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Equinix (EQIX) Beats on Q3 AFFO & Revenues, Guides Well
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Equinix Inc. (EQIX - Free Report) posted better-than-expected third-quarter 2017 results, wherein both the top and bottom line surpassed the Zacks Consensus Estimate and increased from the year-ago quarter.
The company’s adjusted funds from operations (AFFO) increased from $3.95 per share reported in the year-ago quarter to $4.97 per share. The Zacks Consensus Estimate is pegged at $4.69. The increase can primarily be attributable to robust top-line growth, strong operating performance and lower tax rate, partially offset by higher cost of revenues and share count.
AFFO is a non-GAAP financial measure generally used in the Real Estate Investment Trust (REIT) industry.
Quarter in Detail
Total revenues were $1.152 million, up 24.6% from the year-ago quarter, beating the Zacks Consensus Estimate of $1.138 billion. This marked the 59th quarter of consecutive revenue growth. The year-over-year improvement was primarily driven by strong booking activity, Equinix's global platform, continued enterprise momentum and synergies from acquisition.
Equinix continues to witness strong demand for cloud services from corporations interested in enhancing their networks. The company observed revenue growth across all three geographic regions and verticals. Robust growth in the global Colocation and Interconnection platforms provided a boost to the top line.
Moreover, solid performance in MRR (monthly recurring revenues) per cabinet, MRR churn rate (2.3%) and cross connect additions drove the top line. Recurring revenues came in at $1.089 billion (95% of total revenues), up approximately 24.2% from the year-ago quarter. Non-recurring revenues climbed 32.6% to $63.2 million (5% of total revenues).
Revenues from the three geographic regions increased on a year-over-year basis as well. Revenues from the Americas, EMEA and Asia-Pacific were up 40.3%, 12.5% and 9.4% to $596.5 million, $338.8 million and $216.9 million, respectively.
Gross margin was 67% flat on a year-over-year basis, primarily due to increased cost of revenues as a percentage of sales. Total operating expenses increased 12.2% to $224.2 million. Further, operating expenses decreased 210 basis points (bps) as a percentage of revenues to 19.5%.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $550.3 million, up 31%. Adjusted EBITDA margins came in at 47.7% as compared with 45.4% reported in the year-ago quarter. AFFO increased 37.7% to $391.3 million, during the quarter.
Balance Sheet & Cash Flow
Equinix exited the quarter with cash, cash equivalents and short-term investments of $1.629 billion. The company’s total debt principal outstanding was $10.12 billion as on Sep 30, 2017. It generated cash of $390.5 million from operating activities in the third quarter.
Guidance
Equinix provided fourth-quarter guidance and raised full-year 2017 projections. For 2017, the company now anticipates revenues to be in the range of $4.355-$4.363 billion, reflecting an increase of 21% year over year (previous guidance was more than $4.317-$4.327 billion, pointing at an increase of 20% year over year). The Zacks Consensus Estimate is pegged at $4.33 billion. The company now predicts adjusted EBITDA to be in the range of $2.049-$2.057 billion (prior guidance was in the range of $2.038-$2.048 billion).
The company now anticipates full-year 2017 AFFO to be in the range of $1.411-$1.419 billion, reflecting an increase of 31% year over year (previous guidance was in the range of $1.382-$1.392 billion, indicating an increase of 29% year over year).
The company continues to expect cash gross margin for full-year 2017 to be approximately between 67% and 68%. Cash selling, general and administrative (SG&A) expenses are now projected in the range of $883-$891 million (previous guidance was $868-$878 million).
For the fourth quarter, Equinix expects revenues in the range of $1.187-$1.195 billion (mid-point $1.191 billion). The Zacks Consensus Estimate of $1.17 billion. Adjusted EBITDA is likely to be between $562 million and $570 million.
Cash gross margin for second quarter is anticipated to be approximately 67%. Cash selling, general and administrative (SG&A) expenses are projected in the range of $228-$236 million.
Share Price
Equinix’s share price movement has been quite favorable. In the last one year, its shares gained 40.6% against a loss of 2.5% recorded by the industry.
Recent Activities
The company has made 13 new expansion facilities across all three regions amounting to $615 million. Acquisitions have remained one of the key growth strategies for Equinix. Worldwide, the company owns 190 IBX data centers across 48 markets and 24 countries.
The company recently completed the buyout of an Istanbul-based data center from Zenium. The deal will help the company expand its data center business in Turkey. Per International Monetary Fund, Turkey has the world's 17th largest nominal GDP and a population of around 80 million. Consequently, expanding its facility in the city will attract more enterprises to opt for Equinix’s data center services, leading to revenue boost.
Notably, Oracle (ORCL - Free Report) , Netflix (NFLX - Free Report) , Alphabet Inc. (GOOGL - Free Report) , Charter Communications, Alibaba, Baiduand Salesforce are major clients of Equinix.
Our Take
Equinix reported stellar third-quarter results and issued an upbeat guidance. Further, the company provided strong revenue guidance for the fourth quarter and raised full-year 2017 projection. The company’s top and bottom-line results also improved on a year-over-year basis. Revenues were mainly driven by strong demand for cloud services from corporations and benefits of Equinix's global platform. The company witnessed revenue growth across all three geographic regions and verticals.
The company is presently focusing on improving customer experience through the Equinix Customer One program. We are also optimistic on its recurring revenue model and expansion plans announced in March this year.
Further, it operates across various geographical regions and is becoming increasingly popular among major players in the tech industry for data management, which should drive revenues going ahead.
Notably, acquisitions have been a major growth driver for Equinix. We expect the company’s buyouts of Telecity Group, Bit-isle and Nimbo, to remain catalysts.
Expansion in important markets and consolidation of facilities in existing ones are important components of Equinix's core strategy. We believe that the company’s focus on offering upgraded technology to attract clients will bolster revenues and profitability, going forward.
However, intensifying competition from established Internet data center operators such as AT&T and CenturyLink Inc. may affect product pricing, consequently denting the margins.
A highly leveraged balance sheet and industry consolidation add to its woes.
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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Equinix (EQIX) Beats on Q3 AFFO & Revenues, Guides Well
Equinix Inc. (EQIX - Free Report) posted better-than-expected third-quarter 2017 results, wherein both the top and bottom line surpassed the Zacks Consensus Estimate and increased from the year-ago quarter.
The company’s adjusted funds from operations (AFFO) increased from $3.95 per share reported in the year-ago quarter to $4.97 per share. The Zacks Consensus Estimate is pegged at $4.69. The increase can primarily be attributable to robust top-line growth, strong operating performance and lower tax rate, partially offset by higher cost of revenues and share count.
AFFO is a non-GAAP financial measure generally used in the Real Estate Investment Trust (REIT) industry.
Quarter in Detail
Total revenues were $1.152 million, up 24.6% from the year-ago quarter, beating the Zacks Consensus Estimate of $1.138 billion. This marked the 59th quarter of consecutive revenue growth. The year-over-year improvement was primarily driven by strong booking activity, Equinix's global platform, continued enterprise momentum and synergies from acquisition.
Equinix continues to witness strong demand for cloud services from corporations interested in enhancing their networks. The company observed revenue growth across all three geographic regions and verticals. Robust growth in the global Colocation and Interconnection platforms provided a boost to the top line.
Moreover, solid performance in MRR (monthly recurring revenues) per cabinet, MRR churn rate (2.3%) and cross connect additions drove the top line. Recurring revenues came in at $1.089 billion (95% of total revenues), up approximately 24.2% from the year-ago quarter. Non-recurring revenues climbed 32.6% to $63.2 million (5% of total revenues).
Revenues from the three geographic regions increased on a year-over-year basis as well. Revenues from the Americas, EMEA and Asia-Pacific were up 40.3%, 12.5% and 9.4% to $596.5 million, $338.8 million and $216.9 million, respectively.
Gross margin was 67% flat on a year-over-year basis, primarily due to increased cost of revenues as a percentage of sales. Total operating expenses increased 12.2% to $224.2 million. Further, operating expenses decreased 210 basis points (bps) as a percentage of revenues to 19.5%.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $550.3 million, up 31%. Adjusted EBITDA margins came in at 47.7% as compared with 45.4% reported in the year-ago quarter. AFFO increased 37.7% to $391.3 million, during the quarter.
Balance Sheet & Cash Flow
Equinix exited the quarter with cash, cash equivalents and short-term investments of $1.629 billion. The company’s total debt principal outstanding was $10.12 billion as on Sep 30, 2017. It generated cash of $390.5 million from operating activities in the third quarter.
Guidance
Equinix provided fourth-quarter guidance and raised full-year 2017 projections. For 2017, the company now anticipates revenues to be in the range of $4.355-$4.363 billion, reflecting an increase of 21% year over year (previous guidance was more than $4.317-$4.327 billion, pointing at an increase of 20% year over year). The Zacks Consensus Estimate is pegged at $4.33 billion. The company now predicts adjusted EBITDA to be in the range of $2.049-$2.057 billion (prior guidance was in the range of $2.038-$2.048 billion).
The company now anticipates full-year 2017 AFFO to be in the range of $1.411-$1.419 billion, reflecting an increase of 31% year over year (previous guidance was in the range of $1.382-$1.392 billion, indicating an increase of 29% year over year).
The company continues to expect cash gross margin for full-year 2017 to be approximately between 67% and 68%. Cash selling, general and administrative (SG&A) expenses are now projected in the range of $883-$891 million (previous guidance was $868-$878 million).
For the fourth quarter, Equinix expects revenues in the range of $1.187-$1.195 billion (mid-point $1.191 billion). The Zacks Consensus Estimate of $1.17 billion. Adjusted EBITDA is likely to be between $562 million and $570 million.
Cash gross margin for second quarter is anticipated to be approximately 67%. Cash selling, general and administrative (SG&A) expenses are projected in the range of $228-$236 million.
Share Price
Equinix’s share price movement has been quite favorable. In the last one year, its shares gained 40.6% against a loss of 2.5% recorded by the industry.
Recent Activities
The company has made 13 new expansion facilities across all three regions amounting to $615 million. Acquisitions have remained one of the key growth strategies for Equinix. Worldwide, the company owns 190 IBX data centers across 48 markets and 24 countries.
The company recently completed the buyout of an Istanbul-based data center from Zenium. The deal will help the company expand its data center business in Turkey. Per International Monetary Fund, Turkey has the world's 17th largest nominal GDP and a population of around 80 million. Consequently, expanding its facility in the city will attract more enterprises to opt for Equinix’s data center services, leading to revenue boost.
Notably, Oracle (ORCL - Free Report) , Netflix (NFLX - Free Report) , Alphabet Inc. (GOOGL - Free Report) , Charter Communications, Alibaba, Baiduand Salesforce are major clients of Equinix.
Our Take
Equinix reported stellar third-quarter results and issued an upbeat guidance. Further, the company provided strong revenue guidance for the fourth quarter and raised full-year 2017 projection. The company’s top and bottom-line results also improved on a year-over-year basis. Revenues were mainly driven by strong demand for cloud services from corporations and benefits of Equinix's global platform. The company witnessed revenue growth across all three geographic regions and verticals.
The company is presently focusing on improving customer experience through the Equinix Customer One program. We are also optimistic on its recurring revenue model and expansion plans announced in March this year.
Further, it operates across various geographical regions and is becoming increasingly popular among major players in the tech industry for data management, which should drive revenues going ahead.
Notably, acquisitions have been a major growth driver for Equinix. We expect the company’s buyouts of Telecity Group, Bit-isle and Nimbo, to remain catalysts.
Expansion in important markets and consolidation of facilities in existing ones are important components of Equinix's core strategy. We believe that the company’s focus on offering upgraded technology to attract clients will bolster revenues and profitability, going forward.
However, intensifying competition from established Internet data center operators such as AT&T and CenturyLink Inc. may affect product pricing, consequently denting the margins.
A highly leveraged balance sheet and industry consolidation add to its woes.
Equinix carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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