Equinix Reports Third Quarter 2021 Results

As the Digitization of Business Models Accelerates, Equinix Delivers Another Consecutive Quarter of Revenue Growth

REDWOOD CITY, Calif., Nov. 3, 2021 /PRNewswire/ -- 

  • Quarterly revenues increased 10% over the same quarter last year to $1.675 billion, or 8% on a normalized and constant currency basis, representing the company's 75th consecutive quarter of revenue growth
  • Record channel bookings accounted for more than 35% of total bookings, nearly 50% of enterprise bookings, and more than 60% of new logos in Q3
  • Interconnection revenues continued to outpace colocation revenues in Q3 with total interconnections increasing to more than 414,000
  • Significant milestones in the quarter included closing the GPX India acquisition to enter the strategic market of India and expanding the xScaleTM program with a new agreement to form a $575 million joint venture in Australia

Equinix, Inc. (Nasdaq: EQIX), the world's digital infrastructure companyTM, today reported results for the quarter ended September 30, 2021. 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 2021 Results Summary

  • Revenues
    • $1.675 billion, a 1% increase over the previous quarter
    • Includes a $6 million negative foreign currency impact when compared to prior guidance  rates
  • Operating Income
    • $282 million, a 1% increase over the previous quarter and an operating margin of 17%
  • Adjusted EBITDA
    • $786 million, a 47% adjusted EBITDA margin
    • Includes a $3 million negative foreign currency impact when compared to prior guidance  rates
    • Includes $3 million of integration costs
  • Net Income and Net Income per Share attributable to Equinix
    • $152 million, a 123% increase over the previous quarter, primarily due to lower debt redemption costs and operating performance
    • $1.68 per share, a 121% increase over the previous quarter
  • AFFO and AFFO per Share
    • $628 million, a 1% decrease from the previous quarter, including a $13 million increase in tax expense attributable to lower debt redemption costs
    • $6.94 per share, a 1% decrease from the previous quarter
    • Includes $3 million of integration costs

2021 Annual Guidance Summary

  • Revenues
    • $6.614 - $6.634 billion, an increase of 10 - 11% over the previous year, or a normalized and constant currency increase of ~8%
    • Includes an incremental $5 million from the GPX India acquisition, offset by a $20 million negative foreign currency impact when compared to prior guidance rates
  • Adjusted EBITDA
    • $3.119 - $3.139 billion, a 47% adjusted EBITDA margin
    • Increases prior guidance by $10 million for GPX India and lower integration costs, offset by a $9 million negative foreign currency impact when compared to prior guidance rates
    • Assumes $18 million of integration costs
  • AFFO and AFFO per Share
    • $2.444 - $2.464 billion, an increase of 12 - 13% over the previous year, or a normalized and constant currency increase of 10 - 11%
    • Increases prior guidance by a net $3 million for GPX India and lower integration costs, offset by slightly higher taxes and a $3 million negative foreign currency impact when compared to prior guidance rates
    • $27.03 - $27.25 per share, an increase of 9 - 10% over the previous year on both an as-reported and a normalized and constant currency basis
    • Assumes $18 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.

Equinix Quote

Charles Meyers, President and CEO, Equinix:

"The pandemic has triggered an accelerated need to digitize business models in virtually every segment of the economy, and our strong Q3 results are reflective of this increasing demand for digital services. As the world's digital infrastructure company, Equinix remains uniquely positioned to help businesses as they shift towards distributed, hybrid and multicloud as the clear architecture of choice."

Business Highlights

  • Equinix continued to extend its global platform both organically and through acquisitions, enhancing cloud and network density to offer enterprises the most robust platform for their digital infrastructure:
    • In September, Equinix completed the GPX India acquisition, providing an entry into the strategic market of India and bringing the global footprint of Platform Equinix® to 27 countries, 65 metros and more than 235 data centers.
    • 11 major data center openings and expansions were delivered in Q3, including the key markets of Frankfurt, New York and Singapore.
    • 31 additional major projects are underway across 23 markets in 16 countries.
  • The xScaleTM program continued to expand in Q3, supporting the unique needs of hyperscale companies and the increasing demand for hybrid multicloud architecture:
    • In October, Equinix announced an agreement to form a new $575 million joint venture with PGIM Real Estate to extend its xScale data center program into Australia.
    • The total investment in the xScale program, when closed and fully built out, is expected to be more than $7.5 billion across 34 facilities globally with more than 675 megawatts of power capacity. 
    • Eight xScale builds are currently under development, including newly announced projects in Madrid, Mexico City and Sydney.
  • Equinix continued the growth of its indirect selling initiatives, with channel sales contributing more than 35% of the bookings for the quarter, nearly half of enterprise bookings, and more than 60% of new logos in the quarter. Wins were across a wide range of industry verticals and use cases, with continued strength from strategic partners.

COVID-19 Update

Many of Equinix's International Business ExchangeTM (IBX®) and xScale data centers have been identified as "essential businesses" or "critical infrastructure" by local governments for purposes of remaining open during the ongoing COVID-19 pandemic, and all data centers remain operational at the time of filing of this press release. Precautionary measures have been implemented during the COVID-19 pandemic to minimize the risk of operational impact and to protect the health and safety of employees, customers, partners and communities.

Looking ahead, the full impact of the COVID-19 pandemic on the company's financial condition or results of operations remains uncertain and will depend on a number of factors, including its impact on Equinix customers, partners and vendors and the impact on, and functioning of, the global financial markets. The company's past results may not be indicative of future performance, and historical trends may differ materially. Additional information pertaining to the impact of the COVID-19 pandemic on Equinix and the company's response thereto will be provided in the upcoming Form 10-Q to be filed with the Securities and Exchange Commission for the quarter ended September 30, 2021.

Business Outlook

For the fourth quarter of 2021, the Company expects revenues to range between $1.685 and $1.705 billion, an increase of 1 - 2% compared to the prior quarter on both an as-reported and a normalized and constant currency basis. This guidance includes a $5 million negative foreign currency impact when compared to the average FX rates in Q3 2021. This guidance includes the largest ever normalized step-up in recurring revenues in Q4, a reflection of continued strong execution, and a sequential decrease of non-recurring revenues by approximately $12 million. Adjusted EBITDA is expected to range between $762 and $782 million. Adjusted EBITDA includes a $2 million negative foreign currency impact when compared to the average FX rates in Q3 2021 and $7 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $75 and $85 million.

For the full year of 2021, total revenues are expected to range between $6.614 and $6.634 billion, a 10 - 11% increase over the previous year, or a normalized and constant currency increase of approximately 8%. This updated full year guidance includes an incremental $5 million from the GPX India acquisition, offset by a negative foreign currency impact of $20 million when compared to the prior guidance rates. Adjusted EBITDA is expected to range between $3.119 and $3.139 billion, an adjusted EBITDA margin of 47%. This updated full year guidance includes a $7 million reduction of integration costs and an incremental $3 million from the GPX India acquisition, offset by a negative foreign currency impact of $9 million when compared to the prior guidance rates. AFFO is expected to range between $2.444 and $2.464 billion, an increase of 12 - 13% over the previous year, or a normalized and constant currency increase of 10 - 11%. This updated guidance includes a net $3 million increase due to the GPX India acquisition and lower integration costs, offset by slightly higher taxes and a $3 million negative foreign currency impact when compared to the prior guidance rates. AFFO per share is expected to range between $27.03 and $27.25, an increase of 9 - 10% over the previous year, both as-reported and on a normalized and constant currency basis. Total capital expenditures are expected to range between $2.738 and $2.988 billion. Non-recurring capital expenditures, including xScale-related costs, are expected to range between $2.550 and $2.790 billion, and recurring capital expenditures are expected to range between $188 and $198 million. xScale-related on-balance sheet capital expenditures are expected to range between $425 and $475 million, which we anticipate will be reimbursed from both the current and future xScale JVs.

The U.S. dollar exchange rates used for 2021 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.16 to the Euro, $1.32 to the Pound, S$1.36 to the U.S. dollar, ¥111 to the U.S. dollar, and R$5.47 to the U.S. dollar. The Q3 2021 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 9%, 7%, 7% 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 2021 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2021, along with its future outlook, in its quarterly conference call on Wednesday, November 3, 2021, 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 16, 2022, by dialing 1-866-373-9229 and referencing the passcode 2021. 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 (Nasdaq: EQIX) is the world's digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. Equinix enables today's businesses to access all the right places, partners and possibilities they need to accelerate advantage. With Equinix, they can scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value.

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 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 a data center, and do not reflect its current or future cash spending levels to support its business. Its data centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of a 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 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 data centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our 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 generally 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 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. Additionally, Equinix presents AFFO per share, which is also commonly used in the REIT industry. AFFO per share offers investors and industry analysts a perspective of Equinix's underlying operating performance when compared to other REIT companies. 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 and xScale 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, risks to our business and operating results related to the ongoing COVID-19 pandemic; the challenges of acquiring, operating and constructing IBX and xScale 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 and upcoming 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, 2021

June 30,
2021

September
30, 2020

September
30, 2021

September
30, 2020

Recurring revenues

$

1,563,616

$

1,542,462

$

1,432,072

$

4,617,011

$

4,191,904

Non-recurring revenues

111,560

115,457

87,695

312,148

242,526

Revenues

1,675,176

1,657,919

1,519,767

4,929,159

4,434,430

Cost of revenues

885,650

865,120

767,979

2,561,987

2,243,605

Gross profit

789,526

792,799

751,788

2,367,172

2,190,825

Operating expenses:

Sales and marketing

182,997

185,610

172,727

551,434

531,301

General and administrative

334,625

322,005

279,350

958,086

797,837

Transaction costs

5,197

6,985

5,840

13,364

30,987

Impairment charges

7,306

7,306

Gain on asset sales

(15,414)

(455)

(1,785)

(14,149)

(928)

Total operating expenses

507,405

514,145

463,438

1,508,735

1,366,503

Income from operations

282,121

278,654

288,350

858,437

824,322

Interest and other income (expense):

Interest income

411

374

1,452

1,514

7,410

Interest expense

(78,943)

(87,231)

(99,736)

(255,855)

(315,554)

Other income (expense)

1,482

(39,377)

162

(44,845)

9,610

Gain (loss) on debt extinguishment

179

(102,460)

(93,494)

(115,339)

(101,803)

Total interest and other, net

(76,871)

(228,694)

(191,616)

(414,525)

(400,337)

Income before income taxes

205,250

49,960

96,734

443,912

423,985

Income tax (expense) benefit

(53,224)

18,527

(29,903)

(67,325)

(104,847)

Net income

152,026

68,487

66,831

376,587

319,138

Net (income) loss attributable to non-controlling interests

190

(148)

(144)

330

(355)

Net income attributable to Equinix

$

152,216

$

68,339

$

66,687

$

376,917

$

318,783

Net income per share attributable to Equinix:

Basic net income per share

$

1.69

$

0.76

$

0.75

$

4.21

$

3.65

Diluted net income per share

$

1.68

$

0.76

$

0.74

$

4.18

$

3.63

Shares used in computing basic net income per share

89,858

89,648

88,806

89,614

87,226

Shares used in computing diluted net income per share

90,467

90,104

89,519

90,202

87,925

EQUINIX, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September
30, 2021

June 30,
2021

September
30, 2020

September
30, 2021

September
30, 2020

Net income

$

152,026

$

68,487

$

66,831

$

376,587

$

319,138

Other comprehensive income (loss), net of tax:

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

(260,011)

110,466

299,441

(444,691)

66,935

Net investment hedge CTA gain (loss)

131,080

(37,036)

(227,101)

264,219

(179,213)

Unrealized gain (loss) on cash flow hedges

28,270

(5,700)

(33,842)

52,048

(54,966)

Net actuarial gain on defined benefit plans

14

15

22

41

77

Total other comprehensive income (loss), net of tax

(100,647)

67,745

38,520

(128,383)

(167,167)

Comprehensive income, net of tax

51,379

136,232

105,351

248,204

151,971

Net (income) loss attributable to non-controlling interests

190

(148)

(144)

330

(355)

Other comprehensive (income)  attributable to non-controlling interests

(11)

(30)

(10)

(21)

Comprehensive income attributable to Equinix

$

51,569

$

136,073

$

105,177

$

248,524

$

151,595

EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

September 30, 2021

December 31, 2020

Assets

Cash and cash equivalents

$

1,379,100

$

1,604,869

Short-term investments

4,532

Accounts receivable, net

792,101

676,738

Other current assets

492,832

323,016

Assets held for sale

235,330

          Total current assets

2,899,363

2,609,155

Property, plant and equipment, net

15,307,049

14,503,084

Operating lease right-of-use assets

1,325,872

1,475,057

Goodwill

5,401,744

5,472,553

Intangible assets, net

1,994,023

2,170,945

Other assets

846,080

776,047

          Total assets

$

27,774,131

$

27,006,841

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses

$

844,056

$

844,862

Accrued property, plant and equipment

347,003

301,155

Current portion of operating lease liabilities

150,490

154,207

Current portion of finance lease liabilities

148,522

137,683

Current portion of mortgage and loans payable

67,571

82,289

Current portion of senior notes

150,186

Other current liabilities

223,494

354,368

          Total current liabilities

1,781,136

2,024,750

Operating lease liabilities, less current portion

1,147,490

1,308,627

Finance lease liabilities, less current portion

1,986,266

1,784,816

Mortgage and loans payable, less current portion

560,733

1,287,254

Senior notes, less current portion

11,000,669

9,018,277

Other liabilities

729,264

948,999

          Total liabilities

17,205,558

16,372,723

Common stock

90

89

Additional paid-in capital

15,488,848

15,028,357

Treasury stock

(112,696)

(122,118)

Accumulated dividends

(5,902,937)

(5,119,274)

Accumulated other comprehensive loss

(1,041,761)

(913,368)

Retained earnings

2,137,219

1,760,302

          Total Equinix stockholders' equity

10,568,763

10,633,988

Non-controlling interests

(190)

130

          Total stockholders' equity

10,568,573

10,634,118

                Total liabilities and stockholders' equity

$

27,774,131

$

27,006,841

Ending headcount by geographic region is as follows:

          Americas headcount

4,971

4,599

          EMEA headcount

3,588

3,405

          Asia-Pacific headcount

2,242

2,009

                    Total headcount

10,801

10,013

EQUINIX, INC.

Summary of Debt Principal Outstanding

(in thousands)

(unaudited)

September 30, 2021

December 31, 2020

Finance lease liabilities

$

2,134,788

$

1,922,499

Term loans

555,268

1,288,779

Mortgage payable and other loans payable

73,036

80,764

Plus (minus): mortgage premium, debt discount and issuance costs, net

(1,226)

1,427

           Total mortgage and loans payable principal

627,078

1,370,970

Senior notes

11,000,669

9,168,463

Plus: debt discount and issuance costs

122,031

92,773

Less: debt premium

(186)

          Total senior notes principal

11,122,700

9,261,050

Total debt principal outstanding

$

13,884,566

$

12,554,519

EQUINIX, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September
30, 2021

June 30,
2021

September
30, 2020

September
30, 2021

September
30, 2020

Cash flows from operating activities:

Net income

$

152,026

$

68,487

$

66,831

$

376,587

$

319,138

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

Depreciation, amortization and accretion

419,684

417,758

362,286

1,231,760

1,048,151

Stock-based compensation

94,710

94,335

75,248

267,395

215,591

Amortization of debt issuance costs and debt discounts and premiums

4,390

4,430

3,884

12,760

11,788

(Gain) loss on debt extinguishment

(179)

102,460

93,494

115,339

101,803

Gain on asset sales

(15,414)

(455)

(1,785)

(14,149)

(928)

Impairment charges

7,306

7,306

Other items

5,932

11,296

(2,518)

28,410

18,229

Changes in operating assets and liabilities:

Accounts receivable

(53,984)

(39,709)

(23,871)

(111,313)

(38,104)

Income taxes, net

21,735

(55,661)

(32,054)

(44,200)

(20,193)

Accounts payable and accrued expenses

67,169

19,161

61,410

9,968

35,846

Operating lease right-of-use assets

40,953

20,851

38,319

102,728

114,611

Operating lease liabilities

(37,423)

(63,765)

(35,300)

(137,751)

(107,391)

Other assets and liabilities

(34,853)

20,009

(81,088)

(182,433)

(82,169)

Net cash provided by operating activities

664,746

599,197

532,162

1,655,101

1,623,678

Cash flows from investing activities:

Purchases, sales and maturities of investments, net

(52,138)

(2,595)

3,969

(73,082)

(36,312)

Business acquisitions, net of cash and restricted cash acquired

(158,498)

(158,498)

(478,248)

Real estate acquisitions

(107,212)

(33,900)

(41,895)

(194,849)

(124,462)

Purchases of other property, plant and equipment

(678,277)

(692,232)

(565,285)

(1,934,107)

(1,448,174)

Proceeds from asset sales

174,494

174,494

Net cash used in investing activities

(821,631)

(728,727)

(603,211)

(2,186,042)

(2,087,196)

Cash flows from financing activities:

Proceeds from employee equity awards

37,594

31,727

77,628

62,118

Payment of dividend distributions

(262,362)

(258,053)

(240,690)

(783,454)

(710,177)

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

99,599

196,477

99,599

1,981,375

Proceeds from mortgage and loans payable

750,790

Proceeds from senior notes, net of debt discounts

2,587,910

3,878,662

2,585,736

Repayment of finance lease liabilities

(31,252)

(66,293)

(31,765)

(130,129)

(74,446)

Repayment of mortgage and loans payable

(10,367)

(675,873)

(19,431)

(706,426)

(808,609)

Repayment of senior notes

(1,400,000)

(1,947,050)

(1,990,650)

(2,440,761)

Debt extinguishment costs

(90,664)

(77,785)

(99,185)

(82,404)

Debt issuance costs

(21,950)

(25,102)

(26,266)

Net cash provided by (used in) financing activities

(266,387)

174,676

(2,088,517)

320,943

1,237,356

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

(7,085)

4,965

18,513

(24,139)

5,637

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

(430,357)

50,111

(2,141,053)

(234,137)

779,475

Cash, cash equivalents and restricted cash at beginning of period

1,821,915

1,771,804

4,807,141

1,625,695

1,886,613

Cash, cash equivalents and restricted cash at end of period

$

1,391,558

$

1,821,915

$

2,666,088

$

1,391,558

$

2,666,088

Supplemental cash flow information:

Cash paid for taxes

$

35,755

$

32,667

$

55,473

$

118,392

$

116,549

Cash paid for interest

$

86,466

$

128,636

$

115,174

$

316,157

$

363,767

Negative free cash flow (1)

$

(104,747)

$

(126,935)

$

(75,018)

$

(457,859)

$

(427,206)

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

$

160,963

$

(93,035)

$

(33,123)

$

(104,512)

$

175,504

(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

$

664,746

$

599,197

$

532,162

$

1,655,101

$

1,623,678

Net cash used in investing activities as presented above

(821,631)

(728,727)

(603,211)

(2,186,042)

(2,087,196)

Purchases, sales and maturities of investments, net

52,138

2,595

(3,969)

73,082

36,312

Negative free cash flow

$

(104,747)

$

(126,935)

$

(75,018)

$

(457,859)

$

(427,206)

(2)

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

Negative free cash flow as defined above

$

(104,747)

$

(126,935)

$

(75,018)

$

(457,859)

$

(427,206)

Less business acquisitions, net of cash and restricted cash acquired

158,498

158,498

478,248

Less real estate acquisitions

107,212

33,900

41,895

194,849

124,462

Adjusted free cash flow (negative adjusted free cash flow)

$

160,963

$

(93,035)

$

(33,123)

$

(104,512)

$

175,504

EQUINIX, INC.

Non-GAAP Measures and Other Supplemental Data

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,
2021

June 30, 2021

September 30,
2020

September 30,
2021

September 30,
2020

Recurring revenues

$

1,563,616

$

1,542,462

$

1,432,072

$

4,617,011

$

4,191,904

Non-recurring revenues

111,560

115,457

87,695

312,148

242,526

Revenues (1)

1,675,176

1,657,919

1,519,767

4,929,159

4,434,430

Cash cost of revenues (2)

564,499

544,196

494,187

1,619,505

1,451,674

Cash gross profit (3)

1,110,677

1,113,723

1,025,580

3,309,654

2,982,756

Cash operating expenses (4)(7):

Cash sales and marketing expenses (5)

114,112

115,282

106,317

342,447

332,995

Cash general and administrative expenses (6)

210,267

201,164

182,018

610,400

508,265

Total cash operating expenses (4)(7)

324,379

316,446

288,335

952,847

841,260

Adjusted EBITDA (8)

$

786,298

$

797,277

$

737,245

$

2,356,807

$

2,141,496

Cash gross margins (9)

66

%

67

%

67

%

67

%

67

%

Adjusted EBITDA margins(10)

47

%

48

%

49

%

48

%

48

%

Adjusted EBITDA flow-through rate (11)

(64)

%

39

%

35

%

50

%

48

%

FFO (12)

$

407,981

$

340,873

$

298,183

$

1,166,117

$

998,883

AFFO (13)(14)

$

628,270

$

631,937

$

579,682

$

1,887,035

$

1,672,180

Basic FFO per share (15)

$

4.54

$

3.80

$

3.36

$

13.01

$

11.45

Diluted FFO per share (15)

$

4.51

$

3.78

$

3.33

$

12.93

$

11.36

Basic AFFO per share (15)

$

6.99

$

7.05

$

6.53

$

21.06

$

19.17

Diluted AFFO per share (15)

$

6.94

$

7.01

$

6.48

$

20.92

$

19.02

(1)

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

Americas Revenues:

Colocation

$

504,711

$

497,659

$

450,030

$

1,489,829

$

1,348,482

Interconnection

168,511

167,618

156,677

501,016

460,993

Managed infrastructure

43,313

40,734

28,954

122,532

83,372

Other

4,757

451

3,911

7,246

14,212

Recurring revenues

721,292

706,462

639,572

2,120,623

1,907,059

Non-recurring revenues

41,761

44,181

32,760

119,013

88,597

Revenues

$

763,053

$

750,643

$

672,332

$

2,239,636

$

1,995,656

EMEA Revenues:

Colocation

$

400,395

$

398,703

$

391,773

$

1,187,373

$

1,135,247

Interconnection

65,809

65,258

55,700

192,717

155,145

Managed infrastructure

31,445

31,176

30,690

94,732

89,839

Other

5,639

3,682

5,581

14,367

14,177

Recurring revenues

503,288

498,819

483,744

1,489,189

1,394,408

Non-recurring revenues

41,939

39,110

34,339

112,684

90,674

Revenues

$

545,227

$

537,929

$

518,083

$

1,601,873

$

1,485,082

Asia-Pacific Revenues:

Colocation

$

259,092

$

259,573

$

236,762

$

773,223

$

686,658

Interconnection

56,789

54,898

48,565

164,869

136,376

Managed infrastructure

21,572

22,094

22,614

66,415

66,588

Other

1,583

616

815

2,692

815

Recurring revenues

339,036

337,181

308,756

1,007,199

890,437

Non-recurring revenues

27,860

32,166

20,596

80,451

63,255

Revenues

$

366,896

$

369,347

$

329,352

$

1,087,650

$

953,692

Worldwide Revenues:

Colocation

$

1,164,198

$

1,155,935

$

1,078,565

$

3,450,425

$

3,170,387

Interconnection

291,109

287,774

260,942

858,602

752,514

Managed infrastructure

96,330

94,004

82,258

283,679

239,799

Other

11,979

4,749

10,307

24,305

29,204

Recurring revenues

1,563,616

1,542,462

1,432,072

4,617,011

4,191,904

Non-recurring revenues

111,560

115,457

87,695

312,148

242,526

Revenues

$

1,675,176

$

1,657,919

$

1,519,767

$

4,929,159

$

4,434,430

(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

$

885,650

$

865,120

$

767,979

$

2,561,987

$

2,243,605

Depreciation, amortization and accretion expense

(311,438)

(310,916)

(265,936)

(914,294)

(767,077)

Stock-based compensation expense

(9,713)

(10,008)

(7,856)

(28,188)

(24,854)

Cash cost of revenues

$

564,499

$

544,196

$

494,187

$

1,619,505

$

1,451,674

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

Americas cash cost of revenues

$

239,172

$

234,679

$

196,731

$

667,311

$

576,431

EMEA cash cost of revenues

204,174

196,661

189,423

600,018

554,229

Asia-Pacific cash cost of revenues

121,153

112,856

108,033

352,176

321,014

Cash cost of revenues

$

564,499

$

544,196

$

494,187

$

1,619,505

$

1,451,674

(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

$

517,622

$

507,615

$

452,077

$

1,509,520

$

1,329,138

Depreciation and amortization expense

(108,246)

(106,842)

(96,350)

(317,466)

(281,074)

Stock-based compensation expense

(84,997)

(84,327)

(67,392)

(239,207)

(206,804)

Cash operating expense

$

324,379

$

316,446

$

288,335

$

952,847

$

841,260

(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

$

182,997

$

185,610

$

172,727

$

551,434

$

531,301

Depreciation and amortization expense

(48,320)

(49,549)

(48,780)

(149,940)

(143,916)

Stock-based compensation expense

(20,565)

(20,779)

(17,630)

(59,047)

(54,390)

Cash sales and marketing expense

$

114,112

$

115,282

$

106,317

$

342,447

$

332,995

(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

$

334,625

$

322,005

$

279,350

$

958,086

$

797,837

Depreciation and amortization expense

(59,926)

(57,293)

(47,570)

(167,526)

(137,158)

Stock-based compensation expense

(64,432)

(63,548)

(49,762)

(180,160)

(152,414)

Cash general and administrative expense

$

210,267

$

201,164

$

182,018

$

610,400

$

508,265

(7)

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

Americas cash SG&A

$

202,113

$

190,040

$

185,051

$

580,141

$

532,955

EMEA cash SG&A

73,500

78,742

65,444

228,213

193,882

Asia-Pacific cash SG&A

48,766

47,664

37,840

144,493

114,423

Cash SG&A

$

324,379

$

316,446

$

288,335

$

952,847

$

841,260

(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

$

282,121

$

278,654

$

288,350

$

858,437

$

824,322

Depreciation, amortization and accretion expense

419,684

417,758

362,286

1,231,760

1,048,151

Stock-based compensation expense

94,710

94,335

75,248

267,395

231,658

Impairment charges

7,306

7,306

Transaction costs

5,197

6,985

5,840

13,364

30,987

Gain on asset sales

(15,414)

(455)

(1,785)

(14,149)

(928)

Adjusted EBITDA

$

786,298

$

797,277

$

737,245

$

2,356,807

$

2,141,496

The geographic split of our adjusted EBITDA is presented below:

Americas income from operations

$

26,520

$

27,745

$

50,657

$

135,830

$

156,388

Americas depreciation, amortization and accretion expense

219,106

222,413

182,899

644,225

536,542

Americas stock-based compensation expense

70,495

69,982

55,044

198,739

174,059

Americas transaction costs

4,478

6,239

3,735

10,956

20,288

Americas (gain) loss on asset sales

1,169

(455)

(1,785)

2,434

(1,007)

Americas adjusted EBITDA

$

321,768

$

325,924

$

290,550

$

992,184

$

886,270

EMEA income from operations

$

153,424

$

131,158

$

148,992

$

404,367

$

413,150

EMEA depreciation, amortization and accretion expense

115,026

115,702

101,265

341,941

286,958

EMEA stock-based compensation expense

15,022

15,114

12,770

42,266

36,012

EMEA transaction costs

664

552

189

1,651

772

EMEA (gain) loss on asset sales

(16,583)

(16,583)

79

EMEA adjusted EBITDA

$

267,553

$

262,526

$

263,216

$

773,642

$

736,971

Asia-Pacific income from operations

$

102,177

$

119,751

$

88,701

$

318,240

$

254,784

Asia-Pacific depreciation, amortization and accretion expense

85,552

79,643

78,122

245,594

224,651

Asia-Pacific stock-based compensation expense

9,193

9,239

7,434

26,390

21,587

Asia-Pacific impairment charges

7,306

7,306

Asia-Pacific transaction costs

55

194

1,916

757

9,927

Asia-Pacific adjusted EBITDA

$

196,977

$

208,827

$

183,479

$

590,981

$

518,255

(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

69

%

69

%

71

%

70

%

71

%

EMEA cash gross margins

63

%

63

%

63

%

63

%

63

%

Asia-Pacific cash gross margins

67

%

69

%

67

%

68

%

66

%

(10)

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

Americas adjusted EBITDA margins

42

%

43

%

43

%

44

%

44

%

EMEA adjusted EBITDA margins

49

%

49

%

51

%

48

%

50

%

Asia-Pacific adjusted EBITDA margins

54

%

57

%

56

%

54

%

54

%

(11)

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

Adjusted EBITDA - current period

$

786,298

$

797,277

$

737,245

$

2,356,807

$

2,141,496

Less adjusted EBITDA - prior period

(797,277)

(773,232)

(720,041)

(2,168,688)

(2,027,572)

Adjusted EBITDA growth

$

(10,979)

$

24,045

$

17,204

$

188,119

$

113,924

Revenues - current period

$

1,675,176

$

1,657,919

$

1,519,767

$

4,929,159

$

4,434,430

Less revenues - prior period

(1,657,919)

(1,596,064)

(1,470,121)

(4,554,003)

(4,198,922)

Revenue growth

$

17,257

$

61,855

$

49,646

$

375,156

$

235,508

Adjusted EBITDA flow-through rate

(64)

%

39

%

35

%

50

%

48

%

(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

$

152,026

$

68,487

$

66,831

$

376,587

$

319,138

Net (income) loss attributable to non-controlling interests

190

(148)

(144)

330

(355)

Net income attributable to Equinix

152,216

68,339

66,687

376,917

318,783

Adjustments:

Real estate depreciation

267,973

271,500

232,110

796,117

676,510

(Gain) loss on disposition of real estate property

(13,744)

(518)

(1,313)

(11,132)

1,569

Adjustments for FFO from unconsolidated joint ventures

1,536

1,552

699

4,215

2,021

FFO attributable to common shareholders

$

407,981

$

340,873

$

298,183

$

1,166,117

$

998,883

(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

$

407,981

$

340,873

$

298,183

$

1,166,117

$

998,883

Adjustments:

Installation revenue adjustment

13,710

4,539

(3,797)

22,161

(3,629)

Straight-line rent expense adjustment

3,855

3,381

3,019

11,597

7,220

Amortization of deferred financing costs and debt discounts and premiums

4,390

4,447

3,884

12,760

11,788

Contract cost adjustment

(15,919)

(13,381)

(7,111)

(43,311)

(22,852)

Stock-based compensation expense

94,710

94,335

75,248

267,395

231,658

Non-real estate depreciation expense

100,604

93,062

78,356

278,644

220,565

Amortization expense

50,354

51,679

50,222

155,428

148,075

Accretion expense

753

1,517

1,598

1,571

3,001

Recurring capital expenditures

(47,735)

(45,331)

(38,327)

(113,396)

(86,191)

(Gain) loss on debt extinguishment

(179)

102,460

93,494

115,339

101,803

Transaction costs

5,197

6,985

5,840

13,364

30,987

Impairment charges (1)

(1,240)

33,552

7,306

32,312

7,306

Income tax expense adjustment (1)

11,256

(47,440)

11,480

(35,419)

22,383

Adjustments for AFFO from unconsolidated joint ventures

533

1,259

287

2,473

1,183

AFFO attributable to common shareholders

$

628,270

$

631,937

$

579,682

$

1,887,035

$

1,672,180

(1)

Impairment charges for 2021 relate to the impairment of an indemnification asset in Q2 2021 resulting from the settlement of a pre-acquisition uncertain tax position, which was recorded as Other Income (Expense) on the Condensed Consolidated Statements of Operations. This impairment charge was offset by the recognition of tax benefits in the same amount, which was included within the Income tax expense adjustment line on the table above.

(14)

 Following is how we reconcile from adjusted EBITDA to AFFO:

Adjusted EBITDA

$

786,298

$

797,277

$

737,245

$

2,356,807

$

2,141,496

Adjustments:

Interest expense, net of interest income

(78,532)

(86,857)

(98,284)

(254,341)

(308,144)

Amortization of deferred financing costs and debt discounts and premiums

4,390

4,447

3,884

12,760

11,788

Income tax (expense) benefit

(53,224)

18,527

(29,903)

(67,325)

(104,847)

Income tax expense adjustment (1)

11,256

(47,440)

11,480

(35,419)

22,383

Straight-line rent expense adjustment

3,855

3,381

3,019

11,597

7,220

Contract cost adjustment

(15,919)

(13,381)

(7,111)

(43,311)

(22,852)

Installation revenue adjustment

13,710

4,539

(3,797)

22,161

(3,629)

Recurring capital expenditures

(47,735)

(45,331)

(38,327)

(113,396)

(86,191)

Other income (expense)

1,482

(39,377)

162

(44,845)

9,610

(Gain) loss on disposition of real estate property

(13,744)

(518)

(1,313)

(11,132)

1,569

Adjustments for unconsolidated JVs' and non-controlling interests

2,259

2,663

842

7,018

2,849

Adjustments for impairment charges (1)

(1,240)

33,552

32,312

Adjustment for gain on sale of assets

15,414

455

1,785

14,149

928

AFFO attributable to common shareholders

$

628,270

$

631,937

$

579,682

$

1,887,035

$

1,672,180

(1) 

Impairment charges for 2021 relate to the impairment of an indemnification asset in Q2 2021 resulting from the settlement of a pre-acquisition uncertain tax position, which was recorded as Other Income (Expense) on the Condensed Consolidated Statements of Operations. This impairment charge was offset by the recognition of tax benefits in the same amount, which was included within the Income tax expense adjustment line on the table above.

(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

89,858

89,648

88,806

89,614

87,226

Effect of dilutive securities:

Employee equity awards

609

456

713

588

699

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

90,467

90,104

89,519

90,202

87,925

Basic FFO per share

$

4.54

$

3.80

$

3.36

$

13.01

$

11.45

Diluted FFO per share

$

4.51

$

3.78

$

3.33

$

12.93

$

11.36

Basic AFFO per share

$

6.99

$

7.05

$

6.53

$

21.06

$

19.17

Diluted AFFO per share

$

6.94

$

7.01

$

6.48

$

20.92

$

19.02

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

 

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SOURCE Equinix, Inc.