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November 2, 2016

Equinix Reports Third Quarter 2016 Results

Interconnection and Data Center Leader Delivers 55th Consecutive Quarter of Revenue Growth

REDWOOD CITY, Calif., Nov. 2, 2016 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended September 30, 2016. 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.

Third Quarter 2016 Results Summary

  • Revenues from continuing operations
    • $924.7 million, a 3% increase over the previous quarter
    • Includes $39.7 million of revenues from Bit-isle
    • Includes $107.3 million of revenues from Telecity
  • Operating Income
    • $169.9 million, a 12% increase over the previous quarter
  • Adjusted EBITDA
    • $420.0 million, a 45% adjusted EBITDA margin
    • Includes $13.1 million of adjusted EBITDA from Bit-isle
    • Includes $44.1 million of adjusted EBITDA from Telecity
    • Includes $19.0 million of integration costs for acquisitions ($2.5 million incremental to prior guidance)
    • Absorbs an incremental $5 million of cash-neutral U.S. GAAP adjustments related to Telecity
  • Net Income from Continuing Operations
    • $48.8 million
  • AFFO
    • $284.2 million, a 2% decrease from the previous quarter
    • Includes $19.0 million of integration costs for acquisitions

2016 Annual Guidance Summary

  • Revenues from continuing operations
    • $3,609 million - $3,615 million, a 32.5% increase over the previous year; an organic and constant currency growth rate of greater than 14%
    • Assumes $556 million in revenues from Bit-isle and Telecity
  • Adjusted EBITDA
    • $1,650 million - $1,656 million or a 45.8% adjusted EBITDA margin
    • Includes approximately $250 million from Bit-isle and Telecity
    • Assumes $59 million of integration costs for acquisitions ($4.0 million incremental to prior guidance)
    • Absorbs incremental $10 million of primarily cash-neutral U.S. GAAP adjustments related to Telecity
  • AFFO
    • $1,059 million - $1,065 million, a 27.6% increase over the previous year
    • Assumes a $64 million foreign currency loss related to the Telecity acquisition
    • Assumes $59 million of integration costs for acquisitions

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.

Steve Smith, president and CEO, Equinix:

"We had a great third quarter, delivering record bookings with double-digit growth in the cloud, financial and enterprise segments," said Steve Smith, president and CEO of Equinix. "We continue to see growth in Fortune 500 new customers as multi-national enterprises re-architect to a cloud-delivered infrastructure to optimize performance. We remain focused on scaling and refining our go-to-market engine, directed at capturing this significant shift to the cloud, and delivering continued profitable growth." 

Business Highlights

  • Equinix continues to expand the scale and reach of its global platform with 18 announced expansion projects underway, and today Equinix announced:
    • New expansions in Dallas, Dublin, Frankfurt, Helsinki and Zurich totaling more than $100 million of capital expenditures. 
    • The purchase of six acres of real estate adjacent to the Equinix Chicago area CH3 IBX which will be developed over time to expand Equinix's Elk Grove campus – a key location for cloud and financial customers.
  • Equinix added 10 Fortune 500 customers in Q3 2016, including: Target, a leading retailer; J.B Hunt, a transportation company; and Aetna, a healthcare and insurance provider.  Equinix has now penetrated nearly one-third of the Fortune 500 and a quarter of Global 2000 companies.  Additional customer momentum from the quarter:
    • Equinix recorded its second highest bookings quarter in the enterprise segment in Q3, as enterprises continue to re-architect their IT delivery to better interconnect people, locations, clouds and data.  Wins included one of the top three auto manufacturers that has selected Equinix to optimize their network topology and connect to Microsoft Azure via Equinix Cloud Exchange.
    • The financial services vertical achieved record bookings, and key customer wins included: an expansion with PayPal, an important customer in the digital payments ecosystem that is interconnecting to business partners to improve performance and latency; and Lloyd's, which is deploying a cloud-based risk modeling platform for the insurance industry.
    • The cloud and IT services vertical recorded its second best bookings quarter in Q3, with expansions from Amazon.com, Cisco Systems, Dell EMC, Marketo and others.  Equinix continues to enhance its value as the home of the interconnected cloud by increasing cloud density, making it easy for enterprises to find and consume cloud services from leading SaaS and IaaS partners, including AWS, Azure, IBM Softlayer, Google and Oracle.
    • As companies seek to locate their infrastructure closer to the digital edge, Equinix customer deployments across all three regions (Americas, APAC, EMEA) represented 55% of total recurring revenue for the quarter.
  • Additional business highlights announced in Q3 2016 included:
    • Momentum for Equinix continues as a strategic partner for the submarine cable industry with its selection as the US cable landing station for the Monet Submarine Cable System , which is owned by Algar Telecom, Angola Cables, Antel and Google.  The Monet project links North and South America from points in Miami and São Paulo.  In addition to this most recent win, Equinix has been selected as an interconnection partner in 12 of the current submarine cable projects that are experiencing high growth driven primarily by exponential increases in cloud services and innovation in optical equipment.
    • The ninth quarter in a row in which Equinix has added more than 5,000 cross-connects.  As more businesses adopt an IT architecture that enables direct interconnection with key partners and customers, Equinix now has more than 188,000 cross-connects between customers. 
    • The rollout of Equinix Internet Exchange in Helsinki, expanding coverage of this platform to 19 markets worldwide.
    • The rollout of the Equinix Media Cloud Ecosystem for Entertainment (EMCEE™), an ecosystem of interconnected media and content providers, along with content delivery networks (CDNs) and cloud service providers, that optimizes content creation, global distribution and services across the entire media and entertainment (M&E) industry.  As digital disruption changes the way that content is created, enhanced, transported, stored and distributed, more than 500 content and media companies use EMCEE to peer with the industry's largest concentration of CDNs, multiple system operators (MSOs) and social media platforms.

Business Outlook

Equinix's guidance includes forecasted results for Telecity from January 15, 2016, Bit-isle for the full year of 2016 and incremental operating results relating to Equinix's purchase of its Paris campus from Digital Realty on August 1, 2016 for approximately $215.9 million. As previously announced, Equinix divested eight assets, seven from Telecity along with its London 2 asset ("LD2"), to obtain regulatory clearance for the Telecity transaction. Equinix completed these divestitures on July 5, 2016 for approximately $827.3 million. Equinix's guidance does not include the seven Telecity assets, which were treated as discontinued operations, but does assume six months, or $6.0 million in revenues, from LD2, which was under a different accounting treatment that required results to be reported as continuing operations until the sales were completed.

For the fourth quarter of 2016 -- Equinix expects revenues to range between $940 and $946 million, or a normalized and constant currency growth rate of 2.4% quarter over quarter.  This guidance includes a negative foreign currency impact of $4 million when compared to the average FX rates in Q3 2016. Cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between $199 and $205 million.  Adjusted EBITDA is expected to range between $429 and $435 million, which includes a $2 million negative foreign currency impact when compared to the average FX rates used in Q3 2016 and approximately $17 million in integration costs from the two acquisitions. Capital expenditures are expected to be approximately $273 million, which includes approximately $42 million of recurring capital expenditures and approximately $231 million of non-recurring capital expenditures.

For the full year of 2016 -- Total revenues are expected to range between $3,609 and $3,615 million, an organic and constant currency growth rate of 14.1% year over year.  This guidance includes a negative foreign currency impact of $1 million when compared to prior guidance rates, and includes an expected $553 to $559 million in revenues from the Bit-isle and Telecity acquisitions. Net of FX, revenues are stepping up $10 million, the result of strong Q3 operating performance. Total year cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between $779 and $785 million. Adjusted EBITDA is expected to range between $1,650 and $1,656 million, an organic and constant currency growth rate of 17% year over year.  This absorbs an incremental $4 million of integration costs, or approximately $59 million in integration costs for the full year, an incremental $10 million of primarily cash-neutral U.S. GAAP adjustments related to Telecity and minimal FX impact. This guidance also includes approximately $250 million in adjusted EBITDA from the Bit-isle and Telecity acquisitions. AFFO is expected to range between $1,059 and $1,065 million, including approximately $59 million of integration costs and the $64 million Q1 2016 foreign currency loss attributed to the Telecity acquisition. This $17 million AFFO increase has negligible foreign currency benefit when compared to prior guidance, and is the result of strong business performance and lower interest expense. Capital expenditures are expected to be approximately $1,000 million, including approximately $147 million of recurring capital expenditures and approximately $853 million of non-recurring capital expenditures.  

The U.S. dollar exchange rates used for 2016 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.12 to the Euro, $1.42 to the Pound, S$1.37 to the U.S. dollar, ¥103.01 to the U.S. dollar and R3.23 to the U.S. dollar. The 2016 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 19%, 10%, 8%, 7% and 3%, respectively.

Q3 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended September 30, 2016, along with its future outlook, in its quarterly conference call on Wednesday, November 2, 2016, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on Equinix's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-210-234-8004 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call, through Friday, February 3, 2017, by dialing 1-203-369-1392 and referencing the passcode 2016. In addition, the webcast will be available at www.equinix.com/investors. No password is required for the webcast.

Investor Presentation and Supplemental Financial Information

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 Equinix's Investor Relations website at www.equinix.com/investors.

Additional Resources

About Equinix

Equinix, Inc. (Nasdaq: EQIX) connects the world's leading businesses to their customers, employees and partners inside the most interconnected data centers. In 40 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 presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income or loss from operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, acquisition costs and gains 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 gains 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 center, and do not reflect its current or future cash spending levels to support its business.  Its IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of an IBX 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 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 centers.  These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, Equinix also excludes amortization expense related to intangible assets, as it is not meaningful in evaluating Equinix's current or future operating performance; however, like depreciation, is an expense expected to recur in future 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 represents expense attributed to equity awards that have no current or future cash obligations. As such, Equinix, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX centers, which it did not intend to build out, or its decision to reverse such restructuring charges.  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 gains on asset sales as it represents profit that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes acquisition costs from its non-GAAP financial measures.  The acquisition costs relate to costs Equinix incurs in connection with business combinations.  Management believes items such as restructuring charges, impairment charges, acquisition costs and gains 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 (loss), excluding gains (losses) from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. AFFO represents FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income (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 revenue from installation fees, since installation fees are deferred and recognized ratably over the expected life of the installation, although the fees are generally paid in a lump sum upon installation. 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 revenue and straight-line rent expense are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. 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 gains (losses) 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 centers or other assets that are required to support current revenues. Equinix also excludes net income (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 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 (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, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenue from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.

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

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)































Three Months Ended


Nine Months Ended





September 30,


June 30,


September 30,


September 30,


September 30,





2016


2016


2015


2016


2015














Recurring revenues


$       877,494


$        851,771


$        646,721


$     2,526,359


$     1,883,069

Non-recurring revenues


47,182


48,739


39,928


142,983


112,336


Revenues


924,676


900,510


686,649


2,669,342


1,995,405














Cost of revenues


470,302


456,967


325,468


1,354,949


939,538



Gross profit

454,374


443,543


361,181


1,314,393


1,055,867














Operating expenses:












Sales and marketing

110,936


107,832


83,709


325,358


243,573


General and administrative

181,239


168,462


123,237


515,605


356,455


Impairment charges

7,698


-


-


7,698


-


Acquisition costs

12,505


15,594


13,352


64,635


24,374


Gains on asset sales

(27,945)


-


-


(33,187)


-



Total operating expenses

284,433


291,888


220,298


880,109


624,402














Income from continuing operations

169,941


151,655


140,883


434,284


431,465














Interest and other income (expense):











Interest income


762


841


934


2,528


2,375


Interest expense

(92,200)


(100,332)


(76,269)


(293,395)


(219,556)


Other income (expense)

2,938


1,555


(12,836)


(56,217)


(11,964)


Loss on debt extinguishment 

(9,894)


(605)


-


(10,499)


-



Total interest and other, net

(98,394)


(98,541)


(88,171)


(357,583)


(229,145)














Income from continuing operations before income taxes

71,547


53,114


52,712


76,701


202,320















Income tax expense

(22,778)


(13,812)


(11,580)


(25,957)


(25,277)














Net income from continuing operations

48,769


39,302


41,132


50,744


177,043















Net income from discontinued operations, net of tax

2,681


5,409


-


14,306


-














Net income



$        51,450


$          44,711


$          41,132


$          65,050


$        177,043














Net income per share:
























Basic net income per share from continuing operations

$            0.69


$             0.56


$             0.72


$             0.73


$             3.11


Basic net income per share from discontinued operations

0.04


0.08


-


0.21


-


Basic net income per share

$            0.73


$             0.64


$             0.72


$             0.94


$             3.11















Diluted net income per share from continuing operations

$            0.68


$             0.56


$             0.71


$             0.72


$             3.08


Diluted net income per share from discontinued operations

0.04


0.08


-


0.20


-


Diluted net income per share

$            0.72


$             0.64


$             0.71


$             0.92


$             3.08















Shares used in computing basic net income per share

71,190


69,729


57,082


69,689


56,894















Shares used in computing diluted net income per share

71,908


70,364


57,708


70,389


57,521

 


EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)































Three Months Ended


Nine Months Ended





September 30,


June 30,


September 30,


September 30,


September 30,





2016


2016


2015


2016


2015














Net income



$         51,450


$          44,711


$          41,132


$          65,050


$        177,043














Other comprehensive loss, net of tax:











 Foreign currency translation adjustment ("CTA") loss 

(32,603)


(298,361)


(72,677)


(215,065)


(149,546)


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

1,487


1,199


(21)


2,382


99


 Unrealized gain (loss) on cash flow hedges 

(4,153)


14,726


3,309


3,789


(425)


 Net investment hedge CTA gain (loss) 

(34,721)


55,196


4,426


4,163


(5,963)


 Net actuarial gain on defined benefit plans 

7


8


124


21


266

Other comprehensive loss, net of tax: 

(69,983)


(227,232)


(64,839)


(204,710)


(155,569)














Comprehensive income (loss), net of tax 

(18,533)


(182,521)


(23,707)


(139,660)


21,474

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)








Assets

September 30,


 December 31, 





2016


2015








Cash and cash equivalents

$           987,915


$     2,228,838

Short-term investments

443


12,875

Accounts receivable, net

377,528


291,964

Current portion of restricted cash

25,305


479,417

Other current assets

172,370


212,929

Assets held for sale

96,923


33,257


Total current assets

1,660,484


3,259,280

Long-term investments

15,036


4,584

Property, plant and equipment, net

7,251,399


5,606,436

Goodwill



3,118,686


1,063,200

Intangible assets, net

803,260


224,565

Other assets


248,692


198,630


Total assets

$      13,097,557


$   10,356,695








Liabilities and Stockholders' Equity











Accounts payable and accrued expenses

$           534,602


$        400,948

Accrued property, plant and equipment

185,683


103,107

Current portion of capital lease and other financing obligations

92,120


40,121

Current portion of mortgage and loans payable

518,985


770,236

Convertible debt


-


146,121

Other current liabilities

149,516


192,286

Liabilities held for sale

14,660


3,535


Total current liabilities

1,495,566


1,656,354

Capital lease and other financing obligations, less current portion

1,446,455


1,287,139

Mortgage and loans payable, less current portion

1,058,418


472,769

Senior notes


3,809,332


3,804,634

Other liabilities


664,076


390,413


Total liabilities

8,473,847


7,611,309








Common stock


72


62

Additional paid-in capital

7,371,024


4,838,444

Treasury stock


(147,617)


(7,373)

Accumulated dividends

(1,842,834)


(1,468,472)

Accumulated other comprehensive loss

(713,769)


(509,059)

Accumulated deficit

(43,166)


(108,216)


Total stockholders' equity

4,623,710


2,745,386


Total liabilities and stockholders' equity

$      13,097,557


$   10,356,695






















Ending headcount by geographic region is as follows:












Americas headcount

2,472


2,329


EMEA headcount

2,051


1,188


Asia-Pacific headcount

1,411


1,525



Total headcount

5,934


5,042

 

EQUINIX, INC.

SUMMARY OF DEBT PRINCIPAL OUTSTANDING

(in thousands)

(unaudited)












September 30,


December 31,





2016


2015








Capital lease and other financing obligations

$                     1,538,575


$                         1,327,260








Term loan, net of debt discount and debt issuance costs

1,055,950


454,503

Brazil financings, net of debt issuance costs

1,585


26,668

Mortgage payable and other loans payable

519,868


436,212

Revolving credit facility borrowings

-


325,622

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

12,011


694


Total mortgage and loans payable principal

1,589,414


1,243,699








Senior notes, net of debt issuance costs

3,809,332


3,804,634

Plus: debt issuance costs

40,668


45,366


Total senior notes principal

3,850,000


3,850,000








Convertible debt, net of debt discount and debt issuance costs

-


146,121

Plus: debt discount and debt issuance costs

-


3,961


Total convertible debt principal

-


150,082








Total debt principal outstanding

$                     6,977,989


$                         6,571,041

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)




















Three Months Ended


Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,






2016


2016


2015


2016


2015















Cash flows from operating activities:











Net income


$               51,450


$          44,711


$          41,132


$          65,050


$        177,043


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






















Depreciation, amortization and accretion

215,370


213,719


133,268


631,242


384,068



Stock-based compensation

42,346


39,323


33,969


115,730


98,575



Amortization of debt issuance costs and debt discounts

2,684


5,517


3,972


13,709


11,557



Loss on debt extinguishment 

10,181


318


-


10,499


-



Impairment charges

7,698


-


-


7,698


-



Gains on asset sales

(27,945)


-


-


(33,187)


-



Gains on sale of discontinued operations

(4,242)


-


-


(4,242)


-



Other items

3,905


7,311


3,589


16,087


12,696



Changes in operating assets and liabilities:













Accounts receivable

(30,440)


(31,055)


(220)


(72,807)


(42,002)




Income taxes, net

24,776


4,901


(18,376)


1,021


(84,523)




Accounts payable and accrued expenses

(901)


29,592


25,926


(11,526)


75,219




Other assets and liabilities

39,290


(35,509)


(8,858)


(22,004)


27,042





Net cash provided by operating activities

334,172


278,828


214,402


717,270


659,675

Cash flows from investing activities:











Purchases, sales and maturities of investments, net

(2,123)


8,764


94,217


10,060


523,477


Business acquisitions, net of cash acquired

(165,901)


-


-


(1,767,528)


(10,247)


Purchases of real estate

-


(11,710)


-


(28,118)


(38,282)


Purchases of other property, plant and equipment

(279,477)


(249,867)


(216,046)


(727,044)


(587,508)


Proceeds from asset sales

805,372


-


-


828,197


-


Other investing activities

(21,851)


(117)


14,274


444,736


(493,371)





Net cash provided by (used in) investing activities

336,020


(252,930)


(107,555)


(1,239,697)


(605,931)

Cash flows from financing activities:











Proceeds from employee equity awards

16,504


1,335


13,290


34,143


29,855


Payment of dividend distributions

(127,457)


(121,858)


(98,041)


(374,151)


(291,009)


Proceeds from loans payable

9,154


-


-


710,404


490,000


Repayment of capital lease and other financing obligations

(55,528)


(12,103)


(6,576)


(100,863)


(20,213)


Repayment of mortgage and loans payable

(13,354)


(36,707)


(10,818)


(986,414)


(529,447)


Repayment of convertible debt

-


(51)


-


(51)


-


Debt extinguishment costs

(10,181)


-


-


(10,181)


-


Debt issuance costs

(11,709)


23


-


(11,751)


(617)


Other financing activities

1,465


(564)


732


1,465


1,663





Net cash used in financing activities

(191,106)


(169,925)


(101,413)


(737,399)


(319,768)

Effect of foreign currency exchange rates on cash and cash equivalents

4,313


18,540


(6,098)


22,658


(9,424)

Change in cash balances included in assets held for sale

21,356


(25,111)


-


(3,755)


-

Net increase (decrease) in cash and cash equivalents

504,755


(150,598)


(664)


(1,240,923)


(275,448)

Cash and cash equivalents at beginning of period

483,160


633,758


336,133


2,228,838


610,917

Cash and cash equivalents at end of period

$              987,915


$        483,160


$        335,469


$        987,915


$        335,469
















Supplemental cash flow information:












Cash paid (refunded) for taxes

$                     (73)


$          12,361


$          28,333


$          31,503


$        103,137



Cash paid for interest

$              111,094


$          85,897


$          68,568


$        271,530


$        164,367















Free cash flow (1)


$              672,315


$          17,134


$          12,630


$       (532,487)


$       (469,733)















Adjusted free cash flow (2)

$              839,681


$          28,280


$          34,035


$     1,264,624


$       (352,462)





























(1)

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






















Net cash provided by operating activities as presented above

$              334,172


$        278,828


$        214,402


$        717,270


$        659,675


Net cash used in investing activities as presented above

336,020


(252,930)


(107,555)


(1,239,697)


(605,931)


Purchases, sales and maturities of investments, net

2,123


(8,764)


(94,217)


(10,060)


(523,477)



Free cash flow (negative free cash flow)

$              672,315


$          17,134


$          12,630


$       (532,487)


$       (469,733)















(2)

We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate, acquisitions, any excess tax benefits from employee equity awards, cash paid for taxes associated with reclassifying our assets for tax purposes triggered by our conversion into a real estate investment trust ("REIT") and costs related to the REIT conversion, as presented below:









































Free cash flow (as defined above)

$              672,315


$          17,134


$          12,630


$       (532,487)


$       (469,733)


Less business acquisitions, net of cash

165,901


-


-


1,767,528


10,247


Less purchases of real estate

-


11,710


-


28,118


38,282


Less excess tax benefits from employee equity awards

1,465


(564)


732


1,465


1,663


Less cash paid for taxes resulting from the REIT conversion 

-


-


20,033


-


65,146


Less costs related to the REIT conversion

-


-


640


-


1,933



Adjusted free cash flow

$              839,681


$          28,280


$          34,035


$     1,264,624


$       (352,462)






























We categorize our cash paid for taxes into cash paid for taxes resulting from the REIT conversion (as defined above) and other cash taxes paid.

































Cash paid for taxes resulting from the REIT conversion

$                      -


$                   -


$          20,033


$                   -


$          65,146


Other cash taxes paid

(73)


12,361


8,300


31,503


37,991



Total cash paid for taxes

$                  (73)


$          12,361


$          28,333


$          31,503


$        103,137

 

EQUINIX, INC.

NON-GAAP MEASURES AND OTHER SUPPLEMENTAL DATA

(in thousands)

(unaudited)































Three Months Ended


Nine Months Ended





September 30,


June 30,


September 30,


September 30,


September 30,





2016


2016


2015


2016


2015














Recurring revenues



$        877,494


$        851,771


$        646,721


$     2,526,359


$  1,883,069

Non-recurring revenues


47,182


48,739


39,928


142,983


112,336


Revenues (1)


924,676


900,510


686,649


2,669,342


1,995,405














Cash cost of revenues (2)

304,821


292,033


211,617


867,954


608,483




Cash gross profit (3)

619,855


608,477


475,032


1,801,388


1,386,922














Cash operating expenses (4):











Cash sales and marketing expenses (5)

79,515


78,071


68,323


237,278


197,201


Cash general and administrative expenses (6)

120,298


110,115


85,237


343,127


251,239




Total cash operating expenses (7)

199,813


188,186


153,560


580,405


448,440














Adjusted EBITDA (8)


$        420,042


$        420,291


$        321,472


$     1,220,983


$     938,482














Cash gross margins (9)

67%


68%


69%


67%


70%














Adjusted EBITDA margins (10)

45%


47%


47%


46%


47%














Adjusted EBITDA flow-through rate (11)

(1%)


70%


48%


43%


65%














FFO (12)




$        187,831


$        201,515


$        151,197


$        505,221


$     497,755














AFFO (13) (14)



$        284,179


$        290,529


$        210,361


$        784,554


$     653,505








































(1)

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
























Americas Revenues:
























Colocation


$        295,927


$        289,578


$        268,156


$        867,826


$     789,022


Interconnection

92,803


89,860


79,902


268,599


232,090


Managed infrastructure

14,830


13,255


11,788


39,255


37,920


Other



902


786


841


2,417


2,314



Recurring revenues

404,462


393,479


360,687


1,178,097


1,061,346


Non-recurring revenues

20,680


19,992


21,943


64,910


56,700



Revenues

425,142


413,471


382,630


1,243,007


1,118,046















EMEA Revenues:
























Colocation


244,420


240,421


143,721


699,019


415,938


Interconnection

21,464


22,425


15,227


63,589


41,715


Managed infrastructure

16,359


15,391


5,875


50,310


17,577


Other



3,947


3,573


1,333


8,463


4,413



Recurring revenues

286,190


281,810


166,156


821,381


479,643


Non-recurring revenues

15,060


18,799


11,407


48,334


36,510



Revenues

301,250


300,609


177,563


869,715


516,153















Asia-Pacific Revenues:
























Colocation


140,194


132,670


99,775


396,258


284,847


Interconnection

21,222


19,955


15,439


59,495


43,082


Managed infrastructure

21,797


20,078


4,664


60,132


14,151


Other



3,629


3,779


-


10,996


-



Recurring revenues

186,842


176,482


119,878


526,881


342,080


Non-recurring revenues

11,442


9,948


6,578


29,739


19,126



Revenues

198,284


186,430


126,456


556,620


361,206















Worldwide Revenues:
























Colocation


680,541


662,669


511,652


1,963,103


1,489,807


Interconnection

135,489


132,240


110,568


391,683


316,887


Managed infrastructure

52,986


48,724


22,327


149,697


69,648


Other



8,478


8,138


2,174


21,876


6,727



Recurring revenues

877,494


851,771


646,721


2,526,359


1,883,069


Non-recurring revenues

47,182


48,739


39,928


142,983


112,336



Revenues

$        924,676


$        900,510


$        686,649


$     2,669,342


$  1,995,405



























(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

$        470,302


$        456,967


$        325,468


$     1,354,949


$     939,538


Depreciation, amortization and accretion expense

(162,165)


(161,493)


(111,337)


(477,241)


(323,684)


Stock-based compensation expense

(3,316)


(3,441)


(2,514)


(9,754)


(7,371)



Cash cost of revenues

$        304,821


$        292,033


$        211,617


$        867,954


$     608,483















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
























Americas cash cost of revenues

$        114,934


$        109,296


$        105,864


$        333,250


$     303,275


EMEA cash cost of revenues

116,587


114,950


64,443


333,046


185,368


Asia-Pacific cash cost of revenues

73,300


67,787


41,310


201,658


119,840



Cash cost of revenues

$        304,821


$        292,033


$        211,617


$        867,954


$     608,483














(3)

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























(4)

We define cash operating expenses as operating expenses less depreciation, amortization, stock-based compensation and








acquisition costs.  We also refer to cash operating expenses as cash selling, general and administrative expenses or 









"cash SG&A".
























(5)

We define cash sales and marketing expenses as sales and marketing expenses less depreciation,











amortization and stock-based compensation as presented below:
























Sales and marketing expenses

$        110,936


$        107,832


$          83,709


$        325,358


$     243,573


Depreciation and amortization expense

(19,719)


(19,047)


(6,213)


(55,893)


(18,566)


Stock-based compensation expense

(11,702)


(10,714)


(9,173)


(32,187)


(27,806)



Cash sales and marketing expenses

$          79,515


$          78,071


$          68,323


$        237,278


$     197,201














(6)

We define cash general and administrative expenses as general and administrative expenses less depreciation, 










amortization and stock-based compensation as presented below:
























General and administrative expenses

$        181,239


$        168,462


$        123,237


$        515,605


$     356,455


Depreciation and amortization expense

(33,486)


(33,179)


(15,718)


(98,108)


(41,818)


Stock-based compensation expense

(27,455)


(25,168)


(22,282)


(74,370)


(63,398)



Cash general and administrative expenses

$        120,298


$        110,115


$          85,237


$        343,127


$     251,239














(7)

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
























Cash sales and marketing expenses

$          79,515


$          78,071


$          68,323


$        237,278


$     197,201


Cash general and administrative expenses

120,298


110,115


85,237


343,127


251,239



Cash SG&A

$        199,813


$        188,186


$        153,560


$        580,405


$     448,440















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
























Americas cash SG&A

$        108,077


$        109,147


$        102,596


$        328,138


$     296,981


EMEA cash SG&A

63,195


52,204


31,717


170,257


93,818


Asia-Pacific cash SG&A

28,541


26,835


19,247


82,010


57,641



Cash SG&A

$        199,813


$        188,186


$        153,560


$        580,405


$     448,440














(8)

We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion, stock-based








compensation expense, impairment charges, acquisition costs and gains on asset sales as presented below:























Income from continuing operations

$        169,941


$        151,655


$        140,883


$        434,284


$     431,465


Depreciation, amortization and accretion expense

215,370


213,719


133,268


631,242


384,068


Stock-based compensation expense

42,473


39,323


33,969


116,311


98,575


Impairment charges

7,698


-


-


7,698


-


Acquisition costs

12,505


15,594


13,352


64,635


24,374


Gains on asset sales

(27,945)


-


-


(33,187)


-



Adjusted EBITDA

$        420,042


$        420,291


$        321,472


$     1,220,983


$     938,482















The geographic split of our adjusted EBITDA is presented below:
























Americas income from continuing operations

$          89,004


$          87,100


$          81,914


$        264,643


$     241,033


Americas depreciation, amortization and accretion expense

82,204


78,874


70,118


237,798


205,621


Americas stock-based compensation expense

29,309


27,790


25,810


81,428


75,184


Americas acquisition costs

1,614


1,264


(3,672)


2,992


(4,048)


Americas gains on asset sales

-


-


-


(5,242)


-



Americas adjusted EBITDA

202,131


195,028


174,170


581,619


517,790















EMEA income from continuing operations

51,829


29,096


29,865


73,506


111,516


EMEA depreciation, amortization and accretion expense

78,555


82,929


33,055


237,972


87,574


EMEA stock-based compensation expense

8,138


7,060


4,338


21,433


12,342


EMEA acquisition costs

10,891


14,370


14,145


61,446


25,535


EMEA gains on asset sales

(27,945)


-


-


(27,945)


-



EMEA adjusted EBITDA

121,468


133,455


81,403


366,412


236,967















Asia-Pacific income from continuing operations

29,108


35,459


29,104


96,135


78,916


Asia-Pacific depreciation, amortization and accretion expense

54,611


51,916


30,095


155,472


90,873


Asia-Pacific stock-based compensation expense

5,026


4,473


3,821


13,450


11,049


Asia-Pacific impairment charges

7,698


-


-


7,698


-


Asia-Pacific acquisition costs

-


(40)


2,879


197


2,887



Asia-Pacific adjusted EBITDA

96,443


91,808


65,899


272,952


183,725
















Adjusted EBITDA

$        420,042


$        420,291


$        321,472


$     1,220,983


$     938,482














(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

73%


74%


72%


73%


73%















EMEA cash gross margins

61%


62%


64%


62%


64%















Asia-Pacific cash gross margins

63%


64%


67%


64%


67%














(10)

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
























Americas adjusted EBITDA margins

48%


47%


46%


47%


46%















EMEA adjusted EBITDA margins

40%


44%


46%


42%


46%















Asia-Pacific adjusted EBITDA margins

49%


49%


52%


49%


51%














(11)

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










revenue growth as follows:
























Adjusted EBITDA - current period

$        420,042


$        420,291


$        321,472


$     1,220,983


$     938,482


Less adjusted EBITDA - prior period

(420,291)


(380,650)


(311,262)


(965,879)


(853,503)



Adjusted EBITDA growth

$             (249)


$          39,641


$          10,210


$        255,104


$       84,979















Revenues - current period

$        924,676


$        900,510


$        686,649


$     2,669,342


$  1,995,405


Less revenues - prior period

(900,510)


(844,156)


(665,582)


(2,082,693)


(1,863,723)



Revenue growth

$          24,166


$          56,354


$          21,067


$        586,649


$     131,682















Adjusted EBITDA flow-through rate

(1%)


70%


48%


43%


65%



























(12)

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









































Net income


$          51,450


$          44,711


$          41,132


$          65,050


$     177,043


Adjustments:













Real estate depreciation and amortization

159,788


158,727


109,856


469,510


319,825



(Gain)/loss on disposition of real estate property

(23,436)


(1,951)


182


(29,424)


803



Adjustments for FFO from unconsolidated joint ventures

29


28


27


85


84



FFO 

$        187,831


$        201,515


$        151,197


$        505,221


$     497,755



























(13)

AFFO is defined as FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, acquisition costs, an installation revenue adjustment, a straight-line rent expense adjustment, amortization of deferred financing costs, gains (losses) on debt extinguishment, an income tax expense adjustment, net income 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 



$        187,831


$        201,515


$        151,197


$        505,221


$     497,755


Adjustments:













Installation revenue adjustment

4,612


7,407


8,527


15,373


29,655



Straight-line rent expense adjustment

2,686


1,895


1,251


5,714


6,469



Amortization of deferred financing costs

2,687


5,243


3,934


13,438


11,640



Stock-based compensation expense

42,474


39,323


33,969


116,312


98,575



Non-real estate depreciation expense

22,108


21,021


15,946


64,516


42,244



Amortization expense

32,929


32,303


6,601


93,384


19,346



Accretion expense

545


1,668


865


3,832


2,653



Recurring capital expenditures

(41,600)


(31,928)


(25,910)


(105,343)


(75,613)



Loss on debt extinguishment

9,894


605


-


10,499


-



Acquisition costs

12,505


15,594


13,352


64,635


24,374



Impairment charges

7,698


-


-


7,698


-



Income tax expense adjustment

2,501


1,301


643


3,612


(3,549)



Net income from discontinued operations, net of tax

(2,681)


(5,409)


-


(14,306)


-



Adjustments for AFFO from unconsolidated joint ventures

(10)


(9)


(14)


(31)


(44)



AFFO

$        284,179


$        290,529


$        210,361


$        784,554


$     653,505














(14)

Following is how we reconcile from adjusted EBITDA to AFFO:
























Adjusted EBITDA

$        420,042


$        420,291


$        321,472


$     1,220,983


$     938,482


Adjustments:













Interest expense, net of interest income

(91,437)


(99,491)


(75,335)


(290,866)


(217,181)



Amortization of deferred financing costs

2,687


5,243


3,934


13,438


11,640



Income tax (benefit) expense

(22,778)


(13,812)


(11,580)


(25,957)


(25,277)



Income tax expense adjustment

2,501


1,301


643


3,612


(3,549)



Straight-line rent expense adjustment

2,686


1,895


1,251


5,714


6,469



Installation revenue adjustment

4,612


7,407


8,527


15,373


29,655



Recurring capital expenditures

(41,600)


(31,928)


(25,910)


(105,343)


(75,613)



Other (income)/expense

2,938


1,555


(12,836)


(56,217)


(11,964)



Gain/loss on disposition of depreciable real estate property

(23,436)


(1,951)


182


(29,424)


803



Adjustments for unconsolidated JVs' and non-controlling interests

19


19


13


54


40



Adjustment for gain on sale of asset

27,945


-


-


33,187


-



AFFO

$        284,179


$        290,529


$        210,361


$        784,554


$     653,505

 

 

SOURCE Equinix, Inc.

Equinix Investor Relations Contacts: Katrina Rymill, Equinix, Inc., (650) 598-6583, krymill@equinix.com; Michelle Lindeman, Equinix, Inc., (650) 598-6361, mlindeman@equinix.com; Equinix Media Contact: Paul Thomas, Equinix, Inc., (650) 598-6442, pthomas@equinix.com