ST. LOUIS, February 3, 2010 – Savvis, Inc. (NASDAQ:SVVS), a global leader in outsourced internet infrastructure services for enterprises, today reported its fourth quarter 2009 financial results, with revenue of $219.8 million, compared to $222.4 million in the fourth quarter of 2008. Adjusted EBITDA was $54.9 million, compared to $52.0 million of adjusted EBITDA in the fourth quarter of 2008.

Income from operations for the fourth quarter of 2009 was $10.4 million, compared to $15.0 million in the fourth quarter of 2008. The company reported a net loss of ($5.4) million, or ($0.10) per share, in the fourth quarter of 2009, compared to a fourth quarter 2008 net loss of ($0.3) million, or ($0.01) per share.

For full year 2009, revenue was $874.4 million, up 2% when compared to full year 2008 revenue of $857.0 million. Adjusted EBITDA for 2009 was $220.0 million, up 19% over the $184.6 million reported in 2008. Leveraged free cash flow* in 2009 was $50.1 million, up significantly compared to ($90.6) million in the prior year. The improvement in leveraged free cash flow is due to a reduction in capital expenditures in 2009, following the completion of the company’s global data center expansion in 2008.

Compared to full year 2008 income from operations of $26.5 million, Savvis reported income from operations of $40.1 million in 2009. The company reported a net loss of ($20.8) million in 2009, an improvement over its 2008 net loss of ($22.0) million. For full year 2009, Savvis had a net loss per share of ($0.39), compared to a net loss per share of ($0.41) in 2008.

“In the fourth quarter, Savvis recorded its best bookings in 18 months,” said Jim Ousley, interim chief executive officer of Savvis. “The fourth quarter included a $33 million, five-year deal to provide outsourcing to a global, information distribution services company. In addition, we saw strong sales in the financial and media verticals, as well as with our cloud offerings. We are pleased with the sequential revenue growth in the fourth quarter, particularly in our Hosting segment.”

Fourth Quarter Financial Results  

 

US dollars in millions

Three months ended

 

12/31/09

9/30/09

12/31/08

Hosting

$154.7

$148.1

$150.9

Network

$65.1

$65.1

$71.5

Total Revenue

$219.8

$213.2

$222.4

 

 

 

 

Cost of Revenue(1)

$120.4

$117.9

$123.7

SG&A Expenses(1)

$50.5

$52.6

$48.8

Non-Cash, Equity-Based Compensation(1)

$6.0

$8.5

$2.0

Income from Operations

$10.4

$4.5

$15.0

Net Income (Loss)(2)

($5.4)

($9.9)

($0.3)

 

 

 

 

Adjusted EBITDA

$54.9

$51.2

$52.0

Adjusted EBITDA Margin

25%

24%

23%

 

(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 December 31, 2009, September 30, 2009, and December 31, 2008, was $1.1 million, $1.5 million and $0.1 million and to SG&A expenses was $4.9 million, $7.0 million and $1.9 million, respectively.
(2) Net income (loss) is restated from amounts reported in the prior year, due to Savvis’ adoption of new accounting guidance for certain convertible securities. Interest expense increased $3.3 million for the three months ended December 31, 2008.

Fourth Quarter Overview
Total Savvis revenue for the fourth quarter was $219.8 million. Revenue was up 3%, compared to third quarter 2009 revenue of $213.2 million. For the fourth quarter of 2009, income from operations of $10.4 million was up significantly, when compared to the $4.5 million recorded in the third quarter of 2009.

A consolidated net loss of ($5.4) million was recorded in the fourth quarter of 2009, compared to a net loss of ($9.9) million in the third quarter of 2009. Savvis recorded a loss per share of ($0.10) in the fourth quarter of 2009, compared to a loss per share of ($0.18) in the third quarter of 2009.

Adjusted EBITDA was $54.9 million for the fourth quarter of 2009. This amount represented a 7% increase from the $51.2 million of adjusted EBITDA that was recorded in the third quarter of 2009.

Hosting

 

US dollars in millions

Three months ended

 

12/31/09

9/30/09

12/31/08

Colocation

$86.9

$85.3

$83.2

Managed Services

$67.8

$62.8

$67.7

Total Hosting Revenue

$154.7

$148.1

$150.9

Percentage Change

 

4%

2%

 

Overall Hosting revenue was $154.7 million in the fourth quarter, up 2% on a year-over-year basis. On a quarter-over-quarter basis, Hosting revenue was up 4%.

For the quarter, Managed Services contributed $67.8 million to overall Hosting revenue, or 44%, and included $2.2 million in early termination fees. Managed Services revenue was up 8%, on a quarterly basis, and positive trends in cloud revenue contributed to the fourth quarter improvement. On an annual basis, Managed Services revenue was flat. Excluding fourth quarter 2008 revenue of $5.2 million from the American Stock Exchange, Managed Services revenue was up 8%, year-over-year.

Colocation contributed $86.9 million to overall Hosting revenue in the quarter, or 56%. Year-over-year, Colocation revenue grew 4%. On a quarter-over-quarter basis, colocation revenue growth was 2%. As expected, Savvis saw several colocation customers transition to their own underutilized data centers late in the fourth quarter. This churn will result in a first quarter 2010 sequential quarterly decline in colocation revenue of $6.1 million.

Network

 

US dollars in millions

Three months ended

 

12/31/09

9/30/09

12/31/08

Core

$31.4

$28.6

$24.7

Sustaining

$33.7

$36.4

$46.8

Total Network Revenue

$65.1

$65.0

$71.5

Percentage Change

 

0%

(9%)

 

Overall Network revenue was $65.1 million in the fourth quarter and was down (9%) on an annual basis. On a quarterly basis, Network revenue was flat, as the company began to see some initial results from its long-term strategy to focus on Core Network customers, which are generally associated with its data centers. For the quarter, Core Network contributed $31.4 million to overall Network revenue, or 48%. Core Network revenue was up 27%, on a year-over-year basis, and was up 10%, on a quarter-over-quarter basis. Core Network includes network revenue from Thomson Reuters and from other financial vertical and data center customers, who also purchase bundled network and hosting services.

Sustaining Network contributed $33.7 million to overall Network revenue in the quarter, or 52%. Year-over-year, Sustaining Network revenue declined (28%). On a quarter-over-quarter basis, Sustaining Network revenue was down (7%).

Sustaining Network includes revenue from network services that are either in slower growth or declining markets or are not directly tied to the future growth of the company’s Hosting and Network businesses.

Highlights
The financial vertical represented 26% of total revenue, or $57.7 million, in the fourth quarter of 2009. Revenue in the quarter was down (2%), compared to the fourth quarter of 2008, and up 7%, compared to the third quarter of 2009. Savvis saw sequential improvement in its proximity hosting business and overall good growth in the financial vertical, in the fourth quarter.

Also during the quarter, Savvis reported cloud revenue of $2.5 million, up 25% on a quarter-over-quarter basis and 105% year-over-year. In addition, Savvis announced that it had expanded its progressive relationship with Cisco to include the use of the Cisco Unified Computing System (UCS) in its Symphony Virtual Private Data Center (VPDC) cloud offering.

In the fourth quarter, Savvis brought new Software-as-a-Service (SaaS) customers on board, including Peopleclick. Its database of more than 90 million resumes will be powered by Savvis. As part of the three-year agreement, Peopleclick is deploying Savvis' SaaS IT infrastructure solution, which is hosted from multiple Savvis data centers in the United States and the United Kingdom. SaaS revenue in the fourth quarter was $19.3 million, up 3% on a quarter-over-quarter basis and 31% year-over-year.

In addition to new relationships, Savvis saw existing client relationships grow stronger, during the fourth quarter. The Thomson Reuters collaboration, which was announced in the quarter, is ahead of plan. This relationship showed revenue growth, and it is contributing to the company’s Hosting and Network revenue. At present, the Thomson Reuters solution is deployed in five of the anticipated six data centers, with Frankfurt expected online by the end of the first quarter of 2010.

Cash Flow and Balance Sheet
Net cash provided by operating activities was $57.5 million in the fourth quarter of 2009, compared to $44.9 million in the fourth quarter of 2008. Cash capital expenditures for the fourth quarter of 2009 totaled $57.1 million.

The company’s cash position at December 31, 2009, was $160.8 million, compared to $163.5 million at September 30, 2009. As of December 31, 2009, the long-term debt and capital leases for Savvis (net of current portion) totaled $600.0 million. During the fourth quarter, the company expanded its existing footprint at its CH4 data center, in downtown Chicago, by 50% and lengthened the term of the lease. This resulted in an increase in capital lease obligations, as CH4 was reclassified as a capital lease valued at $37.8 million, in aggregate.

Full Year Financial Results  

 

US dollars in millions

12 months ended

 

12/31/09

12/31/08

% change

Colocation

$341.3

$304.3

12%

Managed Services

$266.0

$260.2

2%

Hosting

$607.3

$564.5

8%

Core

$112.6

$89.6

26%

Sustaining

$154.5

$202.9

(24%)

Network Services

$267.1

$292.5

(9%)

Total Revenue

$874.4

$857.0

2%

 

 

 

 

Cost of Revenue(1)

$480.3

$483.1

1%

SG&A Expenses(1)

$203.2

$212.3

4%

Non-Cash, Equity-Based Compensation(1)

$29.1

$23.0

(27%)

Income from Operations

$40.1

$26.5

51%

Net Income (Loss)(2)

($20.8)

($22.0)

5%

 

 

 

 

Adjusted EBITDA

$220.0

$184.6

19%

Adjusted EBITDA Margin

25%

22%

~360 bps

 

(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 12 months ended December 31, 2009, and December 31, 2008, was $5.5 million and $3.3 million and to SG&A expenses was $23.6 million and $19.6 million, respectively.
(2) Net income (loss) is restated from amounts reported in the prior year, due to Savvis’ adoption of new accounting guidance for certain convertible securities. Interest expense increased $12.8 million for the year ended December 31, 2008.

Full Year Highlights
In 2009, Savvis continued as a leader in the financial vertical, when it added Chi-X Canada, the Turquoise Multilateral Trading Facility in Europe, and Credit Suisse CrossFinder as Savvis connectivity options. The company also announced that BATS Global Markets expanded its hosting space in Savvis’ Weehawken, NJ, data center and expanded its footprint within the Savvis Docklands data center in London. Outside the financial vertical, Savvis announced big customer wins in the areas of SaaS and media, among others.

Savvis was positioned in the Leaders Quadrant in the Web Hosting and Hosted Cloud System Infrastructure Services Magic Quadrant, in 2009. 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.

Significant year-over-year trends for Savvis include Hosting revenue growth of 8% and a 26% improvement in Core Network revenue. In the financial vertical, 2009 revenue was $229.1 million, up 3% over 2008. The company’s cloud revenue for 2009 was $7.4 million, which was up 93% over 2008. SaaS 2009 revenue of $70.7 million was up 38%, year-over-year.

Financial Outlook
“We look forward to quarterly sequential growth beginning in the second quarter and continuing throughout 2010,” said Greg Freiberg, chief financial officer for Savvis. “However, we still expect the colocation churn we experienced late in the fourth quarter to impact sequential revenue and adjusted EBITDA growth in the first quarter.”

Savvis currently expects the following for full year 2010:

  • Adjusted EBITDA of $205 to $225 million
  • Total cash capital expenditures of $180 to $200 million, including approximately $53 million for data center expansion
  • Cash interest expense (net) of approximately $40 to $50 million

Investor Conference Call
Savvis will webcast an investor conference call at 10:00 a.m. ET today, February 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) 253-6509 for financial analysts in North America or (703) 639-1208 for international analysts. A replay will be available on the Web site for six months. Investors may also access the replay by telephone through Monday, February 15, by dialing (888) 266-2081 in North America or (703) 925-2533 internationally and using the access code 1424739.

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.

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 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, February 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” (formerly known as adjusted 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. “Cash 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 cash 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. 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, leveraged free cash flow and cash return on capital employed for forward looking data, including 2010 full-year guidance. The calculations of adjusted EBITDA, leveraged free cash flow and cash return on capital employed are not specified by United States generally accepted accounting principles. Our calculations of adjusted EBITDA, leveraged free cash flow and cash return on capital employed 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