St. Louis, Missouri – (The Hosting News) – February 6, 2009 – IT infrastructure services for business applications, Savvis, has for the quarter, reported revenue of $222.4 million and income from operations of $15.0 million.
The company also reported net income of $3.0 million, or $0.06 per share, compared to a loss of ($2.5) million, or ($0.05) per share, in the fourth quarter of 2007.
Phil Koen, Chief Executive Officer of Savvis remarked, ”I’m just delighted that we hit a new milestone and became adjusted free cash flow positive in the fourth quarter. We are also pleased with our fourth quarter year-over-year growth in revenue and adjusted EBITDA of 12% and 32%, respectively. However, we are mindful that general economic conditions continue to be weak and that there is considerable economic uncertainty, which we will be facing in 2009.”
Revenue in the quarter increased 2%, compared to the third quarter of 2008. This improvement was achieved in spite of the worsening global macro economic environment. On a year-over-year basis, revenue was up 12%, compared to the fourth quarter of 2007. Year-over-year, overall Hosting revenue was up 24%, reflecting continued enterprise adoption of outsourced IT infrastructure solutions.
Adjusted EBITDA in the quarter of $52.0 million was up 9% from the third quarter of 2008 and up 32% from the fourth quarter of 2007. Growth in adjusted EBITDA was the result of improved revenue and a continued focus on cost savings.
For full year 2008, revenue increased 8% over 2007, while adjusted EBITDA improved 15%. The company reported a loss in 2008 of ($9.2) million, or ($0.17) per share, compared to 2007 net income of $250.6 million, or $4.51 per diluted share. The results for 2007 included a $305.7 million gain on the sale of data center and CDN assets and a $45.1 million expense incurred for the extinguishment of subordinated debt.
Total Savvis revenue for the fourth quarter was $222.4 million, an increase of 12% compared to revenue of $197.8 million in the fourth quarter of 2007 and an increase of 2% when compared to $218.4 million of revenue in the third quarter of 2008. When compared to the third quarter of 2008, fourth quarter revenue was negatively impacted by a 16% reduction in average sterling exchange rates between the third and fourth quarters of 2008. On a constant exchange basis, the quarterly sequential growth rate for Hosting revenue would have been 5% and total revenue growth would have been 3%.
Income from operations of $15.0 million showed an improvement from the $2.8 million recorded in the fourth quarter of 2007 and the $11.1 million for the third quarter of 2008. Both the third and fourth quarters of 2008 had favorable non-cash compensation adjustments.
For the fourth quarter, adjusted EBITDA was $52.0 million, an increase of 32% from adjusted EBITDA of $39.4 million in the fourth quarter of 2007 and an improvement of 9% when compared to $47.7 million of adjusted EBITDA in the third quarter of 2008. Adjusted EBITDA margin for the quarter was 23%, which reflected a year-over-year improvement of approximately 300 basis points and a quarter-over-quarter improvement of approximately 100 basis points.
The company’s consolidated net income was $3.0 million in the fourth quarter of 2008, compared to a loss of ($2.5) million in the fourth quarter of 2007 and a loss of ($0.6) million in the third quarter of 2008. Earnings per share were $0.06 in the fourth quarter of 2008, compared to a loss per share of ($0.05) in the fourth quarter of 2007 and ($0.01) in the third quarter of 2008.
Overall Hosting revenue was $150.9 million in the fourth quarter, with Managed Hosting contributing $67.7 million, or 45%. Year-over-year, Managed Hosting revenue grew 14%, as outsourced enterprise IT solutions continued to move into the mainstream. On a quarter-over-quarter basis, Managed Hosting revenue grew 2%. While enterprise customers continued to explore outsourced IT solutions for cost savings and other benefits, the internal approval process remained lengthy.
Colocation contributed $83.2 million to overall Hosting revenue in the fourth quarter, or 55%. Year-over-year, Colocation grew 34%, as the industry remained stable throughout 2008. On a quarter-over-quarter basis, Colocation grew 6%, as companies continued to turn to outsourcing during the difficult economic times. This growth reflects the value offered to customers through the company’s new data centers, good utilization and strong pricing.
For the fourth quarter of 2008, the Financial Vertical represented 19% of total revenue, or 26% including revenue contribution from Reuters. While Financial Vertical revenue in the quarter showed slight growth over the third quarter of 2008, on a year-over-year basis it was up 21%.
For Hosting, revenue of $150.9 million in the fourth quarter of 2008 represented 24% growth over the fourth quarter of 2007. Software-as-a-service (SaaS) revenue grew 12%, quarter-over-quarter, as the company continued to focus on this exciting new area. For 2009, Savvis expects to be making several Cloud-related product announcements, as the company addresses the specific needs of the enterprise Cloud customer.
Net cash provided by operating activities was $44.9 million in the fourth quarter of 2008, compared to $27.1 million in the fourth quarter of 2007. Cash capital expenditures for the quarter totaled $36.9 million, which included $13.3 million for the build-out of new data centers.
The long-term debt and capital leases for Savvis, as of December 31, 2008, totaled $605.1 million. The company