MISSISSAUGA, ON and FT. LAUDERDALE, FL, Feb. 11 /CNW/ - Hostopia.com Inc. (TSX: H), a leading provider of web services that enable small and medium-sized businesses to establish and maintain an Internet presence, today reported its unaudited financial results for the third quarter ended December 31, 2007. All figures are in U.S. dollars unless otherwise stated.
Highlights
- Q3 revenue increased 29.8% year over year; 7.1% sequentially from Q2 - 31st consecutive quarter of increasing revenue - 17th consecutive quarter of positive operating income - Announced the launch of new Nexthaus mobile data synchronization applications - Closed 9 new customer contracts for web services, templates and mobile sync services - Added 8,000 end users
"We are pleased with our continued sequential revenue growth and the demonstrated earnings leverage our increased revenues bring," said Colin Campbell, Hostopia's CEO. "The Company showed strong revenue growth driven by the record 28,000 end user accounts we migrated onto our platform in the previous quarter and the net addition of a further 8,000 end users this quarter. The large end user increase year to date, combined with our backlog of website and email migrations, should result in a further improvement in our operating results over the remainder of the year."
Financial Results for the Third Quarter of Fiscal 2008
Revenues increased 29.8% to $7.3 million in the three months ended December 31, 2007, compared to the same period last year. This was the 31st consecutive quarter of higher revenues. Sequential revenue growth of 7.1% in the third quarter was primarily due to the migration of 28,000 end users onto the Hostopia platform in the previous quarter as well as the net addition of 8,000 end users this quarter. Two website template license contracts also contributed to the sequential revenue growth.
Gross profit of $6.3 million increased by $1.4 million compared to last year. Income before interest and income taxes was $643,000 up $189,000, compared to the third quarter of last year. This 42% increase in income before interest and income taxes was tempered by the $1.2 million increase in operating expenses resulting primarily from: (1) personnel costs associated with two new start-up units within Hostopia: Website Experts (website creation services) and the Nexthaus mobile syncing service, (2) higher amortization expenses related to the acquisition of licensed technology and Nexthaus' intellectual property, (3) increased operating costs and sales commissions related to the large end user migrations in the second quarter, and (4) the effect of the appreciation of the Canadian dollar on our Canadian dollar denominated expenses.
Income before income taxes of $950,000 was $320,000 higher than the same period last year because of improved operating profitability as well as $131,000 higher net interest income. As revenues continue to grow over the remainder of the year, both from our existing and expanding customer base as well as our expanded product offerings, we expect our income before interest and taxes will continue to improve.
Net income of $615,000 was $242,000 higher than the same quarter last year. Basic and diluted net income per common share were both $0.05 this quarter compared to $0.05 for basic and $0.04 for diluted net income per common share in the third quarter of last year. Net income per share was little changed as higher net income was offset by the increase in weighted average shares outstanding related to the Company's public offering of 4.83 million shares in the third quarter of last year and the exercise of 516,000 stock options this year.
"Telecoms today are looking to expand into the high-growth web services industry," said Mr. Campbell. "Hostopia is uniquely positioned to assist telecoms in this market with its comprehensive suite of value-add services that support small businesses who want to earn additional revenue using the Internet. New and planned additions to our suite of services include Website Experts, Mobile Sync and digital fax to e-mail. All of these services will support future revenue growth.
Mr. Campbell continued, "In addition we are looking to accelerate our growth through acquisitions that fully meet our strict investment criteria. We are committed to creating value for our shareholders in the coming quarters through both internal and external investment."
About Hostopia.com Inc.
Hostopia is a leading provider of web services that enable small and medium-sized businesses to establish and maintain an Internet presence. The company's customers are communication services providers, including telecommunication carriers, cable companies, internet service providers, domain registrars, and web hosting service providers. Hostopia's customers purchase its web services on a wholesale basis and resell these services under their own brands to small and medium-sized businesses. The company provides customers with the technology, infrastructure, and support services to enable them to offer web services, while saving them research and development as well as capital and operating costs typically associated with the design, development, and delivery of web services.
Forward-Looking Statements
This news release includes certain "forward-looking statements" and forward-looking information that are subject to risks, uncertainties and by the forward-looking statements. These forward-looking statements and forward-looking information include, but are not limited to, plans, objectives, expectations and intentions, growth trends and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These other factors that could cause actual results or outcomes to differ materially from those contemplated statements are based on our current beliefs or expectations and there are a number of important factors that could cause the actual results or outcomes to differ materially from those indicated by these forward-looking statements, including without limitation, our ability to maintain our sales efficiency, our ability to maintain our existing, and develop new, strategic relationships, the number of our net end-user additions, our monthly customer turnover and our ability to successfully integrate recently acquired businesses and operations and those risks set forth or referenced under the caption "Risk Factors" in Hostopia's Form 10-K for the year ended March 31, 2007. This filing is available on web sites maintained by the Securities and Exchange Commission at www.sec.gov and SEDAR at www.sedar.com. Readers are cautioned not to place undue reliance on forward-looking statements as actual future results and events could differ materially from that expressed in the forward-looking statements. Hostopia does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
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Conference Call Information
Hostopia will hold its third quarter conference call on Monday,
February 11, 2008 at 5:15 p.m. EST. Colin Campbell, Chief Executive
Officer and Michael Mugan, Chief Financial Officer, will discuss
financial results and performance for the three months ended December 31,
2007.
To access the call, please dial 416-644-3415 or 1-800-732-9307.
A replay of the conference call will be available as of 7:15 p.m. EST,
Monday February 11, 2008 until midnight, Monday, February 18, 2008. To
access the replay, call 416-640-1917 or 1-877-289-8525, followed by
passcode 21260486, followed by the number sign.
To listen to live Webcast of the call please enter http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2146100 in your web browser
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Hostopia.com Inc.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
December 31, March 31,
2007 2007
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $26,016,795 $27,367,667
Trade accounts receivable, net of
allowance for doubtful accounts of
$224,953; (March 31, 2007 - $114,755) 3,100,073 1,320,422
Deferred tax assets 166,000 117,000
Prepaid expenses 393,550 377,242
Income taxes recoverable 1,341,741 -
------------ ------------
Total current assets 31,018,159 29,182,331
------------ ------------
Property and equipment, net of accumulated
amortization of $6,678,020; (March 31,
2007 - $5,163,911) 3,571,417 2,922,677
Other assets 65,074 60,997
Intangible assets, net of accumulated
amortization of $2,519,945; (March 31, 2007
- $1,594,348) 2,414,837 1,690,284
Deferred tax assets 1,289,000 1,101,000
------------ ------------
Total assets $38,358,487 $34,957,289
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 527,538 $ 380,040
Accrued liabilities 1,265,939 705,229
Payroll and other taxes payable 36,930 34,956
Income taxes payable - 269,020
Current portion of deferred lease
inducements 79,900 79,900
Deferred revenue 790,269 983,299
Current portion of long-term liability - 72,000
------------ ------------
Total current liabilities 2,700,576 2,524,444
Deferred lease inducements 182,261 237,035
Long-term liability - 292,957
------------ ------------
Total liabilities 2,882,837 3,054,436
------------ ------------
Stockholders' equity:
Capital stock
Authorized:
30,000,000 common shares, par value
$0.0001
Issued and outstanding
11,613,411 common shares (March 31, 2007
- 11,097,251 common shares) 217,120 217,069
Additional paid-in capital 33,142,987 31,054,703
Accumulated other comprehensive loss (43,881) (43,881)
Retained earnings 2,159,424 674,962
------------ ------------
Total stockholders' equity 35,475,650 31,902,853
------------ ------------
Total liabilities and stockholders' equity $38,358,487 $34,957,289
------------ ------------
------------ ------------
Hostopia.com Inc.
Consolidated Statements of Operations
(Expressed in U.S. dollars)
(Unaudited)
Three months ended Nine months ended
December 31, December 31,
---------------------------------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenues
Webhosting and
applications
services $ 6,869,526 $ 5,433,707 $19,498,231 $16,059,489
Other services 419,683 183,142 857,019 544,399
------------ ------------ ------------ ------------
Total revenues 7,289,209 5,616,849 20,355,250 16,603,888
------------ ------------ ------------ ------------
Cost of revenues
Webhosting and
applications
services 894,180 624,834 2,477,510 1,825,514
Other services 66,365 84,963 234,620 254,066
------------ ------------ ------------ ------------
Total cost of
revenues 960,545 709,797 2,712,130 2,079,580
------------ ------------ ------------ ------------
Gross profit 6,328,664 4,907,052 17,643,120 14,524,308
------------ ------------ ------------ ------------
Expenses
Sales and
marketing(a) 1,498,140 1,259,359 4,352,426 3,606,616
Research and
development(a) 1,084,361 773,901 2,939,238 2,268,885
Project
management(a) 516,464 407,936 1,584,132 1,247,733
Technical support(a) 985,118 781,916 2,863,250 2,255,123
General and
administrative(a) 737,299 541,285 1,971,248 1,363,966
Amortization of
intangible assets 326,204 201,219 916,878 543,264
Amortization of
property and
equipment 537,827 487,310 1,514,109 1,338,253
------------ ------------ ------------ ------------
5,685,413 4,452,926 16,141,281 12,623,840
------------ ------------ ------------ ------------
Income before the
undernoted 643,251 454,126 1,501,839 1,900,468
------------ ------------ ------------ ------------
Interest income 306,864 180,327 954,829 220,026
Interest (expense) - (4,206) (4,206) (12,618)
------------ ------------ ------------ ------------
306,864 176,121 950,623 207,408
------------ ------------ ------------ ------------
Income before income
taxes 950,115 630,247 2,452,462 2,107,876
------------ ------------ ------------ ------------
Income taxes (recovery)
Current 283,000 343,000 1,205,000 1,090,000
Deferred 52,000 (86,000) (237,000) (274,000)
------------ ------------ ------------ ------------
335,000 257,000 968,000 816,000
------------ ------------ ------------ ------------
Net income $ 615,115 $ 373,247 $ 1,484,462 $ 1,291,876
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share
Basic $ 0.05 $ 0.05 $ 0.13 $ 0.23
Diluted 0.05 0.04 0.13 0.18
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average
number of common
shares outstanding
Basic 11,594,710 7,787,745 11,473,904 5,288,716
Diluted 11,674,748 8,951,380 11,600,738 7,340,008
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
(a) Stock-based
compensation is
included in operating
expenses as follows:
Sales and marketing $ 31,672 $ 27,925 $ 95,055 $ 94,210
Research and
development 40,491 4,468 98,600 15,074
Project management 3,944 2,467 13,014 8,322
Technical support 3,321 3,723 10,549 12,561
General and
administrative 24,450 7,959 63,448 26,850
------------ ------------ ------------ ------------
$103,878 $ 46,542 $ 280,666 $ 157,017
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Hostopia.com Inc.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
Nine months
ended December 31,
2007 2006
------------ ------------
Cash flows from operating activities:
Net income $ 1,484,462 $ 1,291,876
Items which do not involve cash:
Amortization 2,439,706 1,881,517
Stock-based compensation 280,666 157,017
Excess tax benefits from stock-based
compensation (350,000) -
Non-cash interest 4,206 12,618
Deferred income taxes (237,000) (446,350)
Deferred lease inducements (54,774) (43,921)
Change in operating assets and liabilities
Trade accounts receivable (1,779,651) (393,635)
Prepaid expense (16,308) (211,319)
Accounts payable 147,498 422,860
Accrued liabilities 560,710 214,340
Payroll taxes and other taxes payable 1,974 (17,521)
Income taxes payable (1,260,761) 13,000
Deferred revenue (193,030) (119,080)
------------ ------------
Cash flows from operating activities 1,027,698 2,761,402
------------ ------------
Cash flows from (used in) financing activities:
Issue of common shares on exercise of stock
options 1,422,811 1,799
Issue of common shares on exercise of
warrants 192,000
Issue of common shares on initial public
offering 21,965,578
Refund of initial public offering expenses 34,858
Repayment of long-term liabilities (369,163) (126,326)
Excess tax benefits from stock-based
compensation 350,000 -
------------ ------------
Cash flows from (used in) financing
activities 1,438,506 22,033,051
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (2,162,849) (1,343,096)
Acquisition of intellectual property (1,650,150) (793,175)
------------ ------------
Cash flows from investing activities (3,812,999) (2,136,271)
------------ ------------
Effect of currency translation on cash
balances (4,077) (36)
------------ ------------
Increase (decrease) in cash and cash
equivalents (1,350,872) 22,658,146
Cash and cash equivalents, beginning of
period(1) 27,367,667 3,038,217
------------ ------------
Cash and cash equivalents, end of period $26,016,795 $25,696,363
------------ ------------
------------ ------------
Supplemental cash flow information:
Interest paid $ - $ -
Income taxes paid 1,900,428 1,249,350
------------ ------------
------------ ------------
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(1) Cash and cash equivalents consists primarily of an amount invested
in a highly rated money market mutual fund, as well as cash on
deposit and bank certificates of deposit.
%SEDAR: 00023928E