EX-99.1 2 a5208798ex99_1.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Equinix Reports Second Quarter 2006 Results FOSTER CITY, Calif.--(BUSINESS WIRE)--Aug. 14, 2006--Equinix, Inc. (Nasdaq:EQIX), the leading provider of network-neutral data centers and Internet exchange services, today reported quarterly results for the period ended June 30, 2006. The independent review by the Audit Committee has been completed, and, as originally disclosed on August 2, 2006, the Committee reached the conclusion that the accounting measurement dates of certain stock option grants issued in the past differ from their actual grant dates. Accordingly, Equinix recorded an additional non-cash stock-based compensation charge of $445,000 for the second quarter. The Audit Committee concluded that the Company did not engage in intentional or fraudulent misconduct in the granting of stock options. This one-time charge, the cumulative effect for the correction of errors related to prior periods, was not material to any particular prior quarter, and thus there is no restatement to the Company's previously filed financial statements. Also, the Company has filed its Form 10-Q for the second quarter of 2006 today. As reported August 2, 2006, revenues were $68.5 million for the second quarter, a 6% increase over the previous quarter and a 31% increase over the same quarter last year. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $65.1 million, a 5% increase over the previous quarter and a 32% increase over the same quarter last year. Non-recurring revenues were $3.4 million in the quarter, consisting primarily of professional services and installation fees. 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), 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 is attached to this release and commences at the bottom of our condensed consolidated statements of operations -- GAAP presentation. Cost of revenues were $45.6 million for the second quarter, including $963,000 of stock-based compensation, a 5% increase over the previous quarter and a 17% increase over the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $18.8 million, were $26.8 million for the second quarter, a 6% increase over the previous quarter and a 15% increase over the same quarter last year. Cash gross margins, defined as gross profit less depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 61%, the same as the previous quarter and up from 56% the same quarter last year. Selling, general and administrative expenses were $26.2 million for the second quarter, including $7.9 million of stock-based compensation, an 8% increase over the previous quarter and a 62% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $8.5 million, were $17.7 million for the second quarter, a 5% increase over the previous quarter and a 35% increase over same quarter last year. Net loss for the second quarter, including stock-based compensation expense of $8.9 million, was $5.3 million. This represents a basic and diluted net loss per share of $0.19 based on a weighted average share count of 28.5 million. Excluding stock-based compensation, the Company was net income positive for the second quarter, with a non-GAAP net income of $3.6 million. This was a $939,000 improvement from the previous quarter's result of $2.7 million and a $4.6 million improvement over the same quarter last year. EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation expense and restructuring charges, for the second quarter was $24.0 million, up 5% over the previous quarter and up from $16.1 million the same quarter last year. "We continue to experience strong momentum across all areas of our business," said Peter Van Camp, chairman and CEO, Equinix. "We are pleased the Audit Committee has completed the investigation and found no intentional misconduct in our prior stock option grant practices. We intend to continue to cooperate with the ongoing inquiries from the SEC and DOJ." Capital expenditures in the second quarter were $29.7 million, of which $8.9 million was attributed to ongoing capital expenditures and $20.8 million was attributed to expansion capital expenditures. In addition, the Company also purchased the previously announced Chicago IBX expansion property in the second quarter for $9.8 million, which the Company paid for in full with cash in June 2006. The Company generated cash from operating activities of $16.1 million as compared to $12.8 million in the previous quarter. Cash used in investing activities was $35.8 million as compared to $24.1 million in the previous quarter. Adjusted free cash flow was a negative $9.9 million in the second quarter. 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 June 30, 2006, the Company's cash, cash equivalents and investments were $147.9 million, as compared to $162.2 million in the previous quarter. Business Outlook For the third quarter 2006, revenues are expected to be in the range of $72.0 to $73.0 million. Cash gross margins will be approximately 60%. Cash selling, general and administrative expenses are expected to be approximately $18.0 million. EBITDA for the third quarter is expected to be approximately $25.0 million. Net loss is expected to be approximately $6.0 million, including the impact of approximately $8.0 million of stock-based compensation expense. Net interest expense will be approximately $2.5 million. The weighted average shares outstanding will be approximately 28.9 million. Capital expenditures are expected to be approximately $55.0 to $60.0 million, including $45.0 to $50.0 million of expansion capital expenditures. For the full year of 2006, total revenues are expected to be in the range of $280.0 to $286.0 million. Cash gross margins are expected to be in the range of 60% to 61% including approximately $4.0 million of net cash costs attributed to our expansion IBXs. Cash selling, general and administrative expenses are expected to be in the range of $68.0 to $70.0 million, including incremental professional fees attributed to the stock option investigation. EBITDA for the year is expected to be $100.0 to $104.0 million. Capital expenditures for 2006 are expected to be in a range of $180.0 to $185.0 million, comprised of approximately $30.0 million of ongoing capital expenditures and $150.0 to $155.0 million of expansion capital expenditures for the build out of the Chicago, Los Angeles and Silicon Valley expansions opened this year, as well as the greenfield expansions in the Washington, D.C., Chicago and New York metro areas. 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; the results of any regulatory review of past stock option grants and practices or any litigation relating to such grants and practices; 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. 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), 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 and restructuring charges. 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 IBX expansion projects or acquired 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 liabilities, 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. 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. Management believes such restructuring charges 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, 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 six months ended June 30, 2006 and 2005, presented within this press release. EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- GAAP PRESENTATION (in thousands, except per share detail) (unaudited) Three Months Ended Six Months Ended --------------------------- ------------------- June 30, March 31, June 30, June 30, June 30, 2006 2006 2005 2006 2005 -------- --------- -------- --------- --------- Recurring revenues $65,089 $ 61,752 $49,431 $126,841 $ 95,332 Non-recurring revenues 3,459 3,117 3,048 6,576 5,831 -------- --------- -------- --------- --------- Revenues 68,548 64,869 52,479 133,417 101,163 Cost of revenues 45,563 43,345 38,811 88,908 75,684 -------- --------- -------- --------- --------- Gross profit 22,985 21,524 13,668 44,509 25,479 -------- --------- -------- --------- --------- Operating expenses: Sales and marketing 8,480 7,198 5,145 15,678 9,964 General and administrative 17,725 17,130 11,027 34,855 21,516 -------- --------- -------- --------- --------- Total operating expenses 26,205 24,328 16,172 50,533 31,480 -------- --------- -------- --------- --------- Income (loss) from operations (3,220) (2,804) (2,504) (6,024) (6,001) -------- --------- -------- --------- --------- Interest and other income (expense): Interest income 1,730 1,611 902 3,341 1,569 Interest expense and other (3,565) (3,868) (1,945) (7,433) (4,404) -------- --------- -------- --------- --------- Total interest and other, net (1,835) (2,257) (1,043) (4,092) (2,835) -------- --------- -------- --------- --------- Net loss before income taxes and cumulative effect of a change in accounting principle (5,055) (5,061) (3,547) (10,116) (8,836) Income taxes (215) (385) 116 (600) (389) Net loss before cumulative effect of -------- --------- -------- --------- --------- a change in accounting principle (5,270) (5,446) (3,431) (10,716) (9,225) Cumulative effect of a change in accounting principle - 376 - 376 - -------- --------- -------- --------- --------- Net loss $(5,270) $ (5,070) $(3,431) $(10,340) $ (9,225) ======== ========= ======== ========= ========= Net loss per share: Basic and diluted net loss per share before cumulative effect of a change in accounting principle $ (0.19) $ (0.20) $ (0.14) $ (0.38) $ (0.40) Cumulative effect of a change in accounting principle - 0.02 - 0.01 - -------- --------- -------- --------- --------- Basic and diluted net loss per share $ (0.19) $ (0.18) $ (0.14) $ (0.37) $ (0.40) ======== ========= ======== ========= ========= Shares used in computing basic and diluted net loss per share 28,468 27,848 23,727 28,160 22,964 ======== ========= ======== ========= ========= ---------------------------------------------------------------------- Non-GAAP net income (loss) (1) $ 3,627 $ 2,688 $ (942) $ 6,315 $ (4,292) ======== ========= ======== ========= ========= (1)Non-GAAP net income (loss) excludes stock-based compensation and restructuring charges as follows: Net loss $(5,270) $ (5,070) $(3,431) $(10,340) $ (9,225) Stock-based compensation 8,897 7,758 2,489 16,655 4,933 Restructuring charges - - - - - -------- --------- -------- --------- --------- Non-GAAP net income (loss) $ 3,627 $ 2,688 $ (942) $ 6,315 $ (4,292) ======== ========= ======== ========= ========= EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- NON-GAAP PRESENTATION (in thousands) (unaudited) Three Months Ended Six Months Ended ----------------------------- -------------------- June 30, March 31, June 30, June 30, June 30, 2006 2006 2005 2006 2005 --------- --------- --------- ---------- --------- Recurring revenues $ 65,089 $ 61,752 $ 49,431 $ 126,841 $ 95,332 Non-recurring revenues 3,459 3,117 3,048 6,576 5,831 --------- --------- --------- ---------- --------- Revenues (1) 68,548 64,869 52,479 133,417 101,163 Cash cost of revenues (2) 26,845 25,272 23,317 52,117 45,246 --------- --------- --------- ---------- --------- Cash gross profit (3) 41,703 39,597 29,162 81,300 55,917 --------- --------- --------- ---------- --------- Cash operating expenses (4): Cash sales and marketing expenses (5) 6,333 5,291 4,676 11,624 9,033 Cash general and administrative expenses (6) 11,332 11,471 8,431 22,803 16,492 --------- --------- --------- ---------- --------- Total cash operating expenses (7) 17,665 16,762 13,107 34,427 25,525 --------- --------- --------- ---------- --------- EBITDA (8) $ 24,038 $ 22,835 $ 16,055 $ 46,873 $ 30,392 ========= ========= ========= ========== ========= Cash gross margins (9) 61% 61% 56% 61% 55% ========= ========= ========= ========== ========= EBITDA flow-through rate (10) 33% 33% 45% 53% 58% ========= ========= ========= ========== ========= ------------------- (1) The geographic split of our revenues is presented below: U.S. revenues $ 58,900 $ 55,840 $ 45,384 $ 114,741 $ 87,400 Asia-Pacific revenues 9,648 9,029 7,095 18,676 13,763 --------- --------- --------- ---------- --------- Revenues $ 68,548 $ 64,869 $ 52,479 $ 133,417 $101,163 ========= ========= ========= ========== ========= Revenues on a services basis is presented below: Colocation $ 47,988 $ 45,569 $ 36,105 $ 93,557 $ 69,341 Interconnection 12,644 11,804 9,845 24,448 19,169 Managed infrastructure 4,046 3,933 3,481 7,979 6,822 Rental 411 446 - 857 - --------- --------- --------- ---------- --------- Recurring revenues 65,089 61,752 49,431 126,841 95,332 Non-recurring revenues 3,459 3,117 3,048 6,576 5,831 --------- --------- --------- ---------- --------- Revenues $ 68,548 $ 64,869 $ 52,479 $ 133,417 $101,163 ========= ========= ========= ========== ========= 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 $ 68,190 $ 62,530 $ 51,282 $ 130,720 $ 99,739 New IBX centers 358 2,339 1,197 2,697 1,424 --------- --------- --------- ---------- --------- Revenues $ 68,548 $ 64,869 $ 52,479 $ 133,417 $101,163 ========= ========= ========= ========== ========= (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 $ 45,563 $ 43,345 $ 38,811 $ 88,908 $ 75,684 Depreciation, amortization and accretion expense (17,755) (17,315) (15,494) (35,070) (30,438) Stock-based compensation expense (963) (758) - (1,721) - --------- --------- --------- ---------- --------- Cash cost of revenues $ 26,845 $ 25,272 $ 23,317 $ 52,117 $ 45,246 ========= ========= ========= ========== ========= The geographic split of our cash cost of revenues is presented below: U.S. cash cost of revenues $ 22,312 $ 20,951 $ 19,339 $ 43,263 $ 37,400 Asia-Pacific cash cost of revenues 4,533 4,321 3,978 8,854 7,846 --------- --------- --------- ---------- --------- Cash cost of revenues $ 26,845 $ 25,272 $ 23,317 $ 52,117 $ 45,246 ========= ========= ========= ========== ========= 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 $ 24,849 $ 22,476 $ 21,390 $ 47,325 $ 42,481 Same IBX centers- depreciation, amortization and accretion expense 16,433 15,532 14,183 31,965 28,379 Same IBX centers-stock- based compensation expense 963 758 - 1,721 - --------- --------- --------- ---------- --------- Same IBX centers cost of revenues 42,245 38,766 35,573 81,011 70,860 --------- --------- --------- ---------- --------- New IBX centers-cash cost of revenues 1,996 2,796 1,927 4,792 2,765 New IBX centers- depreciation, amortization and accretion expense 1,322 1,783 1,311 3,105 2,059 New IBX centers-stock- based compensation expense - - - - - --------- --------- --------- ---------- --------- New IBX centers cost of revenues 3,318 4,579 3,238 7,897 4,824 --------- --------- --------- ---------- --------- Cost of revenues $ 45,563 $ 43,345 $ 38,811 $ 88,908 $ 75,684 ========= ========= ========= ========== ========= (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 $ 8,480 $ 7,198 $ 5,145 $ 15,678 $ 9,964 Depreciation and amortization expense (15) (15) (15) (30) (30) Stock-based compensation expense (2,132) (1,892) (454) (4,024) (901) --------- --------- --------- ---------- --------- Cash sales and marketing expenses $ 6,333 $ 5,291 $ 4,676 $ 11,624 $ 9,033 ========= ========= ========= ========== ========= (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 $ 17,725 $ 17,130 $ 11,027 $ 34,855 $ 21,516 Depreciation and amortization expense (591) (551) (561) (1,142) (992) Stock-based compensation expense (5,802) (5,108) (2,035) (10,910) (4,032) --------- --------- --------- ---------- --------- Cash general and adminis- trative expenses $ 11,332 $ 11,471 $ 8,431 $ 22,803 $ 16,492 ========= ========= ========= ========== ========= (7) Our cash operating expenses, or cash SG&A, as defined above, is presented below: Cash sales and marketing expenses $ 6,333 $ 5,291 $ 4,676 $ 11,624 $ 9,033 Cash general and adminis- trative expenses 11,332 11,471 8,431 22,803 16,492 --------- --------- --------- ---------- --------- Cash SG&A $ 17,665 $ 16,762 $ 13,107 $ 34,427 $ 25,525 ========= ========= ========= ========== ========= The geographic split of our cash operating expenses, or cash SG&A, is presented below: U.S. cash SG&A $ 14,599 $ 13,327 $ 10,486 $ 27,926 $ 20,394 Asia-Pacific cash SG&A 3,066 3,435 2,621 6,501 5,131 --------- --------- --------- ---------- --------- Cash SG&A $ 17,665 $ 16,762 $ 13,107 $ 34,427 $ 25,525 ========= ========= ========= ========== ========= (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 $ (3,220) $ (2,804) $ (2,504) $ (6,024) $ (6,001) Depreciation, amortization and accretion expense 18,361 17,881 16,070 36,242 31,460 Stock-based compensation expense 8,897 7,758 2,489 16,655 4,933 Restructuring charges - - - - - --------- --------- --------- ---------- --------- EBITDA $ 24,038 $ 22,835 $ 16,055 $ 46,873 $ 30,392 ========= ========= ========= ========== ========= The geographic split of our EBITDA is presented below: U.S. income (loss) from operations $ (3,404) $ (2,247) $ (1,871) $ (5,651) $ (4,485) U.S. depreciation, amortization and accretion expense 17,419 16,866 14,941 34,285 29,158 U.S. stock- based compensation expense 7,975 6,943 2,489 14,918 4,933 U.S. restructuring charges - - - - - --------- --------- --------- ---------- --------- U.S. EBITDA 21,990 21,562 15,559 43,552 29,606 --------- --------- --------- ---------- --------- Asia-Pacific income (loss) from operations 184 (557) (633) (373) (1,516) Asia-Pacific depreciation, amortization and accretion expense 942 1,015 1,129 1,957 2,302 Asia-Pacific stock-based compensation expense 922 815 - 1,737 - Asia-Pacific restructuring charges - - - - - --------- --------- --------- ---------- --------- Asia- Pacific EBITDA 2,048 1,273 496 3,321 786 --------- --------- --------- ---------- --------- EBITDA $ 24,038 $ 22,835 $ 16,055 $ 46,873 $ 30,392 ========= ========= ========= ========== ========= 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 $ 76 $ (368) $ (232) $ (292) $ (2,187) Same IBX centers- depreciation, amortization and accretion expense 17,039 16,098 14,759 33,137 29,401 Same IBX centers-stock- based compensation expense 8,897 7,758 2,489 16,655 4,933 Same IBX centers- restructuring charges - - - - - --------- --------- --------- ---------- --------- Same IBX center EBITDA 26,012 23,488 17,016 49,500 32,147 --------- --------- --------- ---------- --------- New IBX centers-income (loss) from operations (3,296) (2,436) (2,272) (5,732) (3,814) New IBX centers- depreciation, amortization and accretion expense 1,322 1,783 1,311 3,105 2,059 New IBX centers-stock- based compensation expense - - - - - New IBX centers- restructuring charges - - - - - --------- --------- --------- ---------- --------- New IBX center EBITDA (1,974) (653) (961) (2,627) (1,755) --------- --------- --------- ---------- --------- EBITDA $ 24,038 $ 22,835 $ 16,055 $ 46,873 $ 30,392 ========= ========= ========= ========== ========= (9) 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 62% 62% 57% 62% 57% ========= ========= ========= ========== ========= Asia-Pacific cash gross margins 53% 52% 44% 53% 43% ========= ========= ========= ========== ========= 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 64% 64% 58% 64% 57% ========= ========= ========= ========== ========= (10) We define EBITDA flow-through rate as incremental EBITDA growth divided by incremental revenue growth as follows: EBITDA -- current period $ 24,038 $ 22,835 $ 16,055 $ 46,873 $ 30,392 Less EBITDA -- prior period (22,835) (21,828) (14,337) (39,747) (22,429) --------- --------- --------- ---------- --------- EBITDA growth $ 1,203 $ 1,007 $ 1,718 $ 7,126 $ 7,963 ========= ========= ========= ========== ========= Revenues -- current period $ 68,548 $ 64,869 $ 52,479 $ 133,417 $101,163 Less revenues -- prior period (64,869) (61,798) (48,684) (119,894) (87,428) --------- --------- --------- ---------- --------- Revenue growth $ 3,679 $ 3,071 $ 3,795 $ 13,523 $ 13,735 ========= ========= ========= ========== ========= EBITDA flow- through rate 33% 33% 45% 53% 58% ========= ========= ========= ========== ========= EQUINIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) Assets June 30, December 31, 2006 2005 ------------ ------------ Cash, cash equivalents and investments $ 147,939 $ 188,855 Accounts receivable, net 23,347 17,237 Property and equipment, net 471,765 438,790 Goodwill and other intangible assets, net 23,485 21,829 Debt issuance costs, net 2,659 3,075 Prepaid expenses 4,900 5,098 Deposits 6,641 3,548 Other assets 2,437 2,565 ------------ ------------ Total assets $ 683,173 $ 680,997 ============ ============ Liabilities and Stockholders' Equity Accounts payable and accrued expenses $ 23,582 $ 22,557 Accrued property and equipment 21,938 15,783 Accrued restructuring charges 45,350 49,831 Borrowings under credit line - 30,000 Capital lease obligations 34,130 34,530 Other financing obligations 61,336 61,675 Mortgage payable 59,484 60,000 Convertible subordinated debentures 86,250 86,250 Deferred installation revenue 7,573 7,658 Customer deposits 785 1,188 Deferred rent 21,152 18,792 Asset retirement obligations 3,904 3,649 Other liabilities 562 411 ------------ ------------ Total liabilities 366,046 392,324 ------------ ------------ Common stock 29 27 Additional paid-in capital 871,999 839,497 Deferred stock-based compensation - (4,930) Accumulated other comprehensive income 2,486 1,126 Accumulated deficit (557,387) (547,047) ------------ ------------ Total stockholders' equity 317,127 288,673 ------------ ------------ Total liabilities and stockholders' equity $ 683,173 $ 680,997 ============ ============ --------------------------------------------------------- ------------ Ending headcount by geographic region is as follows: U.S. headcount 402 372 Asia-pacific headcount 169 165 ------------ ------------ Total headcount 571 537 ============ ============ EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1) (in thousands) (unaudited) Three Months Ended Six Months Ended ----------------------------- ------------------- June 30, March 31, June 30, June 30, June 30, 2006 2006 2005 2006 2005 --------- --------- --------- --------- --------- Cash flows from operating activities: Net loss $ (5,270) $ (5,070) $ (3,431) $(10,340) $ (9,225) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization and accretion 18,361 17,881 16,070 36,242 31,460 Stock-based compensation 8,897 7,758 2,489 16,655 4,933 Non-cash interest expense 208 208 268 416 1,173 Restructuring charges - - - - - Other reconciling items (64) (727) 6 (791) (49) Changes in operating assets and liabilities: Accounts receivable (5,011) (1,251) (1,484) (6,262) (3,748) Accounts payable and accrued expenses 2,597 (993) 3,402 1,604 2,952 Accrued restructuring charges (3,168) (2,957) (486) (6,125) (968) Other assets and liabilities (443) (2,058) 1,315 (2,501) 7,014 --------- --------- --------- --------- --------- Net cash provided by operating activities 16,107 12,791 18,149 28,898 33,542 --------- --------- --------- --------- --------- Cash flows from investing activities: Purchase of Ashburn campus property - - - - - Purchase of Los Angeles IBX property - - - - - Purchase of Chicago IBX property (9,766) - - (9,766) - Purchases of other property and equipment (29,671) (26,613) (9,890) (56,284) (15,413) Accrued property and equipment 3,643 2,512 3,155 6,155 2,512 Other investing activities - 6 - 6 - --------- --------- --------- --------- --------- Net cash used in investing activities (35,794) (24,095) (6,735) (59,889) (12,901) --------- --------- --------- --------- --------- Cash flows from financing activities: Proceeds from warrants, stock options and employee stock purchase plans 5,862 14,714 3,285 20,576 7,632 Repayment of borrowings under credit line - (30,000) - (30,000) - Repayment of capital lease obligations (201) (197) (163) (398) (322) Repayment of other financing obligations (174) (167) (627) (341) (3,690) Repayment of mortgage payable (311) (205) - (516) - Other financing activities 200 370 - 570 - --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities 5,376 (15,485) 2,495 (10,109) 3,620 --------- --------- --------- --------- --------- Effect of foreign currency exchange rates on cash and cash equivalents 27 157 (16) 184 (324) --------- --------- --------- --------- --------- Net increase (decrease) in cash, cash equivalents and investments (14,284) (26,632) 13,893 (40,916) 23,937 Cash, cash equivalents and investments at beginning of period 162,223 188,855 118,136 188,855 108,092 --------- --------- --------- --------- --------- Cash, cash equivalents and investments at end of period $147,939 $162,223 $132,029 $147,939 $132,029 ========= ========= ========= ========= ========= Free cash flow (2) $(19,687) $(11,304) $ 11,414 $(30,991) $ 20,641 ========= ========= ========= ========= ========= Adjusted free cash flow (3) $ (9,921) $(11,304) $ 11,414 $(21,225) $ 20,641 ========= ========= ========= ========= ========= -------------------- (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 $ 16,107 $ 12,791 $ 18,149 $ 28,898 $ 33,542 Net cash used in investing activities as presented above (35,794) (24,095) (6,735) (59,889) (12,901) --------- --------- --------- --------- --------- Free cash flow $(19,687) $(11,304) $ 11,414 $(30,991) $ 20,641 ========= ========= ========= ========= ========= (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) $(19,687) $(11,304) $ 11,414 $(30,991) $ 20,641 Less purchase of Chicago IBX property 9,766 - - 9,766 - --------- --------- --------- --------- --------- Adjusted free cash flow $ (9,921) $(11,304) $ 11,414 $(21,225) $ 20,641 ========= ========= ========= ========= ========= 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