Equinix Reports Second Quarter 2020 Results
REDWOOD CITY, Calif., July 29, 2020 /PRNewswire/ --
-- Quarterly revenues increased 6% over the same quarter last year to
$1.470 billion, or 8% on a normalized and constant currency basis,
representing the 70(th) consecutive quarter of revenue growth
-- Delivered one of the strongest quarters of interconnection growth and
activity in the company's history
-- Customer deployments across multiple metros comprised 88% of total
recurring revenues, demonstrating the value of the Equinix global
platform
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported results for the quarter ended June 30, 2020. 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 2020 Results Summary
-- Revenues
-- $1.470 billion, a 2% increase over the previous quarter
-- Includes a $3 million foreign currency benefit when compared to
prior guidance rates
-- Operating Income
-- $282 million, an 11% increase over the previous quarter and an
operating margin of 19%
-- Adjusted EBITDA
-- $720 million, a 49% adjusted EBITDA margin
-- Includes a $1 million foreign currency benefit when compared to
prior guidance rates
-- Includes $2 million of integration costs
-- Net Income and Net Income per Share attributable to Equinix
-- $133 million, a 12% increase over the previous quarter
-- $1.52 per share, a 10% increase over the previous quarter
-- AFFO and AFFO per Share
-- $558 million, a 4% increase over the previous quarter
-- $6.35 per share, a 2% increase over the previous quarter
-- Includes $2 million of integration costs
2020 Annual Guidance Summary
-- Revenues
-- $5.919 - $5.989 billion, a 6 - 8% increase over the previous year,
or a normalized and constant currency increase of 8 - 9%
-- An increase of $23 million due to a foreign currency benefit when
compared to the prior guidance FX rates
-- Adjusted EBITDA
-- $2.781 - $2.851 billion, a 47% adjusted EBITDA margin
-- An increase of $11 million due to a foreign currency benefit when
compared to the prior guidance FX rates
-- Assumes $20 million of integration costs
-- AFFO and AFFO per Share
-- $2.107 - $2.177 billion, an increase of 9 - 13% over the previous
year, or a normalized and constant currency increase of 14 - 18%; an
increase of $54 million compared to prior guidance, including an $11
million foreign currency benefit
-- $23.87 - $24.67 per share, an increase of 5 - 8% over the previous
year, or a normalized and constant currency increase of 8 - 12%;
reaffirms prior full-year AFFO per share guidance while fully
absorbing the dilution impact from the $1.7 billion public offering
of common stock
-- Assumes $20 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.
Equinix Quote
Charles Meyers, President and CEO, Equinix:
"Even in the face of an uncertain macro environment created by the global pandemic, the Equinix business continues to perform well. The demand drivers for digital infrastructure have never been stronger, and our relevance in enabling our customers to respond effectively to their digital transformation imperatives continues to increase. The power of our global platform and the resiliency and adaptability of our global teams are helping us create distinct and durable value for our customers, driving strong business results and allowing us to remain focused on delivering a positive impact to our many stakeholders as we build an enduring and sustainable culture and business."
Business Highlights
-- Equinix continued to invest in building out its global platform in
response to strong customer demand and a high level of inventory
utilization:
-- On May 29, Equinix entered into an agreement to purchase a portfolio
of 13 data center sites, representing 25 data centers, across Canada
from BCE Inc. ("Bell") for approximately $750 million. The addition
of these strategic assets, their associated operations and the more
than 600 customers operating within the data centers will further
strengthen Equinix's global platform. The acquisition will expand
Equinix's coverage in Canada coast to coast, making it a market
leader in data center and interconnection services. In addition to
adding new capacity in Toronto, Ontario, where Equinix currently
operates two International Business Exchange(TM) (IBX(®)) data
centers, it will extend Equinix's interconnection services to seven
new metros.
-- Equinix continues its investment in organic growth and expansion
activities with 29 major expansion projects underway in 20 markets
across 14 countries.
-- Additionally, Equinix completed seven new openings or phased
expansions in Q2 in Amsterdam, Chicago, Dallas, Hamburg, Hong Kong,
Toronto and Washington, D.C.
-- In Q2, Equinix opened the 5G and Edge Proof of Concept Center (POCC) at
its Dallas Infomart campus, which provides a 5G and edge "sandbox"
environment, enabling Mobile Network Operators (MNOs), cloud platforms,
technology vendors and enterprises to directly connect with the largest
edge data center platform in order to test, demonstrate and accelerate
complex 5G and edge deployment and interoperability scenarios. The POCC
will support the growing demand for companies to accelerate their
evolution from traditional to digital businesses.
-- Equinix continues to strengthen its leadership position in the cloud
ecosystem through the company's hyperscale strategy, expanding its
footprint to service both retail and large footprint hyperscale
requirements in key markets, while leveraging its joint venture
relationship with GIC. Equinix is seeing strong customer demand in its
initial European xScale JV(TM) with GIC, and is expected to expand this
JV with its PA9x asset, which is expected to open early next year and is
already 100% pre-leased to a major hyperscaler. Equinix is also
targeting to close its new xScale JV in Japan with GIC in Q4, adding
hyperscale assets in both Osaka and Tokyo.
-- Interconnection revenues in Q2 grew 14% year-over-year, or 16% on a
normalized and constant currency basis, steadily rising over the last
few quarters, reflecting the demand across the Equinix portfolio for
interconnection products. Today, Equinix has the most comprehensive
global interconnection platform, comprising over 378,000 physical and
virtual interconnections. In Q2, Equinix added an incremental 8,000
interconnections, fueled by streaming, video conferencing, enterprise
cloud connectivity and work-from-home local aggregation.
-- Equinix had strong bookings across all three regions (Americas, EMEA and
Asia-Pacific) in Q2, with record bookings in the Americas. The network
vertical also achieved record bookings, driven by robust network
reseller activity and network expansions to support traffic growth. The
financial services vertical captured its second-highest bookings, with
strength in global financial and insurance firms as they embrace digital
transformation.
-- Equinix's financial strength remains a significant and strategic
advantage. In May, Equinix raised approximately $1.7 billion in common
stock to support the continued organic and inorganic growth of the
business and received its third investment grade rating when Moody's
upgraded Equinix's corporate debt rating to Baa3 from Ba1. In June,
Equinix leveraged the company's investment-grade ratings by refinancing
$2.6 billion of high-yield debt at a blended interest rate of 2.07%. The
interest savings from the refinancing effectively offset the dilution
associated with equity raise.
COVID-19 Update
Many of the Company's IBX data centers have been identified as "essential businesses" or "critical infrastructure" by local governments for purposes of remaining open during the COVID-19 pandemic, and all IBX data centers remain operational at the time of filing of this press release. Precautionary measures have been implemented to minimize the risk of operational impact and to protect the health and safety of employees, customers, partners and communities. These include implementing tools such as an appointment-based system to control timing and frequency of visits, while also encouraging customers to leverage IBX technicians via Smart Hands(®) in order to restrict visits and minimize the number of people and the amount of time spent in the Company's IBX facilities. For the health and safety of Equinix employees, the Company's corporate offices were closed in March and non-IBX employees across the globe were instructed to work from home until further notice. Recently, a phased plan has been announced for a return-to-office for non-IBX attached sites, and the Company will begin to open certain offices as local conditions allow. Additionally, the Company has decided to continue to limit employee travel and has made the decision to either postpone or virtualize all global events through January 2021.
Looking ahead, the full impact of the COVID-19 pandemic on the Company's financial condition or results of operations remains uncertain and will depend on a number of factors, including its impact on Equinix customers, partners and vendors and the impact on, and functioning of, the global financial markets. The Company's past results may not be indicative of future performance, and historical trends may differ materially. Additional information pertaining to the impact of COVID-19 on Equinix and the Company's response thereto will be provided in the upcoming Form 10-Q for the quarter ended June 30, 2020.
Business Outlook
For the third quarter of 2020, the Company expects revenues to range between $1.493 and $1.513 billion, an increase of 2 - 3% quarter-over-quarter, or a normalized and constant currency increase of approximately 1 - 3%. This guidance includes a $5 million foreign currency benefit when compared to the average foreign currency ("FX") rates in Q2 2020. Adjusted EBITDA is expected to range between $696 and $716 million, including a $3 million foreign currency benefit when compared to the average FX rates in Q2 2020 and $5 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $36 and $46 million.
For the full year of 2020, total revenues are expected to range between $5.919 and $5.989 billion, a 6 - 8% increase over the previous year, or a normalized and constant currency increase of approximately 8 - 9%. This $23 million guidance raise is due to a foreign currency benefit when compared to the prior guidance FX rates. Adjusted EBITDA is expected to range between $2.781 and $2.851 billion, an adjusted EBITDA margin of 47% at the mid-point. This $11 million guidance raise is due to a foreign currency benefit when compared to the prior guidance FX rates. For the year, the company expects to incur $20 million in integration costs related to acquisitions. AFFO is expected to range between $2.107 and $2.177 billion, an increase of 9 - 13% over the previous year, or a normalized and constant currency increase of 14 - 18% and $20 million of integration costs related to our acquisitions. This $54 million guidance raise includes an $11 million foreign currency benefit when compared to prior guidance rates. AFFO per share is expected to range between $23.87 and $24.67, an increase of 5 - 8% over the previous year, or a normalized and constant currency increase of 8 - 12%. This guidance reaffirms prior full-year underlying AFFO per share guidance while fully absorbing the dilution impact from the $1.7 billion public offering of common stock that the company undertook in the second quarter. This guidance excludes any potential financing or refinancing the Company may undertake in the future. Non-recurring capital expenditures are expected to range between $2.050 and $2.240 billion, including $150 million of incremental xScale capital expenditures which we expect to transfer to the Japan JV in Q4, and recurring capital expenditures are expected to range between $150 and $160 million.
The U.S. dollar exchange rates used for 2020 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.13 to the Euro, $1.28 to the Pound, S$1.39 to the U.S. dollar, ¥108 to the U.S. dollar, and R$5.41 to the U.S. dollar. The Q2 2020 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 10%, 7%, 7% and 2%, 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 2020 Results Conference Call and Replay Information
Equinix will discuss its quarterly results for the period ended June 30, 2020, along with its future outlook, in its quarterly conference call on Wednesday, July 29, 2020, 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, November 4, 2020, by dialing 1-203-369-3598 and referencing the passcode 2020. 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 55 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 from operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction 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, transaction 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 transaction costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The transaction costs relate to costs Equinix incurs in connection with business combinations and formation of joint ventures, including advisory, legal, accounting, valuation and other professional or consulting fees. 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 transactions. Management believes items such as restructuring charges, impairment charges, transaction 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, transaction 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 transaction 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, risks to our business and operating results related to the COVID-19 pandemic; 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 and upcoming 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,
2020 2020 2019 2020 2019
---
Recurring revenues $
1,398,138 $
1,361,694 $
1,306,045 $
2,759,832 $
2,580,873
Non-recurring revenues 71,983 82,848 78,932 154,831 167,322
Revenues 1,470,121 1,444,542 1,384,977 2,914,663 2,748,195
Cost of revenues 739,344 736,282 698,179 1,475,626 1,380,209
Gross profit 730,777 708,260 686,798 1,439,037 1,367,986
Operating expenses:
Sales and marketing 178,124 180,450 159,201 358,574 328,916
General and administrative 256,890 261,597 232,656 518,487 447,702
Transaction costs 13,617 11,530 2,774 25,147 5,245
Impairment charges - 386 14,834
(Gain) loss on asset sales (342) 1,199 857
Total operating expenses 448,289 454,776 395,017 903,065 796,697
Income from operations 282,488 253,484 291,781 535,972 571,289
Interest and other income (expense):
Interest income 1,685 4,273 7,762 5,958 11,964
Interest expense (108,480) (107,338) (120,547) (215,818) (243,393)
Other income 4,278 5,170 12,180 9,448 12,014
Loss on debt extinguishment (1,868) (6,441) (8,309) (382)
Total interest and other,
net (104,385) (104,336) (100,605) (208,721) (219,797)
Income before income taxes 178,103 149,148 191,176 327,251 351,492
Income tax expense (44,753) (30,191) (47,324) (74,944) (89,893)
Net income 133,350 118,957 143,852 252,307 261,599
Net (income) loss
attributable to non-
controlling interests (46) (165) (325) (211) 6
Net income attributable to
Equinix $
133,304 $
118,792 $
143,527 $
252,096 $
261,605
Net income per share attributable to Equinix:
Basic net income per share $
1.53 $
1.39 $
1.70 $
2.92 $
3.15
Diluted net income per
share $
1.52 $
1.38 $
1.69 $
2.90 $
3.13
Shares used in computing
basic net income per share 87,303 85,551 84,399 86,427 83,114
Shares used in computing
diluted net income per
share 87,901 86,144 84,767 87,065 83,471
EQUINIX, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2020 2020 2019 2020 2019
---
Net income $
133,350 $
118,957 $
143,852 $
252,307 $
261,599
Other comprehensive loss, net of tax:
Foreign currency translation adjustment
("CTA") gain (loss) 181,286 (413,792) 25,127 (232,506) (56,592)
Net investment hedge CTA gain (loss) (97,058) 144,946 (37,857) 47,888 38,993
Unrealized gain (loss) on cash flow
hedges (17,868) (3,256) (3,355) (21,124) 4,869
Net actuarial gain (loss) on defined
benefit plans 20 35 (7) 55 (18)
Total other comprehensive income (loss),
net of tax 66,380 (272,067) (16,092) (205,687) (12,748)
Comprehensive income (loss), net of tax 199,730 (153,110) 127,760 46,620 248,851
Net (income) loss attributable to non-
controlling interests (46) (165) (325) (211) 6
Other comprehensive (income) loss
attributable to non-controlling
interests (2) 11 14 9 7
Comprehensive income (loss) attributable
to Equinix $
199,682 $
(153,264) $
127,449 $
46,418 $
248,864
EQUINIX, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, 2020 December 31, 2019
---
Assets
Cash and cash
equivalents $
4,785,050 $
1,869,577
Short-term
investments 22,069 10,362
Accounts receivable,
net 691,589 689,134
Other current assets 330,521 302,880
Assets held for sale 152,188 663
Total current assets 5,981,417 2,872,616
Property, plant and
equipment, net 12,663,827 12,152,597
Operating lease right-
of-use assets 1,396,101 1,475,367
Goodwill 5,016,350 4,781,858
Intangible assets, net 2,074,689 2,102,389
Other assets 660,246 580,788
Total assets $
27,792,630 $
23,965,615
Liabilities and Stockholders' Equity
Accounts payable and
accrued expenses $
745,517 $
760,718
Accrued property,
plant and equipment 335,013 301,535
Current portion of
operating lease
liabilities 139,833 145,606
Current portion of
finance lease
liabilities 102,416 75,239
Current portion of
mortgage and loans
payable 75,589 77,603
Current portion of
senior notes 2,227,768 643,224
Other current
liabilities 229,635 153,938
Total current
liabilities 3,855,771 2,157,863
Operating lease
liabilities, less
current portion 1,243,362 1,315,656
Finance lease
liabilities, less
current portion 1,658,432 1,430,882
Mortgage and loans
payable, less current
portion 1,218,049 1,289,434
Senior notes, less
current portion 8,804,633 8,309,673
Other liabilities 624,125 621,725
Total liabilities 17,404,372 15,125,233
Common stock 89 86
Additional paid-in
capital 14,651,944 12,696,433
Treasury stock (127,042) (144,256)
Accumulated dividends (4,639,041) (4,168,469)
Accumulated other
comprehensive loss (1,140,291) (934,613)
Retained earnings 1,642,621 1,391,425
Total Equinix
stockholders' equity 10,388,280 8,840,606
Non-controlling
interests (22) (224)
Total stockholders'
equity 10,388,258 8,840,382
Total liabilities and
stockholders' equity $
27,792,630 $
23,965,615
Ending headcount by geographic region is as
follows:
Americas headcount 4,103 3,672
EMEA headcount 3,172 2,941
Asia-Pacific
headcount 1,906 1,765
Total headcount 9,181 8,378
EQUINIX, INC.
Summary of Debt Principal Outstanding
(in thousands)
(unaudited)
June 30, 2020 December 31, 2019
---
Finance lease
liabilities $
1,760,848 $
1,506,121
Term loans 1,214,332 1,282,302
Mortgage
payable and
other loans
payable 79,306 84,735
Plus: debt
discount and
issuance
costs, net 2,195 3,081
Total mortgage
and loans
payable
principal 1,295,833 1,370,118
Senior notes 11,032,401 8,952,897
Plus: debt
issuance costs 108,519 78,030
Less: debt
premium (745) (1,716)
Total senior
notes
principal 11,140,175 9,029,211
Total debt
principal
outstanding $
14,196,856 $
11,905,450
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,
2020 2020 2019 2020 2019
Cash flows from operating activities:
Net income $
133,350 $
118,957 $
143,852 $
252,307 $
261,599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 348,434 337,431 320,550 685,865 635,255
Stock-based compensation 75,844 64,499 61,519 140,343 110,542
Amortization of debt issuance costs and
debt discounts and premiums 4,444 3,460 3,238 7,904 6,233
Loss on debt extinguishment 1,868 6,441 8,309 382
(Gain) loss on asset sales (342) 1,199 857
Impairment charges 386 14,834
Other items 13,891 6,856 4,745 20,747 12,969
Changes in operating assets and liabilities:
Accounts receivable (29,539) 15,306 (42,370) (14,233) (126,720)
Income taxes, net 8,164 3,697 14,837 11,861 30,662
Accounts payable and accrued expenses 117 (25,681) 7,476 (25,564) (3,987)
Operating lease right-of-use assets 37,495 38,797 37,219 76,292 78,483
Operating lease liabilities (36,898) (35,193) (34,919) (72,091) (73,805)
Other assets and liabilities 17,858 (18,939) 26,390 (1,081) 17,617
Net cash provided by operating
activities 574,686 516,830 542,923 1,091,516 964,064
Cash flows from investing activities:
Purchases, sales and maturities of
investments, net (1,341) (38,940) (3,063) (40,281) (11,842)
Business acquisitions, net of cash and
restricted cash acquired 39 (478,287) (34,143) (478,248) (34,143)
Purchases of real estate (46,194) (36,373) (41,715) (82,567) (47,436)
Purchases of other property, plant and
equipment (481,948) (400,941) (444,171) (882,889) (808,138)
Proceeds from asset sales
Net cash used in investing activities (529,444) (954,541) (523,092) (1,483,985) (901,559)
Cash flows from financing activities:
Proceeds from employee equity awards 30,391 30,391 27,593
Payment of dividend distributions (236,008) (233,479) (208,449) (469,487) (413,052)
Proceeds from public offering of common
stock, net of offering costs 1,683,106 101,792 348,121 1,784,898 1,561,555
Proceeds from mortgage and loans payable 500,790 250,000 750,790
Proceeds from senior notes, net of debt
discounts 2,585,736 2,585,736
Repayment of finance lease liabilities (23,704) (18,977) (11,954) (42,681) (43,112)
Repayment of mortgage and loans payable (770,677) (18,501) (17,878) (789,178) (36,212)
Repayment of senior notes (150,000) (343,711) (150,000) (493,711) (150,000)
Debt extinguishment costs (4,619) (4,619)
Debt issuance costs (26,266) (26,266)
Net cash provided by (used in)
financing activities 3,562,977 (237,104) (40,160) 3,325,873 946,772
Effect of foreign currency exchange
rates on cash, cash equivalents and
restricted cash 12,411 (25,287) 2,106 (12,876) 411
Net increase (decrease) in cash, cash
equivalents and restricted cash 3,620,630 (700,102) (18,223) 2,920,528 1,009,688
Cash, cash equivalents and restricted
cash at beginning of period 1,186,511 1,886,613 1,655,515 1,886,613 627,604
Cash, cash equivalents and restricted
cash at end of period $
4,807,141 $
1,186,511 $
1,637,292 $
4,807,141 $
1,637,292
Supplemental cash flow information:
Cash paid for taxes $
15,752 $
45,324 $
32,669 $
61,076 $
59,693
Cash paid for interest $
122,669 $
125,924 $
113,266 $
248,593 $
259,410
Free cash flow (negative free cash
flow)(1) $
46,583 $
(398,771) $
22,894 $
(352,188) $
74,347
Adjusted free cash flow (2) $
92,738 $
115,889 $
98,752 $
208,627 $
155,926
(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 $
574,686 $
516,830 $
542,923 $
1,091,516 $
964,064
Net cash used in investing activities as
presented above (529,444) (954,541) (523,092) (1,483,985) (901,559)
Purchases, sales and maturities of
investments, net 1,341 38,940 3,063 40,281 11,842
Free cash flow (negative free cash flow) $
46,583 $
(398,771) $
22,894 $
(352,188) $
74,347
(2) We define adjusted 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 $
46,583 $
(398,771) $
22,894 $
(352,188) $
74,347
Less business acquisitions, net of cash
and restricted cash acquired (39) 478,287 34,143 478,248 34,143
Less purchases of real estate 46,194 36,373 41,715 82,567 47,436
Adjusted free cash flow $
92,738 $
115,889 $
98,752 $
208,627 $
155,926
EQUINIX, INC.
Non-GAAP Measures and Other Supplemental Data
(in thousands)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Recurring revenues $
1,398,138 $
1,361,694 $
1,306,045 $
2,759,832 $
2,580,873
Non-recurring revenues 71,983 82,848 78,932 154,831 167,322
Revenues (1) 1,470,121 1,444,542 1,384,977 2,914,663 2,748,195
Cash cost of revenues (2) 480,946 476,541 460,983 957,487 909,364
Cash gross profit (3) 989,175 968,001 923,994 1,957,176 1,838,831
Cash operating expenses (4)(7):
Cash sales and marketing expenses (5) 111,007 115,671 95,114 226,678 203,330
Cash general and administrative expenses (6) 158,127 168,120 151,870 326,247 298,336
Total cash operating expenses (4)(7) 269,134 283,791 246,984 552,925 501,666
Adjusted EBITDA (8) $
720,041 $
684,210 $
677,010 $
1,404,251 $
1,337,165
Cash gross margins (9) 67 67 67 67 67
% % % % %
Adjusted EBITDA margins(10) 49 47 49 48 49
% % % % %
Adjusted EBITDA flow-through rate (11) 140 30 77 53 70
% % % % %
FFO (12) $
356,946 $
343,754 $
352,973 $
700,700 $
679,046
AFFO (13)(14) $
557,793 $
534,705 $
497,647 $
1,092,498 $
985,767
Basic FFO per share (15) $
4.09 $
4.02 $
4.18 $
8.11 $
8.17
Diluted FFO per share (15) $
4.06 $
3.99 $
4.16 $
8.05 $
8.14
Basic AFFO per share (15) $
6.39 $
6.25 $
5.90 $
12.64 $
11.86
Diluted AFFO per share (15) $
6.35 $
6.21 $
5.87 $
12.55 $
11.81
(1) The geographic split of our revenues on a services basis is presented below:
Americas Revenues:
Colocation $
447,498 $
450,954 $
444,086 $
898,452 $
884,067
Interconnection 153,387 150,929 142,460 304,316 281,023
Managed infrastructure 28,889 25,529 22,908 54,418 44,695
Other 5,081 5,220 5,352 10,301 11,331
Recurring revenues 634,855 632,632 614,806 1,267,487 1,221,116
Non-recurring revenues 26,564 29,273 29,614 55,837 67,670
Revenues $
661,419 $
661,905 $
644,420 $
1,323,324 $
1,288,786
EMEA Revenues:
Colocation $
381,144 $
362,330 $
347,795 $
743,474 $
678,920
Interconnection 50,904 48,541 38,614 99,445 76,139
Managed infrastructure 29,012 30,137 28,397 59,149 57,485
Other 6,130 2,466 2,275 8,596 4,774
Recurring revenues 467,190 443,474 417,081 910,664 817,318
Non-recurring revenues 20,900 35,435 32,774 56,335 67,197
Revenues $
488,090 $
478,909 $
449,855 $
966,999 $
884,515
Asia-Pacific Revenues:
Colocation $
228,803 $
221,093 $
213,734 $
449,896 $
423,399
Interconnection 45,140 42,671 37,957 87,811 74,653
Managed infrastructure 22,150 21,824 22,467 43,974 44,387
Recurring revenues 296,093 285,588 274,158 581,681 542,439
Non-recurring revenues 24,519 18,140 16,544 42,659 32,455
Revenues $
320,612 $
303,728 $
290,702 $
624,340 $
574,894
Worldwide Revenues:
Colocation $
1,057,445 $
1,034,377 $
1,005,615 $
2,091,822 $
1,986,386
Interconnection 249,431 242,141 219,031 491,572 431,815
Managed infrastructure 80,051 77,490 73,772 157,541 146,567
Other 11,211 7,686 7,627 18,897 16,105
Recurring revenues 1,398,138 1,361,694 1,306,045 2,759,832 2,580,873
Non-recurring revenues 71,983 82,848 78,932 154,831 167,322
Revenues $
1,470,121 $
1,444,542 $
1,384,977 $
2,914,663 $
2,748,195
(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 $
739,344 $
736,282 $
698,179 $
1,475,626 $
1,380,209
Depreciation, amortization and accretion
expense (250,743) (250,398) (230,696) (501,141) (459,333)
Stock-based compensation expense (7,655) (9,343) (6,500) (16,998) (11,512)
Cash cost of revenues $
480,946 $
476,541 $
460,983 $
957,487 $
909,364
The geographic split of our cash cost of revenues is presented below:
Americas cash cost of revenues $
194,467 $
185,233 $
182,920 $
379,700 $
362,555
EMEA cash cost of revenues 177,558 187,248 179,347 364,806 352,548
Asia-Pacific cash cost of revenues 108,921 104,060 98,716 212,981 194,261
Cash cost of revenues $
480,946 $
476,541 $
460,983 $
957,487 $
909,364
(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 $
435,014 $
442,047 $
391,857 $
877,061 $
776,618
Depreciation and amortization expense (97,691) (87,033) (89,854) (184,724) (175,922)
Stock-based compensation expense (68,189) (71,223) (55,019) (139,412) (99,030)
Cash operating expense $
269,134 $
283,791 $
246,984 $
552,925 $
501,666
(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 $
178,124 $
180,450 $
159,201 $
358,574 $
328,916
Depreciation and amortization expense (48,902) (46,234) (48,930) (95,136) (97,128)
Stock-based compensation expense (18,215) (18,545) (15,157) (36,760) (28,458)
Cash sales and marketing expense $
111,007 $
115,671 $
95,114 $
226,678 $
203,330
(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 $
256,890 $
261,597 $
232,656 $
518,487 $
447,702
Depreciation and amortization expense (48,789) (40,799) (40,924) (89,588) (78,794)
Stock-based compensation expense (49,974) (52,678) (39,862) (102,652) (70,572)
Cash general and administrative expense $
158,127 $
168,120 $
151,870 $
326,247 $
298,336
(7)
The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below:
Americas cash SG&A $
164,845 $
183,059 $
152,448 $
347,904 $
309,341
EMEA cash SG&A 66,935 61,503 60,863 128,438 123,250
Asia-Pacific cash SG&A 37,354 39,229 33,673 76,583 69,075
Cash SG&A $
269,134 $
283,791 $
246,984 $
552,925 $
501,666
(8) We define adjusted EBITDA as income from operations excluding depreciation, amortization, accretion, stock-based compensation,
restructuring charges, impairment charges, transaction costs and gain or loss on asset sales as presented below:
Income from operations $
282,488 $
253,484 $
291,781 $
535,972 $
571,289
Depreciation, amortization and accretion
expense 348,434 337,431 320,550 685,865 635,255
Stock-based compensation expense 75,844 80,566 61,519 156,410 110,542
Impairment charges 386 14,834
Transaction costs 13,617 11,530 2,774 25,147 5,245
(Gain) loss on asset sales (342) 1,199 857
Adjusted EBITDA $
720,041 $
684,210 $
677,010 $
1,404,251 $
1,337,165
The geographic split of our adjusted EBITDA is presented below:
Americas income from operations $
58,423 $
47,308 $
99,195 $
105,731 $
189,206
Americas depreciation, amortization and
accretion expense 182,204 171,439 167,614 353,643 334,750
Americas stock-based compensation expense 56,326 62,689 42,676 119,015 76,847
Americas impairment charges 386 14,834
Americas transaction costs 5,575 10,978 (819) 16,553 1,253
Americas (gain) loss on asset sales (421) 1,199 778
Americas adjusted EBITDA $
302,107 $
293,613 $
309,052 $
595,720 $
616,890
EMEA income from operations $
138,154 $
126,004 $
106,555 $
264,158 $
211,562
EMEA depreciation, amortization and
accretion expense 92,953 92,740 88,109 185,693 172,656
EMEA stock-based compensation expense 12,240 11,002 11,353 23,242 20,216
EMEA transaction costs 171 412 3,628 583 4,283
EMEA loss on asset sales 79 79
EMEA adjusted EBITDA $
243,597 $
230,158 $
209,645 $
473,755 $
408,717
Asia-Pacific income from operations $
85,911 $
80,172 $
86,031 $
166,083 $
170,521
Asia-Pacific depreciation, amortization and
accretion expense 73,277 73,252 64,827 146,529 127,849
Asia-Pacific stock-based compensation
expense 7,278 6,875 7,490 14,153 13,479
Asia-Pacific transaction costs 7,871 140 (35) 8,011 (291)
Asia-Pacific adjusted EBITDA $
174,337 $
160,439 $
158,313 $
334,776 $
311,558
(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
% 72
% 72
% 71
% 72
%
EMEA cash gross margins 64
% 61
% 60
% 62
% 60
%
Asia-Pacific cash gross margins 66
% 66
% 66
% 66
% 66
%
(10)
We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
Americas adjusted EBITDA margins 46
% 44
% 48
% 45
% 48
%
EMEA adjusted EBITDA margins 50
% 48
% 47
% 49
% 46
%
Asia-Pacific adjusted EBITDA margins 54
% 53
% 54
% 54
% 54
%
(11) We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as
follows:
Adjusted EBITDA - current period $
720,041 $
684,210 $
677,010 $
1,404,251 $
1,337,165
Less adjusted EBITDA -prior period (684,210) (675,860) (660,155) (1,350,562) (1,229,721)
Adjusted EBITDA growth $
35,831 $
8,350 $
16,855 $
53,689 $
107,444
Revenues - current period $
1,470,121 $
1,444,542 $
1,384,977 $
2,914,663 $
2,748,195
Less revenues - prior period (1,444,542) (1,417,135) (1,363,218) (2,813,945) (2,593,834)
Revenue growth $
25,579 $
27,407 $
21,759 $
100,718 $
154,361
Adjusted EBITDA flow-through rate 140
% 30
% 77
% 53
% 70
%
(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 $
133,350 $
118,957 $
143,852 $
252,307 $
261,599
Net (income) loss attributable to non-
controlling interests (46) (165) (325) (211) 6
Net income attributable to Equinix 133,304 118,792 143,527 252,096 261,605
Adjustments:
Real estate depreciation 222,613 221,787 209,103 444,400 414,752
(Gain) loss on disposition of real estate
property 376 2,506 343 2,882 2,689
Adjustments for FFO from unconsolidated
joint ventures 653 669 1,322
FFO attributable to common shareholders $
356,946 $
343,754 $
352,973 $
700,700 $
679,046
(13) AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based
compensation, restructuring charges, impairment charges, transaction 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 $
356,946 $
343,754 $
352,973 $
700,700 $
679,046
Adjustments:
Installation revenue adjustment 3,649 (3,481) 1,492 168 2,521
Straight-line rent expense adjustment 2,395 1,806 2,300 4,201 4,678
Amortization of deferred financing costs and
debt discounts and premiums 4,444 3,460 3,238 7,904 6,233
Contract cost adjustment (5,307) (10,434) (12,348) (15,741) (19,126)
Stock-based compensation expense 75,844 80,566 61,519 156,410 110,542
Non-real estate depreciation expense 76,618 65,591 60,904 142,209 118,898
Amortization expense 49,362 48,491 49,217 97,853 98,752
Accretion expense (adjustment) (159) 1,562 1,326 1,403 2,853
Recurring capital expenditures (29,996) (17,868) (36,726) (47,864) (57,673)
Loss on debt extinguishment 1,868 6,441 8,309 382
Transaction costs 13,617 11,530 2,774 25,147 5,245
Impairment charges 386 14,834
Income tax expense adjustment 8,070 2,833 10,592 10,903 18,582
Adjustments for AFFO from unconsolidated
joint ventures 442 454 896
AFFO attributable to common shareholders $
557,793 $
534,705 $
497,647 $
1,092,498 $
985,767
(14)
Following is how we reconcile from adjusted EBITDA to AFFO:
Adjusted EBITDA $
720,041 $
684,210 $
677,010 $
1,404,251 $
1,337,165
Adjustments:
Interest expense, net of interest income (106,795) (103,065) (112,785) (209,860) (231,429)
Amortization of deferred financing costs and
debt discounts and premiums 4,444 3,460 3,238 7,904 6,233
Income tax expense (44,753) (30,191) (47,324) (74,944) (89,893)
Income tax expense adjustment 8,070 2,833 10,592 10,903 18,582
Straight-line rent expense adjustment 2,395 1,806 2,300 4,201 4,678
Contract cost adjustment (5,307) (10,434) (12,348) (15,741) (19,126)
Installation revenue adjustment 3,649 (3,481) 1,492 168 2,521
Recurring capital expenditures (29,996) (17,868) (36,726) (47,864) (57,673)
Other income (expense) 4,278 5,170 12,180 9,448 12,014
(Gain) loss on disposition of real estate
property 376 2,506 343 2,882 2,689
Adjustments for unconsolidated JVs' and non-
controlling interests 1,049 958 (325) 2,007 6
Adjustment for gain (loss) on asset sales 342 (1,199) (857)
AFFO attributable to common shareholders $
557,793 $
534,705 $
497,647 $
1,092,498 $
985,767
(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 87,303 85,551 84,399 86,427 83,114
Effect of dilutive securities:
Employee equity awards 598 593 368 638 357
Shares used in computing diluted net income
per share, FFO per share and AFFO per share 87,901 86,144 84,767 87,065 83,471
Basic FFO per share $
4.09 $
4.02 $
4.18 $
8.11 $
8.17
Diluted FFO per share $
4.06 $
3.99 $
4.16 $
8.05 $
8.14
Basic AFFO per share $
6.39 $
6.25 $
5.90 $
12.64 $
11.86
Diluted AFFO per share $
6.35 $
6.21 $
5.87 $
12.55 $
11.81
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SOURCE Equinix, Inc.
