Equinix Reports First Quarter 2018 Results
Equinix Reports First Quarter 2018 Results
Interconnection and Data Center Leader Delivers 61(st) Consecutive Quarter of Revenue Growth
REDWOOD CITY, Calif., May 2, 2018 /PRNewswire/ --
-- Quarterly revenues increased 28% year-over-year to $1.216 billion; a 10%
year-over-year increase on a normalized and constant currency basis
-- New expansions announced in the Amsterdam, Tokyo and Zurich metros
totaling more than $160 million of capital expenditures
-- Key customer wins and expansions included Alibaba, Dropbox and
InterContinental Hotels Group
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended March 31, 2018. 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.
First Quarter 2018 Results Summary
-- Revenues
-- $1.216 billion, a 1% increase over the previous quarter
-- Operating Income
-- $226 million, a 3% decrease from the previous quarter
-- Adjusted EBITDA
-- $580 million, a 48% adjusted EBITDA margin
-- Includes $6 million of integration costs
-- Net Income
-- $63 million
-- AFFO
-- $415 million, a 9% increase over the previous quarter
-- Includes $6 million of integration costs
2018 Annual Guidance Summary
-- Revenues
-- $5.082 - $5.122 billion, a 17% increase over the previous year; a
normalized and constant currency increase of 9% including the
Verizon assets acquisition
-- Adjusted EBITDA
-- $2.395 - $2.435 billion or a 47% adjusted EBITDA margin
-- Assumes $50 million of integration costs for acquisitions
-- AFFO
-- $1.595 - $1.635 billion, a 12% increase over the previous year
-- Assumes $50 million of integration costs and $50 million of
additional debt service costs related to acquisitions including
Infomart Dallas and Metronode
Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.
Quote
Peter Van Camp, Executive Chairman and Interim CEO and President, Equinix:
"As Equinix approaches its 20(th )anniversary, we are excited to post our 61(st) quarter of consecutive revenue growth, which is reflective of the critical role we serve in helping businesses interconnect their IT infrastructure to succeed in the digital economy. Equinix currently serves nearly half of the Fortune 500 and our recent acquisitions, combined with our currently announced organic expansions, have positioned Equinix to capture an even greater share of the market opportunity."
Business Highlights
-- Equinix continues to invest in building out its global platform,
reflecting strong customer demand and a high level of inventory
utilization. With 30 organic expansion projects currently underway,
Equinix also completed Q1 builds in the Chicago, Osaka and Paris metros.
Today, Equinix announced new expansions in the Amsterdam, Tokyo and
Zurich metros totaling more than $160 million of additional capital
expenditures.
-- Last month, Equinix closed its 21(st) and 22(nd) acquisitions -- the
Infomart Building(TM) in Dallas and Metronode in Australia -- to expand
the reach of Platform Equinix(®) to 200 International Business
Exchange(TM) (IBX(®)) data centers across 52 markets globally, and
increasing Equinix's percentage of revenue from owned assets to over
45%.
-- The Infomart Building is one of the most-interconnected hubs in
North America and is home to four of the eight Dallas area Equinix
IBX data centers. The addition of this landmark facility strengthens
interconnection density, creates new opportunities to grow in
targeted verticals, and provides the ability to expand on adjacent
land on the property.
-- The addition of Metronode's 10 data centers and customers to
Platform Equinix establishes Equinix as the market leader in
Australia, with 15 IBX data centers to accelerate interconnection
and digital edge deployments nationwide. The acquisition provides a
stronger presence in existing metros and a wider footprint in four
new metros (Adelaide, Brisbane, Canberra and Perth). Metronode's
site in Perth, which will become the landing station for the new
Vocus Australia Singapore Cable, positions Equinix as a leading hub
for intercontinental connectivity, and builds on existing subsea
traction in Sydney.
-- In addition to global expansion initiatives, Equinix progressed its
platform vision to add new products and services that deliver increasing
value to companies by easing their shift to cloud-centric and digital
architectures. In Q1, Equinix launched Equinix SmartKey(TM), a global
key management and encryption Software as a Service (SaaS) offering that
simplifies data protection across any cloud or destination, by hosting
encryption keys separate from, but in close proximity to, the data
located across networks and hybrid multicloud environments. When
implemented as part of an Interconnection Oriented Architecture(®)
(IOA(®)) strategy, SmartKey enables companies to achieve a globally
consistent end-to-end encryption strategy with central control over
access, latency, compliance and performance.
-- The enterprise vertical continued to be the fastest growing segment in
Q1 with growth across the healthcare, legal and travel sub-verticals.
New Fortune 500 customer wins included a global beauty company deploying
distributed data management for global workforce and regulatory
compliance, and a large health insurance provider utilizing Platform
Equinix for cloud connectivity and data management. Additional wins and
expansions in Q1 included Alibaba, Dropbox and InterContinental Hotels
Group, which is leveraging Platform Equinix to connect to ecosystem
partners in key metros.
-- Interconnection revenues in Q1 grew 32% year-over-year and 16%
year-over-year on a normalized and constant currency basis. This
represents the fastest growing revenue segment and is significantly
outpacing colocation revenues, reflecting the movement towards
Interconnection Oriented Architectures and the rapid adoption of hybrid
multicloud as the preferred IT deployment model. Cross connects between
customers increased to 283,000, and the enhanced Equinix Cloud Exchange
Fabric(TM )(ECX Fabric(TM)) and its software-defined global connectivity
is offering customers even more options for transforming their digital
businesses through Platform Equinix.
Business Outlook
For the second quarter of 2018, the Company expects revenues to range between $1.257 and $1.267 billion, an increase of 4% quarter-over-quarter, or a normalized and constant currency growth rate of approximately 2%. This guidance includes an incremental $18 million from the Infomart and Metronode acquisitions and a positive foreign currency benefit of $2 million when compared to the average FX rates in Q1 2018. Adjusted EBITDA is expected to range between $579 and $589 million, which includes the Infomart and Metronode acquisitions, a $3 million positive foreign currency benefit when compared to the average FX rates in Q1 2018 and $20 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $42 and $52 million.
For the full year of 2018, total revenues are expected to range between $5.082 and $5.122 billion, an increase of 17% year-over-year, or a normalized and constant currency growth rate of approximately 9% including the Verizon assets acquisition. This updated guidance includes an incremental $92 million, due to a combination of $62 million from the Infomart and Metronode acquisitions, a positive foreign currency benefit of $35 million when compared to prior Equinix guidance rates and other accounting and Verizon-related adjustments. Adjusted EBITDA is expected to range between $2.395 and $2.435 billion, an increase of 18% year-over-year. This updated guidance includes an incremental $45 million, excluding integration costs, due to a combination of $33 million from the Infomart and Metronode acquisitions, a positive foreign currency benefit of $12 million when compared to prior Equinix guidance rates and other accounting and Verizon-related adjustments. This guidance includes an expected $50 million in integration costs. AFFO is expected to range between $1.595 and $1.635 billion, an increase of 12% year-over-year. This updated guidance includes an incremental $40 million from the Infomart and Metronode acquisitions and a $10 million positive foreign currency benefit when compared to prior Equinix guidance rates. Also, AFFO includes $50 million of additional debt service costs related to our recent acquisitions, as well as an expected $50 million in integration costs. Non-recurring capital expenditures are expected to range between $1.8 and $1.9 billion, and recurring capital expenditures are expected to range between $203 and $213 million.
The U.S. dollar exchange rates used for 2018 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.16 to the Euro, $1.35 to the Pound, ¥106 to the U.S. dollar, S$1.31 to the U.S. dollar, and R$3.30 to the U.S. dollar. The Q1 2018 global revenue breakdown by currency for the Euro, British Pound, Japanese Yen, Singapore Dollar, and Brazilian Real is 20%, 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, a contract cost 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.
Q1 2018 Results Conference Call and Replay Information
Equinix will discuss its quarterly results for the period ended March 31, 2018, along with its future outlook, in its quarterly conference call on Wednesday, May 2, 2018, 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, August 8, 2018, by dialing 1-402-220-4189 and referencing the passcode 2018. In addition, the webcast will be available at www.equinix.com/investors (no password required).
Investor Presentation and Supplemental Financial Information
Equinix has made available on its website a presentation designed to accompany the discussion of Equinix 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 52 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, changes in accounting principles and foreign currency.
Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, 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 data center, and do not reflect its current or future cash spending levels to support its business. Its IBX data centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX data center do not recur with respect to such data center, although Equinix may incur initial construction costs in future periods with respect to additional IBX data centers, and future capital expenditures remain minor relative to the initial investment. This is a trend it expects to continue. In addition, depreciation is also based on the estimated useful lives of the IBX data centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX data centers and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.
In addition, in presenting the non-GAAP financial measures, Equinix also excludes amortization expense related to acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of acquisitions and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which Equinix also believes are not meaningful in evaluating Equinix's current operations. Equinix excludes stock-based compensation expense, as it can vary significantly from period to period based on share price and the timing, size and nature of equity awards. As such, Equinix and many investors and analysts exclude stock-based compensation expense to compare its operating results with those of other companies. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX data centers, which it did not intend to build out, or its decision to reverse such restructuring charges. Equinix also excludes impairment charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Equinix also excludes gain or loss on asset sales as it represents profit or loss that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes 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, a contract cost 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 period of contract term, although the fees are generally paid in a lump sum upon installation. Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term. Equinix also includes an adjustment to contract costs incurred to obtain contracts, since contract costs are capitalized and amortized over the estimated period of benefit on a straight-line basis, although costs of obtaining contracts are generally incurred and paid during the period of obtaining the contracts. The adjustments for installation revenues, straight-line rent expense and contract costs are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. Equinix excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. Equinix excludes gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX data centers or other assets that are required to support current revenues. Equinix also excludes net income or loss from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.
Equinix presents constant currency results of operations, which is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, Equinix has presented this non-GAAP financial measure to provide investors with an additional tool to evaluate its operating results without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Equinix's business performance. To present this information, Equinix's current and comparative prior period revenues and certain operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at a consistent exchange rate for purposes of each result being compared.
Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Equinix presents such non-GAAP financial measures to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what management believes to be its core, ongoing business operations. Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.
Investors should note that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income or loss from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX data centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix including the Infomart and Metronode; 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 filings with the Securities and Exchange Commission. In particular, see recent Equinix quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.
EQUINIX, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Recurring revenues $1,150,629 $1,122,599 $898,440
Non-recurring revenues 65,248 77,622 51,085
------ ------ ------
Revenues 1,215,877 1,200,221 949,525
Cost of revenues 622,430 619,625 468,961
------- ------- -------
Gross profit 593,447 580,596 480,564
------- ------- -------
Operating expenses:
Sales and marketing 159,776 153,612 128,927
General and administrative 203,157 187,816 181,399
Acquisition costs 4,639 7,125 3,025
Total operating expenses 367,572 348,553 313,351
------- ------- -------
Income from operations 225,875 232,043 167,213
------- ------- -------
Interest and other income (expense):
Interest income 4,610 3,255 3,092
Interest expense (126,277) (126,144) (111,684)
Other income (expense) (3,064) 8,668 337
Loss on debt extinguishment (21,491) (23,669) (3,503)
------- ------- ------
Total interest and other,
net (146,222) (137,890) (111,758)
-------- -------- --------
Income before income taxes 79,653 94,153 55,455
Income tax expense (16,759) (28,938) (13,393)
------- ------- -------
Net income $62,894 $65,215 $42,062
======= ======= =======
Net income per share:
Basic net income per share $0.79 $0.83 $0.58
===== ===== =====
Diluted net income per
share $0.79 $0.82 $0.57
===== ===== =====
Shares used in computing
basic net income per share 79,241 78,543 72,773
====== ====== ======
Shares used in computing
diluted net income per
share 79,649 79,128 73,367
====== ====== ======
EQUINIX, INC.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Net income $62,894 $65,215 $42,062
------- ------- -------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
("CTA") gain 145,851 45,439 106,938
Net investment hedge CTA loss (72,635) (44,171) (28,551)
Unrealized gain (loss) on available-
for-sale securities - 99 (265)
Unrealized loss on cash flow hedges (4,080) (2,427) (11,727)
Net actuarial gain (loss) on defined
benefit plans 8 (182) 11
--- ---- ---
Total other comprehensive income (loss),
net of tax 69,144 (1,242) 66,406
------ ------ ------
Comprehensive income, net of tax $132,038 $63,973 $108,468
======== ======= ========
EQUINIX, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
March 31, December 31,
2018 2017
---- ----
Assets
Cash and cash
equivalents $2,023,808 $1,412,517
Short-term investments 27,033 28,271
Accounts receivable,
net 645,468 576,313
Other current assets 247,175 232,027
------- -------
Total current assets 2,943,484 2,249,128
Long-term investments 12,173 9,243
Property, plant and
equipment, net 9,696,692 9,394,602
Goodwill 4,485,155 4,411,762
Intangible assets, net 2,356,608 2,384,972
Other assets 447,816 241,750
------- -------
Total assets $19,941,928 $18,691,457
=========== ===========
Liabilities and Stockholders' Equity
Accounts payable and
accrued expenses $686,612 $719,257
Accrued property,
plant and equipment 257,813 220,367
Current portion of
capital lease and
other financing
obligations 77,386 78,705
Current portion of
mortgage and loans
payable 79,699 64,491
Other current
liabilities 144,965 159,914
------- -------
Total current
liabilities 1,246,475 1,242,734
Capital lease and
other financing
obligations, less
current portion 1,629,597 1,620,256
Mortgage and loans
payable, less current
portion 1,416,538 1,393,118
Senior notes 7,900,611 6,923,849
Other liabilities 608,156 661,710
------- -------
Total liabilities 12,801,377 11,841,667
---------- ----------
Common stock 80 79
Additional paid-in
capital 10,193,030 10,121,323
Treasury stock (145,695) (146,320)
Accumulated dividends (2,776,178) (2,592,792)
Accumulated other
comprehensive loss (718,169) (785,189)
Retained earnings 587,483 252,689
------- -------
Total stockholders'
equity 7,140,551 6,849,790
--------- ---------
Total liabilities and
stockholders' equity $19,941,928 $18,691,457
=========== ===========
Ending headcount by geographic region is
as follows:
Americas headcount 3,233 3,154
EMEA headcount 2,659 2,560
Asia-Pacific
headcount 1,581 1,559
----- -----
Total headcount 7,473 7,273
===== =====
EQUINIX, INC.
Summary of Debt Principal Outstanding
(in thousands)
(unaudited)
March 31, 2018 December 31, 2017
-------------- -----------------
Capital lease
and other
financing
obligations $1,706,983 $1,698,961
---------- ----------
Term loans, net
of debt
discount and
debt issuance
costs 1,444,420 1,406,686
Mortgage
payable and
other loans
payable 51,817 50,923
Plus: debt
discount and
issuance
costs, net 8,345 8,615
----- -----
Total mortgage
and loans
payable
principal 1,504,582 1,466,224
--------- ---------
Senior notes,
net of debt
issuance costs 7,900,611 6,923,849
Plus: debt
issuance costs 87,664 78,151
------ ------
Total senior
notes
principal 7,988,275 7,002,000
--------- ---------
Total debt
principal
outstanding $11,199,840 $10,167,185
=========== ===========
EQUINIX, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Cash flows from operating activities:
Net income $62,894 $65,215 $42,062
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 306,465 279,774 219,013
Stock-based compensation 42,536 45,898 38,323
Amortization of debt issuance costs and
debt discounts 4,099 4,349 11,580
Loss on debt extinguishment 21,491 23,669 3,503
Other items 8,888 (3,439) 8,380
Changes in operating assets and
liabilities:
Accounts receivable (71,275) 40,656 (39,664)
Income taxes, net (15,381) 18,672 (20,637)
Accounts payable and accrued expenses (35,143) 29,536 (65,414)
Other assets and liabilities (23,667) (9,451) 50,225
Net cash provided by operating
activities 300,907 494,879 247,371
------- ------- -------
Cash flows from investing activities:
Purchases, sales and maturities of
investments, net (497) 13,554 (7,104)
Business acquisitions, net of cash and
restricted cash acquired - (334,754) (36,041)
Purchases of real estate (14,700) (30,119) (41,739)
Purchases of other property, plant and
equipment (349,729) (432,677) (277,242)
Proceeds from asset sales - - 47,767
Net cash used in investing activities (364,926) (783,996) (314,359)
-------- -------- --------
Cash flows from financing activities:
Proceeds from employee equity awards 25,847 71 20,074
Payments of dividend distributions (186,999) (157,583) (148,083)
Proceeds from public offering of common
stock, net of offering costs - 355,080 2,126,258
Proceeds from loans payable - 997,076 1,059,800
Proceeds from senior notes 929,850 1,179,001 1,250,000
Repayment of capital lease and other
financing obligations (55,787) (33,218) (16,596)
Repayments of mortgage and loans payable (6,599) (2,214,278) (21,510)
Debt extinguishment costs (20,704) (3,102) (3,132)
Debt issuance costs (11,583) (24,161) (40,665)
Other financing activities - - (900)
---
Net cash provided by financing
activities 674,025 98,886 4,225,246
------- ------ ---------
Effect of foreign currency exchange
rates on cash, cash equivalents and
restricted cash 7,903 4,737 11,541
----- ----- ------
Net increase (decrease) in cash, cash
equivalents and restricted cash 617,909 (185,494) 4,169,799
Cash, cash equivalents and restricted
cash at beginning of period 1,450,701 1,636,195 773,247
Cash, cash equivalents and restricted
cash at end of period $2,068,610 $1,450,701 $4,943,046
========== ========== ==========
Supplemental cash flow information:
Cash paid for taxes $31,761 $10,230 $29,552
======= ======= =======
Cash paid for interest $107,057 $102,385 $115,434
======== ======== ========
Free cash flow (negative free cash
flow) (1) $(63,522) $(302,671) $(59,884)
======== ========= ========
Adjusted free cash flow (adjusted
negative free cash flow) (2) $(48,822) $62,202 $17,896
======== ======= =======
(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 $300,907 $494,879 $247,371
Net cash used in investing activities as
presented above (364,926) (783,996) (314,359)
Purchases, sales and maturities of
investments, net 497 (13,554) 7,104
Negative free cash flow $(63,522) $(302,671) $(59,884)
===
(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) $(63,522) $(302,671) $(59,884)
Less business acquisitions, net of cash
and restricted cash acquired - 334,754 36,041
Less purchases of real estate 14,700 30,119 41,739
Adjusted free cash flow (adjusted negative
free cash flow) $(48,822) $62,202 $17,896
===
EQUINIX, INC.
Non-GAAP Measures and Other Supplemental Data
(in thousands)
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Recurring revenues $1,150,629 $1,122,599 $898,440
Non-recurring revenues 65,248 77,622 51,085
------
Revenues (1) 1,215,877 1,200,221 949,525
---------
Cash cost of revenues (2) 395,522 407,389 303,540
-------
Cash gross profit (3) 820,355 792,832 645,985
-------
Cash operating expenses (4):
Cash sales and marketing expenses (5) 98,069 94,273 99,861
Cash general and administrative expenses (6) 142,771 133,719 118,550
-------
Total cash operating expenses (7) 240,840 227,992 218,411
-------
Adjusted EBITDA (8) $579,515 $564,840 $427,574
===
Cash gross margins (9) 67% 66% 68%
=== === === ===
Adjusted EBITDA margins (10) 48% 47% 45%
=== === === ===
Adjusted EBITDA flow-through rate (11) 94% 30% (130)%
=== === === ===
FFO (12) $290,755 $285,618 $200,866
===
AFFO (13) (14) $414,576 $381,527 $304,110
===
(1) The geographic split of our revenues on a services basis is presented below:
Americas Revenues:
Colocation $427,125 $422,648 $299,273
Interconnection 129,253 127,793 100,850
Managed infrastructure 18,535 18,512 15,061
Other 1,079 1,340 919
-----
Recurring revenues 575,992 570,293 416,103
Non-recurring revenues 26,635 35,874 20,344
------
Revenues $602,627 $606,167 $436,447
===
EMEA Revenues:
Colocation $288,061 $282,240 $253,254
Interconnection 34,977 31,311 22,351
Managed infrastructure 30,686 28,780 17,672
Other 1,766 2,573 3,330
-----
Recurring revenues 355,490 344,904 296,607
Non-recurring revenues 24,140 24,728 18,240
------
Revenues $379,630 $369,632 $314,847
===
Asia-Pacific Revenues:
Colocation $166,198 $156,824 $138,995
Interconnection 30,769 28,781 24,859
Managed infrastructure 22,180 21,797 21,876
Recurring revenues 219,147 207,402 185,730
Non-recurring revenues 14,473 17,020 12,501
------
Revenues $233,620 $224,422 $198,231
===
Worldwide Revenues:
Colocation $881,384 $861,712 $691,522
Interconnection 194,999 187,885 148,060
Managed infrastructure 71,401 69,089 54,609
Other 2,845 3,913 4,249
-----
Recurring revenues 1,150,629 1,122,599 898,440
Non-recurring revenues 65,248 77,622 51,085
Revenues $1,215,877 $1,200,221 $949,525
===
(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 $622,430 $619,625 $468,961
Depreciation, amortization and accretion
expense (223,009) (208,615) (162,510)
Stock-based compensation expense (3,899) (3,621) (2,911)
-------
Cash cost of revenues $395,522 $407,389 $303,540
===
The geographic split of our cash cost of revenues is presented below:
Americas cash cost of revenues $164,255 $179,884 $113,059
EMEA cash cost of revenues 152,814 148,721 122,175
Asia-Pacific cash cost of revenues 78,453 78,784 68,306
Cash cost of revenues $395,522 $407,389 $303,540
===
(3) We define cash gross profit as revenues less cash cost of revenues (as defined
above).
(4) We define cash operating expense as selling, general, and administrative expense
less depreciation, amortization, and stock-based compensation. We also refer to
cash operating expense as cash selling, general and administrative expense or
"cash SG&A".
Selling, general, and administrative expense $362,933 $341,428 $310,326
Depreciation and amortization expense (83,456) (71,159) (56,503)
Stock-based compensation expense (38,637) (42,277) (35,412)
--------
Cash operating expense $240,840 $227,992 $218,411
===
(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 $159,776 $153,612 $128,927
Depreciation and amortization expense (50,001) (47,490) (18,094)
Stock-based compensation expense (11,706) (11,849) (10,972)
--------
Cash sales and marketing expense $98,069 $94,273 $99,861
===
(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 $203,157 $187,816 $181,399
Depreciation and amortization expense (33,455) (23,669) (38,409)
Stock-based compensation expense (26,931) (30,428) (24,440)
--------
Cash general and administrative expense $142,771 $133,719 $118,550
===
(7) The geographic split of our cash operating expense, or cash SG&A, as defined above,
is presented below:
Americas cash SG&A $146,823 $140,460 $124,769
EMEA cash SG&A 60,638 55,854 63,118
Asia-Pacific cash SG&A 33,379 31,678 30,524
------
Cash SG&A $240,840 $227,992 $218,411
===
(8) We define adjusted EBITDA as income from 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 operations $225,875 $232,043 $167,213
Depreciation, amortization and accretion
expense 306,465 279,774 219,013
Stock-based compensation expense 42,536 45,898 38,323
Acquisition costs 4,639 7,125 3,025
Adjusted EBITDA $579,515 $564,840 $427,574
===
The geographic split of our adjusted EBITDA is presented below:
Americas income from operations $101,736 $101,286 $81,110
Americas depreciation, amortization and
accretion expense 158,026 149,970 88,428
Americas stock-based compensation expense 29,877 33,455 27,774
Americas acquisition costs 1,910 1,112 1,307
Americas adjusted EBITDA $291,549 $285,823 $198,619
===
EMEA income from operations $64,103 $73,749 $44,981
EMEA depreciation, amortization and accretion
expense 92,492 79,741 76,806
EMEA stock-based compensation expense 7,139 6,874 6,049
EMEA acquisition costs 2,444 4,693 1,718
EMEA adjusted EBITDA $166,178 $165,057 $129,554
===
Asia-Pacific income from operations $60,036 $57,008 $41,122
Asia-Pacific depreciation, amortization and
accretion expense 55,947 50,063 53,779
Asia-Pacific stock-based compensation expense 5,520 5,569 4,500
Asia-Pacific acquisition costs 285 1,320 -
Asia-Pacific adjusted EBITDA $121,788 $113,960 $99,401
===
(9) We define cash gross margins as cash gross profit divided by revenues.
Our cash gross margins by geographic region is presented below:
Americas cash gross margins 73% 70% 74%
=== === === ===
EMEA cash gross margins 60% 60% 61%
=== === === ===
Asia-Pacific cash gross margins 66% 65% 66%
=== === === ===
(10) We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
Americas adjusted EBITDA margins 48% 47% 46%
=== === === ===
EMEA adjusted EBITDA margins 44% 45% 41%
=== === === ===
Asia-Pacific adjusted EBITDA margins 52% 51% 50%
=== === === ===
(11) We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth
divided by incremental revenue growth as follows:
Adjusted EBITDA - current period $579,515 $564,840 $427,574
Less adjusted EBITDA - prior period (564,840) (550,319) (436,491)
---------
Adjusted EBITDA growth $14,675 $14,521 $(8,917)
===
Revenues - current period $1,215,877 $1,200,221 $949,525
Less revenues - prior period (1,200,221) (1,152,261) (942,647)
-----------
Revenue growth $15,656 $47,960 $6,878
===
Adjusted EBITDA flow-through rate 94% 30% (130)%
=== === === ===
(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 $62,894 $65,215 $42,062
Adjustments:
Real estate depreciation 222,855 219,237 159,414
(Gain) loss on disposition of real estate
property 5,006 1,166 (638)
Adjustments for FFO from unconsolidated joint
ventures - - 28
---
FFO $290,755 $285,618 $200,866
===
(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, a contract cost 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 $290,755 $285,618 $200,866
Adjustments:
Installation revenue adjustment 2,159 6,721 4,675
Straight-line rent expense adjustment 2,301 3,204 2,409
Amortization of deferred financing costs 4,099 4,349 11,580
Contract cost adjustment (3,355) - -
Stock-based compensation expense 42,536 45,898 38,323
Non-real estate depreciation expense 34,097 24,100 28,575
Amortization expense 50,616 48,940 29,017
Accretion expense (adjustment) (1,103) (12,503) 2,007
Recurring capital expenditures (35,231) (62,540) (22,672)
Loss on debt extinguishment 21,491 23,669 3,503
Acquisition costs 4,639 7,125 3,025
Income tax expense adjustment 1,572 6,946 2,809
Adjustments for AFFO from unconsolidated
joint ventures - - (7)
---
AFFO $414,576 $381,527 $304,110
===
(14) Following is how we reconcile from adjusted EBITDA to AFFO:
Adjusted EBITDA $579,515 $564,840 $427,574
Adjustments:
Interest expense, net of interest income (121,667) (122,889) (108,592)
Amortization of deferred financing costs 4,099 4,349 11,580
Income tax expense (16,759) (28,938) (13,393)
Income tax expense adjustment 1,572 6,946 2,809
Straight-line rent expense adjustment 2,301 3,204 2,409
Contract cost adjustment (3,355) - -
Installation revenue adjustment 2,159 6,721 4,675
Recurring capital expenditures (35,231) (62,540) (22,672)
Other income (expense) (3,064) 8,668 337
(Gain) loss on disposition of real estate
property 5,006 1,166 (638)
Adjustments for unconsolidated JVs' and non-
controlling interests - - 21
AFFO $414,576 $381,527 $304,110
===
CONTACT: Equinix Investor Relations Contacts: Katrina Rymill, Equinix, Inc., (650) 598-6583, krymill@equinix.com; or Chip Newcom, Equinix, Inc., (650) 598-6262, cnewcom@equinix.com; or Equinix Media Contact: David Fonkalsrud, Equinix, Inc., (650) 598-6240, dfonkalsrud@equinix.com
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SOURCE Equinix, Inc.
