PEER 1 Hosting Reports Fiscal 2012 Second Quarter Results

VANCOUVER, Feb. 8, 2012 /CNW/ - PEER 1 Network Enterprises, Inc. (TSX:PIX), operating as PEER 1 Hosting, a leading provider of online IT infrastructure, today announced its results for the three and six months ended December 31, 2011.  All amounts are stated in US dollars unless otherwise noted.

Selected Financial Highlights Comparing the Quarters Ended December 31, 2011 and 2010

  • Revenue increased 20.56% to $33.62 million from $27.89 million;
  • Gross profit increased 23.37% to $13.48 million from $10.90 million;
  • Operating profit decreased 38.23% to $0.53 million from $0.86 million;
  • Normalized EBITDA was $8.6 million, up from $6.4 million; and
  • Net loss was $0.25 million compared to net income of $0.74 million.

Selected Highlights for Second Quarter and Period Subsequent to Quarter-End

  • Opened new 57,800 square foot green datacenter in Portsmouth, UK offering scalable managed hosting, dedicated hosting and colocation services in one of the greenest datacenters in the country. Within easy reach of London, the center has 11MVA of available power, room for 20,000 servers, and provides a direct connection to PEER 1 Hosting's 10Gb FastFiber Network™; and
  • Launched public cloud division Zunicore and Zunicore Cloud Hosting product focused on the business professional and offering users a high degree of control and flexibility through customizable resource pools, hands-free auto-scaling, and transparent pricing.

"Our key achievement in the second quarter was the commissioning of our new flagship UK data centre and we rapidly worked to migrate servers and clients to our new facility, with the goal of aligning our cost structures across international operating regions," said Fabio Banducci, President and CEO of PEER 1 Hosting. "We continue to see meaningful improvements in revenues as new facilities are completed and opened to customer deployments. Our growing portfolio of state of the art data centres will provide a strong backbone for additional growth in the quarters ahead."

Financial Review for the Three and Six Months Ended December 31, 2011 and 2010

Revenue increased to $33.62 million (20.56%) for the three months ended December 31, 2011 from $27.88 million for the three months ended December 31, 2010. Revenue increased to $65.13 million (20.13%) for the six months ended December 31, 2011 from $54.21 million for the six months ended December 31, 2010.  The increases in revenue are primarily attributable to organic growth and the effect of the increase in value of the Canadian dollar against the US dollar. When adjusted for the exchange rates in effect during the period, revenue for the three months ended December 31, 2011 was $33.68 million and $64.84 million for the six month period. Taking into account the effect of the differing exchange rates between the Canadian and US dollars for the comparative period, revenue increased by 20.79% and 19.59 % for the three and six-month periods ended December 31, 2011.

Colocation revenue increased to $4.31 million and $8.82 million for the three and six months ended December 31, 2011, respectively, compared with $3.55 million and $7.03 million for the three and six months ended December 31, 2010.  The increase in colocation revenue is attributable to organic growth as well as the change in the value of the Canadian dollar against the US dollar.  The effect on revenue from the change in value of the Canadian dollar against the US dollar was ($0.04) million and $0.16 million for the three and six months ended December 31, 2011, respectively.

Bandwidth revenue increased to $2.32 million and $4.65 million for the three and six months ended December 31, 2011, respectively, compared with $2.28 million and $4.48 million for the three and six months ended December 31, 2010. The increase in bandwidth revenue for the three and six months ended December 31, 2011 is primarily attributable to organic growth and the change in value of the Canadian dollars against the US dollar.  The effect on revenue from the change in value of the Canadian dollar against the US dollar was ($0.02) million and $0.09 million for the three and six months ended December 31, 2011, respectively.

Hosting Services revenues increased to $25.29 million and $48.42 million for the three and six months ended December 31, 2011, respectively, from $20.54 million and $39.78 million for the three and six months ended December 31, 2010.  The increase for the three and six months ended December 31, 2011 is attributable to organic growth. Hosting Services revenues have not been materially impacted by foreign exchange effects as virtually all Hosting Services sales are currently denominated in US dollars.

PEER 1 Hosting's Canadian operations accounted for $8.46 million and $16.77 million of revenue for the three and six months ended December 31, 2011, respectively, compared with $6.06 million and $11.54 million of revenue for the three and six months ended December 31, 2010. This change is primarily related to organic growth partly offset by unfavourable foreign exchange effects of $0.06 million for the three months ended December 31, 2011, and organic growth and favourable foreign exchange effects of $0.27 million for the three and six months ended December 31, 2011.

Cost of sales increased by $3.20 million for the three months ended December 31, 2011 from $17.0 million for the three months ended December 31, 2010.  During the three months ended December 31, 2011 and December 31, 2010, respectively, the Company incurred costs of $1.96 million and $1.05 million related to its operations in the United Kingdom, which are included in cost of sales.  Cost of sales as a percentage of revenue decreased to 60.0% for the three months ended December 31, 2011 from 60.91% for the three months ended December 31, 2010.  Cost of sales increased by $5.68 million for the six months ended December 31, 2011 from $33.27 million for the six months ended December 31, 2010.  During the six months ended December 31, 2011 and December 31, 2010, respectively, the Company incurred costs of $3.30 million and $1.88 million related to its operations in the United Kingdom, which are included in cost of sales.  Cost of sales as a percentage of revenue decreased to 59.81% for the three months ended December 31, 2011 from 61.37% for the three months ended December 31, 2010.

The increase in cost of sales for the three months ended December 31, 2011 compared to the same period in the prior year is primarily due to increased depreciation costs of $1.33 million, increased labor cost of $0.49 million, increased rent costs of $0.34 million, increased power costs of $0.06 million, increased software license costs of $0.56 million, increased bandwidth costs of $0.15 million, and increased repair and maintenance of $0.14 million.

The increase in cost of sales for the six months ended December 31, 2011 compared to the same period in the prior year is primarily due to increased depreciation costs of $2.38 million, increased rent costs of $0.66 million, increased labor costs of $0.60 million, increased power costs of $0.35 million, increased software license costs of $1.06 million, increased bandwidth costs of $0.16 million, and increased repair and maintenance of $0.30 million.

Operating expenses increased to $12.92 million for the three months ended December 31, 2011 from $10.04 million for the three months ended December 31, 2010.  Operating expenses as a percentage of revenue increased to 38.42% for the three months ended December 31, 2011 from 36.0% for the three months ended December 31, 2010.  The increase in operating expenses for the three months ended December 31, 2011 is largely attributable to $0.85 million higher staff and training cost, increased commission expenses of $0.38 million, increased amortization expense of $0.27 million, increased bad debt expense of $0.11 million, increased stock based compensation of $0.89 million.  Total operating expenses for the three months ended December 31, 2011 are comprised of $5.05 million (2010: $3.98 million) sales and marketing expenses, $6.65 million (2010: $4.85 million) general and administrative expenses, and $1.2 million (2010: $1.21 million) in other operating expenses for technology and customer relations. During the three months ended December 31, 2011 and December 31, 2010, respectively, the company incurred expenses of $1.32 and $0.84 million related to its United Kingdom operations which are included in operating expenses, $0.40 million and $0.40 million of which are categorized as general and administrative expenses and $0.88 million and $0.47 million of which are categorized as selling and marketing expenses.

Operating expenses increased to $23.82 million for the six months ended December 31, 2011 from $19.84 million for the six months ended December 31, 2010.  Operating expenses as a percentage of revenue were flat at 36.58% for the six months ended December 31, 2011 compared to 36.59% for the six months ended December 31, 2010.  The increase in operating expenses for the six months ended December 31, 2011 is largely attributable to $1.73 million higher staff and training cost, increased commission expenses of $0.57 million, increased amortization expense of $0.53 million, increased bad debt expense of $0.30 million, in part offset by lower stock based compensation of $0.13 million.  Total operating expenses for the six months ended December 31, 2011 are comprised of $9.80 million (2010: $7.93 million) sales and marketing expenses, $11.60 million (2010: $9.51 million) general and administrative expenses, and $2.42 million (2010: $2.40 million) in other operating expenses for technology and customer relations. During the six months ended December 31, 2011 and December 31, 2010, respectively, the company incurred expenses of $2.52 million and $1.60 million related to its United Kingdom operations which are included in operating expenses, $0.80 million and $0.65 million of which are categorized as general and administrative expenses and $1.68 million and $0.94 million of which are categorized as selling and marketing expenses.

Normalized EBITDA was $8.6 million for the three months ended December 31, 2011, compared with $6.40 million in the prior year period.

Net loss for the second quarter ended December 31, 2011 was $0.25 million, compared with net income of $0.74 million for the same period in 2010.

The Company had working capital deficit of $7.3 million at December 31, 2011 compared to working capital of $0.44 million as at June 30, 2011.  The increased in working capital deficit is primarily due to expenditure related to the UK expansion.  As at December 31, 2011, the Company had available $12.34 million under its $75 million credit facilities.

PEER 1 Hosting had 123,879,665 common shares issued and outstanding as at December 31, 2011.

EBITDA Reconcilation    
(unaudited - prepared by management)    
(in $ thousands) Three Months Ended
  31-Dec-11 31-Dec-10
     
Net Profit (loss)                  (249)                  736
Income tax expense                     623                  226
Interest expense                     745                  474
Amortization - licences, fixed assets and deferred network costs                 6,166               4,564
Stock based compensation                 1,875                  982
Loss (gain) on disposal of assets                       (10)                    (12)
Foreign exchange loss                   (578)                (590)
EBITDA                   8,572               6,380
Settlement of legal claim                          -                    24
Normalized EBITDA                   8,572               6,404

Conference Call

PEER 1 Hosting will hold a conference call on Wednesday, February 8, 2012 at 5:30pm Eastern Time (ET), to discuss the results for the second quarter of fiscal 2012. The Company's full Financial Statements and Management's Discussion and Analysis are available on its website at http://www.peer1.com/investors.

To access the conference call by telephone, dial (647) 427-7450 or 1-888-231-8191. The conference call will be archived for replay until February 15, 2012, at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 48533328 followed by the number sign.

A live audio webcast of the conference call will be available at:

http://www.newswire.ca/en/webcast/detail/912953/974405

Please connect at least 10 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.

Non-IFRS Measures
PEER 1 Hosting reports EBITDA because it is a key measure used by management to evaluate the Company's performance. PEER 1 Hosting believes that EBITDA is useful supplemental information, as it provides an indication of the results generated by PEER 1 Hosting's main business activities prior to taking into consideration how those activities are financed and expensed. EBITDA is not a recognized measure under IFRS, and accordingly investors are cautioned that EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as an indicator of financial performance of PEER 1 Hosting, or as a measure of the company's liquidity and cash flows. PEER 1 Hosting's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similar measures presented by other issuers. The schedule above sets out PEER 1 Hosting's EBITDA calculations.

About PEER 1 Hosting
PEER 1 Hosting believes in the limitless opportunity of the Internet, and the business growth potential it provides for its more than 10,000 customers. As a global online IT hosting provider, PEER 1 Hosting offers a reliable high performance Internet network supporting scalable managed hosting, dedicated hosting through the ServerBeach brand, and colocation solutions. Backed by its 100 percent uptime guarantee and 24x7x365 FirstCall Support™, PEER 1 Hosting ensures customers' online presence is always fast, always available. Since 1999, PEER 1 Hosting has grown to include 18 state-of-the-art data centers and points-of-presence throughout North America and Europe. The company's headquarters are in Vancouver, Canada, with European operations headquartered in Southampton, UK.  PEER 1 Hosting shares are traded on the TSX under the symbol PIX. For more information visit: www.peer1.com or www.peer1hosting.co.uk.

Forward Looking Statements
Statements in this release relating to matters that are not historical fact are forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, general economic conditions, changes in technology, reliance on third party manufacturing, managing rapid growth, global sales risks, limited intellectual property protection and other risks and uncertainties described in PEER 1 Hosting's public filings with securities regulatory authorities.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(unaudited, expressed in thousands of United States dollars)

  December 31,
2011
June 30,
2011
ASSETS    
Current assets    
Cash and cash equivalents $            6,303 $            7,803
Trade and other receivables               6,783               6,447
Prepaid expenses               2,863               1,448
Income tax receivable               1,900               2,874
              17,849             18,572
Non-current assets    
Other assets               2,760               2,353
Deferred tax assets               2,549               1,818
Property and equipment             96,390             87,697
Equipment under finance lease                2,973                  724
Intangible assets               7,549               6,636
              112,221               99,228
Total assets             130,070             117,800
     
LIABILITIES AND EQUITY    
Current liabilities    
Trade and other payables             14,632                9,944
Loans and borrowing               6,319                5,008
Derivatives                  472                   250
Income tax payable                      -                       -
Deferred lease inducement                  251                   136
Obligations under finance lease                  802                   237
Deferred Revenue               2,630                2,561
              25,106              18,136
Non-current liabilities    
Loans and borrowings             53,823              53,062
Derivatives               1,415                   875
Deferred tax liability               1,472                1,354
Obligations under finance lease               1,805                     11
Deferred lease inducement                  732                   655
              59,247              55,957
Total liabilities             84,353              74,093
     
EQUITY    
Issued capital             31,524              28,221
Share-based payments reserve             10,184                9,985
Warrants                       -                       -
Accumulated other comprehensive income (428)   (492)
Retained earnings               4,437                5,993
Total equity             45,717              43,707
Total liabilities and equity           130,070            117,800

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(unaudited, expressed in thousands of United States dollars)

  Three months ended
December 31
Six months ended
December  31
  2011 2010 2011 2010
Revenue        
Colocation services $         8,328 $       7,341 $       16,710 $       14,433
Hosting Services          25,289          20,544          48,418          39,780
           33,617          27,885          65,128          54,213
Cost of sales          20,170          16,985          38,951          33,271
Gross profit          13,447          10,900          26,177          20,942
Administration expenses            6,650            4,851          11,601            9,506
Sales and marketing expenses            5,050            3,979            9,804            7,928
Other operating expenses            1,217            1,211            2,419            2,403
Operating profit before other items               530                859            2,353            1,105
         
Finance income                    -                    - (6) (13)
Gain on disposal of property and equipment (10) (12)                  38 (28)
Loss on legal settlement                    -                 24                    -                 24
Foreign exchange loss (gain) (579) (590)            1,413 (2,289)
Finance expense               745               475            2,273               849
Profit (loss) before income taxes               374               962 (1,365)            2,562
         
Income taxes               623               226               191               787
Profit (loss) for the period (249)               736 (1,556)            1,775
         
Other comprehensive income (loss)        
Foreign currency translation gain (loss)            1,526 (1,573) (2,489)            2,084
Unrealized gain (loss) on net investment in subsidiaries (1,965) (117)            2,553 (2,663)
Other comprehensive income (loss) for the period, net of tax (439) (1,690)                 64 (579)
Total comprehensive income (loss) for the period (688) (954) (1,492)            1,196
         
Profit (loss) attributable to common shares (249)               736 (1,556)            1,775
Total comprehensive income (loss) attributable to common shares (688) (954) (1,492)            1,196
         
Earnings (loss) per share        
Basic (0.00)              0.01 (0.01)              0.01
Diluted (0.00)              0.01 (0.01)              0.01
         
Weighted average number of common shares outstanding        
Basic 121,519,993 119,612,118 123,393,295 119,683,351
Diluted 121,519,993 124,270,679 123,393,295 123,403,279

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited, expressed in thousands of United States dollars)

  Share capital          
  Number Amount Warrants Share-based
payments
reserve
Accumulated
other
comprehensive
income
Retained
earnings
Total
               
Balance at July 1, 2010 119,721,834 $ 27,631 $ 86 $ 6,804 $ - $ 4,961 $ 39,482
  Stock options exercised 113,331 106 - (44) - - 62
  Stock-based compensation - - - 2,348 - - 2,348
  Purchase of shares for cancellation pursuant
to normal course issuer bid
(189,500) (44) - - - (211) (255)
Transactions with owners 119,645,665 27,693 86 9,108 - 4,750 41,637
  Profit for the period - - - - - 1,775 1,775
  Other comprehensive income (loss):              
    Foreign currency translation gain - - - - 2,084 - 2,084
Unrealized loss on net investment in subsidiaries - - - - (2,663) - (2,663)
Total comprehensive income for the period - - - - (579) 1,775 1,196
Balance at December 31, 2010 119,645,665 27,693 86 9,108 (579) 6,525 42,833
               
Balance at July 1, 2011 120,576,370 28,221 - 9,985 (492) 5,993 43,707
  Stock options exercised 3,303,295 3,303 - (2,022) - - 1,281
  Stock-based compensation - - - 2,221 - - 2,221
Transactions with owners 123,879,665 31,524 - 10,184 (492) 5,993 47,209
  Loss for the period - - - - - (1,556) (1,556)
  Other comprehensive income (loss):              
    Foreign currency translation gain (loss) - - - - 2,553 - 2,553
Unrealized loss on net investment in subsidiaries - - - - (2,489) - (2,489)
Total comprehensive income for the period - - - - 64 (1,556) (1,492)
Balance at December 31, 2011 123,879,665 31,524 - 10,184 (428) 4,437 45,717

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, expressed in thousands of United States dollars)

  Six months ended December 31
  2011 2010
      
Operating Activities     
  Net income (loss)  $        (1,556)  $          1,775
      
Depreciation of property and equipment               11,328              8,734
Amortization of intangible assets                    542                 226
Bad debt expense                    481                 182
Gain on disposal of property and equipment                      38  (28)
Amortization of deferred loan origination fees                    131               346
Future income tax expense (653)  (928)
Stock-based compensation                 2,221             2,348
Interest paid          (1,565)  (593)
Income taxes refunded (paid)                  58  (3,293)
Net change in non-cash working capital             3,757  (1,318)
Cash flows from operating activities          14,782            7,451
      
Investment Activities     
  Investment in other assets               (398)             (670)
  Acquisition of property and equipment           (20,105)         (20,255)
  Acquisition of intangible assets            (1,482)              (557)
  Proceeds on disposition of equipment                 41                    28
Cash flows used in investing activities           (21,944)          (21,454)
      
Financing Activities     
  Proceeds from notes payable            4,971         49,193
  Repayments of notes payable             (1,584)         (31,783)
  Payment of finance lease obligations                (182)             (197)
  Purchase of shares for cancellation pursuant to normal course issuer bid                   -             (255)
  Issuance of capital stock             1,270              63
Cash flow from (used in) financing activities             4,475        17,021
      
Foreign exchange gain (loss) on cash and cash equivalents             1,187           (2,823)
Increase in cash and cash equivalents, beginning             (1,500)              195
Cash and cash equivalents, beginning             7,803           2,321
Cash and cash equivalents, ending             6,303           2,516
Supplemental non-cash financing and investing disclosure:     
Effect of acquisition of property and equipment in trade and other payables             2,054           2,221

 

SOURCE Peer 1 Network Enterprises, Inc.

For further information:

For investor inquiries please contact:
David Feick
The Equicom Group
+1 (403) 218-2839
dfeick@equicomgroup.com

For media inquiries please contact:
Marcela Peake
PEER 1 Hosting
+1 (604) 909-6428
mpeake@peer1.com

Profil de l'entreprise

Peer 1 Network Enterprises, Inc.

Renseignements sur cet organisme


FORFAITS PERSONNALISÉS

Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .

ADHÉSION À CNW

Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.

RENSEIGNEZ-VOUS SUR LES SERVICES DE CNW

Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.