Equinix Inc.
(
EQIX
) reported first quarter 2012 earnings per share of $1.33, way
ahead of the Zacks Consensus Estimate of 49 cents.
Revenues
Revenues in the reported quarter were $452.2 million, up 24.6%
from the year-ago quarter. The company's strong first quarter
results reflect growth across three of its geographical regions.
The company also witnessed strong business trends across mobility,
cloud computing and data management, and is well positioned to
achieve its objective in 2012.
On the other hand, quarterly revenues were slightly impacted by
the negative currency fluctuations that the company has faced in
the recent quarter, thereby registering a revenue loss of
$500,000.
Within segments,
Recurring revenues
(consisting primarily of colocation, interconnection and managed
services) were $429.6 million in the first quarter, a 24.9%
increase over the year-ago quarter.
Non-recurring revenues
were $22.6 million in the quarter, up 18.1% from $19.1 million in
the year-ago quarter. The company secures 59% of monthly recurring
revenues from different customers from different countries.
Operating Results
Gross margin for the quarter was 50.2% versus 46.4% in the
year-ago quarter. The improvement in gross margin was the result of
strong revenue growth, and lower lease cost and an amicable
settlement with one of Equinix's contractors in the EU region.
Total operating expenses increased 29.7% from the year-ago
quarter. The year-over-year increase in cash operating expenses was
primarily attributed to higher selling and marketing expenses (up
38.4%) and general and administrative expenses (up 25.3%).
Adjusted EBITDA, defined as income or loss from operations
before depreciation, amortization and accretion, stock-based
compensation, restructuring charges and acquisition costs, was
$215.1 million in the quarter, up 28.6% year over year. The
adjusted EBITDA has grown consistently over the past few quarters
and reflects the underlying strength in the company's business.
Adjusted net income attributable to Equinix stood at $67.9
million or $1.33 per diluted share versus $75.8 million or $1.61
per share in the year-ago quarter.
Balance Sheet, Cash Flow & Capital
Expenditure
The company generated cash from operating activities of $126.0
million in the first quarter compared with $187.6 million in the
previous quarter. As of March 31, 2012 cash, cash equivalents and
short-term investments were $916.9 million versus $914.5 million in
the earlier quarter. During reported quarter, the company
repurchased 1 million shares for a total consideration of $100
million.
Guidance
For the second quarter of 2012, the revenue is expected in the
range of $466.0 to $468.0 million. Cash gross margin is projected
to be 68%. Cash selling, general and administrative expenses are
expected to range between $100.0 and $104.0 million. Adjusted
EBITDA is expected in the $212.0 and $214.0 million range. Capital
expenditures are expected to be between $240.0 and $260.0
million.
For fiscal 2012, total revenue is expected to be more than
$1,890.0 million. Cash gross margin is expected to approximate 67%.
Adjusted EBITDA for the year is expected to be higher than $860.0
million. The company expects capital expenditures in the range of
$700.0 to $800.0 million, comprised of ongoing capital expenditures
of $565.0 to $665.0 million.
Our Take
The company has delivered modest first quarter results with EPS
exceeding our expectation. Moreover, revenue improved substantially
on a year-over-year basis as the company is witnessing improvement
in mobility, cloud computing and data management. The company
is also experiencing improvement in business fundamentals across
all the segments, along with better supply chain process and firm
pricing environment.
Although the company is cash rich, the company should reduce its
debt level. We are also positive about its recurring revenue model.
Despite all the positives, competitive threats from the likes of
AT&T Inc.
(
T
) and
Verizon Inc.
(
VZ
) raise our apprehension. European exposure and industry
consolidation are also concerning.
Equinix carries a Zacks #3 Rank, implying a short-term Hold
rating.
EQUINIX INC (
EQIX
): Free Stock Analysis Report
AT&T INC (
T
): Free Stock Analysis Report
VERIZON COMM (
VZ
): Free Stock Analysis Report
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