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August 3, 2016

Equinix Reports Second Quarter 2016 Results

Equinix Delivers 54th Consecutive Quarter of Revenue Growth

REDWOOD CITY, Calif., Aug. 3, 2016 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended June 30, 2016.  The Company uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements.

Second Quarter 2016 Results Summary

  • Revenues from continuing operations
    • $900.5 million, a 7% increase over the previous quarter
    • Includes $37.3 million of revenues from Bit-isle
    • Includes $107.2 million of revenues from Telecity
  • Operating Income
    • $151.7 million, a 35% increase from the previous quarter
  • Adjusted EBITDA
    • $420.3 million, a 47% adjusted EBITDA margin
    • Includes $12.1 million of adjusted EBITDA from Bit-isle
    • Includes $51.9 million of adjusted EBITDA from Telecity
    • Includes $10.4 million of integration costs
  • Net Income from Continuing Operations
    • $39.3 million
  • AFFO
    • $290.5 million, a 38% increase over the previous quarter
    • Includes $10.4 million of integration costs

2016 Annual Guidance Summary

  • Revenues from continuing operations
    • $3,598.0 million - $3,608.0 million, a 32% increase over the previous year; an organic and constant currency growth rate of 13.8%
    • Assumes $550.0 million - $560.0 million in revenues from Telecity and Bit-isle
  • Adjusted EBITDA
    • $1,658.0 million - $1,668.0 million or a 46.2% adjusted EBITDA margin
    • Assumes 120 basis point YoY improvement in adjusted EBITDA for the Equinix organic business
    • Assumes $250.0 million - $260.0 million of adjusted EBITDA from Telecity and Bit-isle
    • Assumes approximately $55.0 million of integration costs for acquisitions
  • AFFO
    • $1,040.0 million - $1,050 million, a 26% increase over the previous year
    • Includes the Q1 $63.5 million foreign currency loss related to the Telecity acquisition
    • Assumes approximately $55.0 million of integration costs for acquisitions

The Company 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.

The second quarter includes full quarterly results of Bit-isle and Telecity, which were acquired by the Company in November 2015 and January 2016, respectively. In addition, in order to obtain the approval of the European Commission for the acquisition of Telecity, the Company and Telecity agreed to divest certain data centers, including the Company's London 2 International Business Exchange™ (IBX®) in London, UK ("LD2") and certain Telecity data centers. The Company completed these divestitures on July 5, 2016. The quarterly financial results include results from LD2 in continuing operations; the data centers in Telecity that were divested are reported as discontinued operations.

Revenues from continuing operations were $900.5 million for the second quarter, a 7% increase over the previous quarter and a 35% increase over the same quarter last year. Results include $144.5 million of revenues from the acquisitions of Bit-isle and Telecity. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $851.8 million for the second quarter, a 7% increase over the previous quarter and a 36% increase over the same quarter last year.  Non-recurring revenues were $48.7 million in the quarter. MRR churn for the second quarter was 1.8% as compared to 2.2% in the previous quarter.

"The second quarter marked another strong performance for Equinix as we delivered both revenues and adjusted EBITDA above the top end of our guidance ranges, and as the company recorded its 54th quarter of consecutive revenue growth," said Steve Smith, president and CEO of Equinix.  "As digital transformation drives companies to evolve business models and operations, Equinix continues to serve as an important partner as reflected in our strong growth and market leadership position. During the quarter we made significant progress towards our goal of owning more of our real estate with the acquisition of two Paris data centers, and we commenced construction on DC12, our first data center build on our owned Ashburn North Campus. The Ashburn campus is the largest internet exchange point in North America, and this expansion will effectively double our owned capacity in this important market over the next few years."

Cost of revenues was $457.0 million for the second quarter, a 7% increase from the previous quarter and a 45% increase from the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $164.9 million for the quarter, which we refer to as cash cost of revenues, was $292.0 million for the quarter, an 8% increase over the previous quarter and a 43% increase over the same quarter last year.  Gross margins were 49%, unchanged from the prior quarter, as compared to 53% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, were 68% for the quarter, unchanged from the previous quarter, and 69% for the same quarter last year. 

Selling, general and administrative expenses were $276.3 million for the second quarter, a 1% increase over the previous quarter and a 38% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $88.1 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $188.2 million for the quarter, a 2% decrease from the previous quarter and a 26% increase over the same quarter last year. 

Interest expense was $100.3 million for the second quarter, a 1% decrease from the previous quarter, primarily attributed to prepayment of Brazil financings and maturity of the 4.75% convertible notes, and a 35% increase from the same quarter last year, primarily attributed to the interest associated with debt financings in November 2015 and other financings, such as various capital lease and other financing obligations related to the Bit-isle and Telecity acquisitions.

The Company recorded income tax expense from continuing operations of $13.8 million for the second quarter as compared to an income tax benefit of $10.6 million for the previous quarter and income tax expense from continuing operations of $7.5 million for the same quarter last year.  

Income from continuing operations was $151.7 million for the second quarter, a 35% increase from the previous quarter and a 9% increase over the same quarter last year.  Adjusted EBITDA, as defined below, for the second quarter was $420.3 million, a 10% increase over the previous quarter and a 35% increase over the same quarter last year. Adjusted EBITDA includes $64.0 million from the acquisitions of Bit-isle and Telecity.

Net income from continuing operations was $39.3 million for the second quarter. This represents a basic and diluted net income per share from continuing operations of $0.56 for the second quarter based on a weighted average basic and diluted share count of 69.7 million shares and 70.4 million shares, respectively. Net income from discontinued operations was $5.4 million for the second quarter. Basic and diluted net income per share from discontinued operations was $0.08 per share.

Adjusted funds from operations ("AFFO"), as defined below, were $290.5 million for the second quarter, a 38% increase from the previous quarter and a 31% increase over the same quarter last year. AFFO for the second quarter included $10.4 million of integration costs.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the second quarter, were $249.9 million, as compared to capital expenditures of $197.7 million for the previous quarter and $221.3 million for the same quarter last year.

The Company generated cash from operating activities of $278.8 million for the second quarter as compared to cash generated from operating activities of $104.3 million in the previous quarter. Cash used in investing activities was $252.9 million in the second quarter, as compared to cash used in investing activities of $1.3 billion in the previous quarter, primarily attributable to the Telecity acquisition. Cash used in financing activities was $169.9 million for the second quarter as compared to cash used in financing activities of $376.4 million in the previous quarter.

As of June 30, 2016, the Company's cash, cash equivalents and investments were $494.2 million, as compared to $2,246.3 million as of December 31, 2015. 

Business Outlook

The Company's guidance includes forecasted results for Telecity from January 15, 2016, Bit-isle for the full year of 2016 and incremental operating results relating to the Company's purchase of our two data centers, Paris 2 and Paris 3, from Digital Realty on August 1, 2016 for approximately $211.7 million.  As previously announced, the Company divested eight assets, seven from Telecity along with LD2, to obtain regulatory clearance for the transaction. The Company completed these divestitures on July 5, 2016 for approximately $827.2 million, which excludes the benefit attributed to our favorable hedge arrangement. The Company's guidance does not include the seven Telecity assets, which were treated as discontinued operations, but does assume six months, or $6.0 million in revenues, from LD2, which was under a different accounting treatment that required results to be reported as continuing operations until the sales were completed.

For the third quarter of 2016, the Company expects revenues to range between $915.0 and $921.0 million, or a normalized and constant currency growth rate of 2.4% quarter over quarter.  This guidance includes a negative foreign currency impact of $3.0 million when compared to the average FX rates in Q2 2016. Cash gross margins are expected to approximate 68%. Cash selling, general and administrative expenses are expected to range between $199.0 and $205.0 million.  Adjusted EBITDA is expected to range between $419.0 and $425.0 million, which includes a $1.6 million negative foreign currency impact when compared to the average FX rates in Q2 2016 and approximately $17.0 million in integration costs from the two acquisitions. Capital expenditures are expected to range between $270.0 and $290.0 million, which includes approximately $40.0 million of recurring capital expenditures and $230.0 to $250.0 million of non-recurring capital expenditures.

For the full year of 2016, total revenues are expected to range between $3,598.0 and $3,608.0 million, an organic and constant currency growth rate of 13.8% over year.  This guidance includes a positive foreign currency benefit of $1.5 million on revenues when compared to prior guidance rates, and includes an expected $550.0 to $560.0 million in revenues from the Bit-isle and Telecity acquisitions. Total year cash gross margins are expected to approximate 68%. Cash selling, general and administrative expenses are expected to range between $782.0 and $792.0 million. Adjusted EBITDA is expected to range between $1,658.0 and $1,668.0 million, or a year over year organic and constant currency growth rate of 16.8%.  This guidance includes $0.8 million of positive foreign currency benefit on adjusted EBITDA when compared to our prior guidance rates, and includes an expected $250.0 to $260.0 million in adjusted EBITDA from the Bit-isle and Telecity acquisitions, as well as approximately $55.0 million in integration costs related to these two acquisitions. AFFO is expected to range between $1,040.0 and $1,050 million, including approximately $55.0 million of integration costs and the $63.5 million Q1 foreign currency loss attributed to the Telecity acquisition.  Capital expenditures are expected to range from $950.0 to $1,000.0 million, including approximately $145.0 million of recurring capital expenditures and $805.0 to $855.0 million of non-recurring capital expenditures.  

The U.S. dollar exchange rates used for 2016 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.12 to the Euro, $1.43 to the Pound, S$1.35 to the U.S. dollar,  ¥101.0 to the U.S. dollar and R$3.327 to the U.S. dollar. The 2016 global revenue breakdown by currency for the Euro, Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 19%, 11%, 7%, 6% and 3%, respectively.

The guidance provided above is forward-looking and includes the impact of the Company's acquisition of Telecity, which closed on January 15, 2016.  The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses.  The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q2 Results Conference Call and Replay Information

The Company will discuss its quarterly results for the period ended June 30, 2016, along with its future outlook, in its quarterly conference call on Wednesday, August 3, 2016, at 5:30 p.m. ET (2:30 p.m. PT).  A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-210-234-8004 (domestic and international) and reference the passcode EQIX.   

A replay of the call will be available one hour after the call, through Friday, November 4, 2016, by dialing 1-203-369-1052 and referencing the passcode 2016.  In addition, the webcast will be available at www.equinix.com/investors.  No password is required for the webcast.

Investor Presentation and Supplemental Financial Information

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

Additional Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most interconnected data centers. In 40 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

The Company 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, the Company uses non-GAAP financial measures to evaluate its operations.

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, the Company excludes certain items that it believes are not good indicators of the Company's current or future operating performance. These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges, acquisition costs and gains on asset sales.  The Company excludes these items in order for its lenders, investors and the industry analysts who review and report on the Company to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitors.

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

In addition, in presenting the non-GAAP financial measures, the Company also excludes amortization expense related to intangible assets, as it is not meaningful in evaluating the Company's current or future operating performance; however, like depreciation, is an expense expected to recur in future periods. The Company 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 the Company also believes are not meaningful in evaluating the Company's current operations. The Company excludes stock-based compensation expense as it represents expense attributed to equity awards that have no current or future cash obligations.  As such, the Company, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. The Company excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges.  The Company 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. The Company also excludes gains on asset sales as it represents profit that is not meaningful in evaluating the current or future operating performance. Finally, the Company excludes acquisition costs from its non-GAAP financial measures.  The acquisition costs relate to costs the Company incurs in connection with business combinations.  Management believes items such as restructuring charges, impairment charges, acquisition costs and gains on asset sales are non-core transactions; however, these types of costs may occur in future periods.

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

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

The Company includes an adjustment for revenue from installation fees, since installation fees are deferred and recognized ratably over the expected life of the installation, although the fees are generally paid in a lump sum upon installation. The Company includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term.  The adjustments for both installation revenue and straight-line rent expense are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. The Company 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. The Company excludes gains (losses) on debt extinguishment since it represents a cost that is not a good indicator of the Company's current or future operating performance. The Company 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. The Company excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX centers or other assets that are required to support current revenues. The Company also excludes net income (loss) from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.

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. The Company 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. The Company believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze the Company effectively.

Investors should note that the non-GAAP financial measures used by the Company 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. The Company 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. The Company intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Forward Looking Statements

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

Equinix and IBX are registered trademarks of Equinix, Inc. International Business Exchange is a trademark of Equinix, Inc. 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)































Three Months Ended


Six Months Ended





June 30,


March 31,


June 30,


June 30,


June 30,





2016


2016


2015


2016


2015














Recurring revenues


$       851,771


$        797,094


$        626,691


$     1,648,865


$     1,236,348

Non-recurring revenues


48,739


47,062


38,891


95,801


72,408


Revenues


900,510


844,156


665,582


1,744,666


1,308,756














Cost of revenues


456,967


427,680


315,757


884,647


614,070



Gross profit


443,543


416,476


349,825


860,019


694,686














Operating expenses:












Sales and marketing

107,832


106,590


81,248


214,422


159,864


General and administrative

168,462


165,904


119,578


334,366


233,218


Acquisition costs

15,594


36,536


9,866


52,130


11,022


Gains on asset sales

-


(5,242)


-


(5,242)


-



Total operating expenses

291,888


303,788


210,692


595,676


404,104














Income from continuing operations

151,655


112,688


139,133


264,343


290,582














Interest and other income (expense):











Interest income


841


925


921


1,766


1,441


Interest expense

(100,332)


(100,863)


(74,496)


(201,195)


(143,287)


Other income (expense)

1,555


(60,710)


1,386


(59,155)


872


Loss on debt extinguishment 

(605)


-


-


(605)


-



Total interest and other, net

(98,541)


(160,648)


(72,189)


(259,189)


(140,974)














Income (loss) from continuing operations before income taxes

53,114


(47,960)


66,944


5,154


149,608















Income tax benefit (expense)

(13,812)


10,633


(7,485)


(3,179)


(13,697)














Net income (loss) from continuing operations

39,302


(37,327)


59,459


1,975


135,911















Net income from discontinued operations, net of tax

5,409


6,216


-


11,625


-














Net income (loss)


$        44,711


$         (31,111)


$          59,459


$          13,600


$        135,911














Net income (loss) per share:
























Basic net income (loss) per share from continuing operations

$            0.56


$            (0.55)


$             1.04


$             0.03


$             2.39


Basic net income per share from discontinued operations

0.08


0.09


-


0.17


-


Basic net income (loss) per share

$            0.64


$            (0.46)


$             1.04


$             0.20


$             2.39















Diluted net income (loss) per share from continuing operations

$            0.56


$            (0.55)


$             1.03


$             0.03


$             2.37


Diluted net income per share from discontinued operations

0.08


0.09


-


0.17


-


Diluted net income (loss) per share

$            0.64


$            (0.46)


$             1.03


$             0.20


$             2.37















Shares used in computing basic net income (loss) per share

69,729


68,132


56,935


68,931


56,798















Shares used in computing diluted net income (loss) per share

70,364


68,132


57,499


69,575


57,410

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)































Three Months Ended


Six Months Ended





June 30,


March 31,


June 30,


June 30,


June 30,





2016


2016


2015


2016


2015














Net income (loss)


$         44,711


$         (31,111)


$          59,459


$          13,600


$        135,911














Other comprehensive income (loss), net of tax:











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

(298,361)


115,899


69,443


(182,462)


(76,869)


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

1,199


(304)


17


895


120


 Unrealized gain (loss) on cash flow hedges 

14,726


(6,784)


(14,290)


7,942


(3,734)


 Net investment hedge CTA gain (loss) 

55,196


(16,312)


(10,389)


38,884


(10,389)


 Net actuarial gain on defined benefit plans 

8


6


83


14


142

 Other comprehensive income (loss), net of tax: 

(227,232)


92,505


44,864


(134,727)


(90,730)














 Comprehensive income (loss), net of tax 

(182,521)


61,394


104,323


(121,127)


45,181

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)








Assets

June 30,


 December 31, 





2016


2015








Cash and cash equivalents

$           483,160


$     2,228,838

Short-term investments

3,328


12,875

Accounts receivable, net

346,994


291,964

Current portion of restricted cash

3,411


479,417

Other current assets

233,870


212,929

Assets held for sale

1,024,666


33,257


Total current assets

2,095,429


3,259,280

Long-term investments

7,694


4,584

Property, plant and equipment, net

6,958,794


5,606,436

Goodwill



3,190,197


1,063,200

Intangible assets, net

788,955


224,565

Other assets


227,976


198,630


Total assets

$      13,269,045


$   10,356,695








Liabilities and Stockholders' Equity











Accounts payable and accrued expenses

$           498,212


$        400,948

Accrued property, plant and equipment

163,388


103,107

Current portion of capital lease and other financing obligations

92,611


40,121

Current portion of mortgage and loans payable

511,331


770,236

Convertible debt


-


146,121

Other current liabilities

142,113


192,286

Liabilities held for sale

152,124


3,535


Total current liabilities

1,559,779


1,656,354

Capital lease and other financing obligations, less current portion

1,514,804


1,287,139

Mortgage and loans payable, less current portion

1,074,663


472,769

Senior notes


3,807,816


3,804,634

Other liabilities


606,518


390,413


Total liabilities

8,563,580


7,611,309








Common stock


71


62

Additional paid-in capital

7,307,575


4,838,444

Treasury stock


(148,246)


(7,373)

Accumulated dividends

(1,715,533)


(1,468,472)

Accumulated other comprehensive loss

(643,786)


(509,059)

Accumulated deficit

(94,616)


(108,216)


Total stockholders' equity

4,705,465


2,745,386


Total liabilities and stockholders' equity

$      13,269,045


$   10,356,695






















Ending headcount by geographic region is as follows:










Americas headcount

2,408


2,329


EMEA headcount

2,088


1,188


Asia-Pacific headcount

1,311


1,525



Total headcount

5,807


5,042

 

EQUINIX, INC.

SUMMARY OF DEBT PRINCIPAL OUTSTANDING

(in thousands)

(unaudited)












June 30,


December 31,





2016


2015








Capital lease and other financing obligations

$                     1,607,415


$                         1,327,260








Term loan, net of debt discount and debt issuance costs

1,071,853


454,503

Brazil financings, net of debt issuance costs

2,841


26,668

Mortgage payable and other loans payable

511,300


436,212

Revolving credit facility borrowings

-


325,622

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

12,651


694


Total mortgage and loans payable principal

1,598,645


1,243,699








Senior notes, net of debt issuance costs

3,807,816


3,804,634

Plus: debt issuance costs

42,184


45,366


Total senior notes principal

3,850,000


3,850,000








Convertible debt, net of debt discount and debt issuance costs

-


146,121

Plus: debt discount and debt issuance costs

-


3,961


Total convertible debt principal

-


150,082








Total debt principal outstanding

$                     7,056,060


$                         6,571,041

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)




















Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,


June 30,


June 30,






2016


2016


2015


2016


2015















Cash flows from operating activities:











Net income (loss)

$               44,711


$         (31,111)


$          59,459


$          13,600


$        135,911


Adjustments to reconcile net income (loss) to net cash











provided by operating activities:












Depreciation, amortization and accretion

213,719


202,153


128,270


415,872


250,800



Stock-based compensation

39,323


34,061


33,993


73,384


64,606



Amortization of debt issuance costs and debt discounts

5,517


5,508


3,811


11,025


7,585



Loss on debt extinguishment 

318


-


-


318


-



Gains on asset sales

-


(5,242)


-


(5,242)


-



Other items

7,311


4,871


4,946


12,182


9,108



Changes in operating assets and liabilities:













Accounts receivable

(31,055)


(11,312)


(10,991)


(42,367)


(41,782)




Income taxes, net

4,901


(28,656)


(53,592)


(23,755)


(66,147)




Accounts payable and accrued expenses

29,592


(40,217)


19,600


(10,625)


49,293




Other assets and liabilities

(35,509)


(25,785)


26,967


(61,294)


35,900





Net cash provided by operating activities

278,828


104,270


212,463


383,098


445,274

Cash flows from investing activities:











Purchases, sales and maturities of investments, net

8,764


3,419


433,966


12,183


429,260


Business acquisitions, net of cash acquired

-


(1,601,627)


-


(1,601,627)


(10,247)


Purchases of real estate

(11,710)


(16,408)


-


(28,118)


(38,282)


Purchases of other property, plant and equipment

(249,867)


(197,700)


(221,342)


(447,567)


(371,462)


Proceeds from asset sales

-


22,825


-


22,825


-


Other investing activities

(117)


466,704


(511,166)


466,587


(507,645)





Net cash used in investing activities

(252,930)


(1,322,787)


(298,542)


(1,575,717)


(498,376)

Cash flows from financing activities:











Proceeds from employee equity awards

1,335


16,304


181


17,639


16,565


Payment of dividend distributions

(121,858)


(124,836)


(96,349)


(246,694)


(192,968)


Proceeds from loans payable

-


701,250


490,000


701,250


490,000


Repayment of capital lease and other financing obligations

(12,103)


(33,232)


(8,342)


(45,335)


(13,638)


Repayment of mortgage and loans payable

(36,758)


(936,353)


(505,268)


(973,111)


(518,629)


Other financing activities

(541)


499


216


(42)


314





Net cash used in financing activities

(169,925)


(376,368)


(119,562)


(546,293)


(218,356)

Effect of foreign currency exchange rates on cash and cash equivalents

18,540


(195)


5,065


18,345


(3,326)

Change in cash balances included in assets held for sale

(25,111)


-


-


(25,111)


-

Net increase (decrease) in cash and cash equivalents

(150,598)


(1,595,080)


(200,576)


(1,745,678)


(274,784)

Cash and cash equivalents at beginning of period

633,758


2,228,838


536,709


2,228,838


610,917

Cash and cash equivalents at end of period

$              483,160


$        633,758


$        336,133


$        483,160


$        336,133
















Supplemental cash flow information:












Cash paid for taxes

$               12,361


$          19,215


$          60,266


$          31,576


$          74,804



Cash paid for interest

$               85,897


$          74,540


$          71,823


$        160,437


$          95,799















Free cash flow (1)

$               17,134


$    (1,221,936)


$       (520,045)


$    (1,204,802)


$       (482,362)















Adjusted free cash flow (2)

$               28,280


$        396,663


$       (474,162)


$        424,943


$       (386,496)





























(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

$              278,828


$        104,270


$        212,463


$        383,098


$        445,274


Net cash used in investing activities as presented above

(252,930)


(1,322,787)


(298,542)


(1,575,717)


(498,376)


Purchases, sales and maturities of investments, net

(8,764)


(3,419)


(433,966)


(12,183)


(429,260)



Free cash flow (negative free cash flow)

$               17,134


$    (1,221,936)


$       (520,045)


$    (1,204,802)


$       (482,362)















(2)

We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate, acquisitions, any excess tax benefits from employee equity awards, cash paid for taxes associated with reclassifying our assets for tax purposes triggered by our conversion into a real estate investment trust ("REIT") and costs related to the REIT conversion, as presented below:
















Free cash flow (as defined above)

$               17,134


$    (1,221,936)


$       (520,045)


$    (1,204,802)


$       (482,362)


Less business acquisitions, net of cash

-


1,601,627


-


1,601,627


10,247


Less purchases of real estate

11,710


16,408


-


28,118


38,282


Less excess tax benefits from employee equity awards

(564)


564


223


-


931


Less cash paid for taxes resulting from the REIT conversion 

-


-


45,113


-


45,113


Less costs related to the REIT conversion

-


-


547


-


1,293



Adjusted free cash flow

$               28,280


$        396,663


$       (474,162)


$        424,943


$       (386,496)






























We categorize our cash paid for taxes into cash paid for taxes resulting from the REIT conversion (as defined above) and other cash taxes paid.
















Cash paid for taxes resulting from the REIT conversion

$                         -


$                    -


$          45,113


$                     -


$           45,113


Other cash taxes paid

12,361


19,215


15,153


31,576


29,691



Total cash paid for taxes

$               12,361


$          19,215


$          60,266


$          31,576


$          74,804

 

EQUINIX, INC.

NON-GAAP MEASURES AND OTHER SUPPLEMENTAL DATA

(in thousands)

(unaudited)































Three Months Ended


Six Months Ended





June 30,


March 31,


June 30,


June 30,


June 30,





2016


2016


2015


2016


2015














Recurring revenues



$        851,771


$        797,094


$        626,691


$     1,648,865


$  1,236,348

Non-recurring revenues


48,739


47,062


38,891


95,801


72,408


Revenues (1)


900,510


844,156


665,582


1,744,666


1,308,756














Cash cost of revenues (2)

292,033


271,100


204,736


563,133


396,866


Cash gross profit (3)

608,477


573,056


460,846


1,181,533


911,890














Cash operating expenses (4):











Cash sales and marketing expenses (5)

78,071


79,692


65,058


157,763


128,878


Cash general and administrative expenses (6)

110,115


112,714


84,526


222,829


166,002



Total cash operating expenses (7)

188,186


192,406


149,584


380,592


294,880














Adjusted EBITDA (8)


$        420,291


$        380,650


$        311,262


$        800,941


$     617,010














Cash gross margins (9)

68%


68%


69%


68%


70%














Adjusted EBITDA margins (10)

47%


45%


47%


46%


47%














Adjusted EBITDA flow-through rate (11)

70%


42%


25%


45%


77%














FFO (12)



$        201,515


$        115,875


$        167,368


$        317,390


$     346,558














AFFO (13) (14)


$        290,529


$        209,846


$        221,388


$        500,375


$     443,144








































(1)

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















Americas Revenues:
























Colocation


$        289,578


$        282,321


$        262,934


$        571,899


$     520,866


Interconnection

89,860


85,936


77,102


175,796


152,188


Managed infrastructure

13,255


11,170


12,837


24,425


26,132


Other



786


729


732


1,515


1,473



Recurring revenues

393,479


380,156


353,605


773,635


700,659


Non-recurring revenues

19,992


24,238


17,842


44,230


34,757



Revenues

413,471


404,394


371,447


817,865


735,416















EMEA Revenues:
























Colocation


240,421


214,178


139,482


454,599


272,217


Interconnection

22,425


19,700


13,440


42,125


26,488


Managed infrastructure

15,391


18,560


5,919


33,951


11,702


Other



3,573


943


1,222


4,516


3,080



Recurring revenues

281,810


253,381


160,063


535,191


313,487


Non-recurring revenues

18,799


14,475


13,904


33,274


25,103



Revenues

300,609


267,856


173,967


568,465


338,590















Asia-Pacific Revenues:
























Colocation


132,670


123,394


94,194


256,064


185,072


Interconnection

23,436


21,569


14,119


45,005


27,643


Managed infrastructure

16,597


15,006


4,710


31,603


9,487


Other



3,779


3,588


-


7,367


-



Recurring revenues

176,482


163,557


113,023


340,039


222,202


Non-recurring revenues

9,948


8,349


7,145


18,297


12,548



Revenues

186,430


171,906


120,168


358,336


234,750















Worldwide Revenues:
























Colocation


662,669


619,893


496,610


1,282,562


978,155


Interconnection

135,721


127,205


104,661


262,926


206,319


Managed infrastructure

45,243


44,736


23,466


89,979


47,321


Other



8,138


5,260


1,954


13,398


4,553



Recurring revenues

851,771


797,094


626,691


1,648,865


1,236,348


Non-recurring revenues

48,739


47,062


38,891


95,801


72,408



Revenues

$        900,510


$        844,156


$        665,582


$     1,744,666


$  1,308,756



























(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

$        456,967


$        427,680


$        315,757


$        884,647


$     614,070


Depreciation, amortization and accretion expense

(161,493)


(153,583)


(108,470)


(315,076)


(212,347)


Stock-based compensation expense

(3,441)


(2,997)


(2,551)


(6,438)


(4,857)



Cash cost of revenues

$        292,033


$        271,100


$        204,736


$        563,133


$     396,866















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
























Americas cash cost of revenues

$        109,296


$        109,020


$        102,249


$        218,316


$     197,411


EMEA cash cost of revenues

114,950


101,509


62,431


216,459


120,925


Asia-Pacific cash cost of revenues

67,787


60,571


40,056


128,358


78,530



Cash cost of revenues

$        292,033


$        271,100


$        204,736


$        563,133


$     396,866














(3)

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














(4)

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














(5)

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















Sales and marketing expenses

$        107,832


$        106,590


$          81,248


$        214,422


$     159,864


Depreciation and amortization expense

(19,047)


(17,127)


(6,268)


(36,174)


(12,353)


Stock-based compensation expense

(10,714)


(9,771)


(9,922)


(20,485)


(18,633)



Cash sales and marketing expenses

$          78,071


$          79,692


$          65,058


$        157,763


$     128,878














(6)

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















General and administrative expenses

$        168,462


$        165,904


$        119,578


$        334,366


$     233,218


Depreciation and amortization expense

(33,179)


(31,443)


(13,532)


(64,622)


(26,100)


Stock-based compensation expense

(25,168)


(21,747)


(21,520)


(46,915)


(41,116)



Cash general and administrative expenses

$        110,115


$        112,714


$          84,526


$        222,829


$     166,002














(7)

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















Cash sales and marketing expenses

$          78,071


$          79,692


$          65,058


$        157,763


$     128,878


Cash general and administrative expenses

110,115


112,714


84,526


222,829


166,002



Cash SG&A

$        188,186


$        192,406


$        149,584


$        380,592


$     294,880















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
























Americas cash SG&A

$        109,147


$        110,914


$          98,312


$        220,061


$     194,385


EMEA cash SG&A

52,204


54,858


32,003


107,062


62,101


Asia-Pacific cash SG&A

26,835


26,634


19,269


53,469


38,394



Cash SG&A

$        188,186


$        192,406


$        149,584


$        380,592


$     294,880














(8)

We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion, stock-based compensation expense, acquisition costs and gains on asset sales as presented below:















Income from continuing operations

$        151,655


$        112,688


$        139,133


$        264,343


$     290,582


Depreciation, amortization and accretion expense

213,719


202,153


128,270


415,872


250,800


Stock-based compensation expense

39,323


34,515


33,993


73,838


64,606


Acquisition costs

15,594


36,536


9,866


52,130


11,022


Gains on asset sales

-


(5,242)


-


(5,242)


-



Adjusted EBITDA

$        420,291


$        380,650


$        311,262


$        800,941


$     617,010















The geographic split of our adjusted EBITDA is presented below:
























Americas income from continuing operations

$          87,100


$          88,539


$          77,653


$        175,639


$     159,119


Americas depreciation, amortization and accretion expense

78,874


76,720


68,692


155,594


135,503


Americas stock-based compensation expense

27,790


24,329


25,883


52,119


49,374


Americas acquisition costs

1,264


114


(1,342)


1,378


(376)


Americas gains on asset sales

-


(5,242)


-


(5,242)


-



Americas adjusted EBITDA

195,028


184,460


170,886


379,488


343,620















EMEA income from continuing operations

29,096


(7,419)


36,110


21,677


81,651


EMEA depreciation, amortization and accretion expense

82,929


76,488


27,826


159,417


54,519


EMEA stock-based compensation expense

7,060


6,235


4,397


13,295


8,004


EMEA acquisition costs

14,370


36,185


11,200


50,555


11,390



EMEA adjusted EBITDA

133,455


111,489


79,533


244,944


155,564















Asia-Pacific income from continuing operations

35,459


31,568


25,370


67,027


49,812


Asia-Pacific depreciation, amortization and accretion expense

51,916


48,945


31,752


100,861


60,778


Asia-Pacific stock-based compensation expense

4,473


3,951


3,713


8,424


7,228


Asia-Pacific acquisition costs

(40)


237


8


197


8



Asia-Pacific adjusted EBITDA

91,808


84,701


60,843


176,509


117,826
















Adjusted EBITDA

$        420,291


$        380,650


$        311,262


$        800,941


$     617,010














(9)

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















Our cash gross margins by geographic region is presented below:
























Americas cash gross margins

74%


73%


72%


73%


73%















EMEA cash gross margins

62%


62%


64%


62%


64%















Asia-Pacific cash gross margins

64%


65%


67%


64%


67%














(10)

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















Americas adjusted EBITDA margins

47%


46%


46%


46%


47%















EMEA adjusted EBITDA margins

44%


42%


46%


43%


46%















Asia-Pacific adjusted EBITDA margins

49%


49%


51%


49%


50%














(11)

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















Adjusted EBITDA - current period

$        420,291


$        380,650


$        311,262


$        800,941


$     617,010


Less adjusted EBITDA - prior period

(380,650)


(333,145)


(305,748)


(654,617)


(578,226)



Adjusted EBITDA growth

$          39,641


$          47,505


$            5,514


$        146,324


$       38,784















Revenues - current period

$        900,510


$        844,156


$        665,582


$     1,744,666


$  1,308,756


Less revenues - prior period

(844,156)


(730,462)


(643,174)


(1,417,111)


(1,258,562)



Revenue growth

$          56,354


$        113,694


$          22,408


$        327,555


$       50,194















Adjusted EBITDA flow-through rate

70%


42%


25%


45%


77%



























(12)

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















Net income (loss)

$          44,711


$         (31,111)


$          59,459


$          13,600


$     135,911


Adjustments:













Real estate depreciation and amortization

158,727


150,995


107,321


309,722


209,969



Gain/loss on disposition of real estate property

(1,951)


(4,037)


559


(5,988)


621



Adjustments for FFO from unconsolidated joint ventures

28


28


29


56


57



FFO 

$        201,515


$        115,875


$        167,368


$        317,390


$     346,558



























(13)

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















FFO 



$        201,515


$        115,875


$        167,368


$        317,390


$     346,558


Adjustments:













Installation revenue adjustment

7,407


3,354


12,474


10,761


21,128



Straight-line rent expense adjustment

1,895


1,133


2,017


3,028


5,218



Amortization of deferred financing costs

5,243


5,508


3,848


10,751


7,706



Stock-based compensation expense

39,323


34,515


33,993


73,838


64,606



Non-real estate depreciation expense

21,021


21,387


13,605


42,408


26,298



Amortization expense

32,303


28,152


6,450


60,455


12,745



Accretion expense

1,668


1,619


894


3,287


1,788



Recurring capital expenditures

(31,928)


(31,815)


(27,330)


(63,743)


(49,703)



Loss on debt extinguishment

605


-


-


605


-



Acquisition costs

15,594


36,536


9,866


52,130


11,022



Income tax expense adjustment

1,301


(190)


(1,784)


1,111


(4,192)



Net Income from discontinued operations, net of tax

(5,409)


(6,216)


(13)


(11,625)


(30)



Adjustments for AFFO from unconsolidated joint ventures

(9)


(12)


-


(21)


-



AFFO

$        290,529


$        209,846


$        221,388


$        500,375


$     443,144














(14)

Following is how we reconcile from adjusted EBITDA to AFFO:















Adjusted EBITDA

$        420,291


$        380,650


$        311,262


$        800,941


$     617,010


Adjustments:













Interest expense, net of interest income

(99,491)


(99,938)


(73,575)


(199,429)


(141,846)



Amortization of deferred financing costs

5,243


5,508


3,848


10,751


7,706



Income tax (benefit) expense

(13,812)


10,633


(7,485)


(3,179)


(13,697)



Income tax expense adjustment

1,301


(190)


(1,784)


1,111


(4,192)



Straight-line rent expense adjustment

1,895


1,133


2,017


3,028


5,218



Installation revenue adjustment

7,407


3,354


12,474


10,761


21,128



Recurring capital expenditures

(31,928)


(31,815)


(27,330)


(63,743)


(49,703)



Other (income)/expense

1,555


(60,710)


1,386


(59,155)


872



Gain/loss on disposition of depreciable real estate property

(1,951)


(4,037)


559


(5,988)


621



Adjustments for unconsolidated JVs' and non-controlling interests

19


16


16


35


27



Adjustment for gain on sale of asset

-


5,242


-


5,242


-



AFFO

$        290,529


$        209,846


$        221,388


$        500,375


$     443,144

 

SOURCE Equinix, Inc.

helle Lindeman, Equinix, Inc., (650) 598-6361, mlindeman@equinix.com