Equinix Reports Third Quarter 2018 Results

Equinix Reports Third Quarter 2018 Results

Interconnection and Data Center Leader Delivers 63rd Consecutive Quarter of Revenue Growth

PR Newswire

REDWOOD CITY, Calif., Nov. 1, 2018 /PRNewswire/ --

  • Quarterly revenues increased 11% year-over-year to $1.284 billion; a 9% year-over-year increase on a normalized and constant currency basis
  • Significant number of new wins in multiple verticals in Q3, with notable outperformance from content and digital media and enterprise
  • Seven new expansions announced

Equinix, Inc. EQIX, the global interconnection and data center company, today reported quarterly results for the quarter ended September 30, 2018. 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.

Third Quarter 2018 Results Summary

  • Revenues
    • $1.284 billion, a 2% increase over the previous quarter
  • Operating Income
    • $266 million, a 24% increase over the previous quarter, an operating margin of 21%
  • Adjusted EBITDA
    • $613 million, a 48% adjusted EBITDA margin
    • Includes $9 million of integration costs for acquisitions
  • Net Income
    • $125 million, an 85% increase over the previous quarter
    • Includes $9 million of integration costs for acquisitions
    • Diluted earnings per share of $1.55, an 82% increase compared to prior quarter
  • AFFO
    • $402 million, a 6% decrease from the previous quarter
    • Includes $9 million of integration costs for acquisitions

2018 Annual Guidance Summary

  • Revenues
    • $5.060 - $5.070 billion, a 16% increase over the previous year or a normalized and constant currency increase of 9%; an $8 million increase compared to prior guidance after absorbing a $7 million negative FX impact
  • Adjusted EBITDA
    • $2.400 - $2.410 billion or a 48% adjusted EBITDA margin, an increase of $6 million compared to prior guidance after absorbing a $3 million negative FX impact
    • Assumes $40 million of integration costs for acquisitions
  • AFFO
    • $1.619 - $1.639 billion, a 13% increase over the previous year, an increase of $13 million compared to prior guidance after including a $3 million FX benefit
    • Assumes $40 million of integration costs for acquisitions

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:

"I am extremely proud of our track record of success in my eight years as a member of the leadership team, and that track record continues this quarter with our 63rd quarter of consecutive revenue growth. Since 2010, we have more than quadrupled the size of our business, and we have invested $22 billion in capital to build the world's leading interconnection platform, positioning us as the trusted center of a cloud-first world. As CEO I will build on this strong foundation, and we will remain focused on extending our core sources of differentiation: superior global reach; market-leading network and cloud density; the industry's most comprehensive interconnection portfolio; scaled digital ecosystems; and an unwavering commitment to service excellence."

Q3 Business Highlights

  • In September, Equinix announced the appointment of Charles Meyers as President and CEO. Meyers is an eight-year veteran of the company having held the previous positions of President of Strategy, Services and Innovation and Chief Operating Officer for Equinix.
  • Equinix continued to invest in building out its global platform in Q3 in response to strong customer demand and a high level of inventory utilization:
    • Equinix completed nine expansion projects in eight markets including Culpeper, Frankfurt, Houston, Melbourne, Miami, Rio de Janeiro, Singapore and two in São Paulo.
    • Continuing its investment in organic growth and expansion, Equinix has 30 expansion projects currently underway across 21 markets in all three regions, including seven newly announced expansions in Frankfurt, Helsinki, London, Madrid, Osaka, Seattle and Warsaw.
  • Customers continue to leverage the global scope of Platform Equinix® to achieve a distributed digital edge. In Q3, more than 59% of revenues came from customers deployed across all three regions, and 85% came from customers deployed across multiple metros.
  • Equinix achieved a significant number of new wins across multiple verticals in Q3. The content and digital media vertical experienced record bookings this quarter led by Asia-Pacific with customer expansions from Alibaba and Tencent. The enterprise vertical continued to be the company's fastest growing vertical, led by the manufacturing, healthcare and travel sub-segments.
  • Interconnection revenues continued to outpace colocation revenues in Q3, reflecting the movement towards Interconnection Oriented Architecture® (IOA®) strategies and the adoption of hybrid multicloud as the preferred IT deployment model. Cross connects between customers increased to more than 294,000, and the Equinix Cloud Exchange Fabric (ECX Fabric) platform now serves more than 1,300 customers.

Business Outlook

For the fourth quarter of 2018, the Company expects revenues to range between $1.299 and $1.309 billion, an increase of 2% quarter-over-quarter, on both an as-reported and a normalized and constant currency basis. Adjusted EBITDA is expected to range between $604 and $614 million, which includes deferred costs from Q3, higher utilities costs and $15 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $66 and $76 million.

For the full year of 2018, total revenues are expected to range between $5.060 and $5.070 billion, an increase of 16% year-over-year, or a normalized and constant currency growth rate of approximately 9%, an $8 million increase compared to prior guidance. This updated guidance includes a full year revenues guidance raise of $15 million offset in part by a $7 million negative foreign currency impact when compared to prior guidance rates. Adjusted EBITDA is expected to range between $2.400 and $2.410 billion, an increase of 17% year-over-year, a $6 million increase compared to prior guidance. This updated guidance includes full year adjusted EBITDA guidance raise of $9 million offset in part by a $3 million negative foreign currency impact when compared to prior guidance rates, and an expected $40 million in integration costs. AFFO is expected to range between $1.619 and $1.639 billion, an increase of 13% year-over-year. This $13 million guidance raise is primarily due to a $10 million reduction of integration costs and improved business performance and a $3 million positive foreign currency benefit when compared to prior guidance rates. Non-recurring capital expenditures are expected to range between $1.8 and $1.9 billion, and recurring capital expenditures are expected to range between approximately $199 and $209 million.

The U.S. dollar exchange rates used for 2018 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.16 to the Euro, $1.31 to the Pound, ¥114 to the U.S. dollar, S$1.37 to the U.S. dollar, and R$4.04 to the U.S. dollar. The Q3 2018 global revenue breakdown by currency for the Euro, British Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 19%, 9%, 6%, 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, 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.

Q3 2018 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2018, along with its future outlook, in its quarterly conference call on Thursday, November 1, 2018, 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, February 13, 2019, by dialing 1-203-369-1730 and referencing the passcode 2018. 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 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. EQIX connects the world's leading businesses to their customers, employees and partners inside the most-interconnected data centers. In 52 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, 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"), 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 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 services; 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; 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



Nine Months Ended



September 30,

2018



June 30,

2018



September 30,

2017



September 30,

2018



September 30,

2017

Recurring revenues

$

1,207,806





$

1,187,749





$

1,089,033





$

3,546,184





$

2,997,521



Non-recurring revenues

75,945





74,194





63,228





215,387





170,686



Revenues

1,283,751





1,261,943





1,152,261





3,761,571





3,168,207



Cost of revenues

660,309





651,801





582,360





1,934,540





1,573,524



Gross profit

623,442





610,142





569,901





1,827,031





1,594,683



Operating expenses:



















Sales and marketing

157,920





154,202





157,619





471,898





428,112



General and administrative

206,902





210,489





185,336





620,548





558,090



Acquisition costs

(1,120)





30,413





2,083





33,932





31,510



Gain on asset sales

(6,013)













(6,013)







Total operating expenses

357,689





395,104





345,038





1,120,365





1,017,712



Income from operations

265,753





215,038





224,863





706,666





576,971



Interest and other income (expense):

















Interest income

2,912





3,958





2,291





11,480





9,820



Interest expense

(130,566)





(134,673)





(121,828)





(391,516)





(352,554)



Other income (expense)

3,744





8,866





(1,076)





9,546





545



Gain (loss) on debt extinguishment

1,492





(19,215)





(22,156)





(39,214)





(42,103)



Total interest and other, net

(122,418)





(141,064)





(142,769)





(409,704)





(384,292)



Income before income taxes

143,335





73,974





82,094





296,962





192,679



Income tax expense

(18,510)





(6,356)





(2,194)





(41,625)





(24,912)



Net income

$

124,825





$

67,618





$

79,900





$

255,337





$

167,767



Net income per share:



















Basic net income per share

$

1.56





$

0.85





$

1.02





$

3.21





$

2.20



Diluted net income per share

$

1.55





$

0.85





$

1.02





$

3.19





$

2.18



Shares used in computing basic net income per share

79,872





79,479





78,055





79,533





76,283



Shares used in computing diluted net income per share

80,283





79,752





78,719





79,956





76,948























 

EQUINIX, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)











Three Months Ended



Nine Months Ended



September 30,

2018



June 30,

2018



September 30,

2017



September 30,

2018



September 30,

2017

Net income

$

124,825





$

67,618





$

79,900





$

255,337





$

167,767



Other comprehensive income (loss), net of tax:



















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

(77,566)





(421,233)





100,909





(352,948)





408,830



Net investment hedge CTA gain (loss)

27,214





226,115





(60,723)





180,694





(191,121)



Unrealized gain (loss) on available-for-sale securities









245









(85)



Unrealized gain (loss) on cash flow hedges

6,184





35,280





(13,070)





37,384





(52,468)



Net actuarial gain on defined benefit plans

14





13





13





35





39



Total other comprehensive income (loss), net of tax

(44,154)





(159,825)





27,374





(134,835)





165,195



Comprehensive income (loss), net of tax

$

80,671





$

(92,207)





$

107,274





$

120,502





$

332,962



 

EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)











September 30,

2018



December 31,

2017

Assets







Cash and cash equivalents

$

870,486





$

1,412,517



Short-term investments

15,415





28,271



Accounts receivable, net

662,401





576,313



Other current assets

258,685





232,027



          Total current assets

1,806,987





2,249,128



Long-term investments





9,243



Property, plant and equipment, net

10,682,826





9,394,602



Goodwill

4,852,549





4,411,762



Intangible assets, net

2,383,377





2,384,972



Other assets

562,332





241,750



          Total assets

$

20,288,071





$

18,691,457



Liabilities and Stockholders' Equity







Accounts payable and accrued expenses

$

739,117





$

719,257



Accrued property, plant and equipment

276,314





220,367



Current portion of capital lease and other financing obligations

98,219





78,705



Current portion of mortgage and loans payable

73,288





64,491



Current portion of senior notes

150,557







Other current liabilities

123,824





159,914



          Total current liabilities

1,461,319





1,242,734



Capital lease and other financing obligations, less current portion

1,386,260





1,620,256



Mortgage and loans payable, less current portion

1,327,477





1,393,118



Senior notes, less current portion

8,318,782





6,923,849



Other liabilities

634,060





661,710



          Total liabilities

13,127,898





11,841,667



Common stock

81





79



Additional paid-in capital

10,592,960





10,121,323



Treasury stock

(145,216)





(146,320)



Accumulated dividends

(3,145,430)





(2,592,792)



Accumulated other comprehensive loss

(922,148)





(785,189)



Retained earnings

779,926





252,689



          Total stockholders' equity

7,160,173





6,849,790



          Total liabilities and stockholders' equity

$

20,288,071





$

18,691,457



















Ending headcount by geographic region is as follows:















          Americas headcount

3,404





3,154



          EMEA headcount

2,695





2,560



          Asia-Pacific headcount

1,656





1,559



                    Total headcount

7,755





7,273



 

EQUINIX, INC.

Summary of Debt Principal Outstanding

(in thousands)

(unaudited)











September 30, 2018



December 31, 2017









Capital lease and other financing obligations

$

1,484,479





$

1,698,961











Term loans

1,353,763





1,406,686



Mortgage payable and other loans payable

47,002





50,923



Plus: debt discount and issuance costs, net

5,033





8,615



           Total mortgage and loans payable principal

1,405,798





1,466,224











Senior notes

8,469,339





6,923,849



Plus: debt issuance costs

78,961





78,151



Less: debt premium

(6,100)







          Total senior notes principal

8,542,200





7,002,000











Total debt principal outstanding

$

11,432,477





$

10,167,185



 

EQUINIX, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)















Three Months Ended



Nine Months Ended





September 30, 2018



June 30,

2018



September 30, 2017



September 30,

2018



September 30,

2017























Cash flows from operating activities:



Net income

$

124,825





$

67,618





$

79,900





$

255,337





$

167,767





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



Depreciation, amortization and accretion

306,318





308,828





277,719





921,611





749,118





Stock-based compensation

47,588





49,725





45,654





139,849





129,602





Amortization of debt issuance costs and debt discounts and premiums

3,148





3,362





4,390





10,609





20,100





(Gain) loss on debt extinguishment

(1,492)





19,215





22,156





39,214





42,103





Gain on asset sales

(6,013)













(6,013)









Other items

5,730





2,322





(744)





16,940





11,411





Changes in operating assets and liabilities:



Accounts receivable

(46,685)





32,834





(50,530)





(85,126)





(202,430)





Income taxes, net

(10,010)





(7,485)





(19,681)





(32,876)





(53,608)





Accounts payable and accrued expenses

29,107





10,818





28,781





4,782





44,952





Other assets and liabilities

(35,354)





51,491





2,865





(7,530)





35,339



Net cash provided by operating activities

417,162





538,728





390,510





1,256,797





944,354



Cash flows from investing activities:



Purchases, sales and maturities of investments, net

6,452





13,240





(28,258)





19,195





(25,059)





Business acquisitions, net of cash and restricted cash acquired

1,808





(830,993)





1,128





(829,185)





(3,628,526)





Purchases of real estate

(94,830)





(27,082)





(16,384)





(136,612)





(64,964)





Purchases of other property, plant and equipment

(545,541)





(520,239)





(320,234)





(1,415,509)





(946,048)





Proceeds from asset sales

12,154













12,154





47,767



Net cash used in investing activities

(619,957)





(1,365,074)





(363,748)





(2,349,957)





(4,616,830)



Cash flows from financing activities:



Proceeds from employee equity awards

24,243





13





21,506





50,103





41,625





Payment of dividend distributions

(185,983)





(181,760)





(159,541)





(554,742)





(463,914)





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

265,671





8,202









273,873





2,126,341





Proceeds from loans payable

424,650













424,650





1,059,800





Proceeds from senior notes









1,199,700





929,850





2,449,700





Repayment of capital lease and other financing obligations

(19,799)





(14,069)





(15,792)





(89,655)





(60,252)





Repayment of mortgage and loans payable

(404,083)





(18,816)





(21,215)





(429,498)





(63,520)





Repayment of senior notes









(500,000)









(500,000)





Debt extinguishment costs





148





(11,766)





(20,556)





(23,020)





Debt issuance costs

(635)









(16,267)





(12,218)





(56,886)





Other financing activities

















(900)



Net cash provided by (used in) financing activities

104,064





(206,282)





496,625





571,807





4,508,974



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

(5,104)





(33,743)





9,582





(30,944)





26,450



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

(103,835)





(1,066,371)





532,969





(552,297)





862,948



Cash, cash equivalents and restricted cash at beginning of period

1,002,239





2,068,610





1,103,226





1,450,701





773,247



Cash, cash equivalents and restricted cash at end of period

$

898,404





$

1,002,239





$

1,636,195





$

898,404





$

1,636,195



Supplemental cash flow information:

Cash paid for taxes

$

77,648





$

17,681





$

16,590





$

127,090





$

62,411



Cash paid for interest

$

152,887





$

115,071





$

129,014





$

375,015





$

342,408

























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

$

(209,247)





$

(839,586)





$

55,020





$

(1,112,355)





$

(3,647,417)

























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

$

(116,225)





$

18,489





$

70,276





$

(146,558)





$

46,073





































































(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

$

417,162





$

538,728





$

390,510





$

1,256,797





$

944,354





Net cash used in investing activities as presented above

(619,957)





(1,365,074)





(363,748)





(2,349,957)





(4,616,830)





Purchases, sales and maturities of investments, net

(6,452)





(13,240)





28,258





(19,195)





25,059





Free cash flow (negative free cash flow)

$

(209,247)





$

(839,586)





$

55,020





$

(1,112,355)





$

(3,647,417)















































(2)

We define adjusted free cash flow as 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 (as defined above)

$

(209,247)





$

(839,586)





$

55,020





$

(1,112,355)





$

(3,647,417)





Less business acquisitions, net of cash and restricted cash acquired

(1,808)





830,993





(1,128)





829,185





3,628,526





Less purchases of real estate

94,830





27,082





16,384





136,612





64,964





Adjusted free cash flow (adjusted negative free cash flow)

$

(116,225)





$

18,489





$

70,276





$

(146,558)





$

46,073



























 

EQUINIX, INC.

Non-GAAP Measures and Other Supplemental Data

(in thousands)

(unaudited)















Three Months Ended



Nine Months Ended





September 30,

2018



June 30,

2018



September 30,

2017



September 30,

2018



September 30,

2017



Recurring revenues

$

1,207,806





$

1,187,749





$

1,089,033





$

3,546,184





$

2,997,521





Non-recurring revenues

75,945





74,194





63,228





215,387





170,686





Revenues (1)

1,283,751





1,261,943





1,152,261





3,761,571





3,168,207



























Cash cost of revenues (2)

433,186





421,733





377,767





1,250,441





1,025,776





Cash gross profit (3)

850,565





840,210





774,494





2,511,130





2,142,431



























Cash operating expenses (4)(7):



















Cash sales and marketing expenses (5)

93,339





91,468





96,873





282,876





286,350





Cash general and administrative expenses(6)

144,700





144,738





127,302





432,209





368,880





Total cash operating expenses (4) (7)

238,039





236,206





224,175





715,085





655,230



























Adjusted EBITDA (8)

$

612,526





$

604,004





$

550,319





$

1,796,045





$

1,487,201



























Cash gross margins (9)

66

%



67

%



67

%



67

%



68

%

























Adjusted EBITDA  margins (10)

48

%



48

%



48

%



48

%



47

%

























Adjusted EBITDA flow-through rate (11)

39

%



53

%



48

%



50

%



53

%

























FFO (12)

$

340,030





$

289,525





$

286,119





$

920,310





$

706,745



























AFFO (13) (14)

$

402,250





$

428,126





$

391,289





$

1,244,952





$

1,055,513





































































(1)

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

































Americas Revenues:







































Colocation

$

433,828





$

433,895





$

422,244





$

1,294,848





$

1,096,281





Interconnection

134,159





131,720





124,377





395,132





341,475





Managed infrastructure

18,698





18,292





18,359





55,525





50,425





Other

5,161





4,980





1,056





11,220





3,878





Recurring revenues

591,846





588,887





566,036





1,756,725





1,492,059





Non-recurring revenues

33,838





29,388





30,502





89,861





74,534





Revenues

$

625,684





$

618,275





$

596,538





$

1,846,586





$

1,566,593

















































EMEA Revenues:









































Colocation

$

305,072





$

293,518





$

268,365





$

886,651





$

781,303





Interconnection

34,640





33,969





27,574





103,586





73,580





Managed infrastructure

28,387





29,731





22,465





88,804





59,342





Other

2,552





2,364





2,475





6,682





7,842





Recurring revenues

370,651





359,582





320,879





1,085,723





922,067





Non-recurring revenues

26,104





23,586





17,954





73,830





54,557





Revenues

$

396,755





$

383,168





$

338,833





$

1,159,553





$

976,624



























Asia-Pacific Revenues:







































Colocation

$

191,143





$

186,172





$

152,071





$

543,513





$

438,849





Interconnection

33,318





31,924





27,593





96,011





78,233





Managed infrastructure

20,848





21,184





22,454





64,212





66,313





Recurring revenues

245,309





239,280





202,118





703,736





583,395





Non-recurring revenues

16,003





21,220





14,772





51,696





41,595





Revenues

$

261,312





$

260,500





$

216,890





$

755,432





$

624,990



























Worldwide Revenues:







































Colocation

$

930,043





$

913,585





$

842,680





$

2,725,012





$

2,316,433





Interconnection

202,117





197,613





179,544





594,729





493,288





Managed infrastructure

67,933





69,207





63,278





208,541





176,080





Other

7,713





7,344





3,531





17,902





11,720





Recurring revenues

1,207,806





1,187,749





1,089,033





3,546,184





2,997,521





Non-recurring revenues

75,945





74,194





63,228





215,387





170,686





Revenues

$

1,283,751





$

1,261,943





$

1,152,261





$

3,761,571





$

3,168,207















































(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

$

660,309





$

651,801





$

582,360





$

1,934,540





$

1,573,524





Depreciation, amortization and accretion expense

(222,523)





(225,461)





(200,682)





(670,993)





(537,748)





Stock-based compensation expense

(4,600)





(4,607)





(3,911)





(13,106)





(10,000)





Cash cost of revenues

$

433,186





$

421,733





$

377,767





$

1,250,441





$

1,025,776



























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

































Americas cash cost of revenues

$

181,826





$

180,057





$

168,901





$

526,138





$

430,549





EMEA cash cost of revenues

160,173





155,085





133,137





468,072





379,797





Asia-Pacific cash cost of revenues

91,187





86,591





75,729





256,231





215,430





Cash cost of revenues

$

433,186





$

421,733





$

377,767





$

1,250,441





$

1,025,776













(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

$

364,822





$

364,691





$

342,955





$

1,092,446





$

986,202





Depreciation and amortization expense

(83,795)





(83,367)





(77,037)





(250,618)





(211,370)





Stock-based compensation expense

(42,988)





(45,118)





(41,743)





(126,743)





(119,602)





Cash operating expense

$

238,039





$

236,206





$

224,175





$

715,085





$

655,230

























(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

$

157,920





$

154,202





$

157,619





$

471,898





$

428,112





Depreciation and amortization expense

(50,415)





(48,626)





(46,899)





(149,042)





(103,517)





Stock-based compensation expense

(14,166)





(14,108)





(13,847)





(39,980)





(38,245)





Cash sales and marketing expense

$

93,339





$

91,468





$

96,873





$

282,876





$

286,350

























(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

$

206,902





$

210,489





$

185,336





$

620,548





$

558,090





Depreciation and amortization expense

(33,380)





(34,741)





(30,138)





(101,576)





(107,853)





Stock-based compensation expense

(28,822)





(31,010)





(27,896)





(86,763)





(81,357)





Cash general and administrative expense

$

144,700





$

144,738





$

127,302





$

432,209





$

368,880

























(7)

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

























Americas cash SG&A

$

147,855





$

144,263





$

135,536





$

438,941





$

387,173





EMEA cash SG&A

56,785





57,268





59,232





174,691





179,187





Asia-Pacific cash SG&A

33,399





34,675





29,407





101,453





88,870





Cash SG&A

$

238,039





$

236,206





$

224,175





$

715,085





$

655,230

























(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

$

265,753





$

215,038





$

224,863





$

706,666





$

576,971





Depreciation, amortization and accretion expense

306,318





308,828





277,719





921,611





749,118





Stock-based compensation expense

47,588





49,725





45,654





139,849





129,602





Acquisition costs

(1,120)





30,413





2,083





33,932





31,510





Gain on asset sales

(6,013)













(6,013)









Adjusted EBITDA

$

612,526





$

604,004





$

550,319





$

1,796,045





$

1,487,201



























The geographic split of our adjusted EBITDA is presented below:

































Americas income from operations

$

106,536





$

87,711





$

105,785





$

295,983





$

261,934





Americas depreciation, amortization and accretion expense

156,920





160,337





151,665





475,283





364,998





Americas stock-based compensation expense

32,818





35,104





33,419





97,799





94,964





Americas acquisition costs

(271)





10,803





1,232





12,442





26,975





Americas adjusted EBITDA

$

296,003





$

293,955





$

292,101





$

881,507





$

748,871



























EMEA income from operations

$

88,830





$

73,046





$

64,197





$

225,979





$

164,105





EMEA depreciation, amortization and accretion expense

89,190





88,828





74,625





270,510





229,549





EMEA stock-based compensation expense

8,532





8,403





6,791





24,074





19,451





EMEA acquisition costs

(742)





538





851





2,240





4,535





EMEA gain on asset sales

(6,013)













(6,013)









EMEA adjusted EBITDA

$

179,797





$

170,815





$

146,464





$

516,790





$

417,640



























Asia-Pacific income from operations

$

70,387





$

54,281





$

54,881





$

184,704





$

150,932





Asia-Pacific depreciation, amortization and accretion expense

60,208





59,663





51,429





175,818





154,571





Asia-Pacific stock-based compensation expense

6,238





6,218





5,444





17,976





15,187





Asia-Pacific acquisition costs

(107)





19,072









19,250









Asia-Pacific adjusted EBITDA

$

136,726





$

139,234





$

111,754





$

397,748





$

320,690

























(9)

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

































Our cash gross margins by geographic region is presented below:

































Americas cash gross margins

71

%



71

%



72

%



72

%



73

%



EMEA cash gross margins

60

%



60

%



61

%



60

%



61

%



Asia-Pacific cash gross margins

65

%



67

%



65

%



66

%



66

%























(10)

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

























Americas adjusted EBITDA margins

47

%



48

%



49

%



48

%



48

%



EMEA adjusted EBITDA margins

45

%



45

%



43

%



45

%



43

%



Asia-Pacific adjusted EBITDA margins

52

%



53

%



52

%



53

%



51

%











(11)

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

























Adjusted EBITDA - current period

$

612,526





$

604,004





$

550,319





$

1,796,045





$

1,487,201





Less adjusted EBITDA - prior period

(604,004)





(579,515)





(509,308)





(1,624,467)





(1,276,824)





Adjusted EBITDA growth

$

8,522





$

24,489





$

41,011





$

171,578





$

210,377

















































Revenues - current period

$

1,283,751





$

1,261,943





$

1,152,261





$

3,761,571





$

3,168,207





Less revenues - prior period

(1,261,943)





(1,215,877)





(1,066,421)





(3,418,903)





(2,767,833)





Revenue growth

$

21,808





$

46,066





$

85,840





$

342,668





$

400,374



























Adjusted EBITDA flow-through rate

39

%



53

%



48

%



50

%



53

%























(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

$

124,825





$

67,618





$

79,900





$

255,337





$

167,767





Adjustments:





















Real estate depreciation

220,017





221,029





200,313





663,901





535,114





(Gain) loss on disposition of real estate property

(4,812)





878





5,877





1,072





3,779





Adjustments for FFO from unconsolidated joint ventures









29









85





FFO

$

340,030





$

289,525





$

286,119





$

920,310





$

706,745

























(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

$

340,030





$

289,525





$

286,119





$

920,310





$

706,745





Adjustments:





















Installation revenue adjustment

3,209





840





6,161





6,208





17,775





Straight-line rent expense adjustment

1,551





1,664





2,297





5,516





5,721





Amortization of deferred financing costs and debt discounts and premiums

3,148





3,362





4,390





10,609





20,100





Contract cost adjustment

(5,271)





(4,384)









(13,010)









Stock-based compensation expense

47,588





49,725





45,654





139,849





129,602





Non-real estate depreciation expense

33,917





35,267





29,205





103,281





87,021





Amortization expense

51,792





51,035





48,893





153,443





128,068





Accretion expense (adjustment)

592





1,497





(692)





986





(1,085)





Recurring capital expenditures

(55,382)





(42,206)





(44,914)





(132,819)





(105,455)





(Gain) loss on debt extinguishment

(1,492)





19,215





22,156





39,214





42,103





Acquisition costs

(1,120)





30,413





2,083





33,932





31,510





Income tax expense adjustment

(16,312)





(7,827)





(10,058)





(22,567)





(6,575)





Adjustments for AFFO from unconsolidated joint ventures









(5)









(17)





AFFO

$

402,250





$

428,126





$

391,289





$

1,244,952





$

1,055,513

























(14)

 Following is how we reconcile from adjusted EBITDA to AFFO:





















Adjusted EBITDA

$

612,526





$

604,004





$

550,319





$

1,796,045





$

1,487,201





Adjustments:





















Interest expense, net of interest income

(127,654)





(130,715)





(119,537)





(380,036)





(342,734)





Amortization of deferred financing costs and debt discounts and premiums

3,148





3,362





4,390





10,609





20,100





Income tax expense

(18,510)





(6,356)





(2,194)





(41,625)





(24,912)





Income tax expense adjustment

(16,312)





(7,827)





(10,058)





(22,567)





(6,575)





Straight-line rent expense adjustment

1,551





1,664





2,297





5,516





5,721





Contract cost adjustment

(5,271)





(4,384)









(13,010)









Installation revenue adjustment

3,209





840





6,161





6,208





17,775





Recurring capital expenditures

(55,382)





(42,206)





(44,914)





(132,819)





(105,455)





Other income (expense)

3,744





8,866





(1,076)





9,546





545





(Gain) loss on disposition of real estate property

(4,812)





878





5,877





1,072





3,779





Adjustments for unconsolidated JVs' and non-controlling interests









24









68





Adjustment for gain on sale of asset

6,013













6,013









AFFO

$

402,250





$

428,126





$

391,289





$

1,244,952





$

1,055,513



 

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

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/equinix-reports-third-quarter-2018-results-300742493.html

SOURCE Equinix, Inc.

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