Loudcloud posts Q1 EBITDA loss, revises guidance

Loudcloud reported this week an EBITDA loss for first quarter 2001 of $36.4 million, which the company said was a 50 percentage-point improvement, as a percentage of revenue, compared with fourth quarter 2000. EBITDA loss for first quarter 2001 was 312 percent of quarterly revenue; it was 362 percent of revenue for fourth quarter 2000.

The company posted fourth quarter 2001 revenue of $11.7 million, a 31 percent increase over the $8.9 million recorded for first quarter 2000. Net loss for first quarter 2001 was $60.3 million, or $1.25 per share. This compares with a net loss for fiscal year 2000 of $14.6 million. Loudcloud ended the quarter with about $205 million in cash and cash equivalents according to the company’s financial statement.

Loudcloud indicated in an analyst conference call that had successfully transitioned its business to the enterprise marketplace. As evidence, the company reported that 85% of new contract bookings for first quarter 2001 were from enterprise customers, up from 50% in fourth quarter 2000. The proportion of first quarter revenue generated from enterprise customers was about 55%, up from 45% in fourth quarter 2000.

Major new enterprise customers added in the first quarter included Ford Motor Company, USA Today, Consignia (formerly the United Kingdom Post Office) and a consortium of global financial institutions.

“We believe that the growing demand for Loudcloud services from traditional enterprise corporate customers validates the long-term opportunity for Loudcloud,” said Ben Horowitz, president and CEO. “We stated previously that, as a percentage of revenue, we expected to see enterprise revenue contribution around 50 percent in the near term and 70 percent in the long term. With this quarter’s results, we have already exceeded our near-term expectations, demonstrating that we are successfully transitioning our sales efforts and our service offerings to be a enterprise managed services provider.”

Horowitz added that, due to the soft economy, Loudcloud would revise its revenue guidance for the remainder of the fiscal year. The company is now predicting revenue of $53 million to $57 million for 2001, and an EBITDA loss of $129 million to $132 million. For the second quarter alone, Loudcloud is predicting an EBITDA loss of $33.5 million to $34.5 million, which includes a one-time restructuring charge of $25 million to $28 million related to cost-restructuring initiatives announced last month.

According to Marc Andreessen, chairman and co-founder, the opportunities in the marketplace are “very real,” despite the fact that the purchasing cycles can be very long.

“Although much has been said about the difficult economic environment and its effect on business spending, it cannot be overstated,” he said. “Quite simply, most large businesses have dramatically slowed their spending largely because there is too much uncertainty regarding their own near-term business prospects.”

The good news for companies like Loudcloud, Andreessen continued, is that Internet initiatives continue to be given a high priority by enterprise customers, and they are increasingly looking to outsource the management of those initiatives.

“The question is not whether they are going to pull the trigger, but when,” he said.