Equinix's Q1 Revenue Rises, but AFFO Still Hurt by Currency Headwinds
Inside Telecity's Dublin, Ireland, data center. Image source: Equinix.
Equinix(NASDAQ: EQIX) reported first-quarter 2016 results after the market closed on Wednesday. The global interconnection and data center company's revenue increased from the previous year's period. Adjusted funds from operations (AFFO) declined, however, as it continues to be negatively affected by foreign-exchange currency headwinds.
AFFO is a closely watched metric for companies organized as real estate investment trusts (REITs), as it's a driver of payouts to shareholders. It's calculated by taking net income, and adding backitems such as depreciation and amortization.
The market's reaction was relatively muted, with shares falling 1.2% on Thursday. Equinix stock has returned 26% for the one-year period through May 4, crushing the S&P 500's nearly flat return.
Equinix's key quarterly numbers
|
Metric |
Q1 2016 |
Q1 2015 |
Growth (YOY) |
|---|---|---|---|
|
Revenue |
$844.2 million |
$643. 2 million |
31.1% |
|
Net Income |
$(31.1) million |
$76.5 million |
-- |
|
Earnings Per Share |
$(0.46) |
$1.34 |
-- |
|
Adjusted Funds from operations (AFFO) |
$209.8 million |
$221.8 million |
(5.4)% |
|
AFFO Per Share |
$2.98 |
$3.77 |
(21)% |
Data source: Equinix.
AFFOincludes a whopping $63.5 millionforeign-currency exchange loss, primarily attributed to the Telecity acquisition,and $13.3 million of integration costs.
Equinix beat its revenue guidance of $838.0 million to $842.0 million, as well as its adjusted EBITDA outlook of $368.0 million to $372.0 million. Adjusted EBITDA came in at$380.7 million. The company doesn't provide quarterly AFFOguidance.
Long-term investors shouldn't give too much power to analysts' estimates, as Wall Street is focused on the short term. That said, market reactions can often be explained by these expectations, so they can be worth knowing. Analysts were expecting AFFO of $3.23 per share on revenue of $835.18 million,so Equinix beat revenue expectations, but fell short of the AFFO consensus.
Revenue breakdown
- Of the total revenue, $34.2 million was generated from Bit-isle, a European data-center operator acquired on Nov. 2 and $84.4 million from Telecity, a European data-center operator acquired on Feb. 15.
- Recurring revenue, consisting primarily of colocation, interconnection, and managed services, was $797.1 million, a 31% increase over the year-ago period. Non-recurring revenue was $47.1 million.
Divestiture of select Telecity locations on tap As a reminder, Equinix's clearance from the European Commission to acquire London-based TeleCity, which operates more than 40 data centers in Europe, was contingent upon the company divesting eight data centers in Europe. Equinix plans to complete the divestures by mid-2016. (These data centers contributed approximately 4% of the combined Equinix and Telecity revenue for the first nine months of 2015.)
What management had to sayEquinix CEO Steve Smith said in the press release:
Looking aheadEquinix provided guidance for Q2, and edged up its previously establishedfull-year 2016 outlook. The companyexpects Q2 revenue in the range of$893 million to $899 million. At the midpoint, this represents year-over-year growth of 34.6%.
It doesn't provide quarterly AFFO guidance. Going into earnings, analysts were projecting that Equinix's Q2 revenue and AFFO would be $872.16 million and $3.55 per share, respectively. So, the low-end of Equinix's revenue guidanceexceeded analysts' expectations.
FY 2016 guidance
|
Metric |
Current Guidance |
Growth (YOY) |
Previous Guidance |
|---|---|---|---|
|
Revenue |
$3.60 billion |
32% (greater than 13.4 % on normalized and constant- currency basis) |
$3.55 billion |
|
AFFO |
$1.02 billion |
22% on normalized and constant-currency basis |
Exceed $970 million |
Image source: Equinix.
Investors shouldn't read much into the bump up in 2016 guidance, as it's largely due to Equinix expecting less of a currency impact than it did when it established its outlook last quarter.
The article Equinix's Q1 Revenue Rises, but AFFO Still Hurt by Currency Headwinds originally appeared on Fool.com.
Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends Equinix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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