MEDIA RELEASE PR36808
Savvis Reports Third Quarter 2009 Results
ST. LOUIS, Oct. 28 /PRNewswire-AsiaNet/ --
Revenue of US$213.2 Million
Adjusted EBITDA* of US$51.2 Million
Adjusted Free Cash Flow* of US$15.4 Million
Savvis, Inc. (Nasdaq: SVVS), a global leader in outsourced internet
infrastructure services for enterprises, today reported its third quarter
2009 financial results, with revenue of US$213.2 million, compared to
US$218.4 million in the third quarter of 2008. Adjusted EBITDA for the third
quarter of 2009 was US$51.2 million, compared to US$47.7 million of adjusted
EBITDA in the third quarter of 2008. For the third quarter, positive adjusted
free cash flow was US$15.4 million, compared to negative adjusted free cash
flow of (US$26.2) million in the third quarter of 2008.
Income from operations for the third quarter of 2009 was US$4.5 million,
compared to US$11.1 million in the third quarter of 2008. The company
reported a net loss of (US$9.9) million, or (US$0.18) per share, in the third
quarter of 2009, compared to a third quarter 2008 net loss of (US$3.8)
million, or (US$0.07) per share.
"Performance in the third quarter was as expected, and we look forward to
continuing the transformation of our business as we drive our long-term
growth initiatives," said Phil Koen, chief executive officer of Savvis. "We
believe our Proximity Hosting strength - which is being supported by our NJ2X
financial data center complex expansion - the continued growth of our Cloud
and Software-as-a-Service offerings, and our collaboration with Thomson
Reuters will drive our revenue growth over the long term, while making
efficient use of our capital resources."
Third Quarter Financial Results
US dollars in millions Three months ended
9/30/09 6/30/09(1) 9/30/08
Colocation $85.3 $84.9 $78.4
Managed Hosting $62.8 $67.3 $66.5
Hosting $148.1 $152.2 $144.9
Network Services $65.1 $67.7 $73.5
Total Revenue $213.2 $219.9 $218.4
------ ------ ------
Cost of Revenue(2)(3) $117.9 $121.4 $124.0
SG&A Expenses(2)(3) $52.6 $51.1 $49.0
Non-Cash, Equity-Based Compensation $8.5 $7.8 $2.4
Income from Operations $4.5 $9.5 $11.1
Net Income (Loss)(4) ($9.9) ($6.2) ($3.8)
Adjusted EBITDA $51.2 $55.1 $47.7
Adjusted EBITDA Margin 24% 25% 22%
(1) Excluding the $6.5 million AMEX non-recurring ETF, for the three
months ended June 30, 2009, total revenue was $213.4 million, adjusted EBITDA
was $48.6 million and adjusted EBITDA margin was 23%.
(2) Both cost of revenue and SG&A expenses exclude depreciation,
amortization, accretion and include non-cash, equity-based compensation.
Total non-cash, equity-based compensation attributed to cost of revenue for
the three months ended September 30, 2009, June 30, 2009, and September 30,
2008, was $1.5 million, $1.5 million and $0.2 million and to SG&A expenses
was $7.0 million, $6.3 million and $2.2 million, respectively.
(3) Amounts include a reclassification from cost of revenue to SG&A
expenses of $3.0 million for the three months ended September 30, 2008.
(4) Net income (loss) is restated from amounts reported in the prior
year, due to Savvis' adoption of new accounting guidance for certain
convertible securities. Interest expense increased $3.2 million for the three
months ended September 30, 2008.
Third Quarter Overview
Total Savvis revenue for the third quarter was $213.2 million. Revenue
was down (3%), compared to second quarter 2009 revenue of $219.9 million,
which included a $6.5 million non-recurring early termination fee (ETF)
related to the departure of the American Stock Exchange (AMEX). Excluding the
AMEX non-recurring ETF, revenue was basically flat on quarter-over-quarter
basis, compared to revenue of $213.4 million for the second quarter of 2009.
For the third quarter of 2009, income from operations of $4.5 million was
down when compared to the $9.5 million recorded in the second quarter of
2009. A consolidated net loss of ($9.9) million was recorded in the third
quarter of 2009, compared to a net loss of ($6.2) million in the second
quarter of 2009. Savvis recorded a loss per share of ($0.18) in the third
quarter of 2009, compared to a loss per share of ($0.12) in the second
quarter of 2009.
Adjusted EBITDA was $51.2 million for the third quarter of 2009, which
represented a (7%) decline from the $55.1 million of adjusted EBITDA that was
recorded in the second quarter of 2009. Excluding the impact of the AMEX
non-recurring ETF, adjusted EBITDA was up 5%, when compared to second quarter
2009 adjusted EBITDA of $48.6 million.
Hosting
US dollars in millions Three months ended
9/30/09 6/30/09 9/30/08
Colocation $85.3 $84.9 $78.4
Managed Hosting $62.8 $67.3 $66.5
----- ----- -----
Total Hosting Revenue $148.1 $152.2 $144.9
Percentage change (3%) 2%
Overall Hosting revenue was $148.1 million in the third quarter, and on a
year-over-year basis, was up 2%. On a quarter-over-quarter basis, Hosting was
down (3%), due to the departure of the American Stock Exchange. Excluding all
AMEX revenue, Hosting revenue was up 6%, on a year-over-year basis, and up
slightly, on a quarter-over-quarter basis.
For the quarter, Managed Hosting contributed $62.8 million to overall
Hosting revenue, or 42%. Managed Hosting revenue was down (6%), on a
year-over-year basis, and (7%), on a quarter-over-quarter basis. Both the
annual and quarterly comparisons reflect the loss of the American Stock
Exchange, which was primarily a Managed Hosting customer.
Colocation contributed $85.3 million to overall Hosting revenue in the
quarter, or 58%. Year-over-year, Colocation grew 9%. On a
quarter-over-quarter basis, colocation growth was flat. Savvis remains
committed to attracting enterprise customers into its data centers, as the
company continues to transition away from below-market margin customers to
customers with stronger margins and pricing.
Network Services
US dollars in millions Three months ended
9/30/09 6/30/09 9/30/08
Revenue $65.1 $67.7 $73.5
Percentage change (4%) (11%)
In the third quarter, Network Services revenue was 31% of overall
revenue, or $65.1 million. This represented an (11%) year-over-year decline
and a (4%) quarter-over-quarter decline. The company continues to focus on
improving the network revenue associated with its data centers, over the long
term, while moving away from less profitable customers.
Highlights
For the third quarter of 2009, the Financial Vertical represented 25% of
total revenue, or $54.0 million. Financial Vertical revenue in the quarter
was down (7%), compared to the third quarter of 2008, and down (10%),
compared to the second quarter of 2009, both reflecting the departure of the
American Stock Exchange. Excluding any AMEX related revenue, the Financial
Vertical would have been up 5% on an annual and 1% on a quarterly basis.
Since its second quarter earnings release, Savvis has made several major
announcements, including this week's news that BATS Global Markets is
expanding its hosting space in Savvis' Weehawken, NJ, data center. This
expansion will help support the launch of the BATS U.S. Equity Options
Exchange. BATS will also expand its footprint within the Savvis Docklands
data center in London, in expectation of continued growth of the BATS Europe
multilateral trading facility.
Earlier this month, Savvis announced that it will be collaborating with
Thomson Reuters in a major expansion of their hosting capabilities, which
will be powered by Savvis. This collaboration represents a strategic shift
toward providing the Thomson Reuters trading infrastructure solution as a
fully managed, hosted offering. This collaboration is expected to create new
sales channel opportunities for Savvis, and it should enhance the company's
ability to grow revenue more broadly in the Financial Vertical.
In September, the company previewed its next-generation cloud compute
platform - Project Spirit - which will power the industry's first
enterprise-class Virtual Private Data Center with multi-tiered Quality of
Service capabilities. Savvis believes Project Spirit will be the industry's
most feature-rich cloud delivery platform available for enterprises. In
addition, Project Spirit should help advance Savvis' current suite of
dedicated and open cloud solutions, which are gaining traction worldwide.
Cash Flow and Balance Sheet
Net cash provided by operating activities was $45.0 million in the third
quarter of 2009, compared to $47.3 million in the third quarter of 2008. Cash
capital expenditures for the quarter totaled $30.3 million.
As of September 30, 2009, the long-term debt and capital leases for
Savvis (net of current portion) totaled $561.6 million. The company's cash
position at September 30, 2009, was $163.5 million, compared to $154.9
million at June 30, 2009.
Financial Outlook
"Our performance year-to-date has resulted in an increase in our 2009
guidance, however, we are still facing a challenging environment," said Greg
Freiberg, chief financial officer for Savvis. "We are anticipating
approximately $4 to $6 million of colocation revenue will churn in the first
quarter of 2010, as we substantially complete our transition away from
below-market margin customers to customers with stronger margins and
pricing."
Savvis now expects the following for full year 2009:
- Adjusted EBITDA of $215 to $220 million, an increase over
previous guidance of $195 to $210 million
- Total cash capital expenditures of $120 to $140 million, an
increase over previous guidance of $110 to $140 million and including
$10 million to be expended in 2009 for the expansion of the financial
data center complex in metro New York
- Cash interest expense (net) of approximately $40 to $45 million
- Adjusted free cash flow of $40 to $50 million, an increase over
previous guidance of $25 to $45 million
Investor Conference Call
Savvis will webcast an investor conference call at 10:00 a.m. ET today,
October 28, 2009. Both the webcast and supporting presentation will be
available at savvis.net on the Investor Relations page. A live conference
call will also be available by telephone at +1-866-259-1024 for financial
analysts in North America or +1-703-639-1218 for international analysts. A
replay will be available on the Web site for six months. Investors may also
access the replay by telephone through Wednesday, November 11, by dialing
+1-888-266-2081 in North America or +1-703-925-2533 internationally and using
the access code 1404087.
About Savvis
Savvis, Inc. (Nasdaq: SVVS) is a global leader in outsourced internet
infrastructure services for enterprises. More than 4,000 customers, including
40 percent of the top 100 companies in the Fortune 500, use Savvis to reduce
capital expense, improve service levels and harness the latest advances in
Forward-Looking Statements
This document contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Actual results may
differ materially from Savvis' expectations. Certain factors that could
adversely affect actual results are set forth as risk factors described in
Savvis' SEC reports and filings, including its annual report on Form 10-K for
the year ended December 31, 2008, and subsequent filings. Those risk factors
include, but are not limited to, uncertainties in economic conditions,
including conditions that could pressure enterprise IT spending; introduction
of, demand for and market acceptance of Savvis' products and services;
whether or not Savvis is able to sign additional outsourcing deals;
variability in pricing for those products and services; merger and
acquisition activity by Savvis customers or other customer activity that
affects the level of business done with Savvis; rapid evolution of
technology; changes in the operating environment; and changes in regulatory
environments. The forward-looking statements contained in this document speak
only as of the date of publication, October 28, 2009. Subsequent events and
developments may cause the company's forward-looking statements to change,
and the company will not undertake efforts to revise those forward-looking
statements to reflect events after this date.
* Non-GAAP Measures
Savvis includes information pertaining to certain non-GAAP measures in
conjunction with reporting of its quarterly financial results. "Adjusted
EBITDA" represents income from operations before depreciation, amortization
and accretion, gains and losses on sales of assets, and non-cash,
equity-based compensation. We have included information concerning adjusted
EBITDA because we believe that in our industry such information is a relevant
measurement of a company's operating financial performance and liquidity.
"Adjusted free cash flow" represents adjusted EBITDA less cash capital
expenditures and less cash interest, net. We have included information
concerning adjusted free cash flow because we believe that in our industry
such information is a relevant measurement of a company's operating financial
performance and liquidity. "Cash return on capital employed" represents
operating cash flow divided by capital employed (short-term and long-term
debt plus equity). We have included information concerning cash return on
capital employed because we believe that in our industry such information is
a relevant measurement of a company's operating financial performance and its
efficient use of capital. We do not provide forward looking guidance for
certain financial data, such as income from operations, depreciation,
amortization and accretion, non-cash, equity-based compensation, and interest
income. As a result, we are unable to provide a reconciliation of non-GAAP
measures, such as adjusted EBITDA, adjusted free cash flow and cash return on
capital employed for forward looking data, including 2009 full-year guidance.
The calculations of adjusted EBITDA, adjusted free cash flow and cash return
on capital employed are not specified by United States generally accepted
accounting principles. Our calculations of adjusted EBITDA, adjusted free
cash flow and cash return on capital employed may not be comparable to
similarly-titled measures of other companies.
SAVVIS, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue $213,211 $218,363 $654,595 $634,587
Operating Expenses:
Cost of revenue (including
non-cash, equity-based
compensation of
$1,473, $173, $4,430
and $3,274) (1) 117,945 124,042 359,907 359,382
Sales, general and
administrative expenses
(including
non-cash, equity-
based
compensation of
$7,003, $2,269,
$18,722 and
$17,738) (1) 52,551 49,030 152,704 163,569
Depreciation,
amortization and
accretion 38,201 34,222 112,335 100,120
------ ------ ------- -------
Total Operating Expenses 208,697 207,294 624,946 623,071
------- ------- ------- -------
Income from Operations 4,514 11,069 29,649 11,516
Other (income) and
expense 13,887 13,207 43,268 30,599
------ ------ ------ ------
Income (Loss) before
Income Taxes (9,373) (2,138) (13,619) (19,083)
Income tax expense 557 1,659 1,868 2,589
--- ----- ----- -----
Net Income (Loss) $(9,930) $(3,797) $(15,487) $(21,672)
======= ======= ======== ========
Net Income (Loss) per
Common Share
Basic $(0.18) $(0.07) $(0.29) $(0.41)
====== ====== ====== ======
Diluted $(0.18) $(0.07) $(0.29) $(0.41)
====== ====== ====== ======
Weighted-Average Common
Shares Outstanding (2)
Basic 53,960 53,383 53,724 53,338
====== ====== ====== ======
Diluted 53,960 53,383 53,724 53,338
====== ====== ====== ======
(1) Excludes depreciation, amortization and accretion, which is reported
separately.
(2) For the three and nine months ended September 30, 2009, and 2008,
the effects of including the incremental shares associated with the
Convertible Notes, options, unvested restricted preferred units,
unvested restricted stock units and unvested restricted stock awards
are anti-dilutive, and as such, are not included in the diluted
weighted-average common shares outstanding.
SAVVIS, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2009 2008
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $163,498 $121,284
Trade accounts receivable, net 46,737 51,745
Prepaid expenses and other current
assets 27,534 23,641
------ ------
Total Current Assets 237,769 196,670
------- -------
Property and equipment, net 713,499 736,646
Other non-current assets 14,093 16,379
------ ------
Total Assets $965,361 $949,695
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Payables and other trade accruals $34,779 $41,538
Current portion of long-term
debt and lease obligations 14,231 13,049
Other accrued liabilities 68,820 71,675
------ ------
Total Current Liabilities 117,830 126,262
------- -------
Long-term debt, net of current
portion 374,938 360,249
Capital and financing method lease
obligations, net of current
portion 186,622 191,419
Other accrued liabilities 76,447 71,588
------ ------
Total Liabilities 755,837 749,518
------- -------
Stockholders' Equity:
Common stock 544 535
Additional paid-in capital 856,986 834,882
Accumulated deficit (629,070) (613,583)
Accumulated other comprehensive
loss (18,936) (21,657)
------- -------
Total Stockholders' Equity 209,524 200,177
------- -------
Total Liabilities and Stockholders'
Equity $965,361 $949,695
======== ========
SAVVIS, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Cash Flows from
Operating Activities:
Net income (loss) $(9,930) $(3,797) $(15,487) $(21,672)
Reconciliation of net
income (loss) to net
cash provided by
operating activities:
Depreciation,
amortization and
accretion 38,201 34,222 112,335 100,120
Non-cash, equity-
based compensation 8,476 2,442 23,152 21,012
Accrued interest 7,631 7,133 16,908 15,407
Other, net 1,469 68 927 203
Net changes in operating
assets and liabilities:
Trade accounts
receivable, net 8 (675) 5,472 (6,828)
Prepaid expenses
and other
current and non-
current assets 1,712 1,776 (565) (8,372)
Payables and
other trade
accruals (2,284) 1,438 (5,275) 4,832
Other accrued
liabilities (318) 4,658 (8,456) (4,022)
---- ----- ------ ------
Net cash provided
by operating
activities 44,965 47,265 129,011 100,680
------ ------ ------- -------
Cash Flows from
Investing Activities:
Payments for
capital
expenditures (30,328) (68,877) (75,804) (209,277)
------- ------- ------- --------
Net cash used in
investing
activities (30,328) (68,877) (75,804) (209,277)
------- ------- ------- --------
Cash Flows from
Financing Activities:
Proceeds from long-
term debt - 23,164 2,865 56,447
Payments for
employee taxes on
equity-based
instruments (1,175) (38) (1,619) (2,283)
Payments for debt
issuance costs - - - (1,135)
Principal payments
on long-term debt (1,650) (1,652) (4,950) (3,481)
Principal payments
under capital
lease obligations (1,932) (1,481) (6,090) (4,152)
Other, net (1,174) 86 (1,132) 907
------ -- ------ ---
Net cash provided
by (used in)
financing
activities (5,931) 20,079 (10,926) 46,303
------ ------ ------- ------
Effect of exchange rate
changes on cash and
cash equivalents (156) (629) (67) (4,800)
---- ---- --- ------
Net Increase
(Decrease) in Cash
and Cash
Equivalents 8,550 (2,162) 42,214 (67,094)
Cash and Cash
Equivalents,
Beginning of
Period 154,948 118,209 121,284 183,141
------- ------- ------- -------
Cash and Cash
Equivalents, End
of Period $163,498 $116,047 $163,498 $116,047
======== ======== ======== ========
Supplemental
Disclosures
of Cash Flow
Information:
Cash paid for
interest $5,541 $5,635 $25,642 $21,104
SAVVIS, Inc. and Subsidiaries
Unaudited Selected Condensed Consolidated Financial
Information
(in thousands)
Three Months Ended
-----------------------------
September 30,
---------------- June 30,
2009 2008 2009
---- ---- ----
Revenue:
Colocation $85,341 $78,382 $84,856
Managed hosting 62,814 66,518 67,303
------ ------ ------
Total hosting 148,155 144,900 152,159
Network services 65,056 73,463 67,702
------ ------ ------
Total Revenue $213,211 $218,363 $219,861
======== ======== ========
Adjusted EBITDA
Reconciliation:
Income from
operations $4,514 $11,069 $9,537
Depreciation,
amortization and
accretion 38,201 34,222 37,799
Non-cash, equity-
based
compensation 8,476 2,442 7,785
----- ----- -----
Adjusted EBITDA(1) $51,191 $47,733 $55,121
======= ======= =======
Adjusted Free Cash
Flow Reconciliation:
Adjusted EBITDA $51,191 $47,733 $55,121
Cash Capital
Expenditures (30,328) (68,877) (27,224)
Cash Interest Paid (5,541) (5,635) (12,613)
Interest Income 33 604 44
-- --- --
Adjusted Free
Cash Flow (2) $15,355 $(26,175) $15,328
======= ======== =======
Headcount 2,290 2,320 2,289
(1) Adjusted EBITDA represents income from operations before
depreciation, amortization, accretion and non-cash, equity-based
compensation. We have included information concerning adjusted EBITDA
because we believe that in our industry such information is a relevant
measurement of a company's operating financial performance and
liquidity. The calculation of adjusted EBITDA is not specified by
United States generally accepted accounting principles. Our
calculation of adjusted EBITDA may not be comparable to similarly
titled measures of other companies.
(2) Adjusted Free Cash Flow represents adjusted EBITDA less cash capital
expenditures and less cash interest, net. We have included information
concerning adjusted free cash flow because we believe that in our
industry such information is a relevant measurement of a company's
operating financial performance and liquidity.
SAVVIS, Inc. and Subsidiaries
Unaudited Supplemental Revenue Information
(in thousands, except per square foot amounts)
Hosting Supplemental Three Months Ended
Information: ------------------
Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
2008 2008 2009 2009 2009
---- ---- ---- ---- ----
Data Center Revenue
Colocation $78,382 $83,245 $84,232 $84,856 $85,341
Managed hosting 66,518 67,672 68,086 67,303 62,814
Hosting area network 17,166 17,711 17,562 17,417 17,099
------ ------ ------ ------ ------
Total Data Center
Revenue $162,066 $168,628 $169,880 $169,576 $165,254
======== ======== ======== ======== ========
Average Billed
Square Feet
Colocation 631.8 611.3 590.5 595.4 608.6
Managed hosting 19.6 20.5 21.2 21.4 22.2
---- ---- ---- ---- ----
Total Average Billed
Square Feet 651.4 631.8 611.7 616.8 630.8
===== ===== ===== ===== =====
Average Monthly Data
Center
Revenue Per Billed
Square Foot (1)
Colocation $41.4 $45.4 $47.6 $47.5 $46.7
Managed hosting 1,133.2 1,101.4 1,069.2 1,046.4 945.1
Hosting area
network (2) 8.8 9.3 9.6 9.4 9.0
Total Average
Monthly Data
Center
Revenue Per Billed
Square Foot $82.9 $89.0 $92.6 $91.6 $87.3
(1) Average monthly data center revenue per billed square foot is
calculated as the revenue per quarter divided by the average billed
square feet per quarter stated on a monthly basis.
(2) Hosting area network average monthly revenue per billed square foot
is calculated as the hosting area network revenue per quarter divided
by the total average billed square feet per quarter stated on a
monthly basis.
Network Services Supplemental Information:
Three Months Ended
------------------
Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
2008 2008 2009 2009 2009
---- ---- ---- ---- ----
Network
Services
Managed network $43,689 $41,801 $39,831 $39,273 $37,881
Hosting area
network 17,166 17,711 17,562 17,417 17,099
Bandwidth 12,608 12,025 11,812 11,012 10,076
------ ------ ------ ------ ------
Total Network
Services $73,463 $71,537 $69,205 $67,702 $65,056
======= ======= ======= ======= =======
SOURCE: Savvis, Inc.
CONTACT: Investors: Peggy Reilly Tharp,
+1-314-628-7491,
peggy.tharp@savvis.net, or
Media: Carter Cromley,
+1-703-667-6110,
carter.cromley@savvis.net
NEWS 
