REDWOOD CITY, Calif., July 30, 2014 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended June 30, 2014. 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.
Revenues were $605.2 million for the second quarter, a 4% increase over the previous quarter and a 14% increase over the same quarter last year. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $574.2 million for the second quarter, a 4% increase over the previous quarter and a 14% increase over the same quarter last year. Non-recurring revenues were $31.0 million for the quarter. Due to a lengthening of the estimated period that non-recurring installation fees are recognized, non-recurring revenues were reduced by $1.8 million for the second quarter and a total estimated revenue reduction of approximately $5.3 million for the full year 2014, a change in accounting estimate that the Company applied on a prospective basis beginning in the second quarter. MRR churn for the second quarter was 2.7%, an increase from the previous quarter but lower than prior guidance.
"We are very pleased to have delivered both revenue and adjusted EBITDA above the top end of our guidance ranges with record bookings," said Steve Smith, president and CEO of Equinix. "This quarter we passed a major milestone of having over 1,000 networks available around the globe. Our network density - combined with over 1,200 cloud and IT services providers - is at the heart of value creation for Platform Equinix creating business ecosystems in the cloud, financial, and content and digital media markets."
Cost of revenues were $292.9 million for the second quarter, a 2% increase over the previous quarter and a 10% increase from the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $102.0 million for the quarter, which we refer to as cash cost of revenues, were $190.9 million for the quarter, a 4% increase over the previous quarter and a 13% increase over the same quarter last year. Gross margins for the quarter were 52%, up from 50% for the previous quarter and 49% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 68%, unchanged from the previous quarter and the same quarter last year.
Selling, general and administrative expenses were $186.9 million for the second quarter, a 9% increase over the previous quarter and a 26% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $47.9 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $139.0 million for the quarter, a 3% increase over the previous quarter and a 24% increase over the same quarter last year.
Interest expense was $66.9 million for the second quarter, a 3% decrease from the previous quarter and a 10% increase over the same quarter last year, primarily attributed to additional financings such as various capital lease and other financing obligations to support the Company's expansion projects. The Company recorded an income tax benefit of $2.0 million for the second quarter as compared to an income tax benefit of $9.7 million in the same quarter last year.
During the second quarter, the Company entered into agreements with certain note holders to exchange $215.8 million of the principal amount of its 4.75% convertible subordinated notes for approximately 2.4 million shares of the Company's common stock and cash payments of approximately $51.7 million. The Company also entered into an agreement with a note holder to exchange $217.2 million of the principal amount of its 3.00% convertible subordinated notes for approximately 1.9 million shares of the Company's common stock and a cash payment of approximately $5.4 million. As a result, the Company recognized a loss on debt extinguishment of $51.2 million in the second quarter upon the exchange of the convertible subordinated notes.
Net income attributable to Equinix for the second quarter was $11.3 million. This represents a basic and diluted net income per share attributable to Equinix of $0.22 based on a weighted average share count of 51.3 million and 51.7 million, respectively, for the second quarter of 2014. This includes a charge to the income statement of $51.2 million for the loss on debt extinguishment related to the exchanges of the convertible subordinated notes.
Income from operations was $124.7 million for the second quarter, a 3% increase from the previous quarter and an 8% increase over the same quarter last year. Adjusted EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation, restructuring charges, impairment charges and acquisition costs, for the second quarter was $275.3 million, a 6% increase over the previous quarter and an 11% increase over the same quarter last year.
Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the second quarter, were $159.8 million.
The Company has repurchased approximately 1.8 million shares of its common stock under the $500 million share repurchase program authorized in December 2013, at an average price of $191.95 per share, for total consideration of $346.8 million from December 5, 2013 through July 25, 2014.
The Company generated cash from operating activities of $99.0 million for the second quarter as compared to $171.7 million in the previous quarter and $147.2 million for the same quarter last year. The decrease in cash from operating activities was primarily attributed to tax payments related to both REIT and non-REIT related obligations and cash interest payments during the second quarter. Cash provided by investing activities was $91.5 million in the second quarter as compared to cash provided by investing activities of $98.9 million in the previous quarter and cash provided by investing activities of $537.5 million in the same quarter last year, primarily attributed to $836.4 million of restricted cash released for the redemption of the $750.0 million 8.125% senior notes. Cash used in financing activities was $278.9 million for the second quarter, primarily attributed to repurchases of common stock under the share repurchase program and the exchanges of the 3.00% convertible subordinated notes and 4.75% convertible subordinated notes, as compared to cash used in financing activities of $37.3 million in the previous quarter and cash used in financing activities of $850.0 million in the same quarter last year, primarily attributed to the redemption of the $750.0 million 8.125% senior notes.
As of June 30, 2014, the Company's cash, cash equivalents and investments were $704.3 million, as compared to $1,030.1 million as of December 31, 2013.
In July 2014, the Company purchased Riverwood Capital L.P.'s interest in ALOG Data Centers do Brasil S.A. ("ALOG"), along with the approximate 10% of ALOG owned by ALOG management, for cash consideration of approximately $225.0 million. As a result, the Company owns 100% of the outstanding shares of ALOG. The Company has fully consolidated ALOG's results of operations in the Company's consolidated financial statements from the time the Company acquired a controlling equity interest in ALOG in April 2011.
Business Outlook
For the third quarter of 2014, the Company expects revenues to range between $614.0 and $618.0 million. Cash gross margins are expected to approximate 68% to 69%. Cash selling, general and administrative expenses are expected to approximate $140.0 million. Adjusted EBITDA is expected to range between $278.0 and $282.0 million, which includes $8.0 million in professional fees and costs primarily related to the REIT conversion. Capital expenditures are expected to range between $175.0 and $185.0 million, comprised of approximately $25.0 million of recurring capital expenditures and $150.0 to $160.0 million of expansion capital expenditures.
For the full year of 2014, total revenues are now expected to range between $2,425.0 and $2,435.0 million, or an as-reported 13% year over year growth rate, which includes a positive foreign currency benefit of approximately $6.5 million compared to the rates used from the Company's prior guidance. Total year cash gross margins are expected to approximate 68% and 69%. Cash selling, general and administrative expenses are expected to approximate $550.0 million. Adjusted EBITDA for the year is expected to range between $1,105.0 and $1,115.0 million, which includes a positive foreign currency benefit of approximately $3.0 million compared to the rates used from our prior guidance, and includes $35.0 million in professional fees and costs primarily related to the REIT conversion. Capital expenditures for 2014 are expected to range between $600.0 and $650.0 million, comprised of approximately $115.0 million of recurring capital expenditures and $485.0 to $535.0 million of expansion capital expenditures.
The U.S. dollar exchange rates used for 2014 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.36 to the Euro, $1.67 to the Pound, S$1.24 to the U.S. dollar and R$2.22 to the U.S. dollar. The 2014 global revenue breakdown by currency for the Euro, Pound, Singapore dollar and Brazilian Real is 15%, 9%, 7% and 4%, respectively.
Company Metrics and Q2 Results Presentation
The Company will discuss its results and guidance on its quarterly conference call on Wednesday, July 30, 2014, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available over the internet at Equinix.com under the Investor Relations heading. To hear the conference call live, please dial 1-210-234-8004 (domestic and international) and reference the passcode (EQIX). A presentation to accompany the call, as well as the Company's Non-Financial Metrics tracking sheet, will also be available on the website.
A replay of the call will be available beginning on Wednesday, July 30, 2014, at 7:30 p.m. ET through Thursday, October 30, 2014, by dialing 1-203-369-3450 and referencing the passcode (2014). In addition, the webcast will be available on the Investors section of the Company's website over the same time period. No password is required for the webcast.
About Equinix
Equinix, Inc. (Nasdaq: EQIX), connects more than 4,500 companies directly to their customers and partners inside the world's most networked data centers. Today, businesses leverage the Equinix interconnection platform in 32 strategic markets across the Americas, EMEA and Asia-Pacific. www.equinix.com.
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, 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, adjusted free cash flow, discretionary free cash flow and adjusted discretionary free cash flow to evaluate its operations. In presenting these non-GAAP financial measures, Equinix 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 and acquisition costs. Legislative and regulatory requirements encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. Equinix excludes these items in order for Equinix's lenders, investors, and 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.
Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business. Our IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our 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, Equinix excludes depreciation from its operating results when evaluating its operations.
In addition, in presenting the non-GAAP financial measures, Equinix excludes amortization expense related to certain intangible assets, as it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance. 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 believes are not meaningful in evaluating the Company's current operations. Equinix excludes stock-based compensation expense as it primarily represents expense attributed to equity awards that have no current or future cash obligations. As such, we, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix 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 our IBX centers, which we did not intend to build out, or our decision to reverse such restructuring charges or severance charges related to the Switch and Data acquisition. 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. Finally, Equinix 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 such items as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of costs will or may occur in future periods.
Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our 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, however, 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 that of other companies. In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.
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. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX 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, 2014 2014 2013 2014 2013 ---- ---- ---- ---- ---- Recurring revenues $574,158 $549,703 $501,814 $1,123,861 $996,336 Non-recurring revenues 31,003 30,350 27,057 61,353 48,669 ------ ------ ------ ------ ------ Revenues 605,161 580,053 528,871 1,185,214 1,045,005 Cost of revenues 292,859 287,525 267,109 580,384 525,700 ------- ------- ------- ------- ------- Gross profit 312,302 292,528 261,762 604,830 519,305 ------- ------- ------- ------- ------- Operating expenses: Sales and marketing 75,254 67,428 59,478 142,682 117,754 General and administrative 111,675 103,303 88,632 214,978 179,450 Restructuring charges - - (4,837) - (4,837) Acquisition costs 676 185 2,526 861 6,188 Total operating expenses 187,605 170,916 145,799 358,521 298,555 ------- ------- ------- ------- ------- Income from operations 124,697 121,612 115,963 246,309 220,750 ------- ------- ------- ------- ------- Interest and other income (expense): Interest income 744 1,434 917 2,178 1,664 Interest expense (66,874) (68,820) (61,001) (135,694) (121,332) Loss on debt extinguishment (51,183) - (93,602) (51,183) (93,602) Other income (expense) 681 678 2,768 1,359 2,309 Total interest and other, net (116,632) (66,708) (150,918) (183,340) (210,961) -------- ------- -------- -------- -------- Income (loss) before income taxes 8,065 54,904 (34,955) 62,969 9,789 Income tax benefit (expense) 2,014 (13,567) 9,668 (11,553) (1,792) ----------- Net income (loss) 10,079 41,337 (25,287) 51,416 7,997 Net (income) loss attributable to redeemable non-controlling interests 1,249 50 (529) 1,299 (970) Net income (loss) attributable to Equinix $11,328 $41,387 $(25,816) $52,715 $7,027 ======= ======= ======== ======= ====== Net income (loss) per share attributable to Equinix: Basic net income (loss) per share (1) $0.22 $0.83 $(0.52) $1.04 $0.14 ============== Diluted net income (loss) per share (1) $0.22 $0.81 $(0.52) $1.04 $0.14 ============== Shares used in computing basic net income (loss) per share 51,332 49,598 49,379 50,470 49,205 =========== Shares used in computing diluted net income (loss) per share 51,652 53,386 49,379 50,884 49,976 =========== (1) The net income (loss) attributable to Equinix used in the computation of basic and diluted net income (loss) per share attributed to Equinix is presented below: Net income (loss) $10,079 $41,337 $(25,287) $51,416 $7,997 Net (income) loss attributable to non- controlling interests 1,249 50 (529) 1,299 (970) ----------- Net income (loss) attributable to Equinix, basic 11,328 41,387 (25,816) 52,715 7,027 Interest on convertible debt - 1,984 - - - Net income (loss) attributable to Equinix, diluted $11,328 $43,371 $(25,816) $52,715 $7,027 ======= ======= ======== ======= ======
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, 2014 2014 2013 2014 2013 ---- ---- ---- ---- ---- Net income (loss) $10,079 $41,337 $(25,287) $51,416 $7,997 ------- ------- -------- ------- ------ Other comprehensive income (loss), net of tax: Foreign currency translation gain (loss) 23,081 14,970 (30,666) 38,051 (103,220) Unrealized gain (loss) on available for sale securities (73) 839 (458) 766 (360) Unrealized gain on cash flow hedges 54 200 - 254 - Other comprehensive income (loss), net of tax: 23,062 16,009 (31,124) 39,071 (103,580) ------ ------ ------- ------ -------- Comprehensive income (loss), net of tax 33,141 57,346 (56,411) 90,487 (95,583) ------ ------ ------- ------ ------- Net (income) loss attributable to redeemable non-controlling interests 1,249 50 (529) 1,299 (970) Other comprehensive (income) loss attributable to redeemable non- controlling interests (750) (2,067) 5,309 (2,817) 4,540 ----- Comprehensive income (loss) attributable to Equinix, net of tax $33,640 $55,329 $(51,631) $88,969 $(92,013) ======= ======= ======== ======= ========
EQUINIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) Assets June 30, December 31, 2014 2013 ---- ---- Cash and cash equivalents $408,334 $261,894 Investments 296,015 768,198 Accounts receivable, net 237,831 184,840 Property, plant and equipment, net 4,922,380 4,591,650 Goodwill 1,058,363 1,042,153 Intangible assets, net 170,130 184,182 Other assets 508,764 459,442 ------- ------- Total assets $7,601,817 $7,492,359 ============ Liabilities and Stockholders' Equity Accounts payable and accrued expenses $224,109 $263,223 Accrued property and equipment 82,014 64,601 Capital lease and other financing obligations 1,134,607 931,246 Mortgage and loans payable 230,654 253,208 Senior notes 2,250,000 2,250,000 Convertible debt 320,914 724,202 Other liabilities 449,304 422,913 ------- ------- Total liabilities 4,691,602 4,909,393 ------------ Redeemable non-controlling interests 227,156 123,902 ------- ------- Common stock 53 50 Additional paid-in capital 2,797,186 2,693,887 Treasury stock (52,938) (84,663) Accumulated other comprehensive loss (77,514) (113,767) Retained earnings (accumulated deficit) 16,272 (36,443) ------ ------- Total stockholders' equity 2,683,059 2,459,064 ------------- Total liabilities, redeemable non- controlling interests and stockholders' equity $7,601,817 $7,492,359 ============= Ending headcount by geographic region is as follows: Americas headcount 2,059 1,984 EMEA headcount 945 899 Asia-Pacific headcount 655 617 Total headcount 3,659 3,500 ===== =====
EQUINIX, INC. SUMMARY OF DEBT OUTSTANDING (in thousands) (unaudited) June 30, December 31, 2014 2013 ---- ---- Capital lease and other financing obligations $1,134,607 $931,246 ---------- -------- U.S. term loan 120,000 140,000 ALOG financings 65,972 67,882 Mortgage payable 42,634 43,497 Other loans payable 2,048 1,829 Total mortgage and loans payable 230,654 253,208 ------- Senior notes 2,250,000 2,250,000 --------- --------- Convertible debt, net of debt discount 320,914 724,202 Plus: debt discount 15,762 45,508 Total convertible debt principal 336,676 769,710 ------- Total debt outstanding $3,951,937 $4,204,164 ========== ==========
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, 2014 2014 2013 2014 2013 ---- ---- ---- ---- ---- Cash flows from operating activities: Net income (loss) $10,079 $41,337 $(25,287) $51,416 $7,997 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, amortization and accretion 116,074 113,610 110,189 229,684 218,792 Stock-based compensation 33,830 24,981 24,194 58,811 48,030 Debt issuance costs and debt discount 4,717 6,409 5,884 11,126 11,637 Loss on debt extinguishment 51,183 - 93,602 51,183 93,602 Restructuring charges - - (4,837) - (4,837) Excess tax benefits from employee equity awards (1,614) (10,018) (3,431) (11,632) (22,421) Other reconciling items 7,455 5,292 3,949 12,747 7,034 Changes in operating assets and liabilities: Accounts receivable (24,510) (28,995) (19,098) (53,505) (43,761) Income taxes, net (76,764) (15,749) (73,209) (92,513) (75,556) Accounts payable and accrued expenses (16,498) 8,830 28,392 (7,668) 396 Other assets and liabilities (4,988) 26,021 6,811 21,033 (9,573) Net cash provided by operating activities 98,964 171,718 147,159 270,682 231,340 ------ ------- ------- ------- ------- Cash flows from investing activities: Purchases, sales and maturities of investments, net 250,737 221,654 (175,593) 472,391 (408,558) Purchase of Asia Tone, less cash acquired - - - - (107) Purchase of real estate - (16,791) (2,960) (16,791) (2,960) Purchases of other property, plant and equipment (159,816) (105,907) (122,863) (265,723) (198,530) Other investing activities 582 (71) 838,963 511 5,162 Net cash provided by (used in) investing activities 91,503 98,885 537,547 190,388 (604,993) ------ ------ ------- ------- -------- Cash flows from financing activities: Purchases of treasury stock (208,263) (47,120) - (255,383) - Proceeds from employee equity awards 1,434 14,387 1,512 15,821 15,880 Proceeds from senior notes - - - - 1,500,000 Repayment of capital lease and other financing obligations (5,033) (4,250) (4,157) (9,283) (7,673) Repayment of mortgage and loans payable (16,777) (10,317) (18,139) (27,094) (32,191) Repayment of senior notes - - (750,000) - (750,000) Repayment of convertible debt (29,479) - - (29,479) - Debt extinguishment costs (22,552) - (80,925) (22,552) (80,925) Excess tax benefits from employee equity awards 1,614 10,018 3,431 11,632 22,421 Other financing activities 128 - (1,756) 128 (20,786) Net cash provided by (used in) financing activities (278,928) (37,282) (850,034) (316,210) 646,726 -------- ------- -------- -------- ------- Effect of foreign currency exchange rates on cash and cash equivalents 1,621 (41) (2,195) 1,580 (7,790) ----- --- ------ ----- ------ Net increase (decrease) in cash and cash equivalents (86,840) 233,280 (167,523) 146,440 265,283 Cash and cash equivalents at beginning of period 495,174 261,894 685,019 261,894 252,213 Cash and cash equivalents at end of period $408,334 $495,174 $517,496 $408,334 $517,496 ======== ======== ======== ======== ======== Supplemental cash flow information: Cash paid for taxes $75,371 $29,913 $62,818 $105,284 $76,854 ======= ======= ======= ======== ======= Cash paid for interest $79,517 $42,385 $29,440 $121,902 $96,280 ======= ======= ======= ======== ======= Free cash flow (1) $(60,270) $48,949 $860,299 $(11,321) $34,905 ======== ======= ======== ======== ======= Adjusted free cash flow (2) $12,119 $103,375 $923,876 $115,494 $123,370 ======= ======== ======== ======== ======== Ongoing capital expenditures (3) $63,581 $44,914 $40,210 $108,495 $74,207 ======= ======= ======= ======== ======= Discretionary free cash flow (4) $35,383 $126,804 $106,949 $162,187 $157,133 ======= ======== ======== ======== ======== Adjusted discretionary free cash flow (5) $107,772 $164,439 $167,566 $272,211 $242,531 ======== ======== ======== ======== ======== (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 $98,964 $171,718 $147,159 $270,682 $231,340 Net cash provided by (used in) investing activities as presented above 91,503 98,885 537,547 190,388 (604,993) Purchases, sales and maturities of investments, net (250,737) (221,654) 175,593 (472,391) 408,558 Free cash flow (negative free cash flow) $(60,270) $48,949 $860,299 $(11,321) $34,905 ======== ======= ======== ======== ======= (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 planned conversion into a real estate investment trust ("REIT") and costs related to the planned REIT conversion, as presented below: Free cash flow (as defined above) $(60,270) $48,949 $860,299 $(11,321) $34,905 Less purchase of Asia Tone, less cash acquired - - - - 107 Less purchase of real estate - 16,791 2,960 16,791 2,960 Less excess tax benefits from employee equity awards 1,614 10,018 3,431 11,632 22,421 Less cash paid for taxes resulting from the planned REIT conversion 61,873 17,827 53,570 79,700 57,304 Less costs related to the planned REIT conversion 8,902 9,790 3,616 18,692 5,673 Adjusted free cash flow $12,119 $103,375 $923,876 $115,494 $123,370 ======= ======== ======== ======== ======== We categorize our cash paid for taxes into cash paid for taxes resulting from the planned REIT conversion (as defined above) and other cash taxes paid. Cash paid for taxes resulting from the planned REIT conversion $61,873 $17,827 $53,570 $79,700 $57,304 Other cash taxes paid 13,498 12,086 9,248 25,584 19,550 Total cash paid for taxes $75,371 $29,913 $62,818 $105,284 $76,854 ======= ======= ======= ======== ======= (3) We refer to our purchases of other property, plant and equipment as our capital expenditures (or capex). We categorize our capital expenditures into expansion and ongoing capex. Expansion capex is capex spent to build out our new data centers and data center expansions. Our ongoing capex represents all of our other capex spending. Ongoing capital expenditures $63,581 $44,914 $40,210 $108,495 $74,207 Expansion capital expenditures 96,235 60,993 82,653 157,228 124,323 Total capital expenditures $159,816 $105,907 $122,863 $265,723 $198,530 ======== ======== ======== ======== ======== (4) We define discretionary free cash flow as net cash provided by operating activities less ongoing capital expenditures (as described above), as presented below: Net cash provided by operating activities, as presented above $98,964 $171,718 $147,159 $270,682 $231,340 Less ongoing capital expenditures (63,581) (44,914) (40,210) (108,495) (74,207) Discretionary free cash flow $35,383 $126,804 $106,949 $162,187 $157,133 ======= ======== ======== ======== ======== (5) We define adjusted discretionary free cash flow as discretionary free cash flow (as defined above), excluding any excess tax benefits from employee equity awards, cash paid for taxes associated with reclassifying our assets for tax purposes triggered by our planned REIT conversion and costs related to the planned REIT conversion, as presented below: Discretionary free cash flow (as defined above) $35,383 $126,804 $106,949 $162,187 $157,133 Excess tax benefits from employee equity awards 1,614 10,018 3,431 11,632 22,421 Cash paid for taxes resulting from the planned REIT conversion 61,873 17,827 53,570 79,700 57,304 Costs related to the planned REIT conversion 8,902 9,790 3,616 18,692 5,673 Adjusted discretionary free cash flow $107,772 $164,439 $167,566 $272,211 $242,531 ======== ======== ======== ======== ========
EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION ----------------------------------------------------------------------- (in thousands) (unaudited) Three Months Ended Six Months Ended ------------------ ---------------- June 30, March 31, June 30, June 30, June 30, 2014 2014 2013 2014 2013 ---- ---- ---- ---- ---- Recurring revenues $574,158 $549,703 $501,814 $1,123,861 $996,336 Non-recurring revenues 31,003 30,350 27,057 61,353 48,669 Revenues (1) 605,161 580,053 528,871 1,185,214 1,045,005 Cash cost of revenues (2) 190,901 184,248 168,421 375,149 330,431 ------- ------- ------- ------- ------- Cash gross profit (3) 414,260 395,805 360,450 810,065 714,574 ------- ------- ------- ------- ------- Cash operating expenses (4): Cash sales and marketing expenses (5) 58,785 55,799 46,430 114,584 92,710 Cash general and administrative expenses (6) 80,198 79,618 65,985 159,816 132,941 Total cash operating expenses (7) 138,983 135,417 112,415 274,400 225,651 ------- ------- ------- ------- ------- Adjusted EBITDA (8) $275,277 $260,388 $248,035 $535,665 $488,923 ======== ======== ======== ======== ======== Cash gross margins (9) 68% 68% 68% 68% 68% === === === === === Adjusted EBITDA margins (10) 45% 45% 47% 45% 47% === === === === === Adjusted EBITDA flow-through rate (11) 59% (20%) 56% 31% 45% === ==== === === === (1) The geographic split of our revenues on a services basis is presented below: Americas Revenues: Colocation $242,873 $236,614 $226,290 $479,487 $449,575 Interconnection 66,451 64,302 59,800 130,753 118,006 Managed infrastructure 14,885 13,112 13,567 27,997 26,714 Rental 943 952 445 1,895 905 Recurring revenues 325,152 314,980 300,102 640,132 595,200 Non-recurring revenues 17,104 15,053 13,366 32,157 24,060 Revenues 342,256 330,033 313,468 672,289 619,260 ------- ------- ------- ------- ------- EMEA Revenues: Colocation 127,132 122,176 103,916 249,308 204,448 Interconnection 12,329 11,366 8,854 23,695 17,235 Managed infrastructure 7,434 6,865 5,734 14,299 9,983 Rental 1,730 1,718 138 3,448 258 Recurring revenues 148,625 142,125 118,642 290,750 231,924 Non-recurring revenues 8,537 9,305 8,367 17,842 15,054 Revenues 157,162 151,430 127,009 308,592 246,978 ------- ------- ------- ------- ------- Asia-Pacific Revenues: Colocation 82,655 75,833 67,881 158,488 138,895 Interconnection 12,189 11,358 9,699 23,547 19,103 Managed infrastructure 5,537 5,407 5,490 10,944 11,214 Recurring revenues 100,381 92,598 83,070 192,979 169,212 Non-recurring revenues 5,362 5,992 5,324 11,354 9,555 Revenues 105,743 98,590 88,394 204,333 178,767 ------- ------ ------ ------- ------- Worldwide Revenues: Colocation 452,660 434,623 398,087 887,283 792,918 Interconnection 90,969 87,026 78,353 177,995 154,344 Managed infrastructure 27,856 25,384 24,791 53,240 47,911 Rental 2,673 2,670 583 5,343 1,163 Recurring revenues 574,158 549,703 501,814 1,123,861 996,336 Non-recurring revenues 31,003 30,350 27,057 61,353 48,669 Revenues $605,161 $580,053 $528,871 $1,185,214 $1,045,005 ======== ======== ======== ========== ========== (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 $292,859 $287,525 $267,109 $580,384 $525,700 Depreciation, amortization and accretion expense (99,730) (101,407) (96,894) (201,137) (191,873) Stock-based compensation expense (2,228) (1,870) (1,794) (4,098) (3,396) Cash cost of revenues $190,901 $184,248 $168,421 $375,149 $330,431 ======== ======== ======== ======== ======== The geographic split of our cash cost of revenues is presented below: Americas cash cost of revenues $94,684 $91,037 $89,890 $185,721 $177,614 EMEA cash cost of revenues 58,727 58,116 47,304 116,843 90,933 Asia-Pacific cash cost of revenues 37,490 35,095 31,227 72,585 61,884 Cash cost of revenues $190,901 $184,248 $168,421 $375,149 $330,431 ======== ======== ======== ======== ======== (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 $75,254 $67,428 $59,478 $142,682 $117,754 Depreciation and amortization expense (8,526) (4,629) (6,223) (13,155) (12,498) Stock-based compensation expense (7,943) (7,000) (6,825) (14,943) (12,546) Cash sales and marketing expenses $58,785 $55,799 $46,430 $114,584 $92,710 ======= ======= ======= ======== ======= (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 $111,675 $103,303 $88,632 $214,978 $179,450 Depreciation and amortization expense (7,818) (7,574) (7,072) (15,392) (14,421) Stock-based compensation expense (23,659) (16,111) (15,575) (39,770) (32,088) Cash general and administrative expenses $80,198 $79,618 $65,985 $159,816 $132,941 ======= ======= ======= ======== ======== (7) Our cash operating expenses, or cash SG&A, as defined above, is presented below: Cash sales and marketing expenses $58,785 $55,799 $46,430 $114,584 $92,710 Cash general and administrative expenses 80,198 79,618 65,985 159,816 132,941 Cash SG&A $138,983 $135,417 $112,415 $274,400 $225,651 ======== ======== ======== ======== ======== The geographic split of our cash operating expenses, or cash SG&A, is presented below: Americas cash SG&A $89,447 $89,433 $69,287 $178,880 $142,838 EMEA cash SG&A 33,084 30,109 29,016 63,193 56,627 Asia-Pacific cash SG&A 16,452 15,875 14,112 32,327 26,186 Cash SG&A $138,983 $135,417 $112,415 $274,400 $225,651 ======== ======== ======== ======== ======== (8) We define adjusted EBITDA as income from operations plus depreciation, amortization, accretion, stock- based compensation expense and acquisition costs as presented below: Income from operations $124,697 $121,612 $115,963 $246,309 $220,750 Depreciation, amortization and accretion expense 116,074 113,610 110,189 229,684 218,792 Stock-based compensation expense 33,830 24,981 24,194 58,811 48,030 Acquisition costs 676 185 2,526 861 6,188 Adjusted EBITDA $275,277 $260,388 $248,035 $535,665 $488,923 ======== ======== ======== ======== ======== The geographic split of our adjusted EBITDA is presented below: Americas income from operations $67,739 $71,735 $73,673 $139,474 $133,052 Americas depreciation, amortization and accretion expense 62,481 58,933 65,149 121,414 128,445 Americas stock-based compensation expense 27,177 18,793 18,168 45,970 36,612 Americas acquisition costs 728 102 2,138 830 5,536 Americas adjusted EBITDA 158,125 149,563 154,291 307,688 298,808 ------- ------- ------- ------- ------- EMEA income from operations 34,067 29,903 23,811 63,970 46,349 EMEA depreciation, amortization and accretion expense 27,901 29,902 23,424 57,803 46,495 EMEA stock-based compensation expense 3,385 3,317 3,065 6,702 6,103 EMEA acquisition costs (2) 83 389 81 471 EMEA adjusted EBITDA 65,351 63,205 50,689 128,556 99,418 ------ ------ ------ ------- ------ Asia-Pacific income from operations 22,891 19,974 18,479 42,865 41,349 Asia-Pacific depreciation, amortization and accretion expense 25,692 24,775 21,616 50,467 43,852 Asia-Pacific stock-based compensation expense 3,268 2,871 2,961 6,139 5,315 Asia-Pacific acquisition costs (50) - (1) (50) 181 Asia-Pacific adjusted EBITDA 51,801 47,620 43,055 99,421 90,697 ------ ------ ------ ------ ------ Adjusted EBITDA $275,277 $260,388 $248,035 $535,665 $488,923 ======== ======== ======== ======== ======== (9) We define cash gross margins as cash gross profit divided by revenues. Our cash gross margins by geographic region is presented below: Americas cash gross margins 72% 72% 71% 72% 71% === EMEA cash gross margins 63% 62% 63% 62% 63% === Asia-Pacific cash gross margins 65% 64% 65% 64% 65% === (10) We define adjusted EBITDA margins as adjusted EBITDA divided by revenues. Americas adjusted EBITDA margins 46% 45% 49% 46% 48% === EMEA adjusted EBITDA margins 42% 42% 40% 42% 40% === Asia-Pacific adjusted EBITDA margins 49% 48% 49% 49% 51% === (11) We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows: Adjusted EBITDA -current period $275,277 $260,388 $248,035 $535,665 $488,923 Less adjusted EBITDA - prior period (260,388) (263,530) (240,888) (511,975) (464,702) Adjusted EBITDA growth $14,889 $(3,142) $7,147 $23,690 $24,221 ======= ======= ====== ======= ======= Revenues - current period $605,161 $580,053 $528,871 $1,185,214 $1,045,005 Less revenues -prior period (580,053) (564,677) (516,134) (1,107,761) (990,894) Revenue growth $25,108 $15,376 $12,737 $77,453 $54,111 ======= ======= ======= ======= ======= Adjusted EBITDA flow- through rate 59% (20%) 56% 31% 45% ===
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SOURCE Equinix