01—Abstract
Summary
Summary of the 10-K filed February 21, 2020. Cited figures are marked; the original filing is the authoritative source.
Equinix (EQIX) closed 2019 with revenues of $5.56 billiona, up 10% year over year (10% in constant currency), and income from operations of $1.17 billion, up 20%.
Adjusted EBITDA rose 11% to $2.69 billionb, and AFFO grew 16% to $1.93 billion. Recurring revenues were 94% of the total, and the company reported a 99.9999% operational uptime figure. Growth was led by EMEA (up 16%) and Asia-Pacific (up 14%), while Americas grew 4%.
Net income attributable to Equinix was $507 millionc, or $5.99 diluted EPS, compared with $4.56 in 2018. The company operated 210 IBX and xScale data centers across 55 markets at year-end. The balance sheet expanded materially.
Total indebtedness was about $11.9 billiond, against $8.8 billion of stockholders' equity and $1.9 billion of cash and short-term investments. In 2019 the company issued $2.8 billion of senior notes at a weighted average rate of 2.93%, redeemed $1.9 billion of higher-coupon notes at 5.47%, and raised about $1.2 billion in a common equity offering plus roughly $448 million through its ATM program. The GIC joint venture, which sold London 10 and Paris 8 and related assets, generated a $45 million gain and gives Equinix a 20% stake in the xScale vehicle.
Equinix's expansion pipeline is substantial: about $2.2 billion of announced projects under construction, with $795 million of unaccrued capital commitments at year-end. Key investor considerations include leverage, a sizeable and growing capex program, REIT distribution requirements, and risks from acquisitions and international exposure, where about 58% of revenue is generated outside the U.S. Effective tax rate rose to 26.8% from 15.6%, and the auditor flagged REIT asset tests as a critical audit matter. Disclosed risks also include the PG&E bankruptcy's potential effect on California power supply, the Covid-19 outbreak's supply-chain impact, and the planned Packet Host bare metal acquisition.
02—Key points
Key Highlights
- Revenue grew 10% to $5.56B, with recurring revenue at 94% of the total; Americas +4%, EMEA +16%, Asia-Pacific +14%.
- Adjusted EBITDA rose 11% to $2.69B and AFFO rose 16% to $1.93B, showing strong operating leverage from the fixed-cost base.
- Diluted EPS of $5.99 vs. $4.56 in 2018; income from operations up 20% to $1.17B.
- Total indebtedness of about $11.9B against $8.8B of equity; the company refinanced at lower rates, issuing $2.8B at a 2.93% weighted average rate.
- Raised roughly $1.2B in a March 2019 equity offering and about $448M through ATM sales, with $300M still available under the ATM program.
- GIC joint venture closed in October 2019 for European xScale data centers; Equinix holds a 20% stake and recognized a $45.1M gain on the asset sale.
- Expansion pipeline of 29,500 sellable cabinets under construction (~$2.2B capex), with cabinet utilization at about 79% and power constraints a noted limit on growth.
- Acquisitions of three Mexico data centers (Jan 2020, ~$175M) and a pending agreement to acquire Packet Host add to the 2020 growth outlook.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Equinix kept $0.09.
- Revenue$5.56B100.0%
- Cost of revenue−$2.81B50.5%
- Gross profit$2.75B49.5%
- Operating costs−$1.58B28.4%
- Operating income$1.17B21.0%
- Interest, other & tax−$662.2M11.9%
- Net income$507.4M9.1%
Where FY2019 revenue went
$5.56B- Cost of revenue: $2.81B, 51% of revenue
- Operating costs: $1.58B, 28% of revenue
- Net income: $507.4M, 9.1% of revenue
- Interest, other & tax: $662.2M, 12% of revenue
Kept 9.1% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 21, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $5.56B$5.07B | +9.7% |
| Cost of Revenue | $2.81B$2.61B | +7.9% |
| Gross Profit | $2.75B$2.47B | +11.6% |
| Operating Expenses | $4.39B$4.09B | +7.3% |
| Operating Income | $1.17B$977.38M | +19.7% |
| Interest Expense | $479.68M$521.49M | −8.0% |
| Net Income | $507.45M$365.36M | +38.9% |
| EPS (Basic) | $6.03$4.58 | +31.7% |
| EPS (Diluted) | $5.99$4.56 | +31.4% |
| Shares Outstanding (Basic) | 84.14M79.78M | +5.5% |
| Shares Outstanding (Diluted) | 84.68M80.20M | +5.6% |
05—Questions
Frequently Asked Questions
How did Equinix perform financially in 2019?
Revenue rose 10% to $5.56 billion and income from operations rose 20% to $1.17 billion. Adjusted EBITDA reached $2.69 billion (up 11%) and AFFO reached $1.93 billion (up 16%). Net income attributable to Equinix was $507 million, or $5.99 diluted EPS.
How leveraged is Equinix, and how is it managing its debt?
Total indebtedness was about $11.9 billion at year-end 2019, against $8.8 billion of equity. Management refinanced expensive debt in 2019, issuing $2.8 billion of notes at a 2.93% weighted average rate and redeeming $1.9 billion of notes at 5.47%. Interest expense fell to $480 million from $522 million, though the company remains capital-intensive and depends on continued access to capital markets.
What is the GIC joint venture and why does it matter?
In October 2019 Equinix formed a limited liability partnership with GIC, Singapore's sovereign wealth fund, to develop and operate xScale hyperscale data centers in Europe. GIC holds 80% and Equinix 20%, while Equinix operates the facilities. The deal brought in about $351.8 million of net cash proceeds plus a stake valued at $41.9 million, and it positions Equinix to serve large cloud providers without fully funding those builds itself.
What are the key risks investors should monitor?
Key risks include leverage and refinancing exposure, rising build-out costs that could pressure margins if revenue lags, acquisition integration, and international exposure (about 58% of revenue). Equinix also flagged power supply risk tied to PG&E's bankruptcy, the Covid-19 outbreak's effect on suppliers and construction, and a higher 26.8% effective tax rate. Its REIT status depends on continued compliance with complex asset and distribution tests, which the auditor identified as a critical audit matter.
06—Continue