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Equinix Reports Fourth Quarter and Year-End 2012 Results

  Equinix Reports Fourth Quarter and Year-End 2012 Results

  *Reported 2012 annual revenues from continuing operations of $1,895.7
    million, a 21% increase over the previous year
  *Reiterated 2013 annual guidance of 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. -- February 13, 2013

Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center
company, today reported quarterly and year-end results for the period ended
December 31, 2012. The Company uses certain non-GAAP financial measures, which
are described further below and reconciled to the most comparable GAAP
financial measures after the presentation of our GAAP financial statements.

The quarterly and year-end results for the period ended December 31, 2012
include the results of Asia Tone Limited and ancotel GmbH from July 2012, the
date that both of these data center providers were acquired by the Company.
Due to the Company’s sale of 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 for net
proceeds of $76.5 million, the financial results derived from these 16 data
centers are excluded from Equinix’s continuing operations and are reported as
discontinued operations. As a result, the Company has retroactively adjusted
its financial results for all applicable prior periods beginning April 30,
2010, the date the Company acquired these assets, through November 1, 2012,
the date the sale was closed, 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 $506.5 million for the fourth
quarter, a 4% increase over the previous quarter and a 20% increase over the
same quarter last year. This result included $18.4 million in revenues from
the Company’s Asia Tone and ancotel acquisitions for the quarter and excluded
$2.8 million of revenues from discontinued operations. Revenues from
continuing operations for the year ended December 31, 2012, were $1,895.7
million, a 21% increase over 2011 revenues. This result included $34.6 million
in revenues from the Company’s Asia Tone and ancotel acquisitions and excluded
$29.6 million of revenues from discontinued operations. Recurring revenues,
consisting primarily of colocation, interconnection and managed services, were
$481.7 million for the fourth quarter, a 4% increase over the previous quarter
and $1,799.2 million for the year ended December 31, 2012, a 21% increase over
2011. Non-recurring revenues were $24.8 million in the quarter and $96.5
million for the year ended December 31, 2012.

“2012 was a milestone year for Equinix. We delivered half a billion dollars of
revenue in the fourth quarter, underscoring the scale and reach of our
business,” said Steve Smith, CEO of Equinix. “With our entry into Mainland
China, Jakarta and Dubai as well as our continued investment in existing
markets, we now have over 7 million of gross square feet of capacity, making
us the largest retail colocation provider in the world. We believe the value
of our global interconnection platform and the strength of our business
ecosystems puts us in a strong position to deliver exceptional value to our
customers.”

Cost of revenues were $250.1 million for the fourth quarter, a 1% decrease
from the previous quarter, and $944.0 million for the year ended December 31,
2012, a 13% increase over 2011. Cost of revenues, excluding depreciation,
amortization, accretion and stock-based compensation of $91.1 million for the
fourth quarter and $348.6 million for the year, were $159.0 million for the
fourth quarter, a 1% increase over the previous quarter, and $595.4 million
for the year ended December 31, 2012, a 12% increase over 2011. Gross margins
for the quarter were 51%, up from 49% for the previous quarter and up from 48%
for the same quarter last year. Gross margins were 50% for the year ended
December 31, 2012, up from 47% for the prior year. Cash gross margins, defined
as gross profit before depreciation, amortization, accretion and stock-based
compensation, divided by revenues, for the quarter, were 69%, up from 68% for
the previous quarter and up from 67% for the same quarter last year. Cash
gross margins were 69% for the year ended December 31, 2012, up from 66% for
the prior year.

Selling, general and administrative expenses were $142.6 million for the
fourth quarter, a 4% increase over the previous quarter and $532.3 million for
the year ended December 31, 2012, a 26% increase over 2011. Selling, general
and administrative expenses, excluding depreciation, amortization and
stock-based compensation of $34.3 million for the fourth quarter and $127.6
million for the year, were $108.3 million for the fourth quarter, a 6%
increase over the previous quarter, and $404.7 million for 2012, a 27%
increase over 2011.

Impairment charges were $9.9 million for the fourth quarter and the year ended
December 31, 2012, which were primarily related to the write-off of certain
long-lived assets in the Los Angeles and Sydney metro areas. Acquisition costs
were $1.9 million for the fourth quarter and $8.8 million for the year ended
December 31, 2012, which were primarily related to the Asia Tone, ancotel and
Dubai IBX data center acquisitions.

Interest expense was $50.5 million for the fourth quarter, a 1% increase over
the last quarter, and $200.3 million for the year ended December 31, 2012. The
Company recorded income tax expense of $17.3 million for the fourth quarter as
compared to income tax expense of $13.5 million in the prior quarter and
income tax expense of $61.8 million for the year ended December 31, 2012 as
compared to income tax expense of $37.5 million in the prior year.

Income from continuing operations was $102.0 million for the fourth quarter, a
6% increase over the previous quarter and $400.8 million for the year ended
December 31, 2012, a 31% increase over 2011. Adjusted EBITDA, defined as
income or loss from continuing operations before depreciation, amortization,
accretion, stock-based compensation, restructuring charges, impairment charges
and acquisition costs, for the fourth quarter was $239.3 million, an increase
of 5% over the previous quarter and $895.7 million for the year ended December
31, 2012, a 24% increase over 2011. These results included adjusted EBITDA
from the Company’s Asia Tone and ancotel acquisitions of $7.8 million and
$14.5 million, respectively, and excluded adjusted EBITDA from discontinued
operations for the fourth quarter and the year ended December 31, 2012 of $1.3
million and $14.7 million, respectively.

Net income attributable to Equinix for the fourth quarter was $44.9 million.
This represents a basic net income per share attributable to Equinix of $0.92
and diluted net income per share attributable to Equinix of $0.88 based on a
weighted average share count of 48.7 million and 52.9 million, respectively,
for the fourth quarter of 2012. Net income attributable to Equinix for the
year ended December 31, 2012 was $144.7 million. This represents a basic net
income per share attributable to Equinix of $3.01 and diluted net income per
share attributable to Equinix of $2.92 based on a weighted share count of 48.0
million and 51.8 million, respectively, for the year ended December 31, 2012.

Capital expenditures, defined as gross capital expenditures less the net
change in accrued property, plant and equipment in the fourth quarter were
$210.4 million, of which $166.9 million was attributed to expansion capital
expenditures and $43.5 million was attributed to ongoing capital expenditures.
Capital expenditures for the year ended December 31, 2012 were $764.5 million,
of which $607.4 million was attributed to expansion capital expenditures and
$157.1 million was attributed to ongoing capital expenditures. In addition,
the Company purchased real estate for cash in the year ended December 31, 2012
totaling $24.7 million primarily located in the Washington, D.C. metro area.

The Company generated cash from operating activities of $209.1 million for the
fourth quarter as compared to $102.2 million in the previous quarter. Cash
generated from operating activities for the year ended December 31, 2012 was
$632.0 million as compared to $587.6 million in the previous year. Cash used
in investing activities was $209.3 million in the fourth quarter as compared
to cash used in investing activities of $596.9 million in the previous
quarter, primarily attributed to cash consideration paid for the acquisitions
of Asia Tone and ancotel during the previous quarter. Cash used in investing
activities for the year ended December 31, 2012 was $442.9 million as compared
to cash used in investing activities of $1,499.4 million in the previous year,
primarily attributed to net purchases of investments in marketable securities
during the previous year. Cash provided by financing activities was $12.2
million for the fourth quarter, as compared to cash provided by financing
activities of $73.7 million in the previous quarter, primarily attributed to
the net proceeds from drawdowns of loans payable during the previous quarter.
Cash used in financing activities was $222.7 million for the year ended
December 31, 2012, primarily attributed to the settlement on the 2.50%
convertible subordinated notes upon maturity during the year, as compared to
cash provided by financing activities of $748.7 million in the previous year,
primarily attributed to the issuance of the 7.00% senior notes during the
previous year.

As of December 31, 2012, the Company’s cash, cash equivalents and investments
were $546.5 million, as compared to $1,076.3 million as of December 31, 2011.

Business Outlook

For the first quarter of 2013, the Company expects revenues to be in the range
of $518.0 to $522.0 million. Cash gross profit margin is expected to range
between 68% and 69%. Cash selling, general and administrative expenses are
expected to range between $116.0 and $120.0 million. Adjusted EBITDA is
expected to be between $236.0 and $240.0 million. Capital expenditures are
expected to range between $140.0 to $160.0 million, comprised of approximately
$40.0 million of ongoing capital expenditures and $100.0 to $120.0 million of
expansion capital expenditures.

For the full year of 2013, total revenues are expected to be greater than
$2,200.0 million. Total year cash gross margins are expected to range between
68% and 69%. Cash selling, general and administrative expenses are expected to
range between $490.0 and $510.0 million. Adjusted EBITDA for the year is
expected to be greater than $1,010.0 million including approximately $3.0
million in net costs attributed to our Dubai IBX data center acquisition.
Capital expenditures for 2013 are expected to be in the range of $550.0 to
$650.0 million, comprised of approximately $165.0 million of ongoing capital
expenditures and $385.0 to $485.0 million for expansion capital expenditures.

The U.S. dollar exchange rates used for 2013 guidance have been updated to
$1.34 to the Euro, $1.59 to the Pound, S$1.23 to the U.S. dollar and $R2.03 to
the U.S. dollar. Updated global revenue breakdown by currency for the Euro,
Pound, Singapore dollar and Brazilian Real is 14%, 8%, 6% and 4%,
respectively.

Company Metrics and Q4 Results Presentation

The Company will discuss its results and guidance on its quarterly conference
call on Wednesday, February 13, 2013, at 5:30 p.m. ET (2:30 p.m. PT). A
presentation to accompany the call will be available on the Company’s website
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
simultaneous live Webcast of the call will also be available at
www.equinix.com/investors.

A replay of the call will be available beginning on Wednesday, February 13,
2013 at 7:30 p.m. (ET) through March 14, 2013 by dialing 203-369-0250 and
referencing the passcode (2013). In addition, the webcast will be available on
the Company's web site at www.equinix.com/investors. No password is required
for 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 31
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, adjusted free
cash flow, discretionary free cash flow and adjusted discretionary 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, impairment charges, acquisition costs and excess tax
benefits from employee equity awards.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 impairment charges related to certain long-lived
assets. The impairment charges relate to expense recognized whenever events or
changes in circumstances indicate that the carrying amount of long-lived
assets are not recoverable. 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, impairment charges and acquisition costs are
non-core transactions; however, these types of costs will or may occur in
future periods.

Equinix excludes excess tax benefits from employee equity awards from adjusted
discretionary free cash flow as they are required to appear as an operating
cash outflow with an offsetting financing cash inflow in the statement of cash
flows and, as a result, do not actually reflect a true cash outflow to the
Company. However, this type of cash flow activity 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                        Twelve Months Ended
                          December      September     December      December 31,    December 31,
                          31,           30,           31,
                          2012          2012          2011          2012            2011
                                                                                    
Recurring revenues        $ 481,738     $ 462,829     $ 401,765     $ 1,799,243     $ 1,492,414
Non-recurring revenues     24,782      25,901      20,351      96,501        77,370    
      Revenues              506,520       488,730       422,116       1,895,744       1,569,784
                                                                                    
Cost of revenues           250,121     251,487     221,271     943,995       833,851   
           Gross profit    256,399     237,243     200,845     951,749       735,933   
                                                                                    
Operating expenses:
      Sales and             55,690        53,211        45,136        202,914         158,347
      marketing
      General and           86,867        83,621        71,568        329,399         265,554
      administrative
      Restructuring         -             -             1,295         -               3,481
      charges
      Impairment            9,861         -             -             9,861           -
      charges
      Acquisition costs    1,939       4,542       568         8,822         3,297     
           Total
           operating       154,357     141,374     118,567     550,996       430,679   
           expenses
                                                                                    
Income from continuing     102,042     95,869      82,278      400,753       305,254   
operations
                                                                                    
Interest and other
income (expense):
      Interest income       758           1,054         754           3,466           2,280
      Interest expense      (50,516 )     (50,207 )     (55,151 )     (200,328  )     (181,303  )
      Other income          (717    )     507           1,383         (2,208    )     2,821
      (expense)
      Loss on debt         -           (5,204  )    -           (5,204    )    -         
      extinguishment
           Total
           interest and    (50,475 )    (53,850 )    (53,014 )    (204,274  )    (176,202  )
           other, net
                                                                                    
Income from continuing
operations before           51,567        42,019        29,264        196,479         129,052
income taxes
                                                                                    
      Income tax           (17,294 )    (13,498 )    (13,361 )    (61,783   )    (37,451   )
      expense
                                                                                    
Net income from             34,273        28,521        15,903        134,696         91,601
continuing operations
                                                                                    
      Net income from
      discontinued          6             679           190           1,234           1,009
      operations, net
      of tax
      Gain on sale of
      discontinued         11,852      -           -           11,852        -         
      operations, net
      of tax
                                                                                    
Net income                  46,131        29,200        16,093        147,782         92,610
                                                                                    
Net (income) loss
attributable to
redeemable                  (1,273  )     (362    )     1,717         (3,116    )     1,394
non-controlling
interests
                                                                                
Net income attributable   $ 44,858     $ 28,838     $ 17,810     $ 144,666      $ 94,004    
to Equinix
                                                                                    
Net income per share
attributable to
Equinix:
                                                                                    
      Basic net income
      per share from      $ 0.68        $ 0.58        $ 0.36        $ 2.74          $ 1.74
      continuing
      operations
      Basic net income
      per share from       0.24        0.02        0.00        0.27          0.02      
      discontinued
      operations
      Basic net income    $ 0.92       $ 0.60       $ 0.36       $ 3.01         $ 1.76      
      per share (1)
                                                                                    
      Diluted net
      income per share    $ 0.66        $ 0.57        $ 0.35        $ 2.67          $ 1.70
      from continuing
      operations
      Diluted net
      income per share     0.22        0.01        0.00        0.25          0.02      
      from discontinued
      operations
      Diluted net
      income per share    $ 0.88       $ 0.58       $ 0.35       $ 2.92         $ 1.72      
      (2)
                                                                                    
      Shares used in
      computing basic      48,673      48,361      47,235      48,004        46,956    
      net income per
      share
                                                                                    
      Shares used in
      computing diluted    52,917      52,655      48,083      51,816        47,898    
      net 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          $ 34,273      $ 28,521      $ 15,903      $ 134,696       $ 91,601
      operations
      Net income
      attributable to       (1,273  )     (362    )     1,717         (3,116    )     1,394
      non-controlling
      interests
      Adjustments
      attributable to
      redemption value     -           -           (837    )    -             (11,476   )
      of
      non-controlling
      interests
           Net income
           from
           continuing
           operations       33,000        28,159        16,783        131,580         81,519
           attributable
           to Equinix,
           basic
      Net income from
      discontinued         11,858      679         190         13,086        1,009     
      operations
           Net income
           attributable   $ 44,858     $ 28,838     $ 16,973     $ 144,666      $ 82,528    
           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          $ 33,000      $ 28,159      $ 16,783      $ 131,580       $ 81,519
      attributable to
      Equinix, basic
      Interest on          1,707       1,696       -           6,789         -         
      convertible debt
           Net income
           from
           continuing
           operations       34,707        29,855        16,783        138,369         81,519
           attributable
           to Equinix,
           diluted
      Net income from
      discontinued         11,858      679         190         13,086        1,009     
      operations
           Net income
           attributable   $ 46,565     $ 30,534     $ 16,973     $ 151,455      $ 82,528    
           to Equinix,
           diluted
                                                                                                

EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
                                                                   
                                                                           
                     Three Months Ended                      Twelve Months Ended
                     December     September    December      December      December
                     31,          30,          31,           31,           31,
                     2012         2012         2011          2012          2011
                                                                           
Net income           $ 46,131    $ 29,200    $ 16,093     $ 147,782    $ 92,610  
                                                                           
Other
comprehensive
income (loss), net
of tax:
   Foreign
   currency            9,307        41,782       (21,549 )     36,194        (38,776 )
   translation
   gain (loss)
   Unrealized gain
   (loss) on          (37    )    113        253         (23     )    (14     )
   available for
   sale securities
Other
comprehensive         9,270      41,895     (21,296 )    36,171      (38,790 )
income (loss), net
of tax:
                                                                           
Comprehensive
income (loss), net    55,401     71,095     (5,203  )    183,953     53,820  
of tax
                                                                           
   Net (income)
   loss
   attributable to     (1,273 )     (362   )     1,717         (3,116  )     1,394
   redeemable
   non-controlling
   interests
   Other
   comprehensive
   income (loss)
   attributable to    3,330      240        (1,986  )    6,485       7,110   
   redeemable
   non-controlling
   interests
                                                                           
Comprehensive
income (loss)
attributable to      $ 57,458    $ 70,973    $ (5,472  )   $ 187,322    $ 62,324  
Equinix, net of
tax
                                                                                     

EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                                                             
Assets                                           December 31,    December 31,
                                                 2012            2011
                                                                 
Cash and cash equivalents                        $ 252,213       $ 278,823
Short-term investments                             166,492         635,721
Accounts receivable, net                           163,840         139,057
Other current assets                              57,206        182,156   
       Total current assets                        639,751         1,235,757
Long-term investments                              127,819         161,801
Property, plant and equipment, net                 3,918,999       3,225,912
Goodwill                                           1,042,564       866,495
Intangible assets, net                             201,562         148,635
Other assets                                      202,269       146,724   
       Total assets                              $ 6,132,964    $ 5,785,324 
                                                                 
Liabilities and Stockholders' Equity
                                                                 
Accounts payable and accrued expenses            $ 268,853       $ 229,043
Accrued property and equipment                     63,509          93,224
Current portion of capital lease and other         15,206          11,542
financing obligations
Current portion of loans payable                   52,160          87,440
Current portion of convertible debt                -               246,315
Current portion of deferred tax liabilities        69,689          394
Other current liabilities                         69,872        57,296    
       Total current liabilities                   539,289         725,254
Capital lease and other financing obligations,     545,853         390,269
less current portion
Loans payable, less current portion                188,802         168,795
Senior notes                                       1,500,000       1,500,000
Convertible debt                                   708,726         694,769
Other liabilities                                 230,843       286,424   
       Total liabilities                          3,713,513     3,765,511 
                                                                 
Redeemable non-controlling interests              84,178        67,601    
                                                                 
Common stock                                       49              48
Additional paid-in capital                         2,583,371       2,437,623
Treasury stock                                     (36,676   )     (86,666   )
Accumulated other comprehensive loss               (101,042  )     (143,698  )
Accumulated deficit                               (110,429  )    (255,095  )
       Total stockholders' equity                 2,335,273     1,952,212 
                                                                 
       Total liabilities, redeemable
       non-controlling interests and             $ 6,132,964    $ 5,785,324 
       stockholders' equity
                                                                 
                                                           
                                                                 
Ending headcount by geographic region is as
follows:
                                                                 
       Americas headcount                          1,821           1,763
       EMEA headcount                              811             570
       Asia-Pacific headcount                     521           376       
                        Total headcount           3,153         2,709     
                                                                             

EQUINIX, INC.
SUMMARY OF DEBT OUTSTANDING
(in thousands)
(unaudited)
                                                          
                                                December 31,   December 31,
                                                2012           2011
                                                               
Capital lease and other financing obligations   $  561,059     $  401,811
                                                               
U.S. term loan                                     180,000        -
ALOG financing                                     48,807         -
Paris 4 IBX financing                              8,071          52,104
ALOG loans payable                                 -              10,288
Asia-Pacific financing                             -              193,843
Other loans payable                               4,084         -
         Total loans payable                      240,962       256,235
                                                               
Senior notes                                      1,500,000     1,500,000
                                                               
Convertible debt, net of debt discount             708,726        941,084
Plus debt discount                                60,990        78,652
         Total convertible debt principal         769,716       1,019,736
                                                               
Total debt outstanding                          $  3,071,737   $  3,177,782
                                                                  

EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                                             
                                                                                      
                          Three Months Ended                           Twelve Months Ended
                          December 31,   September      December 31,   December 31,   December 31,
                                         30,
                          2012           2012           2011           2012           2011
                                                                                      
Cash flows from
operating activities:
      Net                 $ 46,131       $ 29,200       $ 16,093       $ 147,782      $ 92,610
      income
      Adjustments to
      reconcile net
      income to net
      cash provided by
      operating
      activities:
         Depreciation,
         amortization       103,457        107,623        94,683         401,946        352,653
         and accretion
         Stock-based        21,924         22,582         18,472         84,158         71,532
         compensation
         Debt issuance
         costs and debt     5,308          5,048          8,356          23,365         32,172
         discount
         Loss on debt       -              5,204          -              5,204          -
         extinguishment
         Restructuring      -              -              1,295          -              3,481
         charges
         Impairment         9,861          -              -              9,861          -
         charges
         Gain on sale
         of                 (11,852  )     -              -              (11,852  )     -
         discontinued
         operations
         Excess tax
         benefits from      (19,457  )     (53,174  )     -              (72,631  )     -
         employee
         equity awards
         Other
         reconciling        584            2,205          4,526          6,630          9,874
         items
         Changes in
         operating
         assets and
         liabilities:
           Accounts         20,299         (12,359  )     3,238          (26,601  )     (23,061    )
           receivable
           Deferred tax     8,593          (1,656   )     4,632          21,838         9,525
           assets, net
           Accounts
           payable and      20,977         17,500         45,274         40,284         35,782
           accrued
           expenses
           Other assets
           and             3,274        (20,021  )    (8,948   )    2,042        3,041      
           liabilities
             Net cash
             provided
             by            209,099      102,152      187,621      632,026      587,609    
             operating
             activities
Cash flows from
investing activities:
      Purchases, sales
      and maturities of     (15,162  )     (111,574 )     1,400          499,251        (647,035   )
      investments, net
      Purchase of Dubai     (22,918  )     -              -              (22,918  )     -
      IBX data center
      Purchase of Asia
      Tone, less cash       (13,540  )     (188,798 )     -              (202,338 )     -
      acquired
      Purchase of
      ancotel, less         -              (84,236  )     -              (84,236  )     -
      cash acquired
      Purchase of ALOG,
      less cash             -              -              -              -              (41,954    )
      acquired
      Purchases of real     (24,656  )     -              (4,073   )     (24,656  )     (28,066    )
      estate
      Purchases of
      other property,       (210,408 )     (212,118 )     (190,160 )     (764,500 )     (685,675   )
      plant and
      equipment
      Proceeds from
      sale of               76,458         -              -              76,458         -
      discontinued
      operations
      Other investing      899          (133     )    (1,792   )    80,066       (96,714    )
      activities
             Net cash
             used in       (209,327 )    (596,859 )    (194,625 )    (442,873 )    (1,499,444 )
             investing
             activities
Cash flows from
financing activities:
      Purchases of          -              -              (86,666  )     (13,364  )     (86,666    )
      treasury stock
      Proceeds from
      employee equity       5,998          13,666         3,189          56,137         38,893
      awards
      Proceeds from         4,049          249,633        4,701          262,591        95,336
      loans payable
      Proceeds from         -              -              -              -              750,000
      senior notes
      Repayment of
      capital lease and     (3,471   )     (3,049   )     (3,022   )     (12,378  )     (10,426    )
      other financing
      obligations
      Repayment of          (13,332  )     (238,480 )     (1,556   )     (329,111 )     (22,829    )
      loans payable
      Repayment of          -              -              -              (250,007 )     -
      convertible debt
      Excess tax
      benefits from         19,457         53,174         -              72,631         -
      employee equity
      awards
      Other financing      (453     )    (1,247   )    (29      )    (9,220   )    (15,580    )
      activities
             Net cash
             provided
             by (used      12,248       73,697       (83,383  )    (222,721 )    748,728    
             in)
             financing
             activities
Effect of foreign
currency exchange rates    506          6,601        (1,313   )    6,958        (911       )
on cash and cash
equivalents
Net increase (decrease)
in cash and cash            12,526         (414,409 )     (91,700  )     (26,610  )     (164,018   )
equivalents
Cash and cash
equivalents at             239,687      654,096      370,523      278,823      442,841    
beginning of period
Cash and cash
equivalents at end of     $ 252,213     $ 239,687     $ 278,823     $ 252,213     $ 278,823    
period
                                                                                      
      Supplemental cash
      flow information:
         Cash paid for    $ 10,868      $ 12,813      $ 1,985       $ 30,446      $ 9,157      
         taxes
         Cash paid for    $ 27,404      $ 65,616      $ 28,846      $ 185,321     $ 129,129    
         interest
                                                                                      
Free cash flow (1)        $ 14,934      $ (383,133 )   $ (8,404   )   $ (310,098 )   $ (264,800   )
                                                                                      
Adjusted free cash flow   $ 19,047      $ (56,925  )   $ (4,331   )   $ 20,223      $ (194,780   )
(2)
                                                                                      
Ongoing capital           $ 43,497      $ 37,593      $ 44,278      $ 157,089     $ 127,690    
expenditures (3)
                                                                                      
Discretionary free cash   $ 165,602     $ 64,559      $ 143,343     $ 474,937     $ 459,919    
flow (4)
                                                                                      
Adjusted discretionary    $ 185,059     $ 117,733     $ 143,343     $ 547,568     $ 459,919    
free cash flow (5)
        
                                                                                      
      We define free cash flow as net cash provided by operating activities plus net cash used in
(1)   investing activities (excluding the net purchases, sales and maturities of investments) as
      presented below:
                                                                                      
      Net cash provided
      by operating        $ 209,099      $ 102,152      $ 187,621      $ 632,026      $ 587,609
      activities as
      presented above
      Net cash used in
      investing             (209,327 )     (596,859 )     (194,625 )     (442,873 )     (1,499,444 )
      activities as
      presented above
      Purchases, sales
      and maturities of    15,162       111,574      (1,400   )    (499,251 )    647,035    
      investments, net
         Free cash flow
         (negative free   $ 14,934      $ (383,133 )   $ (8,404   )   $ (310,098 )   $ (264,800   )
         cash flow)
                                                                                      
      We define adjusted free cash flow as free cash flow (as defined above) excluding any purchases
(2)   of real estate, acquisitions, sales of discontinued operations and any excess tax benefits
      from employee equity awards, as presented below:
                                                                                      
      Free cash flow
      (as defined         $ 14,934       $ (383,133 )   $ (8,404   )   $ (310,098 )   $ (264,800   )
      above)
      Less purchase of
      Dubai IBX data        22,918         -              -              22,918         -
      center, less cash
      acquired
      Less purchase of
      Asia Tone, less       13,540         188,798        -              202,338        -
      cash acquired
      Less purchase of
      ancotel, less         -              84,236         -              84,236         -
      cash acquired
      Less purchase of
      ALOG, less cash       -              -              -              -              41,954
      acquired
      Less purchases of     24,656         -              4,073          24,656         28,066
      real estate
      Less sale of
      discontinued          (76,458  )     -              -              (76,458  )     -
      operations
      Less excess tax
      benefits from        19,457       53,174       -            72,631       -          
      employee equity
      awards
         Adjusted free
         cash flow
         (negative        $ 19,047      $ (56,925  )   $ (4,331   )   $ 20,223      $ (194,780   )
         adjusted free
         cash flow)
                                                                                      
      We refer to our purchases of other property, plant and equipment as our capital expenditures
(3)   (or capex). 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     $ 43,497       $ 37,593       $ 44,278       $ 157,089      $ 127,690
      expenditures
      Expansion capital    166,911      174,525      145,882      607,411      557,985    
      expenditures
         Total capital    $ 210,408     $ 212,118     $ 190,160     $ 764,500     $ 685,675    
         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        $ 209,099      $ 102,152      $ 187,621      $ 632,026      $ 587,609
      activities as
      presented above
      Less ongoing
      capital              (43,497  )    (37,593  )    (44,278  )    (157,089 )    (127,690   )
      expenditures
         Discretionary    $ 165,602     $ 64,559      $ 143,343     $ 474,937     $ 459,919    
         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       $ 165,602      $ 64,559       $ 143,343      $ 474,937      $ 459,919
      free cash flow
      Excess tax
      benefits from        19,457       53,174       -            72,631       -          
      employee equity
      awards
         Adjusted
         discretionary    $ 185,059     $ 117,733     $ 143,343     $ 547,568     $ 459,919    
         free cash flow
                                                                                                   

EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FROM CONTINUING OPERATIONS- NON-GAAP PRESENTATION
(in thousands)
(unaudited)
                                                                                    
                                                                                            
                              Three Months Ended                           Twelve Months Ended
                              December 31,   September      December 31,   December 31,     December 31,
                                             30,
                              2012           2012           2011           2012             2011
                                                                                            
Recurring revenues            $ 481,738      $ 462,829      $ 401,765      $ 1,799,243      $ 1,492,414
Non-recurring revenues         24,782       25,901       20,351       96,501         77,370     
       Revenues (1)            506,520      488,730      422,116      1,895,744      1,569,784  
                                                                                            
Cash cost of revenues (2)      158,950      158,038      139,196      595,360        529,757    
                  Cash
                  gross        347,570      330,692      282,920      1,300,384      1,040,027  
                  profit
                  (3)
                                                                                            
Cash operating expenses
(4):
       Cash sales and
       marketing expenses       43,996         42,120         36,993         162,924          127,586
       (5)
       Cash general and
       administrative          64,291       60,274       52,486       241,803        191,894    
       expenses (6)
                  Total
                  cash
                  operating    108,287      102,394      89,479       404,727        319,480    
                  expenses
                  (7)
                                                                                            
Adjusted EBITDA (8)           $ 239,283     $ 228,298     $ 193,441     $ 895,657       $ 720,547    
                                                                                            
Cash gross margins (9)         69       %    68       %    67       %    69         %    66         %
                                                                                            
Adjusted EBITDA margins        47       %    47       %    46       %    47         %    46         %
(10)
                                                                                            
Adjusted EBITDA                62       %    34       %    46       %    54         %    50         %
flow-through rate (11)
              
                                                                                            
(1)    The geographic split of our revenues on a services basis is presented below:
                                                                                            
       Americas Revenues:
                                                                                            
       Colocation             $ 218,442      $ 213,011      $ 196,741      $ 845,127        $ 733,144
       Interconnection          56,426         54,943         49,549         216,156          186,989
       Managed                  12,529         12,424         12,440         51,453           37,768
       infrastructure
       Rental                  490          469          463          1,843          2,006      
             Recurring          287,887        280,847        259,193        1,114,579        959,907
             revenues
       Non-recurring           11,456       13,034       9,114        45,895         35,808     
       revenues
             Revenues          299,343      293,881      268,307      1,160,474      995,715    
                                                                                            
       EMEA Revenues:
                                                                                            
       Colocation               95,823         91,512         80,174         359,106          300,728
       Interconnection          7,989          7,188          3,600          23,193           13,061
       Managed                  4,596          5,112          3,401          16,384           13,771
       infrastructure
       Rental                  325          314          238          1,319          795        
             Recurring          108,733        104,126        87,413         400,002          328,355
             revenues
       Non-recurring           8,726        7,832        7,835        33,448         29,867     
       revenues
             Revenues          117,459      111,958      95,248       433,450        358,222    
                                                                                            
       Asia-Pacific
       Revenues:
                                                                                            
       Colocation               69,798         63,204         43,686         229,770          161,000
       Interconnection          9,090          8,550          6,789          32,754           24,326
       Managed                 6,230        6,102        4,684        22,138         18,826     
       infrastructure
             Recurring          85,118         77,856         55,159         284,662          204,152
             revenues
       Non-recurring           4,600        5,035        3,402        17,158         11,695     
       revenues
             Revenues          89,718       82,891       58,561       301,820        215,847    
                                                                                            
       Worldwide Revenues:
                                                                                            
       Colocation               384,063        367,727        320,601        1,434,003        1,194,872
       Interconnection          73,505         70,681         59,938         272,103          224,376
       Managed                  23,355         23,638         20,525         89,975           70,365
       infrastructure
       Rental                  815          783          701          3,162          2,801      
             Recurring          481,738        462,829        401,765        1,799,243        1,492,414
             revenues
       Non-recurring           24,782       25,901       20,351       96,501         77,370     
       revenues
             Revenues         $ 506,520     $ 488,730     $ 422,116     $ 1,895,744     $ 1,569,784  
                                                                                            
(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       $ 250,121      $ 251,487      $ 221,271      $ 943,995        $ 833,851
       Depreciation,
       amortization and         (89,530  )     (91,723  )     (80,625  )     (342,417   )     (298,525   )
       accretion expense
       Stock-based             (1,641   )    (1,726   )    (1,450   )    (6,218     )    (5,569     )
       compensation expense
             Cash cost of     $ 158,950     $ 158,038     $ 139,196     $ 595,360       $ 529,757    
             revenues
                                                                                            
       The geographic split of our cash cost of revenues is presented below:
                                                                                            
       Americas cash cost     $ 83,529       $ 85,384       $ 80,356       $ 329,460        $ 304,767
       of revenues
       EMEA cash cost of        43,888         42,615         36,677         159,248          144,315
       revenues
       Asia-Pacific cash       31,533       30,039       22,163       106,652        80,675     
       cost of revenues
             Cash cost of     $ 158,950     $ 158,038     $ 139,196     $ 595,360       $ 529,757    
             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,
(4)    stock-based compensation, restructuring charges, impairment 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    $ 55,690       $ 53,211       $ 45,136       $ 202,914        $ 158,347
       expenses
       Depreciation and         (6,469   )     (6,296   )     (4,214   )     (21,260    )     (16,203    )
       amortization expense
       Stock-based             (5,225   )    (4,795   )    (3,929   )    (18,730    )    (14,558    )
       compensation expense
             Cash sales and
             marketing        $ 43,996      $ 42,120      $ 36,993      $ 162,924       $ 127,586    
             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         $ 86,867       $ 83,621       $ 71,568       $ 329,399        $ 265,554
       expenses
       Depreciation and         (7,480   )     (7,431   )     (6,086   )     (28,676    )     (22,650    )
       amortization expense
       Stock-based             (15,096  )    (15,916  )    (12,996  )    (58,920    )    (51,010    )
       compensation expense
             Cash general
             and              $ 64,291      $ 60,274      $ 52,486      $ 241,803       $ 191,894    
             administrative
             expenses
                                                                                            
(7)    Our cash operating expenses, or cash SG&A, as defined above, is presented below:
                                                                                            
       Cash sales and         $ 43,996       $ 42,120       $ 36,993       $ 162,924        $ 127,586
       marketing expenses
       Cash general and
       administrative          64,291       60,274       52,486       241,803        191,894    
       expenses
             Cash SG&A        $ 108,287     $ 102,394     $ 89,479      $ 404,727       $ 319,480    
                                                                                            
       The geographic split of our cash operating expenses, or cash SG&A, is presented below:
                                                                                            
       Americas cash SG&A     $ 65,466       $ 67,136       $ 59,683       $ 265,225        $ 212,284
       EMEA cash SG&A           28,043         22,818         18,853         90,060           70,761
       Asia-Pacific cash       14,778       12,440       10,943       49,442         36,435     
       SG&A
             Cash SG&A        $ 108,287     $ 102,394     $ 89,479      $ 404,727       $ 319,480    
                                                                                            
       We define adjusted EBITDA as income from continuing operations plus depreciation, amortization,
(8)    accretion, stock-based compensation expense, restructuring charges, impairment charges and
       acquisition costs as presented below:
                                                                                            
       Income from
       continuing             $ 102,042      $ 95,869       $ 82,278       $ 400,753        $ 305,254
       operations
       Depreciation,
       amortization and         103,479        105,450        90,925         392,353          337,378
       accretion expense
       Stock-based              21,962         22,437         18,375         83,868           71,137
       compensation expense
       Restructuring            -              -              1,295          -                3,481
       charges
       Impairment charges       9,861          -              -              9,861            -
       Acquisition costs       1,939        4,542        568          8,822          3,297      
             Adjusted         $ 239,283     $ 228,298     $ 193,441     $ 895,657       $ 720,547    
             EBITDA
                                                                                            
       The geographic split of our adjusted EBITDA is presented below:
                                                                                            
       Americas income from
       continuing             $ 66,642       $ 63,740       $ 56,547       $ 258,620        $ 203,286
       operations
       Americas
       depreciation,            59,761         60,322         55,839         235,391          213,464
       amortization and
       accretion expense
       Americas stock-based     16,972         17,299         14,572         64,896           55,819
       compensation expense
       Americas
       restructuring            -              -              1,295          -                3,481
       charges
       Americas impairment      6,972          -              -              6,972            -
       charges
       Americas acquisition    1            -            15           (90        )    2,614      
       costs
             Americas
             adjusted          150,348      141,361      128,268      565,789        478,664    
             EBITDA
                                                                                            
       EMEA income from
       continuing               18,738         20,565         17,466         89,544           59,420
       operations
       EMEA depreciation,
       amortization and         22,554         22,054         19,776         80,249           74,486
       accretion expense
       EMEA stock-based         2,633          2,900          2,119          10,370           8,869
       compensation expense
       EMEA acquisition        1,603        1,006        357          3,979          371        
       costs
             EMEA adjusted     45,528       46,525       39,718       184,142        143,146    
             EBITDA
                                                                                            
       Asia-Pacific income
       from continuing          16,662         11,564         8,265          52,589           42,548
       operations
       Asia-Pacific
       depreciation,            21,164         23,074         15,310         76,713           49,428
       amortization and
       accretion expense
       Asia-Pacific
       stock-based              2,357          2,238          1,684          8,602            6,449
       compensation expense
       Asia-Pacific             2,889          -              -              2,889            -
       impairment charges
       Asia-Pacific            335          3,536        196          4,933          312        
       acquisition costs
             Asia-Pacific
             adjusted          43,407       40,412       25,455       145,726        98,737     
             EBITDA
                                                                                            
                  Adjusted    $ 239,283     $ 228,298     $ 193,441     $ 895,657       $ 720,547    
                  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 gross     72       %    71       %    70       %    72         %    69         %
       margins
                                                                                            
       EMEA cash gross         63       %    62       %    61       %    63         %    60         %
       margins
                                                                                            
       Asia-Pacific cash       65       %    64       %    62       %    65         %    63         %
       gross margins
                                                                                            
(10)   We define adjusted EBITDA margins as adjusted EBITDA divided by revenues.
                                                                                            
       Americas adjusted       50       %    48       %    48       %    49         %    48         %
       EBITDA margins
                                                                                            
       EMEA adjusted EBITDA    39       %    42       %    42       %    42         %    40         %
       margins
                                                                                            
       Asia-Pacific
       adjusted EBITDA         48       %    49       %    43       %    48         %    46         %
       margins
                                                                                            
(11)   We define adjusted EBITDA flow-through rate as incremental adjusted EBITDA growth divided by
       incremental revenue growth as follows:
                                                                                            
       Adjusted EBITDA -      $ 239,283      $ 228,298      $ 193,441      $ 895,657        $ 720,547
       current period
       Less adjusted EBITDA    (228,298 )    (217,480 )    (187,022 )    (720,547   )    (533,270   )
       - prior period
             Adjusted         $ 10,985      $ 10,818      $ 6,419       $ 175,110       $ 187,277    
             EBITDA growth
                                                                                            
       Revenues - current     $ 506,520      $ 488,730      $ 422,116      $ 1,895,744      $ 1,569,784
       period
       Less revenues -         (488,730 )    (457,249 )    (408,208 )    (1,569,784 )    (1,196,214 )
       prior period
             Revenue growth   $ 17,790      $ 31,481      $ 13,908      $ 325,960       $ 373,570    
                                                                                            
       Adjusted EBITDA         62       %    34       %    46       %    54         %    50         %
       flow-through rate
                                                                                                         

<td class="bwpadl0 bwnowrap bwpadr0 bwverta*Story too large*
EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - DISCONTINUED OPERATIONS (1)
(in thousands, except per share data)
(unaudited)
                                                                      
                                                                              
                        Three Months Ended                      Twelve Months Ended
                        December      September    December     December      December
                        31,           30,          31,          31,           31,
                        2012          2012         2011         2012          2011
                                                                              
Recurring revenues      $ 2,763       $ 8,618      $ 8,969      $ 28,902      $ 36,108
Non-recurring            81          208        227        738         950     
revenues
      Revenues            2,844         8,826        9,196        29,640        37,058
                                                                              
Cost of                  1,487       6,585      8,069      23,956      33,790  
revenues
           Gross         1,357       2,241      1,127      5,684       3,268   
           profit
                                                                              
Operating expenses:
      Sales and           (3      )     197          186          516           744
      marketing
      General and         26            61           106          324           378
      administrative
      Acquisition         1,322         655          237          2,582         237
      costs
      Gain on sale of
      discontinued       (25,825 )    -          -          (25,825 )    -       
      operations
           Total
           operating     (24,480 )    913        529        (22,403 )    1,359   
           expenses
                                                                              
Income from
discontinued              25,837        1,328        598          28,087        1,909
operations before
income taxes
                                                                              
      Income tax          (13,979 )     (649   )     (408   )     (15,001 )     (900    )
      expense
                                                                          
Net income from
discontinued            $ 11,858     $ 679       $ 190       $ 13,086     $ 1,009   
operations
                                                                              
Adjusted EBITDA (2)     $ 1,274      $ 4,301     $ 4,690     $ 14,727     $ 17,816  
                                                                              
Gross margins            48      %    25     %    12     %    19      %    9       %
                                                                              
Cash gross margins       46      %    51     %    53     %    52      %    50      %
(3)
           
                                                                              
      The condensed consolidated statements of operations and non-GAAP financial
(1)   information includes the financial results of the 16 IBX data centers located
      throughout the United States through November 1, 2012, the date the Company
      completed the sale of the IBX data centers.
                                                                              
      We define adjusted EBITDA as income from discontinued operations plus depreciation,
(2)   amortization, accretion, stock-based compensation expense, restructuring charges,
      impairment charges and acquisition costs as presented below:
                                                                              
      Income from
      discontinued      $ 25,837      $ 1,328      $ 598        $ 28,087      $ 1,909
      operations
      Depreciation,
      amortization        (22     )     2,173        3,758        9,593         15,275
      and accretion
      expense
      Stock-based
      compensation        (38     )     145          97           290           395
      expense
      Acquisition         1,322         655          237          2,582         237
      costs
      Gain on sale of
      discontinued       (25,825 )    -          -          (25,825 )    -       
      operations
           Adjusted     $ 1,274      $ 4,301     $ 4,690     $ 14,727     $ 17,816  
           EBITDA
                                                                              
(3)   We define cash gross margins as cash gross profit divided by revenues.
                                                                              
      Revenues          $ 2,844      $ 8,826     $ 9,196     $ 29,640     $ 37,058  
                                                                              
      Cost of             1,487         6,585        8,069        23,956        33,790
      revenues
      Depreciation,
      amortization        22            (2,110 )     (3,664 )     (9,342  )     (14,899 )
      and accretion
      expense
      Stock-based
      compensation       38          (145   )    (97    )    (290    )    (395    )
      expense
           Cash cost
           of            1,547       4,330      4,308      14,324      18,496  
           revenues
               Cash
               gross    $ 1,297      $ 4,496     $ 4,888     $ 15,316     $
               profit

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