EQIX Equinix Inc

Equinix, Inc. (Nasdaq:EQIX), the leading provider of network-neutral data centers and Internet exchange services, today reported quarterly results for the period ended September 30, 2008. Revenues were $183.7 million for the third quarter, a 7% increase over the previous quarter and a 77% increase over the same quarter last year, which includes an approximate negative $2.5 million impact as a result of a strengthening U.S. dollar during the quarter. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $173.5 million, a 6% increase over the prior quarter and a 75% increase over the same quarter last year. Non-recurring revenues were $10.2 million in the quarter. Cost of revenues were $109.9 million for the third quarter, an 8% increase over the previous quarter and a 75% increase over the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $39.3 million, were $70.6 million for the third quarter, a 7% increase over the previous quarter and a 75% increase over the same quarter last year. Cash gross margins, defined as gross profit plus depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 62%, the same as the previous quarter and up from 61% the same quarter last year. Selling, general and administrative expenses were $51.5 million for the third quarter, including $11.3 million of stock-based compensation, a 9% decrease from the previous quarter and a 48% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $15.4 million, were $36.1 million for the third quarter, a 2% decrease over the previous quarter and a 58% increase over same quarter last year. Net income for the third quarter was $7.4 million, including stock-based compensation expense of $12.6 million. This represents a basic net income per share of $0.20 based on a weighted average share count of 37.0 million and a diluted net income per share of $0.19 based on a weighted average share count of 37.9 million for the third quarter of 2008. EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation expense and restructuring charges, for the third quarter was $77.0 million, up from $69.1 million the previous quarter and up from $40.6 million the same quarter last year. �Despite the challenging economic environment, Equinix delivered another strong quarter,� said Steve Smith, president and CEO of Equinix.��While we continue to closely monitor all aspects of the business, we believe that the strength of our continued demand and focus on business execution will allow us to extend our market leadership position.� Capital expenditures in the third quarter were $95.4 million, of which $13.5 million was attributed to ongoing capital expenditures and $81.9 million was attributed to expansion capital expenditures. The Company generated cash from operating activities of $62.7 million as compared to $66.5 million in the previous quarter. Cash used in investing activities was $85.2 million as compared to $108.4 million in the previous quarter. As of September 30, 2008, the Company�s cash, cash equivalents and investments were $330.2 million, as compared to $324.7 million at the end of the previous quarter. Other Company Developments Completed on-schedule expansions in the Amsterdam, Frankfurt, and Hong Kong markets, adding approximately 650 cabinet equivalents in Europe and 550 cabinet equivalents in Asia Announced plans to build a new 300,000 square foot data center in London and a new 110,000 square foot data center in Singapore. Total capital investment for the initial phases of the London and Singapore expansions is expected to be in the range of approximately $125.0 - $135.0 million Company Metrics Cabinet capacity as of September 30, 2008, and excluding the Europe region, was approximately 33,800 cabinets, including 27,100 in the U.S., and 6,700 in Asia The total number of cabinets billing as of September 30, 2008, and excluding the Europe region, was approximately 26,400 representing an approximate utilization rate of�78%, a net increase of approximately 1,250 cabinets in the quarter Cabinet and MRR churn, excluding the Europe region, was approximately 2.0% in the quarter On a weighted average basis as of September 30, 2008, and excluding the Europe region, the number of cabinets billing was approximately�26,100 representing an approximate utilization rate of�78%. In the U.S., this result was 20,800 representing an approximate utilization rate of 77%. In Asia, this result was 5,300 representing an approximate utilization rate of 84% Weighted average monthly recurring revenue (MRR) per cabinet as of September 30, 2008, and excluding the Europe region, was $1,654. In the U.S., the MRR per cabinet was $1,756 and in Asia, the MRR per cabinet was $1,254 U.S. interconnection service revenues were 19% of U.S. recurring revenues for the quarter. Interconnection services represented approximately 14% of total worldwide recurring revenues for the quarter The total number of U.S. cross connects that were billing as of September 30, 2008 was 21,522 The total number of exchange ports sold as of September 30, 2008 was 740, which included 136 in Asia and 70 in Europe, and 155 were 10 gigabits per second Ethernet ports Added 178 new customers in the quarter bringing the total number of customers worldwide to 2,228, which excludes approximately 475 customers related to a portion of the Netherlands operations Business Outlook For the full year of 2008, total revenues are expected to be in the range of $702.0 to $706.0 million, including an approximate $12.0 million negative impact from a strengthening U.S. dollar. Total year cash gross margins are expected to range between 61% and 62%. Cash selling, general and administrative expenses are expected to be approximately $145.0 million. EBITDA for the year is expected to be between $287.0 and $289.0 million. Capital expenditures for 2008 are expected to be $450.0 to $460.0 million, including approximately $60.0 million of ongoing capital expenditures. For the full year of 2009, total revenues are expected to be in the range of $870.0 to $892.0 million. EBITDA for the year is expected to be between $365.0 and $385.0 million. Capital expenditures for 2009 are expected to be in a range of $325.0 to $375.0 million, comprised of approximately $60.0 million of ongoing capital expenditures, and $265.0 to $315.0 million of expansion capital expenditures. The Company will discuss its results and guidance on its quarterly conference call on Wednesday, October 22, 2008, at 5:30 p.m. EDT (2:30 p.m. PDT). To hear the conference call live, please dial 210-234-0004 (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, October 22, 2008, at 7:30 p.m. (ET) through November 22, 2008 by dialing 203-369-0943. 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. About Equinix Equinix is the leading global provider of network-neutral data center and interconnection services, offering premium colocation, traffic exchange and outsourced IT infrastructure solutions. Global enterprises, content companies, systems integrators and network service providers look to Equinix Internet Business Exchange (IBX�) centers for world-class reliability and network diversity. Equinix IBX centers serve as critical, core hubs for IP networks and Internet operations worldwide. With 41 IBX centers located in 18 strategic markets across North America, Europe and Asia-Pacific, Equinix enables customers to reliably operate their mission-critical infrastructure on a global basis. Important information about Equinix is routinely posted on the investor relations page of its website located at www.equinix.com. We encourage you to check Equinix�s website regularly for the most up-to-date information. This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of�companies�we have or will acquire into Equinix; a failure to receive significant revenue from customers in recently built out or acquired�data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release. Equinix and IBX are registered trademarks of Equinix, Inc. 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), 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, restructuring charges and, with respect to 2007 results, the loss from conversion and extinguishment of debt and gain on EMS sale. 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 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. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we do not intend to build out now or in the future. With respect to its 2007 results, Equinix excludes the loss from conversion and extinguishment of debt and the gain from EMS sale. The loss from conversion and extinguishment of debt represents activity that is not typical for the company. The gain on EMS sale represents a unique transaction for the Company and future sales of other service offerings are not expected. Management believes such items as restructuring charges, the gain on the sale of a service offering and the loss from conversion and extinguishment of debt are unique transactions that are not expected to recur, and consequently, does not consider these items as a normal component of expenses or income 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 core, 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, 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 nine months ended September 30, 2008 and 2007, presented within this press release. � � � � � EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP PRESENTATION (in thousands, except per share detail) (unaudited) � � � Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, � 2008 � � 2008 � � 2007 � � 2008 � � 2007 � � Recurring revenues $ 173,517 $ 163,395 $ 99,288 $ 487,271 $ 268,078 Non-recurring revenues � 10,218 � � 8,649 � � 4,494 � � 26,726 � � 12,650 � Revenues 183,735 172,044 103,782 513,997 280,728 � Cost of revenues � 109,863 � � 102,008 � � 62,891 � � 306,357 � � 171,265 � Gross profit � 73,872 � � 70,036 � � 40,891 � � 207,640 � � 109,463 � � Operating expenses: Sales and marketing 16,009 15,290 9,630 46,650 27,602 General and administrative 35,529 41,445 25,182 111,350 72,122 Restructuring charges � 799 � � - � � - � � 799 � � 407 � Total operating expenses � 52,337 � � 56,735 � � 34,812 � � 158,799 � � 100,131 � � Income from operations � 21,535 � � 13,301 � � 6,079 � � 48,841 � � 9,332 � � Interest and other income (expense): Interest income 441 2,411 3,309 6,293 10,340 Interest expense (13,880 ) (12,823 ) (5,662 ) (40,297 ) (15,240 ) Other income (expense) (520 ) (918 ) 3,167 602 3,168 Loss on conversion and extinguishment of debt � - � � - � � (2,554 ) � - � � (5,949 ) Total interest and other, net � (13,959 ) � (11,330 ) � (1,740 ) � (33,402 ) � (7,681 ) � Net income (loss) before income taxes 7,576 1,971 4,339 15,439 1,651 � Income taxes (187 ) 258 (215 ) (400 ) (766 ) � � � � � Net income (loss) $ 7,389 � $ 2,229 � $ 4,124 � $ 15,039 � $ 885 � � Net income (loss) per share: � Basic net income (loss) per share $ 0.20 � $ 0.06 � $ 0.13 � $ 0.41 � $ 0.03 � � Diluted net income (loss) per share $ 0.19 � $ 0.06 � $ 0.12 � $ 0.40 � $ 0.03 � � Shares used in computing basic net income (loss) per share � 36,972 � � 36,572 � � 31,683 � � 36,608 � � 30,845 � � Shares used in computing diluted net income (loss) per share � 37,932 � � 37,844 � � 33,112 � � 37,731 � � 32,339 � � � EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP PRESENTATION (in thousands) (unaudited) � � � � � � Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2008 2008 2007 2008 2007 � Recurring revenues $ 173,517 $ 163,395 $ 99,288 $ 487,271 $ 268,078 Non-recurring revenues 10,218 8,649 4,494 26,726 12,650 Revenues (1) 183,735 172,044 103,782 513,997 280,728 � Cash cost of revenues (2) 70,601 66,088 40,240 198,450 105,910 Cash gross profit (3) 113,134 105,956 63,542 315,547 174,818 � Cash operating expenses (4): Cash sales and marketing expenses(5) 12,082 10,911 7,283 34,470 20,834 Cash general and administrative expenses (6) 24,079 25,911 15,620 72,701 45,656 Total cash operating expenses (7) 36,161 36,822 22,903 107,171 66,490 � EBITDA (8) $ 76,973 $ 69,134 $ 40,639 $ 208,376 $ 108,328 � � Cash gross margins (9) 62% 62% 61% 61% 62% � EBITDA flow-through rate (10) 67% 50% 45% 48% 50% � � � (1) The geographic split of our revenues on a services basis is presented below: � United States Revenues: Colocation $ 87,988 $ 83,053 $ 62,232 $ 246,338 $ 172,736 Interconnection 20,756 20,106 17,448 59,881 49,991 Managed infrastructure 545 503 547 1,602 1,663 Rental 133 117 356 498 989 Recurring revenues 109,422 103,779 80,583 308,319 225,379 Non-recurring revenues 5,437 3,468 3,102 12,983 9,082 Revenues 114,859 107,247 83,685 321,302 234,461 � Asia-Pacific Revenues: Colocation 14,592 13,485 8,583 39,888 23,479 Interconnection 1,897 1,648 1,126 5,080 2,956 Managed infrastructure 3,432 3,525 3,816 10,619 11,084 Rental - - - - - Recurring revenues 19,921 18,658 13,525 55,587 37,519 Non-recurring revenues 1,658 1,946 1,118 4,769 3,294 Revenues 21,579 20,604 14,643 60,356 40,813 � Europe Revenues: Colocation 39,358 36,436 4,467 110,035 4,467 Interconnection 1,704 1,638 224 4,936 224 Managed infrastructure 2,991 2,805 467 8,080 467 Rental 121 79 22 314 22 Recurring revenues 44,174 40,958 5,180 123,365 5,180 Non-recurring revenues 3,123 3,235 274 8,974 274 Revenues 47,297 44,193 5,454 132,339 5,454 � Worldwide Revenues: Colocation 141,938 132,974 75,282 396,261 200,682 Interconnection 24,357 23,392 18,798 69,897 53,171 Managed infrastructure 6,968 6,833 4,830 20,301 13,214 Rental 254 196 378 812 1,011 Recurring revenues 173,517 163,395 99,288 487,271 268,078 Non-recurring revenues 10,218 8,649 4,494 26,726 12,650 Revenues $ 183,735 $ 172,044 $ 103,782 $ 513,997 $ 280,728 � (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 $ 109,863 $ 102,008 $ 62,891 $ 306,357 $ 171,265 Depreciation, amortization and accretion expense (38,005) (34,712) (21,773) (104,472) (62,336) Stock-based compensation expense (1,257) (1,208) (878) (3,435) (3,019) Cash cost of revenues $ 70,601 $ 66,088 $ 40,240 $ 198,450 $ 105,910 � The geographic split of our cash cost of revenues is presented below: � U.S. cash cost of revenues $ 37,506 $ 33,587 $ 30,677 $ 104,099 $ 85,074 Asia-Pacific cash cost of revenues 8,848 8,872 6,536 25,489 17,809 Europe cash cost of revenues 24,247 23,629 3,027 68,862 3,027 Cash cost of revenues $ 70,601 $ 66,088 $ 40,240 $ 198,450 $ 105,910 � (3) We define cash gross profit as revenues less cash cost of revenues (as defined above). � (4) We define cash operating expenses as operating expenses less depreciation, amortization, stock-based compensation, restructuring charges and gains on asset sales. 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 $ 16,009 $ 15,290 $ 9,630 $ 46,650 $ 27,602 Depreciation and amortization expense (1,560) (1,626) (298) (4,759) (328) Stock-based compensation expense (2,367) (2,753) (2,049) (7,421) (6,440) Cash sales and marketing expenses $ 12,082 $ 10,911 $ 7,283 $ 34,470 $ 20,834 � (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 $ 35,529 $ 41,445 $ 25,182 $ 111,350 $ 72,122 Depreciation and amortization expense (2,512) (2,447) (2,000) (7,554) (4,893) Stock-based compensation expense (8,938) (13,087) (7,562) (31,095) (21,573) Cash general and administrative expenses $ 24,079 $ 25,911 $ 15,620 $ 72,701 $ 45,656 � (7) Our cash operating expenses, or cash SG&A, as defined above, is presented below: � Cash sales and marketing expenses $ 12,082 $ 10,911 $ 7,283 $ 34,470 $ 20,834 Cash general and administrative expenses 24,079 25,911 15,620 72,701 45,656 Cash SG&A $ 36,161 $ 36,822 $ 22,903 $ 107,171 $ 66,490 � The geographic split of our cash operating expenses, or cash SG&A, is presented below: � U.S. cash SG&A $ 22,728 $ 22,846 $ 17,565 $ 65,628 $ 53,964 Asia-Pacific cash SG&A 4,638 4,686 3,953 14,358 11,141 Europe cash SG&A 8,795 9,290 1,385 27,185 1,385 Cash SG&A $ 36,161 $ 36,822 $ 22,903 $ 107,171 $ 66,490 � (8) We define EBITDA as income (loss) from operations less depreciation, amortization, accretion, stock-based compensation expense, restructuring charges and gains on asset sales as presented below: � Income (loss) from operations $ 21,535 $ 13,301 $ 6,079 $ 48,841 $ 9,332 Depreciation, amortization and accretion expense 42,077 38,785 24,071 116,785 67,557 Stock-based compensation expense 12,562 17,048 10,489 41,951 31,032 Restructuring charges 799 - - 799 407 Gains on asset sales - - - - - EBITDA $ 76,973 $ 69,134 $ 40,639 $ 208,376 $ 108,328 � The geographic split of our EBITDA is presented below: � U.S. income (loss) from operations $ 16,252 $ 15,310 $ 6,386 $ 44,840 $ 8,000 U.S. depreciation, amortization and accretion expense 27,275 24,615 20,175 75,110 60,240 U.S. stock-based compensation expense 10,299 10,889 8,882 30,826 26,776 U.S. restructuring charges 799 - - 799 407 U.S. gain on asset sale - - - - - U.S. EBITDA 54,625 50,814 35,443 151,575 95,423 � Asia-Pacific income (loss) from operations 2,119 1,138 312 3,932 1,951 Asia-Pacific depreciation, amortization and accretion expense 4,419 4,449 2,584 12,492 6,005 Asia-Pacific stock-based compensation expense 1,555 1,459 1,258 4,085 3,907 Asia-Pacific restructuring charges - - - - - Asia-Pacific gain on asset sale - - - - - Asia-Pacific EBITDA 8,093 7,046 4,154 20,509 11,863 � Europe income (loss) from operations 3,164 (3,147) (619) 69 (619) Europe depreciation, amortization and accretion expense 10,383 9,721 1,312 29,183 1,312 Europe stock-based compensation expense 708 4,700 349 7,040 349 Europe restructuring charges - - - - - Europe gain on asset sale - - - - - Europe EBITDA 14,255 11,274 1,042 36,292 1,042 � EBITDA $ 76,973 $ 69,134 $ 40,639 $ 208,376 $ 108,328 � (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 67% 69% 63% 68% 64% � Asia-Pacific cash gross margins 59% 57% 55% 58% 56% � Europe cash gross margins 49% 47% 44% 48% 44% � (10) We define EBITDA flow-through rate as incremental EBITDA growth divided by incremental revenue growth as follows: � EBITDA - current period $ 76,973 $ 69,134 $ 40,639 $ 208,376 $ 108,328 Less EBITDA - prior period (69,134) (62,269) (35,311) (123,012) (79,237) EBITDA growth $ 7,839 $ 6,865 $ 5,328 $ 85,364 $ 29,091 � Revenues - current period $ 183,735 $ 172,044 $ 103,782 $ 513,997 $ 280,728 Less revenues - prior period (172,044) (158,218) (91,837) (334,333) (222,046) Revenue growth $ 11,691 $ 13,826 $ 11,945 $ 179,664 $ 58,682 � EBITDA flow-through rate 67% 50% 45% 48% 50% � � EQUINIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) � � � � Assets September 30, December 31, � 2008 � � 2007 � � Cash, cash equivalents and investments $ 330,199 $ 383,900 Accounts receivable, net 62,376 60,089 Property and equipment, net 1,346,982 1,162,720 Goodwill and other intangible assets, net 473,459 510,133 Debt issuance costs, net 18,453 21,333 Deposits 15,543 16,731 Restricted cash 15,681 1,982 Prepaid expenses 14,191 11,070 Deferred tax assets 6,434 6,404 Taxes receivable 2,295 3,437 Other assets � 6,322 � � 4,069 � Total assets $ 2,291,935 � $ 2,181,868 � � Liabilities and Stockholders' Equity � Accounts payable $ 11,797 $ 14,816 Accrued expenses 59,437 50,280 Accrued property and equipment 56,537 76,504 Accrued restructuring charges 11,468 12,140 Capital lease and other financing obligations 99,081 97,412 Mortgage and loans payable 416,358 330,496 Convertible debt 678,236 678,236 Deferred rent 29,901 26,912 Deferred installation revenue 34,958 26,537 Deferred tax liabilities 21,785 25,955 Deferred recurring revenue 8,951 9,556 Asset retirement obligations 11,280 8,759 Customer deposits 11,686 8,844 Other liabilities � 3,210 � � 989 � Total liabilities � 1,454,685 � � 1,367,436 � � Common stock 37 37 Additional paid-in capital 1,445,363 1,376,915 Accumulated other comprehensive income (64,557 ) (3,888 ) Accumulated deficit � (543,593 ) � (558,632 ) Total stockholders' equity � 837,250 � � 814,432 � � Total liabilities and stockholders' equity $ 2,291,935 � $ 2,181,868 � � � � � � � � � � Ending headcount by geographic region is as follows: � U.S. headcount 618 546 Asia-pacific headcount 176 187 Europe headcount � 268 � � 178 � Total headcount � 1,062 � � 911 � � � EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - GAAP PRESENTATION (in thousands) (unaudited) � � � � � � � � � � Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, � 2008 � � 2008 � � 2007 � � 2008 � � 2007 � � Net cash provided by operating activities $ 63,321 $ 64,958 $ 48,427 $ 191,263 $ 106,139 Net cash used in investing activities (82,435 ) (216,215 ) (721,257 ) (434,850 ) (951,206 ) Net cash provided by financing activities 26,428 41,924 783,240 112,950 1,107,012 Effect of foreign currency exchange rates on cash and cash equivalents � 2,243 � � (374 ) � (1,556 ) � 689 � � (1,056 ) Net increase (decrease) in cash and cash equivalents 9,557 (109,707 ) 108,854 (129,948 ) 260,889 Cash and cash equivalents at beginning of period � 151,128 � � 260,834 � � 234,598 � � 290,633 � � 82,563 � Cash and cash equivalents at end of period $ 160,685 � $ 151,127 � $ 343,452 � $ 160,685 � $ 343,452 � � � In addition to the above condensed consolidated statements of cash flows presented on a GAAP basis, the Company presents non-GAAP condensed consolidated statements of cash flows which combine the Company's short-term and long-term investments with our cash and cash equivalents in an effort to present our total unrestricted cash and equivalent balances as presented herein in our condensed consolidated balance sheets. � � Following is a reconciliation of our cash and cash equivalents to our cash, cash equivalents and investments, which is the basis of how our non-GAAP condensed consolidated statements of cash flows are presented on the following page: � � Cash and cash equivalents $ 160,685 $ 151,127 $ 343,452 $ 160,685 $ 343,452 Short-term investments 101,892 64,980 64,005 101,892 64,005 Long-term investments � 67,622 � � 108,642 � � 28,905 � � 67,622 � � 28,905 � Cash, cash equivalents and investments as presented on condensed balance sheet presented herein $ 330,199 � $ 324,749 � $ 436,362 � $ 330,199 � $ 436,362 � � � EQUINIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - NON-GAAP PRESENTATION (1) (in thousands) (unaudited) � � � � � � Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2008 2008 2007 2008 2007 � Cash flows from operating activities: Net income (loss) $ 7,389 $ 2,229 $ 4,124 $ 15,039 $ 885 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, amortization and accretion 42,077 38,785 24,071 116,785 67,557 Stock-based compensation 12,562 17,048 10,489 41,951 31,032 Debt issuance costs 1,172 1,178 812 3,753 1,985 Restructuring charges 799 - - 799 407 Gain on foreign currency hedge - - (1,494) - (1,494) Other reconciling items 353 268 (529) 1,154 (384) Changes in operating assets and liabilities: Accounts receivable (2,252) (4,037) (5,658) (3,783) (7,068) Accounts payable and accrued expenses (522) 4,430 17,786 5,015 23,079 Accrued restructuring charges (594) (695) (3,203) (2,034) (10,100) Other assets and liabilities 1,729 7,275 2,275 13,647 1,008 Net cash provided by operating activities 62,713 66,481 48,673 192,326 106,907 Cash flows from investing activities: Purchase of IXEurope, less cash acquired - - (541,729) - (541,729) Purchase of Virtu, less cash acquired - - - (23,241) - Purchase of Los Angeles IBX property - - (19) - (49,059) Purchase of San Jose IBX property - - (64,971) - (71,471) Purchases of other property and equipment (95,445) (84,458) (88,921) (305,546) (295,809) Accrued property and equipment 10,226 (23,176) (23,939) (16,015) 23,940 Other investing activities - (732) 1,347 (13,901) 877 Net cash used in investing activities (85,219) (108,366) (718,232) (358,703) (933,251) Cash flows from financing activities: Proceeds from employee equity awards 6,849 12,000 10,406 26,087 27,568 Proceeds from follow-on common stock offering - - 339,946 - 339,946 Proceeds from convertible debt - - 395,986 - 645,986 Proceeds from mortgage and loans payable 24,576 35,643 49,491 102,101 118,754 Repayment of capital lease and other financing obligations (956) (952) (500) (2,874) (1,445) Repayment of mortgage and loans payable (4,034) (4,330) (543) (11,456) (1,573) Debt issuance costs (7) (437) (11,546) (908) (22,224) Net cash provided by financing activities 26,428 41,924 783,240 112,950 1,107,012 Effect of foreign currency exchange rates on cash and cash equivalents 1,528 (816) (1,285) (274) (787) Net increase (decrease) in cash, cash equivalents and investments 5,450 (777) 112,396 (53,701) 279,881 Cash, cash equivalents and investments at beginning of period 324,749 325,526 323,966 383,900 156,481 Cash, cash equivalents and investments at end of period $ 330,199 $ 324,749 $ 436,362 $ 330,199 $ 436,362 � � Free cash flow (2) $ (22,506) $ (41,885) $ (669,559) $ (166,377) $ (826,344) � Adjusted free cash flow (3) $ (22,506) $ (41,885) $ (62,840) $ (143,136) $ (164,085) � � � (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 $ 62,713 $ 66,481 $ 48,673 $ 192,326 $ 106,907 Net cash used in investing activities as presented above (85,219) (108,366) (718,232) (358,703) (933,251) Free cash flow $ (22,506) $ (41,885) $ (669,559) $ (166,377) $ (826,344) � (3) We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases or sales of real estate and acquisitions and proceeds from asset sales as presented below: � Free cash flow (as defined above) $ (22,506) $ (41,885) $ (669,559) $ (166,377) $ (826,344) Less purchase of IXEurope, less cash acquired - - 541,729 - 541,729 Less purchase of Virtu, less cash acquired - - - 23,241 - Less purchase of Los Angeles IBX property - - 19 - 49,059 Less purchase of San Jose IBX property - - 64,971 - 71,471 Adjusted free cash flow $ (22,506) $ (41,885) $ (62,840) $ (143,136) $ (164,085)