Positive Revenue and Earnings Continue
MISSISSAUGA, ON, and FT. LAUDERDALE, FL, May 13 /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, 2008. All figures are in U.S. dollars unless otherwise stated.
Highlights
- Q4 revenue increased 26.6% year over year, 1.8% sequentially from Q3
- 18th consecutive quarter of positive operating income
- Annual revenue increased 23.6 % to $27.8 million
- End-user count grew 18.8% year over year to approximately 309,000
- 11,000 end-users added in Q4
- Company announced launch of Fax-to-Email service
- Subsequent to March 31, Hostopia signed two definitive agreements to
purchase shared webhosting assets that will help drive future revenue
growth.
"We are pleased with our fourth quarter and full year results," said Colin Campbell, Hostopia's CEO. "While sequential revenue growth slowed in the fourth quarter Hostopia grew revenue by 23.6% in fiscal 2008. Our fourth quarter operating income rose to $805,000, up 40% from Q4 last year primarily because of our revenue growth as well as the negotiation of on-going lower bandwidth costs and the favorable resolution of an uncertain bandwidth pricing issue."
Financial Results for the Fourth Quarter of 2008
Revenues increased 26.6% to $7.4 million in the three months ended March 31, 2008, compared to the same period last year making this our 32nd consecutive quarter of higher revenues. Our revenues grew primarily because of the 19% increase in our end-user base with some help from the stronger Canadian dollar. Sequential revenue growth of 1.8% in the fourth quarter was primarily due to a 3.3% increase in end-users as one time licensing and professional services revenue declined by $10,000 from the third quarter.
Gross profit (income after deducting the cost of revenues) grew by $1.5 million compared to last year's fourth quarter primarily because of our increased revenue. Our Q4 gross profit also benefited from a $112,000 resolution of an uncertain bandwidth pricing issue as well as the negotiation of lower bandwidth charges.
Our operating income grew by 40.2% over the prior year's comparable quarter to $805,000 as our improved gross profit was offset by higher operating expenses including (1) increased sales commissions related to two single account sales as well as on generally higher revenue, (2) higher customer care expenses related to the 19% increase in end users and the recent establishment of our Miramichi Customer Care Center (3) higher amortization expenses related to the acquisition of licensed technology (4) higher amortization expenses for computer equipment acquired to support our larger customer base, and( 5) the effect of the stronger Canadian dollar on our Canadian dollar denominated expenses. Our Q4 operating income also benefited from the receipt of $60,000 from the province of Ontario that reduced our product development expense.
Net income of $723,000 was $151,000 higher than the same period last year. Basic and diluted net income per common share were $0.06 and $0.06 respectively, compared to $0.05 and $0.05 respectively per common share for the fourth quarter last year.
Financial Results for Full Year 2008
Our fiscal 2008 revenues grew by 23.6% to $27.8 million. Revenue growth was driven primarily by the 19% increase in end-users to 309,000, the effect of the stronger Canadian dollar on our Canadian dollar denominated revenues and higher other service revenue from three bulk sales of website templates. Customers we had contracts with at March 31, 2007 contributed 3,000 end-users, while new customers, including British Telecommunications plc, contributed the remaining 46,000 end-users to our recurring revenue base.
Gross profit grew by $4.6 million compared to last year primarily because of our increased revenue. As a percentage of revenue, cost of revenues remained constant at 13%.
Operating income decreased $168,000 or 7% to $2.3 million from the previous year as our increased gross profit was more than offset by higher operating expenses including (1) increased sales commissions related to two single account sales as well as on generally higher revenue, (2) higher customer care expenses related to the 19% increase in end users and the establishment of our Miramichi Customer Care Center (3) higher research and development costs related to the Company's SyncSuite and other initiatives (4) higher administration expenses related to the Company being a public entity for the full year (5) higher amortization expenses related to the acquisition of licensed technology (6) higher amortization expenses related to the computer equipment acquired to support our larger customer base, and (7) the effect of the stronger Canadian dollar on our Canadian dollar denominated expenses.
Net income improved by $344,000 to $2.2 million as higher interest income of $631,000 more than offset the decline in operating income and our effective tax rate declined to 36.3% from 37.7% last year. For fiscal 2008, basic and diluted net income per common share were $0.19 and $0.19 respectively, compared to $0.27 and $0.23 respectively in fiscal 2007. Net income per share declined primarily because of the significant increase in average shares outstanding in fiscal 2008 related to our public offering of 4.83 million shares in the third quarter of fiscal 2007.
Cash flow from our operations totaled $2.9 million for fiscal 2008. We invested $5.6 million in capital assets and intellectual property. At March 31, 2008 we had $26.2 million in cash and cash equivalents available to invest in future business growth.
Subsequent events
On April 28, 2008 we announced that Hostopia had signed a definitive agreement to purchase certain customer assets of New Jersey-based hosting services provider, Luxmovera, LLC, operating as uplinkearth.com. This transaction includes a three year marketing agreement. We plan to migrate all of uplinkearth's shared webhosting end-users to our unified web services platform by June 30, 2008.
On May 5, 2008 we entered into an agreement to acquire shared webhosting end-users from one of our wholesale customers, Tucows.com Co., for approximately $1.6 million. This transaction includes an 18 month marketing agreement. We anticipate the transaction will close on or about May 15, 2008.
Outlook
Mr. Campbell continued, "Looking forward, we intend to strengthen our market leadership by marketing the products we have developed internally or through acquisition. We are particularly excited by the progress we are making in our Fax-to-Email and SyncSuite offerings and believe both are services that can be monetized across our customer base. We also intend to grow revenue by acquiring end-users from companies like uplinkearth as we believe now is the time to scale the subscriber base given our leveragable model. We are confident we can accelerate our growth to between 20 and 24 percent in fiscal 2009 by signing up new customers and successfully completing the acquisitions we have already outlined above. This revenue growth is expected, as it did in the fourth quarter, to translate into improved operating profits both in absolute terms, and as a percentage of revenues."
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 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. 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 Tuesday, May 13, 2008, 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, 2008.
To access the call, please dial 416-644-3425 or 1-800-590-1817.
A replay of the conference call will be available as of 7:15 p.m. EDT, Tuesday May 13, 2008 until midnight, Tuesday, May 20, 2008. To access the replay, call 416-640-1917 or 1-877-289-8525, followed by passcode 21270835, followed by the number sign.
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HOSTOPIA.COM INC.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
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March 31, March 31,
2008 2007
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Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 26,199,954 $ 27,367,667
Trade accounts receivable, net of
allowance for doubtful accounts of
$211,410 (2007 - $114,755) 2,574,356 1,320,422
Deferred tax assets 140,000 117,000
Prepaid expense 397,807 377,242
Income taxes recoverable 1,072,257
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Total current assets 30,384,374 29,182,331
Property and equipment, net of
accumulated amortization of
$7,287,593 (2007- $5,163,911) 4,102,484 2,922,677
Intangible assets, net of accumulated
amortization of $2,815,900
(2007 - $1,594,348) 2,700,861 1,690,284
Deferred tax assets 1,526,000 1,101,000
Other assets 63,972 60,997
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Total assets $ 38,777,691 $ 34,957,289
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 452,376 $ 380,040
Accrued liabilities 854,871 705,229
Payroll and other taxes payable 22,496 34,956
Income taxes payable - 269,020
Current portion of deferred lease
inducements 79,900 79,900
Deferred revenue 836,254 983,299
Current portion of long-term liability - 72,000
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Total current liabilities 2,245,897 2,524,444
Deferred lease inducements 163,157 237,035
Long-term liability - 292,957
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Total liabilities 2,409,054 3,054,436
Stockholders' equity:
Capital stock:
Authorized: 30,000,000 common shares,
par value $0.0001
Issued and outstanding:
11,636,631 common shares 217,122 217,069
Additional paid-in capital 33,312,757 31,054,703
Accumulated other comprehensive loss (43,881) (43,881)
Retained Earnings 2,882,639 674,962
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Total stockholders' equity 36,368,637 31,902,853
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Total liabilities and stockholders' equity $ 38,777,691 $ 34,957,289
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Hostopia.com Inc.
Consolidated Statements of Operations
(Expressed in U.S. dollars)
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Three months ended
March 31,
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2008 2007
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(Unaudited) (Unaudited)
Revenues
Webhosting and applications services $ 7,013,230 $ 5,564,848
Other services 409,968 300,928
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Total revenues 7,423,198 5,865,776
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Cost of revenues
Webhosting and applications services 827,389 738,091
Other services 80,831 102,570
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Total cost of revenues 908,220 840,661
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Gross profit 6,514,978 5,025,115
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Expenses
Sales and marketing 1,604,184 1,169,867
Research and development 900,960 800,643
Professional services 489,718 467,835
Customer Care 1,004,670 750,678
General and administrative 747,055 542,937
Amortization of intangible assets 353,804 208,812
Amortization of property and equipment 609,573 510,126
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5,709,964 4,450,898
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Operating Income 805,014 574,217
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Interest income 210,201 314,001
Interest (expense) - (4,206)
------------- -------------
210,201 309,795
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Income before income taxes 1,015,215 884,012
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Income taxes (recovery)
Current 503,000 542,000
Deferred (211,000) (230,000)
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292,000 312,000
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Net income $ 723,215 $ 572,012
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Net income per share
Basic $ 0.06 $ 0.05
Diluted 0.06 0.05
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Weighted average number of common
shares outstanding
Basic 11,636,631 11,071,306
Diluted 11,678,852 11,276,985
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Year ended
March 31,
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2008 2007
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(Unaudited)
Revenues
Webhosting and applications services $ 26,511,461 $ 21,624,337
Other services 1,266,987 845,327
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Total revenues 27,778,448 22,469,664
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Cost of revenues
Webhosting and applications services 3,304,899 2,563,605
Other services 315,451 356,636
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Total cost of revenues 3,620,350 2,920,241
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Gross profit 24,158,098 19,549,423
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Expenses
Sales and marketing 5,956,610 4,776,483
Research and development 3,840,198 3,069,528
Professional services 2,073,850 1,715,568
Customer Care 3,867,920 3,005,801
General and administrative 2,718,303 1,906,903
Amortization of intangible assets 1,270,682 752,076
Amortization of property and equipmen 2,123,682 1,848,379
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21,851,245 17,074,738
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Operating Income 2,306,853 2,474,685
------------- -------------
Interest income 1,165,030 534,027
Interest (expense) (4,206) (16,824)
------------- -------------
1,160,824 517,203
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Income before income taxes 3,467,677 2,991,888
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Income taxes (recovery)
Current 1,708,000 1,632,000
Deferred (448,000) (504,000)
------------- -------------
1,260,000 1,128,000
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Net income $ 2,207,677 $ 1,863,888
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Net income per share
Basic $ 0.19 $ 0.27
Diluted 0.19 0.23
------------- -------------
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Weighted average number of common
shares outstanding
Basic 11,510,957 4,032,336
Diluted 11,605,476 6,683,836
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%SEDAR: 00023928E