EXHIBIT 99.1
Switch and Data Reports Second Quarter 2007 Financial Results
-- Reports 22% Increase in Revenues Over Second Quarter 2006
-- Reports 26% Increase in Adjusted EBITDA, a Non-GAAP Measure,
Over Second Quarter 2006
-- Customer wins and expansions; Akamai, Cox Communications, IIJ
Japan America, Savvis, and Telecom Malaysia
-- Raises 2007 Revenue Guidance to $135MM and Adjusted EBITDA
guidance to $42MM
Business Editors
TAMPA, Fla.--(BUSINESS WIRE)--Aug. 13, 2007--Switch & Data
Facilities Company, Inc. (NASDAQ:SDXC), a leading provider of network
neutral interconnection and colocation services, today reported strong
financial results for the three months ended June 30, 2007.
Total revenues for the three months ended June 30, 2007 increased
22% to $33.3 million from $27.3 million in the comparable period in
2006. Recurring revenues, which consist of colocation and
interconnection services, were $31.5 million in the second quarter
2007, an increase of 20% over the comparable period in 2006.
Non-recurring revenues, representing one time installation fees and
services, were $1.8 million, compared to $1.1 million in the prior
year.
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, increased 26% to
$9.8 million in the second quarter of 2007 as compared to $7.8 million
for the second three months of 2006. Adjusted EBITDA margins increased
to 29% in the second quarter, from 28% in the same quarter of the
prior year. (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.)
Keith Olsen, CEO and President, commented, "Successful execution
of our business model enabled us to deliver strong operational and
financial results during the quarter. We will continue making
investments to support our future growth." Mr. Olsen further added,
"With our second quarter momentum and the continuing demand in the
market, we are increasing guidance for 2007."
Expenses and Balance Sheet
Cost of revenues, excluding depreciation and amortization, for the
three months ended June 30, 2007 was $17.3 million as compared to
$14.7 million for the three months ended June 30, 2006. As a percent
of revenues, cost of revenues was lower in the second quarter of 2007
at 52%, as compared to 54% in the same period of the prior year.
Sales and marketing costs for the second quarter 2007 were $4.0
million as compared to $3.0 million in the comparable quarter in 2006.
General and administrative expenses were $3.8 million for the
second quarter as compared to $2.8 million for the three months ended
June 30, 2006. Total stock based compensation expense was $1.1 million
in the second quarter of 2007.
The Company had cash and cash equivalents of $42.0 million on June
30, 2007. Total debt outstanding on June 30, 2007 was $39.3 million,
down from $144.2 million as of December 31, 2006.
Business Outlook
Switch and Data is updating its financial guidance for 2007. The
Company expects total revenues to be $135 million and Adjusted EBITDA
to be $42 million.
As Switch and Data has outperformed its plan, the Company is
increasing capital expenditures for the current year to accelerate
product capacity. Capital expenditures for 2007 are now expected to be
between $37 million and $39 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 June 30, 2007
as presented within this press release.
Conference Call Info
The Company will host a conference call to discuss second quarter
2007 results on Monday, August 13, 2007 at 4:30 p.m. ET. To listen to
the conference call live, please dial 1-800-322-2803 or 1-617-614-4925
(international callers) and reference Passcode 28532373. 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, August 13, 2007 until August 20,
2007. The replay can be accessed by calling 1-888-286-8010 or
1-617-801-6888 (international) and referencing Passcode 82602907. 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 870
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
(in thousands, except earnings per share)
(Unaudited)
Three months Six months
ended June 30, ended June 30,
------------------ --------------------
2006 2007 2006 2007
--------- -------- --------- ----------
Revenues $ 27,332 $33,277 $ 53,933 $ 64,747
Costs and operating expenses
Cost of revenues, exclusive
of depreciation and
amortization 14,702 17,349 29,182 33,846
Sales and marketing 2,975 4,044 6,120 7,861
General and administrative 2,767 3,798 5,072 7,682
Depreciation and amortization 5,709 6,049 11,505 12,212
Lease litigation settlement -- -- -- 2,600
Asset impairment 1,789 -- 1,841 --
--------- -------- --------- ----------
Total costs and operating
expenses
27,942 31,240 53,720 64,201
--------- -------- --------- ----------
Operating income (loss) (610) 2,037 213 546
Interest income 28 473 51 695
Interest expense (3,066) (575) (5,835) (3,183)
Loss from debt extinguishment -- -- -- (2,809)
Other income (expense), net 141 (9) 144 (113)
--------- -------- --------- ----------
Income (loss) from
continuing operations
before income taxes (3,507) 1,926 (5,427) (4,864)
Provision for income taxes (27) -- (60) (12)
--------- -------- --------- ----------
Income (loss) from
continuing operations (3,534) 1,926 (5,487) (4,876)
Income (loss) from discontinued
operations 19 37 (359) 207
--------- -------- --------- ----------
Net income (loss) (3,515) 1,963 (5,846) (4,669)
Preferred stock accretions and
dividends (3,289) -- (6,578) (227,522)
--------- -------- --------- ----------
Net income (loss),
attributable to common
shareholders $ (6,804) $ 1,963 $(12,424) $(232,191)
========= ======== ========= ==========
Income (loss) per share--basic
Continuing operations,
attributable to common
shareholders $ (0.06) $ 0.06 $ (0.11) $ (4.71)
Discontinued operations 0.00 0.00 (0.01) 0.00
--------- -------- --------- ----------
Net income loss,
attributable to common
shareholders $ (0.06) $ 0.06 $ (0.12) $ (4.71)
========= ======== ========= ==========
Weighted average shares
outstanding 107,512 33,849 107,575 49,307
Income (loss) per share--
diluted
Continuing operations,
attributable to common
shareholders $ 0.06 $ 0.06 $ (0.11) $ (4.71)
Discontinued operations 0.00 0.00 (0.01) 0.00
--------- -------- --------- ----------
Net income (loss),
attributable to common
shareholders $ (0.06) $ 0.06 $ (0.12) $ (4.71)
========= ======== ========= ==========
Weighted average shares
outstanding 107,512 34,075 107,575 49,307
Switch & Data Facilities Company, Inc.
Condensed Consolidated Balance Sheet
(in thousands)
(Unaudited)
December 31, June 30,
2006 2007
------------ ----------
Assets
Cash and cash equivalents 3,671 42,041
Current assets 8,735 8,936
Long-term assets 139,650 138,386
------------ ----------
Total assets $ 152,056 $ 189,363
============ ==========
Liabilities, Preferred Stock and Stockholders'
Equity (Deficit)
Current liabilities $ 16,261 $ 20,141
Current portion of long-term debt 4,125 3,000
Other long-term liabilities 11,785 12,921
Long-term debt, less current portion 140,031 36,314
------------ ----------
Total liabilities 172,202 72,376
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) (71)
Additional paid in capital - 337,023
Accumulated deficit (214,971) (221,374)
Accumulated other comprehensive income 772 1,406
------------ ----------
Total stockholders' equity (deficit) (214,320) 116,987
------------ ----------
Total liabilities, preferred stock and
stockholders' equity (deficit) $ 152,056 $ 189,363
============ ==========
Switch & Data Facilities Company, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
Six months
ended June 30,
--------------------
2006 2007
--------- ----------
Cash flows from operating activities
Net loss $ (5,846) $ (4,669)
Adjustments to reconcile net loss to net cash
provided by operating Activities
Depreciation 7,524 8,581
Amortization of debt issuance costs 420 244
Amortization of other intangible assets 3,994 3,621
Stock compensation expense 127 1,968
Loss on debt extinguishment -- 2,359
Provision for bad debts, net of recoveries 369 (210)
Deferred rent 1,048 675
Change in fair value of derivative asset and
derivative liability (1,385) (32)
Asset impairment 2,193 --
Loss on disposal of fixed assets -- 38
Changes in operating assets and liabilities,
net of acquired amounts
(Increase) decrease in accounts
receivable (359) 428
Increase in prepaids and other assets (251) (325)
Decrease in other long term assets -- 13
Increase in accounts payable, accrued
expenses, and other liabilities 130 1,484
Increase in unearned revenue 724 1,528
--------- ----------
Net cash provided by operating
activities 8,688 15,703
--------- ----------
Cash flows from investing activities
Purchase of property and equipment, and other (11,554) (13,766)
--------- ----------
Net cash used in investing activities (11,554) (13,766)
--------- ----------
Cash flows from financing activities
Principal payments under long-term debt (125) (104,843)
Proceeds from exercise of common stock -- 1
Public offering costs (51) (1,072)
Proceeds from initial public offering, net of
commissions -- 142,290
Debt issuance and amendment costs (137) (55)
--------- ----------
Net cash provided by (used in)
financing activities (313) 36,321
--------- ----------
Net increase (decrease) in cash and cash
equivalents (3,179) 38,258
Effect of exchange rate changes on cash 19 112
Cash and cash equivalents
Beginning of the period 10,417 3,671
--------- ----------
End of the period $ 7,257 $ 42,041
========= ==========
Additional Company Information
- ----------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2006 2007 2006 2007
-------------- ------------ ------------ ------------
Revenues
Colocation $15,792 58% $20,344 61% $31,233 58% $39,261 61%
Interconnection 10,412 38% 11,179 34% 20,529 38% 22,095 34%
-------- ----- ------- ---- ------- ---- ------- ----
Recurring
Total $26,204 96% $31,523 95% $51,762 96% $61,356 95%
Non-recurring 1,128 4% 1,754 5% 2,171 4% 3,391 5%
-------- ----- ------- ---- ------- ---- ------- ----
Total $27,332 100% $33,277 100% $53,933 100% $64,747 100%
======== ===== ======= ==== ======= ==== ======= ====
As of June 30,
---------------------------
2006 2007
------------ ------------
Number of customers 821 871
Number of cross connects 16,991 18,775
Cabinets equivalents billed 5,393 6,184
Utilization rate 64% 69%
Three Months Ended June 30,
---------------------------
2006 2007
------------ ------------
New Sales
- -----------------------------
Recurring Revenues* $ 915 $ 975
Non-recurring Revenues** 1,148 2,967
------------ ------------
New Sales $ 2,063 $ 3,942
============ ============
*Recurring revenues represent new service agreements entered into
by new and existing customers during the given quarter. Revenues from
these agreements will recur monthly over the life of the agreement.
**Non-recurring revenues represent 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
revenues are recognized on a straight-line basis over the life of the
agreement.
Adjusted EBITDA Reconciliation
The following is a reconciliation of the Company's operating
income (loss) for the three month periods ended June 30, 2006 and June
30, 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.
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ---------------
2006 2007 2006 2007
------- ------- ------- -------
Operating income (loss) $ (610) $ 2,037 $ 213 $ 546
Depreciation and amortization 5,709 6,049 11,505 12,212
Asset impairment 1,789 - 1,841 -
Lease litigation settlement accrual - - - 2,600
Deferred rent expense, non-cash (1) 512 453 1,048 840
Loss on disposal of fixed assets (2) - 14 - 38
Stock-based compensation expense (3) 59 1,055 127 1,968
Legal expenses for real estate
litigation (4) 305 171 470 499
------- ------- ------- -------
Adjusted EBITDA $ 7,764 $ 9,779 $15,204 $18,703
======= ======= ======= =======
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. Amounts for 2007
are $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) The Company has incurred legal expenses for lawsuits brought by
several landlords for alleged breach of lease agreements. These
expenses are included in the General and administrative line item of
the Company's 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