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Equinix Posts Strong Revenue and AFFO Growth

By Beth McKenna - Apr 27, 2017 at 2:26PM

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Adoption of cloud computing by enterprise customers continues to drive demand for the services provided by the data-center operator and global interconnection specialist.

Equinix (EQIX -0.69%) reported first-quarter 2017 results after the market closed on Wednesday.

Here's how the quarter worked out for the data-center operator and global interconnection specialist real estate investment trust (REIT) and its investors.

Equinix's key quarterly numbers

          Metric           Q1 2017                Q1 2016     Year-Over-Year Change  
Revenue  $949.5 million $844.2 million  12.5%
Net income $42.1 million ($31.1 million)  N/A
Earnings per share $0.57  ($0.46)   N/A
Adjusted funds from operations (AFFO)* $304.1  million $209.8 million 44.9%
AFFO per share  $4.14 $3.03   36.6% 

Data source: Equinix. *AFFO is a closely watched metric for companies organized as REITs, as it's a driver of payouts to shareholders. It's akin to "earnings" for REITs.

Equinix's revenue came in above its guidance range of $940 million to $946 million. The company doesn't provide quarterly AFFO guidance.

The company's quarterly year-over-year comparisons are still getting a boost from its acquisition of Telecity, a European data-center operator, as that closed in February (or mid-first quarter) of 2016. 

The interior of a data center.

Image source: Equinix.

What happened with Equinix in the quarter?

  • Recurring revenue, consisting primarily of colocation, interconnection, and managed services, was $898.4 million, a 12.8% increase over the year-ago period. Non-recurring revenue was $51.1 million.
  • Customer deployments across multiple metro areas increased to 83% of total recurring revenue, which the company said demonstrates the value of its global platform -- and I agree.
  • The company achieved record quarterly bookings in Europe.
  • It also achieved records in terms of total new customer wins and new enterprise customer wins. 
  • Eleven new Fortune 500 customers came on board, including Progressive Corp. and Eli Lilly.
  • Enterprise remained its fastest-growing vertical, with recurring revenue exceeding $100 million. 
  • The company achieved record quarterly bookings in its network vertical, driven by major telecommunication providers expanding capacity and capabilities for digital services such as streaming, cloud, and security, and upgrading network deployments with more advanced optical technologies.
  • A new international business exchange data center opened in Sao Paulo, Brazil.

What management had to say

Here's what CEO Steve Smith had to say about the quarter:

Equinix is off to a strong start in 2017, with our 57th quarter of consecutive revenue growth and continued momentum in capturing and curating powerful digital ecosystems at global scale. We are adding new enterprises at a solid pace, as enterprises adopt hybrid and multi-cloud as their IT architecture of choice. We have also made great progress toward our $3.6 billion acquisition of the portfolio of 29 data centers from Verizon in the U.S. and Latin America, and we remain highly confident that this transaction will create significant value for both our customers and our shareholders, strengthening our global platform and delivering AFFO per share accretion on Day One, excluding transaction and integration costs.

Looking ahead

Equinix's results should get a boost starting next quarter from its acquisition of 29 data centers from Verizon; this acquisition is expected to close in the second quarter.

The company provided second-quarter guidance and slightly tweaked its previously issued full-year 2017 guidance. For the second quarter, it expects revenue in the range of $976 million to $982 million, which at the midpoint represents growth of 3.1% and constant-currency growth of 2.6% over the second quarter of 2016. Equinix does not issue quarterly AFFO guidance.

Updated 2017 guidance is as follows:

  Metric           Previous 2017 Guidance       Updated 2017 Guidance           Projected Year-Over-Year Change  
Revenue Greater than $3,933 million Greater than $3,976 million 10.1% (more than 11.1% on normalized and constant-currency basis)
AFFO Greater than $1,249 million Greater than $1,214 million 13%

Data source: Equinix.

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