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Equinix Reports Third Quarter 2017 Results
Interconnection and Data Center Leader Delivers 59th Consecutive Quarter of Revenue Growth

REDWOOD CITY, Calif., Nov. 1, 2017 /PRNewswire/ --

  • Quarterly revenues increased 25% year-over-year to $1,152 million; 10% year-over-year on a normalized and constant currency basis
  • Record number of new wins closed across every vertical in Q3, with notable outperformance from enterprise and financial services
  • Key customer wins and expansions included Alibaba.com, Baidu, Blade, Charter Communications, Netflix, Priceline.com, Oracle, Salesforce.com, SAP, Tencent and Walmart
  • 13 new expansion projects announced across all three regions totaling $615 million

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended September 30, 2017. Equinix 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.

Third Quarter 2017 Results Summary

  • Revenues from continuing operations
    • $1,152 million, an 8% increase over the previous quarter
    • Includes $137 million of revenues from the acquisition of 29 Verizon data centers
  • Operating Income
    • $225 million, a 22% increase over the previous quarter
  • Adjusted EBITDA
    • $550 million, a 48% adjusted EBITDA margin
    • Includes $14 million of integration costs
  • Net Income from Continuing Operations
    • $80 million
  • AFFO
    • $391 million, a 9% increase over the previous quarter

2017 Annual Guidance Summary

  • Revenues from continuing operations
    • $4,355 - $4,363 million, a 21% increase over the previous year; a normalized and constant currency increase of 11%
  • Adjusted EBITDA
    • $2,049 - $2,057 million or a 47% adjusted EBITDA margin
    • Assumes $54 million of integration costs for acquisitions
  • AFFO
    • $1,411 - $1,419 million, a 31% increase over the previous year; a normalized and constant currency increase of 14%
    • Assumes $54 million of integration costs for acquisitions

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income or 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 without unreasonable effort. The impact of such adjustments could be significant.

Quote
Steve Smith, President and CEO, Equinix:
"Equinix had a strong third quarter as customers continue to adopt interconnection oriented architectures as the preferred platform for their shift to digital.  Robust demand is driving higher utilization levels, and we are investing in support of this momentum with expansions, both organically and through strategic acquisitions, to deliver even greater value to customers through our global platform.  As customers embrace hybrid and multicloud as the IT architecture of choice, our interconnection strength is resonating, and Equinix continues to outpace market growth and gain market share."

Business Highlights

  • In Q3, Equinix continued, through both organic builds and acquisitions, to expand the industry-leading global reach of Platform EquinixTM, which now spans 190 International Business Exchange™ (IBX®) data centers across 48 markets and 24 countries.
    • The purchase of Itconic, which closed in early Q4, added 400 customers across five new data centers in Spain and Portugal, further expanding Equinix's presence in EMEA and extending the company's footprint into two new countries and four new markets.
    • Equinix also expanded in Turkey, completing the acquisition in early Q4 of its second IBX data center in Istanbul, a strategic gateway between Europe and Asia with critical economic and geopolitical importance.
    • Organic expansion included the opening of the HK5 IBX in the TKO data center area of Hong Kong and the DC12 IBX at the Equinix Ashburn campus in the Washington, D.C. area. These openings add capacity in two of the company's most interconnection-rich markets.
    • Continuing its investment in organic expansion, Equinix today announced 13 new expansion projects in the Americas (Denver, Miami and São Paulo), EMEA (Amsterdam, London, Stockholm and three new projects in Frankfurt) and APAC (Hong Kong, Melbourne, Shanghai and Singapore) regions totaling $615 million in capital expenditures. These new projects bring the total number of announced expansion projects underway to 22.
  • These expansions come as customers continue to leverage the global scope of Platform Equinix to achieve a distributed digital edge. In Q3, more than 59% of revenues came from customers deployed across all three regions, up from 58% in Q2, and 84% came from customers deployed across multiple metros.
  • Equinix achieved a record number of new wins across every vertical in Q3, a notable outperformance that included 10 new Fortune 500 wins from the enterprise and financial services verticals as these businesses re-architect their infrastructure to directly and securely interconnect their people, locations, clouds and data. The network vertical achieved record bookings with expansions from Charter Communications, and with continued momentum within the subsea space from Seaborn Networks and Aqua Comms.
  • In Q3, Equinix continued growing the penetration of its indirect channel, with 19% of bookings originating from the channel, up from 17% last quarter. As a part of this strategy, partners such as Datalink, Datapipe and NetApp are beginning to build their value-added services around core Equinix offerings, including Equinix Cloud ExchangeTM and Equinix Performance HubTM.
  • Interconnection revenues in Q3 grew 31% year-over-year and 17% year-over-year on a normalized and constant currency basis, significantly outpacing colocation revenues and reflecting the movement towards Interconnection Oriented ArchitectureTM strategies and the rapid adoption of hybrid, multicloud as the preferred IT deployment model. Cross-connects between customers increased to more than 248,000, and the Equinix Cloud ExchangeTM platform now serves more than 950 customers.

Business Outlook

For the fourth quarter of 2017, the Company expects revenues to range between $1,187 and $1,195 million, an increase of 3% quarter over quarter at the midpoint, on both an as-reported and a normalized and constant currency basis. This guidance includes a negative foreign currency impact of $1 million when compared to the average FX rates in Q3 2017. Cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between $228 and $236 million. Adjusted EBITDA is expected to range between $562 and $570 million, which includes a $2 million negative foreign currency impact when compared to the average FX rates in Q3 2017, and $13 million of integration costs related to acquisitions. Capital expenditures are expected to range between $355 and $375 million, which includes approximately $65 million of recurring capital expenditures.

For the full year of 2017, total revenues are expected to range between $4,355 and $4,363 million, an increase of 21% year over year, or a normalized and constant currency increase of 11%. This $37 million guidance raise is due to better than expected combined operating business performance of $8 million, foreign currency benefit of $16 million when compared to prior Equinix guidance rates and $13 million in revenues from the Itconic and Istanbul 2 ("IS2") acquisitions. Total year cash gross margins are expected to approximate 67 - 68%. Cash selling, general and administrative expenses are expected to range between $883 and $891 million. Adjusted EBITDA is expected to range between $2,049 and $2,057 million, an increase of 24% year over year, or a normalized and constant currency increase of approximately 11%. This $10 million adjusted EBITDA raise is due to better than expected combined operating performance of $2 million, a foreign currency benefit of $7 million when compared to prior Equinix guidance rates and net $1 million in adjusted EBITDA from the Itconic and IS2 acquisitions. This guidance includes an expected $54 million in integration costs from acquisitions, and includes an incremental $2 million from IS2 and Itconic. AFFO is expected to range between $1,411 and $1,419 million, an increase of 31% year over year, or a normalized and constant currency increase of approximately 14%. This $28 million AFFO guidance raise is due to better than expected combined business performance of $20 million, foreign currency benefit of $7 million when compared to prior Equinix guidance rates and net $1 million in adjusted EBITDA from the Itconic and IS2 acquisitions. Capital expenditures are expected to range between $1,300 and $1,320 million, including approximately $170 million of recurring capital expenditure.

The U.S. dollar exchange rates used for 2017 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.13 to the Euro, $1.38 to the Pound, S$1.36 to the U.S. dollar,  ¥112 to the U.S. dollar and R$3.16 to the U.S. dollar. The Q3 2017 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 18%, 9%, 6%, 6% and 4%, respectively.

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.

Q3 2017 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2017, along with its future outlook, in its quarterly conference call on Wednesday, November 1, 2017, 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 1-517-308-9482 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call, through Wednesday, February 14, 2018, by dialing 1-203-369-1512 and referencing the passcode 2017. In addition, the webcast will be available at www.equinix.com/investors. No password is required for the webcast.

Investor Presentation and Supplemental Financial Information

Equinix has made available on its website a presentation designed to accompany the discussion of Equinix results and future outlook, along with certain supplemental financial information and other data. Interested parties may access this information through the Equinix Investor Relations website at www.equinix.com/investors.

Additional Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most interconnected data centers. In 48 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.

Equinix provides normalized and constant currency growth rates, which are calculated to adjust for acquisitions, dispositions, integration costs and foreign currency.

Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from continuing operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales.

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 Equinix'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, acquisition costs and gain or loss on asset sales.  Equinix excludes these items in order for its lenders, investors and the industry analysts who review and report on Equinix to better evaluate Equinix'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 an IBX center, and do not reflect its current or future cash spending levels to support its business. Its IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX center do not recur with respect to such data center, although Equinix may incur initial construction costs in future periods with respect to additional IBX centers, and future capital expenditures remain minor relative to the initial investment. This is a trend it expects to continue. In addition, depreciation is also based on the estimated useful lives of the IBX centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers and are not indicative of current or expected future capital expenditures. Therefore, 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 acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of acquisitions and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. 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 also believes are not meaningful in evaluating Equinix's current operations. Equinix excludes stock-based compensation expense, as it can vary significantly from period to period based on share price, the timing, size and nature of equity awards. As such, Equinix and many investors and analysts, exclude this stock-based compensation expense to compare its operating results with those of other companies. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges. 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. Equinix also excludes gain or loss on asset sales as it represents profit that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes acquisition costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The acquisition costs relate to costs Equinix incurs in connection with business combinations. Such charges generally are not relevant to assessing the long-term performance of Equinix. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the acquisitions. Management believes items such as restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales are non-core transactions; however, these types of costs 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 or loss, excluding gain or loss 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, gain or loss on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income or loss from discontinued operations, net of tax 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 costs for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above.

Equinix includes an adjustment for revenues 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 revenues 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 its debt financings that have no current or future cash obligations. Equinix excludes gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix 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. Equinix also excludes net income or loss from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.

Equinix presents constant currency results of operations, which is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, Equinix has presented this non-GAAP financial measure to provide investors with an additional tool to evaluate its operating results without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Equinix's business performance. To present this information, Equinix's current and comparative prior period revenues and certain operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at a consistent exchange rate for purposes of each result being compared.

Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financials measures. Equinix presents such non-GAAP financial measures to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what management believes to be its core, ongoing business operations.  Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. 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 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 those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income or 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 without unreasonable effort. The impact of such adjustments could be significant. 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 data 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 revenues 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,
2017


June 30,
2017


September 30,
2016


September 30,
2017


September 30,
2016

Recurring revenues

$

1,089,033



$

1,010,048



$

877,006



$

2,997,521



$

2,524,932


Non-recurring revenues

63,228



56,373



47,670



170,686



144,410


Revenues

1,152,261



1,066,421



924,676



3,168,207



2,669,342


Cost of revenues

582,360



522,203



470,302



1,573,524



1,354,949


Gross profit

569,901



544,218



454,374



1,594,683



1,314,393


Operating expenses:










Sales and marketing

157,619



141,566



110,936



428,112



325,358


General and administrative

185,336



191,355



181,239



558,090



515,605


Acquisition costs

2,083



26,402



12,505



31,510



64,635


Impairment charges





7,698





7,698


Gain on asset sales





(27,945)





(33,187)


Total operating expenses

345,038



359,323



284,433



1,017,712



880,109


Income from continuing operations

224,863



184,895



169,941



576,971



434,284


Interest and other income (expense):










Interest income

2,291



4,437



762



9,820



2,528


Interest expense

(121,828)



(119,042)



(92,200)



(352,554)



(293,395)


Other income (expense)

(1,076)



1,284



2,938



545



(56,217)


Loss on debt extinguishment

(22,156)



(16,444)



(9,894)



(42,103)



(10,499)


Total interest and other, net

(142,769)



(129,765)



(98,394)



(384,292)



(357,583)


Income from continuing operations before income taxes

82,094



55,130



71,547



192,679



76,701


Income tax expense

(2,194)



(9,325)



(22,778)



(24,912)



(25,957)


Net income from continuing operations

79,900



45,805



48,769



167,767



50,744


Net income from discontinued operations, net of tax





2,681





14,306


Net income

$

79,900



$

45,805



$

51,450



$

167,767



$

65,050


Net income per share:










Basic net income per share from continuing operations

$

1.02



$

0.59



$

0.69



$

2.20



$

0.73


Basic net income per share from discontinued operations





0.04





0.21


Basic net income per share

$

1.02



$

0.59



$

0.73



$

2.20



$

0.94


Diluted net income per share from continuing operations

$

1.02



$

0.58



$

0.68



$

2.18



$

0.72


Diluted net income per share from discontinued operations





0.04





0.20


Diluted net income per share

$

1.02



$

0.58



$

0.72



$

2.18



$

0.92


Shares used in computing basic net income per share

78,055



77,923



71,190



76,283



69,689


Shares used in computing diluted net income per share

78,719



78,508



71,908



76,948



70,389












 

EQUINIX, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)






Three Months Ended


Nine Months Ended


September 30,
2017


June 30,
2017


September 30,
2016


September 30,
2017


September 30,
2016

Net income

$

79,900



$

45,805



$

51,450



$

167,767



$

65,050












Other comprehensive income (loss), net of tax:










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

100,909



200,983



(32,603)



408,830



(215,065)


Unrealized gain (loss) on available-for-sale securities

245



(65)



1,487



(85)



2,382


Unrealized gain (loss) on cash flow hedges

(13,070)



(27,671)



(4,153)



(52,468)



3,789


Net investment hedge CTA gain (loss)

(60,723)



(101,847)



(34,721)



(191,121)



4,163


Net actuarial gain on defined benefit plans

13



15



7



39



21


Total other comprehensive income (loss), net of tax

27,374



71,415



(69,983)



165,195



(204,710)












Comprehensive income (loss), net of tax

$

107,274



$

117,220



$

(18,533)



$

332,962



$

(139,660)


 

EQUINIX, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)






September 30,
2017


December 31,
2016

Assets




Cash and cash equivalents

$

1,599,988



$

748,476


Short-term investments

29,572



3,409


Accounts receivable, net

597,242



396,245


Other current assets

217,006



319,396


          Total current assets

2,443,808



1,467,526


Long-term investments

10,885



10,042


Property, plant and equipment, net

9,006,171



7,199,210


Goodwill

4,226,490



2,986,064


Intangible assets, net

2,335,175



719,231


Other assets

285,967



226,298


          Total assets

$

18,308,496



$

12,608,371


Liabilities and Stockholders' Equity




Accounts payable and accrued expenses

$

657,229



$

581,739


Accrued property, plant and equipment

205,444



144,842


Current portion of capital lease and other financing obligations

60,201



101,046


Current portion of mortgage and loans payable

84,455



67,928


Other current liabilities

149,295



133,140


          Total current liabilities

1,156,624



1,028,695


Capital lease and other financing obligations, less current portion

1,612,188



1,410,742


Mortgage and loans payable, less current portion

2,551,510



1,369,087


Senior notes

5,717,276



3,810,770


Other liabilities

728,681



623,248


          Total liabilities

11,766,279



8,242,542


Common stock

79



72


Additional paid-in capital

9,718,580



7,413,519


Treasury stock

(146,369)



(147,559)


Accumulated dividends

(2,433,600)



(1,969,645)


Accumulated other comprehensive loss

(783,947)



(949,142)


Retained earnings

187,474



18,584


          Total stockholders' equity

6,542,217



4,365,829


          Total liabilities and stockholders' equity

$

18,308,496



$

12,608,371










Ending headcount by geographic region is as follows:








          Americas headcount

3,063



2,510


          EMEA headcount

2,289



2,063


          Asia-Pacific headcount

1,543



1,420


                    Total headcount

6,895



5,993



 

EQUINIX, INC.
Summary of Debt Principal Outstanding
(in thousands)
(unaudited)



September 30, 2017


December 31, 2016





Capital lease and other financing obligations

$

1,672,389



$

1,511,788






Term loans, net of debt discount and debt issuance costs

2,587,770



1,390,771


Mortgage payable and other loans payable

48,195



46,244


Plus: debt discount, premium and issuance costs, net

29,840



20,949


           Total mortgage and loans payable principal

2,665,805



1,457,964






Senior notes, net of debt issuance costs

5,717,276



3,810,770


Plus: debt issuance costs

64,224



39,230


          Total senior notes principal

5,781,500



3,850,000






Total debt principal outstanding

$

10,119,694



$

6,819,752



 

EQUINIX, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)








Three Months Ended


Nine Months Ended



September 30,
2017


June 30,
2017


September 30,
2016


September 30,
2017


September 30,
2016

Cash flows from operating activities:











Net income

$

79,900



$

45,805



$

51,450



$

167,767



$

65,050



Adjustments to reconcile net income to net cash provided by operating activities:











Depreciation, amortization and accretion

277,719



252,386



215,370



749,118



631,242



Stock-based compensation

45,654



45,625



42,346



129,602



115,730



Amortization of debt issuance costs and debt discounts

4,390



4,130



2,684



20,100



13,709



Loss on debt extinguishment

22,156



16,444



10,181



42,103



10,499



Gain on asset sales





(27,945)





(33,187)



Gain on sale of discontinued operations





(4,242)





(4,242)



Impairment charges





7,698





7,698



Other items

(744)



3,775



5,370



11,411



17,552



Changes in operating assets and liabilities:











Accounts receivable

(50,530)



(112,236)



(30,440)



(202,430)



(72,807)



Income taxes, net

(19,681)



(13,290)



24,776



(53,608)



1,021



Accounts payable and accrued expenses

28,781



81,585



(901)



44,952



(11,526)



Other assets and liabilities

2,865



(17,751)



39,290



35,339



(22,004)


Net cash provided by operating activities

390,510



306,473



335,637



944,354



718,735


Cash flows from investing activities:











Purchases, sales and maturities of investments, net

(28,258)



10,303



(2,123)



(25,059)



10,060



Business acquisitions, net of cash and restricted cash acquired

1,128



(3,593,613)



(165,901)



(3,628,526)



(1,767,227)



Purchases of real estate

(16,384)



(6,841)





(64,964)



(28,118)



Purchases of other property, plant and equipment

(320,234)



(348,572)



(279,477)



(946,048)



(727,044)



Proceeds from asset sales





805,372



47,767



828,197


Net cash provided by (used in) investing activities

(363,748)



(3,938,723)



357,871



(4,616,830)



(1,684,132)













Cash flows from financing activities:











Proceeds from employee equity awards

21,506



45



16,504



41,625



34,143



Payments of dividend distributions

(159,541)



(156,290)



(127,457)



(463,914)



(374,151)



Proceeds from public offering of common stock, net of offering costs



83





2,126,341





Proceeds from loans payable





9,154



1,059,800



710,404



Proceeds from senior notes

1,199,700







2,449,700





Repayments of capital lease and other financing obligations

(15,792)



(27,864)



(55,528)



(60,252)



(100,863)



Repayments of mortgage and loans payable and convertible debt

(21,215)



(20,795)



(13,354)



(63,520)



(986,465)



Repayment of senior notes

(500,000)







(500,000)





Debt extinguishment costs

(11,766)



(8,122)



(10,181)



(23,020)



(10,181)



Debt issuance costs

(16,267)



46



(11,709)



(56,886)



(11,751)



Other financing activities







(900)




Net cash provided by (used in) financing activities

496,625



(212,897)



(192,571)



4,508,974



(738,864)


Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

9,582



5,327



4,491



26,450



13,130


Change in cash balances included in assets held for sale





21,356





(3,755)


Net increase (decrease) in cash, cash equivalents and restricted cash

532,969



(3,839,820)



526,784



862,948



(1,694,886)


Cash, cash equivalents and restricted cash at beginning of period

1,103,226



4,943,046



496,757



773,247



2,718,427


Cash, cash equivalents and restricted cash at end of period

$

1,636,195



$

1,103,226



$

1,023,541



$

1,636,195



$

1,023,541













Supplemental cash flow information:










Cash paid (refunded) for taxes

$

16,590



$

16,269



$

(73)



$

62,411



$

31,503


Cash paid for interest

$

129,014



$

97,960



$

111,094



$

342,408



$

271,530













Free cash flow (negative free cash

flow) (1)

$

55,020



$

(3,642,553)



$

695,631



$

(3,647,417)



$

(975,457)













Adjusted free cash flow (adjusted negative free cash flow) (2)

$

70,276



$

(42,099)



$

861,532



$

46,073



$

819,888
























(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

$

390,510



$

306,473



$

335,637



$

944,354



$

718,735



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

(363,748)



(3,938,723)



357,871



(4,616,830)



(1,684,132)



Purchases, sales and maturities of investments, net

28,258



(10,303)



2,123



25,059



(10,060)



Free cash flow (negative free cash flow)

$

55,020



$

(3,642,553)



$

695,631



$

(3,647,417)



$

(975,457)













(2)

We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate and business acquisitions, net of cash and restricted cash acquired as presented below:




Free cash flow (as defined above)

$

55,020



$

(3,642,553)



$

695,631



$

(3,647,417)



$

(975,457)



Less business acquisitions, net of cash and restricted cash acquired

(1,128)



3,593,613



165,901



3,628,526



1,767,227



Less purchases of real estate

16,384



6,841





64,964



28,118



Adjusted free cash flow (adjusted negative free cash flow)

$

70,276



$

(42,099)



$

861,532



$

46,073



$

819,888














 

EQUINIX, INC.
Non-GAAP Measures and Other Supplemental Data
(in thousands)
(unaudited)








Three Months Ended


Nine Months Ended



September 30,
2017


June 30,
2017


September 30,
2016


September 30,
2017


September 30,
2016


Recurring revenues

$

1,089,033



$

1,010,048



$

877,006



$

2,997,521



$

2,524,932



Non-recurring revenues

63,228



56,373



47,670



170,686



144,410



Revenues (1)

1,152,261



1,066,421



924,676



3,168,207



2,669,342














Cash cost of revenues (2)

377,767



344,469



304,821



1,025,776



867,954



Cash gross profit (3)

774,494



721,952



619,855



2,142,431



1,801,388














Cash operating expenses (4):











Cash sales and marketing expenses (5)

96,873



89,616



79,515



286,350



237,278



Cash general and administrative

    expenses (6)

127,302



123,028



120,298



368,880



343,127



Total cash operating expenses (7)

224,175



212,644



199,813



655,230



580,405














Adjusted EBITDA (8)

$

550,319



$

509,308



$

420,042



$

1,487,201



$

1,220,983














Cash gross margins (9)

67

%


68

%


67

%


68

%


67

%













Adjusted EBITDA

    margins (10)

48

%


48

%


45

%


47

%


46

%













Adjusted EBITDA flow-through rate (11)

48

%


70

%


(1)

%


53

%


43

%













FFO (12)

$

286,119



$

219,760



$

187,831



$

706,745



$

505,221














AFFO (13) (14)

$

391,289



$

360,114



$

284,179



$

1,055,513



$

784,554
























(1)

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

















Americas Revenues:






















Colocation

$

422,244



$

374,764



$

294,046



$

1,096,281



$

862,465



Interconnection

124,377



116,248



94,865



341,475



274,196



Managed infrastructure

18,359



17,005



14,649



50,425



39,019



Other

1,056



1,903



902



3,878



2,417



Recurring revenues

566,036



509,920



404,462



1,492,059



1,178,097



Non-recurring revenues

30,502



23,688



20,680



74,534



64,910



Revenues

$

596,538



$

533,608



$

425,142



$

1,566,593



$

1,243,007

























EMEA Revenues:






















Colocation

$

268,365



$

259,684



$

244,420



$

781,303



$

699,019



Interconnection

27,574



23,655



21,464



73,580



63,589



Managed infrastructure

22,465



19,205



16,359



59,342



50,310



Other

2,475



2,037



3,947



7,842



8,463



Recurring revenues

320,879



304,581



286,190



922,067



821,381



Non-recurring revenues

17,954



18,363



15,060



54,557



48,334



Revenues

$

338,833



$

322,944



$

301,250



$

976,624



$

869,715














Asia-Pacific Revenues:






















Colocation

$

152,071



$

147,783



$

140,493



$

438,849



$

397,098



Interconnection

27,593



25,781



21,172



78,233



59,362



Managed infrastructure

22,454



21,983



24,138



66,313



66,973



Other





551





2,021



Recurring revenues

202,118



195,547



186,354



583,395



525,454



Non-recurring revenues

14,772



14,322



11,930



41,595



31,166



Revenues

$

216,890



$

209,869



$

198,284



$

624,990



$

556,620














Worldwide Revenues:






















Colocation

$

842,680



$

782,231



$

678,959



$

2,316,433



$

1,958,582



Interconnection

179,544



165,684



137,501



493,288



397,147



Managed infrastructure

63,278



58,193



55,146



176,080



156,302



Other

3,531



3,940



5,400



11,720



12,901



Recurring revenues

1,089,033



1,010,048



877,006



2,997,521



2,524,932



Non-recurring revenues

63,228



56,373



47,670



170,686



144,410



Revenues

$

1,152,261



$

1,066,421



$

924,676



$

3,168,207



$

2,669,342













(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

$

582,360



$

522,203



$

470,302



$

1,573,524



$

1,354,949



Depreciation, amortization and accretion expense

(200,682)



(174,556)



(162,165)



(537,748)



(477,241)



Stock-based compensation expense

(3,911)



(3,178)



(3,316)



(10,000)



(9,754)



Cash cost of revenues

$

377,767



$

344,469



$

304,821



$

1,025,776



$

867,954














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

















Americas cash cost of revenues

$

168,901



$

148,589



$

114,934



$

430,549



$

333,250



EMEA cash cost of revenues

133,137



124,485



116,587



379,797



333,046



Asia-Pacific cash cost of revenues

75,729



71,395



73,300



215,430



201,658



Cash cost of revenues

$

377,767



$

344,469



$

304,821



$

1,025,776



$

867,954







(3)

We define cash gross profit as revenues less cash cost of revenues (as defined above).












(4)

We define cash operating expense as selling, general, and administrative expense less depreciation, amortization, and stock-based compensation. We also refer to cash operating expense as cash selling, marketing, general and administrative expense or "cash SG&A".







Selling, general, and administrative expense

$

342,955



$

332,921



$

292,175



$

986,202



$

840,963



Depreciation and amortization expense

(77,037)



(77,830)



(53,205)



(211,370)



(154,001)



Stock-based compensation expense

(41,743)



(42,447)



(39,157)



(119,602)



(106,557)



Cash operating expense

$

224,175



$

212,644



$

199,813



$

655,230



$

580,405













(5)

We define cash sales and marketing expense as sales and marketing expense less depreciation, amortization and stock-based compensation as presented below:













Sales and marketing expense

$

157,619



$

141,566



$

110,936



$

428,112



$

325,358



Depreciation and amortization expense

(46,899)



(38,524)



(19,719)



(103,517)



(55,893)



Stock-based compensation expense

(13,847)



(13,426)



(11,702)



(38,245)



(32,187)



Cash sales and marketing expense

$

96,873



$

89,616



$

79,515



$

286,350



$

237,278
























(6)

We define cash general and administrative expense as general and administrative expense less depreciation, amortization and stock-based compensation as presented below:













General and administrative expense

$

185,336



$

191,355



$

181,239



$

558,090



$

515,605



Depreciation and amortization expense

(30,138)



(39,306)



(33,486)



(107,853)



(98,108)



Stock-based compensation expense

(27,896)



(29,021)



(27,455)



(81,357)



(74,370)



Cash general and administrative expense

$

127,302



$

123,028



$

120,298



$

368,880



$

343,127













(7)

The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below:













Americas cash SG&A

$

135,536



$

126,868



$

108,077



$

387,173



$

328,138



EMEA cash SG&A

59,232



56,837



63,195



179,187



170,257



Asia-Pacific cash SG&A

29,407



28,939



28,541



88,870



82,010



Cash SG&A

$

224,175



$

212,644



$

199,813



$

655,230



$

580,405













(8)

We define adjusted EBITDA as income from continuing operations excluding depreciation, amortization, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales as presented below:













Income from continuing operations

$

224,863



$

184,895



$

169,941



$

576,971



$

434,284



Depreciation, amortization and accretion expense

277,719



252,386



215,370



749,118



631,242



Stock-based compensation expense

45,654



45,625



42,473



129,602



116,311



Impairment charges





7,698





7,698



Acquisition costs

2,083



26,402



12,505



31,510



64,635



Gain on asset sales





(27,945)





(33,187)



Adjusted EBITDA

$

550,319



$

509,308



$

420,042



$

1,487,201



$

1,220,983

























The geographic split of our adjusted EBITDA is presented below:

















Americas income from continuing operations

$

105,785



$

75,039



$

89,004



$

261,934



$

264,643



Americas depreciation, amortization and accretion expense

151,665



124,905



82,204



364,998



237,798



Americas stock-based compensation expense

33,419



33,771



29,309



94,964



81,428



Americas acquisition costs

1,232



24,436



1,614



26,975



2,992



Americas gain on asset sales









(5,242)



Americas adjusted EBITDA

$

292,101



$

258,151



$

202,131



$

748,871



$

581,619














EMEA income from continuing operations

$

64,197



$

54,927



$

51,829



$

164,105



$

73,506



EMEA depreciation, amortization and accretion expense

74,625



78,118



78,555



229,549



237,972



EMEA stock-based compensation expense

6,791



6,611



8,138



19,451



21,433



EMEA acquisition costs

851



1,966



10,891



4,535



61,446



EMEA gain on asset sales





(27,945)





(27,945)



EMEA adjusted EBITDA

$

146,464



$

141,622



$

121,468



$

417,640



$

366,412