eqix-8k_20200506.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549 

 

FORM 8-K 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 6, 2020 

 

EQUINIX, INC.

(Exact Name of Registrant as Specified in Charter) 

 

  

 

 

 

 

Delaware

 

000-31293

 

77-0487526

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

 

 

One Lagoon Drive

Redwood City, CA 94065

(Address of Principal Executive Offices, and Zip Code)

 

(650) 598-6000

Registrant’s Telephone Number, Including Area Code

 

(Former Name or Former Address, if Changed Since Last Report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001

EQIX

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



 

Item 2.02. Results of Operations and Financial Condition

 

On May 6, 2020, Equinix, Inc. (“Equinix”) issued a press release and will hold a conference call regarding its financial results for the first quarter ended March 31, 2020.  A copy of the press release is furnished as Exhibit 99.1 to this report.

 

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Equinix is making reference to certain non-GAAP financial information in both the press release and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.

 

Item 9.01.  Financial Statements and Exhibits

 

(d)Exhibits

 

Exhibit
Number

 

Description

 

 

 

99.1

 

Press Release of Equinix, Inc. dated May 6, 2020.

 

104

 

Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document



SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

EQUINIX, INC.

 

 

 

 

By:

/s/ Keith D. Taylor

DATE:  May 6, 2020

 

Keith D. Taylor

 

 

Chief Financial Officer

 

 

Exhibit 99.1

Equinix Reports First Quarter 2020 Results



Interconnection and Data Center Leader Delivers Another Consecutive Quarter of Revenue and Interconnection Growth

REDWOOD CITY, Calif., May 6, 2020 /PRNewswire/ --

  • Quarterly revenues increased 6% over the same quarter last year to $1.445 billion, or 7% on a normalized and constant currency basis, representing the 69th consecutive quarter of revenue growth
  • Key customer expansions included Hurricane Electric, TikTok and Zoom
  • Customer deployments across multiple metros comprised 87% of total recurring revenues, demonstrating the value of the Equinix global platform
  • Interconnection revenues in the quarter increased 14% over the same quarter last year, or 15% on a normalized and constant currency basis, a sustainable and steady increase over the past few quarters
  • Peak Equinix Internet Exchange™ traffic increased 44% over the same quarter last year, or over 20% compared to the prior quarter, reflecting the impact of the sudden global shift to remote and work-from-home practices

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported results for the quarter ended March 31, 2020. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements. All per share results are presented on a fully diluted basis.

First Quarter 2020 Results Summary

  • Revenues
    • $1.445 billion, a 2% increase over the previous quarter
    • Includes $15 million of negative foreign currency impact when compared to prior guidance rates
  • Operating Income
    • $253 million, a 19% decrease from the previous quarter, largely due to the sale of certain assets in Q4 to the EMEA xScale™ joint venture, and an operating margin of 18%
  • Adjusted EBITDA
    • $684 million, a 47% adjusted EBITDA margin, including higher seasonal costs
    • Includes $7 million of negative foreign currency impact when compared to prior guidance rates
    • Includes $3 million of integration costs
  • Net Income and Net Income per Share attributable to Equinix
    • $119 million, a 5% decrease from the previous quarter
    • $1.38 per share, a 5% decrease from the previous quarter
  • AFFO and AFFO per Share
    • $535 million, a 13% increase over the previous quarter
    • $6.21 per share, a 13% increase over the previous quarter
    • Includes $3 million of integration costs

2020 Annual Guidance Summary

  • Revenues
    • $5.877 - $5.985 billion, a 6 - 8% increase over the previous year, or a normalized and constant currency increase of 7 - 9%
    • Includes a negative foreign currency impact of $105 million when compared to the prior guidance FX rates due to a strong U.S. dollar compared to our more significant other operating currencies, including the Euro, Pound and Brazilian Real
  • Adjusted EBITDA
    • $2.765 - $2.845 billion, a 47% adjusted EBITDA margin
    • Includes a negative foreign currency impact of $48 million when compared to the prior guidance FX rates
    • Assumes $20 million of integration costs
  • AFFO and AFFO per Share
    • $2.043 - $2.133 billion, an increase of 6 - 10% over the previous year, or a normalized and constant currency increase of 11 - 16%
    • $23.62 - $24.66 per share, an increase of 4 - 8% over the previous year, or a normalized and constant currency increase of 8 - 12%
    • Includes a negative foreign currency impact of $35 million when compared to the prior guidance FX rates
    • Assumes $20 million of integration costs

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

Equinix Quote
Charles Meyers, President and CEO, Equinix:

"These are unprecedented times and our hearts go out to those who have been impacted by COVID-19. We extend our gratitude to all the front-line workers who are helping to keep us safe and healthy during this global pandemic. The Equinix business continues to perform well and show resiliency through these times of uncertainty, enabling us to remain focused on the clear set of priorities we laid out at the beginning of the yearinvesting in our people, evolving our platform and service portfolio to meet the changing needs of customers, expanding our go-to-market engine to fuel long-term growth, and simplifying our business to drive operating leverage and enhance our customer experience."

Business Highlights

  • Interconnection revenues in Q1 grew 14% year-over-year, or 15% on a normalized and constant currency basis, steadily rising over the last few quarters, reflecting the demand across our portfolio of interconnection products. Today, Equinix has the most comprehensive global interconnection platform, comprising over 370,000 physical and virtual interconnections. In Q1, Equinix added an incremental 6,800 interconnections, fueled by content video streaming and unified communication services. Equinix Cloud Exchange Fabric™ (ECX Fabric™) demonstrated strong growth in average revenue per user, as higher bandwidth and inter-metro connections become a larger share of the total.
  • Equinix continues the growth of its indirect selling initiatives, as the company pursues high-value strategic channel partnerships. In Q1, channel activity accounted for approximately 30% of bookings, including wins across a wide range of industry segments with projects focused on digital transformation efforts, as well as COVID-19 responses.
  • Equinix delivered strong bookings in the quarter, the second-best Q1 bookings performance in the company's history, reflecting diverse customer demand and robust interconnection growth. The network vertical achieved its third-highest bookings, with strong network reseller activity driving a diverse funnel of enterprise deals and internet capacity upgrades to support increased bandwidth for work-from-home employees. The content and digital media vertical also saw strong bookings with strength in video and social media.
  • As part of the company's hyperscale initiative, on April 21, 2020, Equinix signed a greater than $1.0 billion initial joint venture in the form of a limited liability partnership with GIC, Singapore's sovereign wealth fund, to develop and operate xScale™ data centers in Japan. The three initial facilities in the joint venture—one in Osaka and two in Tokyo—will serve the unique core workload deployment needs of a targeted group of hyperscale companies, including the world's largest cloud service providers. This is Equinix's second joint venture with GIC. In 2019, Equinix and GIC announced the formation of a joint venture to develop and operate xScale data centers in Europe.
  • On March 3, 2020, Equinix announced the completion of the $335 million acquisition of Packet. Now operating as "Packet, an Equinix company," the Packet team is contributing to Equinix's strategy to help enterprises seamlessly deploy hybrid multicloud architectures by developing new solutions that combine Packet's leading bare metal automation technology with the rich ecosystems, global reach and interconnection fabric of Platform Equinix®.
  • Equinix continues to advance the company's sustainability agenda with meaningful progress across environmental, social and governance (ESG) initiatives. On May 5, 2020, Equinix launched its fifth annual sustainability report highlighting FY19 ESG metrics and progress, reinforcing the company's commitment toward 100% clean and renewable energy use, and its transparency around the impact of the company's global operations as it continues to grow a sustainable business.

COVID-19 Update

Many of our IBX® data centers have been identified as "essential businesses" or "critical infrastructure" by local governments for purposes of remaining open during the COVID-19 pandemic, and all IBX data centers remain operational at the time of filing of this press release. We have implemented precautionary measures to minimize the risk of operational impact and to protect the health and safety of our employees, customers, partners and communities. These include implementing tools such as an appointment-based system to control timing and frequency of visits while also encouraging our customers to leverage our IBX technicians via Smart Hands® in order to restrict visits and minimize the number of people and the amount of time spent in our IBX facilities. For the health and safety of our employees, we have temporarily closed all of our corporate offices and instructed our non-IBX employees across the globe to work from home.

The full potential impact of the COVID-19 pandemic on our financial condition or results of operations remains uncertain and will depend on a number of factors, including its impact on our customers, partners and vendors, and the impact and functioning of the global financial markets. Additional information pertaining to the impact of COVID-19 on Equinix and our response thereto will be provided in our upcoming Form 10-Q for the quarter ended March 31, 2020.

Business Outlook

Equinix widened quarterly total revenues and adjusted EBITDA guidance ranges to account for the possible net financial impact associated with COVID-19. For the second quarter of 2020, the Company expects revenues to range between $1.446 and $1.466 billion, an increase of 0 - 2% quarter-over-quarter, or a normalized and constant currency increase of approximately 1 - 2%. This guidance includes a negative foreign currency impact of $17 million when compared to the average foreign currency ("FX") rates in Q1 2020 and an approximate $6 million impact from the COVID-19 reduction in revenues attributed to the waiver of certain Smart Hands fees. Adjusted EBITDA is expected to range between $679 and $699 million, including a negative foreign currency impact of $7 million when compared to the average FX rates in Q1 2020, $8 million of integration costs from acquisitions, and the flow-through impacts related to COVID-19. Recurring capital expenditures are expected to range between $26 and $36 million.

Equinix widened full-year total revenues, adjusted EBITDA and AFFO guidance ranges to account for the possible net financial impact associated with COVID-19. For the full year of 2020, total revenues are expected to range between $5.877 and $5.985 billion, a 6 - 8% increase over the previous year, or a normalized and constant currency increase of approximately 7 - 9%. Revenues attributed to the Packet acquisition are expected to range between $32 and $40 million. This guidance includes a negative foreign currency impact of $105 million when compared to the prior guidance FX rates. Adjusted EBITDA is expected to range between $2.765 and $2.845 billion, an adjusted EBITDA margin of 47% at the mid-point. This adjusted EBITDA includes a negative foreign currency impact of $48 million when compared to the prior guidance FX rates. For the year, the company expects to incur $20 million in integration costs related to acquisitions. AFFO is expected to range between $2.043 and $2.133 billion, an increase of 6 - 10% over the previous year, including a negative foreign currency impact of $35 million when compared to the prior guidance FX rates, or a normalized and constant currency increase of 11 - 16% and $20 million of integration costs related to our acquisitions. This updated AFFO guidance, on a constant currency basis, effectively reaffirms prior full-year underlying AFFO guidance at the mid-point. AFFO per share is expected to range between $23.62 and $24.66, an increase of 4 - 8% over the previous year, or a normalized and constant currency increase of 8 - 12%. This excludes any potential financing or refinancing the Company may undertake in the future. Non-recurring capital expenditures are expected to range between $1.900 and $2.090 billion, and recurring capital expenditures are expected to range between $150 and $160 million.

The U.S. dollar exchange rates used for 2020 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.13 to the Euro, $1.28 to the Pound, S$1.42 to the U.S. dollar, ¥108 to the U.S. dollar, and R$5.21 to the U.S. dollar. The Q1 2020 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 9%, 7%, 6% and 3%, respectively.

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

Q1 2020 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended March 31, 2020, along with its future outlook, in its quarterly conference call on Wednesday, May 6, 2020, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-517-308-9482 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call through Wednesday, July 29, 2020, by dialing 1-203-369-0156 and referencing the passcode 2020. In addition, the webcast will be available at www.equinix.com/investors (no password required).

Investor Presentation and Supplemental Financial Information

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

Additional Resources

  • Equinix Investor Relations Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most-interconnected data centers. On this global platform for digital business, companies come together across more than 50 markets on five continents to reach everywhere, interconnect everyone and integrate everything they need to create their digital futures.

Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

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

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

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

Forward-Looking Statements

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

EQUINIX, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



Three Months Ended


March 31,
2020


December 31,
2019


March 31,
2019

Recurring revenues

$

1,361,694



$

1,337,977



$

1,274,828


Non-recurring revenues

82,848



79,158



88,390


Revenues

1,444,542



1,417,135



1,363,218


Cost of revenues

736,282



725,636



682,030


Gross profit

708,260



691,499



681,188


Operating expenses:






Sales and marketing

180,450



160,556



169,715


General and administrative

261,597



245,504



215,046


Transaction costs

11,530



16,545



2,471


Impairment charges



(233)



14,448


(Gain) loss on asset sales

1,199



(43,847)




Total operating expenses

454,776



378,525



401,680


Income from operations

253,484



312,974



279,508


Interest and other income (expense):





Interest income

4,273



7,532



4,202


Interest expense

(107,338)



(117,617)



(122,846)


Other income (expense)

5,170



12,336



(166)


Loss on debt extinguishment

(6,441)



(52,758)



(382)


Total interest and other, net

(104,336)



(150,507)



(119,192)


Income before income taxes

149,148



162,467



160,316


Income tax expense

(30,191)



(37,632)



(42,569)


Net income

118,957



124,835



117,747


Net (income) loss attributable to non-controlling interests

(165)



160



331


Net income attributable to Equinix

$

118,792



$

124,995



$

118,078


Net income per share attributable to Equinix:

Basic net income per share

$

1.39



$

1.47



$

1.44


Diluted net income per share

$

1.38



$

1.46



$

1.44


Shares used in computing basic net income per share

85,551



85,289



81,814


Shares used in computing diluted net income per share

86,144



85,831



82,090


EQUINIX, INC.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)



Three Months Ended


March 31,
2020


December 31,
2019


March 31,
2019

Net income

$

118,957



$

124,835



$

117,747


Other comprehensive loss, net of tax:



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

(413,792)



283,185



(81,719)


Net investment hedge CTA gain (loss)

144,946



(154,596)



76,850


Unrealized gain (loss) on cash flow hedges

(3,256)



(22,928)



8,224


Net actuarial gain (loss) on defined benefit plans

35



(22)



(11)


Total other comprehensive income (loss), net of tax

(272,067)



105,639



3,344


Comprehensive income (loss), net of tax

(153,110)



230,474



121,091


Net (income) loss attributable to non-controlling interests

(165)



160



331


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

11



(16)



(7)


Comprehensive income (loss) attributable to Equinix

$

(153,264)



$

230,618



$

121,415


EQUINIX, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)



March 31, 2020


December 31, 2019

Assets




Cash and cash equivalents

$

1,171,339



$

1,869,577


Short-term investments

25,833



10,362


Accounts receivable, net

687,153



689,134


Other current assets

435,784



303,543


          Total current assets

2,320,109



2,872,616


Property, plant and equipment, net

12,177,044



12,152,597


Operating lease right-of-use assets

1,414,711



1,475,367


Goodwill

4,927,459



4,781,858


Intangible assets, net

2,108,539



2,102,389


Other assets

642,836



580,788


          Total assets

$

23,590,698



$

23,965,615


Liabilities and Stockholders' Equity




Accounts payable and accrued expenses

$

717,574



$

760,718


Accrued property, plant and equipment

317,144



301,535


Current portion of operating lease liabilities

140,596



145,606


Current portion of finance lease liabilities

89,262



75,239


Current portion of mortgage and loans payable

74,473



77,603


Current portion of senior notes

300,401



643,224


Other current liabilities

199,023



153,938


          Total current liabilities

1,838,473



2,157,863


Operating lease liabilities, less current portion

1,261,964



1,315,656


Finance lease liabilities, less current portion

1,489,945



1,430,882


Mortgage and loans payable, less current portion

1,469,195



1,289,434


Senior notes, less current portion

8,253,745



8,309,673


Other liabilities

608,082



621,725


          Total liabilities

14,921,404



15,125,233


Common stock

86



86


Additional paid-in capital

12,893,455



12,696,433


Treasury stock

(127,298)



(144,256)


Accumulated dividends

(4,399,527)



(4,168,469)


Accumulated other comprehensive loss

(1,206,669)



(934,613)


Retained earnings

1,509,317



1,391,425


          Total Equinix stockholders' equity

8,669,364



8,840,606


Non-controlling interests

(70)



(224)


          Total stockholders' equity

8,669,294



8,840,382


                Total liabilities and stockholders' equity

$

23,590,698



$

23,965,615






Ending headcount by geographic region is as follows:




          Americas headcount

3,924



3,672


          EMEA headcount

3,044



2,941


          Asia-Pacific headcount

1,813



1,765


                    Total headcount

8,781



8,378


EQUINIX, INC.

Summary of Debt Principal Outstanding

(in thousands)

(unaudited)




March 31, 2020


December 31, 2019





Finance lease liabilities

$

1,579,207



$

1,506,121






Term loans

1,214,717



1,282,302


Revolving credit facility

250,000




Mortgage payable and other loans payable

78,951



84,735


Plus: debt discount and issuance costs, net

2,615



3,081


           Total mortgage and loans payable principal

1,546,283



1,370,118






Senior notes

8,554,146



8,952,897


Plus: debt issuance costs

73,075



78,030


Less: debt premium

(1,121)



(1,716)


          Total senior notes principal

8,626,100



9,029,211






Total debt principal outstanding

$

11,751,590



$

11,905,450


EQUINIX, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)




Three Months Ended



March 31,
2020


December 31,
2019


March 31,
2019








Cash flows from operating activities:


Net income

$

118,957



$

124,835



$

117,747



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


Depreciation, amortization and accretion

337,431



328,295



314,705



Stock-based compensation

64,499



62,126



49,023



Amortization of debt issuance costs and debt discounts and premiums

3,460



3,613



2,995



Loss on debt extinguishment

6,441



52,758



382



(Gain) loss on asset sales

1,199



(43,847)





Impairment charges



(233)



14,448



Other items

6,856



3,831



8,224



Changes in operating assets and liabilities:


Accounts receivable

15,306



96,480



(84,350)



Income taxes, net

3,697



(40,649)



15,825



Accounts payable and accrued expenses

(25,681)



(34,588)



(11,463)



Operating lease right-of-use assets

38,797



40,805



41,264



Operating lease liabilities

(35,193)



(40,032)



(38,886)



Other assets and liabilities

(18,939)



(23,724)



(8,773)


Net cash provided by operating activities

516,830



529,670



421,141


Cash flows from investing activities:


Purchases, sales and maturities of investments, net

(38,940)



(5,776)



(8,779)



Business acquisitions, net of cash and restricted cash acquired

(478,287)







Purchases of real estate

(36,373)



(104,865)



(5,721)



Purchases of other property, plant and equipment

(400,941)



(714,561)



(363,967)



Proceeds from asset sales



358,656




Net cash used in investing activities

(954,541)



(466,546)



(378,467)


Cash flows from financing activities:


Proceeds from employee equity awards

30,391





27,593



Payment of dividend distributions

(233,479)



(210,360)



(204,603)



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

101,792





1,213,434



Proceeds from revolving credit facility

250,000







Proceeds from senior notes, net of debt discounts



2,797,906





Repayment of finance lease liabilities

(18,977)



(63,701)



(31,158)



Repayment of mortgage and loans payable

(18,501)



(19,431)



(18,334)



Repayment of senior notes

(343,711)



(2,056,289)





Debt extinguishment costs

(4,619)



(43,311)





Debt issuance costs



(23,341)




Net cash provided by (used in) financing activities

(237,104)



381,473



986,932


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

(25,287)



21,883



(1,695)


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

(700,102)



466,480



1,027,911


Cash, cash equivalents and restricted cash at beginning of period

1,886,613



1,420,133



627,604


Cash, cash equivalents and restricted cash at end of period

$

1,186,511



$

1,886,613



$

1,655,515


Supplemental cash flow information:

Cash paid for taxes

$

45,324



$

47,507



$

27,024


Cash paid for interest

$

125,924



$

141,140



$

146,144









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

$

(398,771)



$

68,900



$

51,453









Adjusted free cash flow (2)

$

115,889



$

173,765



$

57,174









(1)

We define free cash flow (negative 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

$

516,830



$

529,670



$

421,141



Net cash used in investing activities as presented above

(954,541)



(466,546)



(378,467)



Purchases, sales and maturities of investments, net

38,940



5,776



8,779



Free cash flow (negative free cash flow)

$

(398,771)



$

68,900



$

51,453









(2)

We define adjusted free cash flow as free cash flow (negative 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 (negative free cash flow) as defined above

$

(398,771)



$

68,900



$

51,453



Less business acquisitions, net of cash and restricted cash acquired

478,287







Less purchases of real estate

36,373



104,865



5,721



Adjusted free cash flow

$

115,889



$

173,765



$

57,174


EQUINIX, INC.

Non-GAAP Measures and Other Supplemental Data

(in thousands)

(unaudited)




Three Months Ended



March 31,
2020


December 31,
2019


March 31,
2019


Recurring revenues

$

1,361,694



$

1,337,977



$

1,274,828



Non-recurring revenues

82,848



79,158



88,390



Revenues (1)

1,444,542



1,417,135



1,363,218










Cash cost of revenues (2)

476,541



477,144



448,381



Cash gross profit (3)

968,001



939,991



914,837










Cash operating expenses (4)(7):






Cash sales and marketing expenses (5)

115,671



100,430



108,216



Cash general and administrative expenses (6)

168,120



163,701



146,466



Total cash operating expenses (4)(7)

283,791



264,131



254,682










Adjusted EBITDA (8)

$

684,210



$

675,860



$

660,155










Cash gross margins (9)

67

%


66

%


67

%









Adjusted EBITDA margins (10)

47

%


48

%


48

%









Adjusted EBITDA flow-through rate (11)

30

%


6

%


81

%









FFO (12)

$

343,754



$

304,025



$

326,073










AFFO (13)(14)

$

534,705



$

472,611



$

488,120










Basic FFO per share (15)

$

4.02



$

3.56



$

3.99










Diluted FFO per share (15)

$

3.99



$

3.54



$

3.97










Basic AFFO per share (15)

$

6.25



$

5.54



$

5.97










Diluted AFFO per share (15)

$

6.21



$

5.51



$

5.95























(1)

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









Americas Revenues:














Colocation

$

450,954



$

443,991



$

439,981



Interconnection

150,929



149,474



138,563



Managed infrastructure

25,529



21,485



21,787



Other

5,220



5,020



5,979



Recurring revenues

632,632



619,970



606,310



Non-recurring revenues

29,273



33,696



38,056



Revenues

$

661,905



$

653,666



$

644,366










EMEA Revenues:














Colocation

$

362,330



$

359,423



$

331,125



Interconnection

48,541



44,350



37,525



Managed infrastructure

30,137



28,495



29,088



Other

2,466



3,458



2,499



Recurring revenues

443,474



435,726



400,237



Non-recurring revenues

35,435



28,063



34,423



Revenues

$

478,909



$

463,789



$

434,660










Asia-Pacific Revenues:














Colocation

$

221,093



$

219,306



$

209,665



Interconnection

42,671



41,180



36,696



Managed infrastructure

21,824



21,795



21,920



Recurring revenues

285,588



282,281



268,281



Non-recurring revenues

18,140



17,399



15,911



Revenues

$

303,728



$

299,680



$

284,192










Worldwide Revenues:














Colocation

$

1,034,377



$

1,022,720



$

980,771



Interconnection

242,141



235,004



212,784



Managed infrastructure

77,490



71,775



72,795



Other

7,686



8,478



8,478



Recurring revenues

1,361,694



1,337,977



1,274,828



Non-recurring revenues

82,848



79,158



88,390



Revenues

$

1,444,542



$

1,417,135



$

1,363,218






























(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

$

736,282



$

725,636



$

682,030



Depreciation, amortization and accretion expense

(250,398)



(241,753)



(228,637)



Stock-based compensation expense

(9,343)



(6,739)



(5,012)



Cash cost of revenues

$

476,541



$

477,144



$

448,381










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









Americas cash cost of revenues

$

185,233



$

184,029



$

179,635



EMEA cash cost of revenues

187,248



187,972



173,201



Asia-Pacific cash cost of revenues

104,060



105,143



95,545



Cash cost of revenues

$

476,541



$

477,144



$

448,381



(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

$

442,047



$

406,060



$

384,761



Depreciation and amortization expense

(87,033)



(86,542)



(86,068)



Stock-based compensation expense

(71,223)



(55,387)



(44,011)



Cash operating expense

$

283,791



$

264,131



$

254,682









(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

$

180,450



$

160,556



$

169,715



Depreciation and amortization expense

(46,234)



(47,659)



(48,198)



Stock-based compensation expense

(18,545)



(12,467)



(13,301)



Cash sales and marketing expense

$

115,671



$

100,430



$

108,216









(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

$

261,597



$

245,504



$

215,046



Depreciation and amortization expense

(40,799)



(38,883)



(37,870)



Stock-based compensation expense

(52,678)



(42,920)



(30,710)



Cash general and administrative expense

$

168,120



$

163,701



$

146,466









(7)

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









Americas cash SG&A

$

183,059



$

155,561



$

156,893



EMEA cash SG&A

61,503



69,072



62,387



Asia-Pacific cash SG&A

39,229



39,498



35,402



Cash SG&A

$

283,791



$

264,131



$

254,682









(8)

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









Income from operations

$

253,484



$

312,974



$

279,508



Depreciation, amortization and accretion expense

337,431



328,295



314,705



Stock-based compensation expense

80,566



62,126



49,023



Impairment charges



(233)



14,448



Transaction costs

11,530



16,545



2,471



(Gain) loss on asset sales

1,199



(43,847)





Adjusted EBITDA

$

684,210



$

675,860



$

660,155










The geographic split of our adjusted EBITDA is presented below:









Americas income from operations

$

47,308



$

136,236



$

90,011



Americas depreciation, amortization and accretion expense

171,439



165,580



167,136



Americas stock-based compensation expense

62,689



44,878



34,171



Americas impairment charges



(233)



14,448



Americas transaction costs

10,978



13,378



2,072



Americas (gain) loss on asset sales

1,199



(45,763)





Americas adjusted EBITDA

$

293,613



$

314,076



$

307,838










EMEA income from operations

$

126,004



$

96,453



$

105,007



EMEA depreciation, amortization and accretion expense

92,740



95,264



84,547



EMEA stock-based compensation expense

11,002



10,788



8,863



EMEA transaction costs

412



2,324



655



EMEA loss on asset sales



1,916





EMEA adjusted EBITDA

$

230,158



$

206,745



$

199,072










Asia-Pacific income from operations

$

80,172



$

80,285



$

84,490



Asia-Pacific depreciation, amortization and accretion expense

73,252



67,451



63,022



Asia-Pacific stock-based compensation expense

6,875



6,460



5,989



Asia-Pacific transaction costs

140



843



(256)



Asia-Pacific adjusted EBITDA

$

160,439



$

155,039



$

153,245









(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

%


EMEA cash gross margins

61

%


59

%


60

%


Asia-Pacific cash gross margins

66

%


65

%


66

%








(10)

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









Americas adjusted EBITDA margins

44

%


48

%


48

%


EMEA adjusted EBITDA margins

48

%


45

%


46

%


Asia-Pacific adjusted EBITDA margins

53

%


52

%


54

%


(11)

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









Adjusted EBITDA - current period

$

684,210



$

675,860



$

660,155



Less adjusted EBITDA - prior period

(675,860)



(674,702)



(617,195)



Adjusted EBITDA growth

$

8,350



$

1,158



$

42,960










Revenues - current period

$

1,444,542



$

1,417,135



$

1,363,218



Less revenues - prior period

(1,417,135)



(1,396,810)



(1,310,083)



Revenue growth

$

27,407



$

20,325



$

53,135










Adjusted EBITDA flow-through rate

30

%


6

%


81

%








(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

$

118,957



$

124,835



$

117,747



Net (income) loss attributable to non-controlling interests

(165)



160



331



Net income attributable to Equinix

118,792



124,995



118,078



Adjustments:







Real estate depreciation

221,787



221,143



205,649



(Gain) loss on disposition of real estate property

2,506



(42,758)



2,346



Adjustments for FFO from unconsolidated joint ventures

669



645





FFO attributable to common shareholders

$

343,754



$

304,025



$

326,073
















(13)

AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, transaction costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, 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 attributable to common shareholders

$

343,754



$

304,025



$

326,073



Adjustments:







Installation revenue adjustment

(3,481)



2,751



1,029



Straight-line rent expense adjustment

1,806



773



2,378



Amortization of deferred financing costs and debt discounts and premiums

3,460



3,613



2,995



Contract cost adjustment

(10,434)



(11,556)



(6,778)



Stock-based compensation expense

80,566



62,126



49,023



Non-real estate depreciation expense

65,591



60,712



57,994



Amortization expense

48,491



48,689



49,535



Accretion expense (adjustment)

1,562



(2,249)



1,527



Recurring capital expenditures

(17,868)



(80,925)



(20,947)



Loss on debt extinguishment

6,441



52,758



382



Transaction costs

11,530



16,545



2,471



Impairment charges



(233)



14,448



Income tax expense adjustment

2,833



13,502



7,990



Adjustments for AFFO from unconsolidated joint ventures

454



2,080





AFFO attributable to common shareholders

$

534,705



$

472,611



$

488,120









(14)

 Following is how we reconcile from adjusted EBITDA to AFFO:



Adjusted EBITDA

$

684,210



$

675,860



$

660,155



Adjustments:







Interest expense, net of interest income

(103,065)



(110,085)



(118,644)



Amortization of deferred financing costs and debt discounts and premiums

3,460



3,613



2,995



Income tax expense

(30,191)



(37,632)



(42,569)



Income tax expense adjustment

2,833



13,502



7,990



Straight-line rent expense adjustment

1,806



773



2,378



Contract cost adjustment

(10,434)



(11,556)



(6,778)



Installation revenue adjustment

(3,481)



2,751



1,029



Recurring capital expenditures

(17,868)



(80,925)



(20,947)



Other income (expense)

5,170



12,336



(166)



(Gain) loss on disposition of real estate property

2,506



(42,758)



2,346



Adjustments for unconsolidated JVs' and non-controlling interests

958



2,885



331



Adjustment for gain (loss) on asset sales

(1,199)



43,847





AFFO attributable to common shareholders

$

534,705



$

472,611



$

488,120









(15)

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









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

85,551



85,289



81,814



Effect of dilutive securities:






Employee equity awards

593



542



276



Shares used in computing diluted net income per share, FFO per share and AFFO per share

86,144