Equinix Reports Third Quarter 2017 Results
REDWOOD CITY, Calif., Nov. 1, 2017 /PRNewswire/ --
-- Quarterly revenues increased 25% year-over-year to $1,152 million; 10%
year-over-year on a normalized and constant currency basis
-- Record number of new wins closed across every vertical in Q3, with
notable outperformance from enterprise and financial services
-- Key customer wins and expansions included Alibaba.com, Baidu, Blade,
Charter Communications, Netflix, Priceline.com, Oracle, Salesforce.com,
SAP, Tencent and Walmart
-- 13 new expansion projects announced across all three regions totaling
$615 million
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended September 30, 2017. 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 2017 Results Summary
-- Revenues from continuing operations
-- $1,152 million, an 8% increase over the previous quarter
-- Includes $137 million of revenues from the acquisition of 29 Verizon
data centers
-- Operating Income
-- $225 million, a 22% increase over the previous quarter
-- Adjusted EBITDA
-- $550 million, a 48% adjusted EBITDA margin
-- Includes $14 million of integration costs
-- Net Income from Continuing Operations
-- $80 million
-- AFFO
-- $391 million, a 9% increase over the previous quarter
2017 Annual Guidance Summary
-- Revenues from continuing operations
-- $4,355 - $4,363 million, a 21% increase over the previous year; a
normalized and constant currency increase of 11%
-- Adjusted EBITDA
-- $2,049 - $2,057 million or a 47% adjusted EBITDA margin
-- Assumes $54 million of integration costs for acquisitions
-- AFFO
-- $1,411 - $1,419 million, a 31% increase over the previous year; a
normalized and constant currency increase of 14%
-- Assumes $54 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 or loss from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.
Quote
Steve Smith, President and CEO, Equinix:
"Equinix had a strong third quarter as customers continue to adopt interconnection oriented architectures as the preferred platform for their shift to digital. Robust demand is driving higher utilization levels, and we are investing in support of this momentum with expansions, both organically and through strategic acquisitions, to deliver even greater value to customers through our global platform. As customers embrace hybrid and multicloud as the IT architecture of choice, our interconnection strength is resonating, and Equinix continues to outpace market growth and gain market share."
Business Highlights
-- In Q3, Equinix continued, through both organic builds and acquisitions,
to expand the industry-leading global reach of Platform Equinix(TM),
which now spans 190 International Business Exchange(TM) (IBX(®)) data
centers across 48 markets and 24 countries.
-- The purchase of Itconic, which closed in early Q4, added 400
customers across five new data centers in Spain and Portugal,
further expanding Equinix's presence in EMEA and extending the
company's footprint into two new countries and four new markets.
-- Equinix also expanded in Turkey, completing the acquisition in early
Q4 of its second IBX data center in Istanbul, a strategic gateway
between Europe and Asia with critical economic and geopolitical
importance.
-- Organic expansion included the opening of the HK5 IBX in the TKO
data center area of Hong Kong and the DC12 IBX at the Equinix
Ashburn campus in the Washington, D.C. area. These openings add
capacity in two of the company's most interconnection-rich markets.
-- Continuing its investment in organic expansion, Equinix today
announced 13 new expansion projects in the Americas (Denver, Miami
and São Paulo), EMEA (Amsterdam, London, Stockholm and three new
projects in Frankfurt) and APAC (Hong Kong, Melbourne, Shanghai and
Singapore) regions totaling $615 million in capital expenditures.
These new projects bring the total number of announced expansion
projects underway to 22.
-- These expansions come as customers continue to leverage the global scope
of Platform Equinix to achieve a distributed digital edge. In Q3, more
than 59% of revenues came from customers deployed across all three
regions, up from 58% in Q2, and 84% came from customers deployed across
multiple metros.
-- Equinix achieved a record number of new wins across every vertical in
Q3, a notable outperformance that included 10 new Fortune 500 wins from
the enterprise and financial services verticals as these businesses
re-architect their infrastructure to directly and securely interconnect
their people, locations, clouds and data. The network vertical achieved
record bookings with expansions from Charter Communications, and with
continued momentum within the subsea space from Seaborn Networks and
Aqua Comms.
-- In Q3, Equinix continued growing the penetration of its indirect
channel, with 19% of bookings originating from the channel, up from 17%
last quarter. As a part of this strategy, partners such as Datalink,
Datapipe and NetApp are beginning to build their value-added services
around core Equinix offerings, including Equinix Cloud Exchange(TM) and
Equinix Performance Hub(TM).
-- Interconnection revenues in Q3 grew 31% year-over-year and 17%
year-over-year on a normalized and constant currency basis,
significantly outpacing colocation revenues and reflecting the movement
towards Interconnection Oriented Architecture(TM) strategies and the
rapid adoption of hybrid, multicloud as the preferred IT deployment
model. Cross-connects between customers increased to more than 248,000,
and the Equinix Cloud Exchange(TM) platform now serves more than 950
customers.
Business Outlook
For the fourth quarter of 2017, the Company expects revenues to range between $1,187 and $1,195 million, an increase of 3% quarter over quarter at the midpoint, on both an as-reported and a normalized and constant currency basis. This guidance includes a negative foreign currency impact of $1 million when compared to the average FX rates in Q3 2017. Cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between $228 and $236 million. Adjusted EBITDA is expected to range between $562 and $570 million, which includes a $2 million negative foreign currency impact when compared to the average FX rates in Q3 2017, and $13 million of integration costs related to acquisitions. Capital expenditures are expected to range between $355 and $375 million, which includes approximately $65 million of recurring capital expenditures.
For the full year of 2017, total revenues are expected to range between $4,355 and $4,363 million, an increase of 21% year over year, or a normalized and constant currency increase of 11%. This $37 million guidance raise is due to better than expected combined operating business performance of $8 million, foreign currency benefit of $16 million when compared to prior Equinix guidance rates and $13 million in revenues from the Itconic and Istanbul 2 ("IS2") acquisitions. Total year cash gross margins are expected to approximate 67 - 68%. Cash selling, general and administrative expenses are expected to range between $883 and $891 million. Adjusted EBITDA is expected to range between $2,049 and $2,057 million, an increase of 24% year over year, or a normalized and constant currency increase of approximately 11%. This $10 million adjusted EBITDA raise is due to better than expected combined operating performance of $2 million, a foreign currency benefit of $7 million when compared to prior Equinix guidance rates and net $1 million in adjusted EBITDA from the Itconic and IS2 acquisitions. This guidance includes an expected $54 million in integration costs from acquisitions, and includes an incremental $2 million from IS2 and Itconic. AFFO is expected to range between $1,411 and $1,419 million, an increase of 31% year over year, or a normalized and constant currency increase of approximately 14%. This $28 million AFFO guidance raise is due to better than expected combined business performance of $20 million, foreign currency benefit of $7 million when compared to prior Equinix guidance rates and net $1 million in adjusted EBITDA from the Itconic and IS2 acquisitions. Capital expenditures are expected to range between $1,300 and $1,320 million, including approximately $170 million of recurring capital expenditure.
The U.S. dollar exchange rates used for 2017 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.13 to the Euro, $1.38 to the Pound, S$1.36 to the U.S. dollar, ¥112 to the U.S. dollar and R$3.16 to the U.S. dollar. The Q3 2017 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 18%, 9%, 6%, 6% and 4%, respectively.
The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses. The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.
Q3 2017 Results Conference Call and Replay Information
Equinix will discuss its quarterly results for the period ended September 30, 2017, along with its future outlook, in its quarterly conference call on Wednesday, November 1, 2017, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-517-308-9482 (domestic and international) and reference the passcode EQIX.
A replay of the call will be available one hour after the call, through Wednesday, February 14, 2018, by dialing 1-203-369-1512 and referencing the passcode 2017. 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 results and future outlook, along with certain supplemental financial information and other data. Interested parties may access this information through the Equinix Investor Relations website at www.equinix.com/investors.
Additional Resources
-- Equinix Investor Relations 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 48 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies.
Non-GAAP Financial Measures
Equinix provides all information required in accordance with generally accepted accounting principles ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Equinix uses non-GAAP financial measures to evaluate its operations.
Equinix provides normalized and constant currency growth rates, which are calculated to adjust for acquisitions, dispositions, integration costs and foreign currency.
Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from continuing operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales.
In presenting non-GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow and adjusted free cash flow, Equinix excludes certain items that it believes are not good indicators of Equinix's current or future operating performance. These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales. Equinix excludes these items in order for its lenders, investors and the industry analysts who review and report on Equinix to better evaluate Equinix's operating performance and cash spending levels relative to its industry sector and competitors.
Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of an IBX 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 acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of acquisitions and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which Equinix also believes are not meaningful in evaluating Equinix's current operations. Equinix excludes stock-based compensation expense, as it can vary significantly from period to period based on share price, the timing, size and nature of equity awards. As such, Equinix and many investors and analysts, exclude this stock-based compensation expense to compare its operating results with those of other companies. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges. Equinix also excludes impairment charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Equinix also excludes gain or loss on asset sales as it represents profit that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes acquisition costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The acquisition costs relate to costs Equinix incurs in connection with business combinations. Such charges generally are not relevant to assessing the long-term performance of Equinix. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the acquisitions. Management believes items such as restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales are non-core transactions; however, these types of costs may occur in future periods.
Equinix also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), which are non-GAAP financial measures commonly used in the REIT industry. FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income or loss, excluding gain or loss from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. AFFO represents FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gain or loss on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income or loss from discontinued operations, net of tax and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and acquisition costs for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above.
Equinix includes an adjustment for revenues from installation fees, since installation fees are deferred and recognized ratably over the 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 revenues 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 gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX centers or other assets that are required to support current revenues. Equinix also excludes net income or loss from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.
Equinix presents constant currency results of operations, which is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, Equinix has presented this non-GAAP financial measure to provide investors with an additional tool to evaluate its operating results without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Equinix's business performance. To present this information, Equinix's current and comparative prior period revenues and certain operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at a consistent exchange rate for purposes of each result being compared.
Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP 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 or loss from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX data centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix'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,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Recurring revenues $1,089,033 $1,010,048 $877,006 $2,997,521 $2,524,932
Non-recurring revenues 63,228 56,373 47,670 170,686 144,410
------ ------ ------ ------- -------
Revenues 1,152,261 1,066,421 924,676 3,168,207 2,669,342
Cost of revenues 582,360 522,203 470,302 1,573,524 1,354,949
------- ------- ------- --------- ---------
Gross profit 569,901 544,218 454,374 1,594,683 1,314,393
------- ------- ------- --------- ---------
Operating expenses:
Sales and marketing 157,619 141,566 110,936 428,112 325,358
General and administrative 185,336 191,355 181,239 558,090 515,605
Acquisition costs 2,083 26,402 12,505 31,510 64,635
Impairment charges - - 7,698 - 7,698
Gain on asset sales - - (27,945) - (33,187)
--- --- ------- --- -------
Total operating expenses 345,038 359,323 284,433 1,017,712 880,109
------- ------- ------- --------- -------
Income from continuing
operations 224,863 184,895 169,941 576,971 434,284
------- ------- ------- ------- -------
Interest and other income (expense):
Interest income 2,291 4,437 762 9,820 2,528
Interest expense (121,828) (119,042) (92,200) (352,554) (293,395)
Other income (expense) (1,076) 1,284 2,938 545 (56,217)
Loss on debt extinguishment (22,156) (16,444) (9,894) (42,103) (10,499)
------- ------- ------ ------- -------
Total interest and other,
net (142,769) (129,765) (98,394) (384,292) (357,583)
-------- -------- ------- -------- --------
Income from continuing
operations before income
taxes 82,094 55,130 71,547 192,679 76,701
Income tax expense (2,194) (9,325) (22,778) (24,912) (25,957)
------ ------ ------- ------- -------
Net income from continuing
operations 79,900 45,805 48,769 167,767 50,744
Net income from
discontinued operations,
net of tax - - 2,681 - 14,306
Net income $79,900 $45,805 $51,450 $167,767 $65,050
======= ======= ======= ======== =======
Net income per share:
Basic net income per share
from continuing operations $1.02 $0.59 $0.69 $2.20 $0.73
Basic net income per share
from discontinued
operations - - 0.04 - 0.21
--- --- ---- --- ----
Basic net income per share $1.02 $0.59 $0.73 $2.20 $0.94
===== ===== ===== ===== =====
Diluted net income per
share from continuing
operations $1.02 $0.58 $0.68 $2.18 $0.72
Diluted net income per
share from discontinued
operations - - 0.04 - 0.20
Diluted net income per
share $1.02 $0.58 $0.72 $2.18 $0.92
===== ===== ===== ===== =====
Shares used in computing
basic net income per share 78,055 77,923 71,190 76,283 69,689
====== ====== ====== ====== ======
Shares used in computing
diluted net income per
share 78,719 78,508 71,908 76,948 70,389
====== ====== ====== ====== ======
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,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Net income $79,900 $45,805 $51,450 $167,767 $65,050
------- ------- ------- -------- -------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
("CTA") gain (loss) 100,909 200,983 (32,603) 408,830 (215,065)
Unrealized gain (loss) on available-
for-sale securities 245 (65) 1,487 (85) 2,382
Unrealized gain (loss) on cash flow
hedges (13,070) (27,671) (4,153) (52,468) 3,789
Net investment hedge CTA gain (loss) (60,723) (101,847) (34,721) (191,121) 4,163
Net actuarial gain on defined benefit
plans 13 15 7 39 21
--- --- --- --- ---
Total other comprehensive income (loss),
net of tax 27,374 71,415 (69,983) 165,195 (204,710)
------ ------ ------- ------- --------
Comprehensive income (loss), net of tax $107,274 $117,220 $(18,533) $332,962 $(139,660)
======== ======== ======== ======== =========
EQUINIX, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
2017 2016
---- ----
Assets
Cash and cash
equivalents $1,599,988 $748,476
Short-term investments 29,572 3,409
Accounts receivable,
net 597,242 396,245
Other current assets 217,006 319,396
------- -------
Total current assets 2,443,808 1,467,526
Long-term investments 10,885 10,042
Property, plant and
equipment, net 9,006,171 7,199,210
Goodwill 4,226,490 2,986,064
Intangible assets, net 2,335,175 719,231
Other assets 285,967 226,298
------- -------
Total assets $18,308,496 $12,608,371
=========== ===========
Liabilities and Stockholders' Equity
Accounts payable and
accrued expenses $657,229 $581,739
Accrued property,
plant and equipment 205,444 144,842
Current portion of
capital lease and
other financing
obligations 60,201 101,046
Current portion of
mortgage and loans
payable 84,455 67,928
Other current
liabilities 149,295 133,140
------- -------
Total current
liabilities 1,156,624 1,028,695
Capital lease and
other financing
obligations, less
current portion 1,612,188 1,410,742
Mortgage and loans
payable, less current
portion 2,551,510 1,369,087
Senior notes 5,717,276 3,810,770
Other liabilities 728,681 623,248
------- -------
Total liabilities 11,766,279 8,242,542
---------- ---------
Common stock 79 72
Additional paid-in
capital 9,718,580 7,413,519
Treasury stock (146,369) (147,559)
Accumulated dividends (2,433,600) (1,969,645)
Accumulated other
comprehensive loss (783,947) (949,142)
Retained earnings 187,474 18,584
------- ------
Total stockholders'
equity 6,542,217 4,365,829
--------- ---------
Total liabilities and
stockholders' equity $18,308,496 $12,608,371
=========== ===========
Ending headcount by geographic region is
as follows:
Americas headcount 3,063 2,510
EMEA headcount 2,289 2,063
Asia-Pacific
headcount 1,543 1,420
----- -----
Total headcount 6,895 5,993
===== =====
EQUINIX, INC.
Summary of Debt Principal Outstanding
(in thousands)
(unaudited)
September 30, 2017 December 31, 2016
------------------ -----------------
Capital lease
and other
financing
obligations $1,672,389 $1,511,788
---------- ----------
Term loans, net
of debt
discount and
debt issuance
costs 2,587,770 1,390,771
Mortgage
payable and
other loans
payable 48,195 46,244
Plus: debt
discount,
premium and
issuance
costs, net 29,840 20,949
------ ------
Total mortgage
and loans
payable
principal 2,665,805 1,457,964
--------- ---------
Senior notes,
net of debt
issuance costs 5,717,276 3,810,770
Plus: debt
issuance costs 64,224 39,230
------ ------
Total senior
notes
principal 5,781,500 3,850,000
--------- ---------
Total debt
principal
outstanding $10,119,694 $6,819,752
=========== ==========
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,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Cash flows from operating activities:
Net income $79,900 $45,805 $51,450 $167,767 $65,050
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and accretion 277,719 252,386 215,370 749,118 631,242
Stock-based compensation 45,654 45,625 42,346 129,602 115,730
Amortization of debt issuance costs and
debt discounts 4,390 4,130 2,684 20,100 13,709
Loss on debt extinguishment 22,156 16,444 10,181 42,103 10,499
Gain on asset sales - - (27,945) - (33,187)
Gain on sale of discontinued operations - - (4,242) - (4,242)
Impairment charges - - 7,698 - 7,698
Other items (744) 3,775 5,370 11,411 17,552
Changes in operating assets and
liabilities:
Accounts receivable (50,530) (112,236) (30,440) (202,430) (72,807)
Income taxes, net (19,681) (13,290) 24,776 (53,608) 1,021
Accounts payable and accrued expenses 28,781 81,585 (901) 44,952 (11,526)
Other assets and liabilities 2,865 (17,751) 39,290 35,339 (22,004)
-----
Net cash provided by operating
activities 390,510 306,473 335,637 944,354 718,735
------- ------- ------- ------- -------
Cash flows from investing activities:
Purchases, sales and maturities of
investments, net (28,258) 10,303 (2,123) (25,059) 10,060
Business acquisitions, net of cash and
restricted cash acquired 1,128 (3,593,613) (165,901) (3,628,526) (1,767,227)
Purchases of real estate (16,384) (6,841) - (64,964) (28,118)
Purchases of other property, plant and
equipment (320,234) (348,572) (279,477) (946,048) (727,044)
Proceeds from asset sales - - 805,372 47,767 828,197
Net cash provided by (used in)
investing activities (363,748) (3,938,723) 357,871 (4,616,830) (1,684,132)
-------- ---------- ------- ---------- ----------
Cash flows from financing activities:
Proceeds from employee equity awards 21,506 45 16,504 41,625 34,143
Payments of dividend distributions (159,541) (156,290) (127,457) (463,914) (374,151)
Proceeds from public offering of common
stock, net of offering costs - 83 - 2,126,341 -
Proceeds from loans payable - - 9,154 1,059,800 710,404
Proceeds from senior notes 1,199,700 - - 2,449,700 -
Repayments of capital lease and other
financing obligations (15,792) (27,864) (55,528) (60,252) (100,863)
Repayments of mortgage and loans payable
and convertible debt (21,215) (20,795) (13,354) (63,520) (986,465)
Repayment of senior notes (500,000) - - (500,000) -
Debt extinguishment costs (11,766) (8,122) (10,181) (23,020) (10,181)
Debt issuance costs (16,267) 46 (11,709) (56,886) (11,751)
Other financing activities - - - (900) -
---
Net cash provided by (used in)
financing activities 496,625 (212,897) (192,571) 4,508,974 (738,864)
------- -------- -------- --------- --------
Effect of foreign currency exchange
rates on cash, cash equivalents and
restricted cash 9,582 5,327 4,491 26,450 13,130
Change in cash balances included in
assets held for sale - - 21,356 - (3,755)
--- --- ------ --- ------
Net increase (decrease) in cash, cash
equivalents and restricted cash 532,969 (3,839,820) 526,784 862,948 (1,694,886)
Cash, cash equivalents and restricted
cash at beginning of period 1,103,226 4,943,046 496,757 773,247 2,718,427
Cash, cash equivalents and restricted
cash at end of period $1,636,195 $1,103,226 $1,023,541 $1,636,195 $1,023,541
========== ========== ========== ========== ==========
Supplemental cash flow information:
Cash paid (refunded) for taxes $16,590 $16,269 $(73) $62,411 $31,503
======= ======= ==== ======= =======
Cash paid for interest $129,014 $97,960 $111,094 $342,408 $271,530
======== ======= ======== ======== ========
Free cash flow (negative free cash $55,020 $(3,642,553) $695,631 $(3,647,417) $(975,457)
flow) (1)
Adjusted free cash flow (adjusted
negative free cash flow) (2) $70,276 $(42,099) $861,532 $46,073 $819,888
======= ======== ======== ======= ========
(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 $390,510 $306,473 $335,637 $944,354 $718,735
Net cash provided by (used in) investing
activities as presented above (363,748) (3,938,723) 357,871 (4,616,830) (1,684,132)
Purchases, sales and maturities of
investments, net 28,258 (10,303) 2,123 25,059 (10,060)
Free cash flow (negative free cash flow) $55,020 $(3,642,553) $695,631 $(3,647,417) $(975,457)
===
(2) We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate and business
acquisitions, net of cash and restricted cash acquired as presented below:
Free cash flow (as defined above) $55,020 $(3,642,553) $695,631 $(3,647,417) $(975,457)
Less business acquisitions, net of cash
and restricted cash acquired (1,128) 3,593,613 165,901 3,628,526 1,767,227
Less purchases of real estate 16,384 6,841 - 64,964 28,118
Adjusted free cash flow (adjusted negative
free cash flow) $70,276 $(42,099) $861,532 $46,073 $819,888
===
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,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Recurring revenues $1,089,033 $1,010,048 $877,006 $2,997,521 $2,524,932
Non-recurring revenues 63,228 56,373 47,670 170,686 144,410
------
Revenues (1) 1,152,261 1,066,421 924,676 3,168,207 2,669,342
---------
Cash cost of revenues (2) 377,767 344,469 304,821 1,025,776 867,954
-------
Cash gross profit (3) 774,494 721,952 619,855 2,142,431 1,801,388
-------
Cash operating expenses (4):
Cash sales and marketing expenses (5) 96,873 89,616 79,515 286,350 237,278
Cash general and administrative 127,302 123,028 120,298 368,880 343,127
expenses (6)
---
Total cash operating expenses (7) 224,175 212,644 199,813 655,230 580,405
-------
Adjusted EBITDA (8) $550,319 $509,308 $420,042 $1,487,201 $1,220,983
===
Cash gross margins (9) 67% 68% 67% 68% 67%
=== === === === === ===
Adjusted EBITDA 48% 48% 45% 47% 46%
margins (10)
===
Adjusted EBITDA flow-through rate (11) 48% 70% (1)% 53% 43%
=== === === === === ===
FFO (12) $286,119 $219,760 $187,831 $706,745 $505,221
===
AFFO (13) (14) $391,289 $360,114 $284,179 $1,055,513 $784,554
===
(1) The geographic split of our revenues on a services basis is presented below:
Americas Revenues:
Colocation $422,244 $374,764 $294,046 $1,096,281 $862,465
Interconnection 124,377 116,248 94,865 341,475 274,196
Managed infrastructure 18,359 17,005 14,649 50,425 39,019
Other 1,056 1,903 902 3,878 2,417
-----
Recurring revenues 566,036 509,920 404,462 1,492,059 1,178,097
Non-recurring revenues 30,502 23,688 20,680 74,534 64,910
------
Revenues $596,538 $533,608 $425,142 $1,566,593 $1,243,007
===
EMEA Revenues:
Colocation $268,365 $259,684 $244,420 $781,303 $699,019
Interconnection 27,574 23,655 21,464 73,580 63,589
Managed infrastructure 22,465 19,205 16,359 59,342 50,310
Other 2,475 2,037 3,947 7,842 8,463
-----
Recurring revenues 320,879 304,581 286,190 922,067 821,381
Non-recurring revenues 17,954 18,363 15,060 54,557 48,334
------
Revenues $338,833 $322,944 $301,250 $976,624 $869,715
===
Asia-Pacific Revenues:
Colocation $152,071 $147,783 $140,493 $438,849 $397,098
Interconnection 27,593 25,781 21,172 78,233 59,362
Managed infrastructure 22,454 21,983 24,138 66,313 66,973
Other - - 551 - 2,021
---
Recurring revenues 202,118 195,547 186,354 583,395 525,454
Non-recurring revenues 14,772 14,322 11,930 41,595 31,166
------
Revenues $216,890 $209,869 $198,284 $624,990 $556,620
===
Worldwide Revenues:
Colocation $842,680 $782,231 $678,959 $2,316,433 $1,958,582
Interconnection 179,544 165,684 137,501 493,288 397,147
Managed infrastructure 63,278 58,193 55,146 176,080 156,302
Other 3,531 3,940 5,400 11,720 12,901
-----
Recurring revenues 1,089,033 1,010,048 877,006 2,997,521 2,524,932
Non-recurring revenues 63,228 56,373 47,670 170,686 144,410
Revenues $1,152,261 $1,066,421 $924,676 $3,168,207 $2,669,342
===
(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 $582,360 $522,203 $470,302 $1,573,524 $1,354,949
Depreciation, amortization and accretion
expense (200,682) (174,556) (162,165) (537,748) (477,241)
Stock-based compensation expense (3,911) (3,178) (3,316) (10,000) (9,754)
-------
Cash cost of revenues $377,767 $344,469 $304,821 $1,025,776 $867,954
===
The geographic split of our cash cost of revenues is presented below:
Americas cash cost of revenues $168,901 $148,589 $114,934 $430,549 $333,250
EMEA cash cost of revenues 133,137 124,485 116,587 379,797 333,046
Asia-Pacific cash cost of revenues 75,729 71,395 73,300 215,430 201,658
Cash cost of revenues $377,767 $344,469 $304,821 $1,025,776 $867,954
===
(3) We define cash gross profit as revenues less cash cost of revenues (as defined above).
(4) We define cash operating expense as selling, general, and administrative expense less depreciation, amortization, and stock-based
compensation. We also refer to cash operating expense as cash selling, marketing, general and administrative expense or "cash
SG&A".
Selling, general, and administrative expense $342,955 $332,921 $292,175 $986,202 $840,963
Depreciation and amortization expense (77,037) (77,830) (53,205) (211,370) (154,001)
Stock-based compensation expense (41,743) (42,447) (39,157) (119,602) (106,557)
--------
Cash operating expense $224,175 $212,644 $199,813 $655,230 $580,405
===
(5) We define cash sales and marketing expense as sales and marketing expense less depreciation, amortization and stock-based
compensation as presented below:
Sales and marketing expense $157,619 $141,566 $110,936 $428,112 $325,358
Depreciation and amortization expense (46,899) (38,524) (19,719) (103,517) (55,893)
Stock-based compensation expense (13,847) (13,426) (11,702) (38,245) (32,187)
--------
Cash sales and marketing expense $96,873 $89,616 $79,515 $286,350 $237,278
===
(6) We define cash general and administrative expense as general and administrative expense less depreciation, amortization and stock-
based compensation as presented below:
General and administrative expense $185,336 $191,355 $181,239 $558,090 $515,605
Depreciation and amortization expense (30,138) (39,306) (33,486) (107,853) (98,108)
Stock-based compensation expense (27,896) (29,021) (27,455) (81,357) (74,370)
--------
Cash general and administrative expense $127,302 $123,028 $120,298 $368,880 $343,127
===
(7) The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below:
Americas cash SG&A $135,536 $126,868 $108,077 $387,173 $328,138
EMEA cash SG&A 59,232 56,837 63,195 179,187 170,257
Asia-Pacific cash SG&A 29,407 28,939 28,541 88,870 82,010
------
Cash SG&A $224,175 $212,644 $199,813 $655,230 $580,405
===
(8) We define adjusted EBITDA as income from continuing operations excluding depreciation, amortization, accretion, stock-based
compensation, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales as presented below:
Income from continuing operations $224,863 $184,895 $169,941 $576,971 $434,284
Depreciation, amortization and accretion
expense 277,719 252,386 215,370 749,118 631,242
Stock-based compensation expense 45,654 45,625 42,473 129,602 116,311
Impairment charges - - 7,698 - 7,698
Acquisition costs 2,083 26,402 12,505 31,510 64,635
Gain on asset sales - - (27,945) - (33,187)
---
Adjusted EBITDA $550,319 $509,308 $420,042 $1,487,201 $1,220,983
===
The geographic split of our adjusted EBITDA is presented below:
Americas income from continuing operations $105,785 $75,039 $89,004 $261,934 $264,643
Americas depreciation, amortization and
accretion expense 151,665 124,905 82,204 364,998 237,798
Americas stock-based compensation expense 33,419 33,771 29,309 94,964 81,428
Americas acquisition costs 1,232 24,436 1,614 26,975 2,992
Americas gain on asset sales - - - - (5,242)
---
Americas adjusted EBITDA $292,101 $258,151 $202,131 $748,871 $581,619
===
EMEA income from continuing operations $64,197 $54,927 $51,829 $164,105 $73,506
EMEA depreciation, amortization and accretion
expense 74,625 78,118 78,555 229,549 237,972
EMEA stock-based compensation expense 6,791 6,611 8,138 19,451 21,433
EMEA acquisition costs 851 1,966 10,891 4,535 61,446
EMEA gain on asset sales - - (27,945) - (27,945)
---
EMEA adjusted EBITDA $146,464 $141,622 $121,468 $417,640 $366,412
===
Asia-Pacific income from continuing
operations $54,881 $54,929 $29,108 $150,932 $96,135
Asia-Pacific depreciation, amortization and
accretion expense 51,429 49,363 54,611 154,571 155,472
Asia-Pacific stock-based compensation expense 5,444 5,243 5,026 15,187 13,450
Asia-Pacific impairment charges - - 7,698 - 7,698
Asia-Pacific acquisition costs - - - - 197
Asia-Pacific adjusted EBITDA $111,754 $109,535 $96,443 $320,690 $272,952
===
(9) We define cash gross margins as cash gross profit divided by revenues.
Our cash gross margins by geographic region is presented below:
Americas cash gross margins 72% 72% 73% 73% 73%
=== === === === === ===
EMEA cash gross margins 61% 61% 61% 61% 62%
=== === === === === ===
Asia-Pacific cash gross margins 65% 66% 63% 66% 64%
=== === === === === ===
(10) We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
Americas adjusted EBITDA margins 49% 48% 48% 48% 47%
=== === === === === ===
EMEA adjusted EBITDA margins 43% 44% 40% 43% 42%
=== === === === === ===
Asia-Pacific adjusted EBITDA margins 52% 52% 49% 51% 49%
=== === === === === ===
(11) We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as
follows:
Adjusted EBITDA - current period $550,319 $509,308 $420,042 $1,487,201 $1,220,983
Less adjusted EBITDA - prior period (509,308) (427,574) (420,291) (1,276,824) (965,879)
---------
Adjusted EBITDA growth $41,011 $81,734 $(249) $210,377 $255,104
===
Revenues - current period $1,152,261 $1,066,421 $924,676 $3,168,207 $2,669,342
Less revenues - prior period (1,066,421) (949,525) (900,510) (2,767,833) (2,082,693)
-----------
Revenue growth $85,840 $116,896 $24,166 $400,374 $586,649
===
Adjusted EBITDA flow-through rate 48% 70% (1)% 53% 43%
=== === === === === ===
(12) FFO is defined as net income or loss, excluding gain or loss from the disposition of real estate assets, depreciation and
amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of
these items.
Net income $79,900 $45,805 $51,450 $167,767 $65,050
Adjustments:
Real estate depreciation 200,313 175,387 159,788 535,114 469,510
(Gain) loss on disposition of real estate
property 5,877 (1,460) (23,436) 3,779 (29,424)
Adjustments for FFO from unconsolidated joint
ventures 29 28 29 85 85
---
FFO $286,119 $219,760 $187,831 $706,745 $505,221
===
(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, gain or loss on debt extinguishment, an income tax expense
adjustment, net income or loss from discontinued operations, net of tax, recurring capital expenditures and adjustments from FFO
to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items.
FFO $286,119 $219,760 $187,831 $706,745 $505,221
Adjustments:
Installation revenue adjustment 6,161 6,939 4,612 17,775 15,373
Straight-line rent expense adjustment 2,297 1,015 2,686 5,721 5,714
Amortization of deferred financing costs 4,390 4,130 2,687 20,100 13,438
Stock-based compensation expense 45,654 45,625 42,474 129,602 116,312
Non-real estate depreciation expense 29,205 29,241 22,108 87,021 64,516
Amortization expense 48,893 50,158 32,929 128,068 93,384
Accretion expense (gain) (692) (2,400) 545 (1,085) 3,832
Recurring capital expenditures (44,914) (37,869) (41,600) (105,455) (105,343)
Loss on debt extinguishment 22,156 16,444 9,894 42,103 10,499
Acquisition costs 2,083 26,402 12,505 31,510 64,635
Impairment charges - - 7,698 - 7,698
Income tax expense adjustment (10,058) 674 2,501 (6,575) 3,612
Net income from discontinued operations, net
of tax - - (2,681) - (14,306)
Adjustments for AFFO from unconsolidated
joint ventures (5) (5) (10) (17) (31)
---
AFFO $391,289 $360,114 $284,179 $1,055,513 $784,554
===
(14) Following is how we reconcile from adjusted EBITDA to AFFO:
Adjusted EBITDA $550,319 $509,308 $420,042 $1,487,201 $1,220,983
Adjustments:
Interest expense, net of interest income (119,537) (114,605) (91,437) (342,734) (290,866)
Amortization of deferred financing costs 4,390 4,130 2,687 20,100 13,438
Income tax expense (2,194) (9,325) (22,778) (24,912) (25,957)
Income tax expense adjustment (10,058) 674 2,501 (6,575) 3,612
Straight-line rent expense adjustment 2,297 1,015 2,686 5,721 5,714
Installation revenue adjustment 6,161 6,939 4,612 17,775 15,373
Recurring capital expenditures (44,914) (37,869) (41,600) (105,455) (105,343)
Other income (expense) (1,076) 1,284 2,938 545 (56,217)
(Gain) loss on disposition of real estate
property 5,877 (1,460) (23,436) 3,779 (29,424)
Adjustments for unconsolidated JVs' and non-
controlling interests 24 23 19 68 54
Adjustment for gain on sale of asset - - 27,945 - 33,187
---
AFFO $391,289 $360,114 $284,179 $1,055,513 $784,554
===
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SOURCE Equinix, Inc.
