758

2,879

-

8,645

(50)

Asia-Pacific adjusted EBITDA

70,737

65,899

56,241

254,462

209,662

Adjusted EBITDA

$       333,145

$         321,472

$       294,365

$    1,271,627

$    1,113,891

(9)

We define cash gross margins as cash gross profit divided by revenues.

Our cash gross margins by geographic region is presented below:

Americas cash gross margins

73%

72%

73%

73%

72%

EMEA cash gross margins

65%

64%

64%

64%

63%

Asia-Pacific cash gross margins

63%

67%

66%

66%

65%

(10)

We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.

Americas adjusted EBITDA margins

46%

46%

47%

46%

46%

EMEA adjusted EBITDA margins

45%

46%

42%

46%

42%

Asia-Pacific adjusted EBITDA margins

46%

52%

49%

49%

49%

(11)

We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows:

Adjusted EBITDA - current period

$       333,145

$         321,472

$       294,365

$    1,271,627

$    1,113,891

Less adjusted EBITDA - prior period

(321,472)

(311,262)

(283,861)

(1,113,891)

(1,000,898)

Adjusted EBITDA growth

$         11,673

$           10,210

$         10,504

$       157,736

$       112,993

Revenues - current period

$       730,462

$         686,649

$       638,121

$    2,725,867

$    2,443,776

Less revenues - prior period

(686,649)

(665,582)

(620,441)

(2,443,776)

(2,152,766)

Revenue growth

$         43,813

$           21,067

$         17,680

$       282,091

$       291,010

Adjusted EBITDA flow-through rate

27%

48%

59%

56%

39%

(12)

FFO is defined as net income (loss), excluding gains (losses) 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. 

Net income 

$         10,731

$           41,132

$      (355,103)

$       187,774

$      (260,726)

Net loss attributable to redeemable non-controlling interests

-

-

-

-

1,179

Net income (loss) attributable to Equinix

10,731

41,132

(355,103)

187,774

(259,547)

Adjustments:

Real estate depreciation and amortization

120,144

109,856

113,683

439,969

417,703

Gain/loss on disposition of real estate property

579

182

54

1,382

301

Adjustments for FFO from unconsolidated joint ventures

29

27

28

113

112

Non-controlling interests' share of above adjustments

-

-

-

-

(5,303)

FFO 

$       131,483

$         151,197

$      (241,338)

$       629,238

$       153,266

(13)

AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs,  gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items.  

FFO 

$       131,483

$         151,197

$      (241,338)

$       629,238

$       153,266

Adjustments:

Installation revenue adjustment

5,843

8,527

7,224

35,498

25,720

Straight-line rent expense adjustment

1,462

1,251

3,335

7,931

13,048

Amortization of deferred financing costs

4,495

3,934

3,944

16,135

19,020

Stock-based compensation expense

35,058

33,969

31,517

133,633

117,990

Non-real estate depreciation expense

15,921

15,946

11,478

58,165

36,232

Amortization expense

8,100

6,601

6,803

27,446

27,756

Accretion expense

696

865

1,132

3,349

2,438

Recurring capital expenditures

(44,668)

(25,910)

(33,124)

(120,281)

(105,366)

Loss on debt extinguishment

289

-

105,807

289

156,990

Acquisition costs

17,349

13,352

1,926

41,723

2,506

Income tax expense adjustment

2,279

643

295,820

(1,270)

315,289

Adjustments for AFFO from unconsolidated joint ventures

(14)

(14)

(18)

(58)

(76)

Non-controlling interests share of above adjustments

-

-

-

-

(3,134)

AFFO

$       178,293

$         210,361

$       194,506

$       831,798

$       761,679

(14)

The FFO used in the computation of basic and diluted FFO per share attributable to Equinix is presented below:

FFO, basic

$       131,483

$         151,197

$      (241,338)

$       629,238

$       153,266

Interest on convertible debt

3,442

3,279

-

13,357

-

FFO, diluted

$       134,925

$         154,476

$      (241,338)

$       642,595

$       153,266

The shares used in the computation of basic and diluted FFO per share attributable to Equinix is presented below:

 Shares used in computing basic net income per share and FFO per share 

60,393

57,082

55,295

57,790

52,359

 Effect of dilutive securities: 

 Convertible debt 

2,041

1,970

-

1,977

-

 Employee equity awards 

612

626

-

693

626

 Shares used in computing diluted FFO per share 

63,046

59,678

55,295

60,460

52,985

(15)

The AFFO used in the computation of basic and diluted AFFO per share attributable to Equinix is presented below:

AFFO, basic

$       178,293

$         210,361

$       194,506

$       831,798

$       761,679

Interest on convertible debt

1,557

1,390

2,372

6,279

20,861

AFFO, diluted

$       179,850

$         211,751

$       196,878

$       838,077

$       782,540

The shares used in the computation of basic and diluted AFFO per share attributable to Equinix is presented below:

 Shares used in computing basic net income per share and AFFO per share 

60,393

57,082

55,295

57,790

52,359

 Effect of dilutive securities: 

 Convertible debt 

2,041

1,970

2,199

1,977

3,685

 Employee equity awards 

612

626

557

693

626

 Shares used in computing diluted AFFO per share 

63,046

59,678

58,051

60,460

56,670

SOURCE Equinix, Inc.



RELATED LINKS

http://www.equinix.com