Categories Investor Relations
6th March 2019
AMSTERDAM 6 March 2019 – InterXion Holding NV (NYSE:INXN, news), a leading European provider of carrier and cloud-neutral colocation data centre services, announced its results today for the three months and full year ended 31 December 2018.
Financial Highlights
Revenue for the fourth quarter and full year increased by 13% and 15% to €146.9 million and €561.8 million, respectively (4Q 2017: €129.9 million; FY 2017: €489.3 million).
Recurring revenue for the fourth quarter and full year increased by 13% and 15% to €139.7 million and €533.1 million, respectively (4Q 2017: €123.4 million; FY 2017: €462.5 million).
Net income for the fourth quarter and full year decreased by 18% and 20% to €8.0 million and €31.1 million, respectively (4Q 2017: €9.7 million; FY 2017: €39.1 million).
Adjusted net income for the fourth quarter decreased by 26% to €7.8 million (4Q 2017: €10.6 million) and was flat for the full year compared to the prior year at €40.2 million.
Diluted earnings per share for the fourth quarter and full year were €0.11 and €0.43, respectively (4Q 2017: €0.14; FY 2017: €0.55).
Adjusted diluted earnings per share for the fourth quarter and full year were €0.11 and €0.56, respectively (4Q 2017: €0.15; FY 2017: €0.56).
Adjusted EBITDA for the fourth quarter and full year increased by 15% and 17% to €67.7 million and €257.8 million, respectively (4Q 2017: €59.1 million; FY 2017: €221.0 million).
Adjusted EBITDA margin for the fourth quarter and full year was 46.1% and 45.9%, up 60 basis points and up 70 basis points, respectively (4Q 2017: 45.5%; FY 2017: 45.2%).
Capital expenditures, including intangible assets, were €131.3 million in the fourth quarter and €451.2 million for full year (4Q 2017: €69.7 million; FY 2017: €256.0 million).
Operating Highlights
Equipped space increased by 4,500 square metres in the fourth quarter and 22,300 square metres in the full year to 144,800 square metres.
Revenue generating space4 increased by 3,800 square metres in the fourth quarter and 15,200 square metres in the full year to 115,000 square metres.
Utilisation rate was 79% at the end of 2018.
During the fourth quarter 2018, Interxion completed the following expansions:
2,700 sqm expansion in Amsterdam;
1,500 sqm expansion in Paris; and,
300 sqm expansion in Frankfurt.
“Our highly-connected data centres continue to attract strong demand from all customer segments, resulting in solid booking trends across our European footprint,” said David Ruberg, Interxion’s Chief Executive Officer. “The underlying drivers of this growth are secular in nature, reflecting the widespread adoption of digital technologies by consumers and enterprises alike. The cloud and content platforms continue to lead the way, which in turn, require larger infrastructure capacities for core and edge deployments. We are still in the early stages of this transformation and believe there is a substantial opportunity ahead of us.”
Quarterly Review
Revenue in the fourth quarter of 2018 was €146.9 million, a 13% increase from the fourth quarter of 2017 and a 3% increase from the third quarter of 2018. Recurring revenue was €139.7 million, a 13% increase from the fourth quarter of 2017 and a 4% increase from the third quarter of 2018. Recurring revenue in the fourth quarter represented 95% of total revenue. On an organic constant currency basis, revenue in the fourth quarter of 2018 was 13% higher than in the fourth quarter of 2017 and 3% higher than in the third quarter of 2018.
Cost of sales in the fourth quarter of 2018 was €57.2 million, a 17% increase from the fourth quarter of 2017 and a 2% increase from the third quarter of 2018.
Gross profit was €89.7 million in the fourth quarter of 2018, an 11% increase from the fourth quarter of 2017 and a 4% increase from the third quarter of 2018. Gross profit margin was 61.1% in the fourth quarter of 2018, compared to 62.4% in the fourth quarter of 2017 and 60.7% in the third quarter of 2018.
General and administrative costs, excluding the items we adjust for in the determination of Adjusted EBITDA, were €12.5 million in the fourth quarter of 2018, a 3% decrease over the fourth quarter of 2017 and a 6% increase from the third quarter of 2018.
Depreciation and amortisation in the fourth quarter of 2018 was €34.3 million, an 18% increase from the fourth quarter of 2017 and a 4% increase from the third quarter of 2018.
Operating income in the fourth quarter of 2018 was €31.0 million, a 20% increase from the fourth quarter of 2017 and a 15% increase from the third quarter of 2018.
Net finance expense for the fourth quarter of 2018 was €15.8 million, a 28% increase from the fourth quarter of 2017 and a 34% increase from the third quarter of 2018.
Income tax expense for the fourth quarter of 2018 was €7.3 million, a 98% increase compared to the fourth quarter of 2017 and a 64% increase from the third quarter of 2018. While benefiting from reductions in statutory corporate tax rates in a number of countries of operation, there was an associated non-cash negative impact to deferred tax assets. In the fourth quarter 2018, this charge amounted to €2.4 million.
Net income was €8.0 million in the fourth quarter of 2018, an 18% decrease over the fourth quarter of 2017 and a 27% decrease from the third quarter of 2018.
Adjusted net income was €7.8 million in the fourth quarter of 2018, a 26% decrease over the fourth quarter of 2017 and a 33% decrease from the third quarter of 2018.
Adjusted EBITDA for the fourth quarter of 2018 was €67.7 million, a 15% increase from the fourth quarter of 2017 and a 3% increase from the third quarter of 2018.
Adjusted EBITDA margin was 46.1% in the fourth quarter of 2018, compared to 45.5% in the fourth quarter of 2017 and 46.3% in the third quarter of 2018.
Net cash flows from operating activities were €44.8 million in the fourth quarter of 2018, compared to €45.5 million in the fourth quarter of 2017 and €53.9 million in the third quarter of 2018.
Cash generated from operations was €76.9 million in the fourth quarter of 2018, compared to €50.3 million in the fourth quarter of 2017 and €60.9 million in the third quarter of 2018.
Capital expenditures, including intangible assets, were €131.3 million in the fourth quarter of 2018, compared to €69.7 million in the fourth quarter of 2017 and €103.2 million in the third quarter of 2018.
Cash and cash equivalents were €186.1 million at 31 December 2018, compared to €38.5 million at 31 December 2017.
Total borrowings, excluding revolving facility deferred financing costs, were €1,287.9 million at 31 December 2018, compared to €832.6 million at 31 December 2017. As at 31 December 2018 no amounts had been drawn under this facility. During the first quarter of 2019, Interxion increased its unsecured revolving credit facility by €100 million for total commitment of €300 million.
Equipped space at the end of the fourth quarter of 2018 was 144,800 square metres, compared to 122,500 square metres at the end of the fourth quarter of 2017 and 140,300 square metres at the end of the third quarter of 2018.
Revenue generating space at the end of the fourth quarter of 2018 was 115,000 square metres, compared to 99,800 square metres at the end of the fourth quarter of 2017 and 111,200 square metres at the end of the third quarter of 2018.
Utilisation rate, the ratio of revenue-generating space to equipped space, was 79% at the end of the fourth quarter of 2018, compared to 81% at the end of the fourth quarter of 2017 and 79% at the end of the third quarter of 2018.
Annual Review
Revenue for 2018 was €561.8 million, a 15% increase compared to 2017. Recurring revenue for 2018 was €533.1 million, a 15% increase compared to 2017, and accounted for 95% of total revenue in 2018, consistent with 2017. On an organic constant currency basis, revenue in 2018 was 15% higher than in 2017.
Gross profit was €342.3 million in 2018, a 15% increase compared to 2017. Gross profit margin was 60.9% in 2018, a decrease of 20 bps compared to 2017.
Sales and marketing costs for 2018 were €36.5 million, a 9% increase compared to 2017.
Adjusted EBITDA for 2018 was €257.8 million, a 17% increase compared to 2017. Adjusted EBITDA margin for 2018 was 45.9%, an increase of 70 bps compared to 2017.
Net income was €31.1 million in 2018, compared to €39.1 million in 2017. Diluted earnings per share in 2018 were €0.43 on a weighted average of 72.1 million shares, compared to €0.55 on a weighted average of 71.5 million shares in 2017.
Adjusted net income was €40.2 million in both 2018 and 2017. Adjusted diluted earnings per share were €0.56 on a weighted average of 72.1 million shares, compared to €0.56 on a weighted average of 71.5 million shares in 2017. A reconciliation from Net income to Adjusted net income is provided in the tables attached to this press release.
Cash generated from operations was €251.0 million in 2018, an increase of 20% compared to 2017.
Capital expenditures, including intangible assets, were €451.2 million in 2018 compared to €256.0 million in 2017.
During 2018, Equipped space increased by 22,300 square metres, and Revenue generating space increased by 15,200 square metres4. Utilisation rate was 79% as of 31 December 2018, compared to 81% as of 31 December 2017.
Expansions in Frankfurt and Zurich; Land Purchase in Copenhagen
In response to continuing strong demand, Interxion is today announcing that it will construct a new data centre in Zurich (“ZUR2”) and expand its FRA15 data centre in Frankfurt. In addition, Interxion has purchased land to expand its Copenhagen campus.
In Zurich, ZUR2 will be built on land purchased in the fourth quarter of 2018. It will be constructed in four phases delivering 6,600 square metres of equipped space and 12 MW of customer available power when fully built out. The first phase of ZUR2 is expected to provide 1,700 sqm and is scheduled to be completed in the first quarter of 2020. The second phase is expected to provide 1,900 sqm and is scheduled to become available in the third quarter of 2020. The capital expenditure associated with the full build of ZUR2 and the associated land, is expected to be approximately €120 million.
In Frankfurt, Interxion will expand its FRA15 data centre by constructing Phase 2 which will add an additional 2,600 square metres of equipped space that is scheduled to open in the fourth quarter of 2020. Capital expenditure associated with the first two phases of FRA15 is expected to be approximately €137 million.
In Copenhagen, Interxion has expanded its land bank by purchasing land adjacent to its existing data centres sufficient to add capacity of approximately 15,000 square metres in equipped space to the existing campus. The capital expenditure associated with the Copenhagen land purchase was approximately €10 million.
Business Outlook
Interxion today is providing guidance for full year 2019:
2018
(As Reported) 2018
(IFRS16(a)(b) basis) 2019 Guidance
(IFRS 16(a))
Revenue €561.8 million €562.1 million €632 million – €647 million
Adjusted EBITDA €257.8 million €296.5 million €324 million – €334 million
Capital expenditures
(including intangibles) €451.2 million €451.2 million €570 million – €600 million
(a) IFRS16 refers to the International Financial Reporting Standard 16 – Leases, which the company adopted from 1 January 2019. Under IFRS16, operating leases will be recognized as right of use assets and lease liabilities, and certain components of revenue will be recognized as lease revenue.
(b) The 2018 results on an IFRS16 basis represent the Company’s estimates as if IFRS16 had been adopted as of 1 January 2018. On this basis, revenue for 2018 would have remained broadly unchanged versus as reported. Adjusted EBITDA for 2018 increases by €38.7 million due to changes in the treatment of rent expenses. The 2018 results on an IFRS16 basis are being presented solely for comparative purposes in the context of the Company’s 2019 guidance.
Conference Call to Discuss Results
Interxion will host a conference call today at 8:30 a.m. ET (1:30 p.m. GMT, 2:30 p.m. CET) to discuss the results.
To participate on this call, U.S. callers may dial toll free 1-866-966-1396; callers outside the U.S. may dial direct +44 (0) 2071 928 000. The conference ID for this call is INXN. This event also will be webcast live over the Internet in listen-only mode at investors.interxion.com.
A replay of this call will be available shortly after the call concludes and will be available until 19 March 2019. To access the replay, U.S. callers may dial toll free 1-866-331-1332; callers outside the U.S. may dial direct +44 (0) 3333 009 785. The replay access number is 6137888.
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, delays in remediating the material weakness in internal control over financial reporting and/or making disclosure controls and procedures effective, 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) Adjusted EBITDA; (ii) Recurring revenue; (iii) Revenue on an organic constant currency basis; (iv) Adjusted net income; (v) Adjusted basic earnings per share; (vi) Adjusted diluted earnings per share and (vii) Cash generated from operations.
Other companies may present Adjusted EBITDA, Recurring revenue, Revenue on an organic constant currency basis, Adjusted net income, Adjusted basic earnings per share, Adjusted diluted earnings per share and Cash generated from operations 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.
Adjusted EBITDA, Recurring revenue and Revenue on an organic constant currency basis
We define Adjusted EBITDA as Operating income adjusted for the following items, which may occur in any period, and which management believes are not representative of our operating performance:
Depreciation and amortisation – property, plant and equipment and intangible assets (except goodwill) are depreciated on a straight-line basis over the estimated useful life. We believe that these costs do not represent our operating performance.
Share-based payments – represents primarily the fair value at the date of grant of employee equity awards, which is recognised as an expense over the vesting period. In certain cases, the fair value is redetermined for market conditions at each reporting date, until the final date of grant is achieved. 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 on-going 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 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.
We believe 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 Adjusted EBITDA facilitates comparisons between us and other data centre operators (including other data centre operators that are REITs) and other infrastructure-based businesses. Adjusted EBITDA is also a relevant measure used in the financial covenants of our revolving credit facility and our 4.75% Senior Notes due 2025.
A reconciliation from net income to Adjusted EBITDA is provided in the tables attached to this press release. Adjusted EBITDA and other key performance indicators may not be indicative of our historical results of operations based on IFRS, nor are they meant to be predictive of future results under IFRS.
We present organic constant currency information for revenue to provide a framework for assessing how our underlying businesses performed excluding the effect of acquisitions and foreign currency rate fluctuations. For purposes of calculating revenue on an organic constant currency basis, revenues from entities acquired during the current and comparison periods are excluded. Also, 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 organic constant currency information for revenue provides useful supplemental information to investors regarding our on-going operational performance because it helps us and our investors evaluate the on-going operating performance of the business after removing the impact of acquisitions and 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 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.
Management believes 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 prepared in accordance with IFRS, is beneficial to a complete understanding of our performance. A reconciliation from reported net income to Adjusted net income is provided in the tables attached to this press release.
Adjusted basic earnings per share and Adjusted diluted earnings per share amounts are determined on Adjusted net income.
Cash generated from operations
Cash generated from operations is defined as net cash flows from operating activities, excluding interest and corporate income tax payments and receipts. Management believes that the exclusion of these items provides useful supplemental information to net cash flows from operating activities to aid investors in evaluating the cash generating performance of our business.
Management’s outlook for 2019 included in this press release includes a range for expected Adjusted EBITDA, a non-IFRS financial measure, which excludes items that management believes are not representative of our operating performance. These items include, but are not limited to, depreciation and amortisation, share-based payments, income or expense related to the evaluation and execution of potential mergers or acquisitions, adjustments related to terminated and unused data centre sites, and other significant items that currently cannot be predicted. The exact amount of these items is not currently determinable but may be significant. Accordingly, the company is unable to provide equivalent reconciliations from the corresponding forward-looking IFRS measures to expected Adjusted EBITDA.
A full version of this press release can be downloaded here.
(pdf)
About Interxion
Interxion (NYSE: INXN) is a leading provider of carrier and cloud-neutral colocation data centre services in Europe, serving a wide range of customers through more than 50 data centres in 11 European countries. Interxion’s uniformly designed, energy efficient data centres offer customers extensive security and uptime for their mission-critical applications. With over 700 connectivity providers, 21 European Internet exchanges, and most leading cloud and digital media platforms across its footprint, Interxion has created connectivity, cloud, content and finance hubs that foster growing customer communities of interest. For more information, please visit www.interxion.com.
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