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April 26, 2017

Equinix Reports First Quarter 2017 Results

Interconnection and Data Center Leader Delivers 57th Consecutive Quarter of Revenue Growth; Quarterly Revenues Increase 12% Year-over-Year to $950 million

REDWOOD CITY, Calif., April 26, 2017 /PRNewswire/ --

  • Record quarterly bookings in Europe and the network vertical
  • Added 11 Fortune 500 customers including Progressive Corporation and Eli Lilly and Company
  • Customer deployments across multiple metros increase to 83% of total recurring revenue, demonstrating the value of Equinix's global platform

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended March 31, 2017.  Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements.

First Quarter 2017 Results Summary

  • Revenues from continuing operations
    • $950 million, a 1% increase over the previous quarter
  • Operating Income
    • $167 million, a 9% decrease from the previous quarter
  • Adjusted EBITDA
    • $428 million, a 45% adjusted EBITDA margin
    • Includes $12 million of integration costs
  • Net Income from Continuing Operations
    • $42 million
  • AFFO
    • $304 million, a 4% increase over the previous quarter

2017 Annual Guidance Summary

  • Revenues from continuing operations
    • >$3,976 million, a 10.1% increase over the previous year; a normalized and constant currency growth rate of greater than 11.1%
  • Adjusted EBITDA
    • >$1,860 million or a 46.8% adjusted EBITDA margin
    • Assumes $30 million of integration costs for acquisitions
  • AFFO
    • >$1,214 million, a 13% increase over the previous year
    • Assumes $30 million of integration costs for acquisitions
    • Assumes $87 million of incremental interest expense attributed to the Verizon data center acquisition funding

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.

Quote
Steve Smith, President and CEO, Equinix:
"Equinix is off to a strong start in 2017 with our 57th quarter of consecutive revenue growth and continued momentum in capturing and curating powerful digital ecosystems at global scale. We are adding new enterprises at a solid pace, as enterprises adopt hybrid and multi-cloud as their IT architecture of choice.  We have also made great progress towards our $3.6 billion acquisition of the portfolio of 29 data centers from Verizon in the U.S. and Latin America, and we remain highly confident that this transaction will create significant value for both our customers and our shareholders, strengthening our global platform and delivering AFFO per share accretion on day one, excluding transaction and integration costs."

Business Highlights

  • As Equinix expects to complete the transaction to acquire 29 data centers from Verizon in Q2, it also continues to invest in organic expansion, with 20 announced expansion projects currently underway. In Q1, Equinix opened a new IBX data center in São Paulo, Brazil (SP3), and today Equinix announced new expansions in London, Paris and Sydney totaling $145 million of capital expenditures. The global reach of Equinix continues to attract companies seeking to interconnect their IT infrastructure closer to the digital edge, and in Q1 customer deployments across multiple metros of Platform EquinixTM increased to 83% of total recurring revenue.
  • The enterprise vertical remained the fastest growing, with recurring revenue surpassing $100 million in Q1, as enterprises re-architect their infrastructure to directly and securely interconnect their people, locations, clouds and data at the digital edge.  Q1 was also a record quarter in terms of new enterprise wins, and customer wins included 11 Fortune 500 customers, among them Progressive Corporation, one of the largest providers of car insurance in the United States, and Eli Lilly and Company, a global pharmaceutical company.
  • Equinix continues to deliver strong results in the network vertical with record bookings led by the major telecommunication providers which are expanding capacity and capabilities for digital services such as OTT, cloud and security, as well as refreshing deployments with upgraded optical technologies.  Network customer expansions in Q1 included a top tier global provider building out its new digital services, and a global carrier that is making major investments in EMEA for their core backbone network.
  • Building on a foundation of innovative solutions for customers, Equinix launched IBX SmartView™ in Q1. This new data center monitoring software platform provides unprecedented visibility into distributed infrastructure for enterprises moving their IT operations to the digital edge.  It enables precise and real-time monitoring and forecasting of power, mechanical and environmental conditions across a customer's global footprint across Platform Equinix.

Business Outlook

For the second quarter of 2017, the Company expects revenues to range between $976 and $982 million, an increase of 3.1% quarter over quarter at the midpoint, or a normalized and constant currency growth rate of 2.6%. This guidance includes a foreign currency benefit of $5 million when compared to the average FX rates in Q1 2017. Cash gross margins are expected to approximate 67-68%. Cash selling, general and administrative expenses are expected to range between $206 and $212 million. Adjusted EBITDA is expected to range between $447 and $453 million, which includes a $4 million foreign currency benefit when compared to the average FX rates in Q1 2017 and $10 million of integration costs from the Telecity and Bit-isle acquisitions. Capital expenditures are expected to range between $331 and $351 million, which includes approximately $41 million of recurring capital expenditures.

For the full year of 2017, total revenues are expected to be greater than $3,976 million, an increase of 10.1% year over year, or a normalized and constant currency growth rate of greater than 11.1%. This guidance includes a foreign currency benefit of $40 million when compared to prior Equinix guidance rates, and has been normalized for the Telecity January 15th close impact and other acquisition related activities. Total year cash gross margins are expected to approximate 67-68%. Cash selling, general and administrative expenses are expected to range between $810 and $830 million. Adjusted EBITDA is expected to be greater than $1,860 million, an increase of 12.2% year over year, or a normalized and constant currency growth rate of greater than 11.3%. This guidance includes $14 million of foreign currency benefit on adjusted EBITDA when compared to prior Equinix guidance rates and an expected $30 million in integration costs. AFFO is expected to be greater than $1,214 million, including $87 million in interest expense related to the pending Verizon data center acquisition, but does not yet include the operating results attributed to the acquisition. Capital expenditures are expected to range between $1,100 and $1,200 million, including approximately $160 and $165 million of recurring capital expenditures and $940 and $1,035 million of non-recurring capital expenditures.

The U.S. dollar exchange rates used for 2017 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.09 to the Euro, $1.40 to the Pound, S$1.40 to the U.S. dollar,  ¥111.11 to the U.S. dollar and R$3.13 to the U.S. dollar. The 2017 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 19%, 10%, 7%, 7% and 3%, respectively.

The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses. The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, 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.

Q1 2017 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended March 31, 2017, along with its future outlook, in its quarterly conference call on Wednesday, April 26, 2017, 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 Tuesday, August 1, 2017, by dialing 203-369-1016 and referencing the passcode 2017. 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

Equinix has made available on its website a presentation designed to accompany the discussion of Equinix's results and future outlook, along with certain supplemental financial information and other data. Interested parties may access this information through Equinix's Investor Relations website at www.equinix.com/investors.

Additional Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most interconnected data centers. In 41 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies.

Non-GAAP Financial Measures

Equinix provides all information required in accordance with generally accepted accounting principles ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Equinix uses non-GAAP financial measures to evaluate its operations.

Equinix provides normalized and constant currency growth rates, which are calculated to adjust for acquisitions, dispositions, integration costs and foreign currency.

Equinix 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.

In presenting non-GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow and adjusted free cash flow, Equinix excludes certain items that it believes are not good indicators of Equinix's current or future operating performance. These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges, acquisition costs and gains on asset sales.  Equinix excludes these items in order for its lenders, investors and the industry analysts who review and report on Equinix to better evaluate Equinix's operating performance and cash spending levels relative to its industry sector and competitors.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of an IBX 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 Equinix 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, Equinix excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, Equinix also excludes amortization expense related to acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of acquisitions and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which Equinix also believes are not meaningful in evaluating Equinix's current operations. Equinix excludes stock-based compensation expense, as it can vary significantly from period to period based on share price, the timing, size and nature of equity awards. As such, Equinix and many investors and analysts, exclude this stock-based compensation expense to compare its operating results with those of other companies. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges.  Equinix also excludes impairment charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Equinix also excludes gains on asset sales as it represents profit that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes acquisition costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The acquisition costs relate to costs Equinix incurs in connection with business combinations. Such charges generally are not relevant to assessing the long-term performance of Equinix. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the acquisitions. Management believes items such as restructuring charges, impairment charges, acquisition costs and gains on asset sales are non-core transactions; however, these types of costs may occur in future periods.

Equinix also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), which are non-GAAP financial measures commonly used in the REIT industry. FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income (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.

Equinix 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. Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term.  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. Equinix 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. Equinix excludes gains (losses) on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX centers or other assets that are required to support current revenues. Equinix 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.

Equinix presents constant currency results of operations, which is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, Equinix has presented this non-GAAP financial measure to provide investors with an additional tool to evaluate its operating results without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Equinix's business performance. To present this information, Equinix's current and comparative prior period revenues and certain operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at a consistent exchange rate for purposes of each result being compared.

Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP.  Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financials measures. Equinix presents such non-GAAP financial measures to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what management believes to be its core, ongoing business operations.  Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.

Investors should note that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX data centers and developing, deploying and delivering Equinix 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


March 31,
2017


December 31,
2016


March 31,
2016

Recurring revenues

$

898,440



$

892,442



$

796,620


Non-recurring revenues

51,085



50,205



47,536


Revenues

949,525



942,647



844,156


Cost of revenues

468,961



465,921



427,680


Gross profit

480,564



476,726



416,476


Operating expenses:






Sales and marketing

128,927



113,384



106,590


General and administrative

181,399



178,956



165,904


Acquisition costs

3,025



(440)



36,536


(Gain) loss on asset sales



371



(5,242)


Total operating expenses

313,351



292,271



303,788


Income from continuing operations

167,213



184,455



112,688


Interest and other income (expense):






Interest income

3,092



948



925


Interest expense

(111,684)



(98,761)



(100,863)


Other income (expense)

337



(1,707)



(60,710)


Loss on debt extinguishment

(3,503)



(1,777)




Total interest and other, net

(111,758)



(101,297)



(160,648)


Income (loss) from continuing operations before income taxes

55,455



83,158



(47,960)


Income tax benefit (expense)

(13,393)



(19,494)



10,633


Net income (loss) from continuing operations

42,062



63,664



(37,327)


Net income (loss) from discontinued operations, net of tax



(1,914)



6,216


Net income (loss)

$

42,062



$

61,750



$

(31,111)


Net income (loss) per share:






Basic net income (loss) per share from continuing operations

$

0.58



$

0.89



$

(0.55)


Basic net income (loss) per share from discontinued operations



(0.03)



0.09


Basic net income (loss) per share

$

0.58



$

0.86



$

(0.46)


Diluted net income (loss) per share from continuing operations

$

0.57



$

0.88



$

(0.55)


Diluted net income (loss) per share from discontinued operations



(0.02)



0.09


Diluted net income (loss) per share

$

0.57



$

0.86



$

(0.46)


Shares used in computing basic net income per share

72,773



71,389



68,132


Shares used in computing diluted net income per share

73,367



71,959



68,132








 

EQUINIX, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)



Three Months Ended


March 31,
2017


December 31,
2016


March 31,
2016

Net income (loss)

$

42,062



$

61,750



$

(31,111)








Other comprehensive income (loss), net of tax:






Foreign currency translation adjustment ("CTA") gain (loss)

106,938



(292,355)



115,899


Unrealized loss on available-for-sale securities

(265)



(133)



(304)


Unrealized gain (loss) on cash flow hedges

(11,727)



15,762



(6,784)


Net investment hedge CTA gain (loss)

(28,551)



41,342



(16,312)


Net actuarial gain on defined benefit plans

11



11



6


Other comprehensive income (loss), net of tax:

66,406



(235,373)



92,505








Comprehensive income (loss), net of tax

$

108,468



$

(173,623)



$

61,394


 

EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)



March 31,
2017


December 31,
2016

Assets




Cash and cash equivalents

$

4,923,259



$

748,476


Short-term investments

14,742



3,409


Accounts receivable, net

429,990



396,245


Other current assets

206,026



319,396


          Total current assets

5,574,017



1,467,526


Long-term investments

6,461



10,042


Property, plant and equipment, net

7,605,829



7,199,210


Goodwill

3,053,026



2,986,064


Intangible assets, net

710,706



719,231


Other assets

234,645



226,298


          Total assets

$

17,184,684



$

12,608,371


Liabilities and Stockholders' Equity




Accounts payable and accrued expenses

$

515,959



$

581,739


Accrued property, plant and equipment

190,176



144,842


Current portion of capital lease and other financing obligations

99,202



101,046


Current portion of mortgage and loans payable

80,799



67,928


Other current liabilities

133,932



133,140


          Total current liabilities

1,020,068



1,028,695


Capital lease and other financing obligations, less current portion

1,523,309



1,410,742


Mortgage and loans payable, less current portion

2,432,610



1,369,087


Senior notes

5,045,449



3,810,770


Other liabilities

645,409



623,248


          Total liabilities

10,666,845



8,242,542


Common stock

78



72


Additional paid-in capital

9,601,627



7,413,519


Treasury stock

(146,936)



(147,559)


Accumulated dividends

(2,115,963)



(1,969,645)


Accumulated other comprehensive loss

(882,736)



(949,142)


Retained earnings

61,769



18,584


          Total stockholders' equity

6,517,839



4,365,829


          Total liabilities and stockholders' equity

$

17,184,684



$

12,608,371










Ending headcount by geographic region is as follows:








          Americas headcount

2,595



2,510


          EMEA headcount

2,156



2,063


          Asia-Pacific headcount

1,437



1,420


                    Total headcount

6,188



5,993


 

EQUINIX, INC.

Summary of Debt Principal Outstanding

(in thousands)

(unaudited)



March 31, 2017


December 31, 2016





Capital lease and other financing obligations

$

1,622,511



$

1,511,788






Term loans, net of debt discount and debt issuance costs

2,466,664



1,390,771


Mortgage payable and other loans payable

46,745



46,244


Plus: debt discount, debt issuance costs and premium, net

33,525



20,949


           Total mortgage and loans payable principal

2,546,934



1,457,964






Senior notes, net of debt issuance costs

5,045,449



3,810,770


Plus: debt issuance costs

54,551



39,230


          Total senior notes principal

5,100,000



3,850,000






Total debt principal outstanding

$

9,269,445



$

6,819,752


 

EQUINIX, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)



Three Months Ended


March 31,
2017


December 31,
2016


March 31,
2016

Cash flows from operating activities:






Net income (loss)

$

42,062



$

61,750



$

(31,111)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:






Depreciation, amortization and accretion

219,013



212,268



202,153


Stock-based compensation

38,323



39,837



34,061


Amortization of debt issuance costs and debt discounts

11,580



5,428



5,508


Loss on debt extinguishment

3,503



1,777




(Gain) loss on asset sales



371



(5,242)


Loss on sale of discontinued operations



1,891




Other items

8,380



5,014



5,435


Changes in operating assets and liabilities:






Accounts receivable

(39,664)



(27,423)



(11,312)


Income taxes, net

(20,637)



27,999



(28,656)


Accounts payable and accrued expenses

(65,414)



73,091



(40,217)


Other assets and liabilities

50,225



(101,385)



(25,785)


Net cash provided by operating activities

247,371



300,618



104,834


Cash flows from investing activities:






Purchases, sales and maturities of investments, net

(7,104)



779



3,419


Business acquisitions, net of cash and restricted cash acquired

(36,041)



621



(1,601,326)


Purchases of real estate

(41,739)





(16,408)


Purchases of other property, plant and equipment

(277,242)



(386,321)



(197,700)


Proceeds from asset sales

47,767



23,385



22,825


Net cash used in investing activities

(314,359)



(361,536)



(1,789,190)


Cash flows from financing activities:






Proceeds from employee equity awards

20,074



36



16,304


Payments of dividend distributions

(148,083)



(125,312)



(124,836)


Proceeds from public offering of common stock, net of offering costs

2,126,258






Proceeds from loans payable

1,059,800



457,900



701,250


Proceeds from senior notes

1,250,000






Repayment of capital lease and other financing obligations

(16,596)



(13,522)



(33,232)


Repayments of mortgage and loans payable and convertible debt

(21,510)



(476,474)



(936,353)


Debt extinguishment costs

(3,132)



(1,199)




Debt issuance costs

(40,665)



370



(65)


Other financing activities

(900)






Net cash provided by (used in) financing

activities

4,225,246



(158,201)



(376,932)


Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

11,541



(34,930)



(9,501)


Change in cash balances included in assets held for sale



3,755




Net increase (decrease) in cash, cash equivalents and restricted cash

4,169,799



(250,294)



(2,070,789)


Cash, cash equivalents and restricted cash at beginning of period

773,247



1,023,541



2,718,427


Cash, cash equivalents and restricted cash at end of period

$

4,943,046



$

773,247



$

647,638








Supplemental cash flow information:






Cash paid for taxes

$

29,552



$

7,817



$

19,215


Cash paid for interest

$

115,434



$

78,553



$

74,540








Free cash flow (negative free cash flow) (1)

$

(59,884)



$

(61,697)



$

(1,687,775)








Adjusted free cash flow (adjusted negative free cash

flow) (2)

$

17,896



$

(62,318)



$

(70,041)














(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

$

247,371



$

300,618



$

104,834


Net cash used in investing activities as presented above

(314,359)



(361,536)



(1,789,190)


Purchases, sales and maturities of investments, net

7,104



(779)



(3,419)


Free cash flow (negative free cash flow)

$

(59,884)



$

(61,697)



$

(1,687,775)








(2)  We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate and business acquisitions as presented below:







Free cash flow (as defined above)

$

(59,884)



$

(61,697)



$

(1,687,775)


Less business acquisitions, net of cash and restricted cash

36,041



(621)



1,601,326


Less purchases of real estate

41,739





16,408


Adjusted free cash flow

$

17,896



$

(62,318)



$

(70,041)








 

EQUINIX, INC.

Non-GAAP Measures and Other Supplemental Data

(in thousands)

(unaudited)



Three Months Ended


March 31,
2017


December 31,
2016


March 31,
2016

Recurring revenues

$

898,440



$

892,442



$

796,620


Non-recurring revenues

51,085



50,205



47,536


Revenues (1)

949,525



942,647



844,156








Cash cost of revenues (2)

303,540



301,540



271,100


Cash gross profit (3)

645,985



641,107



573,056








Cash operating expenses (4):






Cash sales and marketing expenses (5)

99,861



85,196



79,692


Cash general and administrative expenses (6)

118,550



119,420



112,714


Total cash operating expenses (7)

218,411



204,616



192,406








Adjusted EBITDA (8)

$

427,574



$

436,491



$

380,650








Cash gross margins (9)

68

%


68

%


68

%







Adjusted EBITDA margins (10)

45

%


46

%


45

%







Adjusted EBITDA flow-through rate (11)

(130)

%


92

%


42

%







FFO (12)

$

200,866



$

219,868



$

115,875








AFFO (13) (14)

$

304,110



$

293,785



$

209,846














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







Americas Revenues:












Colocation

$

299,273



$

299,200



$

280,564


Interconnection

100,850



100,459



87,609


Managed infrastructure

15,061



14,385



11,254


Other

919



943



729


Recurring revenues

416,103



414,987



380,156


Non-recurring revenues

20,344



21,555



24,238


Revenues

$

436,447



$

436,542



$

404,394








EMEA Revenues:












Colocation

$

253,254



$

242,829



$

214,178


Interconnection

22,351



22,280



19,700


Managed infrastructure

17,672



17,243



18,560


Other

3,330



2,919



943


Recurring revenues

296,607



285,271



253,381


Non-recurring revenues

18,240



16,353



14,475


Revenues

$

314,847



$

301,624



$

267,856








Asia-Pacific Revenues:












Colocation

$

138,995



$

146,483



$

123,653


Interconnection

24,859



23,159



18,278


Managed infrastructure

21,876



22,362



20,496


Other



180



656


Recurring revenues

185,730



192,184



163,083


Non-recurring revenues

12,501



12,297



8,823


Revenues

$

198,231



$

204,481



$

171,906








Worldwide Revenues:












Colocation

$

691,522



$

688,512



$

618,395


Interconnection

148,060



145,898



125,587


Managed infrastructure

54,609



53,990



50,310


Other

4,249



4,042



2,328


Recurring revenues

898,440



892,442



796,620


Non-recurring revenues

51,085



50,205



47,536


Revenues

$

949,525



$

942,647



$

844,156








(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

$

468,961



$

465,921



$

427,680


Depreciation, amortization and accretion expense

(162,510)



(161,049)



(153,583)


Stock-based compensation expense

(2,911)



(3,332)



(2,997)


Cash cost of revenues

$

303,540



$

301,540



$

271,100








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







Americas cash cost of revenues

$

113,059



$

115,838



$

109,020


EMEA cash cost of revenues

122,175



113,796



101,509


Asia-Pacific cash cost of revenues

68,306



71,906



60,571


Cash cost of revenues

$

303,540



$

301,540



$

271,100



(3)     We define cash gross profit as revenues less cash cost of revenues (as defined above).







(4)  We define cash operating expenses as selling, general, and administrative expense less depreciation, amortization, and stock-based compensation. We also refer to cash operating expense as cash selling, marketing, general and administrative expense or "cash SG&A".







Selling, general, and administrative expense

$

310,326



$

292,340



$

272,494


Depreciation and amortization expense

(56,503)



(51,219)



(48,570)


Stock-based compensation expense

(35,412)



(36,505)



(31,518)


Cash operating expense

$

218,411



$

204,616



$

192,406








(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

$

128,927



$

113,384



$

106,590


Depreciation and amortization expense

(18,094)



(17,345)



(17,127)


Stock-based compensation expense

(10,972)



(10,843)



(9,771)


Cash sales and marketing expenses

$

99,861



$

85,196



$

79,692








(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

$

181,399



$

178,956



$

165,904


Depreciation and amortization expense

(38,409)



(33,874)



(31,443)


Stock-based compensation expense

(24,440)



(25,662)



(21,747)


Cash general and administrative expenses

$

118,550



$

119,420



$

112,714








(7)      Our cash operating expenses, or cash SG&A, as defined above, is presented below:







Cash sales and marketing expenses

$

99,861



$

85,196



$

79,692


Cash general and administrative expenses

118,550



119,420



112,714


Cash SG&A

$

218,411



$

204,616



$

192,406








The geographic split of our cash operating expenses, or cash SG&A, is presented below:







Americas cash SG&A

$

124,769



$

115,012



$

110,914


EMEA cash SG&A

63,118



59,977



54,858


Asia-Pacific cash SG&A

30,524



29,627



26,634


Cash SG&A

$

218,411



$

204,616



$

192,406








(8)    We define adjusted EBITDA as income from continuing operations excluding depreciation, amortization, accretion, stock-based compensation expense, impairment charges, acquisition costs and gains or loss on asset sales as presented below:







Income from continuing operations

$

167,213



$

184,455



$

112,688


Depreciation, amortization and accretion expense

219,013



212,268



202,153


Stock-based compensation expense

38,323



39,837



34,515


Acquisition costs

3,025



(440)



36,536


(Gain) loss on asset sales



371



(5,242)


Adjusted EBITDA

$

427,574



$

436,491



$

380,650








The geographic split of our adjusted EBITDA is presented below:







Americas income from continuing operations

$

81,110



$

87,537



$

88,539


Americas depreciation, amortization and accretion expense

88,428



83,305



76,720


Americas stock-based compensation expense

27,774



28,312



24,329


Americas acquisition costs

1,307



6,538



114


Americas gain on asset sales





(5,242)


Americas adjusted EBITDA

$

198,619



$

205,692



$

184,460








EMEA income from continuing operations

$

44,981



$

51,347



$

(7,419)


EMEA depreciation, amortization and accretion expense

76,806



76,598



76,488


EMEA stock-based compensation expense

6,049



6,884



6,235


EMEA acquisition costs

1,718



(6,978)



36,185


EMEA adjusted EBITDA

$

129,554



$

127,851



$

111,489








Asia-Pacific income from continuing operations

$

41,122



$

45,571



$

31,568


Asia-Pacific depreciation, amortization and accretion expense

53,779



52,365



48,945


Asia-Pacific stock-based compensation expense

4,500



4,641



3,951


Asia-Pacific acquisition costs





237


Asia-Pacific loss on asset sales



371




Asia-Pacific adjusted EBITDA

$

99,401



$

102,948



$

84,701








(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

%


73

%







EMEA cash gross margins

61

%


62

%


62

%







Asia-Pacific cash gross margins

66

%


65

%


65

%







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







Americas adjusted EBITDA margins

46

%


47

%


46

%







EMEA adjusted EBITDA margins

41

%


42

%


42

%







Asia-Pacific adjusted EBITDA margins

50

%


50

%


49

%


(11)  We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows:







          Adjusted EBITDA - current period

$

427,574



$

436,491



$

380,650


          Less adjusted EBITDA - prior period

(436,491)



(420,042)



(333,145)


                    Adjusted EBITDA growth

$

(8,917)



$

16,449



$

47,505








          Revenues - current period

$

949,525



$

942,647



$

844,156


          Less revenues - prior period

(942,647)



(924,676)



(730,462)


                    Revenue growth

$

6,878



$

17,971



$

113,694








          Adjusted EBITDA flow-through rate

(130)%



92

%


42

%







(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)

$

42,062



$

61,750



$

(31,111)


Adjustments:






Real estate depreciation and amortization

159,414



157,054



150,995


(Gain) loss on disposition of real estate property

(638)



1,036



(4,037)


Adjustments for FFO from unconsolidated joint ventures

28



28



28


FFO

$

200,866



$

219,868



$

115,875








(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

$

200,866



$

219,868



$

115,875


Adjustments:






Installation revenue adjustment

4,675



4,788



3,354


Straight-line rent expense adjustment

2,409



1,986



1,133


Amortization of deferred financing costs

11,580



5,258



5,508


Stock-based compensation expense

38,323



39,837



34,515


Non-real estate depreciation expense

28,575



23,265



21,387


Amortization expense

29,017



29,478



28,152


Accretion expense

2,007



2,471



1,619


Recurring capital expenditures

(22,672)



(36,476)



(31,815)


Loss on debt extinguishment

3,503



1,777




Acquisition costs

3,025



(440)



36,536


Income tax expense adjustment

2,809



68



(190)


Net (income) loss from discontinued operations, net of tax



1,914



(6,216)


Adjustments for AFFO from unconsolidated joint ventures

(7)



(9)



(12)


AFFO

$

304,110



$

293,785



$

209,846








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







Adjusted EBITDA

$

427,574



$

436,491



$

380,650


Adjustments:






Interest expense, net of interest income

(108,592)



(97,813)



(99,938)


Amortization of deferred financing costs

11,580



5,258



5,508


Income tax benefit (expense)

(13,393)



(19,494)



10,633


Income tax expense adjustment

2,809



68



(190)


Straight-line rent expense adjustment

2,409



1,986



1,133


Installation revenue adjustment

4,675



4,788



3,354


Recurring capital expenditures

(22,672)



(36,476)



(31,815)


Other income (expense)

337



(1,707)



(60,710)


(Gain) loss on disposition of depreciable real estate property

(638)



1,036



(4,037)


Adjustments for unconsolidated JVs' and non-controlling interests

21



19



16


Adjustment for gain (loss) on sale of asset



(371)



5,242


AFFO

$

304,110



$

293,785



$

209,846








 

 

SOURCE Equinix, Inc.

inix, Inc., (650) 598-6240, dfonkalsrud@equinix.com