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Press Release -- March 11th, 2010
Source: Navisite
Tags: Exchange

NaviSite Reports Second Quarter Fiscal Year 2010 Financial Results

Bookings of recurring revenue of $0.9 million, up 23% over prior year Quarterly adjusted EBITDA of $9.1 million, up 4% over prior year

Andover, Mass., March 11, 2010 – NaviSite, Inc. (NASDAQ:NAVI, news, filings), a leading provider of cloud enabled enterprise-hosting and application-management services, today reported financial results for the second quarter fiscal year 2010, which ended on January 31, 2010.

  • Recurring hosting revenue was $36.1 million for the second quarter, an increase of 2%, compared to $35.3 million for the second quarter of fiscal year 2009. The second quarter of fiscal year 2009 included $0.8 million of hosting revenue from NaviSite’s former Los Angeles data center, which lease NaviSite did not renew at the end of the third quarter of fiscal year 2009. Excluding the Los Angeles hosting revenue in the second quarter of fiscal year 2009, recurring hosting revenue increased 4%.
  • Total revenue for the quarter ended on January 31, 2010, was $37.7 million, compared to $38.0 million in the second quarter of fiscal year 2009, representing a year-over-year decrease of 1%. The expected decrease in total revenue for the quarter was due to the planned decline in NaviSite’s recurring hosting revenue resulting from the nonrenewal of the Los Angeles data center and due to a reduction of professional-services revenue during these periods.
  • Gross margin improved to 34% for the second quarter, representing a two-percentage-point increase from the 32% recorded in the second quarter of the previous year.
  • Income from operations improved 30% for the second quarter of fiscal year 2010, increasing to $2.2 million, compared to $1.7 million in the second quarter of fiscal year 2009.
  • EBITDA, excluding impairment costs, stock-based compensation, severance and other non-operational charges (“EBITDA, as adjusted”), for the second quarter was $9.1 million, representing a year-over-year increase of 4%.
  • Net loss attributable to common shareholders for the second quarter of fiscal year 2010 was $2.9 million, or $(0.08) per share, compared to a loss of $3.3 million, or $(0.09) per share, in the second quarter of fiscal year 2009.
  • Cash generated from operating activities for the second quarter of fiscal year 2010 was $12.5 million, representing an increase of 396% from the $2.5 million recorded in the second quarter of fiscal year 2009.

“We are on track to see accelerated growth in our bookings and hosting revenue from our Enterprise Customers. Our increased focus on this customer segment is yielding new and significantly larger opportunities as we leverage our experience in complex hosting solutions and prepare to launch our Managed Cloud Offering to these Enterprise customers,” said Arthur Becker, Chief Executive Officer of NaviSite.

Quarterly Business Highlights

  • Booked approximately $0.86 million of new monthly recurring hosting revenue (“MRR”) in the second quarter of fiscal year 2010, an increase of 112% from the $0.40 million booked in the first quarter of fiscal year 2010 and an increase of 23% from the $0.70 million booked in the second quarter of fiscal year 2009.
  • Signed $25.3 million of hosting contract value, with an average contract term of 30 months during the second quarter of fiscal year 2010 for recurring enterprise-hosting business, an increase of 183% compared to bookings of $8.9 million in recurring hosting-contract value in the previous quarter and $18.9 million in hosting-contract value in the second quarter of 2009.
  • Customer churn, defined as the percentage loss of a customer or a reduction in a customer’s monthly recurring revenue from our active customer pool, was 1.1% per month during the quarter, compared to 1.3% in the prior quarter and 1.0% a year ago.

Subsequent Event

  • Announced the sale on February 19, 2010 of our Lawson / Kronos Application Services business to Velocity Technology Solutions, Inc. for $56.0 million in cash. NaviSite will use all of the net sale proceeds for debt repayment.

Conference Call Scheduled for March 11, 2009

NaviSite, Inc. Chief Executive Officer Arthur Becker and Chief Financial Officer Jim Pluntze will host a conference call on Thursday, March 11, 2010, at 5:00 p.m. Eastern Time to discuss the company’s financial results for its second quarter fiscal year 2010.

NaviSite’s conference call can be accessed by dialing 866.543-6411 (International: +1.617.213.8900) and entering passcode 12668656. Alternatively, participants can listen to a live webcast of the call available through NaviSite’s website here. A replay of the call will be accessible following the conference call by dialing 888.286.8010 (International: +1.617.801.6888) and using passcode 66871291.


EBITDA is not a recognized measure for financial-statement presentation under United States generally accepted accounting principles (“GAAP”). NaviSite believes that the non-GAAP measure of EBITDA, as adjusted, provides investors with a useful supplemental measure of our actual and expected operating and financial performance by excluding the impact of interest, taxes, depreciation and amortization. We also exclude impairment costs, stock-based compensation, severance and other non-recurring charges from our 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. We use EBITDA, as adjusted, to assist in evaluating our actual and expected operating and financial performance. These non-GAAP results should not be evaluated in isolation from, or as a substitute for, our financial results prepared in accordance with GAAP. A table reconciling our net loss, as reported, to EBITDA, as adjusted, is included in the condensed consolidated financial statements in this release. We believe that using EBITDA, as adjusted, as a performance measure, together with net loss, will help investors better understand our underlying financial performance.

About NaviSite

NaviSite, Inc. (NASDAQ: NAVI) is a leading worldwide provider of enterprise-class, cloud-enabled hosting, managed applications and services. With over 20 years experience, the Company provides a full suite of reliable and scalable managed services, including Applications Services, industry-leading Enterprise Hosting, and Managed Cloud Services for enterprises looking to outsource IT infrastructures and lower their capital and operational costs. Over 1,400 customers depend on NaviSite for customized solutions, delivered through a global footprint of over a dozen state-of-the-art data centers supported by approximately 650 professionals. For more information on NaviSite services, please visit


This release contains forward-looking statements that address a variety of subjects, including NaviSite’s expected future operating and financial results, such as profitability, revenue growth and EBITDA, the success and performance of our product and service offerings and our strategic business plans for growing its customer base and increasing sales. All statements other than statements of historical fact — including, without limitation, those with respect to our goals, plans and strategies set forth herein — are forward-looking statements. The following important factors and uncertainties, along with general economic conditions, changes in economic conditions and others, could cause actual results to differ materially from those described in these forward-looking statements. Our success — including our ability to improve our gross profit, to improve our cash flows, to expand our operations and revenue and to reach and sustain profitability — depends in part on our ability to execute on our business strategy and the continued and increased demand for, and market acceptance of, our products and services. We may not remain compliant with our agreement with our senior secured lenders, including financial covenants. Our financial forecasts may not be achieved, including those as to expected EBITDA and revenue. We may be unable to raise the necessary funds to meet our payment obligations to our lending group under our senior secured credit facility and other creditors. We may not be able to expand our operations in accordance with our business strategy. We may experience difficulties integrating technologies, operations and personnel in accordance with our business strategy. Our products, technologies and resources may not successfully operate with the technology, resources and applications of third parties. We derive a significant portion of our revenue from a small number of customers, and the loss of any of those customers could significantly damage our financial condition and results of operations. Competition has increased, and technological changes made, in the markets in which we compete. For a detailed discussion of cautionary statements that may affect our future results of operations and financial results, please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10 K and our quarterly reports on Form 10 Q. Forward-looking statements represent our current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements that we make. All logos, company and product names may be trademarks or registered trademarks of their respective owners.

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