Equinix Reports Third Quarter 2005 Results
-- Increased revenues by 37% over the same quarter 2004 and 11% over the previous quarter
-- Reported EBITDA, a non-GAAP financial measure, of $17.9 million with all operational IBX centers contributing positive EBITDA, including the recently opened centers in the Silicon Valley and Washington, D.C. areas
-- Continues expansion efforts with acquisitions of properties in Los Angeles and Washington, D.C. areas
-- Added 74 new customers in the quarter
Equinix, Inc. (Nasdaq:EQIX), the leading provider of network-neutral data centers and Internet exchange services, today reported its quarterly results for the period ended September 30, 2005.
Revenues were $58.1 million for the third quarter, a 37% increase over the same quarter last year and an 11% increase over the previous quarter. Recurring revenues, consisting of colocation, interconnection and managed services, were $54.3 million, a 36% increase over the same quarter last year and a 10% increase over the previous quarter. Non-recurring revenues were $3.8 million in the quarter, consisting of $2.9 million in professional services and installation fees and customer settlements of $859,000.
Note: Equinix uses non-GAAP financial measures, such as EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), cash interest expense, cash net income (loss), non-GAAP net income (loss), and free cash flow to evaluate its operations. A reconciliation of these non-GAAP financial measures to the most closely applicable GAAP financial measure are attached to this release and commence at the bottom of our condensed consolidated statements of operations -- GAAP presentation.
Cost of revenues were $41.0 million for the third quarter, a 19% increase over the same quarter last year and a 6% increase over the previous quarter. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $15.9 million, were $25.1 million for the third quarter, a 22% increase over the same quarter last year and an 8% increase over the previous quarter. Cash gross margins, defined as gross profit less depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 57%, up from 51% the same quarter last year and 56% the previous quarter.
Selling, general and administrative expenses were $16.9 million for the third quarter, a 33% increase over the same quarter last year and a 5% increase over the previous quarter. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $1.8 million, were $15.1 million for the third quarter, a 29% increase over same quarter last year and a 15% increase over the previous quarter.
Net loss for the third quarter, including stock-based compensation expense of $1.4 million, was $783,000. This represents a basic and diluted net loss per share of $0.03 based on a weighted average share count of 24.1 million. Excluding stock-based compensation, the Company, for the first time, was net income positive for the quarter, with a non-GAAP net income of $575,000, a $7.0 million improvement over the same quarter last year and $1.5 million improvement over the previous quarter. The Company's cash net income, defined as net income (loss) less depreciation, amortization, accretion, stock-based compensation expense, restructuring charges and non-cash interest expense for the quarter was $17.2 million, a 12% improvement over the previous quarter.
EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation expense and restructuring charges, for the third quarter was $17.9 million, up 12% over the previous quarter and up from $10.1 million the same quarter 2004.
Capital expenditures in the quarter were $7.1 million, of which $5.0 million was attributed to ongoing capital expenditures and $2.1 million was attributed to expansion capital expenditures. In addition, the Company used $34.7 million of its cash to acquire its new Los Angeles IBX center in September 2005.
The Company generated cash from operating activities of $15.5 million as compared to $18.1 million in the previous quarter. Cash used in investing activities was $42.1 million as compared to $6.7 million in the previous quarter, primarily attributed to the $34.7 million acquisition of the new Los Angeles area IBX center. Free cash flow was negative $26.6 million, including the investment in the new Los Angeles area IBX center. Free cash flow is defined as net cash generated from operating activities less net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments). Excluding the investment in the new Los Angeles area IBX center, free cash flow was $8.1 million.
As of September 30, 2005, the Company's cash, cash equivalents and investments were $108.3 million, as compared to $132.0 million in the previous quarter.
"Our market position, customer momentum, and brand have never been stronger," said Peter Van Camp, CEO of Equinix. "With the continued solid demand for our services and recent data center acquisitions to support the demand, we believe we are well-positioned for 2006."
Other Company Developments & Metrics
-- In September 2005, Equinix purchased a 107,000 square foot stand-alone data center located in El Segundo, in the Los Angeles area, for $34.7 million, including closing costs. The Company has now entered into a purchase and sale agreement dated October 24, 2005, to sell this data center for $38.7 million and to lease it back from the purchaser pursuant to a long-term lease. Equinix will realize approximately $15.0 million in cash savings over the initial term of the lease as opposed to having entered into a direct lease with the previous owner. These savings include a cash benefit on the sale of the center approximating $3.5 million, net of costs. The sale-leaseback transaction is subject to certain closing contingencies. Although there can be no assurance that these contingencies will be met, it is expected that these conditions will be removed on or before November 1, 2005 and the transaction will close before the end of the year.
-- Equinix announced today that it has negotiated a non-binding letter of intent to finance the recently-acquired Washington, D.C. area center campus with a $60.0 million, 8% mortgage to be amortized over 20 years. The Company also announced today that it has entered into a non-binding letter of intent for the early termination of its 39 acre San Jose ground lease whereby Equinix will pay $40.0 million over the next four years, or an incremental amount of approximately $4.0 million per year over the current lease obligations, completely eliminating the $6.0 to $7.0 million annual lease payments in years 2010 through 2020. The early termination payments commence January 1, 2006. As a result of this transaction, Equinix expects to incur a restructuring charge in the range of $35.0 to $40.0 million in the fourth quarter of 2005. These transactions are subject to the completion of definitive agreements, and although there is no assurance that the definitive agreements will be completed, the Company currently expects the transaction to close before the end of the year.
-- In October, Equinix filed a shelf registration statement with the Securities and Exchange Commission in order to register approximately 10.2 million shares of the Company's common stock on behalf of STT Communications Ltd. At the time any securities are offered for sale, one or more prospectus supplements will be provided containing specific information about the terms of any such offering.
-- On a same IBX basis (defined as IBX centers which have been available for new customer installs for at least four full quarters), revenues were $54.8 million; cost of revenues were $37.3 million; cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation, were $23.3 million and cash gross margins for the quarter were 57%. EBITDA on a same IBX basis was $16.9 million. Included in the same IBX results were certain selling, general and administrative expenses such as the costs related to our recent S-3 registration statement filing and related costs and severance charges.
-- Equinix added 74 new customers in the quarter including BT Japan Corporation, Citic Capital Markets Holdings Limited, L'Oreal USA, NJ State Library, NTT Singapore Pte Ltd, Petfinder.com, Raindance Communications, Time Warner Entertainment and Vonage Australia Pty Ltd. Over 50 percent of Equinix's new bookings in the quarter came from existing customers including The Gap, Salesforce.com, Sony Corporation of America, XM Satellite Radio and Yahoo!.
-- Based on a total cabinet capacity of approximately 26,200, the number of cabinets billing at the end of the quarter was approximately 13,700, or 52%, up from approximately 12,400 the previous quarter. On a weighted average basis, the number of cabinets billing was approximately 13,300, which represents 51%.
-- U.S. interconnection service revenues were 21% of U.S. recurring revenues for the quarter. Interconnection services represent greater than 19% of total worldwide recurring revenues. Equinix signed additional customers on its new 10 Gigabit Ethernet service including Cox Communications, Free and nLayer Communications.
Business Outlook
For the full year of 2005, revenues are expected to be in the range of $219.3 to $220.3 million, an increase from previously provided guidance of $216.0 to $219.0 million. Total year cash gross margins will range between 56% and 57%. Cash selling, general and administrative expenses are expected to be approximately $55.0 million, an increase from our previously provided guidance of $53.0 million. EBITDA for the year is expected to be between $69.0 and $70.0 million, an increase from its previous guidance of $66.0 to $68.0 million. Net loss is expected to range between $48.0 and $50.0 million including the restructuring charge attributable to the pending San Jose ground lease transaction, approximately $8.5 million of stock-based compensation expense primarily attributed to the restricted stock grants and $9.0 million of interest expense. The weighted average shares outstanding will be approximately 23.5 million. Capital expenditures for 2005, excluding purchases and sales of real estate assets, are expected to be approximately $46.0 to $48.0 million, comprised of $21.0 to $22.0 million of ongoing capital expenditures and $25.0 to $26.0 million of expansion capital expenditures. Free cash flow loss, defined as net cash generated from operating activities less net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments), is expected to be $18.0 to 19.0 million for the year, which includes the recent purchase of the Washington, D.C. area Ashburn campus. Excluding the purchases and sales of real estate, comprised of the Company's recent Los Angeles and Washington, D.C. area property acquisitions, free cash flow is expected to be greater than $32.0 million, an increase from our previous guidance of greater than $30.0 million.
For 2006, total revenues are expected to be in the range of $275.0 to $285.0 million. Cash gross margins are expected to be in the range of 57% to 59%, including the full year impact of approximately $5.7 million of additional cost of revenues from three new IBX centers expected to open in the first half of 2006. Cash selling, general and administrative expenses are expected to be in the range of $60.0 to $64.0 million, including approximately $3.6 million of investments in expansion efforts. EBITDA for the year is expected to be between $95.0 and $105.0 million, including the benefit realized from the restructuring charge attributable to the pending San Jose ground lease transaction, of approximately $6.0 million. Capital expenditures for 2006 are expected to be in a range of $55.0 to $60.0 million, comprised of approximately $20.0 million of ongoing capital expenditures and $35.0 to $40.0 million of expansion capital expenditures for the build out of the Silicon Valley, Chicago and Los Angeles expansions. Free cash flow is expected to be greater than $40.0 million.
The Company will discuss its results and guidance on its quarterly conference call on Tuesday, October 25, 2005, at 4:30 p.m. ET (1:30 p.m. PT). To hear the conference call, please dial 1-773-799-3263 (domestic and international) and reference the passcode (EQIX). A simultaneous live Webcast of the call will be available over the Internet at www.equinix.com, under the Investor Relations heading. A replay of the call will be available beginning on Tuesday, October 25, 2005 at 6:30 p.m. (ET) by dialing 203-369-3605. In addition, the Webcast will be available for replay on the Company's Web site at www.equinix.com. No password is required for either method of replay. A reconciliation between GAAP information and non-GAAP information contained in this press release is provided in a table immediately following the Condensed Consolidated Statements of Operations -- GAAP Presentation. This reconciliation is also available at www.equinix.com under the Investor Relations heading.
About Equinix
Equinix is the leading global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators and network services providers. Through the company's Internet Business Exchange(TM) (IBX(R)) centers in 11 markets in the U.S. and Asia, customers can directly interconnect with every major global network and ISP for their critical peering, transit and traffic exchange requirements. These interconnection points facilitate the highest performance and growth of the Internet by serving as neutral and open marketplaces for Internet infrastructure services, allowing customers to expand their businesses while reducing costs.
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 and operating IBX centers and developing, deploying and delivering Equinix services; a failure to receive significant revenue from customers in recently-acquired data centers; a failure to complete our contemplated financing arrangements; 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 and registration statement on Form S-3 filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.
Equinix and IBX are registered trademarks of Equinix, Inc. Internet Business Exchange is a trademark of Equinix, Inc.
Non-GAAP Financial Measures
Equinix continues to provide 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 EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), cash interest expense, cash net income (loss), non-GAAP net income (loss), and free cash flow to evaluate its operations. In presenting these non-GAAP financial measures, Equinix excludes certain non-cash or non-recurring items that it believes are not good indicators of the Company's current or future operating performance. These non-cash or non-recurring items are depreciation, amortization, accretion, stock-based compensation, non-cash interest, and, with respect to 2004 results, the non-cash portion of loss on debt extinguishment and conversion and restructuring charges (there were no such charges or losses in 2005). Recent legislative and regulatory changes encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. Equinix excludes these non-cash or non-recurring items in order for Equinix's lenders, investors, and industry analysts who review and report on the Company, to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitor base.
Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business. Our IBX centers are long-lived assets, and have an economic life greater than ten years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our IBX centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers, and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.
In addition, in presenting the non-GAAP financial measures, Equinix excludes amortization expense related to certain intangible assets, as it represents a non-cash cost that may not recur and is not a good indicator of the Company's current or future operating performance. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charge liability, as these expenses represent costs, which Equinix believes are not meaningful in evaluating the Company's current operations. Equinix excludes non-cash stock-based compensation expense as it represents expense attributed to stock awards that have no current or future cash obligations. As such, we, and our investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes interest expense associated with the amortization of debt issuance costs and discounts, as well as the interest expense associated with its convertible secured notes as such interest expenses do not require any cash in the periods presented nor will they in future periods. Lastly, with respect to its 2004 results, Equinix excludes restructuring charges and the non-cash portion of the loss on debt extinguishment and conversion. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we do not intend to build out now or in the future. The non-cash portion of the loss on debt extinguishment and conversion, which represents the write-off of the unamortized debt issuance costs and discounts associated with the debt facilities extinguished or converted as no cash was expended in the periods presented for such write-offs nor will there be in the future. Management believes such restructuring charges and write-offs of debt issuance costs and discounts were unique costs that are not expected to recur, and consequently, does not consider these charges as a normal component of expenses related to current and ongoing operations.
Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our ongoing business operations. Management believes that the inclusion of these non-GAAP financial measures provide consistency and comparability with past reports and provide 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 (with respect to 2006), net income (loss) from operations, interest income, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how it was calculated for the three and nine months ended September 30, 2005 and 2004, presented within this press release.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP PRESENTATION
(in thousands, except per share detail)
(unaudited)
Three Months Ended Nine Months Ended
---------------------------- -------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2005 2005 2004 2005 2004
--------- -------- --------- --------- ---------
Recurring revenues $54,291 $49,431 $40,057 $149,623 $111,811
Non-recurring
revenues 3,805 3,048 2,382 9,636 6,871
--------- -------- --------- --------- ---------
Revenues 58,096 52,479 42,439 159,259 118,682
Cost of revenues 40,955 38,811 34,310 116,639 102,245
--------- -------- --------- --------- ---------
Gross
profit 17,141 13,668 8,129 42,620 16,437
--------- -------- --------- --------- ---------
Operating expenses:
Sales and
marketing 4,829 5,145 4,433 14,793 13,498
General and
administrative 12,078 11,027 8,294 33,594 24,544
--------- -------- --------- --------- ---------
Total
operating
expenses 16,907 16,172 12,727 48,387 38,042
--------- -------- --------- --------- ---------
Income (loss) from
operations 234 (2,504) (4,598) (5,767) (21,605)
--------- -------- --------- --------- ---------
Interest and other
income (expense):
Interest income 1,075 902 335 2,644 819
Interest
expense and
other (1,928) (1,945) (2,352) (6,332) (8,765)
Loss on debt
extinguishment
and conversion - - - - (16,211)
--------- -------- --------- --------- ---------
Total
interest
and
other,
net (853) (1,043) (2,017) (3,688) (24,157)
--------- -------- --------- --------- ---------
Net loss before
income taxes (619) (3,547) (6,615) (9,455) (45,762)
Income taxes (164) 116 - (553) (200)
--------- -------- --------- --------- ---------
Net loss $(783) $(3,431) $(6,615) $(10,008) $(45,962)
========= ======== ========= ========= =========
Non-GAAP net income
(loss) (1) $575 $(942) $(6,456) $(3,717) $(28,732)
========= ======== ========= ========= =========
Basic and diluted net
loss per share $(0.03) $(0.14) $(0.36) $(0.43) $(2.65)
========= ======== ========= ========= =========
Shares used in
computing basic and
diluted net loss
per share 24,076 23,727 18,386 23,335 17,370
========= ======== ========= ========= =========
---------------------
(1)Non-GAAP net income (loss) excludes the $16,211,000 loss on
debt extinguishment and conversion during the nine months
ended September 30, 2004 and stock-based compensation
expense for all periods presented as follows:
Net loss $(783) $(3,431) $(6,615) $(10,008) $(45,962)
Stock-based
compensation 1,358 2,489 159 6,291 1,019
Loss on debt
extinguishment
and conversion - - - - 16,211
--------- -------- --------- --------- ---------
Non-GAAP
net
income
(loss) $575 $(942) $(6,456) $(3,717) $(28,732)
========= ======== ========= ========= =========
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
NON-GAAP PRESENTATION
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
----------------------------- -------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2005 2005 2004 2005 2004
---------- -------- --------- --------- ---------
Recurring revenues $54,291 $49,431 $40,057 $149,623 $111,811
Non-recurring
revenues 3,805 3,048 2,382 9,636 6,871
---------- -------- --------- --------- ---------
Revenues (1) 58,096 52,479 42,439 159,259 118,682
Cash cost of
revenues (2) 25,119 23,317 20,659 70,365 61,510
---------- -------- --------- --------- ---------
Cash gross
profit (3) 32,977 29,162 21,780 88,894 57,172
---------- -------- --------- --------- ---------
Cash operating
expenses (4):
Cash sales and
marketing
expenses(5) 4,566 4,676 3,958 13,599 12,029
Cash general and
administrative
expenses (6) 10,492 8,431 7,756 26,984 21,892
---------- -------- --------- --------- ---------
Total
cash
operating
expenses(7) 15,058 13,107 11,714 40,583 33,921
---------- -------- --------- --------- ---------
EBITDA (8) 17,919 16,055 10,066 48,311 23,251
---------- -------- --------- --------- ---------
Cash interest and
other income
(expense) (9):
Interest income 1,075 902 335 2,644 819
Cash interest
expense and
other (10) (1,650) (1,677) (657) (4,881) (2,719)
Cash loss on debt
extinguishment
and conversion(11) - - - - (2,505)
Income taxes (164) 116 - (553) (200)
---------- -------- --------- --------- ---------
Total cash
interest
and other,
net (739) (659) (322) (2,790) (4,605)
---------- -------- --------- --------- ---------
Cash net income (12) $17,180 $15,396 $9,744 $45,521 $18,646
========== ======== ========= ========= =========
Cash gross margins(13) 57% 56% 51% 56% 48%
========== ======== ========= ========= =========
EBITDA flow-through
rate(14) 33% 45% 84% 57% 71%
========== ======== ========= ========= =========
--------------------
(1) The geographic split of our revenues is presented below:
U.S. revenues $50,527 $45,384 $36,779 $137,927 $102,893
Asia-Pacific
revenues 7,569 7,095 5,660 21,332 15,789
---------- -------- --------- --------- ---------
Revenues $58,096 $52,479 $42,439 $159,259 $118,682
========== ======== ========= ========= =========
Revenues on a services basis is presented below:
Colocation $40,138 $36,105 $29,161 $109,479 $81,172
Interconnection 10,527 9,845 8,193 29,696 22,513
Managed
infrastructure 3,626 3,481 2,703 10,448 8,126
---------- -------- --------- --------- ---------
Recurring
revenues 54,291 49,431 40,057 149,623 111,811
Non-recurring
revenues 3,805 3,048 2,382 9,636 6,871
---------- -------- --------- --------- ---------
Revenues $58,096 $52,479 $42,439 $159,259 $118,682
========== ======== ========= ========= =========
New IBX centers are IBX centers which have not been available for
customer installs for at least four full quarters. Revenues
on a same IBX versus new IBX basis is presented below:
Same IBX centers $54,776 $51,282 $40,758 $154,515 $114,491
New IBX centers 3,320 1,197 1,681 4,744 4,191
---------- -------- --------- --------- ---------
Revenues $58,096 $52,479 $42,439 $159,259 $118,682
========== ======== ========= ========= =========
(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 $40,955 $38,811 $34,310 $116,639 $102,245
Depreciation,
amortization and
accretion
expense (15,836) (15,494) (13,638) (46,274) (40,700)
Stock-based
compensation
expense - - (13) - (35)
---------- -------- --------- --------- ---------
Cash cost of
revenues $25,119 $23,317 $20,659 $70,365 $61,510
========== ======== ========= ========= =========
The geographic split of our cash cost of revenues is
presented below:
U.S. cash cost of
revenues $20,933 $19,339 $17,185 $58,333 $50,740
Asia-Pacific cash
cost of revenues 4,186 3,978 3,474 12,032 10,770
---------- -------- --------- --------- ---------
Cash cost of
revenues $25,119 $23,317 $20,659 $70,365 $61,510
========== ======== ========= ========= =========
New IBX centers are IBX centers which have not been available for
customer installs for at least four full quarters. Cost of
revenues and cash cost of revenues on a same IBX versus new IBX
basis is presented below:
Same IBX centers-
cash cost of
revenues $23,292 $21,390 $18,747 $65,773 $55,944
Same IBX centers-
depreciation,
amortization and
accretion
expense 14,031 14,183 13,356 42,410 39,943
Same IBX centers-
stock-based
compensation
expense - - 13 - 35
---------- -------- --------- --------- ---------
Same IBX centers
cost of
revenues 37,323 35,573 32,116 108,183 95,922
---------- -------- --------- --------- ---------
New IBX centers-
cash cost of
revenues 1,827 1,927 1,912 4,592 5,566
New IBX centers-
depreciation,
amortization and
accretion
expense 1,805 1,311 282 3,864 757
New IBX centers-
stock-based
compensation
expense - - - - -
---------- -------- --------- --------- ---------
New IBX centers
cost of
revenues 3,632 3,238 2,194 8,456 6,323
---------- -------- --------- --------- ---------
Cost of
revenues $40,955 $38,811 $34,310 $116,639 $102,245
========== ======== ========= ========= =========
(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 and stock-based
compensation. 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 $4,829 $5,145 $4,433 $14,793 $13,498
Depreciation and
amortization
expense (15) (15) (469) (45) (1,418)
Stock-based
compensation
expense (248) (454) (6) (1,149) (51)
---------- -------- --------- --------- ---------
Cash sales and
marketing
expenses $4,566 $4,676 $3,958 $13,599 $12,029
========== ======== ========= ========= =========
(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 $12,078 $11,027 $8,294 $33,594 $24,544
Depreciation and
amortization
expense (476) (561) (398) (1,468) (1,719)
Stock-based
compensation
expense (1,110) (2,035) (140) (5,142) (933)
---------- -------- --------- --------- ---------
Cash general
and
administrative
expenses $10,492 $8,431 $7,756 $26,984 $21,892
========== ======== ========= ========= =========
(7) Our cash operating expenses, or cash SG&A, as defined
above, is presented below:
Cash sales and
marketing
expenses $4,566 $4,676 $3,958 $13,599 $12,029
Cash general and
administrative
expenses 10,492 8,431 7,756 26,984 21,892
---------- -------- --------- --------- ---------
$15,058 $13,107 $11,714 $40,583 $33,921
========== ======== ========= ========= =========
The geographic split of our cash operating expenses, or
cash SG&A, is presented below:
U.S. cash SG&A $12,338 $10,486 $9,500 $32,732 $27,031
Asia-Pacific
cash SG&A 2,720 2,621 2,214 7,851 6,890
---------- -------- --------- --------- ---------
Cash SG&A $15,058 $13,107 $11,714 $40,583 $33,921
========== ======== ========= ========= =========
(8) We define EBITDA as income (loss) from operations less
depreciation, amortization, accretion, stock-based compensation
expense and restructuring charges as presented below:
Income (loss)
from operations $234 $(2,504) $(4,598) $(5,767) $(21,605)
Depreciation,
amortization
and accretion
expense 16,327 16,070 14,505 47,787 43,837
Stock-based
compensation
expense 1,358 2,489 159 6,291 1,019
Restructuring
charges - - - - -
---------- -------- --------- --------- ---------
EBITDA $17,919 $16,055 $10,066 $48,311 $23,251
========== ======== ========= ========= =========
The geographic split of our EBITDA is presented below:
U.S. income
(loss) from
operations $541 $(1,871) $(3,028) $(3,944) $(15,230)
U.S.
depreciation,
amortization
and accretion
expense 15,357 14,941 12,963 44,515 39,333
U.S. stock-based
compensation
expense 1,358 2,489 159 6,291 1,019
U.S.
restructuring
charges - - - - -
---------- -------- --------- --------- ---------
U.S. EBITDA 17,256 15,559 10,094 46,862 25,122
---------- -------- --------- --------- ---------
Asia-Pacific
loss from
operations (307) (633) (1,570) (1,823) (6,375)
Asia-Pacific
depreciation,
amortization
and accretion
expense 970 1,129 1,542 3,272 4,504
Asia-Pacific
stock-based
compensation
expense - - - - -
Asia-Pacific
restructuring
charges - - - - -
---------- -------- --------- --------- ---------
Asia-Pacific
EBITDA 663 496 (28) 1,449 (1,871)
---------- -------- --------- --------- ---------
EBITDA $17,919 $16,055 $10,066 $48,311 $23,251
========== ======== ========= ========= =========
New IBX centers are IBX centers which have not been available for
customer installs for at least four full quarters. EBITDA on a
same IBX versus new IBX basis is presented below:
Same IBX
centers-
income (loss)
from operations $1,008 $(232) $(4,062) $(1,179) $(19,392)
Same IBX
centers-
depreciation,
amortization
and accretion
expense 14,522 14,759 14,223 43,923 43,080
Same IBX
centers-stock-
based
compensation
expense 1,358 2,489 159 6,291 1,019
Same IBX
centers-
restructuring
charges - - - - -
---------- -------- --------- --------- ---------
Same IBX center
EBITDA 16,888 17,016 10,320 49,035 24,707
---------- -------- --------- --------- ---------
New IBX centers-
loss from
operations (774) (2,272) (536) (4,588) (2,213)
New IBX centers-
depreciation,
amortization
and accretion
expense 1,805 1,311 282 3,864 757
New IBX centers-
stock-based
compensation
expense - - - - -
New IBX centers-
restructuring
charges - - - - -
---------- -------- --------- --------- ---------
New IBX center
EBITDA 1,031 (961) (254) (724) (1,456)
---------- -------- --------- --------- ---------
EBITDA $17,919 $16,055 $10,066 $48,311 $23,251
========== ======== ========= ========= =========
(9) We define cash interest and other income (expense) as interest
expense plus income taxes less interest income, non-cash interest
expense and non-cash loss on debt extinguishment and conversion.
Non-cash interest expense is comprised of amortization of debt
discounts and debt issuance costs and non-cash interest on our
convertible secured notes. Non-cash loss on debt extinguishment
and conversion is comprised of the non-cash
write-off of debt issuance costs and discounts.
(10)Cash interest expense and other is defined as interest
expense less amortization of debt discounts and debt issuance
costs and non-cash interest on our convertible secured notes as
presented below:
Interest expense
and other $(1,928) $(1,945) $(2,352) $(6,332) $(8,765)
Amortization of
debt discounts
and debt
issuance costs 206 198 437 602 2,251
Non-cash
interest on
convertible
secured notes 72 70 1,258 849 3,795
---------- -------- --------- --------- ---------
Non-cash
interest
expense 278 268 1,695 1,451 6,046
---------- -------- --------- --------- ---------
Cash interest
expense and
other $(1,650) $(1,677) $(657) $(4,881) $(2,719)
========== ======== ========= ========= =========
(11)Loss on debt
extinguishment
and conversion $- $- $- $- $(16,211)
Non-cash write-
off of debt
issuance costs
and discounts - - - - 13,706
---------- -------- --------- --------- ---------
Non-cash loss
on debt
extinguishment
and conversion - - - - 13,706
---------- -------- --------- --------- ---------
Cash loss on
debt
extinguishment
and conversion $- $- $- $- $(2,505)
========== ======== ========= ========= =========
(12)We define cash net income as net income (loss) less depreciation,
amortization, accretion, stock-based compensation
expense, restructuring charges, non-cash interest expense and
non-cash loss on debt extinguishment and conversion as
presented below:
Net income
(loss) $(783) $(3,431) $(6,615) $(10,008) $(45,962)
Depreciation,
amortization
and accretion
expense 16,327 16,070 14,505 47,787 43,837
Stock-based
compensation
expense 1,358 2,489 159 6,291 1,019
Restructuring
charges - - - - -
Non-cash
interest
expense
(defined above) 278 268 1,695 1,451 6,046
Non-cash loss on
debt
extinguishment
and conversion
(defined above) - - - - 13,706
---------- -------- --------- --------- ---------
Cash net income $17,180 $15,396 $9,744 $45,521 $18,646
========== ======== ========= ========= =========
(13)We define cash gross margins as cash gross profit
divided by revenues.
Our cash gross margins by geographic region is presented below:
U.S. cash gross
margins 59% 57% 53% 58% 51%
========== ======== ========= ========= =========
Asia-Pacific
cash gross
margins 45% 44% 39% 44% 32%
========== ======== ========= ========= =========
Same IBX centers are IBX centers which have been available for
customer installs for at least four full quarters. Our cash
gross margins for same IBX centers is presented below:
Same IBX cash
gross margins 57% 58% 54% 57% 51%
========== ======== ========= ========= =========
(14)We define EBITDA flow-through rate as incremental EBITDA growth
divided by incremental revenue growth as follows:
EBITDA - current
period $17,919 $16,055 $10,066 $48,311 $23,251
Less EBITDA -
prior period (16,055) (14,337) (7,528) (29,957) (4,772)
---------- -------- --------- --------- ---------
EBITDA growth $1,864 $1,718 $2,538 $18,354 $18,479
========== ======== ========= ========= =========
Revenues -
current period $58,096 $52,479 $42,439 $159,259 $118,682
Less revenues -
prior period (52,479) (48,684) (39,423) (126,851) (92,507)
---------- -------- --------- --------- ---------
Revenue growth $5,617 $3,795 $3,016 $32,408 $26,175
========== ======== ========= ========= =========
EBITDA
flow-through
rate 33% 45% 84% 57% 71%
========== ======== ========= ========= =========
Same IBX centers are IBX centers which have been available for
customer installs for at least four full quarters. Our EBITDA
flow-through rates for same IBX centers is presented below:
Same IBX
EBITDA -
current period $16,888 $17,016 $10,320 $49,035 $24,707
Less same IBX
EBITDA -
prior period (17,016) (15,131) (7,953) (31,095) (4,996)
---------- -------- --------- --------- ---------
Same IBX
EBITDA growth $(128) $1,885 $2,367 $17,940 $19,711
========== ======== ========= ========= =========
Same IBX
revenues -
current period $54,776 $51,282 $40,758 $154,515 $114,491
Less same IBX
revenues -
prior period (51,282) (48,457) (37,996) (121,919) (92,134)
---------- -------- --------- --------- ---------
Same IBX
revenue growth $3,494 $2,825 $2,762 $32,596 $22,357
========== ======== ========= ========= =========
Same IBX
EBITDA
flow-through
rate (4%) 67% 86% 55% 88%
========== ======== ========= ========= =========
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Assets September 30, December 31,
2005 2004
------------- -------------
Cash, cash equivalents and investments $108,290 $108,092
Accounts receivable, net 16,199 11,919
Property and equipment, net 371,005 343,361
Goodwill and other intangible assets, net 21,534 22,253
Debt issuance costs, net 2,621 3,164
Prepaid expenses 5,694 3,603
Deposits 5,480 6,062
Other assets 2,557 3,344
------------- -------------
Total assets $533,380 $501,798
============= =============
Liabilities and Stockholders'
Equity
Accounts payable and accrued expenses $22,567 $19,822
Accrued restructuring charges 13,963 14,750
Accrued property and equipment 5,157 2,912
Capital lease obligation 34,715 35,204
Other debt facility 14,988 -
Convertible secured notes 1,962 35,824
Convertible subordinated debentures 86,250 86,250
Deferred installation revenue 8,100 3,745
Customer deposits 1,686 3,360
Deferred rent 24,518 22,915
Other liabilities 4,398 3,310
------------- -------------
Total liabilities 218,304 228,092
------------- -------------
Preferred stock 2 2
Common stock 24 19
Additional paid-in capital 836,108 776,123
Deferred stock-based compensation (7,458) (260)
Accumulated other comprehensive income 843 2,257
Accumulated deficit (514,443) (504,435)
------------- -------------
Total stockholders' equity 315,076 273,706
------------- -------------
Total liabilities and
stockholders' equity $533,380 $501,798
============= =============
--------------------------------------------------------
Ending headcount by geographic region is as follows:
U.S. headcount 364 315
Asia-pacific headcount 166 153
------------- -------------
Total headcount 530 468
============= =============
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
---------------------------- -------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2005 2005 2004 2005 2004
--------- --------- -------- --------- ---------
Cash flows from
operating
activities:
Net loss $(783) $(3,431) $(6,615) $(10,008) $(45,962)
Adjustments to
reconcile net
loss to
net cash provided
by operating
activities:
Depreciation,
amortization
and accretion 16,327 16,070 14,505 47,787 43,837
Amortization of
stock-based
compensation 1,358 2,489 159 6,291 1,019
Non-cash
interest
expense 278 268 1,695 1,451 6,046
Loss on debt
extinguishment
and conversion - - - - 16,211
Other
reconciling
items 100 542 1,040 1,150 3,959
Changes in operating
assets and liabilities:
Accounts
receivable (75) (1,484) (223) (3,823) (2,591)
Accounts
payable and
accrued
expenses 1,189 2,863 1,890 4,141 2,903
Accrued
restructuring
charges (480) (486) (295) (1,448) (761)
Accrued
interest
payable (539) 539 (563) (539) (60)
Other assets
and
liabilities (1,881) 779 (680) 4,034 1,685
--------- --------- -------- --------- ---------
Net cash
provided
by
operating
activities 15,494 18,149 10,913 49,036 26,286
--------- --------- -------- --------- ---------
Cash flows from
investing
activities:
Purchase of Los
Angeles IBX
property (34,727) - - (34,727) -
Purchases of other
property and
equipment (7,079) (9,890) (7,621) (22,492) (16,783)
Accrued property
and equipment (267) 3,155 2,083 2,245 551
--------- --------- -------- --------- ---------
Net cash
used in
investing
activities (42,073) (6,735) (5,538) (54,974) (16,232)
--------- --------- -------- --------- ---------
Cash flows from
financing
activities:
Proceeds from
warrants, stock
options and
employee stock
purchase plans 3,585 3,285 1,041 11,217 3,631
Proceeds from
convertible
subordinated
debentures - - - - 86,250
Repayment of
capital lease
obligations (167) (163) - (489) (201)
Repayment of other
debt facilities (34) (627) - (3,724) (3,326)
Repayment of
credit facility - - - - (34,281)
Repayment of
senior notes - - - - (30,475)
Debt issuance and
extinguishment
costs (342) - (20) (342) (5,747)
--------- --------- -------- --------- ---------
Net cash
provided
by
financing
activities 3,042 2,495 1,021 6,662 15,851
--------- --------- -------- --------- ---------
Effect of foreign
currency exchange
rates on cash and
cash equivalents (202) (16) 18 (526) (63)
--------- --------- -------- --------- ---------
Net increase in cash,
cash equivalents and
investments (23,739) 13,893 6,414 198 25,842
Cash, cash
equivalents and
investments at
beginning of period 132,029 118,136 92,399 108,092 72,971
--------- --------- -------- --------- ---------
Cash, cash
equivalents and
investments at end
of period $108,290 $132,029 $98,813 $108,290 $98,813
========= ========= ======== ========= =========
Free cash flow (2) $(26,579) $11,414 $5,375 $(5,938) $10,054
========= ========= ======== ========= =========
Adjusted free cash
flow (3) $8,148 $11,414 $5,375 $28,789 $10,054
========= ========= ======== ========= =========
---------------------
(1)The cash flow statements presented herein combine our short-term
and long-term investments with our cash and cash equivalents in an
effort to present our total unrestricted cash and equivalent
balances. In our quarterly filings with the SEC on Forms 10-Q and
10-K, the purchases, sales and maturities of our short-term and
long-term investments will be presented as activities within the
investing activities portion of the cash flow statements.
(2)We define free cash flow as net cash provided by operating
activities plus net cash used in investing activities
(excluding the purchases, sales and maturities of short-term and
long-term investments) as presented below:
Net cash provided
by operating
activities as
presented above $15,494 $18,149 $10,913 $49,036 $26,286
Net cash used in
investing
activities as
presented above (42,073) (6,735) (5,538) (54,974) (16,232)
--------- --------- -------- --------- ---------
Free cash flow $(26,579) $11,414 $5,375 $(5,938) $10,054
========= ========= ======== ========= =========
(3)We define adjusted free cash flow as free cash flow (as defined
above) excluding any purchases or sales of real estate
as presented below:
Free cash flow (as
defined above) $(26,579) $11,414 $5,375 $(5,938) $10,054
Less purchase of
Los Angeles IBX
property 34,727 - - 34,727 -
--------- --------- -------- --------- ---------
Adjusted free
cash flow $8,148 $11,414 $5,375 $28,789 $10,054
========= ========= ======== ========= =========
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