Executives
Elizabeth Corse - Director, IR
Philip Koen - CEO
Jeffrey Von Deylen - CFO
Analysts
Jonathan Atkin - RBC Capital Markets
Colby Synesael - Merriman Curhan Ford & Co.
Jonathan Schildkraut - Jefferies & Co.
Tom Watts - Cowen & Co.
Manuel Recarey - Kaufman Brothers
Jason Armstrong - Goldman Sachs
Srinivas Anantha - Oppenheimer & Co.
Donna Jaegers - Janco Partners
John Marchetti - Morgan Stanley
Richard Keiser - Sanford C. Bernstein
SAVVIS, Inc. (SVVS) Q1 FY08 Earnings Call April 29, 2008 5:30 PM ET
Operator
Good afternoon and welcome to the SAVVIS First Quarter Investor Conference Call and Webcast. This call is being broadcast live at www.SAVVIS.net and recorded for replay on SAVVIS' website. At this time all participants are in listen-only mode. After the presentation we will conduct an interactive question-and-answer session. Ms. Corse, please begin.
Elizabeth Corse - Director, Investor Relations
Welcome everyone and thank you for joining us. I'm Elizabeth Corse, Director of Investor Relations for SAVVIS. We distributed our press release this afternoon with detailed financial tables, that's available on our website at SAVVIS.net. We also have some slides supporting this discussion on that site through the Investors link. CEO, Phil Koen, and Chief Financial Officer, Jeff Von Deylen are here to talk with you today after they review the quarter and our outlook they'll take your questions.
Please be aware that today's discussion contains forward-looking statements as defined under Federal Securities laws. Actual results could differ materially from our projections due to various risk factors including but not limited to the factors disclosed in our Form 10-K and other filings with the U.S. Securities and Exchange Commission and we encourage you to review those disclosures before making any investment decisions. Our presentation this afternoon will include references to certain non-GAAP financial measures that provide additional information for investors in compliance with the SEC's Regulation G. Our press release distributed today, posted on our website and furnished to the SEC on Form 8-K include both our rationale for why we believe non-GAAP information is important in describing our operating performance and the full reconciliation with the corresponding GAAP numbers.
Now may I introduce Phil Koen, Chief Executive Officer of SAVVIS.
Philip Koen - Chief Executive Officer
Good afternoon and thank you for joining our call. We're pleased to report good first quarter results. I want to emphasize as we look ahead we continue to appositive out our prospects for meaningful growth. Having said that, we are reducing our 2008 guidance to reflect our current experience. We have begun to see a lengthening in our managed hosting sales cycle and additional pressure on our network business. This new reality was clearly inconsistent with our previous outlook for growth in both of these segments, especially when looking at first half to second half of year growth rates. While I know this reduction of our expectations is disappointing, I want to emphasize revised guidance still reflects strong double-digit growth in both colocation and managed hosting and roughly 12% pro forma revenue growth overall.
I'm going to begin with a brief review of Q1, then discuss how we see market dynamics effecting our different businesses for the remainder of the year. Jeff will go through the financials of the quarter and more detail on guidance. I'll end with some thoughts on our unique competitive position, what remains a solid growing market.
Q1 highlights are on slide 4. We're pleased to report revenue growth of 3% from Q4 and 8% year-over-year on a pro forma basis. Colo shows a ramp-up, reported 9% sequential growth and 18% pro forma year-over-year growth. Managed hosting remains a growth driver with revenue up 3% sequentially and 22% year-over-year. Network services revenue was down 3% sequentially and down 8% year-over-year. I'm pleased with the adjusted EBITDA number which is our key focus. We achieved $40.3 million, up 2% sequentially and 17% from a year ago pro forma, despite the up-tick in spending for the data centers we're bringing into service this year ahead of revenue.
Operationally, we had some important achievements. We were once again included in a leader segment of Gartner's Magic Quadrant for North American web hosting, more on that later. We won new and expanded existing business relationships and had some attractive accounts in the win column. Our new security offerings won considerable industry attention and inquiries from customers. Finally, our Boston, Chicago and Dallas data centers opened on time and on budget with sales performing well against plan.
Moving on to the outlook, slide 5 lays out the key points for revised outlook for 2008. One question we've heard often the last several months is about the impact of the slowdown of the economy. Anecdotally, I want to tell you that I have personally spent a great deal of time resuming meeting with CEOs and CIOs of both current and potential clients. Their message is clear, the long-term outlook for the services we provide is unchanged, it remains strong. For 2008 however, they're being more cautious and making new IT spending commitments. This is especially true when customers are considering a more complex commitment of a buy decision for managed hosting. Therefore, we have a different view today about how strong our growth will be in the second half of this year versus earlier this year. In the near term, there are different market forces affecting each of our revenue lines, so I'll discuss them separately.
Starting with colo on slide 6, there's a lot that's working well here. We continue to achieve solid growth in line with other industry leaders in the U.S. We had a healthy pace of new installations in Q1, growing our average bill colo space to 60,600 square feet billing, an increase about 5%. Based on the end of the period metrics, our utilization rate stands at 70%. The revenue per square foot on our entire footprint increased by 4% on average from fourth quarter of 2007. We continue to execute on our plan of driving colocation prices to market rates as our legacy contracts expire. At our new data centers, pricing is averaging about $70 per square foot per month.
Our program of adding new data centers is driving the growth. As the year unfolds we will be closely watched and the progress of our sales effort to make sure we remain on the right course. I'm please to report that currently both of our Phase 1 and the three open Phase 2 data centers are performing well against our plan.
We do see the market for first generation data centers, the ones built around 2000, coming closer to a supply demand equilibrium. These are still great centers, we're happy to offer to customers. But they're not getting as rapid a take up as we saw a year or so ago. For 2008, we've taken our projection down slightly to reflect that trend, and we continue to look for customers who want managed, as well as colo. Our current expectation is for colo revenue, pro forma growth of around 27% for the full year.
The managed hosting story is more complex, as summarized on slide 7. So what's working? Well, managed hosting contingency, good customer uptake driving a good growth rate. But the deals we want are taking longer to close. We have reflected that in our growth rate projections, especially for the second half. We also, quite frankly, were over ambitious in our planning on the base of sales achievements for the second half of 2007. We've describe those expectations very thoroughly, and I'm confident that our team will be able to deliver 2% to 6% sequential growth in each of the next three quarters for a full year growth rate managed hosting of about 20%.
Managed hosting still makes great sense as a focus area for us. We have a well received service set that solves real problems for clients. For investors managed hosting generates more than 20 times the revenue of a colo on a space basis, which results in higher overall cash flow from data center investment. Selling managed hosting services however is more complex, with a longer sales cycle, more comparable to an enterprise software sale. These deals generate $1.5 million or more of revenue over a three year contract and involve multiple service solutions. This is a strategic decision that requires an education process and very deliberate consideration by the client. Managing the hosting deals have historically require [ph] six to nine months sales process and in the last 60 days, we've seen that cycle elongate to 9 to 12 months. We have not seen deals fall out of the funnel, but they are definitely requiring more time to close.
We are supporting managed hosting success by continuing to introduce service enhancements, like the managed security services we launched in the first quarter. Our new guidance for 2008 reflects our current level of booking, sort of keeping our outlook consistent with this quarter's experience. While we like the economics of our colocation business, we continue to believe that the managed hosting is a significant differentiator and ultimately will help to drive superior returns on our invested capital.
Finally, in our network business on slide 8, clearly we have more work to do. We now expect this business to be down approximately 6% for 2008. We are gaining some traction in hand in managed network bookings from the introduction of our application transport network. However, attracting the customers we want and closing the deals is proving more challenging than our earlier projections reflected. The work of grooming the network base to direct a higher share of our bandwidth to higher margin enterprise customers requires more time and diligence. In addition, we continue to see a tough pricing environment for bandwidth and un-managed network services. What's more, we are seeing slightly higher churn for managed network services from the financial services industry, where many companies are instituting stricter cost management.
On the plus side, we continue to see excellent bookings in colo and managed hosting from financial companies wanting to reduce CapEx, managed risks and enhance trading capabilities with our Proximity Hosting services.
Finally, we continue to take actions ourselves to refocus our network services for our data center customers versus lower margin, standalone managed network offering. This grooming of our base will yield benefits in our adjusted EBITDA margin over time. In short, as I said earlier, we have work to do on our network services businesses and we expect to bring you updates on our progress in coming quarters.
Before I wrap up, I want to spend a moment reminding you about our long term strategy in focus as outlined on slide 9. We strongly believe that our infrastructure and service model is an important competitive differentiator. Gartner agrees sighting our unique strategy in offering a fully-managed integrated solution. While sales cycles are elongating, customers continue to tell us that the value proposition of manage solution is intact, with the advantage of lower costs, lower risk and better service.
We've made significant investments, all self funded, in our data center expansion to help drive hosting revenue growth. We've also committed investment dollars to the development of our application transport network, both for tech, the existing network services revenue, to support our integrated hosting plus network solution.
Finally, our commitment to a full range of infrastructure services enables us to deliver expanding EBITA margins and higher IRRs on our data center investments. So SAVVIS' strategy is very focused on long term sustainable results. We're continuing to manage for these improvements, remain confident that the long term outlook for our company is excellent.
Let me now hand it off to Jeff, who will walk you through a more detailed discussion of the quarter.
Jeffrey Von Deylen - Chief Financial Officer
Thanks, Phil. We're going to start on slide 11, which shows an abbreviated P&L, with quarterly comparisons. We've excluded non-cash compensation from the gross profit and SG&A lines for each period, and we've shown both the pro forma results as well as the reported results from a year ago and the most recent quarter.
Quarter-over-quarter strong colo growth of 9% and solid managed hosting results drove a 3% total revenue growth from the fourth quarter as we installed business one in previous quarters. Gross profit dropped slightly as we added cost ahead of revenue for the Phase 2 data centers. SG&A expenses dropped though, reflecting our ability to manage cost to help drive adjusted EBITDA margin expansion. Adjusted EBITDA was up 2% from Q4, with essentially flat margins despite the new costs from the new IDCs.
On a year-over-year reported basis, revenue was down 1%, reflecting the impact of the sold assets and the Telerate consolidation, as well as lower network revenue. Those challenges were largely offset by 8% growth in hosting revenue. Adjusted EBITDA was down 7% from a year ago, again due to the sold assets and the Phase 2 data center costs being included in this quarter's results.
On a pro forma basis, hosting revenue was up 20% as growth in managed hosting and colo more than offset the lower network revenue. Adjusted EBITDA on a pro forma basis was up 17% from a year ago. In this first quarter we had about $2.7 million negative impact to adjusted EBITDA from our Phase 1 and Phase 2 data centers, which I'll talk about in just a moment.
Slide 12 will update you on the impact of the new data centers and the adjusted EBITDA margins on our legacy hosting and network services, as well as the expansion data centers. In addition on this slide we've provided some additional metrics on the new data centers. New data center revenue more than tripled to $6.2 million this quarter. The new data centers contributed a negative impact of $2.7 million to adjusted EBITDA as we ramp revenue into the fixed cost base.
While total legacy adjusted EBITDA margins were flat in Q1 from Q4 the components of the margin are important. Network margins in the legacy business declined by about $3.5 million in this quarter given the lower revenue and new contractual rates from our vendors. However, we do expect to hold or slightly improve the network margins over the year through aggressive cost measures. The adjusted EBITDA margin on the legacy hosting only businesses expanded from 26% of revenue in Q4 2007 to 28% of revenue this quarter as we leverage the asset base.
Slide 13 shows annualized bookings and churn results for the last five quarters. Our net new bookings in the first quarter of $84 million were 46% higher than the first quarter of 2007, but were down slightly from the fourth quarter and we are at the lower end of our expectations. Churn for the quarter, which includes both price erosion and disconnects, was up slightly to 1.9% of revenue.
Our revised outlook for the remainder of the year reflects bookings and churn assumptions that are consistent with this quarter's performance of the colocation, managed hosting, and network businesses. These revisions and our assumptions are the key contributor to our lowered revenue expectations.
Slide 14 lays out a revised 2008 outlook. Our outlook for the year reflects the recent changes we've seen in the environment in which we operate, as well as the final results of our Q1 sales and customer metrics. As Phil discussed, we continue to see strong demand for colocation services. For managed hosting and network services we've adjusted our outlook to reflect the conditions that are affecting each of those businesses. As we've noted, we expect total pro forma revenue growth in the low double-digit percent increases with a range of 840 to $870 million for the year.
We are taking steps now to manage cost in line with our revised revenue growth rates, while benefiting from a stronger mix of higher margin hosting services revenue, offsetting the declining network services revenue. These efforts will allow us to drive adjusted EBITDA margins of 21% to 22%, and pro forma adjusted EBITDA growth of about 24% at the mid point.
On the capital expenditure side, we expect to spend about $280 million to $300 million of CapEx, with about $145 million to 150 million of that on the previously announced data center expansions. Given the reduction of our expectations for revenue, our success based CapEx spending will be about $10 million lower than previously anticipated.
Below the EBITDA line, we anticipate about $130 million to $140 million of depreciation and amortization for the year. $25 million to $30 million of interest expense for the year, and tax expense of approximately $2 million to $3 million, reflecting our estimated AMT tax cost.
Slide 15 lays out some of the metrics of our revised outlook. First we have about $70 million of annualized revenue in our backlog. As we install that over the next two to three quarters, we'll begin to recognize that revenue. That incremental new revenue, building on the base of approximately $812 million of annualized revenue from quarter one, is the foundation for our new guidance. The other two drivers of revenue growth are new bookings and customer churn.
In new bookings buy-ins, as we have said, are soon to be consistent with this quarter's experience. Our revised churn estimate is essentially flat, at 1.9% of revenue. We'd like to do better and believe we can in the long term, but a realistic expectation for 2008 is for no change from our first quarter performance. So that targeted improvements are not reflected in our results for the rest of the year. We'll continue to sell and install into our available data centers, and we have assumed that we'll continue to grow colo revenue by 5% to 9% sequentially in each of the next three quarters, as we continue to install customers into the data centers. Based on our recent sales experience we expect managed hosting soon to grow 2% to 6% sequentially in each of the next three quarters.
On the cost side, we expect to add another $2 million related to the new IDCs in each of the next three quarters as we bring on the remaining data centers. In addition, you should expect the utility cost will be higher in Q2 and Q3, than in the first quarter and fourth quarter. That increases about $1 million to $3 million as a result of the warmer weather during those quarters. We have taken additional measures to control discretionary costs, and we'll continue to manage the revenue to expense ratio aggressively.
One of the strongest points of SAVVIS is our conservative balance sheets and our under leveraged position as shown on Slide 16. With total debt of about $540 and anticipated adjusted EBITDA of about $182.5 million at the midpoint, we are approximately three times levered, and about 2.1 times levered on a net debt to adjusted EBITDA basis.
Our forecasted adjusted EBITDA covers about seven times our cash interest cost, giving us a strong position to fund our business requirements. With our adjusted EBITDA expanding over the course of the year as we begin to leverage the fixed costs from the new data centers, our leverage and coverage ratios should continue to improve.
Finally, I want to just spend a moment on our managed hosting business. As you can see, our focus on solid financial condition reflected in our strategy of leveraging our data center investments through our managed hosting business as an important contributor to our value proposition.
I've laid out some of the economics of our managed hosting business on slide 17. Our ability to drive increasing revenue margins from our data center investments is a significant value driver for SAVVIS. For example, our annualized first quarter managed hosting revenue of $245 million is generated on just over 17,000 square feet of data center space. We had used all that space for just colocation, the annualized revenue generated would be about 10 to $12 million, or about 1/20th of the manage hosting revenue we currently achieve.
Put another way, to generate $245 million of annualized colocation revenue, we'd need about 400,000 square feet of sellable colocation space, which reflects an investment today of nearly $700 million. Our manage hosting offering is a clear product and service differentiator, but equally important, combining managed hosting and colo produces a far superior economic return versus that of a colocation only data center investment.
With that, I'll turn it back over to Phil for wrap up.
Philip Koen - Chief Executive Officer
Thanks, Jeff. I'd like to touch on our important recent achievement. On slide 19 we've reproduced the Gartner Magic Quadrant. This reflects Gartner's view of North American web hosting, the equivalent of our managed hosting services. Since SAVVIS first placed in the leader's quadrant in 2004, we have found that this recognition has helped strengthen our hand as we've reached out to more customers. More broadly, we see this as a validation of our value proposition that we're offering to customers. The fact that we have again secured the leadership position is a strong statement about our managed services capability and roadmap.
What's more, we're now recognized in three Magic Quadrants. Not only managed hosting, but also network and managed security services. We are proud of this achievement, because it demonstrates our leadership in delivering IT infrastructure as a service. Let me now summarize slide 20 before we open up for Q&A.
We were clearly disappointed at revising our 2008 outlook, but we feel it's important to give investors a realistic framework for our performance outlook based on our current experience. Colocation will continue to be a great business with strong demand for available data center space. Managed hosting holds a lot of promise to drive an adjusted EBITDA margin expansion and enhance and return our data center investments. Over the long term, managed hosting takes advantage of the continuing trends that outsourcing IT infrastructure. We are very pleased we are in a leadership position in Magic Quadrant and feel the breadth of our service offering puts us in excellent shape versus our competitors.
Lastly in our network business, we have more work to do to obtain the growth rate that we'd like to see. I'm confident that the investments we've made in our ATM network properly position us to provide the network services our hosting customers need. In fact, Gartner has identified this as one of our strengths. We have a unique strategy that leverages utility based hosting offerings with IP based network interconnect.
I believe it was important to focus on the near term in this discussion today. Let me touch on the long term prospects briefly on slide 21. I want to make clear that we are as excited about the long-term prospects of SAVVIS' success towards it's ever been. While customers are taking longer to make decisions, their interest in our infrastructure solutions is undiminished. We signed some excellent deals in the first quarter and we are looking forward to managing through the challenges of 2008 to build and grow for a long term. Jeff and I will be happy to take your questions now.
Elizabeth Corse - Director, Investor Relations
Matthew, if you'd assemble the queue, we'd appreciate that. And could I ask that on the first round of questions if people try to keep to one or two questions a piece and then we'll go through a second round if we have time available. Thanks.
Question And Answer
Operator
[Operator instructions]. Our first question comes from Jonathan Atkin of RBC Capital Markets.
Jonathan Atkin - RBC Capital Markets
Yes, good afternoon. Can you hear me okay?
Philip Koen - Chief Executive Officer
Yes, we sure can.
Jonathan Atkin - RBC Capital Markets
So, my question is around the mix between colo and managed services. And in the past you've talked about... as you did on this call, kind of a higher value sale when you feel managed services and managed hosting. Is there any colo business during the quarter that you turned away? And then secondly, with regard to the longer sales cycle that you're seeing in managed hosting and outsourced IT, is that indicative of kind of the broader macro condition? Is it... are you seeing it more in certain sectors of the economy or is it more indicative of changes that maybe are taking place or will take place in the sales organization at SAVVIS?
Philip Koen - Chief Executive Officer
Okay. Jonathan great question. The... as far as the mix between colo and managed services. You know the colo business we continue to compete I think on a very favorable basis with the other players out there. As we have said over and over again, this is not a race to simply fill up space. We really are trying to balance having the right customer at the right price point in the right facility. So if you think about our footprint, we don't nearly have the same size and scale of footprint that some other people out there. So we're very focused on making certain that we're matching up with individuals who, maybe at the first step of this outsourcing task will simply buy colocation, but have a tendency and a pathway to continue to buy additional managed services from us. So that's what we're really focused on. I won't say that we're turning away people, I mean it's competitive and you win some and you lose others. I would say that given where we are that we're right where we should be as for as our colocation business.
Let me take a little bit longer on the longer cycle. In my conversations with CEOs and CIOs, depending upon where you're business is in what industry, there are various reactions. Clearly, those many people that are in or around the financial services area are having, are taking a lot longer time and are being a lot more diligent in making their decisions. Other sectors that might be more consumer oriented are also doing the same. There's other sectors that seemingly are continuing to do quite well. So when we looked at this across the broader marketplace, it was clear that for the type of purchase that a managed hosting solution is, which is anywhere from $1.5 million to north of that over a three year period, they're taking a much deeper inspection and making absolutely certain that these decisions are the one's they want to make. That's translating to simply a longer sales cycle. I want to emphasize that as we looked at this there were no deals in the Q1 funnel that disappeared. So it was not a case of where people are simply pulling back and not committing, this was a case of them being more diligent in their decision making process. And that stamps the reason that when you're looking at a commit of 1.5 to higher, versus a 10 cabinet colo deal where that commit might be only 300,000, the decision cycle is going to be a lot different.
Jonathan Atkin - RBC Capital Markets
Okay, and then just one final question on your physical asset. Can you give us... or can you repeat what... where you are in terms of physical space utilization at the moment in your data centers?
Philip Koen - Chief Executive Officer
Yes. I'll have Jeff do that.
Jeffrey Von Deylen - Chief Financial Officer
Yes, Jonathan, in total we're at 70% utilized today. Obviously we bring on additional space over the course of the year, so that fail rate roughly stays pretty equal, and then at the end of the fourth quarter we've talked about getting back about 50,000 square feet in the data centers. So we really... that 70% probably increases slightly over the course of the year, and then we'll be in the high 60 low 70 by the end of fourth quarter is our current outlook. And that's obviously slightly higher in the legacy data centers and today and then lower in the new data centers. I think we've provided some of the stats on one of my pages on the... what we've sold into the new data centers, both Phase 1 and Phase 2.
Jonathan Atkin - RBC Capital Markets
Thank you.
Operator
Thank you. Our next question comes from Colby Synesael from Merriman.
Colby Synesael - Merriman Curhan Ford & Co.
Great. Along the same lines, the one thing that sounds like... I'm getting out of the calls and you guys are obviously focused on the long term and you're focused on the bundled strategy, and when you look at the history of SAVVIS, obviously managed and colocation has been the strong suite, and where the customer... where the company's always focused. What makes you guys so competitive, so confident that you can be competitive bundling in the network services pieces of business? That was obviously something that struggled in 2007, that's something that you guys obviously seem to be continuing to focus on, and when you guys go through the process of trying to understand what the near-term and long-term growth expectations should be, at least as it relates to the investment community, can you walk us through that process?
Philip Koen - Chief Executive Officer
Sure. Colby, let me open up, and I'll have Jeff chime in here. Let me take it square on. Why are we confident that a bundled strategy, being able to offer managed network coupled with managed security and manage hosting is a winner? Because our customers are telling that. When we go out and do market survey and ask us CIOs if they would prefer to buy a bundled solution for their IT infrastructure services, I will tell you that the returns that we get are an outstanding absolute yes. We are absolutely confident that the demand for that exists. There is no data that suggests to us that that isn't the case. Our issue, quite frankly, is moving from a legacy business to being able to offer that value proposition.
So if you think about our network, there's three components. We have managed network, we have the hosted area network or which we call the hand, and then we have legacy... bandwidth. And as we continue to groom the network business to move towards what data centric customers want, that's going to take time and additional work. The first piece of this was we had to get into the ball game by at least having a network that was competitive. That's what we did when we went and invested in our application transfer network which we just churned up. That was just churned up at the end of the calendar year.
So I think while we remain highly confident that the strategy's right, I think we absolutely have the right technology deployed. I think that we have the right set of services that data centric customers want. Our issue now is getting reengaged and getting our sales organization to accept us, to be able to successfully sell that bundled solution. And then secondly, grooming our revenues away from lower margin carrier based services that don't fit where we're headed. That's just going to take time and I think that... and looking at where we are today, and when we were putting together our view for '08, I think we were just over optimistic as to how much wood we had to chop to get through.
Colby Synesael - Merriman Curhan Ford & Co.
It sounds like you guys keep talking about the right customer for you. And it sounds like, had you just focused more on, again the colo and managed hosting part of the business, we would have seen better, at least near term results.
Philip Koen - Chief Executive Officer
No. I don't think the evidence suggests that at all. I think that we continue to do very, very well in both the hosting and the colocation. We do... and I think we've been talking about for some time, that we're going to have to go through a transformation on the network side. But we're winning deals. I mean, we just put out a press release just the other day of a deal that we won because of this ability to offer the benefits of an application transfer network. And you know, we continue to believe that as we get engaged and work through this that we will see more and more progress.
Jeffrey Von Deylen - Chief Financial Officer
Colby, this is Jeff. I think one of the other metrics that you can kind of watch... I mean, if you looked at a year ago, 18% of our network revenue was kind of tied to customers of the data center. Today that's 23% of our network revenue. So we do have some legacy businesses that... legacy network businesses that are low margins, that we're not emphasizing. So I think it's trying to continue to accelerate the rate of customer adoption of the... the customers either in or around the data center, them buying network services and more network services. Because we think there's certainly some customers who aren't buying network services from us that we can continue to exploit in the introduction of an Ethernet product, and some of the financial proximity hosting products I think are... give us confidence that that part of the revenue can grow. It's just offset by some of the legacy network businesses that aren't connected to a data center, where we're not... we have no competitive differentiation, and where there's price pressure that we've... we're deemphasizing.
Colby Synesael - Merriman Curhan Ford & Co.
Thank you.
Operator
Thank you. Our next question comes from Jonathan Schildkraut of Jefferies.
Jonathan Schildkraut - Jefferies & Co.
Good evening. Thank you for taking the questions. I have just two questions. The first is on the Reuters contract renewal. I know that at least part of the Reuters contract comes up for renewal in May of this year. Jeff, I was wondering if you could give us a little color about how much is at risk, and how you guys are maybe competing for renewal or potentially a greater piece of their business? And the second piece is on guidance and visibility. Second question rather is on guidance and visibility. Listen, over the last... I know this was a difficult quarter for you guys, and the call must have been challenging as well. Over the last nine months, guidance has really gotten whipped around, up and down. And more than once we've heard from the company that you were a little too enthusiastic about what you thought you could accomplish in the near term. How comfortable are you with your current guidance? What have you done differently this time in order to come to these numbers? And what lessons have you learned over the last nine months in term of interpreting some of the data in the marketplace? Thank you.
Jeffrey Von Deylen - Chief Financial Officer
Sure, Jonathan, Jeff. Let me... we'll take a shot at that. I'm sure Phil will add on that. On the guidance question, I think what we've clearly done here is reflect the results for the quarter and just say, that's what we know; let's not assume that we'll have an increase in productivity. And let's not assume that the churn... yes, I think the two big drivers really... as you think about going forward, is what sort of churn rate do you expect, and what's the level of new sales or new bookings do you project? And our reduction is really reflective of the experience we had in this quarter and the completion of that in March. And coming to a realization that as we go forward let's just flat line it at where we're at. The economic conditions are a little different then when we put that guidance together. And I think being a little bit more cautious given all those factors is kind of how we think about... how we put together the guidance.
In terms of the Reuters contract, and then Phil might want to kind of pipe in on that, on your second question is, Reuters today roughly is about a $50 million account. We continue to... the nice thing is we've taken that to a lot more of that business. Historically that was entirely network. So we've grown the hosting part of that business nicely. So we continue to have opportunities there that part of the business, each time we sign new contracts or those are kind of separate contracts than the legacy old bridge network business. Essentially in the past two and a half years, they've had an opportunity on the legacy network business to migrate if they so choose and they have decided not to. So we're working aggressively with them as they think about their Thompson/Reuters merger. And an opportunity for us to get a bigger share of the wallet, we clearly think as one to two of their major network providers that our proportion of the wallet is the smallest. But they haven't made... they haven't given us any clear signals one way or the other which way they're going. We'll continue to work with them and I think we'll kind of get our niches on the network side. And then continue to try to meet their needs on the hosting side.
Jonathan Schildkraut - Jefferies & Co.
All right. Thank you, for it. I'm sorry.
Philip Koen - Chief Executive Officer
Hey Jon, before you leave, let me... I think it's important for me to just take your question head on. I appreciate your question. Look I think it starts off with the fact that we take very seriously that what we want to do is be able to give you, the investor community, a reasonable road map so that you can try to model our progress. So it starts off, and I don't think we didn't have that appreciation, I just think I want to make that an acknowledgment that we take that very seriously, and everything we're doing here is a goal to achieve that.
Specifically I think what we have done now is to really go back in light of what we've seen over the last 60 days and look at each one of these three segments of our business and ask ourselves what's going well, what's not going well, how do we know that and what do we think the reasonable outcome is going to be as we look forward over the next three quarters? And I think that... I think the amount of rigor and inspection has gone on throughout the organization starting at the sales organization and through Paul Goetz, going all the way back, all the way down to the regional sales directors, scrubbing through that, taking a hard look at our existing backlog and making sure we clearly understand the installations around that. I just think that today, through that a lot harder inspection, we know and understand it better. And specifically, around the network, I'm probably the first to admit that, our view of what we were going to be able to achieve in the second half of this year was overly optimistic, you know. We had projected a growth and we're now saying that we're going to be down 6%.
So when you step back and you look at this, I still feel that what we are throwing up as far as our point forecast, or the midpoint for guidance for co-location against every metric out there, it's pretty darn good, 27%. I think that puts us right up there in the league tables with the best of them. When we look at the managed hosting, 20%, and we've done a lot of work with outside analysts to see what their view is to what the managed hosting complex managed hosting, and the numbers we're hearing is 13 to 15, so our take is we're going at it a little bit faster than the overall market. We've got some real challenges in network and this team is up to it and we'll go after it.
Jonathan Schildkraut - Jefferies & Co.
All right. Good luck, guys and thanks for taking the questions.
Operator
Thank you. Our next question is from Tom Watts of Cowen & Co.
Tom Watts - Cowen & Co.
Good afternoon. Could you just update us on the resale process of the 70,000 square feet that was vacated last year? It sounded like the slow sales of the 21 [ph] data centers have lengthened that out and at what point will we have offset that revenue decline? And then also for the space they have been vacated in Q4, I think that is also some of the older, lower power states, what are the prospects for reselling that and are there any other alternatives for some of the older states being difficult to sell?
Jeffrey Von Deylen - Chief Financial Officer
So, hi Tom, it's Jeff. On the kind of the reclaimed space from the two contracts that we exited last year, we said we had about 56,000 square feet that we were going to sell into. We've replaced 90% of that revenue and have about 18,000 square feet to... remaining to sell into. That's primarily in one market in the Santa Clara market. There's less than 2,000 square feet in the D.C. market. So we're... we kind of know where it is. I think that given our new center added in Santa Clara, we feel like we've got adequate different footprints to sell into in terms of power. I think as Phil mentioned, the demand for those lower powered centers is slightly less than some of the higher powered data centers, but we continue to make progress against that and feel like that is a very solid footprint and we continue to add customers each quarter into those centers.
As it relates to Chicago; again, Chicago is lower powered than the new data centers we're bringing online, but it is in that 80 to 100 watts a square foot, so it is pretty solid. And that market has been very robust. We've had no really no data center there to sell prior to the new Chicago site, the small Chicago site that we brought online in March. So that sales team is eagerly waiting that space to be freed up. I think they're working from the opportunities as we speak and that office in particular in that region has been a very good performer for us over the last couple of years. So we certainly think we'll hit the ground running when that space is made available to us.
Philip Koen - Chief Executive Officer
Hey Tom, this is Phil. Let me just pile on here, because I want to make sure we're really clear about how we view this. If you think about our footprint today, and this is just easy to bifurcate, the majority of our footprint today is at over the 100 watts per square foot capability, as we reflected the new builds. The demand for data center space at 100 watt and below is still good, so I don't want anyone to walk away to think that somehow it's difficult to sell. What the reality is that those are data centers that were built 2000-2001, which the vast majority of facilities out there are that generation. So there's just more of it. There's more supply available for people that don't need, and there are a lot of companies out there that don't need over 100 watt per square foot capability. So that environment just as the demand has more choices to pick from.
As you go up over 100 watt, it's just the inverse. There's a lot less supply and a lot more demand so that goes the supply and demand equation work in favor of us. And that's the reason why you're seeing much higher pricing and that's the reason why as of I think the end of Q1 our Phase I and Phase II data centers are open, are already approaching 30% utilization. So just might be... maybe a little longwinded explanation but the notation of difficult to sell I think is probably the wrong way to characterize this. It's, I think it's a simple factor of where the supply and demand curve is for two different products.
Tom Watts - Cowen & Co.
Okay. And then also... so your comments suggested that there was as I understood, there wasn't much of a lengthening of sales cycle on the colo side so we haven't seen any slow down there. Is there something fundamentally different about the colo customer that's not being affected by the economy or is that market different than what you're seeing in the managed hosting?
Philip Koen - Chief Executive Officer
Yeah, I think that the fundamental difference for people that are going into colo is that most enterprises today, if their data center is full or run on the economics is saying, do I really want to commit the CapEx necessary to go build my own. Or do you think outsourcing the co-location requirements is the right answer. I think that's the real, that's the layout. I think what you're seeing is that enterprises are moving more aggressively to an outsourced model for co-location. And as far as the sales cycles, we really haven't seen any change, I think if you've listened to the Equinex calls and the Switch and Data and these other guys, all of us continues to see a very healthy market and one that we're very thankful for.
Tom Watts - Cowen & Co.
That's good. Phil, thanks very much. Thanks, Jeff.
Operator
Thank you. Our next question comes from Manny Recarey from Kaufman Brothers.
Manuel Recarey - Kaufman Brothers
Thanks. Just to follow up on the pervious question about the... below the 100 watts per square foot market. Did... I know those legacy centers, how many, what percentage of your square footage is that and is that going to the fact that it's reaching equilibrium? Is that going to kind of impact your ability to raise prices as contacts are coming up for renewal?
Philip Koen - Chief Executive Officer
Well, let me take the first part of that Manny and I'll hand it off to Jeff. We haven't' actually ever gone out and said what the split is, but I will tell you that the majority of our data center space today is over 100 watts. So I think that's a... so I think if you think about SAVVIS as being able to address various enterprises, and these are well situated there. With regard to sub 100 watt facilities, we still have a number of contracts that are below what we would say is market rate for that for those facilities. In fact, we aggressively as these legacy contracts come up and we bring in new customers or renew are moving them to market rate. So I think the... unlike some other guys out there, if you looked at our Q1 results, our revenue per square foot for colo increased sequentially about 4%. And we still believe that on a blended basis, they can go over 100 and sub 100 as you move through time, that $50 per square foot reference per power and space is a good reference point. So we still have ways to go and we're feeling pretty confident that through time and through mix, we'll get there. Jeff, you want to add anything?
Jeffrey Von Deylen - Chief Financial Officer
Yeah. Just as you just think about less than 100 and more than 100, if that's... I don't know if it's the exact right cut off, but if we just kind of look at our footprint, obviously, all of the new data center space we're adding is well north of that is actually over 125,000 or 125 watts per square foot. But about 45% of our current footprint is less than 100 and the remainder is over 100. And again, there's quite a bit of that 45% is in the 80 to 100 range, which again, is pretty solid power for kind of customers that we're seeing today.
Manuel Recarey - Kaufman Brothers
Okay. Just one more question, if you just talk about the competitive environment for the managed hosting, has there been any significant changes there?
Philip Koen - Chief Executive Officer
No, we have not seen any changes there. I mean again, it is important to realize that managed hosting; our sweet spot is deals that range between 50 and 100,000 of them. And usually these are three year type of contracts. And so far as we have tracked the market for that, I think we're doing very well in our win radar now. So I have not seen any competitive changes other than customers just taking longer to decide.
Manuel Recarey - Kaufman Brothers
Okay, thanks a lot.
Operator
Thank you. Our next question comes from Jason Armstrong of Goldman Sachs.
Jason Armstrong - Goldman Sachs
Thanks. Good afternoon. A couple of questions. First on CapEx, I think historically, you've talked about relatively high success based capital spending ratios and given the magnitude of the revenue guidance cut here, it seems like you know at least based on the historical ratios, the CapEx cut should have been a lot higher than 10 million on the success-based side. Maybe, Jeff, you can just kind of tie out some of the calculations there? And then, second question, this sort of came up couple times last year. Is there any other square footage you've identified in the quarters for sort of retirement or reconfiguration? Thanks.
Jeffrey Von Deylen - Chief Financial Officer
Yeah, let's go to the CapEx question. I think a couple of components there, obviously, the expansion CapEx we're committed to, we think it's the right strategy, so we continue to build out those centers that we've previously announced. Obviously, those have all been previously disclosed and we're on the path to completing those and delivering those. And that's Singapore, our second floor in New Jersey, Boston and London, London, being the most significant. So those we'll continue to do. I think one of the things as we think about CapEx this year, that to your point, it was revenue down with the success-based CapEx. I think the other thing that drives CapEx a bit higher this year is our investment in our back office systems, both our OSS and BSS, we're going to spend $20 million to $25 million in improving tools.
And that should, again, our issue there is driving higher productivity and improving the customer experience. And those investments, while we took down the revenue guidance, we thought that those were investments we wanted to continue to make. And again, in this kind of thought of long-term value, we just thought it was too important to drive those productivity enhancements to our back office, both the service and support areas to cut those just didn't make sense for the long term. So, that's another area that as you just kind of think about our mix of CapEx this year being a little bit higher than our historical rate because of those investments.
Jason Armstrong - Goldman Sachs
So, Jeff, was that in the original CapEx plan, or was that incremental as of today?
Jeffrey Von Deylen - Chief Financial Officer
No, that was in our original CapEx. So, clearly the new, the expansion was always in our plan and then this level of investment in the OSS and BSS has been consistent in our plan.
Jason Armstrong - Goldman Sachs
Okay. And then on the retirements and reconfigurations?
Jeffrey Von Deylen - Chief Financial Officer
Yeah, we have no plans to reconfigure or retire as I said [ph]. We're happy with the footprint, we have the mix of customers that gives us a great opportunity, so a wide range of customers into a wide range of footprint.
Jason Armstrong - Goldman Sachs
Okay. Thanks.
Operator
Thank you. Our next question comes from Sri Anantha from Oppenheimer.
Srinivas Anantha - Oppenheimer & Co.
Yeah, good evening. I have just two questions. Phil, in your prepared remarks I think one thing you mentioned was one of the reasons why people want to do managed hosting is the lower cost. Do you think SAVVIS has the necessary cost structure today to actually compete with the other focused managed hosting guys? The reason why I ask you is because, when I talk to either the enterprise customers or to the other providers, they clearly say that it does not really matter where the data centers are and if you are trying to provide these managed services from some of these high cost areas, I would imagine that would probably put you at a cost disadvantage. The second question was on network services. Based on comments, I still don't get the impression that network services is strategic to your business longer term. And if that's the case, do you think by bundling network services, are customers delaying the decision to buy managed services from you in any manner? And just one clarification, Jeff, the interest expense seemed to have declined substantially, were there any one-time items in 1Q? Thank you.
Philip Koen - Chief Executive Officer
Okay Sri, let me take the first part of this, the managed hosting. I think it's... I think if you asked different people they are going to give different answers with regard to proximity to data centers. For every one they would tell you that they don't care, I will point to one that says they do. So, I think that like it or not, the reality is that within the managed hosting business, there is a locality factor for a major number of our customer base and that's the reason why quite frankly, part of the strategy we have is that for every market that we compete, and we have set aside a managed hosting footprint for us to be able to serve locally. I think that's the right strategy, it doesn't hurt us and I think that if I look at the deals that we win and we're up against our competitor base in the managed hosting, if you just go to the magic quadrant you can see that we... who those people are that we're usually competing on a locality-based basis.
I am not aware of any managed hosting deal that we're actively competing against where the service is being offered offshore. I can't think of one, every one tends to be within a locality where our data center is. So, I don't think the... that is an issue, I think cost is a very important issue and I think our still biggest challenge is to prove to our customer base that on a total TCO basis that we offer a better alternative than them doing it themselves. Our strongest competition still is within the enterprise. That's the reason why I said this was a strategic decision because once you decide to move to an infrastructure and service-based model, you're making a drastic change in your business and how it operates. I think that we have very powerful TCO tools, we do a lot of workshops, we do a lot of executive briefing sessions. I think that one of the major reasons why people do buy from us is because of the lower TCO and also the lower risk that one has, and also the higher service level. So, I think that it's a function of all of those and today, at least based upon where I sit, I think that we're doing fairly well in that competitive arena.
So let me draft the question about how important network service is. Again, it's a simple matter of going and talking to your customer and saying, would you prefer to be able to buy a bundle of services which include managed network, managed security, and managed hosting from one provider versus doing and reintegrating yourself. I will tell you that everything that we have looked at, the overwhelming answer is yes. Our problem is one of a little bit of legacy, as I said earlier, of where we are and where we need to go. I don't think the deals that I'm aware of within our funnel, where we are also offering that bundle solution, that having the network piece is any way slowing down the decision. It's simply the fact that it's a $1.5 million, $2 million, $3 million deal and I think CIOs are looking real hard at making that commit in today's environment than they were perhaps 12 months ago, that just stands the reason. And, particularly, as depending on what, you know, if your particular sector is being more affected in just your overall revenue growth expectations. So, I don't see any... no, there's no evidence that I can see that by offering a bundle network service that it's slowing down the decision making process.
Jeffrey Von Deylen - Chief Financial Officer
I think the last question was on the net interest expense and other, and you're right, there was a one-time $4 million favorable currency gain related to the reevaluation of some foreign currency balances in our interest expense and other. So that net interest expense and others includes our interest expense from our debt instruments, interest income from our cash and then any other sort of other non-operating gains or losses. And we did have a $4 million one-time benefit this quarter.
Srinivas Anantha - Oppenheimer & Co.
Thanks a lot, guys.
Operator
Thank you. Our next question is from Donna Jaegers of Janco Partners.
Donna Jaegers - Janco Partners
Hi and thanks for taking my question. On... I was curious, is there any SLA penalties in the first quarter and do you expect any because of the outage that you guys suffered in early March?
Jeffrey Von Deylen - Chief Financial Officer
Hi, Donna, it's Jeff. We did have SLA credits. Those were recorded in the first quarter. The impact to revenue and then obviously EBITDA was about $1 million. Those are all... given we have to accrue for those in the period; we think we've accounted for all those, and they are behind us.
Donna Jaegers - Janco Partners
Okay. And then Phil, a question for you. Can you talk a little about your relationship with XO? I know you guys use them for some of the local rings for your hosting area networks. It sounds like it might even be a bigger relationship than that. Can you talk a little more about that?
Philip Koen - Chief Executive Officer
No, Donna I think you've pretty well characterized it. That's it.
Donna Jaegers - Janco Partners
Okay, thanks.
Operator
Thank you. Our next question is from John Marchetti of Morgan Stanley.
John Marchetti - Morgan Stanley
Thanks. I just wanted to go back to your outlook for a second. I'm just curious whether it was something in the way the quarter ran out on you from a linear perspective or from a visibility perspective. What gives you confidence that just sort of using the 1Q run rate is either conservative enough or the right metric to use as you're kind of forecasting out the full year? And then secondly, on the managed hosting side, the 2% to 6% for the sequential guide for the next three quarters, obviously a fairly wide margin there. Just curious on either end of that, what you need to see to be at either end of that spectrum? Is it more an economic recovery and customers reengaging at the high-end versus sort of maybe a more pronounced deterioration on the low end of that? Thanks.
Jeffrey Von Deylen - Chief Financial Officer
John, let me take it first one on just on the right metrics. Again, we took our current performance and sort of flowed that out. Obviously we've... if you look backwards, our sales performance has been in terms of the total sales that we're selling today, has been higher. So we think that in terms of trying to be more cautious about the current environment, we've reflected the activity that we know today. And... but given as we look backwards for a couple of quarters, clearly we have done better than that. Our plan was to do at that level, but this revised thinking going forward just takes a more cautious view to the growth rate of sales going forward.
And then in terms of churn, you'd see... I think in the forth quarter, we did about 1.7% churn. You've seen our churn, we characterized good churn and bad churn last year. But our churn rate has been anywhere, ignoring some of the customers that we induced out, has been in that 1.7% to 1.9% range and again I think just taking a more cautious view and saying let's... as we guide forward, let's use 1.9 as the rate. And you know, it's obviously a... we had current experience and just an expectation that we don't know whether that will frankly get better.
On the managed hosting, I think the range of 2% to 6% as you said is a bit wide I think in terms of executing at the higher end, there will be sales cycles coming in shorter than what we've reflected in this current view. I think it's at the low end of the range, it would be or lower it just frankly going from what Phil said, sales cycles extending to decision making, frankly stopping and folks not making decisions, to outsource and keep it all in-source or not move from other providers. But again, we have a history of selling managed hosting and managed services and we think that this revised guidance sort of reflects the historical rate. Our known backlog that's in place today, and that's how the forecast address the year. Any other questions?
Operator
Yes. Our next question is from Nick... and I apologize here, Nick Valedoff [ph] from Lehman Brothers.
Unidentified Analyst
Hey, how you guys doing?
Philip Koen - Chief Executive Officer
Good.
Unidentified Analyst
I had a quick question about pricing again on the older data centers you said the newer ones during 78 hours, could you give us some kind of color around what you get in the older data centers? And also AT&T and Verizon talked about robust demand and gave pretty strong results and they didn't seem to indicate any slow down in demand. Are you seeing more competition from them?
Philip Koen - Chief Executive Officer
Nick [ph] let me... I think what we said is that for the newer data centers we're seeing around 70 and I think that if you look at the numbers that we just published for an overall blend of 3740 and then lastly, taking the point that on a kind of a blended basis, as you run on out, given the mix of older versus newer data centers of $50 per square foot reference, you get the sense that the pricing ranges from around those numbers. What I want everyone to understand is that a lot of this has to do with just how much power an individual is pulling. So if you're in a data center, and you require 150 watts a square foot, the pricing is going to reflect a lot more power than if you're at 100 watts a square foot. So you shouldn't read into it that the pricing difference is because one is less desirable than the other. A very, very major component of this is just how much power you're consuming.
Unidentified Analyst
Okay.
Philip Koen - Chief Executive Officer
And I think that's what's lost on a lot of the investment community out there. What we can tell you is that the vintage 2000, 2001 data centers, there's a lot of them out there. AT&T had them. Clearly, Exodus has them. Switch and Data has them. I mean, everyone has them. And what the real thing going on here is that data centers of the newest vintage, there's just not a lot of them. And we don't see a lot of new people coming on raising capital to go build them. So our conclusion is that the fundamental supply and demand characteristics are very favorable for a newer one, because we really need 150 watts per square foot, you're not going to put it in a 100 watt per square foot facility. And you can charge for that, and you can get the nice return. So that's kind of how we see the marketplace out there and we're competing like everyone else. I think our win rate is in line with what we would expect our shares... our share would be, and I'm pleased with where we've executed so far.
Unidentified Analyst
Okay. Thanks, guys.
Operator
Thank you. Our next question is from Richard Keiser from Sanford Bernstein.
Richard Keiser - Sanford C. Bernstein
Thank you. Can we just go back to... I wanted to go back to something you said about managed hosting, and that there was slower uptick or slower transition in financial services and consumer. You know, if the value proposition is delivering compelling ROI, shouldn't those be the areas where you'd be more apt to see deals?
Philip Koen - Chief Executive Officer
Richard, yeah. I mean, the wonderful thing about this business model is that it works in both a good market and a tough market. In a tough market, obviously, the TCO is really, really important. In a good market, it's not only the TCO, but the fact that you can't find people, and it's difficult to staff, and all the other headaches that come with running infrastructure. Putting that aside, the practical reality is, in a tougher market there's deeper inspection. If your business is changing because this is a strategic decision, you're going to just take a deeper look. That doesn't mean that the value proposition is less, it just means that the decision time is going to be longer.
Richard Keiser - Sanford C. Bernstein
Okay. If a company is going to make that decision and give you a certain portion of the business, how long does that transition typically take? You talked about the sales cycle, but how long is the transition to get their stuff in and up and running?
Philip Koen - Chief Executive Officer
There's a wide... that is a very wide for us. And unfortunately it's deal-by-deal complete. For more complex deals, if you think... I'll give you kind of the bid and the ask here. It could take as much as nine months for full implementation. For less complex deal, it could take 60 days, so it really deals with the global complexity and all of the scope of work that we're taking on.
Richard Keiser - Sanford C. Bernstein
Got it, okay. And then just one question regarding the churn rate. Why did that pick up in the quarter? Was it because of competitive factors or I'm just curious as to why that were moved?
Jeffrey Von Deylen - Chief Financial Officer
I think on the network side, we continue to see some price pressure, price erosion as well as customer churn. I think on the financial vertical in particular on the network side, we had higher churn than we've experienced previously. Clearly, as those firms downsize in terms of number of people and a lot of our financial vertical, financial network products there are delivering market data and other things to their employees as they downside or consolidate and think about how to reduce cost. We were net losers there in the network side of it. I think that was offset by the hosting side of it, where we had great penetration on the network, the financial side, primarily in the co-location part of the business. And Phil mentioned about those larger financial companies making choices about building data centers versus outsourcing to service providers like ourselves.
Richard Keiser - Sanford C. Bernstein
So it's much more a downsizing as opposed to competitive share loss?
Jeffrey Von Deylen - Chief Financial Officer
Yeah, that's clearly on the financial vertical, I think that's absolutely right... on the network side.
Philip Koen - Chief Executive Officer
On the network side. Richard, to be clear on the colo side and particularly if we look at our proximity of hosting offering, we're doing very, very well. The buying characteristics within that financial services vertical is changing.
Richard Keiser - Sanford C. Bernstein
Okay, great. Thank you.
Operator
Thank you. Our next question is a follow-up from Jonathan Schildkraut from Jefferies.
Jonathan Schildkraut - Jefferies & Co.
I apologize. I have no further questions.
Operator
Thank you. In that case, we will move to Donna Jaegers from Janco.
Donna Jaegers - Janco Partners
Hi. I just had a follow-up on install times, and if you have succeeded, I guess, on colo in sort of shortening those lead times?
Jeffrey Von Deylen - Chief Financial Officer
I think what we did, Donna, is we certainly made a very big focus setting expectations of customers and sales force. So, we absolutely have much more clear visibility than we did when we mentioned that in third quarter. So, I think the visibility is there. Expectations are set right, and that issue of not understanding the time frames of installed with our co-location new sales is not a problem.
Donna Jaegers - Janco Partners
Okay, thanks.
Operator
Thank you. I have no other questions in queue.
Philip Koen - Chief Executive Officer
Well, thank you for joining us. We greatly appreciate your questions, and we look forward to keeping you informed of our progress on the next conference call. Thank you very much.
Operator
Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone, have a great day.
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