Equinix, Inc. F1Q2010 Earnings Call Transcript

Equinix, Inc. F1Q2010 Earnings Call Transcript
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Equinix, Inc. (EQIX)

F1Q10 Earnings Call

April 21, 2010; 5:30 pm ET

Executives

Jason Starr – Senior Director, IR

Steve Smith – President, Director & CEO

Keith Taylor – CFO

Jarrett Appleby – CMO

Analysts

David Barden - Banc of America/Merrill Lynch

Robert Dezego - SunTrust Robinson Humphrey

Chris Larsen – Piper Jaffray

Ilya Grozov - Morgan Joseph & Co.

Frank Lawson - L&L Enterprises LLC

Gray Powell - Wells Fargo Securities

Simon Flannery - Morgan Stanley

Mike Rollins - Citigroup

Sri Anantha - Oppenheimer & Co

Jonathan Schildkraut - Jefferies & Co.

Presentation

Operator

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Welcome to the Equinix conference call. All lines will be able to be on listen-only and we’ll open up for questions. Also, today’s conference is being recorded. If anyone has any objections please disconnect at this time.

I’d like to turn the call over to Jason Starr, Senior Director of Investor Relations. Sir, you may begin.

Jason Starr

Good afternoon and welcome to Equinix’s Q1 2010 results conference call. Before we get started I would like to remind everyone that some of the statements we’ll be making today are forward-looking in nature and involve risks and uncertainties.

Actual results may vary significantly from those statements and maybe affected by the risks we identified in today’s press release and those identified in our filings with the SEC including our Form 10-K filed on February 22, 2010.

Equinix assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. In addition, in light of regulation fair disclosure, it is Equinix’s policy not to comment on its financial guidance during the quarter unless it is done through an implicit public disclosure.

In addition, we’ll provide non-GAAP measures on today’s conference call. We provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why the company uses these measures in today’s press release on the Equinix Investor Relations page at www.equinix.com.

We would also like to remind you that we post important information about the company on the Investor Relations page of our website. We encourage you to check our website regularly for the most current available information. With us today are Steve Smith, Equinix’s Chief Executive Officer and President; Keith Taylor, Equinix’s Chief Financial Officer; and Jarrett Appleby, Equinix’s Chief Marketing Officer.

Following our prepared remarks we’ll be taking questions from sales side analyst. In the interest of wrapping this call up in one hour we would like to ask these analysts to limit any follow on questions to just one.

At this time I’ll turn the call over to Steve.

Steve Smith

Thank you, Jason and thanks to everyone for joining us on the call today. I’m pleased to report that Equinix delivered a very solid first quarter result with strong global performance. Both our financial and operational key performance indicators continue to improve on a sequential basis. Reflecting momentum in our business globally and a healthier market environment when compared to last year.

Financially our revenues in the quarter where $248.6 million just about the high end of our range and up 25% year-over-year and our margins can may even stronger with cash gross margins at 66% and adjusted EBTIDA margins at 47% both of our expectations. A customer demand supported another solid bookings quarter with particular strength in our European region we saw continue success without bound deal flow from US multinationals, demonstrating the value of our unique global propositions.

Most importantly, our pipeline remains strong with many deals in the later stages of our sales cycle, providing us good visibility for our overall goals for the year. On the operational front, our IBX reliability metrics in all three regions whereas high as we've experienced in several quarters indicating that our deep focus and continue to investment and eliminating single points of failure and enhancing our predictive and preventative maintenance procedures are paying off.

As we often said our operational reliabilities the number one reason our customers select us. We believe there is a direct relationship between this operational excellence in our historical and future growth rates as well as our market leading position. With these kinds of financial and operational results early in the year, we're well positioned to execute on our 2010 plan and then recurring revenue model there is nothing more important and getting after a quick start in the first quarter.

Shipping the discussion to longer term view as we mentioned on our last call we began to operate within a three year rolling plan that supports our longer-term opportunities, which has a reminder we believe to be an excess of $2 billion in annual revenues.

The key elements of this plan will continue to be our investments in our capacity and scaling our team to be able to operate more effectively on a global basis, while deepening our penetration into our key ecosystems all of which collectively provide us the differentiation and competitive advantage that Equinix and of our customers enjoying.

I’ll touch on the importance of these investments later on the call, but let me take a moment here to quickly update you on a lot of expansion plans. As we announce today we have made their decision to proceed with the additional expansions in our Dallas and Amsterdam markets. Also since our last call we opened about London 5 IBX and we expect 4 IBX to become operational in the coming days.

As a reminder and as listed on our extension tracking sheet we also have projects under way in New York, Silicon Valley, Washington, DC, Frankfurt, Hong Kong and Singapore. We are excited to add this at its capacity underway to continue to address the high demand we see in these markets, that the completion of these we expect to be in a very good position from a capacity standpoint in the majority of our markets through 2011.

Of course also in the quarter we completed a very successful financing. Rising $750 million of senior unsecured notes 8% and 118% the sense funds will support our continued to expansion efforts and provide us the opportunity to better manage our capital structure.

As you maybe aware we recently simply used $105 million of proceeds to repay our Chicago construction loans at 4% discount and we intended repay our European financing by the end of the month. This financing also provides additional funds for the proposed Switch and Data acquisition which we estimate where required about $300 million in cash obligations.

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