NaviSite CEO Discusses F1Q2011 Results – Earnings Call Transcript

NaviSite CEO Discusses F1Q2011 Results â¿¿ Earnings Call Transcript
By Seeking Alpha ,

NaviSite, Inc. (NAVI)

F1Q2011 Earnings Call Transcript

December 8, 2010 5:00 pm ET

Executives

Jim Pluntze – CFO

Brooks Borcherding – President and CEO

Analysts

Alex Kurtz – Merriman & Company [ph]

Presentation

Operator

Compare to:
Previous Statements by NAVI
» NaviSite CEO Discusses F4Q10 Results - Earnings Call Transcript
» NaviSite, Inc. F3Q10 (Qtr End 04/30/10) Earnings Call Transcript
» NaviSite, Inc. F2Q10 (Qtr End 01/31/10) Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the fiscal year 2011 first quarter NaviSite earnings conference call. My name is Dick, and I will be your operator for today. (Operator instructions)

I would now turn the conference over to the Chief Financial Officer, Mr. Jim Pluntze. You may proceed.

Jim Pluntze

Thank you. Good afternoon and welcome to NaviSite's first quarter fiscal year 2011 earnings conference call. Today, Brooks Borcherding, NaviSite's President and Chief Executive Officer, will begin by discussing our key accomplishments over the past quarter. I'll then review our financial results and business highlights for the first quarter, which ended October 31, 2010. I'll then conclude with our outlook for revenue and adjusted EBITDA for our second quarter of fiscal year 2011 before turning the call back over to Brooks for closing comments.

First, I'll read the required Safe Harbor statements. Please be aware that the information we're about to discuss includes forward-looking statements for the purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties. The company's actual results could differ materially from those discussed in this call. Factors that could contribute to such differences include, but are not limited to, those items noted and included in the company's SEC filings.

The forward-looking information that is provided by the company in this call represents the company's outlook as of today and we do not undertake any obligation to update forward-looking statements made by us. Subsequent events and other developments may cause the company's outlook to change from that which is discussed today.

We will also discuss NaviSite's adjusted EBITDA and cash gross margin performance for the first quarter of fiscal year 2011. Please note that adjusted EBITDA and cash gross margin are not recognized measures for financial statement presentation under United States Generally Accepted Accounting Principles, U.S. GAAP. The company believes that the non-GAAP measures, such as EBITDA, adjusted EBITDA, and cash gross margin provide investors with useful supplemental measures of the company's actual and expected operating and financial performance.

EBITDA, adjusted EBITDA, and cash gross margin do not have any standard definition and therefore may not be comparable to similar measures presented by other reporting companies. Management uses these measures to assist in evaluating the company's actual and expected operating and financial performance. These non-GAAP results should not be evaluated in isolation from or as a substitute for the company's financial results prepared in accordance with U.S. GAAP.

Tables reconciling the company's reported net loss to adjusted EBITDA and gross margin to cash gross margin are included in the condensed, consolidated financial statements in NaviSite's first quarter financial results press release.

In addition, in regards to the unsolicited offer made by Atlantic Investors LLC, a special committee of our Board of Directors unanimously rejected the offer on August 6, 2010. O On October 20, 2010, an amended 13D was filed mentioning that on October 19, 2010 subject to the terms of the confidentiality agreement, Atlantic submitted a revised offer with no additional details. The committee has indicated in a press release that it continues to consider strategic alternatives available to NaviSite, including maintaining NaviSite as a standalone public company.

NaviSite does not intend to disclose developments with respect to any consideration of strategic alternative unless and until the committee and the Board of Directors have approved a specific course of action. We will not be able to make any further comments relating to this topic on the call today.

Now, I’d like to turn the call back over to Brooks Borcherding, NaviSite's President and Chief Executive Officer.

Brooks Borcherding

Thank you, Jim, and just to commend you on the excellent job you do on the safe harbor. And I want to welcome everyone to today's call. Well Q1 was an exciting quarter for NaviSite, as it represents our first full quarter with our new managed cloud services offering. And I’m pleased with our performance.

Let me start with the headline results, and then provide specific details around our cloud progress. Total revenue for Q1 was $33.4 million, representing a 9% year-over-year increase and 2% increase versus prior quarter. Adjusted EBITDA for Q1 was $7.7 million, representing a 20% increase year-over-year and 7% increase versus prior quarter. And we also delivered another solid bookings quarter at $600,000, representing 49% increase year-over-year, and a 7% increase versus prior quarter.

We continue to successfully manage churn at 1.2% per month for the quarter, representing what we believe to be best in class performance.

In Q1, we experienced particular success with our new innovative enterprise class cloud offering, which we brought to market in June. Cloud represented a significant portion of our success in the quarter as we closed 13 new cloud contracts with immediate bookings of $50,000. In addition we recognized $27,000 of incremental bookings for our 4 initial cloud customers, reflecting their consumption of cloud resources above and beyond the originally booked right to use fees.

Combined, this represents total quarterly cloud bookings of $77,000 of monthly recurring revenue or 13% of our overall quarterly bookings. And as we experienced with our initial cloud customers, we expect the actual revenues related to these new cloud bookings to grow substantially, as customers embraced our managed cloud services for their business. Going forward, we plan to continue reporting the true up to the bookings each quarter to capture the incremental cloud revenues based on actual billings to more accurately reflect the direct contribution of cloud to our results.

Read the rest of this transcript for free on seekingalpha.com

Loading ...