Equinix, Inc. (Nasdaq: EQIX), a provider of global data center services, yesterday reported quarterly results for the quarter ended March 31, 2012. The Company 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.
Revenues were $452.2 million for the first quarter, a 5% increase over the previous quarter and a 25% increase over the same quarter last year. Recurring revenues, consisting primarily of colocation, interconnection and managed services were $429.6 million for the first quarter, a 5% increase over the previous quarter and a 25% increase over the same quarter last year. Non-recurring revenues were $22.6 million in the quarter.
"Our strong first quarter results reflect growth in all three regions, which is being propelled by strong secular trends in mobility, cloud computing and data management, leaving us well positioned to achieve our 2012 objectives,” said Steve Smith, president and CEO of Equinix. “Global ecosystems being formed inside Equinix reflect these trends as well as our unique position to power the global digital economy."
Cost of revenues were $225.1 million for the first quarter, a 2% decrease over the previous quarter and a 16% increase over the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $84.5 million, which we refer to as cash cost of revenues, were $140.6 million for the first quarter, a 2% decrease from the previous quarter and a 15% increase over the same quarter last year. Gross margins for the quarter were 50%, up from 47% for the previous quarter and up from 46% for the same quarter last year. Cash gross margins, defined as gross profit before depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 69%, up from 67% for the previous quarter and up from 66% for the same quarter last year.
Selling, general and administrative expenses were $125.0 million for the first quarter, a 7% increase over the previous quarter and a 30% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $28.5 million, which we refer to as cash selling, general and administrative expenses, were $96.5 million for the first quarter, an 8% increase over the previous quarter and a 32% increase over the same quarter last year.
Interest expense was $52.8 million for the first quarter, a 4% decrease from the previous quarter and a 41% increase over the same quarter last year, primarily attributed to the $750.0 million 7.00% senior notes offering in July 2011. The Company recorded income tax expense of $14.0 million for the first quarter and income tax expense of $11.1 million in the same quarter last year.
Net income attributable to Equinix for the first quarter was $34.5 million. This represents a basic net income per share attributable to Equinix of $0.74 and a diluted net income per share attributable to Equinix of $0.71 based on a weighted average share count of 47.0 million and 51.1 million, respectively, for the first quarter of 2012.
Income from operations was $101.1 million for the first quarter, a 22% increase from the previous quarter and a 42% increase over the same quarter last year. Adjusted EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation, restructuring charges and acquisition costs, for the first quarter was $215.2 million, an increase of 9% over the previous quarter and a 29% increase over the same quarter last year.
Capital expenditures, defined as gross capital expenditures less the net change in accrued property, plant and equipment in the first quarter, were $145.5 million, of which $102.4 million was attributed to expansion capital expenditures and $43.1 million was attributed to ongoing capital expenditures.
The Company generated cash from operating activities of $126.0 million for the first quarter as compared to $187.6 million in the previous quarter and $117.8 million for the same quarter last year. Cash provided by investing activities was $269.4 million in the first quarter as compared to cash used in investing activities of $194.6 million in the previous quarter and cash used in investing activities of $286.4 million for the same quarter last year. Cash used in financing activities was $44.0 million for the first quarter.
As of March 31, 2012, the Company’s cash, cash equivalents and investments were $1,083.3 million, as compared to $1,076.3 million as of December 31, 2011.
In April 2012, virtually all of the holders of the 2.50% $250.0 million convertible subordinated notes converted their notes. The Company settled the $250.0 million in aggregate principal amount of the 2.50% convertible subordinated notes, plus accrued interest, in $253.1 million of cash and approximately 623,000 shares of the Company’s common stock.
Business Outlook
For the second quarter of 2012, the Company expects revenues to be in the range of $466.0 to $468.0 million, which includes $3.0 million of negative foreign currency headwinds. Cash gross margins are expected to approximate 68%. Cash selling, general and administrative expenses are expected to range between $100.0 and $104.0 million. Adjusted EBITDA is expected to be between $212.0 and $214.0 million, which includes a $3.0 million increase in professional fees and $1.0 million of negative currency headwinds. Capital expenditures are expected to be approximately $240.0 to $260.0 million, comprised of approximately $40.0 million of ongoing capital expenditures and $200.0 to $220.0 million of expansion capital expenditures.
For the full year of 2012, total revenues are expected to be greater than $1,890.0 million, which includes $9.0 million of negative foreign currency headwinds. Total year cash gross margins are expected to approximate 67%. Cash selling, general and administrative expenses are expected to range between $390.0 and $420.0 million. Adjusted EBITDA for the year is expected to be greater than $860.0 million, which includes a $10.0 million increase in professional fees and $4.0 million of negative currency headwinds. Capital expenditures for 2012 are expected to be in the range of $700.0 to $800.0 million, comprised of approximately $135.0 million of ongoing capital expenditures and $565.0 to $665.0 million for expansion capital expenditures.
Company Metrics and Q1 Results Presentation
The Company will discuss its results and guidance on its quarterly conference call on Wednesday, April 25, 2012, at 5:30 p.m. ET (2:30 p.m. PT). A simultaneous live Webcast of the call will be available on the Equinix investors website located at www.equinix.com/investors. To hear the conference call live, please dial 210-234-8004 (domestic and international) and reference the passcode (EQIX). A presentation to accompany the call as well as the Company’s Non-Financial Metrics tracking sheet, will also be available on the website.
A replay of the call will be available beginning on Wednesday, April 25, 2012, at 7:30 p.m. (ET) through May 25, 2012, by dialing 203-369-1363 (domestic and international) and reference the passcode (2012). In addition, the webcast will be available on the investors section of the Company’s website over the same time period. No password is required for the replay or the webcast.