10-QPeriod: Q2 FY2009

EQUINIX INC Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 29, 2009For Securities:EQIX

Summary

Equinix Inc. (EQIX) reported strong revenue growth of 24% for the three months ended June 30, 2009, compared to the same period last year, reaching $213.2 million. This growth was driven by increased recurring revenues across all geographic segments (U.S., Europe, Asia-Pacific) and a 16% increase in customer count year-over-year. The company also demonstrated improved profitability, with net income rising significantly to $17.4 million from $0.7 million in the prior year's quarter, translating to a substantial increase in basic EPS from $0.02 to $0.46. Financially, Equinix strengthened its liquidity position, ending the quarter with $405.2 million in cash and cash equivalents, a significant increase from $220.2 million at the end of 2008. This was partly due to a successful $373.8 million convertible notes offering in June 2009. While the company has a substantial debt load, its operational improvements and robust cash flow provide a solid foundation. Investors should note the ongoing expansion efforts, which require significant capital investment but are crucial for future revenue growth.

Financial Highlights

27 data points
Beta

Revenue

$213.17M

44.4% Gross Margin

Net Income

$17.44M

8.2% Net Margin

EPS (Diluted)

$0.44

Cash & Equivalents

$405.22M

Free Cash Flow

-$14.16M

Financial Statements
Beta
Revenue$213.17M
Cost of Revenue$118.53M
Gross Profit$94.63M
Operating Expenses$172.14M
Operating Income$41.03M
Interest Expense$15.91M
Net Income$17.44M
EPS (Basic)$0.46
EPS (Diluted)$0.44
Shares Outstanding (Basic)38.15M
Shares Outstanding (Diluted)39.32M

Key Highlights

  • 1Revenue increased by 24% year-over-year to $213.2 million for the quarter.
  • 2Net income saw a significant surge to $17.4 million from $0.7 million in the prior year's quarter.
  • 3Basic Earnings Per Share (EPS) improved dramatically from $0.02 to $0.46.
  • 4Cash and cash equivalents more than doubled to $405.2 million as of June 30, 2009.
  • 5The company successfully raised $373.8 million in convertible notes in June 2009.
  • 6Customer count grew by 16% year-over-year, indicating strong market demand.
  • 7Utilization rates improved, with the company strategically managing capacity and expansions.

Frequently Asked Questions

Equinix's revenue growth is primarily driven by an increase in recurring revenues, stemming from growth in both existing and new customers, alongside selective price increases. The company's strategy of expanding its IBX centers and fostering a network effect among its customers continues to fuel this growth.

Equinix has a substantial debt load, including approximately $1 billion in convertible debt and $569.2 million in non-convertible debt as of June 30, 2009. The company successfully issued $373.8 million in 4.75% convertible subordinated notes in June 2009 to fund its operations and expansion. While this debt presents financial leverage, the company's improved profitability and strong cash flow are mitigating factors. Investors should monitor the company's debt service obligations and its ability to manage leverage.

Equinix continues to invest significantly in expansion, with substantial capital expenditures planned for new IBX centers and expansions of existing ones. These investments are crucial for future revenue growth and maintaining market position. While the company believes it has sufficient cash and anticipated operating cash flow for current plans, it acknowledges that future expansion opportunities may require additional debt or equity financing, with potential challenges given market conditions.

Equinix's international operations in Europe and Asia-Pacific are also experiencing robust growth, contributing significantly to overall revenue. The company is actively expanding its presence in these regions, with new IBX center expansions planned. These international efforts are subject to risks associated with currency fluctuations, local regulations, and operational complexities, but are a key component of the company's global strategy.