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engin: Another Happy VoIP Player Losing Money
Friday, 10 March 2006
Following on from Freshtel’s recent announcement of a $2.3 million loss for the six months to December, engin has also come out with first half clearly in the red, but happy with progress.

Like Freshtel, which attributed its loss making result to significant investments required to bring its wholesale VoIP network online in the UK, engin says it too is “pleased” with its progress.

While CEO Ilka Tales has had less to spend on infrastructure costs it’s the revenue side of the equation finally kicking in that will eventually push the company into the black. Engine reported capital expenditures of $1 million up from $300,000 the six months prior. However this significantly expanded the call carrying capabilities to well over 200,000 lines.

Compared to the first half of 2005, the second half showed subscriber numbers and booming minutes more than double the company’s revenues. A 143 per cent increase from $1.25 million to $3.03 million for the July to December half, however failed to help the company reach breakeven.

The half year loss after tax of $3.75 million (EBITDA loss $5.13 million) did not compare all that favourably to the half year ended June 2005 loss of $3.41 million (EBITDA loss $3.79 million), but Tales has assured the market that the additional capital engin raised via an off-market placement of 29.5 million shares gives it some breathing space.

The company's balance sheet shows current cash reserves of $5.70 million, which will take the company past operational breakeven point assures Tales.

Looking past the raw dollar figures demonstrates why he’s so confident. engin's paying subscriber numbers have grown from 5,800 at June 2005 to 18,100 as at the December 2005, and now stand at 24,000 (end of February).

This healthy growth means better use of the infrastructure with some 6,600,000 minutes of voice traffic carried in December. But more minutes does not necessarily mean higher costs and with customers acquisition costs down and the speed of growth apparently accelerating, engin seems well positioned.

A quick look at the following graphic demonstrates the likely efficiencies engin will experience going forward.


Half Year to Dec. 2005
Half Year to Jun 2005

Broadband Telephony Revenue
$3.0m
$1.2m

Paying Subscriber Base
18,100
5,800

Marketing spend per new subscriber line
$95
$245

Cost of managing a subscriber line
$16
$30+

Paying subscriber line per employee
241
111

Call Handling time
<6mins
>7mins

Products
7
3

CAPEX
$1m
$0.3m


CEO Tales said: "We are pleased with our progress, all our business drivers indicate we are on target to meet our business goals. The results show that our growth has been significant and we have balanced this growth with operational effectiveness. We look forward to making even greater strides in 2006 and delivering further savings to Australian consumers and businesses using broadband telephony".

While the company’s main focus appears to be consumer VoIP customers, the company was gonged recently by ATUG (the Australian Telecommunications User Group) which voted engin as the Best Communications Solution - Small Business category winner for its broadband telephony service.

Tales said "engin has always been committed to delivering a truly affordable alternative to fixed line carriers giving SMBs the opportunity to make massive savings on their phone bills using broadband telephony.

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