NaviSite Announces Second Fiscal Quarter 2001 Results.Business Editors ANDOVER Andover (ăn`dōvər), town (1990 pop. 29,151), Essex co., NE Mass.; inc. 1646. Chiefly a textile producer in the 19th cent., Andover now makes toiletries, electronic and computer equipment, chemicals, medical instruments, rubber products, , Mass.--(BUSINESS WIRE)--March 8, 2001 NaviSite, Inc. (Nasdaq: NAVI NAVI Nuclear Arms Verification Instrument NAVI New Analog Video Interface ), a leading managed application hosting provider, and a majority owned operating company operating company A business that engages in transactions with outsiders. of CMGI CMGI Commonly Maintained Grounds Infrastructures CMGI College Marketing Group Information (Services) , Inc. (Nasdaq: CMGI), today announced results for its second fiscal quarter, ended January January: see month. 31, 2001. Revenue for the fiscal 2001 second quarter increased to $27.7 million, compared with $26.0 million reported in the first fiscal quarter of 2001, and representing an increase of 201% versus the same period last year. Net loss for the second quarter was $31.9 million, or ($0.54) per share. This compares to a net loss of $23.1 million, or ($0.39) per share in the first fiscal 2001 quarter and an $11.4 million loss or ($0.21) per share for the comparable period in the prior year. Gross margin percentage continued to improve versus the prior quarter and versus the same period last year. "We are executing on our plans both to manage through a challenging market environment and to take advantage of substantial new business opportunities," commented Joel Rosen, president and chief executive officer of NaviSite, Inc. "We are actively managing costs in a slower growth environment and also introducing substantial new value propositions, based on our intellectual property, which can significantly improve customers' economics in outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. ." The Company continues its focus on attracting enterprise customers, and in the second quarter 17 of the 33 new customers were enterprises, continuing the trend of increasing the percentage of enterprise accounts in the Company's customer base. New customers in the quarter included Blue Cross Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of ; Biogen; Carat Freeman Freeman can mean:
At the end of the second quarter NaviSite had cash and equivalents of approximately $69 million. During the quarter the Company completed its $80 million convertible debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay with CMGI and repaid the $27 million balance outstanding on its bank capital lease obligation. This repayment is anticipated, barring unforeseen circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , to reduce related cash payments by approximately $2 million per quarter, starting in the third quarter. This measure, as well as cost reduction measures, are expected, based on current estimates and expectations, to reduce cash usage by approximately $6 to $8 million per quarter by the fourth quarter. The Company has also taken steps to reduce capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. and expects that current cash levels will be adequate to reach cash flow break-even. Major developments related to the Company include: -- 33 new customers were added in Q2, including Blue Cross Blue Shield of New York, Biogen, Carat Freeman and Sun Microsystems; NaviSite also announced that Wolters Kluwer has selected NaviSite as its sole managed hosting provider for its North American companies. During the quarter the Company terminated 45 customers, primarily in the dot.com space due to payment problems; total customer base at the end of the quarter was 379; -- Revenue stream diversification continued, with 61% of revenue in fiscal Q2 2001 coming from non-CMGI related companies, compared to 58% in fiscal Q1 and 44% in the same period last year; -- Average annualized revenue per customer increased to $292,000, up 10% sequentially from the previous quarter and up 56% from the same period in the prior year. The fastest growing revenue segment again was the enterprise segment, which grew 34% from Q1; -- Introduced the next generation of its ESM monitoring platform that enables significant new functionality, including enhanced event correlation, NOC to NOC failover, and application monitoring; subsequent to the quarter the Company also introduced an enhanced version of its customer care site, MyNaviSite, that provides further value for customers interacting with NaviSite and their site data and statistics; -- Continued to leverage and expand the market acceptance of streamOS(TM), NaviSite's content and delivery automation platform; numerous leading streaming Content Delivery Networks (CDNs), including Digital Island, Enron, eVoke Communications, and subsequent to the quarter Madge.web, Speedera Networks, Inc. and Streaming Media Corporation publicly have announced support of streamOS. During the second quarter, streamOS enabled NaviSite to manage several high-profile events, including the webcast of the Madonna concert from London, in what has been reported to be the most watched event in the history of the Internet, as well as a streaming event for the introduction of the Jennifer Lopez CD; NFL Films also selected streamOS to deliver webcasts for Super Bowl pre-game events; -- Introduced several significant managed hosting services, including enhanced offerings for Microsoft SQL Server database; new e-Metric measurement and analysis services; and enhanced managed security services with Check Point Software's Provider-1; the Company also introduced a suite of integrated managed services designed to enable enterprise customers to rapidly deploy and implement complex Internet applications; -- Capital expenditures for infrastructure were approximately $7 million; -- Depreciation & amortization was approximately $5 million. Business Outlook For Third Quarter Fiscal 2001: Management estimates that barring unforeseen circumstances, for the Company's business, in the third fiscal quarter of 2001: -- Revenue for the third quarter fiscal 2001 is planned to be approximately $26 million; -- Gross margin percentage is planned to be between negative 30% and negative 34%, with gross margin estimated to be turning positive in Q1 of fiscal 2002; -- Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. is expected to be in the range of approximately $29 to $31 million; -- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become losses are expected to be approximately $25 to $27 million; -- Depreciation and amortization are expected to be approximately $5 to $6 million; -- Loss per share is planned to be between negative $0.55 and negative $0.58; -- Capital Expenditures for infrastructure is expected to be approximately $2 to $4 million. Business Outlook Full Fiscal Year 2001: Management estimates that barring unforeseen circumstances, for the Company's business, in fiscal 2001: -- Revenues planned to be in the range of $108 to $111 million; -- Gross margin is expected to be in the range of negative 21% to negative 24% by year end; -- Operating loss is planned to be in the range of $107 to $111 million; -- EBITDA losses are planned to be in the range of $86 to $90 million; -- Depreciation and amortization are expected to be approximately $18 to $20 million; -- Loss per share are expected to be between negative $1.96 and negative $2.03; -- Capital expenditure for infrastructure for the year is expected to be approximately $20 to $30 million. About NaviSite, Inc. NaviSite, Inc., is a leading provider of outsourced Web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. and managed application services See ASP and Web services. for companies conducting mission-critical business on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , including enterprises and other businesses deploying Internet applications. The Company's goal is to help customers focus on their core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
With the rise of web technologies since mid-1995, specialists have emerged that understand the complexities of and applications, allowing customers to fundamentally improve the ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). of their web operations. NaviSite is a majority-owned operating company of CMGI, Inc. with minority investment from Microsoft Corporation (company) Microsoft Corporation - The biggest supplier of operating systems and other software for IBM PC compatibles. Software products include MS-DOS, Microsoft Windows, Windows NT, Microsoft Access, LAN Manager, MS Client, SQL Server, Open Data Base Connectivity (ODBC), MS Mail, . NaviSite's SiteHarbor(R) solutions provide secure, reliable, co-location and high-performance hosting services, including high-performance Internet access See how to access the Internet. , and high-availability server management solutions through load balancing The fine tuning of a computer system, network or disk subsystem in order to more evenly distribute the data and/or processing across available resources. For example, in clustering, load balancing might distribute the incoming transactions evenly to all servers, or it might redirect them , clustering, mirroring and storage services. In addition, NaviSite's enhanced management services, beyond basic co-location and hosting, are designed to meet the expanding needs of businesses as their Web sites and Internet applications become more complex and as their needs for outsourcing all aspects of their online businesses intensify in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: . The Company's application services, which include application hosting, management and rental, provide cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. access to, as well as rapid deployment and reliable operation of, business-critical applications, including managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality for streaming media See streaming audio, streaming video and digital media hub. . For more information about NaviSite, please visit www.navisite.com or by phone on the East Coast call 888-298-8222, on the West Coast call 888-929-0401. NaviSite is headquartered at 400 Minuteman minuteman Colonial soldier of the American Revolution. Minutemen were first organized in Massachusetts in September 1774, when revolutionary leaders sought to eliminate Tories, or British sympathizers, from the militia by replacing all officers. Road, Andover, MA 01810. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. which address a variety of subjects including, for example, expectations of third quarter and fiscal 2001 revenue, gross margin, EBITDA, operating loss, net loss, earnings per share, capital expenditures and cash usage, the results of the cost cutting efforts, including predictions of NaviSite's higher margins, growth, enterprise sales, greater efficiencies, and predictions of when NaviSite will become gross margin profitable and EBITDA profitable. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: NaviSite may experience difficulties integrating technologies, operations and personnel of acquisitions; domestic demand for NaviSite's products and services in the enterprise and other sectors may not grow as fast as expected and international demand and/or business model may not materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. ; increased competition and technological changes in the markets in which NaviSite competes; possible failure of new and existing internal and external products and systems or internal infrastructure, streamOS and/or CDNs; and cost cutting and margin improvement efforts may not have their intended result. Statements in this press release that state NaviSite's or management's intentions, plans, expectations or predictions of future events, are forward-looking statements. Actual results may differ materially due to a number of risks, including changes in a number of competitive market factors, changes in or an inability to execute NaviSite's business strategy, unanticipated changes in the hosting industry, the economy in general and changes in the use of the Internet. NaviSite cannot guarantee future results, levels of activity, performance or achievements. The numbers discussed in this press release also involve risks and uncertainties. For a detailed discussion of these and other cautionary statements, please refer to the filings made by each of NaviSite and CMGI with the Securities and Exchange Commission, including, without limitation, the most recent Quarterly Report on Form 10-Q Form 10-Q See 10-Q. of NaviSite and the Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. of NaviSite for the most recently ended fiscal year. The forward-looking statements and numbers contained herein represent the judgment of NaviSite, as of the date of this release, and NaviSite disclaims any intent or obligation to update such forward-looking statements to reflect any change in NaviSite expectations with regard thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. or any change in events, conditions, circumstances on which such statements are based. SiteHarbor and streamOS are registered trademarks of NaviSite, Inc. All other trademarks and registered trademarks are the property of their respective owners.
NAVISITE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
January 31, January 31,
2001 2000 2001 2000
Revenue:
Revenue $ 17,004 $ 3,997 $ 32,002 $ 6,467
Revenue, related
parties 10,694 5,173 21,732 8,569
Total revenue 27,698 9,170 53,734 15,036
Cost of revenue 33,770 12,322 65,827 21,391
Gross profit
(loss) (6,072) (3,152) (12,093) (6,355)
Operating Expenses:
Product development 3,797 1,056 6,693 1,947
Selling and
marketing 11,163 5,264 19,292 9,070
General and
administrative 9,824 2,663 15,787 5,264
Total operating
expenses 24,784 8,983 41,772 16,281
Loss from
operations (30,856) (12,135) (53,865) (22,636)
Other (1,054) 693 (1,129) 643
Net loss
applicable to
common
shareholders $ (31,910) $ (11,442) $ (54,994) $ (21,993)
Basic and
diluted
net loss per
common share ($0.54) ($0.21) ($0.94) ($0.71)
Basic and diluted
weighted average
number of common
shares
outstanding 58,707 55,741 58,621 30,891
Pro forma basic
and diluted net
loss per common
share(a) ($0.44)
Pro forma basic
and diluted
weighted average
number of common
shares
outstanding 50,164
(a) The unaudited pro forma basic and diluted loss per share
information included in the accompanying statement of operations
reflects the impact of the conversion of debt to CMGI and
preferred stock as of the later of the issuance of the convertible
security or the beginning of each period, using the if-converted
method.
NAVISITE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
January 31, July 31,
2001 2000
Assets:
Current Assets:
Cash and cash equivalents $ 68,731 $ 77,947
Accounts receivable, net 22,039 20,010
Prepaid expenses and other
assets 5,938 3,201
Total current assets 96,708 101,158
Property and equipment, net 74,417 70,651
Other assets 4,128 3,652
Total assets $ 175,253 $175,461
Liabilities and Stockholders'
Equity:
Current liabilities $ 49,856 $ 52,999
Other liabilities 68,165 24,988
Stockholders' Equity:
Deferred compensation - (762)
Capital stock 204,875 190,885
Accumulated deficit (147,643) (92,649)
Total stockholders' equity 57,232 97,474
Total liabilities and
stockholders' equity $ 175,253 $175,461
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