Exhibit 99.2 Equinix Reports Fourth Quarter and Year-End 2006 Results -- Increased Quarterly Revenues to $79.8 Million, an 8% Increase over the Previous Quarter; Increased Annual Revenues to $286.9 Million, a 30% Increase over 2005 Results -- Increased Quarterly EBITDA, a Non-GAAP Financial Measure, to $30.3 Million, a 21% Increase over the Previous Quarter; Increased Annual EBITDA, to $102.1 Million, a 46% Increase over 2005 Results -- Added 81 New Customers, for a Total of 1,290, Including Chicago Mercantile Exchange, Netflix, Network Appliance and Timex -- Announced Today an Agreement to Acquire its Flagship Silicon Valley IBX Center for $65.0 Million and Announces an Incremental Expansion in Singapore for $12.0 Million FOSTER CITY, Calif.--(BUSINESS WIRE)--Feb. 7, 2007--Equinix, Inc. (Nasdaq:EQIX), the leading provider of network-neutral data centers and Internet exchange services, today reported its quarterly and year-end results for the period ended December 31, 2006. Revenues were $79.8 million for the fourth quarter and $286.9 million for the year-ended December 31, 2006, representing an 8% increase over the previous quarter, and a 30% increase over 2005 revenues; however, excluding a non-recurring revenue adjustment that the Company recorded in connection with its adoption of Staff Accounting Bulletin No. 108 (SAB 108), pro forma revenues were $81.0 million for the fourth quarter and $288.1 million for the year-ended December 31, 2006, representing a 10% increase over the previous quarter, and a 30% increase over 2005 revenues. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $76.4 million for the quarter and $273.2 million for the year-ended December 31, 2006, a 9% increase over the previous quarter, and a 31% increase over 2005. Non-recurring revenues were $3.4 million in the quarter, consisting primarily of services and installation fees, and $13.7 million for the year ended December 31, 2006. However, excluding the non-recurring revenue adjustment, pro forma non-recurring revenues were $4.6 million in the quarter, an increase of 19% over the previous quarter, and $14.9 million for the year-ended December 31, 2006. Note: Equinix uses non-GAAP financial measures, such as pro forma revenues, EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), non-GAAP net income (loss), free cash flow and adjusted free cash flow to evaluate its operations. A reconciliation of these non-GAAP financial measures to the most closely applicable GAAP financial measure is attached to this release and commences at the bottom of our condensed consolidated statements of operations - GAAP presentation. Cost of revenues were $50.3 million for the fourth quarter, including $853,000 of stock-based compensation, a 2% increase over the previous quarter. Cost of revenues were $188.4 million for the year-ended December 31, 2006, including $3.2 million of stock-based compensation, a 19% increase over cost of revenues for 2005. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $20.0 million and $76.3 million, respectively, were $30.3 million for the fourth quarter and $112.1 million for the year-ended 2006. Cash gross margins, defined as gross profit less depreciation, amortization, accretion and stock-based compensation divided by pro forma revenues, for the quarter were 63%, up from 60% the previous quarter. Cash gross margins were 61% for 2006, up from 57% in 2005. On a same IBX basis (defined as IBX centers which have been available for new customer installs for at least four full quarters), cash gross margins were 67% for the fourth quarter, and 65% for the year-ended 2006. Selling, general and administrative expenses were $28.1 million for the fourth quarter, including $6.4 million of stock-based compensation, and $104.7 million for the year-ended December 31, 2006, including $27.5 million of stock-based compensation. During the quarter, we recognized greater than expected variable sales and corporate compensation costs totaling $2.8 million. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $7.7 million and $30.8 million, respectively, were $20.4 million for the fourth quarter, a 7% increase from the previous quarter and $73.9 million for 2006, a 33% increase over 2005. This increase included $1.7 million in annual costs related to the audit committee's independent investigation of the Company's stock options practices. Net income for the fourth quarter was $9.1 million, including stock-based compensation expense of $7.2 million, the gain on the sale of the Honolulu IBX of $9.6 million and the $1.2 million adjustment recorded in connection with the adoption of SAB 108. This represents basic net income per share of $0.31 on a weighted average share count of 29.1 million and diluted net income per share of $0.30 on a weighted average share count of 32.7 million. Net loss for the year-ended December 31, 2006 was $6.4 million, or a basic and diluted net loss per share of $0.22. EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation expense, restructuring charges and, with respect to the 2006 results, the gain on the sale of the Honolulu IBX and the adjustment recorded in connection with the adoption of SAB 108, for the fourth quarter was $30.3 million and $102.1 million for the year-ended December 31, 2006, an increase of 21% over the previous quarter, and up from $70.1 million in 2005, a 46% increase. Capital expenditures in the fourth quarter were $59.4 million, of which $8.9 million was attributed to ongoing capital expenditures and $50.5 million was attributed to expansion capital expenditures. Capital expenditures for the year-ended December 31, 2006 were $162.3 million, of which $31.2 million was attributed to ongoing capital expenditures and $131.1 million was attributed to expansion capital expenditures. The result reflects approximately $25.0 million of expansion capital expenditures that were shifted into 2007 as a result of project timing, offset by an additional $10.0 million of expansion capital expenditures attributed to accelerated customer installs in our newly-opened IBXs and some capitalized interest associated with our recent financing for our Washington D.C. area campus. The Company generated cash from operating activities of $26.3 million for the fourth quarter as compared to $20.7 million in the previous quarter. Cash generated from operating activities for the year-ended December 31, 2006 was $75.9 million as compared to $67.6 million in 2005. Cash used in investing activities was $45.1 million in the fourth quarter as compared to $50.0 million in the previous quarter. Cash used in investing activities for the year was $155.0 million as compared to $120.9 million in 2005. Adjusted free cash flow was negative $28.3 million in the fourth quarter, and negative $78.8 million for the year-ended December 31, 2006. Adjusted free cash flow is defined as net cash generated from operating activities less net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments and the purchase and sale of real estate). As of December 31, 2006, the Company's cash, cash equivalents and investments were $156.5 million as compared to $188.9 million as of December 31, 2005. "2006 was another strong year of growth for the Company," said Peter Van Camp, chairman and CEO, Equinix. "Our business execution, expansion program, and momentum as we completed the year provide a solid foundation to continue to build on our market leadership position in 2007." Other Company Developments & Metrics -- Equinix announced an agreement to acquire its flagship Silicon Valley property, located in San Jose, California, for $65.0 million. -- In Asia, the Company will invest $12.0 million for an incremental expansion in its Singapore IBX, which will provide approximately 450 cabinets. -- The Company increased the existing mortgage on its Washington, D.C. area campus from $60.0 million to $100.0 million, and obtained $110.0 million in financing for the previously announced expansion of its Chicago footprint. -- On a same IBX basis for the quarter (defined as IBX centers which have been available for new customer installs for at least four full quarters), pro forma revenues were $75.6 million; cost of revenues were $42.0 million; cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation, were $24.8 million and cash gross margins for the quarter were 67%. EBITDA on a same IBX basis for the quarter was $31.0 million. -- Equinix added 81 new customers in the fourth quarter and 297 customers for the year 2006, ending the year with 1,290 total customers. Customers added in the fourth quarter include Chicago Mercantile Exchange, Netflix, Network Appliance and Timex, and an additional 18 new customers for the Financial Exchange service. Over 50% of Equinix's new bookings in the quarter came from existing customers, including Electronic Arts, IBM and YouTube. -- Based on a total cabinet capacity of approximately 31,000, the number of cabinets billing as of December 31, 2006 was approximately 17,400, up from approximately 16,200 the previous quarter, and up from 14,100 as of December 31, 2005. On a weighted average basis, the number of cabinets billing was approximately 17,200 representing a utilization rate of 55%. -- U.S. interconnection service revenues were 22% of U.S. recurring revenues for the fourth quarter and 22% for the year-ended December 31, 2006. Interconnection services revenues represent approximately 20% of total worldwide recurring revenues for the year-ended December 31, 2006. Business Outlook For the first quarter 2007, the Company expects revenue to be in the range of $84.0 to $85.0 million. Cash gross margins are expected to be approximately 61% including approximately $3.0 million of net cash costs attributed to our expansion IBXs. Cash selling, general and administrative expenses are expected to be approximately $20.0 million. EBITDA is expected to be between $31.0 and $32.0 million. Net loss will approximate $2.0 million, including the impact of approximately $9.0 million of stock-based compensation expense. Net interest expense will be approximately $3.0 million. The weighted average shares outstanding will be approximately 29.5 million. Capital expenditures are expected to be in a range of $55.0 to $60.0 million, comprised of approximately $15.0 million of ongoing capital expenditures and $40.0 to $45.0 million of expansion capital expenditures. For the full year of 2007, total revenues are expected to be in the range of $354.0 to $364.0 million. Cash gross margins are expected to be in the range of 59% to 61%. Cash selling, general and administrative expenses are expected to be in the range of $78.0 to $80.0 million. EBITDA is expected to be between $134.0 and $139.0 million, including $9.0 million of net costs related to the Company's expansion projects. Net loss will approximate $21.0 million, including the impact of approximately $40.0 million of stock-based compensation expense. Net interest expense will be approximately $18.0 million. The estimated weighted average shares outstanding will be approximately 30.0 million. Capital expenditures for 2007 are expected to be in a range of $316.0 to $336.0 million, comprised of approximately $36.0 million of ongoing capital expenditures and $280.0 to $300.0 million of expansion capital expenditures, which includes $25.0 million of expansion capital shifted from 2006 into 2007. In addition, the Company will invest capital of $65.0 million for the purchase of the Silicon Valley IBX. The Company will discuss its results and guidance on its quarterly conference call on Wednesday, February 7, 2007, at 5:30 p.m. ET (2:30 p.m. PT). To hear the conference call live, please dial 1-773-799-3263 (domestic and international) and reference the pass code (EQIX). A simultaneous live Webcast of the call will be available over the Internet at www.equinix.com, under the Investor Relations heading. A replay of the call will be available beginning on Wednesday, February 7, 2007 at 7:30 p.m. (ET) by dialing 1-203-369-0633. In addition, the Webcast will be available on the Company's Web site at www.equinix.com. No password is required for either method of replay. A reconciliation between GAAP information and non-GAAP information contained in this press release is provided in a table immediately following the Condensed Consolidated Statements of Operations - GAAP Presentation. This information is also available on our Web Site under the Investor Relations heading. About Equinix Equinix is the leading global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators and network services providers. Through the Company's Internet Business Exchange(TM) (IBX(R)) centers in 10 markets in the U.S. and Asia, customers can directly interconnect with every major global network and ISP for their critical peering, transit and traffic exchange requirements. These interconnection points facilitate the highest performance and growth of the Internet by serving as neutral and open marketplaces for Internet infrastructure services, allowing customers to expand their businesses while reducing costs. 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; a failure to receive significant revenue from customers in recently built out data centers; failure to complete any financing arrangements contemplated from time to time; failure to receive the proceeds from our loan commitments as expected; 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; the results of any litigation relating to past stock option grants and practices; 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. Internet Business Exchange is a trademark of Equinix, Inc. Non-GAAP Financial Measures Equinix continues to provide 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, such as pro forma revenues, EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), cash interest expense, cash net income (loss), non-GAAP net income (loss), free cash flow and adjusted free cash flow to evaluate its operations. In presenting these non-GAAP financial measures, Equinix excludes certain non-cash or non-recurring items that it believes are not good indicators of the Company's current or future operating performance. These non-cash or non-recurring items are a non-recurring revenue adjustment with respect to 2006 results, depreciation, amortization, accretion, stock-based compensation, non-cash interest, restructuring charges and, with respect to 2006 results, the gain on Honolulu IBX sale (there was no such activity in 2005). Recent legislative and regulatory changes encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. Equinix excludes these non-cash or non-recurring items in order for Equinix's lenders, investors, and industry analysts who review and report on the Company, to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitor base. Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business. Our IBX centers are long-lived assets, and have an economic life greater than ten years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our 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 excludes amortization expense related to certain intangible assets, as it represents a non-cash cost that may not recur and is not a good indicator of the Company's current or future operating performance. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charge liability, as these expenses represent costs, which Equinix believes are not meaningful in evaluating the Company's current operations. Equinix excludes non-cash stock-based compensation expense as it represents expense attributed to stock awards that have no current or future cash obligations. As such, we, and our investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes interest expense associated with the amortization of debt issuance costs and discounts, as well as the interest expense associated with its convertible secured notes as such interest expenses do not require any cash in the periods presented nor will they in future periods. With respect to its 2006 and 2005 results, Equinix excludes restructuring charges and the gain on Honolulu IBX sale. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we do not intend to build out now or in the future. The gain on Honolulu IBX sale represents a unique transaction for the Company and future sales of IBX centers are not expected. The Honolulu market was not considered a core, strategic market for the Company. Management believes such restructuring charges and the gain on the sale of an IBX center were unique transactions that are not expected to recur, and consequently, does not consider these items as a normal component of expenses or income related to current and ongoing operations. Lastly, with respect to its 2006 results, the Company excludes a non-recurring revenue adjustment recorded in the fourth quarter of 2006 as a result of the Company's adoption of Staff Accounting Bulletin No. 108. Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our ongoing business operations. Management believes that the inclusion of these non-GAAP financial measures provide consistency and comparability with past reports and provide 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, however, 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 that of other companies. In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, 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. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how it was calculated for the three and twelve months ended December 31, 2006 and 2005, presented within this press release. EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP PRESENTATION (in thousands, except per share detail) (unaudited) Three Months Ended Twelve Months Ended ----------------------------- ------------------- December September December December December 31, 30, 31, 31, 31, 2006 2006 2005 2006 2005 --------- --------- --------- --------- --------- Recurring revenues $76,401 $69,918 $58,380 $273,160 $208,003 Non-recurring revenues 3,371 3,808 3,418 13,755 13,054 --------- --------- --------- --------- --------- Revenues 79,772 73,726 61,798 286,915 221,057 Cost of revenues 50,334 49,137 41,715 188,379 158,354 --------- --------- --------- --------- --------- Gross profit 29,438 24,589 20,083 98,536 62,703 --------- --------- --------- --------- --------- Operating expenses: Sales and marketing 9,439 7,502 5,759 32,619 20,552 General and administrative 18,637 18,631 11,516 72,123 45,110 Restructuring charges - 1,527 33,814 1,527 33,814 Gain on Honolulu IBX sale (9,647) - - (9,647) - --------- --------- --------- --------- --------- Total operating expenses 18,429 27,660 51,089 96,622 99,476 --------- --------- --------- --------- --------- Income (loss) from operations 11,009 (3,071) (31,006) 1,914 (36,773) --------- --------- --------- --------- --------- Interest and other income (expense): Interest income 1,562 1,724 940 6,627 3,584 Interest expense and other (3,891) (3,551) (2,548) (14,875) (8,880) --------- --------- --------- --------- --------- Total interest and other, net (2,329) (1,827) (1,608) (8,248) (5,296) --------- --------- --------- --------- --------- Net income (loss) before income taxes and cumulative effect of a change in accounting principle 8,680 (4,898) (32,614) (6,334) (42,069) Income taxes 431 (270) 10 (439) (543) Net income (loss) before cumulative --------- --------- --------- --------- --------- effect of a change in accounting principle 9,111 (5,168) (32,604) (6,773) (42,612) Cumulative effect of a change in accounting principle - - - 376 - --------- --------- --------- --------- --------- Net income (loss) $9,111 $(5,168) $(32,604) $(6,397) $(42,612) ========= ========= ========= ========= ========= Net income (loss) per share: Basic net income (loss) per share $0.31 $(0.18) $(1.25) $(0.22) $(1.78) ========= ========= ========= ========= ========= Diluted net income (loss) per share $0.30 $(0.18) $(1.25) $(0.22) $(1.78) ========= ========= ========= ========= ========= Shares used in computing basic net income (loss) per share 29,131 28,743 26,100 28,551 23,956 ========= ========= ========= ========= ========= Net income (loss) as reported $9,111 $(5,168) $(32,604) $(6,397) $(42,612) Effect of assumed conversion of convertible subordinated debentures 700 - - - - Net income (loss) used in computing --------- --------- --------- --------- --------- diluted net income (loss) per share $9,811 $(5,168) $(32,604) $(6,397) $(42,612) ========= ========= ========= ========= ========= Shares used in computing diluted net income (loss) per share 32,700 28,743 26,100 28,551 23,956 ========= ========= ========= ========= ========= - ---------------------------------------------------------------------- Non-GAAP net income (loss) (1) $7,870 $3,244 $3,196 $17,429 $(521) ========= ========= ========= ========= ========= (1) Non-GAAP net income (loss) excludes the non-recurring revenue adjustment, stock-based compensation, restructuring charges and the gain on Honolulu IBX sale as follows: Net income (loss) $9,111 $(5,168) $(32,604) $(6,397) $(42,612) Non-recurring revenue adjustment 1,179 - - 1,179 - Stock-based compensation 7,227 6,885 1,986 30,767 8,277 Restructuring charges - 1,527 33,814 1,527 33,814 Gain on Honolulu IBX sale (9,647) - - (9,647) - --------- --------- --------- --------- --------- Non-GAAP net income (loss) $7,870 $3,244 $3,196 $17,429 $(521) ========= ========= ========= ========= ========= EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION (in thousands) (unaudited) Three Months Ended Twelve Months Ended ----------------------------- ------------------- December September December December December 31, 30, 31, 31, 31, 2006 2006 2005 2006 2005 --------- --------- --------- --------- --------- Recurring revenues $76,401 $69,918 $58,380 $273,160 $208,003 Non-recurring revenues 3,371 3,808 3,418 13,755 13,054 --------- --------- --------- --------- --------- Revenues as reported 79,772 73,726 61,798 286,915 221,057 Non-recurring revenue adjustment (1) 1,179 - - 1,179 - --------- --------- --------- --------- --------- Pro forma revenues (2) 80,951 73,726 61,798 288,094 221,057 Cash cost of revenues (3) 30,287 29,738 25,192 112,142 95,557 --------- --------- --------- --------- --------- Cash gross profit (4) 50,664 43,988 36,606 175,952 125,500 --------- --------- --------- --------- --------- Cash operating expenses (5): Cash sales and marketing expenses(6) 7,622 5,864 5,332 25,110 18,931 Cash general and administrative expenses (7) 12,770 13,197 9,446 48,770 36,430 --------- --------- --------- --------- --------- Total cash operating expenses (8) 20,392 19,061 14,778 73,880 55,361 --------- --------- --------- --------- --------- EBITDA (9) $30,272 $24,927 $21,828 $102,072 $70,139 ========= ========= ========= ========= ========= Cash gross margins (10) 63% 60% 59% 61% 57% ========= ========= ========= ========= ========= EBITDA flow-through rate (11) 74% 17% 106% 48% 60% ========= ========= ========= ========= ========= - --------------------- (1) This adjustment represents the impact of the Company's adoption of Staff Accounting Bulletin No. 108, which was issued in September 2006. (2) The geographic split of our pro forma revenues is presented below: U.S. pro forma revenues $68,851 $63,654 $53,463 $247,245 $191,390 Asia-Pacific pro forma revenues 12,100 10,072 8,335 40,849 29,667 --------- --------- --------- --------- --------- Pro forma revenues $80,951 $73,726 $61,798 $288,094 $221,057 ========= ========= ========= ========= ========= Pro forma revenues on a services basis is presented below: Colocation $56,537 $51,678 $43,127 $201,772 $152,606 Interconnection 15,501 13,862 11,181 53,811 40,877 Managed infrastructure 4,152 4,066 3,760 16,197 14,208 Rental 211 312 312 1,380 312 --------- --------- --------- --------- --------- Recurring revenues 76,401 69,918 58,380 273,160 208,003 Pro forma non- recurring revenues 4,550 3,808 3,418 14,934 13,054 --------- --------- --------- --------- --------- Pro forma revenues $80,951 $73,726 $61,798 $288,094 $221,057 ========= ========= ========= ========= ========= New IBX centers are IBX centers which have not been available for customer installs for at least four full quarters. Revenues on a same IBX versus new IBX basis is presented below: Same IBX centers $75,618 $71,572 $56,752 $277,910 $211,267 New IBX centers 5,333 2,154 5,046 10,184 9,790 --------- --------- --------- --------- --------- Pro forma revenues $80,951 $73,726 $61,798 $288,094 $221,057 ========= ========= ========= ========= ========= (3) We define cash cost of revenues as cost of revenues less depreciation, amortization, accretion and stock-based compensation as presented below: Cost of revenues $50,334 $49,137 $41,715 $188,379 $158,354 Depreciation, amortization and accretion expense (19,194) (18,735) (16,523) (72,999) (62,797) Stock-based compensation expense (853) (664) - (3,238) - --------- --------- --------- --------- --------- Cash cost of revenues $30,287 $29,738 $25,192 $112,142 $95,557 ========= ========= ========= ========= ========= The geographic split of our cash cost of revenues is presented below: U.S. cash cost of revenues $25,019 $25,154 $20,954 $93,436 $79,287 Asia-Pacific cash cost of revenues 5,268 4,584 4,238 18,706 16,270 --------- --------- --------- --------- --------- Cash cost of revenues $30,287 $29,738 $25,192 $112,142 $95,557 ========= ========= ========= ========= ========= New IBX centers are IBX centers which have not been available for customer installs for at least four full quarters. Cost of revenues and cash cost of revenues on a same IBX versus new IBX basis is presented below: Same IBX centers- cash cost of revenues $24,753 $26,422 $21,605 $98,500 $87,378 Same IBX centers- depreciation, amortization and accretion expense 16,420 16,445 14,277 64,830 56,687 Same IBX centers- stock-based compensation expense 854 632 - 3,207 - --------- --------- --------- --------- --------- Same IBX centers cost of revenues 42,027 43,499 35,882 166,537 144,065 --------- --------- --------- --------- --------- New IBX centers- cash cost of revenues 5,534 3,316 3,587 13,642 8,179 New IBX centers- depreciation, amortization and accretion expense 2,774 2,290 2,246 8,169 6,110 New IBX centers- stock-based compensation expense (1) 32 - 31 - --------- --------- --------- --------- --------- New IBX centers cost of revenues 8,307 5,638 5,833 21,842 14,289 --------- --------- --------- --------- --------- Cost of revenues $50,334 $49,137 $41,715 $188,379 $158,354 ========= ========= ========= ========= ========= (4) We define cash gross profit as revenues less cash cost of revenues (as defined above). (5) We define cash operating expenses as operating expenses less depreciation, amortization and stock-based compensation. We also refer to cash operating expenses as cash selling, general and administrative expenses or "cash SG&A". (6) 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 $9,439 $7,502 $5,759 $32,619 $20,552 Depreciation and amortization expense (15) (15) (15) (60) (60) Stock-based compensation expense (1,802) (1,623) (412) (7,449) (1,561) --------- --------- --------- --------- --------- Cash sales and marketing expenses $7,622 $5,864 $5,332 $25,110 $18,931 ========= ========= ========= ========= ========= (7) 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 $18,637 $18,631 $11,516 $72,123 $45,110 Depreciation and amortization expense (1,295) (836) (496) (3,273) (1,964) Stock-based compensation expense (4,572) (4,598) (1,574) (20,080) (6,716) --------- --------- --------- --------- --------- Cash general and administrative expenses $12,770 $13,197 $9,446 $48,770 $36,430 ========= ========= ========= ========= ========= (8) Our cash operating expenses, or cash SG&A, as defined above, is presented below: Cash sales and marketing expenses $7,622 $5,864 $5,332 $25,110 $18,931 Cash general and administrative expenses 12,770 13,197 9,446 48,770 36,430 --------- --------- --------- --------- --------- Cash SG&A $20,392 $19,061 $14,778 $73,880 $55,361 ========= ========= ========= ========= ========= The geographic split of our cash operating expenses, or cash SG&A, is presented below: U.S. cash SG&A $16,899 $16,261 $12,026 $61,086 $44,758 Asia-Pacific cash SG&A 3,493 2,800 2,752 12,794 10,603 --------- --------- --------- --------- --------- Cash SG&A $20,392 $19,061 $14,778 $73,880 $55,361 ========= ========= ========= ========= ========= (9) We define EBITDA as income (loss) from operations less the non- recurring revenue adjustment, depreciation, amortization, accretion, stock-based compensation expense, restructuring charges and the gain on Honolulu IBX sale as presented below: Income (loss) from operations $11,009 $(3,071) $(31,006) $1,914 $(36,773) Non-recurring revenue adjustment 1,179 - - 1,179 - Depreciation, amortization and accretion expense 20,504 19,586 17,034 76,332 64,821 Stock-based compensation expense 7,227 6,885 1,986 30,767 8,277 Restructuring charges - 1,527 33,814 1,527 33,814 Gain on Honolulu IBX sale (9,647) - - (9,647) - --------- --------- --------- --------- --------- EBITDA $30,272 $24,927 $21,828 $102,072 $70,139 ========= ========= ========= ========= ========= The geographic split of our EBITDA is presented below: U.S. income (loss) from operations $9,695 $(3,967) $(31,504) $76 $(35,448) U.S. non- recurring revenue adjustment 1,179 - - 1,179 - U.S. depreciation, amortization and accretion expense 19,448 18,607 16,187 72,340 60,702 U.S. stock-based compensation expense 6,258 6,072 1,986 27,248 8,277 U.S. restructuring charges - 1,527 33,814 1,527 33,814 U.S. gain on Honolulu IBX sale (9,647) - - (9,647) - --------- --------- --------- --------- --------- U.S. EBITDA 26,933 22,239 20,483 92,723 67,345 --------- --------- --------- --------- --------- Asia-Pacific income (loss) from operations 1,314 896 498 1,838 (1,325) Asia-Pacific non- recurring revenue adjustment - - - - - Asia-Pacific depreciation, amortization and accretion expense 1,056 979 847 3,992 4,119 Asia-Pacific stock-based compensation expense 969 813 - 3,519 - Asia-Pacific restructuring charges - - - - - Asia-Pacific gain on Honolulu IBX sale - - - - - --------- --------- --------- --------- --------- Asia-Pacific EBITDA 3,339 2,688 1,345 9,349 2,794 --------- --------- --------- --------- --------- EBITDA $30,272 $24,927 $21,828 $102,072 $70,139 ========= ========= ========= ========= ========= New IBX centers are IBX centers which have not been available for customer installs for at least four full quarters. EBITDA on a same IBX versus new IBX basis is presented below: Same IBX centers- income (loss) from operations $14,541 $944 $(29,882) $15,193 $(31,061) Same IBX centers- non-recurring revenue adjustment 1,179 - - 1,179 - Same IBX centers- depreciation, amortization and accretion expense 17,730 17,296 14,788 68,163 58,711 Same IBX centers- stock-based compensation expense 7,228 6,853 1,986 30,736 8,277 Same IBX centers- restructuring charges - 1,527 33,814 1,527 33,814 Same IBX centers- gain on Honolulu IBX sale (9,647) - - (9,647) - --------- --------- --------- --------- --------- Same IBX center EBITDA 31,031 26,620 20,706 107,151 69,741 --------- --------- --------- --------- --------- New IBX centers- income (loss) from operations (3,532) (4,015) (1,124) (13,279) (5,712) New IBX centers- non-recurring revenue adjustment - - - - - New IBX centers- depreciation, amortization and accretion expense 2,774 2,290 2,246 8,169 6,110 New IBX centers- stock-based compensation expense (1) 32 - 31 - New IBX centers- restructuring charges - - - - - New IBX centers- gain on Honolulu IBX sale - - - - - --------- --------- --------- --------- --------- New IBX center EBITDA (759) (1,693) 1,122 (5,079) 398 --------- --------- --------- --------- --------- EBITDA $30,272 $24,927 $21,828 $102,072 $70,139 ========= ========= ========= ========= ========= (10) We define cash gross margins as cash gross profit divided by pro forma revenues. Our cash gross margins by geographic region is presented below: U.S. cash gross margins 64% 60% 61% 62% 59% ========= ========= ========= ========= ========= Asia-Pacific cash gross margins 56% 54% 49% 54% 45% ========= ========= ========= ========= ========= Same IBX centers are IBX centers which have been available for customer installs for at least four full quarters. Our cash gross margins for same IBX centers is presented below: Same IBX cash gross margins 67% 63% 62% 65% 59% ========= ========= ========= ========= ========= (11) We define EBITDA flow-through rate as incremental EBITDA growth divided by incremental pro forma revenue growth as follows: EBITDA - current period $30,272 $24,927 $21,828 $102,072 $70,139 Less EBITDA - prior period (24,927) (24,038) (17,919) (70,139) (35,614) --------- --------- --------- --------- --------- EBITDA growth $5,345 $889 $3,909 $31,933 $34,525 ========= ========= ========= ========= ========= Pro forma revenues - current period $80,951 $73,726 $61,798 $288,094 $221,057 Less pro forma revenues - prior period (73,726) (68,548) (58,096) (221,057) (163,671) --------- --------- --------- --------- --------- Pro forma revenue growth $7,225 $5,178 $3,702 $67,037 $57,386 ========= ========= ========= ========= ========= EBITDA flow- through rate 74% 17% 106% 48% 60% ========= ========= ========= ========= ========= EQUINIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) Assets December 31, December 31, 2006 2005 ------------ ------------ Cash, cash equivalents and investments $156,481 $188,855 Accounts receivable, net 26,864 17,237 Property and equipment, net 546,395 438,790 Goodwill and other intangible assets, net 17,441 21,829 Debt issuance costs, net 3,006 3,075 Prepaid expenses 7,160 5,098 Deposits 3,932 3,548 Deferred tax assets 6,910 - Other assets 3,643 2,565 ------------ ------------ Total assets $771,832 $680,997 ============ ============ Liabilities and Stockholders' Equity Accounts payable and accrued expenses $27,269 $22,557 Accrued property and equipment 23,337 15,783 Accrued restructuring charges 41,572 49,831 Borrowings under credit line - 30,000 Capital lease and other financing obligations 94,699 96,205 Mortgage payable 98,896 60,000 Convertible subordinated debentures 86,250 86,250 Deferred installation revenue 11,694 7,658 Deferred recurring revenue 6,732 - Customer deposits 910 1,188 Deferred rent 20,924 18,792 Asset retirement obligations 3,985 3,649 Other liabilities 536 411 ------------ ------------ Total liabilities 416,804 392,324 ------------ ------------ Common stock 29 27 Additional paid-in capital 904,573 839,497 Deferred stock-based compensation - (4,930) Accumulated other comprehensive income 3,870 1,126 Accumulated deficit (553,444) (547,047) ------------ ------------ Total stockholders' equity 355,028 288,673 ------------ ------------ Total liabilities and stockholders' equity $771,832 $680,997 ============ ============ - --------------------------------------------------------- ------------ Ending headcount by geographic region is as follows: U.S. headcount 442 372 Asia-pacific headcount 174 165 ------------ ------------ Total headcount 616 537 ============ ============ EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1) (in thousands) (unaudited) Three Months Ended Twelve Months Ended ----------------------------- ------------------- December September December December December 31, 30, 31, 31, 31, 2006 2006 2005 2006 2005 --------- --------- --------- --------- --------- Cash flows from operating activities: Net income (loss) $9,111 $(5,168) $(32,604) $(6,397) $(42,612) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, amortization and accretion 20,504 19,586 17,034 76,332 64,821 Stock-based compensation 7,227 6,885 1,986 30,767 8,277 Non-cash interest expense 237 227 224 880 1,675 Gain on Honolulu IBX sale (9,647) - - (9,647) - Restructuring charges - 1,527 33,814 1,527 33,814 Other reconciling items 40 437 26 (314) (427) Changes in operating assets and liabilities: Accounts receivable (2,758) (646) (1,031) (9,666) (4,854) Accounts payable and accrued expenses 4,286 (1,134) 153 4,756 3,755 Accrued restructuring charges (3,591) (3,088) (1,618) (12,804) (3,066) Other assets and liabilities 938 2,029 575 466 6,212 --------- --------- --------- --------- --------- Net cash provided by operating activities 26,347 20,655 18,559 75,900 67,595 --------- --------- --------- --------- --------- Cash flows from investing activities: Purchase of Ashburn campus property - - (53,759) - (53,759) Purchase of Los Angeles IBX property - - (21) - (34,748) Purchase of Chicago IBX property - - - (9,766) - Purchases of other property and equipment (59,387) (46,620) (22,920) (162,291) (45,412) Accrued property and equipment 4,740 (3,341) 10,626 7,554 12,871 Proceeds from sale of Honolulu IBX 9,530 - - 9,530 - Other investing activities - 2 125 8 125 --------- --------- --------- --------- --------- Net cash used in investing activities (45,117) (49,959) (65,949) (154,965) (120,923) --------- --------- --------- --------- --------- Cash flows from financing activities: Proceeds from warrants, stock options and employee stock purchase plans 10,080 8,180 1,772 38,836 12,989 Proceeds from borrowings under credit line - 40,000 30,000 40,000 30,000 Proceeds from Los Angeles IBX financing - - 38,142 - 38,142 Proceeds from mortgage payable 40,000 - 60,000 40,000 60,000 Repayment of borrowings under credit line (40,000) - - (70,000) - Repayment of capital lease and other financing obligations (376) (391) (1,310) (1,506) (5,523) Repayment of mortgage payable (269) (319) - (1,104) - Other financing activities (680) (9) (655) (119) (997) --------- --------- --------- --------- --------- Net cash provided by financing activities 8,755 47,461 127,949 46,107 134,611 --------- --------- --------- --------- --------- Effect of foreign currency exchange rates on cash and cash equivalents 150 250 6 584 (520) --------- --------- --------- --------- --------- Net increase (decrease) in cash, cash equivalents and investments (9,865) 18,407 80,565 (32,374) 80,763 Cash, cash equivalents and investments at beginning of period 166,346 147,939 108,290 188,855 108,092 --------- --------- --------- --------- --------- Cash, cash equivalents and investments at end of period $156,481 $166,346 $188,855 $156,481 $188,855 ========= ========= ========= ========= ========= Free cash flow (2) $(18,770) $(29,304) $(47,390) $(79,065) $(53,328) ========= ========= ========= ========= ========= Adjusted free cash flow (3) $(28,300) $(29,304) $6,390 $(78,829) $35,179 ========= ========= ========= ========= ========= - -------------------- (1) The cash flow statements presented herein combine our short-term and long-term investments with our cash and cash equivalents in an effort to present our total unrestricted cash and equivalent balances. In our quarterly filings with the SEC on Forms 10-Q and 10-K, the purchases, sales and maturities of our short-term and long-term investments will be presented as activities within the investing activities portion of the cash flow statements. (2) We define free cash flow as net cash provided by operating activities plus net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments) as presented below: Net cash provided by operating activities as presented above $26,347 $20,655 $18,559 $75,900 $67,595 Net cash used in investing activities as presented above (45,117) (49,959) (65,949) (154,965) (120,923) --------- --------- --------- --------- --------- Free cash flow $(18,770) $(29,304) $(47,390) $(79,065) $(53,328) ========= ========= ========= ========= ========= (3) We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases or sales of real estate as presented below: Free cash flow (as defined above) $(18,770) $(29,304) $(47,390) $(79,065) $(53,328) Less purchase of Ashburn campus property - - 53,759 - 53,759 Less purchase of Los Angeles IBX property - - 21 - 34,748 Less purchase of Chicago IBX property - - - 9,766 - Less proceeds from sale of Honolulu IBX (9,530) - - (9,530) - --------- --------- --------- --------- --------- Adjusted free cash flow $(28,300) $(29,304) $6,390 $(78,829) $35,179 ========= ========= ========= ========= ========= CONTACT: Equinix, Inc. Jason Starr, 650-513-7402 (Equinix Investor Relations Contact) jstarr@equinix.com or K/F Communications, Inc. David Fonkalsrud, 415-255-6506 (Equinix Media Contact) dave@kfcomm.com