Because these statements are not guarantees of future performance and involve risks and uncertainties, important factors could cause our actual results to differ materially from those in the forward-looking statements. We discussed these factors in our filings with the Securities and Exchange Commission. We undertake no obligation to amend, update or clarify these statements. In addition to reviewing first quarter 2011 results, we will also discuss recent developments.Now let me turn the call over to Eric Cooney. J. Cooney Thank you, Drew, and good afternoon, everyone. Thank you for joining us for our first quarter 2011 financial results presentation. I'll start off with a summary of our first quarter results and then George will detail our quarterly financial results and operating metrics. I will then conclude with a high-level summary, and we will open the call for your questions. We've summarized revenue and segment profitability results in the period on Slide 3. Revenue decreased $4 million year-over-year and $0.6 million compared with the fourth quarter of 2010. The year-over-year and sequential declines were primarily driven by our initiative to exit low-margin and negative-margin contracts in select partner data centers. As I will detail in a moment, this program was completed in the fourth quarter of 2010, and the final revenue impact was evident in first quarter results. We expect that first quarter 2011 is the last quarter in which revenue is impacted by the now successfully completed proactive data center churn program. Our segment profit and segment margin continues to improve steadily. Segment profit improved $0.9 million sequentially and $1.1 million over the same quarter last year. The combination of higher absolute segment profit on a smaller revenue base has significantly benefited our segment margin over the past year. Segment margin improved 490 basis points year-over-year. Sequentially, segment margin increased 200 basis points. Beyond the immediate benefit of higher segment profitability, the implication for future sales of company services into this significantly higher segment profit margin bodes well for the company's long-term profitable growth.
On Slide 4, we've detailed the basis for the sequential decline in revenue. Of the $0.6 million quarter-over-quarter decrease, $0.4 million came from IP services. Based on bookings and churn trends, we continue to expect the IP segment to show sequential revenue growth in the second quarter of 2011. As we described last quarter, we completed our data center profitability program at the end of fourth quarter 2010. $0.8 million of the quarter-over-quarter revenue decline was attributable to this program and the associated exit of low-margin contracts.While we exited the contracts during the fourth quarter, the full revenue impact was not evident until the first quarter of 2011. We do not expect this flow-through effect to impact our future sequential quarterly comparisons in the Data Center Services segment. Beyond this proactive data center churn impact, the remaining Data Center Services revenue increased $0.6 million compared with the fourth quarter. We were particularly pleased with the first quarter revenue growth rates in both our company-controlled Data Center and Managed Hosting businesses. We feel these businesses are delivering revenue growth at or above market rates, which we believe are in the 15% to 20% range. Moving on to Slide 5. We generated $9.2 million in adjusted EBITDA in the quarter. Adjusted EBITDA decreased $0.7 million year-over-year and $1.1 million, sequentially. Improvements in segment profit were offset by higher operating costs in the quarter relative to both comparable quarters. Sequentially, operating costs increased by $2 million as we added more than 20 new staff in sales, marketing, engineering and operations while also incurring costs associated with our annual sales kickoff meeting and certain targeted marketing initiatives. We believe these investments are appropriate and are expected to support future top line growth. Read the rest of this transcript for free on seekingalpha.com