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Total revenue for the quarter was a record $6.95 million, an increase of more than 7.0% from the same period a year ago and nearly 8.0% from the last quarter. Monthly recurring subscription and related revenue for the quarter was $4.9 million of such amount, up approximately 15.0% year-over-year and 2.4% sequentially. Gross margin for the quarter increased to $3.52 million, a year-over-year increase of 29.7% and 16.3% sequentially. Gross margin continued to substantially improve in the second quarter, growing to 50.7% from 41.8% in the quarter a year ago and 47.0% in the previous quarter. The second quarter income from operations was $0.04 million, which was an improvement from last quarter's loss of $0.96 million and from the loss of $0.48 million from the year ago period. The income from operations was primarily attributable to the improvement in gross margin and increased revenues.
Key highlights for the second quarter of 2009 include the following:
-- Positive Operating Income: For the first time in its history, Glowpoint achieved income from operations for the quarter.
-- Record Revenue Driven by Recurring Revenue Model: Record quarterly revenue of $6.95 million in the second quarter, driven by continued growth of its managed service solutions and other services billed on a monthly recurring basis.
-- Record Gross Margin: Record gross margin of $3.52 million and record gross margin percentage of 50.7%, driven by continued operating scale and efficiency with optimization of costs.
-- Continued Expansion of Telepresence interExchange Network (TEN): Glowpoint has experienced continued expansion of its TEN service offering, with as many as 100 video systems per month being certified to enable easy-to-use, managed business-to-business video communications across the globe. TEN now includes more than 650 businesses and more than 6,200 rooms (both telepresence and traditional) in its global community.
"We're pleased to announce that Glowpoint has positive quarterly operating income and has exceeded 50 percent gross margin for the first time in its history," said David Robinson, Glowpoint's Co-CEO. "These critical milestones highlight the strength of our recurring revenue business model and lay a firm foundation for the Company going forward. While the economy is still challenging and we have more work to do to meet our goals for the third quarter, we remain excited about the opportunities for Glowpoint's managed video service offerings, including connectivity to TEN and its viral growth potential that is being driven by the rapid adoption of telepresence and other high definition video communication solutions."
Glowpoint President and Co-CEO Joe Laezza said, "We are proud and pleased with the progress Glowpoint has made during the past few quarters. We continue to see improved traction in the growing market. There is much more to do and we must remain focused on executing our business plan to accelerate our current momentum and capitalize on our expanding opportunities. The Company's strong position in the industry was highlighted in a recent Frost and Sullivan report that identified Glowpoint as a leading service provider focused on an annual market that it expects will exceed $2 billion by 2013."
Teleconference
Glowpoint will host a conference call at 4:30 pm EDT today to discuss these results and to field questions from investors. Interested participants should call 866-730-5764 and use passcode 82710834. International participants should call 857-350-1588 and use the same passcode.
A recording of the conference call will be available beginning August 12 and will remain archived through August 19, 2009. To listen to the playback, please call 888-286-8010 and use passcode 42047753. For the international playback, dial 617-801-6888 and use the same passcode.
This call is being audio webcast by Thomson Reuters and can be accessed at Glowpoint's website at http://www.glowpoint.com. The audio webcast will also be distributed over Thomson Reuters' Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Reuters' individual investor center at http://www.earnings.com or by visiting any of the investor sites in Thomson Reuters' 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 Reuters' password-protected event management site, StreetEvents: http://www.streetevents.com.
About Glowpoint
Glowpoint, Inc. (OTCBB: GLOW | Quote | Chart | News | PowerRating) is a leading provider of advanced video communications solutions. Glowpoint's suite of robust telepresence and video communications solutions enable organizations to communicate with each other over disparate networks and technology platforms. Glowpoint supports thousands of video communications systems in more than 35 countries with its 24/7 video management services. Glowpoint also powers major broadcasters, Fortune 500 companies, as well as global carriers and video equipment manufacturers - and their customers - worldwide. 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 communications 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.
GLOWPOINT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and shares)
June 30, 2009 December 31, 2008
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 925 $ 1,227
Accounts receivable, net of allowance for doubtful accounts of $255 3,477 3,090
and $301, respectively
Prepaid expenses and other current assets 414 294
Total current assets 4,816 4,611
Property and equipment, net 2,633 2,533
Other assets 31 33
Total assets $ 7,480 $ 7,177
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 2,809 $ 2,367
Accrued expenses 1,041 842
Accrued sales taxes and regulatory fees 4,307 4,535
Customer deposits 526 606
Deferred revenue 264 325
Current portion of capital lease 157 161
Total current liabilities 9,104 8,836
Long term liabilities:
Derivative financial instruments 3,594 --
Senior Secured Notes, net of discount of $240 -- 1,482
Capital lease, less current portion -- 72
Total long term liabilities 3,594 1,554
Total liabilities 12,698 10,390
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.0001 par value 7,500 shares authorized and 16,210 11,574
convertible; and 4,509 and 3,790 shares issued and outstanding
recorded at fair value, respectively (liquidation value of $33,815
and $28,423, respectively) (see Note 12 for information related to
Insider Purchasers - related parties)
Common stock, $.0001 par value;150,000,000 shares authorized; 5 5
49,149,954 and 48,374,954 shares issued; 47,585,063 and 46,810,063
shares outstanding, respectively
Additional paid-in capital 143,887 172,000
Accumulated deficit (163,937 ) (185,409 )
(3,835 ) (1,830 )
Less: Treasury stock, 1,564,891 shares at cost (1,383 ) (1,383 )
Total stockholders' deficit (5,218 ) (3,213 )
Total liabilities and stockholders' deficit $ 7,480 $ 7,177
GLOWPOINT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Six Months Ended June 30, Three Months Ended June 30,
2009 2008 2009 2008
Revenue $ 13,387 $ 12,491 $ 6,945 $ 6,492
Cost of revenue 6,836 7,127 3,423 3,776
Gross margin 6,551 5,364 3,522 2,716
Operating expenses:
Sales and marketing 1,865 1,906 1,003 1,027
General and administrative 5,607 4,296 2,481 2,164
Total operating expense 7,472 6,202 3,484 3,191
Income (loss) from operations (921 ) (838 ) 38 (475 )
Interest and other expense (income):
Interest expense, including $0, $90, $0 and $48, respectively, for 213 2,132 66 1,115
Insider Purchasers
Loss on extinguishment of debt 254 -- -- --
Interest income -- (16 ) -- (5 )
Increase (decrease) in fair value of derivative financial 691 58 (434 ) (1,398 )
instruments, including $20, $3, ($11) and ($40), respectively, for
Insider Purchasers
Amortization of deferred financing costs, including $24 and $12, -- 238 -- 125
respectively, for Insider Purchasers
Total interest and other expense, net 1,158 2,412 (368 ) (163 )
Net income (loss) (2,079 ) (3,250 ) 406 (312 )
Loss on redemption of preferred stock (1,999 ) -- -- --
Net income (loss) attributable to common stockholders $ (4,078 ) $ (3,250 ) $ 406 $ (312 )
Net income (loss) attributable to common stockholders per share:
Basic $ (0.09 ) $ (0.07 ) $ 0.01 $ (0.01 )
Diluted $ (0.09 ) $ (0.07 ) $ 0.00 $ (0.01 )
Weighted average number of common shares:
Basic 45,959 46,305 46,212 45,543
Diluted 45,959 46,305 92,717 45,543
GLOWPOINT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Six Months Ended June 30, 2009
(In thousands)
(Unaudited)
Additional Series A -1 (Note A)
Common Stock Paid In Accumulated Preferred Stock Treasury Stock
Shares Amount Capital Deficit Shares Amount Shares Amount Total
Balance at January 1, 2009 48,375 $ 5 $ 172,000 $ (185,409 ) 3,790 $ 11,574 1,565 $ (1,383 ) $ (3,213 )
Cumulative effect of reclassification of warrants (EITF 07-05) -- -- (26,173 ) 23,551 -- -- -- -- (2,622 )
Balance at January 1, 2009, as adjusted 48,375 5 145,827 (161,858 ) 3,790 11,574 1,565 (1,383 ) (5,835 )
Net loss -- -- -- (2,079 ) -- -- -- -- (2,079 )
Stock-based compensation - options -- -- 155 -- -- -- -- -- 155
Stock-based compensation - restricted stock 775 -- 167 -- -- -- -- -- 167
Series A-1 Preferred Stock issued in connection with the 2009 -- -- -- -- 719 2,637 -- -- 2,637
Private Placement
Loss on redemption of Series A Preferred Stock -- -- (1,999 ) -- -- 1,999 -- -- --
Costs related to 2009 Private Placement -- -- (263 ) -- -- -- -- -- (263 )
Balance at June 30, 2009 49,150 $ 5 $ 143,887 $ (163,937 ) 4,509 $ 16,210 1,565 $ (1,383 ) $ (5,218 )
Note A - In March 2009 the shares of Series A Preferred Stock outstanding at December 31, 2008 were exchanged for an equal number of shares of newly-created Series A-1 Convertible Preferred Stock ("Series A-1 Preferred Stock").
GLOWPOINT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
Six Months Ended June 30,
2009 2008
Cash flows from Operating Activities:
Net loss $ (2,079 ) $ (3,250 )
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 537 647
Other expense recognized for the increase in the estimated fair 691 58
value of the derivative financial instruments
Amortization of deferred financing costs -- 238
Bad debt expense 122 48
Accretion of discount on Senior Secured Notes 23 1,336
Loss on disposal of equipment 10 --
Loss on extinguishment of debt 254 --
Stock-based compensation 322 314
Increase (decrease) attributable to changes in assets and
liabilities:
Accounts receivable (509 ) (972 )
Prepaid expenses and other current assets (120 ) (152 )
Other assets 2 3
Accounts payable 442 872
Customer deposits (80 ) (74 )
Accrued expenses, sales taxes and regulatory fees 39 334
Deferred revenue (61 ) 11
Net cash used in operating activities (407 ) (587 )
Cash flows from Investing Activities:
Purchases of property and equipment (647 ) (681 )
Net cash used in investing activities (647 ) (681 )
Cash flows from Financing Activities:
Proceeds from preferred stock offering 1,800 --
Principal payments for capital lease (77 ) (58 )
Purchase of Senior Secured Notes (750 ) --
Costs related to private placement (221 ) --
Net cash provided by (used in) financing activities 752 (58 )
Decrease in cash and cash equivalents (302 ) (1,326 )
Cash and cash equivalents at beginning of period 1,227 2,312
Cash and cash equivalents at end of period $ 925 $ 986
Supplement disclosures of cash flow information:
Cash paid during the period for
Interest $ 43 $ 59
Non-cash investing and financing activities:
Exchange of Senior Secured Notes for Series A-1 Preferred Stock $ 1,076 $ --
Additional Senior Secured Notes issued as payment for interest 55 644
Costs related to private placement incurred by issuance of placement 133 --
agent warrants
Settlement of accrued 2007 management bonus with restricted stock -- 179
SOURCE: Glowpoint, Inc.
Glowpoint, Inc. Jonathan Brust, 312-235-3888, ext. 2052 jbrust@glowpoint.com www.glowpoint.com
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