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Technology Stocks : Interliant, Inc. (INIT) -- Ignore unavailable to you. Want to Upgrade?

To: $Mogul who wrote (1023)	11/17/1999 4:42:00 PM
From: lurknomore	Read Replies (1) \| Respond to of 1214

From RB Board --- ML Report by: SmartVestor (32/M/Sugarland, TX) 11/17/1999 3:30 pm EST Msg: 18104 of 18106 Summary: We believe 3Q 99 marks an important inflexion point in the Interliant story, characterized by increased topline momentum and a significantly strengthened market positioning. Interliant announced a solid quarter with the first signs that that the company?s consolidation strategy is delivering strong organic revenue growth operating synergies. The company has spent the better part of 1999 acquiring strategic assets to fill out its e-business solutions portfolio. While it will take several quarters for the company to reorganize these assets under a unified brand and organizational structure, we believe FY2000 and FY2001 represent a ?sweet spot? for Interliant. The $600 billion market for ASP e-business solutions targeting small and medium-sized businesses is doubling annually. And currently, management believes only three players -Verio, Concentric and Interliant ? have critical mass and a compelling competitive positioning. We re-iterate our Buy rating. At 5x 2000E revenues with a long-term forecast revenue growth rate of 40%, Interliant represents the most value-oriented way to play this hypergrowth segment, in our view. Interliant announced 3Q99 revenues of $12 million versus our estimate of $11.5 million. We would highlight that the quality of revenue growth exceeded our expectations. Sequential growth was 13% and year over year growth was 600%. Organic revenue growth was up 13% versus our expectation for a flat quarter. Customer churn was low at 1-1.5% and average revenues per customer increased 13%, according to management. Acquisitions accounted for only $400,000 versus our estimate of $1.5 million. This trend marks an important departure from prior quarters where organic revenue growth was flat. EPS was ($0.37) per share versus our estimate of ($0.50) per share. The EPS upside in the quarter was driven by lower than expected sales & marketing expense and acquisition goodwill. Net losses were ($15.7) million versus our estimate of ($22) million. EBITDA was ($8.2) million, significantly ahead of our ($11.4) estimate. The upside in the quarter came from lower than expected sales & marketing expenses and lower amortization expense. Sales and marketing expenses totaled $5.2 million (43% of sales) versus our estimate of $8.2 million (71% of sales) . This was due in part to a late start on expanding the salesforce. Despite this, the company exceeded our organic revenue growth number, reflecting greater efficiencies in sales & marketing spend. Amortization of goodwill was $6 million versus our estimate of $8.7 million. This was due primarily to a mark-up of assets in acquisitions that were closed during the past three months as the company?s initial estimates proved conservative. The company made significant process during the quarter in combining the operations of acquired entities. In finance, Interliant converted 17 out of 19 operating companies to a common financial platform. In human resources, 16 out of 19 were converted. In operations, the number is 18 of 19. And in billing it is 13 of 19. The direct sales force is currently selling across services. The company still needs to develop a common branding and marketing platform.