EQUINIX INC quarterly report, Q3 FY2014

全文

Equinix, Inc. — Form 10-Q Summary

Reporting period: Quarter and nine months ended September 30, 2014. Unaudited results; amounts below are in U.S. dollars. Equinix operates data centers and provides colocation, interconnection, and related services across the Americas, EMEA, and Asia-Pacific.

Financial performance and liquidity

  • Q3 revenue: $620.4 million, up 14% year over year. Recurring revenue was $588.4 million, or 95% of total revenue. Colocation remained the largest service category.
  • Q3 profitability: Operating income was $135.1 million, up from $115.2 million; operating margin was approximately 21.8%, versus 21.2%. Net income attributable to Equinix was $42.8 million, compared with $42.5 million. Diluted EPS declined to $0.79 from $0.83.
  • Q3 adjusted EBITDA: $283.9 million, up 14% year over year; approximately 45.8% of revenue. This is a company-defined non-GAAP measure.
  • Nine-month results: Revenue was $1.806 billion, up 14%; operating income was $381.4 million versus $335.9 million; and net income attributable to Equinix was $95.6 million versus $49.5 million. Diluted EPS was $1.84 versus $0.99. The comparison includes a $51.2 million debt-extinguishment loss in 2014 and a $93.6 million loss in 2013.
  • Cash flow and investment: Nine-month operating cash flow was $487.1 million, up from $437.9 million. Cash purchases of property and equipment were $421.7 million. Cash and cash equivalents were $354.2 million at quarter-end; cash, cash equivalents, and short- and long-term investments totaled $501.1 million, down from $1.030 billion at year-end 2013.
  • Debt and liquidity: Management reported approximately $4.0 billion of total indebtedness, including convertible debt, senior notes, mortgage and loans payable, and financing obligations. Current assets were $857.7 million and current liabilities were $668.2 million. The company reported $513.7 million of additional availability under its U.S. revolving credit line after outstanding letters of credit.

Material changes and notable items

  • Revenue grew across all regions in Q3: Americas 9%, EMEA 21%, and Asia-Pacific 23%. Management attributed growth principally to new and expanded data centers and increased customer orders. Utilization was approximately 77%, or approximately 79% excluding expansions opened in the prior 12 months.
  • Q3 cost of revenue rose 13% to $304.1 million, while remaining 50% of revenue. Sales and marketing rose 17% and general and administrative expense rose 13%, reflecting hiring, compensation, and growth-related spending.
  • In July, Equinix acquired the remaining ALOG interests for a net purchase price of $225.6 million, bringing ownership to 100%. Nine-month financing cash outflows also included $298.0 million of share repurchases and the ALOG buyout.
  • Debt exchanges during the first half reduced convertible-note principal but produced a $51.2 million nine-month extinguishment loss. The remaining 3.00% notes were converted or settled in cash in October, after quarter-end.
  • Foreign currency translation was a significant headwind to comprehensive income: Equinix reported a $144.994 million Q3 translation loss and a $106.943 million nine-month loss. These are other comprehensive losses, not operating expenses.

Outlook, risks, and contingencies

  • Management expected revenue to continue growing, supported by customer demand and announced data-center expansions. It also expected operating costs to rise as the business expands; no specific consolidated revenue or earnings guidance is provided in the filing.
  • Equinix was pursuing REIT status effective January 1, 2015, subject to IRS and other conditions. Management estimated a $330–$370 million fourth-quarter 2014 income-tax provision from reassessing certain deferred tax balances. It estimated REIT-conversion costs of $75–$85 million, of which $75.5 million had been incurred, and total depreciation-recapture tax liabilities of approximately $360–$380 million; $281.1 million had been settled.
  • In October, the board declared a $416 million special distribution, payable in cash or stock at shareholder election, with aggregate cash capped at approximately $83.2 million. Equinix estimated total 2014 and intended 2015 special distributions, including deemed distributions related to convertible-note adjustments, at approximately $1.0–$1.1 billion; the estimate and timing could change.
  • Management said billing-system changes and the Oracle financial-system migration, along with a centralization of EMEA billing and collections, increased days sales outstanding and affected collections and operating cash flow. Further delays were possible as billing-system work continued into 2015.
  • Key risks include failure or delay in REIT qualification, substantial debt and lease commitments, foreign-exchange volatility, power availability and costs, data-center capacity constraints, customer demand and collection risks, and execution risks in expansion and information-system projects. Management described disclosure controls as effective; it also noted that system changes affect processes and procedures for financial reporting.
  • Expansion commitments included $187.7 million of unaccrued capital expenditures and $279.6 million of other purchase commitments. The filing also lists approximately $970 million of minimum operating lease payments, excluding potential renewals.

Most important facts for investors to verify

  • Whether Equinix completed its REIT conversion on the intended timetable and the actual tax provision, conversion costs, and distribution requirements.
  • Actual cash and stock components of the special distributions, and resulting share dilution and liquidity impact.
  • Whether DSO and customer collections normalized after billing and financial-system changes.
  • Expansion spending, utilization and power capacity, particularly whether new facilities generate revenue in line with investment.
  • Debt, financing obligations, lease commitments, and cash available after debt service, distributions, and capital expenditures.
  • Reported GAAP earnings alongside adjusted EBITDA, including the effects of debt-extinguishment items, foreign exchange, taxes, and noncash charges.