Equinix Reports Second Quarter 2019 Results
REDWOOD CITY, Calif., July 31, 2019 /PRNewswire/ --
-- Quarterly revenues increased 10% year-over-year, both on an as-reported
and normalized and constant currency basis, to $1.385 billion
-- Customer deployments across multiple regions increased to 73% of total
recurring revenue, demonstrating the value of Equinix's global platform
-- Interconnection revenue growth continues to outpace colocation revenue
growth, as global ecosystems continue to scale
-- The portfolio of interconnection services on Platform Equinix(®
)expanded with the launch of Network Edge, a new service enabling
customers to deploy virtual network services at Equinix
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported results for the quarter ended June 30, 2019. 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. All per-share results are presented on a fully diluted basis.
Second Quarter 2019 Results Summary
-- Revenues
-- $1.385 billion, a 2% increase over the previous quarter
-- Operating Income
-- $292 million, a 4% increase over the previous quarter, an operating
margin of 21%
-- Adjusted EBITDA
-- $677 million, a 49% adjusted EBITDA margin, a 3% increase over the
previous quarter
-- Includes $3 million of integration costs
-- Net Income and Net Income per Share attributable to Equinix
-- $144 million, a 22% increase over the previous quarter
-- $1.69 per share, a 17% increase over the previous quarter
-- AFFO and AFFO per Share
-- $498 million, a 2% increase over the previous quarter
-- $5.87 per share
-- Includes $3 million of integration costs
2019 Annual Guidance Summary
-- Revenues
-- $5.565 - $5.595 billion, a normalized and constant currency increase
of 9% over the previous year, and a $10 million increase compared to
prior guidance at the mid-point
-- Adjusted EBITDA
-- $2.660 - $2.690 billion, a 48% adjusted EBITDA margin, and a $15
million increase compared to prior guidance at the mid-point
-- Assumes $11 million of integration costs
-- AFFO and AFFO per Share
-- $1.910 - $1.930 billion, a normalized and constant currency increase
of 13 - 14% over the previous year, and a $25 million increase
compared to prior guidance at the mid-point
-- $22.57 - 22.81 per share, a normalized and constant currency
increase of 8 - 9% over the previous year, and a $0.14 increase
compared to prior guidance at the mid-point, including the impact of
the Q2 ATM equity program activity
-- Assumes $11 million of integration costs
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:
"Equinix had another strong quarter, as it continues to deliver distinctive and durable value for customers pursuing their digital transformation initiatives. As a variety of trends are making global businesses think differently about their infrastructure, Equinix is responding by both investing across its traditional strengths and layering in incremental capabilities that make it an easier-to-use, more accessible global platform. We see a large and expanding market opportunity, and we believe Equinix is uniquely positioned to capture this opportunity as customers prioritize digital transformation and adopt hybrid and multicloud as their architecture of choice."
Business Highlights
-- Equinix further extended the portfolio of interconnection offerings on
Platform Equinix with the launch of Network Edge services, a new service
enabling companies to deploy virtualized services such as routers,
firewalls and load balancers from industry-leading vendors including
Cisco, Juniper Networks and Palo Alto Networks. Network Edge offers
enterprises a new way to deploy network services and connect their
digital supply chains on Equinix's global interconnection platform,
without a physical data center deployment or hardware requirements. By
combining Network Edge with Equinix Cloud Exchange Fabric(TM) (ECX
Fabric((TM))), customers can deploy virtual edge devices and
interconnect them to clouds and network providers located in new global
markets, extending their reach to potentially thousands of new business
partners around the world.
-- As a part of the company's hyperscale initiative, Equinix signed a
greater than $1.0 billion initial joint venture limited liability
partnership with GIC, Singapore's sovereign wealth fund, to develop and
operate xScale((TM)) data centers in Amsterdam, Frankfurt, London and
Paris, which is expected to close in Q3 2019. xScale data centers will
serve the unique core workload deployment needs of a targeted group of
hyperscale companies, including the world's largest cloud service
providers. The facilities, on or proximate to some of Equinix's existing
International Business Exchange((TM)) (IBX(®)) data center campuses,
will allow these key enablers of digital transformation to streamline
their continued growth, while strengthening Equinix's leadership
position in the cloud ecosystem, as enterprises increasingly embrace
hybrid multicloud as the IT architecture of choice.
-- Fitch Ratings upgraded all of Equinix's ratings to investment grade,
reflecting Equinix's leading market position in data center colocation
and interconnection, geographic diversity, stable customer and revenue
characteristics, and positive secular demand drivers. Equinix's lower
leverage relative to its peer group, wide access to diverse sources of
capital and substantial liquidity were all deemed consistent with an
investment grade REIT profile. This is Equinix's second investment grade
upgrade following S&P Global Ratings' upgrade to BBB- on February 27,
2019, making Equinix's notes index-eligible to further expand its
potential global investor base while also triggering the automatic
covenant fall-away provisions in certain senior note indentures issued
by Equinix, and also providing the company a significant opportunity to
lower its net borrowing costs on both existing and new debt facilities.
-- Equinix continued to amplify its go-to-market reach through indirect
selling initiatives, with channel sales delivering more than 25% of the
bookings for the quarter. Additionally, channel bookings accounted for
60% of the new logos acquired in the quarter, as Equinix deepened its
engagement with high-priority partners to drive increased productivity
and joint offer creation across its reseller and alliance partners.
-- As digital transformation is forcing companies to change how they
interconnect users and clouds at the digital edge, Equinix now serves
more than half of the Fortune 500 and has its highest number ever of
Fortune 500 and Global 2000 prospects in the pipeline. As a part of
this, in Q2, the enterprise vertical experienced diversified growth
across travel, legal and healthcare sub-segments. New wins included a
global builder and operator of toll roads enabling IoT smart
transportation systems, and a leading fashion brand implementing a
multicloud strategy.
-- Equinix continued strong growth with the cloud and IT vertical with
record bookings in Q2. The company now has 40% of all cloud on-ramps
from the top cloud service providers. Customer wins in the quarter
included a Fortune 75 technology company expanding a hosted unified
communication service, and ServiceNow, expanding its footprint to
support its growing customer base.
Business Outlook
The business outlook includes the expected impact of the EMEA hyperscale joint venture expected to close in the third quarter; including the reduction in revenue, adjusted EBITDA and AFFO due to the sale of both LD10 and PA8 to the joint venture, net of the fees earned, lease payments incurred by Equinix and AFFO contribution from Equinix's 20% non-controlling interest in the joint venture.
For the third quarter of 2019, the Company expects revenues to range between $1.399 and $1.409 billion, an increase of 1% quarter-over-quarter, at the mid-point of guidance on both an as-reported and a normalized and constant currency basis, taking into consideration the net impact of the EMEA hyperscale joint venture. This guidance includes a positive foreign currency benefit of $8 million when compared to the average FX rates in Q2 2019. Adjusted EBITDA is expected to range between $665 and $675 million, including the higher seasonal cost of revenues, and includes a $4 million positive foreign currency benefit when compared to the average FX rates in Q2 2019 and $4 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $52 and $62 million, a meaningful and as-expected step up over the prior two quarters.
For the full year of 2019, total revenues are expected to range between $5.565 and $5.595 billion, a 10% increase over the previous year or a normalized and constant currency increase of 9% at the mid-point. This $10 million increase from previously issued guidance is due to $12 million of better than expected operating business performance and a $5 million positive foreign currency benefit when compared to prior guidance rates, offset in part by a $7 million reduction from the net impact of the EMEA hyperscale joint venture. Adjusted EBITDA is expected to range between $2.660 and $2.690 billion, an adjusted EBITDA margin of 48%. This $15 million increase from previously issued guidance is due to $19 million of better than expected operating business performance, a $2 million reduction of integration costs and a $1 million positive foreign currency benefit when compared to prior guidance rates, offset in part by a $7 million reduction from the net impact of the EMEA hyperscale joint venture. AFFO is expected to range between $1.910 and $1.930 billion, a 15 - 16% increase over the previous year or a normalized and constant currency increase of 13 - 14%. This $25 million increase from previously issued guidance is due to $17 million of better than expected operating business performance, a $2 million reduction of integration costs and an $11 million positive foreign currency benefit when compared to prior guidance rates, offset in part by a $5 million reduction from the net impact of the EMEA hyperscale joint venture. AFFO per share is expected to range between $22.57 - 22.81, a 9 - 10% increase over the previous year or a normalized and constant currency increase of 8 - 9%, after taking into consideration the equity financing activity over the first half of the year. Non-recurring capital expenditures are expected to range between $1.730 and $1.920 billion, and recurring capital expenditures are expected to range between $170 and $180 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 $1.17 to the Euro, $1.34 to the Pound, ¥108 to the U.S. dollar, S$1.35 to the U.S. dollar, and R$3.84 to the U.S. dollar. The Q2 2019 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 9%, 7%, 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.
Q2 2019 Results Conference Call and Replay Information
Equinix will discuss its quarterly results for the period ended June 30, 2019, along with its future outlook, in its quarterly conference call on Wednesday, July 31, 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, October 30, 2019, by dialing 1-203-369-0227 and referencing the passcode 2019. In addition, the webcast will be available at www.equinix.com/investors (no password required).
Investor Presentation and Supplemental Financial Information
Equinix has made available on its website a presentation designed to accompany the discussion of Equinix'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. On this global platform for digital business, companies come together across more than 50 markets on five continents to reach everywhere, interconnect everyone and integrate everything they need to create their digital futures.
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"), both commonly used in the REIT industry, as supplemental performance measures. 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
Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
---
Recurring revenues $
1,306,045 $
1,274,828 $
1,187,749 $
2,580,873 $
2,338,378
Non-recurring revenues 78,932 88,390 74,194 167,322 139,442
Revenues 1,384,977 1,363,218 1,261,943 2,748,195 2,477,820
Cost of revenues 698,179 682,030 651,801 1,380,209 1,274,231
Gross profit 686,798 681,188 610,142 1,367,986 1,203,589
Operating expenses:
Sales and marketing 159,201 169,715 154,202 328,916 313,978
General and administrative 232,656 215,046 210,489 447,702 413,646
Acquisition costs 2,774 2,471 30,413 5,245 35,052
Impairment charges 386 14,448 14,834
Total operating expenses 395,017 401,680 395,104 796,697 762,676
Income from operations 291,781 279,508 215,038 571,289 440,913
Interest and other income (expense):
Interest income 7,762 4,202 3,958 11,964 8,568
Interest expense (120,547) (122,846) (134,673) (243,393) (260,950)
Other income (expense) 12,180 (166) 8,866 12,014 5,802
Loss on debt extinguishment - (382) (19,215) (382) (40,706)
Total interest and other,
net (100,605) (119,192) (141,064) (219,797) (287,286)
Income before income taxes 191,176 160,316 73,974 351,492 153,627
Income tax expense (47,324) (42,569) (6,356) (89,893) (23,115)
Net income 143,852 117,747 67,618 261,599 130,512
Net (income) loss
attributable to non-
controlling interests (325) 331 6
Net income attributable to
Equinix $
143,527 $
118,078 $
67,618 $
261,605 $
130,512
Net income per share attributable to Equinix:
Basic net income per share $
1.70 $
1.44 $
0.85 $
3.15 $
1.64
Diluted net income per
share $
1.69 $
1.44 $
0.85 $
3.13 $
1.64
Shares used in computing
basic net income per share 84,399 81,814 79,479 83,114 79,361
Shares used in computing
diluted net income per
share 84,767 82,090 79,752 83,471 79,746
EQUINIX, INC.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
---
Net income $
143,852 $
117,747 $
67,618 $
261,599 $
130,512
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
("CTA") gain (loss) 25,127 (81,719) (421,233) (56,592) (275,382)
Net investment hedge CTA gain (loss) (37,857) 76,850 226,115 38,993 153,480
Unrealized gain (loss) on cash flow
hedges (3,355) 8,224 35,280 4,869 31,200
Net actuarial gain (loss) on defined
benefit plans (7) (11) 13 (18) 21
Total other comprehensive income (loss),
net of tax (16,092) 3,344 (159,825) (12,748) (90,681)
Comprehensive income (loss), net of tax 127,760 121,091 (92,207) 248,851 39,831
Net (income) loss attributable to non-
controlling interests (325) 331 6
Other comprehensive (income) loss
attributable to non-controlling
interests 14 (7) 7
Comprehensive income (loss) attributable
to Equinix $
127,449 $
121,415 $
(92,207) $
248,864 $
39,831
EQUINIX, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, 2019 December 31, 2018
---
Assets
Cash and cash
equivalents $
1,613,529 $
606,166
Short-term
investments 17,219 4,540
Accounts receivable,
net 752,680 630,119
Other current assets 251,451 274,857
Assets held for sale 353,622
Total current assets 2,988,501 1,515,682
Property, plant and
equipment, net 10,992,740 11,026,020
Operating lease right-
of-use assets 1,468,378
Goodwill 4,768,880 4,836,388
Intangible assets, net 2,204,405 2,333,296
Other assets 463,601 533,252
Total assets $
22,886,505 $
20,244,638
Liabilities and Stockholders' Equity
Accounts payable and
accrued expenses $
768,670 $
756,692
Accrued property,
plant and equipment 344,693 179,412
Current portion of
operating lease
liabilities 140,733
Current portion of
finance lease
liabilities 61,094 77,844
Current portion of
mortgage and loans
payable 72,795 73,129
Current portion of
senior notes 300,929 300,999
Other current
liabilities 142,461 126,995
Liabilities held for
sale 53,030
Total current
liabilities 1,884,405 1,515,071
Operating lease
liabilities, less
current portion 1,324,527
Finance lease
liabilities, less
current portion 1,140,676 1,441,077
Mortgage and loans
payable, less current
portion 1,267,551 1,310,663
Senior notes, less
current portion 7,959,467 8,128,785
Other liabilities 560,650 629,763
Total liabilities 14,137,276 13,025,359
Common stock 85 81
Additional paid-in
capital 12,450,614 10,751,313
Treasury stock (144,725) (145,161)
Accumulated dividends (3,743,869) (3,331,200)
Accumulated other
comprehensive loss (958,443) (945,702)
Retained earnings 1,145,580 889,948
Total Equinix
stockholders' equity 8,749,242 7,219,279
Non-controlling
interests (13)
Total stockholders'
equity 8,749,229 7,219,279
Total liabilities and
stockholders' equity $
22,886,505 $
20,244,638
Ending headcount by geographic region is
as follows:
Americas headcount 3,527 3,480
EMEA headcount 2,872 2,751
Asia-Pacific
headcount 1,691 1,672
Total headcount 8,090 7,903
EQUINIX, INC.
Summary of Debt Principal Outstanding
(in thousands)
(unaudited)
June 30, 2019 December 31, 2018
---
Finance lease
liabilities $
1,201,770 $
1,518,921
Term loans 1,296,124 1,337,868
Mortgage
payable and
other loans
payable 44,222 45,924
Plus: debt
discount and
issuance
costs, net 3,895 4,732
Total mortgage
and loans
payable
principal 1,344,241 1,388,524
Senior notes 8,260,396 8,429,784
Plus: debt
issuance costs 68,936 75,372
Less: debt
premium (3,132) (5,031)
Total senior
notes
principal 8,326,200 8,500,125
Total debt
principal
outstanding $
10,872,211 $
11,407,570
EQUINIX, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
Cash flows from operating activities:
Net income $
143,852 $
117,747 $
67,618 $
261,599 $
130,512
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 320,550 314,705 308,828 635,255 615,293
Stock-based compensation 61,519 49,023 49,725 110,542 92,261
Amortization of debt issuance costs and debt discounts and premiums 3,238 2,995 3,362 6,233 7,461
Loss on debt extinguishment 382 19,215 382 40,706
Impairment charges 386 14,448 14,834
Other items 4,745 8,224 2,322 12,969 11,210
Changes in operating assets and liabilities:
Accounts receivable (42,370) (84,350) 32,834 (126,720) (38,441)
Income taxes, net 14,837 15,825 (7,485) 30,662 (22,866)
Accounts payable and accrued expenses 7,476 (11,463) 10,818 (3,987) (24,325)
Operating lease right-of-use assets 37,219 41,264 78,483
Operating lease liabilities (34,919) (38,886) (73,805)
Other assets and liabilities 26,390 (8,773) 51,491 17,617 27,824
Net cash provided by operating activities 542,923 421,141 538,728 964,064 839,635
Cash flows from investing activities:
Purchases, sales and maturities of investments, net (3,063) (8,779) 13,240 (11,842) 12,743
Business acquisitions, net of cash and restricted cash acquired (34,143) (830,993) (34,143) (830,993)
Purchases of real estate (41,715) (5,721) (27,082) (47,436) (41,782)
Purchases of other property, plant and equipment (444,171) (363,967) (520,239) (808,138) (869,968)
Net cash used in investing activities (523,092) (378,467) (1,365,074) (901,559) (1,730,000)
Cash flows from financing activities:
Proceeds from employee equity awards 27,593 13 27,593 25,860
Payment of dividend distributions (208,449) (204,603) (181,760) (413,052) (368,759)
Proceeds from public offering of common stock, net of offering costs 348,121 1,213,434 7,622 1,561,555 7,622
Proceeds from senior notes 929,850
Repayment of finance lease liabilities (11,954) (31,158) (14,069) (43,112) (69,856)
Repayment of mortgage and loans payable (17,878) (18,334) (18,816) (36,212) (25,415)
Repayment of senior notes (150,000) (150,000)
Debt extinguishment costs 148 (20,556)
Debt issuance costs (11,583)
Other financing activities 580 580
Net cash provided by (used in) financing activities (40,160) 986,932 (206,282) 946,772 467,743
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash 2,106 (1,695) (33,743) 411 (25,840)
Net increase (decrease) in cash, cash equivalents and restricted cash (18,223) 1,027,911 (1,066,371) 1,009,688 (448,462)
Cash, cash equivalents and restricted cash at beginning of period 1,655,515 627,604 2,068,610 627,604 1,450,701
Cash, cash equivalents and restricted cash at end of period $
1,637,292 $
1,655,515 $
1,002,239 $
1,637,292 $
1,002,239
Supplemental cash flow information:
Cash paid for taxes $
32,669 $
27,024 $
17,681 $
59,693 $
49,442
Cash paid for interest $
113,266 $
146,144 $
115,071 $
259,410 $
222,128
Free cash flow (negative free cash flow) (1) $
22,894 $
51,453 $
(839,586) $
74,347 $
(903,108)
Adjusted free cash flow (adjusted negative free cash flow) (2) $
98,752 $
57,174 $
18,489 $
155,926 $
(30,333)
(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 $
542,923 $
421,141 $
538,728 $
964,064 $
839,635
Net cash used in investing activities as presented above (523,092) (378,467) (1,365,074) (901,559) (1,730,000)
Purchases, sales and maturities of investments, net 3,063 8,779 (13,240) 11,842 (12,743)
Free cash flow (negative free cash flow) $
22,894 $
51,453 $
(839,586) $
74,347 $
(903,108)
(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:
Free cash flow (negative free cash flow) as defined above $
22,894 $
51,453 $
(839,586) $
74,347 $
(903,108)
Less business acquisitions, net of cash and restricted cash acquired 34,143 830,993 34,143 830,993
Less purchases of real estate 41,715 5,721 27,082 47,436 41,782
Adjusted free cash flow (adjusted negative free cash flow) $
98,752 $
57,174 $
18,489 $
155,926 $
(30,333)
EQUINIX, INC.
Non-GAAP Measures and Other Supplemental Data
(in thousands)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2019 March 31, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Recurring revenues $
1,306,045 $
1,274,828 $
1,187,749 $
2,580,873 $
2,338,378
Non-recurring revenues 78,932 88,390 74,194 167,322 139,442
Revenues (1) 1,384,977 1,363,218 1,261,943 2,748,195 2,477,820
Cash cost of revenues (2) 460,983 448,381 421,733 909,364 817,255
Cash gross profit (3) 923,994 914,837 840,210 1,838,831 1,660,565
Cash operating expenses (4)(7):
Cash sales and marketing expenses (5) 95,114 108,216 91,468 203,330 189,537
Cash general and administrative expenses(6) 151,870 146,466 144,738 298,336 287,509
Total cash operating expenses (4) (7) 246,984 254,682 236,206 501,666 477,046
Adjusted EBITDA (8) $
677,010 $
660,155 $
604,004 $
1,337,165 $
1,183,519
Cash gross margins (9) 67 67 67 67 67
% % % % %
Adjusted EBITDA margins(10) 49 48 48 49 48
% % % % %
Adjusted EBITDA flow-through rate (11) 77 81 53 70 55
% % % % %
FFO (12) $
352,973 $
326,073 $
289,525 $
679,046 $
580,280
AFFO (13) (14) $
497,647 $
488,120 $
428,126 $
985,767 $
842,702
Basic FFO per share (15) $
4.18 $
3.99 $
3.64 $
8.17 $
7.31
Diluted FFO per share (15) $
4.16 $
3.97 $
3.63 $
8.14 $
7.28
Basic AFFO per share (15) $
5.90 $
5.97 $
5.39 $
11.86 $
10.62
Diluted AFFO per share(15) $
5.87 $
5.95 $
5.37 $
11.81 $
10.57
(1)
The geographic split of our revenues on a services basis is presented below:
Americas Revenues:
Colocation $
444,086 $
439,981 $
433,895 $
884,067 $
861,020
Interconnection 142,460 138,563 131,720 281,023 260,973
Managed infrastructure 22,908 21,787 18,292 44,695 36,827
Other 5,352 5,979 4,980 11,331 6,059
Recurring revenues 614,806 606,310 588,887 1,221,116 1,164,879
Non-recurring revenues 29,614 38,056 29,388 67,670 56,023
Revenues $
644,420 $
644,366 $
618,275 $
1,288,786 $
1,220,902
EMEA Revenues:
Colocation $
347,795 $
331,125 $
293,518 $
678,920 $
581,579
Interconnection 38,614 37,525 33,969 76,139 68,946
Managed infrastructure 28,397 29,088 29,731 57,485 60,417
Other 2,275 2,499 2,364 4,774 4,130
Recurring revenues 417,081 400,237 359,582 817,318 715,072
Non-recurring revenues 32,774 34,423 23,586 67,197 47,726
Revenues $
449,855 $
434,660 $
383,168 $
884,515 $
762,798
Asia-Pacific Revenues:
Colocation $
213,734 $
209,665 $
186,172 $
423,399 $
352,370
Interconnection 37,957 36,696 31,924 74,653 62,693
Managed infrastructure 22,467 21,920 21,184 44,387 43,364
Recurring revenues 274,158 268,281 239,280 542,439 458,427
Non-recurring revenues 16,544 15,911 21,220 32,455 35,693
Revenues $
290,702 $
284,192 $
260,500 $
574,894 $
494,120
Worldwide Revenues:
Colocation $
1,005,615 $
980,771 $
913,585 $
1,986,386 $
1,794,969
Interconnection 219,031 212,784 197,613 431,815 392,612
Managed infrastructure 73,772 72,795 69,207 146,567 140,608
Other 7,627 8,478 7,344 16,105 10,189
Recurring revenues 1,306,045 1,274,828 1,187,749 2,580,873 2,338,378
Non-recurring revenues 78,932 88,390 74,194 167,322 139,442
Revenues $
1,384,977 $
1,363,218 $
1,261,943 $
2,748,195 $
2,477,820
(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 $
698,179 $
682,030 $
651,801 $
1,380,209 $
1,274,231
Depreciation, amortization and accretion expense (230,696) (228,637) (225,461) (459,333) (448,470)
Stock-based compensation expense (6,500) (5,012) (4,607) (11,512) (8,506)
Cash cost of revenues $
460,983 $
448,381 $
421,733 $
909,364 $
817,255
The geographic split of our cash cost of revenues is presented below:
Americas cash cost of revenues $
182,920 $
179,635 $
180,057 $
362,555 $
344,312
EMEA cash cost of revenues 179,347 173,201 155,085 352,548 307,899
Asia-Pacific cash cost of revenues 98,716 95,545 86,591 194,261 165,044
Cash cost of revenues $
460,983 $
448,381 $
421,733 $
909,364 $
817,255
(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 $
391,857 $
384,761 $
364,691 $
776,618 $
727,624
Depreciation and amortization expense (89,854) (86,068) (83,367) (175,922) (166,823)
Stock-based compensation expense (55,019) (44,011) (45,118) (99,030) (83,755)
Cash operating expense $
246,984 $
254,682 $
236,206 $
501,666 $
477,046
(5)
We define cash sales and marketing expense as sales and marketing expense less depreciation, amortization and stock-based compensation as presented below:
Sales and marketing expense $
159,201 $
169,715 $
154,202 $
328,916 $
313,978
Depreciation and amortization expense (48,930) (48,198) (48,626) (97,128) (98,627)
Stock-based compensation expense (15,157) (13,301) (14,108) (28,458) (25,814)
Cash sales and marketing expense $
95,114 $
108,216 $
91,468 $
203,330 $
189,537
(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 $
232,656 $
215,046 $
210,489 $
447,702 $
413,646
Depreciation and amortization expense (40,924) (37,870) (34,741) (78,794) (68,196)
Stock-based compensation expense (39,862) (30,710) (31,010) (70,572) (57,941)
Cash general and administrative expense $
151,870 $
146,466 $
144,738 $
298,336 $
287,509
(7)
The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below:
Americas cash SG&A $
152,448 $
156,893 $
144,263 $
309,341 $
291,086
EMEA cash SG&A 60,863 62,387 57,268 123,250 117,906
Asia-Pacific cash SG&A 33,673 35,402 34,675 69,075 68,054
Cash SG&A $
246,984 $
254,682 $
236,206 $
501,666 $
477,046
(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 $
291,781 $
279,508 $
215,038 $
571,289 $
440,913
Depreciation, amortization and accretion expense 320,550 314,705 308,828 635,255 615,293
Stock-based compensation expense 61,519 49,023 49,725 110,542 92,261
Impairment charges 386 14,448 14,834
Acquisition costs 2,774 2,471 30,413 5,245 35,052
Adjusted EBITDA $
677,010 $
660,155 $
604,004 $
1,337,165 $
1,183,519
The geographic split of our adjusted EBITDA is presented below:
Americas income from operations $
99,195 $
90,011 $
87,711 $
189,206 $
189,447
Americas depreciation, amortization and accretion expense 167,614 167,136 160,337 334,750 318,363
Americas stock-based compensation expense 42,676 34,171 35,104 76,847 64,981
Americas impairment charges 386 14,448 14,834
Americas acquisition costs (819) 2,072 10,803 1,253 12,713
Americas adjusted EBITDA $
309,052 $
307,838 $
293,955 $
616,890 $
585,504
EMEA income from operations $
106,555 $
105,007 $
73,046 $
211,562 $
137,149
EMEA depreciation, amortization and accretion expense 88,109 84,547 88,828 172,656 181,320
EMEA stock-based compensation expense 11,353 8,863 8,403 20,216 15,542
EMEA acquisition costs 3,628 655 538 4,283 2,982
EMEA adjusted EBITDA $
209,645 $
199,072 $
170,815 $
408,717 $
336,993
Asia-Pacific income from operations $
86,031 $
84,490 $
54,281 $
170,521 $
114,317
Asia-Pacific depreciation, amortization and accretion expense 64,827 63,022 59,663 127,849 115,610
Asia-Pacific stock-based compensation expense 7,490 5,989 6,218 13,479 11,738
Asia-Pacific acquisition costs (35) (256) 19,072 (291) 19,357
Asia-Pacific adjusted EBITDA $
158,313 $
153,245 $
139,234 $
311,558 $
261,022
(9)
We define cash gross margins as cash gross profit divided by revenues.
Our cash gross margins by geographic region is presented below:
Americas cash gross margins 72
% 72
% 71
% 72
% 72
%
EMEA cash gross margins 60
% 60
% 60
% 60
% 60
%
Asia-Pacific cash gross margins 66
% 66
% 67
% 66
% 67
%
(10)
We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
Americas adjusted EBITDA margins 48
% 48
% 48
% 48
% 48
%
EMEA adjusted EBITDA margins 47
% 46
% 45
% 46
% 44
%
Asia-Pacific adjusted EBITDA margins 54
% 54
% 53
% 54
% 53
%
(11)
We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows:
Adjusted EBITDA - current period $
677,010 $
660,155 $
604,004 $
1,337,165 $
1,183,519
Less adjusted EBITDA - prior period (660,155) (617,195) (579,515) (1,229,721) (1,115,159)
Adjusted EBITDA growth $
16,855 $
42,960 $
24,489 $
107,444 $
68,360
Revenues - current period $
1,384,977 $
1,363,218 $
1,261,943 $
2,748,195 $
2,477,820
Less revenues - prior period (1,363,218) (1,310,083) (1,215,877) (2,593,834) (2,352,482)
Revenue growth $
21,759 $
53,135 $
46,066 $
154,361 $
125,338
Adjusted EBITDA flow-through rate 77
% 81
% 53
% 70
% 55
%
(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 $
143,852 $
117,747 $
67,618 $
261,599 $
130,512
Net (income) loss attributable to non-controlling interests (325) 331 6
Net income attributable to Equinix 143,527 118,078 67,618 261,605 130,512
Adjustments:
Real estate depreciation 209,103 205,649 221,029 414,752 443,884
Loss on disposition of real estate property 343 2,346 878 2,689 5,884
FFO attributable to common shareholders $
352,973 $
326,073 $
289,525 $
679,046 $
580,280
(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 attributable to common shareholders $
352,973 $
326,073 $
289,525 $
679,046 $
580,280
Adjustments:
Installation revenue adjustment 1,492 1,029 840 2,521 2,999
Straight-line rent expense adjustment 2,300 2,378 1,664 4,678 3,965
Amortization of deferred financing costs and debt discounts and premiums 3,238 2,995 3,362 6,233 7,461
Contract cost adjustment (12,348) (6,778) (4,384) (19,126) (7,739)
Stock-based compensation expense 61,519 49,023 49,725 110,542 92,261
Non-real estate depreciation expense 60,904 57,994 35,267 118,898 69,364
Amortization expense 49,217 49,535 51,035 98,752 101,651
Accretion expense 1,326 1,527 1,497 2,853 394
Recurring capital expenditures (36,726) (20,947) (42,206) (57,673) (77,437)
Loss on debt extinguishment 382 19,215 382 40,706
Acquisition costs 2,774 2,471 30,413 5,245 35,052
Impairment charges 386 14,448 14,834
Income tax expense adjustment 10,592 7,990 (7,827) 18,582 (6,255)
AFFO attributable to common shareholders $
497,647 $
488,120 $
428,126 $
985,767 $
842,702
(14)
Following is how we reconcile from adjusted EBITDA to AFFO:
Adjusted EBITDA $
677,010 $
660,155 $
604,004 $
1,337,165 $
1,183,519
Adjustments:
Interest expense, net of interest income (112,785) (118,644) (130,715) (231,429) (252,382)
Amortization of deferred financing costs and debt discounts and premiums 3,238 2,995 3,362 6,233 7,461
Income tax expense (47,324) (42,569) (6,356) (89,893) (23,115)
Income tax expense adjustment 10,592 7,990 (7,827) 18,582 (6,255)
Straight-line rent expense adjustment 2,300 2,378 1,664 4,678 3,965
Contract cost adjustment (12,348) (6,778) (4,384) (19,126) (7,739)
Installation revenue adjustment 1,492 1,029 840 2,521 2,999
Recurring capital expenditures (36,726) (20,947) (42,206) (57,673) (77,437)
Other income (expense) 12,180 (166) 8,866 12,014 5,802
Loss on disposition of real estate property 343 2,346 878 2,689 5,884
Adjustments for unconsolidated JVs' and non-controlling interests (325) 331 6
AFFO attributable to common shareholders $
497,647 $
488,120 $
428,126 $
985,767 $
842,702
(15)
The shares used in the computation of basic and diluted FFO and AFFO per share attributable to Equinix is presented below:
Shares used in computing basic net income per share, FFO per share and AFFO per share 84,399 81,814 79,479 83,114 79,361
Effect of dilutive securities:
Employee equity awards 368 276 273 357 385
Shares used in computing diluted net income per share, FFO per share and AFFO per share 84,767 82,090 79,752 83,471 79,746
Basic FFO per share $
4.18 $
3.99 $
3.64 $
8.17 $
7.31
Diluted FFO per share $
4.16 $
3.97 $
3.63 $
8.14 $
7.28
Basic AFFO per share $
5.90 $
5.97 $
5.39 $
11.86 $
10.62
Diluted AFFO per share $
5.87 $
5.95 $
5.37 $
11.81 $
10.57
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SOURCE Equinix, Inc.
