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July 31, 2019

Equinix Reports Second Quarter 2019 Results

Interconnection and Data Center Leader Delivers 66th Consecutive Quarter of Revenue Growth and Raises Guidance Across All Key Operating Metrics

REDWOOD CITY, Calif., July 31, 2019 /PRNewswire/ --

  • Quarterly revenues increased 10% year-over-year, both on an as-reported and normalized and constant currency basis, to $1.385 billion
  • Customer deployments across multiple regions increased to 73% of total recurring revenue, demonstrating the value of Equinix's global platform
  • Interconnection revenue growth continues to outpace colocation revenue growth, as global ecosystems continue to scale
  • The portfolio of interconnection services on Platform Equinix® expanded with the launch of Network Edge, a new service enabling customers to deploy virtual network services at Equinix

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported results for the quarter ended June 30, 2019. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements. All per-share results are presented on a fully diluted basis.

Second Quarter 2019 Results Summary

  • Revenues
    • $1.385 billion, a 2% increase over the previous quarter
  • Operating Income
    • $292 million, a 4% increase over the previous quarter, an operating margin of 21%
  • Adjusted EBITDA
    • $677 million, a 49% adjusted EBITDA margin, a 3% increase over the previous quarter
    • Includes $3 million of integration costs
  • Net Income and Net Income per Share attributable to Equinix
    • $144 million, a 22% increase over the previous quarter
    • $1.69 per share, a 17% increase over the previous quarter
  • AFFO and AFFO per Share
    • $498 million, a 2% increase over the previous quarter
    • $5.87 per share
    • Includes $3 million of integration costs

2019 Annual Guidance Summary

  • Revenues
    • $5.565 - $5.595 billion, a normalized and constant currency increase of 9% over the previous year, and a $10 million increase compared to prior guidance at the mid-point
  • Adjusted EBITDA
    • $2.660 - $2.690 billion, a 48% adjusted EBITDA margin, and a $15 million increase compared to prior guidance at the mid-point
    • Assumes $11 million of integration costs
  • AFFO and AFFO per Share
    • $1.910 - $1.930 billion, a normalized and constant currency increase of 13 - 14% over the previous year, and a $25 million increase compared to prior guidance at the mid-point
    • $22.57 - 22.81 per share, a normalized and constant currency increase of 8 - 9% over the previous year, and a $0.14 increase compared to prior guidance at the mid-point, including the impact of the Q2 ATM equity program activity
    • Assumes $11 million of integration costs

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

Quote
Charles Meyers, President and CEO, Equinix:

"Equinix had another strong quarter, as it continues to deliver distinctive and durable value for customers pursuing their digital transformation initiatives. As a variety of trends are making global businesses think differently about their infrastructure, Equinix is responding by both investing across its traditional strengths and layering in incremental capabilities that make it an easier-to-use, more accessible global platform. We see a large and expanding market opportunity, and we believe Equinix is uniquely positioned to capture this opportunity as customers prioritize digital transformation and adopt hybrid and multicloud as their architecture of choice."

Business Highlights

  • Equinix further extended the portfolio of interconnection offerings on Platform Equinix with the launch of Network Edge services, a new service enabling companies to deploy virtualized services such as routers, firewalls and load balancers from industry-leading vendors including Cisco, Juniper Networks and Palo Alto Networks. Network Edge offers enterprises a new way to deploy network services and connect their digital supply chains on Equinix's global interconnection platform, without a physical data center deployment or hardware requirements. By combining Network Edge with Equinix Cloud Exchange Fabric™ (ECX Fabric), customers can deploy virtual edge devices and interconnect them to clouds and network providers located in new global markets, extending their reach to potentially thousands of new business partners around the world.
  • As a part of the company's hyperscale initiative, Equinix signed a greater than $1.0 billion initial joint venture limited liability partnership with GIC, Singapore's sovereign wealth fund, to develop and operate xScale data centers in Amsterdam, Frankfurt, London and Paris, which is expected to close in Q3 2019. xScale data centers will serve the unique core workload deployment needs of a targeted group of hyperscale companies, including the world's largest cloud service providers. The facilities, on or proximate to some of Equinix's existing International Business Exchange (IBX®) data center campuses, will allow these key enablers of digital transformation to streamline their continued growth, while strengthening Equinix's leadership position in the cloud ecosystem, as enterprises increasingly embrace hybrid multicloud as the IT architecture of choice.
  • Fitch Ratings upgraded all of Equinix's ratings to investment grade, reflecting Equinix's leading market position in data center colocation and interconnection, geographic diversity, stable customer and revenue characteristics, and positive secular demand drivers. Equinix's lower leverage relative to its peer group, wide access to diverse sources of capital and substantial liquidity were all deemed consistent with an investment grade REIT profile. This is Equinix's second investment grade upgrade following S&P Global Ratings' upgrade to BBB- on February 27, 2019, making Equinix's notes index-eligible to further expand its potential global investor base while also triggering the automatic covenant fall-away provisions in certain senior note indentures issued by Equinix, and also providing the company a significant opportunity to lower its net borrowing costs on both existing and new debt facilities.
  • Equinix continued to amplify its go-to-market reach through indirect selling initiatives, with channel sales delivering more than 25% of the bookings for the quarter. Additionally, channel bookings accounted for 60% of the new logos acquired in the quarter, as Equinix deepened its engagement with high-priority partners to drive increased productivity and joint offer creation across its reseller and alliance partners.
  • As digital transformation is forcing companies to change how they interconnect users and clouds at the digital edge, Equinix now serves more than half of the Fortune 500 and has its highest number ever of Fortune 500 and Global 2000 prospects in the pipeline. As a part of this, in Q2, the enterprise vertical experienced diversified growth across travel, legal and healthcare sub-segments. New wins included a global builder and operator of toll roads enabling IoT smart transportation systems, and a leading fashion brand implementing a multicloud strategy.
  • Equinix continued strong growth with the cloud and IT vertical with record bookings in Q2. The company now has 40% of all cloud on-ramps from the top cloud service providers. Customer wins in the quarter included a Fortune 75 technology company expanding a hosted unified communication service, and ServiceNow, expanding its footprint to support its growing customer base.

Business Outlook

The business outlook includes the expected impact of the EMEA hyperscale joint venture expected to close in the third quarter; including the reduction in revenue, adjusted EBITDA and AFFO due to the sale of both LD10 and PA8 to the joint venture, net of the fees earned, lease payments incurred by Equinix and AFFO contribution from Equinix's 20% non-controlling interest in the joint venture.

For the third quarter of 2019, the Company expects revenues to range between $1.399 and $1.409 billion, an increase of 1% quarter-over-quarter, at the mid-point of guidance on both an as-reported and a normalized and constant currency basis, taking into consideration the net impact of the EMEA hyperscale joint venture. This guidance includes a positive foreign currency benefit of $8 million when compared to the average FX rates in Q2 2019. Adjusted EBITDA is expected to range between $665 and $675 million, including the higher seasonal cost of revenues, and includes a $4 million positive foreign currency benefit when compared to the average FX rates in Q2 2019 and $4 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $52 and $62 million, a meaningful and as-expected step up over the prior two quarters.

For the full year of 2019, total revenues are expected to range between $5.565 and $5.595 billion, a 10% increase over the previous year or a normalized and constant currency increase of 9% at the mid-point. This $10 million increase from previously issued guidance is due to $12 million of better than expected operating business performance and a $5 million positive foreign currency benefit when compared to prior guidance rates, offset in part by a $7 million reduction from the net impact of the EMEA hyperscale joint venture. Adjusted EBITDA is expected to range between $2.660 and $2.690 billion, an adjusted EBITDA margin of 48%. This $15 million increase from previously issued guidance is due to $19 million of better than expected operating business performance, a $2 million reduction of integration costs and a $1 million positive foreign currency benefit when compared to prior guidance rates, offset in part by a $7 million reduction from the net impact of the EMEA hyperscale joint venture. AFFO is expected to range between $1.910 and $1.930 billion, a 15 - 16% increase over the previous year or a normalized and constant currency increase of 13 - 14%. This $25 million increase from previously issued guidance is due to $17 million of better than expected operating business performance, a $2 million reduction of integration costs and an $11 million positive foreign currency benefit when compared to prior guidance rates, offset in part by a $5 million reduction from the net impact of the EMEA hyperscale joint venture. AFFO per share is expected to range between $22.57 - 22.81, a 9 - 10% increase over the previous year or a normalized and constant currency increase of 8 - 9%, after taking into consideration the equity financing activity over the first half of the year. Non-recurring capital expenditures are expected to range between $1.730 and $1.920 billion, and recurring capital expenditures are expected to range between $170 and $180 million.

The U.S. dollar exchange rates used for 2019 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.17 to the Euro, $1.34 to the Pound, ¥108 to the U.S. dollar, S$1.35 to the U.S. dollar, and R$3.84 to the U.S. dollar. The Q2 2019 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 9%, 7%, 6% and 3%, respectively.

The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses. The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, income tax expense, an income tax expense adjustment, recurring capital expenditures, other income (expense), (gains) losses on disposition of real estate property and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q2 2019 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended June 30, 2019, along with its future outlook, in its quarterly conference call on Wednesday, July 31, 2019, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-517-308-9482 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call through Wednesday, October 30, 2019, by dialing 1-203-369-0227 and referencing the passcode 2019. In addition, the webcast will be available at www.equinix.com/investors (no password required).

Investor Presentation and Supplemental Financial Information

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

Additional Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most-interconnected data centers. On this global platform for digital business, companies come together across more than 50 markets on five continents to reach everywhere, interconnect everyone and integrate everything they need to create their digital futures.

Non-GAAP Financial Measures

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

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

Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales.

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

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of an IBX data center, and do not reflect its current or future cash spending levels to support its business. Its IBX data centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX data center do not recur with respect to such data center, although Equinix may incur initial construction costs in future periods with respect to additional IBX data centers, and future capital expenditures remain minor relative to the initial investment. This is a trend it expects to continue. In addition, depreciation is also based on the estimated useful lives of the IBX data centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX data centers and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.

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

Equinix also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), both commonly used in the REIT industry, as supplemental performance measures. FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income or loss, excluding gain or loss from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. AFFO represents FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income or loss from discontinued operations, net of tax and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and acquisition costs for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above.

Equinix includes an adjustment for revenues from installation fees, since installation fees are deferred and recognized ratably over the period of contract term, although the fees are generally paid in a lump sum upon installation. Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term. Equinix also includes an adjustment to contract costs incurred to obtain contracts, since contract costs are capitalized and amortized over the estimated period of benefit on a straight-line basis, although costs of obtaining contracts are generally incurred and paid during the period of obtaining the contracts. The adjustments for installation revenues, straight-line rent expense and contract costs are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. Equinix excludes the amortization of deferred financing costs and debt discounts and premiums as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. Equinix excludes gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX data centers or other assets that are required to support current revenues. Equinix also excludes net income or loss from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.

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

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

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

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX data centers and developing, deploying and delivering Equinix products and solutions; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; risks related to our taxation as a REIT; and other risks described from time to time in Equinix filings with the Securities and Exchange Commission. In particular, see recent Equinix quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.

EQUINIX, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



Three Months Ended


Six Months Ended


June 30,
2019


March 31,
2019


June 30,
2018


June 30,
2019


June 30,
2018

Recurring revenues

$

1,306,045



$

1,274,828



$

1,187,749



$

2,580,873



$

2,338,378


Non-recurring revenues

78,932



88,390



74,194



167,322



139,442


Revenues

1,384,977



1,363,218



1,261,943



2,748,195



2,477,820


Cost of revenues

698,179



682,030



651,801



1,380,209



1,274,231


Gross profit

686,798



681,188



610,142



1,367,986



1,203,589


Operating expenses:










Sales and marketing

159,201



169,715



154,202



328,916



313,978


General and administrative

232,656



215,046



210,489



447,702



413,646


Acquisition costs

2,774



2,471



30,413



5,245



35,052


Impairment charges

386



14,448





14,834




Total operating expenses

395,017



401,680



395,104



796,697



762,676


Income from operations

291,781



279,508



215,038



571,289



440,913


Interest and other income (expense):









Interest income

7,762



4,202



3,958



11,964



8,568


Interest expense

(120,547)



(122,846)



(134,673)



(243,393)



(260,950)


Other income (expense)

12,180



(166)



8,866



12,014



5,802


Loss on debt extinguishment



(382)



(19,215)



(382)



(40,706)


Total interest and other, net

(100,605)



(119,192)



(141,064)



(219,797)



(287,286)


Income before income taxes

191,176



160,316



73,974



351,492



153,627


Income tax expense

(47,324)



(42,569)



(6,356)



(89,893)



(23,115)


Net income

143,852



117,747



67,618



261,599



130,512


Net (income) loss attributable to non-controlling interests

(325)



331





6




Net income attributable to Equinix

$

143,527



$

118,078



$

67,618



$

261,605



$

130,512


Net income per share attributable to Equinix:

Basic net income per share

$

1.70



$

1.44



$

0.85



$

3.15



$

1.64


Diluted net income per share

$

1.69



$

1.44



$

0.85



$

3.13



$

1.64


Shares used in computing basic net income per share

84,399



81,814



79,479



83,114



79,361


Shares used in computing diluted net income per share

84,767



82,090



79,752



83,471



79,746












 

EQUINIX, INC.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)



Three Months Ended


Six Months Ended


June 30,
2019


March 31,
2019


June 30,
2018


June 30,
2019


June 30,
2018

Net income

$

143,852



$

117,747



$

67,618



$

261,599



$

130,512


Other comprehensive income (loss), net of tax:







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

25,127



(81,719)



(421,233)



(56,592)



(275,382)


Net investment hedge CTA gain (loss)

(37,857)



76,850



226,115



38,993



153,480


Unrealized gain (loss) on cash flow hedges

(3,355)



8,224



35,280



4,869



31,200


Net actuarial gain (loss) on defined benefit plans

(7)



(11)



13



(18)



21


Total other comprehensive income (loss), net of tax

(16,092)



3,344



(159,825)



(12,748)



(90,681)


Comprehensive income (loss), net of tax

127,760



121,091



(92,207)



248,851



39,831


Net (income) loss attributable to non-controlling interests

(325)



331





6




Other comprehensive (income) loss attributable to non-controlling interests

14



(7)





7




Comprehensive income (loss) attributable to Equinix

$

127,449



$

121,415



$

(92,207)



$

248,864



$

39,831


 

EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)



June 30, 2019


December 31, 2018

Assets




Cash and cash equivalents

$

1,613,529



$

606,166


Short-term investments

17,219



4,540


Accounts receivable, net

752,680



630,119


Other current assets

251,451



274,857


Assets held for sale

353,622




          Total current assets

2,988,501



1,515,682


Property, plant and equipment, net

10,992,740



11,026,020


Operating lease right-of-use assets

1,468,378




Goodwill

4,768,880



4,836,388


Intangible assets, net

2,204,405



2,333,296


Other assets

463,601



533,252


          Total assets

$

22,886,505



$

20,244,638


Liabilities and Stockholders' Equity




Accounts payable and accrued expenses

$

768,670



$

756,692


Accrued property, plant and equipment

344,693



179,412


Current portion of operating lease liabilities

140,733




Current portion of finance lease liabilities

61,094



77,844


Current portion of mortgage and loans payable

72,795



73,129


Current portion of senior notes

300,929



300,999


Other current liabilities

142,461



126,995


Liabilities held for sale

53,030




          Total current liabilities

1,884,405



1,515,071


Operating lease liabilities, less current portion

1,324,527




Finance lease liabilities, less current portion

1,140,676



1,441,077


Mortgage and loans payable, less current portion

1,267,551



1,310,663


Senior notes, less current portion

7,959,467



8,128,785


Other liabilities

560,650



629,763


          Total liabilities

14,137,276



13,025,359


Common stock

85



81


Additional paid-in capital

12,450,614



10,751,313


Treasury stock

(144,725)



(145,161)


Accumulated dividends

(3,743,869)



(3,331,200)


Accumulated other comprehensive loss

(958,443)



(945,702)


Retained earnings

1,145,580



889,948


          Total Equinix stockholders' equity

8,749,242



7,219,279


Non-controlling interests

(13)




          Total stockholders' equity

8,749,229



7,219,279


                Total liabilities and stockholders' equity

$

22,886,505



$

20,244,638






Ending headcount by geographic region is as follows:




          Americas headcount

3,527



3,480


          EMEA headcount

2,872



2,751


          Asia-Pacific headcount

1,691



1,672


                    Total headcount

8,090



7,903


 

EQUINIX, INC.

Summary of Debt Principal Outstanding

(in thousands)

(unaudited)



June 30, 2019


December 31, 2018





Finance lease liabilities

$

1,201,770



$

1,518,921






Term loans

1,296,124



1,337,868


Mortgage payable and other loans payable

44,222



45,924


Plus: debt discount and issuance costs, net

3,895



4,732


           Total mortgage and loans payable principal

1,344,241



1,388,524






Senior notes

8,260,396



8,429,784


Plus: debt issuance costs

68,936



75,372


Less: debt premium

(3,132)



(5,031)


          Total senior notes principal

8,326,200



8,500,125






Total debt principal outstanding

$

10,872,211



$

11,407,570


 


EQUINIX, INC.


Condensed Consolidated Statements of Cash Flows


(in thousands)


(unaudited)





Three Months Ended


Six Months Ended



June 30,
2019


March 31,
2019


June 30,
2018


June 30,
2019


June 30,
2018












Cash flows from operating activities:


Net income

$

143,852



$

117,747



$

67,618



$

261,599



$

130,512



Adjustments to reconcile net income to net cash provided by operating activities:


Depreciation, amortization and accretion

320,550



314,705



308,828



635,255



615,293



Stock-based compensation

61,519



49,023



49,725



110,542



92,261



Amortization of debt issuance costs and debt discounts and premiums

3,238



2,995



3,362



6,233



7,461



Loss on debt extinguishment



382



19,215



382



40,706



Impairment charges

386



14,448





14,834





Other items

4,745



8,224



2,322



12,969



11,210



Changes in operating assets and liabilities:


Accounts receivable

(42,370)



(84,350)



32,834



(126,720)



(38,441)



Income taxes, net

14,837



15,825



(7,485)



30,662



(22,866)



Accounts payable and accrued expenses

7,476



(11,463)



10,818



(3,987)



(24,325)



Operating lease right-of-use assets

37,219



41,264





78,483





Operating lease liabilities

(34,919)



(38,886)





(73,805)





Other assets and liabilities

26,390



(8,773)



51,491



17,617



27,824


Net cash provided by operating activities

542,923



421,141



538,728



964,064



839,635


Cash flows from investing activities:


Purchases, sales and maturities of investments, net

(3,063)



(8,779)



13,240



(11,842)



12,743



Business acquisitions, net of cash and restricted cash acquired

(34,143)





(830,993)



(34,143)



(830,993)



Purchases of real estate

(41,715)



(5,721)



(27,082)



(47,436)



(41,782)



Purchases of other property, plant and equipment

(444,171)



(363,967)



(520,239)



(808,138)



(869,968)


Net cash used in investing activities

(523,092)



(378,467)



(1,365,074)



(901,559)



(1,730,000)


Cash flows from financing activities:


Proceeds from employee equity awards



27,593



13



27,593



25,860



Payment of dividend distributions

(208,449)



(204,603)



(181,760)



(413,052)



(368,759)



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

348,121



1,213,434



7,622



1,561,555



7,622



Proceeds from senior notes









929,850



Repayment of finance lease liabilities

(11,954)



(31,158)



(14,069)



(43,112)



(69,856)



Repayment of mortgage and loans payable

(17,878)



(18,334)



(18,816)



(36,212)



(25,415)



Repayment of senior notes

(150,000)







(150,000)





Debt extinguishment costs





148





(20,556)



Debt issuance costs









(11,583)



Other financing activities





580





580


Net cash provided by (used in) financing activities

(40,160)



986,932



(206,282)



946,772



467,743


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

2,106



(1,695)



(33,743)



411



(25,840)


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

(18,223)



1,027,911



(1,066,371)



1,009,688



(448,462)


Cash, cash equivalents and restricted cash at beginning of period

1,655,515



627,604



2,068,610



627,604



1,450,701


Cash, cash equivalents and restricted cash at end of period

$

1,637,292



$

1,655,515



$

1,002,239



$

1,637,292



$

1,002,239


Supplemental cash flow information:

Cash paid for taxes

$

32,669



$

27,024



$

17,681



$

59,693



$

49,442


Cash paid for interest

$

113,266



$

146,144



$

115,071



$

259,410



$

222,128













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

$

22,894



$

51,453



$

(839,586)



$

74,347



$

(903,108)













Adjusted free cash flow (adjusted negative free cash flow) (2)

$

98,752



$

57,174



$

18,489



$

155,926



$

(30,333)













(1)

We define free cash flow (negative free cash flow) as net cash provided by operating activities plus net cash provided by (used in) investing activities (excluding the net purchases, sales and maturities of investments) as presented below:


Net cash provided by operating activities as presented above

$

542,923



$

421,141



$

538,728



$

964,064



$

839,635



Net cash used in investing activities as presented above

(523,092)



(378,467)



(1,365,074)



(901,559)



(1,730,000)



Purchases, sales and maturities of investments, net

3,063



8,779



(13,240)



11,842



(12,743)



Free cash flow (negative free cash flow)

$

22,894



$

51,453



$

(839,586)



$

74,347



$

(903,108)













(2)

We define adjusted free cash flow (adjusted negative free cash flow) as free cash flow (negative free cash flow) as defined above, excluding any purchases of real estate and business acquisitions, net of cash and restricted cash acquired as presented below:


Free cash flow (negative free cash flow) as defined above

$

22,894



$

51,453



$

(839,586)



$

74,347



$

(903,108)



Less business acquisitions, net of cash and restricted cash acquired

34,143





830,993



34,143



830,993



Less purchases of real estate

41,715



5,721



27,082



47,436



41,782



Adjusted free cash flow (adjusted negative free cash flow)

$

98,752



$

57,174



$

18,489



$

155,926



$

(30,333)


 


EQUINIX, INC.


Non-GAAP Measures and Other Supplemental Data


(in thousands)


(unaudited)





Three Months Ended


Six Months Ended



June 30, 2019


March 31, 2019


June 30, 2018


June 30, 2019


June 30, 2018


Recurring revenues

$

1,306,045



$

1,274,828



$

1,187,749



$

2,580,873



$

2,338,378



Non-recurring revenues

78,932



88,390



74,194



167,322



139,442



Revenues (1)

1,384,977



1,363,218



1,261,943



2,748,195



2,477,820














Cash cost of revenues (2)

460,983



448,381



421,733



909,364



817,255



Cash gross profit (3)

923,994



914,837



840,210



1,838,831



1,660,565














Cash operating expenses (4)(7):










Cash sales and marketing expenses (5)

95,114



108,216



91,468



203,330



189,537



Cash general and administrative expenses(6)

151,870



146,466



144,738



298,336



287,509



Total cash operating expenses (4) (7)

246,984



254,682



236,206



501,666



477,046














Adjusted EBITDA (8)

$

677,010



$

660,155



$

604,004



$

1,337,165



$

1,183,519














Cash gross margins (9)

67

%


67

%


67

%


67

%


67

%













Adjusted EBITDA margins(10)

49

%


48

%


48

%


49

%


48

%













Adjusted EBITDA flow-through rate (11)

77

%


81

%


53

%


70

%


55

%













FFO (12)

$

352,973



$

326,073



$

289,525



$

679,046



$

580,280














AFFO (13) (14)

$

497,647



$

488,120



$

428,126



$

985,767



$

842,702














Basic FFO per share (15)

$

4.18



$

3.99



$

3.64



$

8.17



$

7.31














Diluted FFO per share (15)

$

4.16



$

3.97



$

3.63



$

8.14



$

7.28














Basic AFFO per share (15)

$

5.90



$

5.97



$

5.39



$

11.86



$

10.62














Diluted AFFO per share(15)

$

5.87



$

5.95



$

5.37



$

11.81



$

10.57



































(1)

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

















Americas Revenues:






















Colocation

$

444,086



$

439,981



$

433,895



$

884,067



$

861,020



Interconnection

142,460



138,563



131,720



281,023



260,973



Managed infrastructure

22,908



21,787



18,292



44,695



36,827



Other

5,352



5,979



4,980



11,331



6,059



Recurring revenues

614,806



606,310



588,887



1,221,116



1,164,879



Non-recurring revenues

29,614



38,056



29,388



67,670



56,023



Revenues

$

644,420



$

644,366



$

618,275



$

1,288,786



$

1,220,902














EMEA Revenues:






















Colocation

$

347,795



$

331,125



$

293,518



$

678,920



$

581,579



Interconnection

38,614



37,525



33,969



76,139



68,946



Managed infrastructure

28,397



29,088



29,731



57,485



60,417



Other

2,275



2,499



2,364



4,774



4,130



Recurring revenues

417,081



400,237



359,582



817,318



715,072



Non-recurring revenues

32,774



34,423



23,586



67,197



47,726



Revenues

$

449,855



$

434,660



$

383,168



$

884,515



$

762,798














Asia-Pacific Revenues:






















Colocation

$

213,734



$

209,665



$

186,172



$

423,399



$

352,370



Interconnection

37,957



36,696



31,924



74,653



62,693



Managed infrastructure

22,467



21,920



21,184



44,387



43,364



Recurring revenues

274,158



268,281



239,280



542,439



458,427



Non-recurring revenues

16,544



15,911



21,220



32,455



35,693



Revenues

$

290,702



$

284,192



$

260,500



$

574,894



$

494,120














Worldwide Revenues:






















Colocation

$

1,005,615



$

980,771



$

913,585



$

1,986,386



$

1,794,969



Interconnection

219,031



212,784



197,613



431,815



392,612



Managed infrastructure

73,772



72,795



69,207



146,567



140,608



Other

7,627



8,478



7,344



16,105



10,189



Recurring revenues

1,306,045



1,274,828



1,187,749



2,580,873



2,338,378



Non-recurring revenues

78,932



88,390



74,194



167,322



139,442



Revenues

$

1,384,977



$

1,363,218



$

1,261,943



$

2,748,195



$

2,477,820



































(2)

We define cash cost of revenues as cost of revenues less depreciation, amortization, accretion and stock-based compensation as presented below:







Cost of revenues

$

698,179



$

682,030



$

651,801



$

1,380,209



$

1,274,231



Depreciation, amortization and accretion expense

(230,696)



(228,637)



(225,461)



(459,333)



(448,470)



Stock-based compensation expense

(6,500)



(5,012)



(4,607)



(11,512)



(8,506)



Cash cost of revenues

$

460,983



$

448,381



$

421,733



$

909,364



$

817,255














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

















Americas cash cost of revenues

$

182,920



$

179,635



$

180,057



$

362,555



$

344,312



EMEA cash cost of revenues

179,347



173,201



155,085



352,548



307,899



Asia-Pacific cash cost of revenues

98,716



95,545



86,591



194,261



165,044



Cash cost of revenues

$

460,983



$

448,381



$

421,733



$

909,364



$

817,255







(3)

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












(4)

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







Selling, general, and administrative expense

$

391,857



$

384,761



$

364,691



$

776,618



$

727,624



Depreciation and amortization expense

(89,854)



(86,068)



(83,367)



(175,922)



(166,823)



Stock-based compensation expense

(55,019)



(44,011)



(45,118)



(99,030)



(83,755)



Cash operating expense

$

246,984



$

254,682



$

236,206



$

501,666



$

477,046













(5)

We define cash sales and marketing expense as sales and marketing expense less depreciation, amortization and stock-based compensation as presented below:













Sales and marketing expense

$

159,201



$

169,715



$

154,202



$

328,916



$

313,978



Depreciation and amortization expense

(48,930)



(48,198)



(48,626)



(97,128)



(98,627)



Stock-based compensation expense

(15,157)



(13,301)



(14,108)



(28,458)



(25,814)



Cash sales and marketing expense

$

95,114



$

108,216



$

91,468



$

203,330



$

189,537
























(6)

We define cash general and administrative expense as general and administrative expense less depreciation, amortization and stock-based compensation as presented below:













General and administrative expense

$

232,656



$

215,046



$

210,489



$

447,702



$

413,646



Depreciation and amortization expense

(40,924)



(37,870)



(34,741)



(78,794)



(68,196)



Stock-based compensation expense

(39,862)



(30,710)



(31,010)



(70,572)



(57,941)



Cash general and administrative expense

$

151,870



$

146,466



$

144,738



$

298,336



$

287,509













(7)

The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below:













Americas cash SG&A

$

152,448



$

156,893



$

144,263



$

309,341



$

291,086



EMEA cash SG&A

60,863



62,387



57,268



123,250



117,906



Asia-Pacific cash SG&A

33,673



35,402



34,675



69,075



68,054



Cash SG&A

$

246,984



$

254,682



$

236,206



$

501,666



$

477,046













(8)

We define adjusted EBITDA as income from operations excluding depreciation, amortization, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales as presented below:













Income from operations

$

291,781



$

279,508



$

215,038



$

571,289



$

440,913



Depreciation, amortization and accretion expense

320,550



314,705



308,828



635,255



615,293



Stock-based compensation expense

61,519



49,023



49,725



110,542



92,261



Impairment charges

386



14,448





14,834





Acquisition costs

2,774



2,471



30,413



5,245



35,052



Adjusted EBITDA

$

677,010



$

660,155



$

604,004



$

1,337,165



$

1,183,519














The geographic split of our adjusted EBITDA is presented below:

















Americas income from operations

$

99,195



$

90,011



$

87,711



$

189,206



$

189,447



Americas depreciation, amortization and accretion expense

167,614



167,136



160,337



334,750



318,363



Americas stock-based compensation expense

42,676



34,171



35,104



76,847



64,981



Americas impairment charges

386



14,448





14,834





Americas acquisition costs

(819)



2,072



10,803



1,253



12,713



Americas adjusted EBITDA

$

309,052



$

307,838



$

293,955



$

616,890



$

585,504














EMEA income from operations

$

106,555



$

105,007



$

73,046



$

211,562



$

137,149



EMEA depreciation, amortization and accretion expense

88,109



84,547



88,828



172,656



181,320



EMEA stock-based compensation expense

11,353



8,863



8,403



20,216



15,542



EMEA acquisition costs

3,628



655



538



4,283



2,982



EMEA adjusted EBITDA

$

209,645



$

199,072



$

170,815



$

408,717



$

336,993

























Asia-Pacific income from operations

$

86,031



$

84,490



$

54,281



$

170,521



$

114,317



Asia-Pacific depreciation, amortization and accretion expense

64,827



63,022



59,663



127,849



115,610



Asia-Pacific stock-based compensation expense

7,490



5,989



6,218



13,479



11,738



Asia-Pacific acquisition costs

(35)



(256)



19,072



(291)



19,357



Asia-Pacific adjusted EBITDA

$

158,313



$

153,245



$

139,234



$

311,558



$

261,022













(9)

We define cash gross margins as cash gross profit divided by revenues.

















Our cash gross margins by geographic region is presented below:

















Americas cash gross margins

72

%


72

%


71

%


72

%


72

%


EMEA cash gross margins

60

%


60

%


60

%


60

%


60

%


Asia-Pacific cash gross margins

66

%


66

%


67

%


66

%


67

%












(10)

We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.













Americas adjusted EBITDA margins

48

%


48

%


48

%


48

%


48

%


EMEA adjusted EBITDA margins

47

%


46

%


45

%


46

%


44

%


Asia-Pacific adjusted EBITDA margins

54

%


54

%


53

%


54

%


53

%








(11)

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













Adjusted EBITDA - current period

$

677,010



$

660,155



$

604,004



$

1,337,165



$

1,183,519



Less adjusted EBITDA - prior period

(660,155)



(617,195)



(579,515)



(1,229,721)



(1,115,159)



Adjusted EBITDA growth

$

16,855



$

42,960



$

24,489



$

107,444



$

68,360














Revenues - current period

$

1,384,977



$

1,363,218



$

1,261,943



$

2,748,195



$

2,477,820



Less revenues - prior period

(1,363,218)



(1,310,083)



(1,215,877)



(2,593,834)



(2,352,482)



Revenue growth

$

21,759



$

53,135



$

46,066



$

154,361



$

125,338














Adjusted EBITDA flow-through rate

77

%


81

%


53

%


70

%


55

%












(12)

FFO is defined as net income or loss, excluding gain or loss from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.













Net income

$

143,852



$

117,747



$

67,618



$

261,599



$

130,512



Net (income) loss attributable to non-controlling interests

(325)



331





6





Net income attributable to Equinix

143,527



118,078



67,618



261,605



130,512



Adjustments:











Real estate depreciation

209,103



205,649



221,029



414,752



443,884



Loss on disposition of real estate property

343



2,346



878



2,689



5,884



FFO attributable to common shareholders

$

352,973



$

326,073



$

289,525



$

679,046



$

580,280













(13)

AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, net income or loss from discontinued operations, net of tax, recurring capital expenditures and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items.













FFO attributable to common shareholders

$

352,973



$

326,073



$

289,525



$

679,046



$

580,280



Adjustments:











Installation revenue adjustment

1,492



1,029



840



2,521



2,999



Straight-line rent expense adjustment

2,300



2,378



1,664



4,678



3,965



Amortization of deferred financing costs and debt discounts and premiums

3,238



2,995



3,362



6,233



7,461



Contract cost adjustment

(12,348)



(6,778)



(4,384)



(19,126)



(7,739)



Stock-based compensation expense

61,519



49,023



49,725



110,542



92,261



Non-real estate depreciation expense

60,904



57,994



35,267



118,898



69,364



Amortization expense

49,217



49,535



51,035



98,752



101,651



Accretion expense

1,326



1,527



1,497



2,853



394



Recurring capital expenditures

(36,726)



(20,947)



(42,206)



(57,673)



(77,437)



Loss on debt extinguishment



382



19,215



382



40,706



Acquisition costs

2,774



2,471



30,413



5,245



35,052



Impairment charges

386



14,448





14,834





Income tax expense adjustment

10,592



7,990



(7,827)



18,582



(6,255)



AFFO attributable to common shareholders

$

497,647



$

488,120



$

428,126



$

985,767



$

842,702













(14)

Following is how we reconcile from adjusted EBITDA to AFFO:











Adjusted EBITDA

$

677,010



$

660,155



$

604,004



$

1,337,165



$

1,183,519



Adjustments:











Interest expense, net of interest income

(112,785)



(118,644)



(130,715)



(231,429)



(252,382)



Amortization of deferred financing costs and debt discounts and premiums

3,238



2,995



3,362



6,233



7,461



Income tax expense

(47,324)



(42,569)



(6,356)



(89,893)



(23,115)



Income tax expense adjustment

10,592



7,990



(7,827)



18,582



(6,255)



Straight-line rent expense adjustment

2,300



2,378



1,664



4,678



3,965



Contract cost adjustment

(12,348)



(6,778)



(4,384)



(19,126)



(7,739)



Installation revenue adjustment

1,492



1,029



840



2,521



2,999



Recurring capital expenditures

(36,726)



(20,947)



(42,206)



(57,673)



(77,437)



Other income (expense)

12,180



(166)



8,866



12,014



5,802



Loss on disposition of real estate property

343



2,346



878



2,689



5,884



Adjustments for unconsolidated JVs' and non-controlling interests

(325)



331





6





AFFO attributable to common shareholders

$

497,647



$

488,120



$

428,126



$

985,767



$

842,702













(15)

The shares used in the computation of basic and diluted FFO and AFFO per share attributable to Equinix is presented below:













Shares used in computing basic net income per share, FFO per share and AFFO per share

84,399



81,814



79,479




83,114



79,361



Effect of dilutive securities:











Employee equity awards

368



276



273




357



385



Shares used in computing diluted net income per share, FFO per share and AFFO per share

84,767



82,090



79,752



83,471



79,746














Basic FFO per share

$

4.18



$

3.99



$

3.64



$

8.17



$

7.31



Diluted FFO per share

$

4.16



$

3.97



$

3.63



$

8.14



$

7.28














Basic AFFO per share

$

5.90



$

5.97



$

5.39



$

11.86



$

10.62



Diluted AFFO per share

$

5.87



$

5.95



$

5.37



$

11.81



$

10.57













                                               

Equinix.  (PRNewsFoto/Equinix) (PRNewsfoto/Equinix, Inc.)

 

SOURCE Equinix, Inc.

Equinix Investor Relations Contacts: Katrina Rymill, Equinix, Inc., (650) 598-6583, krymill@equinix.com, Chip Newcom, Equinix, Inc., (650) 598-6262, cnewcom@equinix.com, Equinix Media Contact: David Fonkalsrud, Equinix, Inc., (650) 598-6240, dfonkalsrud@equinix.com