-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D/kHZUtMGjtGHS8vnx43FmqZB0Fxn9lS/fzh46VVjB3MKcT3fpMrEMACglWJstyk HcmED+B/nPetHR6oaGITjQ== 0001157523-06-001292.txt : 20060208 0001157523-06-001292.hdr.sgml : 20060208 20060208163023 ACCESSION NUMBER: 0001157523-06-001292 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060208 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060208 DATE AS OF CHANGE: 20060208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUINIX INC CENTRAL INDEX KEY: 0001101239 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 770487526 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-31293 FILM NUMBER: 06589448 BUSINESS ADDRESS: STREET 1: 301 VELOCITY WAY, 5TH FLOOR CITY: FOSTER CITY STATE: CA ZIP: 94404 BUSINESS PHONE: 650-513-7000 MAIL ADDRESS: STREET 1: 301 VELOCITY WAY, 5TH FLOOR CITY: FOSTER CITY STATE: CA ZIP: 94404 8-K 1 a5075383.txt EQUINIX, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event Reported): February 8, 2006 EQUINIX, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 000-31293 77-0487526 - ---------------------------- ------------ ---------------------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification Number) 301 Velocity Way, 5th Floor Foster City, California 94404 (650) 513-7000 - -------------------------------------------------------------------------------- (Addresses of principal executive offices) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition The information in Item 2.02 of this Current Report is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in Item 2.02 of this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. On February 8, 2006, the Company issued a press release announcing its financial results for the quarter and year ended December 31, 2005. A copy of the press release is attached as Exhibit 99.1. The Company released certain non-GAAP information in the press release. Attached to the press release is a reconciliation to the non-GAAP information. On February 8, 2006, in connection with the issuance of the press release, the Company will hold a conference call to discuss the press release. Item 9.01. Financial Statements and Exhibits (c) Exhibits. 99.1 Press Release of Equinix, Inc. dated February 8, 2006, furnished in accordance with Item 2.02 of this Current Report on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EQUINIX, INC. DATE: February 8, 2006 By: /s/ KEITH D. TAYLOR -------------------------------- Keith D. Taylor Chief Financial Officer EXHIBIT INDEX Exhibit Number Description - ------ ----------- 99.1 Text of Press Release dated February 8, 2006. EX-99.1 2 a5075383ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Equinix Reports Fourth Quarter and Year-End 2005 Results FOSTER CITY, Calif.--(BUSINESS WIRE)--Feb. 8, 2006--Equinix, Inc. (Nasdaq:EQIX): -- Increased quarterly revenues to $61.8 million, a 6% increase over previous quarter; increased annual revenues to $221.1 million, a 35% increase over 2004 -- Increased annual EBITDA, a non-GAAP financial measure, to $70.1 million, up from $35.6 million in previous year -- Announces new expansion build in Washington D.C. metro area and plans to expand in the Chicago metro area Equinix, Inc. (Nasdaq:EQIX), the leading provider of network-neutral data centers and Internet exchange services, today reported its quarterly and year-end results for the period ended December 31, 2005. Revenues were $61.8 million for the fourth quarter and $221.1 million for the year ended December 31, 2005, representing a 6% increase over the previous quarter, and a 35% increase over 2004 revenues. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $58.4 million for the quarter and $208.0 million for the year ended December 31, 2005, an 8% increase over the previous quarter, and a 35% increase over 2004. Non-recurring revenues for the fourth quarter were $3.4 million, consisting primarily of professional services and installation fees. Non-recurring revenues for the year ended December 31, 2005 were $13.1 million, consisting of $12.2 million of professional services and installation fees, and $861,000 of customer settlements. Annual non-recurring revenues, excluding customer settlements, increased 46% year over year. Note: Equinix uses non-GAAP financial measures, such as EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), cash interest expense, cash net income (loss), non-GAAP net income (loss), free cash flow and adjusted free cash flow to evaluate its operations. A reconciliation of these non-GAAP financial measures to the most closely applicable GAAP financial measure are attached to this release and commence at the bottom of our condensed consolidated statements of operations -- GAAP presentation. Cost of revenues were $41.7 million for the fourth quarter and $158.4 million for the year ended December 31, 2005, representing a 2% increase over the previous quarter, and a 16% increase over 2004 cost of revenues. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation, were $25.2 million for the fourth quarter and $95.6 million for the year ended December 31, 2005. Cash gross margins, defined as gross profit less depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 59%, up from 57% the previous quarter. Cash gross margins were 57% for 2005, up from 50% in 2004. Selling, general and administrative expenses were $17.3 million for the fourth quarter. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation were $14.8 million for the fourth quarter, a 2% decrease from the previous quarter, and $55.4 million for 2005, a 21% increase over 2004. The company was able to expand its IBX footprint by approximately 19% in 2005 through the acquisition of previously built-out data centers in the Silicon Valley, Chicago and Los Angeles areas, all scheduled to open around the first half of 2006. Equinix also acquired the campus that houses its flagship Washington, D.C. area IBX center for a total purchase price of $53.8 million. In fourth quarter, Equinix completed transactions to purchase and finance its Washington, D.C. area center, the sale and leaseback of its Los Angeles area center, and the planned exit of its San Jose ground lease. The exit of the San Jose ground lease resulted in the recognition of a restructuring charge totaling $33.8 million in the quarter. Net loss for the fourth quarter was $32.6 million, including stock-based compensation expense of $2.0 million, and including the restructuring charge of $33.8 million. This represents a basic and diluted net loss per share of $1.25 on a weighted average share count of 26.1 million. Net loss for the year ended December 31, 2005 was $42.6 million, or a basic and diluted net loss per share of $1.78. Excluding the restructuring charge and stock-based compensation, the company was net income positive for the quarter, with a non-GAAP net income of $3.2 million, a $7.7 million improvement over the same quarter last year and $2.6 million improvement over the previous quarter. The company's cash net income, defined as net income (loss) less depreciation, amortization, accretion, stock-based compensation expense, restructuring changes and non-cash interest expense for the quarter was $20.5 million, a 19% improvement over the previous quarter. EBITDA, defined as loss from operations before depreciation, amortization, accretion, stock-based compensation expense and restructuring charges, was $21.8 million for the fourth quarter and $70.1 million for the year ended December 31, 2005, an increase of 22% over the previous quarter and up from $35.6 million in 2004, or a 60% EBITDA flow-through rate in 2005. Capital expenditures in the fourth quarter were $22.9 million, of which $8.0 million was attributed to ongoing capital expenditures and $14.9 million was attributed to expansion capital expenditures. Capital expenditures for the year ended December 31, 2005 were $45.4 million, of which $19.7 million was attributed to ongoing capital expenditures and $25.7 million was attributed to expansion capital expenditures. The Company generated cash from operating activities of $18.6 million for the fourth quarter as compared to $15.5 million in the previous quarter. Cash generated from operating activities for the year ended December 31, 2005 was $67.6 million as compared to $36.9 million in 2004. Cash used in investing activities was $65.9 million in the fourth quarter as compared to $42.1 million in the previous quarter. Cash used in investing activities for the year was $120.9 million, which includes the purchase of real estate properties, as compared to $20.7 million in 2004. Adjusted free cash flow was $6.4 million in the fourth quarter and $35.2 million for the year ended December 31, 2005. Adjusted free cash flow is defined as net cash generated from operating activities less net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments and the purchase and sale of real estate). As of December 31, 2005, the Company's cash, cash equivalents and investments were $188.9 million, including the $30.0 million draw-down under the Silicon Valley Bank revolving line of credit, an increase of $80.8 million over the previous year. The draw down was repaid in full in January 2006. Other Company Developments & Metrics -- On a same IBX basis (defined as IBX centers which have been available for new customer installs for at least four full quarters), revenues were $56.8 million; cost of revenues were $35.9 million; cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation, were $21.6 million and cash gross margins for the quarter were 62%. EBITDA on a same IBX basis was $20.7 million. Included in the same IBX results were certain selling, general and administrative expenses related to costs for the filing of our recent S-3 registration statement and certain severance charges. -- Equinix added 68 new customers in the fourth quarter and 287 customers for the year 2005, ending the year with 1,138 total customers. Some of the customers added in the fourth quarter include Cable & Wireless Global Ptd Ltd, Bausch & Lomb (HK) Ltd, NTT Australia Pty Ltd, Nokia Japan, PNC Bank, Hotel Booking Solutions, Inc. and Xanga. Over 50 percent of Equinix's new bookings in the quarter came from existing customers including Amazon.com, GE Capital, Goldman Sachs Group, IBM, XM Satellite Radio and Yahoo!. -- Based on a total cabinet capacity of approximately 26,200, the number of cabinets billing as of December 31, 2005 was approximately 14,100, up from approximately 13,700 the previous quarter, and up from 11,100 as of December 31, 2004. On a weighted average basis, the number of cabinets billing was approximately 14,000 representing a utilization rate of 54%. -- U.S. interconnection service revenues were 21% of U.S. recurring revenues for the fourth quarter and 22% for the year ended December 31, 2005. Interconnection services revenues represent approximately 20% of total worldwide recurring revenues for the year ended December 31, 2005. Equinix signed additional customers on its new 10 Gigabit Ethernet service including Akamai, Beyond the Network, Big Pipe and Cable and Wireless. -- The Company also announced that it will build out a new center at its Washington, D.C. area campus to further expand its Washington, D.C. area Internet Business Exchange(TM) (IBX(R)) center. Equinix also announced that it intends to expand in the Chicago metro area and has identified a potential site and commenced performing its due diligence for possible expansion. Business Outlook For the first quarter 2006, the company expects revenue to be in the range of $63.5 to $64.5 million. Cash gross margins are expected to be in the range of 57% to 59%. Cash selling, general and administrative expenses are expected to approximate $15.0 million. EBITDA is expected to be between $21.5 and $22.5 million. Net loss is expected to range between $9.0 and $10.0 million including the impact of approximately $10.0 million of stock-based compensation expense, primarily related to the new stock-based compensation expensing requirements. Net interest expense will approximate $2.0 million. The weighted average shares outstanding will approximate 27.6 million. Capital expenditures are expected to be approximately $30.0 to $35.0 million including between $24.0 and $27.0 million of expansion capital expenditures. For the full year of 2006, revenues are expected to be in the range of $275.0 to $285.0 million. Cash gross margins are expected to be in the range of 57%-59%. Cash selling, general and administrative expenses are expected to be in the range of $60.0 to $64.0 million. EBITDA is expected to be between $95.0 and $105.0 million. Capital expenditures for 2006 are expected to be in a range of $95.0 to $100.0 million, comprised of approximately $20.0 million of ongoing capital expenditures and approximately $75.0 to $80.0 million of expansion capital expenditures for the new Chicago, Los Angeles, and Silicon Valley expansions, as well as the expansion build out in the Washington D.C. area campus announced today. We expect our adjusted free cash flow to be in a range of breakeven to a negative $5.0 million for the year. Adjusted free cash flow is defined as net cash generated from operating activities less net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments, as well as purchases and sales of real estate). The company will discuss its results and guidance on its quarterly conference call on Wednesday, February 8, 2006, at 5:30 p.m. ET (2:30 p.m. PT). To hear the conference call live, please dial 1-773-799-3263 (domestic and international) and reference the passcode (EQIX). A simultaneous live Webcast of the call will be available over the Internet at www.equinix.com, under the Investor Relations heading. A replay of the call will be available beginning on Wednesday, February 8, 2006 at 7:30 p.m. (ET) by dialing 402-220-9685. In addition, the Webcast will be available on the company's Web site at www.equinix.com. No password is required for either method of replay. A reconciliation between GAAP information and non-GAAP information contained in this press release is provided in a table immediately following the Condensed Consolidated Statements of Operations - GAAP Presentation. This information is also available on our Web Site under the Investor Relations heading. About Equinix Equinix is the leading global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators and network services providers. Through the company's Internet Business Exchange(TM) (IBX(R)) centers in 11 markets in the U.S. and Asia, customers can directly interconnect with every major global network and ISP for their critical peering, transit and traffic exchange requirements. These interconnection points facilitate the highest performance and growth of the Internet by serving as neutral and open marketplaces for Internet infrastructure services, allowing customers to expand their businesses while reducing costs. 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; a failure to receive significant revenue from customers in recently-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 and registration statement on Form S-3 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. Internet Business Exchange is a trademark of Equinix, Inc. Non-GAAP Financial Measures Equinix continues to provide 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 EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), cash interest expense, cash net income (loss), non-GAAP net income (loss), free cash flow and adjusted free cash flow to evaluate its operations. In presenting these non-GAAP financial measures, Equinix excludes certain non-cash or non-recurring items that it believes are not good indicators of the Company's current or future operating performance. These non-cash or non-recurring items are depreciation, amortization, accretion, stock-based compensation, non-cash interest, restructuring charges and, with respect to 2004 results, the non-cash portion of loss on debt extinguishment and conversion (there were no such charges or losses in 2005). Recent legislative and regulatory changes 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 non-cash or non-recurring 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 competitor base. 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 ten 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 non-cash 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 charge liability, as these expenses represent costs, which Equinix believes are not meaningful in evaluating the Company's current operations. Equinix excludes non-cash stock-based compensation expense as it represents expense attributed to stock awards that have no current or future cash obligations. As such, we, and our investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes interest expense associated with the amortization of debt issuance costs and discounts, as well as the interest expense associated with its convertible secured notes as such interest expenses do not require any cash in the periods presented nor will they in future periods. Lastly, with respect to its 2005 and 2004 results, Equinix excludes restructuring charges and the non-cash portion of the loss on debt extinguishment and conversion. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we do not intend to build out now or in the future. The non-cash portion of the loss on debt extinguishment and conversion, which represents the write-off of the unamortized debt issuance costs and discounts associated with the debt facilities extinguished or converted as no cash was expended in the periods presented for such write-offs nor will there be in the future. Management believes such restructuring charges and write-offs of debt issuance costs and discounts were unique costs that are not expected to recur, and consequently, does not consider these charges as a normal component of expenses related to current and ongoing operations. 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 ongoing business operations. Management believes that the inclusion of these non-GAAP financial measures provide consistency and comparability with past reports and provide 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 (with respect to 2006), net income (loss) from operations, interest income, 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 it was calculated for the three and twelve months ended December 31, 2005 and 2004, presented within this press release. EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP PRESENTATION (in thousands, except per share detail) (unaudited) Three Months Ended Twelve Months Ended ----------------------------- ------------------- December September December December December 31, 30, 31, 31, 31, 2005 2005 2004 2005 2004 --------- --------- --------- --------- --------- Recurring revenues $58,380 $54,291 $42,638 $208,003 $154,449 Non-recurring revenues 3,418 3,805 2,351 13,054 9,222 --------- --------- --------- --------- --------- Revenues 61,798 58,096 44,989 221,057 163,671 Cost of revenues 41,715 40,955 34,705 158,354 136,950 --------- --------- --------- --------- --------- Gross profit 20,083 17,141 10,284 62,703 26,721 --------- --------- --------- --------- --------- Operating expenses: Sales and marketing 5,759 4,829 5,106 20,552 18,604 General and administrative 11,516 12,078 7,950 45,110 32,494 Restructuring charges 33,814 - 17,685 33,814 17,685 --------- --------- --------- --------- --------- Total operating expenses 51,089 16,907 30,741 99,476 68,783 --------- --------- --------- --------- --------- Income (loss) from operations (31,006) 234 (20,457) (36,773) (42,062) --------- --------- --------- --------- --------- Interest and other income (expense): Interest income 940 1,075 472 3,584 1,291 Interest expense and other (2,548) (1,928) (2,731) (8,880) (11,496) Loss on debt extinguishment and conversion - - - - (16,211) --------- --------- --------- --------- --------- Total interest and other, net (1,608) (853) (2,259) (5,296) (26,416) --------- --------- --------- --------- --------- Net loss before income taxes (32,614) (619) (22,716) (42,069) (68,478) Income taxes 10 (164) 47 (543) (153) --------- --------- --------- --------- --------- Net loss $(32,604) $(783) $(22,669) $(42,612) $(68,631) ========= ========= ========= ========= ========= Basic and diluted net loss per share $(1.25) $(0.03) $(1.21) $(1.78) $(3.87) ========= ========= ========= ========= ========= Shares used in computing basic and diluted net loss per share 26,100 24,076 18,766 23,956 17,719 ========= ========= ========= ========= ========= - ---------------------------------------------------------------------- Non-GAAP net income (loss) (1) $3,196 $575 $(4,536) $(521) $(33,268) ========= ========= ========= ========= ========= (1) Non-GAAP net income (loss) excludes stock-based compensation, restructuring charges and the $16,211,000 loss on debt extinguishment and conversion during the twelve months ended December 31, 2004 as follows: Net loss $(32,604) $(783) $(22,669) $(42,612) $(68,631) Stock-based compensation 1,986 1,358 448 8,277 1,467 Restructuring charges 33,814 - 17,685 33,814 17,685 Loss on debt extinguishment and conversion - - - - 16,211 --------- --------- --------- --------- --------- Non-GAAP net income (loss) $3,196 $575 $(4,536) $(521) $(33,268) ========= ========= ========= ========= ========= EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION (in thousands) (unaudited) Three Months Ended Twelve Months Ended ---------------------------- ------------------- December September December December December 31, 30, 31, 31, 31, 2005 2005 2004 2005 2004 --------- -------- --------- --------- --------- Recurring revenues $58,380 $54,291 $42,638 $208,003 $154,449 Non-recurring revenues 3,418 3,805 2,351 13,054 9,222 --------- -------- --------- --------- --------- Revenues (1) 61,798 58,096 44,989 221,057 163,671 Cash cost of revenues (2) 25,192 25,119 20,928 95,557 82,438 --------- -------- --------- --------- --------- Cash gross profit (3) 36,606 32,977 24,061 125,500 81,233 --------- -------- --------- --------- --------- Cash operating expenses (4): Cash sales and marketing expenses (5) 5,332 4,566 4,613 18,931 16,642 Cash general and administrative expenses (6) 9,446 10,492 7,085 36,430 28,977 --------- -------- --------- --------- --------- Total cash operating expenses (7) 14,778 15,058 11,698 55,361 45,619 --------- -------- --------- --------- --------- EBITDA (8) 21,828 17,919 12,363 70,139 35,614 --------- -------- --------- --------- --------- Cash interest and other income (expense) (9): Interest income 940 1,075 472 3,584 1,291 Cash interest expense and other (10) (2,324) (1,650) (972) (7,205) (3,691) Cash loss on debt extinguishment and conversion (11) - - - - (2,505) Income taxes 10 (164) 47 (543) (153) --------- -------- --------- --------- --------- Total cash interest and other, net (1,374) (739) (453) (4,164) (5,058) --------- -------- --------- --------- --------- Cash net income (12) $20,454 $17,180 $11,910 $65,975 $30,556 ========= ======== ========= ========= ========= Cash gross margins(13) 59% 57% 53% 57% 50% ========= ======== ========= ========= ========= EBITDA flow-through rate (14) 106% 33% 90% 60% 74% ========= ======== ========= ========= ========= - ---------------------- (1) The geographic split of our revenues is presented below: U.S. revenues $53,463 $50,527 $38,705 $191,390 $141,598 Asia-Pacific revenues 8,335 7,569 6,284 29,667 22,073 --------- -------- --------- --------- --------- Revenues $61,798 $58,096 $44,989 $221,057 $163,671 ========= ======== ========= ========= ========= Revenues on a services basis is presented below: Colocation $43,127 $40,138 $30,814 $152,606 $111,986 Interconnection 11,181 10,527 8,901 40,877 31,414 Managed infrastructure 3,760 3,626 2,923 14,208 11,049 Other 312 - - 312 - --------- -------- --------- --------- --------- Recurring revenues 58,380 54,291 42,638 208,003 154,449 Non-recurring revenues 3,418 3,805 2,351 13,054 9,222 --------- -------- --------- --------- --------- Revenues $61,798 $58,096 $44,989 $221,057 $163,671 ========= ======== ========= ========= ========= New IBX centers are IBX centers which have not been available for customer installs for at least four full quarters. Revenues on a same IBX versus new IBX basis is presented below: Same IBX centers $56,752 $54,776 $43,165 $211,267 $157,656 New IBX centers 5,046 3,320 1,824 9,790 6,015 --------- -------- --------- --------- --------- Revenues $61,798 $58,096 $44,989 $221,057 $163,671 ========= ======== ========= ========= ========= (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 $41,715 $40,955 $34,705 $158,354 $136,950 Depreciation, amortization and accretion expense (16,523) (15,836) (13,777) (62,797) (54,477) Stock-based compensation expense - - - - (35) --------- -------- --------- --------- --------- Cash cost of revenues $25,192 $25,119 $20,928 $95,557 $82,438 ========= ======== ========= ========= ========= The geographic split of our cash cost of revenues is presented below: U.S. cash cost of revenues $20,954 $20,933 $16,962 $79,287 $67,702 Asia-Pacific cash cost of revenues 4,238 4,186 3,966 16,270 14,736 --------- -------- --------- --------- --------- Cash cost of revenues $25,192 $25,119 $20,928$95,557 $82,438 ========= ======== ========= ========= ========= New IBX centers are IBX centers which have not been available for customer installs for at least four full quarters. Cost of revenues and cash cost of revenues on a same IBX versus new IBX basis is presented below: Same IBX centers-cash cost of revenues $21,605 $23,292 $18,703 $87,378 $74,647 Same IBX centers- depreciation, amortization and accretion expense 14,277 14,031 13,312 56,687 53,255 Same IBX centers- stock-based compensation expense - - - - 35 --------- -------- --------- --------- --------- Same IBX centers cost of revenues 35,882 37,323 32,015 144,065 127,937 --------- -------- --------- --------- --------- New IBX centers-cash cost of revenues 3,587 1,827 2,225 8,179 7,791 New IBX centers- depreciation, amortization and accretion expense 2,246 1,805 465 6,110 1,222 New IBX centers-stock- based compensation expense - - - - - --------- -------- --------- --------- --------- New IBX centers cost of revenues 5,833 3,632 2,690 14,289 9,013 --------- -------- --------- --------- --------- Cost of revenues $41,715 $40,955 $34,705 $158,354 $136,950 ========= ======== ========= ========= ========= (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 and stock-based compensation. 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 $5,759 $4,829 $5,106 $20,552 $18,604 Depreciation and amortization expense (15) (15) (484) (60) (1,902) Stock-based compensation expense (412) (248) (9) (1,561) (60) --------- -------- --------- --------- --------- Cash sales and marketing expenses $5,332 $4,566 $4,613 $18,931 $16,642 ========= ======== ========= ========= ========= (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 $11,516 $12,078 $7,950 $45,110 $32,494 Depreciation and amortization expense (496) (476) (426) (1,964) (2,145) Stock-based compensation expense (1,574) (1,110) (439) (6,716) (1,372) --------- -------- --------- --------- --------- Cash general and administrative expenses $9,446 $10,492 $7,085 $36,430 $28,977 ========= ======== ========= ========= ========= (7) Our cash operating expenses, or cash SG&A, as defined above, is presented below: Cash sales and marketing expenses $5,332 $4,566 $4,613 $18,931 $16,642 Cash general and administrative expenses 9,446 10,492 7,085 36,430 28,977 --------- -------- --------- --------- --------- $14,778 $15,058 $11,698 $55,361 $45,619 ========= ======== ========= ========= ========= The geographic split of our cash operating expenses, or cash SG&A, is presented below: U.S. cash SG&A $12,026 $12,338 $9,408 $44,758 $36,439 Asia-Pacific cash SG&A 2,752 2,720 2,290 10,603 9,180 --------- -------- --------- --------- --------- Cash SG&A $14,778 $15,058 $11,698 $55,361 $45,619 ========= ======== ========= ========= ========= (8) We define EBITDA as income (loss) from operations less depreciation, amortization, accretion, stock-based compensation expense and restructuring charges as presented below: Income (loss) from operations $(31,006) $234 $(20,457) $(36,773) $(42,062) Depreciation, amortization and accretion expense 17,034 16,327 14,687 64,821 58,524 Stock-based compensation expense 1,986 1,358 448 8,277 1,467 Restructuring charges 33,814 - 17,685 33,814 17,685 --------- -------- --------- --------- --------- EBITDA $21,828 $17,919 $12,363 $70,139 $35,614 ========= ======== ========= ========= ========= The geographic split of our EBITDA is presented below: U.S. income (loss) from operations $(31,504) $541 $(18,877) $(35,448) $(34,107) U.S. depreciation, amortization and accretion expense 16,187 15,357 13,079 60,702 52,412 U.S. stock-based compensation expense 1,986 1,358 448 8,277 1,467 U.S. restructuring charges 33,814 - 17,685 33,814 17,685 --------- -------- --------- --------- --------- U.S. EBITDA 20,483 17,256 12,335 67,345 37,457 --------- -------- --------- --------- --------- Asia-Pacific income (loss) from operations 498 (307) (1,580) (1,325) (7,955) Asia-Pacific depreciation, amortization and accretion expense 847 970 1,608 4,119 6,112 Asia-Pacific stock- based compensation expense - - - - - Asia-Pacific restructuring charges - - - - - --------- -------- --------- --------- --------- Asia-Pacific EBITDA 1,345 663 28 2,794 (1,843) --------- -------- --------- --------- --------- EBITDA $21,828 $17,919 $12,363 $70,139 $35,614 ========= ======== ========= ========= ========= New IBX centers are IBX centers which have not been available for customer installs for at least four full quarters. EBITDA on a same IBX versus new IBX basis is presented below: Same IBX centers- income (loss) from operations $(29,882) $1,008 $(19,533) $(31,061) $(38,925) Same IBX centers- depreciation, amortization and accretion expense 14,788 14,522 14,222 58,711 57,302 Same IBX centers- stock-based compensation expense 1,986 1,358 448 8,277 1,467 Same IBX centers- restructuring charges 33,814 - 17,685 33,814 17,685 --------- -------- --------- --------- --------- Same IBX center EBITDA 20,706 16,888 12,822 69,741 37,529 --------- -------- --------- --------- --------- New IBX centers-income (loss) from operations (1,124) (774) (924) (5,712) (3,137) New IBX centers- depreciation, amortization and accretion expense 2,246 1,805 465 6,110 1,222 New IBX centers-stock- based compensation expense - - - - - New IBX centers- restructuring charges - - - - - --------- -------- --------- --------- --------- New IBX center EBITDA 1,122 1,031 (459) 398 (1,915) --------- -------- --------- --------- --------- EBITDA $21,828 $17,919 $12,363 $70,139 $35,614 ========= ======== ========= ========= ========= (9) We define cash interest and other income (expense) as interest expense plus income taxes less interest income, non-cash interest expense and non-cash loss on debt extinguishment and conversion. Non-cash interest expense is comprised of amortization of debt discounts and debt issuance costs and non-cash interest on our convertible secured notes. Non-cash loss on debt extinguishment and conversion is comprised of the non-cash write-off of debt issuance costs and discounts. (10) Cash interest expense and other is defined as interest expense less amortization of debt discounts and debt issuance costs and non-cash interest on our convertible secured notes as presented below: Interest expense and other $(2,548) $(1,928) $(2,731) $(8,880) $(11,496) Amortization of debt discounts and debt issuance costs 194 206 442 796 2,693 Non-cash interest on convertible secured notes 30 72 1,317 879 5,112 --------- -------- --------- --------- --------- Non-cash interest expense 224 278 1,759 1,675 7,805 --------- -------- --------- --------- --------- Cash interest expense and other $(2,324) $(1,650) $(972) $(7,205) $(3,691) ========= ======== ========= ========= ========= (11) Loss on debt extinguishment and conversion $- $- $- $- $(16,211) Non-cash write-off of debt issuance costs and discounts - - - - 13,706 --------- -------- --------- --------- --------- Non-cash loss on debt extinguishment and conversion - - - - 13,706 --------- -------- --------- --------- --------- Cash loss on debt extinguishment and conversion $- $- $- $- $(2,505) ========= ======== ========= ========= ========= (12) We define cash net income as net income (loss) less depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, non-cash interest expense and non-cash loss on debt extinguishment and conversion as presented below: Net income (loss) $(32,604) $(783) $(22,669) $(42,612) $(68,631) Depreciation, amortization and accretion expense 17,034 16,327 14,687 64,821 58,524 Stock-based compensation expense 1,986 1,358 448 8,277 1,467 Restructuring charges 33,814 - 17,685 33,814 17,685 Non-cash interest expense (defined above) 224 278 1,759 1,675 7,805 Non-cash loss on debt extinguishment and conversion (defined above) - - - - 13,706 --------- -------- --------- --------- --------- Cash net income $20,454 $17,180 $11,910 $65,975 $30,556 ========= ======== ========= ========= ========= Cash net income presents only our actual income taxes calculated on a GAAP basis on our actual net income (loss). Cash net income does not present additional pro forma income taxes on our substantially higher non-GAAP cash net income. (13) We define cash gross margins as cash gross profit divided by revenues. Our cash gross margins by geographic region is presented below: U.S. cash gross margins 61% 59% 56% 59% 52% ========= ======== ========= ========= ========= Asia-Pacific cash gross margins 49% 45% 37% 45% 33% ========= ======== ========= ========= ========= Same IBX centers are IBX centers which have been available for customer installs for at least four full quarters. Our cash gross margins for same IBX centers is presented below: Same IBX cash gross margins 62% 57% 57% 59% 53% ========= ======== ========= ========= ========= (14) We define EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental revenue growth as follows: EBITDA - current period $21,828 $17,919 $12,363 $70,139 $35,614 Less EBITDA - prior period (17,919) (16,055) (10,066) (35,614) (1,698) --------- -------- --------- --------- --------- EBITDA growth $3,909 $1,864 $2,297 $34,525 $33,916 ========= ======== ========= ========= ========= Revenues - current period $61,798 $58,096 $44,989 $221,057 $163,671 Less revenues - prior period (58,096) (52,479) (42,439) (163,671) (117,942) --------- -------- --------- --------- --------- Revenue growth $3,702 $5,617 $2,550 $57,386 $45,729 ========= ======== ========= ========= ========= EBITDA flow-through rate 106% 33% 90% 60% 74% ========= ======== ========= ========= ========= EQUINIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) Assets December 31, December 31, 2005 2004 -------------- -------------- Cash, cash equivalents and investments $188,855 $108,092 Accounts receivable, net 17,237 11,919 Property and equipment, net 438,790 343,361 Goodwill and other intangible assets, net 21,829 22,253 Debt issuance costs, net 3,075 3,164 Prepaid expenses 5,098 3,603 Deposits 3,548 6,062 Other assets 2,565 3,344 -------------- -------------- Total assets $680,997 $501,798 ============== ============== Liabilities and Stockholders' Equity Accounts payable and accrued expenses $22,557 $19,822 Accrued property and equipment 15,783 2,912 Accrued restructuring charges 49,831 14,750 Borrowings under credit line 30,000 - Mortgage payable 60,000 - Capital lease obligations 34,530 35,204 Other debt facilities 61,675 - Convertible secured notes - 35,824 Convertible subordinated debentures 86,250 86,250 Deferred installation revenue 7,658 3,745 Customer deposits 1,188 3,360 Deferred rent 18,792 22,915 Asset retirement obligation 3,649 3,054 Other liabilities 411 256 -------------- -------------- Total liabilities 392,324 228,092 -------------- -------------- Preferred stock - 2 Common stock 27 19 Additional paid-in capital 839,497 776,123 Deferred stock-based compensation (4,930) (260) Accumulated other comprehensive income 1,126 2,257 Accumulated deficit (547,047) (504,435) -------------- -------------- Total stockholders' equity 288,673 273,706 -------------- -------------- Total liabilities and stockholders' equity $680,997 $501,798 ============== ============== - ------------------------------------------------------- Ending headcount by geographic region is as follows: U.S. headcount 372 315 Asia-pacific headcount 165 153 -------------- -------------- Total headcount 537 468 ============== ============== EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1) (in thousands) (unaudited) Three Months Ended Twelve Months Ended ----------------------------- ------------------- December September December December December 31, 30, 31, 31, 31, 2005 2005 2004 2005 2004 --------- --------- --------- --------- --------- Cash flows from operating activities: Net loss $(32,604) $(783) $(22,669) $(42,612) $(68,631) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization and accretion 17,034 16,327 14,687 64,821 58,524 Amortization of stock-based compensation 1,986 1,358 448 8,277 1,467 Non-cash interest expense 224 278 1,759 1,675 7,805 Loss on debt extinguishment and conversion - - - - 16,211 Restructuring charges 33,814 - 17,685 33,814 17,685 Other reconciling items (507) 100 (524) 643 3,435 Changes in operating assets and liabilities: Accounts receivable (1,031) (75) 900 (4,854) (1,691) Accounts payable and accrued expenses (451) 1,189 (295) 3,690 2,608 Accrued restructuring charges (1,618) (480) - (3,066) (761) Accrued interest payable 604 (539) 538 65 478 Other assets and liabilities 1,108 (1,881) (1,903) 5,142 (218) --------- --------- --------- --------- --------- Net cash provided by operating activities 18,559 15,494 10,626 67,595 36,912 --------- --------- --------- --------- --------- Cash flows from investing activities: Purchase of Ashburn campus property (53,759) - - (53,759) - Purchase of Los Angeles IBX property (21) (34,727) - (34,748) - Purchases of other property and equipment (22,920) (7,079) (6,151) (45,412) (22,934) Accrued property and equipment 10,626 (267) (93) 12,871 458 Other investing activities 125 - 1,751 125 1,751 --------- --------- --------- --------- --------- Net cash used in investing activities (65,949) (42,073) (4,493) (120,923) (20,725) --------- --------- --------- --------- --------- Cash flows from financing activities: Proceeds from warrants, stock options and employee stock purchase plans 1,772 3,585 3,658 12,989 7,289 Proceeds from convertible subordinated debentures - - - - 86,250 Proceeds from borrowing under credit line 30,000 - - 30,000 - Proceeds from Los Angeles IBX financing 38,142 - - 38,142 - Proceeds from mortgage payable 60,000 - - 60,000 - Repayment of capital lease obligations (186) (167) (105) (675) (306) Repayment of other debt facilities (1,124) (34) - (4,848) (3,632) Repayment of credit facility - - - - (34,281) Repayment of senior notes - - - - (30,475) Debt issuance and extinguishment costs (655) (342) (165) (997) (5,912) --------- --------- --------- --------- --------- Net cash provided by financing activities 127,949 3,042 3,388 134,611 18,933 --------- --------- --------- --------- --------- Effect of foreign currency exchange rates on cash and cash equivalents 6 (202) (242) (520) (305) --------- --------- --------- --------- --------- Net increase in cash, cash equivalents and investments 80,565 (23,739) 9,279 80,763 34,815 Cash, cash equivalents and investments at beginning of period 108,290 132,029 98,813 108,092 72,971 --------- --------- --------- --------- --------- Cash, cash equivalents and investments at end of period $188,855 $108,290 $108,092 $188,855 $107,786 ========= ========= ========= ========= ========= Free cash flow (2) $(47,390) $(26,579) $6,133 $(53,328) $16,187 ========= ========= ========= ========= ========= Adjusted free cash flow (3) $6,390 $8,148 $6,133 $35,179 $16,187 ========= ========= ========= ========= ========= - --------------------- (1) The cash flow statements presented herein combine our short-term and long-term investments with our cash and cash equivalents in an effort to present our total unrestricted cash and equivalent balances. In our quarterly filings with the SEC on Forms 10-Q and 10-K, the purchases, sales and maturities of our short-term and long-term investments will be presented as activities within the investing activities portion of the cash flow statements. (2) We define free cash flow as net cash provided by operating activities plus net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long- term investments) as presented below: Net cash provided by operating activities as presented above $18,559 $15,494 $10,626 $67,595 $36,912 Net cash used in investing activities as presented above (65,949) (42,073) (4,493) (120,923) (20,725) --------- --------- --------- --------- --------- Free cash flow $(47,390) $(26,579) $6,133 $(53,328) $16,187 ========= ========= ========= ========= ========= (3) We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases or sales of real estate as presented below: Free cash flow (as defined above) $(47,390) $(26,579) $6,133 $(53,328) $16,187 Less purchase of Ashburn campus property 53,759 - - 53,759 - Less purchase of Los Angeles IBX property 21 34,727 - 34,748 - --------- --------- --------- --------- --------- Adjusted free cash flow $6,390 $8,148 $6,133 $35,179 $16,187 ========= ========= ========= ========= ========= CONTACT: Equinix, Inc. Jason Starr, 650-513-7402 (Investor Relations) jstarr@equinix.com or K/F Communications, Inc. David Fonkalsrud, 415-255-6506 (Media) dave@kfcomm.com -----END PRIVACY-ENHANCED MESSAGE-----