Equinix Reports Third-Quarter 2023 Results

Company Delivers Quarterly Revenues Greater than $2 Billion as Enterprises and Service Providers Look to Integrate AI into their Strategies and Offerings

REDWOOD CITY, Calif. --

• Quarterly revenues increased 12% over the same quarter last year to $2.1 billion, or 14% on a normalized and constant currency basis
• Closed 4,200 deals in Q3 across more than 3,100 customers, including record new logos from high-propensity, targeted customers
• Channel bookings accounted for over 65% of new logos with wins focused on digital transformation initiatives
• Increased quarterly cash dividend by 25% to $4.26 per share on its common stock due to continued strong operating performance

Equinix, Inc. (Nasdaq: EQIX), the world's digital infrastructure company^®, today reported results for the quarter ended September 30, 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.

Third-Quarter 2023 Results Summary

• Revenues
  • $2.06 billion, a 12% increase over the same quarter last year
  • Includes a $1 million negative foreign currency impact when compared to prior guidance rates
• Operating Income
  • $380 million, a 14% increase over the same quarter last year, due to strong operating performance and an operating margin of 18%
• Net Income and Net Income per Share attributable to Equinix
  • $276 million, a 30% increase over the same quarter last year, primarily due to higher income from operations and a favorable tax settlement
  • $2.93 per share, a 27% increase from the same quarter last year
• Adjusted EBITDA
  • $936 million, a 7% increase over the same quarter last year, and an adjusted EBITDA margin of 45%
  • Includes a $1 million negative foreign currency impact when compared to prior guidance rates and $2 million of integration costs
• AFFO and AFFO per Share
  • $772 million, an 8% increase over the same quarter last year
  • $8.19 per share, a 6% increase over the same quarter last year

2023 Annual Guidance Summary

• Revenues
  • $8.166 - $8.206 billion, an increase of 12 - 13% over the previous year, or a normalized and constant currency increase of 14 - 15%
  • Includes a $25 million negative foreign currency impact compared to prior guidance rates
• Adjusted EBITDA
  • $3.680 - $3.710 billion, a 45% adjusted EBITDA margin
  • An increase of $17 million compared to prior guidance offset by a $12 million negative foreign currency impact
  • Includes $15 million of integration costs
• AFFO and AFFO per Share
  • $2.996 - $3.026 billion, an increase of 10 - 12% over the previous year, or a normalized and constant currency increase of 12 - 14%
  • An increase of $27 million compared to prior guidance offset by a $9 million negative foreign currency impact
  • $31.87 - $32.19 per share, an increase of 8 - 9% over the previous year, or a normalized and constant currency increase of 10 - 11%

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:

"We delivered another solid quarter of results and continue to drive strong value creation on a per share basis, raising both our dividend and AFFO/share outlook for the full year. A recent Gartner poll found 55% of organizations are in pilot or production mode with generative AI.¹ We're seeing this manifest in accelerated interest from both enterprise customers and emerging service providers looking to service this demand. We expect Equinix's broad portfolio of offerings, in tandem with our key technology partners, will allow us to capture high-value opportunities across the AI value chain, positioning Platform Equinix to be the place where private AI happens and allowing customers to place compute resources in proximity to data and seamlessly leverage public cloud capabilities while maintaining control of high-value proprietary data."

Business Highlights

• Given strong demand signals and the long duration in delivering new capacity, Equinix continues to expand its global footprint. The company currently has 56 major projects underway across 39 markets in 23 countries, including 14 xScale^® builds that are expected to deliver more than 100 megawatts of capacity once opened.
  • In Q3, Equinix added nine new projects, including new builds in Madrid, Osaka, São Paulo and Silicon Valley.
  • More than 50% of expansion capital investment is supporting major metros as the company builds in highly differentiated and scaled markets.
  • To support India's growing digital economy, which is expected to reach $1 trillion by 2026², Equinix announced an investment of $42 million for its fourth International Business Exchange™ (IBX^®) data center in Mumbai, called MB4. Expected to open before the end of the year, the new facility will allow local and overseas businesses to expand their digital capability as a foundation to accelerate digital transformation in India.
  • As AI demand accelerates, Equinix is innovating to build the data center of the future, using its Co-Innovation facility in Ashburn, Virginia, to evaluate technologies to support escalating power requirements including supporting high-power-density AI deployments with liquid cooling technologies—such as direct-to-chip, immersion and rear door heat exchangers. The company can support liquid-cooled deployments across all markets, including support for direct-to-chip liquid cooling in 45 markets across all three regions, with live liquid-cooled deployments across a range of deployment sizes and densities.
• Equinix continues to invest behind its platform strategy with revenue growth from its digital services portfolio over-indexing the broader business, including strong adoption of Equinix's Network Edge offering by enterprise customers.
  • Equinix's global interconnection franchise continues to perform with over 460,000 total interconnections. Equinix Fabric^® saw continued momentum with record port orders, and Equinix Internet Exchange^® had another strong quarter with peak traffic reaching nearly 35 terabits per second.
  • Earlier this month, Equinix and NetApp announced an expanded collaboration with the release of NetApp Storage on Equinix Metal which is an integrated, full stack solution that provides enterprise customers low-latency access to all clouds while keeping control of their data.
  • With nearly 40% market share of cloud on-ramps in markets where it operates, Equinix is well-positioned with key players in the AI ecosystem, and in August, Equinix was recognized as a 2023 Google Cloud Customer Awards winner for the company's work supporting Google AI technology.
• In September, Equinix expanded its relationship with Southern Cross Cables Limited to provide a key U.S.-based interconnectivity access point for the Southern Cross NEXT ("SX NEXT") submarine cable system. SX NEXT is leveraging Equinix's next-generation cable landing station architecture in its LA4 Los Angeles IBX data center to boost aggregate capacity on Southern Cross' Trans-Pacific networks by 500%.
• Earlier this month, Equinix announced that the Warsaw Stock Exchange is migrating its primary matching engine and trading system to Equinix to offer more capabilities and enhanced trading performance.
• Adam Berlew was appointed Chief Marketing Officer in September. With more than 25 years' experience in strategic marketing and global leadership roles, Berlew returns to Equinix after previously serving as Vice President of Global Marketing from 2012 to 2015. He joins Equinix's Customer and Revenue leadership team and will be accountable for driving customer acquisition and revenue growth through effective marketing strategies that align with the company's vision for Platform Equinix^®.

Business Outlook

For the fourth quarter of 2023, the Company expects revenues to range between $2.088 and $2.128 billion, an increase of approximately 1 - 3% over the previous quarter, or a normalized and constant currency increase of 3 - 4%. This guidance includes a $26 million negative foreign currency impact when compared to the average FX rates in Q3 2023. Adjusted EBITDA is expected to range between $899 and $929 million. This guidance includes specific one-time costs attributed to corporate real estate activities,  a $13 million negative foreign currency impact when compared to the average FX rates in Q3 2023 and $5 million of integration costs from acquisitions. Recurring capital expenditures are expected to range between $100 and $120 million.

For the full year of 2023, total revenues are expected to range between $8.166 and $8.206 billion, a 12 - 13% increase over the previous year, or a normalized and constant currency increase of 14 - 15%. This updated guidance maintains prior full year revenue guidance, offset by a $25 million negative foreign currency impact when compared to the prior guidance rates. Adjusted EBITDA is expected to range between $3.680 and $3.710 billion, an adjusted EBITDA margin of 45%. This updated guidance includes an underlying raise of $17 million from better-than-expected operating performance and lower integration costs, offset by a $12 million negative foreign currency impact when compared to prior guidance rates. AFFO is expected to range between $2.996 and $3.026 billion, an increase of 10 - 12% over the previous year, or a normalized and constant currency increase of 12 - 14%. This updated guidance includes an underlying raise of $27 million from better-than-expected business performance and lower integration costs, partially offset by a $9 million negative foreign currency impact when compared to prior guidance rates. AFFO per share is expected to range between $31.87 and $32.19, an increase of 8 - 9% over the previous year, or a normalized and constant currency increase of 10 - 11%. Total capital expenditures are expected to range between $2.675 and $2.925 billion. Non-recurring capital expenditures, including xScale-related capital expenditures, are expected to range between $2.462 and $2.692 billion, and recurring capital expenditures are expected to range between $213 and $233 million. xScale-related on-balance sheet capital expenditures are expected to range between $191 and $241 million, which we anticipate will be reimbursed to Equinix 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 $1.09 to the Euro, $1.19 to the Pound, S$1.37 to the U.S. Dollar, ¥149 to the U.S. Dollar, A$1.56 to the U.S. Dollar, HK$7.83 to the U.S. Dollar, R$5.03 to the U.S. Dollar and C$1.36 to the U.S. Dollar. The Q3 2023 global revenue breakdown by currency for the Euro, British Pound, Singapore Dollar, Japanese Yen, Australian Dollar, Hong Kong Dollar, Brazilian Real and Canadian Dollar is 20%, 11%, 8%, 5%, 4%, 3%, 3% 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.