10-QPeriod: Q2 FY2014

EQUINIX INC Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 8, 2014For Securities:EQIX

Summary

Equinix Inc. reported a significant increase in revenue for the second quarter of 2014, driven by organic growth across its global data center footprint, particularly in the Americas and EMEA regions. The company saw a rise in recurring revenues, indicating a strong, stable customer base. Despite revenue growth, Equinix incurred a substantial loss on debt extinguishment due to the exchange of convertible subordinated notes, which significantly impacted net income for the period. The company also provided updates on its plan to convert to a Real Estate Investment Trust (REIT), including ongoing tax implications and estimated conversion costs, which are expected to be material. Liquidity remains strong with substantial cash and available credit facilities, though the company continues to invest heavily in data center expansions and potential acquisitions.

Financial Highlights

53 data points
Beta

Revenue

$605.16M

51.6% Gross Margin

Net Income

$11.33M

1.9% Net Margin

EPS (Diluted)

$0.22

Total Assets

$7.64B

Cash & Equivalents

$408.33M

Free Cash Flow

-$60.85M

Financial Statements
Beta
Revenue$605.16M
Cost of Revenue$292.86M
Gross Profit$312.30M
Operating Expenses$480.46M
Operating Income$124.70M
Interest Expense$66.87M
Net Income$11.33M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)51.33M
Shares Outstanding (Diluted)51.65M

Key Highlights

  • 1Total revenues increased by 14% year-over-year to $605.2 million for the three months ended June 30, 2014.
  • 2Net income attributable to Equinix was $11.3 million, a significant improvement from a net loss of $25.8 million in the prior year's quarter, though this was heavily influenced by debt extinguishment activities.
  • 3The company recognized a $51.2 million loss on debt extinguishment related to exchanges of convertible subordinated notes.
  • 4Adjusted EBITDA, a non-GAAP measure, increased by 11% to $275.3 million for the three months ended June 30, 2014, reflecting underlying operational improvements.
  • 5Total assets grew to $7.64 billion from $7.49 billion at the end of 2013.
  • 6Cash and cash equivalents increased substantially to $408.3 million from $261.9 million at the end of 2013.
  • 7Capital expenditures for the six months ended June 30, 2014, were $282.5 million, primarily for data center expansions.

Frequently Asked Questions

Equinix's revenue growth in the second quarter of 2014 was primarily driven by organic growth across its global data center operations, with significant contributions from expansions and new data centers in the Americas and EMEA regions, and an increase in orders from both existing and new customers.

Equinix recognized a significant loss on debt extinguishment amounting to $51.2 million during the three months ended June 30, 2014. This loss was primarily due to exchanges of its 3.00% and 4.75% convertible subordinated notes with noteholders, where the fair value of the consideration given exceeded the carrying amount of the debt extinguished.

Equinix is actively pursuing a conversion to a Real Estate Investment Trust (REIT) and plans to make a tax election for REIT status for the taxable year beginning January 1, 2015. The company is awaiting a private letter ruling (PLR) from the IRS and is incurring costs related to this conversion, including significant estimated tax liabilities from depreciation recapture. The company anticipates making a special distribution in Q4 2014.

The company has actively managed its debt, particularly its convertible notes. During the quarter, Equinix exchanged a substantial portion of its 3.00% and 4.75% convertible subordinated notes. This activity significantly reduced the outstanding principal amounts of these notes, contributing to the large loss on debt extinguishment but also de-leveraging the balance sheet from these specific instruments.