Exhibit 99.2
Equinix Reports Fourth Quarter and Year-End 2006 Results
-- Increased Quarterly Revenues to $79.8 Million, an 8% Increase
over the Previous Quarter; Increased Annual Revenues to $286.9
Million, a 30% Increase over 2005 Results
-- Increased Quarterly EBITDA, a Non-GAAP Financial Measure, to
$30.3 Million, a 21% Increase over the Previous Quarter;
Increased Annual EBITDA, to $102.1 Million, a 46% Increase
over 2005 Results
-- Added 81 New Customers, for a Total of 1,290, Including
Chicago Mercantile Exchange, Netflix, Network Appliance and
Timex
-- Announced Today an Agreement to Acquire its Flagship Silicon
Valley IBX Center for $65.0 Million and Announces an
Incremental Expansion in Singapore for $12.0 Million
FOSTER CITY, Calif.--(BUSINESS WIRE)--Feb. 7, 2007--Equinix, Inc.
(Nasdaq:EQIX), the leading provider of network-neutral data centers
and Internet exchange services, today reported its quarterly and
year-end results for the period ended December 31, 2006.
Revenues were $79.8 million for the fourth quarter and $286.9
million for the year-ended December 31, 2006, representing an 8%
increase over the previous quarter, and a 30% increase over 2005
revenues; however, excluding a non-recurring revenue adjustment that
the Company recorded in connection with its adoption of Staff
Accounting Bulletin No. 108 (SAB 108), pro forma revenues were $81.0
million for the fourth quarter and $288.1 million for the year-ended
December 31, 2006, representing a 10% increase over the previous
quarter, and a 30% increase over 2005 revenues. Recurring revenues,
consisting primarily of colocation, interconnection and managed
services, were $76.4 million for the quarter and $273.2 million for
the year-ended December 31, 2006, a 9% increase over the previous
quarter, and a 31% increase over 2005.
Non-recurring revenues were $3.4 million in the quarter,
consisting primarily of services and installation fees, and $13.7
million for the year ended December 31, 2006. However, excluding the
non-recurring revenue adjustment, pro forma non-recurring revenues
were $4.6 million in the quarter, an increase of 19% over the previous
quarter, and $14.9 million for the year-ended December 31, 2006.
Note: Equinix uses non-GAAP financial measures, such as pro forma
revenues, EBITDA, cash cost of revenues, cash gross margins, cash
operating expenses (also known as cash selling, general and
administrative expenses or cash SG&A), non-GAAP net income (loss),
free cash flow and adjusted free cash flow to evaluate its operations.
A reconciliation of these non-GAAP financial measures to the most
closely applicable GAAP financial measure is attached to this release
and commences at the bottom of our condensed consolidated statements
of operations - GAAP presentation.
Cost of revenues were $50.3 million for the fourth quarter,
including $853,000 of stock-based compensation, a 2% increase over the
previous quarter. Cost of revenues were $188.4 million for the
year-ended December 31, 2006, including $3.2 million of stock-based
compensation, a 19% increase over cost of revenues for 2005. Cost of
revenues, excluding depreciation, amortization, accretion and
stock-based compensation of $20.0 million and $76.3 million,
respectively, were $30.3 million for the fourth quarter and $112.1
million for the year-ended 2006. Cash gross margins, defined as gross
profit less depreciation, amortization, accretion and stock-based
compensation divided by pro forma revenues, for the quarter were 63%,
up from 60% the previous quarter. Cash gross margins were 61% for
2006, up from 57% in 2005. On a same IBX basis (defined as IBX centers
which have been available for new customer installs for at least four
full quarters), cash gross margins were 67% for the fourth quarter,
and 65% for the year-ended 2006.
Selling, general and administrative expenses were $28.1 million
for the fourth quarter, including $6.4 million of stock-based
compensation, and $104.7 million for the year-ended December 31, 2006,
including $27.5 million of stock-based compensation. During the
quarter, we recognized greater than expected variable sales and
corporate compensation costs totaling $2.8 million. Selling, general
and administrative expenses, excluding depreciation, amortization and
stock-based compensation of $7.7 million and $30.8 million,
respectively, were $20.4 million for the fourth quarter, a 7% increase
from the previous quarter and $73.9 million for 2006, a 33% increase
over 2005. This increase included $1.7 million in annual costs related
to the audit committee's independent investigation of the Company's
stock options practices.
Net income for the fourth quarter was $9.1 million, including
stock-based compensation expense of $7.2 million, the gain on the sale
of the Honolulu IBX of $9.6 million and the $1.2 million adjustment
recorded in connection with the adoption of SAB 108. This represents
basic net income per share of $0.31 on a weighted average share count
of 29.1 million and diluted net income per share of $0.30 on a
weighted average share count of 32.7 million. Net loss for the
year-ended December 31, 2006 was $6.4 million, or a basic and diluted
net loss per share of $0.22.
EBITDA, defined as income or loss from operations before
depreciation, amortization, accretion, stock-based compensation
expense, restructuring charges and, with respect to the 2006 results,
the gain on the sale of the Honolulu IBX and the adjustment recorded
in connection with the adoption of SAB 108, for the fourth quarter was
$30.3 million and $102.1 million for the year-ended December 31, 2006,
an increase of 21% over the previous quarter, and up from $70.1
million in 2005, a 46% increase.
Capital expenditures in the fourth quarter were $59.4 million, of
which $8.9 million was attributed to ongoing capital expenditures and
$50.5 million was attributed to expansion capital expenditures.
Capital expenditures for the year-ended December 31, 2006 were $162.3
million, of which $31.2 million was attributed to ongoing capital
expenditures and $131.1 million was attributed to expansion capital
expenditures. The result reflects approximately $25.0 million of
expansion capital expenditures that were shifted into 2007 as a result
of project timing, offset by an additional $10.0 million of expansion
capital expenditures attributed to accelerated customer installs in
our newly-opened IBXs and some capitalized interest associated with
our recent financing for our Washington D.C. area campus.
The Company generated cash from operating activities of $26.3
million for the fourth quarter as compared to $20.7 million in the
previous quarter. Cash generated from operating activities for the
year-ended December 31, 2006 was $75.9 million as compared to $67.6
million in 2005. Cash used in investing activities was $45.1 million
in the fourth quarter as compared to $50.0 million in the previous
quarter. Cash used in investing activities for the year was $155.0
million as compared to $120.9 million in 2005. Adjusted free cash flow
was negative $28.3 million in the fourth quarter, and negative $78.8
million for the year-ended December 31, 2006. Adjusted 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 and the purchase
and sale of real estate).
As of December 31, 2006, the Company's cash, cash equivalents and
investments were $156.5 million as compared to $188.9 million as of
December 31, 2005.
"2006 was another strong year of growth for the Company," said
Peter Van Camp, chairman and CEO, Equinix. "Our business execution,
expansion program, and momentum as we completed the year provide a
solid foundation to continue to build on our market leadership
position in 2007."
Other Company Developments & Metrics
-- Equinix announced an agreement to acquire its flagship Silicon
Valley property, located in San Jose, California, for $65.0
million.
-- In Asia, the Company will invest $12.0 million for an
incremental expansion in its Singapore IBX, which will provide
approximately 450 cabinets.
-- The Company increased the existing mortgage on its Washington,
D.C. area campus from $60.0 million to $100.0 million, and
obtained $110.0 million in financing for the previously
announced expansion of its Chicago footprint.
-- On a same IBX basis for the quarter (defined as IBX centers
which have been available for new customer installs for at
least four full quarters), pro forma revenues were $75.6
million; cost of revenues were $42.0 million; cost of
revenues, excluding depreciation, amortization, accretion and
stock-based compensation, were $24.8 million and cash gross
margins for the quarter were 67%. EBITDA on a same IBX basis
for the quarter was $31.0 million.
-- Equinix added 81 new customers in the fourth quarter and 297
customers for the year 2006, ending the year with 1,290 total
customers. Customers added in the fourth quarter include
Chicago Mercantile Exchange, Netflix, Network Appliance and
Timex, and an additional 18 new customers for the Financial
Exchange service. Over 50% of Equinix's new bookings in the
quarter came from existing customers, including Electronic
Arts, IBM and YouTube.
-- Based on a total cabinet capacity of approximately 31,000, the
number of cabinets billing as of December 31, 2006 was
approximately 17,400, up from approximately 16,200 the
previous quarter, and up from 14,100 as of December 31, 2005.
On a weighted average basis, the number of cabinets billing
was approximately 17,200 representing a utilization rate of
55%.
-- U.S. interconnection service revenues were 22% of U.S.
recurring revenues for the fourth quarter and 22% for the
year-ended December 31, 2006. Interconnection services
revenues represent approximately 20% of total worldwide
recurring revenues for the year-ended December 31, 2006.
Business Outlook
For the first quarter 2007, the Company expects revenue to be in
the range of $84.0 to $85.0 million. Cash gross margins are expected
to be approximately 61% including approximately $3.0 million of net
cash costs attributed to our expansion IBXs. Cash selling, general and
administrative expenses are expected to be approximately $20.0
million. EBITDA is expected to be between $31.0 and $32.0 million. Net
loss will approximate $2.0 million, including the impact of
approximately $9.0 million of stock-based compensation expense. Net
interest expense will be approximately $3.0 million. The weighted
average shares outstanding will be approximately 29.5 million. Capital
expenditures are expected to be in a range of $55.0 to $60.0 million,
comprised of approximately $15.0 million of ongoing capital
expenditures and $40.0 to $45.0 million of expansion capital
expenditures.
For the full year of 2007, total revenues are expected to be in
the range of $354.0 to $364.0 million. Cash gross margins are expected
to be in the range of 59% to 61%. Cash selling, general and
administrative expenses are expected to be in the range of $78.0 to
$80.0 million. EBITDA is expected to be between $134.0 and $139.0
million, including $9.0 million of net costs related to the Company's
expansion projects. Net loss will approximate $21.0 million, including
the impact of approximately $40.0 million of stock-based compensation
expense. Net interest expense will be approximately $18.0 million. The
estimated weighted average shares outstanding will be approximately
30.0 million. Capital expenditures for 2007 are expected to be in a
range of $316.0 to $336.0 million, comprised of approximately $36.0
million of ongoing capital expenditures and $280.0 to $300.0 million
of expansion capital expenditures, which includes $25.0 million of
expansion capital shifted from 2006 into 2007. In addition, the
Company will invest capital of $65.0 million for the purchase of the
Silicon Valley IBX.
The Company will discuss its results and guidance on its quarterly
conference call on Wednesday, February 7, 2007, at 5:30 p.m. ET (2:30
p.m. PT). To hear the conference call live, please dial 1-773-799-3263
(domestic and international) and reference the pass code (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, February
7, 2007 at 7:30 p.m. (ET) by dialing 1-203-369-0633. In addition, the
Webcast will be available 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 information is also available on our Web Site 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 10
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, operating and constructing IBX
centers and developing, deploying and delivering Equinix services; 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; failure to receive the proceeds from
our loan commitments as expected; 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.
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 pro
forma revenues, 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), free cash flow and adjusted
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 a non-recurring revenue adjustment with
respect to 2006 results, depreciation, amortization, accretion,
stock-based compensation, non-cash interest, restructuring charges
and, with respect to 2006 results, the gain on Honolulu IBX sale
(there was no such activity 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.
With respect to its 2006 and 2005 results, Equinix excludes
restructuring charges and the gain on Honolulu IBX sale. 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 gain on Honolulu IBX
sale represents a unique transaction for the Company and future sales
of IBX centers are not expected. The Honolulu market was not
considered a core, strategic market for the Company. Management
believes such restructuring charges and the gain on the sale of an IBX
center were unique transactions that are not expected to recur, and
consequently, does not consider these items as a normal component of
expenses or income related to current and ongoing operations. Lastly,
with respect to its 2006 results, the Company excludes a non-recurring
revenue adjustment recorded in the fourth quarter of 2006 as a result
of the Company's adoption of Staff Accounting Bulletin No. 108.
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, 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 it was calculated for the three and twelve months ended December
31, 2006 and 2005, presented within this press release.
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP PRESENTATION
(in thousands, except per share detail)
(unaudited)
Three Months Ended Twelve Months Ended
----------------------------- -------------------
December September December December December
31, 30, 31, 31, 31,
2006 2006 2005 2006 2005
--------- --------- --------- --------- ---------
Recurring revenues $76,401 $69,918 $58,380 $273,160 $208,003
Non-recurring
revenues 3,371 3,808 3,418 13,755 13,054
--------- --------- --------- --------- ---------
Revenues 79,772 73,726 61,798 286,915 221,057
Cost of revenues 50,334 49,137 41,715 188,379 158,354
--------- --------- --------- --------- ---------
Gross profit 29,438 24,589 20,083 98,536 62,703
--------- --------- --------- --------- ---------
Operating expenses:
Sales and marketing 9,439 7,502 5,759 32,619 20,552
General and
administrative 18,637 18,631 11,516 72,123 45,110
Restructuring
charges - 1,527 33,814 1,527 33,814
Gain on Honolulu IBX
sale (9,647) - - (9,647) -
--------- --------- --------- --------- ---------
Total operating
expenses 18,429 27,660 51,089 96,622 99,476
--------- --------- --------- --------- ---------
Income (loss) from
operations 11,009 (3,071) (31,006) 1,914 (36,773)
--------- --------- --------- --------- ---------
Interest and other
income (expense):
Interest income 1,562 1,724 940 6,627 3,584
Interest expense and
other (3,891) (3,551) (2,548) (14,875) (8,880)
--------- --------- --------- --------- ---------
Total interest and
other, net (2,329) (1,827) (1,608) (8,248) (5,296)
--------- --------- --------- --------- ---------
Net income (loss)
before income taxes
and cumulative
effect of a change
in accounting
principle 8,680 (4,898) (32,614) (6,334) (42,069)
Income taxes 431 (270) 10 (439) (543)
Net income (loss)
before cumulative --------- --------- --------- --------- ---------
effect of a change
in accounting
principle 9,111 (5,168) (32,604) (6,773) (42,612)
Cumulative effect of
a change in
accounting
principle - - - 376 -
--------- --------- --------- --------- ---------
Net income (loss) $9,111 $(5,168) $(32,604) $(6,397) $(42,612)
========= ========= ========= ========= =========
Net income (loss) per
share:
Basic net income
(loss) per share $0.31 $(0.18) $(1.25) $(0.22) $(1.78)
========= ========= ========= ========= =========
Diluted net income
(loss) per share $0.30 $(0.18) $(1.25) $(0.22) $(1.78)
========= ========= ========= ========= =========
Shares used in
computing basic net
income (loss) per
share 29,131 28,743 26,100 28,551 23,956
========= ========= ========= ========= =========
Net income (loss) as
reported $9,111 $(5,168) $(32,604) $(6,397) $(42,612)
Effect of assumed
conversion of
convertible
subordinated
debentures 700 - - - -
Net income (loss)
used in computing --------- --------- --------- --------- ---------
diluted net income
(loss) per share $9,811 $(5,168) $(32,604) $(6,397) $(42,612)
========= ========= ========= ========= =========
Shares used in
computing diluted
net income (loss)
per share 32,700 28,743 26,100 28,551 23,956
========= ========= ========= ========= =========
- ----------------------------------------------------------------------
Non-GAAP net income
(loss) (1) $7,870 $3,244 $3,196 $17,429 $(521)
========= ========= ========= ========= =========
(1) Non-GAAP net income (loss) excludes the non-recurring revenue
adjustment, stock-based compensation, restructuring charges and the
gain on Honolulu IBX sale as follows:
Net income (loss) $9,111 $(5,168) $(32,604) $(6,397) $(42,612)
Non-recurring
revenue adjustment 1,179 - - 1,179 -
Stock-based
compensation 7,227 6,885 1,986 30,767 8,277
Restructuring
charges - 1,527 33,814 1,527 33,814
Gain on Honolulu IBX
sale (9,647) - - (9,647) -
--------- --------- --------- --------- ---------
Non-GAAP net
income (loss) $7,870 $3,244 $3,196 $17,429 $(521)
========= ========= ========= ========= =========
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP
PRESENTATION
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
----------------------------- -------------------
December September December December December
31, 30, 31, 31, 31,
2006 2006 2005 2006 2005
--------- --------- --------- --------- ---------
Recurring revenues $76,401 $69,918 $58,380 $273,160 $208,003
Non-recurring
revenues 3,371 3,808 3,418 13,755 13,054
--------- --------- --------- --------- ---------
Revenues as
reported 79,772 73,726 61,798 286,915 221,057
Non-recurring revenue
adjustment (1) 1,179 - - 1,179 -
--------- --------- --------- --------- ---------
Pro forma
revenues (2) 80,951 73,726 61,798 288,094 221,057
Cash cost of revenues
(3) 30,287 29,738 25,192 112,142 95,557
--------- --------- --------- --------- ---------
Cash gross
profit (4) 50,664 43,988 36,606 175,952 125,500
--------- --------- --------- --------- ---------
Cash operating
expenses (5):
Cash sales and
marketing
expenses(6) 7,622 5,864 5,332 25,110 18,931
Cash general and
administrative
expenses (7) 12,770 13,197 9,446 48,770 36,430
--------- --------- --------- --------- ---------
Total cash
operating
expenses
(8) 20,392 19,061 14,778 73,880 55,361
--------- --------- --------- --------- ---------
EBITDA (9) $30,272 $24,927 $21,828 $102,072 $70,139
========= ========= ========= ========= =========
Cash gross margins
(10) 63% 60% 59% 61% 57%
========= ========= ========= ========= =========
EBITDA flow-through
rate (11) 74% 17% 106% 48% 60%
========= ========= ========= ========= =========
- ---------------------
(1) This adjustment represents the impact of the Company's adoption of
Staff Accounting Bulletin No. 108, which was issued in September
2006.
(2) The geographic split of our pro forma revenues is presented below:
U.S. pro forma
revenues $68,851 $63,654 $53,463 $247,245 $191,390
Asia-Pacific pro
forma revenues 12,100 10,072 8,335 40,849 29,667
--------- --------- --------- --------- ---------
Pro forma
revenues $80,951 $73,726 $61,798 $288,094 $221,057
========= ========= ========= ========= =========
Pro forma revenues on a services basis is presented below:
Colocation $56,537 $51,678 $43,127 $201,772 $152,606
Interconnection 15,501 13,862 11,181 53,811 40,877
Managed
infrastructure 4,152 4,066 3,760 16,197 14,208
Rental 211 312 312 1,380 312
--------- --------- --------- --------- ---------
Recurring
revenues 76,401 69,918 58,380 273,160 208,003
Pro forma non-
recurring
revenues 4,550 3,808 3,418 14,934 13,054
--------- --------- --------- --------- ---------
Pro forma
revenues $80,951 $73,726 $61,798 $288,094 $221,057
========= ========= ========= ========= =========
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 $75,618 $71,572 $56,752 $277,910 $211,267
New IBX centers 5,333 2,154 5,046 10,184 9,790
--------- --------- --------- --------- ---------
Pro forma
revenues $80,951 $73,726 $61,798 $288,094 $221,057
========= ========= ========= ========= =========
(3) We define cash cost of revenues as cost of revenues less
depreciation, amortization, accretion and stock-based
compensation as presented below:
Cost of revenues $50,334 $49,137 $41,715 $188,379 $158,354
Depreciation,
amortization and
accretion
expense (19,194) (18,735) (16,523) (72,999) (62,797)
Stock-based
compensation
expense (853) (664) - (3,238) -
--------- --------- --------- --------- ---------
Cash cost of
revenues $30,287 $29,738 $25,192 $112,142 $95,557
========= ========= ========= ========= =========
The geographic split of our cash cost of revenues is presented
below:
U.S. cash cost of
revenues $25,019 $25,154 $20,954 $93,436 $79,287
Asia-Pacific cash
cost of revenues 5,268 4,584 4,238 18,706 16,270
--------- --------- --------- --------- ---------
Cash cost of
revenues $30,287 $29,738 $25,192 $112,142 $95,557
========= ========= ========= ========= =========
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 $24,753 $26,422 $21,605 $98,500 $87,378
Same IBX centers-
depreciation,
amortization and
accretion
expense 16,420 16,445 14,277 64,830 56,687
Same IBX centers-
stock-based
compensation
expense 854 632 - 3,207 -
--------- --------- --------- --------- ---------
Same IBX
centers cost
of revenues 42,027 43,499 35,882 166,537 144,065
--------- --------- --------- --------- ---------
New IBX centers-
cash cost of
revenues 5,534 3,316 3,587 13,642 8,179
New IBX centers-
depreciation,
amortization and
accretion
expense 2,774 2,290 2,246 8,169 6,110
New IBX centers-
stock-based
compensation
expense (1) 32 - 31 -
--------- --------- --------- --------- ---------
New IBX centers
cost of
revenues 8,307 5,638 5,833 21,842 14,289
--------- --------- --------- --------- ---------
Cost of
revenues $50,334 $49,137 $41,715 $188,379 $158,354
========= ========= ========= ========= =========
(4) We define cash gross profit as revenues less cash cost of revenues
(as defined above).
(5) 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".
(6) 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 $9,439 $7,502 $5,759 $32,619 $20,552
Depreciation and
amortization
expense (15) (15) (15) (60) (60)
Stock-based
compensation
expense (1,802) (1,623) (412) (7,449) (1,561)
--------- --------- --------- --------- ---------
Cash sales and
marketing
expenses $7,622 $5,864 $5,332 $25,110 $18,931
========= ========= ========= ========= =========
(7) 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 $18,637 $18,631 $11,516 $72,123 $45,110
Depreciation and
amortization
expense (1,295) (836) (496) (3,273) (1,964)
Stock-based
compensation
expense (4,572) (4,598) (1,574) (20,080) (6,716)
--------- --------- --------- --------- ---------
Cash general
and
administrative
expenses $12,770 $13,197 $9,446 $48,770 $36,430
========= ========= ========= ========= =========
(8) Our cash operating expenses, or cash SG&A, as defined above, is
presented below:
Cash sales and
marketing
expenses $7,622 $5,864 $5,332 $25,110 $18,931
Cash general and
administrative
expenses 12,770 13,197 9,446 48,770 36,430
--------- --------- --------- --------- ---------
Cash SG&A $20,392 $19,061 $14,778 $73,880 $55,361
========= ========= ========= ========= =========
The geographic split of our cash operating expenses, or cash SG&A,
is presented below:
U.S. cash SG&A $16,899 $16,261 $12,026 $61,086 $44,758
Asia-Pacific cash
SG&A 3,493 2,800 2,752 12,794 10,603
--------- --------- --------- --------- ---------
Cash SG&A $20,392 $19,061 $14,778 $73,880 $55,361
========= ========= ========= ========= =========
(9) We define EBITDA as income (loss) from operations less the non-
recurring revenue adjustment, depreciation, amortization,
accretion, stock-based compensation expense, restructuring
charges and the gain on Honolulu IBX sale as presented below:
Income (loss)
from operations $11,009 $(3,071) $(31,006) $1,914 $(36,773)
Non-recurring
revenue
adjustment 1,179 - - 1,179 -
Depreciation,
amortization and
accretion
expense 20,504 19,586 17,034 76,332 64,821
Stock-based
compensation
expense 7,227 6,885 1,986 30,767 8,277
Restructuring
charges - 1,527 33,814 1,527 33,814
Gain on Honolulu
IBX sale (9,647) - - (9,647) -
--------- --------- --------- --------- ---------
EBITDA $30,272 $24,927 $21,828 $102,072 $70,139
========= ========= ========= ========= =========
The geographic split of our EBITDA is presented below:
U.S. income
(loss) from
operations $9,695 $(3,967) $(31,504) $76 $(35,448)
U.S. non-
recurring
revenue
adjustment 1,179 - - 1,179 -
U.S.
depreciation,
amortization and
accretion
expense 19,448 18,607 16,187 72,340 60,702
U.S. stock-based
compensation
expense 6,258 6,072 1,986 27,248 8,277
U.S.
restructuring
charges - 1,527 33,814 1,527 33,814
U.S. gain on
Honolulu IBX
sale (9,647) - - (9,647) -
--------- --------- --------- --------- ---------
U.S. EBITDA 26,933 22,239 20,483 92,723 67,345
--------- --------- --------- --------- ---------
Asia-Pacific
income (loss)
from operations 1,314 896 498 1,838 (1,325)
Asia-Pacific non-
recurring
revenue
adjustment - - - - -
Asia-Pacific
depreciation,
amortization and
accretion
expense 1,056 979 847 3,992 4,119
Asia-Pacific
stock-based
compensation
expense 969 813 - 3,519 -
Asia-Pacific
restructuring
charges - - - - -
Asia-Pacific gain
on Honolulu IBX
sale - - - - -
--------- --------- --------- --------- ---------
Asia-Pacific
EBITDA 3,339 2,688 1,345 9,349 2,794
--------- --------- --------- --------- ---------
EBITDA $30,272 $24,927 $21,828 $102,072 $70,139
========= ========= ========= ========= =========
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 $14,541 $944 $(29,882) $15,193 $(31,061)
Same IBX centers-
non-recurring
revenue
adjustment 1,179 - - 1,179 -
Same IBX centers-
depreciation,
amortization and
accretion
expense 17,730 17,296 14,788 68,163 58,711
Same IBX centers-
stock-based
compensation
expense 7,228 6,853 1,986 30,736 8,277
Same IBX centers-
restructuring
charges - 1,527 33,814 1,527 33,814
Same IBX centers-
gain on Honolulu
IBX sale (9,647) - - (9,647) -
--------- --------- --------- --------- ---------
Same IBX center
EBITDA 31,031 26,620 20,706 107,151 69,741
--------- --------- --------- --------- ---------
New IBX centers-
income (loss)
from operations (3,532) (4,015) (1,124) (13,279) (5,712)
New IBX centers-
non-recurring
revenue
adjustment - - - - -
New IBX centers-
depreciation,
amortization and
accretion
expense 2,774 2,290 2,246 8,169 6,110
New IBX centers-
stock-based
compensation
expense (1) 32 - 31 -
New IBX centers-
restructuring
charges - - - - -
New IBX centers-
gain on Honolulu
IBX sale - - - - -
--------- --------- --------- --------- ---------
New IBX center
EBITDA (759) (1,693) 1,122 (5,079) 398
--------- --------- --------- --------- ---------
EBITDA $30,272 $24,927 $21,828 $102,072 $70,139
========= ========= ========= ========= =========
(10) We define cash gross margins as cash gross profit divided by pro
forma revenues.
Our cash gross margins by geographic region is presented below:
U.S. cash gross
margins 64% 60% 61% 62% 59%
========= ========= ========= ========= =========
Asia-Pacific cash
gross margins 56% 54% 49% 54% 45%
========= ========= ========= ========= =========
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 67% 63% 62% 65% 59%
========= ========= ========= ========= =========
(11) We define EBITDA flow-through rate as incremental EBITDA growth
divided by incremental pro forma revenue growth as follows:
EBITDA - current
period $30,272 $24,927 $21,828 $102,072 $70,139
Less EBITDA -
prior period (24,927) (24,038) (17,919) (70,139) (35,614)
--------- --------- --------- --------- ---------
EBITDA growth $5,345 $889 $3,909 $31,933 $34,525
========= ========= ========= ========= =========
Pro forma
revenues -
current period $80,951 $73,726 $61,798 $288,094 $221,057
Less pro forma
revenues -
prior period (73,726) (68,548) (58,096) (221,057) (163,671)
--------- --------- --------- --------- ---------
Pro forma
revenue growth $7,225 $5,178 $3,702 $67,037 $57,386
========= ========= ========= ========= =========
EBITDA flow-
through rate 74% 17% 106% 48% 60%
========= ========= ========= ========= =========
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Assets December 31, December 31,
2006 2005
------------ ------------
Cash, cash equivalents and investments $156,481 $188,855
Accounts receivable, net 26,864 17,237
Property and equipment, net 546,395 438,790
Goodwill and other intangible assets, net 17,441 21,829
Debt issuance costs, net 3,006 3,075
Prepaid expenses 7,160 5,098
Deposits 3,932 3,548
Deferred tax assets 6,910 -
Other assets 3,643 2,565
------------ ------------
Total assets $771,832 $680,997
============ ============
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $27,269 $22,557
Accrued property and equipment 23,337 15,783
Accrued restructuring charges 41,572 49,831
Borrowings under credit line - 30,000
Capital lease and other financing
obligations 94,699 96,205
Mortgage payable 98,896 60,000
Convertible subordinated debentures 86,250 86,250
Deferred installation revenue 11,694 7,658
Deferred recurring revenue 6,732 -
Customer deposits 910 1,188
Deferred rent 20,924 18,792
Asset retirement obligations 3,985 3,649
Other liabilities 536 411
------------ ------------
Total liabilities 416,804 392,324
------------ ------------
Common stock 29 27
Additional paid-in capital 904,573 839,497
Deferred stock-based compensation - (4,930)
Accumulated other comprehensive income 3,870 1,126
Accumulated deficit (553,444) (547,047)
------------ ------------
Total stockholders' equity 355,028 288,673
------------ ------------
Total liabilities and
stockholders' equity $771,832 $680,997
============ ============
- --------------------------------------------------------- ------------
Ending headcount by geographic region is as
follows:
U.S. headcount 442 372
Asia-pacific headcount 174 165
------------ ------------
Total headcount 616 537
============ ============
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
----------------------------- -------------------
December September December December December
31, 30, 31, 31, 31,
2006 2006 2005 2006 2005
--------- --------- --------- --------- ---------
Cash flows from
operating
activities:
Net income
(loss) $9,111 $(5,168) $(32,604) $(6,397) $(42,612)
Adjustments to
reconcile net
income (loss)
to net cash
provided by
operating
activities:
Depreciation,
amortization
and accretion 20,504 19,586 17,034 76,332 64,821
Stock-based
compensation 7,227 6,885 1,986 30,767 8,277
Non-cash
interest
expense 237 227 224 880 1,675
Gain on
Honolulu IBX
sale (9,647) - - (9,647) -
Restructuring
charges - 1,527 33,814 1,527 33,814
Other
reconciling
items 40 437 26 (314) (427)
Changes in
operating
assets and
liabilities:
Accounts
receivable (2,758) (646) (1,031) (9,666) (4,854)
Accounts
payable and
accrued
expenses 4,286 (1,134) 153 4,756 3,755
Accrued
restructuring
charges (3,591) (3,088) (1,618) (12,804) (3,066)
Other assets
and
liabilities 938 2,029 575 466 6,212
--------- --------- --------- --------- ---------
Net cash
provided
by
operating
activities 26,347 20,655 18,559 75,900 67,595
--------- --------- --------- --------- ---------
Cash flows from
investing
activities:
Purchase of
Ashburn campus
property - - (53,759) - (53,759)
Purchase of Los
Angeles IBX
property - - (21) - (34,748)
Purchase of
Chicago IBX
property - - - (9,766) -
Purchases of
other property
and equipment (59,387) (46,620) (22,920) (162,291) (45,412)
Accrued property
and equipment 4,740 (3,341) 10,626 7,554 12,871
Proceeds from
sale of
Honolulu IBX 9,530 - - 9,530 -
Other investing
activities - 2 125 8 125
--------- --------- --------- --------- ---------
Net cash
used in
investing
activities (45,117) (49,959) (65,949) (154,965) (120,923)
--------- --------- --------- --------- ---------
Cash flows from
financing
activities:
Proceeds from
warrants, stock
options and
employee stock
purchase plans 10,080 8,180 1,772 38,836 12,989
Proceeds from
borrowings
under credit
line - 40,000 30,000 40,000 30,000
Proceeds from
Los Angeles IBX
financing - - 38,142 - 38,142
Proceeds from
mortgage
payable 40,000 - 60,000 40,000 60,000
Repayment of
borrowings
under credit
line (40,000) - - (70,000) -
Repayment of
capital lease
and other
financing
obligations (376) (391) (1,310) (1,506) (5,523)
Repayment of
mortgage
payable (269) (319) - (1,104) -
Other financing
activities (680) (9) (655) (119) (997)
--------- --------- --------- --------- ---------
Net cash
provided
by
financing
activities 8,755 47,461 127,949 46,107 134,611
--------- --------- --------- --------- ---------
Effect of foreign
currency exchange
rates on cash and
cash equivalents 150 250 6 584 (520)
--------- --------- --------- --------- ---------
Net increase
(decrease) in cash,
cash equivalents
and investments (9,865) 18,407 80,565 (32,374) 80,763
Cash, cash
equivalents and
investments at
beginning of period 166,346 147,939 108,290 188,855 108,092
--------- --------- --------- --------- ---------
Cash, cash
equivalents and
investments at end
of period $156,481 $166,346 $188,855 $156,481 $188,855
========= ========= ========= ========= =========
Free cash flow (2) $(18,770) $(29,304) $(47,390) $(79,065) $(53,328)
========= ========= ========= ========= =========
Adjusted free cash
flow (3) $(28,300) $(29,304) $6,390 $(78,829) $35,179
========= ========= ========= ========= =========
- --------------------
(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 $26,347 $20,655 $18,559 $75,900 $67,595
Net cash used in
investing
activities as
presented above (45,117) (49,959) (65,949) (154,965) (120,923)
--------- --------- --------- --------- ---------
Free cash flow $(18,770) $(29,304) $(47,390) $(79,065) $(53,328)
========= ========= ========= ========= =========
(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) $(18,770) $(29,304) $(47,390) $(79,065) $(53,328)
Less purchase of
Ashburn campus
property - - 53,759 - 53,759
Less purchase of
Los Angeles IBX
property - - 21 - 34,748
Less purchase of
Chicago IBX
property - - - 9,766 -
Less proceeds
from sale of
Honolulu IBX (9,530) - - (9,530) -
--------- --------- --------- --------- ---------
Adjusted free
cash flow $(28,300) $(29,304) $6,390 $(78,829) $35,179
========= ========= ========= ========= =========
CONTACT: Equinix, Inc.
Jason Starr, 650-513-7402
(Equinix Investor Relations Contact)
jstarr@equinix.com
or
K/F Communications, Inc.
David Fonkalsrud, 415-255-6506
(Equinix Media Contact)
dave@kfcomm.com