St. Louis, MO, July 29, 2003 -- SAVVIS Communications Corporation (NASDAQ: SVVS), a leading global managed IP and managed hosting services provider, today announced results for the second quarter ended June 30, 2003.
Consolidated revenues for the quarter were $60.4 million versus $61.2 million for the second quarter of 2002. SAVVIS’ gross margin for the quarter grew to $20.0 million, or 33% of revenues, from $17.7 million, or 29% of revenues in the quarter ending June 30, 2002.
Consolidated net loss for the quarter was $(30.1) million versus $(19.8) million for the quarter ending June 30, 2002. The increase in the net loss for the current quarter was due to a charge of $7.9 million related to a leased facility that the company does not plan to use and an increase of $4.9 million in SG&A expense as the result of continued investments in sales and marketing to support growth in SAVVIS’ diversified1 customer base.
Commenting on results for the second quarter, Rob McCormick, chairman and chief executive officer of SAVVIS, said, “We continue to deliver strong results despite a difficult economic environment. Diversified revenue2 maintains its solid record of growth, increasing 71% over the same quarter of last year. Diversified Managed Hosting services made a significant contribution to that increase, with revenue growing almost 300% as we successfully completed the transition of Intel Online Services (IOS) customers to SAVVIS.” McCormick continued, “Our objective of expanding our customer base is on track, with diversified revenue now making up more than 41% of our total revenue, up from 24% a year ago.”
Consolidated revenues for the quarter declined 1% year over year, but grew more than 9% sequentially. Reuters revenues for the quarter ended June 30, 2003 decreased 26% when compared to the same quarter of 2002, but were flat sequentially. Moneyline Telerate revenues declined 12% year over year and declined 5% sequentially.
Diversified revenue for the quarter ended June 30, 2003 expanded to $24.9 million, increasing 71% versus the second quarter of 2002 and 31% sequentially due to strong growth in Managed Services. Managed IP VPN diversified revenue increased 72% and Managed Hosting diversified revenue rose 293% when compared to the second quarter of 2002. As compared to the first quarter of 2003, Managed IP VPN diversified revenue increased 16% and Managed Hosting diversified revenue increased 135%. The significant increases in hosting revenues were primarily the result of the transition of the IOS customers. Internet access revenue declined 11% in the second quarter of 2003 from the second quarter of 2002, but grew 3% sequentially.
Gross Margin Improvement
Gross margin grew from $17.7 million in the second quarter of 2002 to $20.0 million in the current quarter, or from 29% of revenues to 33% of revenues, respectively. These improvements occurred despite lower revenue from Reuters and Moneyline, and were achieved as the result of SAVVIS’ continued focus on reducing its per unit data communications costs.
Jeffery Von Deylen, SAVVIS’ executive vice president and chief financial officer, added, “We are beginning to see returns from investments we had made in IT and sales and marketing in prior periods. SAVVIS saw improvements across the board, generating sequential increases in diversified revenue and gross margin while at the same time lowering SG&A expense.”
Cash Flow and Balance Sheet
Operating cash flow improved significantly, as net cash generated by operating activities for the quarter was $4.4 million, versus a use of $(9.6) million for the quarter ending June 30, 2002 and $(7.1) million for the prior quarter of 2003. The balance sheet and cash position continued to be on target, with Days Sales Outstanding (DSO) below 20 days, and cash required for interest and payments on existing capital leases expected to be below $1.0 million for the remainder of 2003.
As previously announced, SAVVIS sold on July 28, 2003 its Hazelwood, Missouri data center to Reuters, with SAVVIS leasing back, on attractive financial terms, one-third of the center for five years with a five year renewal option. Reuters also agreed to award certain bid preferences to SAVVIS, and SAVVIS in turn agreed to reduce Reuters minimum purchase commitments under the parties’ existing network services agreement. Of the $35 million in gross proceeds, SAVVIS used $12.9 million to reduce debt and $3.1 million for transaction related deposits and expenses. The $19.0 million in net proceeds were added to existing cash balances, further strengthening the company’s balance sheet.
· Customer installations at the end of the second quarter 2003 increased 344% from the second quarter of 2002 and 75% sequentially.
· Added 210 (net) new customers in the second quarter, including Loyalty Management UK Ltd., Tradestream Global, Fine Hotels Corp., and Telekurs. In addition, SAVVIS continued its expansion into media and entertainment sector, marked by agreements with firms such as NBC News, CinemaNow, A&E Television Networks, Lions Gate Entertainment, and Lifetime Entertainment Services.
· Managed Services (IP VPN and Hosting) accounted for over 94% of new contract values.
· Secured first-ever inclusion in Gartner Magic Quadrant for North American Web Hosting. Gartner is the dominant IT industry research firm and their Magic Quadrants are highly scrutinized vendor rankings frequently referenced as part of the IT purchase process.
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 July 29, 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, July 29, 2003 and will continue until 10:00 p.m. eastern on Tuesday, August 5, 2003. To access the replay, dial 800-925-4790 (domestic), or 402-220-4193 (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. Although SAVVIS believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that its expectations will be attained. Certain factors that could cause actual results to differ materially from SAVVIS' expectations 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. Many of these factors are beyond SAVVIS' ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, SAVVIS claims the protection of the safe harbor for forward- looking statements contained in the Private Securities Litigation Reform Act of 1995. SAVVIS assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. For More Information, Investors Contact:
For More Information, Media Contact:
Nancy Bridgman Lysinger
Carter B. Cromley
Director of Public Relations & Analyst Relations
1 Diversified customers are customers other than Reuters and Moneyline Telerate.
2 Diversified revenue is revenue from customers other than Reuters and Moneyline Telerate