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Q9 Networks Reports Second Quarter 2004 Financial Results
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Second quarter revenue of $6.27 million, a 38.4% increase over second quarter, 2003 |
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Strong revenue growth in all service offerings |
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Positive cash flow from operations |
Toronto, ON - June 9, 2004 - Q9 Networks Inc. (TSX:Q), a leading Canadian provider of outsourced Internet infrastructure and related managed IT services, today announced its financial results for the second quarter, ended April 30, 2004.
Q9's total revenue increased 38.4% to $6.27 million for the second quarter, 2004, compared to $4.53 million in the second quarter, 2003 (all figures expressed in Canadian dollars).
Revenue for co-location increased by 50.1% to $2.23 million from $1.49 million in the second quarter, 2003. Revenue for managed bandwidth increased by 15.9% to $1.61 million from $1.39 million in the second quarter, 2003. Managed services revenue increased by 51.5% to $2.28 million from $1.51 million in the second quarter, 2003. Revenue growth for each of these offerings resulted from sales to both new and existing customers.
EBITDA, defined as loss for the period before interest, taxes, amortization and stock-based compensation expense, was a loss of $1.15 million for the second quarter, 2004, compared to a loss of $1.39 million for the second quarter, 2003. Excluding a one-time lease termination fee of $1.57 million, EBITDA for the second quarter, 2004 was a positive $0.42 million.
Net loss for the second quarter, 2004 was $2.69 million, compared to a net loss of $7.05 million for the second quarter, 2003. On a pro forma per share basis the net loss per share for the second quarter, 2004 and 2003 was $0.16 and $0.21, respectively (after taking into effect the conversion and subsequent five-to-one consolidation of the then outstanding shares to common shares and adding the accretion of interest on redeemable convertible preference shares and amortization of deferred financing cost to the loss for the period). Excluding the lease termination fee mentioned above, the net loss for the second quarter, 2004 would have been $1.11 million or a pro forma net loss per share of $0.07.
Cash flow generated from operations for the second quarter, 2004 was $0.83 million, marking the Company's second consecutive quarter of positive cash flow. This compares to a $0.88 million net use of cash in the same quarter, 2003.
The Company ended the quarter with cash and cash equivalents, short-term investments and restricted cash of $73.17 million. Other than $0.21 million in notes payable to an equipment supplier, Q9 had no debt outstanding.
The Company's customer count was 248 as at April 30, 2004, compared to 183 on April 30, 2003. Notable customers added during the quarter were Scotiabank and The Co-operators Group.
"We are pleased to have achieved the results announced today," says Osama Arafat, CEO, Q9 Networks. "Q9's superior reliability and range of service offerings continues to attract customers with mission-critical Internet operations across all industries. We are particularly pleased to note that our revenue has grown to a level where it is sufficient to meet our ongoing operating cash requirements."
Conference Call Information
The Company will host a conference call to discuss the 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 416-640-4127 and 1-800-814-4859. A replay will be available for 48 hours following the conference call and can be accessed by dialing 416-640-1917, pass code 21052762 #.
Non-GAAP Measures
The Company reports EBITDA because it is a key measure used by management to evaluate the Company's performance. The Company believes that 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 depreciation and other non-cash expenses. 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 the financial performance of the Company or as a measure of the Company's liquidity and cash flows. The Company's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similar measures presented by other issuers.
About Q9 Networks
Q9 Networks is a leading Canadian provider of outsourced Internet infrastructure and related managed services. Q9's data centres and network are backed by an industry leading SLA which guarantees 100% 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)
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April 30, October 31,
2004 2003
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Assets
Current assets:
Cash and cash equivalents $ 17,950 $ 2,195
Short-term investments 53,900 39,638
Accounts receivable 1,906 1,959
Unbilled revenue 406 223
Prepaid expenses 710 378
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74,872 44,393
Restricted cash 1,320 2,270
Capital assets 37,769 38,572
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$ 113,961 $ 85,235
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 5,396 $ 2,040
Deferred revenue 2,906 2,517
Current portion of leasehold inducements 195 175
Notes payable 209 467
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8,706 5,199
Deferred gain on sale of property 1,325 1,364
Long-term portion of leasehold inducements 886 779
Shareholders' equity:
Capital stock:
Common shares 177,750 420
Preference shares - 148,472
Contributed surplus 19 -
Deficit (74,725) (70,999)
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103,044 77,893
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$ 113,961 $ 85,235
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Q9 NETWORKS INC.
Statements of Operations and Deficit
(In thousands, except per share amounts)
(Unaudited)
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Three months ended
April 30,
2004 2003
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Revenue:
Co-location $ 2,230 $ 1,486
Managed bandwidth 1,606 1,385
Managed services 2,281 1,507
Set-up fees 155 153
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6,272 4,531
Cost of revenue 5,181 5,301
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Gross margin 1,091 (770)
Expenses:
Sales and marketing 1,090 1,096
General and administrative 1,222 1,425
Lease termination costs 1,571 -
Amortization 134 204
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4,017 2,725
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Loss from operations (2,926) (3,495)
Interest expense (3) (16)
Accretion of interest on redeemable convertible
preference shares - (3,672)
Interest income 252 276
Amortization of deferred
financing costs - (119)
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249 (3,531)
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Loss before income taxes (2,677) (7,026)
Income taxes 12 22
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Loss for the period (2,689) (7,048)
Deficit, beginning of period (72,036) (50,947)
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Deficit, end of period $ (74,725) $ (57,995)
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Basic and diluted loss per share
$ (3.21) $ (17.72)
Basic and diluted weighted average number
of common shares outstanding 838 398
Pro forma basic and diluted loss per share $ (0.16) $ (0.21)
Pro forma basic and diluted weighted average
number of shares outstanding 16,407 16,320
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Q9 NETWORKS INC.
Statements of Cash Flows
(In thousands)
(Unaudited)
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Three months ended
April 30,
2004 2003
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Cash provided by (used in):
Operating activities:
Loss for the period $ (2,689) $ (7,048)
Items not involving cash:
Amortization 1,776 2,120
Deferred gain (19) (13)
Amortization of leasehold inducements (33) (26)
Accretion of interest on redeemable
convertible preference shares - 3,672
Amortization of deferred financing costs - 119
Stock-based compensation expense 19 -
Change in non-cash operating working capital 1,778 293
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832 (883)
Financing activities:
Issuance of notes payable 105 274
Repayment of notes payable (191) -
Repayments of long-term debt - (114)
Increase in leasehold inducements - -
Issuance of shares, net of issue costs 28,858 -
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28,772 160
Investing activities:
Proceeds on sale of property and building - 12,500
Purchase of capital assets (1,144) (1,356)
Increase in short-term investments and
restricted cash, net (14,568) (12,534)
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(15,712) (1,390)
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Increase (decrease) in cash and cash equivalents 13,892 (2,113)
Cash and cash equivalents, beginning of period 4,058 3,996
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Cash and cash equivalents, end of period $ 17,950 $ 1,883
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Supplemental cash flow information:
Interest received $ 181 $ 191
Interest paid 3 16
Income taxes paid 127 360
Supplemental disclosure of non-cash financing
and investing activities:
Acquisition of capital assets in
accounts payable 1,514 188
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EBITDA Reconcilation Three months ended
(In thousands) April 30, April 30,
2004 2003
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Loss for the period $ (2,689) $ (7,048)
Income taxes 12 22
Accretion of interest on redeemable convertible
preference shares - 3,672
Interest expense 3 16
Interest income (252) (276)
Amortization of deferred financing costs - 119
Stock-based compensation 19 -
Amortization 1,757 2,107
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EBITDA (1,150) (1,388)
Lease termination costs 1,571 -
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EBITDA adjusted for lease termination costs $ 421 $ (1,388)
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For further information, please contact:
Media Relations:
Kevin Spikes
Director of Corporate Communications
Toronto: 416-365-7211
Toll Free: 1-888-696-2266
media.relations@Q9.com
Investor Relations:
Monica Zaied
Manager, Investor Relations
Toronto: 416-365-7104
Toll Free: 1-888-696-2266
investor.relations@Q9.com
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