10-KPeriod: FY2013

EQUINIX INC Annual Report, Year Ended Dec 31, 2013

Filed February 28, 2014For Securities:EQIX

Summary

Equinix Inc.'s 2013 10-K filing details a period of significant growth and strategic planning, particularly the ongoing pursuit of conversion to a Real Estate Investment Trust (REIT) slated for January 1, 2015. The company reported strong revenue growth, driven by expanding its global footprint of IBX data centers across the Americas, EMEA, and Asia-Pacific regions. Key to this growth is Equinix's network-neutral interconnection platform, which attracts a critical mass of networks, cloud providers, and enterprises, creating dynamic business ecosystems. Financially, Equinix demonstrated robust operational performance with increasing revenues and Adjusted EBITDA. The company actively managed its capital structure, including issuing new senior notes and managing existing debt. Significant investments were made in expanding existing data centers and entering new markets, reflecting confidence in future demand. The REIT conversion, if successful, is expected to provide tax efficiencies and enable regular dividend distributions to shareholders, though it involves substantial costs and regulatory hurdles, including securing IRS approval for a private letter ruling.

Financial Highlights

54 data points
Beta

Revenue

$2.15B

50.6% Gross Margin

Net Income

$94.69M

4.4% Net Margin

EPS (Diluted)

$1.89

Total Assets

$7.49B

Cash & Equivalents

$261.89M

Free Cash Flow

$604.61M

Financial Statements
Beta
Revenue$2.15B
Cost of Revenue$1.06B
Gross Profit$1.09B
Operating Expenses$1.69B
Operating Income$460.93M
Interest Expense$248.79M
Net Income$94.69M
EPS (Basic)$1.92
EPS (Diluted)$1.89
Shares Outstanding (Basic)49.44M
Shares Outstanding (Diluted)50.12M

Key Highlights

  • 1Reported strong revenue growth of 15% year-over-year for 2013, reaching $2.15 billion.
  • 2Achieved Adjusted EBITDA of $1.00 billion, a 13% increase from the prior year, demonstrating operational profitability.
  • 3Continued aggressive global expansion with new data centers and expansions in key markets like Frankfurt, Osaka, Seattle, and Northern Virginia.
  • 4Actively pursuing conversion to a Real Estate Investment Trust (REIT), targeting a January 1, 2015 effective date, which is expected to offer tax advantages and enable dividend distributions.
  • 5Managed a substantial debt load of approximately $4.2 billion, while maintaining available liquidity of $1.0 billion in cash and equivalents.
  • 6Experienced a 17% increase in customer count, reaching over 5,900 customers by year-end 2013, reflecting growing demand for interconnection services.
  • 7Maintained high operational reliability with 99.999% uptime across its global footprint in 2013.

Frequently Asked Questions

Equinix's primary strategy focused on expanding its global leadership as a premier network-neutral data center platform. Key components included improving customer performance through interconnection, streamlining global operations, deepening existing and growing new ecosystems, expanding its vertical go-to-market approach, and accelerating global reach and scale through strategic acquisitions and new data center builds.

Equinix announced plans to convert to a REIT with an intended effective date of January 1, 2015. This conversion is expected to offer tax benefits by allowing deductions for dividends paid to stockholders, reducing the entity-level tax burden. However, the conversion is complex, involving significant costs (estimated at $75-$85 million) and tax liabilities (estimated at $360-$380 million from depreciation recapture). The success is contingent on receiving favorable IRS private letter rulings and meeting various qualification requirements. If successful, it would enable regular dividend distributions to shareholders.

In 2013, Equinix managed its substantial debt of approximately $4.2 billion through activities like issuing $1.5 billion in senior notes and redeeming $750 million in 8.125% senior notes. The company maintained strong liquidity, ending the year with $1.0 billion in cash, cash equivalents, and investments, with an additional $516.8 million available under its revolving credit facility. These resources were used for operating requirements, expansion projects, and to fund other corporate activities, including the planned REIT conversion.

Equinix's revenue is primarily driven by recurring fees for colocation services (providing space, power, and cooling for customer equipment) and interconnection services (enabling direct connections between customers, networks, and cloud providers). Managed IT infrastructure services also contribute. The company's network-neutral model, which fosters diverse business ecosystems within its data centers, is a key factor in attracting and retaining customers, leading to consistent revenue growth.