Interxion Reports Third Quarter 2019 Results

Revenue Growth of 12% Year Over Year

AMSTERDAM–(BUSINESS WIRE)–Interxion Holding NV (NYSE:INXN), a leading European provider of carrier and cloud-neutral colocation data centre services, today announced its results for the three-month period ended 30 September 2019.

3Q 2019 Financial Highlights

  • Revenue increased by 12% to €159.4 million (3Q 2018: €142.2 million).
  • Recurring revenue(1) increased by 13% to €152.3 million (3Q 2018: €134.8 million).
  • Net income increased by €10.6 million to €21.5 million (3Q 2018: €10.9 million).
  • Adjusted net income(1) increased by €8.6 million to €20.2 million (3Q 2018: €11.6 million).
  • Diluted earnings per share increased by €0.13 to €0.28 (3Q 2018: €0.15).
  • Adjusted diluted earnings per share(1) increased by €0.10 to €0.26 (3Q 2018: €0.16).
  • Adjusted EBITDA(1) increased by 26% to €82.7 million (3Q 2018: €65.8 million).
  • Adjusted EBITDA margin(1) increased to 51.9% (3Q 2018: 46.3%).
  • Capital expenditures, including intangible assets(2), were €150.6 million (3Q 2018: €103.2 million).

3Q 2019 Operating Highlights

  • Equipped space(3) increased by 5,000 square metres (“sqm”) during the quarter to 159,800 sqm.
  • Revenue generating space(4) increased by 1,100 sqm during the quarter to 122,700 sqm.
  • Utilisation rate(5) at the end of the quarter was 77%.
  • During the third quarter, Interxion completed the following capacity additions:

    • 2,600 sqm in Frankfurt;
    • 1,200 sqm in Marseille;
    • 700 sqm in Madrid;
    • 600 sqm in Copenhagen;
    • 200 sqm in Vienna; and
    • 100 sqm in Zurich.
  • Closed 500 sqm satellite data centre that came with the Science Park acquisition that was completed in 2017.

“Interxion posted solid results for the third quarter led by 13% recurring revenue growth and strong margins. Favourable demand trends for colocation reflect ongoing migration towards cloud and digital content platforms by enterprises and consumers,” said David Ruberg, Interxion’s Chief Executive Officer. “The platform providers continue to expand their presence in Europe and seek line of sight to substantial future capacity, which we are well placed to deliver at our highly-connected campuses in key cities across Europe.”

Interxion to Combine with Digital Realty

On 29 October 2019, Interxion and Digital Realty (NYSE:DLR) announced they entered into a definitive agreement to combine their businesses to create a leading global provider of data centre, colocation and interconnection solutions. Under the terms of the agreement, Interxion shareholders will receive a fixed exchange ratio of 0.7067 Digital Realty shares per Interxion share. Based on Digital Realty’s closing stock price of $132.28 on 28 October 2019, the transaction values Interxion at approximately $93.48 per ordinary share, or approximately $8.4 billion of total enterprise value, including assumed net debt. Completion of the transaction is subject to customary closing conditions, including approval by shareholders of Interxion and shareholders of Digital Realty.

“The combination of Interxion with Digital Realty is compelling from a strategic perspective and brings together two highly complementary businesses in terms of market positioning and geographical footprint,” said David Ruberg, Interxion’s Chief Executive Officer. “We are creating one of the largest data centre operators in the world. This transaction offers our shareholders an attractive return and, as you will see in forthcoming filings, follows many discussions over several years with potential strategic and financial acquirers of Interxion and other parties that have sought to pursue transactions with us. We strongly believe that the combination with Digital Realty will deliver significant long-term value for all our stakeholders.”

Quarterly Review

As previously noted, the implementation of International Financial Reporting Standard 16 – Leases (“IFRS 16”) on 1 January 2019 reclassified certain expense items, thus impacting the comparability of our results to periods prior to the implementation of IFRS 16. This accounting change had no impact on our revenues or underlying net cash flows. A reconciliation from the relevant measures reported under IFRS 16 to the corresponding measures excluding the impact of IFRS 16 is provided later in this press release.

Revenue in the third quarter of 2019 was €159.4 million, a 12% increase over the third quarter of 2018 and a 1% increase over the second quarter of 2019. Recurring revenue was €152.3 million, a 13% increase over the third quarter of 2018 and a 2% increase over the second quarter of 2019. Recurring revenue in the third quarter represented 96% of total revenue. On a constant currency(6) basis, revenue in the third quarter of 2019 was also 12% higher than in the third quarter of 2018.

Cost of sales in the third quarter of 2019 were €54.1 million, a 3% decrease from the third quarter of 2018 and a 1% decrease from the second quarter of 2019.

Gross profit was €105.3 million in the third quarter of 2019, a 22% increase over the third quarter of 2018 and a 1% increase over the second quarter of 2019. Gross profit margin was 66.0% in the third quarter of 2019, compared with 60.7% in the third quarter of 2018 and 65.5% in the second quarter of 2019.

Sales and marketing costs in the third quarter of 2019 were €8.7 million, a 0.3% increase over the third quarter of 2018 and a 7% decrease from the second quarter of 2019.

General and administrative costs, excluding the items we adjust for in the determination of Adjusted EBITDA, were €13.9 million in the third quarter of 2019, a 17% increase over the third quarter of 2018 and a 2% decrease from the second quarter of 2019.

Depreciation and amortisation in the third quarter of 2019 were €45.3 million, a 38% increase over the third quarter of 2018 and a 2% increase over the second quarter of 2019.

Operating income in the third quarter of 2019 was €31.3 million, an increase of 16% over the third quarter of 2018 and a 6% increase over the second quarter of 2019.

Net finance expense for the third quarter of 2019 was €3.2 million, a 72% decrease from the third quarter of 2018 and a 81% decrease from the second quarter of 2019. This includes the €9.5 million increase in the fair value of certain convertible loans given to Icolo.

Income tax expense for the third quarter of 2019 was €6.5 million, a 46% increase over the third quarter of 2018 and a 79% increase over the second quarter of 2019.

Net income was €21.5 million in the third quarter of 2019, an 97% increase over the third quarter of 2018 and a 149% increase over the second quarter of 2019, partly driven by the fair value adjustment of the Icolo convertible loans.

Adjusted net income was €20.2 million in the third quarter of 2019, a 74% increase over the third quarter of 2018 and a 171% increase over the second quarter of 2019.

Adjusted EBITDA for the third quarter of 2019 was €82.7 million, a 26% increase over the third quarter of 2018 and a 3% increase over the second quarter of 2019. Adjusted EBITDA margin was 51.9% in the third quarter of 2019, compared to 46.3% in the third quarter of 2018 and 50.6% in the second quarter of 2019.

Adjusted EBITDA excluding the impact of IFRS 16(1) for the third quarter was €74.2 million, a 13% increase over the third quarter of 2018 and a 4% increase over the second quarter of 2019. Adjusted EBITDA margin excluding the effects of IFRS 16 in the third quarter of 2019 was 46.5%, compared to 46.3% in the third quarter of 2018 and 45.1% in the second quarter of 2019.

Net cash flows from operating activities in the third quarter of 2019 were €67.3 million, compared to €53.9 million in the third quarter of 2018 and €35.8 million in the second quarter of 2019.

Cash generated from operations(1) in the third quarter of 2019 was €77.4 million, compared to €60.9 million in the third quarter of 2018 and €71.8 million in the second quarter of 2019.

Capital expenditures, including intangible assets, in the third quarter of 2019 were €150.6 million, compared with €103.2 million in the third quarter of 2018 and €123.5 million in the second quarter of 2019.

Cash and cash equivalents were €205.8 million at 30 September 2019, compared with €186.1 million at year end 2018.

Total borrowings and lease liabilities net of cash and cash equivalents were €1,502.3 million in aggregate at 30 September 2019, compared with €1,104.1 million at 31 December 2018. Excluding lease liabilities, total borrowings were €1,254.7 million at 30 September 2019, compared with €1,239.8 million at 31 December 2018.

As at 30 September 2019, Interxion’s €300 million unsecured revolving credit facility was undrawn.

On 1 July 2019, Interxion issued 4.6 million new ordinary shares in a public offering, which generated net proceeds of €281.6 million.

Equipped space at the end of the third quarter of 2019 was 159,800 square metres, compared to 140,300 square metres at the end of the third quarter of 2018 and 154,800 square metres at the end of the second quarter of 2019. Revenue generating space at the end of the third quarter of 2019 was 122,700 square metres, compared to 111,200 square metres at the end of the third quarter of 2018 and 121,600 square metres at the end of the second quarter of 2019. Utilisation rate, representing the ratio of revenue generating space to equipped space, was 77% at the end of the third quarter of 2019, compared to 79% at the end of the third quarter of 2018 and 79% at the end of the second quarter of 2019.

Forward-looking Statements

This communication contains forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such forward-looking statements. Factors that could cause actual results and future events to differ materially from Interxion’s expectations include, but are not limited to, the difficulty of reducing operating expenses in the short term, the inability to utilise the capacity of newly planned data centres and data centre expansions, significant competition, the cost and supply of electrical power, data centre industry over-capacity, performance under service level agreements, delays in remediating the material weakness in internal control over financial reporting and/or making disclosure controls and procedures effective, certain other risks detailed herein and other risks described from time to time in Interxion’s filings with the United States Securities and Exchange Commission (the “SEC”).

Interxion does not assume any obligation to update the forward-looking information contained in this press release.

Non-IFRS Financial Measures

These materials include non-IFRS financial measures and ratios, including (i) Adjusted EBITDA; (ii) Adjusted EBITDA margin, (iii) Adjusted EBITDA excluding the impact of IFRS 16; (iv) Adjusted EBITDA margin excluding the impact of IFRS 16; (v) Recurring revenue; (vi) Revenue on a constant currency basis; (vii) Adjusted net income; (viii) Adjusted basic earnings per share; (ix) Adjusted diluted earnings per share and (x) Cash generated from operations, that are not required by, or presented in accordance with, IFRS.

Other companies may present Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding the impact of IFRS 16, Adjusted EBITDA margin excluding the impact of IFRS 16, Recurring revenue, Revenue on a constant currency basis, Adjusted net income, Adjusted basic earnings per share, Adjusted diluted earnings per share and Cash generated from operations differently than we do. None of these measures are measures of financial performance under IFRS and should not be considered as a measure of liquidity or as an alternative to Profit for the period attributable to shareholders (“Net income”) or as indicators of our operating performance or any other measure of performance implemented in accordance with IFRS.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding the impact of IFRS 16, Adjusted EBITDA margin excluding the impact of IFRS 16, Recurring revenue and Revenue on a constant currency basis

We define Adjusted EBITDA as Net income adjusted for income tax expense, net finance expense and the following items, which may occur in any period, and which management believes are not representative of our operating performance:

  • Depreciation and amortisation – property, plant and equipment and intangible assets (except goodwill) are depreciated and amortised on a straight-line basis over the estimated useful life. We believe that these costs do not represent our operating performance.
  • Share-based payments – represents primarily the fair value at the date of grant of employee equity awards, which is recognized as an expense over the vesting period. In certain cases, the fair value is redetermined for market conditions at each reporting date, until the final date of grant is achieved. We believe that this expense does not represent our operating performance.
  • Income or expense related to the evaluation and execution of potential mergers or acquisitions (“M&A”) – under IFRS, gains and losses associated with M&A activity are recognized in the period in which such gains or losses are incurred. We exclude these effects because we believe they are not reflective of our ongoing operating performance.
  • Adjustments related to terminated and unused data centre sites – these gains and losses relate to historical leases entered into for certain brownfield sites, with the intention of developing data centres, which were never developed, and for which management has no intention of developing into data centres. We believe the impact of gains and losses related to unused data centres is not reflective of our business activities and our ongoing operating performance.

In certain circumstances, we may also adjust for other items that management believes are not representative of our current ongoing performance. Examples include: adjustments for the cumulative effect of a change in accounting principle or estimate, impairment losses, litigation gains and losses or windfall gains and losses. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue.

In addition, we present Adjusted EBITDA excluding the impact of IFRS 16 for comparative purposes with regard to Adjusted EBITDA presented in periods prior to 1 January 2019, the effective date of IFRS 16. Adjusted EBITDA margin excluding the impact of IFRS 16 is defined as Adjusted EBITDA excluding the impact of IFRS 16 as a percentage of revenue.

For a reconciliation of Net income to Adjusted EBITDA and from Adjusted EBITDA to Adjusted EBITDA excluding the impact of IFRS 16, see the notes to the Condensed Consolidated Interim Financial Statements. Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding the impact of IFRS 16, Adjusted EBITDA margin excluding the impact of IFRS 16 and other key performance indicators may not be indicative of our historical results of operations based on IFRS, nor are they meant to be predictive of future results under IFRS.

We define Recurring revenue as revenue incurred from colocation and associated power charges, office space, amortised set-up fees, cross-connects and certain recurring managed services (but excluding any ad hoc managed services) provided by us directly or through third parties, excluding rents received for the sublease of unused sites. Management believes that the exclusion of these items provides useful supplemental information to revenue from colocation and associated power charges to aid investors in evaluating the recurring revenue performance of our business. For a reconciliation of Revenue to Recurring revenue, see the notes to the Condensed Consolidated Interim Financial Statements.

We present constant currency information for revenue to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than Euro are converted into Euro using the average exchange rates from the prior period rather than the actual exchange rates in effect during the current period. We believe that revenue growth is a key indicator of how a company is progressing from period to period and presenting constant currency information for revenue provides useful supplemental information to investors regarding our on-going operational performance because it helps us and our investors evaluate the on-going operating performance of the business after removing the impact of currency exchange rates.

We believe Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding the impact of IFRS 16, Adjusted EBITDA margin excluding the impact of IFRS 16, Recurring revenue and Revenue on a constant currency basis provide useful supplemental information to investors regarding our ongoing operational performance. These measures help us and our investors evaluate the ongoing operating performance of the business after removing the impact of our capital structure (primarily interest expense), our asset base (primarily depreciation and amortisation) and the implementation of new accounting standards. Management believes that the presentation of Adjusted EBITDA and Adjusted EBITDA excluding the impact of IFRS 16, when combined with the primary IFRS presentation of Net income, provides a more complete analysis of our operating performance. Management also believes the use of Adjusted EBITDA and Adjusted EBITDA excluding the impact of IFRS 16 facilitates comparisons between us and other data centre operators (including other data centre operators that are REITs) and other infrastructure-based businesses. Adjusted EBITDA excluding the impact of IFRS 16 is also a relevant measure used in the financial covenants of our revolving credit facility and our 4.75% Senior Notes due 2025. Pursuant to the terms of our revolving credit facility and our 4.75% Senior Notes due 2025, the calculation of Adjusted EBITDA for the purposes of the financial covenants is determined in accordance with IFRS as of the date of the financing agreements and therefore does not include the impact of IFRS 16.

Adjusted net income, Adjusted basic earnings per share and Adjusted diluted earnings per share

We define Adjusted net income as Net income adjusted for the following items and the related income tax effect, which may occur in any period, and which management believes are not reflective of our operating performance:

  • Income or expense related to the evaluation and execution of potential mergers or acquisitions (“M&A”) – under IFRS, gains and losses associated with M&A activity are recognized in the period in which such gains or losses are incurred. We exclude these effects because we believe they are not reflective of our ongoing operating performance.
  • Adjustments related to provisions – these adjustments are made for adjustments in provisions that are not reflective of the ongoing operating performance of Interxion. These adjustments may include changes in provisions for onerous lease contracts.
  • Adjustments related to capitalized interest – under IFRS, we are required to calculate and capitalize interest allocated to the investment in data centres and exclude it from Net income. We believe that reversing the impact of capitalized interest provides information about the impact of the total interest costs and facilitates comparisons with other data centre operators.

In certain circumstances, we may also adjust for other items that management believes are not representative of our current ongoing performance. Examples include: adjustments for the cumulative effect of a change in accounting principle or estimate, impairment losses, litigation gains and losses or windfall gains and losses.

Management believes that the exclusion of certain items listed above provides useful supplemental information to Net income to aid investors in evaluating the operating performance of our business and comparing our operating performance with other data centre operators and infrastructure companies. We believe the presentation of Adjusted net income, when combined with Net income prepared in accordance with IFRS, is beneficial to a complete understanding of our performance. A reconciliation from reported Net income to Adjusted net income is provided in notes to the Condensed Consolidated Interim Financial Statements.

Adjusted basic earnings per share and Adjusted diluted earnings per share amounts are determined on Adjusted net income.

Cash generated from operations

Cash generated from operations is defined as Net cash flows from operating activities, excluding interest and corporate income tax payments and receipts. Management believes that the exclusion of these items provides useful supplemental information to Net cash flows from operating activities to aid investors in evaluating the cash generating performance of our business.

Additional Key Performance Indicators

In addition to Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding the impact of IFRS 16, Adjusted EBITDA margin excluding the impact of IFRS 16, Recurring revenue, Revenue on a constant currency basis, Adjusted net income, Adjusted basic earnings per share, Adjusted diluted earnings per share and Cash generated from operations, our management also uses the following key performance indicators as measures to evaluate our performance:

  • Equipped space: the amount of data centre space that, on the date indicated, is equipped and either sold or could be sold, without making any significant additional investments to common infrastructure. Equipped space at a particular data centre may decrease if either (a) the power requirements of customers at a data centre change so that all or a portion of the remaining space can no longer be sold because the space does not have enough power capacity and/or common infrastructure to support it without further investment or (b) if the design and layout of a data centre changes to meet among others, fire regulations or customer requirements, and necessitates the introduction of common space (such as corridors) which cannot be sold to individual customers;
  • Revenue generating space: the amount of Equipped space that is under contract and billed on the date indicated;
  • Utilisation rate: on the date indicated, Revenue generating space as a percentage of Equipped space. Some Equipped space is not fully utilised because of customers’ specific requirements regarding the layout of their equipment. In practice, therefore, Utilisation rate does not reach 100%.

IFRS 16 – Leases

We adopted International Financial Reporting Standard 16 – Leases, from 1 January 2019. Under IFRS 16, operating leases are recognized as right of use assets and lease liabilities, and certain components of revenue are recognized as lease revenue.

The impact of IFRS 16 on revenue, gross profit, operating income, Adjusted EBITDA, depreciation and amortisation and net finance expense for the three-month and nine-month periods ended 30 September 2019 and total assets and total liabilities as at 30 September 2019 is provided in the tables attached to this press release.

About Interxion

Interxion (NYSE:INXN) is a leading provider of carrier and cloud-neutral colocation data centre services in Europe, serving a wide range of customers through 54 data centres in 11 European countries. Interxion’s uniformly designed, energy efficient data centres offer customers extensive security and uptime for their mission-critical applications.

Contacts

Interxion

Jim Huseby

Investor Relations

Tel: +1-813-644-9399

IR@interxion.com

Read full story here

Thank you for donating to DutchNews.nl.

We could not provide the Dutch News service, and keep it free of charge, without the generous support of our readers. Your donations allow us to report on issues you tell us matter, and provide you with a summary of the most important Dutch news each day.

Make a donation