Stronger sequential revenue growth and initial licensing of website
templates library
MISSISSAUGA, ON and FT. LAUDERDALE, FL, May 7 /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 preliminary unaudited financial results for the fourth quarter and fiscal year ended March 31, 2007. All figures are in U.S. dollars unless otherwise stated.
Highlights
- Q4 revenue increased 15.4% year over year, 4.4% sequentially from Q3
- 14th consecutive quarter of positive operating income
- 12-month revenue increased 25.1 % to $22.5 million
- 12-month operating income eased 12.8% on investments for growth
(excluding stock-based compensation)
- Grew end users 23.5% year over year to over 260,000
- Added 12,000 end users in Q4
"We are very pleased with our fourth quarter and full year results," said Colin Campbell, Hostopia's CEO. "The company showed strong revenue growth, driven by gains in the number of end users and licensed website templates. We continued to grow the company profitably, posting $574,000 of operating income for the fourth quarter, while investing in the future. Momentum remains strong, with 370,000 e-mail accounts recently migrated and 40,000 websites scheduled to be migrated onto our platform during the first six months of fiscal 2008."
Financial Results for the Fourth Quarter of 2007
Revenues increased 15.4% to $5.9 million in the three months ended March 31, 2007, compared to the same period last year. This was the 28th consecutive quarter of higher revenues. Sequential revenue growth of 4.4% in the fourth quarter was primarily due to a 4.6% increase in end users. The licensing of 2,500 website templates in the fourth quarter also contributed to the revenue gain.
Fourth quarter operating income decreased 34.2% over the prior year's quarter to $574,000, primarily due to a combination of: (1) increased personnel to handle new revenue opportunities that have not yet fully developed, (2) higher amortization expenses related to the acquisition of licensed technology, (3) increased R&D expenses related to the development of new web services and enhanced software and service offerings, (4) the adoption of full stock based compensation accounting and (5) increased public company expenses following the company's initial public offering in November 2006.
The company is preparing for the new contracted business that will begin migrating onto the Hostopia platform. These migrations will begin shortly and will continue into the second quarter. Accordingly, in the first quarter operating expenses will continue to reflect outlays related to the anticipated migrations, seasonal participation in trade shows and the integration of Nexthaus Inc. assets and operations, acquired during the first quarter of fiscal 2008.
Basic and diluted net income were both $0.05 per common share, compared to $0.14 and $0.08 respectively for the fourth quarter last year. Net income of $572,000 was $16,000 lower than the same period last year as lower operating income was largely offset by interest income. Net income per share declined primarily because of the significant increase in shares outstanding related to the Company's public offering of 4.83 million shares in the third quarter.
Financial Results for Full Year 2007
In fiscal 2007, revenues increased 25.1% to $22.5 million. This growth was driven primarily by the 24% increase in end users to 260,000. Customers in place at March 31, 2006 contributed 34,000 of this increase while new customers contributed the remaining 16,000.
Operating income decreased by 19% to $2.5 million from the previous year due to the same factors as the fourth quarter, as outlined above.
For fiscal 2007, basic and diluted net income per common share were $0.27 and $0.23 respectively, compared to $0.47 and $0.28 in fiscal 2006. Net income per share declined primarily because of the significant increase in shares outstanding related to the company's public offering of 4.83 million shares in the third quarter. As of year end, the company had 11,097,251 common shares outstanding.
Cash flow from operations for fiscal 2007 totaled $4.6 million. Hostopia invested $2.4 million in capital assets and intellectual property while expensing $3.0 million on the development of new applications for its technology platform during 2007. At March 31, 2007 the company had $27.3 million in cash and cash equivalents available to invest in future business growth.
Subsequent events
The lock-up agreements, signed as part of Hostopia's initial public offering by certain shareholders and employees with stock options, expire on May 8, 2007. In addition, stock options exercisable for 380,000 shares will expire on May 31, 2007. The average exercise price for these options is $2.75. If all of the options are exercised Hostopia will receive approximately $1.1 million. There is no assurance that any of these options will be exercised.
John Nemanic, Hostopia's former Chairman, has informed the Company he is considering reducing his holdings in Hostopia by an unspecified amount sometime in the future in order to diversify his assets.
On May 2, 2007 Hostopia acquired all of the software assets and intellectual property of Nexthaus, Inc., a US-based developer of software applications for mobile devices.
Outlook
"Key client wins and further investments in our platform in fiscal 2007 position us well for another year of strong revenue growth in fiscal 2008, particularly as recently signed contracts come completely onstream," said Mr. Campbell. "Looking forward, we intend to further strengthen our market leadership by adding new products developed internally or through acquisition. These offerings will help us further penetrate our existing customer base as well as support our expansion in the U.S. and into Europe. In fiscal 2008, we also plan to expand into the mobile telephone market by utilizing the Nexthaus mobile synchronization technology we just acquired. Accordingly, excluding any incremental revenue from the Nexthaus acquisition, we are confirming our expectation that revenues will grow by 18 to 22% in fiscal 2008."
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 other factors that could cause actual results or outcomes to differ materially from those contemplated 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 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 under the caption "Risk Factors" in Hostopia's Quarterly Reports on Form 10-Q for the quarters ended September 30, 2006 and December 31, 2006. This filing is available on web sites maintained by the Securities and Exchange Commission at www.sec.gov and SEDAR at www.sedar.com. Accordingly, 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 fourth quarter conference call on Monday, May 7,
2007, at 5:15 p.m. EDT. Colin Campbell, Chief Executive Officer and
Michael Mugan, Chief Financial Officer, will discuss financial results
and performance for the three and 12 months ended March 31, 2007.
To access the call, please dial 416-644-3415 or 1-800-733-7560.
A replay of the conference call will be available as of 7:00 p.m. EDT,
Monday May 7, 2007 until midnight, Friday, May 18, 2007. To access the
replay, call 416-640-1917 or 1-877-289-8525, followed by passcode
21219279, followed by the number sign.
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Hostopia.com Inc.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
March 31, March 31,
2007 2006
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $27,367,667 $ 3,038,217
Trade accounts receivable, net of allowance
for doubtful accounts of $114,755;
(March 31, 2006 - $48,650) 1,320,422 1,568,103
Deferred tax assets 117,000 83,000
Prepaid expenses 377,242 268,969
------------ ------------
Total current assets 29,182,331 4,958,289
------------ ------------
Property and equipment, net of accumulated
amortization of $5,163,911;
(March 31, 2006 - $4,273,828) 2,922,677 3,173,715
Other assets 60,997 60,699
Intangible assets, net of accumulated
amortization of $1,594,348;
(March 31, 2006 - $842,272) 1,690,284 1,608,605
Deferred tax assets 1,101,000 481,000
------------ ------------
Total assets $34,957,289 $10,282,308
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 380,040 $ 272,456
Accrued liabilities 705,229 511,525
Payroll and other taxes payable 34,956 25,881
Income taxes payable 269,020 155,000
Current portion of deferred lease inducements 79,900 79,900
Deferred revenue 983,299 923,206
Current portion of long-term liability 72,000 260,000
------------ ------------
Total current liabilities 2,524,444 2,227,968
Deferred lease inducements 237,035 298,538
Long-term liability 292,957 243,639
------------ ------------
Total liabilities 3,054,436 2,770,145
------------ ------------
Series A redeemable, convertible preferred shares
Authorized:
10,000,000 Series A redeemable, convertible
preferred shares
Issued and outstanding
Nil (March 31, 2006 - 2,127,658 Series A
shares) - 5,170,448
------------ ------------
Stockholders' equity:
Capital stock
Authorized:
30,000,000 common shares, par value $0.0001
Issued and outstanding:
11,097,251 common shares 217,069 216,362
Additional paid-in capital 31,054,703 3,384,339
Deferred stock-based compensation - (26,179)
Accumulated other comprehensive loss (43,881) (43,881)
Retained earnings (Deficit) 674,962 (1,188,926)
------------ ------------
Total stockholders' equity 31,902,853 2,341,715
------------ ------------
Total liabilities and stockholders' equity $34,957,289 $10,282,308
------------ ------------
------------ ------------
Hostopia.com Inc.
Consolidated Statements of Operations
(Expressed in U.S. dollars)
Three months ended Year ended
March 31, March 31,
------------------ ------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Revenues
Webhosting and
applications
services $ 5,564,848 $ 4,869,939 $21,624,337 $17,295,329
Other services 300,928 212,004 845,327 661,578
------------ ------------ ------------ ------------
Total revenues 5,865,776 5,081,943 22,469,664 17,956,907
------------ ------------ ------------ ------------
Cost of revenues
Webhosting and
applications
services 738,091 506,864 2,563,605 1,756,263
Other services 102,570 88,710 356,636 246,353
------------ ------------ ------------ ------------
Total cost of
revenues 840,661 595,574 2,920,241 2,002,616
------------ ------------ ------------ ------------
Gross profit 5,025,115 4,486,369 19,549,423 15,954,291
------------ ------------ ------------ ------------
Expenses
Sales and marketing 1,169,867 929,575 4,776,483 3,898,904
Research and
development 800,643 595,926 3,069,528 2,107,626
Project management 467,835 403,233 1,715,568 1,393,215
Technical support 750,678 680,203 3,005,801 2,258,511
General and
administrative 542,937 408,884 1,906,903 1,451,251
Amortization of
intangible assets 208,812 134,440 752,076 332,242
Amortization of
property and
equipment 510,126 462,023 1,848,379 1,463,490
------------ ------------ ------------ ------------
4,450,898 3,614,284 17,074,738 12,905,239
------------ ------------ ------------ ------------
Income before the
undernoted 574,217 872,085 2,474,685 3,049,052
------------ ------------ ------------ ------------
Interest income 314,001 9,457 534,027 27,566
Interest (expense) (4,206) - (16,824) (4,566)
------------ ------------ ------------ ------------
309,795 9,457 517,203 23,000
------------ ------------ ------------ ------------
Income before income
taxes 884,012 881,542 2,991,888 3,072,052
------------ ------------ ------------ ------------
Income taxes (recovery)
Current 542,000 (320,000) 1,632,000 455,000
Deferred (230,000) 614,000 (504,000) 614,000
------------ ------------ ------------ ------------
312,000 294,000 1,128,000 1,069,000
------------ ------------ ------------ ------------
Net income $ 572,012 $ 587,542 $ 1,863,888 $ 2,003,052
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share
Basic $ 0.05 $ 0.14 $ 0.27 $ 0.47
Diluted 0.05 0.08 0.23 0.28
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average
number of common
shares outstanding
Basic 11,071,306 4,032,336 6,714,560 4,032,336
Diluted 11,276,985 6,712,246 8,237,754 6,683,836
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
%SEDAR: 00023928E %CIK: 0001365295