The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Business Wire

Equinix Reports Fourth Quarter and Year-End 2012 Results

<ul> <li class='bwlistitemmargb'> <b>Reported 2012 annual revenues from continuing operations of $1,895.7 million, a 21% increase over the previous year</b> </li> <li class='bwlistitemmargb'> <b>Reiterated 2013 annual guidance of revenues to be greater than $2,200.0 million, adjusted EBITDA to be greater than $1,010.0 million and total capital expenditures to be in the range of $550.0 to $650.0 million</b> </li> </ul>

Wednesday, February 13, 2013

Equinix Reports Fourth Quarter and Year-End 2012 Results16:01 EST Wednesday, February 13, 2013 REDWOOD CITY, Calif. (Business Wire) -- Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly and year-end results for the period ended December 31, 2012. The Company 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. The quarterly and year-end results for the period ended December 31, 2012 include the results of Asia Tone Limited and ancotel GmbH from July 2012, the date that both of these data center providers were acquired by the Company. Due to the Company's sale of 16 International Business Exchange data centers located throughout the United States to an investment group consisting of 365 Main, Crosslink Capital and Housatonic Partners in a transaction for net proceeds of $76.5 million, the financial results derived from these 16 data centers are excluded from Equinix's continuing operations and are reported as discontinued operations. As a result, the Company has retroactively adjusted its financial results for all applicable prior periods beginning April 30, 2010, the date the Company acquired these assets, through November 1, 2012, the date the sale was closed, to reflect them as discontinued operations as required under accounting principles generally accepted in the United States of America. The financial results from these 16 data centers are presented on the last page of the attached financial statements associated with this earnings release. Revenues from continuing operations were $506.5 million for the fourth quarter, a 4% increase over the previous quarter and a 20% increase over the same quarter last year. This result included $18.4 million in revenues from the Company's Asia Tone and ancotel acquisitions for the quarter and excluded $2.8 million of revenues from discontinued operations. Revenues from continuing operations for the year ended December 31, 2012, were $1,895.7 million, a 21% increase over 2011 revenues. This result included $34.6 million in revenues from the Company's Asia Tone and ancotel acquisitions and excluded $29.6 million of revenues from discontinued operations. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $481.7 million for the fourth quarter, a 4% increase over the previous quarter and $1,799.2 million for the year ended December 31, 2012, a 21% increase over 2011. Non-recurring revenues were $24.8 million in the quarter and $96.5 million for the year ended December 31, 2012. “2012 was a milestone year for Equinix. We delivered half a billion dollars of revenue in the fourth quarter, underscoring the scale and reach of our business,” said Steve Smith, CEO of Equinix. “With our entry into Mainland China, Jakarta and Dubai as well as our continued investment in existing markets, we now have over 7 million of gross square feet of capacity, making us the largest retail colocation provider in the world. We believe the value of our global interconnection platform and the strength of our business ecosystems puts us in a strong position to deliver exceptional value to our customers.” Cost of revenues were $250.1 million for the fourth quarter, a 1% decrease from the previous quarter, and $944.0 million for the year ended December 31, 2012, a 13% increase over 2011. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $91.1 million for the fourth quarter and $348.6 million for the year, were $159.0 million for the fourth quarter, a 1% increase over the previous quarter, and $595.4 million for the year ended December 31, 2012, a 12% increase over 2011. Gross margins for the quarter were 51%, up from 49% for the previous quarter and up from 48% for the same quarter last year. Gross margins were 50% for the year ended December 31, 2012, up from 47% for the prior year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter, were 69%, up from 68% for the previous quarter and up from 67% for the same quarter last year. Cash gross margins were 69% for the year ended December 31, 2012, up from 66% for the prior year. Selling, general and administrative expenses were $142.6 million for the fourth quarter, a 4% increase over the previous quarter and $532.3 million for the year ended December 31, 2012, a 26% increase over 2011. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $34.3 million for the fourth quarter and $127.6 million for the year, were $108.3 million for the fourth quarter, a 6% increase over the previous quarter, and $404.7 million for 2012, a 27% increase over 2011. Impairment charges were $9.9 million for the fourth quarter and the year ended December 31, 2012, which were primarily related to the write-off of certain long-lived assets in the Los Angeles and Sydney metro areas. Acquisition costs were $1.9 million for the fourth quarter and $8.8 million for the year ended December 31, 2012, which were primarily related to the Asia Tone, ancotel and Dubai IBX data center acquisitions. Interest expense was $50.5 million for the fourth quarter, a 1% increase over the last quarter, and $200.3 million for the year ended December 31, 2012. The Company recorded income tax expense of $17.3 million for the fourth quarter as compared to income tax expense of $13.5 million in the prior quarter and income tax expense of $61.8 million for the year ended December 31, 2012 as compared to income tax expense of $37.5 million in the prior year. Income from continuing operations was $102.0 million for the fourth quarter, a 6% increase over the previous quarter and $400.8 million for the year ended December 31, 2012, a 31% increase over 2011. Adjusted EBITDA, defined as income or loss from continuing operations before depreciation, amortization, accretion, stock-based compensation, restructuring charges, impairment charges and acquisition costs, for the fourth quarter was $239.3 million, an increase of 5% over the previous quarter and $895.7 million for the year ended December 31, 2012, a 24% increase over 2011. These results included adjusted EBITDA from the Company's Asia Tone and ancotel acquisitions of $7.8 million and $14.5 million, respectively, and excluded adjusted EBITDA from discontinued operations for the fourth quarter and the year ended December 31, 2012 of $1.3 million and $14.7 million, respectively. Net income attributable to Equinix for the fourth quarter was $44.9 million. This represents a basic net income per share attributable to Equinix of $0.92 and diluted net income per share attributable to Equinix of $0.88 based on a weighted average share count of 48.7 million and 52.9 million, respectively, for the fourth quarter of 2012. Net income attributable to Equinix for the year ended December 31, 2012 was $144.7 million. This represents a basic net income per share attributable to Equinix of $3.01 and diluted net income per share attributable to Equinix of $2.92 based on a weighted share count of 48.0 million and 51.8 million, respectively, for the year ended December 31, 2012. Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the fourth quarter were $210.4 million, of which $166.9 million was attributed to expansion capital expenditures and $43.5 million was attributed to ongoing capital expenditures. Capital expenditures for the year ended December 31, 2012 were $764.5 million, of which $607.4 million was attributed to expansion capital expenditures and $157.1 million was attributed to ongoing capital expenditures. In addition, the Company purchased real estate for cash in the year ended December 31, 2012 totaling $24.7 million primarily located in the Washington, D.C. metro area. The Company generated cash from operating activities of $209.1 million for the fourth quarter as compared to $102.2 million in the previous quarter. Cash generated from operating activities for the year ended December 31, 2012 was $632.0 million as compared to $587.6 million in the previous year. Cash used in investing activities was $209.3 million in the fourth quarter as compared to cash used in investing activities of $596.9 million in the previous quarter, primarily attributed to cash consideration paid for the acquisitions of Asia Tone and ancotel during the previous quarter. Cash used in investing activities for the year ended December 31, 2012 was $442.9 million as compared to cash used in investing activities of $1,499.4 million in the previous year, primarily attributed to net purchases of investments in marketable securities during the previous year. Cash provided by financing activities was $12.2 million for the fourth quarter, as compared to cash provided by financing activities of $73.7 million in the previous quarter, primarily attributed to the net proceeds from drawdowns of loans payable during the previous quarter. Cash used in financing activities was $222.7 million for the year ended December 31, 2012, primarily attributed to the settlement on the 2.50% convertible subordinated notes upon maturity during the year, as compared to cash provided by financing activities of $748.7 million in the previous year, primarily attributed to the issuance of the 7.00% senior notes during the previous year. As of December 31, 2012, the Company's cash, cash equivalents and investments were $546.5 million, as compared to $1,076.3 million as of December 31, 2011. Business Outlook For the first quarter of 2013, the Company expects revenues to be in the range of $518.0 to $522.0 million. Cash gross profit margin is expected to range between 68% and 69%. Cash selling, general and administrative expenses are expected to range between $116.0 and $120.0 million. Adjusted EBITDA is expected to be between $236.0 and $240.0 million. Capital expenditures are expected to range between $140.0 to $160.0 million, comprised of approximately $40.0 million of ongoing capital expenditures and $100.0 to $120.0 million of expansion capital expenditures. For the full year of 2013, total revenues are expected to be greater than $2,200.0 million. Total year cash gross margins are expected to range between 68% and 69%. Cash selling, general and administrative expenses are expected to range between $490.0 and $510.0 million. Adjusted EBITDA for the year is expected to be greater than $1,010.0 million including approximately $3.0 million in net costs attributed to our Dubai IBX data center acquisition. Capital expenditures for 2013 are expected to be in the range of $550.0 to $650.0 million, comprised of approximately $165.0 million of ongoing capital expenditures and $385.0 to $485.0 million for expansion capital expenditures. The U.S. dollar exchange rates used for 2013 guidance have been updated to $1.34 to the Euro, $1.59 to the Pound, S$1.23 to the U.S. dollar and $R2.03 to the U.S. dollar. Updated global revenue breakdown by currency for the Euro, Pound, Singapore dollar and Brazilian Real is 14%, 8%, 6% and 4%, respectively. Company Metrics and Q4 Results Presentation The Company will discuss its results and guidance on its quarterly conference call on Wednesday, February 13, 2013, at 5:30 p.m. ET (2:30 p.m. PT). A presentation to accompany the call will be available on the Company's website at www.equinix.com/investors. To hear the conference call live, please dial 210-234-8004 (domestic and international) and reference the passcode (EQIX). A simultaneous live Webcast of the call will also be available at www.equinix.com/investors. A replay of the call will be available beginning on Wednesday, February 13, 2013 at 7:30 p.m. (ET) through March 14, 2013 by dialing 203-369-0250 and referencing the passcode (2013). In addition, the webcast will be available on the Company's web site at www.equinix.com/investors. No password is required for the webcast. About Equinix Equinix, Inc. (Nasdaq: EQIX), connects more than 4,000 companies directly to their customers and partners inside the world's most networked data centers. Today, businesses leverage the Equinix interconnection platform in 31 strategic markets across the Americas, EMEA and Asia-Pacific. www.equinix.com. 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, 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, adjusted free cash flow, discretionary free cash flow and adjusted discretionary free cash flow to evaluate its operations. In presenting these non-GAAP financial measures, Equinix excludes certain items that it believes are not good indicators of the Company'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, acquisition costs and excess tax benefits from employee equity awards. Legislative and regulatory requirements encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. Equinix excludes these items in order for Equinix's lenders, investors, and industry analysts who review and report on the Company, to better evaluate the Company'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 our IBX centers and do not reflect our current or future cash spending levels to support our business. Our IBX centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our IBX centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX 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 excludes amortization expense related to certain intangible assets, as it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance. 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 believes are not meaningful in evaluating the Company's current operations. Equinix excludes stock-based compensation expense as it primarily represents expense attributed to equity awards that have no current or future cash obligations. As such, we, and many investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we did not intend to build out, or our decision to reverse such restructuring charges or severance charges related to the Switch and Data acquisition. Equinix excludes impairment charges related to certain long-lived assets. The impairment charges relate to expense recognized whenever events or changes in circumstances indicate that the carrying amount of long-lived assets are not recoverable. Equinix excludes acquisition costs from its non-GAAP financial measures. The acquisition costs relate to costs the Company incurs in connection with business combinations. Management believes such items as restructuring charges, impairment charges and acquisition costs are non-core transactions; however, these types of costs will or may occur in future periods. Equinix excludes excess tax benefits from employee equity awards from adjusted discretionary free cash flow as they are required to appear as an operating cash outflow with an offsetting financing cash inflow in the statement of cash flows and, as a result, do not actually reflect a true cash outflow to the Company. However, this type of cash flow activity will or may occur in future periods. Our management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our 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, however, 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 that of other companies. In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure. 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. 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 StatementsThis 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, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenue 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; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent 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.Equinix and IBX are registered trademarks of Equinix, Inc. International Business Exchange is a trademark of Equinix, Inc.EQUINIX, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(unaudited)                 Three Months EndedTwelve Months EndedDecember 31,September 30,December 31,December 31,December 31,20122012201120122011   Recurring revenues $ 481,738 $ 462,829 $ 401,765 $ 1,799,243 $ 1,492,414 Non-recurring revenues   24,782     25,901     20,351     96,501     77,370   Revenues506,520488,730422,1161,895,7441,569,784   Cost of revenues   250,121     251,487     221,271     943,995     833,851   Gross profit   256,399     237,243     200,845     951,749     735,933     Operating expenses: Sales and marketing 55,690 53,211 45,136 202,914 158,347 General and administrative 86,867 83,621 71,568 329,399 265,554 Restructuring charges - - 1,295 - 3,481 Impairment charges 9,861 - - 9,861 - Acquisition costs   1,939     4,542     568     8,822     3,297   Total operating expenses   154,357     141,374     118,567     550,996     430,679     Income from continuing operations   102,042     95,869     82,278     400,753     305,254     Interest and other income (expense): Interest income 758 1,054 754 3,466 2,280 Interest expense (50,516 ) (50,207 ) (55,151 ) (200,328 ) (181,303 ) Other income (expense) (717 ) 507 1,383 (2,208 ) 2,821 Loss on debt extinguishment   -     (5,204 )   -     (5,204 )   -   Total interest and other, net   (50,475)   (53,850)   (53,014)   (204,274)   (176,202)   Income from continuing operations before income taxes51,56742,01929,264196,479129,052   Income tax expense   (17,294 )   (13,498 )   (13,361 )   (61,783 )   (37,451 )   Net income from continuing operations34,27328,52115,903134,69691,601   Net income from discontinued operations, net of tax 6 679 190 1,234 1,009 Gain on sale of discontinued operations, net of tax   11,852     -     -     11,852     -     Net income46,13129,20016,093147,78292,610   Net (income) loss attributable to redeemable non-controlling interests (1,273 ) (362 ) 1,717 (3,116 ) 1,394           Net income attributable to Equinix$44,858   $28,838   $17,810   $144,666   $94,004     Net income per share attributable to Equinix:   Basic net income per share from continuing operations $ 0.68 $ 0.58 $ 0.36 $ 2.74 $ 1.74 Basic net income per share from discontinued operations   0.24     0.02     0.00     0.27     0.02   Basic net income per share (1) $ 0.92   $ 0.60   $ 0.36   $ 3.01   $ 1.76     Diluted net income per share from continuing operations $ 0.66 $ 0.57 $ 0.35 $ 2.67 $ 1.70 Diluted net income per share from discontinued operations   0.22     0.01     0.00     0.25     0.02   Diluted net income per share (2) $ 0.88   $ 0.58   $ 0.35   $ 2.92   $ 1.72     Shares used in computing basic net income per share   48,673     48,361     47,235     48,004     46,956     Shares used in computing diluted net income per share   52,917     52,655     48,083     51,816     47,898               (1) The net income used in the computation of basic net income per share attributable to Equinix is presented below:   Net income from continuing operations $ 34,273 $ 28,521 $ 15,903 $ 134,696 $ 91,601 Net income attributable to non-controlling interests (1,273 ) (362 ) 1,717 (3,116 ) 1,394 Adjustments attributable to redemption value of non-controlling interests   -     -     (837 )   -     (11,476 ) Net income from continuing operations attributable to Equinix, basic 33,000 28,159 16,783 131,580 81,519 Net income from discontinued operations   11,858     679     190     13,086     1,009   Net income attributable to Equinix, basic $ 44,858   $ 28,838   $ 16,973   $ 144,666   $ 82,528     (2) The net income used in the computation of diluted net income per share attributable to Equinix is presented below:   Net income from continuing operations attributable to Equinix, basic $ 33,000 $ 28,159 $ 16,783 $ 131,580 $ 81,519 Interest on convertible debt   1,707     1,696     -     6,789     -   Net income from continuing operations attributable to Equinix, diluted 34,707 29,855 16,783 138,369 81,519 Net income from discontinued operations   11,858     679     190     13,086     1,009   Net income attributable to Equinix, diluted $ 46,565   $ 30,534   $ 16,973   $ 151,455   $ 82,528     EQUINIX, INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(in thousands)(unaudited)                 Three Months EndedTwelve Months EndedDecember 31,September 30,December 31,December 31,December 31,20122012201120122011   Net income $ 46,131   $ 29,200   $ 16,093   $ 147,782   $ 92,610     Other comprehensive income (loss), net of tax: Foreign currency translation gain (loss) 9,307 41,782 (21,549 ) 36,194 (38,776 ) Unrealized gain (loss) on available for sale securities   (37 )   113     253     (23 )   (14 ) Other comprehensive income (loss), net of tax:   9,270     41,895     (21,296 )   36,171     (38,790 )   Comprehensive income (loss), net of tax   55,401     71,095     (5,203)   183,953     53,820     Net (income) loss attributable to redeemable non-controlling interests (1,273 ) (362 ) 1,717 (3,116 ) 1,394 Other comprehensive income (loss) attributable to redeemable non-controlling interests   3,330     240     (1,986 )   6,485     7,110     Comprehensive income (loss) attributable to Equinix, net of tax$57,458   $70,973   $(5,472)$187,322   $62,324     EQUINIX, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited)       AssetsDecember 31,December 31,20122011   Cash and cash equivalents $ 252,213 $ 278,823 Short-term investments 166,492 635,721 Accounts receivable, net 163,840 139,057 Other current assets   57,206     182,156   Total current assets639,7511,235,757 Long-term investments 127,819 161,801 Property, plant and equipment, net 3,918,999 3,225,912 Goodwill 1,042,564 866,495 Intangible assets, net 201,562 148,635 Other assets   202,269     146,724   Total assets$6,132,964   $5,785,324     Liabilities and Stockholders' Equity   Accounts payable and accrued expenses $ 268,853 $ 229,043 Accrued property and equipment 63,509 93,224 Current portion of capital lease and other financing obligations 15,206 11,542 Current portion of loans payable 52,160 87,440 Current portion of convertible debt - 246,315 Current portion of deferred tax liabilities 69,689 394 Other current liabilities   69,872     57,296   Total current liabilities539,289725,254 Capital lease and other financing obligations, less current portion 545,853 390,269 Loans payable, less current portion 188,802 168,795 Senior notes 1,500,000 1,500,000 Convertible debt 708,726 694,769 Other liabilities   230,843     286,424   Total liabilities   3,713,513     3,765,511     Redeemable non-controlling interests   84,178     67,601     Common stock 49 48 Additional paid-in capital 2,583,371 2,437,623 Treasury stock (36,676 ) (86,666 ) Accumulated other comprehensive loss (101,042 ) (143,698 ) Accumulated deficit   (110,429 )   (255,095 ) Total stockholders' equity   2,335,273     1,952,212     Total liabilities, redeemable non-controlling interests and stockholders' equity$6,132,964   $5,785,324                     Ending headcount by geographic region is as follows:   Americas headcount 1,821 1,763 EMEA headcount 811 570 Asia-Pacific headcount   521     376   Total headcount   3,153     2,709     EQUINIX, INC.SUMMARY OF DEBT OUTSTANDING(in thousands)(unaudited)         December 31,December 31,20122011   Capital lease and other financing obligations $ 561,059 $ 401,811   U.S. term loan 180,000 - ALOG financing 48,807 - Paris 4 IBX financing 8,071 52,104 ALOG loans payable - 10,288 Asia-Pacific financing - 193,843 Other loans payable   4,084   - Total loans payable   240,962   256,235   Senior notes   1,500,000   1,500,000   Convertible debt, net of debt discount 708,726 941,084 Plus debt discount   60,990   78,652 Total convertible debt principal   769,716   1,019,736   Total debt outstanding $ 3,071,737 $ 3,177,782   EQUINIX, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)                   Three Months EndedTwelve Months EndedDecember 31,September 30,December 31,December 31,December 31,20122012201120122011   Cash flows from operating activities: Net income $ 46,131 $ 29,200 $ 16,093 $ 147,782 $ 92,610 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion 103,457 107,623 94,683 401,946 352,653 Stock-based compensation 21,924 22,582 18,472 84,158 71,532 Debt issuance costs and debt discount 5,308 5,048 8,356 23,365 32,172 Loss on debt extinguishment - 5,204 - 5,204 - Restructuring charges - - 1,295 - 3,481 Impairment charges 9,861 - - 9,861 - Gain on sale of discontinued operations (11,852 ) - - (11,852 ) - Excess tax benefits from employee equity awards (19,457 ) (53,174 ) - (72,631 ) - Other reconciling items 584 2,205 4,526 6,630 9,874 Changes in operating assets and liabilities: Accounts receivable 20,299 (12,359 ) 3,238 (26,601 ) (23,061 ) Deferred tax assets, net 8,593 (1,656 ) 4,632 21,838 9,525 Accounts payable and accrued expenses 20,977 17,500 45,274 40,284 35,782 Other assets and liabilities   3,274     (20,021 )   (8,948 )   2,042     3,041   Net cash provided by operating activities   209,099     102,152     187,621     632,026     587,609   Cash flows from investing activities: Purchases, sales and maturities of investments, net (15,162 ) (111,574 ) 1,400 499,251 (647,035 ) Purchase of Dubai IBX data center (22,918 ) - - (22,918 ) - Purchase of Asia Tone, less cash acquired (13,540 ) (188,798 ) - (202,338 ) - Purchase of ancotel, less cash acquired - (84,236 ) - (84,236 ) - Purchase of ALOG, less cash acquired - - - - (41,954 ) Purchases of real estate (24,656 ) - (4,073 ) (24,656 ) (28,066 ) Purchases of other property, plant and equipment (210,408 ) (212,118 ) (190,160 ) (764,500 ) (685,675 ) Proceeds from sale of discontinued operations 76,458 - - 76,458 - Other investing activities   899     (133 )   (1,792 )   80,066     (96,714 ) Net cash used in investing activities   (209,327)   (596,859)   (194,625)   (442,873)   (1,499,444) Cash flows from financing activities: Purchases of treasury stock - - (86,666 ) (13,364 ) (86,666 ) Proceeds from employee equity awards 5,998 13,666 3,189 56,137 38,893 Proceeds from loans payable 4,049 249,633 4,701 262,591 95,336 Proceeds from senior notes - - - - 750,000 Repayment of capital lease and other financing obligations (3,471 ) (3,049 ) (3,022 ) (12,378 ) (10,426 ) Repayment of loans payable (13,332 ) (238,480 ) (1,556 ) (329,111 ) (22,829 ) Repayment of convertible debt - - - (250,007 ) - Excess tax benefits from employee equity awards 19,457 53,174 - 72,631 - Other financing activities   (453 )   (1,247 )   (29 )   (9,220 )   (15,580 ) Net cash provided by (used in) financing activities   12,248     73,697     (83,383)   (222,721)   748,728   Effect of foreign currency exchange rates on cash and cash equivalents   506     6,601     (1,313 )   6,958     (911 ) Net increase (decrease) in cash and cash equivalents 12,526 (414,409 ) (91,700 ) (26,610 ) (164,018 ) Cash and cash equivalents at beginning of period   239,687     654,096     370,523     278,823     442,841   Cash and cash equivalents at end of period$252,213   $239,687   $278,823   $252,213   $278,823     Supplemental cash flow information: Cash paid for taxes $ 10,868   $ 12,813   $ 1,985   $ 30,446   $ 9,157   Cash paid for interest $ 27,404   $ 65,616   $ 28,846   $ 185,321   $ 129,129     Free cash flow (1)$14,934   $(383,133)$(8,404)$(310,098)$(264,800)   Adjusted free cash flow (2)$19,047   $(56,925)$(4,331)$20,223   $(194,780)   Ongoing capital expenditures (3)$43,497   $37,593   $44,278   $157,089   $127,690     Discretionary free cash flow (4)$165,602   $64,559   $143,343   $474,937   $459,919     Adjusted discretionary free cash flow (5)$185,059   $117,733   $143,343   $547,568   $459,919                 (1) We define free cash flow as net cash provided by operating activities plus net cash used in investing activities (excluding the net purchases, sales and maturities of investments) as presented below:   Net cash provided by operating activities as presented above $ 209,099 $ 102,152 $ 187,621 $ 632,026 $ 587,609 Net cash used in investing activities as presented above (209,327 ) (596,859 ) (194,625 ) (442,873 ) (1,499,444 ) Purchases, sales and maturities of investments, net   15,162     111,574     (1,400 )   (499,251 )   647,035   Free cash flow (negative free cash flow) $ 14,934   $ (383,133 ) $ (8,404 ) $ (310,098 ) $ (264,800 )   (2) We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases of real estate, acquisitions, sales of discontinued operations and any excess tax benefits from employee equity awards, as presented below:   Free cash flow (as defined above) $ 14,934 $ (383,133 ) $ (8,404 ) $ (310,098 ) $ (264,800 ) Less purchase of Dubai IBX data center, less cash acquired 22,918 - - 22,918 - Less purchase of Asia Tone, less cash acquired 13,540 188,798 - 202,338 - Less purchase of ancotel, less cash acquired - 84,236 - 84,236 - Less purchase of ALOG, less cash acquired - - - - 41,954 Less purchases of real estate 24,656 - 4,073 24,656 28,066 Less sale of discontinued operations (76,458 ) - - (76,458 ) - Less excess tax benefits from employee equity awards   19,457     53,174     -     72,631     -   Adjusted free cash flow (negative adjusted free cash flow) $ 19,047   $ (56,925 ) $ (4,331 ) $ 20,223   $ (194,780 )   (3) We refer to our purchases of other property, plant and equipment as our capital expenditures (or capex). We categorize our capital expenditures into expansion and ongoing capex. Expansion capex is capex spent to build out our new data centers and data center expansions. Our ongoing capex represents all of our other capex spending.   Ongoing capital expenditures $ 43,497 $ 37,593 $ 44,278 $ 157,089 $ 127,690 Expansion capital expenditures   166,911     174,525     145,882     607,411     557,985   Total capital expenditures $ 210,408   $ 212,118   $ 190,160   $ 764,500   $ 685,675     (4) We define discretionary free cash flow as net cash provided by operating activities less ongoing capital expenditures (as described above), as presented below:   Net cash provided by operating activities as presented above $ 209,099 $ 102,152 $ 187,621 $ 632,026 $ 587,609 Less ongoing capital expenditures   (43,497 )   (37,593 )   (44,278 )   (157,089 )   (127,690 ) Discretionary free cash flow $ 165,602   $ 64,559   $ 143,343   $ 474,937   $ 459,919     (5) We define adjusted discretionary free cash flow as discretionary free cash flow (as defined above) excluding any excess tax benefits from employee equity awards as presented below:   Discretionary free cash flow $ 165,602 $ 64,559 $ 143,343 $ 474,937 $ 459,919 Excess tax benefits from employee equity awards   19,457     53,174     -     72,631     -   Adjusted discretionary free cash flow $ 185,059   $ 117,733   $ 143,343   $ 547,568   $ 459,919     EQUINIX, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FROM CONTINUING OPERATIONS- NON-GAAP PRESENTATION(in thousands)(unaudited)                 Three Months EndedTwelve Months EndedDecember 31,September 30,December 31,December 31,December 31,20122012201120122011   Recurring revenues $ 481,738 $ 462,829 $ 401,765 $ 1,799,243 $ 1,492,414 Non-recurring revenues   24,782     25,901     20,351     96,501     77,370   Revenues (1)   506,520     488,730     422,116     1,895,744     1,569,784     Cash cost of revenues (2)   158,950     158,038     139,196     595,360     529,757   Cash gross profit (3)   347,570     330,692     282,920     1,300,384     1,040,027     Cash operating expenses (4): Cash sales and marketing expenses (5) 43,996 42,120 36,993 162,924 127,586 Cash general and administrative expenses (6)   64,291     60,274     52,486     241,803     191,894   Total cash operating expenses (7)   108,287     102,394     89,479     404,727     319,480     Adjusted EBITDA (8)$239,283   $228,298   $193,441   $895,657   $720,547     Cash gross margins (9)   69%   68%   67%   69%   66%   Adjusted EBITDA margins (10)   47%   47%   46%   47%   46%   Adjusted EBITDA flow-through rate (11)   62%   34%   46%   54%   50%             (1) The geographic split of our revenues on a services basis is presented below:   Americas Revenues:   Colocation $ 218,442 $ 213,011 $ 196,741 $ 845,127 $ 733,144 Interconnection 56,426 54,943 49,549 216,156 186,989 Managed infrastructure 12,529 12,424 12,440 51,453 37,768 Rental   490     469     463     1,843     2,006   Recurring revenues 287,887 280,847 259,193 1,114,579 959,907 Non-recurring revenues   11,456     13,034     9,114     45,895     35,808   Revenues   299,343     293,881     268,307     1,160,474     995,715     EMEA Revenues:   Colocation 95,823 91,512 80,174 359,106 300,728 Interconnection 7,989 7,188 3,600 23,193 13,061 Managed infrastructure 4,596 5,112 3,401 16,384 13,771 Rental   325     314     238     1,319     795   Recurring revenues 108,733 104,126 87,413 400,002 328,355 Non-recurring revenues   8,726     7,832     7,835     33,448     29,867   Revenues   117,459     111,958     95,248     433,450     358,222     Asia-Pacific Revenues:   Colocation 69,798 63,204 43,686 229,770 161,000 Interconnection 9,090 8,550 6,789 32,754 24,326 Managed infrastructure   6,230     6,102     4,684     22,138     18,826   Recurring revenues 85,118 77,856 55,159 284,662 204,152 Non-recurring revenues   4,600     5,035     3,402     17,158     11,695   Revenues   89,718     82,891     58,561     301,820     215,847     Worldwide Revenues:   Colocation 384,063 367,727 320,601 1,434,003 1,194,872 Interconnection 73,505 70,681 59,938 272,103 224,376 Managed infrastructure 23,355 23,638 20,525 89,975 70,365 Rental   815     783     701     3,162     2,801   Recurring revenues 481,738 462,829 401,765 1,799,243 1,492,414 Non-recurring revenues   24,782     25,901     20,351     96,501     77,370   Revenues $ 506,520   $ 488,730   $ 422,116   $ 1,895,744   $ 1,569,784     (2) We define cash cost of revenues as cost of revenues less depreciation, amortization, accretion and stock-based compensation as presented below:   Cost of revenues $ 250,121 $ 251,487 $ 221,271 $ 943,995 $ 833,851 Depreciation, amortization and accretion expense (89,530 ) (91,723 ) (80,625 ) (342,417 ) (298,525 ) Stock-based compensation expense   (1,641 )   (1,726 )   (1,450 )   (6,218 )   (5,569 ) Cash cost of revenues $ 158,950   $ 158,038   $ 139,196   $ 595,360   $ 529,757     The geographic split of our cash cost of revenues is presented below:   Americas cash cost of revenues $ 83,529 $ 85,384 $ 80,356 $ 329,460 $ 304,767 EMEA cash cost of revenues 43,888 42,615 36,677 159,248 144,315 Asia-Pacific cash cost of revenues   31,533     30,039     22,163     106,652     80,675   Cash cost of revenues $ 158,950   $ 158,038   $ 139,196   $ 595,360   $ 529,757     (3) We define cash gross profit as revenues less cash cost of revenues (as defined above).   (4) We define cash operating expenses as operating expenses less depreciation, amortization, stock-based compensation, restructuring charges, impairment charges and acquisition costs. We also refer to cash operating expenses as cash selling, general and administrative expenses or "cash SG&A".   (5) We define cash sales and marketing expenses as sales and marketing expenses less depreciation, amortization and stock-based compensation as presented below:   Sales and marketing expenses $ 55,690 $ 53,211 $ 45,136 $ 202,914 $ 158,347 Depreciation and amortization expense (6,469 ) (6,296 ) (4,214 ) (21,260 ) (16,203 ) Stock-based compensation expense   (5,225 )   (4,795 )   (3,929 )   (18,730 )   (14,558 ) Cash sales and marketing expenses $ 43,996   $ 42,120   $ 36,993   $ 162,924   $ 127,586     (6) We define cash general and administrative expenses as general and administrative expenses less depreciation, amortization and stock-based compensation as presented below:   General and administrative expenses $ 86,867 $ 83,621 $ 71,568 $ 329,399 $ 265,554 Depreciation and amortization expense (7,480 ) (7,431 ) (6,086 ) (28,676 ) (22,650 ) Stock-based compensation expense   (15,096 )   (15,916 )   (12,996 )   (58,920 )   (51,010 ) Cash general and administrative expenses $ 64,291   $ 60,274   $ 52,486   $ 241,803   $ 191,894     (7) Our cash operating expenses, or cash SG&A, as defined above, is presented below:   Cash sales and marketing expenses $ 43,996 $ 42,120 $ 36,993 $ 162,924 $ 127,586 Cash general and administrative expenses   64,291     60,274     52,486     241,803     191,894   Cash SG&A $ 108,287   $ 102,394   $ 89,479   $ 404,727   $ 319,480     The geographic split of our cash operating expenses, or cash SG&A, is presented below:   Americas cash SG&A $ 65,466 $ 67,136 $ 59,683 $ 265,225 $ 212,284 EMEA cash SG&A 28,043 22,818 18,853 90,060 70,761 Asia-Pacific cash SG&A   14,778     12,440     10,943     49,442     36,435   Cash SG&A $ 108,287   $ 102,394   $ 89,479   $ 404,727   $ 319,480     (8) We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges and acquisition costs as presented below:   Income from continuing operations $ 102,042 $ 95,869 $ 82,278 $ 400,753 $ 305,254 Depreciation, amortization and accretion expense 103,479 105,450 90,925 392,353 337,378 Stock-based compensation expense 21,962 22,437 18,375 83,868 71,137 Restructuring charges - - 1,295 - 3,481 Impairment charges 9,861 - - 9,861 - Acquisition costs   1,939     4,542     568     8,822     3,297   Adjusted EBITDA $ 239,283   $ 228,298   $ 193,441   $ 895,657   $ 720,547     The geographic split of our adjusted EBITDA is presented below:   Americas income from continuing operations $ 66,642 $ 63,740 $ 56,547 $ 258,620 $ 203,286 Americas depreciation, amortization and accretion expense 59,761 60,322 55,839 235,391 213,464 Americas stock-based compensation expense 16,972 17,299 14,572 64,896 55,819 Americas restructuring charges - - 1,295 - 3,481 Americas impairment charges 6,972 - - 6,972 - Americas acquisition costs   1     -     15     (90 )   2,614   Americas adjusted EBITDA   150,348     141,361     128,268     565,789     478,664     EMEA income from continuing operations 18,738 20,565 17,466 89,544 59,420 EMEA depreciation, amortization and accretion expense 22,554 22,054 19,776 80,249 74,486 EMEA stock-based compensation expense 2,633 2,900 2,119 10,370 8,869 EMEA acquisition costs   1,603     1,006     357     3,979     371   EMEA adjusted EBITDA   45,528     46,525     39,718     184,142     143,146     Asia-Pacific income from continuing operations 16,662 11,564 8,265 52,589 42,548 Asia-Pacific depreciation, amortization and accretion expense 21,164 23,074 15,310 76,713 49,428 Asia-Pacific stock-based compensation expense 2,357 2,238 1,684 8,602 6,449 Asia-Pacific impairment charges 2,889 - - 2,889 - Asia-Pacific acquisition costs   335     3,536     196     4,933     312   Asia-Pacific adjusted EBITDA   43,407     40,412     25,455     145,726     98,737     Adjusted EBITDA $ 239,283   $ 228,298   $ 193,441   $ 895,657   $ 720,547     (9) We define cash gross margins as cash gross profit divided by revenues.   Our cash gross margins by geographic region is presented below:   Americas cash gross margins   72 %   71 %   70 %   72 %   69 %   EMEA cash gross margins   63 %   62 %   61 %   63 %   60 %   Asia-Pacific cash gross margins   65 %   64 %   62 %   65 %   63 %   (10) We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.   Americas adjusted EBITDA margins   50 %   48 %   48 %   49 %   48 %   EMEA adjusted EBITDA margins   39 %   42 %   42 %   42 %   40 %   Asia-Pacific adjusted EBITDA margins   48 %   49 %   43 %   48 %   46 %   (11) We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows:   Adjusted EBITDA - current period $ 239,283 $ 228,298 $ 193,441 $ 895,657 $ 720,547 Less adjusted EBITDA - prior period   (228,298 )   (217,480 )   (187,022 )   (720,547 )   (533,270 ) Adjusted EBITDA growth $ 10,985   $ 10,818   $ 6,419   $ 175,110   $ 187,277     Revenues - current period $ 506,520 $ 488,730 $ 422,116 $ 1,895,744 $ 1,569,784 Less revenues - prior period   (488,730 )   (457,249 )   (408,208 )   (1,569,784 )   (1,196,214 ) Revenue growth $ 17,790   $ 31,481   $ 13,908   $ 325,960   $ 373,570     Adjusted EBITDA flow-through rate   62 %   34 %   46 %   54 %   50 %   EQUINIX, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - DISCONTINUED OPERATIONS (1)(in thousands, except per share data)(unaudited)                 Three Months EndedTwelve Months EndedDecember 31,September 30,December 31,December 31,December 31,20122012201120122011   Recurring revenues $ 2,763 $ 8,618 $ 8,969 $ 28,902 $ 36,108 Non-recurring revenues   81     208     227     738     950   Revenues2,8448,8269,19629,64037,058   Cost of revenues   1,487     6,585     8,069     23,956     33,790   Gross profit   1,357     2,241     1,127     5,684     3,268     Operating expenses: Sales and marketing (3 ) 197 186 516 744 General and administrative 26 61 106 324 378 Acquisition costs 1,322 655 237 2,582 237 Gain on sale of discontinued operations   (25,825 )   -     -     (25,825 )   -   Total operating expenses   (24,480)   913     529     (22,403)   1,359     Income from discontinued operations before income taxes25,8371,32859828,0871,909   Income tax expense (13,979 ) (649 ) (408 ) (15,001 ) (900 )           Net income from discontinued operations$11,858   $679   $190   $13,086   $1,009     Adjusted EBITDA (2)$1,274   $4,301   $4,690   $14,727   $17,816     Gross margins   48%   25%   12%   19%   9%   Cash gross margins (3)   46%   51%   53%   52%   50%             (1) The condensed consolidated statements of operations and non-GAAP financial information includes the financial results of the 16 IBX data centers located throughout the United States through November 1, 2012, the date the Company completed the sale of the IBX data centers.   (2) We define adjusted EBITDA as income from discontinued operations plus depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges and acquisition costs as presented below:   Income from discontinued operations $ 25,837 $ 1,328 $ 598 $ 28,087 $ 1,909 Depreciation, amortization and accretion expense (22 ) 2,173 3,758 9,593 15,275 Stock-based compensation expense (38 ) 145 97 290 395 Acquisition costs 1,322 655 237 2,582 237 Gain on sale of discontinued operations   (25,825 )   -     -     (25,825 )   -   Adjusted EBITDA $ 1,274   $ 4,301   $ 4,690   $ 14,727   $ 17,816     (3) We define cash gross margins as cash gross profit divided by revenues.   Revenues $ 2,844   $ 8,826   $ 9,196   $ 29,640   $ 37,058     Cost of revenues 1,487 6,585 8,069 23,956 33,790 Depreciation, amortization and accretion expense 22 (2,110 ) (3,664 ) (9,342 ) (14,899 ) Stock-based compensation expense   38     (145 )   (97 )   (290 )   (395 ) Cash cost of revenues   1,547     4,330     4,308     14,324     18,496   Cash gross profit $ 1,297   $ 4,496   $ 4,888   $ 15,316   $ 18,562   Equinix Investor Relations Contacts:Equinix, Inc.Katrina Rymill, 650-598-6583krymill@equinix.comSamir Patodia, 650-598-6587spatodia@equinix.comorEquinix Media Contacts:GolinHarrisLiam Rose, 415-318-4380lrose@golinharris.comorEquinix, Inc.Melissa Neumann, 650-598-6098mneumann@equinix.com