Apptix Reports Fourth Quarter and Year to Date 2011 Results

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Apptix® (OSE: APP) today announced its unaudited financial results for the three months and the year ended December 31, 2011. The Company continued to show progress under its newly aligned field organization during the fourth quarter with the addition of three new significant channel relationships: Insight, MegaPath and Cincinnati Bell, all which are expected to launch their reseller portals by the end of the first quarter of 2012 and are projecting user bookings for 2012 in excess of 100,000 combined.

Apptix

We are quite proud to have reached and maintained profitability for the entire year, a first in the Company’s history.

Apptix® (OSE: APP), the premier provider of hosted business communication and collaboration services, today announced its unaudited financial results for the three months and the year ended December 31, 2011.

Interim Management Report

Overview of the fourth quarter results:

  • Net Income of USD 272 thousand, flat quarter over quarter and USD 685 thousand improvement year over year. EBIT of USD 627 thousand, flat quarter over quarter and USD 649 thousand improvement year over year.
  • Revenue of USD 10.3 million, an increase of 2% quarter over quarter and a 4% increase year over year.
  • User counts increased to 336,000 during the quarter, an increase of 2% quarter over quarter and 8% year over year. New user bookings in Q4 increased 2% quarter over quarter, excluding “Speedway” bookings discussed below; churn improved 15% quarter over quarter.
  • Signed channel partnership agreements with Insight Enterprises, Inc., a USD 4.8 billion global provider of information technology; MegaPath Corp., a national end-to-end facilities-based solutions provider and Cincinnati Bell, Inc., a USD 1.4 billion provider of integrated communications solutions including local, long-distance, data, internet, entertainment and wireless services to resell the Company’s communications and collaboration services on a white-label basis.
  • Expanded “Speedway”, a key 2009 healthcare client, with the addition of a new facility increasing the Speedway user base by 15,000 and the addition of archiving and compliance services to approximately 5,000 “Speedway” users. When fully implemented these additions will add approximately USD 700 thousand of annualized revenues, an increase of approximately 2% over current total revenue levels.

Highlights

The Company continued to show progress under its newly aligned field organization during the fourth quarter with the addition of three new significant channel relationships: Insight, MegaPath and Cincinnati Bell, all which are expected to launch their reseller portals by the end of the first quarter of 2012 and are projecting user bookings for 2012 in excess of 100,000 combined. Furthermore, new user bookings during the fourth quarter increased 2% over the third quarter, excluding a 15,000 user expansion of “Speedway”. Historically, the fourth quarter is a seasonally flat quarter as a result of the holidays. Finally, the Company’s enhanced customer management and priority routing model launched in July continued to show gains with a 15% decrease in user churn during the fourth quarter, and a 30% decrease in the second half of 2011 as compared to the first half of 2011.

The Company exited 2011 having made solid improvements in operating results with a 5% increase in annual revenue, its first full year of positive net income and its 15th consecutive quarter of positive EBITDA. Revenue for the fourth quarter and the year was USD 10.3 million and USD 40.7 million, an increase of 2% and 5%, respectively. Net income for the fourth quarter and the year was USD 272 thousand and USD 703 thousand, flat quarter over quarter and an increase of USD 3.8 million for the year. As anticipated, the Company made targeted investments during the fourth quarter, increasing operating costs slightly to prepare for increased bookings volumes in 2012 from the new channel partner relationships discussed above.

“We are quite proud to have reached and maintained profitability for the entire year, a first in the Company’s history. This achievement is the culmination of several years of intense work and strategic investment to transform Apptix into an established Cloud services market leader,” said David Ehrhardt, President and CEO of Apptix. “Building upon this success we refocused our go-to-market and sales strategies during 2011 on the more profitable mid-market and enterprise sectors as well as deployed a channel first strategy. Our channel strategy has already begun to deliver results with significant partner wins like Insight, MegaPath, Cincinnati Bell, and Web.com. Further, gains in the mid-market and enterprise (which now represent approximately 45% of revenues) have led to expanded uptake of our growing service portfolio; specifically our voice, and security & compliance services which are growing at 40% annually. As such, we believe we enter 2012 well positioned to deliver double digit revenue growth in 2012,” said Ehrhardt.

Financial Results – Fourth Quarter and Year to Date 2011

Revenues totaled USD 10.3 million for the three months ended December 31, 2011, representing 2% growth quarter over quarter and 4% growth year over year. The growth in revenues was due to the increases in the active user counts, primarily as a result of user gains with mid-market and enterprise customers, including Speedway. Revenues for the twelve months ended December 31, 2011 totaled USD 40.7 million up 5% from the same period in 2010.

ARPU was USD 14.52 (excluding Speedway) down 2% quarter over quarter and 4% year over year. The year over year decline is primarily the result of pricing concessions granted in conjunction with the Company’s platform consolidation efforts (which were completed in June 2010) and the Company’s continued focus on the mid-market; trading volume based ARPU concessions for stickier customers, lower relative cost of acquisition and support, and the potential for broader uptake on the Company’s service portfolio. Including the impact of Speedway, ARPU remained steady at USD 10.40.

Operating expenses (including depreciation and amortization) were USD 6.8 million during the fourth quarter of 2011, up 5% quarter over quarter however down 4% year over year. The increase quarter over quarter was due to higher labor and operating expenses incurred in support of the Company’s expected 2012 user growth and higher depreciation expense related to the Company’s third quarter launch of its Exchange 2010 platform. Total operating expenses for the twelve months ended December 31, 2011 were USD 26.8 million, down 10% from the same period in 2010. These improvements were driven primarily by operating efficiencies gained as a result of scale economies associated with an increased user base and the Company’s 2010 platform consolidation efforts.

EBIT for the fourth quarter 2011 was USD 627 thousand, flat quarter over quarter however an improvement of USD 649 thousand year over year. EBIT for the twelve months ended December 31, 2011 was USD 2.2 million, compared to a loss of USD 1.4 million during the comparable period in 2010, an improvement of USD 3.6 million. These improvements were driven primarily by revenue gains in the mid-market which contribute higher relative margin contributions and operating efficiencies gained as a result of the Company’s 2010 platform consolidation efforts.

Net Income for the fourth quarter of 2011 was USD 272 thousand flat quarter over quarter and compared to a loss of USD 413 thousand in the fourth quarter of 2010, an improvement of USD 685 thousand. Net Income was USD 703 thousand for the twelve months ended December 31, 2011, compared to a net loss of USD 3.1 million during the comparable period in 2010, an improvement of USD 3.8 million. As mentioned above, the improvements in the net results were the result of gains in revenue, specifically in the mid-market and operational efficiencies.

Cash generated by operating activities, including the impact of changes in currency rates, totaled USD 1.1 million during the fourth quarter of 2011 compared to USD 624 thousand during the third quarter of 2011 and USD 743 thousand during the fourth quarter of 2010. For the twelve months of 2011, cash generated by operating activities, including the impact of changes in currency rates, totaled USD 3.7 million, up from prior year levels of USD 1.2 million due to the Company’s improved net operating results.

Equipment purchases, net of financing under equipment leases, during the fourth quarter of 2011 was USD 142 thousand compared to USD 80 thousand in the third quarter of 2011 and USD 119 thousand in the fourth quarter of 2010. Equipment purchases, net of financing under equipment leases, in 2011 totaled USD 516 thousand compared to USD 283 thousand in 2010. Increased net purchases were generally related to the launch of the Company’s Exchange 2010 offering and increased user volume.

Cash used to satisfy debt and capital lease obligations totaled USD 983 thousand in the fourth quarter of 2011, consistent with the third quarter 2011 and up USD 153 thousand from 2010 levels. For the twelve months ended December 31, 2011 the Company used USD 3.7 million to satisfy debt and capital lease obligations as compared to USD 3.8 million during the same period of 2010. During 2011 the Company leveraged its working capital facility for USD 350 thousand as compared to USD 1.8 million in 2010.

The Company closed the fourth quarter of 2011 with USD 768 thousand in cash and USD 4.7 million outstanding on its working capital facility. As of December 31, 2011, the Company had approximately USD 2.0 million of combined cash and available borrowing capacity under its working capital facility.

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, 2010. The enclosed consolidated condensed financial statements should be read in conjunction with the Company’s 2010 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.

About Apptix

Apptix (OSE: APP) is the premier provider of hosted business communication, collaboration, and IT solutions to business of all sizes – from SOHO to Fortune 500 – with particular expertise supporting legal, financial, healthcare, and telecom firms. A pioneer in the hosted services space, Apptix currently serves over 335,000 users around the world. Apptix’s comprehensive portfolio of Cloud solutions includes Microsoft Exchange email, VoIP, SharePoint, Web Conferencing, and Secure IM with Presence. Services are delivered over a highly reliable network leveraging best-in-class technology, housed in SAS 70-compliant data centers, and backed by U.S.-based 24/7 support. For more information, visit http://www.apptix.com
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Greg Matranga
greg.matranga@apptix.com
(703) 890-2801
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