News
Glowpoint Reports Record 2007 Revenues of $22.8 Million
HILLSIDE, N.J.-(Business Wire)-March 27, 2008 - Glowpoint, Inc. (OTC BB: GLOW), a premiere, IP-based managed video communications services provider, today announced financial results for the fourth quarter and year ended December 31, 2007.
Financial Highlights
— Realized the highest year-over-year growth in the Company's core revenue at 20.6% for the 2007 year. Core revenue includes our base subscription fees and related services, bridging events and one time services, the foundation of our business. Core revenue excludes our low margin Nuvision business which declined as expected 5.8% for the 2007 year and 22.3% for the 4th quarter of 2007. The two largest components of core revenue, are base monthly subscriptions which grew about 16.1% for the 2007 year and 20.3% for the 4th quarter of 2007 and multi-point bridging which grew by 21.1% for the 2007 year and 24% for the 4th quarter of 2007 as compared to the same period in 2006.
— Achieved highest single month multi-point bridging revenue of $325,000 in 4th quarter of 2007.
— Revenue derived from channel partners increased to 14.2% of total revenue in the month December 2007 from 8.5% of total revenue in the month of December 2006.
Full-Year Financial Results
For the year ended December 31, 2007, revenue increased $3.3 million, or 16.8%, to $22.8 million from $19.5 million in the 2006 year. Cost of revenue for the 2007 year increased $1.6 million, or 12.0%, to $15.2 million from $13.6 million in the 2006 year. Gross profit for the 2007 year increased $1.7 million, or 27.9%, to $7.6 million from $5.9 million in the 2006 year. Gross margin as a percentage of sales was 33.3% for the 2007 year compared to 30.4% in the 2006 year, with the increase primarily due to continuing efforts to eliminate network costs and ongoing activity involving the renegotiation of rates and the migration of service to lower cost providers as well as a reduction in depreciation costs. Excluding the one-time integration services implementation, the Company's gross margin percentage is 34.5% for the 2007 year.
Total operating expense for the 2007 year decreased to $12.2 million or 15.5% from $14.4 million in the 2006 year. The loss from operations improved 45.7%, to $4.6 million in the 2007 year from $8.5 million in the 2006 year.
Michael Brandofino, Glowpoint's President and Chief Executive Officer, commented, "Our core subscription-based business and multi-point bridging solutions posted respectable year-over-year growth and we also saw profit margin expansion while simultaneously reducing our operating expenses. The effectiveness of our approach over the last two years is clearly demonstrated by the positive trends in several key financial metrics. We have successfully expanded both revenue and margins, while stabilizing the cost of goods and reducing operational expenses at a rapid and accelerating pace. Revenue has grown almost 30% to $22.8 million in the 2007 year from $17.7 million in the 2005 year while cost of revenues has been approximately stable at $15 million or just below during that time. During this timeframe, gross profit has increased approximately 176% to $7.6 million in the 2007 year from $2.8 million in the 2005 year while operating expenses have declined 37% to $12.2 million in the 2007 year from $19.4 million in the 2005 year. We are encouraged by these trends."
Operational Highlights
— Received first Patent for Video Operator services.
— Signed a three-year agreement with Polycom, one of the world's leading manufacturers of video communications equipment to use Glowpoint as an underlying provider for a branded, managed service offering tailored specifically for Telepresence rooms.
— Signed a two-year agreement with a leading publishing firm, listed as one of the "Forbes 400 Best Big Companies," to provide managed video services at 15 of its locations around the world.
— Signed two-year agreement with NASCAR for HD video solution.
— Signed deal with Big TenTV for HD Broadcast solution to cover College sports.
— Participated in the Sports Video Group League Technology Summit by enabling panelists to participate remotely from a Glowpoint-connected NFL site using the "TeamCamHD(TM)" solution that Glowpoint has deployed for a number of broadcasters, including Big Ten Network.
— Selected by the Tepper School of Business at Carnegie Mellon University to facilitate multi-point video classroom sessions for their FlexMode MBA Program to employees of some of the country's leading corporations.
— Channel partners involved in approximately 40% of closed deals, up from 25% in 2006.
"We realized the highest year-over-year growth in our core subscription in the 4th quarter of 2007 compared to the same period in 2006 and reported our sixth consecutive quarter of growth in our core subscription revenue, due in large part to the success of our channel partners," continued Mr. Brandofino. "In 2007, Glowpoint partnered with three out of the four Tandberg Master Distributors in the United States and is focused on expanding our channel program further in 2008. With the growing adoption of telepresence and HD technologies, our services become even more critical to our partners as they deploy these solutions."
Mr. Brandofino continued, "In 2008, we have added a new recurring revenue stream which, in part, is a result of our announcement that we had signed a three-year agreement with one of the world's leading manufacturers of video communications equipment to use Glowpoint as an underlying provider for a branded, managed service offering tailored specifically for Telepresence rooms. The Video Network Operation Center (VNOC) solution is actually a suite of services that address the demand for a single point of contact to provide scheduling, support, and management of Telepresence rooms and the associated equipment. We anticipated seeing revenue from this service sometime in the second quarter of 2008, but have already realized revenue related to this new service offering and landed our first VNOC deal in March. We anticipate establishing additional relationships related to VNOC services early in 2008 and expect them to contribute to growth as we move through the year."
Un-Audited Fourth Quarter Financial Results
For the 4th quarter ended December 31, 2007, total revenue increased $0.5 million, or 10.5%, to $5.5 million in the 4th quarter of 2007 from $5.0 million in the 4th quarter of 2006. Subscription and related revenue increased $0.6 million, or 18.0%, to $3.9 million in the 4th quarter of 2007 from $3.3 million in 4th quarter of 2006. The increased subscription and related revenue is the result of increases in installed subscription circuits and revenue per circuit. In the 4th quarter of 2007, non-subscription revenue consisting of bridging services, special events and other one-time fees increased $0.1 million, or 8.5%, to $0.9 million in the 4th quarter of 2007 from $0.8 million in the 4th quarter of 2006. The primary cause of the decrease was a $0.2 million reduction of low-margin ISDN resale services. This decrease was partially offset by a $0.1 million increase in Glowpoint's higher margin bridging services in the 4th quarter of 2007.
Mr. Brandofino continued, "Our stated goal throughout 2007 was to begin eliminating low margin revenue from a legacy ISDN reseller business we bought in 2003. In particular, we indicated during the third quarter of 2007 that we expected this ISDN resale revenue to decline in the fourth quarter. Our ability to offset this commoditized revenue with higher margin sales from recurring subscription and multipoint bridging services revenue demonstrates our focus on growing gross profit margins and building a sustainable, largely recurring base of revenue to support long-term success and shareholder value. As previously indicated, this will be further enhanced in 2008 with the new recurring revenue stream in the form of managed services for Telepresence rooms called VNOC services."
Cost of revenue for the 4th quarter of 2007 remained constant at $3.5 million as compared to the 4th quarter of 2006. Gross profit increased $0.5 million, or 41.9%, to $2.0 million in the 4th quarter of 2007 from $1.5 million in the 4th quarter of 2006. Gross margin as a percentage of sales was 36.6% in the 4th quarter of 2007 compared to 30.3% in the 4th quarter of 2006.
Total SG&A increased to $3.3 million or 40.3% in the 4th quarter of 2007 from $2.0 million in the 2006 quarter. In the 4th quarter of 2006 the Company took various steps to eliminate non-essential spending and caused the cessation of some sales and marketing efforts and the hiring of needed employees in order to achieve positive operating income. This effort was successful with the Company being able to eliminate the exercisability of 6,180,000 of the Series B "penny" warrants which would have caused potentially significant dilution in the Company's outstanding shares. In the 4th quarter of 2007, Glowpoint's expenses were normalized with the exception of professional fees related to the audits, registration statement and debt restructuring.
The loss from operations increased $0.8 million to $1.3 million in the 4th quarter of 2007 from $0.5 million in the 4th quarter of 2006. Net income attributable to common stockholders was $6.9 million or $0.15 per basic and diluted share in the 4th quarter of 2007 compared to a loss of $1.3 million or $0.03 per basic and diluted share in the 4th quarter of 2006. The primary components of the decrease in the net loss attributable to common stockholders was (i) a decrease in the Company's common stock price to $0.48 per share at December 31, 2007 from $0.75 per share at September 30, 2007 which caused a $6.4 million decrease in the derivative liabilities and (ii) a reduction of $2.8 of the derivative liability related to the Convertible Notes as a result of the amendment of the related Registration Rights Agreement which eliminated the liability. In the 2006 quarter there was a nominal change in the derivative liability due to a $0.01 change in the common stock price from September 30, 2006 to December 31, 2006.
Mr. Brandofino concluded, "In the fourth quarter of 2006, our capital structure required that we run a lean organization, inhibiting our growth potential in 2007. However, in the second half of 2007 we improved our balance sheet and began recruiting and hiring sales and marketing personnel, attending trade shows, and traveling to demonstrate our solutions to customers. We have started to realize the benefit of these expenditures and expect 30% year-over-year core revenue growth for the full year of 2008."
Balance Sheet
At December 31, 2007, the Company had a working capital deficit of $9.1 million, compared to a working capital deficit of $11.9 at December 31, 2006, a decrease of $2.8 million. The Company had $2.3 million in cash and cash equivalents at December 31, 2007, compared to $2.2 million at December 31, 2006, an increase of $0.1 million. -0- *T GLOWPOINT, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value and shares) December 31, ——————————- ASSETS 2007 2006 ————— ————— Current assets: Cash and cash equivalents $ 2,312 $ 2,153 Accounts receivable, net of allowance for doubtful accounts of $132 and $121, respectively 2,546 2,748 Prepaid expenses and other current assets 348 327 ————— ————— Total current assets 5,206 5,228 Property and equipment, net 2,692 2,762 Other assets 664 403 ————— ————— Total assets $ 8,562 $ 8,393 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 1,575 $ 1,957 Accrued expenses 1,427 1,906 Accrued sales taxes and regulatory fees 4,011 4,216 Derivative financial instruments 6,117 4,301 Senior Secured Notes, net of discount of $2,280 — 4,326 Customer deposits 713 102 Deferred revenue 330 288 Current portion of capital lease 125 — ————— ————— Total current liabilities 14,298 17,096 Long term liabilities: Senior Secured Notes, net of discount of $3,912 6,647 — Senior Secured Notes held by Insider Purchasers - related parties, net of discount of $221 226 — Capital lease, less current portion 233 — ————— ————— Total long term liabilities 7,106 — ————— ————— Total liabilities 21,404 17,096 ————— ————— Preferred stock: Preferred stock, $.0001 par value; 0 and 5,000,000 shares authorized and redeemable; 0 and 120 Series B shares issued and outstanding (stated value of $0 and $2,888; liquidation value of $0 and $3,735), respectively — 2,888 ————— ————— Preferred stock, $10,000 par value; 1,500 and 0 shares authorized and redeemable; 475 and 0 Series C shares issued and outstanding recorded at fair value (stated value and liquidation value of $4,748 and 0), respectively 4,330 — ————— ————— Commitments and contingencies Stockholders' deficit: Common stock, $.0001 par value; 150,000,000 and 100,000,000 shares authorized; 47,629,564 and 46,389,564 shares issued; 46,064,673 and 46,349,673 shares outstanding, respectively 5 5 Additional paid-in capital 162,300 161,267 Accumulated deficit (178,094) (172,623) ————— ————— (15,789) (11,351) Less: Treasury stock, 1,564,891 and 39,891 shares at cost, respectively (1,383) (240) ————— ————— Total stockholders' deficit (17,172) (11,591) ————— ————— Total liabilities and stockholders' deficit $ 8,562 $ 8,393 ========== ========== *T -0- *T GLOWPOINT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, ———————————- 2007 2006 —————- —————- Revenue $ 22,792 $ 19,511 Cost of revenue 15,212 13,583 —————- —————- Gross margin 7,580 5,928 —————- —————- Operating expenses: Research and development 810 816 Sales and marketing 3,061 2,570 General and administrative 8,330 11,049 —————- —————- Total operating expenses 12,201 14,435 —————- —————- Loss from operations (4,621) (8,507) —————- —————- Interest and other expense (income): Interest expense, including $261 and $0, respectively, for Insider Purchasers 6,043 3,969 Amortization of deferred financing costs, including $14 and $0, respectively, for Insider Purchasers 531 389 Decrease in fair value of derivative financial instruments, including $328 and $0, respectively, for Insider Purchasers (5,665) (1,992) Interest income (59) (83) —————- —————- Total interest and other expense, net 850 2,283 —————- —————- Net loss (5,471) (10,790) Gain on redemption of preferred stock 799 — Preferred stock dividends (252) (347) —————- —————- Net loss attributable to common stockholders $ (4,924) $ (11,137) =========== =========== Net loss attributable to common stockholders per share: Basic and diluted $ (0.11) $ (0.24) =========== =========== Weighted average number of common shares: Basic and diluted 46,735 46,242 =========== =========== *T -0- *T GLOWPOINT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, ———————————- 2007 2006 —————- —————- Cash flows from Operating Activities: Net loss $ (5,471) $ (10,790) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,467 1,947 Amortization of deferred financing costs 531 389 Beneficial conversion feature for Senior Secured Notes 1,977 1,850 Accretion of discount on Senior Secured Notes 2,881 1,359 Loss on disposal of equipment 14 169 Expense recognized for the decrease in the estimated fair value of derivative financial instruments (5,665) (1,992) Stock-based compensation 871 781 Increase (decrease) in cash attributable to changes in assets and liabilities: Accounts receivable 202 (577) Prepaid expenses and other current assets (21) 183 Other assets 41 205 Accounts payable (382) 368 Accrued expenses, sales taxes and regulatory fees 1,024 1,497 Customer deposits 611 3 Deferred revenue 42 (86) —————- —————- Net cash used in operating activities (1,878) (4,694) —————- —————- Cash flows from Investing Activities: Purchases of property and equipment (1,053) (761) —————- —————- Net cash used in investing activities (1,053) (761) —————- —————- Cash flows from Financing Activities: Proceeds from issuance of Senior Secured Notes, including $400 and $0 from Insider Purchasers and net of financing costs of $308 and $595, respectively 3,230 5,585 Costs incurred in extension of maturity date of Senior Secured Notes and Series C convertible preferred stock exchange (140) — —————- —————- Net cash provided by financing activities 3,090 5,585 —————- —————- Increase in cash and cash equivalents 159 130 Cash and cash equivalents at beginning of year 2,153 2,023 —————- —————- Cash and cash equivalents at end of year $ 2,312 $ 2,153 =========== =========== Supplement disclosures of cash flow information: Cash paid during the year for interest $ 5 $ 0 =========== =========== Non-cash investing and financing: Preferred stock dividends $ 252 $ 347 Capital lease used to acquire network equipment 358 — Additional Senior Secured Notes issued as payment for interest including $9 and $0, respectively, for Insider Purchasers 862 426 Deferred financing costs for Senior Secured Notes incurred by issuance of placement agent warrants 417 296 *T
Teleconference
Glowpoint will host a conference call at 4:30 pm ET today to discuss the results and field questions from investors. Interested participants should call 866-203-2528 and use passcode 64455935. International participants should call 617-213-8847 and use the same passcode.
A recording of the conference call will be available beginning March 27, 2008 and will remain archived through April 27, 2008. To listen to the playback, please call 888-286-8010 and use passcode 76471403. For the international playback, dial 617-801-6888 and use the same passcode.
This call is being audio webcast by Thomson Financial and can be accessed at Glowpoint's website at http://www.glowpoint.com. The audio webcast will also be distributed over Thomson Financial's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Financial's individual investor center at http://www.earnings.com or by visiting any of the investor sites in Thomson Financial's Individual Investor Network, such as America Online's Personal Finance Channel, Fidelity Investments(R) (www.fidelity.com), and others. Institutional investors can access the call via Thomson Financial's password-protected event management site, StreetEvents: http://www.streetevents.com.
About Glowpoint
Glowpoint, Inc. (OTC BB: GLOW), is a premiere, IP-based managed video communications services provider. Glowpoint is innovating video communications with services supporting traditional video conferencing, Telepresence VNOC, Broadcast Content Acquisition & Delivery, and Call Center Applications. Glowpoint's services are delivered over a robust, video-centric network that reaches around the world and serves clients ranging from Fortune 100 enterprises and leading broadcast networks to SMB markets. Glowpoint is headquartered in Hillside, New Jersey. To learn more, visit www.glowpoint.com.
The statements contained herein, other than historical information, are or may be deemed to be forward-looking statements and involve factors, risks, and uncertainties that may cause actual results in future periods to differ materially from such statements. These factors, risks, and uncertainties include market acceptance and availability of new video communication services; the nonexclusive and terminable-at-will nature of sales agent agreements; rapid technological change affecting demand for our services; competition from other video communications service providers; and the availability of sufficient financial resources to enable us to expand our operations, as well as other risks detailed from time to time in our filings with the Securities and Exchange Commission.
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