REDWOOD CITY, Calif., Feb. 14, 2018 /PRNewswire/ —

  • Delivered 2017 annual revenues of $4.4 billion, an increase of 21% year-over-year; 11% growth on a normalized and constant currency basis
  • Further strengthened reach through M&A activity in Q4 2017 and early Q1 2018, in addition to active pipeline of 30 organic expansions currently underway
  • Launched next generation of Platform Equinix® that will physically and virtually connect IBX® data centers globally, enabling customers to discover and dynamically connect to any other customer across any Equinix location
  • Expects to deliver 2018 revenues over $5 billion

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

2017 Results Summary

  • Revenues from continuing operations
    • $4,368 million, a 21% increase over the previous year
    • Includes $359 million of revenues from the acquisition of 29 Verizon data centers
    • Includes $17 million of revenues from Itconic and Istanbul 2 (“IS2”) acquisitions
  • Operating Income
    • $809 million, a 31% increase over the previous year
  • Adjusted EBITDA
    • $2,052 million, a 47% adjusted EBITDA margin
    • Includes $54 million of integration costs
  • Net Income from Continuing Operations
    • $233 million
  • AFFO
    • $1,437 million, a 33% increase over the previous year
    • Includes $54 million of integration costs

2018 Annual Guidance Summary

  • Revenues from continuing operations
    • >$5,010 million, a 15% increase over the previous year; a normalized and constant currency increase of 10% excluding Verizon data center assets
  • Adjusted EBITDA
    • >$2,385 million or a 48% adjusted EBITDA margin
    • Assumes $35 million of integration costs
  • AFFO
    • >$1,635 million, a 14% increase over the previous year
    • Assumes recurring capital expenditures of approximately $200 million
    • Assumes $35 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

Peter Van Camp, Executive Chairman and Interim CEO and President, Equinix:

“In addition to strong financial performance, Equinix achieved a number of significant milestones around interconnection, innovation and acquisitions in 2017 that add even more value to our role as a strategic partner to companies in the execution of their digital business strategies. As we approach our 20th anniversary and reflect on what we’ve built, we believe our platform will become even more important for our customers in the years to come. We have a clear vision of our strategy and the opportunities ahead, and we are looking forward to another successful year.”

Business Highlights

  • Equinix further strengthened the reach of its global platform through M&A activity in Q4 2017 and early Q1 2018. Today, Equinix announced the $800 million acquisition of the Infomart Dallas – one of the most-connected facilities in the U.S. In December, Equinix announced a $791 million definitive agreement to acquire Australian data center provider Metronode, which will add 10 data centers and four new metros (Adelaide, Brisbane, Canberra and Perth) to existing Equinix operations in Sydney and Melbourne. Upon closing of these acquisitions, Equinix’s percentage of owned assets revenue will surpass 45%, and Platform Equinix will span 200 International Business Exchange™ (IBX®) data centers, 52 markets and 24 countries. Excluding these acquisitions, Equinix has invested more than $19 billion in capital in building out the global footprint of Platform Equinix since the company was founded.
  • Equinix also continues to expand the reach of its global platform through organic expansion, with 30 projects currently underway, half of which are in the EMEA region. Today, Equinix announced new expansions in the Culpeper, Houston, London, Paris, São Paulo, Silicon Valley, Sofia and Washington, D.C. metros totaling more than $500 million of capital expenditures.  The global reach of Equinix continues to attract companies seeking to locate their infrastructure closer to the digital edge, and in Q4 2017, customer deployments in all three regions of Platform Equinix (Americas, EMEA and Asia-Pacific) represented 58% of total recurring revenues.
  • In Q4, Equinix announced the next phase in the evolution of its global platform that will set the stage for the future introduction of a series of coverage, connectivity and service initiatives intended to deliver increasing value to customers by enabling them to rapidly scale their digital businesses. As a part of this initiative, Equinix is physically and virtually connecting its global data center footprint, enabling customers to discover and dynamically connect to any other customer across any Equinix location. Services are delivered through Equinix Cloud Exchange™ which is evolving from pure cloud connectivity to a multi-purpose interconnection exchange and has been renamed Equinix Cloud Exchange Fabric™ (ECX Fabric). In addition to enhancing its service capabilities, Equinix is also expanding the availability of its interconnection services to more locations, and in Q4 2017, it announced the expansion of Equinix Internet Exchange to nine new metros in the EMEA and Americas regions.
  • Equinix achieved strong growth from enterprise customers in Q4 2017, with revenues growing twice as fast as any other vertical, as digital transformation is forcing firms to change how they interconnect users and clouds across multiple locations. Equinix has now captured 46% of the Fortune 500, and one-third of the Forbes Global 2000 companies.

Business Outlook

Equinix adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method effective January 1, 2018.  The expected impact of adoption is included in the guidance provided.  Equinix guidance excludes the anticipated benefit of either the Metronode or the Infomart Dallas acquisitions.

For the first quarter of 2018, Equinix expects revenues to range between $1,204 and $1,212 million, an increase of 1% quarter over quarter at the midpoint, on both an as-reported and a normalized and constant currency basis. This guidance includes a positive foreign currency benefit of $1 million when compared to the average FX rates in Q4 2017, a negative $3 million impact from the adoption of ASC 606 and non-recurring revenues of approximately 5% of total revenues. Cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to approximate 21% of revenues. Adjusted EBITDA is expected to range between $549 and $557 million, which includes a less than $1 million positive foreign currency benefit when compared to the average FX rates in Q4 2017, $20 million of seasonally adjusted costs and $15 million of integration costs related to acquisitions. Recurring capital expenditures are expected to be approximately $40 million.

For the full year of 2018, total revenues are expected to exceed $5,010 million, an increase of 15% year over year, or a normalized and constant currency increase of 10% excluding Verizon data center assets. This guidance includes a positive foreign currency benefit of $5 million when compared to prior Equinix guidance rates, $65 million of revenues from the Itconic and IS2 acquisitions, a negative impact of $15 million from the adoption of ASC 606 and non-recurring revenues of approximately 5% of total revenues. Total year cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between 19% and 20% of revenues. Adjusted EBITDA is expected to exceed $2,385 million, an increase of 16% year over year. This adjusted EBITDA includes a foreign currency benefit of $2 million when compared to prior Equinix guidance rates, $23 million of adjusted EBITDA from the Itconic and IS2 acquisitions and an expected $35 million in integration costs. AFFO is expected to exceed $1,635 million, an increase of 14% year over year. Non-recurring capital expenditures are expected to range between $1,700 and $1,800 million and recurring capital expenditures are expected to approximate $200 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 $1.15 to the Euro, $1.34 to the Pound, ¥112 to the U.S. dollar, S$1.34 to the U.S. dollar, and R$3.31 to the U.S. dollar. Full year revenue guidance absorbs a negative $54 million from our current foreign currency hedges relative to market rates on December 31, 2017. The Q4 2017 global revenue breakdown by currency for the Euro, Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 19%, 9%, 6%, 5% and 4%, 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, 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. As a result of the adoption of ASC 606 on January 1, 2018, Equinix will capitalize the incremental costs of obtaining a contract if the contract’s term exceeds one year. The capitalized costs of obtaining contracts are amortized over the estimated life of the service. From Q1 2018, Equinix will include a contract cost adjustment in its AFFO calculation.

Q4 2017 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended December 31, 2017, along with its future outlook, in its quarterly conference call on Wednesday, February 14, 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, May 2, 2018, by dialing 1-203-369-1996 and entering passcode (2018). In addition, the webcast will be available on the company’s website 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. In 48 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies.

Non-GAAP Financial Measures

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

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

Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from continuing 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, amortization of deferred financing costs, 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 expected life of the installation, although the fees are generally paid in a lump sum upon installation. Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term. The adjustments for both installation revenues and straight-line rent expense are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. Equinix excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. Equinix excludes 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. From Q1 2018, as a result of the adoption of ASC 606, Equinix will include a contract cost adjustment. Although costs of obtaining contracts are generally incurred and paid during the period of obtaining the contracts, under ASC 606, contract costs are capitalized and amortized over the estimated life of the service. This adjustment to contract costs is intended to isolate the cash activity within the amortized results in the consolidated statement of operations.

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

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

Investors should note that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income 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, with the exception of including a contract cost adjustment as a result of the adoption of ASC 606 beginning in Q1 2018.

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, unanticipated difficulties in closing pending acquisitions; 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, IBX and Platform Equinix are registered trademarks of Equinix, Inc. Equinix Cloud Exchange, Equinix Cloud Exchange Fabric and International Business Exchange are trademarks of Equinix, Inc.

EQUINIX, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31, 2017

September 30, 2017

December 31, 2016

December 31, 2017

December 31, 2016

Recurring revenues

$

1,122,599

$

1,089,033

$

892,442

$

4,120,120

$

3,417,374

Non-recurring revenues

77,622

63,228

50,205

248,308

194,615

Revenues

1,200,221

1,152,261

942,647

4,368,428

3,611,989

Cost of revenues

619,625

582,360

465,921

2,193,149

1,820,870

Gross profit

580,596

569,901

476,726

2,175,279

1,791,119

Operating expenses:

Sales and marketing

153,612

157,619

113,384

581,724

438,742

General and administrative

187,816

185,336

178,956

745,906

694,561

Acquisition costs

7,125

2,083

(440)

38,635

64,195

Impairment charges

7,698

(Gain) loss on asset sales

371

(32,816)

Total operating expenses

348,553

345,038

292,271

1,366,265

1,172,380

Income from continuing operations

232,043

224,863

184,455

809,014

618,739

Interest income

3,255

2,291

948

13,075

3,476

Interest expense

(126,144)

(121,828)

(98,761)

(478,698)

(392,156)

Other income (expense)

8,668

(1,076)

(1,707)

9,213

(57,924)

Loss on debt extinguishment

(23,669)

(22,156)

(1,777)

(65,772)

(12,276)

Total interest and other, net

(137,890)

(142,769)

(101,297)

(522,182)

(458,880)

Income from continuing operations before income taxes

94,153

82,094

83,158

286,832

159,859

Income tax expense

(28,938)

(2,194)

(19,494)

(53,850)

(45,451)

Net income from continuing operations

65,215

79,900

63,664

232,982

114,408

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

(1,914)

12,392

Net income

$

65,215

$

79,900

$

61,750

$

232,982

$

126,800

Net income per share:

Basic net income per share from continuing operations

$

0.83

$

1.02

$

0.89

$

3.03

$

1.63

Basic net income (loss) per share from discontinued operations

(0.03)

0.18

Basic net income per share

$

0.83

$

1.02

$

0.86

$

3.03

$

1.81

Diluted net income per share from continuing operations

$

0.82

$

1.02

$

0.88

$

3.00

$

1.62

Diluted net income (loss) per share from discontinued operations

(0.02)

0.17

Diluted net income per share

$

0.82

$

1.02

$

0.86

$

3.00

$

1.79

Shares used in computing basic net income per share

78,543

78,055

71,389

76,854

70,117

Shares used in computing diluted net income per share

79,128

78,719

71,959

77,535

70,816

 

EQUINIX, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31, 2017

September 30, 2017

December 31, 2016

December 31, 2017

December 31, 2016

Net income

$

65,215

$

79,900

$

61,750

$

232,982

$

126,800

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment (“CTA”) gain (loss)

45,439

100,909

(292,355)

454,269

(507,420)

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

99

245

(133)

14

2,249

Unrealized gain (loss) on cash flow hedges

(2,427)

(13,070)

15,762

(54,895)

19,551

Net investment hedge CTA gain (loss)

(44,171)

(60,723)

41,342

(235,292)

45,505

Net actuarial gain (loss) on defined benefit plans

(182)

13

11

(143)

32

Total other comprehensive income (loss), net of tax

(1,242)

27,374

(235,373)

163,953

(440,083)

Comprehensive income (loss), net of tax

$

63,973

$

107,274

$

(173,623)

$

396,935

$

(313,283)

 

EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

December 31,
2017

December 31,
2016

Assets

Cash and cash equivalents

$

1,412,517

$

748,476

Short-term investments

28,271

3,409

Accounts receivable, net

576,313

396,245

Other current assets

232,027

319,396

Total current assets

2,249,128

1,467,526

Long-term investments

9,243

10,042

Property, plant and equipment, net

9,394,602

7,199,210

Goodwill

4,411,762

2,986,064

Intangible assets, net

2,384,972

719,231

Other assets

246,351

226,298

Total assets

$

18,696,058

$

12,608,371

Liabilities and Stockholders’ Equity

Accounts payable and accrued expenses

$

719,257

$

581,739

Accrued property, plant and equipment

224,968

144,842

Current portion of capital lease and other financing obligations

78,705

101,046

Current portion of mortgage and loans payable

64,491

67,928

Other current liabilities

159,914

133,140

Total current liabilities

1,247,335

1,028,695

Capital lease and other financing obligations, less current portion

1,620,256

1,410,742

Mortgage and loans payable, less current portion

1,393,118

1,369,087

Senior notes

6,923,849

3,810,770

Other liabilities

661,710

623,248

Total liabilities

11,846,268

8,242,542

Common stock

79

72

Additional paid-in capital

10,121,323

7,413,519

Treasury stock

(146,320)

(147,559)

Accumulated dividends

(2,592,792)

(1,969,645)

Accumulated other comprehensive loss

(785,189)

(949,142)

Retained earnings

252,689

18,584

Total stockholders’ equity

6,849,790

4,365,829

Total liabilities and stockholders’ equity

$

18,696,058

$

12,608,371

Ending headcount by geographic region is as follows:

Americas headcount

3,154

2,510

EMEA headcount

2,560

2,063

Asia-Pacific headcount

1,559

1,420

Total headcount

7,273

5,993

 

EQUINIX, INC.

Summary of Debt Principal Outstanding

(in thousands)

(unaudited)

December 31,
2017

December 31,
2016

Capital lease and other financing obligations

$

1,698,961

$

1,511,788

Term loans, net of debt discount and debt issuance costs

1,406,686

1,390,771

Mortgage payable and other loans payable

50,923

46,244

Plus: debt discount and issuance costs, net

8,615

20,949

Total mortgage and loans payable principal

1,466,224

1,457,964

Senior notes, net of debt issuance costs

6,923,849

3,810,770

Plus: debt issuance costs

78,151

39,230

Total senior notes principal

7,002,000

3,850,000

Total debt principal outstanding

$

10,167,185

$

6,819,752

 

EQUINIX, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31,
2017

September 30, 2017

December 31, 2016

December 31,
2017

December 31,
2016

Cash flows from operating activities:

Net income

$

65,215

$

79,900

$

61,750

$

232,982

$

126,800

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

Depreciation, amortization and accretion

279,774

277,719

212,268

1,028,892

843,510

Stock-based compensation

45,898

45,654

39,837

175,500

155,567

Amortization of debt issuance costs and debt discounts

4,349

4,390

5,428

24,449

19,137

Loss on debt extinguishment

23,669

22,156

1,777

65,772

12,276

(Gain) loss on asset sales

371

(32,816)

(Gain) loss on sale of discontinued operations

1,891

(2,351)

Impairment charges

7,698

Other items

(3,439)

(744)

5,014

7,972

22,566

Changes in operating assets and liabilities:

Accounts receivable

40,656

(50,530)

(27,423)

(161,774)

(100,230)

Income taxes, net

18,672

(19,681)

27,999

(34,936)

29,020

Accounts payable and accrued expenses

29,536

28,781

73,091

74,488

61,565

Other assets and liabilities

(9,451)

2,865

(101,385)

25,888

(123,389)

Net cash provided by operating activities

494,879

390,510

300,618

1,439,233

1,019,353

Cash flows from investing activities:

Purchases, sales and maturities of investments, net

13,554

(28,258)

779

(11,505)

10,839

Business acquisitions, net of cash and restricted cash acquired

(334,754)

1,128

621

(3,963,280)

(1,766,606)

Purchases of real estate

(30,119)

(16,384)

(95,083)

(28,118)

Purchases of other property, plant and equipment

(432,677)

(320,234)

(386,321)

(1,378,725)

(1,113,365)

Proceeds from asset sales

23,385

47,767

851,582

Net cash used in investing activities

(783,996)

(363,748)

(361,536)

(5,400,826)

(2,045,668)

Cash flows from financing activities:

Proceeds from employee equity awards

71

21,506

36

41,696

34,179

Payments of dividend distributions

(157,583)

(159,541)

(125,312)

(621,497)

(499,463)

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

355,080

2,481,421

Proceeds from loans payable

997,076

457,900

2,056,876

1,168,304

Proceeds from senior notes

1,179,001

1,199,700

3,628,701

Repayments of capital lease and other financing obligations

(33,218)

(15,792)

(13,522)

(93,470)

(114,385)

Repayments of mortgage and loans payable and convertible debt

(2,214,278)

(21,215)

(476,474)

(2,277,798)

(1,462,939)

Repayment of senior notes

(500,000)

(500,000)

Debt extinguishment costs

(3,102)

(11,766)

(1,199)

(26,122)

(11,380)

Debt issuance costs

(24,161)

(16,267)

370

(81,047)

(11,381)

Other financing activities

(900)

Net cash provided by (used in) financing activities

98,886

496,625

(158,201)

4,607,860

(897,065)

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

4,737

9,582

(34,930)

31,187

(21,800)

Change in cash balances included in assets held for sale

3,755

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

(185,494)

532,969

(250,294)

677,454

(1,945,180)

Cash, cash equivalents and restricted cash at beginning of period

1,636,195

1,103,226

1,023,541

773,247

2,718,427

Cash, cash equivalents and restricted cash at end of period

$

1,450,701

$

1,636,195

$

773,247

$

1,450,701

$

773,247

Supplemental cash flow information:

Cash paid for taxes

$

10,230

$

16,590

$

7,817

$

72,641

$

39,320

Cash paid for interest

$

102,385

$

129,014

$

78,553

$

444,793

$

350,083

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

$

(302,671)

$

55,020

$

(61,697)

$

(3,950,088)

$

(1,037,154)

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

$

62,202

$

70,276

$

(62,318)

$

108,275

$

757,570

(1)

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

Net cash provided by operating activities as presented above

$

494,879

$

390,510

$

300,618

$

1,439,233

$

1,019,353

Net cash used in investing activities as presented above

(783,996)

(363,748)

(361,536)

(5,400,826)

(2,045,668)

Purchases, sales and maturities of investments, net

(13,554)

28,258

(779)

11,505

(10,839)

Free cash flow (negative free cash flow)

$

(302,671)

$

55,020

$

(61,697)

$

(3,950,088)

$

(1,037,154)

(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)

$

(302,671)

$

55,020

$

(61,697)

$

(3,950,088)

$

(1,037,154)

Less business acquisitions, net of cash and restricted cash acquired

334,754

(1,128)

(621)

3,963,280

1,766,606

Less purchases of real estate

30,119

16,384

95,083

28,118

Adjusted free cash flow (adjusted negative free cash flow)

$

62,202

$

70,276

$

(62,318)

$

108,275

$

757,570

 

EQUINIX, INC.

Non-GAAP Measures and Other Supplemental Data

(in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31,
2017

September 30,
2017

December 31, 2016

December 31,
2017

December 31,
2016

Recurring revenues

$

1,122,599

$

1,089,033

$

892,442

$

4,120,120

$

3,417,374

Non-recurring revenues

77,622

63,228

50,205

248,308

194,615

Revenues (1)

1,200,221

1,152,261

942,647

4,368,428

3,611,989

Cash cost of revenues (2)

407,389

377,767

301,540

1,433,165

1,169,494

Cash gross profit (3)

792,832

774,494

641,107

2,935,263

2,442,495

Cash operating expenses (4):

Cash sales and marketing expenses (5)

94,273

96,873

85,196

380,623

322,474

Cash general and administrative

expenses (6)

133,719

127,302

119,420

502,599

462,547

Total cash operating expenses (7)

227,992

224,175

204,616

883,222

785,021

Adjusted EBITDA (8)

$

564,840

$

550,319

$

436,491

$

2,052,041

$

1,657,474

Cash gross margins (9)

66

%

67

%

68

%

67

%

68

%

Adjusted EBITDA

margins (10)

47

%

48

%

46

%

47

%

46

%

Adjusted EBITDA flow-through rate (11)

30

%

48

%

92

%

52

%

44

%

FFO (12)

$

285,618

$

286,119

$

219,868

$

992,363

$

725,089

AFFO (13) (14)

$

381,527

$

391,289

$

293,785

$

1,437,040

$

1,078,339

(1)

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

Americas Revenues:

Colocation

$

422,648

$

422,244

$

299,200

$

1,518,929

$

1,161,665

Interconnection

127,793

124,377

100,459

469,268

374,655

Managed infrastructure

18,512

18,359

14,385

68,937

53,404

Other

1,340

1,056

943

5,218

3,360

Recurring revenues

570,293

566,036

414,987

2,062,352

1,593,084

Non-recurring revenues

35,874

30,502

21,555

110,408

86,465

Revenues

$

606,167

$

596,538

$

436,542

$

2,172,760

$

1,679,549

EMEA Revenues:

Colocation

$

282,240

$

268,365

$

242,829

$

1,063,543

$

941,848

Interconnection

31,311

27,574

22,280

104,891

85,869

Managed infrastructure

28,780

22,465

17,243

88,122

67,553

Other

2,573

2,475

2,919

10,415

11,382

Recurring revenues

344,904

320,879

285,271

1,266,971

1,106,652

Non-recurring revenues

24,728

17,954

16,353

79,285

64,687

Revenues

$

369,632

$

338,833

$

301,624

$

1,346,256

$

1,171,339

Asia-Pacific Revenues:

Colocation

$

156,824

$

152,071

$

146,483

$

595,673

$

543,581

Interconnection

28,781

27,593

23,159

107,014

82,521

Managed infrastructure

21,797

22,454

22,362

88,110

89,335

Other

180

2,201

Recurring revenues

207,402

202,118

192,184

790,797

717,638

Non-recurring revenues

17,020

14,772

12,297

58,615

43,463

Revenues

$

224,422

$

216,890

$

204,481

$

849,412

$

761,101

Worldwide Revenues:

Colocation

$

861,712

$

842,680

$

688,512

$

3,178,145

$

2,647,094

Interconnection

187,885

179,544

145,898

681,173

543,045

Managed infrastructure

69,089

63,278

53,990

245,169

210,292

Other

3,913

3,531

4,042

15,633

16,943

Recurring revenues

1,122,599

1,089,033

892,442

4,120,120

3,417,374

Non-recurring revenues

77,622

63,228

50,205

248,308

194,615

Revenues

$

1,200,221

$

1,152,261

$

942,647

$

4,368,428

$

3,611,989

(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

$

619,625

$

582,360

$

465,921

$

2,193,149

$

1,820,870

Depreciation, amortization and accretion expense

(208,615)

(200,682)

(161,049)

(746,363)

(638,290)

Stock-based compensation expense

(3,621)

(3,911)

(3,332)

(13,621)

(13,086)

Cash cost of revenues

$

407,389

$

377,767

$

301,540

$

1,433,165

$

1,169,494

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

Americas cash cost of revenues

$

179,884

$

168,901

$

115,838

$

610,433

$

449,088

EMEA cash cost of revenues

148,721

133,137

113,796

528,518

446,842

Asia-Pacific cash cost of revenues

78,784

75,729

71,906

294,214

273,564

Cash cost of revenues

$

407,389

$

377,767

$

301,540

$

1,433,165

$

1,169,494

(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

$

341,428

$

342,955

$

292,340

$

1,327,630

$

1,133,303

Depreciation and amortization expense

(71,159)

(77,037)

(51,219)

(282,529)

(205,220)

Stock-based compensation expense

(42,277)

(41,743)

(36,505)

(161,879)

(143,062)

Cash operating expense

$

227,992

$

224,175

$

204,616

$

883,222

$

785,021

(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

$

153,612

$

157,619

$

113,384

$

581,724

$

438,742

Depreciation and amortization expense

(47,490)

(46,899)

(17,345)

(151,007)

(73,238)

Stock-based compensation expense

(11,849)

(13,847)

(10,843)

(50,094)

(43,030)

Cash sales and marketing expense

$

94,273

$

96,873

$

85,196

$

380,623

$

322,474

(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

$

187,816

$

185,336

$

178,956

$

745,906

$

694,561

Depreciation and amortization expense

(23,669)

(30,138)

(33,874)

(131,522)

(131,982)

Stock-based compensation expense

(30,428)

(27,896)

(25,662)

(111,785)

(100,032)

Cash general and administrative expense

$

133,719

$

127,302

$

119,420

$

502,599

$

462,547

(7)

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

Americas cash SG&A

$

140,460

$

135,536

$

115,012

$

527,633

$

443,150

EMEA cash SG&A

55,854

59,232

59,977

235,041

230,234

Asia-Pacific cash SG&A

31,678

29,407

29,627

120,548

111,637

Cash SG&A

$

227,992

$

224,175

$

204,616

$

883,222

$

785,021

(8)

We define adjusted EBITDA as income from continuing 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 continuing operations

$

232,043

$

224,863

$

184,455

$

809,014

$

618,739

Depreciation, amortization and accretion expense

279,774

277,719

212,268

1,028,892

843,510

Stock-based compensation expense

45,898

45,654

39,837

175,500

156,148

Impairment charges

7,698

Acquisition costs

7,125

2,083

(440)

38,635

64,195

(Gain) loss on asset sales

371

(32,816)

Adjusted EBITDA

$

564,840

$

550,319

$

436,491

$

2,052,041

$

1,657,474

The geographic split of our adjusted EBITDA is presented below:

Americas income from continuing operations

$

101,286

$

105,785

$

87,537

$

363,220

$

352,180

Americas depreciation, amortization and accretion expense

149,970

151,665

83,305

514,968

321,103

Americas stock-based compensation expense

33,455

33,419

28,312

128,419

109,740

Americas acquisition costs

1,112

1,232

6,538

28,087

9,530

Americas gain on asset sales

(5,242)

Americas adjusted EBITDA

$

285,823

$

292,101

$

205,692

$

1,034,694

$

787,311

EMEA income from continuing operations

$

73,749

$

64,197

$

51,347

$

237,854

$

124,853

EMEA depreciation, amortization and accretion expense

79,741

74,625

76,598

309,290

314,570

EMEA stock-based compensation expense

6,874

6,791

6,884

26,325

28,317

EMEA acquisition costs

4,693

851

(6,978)

9,228

54,468

EMEA gain on asset sales

(27,945)

EMEA adjusted EBITDA

$

165,057

$

146,464

$

127,851

$

582,697

$

494,263

Asia-Pacific income from continuing operations

$

57,008

$

54,881

$

45,571

$

207,940

$

141,706

Asia-Pacific depreciation, amortization and accretion expense

50,063

51,429

52,365

204,634

207,837

Asia-Pacific stock-based compensation expense

5,569

5,444

4,641

20,756

18,091

Asia-Pacific impairment charges

7,698

Asia-Pacific acquisition costs

1,320

1,320

197

Asia-Pacific loss on asset sales

371

371

Asia-Pacific adjusted EBITDA

$

113,960

$

111,754

$

102,948

$

434,650

$

375,900

(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

70

%

72

%

73

%

72

%

73

%

EMEA cash gross margins

60

%

61

%

62

%

61

%

62

%

Asia-Pacific cash gross margins

65

%

65

%

65

%

65

%

64

%

(10)

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

Americas adjusted EBITDA margins

47

%

49

%

47

%

48

%

47

%

EMEA adjusted EBITDA margins

45

%

43

%

42

%

43

%

42

%

Asia-Pacific adjusted EBITDA margins

51

%

52

%

50

%

51

%

49

%

(11)

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

Adjusted EBITDA – current period

$

564,840

$

550,319

$

436,491

$

2,052,041

$

1,657,474

Less adjusted EBITDA – prior period

(550,319)

(509,308)

(420,042)

(1,657,474)

(1,271,627)

Adjusted EBITDA growth

$

14,521

$

41,011

$

16,449

$

394,567

$

385,847

Revenues – current period

$

1,200,221

$

1,152,261

$

942,647

$

4,368,428

$

3,611,989

Less revenues – prior period

(1,152,261)

(1,066,421)

(924,676)

(3,611,989)

(2,725,867)

Revenue growth

$

47,960

$

85,840

$

17,971

$

756,439

$

886,122

Adjusted EBITDA flow-through rate

30

%

48

%

92

%

52

%

44

%

(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

$

65,215

$

79,900

$

61,750

$

232,982

$

126,800

Adjustments:

Real estate depreciation

219,237

200,313

157,054

754,351

626,564

(Gain) loss on disposition of real estate property

1,166

5,877

1,036

4,945

(28,388)

Adjustments for FFO from unconsolidated joint ventures

29

28

85

113

FFO

$

285,618

$

286,119

$

219,868

$

992,363

$

725,089

(13)

AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, 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

$

285,618

$

286,119

$

219,868

$

992,363

$

725,089

Adjustments:

Installation revenue adjustment

6,721

6,161

4,788

24,496

20,161

Straight-line rent expense adjustment

3,204

2,297

1,986

8,925

7,700

Amortization of deferred financing costs

4,349

4,390

5,258

24,449

18,696

Stock-based compensation expense

45,898

45,654

39,837

175,500

156,149

Non-real estate depreciation expense

24,100

29,205

23,265

111,121

87,781

Amortization expense

48,940

48,893

29,478

177,008

122,862

Accretion expense (adjustment)

(12,503)

(692)

2,471

(13,588)

6,303

Recurring capital expenditures

(62,540)

(44,914)

(36,476)

(167,995)

(141,819)

Loss on debt extinguishment

23,669

22,156

1,777

65,772

12,276

Acquisition costs

7,125

2,083

(440)

38,635

64,195

Impairment charges

7,698

Income tax expense adjustment

6,946

(10,058)

68

371

3,680

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

1,914

(12,392)

Adjustments for AFFO from unconsolidated joint ventures

(5)

(9)

(17)

(40)

AFFO

$

381,527

$

391,289

$

293,785

$

1,437,040

$

1,078,339

(14)

 Following is how we reconcile from adjusted EBITDA to AFFO:

Adjusted EBITDA

$

564,840

$

550,319

$

436,491

$

2,052,041

$

1,657,474

Adjustments:

Interest expense, net of interest income

(122,889)

(119,537)

(97,813)

(465,623)

(388,679)

Amortization of deferred financing costs

4,349

4,390

5,258

24,449

18,696

Income tax expense

(28,938)

(2,194)

(19,494)

(53,850)

(45,451)

Income tax expense adjustment

6,946

(10,058)

68

371

3,680

Straight-line rent expense adjustment

3,204

2,297

1,986

8,925

7,700

Installation revenue adjustment

6,721

6,161

4,788

24,496

20,161

Recurring capital expenditures

(62,540)

(44,914)

(36,476)

(167,995)

(141,819)

Other income (expense)

8,668

(1,076)

(1,707)

9,213

(57,924)

(Gain) loss on disposition of real estate property

1,166

5,877

1,036

4,945

(28,388)

Adjustments for unconsolidated JVs’ and non-controlling interests

24

19

68

73

Adjustment for gain (loss) on sale of asset

(371)

32,816

AFFO

$

381,527

$

391,289

$

293,785

$

1,437,040

$

1,078,339

 

Equinix. (PRNewsFoto/Equinix)

 

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SOURCE Equinix, Inc.