PEER 1 Hosting Reports Fiscal 2010 Second Quarter Results
Selected Financial Highlights Comparing the Second Quarters Ended
December 31, 2009 and 2008
- Revenue increased 1.1% to $23.9 million from $23.6 million;
- Gross profit decreased 9.1% to $9.8 million from $10.8 million;
- Operating income decreased 39% to $2.26 million from $3.7 million;
- EBITDA decreased to $6.3 million from $7.6 million;
- Net income decreased to $0.9 million from $2.0 million.
Selected Operational Highlights
- Selected EMC(R) Atmos TM as the foundation of its new cloud storage
service. PEER 1 will be offering its customers in the Atlanta and San
Antonio data centers this network accessible data storage service in
the first half of calendar year 2010.
- Partnered with InMon, the leading traffic network solution for high-
speed networks, to provide precise bandwidth measurement and analysis
capability. Managed Hosting customers would be able to access this
real time analysis through the online customer portal.
- Partnered with Alert Logic, Inc., to provide integrated IT-compliant
intrusion detection and log management services for its e-commerce
customers using Alert Logic's cloud-based IT compliance and security
solutions. By partnering with Alert Logic, PEER 1 can ensure IT
compliance for Managed Hosting customers who subscribe to the
service, without the customer having to invest in security
infrastructure or monitoring resources.
- Changed operating brand to PEER 1 Hosting with the tag line "Ping and
People" to better communicate both the strength of the Company's
infrastructure and its highly customer focused approach.
- Subsequent to quarter end, PEER 1 announced the launch of its
US$40 million flagship data center in Toronto Ontario. This data
center is more than 40,000 square feet and equipped to offer all
three hosting solutions - collocation, dedicated hosting and managed
hosting - under one roof. The building is separated into 4 sections
called Performance Optimized Data Centre (POD) - with each POD having
the capacity of approximately 270 cabinets, equivalent to
approximately 7,500 servers. The first POD was built with an
estimated capital cost of US$10 million and includes 7,500 square
feet of data center space and 8,000 square feet of office space, and
inventory, network and storage areas to support the data center.
Customers can start purchasing space on February 1, 2010 and start
moving in their equipment in March 2010. The remaining three PODs
(22,500 square feet) will be dedicated to additional data center
space and infrastructure to be built out in future phases based upon
customer demand.
"During the quarter we took steps to broaden our service offering to clients, most notably with the expansion of our cloud computing platform to include high-capacity storage," said Fabio Banducci, President and CEO of PEER 1. "Subsequent to quarter end, we took a major step forward with our strategy to support long term growth by announcing the launch of our new
Review of the Three and Six Months Ended
Revenue for the three and six months ended
Hosting Services revenues for the three and six months ended
Colocation revenue for the three and six months ended
Bandwidth revenues for the three and six months ended
PEER 1's Canadian operations revenue for the three months ended
Cost of sales for the three months ended
Operating expenses for the three months ended
EBITDA for the three months ended
Net income for the three months ended
As at
The Company had a working capital deficit of
PEER 1 had 121,260,741 common shares outstanding as at
EBITDA Reconciliation
(unaudited - prepared by management)
(in $ thousands) Three Months Ended
--------------------------
31-Dec-09 31-Dec-08
Net Profit 886 2,005
Income tax expense 959 1,388
Interest expense 336 437
Amortization - licences, fixed assets and
deferred network costs 3,508 3,328
Stock based compensation 502 587
Loss (gain) on disposal of assets (30) (18)
Amortization of deferred gain (20) (20)
Foreign exchange loss (gain) 109 (91)
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EBITDA 6,250 7,616
Normalized EBITDA 6,250 7,616
Conference Call
PEER 1 will hold a conference call today,
To access the conference call by telephone, dial (647) 427-7450 or 1-888-231-8191. Please connect approximately 15 minutes prior to the beginning of the call. The conference call will be archived for replay until
A live audio webcast of the conference call will be available at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2960320
Please connect at least 15 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-GAAP Measures
PEER 1 reports EBITDA because it is a key measure used by management to evaluate the Company's performance. PEER 1 believes that EBITDA is useful supplemental information, as it provides an indication of the results generated by PEER 1's main business activities prior to taking into consideration how those activities are financed and expensed. EBITDA is not a recognized measure under Canadian GAAP, and accordingly investors are cautioned that EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with Canadian GAAP as an indicator of financial performance of PEER 1, or as a measure of the company's liquidity and cash flows. PEER 1'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'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(TM), PEER 1 Hosting ensures customers' online presence is always fast, always available. Since 1999, PEER 1 Hosting has grown to include 17 state-of-the-art data centres and points-of-presence throughout
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.
PEER 1 NETWORK ENTERPRISES, INC.
Consolidated Balance Sheet
December 31, 2009
(in thousands of United States dollars)
December 31, June 30,
2009 2009
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Assets
Current:
Cash and cash equivalents $ 7,622 $ 15,744
Accounts receivable 4,260 3,449
Future income tax asset 96 237
Prepaid expenses 1,706 1,130
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13,684 20,560
Other assets 2,828 2,692
Future income tax asset 1,680 1,042
Property and equipment 48,039 36,856
Equipment under capital lease 912 1,013
Goodwill 1,715 1,715
Intangible assets 3,000 2,552
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$ 71,858 $ 66,430
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Liabilities
Current:
Accounts payable and accrued liabilities $ 12,637 $ 7,936
Deferred revenue 3,000 2,886
Current portion of deferred gain 79 79
Current portion of deferred lease inducements 130 138
Current portion of derivative liabilities 121 89
Current portion of notes payable 3,000 2,250
Current portion of obligations under
capital lease 241 211
Income taxes payable 23 2,200
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19,231 15,789
Deferred gain 453 493
Deferred lease inducements 599 664
Derivative liabilities 182 179
Notes payable 10,830 12,303
Obligation under capital lease 279 363
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31,574 29,791
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Shareholders' equity 40,284 36,639
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$ 71,858 $ 66,430
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PEER 1 NETWORK ENTERPRISES, INC.
Consolidated Statements of Shareholders' Equity
For the Three and Six Months Ended December 31, 2009
(in thousands of United States dollars except number of shares)
Three months ended
December 31, 2009 December 31, 2008
---------------------------------------------------
Number Amount Number Amount
-------------------------------------------------------------------------
SHARE CAPITAL
Common shares
Balance at beginning
of period 121,055,984 $ 27,790 119,252,657 $ 26,911
Stock options
exercised 204,757 152 41,666 29
Warrants exercised - - - -
-------------------------------------------------------------------------
Balance at end
of period 121,260,741 27,942 119,294,323 26,940
-------------------------------------------------------------------------
Warrants
Balance at beginning
of period 833,333 86 2,461,619 493
Warrants exercised - - - -
-------------------------------------------------------------------------
Balance at end
of period 833,333 86 2,461,619 493
-------------------------------------------------------------------------
Total - share
capital 122,094,074 28,028 121,755,942 27,433
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONTRIBUTED SURPLUS
Balance at
beginning of
period 5,307 3,303
Stock-based
compensation 502 587
Stock options
exercised (100) (11)
-------------------------------------------------------------------------
Balance at end of
period 5,709 3,879
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-------------------------------------------------------------------------
RETAINED EARNINGS
Balance at
beginning of
period 5,976 713
Net income 886 2,005
-------------------------------------------------------------------------
Balance at end
of period 6,862 2,718
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ACCUMULATED OTHER
COMPREHENSIVE INCOME
Balance at
beginning of
period (361) (11)
Other comprehensive
income (loss) 46 -
-------------------------------------------------------------------------
Balance at end of period (315) (11)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total - shareholders' equity $ 40,284 $ 34,019
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months ended
December 31, 2009 December 31, 2008
---------------------------------------------------
Number Amount Number Amount
-------------------------------------------------------------------------
SHARE CAPITAL
Common shares
Balance at beginning
of period 119,314,323 $ 26,950 118,504,368 $ 26,539
Stock options
exercised 318,132 211 111,670 60
Warrants exercised 1,628,286 781 678,285 341
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Balance at end
of period 121,260,741 27,942 119,294,323 26,940
-------------------------------------------------------------------------
Warrants
Balance at beginning
of period 2,461,619 493 3,139,904 678
Warrants exercised (1,628,286) (407) (678,285) (185)
-------------------------------------------------------------------------
Balance at end
of period 833,333 86 2,461,619 493
-------------------------------------------------------------------------
Total - share
capital 122,094,074 28,028 121,755,942 27,433
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONTRIBUTED SURPLUS
Balance at
beginning of
period 4,766 2,509
Stock-based
compensation 1,065 1,392
Stock options
exercised (122) (22)
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Balance at end of
period 5,709 3,879
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RETAINED EARNINGS
Balance at
beginning of
period 4,709 (1,013)
Net income 2,153 3,731
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Balance at end
of period 6,862 2,718
-------------------------------------------------------------------------
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ACCUMULATED OTHER
COMPREHENSIVE INCOME
Balance at
beginning of
period (279) (11)
Other comprehensive
income (loss) (36) -
-------------------------------------------------------------------------
Balance at end of
period (315) (11)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total - shareholders'
equity $ 40,284 $ 34,019
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PEER 1 NETWORK ENTERPRISES, INC.
Consolidated Statement of Operations
For the Three and Six Months Ended December 31, 2009
(in thousands of United States dollars, except per share amounts)
Three months ended Six months ended
-------------------------- -------------------------
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
----------------------------------------------- -------------------------
Revenue
Colocation
Services $ 6,845 $ 6,124 13,473 $ 12,839
Hosting Services 17,051 17,515 33,797 34,305
-------------------------- -------------------------
23,896 23,639 47,270 47,144
Cost of revenue 14,107 12,866 27,818 25,902
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Gross profit 9,789 10,773 19,452 21,242
Operating expenses 7,530 7,069 14,715 14,035
----------------------------------------------- -------------------------
Operating income
before other items 2,259 3,704 4,737 7,207
----------------------------------------------- -------------------------
Other items:
Interest income (1) (17) (6) (54)
Gain on insurance
recovery - - (93) -
Gain on disposal of
property and
equipment (30) (18) (42) (20)
Foreign exchange loss 109 (91) 189 (84)
Interest expense -
long term 336 437 648 861
----------------------------------------------- -------------------------
414 311 696 703
----------------------------------------------- -------------------------
Income before
income taxes 1,845 3,393 4,041 6,504
----------------------------------------------- -------------------------
Future income tax
expense (recovery) (204) (52) (500) 237
Current income
tax expense 1,163 1,440 2,388 2,536
----------------------------------------------- -------------------------
Income tax expense 959 1,388 1,888 2,773
----------------------------------------------- -------------------------
Net income $ 886 $ 2,005 $ 2,153 $ 3,731
Other comprehensive
income:
Change in unrealized
fair value of
derivatives
designated as cash
flow hedges 46 - (36) -
----------------------------------------------- -------------------------
Comprehensive income $ 932 $ 2,005 $ 2,117 $ 3,731
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
Net income
attributable to:
Common shares $ 886 $ 2,005 $ 2,153 $ 3,731
Comprehensive income
attributable to:
Common shares $ 932 2,005 $ 2,117 3,731
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
Basic and diluted
earnings per share $ 0.01 $ 0.02 $ 0.02 $ 0.03
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
Weighted average
number of shares
outstanding:
Basic 121,197,002 119,268,381 120,350,957 118,983,859
Diluted 124,518,581 124,016,730 124,332,317 124,205,739
PEER 1 NETWORK ENTERPRISES, INC.
Consolidated Statement of Cash Flows
For the Three and Six Months Ended December 31, 2009
(in thousands of United States dollars)
Three months ended Six months ended
-------------------------- -------------------------
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
----------------------------------------------- -------------------------
Operating Activities:
Net income $ 886 $ 2,005 $ 2,153 $ 3,731
Adjustments for
non-cash items:
Amortization of
property and
equipment 3,344 2,990 6,495 5,644
Amortization of
intangible
assets 164 338 487 728
Increase in accrued
interest and
accretion of
convertible debt - 37 - 55
Bad debt expense 56 261 214 397
Gain on disposal
of property and
equipment (30) (18) (42) (20)
Amortization of
deferred gain (20) (20) (39) (39)
Gain on insurance - - (93) -
Amortization of
deferred loan
origination fees 68 117 117 240
Future income
tax expense (204) (52) (500) 237
Stock-based
compensation
included in income
for the period 502 587 1,065 1,392
(Decrease) Increase
in deferred lease
inducements (37) 37 (73) 1
Changes in non-cash
working capital:
Decrease (Increase)
accounts
receivable (354) 236 (863) (1,285)
Increase in
prepaid expenses (489) (114) (576) (213)
Increase (Decrease)
in accounts
payable and
accrued liabilities 814 334 657 (1,176)
Increase (Decrease)
in income taxes
payable 247 1,121 (2,177) 299
Increase in
deferred revenue 30 41 114 60
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Cash flows from
operating activities 4,977 7,900 6,939 10,051
----------------------------------------------- -------------------------
Investing Activities:
Investment in
other assets (135) 10 (226) 31
Acquisition of
property and
equipment (7,645) (5,034) (13,603) (9,030)
Acquisition of
intangible assets (612) (496) (936) (895)
Proceeds on
disposition of
equipment 30 18 42 20
----------------------------------------------- -------------------------
Cash flows used in
investing activities (8,362) (5,502) (14,723) (9,874)
----------------------------------------------- -------------------------
Financing Activities:
Repayments of
notes payable (750) (800) (750) (1,600)
Payment of capital
lease obligations (58) (47) (112) (101)
Issuance of
capital stock 52 18 462 194
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Cash flows used in
financing activities (756) (829) (400) (1,507)
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Foreign exchange gain
(loss) on cash and
cash equivalents 9 (160) 62 (120)
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(Decrease) Increase in
cash and cash
equivalents (4,132) 1,409 (8,122) (1,450)
Cash and cash
equivalents, beginning 11,754 8,167 15,744 11,026
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Cash and cash
equivalents, ending $ 7,622 $ 9,576 $ 7,622 $ 9,576
----------------------------------------------- -------------------------
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For further information: For investor inquiries please contact: David Feick, The Equicom Group, (403) 218-2839, [email protected]; For media inquiries please contact: Marcela Peake, PEER 1, (604) 909-6428, [email protected]
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