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Equinix Reports Third Quarter 2018 Results
Interconnection and Data Center Leader Delivers 63rd Consecutive Quarter of Revenue Growth

REDWOOD CITY, Calif., Nov. 1, 2018 /PRNewswire/ --

  • Quarterly revenues increased 11% year-over-year to $1.284 billion; a 9% year-over-year increase on a normalized and constant currency basis
  • Significant number of new wins in multiple verticals in Q3, with notable outperformance from content and digital media and enterprise
  • Seven new expansions announced

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended September 30, 2018. 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 2018 Results Summary

  • Revenues
    • $1.284 billion, a 2% increase over the previous quarter
  • Operating Income
    • $266 million, a 24% increase over the previous quarter, an operating margin of 21%
  • Adjusted EBITDA
    • $613 million, a 48% adjusted EBITDA margin
    • Includes $9 million of integration costs for acquisitions
  • Net Income
    • $125 million, an 85% increase over the previous quarter
    • Includes $9 million of integration costs for acquisitions
    • Diluted earnings per share of $1.55, an 82% increase compared to prior quarter
  • AFFO
    • $402 million, a 6% decrease from the previous quarter
    • Includes $9 million of integration costs for acquisitions

2018 Annual Guidance Summary

  • Revenues
    • $5.060 - $5.070 billion, a 16% increase over the previous year or a normalized and constant currency increase of 9%; an $8 million increase compared to prior guidance after absorbing a $7 million negative FX impact
  • Adjusted EBITDA
    • $2.400 - $2.410 billion or a 48% adjusted EBITDA margin, an increase of $6 million compared to prior guidance after absorbing a $3 million negative FX impact
    • Assumes $40 million of integration costs for acquisitions
  • AFFO
    • $1.619 - $1.639 billion, a 13% increase over the previous year, an increase of $13 million compared to prior guidance after including a $3 million FX benefit
    • Assumes $40 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 (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
Charles Meyers, President and CEO, Equinix:

"I am extremely proud of our track record of success in my eight years as a member of the leadership team, and that track record continues this quarter with our 63rd quarter of consecutive revenue growth. Since 2010, we have more than quadrupled the size of our business, and we have invested $22 billion in capital to build the world's leading interconnection platform, positioning us as the trusted center of a cloud-first world. As CEO I will build on this strong foundation, and we will remain focused on extending our core sources of differentiation: superior global reach; market-leading network and cloud density; the industry's most comprehensive interconnection portfolio; scaled digital ecosystems; and an unwavering commitment to service excellence."

Q3 Business Highlights

  • In September, Equinix announced the appointment of Charles Meyers as President and CEO. Meyers is an eight-year veteran of the company having held the previous positions of President of Strategy, Services and Innovation and Chief Operating Officer for Equinix.
  • Equinix continued to invest in building out its global platform in Q3 in response to strong customer demand and a high level of inventory utilization:
    • Equinix completed nine expansion projects in eight markets including Culpeper, Frankfurt, Houston, Melbourne, Miami, Rio de Janeiro, Singapore and two in São Paulo.
    • Continuing its investment in organic growth and expansion, Equinix has 30 expansion projects currently underway across 21 markets in all three regions, including seven newly announced expansions in Frankfurt, Helsinki, London, Madrid, Osaka, Seattle and Warsaw.
  • 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, and 85% came from customers deployed across multiple metros.
  • Equinix achieved a significant number of new wins across multiple verticals in Q3. The content and digital media vertical experienced record bookings this quarter led by Asia-Pacific with customer expansions from Alibaba and Tencent. The enterprise vertical continued to be the company's fastest growing vertical, led by the manufacturing, healthcare and travel sub-segments.
  • Interconnection revenues continued to outpace colocation revenues in Q3, reflecting the movement towards Interconnection Oriented Architecture® (IOA®) strategies and the adoption of hybrid multicloud as the preferred IT deployment model. Cross connects between customers increased to more than 294,000, and the Equinix Cloud Exchange Fabric (ECX Fabric) platform now serves more than 1,300 customers.

Business Outlook

For the fourth quarter of 2018, the Company expects revenues to range between $1.299 and $1.309 billion, an increase of 2% quarter-over-quarter, on both an as-reported and a normalized and constant currency basis. Adjusted EBITDA is expected to range between $604 and $614 million, which includes deferred costs from Q3, higher utilities costs and $15 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $66 and $76 million.

For the full year of 2018, total revenues are expected to range between $5.060 and $5.070 billion, an increase of 16% year-over-year, or a normalized and constant currency growth rate of approximately 9%, an $8 million increase compared to prior guidance. This updated guidance includes a full year revenues guidance raise of $15 million offset in part by a $7 million negative foreign currency impact when compared to prior guidance rates. Adjusted EBITDA is expected to range between $2.400 and $2.410 billion, an increase of 17% year-over-year, a $6 million increase compared to prior guidance. This updated guidance includes full year adjusted EBITDA guidance raise of $9 million offset in part by a $3 million negative foreign currency impact when compared to prior guidance rates, and an expected $40 million in integration costs. AFFO is expected to range between $1.619 and $1.639 billion, an increase of 13% year-over-year. This $13 million guidance raise is primarily due to a $10 million reduction of integration costs and improved business performance and a $3 million positive foreign currency benefit when compared to prior guidance rates. Non-recurring capital expenditures are expected to range between $1.8 and $1.9 billion, and recurring capital expenditures are expected to range between approximately $199 and $209 million.

The U.S. dollar exchange rates used for 2018 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.16 to the Euro, $1.31 to the Pound, ¥114 to the U.S. dollar, S$1.37 to the U.S. dollar, and R$4.04 to the U.S. dollar. The Q3 2018 global revenue breakdown by currency for the Euro, British Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 19%, 9%, 6%, 6% and 3%, 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, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, 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 2018 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2018, along with its future outlook, in its quarterly conference call on Thursday, November 1, 2018, 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 13, 2019, by dialing 1-203-369-1730 and referencing the passcode 2018. In addition, the webcast will be available at www.equinix.com/investors (no password required).

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 52 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, changes in accounting principles and foreign currency.

Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from 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 data center, and do not reflect its current or future cash spending levels to support its business. Its IBX data centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX data 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 data 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 data centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX data 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 and the timing, size and nature of equity awards. As such, Equinix and many investors and analysts exclude 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 data 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 or loss 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, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, 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 period of contract term, 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. Equinix also includes an adjustment to contract costs incurred to obtain contracts, since contract costs are capitalized and amortized over the estimated period of benefit on a straight-line basis, although costs of obtaining contracts are generally incurred and paid during the period of obtaining the contracts. The adjustments for installation revenues, straight-line rent expense and contract costs 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 and debt discounts and premiums 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 data 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 financial 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 filings with the Securities and Exchange Commission. In particular, see recent Equinix 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, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)






Three Months Ended


Nine Months Ended


September 30,
2018


June 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Recurring revenues

$

1,207,806



$

1,187,749



$

1,089,033



$

3,546,184



$

2,997,521


Non-recurring revenues

75,945



74,194



63,228



215,387



170,686


Revenues

1,283,751



1,261,943



1,152,261



3,761,571



3,168,207


Cost of revenues

660,309



651,801



582,360



1,934,540



1,573,524


Gross profit

623,442



610,142



569,901



1,827,031



1,594,683


Operating expenses:










Sales and marketing

157,920



154,202



157,619



471,898



428,112


General and administrative

206,902



210,489



185,336



620,548



558,090


Acquisition costs

(1,120)



30,413



2,083



33,932



31,510


Gain on asset sales

(6,013)







(6,013)




Total operating expenses

357,689



395,104



345,038



1,120,365



1,017,712


Income from operations

265,753



215,038



224,863



706,666



576,971


Interest and other income (expense):









Interest income

2,912



3,958



2,291



11,480



9,820


Interest expense

(130,566)



(134,673)



(121,828)



(391,516)



(352,554)


Other income (expense)

3,744



8,866



(1,076)



9,546



545


Gain (loss) on debt extinguishment

1,492



(19,215)



(22,156)



(39,214)



(42,103)


Total interest and other, net

(122,418)



(141,064)



(142,769)



(409,704)



(384,292)


Income before income taxes

143,335



73,974



82,094



296,962



192,679


Income tax expense

(18,510)



(6,356)



(2,194)



(41,625)



(24,912)


Net income

$

124,825



$

67,618



$

79,900



$

255,337



$

167,767


Net income per share:










Basic net income per share

$

1.56



$

0.85



$

1.02



$

3.21



$

2.20


Diluted net income per share

$

1.55



$

0.85



$

1.02



$

3.19



$

2.18


Shares used in computing basic net income per share

79,872



79,479



78,055



79,533



76,283


Shares used in computing diluted net income per share

80,283



79,752



78,719



79,956



76,948












 

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






Three Months Ended


Nine Months Ended


September 30,
2018


June 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Net income

$

124,825



$

67,618



$

79,900



$

255,337



$

167,767


Other comprehensive income (loss), net of tax:










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

(77,566)



(421,233)



100,909



(352,948)



408,830


Net investment hedge CTA gain (loss)

27,214



226,115



(60,723)



180,694



(191,121)


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





245





(85)


Unrealized gain (loss) on cash flow hedges

6,184



35,280



(13,070)



37,384



(52,468)


Net actuarial gain on defined benefit plans

14



13



13



35



39


Total other comprehensive income (loss), net of tax

(44,154)



(159,825)



27,374



(134,835)



165,195


Comprehensive income (loss), net of tax

$

80,671



$

(92,207)



$

107,274



$

120,502



$

332,962


 

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






September 30,
2018


December 31,
2017

Assets




Cash and cash equivalents

$

870,486



$

1,412,517


Short-term investments

15,415



28,271


Accounts receivable, net

662,401



576,313


Other current assets

258,685



232,027


          Total current assets

1,806,987



2,249,128


Long-term investments



9,243


Property, plant and equipment, net

10,682,826



9,394,602


Goodwill

4,852,549



4,411,762


Intangible assets, net

2,383,377



2,384,972


Other assets

562,332



241,750


          Total assets

$

20,288,071



$

18,691,457


Liabilities and Stockholders' Equity




Accounts payable and accrued expenses

$

739,117



$

719,257


Accrued property, plant and equipment

276,314



220,367


Current portion of capital lease and other financing obligations

98,219



78,705


Current portion of mortgage and loans payable

73,288



64,491


Current portion of senior notes

150,557




Other current liabilities

123,824



159,914


          Total current liabilities

1,461,319



1,242,734


Capital lease and other financing obligations, less current portion

1,386,260



1,620,256


Mortgage and loans payable, less current portion

1,327,477



1,393,118


Senior notes, less current portion

8,318,782



6,923,849


Other liabilities

634,060



661,710


          Total liabilities

13,127,898



11,841,667


Common stock

81



79


Additional paid-in capital

10,592,960



10,121,323


Treasury stock

(145,216)



(146,320)


Accumulated dividends

(3,145,430)



(2,592,792)


Accumulated other comprehensive loss

(922,148)



(785,189)


Retained earnings

779,926



252,689


          Total stockholders' equity

7,160,173



6,849,790


          Total liabilities and stockholders' equity

$

20,288,071



$

18,691,457










Ending headcount by geographic region is as follows:








          Americas headcount

3,404



3,154


          EMEA headcount

2,695



2,560


          Asia-Pacific headcount

1,656



1,559


                    Total headcount

7,755



7,273


 

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






September 30, 2018


December 31, 2017





Capital lease and other financing obligations

$

1,484,479



$

1,698,961






Term loans

1,353,763



1,406,686


Mortgage payable and other loans payable

47,002



50,923


Plus: debt discount and issuance costs, net

5,033



8,615


           Total mortgage and loans payable principal

1,405,798



1,466,224






Senior notes

8,469,339



6,923,849


Plus: debt issuance costs

78,961



78,151


Less: debt premium

(6,100)




          Total senior notes principal

8,542,200



7,002,000






Total debt principal outstanding

$

11,432,477



$

10,167,185


 

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








Three Months Ended


Nine Months Ended



September 30, 2018


June 30,
2018


September 30, 2017


September 30,

2018


September 30,
2017












Cash flows from operating activities:


Net income

$

124,825



$

67,618



$

79,900



$

255,337



$

167,767



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


Depreciation, amortization and accretion

306,318



308,828



277,719



921,611



749,118



Stock-based compensation

47,588



49,725



45,654



139,849



129,602



Amortization of debt issuance costs and debt discounts and premiums

3,148



3,362



4,390



10,609



20,100



(Gain) loss on debt extinguishment

(1,492)



19,215



22,156



39,214



42,103



Gain on asset sales

(6,013)







(6,013)





Other items

5,730



2,322



(744)



16,940



11,411



Changes in operating assets and liabilities:


Accounts receivable

(46,685)



32,834



(50,530)



(85,126)



(202,430)



Income taxes, net

(10,010)



(7,485)



(19,681)



(32,876)



(53,608)



Accounts payable and accrued expenses

29,107



10,818



28,781



4,782



44,952



Other assets and liabilities

(35,354)



51,491



2,865



(7,530)



35,339


Net cash provided by operating activities

417,162



538,728



390,510



1,256,797



944,354


Cash flows from investing activities:


Purchases, sales and maturities of investments, net

6,452



13,240



(28,258)



19,195



(25,059)



Business acquisitions, net of cash and restricted cash acquired

1,808



(830,993)



1,128



(829,185)



(3,628,526)



Purchases of real estate

(94,830)



(27,082)



(16,384)



(136,612)



(64,964)



Purchases of other property, plant and equipment

(545,541)



(520,239)



(320,234)



(1,415,509)



(946,048)



Proceeds from asset sales

12,154







12,154



47,767


Net cash used in investing activities

(619,957)



(1,365,074)



(363,748)



(2,349,957)



(4,616,830)


Cash flows from financing activities:


Proceeds from employee equity awards

24,243



13



21,506



50,103



41,625



Payment of dividend distributions

(185,983)



(181,760)



(159,541)



(554,742)



(463,914)



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

265,671



8,202





273,873



2,126,341



Proceeds from loans payable

424,650







424,650



1,059,800



Proceeds from senior notes





1,199,700



929,850



2,449,700



Repayment of capital lease and other financing obligations

(19,799)



(14,069)



(15,792)



(89,655)



(60,252)



Repayment of mortgage and loans payable

(404,083)



(18,816)



(21,215)



(429,498)



(63,520)



Repayment of senior notes





(500,000)





(500,000)



Debt extinguishment costs



148



(11,766)



(20,556)



(23,020)



Debt issuance costs

(635)





(16,267)



(12,218)



(56,886)



Other financing activities









(900)


Net cash provided by (used in) financing activities

104,064



(206,282)



496,625



571,807



4,508,974


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

(5,104)



(33,743)



9,582



(30,944)



26,450


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

(103,835)



(1,066,371)



532,969



(552,297)



862,948


Cash, cash equivalents and restricted cash at beginning of period

1,002,239



2,068,610



1,103,226



1,450,701



773,247


Cash, cash equivalents and restricted cash at end of period

$

898,404



$

1,002,239



$

1,636,195



$

898,404



$

1,636,195


Supplemental cash flow information:

Cash paid for taxes

$

77,648



$

17,681



$

16,590



$

127,090



$

62,411


Cash paid for interest

$

152,887



$

115,071



$

129,014



$

375,015



$

342,408













Free cash flow (negative free cash flow) (1)

$

(209,247)



$

(839,586)



$

55,020



$

(1,112,355)



$

(3,647,417)













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

$

(116,225)



$

18,489



$

70,276



$

(146,558)



$

46,073



































(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

$

417,162



$

538,728



$

390,510



$

1,256,797



$

944,354



Net cash used in investing activities as presented above

(619,957)



(1,365,074)



(363,748)



(2,349,957)



(4,616,830)



Purchases, sales and maturities of investments, net

(6,452)



(13,240)



28,258



(19,195)



25,059



Free cash flow (negative free cash flow)

$

(209,247)



$

(839,586)



$

55,020



$

(1,112,355)



$

(3,647,417)
























(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)

$

(209,247)



$

(839,586)



$

55,020



$

(1,112,355)



$

(3,647,417)



Less business acquisitions, net of cash and restricted cash acquired

(1,808)



830,993



(1,128)



829,185



3,628,526



Less purchases of real estate

94,830



27,082



16,384



136,612



64,964



Adjusted free cash flow (adjusted negative free cash flow)

$

(116,225)



$

18,489



$

70,276



$

(146,558)



$

46,073














 

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








Three Months Ended


Nine Months Ended



September 30,
2018


June 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017


Recurring revenues

$

1,207,806



$

1,187,749



$

1,089,033



$

3,546,184



$

2,997,521



Non-recurring revenues

75,945



74,194



63,228



215,387



170,686



Revenues (1)

1,283,751



1,261,943



1,152,261



3,761,571



3,168,207














Cash cost of revenues (2)

433,186



421,733



377,767



1,250,441



1,025,776



Cash gross profit (3)

850,565



840,210



774,494



2,511,130



2,142,431














Cash operating expenses (4)(7):










Cash sales and marketing expenses (5)

93,339



91,468



96,873



282,876



286,350



Cash general and administrative expenses(6)

144,700



144,738



127,302



432,209



368,880



Total cash operating expenses (4) (7)

238,039



236,206



224,175



715,085



655,230














Adjusted EBITDA (8)

$

612,526



$

604,004



$

550,319



$

1,796,045



$

1,487,201














Cash gross margins (9)

66

%


67

%


67

%


67

%


68

%













Adjusted EBITDA  margins (10)

48

%


48

%


48

%


48

%


47

%













Adjusted EBITDA flow-through rate (11)

39

%


53

%


48

%


50

%


53

%













FFO (12)

$

340,030



$

289,525



$

286,119



$

920,310



$

706,745














AFFO (13) (14)

$

402,250



$

428,126



$

391,289



$

1,244,952



$

1,055,513



































(1)

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

















Americas Revenues:




















Colocation

$

433,828



$

433,895



$

422,244



$

1,294,848



$

1,096,281



Interconnection

134,159



131,720



124,377



395,132



341,475



Managed infrastructure

18,698



18,292



18,359



55,525



50,425



Other

5,161



4,980



1,056



11,220



3,878



Recurring revenues

591,846



588,887



566,036



1,756,725



1,492,059



Non-recurring revenues

33,838



29,388



30,502



89,861



74,534



Revenues

$

625,684



$

618,275



$

596,538



$

1,846,586



$

1,566,593

























EMEA Revenues:





















Colocation

$

305,072



$

293,518



$

268,365



$

886,651



$

781,303



Interconnection

34,640



33,969



27,574



103,586



73,580



Managed infrastructure

28,387



29,731



22,465



88,804



59,342



Other

2,552



2,364



2,475



6,682



7,842



Recurring revenues

370,651



359,582



320,879



1,085,723



922,067



Non-recurring revenues

26,104



23,586



17,954



73,830



54,557



Revenues

$

396,755



$

383,168



$

338,833



$

1,159,553



$

976,624














Asia-Pacific Revenues:




















Colocation

$

191,143



$

186,172



$

152,071



$

543,513



$

438,849



Interconnection

33,318



31,924



27,593



96,011



78,233



Managed infrastructure

20,848



21,184



22,454



64,212



66,313



Recurring revenues

245,309



239,280



202,118



703,736



583,395



Non-recurring revenues

16,003



21,220



14,772



51,696



41,595



Revenues

$

261,312



$

260,500



$

216,890



$

755,432



$

624,990














Worldwide Revenues:




















Colocation

$

930,043



$

913,585



$

842,680



$

2,725,012



$

2,316,433



Interconnection

202,117



197,613



179,544



594,729



493,288



Managed infrastructure

67,933



69,207



63,278



208,541



176,080



Other

7,713



7,344



3,531



17,902



11,720



Recurring revenues

1,207,806



1,187,749



1,089,033



3,546,184



2,997,521



Non-recurring revenues

75,945



74,194



63,228



215,387



170,686



Revenues

$

1,283,751



$

1,261,943



$

1,152,261



$

3,761,571



$

3,168,207
























(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

$

660,309



$

651,801



$

582,360



$

1,934,540



$

1,573,524



Depreciation, amortization and accretion expense

(222,523)



(225,461)



(200,682)



(670,993)



(537,748)



Stock-based compensation expense

(4,600)



(4,607)



(3,911)



(13,106)



(10,000)



Cash cost of revenues

$

433,186



$

421,733



$

377,767



$

1,250,441



$

1,025,776














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

















Americas cash cost of revenues

$

181,826



$

180,057



$

168,901



$

526,138



$

430,549



EMEA cash cost of revenues

160,173



155,085



133,137



468,072



379,797



Asia-Pacific cash cost of revenues

91,187



86,591



75,729



256,231



215,430



Cash cost of revenues

$

433,186



$

421,733



$

377,767



$

1,250,441



$

1,025,776







(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, general and administrative expense or "cash SG&A".







Selling, general, and administrative expense

$

364,822



$

364,691



$

342,955



$

1,092,446



$

986,202



Depreciation and amortization expense

(83,795)



(83,367)



(77,037)



(250,618)



(211,370)



Stock-based compensation expense

(42,988)



(45,118)



(41,743)



(126,743)



(119,602)



Cash operating expense

$

238,039



$

236,206



$

224,175



$

715,085



$

655,230













(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

$

157,920



$

154,202



$

157,619



$

471,898



$

428,112



Depreciation and amortization expense

(50,415)



(48,626)



(46,899)



(149,042)



(103,517)



Stock-based compensation expense

(14,166)



(14,108)



(13,847)



(39,980)



(38,245)



Cash sales and marketing expense

$

93,339



$

91,468



$

96,873



$

282,876



$

286,350













(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

$

206,902



$

210,489



$

185,336



$

620,548



$

558,090



Depreciation and amortization expense

(33,380)



(34,741)



(30,138)



(101,576)



(107,853)



Stock-based compensation expense

(28,822)



(31,010)



(27,896)



(86,763)



(81,357)



Cash general and administrative expense

$

144,700



$

144,738



$

127,302



$

432,209



$

368,880













(7)

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













Americas cash SG&A

$

147,855



$

144,263



$

135,536



$

438,941



$

387,173



EMEA cash SG&A

56,785



57,268



59,232



174,691



179,187



Asia-Pacific cash SG&A

33,399



34,675



29,407



101,453



88,870



Cash SG&A

$

238,039



$

236,206



$

224,175



$

715,085



$

655,230













(8)

We define adjusted EBITDA as income from 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 operations

$

265,753



$

215,038



$

224,863



$

706,666



$

576,971



Depreciation, amortization and accretion expense

306,318



308,828



277,719



921,611



749,118



Stock-based compensation expense

47,588



49,725



45,654



139,849



129,602



Acquisition costs

(1,120)



30,413



2,083



33,932



31,510



Gain on asset sales

(6,013)







(6,013)





Adjusted EBITDA

$

612,526



$

604,004



$

550,319



$

1,796,045



$

1,487,201














The geographic split of our adjusted EBITDA is presented below:

















Americas income from operations

$

106,536



$

87,711



$

105,785



$

295,983



$

261,934



Americas depreciation, amortization and accretion expense

156,920



160,337



151,665



475,283



364,998



Americas stock-based compensation expense

32,818



35,104



33,419



97,799



94,964



Americas acquisition costs

(271)



10,803



1,232



12,442



26,975



Americas adjusted EBITDA

$

296,003



$

293,955



$

292,101



$

881,507



$

748,871














EMEA income from operations

$

88,830



$

73,046



$

64,197



$

225,979



$

164,105



EMEA depreciation, amortization and accretion expense

89,190



88,828



74,625



270,510



229,549



EMEA stock-based compensation expense

8,532



8,403



6,791



24,074



19,451



EMEA acquisition costs

(742)



538



851



2,240



4,535



EMEA gain on asset sales

(6,013)







(6,013)





EMEA adjusted EBITDA

$

179,797



$

170,815



$

146,464



$

516,790



$

417,640














Asia-Pacific income from operations

$

70,387



$

54,281



$

54,881



$

184,704



$

150,932



Asia-Pacific depreciation, amortization and accretion expense

60,208



59,663



51,429



175,818



154,571



Asia-Pacific stock-based compensation expense

6,238



6,218



5,444



17,976



15,187



Asia-Pacific acquisition costs

(107)



19,072





19,250