Equinix (EQIX)

Q2 2010 Earnings Call

July 28, 2010 5:30 pm ET


Jarrett Appleby - Chief Marketing Officer

Stephen Smith - Chief Executive Officer, President, Director and Member of Stock Award Committee

Jason Starr - Senior Director of Investor Relations

Keith Taylor - Chief Financial Officer and Principal Accounting Officer


Jonathan Atkin - RBC Capital Markets Corporation

Christopher Larsen - Piper Jaffray Companies

Michael Bowen - Guggenheim Securities, LLC

Mark Kelleher - Brigantine Advisors

Michael McCormack - JP Morgan Chase & Co

Jonathan Schildkraut - Jefferies & Company, Inc.

Michael Rollins - Citigroup Inc

David Barden

Edward Katz - Morgan Stanley



Good afternoon, and welcome to the Equinix Conference Call. [Operator Instructions] 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 our Q2 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 may be 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, and Form 10-Q filed on April 28, 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 to an explicit public disclosure. In addition, we'll provide non-GAAP measures on today’s conference call. We provide a reconciliation of those measures, 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.

For today's call, we posted a presentation on our website to help guide our discussion, and we would also like to remind you we provide important information about the company here as well. We encourage you to check this regularly for the most current information available.

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 sell side analysts. In the interests of wrapping this call up in one hour, we’d 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.

Stephen Smith

Thank you, Jason. Good afternoon, and thanks for joining the call today. I'm pleased to announce that Equinix delivered another quarter of strong financial results with revenues coming in on target and adjusted EBITDA coming in above expectations. Importantly, both results were able to absorb the currency headwinds we experienced throughout the quarter.

This is our 30th consecutive quarter of revenue and adjusted EBITDA growth and a strong proof point of the exceptional visibility we have in our financial model and a track record of strong execution. Highlights of the quarter include record gross bookings in all three regions, as we expected with the scaling of our growth plan in 2010, with the highest-ever outbound bookings for U.S.-based multinationals deploying critical infrastructure into both Europe and Asia, demonstrating the strength of our Global Services delivery platform. We also had strong interconnection growth across all three regions. With a significant pickup in cross connects, exchange ports and traffic on our switches.

All construction projects are on schedule and on budget to deliver needed capacity throughout the remainder of 2010 and into next year. With our history of disciplined investments in expansions, we find ourselves in a very good position in terms of available capacity in the majority of our markets.

From a vertical market perspective, we experienced the highest bookings we’ve had in the last six quarters in the electronic trading ecosystem. We also added 20 networks in key metros to take our count now to over 595 globally. And finally, we added 20 new cloud customers and continue to see both public and private cloud deployments across all regions. On the operational front, our teams across the globe are delivering extremely high levels of reliability within our IBXs and exceeding service-level objectives for our customers.

Lastly, our integration of Switch and Data is ahead of schedule on several key milestones which I will provide more detail on shortly. I will also provide you with information that illustrates the importance of our expansion strategy and a breakout of the strong financial results and return on investment we've experienced over the last several years.

Let me pause here and turn it over to Keith, who will review our financial results and regional trends in the quarter. Over to you, Keith.

Keith Taylor

Great, thanks, Steve, and good afternoon to everyone on the call. I'm pleased to provide you with a review of our second quarter results as well as a snapshot of progress in each of our three regional segments.

So starting on Slide 5 from the presentation that we posted today, as you can see, Global future revenues were $296.1 million, a 19% quarter-over-quarter increase and up 39% over the same quarter last year. This includes approximately $37.6 million of revenues from Switch and Data for the two months starting May 1 and is in line with our expectations.

Due to the strengthening of the U.S. dollar throughout the quarter, total revenues were negatively impacted by $3.4 million in FX compared to our guidance and $5 million when you compare it to the average rates reported in Q1. With the recent movement in some of the FX reporting currencies, we've adjusted Q3 and Q4 guidance rates to $1.30 dollar to the euro and $1.40 Sing to the U.S. dollar. We've left the pound unchanged at $1.56 to the pound. Collectively, this has a negative translation effect of about $4 million on our updated 2010 revenue guidance.

Also with the Switch and Data acquisition, we've updated the Global revenue breakdown by currency. Euro and pound represent 13% and 7% of Global revenues, respectively, and the Sing dollar represents about 5% of Global revenues. As Steve mentioned, bookings in the quarter were solid in all three regions, representing our strongest organic gross bookings quarter with particular strength in Europe and Asia. Organic MRR churn for the quarter came in at 2.2% and in line with our expected range of 1.5% to 2.5% per quarter.

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