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October 28, 2015

Equinix Reports Third Quarter 2015 Results

- Reported revenues of $686.6 million, a 3% increase over the previous quarter and an 11% increase over the same quarter last year

REDWOOD CITY, Calif., Oct. 28, 2015 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended September 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 $686.6 million for the third quarter, a 3% increase over the previous quarter and an 11% increase over the same quarter last year. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $646.7 million for the third quarter, a 3% increase over the previous quarter and a 10% increase over the same quarter last year.  Non-recurring revenues were $39.9 million in the quarter.  MRR churn for the third quarter was 2.0%, as compared to 1.8% from the previous quarter.

"We delivered another strong quarter as Platform Equinix and our digital ecosystems continue to drive sustainable growth," said Steve Smith, president and CEO of Equinix. "Cloud service providers are choosing Equinix to scale their infrastructure globally, and enterprises are increasingly turning to us to implement hybrid and multi-cloud as part of next-generation IT architectures. These trends are transformational for Equinix and we will continue to invest in this significant opportunity."

Cost of revenues was $325.5 million for the third quarter, a 3% increase from the previous quarter and a 7% increase from the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $113.9 million for the quarter, which we refer to as cash cost of revenues, was $211.6 million for the quarter, a 3% increase over the previous quarter and an 8% increase over the same quarter last year.  Gross margins for the quarter and the previous quarter were 53%, as compared to 51% 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 and the previous quarter were 69%, as compared to 68% for the same quarter last year. 

Selling, general and administrative expenses were $206.9 million for the third quarter, a 3% increase over the previous quarter and a 14% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $53.4 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $153.6 million for the quarter, a 3% increase from the previous quarter and a 10% increase over the same quarter last year. 

Interest expense was $76.3 million for the third quarter, a 2% increase from the previous quarter and a 20% increase from the same quarter last year. 

The Company recorded income tax expense of $11.6 million for the third quarter compared to $7.5 million for the previous quarter and $30.6 million for the same quarter last year.

Net income was $41.1 million for the third quarter. This represents a basic net income per share of $0.72 for the third quarter based on a weighted average share count of 57.1 million shares and a diluted net income per share of $0.71 for the third quarter based on a weighted average diluted share count of 57.7 million shares.

Income from operations was $140.9 million for the third quarter, a 1% increase from the previous quarter and a 4% increase over the same quarter last year.  Adjusted EBITDA, as defined below, for the third quarter was $321.5 million, a 3% increase over the previous quarter and a 13% increase over the same quarter last year.

Adjusted funds from operations ("AFFO"), as defined below, were $210.4 million for the third quarter, a 5% decrease from the previous quarter and a 2% increase over the same quarter last year.  This represents a basic AFFO per share attributable to the Company of $3.69 for the third quarter and a diluted AFFO per share attributable to the Company of $3.55 for the third quarter. AFFO for the third quarter includes a foreign currency exchange loss of $11.6 million attributed to hedges of our net investment exposure in connection with the Telecity Group plc acquisition.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the third quarter, were $216.0 million, as compared to capital expenditures of $221.3 million for the previous quarter and $156.0 million for the same quarter last year.

The Company generated cash from operating activities of $214.4 million for the third quarter, a 1% increase over the previous quarter and a 1% decrease over the same quarter last year. Cash used in investing activities was $107.6 million in the third quarter as compared to cash used in investing activities of $298.5 million in the previous quarter. Cash used in financing activities was $101.4 million for the third quarter as compared to cash used in financing activities of $119.6 million in the previous quarter.

As of September 30, 2015, the Company's cash, cash equivalents and investments were $339.5 million, as compared to $1,140.8 million as of December 31, 2014. 

Business Outlook

For the fourth quarter of 2015, the Company expects revenues to range between $701.0 and $705.0 million, which includes a negative foreign currency impact of $4.0 million when compared to the average FX rates in Q3 2015 or a normalized and constant currency growth rate of 3% quarter over quarter.  Cash gross margins are expected to approximate 69%.  Cash selling, general and administrative expenses are expected to range between $153.0 and $157.0 million.  Adjusted EBITDA is expected to range between $328.0 and $332.0 million, which includes a $4.0 million negative foreign currency impact when compared to the average FX rates in Q3 2015.  Capital expenditures are expected to range between $242.0 and $262.0 million, which includes approximately $34.0 million of recurring capital expenditures and $208.0 to $228.0 million of non-recurring capital expenditures.

For the full year of 2015, total revenues are expected to range between $2,696.0 and $2,700.0 million, which includes a negative foreign currency impact of $13.0 million when compared to prior guidance rates, reflecting a normalized and constant currency growth rate of 16%.  Total year cash gross margins are expected to approximate 69%.  Cash selling, general and administrative expenses are expected to range between $601.0 and $605.0 million.  Adjusted EBITDA is expected to range between $1,267.0 and $1,271.0 million, which includes $4.0 million of negative foreign currency impact when compared to prior guidance rates or a normalized and constant currency growth rate of 19%.  AFFO is expected to range between $866.0 and $870.0 million or a normalized and constant currency growth rate of 24%.  Capital expenditures are expected to range between $830.0 and $850.0 million, including approximately $110.0 million of recurring capital expenditures and $720.0 to $740.0 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, $1.53 to the Pound, S$1.42 to the U.S. dollar and R$3.73 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, but does not include the impact of the Company's cash tender offer for Bit-isle Inc., which is expected to close in Q4 2015, nor any mark-to-market gains or losses on the contracts in place that hedge the net investment exposure related to the TelecityGroup acquisition.  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.

Q3 Results Conference Call and Replay Information

The Company will discuss its quarterly results for the period ended September 30, 2015, along with its future outlook, in its quarterly conference call on Wednesday, October 28, 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, January 29, 2016, by dialing 1-203-369-0703 and referencing the passcode 2015.  In addition, the webcast will be available at www.equinix.com/investors.  No password is required for the webcast.

Investor Presentation and Supplemental Financial Information

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

Additional Resources

About Equinix

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

The Company provides all information required in accordance with generally accepted accounting principles ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures.  Accordingly, the Company uses non-GAAP financial measures to evaluate its operations.  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, the Company excludes certain items that it believes are not good indicators of the Company's current or future operating performance.  These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges and acquisition costs.  The Company excludes these items in order for its lenders, investors, and the industry analysts who review and report on the Company to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitors.

The Company excludes depreciation expense as these charges primarily relate to the initial construction costs of its IBX centers and do not reflect our current or future cash spending levels to support our business.  Its IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of its IBX centers do not recur and future capital expenditures remain minor relative to our initial investment.  This is a trend it expects 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, the Company excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, the Company also excludes amortization expense related to 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.  The Company excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which the Company believes are not meaningful in evaluating the Company's current operations.  The Company excludes stock-based compensation expense as it represents expense attributed to equity awards that have no current or future cash obligations.  As such, the Company, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations.  The Company excludes restructuring charges from its non-GAAP financial measures.  The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges.  The Company also excludes impairment charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Finally, the Company excludes acquisition costs from its non-GAAP financial measures.  The acquisition costs relate to costs the Company incurs in connection with business combinations.  Management believes 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.

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

The Company includes an adjustment for revenue from installation fees, since installation fees are deferred and recognized ratably over the expected life of the installation, although the fees are generally paid in a lump sum upon installation.  The Company includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term.  The adjustments for both installation revenue and straight-line rent expense are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. The Company excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations.  The Company excludes gains (losses) on debt extinguishment since it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance. The Company 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. The Company 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.

The Company's 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, the Company 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 its core, ongoing business operations.  Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. The Company believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze the Company effectively.

Investors should note, however, that the non-GAAP financial measures used by the Company may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies.  In addition, whenever the Company 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.  The Company intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Forward Looking Statements

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

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

Schedule 1
Profit Forecast for Equinix, Inc. for the Financial Year ending December 31, 2015 and for three months ending December 31, 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 Third Quarter 2015 Financial Results Announcement:

For the fourth quarter of 2015, the Company expects adjusted EBITDA to be between $328.0 and $332.0 million, which includes a $4.0 million negative foreign currency impact when compared to the average FX rates in Q3 2015.  

For the full year of 2015, adjusted EBITDA is expected to range between $1,267.0 and $1,271.0 million, which includes $4.0 million of negative foreign currency impact when compared to prior guidance rates or a normalized and constant currency growth rate of 19%.  AFFO is expected to range between $866.0 and $870.0 million or a normalized and constant currency growth rate of 24%.  

The above statements for the three months ending December 31, 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, $1.53 to the Pound, S$1.42 to the U.S. dollar and R$3.73 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, an 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 September 30, 2015 and a forecast to 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, including the cash tender offer for Bit-isle. expected to close in Q4 2015.
  • The Equinix Profit Forecast excludes any mark-to-market gains or losses on the contracts in place that hedge a portion of the purchase price of the TelecityGroup acquisition.
  • 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


Nine Months Ended





September 30,


June 30,


September 30,


September 30,


September 30,





2015


2015


2014


2015


2014














Recurring revenues


$       646,721


$        626,691


$        588,437


$     1,883,069


$     1,712,298

Non-recurring revenues


39,928


38,891


32,004


112,336


93,357


Revenues


686,649


665,582


620,441


1,995,405


1,805,655














Cost of revenues


325,468


315,757


304,052


939,538


884,436



Gross profit

361,181


349,825


316,389


1,055,867


921,219














Operating expenses:












Sales and marketing

83,709


81,248


72,185


243,573


214,867


General and administrative

123,237


119,578


109,354


356,455


324,332


Acquisition costs

13,352


9,866


(281)


24,374


580



Total operating expenses

220,298


210,692


181,258


624,402


539,779














Income from operations

140,883


139,133


135,131


431,465


381,440














Interest and other income (expense):











Interest income


934


921


356


2,375


2,534


Interest expense

(76,269)


(74,496)


(63,756)


(219,556)


(199,450)


Loss on debt extinguishment 

-


-


-


-


(51,183)


Other income (expense)

(12,836)


1,386


1,811


(11,964)


3,170



Total interest and other, net

(88,171)


(72,189)


(61,589)


(229,145)


(244,929)














Income before income taxes

52,712


66,944


73,542


202,320


136,511















Income tax expense

(11,580)


(7,485)


(30,581)


(25,277)


(42,134)














Net income


41,132


59,459


42,961


177,043


94,377














Net (income) loss attributable to redeemable non-controlling interests

-


-


(120)


-


1,179














Net income attributable to Equinix

$        41,132


$          59,459


$          42,841


$        177,043


$          95,556














Net income per share attributable to Equinix:
























Basic net income per share (1)

$            0.72


$             1.04


$             0.81


$             3.11


$             1.86















Diluted net income per share (1)

$            0.71


$             1.03


$             0.79


$             3.08


$             1.84















Shares used in computing basic net income per share

57,082


56,935


53,137


56,894


51,369















Shares used in computing diluted net income per share

57,708


57,499


55,238


57,521


54,502



























(1)

The net income attributable to Equinix used in the computation of basic and diluted net income (loss) per share attributed to Equinix is presented below:















Net income 


$        41,132


$          59,459


$          42,961


$        177,043


$          94,377


Net (income) loss attributable to non-controlling interests

-


-


(120)


-


1,179



Net income attributable to Equinix, basic 

41,132


59,459


42,841


177,043


95,556


Interest on convertible debt

-


-


885


-


4,862



Net income attributable to Equinix, diluted

$        41,132


$          59,459


$          43,726


$        177,043


$        100,418

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)































Three Months Ended


Nine Months Ended





September 30, 


June 30,


September 30,


September 30, 


September 30, 





2015


2015


2014


2015


2014














Net income 



$         41,132


$          59,459


$          42,961


$        177,043


$          94,377














Other comprehensive income (loss), net of tax:











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

(72,677)


69,443


(144,994)


(149,546)


(106,943)


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

(21)


17


(862)


99


(97)


Unrealized gain (loss) on cash flow hedges 

3,309


(14,290)


4,194


(425)


4,448


Net investment hedge CTA gain (loss) 

4,426


(10,389)


-


(5,963)


-


Defined benefit plans 

124


83


-


266


-

Other comprehensive income (loss), net of tax: 

(64,839)


44,864


(141,662)


(155,569)


(102,592)














Comprehensive income (loss), net of tax 

(23,707)


104,323


(98,701)


21,474


(8,215)















 Net (income) loss attributable to redeemable non-controlling interests 

-


-


(120)


-


1,179


 Other comprehensive (income) loss attributable to redeemable non-controlling interests 

-


-


1,007


-


(1,810)














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

$        (23,707)


$        104,323


$         (97,814)


$          21,474


$           (8,846)

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)








Assets

September 30,


 December 31, 





2015


2014








Cash and cash equivalents

$           335,469


$        610,917

Short-term investments

-


529,395

Accounts receivable, net

293,125


262,570

Current portion of restricted cash

493,425


3,057

Other current assets

120,004


85,004


Total current assets

1,242,023


1,490,943

Long-term investments

4,077


439

Property, plant and equipment, net

5,218,595


4,998,270

Goodwill



983,530


1,002,129

Intangible assets, net

123,454


147,527

Restricted cash, less current portion

10,464


14,060

Other assets


123,523


128,610


Total assets

$        7,705,666


$     7,781,978








Liabilities and Stockholders' Equity











Accounts payable and accrued expenses

$           340,366


$        285,796

Accrued property and equipment

131,607


114,469

Current portion of capital lease and other financing obligations

26,775


21,362

Current portion of mortgage and loans payable

55,024


59,466

Current portion of convertible debt

151,535


-

Dividends payable

640,063


4,559

Other current liabilities

118,744


158,105


Total current liabilities

1,464,114


643,757

Capital lease and other financing obligations, less current portion

1,198,581


1,168,042

Mortgage and loans payable, less current portion

484,049


532,809

Senior notes


2,720,448


2,717,046

Convertible debt,  less current portion

-


145,229

Other liabilities


349,821


304,964


Total liabilities

6,217,013


5,511,847








Common stock


57


57

Additional paid-in capital

3,467,143


3,334,305

Treasury stock


(9,913)


(11,411)

Accumulated dividends

(1,361,675)


(424,387)

Accumulated other comprehensive loss

(488,012)


(332,443)

Accumulated deficit

(118,947)


(295,990)


Total stockholders' equity

1,488,653


2,270,131


Total liabilities and stockholders' equity

$        7,705,666


$     7,781,978






















Ending headcount by geographic region is as follows:












Americas headcount

2,286


2,122


EMEA headcount

1,147


1,023


Asia-Pacific headcount

804


721



Total headcount

4,237


3,866

 

EQUINIX, INC.

SUMMARY OF DEBT PRINCIPAL OUTSTANDING

(in thousands)

(unaudited)












September 30,


December 31,





2015


2014








Capital lease and other financing obligations

$        1,225,356


$        1,189,404








Term loan, net of debt discount and debt issuance costs

473,223


497,044

ALOG financings, net of debt issuance costs

32,283


56,342

Mortgage payable and other loans payable, net of premium

33,567


38,889

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

829


1,196


Total mortgage and loans payable principal

539,902


593,471








Senior notes, net of debt issuance costs

2,720,448


2,717,046

Plus: debt issuance costs

29,552


32,954


Total senior notes principal

2,750,000


2,750,000








Convertible debt, net of debt discount and debt issuance costs

151,535


145,229

Plus: debt discount and debt issuance costs

6,350


12,656


Total convertible debt principal

157,885


157,885








Total debt principal outstanding

$        4,673,143


$        4,690,760

 

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)




















Three Months Ended


Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,






2015


2015


2014


2015


2014















Cash flows from operating activities:











Net income

$               41,132


$          59,459


$          42,961


$        177,043


$          94,377


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






















Depreciation, amortization and accretion

133,268


128,270


121,349


384,068


351,033



Stock-based compensation

33,969


33,993


27,662


98,575


86,473



Debt issuance costs and debt discount

3,972


3,811


3,714


11,557


14,840



Loss on debt extinguishment 

-


-


-


-


51,183



Excess tax benefits from employee equity awards

(732)


(223)


(5,825)


(1,663)


(17,457)



Other reconciling items

4,321


5,169


5,957


14,359


18,704



Changes in operating assets and liabilities:













Accounts receivable

(220)


(10,991)


(50,889)


(42,002)


(104,394)




Income taxes, net

(18,376)


(53,592)


23,340


(84,523)


(69,173)




Accounts payable and accrued expenses

25,926


19,600


34,778


75,219


27,110




Other assets and liabilities

(8,858)


26,967


13,394


27,042


34,427





Net cash provided by operating activities

214,402


212,463


216,441


659,675


487,123

Cash flows from investing activities:











Purchases, sales and maturities of investments, net

94,217


433,966


148,789


523,477


621,180


Business acquisitions, net of cash acquired

-


-


-


(10,247)


-


Purchases of real estate

-


-


-


(38,282)


(16,791)


Purchases of other property, plant and equipment

(216,046)


(221,342)


(156,003)


(587,508)


(421,726)


Other investing activities

14,274


(511,166)


898


(493,371)


1,409





Net cash provided by (used in) investing activities

(107,555)


(298,542)


(6,316)


(605,931)


184,072

Cash flows from financing activities:











Purchases of treasury stock

-


-


(42,575)


-


(297,958)


Proceeds from employee equity awards

13,290


181


12,362


29,855


28,183


Purchase of redeemable non-controlling interests

-


-


(226,276)


-


(226,276)


Payment of dividend distributions

(98,041)


(96,349)


-


(291,009)


-


Proceeds from loans payable

-


490,000


8,698


490,000


8,826


Repayment of capital lease and other financing obligations

(6,576)


(8,342)


(3,857)


(20,213)


(13,140)


Repayment of mortgage and loans payable

(10,818)


(505,268)


(10,416)


(529,447)


(37,510)


Repayment of convertible debt

-


-


-


-


(29,479)


Debt extinguishment costs

-


-


-


-


(22,552)


Excess tax benefits from employee equity awards

732


223


5,825


1,663


17,457


Other financing activities

-


(7)


-


(617)


-





Net cash used in financing activities

(101,413)


(119,562)


(256,239)


(319,768)


(572,449)

Effect of foreign currency exchange rates on cash and cash equivalents

(6,098)


5,065


(8,039)


(9,424)


(6,459)

Net increase (decrease) in cash and cash equivalents

(664)


(200,576)


(54,153)


(275,448)


92,287

Cash and cash equivalents at beginning of period

336,133


536,709


408,334


610,917


261,894

Cash and cash equivalents at end of period

$              335,469


$        336,133


$        354,181


$        335,469


$        354,181
















Supplemental cash flow information:












Cash paid for taxes

$               28,333


$          60,266


$            5,506


$        103,137


$        110,790



Cash paid for interest

$               68,568


$          71,823


$          45,833


$        164,367


$        167,735















Free cash flow (1)

$               12,630


$       (520,045)


$          61,336


$       (469,733)


$          50,015















Adjusted free cash flow (2)

$               34,035


$       (474,162)


$          74,812


$       (352,462)


$        190,306





























(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

$              214,402


$        212,463


$        216,441


$        659,675


$        487,123


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

(107,555)


(298,542)


(6,316)


(605,931)


184,072


Purchases, sales and maturities of investments, net

(94,217)


(433,966)


(148,789)


(523,477)


(621,180)



Free cash flow (negative free cash flow)

$               12,630


$       (520,045)


$          61,336


$       (469,733)


$          50,015















(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)

$               12,630


$       (520,045)


$          61,336


$       (469,733)


$          50,015


Less business acquisitions, net of cash

-


-


-


10,247


-


Less purchases of real estate

-


-


-


38,282


16,791


Less excess tax benefits from employee equity awards

732


223


5,825


1,663


17,457


Less cash paid for taxes resulting from the REIT conversion 

20,033


45,113


978


65,146


80,678


Less costs related to the REIT conversion

640


547


6,673


1,933


25,365



Adjusted free cash flow

$               34,035


$       (474,162)


$          74,812


$       (352,462)


$        190,306
















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

$               20,033


$          45,113


$              978


$          65,146


$          80,678


Other cash taxes paid

8,300


15,153


4,528


37,991


30,112



Total cash paid for taxes

$               28,333


$          60,266


$            5,506


$        103,137


$        110,790

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION

(in thousands)

(unaudited)































Three Months Ended


Nine Months Ended





September 30,


June 30,


September 30,


September 30,


September 30,





2015


2015


2014


2015


2014














Recurring revenues


$        646,721


$        626,691


$        588,437


$     1,883,069


$  1,712,298

Non-recurring revenues

39,928


38,891


32,004


112,336


93,357


Revenues (1)


686,649


665,582


620,441


1,995,405


1,805,655














Cash cost of revenues (2)

211,617


204,736


196,458


608,483


571,607




Cash gross profit (3)

475,032


460,846


423,983


1,386,922


1,234,048














Cash operating expenses (4):











Cash sales and marketing expenses (5)

68,323


65,058


58,434


197,201


173,018


Cash general and administrative expenses (6)

85,237


84,526


81,688


251,239


241,504




Total cash operating expenses (7)

153,560


149,584


140,122


448,440


414,522














Adjusted EBITDA (8)

$        321,472


$        311,262


$        283,861


$        938,482


$     819,526














Cash gross margins (9)

69%


69%


68%


70%


68%














Adjusted EBITDA margins (10)

47%


47%


46%


47%


45%














Adjusted EBITDA flow-through rate (11)

48%


25%


56%


65%


35%














FFO (12)



$        151,197


$        167,368


$        146,059


$        497,755


$     394,604














AFFO (13)



$        210,361


$        221,388


$        206,832


$        653,505


$     567,173














Basic FFO per share (14)

$             2.65


$             2.94


$             2.75


$             8.75


$          7.68














Diluted FFO per share (14)

$             2.59


$             2.87


$             2.61


$             8.53


$          7.12














Basic AFFO per share (15)

$             3.69


$             3.89


$             3.89


$            11.49


$         11.04














Diluted AFFO per share (15)

$             3.55


$             3.75


$             3.64


$            11.06


$          9.96








































(1)

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


















Americas Revenues:
























Colocation


$        268,156


$        262,934


$        244,979


$        789,022


$     724,466


Interconnection


79,902


77,102


69,512


232,090


200,265


Managed infrastructure

11,788


12,837


15,214


37,920


43,211


Rental



841


732


978


2,314


2,873



Recurring revenues

360,687


353,605


330,683


1,061,346


970,815


Non-recurring revenues

21,943


17,842


16,729


56,700


48,886



Revenues

382,630


371,447


347,412


1,118,046


1,019,701















EMEA Revenues:
























Colocation


143,721


139,482


130,873


415,938


380,181


Interconnection


15,227


13,440


13,163


41,715


36,858


Managed infrastructure

5,875


5,919


7,179


17,577


21,478


Rental



1,333


1,222


1,588


4,413


5,036



Recurring revenues

166,156


160,063


152,803


479,643


443,553


Non-recurring revenues

11,407


13,904


8,777


36,510


26,619



Revenues

177,563


173,967


161,580


516,153


470,172















Asia-Pacific Revenues:
























Colocation


99,775


94,194


86,614


284,847


245,102


Interconnection


15,439


14,119


12,973


43,082


36,520


Managed infrastructure

4,664


4,710


5,364


14,151


16,308



Recurring revenues

119,878


113,023


104,951


342,080


297,930


Non-recurring revenues

6,578


7,145


6,498


19,126


17,852



Revenues

126,456


120,168


111,449


361,206


315,782















Worldwide Revenues:
























Colocation


511,652


496,610


462,466


1,489,807


1,349,749


Interconnection


110,568


104,661


95,648


316,887


273,643


Managed infrastructure

22,327


23,466


27,757


69,648


80,997


Rental



2,174


1,954


2,566


6,727


7,909



Recurring revenues

646,721


626,691


588,437


1,883,069


1,712,298


Non-recurring revenues

39,928


38,891


32,004


112,336


93,357



Revenues

$        686,649


$        665,582


$        620,441


$     1,995,405


$  1,805,655














(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

$        325,468


$        315,757


$        304,052


$        939,538


$     884,436


Depreciation, amortization and accretion expense

(111,337)


(108,470)


(105,449)


(323,684)


(306,586)


Stock-based compensation expense

(2,514)


(2,551)


(2,145)


(7,371)


(6,243)



Cash cost of revenues

$        211,617


$        204,736


$        196,458


$        608,483


$     571,607















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

















Americas cash cost of revenues

$        105,864


$        102,249


$          97,775


$        303,275


$     283,496


EMEA cash cost of revenues

64,443


62,431


59,593


185,368


176,436


Asia-Pacific cash cost of revenues

41,310


40,056


39,090


119,840


111,675



Cash cost of revenues

$        211,617


$        204,736


$        196,458


$        608,483


$     571,607














(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

$          83,709


$          81,248


$          72,185


$        243,573


$     214,867


Depreciation and amortization expense

(6,213)


(6,268)


(6,495)


(18,566)


(19,650)


Stock-based compensation expense

(9,173)


(9,922)


(7,256)


(27,806)


(22,199)



Cash sales and marketing expenses

$          68,323


$          65,058


$          58,434


$        197,201


$     173,018














(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

$        123,237


$        119,578


$        109,354


$        356,455


$     324,332


Depreciation and amortization expense

(15,718)


(13,532)


(9,405)


(41,818)


(24,797)


Stock-based compensation expense

(22,282)


(21,520)


(18,261)


(63,398)


(58,031)



Cash general and administrative expenses

$          85,237


$          84,526


$          81,688


$        251,239


$     241,504














(7)

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

















Cash sales and marketing expenses

$          68,323


$          65,058


$          58,434


$        197,201


$     173,018


Cash general and administrative expenses

85,237


84,526


81,688


251,239


241,504



Cash SG&A

$        153,560


$        149,584


$        140,122


$        448,440


$     414,522















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
















Americas cash SG&A

$        102,596


$          98,312


$          89,562


$        296,981


$     268,442


EMEA cash SG&A

31,717


32,003


32,201


93,818


95,394


Asia-Pacific cash SG&A

19,247


19,269


18,359


57,641


50,686



Cash SG&A

$        153,560


$        149,584


$        140,122


$        448,440


$     414,522














(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

$        140,883


$        139,133


$        135,131


$        431,465


$     381,440


Depreciation, amortization and accretion expense

133,268


128,270


121,349


384,068


351,033


Stock-based compensation expense

33,969


33,993


27,662


98,575


86,473


Acquisition costs

13,352


9,866


(281)


24,374


580



Adjusted EBITDA

$        321,472


$        311,262


$        283,861


$        938,482


$     819,526















The geographic split of our adjusted EBITDA is presented below:

















Americas income from operations

$          81,914


$          77,653


$          72,614


$        241,033


$     212,088


Americas depreciation, amortization and accretion expense

70,118


68,692


66,594


205,621


188,008


Americas stock-based compensation expense

25,810


25,883


21,148


75,184


67,118


Americas acquisition costs

(3,672)


(1,342)


(281)


(4,048)


549



Americas adjusted EBITDA

174,170


170,886


160,075


517,790


467,763















EMEA income from operations

29,865


36,110


38,848


111,516


102,818


EMEA depreciation, amortization and accretion expense

33,055


27,826


27,650


87,574


85,453


EMEA stock-based compensation expense

4,338


4,397


3,288


12,342


9,990


EMEA acquisition costs

14,145


11,200


-


25,535


81



EMEA adjusted EBITDA

81,403


79,533


69,786


236,967


198,342















Asia-Pacific income from operations

29,104


25,370


23,669


78,916


66,534


Asia-Pacific depreciation, amortization and accretion expense

30,095


31,752


27,105


90,873


77,572


Asia-Pacific stock-based compensation expense

3,821


3,713


3,226


11,049


9,365


Asia-Pacific acquisition costs

2,879


8


-


2,887


(50)



Asia-Pacific adjusted EBITDA

65,899


60,843


54,000


183,725


153,421

















Adjusted EBITDA

$        321,472


$        311,262


$        283,861


$        938,482


$     819,526














(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%


72%


72%


73%


72%















EMEA cash gross margins

64%


64%


63%


64%


62%















Asia-Pacific cash gross margins

67%


67%


65%


67%


65%














(10)

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

















Americas adjusted EBITDA margins

46%


46%


46%


46%


46%















EMEA adjusted EBITDA margins

46%


46%


43%


46%


42%















Asia-Pacific adjusted EBITDA margins

52%


51%


48%


51%


49%














(11)

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















Adjusted EBITDA - current period

$        321,472


$        311,262


$        283,861


$        938,482


$     819,526


Less adjusted EBITDA - prior period

(311,262)


(305,748)


(275,277)


(853,503)


(760,010)



Adjusted EBITDA growth

$          10,210


$            5,514


$            8,584


$          84,979


$       59,516















Revenues - current period

$        686,649


$        665,582


$        620,441


$     1,995,405


$  1,805,655


Less revenues - prior period

(665,582)


(643,174)


(605,161)


(1,863,723)


(1,636,632)



Revenue growth

$          21,067


$          22,408


$          15,280


$        131,682


$     169,023















Adjusted EBITDA flow-through rate

48%


25%


56%


65%


35%



























(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 


$          41,132


$          59,459


$          42,961


$        177,043


$       94,377



Net (income) loss attributable to redeemable non-controlling interests

-


-


(120)


-


1,179


Net income attributable to Equinix

41,132


59,459


42,841


177,043


95,556


Adjustments:













Real estate depreciation and amortization

109,856


107,321


103,781


319,825


304,020



Gain/loss on disposition of real estate property

182


559


31


803


247



Adjustments for FFO from unconsolidated joint ventures

27


29


28


84


84



Non-controlling interests' share of above adjustments

-


-


(622)


-


(5,303)



FFO 


$        151,197


$        167,368


$        146,059


$        497,755


$     394,604



























(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 



$        151,197


$        167,368


$        146,059


$        497,755


$     394,604


Adjustments:













Installation revenue adjustment

8,527


12,474


6,079


29,655


18,496



Straight-line rent expense adjustment

1,251


2,017


3,353


6,469


9,713



Amortization of deferred financing costs

3,934


3,848


3,794


11,640


15,076



Stock-based compensation expense

33,969


33,993


27,662


98,575


86,473



Non-real estate depreciation expense

15,946


13,605


9,397


42,244


24,754



Amortization expense

6,601


6,450


6,844


19,346


20,953



Accretion expense

865


894


1,327


2,653


1,306



Recurring capital expenditures

(25,910)


(27,330)


(19,775)


(75,613)


(72,242)



Loss on debt extinguishment

-


-


-


-


51,183



Acquisition costs

13,352


9,866


(281)


24,374


580



Income tax expense adjustment

643


(1,784)


22,240


(3,549)


19,469



Adjustments for AFFO from unconsolidated joint ventures

(14)


(13)


(18)


(44)


(58)



Non-controlling interests share of above adjustments

-


-


151


-


(3,134)



AFFO


$        210,361


$        221,388


$        206,832


$        653,505


$     567,173














(14)

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















FFO, basic


$        151,197


$        167,368


$        146,059


$        497,755


$     394,604



Interest on convertible debt

3,279


3,383


2,988


9,437


15,288


FFO, diluted


$        154,476


$        170,751


$        149,047


$        507,192


$     409,892















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 

57,082


56,935


53,137


56,894


51,369


 Effect of dilutive securities: 












 Convertible debt 

1,970


1,958


3,494


1,956


5,715



 Employee equity awards 

626


563


480


627


460


 Shares used in computing diluted FFO per share 

59,678


59,456


57,111


59,477


57,544














(15)

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















AFFO, basic


$        210,361


$        221,388


$        206,832


$        653,505


$     567,173



Interest on convertible debt

1,390


1,557


1,208


4,244


6,003


AFFO, diluted


$        211,751


$        222,945


$        208,040


$        657,749


$     573,176















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 

57,082


56,935


53,137


56,894


51,369


 Effect of dilutive securities: 












 Convertible debt 

1,970


1,958


3,494


1,956


5,715



 Employee equity awards 

626


563


480


627


460


 Shares used in computing diluted AFFO per share 

59,678


59,456


57,111


59,477


57,544

 

SOURCE Equinix, Inc.

Equinix Investor Relations Contacts: Katrina Rymill, Equinix, Inc., (650) 598-6583, krymill@equinix.com, OR Paul Thomas, Equinix, Inc., (650) 598-6442, pthomas@equinix.com, OR Equinix Media Contacts: Liam Rose, Equinix, Inc., (650) 598-6590, lrose@equinix.com