ST. LOUIS, MO. – February 4, 2008 – SAVVIS, Inc. (NASDAQ: SVVS), a global leader in IT infrastructure services for business applications, announced today that its revenue for the fourth quarter 2007 totaled $197.8 million, income from operations was $2.8 million, and net loss was $2.5 million, or $0.05 per share. Adjusted EBITDA for the quarter was $39.4 million.

Revenue increased 4% from the third quarter 2007, driven by growth in hosting, and was down slightly from the fourth quarter 2006, reflecting the sale of low-growth assets that contributed $16.7 million of revenue in the 2006 quarter. Adjusted EBITDA was up 11% from the third quarter and up 9% from last year’s fourth quarter, reflecting a year-over-year improvement in the adjusted EBITDA margin from 18% to 20%.

For the full year 2007, revenue totaled $793.8 million, income from operations was $338.0 million, and net income was $250.6 million. Adjusted EBITDA for the year was $160.8 million.

Chief Executive Officer Phil Koen said, “SAVVIS achieved major operational objectives in 2007, significantly improving our portfolio of assets and our capital structure to enhance our foundation for consistent, long-term growth. Key accomplishments in 2007 included the successful development of new data centers in four markets, opened on time and on budget to sizable market demand. We have already signed contracts for over one-third of the space available in those locations. We have additional data center space coming on line in 2008 in six very strong markets that will further contribute to our growth.

“We self-funded our expansion through the sale of two major, but low-growth, revenue streams in the year. Despite the sale of revenue streams, we generated 4% revenue growth and a very strong 31% Adjusted EBITDA growth rate on an as-reported basis. On a pro forma* basis, those growth rates were 12% and 65%, respectively. That success reflects our ongoing focus on revenue growth that will drive higher margins."

“As we look forward to a strong year of execution in 2008,” Koen continued, “we are monitoring carefully our customers’ response to the current pressures in the broad economy. To date, we have seen little evidence of slowing demand for SAVVIS’ IT infrastructure solutions, despite a more challenging economic environment. We remain focused on bringing to market the value-added services that enable our customers to use IT more effectively and efficiently – and on meeting our financial targets in 2008.”

Reported Fourth-quarter Results 

(US$ millions)

Three months ended:

 

Dec. 31, 2007

Sept. 30, 2007

Dec. 31, 2006

Revenue:

 

 

 

      Colocation

       $   62.3

       $   58.6

       $   59.0

      Managed hosting

            59.5

            55.1

            48.4

   Total Hosting

          121.8

          113.7

          107.4

   Network services

           76.0

           76.6

           84.1

   Other services

               --

               --

             9.2

Total Revenue

       $ 197.8

       $ 190.3

       $ 200.7

Cost of Revenue(1)

       $ 111.6

       $ 112.3

       $ 118.4

Sales, Gen. & Admin. Expenses(1)

       $   55.8

       $   51.1

       $   53.5

Income from Operations

       $    2.8

       $    3.7

       $   11.6

Net Income (Loss)

       $   (2.5)

       $    5.3

       $   (6.8)

Adjusted EBITDA

       $   39.4

       $   35.5

       $   36.0

Adjusted EBITDA Margin

           20%

           19%

           18%

(1)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, $1.4 million, and $1.2 million and in sales, general and administrative expenses was $7.6 million, $7.3 million, and $6.0 million for the three months ended December 31, 2007, September 30, 2007, and December 31, 2006, respectively.

Total revenue for the fourth quarter was $197.8 million, a decrease of 1% compared to the fourth quarter of 2006, primarily due to the sale of data-center assets to Microsoft at the end of June 2007 and the sale of CDN assets in January 2007, and an increase of 4% compared to the third quarter 2007, reflecting strong growth in hosting revenue. Growth in hosting revenue, up 13% from a year ago, reflected strong growth in managed hosting revenue. Compared to the third quarter, hosting revenue rose 7%, driven by growth in both managed hosting and colocation. Virtualized and utility services contributed $18.1 million of managed hosting revenue in the fourth quarter, up 76% from a year ago and 21% from the third quarter.

In the fourth quarter, network services revenue of $76.0 million declined 10% from the fourth quarter of 2006 and was essentially flat from the prior quarter. Hosting customers continued to increase their use of our Hosting Area Network (“HAN”) services for mission-critical data transport, while Managed Network and Bandwidth revenues declined as expected.

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.

Cost of revenue was $111.6 million, and included $1.4 million of non-cash equity-based compensation costs. Excluding non-cash equity-based compensation costs, gross profit as a percentage of total revenue, or gross margin, was 44% in the current quarter, an increase from 42% in both the same period a year ago and the third quarter.

Sales, general, and administrative expenses (“SG&A”) for the current quarter were $55.8 million, as compared to $53.5 million for the same period last year and $51.1 million in the third quarter 2007. SG&A included non-cash equity-based compensation costs for the current quarter of $7.6 million, as compared to $6.0 million for the same period last year and $7.3 million in the third quarter 2007. As a percentage of revenue, excluding non-cash equity-based compensation costs, SG&A was 24% in the current quarter, consistent with 24% in the fourth quarter 2006 and up slightly from 23% in the third quarter 2007.

In the fourth quarter of 2007, SAVVIS recorded an income tax benefit of $1.2 million to reflect the reduction of its expected annual effective tax rate from 1.0% to 0.55%.

SAVVIS’ consolidated net loss was $2.5 million in the fourth quarter, compared to a net loss of $6.8 million in the same period last year and net income of $5.3 million in the third quarter 2007. Expenses in the current quarter compared to the third quarter included higher interest and depreciation and amortization expenses as a result of new investments being put into service. Loss per share was $0.05 in the fourth quarter 2007, compared to a loss per share of $0.13 in the same period a year previously and earnings per share of $0.10 in the third quarter 2007.

Adjusted EBITDA for the fourth quarter of $39.4 million included a $3.9 million negative impact as costs associated with six new and expanded data centers exceeded revenue generated by those data centers.

Pro Forma Fourth-quarter Results

(US$ millions)

Three months ended:

 

Dec. 31, 2007

Sept. 30, 2007

Dec. 31, 2006

pro forma(1)

Revenue:

 

 

 

      Colocation

       $   62.3

       $   58.6

       $   51.5

      Managed hosting

            59.5

            55.1

            48.4

   Total Hosting

          121.8

          113.7

           99.9

   Network services

            76.0

            76.6

            84.1

Total Revenue

       $ 197.8

       $ 190.3

       $ 184.0

Cost of Revenue

       $ 110.1

       $ 110.9

       $ 109.2

Sales, Gen. & Admin. Expenses

       $   48.2

       $   43.8

       $   46.2

Adjusted EBITDA

       $   39.4

       $   35.5

       $   28.6

Adjusted EBITDA Margin

           20%

           19%

           16%

Average Billed Square Feet

          593

           563

           564

(1)Pro forma results for the three months ended December 31, 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 a network contract with Telerate.

On a pro forma basis, total revenue for the fourth quarter increased 8% from $184.0 million in the same period a year ago. Hosting revenue for the quarter grew 22% year over year. Adjusted EBITDA for the fourth quarter increased 38% on a pro forma basis from $28.6 million in the same period a year ago. Pro forma results for the year-ago period exclude revenue and costs associated with the CDN assets sold in January 2007, the data center assets sold in June 2007, and Telerate business eliminated in June 2007 due to customer consolidation.

Cash Flow and Balance Sheet

Net cash provided by operating activities was $27.1 million in the fourth quarter. Cash capital expenditures for the quarter totaled $100.4 million, which included $52.8 million for the build-out of new data centers.

SAVVIS’ long-term debt as of December 31, 2007, totaled $351.6 million. SAVVIS’ cash position at December 31, 2007, was $183.1 million, compared to $98.7 million at December 31, 2006, and $256.9 million at September 30, 2007.

Reported and Pro Forma Full-year Results

(US$ millions)

Twelve months ended:

 

Dec. 31, 2007

Dec. 31, 2006

Dec. 31, 2007

pro forma(1)

Dec. 31, 2006

pro forma(1)

Revenue:

 

 

 

 

      Colocation

       $ 258.7

       $ 219.2

       $ 238.5

       $ 186.2

      Managed hosting

         215.9

         170.1

         216.0

         170.1

   Total Hosting

          474.6

          389.3

          454.5

          356.3

   Network services

          309.8

          328.9

          309.8

          328.9

   Other services

             9.4

            45.8

               --

               --

Total Revenue

       $ 793.8

       $ 764.0

       $ 764.3

       $ 685.2

Cost of Revenue(2)

       $ 454.3

       $ 464.9

       $ 434.0

       $ 422.2

Sales, Gen. & Admin. Expenses(2)

       $ 212.4

       $ 196.1

       $ 183.3

       $ 174.0

Income from Operations

       $ 338.0

       $   25.5

 

        

Net Income (Loss)

       $ 250.6

       $ (44.0)

 

        

Adjusted EBITDA

       $ 160.8

       $ 122.7

       $ 147.0

       $   89.0

Adjusted EBITDA Margin

           20%

           16%

           19%

           13%

(1)Pro forma results for the twelve months ended December 31, 2007, and December 31, 2006, exclude the impact of non-cash equity-based compensation costs and 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)Cost of revenue excludes depreciation, amortization, and accretion. Both cost of revenue and sales, general and administrative expenses as reported include the effect of non-cash equity-based compensation. Total non-cash equity-based compensation in cost of revenue was $5.7 million and $3.0 million and in sales, general and administrative expenses was $27.9 million and $16.7 million for the twelve months ended December 31, 2007, and December 31, 2006, respectively.

Total revenue for 2007 was $793.8 million, an increase of 4% compared to 2006, as strong growth of 27% in managed hosting and 18% in colocation revenue more than offset $36.4 million of other services revenue sold or otherwise eliminated in 2007. On a pro forma basis, 2007 revenue increased 12% in 2007, with strong growth of 28% in colocation and 27% in managing hosting more than offsetting a 6% decline in network services revenue.

SAVVIS’ consolidated net income in 2007 was $250.6 million, which included realization of gains of $125.2 million from the sale of non-strategic assets in January 2007 and $180.5 million from the sale of assets related to two data centers in June 2007, and a charge of $45.1 million in the second quarter related to the retirement of its 15% Series A Subordinated Notes. Diluted earnings per share for the year were $4.51.

Adjusted EBITDA for 2007 was $160.8 million, an increase of 31% compared to 2006. On a pro forma basis, 2007 Adjusted EBITDA increased 65% in 2007, with Adjusted EBITDA pro forma margin (Adjusted EBITDA as a percent of revenue) expanding from 13% to 19%.

Financial Outlook

Chief Financial Officer Jeff Von Deylen said, “In 2007, SAVVIS retired a 15% debt obligation on the issuance of our 3% convertible notes and achieved strong leverage ratios, with total debt just 2.5 times the midpoint of our 2008 Adjusted EBITDA outlook. Additionally, we expanded our Adjusted EBITDA margin, and raised $319 million of cash through the sale of underperforming assets. In 2008, as we put this cash to work for stockholders through the self-funded expansion of our data center footprint, we anticipate continued growth of revenue with strong Adjusted EBITDA margins.”

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 15-17% on a reported basis, including:
    • approximately $590-610 million of revenue from hosting services, including approximately $310-320 million of colocation revenue and approximately $280-290 million of managed hosting revenue, and
    • approximately $315 million of revenue from network services; and
  • Adjusted EBITDA in a range of $200-210 million; and
  • Capital expenditures of $290-310 million, including approximately $145-150 million for development of data centers in the Boston, Chicago, Dallas, London, New York and Singapore metropolitan areas.

* 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 periods. The calculations of Adjusted EBITDA and pro forma results are not specified by United States generally accepted accounting principles. Our calculations of Adjusted EBITDA and of pro forma results may not be comparable to similarly-titled measures of other companies.

Investor Conference Call
SAVVIS will webcast an investor conference call today, February 4, 2008, at 5:30 pm EST. 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 +1-703-639-1326 and 866-804-3545 (in North America, toll free). Recorded replays will be available on the website for six months, and by telephone through Thursday, February 14, at +1-703-925-2533 and 888-266-2081 (in North America, toll free) with the access code 1182746, beginning at 8:00 pm EST 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, uncertainties in economic conditions that could pressure enterprise IT spending, variability in pricing for SAVVIS’ products, 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, February 4, 2008. 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.

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CONTACTS:
Investors:
Elizabeth Corse
(703) 667-6984
elizabeth.corse@savvis.net

Media:

Carter Cromley

 

(703) 667-6110


carter.cromley@savvis.net