Exhibit 99.1
Switch and Data Reports First Quarter 2007 Financial Results
-- Reports 18% Increase in Revenues Over Same Quarter Prior Year
-- Adjusted EBITDA, a Non-GAAP Measure, Increases 18% Over First
Quarter 2006
-- 857 Customers: Excellent Quarter for New Customers and Key
Customer Expansions including 121 Media, NTT America and Time
Warner Cable
Business Editors/Technology Editors
TAMPA, Fla.--(BUSINESS WIRE)--May 14, 2007--Switch & Data
Facilities Company, Inc. (NASDAQ:SDXC), a leading provider of network
neutral interconnection and colocation services, today reported
financial results for the three months ended March 31, 2007.
For the three months ended March 31, 2007 total revenue increased
18% to $31.5 million from $26.6 million in the comparable period in
2006. Recurring revenue, which consists of colocation and
interconnection services, was $29.8 million in first quarter 2007, an
increase of 17% over the comparable period in 2006. The increase in
recurring revenue was primarily due to the sale of services to new and
existing customers.
For the first quarter 2007, non-recurring revenue, representing
one time installation fees and services, was $1.6 million, compared to
$1.0 million in the prior year.
Cost of revenues, excluding depreciation and amortization, for the
three months ended March 31, 2007 was $16.5 million as compared to
$14.5 million for the three months ended March 31, 2006. The increase
in cost of revenues was primarily due to the expansion of the
Company's facilities in several markets and increased demand for
power. As a percent of revenue, cost of revenues in the first quarter
of 2007 was 52%, an improvement from 54% in the same period of the
prior year.
For the three months ended March 31, 2007, sales and marketing
costs were $3.8 million as compared to $3.1 million in the comparable
quarter in 2006. The increase was due primarily to an increase in
sales commissions due to revenue performance, wage expense due to
increased headcount and stock based compensation expense.
General and administrative expenses increased by $1.6 million for
the three months ended March 31, 2007 to $3.9 million from $2.3
million for the three months ended March 31, 2006. The increase was
due primarily to an increase in professional fees, stock compensation
expense and costs related to being a public company. Stock based
compensation expense recorded in general and administrative expense
was $0.5 million in the first quarter of 2007. Total stock based
compensation expense was $0.9 million in the first quarter of 2007.
Depreciation and amortization was $6.2 million in first quarter
2007, up from $5.8 million in the same period of the prior year. The
increase was attributable to expansion of the Company's facilities.
Adjusted EBITDA, which is a non-GAAP measure, and which the
Company defines as operating income from operations, plus depreciation
and amortization, stock-based compensation expense and other non-cash
items such as deferred rent and asset impairment, was $8.9 million in
the first quarter of 2007 as compared to $7.5 million for the first
three months of 2006. A reconciliation of adjusted EBITDA to operating
income can be found at the end of this release.
Results for first quarter 2007 included a $2.6 million lease
litigation settlement expense and a $2.8 million loss from debt
extinguishment. Excluding the impact of the non-recurring items:
-- Income from operations would be $1.1, compared to $0.8 million
in the same period in the prior year;
-- Net loss would be ($1.2) million as compared to a net loss of
($2.3) million in first quarter 2006.
Loss per common share was affected by a $225.8 million deemed
preferred stock dividend recorded in connection with the corporate
reorganization and accretion on preferred stock. A reconciliation of
net income excluding one-time items can be found at the end of this
release.
Balance Sheet and Cash Flow
The Company had cash and cash equivalents of $42.0 million on
March 31, 2007. Total debt outstanding on March 31, 2007 was $39.5
million down from $144.2 million as of December 31, 2006.
Keith Olsen, CEO and President commented, "We had an excellent
first quarter. The success of our first quarter results can be
measured by our financial and operating results. We ended the quarter
with strong operating metrics. We won bigger deals, added more new
logos than in any quarter in 2006, experienced increased demand from
our existing customers, as well as growth in our interconnection
services." Mr. Olsen further added, "The macro drivers in the industry
continue to scale, and Switch and Data benefits from this industry
growth."
Business Outlook
Switch and Data is reiterating its guidance for 2007. The Company
expects total revenue to be approximately $127 million, with $122
million from recurring revenue.
Adjusted EBITDA is expected to be approximately $40 million.
Adjusted EBITDA margins are projected to be approximately 32%.
Capital expenditures for 2007 are estimated to be between $28
million and $30 million.
Switch and Data does not provide forward-looking guidance for
certain financial data, such as depreciation, amortization, net income
(loss) from operations, cash generated from operating activities and
cash used in investing activities, and as a result, is not able to
provide a reconciliation of GAAP to non-GAAP financial measures for
forward-looking data. The Company intends to calculate the various
non-GAAP financial measures in future periods consistent with the
calculation method utilized for the three months ended March 31, 2007
as presented within this press release.
A reconciliation between GAAP information and non-GAAP information
contained in this press release can be found in the table immediately
following the Consolidated Statements of Cash Flow as well as on the
Company's website in the Investor Relations section.
Conference Call Info
The Company will host a conference call to discuss first quarter
2007 results on Monday, May 14, 2007 at 4:30 p.m. ET. To listen to the
conference call live, please dial 1-888-396-2386 or 1-617-847-8712
(international callers) and reference Passcode 25298771. The
conference call will be webcast and can be accessed from the Company's
website at www.switchanddata.com under the Investor Relations section.
A replay of the conference call will be available for one week
beginning at 6:30 p.m. ET on Monday, May 14, 2007 until May 21, 2007.
The replay can be accessed by calling 1-888-286-8010 or 1-617-801-6888
(international) and reference Passcode 60041494. In addition, the
webcast will be archived on the Company's website at
www.switchanddata.com.
About the Company
Switch and Data is a leading provider of Internet exchange and
colocation services. Based in Tampa, Florida, Switch and Data operates
one of the largest footprints of neutral Internet exchange and
colocation facilities in North America serving more than 850
customers. Switch and Data's PAIX is recognized worldwide as the
premier name in peering and Internet exchange services and is home to
one of the largest commercial exchange points in North America. For
more information, please visit http://www.switchanddata.com/.
Forward-Looking Statements
Certain statements herein are "forward-looking statements". Such
forward-looking statements are not historical facts but instead
reflect Switch and Data's current expectations or beliefs concerning
future events and results of operations, many of which, by their
nature, are inherently uncertain and outside of Switch and Data's
control. It is possible that actual results may differ, possibly
materially, from those anticipated in these forward-looking
statements. The information set forth under the caption "Business
Outlook" are forward-looking statements. Words such as expects,
believes, estimates, anticipates and similar language indicate
forward-looking statements. Further information concerning Switch and
Data and its business, including factors that potentially could
materially affect Switch and Data's financial results and conditions,
as well as its other achievements, are contained in Switch and Data's
filings with the Securities and Exchange Commission. Switch and Data
does not undertake to publicly update or revise its forward-looking
statements, whether as a result of new information, future events or
otherwise.
Switch & Data Facilities Company, Inc.
Consolidated Statement of Operations
($000) (Unaudited)
For the three months ended
March 31,
--------------------------
2006 2007
------------ ------------
Revenues $ 26,601 $ 31,470
Costs and operating expenses:
Cost of revenues, exclusive of depreciation
and amortization 14,480 16,496
Sales and marketing 3,145 3,817
General and administrative 2,305 3,884
Depreciation and amortization 5,796 6,163
Lease litigation settlement - 2,600
Asset impairment 52 -
------------ ------------
Total costs and operating expenses 25,778 32,960
------------ ------------
Operating income (loss) 823 (1,490)
Interest income 23 222
Interest expense (2,769) (2,608)
Loss from debt extinguishment - (2,809)
Other income (expense), net 3 (104)
------------ ------------
Income (loss) from continuing operations
before income taxes (1,920) (6,789)
Provision for income taxes (33) (12)
------------ ------------
Loss from continuing operations (1,953) (6,801)
Income (loss) from discontinued operations (378) 170
------------ ------------
Net loss (2,331) (6,631)
Preferred stock accretions and dividends (3,289) (227,522)
------------ ------------
Net loss, attributable to common
shareholders $ (5,620) $(234,153)
============ ============
Loss per share - basic and diluted:
Continuing operations, attributable to
common shareholders $ (0.05) $ (3.61)
Discontinued operations (0.00) -
------------ ------------
Net loss, attributable to common
shareholders $ (0.05) $ (3.61)
============ ============
Weighted average shares outstanding 107,638 64,937
Switch & Data Facilities Company, Inc.
Condensed Consolidated Balance Sheet
($000) (Unaudited)
December 31, March 31,
2006 2007
------------ -----------
Assets
Cash and cash equivalents 3,671 42,021
Current assets 8,735 10,352
Long-term assets 139,650 134,300
------------ -----------
Total assets $ 152,056 $ 186,673
============ ===========
Liabilities, Preferred Stock and
Stockholders' Equity (Deficit)
Current liabilities $ 16,261 $ 21,495
Current portion of long-term debt 4,125 2,250
Other long-term liabilities 11,785 12,242
Long-term debt, less current portion 140,031 37,251
------------ -----------
Total liabilities 172,202 73,238
Series C redeemable preferred stock 14,376 -
Series B convertible preferred stock 179,798 -
Commitments and contingencies
Stockholders' equity (deficit)
Common stock - Successor - 3
Common stock - Predecessor 4 -
Series B common stock 7 -
Series D-2 preferred stock 5 -
Unearned stock compensation (137) (102)
Additional paid in capital - 336,047
Accumulated deficit (214,971) (223,336)
Accumulated other comprehensive income 772 823
------------ -----------
Total stockholders' equity (deficit) (214,320) 113,435
------------ -----------
Total liabilities, preferred stock and
stockholders' equity (deficit) $ 152,056 $ 186,673
============ ===========
Switch & Data Facilities Company, Inc.
Condensed Consolidated Statement of Cash Flows
($000) (Unaudited)
For the three months ended
March 31,
--------------------------
2006 2007
------------ -----------
Cash flows from operating activities
Net loss $ (2,331) $ (6,631)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation 3,852 4,348
Amortization of debt issuance costs 209 157
Amortization of other intangible assets 1,957 1,805
Stock compensation expense 68 913
Loss on debt extinguishment - 2,359
Provision for bad debts, net of recoveries 240 42
Deferred rent 536 222
Change in fair value of derivative asset
and derivative liability (817) 256
Asset impairment 403 -
Loss on disposal of fixed assets - 24
Changes in operating assets and
liabilities, net of acquired amounts (8) 4,220
------------ -----------
Net cash provided by operating
activities 4,109 7,715
------------ -----------
Cash flows from investing activities
Purchase of property and equipment, and
other (7,735) (5,931)
------------ -----------
Net cash used in investing activities (7,735) (5,931)
------------ -----------
Cash flows from financing activities
Principal payments under long-term debt (63) (104,655)
Public offering costs - (1,024)
Proceeds from initial public offering - 142,290
Debt issuance and amendment costs - (55)
------------ -----------
Net cash provided by (used in)
financing activities (63) 36,556
------------ -----------
Net increase (decrease) in cash and cash
equivalents (3,689) 38,340
Effect of exchange rate changes on cash (3) 10
Cash and cash equivalents
Beginning of the period 10,417 3,671
------------ -----------
End of the period $ 6,725 $ 42,021
============ ===========
Additional Company Information
- ----------------------------------------------------------------------
Three Months Ended
March 31,
-----------------------------------------
2006 2007
-------------------- --------------------
($000) As % of Rev. ($000) As % of Rev.
------- ------------ ------- ------------
Revenue
- -----------------------------
Colocation 15,441 58% 18,917 60%
Interconnection 10,117 38% 10,916 35%
------- ------------ ------- ------------
Recurring Total 25,558 96% 29,833 95%
Non-recurring 1,043 4% 1,637 5%
------- ------------ ------- ------------
TOTAL 26,601 100% 31,470 100%
======= ============ ======= ============
As of March 31,
---------------
2006 2007
Number of customers 794 857
Number of cross connects 16,602 18,194
Cabinet equivalents billed 5,127 5,987
Utilization rate 65% 67%
Three Months Ended
March 31,
------------------
2006 2007
New Sales
--------------------------
Monthly Recurring Revenue* $ 658 $ 896
Non-recurring Revenue ** $ 809 $1,617
-------- --------
TOTAL $1,467 $2,513
======== ========
*Monthly recurring revenue represents new service agreements
entered into by new and existing customers during the given quarter.
Revenue from these agreements will recur monthly over the life of the
agreement.
**Non recurring revenue represents the one-time installation fees
associated with new service agreements. These one-time fees are billed
to customers upon completion of the installation service and such
revenue is recognized on a straight-line basis over the life of the
agreement.
GAAP RECONCILIATIONS
- ----------------------------------------------------------------------
Reconciliation of Net Income, excluding one-time items
For the three months ended
-------------------------------
March 31, 2006 March 31, 2007
-------------- ---------------
Operating income (loss) $ 823 $ (1,490)
Lease litigation expense - 2,600
-------------- ---------------
Operating income, excluding the impact
of non-recurring items. $ 823 $ 1,110
============== ===============
For the three months ended
-------------------------------
March 31, 2006 March 31, 2007
-------------- ---------------
Net loss $ (2,331) $ (6,631)
Lease litigation expense - 2,600
Loss from debt extinguishment - 2,809
-------------- ---------------
Net loss, attributable to common
shareholders, excluding the impact of
non-recurring items $ (2,331) $ (1,222)
============== ===============
Adjusted EBITDA Reconciliation
The following is a reconciliation of the Company's operating
income (loss) for the three month periods ended March 31, 2006 and
March 31, 2007 to Adjusted EBITDA.
Switch and Data uses Adjusted EBITDA:
-- As measurements of operating performance because they assist
management in comparing the results on a consistent basis as
they remove the impact of items not directly resulting from
operations;
-- For planning purposes, including the preparation of its
internal annual operating budget;
-- To establish targets for certain management compensation; and
-- To evaluate the Company's capacity to incur and service debt,
fund capital expenditures and expand the business.
Adjusted EBITDA as calculated by the Company is not necessarily
comparable to similarly titled measures used by other companies. In
addition, Adjusted EBITDA: (a) does not represent net income or cash
flows from operating activities as defined by GAAP; (b) is not
necessarily indicative of cash available to fund the Company's cash
flow needs; and (c) should not be considered as alternatives to net
income, operating income, cash flows from operating activities or the
Company's other financial information as determined under GAAP.
The Company prepares Adjusted EBITDA by adjusting EBITDA to
eliminate the impact of a number of items that it does not consider
indicative of its core operating performance. Investors are encouraged
to evaluate each adjustment and the reasons the Company considers them
appropriate. As an analytical tool, Adjusted EBITDA is subject to all
of the limitations applicable to EBITDA. In addition, in evaluating
Adjusted EBITDA, investors should be aware that in the future the
Company may incur expenses similar to the adjustments in this
presentation. Switch and Data's presentation of Adjusted EBITDA should
not be construed as an implication that its future results will be
unaffected by unusual or non-recurring items.
For the Three Months Ended
--------------------------
Mar 31, 2006 Mar 31, 2007
------------- ------------
Operating income (loss) $ 823 $ (1,490)
Depreciation and amortization 5,796 6,163
Asset impairment 52 -
Lease litigation settlement accrual - 2,600
Deferred rent expense, non-cash (1) 630 388
Loss on disposal of fixed assets (2) - 24
Stock-based compensation expense (3) 68 913
Legal expenses for real estate litigation
(4) 165 328
------------- ------------
Adjusted EBITDA $ 7,534 $ 8,926
============= ============
Footnotes:
- -------------------------------------------
(1) Rent is accrued as a straight-line expense that incorporates
future lease cost escalations. The Deferred rent line item on the
Statement of Cash Flows accounts for the difference between cash paid
for rent and accrued rent expense for the period. The 1st Quarter
2007 amount is $165 higher than the Statement of Cash Flows to
account for discontinued operations deferred rent.
(2) Loss on disposal of fixed assets is a non-cash expense that can be
found on the Statement of Cash Flows.
(3) Stock compensation expense is a non-cash accrued expense to the
company that can be found on the Statement of Cash Flows.
(4) We have incurred legal expenses for lawsuits brought by several
landlords for alleged breaches of lease agreements. These expenses
are included in the General and administrative line item of our
Statement of Operations.
CONTACT: Switch & Data Facilities Company, Inc.
Investor Relations:
Kathleen Heaney, 203-803-3585
ir@switchanddata.com
or
Media:
Brian Ruby, 203-682-8268
pr@switchanddata.com