April 22, 2009
Equinix Reports First Quarter 2009 Results
FOSTER CITY, CA — April 22, 2009 — Equinix, Inc. (Nasdaq: EQIX), a provider of global data center services, today reported results for the quarter ended March 31, 2009.
Revenues were $199.2 million for the quarter, a 4% increase over the previous quarter, and a 26% increase over the same quarter last year, including a negative impact due to foreign currency fluctuations of $1.1 million. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $191.3 million for the first quarter, a 5% increase over the previous quarter, and a 27% increase over the same quarter last year. Non-recurring revenues were $7.9 million in the quarter, consisting primarily of professional services and installation fees.
Cost of revenues was $111.8 million for the quarter, a 3% increase over the previous quarter and an 18% increase over the same quarter last year. Excluding depreciation, amortization, accretion and stock-based compensation expense of $39.9 million for the quarter, cost of revenues was $71.9 million for the quarter, which the Company refers to as cash cost of revenues, a 9% increase over the previous quarter, and a 16% increase over the same quarter last year. Cash gross margins, defined as gross profit less depreciation, amortization, accretion and stock-based compensation expense, divided by revenues, for the quarter were 64%, down from 65% the previous quarter and up from 61% the same quarter last year.
Selling, general and administrative expenses were $49.5 million for the quarter, an 11% decrease from the previous quarter and flat over the same quarter last year. Excluding depreciation, amortization and stock-based compensation expense of $13.6 million for the quarter, selling, general and administrative expenses were $35.9 million for the quarter, which the Company refers to as cash selling, general and administrative expenses, an 11% decrease over the previous quarter, and a 5% increase over the same quarter last year. The Company recorded a reversal of a previously-recorded restructuring charge totaling $5.8 million in the quarter as a result of the Company's decision to utilize a space previously abandoned in order to expand its original Los Angeles IBX center. Interest and other expenses, net, was $16.6 million for the quarter, a 13% increase over the previous quarter, and a 71% increase over the same quarter last year.
The Company recorded income tax expense in the quarter of $11.6 million as compared to an $88.0 million income tax benefit in the previous quarter and $0.5 million of income tax expense in the same quarter last year. This was primarily a result of the Company's decision in the fourth quarter of 2008 to release the valuation allowance against the Company's net deferred tax assets related to its domestic and Australian operations. As a result, net income for the first quarter was $15.5 million as compared to net income of $97.9 million in the previous quarter and net income of $3.8 million in the same quarter last year. This represents a basic net income per share of $0.41 and diluted net income per share of $0.40 based on a weighted average share count of 37.9 million and 38.7 million, respectively, for the first quarter of 2009.
Adjusted EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation expense and restructuring charges for the quarter was $91.4 million, an increase of 9% from the previous quarter, and up 47% from the same quarter last year.
“Equinix delivered strong results in the first quarter despite a challenging economic environment,” said Steve Smith, president and CEO of Equinix. “Our commitment to investing in disciplined and measured expansion for our customers will provide us a long-term competitive advantage.”
As of March 31, 2009, the Company's cash, cash equivalents and investments were $284.0 million, as compared to $307.9 million as of December 31, 2008.
Capital expenditures in the first quarter were $75.0 million, of which $10.3 million was attributed to ongoing capital expenditures and $64.7 million was attributed to expansion capital expenditures.
“Equinix achieved higher-than-expected cash gross margin growth and adjusted EBITDA performance in the first quarter,” said Keith Taylor, chief financial officer of Equinix. “With our strong balance sheet, continued focus on our discretionary spend levels, and the favorable operating cash flow attributes of our business model, we have a solid financial foundation to build on our market leadership position in 2009.”
- To view Equinix's Non-Financial Metrics, please visit the Investors section of Equinix's web site at www.equinix.com/investors and click on View Equinix's Non-Financial Metrics
Adoption of Recent Accounting Pronouncements
As a result of the Company's adoption of FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion” and FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” effective January 1, 2009, the Company adjusted its comparative condensed consolidated financial statements previously issued to reflect such changes in accounting principle.
For the second quarter of 2009, the Company expects revenues to be in the range of $206.0 to $210.0 million. Cash gross margins are expected to range between 63% and 64% and includes incremental costs from expansion IBX centers opening in the quarter. Cash selling, general and administrative expenses are expected to be approximately $39.0 million. Adjusted EBITDA for the quarter is expected to be between $92.0 and $94.0 million. Capital expenditures for the second quarter of 2009 are expected to be $110.0 to $120.0 million, comprised of approximately $20.0 million of ongoing capital expenditures and $90.0 to $100.0 million of expansion capital expenditures.
For the full year of 2009, total revenues are expected to be in the range of $855.0 to $875.0 million. Total year cash gross margins are expected to range between 62% and 63% and includes incremental costs from our expansion IBX centers opening throughout the remainder of the year. Cash selling, general and administrative expenses are expected to range between $160.0 million and $170.0 million. Adjusted EBITDA for the year is expected to be between $370.0 and $385.0 million. Capital expenditures for 2009 are expected to be in the range of $325.0 to $375.0 million, comprised of approximately $60.0 million of ongoing capital expenditures and $265.0 to $315.0 million of expansion capital expenditures. Expansion capital expenditures are for the announced expansions in the Amsterdam, Chicago, Frankfurt, Hong Kong, London, Los Angeles, New York, Paris and Singapore markets.
The Company will discuss its results and guidance on its quarterly conference call on Wednesday, April 22, 2009, at 5:30 p.m. ET (2:30 p.m. PT). To hear the conference call live, please dial 1-210-234-0004 (domestic and international) and reference the passcode (EQIX). A simultaneous live Webcast of the call will be available over the Internet at www.equinix.com/investors.
A replay of the call will be available beginning on Wednesday, April 22, 2009, at 7:30 p.m. (ET) through May 22, 2009 by dialing 1-402-220-4602. In addition, the Webcast will be available on the Company's Web site at www.equinix.com/investors. No password is required for either method of replay.
Equinix, Inc. (Nasdaq: EQIX) provides global data center services that ensure the vitality of the information-driven world. Global enterprises, content and financial companies, and network service providers rely upon Equinix's insight and expertise to protect and connect their most valued information assets. Equinix operates 42 International Business Exchange™ (IBX®) data centers across 18 markets in North America, Europe and Asia-Pacific.
Important information about Equinix is routinely posted on the investor relations page of its website located at www.equinix.com/investors. We encourage you to check Equinix's website regularly for the most up-to-date information.
Non-GAAP Financial Measures
Equinix provides all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Equinix uses non-
GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow and adjusted free cash flow to evaluate its operations. In presenting these non-GAAP financial measures, Equinix excludes certain non-cash or non-recurring items that it believes are not good indicators of the Company's current or future operating performance. These non-cash or non-recurring items are depreciation, amortization, accretion, stock-based compensation and restructuring charges. Legislative and regulatory requirements encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. Equinix excludes these non-cash or non-recurring items in order for Equinix's lenders, investors, and industry analysts who review and report on the Company, to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitor base.
Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business. Our IBX centers are long-lived assets, and have an economic life greater than ten years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our IBX centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers, and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.
In addition, in presenting the non-GAAP financial measures, Equinix excludes amortization expense related to certain intangible assets, as it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charge liabilities, as these expenses represent costs, which Equinix believes are not meaningful in evaluating the Company's current operations. Equinix excludes non-cash stock-based compensation expense as it represents expense attributed to stock awards that have no current or future cash obligations. As such, we, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we did not intend to build out, or our decision to reverse such restructuring charges. Management believes such items as restructuring charges are unique transactions that are not expected to recur, and consequently, does not consider these items as a normal component of expenses or income related to current and ongoing operations.
Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our core, ongoing business operations. Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.
Investors should note, however, that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.
Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how it was calculated for the three months ended March 31, 2009 and 2008, presented within this press release.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenue from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.
Equinix and IBX are registered trademarks of Equinix, Inc. Internet Business Exchange is a trademark of Equinix, Inc.