Equinix Reports Third Quarter 2016 Results

Interconnection and Data Center Leader Delivers 55th Consecutive Quarter of Revenue Growth

- Record quarterly bookings fueled by double-digit growth in financial, cloud and enterprise verticals

- Announces $100M in new expansions in Dallas, Dublin, Frankfurt, Helsinki and Zurich

- Key customer wins include Target, Aetna, PayPal, Lloyd's and J.B Hunt

- Customer deployments across all three global regions represent 55% of total recurring revenue as Equinix's global platform becomes an increasing differentiator

REDWOOD CITY, Calif., Nov. 2, 2016 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended September 30, 2016. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements.

Third Quarter 2016 Results Summary

  • Revenues from continuing operations
    • $924.7 million, a 3% increase over the previous quarter
    • Includes $39.7 million of revenues from Bit-isle
    • Includes $107.3 million of revenues from Telecity
  • Operating Income
    • $169.9 million, a 12% increase over the previous quarter
  • Adjusted EBITDA
    • $420.0 million, a 45% adjusted EBITDA margin
    • Includes $13.1 million of adjusted EBITDA from Bit-isle
    • Includes $44.1 million of adjusted EBITDA from Telecity
    • Includes $19.0 million of integration costs for acquisitions ($2.5 million incremental to prior guidance)
    • Absorbs an incremental $5 million of cash-neutral U.S. GAAP adjustments related to Telecity
  • Net Income from Continuing Operations
    • $48.8 million
  • AFFO
    • $284.2 million, a 2% decrease from the previous quarter
    • Includes $19.0 million of integration costs for acquisitions

2016 Annual Guidance Summary

  • Revenues from continuing operations
    • $3,609 million - $3,615 million, a 32.5% increase over the previous year; an organic and constant currency growth rate of greater than 14%
    • Assumes $556 million in revenues from Bit-isle and Telecity
  • Adjusted EBITDA
    • $1,650 million - $1,656 million or a 45.8% adjusted EBITDA margin
    • Includes approximately $250 million from Bit-isle and Telecity
    • Assumes $59 million of integration costs for acquisitions ($4.0 million incremental to prior guidance)
    • Absorbs incremental $10 million of primarily cash-neutral U.S. GAAP adjustments related to Telecity
  • AFFO
    • $1,059 million - $1,065 million, a 27.6% increase over the previous year
    • Assumes a $64 million foreign currency loss related to the Telecity acquisition
    • Assumes $59 million of integration costs for acquisitions

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.

Steve Smith, president and CEO, Equinix:

"We had a great third quarter, delivering record bookings with double-digit growth in the cloud, financial and enterprise segments," said Steve Smith, president and CEO of Equinix. "We continue to see growth in Fortune 500 new customers as multi-national enterprises re-architect to a cloud-delivered infrastructure to optimize performance. We remain focused on scaling and refining our go-to-market engine, directed at capturing this significant shift to the cloud, and delivering continued profitable growth." 

Business Highlights

  • Equinix continues to expand the scale and reach of its global platform with 18 announced expansion projects underway, and today Equinix announced:
    • New expansions in Dallas, Dublin, Frankfurt, Helsinki and Zurich totaling more than $100 million of capital expenditures. 
    • The purchase of six acres of real estate adjacent to the Equinix Chicago area CH3 IBX which will be developed over time to expand Equinix's Elk Grove campus – a key location for cloud and financial customers.
  • Equinix added 10 Fortune 500 customers in Q3 2016, including: Target, a leading retailer; J.B Hunt, a transportation company; and Aetna, a healthcare and insurance provider.  Equinix has now penetrated nearly one-third of the Fortune 500 and a quarter of Global 2000 companies.  Additional customer momentum from the quarter:
    • Equinix recorded its second highest bookings quarter in the enterprise segment in Q3, as enterprises continue to re-architect their IT delivery to better interconnect people, locations, clouds and data.  Wins included one of the top three auto manufacturers that has selected Equinix to optimize their network topology and connect to Microsoft Azure via Equinix Cloud Exchange.
    • The financial services vertical achieved record bookings, and key customer wins included: an expansion with PayPal, an important customer in the digital payments ecosystem that is interconnecting to business partners to improve performance and latency; and Lloyd's, which is deploying a cloud-based risk modeling platform for the insurance industry.
    • The cloud and IT services vertical recorded its second best bookings quarter in Q3, with expansions from Amazon.com, Cisco Systems, Dell EMC, Marketo and others.  Equinix continues to enhance its value as the home of the interconnected cloud by increasing cloud density, making it easy for enterprises to find and consume cloud services from leading SaaS and IaaS partners, including AWS, Azure, IBM Softlayer, Google and Oracle.
    • As companies seek to locate their infrastructure closer to the digital edge, Equinix customer deployments across all three regions (Americas, APAC, EMEA) represented 55% of total recurring revenue for the quarter.
  • Additional business highlights announced in Q3 2016 included:
    • Momentum for Equinix continues as a strategic partner for the submarine cable industry with its selection as the US cable landing station for the Monet Submarine Cable System , which is owned by Algar Telecom, Angola Cables, Antel and Google.  The Monet project links North and South America from points in Miami and São Paulo.  In addition to this most recent win, Equinix has been selected as an interconnection partner in 12 of the current submarine cable projects that are experiencing high growth driven primarily by exponential increases in cloud services and innovation in optical equipment.
    • The ninth quarter in a row in which Equinix has added more than 5,000 cross-connects.  As more businesses adopt an IT architecture that enables direct interconnection with key partners and customers, Equinix now has more than 188,000 cross-connects between customers. 
    • The rollout of Equinix Internet Exchange in Helsinki, expanding coverage of this platform to 19 markets worldwide.
    • The rollout of the Equinix Media Cloud Ecosystem for Entertainment (EMCEE™), an ecosystem of interconnected media and content providers, along with content delivery networks (CDNs) and cloud service providers, that optimizes content creation, global distribution and services across the entire media and entertainment (M&E) industry.  As digital disruption changes the way that content is created, enhanced, transported, stored and distributed, more than 500 content and media companies use EMCEE to peer with the industry's largest concentration of CDNs, multiple system operators (MSOs) and social media platforms.

Business Outlook

Equinix's guidance includes forecasted results for Telecity from January 15, 2016, Bit-isle for the full year of 2016 and incremental operating results relating to Equinix's purchase of its Paris campus from Digital Realty on August 1, 2016 for approximately $215.9 million. As previously announced, Equinix divested eight assets, seven from Telecity along with its London 2 asset ("LD2"), to obtain regulatory clearance for the Telecity transaction. Equinix completed these divestitures on July 5, 2016 for approximately $827.3 million. Equinix's guidance does not include the seven Telecity assets, which were treated as discontinued operations, but does assume six months, or $6.0 million in revenues, from LD2, which was under a different accounting treatment that required results to be reported as continuing operations until the sales were completed.

For the fourth quarter of 2016 -- Equinix expects revenues to range between $940 and $946 million, or a normalized and constant currency growth rate of 2.4% quarter over quarter.  This guidance includes a negative foreign currency impact of $4 million when compared to the average FX rates in Q3 2016. Cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between $199 and $205 million.  Adjusted EBITDA is expected to range between $429 and $435 million, which includes a $2 million negative foreign currency impact when compared to the average FX rates used in Q3 2016 and approximately $17 million in integration costs from the two acquisitions. Capital expenditures are expected to be approximately $273 million, which includes approximately $42 million of recurring capital expenditures and approximately $231 million of non-recurring capital expenditures.

For the full year of 2016 -- Total revenues are expected to range between $3,609 and $3,615 million, an organic and constant currency growth rate of 14.1% year over year.  This guidance includes a negative foreign currency impact of $1 million when compared to prior guidance rates, and includes an expected $553 to $559 million in revenues from the Bit-isle and Telecity acquisitions. Net of FX, revenues are stepping up $10 million, the result of strong Q3 operating performance. Total year cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between $779 and $785 million. Adjusted EBITDA is expected to range between $1,650 and $1,656 million, an organic and constant currency growth rate of 17% year over year.  This absorbs an incremental $4 million of integration costs, or approximately $59 million in integration costs for the full year, an incremental $10 million of primarily cash-neutral U.S. GAAP adjustments related to Telecity and minimal FX impact. This guidance also includes approximately $250 million in adjusted EBITDA from the Bit-isle and Telecity acquisitions. AFFO is expected to range between $1,059 and $1,065 million, including approximately $59 million of integration costs and the $64 million Q1 2016 foreign currency loss attributed to the Telecity acquisition. This $17 million AFFO increase has negligible foreign currency benefit when compared to prior guidance, and is the result of strong business performance and lower interest expense. Capital expenditures are expected to be approximately $1,000 million, including approximately $147 million of recurring capital expenditures and approximately $853 million of non-recurring capital expenditures.  

The U.S. dollar exchange rates used for 2016 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.12 to the Euro, $1.42 to the Pound, S$1.37 to the U.S. dollar, ¥103.01 to the U.S. dollar and R3.23 to the U.S. dollar. The 2016 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 19%, 10%, 8%, 7% and 3%, respectively.

Q3 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2016, along with its future outlook, in its quarterly conference call on Wednesday, November 2, 2016, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on Equinix's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-210-234-8004 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call, through Friday, February 3, 2017, by dialing 1-203-369-1392 and referencing the passcode 2016. In addition, the webcast will be available at www.equinix.com/investors. No password is required for the webcast.

Investor Presentation and Supplemental Financial Information

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

Additional Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most interconnected data centers. In 40 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies.

Non-GAAP Financial Measures

Equinix provides all information required in accordance with generally accepted accounting principles ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Equinix uses non-GAAP financial measures to evaluate its operations.

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

In presenting non-GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow and adjusted free cash flow, Equinix excludes certain items that it believes are not good indicators of Equinix's current or future operating performance. These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges, acquisition costs and gains on asset sales.  Equinix excludes these items in order for its lenders, investors and the industry analysts who review and report on Equinix to better evaluate Equinix's operating performance and cash spending levels relative to its industry sector and competitors.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of an IBX center, and do not reflect its current or future cash spending levels to support its business.  Its IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX center do not recur with respect to such data center, although Equinix may incur initial construction costs in future periods with respect to additional IBX centers, and future capital expenditures remain minor relative to the initial investment. This is a trend it expects to continue.  In addition, depreciation is also based on the estimated useful lives of the IBX centers.  These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, Equinix also excludes amortization expense related to intangible assets, as it is not meaningful in evaluating Equinix's current or future operating performance; however, like depreciation, is an expense expected to recur in future 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 represents expense attributed to equity awards that have no current or future cash obligations. As such, Equinix, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges.  Equinix also excludes impairment charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Equinix also excludes gains on asset sales as it represents profit that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes acquisition costs from its non-GAAP financial measures.  The acquisition costs relate to costs Equinix incurs in connection with business combinations.  Management believes items such as restructuring charges, impairment charges, acquisition costs and gains on asset sales are non-core transactions; however, these types of costs may occur in future periods.

Equinix also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), which are non-GAAP financial measures commonly used in the REIT industry. FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income (loss), excluding gains (losses) from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. AFFO represents FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income (loss) from discontinued operations, net of tax and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and acquisition costs for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above. 

Equinix includes an adjustment for revenue from installation fees, since installation fees are deferred and recognized ratably over the expected life of the installation, although the fees are generally paid in a lump sum upon installation. Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term.  The adjustments for both installation revenue and straight-line rent expense are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. Equinix excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. Equinix excludes gains (losses) on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX centers or other assets that are required to support current revenues. Equinix also excludes net income (loss) from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.

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

Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP.  Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financials measures. Equinix presents such non-GAAP financial measures to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what management believes to be its core, ongoing business operations.  Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.

Investors should note that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (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 centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenue from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.

Equinix and IBX are registered trademarks of Equinix, Inc. International Business Exchange is a trademark of Equinix, Inc.

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2016

2016

2015

2016

2015

Recurring revenues

$       877,494

$        851,771

$        646,721

$     2,526,359

$     1,883,069

Non-recurring revenues

47,182

48,739

39,928

142,983

112,336

Revenues

924,676

900,510

686,649

2,669,342

1,995,405

Cost of revenues

470,302

456,967

325,468

1,354,949

939,538

Gross profit

454,374

443,543

361,181

1,314,393

1,055,867

Operating expenses:

Sales and marketing

110,936

107,832

83,709

325,358

243,573

General and administrative

181,239

168,462

123,237

515,605

356,455

Impairment charges

7,698

-

-

7,698

-

Acquisition costs

12,505

15,594

13,352

64,635

24,374

Gains on asset sales

(27,945)

-

-

(33,187)

-

Total operating expenses

284,433

291,888

220,298

880,109

624,402

Income from continuing operations

169,941

151,655

140,883

434,284

431,465

Interest and other income (expense):

Interest income

762

841

934

2,528

2,375

Interest expense

(92,200)

(100,332)

(76,269)

(293,395)

(219,556)

Other income (expense)

2,938

1,555

(12,836)

(56,217)

(11,964)

Loss on debt extinguishment 

(9,894)

(605)

-

(10,499)

-

Total interest and other, net

(98,394)

(98,541)

(88,171)

(357,583)

(229,145)

Income from continuing operations before income taxes

71,547

53,114

52,712

76,701

202,320

Income tax expense

(22,778)

(13,812)

(11,580)

(25,957)

(25,277)

Net income from continuing operations

48,769

39,302

41,132

50,744

177,043

Net income from discontinued operations, net of tax

2,681

5,409

-

14,306

-

Net income

$        51,450

$          44,711

$          41,132

$          65,050

$        177,043

Net income per share:

Basic net income per share from continuing operations

$            0.69

$             0.56

$             0.72

$             0.73

$             3.11

Basic net income per share from discontinued operations

0.04

0.08

-

0.21

-

Basic net income per share

$            0.73

$             0.64

$             0.72

$             0.94

$             3.11

Diluted net income per share from continuing operations

$            0.68

$             0.56

$             0.71

$             0.72

$             3.08

Diluted net income per share from discontinued operations

0.04

0.08

-

0.20

-

Diluted net income per share

$            0.72

$             0.64

$             0.71

$             0.92

$             3.08

Shares used in computing basic net income per share

71,190

69,729

57,082

69,689

56,894

Shares used in computing diluted net income per share

71,908

70,364

57,708

70,389

57,521

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2016

2016

2015

2016

2015

Net income

$         51,450

$          44,711

$          41,132

$          65,050

$        177,043

Other comprehensive loss, net of tax:

 Foreign currency translation adjustment ("CTA") loss 

(32,603)

(298,361)

(72,677)

(215,065)

(149,546)

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

1,487

1,199

(21)

2,382

99

 Unrealized gain (loss) on cash flow hedges 

(4,153)

14,726

3,309

3,789

(425)

 Net investment hedge CTA gain (loss) 

(34,721)

55,196

4,426

4,163

(5,963)

 Net actuarial gain on defined benefit plans 

7

8

124

21

266

Other comprehensive loss, net of tax: 

(69,983)

(227,232)

(64,839)

(204,710)

(155,569)

Comprehensive income (loss), net of tax 

(18,533)

(182,521)

(23,707)

(139,660)

21,474

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

Assets

September 30,

 December 31, 

2016

2015

Cash and cash equivalents

$           987,915

$     2,228,838

Short-term investments

443

12,875

Accounts receivable, net

377,528

291,964

Current portion of restricted cash

25,305

479,417

Other current assets

172,370

212,929

Assets held for sale

96,923

33,257

Total current assets

1,660,484

3,259,280

Long-term investments

15,036

4,584

Property, plant and equipment, net

7,251,399

5,606,436

Goodwill

3,118,686

1,063,200

Intangible assets, net

803,260

224,565

Other assets

248,692

198,630

Total assets

$      13,097,557

$   10,356,695

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses

$           534,602

$        400,948

Accrued property, plant and equipment

185,683

103,107

Current portion of capital lease and other financing obligations

92,120

40,121

Current portion of mortgage and loans payable

518,985

770,236

Convertible debt

-

146,121

Other current liabilities

149,516

192,286

Liabilities held for sale

14,660

3,535

Total current liabilities

1,495,566

1,656,354

Capital lease and other financing obligations, less current portion

1,446,455

1,287,139

Mortgage and loans payable, less current portion

1,058,418

472,769

Senior notes

3,809,332

3,804,634

Other liabilities

664,076

390,413

Total liabilities

8,473,847

7,611,309

Common stock

72

62

Additional paid-in capital

7,371,024

4,838,444

Treasury stock

(147,617)

(7,373)

Accumulated dividends

(1,842,834)

(1,468,472)

Accumulated other comprehensive loss

(713,769)

(509,059)

Accumulated deficit

(43,166)

(108,216)

Total stockholders' equity

4,623,710

2,745,386

Total liabilities and stockholders' equity

$      13,097,557

$   10,356,695

Ending headcount by geographic region is as follows:

Americas headcount

2,472

2,329

EMEA headcount

2,051

1,188

Asia-Pacific headcount

1,411

1,525

Total headcount

5,934

5,042

 

EQUINIX, INC.

SUMMARY OF DEBT PRINCIPAL OUTSTANDING

(in thousands)

(unaudited)

September 30,

December 31,

2016

2015

Capital lease and other financing obligations

$                     1,538,575

$                         1,327,260

Term loan, net of debt discount and debt issuance costs

1,055,950

454,503

Brazil financings, net of debt issuance costs

1,585

26,668

Mortgage payable and other loans payable

519,868

436,212

Revolving credit facility borrowings

-

325,622

Plus: debt discount, debt issuance costs and premium, net

12,011

694

Total mortgage and loans payable principal

1,589,414

1,243,699

Senior notes, net of debt issuance costs

3,809,332

3,804,634

Plus: debt issuance costs

40,668

45,366

Total senior notes principal

3,850,000

3,850,000

Convertible debt, net of debt discount and debt issuance costs

-

146,121

Plus: debt discount and debt issuance costs

-

3,961

Total convertible debt principal

-

150,082

Total debt principal outstanding

$                     6,977,989

$                         6,571,041

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2016

2016

2015

2016

2015

Cash flows from operating activities:

Net income

$               51,450

$          44,711

$          41,132

$          65,050

$        177,043

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

Depreciation, amortization and accretion

215,370

213,719

133,268

631,242

384,068

Stock-based compensation

42,346

39,323

33,969

115,730

98,575

Amortization of debt issuance costs and debt discounts

2,684

5,517

3,972

13,709

11,557

Loss on debt extinguishment 

10,181

318

-

10,499

-

Impairment charges

7,698

-

-

7,698

-

Gains on asset sales

(27,945)

-

-

(33,187)

-

Gains on sale of discontinued operations

(4,242)

-

-

(4,242)

-

Other items

3,905

7,311

3,589

16,087

12,696

Changes in operating assets and liabilities:

Accounts receivable

(30,440)

(31,055)

(220)

(72,807)

(42,002)

Income taxes, net

24,776

4,901

(18,376)

1,021

(84,523)

Accounts payable and accrued expenses

(901)

29,592

25,926

(11,526)

75,219

Other assets and liabilities

39,290

(35,509)

(8,858)

(22,004)

27,042

Net cash provided by operating activities

334,172

278,828

214,402

717,270

659,675

Cash flows from investing activities:

Purchases, sales and maturities of investments, net

(2,123)

8,764

94,217

10,060

523,477

Business acquisitions, net of cash acquired

(165,901)

-

-

(1,767,528)

(10,247)

Purchases of real estate

-

(11,710)

-

(28,118)

(38,282)

Purchases of other property, plant and equipment

(279,477)

(249,867)

(216,046)

(727,044)

(587,508)

Proceeds from asset sales

805,372

-

-

828,197

-

Other investing activities

(21,851)

(117)

14,274

444,736

(493,371)

Net cash provided by (used in) investing activities

336,020

(252,930)

(107,555)

(1,239,697)

(605,931)

Cash flows from financing activities:

Proceeds from employee equity awards

16,504

1,335

13,290

34,143

29,855

Payment of dividend distributions

(127,457)

(121,858)

(98,041)

(374,151)

(291,009)

Proceeds from loans payable

9,154

-

-

710,404

490,000

Repayment of capital lease and other financing obligations

(55,528)

(12,103)

(6,576)

(100,863)

(20,213)

Repayment of mortgage and loans payable

(13,354)

(36,707)

(10,818)

(986,414)

(529,447)

Repayment of convertible debt

-

(51)

-

(51)

-

Debt extinguishment costs

(10,181)

-

-

(10,181)

-

Debt issuance costs

(11,709)

23

-

(11,751)

(617)

Other financing activities

1,465

(564)

732

1,465

1,663

Net cash used in financing activities

(191,106)

(169,925)

(101,413)

(737,399)

(319,768)

Effect of foreign currency exchange rates on cash and cash equivalents

4,313

18,540

(6,098)

22,658

(9,424)

Change in cash balances included in assets held for sale

21,356

(25,111)

-

(3,755)

-

Net increase (decrease) in cash and cash equivalents

504,755

(150,598)

(664)

(1,240,923)

(275,448)

Cash and cash equivalents at beginning of period

483,160

633,758

336,133

2,228,838

610,917

Cash and cash equivalents at end of period

$              987,915

$        483,160

$        335,469

$        987,915

$        335,469

Supplemental cash flow information:

Cash paid (refunded) for taxes

$                     (73)

$          12,361

$          28,333

$          31,503

$        103,137

Cash paid for interest

$              111,094

$          85,897

$          68,568

$        271,530

$        164,367

Free cash flow (1)

$              672,315

$          17,134

$          12,630

$       (532,487)

$       (469,733)

Adjusted free cash flow (2)

$              839,681

$          28,280

$          34,035

$     1,264,624

$       (352,462)

(1)

We define free cash flow as net cash provided by operating activities plus net cash provided by (used in) investing activities (excluding the net purchases, sales and maturities of investments) as presented below:

Net cash provided by operating activities as presented above

$              334,172

$        278,828

$        214,402

$        717,270

$        659,675

Net cash used in investing activities as presented above

336,020

(252,930)

(107,555)

(1,239,697)

(605,931)

Purchases, sales and maturities of investments, net

2,123

(8,764)

(94,217)

(10,060)

(523,477)

Free cash flow (negative free cash flow)

$              672,315

$          17,134

$          12,630

$       (532,487)

$       (469,733)

(2)

We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate, acquisitions, any excess tax benefits from employee equity awards, cash paid for taxes associated with reclassifying our assets for tax purposes triggered by our conversion into a real estate investment trust ("REIT") and costs related to the REIT conversion, as presented below:

Free cash flow (as defined above)

$              672,315

$          17,134

$          12,630

$       (532,487)

$       (469,733)

Less business acquisitions, net of cash

165,901

-

-

1,767,528

10,247

Less purchases of real estate

-

11,710

-

28,118

38,282

Less excess tax benefits from employee equity awards

1,465

(564)

732

1,465

1,663

Less cash paid for taxes resulting from the REIT conversion 

-

-

20,033

-

65,146

Less costs related to the REIT conversion

-

-

640

-

1,933

Adjusted free cash flow

$              839,681

$          28,280

$          34,035

$     1,264,624

$       (352,462)

We categorize our cash paid for taxes into cash paid for taxes resulting from the REIT conversion (as defined above) and other cash taxes paid.

Cash paid for taxes resulting from the REIT conversion

$                      -

$                   -

$          20,033

$                   -

$          65,146

Other cash taxes paid

(73)

12,361

8,300

31,503

37,991

Total cash paid for taxes

$                  (73)

$          12,361

$          28,333

$          31,503

$        103,137

 

EQUINIX, INC.

NON-GAAP MEASURES AND OTHER SUPPLEMENTAL DATA

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2016

2016

2015

2016

2015

Recurring revenues

$        877,494

$        851,771

$        646,721

$     2,526,359

$  1,883,069

Non-recurring revenues

47,182

48,739

39,928

142,983

112,336

Revenues (1)

924,676

900,510

686,649

2,669,342

1,995,405

Cash cost of revenues (2)

304,821

292,033

211,617

867,954

608,483

Cash gross profit (3)

619,855

608,477

475,032

1,801,388

1,386,922

Cash operating expenses (4):

Cash sales and marketing expenses (5)

79,515

78,071

68,323

237,278

197,201

Cash general and administrative expenses (6)

120,298

110,115

85,237

343,127

251,239

Total cash operating expenses (7)

199,813

188,186

153,560

580,405

448,440

Adjusted EBITDA (8)

$        420,042

$        420,291

$        321,472

$     1,220,983

$     938,482

Cash gross margins (9)

67%

68%

69%

67%

70%

Adjusted EBITDA margins (10)

45%

47%

47%

46%

47%

Adjusted EBITDA flow-through rate (11)

(1%)

70%

48%

43%

65%

FFO (12)

$        187,831

$        201,515

$        151,197

$        505,221

$     497,755

AFFO (13) (14)

$        284,179

$        290,529

$        210,361

$        784,554

$     653,505

(1)

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

Americas Revenues:

Colocation

$        295,927

$        289,578

$        268,156

$        867,826

$     789,022

Interconnection

92,803

89,860

79,902

268,599

232,090

Managed infrastructure

14,830

13,255

11,788

39,255

37,920

Other

902

786

841

2,417

2,314

Recurring revenues

404,462

393,479

360,687

1,178,097

1,061,346

Non-recurring revenues

20,680

19,992

21,943

64,910

56,700

Revenues

425,142

413,471

382,630

1,243,007

1,118,046

EMEA Revenues:

Colocation

244,420

240,421

143,721

699,019

415,938

Interconnection

21,464

22,425

15,227

63,589

41,715

Managed infrastructure

16,359

15,391

5,875

50,310

17,577

Other

3,947

3,573

1,333

8,463

4,413

Recurring revenues

286,190

281,810

166,156

821,381

479,643

Non-recurring revenues

15,060

18,799

11,407

48,334

36,510

Revenues

301,250

300,609

177,563

869,715

516,153

Asia-Pacific Revenues:

Colocation

140,194

132,670

99,775

396,258

284,847

Interconnection

21,222

19,955

15,439

59,495

43,082

Managed infrastructure

21,797

20,078

4,664

60,132

14,151

Other

3,629

3,779

-

10,996

-

Recurring revenues

186,842

176,482

119,878

526,881

342,080

Non-recurring revenues

11,442

9,948

6,578

29,739

19,126

Revenues

198,284

186,430

126,456

556,620

361,206

Worldwide Revenues:

Colocation

680,541

662,669

511,652

1,963,103

1,489,807

Interconnection

135,489

132,240

110,568

391,683

316,887

Managed infrastructure

52,986

48,724

22,327

149,697

69,648

Other

8,478

8,138

2,174

21,876

6,727

Recurring revenues

877,494

851,771

646,721

2,526,359

1,883,069

Non-recurring revenues

47,182

48,739

39,928

142,983

112,336

Revenues

$        924,676

$        900,510

$        686,649

$     2,669,342

$  1,995,405

(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

$        470,302

$        456,967

$        325,468

$     1,354,949

$     939,538

Depreciation, amortization and accretion expense

(162,165)

(161,493)

(111,337)

(477,241)

(323,684)

Stock-based compensation expense

(3,316)

(3,441)

(2,514)

(9,754)

(7,371)

Cash cost of revenues

$        304,821

$        292,033

$        211,617

$        867,954

$     608,483

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

Americas cash cost of revenues

$        114,934

$        109,296

$        105,864

$        333,250

$     303,275

EMEA cash cost of revenues

116,587

114,950

64,443

333,046

185,368

Asia-Pacific cash cost of revenues

73,300

67,787

41,310

201,658

119,840

Cash cost of revenues

$        304,821

$        292,033

$        211,617

$        867,954

$     608,483

(3)

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

(4)

We define cash operating expenses as operating expenses less depreciation, amortization, stock-based compensation and

acquisition costs.  We also refer to cash operating expenses as cash selling, general and administrative expenses or 

"cash SG&A".

(5)

We define cash sales and marketing expenses as sales and marketing expenses less depreciation,

amortization and stock-based compensation as presented below:

Sales and marketing expenses

$        110,936

$        107,832

$          83,709

$        325,358

$     243,573

Depreciation and amortization expense

(19,719)

(19,047)

(6,213)

(55,893)

(18,566)

Stock-based compensation expense

(11,702)

(10,714)

(9,173)

(32,187)

(27,806)

Cash sales and marketing expenses

$          79,515

$          78,071

$          68,323

$        237,278

$     197,201

(6)

We define cash general and administrative expenses as general and administrative expenses less depreciation, 

amortization and stock-based compensation as presented below:

General and administrative expenses

$        181,239

$        168,462

$        123,237

$        515,605

$     356,455

Depreciation and amortization expense

(33,486)

(33,179)

(15,718)

(98,108)

(41,818)

Stock-based compensation expense

(27,455)

(25,168)

(22,282)

(74,370)

(63,398)

Cash general and administrative expenses

$        120,298

$        110,115

$          85,237

$        343,127

$     251,239

(7)

Our cash operating expenses, or cash SG&A, as defined above, is presented below:

Cash sales and marketing expenses

$          79,515

$          78,071

$          68,323

$        237,278

$     197,201

Cash general and administrative expenses

120,298

110,115

85,237

343,127

251,239

Cash SG&A

$        199,813

$        188,186

$        153,560

$        580,405

$     448,440

The geographic split of our cash operating expenses, or cash SG&A, is presented below:

Americas cash SG&A

$        108,077

$        109,147

$        102,596

$        328,138

$     296,981

EMEA cash SG&A

63,195

52,204

31,717

170,257

93,818

Asia-Pacific cash SG&A

28,541

26,835

19,247

82,010

57,641

Cash SG&A

$        199,813

$        188,186

$        153,560

$        580,405

$     448,440

(8)

We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion, stock-based

compensation expense, impairment charges, acquisition costs and gains on asset sales as presented below:

Income from continuing operations

$        169,941

$        151,655

$        140,883

$        434,284

$     431,465

Depreciation, amortization and accretion expense

215,370

213,719

133,268

631,242

384,068

Stock-based compensation expense

42,473

39,323

33,969

116,311

98,575

Impairment charges

7,698

-

-

7,698

-

Acquisition costs

12,505

15,594

13,352

64,635

24,374

Gains on asset sales

(27,945)

-

-

(33,187)

-

Adjusted EBITDA

$        420,042

$        420,291

$        321,472

$     1,220,983

$     938,482

The geographic split of our adjusted EBITDA is presented below:

Americas income from continuing operations

$          89,004

$          87,100

$          81,914

$        264,643

$     241,033

Americas depreciation, amortization and accretion expense

82,204

78,874

70,118

237,798

205,621

Americas stock-based compensation expense

29,309

27,790

25,810

81,428

75,184

Americas acquisition costs

1,614

1,264

(3,672)

2,992

(4,048)

Americas gains on asset sales

-

-

-

(5,242)

-

Americas adjusted EBITDA

202,131

195,028

174,170

581,619

517,790

EMEA income from continuing operations

51,829

29,096

29,865

73,506

111,516

EMEA depreciation, amortization and accretion expense

78,555

82,929

33,055

237,972

87,574

EMEA stock-based compensation expense

8,138

7,060

4,338

21,433

12,342

EMEA acquisition costs

10,891

14,370

14,145

61,446

25,535

EMEA gains on asset sales

(27,945)

-

-

(27,945)

-

EMEA adjusted EBITDA

121,468

133,455

81,403

366,412

236,967

Asia-Pacific income from continuing operations

29,108

35,459

29,104

96,135

78,916

Asia-Pacific depreciation, amortization and accretion expense

54,611

51,916

30,095

155,472

90,873

Asia-Pacific stock-based compensation expense

5,026

4,473

3,821

13,450

11,049

Asia-Pacific impairment charges

7,698

-

-

7,698

-

Asia-Pacific acquisition costs

-

(40)

2,879

197

2,887

Asia-Pacific adjusted EBITDA

96,443

91,808

65,899

272,952

183,725

Adjusted EBITDA

$        420,042

$        420,291

$        321,472

$     1,220,983

$     938,482

(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

73%

74%

72%

73%

73%

EMEA cash gross margins

61%

62%

64%

62%

64%

Asia-Pacific cash gross margins

63%

64%

67%

64%

67%

(10)

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

Americas adjusted EBITDA margins

48%

47%

46%

47%

46%

EMEA adjusted EBITDA margins

40%

44%

46%

42%

46%

Asia-Pacific adjusted EBITDA margins

49%

49%

52%

49%

51%

(11)

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

revenue growth as follows:

Adjusted EBITDA - current period

$        420,042

$        420,291

$        321,472

$     1,220,983

$     938,482

Less adjusted EBITDA - prior period

(420,291)

(380,650)

(311,262)

(965,879)

(853,503)

Adjusted EBITDA growth

$             (249)

$          39,641

$          10,210

$        255,104

$       84,979

Revenues - current period

$        924,676

$        900,510

$        686,649

$     2,669,342

$  1,995,405

Less revenues - prior period

(900,510)

(844,156)

(665,582)

(2,082,693)

(1,863,723)

Revenue growth

$          24,166

$          56,354

$          21,067

$        586,649

$     131,682

Adjusted EBITDA flow-through rate

(1%)

70%

48%

43%

65%

(12)

FFO is defined as net income (loss), excluding gains (losses) 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

$          51,450

$          44,711

$          41,132

$          65,050

$     177,043

Adjustments:

Real estate depreciation and amortization

159,788

158,727

109,856

469,510

319,825

(Gain)/loss on disposition of real estate property

(23,436)

(1,951)

182

(29,424)

803

Adjustments for FFO from unconsolidated joint ventures

29

28

27

85

84

FFO 

$        187,831

$        201,515

$        151,197

$        505,221

$     497,755

(13)

AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, net income 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 

$        187,831

$        201,515

$        151,197

$        505,221

$     497,755

Adjustments:

Installation revenue adjustment

4,612

7,407

8,527

15,373

29,655

Straight-line rent expense adjustment

2,686

1,895

1,251

5,714

6,469

Amortization of deferred financing costs

2,687

5,243

3,934

13,438

11,640

Stock-based compensation expense

42,474

39,323

33,969

116,312

98,575

Non-real estate depreciation expense

22,108

21,021

15,946

64,516

42,244

Amortization expense

32,929

32,303

6,601

93,384

19,346

Accretion expense

545

1,668

865

3,832

2,653

Recurring capital expenditures

(41,600)

(31,928)

(25,910)

(105,343)

(75,613)

Loss on debt extinguishment

9,894

605

-

10,499

-

Acquisition costs

12,505

15,594

13,352

64,635

24,374

Impairment charges

7,698

-

-

7,698

-

Income tax expense adjustment

2,501

1,301

643

3,612

(3,549)

Net income from discontinued operations, net of tax

(2,681)

(5,409)

-

(14,306)

-

Adjustments for AFFO from unconsolidated joint ventures

(10)

(9)

(14)

(31)

(44)

AFFO

$        284,179

$        290,529

$        210,361

$        784,554

$     653,505

(14)

Following is how we reconcile from adjusted EBITDA to AFFO:

Adjusted EBITDA

$        420,042

$        420,291

$        321,472

$     1,220,983

$     938,482

Adjustments:

Interest expense, net of interest income

(91,437)

(99,491)

(75,335)

(290,866)

(217,181)

Amortization of deferred financing costs

2,687

5,243

3,934

13,438

11,640

Income tax (benefit) expense

(22,778)

(13,812)

(11,580)

(25,957)

(25,277)

Income tax expense adjustment

2,501

1,301

643

3,612

(3,549)

Straight-line rent expense adjustment

2,686

1,895

1,251

5,714

6,469

Installation revenue adjustment

4,612

7,407

8,527

15,373

29,655

Recurring capital expenditures

(41,600)

(31,928)

(25,910)

(105,343)

(75,613)

Other (income)/expense

2,938

1,555

(12,836)

(56,217)

(11,964)

Gain/loss on disposition of depreciable real estate property

(23,436)

(1,951)

182

(29,424)

803

Adjustments for unconsolidated JVs' and non-controlling interests

19

19

13

54

40

Adjustment for gain on sale of asset

27,945

-

-

33,187

-

AFFO

$        284,179

$        290,529

$        210,361

$        784,554

$     653,505

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/equinix-reports-third-quarter-2016-results-300356104.html

SOURCE Equinix, Inc.