Equinix Reports Third Quarter 2012 Results

  Equinix Reports Third Quarter 2012 Results

  *Reported revenues from continuing operations of $488.7 million, a 7%
    increase over the previous quarter and a 20% increase over the same
    quarter last year
  *Announced full year 2012 revenue guidance of $1,890.0 million to $1,895.0
    million and 2012 adjusted EBITDA guidance to $880.0 to $885.0 million
  *Announced initial guidance for 2013 including annual revenues to be
    greater than $2,200.0 million, adjusted EBITDA to be greater than $1,010.0
    million and total capital expenditures to be in the range of $550.0 to
    $650.0 million

Business Wire

REDWOOD CITY, Calif. -- November 01, 2012

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center
company, today reported quarterly results for the quarter ended September 30,
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.

This quarter includes the quarterly results of ancotel GmbH, a data center
provider headquartered in Frankfurt, Germany, and Asia Tone Limited, a data
center provider formerly headquartered in Hong Kong, both of which were
acquired by the Company in July 2012. In addition, due to the Company’s
decision to sell 16 International Business Exchange data centers located
throughout the United States to an investment group consisting of 365 Main,
Crosslink Capital and Housatonic Partners in a transaction valued at
approximately $75 million, the financial results derived from these 16 data
centers are now excluded from Equinix’s continuing operations and are now
reported as discontinued operations.As a result, Equinix has retroactively
adjusted its financial results for all applicable prior periods beginning
April 30, 2010, the date the Company acquired these assets, to reflect them as
discontinued operations as required under accounting principles generally
accepted in the United States of America. The financial results from these 16
data centers are presented on the last page of the attached financial
statements associated with this earnings release.

Revenues from continuing operations were $488.7 million for the third quarter,
a 7% increase over the previous quarter and a 20% increase over the same
quarter last year. This result included $16.1 million in revenues from the
Company’s Asia Tone and ancotel acquisitions for the quarter and excluded $8.8
million of revenues from discontinued operations. Recurring revenues,
consisting primarily of colocation, interconnection and managed services were
$462.8 million for the third quarter, a 7% increase over the previous quarter
and a 19% increase over the same quarter last year. Non-recurring revenues
were $25.9 million in the quarter.

“We delivered solid financial results in the third quarter, driven by
continued demand for our services across all three regions,” said Steve Smith,
president and CEO of Equinix.“We are executing with discipline and remain
focused on profitable growth. We believe the value of our global
interconnection platform and further development of our business ecosystems
will underpin our competitive position in support of our long-term
opportunity.”

Cost of revenues were $251.5 million for the third quarter, a 12% increase
over the previous quarter and a 14% increase over the same quarter last year.
Cost of revenues, excluding depreciation, amortization, accretion and
stock-based compensation of $93.5 million, which we refer to as cash cost of
revenues, were $158.0 million for the third quarter, an 11% increase from the
previous quarter and a 13% increase over the same quarter last year. Gross
margins for the quarter were 49%, down from 51% 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 68%, down from 69% for
the previous quarter and up from 66% for the same quarter last year.

Selling, general and administrative expenses were $136.8 million for the third
quarter, a 7% increase over the previous quarter and a 26% increase over the
same quarter last year. Selling, general and administrative expenses,
excluding depreciation, amortization and stock-based compensation of $34.4
million, which we refer to as cash selling, general and administrative
expenses, were $102.4 million for the third quarter, a 5% increase over the
previous quarter and a 26% increase over the same quarter last year.

Interest expense was $50.2 million for the third quarter, a 7% increase from
the previous quarter and a 2% decrease over the same quarter last year. The
Company recorded income tax expense of $13.5 million for the third quarter and
income tax expense of $5.1 million in the same quarter last year.

Net income attributable to Equinix for the third quarter was $28.8 million.
This represents a basic net income per share attributable to Equinix of $0.60
and a diluted net income per share attributable to Equinix of $0.58 based on a
weighted average share count of 48.4 million and 52.7 million, respectively,
for the third quarter of 2012.

Income from continuing operations was $95.9 million for the third quarter, a
6% decrease from the previous quarter and a 24% increase over the same quarter
last year. Adjusted EBITDA, defined as income or loss from continuing
operations before depreciation, amortization, accretion, stock-based
compensation, restructuring charges and acquisition costs, for the third
quarter was $228.3 million, a 5% increase over the previous quarter and a 22%
increase over the same quarter last year. This result included $6.7 million in
adjusted EBITDA from the Company’s Asia Tone and ancotel acquisitions for the
quarter and excluded $4.3 million in adjusted EBITDA from discontinued
operations.

Capital expenditures, defined as gross capital expenditures less the net
change in accrued property, plant and equipment in the third quarter, were
$212.1 million, of which $174.5 million was attributed to expansion capital
expenditures and $37.6 million was attributed to ongoing capital expenditures.

The Company generated cash from operating activities of $102.2 million for the
third quarter as compared to $194.8 million in the previous quarter and $141.9
million for the same quarter last year. Cash used in investing activities was
$596.9 million in the third quarter as compared to cash provided by investing
activities of $93.9 million in the previous quarter and cash used in investing
activities of $808.7 million for the same quarter last year, primarily
attributed to cash consideration paid for the acquisitions of Asia Tone and
ancotel. Cash provided by financing activities was $73.7 million for the third
quarter, primarily attributed to the net proceeds from drawdowns of loans
payable during the quarter.

As of September 30, 2012, the Company’s cash, cash equivalents and investments
were $519.8 million, as compared to $823.0 million as of June 30, 2012.

Business Outlook

For the full year of 2012, total revenues are expected to be in the range of
$1,890.0 to $1,895.0 million, and reflect a decrease of approximately $36.0
million in annual revenues from the Company’s decision to sell 16 of its
International Business Exchange data centers and approximately $10.0 million
in favorable currency rates, when compared to our prior foreign currency
exchange rates. Total year cash gross margins are expected to range between
68.0% and 69.0%. Cash selling, general and administrative expenses are
expected to range between $410.0 and $415.0 million. Adjusted EBITDA for the
year is expected to range between $880.0 and $885.0 million, and reflect a
decrease of approximately $18.0 million in adjusted EBITDA due to the assets
that are now held for sale and reported as discontinued operations and absorbs
an approximate $4.5 million foreign currency benefit, when compared to our
prior foreign currency exchange guidance rates. Capital expenditures for 2012
are expected to be in the range of $770.0 to $790.0 million, comprised of
approximately $145.0 million of ongoing capital expenditures and $625.0 to
$645.0 million for expansion capital expenditures.

For the full year of 2013, total revenues are expected to be greater than
$2,200.0 million. Adjusted EBITDA for the year is expected to be greater than
$1,010.0 million, including approximately $20.0 million in REIT-related costs.
Capital expenditures for 2013 are expected to be in the range of $550.0 to
$650.0 million, including approximately $165.0 million of ongoing capital
expenditures.

Company Metrics and Q3 Results Presentation

The Company will discuss its results and guidance on its quarterly conference
call on Thursday, November 1, 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 Thursday, November 1,
2012, at 7:30 p.m. (ET) through December 1, 2012, by dialing 203-369-3804
(domestic and international) and reference the passcode (2012). In addition,
the webcast will be available on the Investor Relations section of the
Company’s website over the same time period. No password is required for the
replay or the webcast.

About Equinix

Equinix, Inc. (Nasdaq: EQIX), connects more than 4,000 companies directly to
their customers and partners inside the world’s most networked data centers.
Today, businesses leverage the Equinix interconnection platform in 30
strategic markets across the Americas, EMEA and Asia-Pacific. www.equinix.com.

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,
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 to evaluate its operations. In presenting these non-GAAP
financial measures, Equinix excludes certain items that it believes are not
good indicators of the Company'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 and acquisition costs.Legislative and regulatory
requirements encourage use of and emphasis on GAAP financial metrics and
require companies to explain why non-GAAP financial metrics are relevant to
management and investors. Equinix excludes these items in order for Equinix's
lenders, investors, and industry analysts who review and report on the
Company, to better evaluate the Company'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 our IBX centers and do not reflect our current
or future cash spending levels to support our business. Our IBX centers are
long-lived assets, and have an economic life greater than 10 years. The
construction costs of our IBX centers do not recur and future capital
expenditures remain minor relative to our initial investment. This is a trend
we expect to continue. In addition, depreciation is also based on the
estimated useful lives of our IBX centers. These estimates could vary from
actual performance of the asset, are based on historic costs incurred to build
out our IBX 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 excludes
amortization expense related to certain intangible assets, as it represents a
cost that may not recur and is not a good indicator of the Company's current
or future operating performance. 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
believes are not meaningful in evaluating the Company's current operations.
Equinix excludes stock-based compensation expense as it primarily represents
expense attributed to equity awards that have no current or future cash
obligations. As such, we, and many investors and analysts, exclude this
stock-based compensation expense when assessing the cash generating
performance of our operations. Equinix excludes restructuring charges from its
non-GAAP financial measures. The restructuring charges relate to the Company's
decision to exit leases for excess space adjacent to several of our IBX
centers, which we did not intend to build out, or our decision to reverse such
restructuring charges or severance charges related to the Switch and Data
acquisition. Equinix excludes acquisition costs from its non-GAAP financial
measures. The acquisition costs relate to costs the Company incurs in
connection with business combinations. Management believes such items as
restructuring charges and acquisition costs are non-core transactions;
however, these types of costs will or may occur in future periods.

Our management does not itself, nor does it suggest that investors should,
consider such non-GAAP financial measures in isolation from, or as a
substitute for, financial information prepared in accordance with GAAP.
However, we have presented such non-GAAP financial measures to provide
investors with an additional tool to evaluate our operating results in a
manner that focuses on what management believes to be our 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, however, 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 that of other companies. In addition,
whenever Equinix uses such non-GAAP financial measures, it provides a
reconciliation of non-GAAP financial measures to the most closely applicable
GAAP financial measure. Investors are encouraged to review the related GAAP
financial measures and the reconciliation of these non-GAAP financial measures
to their most directly comparable GAAP financial measure.

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. 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, the challenges of acquiring,
operating and constructing IBX centers and developing, deploying and
delivering Equinix services; unanticipated costs or difficulties relating to
the integration of companies we have acquired or will acquire into Equinix; a
failure to receive significant revenue 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; and other risks described from time to time in Equinix's
filings with the Securities and Exchange Commission. In particular, see
Equinix's recent 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.

Equinix and IBX are registered trademarks of Equinix, Inc. International
Business Exchange is a trademark of Equinix, Inc.

                                                                                
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
     
                           Three Months Ended                              Nine Months Ended
                           September       June 30,        September       September 30,     September 30,
                           30,                             30,
                           2012            2012            2011            2012              2011
                                                                                             
Recurring revenues         $ 462,829       $ 433,786       $ 388,214       $ 1,317,505       $ 1,090,649
Non-recurring               25,901        23,463        19,994        71,719          57,019    
revenues
     Revenues                488,730         457,249         408,208         1,389,224         1,147,668
                                                                                             
Cost of revenues            251,487       225,289       219,724       693,874         612,580   
        Gross profit        237,243       231,960       188,484       695,350         535,088   
                                                                                             
Operating expenses:
     Sales and               53,211          47,603          42,884          147,224           113,211
     marketing
     General and             83,621          80,595          65,873          242,532           193,986
     administrative
     Restructuring           -               -               1,587           -                 2,186
     charges
     Acquisition            4,542         1,666         699           6,883           2,729     
     costs
        Total
        operating           141,374       129,864       111,043       396,639         312,112   
        expenses
                                                                                             
Income from
continuing                  95,869        102,096       77,441        298,711         222,976   
operations
                                                                                             
Interest and other
income (expense):
     Interest income         1,054           963             679             2,708             1,526
     Interest                (50,207 )       (46,787 )       (51,114 )       (149,812  )       (126,152  )
     expense
     Other income            507             (1,844  )       (1,694  )       (1,491    )       1,438
     (expense)
     Loss on debt           (5,204  )      -             -             (5,204    )     
     extinguishment
        Total
        interest and        (53,850 )      (47,668 )      (52,129 )      (153,799  )      (123,188  )
        other, net
                                                                                             
Income from
continuing                   42,019          54,428          25,312          144,912           99,788
operations before
income taxes
                                                                                             
     Income tax             (13,498 )      (17,138 )      (5,137  )      (44,489   )      (24,090   )
     expense
                                                                                             
Net income from
continuing                   28,521          37,290          20,175          100,423           75,698
operations
                                                                                             
     Net income from
     discontinued           679           350           464           1,228           819       
     operations
                                                                                             
Net income                   29,200          37,640          20,639          101,651           76,517
                                                                                             
Net income
attributable to
redeemable                   (362    )       (1,193  )       (320    )       (1,843    )       (323      )
non-controlling
interests
                                                                                         
Net income
attributable to            $ 28,838       $ 36,447       $ 20,319       $ 99,808         $ 76,194    
Equinix
                                                                                             
Net income per share
attributable to
Equinix:
                                                                                             
     Basic net
     income per
     share from            $ 0.58          $ 0.75          $ 0.20          $ 2.06            $ 1.38
     continuing
     operations
     Basic net
     income per
     share from             0.02          0.01          0.01          0.03            0.02      
     discontinued
     operations
     Basic net
     income per            $ 0.60         $ 0.76         $ 0.21         $ 2.09           $ 1.40      
     share (1)
                                                                                             
     Diluted net
     income per
     share from            $ 0.57          $ 0.72          $ 0.19          $ 2.01            $ 1.36
     continuing
     operations
     Diluted net
     income per
     share from             0.01          0.01          0.01          0.02            0.01      
     discontinued
     operations
     Diluted net
     income per            $ 0.58         $ 0.73         $ 0.20         $ 2.03           $ 1.37      
     share (2)
                                                                                             
     Shares used in
     computing basic        48,361        48,016        47,202        47,779          46,861    
     net income per
     share
                                                                                             
     Shares used in
     computing
     diluted net            52,655        52,351        47,943        51,724          47,694    
     income per
     share

                                                                                             
(1 ) The net income used in the computation of basic net income per share attributable to Equinix is
     presented below:
                                                                                             
     Net income from
     continuing            $ 28,521        $ 37,290        $ 20,175        $ 100,423         $ 75,698
     operations
     Net income
     attributable to         (362    )       (1,193  )       (320    )       (1,843    )       (323      )
     non-controlling
     interests
     Adjustments
     attributable to
     redemption             -             -             (10,639 )      -               (10,639   )
     value of
     non-controlling
     interests
        Net income
        from
        continuing
        operations           28,159          36,097          9,216           98,580            64,736
        attributable
        to Equinix,
        basic
     Net income from
     discontinued           679           350           464           1,228           819       
     operations
        Net income
        attributable       $ 28,838       $ 36,447       $ 9,680        $ 99,808         $ 65,555    
        to Equinix,
        basic
                                                                                             
(2 ) The net income used in the computation of diluted net income per share attributable to Equinix is
     presented below:
                                                                                             
     Net income from
     continuing
     operations            $ 28,159        $ 36,097        $ 9,216         $ 98,580          $ 64,736
     attributable to
     Equinix, basic
     Interest on
     convertible            1,696         1,678         -             5,073           -         
     debt
        Net income
        from
        continuing
        operations           29,855          37,775          9,216           103,653           64,736
        attributable
        to Equinix,
        diluted
     Net income from
     discontinued           679           350           464           1,228           819       
     operations
        Net income
        attributable       $ 30,534       $ 38,125       $ 9,680        $ 104,881        $ 65,555    
        to Equinix,
        diluted
                                                                                             
                                                                                             

                                                                           
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)

                        Three Months Ended                             Nine Months Ended
                        September      June 30,        September       September       September
                        30,                            30,             30,             30,
                        2012           2012            2011            2012            2011
                                                                                       
Net income              $ 29,200      $ 37,640       $ 20,639       $ 101,651      $ 76,517  
                                                                                       
Other
comprehensive
income (loss),
net of tax:
  Foreign
  currency                41,782         (49,207 )       (88,659 )       26,887          (17,227 )
  translation
  gain (loss)
  Unrealized gain
  (loss) on              113          (177    )      (241    )      14            (267    )
  available for
  sale securities
Other
comprehensive            41,895       (49,384 )      (88,900 )      26,901        (17,494 )
income (loss),
net of tax:
                                                                                       
Comprehensive
income (loss),           71,095       (11,744 )      (68,261 )      128,552       59,023  
net of tax
                                                                                       
  Net income
  attributable to
  redeemable              (362   )       (1,193  )       (320    )       (1,843  )       (323    )
  non-controlling
  interests
  Other
  comprehensive
  income
  attributable to        240          3,974         10,163        3,155         9,096   
  redeemable
  non-controlling
  interests
                                                                                       
Comprehensive
income (loss)
attributable to         $ 70,973      $ (8,963  )     $ (58,418 )     $ 129,864      $ 67,796  
Equinix, net of
tax
                                                                                       
                                                                                       

                                                    
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
  
Assets                           September 30,                   December 31,
                                 2012                            2011
                                                                 
Cash and cash equivalents        $ 239,687                       $ 278,823
Short-term investments             164,787                         635,721
Accounts receivable, net           181,973                         139,057
Assets held-for-sale               68,991                          -
Other current assets              69,748                        182,156   
   Total current assets            725,186                         1,235,757
Long-term investments              115,362                         161,801
Property, plant and                3,791,063                       3,225,912
equipment, net
Goodwill                           1,043,284                       866,495
Intangible assets, net             200,648                         148,635
Other assets                      115,427                       146,724   
   Total assets                  $ 5,990,970                    $ 5,785,324 
                                                                 
Liabilities and
Stockholders' Equity
                                                                 
Accounts payable and             $ 244,712                       $ 229,043
accrued expenses
Accrued property and               141,025                         93,224
equipment
Current portion of capital
lease and other financing          14,853                          11,542
obligations
Current portion of loans           49,332                          87,440
payable
Current portion of                 -                               246,315
convertible debt
Liabilities held-for-sale          22,745                          -
Current portion of                 70,304                          394
deferred tax liabilities
Other current liabilities         69,488                        57,296    
   Total current                   612,459                         725,254
   liabilities
Capital lease and other
financing obligations,             487,868                         390,269
less current portion
Loans payable, less                199,349                         168,795
current portion
Senior notes                       1,500,000                       1,500,000
Convertible debt                   705,127                         694,769
Other liabilities                 174,327                       286,424   
   Total liabilities              3,679,130                     3,765,511 
                                                                 
Redeemable non-controlling        78,191                        67,601    
interests
                                                                 
Common stock                       49                              48
Additional paid-in capital         2,539,235                       2,437,623
Treasury stock                     (36,706   )                     (86,666   )
Accumulated other                  (113,642  )                     (143,698  )
comprehensive loss
Accumulated deficit               (155,287  )                    (255,095  )
   Total stockholders'            2,233,649                     1,952,212 
   equity
                                                                 
   Total liabilities,
   redeemable
   non-controlling               $ 5,990,970                    $ 5,785,324 
   interests and
   stockholders' equity
                                                                 
                                                            
                                                                 
Ending headcount by
geographic region is as
follows:
                                                                 
   Americas headcount              1,841                           1,763
   EMEA headcount                  789                             570
   Asia-Pacific headcount         506                           376       
        Total headcount           3,136                         2,709     
                                                                 
                                                                 

                                                      
EQUINIX, INC.
SUMMARY OF DEBT OUTSTANDING
(in thousands)
(unaudited)

                                    September 30,                 December 31,
                                    2012                          2011
                                                                  
Capital lease and other             $  502,721                    $  401,811
financing obligations
                                                                  
U.S. term loan                         190,000                       -
ALOG financing                         49,349                        -
Paris 4 IBX financing                  6,132                         52,104
ALOG loans payable                     -                             10,288
Asia Tone loans payable                3,200                         -
Asia-Pacific financing                -                            193,843
     Total loans payable              248,681                      256,235
                                                                  
Senior notes                          1,500,000                    1,500,000
                                                                  
Convertible debt, net of debt          705,127                       941,084
discount
Plus debt discount                    64,589                       78,652
     Total convertible debt           769,716                      1,019,736
     principal
                                                                  
Total debt outstanding              $  3,021,118                  $  3,177,782
                                                                  
                                                                  

                                                                                     
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
       
                              Three Months Ended                                 Nine Months Ended
                              September        June 30,         September        September        September 30,
                              30,                               30,              30,
                              2012             2012             2011             2012             2011
Cash flows from
operating activities:
       Net income             $ 29,200         $ 37,640         $ 20,639         $ 101,651        $ 76,517
       Adjustments to
       reconcile net
       income to net
       cash provided by
       operating
       activities:
         Depreciation,
         amortization           107,623          96,944           92,019           298,489          257,970
         and accretion
         Stock-based            22,582           20,549           19,207           62,234           53,060
         compensation
         Debt issuance
         costs and debt         5,048            4,902            8,207            18,057           23,816
         discount
         Loss on debt
         extinguishment         5,204            -                -                5,204            -
         and interest
         rate swaps
         Restructuring          -                -                1,587            -                2,186
         charges
         Excess tax
         benefits from          (53,174  )       -                -                (53,174  )       -
         employee
         equity awards
         Other
         reconciling            2,205            984              711              6,046            5,348
         items
         Changes in
         operating
         assets and
         liabilities:
            Accounts            (12,359  )       (14,864  )       (9,989   )       (46,900  )       (26,299    )
            receivable
            Deferred
            tax assets,         (1,656   )       9,531            1,760            13,245           4,893
            net
            Accounts
            payable and         17,500           35,544           32               19,307           (9,492     )
            accrued
            expenses
            Other
            assets and         (20,021  )      3,552          7,697          (1,232   )      11,989     
            liabilities
             Net cash
             provided
             by                102,152        194,782        141,870        422,927        399,988    
             operating
             activities
Cash flows from
investing activities:
       Purchases, sales
       and maturities           (111,574 )       279,621          (677,229 )       514,413          (648,435   )
       of investments,
       net
       Purchase of Asia
       Tone, less cash          (188,798 )       -                -                (188,798 )       -
       acquired
       Purchase of
       ancotel, less            (84,236  )       -                -                (84,236  )       -
       cash acquired
       Purchase of
       ALOG, less cash          -                -                -                -                (41,954    )
       acquired
       Purchases of             -                -                -                -                (23,993    )
       real estate
       Purchases of
       other property,          (212,118 )       (196,484 )       (131,525 )       (554,092 )       (495,515   )
       plant and
       equipment
       Other investing         (133     )      10,743         61             79,167         (94,922    )
       activities
             Net cash
             provided
             by (used          (596,859 )      93,880         (808,693 )      (233,546 )      (1,304,819 )
             in)
             investing
             activities
Cash flows from
financing activities:
       Purchases of             -                -                -                (13,364  )       -
       treasury stock
       Proceeds from
       employee equity          13,666           6,013            11,107           50,139           35,704
       awards
       Proceeds from            249,633          -                12,718           258,542          90,635
       loans payable
       Proceeds from            -                -                750,000          -                750,000
       senior notes
       Repayment of
       capital lease
       and other                (3,049   )       (3,032   )       (3,081   )       (8,907   )       (7,404     )
       financing
       obligations
       Repayment of
       mortgage and             (238,480 )       (10,170  )       (11,171  )       (315,779 )       (21,273    )
       loans payable
       Repayment of             -                (250,007 )       -                (250,007 )       -
       convertible debt
       Excess tax
       benefits from            53,174           -                -                53,174           -
       employee equity
       awards
       Other financing         (1,247   )      (7,520   )      (15,426  )      (8,767   )      (15,551    )
       activities
             Net cash
             provided
             by (used          73,697         (264,716 )      744,147        (234,969 )      832,111    
             in)
             financing
             activities
Effect of foreign
currency exchange rates        6,601          (2,794   )      (4,673   )      6,452          402        
on cash and cash
equivalents
Net increase (decrease)
in cash and cash                (414,409 )       21,152           72,651           (39,136  )       (72,318    )
equivalents
Cash and cash
equivalents at                 654,096        632,944        297,872        278,823        442,841    
beginning of period
Cash and cash
equivalents at end of         $ 239,687       $ 654,096       $ 370,523       $ 239,687       $ 370,523    
period
                                                                                                  
       Supplemental
       cash flow
       information:
         Cash paid for        $ 12,813        $ 5,031         $ 347           $ 19,578        $ 7,172      
         taxes
         Cash paid for        $ 65,616        $ 28,965        $ 39,821        $ 157,917       $ 100,283    
         interest
                                                                                                  
Free cash flow (1)            $ (383,133 )     $ 9,041         $ 10,406        $ (325,032 )     $ (256,396   )
                                                                                                  
Adjusted free cash flow       $ (56,925  )     $ 9,041         $ 10,406        $ 1,176         $ (190,449   )
(2)
                                                                                                  
Ongoing capital               $ 37,593        $ 37,537        $ 26,556        $ 113,592       $ 83,451     
expenditures (3)
                                                                                                  
Discretionary free cash       $ 64,559        $ 157,245       $ 115,314       $ 309,335       $ 316,537    
flow (4)
                                                                                                  
Adjusted discretionary        $ 117,733       $ 157,245       $ 115,314       $ 362,509       $ 316,537    
free cash flow (5)

                                                                                                  
       We define free cash flow as net cash provided by operating activities plus net cash provided by (used in)
(1 )   investing activities (excluding the net purchases, sales and maturities of investments) as presented
       below:
                                                                                                  
       Net cash
       provided by
       operating              $ 102,152        $ 194,782        $ 141,870        $ 422,927        $ 399,988
       activities as
       presented above
       Net cash
       provided by
       (used in)                (596,859 )       93,880           (808,693 )       (233,546 )       (1,304,819 )
       investing
       activities as
       presented above
       Purchases, sales
       and maturities          111,574        (279,621 )      677,229        (514,413 )      648,435    
       of investments,
       net
         Free cash flow
         (negative free       $ (383,133 )     $ 9,041         $ 10,406        $ (325,032 )     $ (256,396   )
         cash flow)
                                                                                                  
       We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases or sales
(2 )   of real estate and acquisitions, as well as any excess tax benefits from employee equity awards, as
       presented below:
                                                                                                  
       Free cash flow
       (as defined            $ (383,133 )     $ 9,041          $ 10,406         $ (325,032 )     $ (256,396   )
       above)
       Less purchase of
       Asia Tone, less          188,798          -                -                188,798          -
       cash acquired
       Less purchase of
       ancotel, less            84,236           -                -                84,236           -
       cash acquired
       Less purchase of
       ALOG, less cash          -                -                -                -                41,954
       acquired
       Less purchases           -                -                -                -                23,993
       of real estate
       Less excess tax
       benefits from           53,174         -              -              53,174         -          
       employee equity
       awards
         Adjusted free
         cash flow
         (negative            $ (56,925  )     $ 9,041         $ 10,406        $ 1,176         $ (190,449   )
         adjusted free
         cash flow)
                                                                                                  
       We refer to our purchases of other property, plant and equipment as our capital expenditures (or capex).
(3 )   We categorize our capital expenditures into expansion and ongoing capex. Expansion capex is capex spent
       to build out our new data centers and data center expansions. Our ongoing capex represents all of our
       other capex spending.
                                                                                                  
       Ongoing capital        $ 37,593         $ 37,537         $ 26,556         $ 113,592        $ 83,451
       expenditures
       Expansion
       capital                 174,525        158,947        104,969        440,500        412,064    
       expenditures
         Total capital        $ 212,118       $ 196,484       $ 131,525       $ 554,092       $ 495,515    
         expenditures
                                                                                                  
(4 )   We define discretionary free cash flow as net cash provided by operating activities less ongoing capital
       expenditures (as described above), as presented below:
                                                                                                  
       Net cash
       provided by
       operating              $ 102,152        $ 194,782        $ 141,870        $ 422,927        $ 399,988
       activities as
       presented above
       Less ongoing
       capital                 (37,593  )      (37,537  )      (26,556  )      (113,592 )      (83,451    )
       expenditures
         Discretionary        $ 64,559        $ 157,245       $ 115,314       $ 309,335       $ 316,537    
         free cash flow
                                                                                                  
(5 )   We define adjusted discretionary free cash flow as discretionary free cash flow (as defined above)
       excluding any excess tax benefits from employee equity awards as presented below:
                                                                                                  
       Discretionary          $ 64,559         $ 157,245        $ 115,314        $ 309,335        $ 316,537
       free cash flow
       Excess tax
       benefits from           53,174         -              -              53,174         -          
       employee equity
       awards
         Adjusted
         discretionary        $ 117,733       $ 157,245       $ 115,314       $ 362,509       $ 316,537    
         free cash flow
                                                                                                  
                                                                                                  

                                                                                         
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FROM CONTINUING OPERATIONS- NON-GAAP PRESENTATION
(in thousands)
(unaudited)
       
                               Three Months Ended                                   Nine Months Ended
                               September        June 30,           September        September 30,     September 30,
                               30,                                 30,
                               2012             2012               2011             2012              2011
                                                                                                      
Recurring revenues             $ 462,829        $ 433,786          $ 388,214        $ 1,317,505       $ 1,090,649
Non-recurring revenues          25,901         23,463           19,994         71,719          57,019    
        Revenues (1)            488,730        457,249          408,208        1,389,224       1,147,668 
                                                                                                      
Cash cost of revenues           158,038        142,011          139,968        436,410         390,561   
(2)
            Cash gross          330,692        315,238          268,240        952,814         757,107   
            profit (3)
                                                                                                      
Cash operating expenses
(4):
        Cash sales and
        marketing                42,120           38,689             34,412           118,928           90,593
        expenses (5)
        Cash general and
        administrative          60,274         59,069           46,806         177,512         139,408   
        expenses (6)
            Total cash
            operating           102,394        97,758           81,218         296,440         230,001   
            expenses (7)
                                                                                                      
Adjusted EBITDA (8)            $ 228,298       $ 217,480         $ 187,022       $ 656,374        $ 527,106   
                                                                                                      
Cash gross margins (9)          68       %      69         %      66       %      69        %      66        %
                                                                                                      
Adjusted EBITDA margins         47       %      48         %      46       %      47        %      46        %
(10)
                                                                                                      
Adjusted EBITDA                 34       %      49         %      42       %      57        %      56        %
flow-through rate (11)

                                                                                                      
(1  )   The geographic split of our revenues on a services basis is presented below:
                                                                                                      
        Americas
        Revenues:
                                                                                                      
        Colocation             $ 213,011        $ 209,756          $ 186,438        $ 626,685         $ 536,403
        Interconnection          54,943           53,048             47,208           159,730           137,440
        Managed                  12,424           12,564             15,932           38,924            25,328
        infrastructure
        Rental                  469            445              550            1,353           1,543     
          Recurring              280,847          275,813            250,128          826,692           700,714
          revenues
        Non-recurring           13,034         12,308           9,333          34,439          26,694    
        revenues
          Revenues              293,881        288,121          259,461        861,131         727,408   
                                                                                                      
        EMEA Revenues:
                                                                                                      
        Colocation               91,512           87,820             77,709           263,283           220,554
        Interconnection          7,188            4,192              3,446            15,204            9,461
        Managed                  5,112            3,262              3,691            11,788            10,370
        infrastructure
        Rental                  314            336              262            994             557       
          Recurring              104,126          95,610             85,108           291,269           240,942
          revenues
        Non-recurring           7,832          7,087            7,216          24,722          22,032    
        revenues
          Revenues              111,958        102,697          92,324         315,991         262,974   
                                                                                                      
        Asia-Pacific
        Revenues:
                                                                                                      
        Colocation               63,204           49,651             41,874           159,972           117,314
        Interconnection          8,550            7,794              6,378            23,664            17,537
        Managed                 6,102          4,918            4,726          15,908          14,142    
        infrastructure
          Recurring              77,856           62,363             52,978           199,544           148,993
          revenues
        Non-recurring           5,035          4,068            3,445          12,558          8,293     
        revenues
          Revenues              82,891         66,431           56,423         212,102         157,286   
                                                                                                      
        Worldwide
        Revenues:
                                                                                                      
        Colocation               367,727          347,227            306,021          1,049,940         874,271
        Interconnection          70,681           65,034             57,032           198,598           164,438
        Managed                  23,638           20,744             24,349           66,620            49,840
        infrastructure
        Rental                  783            781              812            2,347           2,100     
          Recurring              462,829          433,786            388,214          1,317,505         1,090,649
          revenues
        Non-recurring           25,901         23,463           19,994         71,719          57,019    
        revenues
          Revenues             $ 488,730       $ 457,249         $ 408,208       $ 1,389,224      $ 1,147,668 
                                                                                                      
(2  )   We define cash cost of revenues as cost of revenues less depreciation, amortization, accretion and
        stock-based compensation as presented below:
                                                                                                      
        Cost of revenues       $ 251,487        $ 225,289          $ 219,724        $ 693,874         $ 612,580
        Depreciation,
        amortization and         (91,723  )       (81,744    )       (78,288  )       (252,887  )       (217,900  )
        accretion
        expense
        Stock-based
        compensation            (1,726   )      (1,534     )      (1,468   )      (4,577    )      (4,119    )
        expense
          Cash cost of         $ 158,038       $ 142,011         $ 139,968       $ 436,410        $ 390,561   
          revenues
                                                                                                      
        The geographic split of our cash cost of revenues is presented below:
                                                                                                      
        Americas cash          $ 85,384         $ 81,465           $ 81,911         $ 245,931         $ 224,411
        cost of revenues
        EMEA cash cost           42,615           37,392             36,930           115,360           107,638
        of revenues
        Asia-Pacific
        cash cost of            30,039         23,154           21,127         75,119          58,512    
        revenues
          Cash cost of         $ 158,038       $ 142,011         $ 139,968       $ 436,410        $ 390,561   
          revenues
                                                                                                      
(3  )   We define cash gross profit as revenues less cash cost of revenues (as defined above).
                                                                                                      
        We define cash operating expenses as operating expenses less depreciation, amortization, stock-based
(4  )   compensation, restructuring charges and acquisition costs. We also refer to cash operating expenses as cash
        selling, general and administrative expenses or "cash SG&A".
                                                                                                      
(5  )   We define cash sales and marketing expenses as sales and marketing expenses less depreciation, amortization
        and stock-based compensation as presented below:
                                                                                                      
        Sales and
        marketing              $ 53,211         $ 47,603           $ 42,884         $ 147,224         $ 113,211
        expenses
        Depreciation and
        amortization             (6,296   )       (4,239     )       (4,319   )       (14,791   )       (11,989   )
        expense
        Stock-based
        compensation            (4,795   )      (4,675     )      (4,153   )      (13,505   )      (10,629   )
        expense
          Cash sales and
          marketing            $ 42,120        $ 38,689          $ 34,412        $ 118,928        $ 90,593    
          expenses
                                                                                                      
(6  )   We define cash general and administrative expenses as general and administrative expenses less
        depreciation, amortization and stock-based compensation as presented below:
                                                                                                      
        General and
        administrative         $ 83,621         $ 80,595           $ 65,873         $ 242,532         $ 193,986
        expenses
        Depreciation and
        amortization             (7,431   )       (7,291     )       (5,586   )       (21,196   )       (16,564   )
        expense
        Stock-based
        compensation            (15,916  )      (14,235    )      (13,481  )      (43,824   )      (38,014   )
        expense
          Cash general
          and                  $ 60,274        $ 59,069          $ 46,806        $ 177,512        $ 139,408   
          administrative
          expenses
                                                                                                      
(7)     Our cash operating expenses, or cash SG&A, as defined above, is presented below:
                                                                                                      
        Cash sales and
        marketing              $ 42,120         $ 38,689           $ 34,412         $ 118,928         $ 90,593
        expenses
        Cash general and
        administrative          60,274         59,069           46,806         177,512         139,408   
        expenses
          Cash SG&A            $ 102,394       $ 97,758          $ 81,218        $ 296,440        $ 230,001   
                                                                                                      
        The geographic split of our cash operating expenses, or cash SG&A, is presented below:
                                                                                                      
        Americas cash          $ 67,136         $ 65,774           $ 54,643         $ 199,759         $ 152,601
        SG&A
        EMEA cash SG&A           22,818           20,100             17,427           62,017            51,908
        Asia-Pacific            12,440         11,884           9,148          34,664          25,492    
        cash SG&A
          Cash SG&A            $ 102,394       $ 97,758          $ 81,218        $ 296,440        $ 230,001   
                                                                                                      
(8  )   We define adjusted EBITDA as income from continuing operations plus depreciation, amortization, accretion,
        stock-based compensation expense, restructuring charges and acquisition costs as presented below:
                                                                                                      
        Income from
        continuing             $ 95,869         $ 102,096          $ 77,441         $ 298,711         $ 222,976
        operations
        Depreciation,
        amortization and         105,450          93,274             88,193           288,874           246,453
        accretion
        expense
        Stock-based
        compensation             22,437           20,444             19,102           61,906            52,762
        expense
        Restructuring            -                -                  1,587            -                 2,186
        charges
        Acquisition             4,542          1,666            699            6,883           2,729     
        costs
          Adjusted             $ 228,298       $ 217,480         $ 187,022       $ 656,374        $ 527,106   
          EBITDA
                                                                                                      
        The geographic
        split of our
        adjusted EBITDA
        is presented
        below:
                                                                                                      
        Americas income
        from continuing        $ 63,740         $ 66,672           $ 50,984         $ 191,978         $ 146,739
        operations
        Americas
        depreciation,
        amortization and         60,322           58,659             54,588           175,630           157,625
        accretion
        expense
        Americas
        stock-based              17,299           15,552             15,071           47,924            41,247
        compensation
        expense
        Americas
        restructuring            -                -                  1,587            -                 2,186
        charges
        Americas
        acquisition             -              (1         )      677            (91       )      2,599     
        costs
          Americas
          adjusted              141,361        140,882          122,907        415,441         350,396   
          EBITDA
                                                                                                      
        EMEA income from
        continuing               20,565           22,962             16,305           70,806            41,954
        operations
        EMEA
        depreciation,
        amortization and         22,054           18,329             19,354           57,695            54,710
        accretion
        expense
        EMEA stock-based
        compensation             2,900            2,673              2,308            7,737             6,750
        expense
        EMEA acquisition        1,006          1,241            -              2,376           14        
        costs
          EMEA adjusted         46,525         45,205           37,967         138,614         103,428   
          EBITDA
                                                                                                      
        Asia-Pacific
        income from              11,564           12,462             10,152           35,927            34,283
        continuing
        operations
        Asia-Pacific
        depreciation,
        amortization and         23,074           16,286             14,251           55,549            34,118
        accretion
        expense
        Asia-Pacific
        stock-based              2,238            2,219              1,723            6,245             4,765
        compensation
        expense
        Asia-Pacific
        acquisition             3,536          426              22             4,598           116       
        costs
          Asia-Pacific
          adjusted              40,412         31,393           26,148         102,319         73,282    
          EBITDA
                                                                                                      
            Adjusted           $ 228,298       $ 217,480         $ 187,022       $ 656,374        $ 527,106   
            EBITDA
                                                                                                      
(9  )   We define cash gross margins as cash gross profit divided by revenues.
                                                                                                      
        Our cash gross margins by geographic region is presented below:
                                                                                                      
        Americas cash           71       %      72         %      68       %      71        %      69        %
        gross margins
                                                                                                      
        EMEA cash gross         62       %      64         %      60       %      63        %      59        %
        margins
                                                                                                      
        Asia-Pacific
        cash gross              64       %      65         %      63       %      65        %      63        %
        margins
                                                                                                      
(10)    We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
                                                                                                      
        Americas
        adjusted EBITDA         48       %      49         %      47       %      48        %      48        %
        margins
                                                                                                      
        EMEA adjusted           42       %      44         %      41       %      44        %      39        %
        EBITDA margins
                                                                                                      
        Asia-Pacific
        adjusted EBITDA         49       %      47         %      46       %      48        %      47        %
        margins
                                                                                                      
(11 )   We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by incremental
        revenue growth as follows:
                                                                                                      
        Adjusted EBITDA        $ 228,298        $ 217,480          $ 187,022        $ 656,374         $ 527,106
        - current period
        Less adjusted
        EBITDA - prior          (217,480 )      (210,596   )      (177,581 )      (558,044  )      (415,998  )
        period
          Adjusted             $ 10,818        $ 6,884           $ 9,441         $ 98,330         $ 111,108   
          EBITDA growth
                                                                                                      
        Revenues -                                457,249
        current period         $ 488,730        $ </td*Story
                                                  too large*

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