EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

 

CONTACTS:  
Investors: Peggy Reilly Tharp   Media: Carter Cromley
(314) 628-7491   (703) 667-6110
peggy.tharp@savvis.net   carter.cromley@savvis.net

Savvis Reports Second Quarter 2009 Results

Revenue of $219.9 Million, up 3% Year-Over-Year

Adjusted EBITDA* of $55.1 Million, up 23% Year-Over-Year

Adjusted Free Cash Flow* of $15.3 Million

ST. LOUIS, July 29, 2009 – Savvis, Inc. (NASDAQ:SVVS), a global leader in outsourced internet infrastructure services for enterprises, today reported its second quarter 2009 financial results, with revenue of $219.9 million, compared to $212.9 million in the second quarter of 2008. Second quarter 2009 revenue included $6.5 million of non-recurring early termination fees (ETF) related to the departure of the American Stock Exchange (AMEX), following its acquisition by NYSE Euronext. Excluding this amount, revenue was $213.4 million, up slightly on a year-over-year basis.

Income from operations for the second quarter of 2009 was $9.5 million, compared to $0.9 million in the second quarter of 2008. The company also reported a net loss of ($6.2) million, or ($0.12) per share, in the second quarter of 2009, which is an improvement compared to a second quarter 2008 loss of ($10.6) million, or ($0.20) per share.

Adjusted EBITDA for the second quarter of 2009 was $55.1 million, compared to $44.7 million of adjusted EBITDA in the second quarter of 2008. Excluding the AMEX non-recurring ETF, adjusted EBITDA was $48.6 million and up 9% on a year-over-year basis. In addition, Savvis reported positive adjusted free cash flow of $15.3 million for the second quarter.

“I’m pleased with our progress to date, especially in light of the overall macroeconomic conditions. As expected, our results for the second quarter were positive,” said Phil Koen, chief executive officer of Savvis. “I’d like to specifically call out our continued positive adjusted free cash flow. This metric, along with return on capital employed*, really defines the kind of success we have seen with our focus on managed hosting. We will continue to make the best use of our capital, as we position the company for long-term growth through our managed hosting strategy.”


Second Quarter Financial Results

 

US dollars in millions    Three months ended  
   6/30/09     3/31/09     6/30/08  

Colocation

   $ 84.9      $ 84.2      $ 74.8   

Managed Hosting

   $ 67.3      $ 68.1      $ 64.7   
                        

Hosting

   $ 152.2      $ 152.3      $ 139.5   

Network Services

   $ 67.7      $ 69.2      $ 73.4   
                        

Total Revenue(1)

   $ 219.9      $ 221.5      $ 212.9   
                        

Cost of Revenue(2)(3)

   $ 120.0      $ 119.0      $ 118.2   

SG&A Expenses(2)(3)

   $ 44.8      $ 43.7      $ 50.1   

Non-Cash, Equity-Based Compensation(4)

   $ 7.8      $ 6.9      $ 9.6   

Income from Operations(5)

   $ 9.5      $ 15.6      $ 0.9   

Net Income (Loss)(5)

   $ (6.2   $ 0.6      $ (10.6

Adjusted EBITDA(1)

   $ 55.1      $ 58.8      $ 44.7   

Adjusted EBITDA Margin(1)

     25.1     26.5     21.0

 

(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 22.8%.
(2) Both cost of revenue and SG&A expenses exclude depreciation, amortization, accretion and non-cash, equity-based compensation. Total non-cash, equity-based compensation attributed to cost of revenue for the three months ended June 30, 2009, March 31, 2009, and June 30, 2008, was $1.5 million, $1.5 million and $1.6 million and to SG&A expenses was $6.3 million, $5.4 million and $8.0 million, respectively.
(3) Amounts include a reclassification from cost of revenue to SG&A expenses of $3.1 million for the three months ended June 30, 2008.
(4) Non-cash, equity-based compensation was favorably impacted in the three months ended March 31, 2009, by net one-time adjustments of $0.9 million, which were primarily related to the impact of employee turnover.
(5) Income from operations and net income (loss) are restated from previously reported amounts due to Savvis’ adoption of FASB Staff Position APB 14-1. Interest expense increased $3.2 million for the three months ended June 30, 2008.

Second Quarter Overview

Total Savvis revenue for the second quarter was $219.9 million. Both including and excluding the AMEX non-recurring ETF, revenue was up, when compared to revenue of $212.9 million in the second quarter of 2008, and down, when compared to first quarter 2009 revenue of $221.5 million. The quarterly decline reflected slower growth in Managed Hosting and churn in Colocation related to the departure of an internet content customer in one of the company’s data centers.

Income from operations of $9.5 million showed an improvement from the $0.9 million recorded in the second quarter of 2008. For the first quarter of 2009, the company reported income from operations of $15.6 million.

 

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A consolidated net loss of ($6.2) million was recorded in the second quarter of 2009, compared to a loss of ($10.6) million in the second quarter of 2008 and net income of $0.6 million in the first quarter of 2009. Savvis recorded a loss per share of ($0.12) in the second quarter of 2009, compared to a loss per share of ($0.20) in the second quarter of 2008 and earnings per share of $0.01 in the first quarter of 2009.

For the second quarter, adjusted EBITDA was $55.1 million. Excluding the $6.5 million AMEX non-recurring ETF, adjusted EBITDA improved 9% from adjusted EBITDA of $44.7 million in the second quarter of 2008 and declined on a quarter-over-quarter basis. Excluding the second quarter AMEX non-recurring ETF, adjusted EBITDA margin for the quarter was 23%. This reflects a year-over-year improvement of approximately 180 basis points and a quarter-over-quarter decline of approximately 380 basis points.

Hosting

 

US dollars in millions    Three months ended  
   6/30/09    3/31/09     6/30/08  

Colocation

   $ 84.9    $ 84.2      $ 74.8   

Managed Hosting

   $ 67.3    $ 68.1      $ 64.7   
                       

Total Hosting Revenue

   $ 152.2    $ 152.3      $ 139.5   

Percentage change

        —       9

Overall Hosting revenue was $152.2 million in the second quarter, and on a year-over-year basis, Hosting was up 9%. The year-over-year improvement in Hosting revenue reflects increased enterprise interest in outsourced hosting offerings, due to the more challenging economic conditions. However, the overall sales cycle remains elongated, compared to historical trends.

For the quarter, Managed Hosting contributed $67.3 million to overall Hosting revenue, or 44%. Year-over-year, Managed Hosting revenue grew 4%, while on a quarter-over-quarter basis, revenue was down slightly.

Colocation contributed $84.9 million to overall Hosting revenue in the second quarter, or 56%. Year-over-year, Colocation grew 14%. On a quarter-over-quarter basis, Colocation grew slightly, despite some increased churn during the quarter related to the departure of an internet content customer.

 

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Network Services

 

US dollars in millions    Three months ended  
   6/30/09    3/31/09     6/30/08  

Revenue

   $ 67.7    $ 69.2      $ 73.4   

Percentage change

        (2 )%      (8 )% 

In the second quarter, Network Services revenue was 31% of overall revenue, or $67.7 million. This represented an (8%) year-over-year decline and a (2%) quarter-over-quarter decline. Savvis continued to focus on network customers within its service profile.

Highlights

For the second quarter of 2009, the Financial Vertical represented 27% of total revenue, or $60.0 million. Financial Vertical revenue in the quarter was up 10%, compared to the second quarter of 2008, and 5%, compared to the first quarter of 2009. The funnel for new Financial Vertical business remains strong, and today Savvis announced that it has added Credit Suisse Crossfinder to its roster of customers.

During the quarter, Savvis announced a three-year extension of its master services agreement with Thomson Reuters, its largest customer with 7% of revenue. In addition to other managed hosting and IT infrastructure services, Savvis will continue to manage the IT infrastructure solutions required for the collection of exchange data for Thomson Reuters market data services worldwide.

Savvis also received several significant certifications during the second quarter. The company achieved Cisco Powered designation for Managed TelePresence™ Network Connection. In addition, Savvis joined the Microsoft Software + Services Incubation Center Program as a Gold Certified Microsoft partner, based on its abilities as a global hosting and IT infrastructure services provider in delivering Software-as-a-Service (SaaS) enablement services to independent software vendors (ISVs) and enterprise customers.

In addition to other SaaS wins, two significant new customers joined Savvis during the quarter. Savvis is providing MedeAnalytics with a managed IT infrastructure services solution, which includes managed compute, storage, network and security. Savvis also announced that it is providing global IT infrastructure solutions to Workday, Inc., the leader in enterprise-class, SaaS-based human resource and financial solutions. Savvis’ SaaS infrastructure solutions are focused on providing a secure, scalable, global and function-rich cloud hosting platform that enables fast, economical and reliable deployment of SaaS applications. SaaS continues to be a strong focus for Savvis, and revenue in this area grew 3%, quarter-over-quarter.

Finally, Savvis was positioned in the Leaders Quadrant in the Web Hosting and Hosted Cloud System Infrastructure Services Magic Quadrant. The Gartner Magic Quadrant is widely recognized as one of the most influential reports for enterprises seeking to evaluate hosting vendors. Its evaluation is based on completeness of vision, including market understanding, product strategy and innovation, and assesses ability to execute, which includes operations and overall viability, among other criteria.

 

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Cash Flow and Balance Sheet

Net cash provided by operating activities was $38.4 million in the second quarter of 2009, compared to $21.4 million in the second quarter of 2008. Cash capital expenditures for the quarter totaled $27.2 million.

As of June 30, 2009, the long-term debt and capital leases for Savvis (net of current portion) totaled $562.5 million. The company’s cash position at June 30, 2009, was $154.9 million, compared to $145.9 million at March 31, 2009.

Financial Outlook

“Although we are seeing an improving overall environment, we still expect our third quarter revenue to be down sequentially,” said Greg Freiberg, chief financial officer for Savvis. “However, given our sales funnel and the quality of engagements to date, we are targeting a return to top- and bottom-line growth during the fourth quarter.”

Reflecting its first half results, Savvis now expects the following for full year 2009:

 

   

Adjusted EBITDA of $195 to $210 million, an increase over previous guidance of $190 to $200 million

 

   

Total cash capital expenditures of $110 to $140 million, 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 $25 to $45 million, an increase over previous guidance of $20 to $35 million

Investor Conference Call

Savvis will webcast an investor conference call today, July 29, 2009, at 10:00 a.m. ET. 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 (866) 837-9780 for financial analysts in North America or (703) 639-1418 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, August 12, by dialing (888) 266-2081 in North America or (703) 925-2533 internationally and using the access code 1376623.

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 cloud computing. For more information visit www.savvis.net

 

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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 our operating environment; and changes in regulatory environments. The forward-looking statements contained in this document speak only as of the date of publication, July 29, 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. “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 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. The calculations of adjusted EBITDA, adjusted free cash flow and return on capital employed are not specified by United States generally accepted accounting principles. Our calculations of adjusted EBITDA, adjusted free cash flow and return on capital employed may not be comparable to similarly-titled measures of other companies.

 

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SAVVIS, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2009     2008     2009     2008  

Revenue

   $ 219,861      $ 212,941      $ 441,384      $ 416,224   

Operating Expenses:

        

Cost of revenue (including non-cash, equity-based compensation of $1,474, $1,646, $2,957 and $3,101) (1)

     121,441        119,807        241,962        235,340   

Sales, general and administrative expenses (including non-cash, equity-based compensation of $6,311, $7,983, $11,719 and $15,469) (1)

     51,084        58,113        100,153        114,539   

Depreciation, amortization and accretion

     37,799        34,154        74,134        65,898   
                                

Total Operating Expenses

     210,324        212,074        416,249        415,777   
                                

Income from Operations

     9,537        867        25,135        447   

Other (income) and expense

     14,955        11,306        29,381        17,392   
                                

Income (Loss) before Income Taxes

     (5,418     (10,439     (4,246     (16,945

Income tax expense

     756        113        1,311        930   
                                

Net Income (Loss)

   $ (6,174   $ (10,552   $ (5,557   $ (17,875
                                

Net Income (Loss) per Common Share

        

Basic

   $ (0.12   $ (0.20   $ (0.10   $ (0.34
                                

Diluted

   $ (0.12   $ (0.20   $ (0.10   $ (0.34
                                

Weighted-Average Common Shares Outstanding (2)

        

Basic

     53,664        53,305        53,650        53,199   
                                

Diluted

     53,664        53,305        53,650        53,199   
                                

 

(1) Excludes depreciation, amortization and accretion, which is reported separately.
(2) For the three and six months ended June 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.

 

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SAVVIS, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 

     June 30,
2009
    December 31,
2008
 
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 154,948      $ 121,284   

Trade accounts receivable, net

     46,797        51,745   

Prepaid expenses and other current assets

     29,122        23,641   
                

Total Current Assets

     230,867        196,670   
                

Property and equipment, net

     721,890        736,646   

Other non-current assets

     15,071        16,379   
                

Total Assets

   $ 967,828      $ 949,695   
                
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current Liabilities:

    

Payables and other trade accruals

   $ 37,702      $ 41,538   

Current portion of long-term debt and lease obligations

     13,927        13,049   

Other accrued liabilities

     65,521        71,675   
                

Total Current Liabilities

     117,150        126,262   
                

Long-term debt, net of current portion

     373,870        360,249   

Capital and financing method lease obligations, net of current portion

     188,601        191,419   

Other accrued liabilities

     76,527        71,588   
                

Total Liabilities

     756,148        749,518   
                

Stockholders’ Equity:

    

Common stock

     543        535   

Additional paid-in capital

     849,640        834,882   

Accumulated deficit

     (619,140     (613,583

Accumulated other comprehensive loss

     (19,363     (21,657
                

Total Stockholders’ Equity

     211,680        200,177   
                

Total Liabilities and Stockholders’ Equity

   $ 967,828      $ 949,695   
                

 

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SAVVIS, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2009     2008     2009     2008  

Cash Flows from Operating Activities:

        

Net income (loss)

   $ (6,174   $ (10,552   $ (5,557   $ (17,875

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

        

Depreciation, amortization and accretion

     37,799        34,154        74,134        65,898   

Non-cash, equity-based compensation

     7,785        9,629        14,676        18,570   

Accrued interest

     2,249        1,656        9,277        8,274   

Other, net

     (595     110        (542     135   

Net changes in operating assets and liabilities:

        

Trade accounts receivable, net

     3,261        (6,528     5,464        (6,153

Prepaid expenses and other current and non-current assets

     (3,268     (6,943     (2,277     (10,148

Payables and other trade accruals

     (3,018     (517     (2,991     3,394   

Other accrued liabilities

     357        422        (8,138     (8,680
                                

Net cash provided by operating activities

     38,396        21,431        84,046        53,415   
                                

Cash Flows from Investing Activities:

        

Payments for capital expenditures

     (27,224     (97,107     (45,476     (140,400
                                

Net cash used in investing activities

     (27,224     (97,107     (45,476     (140,400
                                

Cash Flows from Financing Activities:

        

Proceeds from long-term debt

     799        33,283        2,865        33,283   

Proceeds from stock option exercises

     38        84        42        821   

Payments for employee taxes on equity-based instruments

     —          5        (444     (2,245

Payments for debt issuance costs

     —          (1,135     —          (1,135

Principal payments on long-term debt

     (1,650     (1,156     (3,300     (1,829

Principal payments under capital lease obligations

     (2,208     (1,448     (4,158     (2,671
                                

Net cash provided by (used in) financing activities

     (3,021     29,633        (4,995     26,224   
                                

Effect of exchange rate changes on cash and cash equivalents

     935        (390     89        (4,171
                                

Net Increase (Decrease) in Cash and Cash Equivalents

     9,086        (46,433     33,664        (64,932

Cash and Cash Equivalents, Beginning of Period

     145,862        164,642        121,284        183,141   
                                

Cash and Cash Equivalents, End of Period

   $ 154,948      $ 118,209      $ 154,948      $ 118,209   
                                

Supplemental Disclosures of Cash Flow Information:

        

Cash paid for interest

   $ 12,613      $ 10,378      $ 20,101      $ 15,469   

 

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SAVVIS, Inc. and Subsidiaries

Unaudited Selected Condensed Consolidated Financial Information

(in thousands)

 

     Three Months Ended  
     June 30,     March 31,
2009
 
     2009     2008    

Revenue:

      

Colocation

   $ 84,856      $ 74,762      $ 84,232   

Managed hosting

     67,303        64,714        68,086   
                        

Total hosting

     152,159        139,476        152,318   
                        

Network services

     67,702        73,465        69,205   
                        

Total Revenue

   $ 219,861      $ 212,941      $ 221,523   
                        

Adjusted EBITDA (1) Reconciliation:

      

Income from operations

   $ 9,537      $ 867      $ 15,598   

Depreciation, amortization and accretion

     37,799        34,154        36,335   

Non-cash, equity-based compensation

     7,785        9,629        6,891   
                        

Adjusted EBITDA

   $ 55,121      $ 44,650      $ 58,824   
                        

Adjusted Free Cash Flow:

      

Adjusted EBITDA

   $ 55,121      $ 44,650      $ 58,824   

Cash capital expenditures

     (27,224     (97,107     (18,252

Cash interest paid

     (12,613     (10,378     (7,488

Interest income

     44        729        114   
                        

Adjusted Free Cash Flow (2)

   $ 15,328      $ (62,106   $ 33,198   
                        

Headcount

     2,289        2,278        2,321   

 

(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. The calculation of adjusted free cash flow is not specified by United States generally accepted accounting principles. Our calculation of adjusted free cash flow may not be comparable to similarly titled measures of other companies.

 

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SAVVIS, Inc. and Subsidiaries

Unaudited Supplemental Revenue Information

(in thousands, except per square foot amounts)

Hosting Supplemental Information:

 

     Three Months Ended
     June 30,
2008
   September 30,
2008
   December 31,
2008
   March 31,
2009
   June 30,
2009

Data Center Revenue

              

Colocation

   $ 74,762    $ 78,382    $ 83,245    $ 84,232    $ 84,856

Managed hosting

     64,714      66,518      67,672      68,086      67,303

Hosting area network

     17,231      17,166      17,711      17,562      17,417
                                  

Total Data Center Revenue

   $ 156,707    $ 162,066    $ 168,628    $ 169,880    $ 169,576
                                  

Average Billed Square Feet

              

Colocation

     613.2      631.8      611.3      590.5      595.4

Managed hosting

     18.2      19.6      20.5      21.2      21.4
                                  

Total Average Billed Square Feet

     631.4      651.4      631.8      611.7      616.8
                                  

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

              

Colocation

   $ 40.6    $ 41.4    $ 45.4    $ 47.6    $ 47.5

Managed hosting

     1,186.3      1,133.2      1,101.4      1,069.2      1,046.4

Hosting area network (2)

     9.1      8.8      9.3      9.6      9.4

Total Average Monthly Data Center Revenue Per Billed Square Foot

   $ 82.7    $ 82.9    $ 89.0    $ 92.6    $ 91.6

 

(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
     June 30,
2008
   September 30,
2008
   December 31,
2008
   March 31,
2009
   June 30,
2009

Network Services

              

Managed network

   $ 43,989    $ 43,689    $ 41,801    $ 39,831    $ 39,273

Hosting area network

     17,231      17,166      17,711      17,562      17,417

Bandwidth

     12,245      12,608      12,025      11,812      11,012
                                  

Total Network Services

   $ 73,465    $ 73,463    $ 71,537    $ 69,205    $ 67,702
                                  

 

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