Equinix Reports Second Quarter 2018 Results
REDWOOD CITY, Calif., Aug. 8, 2018 /PRNewswire/ --
-- Quarterly revenues increased 18% year-over-year to $1.262 billion; a 9% year-over-year increase on a normalized and constant currency basis -- Key customer wins and expansions included China Mobile, Lithia Motors and Tencent -- Customer deployments across multiple metros increased to 85% of total recurring revenue, demonstrating the value of the Equinix global platform
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended June 30, 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.
Second Quarter 2018 Results Summary
-- Revenues -- $1.262 billion, a 4% increase over the previous quarter -- Operating Income -- $215 million -- Adjusted EBITDA -- $604 million, a 48% adjusted EBITDA margin -- Includes $10 million of integration costs for acquisitions -- Net Income -- $68 million -- Includes $30 million of acquisition costs and $19 million of loss on debt extinguishment costs primarily related to the Infomart acquisition -- AFFO -- $428 million, a 3% increase over the previous quarter -- Includes $10 million of integration costs for acquisitions
2018 Annual Guidance Summary
-- Revenues -- $5.037 - $5.077 billion, a 16% increase over the previous year; a normalized and constant currency increase of 9%, including $55 million of FX headwinds compared to prior guidance -- Adjusted EBITDA -- $2.379 - $2.419 billion or a 47% adjusted EBITDA margin, including $21 million of FX headwinds compared to prior guidance, or 48% excluding integration costs for acquisitions -- Assumes $49 million of integration costs for acquisitions -- AFFO -- $1.596 - $1.636 billion, a 12% increase over the previous year, including $4 million of FX headwinds compared to prior guidance -- Assumes $49 million of integration costs for acquisitions
Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.
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Peter Van Camp, Executive Chairman and Interim CEO and President, Equinix:
"Equinix delivered another strong quarter with record bookings across all three regions and virtually all key operating metrics showing solid momentum in our go-to-market engine and interconnection strategy. Our unique global platform of 200 data centers, and the customer ecosystems within them, remain at the heart of our strategy, as evidenced by strong cross-regional sales and healthy interconnection activity in Q2. We are looking forward to the second half of the year as we focus on our strategic initiatives, deliver value from our acquisitions and work to convert a healthy customer pipeline."
Q2 Business Highlights
-- Equinix continued to expand its global platform in response to strong underlying demand. In addition to progress with the integration of acquired assets from Infomart, Metronode and Verizon, Equinix completed expansions in the Amsterdam, Denver and London metros. With a utilization rate of 82% across the platform, Equinix has an active pipeline of 32 expansion projects currently underway, including a partnership with Omantel to enter the new market of Muscat, Oman, with a new IBX data center opening next year that will serve as a regional interconnection hub between global business markets. -- Equinix completed the integration of Terremark Federal Group (TFG) into Equinix Government Solutions, expanding the company's Federal industry expertise and adding key capabilities for Federal agencies and systems integrators. This integration included 33 new Equinix employees who bring a deep understanding of the Federal sector to act as trusted advisors for IT transformation initiatives. The diverse portfolio of Equinix assets, including former Verizon government campuses in Miami and Culpeper, enables support for sensitive government workloads in an optimal environment, based on security, cost and performance. -- Interconnection revenue continued to outpace colocation revenue, reflecting the movement towards Interconnection Oriented Architecture(®) strategies and the rapid adoption of hybrid, multicloud as the preferred IT deployment model. Cross connects between customers increased to more than 288,000, and the Equinix Cloud Exchange Fabric(TM )(ECX Fabric(TM)) platform now serves more than 1,200 customers. This includes those deploying virtual connections through the new capabilities of ECX Fabric, which was extended in Q2 to Australia and Japan with full rollout in the Asia-Pacific region targeted for Q3, and full inter-regional connectivity slated for delivery by year end. -- Equinix continued the growth of its indirect selling initiatives, with channel sales increasing to more than 20% of bookings for the quarter. This accounted for half of the new logos acquired in the quarter, driven by solid performance across all regions and channels, including alliance, reseller and referral partners.
Business Outlook
For the third quarter of 2018, the Company expects revenues to range between $1.272 and $1.282 billion, an increase of 1% quarter-over-quarter, or a normalized and constant currency growth rate of approximately 2%. This guidance includes a negative foreign currency impact of $14 million when compared to the average FX rates in Q2 2018. Adjusted EBITDA is expected to range between $591 and $601 million, which includes a $9 million negative foreign currency impact when compared to the average FX rates in Q2 2018, higher seasonal utilities costs and $15 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $56 and $66 million.
For the full year of 2018, total revenues are expected to range between $5.037 and $5.077 billion, an increase of 16% year-over-year, or a normalized and constant currency growth rate of approximately 9%. This updated guidance includes a raise of full year revenues guidance of $10 million, offset by a negative foreign currency impact of $55 million when compared to prior Equinix guidance rates. Adjusted EBITDA is expected to range between $2.379 and $2.419 billion, an increase of 17% year-over-year. This updated guidance includes a raise of full year adjusted EBITDA guidance of $5 million, offset by a negative foreign currency impact of $21 million when compared to prior Equinix guidance rates, and an expected $49 million in integration costs. AFFO is expected to range between $1.596 and $1.636 billion, an increase of 12% year-over-year. This updated guidance includes a raise of full year AFFO guidance of $5 million, offset by a negative foreign currency impact of $4 million when compared to prior Equinix guidance rates. Also, AFFO includes an expected $49 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 approximately $200 and $210 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 $1.14 to the Euro, $1.31 to the Pound, ¥111 to the U.S. dollar, S$1.36 to the U.S. dollar, and R$3.87 to the U.S. dollar. The Q2 2018 global revenue breakdown by currency for the Euro, British Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 19%, 9%, 6%, 6% and 3%, respectively.
The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses. The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, 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.
Q2 2018 Results Conference Call and Replay Information
Equinix will discuss its quarterly results for the period ended June 30, 2018, along with its future outlook, in its quarterly conference call on Wednesday, August 8, 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 Thursday, November 1, 2018, by dialing 1-203-369-0283 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 and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income or loss from discontinued operations, net of tax and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and 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 and debt discounts and premiums as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. Equinix excludes gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX 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, Metronode and Verizon; 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 Six Months Ended June 30, March 31, June 30, June 30, June 30, 2018 2018 2017 2018 2017 ---- ---- ---- ---- ---- Recurring revenues $1,187,749 $1,150,629 $1,010,048 $2,338,378 $1,908,488 Non-recurring revenues 74,194 65,248 56,373 139,442 107,458 ------ ------ ------ ------- ------- Revenues 1,261,943 1,215,877 1,066,421 2,477,820 2,015,946 Cost of revenues 651,801 622,430 522,203 1,274,231 991,164 ------- ------- ------- --------- ------- Gross profit 610,142 593,447 544,218 1,203,589 1,024,782 ------- ------- ------- --------- --------- Operating expenses: Sales and marketing 154,202 159,776 141,566 313,978 270,493 General and administrative 210,489 203,157 191,355 413,646 372,754 Acquisition costs 30,413 4,639 26,402 35,052 29,427 Total operating expenses 395,104 367,572 359,323 762,676 672,674 ------- ------- ------- ------- ------- Income from operations 215,038 225,875 184,895 440,913 352,108 ------- ------- ------- ------- ------- Interest and other income (expense): Interest income 3,958 4,610 4,437 8,568 7,529 Interest expense (134,673) (126,277) (119,042) (260,950) (230,726) Other income (expense) 8,866 (3,064) 1,284 5,802 1,621 Loss on debt extinguishment (19,215) (21,491) (16,444) (40,706) (19,947) ------- ------- ------- ------- ------- Total interest and other, net (141,064) (146,222) (129,765) (287,286) (241,523) -------- -------- -------- -------- -------- Income before income taxes 73,974 79,653 55,130 153,627 110,585 Income tax expense (6,356) (16,759) (9,325) (23,115) (22,718) ------ ------- ------ ------- ------- Net income $67,618 $62,894 $45,805 $130,512 $87,867 ======= ======= ======= ======== ======= Net income per share: Basic net income per share $0.85 $0.79 $0.59 $1.64 $1.17 ===== ===== ===== ===== ===== Diluted net income per share $0.85 $0.79 $0.58 $1.64 $1.16 ===== ===== ===== ===== ===== Shares used in computing basic net income per share 79,479 79,241 77,923 79,361 75,383 ====== ====== ====== ====== ====== Shares used in computing diluted net income per share 79,752 79,649 78,508 79,746 76,008 ====== ====== ====== ====== ======
EQUINIX, INC. Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2018 2018 2017 2018 2017 ---- ---- ---- ---- ---- Net income $67,618 $62,894 $45,805 $130,512 $87,867 ------- ------- ------- -------- ------- Other comprehensive income (loss), net of tax: Foreign currency translation adjustment ("CTA") gain (loss) (421,233) 145,851 200,983 (275,382) 307,921 Net investment hedge CTA gain (loss) 226,115 (72,635) (101,847) 153,480 (130,398) Unrealized loss on available-for-sale securities - - (65) - (330) Unrealized gain (loss) on cash flow hedges 35,280 (4,080) (27,671) 31,200 (39,398) Net actuarial gain on defined benefit plans 13 8 15 21 26 --- --- --- --- --- Total other comprehensive income (loss), net of tax (159,825) 69,144 71,415 (90,681) 137,821 -------- ------ ------ ------- ------- Comprehensive income (loss), net of tax $(92,207) $132,038 $117,220 $39,831 $225,688 ======== ======== ======== ======= ========
EQUINIX, INC. Condensed Consolidated Balance Sheets (in thousands) (unaudited) June 30, December 31, 2018 2017 ---- ---- Assets Cash and cash equivalents $966,308 $1,412,517 Short-term investments 18,199 28,271 Accounts receivable, net 616,472 576,313 Other current assets 249,846 232,027 ------- ------- Total current assets 1,850,825 2,249,128 Long-term investments 4,200 9,243 Property, plant and equipment, net 10,378,915 9,394,602 Goodwill 4,870,300 4,411,762 Intangible assets, net 2,440,087 2,384,972 Other assets 525,961 241,750 ------- ------- Total assets $20,070,288 $18,691,457 =========== =========== Liabilities and Stockholders' Equity Accounts payable and accrued expenses $710,584 $719,257 Accrued property, plant and equipment 269,409 220,367 Current portion of capital lease and other financing obligations 85,263 78,705 Current portion of mortgage and loans payable 75,224 64,491 Current portion of senior notes 150,828 - Other current liabilities 142,312 159,914 Total current liabilities 1,433,620 1,242,734 Capital lease and other financing obligations, less current portion 1,426,368 1,620,256 Mortgage and loans payable, less current portion 1,317,940 1,393,118 Senior notes, less current portion 8,334,383 6,923,849 Other liabilities 633,450 661,710 ------- ------- Total liabilities 13,145,761 11,841,667 ---------- ---------- Common stock 80 79 Additional paid-in capital 10,253,155 10,121,323 Treasury stock (145,632) (146,320) Accumulated dividends (2,960,183) (2,592,792) Accumulated other comprehensive loss (877,994) (785,189) Retained earnings 655,101 252,689 ------- ------- Total stockholders' equity 6,924,527 6,849,790 --------- --------- Total liabilities and stockholders' equity $20,070,288 $18,691,457 =========== =========== Ending headcount by geographic region is as follows: Americas headcount 3,375 3,154 EMEA headcount 2,661 2,560 Asia-Pacific headcount 1,574 1,559 ----- ----- Total headcount 7,610 7,273 ===== =====
EQUINIX, INC. Summary of Debt Principal Outstanding (in thousands) (unaudited) June 30, 2018 December 31, 2017 ------------- ----------------- Capital lease and other financing obligations $1,511,631 $1,698,961 ---------- ---------- Term loans 1,345,349 1,406,686 Mortgage payable and other loans payable 47,815 50,923 Plus: debt discount and issuance costs, net 7,265 8,615 ----- ----- Total mortgage and loans payable principal 1,400,429 1,466,224 --------- --------- Senior notes 8,485,211 6,923,849 Plus: debt issuance costs 82,297 78,151 Less: debt premium (7,158) - ------ --- Total senior notes principal 8,560,350 7,002,000 --------- --------- Total debt principal outstanding $11,472,410 $10,167,185 =========== ===========
EQUINIX, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2018 2018 2017 2018 2017 ---- ---- ---- ---- ---- Cash flows from operating activities: Net income $67,618 $62,894 $45,805 $130,512 $87,867 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion 308,828 306,465 252,386 615,293 471,399 Stock-based compensation 49,725 42,536 45,625 92,261 83,948 Amortization of debt issuance costs and debt discounts and premiums 3,362 4,099 4,130 7,461 15,710 Loss on debt extinguishment 19,215 21,491 16,444 40,706 19,947 Other items 2,322 8,888 3,775 11,210 12,155 Changes in operating assets and liabilities: Accounts receivable 32,834 (71,275) (112,236) (38,441) (151,900) Income taxes, net (7,485) (15,381) (13,290) (22,866) (33,927) Accounts payable and accrued expenses 10,818 (35,143) 81,585 (24,325) 16,171 Other assets and liabilities 51,491 (23,667) (17,751) 27,824 32,474 Net cash provided by operating activities 538,728 300,907 306,473 839,635 553,844 ------- ------- ------- ------- ------- Cash flows from investing activities: Purchases, sales and maturities of investments, net 13,240 (497) 10,303 12,743 3,199 Business acquisitions, net of cash and restricted cash acquired (830,993) - (3,593,613) (830,993) (3,629,654) Purchases of real estate (27,082) (14,700) (6,841) (41,782) (48,580) Purchases of other property, plant and equipment (520,239) (349,729) (348,572) (869,968) (625,814) Proceeds from asset sales - - - - 47,767 Net cash used in investing activities (1,365,074) (364,926) (3,938,723) (1,730,000) (4,253,082) ---------- -------- ---------- ---------- ---------- Cash flows from financing activities: Proceeds from employee equity awards 13 25,847 45 25,860 20,119 Payment of dividend distributions (181,760) (186,999) (156,290) (368,759) (304,373) Proceeds from public offering of common stock, net of offering costs 7,622 - 83 7,622 2,126,341 Proceeds from loans payable - - - - 1,059,800 Proceeds from senior notes - 929,850 - 929,850 1,250,000 Repayment of capital lease and other financing obligations (14,069) (55,787) (27,864) (69,856) (44,460) Repayment of mortgage and loans payable (18,816) (6,599) (20,795) (25,415) (42,305) Debt extinguishment costs 148 (20,704) (8,122) (20,556) (11,254) Debt issuance costs - (11,583) 46 (11,583) (40,619) Other financing activities 580 - - 580 (900) --- Net cash provided by (used in) financing activities (206,282) 674,025 (212,897) 467,743 4,012,349 -------- ------- -------- ------- --------- Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash (33,743) 7,903 5,327 (25,840) 16,868 ------- ----- ----- Net increase (decrease) in cash, cash equivalents and restricted cash (1,066,371) 617,909 (3,839,820) (448,462) 329,979 Cash, cash equivalents and restricted cash at beginning of period 2,068,610 1,450,701 4,943,046 1,450,701 773,247 Cash, cash equivalents and restricted cash at end of period $1,002,239 $2,068,610 $1,103,226 $1,002,239 $1,103,226 ========== ========== ========== ========== ========== Supplemental cash flow information: Cash paid for taxes $17,681 $31,761 $16,269 $49,442 $45,821 ======= ======= ======= ======= ======= Cash paid for interest $115,071 $107,057 $97,960 $222,128 $213,394 ======== ======== ======= ======== ======== Free cash flow (negative free cash flow) (1) $(839,586) $(63,522) $(3,642,553) $(903,108) $(3,702,437) ========= ======== =========== ========= =========== Adjusted free cash flow (adjusted negative free cash flow) (2) $18,489 $(48,822) $(42,099) $(30,333) $(24,203) ======= ======== ======== ======== ======== (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 $538,728 $300,907 $306,473 $839,635 $553,844 Net cash used in investing activities as presented above (1,365,074) (364,926) (3,938,723) (1,730,000) (4,253,082) Purchases, sales and maturities of investments, net (13,240) 497 (10,303) (12,743) (3,199) Negative free cash flow $(839,586) $(63,522) $(3,642,553) $(903,108) $(3,702,437) === (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) $(839,586) $(63,522) $(3,642,553) $(903,108) $(3,702,437) Less business acquisitions, net of cash and restricted cash acquired 830,993 - 3,593,613 830,993 3,629,654 Less purchases of real estate 27,082 14,700 6,841 41,782 48,580 Adjusted free cash flow (adjusted negative free cash flow) $18,489 $(48,822) $(42,099) $(30,333) $(24,203) ===
EQUINIX, INC. Non-GAAP Measures and Other Supplemental Data (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2018 2018 2017 2018 2017 ---- ---- ---- ---- ---- Recurring revenues $1,187,749 $1,150,629 $1,010,048 $2,338,378 $1,908,488 Non-recurring revenues 74,194 65,248 56,373 139,442 107,458 ------ Revenues (1) 1,261,943 1,215,877 1,066,421 2,477,820 2,015,946 --------- Cash cost of revenues (2) 421,733 395,522 344,469 817,255 648,009 ------- Cash gross profit (3) 840,210 820,355 721,952 1,660,565 1,367,937 ------- Cash operating expenses (4) (7): Cash sales and marketing expenses (5) 91,468 98,069 89,616 189,537 189,477 Cash general and administrative expenses (6) 144,738 142,771 123,028 287,509 241,578 ------- Total cash operating expenses (4) (7) 236,206 240,840 212,644 477,046 431,055 ------- Adjusted EBITDA (8) $604,004 $579,515 $509,308 $1,183,519 $936,882 === Cash gross margins (9) 67% 67% 68% 67% 68% === === === === === === Adjusted EBITDA margins (10) 48% 48% 48% 48% 46% === === === === === === Adjusted EBITDA flow-through rate (11) 53% 94% 70% 55% 54% === === === === === === FFO (12) $289,525 $290,755 $219,760 $580,280 $420,626 === AFFO (13) (14) $428,126 $414,576 $360,114 $842,702 $664,224 === (1) The geographic split of our revenues on a services basis is presented below: Americas Revenues: Colocation $433,895 $427,125 $374,764 $861,020 $674,037 Interconnection 131,720 129,253 116,248 260,973 217,098 Managed infrastructure 18,292 18,535 17,005 36,827 32,066 Other 4,980 1,079 1,903 6,059 2,822 ----- Recurring revenues 588,887 575,992 509,920 1,164,879 926,023 Non-recurring revenues 29,388 26,635 23,688 56,023 44,032 ------ Revenues $618,275 $602,627 $533,608 $1,220,902 $970,055 === EMEA Revenues: Colocation $293,518 $288,061 $259,684 $581,579 $512,938 Interconnection 33,969 34,977 23,655 68,946 46,006 Managed infrastructure 29,731 30,686 19,205 60,417 36,877 Other 2,364 1,766 2,037 4,130 5,367 ----- Recurring revenues 359,582 355,490 304,581 715,072 601,188 Non-recurring revenues 23,586 24,140 18,363 47,726 36,603 ------ Revenues $383,168 $379,630 $322,944 $762,798 $637,791 === Asia-Pacific Revenues: Colocation $186,172 $166,198 $147,783 $352,370 $286,778 Interconnection 31,924 30,769 25,781 62,693 50,640 Managed infrastructure 21,184 22,180 21,983 43,364 43,859 Recurring revenues 239,280 219,147 195,547 458,427 381,277 Non-recurring revenues 21,220 14,473 14,322 35,693 26,823 ------ Revenues $260,500 $233,620 $209,869 $494,120 $408,100 === Worldwide Revenues: Colocation $913,585 $881,384 $782,231 $1,794,969 $1,473,753 Interconnection 197,613 194,999 165,684 392,612 313,744 Managed infrastructure 69,207 71,401 58,193 140,608 112,802 Other 7,344 2,845 3,940 10,189 8,189 ----- Recurring revenues 1,187,749 1,150,629 1,010,048 2,338,378 1,908,488 Non-recurring revenues 74,194 65,248 56,373 139,442 107,458 Revenues $1,261,943 $1,215,877 $1,066,421 $2,477,820 $2,015,946 === (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 $651,801 $622,430 $522,203 $1,274,231 $991,164 Depreciation, amortization and accretion expense (225,461) (223,009) (174,556) (448,470) (337,066) Stock-based compensation expense (4,607) (3,899) (3,178) (8,506) (6,089) ------- Cash cost of revenues $421,733 $395,522 $344,469 $817,255 $648,009 === The geographic split of our cash cost of revenues is presented below: Americas cash cost of revenues $180,057 $164,255 $148,589 $344,312 $261,648 EMEA cash cost of revenues 155,085 152,814 124,485 307,899 246,660 Asia-Pacific cash cost of revenues 86,591 78,453 71,395 165,044 139,701 Cash cost of revenues $421,733 $395,522 $344,469 $817,255 $648,009 === (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 $364,691 $362,933 $332,921 $727,624 $643,247 Depreciation and amortization expense (83,367) (83,456) (77,830) (166,823) (134,333) Stock-based compensation expense (45,118) (38,637) (42,447) (83,755) (77,859) -------- Cash operating expense $236,206 $240,840 $212,644 $477,046 $431,055 === (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 $154,202 $159,776 $141,566 $313,978 $270,493 Depreciation and amortization expense (48,626) (50,001) (38,524) (98,627) (56,618) Stock-based compensation expense (14,108) (11,706) (13,426) (25,814) (24,398) -------- Cash sales and marketing expense $91,468 $98,069 $89,616 $189,537 $189,477 === (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 $210,489 $203,157 $191,355 $413,646 $372,754 Depreciation and amortization expense (34,741) (33,455) (39,306) (68,196) (77,715) Stock-based compensation expense (31,010) (26,931) (29,021) (57,941) (53,461) -------- Cash general and administrative expense $144,738 $142,771 $123,028 $287,509 $241,578 === (7) The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below: Americas cash SG&A $144,263 $146,823 $126,868 $291,086 $251,637 EMEA cash SG&A 57,268 60,638 56,837 117,906 119,955 Asia-Pacific cash SG&A 34,675 33,379 28,939 68,054 59,463 ------ Cash SG&A $236,206 $240,840 $212,644 $477,046 $431,055 === (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 $215,038 $225,875 $184,895 $440,913 $352,108 Depreciation, amortization and accretion expense 308,828 306,465 252,386 615,293 471,399 Stock-based compensation expense 49,725 42,536 45,625 92,261 83,948 Acquisition costs 30,413 4,639 26,402 35,052 29,427 Adjusted EBITDA $604,004 $579,515 $509,308 $1,183,519 $936,882 === The geographic split of our adjusted EBITDA is presented below: Americas income from operations $87,711 $101,736 $75,039 $189,447 $156,149 Americas depreciation, amortization and accretion expense 160,337 158,026 124,905 318,363 213,333 Americas stock-based compensation expense 35,104 29,877 33,771 64,981 61,545 Americas acquisition costs 10,803 1,910 24,436 12,713 25,743 Americas adjusted EBITDA $293,955 $291,549 $258,151 $585,504 $456,770 === EMEA income from operations $73,046 $64,103 $54,927 $137,149 $99,908 EMEA depreciation, amortization and accretion expense 88,828 92,492 78,118 181,320 154,924 EMEA stock-based compensation expense 8,403 7,139 6,611 15,542 12,660 EMEA acquisition costs 538 2,444 1,966 2,982 3,684 EMEA adjusted EBITDA $170,815 $166,178 $141,622 $336,993 $271,176 === Asia-Pacific income from operations $54,281 $60,036 $54,929 $114,317 $96,051 Asia-Pacific depreciation, amortization and accretion expense 59,663 55,947 49,363 115,610 103,142 Asia-Pacific stock-based compensation expense 6,218 5,520 5,243 11,738 9,743 Asia-Pacific acquisition costs 19,072 285 - 19,357 - Asia-Pacific adjusted EBITDA $139,234 $121,788 $109,535 $261,022 $208,936 === (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 71% 73% 72% 72% 73% === === === === === === EMEA cash gross margins 60% 60% 61% 60% 61% === === === === === === Asia-Pacific cash gross margins 67% 66% 66% 67% 66% === === === === === === (10) We define adjusted EBITDA margins as adjusted EBITDA divided by revenues. Americas adjusted EBITDA margins 48% 48% 48% 48% 47% === === === === === === EMEA adjusted EBITDA margins 45% 44% 44% 44% 43% === === === === === === Asia-Pacific adjusted EBITDA margins 53% 52% 52% 53% 51% === === === === === === (11) We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows: Adjusted EBITDA - current period $604,004 $579,515 $509,308 $1,183,519 $936,882 Less adjusted EBITDA - prior period (579,515) (564,840) (427,574) (1,115,159) (856,533) --------- Adjusted EBITDA growth $24,489 $14,675 $81,734 $68,360 $80,349 === Revenues - current period $1,261,943 $1,215,877 $1,066,421 $2,477,820 $2,015,946 Less revenues - prior period (1,215,877) (1,200,221) (949,525) (2,352,482) (1,867,323) ----------- Revenue growth $46,066 $15,656 $116,896 $125,338 $148,623 Adjusted EBITDA flow-through rate 53% 94% 70% 55% 54% === === === === === === (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 $67,618 $62,894 $45,805 $130,512 $87,867 Adjustments: Real estate depreciation 221,029 222,855 175,387 443,884 334,801 (Gain) loss on disposition of real estate property 878 5,006 (1,460) 5,884 (2,098) Adjustments for FFO from unconsolidated joint ventures - - 28 - 56 --- FFO $289,525 $290,755 $219,760 $580,280 $420,626 === (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 and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, net income or loss from discontinued operations, net of tax, recurring capital expenditures and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. FFO $289,525 $290,755 $219,760 $580,280 $420,626 Adjustments: Installation revenue adjustment 840 2,159 6,939 2,999 11,614 Straight-line rent expense adjustment 1,664 2,301 1,015 3,965 3,424 Amortization of deferred financing costs and debt discounts and premiums 3,362 4,099 4,130 7,461 15,710 Contract cost adjustment (4,384) (3,355) - (7,739) - Stock-based compensation expense 49,725 42,536 45,625 92,261 83,948 Non-real estate depreciation expense 35,267 34,097 29,241 69,364 57,816 Amortization expense 51,035 50,616 50,158 101,651 79,175 Accretion expense (adjustment) 1,497 (1,103) (2,400) 394 (393) Recurring capital expenditures (42,206) (35,231) (37,869) (77,437) (60,541) Loss on debt extinguishment 19,215 21,491 16,444 40,706 19,947 Acquisition costs 30,413 4,639 26,402 35,052 29,427 Income tax expense adjustment (7,827) 1,572 674 (6,255) 3,483 Adjustments for AFFO from unconsolidated joint ventures - - (5) - (12) --- AFFO $428,126 $414,576 $360,114 $842,702 $664,224 === (14) Following is how we reconcile from adjusted EBITDA to AFFO: Adjusted EBITDA $604,004 $579,515 $509,308 $1,183,519 $936,882 Adjustments: Interest expense, net of interest income (130,715) (121,667) (114,605) (252,382) (223,197) Amortization of deferred financing costs and debt discounts and premiums 3,362 4,099 4,130 7,461 15,710 Income tax expense (6,356) (16,759) (9,325) (23,115) (22,718) Income tax expense adjustment (7,827) 1,572 674 (6,255) 3,483 Straight-line rent expense adjustment 1,664 2,301 1,015 3,965 3,424 Contract cost adjustment (4,384) (3,355) - (7,739) - Installation revenue adjustment 840 2,159 6,939 2,999 11,614 Recurring capital expenditures (42,206) (35,231) (37,869) (77,437) (60,541) Other income (expense) 8,866 (3,064) 1,284 5,802 1,621 (Gain) loss on disposition of real estate property 878 5,006 (1,460) 5,884 (2,098) Adjustments for unconsolidated JVs' and non- controlling interests - - 23 - 44 AFFO $428,126 $414,576 $360,114 $842,702 $664,224 ===
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SOURCE Equinix, Inc.