Exhibit 99.1
Switch and Data Reports Third Quarter 2007 Financial and Operating Results
-- Revenue Increased 26% Over Third Quarter 2006
-- Reports 54% Increase in Adjusted EBITDA, a Non-GAAP Measure,
Over Third Quarter 2006
-- Customer Wins; Azoogle, Marchex, and Telmex
-- Increases 2007 Guidance
-- Revenue of $137.0 million
-- Adjusted EBITDA of $42.5 million
TAMPA, Fla.--(BUSINESS WIRE)--Nov. 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 September 30, 2007.
Total revenues for the three months ended September 30, 2007
increased 26% to $35.4 million from $28.2 million in the comparable
period in 2006. Recurring revenues, which consist of colocation and
interconnection services, were $33.5 million in the third quarter
2007, an increase of 25% over the comparable period in 2006.
Non-recurring revenues, representing one time installation fees and
services, were $1.9 million compared to $1.3 million in the prior
year.
Adjusted EBITDA, which is a non-GAAP measure, and which the
Company defines as operating income from continuing operations, plus
depreciation and amortization, stock-based compensation expense and
other non-cash items such as deferred rent and asset impairment,
increased 54% to $11.2 million in the third quarter of 2007 as
compared to $7.2 million in the comparable period in 2006. Adjusted
EBITDA margins increased to 31.5% in the third quarter, from 25.6% in
the comparable period in 2006. (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, "I am pleased with our
overall results, we had a terrific third quarter." Mr. Olsen added,
"Our performance reflects the continued success in executing on our
business plan."
Expenses and Balance Sheet
Cost of revenues, excluding depreciation and amortization, for the
three months ended September 30, 2007 was $18.7 million as compared to
$15.8 million for the three months ended September 30, 2006. As a
percentage of revenues, cost of revenues was lower in the third
quarter of 2007 at 53% as compared to 56% in the same period of the
prior year.
Sales and marketing costs for the third quarter 2007 were $3.8
million as compared to $3.1 million in the comparable quarter in 2006.
General and administrative expenses were $3.7 million for the
third quarter as compared to $2.8 million for the three months ended
September 30, 2006. Total stock based compensation expense was $1.1
million in the third quarter of 2007.
The Company had cash and cash equivalents of $45.9 million on
September 30, 2007. Bank debt outstanding on September 30, 2007 was
$39.1 million, down from $144.1 million as of December 31, 2006.
Business Outlook
Switch and Data is increasing financial guidance for 2007. The
Company expects:
-- Total revenues to be $137.0 million
-- Adjusted EBITDA to be $42.5 million
-- Capital expenditures are expected to be between $37.0 million
and $39.0 million
Switch and Data is introducing preliminary financial guidance for
2008. The Company expects:
-- Total revenues to be $165 million
-- Adjusted EBITDA to be $51 million
-- Capital expenditures are projected at $155 million to $165
million, of which $125 million will be expended for the
Dallas, New Jersey, Sunnyvale and Toronto facilities.
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 September 30,
2007 as presented within this press release.
Conference Call Info
The Company will host a conference call to discuss third quarter
2007 results on Tuesday, November 13, 2007 at 4:30 p.m. ET. To listen
to the conference call live, please dial 866-383-7989 or 617-597-5328
(international callers) and reference Passcode 72762254. 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 Tuesday, November 13, 2007 until August
20, 2007. The replay can be accessed by calling 888-286-8010 or
617-801-6888 (international) and referencing Passcode 24175935. 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 880
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 Statements of Operations
(in thousands, except earnings per share)
(unaudited)
For the three months For the nine months
ended September 30, ended September 30,
------------------------ -----------------------
2006 2007 2006 2007
------------ ----------- ----------- ----------
Revenues $ 28,193 $ 35,432 $ 81,952 $ 100,033
Costs and operating
expenses
Cost of revenues,
exclusive of
depreciation and
amortization 15,804 18,709 44,562 52,506
Sales and marketing 3,106 3,841 9,227 11,703
General and
administrative 2,835 3,715 7,907 11,397
Depreciation and
amortization 5,861 6,412 17,366 18,624
Lease litigation
settlement - - - 2,600
Asset impairment - - 1,841 -
------------ ----------- ------------ ----------
Total costs and
operating
expenses 27,606 32,677 80,903 96,830
------------ ----------- ------------ ----------
Operating
income 587 2,755 1,049 3,203
Interest income 21 534 71 1,229
Interest expense (4,929) (1,702) (10,764) (4,885)
Loss on debt
extinguishment - - - (2,809)
Other income
(expense), net 11 (163) (60) (276)
------------ ----------- ------------ ----------
Income (loss)
from continuing
operations
before income
taxes (4,310) 1,424 (9,704) (3,538)
Benefit (provision)
for income taxes 115 (106) 56 (118)
------------ ----------- ------------ ----------
Income (loss)
from continuing
operations (4,195) 1,318 (9,648) (3,656)
Income (loss) from
discontinued
operations (19) 84 (411) 389
------------ ----------- ------------ ----------
Net income
(loss) (4,214) 1,402 (10,059) (3,267)
Preferred stock
accretions and
dividends (3,476) - (10,054) (227,522)
------------ ----------- ------------ ----------
Net income
(loss),
attributable to
common
stockholders $ (7,690) $ 1,402 $ (20,113) $(230,789)
============ =========== ============ ==========
Income (loss) per
share--basic
Continuing
operations
attributable to
common
stockholders $ (0.07) $ 0.04 $ (0.19) $ (5.24)
Discontinued
operations (0.00) 0.00 (0.00) 0.01
------------ ----------- ------------ ----------
Net income
(loss)
attributable
to common
stockholders $ (0.07) $ 0.04 $ (0.19) $ (5.23)
============ =========== ============ ==========
Weighted average
shares
outstanding 107,513 33,893 107,554 44,112
Income (loss) per
share--diluted
Continuing
operations
attributable to
common
stockholders $ (0.07) $ 0.04 $ (0.19) $ (5.24)
Discontinued
operations (0.00) 0.00 (0.00) 0.01
------------ ----------- ------------ ----------
Net income
(loss)
attributable
to common
stockholders $ (0.07) $ 0.04 $ (0.19) $ (5.23)
============ =========== ============ ==========
Weighted average
shares
outstanding 107,513 34,787 107,554 44,112
Switch & Data Facilities Company, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31, September 30,
2006 2007
------------ -------------
Assets
Cash and cash equivalents $ 3,671 $ 45,862
Current assets 8,735 9,168
Long-term assets 139,650 159,515
------------ -------------
Total assets $ 152,056 $ 214,545
============ =============
Liabilities, Preferred Stock and
Stockholders' Equity (Deficit)
Current liabilities $ 16,261 $ 19,813
Current portion of long-term debt 4,125 3,750
Other long-term liabilities 11,785 13,671
Long-term debt, less current portion 140,031 35,376
Capital lease obligation - 21,995
------------ -------------
Total liabilities 172,202 94,605
Series C Redeemable Preferred stock 14,376 -
Series B Convertible Preferred stock 179,798 -
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) (38)
Additional paid-in capital - 338,060
Accumulated deficit (214,971) (219,972)
Accumulated other comprehensive
income 772 1,887
------------ -------------
Total stockholders' equity
(deficit) (214,320) 119,940
------------ -------------
Total liabilities, preferred
stock and stockholders'
equity (deficit) $ 152,056 $ 214,545
============ =============
Switch & Data Facilities Company, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the nine months
ended September 30,
-------------------
2006 2007
-------- ---------
Cash flows from operating activities:
Net loss $(10,059) $ (3,267)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation 11,379 13,166
Amortization of debt issuance costs 630 331
Amortization of other intangible assets 6,000 5,447
Loss on debt extinguishment - 2,359
Stock compensation expense 202 3,038
Provision for bad debts, net of recoveries 889 (160)
Deferred rent 1,376 1,387
Change in fair value of derivative (431) 618
Asset impairment 2,193 -
Loss on disposal of fixed assets 181 3
Changes in operating assets and liabilities,
net of acquired amounts
(Increase) decrease in accounts receivable (1,943) 727
Increase in prepaids and other assets (393) (900)
Decrease in other long term assets 12 (7)
Increase in accounts payable, accrued
expenses, and other liabilities 613 1,794
Increase in unearned revenue 672 1,638
- -------- ----------
Net cash provided by operating activities 11,321 26,174
- -------- ----------
Cash flows from investing activities:
Purchase of property and equipment (17,006) (20,168)
Proceeds from sale of property and equipment 236 1
- -------- ----------
Net cash used in investing activities (16,770) (20,167)
- -------- ----------
Cash flows from financing activities:
Principal payments under long-term debt (188) (105,030)
Principal payments under capital lease - (123)
Proceeds from issuance and sale of Series D
Redeemable and Series D-1 Preferred stock,
net of issuance costs
3 -
Proceeds from exercise of stock options - 1
Public offering costs (636) (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 (958) 36,011
- -------- ----------
Net increase (decrease) in cash and cash
equivalents (6,407) 42,018
Effect of exchange rate changes on cash 17 173
Cash and cash equivalents:
Beginning of the period 10,417 3,671
- -------- ----------
End of the period $ 4,027 $ 45,862
========= ==========
Additional Company Information
- ----------------------------------------------------------------------
For the three months For the nine months ended
($ in thousands) ended September 30, September 30,
------------------------- --------------------------
2006 2007 2006 2007
------------ ------------ ------------ -------------
Revenues
Colocation $16,553 59% $22,021 62% $47,651 58% $ 61,162 61%
Interconnection 10,316 37% 11,483 32% 30,809 38% 33,552 34%
------- ---- ------- ---- ------- ---- -------- ----
Recurring
Total 26,869 96% 33,504 94% 78,460 96% 94,714 95%
Non-recurring 1,324 4% 1,928 6% 3,492 4% 5,319 5%
------- ---- ------- ---- ------- ---- -------- ----
Total $28,193 100% $35,432 100% $81,952 100% $100,033 100%
======= ==== ======= ==== ======= ==== ======== ====
As of September 30,
--------------------------
2006 2007
------------ ------------
Number of customers 832 883
Number of cross connects 17,417 19,124
Cabinets equivalents billed 5,526 6,636
Utilization rate 64% 70%
For the three months ended
September 30,
--------------------------
2006 2007
------------ ------------
New Sales ($ in thousands)
- -------------------------------------------
Recurring Revenues* $ 828 $ 779
Non-recurring Revenues** 1,068 1,439
------------ ------------
New Sales $ 1,896 $ 2,218
============ ============
*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 September 30, 2006 and
September 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.
For the three months ended For the nine months ended
September 30, September 30,
-----------------------------------------------------
2006 2007 2006 2007
------------ ------------- ----------- -------------
Operating income$ 587 $ 2,755 $ 1,049 $ 3,203
Depreciation and
amortization 5,861 6,412 17,366 18,624
Asset impairment - - 1,841 -
Lease litigation
settlement
accrual - - - 2,600
Deferred rent
expense, non-
cash (1) 327 794 1,376 1,715
Loss on disposal
of fixed assets
(2) 178 2 178 48
Stock-based
compensation
expense (3) 75 1,070 202 3,038
Legal expenses
for real estate
litigation (4) 194 118 664 617
------------ ------------- ----------- -------------
Adjusted EBITDA $ 7,222 $ 11,151 $ 22,676 $ 29,845
============ ============= =========== =============
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 $327 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 included in
the Cost of Revenue and General & Administrative line items on the
Statement of Operations
(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
certain previous landlords for alleged breach of previous lease
agreements. These expenses are included in the General and
administrative line item of the Statement of Operations.
CONTACT: Investor Relations:
Kathleen Heaney, 203-803-3585
ir@switchanddata.com
or
Media:
Brian Ruby, 203-682-8268
pr@switchanddata.com