Message from Management
January 4, 2010
2010 Achievements
- Restructured the balance sheet resulting in significantly less short and long term debt.
- Reduced costs resulting in a dramatic increase in EBITDA over previous year.
- Launched new brand website at www.lowpricedomains.com after achieving Domain Registrar status.
- Launched new mobile solutions product line at www.websitesource.com.
Current Operations
The nine months ending September 2010 have shown a positive trend for net results. By reporting $929,817 EBITDA for the nine months ended September 2010 we have already surpassed the entire 2009 EBITDA total of $683,525. Although the global recession has had a dampening effect on the Company’s revenue growth we continue to optimize our operations and are now in a better position to capitalize on a turnaround in the general economic environment. We have been spending very little on marketing and advertising during the slowdown and we therefore expect an increase in sales once we resume our ad spend.
As mentioned above we recently announced a major debt restructuring that now positions the Company
for the long haul with serviceable debt loads. The restructuring resulted in several million dollars of
short term debt either being converted to preferred stock or paid back over a seven year period at a
much lower interest rate.
Strategy
The Company was founded with the intention of acquiring privately held companies and customer
bases in its market space, operating them and maintaining or improving margins by economy of scale,
and creating shareholder value by arbitraging the public versus private valuation multiples. Shareholder
values would also benefit from the industry standard organic growth rates of the owned companies and
brands and participation in new emerging market trends and segments. Because of the debt load on the
balance sheet we had not been able to follow through on this, but now, after the restructuring, we will
explore the numerous acquisition candidates out there that fit our parameters..
New Market Segments and Trends
We announced our achieving the status of domain registrar in the spring and have been steadily adding
customers since our branded website launch in May; we rank approximately 150th on the growth profile
of over 500 active registrars worldwide. The Company also expects to announce participation in
several additional hot new market segments in the next six to twelve months. These initiatives will
leverage our core competency of managing and distributing valuable web content from our customers
to end users. We also plan to exploit the increasing use of alternate web device access methods and the
trend towards local search. Expect to see several exciting new product press releases from the company
in the coming months.
Competitive Strengths and Economies of Scale
For both its current core business segments and the new emerging market segments, the Company
believes it will have competitive strengths versus smaller rivals because of the following economies
and other benefits of larger scale.
Bandwidth: The Company expects to have a significant competitive advantage over smaller hosting
companies through aggregate volume purchase contracts, several of which are already in place.
These can result in dramatically lower PPM (Price per Meg) as smaller web hosts are generally
at the mercy of whatever carrier is servicing the collocation provider they host with.
G&A (accounting, marketing, legal, MIS/IT, etc): Many functions that are performed behind the scenes
of customer interaction and brands are opportunities for economies of scale, several of which
the Company has already accomplished with prior acquisitions.
Cost of and Access to Financing: Financing sources are attracted to larger scale operations and the
safety those bring relative to smaller competitors.
Expertise and Support: With a larger revenue and income base the Company can afford to have
internal expertise and support that can be leveraged by all the owned brands and companies.
Multiple Data Centers: Individual brands can offer physical implementations in many locations for
customers that need such distributed services. This also provides an excellent platform for
distributed cloud computing, an area expected to have considerable future growth potential.
Broader Solution Lineup: The hosting services space is rapidly evolving; high growth areas such as
cloud and mobile computing are becoming more and more in demand. By listening to what our
customers want, we are able to address their needs and bring those products to market faster.
Benefits to Investors
The Company believes investors will benefit from the following.
Recurring Revenue: The nature of the Company’s business is recurring revenue and to a large extent
does not change dramatically from month to month giving a comfortable level of predictability
to management and investors
Multiple Brands Diversification: Most of the Company’s business originates via Internet based lead
sources and brand loyalty. Within some reasonable limits, the use of multiple brands maximizes
the cost effective capturing of business, particularly when it is used for market segmentation.
Multiple Market Segments Diversification: As marketplace trends shift the Company will be more
stable and balanced because of the participation in multiple segments.
Multiple Data Centers: Multiple, geographically dispersed datacenters approach lowers the impact any single extraordinary facilities event has on the overall revenue and EBITDA of the Company.
Summary
We are very excited by the achievements so far in 2010. We realized that restructuring our balance
sheet in this harsh economic environment was going to be an overwhelming challenge. But due to the
solid fundamentals of our business, our investors and lenders gave the company the vote of confidence
it needed to get the job done and position the company for success. With a focused management team
and exceptional employee base, the company is poised to successfully take advantage of several of the
new megatrend opportunities where the Company is well positioned. Don’t forget to sign up for our
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