ILND earnings beat estimates (avg. estimate was loss of .55/share, actual is loss of .44/share)...
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Tuesday October 31, 6:04 am Eastern Time
Interland Reports Third Quarter Results; Company Records 260% Year Over Year Revenue Growth Due to Customer Demand for Increasingly Complex Managed Services, Dedicated Managed Services Surge 870% Year Over Year and 33% Sequentially
ATLANTA, Oct. 31 /PRNewswire/ -- Interland, Inc. (Nasdaq: ILND - news), a global leader in Web-enabling solutions, announced today revenues of $9.4 million for the quarter ended September 30, 2000, a 260% increase over the $2.6 million of revenues for the same period one year ago. Dedicated revenues increased to $2.4 million, a 870% increase over year ago revenues and a 33% increase sequentially. For the nine months ended September 30, 2000, revenues totaled $23.9 million compared to revenues of $5.3 million during the first nine months of 1999.
For the quarter ended September 30, 2000, the Company reported a net loss of $18.1 million, or $(.44) per share, based on approximately 40.8 million weighted average shares outstanding, compared to a net loss of $4.9 million, or $(.23) per share, for the same period a year ago. For the nine months ended September 30, 2000, the net loss was $46.9 million or $(1.51) per share, compared to a net loss of $9.8 million or $(.47) per share for the corresponding period in 1999. Adjusted EBITDA (loss before net interest expense, income taxes, depreciation, amortization and other non-cash charges) decreased $700,000 to $15.1 million for the third quarter 2000 from $15.8 million during the second quarter 2000. The company ended the quarter with $81.2 million in cash and short-term investments.
``We are happy to announce that Interland generated more top-line growth in the last three months then last year in total,'' said Ken Gavranovic, President and CEO, Interland, Inc. ``By providing a full range of end-to-end solutions, Interland is emerging as the clear leader in the SME market. Our target market of businesses with 51-500 employees is continuing to migrate up to our more complex hosting solutions as their needs advance, and their Web site and applications become more important to their business.''
The Company's strategy of obtaining customers early in their life cycle and migrating them to more advanced hosting services is clearly working, with over 46% of existing dedicated customers having migrated from introductory complex shared hosting services.
``Our hosting business now tops 79,000 Web sites and our dedicated customer base is nearly 1,000 customers with more than 1600 dedicated servers,'' Gavranovic added. ``Our average monthly revenue per new dedicated customer increased dramatically, from nearly $1,159 in second quarter to $1,481 in the third quarter, a 28% sequential increase.''
According to IDC, the Web hosting market (estimated to be more than $19 billion) is dominated by the SME customers, with approximately 93% of the domestic hosting market size represented by small- and medium-enterprises in 2003.
``Our top 20 customers in the third quarter had average monthly ARPU (average revenue per user/customer) of $10,295, an increase of 106% from $5,009 in the second quarter,'' Gavranovic said. ``We are pleased to note that a majority of these customers are high availability and enhanced managed services customers, products that were both recently introduced. Also of note, our monthly churn for the quarter decreased to 1.3%, signifying that we are attracting and retaining a customer base that is dependant upon Interland for its long-term hosting needs.''
During the quarter, Interland made a number of significant core infrastructure investments which the Company will be able to leverage in the future, including the new 64,000 square foot Internet Management Center now under construction, which is capable of holding nearly 14,000 servers, the addition of a Veritas data backup system, allowing the delivery of world-class managed backup and data services, the introduction of our initial 7 terabyte storage area network for world class data management, and a new mail system capable of supporting millions of accounts.
Interland recently announced the signing of an exclusive, three year agreement with Verizon Communications, a Fortune 10 company and the largest, incumbent telecommunications company in the U.S. This relationship provides Interland exclusive access to over 2 million small- and medium-sized enterprise (SME) customers and is a testament to the quality of Interland's Web hosting solutions and scalability, with more than 79,000 Web sites and nearly 1,000 dedicated customers. Interland will also be able to offer bundled billing solutions to Verizon's customer base through this relationship. This agreement will allow Interland to dramatically reduce our cost of acquisition as the Company works in partnership with Verizon to seamlessly deliver world class managed hosting services to their millions of customers. This partnership also allows Interland to leverage, through co-branding initiatives, the Verizon name and reputation and obtain access to a qualified prospective customer base. Interland hired a former Bell Atlantic executive, Lee Self, to manage this relationship.
The third quarter also marked the introduction of Interland's outside sales force, signifying a continued expansion of its business strategy. Initially, Interland grew its high-end dedicated business through its internal telesales team. The outside sales force will now focus exclusively on the Company's high-end managed services and dedicated hosting solutions. Early results from this sales force are promising. The Company booked approximately $16 million in new orders during the third quarter of 2000, of which approximately 40% were attributable to dedicated customers, significantly surpassing the Company's expectations. At September 30, 2000, the Company had a revenue backlog of approximately $20 million, consisting of approximately $16 million in prepaid shared business and $4 million in dedicated contracts.
Additional operational and financial highlights for the third quarter are as follows:
Operational
* Announced outside sales strategy, estimating more than
25 quota-carrying salespersons focused on the high-end, managed
dedicated hosting customer base to be on board by the end of the year
* Became the largest provider of Windows 2000 Web hosting accounts and is
a leading provider for Red Hat Linux
* Deployed an enhanced suite of managed services that include powerful
features such as system backup and recovery, system administration, as
well as system monitoring and reporting. Forrester Research Inc. has
predicted that Managed Services will take a 55 percent share of the
hosting market and $11 billion in revenue by 2004
* More than 2,300 servers now hosted
* 47,578 total customers; all organic growth
Financial Highlights
* Cash and marketable securities of $81.2 million
* Capital expenditures were $7.1 million
* Revenue mix consisted of: Q3 Q2
Dedicated hosting services 26% 23%
Shared 59% 62%
Applications/Consulting 15% 15%
* $50 million in vendor lease financing became available
through Compaq and Hewlett Packard
* Gross margins were 13.5% of revenue, excluding depreciation
and amortization
Fourth Quarter Outlook:
Interland expectations for the fourth quarter 2000 are as follows:
* Revenue in the range of $11-12 million
* Net loss per share in the range of $(.42)- $(.48)
* Adjusted EBITDA loss in the range of $15-17 million
* Capital expenditures of approximately $11-14 million
``Overall, we continue to provide the small- and medium-enterprise customer base with solutions that help them grow their businesses and work more efficiently via the Web,'' Gavranovic said. ``We continue to build a company that provides state-of-the-art hosting solutions, and are especially pleased with our industry leadership position focusing on the SME market, the largest and fastest growing segment of businesses that are creating a presence on the Web. We are proud of the fact that more than 79,000 Web sites depend upon Interland to maintain and constantly support their digital presence.''
About Interland
Interland, Inc. is a leader in providing managed hosting services for over 79,000 Web sites around the world through its U.S. and European offices. As one of the leading hosting companies in the rapidly growing $19 billion hosting market, Interland provides a full spectrum of Web design, managed shared and dedicated hosting, e-commerce solutions and business applications hosting. Interland's hosting services are based primarily on the Microsoft NT, Windows 2000 and Red Hat Linux operating systems, providing diversity and flexible options to its customers. In September, the company was recognized by Netcraft for hosting the largest number of Windows 2000 Web sites in the world. Strategic partners include Microsoft Corp., Network Solutions, and Verizon. For more information, please visit www.interland.com
Interland, Inc.
Condensed Balance Sheet
September 30, 2000 (unaudited)
(in thousands)
Assets
Cash and equivalents $ 81,248
Other current assets 8,213
Total current assets 89,461
Property, plant and equipment, net 30,402
Other assets 2,752
Total assets $122,615
Liabilities and Shareholders' Equity
Current liabilities 39,874
Long-term liabilities 8,472
Total liabilities 48,346
Shareholders' equity 74,269
Total liabilities and
shareholders' equity $122,615
Interland, Inc.
Condensed Statement of Operations
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
(In thousands, except for share, per share and customer data)
Revenues $ 9,430 $ 2,582 $23,855 $ 5,279
Cost of revenues 8,159 1,953 22,389 4,036
Sales and marketing 11,085 2,371 28,077 4,770
General and administrative 6,827 2,869 17,366 5,721
Depreciation and
amortization 2,020 263 3,710 571
Total operating expenses 28,091 7,456 71,542 15,098
Operating loss (18,661) (4,874) (47,687) (9,819)
Interest (income)
expense, net (536) 12 (806) 18
Net loss ($18,125) ($4,886) ($46,881) ($9,837)
Net loss per share ($0.44) ($0.23) ($1.51) ($0.47)
Shares used in
computing net loss
per share 40,794,229 21,623,646 31,071,579 20,817,342
Other financial data:
Adjusted EBITDA ($15,072) ($3,315) ($39,912) ($ 6,639)
CAPEX $ 7,121 $ 752 $27,271 $ 2,306
Number of active sites
(total) 79,386 34,044
Number of shared
customers 46,635 19,532
Number of dedicated
customers 943 290
ARPU $70 $50 $68 $44
ARPU dedicated $907 $350 $842 $265
* Adjusted EBITDA consists of net loss excluding interest income
(expense), net, and depreciation and amortization, as further adjusted
to exclude non-cash stock compensation expense and non-cash operating
expenses incurred as a result of the issuance of equity securities to
third parties. Adjusted EBITDA does not represent funds available for
discretionary use and is not intended to represent cash flow from
operations as measured under generally accepted accounting principles.
Adjusted EBITDA should not be considered as an alternative to net loss
or net cash used in operating activities, but may be useful to
investors as an indication of operating performance. Our calculations
of Adjusted EBITDA may not be consistent with similarly titled
calculations used by other companies. |
