NaviSite Reports Third Quarter FY2008 Financial Results
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NaviSite, Inc. (NASDAQ: NAVI), a leading provider of enterprise hosting
and applications, today announced financial results for its third
quarter of fiscal year 2008, which ended April 30, 2008.
Financial Results:
Revenue for the period grew 20% to $39.3 million, compared to $32.7
million in the same period a year ago and $38.9 million in the second
quarter of fiscal 2008. Revenue this quarter contains a downward
adjustment of $1.1 million as a result of the finalization of the
initial valuation of the deferred revenue from the three acquisitions
made during the first quarter of fiscal year 2008. Excluding this
adjustment, revenue for the third quarter of fiscal year 2008 would have
been $40.4 million, an increase of 23% over the same period last year
and a sequential increase of 4% over the second quarter of fiscal year
2008.
Income from operations increased to $2.0 million from $1.1 million
reported for the same period a year ago, and from $1.3 million reported
in the second quarter of fiscal year 2008. Excluding the adjustment for
deferred revenue, income from operations would have been $3.0 million
for the third quarter of fiscal year 2008.
Adjusted EBITDA, excluding impairment, stock-based compensation, costs
related to the discontinued operations of America’s
Job Exchange and non-operational charges ("EBITDA”),
grew 43% to $8.6 million compared to the $6.0 million reported in the
third quarter of fiscal year 2007 and $8.6 million reported in the
second quarter of fiscal year 2008. Excluding the adjustment for
deferred revenue, EBITDA would have been $9.7 million for the quarter
representing an increase of 61% from the prior year and a sequential
increase of 14% over the second quarter of fiscal year 2008.
For the third quarter of fiscal year 2008, the Company reported a loss
from continuing operations of $1.6 million and a net loss attributable
to common stockholders of $2.5 million as compared to a net loss of $2.4
million in the third quarter of fiscal year 2007. On a per share basis,
the Company reported a net loss attributable to common stockholders of
$(0.07) for the third quarter of fiscal year 2008 compared to a per
share net loss of $(0.08) for the third quarter of fiscal year 2007.
Excluding the adjustment for deferred revenue, net loss attributable to
common stockholders would have been $1.4 million or $(0.04) per share
for the third quarter of fiscal year 2008.
NaviSite ended the quarter with a cash balance of $4.9 million, which is
unchanged from the previous quarter.
"We continue to see robust bookings in our
enterprise hosting and application services portfolio, with larger
transactions becoming a more significant part of the product mix,”
said Arthur Becker, Chief Executive Officer of the Company. "Successive
quarters of record bookings combined with the continuing downward trend
in churn provide good visibility into accelerating growth in our
recurring revenue and EBITDA for the fourth quarter.” Business Highlights:
Bookings of approximately $1.1 million of incremental monthly
recurring revenue (MRR) – a 40% increase
over same period in fiscal year 2007 and matching the record level of
bookings achieved in the second quarter of fiscal year 2008.
Bookings of $43.3 million in Total Contract Value (TCV) of which $39.7
million is MRR and $3.6 million is non-recurring revenue, primarily
attributable to professional services contracts. The average term of
the MRR contracts during the quarter was 37 months compared to 43
months a year ago and up from 28 months in the prior quarter.
The larger transactions (over $25,000 in MRR) totaled $556,000 in new
MRR compared to $354,000 of new MRR in the same period a year ago and
$420,000 in the prior quarter.
105 new logo MRR customers during the quarter as compared to 112
signed during the second quarter of fiscal year 2008 and 54 new
customers acquired during the third quarter of fiscal year 2007.
Customer churn, excluding major accounts, defined as the loss of a
customer or a reduction in a customer’s
monthly revenue run rate, of 0.6% per month during the quarter
compared to 0.8% per month in the second quarter of fiscal year 2008,
and 1.3% per month for the third quarter of fiscal year 2007. Churn,
including major accounts, was 1.3% per month in the third quarter of
fiscal year 2008, down from the 1.6% per month reported in the prior
quarter.
Created sales organization and booked the first $200,000 of new job
posting business for the America’s Job
Exchange (AJE).
Guidance:
NaviSite projects revenue for the fourth quarter of fiscal year 2008 to
be between $42.0 and $43.0 million. EBITDA, excluding impairment,
stock-based compensation, costs related to the discontinued operations
of America’s Job Exchange and non-operational
charges, is projected to be between $10.0 and $10.5 million for the
fourth quarter of fiscal year 2008.
Conference Call Scheduled for June 3, 2008:
NaviSite, Inc. Chief Executive Officer Arthur Becker and Chief Financial
Officer Jim Pluntze will host a conference call on Tuesday, June 3,
2008, at 5:00 p.m. Eastern Time to discuss the third quarter results.
The conference call can be accessed by dialing 800.901.5248
(International: 617.786.4512) and entering passcode 77748578.
Alternatively, participants can listen to a webcast of the call
available through NaviSite’s website at www.navisite.com/about-navisite/investors/events-earning-calls.php.
A replay of the call will be accessible for one week following the
conference call by dialing 888.286.8010 (International: 617.801.6888)
and using passcode 18413352.
Non-GAAP Measures:
EBITDA is not a recognized measure for financial statement presentation
under United States generally accepted accounting principles (GAAP).
Additionally, revenue, gross profit, income from operations, and net
loss attributable to common shareholders (all excluding the deferred
revenue purchase accounting adjustment recorded in the third quarter of
fiscal 2008) are not recognized measures for financial statement
presentation under GAAP. The Company believes that the non-GAAP measure
of EBITDA provides investors with a useful supplemental measure of the
Company's actual and expected operating and financial performance by
excluding the impact of interest, taxes, depreciation and amortization.
The Company also excludes impairment, non-cash stock-based compensation,
costs related to the discontinued operations of America’s
Job Exchange and non-operational charges from its non-GAAP measure, as
such items are considered to be non-operational in nature. EBITDA does
not have any standardized definition and therefore may not be comparable
to similar measures presented by other reporting companies. Management
uses EBITDA to assist in evaluating the Company's actual and expected
operating and financial performance. The Company believes that the
non-GAAP measures disclosed related to the deferred revenue purchase
accounting adjustment provide investors with a useful supplemental
measure of the Company's actual and expected operating and financial
performance by excluding the impact of the adjustment recorded in the
third quarter of fiscal 2008 as a result of the finalization of the
initial valuation of the deferred revenue from the three acquisitions
made during the first quarter of fiscal year 2008. Such items are
considered to be non-operational in nature. The operating measures
excluding this adjustment do not have any standardized definition and
therefore may not be comparable to similar measures presented by other
reporting companies.
These non-GAAP results should not be evaluated in isolation of, or as a
substitute for, the Company's financial results prepared in accordance
with GAAP. A table reconciling the Company's net loss, as reported, to
EBITDA, as well as a table reconciling the Company's revenue, gross
profit, income from operations, and net loss attributable to common
shareholders, as reported, to the corresponding non-GAAP measures is
included in the financial tables in this release. The Company believes
that using expected EBITDA as a performance measure, together with
expected net loss, will help investors better understand the Company's
underlying financial performance.
About NaviSite, Inc.
NaviSite is a leading provider of application management and managed
hosting solutions. More than 1,500 customers depend on NaviSite for
application development, implementation and management on its web
infrastructure platforms in 18 state-of-the art data centers supported
by more than 700 professionals. NaviSite provides customized and
scalable solutions leveraging its broad range of application development
capabilities, packaged software implementation expertise, deep portfolio
of best in class technologies and a full suite of web-hosting and
internet infrastructure options. For more information, please visit www.navisite.com.
This release contains forward-looking statements, which address a
variety of subjects including the expected future operating and
financial results, including profitability, revenue growth and EBITDA,
success and performance of NaviSite’s product
and service offerings, and NaviSite’s
strategic business plans for growing its customer base and increasing
sales. All statements other than statements of historical fact,
including without limitation those with respect to NaviSite’s
goals, plans and strategies set forth herein, are forward-looking
statements. The following important factors and uncertainties, among
others, could cause actual results to differ materially from those
described in these forward-looking statements. NaviSite’s
success, including its ability to improve its gross profit, improve its
cash flows, expand its operations and revenue, and reach and sustain
profitability, depends on its ability to execute on its business
strategy and the continued and increased demand for and market
acceptance of its products and services; the possibility that financial
forecasts of the Company may not be achieved, including those as to
expected EBITDA and revenue, or an inability to realize expected
synergies or make expected future investments in NaviSite' businesses or
NaviSite may be unable to raise the necessary funds to meet its payment
obligations to its lending group under its senior secured credit
facility and other creditors; NaviSite’s
management may face strain on managerial and operational resources as
they try to oversee the expanded operations; NaviSite may not be able to
expand its operations in accordance with its business strategy; NaviSite
may experience difficulties integrating technologies, operations and
personnel in accordance with its business strategy; NaviSite’s
acquisition of companies and businesses may not produce expected cost
savings, operational efficiencies or revenue; NaviSite’s
products, technologies, and resources may not successfully operate with
the technology, resources and/or applications of third parties; NaviSite
derives a significant portion of its revenue from a small number of
customers and the loss of any of those customers could significantly
damage NaviSite’s financial condition and
results of operations; and increased competition and technological
changes in the markets in which NaviSite’s
competes. For a detailed discussion of cautionary statements that may
affect NaviSite’s future results of
operations and financial results, please refer to NaviSite’s
filings with the Securities and Exchange Commission, including NaviSite’s
most recent Annual Report on Form 10-K and its Quarterly Reports on Form
10-Q. Forward-looking statements represent management’s
current expectations and are inherently uncertain. We do not undertake
any obligation to update forward-looking statements made by us. All
logos, company and product names may be trademarks or registered
trademarks of their respective owners.
NAVISITE FINANCIAL TABLES
EBITDA Summaries
For the Three Months Ended April 30, 2008
April 30, 2007 Unaudited (In thousands)
Net loss, as reported
$
(1,717
)
$
(2,359
)
Depreciation, net of discontinued operations
3,552
2,541
Interest income/expense, net
3,141
3,228
Income taxes
501
293
Amortization
2,138
957
EBITDA
7,615
4,660
Impairment costs (recoveries)
-
-
Stock based compensation
718
852
Severance
101
28
Securities offering costs
-
70
Discontinued operations, net of severance & depreciation
106
-
Loss on debt extinguishment
-
-
Transaction fees and integration costs
105
437
EBITDA (excludes impairment costs, stock based compensation,
severance, securities offering costs, loss on debt extinguishment
and transaction fees and integration costs)
$
8,645
$
6,047
For the Nine Months Ended April 30, 2008 April 30, 2007 Unaudited (In thousands)
Net loss, as reported
$
(8,226
)
$
(8,818
)
Depreciation, net of discontinued operations
9,407
7,240
Interest income/expense, net
8,631
9,572
Income taxes
1,414
880
Amortization
6,064
3,045
EBITDA
17,290
11,919
Impairment costs (recoveries)
(287
)
Stock based compensation
3,226
2,686
Severance
376
148
Securities offering costs
11
694
Discontinued operations, net of severance & depreciation
657
-
Loss on debt extinguishment
1,651
-
Transaction fees and integration costs
884
1,359
EBITDA (excludes impairment costs, stock based compensation,
severance, securities offering costs, loss on debt extinguishment
and transaction fees and integration costs)
$
24,095
$
16,519
NAVISITE FINANCIAL TABLES
Condensed Consolidated Statements of Operations
For the Three Months Ended For the Nine Months Ended April 30, 2008 April 30, 2007 April 30, 2008 April 30, 2007
Unaudited
Unaudited
(In thousands, except per share amounts)
(In thousands, except per share amounts)
Revenue
$
39,249
$
32,664
$
114,112
$
91,225
Revenue, related parties
73
84
220
260
Total revenue
39,322
32,748
114,332
91,485
Cost of revenue, excluding depreciation and amortization
21,769
18,711
64,361
52,304
Depreciation and amortization
5,525
3,203
14,928
9,399
Cost of revenue
27,294
21,914
79,289
61,703
Gross profit
12,028
10,834
35,043
29,782
Operating expenses:
Selling and marketing
4,537
4,274
14,813
12,129
General and administrative
5,530
5,508
16,650
16,662
Impairment costs
-
-
-
(287
)
Total operating expenses
10,067
9,782
31,463
28,504
Income from operations
1,961
1,052
3,580
1,278
Other income (expense):
Interest income
37
79
214
163
Interest expense
(3,178
)
(3,307
)
(8,845
)
(9,735
)
Loss on debt extinguishment
-
-
(1,651
)
Other income (expense), net
70
110
547
356
Loss from continuing operations before income taxes and discontinued
operations
(1,110
)
(2,066
)
(6,155
)
(7,938
)
Income taxes
(501
)
(293
)
(1,414
)
(880
)
Loss from continuing operations before discontinued operations
(1,611
)
(2,359
)
(7,569
)
(8,818
)
Discontinued operations, net of income taxes
(106
)
-
(657
)
-
Net loss
(1,717
)
(2,359
)
(8,226
)
(8,818
)
Accretion of preferred stock dividends
(757
)
-
(1,877
)
-
Net loss attributable to common stockholders
$
(2,474
)
$
(2,359
)
$
(10,103
)
$
(8,818
)
Basic and diluted net loss per common share:
Loss from continuing operations before discontinued operations
available to common shareholders
(0.07
)
$
(0.08
)
(0.27
)
$
(0.29
)
Loss from discontinued operations, net of income taxes
(0.00
)
-
(0.02
)
-
Net loss attributable to common stockholders
$
(0.07
)
$
(0.08
)
$
(0.29
)
$
(0.29
)
Basic and diluted weighted average number of common shares
outstanding
35,033
31,128
34,605
29,947
NAVISITE FINANCIAL TABLES
Condensed Consolidated Balance Sheets
April 30, 2008 July 31, 2007 ASSETS Unaudited (In thousands)
Current assets:
Cash and cash equivalents
$
4,938
$
11,701
Accounts receivable, less allowance for doubtful accounts of $713
and $781 at April 30, 2008 and July 31, 2007, respectively
20,050
15,051
Unbilled accounts receivable
2,018
920
Prepaid expenses and other current assets
15,583
15,975
Total current assets
42,589
43,647
Non-current assets
141,390
72,597
Total assets
$
183,979
$
116,244
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Notes payable, current portion
7,233
1,063
Notes payable to AppliedTheory Estate
6,000
6,000
Capital lease obligations, current portion
3,009
1,829
Accounts payable
7,376
3,913
Accrued expenses, deferred revenue, deferred
other income and customer deposits
18,980
20,231
Total current liabilities
42,598
33,036
Total non-current liabilities
133,676
97,072
Total liabilities
176,274
130,108
Preferred stock
26,750
-
Total stockholders' equity (deficit)
(19,045
)
(13,864
)
Total liabilities and stockholders' equity (deficit)
$
183,979
$
116,244
NAVISITE FINANCIAL TABLES
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended April 30, 2008
April 30, 2007 Unaudited (In thousands)
Net cash provided by (used for) operating activities
$
3,694
$
562
Net cash used for investing activities
(3,185
)
(2,165
)
Net cash provided by (used for) financing activities
(370
)
3,252
Net cash used for discontinued operations
(106
)
Net increase (decrease) in cash
33
1,649
Cash and cash equivalents, beginning of period
4,905
2,975
Cash and cash equivalents, end of period
$
4,938
$
4,624
For the Nine Months Ended April 30, 2008 April 30, 2007 Unaudited (In thousands)
Net cash provided by (used for) operating activities
$
2,645
$
3,168
Net cash used for investing activities
(31,537
)
(5,107
)
Net cash provided by (used for) financing activities
22,786
3,203
Net cash used for discontinued operations
(657
)
Net increase (decrease) in cash
(6,763
)
1,264
Cash and cash equivalents, beginning of year
11,701
3,360
Cash and cash equivalents, end of year
$
4,938
$
4,624
NAVISITE FINANCIAL TABLES
Reconciliation of GAAP Measures to non-GAAP Measures
For the Three Months Ended April 30, 2008 Unaudited (In thousands)
Revenue
Gross Profit
Income from Operations
Net Loss Per Share Attributable to Common Shareholders
Financial statement amounts, as reported
$
39,322
$
12,028
$
1,961
$
(0.07
)
Deferred revenue purchase accounting adjustment
1,063
1,063
1,063
0.03
Amounts excluding adjustment
$
40,385
$
13,091
$
3,024
$
(0.04
)
