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Guest-Tek Reports Record
Sales in Third Quarter Results; 210% growth achieved
in first nine months, 
earns $0.33 per share
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Attract more guests and increase customer loyalty with high-speed Internet access

 


 
Calgary, Alberta - Mar. 2, 2004 - Guest-Tek Interactive Entertainment Ltd., (Guest-Tek) (TSX:GTK), a world-class provider of high-speed Internet access to the hospitality industry, today reported record financial results for the three and nine-month periods ended December 31, 2003.

Nine Months Ended Dec. 31, 2003

For the first nine months of fiscal 2004, Guest-Tek has achieved revenues of $17.2 million, an increase of 210% from $5.5 million for the comparable nine-month period in the previous year. Recurring revenue of $995,325 also showed a strong increase of 193% from $340,098 in the previous nine-month period. Recurring revenue consists of maintenance and support revenue, representing 14% of total revenue.

Net income after tax for the nine months was $3.0 million or $0.33 per share, a substantial increase from net income of $0.4 million, or $0.05 per share in the comparable period. For the first nine months of fiscal 2004, gross margin was 41%.
Selling, general and administrative expenses increased 73% to $3.1 million in the nine months ended December 31, 2003 compared to $1.8 million during the first nine months of the previous year. As a percentage of revenue, SG&A decreased significantly to 17.8% for the nine months ended December 31, 2003 down from 31.9% for the comparable nine-month period of the previous year.

Three Months Ended Dec. 31, 2003

For its fiscal third quarter ended December 31, 2003, Guest-Tek reported a 167% increase in revenues to $6.3 million, compared with revenues of $2.3 million for the same quarter in the previous year.

Operating income (before taxes) increased 138% to $0.7 million, compared to $0.3 million in the previous year and income after taxes improved to $0.4 million, or $0.04 per share, as compared with $0.3 million, or $0.03 per share.

Income tax expense negatively impacted Net Income as it increased to $323,000 in the three months ended December 31, 2003 compared to nil in the three months ended December 31, 2002. The fiscal 2004 third quarter was the Company's first taxable quarter in its history.

Gross margin as a percentage of revenues reported in the third quarter was 34.5%, as compared to 47.6% in the third quarter ended December 31, 2002.  The decrease in margins was expected as the company aggressively grows its market share in the largest hospitality segment, which are three-star hotels and lower. The change in the margins was primarily due to increased deployments in these types of hotel properties combined with an expansion of deployment resources in anticipation of continued sales growth. As the company continues to expand into the mid-market hospitality segment, it is targeting margins to generally be in the 35 % - 40% range.
Selling, general and administrative expenses decreased as a percentage of revenues in the third quarter to 18.5%, as compared to 27.2% of revenues in the comparable quarter last year.

The strong revenue growth experienced in the reporting periods is attributable to the significant escalation of North American sales activity, and more recently, direct sales activity introduced into Latin America and the Caribbean.

"Demand for high-speed Internet access continues to accelerate globally," stated Paul Sullivan, CEO of Guest-Tek. "We are addressing this demand by expanding our sales forces in international markets, while further increasing market share in the North American market with our leading solutions and services."

At December 31, 2003 and 2002, the Company had cash and cash equivalents of $1.3 million and $746,000, respectively. Subsequent to the closing of its third quarter, Guest-Tek completed an Initial Public Offering on the senior Toronto Stock Exchange, raising net proceeds of $28.3 million.

Outlook

To drive further growth over the next several years, Guest-Tek is focusing on three key initiatives:

  • capitalizing on the accelerating demand for high-speed Internet access within North America,
  • increasing its presence internationally, and
  • introducing additional value-added products and services to its existing customer base.
Guest-Tek has begun to expand its geographic coverage in recent quarters. As a result, revenue generated from the international market, has nearly doubled in the three months ended December 31, 2003 compared to the same period in 2002.
"Guest-Tek has established a strong position with the industry for complete high-speed Internet access solutions in North America," stated Paul Sullivan, CEO of Guest-Tek. "We are working aggressively to repeat this success on a global scale, through the establishment of a strong direct presence in key target markets. Guest-Tek is targeting to generate 15 - 20% of new installation revenue outside North America next year."

Guest-Tek has also begun expanding its recurring revenue stream and leveraging its installed base of customers by establishing a Value-Added Solutions team, which is focused on delivering complementary solutions to existing customers. Included in the product offerings are wireless solutions to existing "wired" customers, convenient kiosks in hotel public areas, additional ISP services and credit card billing services aimed at generating revenue from non-hotel guests. Over the next few quarters,
Guest-Tek will be actively introducing new value-added solutions to continue to help its customers generate additional revenue while meeting the growing technology needs of the business traveler.

New Premises

During the quarter Guest-Tek relocated its Calgary offices to larger facilities to accommodate the Company's anticipated growth. The move has been completed without disruption to the business. The address for the Company's new Canadian headquarters is: Guest-Tek, Suite 240, 3030 - 3rd Ave NE, Calgary, Alberta
Canada T2A 6T7.

About GlobalSuite

Using GlobalSuiteTM plug-and-play software, Guest-Tek provides fast and easy high-speed Internet access to hotel guests, so they can connect to the Internet in seconds, without changing laptop settings or downloading software. Using their regular accounts, travelers can send and receive email, access corporate networks and more, all from a guest room, meeting room, or public area. Travelers also benefit from Internet access 50-100 times faster than traditional dial-up connections. Each implementation of the Corporation's solution typically generates one-time revenues from the initial software license, installation services and networking equipment and recurring revenues from agreements to provide ongoing software and hardware maintenance, call center support and Internet service provider services.

About Guest-Tek

Based in Calgary, Alberta, Guest-Tek is a world-class provider of high-speed Internet access to the hospitality industry. Guest-Tek's GlobalSuiteTM high-speed Internet solution enables hotels to offer their guests the convenience of wired and/or wireless broadband Internet access from guest rooms, meeting rooms, and public areas. As a certified supplier with more major hotel chains than any competitor, Guest-Tek has installed its GlobalSuite solution in more than 475 properties worldwide, including over 35 hotel brands and 40 independent boutique hotels. Guest-Tek's Common Shares trade on the Toronto Stock Exchange under the trading symbol GTK with approximately 13.4 million Common Shares outstanding.

The above disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties. 

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Success Stories
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News Releases
Guest-Teks Wireless Solution Gains Repeat Guests at Hyatt Fair Lakes / June 2003

Guest-Tek s high-speed Internet access helps ensure a superior guest experience at the Park Hyatt Chicago

The City Center Marriott is retaining more corporate clients -and more repeat guests - from Guest-Tek s high-speed Internet access

Ocean Properties, Guest-Tek Partner to Deliver High-speed Internet Access to Hotels / December 2003

Guest-Tek Dominates Extended-stay Market with  High-speed in 63 Additional Hotels / March 2003

Sofitel North America and Guest-Tek Partner to Provide High-speed Internet Access at North American Hotels / Jan 2003

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Guest-Tek
American Headquarters 
900 North Michigan Avenue 
Suite 1100 
Chicago, Illinois 60611  U.S.A. 

Canadian Headquarters 
Guest-Tek
Suite 240
3030 - 3rd Ave NE
Calgary, Alberta
Canada T2A 6T7

Phone: (403) 509-1010 
1-866-509-1010 (toll-free)
Fax: (403) 509-1011
info@guest-tek.com
www.guest-tek.com

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