Continued revenue growth from new customers and end-users
MISSISSAUGA, ON, and FT. LAUDERDALE, FL, Feb. 12 /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 financial results for its third quarter ended December 31, 2006. All figures are in U.S. dollars unless otherwise stated.
Colin Campbell, Hostopia's CEO comments, "We are pleased with our third quarter operational progress and financial results. Our business and product development initiatives were both on plan and we entered into agreements with a number of new customers, including an agreement that will add 240,000 email accounts to our platform. This agreement validates our technological leadership in managed email services and our position as a leading web services provider." Mr. Campbell added, "We are also happy to have made exciting progress in new product initiatives by launching a number of web services that we expect will both increase our revenue per user and improve our service."
Business Highlights
- Quarterly revenue increased 25% year over year (97% monthly recurring
revenue)
- 27th quarter of consecutive revenue growth
- End-user growth of 30% year over year to over 248,000
- Signed 14 new customer contracts
- Migrated 11,000 end-users to our platform
- Subsequent to quarter end licensed more than 2,500 website templates
to a large retail webhosting provider
- Received $22 million of net proceeds from our initial public offering
to invest in accelerating business growth
Mr. Campbell notes, "While some isolated factors slowed revenue growth this quarter, business opportunities in the pipeline support our expectation of accelerated growth in the coming quarters." I am also elated by our first licensing agreement of website templates to a large retail web hosting company and the opportunity this represents for incremental revenue from additional licensing agreements."
Financial Results
Revenues increased 25% or $1.1 million to $5.6 million in the three months ended December 31, 2006 compared to the same period last year. This growth in revenues was due to a 30% or 57,500 increase in the number of end-users hosted and serviced since December 31, 2005. At December 31, 2006, the company had approximately 248,000 end-users utilizing its services. Year over year growth in end-users has come from both existing customers that added new end-users, as well as the acquisition of new customers and their end-users.
Cash flows from operations for the nine months ended December 31, 2006 totaled $2.8 million. Hostopia invested $2.1 million in capital assets and intellectual property during the same period. This resulted in net free cash flow of $0.7 million and when combined with the opening cash position as well as the $22 million in net IPO proceeds, Hostopia had $25.7 million in cash and cash equivalents available at December 31, 2006 to invest in its future business growth.
Basic and diluted net income per common share for the third quarter was $0.05 and $0.04 respectively, compared to $0.12 and $0.08 for the same period last year. For the nine months ended December 31, 2006, basic and diluted net income per common share was $0.23 and $0.18 respectively, compared to $0.33 and $0.21 for the nine months ended December 31, 2005. Net income was $0.3 million lower in the quarter and year to date primarily as a result of the higher sales and operating expenses related to preparing the business for our new customer additions and higher research and development expenses related to the development of new web services and enhanced software and service offerings. Net income per share also declined because of the significant increase in shares outstanding related to the Company's public offering of 4.8 million shares in the quarter.
Conference Call Information
Hostopia will hold its third quarter conference call on Monday, February 12, 2007, at 5:00 p.m. ET. Colin Campbell, Chief Executive Officer and Michael Mugan, Chief Financial Officer, will discuss financial results and performance for the three months ended December 31, 2006.
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. ET, Monday February 12, 2007 until midnight, Monday, February 19, 2007. To access the replay, call 416-640-1917 or 1-877-289-8525, followed by passcode 21219279, followed by the number sign.
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 press 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, growth trends, and intentions 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 Report on Form 10-Q for the quarter ended September 30, 2006 which have been incorporated by reference into our Form 10-Q for the nine months ended December 31, 2006, as filed with the Securities and Exchange Commission. These filings are available at www.sec.gov and 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.
Further Information:
Financial Highlights
The following is a summary of financial data provided in the company's Quarterly Report on Form 10-Q for the three and nine months ended December 31, 2006. Please refer to this filed document for a more complete explanation of the company's results.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
December 31, March 31,
2006 2006
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $25,696,363 $ 3,038,217
Trade accounts receivable, net of allowance
for doubtful accounts of $97,533;
(March 31, 2006 - $48,650) 1,961,738 1,568,103
Deferred tax assets 255,350 83,000
Prepaid expenses 480,288 268,969
------------ ------------
Total current assets 28,393,739 4,958,289
------------ ------------
Property and equipment, net of accumulated
amortization of $5,596,568; 3,178,558 3,173,715
(March 31, 2006 - $4,273,828)
Other assets 60,735 60,699
Intangible assets, net of accumulated
amortization of $543,264; 1,858,516 1,608,605
(March 31, 2006 - $842,272)
Deferred tax assets 755,000 481,000
------------ ------------
Total assets $34,246,548 $10,282,308
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 695,316 $ 272,456
Accrued liabilities 725,865 511,525
Payroll and other taxes payable 8,360 25,881
Income taxes payable 168,000 155,000
Current portion of deferred lease inducements 79,900 79,900
Deferred revenue 804,126 923,206
Current portion of long-term liability 260,000 260,000
------------ ------------
Total current liabilities 2,741,567 2,227,968
Deferred lease inducements 254,617 298,538
Long-term liability 129,931 243,639
------------ ------------
Total liabilities 3,126,115 2,770,145
------------ ------------
Series A redeemable, convertible preferred
shares (note 6)
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 11,050,531 common
shares (March 31, 2006 4,032,336 common
shares) 217,064 216,362
Additional paid-in capital 30,844,300 3,384,339
Deferred stock-based compensation - (26,179)
Accumulated other comprehensive loss (43,881) (43,881)
Retained earnings (Deficit) 102,950 (1,188,926)
------------ ------------
Total stockholders' equity 31,120,433 2,341,715
------------ ------------
Total liabilities and stockholders' equity $34,246,548 $10,282,308
------------ ------------
------------ ------------
Hostopia.com Inc.
Consolidated Statements of Operations
(Expressed in U.S. dollars - except per share amounts)
(Unaudited)
Three months ended Nine months ended
December 31, December 31,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenues
Webhosting and
applications
services $ 5,433,707 $ 4,336,591 $16,059,489 $12,425,390
Other services 183,142 147,203 544,399 449,574
------------ ------------ ------------ ------------
Total revenues 5,616,849 4,483,794 16,603,888 12,874,964
------------ ------------ ------------ ------------
Cost of revenues
Webhosting and
applications
services 624,834 449,088 1,825,514 1,249,399
Other services 84,963 50,242 254,066 157,643
------------ ------------ ------------ ------------
Total cost of
revenues 709,797 499,330 2,079,580 1,407,042
------------ ------------ ------------ ------------
Gross profit 4,907,052 3,984,464 14,524,308 11,467,922
------------ ------------ ------------ ------------
Expenses
Sales and marketing 1,259,359 1,012,367 3,606,616 2,969,329
Research and
development 773,901 524,439 2,268,885 1,511,700
Project management 407,936 347,678 1,247,733 989,982
Technical support 781,916 548,066 2,255,123 1,578,308
General and
administrative 541,285 356,331 1,363,966 1,042,367
Amortization of
intangible assets 201,219 71,373 543,264 197,802
Amortization of
property and
equipment 487,310 334,009 1,338,253 1,001,467
------------ ------------ ------------ ------------
4,452,926 3,194,263 12,623,840 9,290,955
------------ ------------ ------------ ------------
Income before the
undernoted 454,126 790,201 1,900,468 2,176,967
------------ ------------ ------------ ------------
Interest income 180,327 9,508 220,026 18,109
Interest (expense) (4,206) - (12,618) (4,566)
------------ ------------ ------------ ------------
176,121 9,508 207,408 13,543
------------ ------------ ------------ ------------
Income before income
taxes 630,247 799,709 2,107,876 2,190,510
------------ ------------ ------------ ------------
Income taxes (recovery)
Current 343,000 285,000 1,090,000 775,000
Deferred (86,000) - (274,000) -
------------ ------------ ------------ ------------
257,000 285,000 816,000 775,000
------------ ------------ ------------ ------------
Net income $ 373,247 $ 514,709 $ 1,291,876 $ 1,415,510
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share
(note 5)
Basic $ 0.05 $ 0.12 $ 0.23 $ 0.33
Diluted 0.04 0.08 0.18 0.21
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average
number of common
shares outstanding
Basic 7,787,745 4,032,336 5,288,716 4,032,336
Diluted 8,951,380 6,660,502 7,340,008 6,645,438
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Hostopia.com Inc.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
Nine months
ended December 31,
--------------------------
2006 2005
------------ ------------
Cash flows from operating activities:
Net income $ 1,291,876 $ 1,415,510
Items which do not involve cash:
Amortization 1,881,517 1,199,269
Stock-based compensation 157,017 14,967
Non-cash interest 12,618 -
Deferred income taxes (446,350) 675,000
Deferred lease inducements (43,921) 40,985
Change in operating assets and
liabilities
Trade accounts receivable (393,635) (377,919)
Prepaid expense (211,319) 1,413
Increase in other assets - (26,145)
Accounts payable 422,860 (32,452)
Accrued liabilities 214,340 245,732
Payroll taxes and other taxes payable (17,521) (434)
Income taxes payable 13,000 -
Deferred revenue (119,080) 39,105
------------ ------------
Cash flows from operating activities 2,761,402 3,195,031
------------ ------------
Cash flows from financing activities:
Issue of common shares on exercise of stock
options 1,799 -
Issue of common shares on exercise of
warrants 192,000 -
Issue of common shares on initial public
offering 21,965,578 -
Repayment of long-term liabilities (126,326) -
------------ ------------
Cash flows from (used in) financing
activities 22,033,051 -
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (1,343,096) (1,294,790)
Acquisition of intellectual property (793,175) (231,474)
------------ ------------
Cash flows from investing activities (2,136,271) (1,526,264)
------------ ------------
Effect of currency translation on cash
balances (36) -
------------ ------------
Increase in cash and cash equivalents 22,658,146 1,668,767
Cash and cash equivalents, beginning 3,038,217 1,897,230
------------ ------------
of period
Cash and cash equivalents, end of period $25,696,363 $ 3,565,997
------------ ------------
------------ ------------
Supplemental cash flow information:
Interest paid $ - $ 4,566
Income taxes paid 1,249,350 100,000
------------ ------------
------------ ------------
%SEDAR: 00023928E