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Equinix (EQIX) Beats FFO & Revenues Estimates in Q2, Ups View

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Equinix Inc. (EQIX - Free Report) posted strong results for second-quarter 2020, wherein adjusted funds from operations (AFFO) per share and revenues surpassed the Zacks Consensus Estimate and improved year over year.

The company’s quarterly AFFO per share was $6.35, beating the Zacks Consensus Estimate of $5.98. The figure also improved 13% from the year-ago quarter’s $5.87.

The upside primarily stemmed from steady growth in interconnection revenues. Nonetheless, $2 million in integration costs hurt AFFO and adjusted EBITDA.

Quarter in Detail

Total quarterly revenues were $1.47 billion, surpassing the Zacks Consensus Estimate of $1.46 billion. Also, the top-line figure improved 6% year over year, representing the 70th consecutive quarter of revenue growth.

Recurring revenues were $1.38 billion, up 7% from the year-ago quarter’s figure. Non-recurring revenues declined 8.8% from the year-ago quarter to $71.9 million.

Revenues from the three geographic regions increased on a year-over-year basis as well. Revenues from the Americas, EMEA and the Asia Pacific jumped 3%, 8% and 10% to $661.4 million, $488.1 million and $320.6 million, respectively.

Cash gross margin was 67%, stable year over year. Total operating expenses were up 13.5% year over year to $448.3 million.

Adjusted EBITDA was $720 million, up 6% year over year. Adjusted EBITDA margins were 49%, stable year over year. AFFO appreciated 12% year over year to $558 million in the June-end quarter.

Balance Sheet

Equinix exited the second quarter with cash and cash equivalents of $4.78 billion. The company’s total debt principal outstanding was $14.19 billion as of Jun 30, 2020.

Dividend Update

Concurrent with its second-quarter 2020 earnings release, on Jul 29, Equinix’s board of directors approved a quarterly cash dividend of $2.66 per share. The dividend will be paid out on Sep 23 to shareholders of record as of Aug 19.

Guidance

The company improved its guidance for the ongoing year on foreign currency benefit. For 2020, it estimates generating revenues of $5.919-$5.989 billion as compared with $5.877-$5.985 billion mentioned earlier. It predicts adjusted EBITDA of $2.781-$2.851 billion, higher than $2.765-$2.845 billion stated earlier. Moreover, AFFO is expected to be $2.107-$2.177 billion as compared with $2.043-$2.133 billion mentioned previously. Further, AFFO per share is estimated to be $23.87-$24.67, up from $23.62-$24.66 stated earlier. The Zacks Consensus Estimate for the same is pegged at $24.33.

For third-quarter 2020, Equinix projects revenues of $1.493-$1.513 billion. Adjusted EBITDA is likely to be between $696 million and $716 million.

Our Take

Equinix’s recurring revenue model and current expansion plans are encouraging. Furthermore, the company delivered strong bookings in the quarter, while its interconnection activity was driven by its global footprint and diverse interconnected ecosystems. In fact, strong results were supported by strong performance across all three geographies.

However, stiff competition and ongoing consolidation in the telecommunication industry might bring down lucrative expansion opportunities for the company over the long term.

Equinix, Inc. Price, Consensus and EPS Surprise

 

Equinix, Inc. Price, Consensus and EPS Surprise

Equinix, Inc. price-consensus-eps-surprise-chart | Equinix, Inc. Quote

Equinix carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Healthcare Trust of America, Inc. (HTA - Free Report) , National Storage Affiliates Trust (NSA - Free Report) and Iron Mountain Incorporated (IRM - Free Report) . All three companies are scheduled to release quarterly numbers on Aug 6.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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