Equinix Reports Fourth Quarter And Year-End 2013 Results - KiiiTV.com South Texas, Corpus Christi, Coastal Bend

Equinix Reports Fourth Quarter And Year-End 2013 Results

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SOURCE Equinix

- Reported 2013 annual revenues of $2,152.8 million, a 14% increase over the previous year

- Announced 2014 annual guidance of revenues to be greater than $2,380.0 million, adjusted EBITDA to be greater than $1,100.0 million

REDWOOD CITY, Calif., Feb. 19, 2014 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly and year-end results for the period ended December 31, 2013.  The Company 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.

(Logo: http://photos.prnewswire.com/prnh/20140102/MM39832LOGO)

Revenues were $564.7 million for the fourth quarter, a 4% increase over the previous quarter and a 12% increase over the same quarter last year.  Revenues for the year ended December 31, 2013, were $2,152.8 million, a 14% increase over 2012.  Recurring revenues, consisting primarily of colocation, interconnection and managed services were $538.1 million for the fourth quarter, a 4% increase over the previous quarter, and $2,050.0 million for the year ended December 31, 2013, a 14% increase over 2012.  Non-recurring revenues were $26.6 million for the fourth quarter and $102.8 million for the year ended December 31, 2013.  Churn for the fourth quarter was 2.3%, down from 2.5% for the previous quarter and consistent with prior guidance.

"In 2013, Equinix delivered over $2 billion of revenue and for the first time over $1 billion of adjusted EBITDA, demonstrating the strength of our business model. Fourth quarter results were positive, underpinned by significant growth in cloud and IT services," said Steve Smith, president and CEO of Equinix. "As we enter 2014, we see continued strength in the business and are well positioned to execute on emerging growth opportunities."

Cost of revenues were $269.7 million for the fourth quarter, a slight increase over the previous quarter, and $1,064.4 million for the year ended December 31, 2013, a 13% increase over 2012.  Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $95.4 million for the quarter and $385.6 million for the year, which we refer to as cash cost of revenues, were $174.3 million for the quarter, a slight increase from the previous quarter, and $678.8 million for the year ended December 31, 2013, a 14% increase over 2012.  Gross margins for the quarter were 52%, up from 50% for the previous quarter and up from 51% for the same quarter last year.  Gross margins were 51% for the year ended December 31, 2013, up from 50% for the prior year.  Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 69%, up from 68% for the previous quarter and unchanged from the same quarter last year.  Cash gross margins were 68% for the year ended December 31, 2013, unchanged from the prior year.   

Selling, general and administrative expenses were $165.7 million for the fourth quarter, a 5% increase over the previous quarter, and $621.4 million for the year ended December 31, 2013, a 17% increase over 2012.  Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $38.8 million for the quarter and $148.4 million for the year, which we refer to as cash selling, general and administrative expenses, were $126.9 million for the quarter, a 5% increase from the previous quarter, and $473.0 million for the year ended December 31, 2013, a 17% increase over 2012. 

The Company recorded a loss on debt extinguishment of $14.9 million for the quarter primarily attributed to the prepayment of financing liabilities for two of our IBX data centers.  The loss on debt extinguishment of $108.5 million for the year ended December 31, 2013 was primarily attributed to the redemption of the entire principal amount of the $750.0 million 8.125% senior notes in April 2013.

Interest expense was $65.5 million for the fourth quarter, a 6% increase from the previous quarter, and $248.8 million for the year ended December 31, 2013, a 24% increase over 2012, primarily attributed to the $1.5 billion senior notes offering in March 2013, additional financings such as various capital lease and other financing obligations to support the Company's expansion projects and less capitalized interest expense.  The Company recorded income tax expense of $2.0 million for the fourth quarter as compared to income tax expense of $12.4 million in the prior quarter and income tax expense of $16.2 million for the year ended December 31, 2013 as compared to income tax expense of $58.6 million in the prior year.

Net income attributable to Equinix for the fourth quarter was $45.2 million.  This represents a basic net income per share attributable to Equinix of $0.91 and a diluted net income per share attributable to Equinix of $0.88 based on a weighted average share count of 49.8 million and 53.5 million, respectively, for the fourth quarter.  Net income attributable to Equinix for the year ended December 31, 2013 was $94.7 million.  This represents a basic net income per share attributable to Equinix of $1.92 and a diluted net income per share attributable to Equinix of $1.89 based on a weighted average share count of 49.4 million and 50.1 million, respectively, for the year ended December 31, 2013.  These amounts include the charges to the income statement for the loss on debt extinguishment of $14.9 million for the quarter and $108.5 million for the year ended December 31, 2013.

Income from continuing operations was $125.0 million for the fourth quarter, a 9% increase from the previous quarter, and $460.9 million for the year ended December 31, 2013, a 17% increase over 2012.  Adjusted EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation, restructuring charges, impairment charges and acquisition costs, for the fourth quarter was $263.5 million, a 6% increase over the previous quarter, and $1,000.9 million for the year ended December 31, 2013, a 13% increase over 2012.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the fourth quarter, were $202.8 million, of which $134.8 million was attributed to expansion capital expenditures and $68.0 million was attributed to ongoing capital expenditures.  Capital expenditures for the year ended December 31, 2013 were $572.4 million, of which $389.1 million was attributed to expansion capital expenditures and $183.3 million was attributed to ongoing capital expenditures. 

To date, the Company has repurchased 0.5 million shares of its common stock under the $500 million share repurchase program authorized in December 2013 at an average price of $172.47 per share for total consideration of $92.5 million.

The Company generated cash from operating activities of $166.7 million for the fourth quarter as compared to $206.6 million in the previous quarter, primarily attributed to the first payment of semi-annual interest related to the $1.5 billion senior notes and an increase in cash paid for taxes in the fourth quarter.  Cash generated from operating activities for the year ended December 31, 2013 was $604.6 million as compared to $632.0 million in the previous year.  Cash used in investing activities was $233.4 million in the fourth quarter as compared to cash used in investing activities of $331.0 million in the previous quarter.  Cash used in investing activities for the year ended December 31, 2013 was $1,169.3 million as compared to cash used in investing activities of $442.9 million in the previous year, primarily attributed to net purchases of investments in marketable securities during 2013.  Cash used in financing activities was $70.6 million for the fourth quarter as compared to cash used in financing activities of $1.2 million in the previous quarter.  Cash provided by financing activities was $574.9 million for the year ended December 31, 2013, primarily attributed to the issuance of the $1.5 billion senior notes offset by the redemption of the $750.0 million 8.125% senior notes, as compared to cash used in financing activities of $222.7 million in the previous year, primarily attributed to the settlement on the 2.50% convertible subordinated notes upon maturity during the year.    

As of December 31, 2013, the Company's cash, cash equivalents and investments were $1,030.1 million, as compared to $546.5 million as of December 31, 2012.    

Revision of Previously-Issued Financial Statements

In November 2013, we completed our evaluation of whether a lengthening of the estimated period over which non-recurring installation fees are recognized, which we originally incorrectly considered a change in estimate that we began to recognize prospectively beginning in the second quarter of 2013, should have been applied in earlier periods. We concluded that these longer lives should have been identified and utilized for revenue recognition purposes beginning in 2006. We assessed the materiality of this error individually and in the aggregate on prior periods' financial statements in accordance with the SEC's Staff Accounting Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the error was not material to any of our prior interim and annual financial statements and, therefore, the previously-issued financial statements could continue to be relied upon and that amendment of previously filed reports with the SEC was not required. We also determined that correcting the cumulative amount of the non-recurring installation fees of $27.2 million as of December 31, 2012 in 2013 would be material to the projected 2013 consolidated financial statements, and, as such, we revised our previously-issued consolidated financial statements accordingly, commencing with our Form 10-Q for the quarterly period ended September 30, 2013. Such adjustment has no effect on our total cash flows. As part of the revision to our previously-issued consolidated financial statements noted above, we also revised our consolidated financial statements for several previously identified immaterial errors that were either uncorrected or corrected in a period subsequent to the period in which the error originated, as more fully described in Note 2 of our Form 10-Q filed for the quarterly period ended September 30, 2013. The financial results contained herein are the as revised financial statements.

Business Outlook

For the first quarter of 2014, the Company expects revenues to range between $572.0 and $576.0 million.  Cash gross margins are expected to approximate 68% to 69%.  Cash selling, general and administrative expenses are expected to range between $133.0 and $137.0 million.  Adjusted EBITDA is expected to range between $256.0 and $260.0 million, which includes $11.0 million in professional fees and costs primarily related to the REIT conversion.  Capital expenditures are expected to range between $130.0 and $140.0 million, comprised of approximately $60.0 million of ongoing capital expenditures and $70.0 to $80.0 million of expansion capital expenditures.  

For the full year of 2014, total revenues are expected to be greater than $2,380.0 million, or an as reported 11% year over year growth rate, which includes negative foreign currency headwinds of approximately $12.0 million compared to the rates used from our prior guidance.  Total year cash gross margins are expected to approximate 69%.  Cash selling, general and administrative expenses are expected to range between $530.0 and $550.0 million.  Adjusted EBITDA for the year is expected to be greater than $1,100.0 million, which includes negative foreign currency headwinds of approximately $5.0 million compared to the rates used from our prior guidance, and includes $37.0 million in professional fees and costs primarily related to the REIT conversion.  Capital expenditures for 2014 are expected to range between $550.0 and $650.0 million, comprised of approximately $200.0 million of ongoing capital expenditures and $350.0 to $450.0 million for expansion capital expenditures. 

The U.S. dollar exchange rates used for 2014 guidance are $1.36 to the Euro, $1.64 to the Pound, S$1.26 to the U.S. dollar and R$2.39 to the U.S. dollar. The 2014 global revenue breakdown by currency for the Euro, Pound, Singapore dollar and Brazilian Real is 15%, 9%, 6% and 4%, respectively.

Company Metrics and Q4 Results Presentation

The Company will discuss its results and guidance on its quarterly conference call on Wednesday, February 19, 2014, at 5:30 p.m. ET (2:30 p.m. PT).  A simultaneous live Webcast of the call will be available on the Equinix investors website located 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 presentation to accompany the call as well as the Company's Non-Financial Metrics tracking sheet, will also be available on the website. 

A replay of the call will be available beginning on Wednesday, February 19, 2014, at 7:30 p.m. (ET) through Tuesday, May 20, 2014, by dialing 1-203-369-1841 and reference the passcode (2013).  In addition, the webcast will be available on the investors section of the Company's website over the same time period.  No password is required for the replay or the webcast.

About Equinix

Equinix, Inc. (Nasdaq: EQIX), connects more than 4,500 companies directly to their customers and partners inside the world's most networked data centers. Today, businesses leverage the Equinix interconnection platform in 32 strategic markets across the Americas, EMEA and Asia-Pacific. www.equinix.com.

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, adjusted free cash flow, discretionary free cash flow and adjusted discretionary free cash flow to evaluate its operations.  In presenting these non-GAAP financial measures, Equinix excludes certain items that it believes are not good indicators of the Company'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 and acquisition costs. 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 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 competitors.

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 10 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 charges, as these expenses represent costs which Equinix believes are not meaningful in evaluating the Company's current operations.  Equinix excludes stock-based compensation expense as it primarily represents expense attributed to equity 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 or severance charges related to the Switch and Data acquisition.  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. Finally, Equinix excludes acquisition costs from its non-GAAP financial measures.  The acquisition costs relate to costs the Company incurs in connection with business combinations.  Management believes such items as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of costs will or may occur in future periods.

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, 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.  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


Twelve Months Ended





December 31,


September 30,


December 31,


December 31,


December 31,





2013


2013


2012


2013


2012














Recurring revenues


$        538,060


$        515,566


$        482,826


$     2,049,962


$     1,797,068

Non-recurring revenues


26,617


27,518


23,233


102,804


90,308


Revenues


564,677


543,084


506,059


2,152,766


1,887,376














Cost of revenues


269,743


268,960


249,329


1,064,403


944,617



Gross profit

294,934


274,124


256,730


1,088,363


942,759














Operating expenses:












Sales and marketing

67,250


61,619


55,690


246,623


202,914


General and administrative

98,466


96,874


86,536


374,790


328,266


Restructuring charges

-


-


-


(4,837)


-


Impairment charges

-


-


9,861


-


9,861


Acquisition costs

4,229


438


1,939


10,855


8,822



Total operating expenses

169,945


158,931


154,026


627,431


549,863














Income from operations

124,989


115,193


102,704


460,932


392,896














Interest and other income (expense):











Interest income


794


929


758


3,387


3,466


Interest expense

(65,503)


(61,957)


(50,516)


(248,792)


(200,328)


Loss on debt extinguishment 

(14,899)


-


-


(108,501)


(5,204)


Other income (expense)

1,959


985


(717)


5,253


(2,208)



Total interest and other, net

(77,649)


(60,043)


(50,475)


(348,653)


(204,274)














Income from continuing operations before income taxes

47,340


55,150


52,229


112,279


188,622















Income tax expense

(1,967)


(12,397)


(17,476)


(16,156)


(58,564)














Net income from continuing operations

45,373


42,753


34,753


96,123


130,058















Net income from discontinued operations, net of tax

-


-


6


-


1,234


Gain on sale of discontinued operations, net of tax

-


-


11,852


-


11,852














Net income



45,373


42,753


46,611


96,123


143,144














Net income attributable to redeemable non-controlling interests

(186)


(282)


(1,273)


(1,438)


(3,116)














Net income attributable to Equinix

$          45,187


$          42,471


$          45,338


$          94,685


$        140,028














Net income per share attributable to Equinix:
























Basic net income per share from continuing operations

$             0.91


$             0.86


$             0.69


$             1.92


$             2.65


Basic net income per share from discontinued operations

-


-


0.24


-


0.27


Basic net income per share (1)

$             0.91


$             0.86


$             0.93


$             1.92


$             2.92















Diluted net income per share from continuing operations

$             0.88


$             0.83


$             0.67


$             1.89


$             2.58


Diluted net income per share from discontinued operations

-


-


0.22


-


0.25


Diluted net income per share (2)

$             0.88


$             0.83


$             0.89


$             1.89


$             2.83















Shares used in computing basic net income per share

49,765


49,555


48,673


49,438


48,004















Shares used in computing diluted net income per share

53,499


53,581


52,917


50,116


51,816



























(1)

The net income used in the computation of basic net income per share attributable to Equinix is presented below: 















Net income from continuing operations

$          45,373


$          42,753


$          34,753


$          96,123


$        130,058


Net income attributable to non-controlling interests

(186)


(282)


(1,273)


(1,438)


(3,116)



Net income from continuing operations attributable to Equinix, basic 

45,187


42,471


33,480


94,685


126,942


Net income from discontinued operations

-


-


11,858


-


13,086



Net income attributable to Equinix, basic

$          45,187


$          42,471


$          45,338


$          94,685


$        140,028














(2)

The net income used in the computation of diluted net income per share attributable to Equinix is presented below: 















Net income from continuing operations attributable to Equinix, basic 

$          45,187


$          42,471


$          33,480


$          94,685


$        126,942


Interest on convertible debt

1,847


1,865


1,707


-


6,789



Net income from continuing operations attributable to Equinix, diluted 

47,034


44,336


35,187


94,685


133,731


Net income from discontinued operations

-


-


11,858


-


13,086



Net income attributable to Equinix, diluted

$          47,034


$          44,336


$          47,045


$          94,685


$        146,817

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)































Three Months Ended


Twelve Months Ended





December 31,


September 30,


December 31,


December 31,


December 31,





2013


2013


2012


2013


2012














Net income



$          45,373


$          42,753


$          46,611


$          96,123


$        143,144














Other comprehensive income (loss), net of tax:











 Foreign currency translation gain (loss) 

6,905


78,113


9,307


(18,203)


36,194


 Unrealized gain (loss) on available for sale securities 

(376)


438


(37)


(298)


(23)


 Unrealized loss on cash flow hedges 

(1,750)


-


-


(1,750)


-

 Other comprehensive income (loss), net of tax: 

4,779


78,551


9,270


(20,251)


36,171














 Comprehensive income, net of tax 

50,152


121,304


55,881


75,872


179,315















 Net income attributable to redeemable non-controlling interests 

(186)


(282)


(1,273)


(1,438)


(3,116)


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

3,185


(200)


3,330


7,526


6,485














 Comprehensive income attributable to Equinix, net of tax 

$          53,151


$        120,822


$          57,938


$          81,960


$        182,684

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)








Assets

December 31,


December 31,





2013


2012








Cash and cash equivalents

$           261,894


$           252,213

Short-term investments

369,808


166,492

Accounts receivable, net

184,840


163,840

Other current assets

72,118


57,547


Total current assets

888,660


640,092

Long-term investments

398,390


127,819

Property, plant and equipment, net

4,591,650


3,915,738

Goodwill



1,042,153


1,042,564

Intangible assets, net

184,182


201,562

Other assets


387,324


208,022


Total assets

$        7,492,359


$        6,135,797








Liabilities and Stockholders' Equity











Accounts payable and accrued expenses

$           263,223


$           268,853

Accrued property and equipment

64,601


63,509

Current portion of capital lease and other financing obligations

17,214


15,206

Current portion of mortgage and loans payable

53,508


52,160

Other current liabilities

147,958


149,344


Total current liabilities

546,504


549,072

Capital lease and other financing obligations, less current portion

914,032


545,853

Mortgage and loans payable, less current portion

199,700


188,802

Senior notes


2,250,000


1,500,000

Convertible debt


724,202


708,726

Other liabilities


274,955


245,725


Total liabilities

4,909,393


3,738,178








Redeemable non-controlling interests

123,902


84,178








Common stock


50


49

Additional paid-in capital

2,693,887


2,582,238

Treasury stock


(84,663)


(36,676)

Accumulated other comprehensive loss

(113,767)


(101,042)

Accumulated deficit

(36,443)


(131,128)


Total stockholders' equity

2,459,064


2,313,441









Total liabilities, redeemable non-controlling interests





and stockholders' equity

$        7,492,359


$        6,135,797






















Ending headcount by geographic region is as follows:












Americas headcount

1,984


1,821


EMEA headcount

899


811


Asia-Pacific headcount

617


521



Total headcount

3,500


3,153

 

EQUINIX, INC.

SUMMARY OF DEBT OUTSTANDING

(in thousands)

(unaudited)












December 31,


December 31,





2013


2012








Capital lease and other financing obligations

$           931,246


$           561,059








U.S. term loan


140,000


180,000

ALOG financing


67,882


48,807

Mortgage payable

43,497


-

Paris 4 IBX financing

122


8,071

Other loans payable

1,707


4,084


Total loans payable

253,208


240,962








Senior notes


2,250,000


1,500,000








Convertible debt, net of debt discount

724,202


708,726

Plus debt discount

45,508


60,990


Total convertible debt principal

769,710


769,716








Total debt outstanding

$        4,204,164


$        3,071,737

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


































Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,






2013


2013


2012


2013


2012















Cash flows from operating activities:











Net income


$          45,373


$          42,753


$          46,611


$          96,123


$        143,144


Adjustments to reconcile net income to net cash











provided by operating activities:












Depreciation, amortization and accretion

106,682


105,534


102,627


431,008


402,234



Stock-based compensation

27,630


27,280


21,593


102,940


83,025



Debt issuance costs and debt discount

6,266


5,965


5,308


23,868


23,365



Loss on debt extinguishment 

14,899


-


-


108,501


5,204



Restructuring charges

-


-


-


(4,837)


-



Impairment charges

-


-


9,861


-


9,861



Gain on sale of discontinued operations

-


-


(11,852)


-


(11,852)



Excess tax benefits from employee equity awards

42


(4,951)


(19,457)


(27,330)


(72,631)



Other reconciling items

7,196


4,595


1,486


18,825


7,532



Changes in operating assets and liabilities:













Accounts receivable

12,336


3,469


20,299


(27,956)


(26,601)




Income taxes, net

(36,622)


3,989


2,893


(108,189)


24,089




Accounts payable and accrued expenses

(10,157)


17,003


26,203


7,242


33,538




Other assets and liabilities

(6,939)


925


(1,880)


(15,587)


11,118





Net cash provided by operating activities

166,706


206,562


203,692


604,608


632,026

Cash flows from investing activities:











Purchases, sales and maturities of investments, net

18,641


(89,219)


(15,162)


(479,136)


499,251


Purchase of Frankfurt Kleyer 90 Carrier Hotel

(48,739)


(1,353)


-


(50,092)


-


Purchase of New York IBX data center

-


(70,481)


-


(73,441)


-


Purchase of Dubai IBX data center

-


-


(22,918)


-


(22,918)


Purchase of Asia Tone, less cash acquired

-


862


(8,133)


755


(202,338)


Purchase of ancotel, less cash acquired

-


-


-


-


(84,236)


Purchases of real estate

-


(891)


(24,656)


(891)


(24,656)


Purchases of other property, plant and equipment

(202,841)


(171,035)


(210,408)


(572,406)


(764,500)


Proceeds from sale of discontinued operations

-


-


76,458


-


76,458


Other investing activities

(423)


1,159


899


5,898


80,066





Net cash used in investing activities

(233,362)


(330,958)


(203,920)


(1,169,313)


(442,873)

Cash flows from financing activities:











Purchases of treasury stock

(48,799)


-


-


(48,799)


(13,364)


Proceeds from employee equity awards

3,810


12,202


5,998


31,892


56,137


Proceeds from loans payable

26,304


1,734


4,049


28,038


262,591


Proceeds from senior notes

-


-


-


1,500,000


-


Repayment of capital lease and other financing obligations

(27,907)


(4,553)


(3,471)


(40,133)


(12,378)


Repayment of mortgage and loans payable

(10,196)


(10,113)


(13,332)


(52,500)


(329,111)


Repayment of senior notes

-


-


-


(750,000)


-


Repayment of convertible debt

-


-


-


-


(250,007)


Debt extinguishment costs

(13,189)


(3,750)


-


(97,864)


-


Excess tax benefits from employee equity awards

(42)


4,951


19,457


27,330


72,631


Other financing activities

(622)


(1,649)


(453)


(23,057)


(9,220)





Net cash provided by (used in) financing activities

(70,641)


(1,178)


12,248


574,907


(222,721)

Effect of foreign currency exchange rates on cash and cash equivalents

(551)


7,820


506


(521)


6,958

Net increase (decrease) in cash and cash equivalents

(137,848)


(117,754)


12,526


9,681


(26,610)

Cash and cash equivalents at beginning of period

399,742


517,496


239,687


252,213


278,823

Cash and cash equivalents at end of period

$        261,894


$        399,742


$        252,213


$        261,894


$        252,213
















Supplemental cash flow information:












Cash paid for taxes

$          36,954


$            9,882


$          17,133


$        123,690


$          36,711



Cash paid for interest

$          74,671


$          38,319


$          27,404


$        210,629


$        185,321















Free cash flow (1)


$         (85,297)


$         (35,177)


$          14,934


$         (85,569)


$       (310,098)















Adjusted free cash flow (2)

$              236


$          50,855


$          22,387


$        174,548


$          28,970















Ongoing capital expenditures (3)

$          68,059


$          41,064


$          43,497


$        183,330


$        157,089















Discretionary free cash flow (4)

$          98,647


$        165,498


$        160,195


$        421,278


$        474,937















Adjusted discretionary free cash flow (5)

$        135,441


$        179,667


$        188,399


$        557,726


$        556,315





























(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

$        166,706


$        206,562


$        203,692


$        604,608


$        632,026


Net cash used in investing activities as presented above

(233,362)


(330,958)


(203,920)


(1,169,313)


(442,873)


Purchases, sales and maturities of investments, net

(18,641)


89,219


15,162


479,136


(499,251)



Free cash flow (negative free cash flow)

$         (85,297)


$         (35,177)


$          14,934


$         (85,569)


$       (310,098)















(2)

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
















Free cash flow (as defined above)

$         (85,297)


$         (35,177)


$          14,934


$         (85,569)


$       (310,098)


Less purchase of Frankfurt Kleyer 90 Carrier Hotel

48,739


1,353


-


50,092


-


Less purchase of New York IBX data center

-


70,481


-


73,441


-


Less purchase of Dubai IBX data center

-


-


22,918


-


22,918


Less purchase of Asia Tone, less cash acquired

-


(862)


8,133


(755)


202,338


Less purchase of ancotel, less cash acquired

-


-


-


-


84,236


Less purchases of real estate

-


891


24,656


891


24,656


Less sale of discontinued operations

-


-


(76,458)


-


(76,458)


Less excess tax benefits from employee equity awards

(42)


4,951


19,457


27,330


72,631


Less cash paid for taxes resulting from the planned REIT conversion 

30,040


805


5,116


88,149


5,116


Less costs related to the planned REIT conversion

6,796


8,413


3,631


20,969


3,631



Adjusted free cash flow

$              236


$          50,855


$          22,387


$        174,548


$          28,970
















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
















Cash paid for taxes resulting from the planned REIT conversion

$          30,040


$              805


$            5,116


$          88,149


$            5,116


Other cash taxes paid

6,914


9,077


12,017


35,541


31,595



Total cash paid for taxes

$          36,954


$            9,882


$          17,133


$        123,690


$          36,711















(3)

We refer to our purchases of other property, plant and equipment as our capital expenditures (or capex).  We categorize our capital expenditures into expansion and ongoing capex. Expansion capex is capex spent to build out our new data centers and data center expansions. Our ongoing capex represents all of our other capex spending.
















Ongoing capital expenditures

$          68,059


$          41,064


$          43,497


$        183,330


$        157,089


Expansion capital expenditures

134,782


129,971


166,911


389,076


607,411



Total capital expenditures

$        202,841


$        171,035


$        210,408


$        572,406


$        764,500















(4)

We define discretionary free cash flow as net cash provided by operating activities less ongoing capital expenditures (as described above), as presented below:
















Net cash provided by operating activities, as presented above

$        166,706


$        206,562


$        203,692


$        604,608


$        632,026


Less ongoing capital expenditures

(68,059)


(41,064)


(43,497)


(183,330)


(157,089)



Discretionary free cash flow

$          98,647


$        165,498


$        160,195


$        421,278


$        474,937















(5)

We define adjusted discretionary free cash flow as discretionary free cash flow (as defined above), excluding any excess tax benefits from employee equity awards, cash paid for taxes associated with reclassifying our assets for tax purposes triggered by our planned REIT conversion and costs related to the planned REIT conversion, as presented below:
















Discretionary free cash flow (as defined above)

$          98,647


$        165,498


$        160,195


$        421,278


$        474,937


Excess tax benefits from employee equity awards

(42)


4,951


19,457


27,330


72,631


Cash paid for taxes resulting from the planned REIT conversion 

30,040


805


5,116


88,149


5,116


Costs related to the planned REIT conversion

6,796


8,413


3,631


20,969


3,631



Adjusted discretionary free cash flow

$        135,441


$        179,667


$        188,399


$        557,726


$        556,315

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION

(in thousands)

(unaudited)































Three Months Ended


Twelve Months Ended





December 31,


September 30,


December 31,


December 31,


December 31,





2013


2013


2012


2013


2012














Recurring revenues


$        538,060


$        515,566


$        482,826


$     2,049,962


$     1,797,068

Non-recurring revenues


26,617


27,518


23,233


102,804


90,308


Revenues (1)


564,677


543,084


506,059


2,152,766


1,887,376














Cash cost of revenues (2)

174,284


174,111


158,086


678,826


594,792




Cash gross profit (3)

390,393


368,973


347,973


1,473,940


1,292,584














Cash operating expenses (4):











Cash sales and marketing expenses (5)

54,235


48,172


43,996


195,117


162,924


Cash general and administrative expenses (6)

72,628


72,356


64,291


277,925


241,803




Total cash operating expenses (7)

126,863


120,528


108,287


473,042


404,727














Adjusted EBITDA (8)


$        263,530


$        248,445


$        239,686


$     1,000,898


$        887,857














Cash gross margins (9)

69%


68%


69%


68%


68%














Adjusted EBITDA margins (10)

47%


46%


47%


46%


47%














Adjusted EBITDA flow-through rate (11)

70%


3%


69%


43%


52%



























(1)

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



















Americas Revenues:
























Colocation


$        236,931


$        230,583


$        218,126


$        917,089


$        844,169


Interconnection


62,306


61,984


56,426


242,296


216,156


Managed infrastructure

12,811


12,905


11,981


52,430


49,587


Rental



763


818


490


2,486


1,843



Recurring revenues

312,811


306,290


287,023


1,214,301


1,111,755


Non-recurring revenues

13,290


13,123


10,023


50,473


40,162



Revenues

326,101


319,413


297,046


1,264,774


1,151,917















EMEA Revenues:
























Colocation


117,003


108,906


95,823


430,357


359,106


Interconnection


10,473


9,233


7,989


36,941


23,193


Managed infrastructure

6,831


6,215


4,596


23,029


16,384


Rental



1,660


116


325


2,034


1,319



Recurring revenues

135,967


124,470


108,733


492,361


400,002


Non-recurring revenues

8,819


8,784


8,593


32,657


32,918



Revenues

144,786


133,254


117,326


525,018


432,920















Asia-Pacific Revenues:
























Colocation


72,758


69,080


71,750


280,733


230,419


Interconnection


11,090


10,433


9,090


40,626


32,754


Managed infrastructure

5,434


5,293


6,230


21,941


22,138



Recurring revenues

89,282


84,806


87,070


343,300


285,311


Non-recurring revenues

4,508


5,611


4,617


19,674


17,228



Revenues

93,790


90,417


91,687


362,974


302,539















Worldwide Revenues:
























Colocation


426,692


408,569


385,699


1,628,179


1,433,694


Interconnection


83,869


81,650


73,505


319,863


272,103


Managed infrastructure

25,076


24,413


22,807


97,400


88,109


Rental



2,423


934


815


4,520


3,162



Recurring revenues

538,060


515,566


482,826


2,049,962


1,797,068


Non-recurring revenues

26,617


27,518


23,233


102,804


90,308



Revenues

$        564,677


$        543,084


$        506,059


$     2,152,766


$     1,887,376














(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

$        269,743


$        268,960


$        249,329


$     1,064,403


$        944,617


Depreciation, amortization and accretion expense

(93,270)


(92,579)


(89,602)


(377,722)


(343,607)


Stock-based compensation expense

(2,189)


(2,270)


(1,641)


(7,855)


(6,218)



Cash cost of revenues

$        174,284


$        174,111


$        158,086


$        678,826


$        594,792















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























Americas cash cost of revenues

$          87,794


$          92,882


$          82,665


$        358,290


$        328,892


EMEA cash cost of revenues

52,363


47,924


43,888


191,220


159,248


Asia-Pacific cash cost of revenues

34,127


33,305


31,533


129,316


106,652



Cash cost of revenues

$        174,284


$        174,111


$        158,086


$        678,826


$        594,792














(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, restructuring charges 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

$          67,250


$          61,619


$          55,690


$        246,623


$        202,914


Depreciation and amortization expense

(6,273)


(6,197)


(6,469)


(24,968)


(21,260)


Stock-based compensation expense

(6,742)


(7,250)


(5,225)


(26,538)


(18,730)



Cash sales and marketing expenses

$          54,235


$          48,172


$          43,996


$        195,117


$        162,924














(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

$          98,466


$          96,874


$          86,536


$        374,790


$        328,266


Depreciation and amortization expense

(7,139)


(6,758)


(7,480)


(28,318)


(28,676)


Stock-based compensation expense

(18,699)


(17,760)


(14,765)


(68,547)


(57,787)



Cash general and administrative expenses

$          72,628


$          72,356


$          64,291


$        277,925


$        241,803














(7)

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


















Cash sales and marketing expenses

$          54,235


$          48,172


$          43,996


$        195,117


$        162,924


Cash general and administrative expenses

72,628


72,356


64,291


277,925


241,803



Cash SG&A

$        126,863


$        120,528


$        108,287


$        473,042


$        404,727















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





















Americas cash SG&A

$          78,701


$          76,227


$          65,466


$        297,766


$        265,225


EMEA cash SG&A

32,794


28,191


28,043


117,612


90,060


Asia-Pacific cash SG&A

15,368


16,110


14,778


57,664


49,442



Cash SG&A

$        126,863


$        120,528


$        108,287


$        473,042


$        404,727














(8)

We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges and acquisition costs as presented below:





















Income from continuing operations

$        124,989


$        115,193


$        102,704


$        460,932


$        392,896


Depreciation, amortization and accretion expense

106,682


105,534


103,551


431,008


393,543


Stock-based compensation expense

27,630


27,280


21,631


102,940


82,735


Restructuring charges

-


-


-


(4,837)


-


Impairment charges

-


-


9,861


-


9,861


Acquisition costs

4,229


438


1,939


10,855


8,822



Adjusted EBITDA

$        263,530


$        248,445


$        239,686


$     1,000,898


$        887,857















The geographic split of our adjusted EBITDA is presented below:
























Americas income from continuing operations

$          76,042


$          70,691


$          65,468


$        279,785


$        250,574


Americas depreciation, amortization and accretion expense

62,623


58,939


59,833


250,007


236,581


Americas stock-based compensation expense

20,926


20,591


16,641


78,129


63,763


Americas restructuring charges

-


-


-


(4,837)


-


Americas impairment charges

-


-


6,972


-


6,972


Americas acquisition costs

15


83


1


5,634


(90)



Americas adjusted EBITDA

159,606


150,304


148,915


608,718


557,800















EMEA income from continuing operations

31,187


28,685


18,605


106,221


89,014


EMEA depreciation, amortization and accretion expense

20,612


24,503


22,554


91,610


80,249


EMEA stock-based compensation expense

3,616


3,596


2,633


13,315


10,370


EMEA acquisition costs

4,214


355


1,603


5,040


3,979



EMEA adjusted EBITDA

59,629


57,139


45,395


216,186


183,612















Asia-Pacific income from continuing operations

17,760


15,817


18,631


74,926


53,308


Asia-Pacific depreciation, amortization and accretion expense

23,447


22,092


21,164


89,391


76,713


Asia-Pacific stock-based compensation expense

3,088


3,093


2,357


11,496


8,602


Asia-Pacific impairment charges

-


-


2,889


-


2,889


Asia-Pacific acquisition costs

-


-


335


181


4,933



Asia-Pacific adjusted EBITDA

44,295


41,002


45,376


175,994


146,445

















Adjusted EBITDA

$        263,530


$        248,445


$        239,686


$     1,000,898


$        887,857














(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%


71%


72%


72%


71%















EMEA cash gross margins

64%


64%


63%


64%


63%















Asia-Pacific cash gross margins

64%


63%


66%


64%


65%














(10)

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



















Americas adjusted EBITDA margins

49%


47%


50%


48%


48%















EMEA adjusted EBITDA margins

41%


43%


39%


41%


42%















Asia-Pacific adjusted EBITDA margins

47%


45%


49%


48%


48%














(11)

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


























Adjusted EBITDA - current period

$        263,530


$        248,445


$        239,686


$     1,000,898


$        887,857


Less adjusted EBITDA - prior period

(248,445)


(248,035)


(225,016)


(887,857)


(721,504)



Adjusted EBITDA growth

$          15,085


$              410


$          14,670


$        113,041


$        166,353















Revenues - current period

$        564,677


$        543,084


$        506,059


$     2,152,766


$     1,887,376


Less revenues - prior period

(543,084)


(528,871)


(484,835)


(1,887,376)


(1,565,625)



Revenue growth

$          21,593


$          14,213


$          21,224


$        265,390


$        321,751















Adjusted EBITDA flow-through rate

70%


3%


69%


43%


52%

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