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February 19, 2015

Equinix Reports Fourth Quarter And Year-End 2014 Results

- Reported 2014 annual revenues of $2,443.8 million, a 14% increase over the previous year

REDWOOD CITY, Calif., Feb. 19, 2015 /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, 2014.  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.

Revenues were $638.1 million for the fourth quarter, a 3% increase over the previous quarter and a 13% increase over the same quarter last year.  Revenues for the year ended December 31, 2014, were $2,443.8 million, a 14% increase over 2013. Recurring revenues, consisting primarily of colocation, interconnection and managed services were $605.5 million for the fourth quarter, a 3% increase over the previous quarter, and $2,317.8 million for the year ended December 31, 2014, a 13% increase over 2013.  Non-recurring revenues were $32.6 million for the fourth quarter and $126.0 million for the year ended December 31, 2014.  MRR churn for the fourth quarter was 1.9%, unchanged from previous quarter and lower than prior guidance.

"In 2014, Equinix leveraged significant market momentum to deliver another year of strong financial results.  In the fourth quarter, we delivered record bookings, driven by strong performance across all three regions, new customer wins and continued expansion of our cloud ecosystem," said Steve Smith, president and CEO of Equinix.  "The rapid growth of interconnection reflects the importance of Equinix as the place where leading companies come to connect to their customers and partners to accelerate the growth of their business.  I am very pleased with our position going into this year." 

Cost of revenues were $313.4 million for the fourth quarter, a 3% increase from the previous quarter, and $1,197.9 million for the year ended December 31, 2014, a 13% increase over 2013.  Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $117.5 million for the quarter and $430.3 million for the year, which we refer to as cash cost of revenues, were $195.9 million for the quarter, a slight decrease from the previous quarter, and $767.6 million for the year ended December 31, 2014, a 13% increase over 2013.  Gross margins for the quarter were 51%, unchanged from the previous quarter and slightly decreased from 52% for the same quarter last year.  Gross margins were 51% for the year ended December 31, 2014, unchanged from 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 69% for the year ended December 31, 2014, up from 68% for the year ended December 31, 2013.   

Selling, general and administrative expenses were $194.9 million for the fourth quarter, a 7% increase over the previous quarter, and $734.1 million for the year ended December 31, 2014, an 18% increase over 2013. Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $47.1 million for the quarter and $171.8 million for the year, which we refer to as cash selling, general and administrative expenses, were $147.8 million for the quarter, a 5% increase from the previous quarter, and $562.3 million for the year ended December 31, 2014, a 19% increase over 2013.  

Interest expense was $71.1 million for the fourth quarter, a 12% increase from the previous quarter, and $270.6 million for the year ended December 31, 2014, a 9% increase over 2013, primarily attributed to debt financings during the fourth quarter and additional financings such as various capital lease and other financing obligations to support the Company's expansion projects. 

The Company recorded income tax expense of $303.3 million for the fourth quarter compared to income tax expense of $30.6 million in the prior quarter and income tax expense of $345.5 million for the year ended December 31, 2014 compared to income tax expense of $16.2 million in the prior year, mainly due to the de-recognition of deferred tax assets and liabilities of the Company's U.S operations in the fourth quarter, when it was determined that all significant actions to effect the REIT conversion had occurred.

The Company recognized a loss on debt extinguishment of $105.8 million for the fourth quarter ended December 31, 2014, comprised of $103.3 million related to the redemption of the $750.0 million 7.00% senior notes and $2.5 million from the termination of the $110.0 million term loan and the $550.0 million revolving credit facility. For the year ended December 31, 2014, the Company recorded a loss on debt extinguishment of $157.0 million, comprised of $103.3 million related to the redemption of the $750.0 million 7.00% senior notes, $51.2 million related to the exchanges of the 3.00% convertible subordinated notes and 4.75% convertible subordinated notes in the second quarter, and $2.5 million from the termination of the $110.0 million term loan and the $550.0 million revolving credit facility.

Net loss attributable to Equinix was $355.1 million for the fourth quarter. This represents a basic and diluted net loss per share attributable to Equinix of $6.42 for the fourth quarter based on a weighted average share count of 55.3 million. Excluding the de-recognition of the deferred tax assets and liabilities relating to the REIT conversion of $324.1 million and the loss on debt extinguishment, pro forma net income attributable to Equinix was $31.1 million for the fourth quarter. This resulted in a pro forma basic and diluted net income per share attributed to Equinix of $0.56 for the fourth quarter.  Net loss attributable to Equinix was $259.5 million for the year ended December 31, 2014. This represents a basic and diluted net loss per share attributed to Equinix of $4.96 for the year ended December 31, 2014 based on a weighted average share count of 52.4 million. Excluding the de-recognition of the deferred tax assets and liabilities relating to the REIT conversion and the loss on debt extinguishment, pro forma net income attributable to Equinix was $161.1 million for the year ended December 31, 2014, which resulted in a pro forma basic and diluted net income per share attributed to Equinix of $3.08 and $3.04, respectively, for the year ended December 31, 2014.

Income from operations was $127.8 million for the fourth quarter, a 5% decrease from the previous quarter, and $509.3 million for the year ended December 31, 2014, a 10% increase over 2013.  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 $294.4 million, a 4% increase over the previous quarter, and $1,113.9 million for the year ended December 31, 2014, an 11% increase over 2013.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the fourth quarter, were $238.5 million.  Capital expenditures for the fourth quarter increased 53% from the previous quarter, primarily due to increased spending on expansion projects in the Frankfurt 4, London 6, New York 6, Silicon Valley 5 and Singapore 3 IBX data centers.  Capital expenditures for the year ended December 31, 2014 were $660.2 million

The Company generated cash from operating activities of $202.3 million for the fourth quarter, a slight decrease from $216.4 million in the previous quarter. Cash generated from operating activities for the year ended December 31, 2014 was $689.4 million as compared to $604.6 million in the previous year.  Cash used in investing activities was $619.9 million in the fourth quarter as compared to cash used in investing activities of $6.3 million in the previous quarter, primarily attributed to the net purchases of investments in marketable securities and higher capital expenditures in the fourth quarter. Cash used in investing activities for the year ended December 31, 2014 was $435.8 million as compared to cash used in investing activities of $1.2 billion in the previous year, primarily attributed to the net purchases of investments in marketable securities during 2013.  Cash provided by financing activities was $679.9 million for the fourth quarter as compared to cash used in financing activities of $256.2 million in the previous quarter, primarily due to the net impact of the issuance of the $1.25 billion senior notes and $500.0 million term loan offset by the redemption of the $750.0 million 7.00% senior notes and repayment of the $110.0 million term loan in the fourth quarter.  Cash provided by financing activities was $107.4 million for the year ended December 31, 2014, as compared to cash provided by financing activities of $574.9 million for the year ended December 31, 2013, primarily due to purchases of treasury stock, purchase of the remaining non-controlling interest in ALOG and the debt activities in 2014 discussed above.

As of December 31, 2014, the Company's cash, cash equivalents and investments were $1,140.8 million, as compared to $1,030.1 million as of December 31, 2013. 

Business Outlook

For the first quarter of 2015, the Company expects revenues to range between $634.0 and $638.0 million, which absorbs $19.0 million of negative foreign currency impact compared to Q4 2014 average FX rates, a normalized and constant currency growth of 3% quarter over quarter.  Cash gross margins are expected to approximate 68% to 69%.  Cash selling, general and administrative expenses are expected to range between $146.0 and $150.0 million.  Adjusted EBITDA is expected to range between $287.0 and $291.0 million, which absorbs $12.0 million of negative foreign currency impact compared to Q4 2014 average FX rates, a normalized and constant currency growth of 3% quarter over quarter.  Capital expenditures are expected to range between $195.0 and $205.0 million, comprised of approximately $25.0 million of recurring capital expenditures and $170.0 to $180.0 million of non-recurring capital expenditures.  

For the full year of 2015, total revenues are expected to be greater than $2,630.0 million, which absorbs $100.0 million of negative foreign currency impact compared to 2014 average FX rates, reflecting a normalized and constant currency growth rate of 12%.  Total year cash gross margins are expected to approximate 68% to 69%.  Cash selling, general and administrative expenses are expected to range between $580.0 and $600.0 million.  Adjusted EBITDA for the year is expected to be greater than $1,220.0 million, which absorbs $47.0 million of negative foreign currency impact compared to 2014 average FX rates, a normalized and constant currency growth rate of 15%.  Adjusted funds from operations ("AFFO") is expected to be greater than $810.0 million, or a normalized and constant currency growth rate of 12%.  Capital expenditures for 2015 are expected to range between $700.0 and $800.0 million, comprised of approximately $115.0 million of recurring capital expenditures and $585.0 to $685.0 million for non-recurring capital expenditures. 

The U.S. dollar exchange rates used for 2015 guidance, taking into consideration the impact of our foreign currency hedges, have been updated to $1.20 to the Euro, $1.55 to the Pound, S$1.32 to the U.S. dollar and R$2.68 to the U.S. dollar. The 2015 global revenue breakdown by currency for the Euro, Pound, Singapore Dollar and Brazilian Real is 14%, 9%, 7% and 4%, respectively.

The guidance provided above is forward-looking.  The adjusted EBITDA guidance is based on the revenue guidance, less our expectations of cash cost of revenue and cash operating expenses.  The AFFO guidance is based on the adjusted EBITDA guidance, excluding our expectations of interest income and interest expense, installation revenue adjustment, straight-line rent expense, amortization of deferred financing costs, gains (losses) on debt extinguishment, cash portion of income tax expense, recurring capital expenditures and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q4 Results Conference Call and Replay Information

The Company will discuss its quarterly and year-end results for the period ended December 31, 2014, along with its future outlook, on its quarterly conference call on Thursday, February 19, 2015, at 5:30 p.m. ET (2:30 p.m. PT).  A simultaneous live webcast of the call will be available on the Company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-210-234-8004 (domestic and international) and reference the passcode EQIX.   

A replay of the call will be available one hour after the call through Friday, May 15, 2015, by dialing 1-203-369-3829 and referencing the passcode 2015.  In addition, the webcast will be available at www.equinix.com/investors over the same time period.  No password is required for the webcast.

Investor Presentation and Supplemental Financial Information

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

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 33 markets across five continents, Equinix is where companies come together to realize new opportunities and accelerate their business, IT and cloud strategies. 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 to evaluate its operations.  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. 

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, adjusted free cash flow, discretionary free cash flow, adjusted discretionary free cash flow and AFFO, 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.  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 also 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.  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.

Equinix will also present 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, straight-line rent expense, amortization of deferred financing costs, gains (losses) on debt extinguishment, non- cash portion of income tax expense, recurring capital expenditures and adjustments 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 charges for the same reasons that they are excluded from the 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.  Equinix excludes the amortization of deferred financing costs as these expenses relate to the initial costs incurred in connection with our debt financings that have no current or future cash obligations.  Equinix excludes gains (losses) on debt extinguishment since 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 the non-cash portion of income tax expense, as it represents a cost that has no current or future cash obligation.  Equinix also excludes recurring capital expenditures, which represent non-incremental building improvements required to maintain current revenues.

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 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,




2014


2014


2013


2014


2013













Recurring revenues

$

605,492


$

588,437


$

538,060


$

2,317,790


$

2,049,962

Non-recurring revenues

32,629


32,004


26,617


125,986


102,804


Revenues

638,121


620,441


564,677


2,443,776


2,152,766













Cost of revenues

313,449


304,052


269,743


1,197,885


1,064,403



Gross profit

324,672


316,389


294,934


1,245,891


1,088,363













Operating expenses:











Sales and marketing

81,236


72,185


67,250


296,103


246,623


General and administrative

113,684


109,354


98,466


438,016


374,790


Restructuring charges

-


-


-


-


(4,837)


Acquisition costs

1,926


(281)


4,229


2,506


10,855



Total operating expenses

196,846


181,258


169,945


736,625


627,431













Income from operations

127,826


135,131


124,989


509,266


460,932













Interest and other income (expense):











Interest income

357


356


794


2,891


3,387


Interest expense

(71,103)


(63,756)


(65,503)


(270,553)


(248,792)


Loss on debt extinguishment 

(105,807)


-


(14,899)


(156,990)


(108,501)


Other income (expense)

(3,051)


1,811


1,959


119


5,253



Total interest and other, net

(179,604)


(61,589)


(77,649)


(424,533)


(348,653)













Income (loss) before income taxes

(51,778)


73,542


47,340


84,733


112,279














Income tax expense

(303,325)


(30,581)


(1,967)


(345,459)


(16,156)













Net income (loss)

(355,103)


42,961


45,373


(260,726)


96,123













Net (income) loss attributable to redeemable non-controlling interests

-


(120)


(186)


1,179


(1,438)













Net income (loss) attributable to Equinix

$

(355,103)


$

42,841


$

45,187


$

(259,547)


$

94,685













Net income (loss) per share attributable to Equinix:























Basic net income (loss) per share (1)

$

(6.42)


$

0.81


$

0.91


$

(4.96)


$

1.92














Diluted net income (loss) per share (1)

$

(6.42)


$

0.79


$

0.88


$

(4.96)


$

1.89














Shares used in computing basic net income (loss) per share

55,295


53,137


49,765


52,359


49,438














Shares used in computing diluted net income (loss) per share

55,295


55,238


53,499


52,359


50,116

























(1)

The net income (loss) attributable to Equinix used in the computation of basic and diluted net income (loss) per share











attributed to Equinix is presented below:























Net income (loss)

$

(355,103)


$

42,961


$

45,373


$

(260,726)


$

96,123


Net (income) loss attributable to non-controlling interests

-


(120)


(186)


1,179


(1,438)



Net income (loss) attributable to Equinix, basic 

(355,103)


42,841


45,187


(259,547)


94,685


Interest on convertible debt

-


885


1,847


-


-



Net income (loss) attributable to Equinix, diluted

$

(355,103)


$

43,726


$

47,034


$

(259,547)


$

94,685

 

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,




2014


2014


2013


2014


2013













Net income (loss)

$      (355,103)


$          42,961


$         45,373


$      (260,726)


$         96,123













Other comprehensive income (loss), net of tax:











 Foreign currency translation gain (loss) 

(97,123)


(144,993)


6,905


(204,065)


(18,203)


 Unrealized loss on available for sale securities 

135


(1,179)


(376)


(279)


(298)


 Unrealized gain (loss) on cash flow hedges 

4,026


4,510


(1,750)


8,790


(1,750)


 Unrealized loss on defined benefit plans 

(2,001)






(2,001)



 Other comprehensive income (loss), net of tax: 

(94,963)


(141,662)


4,779


(197,555)


(20,251)













 Comprehensive income (loss), net of tax 

(450,066)


(98,701)


50,152


(458,281)


75,872














 Net (income) loss attributable to redeemable non-controlling interests 

-


(120)


(186)


1,179


(1,438)


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

-


(18,304)


3,185


(1,810)


7,526













 Comprehensive income (loss) attributable to Equinix, net of tax 

$      (450,066)


$       (117,125)


$         53,151


$      (458,912)


$         81,960

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)







Assets

December 31,


December 31,




2014


2013







Cash and cash equivalents

$       610,917


$       261,894

Short-term investments

529,395


369,808

Accounts receivable, net

262,570


184,840

Other current assets

88,061


72,118


Total current assets

1,490,943


888,660

Long-term investments

439


398,390

Property, plant and equipment, net

4,998,270


4,591,650

Goodwill


1,002,129


1,042,153

Intangible assets, net

147,527


184,182

Other assets

178,125


387,324


Total assets

$    7,817,433


$    7,492,359







Liabilities and Stockholders' Equity










Accounts payable and accrued expenses

$       285,796


$       263,223

Accrued property and equipment

114,469


64,601

Current portion of capital lease and other financing obligations

21,362


17,214

Current portion of mortgage and loans payable

59,466


53,508

Other current liabilities

162,664


147,958


Total current liabilities

643,757


546,504

Capital lease and other financing obligations, less current portion

1,168,042


914,032

Mortgage and loans payable, less current portion

534,686


199,700

Senior notes

2,750,000


2,250,000

Convertible debt

145,853


724,202

Other liabilities

304,964


274,955


Total liabilities

5,547,302


4,909,393







Redeemable non-controlling interests

-


123,902







Common stock

57


50

Additional paid-in capital

3,334,305


2,693,887

Treasury stock

(11,411)


(84,663)

Accumulated dividends

(424,387)


-

Accumulated other comprehensive loss

(332,443)


(113,767)

Accumulated deficit

(295,990)


(36,443)


Total stockholders' equity

2,270,131


2,459,064








Total liabilities, redeemable non-controlling interests





and stockholders' equity

$    7,817,433


$    7,492,359



















Ending headcount by geographic region is as follows:











Americas headcount

2,122


1,984


EMEA headcount

1,023


899


Asia-Pacific headcount

721


617



Total headcount

3,866


3,500

 

EQUINIX, INC.

SUMMARY OF DEBT OUTSTANDING

(in thousands)

(unaudited)










December 31,


December 31,




2014


2013







Capital lease and other financing obligations

$        1,189,404


$           931,246







Term loans, net of debt discount

498,400


140,000

ALOG financings

56,863


69,524

Mortgage payable and other loans payable

38,889


43,684

Plus: debt discount

1,600


-


Total mortgage and loans payable

595,752


253,208







Senior notes

2,750,000


2,250,000







Convertible debt, net of debt discount

145,853


724,202

Plus: debt discount

12,032


45,508


Total convertible debt principal

157,885


769,710







Total debt outstanding

$        4,693,041


$        4,204,164

 

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,






2014


2014


2013


2014


2013















Cash flows from operating activities:











Net income (loss)

$      (355,103)


$          42,961


$         45,373


$      (260,726)


$         96,123


Adjustments to reconcile net income (loss) to net cash











provided by operating activities:












Depreciation, amortization and accretion

133,096


121,349


106,682


484,129


431,008



Stock-based compensation

31,517


27,662


27,630


117,990


102,940



Debt issuance costs and debt discount

3,827


3,714


6,266


18,667


23,868



Loss on debt extinguishment 

105,807


-


14,899


156,990


108,501



Restructuring charges

-


-


-


-


(4,837)



Excess tax benefits from employee equity awards

(2,125)


(5,825)


42


(19,582)


(27,330)



Other reconciling items

5,863


5,957


7,196


24,567


18,825



Changes in operating assets and liabilities:













Accounts receivable

2,428


(50,889)


12,336


(101,966)


(27,956)




Income taxes, net

295,947


23,340


(36,622)


226,774


(108,189)




Accounts payable and accrued expenses

(16,429)


34,778


(10,157)


4,177


7,242




Other assets and liabilities

(2,531)


13,394


(6,939)


38,400


(15,587)





Net cash provided by operating activities

202,297


216,441


166,706


689,420


604,608

Cash flows from investing activities:











Purchases, sales and maturities of investments, net

(381,629)


148,789


18,641


239,551


(479,136)


Business acquisitions, net of cash acquired

-


-


(48,739)


-


(49,337)


Purchases of real estate

-


-


-


(16,791)


(74,332)


Purchases of other property, plant and equipment

(238,477)


(156,003)


(202,841)


(660,203)


(572,406)


Other investing activities

195


898


(423)


1,604


5,898





Net cash used in investing activities

(619,911)


(6,316)


(233,362)


(435,839)


(1,169,313)

Cash flows from financing activities:











Purchases of treasury stock

-


(42,575)


(48,799)


(297,958)


(48,799)


Proceeds from employee equity awards

1,137


12,362


3,810


29,320


31,892


Payment of special distribution

(83,266)


-


-


(83,266)


-


Proceeds from loans payable

500,000


-


26,304


500,000


28,038


Purchase of redeemable non-controlling interests

-


(226,276)


-


(226,276)


-


Proceeds from senior notes

1,250,000


-


-


1,250,000


1,500,000


Repayment of capital lease and other financing obligations

(4,890)


(3,857)


(27,907)


(18,030)


(40,133)


Repayment of mortgage and loans payable

(5,963)


(10,416)


(10,196)


(43,473)


(52,500)


Repayment of senior notes

(750,000)


-


-


(750,000)


(750,000)


Repayment of term loan

(110,000)




-


(110,000)


-


Repayment of convertible debt

(34)


-


-


(29,513)


-


Debt extinguishment costs

(93,965)


-


(13,189)


(116,517)


(97,864)


Debt issuance costs

(25,294)


-


(42)


(25,294)


-


Excess tax benefits from employee equity awards

2,125


5,825


(622)


19,582


27,330


Other financing activities

-


8,698


-


8,826


(23,057)





Net cash provided by (used in) financing activities

679,850


(256,239)


(70,641)


107,401


574,907

Effect of foreign currency exchange rates on cash and cash equivalents

(5,500)


(8,039)


(551)


(11,959)


(521)

Net increase (decrease) in cash and cash equivalents

256,736


(54,153)


(137,848)


349,023


9,681

Cash and cash equivalents at beginning of period

354,181


408,334


399,742


261,894


252,213

Cash and cash equivalents at end of period

$       610,917


$        354,181


$       261,894


$       610,917


$       261,894
















Supplemental cash flow information:












Cash paid for taxes

$           6,407


$            5,506


$          36,954


$       117,197


$       123,690



Cash paid for interest

$         94,283


$          45,833


$          74,671


$       262,018


$       210,629















Free cash flow (1)

$       (35,985)


$          61,336


$        (85,297)


$         14,030


$        (85,569)















Adjusted free cash flow (2)

$       (29,881)


$          74,812


$              236


$       160,425


$       174,548















Ongoing capital expenditures (3)

$         73,120


$          45,549


$         68,059


$       227,164


$       183,330















Discretionary free cash flow (4)

$       129,177


$        170,892


$         98,647


$       462,256


$       421,278















Adjusted discretionary free cash flow (5)

$       135,281


$        184,368


$       135,441


$       591,860


$       557,726





























(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

$       202,297


$        216,441


$       166,706


$       689,420


$       604,608


Net cash provided by (used in) investing activities as presented above

(619,911)


(6,316)


(233,362)


(435,839)


(1,169,313)


Purchases, sales and maturities of investments, net

381,629


(148,789)


(18,641)


(239,551)


479,136



Free cash flow (negative free cash flow)

$        (35,985)


$          61,336


$        (85,297)


$         14,030


$        (85,569)















(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 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)

$        (35,985)


$          61,336


$        (85,297)


$         14,030


$        (85,569)


Less business acquisitions, net of cash acquired

-


-


48,739


-


49,337


Less purchase of real estate

-


-


-


16,791


74,332


Less excess tax benefits from employee equity awards

2,125


5,825


(42)


19,582


27,330


Less cash paid for taxes resulting from the planned REIT conversion 

189


978


30,040


80,867


88,149


Less costs related to the planned REIT conversion

3,790


6,673


6,796


29,155


20,969



Adjusted free cash flow

$        (29,881)


$          74,812


$             236


$       160,425


$       174,548
















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

$             189


$              978


$         30,040


$         80,867


$         88,149


Other cash taxes paid

6,218


4,528


6,914


36,330


35,541



Total cash paid for taxes

$          6,407


$            5,506


$         36,954


$       117,197


$       123,690















(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

$         73,120


$          45,549


$         68,059


$       227,164


$       183,330


Expansion capital expenditures

165,357


110,454


134,782


433,039


389,076



Total capital expenditures

$       238,477


$        156,003


$       202,841


$       660,203


$       572,406















(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

$       202,297


$        216,441


$       166,706


$       689,420


$       604,608


Less ongoing capital expenditures

(73,120)


(45,549)


(68,059)


(227,164)


(183,330)



Discretionary free cash flow

$       129,177


$        170,892


$         98,647


$       462,256


$       421,278















(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)

$       129,177


$        170,892


$         98,647


$       462,256


$       421,278


Excess tax benefits from employee equity awards

2,125


5,825


(42)


19,582


27,330


Cash paid for taxes resulting from the planned REIT conversion 

189


978


30,040


80,867


88,149


Costs related to the planned REIT conversion

3,790


6,673


6,796


29,155


20,969



Adjusted discretionary free cash flow

$       135,281


$        184,368


$       135,441


$       591,860


$       557,726

 

 

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,





2014


2014


2013


2014


2013














Recurring revenues


$       605,492


$        588,437


$       538,060


$    2,317,790


$    2,049,962

Non-recurring revenues


32,629


32,004


26,617


125,986


102,804


Revenues (1)


638,121


620,441


564,677


2,443,776


2,152,766














Cash cost of revenues (2)

195,945


196,458


174,284


767,552


678,826




Cash gross profit (3)

442,176


423,983


390,393


1,676,224


1,473,940














Cash operating expenses (4):











Cash sales and marketing expenses (5)

67,036


58,434


54,235


240,054


195,117


Cash general and administrative expenses (6)

80,775


81,688


72,628


322,279


277,925




Total cash operating expenses (7)

147,811


140,122


126,863


562,333


473,042














Adjusted EBITDA (8)


$       294,365


$        283,861


$       263,530


$    1,113,891


$    1,000,898














Cash gross margins (9)

69%


68%


69%


69%


68%














Adjusted EBITDA margins (10)

46%


46%


47%


46%


46%














Adjusted EBITDA flow-through rate (11)

59%


56%


70%


39%


43%



























(1)

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















Americas Revenues:











Colocation


$       254,037


$        244,979


$       236,931


$       978,503


$       917,089


Interconnection


71,992


69,512


62,306


272,257


242,296


Managed infrastructure

13,860


15,214


12,811


57,071


52,430


Rental



814


978


763


3,687


2,486



Recurring revenues

340,703


330,683


312,811


1,311,518


1,214,301


Non-recurring revenues

15,699


16,729


13,290


64,585


50,473



Revenues

356,402


347,412


326,101


1,376,103


1,264,774















EMEA Revenues:
























Colocation


134,816


130,873


117,003


514,997


430,357


Interconnection


13,484


13,163


10,473


50,342


36,941


Managed infrastructure

5,487


7,179


6,831


26,965


23,029


Rental



1,613


1,588


1,660


6,649


2,034



Recurring revenues

155,400


152,803


135,967


598,953


492,361


Non-recurring revenues

11,693


8,777


8,819


38,312


32,657



Revenues

167,093


161,580


144,786


637,265


525,018















Asia-Pacific Revenues:
























Colocation


91,211


86,613


72,758


336,312


280,733


Interconnection


13,231


12,973


11,090


49,751


40,626


Managed infrastructure

4,947


5,364


5,434


21,255


21,941



Recurring revenues

109,389


104,951


89,282


407,318


343,300


Non-recurring revenues

5,237


6,498


4,508


23,089


19,674



Revenues

114,626


111,449


93,790


430,408


362,974















Worldwide Revenues:
























Colocation


480,064


462,465


426,692


1,829,812


1,628,179


Interconnection


98,707


95,648


83,869


372,350


319,863


Managed infrastructure

24,294


27,757


25,076


105,291


97,400


Rental



2,427


2,566


2,423


10,336


4,520



Recurring revenues

605,492


588,437


538,060


2,317,789


2,049,962


Non-recurring revenues

32,629


32,004


26,617


125,986


102,804



Revenues

$       638,121


$        620,441


$       564,677


$    2,443,776


$    2,152,766














(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

$       313,449


$        304,052


$       269,743


$    1,197,885


$    1,064,403


Depreciation, amortization and accretion expense

(115,236)


(105,449)


(93,270)


(421,822)


(377,722)


Stock-based compensation expense

(2,268)


(2,145)


(2,189)


(8,511)


(7,855)



Cash cost of revenues

$       195,945


$        196,458


$       174,284


$       767,552


$       678,826















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















Americas cash cost of revenues

$         97,396


$          97,775


$         87,794


$       380,892


$       358,290


EMEA cash cost of revenues

59,987


59,593


52,363


236,423


191,220


Asia-Pacific cash cost of revenues

38,562


39,090


34,127


150,237


129,316



Cash cost of revenues

$       195,945


$        196,458


$       174,284


$       767,552


$       678,826














(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

$         81,236


$          72,185


$         67,250


$       296,103


$       246,623


Depreciation and amortization expense

(6,315)


(6,495)


(6,273)


(25,965)


(24,968)


Stock-based compensation expense

(7,885)


(7,256)


(6,742)


(30,084)


(26,538)



Cash sales and marketing expenses

$         67,036


$          58,434


$         54,235


$       240,054


$       195,117














(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

$       113,684


$        109,354


$         98,466


$       438,016


$       374,790


Depreciation and amortization expense

(11,545)


(9,405)


(7,139)


(36,342)


(28,318)


Stock-based compensation expense

(21,364)


(18,261)


(18,699)


(79,395)


(68,547)



Cash general and administrative expenses

$         80,775


$          81,688


$         72,628


$       322,279


$       277,925














(7)

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















Cash sales and marketing expenses

$         67,036


$          58,434


$         54,235


$       240,054


$       195,117


Cash general and administrative expenses

80,775


81,688


72,628


322,279


277,925



Cash SG&A

$       147,811


$        140,122


$       126,863


$       562,333


$       473,042















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















Americas cash SG&A

$         91,762


$          89,562


$         78,701


$       360,204


$       297,766


EMEA cash SG&A

36,226


32,201


32,794


131,620


117,612


Asia-Pacific cash SG&A

19,823


18,359


15,368


70,509


57,664



Cash SG&A

$       147,811


$        140,122


$       126,863


$       562,333


$       473,042














(8)

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















Income from operations

$       127,826


$        135,131


$       124,989


$       509,266


$       460,932


Depreciation, amortization and accretion expense

133,096


121,349


106,682


484,129


431,008


Stock-based compensation expense

31,517


27,662


27,630


117,990


102,940


Restructuring charges

-


-


-


-


(4,837)


Acquisition costs

1,926


(281)


4,229


2,506


10,855



Adjusted EBITDA

$       294,365


$        283,861


$       263,530


$    1,113,891


$    1,000,898















The geographic split of our adjusted EBITDA is presented below:















Americas income from operations

$         70,131


$          72,614


$         76,042


$       282,219


$       279,785


Americas depreciation, amortization and accretion expense

72,408


66,594


62,623


260,416


250,007


Americas stock-based compensation expense

24,351


21,148


20,926


91,469


78,129


Americas restructuring charges

-


-


-


-


(4,837)


Americas acquisition costs

354


(281)


15


903


5,634



Americas adjusted EBITDA

167,244


160,075


159,606


635,007


608,718















EMEA income from operations

35,867


38,848


31,187


138,685


106,221


EMEA depreciation, amortization and accretion expense

29,770


27,650


20,612


115,223


91,610


EMEA stock-based compensation expense

3,671


3,288


3,616


13,661


13,315


EMEA acquisition costs

1,572


-


4,214


1,653


5,040



EMEA adjusted EBITDA

70,880


69,786


59,629


269,222


216,186















Asia-Pacific income from operations

21,828


23,669


17,760


88,362


74,926


Asia-Pacific depreciation, amortization and accretion expense

30,918


27,105


23,447


108,490


89,391


Asia-Pacific stock-based compensation expense

3,495


3,226


3,088


12,860


11,496


Asia-Pacific acquisition costs

-


-


-


(50)


181



Asia-Pacific adjusted EBITDA

56,241


54,000


44,295


209,662


175,994

















Adjusted EBITDA

$       294,365


$        283,861


$       263,530


$    1,113,891


$    1,000,898














(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%


72%


73%


72%


72%















EMEA cash gross margins

64%


63%


64%


63%


64%















Asia-Pacific cash gross margins

66%


65%


64%


65%


64%














(10)

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















Americas adjusted EBITDA margins

47%


46%


49%


46%


48%















EMEA adjusted EBITDA margins

42%


43%


41%


42%


41%















Asia-Pacific adjusted EBITDA margins

49%


48%


47%


49%


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

$       294,365


$        283,861


$       263,530


$    1,113,891


$    1,000,898


Less adjusted EBITDA - prior period

(283,861)


(275,277)


(248,445)


(1,000,898)


(887,857)



Adjusted EBITDA growth

$         10,504


$            8,584


$         15,085


$       112,993


$       113,041















Revenues - current period

$       638,121


$        620,441


$       564,677


$    2,443,776


$    2,152,766


Less revenues - prior period

(620,441)


(605,161)


(543,084)


(2,152,766)


(1,887,376)



Revenue growth

$         17,680


$          15,280


$         21,593


$       291,010


$       265,390















Adjusted EBITDA flow-through rate

59%


56%


70%


39%


43%

 

 


EQUINIX, INC.

PRO FORMA RESULTS EARNINGS PER SHARE

(In thousands, except per share data)

(unaudited)












































Three Months Ended
December 31, 2014



Year Ended
December 31, 2014





Actual


Adjustments


Pro Forma



Actual


Adjustments


Pro Forma







Debt Exting.


REIT Conv.







Debt Exting.


REIT Conv.
























Income from operations

$    127,826


$              -


$              -


$     127,826



$     509,266


$              -


$              -


$     509,266






















Interest and other income (expense):



















Interest income and expense, net

(70,746)




-


(70,746)



(267,662)




-


(267,662)



Loss on debt extinguishment 

(105,807)


105,807

(1)

-


-



(156,990)


156,990

(1) (2)



-



Other income (expense)

(3,051)




-


(3,051)



119




-


119




Total interest and other, net

(179,604)


105,807


-


(73,797)



(424,533)


156,990


-


(267,543)






















Income (loss) from operations before income taxes

(51,778)


105,807


-


54,029



84,733


156,990


-


241,723























Income tax benefit (expense)

(303,325)


(43,734)

(3)

324,142

(4)

(22,918)



(345,459)


(60,440)

(3)

324,142

(4)

(81,758)






















Net income (loss) 

(355,103)


62,073


324,142


31,111



(260,726)


96,550


324,142


159,965






















Net (income) loss attributable to redeemable non-controlling interests

-


-


-


-



1,179


-


-


1,179






















Net income (loss) attributable to Equinix

$   (355,103)


$       62,073


$     324,142


$       31,111



$    (259,547)


$       96,550


$     324,142


$     161,144






















Net income (loss) per share attributable to Equinix:







































Basic net income (loss) per share

$         (6.42)






$          0.56



$         (4.96)






$          3.08



Shares used in computing basic net income (loss) per share

55,295






55,295



52,359






52,359



Diluted net income (loss) per share

$         (6.42)






$          0.56

(5)


$         (4.96)






$          3.04

(5)


Shares used in computing diluted net income (loss) per share

55,295




557

(5)

55,852



52,359




626

(5)

52,985










































(1)

Represents the loss on debt extinguishment related to the redemption of the 7.00% senior notes and refinancing of the term loan and revolving credit facility in Q4 2014 removed for purposes of these pro forma financial results.

(2)

Represents the loss on debt extinguishment related to the exchanges of the 3.00% convertible notes and 4.75% convertible notes in Q2 2014 removed for purposes of these pro forma financial results.

(3)

Represents the estimated tax impact had the loss on debt extinguishment not been recorded.

(4)

Represents the derecognition of the deferred tax assets and liabilities of our U.S. REIT operations in Q4 2014, when it was determined that all significant actions to effect the REIT conversion had occurred and the Company committed to  that action.

(5)

Adjustment for the dilutive impact of the assumed conversion of the employee equity awards as a result of the increased pro forma net income.

 

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SOURCE Equinix, Inc.