Equinix Reports Fourth Quarter And Full Year 2018 Results

REDWOOD CITY, Calif., Feb. 13, 2019 /PRNewswire/ --

    --  Delivered 2018 annual revenues of $5.072 billion, an increase of 16%
        year-over-year; 9% growth on a normalized and constant currency basis
    --  Achieved record global gross and net bookings in the quarter
    --  36 expansion projects underway and three new markets added including
        Hamburg, Muscat and Seoul
    --  Continued to scale its global interconnection platform adding an
        incremental 8,800 interconnections, including 1,800 virtual connections
        through ECX Fabric(TM)

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported results for the quarter and the year ended December 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.

2018 Results Summary

    --  Revenues
        --  $5.072 billion, a 16% increase over the previous year or a
            normalized and constant currency increase of 9%
    --  Operating Income
        --  $977 million, a 21% increase over the previous year
    --  Adjusted EBITDA
        --  $2.413 billion, a 48% adjusted EBITDA margin
        --  Includes $31 million of integration costs
    --  Net Income
        --  $365 million, a 57% increase over the previous year
    --  AFFO
        --  $1.659 billion, a 15% increase over the previous year
        --  Includes $31 million of integration costs

2019 Annual Guidance Summary

    --  Revenues
        --  $5.520 - $5.570 billion, a 9 - 10% increase over the previous year
    --  Adjusted EBITDA
        --  $2.605 - $2.655 billion, a 47% adjusted EBITDA margin
        --  Assumes $15 million of integration costs
        --  Assumes negative $15 million impact from the adoption of ASC 842
    --  AFFO
        --  $1.825 - $1.875 billion, a 10 - 13% increase over the previous year
        --  Assumes $15 million of integration costs
        --  Assumes immaterial impact from the adoption of ASC 842

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
Charles Meyers, President and CEO, Equinix:

"In addition to strong financial performance, we continue to build on our market leadership and cement our position as the trusted center of a cloud-first world. Our reach, scale and innovative product portfolio puts us in a great position to build on our business model that is substantially and durably differentiated from our peers. The market remains in the early innings of the digital transformation journey and our accelerating ability to both land and expand customers on that journey, makes us confident that we are playing the best hand in the business. We continue to have a clear view of our strategy and the opportunities ahead, and we are looking forward to another successful year."

Business Highlights

    --  Equinix continues to expand the reach of its global platform through
        organic expansion with 36 projects across 25 markets underway, including
        expansions in three new markets - Hamburg, Muscat and Seoul. Today,
        Equinix announced new expansions in the Chicago, Dallas, Hong Kong,
        Melbourne, New York, Paris, São Paulo, Singapore, Tokyo and Zurich
        metros.
    --  Equinix had very strong bookings across all three regions (Americas,
        EMEA and Asia-Pacific) in Q4 , with record EMEA bookings, and the
        second-best booking performance to date in the Americas and Asia-Pacific
        regions. Equinix bookings this quarter spanned across more than 3,000
        customers, with a quarter of those customers buying across multiple
        metros, highlighting the unique diversity of Equinix's retail colocation
        business.
    --  Enterprises continue to leverage Equinix's highly distributed and
        cloud-enabled global platform to locate their infrastructure closer to
        the interconnected digital edge. In Q4, 60% of total recurring revenues
        came from customers deployed across all three regions, and 86% of total
        recurring revenues came from customers deployed across multiple metros.
    --  Interconnection revenues continued to outpace colocation revenues in Q4,
        growing 10% year-over-year on an as-reported basis and 12% on a
        normalized and constant currency basis. Today, Equinix has the most
        comprehensive global interconnection platform now comprising over
        333,000 physical and virtual interconnections -- more than four times
        the interconnections of any competitor. In Q4, Equinix added an
        incremental 8,800 interconnections, including 1,800 virtual connections
        through Equinix Cloud Exchange Fabric(TM) (ECX Fabric(TM)).
    --  Equinix channel sales delivered greater than 20% of the bookings for the
        third consecutive quarter. This accounted for half of the new logos
        acquired in the quarter, driven by solid performance across all regions
        and all partner types. In 2018, the channel delivered over 4,000 unique
        deals, a strong indication of the significant velocity derived from
        Equinix's retail selling engine.
    --  Equinix achieved a record number of new wins across multiple verticals
        in Q4. The content and digital media vertical experienced record
        bookings with meaningful customer expansions including Fastly, Roblox
        and Tencent. The Cloud and IT vertical also delivered record bookings.
        Expansions included StackPath, a leading provider of edge cloud security
        services deploying infrastructure across 21 metros. The enterprise
        vertical continues to be our fastest-growing segment, led by energy,
        healthcare and retail sub-segments, as digital transformation forces
        firms to change how they interconnect users and clouds across multiple
        locations. Equinix has now captured 48% of the Fortune 500, and
        one-third of the Forbes Global 2000 companies.

Business Outlook

Equinix adopted FASB Accounting Standard Codification Topic 842, Leases ("ASC 842") effective January 1, 2019. The expected impact of adoption is included in the provided guidance.

For the first quarter of 2019, Equinix expects revenues to range between $1.342 and $1.352 billion, an increase of 3% quarter-over-quarter at the midpoint, on an as-reported basis, and 2% on a normalized and constant currency basis, the largest ever quarterly step-up in recurring revenues. This guidance includes a positive foreign currency benefit of $8 million when compared to the average FX rates in Q4 2018. Adjusted EBITDA is expected to range between $624 and $634 million, which includes a $4 million positive foreign currency benefit when compared to the average FX rates in Q4 2018. Adjusted EBITDA includes $15 million of Q1 seasonal costs, a negative $4 million impact from the adoption of ASC 842, and $5 million of integration costs related to prior acquisitions. Recurring capital expenditures are expected to range between $20 and $30 million.

For the full year of 2019, total revenues are expected to range between $5.520 and $5.570 billion, a 9 - 10% increase over the previous year or a normalized and constant currency increase of 8 - 9%. This guidance includes a positive foreign currency benefit of $10 million when compared to prior Equinix guidance rates. Adjusted EBITDA is expected to range between $2.605 and $2.655 billion, an adjusted EBITDA margin of 47%. This adjusted EBITDA includes a foreign currency benefit of $3 million when compared to prior Equinix guidance rates, a negative $15 million impact from the adoption of ASC 842, $15 million in integration costs related to prior acquisitions, higher EMEA utilities expense and record levels of expansion activities. AFFO is expected to range between $1.825 and $1.875 billion, an increase of 10 - 13% year-over-year on both an as-reported and a normalized and constant currency basis. This AFFO guidance includes a foreign currency benefit of $5 million when compared to prior Equinix guidance rates, $15 million in integration costs related to prior acquisitions, and assumes an immaterial impact from the adoption of ASC 842. Non-recurring capital expenditures are expected to range between $1.725 and $1.915 billion and recurring capital expenditures are expected to range between $175 and $185 million.

The U.S. dollar exchange rates used for 2019 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.16 to the Euro, $1.32 to the Pound, ¥110 to the U.S. dollar, S$1.36 to the U.S. dollar, and R$3.88 to the U.S. dollar. The Q4 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, income tax expense, an income tax expense adjustment, recurring capital expenditures, other income (expense), (gains) losses on disposition of real estate property and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q4 2018 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended December 31, 2018, along with its future outlook, in its quarterly conference call on Wednesday, February 13, 2019, 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, May 1, 2019, by dialing 1-203-369-0224 and entering passcode (2019). In addition, the webcast will be available on the company's website 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's 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 products and solutions; 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; risks related to our taxation as a REIT; 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                                                                          
            
          Twelve Months Ended


                                            December 31,                                           September 30,                            December 31,                               December 31,                            December 31,
                                                    2018                                       2018                                     2017                                        2018                                     2017

                                                                                                                                                                                                                          ---


     Recurring revenues                                    $
         1,230,318                                              $
            1,207,806                                                                   $
          1,122,599                           $
        4,776,502    $
        4,120,120


      Non-recurring revenues                      79,765                                       75,945                                               77,622                                                                 295,152               248,308



                 Revenues                      1,310,083                                    1,283,751                                            1,200,221                                                               5,071,654             4,368,428



     Cost of revenues                           670,935                                      660,309                                              619,625                                                               2,605,475             2,193,149



                 Gross profit                    639,148                                      623,442                                              580,596                                                               2,466,179             2,175,279




     Operating expenses:


      Sales and marketing                        161,804                                      157,920                                              153,612                                                                 633,702               581,724


      General and administrative                 206,146                                      206,902                                              187,816                                                                 826,694               745,906



     Acquisition costs                              481                                      (1,120)                                               7,125                                                                  34,413                38,635


      Gain on asset sales                              -                                     (6,013)                                                                                                                    (6,013)



                 Total operating expenses        368,431                                      357,689                                              348,553                                                               1,488,796             1,366,265



                 Income from operations          270,717                                      265,753                                              232,043                                                                 977,383               809,014




     Interest and other income (expense):



     Interest income                              3,002                                        2,912                                                3,255                                                                  14,482                13,075



     Interest expense                         (129,978)                                   (130,566)                                            (126,144)                                                               (521,494)            (478,698)



     Other income                                 4,498                                        3,744                                                8,668                                                                  14,044                 9,213


      Gain (loss) on debt
       extinguishment                           (12,163)                                       1,492                                             (23,669)                                                               (51,377)             (65,772)



                 Total interest and other,
                  net                          (134,641)                                   (122,418)                                            (137,890)                                                               (544,345)            (522,182)



                 Income before income taxes      136,076                                      143,335                                               94,153                                                                 433,038               286,832



     Income tax expense                        (26,054)                                    (18,510)                                            (28,938)                                                               (67,679)             (53,850)



                 Net income                              $
      
           110,022                                       $
          
              124,825                                                                $
       
            65,215                        $
      
          365,359 $
      
          232,982




     
              Net income per share:


      Basic net income per share                               $
           1.37                                                   $
            1.56                                                                       $
           0.83                              $
          4.58       $
          3.03



      Diluted net income per
       share                                                   $
           1.36                                                   $
            1.55                                                                       $
           0.82                              $
          4.56       $
          3.00



      Shares used in computing
       basic net income per share                 80,509                                       79,872                                               78,543                                                                  79,779                76,854



      Shares used in computing
       diluted net income per
       share                                      80,740                                       80,283                                               79,128                                                                  80,197                77,535


                                                                                                                                  
              
                EQUINIX, INC.


                                                                                                                
          
                Condensed Consolidated Statements of Comprehensive Income


                                                                                                                                 
              
                (in thousands)


                                                                                                                                   
              
                (unaudited)




                                                                                
     
     Three Months Ended                                                                                                      Twelve Months Ended


                                                     December 31,                    September 30,                December 31,                                                             December 31,    December 31,
                                                             2018                              2018                         2017                                                                      2018             2017

                                                                                                                                                                                                                    ---


     Net income                                                     $
     110,022                                                               $
              124,825                                                                $
          65,215                $
     365,359     $
     232,982




     Other comprehensive income (loss), net of tax:


      Foreign currency translation adjustment
       ("CTA") gain (loss)                               (68,795)                                     (77,566)                                                                                   45,439                              (421,743)   454,269


      Unrealized gain on available-for-sale
       securities                                               -                                                                                                                                    99                                               14


      Unrealized gain (loss) on cash flow
       hedges                                               6,287                                         6,184                                                                                   (2,427)                                43,671   (54,895)


      Net investment hedge CTA gain (loss)                 38,934                                        27,214                                                                                  (44,171)                               219,628  (235,292)


      Net actuarial gain (loss) on defined
       benefit plans                                           20                                            14                                                                                     (182)                                    55      (143)



      Total other comprehensive income (loss),
       net of tax                                        (23,554)                                     (44,154)                                                                                  (1,242)                             (158,389)   163,953



                   Comprehensive income, net of tax               $
     
       86,468                                                   $
              
                80,671                                                           $
      
            63,973            $
     
       206,970 $
     
       396,935


                                                                            
            
                EQUINIX, INC.


                                                                 
             
              Condensed Consolidated Balance Sheets


                                                                            
            
                (in thousands)


                                                                             
            
                (unaudited)




                                                                               December 31,                                                   December 31,
                                                                                       2018                                             2017

                                                                                                                                        ---

                             
              
                Assets



     Cash and cash equivalents                                                                               $
              606,166                               $
        1,412,517



     Short-term investments                                                          4,540                                             28,271



     Accounts receivable, net                                                      630,119                                            576,313



     Other current assets                                                          274,857                                            232,027



                   Total current assets                                           1,515,682                                          2,249,128



     Long-term investments                                                               -                                             9,243


      Property, plant and equipment, net                                         11,026,020                                          9,394,602



     Goodwill                                                                    4,836,388                                          4,411,762



     Intangible assets, net                                                      2,333,296                                          2,384,972



     Other assets                                                                  533,252                                            241,750




     
                Total assets                                                               $
              
                20,244,638                          $
     
          18,691,457



              
              
                Liabilities and Stockholders' Equity


      Accounts payable and accrued expenses                                                                   $
              756,692                                 $
        719,257


      Accrued property, plant and equipment                                         179,412                                            220,367


      Current portion of capital lease and
       other financing obligations                                                   77,844                                             78,705


      Current portion of mortgage and loans
       payable                                                                       73,129                                             64,491


      Current portion of senior notes                                               300,999



     Other current liabilities                                                     126,995                                            159,914



                   Total current liabilities                                      1,515,071                                          1,242,734


      Capital lease and other financing
       obligations, less current portion                                          1,441,077                                          1,620,256


      Mortgage and loans payable, less current
       portion                                                                    1,310,663                                          1,393,118


      Senior notes, less current portion                                          8,128,785                                          6,923,849



     Other liabilities                                                             629,763                                            661,710



                   Total liabilities                                             13,025,359                                         11,841,667




     Common stock                                                                       81                                                 79



     Additional paid-in capital                                                 10,751,313                                         10,121,323



     Treasury stock                                                              (145,161)                                         (146,320)



     Accumulated dividends                                                     (3,331,200)                                       (2,592,792)


      Accumulated other comprehensive loss                                        (945,702)                                         (785,189)



     Retained earnings                                                             889,948                                            252,689



                   Total stockholders' equity                                     7,219,279                                          6,849,790



                   Total liabilities and stockholders'
                    equity                                                                    $
              
                20,244,638                          $
     
          18,691,457







      Ending headcount by geographic region is as follows:





     Americas headcount                                                              3,480                                              3,154



     EMEA headcount                                                                  2,751                                              2,560



     Asia-Pacific headcount                                                          1,672                                              1,559




     Total headcount                                                                 7,903                                              7,273


                                   
           
                EQUINIX, INC.


                                
     
             Summary of Debt Principal Outstanding


                                  
           
                (in thousands)


                                    
           
                (unaudited)




                                      December 31, 2018                                     December 31, 2017

                                                                                     ---



      Capital lease and other
       financing obligations                               $
              1,518,921                           $
      1,698,961






     Term loans                              1,337,868                           1,406,686


      Mortgage payable and
       other loans payable                       45,924                              50,923


      Plus: debt discount and
       issuance costs, net                        4,732                               8,615



      Total mortgage and loans
       payable principal                      1,388,524                           1,466,224






     Senior notes                            8,429,784                           6,923,849


      Plus: debt issuance costs                  75,372                              78,151


      Less: debt premium                        (5,031)



      Total senior notes
       principal                              8,500,125                           7,002,000





      Total debt principal
       outstanding                                        $
              11,407,570                          $
      10,167,185


                                                                                                                                                                                      
            
                EQUINIX, INC.


                                                                                                                                                                      
              
             Condensed Consolidated Statements of Cash Flows


                                                                                                                                                                                      
            
                (in thousands)


                                                                                                                                                                                       
            
                (unaudited)




                                                                                                                    
              
                Three Months Ended                                                                         
       
          Twelve Months Ended


                                                                                           December 31,                                                                September 30,                                     December 31,                            December 31,                                           December 31,
                                                                                                   2018                                                        2018                                              2017                        2018                                         2017






     Cash flows from operating activities:


             
              Net income                                                                                         $
              110,022                                                       $
              124,825                                              $
              65,215                                      $
              365,359                  $
              232,982


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


                        Depreciation, amortization and accretion                                  305,130                                                       306,318                                                         279,774                                         1,226,741             1,028,892


             
              Stock-based compensation                                                   40,867                                                        47,588                                                          45,898                                           180,716               175,500


                        Amortization of debt issuance costs and
                         debt discounts and premiums                                                3,009                                                         3,148                                                           4,349                                            13,618                24,449


                        (Gain) loss on debt extinguishment                                         12,163                                                       (1,492)                                                         23,669                                            51,377                65,772


             
              Gain on asset sales                                                                                                                    (6,013)                                                                                                         (6,013)


             
              Other items                                                                10,704                                                         5,730                                                         (3,439)                                           27,644                 7,972


             
              Changes in operating assets and liabilities:


             
              Accounts receivable                                                        32,195                                                      (46,685)                                                         40,656                                          (52,931)            (161,774)


             
              Income taxes, net                                                          22,206                                                      (10,010)                                                         18,672                                          (10,670)             (34,936)


                        Accounts payable and accrued expenses                                      30,713                                                        29,107                                                          29,536                                            35,495                74,488


             
              Other assets and liabilities                                              (8,380)                                                     (35,354)                                                        (9,451)                                         (15,910)               25,888



                   Net cash provided by operating
                    activities                                                                  558,629                                                       417,162                                                         494,879                                         1,815,426             1,439,233




     Cash flows from investing activities:


                        Purchases, sales and maturities of
                         investments, net                                                           1,402                                                         6,452                                                          13,554                                            20,597              (11,505)


                        Business acquisitions, net of cash and
                         restricted cash acquired                                                   (502)                                                        1,808                                                       (334,754)                                        (829,687)          (3,963,280)


             
              Purchases of real estate                                                 (45,806)                                                     (94,830)                                                       (30,119)                                        (182,418)             (95,083)


                        Purchases of other property, plant and
                         equipment                                                              (680,665)                                                    (545,541)                                                       (432,677)                                      (2,096,174)          (1,378,725)


             
              Proceeds from asset sales                                                                                                               12,154                                                                                                           12,154                47,767


                   Net cash used in investing activities                                      (725,571)                                                    (619,957)                                                       (783,996)                                      (3,075,528)          (5,400,826)




     Cash flows from financing activities:


                        Proceeds from employee equity awards                                           33                                                        24,243                                                              71                                            50,136                41,696


                        Payment of dividend distributions                                       (183,858)                                                    (185,983)                                                       (157,583)                                        (738,600)            (621,497)


                        Proceeds from public offering of common
                         stock, net of offering costs                                             114,299                                                       265,671                                                         355,080                                           388,172             2,481,421


             
              Proceeds from loans payable                                                                                                            424,650                                                         997,076                                           424,650             2,056,876


             
              Proceeds from senior notes                                                                                                                                                                          1,179,001                                           929,850             3,628,701


                        Repayment of capital lease and other
                         financing obligations                                                   (14,119)                                                     (19,799)                                                       (33,218)                                        (103,774)             (93,470)


                        Repayment of mortgage and loans payable                                  (17,975)                                                    (404,083)                                                     (2,214,278)                                         (447,473)          (2,277,798)


             
              Repayment of senior notes                                                                                                                                                                                                                                                 (500,000)


             
              Debt extinguishment costs                                                                                                                                                                             (3,102)                                         (20,556)             (26,122)


             
              Debt issuance costs                                                                                                                      (635)                                                       (24,161)                                         (12,218)             (81,047)


             
              Other financing activities                                                    725                                                                                                                                                                           725                 (900)



                   Net cash provided by (used in)
                    financing activities                                                      (100,895)                                                      104,064                                                          98,886                                           470,912             4,607,860



      Effect of foreign currency exchange
       rates on cash, cash equivalents and
       restricted cash                                                                          (2,963)                                                      (5,104)                                                          4,737                                          (33,907)               31,187



      Net increase (decrease) in cash, cash
       equivalents and restricted cash                                                        (270,800)                                                    (103,835)                                                       (185,494)                                        (823,097)              677,454


      Cash, cash equivalents and restricted
       cash at beginning of period                                                              898,404                                                     1,002,239                                                       1,636,195                                         1,450,701               773,247



                   Cash, cash equivalents and restricted
                    cash at end of period                                                                   $
              
                627,604                                            $
            
                898,404                              $
              
                1,450,701                            $
           
                627,604       $
          
                1,450,701




     Supplemental cash flow information:



     Cash paid for taxes                                                                                                 $
              15,727                                                        $
              28,206                                              $
              10,230                                       $
              93,375                   $
              72,641




     Cash paid for interest                                                                                             $
              121,779                                                       $
              152,887                                             $
              102,385                                      $
              496,794                  $
              444,793





                   Negative free cash flow (1)                                                            $
              
                (168,344)                                         $
            
                (209,247)                             $
              
                (302,671)                        $
           
               (1,280,699)      $
         
               (3,950,088)





                   Adjusted free cash flow (adjusted
                    negative free cash flow) (2)                                                          $
              
                (122,036)                                         $
            
                (116,225)                                $
              
                62,202                           $
          
                (268,594)        $
          
                108,275








     (1)              We define free cash flow (negative 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                                                                                $
              558,629                                                       $
              417,162                                             $
              494,879                                    $
              1,815,426                $
              1,439,233


                        Net cash used in investing activities as
                         presented above                                                        (725,571)                                                    (619,957)                                                       (783,996)                                      (3,075,528)          (5,400,826)


                        Purchases, sales and maturities of
                         investments, net                                                         (1,402)                                                      (6,452)                                                       (13,554)                                         (20,597)               11,505


             
              Negative free cash flow                                                                          $
              (168,344)                                                    $
              (209,247)                                          $
              (302,671)                                 $
              (1,280,699)             $
              (3,950,088)








     (2)              We define adjusted free cash flow (adjusted negative free cash flow) as free cash flow (negative 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:


                        Negative free cash flow (as defined above)                                                       $
              (168,344)                                                    $
              (209,247)                                          $
              (302,671)                                 $
              (1,280,699)             $
              (3,950,088)


                        Less business acquisitions, net of cash
                         and restricted cash acquired                                                 502                                                       (1,808)                                                        334,754                                           829,687             3,963,280


             
              Less purchases of real estate                                              45,806                                                        94,830                                                          30,119                                           182,418                95,083


                        Adjusted free cash flow (adjusted negative
                         free cash flow)                                                                                 $
              (122,036)                                                    $
              (116,225)                                             $
              62,202                                    $
              (268,594)                 $
              108,275


                                                                                                                                                                                         
         
                EQUINIX, INC.


                                                                                                                                                                                 
      
           Non-GAAP Measures and Other Supplemental Data


                                                                                                                                                                                        
         
                (in thousands)


                                                                                                                                                                                          
         
                (unaudited)




                                                                                                                      
              
                Three Months Ended                                                                          
          
          Twelve Months Ended


                                                                                            December 31,                                                              September 30,                           December 31,                            December 31,                    December 31,
                                                                                                    2018                                                          2018                                    2017                              2018                                 2017



             
      Recurring revenues                                                                                      $
              1,230,318                                               $
              1,207,806                                         $
              1,122,599                               $
       4,776,502       $
       4,120,120


             
      Non-recurring revenues                                                              79,765                                                          75,945                                                 77,622                                        295,152                  248,308



             
      Revenues (1)                                                                     1,310,083                                                       1,283,751                                              1,200,221                                      5,071,654                4,368,428





             
      Cash cost of revenues (2)                                                          445,995                                                         433,186                                                407,389                                      1,696,436                1,433,165



                             Cash gross profit (3)                                                 864,088                                                         850,565                                                792,832                                      3,375,218                2,935,263





                Cash operating expenses (4)(7):


                Cash sales and marketing expenses (5)                                               99,613                                                          93,339                                                 94,273                                        382,489                  380,623


             
      Cash general and administrative                                                    147,280                                                         144,700                                                133,719                                        579,489                  502,599

             
          expenses (6)



                             Total cash operating expenses   (4)(7)                                246,893                                                         238,039                                                227,992                                        961,978                  883,222





             
      
                Adjusted EBITDA (8)                                                             $
              
                617,195                                         $
         
                612,526                                  $
          
                564,840                           $
     
         2,413,240 $
       
         2,052,041





                             Cash gross margins (9)                                                     66                                                              66                                                     66                                             67                       67
                                                                                                         %                                                              %                                                     %                                             %                       %





             
      
                Adjusted EBITDA                                                            47                                                              48                                                     47                                             48                       47
                                                                                                         %                                                              %                                                     %                                             %                       %

             
      
                    margins (10)





                             Adjusted EBITDA flow-through rate (11)                                     18                                                              39                                                     30                                             51                       52
                                                                                                         %                                                              %                                                     %                                             %                       %





             
      
                FFO (12)                                                                        $
              
                332,810                                         $
         
                340,030                                  $
          
                285,618                           $
     
         1,253,120   $
       
         992,363





             
      
                AFFO (13) (14)                                                                  $
              
                414,145                                         $
         
                402,250                                  $
          
                381,527                           $
     
         1,659,097 $
       
         1,437,040







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




             
      
                Americas Revenues:




             
      Colocation                                                                                                $
              438,150                                                 $
              433,828                                           $
              422,648                               $
       1,732,998       $
       1,518,929


             
      Interconnection                                                                    137,031                                                         134,159                                                127,793                                        532,163                  469,268


             
      Managed infrastructure                                                              20,070                                                          18,698                                                 18,512                                         75,595                   68,937


             
      Other                                                                                5,350                                                           5,161                                                  1,340                                         16,570                    5,218



             
      Recurring revenues                                                                 600,601                                                         591,846                                                570,293                                      2,357,326                2,062,352


             
      Non-recurring revenues                                                              37,547                                                          33,838                                                 35,874                                        127,408                  110,408



             
      Revenues                                                                                                  $
              638,148                                                 $
              625,684                                           $
              606,167                               $
       2,484,734       $
       2,172,760







             
      
                EMEA Revenues:




             
      Colocation                                                                                                $
              315,118                                                 $
              305,072                                           $
              282,240                               $
       1,201,769       $
       1,063,543


             
      Interconnection                                                                     35,288                                                          34,640                                                 31,311                                        138,874                  104,891


             
      Managed infrastructure                                                              29,881                                                          28,387                                                 28,780                                        118,685                   88,122


             
      Other                                                                                1,482                                                           2,552                                                  2,573                                          8,164                   10,415



             
      Recurring revenues                                                                 381,769                                                         370,651                                                344,904                                      1,467,492                1,266,971


             
      Non-recurring revenues                                                              21,315                                                          26,104                                                 24,728                                         95,145                   79,285



             
      Revenues                                                                                                  $
              403,084                                                 $
              396,755                                           $
              369,632                               $
       1,562,637       $
       1,346,256





                             Asia-Pacific Revenues:




             
      Colocation                                                                                                $
              191,891                                                 $
              191,143                                           $
              156,824                                 $
       735,404         $
       595,673


             
      Interconnection                                                                     34,917                                                          33,318                                                 28,781                                        130,928                  107,014


             
      Managed infrastructure                                                              21,140                                                          20,848                                                 21,797                                         85,352                   88,110


             
      Recurring revenues                                                                 247,948                                                         245,309                                                207,402                                        951,684                  790,797


             
      Non-recurring revenues                                                              20,903                                                          16,003                                                 17,020                                         72,599                   58,615



             
      Revenues                                                                                                  $
              268,851                                                 $
              261,312                                           $
              224,422                               $
       1,024,283         $
       849,412





             
      
                Worldwide Revenues:




             
      Colocation                                                                                                $
              945,159                                                 $
              930,043                                           $
              861,712                               $
       3,670,171       $
       3,178,145


             
      Interconnection                                                                    207,236                                                         202,117                                                187,885                                        801,965                  681,173


             
      Managed infrastructure                                                              71,091                                                          67,933                                                 69,089                                        279,632                  245,169


             
      Other                                                                                6,832                                                           7,713                                                  3,913                                         24,734                   15,633



             
      Recurring revenues                                                               1,230,318                                                       1,207,806                                              1,122,599                                      4,776,502                4,120,120


             
      Non-recurring revenues                                                              79,765                                                          75,945                                                 77,622                                        295,152                  248,308


             
      Revenues                                                                                                $
              1,310,083                                               $
              1,283,751                                         $
              1,200,221                               $
       5,071,654       $
       4,368,428







     
      (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                                                                                          $
              670,935                                                 $
              660,309                                           $
              619,625                               $
       2,605,475       $
       2,193,149


                Depreciation, amortization and accretion
                 expense                                                                         (219,799)                                                      (222,523)                                             (208,615)                                     (890,792)               (746,363)


             
      Stock-based compensation expense                                                   (5,141)                                                        (4,600)                                               (3,621)                                      (18,247)                (13,621)



             
      Cash cost of revenues                                                                                     $
              445,995                                                 $
              433,186                                           $
              407,389                               $
       1,696,436       $
       1,433,165





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




             
      Americas cash cost of revenues                                                                            $
              184,545                                                 $
              181,826                                           $
              179,884                                 $
       710,683         $
       610,433


             
      EMEA cash cost of revenues                                                         161,781                                                         160,173                                                148,721                                        629,853                  528,518


                Asia-Pacific cash cost of revenues                                                  99,669                                                          91,187                                                 78,784                                        355,900                  294,214



             
      Cash cost of revenues                                                                                     $
              445,995                                                 $
              433,186                                           $
              407,389                               $
       1,696,436       $
       1,433,165





     
      (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                                                              $
              367,950                                                 $
              364,822                                           $
              341,428                               $
       1,460,396       $
       1,327,630


                Depreciation and amortization expense                                             (85,331)                                                       (83,795)                                              (71,159)                                     (335,949)               (282,529)


             
      Stock-based compensation expense                                                  (35,726)                                                       (42,988)                                              (42,277)                                     (162,469)               (161,879)



             
      Cash operating expense                                                                                    $
              246,893                                                 $
              238,039                                           $
              227,992                                 $
       961,978         $
       883,222





     
      (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                                                                               $
              161,804                                                 $
              157,920                                           $
              153,612                                 $
       633,702         $
       581,724


                Depreciation and amortization expense                                             (48,723)                                                       (50,415)                                              (47,490)                                     (197,765)               (151,007)


             
      Stock-based compensation expense                                                  (13,468)                                                       (14,166)                                              (11,849)                                      (53,448)                (50,094)



             
      Cash sales and marketing expense                                                                           $
              99,613                                                  $
              93,339                                            $
              94,273                                 $
       382,489         $
       380,623









     
      (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                                                                        $
              206,146                                                 $
              206,902                                           $
              187,816                                 $
       826,694         $
       745,906


                Depreciation and amortization expense                                             (36,608)                                                       (33,380)                                              (23,669)                                     (138,184)               (131,522)


             
      Stock-based compensation expense                                                  (22,258)                                                       (28,822)                                              (30,428)                                     (109,021)               (111,785)



                Cash general and administrative expense                                                                   $
              147,280                                                 $
              144,700                                           $
              133,719                                 $
       579,489         $
       502,599





     
      (7) 
      The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below:




             
      Americas cash SG&A                                                                                        $
              151,279                                                 $
              147,855                                           $
              140,460                                 $
       590,220         $
       527,633


             
      EMEA cash SG&A                                                                      59,813                                                          56,785                                                 55,854                                        234,504                  235,041


             
      Asia-Pacific cash SG&A                                                              35,801                                                          33,399                                                 31,678                                        137,254                  120,548



             
      Cash SG&A                                                                                                 $
              246,893                                                 $
              238,039                                           $
              227,992                                 $
       961,978         $
       883,222





     
      (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                                                                                    $
              270,717                                                 $
              265,753                                           $
              232,043                                 $
       977,383         $
       809,014


                Depreciation, amortization and accretion
                 expense                                                                           305,130                                                         306,318                                                279,774                                      1,226,741                1,028,892


             
      Stock-based compensation expense                                                    40,867                                                          47,588                                                 45,898                                        180,716                  175,500


             
      Acquisition costs                                                                      481                                                         (1,120)                                                 7,125                                         34,413                   38,635


             
      Gain on asset sales                                                                                                                               (6,013)                                                                                             (6,013)



             
      Adjusted EBITDA                                                                                           $
              617,195                                                 $
              612,526                                           $
              564,840                               $
       2,413,240       $
       2,052,041







             
      The geographic split of our adjusted EBITDA is presented below:




             
      Americas income from operations                                                                           $
              116,627                                                 $
              106,536                                           $
              101,286                                 $
       412,610         $
       363,220


                Americas depreciation, amortization and
                 accretion expense                                                                 159,762                                                         156,920                                                149,970                                        635,045                  514,968


                Americas stock-based compensation expense                                           25,662                                                          32,818                                                 33,455                                        123,461                  128,419


             
      Americas acquisition costs                                                             273                                                           (271)                                                 1,112                                         12,715                   28,087


             
      Americas adjusted EBITDA                                                                                  $
              302,324                                                 $
              296,003                                           $
              285,823                               $
       1,183,831       $
       1,034,694





             
      EMEA income from operations                                                                                $
              86,184                                                  $
              88,830                                            $
              73,749                                 $
       312,163         $
       237,854


                EMEA depreciation, amortization and
                 accretion expense                                                                  85,731                                                          89,190                                                 79,741                                        356,241                  309,290


                EMEA stock-based compensation expense                                                8,779                                                           8,532                                                  6,874                                         32,853                   26,325


             
      EMEA acquisition costs                                                                 796                                                           (742)                                                 4,693                                          3,036                    9,228


             
      EMEA gain on asset sales                                                                                                                          (6,013)                                                                                             (6,013)



             
      EMEA adjusted EBITDA                                                                                      $
              181,490                                                 $
              179,797                                           $
              165,057                                 $
       698,280         $
       582,697





                Asia-Pacific income from operations                                                                        $
              67,906                                                  $
              70,387                                            $
              57,008                                 $
       252,610         $
       207,940


                Asia-Pacific depreciation, amortization and
                 accretion expense                                                                  59,637                                                          60,208                                                 50,063                                        235,455                  204,634


                Asia-Pacific stock-based compensation
                 expense                                                                             6,426                                                           6,238                                                  5,569                                         24,402                   20,756


             
      Asia-Pacific acquisition costs                                                       (588)                                                          (107)                                                 1,320                                         18,662                    1,320


             
      Asia-Pacific adjusted EBITDA                                                                              $
              133,381                                                 $
              136,726                                           $
              113,960                                 $
       531,129         $
       434,650





     
      (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
            %                                                   71
            %                                          70
            %                                  71
            %            72
            %



             
      EMEA cash gross margins                                                       60
            %                                                   60
            %                                          60
            %                                  60
            %            61
            %



             
      Asia-Pacific cash gross margins                                               63
            %                                                   65
            %                                          65
            %                                  65
            %            65
            %








      (10) 
      We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.




             
      Americas adjusted EBITDA margins                                              47
            %                                                   47
            %                                          47
            %                                  48
            %            48
            %



             
      EMEA adjusted EBITDA margins                                                  45
            %                                                   45
            %                                          45
            %                                  45
            %            43
            %



                Asia-Pacific adjusted EBITDA margins                                          50
            %                                                   52
            %                                          51
            %                                  52
            %            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                                                                          $
              617,195                                                 $
              612,526                                           $
              564,840                               $
       2,413,240       $
       2,052,041


                Less adjusted EBITDA -prior period                                               (612,526)                                                      (604,004)                                             (550,319)                                   (2,052,041)             (1,657,474)



             
      Adjusted EBITDA growth                                                                                      $
              4,669                                                   $
              8,522                                            $
              14,521                                 $
       361,199         $
       394,567





             
      Revenues - current period                                                                               $
              1,310,083                                               $
              1,283,751                                         $
              1,200,221                               $
       5,071,654       $
       4,368,428


             
      Less revenues - prior period                                                   (1,283,751)                                                    (1,261,943)                                           (1,152,261)                                   (4,368,428)             (3,611,989)



             
      Revenue growth                                                                                             $
              26,332                                                  $
              21,808                                            $
              47,960                                 $
       703,226         $
       756,439





             
      Adjusted EBITDA flow-through rate                                             18
            %                                                   39
            %                                          30
            %                                  51
            %            52
            %






      (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                                                                                                $
              110,022                                                 $
              124,825                                            $
              65,215                                 $
       365,359         $
       232,982


             
      Adjustments:


             
      Real estate depreciation                                                           219,217                                                         220,017                                                219,237                                        883,118                  754,351


                (Gain) loss on disposition of real estate
                 property                                                                            3,571                                                         (4,812)                                                 1,166                                          4,643                    4,945


                Adjustments for FFO from unconsolidated
                 joint ventures                                                                                                                                                                                                                                                                    85



             
      FFO                                                                                                       $
              332,810                                                 $
              340,030                                           $
              285,618                               $
       1,253,120         $
       992,363








      (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                                                                                                       $
              332,810                                                 $
              340,030                                           $
              285,618                               $
       1,253,120         $
       992,363


             
      Adjustments:


             
      Installation revenue adjustment                                                      4,650                                                           3,209                                                  6,721                                         10,858                   24,496


                Straight-line rent expense adjustment                                                1,687                                                           1,551                                                  3,204                                          7,203                    8,925


                Amortization of deferred financing costs and
                 debt discounts and premiums                                                         3,009                                                           3,148                                                  4,349                                         13,618                   24,449


             
      Contract cost adjustment                                                           (7,348)                                                        (5,271)                                                                                            (20,358)


             
      Stock-based compensation expense                                                    40,867                                                          47,588                                                 45,898                                        180,716                  175,500


                Non-real estate depreciation expense                                                37,674                                                          33,917                                                 24,100                                        140,955                  111,121


             
      Amortization expense                                                                49,973                                                          51,792                                                 48,940                                        203,416                  177,008


             
      Accretion expense (adjustment)                                                     (1,734)                                                            592                                               (12,503)                                         (748)                (13,588)


             
      Recurring capital expenditures                                                    (70,234)                                                       (55,382)                                              (62,540)                                     (203,053)               (167,995)


                (Gain) loss on debt extinguishment                                                  12,163                                                         (1,492)                                                23,669                                         51,377                   65,772


             
      Acquisition costs                                                                      481                                                         (1,120)                                                 7,125                                         34,413                   38,635


             
      Income tax expense adjustment                                                       10,147                                                        (16,312)                                                 6,946                                       (12,420)                     371


                Adjustments for AFFO from unconsolidated
                 joint ventures                                                                                                                                                                                                                                                                  (17)



             
      AFFO                                                                                                      $
              414,145                                                 $
              402,250                                           $
              381,527                               $
       1,659,097       $
       1,437,040






      (14) 
       Following is how we reconcile from adjusted EBITDA to AFFO:




             
      Adjusted EBITDA                                                                                           $
              617,195                                                 $
              612,526                                           $
              564,840                               $
       2,413,240       $
       2,052,041


             
      Adjustments:


                Interest expense, net of interest income                                         (126,976)                                                      (127,654)                                             (122,889)                                     (507,012)               (465,623)


                Amortization of deferred financing costs and
                 debt discounts and premiums                                                         3,009                                                           3,148                                                  4,349                                         13,618                   24,449


             
      Income tax expense                                                                (26,054)                                                       (18,510)                                              (28,938)                                      (67,679)                (53,850)


             
      Income tax expense adjustment                                                       10,147                                                        (16,312)                                                 6,946                                       (12,420)                     371


                Straight-line rent expense adjustment                                                1,687                                                           1,551                                                  3,204                                          7,203                    8,925


             
      Contract cost adjustment                                                           (7,348)                                                        (5,271)                                                                                            (20,358)


             
      Installation revenue adjustment                                                      4,650                                                           3,209                                                  6,721                                         10,858                   24,496


             
      Recurring capital expenditures                                                    (70,234)                                                       (55,382)                                              (62,540)                                     (203,053)               (167,995)


             
      Other income                                                                         4,498                                                           3,744                                                  8,668                                         14,044                    9,213


                (Gain) loss on disposition of real estate
                 property                                                                            3,571                                                         (4,812)                                                 1,166                                          4,643                    4,945


                Adjustments for unconsolidated JVs' and non-
                 controlling interests                                                                                                                                                                                                                                                             68


                Adjustment for gain on sale of asset                                                                                                                6,013                                                                                                6,013



             
      AFFO                                                                                                      $
              414,145                                                 $
              402,250                                           $
              381,527                               $
       1,659,097       $
       1,437,040

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SOURCE Equinix, Inc.