Equinix Reports Fourth-Quarter and Full-Year 2023 Results

REDWOOD CITY, Calif., Feb. 14, 2024 /PRNewswire/ --

• 2023 annual revenues increased 13% year-over-year on an as-reported basis and 15% on a normalized and constant currency basis to $8.2 billion
• Closed nearly 17,000 deals across more than 5,900 customers in 2023
• Record 90 megawatts ("MW") of xScale^® leasing, the result of increased hyperscale demand to support artificial intelligence (AI) and cloud deployments

Equinix, Inc. EQIX, the world's digital infrastructure company^®, today reported results for the quarter and year ended December 31, 2023. 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.

2023 Results Summary

• Revenues
  • $8.188 billion, a 13% increase over the previous year on an as-reported basis or 15% on a normalized and constant currency basis
• Operating Income
  • $1.443 billion, a 20% increase over the previous year, and an operating margin of 18% due to strong operating performance
• Net Income and Net Income per Share attributable to common shareholders
  • $969 million, a 38% increase over the previous year, primarily due to operating performance strength and other income; partially offset by higher income taxes
  • $10.31 per share, a 34% increase over the previous year
• Adjusted EBITDA
  • $3.702 billion, a 45% adjusted EBITDA margin, an increase of 10% compared to last year on an as-reported basis
  • Includes $13 million of integration costs
• AFFO and AFFO per Share
  • $3.019 billion, an 11% increase over the previous year on an as-reported basis or 13% on a normalized and constant currency basis
  • $32.11 per share, a 9% increase over the previous year on an as-reported basis or 11% on a normalized and constant currency basis

2024 Annual Guidance Summary

• Revenues
  • $8.793 - $8.893 billion, a 7 - 9% increase over the previous year on an as-reported basis or a normalized and constant currency increase of 7 - 8% excluding the year-over-year impact of the power pass-through
• Adjusted EBITDA
  • $4.089 - $4.169 billion, a 47% adjusted EBITDA margin, a 10 - 13% increase over the prior year on an as-reported basis
  • Assumes $25 million of integration costs
• AFFO and AFFO per Share
  • $3.306 - $3.376 billion, an increase of 9 - 12% over the previous year on both an as-reported and normalized and constant currency basis
  • $34.58 - $35.31 per share, an increase of 8 - 10% over the previous year on both an as-reported and normalized and constant currency basis
  • This guidance excludes any capital market activities the company may undertake in the future

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:

"2023 was another strong year for Equinix—we delivered more than $8 billion of revenues, achieving an amazing 21 years of consecutive quarterly revenue growth, all while driving AFFO per share performance above the top end of our long-term expectations. We made substantial progress on our ambitious agenda, positioning the business to capitalize on the immense opportunities that lie ahead. Digital transformation, especially in an AI-driven world, is as important as ever to our customers. In this context, the significance of Platform Equinix and its strong competitive advantages has never been more crucial. We plan to continue our focus on creating a platform that allows our customers to build hybrid and multicloud infrastructure, when they want, where they want, and with the ecosystem of partners they need."

Business Highlights

• Given the strong underlying demand for digital infrastructure, Equinix continues to invest broadly across its global footprint, which now includes 260 data centers across 71 metropolitan areas in 33 countries. There are 49 major builds underway in 35 markets, across 21 countries including 11 xScale builds representing nearly 20,000 cabinets of retail and more than 50 megawatts of xScale capacity through 2024.
  
  
  
  
  • Equinix opened 14 new data centers in 12 metros including Dublin, Frankfurt, Kuala Lumpur, Madrid, Milan, Montreal, Paris, São Paulo, Seattle, Seoul, Tokyo and Washington, D.C. In addition, the company added seven new projects in Dallas, Lagos, Madrid, Milan, Warsaw and Washington, D.C.
    
    
    
    
  • In December, Equinix announced plans to expand support for advanced liquid cooling technologies—including direct-to-chip—to more than 100 of its International Business Exchange^TM (IBX^®) data centers in more than 45 metros around the world. This will enable more businesses to use the most performant cooling technologies for the powerful, high-density hardware that supports compute-intensive workloads such as AI.
    
    
    
    
  • The surge in demand for hyperscale infrastructure to support AI and cloud initiatives is resulting in strong demand and significant leasing activity for Equinix's global xScale data center portfolio. Since the last earnings call, the company leased a record 90 megawatts of capacity across six assets in EMEA and APAC, including approximately 32 megawatts leased at the start of the year. This brings total xScale leasing to 300 megawatts globally.
    
    
    
    
  • In Q4, Equinix purchased the company's London 8 IBX data center. Revenues from owned assets increased to 66% of recurring revenues, stepping up 2%, as the company continues to progress on ownership and long-term control of assets.
    
    
    
    
• Last month Equinix launched a fully managed private cloud service that enables enterprises to easily acquire and manage their own NVIDIA DGX AI supercomputing infrastructure for building and running custom generative AI models. The service includes NVIDIA DGX systems, NVIDIA networking and the NVIDIA AI Enterprise software platform. Equinix installs and operates each customer's privately owned NVIDIA infrastructure and can deploy services on their behalf in key IBX data centers globally.
  
  
  
  
  • Equinix continues to gain traction as a preferred location for deploying private AI infrastructure with both enterprises and service providers. In December, the company announced that customers, including Continental AG, i3D.net and Harrison.ai, are leveraging the cloud adjacency, global reach, robust ecosystems and low-latency interconnection of Platform Equinix^® to deploy private AI infrastructure.
    
    
    
    
• Equinix's industry-leading global interconnection franchise continues to perform with over 462,000 total interconnections deployed on its platform. In Q4, interconnection revenues stepped up 10% year-over-year on an as reported basis or 8% year-over-year on a normalized and constant currency basis, and the company added an incremental 4,300 organic interconnections in the quarter.
  
  
  
  
  • In Q4, Equinix added four new native cloud on-ramps in Bogotá, Calgary and Zurich, further strengthening its cloud ecosystem. Equinix customers can now enjoy low-latency access to multiple native cloud on-ramps in 37 metros, including eight out of the world's 10 largest metros by GDP. Equinix has nearly 40% market share of the on-ramps to the major cloud service providers—key players in the AI ecosystem.
    
    
    
    
  • The company recently launched Equinix Fabric Cloud Router, a virtual routing service designed to simplify networking challenges for enterprises in cloud-to-cloud and hybrid cloud environments. This service provides an easy-to-configure, enterprise-grade, multicloud routing solution that can be deployed within minutes. Customers can utilize Equinix Fabric Cloud Router in all 58 Equinix Fabric^®-enabled metros globally, ensuring low-latency connectivity to major cloud providers and a wide range of service providers.
    
    
    
    
• Equinix's Channel program continued to see strong momentum, contributing to 35% of bookings and over 50% of new customers in Q4. The company saw growth from partners, including Avant, HCL, HPE, NVIDIA and WWT, with wins across a wide range of industry verticals and digital-first use cases.
  
  
  
  
• Equinix remains committed to advancing its Future First Sustainability strategy and has continued to make significant progress in this area.
  
  
  
  
  • In December, Equinix announced the full allocation of proceeds from $4.9 billion in investment-grade green bonds to advance toward its near-term science-based target to become climate neutral by 2030 and improve the operational eco-efficiency of its business. As one of the top ten largest green bond issuers in the U.S., Equinix used the net proceeds to support 172 green building projects across 105 sites, 33 energy-efficiency projects, and two Power Purchase Agreements ("PPAs").
    
    
    
    
  • Earlier this month Equinix executed a new PPA in Australia, signaling a broader industry goal of bringing additional clean power to a region where conditions have traditionally been more challenging for executing renewable energy projects. To date, Equinix has executed 21 PPAs across Australia, France, Iberia, the Nordics and the U.S., representing more than one gigawatt of clean energy once operational.
    
    
    
    
  • For the second year in a row, Equinix achieved the highest-ranking score of the CDP's prestigious 2023 "Climate Change A List," a leading environmental rating system focused on climate-related transparency and action. Equinix was also named as a leader in the IDC MarketScape: Worldwide Datacenter Services 2023 Vendor Assessment, recognized for its sustainability advancements, innovative platform capabilities, and global expansion and ecosystem growth.¹

Business Outlook

For the first quarter of 2024, Equinix expects revenues to range between $2.127 and $2.147 billion, an increase of 1 - 2% over the previous quarter, or flat on a normalized and constant currency basis. This guidance includes lower non-recurring revenues related to significant xScale activity in Q4 2023 partly offset by a foreign currency benefit of $38 million when compared to the average FX rates in Q4 2023. Adjusted EBITDA is expected to range between $960 and $980 million, which includes a foreign currency benefit of $18 million when compared to the average FX rates in Q4 2023. Adjusted EBITDA includes $5 million of integration costs related to acquisitions. Recurring capital expenditures are expected to range between $14 and $34 million.

For the full year of 2024, total revenues are expected to range between $8.793 and $8.893 billion, a 7 - 9% increase over the previous year on an as-reported basis, or a 7 - 8% increase on a normalized and constant currency basis excluding the year-over-year impact of the power pass-through, and includes a foreign currency benefit of $127 million when compared to the prior Equinix guidance FX rates. Adjusted EBITDA is expected to range between $4.089 and $4.169 billion, an adjusted EBITDA margin of 47%. This adjusted EBITDA includes approximately 160 basis points of margin benefit from improving operating leverage and power cost decreases, as well as a foreign currency benefit of $67 million when compared to the prior Equinix guidance FX rates. For the year, the company expects to incur $25 million in integration costs related to acquisitions. AFFO is expected to range between $3.306 and $3.376 billion, a 9 - 12% increase over the previous year on both an as-reported and normalized and constant currency basis. This AFFO guidance includes $25 million in integration costs related to acquisitions. AFFO per share is expected to range between $34.58 and $35.31, an 8 - 10% increase over the previous year on both an as-reported and 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 $2.570 and $2.800 billion, and recurring capital expenditures are expected to range between $210 and $230 million. xScale-related on-balance sheet capital expenditures are expected to range between $50 and $90 million, which we anticipate will be reimbursed from both the current and future xScale JVs.

The U.S. dollar exchange rates used for 2024 guidance, taking into consideration the impact of our current foreign currency hedges, have been updated to $1.10 to the Euro, $1.24 to the Pound, S$1.32 to the U.S. dollar, ¥141 to the U.S. dollar and A$1.47 to the U.S. dollar. The Q4 2023 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen and Australian Dollar is 21%, 10%, 8%, 5% 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 2023 Results Conference Call and Replay Information

Equinix will discuss its quarterly results for the period ended December 31, 2023, along with its future outlook, in its quarterly conference call on Wednesday, February 14, 2024, 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, May 1, 2024, by dialing 1-800-568-3705 and referencing the passcode 2024. 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 EQIX is the world's digital infrastructure company^®. Digital leaders harness Equinix's trusted platform to bring together and interconnect foundational infrastructure at software speed. Equinix enables organizations to access all the right places, partners and possibilities to scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value, while supporting their sustainability goals.

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 an IBX data center do not recur with respect to such data center, and future capital expenditures remain minor relative to our initial investment throughout its useful life. Construction costs in future periods are primarily incurred with respect to additional IBX data centers. This is a trend we expect 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 the 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 deducts 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 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 current inflationary environment; foreign currency exchange rate fluctuations; increased costs and increased challenges 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 potential cybersecurity breaches; 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.

 

 

 

 

 

 

 

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SOURCE Equinix, Inc.