EQIX Equinix Inc

REDWOOD CITY, Calif., Feb. 15, 2023 /PRNewswire/ --

• 2022 annual revenues increased 9% year-over-year on an as-reported basis and 11% on a normalized and constant currency basis to $7.3 billion
• Delivered seventh consecutive quarter of record channel bookings, accounting for nearly 40% of total bookings and approximately 60% of new logos
• Closed over 17,000 deals across more than 6,000 customers in 2022
• 2023 financial outlook at or above company's previously disclosed long-term targets shared at the June 2021 Analyst Day
• Increases quarterly cash dividend by 10% to $3.41 per share on its common stock due to strong operating performance

Equinix, Inc. (Nasdaq: EQIX), the world's digital infrastructure company^TM, today reported results for the quarter and year ended December 31, 2022. Equinix uses certain non-GAAP financial measures, which are described further below and reconciled to the most comparable GAAP financial measures after the presentation of our GAAP financial statements. All per-share results are presented on a fully diluted basis.

2022 Results Summary

• Revenues
• • $7.263 billion, a 9% increase over the previous year on an as-reported basis or 11% on a normalized and constant currency basis
• Operating Income
• • $1.201 billion, an 8% increase over the previous year, and an operating margin of 17%, largely due to strong operating performance offset in part by increased investments to support the expanded scale and reach of the business
• Net Income and Net Income per Share attributable to Equinix
• • $705 million, a 41% increase over the previous year, primarily due to operating performance strength and loss on debt extinguishment in 2021; partially offset by higher income taxes
  • $7.67 per share, a 39% increase over the previous year
• Adjusted EBITDA
• • $3.370 billion, a 46% adjusted EBITDA margin
  • Includes $20 million of integration costs
• AFFO and AFFO per Share
• • $2.714 billion, an 11% increase over the previous year on both an as-reported and normalized and constant currency basis
  • $29.55 per share, a 9% increase over the previous year or a normalized and constant currency increase of 11%
  • Includes $20 million of integration costs

2023 Annual Guidance Summary

• Revenues
• • $8.145 - $8.245 billion, a 12 - 14% increase over the previous year or a normalized and constant currency increase of 14 - 15%
• Adjusted EBITDA
• • $3.615 - $3.695 billion, a 45% adjusted EBITDA margin after taking into consideration power price increases to revenues and corresponding power cost increases
  • Assumes $35 million of integration costs
• AFFO and AFFO per Share
• • $2.883 - $2.963 billion, an increase of 6 - 9% over the previous year or a normalized and constant currency increase of 9 - 12%
  • $30.79 - $31.64 per share, an increase of 4 - 7% over the previous year or a normalized and constant currency increase of 8 - 10%. This guidance excludes any capital market activities the company may undertake in the future
  • Assumes $35 million of integration costs

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. The impact of such adjustments could be significant.

Equinix Quote
Charles Meyers, CEO and President, Equinix:

"With IDC forecasting digital technology spend to grow eight times faster than the broader economy in 2023,¹ today's businesses are seeking the right infrastructure partner to support their specific digital transformation needs, especially in the current environment where operational efficiency and the need to create lasting business differentiation are strategic drivers. Our customers are validating the increasing demand for comprehensive solutions that offer 'the right cloud for them' with flexibility to place their workloads across multiple public clouds, private clouds and on-prem—and they are finding Equinix's global platform and interconnected ecosystems a unique environment to architect this customizable infrastructure."

Business Highlights

• As Equinix continues to extend its comprehensive platform to offer businesses a rich mix of physical and virtual solutions to access its interconnected ecosystem, the company made progress on digital services initiatives in Q4 that included:
• • The November announcement with VMware of VMware Cloud on Equinix Metal^®, which combines VMware-managed and supported cloud Infrastructure as a Service with Equinix's interconnected, global Bare Metal as a Service offering. The solution is aimed at offering customers a combination of on-premises security and control with high performance, data locality, and low overall total cost of ownership.
  • An outline for the extension of its entire digital services portfolio to seven new metros. This 2023 plan includes launching Equinix Metal in Dublin, Manchester, Mexico City, Miami and Milan, and bringing Network Edge to Atlanta, Manchester, Mexico City and Seoul.
• Equinix further invested in the expansion of its global platform, which now encompasses more than 245 data centers across 71 metros in 32 countries:
• • The 49 major projects currently underway across 35 metros and 23 countries represent the largest new-build pipeline in company history.
  • In Q4, Equinix announced its first builds in Johannesburg, South Africa, and Johor, Malaysia. The new Johannesburg facility will augment Equinix's current African footprint in Nigeria, Ghana and Côte d'Ivoire by entering the largest and most digitally developed nation on the continent. The Johor expansion represents Equinix's entry into one of the most-requested markets in Asia-Pacific by global customers.
• In Q4, Equinix advanced its environmental sustainability commitments by becoming the first colocation data center operator to commit to more efficient temperature and humidity standards that will enable the company to reduce its overall power use by increasing operating temperature ranges within its data centers. By "adjusting the thermostat" to optimize data center energy use, Equinix is leading the industry and is expected to enable thousands of customers to reduce the Scope 3 carbon emissions associated with their data center operations, as supply chain sustainability becomes an increasingly important part of the overall environmental initiatives of today's businesses.

Business Outlook

For the first quarter of 2023, Equinix expects revenues to range between $1.965 and $1.995 billion, an increase of 5 - 7% over the previous quarter, or a normalized and constant currency increase of 5 - 6%. This guidance includes power price increases in EMEA, and a negative foreign currency impact of $24 million when compared to the average FX rates in Q4 2022. Adjusted EBITDA is expected to range between $891 and $921 million, which includes a negative foreign currency impact of $9 million when compared to the average FX rates in Q4 2022, a step-down in repairs & maintenance costs incurred in the quarter, although offset in part by increased seasonal salary and benefit costs of $17 million attributed to the FICA reset. Adjusted EBITDA includes $6 million of integration costs related to acquisitions. Recurring capital expenditures are expected to range between $18 and $28 million.

For the full year of 2023, total revenues are expected to range between $8.145 and $8.245 billion, a 12 - 14% increase over the previous year on an as-reported basis, or a 14 - 15% increase on a normalized and constant currency basis, and includes a foreign currency benefit of $267 million when compared to the prior Equinix guidance FX rates. Excluding the impact of power price increases, this guidance represents a 9 - 10% increase on a normalized and constant currency basis. Adjusted EBITDA is expected to range between $3.615 and $3.695 billion, an adjusted EBITDA margin of 45%. This adjusted EBITDA includes approximately 290 basis points of cumulative negative margin impact due to inflated power rates across EMEA and APAC markets and a foreign currency benefit of $123 million when compared to the prior Equinix guidance FX rates.  For the year, the company expects to incur $35 million in integration costs related to acquisitions. AFFO is expected to range between $2.883 and $2.963 billion, a 6 - 9% increase over the previous year on an as-reported basis, or a 9 - 12% increase on a normalized and constant currency basis. This AFFO guidance includes $35 million in integration costs related to acquisitions. AFFO per share is expected to range between $30.79 and $31.64, a 4 - 7% increase over the previous year on an as-reported basis, or an 8 - 10% increase on a normalized and constant currency basis. This guidance excludes any capital market activities the company may undertake in the future. Non-recurring capital expenditures, including xScale^®-related costs, are expected to range between $2.511 and $2.741 billion, and recurring capital expenditures are expected to range between $197 and $217 million. xScale-related on-balance sheet capital expenditures are expected to range between $131 and $181 million, which we anticipate will be reimbursed from both the current and future xScale JVs.

The U.S. dollar exchange rates used for 2023 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.10 to the Euro, $1.23 to the Pound, S$1.34 to the U.S. dollar, ¥131 to the U.S. dollar and R$5.29 to the U.S. dollar. The Q4 2022 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 17%, 9%, 8%, 6% and 3%, respectively.

The adjusted EBITDA guidance is based on the revenue guidance less our expectations of cash cost of revenues and cash operating expenses. The AFFO guidance is based on the adjusted EBITDA guidance less our expectations of net interest expense, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, income tax expense, an income tax expense adjustment, recurring capital expenditures, other income (expense), (gains) losses on disposition of real estate property, and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items.

Q4 2022 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended December 31, 2022, along with its future outlook, in its quarterly conference call on Wednesday, February 15, 2023, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live webcast of the call will be available on the company's Investor Relations website at www.equinix.com/investors. To hear the conference call live, please dial 1-517-308-9482 (domestic and international) and reference the passcode EQIX.

A replay of the call will be available one hour after the call through Wednesday, April 26, 2023, by dialing 1-888-293-8912 and referencing the passcode 2023. In addition, the webcast will be available at www.equinix.com/investors (no password required).

Investor Presentation and Supplemental Financial Information

Equinix has made available on its website a presentation designed to accompany the discussion of Equinix's results and future outlook, along with certain supplemental financial information and other data. Interested parties may access this information through the Equinix Investor Relations website at www.equinix.com/investors.

Additional Resources

• Equinix Investor Relations Resources

About Equinix

Equinix (Nasdaq: EQIX) is the world's digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. Equinix enables today's businesses to access all the right places, partners and possibilities they need to accelerate advantage. With Equinix, they can scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value.

Non-GAAP Financial Measures

Equinix provides all information required in accordance with generally accepted accounting principles ("GAAP"), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Equinix uses non-GAAP financial measures to evaluate its operations.

Equinix provides normalized and constant currency growth rates, which are calculated to adjust for acquisitions, dispositions, integration costs, changes in accounting principles and foreign currency.

Equinix presents adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA represents net income excluding income tax expense, interest income, interest expense, other income or expense, gain or loss on debt extinguishment, depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, transaction costs and gain or loss on asset sales.

In presenting non-GAAP financial measures, such as adjusted EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), adjusted EBITDA margins, free cash flow and adjusted free cash flow, Equinix excludes certain items that it believes are not good indicators of Equinix's current or future operating performance. These items are depreciation, amortization, accretion of asset retirement obligations and accrued restructuring charges, stock-based compensation, restructuring charges, impairment charges, transaction costs and gain or loss on asset sales. Equinix excludes these items in order for its lenders, investors and the industry analysts who review and report on Equinix to better evaluate Equinix's operating performance and cash spending levels relative to its industry sector and competitors.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of a data center, and do not reflect its current or future cash spending levels to support its business. Its data centers are long-lived assets, and have an economic life greater than 10 years. The construction costs of a data center do not recur with respect to such data center, although Equinix may incur initial construction costs in future periods with respect to additional data centers, and future capital expenditures remain minor relative to the initial investment. This is a trend it expects to continue. In addition, depreciation is also based on the estimated useful lives of the data centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our data 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 also excludes amortization expense related to acquired intangible assets. Amortization expense is significantly affected by the timing and magnitude of acquisitions, and these charges may vary in amount from period to period. We exclude amortization expense to facilitate a more meaningful evaluation of our current operating performance and comparisons to our prior periods. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charges, as these expenses represent costs which Equinix also believes are not meaningful in evaluating Equinix's current operations. Equinix excludes stock-based compensation expense, as it can vary significantly from period to period based on share price and the timing, size and nature of equity awards. As such, Equinix and many investors and analysts exclude stock-based compensation expense to compare its operating results with those of other companies. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to Equinix's decision to exit leases for excess space adjacent to several of its IBX^® data centers, which it did not intend to build out, or its decision to reverse such restructuring charges. Equinix also excludes impairment charges generally related to certain long-lived assets. The impairment charges are related to expense recognized whenever events or changes in circumstances indicate that the carrying amount of assets are not recoverable. Equinix also excludes gain or loss on asset sales as it represents profit or loss that is not meaningful in evaluating the current or future operating performance. Finally, Equinix excludes transaction costs from its non-GAAP financial measures to allow more comparable comparisons of the financial results to the historical operations. The transaction costs relate to costs Equinix incurs in connection with business combinations and formation of joint ventures, including advisory, legal, accounting, valuation and other professional or consulting fees. Such charges generally are not relevant to assessing the long-term performance of Equinix. In addition, the frequency and amount of such charges vary significantly based on the size and timing of the transactions. Management believes items such as restructuring charges, impairment charges, transaction costs and gain or loss on asset sales are non-core transactions; however, these types of costs may occur in future periods.

Equinix also presents funds from operations ("FFO") and adjusted funds from operations ("AFFO"), both commonly used in the REIT industry, as supplemental performance measures. Additionally, Equinix presents AFFO per share, which is also commonly used in the REIT industry. AFFO per share offers investors and industry analysts a perspective of Equinix's underlying operating performance when compared to other REIT companies. FFO is calculated in accordance with the definition established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income or loss, excluding gain or loss from the disposition of real estate assets, depreciation and amortization on real estate assets and adjustments for unconsolidated joint ventures' and non-controlling interests' share of these items. AFFO represents FFO, excluding depreciation and amortization expense on non-real estate assets, accretion, stock-based compensation, stock-based charitable contributions, restructuring charges, impairment charges, transaction costs, an installation revenue adjustment, a straight-line rent expense adjustment, a contract cost adjustment, amortization of deferred financing costs and debt discounts and premiums, gain or loss on debt extinguishment, an income tax expense adjustment, recurring capital expenditures, net income or loss from discontinued operations, net of tax and adjustments from FFO to AFFO for unconsolidated joint ventures' and non-controlling interests' share of these items. Equinix excludes depreciation expense, amortization expense, accretion, stock-based compensation, restructuring charges, impairment charges and transaction costs for the same reasons that they are excluded from the other non-GAAP financial measures mentioned above.

Equinix includes an adjustment for revenues from installation fees, since installation fees are deferred and recognized ratably over the period of contract term, although the fees are generally paid in a lump sum upon installation. Equinix includes an adjustment for straight-line rent expense on its operating leases, since the total minimum lease payments are recognized ratably over the lease term, although the lease payments generally increase over the lease term. Equinix also includes an adjustment to contract costs incurred to obtain contracts, since contract costs are capitalized and amortized over the estimated period of benefit on a straight-line basis, although costs of obtaining contracts are generally incurred and paid during the period of obtaining the contracts. The adjustments for installation revenues, straight-line rent expense and contract costs are intended to isolate the cash activity included within the straight-lined or amortized results in the consolidated statement of operations. Equinix excludes the amortization of deferred financing costs and debt discounts and premiums as these expenses relate to the initial costs incurred in connection with its debt financings that have no current or future cash obligations. Equinix excludes gain or loss on debt extinguishment since it represents a cost that is not a good indicator of Equinix's current or future operating performance. Equinix includes an income tax expense adjustment, which represents the non-cash tax impact due to changes in valuation allowances and uncertain tax positions that do not relate to the current period's operations. Equinix excludes recurring capital expenditures, which represent expenditures to extend the useful life of its IBX and xScale data centers or other assets that are required to support current revenues. Equinix also excludes net income or loss from discontinued operations, net of tax, which represents results that are not a good indicator of our current or future operating performance.

Equinix presents constant currency results of operations, which is a non-GAAP financial measure and is not meant to be considered in isolation or as an alternative to GAAP results of operations. However, Equinix has presented this non-GAAP financial measure to provide investors with an additional tool to evaluate its operating results without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of Equinix's business performance. To present this information, Equinix's current and comparative prior period revenues and certain operating expenses from entities with functional currencies other than the U.S. dollar are converted into U.S. dollars at a consistent exchange rate for purposes of each result being compared.

Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Equinix presents such non-GAAP financial measures to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what management believes to be its core, ongoing business operations. Management believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.

Investors should note 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 those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, stock-based compensation, net income or 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 without unreasonable effort. The impact of such adjustments could be significant. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, risks to our business and operating results related to the COVID-19 pandemic; the current inflationary environment; foreign currency exchange rate fluctuations; increased costs to procure power and the general volatility in the global energy market; the challenges of acquiring, operating and constructing IBX and xScale data centers and developing, deploying and delivering Equinix products and solutions; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues 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; risks related to our taxation as a REIT and other risks described from time to time in Equinix filings with the Securities and Exchange Commission. In particular, see recent and upcoming Equinix 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.