PEER 1 Network Enterprises, Inc.

PEER 1 Network Enterprises, Inc.

October 25, 2007 16:00 ET

PEER 1 Reports Record Fiscal 2007 Year-End Results

Company Records First Ever Annual Net Profit of $3.63 Million

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 25, 2007) - PEER 1 Network Enterprises, Inc. (TSX VENTURE:PIX), a leading provider of IT infrastructure, today released the company's financial results for the fiscal year ended June 30, 2007, recording the company's first year of four profitable quarters. All figures are in US dollars.

"Fiscal year 2007 was a transformational year for PEER 1," said Fabio M. Banducci, PEER 1's president and chief executive officer. "We have successfully completed the turnaround of the acquisition of Interland's dedicated server assets, reported record financial results and significantly strengthened our balance sheet. We are now very well positioned to extend our leadership position further by focusing on delivering premium, value added solutions to our growing base of over 9,000 customers worldwide and by enabling them to focus on the possibilities of the Internet, not the problems."

Financial highlights from the year include the following:

- PEER 1's revenue increased 22.45% to $74.36 million for the year ended June 30, 2007, compared to $60.73 million for the year ended June 30, 2006;

- Gross profit increased 28.08% to $28.77 million for the year ended June 30, 2007, compared to $22.46 million for the year ended June 30, 2006;

- Operating income increased 88.90% to $7.61 million for the year ended June 30, 2007, compared to $4.03 million for the year ended June 30, 2006;

- Net profit was $3.63 million for the year ended June 30, 2007, compared to a net loss of $3.19 million for the year ended June 30, 2006.

- Normalized EBITDA for the year ended June 30, 2007 was $19.9 million, a 55.5% increase over normalized EBITDA of $12.8 million for the year ended June 30, 2006.

Corporate highlights from fiscal 2007:

- Effective May 29, 2007, PEER 1 closed a $40 million amended and restated loan agreement with Fortress Credit Opportunities I LP that provides for a $20 million term loan and a $20 million line of credit available to fund growth capital and acquisitions.

- During the year, the company completed a 12,000 square foot data center move and expansion of its available facilities in San Antonio, TX. In addition, the company completed an expansion of both its Vancouver and Toronto data center facilities.

- On February 1, 2007, PEER 1 announced that its data center expansions gave the company the capacity to add approximately 65% more dedicated servers to its then current base of over 16,000 dedicated servers and approximately 40% more co-location cabinet equivalents to its then current base of over 1,100 cabinet equivalents. This capacity will enable PEER 1 to significantly grow its customer base with modest incremental capital expenditures relative to building a new data center.

- PEER 1 was recognized as the ninth fastest-growing company in Canada and second in British Columbia in the 19th annual PROFIT 100 ranking of Canada's Fastest-Growing Companies by PROFIT Magazine. This is PEER 1's second consecutive year in the top ten of the PROFIT 100 list. In 2006 the company ranked fourth in Canada and came in as the number one fastest growing company in British Columbia.

- During the year, the company, in partnership with industry leaders, introduced a number of quality products and services that leverage and complement PEER 1's current infrastructure.

- In April 2007, PEER 1 completed the installation of IBM Tivoli Storage Manager software, and is offering its managed dedicated hosting customers world-class enterprise data backup services.

- In April 2007, PEER 1 announced its partnership with ControlScan, a market leader in e-commerce security and marketing services. This partnership allows PEER 1 to offer its dedicated hosting customers an affordable solution for scanning their servers for the latest vulnerabilities. It also satisfies the rigorous payment card industry (PCI) compliance scan requirements.

- In May 2007, in accordance with the pre-existing terms of the Preferred Shares Series A, the holders of the 7,000 Preferred Shares Series A converted all 7,000 shares and cumulative unpaid dividends into 34,869,628 Common Shares of the company.


Revenue for the fourth quarter of fiscal year 2007 was $19.9 million compared to $17.1 million in the same quarter of fiscal year 2006.

Normalized EBITDA for the fourth quarter was $5.6 million compared to $3.1 million for the quarter ended June 30, 2006.

During the quarter, PEER 1 recorded two one-time charges: a $1.2 million intangible asset impairment charge and a $0.91 million provision for sales and use taxes.


The following corporate developments occurred subsequent to June 30, 2007:

Network upgrade

On September 4, 2007, PEER 1 and Juniper Networks, Inc., the leader in high-performance networking, announced that PEER 1 expanded its managed firewall service offerings with the addition of Juniper Networks Secure Services Gateways (SSGs). Fully managed by PEER 1 experts, the Juniper Networks SSG platforms will provide best-in-class protection, superior capacity and Gigabit Ethernet interfaces, enabling PEER 1 to offer cost-effective, high-capacity security solutions that scale to meet the demands of the largest enterprises.

In addition, the company committed to a $4.5 million capital expenditure program to upgrade its network backbone utilizing the latest Cisco and Juniper switches and routers.

New executive roles

On September 10, 2007, the company announced several changes of roles for members of PEER 1's executive management team. Lance Tracey, co-founder and chief executive officer, announced that he was stepping down from his role as CEO to assume his new role as executive chairman of PEER 1's board of directors. Fabio M. Banducci was then appointed the company's new CEO in addition to his existing role as president of PEER 1. Gary Sherlock, PEER 1's chief financial officer, was promoted to the role of executive vice president in addition to his CFO responsibilities.

Data backup optimization

On September 25, 2007, PEER 1 announced that it deployed EMC Storage Area Network (SAN) platforms across all of its managed dedicated hosting data center operations in Atlanta, Miami, and Fremont, California (Silicon Valley). The EMC platform provides state-of-the-art technology to optimize PEER 1's data backup solution, providing managed dedicated hosting customers with faster and more reliable backup and data recovery.

EBITDA Reconcilation
(unaudited - prepared by management)
(in $ thousands) Quarter Ended Twelve Months Ended
--------------------- ---------------------
30-Jun-07 30-Jun-06 30-Jun-07 30-Jun-06

Net Profit (Loss) 2,303 (1,333) 3,631 (3,188)
Income tax expense (recovery) (2,918) 390 (2,678) 390
Interest expense 687 806 3,152 3,506
Interest accretion on notes
payable 45 49 208 667
Amortization of preferred
share discount 240 343 1,361 1,090
Amortization - licences,
fixed assets and deferred
network costs 2,955 2,399 10,945 8,514
Stock based compensation 133 30 449 289
Loss (gain) on disposal
of assets 11 61 138 61
Amortization of deferred
gain (20) - (59) -
Peer 1 share of Symmetric
Broadband loss - - - 13
Foreign exchange loss
(gain) (9) (28) (33) 305
EBITDA 3,427 2,717 17,114 11,647

Impairment of intangible
assets 1,185 - 1,185 -
Provision for sales / use
tax 915 - 915 -
Integration costs 42 349 650 1,187
Normalized EBITDA 5,569 3,066 19,864 12,834

Non-GAAP Measures

PEER 1 reports EBITDA because it is a key measure used by management to evaluate the company's performance. PEER 1 believes that EBITDA is useful supplemental information as it provides an indication of the results generated by PEER 1's main business activities prior to taking into consideration how those activities are financed and expensed. 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 financial performance of PEER 1 or as a measure of the company's liquidity and cash flows. PEER 1's method of calculating EBITDA differs from other issuers and, accordingly, EBITDA may not be comparable to similar measures presented by other issuers. The schedule above sets out PEER 1's EBITDA calculations.

The annual financial statements, management's discussion and analysis, along with the Annual General Meeting materials, will be mailed out to shareholders in November. Interested persons may access the financial statements and MD&A on the SEDAR website:

About PEER 1

PEER 1 is a leading IT infrastructure provider delivering highly scalable dedicated hosting and co-location solutions to ensure a client's online presence is fast performing and available 100% of the time. Since its inception in 1999, the company has grown to include data centers and network points of presence in 17 major cities across North America and Europe, all connected by PEER 1's world class Internet network. PEER 1 serves a variety of startups and SMEs including software as a service (SaaS), web 2.0, hosting providers, online gaming providers, Internet phone (VoIP) companies, and outsourced enterprise solutions organizations. The company's headquarters are in Vancouver, Canada and the stock is traded on the TSX Venture exchange under the symbol PIX.

Statements in this release relating to matters that are not historical fact are forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, general economic conditions, changes in technology, reliance on third party manufacturing, managing rapid growth, global sales risks, limited intellectual property protection and other risks and uncertainties described in PEER 1's public filings with securities regulatory authorities.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • PEER 1 Network Enterprises, Inc.
    Gary Sherlock
    EVP & CFO
    PEER 1 Network Enterprises, Inc.
    Katie Wilson