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Equinix Reports Fourth Quarter And Full Year 2017 Results
[February 14, 2018]

Equinix Reports Fourth Quarter And Full Year 2017 Results


REDWOOD CITY, Calif., Feb. 14, 2018 /PRNewswire/ --

  • Delivered 2017 annual revenues of $4.4 billion, an increase of 21% year-over-year; 11% growth on a normalized and constant currency basis
  • Further strengthened reach through M&A activity in Q4 2017 and early Q1 2018, in addition to active pipeline of 30 organic expansions currently underway
  • Launched next generation of Platform Equinix® that will physically and virtually connect IBX® data centers globally, enabling customers to discover and dynamically connect to any other customer across any Equinix location
  • Expects to deliver 2018 revenues over $5 billion

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly and annual results for the quarter and the year ended December 31, 2017. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements.

2017 Results Summary

  • Revenues from continuing operations
    • $4,368 million, a 21% increase over the previous year
    • Includes $359 million of revenues from the acquisition of 29 Verizon data centers
    • Includes $17 million of revenues from Itconic and Istanbul 2 ("IS2") acquisitions
  • Operating Income
    • $809 million, a 31% increase over the previous year
  • Adjusted EBITDA
    • $2,052 million, a 47% adjusted EBITDA margin
    • Includes $54 million of integration costs
  • Net Income from Continuing Operations
    • $233 million
  • AFFO
    • $1,437 million, a 33% increase over the previous year
    • Includes $54 million of integration costs

2018 Annual Guidance Summary

  • Revenues from continuing operations
    • >$5,010 million, a 15% increase over the previous year; a normalized and constant currency increase of 10% excluding Verizon data center assets
  • Adjusted EBITDA
    • >$2,385 million or a 48% adjusted EBITDA margin
    • Assumes $35 million of integration costs
  • AFFO
    • >$1,635 million, a 14% increase over the previous year
    • Assumes recurring capital expenditures of approximately $200 million
    • Assumes $35 million of integration costs

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.

Quote

Peter Van Camp, Executive Chairman and Interim CEO and President, Equinix:

"In addition to strong financial performance, Equinix achieved a number of significant milestones around interconnection, innovation and acquisitions in 2017 that add even more value to our role as a strategic partner to companies in the execution of their digital business strategies. As we approach our 20th anniversary and reflect on what we've built, we believe our platform will become even more important for our customers in the years to come. We have a clear vision of our strategy and the opportunities ahead, and we are looking forward to another successful year."

Business Highlights

  • Equinix further strengthened the reach of its global platform through M&A activity in Q4 2017 and early Q1 2018. Today, Equinix announced the $800 million acquisition of the Infomart Dallas - one of the most-connected facilities in the U.S. In December, Equinix announced a $791 million definitive agreement to acquire Australian data center provider Metronode, which will add 10 data centers and four new metros (Adelaide, Brisbane, Canberra and Perth) to existing Equinix operations in Sydney and Melbourne. Upon closing of these acquisitions, Equinix's percentage of owned assets revenue will surpass 45%, and Platform Equinix will span 200 International Business Exchange™ (IBX®) data centers, 52 markets and 24 countries. Excluding these acquisitions, Equinix has invested more than $19 billion in capital in building out the global footprint of Platform Equinix since the company was founded.
  • Equinix also continues to expand the reach of its global platform through organic expansion, with 30 projects currently underway, half of which are in the EMEA region. Today, Equinix announced new expansions in the Culpeper, Houston, London, Paris, São Paulo, Silicon Valley, Sofia and Washington, D.C. metros totaling more than $500 million of capital expenditures.  The global reach of Equinix continues to attract companies seeking to locate their infrastructure closer to the digital edge, and in Q4 2017, customer deployments in all three regions of Platform Equinix (Americas, EMEA and Asia-Pacific) represented 58% of total recurring revenues.
  • In Q4, Equinix announced the next phase in the evolution of its global platform that will set the stage for the future introduction of a series of coverage, connectivity and service initiatives intended to deliver increasing value to customers by enabling them to rapidly scale their digital businesses. As a part of this initiative, Equinix is physically and virtually connecting its global data center footprint, enabling customers to discover and dynamically connect to any other customer across any Equinix location. Services are delivered through Equinix Cloud Exchange™ which is evolving from pure cloud connectivity to a multi-purpose interconnection exchange and has been renamed Equinix Cloud Exchange Fabric™ (ECX Fabric). In addition to enhancing its service capabilities, Equinix is also expanding the availability of its interconnection services to more locations, and in Q4 2017, it announced the expansion of Equinix Internet Exchange to nine new metros in the EMEA and Americas regions.
  • Equinix achieved strong growth from enterprise customers in Q4 2017, with revenues growing twice as fast as any other vertical, as digital transformation is forcing firms to change how they interconnect users and clouds across multiple locations. Equinix has now captured 46% of the Fortune 500, and one-third of the Forbes Global 2000 companies.

Business Outlook

Equinix adopted ASC 606, Revenue from Contracts with Customers ("ASC 606") using the modified retrospective method effective January 1, 2018.  The expected impact of adoption is included in the guidance provided.  Equinix guidance excludes the anticipated benefit of either the Metronode or the Infomart Dallas acquisitions.

For the first quarter of 2018, Equinix expects revenues to range between $1,204 and $1,212 million, an increase of 1% quarter over quarter at the midpoint, on both an as-reported and a normalized and constant currency basis. This guidance includes a positive foreign currency benefit of $1 million when compared to the average FX rates in Q4 2017, a negative $3 million impact from the adoption of ASC 606 and non-recurring revenues of approximately 5% of total revenues. Cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to approximate 21% of revenues. Adjusted EBITDA is expected to range between $549 and $557 million, which includes a less than $1 million positive foreign currency benefit when compared to the average FX rates in Q4 2017, $20 million of seasonally adjusted costs and $15 million of integration costs related to acquisitions. Recurring capital expenditures are expected to be approximately $40 million.

For the full year of 2018, total revenues are expected to exceed $5,010 million, an increase of 15% year over year, or a normalized and constant currency increase of 10% excluding Verizon data center assets. This guidance includes a positive foreign currency benefit of $5 million when compared to prior Equinix guidance rates, $65 million of revenues from the Itconic and IS2 acquisitions, a negative impact of $15 million from the adoption of ASC 606 and non-recurring revenues of approximately 5% of total revenues. Total year cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between 19% and 20% of revenues. Adjusted EBITDA is expected to exceed $2,385 million, an increase of 16% year over year. This adjusted EBITDA includes a foreign currency benefit of $2 million when compared to prior Equinix guidance rates, $23 million of adjusted EBITDA from the Itconic and IS2 acquisitions and an expected $35 million in integration costs. AFFO is expected to exceed $1,635 million, an increase of 14% year over year. Non-recurring capital expenditures are expected to range between $1,700 and $1,800 million and recurring capital expenditures are expected to approximate $200 million.

The U.S. dollar exchange rates used for 2018 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.15 to the Euro, $1.34 to the Pound, ¥112 to the U.S. dollar, S$1.34 to the U.S. dollar, and R$3.31 to the U.S. dollar. Full year revenue guidance absorbs a negative $54 million from our current foreign currency hedges relative to market rates on December 31, 2017. The Q4 2017 global revenue breakdown by currency for the Euro, Pound, Japanese Yen, Singapore Dollar and Brazilian Real is 19%, 9%, 6%, 5% and 4%, respectively.

The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses. The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. As a result of the adoption of ASC 606 on January 1, 2018, Equinix will capitalize the incremental costs of obtaining a contract if the contract's term exceeds one year. The capitalized costs of obtaining contracts are amortized over the estimated life of the service. From Q1 2018, Equinix will include a contract cost adjustment in its AFFO calculation.

Q4 2017 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended December 31, 2017, along with its future outlook, in its quarterly conference call on Wednesday, February 14, 2018, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-517-308-9482 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call, through Wednesday, May 2, 2018, by dialing 1-203-369-1996 and entering passcode (2018). In addition, the webcast will be available on the company's website at www.equinix.com/investors (no password required).

Investor Presentation and Supplemental Financial Information

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

Additional Resources

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

Non-GAAP Financial Measures

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

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

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

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

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

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

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

Equinix includes an adjustment for revenues from installation fees, since installation fees are deferred and recognized ratably over the 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 revenues 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 its debt financings that have no current or future cash obligations. Equinix excludes gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX data centers or other assets that are required to support current revenues. Equinix also excludes net income or loss from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance. From Q1 2018, as a result of the adoption of ASC 606, Equinix will include a contract cost adjustment. Although costs of obtaining contracts are generally incurred and paid during the period of obtaining the contracts, under ASC 606, contract costs are capitalized and amortized over the estimated life of the service. This adjustment to contract costs is intended to isolate the cash activity within the amortized results in the consolidated statement of operations.

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

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

Investors should note that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income or loss from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release, with the exception of including a contract cost adjustment as a result of the adoption of ASC 606 beginning in Q1 2018.

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, unanticipated difficulties in closing pending acquisitions; the challenges of acquiring, operating and constructing IBX data centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix filings with the Securities and Exchange Commission. In particular, see recent Equinix quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.

Equinix, IBX and Platform Equinix are registered trademarks of Equinix, Inc. Equinix Cloud Exchange, Equinix Cloud Exchange Fabric and International Business Exchange are trademarks of Equinix, Inc.



EQUINIX, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



Three Months Ended


Twelve Months Ended


December 31, 2017


September 30, 2017


December 31, 2016


December 31, 2017


December 31, 2016

Recurring revenues

$

1,122,599



$

1,089,033



$

892,442



$

4,120,120



$

3,417,374


Non-recurring revenues

77,622



63,228



50,205



248,308



194,615


Revenues

1,200,221



1,152,261



942,647



4,368,428



3,611,989


Cost of revenues

619,625



582,360



465,921



2,193,149



1,820,870


Gross profit

580,596



569,901



476,726



2,175,279



1,791,119


Operating expenses:










Sales and marketing

153,612



157,619



113,384



581,724



438,742


General and administrative

187,816



185,336



178,956



745,906



694,561


Acquisition costs

7,125



2,083



(440)



38,635



64,195


Impairment charges









7,698


(Gain) loss on asset sales





371





(32,816)


Total operating expenses

348,553



345,038



292,271



1,366,265



1,172,380


Income from continuing operations

232,043



224,863



184,455



809,014



618,739












Interest income

3,255



2,291



948



13,075



3,476


Interest expense

(126,144)



(121,828)



(98,761)



(478,698)



(392,156)


Other income (expense)

8,668



(1,076)



(1,707)



9,213



(57,924)


Loss on debt extinguishment

(23,669)



(22,156)



(1,777)



(65,772)



(12,276)


Total interest and other, net

(137,890)



(142,769)



(101,297)



(522,182)



(458,880)


Income from continuing operations before income taxes

94,153



82,094



83,158



286,832



159,859


Income tax expense

(28,938)



(2,194)



(19,494)



(53,850)



(45,451)


Net income from continuing operations

65,215



79,900



63,664



232,982



114,408


Net income (loss) from discontinued operations, net of tax





(1,914)





12,392


Net income

$

65,215



$

79,900



$

61,750



$

232,982



$

126,800


Net income per share:










Basic net income per share from continuing operations

$

0.83



$

1.02



$

0.89



$

3.03



$

1.63


Basic net income (loss) per share from discontinued operations





(0.03)





0.18


Basic net income per share

$

0.83



$

1.02



$

0.86



$

3.03



$

1.81


Diluted net income per share from continuing operations

$

0.82



$

1.02



$

0.88



$

3.00



$

1.62


Diluted net income (loss) per share from discontinued operations





(0.02)





0.17


Diluted net income per share

$

0.82



$

1.02



$

0.86



$

3.00



$

1.79


Shares used in computing basic net income per share

78,543



78,055



71,389



76,854



70,117


Shares used in computing diluted net income per share

79,128



78,719



71,959



77,535



70,816












 

EQUINIX, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)



Three Months Ended


Twelve Months Ended


December 31, 2017


September 30, 2017


December 31, 2016


December 31, 2017


December 31, 2016

Net income

$

65,215



$

79,900



$

61,750



$

232,982



$

126,800












Other comprehensive income (loss), net of tax:










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

45,439



100,909



(292,355)



454,269



(507,420)


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

99



245



(133)



14



2,249


Unrealized gain (loss) on cash flow hedges

(2,427)



(13,070)



15,762



(54,895)



19,551


Net investment hedge CTA gain (loss)

(44,171)



(60,723)



41,342



(235,292)



45,505


Net actuarial gain (loss) on defined benefit plans

(182)



13



11



(143)



32


Total other comprehensive income (loss), net of tax

(1,242)



27,374



(235,373)



163,953



(440,083)












Comprehensive income (loss), net of tax

$

63,973



$

107,274



$

(173,623)



$

396,935



$

(313,283)


 

EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)



December 31,
2017


December 31,
2016

Assets




Cash and cash equivalents

$

1,412,517



$

748,476


Short-term investments

28,271



3,409


Accounts receivable, net

576,313



396,245


Other current assets

232,027



319,396


Total current assets

2,249,128



1,467,526


Long-term investments

9,243



10,042


Property, plant and equipment, net

9,394,602



7,199,210


Goodwill

4,411,762



2,986,064


Intangible assets, net

2,384,972



719,231


Other assets

246,351



226,298


Total assets

$

18,696,058



$

12,608,371


Liabilities and Stockholders' Equity




Accounts payable and accrued expenses

$

719,257



$

581,739


Accrued property, plant and equipment

224,968



144,842


Current portion of capital lease and other financing obligations

78,705



101,046


Current portion of mortgage and loans payable

64,491



67,928


Other current liabilities

159,914



133,140


Total current liabilities

1,247,335



1,028,695


Capital lease and other financing obligations, less current portion

1,620,256



1,410,742


Mortgage and loans payable, less current portion

1,393,118



1,369,087


Senior notes

6,923,849



3,810,770


Other liabilities

661,710



623,248


Total liabilities

11,846,268



8,242,542


Common stock

79



72


Additional paid-in capital

10,121,323



7,413,519


Treasury stock

(146,320)



(147,559)


Accumulated dividends

(2,592,792)



(1,969,645)


Accumulated other comprehensive loss

(785,189)



(949,142)


Retained earnings

252,689



18,584


Total stockholders' equity

6,849,790



4,365,829


Total liabilities and stockholders' equity

$

18,696,058



$

12,608,371










Ending headcount by geographic region is as follows:








Americas headcount

3,154



2,510


EMEA headcount

2,560



2,063


Asia-Pacific headcount

1,559



1,420


Total headcount

7,273



5,993


 

EQUINIX, INC.

Summary of Debt Principal Outstanding

(in thousands)

(unaudited)



December 31,
2017


December 31,
2016





Capital lease and other financing obligations

$

1,698,961



$

1,511,788






Term loans, net of debt discount and debt issuance costs

1,406,686



1,390,771


Mortgage payable and other loans payable

50,923



46,244


Plus: debt discount and issuance costs, net

8,615



20,949


Total mortgage and loans payable principal

1,466,224



1,457,964






Senior notes, net of debt issuance costs

6,923,849



3,810,770


Plus: debt issuance costs

78,151



39,230


Total senior notes principal

7,002,000



3,850,000






Total debt principal outstanding

$

10,167,185



$

6,819,752


 

EQUINIX, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)




Three Months Ended


Twelve Months Ended



December 31,
2017


September 30, 2017


December 31, 2016


December 31,
2017


December 31,
2016

Cash flows from operating activities:











Net income

$

65,215



$

79,900



$

61,750



$

232,982



$

126,800



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











Depreciation, amortization and accretion

279,774



277,719



212,268



1,028,892



843,510



Stock-based compensation

45,898



45,654



39,837



175,500



155,567



Amortization of debt issuance costs and debt discounts

4,349



4,390



5,428



24,449



19,137



Loss on debt extinguishment

23,669



22,156



1,777



65,772



12,276



(Gain) loss on asset sales





371





(32,816)



(Gain) loss on sale of discontinued operations





1,891





(2,351)



Impairment charges









7,698



Other items

(3,439)



(744)



5,014



7,972



22,566



Changes in operating assets and liabilities:











Accounts receivable

40,656



(50,530)



(27,423)



(161,774)



(100,230)



Income taxes, net

18,672



(19,681)



27,999



(34,936)



29,020



Accounts payable and accrued expenses

29,536



28,781



73,091



74,488



61,565



Other assets and liabilities

(9,451)



2,865



(101,385)



25,888



(123,389)


Net cash provided by operating activities

494,879



390,510



300,618



1,439,233



1,019,353


Cash flows from investing activities:











Purchases, sales and maturities of investments, net

13,554



(28,258)



779



(11,505)



10,839



Business acquisitions, net of cash and restricted cash acquired

(334,754)



1,128



621



(3,963,280)



(1,766,606)



Purchases of real estate

(30,119)



(16,384)





(95,083)



(28,118)



Purchases of other property, plant and equipment

(432,677)



(320,234)



(386,321)



(1,378,725)



(1,113,365)



Proceeds from asset sales





23,385



47,767



851,582


Net cash used in investing activities

(783,996)



(363,748)



(361,536)



(5,400,826)



(2,045,668)


Cash flows from financing activities:











Proceeds from employee equity awards

71



21,506



36



41,696



34,179



Payments of dividend distributions

(157,583)



(159,541)



(125,312)



(621,497)



(499,463)



Proceeds from public offering of common stock, net of offering costs

355,080







2,481,421





Proceeds from loans payable

997,076





457,900



2,056,876



1,168,304



Proceeds from senior notes

1,179,001



1,199,700





3,628,701





Repayments of capital lease and other financing obligations

(33,218)



(15,792)



(13,522)



(93,470)



(114,385)



Repayments of mortgage and loans payable and convertible debt

(2,214,278)



(21,215)



(476,474)



(2,277,798)



(1,462,939)



Repayment of senior notes



(500,000)





(500,000)





Debt extinguishment costs

(3,102)



(11,766)



(1,199)



(26,122)



(11,380)



Debt issuance costs

(24,161)



(16,267)



370



(81,047)



(11,381)



Other financing activities







(900)




Net cash provided by (used in) financing activities

98,886



496,625



(158,201)



4,607,860



(897,065)


Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

4,737



9,582



(34,930)



31,187



(21,800)


Change in cash balances included in assets held for sale





3,755






Net increase (decrease) in cash, cash equivalents and restricted cash

(185,494)



532,969



(250,294)



677,454



(1,945,180)


Cash, cash equivalents and restricted cash at beginning of period

1,636,195



1,103,226



1,023,541



773,247



2,718,427


Cash, cash equivalents and restricted cash at end of period

$

1,450,701



$

1,636,195



$

773,247



$

1,450,701



$

773,247













Supplemental cash flow information:










Cash paid for taxes

$

10,230



$

16,590



$

7,817



$

72,641



$

39,320


Cash paid for interest

$

102,385



$

129,014



$

78,553



$

444,793



$

350,083













Free cash flow (negative free cash flow) (1)

$

(302,671)



$

55,020



$

(61,697)



$

(3,950,088)



$

(1,037,154)













Adjusted free cash flow (adjusted negative free cash flow) (2)

$

62,202



$

70,276



$

(62,318)



$

108,275



$

757,570













(1)

We define free cash flow as net cash provided by operating activities plus net cash used in investing activities (excluding any net purchases, sales and maturities of investments) as presented below:




Net cash provided by operating activities as presented above

$

494,879



$

390,510



$

300,618



$

1,439,233



$

1,019,353



Net cash used in investing activities as presented above

(783,996)



(363,748)



(361,536)



(5,400,826)



(2,045,668)



Purchases, sales and maturities of investments, net

(13,554)



28,258



(779)



11,505



(10,839)



Free cash flow (negative free cash flow)

$

(302,671)



$

55,020



$

(61,697)



$

(3,950,088)



$

(1,037,154)













(2)

We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate and business acquisitions, net of cash and restricted cash acquired as presented below:




Free cash flow (as defined above)

$

(302,671)



$

55,020



$

(61,697)



$

(3,950,088)



$

(1,037,154)



Less business acquisitions, net of cash and restricted cash acquired

334,754



(1,128)



(621)



3,963,280



1,766,606



Less purchases of real estate

30,119



16,384





95,083



28,118



Adjusted free cash flow (adjusted negative free cash flow)

$

62,202



$

70,276



$

(62,318)



$

108,275



$

757,570













 

EQUINIX, INC.

Non-GAAP Measures and Other Supplemental Data

(in thousands)

(unaudited)




Three Months Ended


Twelve Months Ended



December 31,
2017


September 30,
2017


December 31, 2016


December 31,
2017


December 31,
2016


Recurring revenues

$

1,122,599



$

1,089,033



$

892,442



$

4,120,120



$

3,417,374



Non-recurring revenues

77,622



63,228



50,205



248,308



194,615



Revenues (1)

1,200,221



1,152,261



942,647



4,368,428



3,611,989














Cash cost of revenues (2)

407,389



377,767



301,540



1,433,165



1,169,494



Cash gross profit (3)

792,832



774,494



641,107



2,935,263



2,442,495














Cash operating expenses (4):











Cash sales and marketing expenses (5)

94,273



96,873



85,196



380,623



322,474



Cash general and administrative

expenses (6)

133,719



127,302



119,420



502,599



462,547



Total cash operating expenses (7)

227,992



224,175



204,616



883,222



785,021














Adjusted EBITDA (8)

$

564,840



$

550,319



$

436,491



$

2,052,041



$

1,657,474














Cash gross margins (9)

66

%


67

%


68

%


67

%


68

%













Adjusted EBITDA

margins (10)

47

%


48

%


46

%


47

%


46

%













Adjusted EBITDA flow-through rate (11)

30

%


48

%


92

%


52

%


44

%













FFO (12)

$

285,618



$

286,119



$

219,868



$

992,363



$

725,089














AFFO (13) (14)

$

381,527



$

391,289



$

293,785



$

1,437,040



$

1,078,339













(1)

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

















Americas Revenues:






















Colocation

$

422,648



$

422,244



$

299,200



$

1,518,929



$

1,161,665



Interconnection

127,793



124,377



100,459



469,268



374,655



Managed infrastructure

18,512



18,359



14,385



68,937



53,404



Other

1,340



1,056



943



5,218



3,360



Recurring revenues

570,293



566,036



414,987



2,062,352



1,593,084



Non-recurring revenues

35,874



30,502



21,555



110,408



86,465



Revenues

$

606,167



$

596,538



$

436,542



$

2,172,760



$

1,679,549

























EMEA Revenues:






















Colocation

$

282,240



$

268,365



$

242,829



$

1,063,543



$

941,848



Interconnection

31,311



27,574



22,280



104,891



85,869



Managed infrastructure

28,780



22,465



17,243



88,122



67,553



Other

2,573



2,475



2,919



10,415



11,382



Recurring revenues

344,904



320,879



285,271



1,266,971



1,106,652



Non-recurring revenues

24,728



17,954



16,353



79,285



64,687



Revenues

$

369,632



$

338,833



$

301,624



$

1,346,256



$

1,171,339














Asia-Pacific Revenues:






















Colocation

$

156,824



$

152,071



$

146,483



$

595,673



$

543,581



Interconnection

28,781



27,593



23,159



107,014



82,521



Managed infrastructure

21,797



22,454



22,362



88,110



89,335



Other





180





2,201



Recurring revenues

207,402



202,118



192,184



790,797



717,638



Non-recurring revenues

17,020



14,772



12,297



58,615



43,463



Revenues

$

224,422



$

216,890



$

204,481



$

849,412



$

761,101














Worldwide Revenues:






















Colocation

$

861,712



$

842,680



$

688,512



$

3,178,145



$

2,647,094



Interconnection

187,885



179,544



145,898



681,173



543,045



Managed infrastructure

69,089



63,278



53,990



245,169



210,292



Other

3,913



3,531



4,042



15,633



16,943



Recurring revenues

1,122,599



1,089,033



892,442



4,120,120



3,417,374



Non-recurring revenues

77,622



63,228



50,205



248,308



194,615



Revenues

$

1,200,221



$

1,152,261



$

942,647



$

4,368,428



$

3,611,989













(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

$

619,625



$

582,360



$

465,921



$

2,193,149



$

1,820,870



Depreciation, amortization and accretion expense

(208,615)



(200,682)



(161,049)



(746,363)



(638,290)



Stock-based compensation expense

(3,621)



(3,911)



(3,332)



(13,621)



(13,086)



Cash cost of revenues

$

407,389



$

377,767



$

301,540



$

1,433,165



$

1,169,494














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

















Americas cash cost of revenues

$

179,884



$

168,901



$

115,838



$

610,433



$

449,088



EMEA cash cost of revenues

148,721



133,137



113,796



528,518



446,842



Asia-Pacific cash cost of revenues

78,784



75,729



71,906



294,214



273,564



Cash cost of revenues

$

407,389



$

377,767



$

301,540



$

1,433,165



$

1,169,494







(3)

We define cash gross profit as revenues less cash cost of revenues (as defined above).












(4)

We define cash operating expense as selling, general, and administrative expense less depreciation, amortization, and stock-based compensation. We also refer to cash operating expense as cash selling, general and administrative expense or "cash SG&A".







Selling, general, and administrative expense

$

341,428



$

342,955



$

292,340



$

1,327,630



$

1,133,303



Depreciation and amortization expense

(71,159)



(77,037)



(51,219)



(282,529)



(205,220)



Stock-based compensation expense

(42,277)



(41,743)



(36,505)



(161,879)



(143,062)



Cash operating expense

$

227,992



$

224,175



$

204,616



$

883,222



$

785,021













(5)

We define cash sales and marketing expense as sales and marketing expense less depreciation, amortization and stock-based compensation as presented below:













Sales and marketing expense

$

153,612



$

157,619



$

113,384



$

581,724



$

438,742



Depreciation and amortization expense

(47,490)



(46,899)



(17,345)



(151,007)



(73,238)



Stock-based compensation expense

(11,849)



(13,847)



(10,843)



(50,094)



(43,030)



Cash sales and marketing expense

$

94,273



$

96,873



$

85,196



$

380,623



$

322,474













(6)

We define cash general and administrative expense as general and administrative expense less depreciation, amortization and stock-based compensation as presented below:













General and administrative expense

$

187,816



$

185,336



$

178,956



$

745,906



$

694,561



Depreciation and amortization expense

(23,669)



(30,138)



(33,874)



(131,522)



(131,982)



Stock-based compensation expense

(30,428)



(27,896)



(25,662)



(111,785)



(100,032)



Cash general and administrative expense

$

133,719



$

127,302



$

119,420



$

502,599



$

462,547













(7)

The geographic split of our cash operating expense, or cash SG&A, as defined above, is presented below:













Americas cash SG&A

$

140,460



$

135,536



$

115,012



$

527,633



$

443,150



EMEA cash SG&A

55,854



59,232



59,977



235,041



230,234



Asia-Pacific cash SG&A

31,678



29,407



29,627



120,548



111,637



Cash SG&A

$

227,992



$

224,175



$

204,616



$

883,222



$

785,021













(8)

We define adjusted EBITDA as income from continuing operations excluding depreciation, amortization, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs and gain or loss on asset sales as presented below:













Income from continuing operations

$

232,043



$

224,863



$

184,455



$

809,014



$

618,739



Depreciation, amortization and accretion expense

279,774



277,719



212,268



1,028,892



843,510



Stock-based compensation expense

45,898



45,654



39,837



175,500



156,148



Impairment charges









7,698



Acquisition costs

7,125



2,083



(440)



38,635



64,195



(Gain) loss on asset sales





371





(32,816)



Adjusted EBITDA

$

564,840



$

550,319



$

436,491



$

2,052,041



$

1,657,474














The geographic split of our adjusted EBITDA is presented below:

















Americas income from continuing operations

$

101,286



$

105,785



$

87,537



$

363,220



$

352,180



Americas depreciation, amortization and accretion expense

149,970



151,665



83,305



514,968



321,103



Americas stock-based compensation expense

33,455



33,419



28,312



128,419



109,740



Americas acquisition costs

1,112



1,232



6,538



28,087



9,530



Americas gain on asset sales









(5,242)



Americas adjusted EBITDA

$

285,823



$

292,101



$

205,692



$

1,034,694



$

787,311














EMEA income from continuing operations

$

73,749



$

64,197



$

51,347



$

237,854



$

124,853



EMEA depreciation, amortization and accretion expense

79,741



74,625



76,598



309,290



314,570



EMEA stock-based compensation expense

6,874



6,791



6,884



26,325



28,317



EMEA acquisition costs

4,693



851



(6,978)



9,228



54,468



EMEA gain on asset sales









(27,945)



EMEA adjusted EBITDA

$

165,057



$

146,464



$

127,851



$

582,697



$

494,263














Asia-Pacific income from continuing operations

$

57,008



$

54,881



$

45,571



$

207,940



$

141,706



Asia-Pacific depreciation, amortization and accretion expense

50,063



51,429



52,365



204,634



207,837



Asia-Pacific stock-based compensation expense

5,569



5,444



4,641



20,756



18,091



Asia-Pacific impairment charges









7,698



Asia-Pacific acquisition costs

1,320







1,320



197



Asia-Pacific loss on asset sales





371





371



Asia-Pacific adjusted EBITDA

$

113,960



$

111,754



$

102,948



$

434,650



$

375,900













(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

70

%


72

%


73

%


72

%


73

%













EMEA cash gross margins

60

%


61

%


62

%


61

%


62

%













Asia-Pacific cash gross margins

65

%


65

%


65

%


65

%


64

%












(10)

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













Americas adjusted EBITDA margins

47

%


49

%


47

%


48

%


47

%













EMEA adjusted EBITDA margins

45

%


43

%


42

%


43

%


42

%













Asia-Pacific adjusted EBITDA margins

51

%


52

%


50

%


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

$

564,840



$

550,319



$

436,491



$

2,052,041



$

1,657,474



Less adjusted EBITDA - prior period

(550,319)



(509,308)



(420,042)



(1,657,474)



(1,271,627)



Adjusted EBITDA growth

$

14,521



$

41,011



$

16,449



$

394,567



$

385,847














Revenues - current period

$

1,200,221



$

1,152,261



$

942,647



$

4,368,428



$

3,611,989



Less revenues - prior period

(1,152,261)



(1,066,421)



(924,676)



(3,611,989)



(2,725,867)



Revenue growth

$

47,960



$

85,840



$

17,971



$

756,439



$

886,122














Adjusted EBITDA flow-through rate

30

%


48

%


92

%


52

%


44

%












(12)

FFO is defined as net income or loss, excluding gain or loss from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.




Net income

$

65,215



$

79,900



$

61,750



$

232,982



$

126,800



Adjustments:











Real estate depreciation

219,237



200,313



157,054



754,351



626,564



(Gain) loss on disposition of real estate property

1,166



5,877



1,036



4,945



(28,388)



Adjustments for FFO from unconsolidated joint ventures



29



28



85



113



FFO

$

285,618



$

286,119



$

219,868



$

992,363



$

725,089













(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, gain or loss on debt extinguishment, an income tax expense adjustment, net income or loss from discontinued operations, net of tax, recurring capital expenditures and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items.




FFO

$

285,618



$

286,119



$

219,868



$

992,363



$

725,089



Adjustments:











Installation revenue adjustment

6,721



6,161



4,788



24,496



20,161



Straight-line rent expense adjustment

3,204



2,297



1,986



8,925



7,700



Amortization of deferred financing costs

4,349



4,390



5,258



24,449



18,696



Stock-based compensation expense

45,898



45,654



39,837



175,500



156,149



Non-real estate depreciation expense

24,100



29,205



23,265



111,121



87,781



Amortization expense

48,940



48,893



29,478



177,008



122,862



Accretion expense (adjustment)

(12,503)



(692)



2,471



(13,588)



6,303



Recurring capital expenditures

(62,540)



(44,914)



(36,476)



(167,995)



(141,819)



Loss on debt extinguishment

23,669



22,156



1,777



65,772



12,276



Acquisition costs

7,125



2,083



(440)



38,635



64,195



Impairment charges









7,698



Income tax expense adjustment

6,946



(10,058)



68



371



3,680



Net (income) loss from discontinued operations, net of tax





1,914





(12,392)



Adjustments for AFFO from unconsolidated joint ventures



(5)



(9)



(17)



(40)



AFFO

$

381,527



$

391,289



$

293,785



$

1,437,040



$

1,078,339








(14)

 Following is how we reconcile from adjusted EBITDA to AFFO:











Adjusted EBITDA

$

564,840



$

550,319



$

436,491



$

2,052,041



$

1,657,474



Adjustments:











Interest expense, net of interest income

(122,889)



(119,537)



(97,813)



(465,623)



(388,679)



Amortization of deferred financing costs

4,349



4,390



5,258



24,449



18,696



Income tax expense

(28,938)



(2,194)



(19,494)



(53,850)



(45,451)



Income tax expense adjustment

6,946



(10,058)



68



371



3,680



Straight-line rent expense adjustment

3,204



2,297



1,986



8,925



7,700



Installation revenue adjustment

6,721



6,161



4,788



24,496



20,161



Recurring capital expenditures

(62,540)



(44,914)



(36,476)



(167,995)



(141,819)



Other income (expense)

8,668



(1,076)



(1,707)



9,213



(57,924)



(Gain) loss on disposition of real estate property

1,166



5,877



1,036



4,945



(28,388)



Adjustments for unconsolidated JVs' and non-controlling interests



24



19



68



73



Adjustment for gain (loss) on sale of asset





(371)





32,816



AFFO

$

381,527



$

391,289



$

293,785



$

1,437,040



$

1,078,339













 

Equinix. (PRNewsFoto/Equinix)

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/equinix-reports-fourth-quarter-and-full-year-2017-results-300598956.html

SOURCE Equinix, Inc.


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