Arsenal Reloads With $11M

Storage management services provider Arsenal Digital Solutions Worldwide Inc. today announced a debt financing round of $11 million, which it will use to expand its partners and services for managing growing data stores and compliance regulations.

The non-equity financing, led by RBC Centura, gives the Cary, N.C.-based company $21.5 million raised this year and a total of $86 million in equity and debt funding since its 1998 inception (see Arsenal Restocks Its Coffers).

Arsenal CEO Frank Brick says the company achieved positive EBITDA (earnings before interest, taxes, depreciation, and amortization) this year, and that the debt financing will provide working capital and infrastructure.

This is a positive sign of where we are on our maturity curve,” Brick stolidly maintains. “I’d much rather pay reasonable interest rates to accelerate growth than take equity, which does nothing but dilute people. This puts us on the fast trick to leverage market share.”

Brick says Arsenal experienced 60 to 70 percent revenue growth in 2003, and he expects it to continue to grow at that annual rate over the next three years. He is hoping to go public over that period.The funding will be spread over three areas, according to Brick, laying out the figures: “About 60 percent will go to support infrastructure and new partners in 2004; 20 percent will go to expanded business development services; and 20 percent on new services early in 2004. We will announce new strategic partners and new services targeted at end-user customers.”

Those services will help customers better manage their data to meet compliance regulations.

“We’ve got partners with clients begging for solutions to give them centralized control of their data,” Brick says.

Arsenal last month announced a disk-based backup-and-restore service, ViaRemote, and a data-center backup-and-recovery service, ViaExpress. The company also named former Nortel Networks Corp. (NYSE/Toronto: NT) executive Samuel Sigarto as chief commercial officer (CCO) in October. (see Arsenal Debuts IP Backup Service, Arsenal Debuts Disk-Backup Service and Salem Signs Sinn as CEO).

Along with ManagedStorage International Inc. (MSI), LiveVault Corp., AmeriVault Corp., and EVault Inc., Arsenal is among the market leaders of a group of storage service providers that have survived a rough stretch. Arsenal’s winning strategy was offering managed backup, according to Gartner Inc. analyst Adam Couture.“Managed backup always made money, not storage-on-demand,” Couture says. “Arsenal offered backup services right from the get-go, and they used a partner rather than a direct sales model. Their challenge going forward is to sign up more service providers.

Arsenal has 70 employees, and Brick says the company’s 2004 budget calls for a 25 to 30 percent increase in headcount. Arsenal also claims more than 800 customers through its partners, which include AT&T Corp. (NYSE: T), NTT/Verio Inc., AboveNet Inc., Terremark Worldwide Inc., Redundant Networks, and Redundant Networks