01—Abstract
Summary
Summary of the 10-K filed February 17, 2023. Cited figures are marked; the original filing is the authoritative source.
Equinix (EQIX) closed fiscal 2022 with record scale and profitability.
Revenue rose 9% to $7.26 billiona (12% constant currency), driven by recurring revenue of $6.87 billion (95% of total), while income from operations grew 8% to $1.20 billion and net income attributable to Equinix reached $704 million, or $7.67 diluted EPS, versus $5.53 in 2021. Adjusted EBITDA grew 7% to $3.37 billion and AFFO rose about 11% to $2.71 billion. The company expanded its footprint to 248 data centers across 71 markets, opening or acquiring 13 IBX sites, adding three xScale sites, and entering new markets including Africa through the MainOne acquisition, plus Chile, Peru and India deals.
The key investor watch items are margin pressure and leverage. Asia-Pacific adjusted EBITDA fell 6% (2% in constant currency) on sharply higher power costs in Singapore, and management flagged continued power price volatility. Total debt was about $15.2 billionb against $11.5 billion of stockholders' equity and $1.9 billion of cash, and interest expense rose to $356 million.
Capital expenditures remained heavy at $2.28 billionc, and the company is funding growth through both debt and at-the-market equity issuance, with $1.4 billion of capacity remaining under the 2022 ATM program. Dividends were $12.40 per share for the year, with a $3.41 quarterly dividend declared for 2023.
The filing also highlights the ongoing macro backdrop, including inflation, higher construction costs, permitting delays, the Russia-Ukraine conflict, and foreign currency exposure, since about 61%d of revenue came from outside the U.S. The auditor, PwC, issued an unqualified opinion on the financial statements and on internal control, and identified REIT asset tests as a critical audit matter. Part III information is incorporated by reference from the 2023 proxy statement.
02—Key points
Key Highlights
- Revenue grew 9% to $7.26 billion (12% constant currency), with recurring revenue representing 95% of the total and a 10% year-over-year increase in recurring revenue.
- Adjusted EBITDA rose 7% to $3.37 billion, with Americas up 15% and EMEA up 7%, while Asia-Pacific declined 6% due to higher Singapore power costs.
- Diluted EPS increased to $7.67 from $5.53, and net income attributable to Equinix rose to $704 million from $500 million.
- AFFO increased to $2.71 billion from $2.45 billion, and FFO attributable to common shareholders reached $1.83 billion.
- The portfolio expanded to 248 data centers in 71 markets, including 13 new IBX sites, three new xScale sites, and new market entries in Africa (MainOne, $278 million), Chile and Peru (Entel, about $719 million combined).
- Total debt of about $15.2 billion and operating lease liabilities of $1.4 billion create leverage and interest-rate exposure, with interest expense up to $356 million; $1.9 billion of cash and $3.9 billion of revolver availability provide liquidity.
- Capital expenditures of $2.28 billion, about $2.17 billion of construction commitments in progress, and $1.6 billion of unaccrued capex commitments underscore the continued heavy investment cycle.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Equinix kept $0.10.
- Revenue$7.26B100.0%
- Cost of revenue−$3.75B51.6%
- Gross profit$3.51B48.4%
- Operating costs−$2.31B31.8%
- Operating income$1.20B16.5%
- Interest, other & tax−$495.0M6.8%
- Net income$705.0M9.7%
Where FY2022 revenue went
$7.26B- Cost of revenue: $3.75B, 52% of revenue
- Operating costs: $2.31B, 32% of revenue
- Net income: $705.0M, 9.7% of revenue
- Interest, other & tax: $495.0M, 6.8% of revenue
Kept 9.7% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 17, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $7.26B$6.64B | +9.5% |
| Cost of Revenue | $3.75B$3.47B | +8.0% |
| Gross Profit | $3.51B$3.16B | +11.0% |
| Operating Expenses | $6.06B$5.53B | +9.7% |
| Operating Income | $1.20B$1.11B | +8.3% |
| Interest Expense | $356.34M$336.08M | +6.0% |
| Net Income | $705.00M$499.73M | +41.1% |
| EPS (Basic) | $7.69$5.57 | +38.1% |
| EPS (Diluted) | $7.67$5.53 | +38.7% |
| Shares Outstanding (Basic) | 91.57M89.77M | +2.0% |
| Shares Outstanding (Diluted) | 91.83M90.41M | +1.6% |
05—Questions
Frequently Asked Questions
How did Equinix perform financially in 2022?
Equinix grew revenue 9% to $7.26 billion, with income from operations up 8% to $1.20 billion and net income attributable to Equinix up about 41% to $704 million. Adjusted EBITDA rose 7% to $3.37 billion and AFFO rose to $2.71 billion, reflecting the recurring, largely fixed-cost colocation model.
What are the main risks to margins?
Power costs are the biggest near-term risk. Asia-Pacific adjusted EBITDA fell 6% because of sharply higher power prices in Singapore, and management expects power costs to stay volatile. Inflation in construction, equipment and labor, along with energy supply constraints in Europe linked to the Russia-Ukraine conflict, could also pressure margins.
How is Equinix funding its expansion, and what are the balance sheet implications?
Equinix funds expansion with operating cash flow of $2.96 billion, debt, and equity. Total debt is about $15.2 billion against $11.5 billion of equity, and interest expense rose to $356 million. The company also raised $796 million through equity in 2022 and has $1.4 billion remaining under its 2022 ATM program, which could dilute existing shareholders.
Is the dividend sustainable, and how does the REIT structure affect it?
Equinix paid $12.40 per share in 2022 and declared $3.41 per share for the first quarter of 2023, reflecting continued dividend growth. As a REIT it must distribute at least 90% of REIT taxable income, which limits retained cash for growth and makes the company dependent on external capital for expansion. Dividend coverage by AFFO, at $2.71 billion versus about $1.15 billion paid in cash, appears comfortable.
What are the notable post-year-end events and key growth catalysts?
In February 2023 Equinix declared the $3.41 quarterly dividend and began settling about 77 billion yen of new senior notes, starting with 10 billion yen (about $75 million) on February 16. Growth catalysts include a $1.6 billion pipeline of IBX construction, a planned Johannesburg data center expected to open in 2024, and xScale hyperscale joint ventures with GIC and PGIM.
06—Continue