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 $216.6 million, compared to $221.5 million in the first quarter of 2009. Adjusted EBITDA* was $54.0 million, compared to $58.8 million of adjusted EBITDA in the first quarter of 2009.

Income from operations for the first quarter of 2010 was $4.8 million, compared to $15.6 million in the first quarter of 2009. The company reported a net loss of ($11.3) million, or ($0.21) per share, in the first quarter of 2010, compared to first quarter 2009 net income of $0.6 million, or $0.01 per share. Leveraged free cash flow* in the first quarter of 2010 was ($4.5) million, down from $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
Financial Tables

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 (866) 835-8906 for financial analysts in North America or (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 (888) 266-2081 in North America or (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.

Investors:
Peggy Reilly Tharp
(314) 628-7491
peggy.tharp@savvis.net

Media:
Amanda Gomez
(314) 628-7417
amanda.gomez@savvis.net