Equinix Reports Second Quarter 2021 Results

REDWOOD CITY, Calif., July 28, 2021 /PRNewswire/ --  

• Quarterly revenues increased 13% over the same quarter last year to $1.658 billion, or 8% on a normalized and constant currency basis, representing the company's 74^th consecutive quarter of revenue growth
• Record bookings across the company, including in the Americas region and in the enterprise vertical
• Company exceeds 400,000 interconnections, highlighting its critical role in the digital infrastructure of today's businesses
• Significant milestones in the quarter included attaining Fortune 500 status, recognition as a leader in IDC's Marketscape report and upgrades from two top credit ratings agencies

Equinix, Inc. (Nasdaq: EQIX), the world's digital infrastructure company, today reported results for the quarter ended June 30, 2021. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements. All per share results are presented on a fully diluted basis.

Second Quarter 2021 Results Summary

• Revenues
• $1.658 billion, a 4% increase over the previous quarter, including a 36% increase in non-recurring revenues from xScale^TM fees and custom installation services
• Includes an $11 million positive foreign currency benefit when compared to prior guidance foreign currency ("FX") rates
• Operating Income
• $279 million, a 6% decrease from the previous quarter and an operating margin of 17% due to increased depreciation and amortization from recently opened IBX data centers and expansions, higher utilities expense and increased repairs and maintenance spend
• Adjusted EBITDA
• $797 million, a 48% adjusted EBITDA margin
• Includes a $6 million positive foreign currency benefit when compared to prior guidance FX rates
• Includes $4 million of integration costs
• Net Income and Net Income per Share attributable to Equinix
• $68 million, a 56% decrease from the previous quarter, largely due to a $101 million debt extinguishment charge, related to the company's $1.25 billion 2027 Notes redemption completed in June
• $0.76 per share, a 56% decrease from the previous quarter
• AFFO and AFFO per Share
• $632 million, a 1% increase over the previous quarter, including a $25 million increase in recurring capital expenditures
• $7.01 per share, an increase over the previous quarter
• Includes $4 million of integration costs

2021 Annual Guidance Summary

• Revenues
• $6.619 - $6.659 billion, an increase of 10 - 11% over the previous year, or a normalized and constant currency increase of ~8%
• An increase of $50 million compared to prior guidance, including a $25 million foreign currency benefit when compared to prior guidance FX rates
• Adjusted EBITDA
• $3.108 - $3.148 billion, a 47% adjusted EBITDA margin
• An increase of $27 million compared to prior guidance, including an $11 million foreign currency benefit when compared to prior guidance FX rates
• Assumes $25 million of integration costs
• AFFO and AFFO per Share
• $2.434 - $2.474 billion, an increase of 11 - 13% over the previous year, or a normalized and constant currency increase of 10 - 12%
• An increase of $15 million compared to prior guidance, including a $6 million foreign currency benefit when compared to prior guidance FX rates
• $26.92 - $27.36 per share, an increase of 9 - 11% over the previous year on both an as-reported and on a normalized and constant currency basis
• Assumes $25 million of integration costs

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.

Equinix Quote

Charles Meyers, President and CEO, Equinix:

"We have continued to see significant momentum in our business as digital transformation outpaces previous expectations across all industries. Technology spend is accelerating, and we believe Equinix remains uniquely positioned as traditional technology markets continue to shift to as-a-service consumption models and hybrid multicloud is widely adopted as the architecture of choice. The pandemic has highlighted that digital infrastructure is not just a business enabler, but a primary source of competitive advantage for digital leaders across all industries, and we continue to see a multitude of trends driving infrastructure to become more distributed, more on demand, and more ecosystem-connected than ever before."

Business Highlights

• Equinix continued the growth of its indirect selling initiatives, with channel sales delivering a record quarter, contributing more than 35% of the bookings for the quarter. Wins were across a wide range of industry verticals and use cases with continued strength from partners such as AWS, Cisco, Dell, Google, HPE, IBM and Microsoft. Equinix also announced a new structure and leadership team for its growing channel business.
• Equinix continued to strengthen its leadership position in the cloud ecosystem through the company's hyperscale strategy, expanding its footprint to service both retail and large footprint hyperscale requirements in key markets, while leveraging its joint venture relationship with GIC, Singapore's sovereign wealth fund. On June 14th, Equinix announced agreements with GIC to add $3.9 billion to expand the xScale™ data center program. When closed and built out, these agreements will bring the xScale portfolio to greater than $6.9 billion across 32 facilities globally and more than 600 megawatts (MW) of power capacity.
• Advances in the company's sustainability agenda in Q2 resulted in meaningful progress across environmental, social and governance (ESG) initiatives:
• On June 16th, Equinix became the first in the data center industry to commit to reaching climate-neutral status by 2030, backed by science-based targets and an aggressive sustainability innovation agenda.
• On May 4th, Equinix announced the pricing of $2.6 billion principal amount of notes, including $1.0 billion of green bonds in its third green bond offering. To date, Equinix has issued $3.7 billion in green bonds to help advance the company's longstanding commitment to sustainability leadership and reducing its environmental impact, including projects aimed at green buildings, renewable energy, energy and water efficiency, waste and clean transportation.
• As part of its ongoing focus on diversity, inclusion and belonging, and its commitment to well-being, Equinix recently hosted its second annual WeConnect event, a 24-hour virtual gathering that celebrates equality, diversity and connection. The event offers employees an opportunity to listen, learn and engage in courageous conversations as Equinix builds a culture and community that can have a meaningful, sustainable impact on the future of the world.
• Q2 also marked significant milestones and recognition for Equinix:
• In June, Equinix was included in the Fortune 500 list of the largest companies in the U.S., debuting at #461.
• In May, Standard & Poor's and Fitch Ratings both upgraded all of Equinix's credit ratings to BBB, from the previous rating of BBB-. The ratings upgrades from both agencies reflect Equinix's growing portfolio of owned assets, increasing global scale supported by its unique interconnection platform, a disciplined financial policy utilizing broad access to capital, and resilience through the COVID-19 pandemic.
• In June, for the second consecutive year, IDC recognized Equinix as a leader in its MarketScape Report for Worldwide Datacenter Colocation and Interconnection Services.

COVID-19 Update

Many of Equinix's International Business Exchange™ (IBX^®) and xScale data centers have been identified as "essential businesses" or "critical infrastructure" by local governments for purposes of remaining open during the ongoing COVID-19 pandemic, and all data centers remain operational at the time of filing of this press release. Precautionary measures have been implemented during the COVID-19 pandemic to minimize the risk of operational impact and to protect the health and safety of employees, customers, partners and communities.

Looking ahead, the full impact of the COVID-19 pandemic on the company's financial condition or results of operations remains uncertain and will depend on a number of factors, including its impact on Equinix customers, partners and vendors and the impact on, and functioning of, the global financial markets. The company's past results may not be indicative of future performance, and historical trends may differ materially. Additional information pertaining to the impact of the COVID-19 pandemic on Equinix and the company's response thereto will be provided in the upcoming Form 10-Q to be filed with the Securities and Exchange Commission for the quarter ended June 30, 2021.

Business Outlook

For the third quarter of 2021, the Company expects revenues to range between $1.668 and $1.688 billion, an increase of 1 - 2% compared to the prior quarter on both an as-reported and on a normalized and constant currency basis. This guidance includes a $6 million negative foreign currency impact when compared to the average FX rates in Q2 2021. Adjusted EBITDA is expected to range between $766 and $786 million. Adjusted EBITDA includes a $4 million negative foreign currency impact when compared to the average FX rates in Q2 2021 and $7 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $50 and $60 million.

For the full year of 2021, total revenues are expected to range between $6.619 and $6.659 billion, a 10 - 11% increase over the previous year, or a normalized and constant currency increase of approximately 8%. This $50 million increase from previously issued guidance is due to $25 million of better-than-expected operating performance and a $25 million positive foreign currency benefit when compared to the prior guidance FX rates. Adjusted EBITDA is expected to range between $3.108 and $3.148 billion, an adjusted EBITDA margin of 47%. This $27 million increase from previously issued guidance is due to $11 million of better-than-expected operating performance, a $5 million reduction of integration costs and an $11 million positive foreign currency benefit when compared to the prior guidance FX rates. AFFO is expected to range between $2.434 and $2.474 billion, an increase of 11 - 13% over the previous year, or a normalized and constant currency increase of 10 - 12%. This $15 million increase over the previously issued guidance is due to $4 million of better-than-expected operating performance, a $5 million reduction of integration costs and a $6 million foreign currency benefit when compared to the prior guidance FX rates. AFFO per share is expected to range between $26.92 and $27.36, an increase of 9 - 11% over the previous year, both as-reported and on a normalized and constant currency basis. Total capital expenditures are expected to range between $2.738 and $2.988 billion. Non-recurring capital expenditures, including xScale-related costs, are expected to range between $2.550 and $2.790 billion, and recurring capital expenditures are expected to range between $188 and $198 million. xScale-related on-balance sheet capital expenditures are expected to range between $425 and $475 million, which we anticipate will be reimbursed from both the current and future xScale JVs.

The U.S. dollar exchange rates used for 2021 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.17 to the Euro, $1.33 to the Pound, S$1.35 to the U.S. dollar, ¥111 to the U.S. dollar, and R$4.99 to the U.S. dollar. The Q2 2021 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 10%, 7%, 7% and 3%, respectively.

The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses. The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, income tax expense, an income tax expense adjustment, recurring capital expenditures, other income (expense), (gains) losses on disposition of real estate property, and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q2 2021 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended June 30, 2021, along with its future outlook, in its quarterly conference call on Wednesday, July 28, 2021, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-517-308-9482 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call through Wednesday, November 3, 2021, by dialing 1-203-369-0161 and referencing the passcode 2021. In addition, the webcast will be available at www.equinix.com/investors (no password required).

Investor Presentation and Supplemental Financial Information

Equinix has made available on its website a presentation designed to accompany the discussion of Equinix's results and future outlook, along with certain supplemental financial information and other data. Interested parties may access this information through the Equinix Investor Relations website at www.equinix.com/investors.

Additional Resources

• Equinix Investor Relations Resources

About Equinix

Equinix (Nasdaq: EQIX) is the world's digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. Equinix enables today's businesses to access all the right places, partners and possibilities they need to accelerate advantage. With Equinix, they can scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value.

Non-GAAP Financial Measures

Equinix provides all information required in accordance with generally accepted accounting principles ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Equinix uses non-GAAP financial measures to evaluate its operations.

Equinix provides normalized and constant currency growth rates, which are calculated to adjust for acquisitions, dispositions, integration costs, changes in accounting principles and foreign currency.

Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents income from operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction costs and gain or loss on asset sales.

In presenting non-GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow and adjusted free cash flow, Equinix excludes certain items that it believes are not good indicators of Equinix's current or future operating performance. These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges, transaction costs and gain or loss on asset sales.  Equinix excludes these items in order for its lenders, investors and the industry analysts who review and report on Equinix to better evaluate Equinix's operating performance and cash spending levels relative to its industry sector and competitors.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of a data center, and do not reflect its current or future cash spending levels to support its business. Its data centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of a data center do not recur with respect to such data center, although Equinix may incur initial construction costs in future periods with respect to additional data centers, and future capital expenditures remain minor relative to the initial investment. This is a trend it expects to continue. In addition, depreciation is also based on the estimated useful lives of the data centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our data centers and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, Equinix also excludes amortization expense related to acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of acquisitions and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which Equinix also believes are not meaningful in evaluating Equinix's current operations. Equinix excludes stock-based compensation expense, as it can vary significantly from period to period based on share price and the timing, size and nature of equity awards. As such, Equinix and many investors and analysts exclude stock-based compensation expense to compare its operating results with those of other companies. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX data centers, which it did not intend to build out, or its decision to reverse such restructuring charges. Equinix also excludes impairment charges generally related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of assets are not recoverable. Equinix also excludes gain or loss on asset sales as it represents profit or loss that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes transaction costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The transaction costs relate to costs Equinix incurs in connection with business combinations and formation of joint ventures, including advisory, legal, accounting, valuation and other professional or consulting fees. Such charges generally are not relevant to assessing the long-term performance of Equinix. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the transactions. Management believes items such as restructuring charges, impairment charges, transaction costs and gain or loss on asset sales are non-core transactions; however, these types of costs may occur in future periods.

Equinix also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), both commonly used in the REIT industry, as supplemental performance measures. Additionally, Equinix presents AFFO per share, which is also commonly used in the REIT industry. AFFO per share offers investors and industry analysts a perspective of Equinix's underlying operating performance when compared to other REIT companies. FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income or loss, excluding gain or loss from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. AFFO represents FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, restructuring charges, impairment charges, transaction costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income or loss from discontinued operations, net of tax and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and transaction costs for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above.

Equinix includes an adjustment for revenues from installation fees, since installation fees are deferred and recognized ratably over the period of contract term, although the fees are generally paid in a lump sum upon installation. Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term. Equinix also includes an adjustment to contract costs incurred to obtain contracts, since contract costs are capitalized and amortized over the estimated period of benefit on a straight-line basis, although costs of obtaining contracts are generally incurred and paid during the period of obtaining the contracts. The adjustments for installation revenues, straight-line rent expense and contract costs are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. Equinix excludes the amortization of deferred financing costs and debt discounts and premiums as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. Equinix excludes gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX and xScale data centers or other assets that are required to support current revenues. Equinix also excludes net income or loss from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.

Equinix presents constant currency results of operations, which is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, Equinix has presented this non-GAAP financial measure to provide investors with an additional tool to evaluate its operating results without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Equinix's business performance. To present this information, Equinix's current and comparative prior period revenues and certain operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at a consistent exchange rate for purposes of each result being compared.

Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Equinix presents such non-GAAP financial measures to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what management believes to be its core, ongoing business operations.  Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.

Investors should note that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income or loss from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, risks to our business and operating results related to the ongoing COVID-19 pandemic; the challenges of acquiring, operating and constructing IBX and xScale data centers and developing, deploying and delivering Equinix products and solutions; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; risks related to our taxation as a REIT and other risks described from time to time in Equinix filings with the Securities and Exchange Commission. In particular, see recent and upcoming Equinix quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.