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Press Release -- November 1st, 2012
Source: Equinix
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Equinix Reports Third Quarter 2012 Results

  • Reported revenues from continuing operations of $488.7 million, a 7% increase over the previous quarter and a 20% increase over the same quarter last year
  • Announced full year 2012 revenue guidance of $1,890.0 million to $1,895.0 million and 2012 adjusted EBITDA guidance to $880.0 to $885.0 million
  • Announced initial guidance for 2013 including annual revenues to be greater than $2,200.0 million, adjusted EBITDA to be greater than $1,010.0 million and total capital expenditures to be in the range of $550.0 to $650.0 million

REDWOOD CITY, Calif.–(BUSINESS WIRE)–

Equinix, Inc. (NASDAQ:EQIX, news, filings), the global interconnection and data center company, today reported quarterly results for the quarter ended September 30, 2012. 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.

This quarter includes the quarterly results of ancotel GmbH, a data center provider headquartered in Frankfurt, Germany, and Asia Tone Limited, a data center provider formerly headquartered in Hong Kong, both of which were acquired by the Company in July 2012. In addition, due to the Company’s decision to sell 16 International Business Exchange data centers located throughout the United States to an investment group consisting of 365 Main, Crosslink Capital and Housatonic Partners in a transaction valued at approximately $75 million, the financial results derived from these 16 data centers are now excluded from Equinix’s continuing operations and are now reported as discontinued operations. As a result, Equinix has retroactively adjusted its financial results for all applicable prior periods beginning April 30, 2010, the date the Company acquired these assets, to reflect them as discontinued operations as required under accounting principles generally accepted in the United States of America. The financial results from these 16 data centers are presented on the last page of the attached financial statements associated with this earnings release.

Revenues from continuing operations were $488.7 million for the third quarter, a 7% increase over the previous quarter and a 20% increase over the same quarter last year. This result included $16.1 million in revenues from the Company’s Asia Tone and ancotel acquisitions for the quarter and excluded $8.8 million of revenues from discontinued operations. Recurring revenues, consisting primarily of colocation, interconnection and managed services were $462.8 million for the third quarter, a 7% increase over the previous quarter and a 19% increase over the same quarter last year. Non-recurring revenues were $25.9 million in the quarter.

“We delivered solid financial results in the third quarter, driven by continued demand for our services across all three regions,” said Steve Smith, president and CEO of Equinix. “We are executing with discipline and remain focused on profitable growth. We believe the value of our global interconnection platform and further development of our business ecosystems will underpin our competitive position in support of our long-term opportunity.”

Cost of revenues were $251.5 million for the third quarter, a 12% increase over the previous quarter and a 14% increase over the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $93.5 million, which we refer to as cash cost of revenues, were $158.0 million for the third quarter, an 11% increase from the previous quarter and a 13% increase over the same quarter last year. Gross margins for the quarter were 49%, down from 51% for the previous quarter and up from 46% 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 68%, down from 69% for the previous quarter and up from 66% for the same quarter last year.

Selling, general and administrative expenses were $136.8 million for the third quarter, a 7% increase over the previous quarter and a 26% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $34.4 million, which we refer to as cash selling, general and administrative expenses, were $102.4 million for the third quarter, a 5% increase over the previous quarter and a 26% increase over the same quarter last year.

Interest expense was $50.2 million for the third quarter, a 7% increase from the previous quarter and a 2% decrease over the same quarter last year. The Company recorded income tax expense of $13.5 million for the third quarter and income tax expense of $5.1 million in the same quarter last year.

Net income attributable to Equinix for the third quarter was $28.8 million. This represents a basic net income per share attributable to Equinix of $0.60 and a diluted net income per share attributable to Equinix of $0.58 based on a weighted average share count of 48.4 million and 52.7 million, respectively, for the third quarter of 2012.

Income from continuing operations was $95.9 million for the third quarter, a 6% decrease from the previous quarter and a 24% increase over the same quarter last year. Adjusted EBITDA, defined as income or loss from continuing operations before depreciation, amortization, accretion, stock-based compensation, restructuring charges and acquisition costs, for the third quarter was $228.3 million, a 5% increase over the previous quarter and a 22% increase over the same quarter last year. This result included $6.7 million in adjusted EBITDA from the Company’s Asia Tone and ancotel acquisitions for the quarter and excluded $4.3 million in adjusted EBITDA from discontinued operations.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the third quarter, were $212.1 million, of which $174.5 million was attributed to expansion capital expenditures and $37.6 million was attributed to ongoing capital expenditures.

The Company generated cash from operating activities of $102.2 million for the third quarter as compared to $194.8 million in the previous quarter and $141.9 million for the same quarter last year. Cash used in investing activities was $596.9 million in the third quarter as compared to cash provided by investing activities of $93.9 million in the previous quarter and cash used in investing activities of $808.7 million for the same quarter last year, primarily attributed to cash consideration paid for the acquisitions of Asia Tone and ancotel. Cash provided by financing activities was $73.7 million for the third quarter, primarily attributed to the net proceeds from drawdowns of loans payable during the quarter.

As of September 30, 2012, the Company’s cash, cash equivalents and investments were $519.8 million, as compared to $823.0 million as of June 30, 2012.

Business Outlook

For the full year of 2012, total revenues are expected to be in the range of $1,890.0 to $1,895.0 million, and reflect a decrease of approximately $36.0 million in annual revenues from the Company’s decision to sell 16 of its International Business Exchange data centers and approximately $10.0 million in favorable currency rates, when compared to our prior foreign currency exchange rates. Total year cash gross margins are expected to range between 68.0% and 69.0%. Cash selling, general and administrative expenses are expected to range between $410.0 and $415.0 million. Adjusted EBITDA for the year is expected to range between $880.0 and $885.0 million, and reflect a decrease of approximately $18.0 million in adjusted EBITDA due to the assets that are now held for sale and reported as discontinued operations and absorbs an approximate $4.5 million foreign currency benefit, when compared to our prior foreign currency exchange guidance rates. Capital expenditures for 2012 are expected to be in the range of $770.0 to $790.0 million, comprised of approximately $145.0 million of ongoing capital expenditures and $625.0 to $645.0 million for expansion capital expenditures.

For the full year of 2013, total revenues are expected to be greater than $2,200.0 million. Adjusted EBITDA for the year is expected to be greater than $1,010.0 million, including approximately $20.0 million in REIT-related costs. Capital expenditures for 2013 are expected to be in the range of $550.0 to $650.0 million, including approximately $165.0 million of ongoing capital expenditures.

Company Metrics and Q3 Results Presentation

The Company will discuss its results and guidance on its quarterly conference call on Thursday, November 1, 2012, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the Equinix investors website located at www.equinix.com/investors. To hear the conference call live, please dial 210-234-8004 (domestic and international) and reference the passcode (EQIX). A presentation to accompany the call as well as the Company’s Non-Financial Metrics tracking sheet, will also be available on the website.

A replay of the call will be available beginning on Thursday, November 1, 2012, at 7:30 p.m. (ET) through December 1, 2012, by dialing 203-369-3804 (domestic and international) and reference the passcode (2012). In addition, the webcast will be available on the Investor Relations section of the Company’s website over the same time period. No password is required for the replay or the webcast.

About Equinix

Equinix, Inc. (EQIX), connects more than 4,000 companies directly to their customers and partners inside the world’s most networked data centers. Today, businesses leverage the Equinix interconnection platform in 30 strategic markets across the Americas, EMEA and Asia-Pacific.www.equinix.com.

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, 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 to evaluate its operations. In presenting these non-GAAP financial measures, 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 and acquisition costs. 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. 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 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 primarily 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 or severance charges related to the Switch and Data acquisition. 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 and acquisition costs are non-core transactions; however, these types of costs will or may occur in future periods.

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 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. 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.

EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Recurring revenues $ 462,829 $ 433,786 $ 388,214 $ 1,317,505 $ 1,090,649
Non-recurring revenues 25,901 23,463 19,994 71,719 57,019
Revenues 488,730 457,249 408,208 1,389,224 1,147,668
Cost of revenues 251,487 225,289 219,724 693,874 612,580
Gross profit 237,243 231,960 188,484 695,350 535,088
Operating expenses:
Sales and marketing 53,211 47,603 42,884 147,224 113,211
General and administrative 83,621 80,595 65,873 242,532 193,986
Restructuring charges 1,587 2,186
Acquisition costs 4,542 1,666 699 6,883 2,729
Total operating expenses 141,374 129,864 111,043 396,639 312,112
Income from continuing operations 95,869 102,096 77,441 298,711 222,976
Interest and other income (expense):
Interest income 1,054 963 679 2,708 1,526
Interest expense (50,207 ) (46,787 ) (51,114 ) (149,812 ) (126,152 )
Other income (expense) 507 (1,844 ) (1,694 ) (1,491 ) 1,438
Loss on debt extinguishment (5,204 ) (5,204 )
Total interest and other, net (53,850 ) (47,668 ) (52,129 ) (153,799 ) (123,188 )
Income from continuing operations before income taxes 42,019 54,428 25,312 144,912 99,788
Income tax expense (13,498 ) (17,138 ) (5,137 ) (44,489 ) (24,090 )
Net income from continuing operations 28,521 37,290 20,175 100,423 75,698
Net income from discontinued operations 679 350 464 1,228 819
Net income 29,200 37,640 20,639 101,651 76,517
Net income attributable to redeemable non-controlling interests (362 ) (1,193 ) (320 ) (1,843 ) (323 )
Net income attributable to Equinix $ 28,838 $ 36,447 $ 20,319 $ 99,808 $ 76,194
Net income per share attributable to Equinix:
Basic net income per share from continuing operations $ 0.58 $ 0.75 $ 0.20 $ 2.06 $ 1.38
Basic net income per share from discontinued operations 0.02 0.01 0.01 0.03 0.02
Basic net income per share (1) $ 0.60 $ 0.76 $ 0.21 $ 2.09 $ 1.40
Diluted net income per share from continuing operations $ 0.57 $ 0.72 $ 0.19 $ 2.01 $ 1.36
Diluted net income per share from discontinued operations 0.01 0.01 0.01 0.02 0.01
Diluted net income per share (2) $ 0.58 $ 0.73 $ 0.20 $ 2.03 $ 1.37
Shares used in computing basic net income per share 48,361 48,016 47,202 47,779 46,861
Shares used in computing diluted net income per share 52,655 52,351 47,943 51,724 47,694
(1 ) The net income used in the computation of basic net income per share attributable to Equinix is presented below:
Net income from continuing operations $ 28,521 $ 37,290 $ 20,175 $ 100,423 $ 75,698
Net income attributable to non-controlling interests (362 ) (1,193 ) (320 ) (1,843 ) (323 )
Adjustments attributable to redemption value of non-controlling interests (10,639 ) (10,639 )
Net income from continuing operations attributable to Equinix, basic 28,159 36,097 9,216 98,580 64,736
Net income from discontinued operations 679 350 464 1,228 819
Net income attributable to Equinix, basic $ 28,838 $ 36,447 $ 9,680 $ 99,808 $ 65,555
(2 ) The net income used in the computation of diluted net income per share attributable to Equinix is presented below:
Net income from continuing operations attributable to Equinix, basic $ 28,159 $ 36,097 $ 9,216 $ 98,580 $ 64,736
Interest on convertible debt 1,696 1,678 5,073
Net income from continuing operations attributable to Equinix, diluted 29,855 37,775 9,216 103,653 64,736
Net income from discontinued operations 679 350 464 1,228 819
Net income attributable to Equinix, diluted $ 30,534 $ 38,125 $ 9,680 $ 104,881 $ 65,555
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Net income $ 29,200 $ 37,640 $ 20,639 $ 101,651 $ 76,517
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) 41,782 (49,207 ) (88,659 ) 26,887 (17,227 )
Unrealized gain (loss) on available for sale securities 113 (177 ) (241 ) 14 (267 )
Other comprehensive income (loss), net of tax: 41,895 (49,384 ) (88,900 ) 26,901 (17,494 )
Comprehensive income (loss), net of tax 71,095 (11,744 ) (68,261 ) 128,552 59,023
Net income attributable to redeemable non-controlling interests (362 ) (1,193 ) (320 ) (1,843 ) (323 )
Other comprehensive income attributable to redeemable non-controlling interests 240 3,974 10,163 3,155 9,096
Comprehensive income (loss) attributable to Equinix, net of tax $ 70,973 $ (8,963 ) $ (58,418 ) $ 129,864 $ 67,796
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Assets September 30, December 31,
2012 2011
Cash and cash equivalents $ 239,687 $ 278,823
Short-term investments 164,787 635,721
Accounts receivable, net 181,973 139,057
Assets held-for-sale 68,991
Other current assets 69,748 182,156
Total current assets 725,186 1,235,757
Long-term investments 115,362 161,801
Property, plant and equipment, net 3,791,063 3,225,912
Goodwill 1,043,284 866,495
Intangible assets, net 200,648 148,635
Other assets 115,427 146,724
Total assets $ 5,990,970 $ 5,785,324
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses $ 244,712 $ 229,043
Accrued property and equipment 141,025 93,224
Current portion of capital lease and other financing obligations 14,853 11,542
Current portion of loans payable 49,332 87,440
Current portion of convertible debt 246,315
Liabilities held-for-sale 22,745
Current portion of deferred tax liabilities 70,304 394
Other current liabilities 69,488 57,296
Total current liabilities 612,459 725,254
Capital lease and other financing obligations, less current portion 487,868 390,269
Loans payable, less current portion 199,349 168,795
Senior notes 1,500,000 1,500,000
Convertible debt 705,127 694,769
Other liabilities 174,327 286,424
Total liabilities 3,679,130 3,765,511
Redeemable non-controlling interests 78,191 67,601
Common stock 49 48
Additional paid-in capital 2,539,235 2,437,623
Treasury stock (36,706 ) (86,666 )
Accumulated other comprehensive loss (113,642 ) (143,698 )
Accumulated deficit (155,287 ) (255,095 )
Total stockholders’ equity 2,233,649 1,952,212
Total liabilities, redeemable non-controlling interests and stockholders’ equity
$ 5,990,970 $ 5,785,324
Ending headcount by geographic region is as follows:
Americas headcount 1,841 1,763
EMEA headcount 789 570
Asia-Pacific headcount 506 376
Total headcount 3,136 2,709
EQUINIX, INC.
SUMMARY OF DEBT OUTSTANDING
(in thousands)
(unaudited)
September 30, December 31,
2012 2011
Capital lease and other financing obligations $ 502,721 $ 401,811
U.S. term loan 190,000
ALOG financing 49,349
Paris 4 IBX financing 6,132 52,104
ALOG loans payable 10,288
Asia Tone loans payable 3,200
Asia-Pacific financing 193,843
Total loans payable 248,681 256,235
Senior notes 1,500,000 1,500,000
Convertible debt, net of debt discount 705,127 941,084
Plus debt discount 64,589 78,652
Total convertible debt principal 769,716 1,019,736
Total debt outstanding $ 3,021,118 $ 3,177,782
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Cash flows from operating activities:
Net income $ 29,200 $ 37,640 $ 20,639 $ 101,651 $ 76,517
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 107,623 96,944 92,019 298,489 257,970
Stock-based compensation 22,582 20,549 19,207 62,234 53,060
Debt issuance costs and debt discount 5,048 4,902 8,207 18,057 23,816
Loss on debt extinguishment and interest rate swaps 5,204 5,204
Restructuring charges 1,587 2,186
Excess tax benefits from employee equity awards (53,174 ) (53,174 )
Other reconciling items 2,205 984 711 6,046 5,348
Changes in operating assets and liabilities:
Accounts receivable (12,359 ) (14,864 ) (9,989 ) (46,900 ) (26,299 )
Deferred tax assets, net (1,656 ) 9,531 1,760 13,245 4,893
Accounts payable and accrued expenses 17,500 35,544 32 19,307 (9,492 )
Other assets and liabilities (20,021 ) 3,552 7,697 (1,232 ) 11,989
Net cash provided by operating activities 102,152 194,782 141,870 422,927 399,988
Cash flows from investing activities:
Purchases, sales and maturities of investments, net (111,574 ) 279,621 (677,229 ) 514,413 (648,435 )
Purchase of Asia Tone, less cash acquired (188,798 ) (188,798 )
Purchase of ancotel, less cash acquired (84,236 ) (84,236 )
Purchase of ALOG, less cash acquired (41,954 )
Purchases of real estate (23,993 )
Purchases of other property, plant and equipment (212,118 ) (196,484 ) (131,525 ) (554,092 ) (495,515 )
Other investing activities (133 ) 10,743 61 79,167 (94,922 )
Net cash provided by (used in) investing activities (596,859 ) 93,880 (808,693 ) (233,546 ) (1,304,819 )
Cash flows from financing activities:
Purchases of treasury stock (13,364 )
Proceeds from employee equity awards 13,666 6,013 11,107 50,139 35,704
Proceeds from loans payable 249,633 12,718 258,542 90,635
Proceeds from senior notes 750,000 750,000
Repayment of capital lease and other financing obligations (3,049 ) (3,032 ) (3,081 ) (8,907 ) (7,404 )
Repayment of mortgage and loans payable (238,480 ) (10,170 ) (11,171 ) (315,779 ) (21,273 )
Repayment of convertible debt (250,007 ) (250,007 )
Excess tax benefits from employee equity awards 53,174 53,174
Other financing activities (1,247 ) (7,520 ) (15,426 ) (8,767 ) (15,551 )
Net cash provided by (used in) financing activities 73,697 (264,716 ) 744,147 (234,969 ) 832,111
Effect of foreign currency exchange rates on cash and cash equivalents 6,601 (2,794 ) (4,673 ) 6,452 402
Net increase (decrease) in cash and cash equivalents (414,409 ) 21,152 72,651 (39,136 ) (72,318 )
Cash and cash equivalents at beginning of period 654,096 632,944 297,872 278,823 442,841
Cash and cash equivalents at end of period $ 239,687 $ 654,096 $ 370,523 $ 239,687 $ 370,523
Supplemental cash flow information:
Cash paid for taxes $ 12,813 $ 5,031 $ 347 $ 19,578 $ 7,172
Cash paid for interest $ 65,616 $ 28,965 $ 39,821 $ 157,917 $ 100,283
Free cash flow (1) $ (383,133 ) $ 9,041 $ 10,406 $ (325,032 ) $ (256,396 )
Adjusted free cash flow (2) $ (56,925 ) $ 9,041 $ 10,406 $ 1,176 $ (190,449 )
Ongoing capital expenditures (3) $ 37,593 $ 37,537 $ 26,556 $ 113,592 $ 83,451
Discretionary free cash flow (4) $ 64,559 $ 157,245 $ 115,314 $ 309,335 $ 316,537
Adjusted discretionary free cash flow (5) $ 117,733 $ 157,245 $ 115,314 $ 362,509 $ 316,537
(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 $ 102,152 $ 194,782 $ 141,870 $ 422,927 $ 399,988
Net cash provided by (used in) investing activities as presented above (596,859 ) 93,880 (808,693 ) (233,546 ) (1,304,819 )
Purchases, sales and maturities of investments, net 111,574 (279,621 ) 677,229 (514,413 ) 648,435
Free cash flow (negative free cash flow) $ (383,133 ) $ 9,041 $ 10,406 $ (325,032 ) $ (256,396 )
(2 )
We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases or sales of real estate and acquisitions, as well as any excess tax benefits from employee equity awards, as presented below:
Free cash flow (as defined above) $ (383,133 ) $ 9,041 $ 10,406 $ (325,032 ) $ (256,396 )
Less purchase of Asia Tone, less cash acquired 188,798 188,798
Less purchase of ancotel, less cash acquired 84,236 84,236
Less purchase of ALOG, less cash acquired 41,954
Less purchases of real estate 23,993
Less excess tax benefits from employee equity awards 53,174 53,174
Adjusted free cash flow (negative adjusted free cash flow) $ (56,925 ) $ 9,041 $ 10,406 $ 1,176 $ (190,449 )
(3 )
We refer to our purchases of other property, plant and equipment as our capital expenditures (or capex). We categorize our capital expenditures into expansion and ongoing capex. Expansion capex is capex spent to build out our new data centers and data center expansions. Our ongoing capex represents all of our other capex spending.
Ongoing capital expenditures $ 37,593 $ 37,537 $ 26,556 $ 113,592 $ 83,451
Expansion capital expenditures 174,525 158,947 104,969 440,500 412,064
Total capital expenditures $ 212,118 $ 196,484 $ 131,525 $ 554,092 $ 495,515
(4 )
We define discretionary free cash flow as net cash provided by operating activities less ongoing capital expenditures (as described above), as presented below:
Net cash provided by operating activities as presented above $ 102,152 $ 194,782 $ 141,870 $ 422,927 $ 399,988
Less ongoing capital expenditures (37,593 ) (37,537 ) (26,556 ) (113,592 ) (83,451 )
Discretionary free cash flow $ 64,559 $ 157,245 $ 115,314 $ 309,335 $ 316,537
(5 )
We define adjusted discretionary free cash flow as discretionary free cash flow (as defined above) excluding any excess tax benefits from employee equity awards as presented below:
Discretionary free cash flow $ 64,559 $ 157,245 $ 115,314 $ 309,335 $ 316,537
Excess tax benefits from employee equity awards 53,174 53,174
Adjusted discretionary free cash flow $ 117,733 $ 157,245 $ 115,314 $ 362,509 $ 316,537
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FROM CONTINUING OPERATIONS- NON-GAAP PRESENTATION
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Recurring revenues $ 462,829 $ 433,786 $ 388,214 $ 1,317,505 $ 1,090,649
Non-recurring revenues 25,901 23,463 19,994 71,719 57,019
Revenues (1) 488,730 457,249 408,208 1,389,224 1,147,668
Cash cost of revenues (2) 158,038 142,011 139,968 436,410 390,561
Cash gross profit (3) 330,692 315,238 268,240 952,814 757,107
Cash operating expenses (4):
Cash sales and marketing expenses (5) 42,120 38,689 34,412 118,928 90,593
Cash general and administrative expenses (6) 60,274 59,069 46,806 177,512 139,408
Total cash operating expenses (7) 102,394 97,758 81,218 296,440 230,001
Adjusted EBITDA (8) $ 228,298 $ 217,480 $ 187,022 $ 656,374 $ 527,106
Cash gross margins (9) 68 % 69 % 66 % 69 % 66 %
Adjusted EBITDA margins (10) 47 % 48 % 46 % 47 % 46 %
Adjusted EBITDA flow-through rate (11) 34 % 49 % 42 % 57 % 56 %
(1 ) The geographic split of our revenues on a services basis is presented below:
Americas Revenues:
Colocation $ 213,011 $ 209,756 $ 186,438 $ 626,685 $ 536,403
Interconnection 54,943 53,048 47,208 159,730 137,440
Managed infrastructure 12,424 12,564 15,932 38,924 25,328
Rental 469 445 550 1,353 1,543
Recurring revenues 280,847 275,813 250,128 826,692 700,714
Non-recurring revenues 13,034 12,308 9,333 34,439 26,694
Revenues 293,881 288,121 259,461 861,131 727,408
EMEA Revenues:
Colocation 91,512 87,820 77,709 263,283 220,554
Interconnection 7,188 4,192 3,446 15,204 9,461
Managed infrastructure 5,112 3,262 3,691 11,788 10,370
Rental 314 336 262 994 557
Recurring revenues 104,126 95,610 85,108 291,269 240,942
Non-recurring revenues 7,832 7,087 7,216 24,722 22,032
Revenues 111,958 102,697 92,324 315,991 262,974
Asia-Pacific Revenues:
Colocation 63,204 49,651 41,874 159,972 117,314
Interconnection 8,550 7,794 6,378 23,664 17,537
Managed infrastructure 6,102 4,918 4,726 15,908 14,142
Recurring revenues 77,856 62,363 52,978 199,544 148,993
Non-recurring revenues 5,035 4,068 3,445 12,558 8,293
Revenues 82,891 66,431 56,423 212,102 157,286
Worldwide Revenues:
Colocation 367,727 347,227 306,021 1,049,940 874,271
Interconnection 70,681 65,034 57,032 198,598 164,438
Managed infrastructure 23,638 20,744 24,349 66,620 49,840
Rental 783 781 812 2,347 2,100
Recurring revenues 462,829 433,786 388,214 1,317,505 1,090,649
Non-recurring revenues 25,901 23,463 19,994 71,719 57,019
Revenues $ 488,730 $ 457,249 $ 408,208 $ 1,389,224 $ 1,147,668
(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 $ 251,487 $ 225,289 $ 219,724 $ 693,874 $ 612,580
Depreciation, amortization and accretion expense (91,723 ) (81,744 ) (78,288 ) (252,887 ) (217,900 )
Stock-based compensation expense (1,726 ) (1,534 ) (1,468 ) (4,577 ) (4,119 )
Cash cost of revenues $ 158,038 $ 142,011 $ 139,968 $ 436,410 $ 390,561
The geographic split of our cash cost of revenues is presented below:
Americas cash cost of revenues $ 85,384 $ 81,465 $ 81,911 $ 245,931 $ 224,411
EMEA cash cost of revenues 42,615 37,392 36,930 115,360 107,638
Asia-Pacific cash cost of revenues 30,039 23,154 21,127 75,119 58,512
Cash cost of revenues $ 158,038 $ 142,011 $ 139,968 $ 436,410 $ 390,561
(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, restructuring charges 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 $ 53,211 $ 47,603 $ 42,884 $ 147,224 $ 113,211
Depreciation and amortization expense (6,296 ) (4,239 ) (4,319 ) (14,791 ) (11,989 )
Stock-based compensation expense (4,795 ) (4,675 ) (4,153 ) (13,505 ) (10,629 )
Cash sales and marketing expenses $ 42,120 $ 38,689 $ 34,412 $ 118,928 $ 90,593
(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 $ 83,621 $ 80,595 $ 65,873 $ 242,532 $ 193,986
Depreciation and amortization expense (7,431 ) (7,291 ) (5,586 ) (21,196 ) (16,564 )
Stock-based compensation expense (15,916 ) (14,235 ) (13,481 ) (43,824 ) (38,014 )
Cash general and administrative expenses $ 60,274 $ 59,069 $ 46,806 $ 177,512 $ 139,408
(7) Our cash operating expenses, or cash SG&A, as defined above, is presented below:
Cash sales and marketing expenses $ 42,120 $ 38,689 $ 34,412 $ 118,928 $ 90,593
Cash general and administrative expenses 60,274 59,069 46,806 177,512 139,408
Cash SG&A $ 102,394 $ 97,758 $ 81,218 $ 296,440 $ 230,001
The geographic split of our cash operating expenses, or cash SG&A, is presented below:
Americas cash SG&A $ 67,136 $ 65,774 $ 54,643 $ 199,759 $ 152,601
EMEA cash SG&A 22,818 20,100 17,427 62,017 51,908
Asia-Pacific cash SG&A 12,440 11,884 9,148 34,664 25,492
Cash SG&A $ 102,394 $ 97,758 $ 81,218 $ 296,440 $ 230,001
(8 )
We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges and acquisition costs as presented below:
Income from continuing operations $ 95,869 $ 102,096 $ 77,441 $ 298,711 $ 222,976
Depreciation, amortization and accretion expense 105,450 93,274 88,193 288,874 246,453
Stock-based compensation expense 22,437 20,444 19,102 61,906 52,762
Restructuring charges 1,587 2,186
Acquisition costs 4,542 1,666 699 6,883 2,729
Adjusted EBITDA $ 228,298 $ 217,480 $ 187,022 $ 656,374 $ 527,106
The geographic split of our adjusted EBITDA is presented below:
Americas income from continuing operations $ 63,740 $ 66,672 $ 50,984 $ 191,978 $ 146,739
Americas depreciation, amortization and accretion expense 60,322 58,659 54,588 175,630 157,625
Americas stock-based compensation expense 17,299 15,552 15,071 47,924 41,247
Americas restructuring charges 1,587 2,186
Americas acquisition costs (1 ) 677 (91 ) 2,599
Americas adjusted EBITDA 141,361 140,882 122,907 415,441 350,396
EMEA income from continuing operations 20,565 22,962 16,305 70,806 41,954
EMEA depreciation, amortization and accretion expense 22,054 18,329 19,354 57,695 54,710
EMEA stock-based compensation expense 2,900 2,673 2,308 7,737 6,750
EMEA acquisition costs 1,006 1,241 2,376 14
EMEA adjusted EBITDA 46,525 45,205 37,967 138,614 103,428
Asia-Pacific income from continuing operations 11,564 12,462 10,152 35,927 34,283
Asia-Pacific depreciation, amortization and accretion expense 23,074 16,286 14,251 55,549 34,118
Asia-Pacific stock-based compensation expense 2,238 2,219 1,723 6,245 4,765
Asia-Pacific acquisition costs 3,536 426 22 4,598 116
Asia-Pacific adjusted EBITDA 40,412 31,393 26,148 102,319 73,282
Adjusted EBITDA $ 228,298 $ 217,480 $ 187,022 $ 656,374 $ 527,106
(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 71 % 72 % 68 % 71 % 69 %
EMEA cash gross margins 62 % 64 % 60 % 63 % 59 %
Asia-Pacific cash gross margins 64 % 65 % 63 % 65 % 63 %
(10) We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
Americas adjusted EBITDA margins 48 % 49 % 47 % 48 % 48 %
EMEA adjusted EBITDA margins 42 % 44 % 41 % 44 % 39 %
Asia-Pacific adjusted EBITDA margins 49 % 47 % 46 % 48 % 47 %
(11 )
We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows:
Adjusted EBITDA – current period $ 228,298 $ 217,480 $ 187,022 $ 656,374 $ 527,106
Less adjusted EBITDA – prior period (217,480 ) (210,596 ) (177,581 ) (558,044 ) (415,998 )
Adjusted EBITDA growth $ 10,818 $ 6,884 $ 9,441 $ 98,330 $ 111,108
Revenues – current period $ 488,730 $ 457,249 $ 408,208 $ 1,389,224 $ 1,147,668
Less revenues – prior period (457,249 ) (443,245 ) (385,511 ) (1,215,835 ) (947,565 )
Revenue growth $ 31,481 $ 14,004 $ 22,697 $ 173,389 $ 200,103
Adjusted EBITDA flow-through rate 34 % 49 % 42 % 57 % 56 %
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – DISCONTINUED OPERATIONS (1)
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Recurring revenues $ 8,618 $ 8,790 $ 9,137 $ 26,139 $ 27,139
Non-recurring revenues 208 225 256 657 723
Revenues 8,826 9,015 9,393 26,796 27,862
Cost of revenues 6,585 7,903 8,429 22,469 25,721
Gross profit 2,241 1,112 964 4,327 2,141
Operating expenses:
Sales and marketing 197 161 186 519 558
General and administrative 61 128 103 298 272
Acquisition costs 655 253 1,260
Total operating expenses 913 542 289 2,077 830
Income from discontinued operations before income taxes 1,328 570 675 2,250 1,311
Income tax expense (649 ) (220 ) (211 ) (1,022 ) (492 )
Net income from discontinued operations $ 679 $ 350 $ 464 $ 1,228 $ 819
Adjusted EBITDA (2) $ 4,301 $ 4,598 $ 4,606 $ 13,453 $ 13,126
Gross margins 25 % 12 % 10 % 16 % 8 %
Cash gross margins (3) 51 % 53 % 51 % 52 % 49 %
(1 )
The condensed consolidated statements of operations and non-GAAP financial information includes the financial results of the 16 IBX data centers located throughout the United States that the Company entered into in agreement to sell during the three months ended September 30, 2012.
(2 )
We define adjusted EBITDA as income from discontinued operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges and acquisition costs as presented below:
Income from discontinued operations $ 1,328 $ 570 $ 675 $ 2,250 $ 1,311
Depreciation, amortization and accretion expense 2,173 3,670 3,826 9,615 11,517
Stock-based compensation expense 145 105 105 328 298
Acquisition costs 655 253 1,260
Adjusted EBITDA $ 4,301 $ 4,598 $ 4,606 $ 13,453 $ 13,126
(3 ) We define cash gross margins as cash gross profit divided by revenues.
Revenues $ 8,826 $ 9,015 $ 9,393 $ 26,796 $ 27,862
Cost of revenues 6,585 7,903 8,429 22,469 25,721
Depreciation, amortization and accretion expense (2,110 ) (3,576 ) (3,732 ) (9,364 ) (11,235 )
Stock-based compensation expense (145 ) (105 ) (105 ) (328 ) (298 )
Cash cost of revenues 4,330 4,222 4,592 12,777 14,188
Cash gross profit $ 4,496 $ 4,793 $ 4,801 $ 14,019 $ 13,674
Contact:
Equinix Investor Relations Contacts:
Equinix, Inc.
Katrina Rymill, (650) 598-6583
krymill@equinix.com
or
Samir Patodia, (650) 598-6587
spatodia@equinix.com
or
Equinix Media Contacts:
Equinix, Inc.
Melissa Neumann, (650) 598-6098
mneumann@equinix.com
or
GolinHarris for Equinix, Inc.
Liam Rose, (415) 318-4380
lrose@golinharris.com

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