Equinix (EQIX) 8-KEquinix Reports Fourth Quarter And Full Year 2021 Results

REDWOOD CITY, Calif., Feb. 16, 2022 /PRNewswire/ --

• 2021 annual revenues increased 11% year-over-year on an as-reported basis and 8% on a normalized and constant currency basis to $6.6 billion
• Q4 represents the company's 76^th consecutive quarter of revenue growth
• Delivered record channel bookings in Q4, accounting for 40% of total bookings and nearly 60% of new logos
• Significant milestone in the quarter included expansion into Africa through the agreement to acquire MainOne

Equinix, Inc. (Nasdaq: EQIX), the world's digital infrastructure company™, today reported results for the quarter and year ended December 31, 2021. 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.

2021 Results Summary

• Revenues
• $6.636 billion, an 11% increase over the previous year on an as-reported basis or 8% on a normalized and constant currency basis
• Operating Income
• $1.108 billion, a 5% increase from the previous year, and an operating margin of 17%, largely due to strong operating performance and lower acquisition costs offset in part by increased investments to support the expanded scale and reach of the business
• Adjusted EBITDA
• $3.144 billion, a 47% adjusted EBITDA margin
• Includes $15 million of integration costs
• Net Income and Net Income per Share attributable to Equinix
• $500 million, a 35% increase from the previous year, primarily due to lower interest expense and debt extinguishment costs related to balance sheet refinancing initiatives
• $5.53 per share, a 32% increase from the previous year
• AFFO and AFFO per Share
• $2.451 billion, a 12% increase over the previous year or 10% on a normalized and constant currency basis
• $27.11 per share, a 9% increase over the previous year on both an as-reported and normalized and constant currency basis
• Includes $15 million of integration costs

2022 Annual Guidance Summary

• Revenues
• $7.202 - $7.252 billion, a 9% increase over the previous year or a normalized and constant currency increase of 9 - 10%
• Adjusted EBITDA
• $3.307 - $3.337 billion, a 46% adjusted EBITDA margin
• Absorbs higher utilities expense partially offset by operational efficiencies
• Assumes $20 million of integration costs
• AFFO and AFFO per Share
• $2.646 - $2.676 billion, an increase of 8 - 9% over the previous year or a normalized and constant currency increase of 8 - 10%
• $28.87 - $29.20 per share, an increase of 6 - 8% over the previous year or a normalized and constant currency increase of 7 - 8%. This guidance excludes any capital market activities the company may undertake in the future
• Assumes $20 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, President and CEO, Equinix:

"Businesses globally continue to prioritize digital transformation as a foundational source of competitive advantage. While achieving our 76th consecutive quarter of top-line growth in 2021, Equinix also made significant progress in scaling and transforming our data center business and in accelerating our digital services portfolio to deliver on the promise of physical infrastructure at software speed. As we enter 2022, the underlying performance of our business is exceptionally strong, and we remain well positioned to deliver against our long-term targets and strengthen our position as the world's digital infrastructure company."

Business Highlights

• Equinix continued to expand the reach of its global platform which now encompasses 240 data centers across 66 metros in 27 countries:
  
  
• In December, Equinix announced its expansion into Africa through its intended acquisition of MainOne, a leading West African data center and connectivity solutions provider with operations in Nigeria, Ghana and Côte d'Ivoire. The transaction, which marks the first step in Equinix's long-term strategy to become a leading provider of carrier-neutral digital infrastructure services in Africa, is expected to close in early Q2, subject to the satisfaction of customary closing conditions including the requisite regulatory approvals.
  
  
• In October, Equinix announced an agreement to form a new $575 million joint venture with PGIM Real Estate to extend its xScale™data center program into Australia, and in January Equinix announced the signing of an agreement to form a $525 million joint venture with GIC to develop and operate two xScale data centers in Seoul, Korea. These new joint ventures will bring the global xScale data center portfolio to more than $8 billion across 36 facilities when fully built out.
  
  
• Equinix continued to organically expand its market-leading footprint with 41 major projects underway across 28 metros in 19 countries, representing over 20,000 cabinets of retail colocation space and over 80 megawatts of xScale capacity. New expansions announced today include 17 projects across the Bordeaux, Calgary, Dubai, Frankfurt, Kamloops, Los Angeles, Osaka, Paris, Salalah, Singapore, Sofia, São Paulo, Toronto and Washington, D.C. metro areas.
  
  
• As Equinix increased its global footprint, and as businesses continued to leverage the benefits of Equinix's globally consistent platform for their digital infrastructure, revenues from customers deployed across multiple regions now account for 75% of Equinix total revenue.
  
  
• As businesses increasingly seek to create a digital infrastructure that enables physical infrastructure at software speed, customers are embracing a broader set of digital services across the Equinix portfolio, including Equinix Fabric™, Equinix Metal™ and Network Edge, to seamlessly integrate cloud-based workloads and private infrastructure. Currently, one-third of Equinix's more than 10,000 customers are now utilizing the company's Equinix Fabric service, which enables customers to connect digital infrastructure and services on demand via secure, software-defined interconnection.
  
  
• Equinix continued the growth of its indirect selling initiatives, with channel sales delivering a record quarter to close the year, accounting for 40% of Q4 bookings and nearly 60% of new logos in the quarter. Wins were across a wide range of industry verticals and use cases, with continued strength from strategic partners including AT&T, Cisco, Dell, Google and Microsoft.
  
  
• Throughout Q4 and 2021, Equinix made significant advancements in the company's ambitious ESG goals:
  
  
• In December, Equinix announced its participation in a consortium of seven companies to develop low-carbon fuel cells to power data centers. The project is part of the company's effort to prioritize and support the development of clean, sustainable and renewable power solutions for application across the data center industry, while also supporting its own sustainability agenda that targets climate neutrality by 2030.
  
  
• Equinix recently received a perfect score from the Human Rights Campaign Foundation's 2022 Corporate Equality Index, an annual assessment of LGBTQ+ workplace equality. The company was also ranked #1 in Real Estate in JUST Capital's 2022 ranking of America's most "just" companies.

COVID-19 Update

Many of Equinix's International Business Exchange™ (IBX^®) and xScale data centers have been identified as "essential businesses" or "critical infrastructure" by local governments for purposes of remaining open during the ongoing COVID-19 pandemic, and all data centers remain operational at the time of filing of this press release. Precautionary measures have been implemented during the COVID-19 pandemic to minimize the risk of operational impact and to protect the health and safety of employees, customers, partners and communities.

Looking ahead, the full impact of the COVID-19 pandemic on the company's financial condition or results of operations remains uncertain and will depend on a number of factors, including its impact on Equinix customers, partners and vendors and the impact on, and functioning of, the global financial markets. The company's past results may not be indicative of future performance, and historical trends may differ materially. Additional information pertaining to the impact of the COVID-19 pandemic on Equinix and the company's response thereto will be provided in the upcoming Form 10-K to be filed with the Securities and Exchange Commission for the year ended December 31, 2021.

Business Outlook

For the first quarter of 2022, Equinix expects revenues to range between $1.726 and $1.746 billion, an increase of 2% quarter-over-quarter at the midpoint on both an as-reported and normalized and constant currency basis. This guidance includes a negative foreign currency impact of $3 million when compared to the average FX rates in Q4 2021. Adjusted EBITDA is expected to range between $781 and $801 million, which includes negative foreign currency impact of less than $1 million when compared to the average FX rates in Q4 2021, higher utilities expense and increased seasonal salary and benefit costs of $17 million attributed to the FICA reset. Adjusted EBITDA includes $5 million of integration costs related to acquisitions. Recurring capital expenditures are expected to range between $19 and $29 million.

For the full year of 2022, total revenues are expected to range between $7.202 and $7.252 billion, a 9% increase over the previous year on an as-reported basis, or a 9 - 10% increase on a normalized and constant currency basis. This guidance includes a negative foreign currency impact of $46 million when compared to the average FX rates in 2021. Adjusted EBITDA is expected to range between $3.307 and $3.337 billion, an adjusted EBITDA margin of 46%. This adjusted EBITDA includes a negative foreign currency impact of $22 million when compared to the average FX rates in 2021 and includes approximately 130 basis points of year-over-year margin headwind due to the temporarily inflated power rates in Singapore and the lapping of the favorable Texas virtual Power Purchase Agreement settlements from 2021. The power market dislocation in Singapore is expected to be transitory, and adjusted EBITDA margins are expected to improve in the second half of 2022. For the year, the company expects to incur $20 million in integration costs related to acquisitions. AFFO is expected to range between $2.646 and $2.676 billion, an 8 - 9% increase over the previous year on an as-reported basis, or an 8 - 10% increase on a normalized and constant currency basis. This AFFO guidance includes $20 million in integration costs related to acquisitions. AFFO per share is expected to range between $28.87 and $29.20, a 6 - 8% increase over the previous year on an as-reported basis, or a 7 - 8% 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 $2.145 and $2.385 billion, and recurring capital expenditures are expected to range between $158 and $168 million. xScale-related on-balance sheet capital expenditures are expected to range between $75 and $125 million, which we anticipate will be reimbursed from both the current and future xScale JVs.

The U.S. dollar exchange rates used for 2021 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.15 to the Euro, $1.31 to the Pound, S$1.35 to the U.S. dollar, ¥115 to the U.S. dollar and R$5.57 to the U.S. dollar. The Q4 2021 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Brazilian Real is 20%, 9%, 7%, 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 2021 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended December 31, 2021, along with its future outlook, in its quarterly conference call on Wednesday, February 16, 2022, 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 27, 2022, by dialing 1-866-373-4988 and referencing the passcode 2022. 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 income from operations excluding 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, 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 ongoing COVID-19 pandemic; the current inflationary environment; 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.