Vitalstream (NASDAQ:VSTH)
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VitalStream Holdings, Inc. (Nasdaq:VSTH), a world leader in audio and
video streaming, today reported results for the third quarter of fiscal
2006. In light of VitalStream’s pending
acquisition by Internap Network Services Corporation (Nasdaq:INAP),
VitalStream is not holding a conference call to discuss these results or
providing forward guidance. The companies are preparing to file a joint
proxy statement/prospectus with the Securities and Exchange Commission
in the coming weeks that will provide further information about each
company and the pending transaction.
Management Commentary
“VitalStream continued to experience strong
demand for its unique content delivery and monetization solutions in the
third quarter, resulting in record revenue,”
said Jack Waterman, VitalStream’s Chairman and
CEO. “During the quarter we closed our first
significant advertising related customer win as ABC Radio, the largest
radio network in the U.S., selected VitalStream as its exclusive
provider of online ad-insertion and streaming media solutions. We have
strong momentum heading into the peak period for both Internet
viewership and online advertising.”
Third Quarter Financial Results
The Company’s GAAP results of operations for
2006 include the impact of expensing stock options resulting from the
adoption of Statement of Financial Accounting Standards No. 123R.
Revenues for the quarter ended September 30, 2006 were $7.05 million, an
increase of 83% over the prior year quarter and up 15% from $6.2 million
in the second quarter of 2006.
Net loss for the quarter ended September 30, 2006 was ($2,372,095), or
($0.10) per share, which includes $667,902, or $0.03 per share, of
non-cash share-based compensation charges, compared to a net loss of
($999,090), or ($0.06) per share in the third quarter of fiscal 2005 and
($1,403,145), or ($0.06) per share in the second quarter of fiscal 2006.
Adjusted EBITDA for the quarter ended September 30, 2006 was ($535,916),
which includes approximately $350,000 of Sarbanes Oxley related expenses
and approximately $200,000 of additional bad debt allowance due to
increased sales activity. This compares to Adjusted EBITDA of ($338,583)
in the comparable period last year and to ($168,128) in the second
quarter of fiscal 2006. (See “Use of Non-GAAP
Financial Measures” below for definition of
Adjusted EBITDA).
Gross margin for the quarter was 48.7% compared to gross margin of 50.2%
in the second quarter of 2006.
Customer Wins
VitalStream serves more than 846 enterprise customers, including many of
the largest and fastest growing streamers of audio and video content.
Notable new customers added during the third quarter of 2006 include ABC
Radio, Gordet & Schmidt, AT&T, Aramark, Farmer’s
Insurance, Vail Resorts, Merck, PricewaterhouseCoopers Europe, Anderson
Windows and Wayans’ Brothers.
Use of Non-GAAP Financial Measures
VitalStream defines Adjusted EBITDA as net income (loss) before
interest, income taxes, depreciation, amortization, non-recurring asset
sales, and stock-based compensation. Adjusted EBITDA attempts to
eliminate significant non-cash items and items that are not part of the
Company's core operations. Adjusted EBITDA is not a measure used in
financial statements reported in accordance with generally accepted
accounting principles, 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. VitalStream’s
calculation of Adjusted EBITDA may not be comparable to the computation
of similarly titled measures of other companies. A tabular
reconciliation of Adjusted EBITDA to net income is set forth on the last
page of this press release.
VitalStream’s management uses Adjusted EBITDA
as a measure of its operating performance. In addition, VitalStream
believes that Adjusted EBITDA may be useful to existing and potential
creditors of VitalStream, and to analysts and investors that follow
VitalStream’s performance, because it is one
measure of the income generated that is available to service any
outstanding debt.
About VitalStream, Inc.
VitalStream Holdings, Inc. (Nasdaq:VSTH), through its wholly owned
subsidiaries, is a global provider of integrated content delivery
services that enable businesses to stream digital media to large
audiences over the Internet. The company provides solutions, including
video and audio streaming, advertising placement, reporting and
analysis, live event broadcasting, media asset management, integrated
Web hosting and consulting services. For more information, visit www.vitalstream.com.
Forward-Looking Statements
This news release contains forward-looking statements made in reliance
upon the safe harbor provision of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results may differ materially from those indicated by these statements.
Forward-looking statements may include statements addressing future
financial and operational results of the company. The following factors,
among others, could cause actual results to differ materially from those
described in any forward-looking statements: the risk that the company's
revenue may decrease on a quarter over quarter basis because of a slower
than projected growth in the demand for streaming, hosting, advertising
and other services; the risks that our existing customers may cease to
use or reduce our services and/or may not use our services at the
projected rate; uncertainties regarding the outcome of billing or
contractual disputes with customers; uncertainties regarding the future
demand for our products and services generally despite our recent
infrastructure investments, expansion into other markets, product
enhancements and expansion of our sales force; our new advertising
product offerings are new and evolving and may not predictably be
accepted by the intended market of customers, advertisers and end-users;
we may be unable to keep up with evolving industry standards and
changing user needs; the risk that we may experience technical, network,
power supply or security problems that injure our business or increase
our operating costs; and/or uncertainties regarding our ability to
pursue our proposed business strategy. More detailed information about
these factors and others are discussed in "Risk Factors," and elsewhere
in the most recently filed Annual Report on Form 10-K of VitalStream
Holdings, Inc., and other documents periodically filed by VitalStream
Holdings, Inc. with the SEC. Such forward-looking statements speak only
as of the date of this release. The company is under no obligation and
expressly disclaims any obligation to update or revise any
forward-looking statements whether as a result of new information,
future events or otherwise.
VitalStream is a registered trademark of, VitalStream, Inc., a wholly
owned subsidiary of VitalStream Holdings, Inc. All other names and marks
are property of their respective holders.
VITALSTREAM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 AND 2005
(Unaudited)
ASSETS
September 30,
December 31,
2006
2005
(Unaudited)
(Audited)
Current assets:
Cash
$
16,894,296
$
4,118,308
Accounts receivable, net of allowance for doubtful
accounts/credits of $565,006 and $454,182 at September 30, 2006
and December 31, 2005, respectively
5,107,074
3,123,006
Prepaid expenses
1,090,931
628,576
Other current assets
357,219
238,274
Total current assets
23,449,520
8,108,164
Fixed assets, net
12,143,223
7,802,278
Restricted cash
201,077
200,626
Goodwill
19,404,284
3,577,678
Other intangibles, net
1,125,555
167,500
Other assets
163,933
172,915
TOTAL ASSETS
$
56,487,592
$
20,029,161
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
3,968,052
$
1,842,440
Accrued compensation
842,066
487,604
Current portion of capital lease obligations
2,070,204
642,136
Current portion of line of credit obligations
3,991,621
2,991,621
Accrued expenses
1,301,899
807,719
Total current liabilities
12,173,842
6,771,520
Capital lease obligations
1,137,641
208,767
Line of credit obligations
500,000
743,716
Deferred rent
79,938
86,549
1,717,579
1,039,032
Shareholders' equity
Common stock, par value $0.001; authorized shares, 290,000,000;
issued and outstanding shares, 23,211,045 and 17,580,083 at
September 30, 2006 and December 31, 2005, respectively,
86,458
70,321
Additional paid-in capital
59,718,760
24,810,514
Accumulated deficit
(17,209,047)
(12,662,226)
Total shareholders' equity
42,596,171
12,218,609
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
$
56,487,592
$
20,029,161
VITALSTREAM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2006 AND 2005
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2006
2005
2006
2005
Revenue
$
7,049,692
$
3,851,982
$
18,817,503
$
11,207,185
Cost of revenue
3,614,904
1,796,502
9,458,471
5,213,826
Gross Profit
3,434,788
2,055,480
9,359,032
5,993,359
Research & development
467,030
284,066
1,338,177
656,723
Sales & marketing
2,327,671
1,502,490
6,005,261
3,860,036
General & administrative
3,027,881
1,200,820
6,613,214
3,191,469
Operating Loss
(2,387,794)
(931,896)
(4,597,620)
(1,714,869)
Other income (expense):
Interest income (expense), net
22,221
(49,705)
63,616
(167,151)
Income tax expense
(1,014)
(913)
(2,729)
(1,713)
Other income (expense)
(5,508)
(16,576)
(10,067)
160,046
Net other income (expense)
15,699
(67,194)
50,820
(8,818)
Net Loss
$
(2,372,095)
$
(999,090)
$
(4,546,800)
$
(1,723,687)
Basic and diluted net loss per common share
$
(0.10)
$
(0.06)
$
(0.21)
$
(0.11)
Shares used in computing basic and diluted net loss per common share
23,059,174
16,329,523
21,628,087
15,776,414
VITALSTREAM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED EBITDA AND ADJUSTED EBITDA
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2006 AND 2005
Three Months Ended September 30,
Nine Months Ended September 30,
2006
2005
2006
2005
Net Income (Loss)
$
(2,372,095)
$
(999,090)
$
(4,546,800)
$
(1,723,687)
Depreciation and amortization
1,189,484
609,889
3,098,419
1,552,668
Interest (Income) Expense, net
(22,221)
49,705
(63,616)
167,151
Income tax expense
1,014
913
2,729
1,713
EBITDA
$
(1,203,818)
$
(338,583)
$
(1,509,268)
$
(2,155)
Gain on sale of customer accounts
-
-
-
-
Stock-based compensation
667,902
-
1,234,774
-
Adjusted EBITDA
$
(535,916)
$
(338,583)
$
(274,494)
$
(2,155)
VitalStream Holdings, Inc. (Nasdaq:VSTH), a world leader in audio
and video streaming, today reported results for the third quarter of
fiscal 2006. In light of VitalStream's pending acquisition by Internap
Network Services Corporation (Nasdaq:INAP), VitalStream is not holding
a conference call to discuss these results or providing forward
guidance. The companies are preparing to file a joint proxy
statement/prospectus with the Securities and Exchange Commission in
the coming weeks that will provide further information about each
company and the pending transaction.
Management Commentary
"VitalStream continued to experience strong demand for its unique
content delivery and monetization solutions in the third quarter,
resulting in record revenue," said Jack Waterman, VitalStream's
Chairman and CEO. "During the quarter we closed our first significant
advertising related customer win as ABC Radio, the largest radio
network in the U.S., selected VitalStream as its exclusive provider of
online ad-insertion and streaming media solutions. We have strong
momentum heading into the peak period for both Internet viewership and
online advertising."
Third Quarter Financial Results
The Company's GAAP results of operations for 2006 include the
impact of expensing stock options resulting from the adoption of
Statement of Financial Accounting Standards No. 123R.
Revenues for the quarter ended September 30, 2006 were $7.05
million, an increase of 83% over the prior year quarter and up 15%
from $6.2 million in the second quarter of 2006.
Net loss for the quarter ended September 30, 2006 was
($2,372,095), or ($0.10) per share, which includes $667,902, or $0.03
per share, of non-cash share-based compensation charges, compared to a
net loss of ($999,090), or ($0.06) per share in the third quarter of
fiscal 2005 and ($1,403,145), or ($0.06) per share in the second
quarter of fiscal 2006.
Adjusted EBITDA for the quarter ended September 30, 2006 was
($535,916), which includes approximately $350,000 of Sarbanes Oxley
related expenses and approximately $200,000 of additional bad debt
allowance due to increased sales activity. This compares to Adjusted
EBITDA of ($338,583) in the comparable period last year and to
($168,128) in the second quarter of fiscal 2006. (See "Use of Non-GAAP
Financial Measures" below for definition of Adjusted EBITDA).
Gross margin for the quarter was 48.7% compared to gross margin of
50.2% in the second quarter of 2006.
Customer Wins
VitalStream serves more than 846 enterprise customers, including
many of the largest and fastest growing streamers of audio and video
content. Notable new customers added during the third quarter of 2006
include ABC Radio, Gordet & Schmidt, AT&T, Aramark, Farmer's
Insurance, Vail Resorts, Merck, PricewaterhouseCoopers Europe,
Anderson Windows and Wayans' Brothers.
Use of Non-GAAP Financial Measures
VitalStream defines Adjusted EBITDA as net income (loss) before
interest, income taxes, depreciation, amortization, non-recurring
asset sales, and stock-based compensation. Adjusted EBITDA attempts to
eliminate significant non-cash items and items that are not part of
the Company's core operations. Adjusted EBITDA is not a measure used
in financial statements reported in accordance with generally accepted
accounting principles, 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. VitalStream's calculation of
Adjusted EBITDA may not be comparable to the computation of similarly
titled measures of other companies. A tabular reconciliation of
Adjusted EBITDA to net income is set forth on the last page of this
press release.
VitalStream's management uses Adjusted EBITDA as a measure of its
operating performance. In addition, VitalStream believes that Adjusted
EBITDA may be useful to existing and potential creditors of
VitalStream, and to analysts and investors that follow VitalStream's
performance, because it is one measure of the income generated that is
available to service any outstanding debt.
About VitalStream, Inc.
VitalStream Holdings, Inc. (Nasdaq:VSTH), through its wholly owned
subsidiaries, is a global provider of integrated content delivery
services that enable businesses to stream digital media to large
audiences over the Internet. The company provides solutions, including
video and audio streaming, advertising placement, reporting and
analysis, live event broadcasting, media asset management, integrated
Web hosting and consulting services. For more information, visit
www.vitalstream.com.
Forward-Looking Statements
This news release contains forward-looking statements made in
reliance upon the safe harbor provision of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results may differ materially from those indicated by
these statements. Forward-looking statements may include statements
addressing future financial and operational results of the company.
The following factors, among others, could cause actual results to
differ materially from those described in any forward-looking
statements: the risk that the company's revenue may decrease on a
quarter over quarter basis because of a slower than projected growth
in the demand for streaming, hosting, advertising and other services;
the risks that our existing customers may cease to use or reduce our
services and/or may not use our services at the projected rate;
uncertainties regarding the outcome of billing or contractual disputes
with customers; uncertainties regarding the future demand for our
products and services generally despite our recent infrastructure
investments, expansion into other markets, product enhancements and
expansion of our sales force; our new advertising product offerings
are new and evolving and may not predictably be accepted by the
intended market of customers, advertisers and end-users; we may be
unable to keep up with evolving industry standards and changing user
needs; the risk that we may experience technical, network, power
supply or security problems that injure our business or increase our
operating costs; and/or uncertainties regarding our ability to pursue
our proposed business strategy. More detailed information about these
factors and others are discussed in "Risk Factors," and elsewhere in
the most recently filed Annual Report on Form 10-K of VitalStream
Holdings, Inc., and other documents periodically filed by VitalStream
Holdings, Inc. with the SEC. Such forward-looking statements speak
only as of the date of this release. The company is under no
obligation and expressly disclaims any obligation to update or revise
any forward-looking statements whether as a result of new information,
future events or otherwise.
VitalStream is a registered trademark of, VitalStream, Inc., a
wholly owned subsidiary of VitalStream Holdings, Inc. All other names
and marks are property of their respective holders.
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VITALSTREAM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 AND 2005
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
(Unaudited) (Audited)
------------- -------------
Current assets:
Cash $ 16,894,296 $ 4,118,308
Accounts receivable, net of allowance for
doubtful accounts/credits of $565,006 and
$454,182 at September 30, 2006 and
December 31, 2005, respectively 5,107,074 3,123,006
Prepaid expenses 1,090,931 628,576
Other current assets 357,219 238,274
------------- -------------
Total current assets 23,449,520 8,108,164
------------- -------------
Fixed assets, net 12,143,223 7,802,278
------------- -------------
Restricted cash 201,077 200,626
Goodwill 19,404,284 3,577,678
Other intangibles, net 1,125,555 167,500
Other assets 163,933 172,915
------------- -------------
TOTAL ASSETS $ 56,487,592 $ 20,029,161
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,968,052 $ 1,842,440
Accrued compensation 842,066 487,604
Current portion of capital lease
obligations 2,070,204 642,136
Current portion of line of credit
obligations 3,991,621 2,991,621
Accrued expenses 1,301,899 807,719
------------- -------------
Total current liabilities 12,173,842 6,771,520
------------- -------------
Capital lease obligations 1,137,641 208,767
Line of credit obligations 500,000 743,716
Deferred rent 79,938 86,549
------------- -------------
1,717,579 1,039,032
------------- -------------
Shareholders' equity
Common stock, par value $0.001; authorized
shares, 290,000,000; issued and
outstanding shares, 23,211,045 and
17,580,083 at September 30, 2006 and
December 31, 2005, respectively, 86,458 70,321
Additional paid-in capital 59,718,760 24,810,514
Accumulated deficit (17,209,047) (12,662,226)
------------- -------------
Total shareholders' equity 42,596,171 12,218,609
------------- -------------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 56,487,592 $ 20,029,161
============= =============
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VITALSTREAM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2006 AND 2005
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ -------------
Revenue $ 7,049,692 $ 3,851,982 $18,817,503 $ 11,207,185
Cost of revenue 3,614,904 1,796,502 9,458,471 5,213,826
------------ ------------ ------------ -------------
Gross Profit 3,434,788 2,055,480 9,359,032 5,993,359
Research &
development 467,030 284,066 1,338,177 656,723
Sales & marketing 2,327,671 1,502,490 6,005,261 3,860,036
General &
administrative 3,027,881 1,200,820 6,613,214 3,191,469
------------ ------------ ------------ -------------
Operating Loss (2,387,794) (931,896) (4,597,620) (1,714,869)
Other income
(expense):
Interest income
(expense), net 22,221 (49,705) 63,616 (167,151)
Income tax
expense (1,014) (913) (2,729) (1,713)
Other income
(expense) (5,508) (16,576) (10,067) 160,046
------------ ------------ ------------ -------------
Net other income
(expense) 15,699 (67,194) 50,820 (8,818)
------------ ------------ ------------ -------------
Net Loss $(2,372,095) $ (999,090) $(4,546,800) $ (1,723,687)
============ ============ ============ =============
Basic and diluted
net loss per
common share
$ (0.10) $ (0.06) $ (0.21) $ (0.11)
============ ============ ============ =============
Shares used in
computing basic
and diluted net
loss per common
share
23,059,174 16,329,523 21,628,087 15,776,414
============ ============ ============ =============
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VITALSTREAM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED EBITDA AND ADJUSTED EBITDA
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2006 AND 2005
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
------------------------ --------------------------
Net Income
(Loss) $ (2,372,095)$ (999,090) $(4,546,800)$ (1,723,687)
Depreciation and
amortization 1,189,484 609,889 3,098,419 1,552,668
Interest
(Income)
Expense, net (22,221) 49,705 (63,616) 167,151
Income tax
expense 1,014 913 2,729 1,713
------------------------ --------------------------
EBITDA $ (1,203,818)$ (338,583) $(1,509,268)$ (2,155)
------------------------ --------------------------
Gain on sale of
customer
accounts - - - -
Stock-based
compensation 667,902 - 1,234,774 -
------------------------ --------------------------
Adjusted EBITDA $ (535,916)$ (338,583) $ (274,494)$ (2,155)
======================== ==========================
*T