Equinix, Inc. Earnings: Growth by Acquisition

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Data center operator and global interconnection specialist Equinix (NASDAQ: EQIX) reported second-quarter results shortly after the closing bell on Wednesday. Here's how the quarter worked out for Equinix and its investors.

Equinix's Q2 results: The raw numbers

YOY = year over year.Data source: Equinix.

What happened with Equinix this quarter?

The second quarter provided smooth sailing for Equinix, even though the company is working through the integration of two significant buyouts at the moment.

The company delivered both sales and EBITDA profits above the top end of management's own guidance ranges.
Revenues were boosted by two large acquisitions, both of which closed about six months ago. The Bit-isle deal doubled Equinix's data center presence in Japan, and the larger Telecity buyout added more than 40 data centers across Europe. Together, these new assets contributed second-quarter sales of $144.5 million and a net $53.6 million of additional EBITDA earnings.
During the second quarter, Equinix continued its acquisitive ways by picking up two more data centers in Paris, France. The company's campus in Ashburn, Virginia, also broke ground on its first company-owned data center. This construction should double Equinix's access to the crucial Ashburn internet exchange point over the next couple of years.

Management offered guidance targets for both the next quarter and the full fiscal year as follows:

In the third quarter, sales should rise 34% year over year, landing near $918 million. Adjusted EBITDA is seen at roughly $422 million, which would be a 31% increase over the year-ago period.
Full-year revenue guidance was reaffirmed at approximately $3.6 billion. Adjusted EBITDA guidance was tightened around $1.66 billion, up from "more than $1.65 billion" in the forecast provided three months ago.

What management had to say

Equinix CEO Steve Smith underscored the fact that second-quarter results exceeded management's expectations and reminded investors that the company's sales have now seen 54 consecutive quarters of uninterrupted growth.

"As digital transformation drives companies to evolve business models and operations, Equinix continues to serve as an important partner as reflected in our strong growth and market leadership position," Smith said.

Looking ahead

Data center colocation services continue to account for the lion's share of Equinix's total sales, though the balance is changing. In the second quarter of 2015, colocation stood for 75% of all sales. This time, the ratio had fallen to 71% despite the colocation influx of Bit-isle and Telecity operations. Managed infrastructure services are picking up the slack, rising from 3% to 5% of total sales.

This shift reflects a larger amount of cloud computing operations, where some clients can get by with fewer hosted server systems but still need high-quality networking and back-end technology platforms. Equinix plays both sides of that equation, which should help the company stay relevant for the long term as cloud services continue to grow in stature.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Equinix. Try any of our Foolish newsletter services free for 30 days.

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