10-QPeriod: Q3 FY2015

EQUINIX INC Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 30, 2015For Securities:EQIX

Summary

Equinix Inc. (EQIX) reported its third-quarter and nine-month results for 2015, showcasing robust revenue growth driven by expansions across its global data center footprint. The company's strategic shift to a Real Estate Investment Trust (REIT) structure, effective January 1, 2015, is expected to significantly reduce its tax burden and improve cash flow for distributions to shareholders. Despite a challenging foreign currency environment impacting reported figures, the company saw strong performance in constant currency terms across all regions. The company also announced significant strategic moves, including a cash tender offer for Tokyo-based Bit-isle Inc. and a cash and share offer for Telecity Group plc. These acquisitions, while anticipated to incur significant transaction and integration costs, are expected to further enhance Equinix's global market position and service offerings. Management remains focused on deleveraging and capital efficiency while continuing to invest in organic growth and strategic acquisitions.

Financial Highlights

51 data points
Beta

Revenue

$686.65M

52.6% Gross Margin

Net Income

$41.13M

6.0% Net Margin

EPS (Diluted)

$0.71

Total Assets

$7.71B

Cash & Equivalents

$335.47M

Free Cash Flow

-$1.65M

Financial Statements
Beta
Revenue$686.65M
Cost of Revenue$325.47M
Gross Profit$361.18M
Operating Expenses$545.77M
Operating Income$140.88M
Interest Expense$76.27M
Net Income$41.13M
EPS (Basic)$0.72
EPS (Diluted)$0.71
Shares Outstanding (Basic)57.08M
Shares Outstanding (Diluted)57.71M

Key Highlights

  • 1Total revenues increased by 11% year-over-year to $686.6 million for the third quarter and by 11% to $1.995 billion for the first nine months.
  • 2Adjusted EBITDA saw a significant increase, up 13% to $321.5 million for the quarter and 15% to $938.5 million for the nine months, reflecting strong operational performance.
  • 3The company is actively pursuing major acquisitions, including TelecityGroup plc (offered at ~$3.6 billion) and Bit-isle Inc. (offered at ~$280 million), indicating a strategy of aggressive global expansion.
  • 4Equinix successfully converted to a REIT effective January 1, 2015, leading to a substantial decrease in its effective tax rate from 30.9% in the prior year to 12.5% for the nine months ended September 30, 2015.
  • 5Capital expenditures remain high, with $216.0 million invested in the third quarter and $636.0 million for the nine months, primarily for IBX data center expansions across all regions.
  • 6The company declared a special distribution of approximately $627.3 million, payable in November 2015, demonstrating its commitment to returning value to shareholders following its REIT conversion.
  • 7Despite revenue growth, the company reported a net loss attributable to common stock for the nine months of $118.9 million due to accumulated deficit, though net income for the period was positive at $177.0 million.

Frequently Asked Questions

The conversion to a REIT, effective January 1, 2015, allows Equinix to deduct dividends paid to shareholders from taxable income. This has led to a significant reduction in its effective tax rate, from 30.9% in the nine months ended September 30, 2014, to 12.5% for the same period in 2015. This tax efficiency is expected to improve cash flow available for distributions to shareholders.

Equinix is aggressively pursuing growth through both organic expansion and strategic acquisitions. Key initiatives include ongoing IBX data center expansions globally and significant planned acquisitions of TelecityGroup plc and Bit-isle Inc. These moves are aimed at expanding its global footprint and strengthening its market position.

Equinix has significant international operations, and the strengthening of the U.S. dollar against currencies like the Canadian dollar, Brazilian real, British pound, Euro, Australian dollar, and Japanese yen has had an unfavorable impact on its reported revenues and other financial metrics in constant currency terms. For example, Americas revenues were negatively impacted by approximately $12.2 million in the third quarter due to foreign currency movements.

Equinix is making substantial capital investments in expanding its IBX data center footprint, with capital expenditures totaling $636 million for the first nine months of 2015. The company is financing these investments and acquisitions through a combination of existing cash, operating cash flow, revolving credit facilities, and bridge loans. Management intends to secure permanent financing for its bridge loans prior to acquisition closings.