Equinix Reports Third Quarter 2019 Results

Interconnection and Data Center Leader Delivers 67th Consecutive Quarter of Revenue Growth

REDWOOD CITY, Calif., Oct. 30, 2019 /PRNewswire/ --

  • Quarterly revenues increased 9% year-over-year to $1.397 billion, which includes $8 million of negative foreign currency impact when compared to prior guidance rates. This reflects an 8% year-over-year increase on a normalized and constant currency basis
  • Delivered one of the strongest interconnection quarters in the company's history
  • Recognized by the U.S. Environmental Protection Agency (EPA) for leading green power use, ranking number four on the EPA's National Top 100 Partners list
  • Delivered record channel bookings, accounting for more than 30% of total bookings

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported results for the quarter ended September 30, 2019. 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. All per share results are presented on a fully diluted basis.

Third Quarter 2019 Results Summary

  • Revenues
    • $1.397 billion, a 1% increase over the previous quarter
    • Includes $8 million of negative foreign currency impact when compared to prior guidance rates
  • Operating Income
    • $285 million, a 2% decrease from the previous quarter, and an operating margin of 20%
  • Adjusted EBITDA
    • $675 million, a 48% adjusted EBITDA margin
    • Includes $4 million of negative foreign currency impact when compared to prior guidance rates
    • Includes $2 million of integration costs
  • Net Income and Net Income per Share attributable to Equinix
    • $121 million, a 16% decrease from the previous quarter including a $16 million increased income tax expense attributable to FX hedge gains
    • $1.41 per share, a 17% decrease from the previous quarter including a per share reduction of $0.19 related to increased income tax expense attributable to FX hedge gains, a significant portion of which is expected to reverse in Q4
  • AFFO and AFFO per Share
    • $473 million, a 5% decrease from the previous quarter
    • $5.52 per share including a per share reduction of $0.19 related to increased income tax expense attributable to FX hedge gains, a significant portion of which is expected to reverse in Q4
    • Includes $2 million of integration costs

2019 Annual Guidance Summary

  • Revenues
    • $5.554 - $5.564 billion, a normalized and constant currency increase of approximately 9% over the previous year
    • Includes a $21 million negative foreign currency impact when compared to prior guidance rates
  • Adjusted EBITDA
    • $2.666 - $2.676 billion, a 48% adjusted EBITDA margin
    • Includes a $10 million negative foreign currency impact when compared to prior guidance rates
    • Assumes $9 million of integration costs
  • AFFO and AFFO per Share
    • $1.913 - $1.923 billion, a normalized and constant currency increase of 13 - 14% over the previous year
    • $22.56 - $22.68 per share, a normalized and constant currency increase of approximately 8% over the previous year
    • Includes $10 million of increased income tax expense attributable to FX hedge gains, a per share impact of $0.12
    • Assumes $9 million of integration costs

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:

"We had another great quarter, building on our market leadership and unlocking the power of Platform Equinix by expanding our geographic reach, enhancing our market-leading interconnection portfolio and launching new offerings that respond to the evolving needs of our customers. We have a clear view of our strategy and are actively building new capabilities that will enable us to achieve our vision for the future of Platform Equinix, allowing customers to reach everywhere, interconnect everyone and integrate everything on their digital transformation journey."

Business Highlights

  • Equinix continued to invest in building out its global platform in response to strong customer demand and a high level of inventory utilization:
    • On October 4, Equinix announced a US$175 million definitive agreement to acquire three Axtel data centers that serve two new strategic technology metros in Mexico. This acquisition, when combined with the previous acquisitions of key traffic hubs in Dallas (Infomart) and Miami (NAP of the Americas), will further strengthen Equinix's global platform by increasing interconnection between North, Central and South America.
    • On October 9, Equinix announced the completion of the formation of the greater than US$1.0 billion joint venture in the form of a limited liability partnership with GIC, Singapore's sovereign wealth fund, to develop and operate xScale™ data centers in Europe. This was a strategic milestone for Equinix, enhancing its ability to respond to the rapidly expanding needs of the world's largest cloud and hyperscale companies while strengthening leadership in the cloud ecosystem.
    • Equinix continues its investment in organic growth and expansion activities with 28 major expansion projects underway across 21 markets and 16 countries. Among them are four xScale data centers and four newly announced projects, including phased expansions in Chicago and Toronto, and two new builds in Washington, D.C.
    • Additionally, Equinix completed six new phased expansions or openings this quarter, including two new International Business Exchange (IBX®) data centers in Helsinki and Seoul.
  • Equinix achieved its best-ever third quarter bookings with strong performance across all three regions (Americas, EMEA and Asia-Pacific) with notable momentum in EMEA. Bookings this quarter spanned across more than 3,100 customers, with the majority of bookings composed of small to mid-sized multi-metro deals. Equinix continues to lead in cloud connectivity, with over three times as many metros with multicloud on-ramps as its nearest competitor.
  • Equinix continues the growth of its indirect selling initiatives, as the company pursues high-value strategic channel partnerships. In Q3, Equinix delivered record channel bookings, accounting for more than 30% of total bookings, with 60% of this activity going into the enterprise vertical. New channel wins this quarter spanned across all end-user types including insurance, federal government, banking, public utilities and pharmaceutical, with network optimization and hybrid multicloud as key use cases.
  • Interconnection growth again outpaced colocation revenues, growing 13% year-over-year on a normalized and constant currency basis, driven by solid traction across all interconnection products. Today, Equinix has the most comprehensive global interconnection platform, comprising over 356,000 physical and virtual interconnections. In Q3, Equinix added 8,500 interconnections, more per quarter than our top 10 competitors combined. In the quarter, Equinix surpassed 20,000 virtual connections enabled by Equinix Cloud Exchange Fabric(ECX Fabric), which accounted for more than 5% of total interconnections and serves more than 1,800 customers.
  • Equinix is advancing the company's sustainability agenda with meaningful progress across environmental, social and governance initiatives. Equinix is progressing on its commitment to 100% sustainable energy, and over 90% of its energy consumption is now covered by clean and renewable energy sources. In Q3, the U.S. EPA recognized Equinix for leading in green power use, ranking the company number four on the EPA's National Top 100 Partners list, and Equinix received the EPA's Green Power Leadership Award for the 3rd consecutive year, recognizing the company's contribution to advancing the development of the nation's voluntary green power market.
  • Equinix added key leadership positions with the appointments of Sandra Rivera to its Board of Directors and Justin Dustzadeh as its Chief Technology Officer.

Business Outlook

For the fourth quarter of 2019, the Company expects revenues to range between $1.409 and $1.419 billion, an increase of 1% quarter-over-quarter, or a normalized and constant currency increase of approximately 2%. This guidance includes a negative foreign currency impact of $7 million when compared to the average FX rates in Q3 2019. Adjusted EBITDA is expected to range between $654 and $664 million, including the impact of timing of spend, a $3 million negative foreign currency impact when compared to the average FX rates in Q3 2019 and $3 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $65 and $75 million.

For the full year of 2019, total revenues are expected to range between $5.554 and $5.564 billion, a 10% increase over the previous year, or a normalized and constant currency increase of 9% at the mid-point. This updated guidance maintains prior full year revenue guidance, offset by a negative foreign currency impact of $21 million when compared to prior guidance rates. Adjusted EBITDA is expected to range between $2.666 and $2.676 billion, an adjusted EBITDA margin of 48%. This updated guidance raises full year adjusted EBITDA by $6 million, offset by a negative foreign currency impact of $10 million when compared to prior guidance rates, and includes an expected $9 million of integration costs. AFFO is expected to range between $1.913 and $1.923 billion, an approximate 16% increase over the previous year, or a normalized and constant currency increase of 13 - 14%. This updated guidance raises full year underlying AFFO by $8 million due to strong business performance, offset by $10 million of increased income tax expense attributed to FX hedge gains and a negative foreign currency impact. AFFO per share is expected to range between $22.56 - $22.68, an increase of approximately 8% over the previous year, on a normalized and constant currency basis. Non-recurring capital expenditures are expected to range between $1.730 and $1.920 billion, and recurring capital expenditures are expected to range between $170 and $180 million.

The U.S. dollar exchange rates used for 2019 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.15 to the Euro, $1.31 to the Pound, S$1.38 to the U.S. dollar, ¥108 to the U.S. dollar, and R$4.14 to the U.S. dollar. The Q3 2019 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 9%, 7%, 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, income tax expense, an income tax expense adjustment, recurring capital expenditures, other income (expense), (gains) losses on disposition of real estate property and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q3 2019 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2019, along with its future outlook, in its quarterly conference call on Wednesday, October 30, 2019, 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 12, 2020, by dialing 1-203-369-2048 and referencing the passcode 2019. 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's 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. On this global platform for digital business, companies come together across more than 50 markets on five continents to reach everywhere, interconnect everyone and integrate everything they need to create their digital futures.

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, transaction 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, transaction 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 transaction costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The transaction costs relate to costs Equinix incurs in connection with business combinations and formation of joint ventures, including advisory, legal, accounting, valuation and other professional or consulting fees. 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 transactions. Management believes items such as restructuring charges, impairment charges, transaction 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"), both commonly used in the REIT industry, as supplemental performance measures. 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, transaction 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 transaction 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 products and solutions; 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; risks related to our taxation as a REIT; 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,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Recurring revenues

$

1,319,336

$

1,306,045

$

1,207,806

$

3,900,209

$

3,546,184

Non-recurring revenues

77,474

78,932

75,945

244,796

215,387

Revenues

1,396,810

1,384,977

1,283,751

4,145,005

3,761,571

Cost of revenues

704,339

698,179

660,309

2,084,548

1,934,540

Gross profit

692,471

686,798

623,442

2,060,457

1,827,031

Operating expenses:

Sales and marketing

161,574

159,201

157,920

490,490

471,898

General and administrative

241,812

232,656

206,902

689,514

620,548

Transaction costs

2,991

2,774

(1,120)

8,236

33,932

Impairment charges

1,189

386

16,023

Gain on asset sales

(463)

(6,013)

(463)

(6,013)

Total operating expenses

407,103

395,017

357,689

1,203,800

1,120,365

Income from operations

285,368

291,781

265,753

856,657

706,666

Interest and other income (expense):

Interest income

8,201

7,762

2,912

20,165

11,480

Interest expense

(118,674)

(120,547)

(130,566)

(362,067)

(391,516)

Other income

3,428

12,180

3,744

15,442

9,546

Gain (loss) on debt extinguishment

315

1,492

(67)

(39,214)

Total interest and other, net

(106,730)

(100,605)

(122,418)

(326,527)

(409,704)

Income before income taxes

178,638

191,176

143,335

530,130

296,962

Income tax expense

(57,827)

(47,324)

(18,510)

(147,720)

(41,625)

Net income

120,811

143,852

124,825

382,410

255,337

Net (income) loss attributable to non-controlling interests

39

(325)

45

Net income attributable to Equinix

$

120,850

$

143,527

$

124,825

$

382,455

$

255,337

Net income per share attributable to Equinix:

Basic net income per share

$

1.42

$

1.70

$

1.56

$

4.57

$

3.21

Diluted net income per share

$

1.41

$

1.69

$

1.55

$

4.54

$

3.19

Shares used in computing basic net income per share

85,012

84,399

79,872

83,753

79,533

Shares used in computing diluted net income per share

85,571

84,767

80,283

84,223

79,956


 

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

Three Months Ended

Nine Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Net income

$

120,811

$

143,852

$

124,825

$

382,410

$

255,337

Other comprehensive loss, net of tax:

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

(284,927)

25,127

(77,566)

(341,519)

(352,948)

Net investment hedge CTA gain (loss)

188,897

(37,857)

27,214

227,890

180,694

Unrealized gain (loss) on cash flow hedges

14,217

(3,355)

6,184

19,086

37,384

Net actuarial gain (loss) on defined benefit plans

(8)

(7)

14

(26)

35

Total other comprehensive loss, net of tax

(81,821)

(16,092)

(44,154)

(94,569)

(134,835)

Comprehensive income, net of tax

38,990

127,760

80,671

287,841

120,502

Net (income) loss attributable to non-controlling interests

39

(325)

45

Other comprehensive loss attributable to non-controlling interests

28

14

35

Comprehensive income attributable to Equinix

$

39,057

$

127,449

$

80,671

$

287,921

$

120,502

 

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

September 30, 2019

December 31, 2018

Assets

Cash and cash equivalents

$

1,402,400

$

606,166

Short-term investments

19,567

4,540

Accounts receivable, net

746,571

630,119

Other current assets

305,246

274,857

Assets held for sale

379,473

          Total current assets

2,853,257

1,515,682

Property, plant and equipment, net

11,229,197

11,026,020

Operating lease right-of-use assets

1,483,491

Goodwill

4,648,913

4,836,388

Intangible assets, net

2,127,843

2,333,296

Other assets

499,632

533,252

          Total assets

$

22,842,333

$

20,244,638

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses

$

755,150

$

756,692

Accrued property, plant and equipment

335,490

179,412

Current portion of operating lease liabilities

137,002

Current portion of finance lease liabilities

65,518

77,844

Current portion of mortgage and loans payable

70,789

73,129

Current portion of senior notes

300,466

300,999

Other current liabilities

119,976

126,995

Liabilities held for sale

52,092

          Total current liabilities

1,836,483

1,515,071

Operating lease liabilities, less current portion

1,333,901

Finance lease liabilities, less current portion

1,301,482

1,441,077

Mortgage and loans payable, less current portion

1,215,207

1,310,663

Senior notes, less current portion

7,835,317

8,128,785

Other liabilities

558,912

629,763

          Total liabilities

14,081,302

13,025,359

Common stock

86

81

Additional paid-in capital

12,635,450

10,751,313

Treasury stock

(144,301)

(145,161)

Accumulated dividends

(3,956,318)

(3,331,200)

Accumulated other comprehensive loss

(1,040,236)

(945,702)

Retained earnings

1,266,430

889,948

          Total Equinix stockholders' equity

8,761,111

7,219,279

Non-controlling interests

(80)

          Total stockholders' equity

8,761,031

7,219,279

                Total liabilities and stockholders' equity

$

22,842,333

$

20,244,638

Ending headcount by geographic region is as follows:

          Americas headcount

3,647

3,480

          EMEA headcount

2,884

2,751

          Asia-Pacific headcount

1,708

1,672

                    Total headcount

8,239

7,903

 

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

September 30, 2019

December 31, 2018

Finance lease liabilities

$

1,367,000

$

1,518,921

Term loans

1,243,999

1,337,868

Mortgage payable and other loans payable

41,997

45,924

Plus: debt discount and issuance costs, net

3,459

4,732

           Total mortgage and loans payable principal

1,289,455

1,388,524

Senior notes

8,135,783

8,429,784

Plus: debt issuance costs

64,577

75,372

Less: debt premium

(2,310)

(5,031)

          Total senior notes principal

8,198,050

8,500,125

Total debt principal outstanding

$

10,854,505

$

11,407,570


 

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

Three Months Ended

Nine Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Cash flows from operating activities:

Net income

$

120,811

$

143,852

$

124,825

$

382,410

$

255,337

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

Depreciation, amortization and accretion

321,746

320,550

306,318

957,001

921,611

Stock-based compensation

63,871

61,519

47,588

174,413

139,849

Amortization of debt issuance costs and debt discounts and premiums

3,196

3,238

3,148

9,429

10,609

(Gain) loss on debt extinguishment

(315)

(1,492)

67

39,214

Gain on asset sales

(463)

(6,013)

(463)

(6,013)

Impairment charges

1,189

386

16,023

Other items

2,820

4,745

5,730

15,789

16,940

Changes in operating assets and liabilities:

Accounts receivable

3,331

(42,370)

(46,685)

(123,389)

(85,126)

Income taxes, net

42,482

14,837

(10,010)

73,144

(32,876)

Accounts payable and accrued expenses

10,647

7,476

29,107

6,660

4,782

Operating lease right-of-use assets

29,743

37,219

108,226

Operating lease liabilities

(38,254)

(34,919)

(112,059)

Other assets and liabilities

(61,810)

26,390

(35,354)

(44,193)

(7,530)

Net cash provided by operating activities

498,994

542,923

417,162

1,463,058

1,256,797

Cash flows from investing activities:

Purchases, sales and maturities of investments, net

(2,905)

(3,063)

6,452

(14,747)

19,195

Business acquisitions, net of cash and restricted cash acquired

(34,143)

1,808

(34,143)

(829,185)

Purchases of real estate

(16,852)

(41,715)

(94,830)

(64,288)

(136,612)

Purchases of other property, plant and equipment

(556,822)

(444,171)

(545,541)

(1,364,960)

(1,415,509)

Proceeds from asset sales

117

12,154

117

12,154

Net cash used in investing activities

(576,462)

(523,092)

(619,957)

(1,478,021)

(2,349,957)

Cash flows from financing activities:

Proceeds from employee equity awards

24,425

24,243

52,018

50,103

Payment of dividend distributions

(212,752)

(208,449)

(185,983)

(625,804)

(554,742)

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

99,421

348,121

265,671

1,660,976

273,873

Proceeds from loans payable

424,650

424,650

Proceeds from senior notes

929,850

Repayment of finance lease liabilities

(19,673)

(11,954)

(19,799)

(62,785)

(89,655)

Repayment of mortgage and loans payable

(17,584)

(17,878)

(404,083)

(53,796)

(429,498)

Repayment of senior notes

(150,000)

(150,000)

Debt extinguishment costs

(20,556)

Debt issuance costs

(635)

(12,218)

Net cash provided by (used in) financing activities

(126,163)

(40,160)

104,064

820,609

571,807

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

(13,528)

2,106

(5,104)

(13,117)

(30,944)

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

(217,159)

(18,223)

(103,835)

792,529

(552,297)

Cash, cash equivalents and restricted cash at beginning of period

1,637,292

1,655,515

1,002,239

627,604

1,450,701

Cash, cash equivalents and restricted cash at end of period

$

1,420,133

$

1,637,292

$

898,404

$

1,420,133

$

898,404

Supplemental cash flow information:

Cash paid for taxes

$

29,383

$

32,669

$

28,206

$

89,076

$

77,648

Cash paid for interest

$

153,265

$

113,266

$

152,887

$

412,675

$

375,015

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

$

(74,563)

$

22,894

$

(209,247)

$

(216)

$

(1,112,355)

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

$

(57,711)

$

98,752

$

(116,225)

$

98,215

$

(146,558)

(1)

We define free cash flow (negative 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

$

498,994

$

542,923

$

417,162

$

1,463,058

$

1,256,797

Net cash used in investing activities as presented above

(576,462)

(523,092)

(619,957)

(1,478,021)

(2,349,957)

Purchases, sales and maturities of investments, net

2,905

3,063

(6,452)

14,747

(19,195)

Free cash flow (negative free cash flow)

$

(74,563)

$

22,894

$

(209,247)

$

(216)

$

(1,112,355)

(2)

We define adjusted free cash flow (adjusted negative free cash flow) as free cash flow (negative 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 (negative free cash flow) as defined above

$

(74,563)

$

22,894

$

(209,247)

$

(216)

$

(1,112,355)

Less business acquisitions, net of cash and restricted cash acquired

34,143

(1,808)

34,143

829,185

Less purchases of real estate

16,852

41,715

94,830

64,288

136,612

Adjusted free cash flow (adjusted negative free cash flow)

$

(57,711)

$

98,752

$

(116,225)

$

98,215

$

(146,558)


 

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

Three Months Ended

Nine Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Recurring revenues

$

1,319,336

$

1,306,045

$

1,207,806

$

3,900,209

$

3,546,184

Non-recurring revenues

77,474

78,932

75,945

244,796

215,387

Revenues (1)

1,396,810

1,384,977

1,283,751

4,145,005

3,761,571

Cash cost of revenues (2)

464,950

460,983

433,186

1,374,314

1,250,441

Cash gross profit (3)

931,860

923,994

850,565

2,770,691

2,511,130

Cash operating expenses (4)(7):

Cash sales and marketing expenses(5)

98,117

95,114

93,339

301,447

282,876

Cash general and administrative expenses (6)

159,041

151,870

144,700

457,377

432,209

Total cash operating expenses (4)(7)

257,158

246,984

238,039

758,824

715,085

Adjusted EBITDA (8)

$

674,702

$

677,010

$

612,526

$

2,011,867

$

1,796,045

Cash gross margins (9)

67

%

67

%

66

%

67

%

67

%

Adjusted EBITDA margins (10)

48

%

49

%

48

%

49

%

48

%

Adjusted EBITDA flow-through rate (11)

(20)

%

77

%

39

%

62

%

50

%

FFO (12)

$

331,485

$

352,973

$

340,030

$

1,010,531

$

920,310

AFFO (13)(14)

$

472,744

$

497,647

$

402,250

$

1,458,511

$

1,244,952

Basic FFO per share (15)

$

3.90

$

4.18

$

4.26

$

12.07

$

11.57

Diluted FFO per share(15)

$

3.87

$

4.16

$

4.24

$

12.00

$

11.51

Basic AFFO per share (15)

$

5.56

$

5.90

$

5.04

$

17.41

$

15.65

Diluted AFFO per share(15)

$

5.52

$

5.87

$

5.01

$

17.32

$

15.57

(1)

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

Americas Revenues:

Colocation

$

441,596

$

444,086

$

433,828

$

1,325,663

$

1,294,848

Interconnection

146,212

142,460

134,159

427,235

395,132

Managed infrastructure

24,082

22,908

18,698

68,777

55,525

Other

3,392

5,352

5,161

14,723

11,220

Recurring revenues

615,282

614,806

591,846

1,836,398

1,756,725

Non-recurring revenues

29,993

29,614

33,838

97,663

89,861

Revenues

$

645,275

$

644,420

$

625,684

$

1,934,061

$

1,846,586

EMEA Revenues:

Colocation

$

357,201

$

347,795

$

305,072

$

1,036,121

$

886,651

Interconnection

41,063

38,614

34,640

117,202

103,586

Managed infrastructure

27,651

28,397

28,387

85,136

88,804

Other

1,787

2,275

2,552

6,561

6,682

Recurring revenues

427,702

417,081

370,651

1,245,020

1,085,723

Non-recurring revenues

30,438

32,774

26,104

97,635

73,830

Revenues

$

458,140

$

449,855

$

396,755

$

1,342,655

$

1,159,553

Asia-Pacific Revenues:

Colocation

$

214,304

$

213,734

$

191,143

$

637,703

$

543,513

Interconnection

39,495

37,957

33,318

114,148

96,011

Managed infrastructure

22,553

22,467

20,848

66,940

64,212

Recurring revenues

276,352

274,158

245,309

818,791

703,736

Non-recurring revenues

17,043

16,544

16,003

49,498

51,696

Revenues

$

293,395

$

290,702

$

261,312

$

868,289

$

755,432

Worldwide Revenues:

Colocation

$

1,013,101

$

1,005,615

$

930,043

$

2,999,487

$

2,725,012

Interconnection

226,770

219,031

202,117

658,585

594,729

Managed infrastructure

74,286

73,772

67,933

220,853

208,541

Other

5,179

7,627

7,713

21,284

17,902

Recurring revenues

1,319,336

1,306,045

1,207,806

3,900,209

3,546,184

Non-recurring revenues

77,474

78,932

75,945

244,796

215,387

Revenues

$

1,396,810

$

1,384,977

$

1,283,751

$

4,145,005

$

3,761,571

(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

$

704,339

$

698,179

$

660,309

$

2,084,548

$

1,934,540

Depreciation, amortization and accretion expense

(232,285)

(230,696)

(222,523)

(691,618)

(670,993)

Stock-based compensation expense

(7,104)

(6,500)

(4,600)

(18,616)

(13,106)

Cash cost of revenues

$

464,950

$

460,983

$

433,186

$

1,374,314

$

1,250,441

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

Americas cash cost of revenues

$

182,516

$

182,920

$

181,826

$

545,071

$

526,138

EMEA cash cost of revenues

180,370

179,347

160,173

532,918

468,072

Asia-Pacific cash cost of revenues

102,064

98,716

91,187

296,325

256,231

Cash cost of revenues

$

464,950

$

460,983

$

433,186

$

1,374,314

$

1,250,441

(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

$

403,386

$

391,857

$

364,822

$

1,180,004

$

1,092,446

Depreciation and amortization expense

(89,461)

(89,854)

(83,795)

(265,383)

(250,618)

Stock-based compensation expense

(56,767)

(55,019)

(42,988)

(155,797)

(126,743)

Cash operating expense

$

257,158

$

246,984

$

238,039

$

758,824

$

715,085

(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

$

161,574

$

159,201

$

157,920

$

490,490

$

471,898

Depreciation and amortization expense

(47,663)

(48,930)

(50,415)

(144,791)

(149,042)

Stock-based compensation expense

(15,794)

(15,157)

(14,166)

(44,252)

(39,980)

Cash sales and marketing expense

$

98,117

$

95,114

$

93,339

$

301,447

$

282,876

(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

$

241,812

$

232,656

$

206,902

$

689,514

$

620,548

Depreciation and amortization expense

(41,798)

(40,924)

(33,380)

(120,592)

(101,576)

Stock-based compensation expense

(40,973)

(39,862)

(28,822)

(111,545)

(86,763)

Cash general and administrative expense

$

159,041

$

151,870

$

144,700

$

457,377

$

432,209

(7)

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

Americas cash SG&A

$

156,103

$

152,448

$

147,855

$

465,444

$

438,941

EMEA cash SG&A

65,252

60,863

56,785

188,502

174,691

Asia-Pacific cash SG&A

35,803

33,673

33,399

104,878

101,453

Cash SG&A

$

257,158

$

246,984

$

238,039

$

758,824

$

715,085

(8)

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

Income from operations

$

285,368

$

291,781

$

265,753

$

856,657

$

706,666

Depreciation, amortization and accretion expense

321,746

320,550

306,318

957,001

921,611

Stock-based compensation expense

63,871

61,519

47,588

174,413

139,849

Impairment charges

1,189

386

16,023

Transaction costs

2,991

2,774

(1,120)

8,236

33,932

Gain on asset sales

(463)

(6,013)

(463)

(6,013)

Adjusted EBITDA

$

674,702

$

677,010

$

612,526

$

2,011,867

$

1,796,045

The geographic split of our adjusted EBITDA is presented below:

Americas income from operations

$

88,494

$

99,195

$

106,536

$

277,700

$

295,983

Americas depreciation, amortization and accretion expense

168,397

167,614

156,920

503,147

475,283

Americas stock-based compensation expense

48,377

42,676

32,818

125,224

97,799

Americas impairment charges

1,189

386

16,023

Americas transaction costs

199

(819)

(271)

1,452

12,442

Americas adjusted EBITDA

$

306,656

$

309,052

$

296,003

$

923,546

$

881,507

EMEA income from operations

$

113,771

$

106,555

$

88,830

$

325,333

$

225,979

EMEA depreciation, amortization and accretion expense

87,010

88,109

89,190

259,666

270,510

EMEA stock-based compensation expense

9,792

11,353

8,532

30,008

24,074

EMEA transaction costs

2,408

3,628

(742)

6,691

2,240

EMEA gain on asset sales

(463)

(6,013)

(463)

(6,013)

EMEA adjusted EBITDA

$

212,518

$

209,645

$

179,797

$

621,235

$

516,790

Asia-Pacific income from operations

$

83,103

$

86,031

$

70,387

$

253,624

$

184,704

Asia-Pacific depreciation, amortization and accretion expense

66,339

64,827

60,208

194,188

175,818

Asia-Pacific stock-based compensation expense

5,702

7,490

6,238

19,181

17,976

Asia-Pacific transaction costs

384

(35)

(107)

93

19,250

Asia-Pacific adjusted EBITDA

$

155,528

$

158,313

$

136,726

$

467,086

$

397,748

(9)

We define cash gross margins as cash gross profit divided by revenues.

Our cash gross margins by geographic region is presented below:

Americas cash gross margins

72

%

72

%

71

%

72

%

72

%

EMEA cash gross margins

61

%

60

%

60

%

60

%

60

%

Asia-Pacific cash gross margins

65

%

66

%

65

%

66

%

66

%

(10)

We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.

Americas adjusted EBITDA margins

48

%

48

%

47

%

48

%

48

%

EMEA adjusted EBITDA margins

46

%

47

%

45

%

46

%

45

%

Asia-Pacific adjusted EBITDA margins

53

%

54

%

52

%

54

%

53

%

(11)

We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows:

Adjusted EBITDA - current period

$

674,702

$

677,010

$

612,526

$

2,011,867

$

1,796,045

Less adjusted EBITDA - prior period

(677,010)

(660,155)

(604,004)

(1,833,725)

(1,624,467)

Adjusted EBITDA growth

$

(2,308)

$

16,855

$

8,522

$

178,142

$

171,578

Revenues - current period

$

1,396,810

$

1,384,977

$

1,283,751

$

4,145,005

$

3,761,571

Less revenues - prior period

(1,384,977)

(1,363,218)

(1,261,943)

(3,855,777)

(3,418,903)

Revenue growth

$

11,833

$

21,759

$

21,808

$

289,228

$

342,668

Adjusted EBITDA flow-through rate

(20)

%

77

%

39

%

62

%

50

%

(12)

FFO is defined as 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.

Net income

$

120,811

$

143,852

$

124,825

$

382,410

$

255,337

Net (income) loss attributable to non-controlling interests

39

(325)

45

Net income attributable to Equinix

120,850

143,527

124,825

382,455

255,337

Adjustments:

Real estate depreciation

209,903

209,103

220,017

624,655

663,901

(Gain) loss on disposition of real estate property

732

343

(4,812)

3,421

1,072

FFO attributable to common shareholders

$

331,485

$

352,973

$

340,030

$

1,010,531

$

920,310

(13)

AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, transaction 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, net income or loss from discontinued operations, net of tax, recurring capital expenditures and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items.

FFO attributable to common shareholders

$

331,485

$

352,973

$

340,030

$

1,010,531

$

920,310

Adjustments:

Installation revenue adjustment

5,759

1,492

3,209

8,280

6,208

Straight-line rent expense adjustment

2,716

2,300

1,551

7,394

5,516

Amortization of deferred financing costs and debt discounts and premiums

3,196

3,238

3,148

9,429

10,609

Contract cost adjustment

(10,179)

(12,348)

(5,271)

(29,305)

(13,010)

Stock-based compensation expense

63,871

61,519

47,588

174,413

139,849

Non-real estate depreciation expense

63,151

60,904

33,917

182,049

103,281

Amortization expense

48,837

49,217

51,792

147,589

153,443

Accretion expense (adjustment)

(145)

1,326

592

2,708

986

Recurring capital expenditures

(47,404)

(36,726)

(55,382)

(105,077)

(132,819)

(Gain) loss on debt extinguishment

(315)

(1,492)

67

39,214

Transaction costs

2,991

2,774

(1,120)

8,236

33,932

Impairment charges

1,189

386

16,023

Income tax expense adjustment

7,592

10,592

(16,312)

26,174

(22,567)

AFFO attributable to common shareholders

$

472,744

$

497,647

$

402,250

$

1,458,511

$

1,244,952

(14)

 Following is how we reconcile from adjusted EBITDA to AFFO:

Adjusted EBITDA

$

674,702

$

677,010

$

612,526

$

2,011,867

$

1,796,045

Adjustments:

Interest expense, net of interest income

(110,473)

(112,785)

(127,654)

(341,902)

(380,036)

Amortization of deferred financing costs and debt discounts and premiums

3,196

3,238

3,148

9,429

10,609

Income tax expense

(57,827)

(47,324)

(18,510)

(147,720)

(41,625)

Income tax expense adjustment

7,592

10,592

(16,312)

26,174

(22,567)

Straight-line rent expense adjustment

2,716

2,300

1,551

7,394

5,516

Contract cost adjustment

(10,179)

(12,348)

(5,271)

(29,305)

(13,010)

Installation revenue adjustment

5,759

1,492

3,209

8,280

6,208

Recurring capital expenditures

(47,404)

(36,726)

(55,382)

(105,077)

(132,819)

Other income

3,428

12,180

3,744

15,442

9,546

(Gain) loss on disposition of real estate property

732

343

(4,812)

3,421

1,072

Adjustments for unconsolidated JVs' and non-controlling interests

39

(325)

45

Adjustment for gain on sale of asset

463

6,013

463

6,013

AFFO attributable to common shareholders

$

472,744

$

497,647

$

402,250

$

1,458,511

$

1,244,952

(15)

The shares used in the computation of basic and diluted FFO and AFFO per share attributable to Equinix is presented below:

Shares used in computing basic net income per share, FFO per share and AFFO per share

85,012

84,399

79,872

83,753

79,533

Effect of dilutive securities:

Employee equity awards

559

368

411

470

423

Shares used in computing diluted net income per share, FFO per share and AFFO per share

85,571

84,767

80,283

84,223

79,956

Basic FFO per share

$

3.90

$

4.18

$

4.26

$

12.07

$

11.57

Diluted FFO per share

$

3.87

$

4.16

$

4.24

$

12.00

$

11.51

Basic AFFO per share

$

5.56

$

5.90

$

5.04

$

17.41

$

15.65

Diluted AFFO per share

$

5.52

$

5.87

$

5.01

$

17.32

$

15.57

 

Equinix.  (PRNewsFoto/Equinix) (PRNewsfoto/Equinix, Inc.)

 

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SOURCE Equinix, Inc.