EXHIBIT 99.1
NAVISITE, INC. TO ACQUIRE SUREBRIDGE, INC.
COMBINATION TO CREATE $125 MILLION TECHNOLOGY SERVICES PROVIDER WITH MORE THAN
1200 CUSTOMERS
ANDOVER, Mass. May 6, 2004-- NaviSite, Inc. (NASDAQ SC: NAVI) a leading
technology services provider, and Surebridge, Inc., a privately held provider of
managed application services for mid-market companies, today announced the
execution of a definitive asset purchase agreement, pursuant to which NaviSite
will acquire substantially all of the assets and liabilities of Surebridge.
Based in Lexington, Mass., Surebridge offers a complementary portfolio of
managed application and professional services targeting the mid-market and
brings specific expertise in Microsoft Business Solutions, PeopleSoft and Siebel
Systems.
Under the terms of the agreement, NaviSite will acquire the assets of Surebridge
in exchange for two promissory notes in the aggregate principal amount of $39.5
million (subject to certain adjustments based on the financials of Surebridge at
closing), 3 million shares of NaviSite common stock and the assumption of
certain liabilities at closing (more details below). The closing of the
acquisition is expected to occur later this month and is subject to the
satisfaction of customary closing conditions.
"Surebridge's product maturity, technical expertise and partnerships with
Microsoft and PeopleSoft and stable base of customers with contracted and
recurring revenue provides a very strategic fit to the NaviSite operational
platform," said Arthur Becker, CEO of NaviSite. "We believe the combined
organization will be well-positioned to become a leader in providing a broad
range of application services to mid-sized enterprises. We anticipate that this
acquisition will add approximately $11 million to our quarterly revenues, and by
leveraging our proven operational processes, we expect $3 million to $4 million
of EBITDA from the combined company in NaviSite's first quarter of fiscal 2005
ending October 31, 2004."
"By combining our expertise and competency in delivering application management
services to the mid-market with NaviSite's proven hosting and operational
excellence, we are building a company poised for leadership in the managed
application services market," said Peter J. Boni, chairman and CEO of
Surebridge. "The complementary nature of our products, target markets and
operating platforms make this a compelling proposition for both companies and
for our customers."
"Today's NaviSite is a technology services provider with a substantial base of
recurring revenues. Our current service portfolio is the result of five
acquisitions that we completed during the past two years and have integrated
onto one, efficient operational platform," said Becker. "Our ability to
integrate acquired service offerings and manage the operations and cost
structures of these offerings is reflected in our improved EBITDA profitability
results during the past two quarters. With this acquisition we are now
positioned to increase our size and customer base and continue the expansion of
our portfolio of technology service capabilities. Today's announcement is an
important milestone as we strive toward our goal to become a leader in the
managed application services market."
Upon the completion of this acquisition, Surebridge will join five other
companies acquired by NaviSite since September 2002. Since that time, NaviSite
has acquired the capabilities of
Clearblue Technologies Management (including the assets of the former Applied
Theory), Avasta, Conxion, Interliant, and the infrastructure capabilities and
expertise of ClearBlue Technologies (including certain assets of COLO.COM).
Conference Call Scheduled for 10:00 A.M. Today
NaviSite's CEO, Arthur Becker, will host a conference call to discuss the
acquisition of Surebridge at 10:00 a.m. Eastern Daylight Time today.
Call In #: US: 888 346 5716, International: (+) 404 260 5386
Financing Details
The promissory notes to be issued by NaviSite to Surebridge accrue interest on
the unpaid balance at an annual rate of 10% and shall be paid in full no later
than the second anniversary of the closing. No interest shall accrue on any
principal paid within six months of the closing. In the event that NaviSite
realizes proceeds from certain equity or debt financings or sales of assets,
NaviSite is obligated to make payments on the notes equal to 75% of all such
proceeds. The notes are convertible into common shares of NaviSite under certain
conditions.
EBITDA
The Company believes that the non-GAAP measure of EBITDA provides investors with
a useful supplemental measure of the expected operating and financial
performance of the combined entity by excluding the impact of interest, taxes,
depreciation, amortization and non-cash compensation. EBITDA is not a recognized
measure for financial statement presentation under United States generally
accepted accounting principles (U.S. GAAP). 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. 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
U.S. GAAP. In addition, while the acquisition announced today is expected to
have a positive impact on the Company's EBITDA in the first quarter of fiscal
2005, it also is expected that the Company will incur significant non-cash
charges for amortization of intangible assets that will significantly impact the
Company's net loss for the same period. 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 as a
result of this acquisition. A table reconciling expected EBITDA to expected net
loss for the first quarter of fiscal 2005 is included in this release.
About NaviSite, Inc.
NaviSite is a leading provider of outsourced hosting and managed application
services for middle-market organizations, which include mid-sized companies,
divisions of large multi-national companies, and government agencies.
About Surebridge, Inc.
Surebridge, a leading application outsourcer of On Demand Solutions for
mid-market companies, delivers brand name application choice and affordable
strategy, implementation, outsourcing and optimization services. Surebridge's
complete portfolio comprises CRM, supply chain
management, financial management, human resource management and eBusiness
applications for Microsoft Business Solutions, PeopleSoft and Siebel Systems.
The company was founded in 1997 and is headquartered in Lexington,
Massachusetts.
This release contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
including the expected benefits of the acquisition, the expected financial
results and growth of the combined entity, and the expected ability of NaviSite
to meet its payment obligations under the promissory notes. These statements are
based on NaviSite's and Surebridge's current expectations and beliefs and are
subject to a number of risks, uncertainties and assumptions that could cause
actual results to differ materially from those described in the forward-looking
statements. All statements other than statements of historical fact are
statements that could be deemed forward-looking statements. Risks, uncertainties
and assumptions include (1) the possibility that financial forecasts of either
party may not be achieved, including as to expected EBITDA, revenues, growth and
accretion; (2) the possibility that the parties may be unable to obtain
stockholder or regulatory approvals or third-party consents required for or
satisfy other conditions to the merger; (3) problems may arise in successfully
integrating the businesses of the two companies; (4) the acquisition may involve
unexpected costs; (5) NaviSite may be unable to raise the necessary funds to
meet its payment obligations under the promissory notes; (6) the combined
entities may be unable to achieve expected synergies or make expected future
investments in the combined businesses; (7) the businesses may suffer as a
result of uncertainty surrounding the acquisition; (8) management of the
combined entity may face strain on managerial and operational resources as they
try to oversee larger operations; and (9) other risks that are described in
Securities and Exchange Commission (SEC) reports filed by NaviSite. NaviSite and
Surebridge assume no obligation and expressly disclaim any duty to update
information contained in this news release except as required by law.
All logos, company and product names may be trademarks or registered trademarks
of their respective owners.
NAVISITE FINANCIAL TABLES
Reconciliation of EBITDA to GAAP Net Loss
(in thousands)
Three Months Ending
October 31, 2004
----------------------
Range Low Range High
Estimated Net Loss $(4,000) $(3,000)
Estimated Depreciation 3,800 3,800
Estimated Interest expense, net 1,600 1,600
Estimated Amortization of intangible assets(1) 1,400 1,400
Estimated Non-cash compensation 200 200
Estimated EBITDA $3,000 $4,000
(1) Estimated amortization of intangible assets is based on the amortization
over 5 years of $10 million of intangible assets acquired in the acquisition.
Actual amortization of intangible assets could vary substantially based upon the
final measurement of the assets acquired in the acquisition, and thereby result
in a significant variation in actual net loss for the period presented.