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July 29, 2015

Equinix Reports Second Quarter 2015 Results

- Reported revenues of $665.6 million, a 3% increase over the previous quarter and a 10% increase over the same quarter last year

REDWOOD CITY, Calif., July 29, 2015 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended June 30, 2015.  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.

Revenues were $665.6 million for the second quarter, a 3% increase over the previous quarter and a 10% increase over the same quarter last year.  Recurring revenues, consisting primarily of colocation, interconnection and managed services were $626.7 million for the second quarter, a 3% increase over the previous quarter and a 9% increase over the same quarter last year.  Non-recurring revenues were $38.9 million in the quarter.  MRR churn for the second quarter was 1.8%, as compared to 2.0% from the previous quarter.

"This marks our 50th quarter of consecutive revenue growth, and the continued strength and momentum of our business reflects our strategic position and the value of our global platform," said Steve Smith, president and CEO of Equinix. "We sit at the crossroads of the Internet where our customers use Platform Equinix to innovate and accelerate their businesses.  The scope, scale, reach and diversity of our global offering remain without parallel and we are continuing to invest across systems, processes and people to ensure consistent service delivery worldwide."

Cost of revenues were $315.8 million for the second quarter, a 6% increase from the previous quarter and an 8% increase from the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $111.1 million for the quarter, which we refer to as cash cost of revenues, were $204.7 million for the quarter, a 7% increase over the previous quarter and the same quarter last year.  Gross margins for the quarter were 53%, as compared to 54% for the previous quarter and 52% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 69%, as compared to 70% for the previous quarter and 68% for the same quarter last year. 

Selling, general and administrative expenses were $200.8 million for the second quarter, a 4% increase over the previous quarter and a 7% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $51.2 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $149.6 million for the quarter, a 3% increase from the previous quarter and an 8% increase over the same quarter last year. 

Interest expense was $74.5 million for the second quarter, an 8% increase from the previous quarter and an 11% increase from the same quarter last year. 

The Company recorded income tax expense of $7.5 million for the second quarter compared to $6.2 million for the previous quarter and an income tax benefit of $2.0 million for the same quarter last year.

Net income attributable to the Company was $59.5 million for the second quarter. This represents a basic net income per share attributable to the Company of $1.04 for the second quarter based on a weighted average share count of 56.9 million and a diluted net income per share attributable to the Company of $1.03 for the second quarter based on a weighted average share count of 57.5 million.

Income from operations was $139.1 million for the second quarter, an 8% decrease from the previous quarter, but a 12% increase over the same quarter last year.  Adjusted EBITDA, as defined below, for the second quarter was $311.3 million, a 2% increase over the previous quarter and a 13% increase over the same quarter last year.

Adjusted funds from operations ("AFFO"), as defined below, were $221.4 million for the second quarter, largely unchanged from the previous quarter and an 18% increase over the same quarter last year.  This represents a basic AFFO per share attributable to the Company of $3.89 for the second quarter and a diluted AFFO per share attributable to the Company of $3.75 for the second quarter.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the second quarter, were $221.3 million, as compared to capital expenditures of $150.1 million for the previous quarter and $159.8 million for the same quarter last year.

The Company generated cash from operating activities of $212.5 million for the second quarter, a 9% decrease over the previous quarter and a 115% increase over the same quarter last year, primarily due to improved operating results and favorable working capital activities. Cash used in investing activities was $298.5 million in the second quarter as compared to cash used in investing activities of $199.8 million in the previous quarter, primarily attributed to higher capital expenditures and placing approximately £322.8 million, or approximately $493.8 million, into a restricted cash account for the payment of a portion of the purchase price in connection with our intention to acquire Telecity Group plc ("TelecityGroup"). On May 29, 2015, the Company announced a cash and share offer for the entire issued and to be issued share capital of TelecityGroup for approximately £2.4 billion, or approximately $3.6 billion, at the time of the announcement.  The Company expects to close this transaction in the first half of 2016. Cash used in financing activities was $119.6 million for the second quarter as compared to cash used in financing activities of $98.8 million in the previous quarter.

As of June 30, 2015, the Company's cash, cash equivalents and investments were $435.6 million, as compared to $1,140.8 million as of December 31, 2014. 

Business Outlook

For the third quarter of 2015, the Company expects revenues to range between $681.0 and $685.0 million, which includes a negligible foreign currency impact when compared to the average FX rates in Q2 2015 or a normalized and constant currency growth rate of 3% quarter over quarter.  Cash gross margins are expected to approximate 68% to 69%.  Cash selling, general and administrative expenses are expected to approximate $150.0 to $154.0 million.  Adjusted EBITDA is expected to range between $313.0 and $317.0 million, which includes a $1.0 million negative foreign currency impact when compared to the average FX rates in Q2 2015.  Capital expenditures are expected to range between $222.0 and $242.0 million, which includes approximately $32.0 million of recurring capital expenditures and $190.0 to $210.0 million of non-recurring capital expenditures.

For the full year of 2015, total revenues are expected to range between $2,685.0 and $2,695.0 million, which includes a negligible foreign currency impact when compared to prior guidance rates, reflecting a normalized and constant currency growth rate of 15%.  Total year cash gross margins are expected to approximate 69%.  Cash selling, general and administrative expenses are expected to range between $595.0 and $605.0 million.  Adjusted EBITDA is expected to range between $1,250.0 and $1,260.0 million, which includes $2.0 million of positive foreign currency impact when compared to prior guidance rates or a normalized and constant currency growth rate of 18%.  AFFO is expected to range between $850.0 and $860.0 million or a normalized and constant currency growth rate of 19%.  Capital expenditures are expected to range between $800.0 and $850.0 million, including approximately $115.0 million of recurring capital expenditures and $685.0 to $735.0 million of non-recurring capital expenditures. 

The U.S. dollar exchange rates used for 2015 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.18 to the Euro, $1.54 to the Pound, S$1.35 to the U.S. dollar and R$3.22 to the U.S. dollar. The 2015 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar and Brazilian Real is 14%, 10%, 7% and 3%, respectively.

The guidance provided above is forward-looking.  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, 2015, along with its future outlook, on its quarterly conference call on Wednesday, July 29, 2015, 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, October 30, 2015, by dialing 1-203-369-3240 and referencing the passcode 2015.  In addition, the webcast will be available at www.equinix.com/investors over the same time period.  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.

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 33 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.  Legislative and regulatory requirements encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. 

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 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 and acquisition costs.  Equinix excludes these items in order for Equinix's lenders, investors, and 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.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business.  Our IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment.  This is a trend we expect to continue.  In addition, depreciation is also based on the estimated useful lives of our 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, 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 certain intangible assets, as it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance.  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 believes are not meaningful in evaluating the Company's current operations.  Equinix excludes stock-based compensation expense as it represents expense attributed to equity awards that have no current or future cash obligations.  As such, we, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations.  Equinix 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 our IBX centers, which we did not intend to build out, or our 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. Finally, Equinix 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 such items as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of costs will or 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 (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 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 charges for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above. 

Equinix 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.  Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term.  The adjustments for both installation 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.  Equinix excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with our debt financings that have no current or future cash obligations.  Equinix excludes gains (losses) on debt extinguishment since it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance. Equinix includes an income tax expense adjustment, which represents changes in its income tax reserves and valuation allowances that may not recur or may not relate to the current year's operations. Equinix also 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.

Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our 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, however, 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 that of other companies.  In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.  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 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.

Schedule 1
Profit Forecast for Equinix, Inc. for the Financial Year ending December 31, 2015 and for three months ending September 30, 2015

In accordance with Rule 28.4(a) of the City Code on Takeovers and Mergers (the "Code"), the principal assumptions upon which the profit forecast is based are included in this Schedule 1 to the announcement. In accordance with Rule 28.4(c) of the Code, there is a clear distinction made between assumptions which the Directors of Equinix (or other members of Equinix's management) can influence and those which they cannot influence.

1.         General

Equinix today made the following statements in its Second Quarter 2015 Financial Results Announcement:

For the third quarter of 2015, the Company expects adjusted EBITDA to be between $313.0 and $317.0 million, which includes a $1.0 million negative foreign currency impact when compared to the average FX rates in Q2 2015.  

For the full year of 2015, adjusted EBITDA is expected to range between $1,250.0 to $1,260.0 million, which includes $2.0 million of positive foreign currency impact when compared to prior guidance rates or a normalized and constant currency growth rate of 18%.  AFFO is expected to range between $850.0 to $860.0 million or a normalized and constant currency growth rate of 19%.  

The above statements for the three months ending September 30, 2015 and for the financial year ending December 31, 2015 constitute profit forecasts for the purposes of the Code (the "Equinix Profit Forecast").

The U.S. dollar exchange rates used for 2015 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.18 to the Euro, $1.54 to the Pound, S$1.35 to the U.S. dollar and R$3.22 to the U.S. dollar. The 2015 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar and Brazilian Real is 14%, 10%, 7% and 3%, respectively.

In the above statements, adjusted EBITDA is defined as income or loss from operations before depreciation, amortization, accretion, stock based compensation, restructuring charges, impairment charges and acquisition costs. AFFO is defined as funds from operations ("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, straight-line rent expense, amortization of deferred financing costs, gains (losses) on debt extinguishment, income tax expense adjustment, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. 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.

2.         Basis of preparation

The Equinix Profit Forecast has been prepared on a basis consistent with the accounting policies for Equinix which are in accordance with generally accepted accounting standards in the U.S. and those which Equinix anticipates will be applicable for the full year ending December 31, 2015.

Equinix has prepared the Equinix Profit Forecast based on unaudited interim financial results for the three months ended June 30, 2015 and a forecast to September 30, 2015 and December 31, 2015.

3.         Assumptions

Equinix has prepared the Equinix Profit Forecast on the basis of the following assumptions:

Factors outside the influence or control of Equinix and its Directors

  • There will be no material change in legislation or regulatory requirements impacting on Equinix's operations or its accounting policies during the year ending December 31, 2015.
  • There will be no material change in the current trading environment and economic conditions.
  • There will be no material change in the Euro, British Pound, Singapore Dollar and Brazilian Real exchange rates assumed above.
  • Inflation and tax rates in Equinix's principal markets will remain materially unchanged from the prevailing rates.
  • Equinix will maintain its REIT status throughout 2015.
  • There will be no material adverse events that will have a significant impact on Equinix's financial performance.

Factors within the influence or control of Equinix and its Directors

  • The Equinix Profit Forecast excludes any material acquisitions or disposals in the year ended December 31, 2015.
  • The Equinix Profit Forecast excludes any one-time costs or benefits associated with the proposed transaction with Telecity Group plc.
  • There will be no material change in the present management or control of Equinix or its existing operational strategy.

4.         Directors' confirmation

The Directors of Equinix have considered the Equinix Profit Forecast and confirm that it is valid as at the date of this document and has been properly compiled on the basis of the assumptions set out above and that the basis of the accounting used is consistent with Equinix's accounting policies.

 

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,





2015


2015


2014


2015


2014














Recurring revenues


$626,691


$609,657


$574,158


$1,236,348


$1,123,861

Non-recurring revenues


38,891


33,517


31,003


72,408


61,353


Revenues


665,582


643,174


605,161


1,308,756


1,185,214














Cost of revenues


315,757


298,313


292,859


614,070


580,384



Gross profit

349,825


344,861


312,302


694,686


604,830














Operating expenses:












Sales and marketing

81,248


78,616


75,254


159,864


142,682


General and administrative

119,578


113,640


111,675


233,218


214,978


Acquisition costs

9,866


1,156


676


11,022


861



Total operating expenses

210,692


193,412


187,605


404,104


358,521














Income from operations

139,133


151,449


124,697


290,582


246,309














Interest and other income (expense):











Interest income


921


520


744


1,441


2,178


Interest expense

(74,496)


(68,791)


(66,874)


(143,287)


(135,694)


Loss on debt extinguishment 

-


-


(51,183)


-


(51,183)


Other income (expense)

1,386


(514)


681


872


1,359



Total interest and other, net

(72,189)


(68,785)


(116,632)


(140,974)


(183,340)














Income before income taxes

66,944


82,664


8,065


149,608


62,969















Income tax benefit (expense)

(7,485)


(6,212)


2,014


(13,697)


(11,553)














Net income



59,459


76,452


10,079


135,911


51,416














Net loss attributable to redeemable non-controlling interests

-


-


1,249


-


1,299














Net income attributable to Equinix

$  59,459


$  76,452


$  11,328


$   135,911


$     52,715














Net income per share attributable to Equinix:
























Basic net income per share

$     1.04


$     1.35


$     0.22


$        2.39


$        1.04















Diluted net income per share

$     1.03


$     1.34


$     0.22


$        2.37


$        1.04















Shares used in computing basic net income per share

56,935


56,661


51,332


56,798


50,470















Shares used in computing diluted net income per share

57,499


57,227


51,652


57,410


50,884

 

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, 





2015


2015


2014


2015


2014














Net income 



$  59,459


$  76,452


$10,079


$135,911


$ 51,416














Other comprehensive income (loss), net of tax:











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

69,443


(146,311)


23,081


(76,869)


38,051


Unrealized gain (loss) on available for sale securities 

17


103


(73)


120


765


Unrealized gain (loss) on cash flow hedges 

(14,290)


10,556


54


(3,734)


254


Net investment hedge CTA loss 

(10,389)


-


-


(10,389)


-


Defined benefit plans 

83


59


-


142


-

Other comprehensive income (loss), net of tax: 

44,864


(135,593)


23,062


(90,730)


39,070














Comprehensive income (loss), net of tax 

104,323


(59,141)


33,141


45,181


90,486















Net loss attributable to redeemable non-controlling interests 

-


-


1,249


-


1,299


Other comprehensive income attributable to redeemable non-controlling interests 

-


-


(750)


-


(2,817)





-






-



Comprehensive income (loss) attributable to Equinix, net of tax 

$104,323


$ (59,141)


$33,640


$  45,181


$ 88,968

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)








Assets

June 30,


 December 31, 





2015


2014








Cash and cash equivalents

$   336,133


$         610,917

Short-term investments

95,397


529,395

Accounts receivable, net

293,855


262,570

Current portion of restricted cash

523,003


3,057

Other current assets

81,730


85,004

Total current assets

1,330,118


1,490,943

Long-term investments

4,039


439

Property, plant and equipment, net

5,184,800


4,998,270

Goodwill



1,007,739


1,002,129

Intangible assets, net

131,383


147,527

Restricted cash, less current portion

10,524


14,060

Other assets


157,415


164,065

Total assets

$7,826,018


$      7,817,433








Liabilities and Stockholders' Equity











Accounts payable and accrued expenses

$   315,554


$         285,796

Accrued property and equipment

128,193


114,469

Current portion of capital lease and other financing obligations

26,832


21,362

Current portion of mortgage and loans payable

59,041


59,466

Current portion of convertible debt

149,780


-

Other current liabilities

138,332


162,664

Total current liabilities

817,732


643,757

Capital lease and other financing obligations, less current portion

1,217,746


1,168,042

Mortgage and loans payable, less current portion

506,631


534,686

Senior notes


2,750,000


2,750,000

Convertible debt,  less current portion

-


145,853

Other liabilities


331,319


304,964

Total liabilities

5,623,428


5,547,302








Common stock


57


57

Additional paid-in capital

3,418,223


3,334,305

Treasury stock


(10,646)


(11,411)

Accumulated dividends

(621,792)


(424,387)

Accumulated other comprehensive loss

(423,173)


(332,443)

Accumulated deficit

(160,079)


(295,990)

Total stockholders' equity

2,202,590


2,270,131

Total liabilities and stockholders' equity

$7,826,018


$      7,817,433






















Ending headcount by geographic region is as follows:











Americas headcount

2,229


2,122

EMEA headcount

1,096


1,023

Asia-Pacific headcount

789


721

Total headcount

4,114


3,866

 

EQUINIX, INC.

SUMMARY OF DEBT PRINCIPAL OUTSTANDING

(in thousands)

(unaudited)












June 30,


December 31,





2015


2014








Capital lease and other financing obligations

$  1,244,578


$    1,189,404








Term loan, net of debt discount

488,819


498,400

ALOG financings

43,133


56,863

Mortgage payable and other loans payable

33,720


38,889

less: debt discount and premium, net

(680)


(681)


Total mortgage and loans payable principal

564,992


593,471








Senior notes


2,750,000


2,750,000








Convertible debt, net of debt discount

149,780


145,853

Plus: debt discount

8,105


12,032


Total convertible debt principal

157,885


157,885








Total debt principal outstanding

$  4,717,455


$    4,690,760

 

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,






2015


2015


2014



2015


2014
















Cash flows from operating activities:












Net income


$   59,459


$  76,452


$  10,079



$ 135,911


$  51,416


Adjustments to reconcile net income to net cash












provided by operating activities:













Depreciation, amortization and accretion

128,270


122,530


116,074



250,800


229,684



Stock-based compensation

33,993


30,613


33,830



64,606


58,811



Debt issuance costs and debt discount

3,811


3,774


4,717



7,585


11,126



Loss on debt extinguishment 

-


-


51,183



-


51,183



Excess tax benefits from employee equity awards

(223)


(708)


(1,614)



(931)


(11,632)



Other reconciling items

5,169


4,870


7,455



10,039


12,747



Changes in operating assets and liabilities:














Accounts receivable

(10,991)


(30,791)


(24,510)



(41,782)


(53,505)




Income taxes, net

(53,592)


(12,555)


(76,764)



(66,147)


(92,513)




Accounts payable and accrued expenses

19,600


29,693


(16,498)



49,293


(7,668)




Other assets and liabilities

26,967


8,933


(4,988)



35,900


21,033





Net cash provided by operating activities

212,463


232,811


98,964



445,274


270,682

Cash flows from investing activities:












Purchases, sales and maturities of investments, net

433,966


(4,706)


250,737



429,260


472,391


Business acquisitions, net of cash acquired

-


(10,247)


-



(10,247)


-


Purchases of real estate

-


(38,282)


-



(38,282)


(16,791)


Purchases of other property, plant and equipment

(221,342)


(150,120)


(159,816)



(371,462)


(265,723)


Other investing activities

(511,166)


3,521


582



(507,645)


511





Net cash provided by (used in) investing activities

(298,542)


(199,834)


91,503



(498,376)


190,388

Cash flows from financing activities:












Purchases of treasury stock

-


-


(208,263)



-


(255,383)


Proceeds from employee equity awards

181


16,384


1,434



16,565


15,821


Payment of dividend distributions

(96,349)


(96,619)


-



(192,968)


-


Proceeds from loans payable

490,000


-


-



490,000


-


Repayment of capital lease and other financing obligations

(8,342)


(5,296)


(5,033)



(13,638)


(9,283)


Repayment of mortgage and loans payable

(505,268)


(13,361)


(16,777)



(518,629)


(27,094)


Repayment of convertible debt

-


-


(29,479)



-


(29,479)


Debt extinguishment costs

-


-


(22,552)



-


(22,552)


Excess tax benefits from employee equity awards

223


708


1,614



931


11,632


Other financing activities

(7)


(610)


128



(617)


128





Net cash used in financing activities

(119,562)


(98,794)


(278,928)



(218,356)


(316,210)

Effect of foreign currency exchange rates on cash and cash equivalents

5,065


(8,391)


1,621



(3,326)


1,580

Net increase (decrease) in cash and cash equivalents

(200,576)


(74,208)


(86,840)



(274,784)


146,440

Cash and cash equivalents at beginning of period

536,709


610,917


495,174



610,917


261,894

Cash and cash equivalents at end of period

$ 336,133


$536,709


$408,334



$ 336,133


$408,334

















Supplemental cash flow information:













Cash paid for taxes

$   60,266


$  14,538


$  75,371



$   74,804


$105,284



Cash paid for interest

$   71,823


$  23,976


$  79,517



$   95,799


$121,902
















Free cash flow (1)


$(520,045)


$  37,683


$ (60,270)



$(482,362)


$ (11,321)
















Adjusted free cash flow (2)

$(474,162)


$  87,666


$  12,119



$(386,496)


$115,494































(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

$ 212,463


$232,811


$  98,964



$ 445,274


$270,682


Net cash provided by (used in) investing activities as presented above

(298,542)


(199,834)


91,503



(498,376)


190,388


Purchases, sales and maturities of investments, net

(433,966)


4,706


(250,737)



(429,260)


(472,391)



Free cash flow (negative free cash flow)

$(520,045)


$  37,683


$ (60,270)



$(482,362)


$ (11,321)
















(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)

$(520,045)


$  37,683


$ (60,270)



$(482,362)


$ (11,321)


Less business acquisitions, net of cash

-


10,247


-



10,247


-


Less purchases of real estate

-


38,282


-



38,282


16,791


Less excess tax benefits from employee equity awards

223


708


1,614



931


11,632


Less cash paid for taxes resulting from the REIT conversion 

45,113


-


61,873



45,113


79,700


Less costs related to the REIT conversion

547


746


8,902



1,293


18,692



Adjusted free cash flow

$(474,162)


$  87,666


$  12,119



$(386,496)


$115,494

















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


$           -


$  61,873



$   45,113


$  79,700


Other cash taxes paid

15,153


14,538


13,498



29,691


25,584



Total cash paid for taxes

$   60,266


$  14,538


$  75,371



$   74,804


$105,284

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION

(in thousands)

(unaudited)































Three Months Ended


Six Months Ended





June 30, 


March 31, 


June 30, 


June 30, 


June 30, 





2015


2015


2014


2015


2014














Recurring revenues


$626,691


$ 609,657


$574,158


$1,236,348


$1,123,861

Non-recurring revenues

38,891


33,517


31,003


72,408


61,353


Revenues (1)


665,582


643,174


605,161


1,308,756


1,185,214














Cash cost of revenues (2)

204,736


192,130


190,901


396,866


375,149




Cash gross profit (3)

460,846


451,044


414,260


911,890


810,065














Cash operating expenses (4):











Cash sales and marketing expenses (5)

65,058


63,820


58,785


128,878


114,584


Cash general and administrative expenses (6)

84,526


81,476


80,198


166,002


159,816




Total cash operating expenses (7)

149,584


145,296


138,983


294,880


274,400














Adjusted EBITDA (8)

$311,262


$ 305,748


$275,277


$   617,010


$   535,665














Cash gross margins (9)

69%


70%


68%


70%


68%














Adjusted EBITDA margins (10)

47%


48%


45%


47%


45%














Adjusted EBITDA flow-through rate (11)

25%


225%


59%


77%


31%














FFO (12)



$167,368


$ 179,190

#

$109,813


$   346,558


$   248,545














AFFO (13)



$221,388


$ 221,756


$187,597


$   443,144


$   360,341














Basic FFO per share (14)

$     2.94


$      3.16


$     2.14


$        6.10


$        4.88














Diluted FFO per share (14)

$     2.87


$      3.09


$     1.99


$        5.95


$        4.48














Basic AFFO per share (15)

$     3.89


$      3.91


$     3.65


$        7.80


$        7.08














Diluted AFFO per share (15)

$     3.75


$      3.77


$     3.29


$        7.52


$        6.28








































(1)

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
























Americas Revenues:
























Colocation


$262,934


$ 257,932


$242,873


$   520,866


$   479,487


Interconnection


77,102


75,086


66,451


152,188


130,753


Managed infrastructure

12,837


13,295


14,885


26,132


27,997


Rental



732


741


943


1,473


1,895



Recurring revenues

353,605


347,054


325,152


700,659


640,132


Non-recurring revenues

17,842


16,915


17,104


34,757


32,157



Revenues

371,447


363,969


342,256


735,416


672,289















EMEA Revenues:
























Colocation


139,482


132,735


127,132


272,217


249,308


Interconnection


13,440


13,048


12,329


26,488


23,695


Managed infrastructure

5,919


5,783


7,434


11,702


14,299


Rental



1,222


1,858


1,730


3,080


3,448



Recurring revenues

160,063


153,424


148,625


313,487


290,750


Non-recurring revenues

13,904


11,199


8,537


25,103


17,842



Revenues

173,967


164,623


157,162


338,590


308,592















Asia-Pacific Revenues:
























Colocation


94,194


90,878


82,655


185,072


158,488


Interconnection


14,119


13,524


12,189


27,643


23,547


Managed infrastructure

4,710


4,777


5,537


9,487


10,944



Recurring revenues

113,023


109,179


100,381


222,202


192,979


Non-recurring revenues

7,145


5,403


5,362


12,548


11,354



Revenues

120,168


114,582


105,743


234,750


204,333















Worldwide Revenues:
























Colocation


496,610


481,545


452,660


978,155


887,283


Interconnection


104,661


101,658


90,969


206,319


177,995


Managed infrastructure

23,466


23,855


27,856


47,321


53,240


Rental



1,954


2,599


2,673


4,553


5,343



Recurring revenues

626,691


609,657


574,158


1,236,348


1,123,861


Non-recurring revenues

38,891


33,517


31,003


72,408


61,353



Revenues

$665,582


$ 643,174


$605,161


$1,308,756


$1,185,214














(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

$315,757


$ 298,313


$292,859


$   614,070


$   580,384


Depreciation, amortization and accretion expense

(108,470)


(103,877)


(99,730)


(212,347)


(201,137)


Stock-based compensation expense

(2,551)


(2,306)


(2,228)


(4,857)


(4,098)



Cash cost of revenues

$204,736


$ 192,130


$190,901


$   396,866


$   375,149















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
























Americas cash cost of revenues

$102,249


$   95,162


$  94,684


$   197,411


$   185,721


EMEA cash cost of revenues

62,431


58,494


58,727


120,925


116,843


Asia-Pacific cash cost of revenues

40,056


38,474


37,490


78,530


72,585



Cash cost of revenues

$204,736


$ 192,130


$190,901


$   396,866


$   375,149














(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

$  81,248


$   78,616


$  75,254


$   159,864


$   142,682


Depreciation and amortization expense

(6,268)


(6,085)


(8,526)


(12,353)


(13,155)


Stock-based compensation expense

(9,922)


(8,711)


(7,943)


(18,633)


(14,943)



Cash sales and marketing expenses

$  65,058


$   63,820


$  58,785


$   128,878


$   114,584














(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

$119,578


$ 113,640


$111,675


$   233,218


$   214,978


Depreciation and amortization expense

(13,532)


(12,568)


(7,818)


(26,100)


(15,392)


Stock-based compensation expense

(21,520)


(19,596)


(23,659)


(41,116)


(39,770)



Cash general and administrative expenses

$  84,526


$   81,476


$  80,198


$   166,002


$   159,816














(7)

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
























Cash sales and marketing expenses

$  65,058


$   63,820


$  58,785


$   128,878


$   114,584


Cash general and administrative expenses

84,526


81,476


80,198


166,002


159,816



Cash SG&A

$149,584


$ 145,296


$138,983


$   294,880


$   274,400















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
























Americas cash SG&A

$  98,312


$   96,073


$  89,447


$   194,385


$   178,880


EMEA cash SG&A

32,003


30,098


33,084


62,101


63,193


Asia-Pacific cash SG&A

19,269


19,125


16,452


38,394


32,327



Cash SG&A

$149,584


$ 145,296


$138,983


$   294,880


$   274,400














(8)

We define adjusted EBITDA as income from operations plus depreciation, amortization, accretion, stock-based








compensation expense and acquisition costs as presented below:
























Income from operations

$139,133


$ 151,449


$124,697


$   290,582


$   246,309


Depreciation, amortization and accretion expense

128,270


122,530


116,074


250,800


229,684


Stock-based compensation expense

33,993


30,613


33,830


64,606


58,811


Acquisition costs

9,866


1,156


676


11,022


861



Adjusted EBITDA

$311,262


$ 305,748


$275,277


$   617,010


$   535,665















The geographic split of our adjusted EBITDA is presented below:
























Americas income from operations

$  77,653


$   81,466


$  67,739


$   159,119


$   139,474


Americas depreciation, amortization and accretion expense

68,692


66,811


62,481


135,503


121,414


Americas stock-based compensation expense

25,883


23,491


27,177


49,374


45,970


Americas acquisition costs

(1,342)


966


728


(376)


830



Americas adjusted EBITDA

170,886


172,734


158,125


343,620


307,688















EMEA income from operations

36,110


45,541


34,067


81,651


63,970


EMEA depreciation, amortization and accretion expense

27,826


26,693


27,901


54,519


57,803


EMEA stock-based compensation expense

4,397


3,607


3,385


8,004


6,702


EMEA acquisition costs

11,200


190


(2)


11,390


81



EMEA adjusted EBITDA

79,533


76,031


65,351


155,564


128,556















Asia-Pacific income from operations

25,370


24,442


22,891


49,812


42,865


Asia-Pacific depreciation, amortization and accretion expense

31,752


29,026


25,692


60,778


50,467


Asia-Pacific stock-based compensation expense

3,713


3,515


3,268


7,228


6,139


Asia-Pacific acquisition costs

8


-


(50)


8


(50)



Asia-Pacific adjusted EBITDA

60,843


56,983


51,801


117,826


99,421

















Adjusted EBITDA

$311,262


$ 305,748


$275,277


$   617,010


$   535,665














(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

72%


74%


72%


73%


72%















EMEA cash gross margins

64%


64%


63%


64%


62%















Asia-Pacific cash gross margins

67%


66%


65%


67%


64%














(10)

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
























Americas adjusted EBITDA margins

46%


47%


46%


47%


46%















EMEA adjusted EBITDA margins

46%


46%


42%


46%


42%















Asia-Pacific adjusted EBITDA margins

51%


50%


49%


50%


49%














(11)

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








revenue growth as follows:
























Adjusted EBITDA - current period

$311,262


$ 305,748


$275,277


$   617,010


$   535,665


Less adjusted EBITDA - prior period

(305,748)


(294,365)


(260,388)


(578,226)


(511,975)



Adjusted EBITDA growth

$    5,514


$   11,383


$  14,889


$     38,784


$     23,690















Revenues - current period

$665,582


$ 643,174


$605,161


$1,308,756


$1,185,214


Less revenues - prior period

(643,174)


(638,121)


(580,053)


(1,258,562)


(1,107,761)



Revenue growth

$  22,408


$     5,053


$  25,108


$     50,194


$     77,453















Adjusted EBITDA flow-through rate

25%


225%


59%


77%


31%



























(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 


$  59,459


$   76,452


$  10,079


$   135,911


$     51,416



Net loss attributable to redeemable non-controlling interests

-


-


1,249


-


1,299


Net income attributable to Equinix

59,459


76,452


11,328


135,911


52,715


Adjustments:













Real estate depreciation and amortization

107,321


102,648


100,788


209,969


200,239



Gain/loss on disposition of real estate property

559


62


183


621


216



Adjustments for FFO from unconsolidated joint ventures

29


28


28


57


56



Non-controlling interests' share of above adjustments

-


-


(2,514)


-


(4,681)



FFO 


$167,368


$ 179,190


$109,813


$   346,558


$   248,545



























(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, recurring capital expenditures and adjustments from FFO to AFFO for 









unconsolidated joint ventures' and non-controlling interests' share of these items.  
























FFO 



$167,368


$ 179,190


$109,813


$   346,558


$   248,545


Adjustments:













Installation revenue adjustment

12,474


8,654


5,244


21,128


12,417



Straight-line rent expense adjustment

2,017


3,201


3,331


5,218


6,360



Amortization of deferred financing costs

3,848


3,858


4,783


7,706


11,282



Stock-based compensation expense

33,993


30,613


33,830


64,606


58,811



Non-real estate depreciation expense

13,605


12,693


7,785


26,298


15,357



Amortization expense

6,450


6,295


7,139


12,745


14,109



Accretion expense

894


894


362


1,788


(21)



Recurring capital expenditures

(27,330)


(22,373)


(26,018)


(49,703)


(52,467)



Loss on debt extinguishment

-


-


51,183


-


51,183



Acquisition costs

9,866


1,156


676


11,022


861



Income tax expense adjustment

(1,784)


(2,408)


(7,726)


(4,192)


(2,771)



Adjustments for AFFO from unconsolidated joint ventures

(13)


(17)


(19)


(30)


(40)



Non-controlling interests share of above adjustments

-


-


(2,786)


-


(3,285)



AFFO


$221,388


$ 221,756


$187,597


$   443,144


$   360,341














(14)

The FFO used in the computation of basic and diluted FFO per share attributable to Equinix is presented below:





















FFO, basic


$167,368


$ 179,190


$109,813


$   346,558


$   248,545



Interest on convertible debt

3,383


3,362


5,188


6,745


12,300


FFO, diluted


$170,751


$ 182,552


$115,001


$   353,303


$   260,845















The shares used in the computation of basic and diluted FFO per share attributable to Equinix is presented below:





















Shares used in computing basic net income per share and FFO per share 

56,935


56,661


51,332


56,798


50,884


 Effect of dilutive securities: 












 Convertible debt 

1,958


1,942


6,000


1,950


6,894



 Employee equity awards 

563


566


320


612


414


Shares used in computing diluted FFO per share 

59,456


59,169


57,652


59,360


58,192














(15)

The AFFO used in the computation of basic and diluted AFFO per share attributable to Equinix is presented below:





















AFFO, basic


$221,388


$ 221,756


$187,597


$   443,144


$   360,341



Interest on convertible debt

1,557


1,554


2,271


3,111


4,899


AFFO, diluted


$222,945


$ 223,310


$189,868


$   446,255


$   365,240















The shares used in the computation of basic and diluted AFFO per share attributable to Equinix is presented below:





















Shares used in computing basic net income per share and AFFO per share 

56,935


56,661


51,332


56,798


50,884


 Effect of dilutive securities: 












 Convertible debt 

1,958


1,942


6,000


1,950


6,894



 Employee equity awards 

563


566


320


612


414


Shares used in computing diluted AFFO per share 

59,456


59,169


57,652


59,360


58,192

 

Equinix.

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SOURCE Equinix, Inc.

, lrose@equinix.com