Hostopia reports second quarter results to September 30, 2007



    MISSISSAUGA, ON and FT. LAUDERDALE, FL, Nov. 12 /CNW/ - Hostopia.com Inc.
(TSX: H), a leading provider of web services that enable small and
medium-sized businesses to establish and maintain an internet presence, today
reported its unaudited financial results for the second quarter ended
September 30, 2007. All figures are in U.S. dollars unless otherwise stated.

    
    Highlights

    -  Q2 revenue increased 21.8% year over year, 8.6% sequentially from Q1
    -  30th consecutive quarter of increasing revenue
    -  16th consecutive quarter of positive operating income
    -  Established a new customer care centre in Miramichi, New Brunswick
    -  Licensed the digital fax patent portfolio of j2 Global
       Communications, Inc.
    -  Continued to develop and integrate Nexthaus mobile syncing technology
    -  Added 28,000 end users - largest quarterly increase in Hostopia's
       history
    

    "We are very pleased with our sequential revenue growth and operational
achievements in the second quarter," said Colin Campbell, Hostopia's CEO. "The
Company showed strong revenue growth, driven by the 28,000 end user accounts
we migrated onto our platform in the quarter. This was the largest quarterly
migration in Hostopia's history and we are very proud of our project
management team's achievement. This migration concludes a project successfully
executed by Hostopia over many months for a global telecommunications leader
in Europe. This large end user increase significantly contributes to our
revenue growth and will improve our operating profits over the remainder of
the year."

    Financial Results for the Second Quarter of Fiscal 2008

    Revenues increased 21.8% to $6.8 million in the three months ended
September 30, 2007, compared to the same period last year. This was the 30th
consecutive quarter of higher revenues. Sequential revenue growth of 8.6% in
the second quarter was primarily due to the migration of 28,000 end users onto
the Hostopia platform. A full quarter of revenue from 375,000 e-mail accounts
added during the previous quarter also contributed to the sequential revenue
growth.
    Gross profit of $5.9 million increased by $1.0 million compared to last
year. The gross margin percentage declined slightly. Income before interest
and income taxes was $474,000, down $177,000 from the second quarter of last
year. This decrease was due to a $1.2 million increase in operating expenses
resulting primarily from: (1) personnel costs associated with two new start-up
units within Hostopia: Website Experts (site 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 quarter, (4) significantly higher general and
administration expenses related to public company costs, (5) the effect of the
appreciation of the Canadian dollar on our Canadian dollar denominated
expenses.
    Income before income taxes of $796,000 was $131,000 higher than the same
period last year as $308,000 higher net interest income offset the increased
operating expenses. 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 improve.
    Net income of $456,000 was $16,000 higher than the same quarter last
year. Basic and diluted net income per common share were both $0.04 this
quarter compared to $0.10 for basic and $0.07 for diluted net income per
common share in the second quarter of last year. Net income per share declined
primarily because of the significant increase in 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 462,000 stock options this year.

    Outlook

    "We believe the strong growth in our recurring revenue base in the second
quarter will result in improved profitability over the next two quarters.
Moreover, we expect Website Experts, Nexthaus and digital fax to e-mail will
contribute more meaningfully to our revenue growth and pre tax income. While
lowering profitability in the short-term, these initiatives provide us with a
broader portfolio of value-added services that positions us well with current
and prospective customers. Similarly our technical support costs will improve
once our New Brunswick customer care centre is fully operational." said Mr.
Campbell. "We are committed to growing Hostopia's business both organically
and by strategic acquisitions of technology and end users. We will continue to
actively seek out, in a disciplined and prudent fashion, investment
opportunities that create value for our shareholders."

    About Hostopia.com Inc.

    Hostopia is a leading provider of web services that 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 them research and development as well
as capital and operating costs typically associated with the design,
development, and delivery of web services.

    Forward-Looking Statements

    This news release includes certain "forward-looking statements" and
forward-looking information that are subject to risks, uncertainties and other
factors that could cause actual results or outcomes to differ materially from
those contemplated by the forward-looking statements. These forward-looking
statements and forward-looking information include, but are not limited to,
plans, objectives, expectations and intentions, growth trends and other
statements contained in this press release that are not historical facts and
statements identified by words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates" or words of similar meaning. These
statements are based on our current beliefs or expectations and there are a
number of important factors that could cause the actual results or outcomes to
differ materially from those indicated by these forward-looking statements,
including without limitation, our ability to maintain our sales efficiency,
our ability to maintain our existing, and develop new, strategic
relationships, the number of our net end-user additions, our monthly customer
turnover and our ability to successfully integrate recently acquired
businesses and operations and those risks set forth or referenced under the
caption "Risk Factors" in Hostopia's Form 10-K for the year ended March 31,
2007. This filing is available on web sites maintained by the Securities and
Exchange Commission at www.sec.gov and SEDAR at www.sedar.com. Readers are
cautioned not to place undue reliance on forward-looking statements as actual
future results and events could differ materially from that expressed in the
forward-looking statements. Hostopia does not undertake any obligation to
update any forward-looking statements contained in this document as a result
of new information, future events or otherwise.

    -------------------------------------------------------------------------
    Conference Call Information

    Hostopia will hold its second quarter conference call on Monday,
    November 12, 2007, at 5:00 p.m. EDT. Colin Campbell, Chief Executive
    Officer and Michael Mugan, Chief Financial Officer, will discuss
    financial results and performance for the three months ended
    September 30, 2007.

    To access the call, please dial 416-644-3421 or 1-800-732-1073

    A replay of the conference call will be available as of 7:00 p.m. EST,
    Monday November 12, 2007 until midnight, Monday, November 19, 2007. To
    access the replay, call 416-640-1917 or 1-877-289-8525, followed by
    passcode 21252454, followed by the number sign.

    To listen to live Webcast of the call please enter
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2075260
    in your web browser
    -------------------------------------------------------------------------



    
                              Hostopia.com Inc.
                         Consolidated Balance Sheets
                         (Expressed in U.S. dollars)


                                                  September 30,    March 31,
                                                       2007          2007
                                                  ------------- -------------
                                                   (Unaudited)
    Assets
    Current assets:
      Cash and cash equivalents                   $ 26,073,572  $ 27,367,667
      Trade accounts receivable, net of allowance
       for doubtful accounts of $102,399;
       (March 31, 2007 - $114,755)                   2,024,459     1,320,422
      Deferred tax assets                              134,000       117,000
      Income taxes recoverable                       1,025,408             -
      Prepaid expenses                                 372,173       377,242
                                                  ------------- -------------
      Total current assets                          29,629,612    29,182,331
                                                  ------------- -------------

    Property and equipment, net of accumulated
     amortization of $6,140,198;
     (March 31, 2007 - $5,163,911)                   3,662,957     2,922,677
    Other assets                                        64,840        60,997
    Intangible assets, net of accumulated
     amortization of $2,185,022;
     (March 31, 2007 - $1,594,348)                   2,485,891     1,690,284
    Deferred tax assets                              1,373,000     1,101,000
                                                  ------------- -------------
    Total assets                                  $ 37,216,300  $ 34,957,289
                                                  ------------- -------------
                                                  ------------- -------------

    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                            $    333,236  $    380,040
      Accrued liabilities                            1,161,046       705,229
      Payroll and other taxes payable                   27,821        34,956
      Income taxes payable                                   -       269,020
      Current portion of deferred lease
       inducements                                      79,900        79,900
      Deferred revenue                                 839,600       983,299
      Current portion of long-term liability                -         72,000
                                                  ------------- -------------
      Total current liabilities                      2,441,603     2,524,444
    Deferred lease inducements                         201,364       237,035
    Long-term liability                                      -       292,957
                                                  ------------- -------------
    Total liabilities                                2,642,967     3,054,436
                                                  ------------- -------------
    Stockholders' equity:
      Capital stock
        Authorized:
          30,000,000 common shares, par value
           $0.0001
        Issued and outstanding
          11,559,111 common shares
           (March 31, 2007 - 11,097,251 common
           shares)                                     217,115       217,069
      Additional paid-in capital                    32,855,790    31,054,703
      Accumulated other comprehensive loss             (43,881)      (43,881)
      Retained earnings                              1,544,309       674,962
                                                  ------------- -------------
    Total stockholders' equity                      34,573,333    31,902,853
                                                  ------------- -------------
    Total liabilities and stockholders' equity    $ 37,216,300  $ 34,957,289
                                                  ------------- -------------
                                                  ------------- -------------



                              Hostopia.com Inc.
                    Consolidated Statements of Operations
                         (Expressed in U.S. dollars)
                                 (Unaudited)

                           Three months ended           Six months ended
                              September 30,               September 30,
                      -------------------------------------------------------
                           2007          2006          2007          2006
                      ------------- ------------- ------------- -------------
    Revenues
      Webhosting and
       applications
       services       $  6,561,480  $  5,406,362  $ 12,628,705  $ 10,625,782
      Other services       241,868       179,141       437,336       361,257
                      ------------- ------------- ------------- -------------
      Total revenues     6,803,348     5,585,503    13,066,041    10,987,039
                      ------------- ------------- ------------- -------------
    Cost of revenues
      Webhosting and
       applications
       services            820,069       637,908     1,583,330     1,200,680
      Other services        83,162        84,387       168,255       169,103
                      ------------- ------------- ------------- -------------
      Total cost of
       revenues            903,231       722,295     1,751,585     1,369,783
                      ------------- ------------- ------------- -------------
    Gross profit         5,900,117     4,863,208    11,314,456     9,617,256
                      ------------- ------------- ------------- -------------
    Expenses
      Sales and
       marketing(a)      1,466,974     1,144,907     2,854,286     2,347,257
      Research and
       development(a)      969,540       782,499     1,854,877     1,494,984
      Project
       management(a)       537,662       423,339     1,067,668       839,797
      Technical
       support(a)          963,758       794,331     1,878,132     1,473,207
      General and
       administrative(a)   652,246       431,362     1,233,949       822,681
      Amortization of
       intangible
       assets              321,791       183,623       590,674       342,045
      Amortization of
       property and
       equipment           514,607       452,683       976,282       850,943
                      ------------- ------------- ------------- -------------
                         5,426,578     4,212,744    10,455,868     8,170,914
                      ------------- ------------- ------------- -------------
    Income before the
     undernoted            473,539       650,464       858,588     1,446,342
                      ------------- ------------- ------------- -------------
    Interest income        322,457        18,170       647,965        39,699
    Interest (expense)           -        (4,206)       (4,206)       (8,412)
                      ------------- ------------- ------------- -------------
                           322,457        13,964       643,759        31,287
                      ------------- ------------- ------------- -------------
    Income before
     income taxes          795,996       664,428     1,502,347     1,477,629
                      ------------- ------------- ------------- -------------
    Income taxes
     (recovery)
      Current              458,000       341,000       922,000       747,000
      Deferred            (118,000)     (117,000)     (289,000)     (188,000)
                      ------------- ------------- ------------- -------------
                           340,000       224,000       633,000       559,000
                      ------------- ------------- ------------- -------------
    Net income        $    455,996  $    440,428  $    869,347  $    918,629
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    Net income per
     share
      Basic           $       0.04 $        0.10  $       0.08  $       0.21
      Diluted                 0.04          0.07          0.08          0.15
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------
    Wt. average number
     of common shares
     outstanding
      Basic             11,539,583     4,032,406    11,413,172     4,032,371
      Diluted           11,649,774     6,310,070    11,583,421     6,310,035
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    (a) Stock-based
     compensation is
     included in
     operating
     expenses
     as follows:
      Sales and
       marketing      $     33,412  $     31,970  $     63,382  $     66,285
      Research and
       development          41,908         5,163        58,110        10,606
      Project
       management            4,413         2,819         9,070         5,855
      Technical
       support               3,594         4,294         7,227         8,838
      General and
       administrative $     28,121         9,130        38,999        18,891
                      ------------- ------------- ------------- -------------
                      $    111,448  $     53,376  $    176,788  $    110,475
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------




                              Hostopia.com Inc.
                    Consolidated Statements of Cash Flows
                         (Expressed in U.S. dollars)
                                 (Unaudited)

                                               Six months ended September 30,
                                                       2007          2006
                                                  ------------- -------------
    Cash flows from operating activities:
      Net income                                  $    869,347  $    918,629
      Items which do not involve cash:
        Amortization                                 1,566,956     1,192,988
        Stock-based compensation                       176,788       110,475
        Excess tax benefits from stock-based
         compensation                                 (316,000)            -
        Non-cash interest                                4,206         8,412
        Deferred income taxes                         (289,000)     (105,000)
        Deferred lease inducements                     (35,671)      (26,730)
      Change in operating assets and liabilities
        Trade accounts receivable                     (704,037)      172,827
        Prepaid expense                                  5,069      (111,516)
        Accounts payable                               (46,804)      191,506
        Accrued liabilities                            455,817       205,622
        Payroll taxes and other taxes payable           (7,135)      (17,938)
        Income taxes payable                          (978,428)     (131,000)
        Deferred revenue                              (143,699)      (18,695)
                                                  ------------- -------------
      Cash flows from operating activities             557,409     2,389,580
                                                  ------------- -------------

    Cash flows from (used in) financing activities:
      Issue of common shares on exercise of
       stock options                                 1,273,487         1,799
      Refund of initial public offering expenses        34,858
      Repayment of long-term liabilities              (369,163)     (105,701)
      Deferred initial public offering costs                 -    (1,202,400)
      Excess tax benefits from stock-based
       compensation                                    316,000             -
                                                  ------------- -------------
      Cash flows from (used in) financing
       activities                                    1,255,182    (1,306,302)
                                                  ------------- -------------

    Cash flows from investing activities:
      Acquisition of property and equipment         (1,716,562)     (987,263)
      Acquisition of intellectual property          (1,386,281)     (746,015)
                                                  ------------- -------------
      Cash flows from investing activities          (3,102,843)   (1,733,278)
                                                  ------------- -------------
    Effect of currency translation on cash
     balances                                           (3,843)       (1,124)
                                                  ------------- -------------

    Increase (decrease) in cash and cash
     equivalents                                    (1,294,095)     (651,124)

    Cash and cash equivalents, beginning of
     period(1)                                      27,367,667     3,038,217
                                                  ------------- -------------
    Cash and cash equivalents, end of period      $ 26,073,572  $  2,387,093
                                                  ------------- -------------
                                                  ------------- -------------

    Supplemental cash flow information:
      Interest paid                               $          -  $          -
      Income taxes paid                              1,900,428       795,000
                                                  ------------- -------------
                                                  ------------- -------------

    ------------------------------
    (1) Cash and cash equivalents consists primarily of an amount invested
        in a highly rated money market mutual fund, as well as cash on
        deposit and bank certificates of deposit.
    

    %SEDAR: 00023928E




For further information:

For further information: Michael Mugan, Chief Financial Officer,
Hostopia.com Inc., Tel: (905) 671-7211; Gordie Campbell, Investor Relations,
Hostopia.com Inc., Tel: (877) 444-4116, Email: invest@hostopia.com

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