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. -0- *T 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 ========= =========
========= ========= ========= *T
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