Equinix Reports Third Quarter 2020 Results

REDWOOD CITY, Calif., Oct. 28, 2020 /PRNewswire/ --

• Quarterly revenues increased 9% on both an as-reported and a normalized and constant currency basis over the same quarter last year to $1.520 billion, representing the company's 71^st consecutive quarter of revenue growth
• Initiated $1.85 billion debt capital raise including the company's inaugural green bonds totaling $1.35 billion to further invest in its sustainability initiatives
• Expanded Platform Equinix^® with the launch of Equinix Metal™, a fully automated and interconnected bare metal service

Equinix, Inc. (Nasdaq: EQIX), the world's digital infrastructure company, today reported results for the quarter ended September 30, 2020. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements. All per share results are presented on a fully diluted basis.

Third Quarter 2020 Results Summary

• Revenues
• $1.520 billion, a 3% increase over the previous quarter
• Includes a $13 million foreign currency benefit when compared to prior guidance rates
• Operating Income
• $288 million, a 2% increase over the previous quarter and an operating margin of 19%
• Adjusted EBITDA
• $737 million, a 49% adjusted EBITDA margin
• Includes a $6 million foreign currency benefit when compared to prior guidance rates
• Includes $6 million of integration costs
• Net Income and Net Income per Share attributable to Equinix
• $67 million, a 50% decrease from the previous quarter, largely due to the $93 million loss on debt extinguishment charge, related to the company's $2.6 billion debt refinancing completed in July
• $0.74 per share, a 51% decrease from the previous quarter
• AFFO and AFFO per Share
• $580 million, a 4% increase over the previous quarter, due to strong operating performance and a decrease in net interest expense
• $6.48 per share, a 2% increase over the previous quarter
• Includes $6 million of integration costs

2020 Annual Guidance Summary

• Revenues
• $5.983 - $6.003 billion, an ~8% increase over the previous year on both an as-reported and a normalized and constant currency basis
• An increase of $39 million compared to prior guidance, including a $25 million foreign currency benefit when compared to the prior guidance FX rates
• Adjusted EBITDA
• $2.827 - $2.847 billion, a 47% adjusted EBITDA margin
• An increase of $21 million compared to prior guidance, including an $11 million foreign currency benefit when compared to the prior guidance FX rates
• Assumes $20 million of integration costs
• AFFO and AFFO per Share
• $2.157 - $2.177 billion, an increase of 12 - 13% over the previous year, or a normalized and constant currency increase of 16 - 17%
• An increase of $25 million compared to prior guidance, including an $8 million foreign currency benefit
• $24.38 - $24.61 per share, an increase of 7 - 8% over the previous year, or a normalized and constant currency increase of 10 - 11%
• Assumes $20 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.

Equinix Quote

Charles Meyers, President and CEO, Equinix:

"As businesses navigate the economic, health and societal changes happening in the world, Equinix is in a unique position to help our customers adapt, respond and accelerate their digital transformation – a key driver for economic recovery. Companies in every sector are embracing digital transformation as a critical business priority, and we are well-positioned to help our customers scale with agility and create digital advantage. We continue to invest in our strategy, evolving our platform in response to evolving customer needs, expanding our global reach to accelerate digital delivery, committing to a more sustainable future and ensuring that our culture is widely recognized as a place that attracts, embraces, inspires and develops exceptional and diverse talent."

Business Highlights

• Today, Equinix has the most comprehensive global interconnection platform, comprising over 386,000 physical and virtual interconnections. In Q3, Equinix added 8,500 net interconnections, more than its next 15 competitors combined, driven by video conferencing, streaming, enterprise cloud connectivity and work-from-home local aggregation. Equinix Internet Exchange™ experienced peak traffic, up 43% year-over-year, with a 7% increase quarter-over-quarter. Equinix Cloud Exchange Fabric®, which has been renamed Equinix Fabric™, also had a strong quarter, crossing the $100 million annual run rate, with broad-based adoption across all verticals driven by virtual connections and increasing bandwidth consumption.
• Equinix continued to complement and extend its global platform both organically and through acquisitions, enhancing cloud and network density to offer enterprises options for digital transformation:
• On August 10 , Equinix announced its entry into India, one of the world's largest economies and fastest-growing data center markets and the 27^th country served by Platform Equinix^®. Upon close, the GPX India acquisition will add two highly interconnected data centers in Mumbai to support the company's pan-Indian expansion.
• On October 1 , Equinix closed the acquisition of 12 Bell Canada data centers, positioning the company as a leading digital infrastructure provider in Canada, while strengthening relationships with Canadian enterprises. Equinix expects to acquire Bell Canada's Ottawa data center (OT1) in the fourth quarter of 2020.
• On October 6 , Equinix launched Equinix Metal ™, a fully automated and interconnected bare metal service. Equinix Metal provides digital businesses with an automated, "as-a-service" deployment method to build their foundational infrastructure and take advantage of the global reach, interconnected ecosystems and trusted partners available on Platform Equinix ^®. Featuring native integration with Equinix Fabric™, Equinix Metal provides companies the option to deploy the physical infrastructure of their choice, at software speed across our platform, enabling digital leaders to place infrastructure where they need it, when they need it.
• In Q3, Equinix initiated its first green bon d financing as a mechanism to further invest in innovative designs and technologies, while increasing the company's efficiency in sustainable operations. The debt financing closed in October 2020. Equinix also received the 2020 Green Power Partner Award from the U.S. EPA, recognizing the company's contribution to helping advance the development of the nation's green power market, and its commitment to reach 100% clean and renewable energy across its portfolio.
• Equinix continues the growth of its indirect selling initiatives, as the company pursues high-value strategic channel partnerships. In Q3, Equinix delivered strong channel bookings, accounting for more than 30% of its total bookings and generating 60% of all new logos. New channel wins this quarter spanned across a wide range of industry segments with reseller and alliance partners, including Cisco, Microsoft, Oracle, WWT and Zenlayer.

COVID-19 Update

Many of the Company's IBX^® data centers have been identified as "essential businesses" or "critical infrastructure" by local governments for purposes of remaining open during the COVID-19 pandemic, and all IBX data centers remain operational at the time of filing of this press release. Precautionary measures have been implemented to minimize the risk of operational impact and to protect the health and safety of employees, customers, partners and communities. These include implementing tools such as an appointment-based system to control timing and frequency of visits, while also encouraging customers to leverage IBX technicians via Smart Hands^® in order to restrict visits and minimize the number of people and the amount of time spent in the Company's IBX facilities. For the health and safety of Equinix employees, the Company's corporate offices were closed in March and non-IBX employees across the globe were instructed to work from home until further notice. A phased plan has been announced for a return-to-office for non-IBX attached sites, and the Company has been following this plan to open certain offices with occupancy limits as local conditions allow. Additionally, the Company has decided to continue to limit employee travel and has made the decision to either postpone or virtualize all global events through January 2021.

Looking ahead, the full impact of the COVID-19 pandemic on the Company's financial condition or results of operations remains uncertain and will depend on a number of factors, including its impact on Equinix customers, partners and vendors and the impact on, and functioning of, the global financial markets. The Company's past results may not be indicative of future performance, and historical trends may differ materially. Additional information pertaining to the impact of COVID-19 on Equinix and the Company's response thereto will be provided in the upcoming Form 10-Q for the quarter ended September 30, 2020.

Business Outlook

For the fourth quarter of 2020, the Company expects revenues to range between $1.549 and $1.569 billion, an increase of 2 - 3% quarter-over-quarter, or a normalized and constant currency increase of approximately 1 - 2%. This guidance includes a $4 million negative foreign currency impact when compared to the average foreign currency ("FX") rates in Q3 2020. Adjusted EBITDA is expected to range between $685 and $705 million, including higher repairs and maintenance and utilities expenses and certain COVID-19-related one-off costs. Adjusted EBITDA includes a $2 million negative foreign currency impact when compared to the average FX rates in Q3 2020 and $10 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $69 and $79 million.

For the full year of 2020, total revenues are expected to range between $5.983 and $6.003 billion, an 8% increase over the previous year on both an as-reported and a normalized and constant currency basis. This updated revenue guidance includes an incremental $39 million, due to a combination of $25 million from the acquisition of the Bell Canada data centers (excluding OT1) and a foreign currency benefit of $25 million when compared to the prior guidance FX rates offset in part by Packet revenues being slightly below our prior range and the deferred timing of Equinix custom order work. Adjusted EBITDA is expected to range between $2.827 and $2.847 billion, an adjusted EBITDA margin of 47% at the mid-point. This updated adjusted EBITDA guidance includes an incremental $21 million, due to a combination of $10 million from the acquisition of the Bell Canada data centers (excluding OT1) and a foreign currency benefit of $11 million when compared to the prior guidance FX rates. For the year, the company expects to incur $20 million in integration costs related to acquisitions. AFFO is expected to range between $2.157 and $2.177 billion, an increase of 12 - 13% over the previous year, or a normalized and constant currency increase of 16 - 17%. This updated AFFO guidance includes an incremental $25 million, due to a combination of the acquisition of the Bell Canada data centers (excluding OT1), lower net interest expenses and a foreign currency benefit of $8 million when compared to the prior guidance FX rates. AFFO per share is expected to range between $24.38 and $24.61, an increase of 7 - 8% over the previous year, or a normalized and constant currency increase of 10 - 11%. Non-recurring capital expenditures are expected to range between $2.045 and $2.235 billion, and recurring capital expenditures are expected to range between $155 and $165 million.

The U.S. dollar exchange rates used for 2020 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.14 to the Euro, $1.28 to the Pound, S$1.36 to the U.S. dollar, ¥105 to the U.S. dollar, and R$5.62 to the U.S. dollar. The Q3 2020 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 21%, 9%, 7%, 6% and 2%, respectively.

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

Q3 2020 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2020, along with its future outlook, in its quarterly conference call on Wednesday, October 28, 2020, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors . To hear the conference call live, please dial 1-517-308-9482 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call through Wednesday, February 10, 2021, by dialing 1-203-369-0270 and referencing the passcode 2020. In addition, the webcast will be available at www.equinix.com/investors (no password required).

Investor Presentation and Supplemental Financial Information

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

Additional Resources

• Equinix Investor Relations Resources

About Equinix

Equinix (Nasdaq: EQIX) is the world's digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. Equinix enables today's businesses to access all the right places, partners and possibilities they need to accelerate advantage. With Equinix, they can scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value.

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 from operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction 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, transaction 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 transaction costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The transaction costs relate to costs Equinix incurs in connection with business combinations and formation of joint ventures, including advisory, legal, accounting, valuation and other professional or consulting fees. 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 transactions. Management believes items such as restructuring charges, impairment charges, transaction costs and gain or loss on asset sales are non-core transactions; however, these types of costs may occur in future periods.

Equinix also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), both commonly used in the REIT industry, as supplemental performance measures. Additionally, Equinix presents AFFO per share, which is also commonly used in the REIT industry. AFFO per share offers investors and industry analysts a perspective of Equinix's underlying operating performance when compared to other REIT companies. 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, transaction costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income or loss from discontinued operations, net of tax and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and transaction costs for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above.

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

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

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

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

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, risks to our business and operating results related to the COVID-19 pandemic; the challenges of acquiring, operating and constructing IBX data centers and developing, deploying and delivering Equinix products and solutions; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; risks related to our taxation as a REIT and other risks described from time to time in Equinix filings with the Securities and Exchange Commission. In particular, see recent and upcoming 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.