(Source: Business Wire)
Equinix, Inc. (Nasdaq:EQIX), a provider of global data center services,
today reported quarterly results for the quarter ended September 30,
2009.
Revenues were $227.6 million for the third quarter, a 7% increase over
the previous quarter, and a 24% increase over the same quarter last
year. Recurring revenues, consisting primarily of colocation,
interconnection and managed services, were $218.3 million for the third
quarter, a 6% increase over the previous quarter, and a 26% increase
over the same quarter last year. Non-recurring revenues were $9.3
million in the quarter, consisting primarily of professional services
and installation fees.
Cost of revenues was $126.0 million for the third quarter, a 6% increase
over the previous quarter and a 15% increase over the same quarter last
year. Excluding depreciation, amortization, accretion and stock-based
compensation of $44.1 million for the third quarter, cost of revenues
was $81.9 million for the third quarter, which the Company refers to as
cash cost of revenues, a 9% increase over the previous quarter, and a
16% increase over the same quarter last year. Cash gross margins,
defined as gross profit less depreciation, amortization, accretion and
stock-based compensation, divided by revenues, for the quarter were 64%,
down from 65% the previous quarter and up from 62% the same quarter last
year.
Selling, general and administrative expenses were $54.6 million for the
third quarter, a 1% increase from the previous quarter and a 6% increase
over the same quarter last year. Excluding depreciation, amortization
and stock-based compensation of $15.0 million for the third quarter,
selling, general and administrative expenses were $39.6 million for the
third quarter, which the Company refers to as cash selling, general and
administrative expenses, a 3% increase over the previous quarter, and a
9% increase over the same quarter last year. Interest and other
expenses, net, was $19.4 million for the quarter, a 54% increase over
the previous quarter, and a 23% increase over the same quarter last year.
Net income for the third quarter was $18.8 million compared to net
income of $17.4 million in the previous quarter and net income of $5.6
million in the same quarter last year. This represents a basic net
income per share of $0.49 based on a weighted average share count of
38.8 million and a diluted net income per share of $0.47 based on a
weighted average share count of 39.9 million for the third quarter of
2009.
Adjusted EBITDA, defined as income or loss from operations before
depreciation, amortization, accretion, stock-based compensation expense,
restructuring charges and acquisition costs, for the third quarter was
$106.0 million, an increase of 7% from the previous quarter, and up 38%
from the same quarter last year.
"Equinix delivered strong results in the third quarter, driven by solid
demand and sound execution across all areas of the business," said Steve
Smith, president and CEO of Equinix."As we have continued our
disciplined expansion strategy throughout the challenging macroeconomic
climate of the past several quarters, we are well positioned to continue
building upon our global market leadership position, and we continue to
see a strong opportunity in front of us as the economy begins to
recover."
Capital expenditures in the third quarter were $88.7 million, of which
$14.7 million was attributed to ongoing capital expenditures and $74.0
million was attributed to expansion capital expenditures.
The Company generated cash from operating activities of $107.5 million
for the third quarter as compared to $78.7 million in the previous
quarter, and $63.3 million the same quarter last year. Cash used in
investing activities was $260.5 million in the third quarter as compared
to $204.1 million in the previous quarter and $82.4 million for the same
quarter last year.
As of September 30, 2009, the Company's cash, cash equivalents and
investments were $627.4 million, as compared to $603.4 million as of
June 30, 2009.
Company Metrics
To view Equinix's Non-Financial Metrics, please visit the Investors
section of Equinix's web site at www.equinix.com/investors
and click on View Equinix's Non-Financial Metrics
Changes in Estimates -- Property, Plant and Equipment
During the three months ended September 30, 2009, the Company reassessed
the estimated useful lives of its property, plant and equipment as part
of a review of the assumptions used to estimate the useful lives of its
property, plant and equipment. This reassessment has generally resulted
in extended estimated useful lives for many of the Company's property,
plant and equipment categories, such as IBX plant and machinery,
resulting in a decrease to depreciation expense.
The change in the estimated useful lives of certain of the Company's
property, plant and equipment is accounted for as a change in accounting
estimate on a prospective basis from the three months ended September
30, 2009 under the accounting standard related to a change in accounting
estimate.
The change in estimated useful lives of certain of the Company's
property, plant and equipment, which has decreased the Company's
depreciation expense by $4.8 million for the three and nine months ended
September 30, 2009, has resulted in the following increases (in
thousands, except per share amounts):
Three months ended Nine months ended
September 30, 2009
Income from operations $ 4,804 $ 4,804
Net income 2,993 2,993
Earnings per share:
Basic 0.08 0.08
Diluted 0.08 0.08
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Adoption of Recent Accounting Pronouncements
As a result of the Company's adoption of a FASB accounting standard
related to the accounting for convertible debt instruments that may be
settled in cash upon conversion, including partial cash settlement,
effective January 1, 2009 and a FASB accounting standard related to the
accounting for instruments granted in share-based payment transactions
that are considered participating securities prior to vesting and should
therefore be included in the calculation of earnings per share effective
January 1, 2009, the Company adjusted its comparative condensed
consolidated financial statements previously issued to reflect such
changes in accounting principle.
Business Outlook
For the full year of 2009, total revenues are expected to be in the
range of $875.0 to $880.0 million. Total year cash gross margins are
expected to range between approximately 63% and 64%. Cash selling,
general and administrative expenses are expected to be approximately
$160.0 million. Adjusted EBITDA for the year is expected to be between
$395.0 and $400.0 million. Capital expenditures for 2009 are expected to
be in the range of $390.0 to $400.0 million, comprised of approximately
$60.0 million of ongoing capital expenditures and $330.0 to $340.0
million of expansion capital expenditures.
The Company will discuss its results and guidance on its quarterly
conference call on Wednesday, October 21, 2009, at 5:30 p.m. ET (2:30
p.m. PT). To hear the conference call live, please dial 1-773-756-4788
(domestic and international) and reference the passcode (EQIX). A
simultaneous live Webcast of the call will be available over the
Internet at www.equinix.com,
under the Investor Relations heading.
A replay of the call will be available beginning on Wednesday, October
21, 2009, at 7:30 p.m. (ET) through November 21, 2009 by dialing
1-203-369-1619. In addition, the Webcast will be available on the
company's Web site at www.equinix.com.
No password is required for either method of replay.
About Equinix
Equinix, Inc. (Nasdaq:EQIX) provides global data center services that
ensure the vitality of the information-driven world. Global enterprises,
content and financial companies, and network service providers rely upon
Equinix's insight and expertise to protect and connect their most valued
information assets. Equinix operates 45 International Business Exchange
(IBX®) data centers across 18 markets in North America, Europe and
Asia-Pacific.
Important information about Equinix is routinely posted on the investor
relations page of its website located at www.equinix.com/investors.
We encourage you to check Equinix's website regularly for the most
up-to-date information.
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, 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 to evaluate its
operations. In presenting these non-GAAP financial measures, Equinix
excludes certain non-cash or non-recurring items that it believes are
not good indicators of the Company's current or future operating
performance. These non-cash or non-recurring items are depreciation,
amortization, accretion, stock-based compensation, restructuring charges
and acquisition costs.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. Equinix excludes these non-cash or non-recurring 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
competitor base.
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 ten 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
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 charge liabilities, as
these expenses represent costs, which Equinix believes are not
meaningful in evaluating the Company's current operations. Equinix
excludes non-cash stock-based compensation expense as it represents
expense attributed to stock 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 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
and acquisition costs are unique transactions, and consequently, does
not consider these items as a normal component of expenses or income
related to current and ongoing operations.
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 does not provide forward-looking guidance for certain financial
data, such as depreciation, amortization, accretion, net income (loss)
from operations, cash generated from operating activities and cash used
in investing activities, and as a result, is not able to provide a
reconciliation of GAAP to non-GAAP financial measures for
forward-looking data. Equinix intends to calculate the various non-GAAP
financial measures in future periods consistent with how it was
calculated for the three and nine months ended September 30, 2009 and
2008, presented within this press release.
Forward Looking Statements
This press release contains forward-looking statements that involve
risks and uncertainties. Actual results may differ materially from
expectations discussed in such forward-looking statements. Factors that
might cause such differences include, but are not limited to, the
challenges of acquiring, operating and constructing IBX centers and
developing, deploying and delivering Equinix services; unanticipated
costs or difficulties relating to the integration of companies we have
acquired or will acquire into Equinix; a failure to receive significant
revenue from customers in recently built out or acquired data centers;
failure to complete any financing arrangements contemplated from time to
time; competition from existing and new competitors; the ability to
generate sufficient cash flow or otherwise obtain funds to repay new or
outstanding indebtedness; the loss or decline in business from our key
customers; and other risks described from time to time in Equinix's
filings with the Securities and Exchange Commission. In particular, see
Equinix's recent quarterly and annual reports filed with the Securities
and Exchange Commission, copies of which are available upon request from
Equinix. Equinix does not assume any obligation to update the
forward-looking information contained in this press release.
Equinix and IBX are registered trademarks of Equinix, Inc.
International Business Exchange is a trademark of Equinix, Inc.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP PRESENTATION
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
As Adjusted As Adjusted
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
Recurring revenues $ 218,334 $ 205,313 $ 173,517 $ 614,934 $ 487,271
Non-recurring revenues 9,224 7,855 10,218 25,023 26,726
Revenues 227,558 213,168 183,735 639,957 513,997
Cost of revenues 126,007 118,534 109,905 356,346 306,453
Gross profit 101,551 94,634 73,830 283,611 207,544
Operating expenses:
Sales and marketing 15,543 16,369 16,009 46,315 46,650
General and administrative 39,071 37,456 35,529 111,677 111,350
Restructuring charges - (220 ) 799 (6,053 ) 799
Acquisition costs 1,379 - - 1,379 -
Total operating expenses 55,993 53,605 52,337 153,318 158,799
Income from operations 45,558 41,029 21,493 130,293 48,745
Interest and other income (expense):
Interest income 353 680 1,968 1,949 7,820
Interest expense (22,256 ) (15,912 ) (15,671 ) (51,619 ) (45,179 )
Other-than-temporary impairment loss on investments - - (1,527 ) (2,687 ) (1,527 )
Other income (expense) 2,484 2,610 (520 ) 3,675 602
Total interest and other, net (19,419 ) (12,622 ) (15,750 ) (48,682 ) (38,284 )
Net income before income taxes 26,139 28,407 5,743 81,611 10,461
Income tax expense (7,327 ) (10,967 ) (187 ) (29,902 ) (400 )
Net income $ 18,812 $ 17,440 $ 5,556 $ 51,709 $ 10,061
Net income per share:
Basic net income per share $ 0.49 $ 0.46 $ 0.15 $ 1.35 $ 0.27
Diluted net income per share $ 0.47 $ 0.44 $ 0.15 $ 1.32 $ 0.27
Shares used in computing basic net income per share 38,787 38,152 37,268 38,270 36,976
Shares used in computing diluted net income per share 39,887 39,318 38,023 39,305 37,854
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EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
As Adjusted As Adjusted
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
Recurring revenues $ 218,334 $ 205,313 $ 173,517 $ 614,934 $ 487,271
Non-recurring revenues 9,224 7,855 10,218 25,023 26,726
Revenues (1) 227,558 213,168 183,735 639,957 513,997
Cash cost of revenues (2) 81,931 75,177 70,601 229,047 198,450
Cash gross profit (3) 145,627 137,991 113,134 410,910 315,547
Cash operating expenses (4):
Cash sales and marketing expenses(5) 11,453 12,204 12,082 34,637 34,470
Cash general and administrative expenses (6) 28,138 26,253 24,079 79,325 72,701
Total cash operating expenses (7) 39,591 38,457 36,161 113,962 107,171
Adjusted EBITDA (8) $ 106,036 $ 99,534 $ 76,973 $ 296,948 $ 208,376
Cash gross margins (9) 64 % 65 % 62 % 64 % 61 %
Adjusted EBITDA margins (10) 47 % 47 % 42 % 46 % 41 %
Adjusted EBITDA flow-through rate (11) 45 % 59 % 67 % 71 % 48 %
(1 ) The geographic split of our revenues on a services basis is presented below:
United States Revenues:
Colocation $ 109,161 $ 104,337 $ 87,988 $ 312,502 $ 246,338
Interconnection 22,494 21,956 20,756 65,966 59,881
Managed infrastructure 529 522 545 1,620 1,602
Rental 123 118 133 402 498
Recurring revenues 132,307 126,933 109,422 380,490 308,319
Non-recurring revenues 4,027 2,813 5,437 10,484 12,983
Revenues 136,334 129,746 114,859 390,974 321,302
Asia-Pacific Revenues:
Colocation 22,768 20,847 14,592 62,833 39,888
Interconnection 2,831 2,516 1,897 7,643 5,080
Managed infrastructure 3,515 3,590 3,432 10,640 10,619
Rental - - - - -
Recurring revenues 29,114 26,953 19,921 81,116 55,587
Non-recurring revenues 1,304 1,413 1,658 4,205 4,769
Revenues 30,418 28,366 21,579 85,321 60,356
Europe Revenues:
Colocation 51,855 46,625 39,358 138,707 110,035
Interconnection 1,910 1,662 1,462 4,957 3,517
Managed infrastructure 2,976 3,019 3,233 9,268 9,499
Rental 172 121 121 396 314
Recurring revenues 56,913 51,427 44,174 153,328 123,365
Non-recurring revenues 3,893 3,629 3,123 10,334 8,974
Revenues 60,806 55,056 47,297 163,662 132,339
Worldwide Revenues:
Colocation 183,784 171,809 141,938 514,042 396,261
Interconnection 27,235 26,134 24,115 78,566 68,478
Managed infrastructure 7,020 7,131 7,210 21,528 21,720
Rental 295 239 254 798 812
Recurring revenues 218,334 205,313 173,517 614,934 487,271
Non-recurring revenues 9,224 7,855 10,218 25,023 26,726
Revenues $ 227,558 $ 213,168 $ 183,735 $ 639,957 $ 513,997
(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 $ 126,007 $ 118,534 $ 109,905 $ 356,346 $ 306,453
Depreciation, amortization and accretion expense (42,189 ) (41,899 ) (38,047 ) (122,860 ) (104,568 )
Stock-based compensation expense (1,887 ) (1,458 ) (1,257 ) (4,439 ) (3,435 )
Cash cost of revenues $ 81,931 $ 75,177 $ 70,601 $ 229,047 $ 198,450
The geographic split of our cash cost of revenues is presented below:
U.S. cash cost of revenues $ 43,123 $ 40,054 $ 37,506 $ 121,778 $ 104,099
Asia-Pacific cash cost of revenues 10,697 10,451 8,848 30,959 25,489
Europe cash cost of revenues 28,111 24,672 24,247 76,310 68,862
Cash cost of revenues $ 81,931 $ 75,177 $ 70,601 $ 229,047 $ 198,450
(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, restructuring charges, acquisition costs and gains on asset sales. 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 $ 15,543 $ 16,369 $ 16,009 $ 46,315 $ 46,650
Depreciation and amortization expense (1,409 ) (1,327 ) (1,560 ) (3,979 ) (4,759 )
Stock-based compensation expense (2,681 ) (2,838 ) (2,367 ) (7,699 ) (7,421 )
Cash sales and marketing expenses $ 11,453 $ 12,204 $ 12,082 $ 34,637 $ 34,470
(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 $ 39,071 $ 37,456 $ 35,529 $ 111,677 $ 111,350
Depreciation and amortization expense (1,468 ) (2,040 ) (2,512 ) (5,460 ) (7,554 )
Stock-based compensation expense (9,465 ) (9,163 ) (8,938 ) (26,892 ) (31,095 )
Cash general and administrative expenses $ 28,138 $ 26,253 $ 24,079 $ 79,325 $ 72,701
(7 ) Our cash operating expenses, or cash SG&A, as defined above, is presented below:
Cash sales and marketing expenses $ 11,453 $ 12,204 $ 12,082 $ 34,637 $ 34,470
Cash general and administrative expenses 28,138 26,253 24,079 79,325 72,701
Cash SG&A $ 39,591 $ 38,457 $ 36,161 $ 113,962 $ 107,171
The geographic split of our cash operating expenses, or cash SG&A, is presented below:
U.S. cash SG&A $ 25,187 $ 23,678 $ 22,728 $ 72,195 $ 65,628
Asia-Pacific cash SG&A 5,023 4,996 4,638 14,709 14,358
Europe cash SG&A 9,381 9,783 8,795 27,058 27,185
Cash SG&A $ 39,591 $ 38,457 $ 36,161 $ 113,962 $ 107,171
(8 ) We define adjusted EBITDA as income from operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges and acquisition costs as presented below:
Income from operations $ 45,558 $ 41,029 $ 21,493 $ 130,293 $ 48,745
Depreciation, amortization and accretion expense 45,066 45,266 42,119 132,299 116,881
Stock-based compensation expense 14,033 13,459 12,562 39,030 41,951
Restructuring charges A service of YellowBrix, Inc.
