Las Vegas-based Switch reports 80% drop in first quarter profit

Las Vegas-based data center services company Switch reported Monday that its net income fell 80 percent in the first quarter of 2018 from the same period a year ago.

Net income for the quarter fell to $4 million from $20.3 million for the first quarter of 2017. Its earnings per share fell from 10 cents in the year-ago quarter to 2 cents this quarter.

Switch also reported that its operating income fell to $9.4 million from $24.4 million year over year, a decrease of 61 percent.

The company’s stock fell about 7 percent to $14.38 in after-hours trading following Switch’s earnings report. Shares closed regular trading at $15.47, up 14 cents.

The company blamed the decreases in income on $12.4 million in equity-based compensation following an initial public offering, $4.6 million in asset depreciation and $1.8 million in hiring costs.

Switch reported total revenue in the first quarter rose 10 percent to $97.7 million compared to $89.2 million year over year.

More than half of the revenue increase came from customers with Switch for over a year. During the latest reported quarter, the company signed 450 contracts for new services, renewals and expansions and added 36 customers.

The company reported adjusted earnings of $46.9 million compared to $47.1 million during the first quarter of 2017.

As of March 31, the company had net debt of $374 million and liquidity of $739 million.

The company’s last earnings update, for fiscal year 2017, hit the share price hard due to construction on new campuses. That construction spending sank annual operating income 63 percent year over year.

Switch is building a new data center in Atlanta, putting the company in a highly competitive market for the first time. The company has data centers in Southern Nevada, Northern Nevada and Michigan.

Switch spent $19.5 million in the Las Vegas area during the first quarter to expand power and cooling in a local data center, as well as a shell building at another local data center planned to open by early 2019.

The company spent $36 million on the campus near Reno for additional power and cooling, $4.3 million for expansion at the Michigan campus and $1.6 million at the Atlanta area campus, scheduled to open in 2019.

Switch predicts total revenue for 2018 of at least $423 million, adjusted earnings of at least $216 million and capital spending of at least $260 million.

Contact Wade Tyler Millward at (702) 383-4602 or wmillward @reviewjournal.com. Follow @wademillward on Twitter

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