Equinix Inc’s. (EQIX) first quarter 2010 EPS of 35 cents fell below the Zacks Consensus Estimate of 43 cents per share.
Revenue
Revenue for the first quarter was $242.6 million up 3.0% over the previous quarter and 25.0% over the same quarter last year. This reflects the continued benefit of strong demand across geographies and business segments.
Recurring revenues, consisting primarily of colocation, interconnection and managed services, were $237.2 million (95.4% of total revenues), a 2.0% increase over the previous quarter and a 25.0% increase over the same quarter last year. Non-recurring revenues of $11.4 million (4.6% of total revenues), increased 2.9% sequentially and 28.1% from the same quarter last year.
Operating Results
Cash gross margins (defined as gross profit less depreciation, amortization, accretion and stock-based compensation, divided by revenues) for the quarter was 66%, up from 65% in the previous quarter and 64% compared to the same quarter last year. The cash gross margin in the U.S. was flat sequentially at 70%. This may be attributed to slower-than-expected hiring during the quarter.
Europe cash gross margins were 56%, a 300 basis point (bps) sequential increase. This may be attributed to the decline in lower-margin power revenues specifically in Germany. Asia/Pacific cash gross margins declined 300 bps sequentially to 65%. This may be attributed to the timing of repairs and maintenance expenses over the last two quarters.
Operating expenses were comparatively high in the quarter increasing 4.5% sequentially and 54.7% from the year-ago quarter. Selling, General and Administrative expenses were $62.6 million, a 3.0% increase from the previous quarter and a 26.0% increase over the same quarter last year. Adjusted EBITDA, defined as income or loss from operations before depreciation and amortization, accretion, stock-based compensation expense and restructuring charges for the quarter was $117.3 million, an increase of 5.0% from the previous quarter and up 28.0% from the same quarter last year.
Net income for the quarter came in at $14.2 million or $0.35 per diluted share, versus net income of $15.5 million or $0.40 per diluted share in the in the year-ago quarter.
During the quarter, Equinix generated $99.8 million from operating activities versus $82.5 million in the previous quarter. Capital expenditures in the first quarter were $143.4 million, of which $14.5 million was spent on ongoing capital expenditures and $128.9 million on expansion. The company exited the quarter with $1179.9 million in total cash and cash equivalents and investments, versus $594.6 million in the previous quarter.
Guidance
For the second quarter of 2010, total revenues are expected to be in the range of $258.0 to $260.0 million. Cash gross margins are expected to be 65%. Cash selling, general and administrative expenses are expected to be $55.0 million. Adjusted EBITDA for the year is expected to be between $113.0 and $115.0 million.
Capital expenditures are expected to be in the range of $140.0 to $170.0 million, comprising approximately $30.0 million of capital expenditures, which is ongoing in nature and $110.0 to $140.0 million of related to expansion activity.
For fiscal year 2010, management expects total revenue of $1.06 to $1.08 billion. The cash gross margins for the year are expected to be approximately in the range of 64% – 65%. Cash selling, general and administrative expenses are expected to be in the range of $210.0 to $220.0 million.
Adjusted EBITDA is expected to be in the range of $470.0 to $480.0 million. Capital expenditures to remain in the range of $450.0 to $510.0 million, with approximately $100.0 million slated for ongoing capital expenditures related to customer installation, new product innovation, ERP system solutions and increased investment in IBX reliability. Capital expenditures supplementing the expansion activity are expected to range between $350.0 and $410.0 million.
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