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Q9 Networks Reports First Quarter 2005 Results
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Increased revenue to $8.01 million, a 32% increase over the same quarter 2004 and a 9% increase over the previous quarter |
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Increased EBITDA to $1.93 million, a 325% increase over the same quarter 2004 and a 48% increase over the previous quarter |
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Sixth consecutive quarter of positive cash flow from operations |
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Narrowed net loss to $0.26 million, a 76% improvement over the same quarter 2004 and a 71% improvement over the previous quarter |
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Opened Brampton data centre on schedule |
Toronto, ON - March 10, 2005 - Q9 Networks Inc. (TSX:Q), a leading Canadian provider of outsourced Internet infrastructure and related managed services, today announced its financial results for the first quarter ended, January 31, 2005.
Revenue for the first quarter 2005 was $8.01 million, an increase of 32% from first quarter 2004 revenue of $6.06 million and a 9% increase over fourth quarter 2004 revenue of $7.34 million (all figures expressed in Canadian dollars).
Co-location revenue for the first quarter 2005 was $2.98 million, managed bandwidth revenue was $1.66 million and managed services revenue was $3.15 million.
EBITDA for the first quarter 2005 was $1.93 million, up 325% or $1.48 million over the same period last year and a $.63 million or 48% improvement over the fourth quarter 2004. Please see the attached financial statements for EBITDA definition and reconciliation to loss for the period.
Net loss for the first quarter 2005 was $0.26 million, compared to a net loss of $1.05 million for the first quarter 2004 and a net loss of $0.88 million for the fourth quarter 2004. Basic and diluted loss per share for the first quarter 2005 was $0.01 compared to a pro forma loss per share of $0.06 in the same quarter 2004, after taking into effect the conversion of the then outstanding preference shares and subsequent share capital consolidation.
Cash flow generated from operations for the first quarter, 2005 was $2.40 million, marking the Company's sixth consecutive quarter of positive cash flow. The Company ended the quarter with cash, cash equivalents and short-term investments of $71.17 million, including $1.14 million in restricted cash. Other than $0.75 million in notes payable to an equipment supplier, Q9 had no debt outstanding.
"We are very pleased to report another quarter of growth across all service offerings," says Osama Arafat, CEO, Q9 Networks. "Q9 delivered solid gains in revenue, EBITDA and cash flow. I am particularly pleased to note that we significantly narrowed our net loss from the same period a year ago and from the previous quarter. We continue to see excellent opportunities for further growth based on our strong customer base, the opening of our Brampton facility and the continued strong demand for services at our downtown Toronto and Calgary facilities."
Conference Call Information
The Company 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 416-640-4127 and 1-800-814-4860. A replay will be available until March 17, 2004, following the conference call and can be accessed by dialing 416-640-1917, pass code 21113928#.
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. Please see the schedule below that sets out the Company's EBITDA calculations.
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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January 31, October 31,
2005 2004
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Assets
Current assets:
Cash and cash equivalents $ 5,921 $ 6,135
Short-term investments 64,111 64,023
Accounts receivable 1,818 1,846
Unbilled revenue 234 154
Prepaid expenses 810 646
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72,894 72,804
Restricted cash 1,140 1,140
Capital assets 39,132 38,533
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$ 113,166 $ 112,477
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 3,220 $ 3,075
Deferred revenue 3,856 3,639
Current portion of leasehold inducements 195 195
Notes payable 746 789
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8,017 7,698
Deferred gain on sale of property 1,266 1,286
Leasehold inducements 784 818
Other long-term liabilities 996 879
Shareholders' equity:
Capital stock:
Common shares 177,752 177,750
Contributed surplus 1,711 1,149
Deficit (77,360) (77,103)
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102,103 101,796
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$ 113,166 $ 112,477
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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
January 31,
2005 2004
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Revenue:
Co-location $ 2,977 $ 1,959
Managed bandwidth 1,657 1,573
Managed services 3,154 2,365
Set-up fees 220 164
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8,008 6,061
Cost of revenue 5,801 4,930
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Gross margin 2,207 1,131
Expenses:
Sales and marketing 960 928
General and administrative 1,764 1,387
Amortization 138 133
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2,862 2,448
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Loss from operations (655) (1,317)
Interest income 412 287
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412 287
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Loss before income taxes (243) (1,030)
Income taxes 14 21
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Loss for the period (257) (1,051)
Deficit, beginning of period as
previously reported (76,861) (70,999)
Change in accounting policy (242) (161)
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Deficit as restated, beginning of period (77,103) (71,160)
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Deficit, end of period $ (77,360) $ (72,211)
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Basic and diluted loss per share
$ (0.01) $ (2.64)
Basic and diluted weighted average
number of common shares
outstanding 20,136 398
Pro forma basic and diluted loss
per share $ (0.01) $ (0.06)
Pro forma basic and diluted weighted
average number of shares
outstanding 20,136 16,320
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Q9 NETWORKS INC.
Statements of Cash Flows
(In thousands, except per share amounts)
(Unaudited)
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Three months ended
January 31,
2005 2004
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Cash provided by (used in):
Operating activities:
Loss for the period $ (257) $ (1,051)
Items not involving cash:
Amortization 2,035 1,781
Deferred gain on sale of property (20) (20)
Amortization of leasehold inducements (34) (34)
Accretion expense 16 11
Non-cash rent expense 101 -
Stock-based compensation expense 562 -
Change in non-cash operating working capital (2) 269
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2,401 956
Financing activities:
Issuance of notes payable 186 -
Repayment of notes payable (229) (172)
Increase in leasehold inducements - 194
Issuance of shares, net of issue costs 2 -
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(41) 22
Investing activities:
Purchase of capital assets (2,486) (371)
Increase in short-term investments (88) 1,256
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(2,574) 885
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Increase (decrease) in cash and cash equivalents (214) 1,863
Cash and cash equivalents, beginning of period 6,135 2,195
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Cash and cash equivalents, end of period $ 5,921 $ 4,058
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Supplemental cash flow information:
Interest received $ 652 $ 517
Supplemental disclosure of non-cash
financing and investing activities:
Acquisition of capital assets in
accounts payable 755 255
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Q9 NETWORKS INC.
EBITDA Reconciliation
(In thousands)
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Three months ended,
January 31,
2005 2004
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Loss for the Period (257) (1,051)
Income taxes 14 21
Accretion expense 16 11
Interest income (412) (287)
Amortization 2,015 1,761
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EBITDA before the under-noted 1,376 455
Stock-based compensation(x) 558 -
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EBITDA 1,934 455
(x) Note: Stock-based compensation expense included here is related
solely to the nominal exercise price options, which were awarded to
employees immediately prior to the Company's Initial Public Offering
(IPO). Stock-based compensation expense related to all other options is
not added back to loss for the period in calculating EBITDA.
Note: Comparative figures have been restated due to the adoption of a new
accounting pronouncement related to asset retirement obligations.
For further information, please contact:
Media Relations:
Kevin Spikes
Director of Corporate & Investor Relations
Toronto: 416-365-7211
Toll Free: 1-888-696-2266
media.relations@Q9.com
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