Newsroom Press Release

July 25, 2007

Equinix reports second quarter 2007 results

Equinix, Inc. (Nasdaq: EQIX), the leading provider of network-neutral data centers and Internet exchange services, today reported quarterly results for the period ended June 30, 2007

  • Increased revenues to $91.8 million, an 8% increase over the previous quarter and a 34% increase over the same quarter last year
  • Increased quarterly EBITDA, a non-GAAP financial measure, to $35.3 million, a 9% increase over the previous quarter
  • Raises 2007 annual revenue guidance to $373.0 to $377.0 million and EBITDA guidance to $141.0 to $143.0 million
  • Announced its intention to acquire IXEurope for approximately �270.1 million

FOSTER CITY, CA — July 25, 2007 — Equinix, Inc. (Nasdaq: EQIX), the leading provider of network-neutral data centers and Internet exchange services, today reported quarterly results for the period ended June 30, 2007.

Revenues were $91.8 million for the second quarter, a 34% increase over the same quarter last year and an 8% increase over the previous quarter. Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $87.9 million, a 35% increase over the same quarter last year and a 9% increase over the previous quarter. Non-recurring revenues were $3.9 million in the quarter, consisting primarily of professional services and installation fees.

Cost of revenues were $55.6 million for the second quarter, including $1.0 million of stock-based compensation, a 5% increase over the previous quarter and a 22% increase over the same quarter last year. Cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation of $21.9 million, were $33.7 million for the second quarter, a 6% increase over the previous quarter and a 26% increase over the same quarter last year. Cash gross margins, defined as gross profit less depreciation, amortization, accretion and stock-based compensation, divided by revenues, for the quarter were 63%, up from 62% the previous quarter and up from 61% the same quarter last year. On a same IBX basis (defined as IBX centers which have been available for new customer installs for at least four full quarters), cash gross margins were 68%.

Selling, general and administrative expenses were $33.4 million for the second quarter, including $9.0 million of stock-based compensation, a 6% increase from the previous quarter and a 27% increase over the same quarter last year. Selling, general and administrative expenses, excluding depreciation, amortization and stock-based compensation of $10.6 million, were $22.8 million for the second quarter, a 10% increase over the previous quarter and a 29% increase over same quarter last year.

Net income for the second quarter was $1.2 million, including stock-based compensation expense of $10.0 million. This represents basic and diluted net income per share of $0.04 based on a weighted average share count of 31.1 million and 32.7 million, respectively. Excluding stock-based compensation and the restructuring charge, the Company had non-GAAP net income of $11.7 million for the second quarter. This was a $2.3 million increase over the prior quarter and an $8.1 million improvement over the same quarter last year.

EBITDA, defined as income or loss from operations before depreciation, amortization, accretion, stock-based compensation expense and restructuring charges, for the second quarter was $35.3 million, up from $32.4 million the previous quarter and up from $24.0 million the same quarter last year.

“Equinix delivered an exceptional second quarter and, as demonstrated by our increased guidance, is positioned for a very strong second half,” said Steve Smith, CEO of Equinix. “Our continued execution on our expansion plan and our strategic move into Europe with the announced acquisition of IXEurope demonstrate our ability to fully capitalize on our market leadership position.”

Capital expenditures in the second quarter were $139.8 million, of which $10.2 million was attributed to ongoing capital expenditures and $129.6 million was attributed to expansion capital expenditures. In addition, the Company purchased a new property in the Los Angeles metro area for $49.0 million with cash in June 2007.

The Company generated cash from operating activities of $38.1 million as compared to $20.1 million in the previous quarter. Cash used in investing activities was $157.4 million as compared to $57.6 million in the previous quarter. Adjusted free cash flow was a negative $70.3 million in the second quarter. Adjusted free cash flow is defined as net cash generated from operating activities less net cash used in investing activities (excluding the purchases, sales and maturities of short-term and long-term investments and the purchase and sale of real estate).

As of June 30, 2007, the Company's cash, cash equivalents and investments were $324.0 million, as compared to $392.4 million in the previous quarter.

Other Company Developments & Metrics

  • On a same IBX basis (defined as IBX centers which have been available for new customer installs for at least four full quarters), revenues were $80.5 million; cost of revenues were $42.7 million; cost of revenues, excluding depreciation, amortization, accretion and stock-based compensation, were $25.9 million and cash gross margins for the quarter were 68%. EBITDA on a same IBX basis was $32.5 million.
  • Equinix added 96 new customers in the quarter.
  • On a weighted average basis, the number of cabinets billing at the end of the quarter was approximately 19,200 representing an approximate utilization rate of 77%.
  • U.S. interconnection service revenues were 22% of U.S. recurring revenues for the quarter. Interconnection services represent approximately 20% of total worldwide recurring revenues.
  • The company announced the acquisition of a site for a new IBX in the Los Angeles market for $49.0 million, which closed in June 2007, as well as its intention to expand its existing IBX center in Santa Clara by approximately 1,100 cabinets.
  • The company completed its purchase of its flagship Silicon Valley IBX for $65.0 million in early July 2007.

Business Outlook

For the third quarter 2007, revenues are expected to be in the range of $96.5 to $97.5 million. Cash gross margins are expected to be approximately 61%. Cash selling, general and administrative expenses are expected to be $22.0 to $23.0 million. EBITDA for the third quarter is expected to be $36.0 to $37.0 million. Net loss is expected to be approximately $2.0 million, including the impact of approximately $10.0 million of stock-based compensation expense. Net interest expense is expected to be approximately $6.0 million. The weighted average shares outstanding are expected to be approximately 31.4 million. Capital expenditures are expected to be approximately $100.0 to $105.0 million, including approximately $90.0 million of expansion capital expenditures.

For the full year of 2007, total revenues are expected to be in the range of $373.0 to $377.0 million. Total year cash gross margins are expected to be in the range of 61% to 62% including approximately $6.9 million of net cash costs attributed to our expansion IBXs. Cash selling, general and administrative expenses are expected to be approximately $88.0 million. EBITDA for the year is expected to be $141.0 to $143.0 million. Net loss is expected to be in a range of $10.0 to $12.0 million, including the impact of approximately $41.0 million of stock-based compensation expense. Net interest expense and loss on conversion and extinguishment of debt is expected to be approximately $16.0 million. The weighted average shares outstanding are expected to be approximately 30.7 million. Capital expenditures for 2007 are expected to be in a range of $380.0 to $390.0 million, comprised of approximately $40.0 million of ongoing capital expenditures and $340.0 to $350.0 million of expansion capital expenditures for the build out of the Washington, D.C., Tokyo and Singapore expansions opened this year, as well as the announced expansions in the Washington, D.C., Chicago, New York, Silicon Valley and Los Angeles metro areas. This range reflects $10.0 million of expansion capital shifted from 2007 into 2008 for the second phase of the Tokyo build.

The Company will discuss its results and guidance on its quarterly conference call on Wednesday, July 25, 2007, at 5:30 p.m. EDT (2:30 p.m. PDT). To hear the conference call live, please dial 1-773-799-3263 (domestic and international) and reference the pass code (EQIX). A simultaneous live Webcast of the call will be available over the Internet at www.equinix.com, under the Investor Relations heading. A replay of the call will be available beginning on Wednesday, July 25, 2007 at 7:30 p.m. EDT (4:30 p.m. PDT) by dialing 1-203-369-3899. In addition, the Webcast will be available on the Company's Web site at www.equinix.com. No password is required for either method of replay.

About Equinix

Equinix is the leading global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators and network services providers. Through the company's Internet Business Exchange™ (IBX®) centers in 10 markets in the U.S. and Asia, customers can directly interconnect with every major global network and ISP for their critical peering, transit and traffic exchange requirements. These interconnection points facilitate the highest performance and growth of the Internet by serving as neutral and open marketplaces for Internet infrastructure services, allowing customers to expand their businesses while reducing costs.

Non-GAAP Financial Measures

Equinix continues to provide all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Equinix uses non- GAAP financial measures, such as pro forma revenues, EBITDA, cash cost of revenues, cash gross margins, cash operating expenses (also known as cash selling, general and administrative expenses or cash SG&A), non-GAAP net income (loss), free cash flow and adjusted free cash flow to evaluate its operations. In presenting these non-GAAP financial measures, Equinix excludes certain non-cash or non-recurring items that it believes are not good indicators of the Company's current or future operating performance. These non-cash or non-recurring items are a non-recurring revenue adjustment with respect to 2006 results, depreciation, amortization, accretion, stock-based compensation, restructuring charges and, with respect to 2006 results, the gain on Honolulu IBX sale, and with respect to 2007 results, the loss from conversion of debt. Recent legislative and regulatory changes encourage use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. Equinix excludes these non-cash or non-recurring items in order for Equinix's lenders, investors, and industry analysts who review and report on the Company, to better evaluate the Company's operating performance and cash spending levels relative to its industry sector and competitor base.

Equinix excludes depreciation expense as these charges primarily relate to the initial construction costs of our IBX centers and do not reflect our current or future cash spending levels to support our business. Our IBX centers are long-lived assets, and have an economic life greater than ten years. The construction costs of our IBX centers do not recur and future capital expenditures remain minor relative to our initial investment. This is a trend we expect to continue. In addition, depreciation is also based on the estimated useful lives of our IBX centers. These estimates could vary from actual performance of the asset, are based on historic costs incurred to build out our IBX centers, and are not indicative of current or expected future capital expenditures. Therefore, Equinix excludes depreciation from its operating results when evaluating its operations.

In addition, in presenting the non-GAAP financial measures, Equinix excludes amortization expense related to certain intangible assets, as it represents a cost that may not recur and is not a good indicator of the Company's current or future operating performance. Equinix excludes accretion expense, both as it relates to its asset retirement obligations as well as its accrued restructuring charge liabilities, as these expenses represent costs, which Equinix believes are not meaningful in evaluating the Company's current operations. Equinix excludes non-cash stock-based compensation expense as it represents expense attributed to stock awards that have no current or future cash obligations. As such, we, and our investors and analysts, exclude this stock-based compensation expense when assessing the cash generating performance of our operations. Equinix excludes restructuring charges from its non-GAAP financial measures. The restructuring charges relate to the Company's decision to exit leases for excess space adjacent to several of our IBX centers, which we do not intend to build out now or in the future. With respect to its 2006 results, Equinix reports pro forma revenues and excludes the gain on Honolulu IBX sale. Pro forma revenues exclude a revenue adjustment recorded in the fourth quarter of 2006 in connection with our adoption of Staff Accounting Bulletin No. 108, which is a one-time adjustment and will not recur. The gain on Honolulu IBX sale represents a unique transaction for the Company and future sales of IBX centers are not expected. The Honolulu market was not considered a core, strategic market for the Company. With respect to its 2007 results, Equinix excludes the loss from conversion of debt as this activity is not typical for the company. Management believes such items as restructuring charges, the gain on the sale of an IBX center and the loss from conversion of debt are unique transactions that are not expected to recur, and consequently, does not consider these items as a normal component of expenses or income related to current and ongoing operations.

Our management does not itself, nor does it suggest that investors should, consider such non- GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. However, we have presented such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be our core, ongoing business operations. Management believes that the inclusion of these non-GAAP financial measures provide consistency and comparability with past reports and provide a better understanding of the overall performance of the business and its ability to perform in subsequent periods. Equinix believes that if it did not provide such non-GAAP financial information, investors would not have all the necessary data to analyze Equinix effectively.

Investors should note, however, that the non-GAAP financial measures used by Equinix may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. In addition, whenever Equinix uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

Equinix does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data. Equinix intends to calculate the various non-GAAP financial measures in future periods consistent with how it was calculated for the three and six months ended June 30, 2007 and 2006, presented within this press release.

View Q2 2007 Financial Statements

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinix services; unanticipated costs or difficulties relating to the integration of IXEurope into Equinix; a failure to receive significant revenue from customers in recently built out data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; the results of any litigation relating to past stock option grants and practices; and other risks described from time to time in Equinix's filings with the Securities and Exchange Commission. In particular, see Equinix's recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.

Equinix and IBX are registered trademarks of Equinix, Inc. Internet Business Exchange is a trademark of Equinix, Inc.