Savvis Returns to Growth in Q4, Expands in Chicago

February 3rd, 2010 by · 2 Comments

Colocation and managed hosting provider Savvis (news, filings) [a subsidiary of CenturyLink (NYSE:CTL, news, filings)] reported Q4 and full year 2009 earnings this morning.  The company took a harder hit than most in the datacenter space during last year’s economic downturn, as churn from large financial customers took hold.  And just a few weeks ago, CEO Phil Koen stepped down.   But in the fourth quarter they seem to have regained some of their operational footing.  Here are the numbers in the context of prior quarters:

Q1/09 Q2/09 Q3/09 Q4/09
Colocation 84.2 84.9 85.3 86.9
Managed Hosting 68.1 67.3 62.8 67.8
Network Services 69.2 67.7 65.1 65.1
Total Revenue 221.5 219.7 213.2 219.8
EBITDA 58.8 55.1 51.2 54.9
EBITDA Margin 26.5% 25.1% 24.0% 25.0%

As you can see, Colocation revenues had been steadily growing throughout the year, and accelerated in the fourth quarter.  However, there is some $6.1M in quarterly churn coming in that segment in the first quarter.  Managed Hosting revenues which had been falling all year staged a nice recovery in the fourth quarter.  And Network Services revenue managed to hold steady, as the balance between core sales and non-core sales has finally begun to shift in the company’s favor.  Overall, revenues came in at the top of guidance and above analyst estimates.  The company attributed some $2.5M to cloud computing services, or just over 1% of revenue – an interesting number but not yet one that is driving results.

Guidance for 2010 is for full year adjusted EBITDA of $205-225M, capital expenditures of $180-200M, and cash interest expense of $40-50M.   Those are not going to get anybody particularly excited, and in the first quarter they do expect that churn in their colocation business that will do damage to revenue growth.   Some $53M of their capex is earmarked for further buildouts of colocation space.  Savvis announced one such expansion already, adding another 10,000 square feet to their Cermak Road facility in Chicago – a 50% increase.

Overall, it was the best quarter Savvis has had in a while, though I’m sure they’re tired of having large chunks of churn to tell us about every time something goes well.  They have been working hard to position itself for the coming cloud revolution.  Hence, the if, when, and how that materializes will probably determine how 2010 turns out.

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Categories: Cloud Computing · Datacenter · Financials

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2 Comments So Far

  • Alfred J. Beljan says:

    Rob – are we to assume that you are getting more bullish on this entire business electronic grouping such as Savvis, LVLT, etc?? if not, when do you forsee the turning around of their business results??

    • Rob Powell says:

      I do feel that the sector as a whole will be much more fun this year. So yes, overall I am definitely more bullish than a year ago – but then we’re not in a recession so it’s not that big a leap!

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