EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

CONTACTS:

Investors: Elizabeth Corse   Media: Carter Cromley
(703) 667-6984   (703) 667-6110
elizabeth.corse@savvis.net   carter.cromley@savvis.net

SAVVIS REPORTS THIRD QUARTER RESULTS

Third Quarter Net Income $5.3 Million, for Earnings Per Share of $0.10

Third Quarter Adjusted EBITDA* $35.5 Million on Total Revenue $190.3 Million

Outlook for 2008 Revenue of $910-925 Million and Adjusted EBITDA of $210-220 Million

Record Sales Bookings in Quarter of Over $100 Million of Annualized Revenue

ST. LOUIS, MO. – October 23, 2007 – SAVVIS, Inc. (NASDAQ: SVVS), a global leader in IT infrastructure services for business applications, announced today that its revenue for the third quarter of 2007 totaled $190.3 million, income from operations was $3.7 million, and net income was $5.3 million. Adjusted EBITDA* for the third quarter was $35.5 million.

Third quarter operating cash flow was $33.9 million and cash capital expenditures were $86.4 million, which included previously-announced expenditures for the build-out of four new data centers.

Chief Executive Officer Phil Koen said, “In 2007, SAVVIS has been making important changes to transition our business for consistent, long-term growth. During the year we sold low-growth assets for cash proceeds of $319 million, which we are reinvesting in seven high-quality data centers that will increase our growth opportunities for 2008 and beyond. Market demand for our services continues to be very robust, as evidenced by our record sales bookings. Third quarter bookings totaled more than $100 million of annualized revenue, an increase of more than 40% from a year ago and over 25% from the second quarter of 2007.

“With our business largely repositioned as of the end of the third quarter, we look forward to leveraging strong demand for our services to grow 2008 revenue on a pro forma basis* at 19-21%, with 30-35% growth in hosting revenue, driving Adjusted EBITDA growth on a pro forma basis of approximately 42-49%.”


SAVVIS

Third-quarter Financial Results

October 23, 2007

page 2

 

Today SAVVIS also announced the development of a new data center in Dallas. With previously-announced data centers opened or in development in the Atlanta, Boston, Chicago, Silicon Valley, New York and Washington, DC metropolitan areas, SAVVIS is adding a total of 260,000 square feet of raised-floor space in seven high-quality data centers in 2007 and 2008. Expansion of SAVVIS’ data-center footprint demonstrates the company’s confidence in and commitment to its markets and growth strategy and is part of the reinvestment program of redeploying proceeds of cash from low-growth assets sold in 2007.

Third-quarter Results, as Reported

 

(US$ millions)    Three months ended:  
     Sept. 30, 2007     June 30, 2007     Sept. 30, 2006  

Revenue:

      

Colocation

   $ 58.6     $ 68.4     $ 55.3  

Managed hosting

     55.1       51.0       45.2  
                        

Total Hosting

     113.7       119.4       100.5  

Network services(1)

     76.6       77.0       82.4  

Other services(1)

     —         4.2       10.8  
                        

Total Revenue

   $ 190.3     $ 200.6     $ 193.7  
                        

Cost of Revenue(2)

   $ 112.3     $ 113.8     $ 116.5  

Sales, Gen. & Admin. Expenses(2)

   $ 51.1     $ 52.3     $ 52.4  

Income from Operations

   $ 3.7     $ 192.5     $ 4.1  

Net Income (Loss)

   $ 5.3     $ 133.3     $ (13.6 )

Adjusted EBITDA

   $ 35.5     $ 42.6     $ 32.8  

Adjusted EBITDA Margin

     19 %     21 %     17 %

(1)

$1.4 million of revenue previously reported as other services revenue has been reclassified as network services revenue to reflect retention of network-services revenue SAVVIS had previously anticipated would be eliminated in 2007.

(2)

Cost of revenue excludes depreciation, amortization, and accretion. Both cost of revenue and sales, general and administrative expenses include the effect of non-cash equity-based compensation. Total non-cash equity-based compensation in cost of revenue was $1.4 million, $1.5 million, and $1.3 million and in sales, general and administrative expenses was $7.3 million, $6.7 million, and $6.5 million for the three months ended September 30, 2007, June 30, 2007, and September 30, 2006, respectively.


SAVVIS

Third-quarter Financial Results

October 23, 2007

page 3

 

Third-quarter Results, Pro Forma

 

(US$ millions)    Three months ended:  
     Sept. 30, 2007    

June 30, 2007

pro forma(1)

    Sept. 30, 2006
pro forma(1)
 

Revenue:

      

Colocation

   $ 58.6     $ 60.0     $ 48.2  

Managed hosting

     55.1       51.0       45.2  
                        

Total Hosting

     113.7       111.0       93.4  

Network services

     76.6       76.9       82.4  
                        

Total Revenue

   $ 190.3     $ 187.9     $ 175.8  
                        

Adjusted EBITDA

   $ 35.5     $ 37.6     $ 24.6  

Adjusted EBITDA Margin

     19 %     20 %     14 %

Average Billable Square Feet

     563       590       541  

(1)

Pro forma results for the three months ended June 30, 2007, and September 30, 2006, exclude the impact of revenue and related costs from: the sale of data center assets to Microsoft in June 2007; CDN assets sold in January 2007 and transferred to the buyer throughout the first half of that year; and a network contract with Telerate.

As-Reported Commentary

Total revenue for the third quarter was $190.3 million, a decrease of 2% compared to the third quarter of 2006 and 5% compared to the second quarter 2007, primarily due to the sale of data-center assets to Microsoft at the end of June 2007. Growth in hosting revenue, up 13% from a year ago, reflected strong growth in managed hosting revenue and re-pricing of existing colocation contracts to market rates. Compared to the second quarter, hosting revenue declined 5%, as the sale to Microsoft of certain data center assets drove lower sequential-quarter colocation revenue. The decline in colocation was offset by very strong 8% sequential-quarter growth in managed hosting as a result of strong sales in the second and third quarters of 2007. Virtualized and utility services contributed $15.0 million of managed hosting revenue in the third quarter, up 69% from a year ago and 11% from the second quarter.

In the third quarter, network services revenue of $76.6 million was essentially flat from the prior quarter. Hosting customers continued to increase their utilization of our Hosting Area Network (“HAN”) services for mission-critical data transport, driving revenue growth, which was offset by declines in managed network and bandwidth revenue.

Other services revenue, in keeping with previous announcements, was eliminated in the third quarter. The line as previously reported included revenue from two sources that SAVVIS had announced would be eliminated in 2007: SAVVIS’ customer Telerate, which was acquired by Reuters in 2005 and migrated its customers to Reuters networks, and the non-strategic CDN assets sold in January 2007.


SAVVIS

Third-quarter Financial Results

October 23, 2007

page 4

 

Cost of revenue was $112.3 million, and included $1.4 million of non-cash equity-based compensation costs, resulting in gross profit as a percentage of total revenue, or gross margin, of 41% in the current quarter. Excluding non-cash equity-based compensation costs, gross margin was 42% in the current quarter, an increase from 41% in the same period a year ago, and down from 44% in the second quarter largely due to $3.2 million of costs associated with the development of five new data centers opening in 2007.

Sales, general, and administrative expenses (“SG&A”) for the current quarter were $51.1 million, as compared to $52.4 million for the same period last year and $52.3 million in the second quarter 2007. SG&A included non-cash equity-based compensation costs for the current quarter of $7.3 million, as compared to $6.5 million for the same period last year and $6.7 million in the second quarter 2007. As a percentage of revenue, excluding non-cash equity-based compensation costs, SG&A was 23% in the current quarter, down from 24% in the third quarter 2006 and consistent with the second quarter 2007.

In the third quarter of 2007, SAVVIS recorded an income tax benefit of $1.9 million to reflect the reduction of its expected annual effective tax rate from 1.75% to 1.0%.

SAVVIS’ consolidated net income was $5.3 million in the third quarter, compared to a net loss of $13.6 million in the same period last year and net income of $133.3 million in the second quarter 2007, which included $180.8 million for the gain on a sale of non-strategic assets and $45.1 million for a charge related to retirement of subordinated notes. Diluted earnings per share were $0.10 in the third quarter 2007, compared to losses per share of $(0.27) in the same period a year previously and diluted earnings per share of $2.36 in the second quarter 2007.

Adjusted EBITDA for the third quarter of $35.5 million included $3.2 million of operating costs associated with the new Atlanta, Boston, New York, Silicon Valley and Washington DC-area data centers, which have operating expenses ahead of revenue.

Pro Forma Commentary

Pro forma results exclude the impact of revenue and related costs from the sale of data center assets to Microsoft, CDN assets sold in January 2007 and the elimination of Telerate revenue as a result of the acquisition of Telerate by Reuters. Total pro forma revenue for the third quarter increased 8% from $175.8 million in the same period a year ago and 1% from $187.9 million in the second quarter 2007. Pro forma hosting revenue for the quarter grew 22% year over year and were up 2% sequentially from the second quarter of 2007.


SAVVIS

Third-quarter Financial Results

October 23, 2007

page 5

 

On a pro forma basis, Adjusted EBITDA for the third quarter increased 44% from $24.6 million in the same period a year ago, and declined 6% from $37.6 million compared to the second quarter 2007 on a pro forma basis. The sequential-quarter pro forma decline in Adjusted EBITDA reflects $3.2 million of operating costs associated with new data centers in development in the third quarter.

Cash Flow and Balance Sheet

Net cash provided by operating activities was $33.9 million in the third quarter. Cash capital expenditures for the quarter totaled $86.4 million, which included $70.2 million for the build-out of new data centers.

During the third quarter, SAVVIS borrowed $5.5 million against a previously-established credit facility with Cisco to fund network equipment purchases. SAVVIS’ long-term debt as of September 30, 2007, totaled $349.2 million. SAVVIS’ cash position at September 30, 2007, was $256.9 million, compared to $98.7 million at December 31, 2006, and $309.0 million at June 30, 2007.

Financial Outlook

Chief Financial Officer Jeff Von Deylen said, “SAVVIS has now largely completed the transitional initiatives of 2007, and looks forward to strong growth in the fourth quarter and continuing into 2008. Our record sales bookings in the third quarter demonstrate the strength of our model of providing high-quality data center services and managed hosting solutions for enterprises that want to achieve increased IT reliability and security at lower total cost. Given our market successes in 2007, we anticipate revenue for 2008 in a range of $910-925 million, with Adjusted EBITDA of $210-220 million.”

“On a pro forma basis, the revenue growth rate for 2007 is now 12% versus the previously-issued guidance of 14%, due primarily to the following factors:

 

   

Colocation revenue will be lower than expected due to delayed customer installations to accommodate customers’ migration plans and a slower than expected fill rate in our recently vacated space.

   

Network revenue will be lower than expected primarily due to slightly higher churn in our managed network and bandwidth services.

Adjusted EBITDA guidance is largely in line with our previous guidance.”

Fourth-quarter Financial Outlook

SAVVIS management’s current expectations for fourth-quarter 2007 financial results include:

 

   

Total revenue in a range of $197-200 million for sequential-quarter growth of 4-5%, including

 

  ¡  

total hosting revenue of $121-124 million, for sequential-quarter growth of 6-9%, including $58-60 million from managed hosting services, for sequential-quarter growth of 5-9%; and

 

   

Adjusted EBITDA in a range of $39-41 million, for sequential-quarter growth of 10-15%, reflecting an Adjusted EBITDA margin of approximately 20%; and

 

   

Capital expenditures of $125-130 million, of which approximately $100-105 million will be in cash and approximately $25 million will be financed through an existing credit facility.

 

   

For the full year 2007, total capital expenditures are expected to be approximately $380 million, of which approximately $30 million will be financed through an existing credit facility.


SAVVIS

Third-quarter Financial Results

October 23, 2007

page 6

 

  ¡  

Total capital expenditures for 2007 will include approximately $225 million of cash capital expenditures related to development of seven data centers and approximately $35 million of largely financed capital expenditures for network upgrades, with approximately 60-70% of the remainder reflecting ongoing customer-growth-based investments.

 

  ¡  

Ending cash balance for 2007 will be approximately $175-180 million.

2008 Financial Outlook

For the full year 2008, SAVVIS management’s current expectations for financial results include:

 

   

Total revenue in a range of $910-925 million, for growth of 15-16% on a reported basis.

 

  ¡  

On a pro forma basis, management anticipates revenue growth of 19-21%.

 

  ¡  

Pro forma hosting revenue growth of approximately 30-35%, as a result of strong demand for the company’s new data center expansions.

 

   

Adjusted EBITDA in a range of $210-220 million, reflecting an Adjusted EBITDA margin of 23-24%.

 

  ¡  

On a pro forma basis, management anticipates Adjusted EBITDA growth of 42-49%.

 

   

Capital expenditures of $180-200 million, including approximately $40 million for development of data centers in Boston, Chicago and Dallas.

The outlook for 2008 includes revenue, Adjusted EBITDA and capital expenditures from the base business as well as from the Phase 1 expansion plans in four data centers in the Atlanta, New York, Silicon Valley, and Washington DC areas and from the recently-announced Phase 2 data center expansion plans in the Boston, Chicago and Dallas areas.

Supplemental Financial Projections at Mid-Point of 2008 Outlook

 

(US$ millions)    Revenue    Adjusted
EBITDA
   Capital
Expenditures

Base Business

   $ 847.5    $ 193.0    $ 136.0

Phase 1 Expansion

     50.0      20.0      10.0

Phase 2 Expansion

     20.0      2.0      44.0

* 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. “Pro forma” results exclude certain revenue and costs related to exited contracts and sold assets. We have included information concerning pro forma results because we believe they enable investors to better compare current results to results of prior


SAVVIS

Third-quarter Financial Results

October 23, 2007

page 7

 

periods and because they enable investors to identify underlying business trends that may otherwise be distorted by the excluded items. The calculation of Adjusted EBITDA and pro forma results is not specified by United States generally accepted accounting principles. Our calculation of Adjusted EBITDA and of pro forma results may not be comparable to similarly-titled measures of other companies. Investors should consider these non-GAAP measures in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.

Investor Conference Call

SAVVIS will webcast an investor conference call today, October 23, 2007, at 5:30 PM EDT. Both the webcast and supporting presentation will be available at www.savvis.net on the Investor Relations page. A live conference call will also be available by telephone at +1-703-639-1158 and 866-238-0826 (in North America, toll free). Recorded replays will be available on the website for six months, and by telephone through Friday, November 2, at +1-703-925-2533 and 888-266-2081 (in North America, toll free) with the access code 259626, beginning at about 8:00 PM EDT today.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results, including financial performance and product growth, 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, 2006, and all subsequent filings. Those risk factors include, but are not limited to, variability in pricing for SAVVIS’ products, highly competitive markets, rapid evolution of technology, variability in the availability and terms of financing, uncertainties related to merger and acquisition activity, changes in our operating environment, and changes in regulatory environments. The forward-looking statements contained in this document speak only as of the date of publication, October 23, 2007. 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.

About SAVVIS

SAVVIS, Inc. (NASDAQ: SVVS) is a global leader in IT infrastructure services for enterprise applications. With an IT services platform spanning North America, Europe, and Asia, SAVVIS leads the industry in delivering secure, reliable, and scalable hosting, network, and application services. These solutions enable customers to focus on their core business while SAVVIS ensures the quality of their IT systems and operations. SAVVIS’ strategic approach combines virtualization technology, a global network and multiple data centers, and automated management and provisioning systems. For more information about SAVVIS, visit www.savvis.net.

# # #


SAVVIS, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(dollars in thousands, except share data)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2007     2006     2007     2006  

Revenue

   $ 190,262     $ 193,748     $ 596,064     $ 563,300  

Operating Expenses:

        

Cost of revenue (including non-cash equity-based compensation of $1,437, $1,345, $4,303, and $1,776) (1)

     112,348       116,484       342,778       346,555  

Sales, general, and administrative expenses (including non-cash equity-based compensation of $7,284, $6,528, $20,362, and $10,708)

     51,101       52,372       156,593       142,551  

Depreciation, amortization, and accretion

     22,742       20,807       67,174       60,370  

(Gain) loss on sales of data center and CDN assets

     337       —         (305,707 )     —    
                                

Total Operating Expenses

     186,528       189,663       260,838       549,476  
                                

Income from Operations

     3,734       4,085       335,226       13,824  

Loss on debt extinguishment

     —         —         45,127       —    

Net interest expense and other

     320       17,663       34,457       50,941  
                                

Net Income (Loss) before Income Taxes

     3,414       (13,578 )     255,642       (37,117 )

Income taxes

     (1,855 )     —         2,559       —    
                                

Net Income (Loss)

     5,269       (13,578 )     253,083       (37,117 )

Accreted and deemed dividends on Series A

        

Convertible Preferred stock

     —         —         —         262,810  
                                

Net Income (Loss) Attributable to Common Stockholders

   $ 5,269     $ (13,578 )   $ 253,083     $ (299,927 )
                                

Net Income (Loss) per Common Share

        

Basic

   $ 0.10     $ (0.27 )   $ 4.81     $ (11.68 )
                                

Diluted

   $ 0.10     $ (0.27 )   $ 4.55     $ (11.68 )
                                

Weighted-Average Common Shares Outstanding (2)

        

Basic

     52,898,799       50,994,700       52,603,217       25,681,868  
                                

Diluted

     54,032,945       50,994,700       56,687,552       25,681,868  
                                

(1) Excludes depreciation, amortization, and accretion, which is reported separately.
(2) Diluted weighted-average common shares outstanding includes 2.6 million common shares for the nine months ended September 30, 2007, which reflects the dilution impact of the 3% convertible notes using the "if-converted" method. For the three months ended September 30, 2007, the convertible notes are anti-dilutive and, as such, are not included in diluted weighted-average common shares outstanding. For the three and nine months ended September 30, 2006, the effects of including the incremental shares associated with options, warrants, unvested restricted preferred units, unvested restricted stock units, and unvested restricted stock awards are antidilutive and, as such, are not included in diluted weighted-average common shares outstanding. The increase in weighted-average common shares outstanding for the nine months ended September 30, 2007, compared to September 30, 2006, was primarily due to the exchange of Series A Convertible Preferred stock for 37,417,347 shares of common stock on June 30, 2006.


SAVVIS, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(dollars in thousands)

 

     September 30,
2007
    December 31,
2006
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 256,940     $ 98,693  

Trade accounts receivable, net

     48,215       44,949  

Prepaid expenses and other current assets

     21,877       21,607  
                

Total Current Assets

     327,032       165,249  
                

Property and equipment, net

     519,341       284,437  

Other non-current assets

     19,859       17,333  
                

Total Assets

   $ 866,232     $ 467,019  
                

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

    

Current Liabilities:

    

Payables and other trade accruals

   $ 61,355     $ 43,009  

Current portion of long-term debt and lease obligations

     3,796       2,100  

Other accrued liabilities

     105,500       94,977  
                

Total Current Liabilities

     170,651       140,086  
                

Long-term debt, net of current portion

     349,234       269,436  

Capital and financing method lease obligations, net of current portion

     141,760       112,891  

Other accrued liabilities

     59,417       82,941  
                

Total Liabilities

     721,062       605,354  
                

Stockholders’ Equity (Deficit):

    

Common stock

     529       515  

Additional paid-in capital

     729,018       699,450  

Accumulated deficit

     (581,409 )     (834,492 )

Accumulated other comprehensive loss

     (2,968 )     (3,808 )
                

Total Stockholders’ Equity (Deficit)

     145,170       (138,335 )
                

Total Liabilities and Stockholders’ Equity (Deficit)

   $ 866,232     $ 467,019  
                


SAVVIS, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2007     2006     2007     2006  

Cash Flows from Operating Activities:

        

Net income (loss)

   $ 5,269     $ (13,578 )   $ 253,083     $ (37,117 )

Reconciliation of net income (loss) to net cash provided by operating activities:

        

Depreciation, amortization, and accretion

     22,742       20,807       67,174       60,370  

Non-cash equity-based compensation

     8,721       7,873       24,665       12,484  

Accrued interest

     3,635       14,139       35,547       39,840  

(Gain) loss on sales of data center and CDN assets

     337       —         (305,707 )     —    

(Gain) loss on disposal of fixed assets

     40       306       (934 )     306  

Loss on debt extinguishment

     —         —         45,127       —    

Net changes in operating assets and liabilities, net of effects from sales of assets:

        

Trade accounts receivable

     (6,330 )     2,271       (1,062 )     6,346  

Prepaid expenses, other current assets, and other non-current assets

     7,193       591       (5,647 )     (8,191 )

Accounts payable, deferred revenue, and other accrued liabilities

     (7,683 )     5,174       (22,005 )     3,684  
                                

Net cash provided by operating activities

     33,924       37,583       90,241       77,722  
                                

Cash Flows from Investing Activities:

        

Payments for capital expenditures

     (86,386 )     (14,350 )     (248,249 )     (51,293 )

Proceeds from sale of data center assets, net

     —         —         190,225       —    

Proceeds from sale of CDN assets, net

     —         —         128,305       —    

Payment for purchase of data center buildings

     —         —         —         (13,817 )

Other investing activities, net

     —         14       694       124  
                                

Net cash provided by (used in) investing activities

     (86,386 )     (14,336 )     70,975       (64,986 )
                                

Cash Flows from Financing Activities:

        

Proceeds from convertible notes offering

     —         —         345,000       —    

Proceeds from financing method lease

     —         —         —         50,600  

Proceeds from stock option exercises

     948       1,799       15,077       16,094  

Payments for extinguishment of Series A Subordinated Notes

     —         —         (342,491 )     —    

Payments for issuance costs on convertible notes

     —         —         (8,866 )     —    

Payments for employee taxes on equity-based instruments

     (47 )     —         (10,160 )     —    

Principal payments under revolving credit facility

     —         (32,000 )     —         (58,000 )

Principal payments under capital lease obligations

     (615 )     (389 )     (2,031 )     (2,248 )

Other financing activities, net

     (154 )     (120 )     (154 )     (1,405 )
                                

Net cash provided by (used in) financing activities

     132       (30,710 )     (3,625 )     5,041  
                                

Effect of exchange rate changes on cash and cash equivalents

     267       (515 )     656       (794 )
                                

Net Increase (Decrease) in Cash and Cash Equivalents

     (52,063 )     (7,978 )     158,247       16,983  

Cash and Cash Equivalents, Beginning of Period

     309,003       86,127       98,693       61,166  
                                

Cash and Cash Equivalents, End of Period

   $ 256,940     $ 78,149     $ 256,940     $ 78,149  
                                


SAVVIS, Inc. and Subsidiaries

Unaudited Selected Condensed Consolidated Financial Information

Reported Results

(dollars in thousands)

 

     Three Months Ended  
     September 30,    June 30,
2007
 
     2007    2006   

Revenue (as reported):

        

Colocation

   $ 58,559    $ 55,296    $ 68,404  

Managed hosting

     55,155      45,228      51,005  
                      

Total hosting

     113,714      100,524      119,409  
                      

Network services (1)

     76,548      82,420      76,900  

Other services (1)

     —        10,804      4,245  
                      

Total Revenue

   $ 190,262    $ 193,748    $ 200,554  
                      

Adjusted EBITDA(2) Reconciliation:

        

Income from operations

   $ 3,734    $ 4,085    $ 192,537  

Depreciation, amortization, and accretion

     22,742      20,807      22,787  

(Gain) loss on sales of data center and CDN assets

     337      —        (180,846 )

Non-cash equity-based compensation

     8,721      7,873      8,165  
                      

Adjusted EBITDA

   $ 35,534    $ 32,765    $ 42,643  
                      

(1) $1.4 million of revenue previously reported as other services revenue has been reclassified as network services revenue to reflect retention of network-services revenue SAVVIS had previously anticipated would be eliminated in 2007.
(2) “Adjusted EBITDA” represents income from operations before depreciation, amortization, and accretion, gain (loss) 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. 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.


SAVVIS, Inc. and Subsidiaries

Unaudited Selected Condensed Consolidated Pro Forma Financial Information

(dollars in thousands)

 

     Three Months Ended   

Nine Months Ended
September 30,

2007

     March 31,
2007
   June 30,
2007
   September 30,
2007
  

Pro Forma Revenue:

           

Colocation (1)

   $ 57,691    $ 59,986    $ 58,559    $ 176,236

Managed hosting

     50,304      51,005      55,155      156,464
                           

Total hosting

     107,995      110,991      113,714      332,700
                           

Network services

     80,414      76,900      76,548      233,862

Other services (2)

     —        —        —        —  
                           

Total Pro Forma Revenue

   $ 188,409    $ 187,891    $ 190,262    $ 566,562
                           

Pro Forma Cost of Revenue (3)

     107,814      105,183      110,911      323,908

Pro Forma Sales, General, & Administrative Expenses (4)

     46,143      45,151      43,817      135,111
                           

Pro Forma Adjusted EBITDA (5)

   $ 34,452    $ 37,557    $ 35,534    $ 107,543
                           

Non-GAAP and Pro Forma reconciliations

 

(1) Colocation revenue pro forma adjustments reflect the elimination of revenue related to a Microsoft contract exited in connection with the sale of data center assets in June 2007. The first quarter of 2007 also reflects the elimination of $3.6 million related to a one-time customer settlement.

 

Colocation - as reported

   $ 69,416     $ 68,404     $ 58,559    $ 196,379  

Pro forma adjustments

     (11,725 )     (8,418 )     —        (20,143 )
                               

Colocation - pro forma

   $ 57,691     $ 59,986     $ 58,559    $ 176,236  
                               

 

(2) Other services revenue pro forma adjustments reflect the eliminated revenue from content delivery services related to the sale of assets in January 2007, and the elimination of Telerate revenue in connection with Reuters’ acquisition of MoneyLine Telerate.

 

Other services - as reported

   $ 5,114     $ 4,245     $ —      $ 9,359  

Pro forma adjustments

     (5,114 )     (4,245 )     —        (9,359 )
                               

Other services - pro forma

   $ —       $ —       $ —      $ —    
                               

 

(3) Cost of revenue pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein.

 

Cost of revenue - as reported

   $ 116,675     $ 113,755     $ 112,348     $ 342,778  

Non-cash equity-based compensation

     (1,359 )     (1,507 )     (1,437 )     (4,303 )

Pro forma adjustments

     (7,502 )     (7,065 )     —         (14,567 )
                                

Cost of revenue - pro forma

   $ 107,814     $ 105,183     $ 110,911     $ 323,908  
                                

 

(4) Sales, general & administrative pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein.

 

Sales, general, & administrative - as reported

   $ 53,171     $ 52,321     $ 51,101     $ 156,593  

Non-cash equity-based compensation

     (6,420 )     (6,658 )     (7,284 )     (20,362 )

Pro forma adjustments

     (608 )     (512 )     —         (1,120 )
                                

Sales, general, & administrative - pro forma

   $ 46,143     $ 45,151     $ 43,817     $ 135,111  
                                

 

(5) “Adjusted Pro Forma EBITDA” represents income from operations before depreciation, amortization, and accretion, gain (loss) on sales of assets, non-cash equity-based compensation, and adjustments made to eliminate the results of operations related to the asset sale and contract exit activity described herein. 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.

 

Adjusted Pro Forma EBITDA Reconciliation:

         

Income from operations - as reported

   $ 138,955     $ 192,537     $ 3,734    $ 335,226  

Depreciation, amortization, and accretion - as reported

     21,645       22,787       22,742      67,174  

(Gain) loss on sales of data center and CDN assets - as reported

     (125,198 )     (180,846 )     337      (305,707 )

Non-cash equity-based compensation - as reported

     7,779       8,165       8,721      24,665  

Pro forma adjustments

     (8,729 )     (5,086 )     —        (13,815 )
                               

Adjusted Pro Forma EBITDA

   $ 34,452     $ 37,557     $ 35,534    $ 107,543  
                               


SAVVIS, Inc. and Subsidiaries

Unaudited Selected Condensed Consolidated Pro Forma Financial Information

(dollars in thousands)

 

     Three Months Ended   

Year Ended

December 31,
2006

     March 31,
2006
   June 30,
2006
   September 30,
2006
   December 31,
2006
  

Pro Forma Revenue:

              

Colocation (1)

   $ 41,413    $ 45,057    $ 48,232    $ 51,530    $ 186,232

Managed hosting

     36,646      39,816      45,228      48,424      170,114
                                  

Total hosting

     78,059      84,873      93,460      99,954      356,346
                                  

Network services

     80,314      82,109      82,420      84,059      328,902

Other services (2)

     —        —        —        —        —  
                                  

Total Pro Forma Revenue

   $ 158,373    $ 166,982    $ 175,880    $ 184,013    $ 685,248
                                  

Pro Forma Cost of Revenue (3)

     101,047      105,157      106,777      109,203      422,184

Pro Forma Sales, General, & Administrative Expenses (4)

     40,407      42,869      44,547      46,198      174,021
                                  

Pro Forma Adjusted EBITDA (5)

   $ 16,919    $ 18,956    $ 24,556    $ 28,612    $ 89,043
                                  

Non-GAAP and Pro Forma reconciliations

 

(1) Colocation revenue pro forma adjustments reflect the elimination of revenue related to a Microsoft contract exited in connection with the sale of data center assets in June 2007. The lower revenue adjustment in the second half of 2006 reflects power costs being directly paid by the customer.

 

Colocation - as reported

   $ 50,118     $ 54,806     $ 55,296     $ 58,936     $ 219,156  

Pro forma adjustments

     (8,705 )     (9,749 )     (7,064 )     (7,406 )     (32,924 )
                                        

Colocation - pro forma

   $ 41,413     $ 45,057     $ 48,232     $ 51,530     $ 186,232  
                                        

 

(2) Other services revenue pro forma adjustments reflect the eliminated revenue from content delivery services related to the sale of assets in January 2007, and the elimination of Telerate revenue in connection with Reuters' acquisition of MoneyLine Telerate.

 

Other services - as reported

   $ 12,877     $ 12,866     $ 10,804     $ 9,253     $ 45,800  

Pro forma adjustments

     (12,877 )     (12,866 )     (10,804 )     (9,253 )     (45,800 )
                                        

Other services - pro forma

   $ —       $ —       $ —       $ —       $ —    
                                        

 

(3) Cost of revenue pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein.

 

Cost of revenue - as reported

   $ 112,969     $ 117,102     $ 116,484     $ 118,369     $ 464,924  

Non-cash equity based compensation

     (243 )     (186 )     (1,345 )     (1,209 )     (2,983 )

Pro forma adjustments

     (11,679 )     (11,759 )     (8,362 )     (7,957 )     (39,757 )
                                        

Cost of revenue - pro forma

   $ 101,047     $ 105,157     $ 106,777     $ 109,203     $ 422,184  
                                        

 

(4) Sales, general & administrative pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein.

 

Sales, general, & administrative - as reported

   $ 43,356     $ 46,825     $ 52,372     $ 53,508     $ 196,059  

Non-cash equity based compensation

     (1,574 )     (2,608 )     (6,528 )     (6,013 )     (16,723 )

Pro forma adjustments

     (1,375 )     (1,348 )     (1,297 )     (1,297 )     (5,315 )
                                        

Sales, general, & administrative - pro forma

   $ 40,407     $ 42,869     $ 44,547     $ 46,198     $ 174,021  
                                        

 

(5) “Adjusted Pro Forma EBITDA” represents income from operations before depreciation, amortization, and accretion, gain (loss) on sales of assets, non-cash equity-based compensation, and adjustments made to eliminate the results of operations related to the asset sale and contract exit activity described herein. 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.

 

Adjusted Pro Forma EBITDA Reconciliation:

          

Income from operations - as reported

   $ 3,705     $ 6,034     $ 4,085     $ 11,626     $ 25,450  

Depreciation, amortization, and accretion - as reported

     19,926       19,636       20,807       17,168       77,537  

Non-cash equity-based compensation - as reported

     1,817       2,794       7,873       7,222       19,706  

Pro forma adjustments

     (8,529 )     (9,508 )     (8,209 )     (7,404 )     (33,650 )
                                        

Adjusted Pro Forma EBITDA

   $ 16,919     $ 18,956     $ 24,556     $ 28,612     $ 89,043  
                                        


SAVVIS, Inc. and Subsidiaries

Unaudited Supplemental Pro Forma Revenue Information

(in thousands)

 

Hosting Supplemental Information

                    
     Three Months Ended
     March 31,
2006
   June 30,
2006
   September 30,
2006
   December 31,
2006
   March 31,
2007
   June 30,
2007
   September 30,
2007

Colocation

   $ 41,413    $ 45,057    $ 48,232    $ 51,530    $ 57,691    $ 59,986    $ 58,559

Managed hosting

     36,646      39,816      45,228      48,424      50,304      51,005      55,155

Hosting area network

     13,146      13,784      13,717      14,613      15,297      14,832      15,528
                                                

Total Data Center Pro forma Revenue

   $ 91,205    $ 98,657    $ 107,177    $ 114,567    $ 123,292    $ 125,823    $ 129,242
                                                

Average Billed Square Feet

                    

Colocation

     489.7      504.5      529.4      551.8      577.1      575.9      548.6

Managed hosting

     9.8      10.3      11.4      12.6      13.2      13.6      14.2

Hosting area network

     —        —        —        —        —        —        —  
                                                

Total - Average Billed Square Feet

     499.5      514.8      540.8      564.4      590.3      589.5      562.8
                                                

Average Monthly Data Center Revenue Per Billed Square Foot (1)

                    

Colocation

   $ 28.2    $ 29.8    $ 30.4    $ 31.1    $ 33.3    $ 34.7    $ 35.6

Managed hosting

     1,242.3      1,293.8      1,321.4      1,284.7      1,266.0      1,253.2      1,290.7

Hosting area network (2)

     8.8      8.9      8.5      8.6      8.6      8.4      9.2
                                                

Total Data Center Revenue per Average Billed Square Foot

   $ 60.9    $ 63.9    $ 66.1    $ 67.7    $ 69.6    $ 71.2    $ 76.5
                                                

(1) Data center monthly revenue per 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 monthly revenue per square foot is calculated as the hosting area network revenue per quarter divided by total-average billed square feet stated on a monthly basis.

Network Services Supplemental Information

 

     Three Months Ended
     March 31,
2006
   June 30,
2006
   September 30,
2006
   December 31,
2006
   March 31,
2007
   June 30,
2007
   September 30,
2007

Managed network

   $ 49,601    $ 51,768    $ 52,933    $ 52,951    $ 49,819    $ 47,666    $ 47,033

Hosting area network

     13,146      13,784      13,717      14,613      15,297      14,832      15,528

Bandwidth

     17,567      16,557      15,770      16,495      15,298      14,402      13,987
                                                

Total Pro forma network services

   $ 80,314    $ 82,109    $ 82,420    $ 84,059    $ 80,414    $ 76,900    $ 76,548