| << Back | | Switch and Data Reports First Quarter 2009 Financial and Operating Results | | Revenue Grew 18.5% EBITDA Increased 31.7% EBITDA Margin Expanded From 31.7% to 35.2%
TAMPA, Fla.--(BUSINESS WIRE)--Apr. 28, 2009--
Switch & Data Facilities Company, Inc. (NASDAQ:SDXC), a
leading provider of network neutral data center and Internet exchange
services, today reported strong financial results for the first quarter
ended March 31, 2009.
“In the first quarter we delivered strong sequential recurring revenue
growth and improved margins supported by continued demand for our
services,” commented Keith Olsen, Switch and Data President and CEO.
Added, Mr. Olsen, “Switch and Data posted an overall solid performance.”
First Quarter 2009
Total revenues increased 18.5% from $39.8 million to $47.1 million in
the first quarter of 2009 compared to the same period in 2008. Recurring
revenues, which consist of colocation and interconnection services,
increased 19.2% over the same period in the prior year to $44.9 million.
Non-recurring revenues, representing one time installation fees and
services, were $2.3 million in the first quarter 2009, compared to $2.2
million in the same period of the prior year.
EBITDA increased 31.7% from $12.6 million to $16.6 million in the first
quarter of 2009 compared to the same period in 2008. EBITDA margins
increased from 31.7% to 35.2% in the first quarter of 2009 compared to
the same period 2008. (A reconciliation between GAAP information and
non-GAAP information contained in this press release can be found in the
table immediately following the Consolidated Statements of Cash Flow, as
well as on the Company’s website in the Investor Relations section.)
Expenses
Cost of revenues, excluding depreciation and amortization, for the first
quarter 2009 was $24.3 million compared to $20.4 million for the first
quarter 2008. The increase is primarily due to the incremental expenses
associated with investments the company made in the top markets to add
product capacities. As a percentage of revenues, cost of revenues were
51.5% in first quarter 2009 compared to 51.2% in the first quarter of
2008.
Sales and marketing costs decreased as a percentage of revenue from
13.1% in first quarter 2008 to 11.1% in first quarter 2009. Sales and
marketing costs were $5.2 million in each of the first quarters in 2009
and 2008. General and administrative (G&A) expenses decreased as a
percentage of revenue from 10.9% in first quarter 2008 to 9.9% in first
quarter 2009. G&A expenses were $4.7 million for the first quarter 2009
compared to $4.3 million for the first quarter 2008. Total stock based
compensation expense was $1.4 million in the first quarter of 2009.
Balance Sheet and Cash Flow
The Company had cash and cash equivalents of $22.4 million on March 31,
2009. Total bank debt outstanding on March 31, 2009 was $142.5 million.
Cash capital expenditures in the quarter were $23.7 million.
Business Outlook
The Company expects the following financial results for 2009:
-
Total revenues are expected to be in the range of $207 to 210 million
-
EBITDA for the year is expected to be between $71 to 73 million
-
Capital expenditures are projected at $75 million
Switch and Data does not provide forward-looking guidance for certain
financial data, such as depreciation, amortization, net income (loss)
from operations, cash generated from operating activities and cash used
in investing activities and, as a result, is not able to provide a
reconciliation of GAAP to non-GAAP financial measures for
forward-looking data. The Company intends to calculate the various
non-GAAP financial measures in future periods consistent with the
calculation method utilized for the three months ended March 31, 2009 as
presented within this press release.
Conference Call Info
The Company will host a conference call to discuss first quarter 2009
results on Tuesday, April 28, 2009 at 4:30 p.m. ET. To listen to the
conference call live, please dial 888-680-0865 or 617–213-4853
(international callers) and reference Passcode 57284040. The conference
call will be webcast and can be accessed from the Company’s website at www.switchanddata.com
in the Investor Relations section. A replay of the conference call will
be available for one week beginning at 6:30 p.m. ET on Tuesday, April
28, 2009 until 11:59 p.m. ET on May 5, 2009. The replay can be accessed
by dialing 888-286-8010 or 617-801-6888 (international) and referencing
Passcode 20414866. The webcast will be archived on the Company’s website
at www.switchanddata.com.
About the Company
Switch and Data is a premier provider of network-neutral data centers
that house, power, and interconnect the Internet. Leading content
companies, enterprises, and communications service providers rely on
Switch and Data to connect to customers and exchange Internet traffic.
Switch and Data has built a reputation for world-class service,
delivered across the broadest colocation footprint and richest network
of interconnections in North America. Switch and Data operates 34 sites
in the U.S. and Canada, provides one of the highest customer
satisfaction scores for technical and engineering support in the
industry, and is home to PAIX(R) - the world's first commercial Internet
exchange.
Important information about Switch and Data is routinely posted to the
investor relations section of the company’s website www.switchanddata.com.
For copies of all Switch and Data press releases and SEC filings, please
visit www.switchanddata.com
and click on Investor Relations tab. To automatically receive Switch and
Data financial news by email, please visit www.switchanddata.com
and subscribe to Email Alerts. Investors are encouraged to check Switch
and Data’s website frequently to access the most up to date information.
Forward-Looking Statements
Certain statements herein are “forward-looking statements.” Such
forward-looking statements are not historical facts but instead reflect
Switch and Data’s current expectations or beliefs concerning future
events and results of operations, many of which, by their nature, are
inherently uncertain and outside of Switch and Data’s control. It is
possible that actual results may differ, possibly materially, from those
anticipated in these forward-looking statements. The information set
forth under the caption “Business Outlook” are forward-looking
statements. Words such as expects, believes, estimates,
anticipates and similar language indicates forward-looking statements.
Further information concerning Switch and Data and its business,
including factors that potentially could materially affect Switch and
Data's financial results and conditions, as well as its other
achievements, are contained in Switch and Data's filings with the
Securities and Exchange Commission. Switch and Data does not
undertake to publicly update or revise its forward-looking statements,
whether as a result of new information, future events or otherwise.
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Switch & Data Facilities Company, Inc.
Consolidated Statement of Operations
(in thousands, except earnings per share)
(Unaudited)
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For the three months
ended March 31,
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|
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2008
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|
2009
|
|
Revenues
|
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$
|
39,777
|
|
|
$
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47,133
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|
Costs and operating expenses
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Cost of revenues, exclusive of depreciation and amortization
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20,359
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|
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24,293
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Sales and marketing
|
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5,194
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|
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5,224
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General and administrative
|
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|
4,331
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|
|
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4,682
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Depreciation and amortization
|
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6,524
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|
|
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10,046
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Total costs and operating expenses
|
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36,408
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44,245
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Operating income
|
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3,369
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2,888
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Interest income
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372
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3
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Interest expense
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(2,502
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)
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(4,358
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)
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Loss from debt extinguishment
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(695
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)
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-
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Other expense, net
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(161
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)
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(238
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)
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Income (loss) before income taxes
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383
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(1,705
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)
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Provision for income taxes
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(44
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)
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(275
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)
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Net income (loss)
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$
|
339
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|
|
$
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(1,980
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)
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Income (loss) per common share—basic
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$
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0.01
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$
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(0.06
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)
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Weighted average common shares outstanding—basic
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34,311
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34,563
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Income (loss) per common share—diluted
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$
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0.01
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$
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(0.06
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)
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Weighted average common shares outstanding—diluted
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34,896
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34,563
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Switch & Data Facilities Company, Inc.
Consolidated Balance Sheet
(in thousands)
(Unaudited)
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December 31,
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March 31,
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2008
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2009
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Assets
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Current assets
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Cash and cash equivalents
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$
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14,706
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$
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22,421
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Accounts receivable, net of allowance for bad debts of $818 and
$971, respectively
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11,497
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10,584
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Prepaids and other assets
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2,429
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1,584
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Total current assets
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28,632
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34,589
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Property and equipment, net
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270,286
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278,253
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Goodwill
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36,023
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36,023
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Other intangible assets, net
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18,575
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|
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17,625
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Other long-term assets, net
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5,349
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|
|
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5,393
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Total assets
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$
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358,865
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$
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371,883
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Liabilities and Stockholders’ Equity
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Current liabilities
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Accounts payable and accrued expenses
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$
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34,131
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$
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22,901
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Derivative liability
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|
7,434
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|
|
|
8,173
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Current portion of unearned revenue
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3,629
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3,362
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Current portion of deferred rent
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455
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|
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459
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Current portion of customer security deposits
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547
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|
600
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Current portion of long-term debt
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|
-
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3,563
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Total current liabilities
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46,196
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39,058
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Unearned revenue, less current portion
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1,858
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|
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1,841
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Deferred rent, less current portion
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18,587
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20,819
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Customer security deposits, less current portion
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376
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|
|
305
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Long-term debt, less current portion
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120,000
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138,937
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Long-term portion of capital lease obligation
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50,927
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|
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50,990
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Total liabilities
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|
237,944
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|
|
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251,950
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Commitments and contingencies
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Stockholders’ equity
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Common stock, $0.0001 par value, 200,000 shares authorized; 34,563
issued and outstanding as of December 31, 2008 and March 31, 2009
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3
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3
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Preferred stock, $0.0001 par value, 25,000 shares authorized; no
shares issued
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|
-
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-
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Additional paid-in capital
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347,909
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349,273
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Accumulated deficit
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|
(224,534
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)
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|
|
(226,513
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)
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Accumulated other comprehensive loss
|
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(2,457
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)
|
|
|
(2,830
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)
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Total stockholders’ equity
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120,921
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|
|
119,933
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Total liabilities and stockholders’ equity
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$
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358,865
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$
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371,883
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Switch & Data Facilities Company, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
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For the three months
ended March 31,
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2008
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2009
|
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Cash flows from operating activities:
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Net income (loss)
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$
|
339
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$
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(1,980
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)
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Adjustments to reconcile net income (loss) to net cash provided by
operating
activities
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Depreciation
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5,217
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9,144
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Amortization of debt issuance costs
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88
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230
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Amortization of other intangible assets
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|
1,308
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|
|
|
903
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Loss on debt extinguishment
|
|
|
695
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-
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Stock compensation expense
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1,515
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1,365
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Provision for bad debts, net of recoveries
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268
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223
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Deferred rent
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1,133
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|
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2,270
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Change in fair value of derivative
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1,065
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|
739
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Loss (gain) on disposal of fixed assets
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13
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|
(5
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)
|
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Changes in operating assets and liabilities
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|
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Decrease in accounts receivable
|
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1,049
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|
673
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Decrease in prepaids and other assets
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22
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844
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Increase in other long term assets
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(29
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)
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(275
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)
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Decrease in accounts payable, accrued expenses,
and other
liabilities
|
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|
(1,052
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)
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(4,904
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)
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Decrease in unearned revenue
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(595
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)
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(263
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)
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Net cash provided by operating activities
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11,036
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8,964
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Cash flows from investing activities:
|
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|
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Purchase of property and equipment
|
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|
(24,908
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)
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(23,734
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)
|
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Net cash used in investing activities
|
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(24,908
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)
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(23,734
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)
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Cash flows from financing activities:
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Principal payments under long-term debt
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(38,189
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)
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|
-
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Proceeds from long-term debt
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120,000
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22,500
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Debt issuance and amendment costs
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(3,801
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)
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|
-
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Net cash provided by financing activities
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|
|
78,010
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|
|
|
22,500
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
64,138
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|
|
|
7,730
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|
|
Effect of exchange rate changes on cash
|
|
|
(184
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)
|
|
|
(15
|
)
|
|
|
|
|
|
|
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Cash and cash equivalents:
|
|
|
|
|
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Beginning of the period
|
|
|
45,595
|
|
|
|
14,706
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|
|
End of the period
|
|
$
|
109,549
|
|
|
$
|
22,421
|
|
|
|
|
|
|
|
Additional Company Information
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For the three months ended
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($ in Thousands)
|
|
March 31. 2008
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March 31. 2009
|
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Revenues
|
|
|
|
|
|
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Colocation
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$
|
25,297
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64
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%
|
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$
|
30,228
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|
64
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%
|
|
Interconnection
|
|
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12,326
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|
31
|
%
|
|
|
14,629
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31
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%
|
|
Recurring Total
|
|
$
|
37,623
|
|
95
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%
|
|
$
|
44,857
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|
95
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%
|
|
Non-recurring
|
|
|
2,154
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|
5
|
%
|
|
|
2,276
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|
5
|
%
|
|
Total
|
|
$
|
39,777
|
|
100
|
%
|
|
$
|
47,133
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
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March 31,
|
|
|
|
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2008
|
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|
|
2009
|
|
|
Number of customers
|
|
|
907
|
|
|
|
966
|
|
|
Number of cross connects
|
|
|
19,797
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|
|
|
21,504
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|
|
Cabinet equivalents billed
|
|
|
7,034
|
|
|
|
7,864
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|
|
Utilization rate
|
|
|
70.3
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%
|
|
|
60.4
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%
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
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|
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March 31,
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March 31
|
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|
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2008
|
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2009
|
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New Sales ($ in Thousands):
|
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|
|
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Recurring revenue
|
|
$
|
1,333
|
|
|
$
|
1,297
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|
|
Non-recurring revenue
|
|
|
1,830
|
|
|
|
1,825
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|
|
New Sales
|
|
$
|
3,163
|
|
|
$
|
3,122
|
|
|
|
|
|
|
|
|
|
|
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*Recurring revenues represent new service agreements entered into by new
and existing customers during the given quarter. Revenues from these
agreements will recur monthly over the life of the agreement.
**Non-recurring revenues represent the one-time installation fees
associated with new service agreements. These one-time fees are billed
to customers upon completion of the installation service and such
revenues are recognized on a straight-line basis over the life of the
agreement.
EBITDA Reconciliation
Switch and Data defines EBITDA as operating income from continuing
operations, plus depreciation and amortization, stock-based compensation
expense and other non-cash items such as deferred rent. The following is
a reconciliation of the Company’s operating income (loss) for the three
months ended March 31, 2008 and March 31, 2009 to EBITDA.
Switch and Data uses EBITDA:
-
As measurements of operating performance because they assist
management in comparing the results on a consistent basis as they
remove the impact of items not directly resulting from operations;
-
For planning purposes, including the preparation of its internal
annual operating budget;
-
To establish targets for certain management compensation; and
-
To evaluate the Company’s capacity to incur and service debt, fund
capital expenditures and expand the business.
EBITDA as calculated by the Company is not necessarily comparable to
similarly titled measures used by other companies. In addition, EBITDA:
(a) does not represent net income or cash flows from operating
activities as defined by GAAP; (b) is not necessarily indicative of cash
available to fund the Company’s cash flow needs; and (c) should not be
considered as alternatives to net income, operating income, cash flows
from operating activities or the Company’s other financial information
as determined under GAAP.
The Company prepares EBITDA by adjusting EBITDA to eliminate the impact
of a number of items that it does not consider indicative of its core
operating performance. Investors are encouraged to evaluate each
adjustment and the reasons the Company considers them appropriate. As an
analytical tool, EBITDA is subject to all of the limitations applicable
to EBITDA. In addition, in evaluating EBITDA, investors should be aware
that in the future the Company may incur expenses similar to the
adjustments in this presentation. Switch and Data’s presentation of
EBITDA should not be construed as an implication that its future results
will be unaffected by unusual or non-recurring items.
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|
|
|
|
|
|
|
|
|
For the three months ended
March 31,
|
|
(in thousands)
|
|
|
2008
|
|
|
2009
|
|
Operating income
|
|
$
|
3,369
|
|
$
|
2,888
|
|
Depreciation and amortization
|
|
|
6,524
|
|
|
10,046
|
|
Deferred rent expense, non-cash
|
|
|
1,133
|
|
|
2,270
|
|
Loss (gain) on disposal of fixed assets (1)
|
|
|
6
|
|
|
(5)
|
|
Stock-based compensation expense (2)
|
|
|
1,515
|
|
|
1,365
|
|
Legal expenses for real estate litigation (3)
|
|
|
46
|
|
|
26
|
|
EBITDA
|
|
$
|
12,593
|
|
$
|
16,590
|
|
|
|
|
|
|
|
|
|
Footnotes:
|
|
|
|
|
(1) Loss on disposal of fixed assets is a non-cash expense that can
be found on the Statement of Cash Flows.
|
|
|
|
|
(2) Stock compensation expense is a non-cash accrued expense to the
company that can be found on the Statement of Cash Flows.
|
|
|
|
|
(3) The Company has incurred legal expenses for lawsuits brought by
several landlords for alleged breach of lease agreements. These
expenses are included in the General and Administrative line item of
the Statement of Operations.
|
Source: Switch & Data Facilities Company, Inc.
Investor Relations:
Switch & Data Facilities Company, Inc.
Kathleen
Heaney, 203-803-3585
ir@switchanddata.com
|
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