EQUINIX, INC. REDWOOD CITY, Calif., Aug. 3, 2016 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended June 30, 2016. The Company uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements.
Second Quarter 2016 Results Summary
-- Revenues from continuing operations
-- $900.5 million, a 7% increase over the previous quarter
-- Includes $37.3 million of revenues from Bit-isle
-- Includes $107.2 million of revenues from Telecity
-- Operating Income
-- $151.7 million, a 35% increase from the previous quarter
-- Adjusted EBITDA
-- $420.3 million, a 47% adjusted EBITDA margin
-- Includes $12.1 million of adjusted EBITDA from Bit-isle
-- Includes $51.9 million of adjusted EBITDA from Telecity
-- Includes $10.4 million of integration costs
-- Net Income from Continuing Operations
-- $39.3 million
-- AFFO
-- $290.5 million, a 38% increase over the previous quarter
-- Includes $10.4 million of integration costs
2016 Annual Guidance Summary
-- Revenues from continuing operations
-- $3,598.0 million - $3,608.0 million, a 32% increase over the
previous year; an organic and constant currency growth rate of 13.8%
-- Assumes $550.0 million - $560.0 million in revenues from Telecity
and Bit-isle
-- Adjusted EBITDA
-- $1,658.0 million - $1,668.0 million or a 46.2% adjusted EBITDA
margin
-- Assumes 120 basis point YoY improvement in adjusted EBITDA for the
Equinix organic business
-- Assumes $250.0 million - $260.0 million of adjusted EBITDA from
Telecity and Bit-isle
-- Assumes approximately $55.0 million of integration costs for
acquisitions
-- AFFO
-- $1,040.0 million - $1,050 million, a 26% increase over the previous
year
-- Includes the Q1 $63.5 million foreign currency loss related to the
Telecity acquisition
-- Assumes approximately $55.0 million of integration costs for
acquisitions
The Company 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.
The second quarter includes full quarterly results of Bit-isle and Telecity, which were acquired by the Company in November 2015 and January 2016, respectively. In addition, in order to obtain the approval of the European Commission for the acquisition of Telecity, the Company and Telecity agreed to divest certain data centers, including the Company's London 2 International Business Exchange(TM) (IBX®) in London, UK ("LD2") and certain Telecity data centers. The Company completed these divestitures on July 5, 2016. The quarterly financial results include results from LD2 in continuing operations; the data centers in Telecity that were divested are reported as discontinued operations.
Revenues from continuing operations were $900.5 million for the second quarter, a 7% increase over the previous quarter and a 35% increase over the same quarter last year. Results include $144.5 million of revenues from the acquisitions of Bit-isle and Telecity. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $851.8 million for the second quarter, a 7% increase over the previous quarter and a 36% increase over the same quarter last year. Non-recurring revenues were $48.7 million in the quarter. MRR churn for the second quarter was 1.8% as compared to 2.2% in the previous quarter.
"The second quarter marked another strong performance for Equinix as we delivered both revenues and adjusted EBITDA above the top end of our guidance ranges, and as the company recorded its 54th quarter of consecutive revenue growth," said Steve Smith, president and CEO of Equinix. "As digital transformation drives companies to evolve business models and operations, Equinix continues to serve as an important partner as reflected in our strong growth and market leadership position. During the quarter we made significant progress towards our goal of owning more of our real estate with the acquisition of two Paris data centers, and we commenced construction on DC12, our first data center build on our owned Ashburn North Campus. The Ashburn campus is the largest internet exchange point in North America, and this expansion will effectively double our owned capacity in this important market over the next few years."
Cost of revenues was $457.0 million for the second quarter, a 7% increase from the previous quarter and a 45% increase from the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $164.9 million for the quarter, which we refer to as cash cost of revenues, was $292.0 million for the quarter, an 8% increase over the previous quarter and a 43% increase over the same quarter last year. Gross margins were 49%, unchanged from the prior quarter, as compared to 53% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, were 68% for the quarter, unchanged from the previous quarter, and 69% for the same quarter last year.
Selling, general and administrative expenses were $276.3 million for the second quarter, a 1% increase over the previous quarter and a 38% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $88.1 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $188.2 million for the quarter, a 2% decrease from the previous quarter and a 26% increase over the same quarter last year.
Interest expense was $100.3 million for the second quarter, a 1% decrease from the previous quarter, primarily attributed to prepayment of Brazil financings and maturity of the 4.75% convertible notes, and a 35% increase from the same quarter last year, primarily attributed to the interest associated with debt financings in November 2015 and other financings, such as various capital lease and other financing obligations related to the Bit-isle and Telecity acquisitions.
The Company recorded income tax expense from continuing operations of $13.8 million for the second quarter as compared to an income tax benefit of $10.6 million for the previous quarter and income tax expense from continuing operations of $7.5 million for the same quarter last year.
Income from continuing operations was $151.7 million for the second quarter, a 35% increase from the previous quarter and a 9% increase over the same quarter last year. Adjusted EBITDA, as defined below, for the second quarter was $420.3 million, a 10% increase over the previous quarter and a 35% increase over the same quarter last year. Adjusted EBITDA includes $64.0 million from the acquisitions of Bit-isle and Telecity.
Net income from continuing operations was $39.3 million for the second quarter. This represents a basic and diluted net income per share from continuing operations of $0.56 for the second quarter based on a weighted average basic and diluted share count of 69.7 million shares and 70.4 million shares, respectively. Net income from discontinued operations was $5.4 million for the second quarter. Basic and diluted net income per share from discontinued operations was $0.08 per share.
Adjusted funds from operations ("AFFO"), as defined below, were $290.5 million for the second quarter, a 38% increase from the previous quarter and a 31% increase over the same quarter last year. AFFO for the second quarter included $10.4 million of integration costs.
Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the second quarter, were $249.9 million, as compared to capital expenditures of $197.7 million for the previous quarter and $221.3 million for the same quarter last year.
The Company generated cash from operating activities of $278.8 million for the second quarter as compared to cash generated from operating activities of $104.3 million in the previous quarter. Cash used in investing activities was $252.9 million in the second quarter, as compared to cash used in investing activities of $1.3 billion in the previous quarter, primarily attributable to the Telecity acquisition. Cash used in financing activities was $169.9 million for the second quarter as compared to cash used in financing activities of $376.4 million in the previous quarter.
As of June 30, 2016, the Company's cash, cash equivalents and investments were $494.2 million, as compared to $2,246.3 million as of December 31, 2015.
Business Outlook
The Company's guidance includes forecasted results for Telecity from January 15, 2016, Bit-isle for the full year of 2016 and incremental operating results relating to the Company's purchase of our two data centers, Paris 2 and Paris 3, from Digital Realty on August 1, 2016 for approximately $211.7 million. As previously announced, the Company divested eight assets, seven from Telecity along with LD2, to obtain regulatory clearance for the transaction. The Company completed these divestitures on July 5, 2016 for approximately $827.2 million, which excludes the benefit attributed to our favorable hedge arrangement. The Company's guidance does not include the seven Telecity assets, which were treated as discontinued operations, but does assume six months, or $6.0 million in revenues, from LD2, which was under a different accounting treatment that required results to be reported as continuing operations until the sales were completed.
For the third quarter of 2016, the Company expects revenues to range between $915.0 and $921.0 million, or a normalized and constant currency growth rate of 2.4% quarter over quarter. This guidance includes a negative foreign currency impact of $3.0 million when compared to the average FX rates in Q2 2016. Cash gross margins are expected to approximate 68%. Cash selling, general and administrative expenses are expected to range between $199.0 and $205.0 million. Adjusted EBITDA is expected to range between $419.0 and $425.0 million, which includes a $1.6 million negative foreign currency impact when compared to the average FX rates in Q2 2016 and approximately $17.0 million in integration costs from the two acquisitions. Capital expenditures are expected to range between $270.0 and $290.0 million, which includes approximately $40.0 million of recurring capital expenditures and $230.0 to $250.0 million of non-recurring capital expenditures.
For the full year of 2016, total revenues are expected to range between $3,598.0 and $3,608.0 million, an organic and constant currency growth rate of 13.8% over year. This guidance includes a positive foreign currency benefit of $1.5 million on revenues when compared to prior guidance rates, and includes an expected $550.0 to $560.0 million in revenues from the Bit-isle and Telecity acquisitions. Total year cash gross margins are expected to approximate 68%. Cash selling, general and administrative expenses are expected to range between $782.0 and $792.0 million. Adjusted EBITDA is expected to range between $1,658.0 and $1,668.0 million, or a year over year organic and constant currency growth rate of 16.8%. This guidance includes $0.8 million of positive foreign currency benefit on adjusted EBITDA when compared to our prior guidance rates, and includes an expected $250.0 to $260.0 million in adjusted EBITDA from the Bit-isle and Telecity acquisitions, as well as approximately $55.0 million in integration costs related to these two acquisitions. AFFO is expected to range between $1,040.0 and $1,050 million, including approximately $55.0 million of integration costs and the $63.5 million Q1 foreign currency loss attributed to the Telecity acquisition. Capital expenditures are expected to range from $950.0 to $1,000.0 million, including approximately $145.0 million of recurring capital expenditures and $805.0 to $855.0 million of non-recurring capital expenditures.
The U.S. dollar exchange rates used for 2016 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.12 to the Euro, $1.43 to the Pound, S$1.35 to the U.S. dollar, ¥101.0 to the U.S. dollar and R$3.327 to the U.S. dollar. The 2016 global revenue breakdown by currency for the Euro, Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 19%, 11%, 7%, 6% and 3%, respectively.
The guidance provided above is forward-looking and includes the impact of the Company's acquisition of Telecity, which closed on January 15, 2016. 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, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.
Q2 Results Conference Call and Replay Information
The Company will discuss its quarterly results for the period ended June 30, 2016, along with its future outlook, in its quarterly conference call on Wednesday, August 3, 2016, 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 1-210-234-8004 (domestic and international) and reference the passcode EQIX.
A replay of the call will be available one hour after the call, through Friday, November 4, 2016, by dialing 1-203-369-1052 and referencing the passcode 2016. In addition, the webcast will be available at www.equinix.com/investors. No password is required for the webcast.
Investor Presentation and Supplemental Financial Information
The Company has made available on its website a presentation designed to accompany the discussion of the Company's results and future outlook, along with certain supplemental financial information and other data. Interested parties may access this information through the Company's Investor Relations website at www.equinix.com/investors.
Additional Resources
-- Q2 2016 financial earnings press release (PDF)
-- Q2 2016 financial tables (PDF)
About Equinix
Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most interconnected data centers. In 40 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies.
Non-GAAP Financial Measures
The Company 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, the Company uses non-GAAP financial measures to evaluate its operations.
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, the Company excludes certain items that it believes are not good indicators of the Company'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 gains on asset sales. The Company excludes these items in order for its lenders, investors and the industry analysts who review and report on the Company to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitors.
The Company excludes depreciation expense as these charges primarily relate to the initial construction costs of an IBX center, and do not reflect its current or future cash spending levels to support its business. Its IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX center do not recur with respect to such data center, although the Company may incur initial construction costs in future periods with respect to additional IBX 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 centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers and are not indicative of current or expected future capital expenditures. Therefore, the Company excludes depreciation from its operating results when evaluating its operations.
In addition, in presenting the non-GAAP financial measures, the Company also excludes amortization expense related to intangible assets, as it is not meaningful in evaluating the Company's current or future operating performance; however, like depreciation, is an expense expected to recur in future periods. The Company 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 the Company also believes are not meaningful in evaluating the Company's current operations. The Company excludes stock-based compensation expense as it represents expense attributed to equity awards that have no current or future cash obligations. As such, the Company, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. The Company excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges. The Company 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. The Company also excludes gains on asset sales as it represents profit that is not meaningful in evaluating the current or future operating performance. Finally, the Company excludes acquisition costs from its non-GAAP financial measures. The acquisition costs relate to costs the Company incurs in connection with business combinations. Management believes items such as restructuring charges, impairment charges, acquisition costs and gains on asset sales are non-core transactions; however, these types of costs may occur in future periods.
The Company presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, acquisition costs and gains on asset sales.
The Company also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), which are non-GAAP financial measures commonly used in the REIT industry. FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income (loss), excluding gains (losses) 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, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income (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.
The Company includes an adjustment for revenue from installation fees, since installation fees are deferred and recognized ratably over the expected life of the installation, although the fees are generally paid in a lump sum upon installation. The Company 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. The adjustments for both installation revenue and straight-line rent expense are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. The Company excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. The Company excludes gains (losses) on debt extinguishment since it represents a cost that is not a good indicator of the Company's current or future operating performance. The Company 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. The Company excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX centers or other assets that are required to support current revenues. The Company also excludes net income (loss) from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.
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 financials measures. The Company 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. The Company believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze the Company effectively.
Investors should note that the non-GAAP financial measures used by the Company 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. The Company 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. The Company 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 centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenue from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent 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 and IBX are registered trademarks of Equinix, Inc. International Business Exchange is a trademark of Equinix, Inc.
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,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Recurring revenues $851,771 $797,094 $626,691 $1,648,865 $1,236,348
Non-recurring revenues 48,739 47,062 38,891 95,801 72,408
------ ------ ------ ------ ------
Revenues 900,510 844,156 665,582 1,744,666 1,308,756
Cost of revenues 456,967 427,680 315,757 884,647 614,070
------- ------- ------- ------- -------
Gross profit 443,543 416,476 349,825 860,019 694,686
------- ------- ------- ------- -------
Operating expenses:
Sales and
marketing 107,832 106,590 81,248 214,422 159,864
General and
administrative 168,462 165,904 119,578 334,366 233,218
Acquisition
costs 15,594 36,536 9,866 52,130 11,022
Gains on asset
sales - (5,242) - (5,242) -
Total
operating
expenses 291,888 303,788 210,692 595,676 404,104
------- ------- ------- ------- -------
Income from continuing operations 151,655 112,688 139,133 264,343 290,582
------- ------- ------- ------- -------
Interest and other income (expense):
Interest
income 841 925 921 1,766 1,441
Interest
expense (100,332) (100,863) (74,496) (201,195) (143,287)
Other income
(expense) 1,555 (60,710) 1,386 (59,155) 872
Loss on debt
extinguishment (605) - - (605) -
Total
interest
and other,
net (98,541) (160,648) (72,189) (259,189) (140,974)
------- -------- ------- -------- --------
Income (loss) from continuing
operations before income taxes 53,114 (47,960) 66,944 5,154 149,608
Income tax
benefit
(expense) (13,812) 10,633 (7,485) (3,179) (13,697)
-----------
Net income (loss) from continuing
operations 39,302 (37,327) 59,459 1,975 135,911
Net income from
discontinued
operations,
net of tax 5,409 6,216 - 11,625 -
Net income (loss) $44,711 $(31,111) $59,459 $13,600 $135,911
======= ======== ======= ======= ========
Net income (loss) per share:
Basic net
income (loss)
per share from
continuing
operations $0.56 $(0.55) $1.04 $0.03 $2.39
Basic net
income per
share from
discontinued
operations 0.08 0.09 - 0.17 -
Basic net
income (loss)
per share $0.64 $(0.46) $1.04 $0.20 $2.39
==============
Diluted net
income (loss)
per share from
continuing
operations $0.56 $(0.55) $1.03 $0.03 $2.37
Diluted net
income per
share from
discontinued
operations 0.08 0.09 - 0.17 -
Diluted net
income (loss)
per share $0.64 $(0.46) $1.03 $0.20 $2.37
==============
Shares used in
computing
basic net
income (loss)
per share 69,729 68,132 56,935 68,931 56,798
==============
Shares used in
computing
diluted net
income (loss)
per share 70,364 68,132 57,499 69,575 57,410
==============
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,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Net income (loss) $44,711 $(31,111) $59,459 $13,600 $135,911
------- -------- ------- ------- --------
Other comprehensive income (loss), net of tax:
Foreign
currency
translation
adjustment
("CTA") gain
(loss) (298,361) 115,899 69,443 (182,462) (76,869)
Unrealized
gain (loss)
on
available-
for-sale
securities 1,199 (304) 17 895 120
Unrealized
gain (loss)
on cash flow
hedges 14,726 (6,784) (14,290) 7,942 (3,734)
Net
investment
hedge CTA
gain (loss) 55,196 (16,312) (10,389) 38,884 (10,389)
Net actuarial
gain on
defined
benefit
plans 8 6 83 14 142
Other comprehensive income
(loss), net of tax: (227,232) 92,505 44,864 (134,727) (90,730)
-------- ------ ------ -------- -------
Comprehensive income (loss),
net of tax (182,521) 61,394 104,323 (121,127) 45,181
======== ====== ======= ======== ======
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Assets June 30, December 31,
2016 2015
---- ----
Cash and cash equivalents $483,160 $2,228,838
Short-term investments 3,328 12,875
Accounts receivable, net 346,994 291,964
Current portion of restricted cash 3,411 479,417
Other current assets 233,870 212,929
Assets held for sale 1,024,666 33,257
Total current
assets 2,095,429 3,259,280
Long-term investments 7,694 4,584
Property, plant and equipment, net 6,958,794 5,606,436
Goodwill 3,190,197 1,063,200
Intangible assets, net 788,955 224,565
Other assets 227,976 198,630
-------
Total assets $13,269,045 $10,356,695
============
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $498,212 $400,948
Accrued property, plant and equipment 163,388 103,107
Current portion of capital lease and
other financing obligations 92,611 40,121
Current portion of mortgage and loans
payable 511,331 770,236
Convertible debt - 146,121
Other current liabilities 142,113 192,286
Liabilities held for sale 152,124 3,535
Total current
liabilities 1,559,779 1,656,354
Capital lease and other financing
obligations, less current portion 1,514,804 1,287,139
Mortgage and loans payable, less
current portion 1,074,663 472,769
Senior notes 3,807,816 3,804,634
Other liabilities 606,518 390,413
-------
Total liabilities 8,563,580 7,611,309
------------
Common stock 71 62
Additional paid-in capital 7,307,575 4,838,444
Treasury stock (148,246) (7,373)
Accumulated dividends (1,715,533) (1,468,472)
Accumulated other comprehensive loss (643,786) (509,059)
Accumulated deficit (94,616) (108,216)
Total
stockholders'
equity 4,705,465 2,745,386
------------
Total liabilities
and
stockholders'
equity $13,269,045 $10,356,695
==================
Ending headcount by geographic region is as follows:
Americas
headcount 2,408 2,329
EMEA headcount 2,088 1,188
Asia-Pacific
headcount 1,311 1,525
Total
headcount 5,807 5,042
===== =====
EQUINIX, INC.
SUMMARY OF DEBT PRINCIPAL OUTSTANDING
(in thousands)
(unaudited)
June 30, December 31,
2016 2015
---- ----
Capital lease and
other financing
obligations $1,607,415 $1,327,260
---------- ----------
Term loan, net of debt
discount and debt
issuance costs 1,071,853 454,503
Brazil financings, net
of debt issuance
costs 2,841 26,668
Mortgage payable and
other loans payable 511,300 436,212
Revolving credit
facility borrowings - 325,622
Plus: debt discount,
debt issuance costs
and premium, net 12,651 694
Total
mortgage
and loans
payable
principal 1,598,645 1,243,699
---------
Senior notes, net of
debt issuance costs 3,807,816 3,804,634
Plus: debt issuance
costs 42,184 45,366
Total
senior
notes
principal 3,850,000 3,850,000
----------
Convertible debt, net
of debt discount and
debt issuance costs - 146,121
Plus: debt discount
and debt issuance
costs - 3,961
Total
convertible
debt
principal - 150,082
------------
Total debt principal
outstanding $7,056,060 $6,571,041
========== ==========
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,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Cash flows from operating activities:
Net income (loss) $44,711 $(31,111) $59,459 $13,600 $135,911
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation,
amortization and
accretion 213,719 202,153 128,270 415,872 250,800
Stock-based
compensation 39,323 34,061 33,993 73,384 64,606
Amortization of
debt issuance
costs and debt
discounts 5,517 5,508 3,811 11,025 7,585
Loss on debt
extinguishment 318 - - 318 -
Gains on asset
sales - (5,242) - (5,242) -
Other items 7,311 4,871 4,946 12,182 9,108
Changes in
operating assets
and liabilities:
Accounts
receivable (31,055) (11,312) (10,991) (42,367) (41,782)
Income taxes,
net 4,901 (28,656) (53,592) (23,755) (66,147)
Accounts
payable and
accrued
expenses 29,592 (40,217) 19,600 (10,625) 49,293
Other assets
and
liabilities (35,509) (25,785) 26,967 (61,294) 35,900
Net cash provided by
operating activities 278,828 104,270 212,463 383,098 445,274
------- ------- ------- ------- -------
Cash flows from investing activities:
Purchases, sales and
maturities of
investments, net 8,764 3,419 433,966 12,183 429,260
Business acquisitions,
net of cash acquired - (1,601,627) - (1,601,627) (10,247)
Purchases of real
estate (11,710) (16,408) - (28,118) (38,282)
Purchases of other
property, plant and
equipment (249,867) (197,700) (221,342) (447,567) (371,462)
Proceeds from asset
sales - 22,825 - 22,825 -
Other investing
activities (117) 466,704 (511,166) 466,587 (507,645)
Net cash used in investing
activities (252,930) (1,322,787) (298,542) (1,575,717) (498,376)
-------- ---------- -------- ---------- --------
Cash flows from financing activities:
Proceeds from employee
equity awards 1,335 16,304 181 17,639 16,565
Payment of dividend
distributions (121,858) (124,836) (96,349) (246,694) (192,968)
Proceeds from loans
payable - 701,250 490,000 701,250 490,000
Repayment of capital
lease and other
financing obligations (12,103) (33,232) (8,342) (45,335) (13,638)
Repayment of mortgage
and loans payable (36,758) (936,353) (505,268) (973,111) (518,629)
Other financing
activities (541) 499 216 (42) 314
Net cash used in financing
activities (169,925) (376,368) (119,562) (546,293) (218,356)
-------- -------- -------- -------- --------
Effect of foreign currency exchange rates on cash and
cash equivalents 18,540 (195) 5,065 18,345 (3,326)
------ ---- ----- ------ ------
Change in cash balances included in assets held for
sale (25,111) - - (25,111) -
------- --- --- ------- ---
Net increase (decrease) in cash and cash equivalents (150,598) (1,595,080) (200,576) (1,745,678) (274,784)
Cash and cash equivalents at beginning of period 633,758 2,228,838 536,709 2,228,838 610,917
Cash and cash equivalents at end of period $483,160 $633,758 $336,133 $483,160 $336,133
======== ======== ======== ======== ========
Supplemental cash flow
information:
Cash paid for
taxes $12,361 $19,215 $60,266 $31,576 $74,804
======= ======= ======= ======= =======
Cash paid for
interest $85,897 $74,540 $71,823 $160,437 $95,799
======= ======= ======= ======== =======
Free cash flow (1) $17,134 $(1,221,936) $(520,045) $(1,204,802) $(482,362)
======= =========== ========= =========== =========
Adjusted free cash flow (2) $28,280 $396,663 $(474,162) $424,943 $(386,496)
======= ======== ========= ======== =========
(1) We define free cash flow as net cash provided by operating activities plus net cash provided by (used in) investing
activities (excluding the net purchases, sales and maturities of investments) as presented below:
Net cash provided by
operating activities
as presented above $278,828 $104,270 $212,463 $383,098 $445,274
Net cash used in
investing activities
as presented above (252,930) (1,322,787) (298,542) (1,575,717) (498,376)
Purchases, sales and
maturities of
investments, net (8,764) (3,419) (433,966) (12,183) (429,260)
Free cash flow
(negative free
cash flow) $17,134 $(1,221,936) $(520,045) $(1,204,802) $(482,362)
======= =========== ========= =========== =========
(2) We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate,
acquisitions, any excess tax benefits from employee equity awards, cash paid for taxes associated with
reclassifying our assets for tax purposes triggered by our conversion into a real estate investment trust ("REIT")
and costs related to the REIT conversion, as presented below:
Free cash flow (as
defined above) $17,134 $(1,221,936) $(520,045) $(1,204,802) $(482,362)
Less business
acquisitions, net of
cash - 1,601,627 - 1,601,627 10,247
Less purchases of real
estate 11,710 16,408 - 28,118 38,282
Less excess tax
benefits from
employee equity
awards (564) 564 223 - 931
Less cash paid for
taxes resulting from
the REIT conversion - - 45,113 - 45,113
Less costs related to
the REIT conversion - - 547 - 1,293
Adjusted free cash
flow $28,280 $396,663 $(474,162) $424,943 $(386,496)
======= ======== ========= ======== =========
We categorize our cash paid for taxes into cash paid for taxes resulting from the REIT conversion (as defined
above) and other cash taxes paid.
Cash paid for taxes
resulting from the
REIT conversion $ - $ - $45,113 $ - $45,113
Other cash taxes paid 12,361 19,215 15,153 31,576 29,691
Total cash paid
for taxes $12,361 $19,215 $60,266 $31,576 $74,804
======= ======= ======= ======= =======
EQUINIX, INC.
NON-GAAP MEASURES AND OTHER SUPPLEMENTAL DATA
---------------------------------------------
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Recurring revenues $851,771 $797,094 $626,691 $1,648,865 $1,236,348
Non-recurring revenues 48,739 47,062 38,891 95,801 72,408
Revenues (1) 900,510 844,156 665,582 1,744,666 1,308,756
Cash cost of revenues (2) 292,033 271,100 204,736 563,133 396,866
------- ------- ------- ------- -------
Cash gross profit (3) 608,477 573,056 460,846 1,181,533 911,890
-------
Cash operating expenses (4):
Cash sales and marketing
expenses (5) 78,071 79,692 65,058 157,763 128,878
Cash general and
administrative expenses
(6) 110,115 112,714 84,526 222,829 166,002
Total cash
operating
expenses (7) 188,186 192,406 149,584 380,592 294,880
------- ------- ------- ------- -------
Adjusted EBITDA (8) $420,291 $380,650 $311,262 $800,941 $617,010
======== ======== ======== ======== ========
Cash gross margins (9) 68% 68% 69% 68% 70%
=== === === === ===
Adjusted EBITDA margins (10) 47% 45% 47% 46% 47%
=== === === === ===
Adjusted EBITDA flow-through rate (11) 70% 42% 25% 45% 77%
=== === === === ===
FFO (12) $201,515 $115,875 $167,368 $317,390 $346,558
======== ======== ======== ======== ========
AFFO (13) (14) $290,529 $209,846 $221,388 $500,375 $443,144
======== ======== ======== ======== ========
(1) The geographic split of our revenues on a services basis is presented below:
Americas Revenues:
Colocation $289,578 $282,321 $262,934 $571,899 $520,866
Interconnection 89,860 85,936 77,102 175,796 152,188
Managed infrastructure 13,255 11,170 12,837 24,425 26,132
Other 786 729 732 1,515 1,473
Recurring
revenues 393,479 380,156 353,605 773,635 700,659
Non-recurring revenues 19,992 24,238 17,842 44,230 34,757
Revenues 413,471 404,394 371,447 817,865 735,416
------- ------- ------- ------- -------
EMEA Revenues:
Colocation 240,421 214,178 139,482 454,599 272,217
Interconnection 22,425 19,700 13,440 42,125 26,488
Managed infrastructure 15,391 18,560 5,919 33,951 11,702
Other 3,573 943 1,222 4,516 3,080
Recurring
revenues 281,810 253,381 160,063 535,191 313,487
Non-recurring revenues 18,799 14,475 13,904 33,274 25,103
Revenues 300,609 267,856 173,967 568,465 338,590
------- ------- ------- ------- -------
Asia-Pacific Revenues:
Colocation 132,670 123,394 94,194 256,064 185,072
Interconnection 23,436 21,569 14,119 45,005 27,643
Managed infrastructure 16,597 15,006 4,710 31,603 9,487
Other 3,779 3,588 - 7,367 -
Recurring
revenues 176,482 163,557 113,023 340,039 222,202
Non-recurring revenues 9,948 8,349 7,145 18,297 12,548
Revenues 186,430 171,906 120,168 358,336 234,750
------- ------- ------- ------- -------
Worldwide Revenues:
Colocation 662,669 619,893 496,610 1,282,562 978,155
Interconnection 135,721 127,205 104,661 262,926 206,319
Managed infrastructure 45,243 44,736 23,466 89,979 47,321
Other 8,138 5,260 1,954 13,398 4,553
Recurring
revenues 851,771 797,094 626,691 1,648,865 1,236,348
Non-recurring revenues 48,739 47,062 38,891 95,801 72,408
Revenues $900,510 $844,156 $665,582 $1,744,666 $1,308,756
======== ======== ======== ========== ==========
(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 $456,967 $427,680 $315,757 $884,647 $614,070
Depreciation, amortization
and accretion expense (161,493) (153,583) (108,470) (315,076) (212,347)
Stock-based compensation
expense (3,441) (2,997) (2,551) (6,438) (4,857)
Cash cost of
revenues $292,033 $271,100 $204,736 $563,133 $396,866
======== ======== ======== ======== ========
The geographic split of our
cash cost of revenues is
presented below:
Americas cash cost of
revenues $109,296 $109,020 $102,249 $218,316 $197,411
EMEA cash cost of revenues 114,950 101,509 62,431 216,459 120,925
Asia-Pacific cash cost of
revenues 67,787 60,571 40,056 128,358 78,530
Cash cost of
revenues $292,033 $271,100 $204,736 $563,133 $396,866
======== ======== ======== ======== ========
(3) We define cash gross profit as revenues less cash cost of revenues (as defined above).
(4) We define cash operating expenses as operating expenses less depreciation, amortization, stock-based compensation and
acquisition costs. We also refer to cash operating expenses as cash selling, general and administrative expenses or
"cash SG&A".
(5) We define cash sales and marketing expenses as sales and marketing expenses less depreciation, amortization and stock-
based compensation as presented below:
Sales and marketing
expenses $107,832 $106,590 $81,248 $214,422 $159,864
Depreciation and
amortization expense (19,047) (17,127) (6,268) (36,174) (12,353)
Stock-based compensation
expense (10,714) (9,771) (9,922) (20,485) (18,633)
Cash sales and
marketing
expenses $78,071 $79,692 $65,058 $157,763 $128,878
======= ======= ======= ======== ========
(6) We define cash general and administrative expenses as general and administrative expenses less depreciation, amortization
and stock-based compensation as presented below:
General and administrative
expenses $168,462 $165,904 $119,578 $334,366 $233,218
Depreciation and
amortization expense (33,179) (31,443) (13,532) (64,622) (26,100)
Stock-based compensation
expense (25,168) (21,747) (21,520) (46,915) (41,116)
Cash general and
administrative
expenses $110,115 $112,714 $84,526 $222,829 $166,002
======== ======== ======= ======== ========
(7) Our cash operating expenses, or cash SG&A, as defined above, is presented below:
Cash sales and marketing
expenses $78,071 $79,692 $65,058 $157,763 $128,878
Cash general and
administrative expenses 110,115 112,714 84,526 222,829 166,002
Cash SG&A $188,186 $192,406 $149,584 $380,592 $294,880
======== ======== ======== ======== ========
The geographic split of our
cash operating expenses,
or cash SG&A, is presented
below:
Americas cash SG&A $109,147 $110,914 $98,312 $220,061 $194,385
EMEA cash SG&A 52,204 54,858 32,003 107,062 62,101
Asia-Pacific cash SG&A 26,835 26,634 19,269 53,469 38,394
Cash SG&A $188,186 $192,406 $149,584 $380,592 $294,880
======== ======== ======== ======== ========
(8) We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion, stock-based
compensation expense, acquisition costs and gains on asset sales as presented below:
Income from continuing
operations $151,655 $112,688 $139,133 $264,343 $290,582
Depreciation, amortization
and accretion expense 213,719 202,153 128,270 415,872 250,800
Stock-based compensation
expense 39,323 34,515 33,993 73,838 64,606
Acquisition costs 15,594 36,536 9,866 52,130 11,022
Gains on asset sales - (5,242) - (5,242) -
Adjusted EBITDA $420,291 $380,650 $311,262 $800,941 $617,010
======== ======== ======== ======== ========
The geographic split of our
adjusted EBITDA is
presented below:
Americas income from
continuing operations $87,100 $88,539 $77,653 $175,639 $159,119
Americas depreciation,
amortization and accretion
expense 78,874 76,720 68,692 155,594 135,503
Americas stock-based
compensation expense 27,790 24,329 25,883 52,119 49,374
Americas acquisition costs 1,264 114 (1,342) 1,378 (376)
Americas gains on asset
sales - (5,242) - (5,242) -
Americas adjusted
EBITDA 195,028 184,460 170,886 379,488 343,620
------- ------- ------- ------- -------
EMEA income from continuing
operations 29,096 (7,419) 36,110 21,677 81,651
EMEA depreciation,
amortization and accretion
expense 82,929 76,488 27,826 159,417 54,519
EMEA stock-based
compensation expense 7,060 6,235 4,397 13,295 8,004
EMEA acquisition costs 14,370 36,185 11,200 50,555 11,390
EMEA adjusted
EBITDA 133,455 111,489 79,533 244,944 155,564
------- ------- ------ ------- -------
Asia-Pacific income from
continuing operations 35,459 31,568 25,370 67,027 49,812
Asia-Pacific depreciation,
amortization and accretion
expense 51,916 48,945 31,752 100,861 60,778
Asia-Pacific stock-based
compensation expense 4,473 3,951 3,713 8,424 7,228
Asia-Pacific acquisition
costs (40) 237 8 197 8
Asia-Pacific
adjusted EBITDA 91,808 84,701 60,843 176,509 117,826
------ ------ ------ ------- -------
Adjusted EBITDA $420,291 $380,650 $311,262 $800,941 $617,010
======== ======== ======== ======== ========
(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 74% 73% 72% 73% 73%
===
EMEA cash gross margins 62% 62% 64% 62% 64%
===
Asia-Pacific cash gross
margins 64% 65% 67% 64% 67%
===
(10) We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
Americas adjusted EBITDA
margins 47% 46% 46% 46% 47%
===
EMEA adjusted EBITDA
margins 44% 42% 46% 43% 46%
===
Asia-Pacific adjusted
EBITDA margins 49% 49% 51% 49% 50%
===
(11) We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth
as follows:
Adjusted EBITDA -current
period $420,291 $380,650 $311,262 $800,941 $617,010
Less adjusted EBITDA -
prior period (380,650) (333,145) (305,748) (654,617) (578,226)
Adjusted EBITDA
growth $39,641 $47,505 $5,514 $146,324 $38,784
======= ======= ====== ======== =======
Revenues - current period $900,510 $844,156 $665,582 $1,744,666 $1,308,756
Less revenues -prior
period (844,156) (730,462) (643,174) (1,417,111) (1,258,562)
Revenue growth $56,354 $113,694 $22,408 $327,555 $50,194
======= ======== ======= ======== =======
Adjusted EBITDA flow-
through rate 70% 42% 25% 45% 77%
===
(12) FFO is defined as net income (loss), excluding gains (losses) 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 (loss) $44,711 $(31,111) $59,459 $13,600 $135,911
Adjustments:
Real estate
depreciation and
amortization 158,727 150,995 107,321 309,722 209,969
Gain/loss on
disposition of
real estate
property (1,951) (4,037) 559 (5,988) 621
Adjustments for
FFO from
unconsolidated
joint ventures 28 28 29 56 57
FFO $201,515 $115,875 $167,368 $317,390 $346,558
======== ======== ======== ======== ========
(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, amortization of deferred financing costs, gains (losses) on debt extinguishment,
an income tax expense adjustment, net income 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 $201,515 $115,875 $167,368 $317,390 $346,558
Adjustments:
Installation
revenue
adjustment 7,407 3,354 12,474 10,761 21,128
Straight-line
rent expense
adjustment 1,895 1,133 2,017 3,028 5,218
Amortization of
deferred
financing costs 5,243 5,508 3,848 10,751 7,706
Stock-based
compensation
expense 39,323 34,515 33,993 73,838 64,606
Non-real estate
depreciation
expense 21,021 21,387 13,605 42,408 26,298
Amortization
expense 32,303 28,152 6,450 60,455 12,745
Accretion expense 1,668 1,619 894 3,287 1,788
Recurring capital
expenditures (31,928) (31,815) (27,330) (63,743) (49,703)
Loss on debt
extinguishment 605 - - 605 -
Acquisition costs 15,594 36,536 9,866 52,130 11,022
Income tax
expense
adjustment 1,301 (190) (1,784) 1,111 (4,192)
Net Income from
discontinued
operations, net
of tax (5,409) (6,216) (13) (11,625) (30)
Adjustments for
AFFO from
unconsolidated
joint ventures (9) (12) - (21) -
AFFO $290,529 $209,846 $221,388 $500,375 $443,144
======== ======== ======== ======== ========
(14) Following is how we reconcile from adjusted EBITDA to AFFO:
Adjusted EBITDA $420,291 $380,650 $311,262 $800,941 $617,010
Adjustments:
Interest expense,
net of interest
income (99,491) (99,938) (73,575) (199,429) (141,846)
Amortization of
deferred
financing costs 5,243 5,508 3,848 10,751 7,706
Income tax
(benefit)
expense (13,812) 10,633 (7,485) (3,179) (13,697)
Income tax
expense
adjustment 1,301 (190) (1,784) 1,111 (4,192)
Straight-line
rent expense
adjustment 1,895 1,133 2,017 3,028 5,218
Installation
revenue
adjustment 7,407 3,354 12,474 10,761 21,128
Recurring capital
expenditures (31,928) (31,815) (27,330) (63,743) (49,703)
Other
(income)/expense 1,555 (60,710) 1,386 (59,155) 872
Gain/loss on
disposition of
depreciable real
estate property (1,951) (4,037) 559 (5,988) 621
Adjustments for
unconsolidated
JVs' and non-
controlling
interests 19 16 16 35 27
Adjustment for
gain on sale of
asset - 5,242 - 5,242 -
AFFO $290,529 $209,846 $221,388 $500,375 $443,144
======== ======== ======== ======== ========
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SOURCE Equinix, Inc.
