Equinix Reports First Quarter 2014 Results - KTRE.com | Lufkin and Nacogdoches, Texas

Equinix Reports First Quarter 2014 Results

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SOURCE Equinix, Inc.

Reported revenues of $580.1 million, a 3% increase over the previous quarter and a 12% increase over the same quarter last year

Increased 2014 annual guidance of revenues to be greater than $2,395.0 million and adjusted EBITDA to be greater than $1,105.0 million

REDWOOD CITY, Calif., April 30, 2014 /PRNewswire/ -- Equinix, Inc. (Nasdaq: EQIX), a global interconnection and data center company, today reported quarterly results for the quarter ended March 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.

Equinix.

Revenues were $580.1 million for the first quarter, a 3% increase over the previous quarter and a 12% increase over the same quarter last year.  Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $549.7 million for the first quarter, a 2% increase over the previous quarter and an 11% increase over the same quarter last year.  Non-recurring revenues were $30.4 million in the quarter.  MRR churn for the first quarter was 2.3%, unchanged from the previous quarter and lower than prior guidance. 

"Equinix delivered a strong start to the year with revenue and adjusted EBITDA above the top end of our guidance ranges. Our first quarter performance was solid across all three regions, and our key operating metrics, including MRR per cabinet, MRR churn, and cross-connect additions, reflect continued health of the business and the competitive edge derived from Platform Equinix," said Steve Smith, president and CEO of Equinix.  "Today we are also excited to announce the Equinix Cloud Exchange, which builds on our successful heritage in interconnection service delivery by bringing together cloud and network service providers with buyers in a new way to realize the promise of cloud computing. With an encouraging start to 2014, Equinix is on track to deliver its financial objectives for the year."

Cost of revenues were $287.5 million for the first quarter, a 7% increase over the previous quarter and an 11% increase from the same quarter last year.  Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $103.3 million for the quarter, which we refer to as cash cost of revenues, were $184.2 million for the quarter, a 6% increase over the previous quarter and a 14% increase over the same quarter last year.  Gross margins for the quarter were 50%, down from 52% for the previous quarter and unchanged from the same quarter last year.  Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 68%, down from 69% for the previous quarter and the same quarter last year.     

Selling, general and administrative expenses were $170.7 million for the first quarter, a 3% increase over the previous quarter and a 15% increase over the same quarter last year.  Selling, general and administrative expenses, excluding depreciation, amortization, accretion and stock-based compensation of $35.3 million for the quarter, which we refer to as cash selling, general and administrative expenses, were $135.4 million for the quarter, a 7% increase over the previous quarter and a 20% increase over the same quarter last year. 

Interest expense was $68.8 million for the first quarter, a 5% increase over the previous quarter and a 14% increase over the same quarter last year, primarily attributed to the $1.5 billion senior notes offering in March 2013 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 $13.6 million for the first quarter as compared to income tax expense of $11.5 million in the same quarter last year.

Net income attributable to Equinix for the first quarter was $41.4 million.  This represents a basic net income per share attributable to Equinix of $0.83 and a diluted net income per share attributable to Equinix of $0.81 based on a weighted average share count of 49.6 million and 53.4 million, respectively, for the first quarter of 2014.  

Income from operations was $121.6 million for the first quarter, a 3% decrease from the previous quarter and a 16% increase over the same quarter last year.  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 first quarter was $260.4 million, a 1% decrease over the previous quarter and an 8% increase over the same quarter last year.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the first quarter, were $105.9 million, of which $61.0 million was attributed to expansion capital expenditures and $44.9 million was attributed to ongoing capital expenditures. 

The Company has repurchased approximately 732,000 shares of its common stock under the $500 million share repurchase program authorized in December 2013 at an average price of $173.46 per share for total consideration of $127.0 million through April 25, 2014. 

The Company generated cash from operating activities of $171.7 million for the first quarter as compared to $166.7 million in the previous quarter and $84.2 million for the same quarter last year.  Cash provided by investing activities was $98.9 million in the first quarter as compared to cash used in investing activities of $233.4 million in the previous quarter and cash used in investing activities of $1,142.5 million in the same quarter last year, primarily attributed to $836.4 million of the proceeds from the issuance of the $1.5 billion senior notes that was placed into a restricted cash account for the redemption of the $750.0 million 8.125% senior notes in April 2013.  Cash used in financing activities was $37.3 million for the first quarter as compared to cash used in financing activities of $70.6 million in the previous quarter and cash provided by financing activities of $1,496.8 million in the same quarter last year, primarily attributed to the issuance of the $1.5 billion senior notes.    

As of March 31, 2014, the Company's cash, cash equivalents and investments were $1,041.7 million, as compared to $1,030.1 million as of December 31, 2013.   

In April 2014, the Company entered into an agreement with a note holder to exchange $98.9 million of the principal amount of its 4.75% convertible subordinated notes for approximately 1.2 million shares of the Company's common stock and a cash payment of approximately $10.3 million. As a result, the Company will recognize a loss on debt extinguishment of approximately $22.0 million in the second quarter of 2014 upon the exchange of the 4.75% convertible subordinated notes.  

Business Outlook

For the second quarter of 2014, the Company expects revenues to range between $594.0 and $598.0 million.  Cash gross margins are expected to approximate 68% to 69%.  Cash selling, general and administrative expenses are expected to range between $135.0 and $139.0 million.  Adjusted EBITDA is expected to range between $267.0 and $273.0 million, which includes $11.0 million in professional fees and costs primarily related to the REIT conversion.  Capital expenditures are expected to range between $165.0 and $175.0 million, comprised of approximately $60.0 million of ongoing capital expenditures and $105.0 to $115.0 million of expansion capital expenditures.  

For the full year of 2014, total revenues are expected to be greater than $2,395.0 million, or an as-reported greater than 11% year over year growth rate, which includes a positive foreign currency benefit of approximately $7.0 million compared to the rates used from our prior guidance.  Total year cash gross margins are expected to approximate 69%.  Cash selling, general and administrative expenses are expected to range between $530.0 and $550.0 million.  Adjusted EBITDA for the year is expected to be greater than $1,105.0 million, which includes a positive foreign currency benefit of approximately $3.0 million compared to the rates used from our prior guidance, and includes $37.0 million in professional fees and costs primarily related to the REIT conversion.  Capital expenditures for 2014 are expected to range between $550.0 and $650.0 million, comprised of approximately $200.0 million of ongoing capital expenditures and $350.0 to $450.0 million for expansion capital expenditures. 

The U.S. dollar exchange rates used for 2014 guidance have been updated to $1.37 to the Euro, $1.64 to the Pound, S$1.26 to the U.S. dollar and R$2.28 to the U.S. dollar, and take into consideration the impact of currency hedges where applicable.  The 2014 global revenue breakdown by currency for the Euro, Pound, Singapore dollar and Brazilian Real is 15%, 9%, 6% and 4%, respectively.

Company Metrics and Q1 Results Presentation

The Company will discuss its results and guidance on its quarterly conference call on Wednesday, April 30, 2014, at 5:30 p.m. ET (2:30 p.m. PT).  A simultaneous live webcast of the call will be available over the internet at Equinix.com under the Investor Relations heading. To hear the conference call live, please dial 1-210-234-8004 (domestic and international) and reference the passcode (EQIX).  A presentation to accompany the call as well as the Company's Non-Financial Metrics tracking sheet, will also be available on the website. 

A replay of the call will be available beginning on Wednesday, April 30, 2014, at 7:30 p.m. (ET) through Thursday, July 31, 2014, by dialing 1-203-369-0063 and reference the passcode (2014).  In addition, the webcast will be available on the Investors section of the Company's website over the same time period.  No password is required for the webcast.

About Equinix

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

 Non-GAAP Financial Measures

Equinix provides all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures.  Accordingly, Equinix uses non-GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow, adjusted free cash flow, discretionary free cash flow and adjusted discretionary free cash flow to evaluate its operations.  In presenting these non-GAAP financial measures, Equinix excludes certain items that it believes are not good indicators of the Company's current or future operating performance.  These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges and acquisition costs. Legislative and regulatory requirements encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors.  Equinix excludes these items in order for Equinix's lenders, investors, and industry analysts who review and report on the Company, to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitors.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business.  Our IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment.  This is a trend we expect to continue.  In addition, depreciation is also based on the estimated useful lives of our IBX centers.  These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers, and are not indicative of current or expected future capital expenditures.  Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, Equinix excludes amortization expense related to certain intangible assets, as it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance.  Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which Equinix believes are not meaningful in evaluating the Company's current operations.  Equinix excludes stock-based compensation expense as it primarily represents expense attributed to equity awards that have no current or future cash obligations.  As such, we, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations.  Equinix excludes restructuring charges from its non-GAAP financial measures.  The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we did not intend to build out, or our decision to reverse such restructuring charges or severance charges related to the Switch and Data acquisition.  Equinix also excludes impairment charges related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Finally, Equinix excludes acquisition costs from its non-GAAP financial measures.  The acquisition costs relate to costs the Company incurs in connection with business combinations.  Management believes such items as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of costs will or may occur in future periods.

Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our core, ongoing business operations.  Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.

Investors should note, however, that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies.  In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data.  Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenue from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.

Equinix and IBX are registered trademarks of Equinix, Inc. International Business Exchange is a trademark of Equinix, Inc.

 

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)























Three Months Ended





March 31,


December 31,


March 31,





2014


2013


2013










Recurring revenues


$        549,703


$        538,060


$        494,522

Non-recurring revenues


30,350


26,617


21,612


Revenues


580,053


564,677


516,134










Cost of revenues


287,525


269,743


258,591



Gross profit

292,528


294,934


257,543










Operating expenses:








Sales and marketing

67,428


67,250


58,276


General and administrative

103,303


98,466


90,818


Acquisition costs

185


4,229


3,662



Total operating expenses

170,916


169,945


152,756










Income from operations

121,612


124,989


104,787










Interest and other income (expense):







Interest income


1,434


794


747


Interest expense

(68,820)


(65,503)


(60,331)


Loss on debt extinguishment 

-


(14,899)


-


Other income (expense)

678


1,959


(459)



Total interest and other, net

(66,708)


(77,649)


(60,043)










Income before income taxes

54,904


47,340


44,744











Income tax expense

(13,567)


(1,967)


(11,460)










Net income



41,337


45,373


33,284










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

50


(186)


(441)










Net income attributable to Equinix

$          41,387


$          45,187


$          32,843










Net income per share attributable to Equinix:
















Basic net income per share (1)

$             0.83


$             0.91


$             0.67











Diluted net income per share (1)

$             0.81


$             0.88


$             0.65











Shares used in computing basic net income per share

49,598


49,765


49,029











Shares used in computing diluted net income per share

53,386


53,499


53,480



















(1)

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




attributed to Equinix is presented below:
















Net income


$          41,337


$          45,373


$          33,284


Net (income) loss attributable to non-controlling interests

50


(186)


(441)



Net income attributable to Equinix, basic 

41,387


45,187


32,843


Interest on convertible debt

1,984


1,847


1,851



Net income attributable to Equinix, diluted

$          43,371


$          47,034


$          34,694

 

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)























Three Months Ended





March 31,


December 31,


March 31,





2014


2013


2013










Net income



$          41,337


$          45,373


$          33,284










Other comprehensive income (loss), net of tax:







 Foreign currency translation gain (loss) 

14,970


6,905


(72,554)


 Unrealized gain (loss) on available for sale securities 

839


(376)


98


 Unrealized gain (loss) on cash flow hedges 

200


(1,750)


-

 Other comprehensive income (loss), net of tax: 

16,009


4,779


(72,456)










 Comprehensive income (loss), net of tax 

57,346


50,152


(39,172)











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

50


(186)


(441)


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

(2,067)


3,185


(769)










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

$          55,329


$          53,151


$         (40,382)

 

 

EQUINIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)








Assets

March 31,


December 31,





2014


2013








Cash and cash equivalents

$           495,174


$           261,894

Short-term investments

322,374


369,808

Accounts receivable, net

213,560


184,840

Other current assets

54,910


72,118


Total current assets

1,086,018


888,660

Long-term investments

224,176


398,390

Property, plant and equipment, net

4,766,297


4,591,650

Goodwill



1,047,578


1,042,153

Intangible assets, net

176,914


184,182

Other assets


429,615


387,324


Total assets

$        7,730,598


$        7,492,359








Liabilities and Stockholders' Equity











Accounts payable and accrued expenses

$           293,295


$           263,223

Accrued property and equipment

80,516


64,601

Current portion of capital lease and other financing obligations

17,880


17,214

Current portion of mortgage and loans payable

54,122


53,508

Other current liabilities

149,343


147,958


Total current liabilities

595,156


546,504

Capital lease and other financing obligations, less current portion

1,037,247


914,032

Mortgage and loans payable, less current portion

191,761


199,700

Senior notes


2,250,000


2,250,000

Convertible debt


728,361


724,202

Other liabilities


284,108


274,955


Total liabilities

5,086,633


4,909,393








Redeemable non-controlling interests

126,959


123,902








Common stock


51


50

Additional paid-in capital

2,743,244


2,693,887

Treasury stock


(131,408)


(84,663)

Accumulated other comprehensive loss

(99,825)


(113,767)

Retained earnings (accumulated deficit)

4,944


(36,443)


Total stockholders' equity

2,517,006


2,459,064









Total liabilities, redeemable non-controlling interests and stockholders' equity

$        7,730,598


$        7,492,359






















Ending headcount by geographic region is as follows:












Americas headcount

2,018


1,984


EMEA headcount

907


899


Asia-Pacific headcount

636


617



Total headcount

3,561


3,500

 

 

EQUINIX, INC.

SUMMARY OF DEBT OUTSTANDING

(in thousands)

(unaudited)












March 31,


December 31,





2014


2013








Capital lease and other financing obligations

$        1,055,127


$           931,246








U.S. term loan


130,000


140,000

ALOG financings

70,799


67,882

Mortgage payable

43,202


43,497

Other loans payable

1,882


1,829


Total mortgage and loans payable

245,883


253,208








Senior notes


2,250,000


2,250,000








Convertible debt, net of debt discount

728,361


724,202

Plus: debt discount

41,348


45,508


Total convertible debt principal

769,709


769,710








Total debt outstanding

$        4,320,719


$        4,204,164

 

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


























Three Months Ended



March 31,


December 31,


March 31,






2014


2013


2013











Cash flows from operating activities:







Net income


$          41,337


$          45,373


$          33,284


Adjustments to reconcile net income to net cash







provided by operating activities:








Depreciation, amortization and accretion

113,610


106,682


108,603



Stock-based compensation

24,981


27,630


23,836



Debt issuance costs and debt discount

6,409


6,266


5,753



Loss on debt extinguishment 

-


14,899


-



Excess tax benefits from employee equity awards

(10,018)


42


(18,990)



Other reconciling items

5,292


7,196


3,085



Changes in operating assets and liabilities:









Accounts receivable

(28,995)


12,336


(24,663)




Income taxes, net

(15,749)


(36,622)


(2,347)




Accounts payable and accrued expenses

8,830


(10,157)


(27,996)




Other assets and liabilities

26,021


(6,939)


(16,384)





Net cash provided by operating activities

171,718


166,706


84,181

Cash flows from investing activities:







Purchases, sales and maturities of investments, net

221,654


18,641


(232,965)


Purchase of Frankfurt Kleyer 90 Carrier Hotel

-


(48,739)


-


Purchase of Asia Tone, less cash acquired

-


-


(107)


Purchase of real estate

(16,791)


-


-


Purchases of other property, plant and equipment

(105,907)


(202,841)


(75,667)


Other investing activities

(71)


(423)


(833,801)





Net cash provided by (used in) investing activities

98,885


(233,362)


(1,142,540)

Cash flows from financing activities:







Purchases of treasury stock

(47,120)


(48,799)


-


Proceeds from employee equity awards

14,387


3,810


14,368


Proceeds from loans payable

-


26,304


-


Proceeds from senior notes

-


-


1,500,000


Repayment of capital lease and other financing obligations

(4,250)


(27,907)


(3,516)


Repayment of mortgage and loans payable

(10,317)


(10,196)


(14,052)


Debt extinguishment costs

-


(13,189)


-


Excess tax benefits from employee equity awards

10,018


(42)


18,990


Other financing activities

-


(622)


(19,030)





Net cash provided by (used in) financing activities

(37,282)


(70,641)


1,496,760

Effect of foreign currency exchange rates on cash and cash equivalents

(41)


(551)


(5,595)

Net increase (decrease) in cash and cash equivalents

233,280


(137,848)


432,806

Cash and cash equivalents at beginning of period

261,894


399,742


252,213

Cash and cash equivalents at end of period

$        495,174


$        261,894


$        685,019












Supplemental cash flow information:








Cash paid for taxes

$          29,913


$          36,954


$          14,036



Cash paid for interest

$          42,385


$          74,671


$          67,975











Free cash flow (1)


$          48,949


$         (85,297)


$       (825,394)











Adjusted free cash flow (2)

$        103,375


$              236


$       (800,506)











Ongoing capital expenditures (3)

$          44,914


$          68,059


$          33,997











Discretionary free cash flow (4)

$        126,804


$          98,647


$          50,184











Adjusted discretionary free cash flow (5)

$        164,439


$        135,441


$          74,965





















(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

$        171,718


$        166,706


$          84,181


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

98,885


(233,362)


(1,142,540)


Purchases, sales and maturities of investments, net

(221,654)


(18,641)


232,965



Free cash flow (negative free cash flow)

$          48,949


$         (85,297)


$       (825,394)











(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)

$          48,949


$         (85,297)


$       (825,394)


Less purchase of Frankfurt Kleyer 90 Carrier Hotel

-


48,739


-


Less purchase of Asia Tone, less cash acquired

-


-


107


Less purchase of real estate

16,791


-


-


Less excess tax benefits from employee equity awards

10,018


(42)


18,990


Less cash paid for taxes resulting from the planned REIT conversion 

17,827


30,040


3,734


Less costs related to the planned REIT conversion

9,790


6,796


2,057



Adjusted free cash flow

$        103,375


$              236


$       (800,506)












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

$          17,827


$          30,040


$            3,734


Other cash taxes paid

12,086


6,914


10,302



Total cash paid for taxes

$          29,913


$          36,954


$          14,036











(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

$          44,914


$          68,059


$          33,997


Expansion capital expenditures

60,993


134,782


41,670



Total capital expenditures

$        105,907


$        202,841


$          75,667











(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

$        171,718


$        166,706


$          84,181


Less ongoing capital expenditures

(44,914)


(68,059)


(33,997)



Discretionary free cash flow

$        126,804


$          98,647


$          50,184











(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)

$        126,804


$          98,647


$          50,184


Excess tax benefits from employee equity awards

10,018


(42)


18,990


Cash paid for taxes resulting from the planned REIT conversion 

17,827


30,040


3,734


Costs related to the planned REIT conversion

9,790


6,796


2,057



Adjusted discretionary free cash flow

$        164,439


$        135,441


$          74,965

 

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION

(in thousands)

(unaudited)

























Three Months Ended






March 31,


December 31,


March 31,






2014


2013


2013












Recurring revenues


$        549,703


$        538,060


$        494,522


Non-recurring revenues


30,350


26,617


21,612



Revenues (1)


580,053


564,677


516,134












Cash cost of revenues (2)

184,248


174,284


162,010





Cash gross profit (3)

395,805


390,393


354,124












Cash operating expenses (4):








Cash sales and marketing expenses (5)

55,799


54,235


46,280



Cash general and administrative expenses (6)

79,618


72,628


66,956





Total cash operating expenses (7)

135,417


126,863


113,236












Adjusted EBITDA (8)


$        260,388


$        263,530


$        240,888












Cash gross margins (9)

68%


69%


69%












Adjusted EBITDA margins (10)

45%


47%


47%












Adjusted EBITDA flow-through rate (11)

(20%)


70%


12%






















(1)

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

















Americas Revenues:


















Colocation


$        236,614


$        236,931


$        223,285



Interconnection


64,302


62,306


58,206



Managed infrastructure

13,112


12,811


13,147



Rental



952


763


460




Recurring revenues

314,980


312,811


295,098



Non-recurring revenues

15,053


13,290


10,694




Revenues

330,033


326,101


305,792













EMEA Revenues:


















Colocation


122,176


117,003


100,532



Interconnection


11,366


10,473


8,381



Managed infrastructure

6,865


6,831


4,249



Rental



1,718


1,660


120




Recurring revenues

142,125


135,967


113,282



Non-recurring revenues

9,305


8,819


6,687




Revenues

151,430


144,786


119,969













Asia-Pacific Revenues:


















Colocation


75,833


72,758


71,014



Interconnection


11,358


11,090


9,404



Managed infrastructure

5,407


5,434


5,724




Recurring revenues

92,598


89,282


86,142



Non-recurring revenues

5,992


4,508


4,231




Revenues

98,590


93,790


90,373













Worldwide Revenues:


















Colocation


434,623


426,692


394,831



Interconnection


87,026


83,869


75,991



Managed infrastructure

25,384


25,076


23,120



Rental



2,670


2,423


580




Recurring revenues

549,703


538,060


494,522



Non-recurring revenues

30,350


26,617


21,612




Revenues

$        580,053


$        564,677


$        516,134












(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

$        287,525


$        269,743


$        258,591



Depreciation, amortization and accretion expense

(101,407)


(93,270)


(94,979)



Stock-based compensation expense

(1,870)


(2,189)


(1,602)




Cash cost of revenues

$        184,248


$        174,284


$        162,010













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

















Americas cash cost of revenues

$          91,037


$          87,794


$          87,724



EMEA cash cost of revenues

58,116


52,363


43,629



Asia-Pacific cash cost of revenues

35,095


34,127


30,657




Cash cost of revenues

$        184,248


$        174,284


$        162,010












(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

$          67,428


$          67,250


$          58,276



Depreciation and amortization expense

(4,629)


(6,273)


(6,275)



Stock-based compensation expense

(7,000)


(6,742)


(5,721)




Cash sales and marketing expenses

$          55,799


$          54,235


$          46,280












(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

$        103,303


$          98,466


$          90,818



Depreciation and amortization expense

(7,574)


(7,139)


(7,349)



Stock-based compensation expense

(16,111)


(18,699)


(16,513)




Cash general and administrative expenses

$          79,618


$          72,628


$          66,956












(7)

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













Cash sales and marketing expenses

$          55,799


$          54,235


$          46,280



Cash general and administrative expenses

79,618


72,628


66,956




Cash SG&A

$        135,417


$        126,863


$        113,236













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













Americas cash SG&A

$          89,433


$          78,701


$          73,551



EMEA cash SG&A

30,109


32,794


27,611



Asia-Pacific cash SG&A

15,875


15,368


12,074




Cash SG&A

$        135,417


$        126,863


$        113,236












(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

$        121,612


$        124,989


$        104,787



Depreciation, amortization and accretion expense

113,610


106,682


108,603



Stock-based compensation expense

24,981


27,630


23,836



Acquisition costs

185


4,229


3,662




Adjusted EBITDA

$        260,388


$        263,530


$        240,888













The geographic split of our adjusted EBITDA is presented below:















Americas income from operations

$          71,735


$          76,042


$          59,379



Americas depreciation, amortization and accretion expense

58,933


62,623


63,296



Americas stock-based compensation expense

18,793


20,926


18,444



Americas acquisition costs

102


15


3,398




Americas adjusted EBITDA

149,563


159,606


144,517













EMEA income from operations

29,903


31,187


22,538



EMEA depreciation, amortization and accretion expense

29,902


20,612


23,071



EMEA stock-based compensation expense

3,317


3,616


3,038



EMEA acquisition costs

83


4,214


82




EMEA adjusted EBITDA

63,205


59,629


48,729













Asia-Pacific income from operations

19,974


17,760


22,870



Asia-Pacific depreciation, amortization and accretion expense

24,775


23,447


22,236



Asia-Pacific stock-based compensation expense

2,871


3,088


2,354



Asia-Pacific acquisition costs

-


-


182




Asia-Pacific adjusted EBITDA

47,620


44,295


47,642















Adjusted EBITDA

$        260,388


$        263,530


$        240,888












(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

72%


73%


71%













EMEA cash gross margins

62%


64%


64%













Asia-Pacific cash gross margins

64%


64%


66%












(10)

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














Americas adjusted EBITDA margins

45%


49%


47%













EMEA adjusted EBITDA margins

42%


41%


41%













Asia-Pacific adjusted EBITDA margins

48%


47%


53%












(11)

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













Adjusted EBITDA - current period

$        260,388


$        263,530


$        240,888



Less adjusted EBITDA - prior period

(263,530)


(248,445)


(239,686)




Adjusted EBITDA growth

$           (3,142)


$          15,085


$            1,202













Revenues - current period

$        580,053


$        564,677


$        516,134



Less revenues - prior period

(564,677)


(543,084)


(506,059)




Revenue growth

$          15,376


$          21,593


$          10,075













Adjusted EBITDA flow-through rate

(20%)


70%


12%


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