Colocation provider Switch & Data (SDXC) reports earnings on Tuesday after the market closes, following on the heels of Equinix’s solid report. Switch & Data, which went public in an IPO in the first quarter of 2007, operates some 34 carrier neutral datacenters in 23 markets in North America, and like Equinix has been investing heavily in new datacenter space. Will they be forced to slow down their buildouts because of the economy? Let’s take a look at where Switch & Data stands going into their earnings call:
Revenue guidance of $170, a target which was raised after Q2, seems to imply a sequential gain of $1.5-2M for both Q3 and Q4, which seems achievable. EBITDA guidance, which was also raised after Q2 seems to assume an average of $14.5M for Q3 and Q4, which represents a very slight increase from Q2 levels. Likely this is due to costs from expansion coming online prior to revenues (for example, their Bergen County NJ facility that opened last week), which likely also means a slight temporary hit to gross margins.
All in all, their earnings guidance does not appear to be aggressive. It seems likely that Switch and Data will not surprise in either direction, but will express the usual caution given the difficult economic environment. It seems likely that they slow their expansion going forward, however, given that their cash position is rather small at $92M relative to their projected capex of around $100M for the second half. They are profitable and do have additional funds in their credit facility to draw on, but not the resources of an Equinix. The $300M mixed shelf they filed back in July was, of course, prior to the disintegration of the financial markets.
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