Equinix's Earnings In Line, Rev Grows - Analyst Blog
27 April 2013 - 12:42AM
Zacks
Equinix Inc. (EQIX) reported first-quarter 2013
earnings per share of 75 cents, in line with the Zacks Consensus
Estimate of 75 cents.
Revenues
Total revenue in the reported quarter was $519.5 million, up
17.2% from the year-ago quarter. The company witnessed double-digit
revenue growth compared with the previous year across all three
regions of the network vertical, with particular strength in
Asia-Pacific. Moreover, as the IP traffic continues to grow,
Equinix has started witnessing better business in the sub-sea cable
systems.
This apart, recurring revenues (including
colocation, interconnection and managed services) were $495.3
million during the first quarter, up 17.7% from the year-ago
quarter. Non-recurring revenues were $24.2 million
in the quarter, up 8.2% from $22.4 million reported in the year-ago
quarter.
Operating Results
Gross margin for the quarter was 50.1% versus 51.0% in the
year-ago quarter. The gross margin remained constant, but was
better than the company’s expectation, as a result of lower payroll
costs and utility expenses.
Total operating expenses increased 20.9% from the year-ago
quarter. The year-over-year increase in cash operating expenses was
primarily attributed to higher selling and marketing expenses (up
25.6%) and general and administrative expenses (up 14.5%).
Operating income from continuing operation was $108.6 million,
up 7.8% from $100.8 million reported in the year-ago quarter.
Net income attributable to Equinix stood at $35.9 million or 71
cents per share versus $34.5 million or 71 cents per share in the
year-ago quarter.
Balance Sheet, Cash Flow & Capital
Expenditure
The company generated $84.2 million of cash from operating
activities for the first quarter, down from $209.1 million reported
in the previous quarter. This apart, cash, cash equivalents and
short-term investments were $918.3 million versus $418.7 million in
the earlier quarter.
Equinix reported capital expenditures of $75.7 million, which
was below Equinix’s expectation, mostly as a result of the timing
of cash payment to Equinix’s contractors. Total capital expenditure
includes ongoing capital expenditure of $34.0 million.
Guidance
Equinix expects second-quarter 2013 revenues in the range of
$530.0 to $534.0 million. While the cash gross margins are expected
to range between 68.0% and 69.0%. Adjusted EBITDA would be around
$240.0 and $244.0 million. Capital expenditures are expected to
hover in the range of $170.0 to $180.0 million. This will include
$45.0 million of ongoing capital expenditures and expansion capital
expenditure in the range of $125.0 to $135.0 million.
Again, for full year 2013, the company expects total revenue to
exceed $2,200.0 million. Cash gross margin is expected to range
between 68% to 69%. Adjusted EBITDA is expected to exceed $1,010.0
million. Capital expenditures for 2013 are expected in the range of
$550.0 to $650.0 million, which would include $165.0 million of
ongoing capital expenditures and $385.0 to $485.0 million for
expansion capital expenditures.
Outlook
Equinix’s first-quarter results were modest with the bottom line
matching the company’s expectation. Total revenue for Equinix
improved on a year-over-year basis as a result of good contribution
from the acquired companies. Moreover, Equinix has been efficient
in controlling costs, although gross margin remained flat
sequentially.
Equinix is also experiencing improvement in business
fundamentals across most of its business segments. Moreover,
capital expenditure fund allocated by the company is quite decent
and will help it generate meaningful growth. On the other hand,
Equinix’s cash generation ability declined sequentially.
Moreover, the company must work to reduce its debt level. In
spite of all the positives, competitive threats from the likes of
AT&T Inc. (T) raise our
apprehension. European exposure and industry consolidation are the
other headwinds.
Currently, Equinix has a Zacks Rank #4 (Sell).
Investors can look into other stocks such as,SBA Comm
Corp. (SBAC) with a Zacks Rank #2 (Buy) and
Symmentricon Inc. (SYMM) with a Zacks Rank #2
(Buy).
EQUINIX INC (EQIX): Free Stock Analysis Report
SBA COMM CORP (SBAC): Free Stock Analysis Report
SYMMETRICOM INC (SYMM): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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