10-QPeriod: Q2 FY2011

EQUINIX INC Quarterly Report for Q2 Ended Jun 30, 2011

Filed July 29, 2011For Securities:EQIX

Summary

Equinix Inc. (EQIX) reported a mixed financial performance for the quarter ending June 30, 2011. While revenues saw a significant increase of 33% year-over-year to $394.9 million, driven by strong growth in all geographic segments, particularly the Americas and EMEA, the company's net income attributable to Equinix saw a substantial rise to $30.7 million, a significant turnaround from a net loss of $2.3 million in the same period last year. This improvement was largely due to robust operational performance and a substantial increase in income before income taxes, which rose to $38.8 million from a mere $0.2 million. The company also completed the acquisition of ALOG Data Centers do Brasil S.A. during the period, expanding its presence in South America. However, investors should note the considerable increase in total liabilities, which grew to $2.8 billion from $2.6 billion, driven by a notable rise in current liabilities including the current portion of convertible debt. While the company reported a healthy increase in cash from operating activities, investing activities consumed significantly more cash, reflecting ongoing expansion and acquisition efforts. The company also announced a subsequent event of issuing $750 million in senior notes, indicating a continued reliance on debt financing for growth and operational needs.

Financial Highlights

50 data points
Beta

Revenue

$394.90M

45.4% Gross Margin

Net Income

$30.73M

7.8% Net Margin

EPS (Diluted)

$0.64

Total Assets

$4.97B

Cash & Equivalents

$297.87M

Free Cash Flow

-$48.53M

Financial Statements
Beta
Revenue$394.90M
Cost of Revenue$215.57M
Gross Profit$179.26M
Operating Expenses$320.03M
Operating Income$74.87M
Interest Expense$37.68M
Net Income$30.73M
EPS (Basic)$0.65
EPS (Diluted)$0.64
Shares Outstanding (Basic)46.92M
Shares Outstanding (Diluted)50.66M

Key Highlights

  • 1Total revenues increased by 33% to $394.9 million for the three months ended June 30, 2011, compared to $296.1 million for the same period in 2010.
  • 2Net income attributable to Equinix was $30.7 million for the three months ended June 30, 2011, a substantial improvement from a net loss of $2.3 million in the prior year's period.
  • 3The company acquired approximately 53% of ALOG Data Centers do Brasil S.A. on April 25, 2011, expanding its global footprint into South America.
  • 4Goodwill increased significantly to $897.5 million from $774.4 million, largely due to the ALOG acquisition.
  • 5Total assets grew to $4.97 billion from $4.45 billion, primarily driven by an increase in Property, plant and equipment, and Goodwill.
  • 6Total liabilities increased to $2.84 billion from $2.57 billion, with a notable rise in current liabilities.
  • 7Cash and cash equivalents decreased to $297.9 million from $442.8 million, while net cash used in investing activities increased substantially.

Frequently Asked Questions

The acquisition of ALOG Data Centers do Brasil S.A. was completed on April 25, 2011, resulting in Equinix acquiring an approximate 53% indirect, controlling equity interest. The acquisition contributed $11.7 million in revenue and an inconsequential amount of net income for the period it was consolidated. It also resulted in a significant increase in goodwill by $104.8 million and intangible assets by $19.3 million, reflecting the purchase price allocation.

Total liabilities increased significantly due to a rise in both current and non-current liabilities. Specifically, the current portion of convertible debt increased from $0 to $240.1 million, and loans payable also increased. In July 2011, subsequent to the reporting period, Equinix issued $750 million in 7.00% Senior Notes due 2021. The company's total debt, including senior notes and convertible debt, stood at over $1.9 billion as of June 30, 2011.

Equinix expects continued revenue growth driven by organic expansion and new customer acquisition across all regions. The company's recurring revenue model and fixed cost structure are expected to drive improving profitability. Management anticipates ongoing investments in expansion and potential acquisitions, funded through operating cash flow and debt financing, to support future growth.

As of June 30, 2011, Equinix held $297.9 million in cash and cash equivalents, down from $442.8 million at the end of 2010. Net cash provided by operating activities increased to $258.1 million for the six months ended June 30, 2011. However, net cash used in investing activities significantly increased due to capital expenditures and the ALOG acquisition. The company believes it has sufficient liquidity for current operations and announced expansion projects, supported by existing cash and recent financing activities, including the July 2011 senior notes issuance.