Apptix Reports First Quarter 2009 Results

Transcription

1 Apptix Reports First Quarter 2009 Results Herndon, VA. and Oslo, Norway May 6, 2009 Apptix (OSE: APP), the industry-leading provider of hosted Microsoft Exchange , VoIP phone service, and SharePoint collaboration services for small and medium businesses (SMBs), today announced its unaudited financial results for the three months ended March 31, Overview of first quarter results: Highlights Top-line revenue of USD 10.3 million, a 3% decrease over fourth quarter 2008 and a 2% increase over first quarter 2008 Number of customers were flat with the fourth quarter of 2008 and increased 11% over first quarter of 2008, while the number of users decreased compared to fourth quarter 2008 due to negative net user growth in existing customers as customers aggressively implemented cost cutting measures in response to the declining economy Bookings (i.e. new users) from new customers increased 1% over fourth quarter 2008 and 45% over first quarter 2008 Average Revenue Per User (ARPU) of USD 17.56, a decrease of 2% over fourth quarter 2008; flat with first quarter 2008 EBITDA of USD 0.38 million, an increase of USD 0.25 million, or 198%, over fourth quarter 2008 and an increase of USD 0.76 million over first quarter 2008 Continued expansion of product catalog including the launch of Web Conferencing, Secure Instant Messaging (IM), and Desktop Fax solutions Formally launched the Company s multi-tiered reseller partner distribution program The ongoing economic decline in the United States has significantly impacted the Company s user base as existing customers aggressively implemented cost cutting measures during the first quarter, which resulted in a significant reduction of users. However, the Company s continued focus on operational and service excellence combined with its newly-expanded sales channels and product catalog allowed it to substantially replace lost revenue as a result of existing customers cost cutting efforts. Bookings from new customers increased 45% year over year and 1% quarter over quarter, non-exchange revenue increased 21% year over year, and user declines from customer churn improved 17% year over year and 4% quarter over quarter. Adding to the product launches of Apptix Online Backup by Mozy, Virtual Private application Servers (VPS), and several online presence solutions, such as Domain Registration with DNS Hosting and Shared Website Hosting at the end of the fourth quarter of 2008, the Company continued its product catalog expansion in the first quarter of 2009 with the launch of Web Conferencing and Secure IM utilizing Microsoft s Office Communications Server 2007, as well as Desktop Fax. Taking advantage of the Company s expanded Partner Program which adds a multi-tiered Reseller Program to the Company s existing referral and private label partner programs and significantly reduces both the time and cost to market for all Partner Programs the Company now has an additional 44 resellers marketing its services to small and medium-sized businesses (SMBs). Apptix ASA First Quarter 2009 Earnings Report Page 1

2 While it is clear the ongoing recession has driven our customers to take aggressive cost control measures, thereby negatively impacting our overall user count, it is also clear that our efforts in 2008 to establish a strong infrastructure both technically and organizationally is paying dividends in the form of increased bookings from new customers, growing success in up selling our expanding services, reduced customer churn, and significantly improved operating cash flow and profitability, having posted our third consecutive quarter of positive EBITDA said David Ehrhardt, CEO of Apptix. Financial Results First Quarter 2009 Total revenues decreased by 3% quarter over quarter, but increased 2% year over year to USD 10.3 million. The year over year growth was primarily the result of increased VoIP revenues, as well as improved penetration of add-on services within the Company s existing customer base. This was partially offset by a decrease in the Company s user base as a result of cost control measures implemented by the Company s customers and storage pricing concessions granted by the Company in response to market pressure. The quarter over quarter decline in revenue is primarily attributed to user declines related to customer employee reductions, customers terminated due to business failure or inability to pay the Company s fees, and storage pricing concessions initiated by the Company to curtail customers market shopping efforts. ARPU decreased 2% quarter over quarter and was flat year over year at USD for the first quarter of Historically the Company has not included sharepoint revenue or users in the calculation of ARPU; however as a result of the Company s efforts over the past quarter to up sell its expanding product catalog, which includes a concerted effort to expand sharepoint revenues, the Company has revised its ARPU calculation to reflect revenue from all products and all unique users (i.e.: users of two products are only counted once). Under the new method, ARPU for the first quarter of 2009, the fourth quarter of 2008 and the first quarter of 2008 is USD 17.56, USD and USD 17.58, respectively, compared to ARPU calculated under the previous method of USD 16.75, USD and USD 17.05, respectively. The comparative quarter over quarter decrease in ARPU was due primarily to storage pricing concessions, partially offset by gains from success in up selling the Company s expanded product set. The Company believes revenue and ARPU declines resulting from storage pricing concessions will be replaced over time as a result of reduced customer churn and increased revenue resulting from product up selling. While ARPU was flat year over year, first quarter 2008 included 21 cents related to a one-time revenue fee, absent this, year over year ARPU gains reflect success in up selling the Company s expanded product set. Total operating expenses (including depreciation and amortization) were USD 8.0 million during the first quarter of 2009, a decrease of USD 0.8 million, or 9%, quarter over quarter excluding asset impairment charges taken in the fourth quarter of 2008 and a decrease of USD 1.0 million, or 11%, year over year. The reductions in operating expenses are due primarily to lower net staffing costs resulting from the December 2008 sale of Apptix India, lower marketing expenditures, and lower depreciation expense. EBITDA increased to USD 0.38 million, or 198%, quarter over quarter and increased USD 0.76 million year over year from negative USD 0.38 million. The improvement quarter over quarter was primarily due to lower staffing expenses and operating expenses as mentioned above. The year over year improvement was due to a combination of revenue growth and lower operating expenses. The net loss was USD 1.0 million, as compared to a net loss of USD 3.4 million in the fourth quarter of 2008 (including the USD 1.9 million impairment charge and USD 0.15 million loss on the sale of Apptix India) and a USD 2.1 million net loss in the first quarter of Apptix ASA First Quarter 2009 Earnings Report Page 2

3 During the first quarter 2009, the Company generated positive cash flow from operating activities (including the effects of foreign currencies) of USD 0.4 million compared to cash used of USD 0.2 million during the same period in The improvement was primarily the result of the lower net loss recognized during the period. Net cash used in investing activities totaled USD 0.5 million, as compared to USD 0.8 million used during the first quarter of The decrease was due to lower software related purchases from third parties and capitalized software costs from internal initiatives. Cash used to satisfy debt and capital lease obligations was approximately USD 0.5 million in the first quarter of 2009, as compared to USD 2.5 million during the same period of During the first quarter of 2008, the Company paid USD 2.0 million related to the divestiture of WebMessenger. The Company utilized USD 0.38 million of its working capital facility during the quarter to fund a portion of its current period fixed asset purchases not eligible for funding via finance leases. The Company closed the quarter with USD 3.4 million of cash and USD 1.48 million outstanding on its working capital credit facility, as compared to USD 3.6 million and USD 1.1 million, respectively, at the end of the fourth quarter of During the quarter, the Company renewed its working capital facility with its bank. Under the terms of the renewal, the Company may borrow up to 75% of the previous two months cash receipts, up to a maximum of USD 6 million, subject to certain financial covenants including tangible net worth and a liquidity ratio. Financial Statements Basis for Preparation The enclosed consolidated condensed financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting Standards (IFRS). Significant Accounting Policies The accounting policies and methods of computation used in the preparation of the enclosed financial statements are consistent with the policies used in the annual financial statements for the year ended December 31, The enclosed consolidated condensed financial statements should be read in conjunction with the Company s 2008 annual financial statements, which include a full description of the Company s accounting policies. The enclosed consolidated condensed financial statements are unaudited. As a result of rounding differences, numbers or percentages may not add up to the total. The financial statements are attached. Apptix ASA First Quarter 2009 Earnings Report Page 3

4 About Apptix Apptix (OSE: APP) is the industry-leading provider of hosted , voice, and collaboration services for small and medium-sized businesses, serving over 21,000 companies worldwide. A pioneer in the hosted services space, directly and through its MailStreet subsidiary, Apptix offers a variety of hosted communications and IT services including: Microsoft Exchange; VoIP; Microsoft SharePoint; Web Conferencing and Secure Instant Messaging (IM) utilizing Microsoft Office Communications Server 2007; Online Backup by EMC s Mozy; mobile messaging (including BlackBerry and iphone); compliance and archiving; and Online Presence solutions including domain registration, DNS hosting, Virtual Private Servers (VPS), and Website hosting. Apptix provides the reliability and scalability of big business communications solutions at a small business price, freeing IT staff to focus on improving and innovating within their companies. Apptix is a Microsoft Gold Certified Partner for Hosting and Application Services. The company is headquartered in Herndon, Virginia, with additional locations in Florida, Illinois, and Texas. Apptix is recognized as one of the CRN 2008 Fast Growth 100, Deloitte s 2008 Virginia Technology Fast 50 and 2008 North American Technology Fast 500, Software Magazine s 2008 Software 500, and Washington Business Journal 2008 Fastest Growing Companies. For more information, visit For further information: Johan Lindqvist (Chairman) David Ehrhardt (CEO) Chris Mack (CFO) johan.lindqvist@windchange.se david.ehrhardt@apptix.com chris.mack@apptix.com Apptix ASA First Quarter 2009 Earnings Report Page 4

5 Interim Consolidated Income Statement Three months ended March 31, 2009 March 31, 2008 (Amounts in USD 1,000) IFRS IFRS Operating Revenues Recurring revenues 10,060 9,890 Other revenues Total Operating Revenues 10,298 10,125 Cost of Sales Direct costs of recurring revenues 2,690 2,703 Direct costs of other revenues Total Cost of Sales 2,733 2,727 Gross Profit 7,565 7,398 Operating Expenses Employee compensation and benefits 3,943 4,041 Other operational and administrative costs 3,240 3,737 Asset impairment charge - - Depreciation and amortization 828 1,182 Total Operating Expenses 8,011 8,960 Operating Loss (446) (1,562) Other (Expense)/Income Interest, net (239) (236) Loss on sale of subsidiary - (40) Other financial (expense)/income (321) (256) Other (Expense)/Income (560) (532) Loss Before Income Taxes (1,006) (2,094) Income tax benefit/(expense) (5) (34) Net Loss for the Period (1,011) (2,128) Attributable to Equity Holders of Parent (1,011) (2,128) Loss Per Share for the Period (0.04) (0.11) Attributable to Equity Holders of Parent (0.04) (0.11) Weighted Average Common Shares Outstanding 25,430 19,430 Apptix ASA First Quarter 2009 Earnings Report Page 5

6 Interim Consolidated Income Statement Three months ended March 31, 2009 March 31, 2008 (Amounts in NOK 1,000) IFRS IFRS Operating Revenues Recurring revenues 69,176 52,678 Other revenues 1,636 1,251 Total Operating Revenues 70,812 53,929 Cost of Sales Direct costs of recurring revenues 18,497 14,405 Direct costs of other revenues Total Cost of Sales 18,793 14,533 Gross Profit 52,019 39,396 Operating Expenses Employee compensation and benefits 27,114 21,530 Other operational and administrative costs 22,289 19,843 Asset impairment charge - - Depreciation and amortization 5,689 6,294 Total Operating Expenses 55,092 47,667 Operating Loss (3,073) (8,271) Other (Expense)/Income Interest, net (1,639) (1,289) Loss on sale of subsidiary - (3,629) Other financial (expense)/income (2,194) (1,366) Other (Expense)/Income (3,833) (6,284) Loss Before Income Taxes (6,906) (14,555) Income tax benefit/(expense) (36) (185) Net Loss for the Period (6,942) (14,740) Attributable to Equity Holders of Parent (6,942) (14,740) Loss Per Share for the Period (0.27) (0.76) Attributable to Equity Holders of Parent (0.27) (0.76) Weighted Average Common Shares Outstanding 25,430 19,430 Apptix ASA First Quarter 2009 Earnings Report Page 6

7 Interim Consolidated Statement of Comprehensive Income Three months ended March 31, 2009 March 31, 2008 (Amounts in NOK 1,000) IFRS IFRS Loss for the Period (6,942) (14,740) Other Comprehensive Income/(Loss): Exchange rate differences on translation of foreign operations (8,059) (8,502) Total Other Comprehensive Loss for the Period (8,059) (8,502) Total Comprehensive Loss for the Period (15,001) (23,242) Attributed to Equity Holders of Parent (15,001) (23,242) Apptix ASA First Quarter 2009 Earnings Report Page 7

8 Interim Consolidated Statement of Finanical Position March 31, December 31, March 31, (Amounts in USD 1,000) IFRS IFRS IFRS ASSETS Non-Current Assets Intangible assets 23,309 23,389 26,151 Total Intangible Assets, net 23,309 23,389 26,151 Property, Plant and Equipment, net 3,966 3,674 4,268 Total Non-Current Assets 27,276 27,063 30,419 Current Assets Accounts receivable 2,489 2,791 3,425 Other current assets Prepaid expenses 1,175 1, Cash and cash equivalents 3,421 3,600 2,605 Total Current Assets 7,295 7,657 7,230 TOTAL ASSETS 34,571 34,720 37,649 LIABILITIES AND SHAREHOLDERS EQUITY Equity Attributed to Equity Holders of the Parent Common stock 1,257 1,200 1,266 Paid-in premium reserve 62,436 59,574 77,219 Other paid-in capital 4,206 3,907 4,850 Retained earnings (48,503) (44,155) (63,412) Total Shareholders Equity 19,396 20,526 19,923 Long-Term Debt Other long-term debt 1,880 1,413 1,471 Convertible debt - - 6,221 Total Long-Term Debt 1,880 1,413 7,692 Current Liabilities Trade accounts payable 2,255 2,568 3,427 Other current liabilities 6,055 5,652 6,329 Restructuring provision Convertible debt 4,985 4,563 - Total Current Liabilities 13,295 12,782 10,034 TOTAL LIABILITIES AND EQUITY 34,571 34,720 37,649 Apptix ASA First Quarter 2009 Earnings Report Page 8

9 Interim Consolidated Statement of Finanical Position March 31, December 31, March 31, (Amounts in NOK 1,000) IFRS IFRS IFRS ASSETS Non-Current Assets Intangible assets 156, , ,683 Total Intangible Assets, net 156, , ,683 Property, Plant and Equipment, net 26,715 25,933 21,819 Total Non-Current Assets 183, , ,502 Current Assets Accounts receivable 16,763 19,701 17,508 Other current assets 1,415 1,716 1,563 Prepaid expenses 7,916 7,218 4,568 Cash and cash equivalents 23,044 25,415 13,316 Total Current Assets 49,138 54,050 36,955 TOTAL ASSETS 232, , ,457 LIABILITIES AND SHAREHOLDERS EQUITY Equity Attributed to Equity Holders of the Parent Common stock 8,468 8,468 6,470 Paid-in premium reserve 420, , ,737 Other paid-in capital 28,332 27,578 24,793 Retained earnings (326,690) (311,689) (324,155) Total Shareholders Equity 130, , ,845 Long-Term Debt Other long-term debt 12,666 9,971 7,520 Convertible debt ,799 Total Long-Term Debt 12,666 9,971 39,319 Current Liabilities Trade accounts payable 15,189 18,125 17,519 Other current liabilities 40,776 39,888 32,353 Restructuring provision - - 1,421 Convertible debt 33,576 32,211 - Total Current Liabilities 89,541 90,224 51,293 TOTAL LIABILITIES AND EQUITY 232, , ,457 Apptix ASA First Quarter 2009 Earnings Report Page 9

10 Interim Consolidated Cash Flow Statement Three months ended March 31, (Amounts in USD 1,000) IFRS IFRS Cash Flows from Operating Activities Net loss for the period (1,011) (2,128) Stock based compensation expense Depreciation and amortization 828 1,182 Loss on sale of subsidiary - 40 Change in accounts receivable 302 (504) Change in trade accounts payable Change in other assets and liabilities Cash Flows From (Used in) Operating Activities 429 (80) Cash Flows from Investing Activities Purchases of intangibles and property and equipment (487) (741) Cash used in divestitures and acquisitions, net - (40) Cash Flows Used in Investing Activities (487) (781) Cash Flows from Financing Activities Payments on capital lease and debt obligations (492) (2,470) Proceeds from debt facilities Cash Flows Used in Financing Activities (117) (2,470) Effect of Exchange Rates on Cash and Cash Equivalents (4) (113) Net change in cash and cash equivalents (179) (3,444) Cash and cash equivalents at beginning of period 3,600 6,049 Cash and Cash Equivalents at End of Period 3,421 2,605 Apptix ASA First Quarter 2009 Earnings Report Page 10

11 Interim Consolidated Cash Flow Statement Three months ended March 31, (Amounts in NOK 1,000) IFRS IFRS Cash Flows from Operating Activities Net loss for the period (6,942) (14,740) Stock based compensation expense 754 1,457 Depreciation and amortization 5,689 6,294 Loss on sale of subsidiary - 3,629 Change in accounts receivable 2,035 (2,573) Change in trade accounts payable 401 1,997 Change in other assets and liabilities 936 3,773 Cash Flows From (Used in) Operating Activities 2,873 (163) Cash Flows from Investing Activities Purchases of intangibles and property and equipment (3,341) (4,031) Cash used in divestitures and acquisitions, net - (213) Cash Flows Used in Investing Activities (3,341) (4,244) Cash Flows from Financing Activities Payments on capital lease and debt obligations (3,385) (13,054) Proceeds from debt facilities 2,570 - Cash Flows Used in Financing Activities (815) (13,054) Effect of Exchange Rates on Cash and Cash Equivalents (1,088) (2,000) Net change in cash and cash equivalents (2,371) (19,461) Cash and cash equivalents at beginning of period 25,415 32,777 Cash and Cash Equivalents at End of Period 23,044 13,316 Apptix ASA First Quarter 2009 Earnings Report Page 11

12 Interim Consoliated Statement of Changes in Equity Attributed to Equity Holders of the Parent Foreign (Amounts in NOK 1,000) Share Capital Share Premium Reserve Other Paid in Capital Currency Translation Reserves Retained Earnings Total Equity Equity December 31, , ,737 23,336 (44,158) (260,171) 120,214 Net Loss for the Period (57,573) (57,573) Reversal of Translation Effect on Sale of WebMessenger 3,416 3,416 Other Comprehensive Income (Loss) 46,797 46,797 Total Comprehensive Income 50,213 (57,573) (7,360) Issue of Share Capital 1,998 28,002 30,000 Transaction Costs Related to Issue of Share Capital (2,206) (2,206) Equity Element of Expensed Options 4,242 4,242 Equity December 31, , ,533 27,578 6,055 (317,744) 144,890 Net Loss for the Period (6,942) (6,942) Other Comprehensive Income (Loss) (8,059) (8,059) Total Comprehensive Income (8,059) (6,942) (15,001) Equity Element of Expensed Options Equity March 31, , ,533 28,332 (2,004) (324,686) 130,643 Apptix ASA First Quarter 2009 Earnings Report Page 12

13 Selected Explanatory Notes to Apptix ASA Interim Condensed Financial Statements Convertible Debt/Working Capital A convertible bond of NOK 33.5 million was placed in the Norwegian market in November The convertible bond had a maturity of 2 years with an option to convert into shares at a conversion price of NOK 50 at any time prior to maturity. The annual coupon rate was 11%. In November 2007, the Company entered into an agreement to extend the maturity of the convertible bond until November All other terms of the bond remained unchanged. The Company treated the bond extension as a new issuance for accounting purposes. The outstanding bond could increase the share capital by 670,000 shares and could be dilutive to the Company s shareholders; however, as of the balance sheet dates presented, the effects are anti-dilutive due to the current share price of the Company s stock. Face value minus the calculated fair value of the loan is recognized as other paid in capital. The Company believes that its current working capital resources are not sufficient to meet its liquidity obligations for the next twelve months. The working capital deficiency relates to the aforementioned November 2009 bond obligation. At maturity, the total amount due will be NOK 37.2 million, including the current year interest obligation. The Company is in the process of evaluating various options to remedy the working capital shortfall. The Company anticipates the need to secure additional capital to satisfy at least 50% of the total obligation due at maturity. The Company plans to utilize existing cash resources, cash generated from operations and amounts available under its working capital line of credit to satisfy the remaining balance. In March 2009, the Company entered into a forward currency contract to purchase NOK 12 million as a partial economic hedge against the November 2009 bond repayment. The settlement date is on or before November 25, At March 31, 2009, the net fair value of this contract and the loss on foreign currency was negative USD 0.1 million or negative NOK 0.8 million. For more information related to this subject, refer to the Company s 2008 Annual Report and 2008 Director s Report. Apptix ASA First Quarter 2009 Earnings Report Page 13