Ft. Lauderdale, Florida – (The Hosting News) – February 15, 2008 – Web hosting company specializing in small and medium business support, Hostopia, has reported a 42% increase in its operating income with record third quarter revenue, for the third quarter ending December 31, 2007.
Colin Campbell, CEO of Hostopia remarked, ”We are pleased with our continued sequential revenue growth and the demonstrated earnings leverage our increased revenues bring. The Company showed strong revenue growth driven by the record 28,000 end user accounts we migrated onto our platform in the previous quarter and the net addition of a further 8,000 end users this quarter. The large end user increase year to date, combined with our backlog of website and email migrations, should result in a further improvement in our operating results over the remainder of the year.”
Highlights include: – Q3 revenue increased 29.8% year over year; 7.1% sequentially from Q2 – 31st consecutive quarter of increasing revenue – 17th consecutive quarter of positive operating income – Announced the launch of new Nexthaus mobile data synchronization applications – Closed 9 new customer contracts for web services, templates and mobile sync services – Added 8,000 end users.
Financial Results for the Third Quarter of Fiscal 2008 Revenues increased 29.8% to $7.3 million in the three months ended December 31, 2007, compared to the same period last year. This was the 31st consecutive quarter of higher revenues. Sequential revenue growth of 7.1% in the third quarter was primarily due to the migration of 28,000 end users onto the Hostopia platform in the previous quarter as well as the net addition of 8,000 end users this quarter. Two website template license contracts also contributed to the sequential revenue growth. Gross profit of $6.3 million increased by $1.4 million compared to last year. Income before interest and income taxes was $643,000 up $189,000, compared to the third quarter of last year.
This 42% increase in income before interest and income taxes was tempered by the $1.2 million increase in operating expenses resulting primarily from: (1) personnel costs associated with two new start-up units within Hostopia: Website Experts (website creation services) and the Nexthaus mobile syncing service, (2) higher amortization expenses related to the acquisition of licensed technology and Nexthaus’ intellectual property, (3) increased operating costs and sales commissions related to the large end user migrations in the second quarter, and (4) the effect of the appreciation of the Canadian dollar on our Canadian dollar denominated expenses. Income before income taxes of $950,000 was $320,000 higher than the same period last year because of improved operating profitability as well as $131,000 higher net interest income.
As revenues continue to grow over the remainder of the year, both from our existing and expanding customer base as well as our expanded product offerings, we expect our income before interest and taxes will continue to improve. Net income of $615,000 was $242,000 higher than the same quarter last year. Basic and diluted net income per common share were both $0.05 this quarter compared to $0.05 for basic and $0.04 for diluted net income per common share in the third quarter of last year. Net income per share was little changed as higher net income was offset by the increase in weighted average shares outstanding related to the Company’s public offering of 4.83 million shares in the third quarter of last year and the exercise of 516,000 stock options this year.
Mr. Campbell added, ”Telecoms today are looking to expand into the high-growth web services industry. Hostopia is uniquely positioned to assist telecoms in this market with its comprehensive suite of value-add services that support small businesses who want to earn additional revenue using the Internet. New and planned additions to our suite of services include Website Experts, Mobile Sync and digital fax to e-mail. All of these services will support future revenue growth. In addition we are looking to accelerate our growth through acquisitions that fully meet our strict investment criteria. We are committed to creating value for our shareholders in the coming quarters through both internal and external investment.”
Hostopia is a provider of web services that are designed to 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 research and development as well as capital and operating costs typically associated with the design, development, and delivery of web services.
For more information about Hostopia, please visit: www.hostopia.com.