Outlook for 2007 Revenue of $815-835 Million and Adjusted EBITDA of $145-155 Million
SAVVIS, Inc. (NASDAQ:SVVS), a global leader in IT infrastructure services for business applications, today announced that it has entered into a definitive agreement to sell its content delivery network (CDN) services business to Level 3 Communications, Inc. (NASDAQ:LVLT) for $135 million in cash. Upon closing, the transaction is anticipated to result in net proceeds to SAVVIS of approximately $125-130 million after fees, expenses and taxes. The purchase price is subject to certain customary post closing working capital adjustments. The transaction is expected to close by the middle of the first quarter of 2007.
In March 2004, SAVVIS acquired substantially all of the assets of Cable & Wireless America, which consisted primarily of data centers, a Tier1 Internet backbone, a professional services practice and managed security business, and a content delivery network. Since then, SAVVIS has integrated the assets and grown into one of the leading providers of core IT infrastructure services focusing on hosting, data networks, data security, and data storage.
Phil Koen, SAVVIS' Chief Executive Officer said, âSAVVIS continues to hone its strategy of delivering IT infrastructure as a service, and our customers are responding favorably. We are selling our CDN services business with confidence that those customers will be best served by Level 3âs commitment and focus as they integrate CDN as a strategic piece of their business portfolio. This sale, together with the planned opening of four new data centers also announced today, will enable us to serve customers better and grow our core hosting and managed network services, which include professional services and security services, while creating value for our stockholders.â
Chief Financial Officer Jeff Von Deylen commented, âSAVVISâ core hosting and network services are helping change the way businesses manage information technology. We continue to sharpen our focus on these services as the drivers of our companyâs growth. Adjusted for the sale of the CDN services business and the expansion of our data-center footprint, we believe SAVVIS can achieve pro forma revenue growth of 10-13% and pro forma Adjusted EBITDA growth of approximately 30% or better in 2007.â
SAVVIS managementâs current expectations for 2007 financial results include:
. Total revenue in a range of $815-835 million, including
- the impact of the anticipated decline of revenue from Reuters, SAVVISâ largest customer, to approximately $50-60 million in 2007, and
- approximately $20 million of revenue impact from the sale of the CDN services business;
. Adjusted EBITDA in a range of $145-155 million, including
- approximately $6 million of negative Adjusted EBITDA impact for operating four new data centers, as detailed in SAVVISâ press release today, as operating expenses proceed customer revenues, and
- approximately $4 million of Adjusted EBITDA impact from the sale of the CDN services business; and
. Cash capital expenditures of $340-350 million, including $35-40 million for the network upgrade previously announced and approximately $200 million for the data center expansion announced today, with the remainder representing approximately 70% ongoing success-based investments and 30% maintenance investments.
Funding for the data center expansion is expected to come from proceeds from the sale of the CDN services business, available cash, and available debt capacity.
Savvian Advisors LLC, the San Francisco-based investment bank, provided financial advice to SAVVIS in conjunction with the transaction.