Equinix Reports Second Quarter 2015 Results

- Reported revenues of $665.6 million, a 3% increase over the previous quarter and a 10% increase over the same quarter last year

- Marks 50th quarter of consecutive revenue growth

- Raising 2015 annual guidance: revenues to range between $2,685.0 and $2,695.0 million, adjusted EBITDA to range between $1,250.0 and $1,260.0 million and AFFO to range between $850.0 and $860.0 million

Jul 29, 2015, 16:01 ET from Equinix, Inc.

REDWOOD CITY, Calif., July 29, 2015 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended June 30, 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.

Revenues were $665.6 million for the second quarter, a 3% increase over the previous quarter and a 10% increase over the same quarter last year.  Recurring revenues, consisting primarily of colocation, interconnection and managed services were $626.7 million for the second quarter, a 3% increase over the previous quarter and a 9% increase over the same quarter last year.  Non-recurring revenues were $38.9 million in the quarter.  MRR churn for the second quarter was 1.8%, as compared to 2.0% from the previous quarter.

"This marks our 50th quarter of consecutive revenue growth, and the continued strength and momentum of our business reflects our strategic position and the value of our global platform," said Steve Smith, president and CEO of Equinix. "We sit at the crossroads of the Internet where our customers use Platform Equinix to innovate and accelerate their businesses.  The scope, scale, reach and diversity of our global offering remain without parallel and we are continuing to invest across systems, processes and people to ensure consistent service delivery worldwide."

Cost of revenues were $315.8 million for the second quarter, a 6% increase from the previous quarter and an 8% increase from the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $111.1 million for the quarter, which we refer to as cash cost of revenues, were $204.7 million for the quarter, a 7% increase over the previous quarter and the same quarter last year.  Gross margins for the quarter were 53%, as compared to 54% for the previous quarter and 52% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 69%, as compared to 70% for the previous quarter and 68% for the same quarter last year. 

Selling, general and administrative expenses were $200.8 million for the second quarter, a 4% increase over the previous quarter and a 7% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $51.2 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $149.6 million for the quarter, a 3% increase from the previous quarter and an 8% increase over the same quarter last year. 

Interest expense was $74.5 million for the second quarter, an 8% increase from the previous quarter and an 11% increase from the same quarter last year. 

The Company recorded income tax expense of $7.5 million for the second quarter compared to $6.2 million for the previous quarter and an income tax benefit of $2.0 million for the same quarter last year.

Net income attributable to the Company was $59.5 million for the second quarter. This represents a basic net income per share attributable to the Company of $1.04 for the second quarter based on a weighted average share count of 56.9 million and a diluted net income per share attributable to the Company of $1.03 for the second quarter based on a weighted average share count of 57.5 million.

Income from operations was $139.1 million for the second quarter, an 8% decrease from the previous quarter, but a 12% increase over the same quarter last year.  Adjusted EBITDA, as defined below, for the second quarter was $311.3 million, a 2% increase over the previous quarter and a 13% increase over the same quarter last year.

Adjusted funds from operations ("AFFO"), as defined below, were $221.4 million for the second quarter, largely unchanged from the previous quarter and an 18% increase over the same quarter last year.  This represents a basic AFFO per share attributable to the Company of $3.89 for the second quarter and a diluted AFFO per share attributable to the Company of $3.75 for the second quarter.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the second quarter, were $221.3 million, as compared to capital expenditures of $150.1 million for the previous quarter and $159.8 million for the same quarter last year.

The Company generated cash from operating activities of $212.5 million for the second quarter, a 9% decrease over the previous quarter and a 115% increase over the same quarter last year, primarily due to improved operating results and favorable working capital activities. Cash used in investing activities was $298.5 million in the second quarter as compared to cash used in investing activities of $199.8 million in the previous quarter, primarily attributed to higher capital expenditures and placing approximately £322.8 million, or approximately $493.8 million, into a restricted cash account for the payment of a portion of the purchase price in connection with our intention to acquire Telecity Group plc ("TelecityGroup"). On May 29, 2015, the Company announced a cash and share offer for the entire issued and to be issued share capital of TelecityGroup for approximately £2.4 billion, or approximately $3.6 billion, at the time of the announcement.  The Company expects to close this transaction in the first half of 2016. Cash used in financing activities was $119.6 million for the second quarter as compared to cash used in financing activities of $98.8 million in the previous quarter.

As of June 30, 2015, the Company's cash, cash equivalents and investments were $435.6 million, as compared to $1,140.8 million as of December 31, 2014. 

Business Outlook

For the third quarter of 2015, the Company expects revenues to range between $681.0 and $685.0 million, which includes a negligible foreign currency impact when compared to the average FX rates in Q2 2015 or a normalized and constant currency growth rate of 3% quarter over quarter.  Cash gross margins are expected to approximate 68% to 69%.  Cash selling, general and administrative expenses are expected to approximate $150.0 to $154.0 million.  Adjusted EBITDA is expected to range between $313.0 and $317.0 million, which includes a $1.0 million negative foreign currency impact when compared to the average FX rates in Q2 2015.  Capital expenditures are expected to range between $222.0 and $242.0 million, which includes approximately $32.0 million of recurring capital expenditures and $190.0 to $210.0 million of non-recurring capital expenditures.

For the full year of 2015, total revenues are expected to range between $2,685.0 and $2,695.0 million, which includes a negligible foreign currency impact when compared to prior guidance rates, reflecting a normalized and constant currency growth rate of 15%.  Total year cash gross margins are expected to approximate 69%.  Cash selling, general and administrative expenses are expected to range between $595.0 and $605.0 million.  Adjusted EBITDA is expected to range between $1,250.0 and $1,260.0 million, which includes $2.0 million of positive foreign currency impact when compared to prior guidance rates or a normalized and constant currency growth rate of 18%.  AFFO is expected to range between $850.0 and $860.0 million or a normalized and constant currency growth rate of 19%.  Capital expenditures are expected to range between $800.0 and $850.0 million, including approximately $115.0 million of recurring capital expenditures and $685.0 to $735.0 million of non-recurring capital expenditures. 

The U.S. dollar exchange rates used for 2015 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.18 to the Euro, $1.54 to the Pound, S$1.35 to the U.S. dollar and R$3.22 to the U.S. dollar. The 2015 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar and Brazilian Real is 14%, 10%, 7% and 3%, respectively.

The guidance provided above is forward-looking.  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.

Q2 Results Conference Call and Replay Information

The Company will discuss its quarterly results for the period ended June 30, 2015, along with its future outlook, on its quarterly conference call on Wednesday, July 29, 2015, 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 Friday, October 30, 2015, by dialing 1-203-369-3240 and referencing the passcode 2015.  In addition, the webcast will be available at www.equinix.com/investors over the same time period.  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.

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 33 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

Equinix 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, Equinix uses non-GAAP financial measures to evaluate its operations.  Legislative and regulatory requirements encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. 

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, Equinix 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.  Equinix excludes these items in order for Equinix's lenders, investors, and 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.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business.  Our IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment.  This is a trend we expect to continue.  In addition, depreciation is also based on the estimated useful lives of our IBX 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, Equinix excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, Equinix also excludes amortization expense related to certain intangible assets, as it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance.  Equinix 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 Equinix believes are not meaningful in evaluating the Company's current operations.  Equinix excludes stock-based compensation expense as it represents expense attributed to equity awards that have no current or future cash obligations.  As such, we, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations.  Equinix 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 our IBX centers, which we did not intend to build out, or our decision to reverse such restructuring charges.  Equinix 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, Equinix 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 such items as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of costs will or may occur in future periods.

Equinix 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. 

Equinix 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.  Equinix 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.  Equinix excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with our debt financings that have no current or future cash obligations.  Equinix 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. Equinix 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. Equinix 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.

Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  However, we have presented 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 our 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. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.

Investors should note, however, that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies.  In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.  Equinix 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.

Schedule 1 Profit Forecast for Equinix, Inc. for the Financial Year ending December 31, 2015 and for three months ending September 30, 2015

In accordance with Rule 28.4(a) of the City Code on Takeovers and Mergers (the "Code"), the principal assumptions upon which the profit forecast is based are included in this Schedule 1 to the announcement. In accordance with Rule 28.4(c) of the Code, there is a clear distinction made between assumptions which the Directors of Equinix (or other members of Equinix's management) can influence and those which they cannot influence.

1.         General

Equinix today made the following statements in its Second Quarter 2015 Financial Results Announcement:

For the third quarter of 2015, the Company expects adjusted EBITDA to be between $313.0 and $317.0 million, which includes a $1.0 million negative foreign currency impact when compared to the average FX rates in Q2 2015.  

For the full year of 2015, adjusted EBITDA is expected to range between $1,250.0 to $1,260.0 million, which includes $2.0 million of positive foreign currency impact when compared to prior guidance rates or a normalized and constant currency growth rate of 18%.  AFFO is expected to range between $850.0 to $860.0 million or a normalized and constant currency growth rate of 19%.  

The above statements for the three months ending September 30, 2015 and for the financial year ending December 31, 2015 constitute profit forecasts for the purposes of the Code (the "Equinix Profit Forecast").

The U.S. dollar exchange rates used for 2015 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.18 to the Euro, $1.54 to the Pound, S$1.35 to the U.S. dollar and R$3.22 to the U.S. dollar. The 2015 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar and Brazilian Real is 14%, 10%, 7% and 3%, respectively.

In the above statements, adjusted EBITDA is defined as income or loss from operations before depreciation, amortization, accretion, stock based compensation, restructuring charges, impairment charges and acquisition costs. AFFO is defined as funds from operations ("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, straight-line rent expense, amortization of deferred financing costs, gains (losses) on debt extinguishment, income tax expense adjustment, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. 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.

2.         Basis of preparation

The Equinix Profit Forecast has been prepared on a basis consistent with the accounting policies for Equinix which are in accordance with generally accepted accounting standards in the U.S. and those which Equinix anticipates will be applicable for the full year ending December 31, 2015.

Equinix has prepared the Equinix Profit Forecast based on unaudited interim financial results for the three months ended June 30, 2015 and a forecast to September 30, 2015 and December 31, 2015.

3.         Assumptions

Equinix has prepared the Equinix Profit Forecast on the basis of the following assumptions:

Factors outside the influence or control of Equinix and its Directors

  • There will be no material change in legislation or regulatory requirements impacting on Equinix's operations or its accounting policies during the year ending December 31, 2015.
  • There will be no material change in the current trading environment and economic conditions.
  • There will be no material change in the Euro, British Pound, Singapore Dollar and Brazilian Real exchange rates assumed above.
  • Inflation and tax rates in Equinix's principal markets will remain materially unchanged from the prevailing rates.
  • Equinix will maintain its REIT status throughout 2015.
  • There will be no material adverse events that will have a significant impact on Equinix's financial performance.

Factors within the influence or control of Equinix and its Directors

  • The Equinix Profit Forecast excludes any material acquisitions or disposals in the year ended December 31, 2015.
  • The Equinix Profit Forecast excludes any one-time costs or benefits associated with the proposed transaction with Telecity Group plc.
  • There will be no material change in the present management or control of Equinix or its existing operational strategy.

4.         Directors' confirmation

The Directors of Equinix have considered the Equinix Profit Forecast and confirm that it is valid as at the date of this document and has been properly compiled on the basis of the assumptions set out above and that the basis of the accounting used is consistent with Equinix's accounting policies.

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2015

2015

2014

2015

2014

Recurring revenues

$626,691

$609,657

$574,158

$1,236,348

$1,123,861

Non-recurring revenues

38,891

33,517

31,003

72,408

61,353

Revenues

665,582

643,174

605,161

1,308,756

1,185,214

Cost of revenues

315,757

298,313

292,859

614,070

580,384

Gross profit

349,825

344,861

312,302

694,686

604,830

Operating expenses:

Sales and marketing

81,248

78,616

75,254

159,864

142,682

General and administrative

119,578

113,640

111,675

233,218

214,978

Acquisition costs

9,866

1,156

676

11,022

861

Total operating expenses

210,692

193,412

187,605

404,104

358,521

Income from operations

139,133

151,449

124,697

290,582

246,309

Interest and other income (expense):

Interest income

921

520

744

1,441

2,178

Interest expense

(74,496)

(68,791)

(66,874)

(143,287)

(135,694)

Loss on debt extinguishment 

-

-

(51,183)

-

(51,183)

Other income (expense)

1,386

(514)

681

872

1,359

Total interest and other, net

(72,189)

(68,785)

(116,632)

(140,974)

(183,340)

Income before income taxes

66,944

82,664

8,065

149,608

62,969

Income tax benefit (expense)

(7,485)

(6,212)

2,014

(13,697)

(11,553)

Net income

59,459

76,452

10,079

135,911

51,416

Net loss attributable to redeemable non-controlling interests

-

-

1,249

-

1,299

Net income attributable to Equinix

$  59,459

$  76,452

$  11,328

$   135,911

$     52,715

Net income per share attributable to Equinix:

Basic net income per share

$     1.04

$     1.35

$     0.22

$        2.39

$        1.04

Diluted net income per share

$     1.03

$     1.34

$     0.22

$        2.37

$        1.04

Shares used in computing basic net income per share

56,935

56,661

51,332

56,798

50,470

Shares used in computing diluted net income per share

57,499

57,227

51,652

57,410

50,884

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

March 31,

June 30,

June 30, 

June 30, 

2015

2015

2014

2015

2014

Net income 

$  59,459

$  76,452

$10,079

$135,911

$ 51,416

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment ("CTA") gain (loss) 

69,443

(146,311)

23,081

(76,869)

38,051

Unrealized gain (loss) on available for sale securities 

17

103

(73)

120

765

Unrealized gain (loss) on cash flow hedges 

(14,290)

10,556

54

(3,734)

254

Net investment hedge CTA loss 

(10,389)

-

-

(10,389)

-

Defined benefit plans 

83

59

-

142

-

Other comprehensive income (loss), net of tax: 

44,864

(135,593)

23,062

(90,730)

39,070

Comprehensive income (loss), net of tax 

104,323

(59,141)

33,141

45,181

90,486

Net loss attributable to redeemable non-controlling interests 

-

-

1,249

-

1,299

Other comprehensive income attributable to redeemable non-controlling interests 

-

-

(750)

-

(2,817)

-

-

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

$104,323

$ (59,141)

$33,640

$  45,181

$ 88,968

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

Assets

June 30,

 December 31, 

2015

2014

Cash and cash equivalents

$   336,133

$         610,917

Short-term investments

95,397

529,395

Accounts receivable, net

293,855

262,570

Current portion of restricted cash

523,003

3,057

Other current assets

81,730

85,004

Total current assets

1,330,118

1,490,943

Long-term investments

4,039

439

Property, plant and equipment, net

5,184,800

4,998,270

Goodwill

1,007,739

1,002,129

Intangible assets, net

131,383

147,527

Restricted cash, less current portion

10,524

14,060

Other assets

157,415

164,065

Total assets

$7,826,018

$      7,817,433

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses

$   315,554

$         285,796

Accrued property and equipment

128,193

114,469

Current portion of capital lease and other financing obligations

26,832

21,362

Current portion of mortgage and loans payable

59,041

59,466

Current portion of convertible debt

149,780

-

Other current liabilities

138,332

162,664

Total current liabilities

817,732

643,757

Capital lease and other financing obligations, less current portion

1,217,746

1,168,042

Mortgage and loans payable, less current portion

506,631

534,686

Senior notes

2,750,000

2,750,000

Convertible debt,  less current portion

-

145,853

Other liabilities

331,319

304,964

Total liabilities

5,623,428

5,547,302

Common stock

57

57

Additional paid-in capital

3,418,223

3,334,305

Treasury stock

(10,646)

(11,411)

Accumulated dividends

(621,792)

(424,387)

Accumulated other comprehensive loss

(423,173)

(332,443)

Accumulated deficit

(160,079)

(295,990)

Total stockholders' equity

2,202,590

2,270,131

Total liabilities and stockholders' equity

$7,826,018

$      7,817,433

Ending headcount by geographic region is as follows:

Americas headcount

2,229

2,122

EMEA headcount

1,096

1,023

Asia-Pacific headcount

789

721

Total headcount

4,114

3,866

 

EQUINIX, INC.

SUMMARY OF DEBT PRINCIPAL OUTSTANDING

(in thousands)

(unaudited)

June 30,

December 31,

2015

2014

Capital lease and other financing obligations

$  1,244,578

$    1,189,404

Term loan, net of debt discount

488,819

498,400

ALOG financings

43,133

56,863

Mortgage payable and other loans payable

33,720

38,889

less: debt discount and premium, net

(680)

(681)

Total mortgage and loans payable principal

564,992

593,471

Senior notes

2,750,000

2,750,000

Convertible debt, net of debt discount

149,780

145,853

Plus: debt discount

8,105

12,032

Total convertible debt principal

157,885

157,885

Total debt principal outstanding

$  4,717,455

$    4,690,760

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2015

2015

2014

2015

2014

Cash flows from operating activities:

Net income

$   59,459

$  76,452

$  10,079

$ 135,911

$  51,416

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation, amortization and accretion

128,270

122,530

116,074

250,800

229,684

Stock-based compensation

33,993

30,613

33,830

64,606

58,811

Debt issuance costs and debt discount

3,811

3,774

4,717

7,585

11,126

Loss on debt extinguishment 

-

-

51,183

-

51,183

Excess tax benefits from employee equity awards

(223)

(708)

(1,614)

(931)

(11,632)

Other reconciling items

5,169

4,870

7,455

10,039

12,747

Changes in operating assets and liabilities:

Accounts receivable

(10,991)

(30,791)

(24,510)

(41,782)

(53,505)

Income taxes, net

(53,592)

(12,555)

(76,764)

(66,147)

(92,513)

Accounts payable and accrued expenses

19,600

29,693

(16,498)

49,293

(7,668)

Other assets and liabilities

26,967

8,933

(4,988)

35,900

21,033

Net cash provided by operating activities

212,463

232,811

98,964

445,274

270,682

Cash flows from investing activities:

Purchases, sales and maturities of investments, net

433,966

(4,706)

250,737

429,260

472,391

Business acquisitions, net of cash acquired

-

(10,247)

-

(10,247)

-

Purchases of real estate

-

(38,282)

-

(38,282)

(16,791)

Purchases of other property, plant and equipment

(221,342)

(150,120)

(159,816)

(371,462)

(265,723)

Other investing activities

(511,166)

3,521

582

(507,645)

511

Net cash provided by (used in) investing activities

(298,542)

(199,834)

91,503

(498,376)

190,388

Cash flows from financing activities:

Purchases of treasury stock

-

-

(208,263)

-

(255,383)

Proceeds from employee equity awards

181

16,384

1,434

16,565

15,821

Payment of dividend distributions

(96,349)

(96,619)

-

(192,968)

-

Proceeds from loans payable

490,000

-

-

490,000

-

Repayment of capital lease and other financing obligations

(8,342)

(5,296)

(5,033)

(13,638)

(9,283)

Repayment of mortgage and loans payable

(505,268)

(13,361)

(16,777)

(518,629)

(27,094)

Repayment of convertible debt

-

-

(29,479)

-

(29,479)

Debt extinguishment costs

-

-

(22,552)

-

(22,552)

Excess tax benefits from employee equity awards

223

708

1,614

931

11,632

Other financing activities

(7)

(610)

128

(617)

128

Net cash used in financing activities

(119,562)

(98,794)

(278,928)

(218,356)

(316,210)

Effect of foreign currency exchange rates on cash and cash equivalents

5,065

(8,391)

1,621

(3,326)

1,580

Net increase (decrease) in cash and cash equivalents

(200,576)

(74,208)

(86,840)

(274,784)

146,440

Cash and cash equivalents at beginning of period

536,709

610,917

495,174

610,917

261,894

Cash and cash equivalents at end of period

$ 336,133

$536,709

$408,334

$ 336,133

$408,334

Supplemental cash flow information:

Cash paid for taxes

$   60,266

$  14,538

$  75,371

$   74,804

$105,284

Cash paid for interest

$   71,823

$  23,976

$  79,517

$   95,799

$121,902

Free cash flow (1)

$(520,045)

$  37,683

$ (60,270)

$(482,362)

$ (11,321)

Adjusted free cash flow (2)

$(474,162)

$  87,666

$  12,119

$(386,496)

$115,494

(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

$ 212,463

$232,811

$  98,964

$ 445,274

$270,682

Net cash provided by (used in) investing activities as presented above

(298,542)

(199,834)

91,503

(498,376)

190,388

Purchases, sales and maturities of investments, net

(433,966)

4,706

(250,737)

(429,260)

(472,391)

Free cash flow (negative free cash flow)

$(520,045)

$  37,683

$ (60,270)

$(482,362)

$ (11,321)

(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)

$(520,045)

$  37,683

$ (60,270)

$(482,362)

$ (11,321)

Less business acquisitions, net of cash

-

10,247

-

10,247

-

Less purchases of real estate

-

38,282

-

38,282

16,791

Less excess tax benefits from employee equity awards

223

708

1,614

931

11,632

Less cash paid for taxes resulting from the REIT conversion 

45,113

-

61,873

45,113

79,700

Less costs related to the REIT conversion

547

746

8,902

1,293

18,692

Adjusted free cash flow

$(474,162)

$  87,666

$  12,119

$(386,496)

$115,494

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

$   45,113

$           -

$  61,873

$   45,113

$  79,700

Other cash taxes paid

15,153

14,538

13,498

29,691

25,584

Total cash paid for taxes

$   60,266

$  14,538

$  75,371

$   74,804

$105,284

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

March 31, 

June 30, 

June 30, 

June 30, 

2015

2015

2014

2015

2014

Recurring revenues

$626,691

$ 609,657

$574,158

$1,236,348

$1,123,861

Non-recurring revenues

38,891

33,517

31,003

72,408

61,353

Revenues (1)

665,582

643,174

605,161

1,308,756

1,185,214

Cash cost of revenues (2)

204,736

192,130

190,901

396,866

375,149

Cash gross profit (3)

460,846

451,044

414,260

911,890

810,065

Cash operating expenses (4):

Cash sales and marketing expenses (5)

65,058

63,820

58,785

128,878

114,584

Cash general and administrative expenses (6)

84,526

81,476

80,198

166,002

159,816

Total cash operating expenses (7)

149,584

145,296

138,983

294,880

274,400

Adjusted EBITDA (8)

$311,262

$ 305,748

$275,277

$   617,010

$   535,665

Cash gross margins (9)

69%

70%

68%

70%

68%

Adjusted EBITDA margins (10)

47%

48%

45%

47%

45%

Adjusted EBITDA flow-through rate (11)

25%

225%

59%

77%

31%

FFO (12)

$167,368

$ 179,190

#

$109,813

$   346,558

$   248,545

AFFO (13)

$221,388

$ 221,756

$187,597

$   443,144

$   360,341

Basic FFO per share (14)

$     2.94

$      3.16

$     2.14

$        6.10

$        4.88

Diluted FFO per share (14)

$     2.87

$      3.09

$     1.99

$        5.95

$        4.48

Basic AFFO per share (15)

$     3.89

$      3.91

$     3.65

$        7.80

$        7.08

Diluted AFFO per share (15)

$     3.75

$      3.77

$     3.29

$        7.52

$        6.28

(1)

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

Americas Revenues:

Colocation

$262,934

$ 257,932

$242,873

$   520,866

$   479,487

Interconnection

77,102

75,086

66,451

152,188

130,753

Managed infrastructure

12,837

13,295

14,885

26,132

27,997

Rental

732

741

943

1,473

1,895

Recurring revenues

353,605

347,054

325,152

700,659

640,132

Non-recurring revenues

17,842

16,915

17,104

34,757

32,157

Revenues

371,447

363,969

342,256

735,416

672,289

EMEA Revenues:

Colocation

139,482

132,735

127,132

272,217

249,308

Interconnection

13,440

13,048

12,329

26,488

23,695

Managed infrastructure

5,919

5,783

7,434

11,702

14,299

Rental

1,222

1,858

1,730

3,080

3,448

Recurring revenues

160,063

153,424

148,625

313,487

290,750

Non-recurring revenues

13,904

11,199

8,537

25,103

17,842

Revenues

173,967

164,623

157,162

338,590

308,592

Asia-Pacific Revenues:

Colocation

94,194

90,878

82,655

185,072

158,488

Interconnection

14,119

13,524

12,189

27,643

23,547

Managed infrastructure

4,710

4,777

5,537

9,487

10,944

Recurring revenues

113,023

109,179

100,381

222,202

192,979

Non-recurring revenues

7,145

5,403

5,362

12,548

11,354

Revenues

120,168

114,582

105,743

234,750

204,333

Worldwide Revenues:

Colocation

496,610

481,545

452,660

978,155

887,283

Interconnection

104,661

101,658

90,969

206,319

177,995

Managed infrastructure

23,466

23,855

27,856

47,321

53,240

Rental

1,954

2,599

2,673

4,553

5,343

Recurring revenues

626,691

609,657

574,158

1,236,348

1,123,861

Non-recurring revenues

38,891

33,517

31,003

72,408

61,353

Revenues

$665,582

$ 643,174

$605,161

$1,308,756

$1,185,214

(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

$315,757

$ 298,313

$292,859

$   614,070

$   580,384

Depreciation, amortization and accretion expense

(108,470)

(103,877)

(99,730)

(212,347)

(201,137)

Stock-based compensation expense

(2,551)

(2,306)

(2,228)

(4,857)

(4,098)

Cash cost of revenues

$204,736

$ 192,130

$190,901

$   396,866

$   375,149

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

Americas cash cost of revenues

$102,249

$   95,162

$  94,684

$   197,411

$   185,721

EMEA cash cost of revenues

62,431

58,494

58,727

120,925

116,843

Asia-Pacific cash cost of revenues

40,056

38,474

37,490

78,530

72,585

Cash cost of revenues

$204,736

$ 192,130

$190,901

$   396,866

$   375,149

(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

$  81,248

$   78,616

$  75,254

$   159,864

$   142,682

Depreciation and amortization expense

(6,268)

(6,085)

(8,526)

(12,353)

(13,155)

Stock-based compensation expense

(9,922)

(8,711)

(7,943)

(18,633)

(14,943)

Cash sales and marketing expenses

$  65,058

$   63,820

$  58,785

$   128,878

$   114,584

(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

$119,578

$ 113,640

$111,675

$   233,218

$   214,978

Depreciation and amortization expense

(13,532)

(12,568)

(7,818)

(26,100)

(15,392)

Stock-based compensation expense

(21,520)

(19,596)

(23,659)

(41,116)

(39,770)

Cash general and administrative expenses

$  84,526

$   81,476

$  80,198

$   166,002

$   159,816

(7)

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

Cash sales and marketing expenses

$  65,058

$   63,820

$  58,785

$   128,878

$   114,584

Cash general and administrative expenses

84,526

81,476

80,198

166,002

159,816

Cash SG&A

$149,584

$ 145,296

$138,983

$   294,880

$   274,400

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

Americas cash SG&A

$  98,312

$   96,073

$  89,447

$   194,385

$   178,880

EMEA cash SG&A

32,003

30,098

33,084

62,101

63,193

Asia-Pacific cash SG&A

19,269

19,125

16,452

38,394

32,327

Cash SG&A

$149,584

$ 145,296

$138,983

$   294,880

$   274,400

(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

$139,133

$ 151,449

$124,697

$   290,582

$   246,309

Depreciation, amortization and accretion expense

128,270

122,530

116,074

250,800

229,684

Stock-based compensation expense

33,993

30,613

33,830

64,606

58,811

Acquisition costs

9,866

1,156

676

11,022

861

Adjusted EBITDA

$311,262

$ 305,748

$275,277

$   617,010

$   535,665

The geographic split of our adjusted EBITDA is presented below:

Americas income from operations

$  77,653

$   81,466

$  67,739

$   159,119

$   139,474

Americas depreciation, amortization and accretion expense

68,692

66,811

62,481

135,503

121,414

Americas stock-based compensation expense

25,883

23,491

27,177

49,374

45,970

Americas acquisition costs

(1,342)

966

728

(376)

830

Americas adjusted EBITDA

170,886

172,734

158,125

343,620

307,688

EMEA income from operations

36,110

45,541

34,067

81,651

63,970

EMEA depreciation, amortization and accretion expense

27,826

26,693

27,901

54,519

57,803

EMEA stock-based compensation expense

4,397

3,607

3,385

8,004

6,702

EMEA acquisition costs

11,200

190

(2)

11,390

81

EMEA adjusted EBITDA

79,533

76,031

65,351

155,564

128,556

Asia-Pacific income from operations

25,370

24,442

22,891

49,812

42,865

Asia-Pacific depreciation, amortization and accretion expense

31,752

29,026

25,692

60,778

50,467

Asia-Pacific stock-based compensation expense

3,713

3,515

3,268

7,228

6,139

Asia-Pacific acquisition costs

8

-

(50)

8

(50)

Asia-Pacific adjusted EBITDA

60,843

56,983

51,801

117,826

99,421

Adjusted EBITDA

$311,262

$ 305,748

$275,277

$   617,010

$   535,665

(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

72%

74%

72%

73%

72%

EMEA cash gross margins

64%

64%

63%

64%

62%

Asia-Pacific cash gross margins

67%

66%

65%

67%

64%

(10)

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

Americas adjusted EBITDA margins

46%

47%

46%

47%

46%

EMEA adjusted EBITDA margins

46%

46%

42%

46%

42%

Asia-Pacific adjusted EBITDA margins

51%

50%

49%

50%

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

$311,262

$ 305,748

$275,277

$   617,010

$   535,665

Less adjusted EBITDA - prior period

(305,748)

(294,365)

(260,388)

(578,226)

(511,975)

Adjusted EBITDA growth

$    5,514

$   11,383

$  14,889

$     38,784

$     23,690

Revenues - current period

$665,582

$ 643,174

$605,161

$1,308,756

$1,185,214

Less revenues - prior period

(643,174)

(638,121)

(580,053)

(1,258,562)

(1,107,761)

Revenue growth

$  22,408

$     5,053

$  25,108

$     50,194

$     77,453

Adjusted EBITDA flow-through rate

25%

225%

59%

77%

31%

(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 

$  59,459

$   76,452

$  10,079

$   135,911

$     51,416

Net loss attributable to redeemable non-controlling interests

-

-

1,249

-

1,299

Net income attributable to Equinix

59,459

76,452

11,328

135,911

52,715

Adjustments:

Real estate depreciation and amortization

107,321

102,648

100,788

209,969

200,239

Gain/loss on disposition of real estate property

559

62

183

621

216

Adjustments for FFO from unconsolidated joint ventures

29

28

28

57

56

Non-controlling interests' share of above adjustments

-

-

(2,514)

-

(4,681)

FFO 

$167,368

$ 179,190

$109,813

$   346,558

$   248,545

(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 

$167,368

$ 179,190

$109,813

$   346,558

$   248,545

Adjustments:

Installation revenue adjustment

12,474

8,654

5,244

21,128

12,417

Straight-line rent expense adjustment

2,017

3,201

3,331

5,218

6,360

Amortization of deferred financing costs

3,848

3,858

4,783

7,706

11,282

Stock-based compensation expense

33,993

30,613

33,830

64,606

58,811

Non-real estate depreciation expense

13,605

12,693

7,785

26,298

15,357

Amortization expense

6,450

6,295

7,139

12,745

14,109

Accretion expense

894

894

362

1,788

(21)

Recurring capital expenditures

(27,330)

(22,373)

(26,018)

(49,703)

(52,467)

Loss on debt extinguishment

-

-

51,183

-

51,183

Acquisition costs

9,866

1,156

676

11,022

861

Income tax expense adjustment

(1,784)

(2,408)

(7,726)

(4,192)

(2,771)

Adjustments for AFFO from unconsolidated joint ventures

(13)

(17)

(19)

(30)

(40)

Non-controlling interests share of above adjustments

-

-

(2,786)

-

(3,285)

AFFO

$221,388

$ 221,756

$187,597

$   443,144

$   360,341

(14)

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

FFO, basic

$167,368

$ 179,190

$109,813

$   346,558

$   248,545

Interest on convertible debt

3,383

3,362

5,188

6,745

12,300

FFO, diluted

$170,751

$ 182,552

$115,001

$   353,303

$   260,845

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 

56,935

56,661

51,332

56,798

50,884

 Effect of dilutive securities: 

 Convertible debt 

1,958

1,942

6,000

1,950

6,894

 Employee equity awards 

563

566

320

612

414

Shares used in computing diluted FFO per share 

59,456

59,169

57,652

59,360

58,192

(15)

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

AFFO, basic

$221,388

$ 221,756

$187,597

$   443,144

$   360,341

Interest on convertible debt

1,557

1,554

2,271

3,111

4,899

AFFO, diluted

$222,945

$ 223,310

$189,868

$   446,255

$   365,240

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 

56,935

56,661

51,332

56,798

50,884

 Effect of dilutive securities: 

 Convertible debt 

1,958

1,942

6,000

1,950

6,894

 Employee equity awards 

563

566

320

612

414

Shares used in computing diluted AFFO per share 

59,456

59,169

57,652

59,360

58,192

 

Logo - http://photos.prnewswire.com/prnh/20140102/MM39832LOGO

 

SOURCE Equinix, Inc.



RELATED LINKS

http://www.equinix.com