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Press release from Business Wire

Equinix Reports First Quarter 2013 Results

<ul> <li class='bwlistitemmargb'> <b>Reported revenues of $519.5 million, a 3% increase over the previous quarter and a 17% increase over the same quarter last 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, April 24, 2013

Equinix Reports First Quarter 2013 Results

16:01 EDT Wednesday, April 24, 2013

REDWOOD CITY, Calif. (Business Wire) -- Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today reported quarterly results for the quarter ended March 31, 2013. 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.

Revenues were $519.5 million for the first quarter, a 3% increase over the previous quarter and a 17% increase over the same quarter last year. Recurring revenues, consisting primarily of colocation, interconnection and managed services were $495.3 million for the first quarter, a 3% increase over the previous quarter and an 18% increase over the same quarter last year. Non-recurring revenues were $24.2 million in the quarter.

“Equinix delivered solid financial results in the first quarter, and we are well positioned for the remainder of 2013,” said Steve Smith, president and CEO of Equinix. “We are executing with discipline and focus to capture the demand driven by strong secular trends in video, cloud, mobility and IP traffic. This quarter we saw record bookings in Cloud as service providers expand their services to meet the changing needs of enterprises who are deploying hybrid cloud architectures across Platform Equinix.”

Cost of revenues were $259.3 million for the first quarter, a 4% increase over the previous quarter and a 19% increase over the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $96.5 million, which we refer to as cash cost of revenues, were $162.8 million for the first quarter, a 2% increase from the previous quarter and a 19% increase over the same quarter last year. Gross margins for the quarter were 50%, down from 51% for the previous quarter and 51% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 69%, unchanged from the previous quarter and the same quarter last year.

Selling, general and administrative expenses were $148.0 million for the first quarter, a 4% increase over the previous quarter and a 19% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $34.8 million, which we refer to as cash selling, general and administrative expenses, were $113.2 million for the first quarter, a 5% increase over the previous quarter and an 18% increase over the same quarter last year.

Interest expense was $60.3 million for the first quarter, a 19% increase from the previous quarter and a 14% increase over the same quarter last year, primarily attributed to the $1.5 billion senior notes offering in March 2013. The Company recorded income tax expense of $12.2 million for the first quarter and income tax expense of $13.9 million in the same quarter last year.

Income from continuing operations was $108.6 million for the first quarter, a 6% increase from the previous quarter and an 8% increase over the same quarter last year. 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 first quarter was $243.5 million, an increase of 2% over the previous quarter and a 16% increase over the same quarter last year.

Net income attributable to Equinix for the first quarter was $35.9 million. This represents a basic net income per share attributable to Equinix of $0.73 and a diluted net income per share attributable to Equinix of $0.71 based on a weighted average share count of 49.0 million and 53.5 million, respectively, for the first quarter of 2013.

Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the first quarter, were $75.7 million, of which $41.7 million was attributed to expansion capital expenditures and $34.0 million was attributed to ongoing capital expenditures.

The Company generated cash from operating activities of $84.2 million for the first quarter as compared to $209.1 million in the previous quarter and $126.0 million for the same quarter last year. Cash used in investing activities was $1,142.5 million in the first quarter, primarily attributed to $836.4 million of the proceeds from the issuance of the $1.5 billion senior notes that was placed into a restricted cash account for the redemption of the $750.0 million 8.125% senior notes, as compared to cash used in investing activities of $209.3 million in the previous quarter and cash provided by investing activities of $269.4 million for the same quarter last year. Cash provided by financing activities was $1,496.8 million for the first quarter, primarily attributed to the issuance of the $1.5 billion senior notes, as compared to cash provided by financing activities of $12.2 million in the previous quarter and cash used in financing activities of $44.0 million for the same quarter last year.

As of March 31, 2013, the Company's cash, cash equivalents and investments, excluding restricted cash, were $1,212.1 million as compared to $546.5 million as of December 31, 2012.

In April 2013, the Company redeemed the entire principal amount of the $750.0 million 8.125% senior notes pursuant to the optional redemption provisions of such notes. As a result, the Company will recognize a loss on debt extinguishment in the second quarter of 2013 of approximately $89.9 million, representing the redemption premium paid of $80.9 million and the write-off of unamortized debt issuance costs of $9.0 million related to the $750.0 million 8.125% senior notes.

Business Outlook

For the second quarter of 2013, the Company expects revenues to be in the range of $530.0 to $534.0 million. Cash gross margins are expected to range between 68% and 69%. Cash selling, general and administrative expenses are expected to range between $120.0 and $124.0 million. Adjusted EBITDA is expected to be between $240.0 and $244.0 million. Capital expenditures are expected to be approximately $170.0 to $180.0 million, comprised of approximately $45.0 million of ongoing capital expenditures and $125.0 to $135.0 million of expansion capital expenditures.

For the full year of 2013, total revenues are expected to be greater than $2,200.0 million, which absorbs approximately $21.0 million in negative currency movements, when compared to our prior foreign currency exchange rates. Total year cash gross margins are expected to range between 68% to 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, which absorbs approximately $9.0 million in negative currency movements, when compared to our prior foreign currency exchange rates. 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 $1.28 to the Euro, $1.52 to the Pound, S$1.24 to the U.S. dollar and R$2.02 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 Q1 Results Presentation

The Company will discuss its results and guidance on its quarterly conference call on Wednesday, April 24, 2013, at 5:30 p.m. ET (2:30 p.m. PT). A presentation to accompany the call as well as the Company's Non-Financial Metrics tracking sheet 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, April 24, 2013, at 7:30 p.m. (ET) through May 24, 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 replay or 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 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, 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 Ended

March 31,
2013

December 31,
2012

March 31,
2012

 
Recurring revenues $ 495,271 $ 481,738 $ 420,890
Non-recurring revenues   24,184   24,782   22,355
Revenues 519,455 506,520 443,245
 
Cost of revenues   259,268   250,121   217,098
Gross profit   260,187   256,399   226,147
 
Operating expenses:
Sales and marketing 58,276 55,690 46,410
General and administrative 89,685 86,867 78,316
Impairment charges - 9,861 -
Acquisition costs   3,662   1,939   675
Total operating expenses   151,623   154,357   125,401
 
Income from continuing operations   108,564   102,042   100,746
 
Interest and other income (expense):
Interest income 747 758 691
Interest expense (60,331) (50,516) (52,818)
Other expense   (459)   (717)   (154)
Total interest and other, net   (60,043)   (50,475)   (52,281)
 
Income from continuing operations before income taxes 48,521 51,567 48,465
 
Income tax expense   (12,198)   (17,294)   (13,853)
 
Net income from continuing operations 36,323 34,273 34,612
 
Net income from discontinued operations, net of tax - 6 199
Gain on sale of discontinued operations, net of tax   -   11,852   -
 
Net income 36,323 46,131 34,811
 
Net income attributable to redeemable non-controlling interests (441) (1,273) (288)
     
Net income attributable to Equinix $ 35,882 $ 44,858 $ 34,523
 
Net income per share attributable to Equinix:
 
Basic net income per share from continuing operations $ 0.73 $ 0.68 $ 0.74
Basic net income per share from discontinued operations   -   0.24   0.00
Basic net income per share (1) $ 0.73 $ 0.92 $ 0.74
 
Diluted net income per share from continuing operations $ 0.71 $ 0.66 $ 0.71
Diluted net income per share from discontinued operations   -   0.22   0.00
Diluted net income per share (2) $ 0.71 $ 0.88 $ 0.71
 
Shares used in computing basic net income per share   49,029   48,673   46,955
 
Shares used in computing diluted net income per share   53,480   52,917   51,061
   
 

(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 $ 36,323 $ 34,273 $ 34,612
Net income attributable to non-controlling interests (441) (1,273) (288)
Adjustments attributable to redemption value of non-controlling interests   -   -   209
Net income from continuing operations attributable to Equinix, basic 35,882 33,000 34,533
Net income from discontinued operations   -   11,858   199
Net income attributable to Equinix, basic $ 35,882 $ 44,858 $ 34,732
 

(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 $ 35,882 $ 33,000 $ 34,533
Interest on convertible debt   1,851   1,707   1,699
Net income from continuing operations attributable to Equinix, diluted 37,733 34,707 36,232
Net income from discontinued operations   -   11,858   199
Net income attributable to Equinix, diluted $ 37,733 $ 46,565 $ 36,431
 

 

EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
                       
 
Three Months Ended

March 31,
2013

December 31,
2012

March 31,
2012

 
Net income $ 36,323 $ 46,131 $ 34,811
 
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) (72,554) 9,307 34,312
Unrealized gain (loss) on available for sale securities   98   (37)   78
Other comprehensive income (loss), net of tax:   (72,456)   9,270   34,390
 
Comprehensive income (loss), net of tax   (36,133)   55,401   69,201
 
Net income attributable to redeemable non-controlling interests (441) (1,273) (288)
Other comprehensive income (loss) attributable to redeemable non-controlling interests   (769)   3,330   (1,059)
 
Comprehensive income (loss) attributable to Equinix, net of tax $ (37,343) $ 57,458 $ 67,854
 

           
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
     
Assets

March 31,
2013

December 31,
2012

 
Cash and cash equivalents $ 685,019 $ 252,213
Short-term investments 233,289 166,492
Restricted cash 843,478 9,380
Accounts receivable, net 185,163 163,840
Other current assets   58,908   47,826
Total current assets 2,005,857 639,751
Long-term investments 293,751 127,819
Property, plant and equipment, net 3,888,624 3,918,999
Goodwill 1,018,777 1,042,564
Intangible assets, net 191,935 201,562
Other assets   212,423   202,269
Total assets $ 7,611,367 $ 6,132,964
 
Liabilities and Stockholders' Equity
 
Accounts payable and accrued expenses $ 248,395 $ 268,853
Accrued property and equipment 63,077 63,509
Current portion of capital lease and other financing obligations 16,304 15,206
Current portion of loans payable 47,350 52,160
Current portion of senior notes 750,000 -
Current portion of deferred tax liabilities 69,689 69,689
Other current liabilities   69,329   69,872
Total current liabilities 1,264,144 539,289
Capital lease and other financing obligations, less current portion 568,067 545,853
Loans payable, less current portion 179,560 188,802
Senior notes, less current portion 2,250,000 1,500,000
Convertible debt 712,478 708,726
Other liabilities   197,966   230,843
Total liabilities   5,172,215   3,713,513
 
Redeemable non-controlling interests   96,891   84,178
 
Common stock 50 49
Additional paid-in capital 2,627,334 2,583,371
Treasury stock (36,309) (36,676)
Accumulated other comprehensive loss (174,267) (101,042)
Accumulated deficit   (74,547)   (110,429)
Total stockholders' equity   2,342,261   2,335,273
 

 

Total liabilities, redeemable non-controlling interests and stockholders' equity

$ 7,611,367 $ 6,132,964
 
                 
 
Ending headcount by geographic region is as follows:
 
Americas headcount 1,872 1,821
EMEA headcount 848 811
Asia-Pacific headcount   553   521
Total headcount   3,273   3,153
 

 
EQUINIX, INC.
SUMMARY OF DEBT OUTSTANDING
(in thousands)
(unaudited)
                 

 

 

March 31,
2013

December 31,
2012

 
Capital lease and other financing obligations $ 584,371 $ 561,059
 
U.S. term loan 170,000 180,000
ALOG financing 49,566 48,807
Paris 4 IBX financing 7,308 8,071
Other loans payable   36   4,084
Total loans payable   226,910   240,962
 
Senior notes   3,000,000   1,500,000
 
Convertible debt, net of debt discount 712,478 708,726
Plus debt discount   57,235   60,990
Total convertible debt principal   769,713   769,716
 
Total debt outstanding $ 4,580,994 $ 3,071,737
 

 
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                         
 
Three Months Ended

March 31,
2013

December 31,
2012

March 31,
2012

 
Cash flows from operating activities:
Net income $ 36,323 $ 46,131 $ 34,811

Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation, amortization and accretion 108,531 103,457 93,922
Stock-based compensation 22,703 21,924 19,103
Debt issuance costs and debt discount 5,753 5,308 8,107
Impairment charges - 9,861 -
Gain on sale of discontinued operations - (11,852) -
Excess tax benefits from employee equity awards (18,990) (19,457) -
Other reconciling items 3,085 584 2,857
Changes in operating assets and liabilities:
Accounts receivable (24,663) 20,299 (19,677)
Income taxes, net (1,609) 2,711 (8,763)
Accounts payable and accrued expenses (27,996) 26,203 (40,535)
Other assets and liabilities   (18,956)   3,930   36,168
Net cash provided by operating activities   84,181   209,099   125,993
Cash flows from investing activities:
Purchases, sales and maturities of investments, net (232,965) (15,162) 346,366
Purchase of Dubai IBX data center - (22,918) -
Purchase of Asia Tone, less cash acquired (107) (13,540) -
Purchases of real estate - (24,656) -
Purchases of other property, plant and equipment (75,667) (210,408) (145,490)
Proceeds from sale of discontinued operations - 76,458 -
Other investing activities   (833,801)   899   68,557
Net cash provided by (used in) investing activities   (1,142,540)   (209,327)   269,433
Cash flows from financing activities:
Purchases of treasury stock - - (13,364)
Proceeds from employee equity awards 14,368 5,998 30,460
Proceeds from loans payable - 4,049 8,909
Proceeds from senior notes 1,500,000 - -
Repayment of capital lease and other financing obligations (3,516) (3,471) (2,826)
Repayment of loans payable (14,052) (13,332) (67,129)
Excess tax benefits from employee equity awards 18,990 19,457 -
Other financing activities   (19,030)   (453)   -
Net cash provided by (used in) financing activities   1,496,760   12,248   (43,950)
Effect of foreign currency exchange rates on cash and cash equivalents   (5,595)   506   2,645
Net increase in cash and cash equivalents 432,806 12,526 354,121
Cash and cash equivalents at beginning of period   252,213   239,687   278,823
Cash and cash equivalents at end of period $ 685,019 $ 252,213 $ 632,944
 
Supplemental cash flow information:
Cash paid for taxes $ 14,036 $ 17,133 $ 1,734
Cash paid for interest $ 67,975 $ 27,404 $ 63,336
 
Free cash flow (1) $ (825,394) $ 14,934 $ 49,060
 
Adjusted free cash flow (2) $ (806,297) $ 19,047 $ 49,060
 
Ongoing capital expenditures (3) $ 33,997 $ 43,497 $ 38,462
 
Discretionary free cash flow (4) $ 50,184 $ 165,602 $ 87,531
 
Adjusted discretionary free cash flow (5) $ 69,174 $ 185,059 $ 87,531
           
 

(1)

We define free cash flow as net cash provided by operating activities plus net cash provided by (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 $ 84,181 $ 209,099 $ 125,993
Net cash provided by (used in) investing activities as presented above (1,142,540) (209,327) 269,433
Purchases, sales and maturities of investments, net   232,965   15,162   (346,366)
Free cash flow (negative free cash flow) $ (825,394) $ 14,934 $ 49,060
 

(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) $ (825,394) $ 14,934 $ 49,060
Less purchase of Dubai IBX data center, less cash acquired - 22,918 -
Less purchase of Asia Tone, less cash acquired 107 13,540 -
Less purchases of real estate - 24,656 -
Less sale of discontinued operations - (76,458) -
Less excess tax benefits from employee equity awards   18,990   19,457   -
Adjusted free cash flow (negative adjusted free cash flow) $ (806,297) $ 19,047 $ 49,060
 

(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 $ 33,997 $ 43,497 $ 38,462
Expansion capital expenditures   41,670   166,911   107,028
Total capital expenditures $ 75,667 $ 210,408 $ 145,490
 

(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 $ 84,181 $ 209,099 $ 125,993
Less ongoing capital expenditures   (33,997)   (43,497)   (38,462)
Discretionary free cash flow $ 50,184 $ 165,602 $ 87,531
 

(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 $ 50,184 $ 165,602 $ 87,531
Excess tax benefits from employee equity awards   18,990   19,457   -
Adjusted discretionary free cash flow $ 69,174 $ 185,059 $ 87,531
 

                 
EQUINIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION

(in thousands)
(unaudited)
   
 
Three Months Ended

March 31,
2013

December 31,
2012

March 31,
2012

 
Recurring revenues $ 495,271 $ 481,738 $ 420,890
Non-recurring revenues   24,184   24,782   22,355
Revenues (1)   519,455   506,520   443,245
 
Cash cost of revenues (2)   162,759   158,950   136,361
Cash gross profit (3)   356,696   347,570   306,884
 
Cash operating expenses (4):
Cash sales and marketing expenses (5) 46,280 43,996 38,119
Cash general and administrative expenses (6)   66,956   64,291   58,169
Total cash operating expenses (7)   113,236   108,287   96,288
 
Adjusted EBITDA (8) $ 243,460 $ 239,283 $ 210,596
 
Cash gross margins (9)   69%   69%   69%
 
Adjusted EBITDA margins (10)   47%   47%   48%
 
Adjusted EBITDA flow-through rate (11)   32%   62%   81%
         
 

(1)

The geographic split of our revenues on a services basis is presented below:

 
Americas Revenues:
Colocation $ 223,565 $ 218,442 $ 203,918
Interconnection 58,206 56,426 51,739
Managed infrastructure 13,616 12,529 13,936
Rental   460   490   439
Recurring revenues 295,847 287,887 270,032
Non-recurring revenues   12,707   11,456   9,097
Revenues   308,554   299,343   279,129
 
EMEA Revenues:
Colocation 100,532 95,823 83,951
Interconnection 8,381 7,989 3,824
Managed infrastructure 4,249 4,596 3,414
Rental   120   325   344
Recurring revenues 113,282 108,733 91,533
Non-recurring revenues   7,012   8,726   9,803
Revenues   120,294   117,459   101,336
 
Asia-Pacific Revenues:
Colocation 71,014 69,798 47,117
Interconnection 9,404 9,090 7,320
Managed infrastructure   5,724   6,230   4,888
Recurring revenues 86,142 85,118 59,325
Non-recurring revenues   4,465   4,600   3,455
Revenues   90,607   89,718   62,780
 
Worldwide Revenues:
Colocation 395,111 384,063 334,986
Interconnection 75,991 73,505 62,883
Managed infrastructure 23,589 23,355 22,238
Rental   580   815   783
Recurring revenues 495,271 481,738 420,890
Non-recurring revenues   24,184   24,782   22,355
Revenues $ 519,455 $ 506,520 $ 443,245
 

(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 $ 259,268 $ 250,121 $ 217,098
Depreciation, amortization and accretion expense (94,907) (89,530) (79,420)
Stock-based compensation expense   (1,602)   (1,641)   (1,317)
Cash cost of revenues $ 162,759 $ 158,950 $ 136,361
 
The geographic split of our cash cost of revenues is presented below:
 
Americas cash cost of revenues $ 88,473 $ 83,529 $ 79,082
EMEA cash cost of revenues 43,629 43,888 35,353
Asia-Pacific cash cost of revenues   30,657   31,533   21,926
Cash cost of revenues $ 162,759 $ 158,950 $ 136,361
 

(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 $ 58,276 $ 55,690 $ 46,410
Depreciation and amortization expense (6,275) (6,469) (4,256)
Stock-based compensation expense   (5,721)   (5,225)   (4,035)
Cash sales and marketing expenses $ 46,280 $ 43,996 $ 38,119
 

(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 $ 89,685 $ 86,867 $ 78,316
Depreciation and amortization expense (7,349) (7,480) (6,474)
Stock-based compensation expense   (15,380)   (15,096)   (13,673)
Cash general and administrative expenses $ 66,956 $ 64,291 $ 58,169
 

(7)

Our cash operating expenses, or cash SG&A, as defined above, is presented below:

 
Cash sales and marketing expenses $ 46,280 $ 43,996 $ 38,119
Cash general and administrative expenses   66,956   64,291   58,169
Cash SG&A $ 113,236 $ 108,287 $ 96,288
 
The geographic split of our cash operating expenses, or cash SG&A, is presented below:
 
Americas cash SG&A $ 73,551 $ 65,466 $ 66,849
EMEA cash SG&A 27,611 28,043 19,099
Asia-Pacific cash SG&A   12,074   14,778   10,340
Cash SG&A $ 113,236 $ 108,287 $ 96,288
 

(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 $ 108,564 $ 102,042 $ 100,746
Depreciation, amortization and accretion expense 108,531 103,479 90,150
Stock-based compensation expense 22,703 21,962 19,025
Impairment charges - 9,861 -
Acquisition costs   3,662   1,939   675
Adjusted EBITDA $ 243,460 $ 239,283 $ 210,596
 
The geographic split of our adjusted EBITDA is presented below:
 
Americas income from continuing operations $ 62,597 $ 66,642 $ 61,566
Americas depreciation, amortization and accretion expense 63,224 59,761 56,649
Americas stock-based compensation expense 17,311 16,972 15,073
Americas impairment charges - 6,972 -
Americas acquisition costs   3,398   1   (90)
Americas adjusted EBITDA   146,530   150,348   133,198
 
EMEA income from continuing operations 22,863 18,738 27,279
EMEA depreciation, amortization and accretion expense 23,071 22,554 17,312
EMEA stock-based compensation expense 3,038 2,633 2,164
EMEA acquisition costs   82   1,603   129
EMEA adjusted EBITDA   49,054   45,528   46,884
 
Asia-Pacific income from continuing operations 23,104 16,662 11,901
Asia-Pacific depreciation, amortization and accretion expense 22,236 21,164 16,189
Asia-Pacific stock-based compensation expense 2,354 2,357 1,788
Asia-Pacific impairment charges - 2,889 -
Asia-Pacific acquisition costs   182   335   636
Asia-Pacific adjusted EBITDA   47,876   43,407   30,514
 
Adjusted EBITDA $ 243,460 $ 239,283 $ 210,596
 

(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   71%   72%   72%
 
EMEA cash gross margins   64%   63%   65%
 
Asia-Pacific cash gross margins   66%   65%   65%
 

(10)

We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.

 
Americas adjusted EBITDA margins   47%   50%   48%
 
EMEA adjusted EBITDA margins   41%   39%   46%
 
Asia-Pacific adjusted EBITDA margins   53%   48%   49%
 

(11)

We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental
revenue growth as follows:

 
Adjusted EBITDA - current period $ 243,460 $ 239,283 $ 210,596
Less adjusted EBITDA - prior period   (239,283)   (228,298)   (193,441)
Adjusted EBITDA growth $ 4,177 $ 10,985 $ 17,155
 
Revenues - current period $ 519,455 $ 506,520 $ 443,245
Less revenues - prior period   (506,520)   (488,730)   (422,116)
Revenue growth $ 12,935 $ 17,790 $ 21,129
 
Adjusted EBITDA flow-through rate   32%   62%   81%
 

Equinix Investor Relations Contacts:
Equinix, Inc.
Katrina Rymill, 650-598-6583
krymill@equinix.com
or
Samir Patodia, 650-598-6587
spatodia@equinix.com
or
Equinix Media Contacts:
Equinix, Inc.
Melissa Neumann, 650-598-6098
mneumann@equinix.com
or
GolinHarris
Liam Rose, 415-318-4380
lrose@golinharris.com

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