St. Louis, MO, October 28, 2003 -- SAVVIS Communications Corporation (NASDAQ: SVVS), a leading global managed IP and managed hosting services provider, today announced results for the third quarter ended September 30, 2003.
Consolidated revenues for the quarter increased 20% to a record $67.9 million versus $56.7 million for the third quarter of 2002. SAVVIS’ gross margin for the current quarter expanded to $25.5 million, or 38% of revenues, from $19.0 million, or 34% of revenues for the same quarter of 2002.
SAVVIS’ consolidated net loss for the quarter was $(23.7) million versus $(15.8) million for the same quarter last year. The increase in the net loss for the current quarter was principally due to a loss of $8.1 million recorded for the previously announced sale of the Company’s Hazelwood, Missouri data center to Reuters in July.
Commenting on third quarter results, Rob McCormick, SAVVIS’ chairman and chief executive officer, said “SAVVIS’ third quarter performance reflects increasing interest in our managed utility model as well as our continued focus on managing costs. We continue to execute on our business plan by expanding revenues and diversifying our customer base. Diversified revenue shows sustained growth, and now comprises over half of SAVVIS’ total revenues. In addition, we successfully completed the acquisition of WAM!NET’s commercial assets, and expect additional opportunities and synergies from this transaction.”
McCormick continued, “Going forward, we believe there is a growing distinction between the traditional telecom carriers and the emerging, more focused providers delivering value-added services, such as SAVVIS. We believe we are well positioned and already benefiting as our customers increase their attention on value and cost of ownership.”
Consolidated revenues for the quarter increased 20% year over year and grew 13% sequentially. Reuters and Moneyline Telerate revenues for the quarter decreased 18% when compared to the same quarter of 2002 and 5% sequentially.
Diversified revenue for the quarter expanded to $34.1 million, rising over 120% when compared to the third quarter of 2002 and increasing 37% sequentially due to strong growth in Managed Services . Managed IP VPN diversified revenue increased 115% and Managed Hosting diversified revenue rose 432% when compared to the same quarter last year. As compared to the second quarter of 2003, Managed IP VPN diversified revenue increased 43% and Managed Hosting diversified revenue increased 38%. The considerable increases in Managed IP VPN diversified revenue were partially the result of revenues from customers acquired in the previously announced WAM!NET transaction, which closed August 1, 2003, with the remainder due to the addition of new customers and the expansion of business with existing customers. Excluding the impact of WAM!NET, Managed IP VPN diversified revenue increased 74% over the same quarter last year and 16% sequentially. The significant increase in Managed Hosting diversified revenue in the current quarter over the same quarter last year was the result of the transition of Intel Online Services (“IOS”) customers, along with steady growth in sales beyond IOS. Internet access revenue in the current quarter grew 20% over the same quarter of last year and 20% sequentially.
Margin Improvements Continue
Gross margin widened to $25.5 million in the current quarter, from $19.0 million in the third quarter of 2002 and $20.0 million in the prior quarter. As a percentage of revenues, gross margin grew to 38% in the quarter, up from 34% in the prior year and 33% sequentially. These improvements were achieved as the result of SAVVIS’ continued focus on reducing its per unit data communications costs, as well as operating cost synergies resulting from the acquisition of WAM!NET’s commercial assets.
Selling, general, and administrative expenses (“SG&A”) for the quarter increased to $23.2 million, from $22.0 million in the prior quarter, but as a percentage of revenues declined to 34%, from 37% in the second quarter of 2003. The improvement was due to prior period planned investments in sales and marketing generating returns, and the Company continuing to leverage the existing infrastructure with revenue growth. SG&A for the same period last year was $16.7 million, or 30% of revenues.
Jeff Von Deylen, SAVVIS’ chief financial officer, added, “SAVVIS’ financial performance continues to improve. Net proceeds generated by the sale of the Hazelwood data center have strengthened our financial position through higher cash balances and reduced debt levels. Our long-term outlook is enhanced by our revenue growth, improved cost structure, low capex, minimal financing payments, and increasing margins. ”
Cash Flow and Balance Sheet
Net cash used in operating activities in the quarter was $(1.5) million, versus $(10.5) million in the same quarter a year ago and $4.4 million generated in the prior quarter of 2003. The balance sheet and cash position continued to be on target, with Days Sales Outstanding (“DSO”) continuing to be below 20 days, and cash required for interest and payments on existing capital leases expected to be below $0.2 million for the remainder of 2003.
As previously announced, in August of 2003 SAVVIS acquired certain assets and commercial customer contracts of WAM!NET, a leading global provider of content management and delivery services. SAVVIS paid $3.0 million at closing and anticipates additional consideration to be paid starting in the second quarter of 2004, based on revenue performance from acquired WAM!NET customers.
Also in the current quarter, SAVVIS closed the sale of its Hazelwood, Missouri data center to Reuters. Of the $35.0 million in gross proceeds, $12.9 million was used to reduce debt and approximately $3.1 million for transaction related deposits and expenses. SAVVIS recorded an $8.1 million loss on the sale.
1 Diversified Revenue is revenue from customers other than Reuters and Moneyline Telerate.
2 Managed Services are Managed IP VPN and Managed Hosting services.
· Added 1,341 (net) new customers in the third quarter (including customers acquired as part of the WAM!NET transaction), such as the U.S. Fund for UNICEF, architectural firm HOK S-V-E, entertainment industry leader Deluxe, and global financial services company ITG. SAVVIS also expanded existing relationships with Time, Inc. and Universal Music Group, among others.
· SAVVIS introduced a new suite of fully-managed network-based voice application services for enterprise IT environments which reduce costs while also enhancing employee productivity. These services are designed to work with both legacy and IP-based voice networks, and enable customers to receive all the benefits of conferencing, 800, and follow-me services without the need for capital investment.
· SAVVIS launched its Business Partner Program which included new business partner agreements with CMS, LinkSource, PlanetOne, and Intelisys.
· Third quarter revenues of $67.9 million (highest in company’s history).
· Third quarter gross margin, in both absolute and as a percentage of revenues, the largest ever generated by SAVVIS in a single quarter.
· Revenues from Reuters and Moneyline Telerate now comprise less than half of total company revenues, as opposed to 83% of total revenues that were represented by Bridge (prior to its assets being acquired by Reuters and Moneyline Telerate) at the time of SAVVIS’ IPO in February of 2000.
SAVVIS Communications (NASDAQ: SVVS) is a leading managed services provider that delivers IP VPNs (virtual private networks), hosting, and application services to businesses. SAVVIS solutions are designed for industries with demanding information technology requirements including legal, media, retail, professional services, healthcare, manufacturing, and financial services.
Known as The Network that Powers Wall StreetSM, SAVVIS was ranked #3 in IP VPN market share by IDC in its 2003 report, trailing only AT&T and WorldCom, and its network reliability was declared "perfect" in Network World magazine's groundbreaking study of backbone performance. SAVVIS recently won the first ever American Business Awards “Stevie”TM in the category of “Best Customer Service Organization.” SAVVIS' managed hosting services were awarded the Service Provider Excellence Award by Boardwatch magazine for its virtualized approach to managed hosting, and the Market Engineering Award from Frost & Sullivan for product differentiation and innovation.
For more information about SAVVIS' Intelligent IP NetworkSM and managed hosting solutions, visit: .
Financial tables to follow.
A copy of this release and associated tables will be available on www.savvis.net. The quarterly earnings conference call will take place on October 28, 2003 at 9:00 AM Eastern and will be available on /company/investors/index.html. Investors should then click on the Conference Calls section. The presentation for the call will be under the Presentations section. Please call 888-405-4399 (domestic) or 610-769-3888 (international). The passcode is “SAVVIS NEWS” and the conference leader is Nancy Bridgman Lysinger. A replay of the call will begin one hour after the end of the call on Tuesday, October 28, 2003 and will continue until 10:00 p.m. eastern on Tuesday, November 4, 2003. To access the replay, dial 800-944-0939 (domestic), or 402-220-2249 (international). An audio version of the conference call is permanently available on /company/investors/index.html. in the Audio Archives section.
This press release 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 affect actual results are set forth as risk factors in SAVVIS’ SEC reports and filings, including its annual report on Form 10-K for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on February 28, 2003. For More Information, Investors Contact: