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SEC Filings

10-Q
EQUINIX INC filed this Form 10-Q on 11/02/2018
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and the data center operations in EMEA with the exception of Bulgaria, United Arab Emirates and a portion of Turkey. Our data center operations in other jurisdictions are operated as taxable REIT subsidiaries ("TRSs").
As a REIT, we generally are permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal income tax at the entity level but is taxed, if at all, at the stockholder level. Nevertheless, the income of our TRSs which hold our U.S. operations that may not be REIT compliant is subject, as applicable, to federal and state corporate income tax. Likewise, our foreign subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through TRSs or through qualified REIT subsidiaries ("QRSs"). We are also subject to a separate corporate income tax on any gain recognized from a sale of a REIT asset where our basis in the asset is determined by reference to the basis of the asset in the hands of a C corporation (such as (i) an asset that we held as of the effective date of our REIT election, which was January 1, 2015, or (ii) an asset held by us or a QRS following the liquidation or other conversion of a former TRS). This built-in-gain tax is generally applicable to any disposition of such an asset during the five-year period after the date we first owned the asset as a REIT asset (e.g., January 1, 2015 in the case of REIT assets we held at the time of our REIT conversion), to the extent of the built-in-gain based on the fair market value of such asset on the date we first held the asset as a REIT asset. If we fail to remain qualified for federal income taxation as a REIT, we will be subject to federal income tax at regular corporate tax rates. Even if we remain qualified for federal income taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRSs’ operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules, and some may not follow them at all.
On each of March 21, 2018, June 20, 2018, and September 19, 2018, we paid quarterly cash dividends of $2.28 per share. On November 1, 2018, we declared a quarterly cash dividend of $2.28 per share, payable on December 12, 2018, to the common stockholders of record as of the close of business on November 14, 2018. We expect the amount of all 2018 quarterly distributions and other applicable distributions to equal or exceed the REIT's taxable income to be recognized in 2018.
On December 22, 2017, the United States enacted legislation commonly referred to as the Tax Cuts and Jobs Act ("TCJA") which amended existing U.S. federal income tax laws. The TCJA retained the REIT regime but contained many significant changes which impact a REIT, particularly any REIT with global operations. We are still analyzing the new tax legislation and assessing its impact. Based on our current assessment, which is subject to further interpretation and guidance on the new tax legislation, we believe we can continue to meet all the REIT compliance requirements in the foreseeable future and the changes are not expected to meaningfully increase our tax liabilities in the U.S., as we will fully distribute our REIT taxable income.
We continue to monitor our REIT compliance in order to maintain our qualification for federal income taxation as a REIT. For this and other reasons, as necessary, we may convert some of our data center operations in other countries into the REIT structure in future periods.
Results of Operations
Our results of operations for the three and nine months ended September 30, 2018 include the results of operations from the Metronode Acquisition from April 18, 2018, the Infomart Dallas Acquisition from April 2, 2018, the Zenium data center acquisition from October 6, 2017, and the Itconic acquisition from October 9, 2017. Our results of operations for the three and nine months ended September 30, 2017 include the results of operations from certain colocation business acquired from Verizon (the "Verizon Data Center Acquisition") from May 1, 2017 and IO UK's data center operating business (the "IO Acquisition") from February 3, 2017.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") and issued subsequent amendments to the initial guidance, collectively referred as "Topic 606." On January 1, 2018, as more fully described in Note 1 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q, we adopted Topic 606. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while the comparative information has not been restated and continues to be reported under accounting standards in effect for those periods. Under the new standard, we recognize installation revenue over the contract period rather than over the estimated installation life as under the prior revenue standard. We also capitalize and amortize certain costs to obtain contracts, rather than expense them immediately as under the previous standard.
Three Months Ended September 30, 2018 and 2017
Revenues. Our revenues for the three months ended September 30, 2018 and 2017 were generated from the following revenue classifications and geographic regions (dollars in thousands):
 
Three Months Ended September 30,
 
% Change
 
2018
 
%
 
2017
 
%
 
Actual
 
Constant
Currency (1)
Americas:
 
 
 
 
 
 
 
 
 
 
 
Recurring revenues
$
591,846

 
46
%
 
$
566,036

 
49
%
 
5
%
 
6
%
Non-recurring revenues
33,838

 
3
%
 
30,502

 
3
%
 
11
%
 
12
%
 
625,684

 
49
%
 
596,538

 
52
%
 
5
%
 
7
%
EMEA:
 
 
 
 
 
 
 
 
 
 
 
Recurring revenues
370,651

 
29
%
 
320,879

 
27
%
 
16
%
 
17
%
Non-recurring revenues
26,104

 
2
%
 
17,954

 
2
%
 
45
%
 
47
%
 
396,755

 
31
%
 
338,833

 
29
%
 
17
%
 
18
%
Asia-Pacific:
 
 
 
 
 
 
 
 
 
 
 
Recurring revenues
245,309

 
19
%
 
202,118

 
18
%
 
21
%
 
23
%
Non-recurring revenues
16,003

 
1
%
 
14,772

 
1
%
 
8
%
 
10
%
 
261,312

 
20
%
 
216,890

 
19
%
 
20
%
 
22
%
Total:
 
 
 
 
 
 
 
 
 
 
 
Recurring revenues
1,207,806

 
94
%
 
1,089,033

 
94
%
 
11
%
 
13
%
Non-recurring revenues
75,945

 
6
%
 
63,228

 
6
%
 
20
%
 
22
%
 
$
1,283,751

 
100
%
 
$
1,152,261

 
100
%
 
11
%
 
13
%
 
(1) 
As defined in the "Non-GAAP Financial Measures" section in Item 2 of this Quarterly Report on Form 10-Q.
Americas Revenues. As compared to the three months ended September 30, 2017, revenues for our Americas region for the three months ended September 30, 2018 included approximately $10.4 million of incremental revenues from the Infomart Dallas Acquisition, which closed in April 2018. Our revenues from the U.S., the largest revenue contributor in the Americas region for the period, represented approximately 92% and 91%, respectively, of the regional revenues during the three months ended September 30, 2018 and 2017. Excluding revenues attributable to the Infomart Dallas Acquisition, our Americas revenue growth was primarily due to (i) approximately $15.0 million of revenues generated from our recently-opened IBX data centers or IBX data center expansions in the Chicago, Dallas, Washington, D.C., Miami, Sao Paulo, Culpepper and Silicon Valley metro areas and (ii) an increase in orders from both our existing customers and new customers during the period. During the three months ended September 30, 2018, foreign currency fluctuations resulted in approximately $10.1 million of unfavorable foreign currency impact to our Americas revenues primarily due to a generally stronger U.S. dollar relative to the Brazilian Real during the three months ended September 30, 2018 compared to the three months ended September 30, 2017.

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