UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 000-31293
EQUINIX, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0487526 | |
| (State of incorporation) | (I.R.S. Employer Identification No.) |
301 Velocity Way, Fifth Floor, Foster City, California 94404
(Address of principal executive offices, including ZIP code)
(650) 513-7000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) Yes x No ¨ and (2) has been subject to such filing requirements for the past 90 days. Yes x. No ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b of the Exchange Act). Yes x No ¨ .
The number of shares outstanding of the Registrant’s Common Stock as of September 30, 2004 was 18,459,337.
INDEX
2
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
(in thousands)
| September 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 42,584 | $ | 60,428 | ||||
| Short-term investments |
54,988 | 12,543 | ||||||
| Accounts receivable, net |
12,875 | 10,178 | ||||||
| Prepaids and other current assets |
3,220 | 3,139 | ||||||
| Total current assets |
113,667 | 86,288 | ||||||
| Long-term investments |
1,241 | — | ||||||
| Property and equipment, net |
318,234 | 343,554 | ||||||
| Goodwill |
21,311 | 21,228 | ||||||
| Debt issuance costs, net |
3,197 | 5,954 | ||||||
| Other assets |
9,892 | 7,508 | ||||||
| Total assets |
$ | 467,542 | $ | 464,532 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued expenses |
$ | 21,573 | $ | 18,880 | ||||
| Accrued interest payable |
2,367 | 1,114 | ||||||
| Current portion of debt facilities and capital lease obligations |
— | 2,689 | ||||||
| Current portion of credit facility |
— | 12,000 | ||||||
| Other current liabilities |
6,996 | 3,843 | ||||||
| Total current liabilities |
30,936 | 38,526 | ||||||
| Debt facilities and capital lease obligations, less current portion |
— | 723 | ||||||
| Credit facility, less current portion |
— | 22,281 | ||||||
| Senior notes |
— | 29,220 | ||||||
| Convertible secured notes |
33,064 | 31,683 | ||||||
| Convertible subordinated debentures |
86,250 | — | ||||||
| Deferred rent and other liabilities |
26,095 | 22,022 | ||||||
| Total liabilities |
176,345 | 144,455 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock |
2 | 2 | ||||||
| Common stock |
18 | 15 | ||||||
| Additional paid-in capital |
772,115 | 755,698 | ||||||
| Deferred stock-based compensation |
(355 | ) | (1,032 | ) | ||||
| Accumulated other comprehensive income |
1,183 | 1,198 | ||||||
| Accumulated deficit |
(481,766 | ) | (435,804 | ) | ||||
| Total stockholders’ equity |
291,197 | 320,077 | ||||||
| Total liabilities and stockholders’ equity |
$ | 467,542 | $ | 464,532 | ||||
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (unaudited) | ||||||||||||||||
| Revenues |
$ | 42,439 | $ | 30,919 | $ | 118,682 | $ | 84,788 | ||||||||
| Costs and operating expenses: |
||||||||||||||||
| Cost of revenues |
34,310 | 33,314 | 102,245 | 95,567 | ||||||||||||
| Sales and marketing |
4,433 | 4,823 | 13,498 | 14,210 | ||||||||||||
| General and administrative |
8,294 | 7,068 | 24,544 | 26,350 | ||||||||||||
| Total costs and operating expenses |
47,037 | 45,205 | 140,287 | 136,127 | ||||||||||||
| Loss from operations |
(4,598 | ) | (14,286 | ) | (21,605 | ) | (51,339 | ) | ||||||||
| Interest income |
335 | 46 | 819 | 182 | ||||||||||||
| Interest expense |
(2,352 | ) | (5,478 | ) | (8,765 | ) | (15,317 | ) | ||||||||
| Loss on debt extinguishment and conversion |
— | — | (16,211 | ) | — | |||||||||||
| Net loss before income taxes |
(6,615 | ) | (19,718 | ) | (45,762 | ) | (66,474 | ) | ||||||||
| Income taxes |
— | — | (200 | ) | — | |||||||||||
| Net loss |
$ | (6,615 | ) | $ | (19,718 | ) | $ | (45,962 | ) | $ | (66,474 | ) | ||||
| Net loss per share: |
||||||||||||||||
| Basic and diluted |
$ | (0.36 | ) | $ | (2.12 | ) | $ | (2.65 | ) | $ | (7.52 | ) | ||||
| Weighted-average shares |
18,386 | 9,293 | 17,370 | 8,837 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows
(in thousands)
| Nine months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| (unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (45,962 | ) | $ | (66,474 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and accretion |
42,169 | 46,212 | ||||||
| Amortization of intangible assets and non-cash prepaid rent |
1,668 | 1,562 | ||||||
| Amortization of deferred stock-based compensation |
1,019 | 2,160 | ||||||
| Non-cash interest expense |
6,046 | 7,245 | ||||||
| Allowance for (recovery of) doubtful accounts |
(106 | ) | 164 | |||||
| Deferred rent |
4,030 | 2,328 | ||||||
| Loss on disposal of assets |
35 | — | ||||||
| Loss on debt extinguishment and conversion |
16,211 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(2,591 | ) | (194 | ) | ||||
| Prepaids and other current assets |
44 | 4,594 | ||||||
| Other assets |
(1,479 | ) | 518 | |||||
| Accounts payable and accrued expenses |
2,903 | (1,263 | ) | |||||
| Accrued restructuring charges |
(761 | ) | (10,617 | ) | ||||
| Accrued merger and financing costs |
— | (4,478 | ) | |||||
| Accrued interest payable |
(60 | ) | (990 | ) | ||||
| Other current liabilities |
3,153 | (722 | ) | |||||
| Other liabilities |
(33 | ) | (389 | ) | ||||
| Net cash provided by (used in) operating activities |
26,286 | (20,344 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Purchases of short-term and long-term investments |
(67,682 | ) | (3,500 | ) | ||||
| Maturities of short-term investments |
18,986 | — | ||||||
| Sales of short-term investments |
5,010 | — | ||||||
| Purchases of property and equipment |
(16,783 | ) | (2,889 | ) | ||||
| Accrued property and equipment |
551 | — | ||||||
| Purchases of restricted cash |
— | (50 | ) | |||||
| Sale of restricted cash |
— | 2,256 | ||||||
| Net cash used in investing activities |
(59,918 | ) | (4,183 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of warrants, stock options and employee stock purchase plan |
3,631 | 1,521 | ||||||
| Proceeds from convertible secured notes |
— | 10,000 | ||||||
| Proceeds from convertible subordinated debentures |
86,250 | — | ||||||
| Repayment of debt facilities and capital lease obligations |
(3,527 | ) | (5,102 | ) | ||||
| Repayment of credit facility |
(34,281 | ) | (990 | ) | ||||
| Repayment of senior notes |
(30,475 | ) | — | |||||
| Debt issuance costs |
(3,242 | ) | (458 | ) | ||||
| Debt extinguishment costs |
(2,505 | ) | — | |||||
| Net cash provided by financing activities |
15,851 | 4,971 | ||||||
| Effect of foreign currency exchange rates on cash and cash equivalents |
(63 | ) | 63 | |||||
| Net decr | ||||||||