Ft. Lauderdale, Florida – (The Hosting News) – April 29, 2008 – Web hosting company specializing in small and medium business support, Hostopia, will sign a definitive agreement to purchase the customer assets of New Jersey-based hosting services provider, Luxmovera, LLC’s uplinkearth.
Uplinkearth accepted the all-cash offer last week. The companies plan to migrate all users of record from uplinkearth’s data center facility to Hostopia’s unified web services platform by June 30, 2008. The companies indicated that all users shall continue to be served under the familiar brand of uplinkearth, which will operate as a managed service by Hostopia.
Colin Campbell, CEO of Hostopia noted, ”We are very pleased to have concluded this agreement with uplinkearth. They have approximately 12,500 small business subscribers, which we feel are very compatible with the Hostopia web services platform. Our strategy will be to migrate all users and present them with many upgraded features and services. Over time, we will expect additional value-added services to be a logical upgrade path for many of these small businesses. Hostopia’s main focus is private-labeled, wholesale outsourced web services that we sell to Telco’s and broadband providers. Acquisitions such as uplinkearth complement our organic growth plan by adding end-users to our unified platform and giving us revenue-per-user opportunities through the many additional value-added services we offer, such as fax-to-email and collaborative email with wireless mobility synchronization.”
Michael Yablonowitz, Co-founder and President of Uplinkearth added, ”My partners and I have built a very successful hosting services business over the years. We are experiencing increased demand for new services from our customers which can drive opportunity for our business to grow. We decided the market timing was ideal to transfer our user base over to a highly capable provider in the hosting and SaaS arena – one who can deliver the high-demand services our users need. Hostopia’s proven credentials and track record in migrating large numbers of hosted business customers made them the ideal choice as our chosen buyer. We think our users will eagerly respond to the many new upgrades and value-added services Hostopia plans to offer them.”
Earlier this year, Hostopia reported a 42% increase in its operating income with record third quarter revenue, for the third quarter of 2007.
Highlights included: – 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.
The 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.
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.