Equinix Revenue & Profit Grows

Equinix Inc’s. (EQIX: 95.23 0.00 0.00%) fourth quarter 2009 EPS of 44 cents exceeded the Zacks Consensus Estimate of 34 cents per share.
 
Revenue
 
Revenue for the third quarter was $242.6 million, up 7% over the previous quarter and 27.2% over the same quarter last year. This reflects the continued benefit of strong demand across all three geographic regions. This apart, the company witnessed revenue growth across all its business segments.
 
Recurring revenues, consisting primarily of colocation, interconnection and managed services were $231.5 million (95.4% of total revenues), a 7% increase over the previous quarter and a 27.6% increase over the same quarter last year. Non-recurring revenues of $11.1 million (4.6% of total revenues), remained almost flat sequentially and 19.6% from the same quarter last year.
 
Operating Results
 
Cash gross margins, (defined as gross profit less depreciation, amortization, accretion and stock-based compensation, divided by revenues) for the quarter was 65%, up from 64% in the previous quarter and flat compared to the same quarter last year.

The cash gross margins in the U.S. improved by 200 basis points sequentially to 70%,a reflection of lower seasonal utility rates, slower than expected hiring and favorable tax recoveries. Europe cash gross margins were 53%, a 100 basis points (bps) decline in the quarter. This can be attributed to an increase in lower-margin power revenues and higher seasonal utility rates.

Asia Pacific cash gross margins declined 300 bps sequentially to 62%. This can be attributed to increased repairs and maintenance expense and an increase in utility costs.
 
Operating expenses were comparatively high in the quarter. Selling, General and Administrative expenses were $60.9 million, a 12% increase from the previous quarter and a 3% increase over the same quarter last year.

Adjusted EBITDA, defined as income or loss from operations before depreciation and amortization, accretion, stock-based compensation expense and restructuring charges for the quarter was $111.7 million, an increase of 5% from the previous quarter and up 40% from the same quarter last year.
 
Net income for the quarter came in at $17.8 million or 44 cents per share versus net income of $18.8 million or 47 cents per share in the previous quarter. In the year-ago period, the company’s net income stood at $97.8 million (includes income tax benefit of $88 million) or $2.33 per share.
 
Cash Flow
 
During the quarter, Equinix generated $82.5 million from operating activities versus $107.5 million in the previous quarter. Capital expenditures in the third quarter were $101.7 million, of which $20.7 million was spent on ongoing capital expenditures and $81.0 million on expansion. The company exited the quarter with $604.4 million in total cash and cash equivalents (unrestricted and restricted) and investments versus $307.9 million in the previous quarter.
 
Guidance
 
For the first quarter of 2010, total revenues are expected to be in the range of $245.0 to $247.0 million. The cash gross margins are expected to be 64%. Cash selling, general and administrative expenses are expected to be $46 million.

Adjusted EBITDA for the year is expected to be between $110 and $120 million. Capital expenditures are expected to be in the range of $110 to $130 million, comprising approximately $20 million of ongoing capital expenditures and $90 to $110 million of expansion activity.

For the fiscal year 2010, management expects total revenue of $1.05 to $1.07 billion. The cash gross margins for the year are expected to be approximately 64%. Cash selling, general and administrative expenses are expected to be in the range of $200 to $220 million. Adjusted EBITDA is expected to be in the range of $460 to $480 million.

Capital expenditures to remain in the range of $400 to $500 million, with approximately $100 million slated for ongoing capital expenditures related to customer installation, new product innovation, internal ERP system solutions and increased investment in IBX reliability. Capital expenditures relating to expansion are expected to range between $300 and $400 million.