ST. LOUIS, May 3, 2010 /PRNewswire/ -- Savvis, Inc. , a global leader in cloud infrastructure and hosted IT solutions for enterprises, today reported its first quarter 2010 financial results, with revenue of US$216.6 million, compared to US$221.5 million in the first quarter of 2009. Adjusted EBITDA* was US$54.0 million, compared to US$58.8 million of adjusted EBITDA in the first quarter of 2009.

Income from operations for the first quarter of 2010 was US$4.8 million, compared to US$15.6 million in the first quarter of 2009. The company reported a net loss of (US$11.3) million, or (US$0.21) per share, in the first quarter of 2010, compared to first quarter 2009 net income of US$0.6 million, or US$0.01 per share. Leveraged free cash flow* in the first quarter of 2010 was (US$4.5) million, down from US$33.2 million in the first quarter of 2009.

We've made good progress refocusing our sales and marketing programs and personnel, expanding our collaborative partnerships, and improving our client satisfaction efforts. The initial results of these and other initiatives are reflected in strong bookings and reduced churn in the first quarter, said Jim Ousley, chairman and chief executive officer for Savvis. We will continue to focus on sales productivity, churn management, the Financial and other verticals, Cloud Services, and new business development initiatives, which are expected to put us firmly on the path to improved growth throughout the remainder of this year and beyond.

First Quarter Financial Results US dollars in millions Three months ended 3/31/10 12/31/09 3/31/09 Hosting $152.8 $154.7 $152.3 Network $63.8 $65.1 $69.2 ----- ----- ----- Total Revenue $216.6 $219.8 $221.5 ------ ------ ------ Cost of Revenue(1) $119.4 $120.4 $120.5 SGA Expenses(1) $51.7 $50.5 $49.1 Non-Cash, Equity-Based Compensation(1) $8.5 $6.0 $6.9 Income from Operations $4.8 $10.4 $15.6 Net Income (Loss) ($11.3) ($5.4) $0.6 Adjusted EBITDA $54.0 $54.9 $58.8 Adjusted EBITDA Margin 25% 25% 27% (1) Both cost of revenue and SGA expenses exclude depreciation, amortization and accretion and include non-cash, equity-based compensation. Total non-cash, equity-based compensation attributed to cost of revenue for the three months ended March 31, 2010, December 31, 2009, and March 31, 2009, was $1.6 million, $1.1 million and $1.5 million and to SGA expenses was $6.8 million, $4.9 million and $5.4 million, respectively.

First Quarter Overview

Total Savvis revenue for the first quarter was $216.6 million, down (1%) compared to fourth quarter 2009 revenue of $219.8 million. Revenue in the first quarter was impacted by an expected $6.1 million of colocation churn, which occurred at the end of the fourth quarter of 2009.

Adjusted EBITDA was $54.0 million for the first quarter of 2010, which represented a (2%) decline from the $54.9 million of adjusted EBITDA that was recorded in the fourth quarter of 2009. Adjusted EBITDA was lower as a result of the quarterly decline in revenue, which was offset in part by cost savings initiatives.

For the first quarter of 2010, income from operations of $4.8 million was down when compared to the $10.4 million recorded in the fourth quarter of 2009. This decline was due to an increase in depreciation expense and higher non-cash, equity-based compensation in the first quarter.

A consolidated net loss of ($11.3) million was recorded in the first quarter of 2010, compared to a net loss of ($5.4) million in the fourth quarter of 2009. Savvis recorded a loss per share of ($0.21) in the first quarter of 2010, compared to a loss per share of ($0.10) in the fourth quarter of 2009. For the first quarter, leveraged free cash flow was ($4.5) million, up from ($13.8) million in the fourth quarter of 2009.

Hosting US dollars in millions Three months ended 3/31/10 12/31/09 3/31/09 Colocation $82.5 $86.9 $84.2 Managed Services $70.3 $67.8 $68.1 ----- ----- ----- Total Hosting Revenue $152.8 $154.7 $152.3 Percentage Change (1%) --

Overall Hosting revenue was $152.8 million in the first quarter, flat on a year-over-year basis. On a quarter-over-quarter basis, Hosting revenue was down slightly.

For the quarter, Managed Services contributed $70.3 million to overall Hosting revenue, or 46%. Managed Services revenue was up 4%, on a quarterly basis, and year-over-year, it was up 3%. The growth in Managed Services was due to continued strength in Cloud Services revenue growth, which includes uptake from Software-as-a-Service (SaaS) providers as well as increasing momentum in winning larger outsourcing opportunities.

Colocation contributed $82.5 million to overall Hosting revenue in the quarter, or 54%. Year-over-year, Colocation revenue was down (2%). On a quarter-over-quarter basis, Colocation revenue was down (5%). As expected, Savvis was impacted by $6.1 million of colocation churn, which occurred at the end of the fourth quarter of 2009.

Network US dollars in millions Three months ended 3/31/10 12/31/09 3/31/09 Core $31.7 $31.4 $25.6 Sustaining $32.2 $33.7 $43.6 ----- ----- ----- Total Network Revenue $63.8 $65.1 $69.2 Percentage Change (2%) (8%)

Overall Network revenue was $63.8 million in the first quarter and was down (8%) on an annual basis. On a quarterly basis, Network revenue was down (2%), as pricing pressure continued to impact this portion of the business. At the end of the first quarter, Network revenue was nearly evenly split between Core and Sustaining.

For the quarter, Core Network contributed $31.7 million to overall Network revenue. Core Network revenue was up 24%, on a year-over-year basis, and was up 1%, on a quarter-over-quarter basis.

Sustaining Network contributed $32.2 million to overall Network revenue in the quarter. Year-over-year, Sustaining Network revenue declined (26%). On a quarter-over-quarter basis, Sustaining Network revenue was down (5%).

Vertical Highlights

The Financial Vertical represented 26% of total revenue, or $55.5 million, in the first quarter of 2010. Revenue in the quarter was down (3%), compared to the first quarter of 2009, and down (4%), compared to the fourth quarter of 2009. Revenue for the quarter was impacted by the $6.1 million of colocation churn experienced at the end of the fourth quarter, with approximately 50% of this amount occurring in the Financial Vertical.

In the first quarter of 2010, Software-as-a-Service revenue was $19.7 million, up slightly on a quarter-over-quarter basis and up 23% year-over-year. In April, Savvis announced the formation of a new sales team dedicated to the Software Vertical, which includes SaaS. In addition to managed services, SaaS and Software clients are particularly interested in Savvis' leading-edge cloud platforms. During the first quarter of 2010, Savvis reported Cloud Services revenue of $2.8 million, up 14% on a quarter-over-quarter basis and up 100% year-over-year.

Cash Flow and Balance Sheet

Net cash provided by operating activities was $39.0 million in the first quarter of 2010, compared to $45.7 million in the first quarter of 2009. Cash capital expenditures for the first quarter of 2010 totaled $50.7 million.

The company's cash position at March 31, 2010, was $145.9 million, compared to $160.8 million at December 31, 2009. As of March 31, 2010, the long-term debt and capital leases for Savvis (net of current portion) totaled $595.8 million, down from $600.0 million as of December 31, 2009.

Financial Outlook

In the first quarter, revenue and adjusted EBITDA were higher than Street expectations, due to stronger than expected sales, a continued focus on cost savings efforts and lower than expected SGA spending, said Greg Freiberg, chief financial officer for Savvis. However, in order to build on our strong sales trend, we expect to increase our sales and marketing spend, which could impact adjusted EBITDA in the second quarter.

Savvis expects the following for full year 2010:

- Adjusted EBITDA of $210 to $225 million, which narrows the range slightly from previous guidance of $205 to $225 million - Total cash capital expenditures of $180 to $200 million, including $50 to $55 million for data center expansion - Cash interest expense (net) of approximately $40 to $50 million

Investor Conference Call

Savvis will webcast an investor conference call at 9:30 a.m. ET today, May 3, 2010. Both the webcast and supporting presentation will be available at savvis.net on the Investor Relations page. A live conference call will also be available by telephone at 1-866-835-8906 for financial analysts in North America or +1-703-639-1413 for international analysts. A replay will be available on the Web site for six months. Investors may also access the replay by telephone through Saturday, May 15, by dialing 1-888-266-2081 in North America or +1-703-925-2533 internationally and using the access code 1447970.

About Savvis

Savvis, Inc. is a global leader in cloud infrastructure and hosted IT solutions for enterprises. More than 2,500 unique clients, including 30 of the top 100 companies in the Fortune 500, use Savvis to reduce capital expense, improve service levels and harness the latest advances in cloud computing. For more information, please visit savvis.net.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results 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, 2009, and subsequent filings. Those risk factors include, but are not limited to, uncertainties in economic conditions, including conditions that could pressure enterprise IT spending; introduction of, demand for and market acceptance of Savvis' products and services; whether or not Savvis is able to sign additional outsourcing deals; variability in pricing for those products and services; merger and acquisition activity by Savvis customers or other customer activity that affects the level of business done with Savvis; rapid evolution of technology; changes in the operating environment; and changes or proposed changes in, or introduction of new, regulatory schemes or environments that impact Savvis and/or its customers' businesses. The forward-looking statements contained in this document speak only as of the date of publication, May 3, 2010. 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.

* Non-GAAP Measures

Savvis includes information pertaining to certain non-GAAP measures in conjunction with reporting of its quarterly and year-end 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. Leveraged free cash flow represents adjusted EBITDA less cash capital expenditures and less cash interest, net. We have included information concerning leveraged free cash flow because we believe that in our industry such information is a relevant measurement of a company's operating financial performance and liquidity. We do not provide forward looking guidance for certain financial data, such as income from operations, depreciation, amortization and accretion, non-cash, equity-based compensation, and interest income. As a result, we are unable to provide a reconciliation of non-GAAP measures, such as adjusted EBITDA and leveraged free cash flow for forward looking data, including 2010 full-year guidance. The calculations of adjusted EBITDA and leveraged free cash flow are not specified by United States generally accepted accounting principles. Our calculations of adjusted EBITDA and leveraged free cash flow may not be comparable to similarly-titled measures of other companies.

SAVVIS, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share data) Three Months Ended March 31, --------- 2010 2009 ---- ---- Revenue $216,587 $221,523 Operating Expenses: Cost of revenue (including non-cash, equity-based compensation of $1,630 and $1,483) (1) 119,368 120,521 Sales, general and administrative expenses (including non-cash, equity-based compensation of $6,823 and $5,408) (1) 51,719 49,069 Depreciation, amortization and accretion 40,737 36,335 ------ ------ Total Operating Expenses 211,824 205,925 ------- ------- Income from Operations 4,763 15,598 Other income and expense 15,757 14,426 ------ ------ Income (Loss) before Income Taxes (10,994) 1,172 Income tax expense 355 555 --- --- Net Income (Loss) $(11,349) $617 ======== ==== Net Income (Loss) per Common Share Basic $(0.21) $0.01 ====== ===== Diluted $(0.21) $0.01 ====== ===== Weighted-Average Common Shares Outstanding(2) Basic 54,494 53,609 ====== ====== Diluted 54,494 53,774 ====== ====== (1) Excludes depreciation, amortization and accretion, which is reported separately. (2) For the three months ended March 31, 2010, the effect of including the incremental shares associated with the Convertible Notes, options, unvested restricted stock units, and unvested restricted stock awards are anti-dilutive, and as such, are not included in the diluted weighted-average common shares outstanding. For the three months ended March 31, 2009, the effects of including the incremental shares associated with unvested restricted stock awards and the Convertible Notes are anti-dilutive, and as such, are not included in the diluted weighted-average common shares outstanding.

SAVVIS, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (in thousands) March 31, December 31, 2010 2009 ---- ---- ASSETS Current Assets: Cash and cash equivalents $145,928 $160,815 Trade accounts receivable, net 51,823 45,754 Prepaid expenses and other current assets 27,686 21,217 Total Current Assets 225,437 227,786 ------- ------- Property and equipment, net 792,376 783,852 Other non-current assets 12,893 13,120 ------ ------ Total Assets $1,030,706 $1,024,758 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Payables and other trade accruals $59,742 $52,710 Current portion of long-term debt and lease obligations 18,385 17,479 Other accrued liabilities 68,965 68,314 Total Current Liabilities 147,092 138,503 ------- ------- Long-term debt, net of current portion 374,551 376,089 Capital and financing method lease obligations, net of current portion 221,211 223,897 Other accrued liabilities 79,407 76,452 Total Liabilities 822,261 814,941 ------- ------- Stockholders' Equity: Common stock 552 545 Additional paid-in capital 875,112 862,834 Accumulated deficit (645,778) (634,429) Accumulated other comprehensive loss (21,441) (19,133) Total Stockholders' Equity 208,445 209,817 ------- ------- Total Liabilities and Stockholders' Equity $1,030,706 $1,024,758 ========== ==========

SAVVIS, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) Three Months Ended March 31, --------- 2010 2009 ---- ---- Cash Flows from Operating Activities: Net income (loss) $(11,349) $617 Reconciliation of net income (loss) to net cash provided by operating activities: Depreciation, amortization and accretion 40,737 36,335 Non-cash, equity-based compensation 8,453 6,891 Accrued interest, net 3,286 3,557 Amortization of debt discount 3,767 3,471 Other, net 332 53 Net changes in operating assets and liabilities: Trade accounts receivable, net (6,581) 2,203 Prepaid expenses and other current and non- current assets (6,572) 991 Payables and other trade accruals 7,455 27 Other accrued liabilities (556) (8,495) ---- ------ Net cash provided by operating activities 38,972 45,650 ------ ------ Cash Flows from Investing Activities: Payments for capital expenditures (50,691) (18,252) Net cash used in investing activities (50,691) (18,252) ------- ------- Cash Flows from Financing Activities: Proceeds from long-term debt - 2,066 Proceeds from stock option exercises 6,648 4 Payments for employee taxes on equity-based instruments (2,812) (444) Principal payments on long-term debt (1,650) (1,650) Principal payments under capital lease obligations (2,538) (1,950) Other, net (612) - Net cash provided by (used in) financing activities (964) (1,974) ---- ------ Effect of exchange rate changes on cash and cash equivalents (2,204) (846) ------ ---- Net Increase (Decrease) in Cash and Cash Equivalents (14,887) 24,578 Cash and Cash Equivalents, Beginning of Period 160,815 121,284 ------- ------- Cash and Cash Equivalents, End of Period $145,928 $145,862 ======== ======== Supplemental Disclosures of Cash Flow Information: Cash paid for interest $7,832 $7,488

SAVVIS, Inc. and Subsidiaries Unaudited Selected Condensed Consolidated Financial Information (in thousands) Three Months Ended ------------------ March 31, December 31, --------- 2010 2009 2009 ---- ---- ---- Segment Revenue: Hosting $152,751 $152,318 $154,664 Network 63,836 69,205 65,155 Total Revenue $216,587 $221,523 $219,819 ======== ======== ======== Segment Adjusted EBITDA: Hosting $58,960 $64,161 $59,326 Network 16,265 16,252 16,070 Corporate - Other (1) (21,272) (21,589) (20,509) Total Adjusted EBITDA (2) $53,953 $58,824 $54,887 ======= ======= ======= Adjusted EBITDA Reconciliation: Income from operations $4,763 $15,598 $10,418 Depreciation, amortization and accretion 40,737 36,335 38,519 Non-cash, equity-based compensation 8,453 6,891 5,950 Adjusted EBITDA $53,953 $58,824 $54,887 ======= ======= ======= Reconciliation of Adjusted EBITDA to Income (Loss) before Income Taxes: Adjusted EBITDA $53,953 $58,824 $54,887 Depreciation, amortization and accretion (40,737) (36,335) (38,519) Non-cash, equity-based compensation (8,453) (6,891) (5,950) Interest income 30 114 35 Interest expense (15,475) (14,516) (14,266) Other income (expense) (312) (24) (685) Income (Loss) before Income Taxes $(10,994) $1,172 $(4,498) ======== ====== ======= Leveraged Free Cash Flow Reconciliation: Adjusted EBITDA $53,953 $58,824 $54,887 Cash capital expenditures (50,691) (18,252) (57,132) Cash interest paid (7,832) (7,488) (11,586) Interest income 30 114 35 Leveraged Free Cash Flow (3) $(4,540) $33,198 $(13,796) ======= ======= ======== (1) Corporate -Other adjusted EBITDA includes all costs not directly associated with hosting services or network services. Costs not directly associated with hosting services or network services include, but are not limited to, general and administrative costs. (2) Adjusted EBITDA represents income from operations before depreciation, amortization, accretion 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. (3) Leveraged Free Cash Flow represents adjusted EBITDA less cash capital expenditures and less cash interest, net. We have included information concerning leveraged free cash flow because we believe that in our industry such information is a relevant measurement of a company's operating financial performance and liquidity.

SAVVIS, Inc. and Subsidiaries Unaudited Supplemental Revenue Information (in thousands, except per square foot amounts) Three Months Ended ------------------ March 31, June 30, September 30, December 31, March 31, 2009 2009 2009 2009 2010 ---- ---- ---- ---- ---- Data Center Revenue Colocation $84,232 $84,856 $85,341 $86,892 $82,467 Managed hosting 68,086 67,303 62,814 67,772 70,284 Data Center Metrics (1) Total raised floor 1,433 1,433 1,433 1,433 1,477 Revenue space 912 923 886 878 889 Billed square feet 612 622 640 591 601 Utilization 67% 67% 72% 67% 68% Average Billed Square Feet Colocation 590.5 595.4 608.6 592.3 572.1 Managed hosting 21.2 21.4 22.2 22.9 23.8 Total Average Billed Square Feet 611.7 616.8 630.8 615.2 595.9 ===== ===== ===== ===== ===== Average Monthly Data Center Revenue Per Billed Square Foot (2) Colocation $47.6 $47.5 $46.7 $48.9 $48.1 Managed hosting 1,069.2 1,046.4 945.1 985.4 984.5 (1) Data center metrics are calculated as of period end for each respective quarter. (2) Average monthly data center revenue per billed square foot is calculated as the revenue per quarter divided by the average billed square feet per quarter stated on a monthly basis.

SAVVIS Revenue by Vertical Three Months Ended ------------------ March 31, June 30, September 30, December 31, March 31, 2009 2009 2009 2009 2010 ---- ---- ---- ---- ---- Financial vertical $57,353 $60,065 $53,974 $57,742 $55,532 Other 164,170 159,796 159,237 162,077 161,055 Total Revenue $221,523 $219,861 $213,211 $219,819 $216,587 ======== ======== ======== ======== ======== Network Revenue Supplemental Information: Three Months Ended ------------------ March 31, June 30, September 30, December 31, March 31, 2009 2009 2009 2009 2010 ---- ---- ---- ---- ---- Core (1) $25,585 $26,918 $28,616 $31,483 $31,670 Sustaining (2) 43,620 40,784 36,440 33,672 32,166 Total Network Revenue $69,205 $67,702 $65,056 $65,155 $63,836 ======= ======= ======= ======= ======= (1) Core network includes revenue from Thomson Reuters and from other financial vertical and data center customers, who also purchase bundled network and hosting services. (2) Sustaining network includes revenue from services that are either in slower growth or declining markets or are not directly tied to the future growth of the company's network and hosting businesses.

SOURCE: Savvis, Inc.

CONTACT: Investors, Peggy Reilly Tharp, +1-314-628-7491,peggy.tharp@savvis.net; or Media, Amanda Gomez, +1-314-628-7417,amanda.gomez@savvis.net both of Savvis, Inc.