In an industry that has been “tainted by failure”, Peak 10 has reached a significant milestone.
It’s in the black.
The Charlotte-based provider of web hosting, managed services and operator of four data centers, reported Friday that it has become in words that accountants and investors like to hear: EBITDA positive. That’s more money in that out — earnings before interest, taxes, depreciation and amortization.
“We’re extremely pleased,” Dave Jones, co-founder and chief executive officer of the four-year-old company, tells Local Tech Wire. “I’ve been sort of teasing you for a few months, knowing this is coming. Our folks have really worked hard to get us to this point.”
“By getting to where we are, we have covered the big costs of operations over four years and opened four data centers that didn’t open already cash-flow positive. We’re over that hump now.”
The Yankee Group has estimated the web hosting and network services market generated $14 billion in 2003 and forecast high rates of growth. IDC has estimated the market at being $18 billion. A recent article from CNET said managed services are expected to grow between 15-20 percent a year.
While privately held Peak 10 did not disclose specific revenues, it did report earnings were up in the second quarter of this year by 44 percent in sales, 47 percent in revenues and 89 percent growth in managed services over the same period in 2003.
Getting into the black is important for several reasons, one of which is to assure clients and potential ones that the company is in good fiscal health, says Brian Noonan, the chief financial officer for Peak 10.
Noonan points out that the web hosting business has been riddled by failures, with providers large and small going bankrupt. “The industry has been tainted by failure,” Jones points out. Adds Noonan: “Practically all the companies, if not most, perform due diligence before picking a service provider. We’re in an industry where many companies started that did not have the horsepower to get the job finished.”
Jones says Peak 10 will leverage its growth by beefing up staff, sales and services at its four centers in Charlotte, Research Triangle Park, Jacksonville and Tampa.
“While we have a pretty solid corporate structure, our effort now is to enhance delivery and to continue the technology leadership we have already established in all four markets,: Jones says, “and grow those markets more aggressively.”
Noonan points out that having positive cash flow means Peak 10 can “really look to put in more technical expertise, make investments in people, and take the business to a new level by helping customers more through enhancing what we do.”
The cash does not mean that the company will rush into any new product offerings, Jones adds.
“The next new thing is not necessarily where we are focused,” he explains. As customer demands change, so will Peak 10. “We have never been one to be first to market with a brand new service. That model has never worked in this business.”
The fastest growing segment right now is managing mission critical applications, and Jones says that is one reason why Peak 10 will be hiring more technical personnel.
Other big demand items included security and disaster recovery — something driven home by the hurricane in Florida last week. Peak 10’s centers stayed open and online through the storm, and Jones says it won new customers from Southern Florida that were looking to get back online.
Peak 10 also has hinted in the past that it might open a fifth data center. “We’re very opportunistic and continue to look at some opportunities that are out there,” Jones says. Each of the four existing centers can accommodate more growth, he adds. “We have reached EBITDA and we are utilizing only 30 percent of our space in the centers.”
The company has further secured its finances with a line of credit through RBC Centura.
“There is no need for any additional investment at all,” says Noonan. “We are on our own and going forward.”
Peak 10: www.peak10.com