|
Q9 Networks Reports Second Quarter 2008 Results
 |
Revenue of $16.0 million, a 19% increase over the same quarter 2007 and a 1% increase over the previous quarter |
|
Adjusted EBITDA of $4.6 million, a 54% increase from the same quarter 2007 and an 11% increase from the previous quarter |
|
Income before taxes of $0.7 million, compared to $nil for the same quarter 2007 and $0.8 million in the previous quarter |
|
Revenue under contract entering the third quarter 2008 was $14.1 million, an increase of 3% over the previous quarter |
Toronto, ON - June 12, 2008 - Q9 Networks Inc. (TSX:Q) today announced its quarterly results for the three and six months ended April 30, 2008.
Revenue for the second quarter 2008 was $16.0 million, a 19% increase over second quarter 2007 revenue of $13.4 million and an increase of 1% or $0.2 million from first quarter 2008 revenue of $15.8 million (all figures expressed in Canadian dollars).
Revenue under contract entering the third quarter 2008 increased to $14.1 million, up 3% over revenue under contract of $13.6 million at the beginning of the second quarter 2008. Revenue under contract does not include contracts signed but not yet installed.
Co-location revenue for the second quarter 2008 was $8.1 million, managed services revenue was $5.2 million and managed bandwidth revenue was $2.3 million. Set-up and other fees were $0.4 million.
Adjusted EBITDA for the second quarter 2008 was $4.6 million, a 54% increase from the second quarter 2007 and an increase of $0.4 million or 11% compared to the previous quarter. Please see the attached schedules for the Company's Adjusted EBITDA definition and reconciliation.
Net income for the second quarter 2008 was $0.3 million, compared to a loss of $0.3 million in the second quarter 2007 and net income of $0.3 million in the first quarter 2008. Basic and diluted earnings per share for the second quarter 2008 was $0.01, compared to a basic and diluted loss per share of $0.02 in the second quarter 2007 and basic and diluted earnings per share of $0.01 in the first quarter 2008.
Cash flow generated from operations for the second quarter 2008 was $4.5 million. Q9 ended the quarter with cash, cash equivalents and short-term investments of $31.2 million, a decrease of $2.0 million from the previous quarter. The decrease is primarily related to Q9's investment in its Brampton data centre expansion. Other than $0.3 million in notes payable to an equipment supplier, Q9 had no debt outstanding.
During the quarter, Q9 repurchased and cancelled 62,000 shares under its Normal Course Issuer Bid program, at an average cost of $10.90 per share.
"We had a solid quarter," said Osama Arafat, CEO, Q9 Networks. "Excluding the one-time cancellation fee of $0.5 million we received in the first quarter, revenue increased by approximately $0.7 million in the second quarter. We added approximately $0.5 million in contracted revenue and entered the third quarter with $14.1 million in revenue under contract. We also completed our Brampton expansion with the addition of the final 400 cabinet equivalents. We are well-positioned for the second half of the year with continued strong demand from new and existing customers."
Conference Call Information
Q9 will host a conference call to discuss its results at 5:00 PM today. The conference call will be available over the Internet through the Investor Relations section of the Company's Web site at www.Q9.com or by telephone at 416-644-3418 and 1-800-732-9303. A replay will be available until Thursday June 19, 2008 following the conference call and can be accessed by dialing 416-640-1917 or 1-877-289-8525, pass code 21269126#.
Non-GAAP Measures
The Company reports Adjusted EBITDA because it is a key measure used by management to evaluate the Company's performance. The Company believes that Adjusted EBITDA is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset amortization and other non-cash expenses. Adjusted EBITDA is not a recognized measure under Canadian GAAP, and accordingly investors are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with Canadian GAAP as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows. The Company's method of calculating Adjusted EBITDA differs from other issuers and, accordingly, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Please see the attached schedule for the Company's Adjusted EBITDA definition and reconciliation.
Prior to the second quarter of fiscal 2007, the Company used the term EBITDA for this key measure. For the purposes of reporting the second quarter of fiscal 2007 results, the Company started using the term Adjusted EBITDA and added back total stock-based compensation expense in determining Adjusted EBITDA. Previously, the Company included only stock-based compensation expense related to the nominal exercise options issued at the time of its IPO as described in note 7 to the second quarter 2008 financial statements. Beginning in the first quarter of fiscal 2008, the Company changed the method of calculating Adjusted EBITDA by reclassifying from interest income, net (referred to as investment income, net in fiscal 2007), realized and unrealized gains and losses on short-term investments and included them as reconciling items to Adjusted EBITDA.
Forward Looking Statements
This media release includes certain forward-looking statements that are based upon current expectations, which involve risks and uncertainties associated with our business and the economic environment in which the business operates. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. For example, the words anticipate, believe, plan, estimate, expect, intend, should and similar expressions are intended to identify forward-looking statements. Should one or more of the risks and uncertainties materialize or should the underlying assumptions prove incorrect, actual results or events may differ materially from current expectations. Please refer to the Risks section at the end of Q9's second quarter 2008 MD&A, dated June 12, 2008, which can be found on the Company's website at www.Q9.com or through SEDAR. Q9 does not intend, and disclaims any obligation, except as required by law, to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
About Q9 Networks
Q9 Networks is a leading Canadian provider of outsourced data centre infrastructure for organizations with mission-critical IT operations. Q9's data centres and network are backed by an industry leading SLA which guarantees 100 per cent network and power availability. Q9 managed services, including: bandwidth, dedicated servers, firewalls, load balancing, virtual private networking (VPN) and back-up/restore, enable the rapid provisioning and scalability of client infrastructure.
Q9 NETWORKS INC.
Balance Sheets
(In thousands)
(Unaudited)
-------------------------------------------------------------------------
April 30, October 31,
2008 2007
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 8,085 $ 5,956
Short-term investments 23,082 36,922
Accounts receivable 5,201 4,552
Unbilled revenue 493 593
Future tax asset 2,447 2,554
Prepaid expenses 1,387 686
-----------------------------------------------------------------------
40,695 51,263
Restricted cash - 50
Other assets 1,105 1,101
Future tax asset 983 1,795
Property and equipment 92,660 87,226
-------------------------------------------------------------------------
$ 135,443 $ 141,435
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 5,967 $ 12,003
Deferred revenue 6,291 5,923
Notes payable 287 403
-----------------------------------------------------------------------
12,545 18,329
Deferred revenue 1,252 1,032
Deferred gain on sale of property 1,010 1,049
Leasehold inducements 1,086 1,209
Asset retirement obligations 1,176 1,111
Deferred rent 1,778 1,605
Shareholders' equity:
Capital stock:
Common shares 144,476 145,452
Contributed surplus 1,843 1,072
Deficit (29,723) (29,424)
-----------------------------------------------------------------------
116,596 117,100
-------------------------------------------------------------------------
$ 135,443 $ 141,435
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Q9 NETWORKS INC.
Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Six months ended
April 30, April 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue:
Co-location $ 8,098 $ 6,463 $ 15,606 $ 12,520
Managed services 5,221 4,785 10,431 9,442
Managed bandwidth 2,289 1,893 4,520 3,729
Set-up and other fees 383 281 1,236 543
-----------------------------------------------------------------------
15,991 13,422 31,793 26,234
Cost of revenue 11,426 9,477 22,343 17,883
-------------------------------------------------------------------------
Gross profit 4,565 3,945 9,450 8,351
Expenses:
Sales and marketing 1,460 1,693 3,079 3,202
General and
administrative 2,499 2,517 5,166 4,824
Amortization of property
and equipment 193 230 386 464
-----------------------------------------------------------------------
4,152 4,440 8,631 8,490
-------------------------------------------------------------------------
Income (loss) from operations 413 (495) 819 (139)
Investment income, net 252 514 638 1,106
-------------------------------------------------------------------------
Income before income taxes 665 19 1,457 967
Income tax expense:
Current - 1 - 1
Future 399 354 919 928
-------------------------------------------------------------------------
399 355 919 929
-------------------------------------------------------------------------
Net income (loss) and
comprehensive income
(loss) 266 (336) 538 38
Deficit, beginning of
period (29,743) (25,761) (29,424) (26,122)
Repurchase of shares (246) (763) (837) (776)
-------------------------------------------------------------------------
Deficit, end of period $ (29,723) $ (26,860) $ (29,723) $ (26,860)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) per
share:
Basic $ 0.01 $ (0.02) $ 0.03 $ 0.00
Diluted 0.01 (0.02) 0.03 0.00
Weighted average number of
shares outstanding:
Basic 20,862 20,522 20,912 20,391
Diluted 20,868 20,522 20,953 21,123
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Q9 NETWORKS INC.
Statements of Cash Flows
(In thousands)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Six months ended
April 30, April 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income (loss) $ 266 $ (336) $ 538 $ 38
Items not involving cash:
Amortization of
property and equipment 3,749 2,897 7,057 5,220
Amortization of other
assets 10 11 20 21
Gain on sale of
property (20) (20) (39) (39)
Accretion expense 33 27 65 54
Unrealized gain on
short-term investments (4) (2) (19) (9)
Loss on disposal of
property and equipment 3 - 3 -
Net non-cash rent
expense 18 58 50 195
Stock-based
compensation expense 426 571 852 1,147
Future income taxes 399 354 919 928
Change in non-cash
operating working
capital (396) 303 59 422
-----------------------------------------------------------------------
4,484 3,863 9,505 7,977
Financing activities:
Issuance of notes payable - 388 375 878
Repayment of notes
payable (240) (253) (491) (484)
Repurchase of shares (676) (1,489) (2,272) (1,516)
Proceeds upon exercise
of options 5 3,769 33 3,796
-----------------------------------------------------------------------
(911) 2,415 (2,355) 2,674
Investing activities:
Purchase of property and
equipment (5,583) (8,789) (18,700) (24,798)
Purchase of short-term
investments (16,470) (38,933) (45,381) (144,982)
Sale of short-term
investments 20,591 38,499 59,034 158,760
Decrease (increase) in
other assets 15 (174) (24) (172)
Decrease in restricted
cash - - 50 -
-----------------------------------------------------------------------
(1,447) (9,397) (5,021) (11,192)
-------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 2,126 (3,119) 2,129 (541)
Cash and cash equivalents,
beginning of period 5,959 8,539 5,956 5,961
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 8,085 $ 5,420 $ 8,085 $ 5,420
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents
is comprised of:
Cash on hand and cash in
the bank $ 7,845 $ 5,420 $ 7,845 $ 5,420
Money market mutual funds 240 - 240 -
-------------------------------------------------------------------------
$ 8,085 $ 5,420 $ 8,085 $ 5,420
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow
information:
Interest received $ 260 $ 502 $ 833 $ 1,350
Interest paid 8 10 15 19
Income taxes paid - 1 - 1
Supplemental disclosure of
non-cash financing and
investing activities:
Effect of acquisition of
property and equipment
in accounts payable and
accrued liabilities 2,788 112 6,206 3,646
Effect of repurchase of
shares in accounts
payable and accrued
liabilities - (24) 345 (24)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Q9 NETWORKS INC.
Adjusted EBITDA(1) Reconciliation
(In thousands)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Six months ended
April 30, April 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Net income (loss) for the
period $ 266 $ (336) $ 538 $ 38
Interest income, net(2) (242) (512) (613) (1,140)
Income tax expense 399 355 919 929
Amortization 3,739 2,888 7,038 5,202
-------------------------------------------------------------------------
EBITDA 4,162 2,395 7,882 5,029
Stock-based compensation
expense 426 571 852 1,147
Accretion expense 33 27 65 54
Realized (gain) loss on
short-term investments(2) (6) - (6) 25
Unrealized (gain) loss on
short-term investments(2) (4) (2) (19) 9
-------------------------------------------------------------------------
Adjusted EBITDA $ 4,611 $ 2,991 $ 8,774 $ 6,264
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note 1: Adjusted EBITDA means earnings before interest income and
expense, income tax expense, amortization, stock-based compensation
expense, accretion expense, and realized and unrealized gains and losses
on short-term investments.
Note 2: Realized and unrealized gains and losses on short-term
investments have been reclassified from interest income, net (referred to
as investment income, net in fiscal 2007 Adjusted EBITDA reconciliation)
and included as reconciling items to Adjusted EBITDA.
For further information, please contact:
Media Relations:
Kevin Spikes
Director of Corporate & Investor Relations
Toronto: 416-848-3311
Toll Free: 1-888-696-2266
media.relations@Q9.com
|
