SAVVIS Reports $212.9 Million of Revenue and $44.7 Million of Adjusted EBITDA* for Second Quarter 2008
· Colocation revenue up 10% vs. Q1 ’08
· Managed hosting revenue up 6% vs. Q1 ’08
· Reaffirms 2008 annual expectation of $840-870 million of revenue and $175-190 million of Adjusted EBITDA
ST. LOUIS, MO. – July 29, 2008 – SAVVIS, Inc. (NASDAQ: SVVS), a global leader in IT infrastructure services for business applications, announced today that its revenue for the second quarter 2008 totaled $212.9 million, income from operations was $0.9 million, and net loss was $7.4 million, or $(0.14) per share. Adjusted EBITDA for the quarter was $44.7 million.
Revenue increased 6% from the same period a year ago and 5% from the first quarter 2008, driven by growth in hosting. Adjusted EBITDA was up 5% from a year ago and 11% from the first quarter. The second quarter of 2007 included results from low-growth assets subsequently divested, which contributed $12.7 million of revenue and $5.0 million of Adjusted EBITDA in the year-earlier period.
Chief Executive Officer Phil Koen said, “I’m pleased with the results we achieved in the second quarter against continuing broader economic challenges. The 26% year-over-year pro forma growth in hosting revenue reflects the demand by enterprise customers for our highly differentiated value proposition of greater agility, greater visibility and lower cost for IT infrastructure. We continue to expect 10-14% pro forma revenue growth in 2008 and approximately $175-190 million of Adjusted EBITDA, for pro forma growth of 19-29% for fiscal 2008. Our team remains mindful of the economic environment as we focus on driving improved Adjusted EBITDA margin, as reflected in expanding margins for the quarter and the full-year projection.”
Second Quarter Results
|
(US$ millions) |
Three months ended: |
|
|
June 30, 2008 |
March 31, 2008 |
June 30, 2007 |
June 30, 2007
pro forma(1) |
|
Revenue: |
|
|
|
|
|
Colocation |
$ 74.8 |
$ 67.9 |
$ 68.4 |
$ 60.0 |
|
Managed hosting |
64.7 |
61.3 |
51.0 |
51.0 |
|
Total Hosting |
139.5 |
129.2 |
119.4 |
111.0 |
|
Network services |
73.4 |
74.1 |
76.9 |
76.9 |
|
Other services |
-- |
-- |
4.3 |
-- |
|
Total Revenue |
$ 212.9 |
$ 203.3 |
$ 200.6 |
$ 187.9 |
|
Cost of Revenue(2) |
$ 122.9 |
$ 118.7 |
$ 113.8 |
$ 105.2 |
|
Sales, Gen. & Admin. Expenses(2) |
$ 55.0 |
$ 53.3 |
$ 52.3 |
$ 45.2 |
|
Income (Loss) from Operations |
$ 0.9 |
$ (0.4) |
$ 192.5 |
|
|
Net Income (Loss) |
$ (7.4) |
$ (4.2) |
$ 133.3 |
|
|
Adjusted EBITDA |
$ 44.7 |
$ 40.3 |
$ 42.6 |
$ 37.6 |
|
Adjusted EBITDA Margin |
21% |
20% |
21% |
20% |
(1)Pro forma results for the three months ended June 30, 2007, exclude the impact of non-cash equity-based compensation cost; revenue and related costs from the sale of data center assets to Microsoft in June 2007; CDN assets sold in January 2007; and a network contract with Telerate.
(2)Both cost of revenue and sales, general and administrative expenses exclude depreciation, amortization, and accretion and include the effect of non-cash equity-based compensation. Total non-cash equity-based compensation in cost of revenue for the three months ended June 30, 2008, March 31, 2008, and June 30, 2007, was $1.6 million, $1.5 million and $1.5 million and in sales, general and administrative expenses was $8.0 million, $7.5 million and $6.7 million respectively.
Second-quarter Results
Total revenue for the second quarter was $212.9 million, an increase of 6% compared to the second quarter 2007. On a pro forma basis, excluding the impact of the sale of data-center assets to Microsoft in June 2007 and the sale of CDN assets in January 2007 and a concluded contract, revenue increased 13% from the prior year. Revenue increased 5% compared to the first quarter 2008, reflecting strong growth in colocation and managed hosting revenue.
Growth in hosting revenue, up 17% from a year ago, reflected 27% growth in managed hosting revenue and 9% growth in colocation revenue. On a pro forma basis, hosting revenue increased 26% from the year-earlier period, with colocation revenue up 25% and managed hosting revenue up 27%. Compared to the first quarter, hosting revenue rose 8%, driven by growth in both colocation and managed hosting. Virtualized and utility services contributed $20.6 million of managed hosting revenue in the second quarter, up 50% from a year ago and 10% from the first quarter.
In the second quarter, network services revenue declined 4% from the second quarter 2007, to $73.4 million, and 1% from the first quarter 2008. Revenue from SAVVIS’ Hosting Area Network increased 16% from a year ago on a pro forma basis, to $17.2 million, and 2% from the first quarter 2008, partially offsetting the declines in revenue from managed network and bandwidth services.
Adjusted EBITDA for the second quarter of $44.7 million increased from the second quarter 2007 by 5% and by 19% on a pro forma basis, and by 11% from the first quarter 2008. SAVVIS opened four new data centers in late 2007 and three new data centers in the first half of 2008. Those new data centers generate operating costs ahead of revenue, initially adversely affecting Adjusted EBITDA.
SAVVIS’ consolidated net loss was $7.4 million in the second quarter, compared to net income of $133.3 million in the same period last year, which included a gain of $180.8 million on the sale of non-strategic assets and a charge of $45.1 million related to retirement of subordinated notes, and compared to a net loss of $4.2 million in the first quarter 2008. Expenses in the current quarter compared to the first quarter included higher depreciation and amortization expense as a result of new investments being put into service. Loss per share was $(0.14) in the second quarter 2008, compared to diluted earnings per share of $2.36 in the same period a year previously and a loss per share of $(0.08) in the first quarter 2008.
Cash Flow and Balance Sheet
Net cash provided by operating activities was $21.4 million in the second quarter. Cash capital expenditures for the quarter totaled $97.1 million, which included $62.0 million for the build-out of new data centers.
SAVVIS’ long-term debt and capital leases as of June 30, 2008, totaled $568.5 million, including $33.3 million of new debt incurred through a loan established to fund construction of SAVVIS’ London-area data center, as announced on June 30, 2008. SAVVIS’ cash position at June 30, 2008, was $118.2 million, compared to $164.6 million at March 31, 2008.
Operational Highlights
SAVVIS continued to extend its Proximity Hosting service, targeted at the growing electronic securities-trading community. The company expanded its offering significantly by launching Proximity Hosting services in London, Chicago and Singapore and successfully securing strategic relationships with a number of key exchanges in each market that included the London Stock Exchange, Chi-X, BATS (UK), Intercontinental Exchange, Chicago Mercantile Exchange and the Singapore Exchange.
SAVVIS announced new or expanded relationships with customers including CMPi, Cognisco, Ellie Mae, iJet and Star Compliance. Additionally, Thomson Reuters extended its master services agreement with SAVVIS, including provisions for deployment of IT infrastructure services in Asia.
In the United Kingdom, SAVVIS won that country’s Home Office’s Supplier Value Award for the Best Technology Implementation for on-time, on-budget delivery of a complex shared services infrastructure platform that speeded application deployment times and saved costs for that government agency.
SAVVIS has opened three new and one expanded data center this year, on time and on budget, in Boston, Chicago, Dallas and most recently Singapore. The company expects to expand a facility in the New York metro area significantly and open a new facility in the London metro area in the fourth quarter 2008.