Savvis Reports First Quarter 2010 Results
By Savvis Inc., PRNESunday, May 2, 2010
Company Focused on Delivering Sequential Quarterly Revenue Growth for Remainder of 2010
ST. LOUIS, May 3, 2010 - Savvis, Inc. (Nasdaq: SVVS), a global leader in cloud infrastructure and
hosted IT solutions for enterprises, today reported its first quarter 2010
financial results, with revenue of US$216.6 million, compared to US$221.5
million in the first quarter of 2009. Adjusted EBITDA* was US$54.0 million,
compared to US$58.8 million of adjusted EBITDA in the first quarter of 2009.
Income from operations for the first quarter of 2010 was US$4.8 million,
compared to US$15.6 million in the first quarter of 2009. The company
reported a net loss of (US$11.3) million, or (US$0.21) per share, in the
first quarter of 2010, compared to first quarter 2009 net income of US$0.6
million, or US$0.01 per share. Leveraged free cash flow* in the first quarter
of 2010 was (US$4.5) million, down from US$33.2 million in the first quarter
of 2009.
"We've made good progress refocusing our sales and marketing programs and
personnel, expanding our collaborative partnerships, and improving our client
satisfaction efforts. The initial results of these and other initiatives are
reflected in strong bookings and reduced churn in the first quarter," said
Jim Ousley, chairman and chief executive officer for Savvis. "We will
continue to focus on sales productivity, churn management, the Financial and
other verticals, Cloud Services, and new business development initiatives,
which are expected to put us firmly on the path to improved growth throughout
the remainder of this year and beyond."
First Quarter Financial Results
US dollars in millions Three months ended
3/31/10 12/31/09 3/31/09
Hosting $152.8 $154.7 $152.3
Network $63.8 $65.1 $69.2
----- ----- -----
Total Revenue $216.6 $219.8 $221.5
------ ------ ------
Cost of Revenue(1) $119.4 $120.4 $120.5
SG&A Expenses(1) $51.7 $50.5 $49.1
Non-Cash, Equity-Based Compensation(1) $8.5 $6.0 $6.9
Income from Operations $4.8 $10.4 $15.6
Net Income (Loss) ($11.3) ($5.4) $0.6
Adjusted EBITDA $54.0 $54.9 $58.8
Adjusted EBITDA Margin 25% 25% 27%
(1) Both cost of revenue and SG&A expenses exclude depreciation,
amortization and accretion and include non-cash, equity-based
compensation. Total non-cash, equity-based compensation
attributed to cost of revenue for the three months ended March 31,
2010, December 31, 2009, and March 31, 2009, was $1.6 million, $1.1
million and $1.5 million and to SG&A expenses was $6.8 million, $4.9
million and $5.4 million, respectively.
First Quarter Overview
Total Savvis revenue for the first quarter was $216.6 million, down (1%)
compared to fourth quarter 2009 revenue of $219.8 million. Revenue in the
first quarter was impacted by an expected $6.1 million of colocation churn,
which occurred at the end of the fourth quarter of 2009.
Adjusted EBITDA was $54.0 million for the first quarter of 2010, which
represented a (2%) decline from the $54.9 million of adjusted EBITDA that was
recorded in the fourth quarter of 2009. Adjusted EBITDA was lower as a result
of the quarterly decline in revenue, which was offset in part by cost savings
initiatives.
For the first quarter of 2010, income from operations of $4.8 million was
down when compared to the $10.4 million recorded in the fourth quarter of
2009. This decline was due to an increase in depreciation expense and higher
non-cash, equity-based compensation in the first quarter.
A consolidated net loss of ($11.3) million was recorded in the first
quarter of 2010, compared to a net loss of ($5.4) million in the fourth
quarter of 2009. Savvis recorded a loss per share of ($0.21) in the first
quarter of 2010, compared to a loss per share of ($0.10) in the fourth
quarter of 2009. For the first quarter, leveraged free cash flow was ($4.5)
million, up from ($13.8) million in the fourth quarter of 2009.
Hosting
US dollars in millions Three months ended
3/31/10 12/31/09 3/31/09
Colocation $82.5 $86.9 $84.2
Managed Services $70.3 $67.8 $68.1
----- ----- -----
Total Hosting Revenue $152.8 $154.7 $152.3
Percentage Change (1%) --
Overall Hosting revenue was $152.8 million in the first quarter, flat on
a year-over-year basis. On a quarter-over-quarter basis, Hosting revenue was
down slightly.
For the quarter, Managed Services contributed $70.3 million to overall
Hosting revenue, or 46%. Managed Services revenue was up 4%, on a quarterly
basis, and year-over-year, it was up 3%. The growth in Managed Services was
due to continued strength in Cloud Services revenue growth, which includes
uptake from Software-as-a-Service (SaaS) providers as well as increasing
momentum in winning larger outsourcing opportunities.
Colocation contributed $82.5 million to overall Hosting revenue in the
quarter, or 54%. Year-over-year, Colocation revenue was down (2%). On a
quarter-over-quarter basis, Colocation revenue was down (5%). As expected,
Savvis was impacted by $6.1 million of colocation churn, which occurred at
the end of the fourth quarter of 2009.
Network
US dollars in millions Three months ended
3/31/10 12/31/09 3/31/09
Core $31.7 $31.4 $25.6
Sustaining $32.2 $33.7 $43.6
----- ----- -----
Total Network Revenue $63.8 $65.1 $69.2
Percentage Change (2%) (8%)
Overall Network revenue was $63.8 million in the first quarter and was
down (8%) on an annual basis. On a quarterly basis, Network revenue was down
(2%), as pricing pressure continued to impact this portion of the business.
At the end of the first quarter, Network revenue was nearly evenly split
between Core and Sustaining.
For the quarter, Core Network contributed $31.7 million to overall
Network revenue. Core Network revenue was up 24%, on a year-over-year basis,
and was up 1%, on a quarter-over-quarter basis.
Sustaining Network contributed $32.2 million to overall Network revenue
in the quarter. Year-over-year, Sustaining Network revenue declined (26%). On
a quarter-over-quarter basis, Sustaining Network revenue was down (5%).
Vertical Highlights
The Financial Vertical represented 26% of total revenue, or $55.5
million, in the first quarter of 2010. Revenue in the quarter was down (3%),
compared to the first quarter of 2009, and down (4%), compared to the fourth
quarter of 2009. Revenue for the quarter was impacted by the $6.1 million of
colocation churn experienced at the end of the fourth quarter, with
approximately 50% of this amount occurring in the Financial Vertical.
In the first quarter of 2010, Software-as-a-Service revenue was $19.7
million, up slightly on a quarter-over-quarter basis and up 23%
year-over-year. In April, Savvis announced the formation of a new sales team
dedicated to the Software Vertical, which includes SaaS. In addition to
managed services, SaaS and Software clients are particularly interested in
Savvis' leading-edge cloud platforms. During the first quarter of 2010,
Savvis reported Cloud Services revenue of $2.8 million, up 14% on a
quarter-over-quarter basis and up 100% year-over-year.
Cash Flow and Balance Sheet
Net cash provided by operating activities was $39.0 million in the first
quarter of 2010, compared to $45.7 million in the first quarter of 2009. Cash
capital expenditures for the first quarter of 2010 totaled $50.7 million.
The company's cash position at March 31, 2010, was $145.9 million,
compared to $160.8 million at December 31, 2009. As of March 31, 2010, the
long-term debt and capital leases for Savvis (net of current portion) totaled
$595.8 million, down from $600.0 million as of December 31, 2009.
Financial Outlook
"In the first quarter, revenue and adjusted EBITDA were higher than
Street expectations, due to stronger than expected sales, a continued focus
on cost savings efforts and lower than expected SG&A spending," said Greg
Freiberg, chief financial officer for Savvis. "However, in order to build on
our strong sales trend, we expect to increase our sales and marketing spend,
which could impact adjusted EBITDA in the second quarter."
Savvis expects the following for full year 2010:
- Adjusted EBITDA of $210 to $225 million, which narrows the
range slightly from previous guidance of $205 to $225 million
- Total cash capital expenditures of $180 to $200 million,
including $50 to $55 million for data center expansion
- Cash interest expense (net) of approximately $40 to $50 million
Investor Conference Call
Savvis will webcast an investor conference call at 9:30 a.m. ET today,
May 3, 2010. 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 1-866-835-8906 for financial analysts in
North America or +1-703-639-1413 for international analysts. A replay will be
available on the Web site for six months. Investors may also access the
replay by telephone through Saturday, May 15, by dialing 1-888-266-2081 in
North America or +1-703-925-2533 internationally and using the access code
1447970.
About Savvis
Savvis, Inc. (NASDAQ: SVVS) is a global leader in cloud infrastructure
and hosted IT solutions for enterprises. More than 2,500 unique clients,
including 30 of the top 100 companies in the Fortune 500, use Savvis to
reduce capital expense, improve service levels and harness the latest
advances in cloud computing. For more information, please visit savvis.net.
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, 2009, 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 or proposed
changes in, or introduction of new, regulatory schemes or environments that
impact Savvis and/or its customers' businesses. The forward-looking
statements contained in this document speak only as of the date of
publication, May 3, 2010. 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 and year-end 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. "Leveraged free cash flow" represents adjusted EBITDA less cash
capital expenditures and less cash interest, net. We have included
information concerning leveraged 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. 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 and leveraged
free cash flow for forward looking data, including 2010 full-year guidance.
The calculations of adjusted EBITDA and leveraged free cash flow are not
specified by United States generally accepted accounting principles. Our
calculations of adjusted EBITDA and leveraged free cash flow 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
March 31,
---------
2010 2009
---- ----
Revenue $216,587 $221,523
Operating Expenses:
Cost of revenue (including non-cash,
equity-based
compensation of $1,630 and $1,483) (1) 119,368 120,521
Sales, general and administrative expenses
(including non-cash, equity-based
compensation of $6,823 and $5,408) (1) 51,719 49,069
Depreciation, amortization and accretion 40,737 36,335
------ ------
Total Operating Expenses 211,824 205,925
------- -------
Income from Operations 4,763 15,598
Other income and expense 15,757 14,426
------ ------
Income (Loss) before Income Taxes (10,994) 1,172
Income tax expense 355 555
--- ---
Net Income (Loss) $(11,349) $617
======== ====
Net Income (Loss) per Common Share
Basic $(0.21) $0.01
====== =====
Diluted $(0.21) $0.01
====== =====
Weighted-Average Common Shares Outstanding(2)
Basic 54,494 53,609
====== ======
Diluted 54,494 53,774
====== ======
(1) Excludes depreciation, amortization and accretion, which is
reported separately.
(2) For the three months ended March 31, 2010, the effect of including
the incremental shares associated with the Convertible Notes,
options, 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. For the
three months ended March 31, 2009, the effects of including the
incremental shares associated with unvested restricted stock awards
and the Convertible Notes 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)
March 31, December 31,
2010 2009
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $145,928 $160,815
Trade accounts receivable, net 51,823 45,754
Prepaid expenses and other current assets 27,686 21,217
Total Current Assets 225,437 227,786
------- -------
Property and equipment, net 792,376 783,852
Other non-current assets 12,893 13,120
------ ------
Total Assets $1,030,706 $1,024,758
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Payables and other trade accruals $59,742 $52,710
Current portion of long-term debt and lease
obligations 18,385 17,479
Other accrued liabilities 68,965 68,314
Total Current Liabilities 147,092 138,503
------- -------
Long-term debt, net of current portion 374,551 376,089
Capital and financing method lease
obligations, net of current portion 221,211 223,897
Other accrued liabilities 79,407 76,452
Total Liabilities 822,261 814,941
------- -------
Stockholders' Equity:
Common stock 552 545
Additional paid-in capital 875,112 862,834
Accumulated deficit (645,778) (634,429)
Accumulated other comprehensive loss (21,441) (19,133)
Total Stockholders' Equity 208,445 209,817
------- -------
Total Liabilities and Stockholders' Equity $1,030,706 $1,024,758
========== ==========
SAVVIS, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended
March 31,
---------
2010 2009
---- ----
Cash Flows from Operating Activities:
Net income (loss) $(11,349) $617
Reconciliation of net income (loss) to net cash
provided by operating activities:
Depreciation, amortization and accretion 40,737 36,335
Non-cash, equity-based compensation 8,453 6,891
Accrued interest, net 3,286 3,557
Amortization of debt discount 3,767 3,471
Other, net 332 53
Net changes in operating assets and liabilities:
Trade accounts receivable, net (6,581) 2,203
Prepaid expenses and other current and non-
current assets (6,572) 991
Payables and other trade accruals 7,455 27
Other accrued liabilities (556) (8,495)
---- ------
Net cash provided by operating activities 38,972 45,650
------ ------
Cash Flows from Investing Activities:
Payments for capital expenditures (50,691) (18,252)
Net cash used in investing activities (50,691) (18,252)
------- -------
Cash Flows from Financing Activities:
Proceeds from long-term debt - 2,066
Proceeds from stock option exercises 6,648 4
Payments for employee taxes on equity-based
instruments (2,812) (444)
Principal payments on long-term debt (1,650) (1,650)
Principal payments under capital lease obligations (2,538) (1,950)
Other, net (612) -
Net cash provided by (used in) financing
activities (964) (1,974)
---- ------
Effect of exchange rate changes on
cash and cash equivalents (2,204) (846)
------ ----
Net Increase (Decrease) in Cash and Cash
Equivalents (14,887) 24,578
Cash and Cash Equivalents, Beginning of Period 160,815 121,284
------- -------
Cash and Cash Equivalents, End of Period $145,928 $145,862
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $7,832 $7,488
SAVVIS, Inc. and Subsidiaries
Unaudited Selected Condensed Consolidated Financial Information
(in thousands)
Three Months Ended
------------------
March 31, December 31,
---------
2010 2009 2009
---- ---- ----
Segment Revenue:
Hosting $152,751 $152,318 $154,664
Network 63,836 69,205 65,155
Total Revenue $216,587 $221,523 $219,819
======== ======== ========
Segment Adjusted EBITDA:
Hosting $58,960 $64,161 $59,326
Network 16,265 16,252 16,070
Corporate - Other (1) (21,272) (21,589) (20,509)
Total Adjusted EBITDA (2) $53,953 $58,824 $54,887
======= ======= =======
Adjusted EBITDA Reconciliation:
Income from operations $4,763 $15,598 $10,418
Depreciation, amortization and
accretion 40,737 36,335 38,519
Non-cash, equity-based
compensation 8,453 6,891 5,950
Adjusted EBITDA $53,953 $58,824 $54,887
======= ======= =======
Reconciliation of Adjusted
EBITDA to Income
(Loss) before Income Taxes:
Adjusted EBITDA $53,953 $58,824 $54,887
Depreciation, amortization and
accretion (40,737) (36,335) (38,519)
Non-cash, equity-based
compensation (8,453) (6,891) (5,950)
Interest income 30 114 35
Interest expense (15,475) (14,516) (14,266)
Other income (expense) (312) (24) (685)
Income (Loss) before Income
Taxes $(10,994) $1,172 $(4,498)
======== ====== =======
Leveraged Free Cash Flow
Reconciliation:
Adjusted EBITDA $53,953 $58,824 $54,887
Cash capital expenditures (50,691) (18,252) (57,132)
Cash interest paid (7,832) (7,488) (11,586)
Interest income 30 114 35
Leveraged Free Cash Flow (3) $(4,540) $33,198 $(13,796)
======= ======= ========
(1) Corporate -Other adjusted EBITDA includes all costs not directly
associated with hosting services or network services. Costs not
directly associated with hosting services or network services
include, but are not limited to, general and administrative costs.
(2) 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.
(3) Leveraged Free Cash Flow represents adjusted EBITDA less cash
capital expenditures and less cash interest, net. We have included
information concerning leveraged 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)
Three Months Ended
------------------
March 31, June 30, September 30, December 31, March 31,
2009 2009 2009 2009 2010
---- ---- ---- ---- ----
Data Center
Revenue
Colocation $84,232 $84,856 $85,341 $86,892 $82,467
Managed
hosting 68,086 67,303 62,814 67,772 70,284
Data Center
Metrics (1)
Total raised
floor 1,433 1,433 1,433 1,433 1,477
Revenue
space 912 923 886 878 889
Billed
square feet 612 622 640 591 601
Utilization 67% 67% 72% 67% 68%
Average
Billed
Square Feet
Colocation 590.5 595.4 608.6 592.3 572.1
Managed
hosting 21.2 21.4 22.2 22.9 23.8
Total
Average
Billed
Square Feet 611.7 616.8 630.8 615.2 595.9
===== ===== ===== ===== =====
Average
Monthly
Data Center
Revenue
Per Billed
Square Foot (2)
Colocation $47.6 $47.5 $46.7 $48.9 $48.1
Managed
hosting 1,069.2 1,046.4 945.1 985.4 984.5
(1) Data center metrics are calculated as of period end for each
respective quarter.
(2) 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.
SAVVIS Revenue by Vertical
Three Months Ended
------------------
March 31, June 30, September 30, December 31, March 31,
2009 2009 2009 2009 2010
---- ---- ---- ---- ----
Financial
vertical $57,353 $60,065 $53,974 $57,742 $55,532
Other 164,170 159,796 159,237 162,077 161,055
Total Revenue $221,523 $219,861 $213,211 $219,819 $216,587
======== ======== ======== ======== ========
Network Revenue
Supplemental Information:
Three Months Ended
------------------
March 31, June 30, September 30, December 31, March 31,
2009 2009 2009 2009 2010
---- ---- ---- ---- ----
Core (1) $25,585 $26,918 $28,616 $31,483 $31,670
Sustaining (2) 43,620 40,784 36,440 33,672 32,166
Total Network
Revenue $69,205 $67,702 $65,056 $65,155 $63,836
======= ======= ======= ======= =======
(1) Core network includes revenue from Thomson Reuters and from other
financial vertical and data center customers, who also purchase
bundled network and hosting services.
(2) Sustaining network includes revenue from services that are either in
slower growth or declining markets or are not directly tied to the
future growth of the company's network and hosting businesses.
Investors, Peggy Reilly Tharp, +1-314-628-7491, peggy.tharp at savvis.net; or Media, Amanda Gomez, +1-314-628-7417, amanda.gomez at savvis.net both of Savvis, Inc.
Tags: England, May 3, North carolina, Savvis Inc., St. louis
