AMSTERDAM 3 May 2017 – Interxion Holding NV (NYSE: INXN), a leading European provider of carrier and cloud-neutral colocation data centre services, announced its results today for the three months ended 31 March 2017.
Financial Highlights
- Revenue increased by 12% to €113.9 million (1Q 2016: €102.0 million).
- Recurring revenue1 increased by 11% to €108.3 million (1Q 2016: €97.2 million).
- Net income increased by 6% to €10.8 million (1Q 2016: €10.2 million).
- Adjusted net income2 increased by 7% to €10.7 million (1Q 2016: €10.0 million).
- Earnings per diluted share increased by 5% to €0.15 (1Q 2016: €0.14).
- Adjusted earnings2 per diluted share increased by 6% to €0.15 (1Q 2016: €0.14).
- Adjusted EBITDA2 increased by 12% to €51.3 million (1Q 2016: €45.9 million).
- Adjusted EBITDA margin increased to 45.1% (1Q 2016: 45.0%).
- Capital expenditures3, including intangible assets, were €54.8 million (1Q 2016: €50.0 million).
- Acquired Interxion Science Park data centre business for €77.5 million on 24 February 2017.
Operating Highlights
- Equipped space4 increased by 3,300 square metres in the quarter to 114,100 square metres.
- Revenue generating space4 increased by 2,600 square metres in the quarter to 89,800 square metres.
- Utilisation rate at the end of the quarter was 79%.
- During the first quarter, Interxion completed the following expansions:
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- 1,300 sqm expansion in Amsterdam,
- 600 sqm expansion in Marseille,
- 1,100 sqm expansion in Paris, and
- 300 sqm expansion in Copenhagen.
“Interxion continued to post strong results in the first quarter of 2017, with 12% revenue growth year over year and expanding Adjusted EBITDA margins. Bookings in the quarter remained strong and were spread across our broad Western European footprint, reflecting our strong position to capture the growing demand,” said David Ruberg, Interxion’s Chief Executive Officer. “The European cloud is developing consistent with our expectations, and our success in attracting cloud and digital media platforms, connectivity providers, and enterprises reflects the value that our customers realize from being part of our communities of interest.”
Quarterly Review
Revenue in the first quarter of 2017 was €113.9 million, a 12% increase over the first quarter of 2016 and a 3% increase over the fourth quarter of 2016. Recurring revenue was €108.3 million, an 11% increase over the first quarter of 2016 and a 5% increase over the fourth quarter of 2016. Recurring revenue in the first quarter represented 95% of total revenue. On a constant currency5 basis, revenue in the first quarter of 2017 was 13% higher than in the first quarter of 2016.
Cost of sales in the first quarter of 2017 was €44.1 million, a 13% increase over the first quarter of 2016 and a 2% increase over the fourth quarter of 2016.
Gross profit was €69.9 million in the first quarter of 2017, an 11% increase over the first quarter of 2016 and a 4% increase over the fourth quarter of 2016. Gross profit margin was 61.3% in the first quarter of 2017, compared with 61.6% in the first quarter of 2016 and 61.1% in the fourth quarter of 2016.
Sales and marketing costs in the first quarter of 2017 were €7.9 million, a 3% increase over the first quarter of 2016 and a 4% increase from the fourth quarter of 2016.
Other general and administrative costs, which exclude depreciation, amortisation, impairments, share-based payments, and M&A transaction costs, were €10.6 million in the first quarter of 2017, a 15% increase over the first quarter of 2016 and a slight increase from the fourth quarter of 2016.
Depreciation, amortisation, and impairments in the first quarter of 2017 was €24.2 million, an increase of 13% from the first quarter of 2016 and a slight decrease from the fourth quarter of 2016.
Operating income in the first quarter of 2017 was €24.4 million, an increase of 7% from the first quarter of 2016 and an 8% increase from the fourth quarter of 2016.
Net finance expense for the first quarter of 2017 was €10.3 million, a 29% increase over the first quarter of 2016 and an 8% increase over the fourth quarter of 2016. Comparison to first quarter of 2016 is impacted by the issuance of €150.0 million of additional 6.00% senior secured notes due 2020 in April 2016.
Income tax expense for the first quarter of 2017 was €3.3 million, a 30% decrease compared with the first quarter of 2016 and a 9% increase from the fourth quarter of 2016. Income tax expense in the first quarter of 2017 was positively impacted by tax deductible energy investment incentives.
Net income was €10.8 million in the first quarter of 2017, a 6% increase over the first quarter of 2016 and an 8% increase from the fourth quarter of 2016.
Adjusted net income was €10.7 million in the first quarter of 2017, a 7% increase over the first quarter of 2016 and a 20% increase from the fourth quarter of 2016.
Adjusted EBITDA for the first quarter of 2017 was €51.3 million, a 12% increase over the first quarter of 2016 and a 4% increase over the fourth quarter of 2016. Adjusted EBITDA margin was 45.1% in the first quarter of 2017 compared with 45.0% in the first quarter of 2016 and 44.6% in the fourth quarter of 2016.
Cash generated from operations, defined as cash generated from operating activities before interest and corporate income tax payments and receipts, was €63.0 million in the first quarter of 2017, compared with €50.4 million in the first quarter of 2016 and €50.2 million in the fourth quarter of 2016.
Capital expenditures, including intangible assets, were €54.8 million in the first quarter of 2017, compared with €50.0 million in the first quarter of 2016 and €73.8 million in the fourth quarter of 2016.
Cash and cash equivalents were €72.5 million at 31 March 2017, compared with €115.9 million at year end 2016. Total borrowings, net of deferred revolving facility financing fees, were €778.9 million at 31 March 2017, compared with €735.0 million at year end 2016. On 9 March 2017, Interxion entered into a €75.0 million senior secured revolving facility, to supplement its €100.0 million revolving credit facility. During the first quarter of 2017, Interxion acquired the Science Park data centre business from Vancis BV for approximately €77.5 million.
Equipped space at the end of the first quarter of 2017 was 114,100 square metres, compared with 101,600 square metres at the end of the first quarter of 2016 and 110,800 square metres at the end of the fourth quarter of 2016. Revenue generating space at the end of the first quarter of 2017 was 89,800 square metres, compared with 80,400 square metres at the end of the first quarter of 2016 and 87,200 square metres at the end of the fourth quarter of 2016. Utilisation rate, the ratio of revenue-generating space to equipped space, was 79% at the end of the first quarter of 2017, compared with 79% at the end of the first quarter of 2016 and 79% at the end of the fourth quarter of 2016. These capacity metrics exclude Interxion Science Park.
Business Outlook
Interxion today reaffirms guidance for its revenue, Adjusted EBITDA and capital expenditures (including intangibles) for full year 2017:
|
Revenue |
€468 million – €483 million |
|
Adjusted EBITDA |
€212 million – €222 million |
|
Capital expenditures (including intangibles) |
€250 million – €270 million |
Capital expenditure guidance does not include €77.5 million for the acquisition of Interxion Science Park in 1Q 2017.
Conference Call to Discuss Results
Interxion will host a conference call today at 8:30 a.m. EDT (1:30 p.m. BST, 2:30 p.m. CET) to discuss the results.
To participate on this call, U.S. callers may dial toll free 1-866-966-9439; callers outside the U.S. may dial direct +44 (0) 1452 555 566. The conference ID for this call is INXN. This event also will be webcast live over the Internet in listen-only mode atinvestors.interxion.com.
A replay of this call will be available shortly after the call concludes and will be available until 16 May 2017. To access the replay, U.S. callers may dial toll free 1-866-247-4222; callers outside the U.S. may dial direct +44 (0) 1452 550 000. The replay access number is 2827550.
Forward-looking Statements
This communication contains forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such forward-looking statements. Factors that could cause actual results and future events to differ materially from Interxion’s expectations include, but are not limited to, the difficulty of reducing operating expenses in the short term, the inability to utilise the capacity of newly planned data centres and data centre expansions, significant competition, the cost and supply of electrical power, data centre industry over-capacity, performance under service level agreements, certain other risks detailed herein and other risks described from time to time in Interxion’s filings with the United States Securities and Exchange Commission (the “SEC”).
Interxion does not assume any obligation to update the forward-looking information contained in this report.
Non-IFRS Financial Measures
Included in these materials are certain non-IFRS financial measures, which are measures of our financial performance that are not calculated and presented in accordance with IFRS, within the meaning of applicable SEC rules. These measures are as follows: (i) EBITDA; (ii) Adjusted EBITDA; (iii) revenue on a constant currency basis, (iv) Recurring revenue; (v) Adjusted net income; (vi) Adjusted basic earnings per share and (vii) Adjusted diluted earnings per share.
Other companies may present EBITDA, Adjusted EBITDA, revenue on a constant currency basis, Recurring revenue, Adjusted net income, Adjusted basic earnings per share and Adjusted diluted earnings per share differently than we do. Each of these measures are not measures of financial performance under IFRS and should not be considered as an alternative to operating income or as a measure of liquidity or an alternative to Profit for the period attributable to shareholders (“net income”) as indicators of our operating performance or any other measure of performance implemented in accordance with IFRS.
EBITDA, Adjusted EBITDA and Recurring revenue
We define EBITDA as net income plus income tax expense, net finance expense, depreciation, amortisation and impairment of assets.
We define Adjusted EBITDA as EBITDA adjusted for the following items, which may occur in any period, and which management believes are not representative of our operating performance:
- Share-based payments – primarily the fair value at the date of grant to employees of equity awards, are recognised as an employee expense over the vesting period. We believe that this expense does not represent our operating performance.
- Income or expense related to the evaluation and execution of potential mergers or acquisitions (“M&A”) – under IFRS, gains and losses associated with M&A activity are recognised in the period in which such gains or losses are incurred. We exclude these effects because we believe they are not reflective of our ongoing operating performance.
- Adjustments related to terminated and unused data centre sites – these gains and losses relate to historical leases entered into for certain brownfield sites, with the intention of developing data centres, which were never developed and for which management has no intention of developing into data centres. We believe the impact of gains and losses related to unused data centres are not reflective of our business activities and our on-going operating performance.
In certain circumstances, we may also adjust for other items that management believes are not representative of our current on-going performance. Examples include: adjustments for the cumulative effect of a change in accounting principle or estimate, impairment losses, litigation gains and losses or windfall gains and losses.
We define Recurring revenue as revenue incurred monthly from colocation, connectivity and associated power charges, office space, amortized set-up fees and certain recurring managed services (but excluding any ad hoc managed services) provided by us directly or through third parties, excluding rents received for the sublease of unused sites.
We believe EBITDA, Adjusted EBITDA and Recurring revenue provide useful supplemental information to investors regarding our on-going operational performance. These measures help us and our investors evaluate the on-going operating performance of the business after removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortisation). Management believes that the presentation of Adjusted EBITDA, when combined with the primary IFRS presentation of net income, provides a more complete analysis of our operating performance. Management also believes the use of EBITDA and Adjusted EBITDA facilitates comparisons between us and other data centre operators (including other data centre operators that are REITs) and other infrastructure based businesses. EBITDA and Adjusted EBITDA are also relevant measures used in the financial covenants of our €100.0 million revolving facility and our 6.00% Senior Secured Notes due 2020.
A reconciliation from net income to EBITDA and EBITDA to Adjusted EBITDA is provided in the tables attached to this press release. EBITDA, Adjusted EBITDA and other key performance indicators may not be indicative of our historical results of operations, nor are they meant to be predictive of future results.
We present constant currency information for revenue to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than Euro are converted into Euro using the average exchange rates from the prior period rather than the actual exchange rates in effect during the current period.
We believe that revenue growth is a key indicator of how a company is progressing from period to period and presenting constant currency information for revenue provides useful supplemental information to investors regarding our ongoing operational performance because it helps us and our investors evaluate the ongoing operating performance of the business after removing the impact of currency exchange rates.
Adjusted net income, Adjusted basic earnings per share and Adjusted diluted earnings per share
We define Adjusted net income as net income adjusted for the following items and the related income tax effect, which may occur in any period, and which management believes are not reflective of our operating performance:
- Income or expense related to the evaluation and execution of potential mergers or acquisitions (“M&A”) – under IFRS, gains and losses associated with M&A activity are recognised in the period in which such gains or losses are incurred. We exclude these effects because we believe they are not reflective of our on-going operating performance.
- Adjustments related to provisions – these adjustments are made for adjustments in provisions that are not reflective of the on-going operating performance of Interxion. These adjustments may include changes in provisions for onerous lease contracts.
- Adjustments related to capitalised interest – Under IFRS we are required to calculate and capitalise interest allocated to the investment in data centres and exclude it from net income. We believe that reversing the impact of capitalised interest provides information about the impact of the total interest costs and facilitates comparisons with other data centre operators.
In certain circumstances, we may also adjust for items that management believes are not representative of our current on-going performance. Examples include: adjustments for the cumulative effect of a change in accounting principle or estimate, impairment losses, litigation gains and losses or windfall gains and losses.
Management believe that the exclusion of certain items listed above, provides useful supplemental information to net income to aid investors in evaluating the operating performance of our business and comparing our operating performance with other data centre operators and infrastructure companies. We believe the presentation of adjusted net income, when combined with net income (loss) prepared in accordance with IFRS is beneficial to a complete understanding of our performance.
Adjusted basic earnings per share and Adjusted diluted earnings per share amounts are determined on Adjusted net income.
Interxion does not provide forward-looking estimates of net income, operating income, depreciation, amortisation, and impairments, share-based payments, M&A transaction costs or increase/decrease in provision for onerous lease contracts, and income from sub-leases of unused data centre sites, which it uses to reconcile to Adjusted EBITDA. The Company is, therefore, unable to provide forward-looking reconciling information for Adjusted EBITDA.
A reconciliation from reported net income to Adjusted net income is provided in the tables attached to this press release.
1 Recurring revenue is revenue incurred from colocation and associated power charges, office space, amortised set-up fees, cross-connects and certain recurring managed services (but excluding any ad hoc managed services) provided by us directly or through third parties, excluding rents received for the sublease of unused sites.
2 Adjusted net income (or ‘Adjusted earnings’) and Adjusted EBITDA are non-IFRS figures intended to adjust for certain items and are not measures of financial performance under IFRS. Complete definitions can be found in the “Non-IFRS Financial Measures” section in this press release. Reconciliations of net income to Adjusted EBITDA and Net income to Adjusted net income can be found in the financial tables later in this press release.
3 Capital expenditures, including intangible assets, represent payments to acquire property, plant, equipment and intangible assets, as recorded in the consolidated statement of cash flows as “Purchase of property, plant and equipment” and “Purchase of intangible assets”, respectively.
4 Equipped space and Revenue generating space (and other metrics derived from these) exclude Interxion Science Park, which was acquired on 24 February 2017.
5 We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than Euro are converted into Euro using the average exchange rates from the prior period rather than the actual exchange rates in effect during the current period.
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