[NAVISITE LOGO]
FOR RELEASE TUESDAY, MARCH 8, 2005
CONTACTS:
Jeffrey Hodnett
NaviSite, Inc.
(978) 946-7833
jhodnett@navisite.com
NAVISITE REPORTS FISCAL YEAR 2005 SECOND QUARTER RESULTS
Doubles EBITDA from prior quarter, significantly lowers loss from operations,
and adds more than 30 new customers
ANDOVER, MASS. - MARCH 8, 2005 - NaviSite, Inc. (Nasdaq SC: NAVI), a leading
provider of IT Outsourcing and Software On Demand enablement services for
middle-market organizations, today reported financial results for its second
quarter of fiscal year 2005, which ended January 31, 2005.
NaviSite continued to post positive EBITDA, excluding impairment and other
one-time charges, for the sixth consecutive fiscal quarter, improving to $2.6
million in the second fiscal quarter of 2005, from $1.3 million in the first
fiscal quarter of 2005, a 100% improvement. The Company also continued in its
efforts to increase efficiency, reducing its loss from operations for the second
consecutive quarter to $2.0 million, down from $4.8 million in the prior quarter
and $2.9 million in the second quarter of fiscal year 2004. The Company's focus
on customer service and satisfaction led to adding more than 30 new customers
and more than 90 customer contract renewals during the quarter.
KEY HIGHLIGHTS AND SUBSEQUENT EVENTS
NaviSite continues to make strides in its company-wide initiatives to streamline
operational expenses and improve customer service.
In January 2005, the Company created NaviSite India Private Limited. Based in
New Delhi, India, this office will expand NaviSite's international footprint and
provide the ability to rapidly scale operations and broaden the Company's
service offerings. The cost advantages of a Global Delivery platform will allow
NaviSite to be more aggressive with its pricing model, while still providing
high quality services, to attract new customers. To date, the Company has hired
professionals in engineering, management and network operations center
functions, and has plans to expand significantly during the next 6 months. These
employees are currently focused on delivering managed messaging, networking and
PeopleSoft application services and will expand to include key growth areas,
such as EnterpriseOne and Oracle DBA services, by NaviSite's fourth fiscal
quarter of 2005.
In February 2005, NaviSite signed an agreement that provided a Las Vegas-based
company use of approximately 18,000 square feet of space and the sale of
infrastructure equipment in the Las Vegas data center in exchange for an initial
payment of $600,000 and approximately $55,000 per month for the next two years.
It also assumed responsibility for management of the data center and is expected
to upgrade the facility's infrastructure. Including operational expense savings,
the anticipated total cash value of the transaction to NaviSite over the next
two years is approximately $2.9 million. NaviSite has retained approximately
2,000 square feet in the data center to service and support its current and
future customers.
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
The Company continued to expand its managed application business in the second
quarter by adding more than 30 new customers. These included Rossignol, a
leading manufacturer of skiing products who outsourced a new Microsoft Great
Plains system to manage its inventory, and Sterngold, a world leader in dental
products who has engaged NaviSite to outsource its Microsoft Commerce Server
based eCommerce system.
NaviSite continues to focus on its commitment to customer service and
satisfaction and, as a result, more than 90 customers renewed their existing
agreements during the second quarter of fiscal year 2005 and more than 110
customers added incremental services to their existing contracts during the
quarter.
Overall, the Company ended the second quarter of fiscal year 2005 with more than
750 customers in its managed services (Application, Hosting, Messaging, and
CDN/ESD) and software on demand portfolio, approximately 115 indirect customers
through channel partners. In addition, we had more than 250 professional
services and software licensing customers that were active during the second
quarter.
In December 2004, the Company announced it signed a reseller agreement with
PeopleSoft, Inc. to sell its PeopleSoft(R) EnterpriseOne and PeopleSoft(R) World
software packages directly to companies. This agreement enables NaviSite to
extend the benefits of its end-to-end solutions for business application
strategy, implementation, integration, and optimization services to smaller and
mid-market enterprises. The Company views the recent acquisition of Peoplesoft
by Oracle as an opportunity to strengthen its outsourced mid-market application
offerings.
SECOND QUARTER FINANCIAL RESULTS
Total revenue for the second quarter of fiscal year 2005 was $28.4 million, a 2%
decrease from $28.9 million in the prior quarter, and a 27% increase from $22.3
million in the second quarter of fiscal year 2004. NaviSite posted a gross
profit of $7.7 million for the second quarter of fiscal year 2005, an increase
of 27% from $6.1 million in the prior quarter, and an increase of 38% from the
gross profit of $5.6 million reported for second quarter of fiscal year 2004.
Net loss decreased to $4.6 million for the second quarter of fiscal year 2005, a
30% improvement, as compared with a net loss of $6.6 million for the prior
quarter. Net loss for the second quarter of fiscal year 2004 was $3.4 million.
Net loss per share decreased to $0.17 for the second quarter of fiscal year
2005, from a net loss of $0.24 per share for the prior quarter. Net loss per
share for the second quarter of fiscal year 2004 was $0.14. NaviSite posted
positive EBITDA, excluding impairment and other one-time charges, of $2.6
million for the second quarter of fiscal year 2005, as compared to $1.3 million
of EBITDA, excluding impairment and other one-time charges, for the prior
quarter and $1.7 million of EBITDA, excluding impairment and other one-time
charges, for the second quarter of fiscal year 2004.
"With an improving cost structure and a continued focus on higher-margin
services, NaviSite has positioned itself to take a leadership role as the
independent alternative for outsourced application services for mid-market
companies," said Arthur Becker, CEO of NaviSite. "We anticipate revenue for the
third quarter of fiscal year 2005, ending April 30, 2005, will be in the range
of $27.6 million to $28.1 million and EBITDA, excluding impairment and other
one-time charges, to be between $2.8 million and $3.3 million."
EBITDA
EBITDA is not a recognized measure for financial statement presentation under
United States generally accepted accounting principles (U.S. GAAP). The Company
believes that the non-GAAP measure of EBITDA provides investors with a useful
supplemental measure of the Company's actual and expected
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
operating and financial performance by excluding the impact of interest, taxes,
depreciation, amortization and non-cash compensation. The Company also excludes
impairment and other one-time charges from its non-GAAP measure, as such items
may be considered to be of a non-operational nature. 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. A table reconciling the Company's net loss, as reported, to EBITDA is
included in the consolidated financial statements in this release. 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. A table reconciling expected net loss to
expected EBITDA for the third quarter of fiscal year 2005 is also included in
this release.
CONFERENCE CALL SCHEDULED FOR TUESDAY, MARCH 8, 2005
NaviSite's Chief Executive Officer, Arthur Becker, and Chief Financial Officer,
John J. Gavin, Jr., will host a conference call to discuss NaviSite's fiscal
year 2005 second quarter financial results at 9:00 a.m. Eastern Time, on
Tuesday, March 8, 2005.
DATE AND TIME: Tuesday, March 8, 2005, 9:00 A.M. ET
CALL IN #: Toll free: 866-682-6100 (INTL:201-499-0416)
DIAL IN REPLAY: Toll Free: 888-346-3949 (INTL:404-260-5385)
Enter PIN#: 03080544 - Enter Confirmation#: 20050304132267
WEBCAST REPLAY: www.navisite.com/investors.cfm
ABOUT NAVISITE
NaviSite, Inc. (NASDAQ SC: NAVI) deploys, manages and enables software
applications and infrastructure for middle-market organizations, which include
mid-sized companies, divisions of large multi-national companies and government
agencies.
The Company offers a full range of services including design, implementation,
optimization, upgrade, application development, fully hosted and remote
application management, managed services, content delivery, colocation, and
Software as a Service enablement.
NaviSite is a Microsoft Gold Certified Partner, PeopleSoft Distributor and
Silver Services Partner, and a Siebel Reseller Partner. The Company offers
vertical expertise in the manufacturing/distribution, financial services,
healthcare/pharmaceutical, services, publishing/media & communications, and
public sector industries.
NaviSite was founded in 1997 and is headquartered in Andover, Massachusetts,
with offices and data centers across the United States, and in the UK and India.
The Company has approximately 480 employees servicing approximately 1,100
customers world-wide. For more information, please visit www.navisite.com or
call 978.682.8300.
# # #
This release contains forward-looking statements, which address a variety of
subjects including, for example, the expected future operating and financial
results, including profitability, revenue growth and EBITDA, the expected
benefits, capabilities and marketability of NaviSite's product and service
offerings, NaviSite's strategic business plans for growing its customer base and
increasing sales, the expected benefits, efficiencies, synergies and integration
efforts of the Surebridge acquisition, and the expected financial results and
growth of the combined entity. All statements other than statements of
historical fact, including without limitation, those with respect to NaviSite's
goals, plans and strategies set forth herein are forward-looking statements. The
following important factors and uncertainties, among others, could cause actual
results to differ materially from those
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
described in these forward-looking statements: NaviSite's success, including its
ability to improve its gross profit, improve its cash flows, expand its
operations and revenue, and reach and sustain profitability, depends on its
ability to execute on its business strategy and the continued and increased
demand for and market acceptance of its products and services; the possibility
that financial forecasts of the Company following the Surebridge acquisition may
not be achieved, including those as to expected EBITDA and revenue, due to
problems or unexpected costs that may arise in successfully integrating the
Surebridge business or an inability to realize expected synergies or make
expected future investments in the combined businesses; NaviSite may be unable
to raise the necessary funds to meet its payment obligations under the
promissory notes issued to certain creditors; NaviSite's management may face
strain on managerial and operational resources as they try to oversee the
expanded operations; NaviSite may not be able to expand its operations in
accordance with its business strategy; NaviSite may experience difficulties
integrating technologies, operations and personnel in accordance with its
business strategy; NaviSite's acquisition of companies and businesses may not
produce expected cost savings, operational efficiencies or revenue; NaviSite's
products, technologies, and resources may not successfully operate with the
technology, resources and/or applications of third parties; NaviSite derives a
significant portion of its revenue from a small number of customers and the loss
of any of those customers would significantly damage NaviSite's financial
condition and results of operations; and increased competition and technological
changes in the markets in which NaviSite's competes. For a detailed discussion
of cautionary statements that may affect NaviSite's future results of operations
and financial results, please refer to NaviSite's filings with the Securities
and Exchange Commission, including NaviSite's most recent Quarterly Report on
Form 10-Q. Forward-looking statements represent management's current
expectations and are inherently uncertain. We do not undertake any obligation to
update forward-looking statements made by us.
All logos, company and product names may be trademarks or registered trademarks
of their respective owners.
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
NAVISITE FINANCIAL TABLES - SECOND QUARTER FISCAL YEAR 2005
EBITDA Summaries
For the Three Months Ended
January 31, 2005 January 31, 2004
--------------Unaudited--------------
------------(In thousands)-----------
Net loss, as reported $ (4,632) $(3,439)
Depreciation 2,164 2,320
Interest expense, net 1,912 637
Taxes 765 -
Amortization 1,425 852
Non-cash compensation 196 218
-------- --------
EBITDA 1,830 588
Impairments 507 946
Severance, Avasta settlement and
acquisition migration costs 222 214
-------- --------
EBITDA, excluding impairments, severance,
Avasta settlement and acquisition migration
costs $ 2,559 $ 1,748
======= =======
For the Six Months Ended
January 31, 2005 January 31, 2004
--------------Unaudited--------------
------------(In thousands)-----------
Net loss, as reported $ (11,208) $ (6,792)
Depreciation 4,503 4,943
Interest expense, net 3,797 1,182
Taxes 765 -
Amortization 2,851 1,699
Non-cash compensation 380 218
--------- --------
EBITDA 1,088 1,250
Impairments 1,539 2,035
Severance, Avasta settlement and
acquisition migration costs 1,199 459
EBITDA, excluding impairments, severance,
Avasta settlement and acquisition migration
costs $ 3,826 $ 3,744
======= =======
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
NAVISITE FINANCIAL TABLES - SECOND QUARTER FISCAL YEAR 2005
Reconciliations of Expected GAAP Net Loss to Expected EBITDA
FOR THE THREE MONTHS ENDED
APRIL 30, 2005
RANGE LOW RANGE HIGH
-------(IN THOUSANDS)-----
Expected Net loss $ (3,238) $ (2,738)
Expected Depreciation 2,175 2,175
Expected Interest expense, net 1,960 1,960
Expected Taxes 287 287
Expected Amortization of
intangible assets 1,420 1,420
Expected Non-cash compensation 196 196
--------- ---------
Expected EBITDA $ 2,800 $ 3,300
========= =========
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
NAVISITE FINANCIAL TABLES - SECOND QUARTER FISCAL YEAR 2005
Condensed Consolidated Statements of Operations
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JANUARY 31, 2005 JANUARY 31, 2004 JANUARY 31, 2005 JANUARY 31, 2004
--------------UNAUDITED----------------- --------------UNAUDITED-----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenue $ 28,346 $ 22,329 $57,207 $ 45,802
Revenue, related parties 35 - 68 -
-------- -------- ------- --------
Total revenue 28,381 22,329 57,275 45,802
-------- -------- ------- --------
Cost of revenue 20,634 16,758 43,454 34,682
Impairment, restructuring and
other 34 - 34 633
-------- -------- ------- --------
Total cost of revenue 20,668 16,758 43,488 35,315
-------- -------- ------- --------
Gross profit 7,713 5,571 13,787 10,487
-------- -------- ------- --------
Operating expense:
Operating expense 9,196 7,503 19,004 14,781
Impairment, restructuring
and other 473 946 1,505 1,402
-------- -------- ------- --------
Total operating expenses 9,669 8,449 20,509 16,183
-------- -------- ------- --------
Loss from operations (1,956) (2,878) (6,722) (5,696)
Other income (expense):
Interest income 15 33 28 97
Interest expense (1,927) (670) (3,825) (1,279)
Other income (expense), net 1 76 76 86
-------- -------- ------- --------
Loss before income tax expense (3,867) (3,439) (10,443) (6,792)
Income tax expense (765) - (765) -
-------- -------- ------- --------
Net loss $ (4,632) $ (3,439) $ (11,208) $(6,792)
======== ======== ======= ========
Basic and diluted net loss per
common share $ (0.17) $ (0.14) $ (0.40) $(0.28)
======== ======== ======= ========
Basic and diluted weighted
average number of common
shares outstanding 27,944 24,741 27,936 24,624
======== ======== ======= ========
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
NAVISITE FINANCIAL TABLES - SECOND QUARTER FISCAL YEAR 2005
Condensed Consolidated Balance Sheets
JANUARY 31, 2005 JULY 31, 2004
---------------- -------------
ASSETS
- ------ ---------UNAUDITED-----------
-------(IN THOUSANDS)--------
Current assets:
Cash and cash equivalents $ 1,517 $ 3,195
Accounts receivable, less allowance for
doubtful accounts of $3,093 at January 31, 2005
and $2,498 at July 31, 2004 15,532 16,584
Due from related party 108 101
Prepaid expenses and other current assets 4,676 5,967
------------ ------------
Total current assets 21,833 25,847
Non-current assets 91,908 98,017
------------ ------------
Total assets $ 113,741 $ 123,864
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts receivable financing line, net $ 20,293 $ 20,240
Notes payable, current portion 1,334 1,551
Note payable to related party 3,000 3,000
Capital lease obligations, current portion 1,381 2,921
Accounts payable 10,696 8,285
Accrued expenses, deferred revenue and
customer deposits 21,291 26,561
------------ ------------
Total current liabilities 57,995 62,558
Total non-current liabilities 54,041 50,224
------------ ------------
Total liabilities 112,036 112,782
Total stockholders' equity 1,705 11,082
------------ ------------
Total liabilities and stockholders'
equity $ 113,741 $ 123,864
============ ============
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA
NAVISITE FINANCIAL TABLES - SECOND QUARTER FISCAL YEAR 2005
Condensed Consolidated Statements of Cash Flows
FOR THE THREE MONTHS ENDED
JANUARY 31, 2005 JANUARY 31,2004
----------UNAUDITED-------------
--------(IN THOUSANDS)----------
Net cash provided by operating activities $ 2,262 $ 3,204
Net cash used for investing activities (702) (360)
Net cash provided by (used for)
financing activities (1,067) 1,977
---------- ----------
Net increase in cash 493 4,821
Cash and cash equivalents, beginning of
period 1,024 2,898
---------- ----------
Cash and cash equivalents, end of period $ 1,517 $ 7,719
========== ==========
FOR THE SIX MONTHS ENDED
JANUARY 31, 2005 JANUARY 31,2004
----------UNAUDITED-------------
--------(IN THOUSANDS)----------
Net cash provided by (used for)
operating activities $ 1,518 $ (15)
Net cash used for investing activities (2,121) (846)
Net cash provided by (used for)
financing activities (1,075) 4,718
---------- ----------
Net increase (decrease) in cash (1,678) 3,857
Cash and cash equivalents, beginning of
period 3,195 3,862
---------- ----------
Cash and cash equivalents, end of period $ 1,517 $ 7,719
---------- ---------
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Corporate Headquarters: 400 Minuteman Road, Andover MA, 01810 USA