Company Generates $3.6 Million Positive EBITDA For Fourth Quarter 2003
Atlanta, GA — (BUSINESS WIRE) — Interland, Inc.
(Nasdaq: INLD), a leading provider of business-class Web hosting and
online services to small and medium businesses (SMBs), today announced
financial results for its fourth fiscal quarter and fiscal year, ended
August 31, 2003.
“We are delighted to announce the achievement of our financial goal
for FY2003 with the attainment of $3.6 million of positive EBITDA in the
fourth quarter. We have improved our EBITDA performance from a loss of
$13.2 million just 6 quarters ago by relentlessly executing on an
aggressive acquisition and integration plan,” said Joel J. Kocher,
Interland’s chairman and chief executive officer. “Now that we have
scale and have established very attractive incremental margins, proving
the value of our model and of our vision, we can confidently invest in
growing our business by bringing the world of mainstream small business
to the Web.”
The company reported revenues of $27.3 million for the quarter and
$106.6 million for fiscal year 2003, an increase of 4.9 percent over
fiscal year 2002. Net loss from continuing operations was $5.9 million
for the quarter equating to a loss of $0.40 per share on 14.8 million
shares outstanding. Including discontinued operations, net loss for the
quarter was $0.6 million, or $0.04 per share. Net loss for the fiscal
year was $173.9 million, or $11.86 per share. The company reported its
first quarter of positive EBITDA(1) from continuing operations with $3.6
million in EBITDA for the period.
Allen L. Shulman, Interland’s chief financial officer, said, “Our
integration efforts resulted in more than $7 million in expense
reductions in the fourth quarter compared to the first quarter, and in
some $16 million in reductions compared to the first quarter of FY02,
before the impact of the Hostcentric acquisition. Significant reductions
in connectivity, facility, and labor costs arising from the closure of
nine acquired data centers, and the successful relocation of close to
4,000 servers, made these savings possible.”
This quarter’s results validate the profitability potential of
Interland’s business model at scale. Even after net expenses of about $1
million attributable to the company’s mainstream market growth
initiative, the company produced $3.6 million in EBITDA, representing an
EBITDA margin of more than 13%.
The acquisition of Hostcentric, effective June 13, 2003, contributed
revenues of $3.2 million and EBITDA of $0.6 million in the fourth
quarter. No significant integration expenses related to the Hostcentric
acquisition are expected.
Interland maintained a strong cash position while further reducing
liabilities on its balance sheet. As of August 31, 2003, Interland’s
cash position, which includes cash and equivalents ($35.2 million),
short term unrestricted investments ($16.3 million) and restricted
investments ($18.6 million), was $70.1 million. The change in cash
balances from last quarter consists of: cash used in operating
activities during the quarter ($6.4 million), including payments of
previously recorded liabilities of $1.8 million due to integration;
repayments of debt and capital lease obligations ($3.3 million); cash
used in the acquisition of Hostcentric ($1.4 million); capital
expenditures ($3.1 million); and cash used in discontinued operations
Organic Growth Phase
The completion of the integration phase achieves a primary goal of
Interland’s strategy: the creation of a large integrated hosting
business, at scale, and generating positive EBITDA. This accomplishment
now enables the company to concentrate on the execution of its organic
growth strategies, including reducing churn through customer-focused
improvements in its infrastructure, processes and systems.
Organic growth in the core hosting business will be driven by the
company’s renewed focus on improving the Interland customer experience.
“We recognize that the necessary relocation of servers has
inconvenienced some of our customers, and has led to substantially
higher churn rates among migrated customers,” Kocher said. “It’s not
enough for us to be the biggest, we want to and intend to be the best.”
Accordingly, the company announces the launch of a broad, multi-million
dollar initiative designed to enhance network security, self-service and
live technical support. The company’s scale and strong financial
position should enable it to distance itself from its competition by
making infrastructure investments that provide meaningful service level
improvements at a substantially lower cost per customer.
Interland’s most exciting growth initiative for fiscal 2004 and
beyond is to make it easy and affordable for the more than 20 million
mainstream small businesses to have the effective Web presence they want
and need. Serving this segment represents a very attractive long-term
growth, profitability and strategic opportunity. Coupled with its highly
efficient hosting platform, Interland’s unique suite of website
development tools enables it to profitably provide a low-cost
professional Web presence to small businesses. The company plans to
increase its investment in this area, going to market with a broad array
of products, services and distribution channels, including those
targeted at the general market as well as those tailored to specific
The company made further progress in its program of mainstream market
direct sales testing in the fourth quarter, confirming this Spring’s
encouraging preliminary results, and leading to the transition from
testing to production. Overall, the company devoted about $1.0 million
in the fourth quarter to the mainstream market, and expects a net
expenditure of about $1.5 million in the first quarter.
In fiscal year 2004, the company expects to invest heavily in its
organic growth initiatives while maintaining positive EBITDA for the
first quarter and the year as a whole, on flat to slightly higher
revenues. The level of EBITDA will be primarily dependent upon the
amount and timing of the investments the company elects to make.
The company anticipates about $10 million in depreciation and
amortization expenses each quarter, resulting in a net loss in each
quarter and the fiscal year.
Over the course of the year, the company expects to devote about $6
million in capital expenditures to its mainstream and customer
satisfaction initiatives. The company’s other capital expenditures,
primarily for new servers and related equipment, are expected to remain
at about $1.5 million each quarter.
Interland will conduct a conference call today at 4:30 p.m. EST,
accessible by calling 312-461-1932, no pass code necessary, or via the
Internet at www.interland.com
under the Investor Relations section. A replay of the conference call
will also be available at 402-220-2306, passcode: 5866465, and at the
Web site. The audio archive of the conference call on the website will
be available for a period of at least one year.
Interland, Inc. (Nasdaq: INLD) is a leading Web hosting and online
services company dedicated to helping small and medium businesses
achieve success by providing the knowledge, services and tools to build,
manage and promote businesses online. Interland offers a wide selection
of online services, including standardized Web hosting, e-commerce,
application hosting, and Web site development, marketing and
optimization tools. For more information about Interland, please visit www.interland.com.