Q1 2009 Earning Report of Savvis Inc.

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Q1 2009 Earning Report of Savvis Inc.

  1. 1. Investor Relations Savvis Investor Update First Quarter 2009
  2. 2. Review SEC Filings This document may contain 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 affect actual results are set forth as risk factors in Savvis’ SEC reports and filings, including its annual report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on February 27, 2009, and all subsequent filings. The forward-looking statements in this document speak only as of the date of initial publication, April 29, 2009. Savvis assumes no obligation to update or supplement forward-looking statements. The presentation also includes references to certain non-GAAP financial measures that provide additional information for investors. In compliance with the SEC’s Regulation G, both Savvis’ press release and filing on Form 8-K of April 29, 2009, include both the rationale for why non-GAAP information is important in describing operating performance, and the full reconciliation with corresponding GAAP numbers. 2 Savvis Proprietary & Confidential
  3. 3. Review of First Quarter Steadiness during uncertain times Phil Koen, CEO 3
  4. 4. First Quarter 2009 Accomplishments • Revenue of $221.5 million • Expanded Proximity Hosting connectivity options – Increased 9% YoY – Added Chi-X Canada and – Includes $3.0M of non-recurring, Turquoise MTF in Europe termination fees • Announced first Cloud Compute • Hosting revenue of $152.3 offerings million – Provides unprecedented control – Overall growth of 18% YoY across virtualized, enterprise-class – Managed hosting up 11% YoY hosting environment – Colocation up 24% YoY – Enables customers to reduce costs and security risk • Adjusted EBITDA of $58.8 million • Booked significant outsourcing – Improved 46% YoY deal – Large, online digital media • Adjusted free cash flow of $33.2 services company outsourcing million > 10 petabytes of storage – Second quarter of positive – Five-year total value > $40M adjusted free cash flow – Re-architect platform to drive efficiencies and cost savings 4 Savvis Proprietary & Confidential
  5. 5. Savvis Delivers Solid Financial Results First quarter 2009 Jeff Von Deylen, SVP Global Operations and Services 5
  6. 6. First Quarter Summary Continued growth • Revenue of $221.5 million • Adjusted EBITDA of $58.8 million – 9% growth over 1Q’08 – 46% growth over 1Q’08 Adjusted EBITDA Revenue US$M US$M $80 $225 $222 $222 $218 $60 $215 $213 $59 $52 $203 $48 $205 $40 $45 $40 $20 $195 $0 $185 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 6 Savvis Proprietary & Confidential
  7. 7. Business Unit Update First quarter 2009 Financial Vertical Hosting Network Financial Vertical Hosting Network •• 26% of total •• Revenue of •• Revenue of $69.2M 26% of total Revenue of Revenue of $69.2M revenue (19% $152.3M revenue (19% $152.3M •• (7%) decline YoY (7%) decline YoY excluding Reuters) excluding Reuters) •• 18% growth YoY 18% growth YoY •• (3%) decline QoQ (3%) decline QoQ •• Up 12% YoY Up 12% YoY •• Up 1% QoQ Up 1% QoQ •• Focus on network Focus on network •• Down 3% QoQ Down 3% QoQ •• 8% growth in SaaS customers within 8% growth in SaaS customers within •• Remain cautious in over 4Q’08 service profile Remain cautious in over 4Q’08 service profile 2009 2009 •• Continued •• Drive network Continued Drive network investment in margin investment in margin Cloud product improvement Cloud product improvement development development 7 Savvis Proprietary & Confidential
  8. 8. Quarterly Financials US$ in millions 1Q’09 4Q’08 1Q’08 Total Hosting 152.3 150.9 129.2 Network Services 69.2 71.5 74.1 Total revenue $221.5 $222.4 $203.3 Gross profit 102.5 98.8 89.2 Percent of revenue 46% 44% 44% SG&A 43.7 46.9 48.9 (1) (2) Percent of revenue 20% 21% 24% Adjusted EBITDA $58.8 $52.0 $40.3 Percent of revenue 26.5% 23.4% 19.8% (1) SG&A expenses exclude D&A, accretion and non-cash, equity-based compensation. Total non-cash, equity-based compensation attributed to SG&A expenses for the three months ended 3/31/09, 12/31/08 and 3/31/08, was $5.4M, $1.9M and $7.5M, respectively. (2) Amounts include a reclassification from cost of revenue to SG&A expenses of $3.0M and $3.1M for the three months ended 12/31/08 and 8 Savvis Proprietary & Confidential 3/31/08, respectively.
  9. 9. Utilization of Resources Starting to see results of colo grooming Average Monthly Revenue Hosting Revenue 1Q’09 per square foot Colocation Total Data Center Yield Colo Managed 93 55% 45% 89 83 83 83 $ in millions Avg. Billed Sq. Ft. 1Q’09 48 45 41 Managed 41 40 3% Colo 97% 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 9 Savvis Proprietary & Confidential
  10. 10. Colocation Transformation Customer mix shift • Quarterly colocation revenue 4Q’06 Percent of Colo Footprint – 4Q’06: $58.9M ◦ Average colo revenue per sq. ft. of $31 – 1Q’09: $84.2M Enterprise Large ◦ Average colo revenue per 47% Content sq. ft. of $48 53% • Savvis driving mix shift – Large content customers ◦ Pay lower wholesale-type prices 1Q’09 Percent of Colo Footprint ◦ No managed services – Enterprise customers Large Content ◦ Paying market colo rates 12% ◦ Interested in managed services Enterprise • Higher overall yield per sq. ft. 88% – As enterprise colo customers add managed services 10 Savvis Proprietary & Confidential
  11. 11. Capital Expenditures Customer growth, maintenance and expansion Global data center expansion completed in 2008 ~$246 Million ~$125 Million estimated* Expansion $144M • Global expansion plan largely completed in 2008 • Additional expansion CAPEX not expected for new data center development in 2009 ~$15M ~$65M Customer Growth $62M • Success-based • Product development Maintenance and IT ~$45M • Maintaining business standards $40M • General systems development 2008 2009 11 * 2009 CAPEX shown at mid-range of 2009 guidance Savvis Proprietary & Confidential
  12. 12. Adjusted Free Cash Flow The right financial metric for 2009 by Quarter US$ in millions 1Q’09 4Q’08 1Q’08 Adjusted EBITDA 58.8 52.0 40.3 Cash CAPEX (18.2) (36.9) (43.3) Cash Interest, Net (7.4) (10.8) (3.4) Adjusted Free Cash Flow 33.2 4.3 (6.4) Cash CAPEX, Expansion 0.2 13.3 36.0 Adjusted Free Cash Flow, excluding expansion 33.4 17.6 29.6 Convertible note interest payments made every May and November Expect $5.2M related outflow in 2Q’09 12 Savvis Proprietary & Confidential
  13. 13. Cash Return on Capital Employed Using capital the right way Savvis well-positioned within industry $3,000 ROCE $2,000 2,124 US$ in millions Operating Cash Flow Capital Employed $1,000 24% 21% 775 14% 14% 570 9% 423 159 137 313 291 44 37 $0 (1) SVVS EQIX RAX SDXC TMRK Source: Company data for RAX, TMRK as of 12/31/08; SVVS, EQIX, SDXC TTM as of 3/31/09; ROCE = Op. Cash Flow/Capital Employed (short-term and long-term debt plus equity); (1) TMRK FY’09 ends 3/31/09. 13 Savvis Proprietary & Confidential
  14. 14. Liquidity and Liabilities The right balance for 2009 Issue Maturity Long US$ in millions Date Date Term Current Total Comments (1) Convertible Notes 5/07 5/12 $345.0 $345.0 3% coupon Revolver ($50M Facility) 12/08 12/11 0.0 $25M in letters of credit (2) UK Facility (Lombard Loan) 6/08 12/13 50.6 50.6 7.86% interest rate Cisco Loan ’07/’08 ’12/’13 19.1 6.6 25.7 6.50% interest rate Total Long-Term Debt $414.7 (3) Leases ’11-’22 190.2 7.3 197.5 Current portion of long-term debt and lease obligations $13.9 Total Long-Term Debt and Leases $604.9 (4) TTM EBITDA $203.2 Gross leverage 3.0 Net leverage 2.3 Savvis had $145.9 million in cash as of 3.31.09 (1) Adopted FSP APB 14-1 on 1/1/09. Net carrying amount is $295.1M, with an effective interest rate of 8.36%; (2) Interest rate 14 fixed by interest rate swap agreement; (3) Includes $50.6 million deferred gain; (4) TTM adjusted EBITDA. Savvis Proprietary & Confidential
  15. 15. Guidance for 2009 Headwinds for 2009 • Adjusted EBITDA of $190 to $200M – Focused on improving EBITDA • American Stock Exchange (AMEX) margin over next three to five – ~$27M annualized revenue years contribution – Contract terminated 3/09 • Cash capital expenditures of $110 – Acquired by NYSE Euronext to $140M – ~$15M in expansion • Currency – ~$65M of customer success, – Volatility impact on 2008 revenue product development of ~$12M, mainly from UK – ~$45M of maintenance, other operations • Cash interest expense of $40 to • Financial Vertical $45M – 19% of total revenue (26%, • Adjusted free cash flow of $20 to including Reuters) $35M – Uncertain environment, given – Targeting positive adjusted free market turmoil cash flow in 2009 Continue to drive costs out and improve margin 15 Savvis Proprietary & Confidential
  16. 16. What’s Next Customer, industry and Savvis updates Phil Koen, CEO 16
  17. 17. Customer Sentiment Colocation Managed Hosting Colocation Managed Hosting •• Customers moving •• Active interest in IT Customers moving Active interest in IT to JIT purchasing infrastructure to JIT purchasing infrastructure solutions solutions •• Strength in Silicon Strength in Silicon Valley, DC, NY/NJ •• Customers focused Valley, DC, NY/NJ Customers focused on cost savings on cost savings •• Opportunity to be Opportunity to be more aggressive in •• Customers more aggressive in Customers Chicago interested in Chicago interested in virtualization and virtualization and •• Would consider Would consider consolidation consolidation adding space for a adding space for a key market •• Savvis working to key market Savvis working to save customers save customers money money Overall Hosting Overall Hosting •• 1Q’09 roughly inline with 3Q’08 and 4Q’08 1Q’09 roughly inline with 3Q’08 and 4Q’08 •• Seeing some delays in colo bookings Seeing some delays in colo bookings •• Managed hosting bookings up slightly QoQ Managed hosting bookings up slightly QoQ •• Enterprises turning to data center outsourcing Enterprises turning to data center outsourcing 17 Savvis Proprietary & Confidential
  18. 18. Industry Overview Managed Hosting Colocation Network Managed Hosting Colocation Network Deal focus shifting Seeing shift in pricing Bookings up QoQ Deal focus shifting Seeing shift in pricing Bookings up QoQ •• Customers implementing •• Pricing for larger deals •• Encouraging indication that Customers implementing Pricing for larger deals Encouraging indication that selective sourcing strategy significantly more network strategy gaining selective sourcing strategy significantly more network strategy gaining competitive traction competitive traction •• Moving from mega- Moving from mega- providers to companies •• Price single most important •• Pricing pressure in providers to companies Price single most important Pricing pressure in with flexible expertise factor for customers bandwidth with flexible expertise factor for customers bandwidth •• Customers looking to •• Pricing holding up for •• Churn from network Customers looking to Pricing holding up for Churn from network accelerate time to value smaller, enterprise customers not attached to accelerate time to value smaller, enterprise customers not attached to customers that Savvis data center operations customers that Savvis data center operations •• Unbundling large projects Unbundling large projects targets targets •• Efforts to target customers Efforts to target customers •• Deals with TCV of < $10M Deals with TCV of < $10M On our way to $50/sq. ft. associated with data On our way to $50/sq. ft. associated with data fastest growing segment fastest growing segment centers proving successful centers proving successful Situated for LT success Situated for LT success over long-term over long-term We’ll keep you updated We’ll keep you updated International: Solid 1Q’09, due to ability to address global enterprise needs 18 Savvis Proprietary & Confidential
  19. 19. Savvis Cloud Compute • Cloud Compute offering opening customer doors for us • Technology partner with key cloud players like HP, Cisco, VMware • Savvis Cloud Compute - Open and Dedicated – Will enable customers to reduce costs and security risk – Security single largest customer concern around cloud – Savvis has highly secure network: helps make the cloud more secure • Positioned in visionaries quadrant – Gartner’s Magic Quadrant for Managed Security Services Providers 19 Savvis Proprietary & Confidential
  20. 20. Looking forward • Dedicated to managed hosting – Continues to be center point – Expect to target more managed storage deals – Looking to dominate Web hosting solutions market • Long-term model moving in right direction – Revenue mix improving – Moving toward higher margin products Successful first quarter – Full-quarter of AMEX revenue – $3.0M of non-recurring revenue items – Still need to grow through challenges in 2009 ◦ 1Q’09 storage win a significant step in backfilling revenue loss related to AMEX ◦ Expect to be down sequentially in 2Q’09 and 3Q’09 ◦ Expect to see revenue rebound in 4Q’09 20 Savvis Proprietary & Confidential
  21. 21. Thank You 21

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