Switch & Data Keeps Rolling

Colocation specialist sdxc reported earnings after the bell, facing down the economy without a flinch.  They finished the year with 25% revenue growth and 33% EBITDA growth despite the economic turmoil and they did not revise 2009 guidance.  There can be no doubt that the datacenter space will feel the effects of the economy, but if a recession like this one merely causes your growth to pull back from 25% to 21-22% then you are doing pretty darn well.

Revenues rose to $45.8, up from $44.1 last quarter and from $35.4M in the same quarter last year. EBITDA was $15.8M, up from $14.0M last quarter and from $12.7M in the same quarter last year.  Both numbers very accurately matched the company’s guidance.  For 2009, the company maintained its revenue and EBITDA guidance at $207-210M and $71-73M, and raised its capex projection somewhat from $65M to $75M.

Higher depreciation and amortization costs from their continuing expansion and a one time interest expense adjustment drove earnings per share down to a loss of $(0.25).  Neither seem to be of concern.  Higher depreciation is the natural result of expansion, and must always precede revenue growth in this sector, and the interest expense relates to the fair value of their swaps and simply reflects the wild fluctuations in the financial markets.

Cash levels fell to $14.8M as they continued to build out more space with $37.1M of capex.  While that seems a bit low, the company has since then drawn on its $22.5M delayed draw term loan.  Cash requirements for 2009 are much lower as the construction of new space slows down as it is throughout the sector.  So for 2009 Switch and Data seems likely to settle into a pattern of less building of new sites and more operating the ones they have.

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Categories: Datacenter · Financials