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Bulletproof feels the squeeze from public cloud vendor competition

Bulletproof feels the squeeze from public cloud vendor competition

Reports $1.3M net loss in the first half of the 2018 financial year

Bulletproof (ASX:BPF) has reported a net loss after tax of $1.3 million for the six months ending December, citing pressure from external public cloud vendors.

“While recurring public cloud margins have come under pressure from external public cloud vendors’ activities, private cloud revenues leveraging asset investment continue to track at a higher and more stable margin,” the company said in its half-yearly financial report to shareholders on 16 February.

Bulletproof reported a 4.9 per cent year-on-year decline in revenue for the six-month period, to $23.3 million. 

However, the company's overall losses narrowed compared to the same period the year prior, with its $1.3 million reported net loss after tax (NPAT) representing a substantial retreat from the $5.4 million loss reported during the same period the previous year.

At the same time, Bulletproof saw a $2.3 million increase in underlying earnings before interest, tax, depreciation and amortisation (EBITDA), to $1.9 million for the period. Last year, the company clocked a $400,000 loss for the period.

Within the competition-impacted public cloud segment, the company reported an 8.1 per cent year-on-year reduction in recurring revenue for the six month period, and a 24.3 per cent fall in gross margin, to $2.8 million.

Meanwhile, the company’s professional services segment enjoyed a 16 per cent year-on-year surge in revenue to $2.9 million.

“Improvements to the governance and delivery of professional services projects have improved that business line’s gross margin,” the company told shareholders. “Meanwhile, other costs have been dramatically reduced, contributing strongly to the underlying operating result for the period.”

Bulletproof, which is an Amazon Web Services (AWS) and Microsoft Azure partner, also flagged a number of new professional services contracts won with the NSW Department of Finance, Services and Innovation, and an unnamed large global financial institution.

Additionally, Bulletproof provided an update to its ongoing legal case against directors of Cloud House, the Auckland-based cloud specialist it acquired in 2016.

“The directors remain of the view that the claim has no basis and therefore no provision has been made in the financial statements as at 31 December 2017,” the company told investors. “An estimate of legal costs to defend the case is [around] $450k, should the matter run to trial.

“The Company’s defence to the claim was lodged in the New Zealand High Court on 24 August 2017, and its counter-claim was lodged on 22 October 2017,” it said.

It remains to be seen whether the latest financial results will influence the ongoing acquisition discussions Bulletproof is having with IT services player, AC3, and publicly-listed telco, Macquarie Telecom Group (ASX:MAQ).

Macquarie Telecom Group made a bid late last year to acquire the cloud solutions provider, through its subsidiary, Macquarie Cloud Services, for $17.9 million.

Since then, however, AC3 has swooped in with a bid valued at around $24.7 million.

As reported by ARN on 15 February, AC3 edged a step closer to acquiring Bulletproof after entering into a scheme implementation deed to wholly acquire the business.

While the offer remains subject to Bulletproof shareholder and court approvals, the scheme looks set to position AC3 as the lead bidder in the process, ahead of the earlier bid issued by Macquarie Cloud Services.

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Tags MicrosoftazureMacquarieac3AWSBulletProof

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