Equinix Reports First Quarter 2018 Results

REDWOOD CITY, Calif., May 2, 2018 /PRNewswire/ --

• Quarterly revenues increased 28% year-over-year to $1.216 billion; a 10% year-over-year increase on a normalized and constant currency basis
• New expansions announced in the Amsterdam, Tokyo and Zurich metros totaling more than $160 million of capital expenditures
• Key customer wins and expansions included Alibaba, Dropbox and InterContinental Hotels Group

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended March 31, 2018. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements.

First Quarter 2018 Results Summary

• Revenues
• $1.216 billion, a 1% increase over the previous quarter
• Operating Income
• $226 million, a 3% decrease from the previous quarter
• Adjusted EBITDA
• $580 million, a 48% adjusted EBITDA margin
• Includes $6 million of integration costs
• Net Income
• $63 million
• AFFO
• $415 million, a 9% increase over the previous quarter
• Includes $6 million of integration costs

2018 Annual Guidance Summary

• Revenues
• $5.082 - $5.122 billion, a 17% increase over the previous year; a normalized and constant currency increase of 9% including the Verizon assets acquisition
• Adjusted EBITDA
• $2.395 - $2.435 billion or a 47% adjusted EBITDA margin
• Assumes $50 million of integration costs for acquisitions
• AFFO
• $1.595 - $1.635 billion, a 12% increase over the previous year
• Assumes $50 million of integration costs and $50 million of additional debt service costs related to acquisitions including Infomart Dallas and Metronode

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:

"As Equinix approaches its 20^th anniversary, we are excited to post our 61^st quarter of consecutive revenue growth, which is reflective of the critical role we serve in helping businesses interconnect their IT infrastructure to succeed in the digital economy. Equinix currently serves nearly half of the Fortune 500 and our recent acquisitions, combined with our currently announced organic expansions, have positioned Equinix to capture an even greater share of the market opportunity."

Business Highlights

• Equinix continues to invest in building out its global platform, reflecting strong customer demand and a high level of inventory utilization. With 30 organic expansion projects currently underway, Equinix also completed Q1 builds in the Chicago, Osaka and Paris metros. Today, Equinix announced new expansions in the Amsterdam, Tokyo and Zurich metros totaling more than $160 million of additional capital expenditures.
• Last month, Equinix closed its 21^st and 22^nd acquisitions — the Infomart Building^TM in Dallas and Metronode in Australia — to expand the reach of Platform Equinix^® to 200 International Business Exchange^TM (IBX^®) data centers across 52 markets globally, and increasing Equinix's percentage of revenue from owned assets to over 45%.
• The Infomart Building is one of the most-interconnected hubs in North America and is home to four of the eight Dallas area Equinix IBX data centers. The addition of this landmark facility strengthens interconnection density, creates new opportunities to grow in targeted verticals, and provides the ability to expand on adjacent land on the property.
• The addition of Metronode's 10 data centers and customers to Platform Equinix establishes Equinix as the market leader in Australia, with 15 IBX data centers to accelerate interconnection and digital edge deployments nationwide. The acquisition provides a stronger presence in existing metros and a wider footprint in four new metros (Adelaide, Brisbane, Canberra and Perth). Metronode's site in Perth, which will become the landing station for the new Vocus Australia Singapore Cable, positions Equinix as a leading hub for intercontinental connectivity, and builds on existing subsea traction in Sydney.
• In addition to global expansion initiatives, Equinix progressed its platform vision to add new products and services that deliver increasing value to companies by easing their shift to cloud-centric and digital architectures. In Q1, Equinix launched Equinix SmartKey ^TM, a global key management and encryption Software as a Service (SaaS) offering that simplifies data protection across any cloud or destination, by hosting encryption keys separate from, but in close proximity to, the data located across networks and hybrid multicloud environments. When implemented as part of an Interconnection Oriented Architecture^® (IOA^®) strategy, SmartKey enables companies to achieve a globally consistent end-to-end encryption strategy with central control over access, latency, compliance and performance.
• The enterprise vertical continued to be the fastest growing segment in Q1 with growth across the healthcare, legal and travel sub-verticals. New Fortune 500 customer wins included a global beauty company deploying distributed data management for global workforce and regulatory compliance, and a large health insurance provider utilizing Platform Equinix for cloud connectivity and data management. Additional wins and expansions in Q1 included Alibaba, Dropbox and InterContinental Hotels Group, which is leveraging Platform Equinix to connect to ecosystem partners in key metros.
• Interconnection revenues in Q1 grew 32% year-over-year and 16% year-over-year on a normalized and constant currency basis. This represents the fastest growing revenue segment and is significantly outpacing colocation revenues, reflecting the movement towards Interconnection Oriented Architectures and the rapid adoption of hybrid multicloud as the preferred IT deployment model. Cross connects between customers increased to 283,000, and the enhanced Equinix Cloud Exchange Fabric ^TM (ECX Fabric^TM) and its software-defined global connectivity is offering customers even more options for transforming their digital businesses through Platform Equinix.

Business Outlook

For the second quarter of 2018, the Company expects revenues to range between $1.257 and $1.267 billion, an increase of 4% quarter-over-quarter, or a normalized and constant currency growth rate of approximately 2%. This guidance includes an incremental $18 million from the Infomart and Metronode acquisitions and a positive foreign currency benefit of $2 million when compared to the average FX rates in Q1 2018. Adjusted EBITDA is expected to range between $579 and $589 million, which includes the Infomart and Metronode acquisitions, a $3 million positive foreign currency benefit when compared to the average FX rates in Q1 2018 and $20 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $42 and $52 million.

For the full year of 2018, total revenues are expected to range between $5.082 and $5.122 billion, an increase of 17% year-over-year, or a normalized and constant currency growth rate of approximately 9% including the Verizon assets acquisition. This updated guidance includes an incremental $92 million, due to a combination of $62 million from the Infomart and Metronode acquisitions, a positive foreign currency benefit of $35 million when compared to prior Equinix guidance rates and other accounting and Verizon-related adjustments. Adjusted EBITDA is expected to range between $2.395 and $2.435 billion, an increase of 18% year-over-year. This updated guidance includes an incremental $45 million, excluding integration costs, due to a combination of $33 million from the Infomart and Metronode acquisitions, a positive foreign currency benefit of $12 million when compared to prior Equinix guidance rates and other accounting and Verizon-related adjustments. This guidance includes an expected $50 million in integration costs. AFFO is expected to range between $1.595 and $1.635 billion, an increase of 12% year-over-year. This updated guidance includes an incremental $40 million from the Infomart and Metronode acquisitions and a $10 million positive foreign currency benefit when compared to prior Equinix guidance rates. Also, AFFO includes $50 million of additional debt service costs related to our recent acquisitions, as well as an expected $50 million in integration costs. Non-recurring capital expenditures are expected to range between $1.8 and $1.9 billion, and recurring capital expenditures are expected to range between $203 and $213 million.

The U.S. dollar exchange rates used for 2018 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.16 to the Euro, $1.35 to the Pound, ¥106 to the U.S. dollar, S$1.31 to the U.S. dollar, and R$3.30 to the U.S. dollar. The Q1 2018 global revenue breakdown by currency for the Euro, British Pound, Japanese Yen, Singapore Dollar, and Brazilian Real is 20%, 9%, 6%, 6% 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.

Q1 2018 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended March 31, 2018, along with its future outlook, in its quarterly conference call on Wednesday, May 2, 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, August 8, 2018, by dialing 1-402-220-4189 and referencing the passcode 2018. In addition, the webcast will be available at www.equinix.com/investors (no password required).

Investor Presentation and Supplemental Financial Information

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

Additional Resources

• Equinix Investor Relations 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 52 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies.

Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

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

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

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

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX data centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix including the Infomart and Metronode; 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.

 

 

 

 

 

 

 

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SOURCE Equinix, Inc.