Equinix's 2Q Earnings Beat Estimates - Analyst Blog
Equinix Inc. ( EQIX ) reported second-quarter 2013 adjusted earnings per share of $1.27, far ahead of Zacks Consensus Estimate of 69 cents. The quarter's figure excludes a loss from debt extinguishment ($1.90 per share), restructuring gains, acquisition costs, but includes stock-based compensation expense.
Total revenue in the reported quarter was $525.7 million, up 15.0% from the year-ago quarter. The company witnessed decent revenue growth across all three geographic regions of the network vertical, especially in Asia-Pacific. The company's 1,150 cloud and IT services' customers generate 24% of the total revenue.
Apart from this, the company witnessed substantial growth witnessed in the Software-as-a-Service. This sub segment continues to contribute a lot of revenue as the end users continue to require highly interconnected footprint to deliver the application performance their customers expect.
Moreover, recurring revenues (including colocation, interconnection and managed services) were $502.5 million during the second quarter, up 15.8% from the year-ago quarter. Non-recurring revenues were $23.2 million in the quarter, down 1.1% from $23.5 million reported in the year-ago quarter.
Gross margin for the quarter was 49.1% versus 50.7% in the year-ago quarter. The gross margin as the cost of revenue increased by 19.1% compared to the year-ago quarter.
Total operating expenses increased 12.3% from the year-ago quarter. The year-over-year increase in operating expenses was primarily attributed to higher selling and marketing expenses (up 24.9%) and general and administrative expenses (up 10.0%).
Operating income from continuing operation was $112.2 million, up 9.9% from $102.1 million reported in the year-ago quarter.
Net loss attributable to Equinix stood at $28.7 million or 58 cents per share compared to net income of $36.4 million or 72 cents per share in the year-ago quarter. Adjusted earnings per share were $1.27.
Balance Sheet & Cash Flow
Equinix continues to generate cash from operating activities of $147.2 million as compared to $84.2 million in the previous quarter. Cash, cash equivalents and investments were $1.22 billion, as compared to $1.21 billion in the previous quarter.
Equinix reported capital expenditures of $122.9 million, of which $82.7 million forms part of the expansion capital expenditures and $40.2 million was attributed to ongoing capital expenditures. The company has loans payable of $164.9 million, while convertible debts stood at $716.3 million.
Equinix expects the third quarter of 2013 revenues in the range of $538.0 million to $542.0 million. Cash gross margins are expected to approximate 68%, while the cash selling, general and administrative expenses are expected to range between $126.0 million and $130.0 million, while the adjusted EBITDA is expected in the range of $236.0 million and $240.0 million.
Moreover, capital expenditures are expected to be approximately $180.0 million to $200.0 million, comprising of mainly $50.0 million of ongoing capital expenditures and $130.0 million to $150.0 million of expansion capital expenditures.
For the full year of 2013, total revenue is expected between $2,135.0 million and $2,145.0 million. The full year cash gross margins is expected to be around 68%. Cash selling, general and administrative expenses are expected to range between $465.0 million and $475.0 million.
Adjusted EBITDA is expected to hover in the range of $985.0 million to $990.0 million, Capital expenditures for 2013 is expected in the range of $575.0 million to $625.0 million, mainly comprised of $165.0 million of ongoing capital expenditures and $410.0 to $460.0 million for expansion capital expenditures.
Equinix reported second-quarter 2013 earnings ahead of the Zacks Consensus Estimate. Total revenue for Equinix improved on a year-over-year basis as the companies witnessed revenue growth across geographies and revenue segments.
The company provided decent fiscal year and third-quarter 2013 guidance. Demand for Equinix' data centers are growing, which is attracting new clients. Equinix has also gained from its recent acquisitions. The recurring revenue model is working well for the company and providing enough revenue support.
On the other hand, the company must work to reduce its debt level although it has cleared a considerable amount of debt in the reported quarter. In spite of all the positives, competitive threats from the likes of AT&T Inc. ( T ) raise our apprehension. European exposure and industry consolidation are the other headwinds.
Equinix has a Zacks Rank #3 (Hold).
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