Equinix Management Discusses Q2 2012 Results - Earnings Call Transcript

Equinix (EQIX)

Q2 2012 Earnings Call

July 25, 2012 5:30 pm ET

Executives

Katrina Rymill

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

Keith D. Taylor - Chief Financial Officer and Principal Accounting Officer

Charles Meyers - President of North America

Analysts

Sterling P. Auty - JP Morgan Chase & Co, Research Division

David W. Barden - BofA Merrill Lynch, Research Division

Jonathan Atkin - RBC Capital Markets, LLC, Research Division

James D. Breen - William Blair & Company L.L.C., Research Division

Michael Rollins - Citigroup Inc, Research Division

Scott Goldman - Goldman Sachs Group Inc., Research Division

Gray Powell - Wells Fargo Securities, LLC, Research Division

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

Simon Flannery - Morgan Stanley, Research Division

Presentation

Operator

Good afternoon, and welcome to the Equinix Conference Call. [Operator Instructions] 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 Katrina Rymill, VP of IR. You may begin.

Katrina Rymill

Good afternoon, and welcome to today's conference call. Before we get started, I would like to remind everyone that some of the statements that 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 most recent Form 10-K filed on February 24, 2012, and Form 10-Q filed on April 27, 2012. 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's Equinix's policy not to comment on its financial guidance during the quarter unless it's done through an exclusive public disclosure.

In addition, we will provide non-GAAP measures on today's conference call. We will 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 Equinix 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 CEO and President; Keith Taylor, Chief Financial Officer; and Charles Meyers, President of the Americas. Following our prepared remarks, we'll be taking questions from sell-side analysts. In the interest of wrapping this call in an 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.

Stephen M. Smith

Thank you, Katrina. And good afternoon, and welcome to our second quarter earnings call. I'm pleased to report that Equinix delivered another quarter of strong financial results, and we made solid progress against our operating goals in the first half of 2012.

As shown on Slide 3, revenues were $466.3 million, up 3% quarter-over-quarter and 18% over the same quarter last year. Adjusted EBITDA was $222.1 million for the quarter, up 22% over the same quarter last year. Our results demonstrate our focus on disciplined execution, striking an appropriate balance between revenue growth, margin expansion and attractive returns on invested capital. We are executing on our strategy of building network density in key metros, deepening our ecosystems and interconnection across our 5 verticals and expanding our global reach.

Our global platform continues to be a unique competitive advantage for Equinix. Today, 58% of our revenue comes from customers deployed across multiple regions, and revenues from companies who are deployed in all 3 regions increased by 34% over the last year.

With more applications benefiting from a distributed architecture, we've seen attractive opportunity to help our customers expand their deployments into multiple regions across our global footprint.

Specifically, we have an increasing number of customers in Europe and North America who view Asia as a critical market for expansion. To enhance our ability to meet demand from these customers, this quarter, we acquired Asia Tone for $230.5 million, making Equinix the market leader in Hong Kong, strengthening our position in Singapore and establishing a significant presence in Mainland China.

Equinix gained a total of 6 data centers and 1 disaster recovery center, which includes 2 existing data centers in Shanghai plus a third under construction. This world-class data center is expected to open in Q3 this year, and we are already seeing a significant pipeline from customers looking to extend their footprint into Mainland China. Having just returned from Shanghai, I believe our strong local operating team, combined with this impressive facility, will give customers full confidence to expand with Platform Equinix into this critical market.

Similarly in Europe, we are using M&A to build network density in this region. Network density is the foundation upon which we build and support robust global ecosystems. As announced earlier this month, we completed the acquisition of ancotel, one of Europe's leading carrier-neutral colocation providers for $86 million. With ancotel, Equinix increases its network customer base from 700 to 900, considerably expanding our network density to include a broad mix of networks from both Western and Eastern Europe. Equinix now operates in over -- operates over 220,000 net sellable square feet of data center capacity across 4 data centers in the Frankfurt market, one of the world's busiest data hubs. ancotel also adds over 6,000 cross connects, bringing the total number of cross connects across Platform Equinix to approximate 110,000. ancotel is a powerful addition to our European business and delivers significant value to our global offering.

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