Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACTS:
| Investors: Elizabeth Corse | Media: Carter Cromley | |
| (703) 667-6984 | (703) 667-6110 | |
| elizabeth.corse@savvis.net | carter.cromley@savvis.net |
SAVVIS REPORTS THIRD QUARTER RESULTS
Third Quarter Net Income $5.3 Million, for Earnings Per Share of $0.10
Third Quarter Adjusted EBITDA* $35.5 Million on Total Revenue $190.3 Million
Outlook for 2008 Revenue of $910-925 Million and Adjusted EBITDA of $210-220 Million
Record Sales Bookings in Quarter of Over $100 Million of Annualized Revenue
ST. LOUIS, MO. – October 23, 2007– SAVVIS, Inc. (NASDAQ: SVVS), a global leader in IT infrastructure services for business applications, announced today that its revenue for the third quarter of 2007 totaled $190.3 million, income from operations was $3.7 million, and net income was $5.3 million. Adjusted EBITDA* for the third quarter was $35.5 million.
Third quarter operating cash flow was $33.9 million and cash capital expenditures were $86.4 million, which included previously-announced expenditures for the build-out of four new data centers.
Chief Executive Officer Phil Koen said, “In 2007, SAVVIS has been making important changes to transition our business for consistent, long-term growth. During the year we sold low-growth assets for cash proceeds of $319 million, which we are reinvesting in seven high-quality data centers that will increase our growth opportunities for 2008 and beyond. Market demand for our services continues to be very robust, as evidenced by our record sales bookings. Third quarter bookings totaled more than $100 million of annualized revenue, an increase of more than 40% from a year ago and over 25% from the second quarter of 2007.
“With our business largely repositioned as of the end of the third quarter, we look forward to leveraging strong demand for our services to grow 2008 revenue on a pro forma basis* at 19-21%, with 30-35% growth in hosting revenue, driving Adjusted EBITDA growth on a pro forma basis of approximately 42-49%.”
SAVVIS
Third-quarter Financial Results
October 23, 2007
page 2
Today SAVVIS also announced the development of a new data center in Dallas. With previously-announced data centers opened or in development in the Atlanta, Boston, Chicago, Silicon Valley, New York and Washington, DC metropolitan areas, SAVVIS is adding a total of 260,000 square feet of raised-floor space in seven high-quality data centers in 2007 and 2008. Expansion of SAVVIS’ data-center footprint demonstrates the company’s confidence in and commitment to its markets and growth strategy and is part of the reinvestment program of redeploying proceeds of cash from low-growth assets sold in 2007.
Third-quarter Results, as Reported
| (US$ millions) | Three months ended: | |||||||||||
| Sept. 30, 2007 | June 30, 2007 | Sept. 30, 2006 | ||||||||||
Revenue: | ||||||||||||
Colocation | $ | 58.6 | $ | 68.4 | $ | 55.3 | ||||||
Managed hosting | 55.1 | 51.0 | 45.2 | |||||||||
Total Hosting | 113.7 | 119.4 | 100.5 | |||||||||
Network services(1) | 76.6 | 77.0 | 82.4 | |||||||||
Other services(1) | — | 4.2 | 10.8 | |||||||||
Total Revenue | $ | 190.3 | $ | 200.6 | $ | 193.7 | ||||||
Cost of Revenue(2) | $ | 112.3 | $ | 113.8 | $ | 116.5 | ||||||
Sales, Gen. & Admin. Expenses(2) | $ | 51.1 | $ | 52.3 | $ | 52.4 | ||||||
Income from Operations | $ | 3.7 | $ | 192.5 | $ | 4.1 | ||||||
Net Income (Loss) | $ | 5.3 | $ | 133.3 | $ | (13.6 | ) | |||||
Adjusted EBITDA | $ | 35.5 | $ | 42.6 | $ | 32.8 | ||||||
Adjusted EBITDA Margin | 19 | % | 21 | % | 17 | % | ||||||
(1) | $1.4 million of revenue previously reported as other services revenue has been reclassified as network services revenue to reflect retention of network-services revenue SAVVIS had previously anticipated would be eliminated in 2007. |
(2) | 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, $1.5 million, and $1.3 million and in sales, general and administrative expenses was $7.3 million, $6.7 million, and $6.5 million for the three months ended September 30, 2007, June 30, 2007, and September 30, 2006, respectively. |
SAVVIS
Third-quarter Financial Results
October 23, 2007
page 3
Third-quarter Results, Pro Forma
| (US$ millions) | Three months ended: | |||||||||||
| Sept. 30, 2007 | June 30, 2007 pro forma(1) | Sept. 30, 2006 pro forma(1) | ||||||||||
Revenue: | ||||||||||||
Colocation | $ | 58.6 | $ | 60.0 | $ | 48.2 | ||||||
Managed hosting | 55.1 | 51.0 | 45.2 | |||||||||
Total Hosting | 113.7 | 111.0 | 93.4 | |||||||||
Network services | 76.6 | 76.9 | 82.4 | |||||||||
Total Revenue | $ | 190.3 | $ | 187.9 | $ | 175.8 | ||||||
Adjusted EBITDA | $ | 35.5 | $ | 37.6 | $ | 24.6 | ||||||
Adjusted EBITDA Margin | 19 | % | 20 | % | 14 | % | ||||||
Average Billable Square Feet | 563 | 590 | 541 | |||||||||
(1) | Pro forma results for the three months ended June 30, 2007, and September 30, 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 transferred to the buyer throughout the first half of that year; and a network contract with Telerate. |
As-Reported Commentary
Total revenue for the third quarter was $190.3 million, a decrease of 2% compared to the third quarter of 2006 and 5% compared to the second quarter 2007, primarily due to the sale of data-center assets to Microsoft at the end of June 2007. Growth in hosting revenue, up 13% from a year ago, reflected strong growth in managed hosting revenue and re-pricing of existing colocation contracts to market rates. Compared to the second quarter, hosting revenue declined 5%, as the sale to Microsoft of certain data center assets drove lower sequential-quarter colocation revenue. The decline in colocation was offset by very strong 8% sequential-quarter growth in managed hosting as a result of strong sales in the second and third quarters of 2007. Virtualized and utility services contributed $15.0 million of managed hosting revenue in the third quarter, up 69% from a year ago and 11% from the second quarter.
In the third quarter, network services revenue of $76.6 million was essentially flat from the prior quarter. Hosting customers continued to increase their utilization of our Hosting Area Network (“HAN”) services for mission-critical data transport, driving revenue growth, which was offset by declines in managed network and bandwidth revenue.
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.
SAVVIS
Third-quarter Financial Results
October 23, 2007
page 4
Cost of revenue was $112.3 million, and included $1.4 million of non-cash equity-based compensation costs, resulting in gross profit as a percentage of total revenue, or gross margin, of 41% in the current quarter. Excluding non-cash equity-based compensation costs, gross margin was 42% in the current quarter, an increase from 41% in the same period a year ago, and down from 44% in the second quarter largely due to $3.2 million of costs associated with the development of five new data centers opening in 2007.
Sales, general, and administrative expenses (“SG&A”) for the current quarter were $51.1 million, as compared to $52.4 million for the same period last year and $52.3 million in the second quarter 2007. SG&A included non-cash equity-based compensation costs for the current quarter of $7.3 million, as compared to $6.5 million for the same period last year and $6.7 million in the second quarter 2007. As a percentage of revenue, excluding non-cash equity-based compensation costs, SG&A was 23% in the current quarter, down from 24% in the third quarter 2006 and consistent with the second quarter 2007.
In the third quarter of 2007, SAVVIS recorded an income tax benefit of $1.9 million to reflect the reduction of its expected annual effective tax rate from 1.75% to 1.0%.
SAVVIS’ consolidated net income was $5.3 million in the third quarter, compared to a net loss of $13.6 million in the same period last year and net income of $133.3 million in the second quarter 2007, which included $180.8 million for the gain on a sale of non-strategic assets and $45.1 million for a charge related to retirement of subordinated notes. Diluted earnings per share were $0.10 in the third quarter 2007, compared to losses per share of $(0.27) in the same period a year previously and diluted earnings per share of $2.36 in the second quarter 2007.
Adjusted EBITDA for the third quarter of $35.5 million included $3.2 million of operating costs associated with the new Atlanta, Boston, New York, Silicon Valley and Washington DC-area data centers, which have operating expenses ahead of revenue.
Pro Forma Commentary
Pro forma results exclude the impact of revenue and related costs from the sale of data center assets to Microsoft, CDN assets sold in January 2007 and the elimination of Telerate revenue as a result of the acquisition of Telerate by Reuters. Total pro forma revenue for the third quarter increased 8% from $175.8 million in the same period a year ago and 1% from $187.9 million in the second quarter 2007. Pro forma hosting revenue for the quarter grew 22% year over year and were up 2% sequentially from the second quarter of 2007.
SAVVIS
Third-quarter Financial Results
October 23, 2007
page 5
On a pro forma basis, Adjusted EBITDA for the third quarter increased 44% from $24.6 million in the same period a year ago, and declined 6% from $37.6 million compared to the second quarter 2007 on a pro forma basis. The sequential-quarter pro forma decline in Adjusted EBITDA reflects $3.2 million of operating costs associated with new data centers in development in the third quarter.
Cash Flow and Balance Sheet
Net cash provided by operating activities was $33.9 million in the third quarter. Cash capital expenditures for the quarter totaled $86.4 million, which included $70.2 million for the build-out of new data centers.
During the third quarter, SAVVIS borrowed $5.5 million against a previously-established credit facility with Cisco to fund network equipment purchases. SAVVIS’ long-term debt as of September 30, 2007, totaled $349.2 million. SAVVIS’ cash position at September 30, 2007, was $256.9 million, compared to $98.7 million at December 31, 2006, and $309.0 million at June 30, 2007.
Financial Outlook
Chief Financial Officer Jeff Von Deylen said, “SAVVIS has now largely completed the transitional initiatives of 2007, and looks forward to strong growth in the fourth quarter and continuing into 2008. Our record sales bookings in the third quarter demonstrate the strength of our model of providing high-quality data center services and managed hosting solutions for enterprises that want to achieve increased IT reliability and security at lower total cost. Given our market successes in 2007, we anticipate revenue for 2008 in a range of $910-925 million, with Adjusted EBITDA of $210-220 million.”
“On a pro forma basis, the revenue growth rate for 2007 is now 12% versus the previously-issued guidance of 14%, due primarily to the following factors:
| • | Colocation revenue will be lower than expected due to delayed customer installations to accommodate customers’ migration plans and a slower than expected fill rate in our recently vacated space. |
| • | Network revenue will be lower than expected primarily due to slightly higher churn in our managed network and bandwidth services. |
Adjusted EBITDA guidance is largely in line with our previous guidance.”
Fourth-quarter Financial Outlook
SAVVIS management’s current expectations for fourth-quarter 2007 financial results include:
| • | Total revenue in a range of $197-200 million for sequential-quarter growth of 4-5%, including |
| ¡ | total hosting revenue of $121-124 million, for sequential-quarter growth of 6-9%, including $58-60 million from managed hosting services, for sequential-quarter growth of 5-9%; and |
| • | Adjusted EBITDA in a range of $39-41 million, for sequential-quarter growth of 10-15%, reflecting an Adjusted EBITDA margin of approximately 20%; and |
| • | Capital expenditures of $125-130 million, of which approximately $100-105 million will be in cash and approximately $25 million will be financed through an existing credit facility. |
| • | For the full year 2007, total capital expenditures are expected to be approximately $380 million, of which approximately $30 million will be financed through an existing credit facility. |
SAVVIS
Third-quarter Financial Results
October 23, 2007
page 6
| ¡ | Total capital expenditures for 2007 will include approximately $225 million of cash capital expenditures related to development of seven data centers and approximately $35 million of largely financed capital expenditures for network upgrades, with approximately 60-70% of the remainder reflecting ongoing customer-growth-based investments. |
| ¡ | Ending cash balance for 2007 will be approximately $175-180 million. |
2008 Financial Outlook
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 15-16% on a reported basis. |
| ¡ | On a pro forma basis, management anticipates revenue growth of 19-21%. |
| ¡ | Pro forma hosting revenue growth of approximately 30-35%, as a result of strong demand for the company’s new data center expansions. |
| • | Adjusted EBITDA in a range of $210-220 million, reflecting an Adjusted EBITDA margin of 23-24%. |
| ¡ | On a pro forma basis, management anticipates Adjusted EBITDA growth of 42-49%. |
| • | Capital expenditures of $180-200 million, including approximately $40 million for development of data centers in Boston, Chicago and Dallas. |
The outlook for 2008 includes revenue, Adjusted EBITDA and capital expenditures from the base business as well as from the Phase 1 expansion plans in four data centers in the Atlanta, New York, Silicon Valley, and Washington DC areas and from the recently-announced Phase 2 data center expansion plans in the Boston, Chicago and Dallas areas.
Supplemental Financial Projections at Mid-Point of 2008 Outlook
| (US$ millions) | Revenue | Adjusted EBITDA | Capital Expenditures | ||||||
Base Business | $ | 847.5 | $ | 193.0 | $ | 136.0 | |||
Phase 1 Expansion | 50.0 | 20.0 | 10.0 | ||||||
Phase 2 Expansion | 20.0 | 2.0 | 44.0 | ||||||
* 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
SAVVIS
Third-quarter Financial Results
October 23, 2007
page 7
periods and because they enable investors to identify underlying business trends that may otherwise be distorted by the excluded items. The calculation of Adjusted EBITDA and pro forma results is not specified by United States generally accepted accounting principles. Our calculation of Adjusted EBITDA and of pro forma results may not be comparable to similarly-titled measures of other companies. Investors should consider these non-GAAP measures in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP.
Investor Conference Call
SAVVIS will webcast an investor conference call today, October 23, 2007, at 5:30PM EDT. 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 +1-703-639-1158 and 866-238-0826 (in North America, toll free). Recorded replays will be available on the website for six months, and by telephone through Friday, November 2, at +1-703-925-2533 and 888-266-2081 (in North America, toll free) with the access code 259626, beginning at about 8:00PM EDT 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, variability in pricing for SAVVIS’ products, highly competitive markets, rapid evolution of technology, variability in the availability and terms of financing, uncertainties related to merger and acquisition activity, 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, October 23, 2007. 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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SAVVIS, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenue | $ | 190,262 | $ | 193,748 | $ | 596,064 | $ | 563,300 | ||||||||
Operating Expenses: | ||||||||||||||||
Cost of revenue (including non-cash equity-based compensation of $1,437, $1,345, $4,303, and $1,776)(1) | 112,348 | 116,484 | 342,778 | 346,555 | ||||||||||||
Sales, general, and administrative expenses (including non-cash equity-based compensation of $7,284, $6,528, $20,362, and $10,708) | 51,101 | 52,372 | 156,593 | 142,551 | ||||||||||||
Depreciation, amortization, and accretion | 22,742 | 20,807 | 67,174 | 60,370 | ||||||||||||
(Gain) loss on sales of data center and CDN assets | 337 | — | (305,707 | ) | — | |||||||||||
Total Operating Expenses | 186,528 | 189,663 | 260,838 | 549,476 | ||||||||||||
Income from Operations | 3,734 | 4,085 | 335,226 | 13,824 | ||||||||||||
Loss on debt extinguishment | — | — | 45,127 | — | ||||||||||||
Net interest expense and other | 320 | 17,663 | 34,457 | 50,941 | ||||||||||||
Net Income (Loss) before Income Taxes | 3,414 | (13,578 | ) | 255,642 | (37,117 | ) | ||||||||||
Income taxes | (1,855 | ) | — | 2,559 | — | |||||||||||
Net Income (Loss) | 5,269 | (13,578 | ) | 253,083 | (37,117 | ) | ||||||||||
Accreted and deemed dividends on Series A | ||||||||||||||||
Convertible Preferred stock | — | — | — | 262,810 | ||||||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | 5,269 | $ | (13,578 | ) | $ | 253,083 | $ | (299,927 | ) | ||||||
Net Income (Loss) per Common Share | ||||||||||||||||
Basic | $ | 0.10 | $ | (0.27 | ) | $ | 4.81 | $ | (11.68 | ) | ||||||
Diluted | $ | 0.10 | $ | (0.27 | ) | $ | 4.55 | $ | (11.68 | ) | ||||||
Weighted-Average Common Shares Outstanding(2) | ||||||||||||||||
Basic | 52,898,799 | 50,994,700 | 52,603,217 | 25,681,868 | ||||||||||||
Diluted | 54,032,945 | 50,994,700 | 56,687,552 | 25,681,868 | ||||||||||||
| (1) | Excludes depreciation, amortization, and accretion, which is reported separately. |
| (2) | Diluted weighted-average common shares outstanding includes 2.6 million common shares for the nine months ended September 30, 2007, which reflects the dilution impact of the 3% convertible notes using the "if-converted" method. For the three months ended September 30, 2007, the convertible notes are anti-dilutive and, as such, are not included in diluted weighted-average common shares outstanding. For the three and nine months ended September 30, 2006, the effects of including the incremental shares associated with options, warrants, unvested restricted preferred units, unvested restricted stock units, and unvested restricted stock awards are antidilutive and, as such, are not included in diluted weighted-average common shares outstanding. The increase in weighted-average common shares outstanding for the nine months ended September 30, 2007, compared to September 30, 2006, was primarily due to the exchange of Series A Convertible Preferred stock for 37,417,347 shares of common stock on June 30, 2006. |
SAVVIS, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands)
| September 30, 2007 | December 31, 2006 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 256,940 | $ | 98,693 | ||||
Trade accounts receivable, net | 48,215 | 44,949 | ||||||
Prepaid expenses and other current assets | 21,877 | 21,607 | ||||||
Total Current Assets | 327,032 | 165,249 | ||||||
Property and equipment, net | 519,341 | 284,437 | ||||||
Other non-current assets | 19,859 | 17,333 | ||||||
Total Assets | $ | 866,232 | $ | 467,019 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current Liabilities: | ||||||||
Payables and other trade accruals | $ | 61,355 | $ | 43,009 | ||||
Current portion of long-term debt and lease obligations | 3,796 | 2,100 | ||||||
Other accrued liabilities | 105,500 | 94,977 | ||||||
Total Current Liabilities | 170,651 | 140,086 | ||||||
Long-term debt, net of current portion | 349,234 | 269,436 | ||||||
Capital and financing method lease obligations, net of current portion | 141,760 | 112,891 | ||||||
Other accrued liabilities | 59,417 | 82,941 | ||||||
Total Liabilities | 721,062 | 605,354 | ||||||
Stockholders’ Equity (Deficit): | ||||||||
Common stock | 529 | 515 | ||||||
Additional paid-in capital | 729,018 | 699,450 | ||||||
Accumulated deficit | (581,409 | ) | (834,492 | ) | ||||
Accumulated other comprehensive loss | (2,968 | ) | (3,808 | ) | ||||
Total Stockholders’ Equity (Deficit) | 145,170 | (138,335 | ) | |||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 866,232 | $ | 467,019 | ||||
SAVVIS, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net income (loss) | $ | 5,269 | $ | (13,578 | ) | $ | 253,083 | $ | (37,117 | ) | ||||||
Reconciliation of net income (loss) to net cash provided by operating activities: | ||||||||||||||||
Depreciation, amortization, and accretion | 22,742 | 20,807 | 67,174 | 60,370 | ||||||||||||
Non-cash equity-based compensation | 8,721 | 7,873 | 24,665 | 12,484 | ||||||||||||
Accrued interest | 3,635 | 14,139 | 35,547 | 39,840 | ||||||||||||
(Gain) loss on sales of data center and CDN assets | 337 | — | (305,707 | ) | — | |||||||||||
(Gain) loss on disposal of fixed assets | 40 | 306 | (934 | ) | 306 | |||||||||||
Loss on debt extinguishment | — | — | 45,127 | — | ||||||||||||
Net changes in operating assets and liabilities, net of effects from sales of assets: | ||||||||||||||||
Trade accounts receivable | (6,330 | ) | 2,271 | (1,062 | ) | 6,346 | ||||||||||
Prepaid expenses, other current assets, and other non-current assets | 7,193 | 591 | (5,647 | ) | (8,191 | ) | ||||||||||
Accounts payable, deferred revenue, and other accrued liabilities | (7,683 | ) | 5,174 | (22,005 | ) | 3,684 | ||||||||||
Net cash provided by operating activities | 33,924 | 37,583 | 90,241 | 77,722 | ||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Payments for capital expenditures | (86,386 | ) | (14,350 | ) | (248,249 | ) | (51,293 | ) | ||||||||
Proceeds from sale of data center assets, net | — | — | 190,225 | — | ||||||||||||
Proceeds from sale of CDN assets, net | — | — | 128,305 | — | ||||||||||||
Payment for purchase of data center buildings | — | — | — | (13,817 | ) | |||||||||||
Other investing activities, net | — | 14 | 694 | 124 | ||||||||||||
Net cash provided by (used in) investing activities | (86,386 | ) | (14,336 | ) | 70,975 | (64,986 | ) | |||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Proceeds from convertible notes offering | — | — | 345,000 | — | ||||||||||||
Proceeds from financing method lease | — | — | — | 50,600 | ||||||||||||
Proceeds from stock option exercises | 948 | 1,799 | 15,077 | 16,094 | ||||||||||||
Payments for extinguishment of Series A Subordinated Notes | — | — | (342,491 | ) | — | |||||||||||
Payments for issuance costs on convertible notes | — | — | (8,866 | ) | — | |||||||||||
Payments for employee taxes on equity-based instruments | (47 | ) | — | (10,160 | ) | — | ||||||||||
Principal payments under revolving credit facility | — | (32,000 | ) | — | (58,000 | ) | ||||||||||
Principal payments under capital lease obligations | (615 | ) | (389 | ) | (2,031 | ) | (2,248 | ) | ||||||||
Other financing activities, net | (154 | ) | (120 | ) | (154 | ) | (1,405 | ) | ||||||||
Net cash provided by (used in) financing activities | 132 | (30,710 | ) | (3,625 | ) | 5,041 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 267 | (515 | ) | 656 | (794 | ) | ||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (52,063 | ) | (7,978 | ) | 158,247 | 16,983 | ||||||||||
Cash and Cash Equivalents, Beginning of Period | 309,003 | 86,127 | 98,693 | 61,166 | ||||||||||||
Cash and Cash Equivalents, End of Period | $ | 256,940 | $ | 78,149 | $ | 256,940 | $ | 78,149 | ||||||||
SAVVIS, Inc. and Subsidiaries
Unaudited Selected Condensed Consolidated Financial Information
Reported Results
(dollars in thousands)
| Three Months Ended | ||||||||||
| September 30, | June 30, 2007 | |||||||||
| 2007 | 2006 | |||||||||
Revenue (as reported): | ||||||||||
Colocation | $ | 58,559 | $ | 55,296 | $ | 68,404 | ||||
Managed hosting | 55,155 | 45,228 | 51,005 | |||||||
Total hosting | 113,714 | 100,524 | 119,409 | |||||||
Network services(1) | 76,548 | 82,420 | 76,900 | |||||||
Other services(1) | — | 10,804 | 4,245 | |||||||
Total Revenue | $ | 190,262 | $ | 193,748 | $ | 200,554 | ||||
Adjusted EBITDA(2) Reconciliation: | ||||||||||
Income from operations | $ | 3,734 | $ | 4,085 | $ | 192,537 | ||||
Depreciation, amortization, and accretion | 22,742 | 20,807 | 22,787 | |||||||
(Gain) loss on sales of data center and CDN assets | 337 | — | (180,846 | ) | ||||||
Non-cash equity-based compensation | 8,721 | 7,873 | 8,165 | |||||||
Adjusted EBITDA | $ | 35,534 | $ | 32,765 | $ | 42,643 | ||||
| (1) | $1.4 million of revenue previously reported as other services revenue has been reclassified as network services revenue to reflect retention of network-services revenue SAVVIS had previously anticipated would be eliminated in 2007. |
| (2) | “Adjusted EBITDA” represents income from operations before depreciation, amortization, and accretion, gain (loss) 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. The calculation of Adjusted EBITDA is not specified by United States generally accepted accounting principles. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. |
SAVVIS, Inc. and Subsidiaries
Unaudited Selected Condensed Consolidated Pro Forma Financial Information
(dollars in thousands)
| Three Months Ended | Nine Months Ended 2007 | |||||||||||
| March 31, 2007 | June 30, 2007 | September 30, 2007 | ||||||||||
Pro Forma Revenue: | ||||||||||||
Colocation(1) | $ | 57,691 | $ | 59,986 | $ | 58,559 | $ | 176,236 | ||||
Managed hosting | 50,304 | 51,005 | 55,155 | 156,464 | ||||||||
Total hosting | 107,995 | 110,991 | 113,714 | 332,700 | ||||||||
Network services | 80,414 | 76,900 | 76,548 | 233,862 | ||||||||
Other services(2) | — | — | — | — | ||||||||
Total Pro Forma Revenue | $ | 188,409 | $ | 187,891 | $ | 190,262 | $ | 566,562 | ||||
Pro Forma Cost of Revenue(3) | 107,814 | 105,183 | 110,911 | 323,908 | ||||||||
Pro Forma Sales, General, & Administrative Expenses(4) | 46,143 | 45,151 | 43,817 | 135,111 | ||||||||
Pro Forma Adjusted EBITDA(5) | $ | 34,452 | $ | 37,557 | $ | 35,534 | $ | 107,543 | ||||
Non-GAAP and Pro Forma reconciliations
| (1) | Colocation revenue pro forma adjustments reflect the elimination of revenue related to a Microsoft contract exited in connection with the sale of data center assets in June 2007. The first quarter of 2007 also reflects the elimination of $3.6 million related to a one-time customer settlement. |
Colocation - as reported | $ | 69,416 | $ | 68,404 | $ | 58,559 | $ | 196,379 | |||||||
Pro forma adjustments | (11,725 | ) | (8,418 | ) | — | (20,143 | ) | ||||||||
Colocation - pro forma | $ | 57,691 | $ | 59,986 | $ | 58,559 | $ | 176,236 | |||||||
| (2) | Other services revenue pro forma adjustments reflect the eliminated revenue from content delivery services related to the sale of assets in January 2007, and the elimination of Telerate revenue in connection with Reuters’ acquisition of MoneyLine Telerate. |
Other services - as reported | $ | 5,114 | $ | 4,245 | $ | — | $ | 9,359 | |||||||
Pro forma adjustments | (5,114 | ) | (4,245 | ) | — | (9,359 | ) | ||||||||
Other services - pro forma | $ | — | $ | — | $ | — | $ | — | |||||||
| (3) | Cost of revenue pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein. |
Cost of revenue - as reported | $ | 116,675 | $ | 113,755 | $ | 112,348 | $ | 342,778 | ||||||||
Non-cash equity-based compensation | (1,359 | ) | (1,507 | ) | (1,437 | ) | (4,303 | ) | ||||||||
Pro forma adjustments | (7,502 | ) | (7,065 | ) | — | (14,567 | ) | |||||||||
Cost of revenue - pro forma | $ | 107,814 | $ | 105,183 | $ | 110,911 | $ | 323,908 | ||||||||
| (4) | Sales, general & administrative pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein. |
Sales, general, & administrative - as reported | $ | 53,171 | $ | 52,321 | $ | 51,101 | $ | 156,593 | ||||||||
Non-cash equity-based compensation | (6,420 | ) | (6,658 | ) | (7,284 | ) | (20,362 | ) | ||||||||
Pro forma adjustments | (608 | ) | (512 | ) | — | (1,120 | ) | |||||||||
Sales, general, & administrative - pro forma | $ | 46,143 | $ | 45,151 | $ | 43,817 | $ | 135,111 | ||||||||
| (5) | “Adjusted Pro Forma EBITDA” represents income from operations before depreciation, amortization, and accretion, gain (loss) on sales of assets, non-cash equity-based compensation, and adjustments made to eliminate the results of operations related to the asset sale and contract exit activity described herein. 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. The calculation of Adjusted EBITDA is not specified by United States generally accepted accounting principles. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. |
Adjusted Pro Forma EBITDA Reconciliation: | |||||||||||||||
Income from operations - as reported | $ | 138,955 | $ | 192,537 | $ | 3,734 | $ | 335,226 | |||||||
Depreciation, amortization, and accretion - as reported | 21,645 | 22,787 | 22,742 | 67,174 | |||||||||||
(Gain) loss on sales of data center and CDN assets - as reported | (125,198 | ) | (180,846 | ) | 337 | (305,707 | ) | ||||||||
Non-cash equity-based compensation - as reported | 7,779 | 8,165 | 8,721 | 24,665 | |||||||||||
Pro forma adjustments | (8,729 | ) | (5,086 | ) | — | (13,815 | ) | ||||||||
Adjusted Pro Forma EBITDA | $ | 34,452 | $ | 37,557 | $ | 35,534 | $ | 107,543 | |||||||
SAVVIS, Inc. and Subsidiaries
Unaudited Selected Condensed Consolidated Pro Forma Financial Information
(dollars in thousands)
| Three Months Ended | Year Ended December 31, | ||||||||||||||
| March 31, 2006 | June 30, 2006 | September 30, 2006 | December 31, 2006 | ||||||||||||
Pro Forma Revenue: | |||||||||||||||
Colocation(1) | $ | 41,413 | $ | 45,057 | $ | 48,232 | $ | 51,530 | $ | 186,232 | |||||
Managed hosting | 36,646 | 39,816 | 45,228 | 48,424 | 170,114 | ||||||||||
Total hosting | 78,059 | 84,873 | 93,460 | 99,954 | 356,346 | ||||||||||
Network services | 80,314 | 82,109 | 82,420 | 84,059 | 328,902 | ||||||||||
Other services(2) | — | — | — | — | — | ||||||||||
Total Pro Forma Revenue | $ | 158,373 | $ | 166,982 | $ | 175,880 | $ | 184,013 | $ | 685,248 | |||||
Pro Forma Cost of Revenue(3) | 101,047 | 105,157 | 106,777 | 109,203 | 422,184 | ||||||||||
Pro Forma Sales, General, & Administrative Expenses(4) | 40,407 | 42,869 | 44,547 | 46,198 | 174,021 | ||||||||||
Pro Forma Adjusted EBITDA(5) | $ | 16,919 | $ | 18,956 | $ | 24,556 | $ | 28,612 | $ | 89,043 | |||||
Non-GAAP and Pro Forma reconciliations
| (1) | Colocation revenue pro forma adjustments reflect the elimination of revenue related to a Microsoft contract exited in connection with the sale of data center assets in June 2007. The lower revenue adjustment in the second half of 2006 reflects power costs being directly paid by the customer. |
Colocation - as reported | $ | 50,118 | $ | 54,806 | $ | 55,296 | $ | 58,936 | $ | 219,156 | ||||||||||
Pro forma adjustments | (8,705 | ) | (9,749 | ) | (7,064 | ) | (7,406 | ) | (32,924 | ) | ||||||||||
Colocation - pro forma | $ | 41,413 | $ | 45,057 | $ | 48,232 | $ | 51,530 | $ | 186,232 | ||||||||||
| (2) | Other services revenue pro forma adjustments reflect the eliminated revenue from content delivery services related to the sale of assets in January 2007, and the elimination of Telerate revenue in connection with Reuters' acquisition of MoneyLine Telerate. |
Other services - as reported | $ | 12,877 | $ | 12,866 | $ | 10,804 | $ | 9,253 | $ | 45,800 | ||||||||||
Pro forma adjustments | (12,877 | ) | (12,866 | ) | (10,804 | ) | (9,253 | ) | (45,800 | ) | ||||||||||
Other services - pro forma | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| (3) | Cost of revenue pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein. |
Cost of revenue - as reported | $ | 112,969 | $ | 117,102 | $ | 116,484 | $ | 118,369 | $ | 464,924 | ||||||||||
Non-cash equity based compensation | (243 | ) | (186 | ) | (1,345 | ) | (1,209 | ) | (2,983 | ) | ||||||||||
Pro forma adjustments | (11,679 | ) | (11,759 | ) | (8,362 | ) | (7,957 | ) | (39,757 | ) | ||||||||||
Cost of revenue - pro forma | $ | 101,047 | $ | 105,157 | $ | 106,777 | $ | 109,203 | $ | 422,184 | ||||||||||
| (4) | Sales, general & administrative pro forma adjustments reflect the elimination of costs related to the asset sale and contract exit activity described herein. |
Sales, general, & administrative - as reported | $ | 43,356 | $ | 46,825 | $ | 52,372 | $ | 53,508 | $ | 196,059 | ||||||||||
Non-cash equity based compensation | (1,574 | ) | (2,608 | ) | (6,528 | ) | (6,013 | ) | (16,723 | ) | ||||||||||
Pro forma adjustments | (1,375 | ) | (1,348 | ) | (1,297 | ) | (1,297 | ) | (5,315 | ) | ||||||||||
Sales, general, & administrative - pro forma | $ | 40,407 | $ | 42,869 | $ | 44,547 | $ | 46,198 | $ | 174,021 | ||||||||||
| (5) | “Adjusted Pro Forma EBITDA” represents income from operations before depreciation, amortization, and accretion, gain (loss) on sales of assets, non-cash equity-based compensation, and adjustments made to eliminate the results of operations related to the asset sale and contract exit activity described herein. 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. The calculation of Adjusted EBITDA is not specified by United States generally accepted accounting principles. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. |
Adjusted Pro Forma EBITDA Reconciliation: | ||||||||||||||||||||
Income from operations - as reported | $ | 3,705 | $ | 6,034 | $ | 4,085 | $ | 11,626 | $ | 25,450 | ||||||||||
Depreciation, amortization, and accretion - as reported | 19,926 | 19,636 | 20,807 | 17,168 | 77,537 | |||||||||||||||
Non-cash equity-based compensation - as reported | 1,817 | 2,794 | 7,873 | 7,222 | 19,706 | |||||||||||||||
Pro forma adjustments | (8,529 | ) | (9,508 | ) | (8,209 | ) | (7,404 | ) | (33,650 | ) | ||||||||||
Adjusted Pro Forma EBITDA | $ | 16,919 | $ | 18,956 | $ | 24,556 | $ | 28,612 | $ | 89,043 | ||||||||||
SAVVIS, Inc. and Subsidiaries
Unaudited Supplemental Pro Forma Revenue Information
(in thousands)
Hosting Supplemental Information | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| March 31, 2006 | June 30, 2006 | September 30, 2006 | December 31, 2006 | March 31, 2007 | June 30, 2007 | September 30, 2007 | |||||||||||||||
Colocation | $ | 41,413 | $ | 45,057 | $ | 48,232 | $ | 51,530 | $ | 57,691 | $ | 59,986 | $ | 58,559 | |||||||
Managed hosting | 36,646 | 39,816 | 45,228 | 48,424 | 50,304 | 51,005 | 55,155 | ||||||||||||||
Hosting area network | 13,146 | 13,784 | 13,717 | 14,613 | 15,297 | 14,832 | 15,528 | ||||||||||||||
Total Data Center Pro forma Revenue | $ | 91,205 | $ | 98,657 | $ | 107,177 | $ | 114,567 | $ | 123,292 | $ | 125,823 | $ | 129,242 | |||||||
Average Billed Square Feet | |||||||||||||||||||||
Colocation | 489.7 | 504.5 | 529.4 | 551.8 | 577.1 | 575.9 | 548.6 | ||||||||||||||
Managed hosting | 9.8 | 10.3 | 11.4 | 12.6 | 13.2 | 13.6 | 14.2 | ||||||||||||||
Hosting area network | — | — | — | — | — | — | — | ||||||||||||||
Total - Average Billed Square Feet | 499.5 | 514.8 | 540.8 | 564.4 | 590.3 | 589.5 | 562.8 | ||||||||||||||
Average Monthly Data Center Revenue Per Billed Square Foot(1) | |||||||||||||||||||||
Colocation | $ | 28.2 | $ | 29.8 | $ | 30.4 | $ | 31.1 | $ | 33.3 | $ | 34.7 | $ | 35.6 | |||||||
Managed hosting | 1,242.3 | 1,293.8 | 1,321.4 | 1,284.7 | 1,266.0 | 1,253.2 | 1,290.7 | ||||||||||||||
Hosting area network(2) | 8.8 | 8.9 | 8.5 | 8.6 | 8.6 | 8.4 | 9.2 | ||||||||||||||
Total Data Center Revenue per Average Billed Square Foot | $ | 60.9 | $ | 63.9 | $ | 66.1 | $ | 67.7 | $ | 69.6 | $ | 71.2 | $ | 76.5 | |||||||
| (1) | Data center monthly revenue per square foot is calculated as the revenue per quarter divided by the average billed square feet per quarter stated on a monthly basis. |
| (2) | Hosting area network monthly revenue per square foot is calculated as the hosting area network revenue per quarter divided by total-average billed square feet stated on a monthly basis. |
Network Services Supplemental Information
| Three Months Ended | |||||||||||||||||||||
| March 31, 2006 | June 30, 2006 | September 30, 2006 | December 31, 2006 | March 31, 2007 | June 30, 2007 | September 30, 2007 | |||||||||||||||
Managed network | $ | 49,601 | $ | 51,768 | $ | 52,933 | $ | 52,951 | $ | 49,819 | $ | 47,666 | $ | 47,033 | |||||||
Hosting area network | 13,146 | 13,784 | 13,717 | 14,613 | 15,297 | 14,832 | 15,528 | ||||||||||||||
Bandwidth | 17,567 | 16,557 | 15,770 | 16,495 | 15,298 | 14,402 | 13,987 | ||||||||||||||
Total Pro forma network services | $ | 80,314 | $ | 82,109 | $ | 82,420 | $ | 84,059 | $ | 80,414 | $ | 76,900 | $ | 76,548 | |||||||