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.



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