27. Juli 2005
Equinix Reports Second Quarter 2005 Results
- Increased revenues by 33% over same quarter 2004
- Increased EBITDA to $16.1 million, up from $7.5 million in same quarter 2004
- Continues expansion efforts with acquisitions of centers in Silicon Valley and recently announced Chicago center
- Added 70 customers including D.E. Shaw, Fox Sports Interactive Media, Merrill Lynch Asia Pacific Ltd, NASA and Salesforce.com
Foster City, CA — July 27, 2005 — 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 June 30, 2005.
Revenues were $52.5 million for the second quarter, a 33% increase over the same quarter last year and an 8% increase over the previous quarter. Recurring revenues, consisting of colocation, interconnection and managed services, were $49.4 million, a 33% increase over the same quarter last year and an 8% increase over the previous quarter. Non- recurring revenues, consisting primarily of professional services and installation fees, were $3.1 million for the quarter, as compared to $2.1 million in the same quarter last year and $2.8 million the previous quarter.
Cost of revenues were $38.8 million for the second quarter, a 14% increase over the same quarter last year and a 5% increase over the previous quarter. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $15.5 million, were $23.3 million for the second quarter, a 13% increase over same quarter last year and a 6% 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 56%, up from 48% the same quarter last year and 55% the previous quarter.
Selling, general and administrative expenses, including stock-based compensation of $2.5 million, were $16.2 million for the second quarter, a 30% increase over the same quarter last year and a 6% increase over the previous quarter. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $3.1 million, were $13.1 million for the second quarter, a 16% increase over same quarter last year and a 6% increase over the previous quarter.
Net loss for the second quarter, including stock-based compensation expense of $2.5 million, was $3.4 million. This represents a basic and diluted net loss per share of $0.14 based on a weighted average share count of 23.7 million or a pro forma net loss per share of $0.04 excluding the stock-based compensation expense. 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 $15.4 million, a 19% improvement over the previous quarter.
EBITDA, defined as loss from operations less depreciation, amortization, accretion, stock-based compensation expense and restructuring charges, for the second quarter was $16.1 million, up 12% over the previous quarter and up from $7.5 million the same quarter 2004. Capital expenditures in the quarter were $9.9 million, of which $5.4 million was attributed to ongoing capital expenditures and $4.5 million was attributed to expansion capital expenditures.
The company generated cash from operating activities of $18.1 million, a $2.8 million or 18% increase over the previous quarter. Cash used in investing activities was $6.7 million, an increase of $0.6 million over the previous quarter. As a result, the company generated $11.4 million in free cash flow, a $2.2 million increase over the previous quarter. 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).
As of June 30, 2005, the company's cash, cash equivalents and investments were $132.0 million, an increase of $13.9 million over the previous quarter.
"Equinix delivered strong results in the second quarter contributing to a solid first half for the company," said Peter Van Camp, CEO of Equinix. "Significant in this was the level of our bookings and the quality of our new customers. This was a new high for the company, setting up a second half of continued strong growth."
Other Company Metrics & Developments
On a same IBX basis (defined as IBX centers which have been available for new customer installs for at least four full quarters), revenue was $51.3 million; cost of revenues were $35.6 million; cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation, were $21.4 million and cash gross margins for the quarter were 58%. EBITDA on a same IBX basis was $17.0 million.
Equinix added 70 new customers in the quarter including AON Warranty Group, Coral Wireless, D.E. Shaw, eHarmony.com, Fox Sports Interactive Media, Ikea Asia Pacific Pte Ltd, Merrill Lynch Asia Pacific Ltd, MySpace.com, NASA, Salesforce.com, Samsung Networks and Sandisk.
Based on a total cabinet capacity of approximately 26,100, the number of cabinets billing at the end of the quarter was approximately 12,400, or 47%, up from approximately 11,700 the previous quarter. On a weighted average basis, the number of cabinets billing was approximately 12,100, which represents 46%.
U.S. interconnection service revenues were 22% of U.S. recurring revenues for the quarter. Interconnection services represent 20% of total worldwide recurring revenues.
For the third quarter 2005, the company expects revenues to be in the range of $55.5 to $56.5 million. Cash gross margins are expected to be approximately 56%. Cash selling, general and administrative expenses are expected to be in the range of $13.0 to $14.0 million. EBITDA is expected to be between $17.0 and $18.0 million as the company continues to invest in growing the business. Net loss is expected to be in the range of $2.0 to $3.0 million. This includes approximately $1.8 million of stock-based compensation expense primarily attributed to the restricted stock grants, based on recent stock trading levels of approximately $45.00 per share, and approximately $1.9 million of interest expense. The weighted average shares outstanding will be approximately 24.0 million. Capital expenditures are estimated to be in the range of $8.0 to $10.0 million, including approximately $5.0 million in capital required for improvements to the newly acquired Silicon Valley and Chicago IBX centers.
For the full year of 2005, revenues are expected to be in the range of $216.0 to $219.0 million. Cash gross margins are expected to be in the range of 55-56%. Cash selling, general and administrative expenses are expected to be approximately $53.0 million. EBITDA is expected to be between $66.0 and $68.0 million. Net loss is expected to be in the range of $13.0 to $15.0 million. This includes approximately $8.5 million of stock- based compensation expense primarily attributed to the restricted stock grants, based on recent stock trading levels of approximately $45.00 per share, and $9.0 million of interest expense. The weighted average shares outstanding will be approximately 23.5 million. Capital expenditures for 2005 are expected to be in a range of $40.0 to $45.0 million, comprised of $17.0 to $18.0 million of ongoing capital expenditures and $23.0 to $27.0 million of expansion capital expenditures.
The company will discuss its results and guidance on its quarterly conference call on Wednesday, July 27, 2005, at 5:30 p.m. ET (2:30 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 Wednesday, July 27, 2005 at 7:30 p.m. (ET) by dialing 203-369-1928. 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.
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 15 Internet Business Exchange™ (IBX®) centers in five countries, 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.
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 and cash 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 intends to calculate the various non-GAAP financial measures in future periods consistent with how it was calculated for the three and six months ended June 30, 2005 and 2004, presented within this press release.
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 IXEurope into Equinix; a failure to receive significant revenue from customers in recently built out 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; the results of any litigation relating to past stock option grants and practices; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.
Equinix and IBX are registered trademarks of Equinix, Inc. Internet Business Exchange is a trademark of Equinix, Inc.