Exhibit 99.1
Equinix Reports First Quarter 2004 Results
FOSTER CITY, Calif.--(BUSINESS WIRE)--April 22, 2004--Equinix, Inc.
(Nasdaq:EQIX)
-- Increased revenues by 45% over same quarter 2003 and 11% over
previous quarter.
-- Added 82 new customers including BellSouth, MCI Worldcom Asia
Pte., Tommy Hilfiger and Viacom with strong bookings from
installed base including Amazon.com, IBM, Ticketmaster and
Yahoo!
-- Completed sale of $86 million convertible subordinated
debentures and reduced effective interest rate on outstanding
debt that requires cash interest payments from 10% to 2.5%.
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 March 31, 2004.
Revenues were $36.8 million for the first quarter ended March 31, 2004
representing a 45% increase over the same quarter last year and an 11% increase
over fourth quarter of 2003. Recurring revenues, consisting of colocation,
interconnection and managed services, were $34.5 million, a 43% increase over
the same quarter last year and a 9% increase over fourth quarter 2003.
Non-recurring revenues were $2.3 million for the quarter ended March 31, 2004,
consisting of $1.6 million of professional services and installation fees and
$700,000 of customer settlements.
Cost of revenues were $33.8 million for the first quarter, a 10% increase
over the same quarter last year and a 4% increase over the previous quarter.
Cost of revenues, excluding non-cash depreciation, amortization, accretion and
stock-based compensation of $13.6 million, were $20.2 million for the first
quarter, a 19% 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 45%, up from 33% the same quarter last year and 43% the
previous quarter.
Selling, general and administrative expenses were $12.9 million for the
first quarter, an 18% decrease from the same quarter last year and a 3% decrease
from the previous quarter. Selling, general and administrative expenses,
excluding non-cash depreciation, amortization and stock-based compensation of
$2.0 million, were $10.9 million for the first quarter, a 5% decrease from same
quarter last year and 1% decrease from the previous quarter.
With the net proceeds from the 2.5% convertible subordinated debenture
offering in February 2004, the Company paid off the remaining amounts
outstanding on its credit facility and 13% senior notes, as well as two other
smaller debt facilities. This translates to a reduction of quarterly cash pay
interest from approximately $1.6 million to approximately $550,000. In addition,
in March 2004, holders of our 10% $10.0 million convertible secured notes issued
in connection with the Crosslink financing in June 2003, converted the $10.0
million of principal into 2.5 million shares of our common stock. As a result of
these debt repayments and debt conversions, we recorded a charge for loss on
debt extinguishment and conversion totaling $16.2 million during the quarter
ended March 31, 2004, comprised of the non-cash charges for the write-off of
debt issuance costs and discounts in connection with these various debt
instruments totaling $13.7 million and approximately $2.5 million for cash
redemption and transaction costs.
Net loss for the first quarter was $30.1 million, or a basic and diluted
net loss per share of $2.00. Excluding the loss on debt extinguishment and
conversion, the net loss for the quarter was $13.9 million, or a basic and
diluted net loss per share of $0.92.
The Company's cash net income, defined as net income (loss) less
depreciation, amortization, accretion, stock-based compensation expense,
non-cash interest expense and non-cash loss on debt extinguishment and
conversion, for the quarter was $1.7 million.
EBITDA, defined as loss from operations less depreciation, amortization,
accretion and stock-based compensation expense for the first quarter was $5.7
million, an $8.7 million increase from the same quarter last year and a $2.6
million increase over the previous quarter. This reflects a 70% flow-though rate
on incremental revenues in the quarter.
Capital expenditures in the quarter were $4.9 million, half of which was
related to the new Santa Clara center.
As of March 31, 2004, the company's cash, cash equivalents and short-term
investments were $88.6 million.
Equinix added 82 new customers in the first quarter including BellSouth,
Burrelle's Information Services, First Commercial Bank Ltd., MCI Worldcom Asia
Pte., Misys International Banking Systems, Postini, Tommy Hilfiger, XO Asia and
Viacom. The company received additional orders in the quarter from more than 50%
of its existing U.S. customers including Amazon.com, IBM, Ticketmaster and
Yahoo! The company ended the quarter with approximately 775 customers and a
utilization rate in its existing centers of 43%.
"Equinix delivered a great quarter with solid revenue gains and continued
expansion of operating margins," said Peter Van Camp, CEO of Equinix. "We
continue to see excellent opportunities for further growth evidenced by strong
bookings, our expansion in the Washington, D.C. market and our confidence in the
outlook for the year."
Recent Company Developments
-- Equinix announced today that it has signed a long-term lease to expand
its footprint with the addition of a new 95,000 square foot data
center in the Washington, D.C. metro area. The center is adjacent to
Equinix's existing Washington, D.C. metro area IBX. The addition of
the center expands the global Equinix footprint to over 1.3 million
square feet and adds 2,500 cabinets to Equinix capacity. Equinix
intends to invest approximately $5.0 million in 2004 to make
additional infrastructure enhancements and currently intends to begin
placing customers in the center beginning November 1, 2004.
-- At close of business today, Equinix filed an S-3 registration
statement with the Securities and Exchange Commission to register 2.5
million shares of common stock on behalf of Crosslink Capital and its
affiliates. The shares of common stock to be registered represent the
conversion of all holdings of convertible secured notes held by
entities affiliated with Crosslink Capital from the original $10.0
million investment, which closed in June 2003. As a result of this
conversion, these convertible secured notes will no longer accrue
interest.
-- U.S. interconnection services revenue increased by 11% over fourth
quarter 2003 and was 22% of U.S. recurring revenues for the quarter.
Interconnection services represent 20% of total recurring revenues.
Customer cross-connects grew to 7,293, a 9% increase over the prior
quarter and a 66% increase over same quarter last year. Ports on the
Equinix GigE Exchange were reported at 282, a 6% increase over the
fourth quarter 2003 and a 53% increase over the same quarter last
year.
Business Outlook
For 2004, revenues are expected to be in the range of $156.0 to $162.0
million. Total year cash gross margins are expected to be in the range of
45-50%. Cash selling, general and administrative expenses are expected to be in
the range of $42.0 to $44.0 million. EBITDA for the year is expected to be
between $30.0 and $35.0 million. Capital expenditures for 2004 are expected to
be approximately $20.0 million, of which approximately $10.0 million will be for
expansion capital expenditures related to our Santa Clara and Washington, D.C.
acquisitions. Free cash flow is expected to be in excess of $10.0 million.
For the second quarter 2004, the company expects revenue to be in the range
of $38.0 to $39.0 million. Capital expenditures in the quarter will be
approximately $5.0 million. Cash gross margins are expected to be in the range
of 45-46%. Cash selling, general and administrative expenses are expected to be
in the range of $10.0 to $11.0 million. EBITDA for the quarter is expected to be
between $6.5 and $7.5 million.
The company will discuss its results and guidance on its quarterly
conference call on Thursday, April 22, 2004, at 5:30 p.m. Eastern Time (2:30
p.m. Pacific Time). To hear the conference call, please dial 1-484-630-5144
(domestic and international) at 5:20 p.m. (ET) 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 on Thursday April 22, 2004 at 7:30 p.m. (ET) until
May 22, 2004 by dialing 1-402-998-1741.
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 14 Internet
Business Exchange(TM) (IBX(R)) 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.
Equinix and IBX are registered trademarks of Equinix, Inc. Internet
Business Exchange is a trademark of Equinix, Inc.
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 operating IBX
centers and developing, deploying and delivering Equinix services; a failure to
receive significant revenue from customers in the recently-acquired Santa Clara
and Washington, D.C. centers; competition from existing and new competitors; the
ability to generate sufficient cash flow or otherwise obtain funds to repay
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.
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) and free cash flow to evaluate its
operations. In presenting these non-GAAP financial measures, Equinix excludes
certain non-cash items that it believes are not good indicators of the company's
current or future operating performance. These non-cash 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 (there were no such loss in 2003). 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 items in order for Equinix's
lenders, investors, and industry analysts who review and report on the company,
to better evaluate the company's core operating performance and cash spending
levels relative to its industry sector and competitor base.
Equinix excludes depreciation expense as these non-cash charges primarily
relate to the initial construction costs of our IBX hubs and do not reflect our
current or future cash spending levels to support our business. Our IBX hubs are
long-lived assets, and have an economic life greater than ten years. The
construction costs of our IBX hubs 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 hubs. These estimates could vary from actual performance of the
asset, are based on historic costs incurred to build out our IBX hubs, 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 non-cash
stock-based compensation expense as it represents expense attributed to stock
options 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 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
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 months ended
March 31, 2004 and 2003, presented within this press release.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP PRESENTATION
(in thousands, except per share detail)
Three Months Ended
March 31, March 31,
2004 2003
------------ -----------
(unaudited)
Recurring revenues $34,483 $24,103
Non-recurring revenues 2,337 1,332
------------ -----------
Revenues 36,820 25,435
Cost of revenues 33,785 30,619
------------ -----------
Gross profit (loss) 3,035 (5,184)
------------ -----------
Operating expenses:
Sales and marketing 4,642 4,703
General and administrative 8,242 10,924
------------ -----------
Total operating expenses 12,884 15,627
------------ -----------
Loss from operations (9,849) (20,811)
------------ -----------
Interest and other income (expense):
Interest income 242 70
Interest expense and other (4,130) (4,812)
Loss on debt extinguishment and conversion (16,211) -
------------ -----------
Total interest and other, net (20,099) (4,742)
------------ -----------
Net loss before income taxes (29,948) (25,553)
Income taxes (194) -
------------ -----------
Net loss $(30,142) $(25,553)
============ ===========
Basic and diluted net loss per share $(2.00) $(3.00)
============ ===========
Shares used in computing basic
and diluted net loss per share 15,104 8,512
============ ===========
Pro forma basic and diluted
net loss per share (1) $(0.92) $(3.00)
============ ===========
Shares used in computing pro forma
basic and diluted net loss per share 15,104 8,512
============ ===========
- ---------------------------------------------
(1) Pro forma basic and diluted net loss per share excludes the
$16,211,000 loss on debt extinguishment and conversion in the
quarter ended March 31, 2004.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP
PRESENTATION
(in thousands)
Three Months Ended
March 31, March 31,
2004 2003
-------------- -----------
(unaudited)
Recurring revenues $34,483 $24,103
Non-recurring revenues 2,337 1,332
-------------- -----------
Revenues 36,820 25,435
Cash cost of revenues (1) 20,220 17,030
-------------- -----------
Cash gross profit (2) 16,600 8,405
-------------- -----------
Cash operating expenses (3):
Cash sales and marketing expenses(4) 4,138 4,065
Cash general and administrative
expenses(5) 6,805 7,414
-------------- -----------
Total cash operating expenses 10,943 11,479
-------------- -----------
EBITDA (6) 5,657 (3,074)
-------------- -----------
Cash interest and other income
(expense)(7):
Interest income 242 70
Cash interest expense and other (8) (1,515) (2,726)
Cash loss on debt extinguishment and
conversion (9) (2,505) -
Income taxes (194) -
-------------- -----------
Total cash interest and other, net (3,972) (2,656)
-------------- -----------
Cash net income (loss) (10) $1,685 $(5,730)
============== ===========
Cash gross margins (11) 45% 33%
============== ===========
- --------------------------------------------
(1) We define cash cost of revenues as cost of revenues less
depreciation, amortization, accretion and stock-based compensation
as presented below:
Cost of revenues $33,785 $30,619
Depreciation, amortization and accretion
expense (13,545) (13,549)
Stock-based compensation expense (20) (40)
-------------- -----------
Cash cost of revenues $20,220 $17,030
============== ===========
(2) We define cash gross profit as revenues less cash cost of revenues
(as defined above).
(3) We define cash operating expenses as operating expenses less
depreciation, amortization, accretion and stock-based
compensation. We also refer to cash operating expenses as cash
selling, general and administrative expenses or "cash SG&A".
(4) 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 $4,642 $4,703
Depreciation and amortization expense (474) (525)
Stock-based compensation expense (30) (113)
-------------- -----------
Cash sales and marketing expenses $4,138 $4,065
============== ===========
(5) 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 $8,242 $10,924
Depreciation and amortization expense (810) (2,705)
Stock-based compensation expense (627) (805)
-------------- -----------
Cash general and administrative
expenses $6,805 $7,414
============== ===========
(6) We define EBITDA as loss from operations less depreciation,
amortization, accretion and stock-based compensation expense as
presented below:
Loss from operations $(9,849) $(20,811)
Depreciation, amortization and accretion
expense 14,829 16,779
Stock-based compensation expense 677 958
-------------- -----------
EBITDA $5,657 $(3,074)
============== ===========
(7) 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.
(8) 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 $(4,130) $(4,812)
Amortization of debt discounts and debt
issuance costs 1,309 1,036
Non-cash interest on convertible secured
notes 1,306 1,050
-------------- -----------
Non-cash interest expense 2,615 2,086
-------------- -----------
Cash interest expense and other $(1,515) $(2,726)
============== ===========
(9) 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) $-
============== ===========
(10) We define cash net income (loss) as net income (loss) less
depreciation, amortization, accretion, stock-based compensation
expense, non-cash interest expense and non-cash loss on debt
extinguishment and conversion as presented below:
Net income (loss) $(30,142) $(25,553)
Depreciation, amortization and accretion
expense 14,829 16,779
Stock-based compensation expense 677 958
Non-cash interest expense (defined above) 2,615 2,086
Non-cash loss on debt extinguishment and
conversion (defined above) 13,706 -
-------------- -----------
Cash net income (loss) $1,685 $(5,730)
============== ===========
(11) We define cash gross margins as cash gross profit divided by
revenues.
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Assets March 31, December 31,
2004 2003
------------ ------------
(unaudited)
Cash, cash equivalents and short-term
investments $88,638 $72,971
Accounts receivable, net 10,079 10,178
Property and equipment, net 334,295 343,554
Goodwill and other intangible assets, net 23,190 23,509
Debt issuance costs, net 3,625 5,954
Other assets 7,346 8,366
------------ ------------
Total assets $467,173 $464,532
============ ============
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $16,158 $16,426
Accrued property and equipment 2,258 2,454
Accrued interest payable 2,254 1,114
Debt facilities and capital lease
obligations - 3,412
Credit facility - 34,281
Senior notes - 29,220
Convertible secured notes 30,218 31,683
Convertible subordinated debentures 86,250 -
Deferred rent 21,921 20,283
Other liabilities 5,191 5,582
------------ ------------
Total liabilities 164,250 144,455
------------ ------------
Preferred stock 2 2
Common stock 18 15
Additional paid-in capital 768,058 755,698
Deferred stock-based compensation (661) (1,032)
Accumulated other comprehensive income 1,452 1,198
Accumulated deficit (465,946) (435,804)
------------ ------------
Total stockholders' equity 302,923 320,077
------------ ------------
Total liabilities and stockholders'
equity $467,173 $464,532
============ ============
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(in thousands)
Three Months Ended
March 31, March 31,
2004 2003
------------- ------------
(unaudited)
Cash flows from operating activities:
Net loss $(30,142) $(25,553)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation, amortization and accretion 14,829 16,779
Amortization of stock-based compensation 677 958
Non-cash interest expense 2,615 2,086
Loss on debt extinguishment and conversion 16,211 -
Other reconciling items 1,711 987
Changes in operating assets and
liabilities:
Accounts receivable 29 (1,677)
Accounts payable and accrued expenses 190 (2,642)
Accrued restructuring charges (458) (7,919)
Accrued merger and financing costs - (3,768)
Accrued interest payable (36) (990)
Other assets and liabilities 855 2,181
------------- ------------
Net cash provided by (used in)
operating activities 6,481 (19,558)
------------- ------------
Cash flows from investing activities:
Purchases of property and equipment (4,908) (346)
Accrued property and equipment (196) -
Other investing activities - 1,989
------------- ------------
Net cash provided by (used in)
investing activities (5,104) 1,643
------------- ------------
Cash flows from financing activities:
Proceeds from warrants, stock options and
employee stock purchase plan 2,060 159
Proceeds from convertible subordinated
debentures 86,250 -
Repayment of debt facilities and capital
lease obligations (3,527) (2,518)
Repayment of credit facility (34,281) -
Repayment of senior notes (30,475) -
Other financing activities (5,727) -
------------- ------------
Net cash provided by (used in)
financing activities 14,300 (2,359)
------------- ------------
Effect of foreign currency exchange rates on
cash and cash equivalents (10) 36
------------- ------------
Net increase (decrease) in cash, cash
equivalents and short-term investments 15,667 (20,238)
Cash, cash equivalents and short-term
investments at beginning of period 72,971 41,216
------------- ------------
Cash, cash equivalents and short-term
investments at end of period $88,638 $20,978
============= ============
Free cash flow (2) $1,377 $(17,915)
============= ============
- --------------------------------------------
(1) The cash flow statements presented herein combines our short-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
purchase, sale and maturities of our short-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 (used in)
operating activities plus net cash provided by (used in) investing
activities (excluding the purchase, sale and maturities of
short-term investments) as presented below:
Net cash provided by (used in) operating
activities as presented above $6,481 $(19,558)
Net cash provided by (used in) investing
activities as presented above (5,104) 1,643
------------- ------------
Free cash flow positive (negative $1,377 $(17,915)
============= ============
CONTACT: Equinix
Jason Starr, 650-513-7402 (Investor Relations)
jstarr@equinix.com
or
K/F Communications, Inc. for Equinix
David Fonkalsrud, 415-255-6506 (Media)
dave@kfcomm.com