UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended April 30, 2004 | ||
| or | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to | ||
Commission file number: 000-27597
NaviSite, Inc.
| Delaware | 52-2137343 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
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400 Minuteman Road Andover, Massachusetts (Address of principal executive offices) |
01810 (Zip Code) |
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(978) 682-8300
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of June 10, 2004, there were 27,844,311 shares outstanding of the registrant’s common stock, par value $.01 per share.
NAVISITE, INC.
INDEX
Report on Form 10-Q for the Quarter Ended April 30, 2004
1
PART I: FINANCIAL INFORMATION
| Item 1. | Financial Statements |
NAVISITE, INC. AND SUBSIDIARIES
| April 30, | July 31, | |||||||||
| 2004 | 2003 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands, | ||||||||||
| except par value) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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||||||||||
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Cash and cash equivalents
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$ | 7,630 | $ | 3,862 | ||||||
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Accounts receivable, less allowance for doubtful
accounts of $2,307 and $2,030 at April 30, 2004 and
July 31, 2003, respectively
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13,583 | 14,741 | ||||||||
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Due from related party
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12 | — | ||||||||
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Prepaid expenses and other current assets
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4,224 | 4,011 | ||||||||
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Total current assets
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25,449 | 22,614 | ||||||||
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Property and equipment, net
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15,388 | 22,165 | ||||||||
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Customer lists, less accumulated amortization of
$6,696 and $3,724 at April 30, 2004 and July 31, 2003,
respectively
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10,279 | 12,052 | ||||||||
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Goodwill
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3,206 | 3,206 | ||||||||
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Other assets
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5,913 | 6,280 | ||||||||
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Restricted cash
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1,253 | 3,054 | ||||||||
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Total assets
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$ | 61,488 | $ | 69,371 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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||||||||||
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Accounts receivable financing line, net
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$ | 15,786 | $ | 6,358 | ||||||
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Notes payable, current portion
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1,048 | 1,211 | ||||||||
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Capital lease obligations, current portion
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2,418 | 3,268 | ||||||||
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Note payable to related party, current portion
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3,000 | 3,000 | ||||||||
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Accounts payable
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3,856 | 4,371 | ||||||||
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Accrued expenses
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13,628 | 17,580 | ||||||||
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Deferred revenue
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2,196 | 2,993 | ||||||||
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Customer deposits
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135 | 134 | ||||||||
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Total current liabilities
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42,067 | 38,915 | ||||||||
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Capital lease obligations, less current portion
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830 | 1,907 | ||||||||
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Accrued lease abandonment, less current portion
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1,782 | 3,476 | ||||||||
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Note to AppliedTheory Estate
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6,000 | 6,000 | ||||||||
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Note payable
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1,352 | — | ||||||||
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Other long-term liabilities
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737 | 2,194 | ||||||||
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Total liabilities
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52,768 | 52,492 | ||||||||
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Commitments and contingencies
(Note 10)
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Stockholders’ equity:
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Preferred stock, $0.01 par value;
Authorized: 5,000 shares; Issued and outstanding: no shares
at April 30, 2004 and July 31, 2003
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— | — | ||||||||
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Common stock, $0.01 par value; Authorized:
395,000 shares; Issued and outstanding: 24,829 and 23,412
at April 30, 2004 and July 31, 2003, respectively
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249 | 235 | ||||||||
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Deferred compensation
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(1,699 | ) | — | |||||||
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Accumulated other comprehensive income (loss)
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9 | (16 | ) | |||||||
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Additional paid-in capital
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438,482 | 432,399 | ||||||||
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Accumulated deficit
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(428,321 | ) | (415,739 | ) | ||||||
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Total stockholders’ equity
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8,720 | 16,879 | ||||||||
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Total liabilities and stockholders’ equity
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$ | 61,488 | $ | 69,371 | ||||||
See accompanying notes to interim consolidated financial statements.
2
NAVISITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| April 30, | April 30, | ||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||
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Revenue
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$ | 20,173 | $ | 19,620 | $ | 65,975 | $ | 52,942 | |||||||||
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Revenue, related parties
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12 | — | 12 | 1,310 | |||||||||||||
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Total revenue
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20,185 | 19,620 | 65,987 | 54,252 | |||||||||||||
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Cost of revenue
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14,217 | 17,312 | 48,899 | 50,821 | |||||||||||||
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Impairment, restructuring and other
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— | — | 633 | — | |||||||||||||
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Total cost of revenue
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14,217 | 17,312 | 49,532 | 50,821 | |||||||||||||
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Gross profit
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5,968 | 2,308 | 16,455 | 3,431 | |||||||||||||
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Operating expenses:
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Product development
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230 | 121 | 890 | 624 | |||||||||||||
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Selling and marketing
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1,848 | 1,429 | 5,724 | 3,759 | |||||||||||||
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General and administrative
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6,097 | 5,023 | 16,342 | 13,718 | |||||||||||||
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Impairment, restructuring and other
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206 | 3,819 | 1,608 | 6,274 | |||||||||||||
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Total operating expenses
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8,381 | 10,392 | 24,564 | 24,375 | |||||||||||||
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Loss from operations
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(2,413 | ) | (8,084 | ) | (8,109 | ) | (20,944 | ) | |||||||||
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Other income (expense):
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Interest income
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18 | 169 | 115 | 685 | |||||||||||||
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Interest expense
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(656 | ) | (2,470 | ) | (1,935 | ) | (20,170 | ) | |||||||||
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Other income (expense), net
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25 | (919 | ) | 111 | (1,111 | ) | |||||||||||
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Loss before income tax expense
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(3,026 | ) | (11,304 | ) | (9,818 | ) | (41,540 | ) | |||||||||
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Income tax expense
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— | — | — | — | |||||||||||||
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Net loss
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$ | (3,026 | ) | $ | (11,304 | ) | $ | (9,818 | ) | $ | (41,540 | ) | |||||
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Basic and diluted net loss per common share
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$ | (0.12 | ) | $ | (0.88 | ) | $ | (0.40 | ) | $ | (4.33 | ) | |||||
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Basic and diluted weighted average number of
common shares outstanding
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24,809 | 12,845 | 24,685 | 9,587 | |||||||||||||
See accompanying notes to interim consolidated financial statements.
3
NAVISITE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended | ||||||||||
| April 30, | ||||||||||
| 2004 | 2003 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
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Cash flows from operating activities:
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Net loss
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$ | (9,818 | ) | $ | (41,540 | ) | ||||
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Adjustments to reconcile net loss to net cash
used for operating activities:
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Depreciation and amortization
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9,522 | 10,119 | ||||||||
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Amortization of beneficial conversion feature to
interest expense
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— | 15,173 | ||||||||
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Interest on debt paid in stock
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— | 2,098 | ||||||||
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Amortization of warrants
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304 | — | ||||||||
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Non-cash stock compensation
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287 | — | ||||||||
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Impairment of leased facilities
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1,941 | — | ||||||||
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Impairment on long-lived assets
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300 | (71 | ) | |||||||
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Impairment of assets held for sale
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— | 1,042 | ||||||||
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Impairment of goodwill and intangibles
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— | 6,127 | ||||||||
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Loss on disposal of assets
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26 | 250 | ||||||||
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Provision for doubtful accounts
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1,902 | 753 | ||||||||
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Changes in operating assets and liabilities, net
of impact of acquisitions:
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Accounts receivable
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(877 | ) | 521 | |||||||
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Due from related parties
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(12 | ) | (3,533 | ) | ||||||
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Prepaid expenses and other current assets, net
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(220 | ) | 808 | |||||||
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Other assets
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796 | 791 | ||||||||
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Accounts payable
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(515 | ) | (1,211 | ) | ||||||
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Customer deposits
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1 | (11 | ) | |||||||
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Accrued expenses and deferred revenue
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(4,920 | ) | (635 | ) | ||||||
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Other long-term liabilities
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(1,456 | ) | 217 | |||||||
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Net cash used for operating activities
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(2,739 | ) | (9,102 | ) | ||||||
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Cash flows from investing activities:
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Purchase of property and equipment
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(1,800 | ) | (579 | ) | ||||||
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Purchase of debt securities
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— | (1,963 | ) | |||||||
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Cash acquired, net of cash paid for businesses
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— | 3,759 | ||||||||
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Loans to related parties
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— | (1,396 | ) | |||||||
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Proceeds from the sale of equipment
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67 | 395 | ||||||||
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Net cash (used for) provided by investing
activities
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(1,733 | ) | 216 | |||||||
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Cash flows from financing activities:
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Decrease in restricted cash
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1,677 | 594 | ||||||||
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Proceeds from exercise of stock options
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350 | — | ||||||||
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Proceeds from sale-leaseback
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120 | — | ||||||||
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Net proceeds from modified accounts receivable
line
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16,000 | — | ||||||||
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Proceeds from note payable
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450 | — | ||||||||
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Repayment of note payable
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(1,581 | ) | — | |||||||
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Borrowing under note to affiliate
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— | 5,600 | ||||||||
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Net repayment under former accounts receivable
line
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(6,874 | ) | — | |||||||
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Payments under note to affiliates
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(30 | ) | (2,600 | ) | ||||||
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Debt repayment to AppliedTheory Estate
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— | (6,100 | ) | |||||||
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Payment of capital lease obligations
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(1,872 | ) | (3,104 | ) | ||||||
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Net cash provided by (used for) financing
activities
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8,240 | (5,610 | ) | |||||||
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Net increase (decrease) in cash
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3,768 | (14,496 | ) | |||||||
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Cash and cash equivalents, beginning of period
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3,862 | 21,842 | ||||||||
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Cash and cash equivalents, end of period
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$ | 7,630 | $ | 7,346 | ||||||
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Supplemental disclosure of cash flow information:
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Cash paid during the period for:
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Interest
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$ | 1,044 | $ | 1,657 | ||||||
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Acquisitions of businesses:
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Assets acquired
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— | $ | 12,122 | |||||||
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Liabilities assumed
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— | (7,993 | ) | |||||||
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Common stock issued
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— | (370 | ) | |||||||
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Cash acquired, net of cash paid for businesses
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— | $ | 3,759 | |||||||