REDMOND, Wash.--(Business Wire)--
Dear Shareholders and Friends,
On behalf of the Board of Directors, please allow me to thank you
for your continued support of Innuity as we have come through some of
the most challenging times in the history of the company. Our company
is a Software as a Service ("SaaS") company that has prided itself in
helping small businesses thrive and grow with our core services. And,
as the marketplace and its environment changes rapidly, so have we.
There are some twenty-four million businesses in the United States
alone. As our tagline states, we believe that "Small is the new
big(TM)," and that every small business deserves to benefit from the
technology that large organizations often take for granted. Innuity
differentiates itself by focusing on the needs of individual small
businesses and making certain we satisfy or exceed our client
expectations.
In 2006, the capital market for micro-cap companies underwent
comprehensive changes. These changes required us to leverage our
balance sheet and ultimately secure $2 million of debt financing from
Imperium Partners in the first half of 2007.
In turn, our management team needed to focus on daily cash flow
and design a plan that could improve the balance sheet without greatly
compromising shareholder value. Our efforts, ingenuity, and overall
business acumen resulted in a successful initiative that focused on
the divestiture of non-strategic assets. This included the sale of the
Vista.com domain name to VistaPrint Limited for $1.2 million in
November of last year and the sale of the Jadeon business line to
Radiant Systems, Inc. for $7 million this last May. Although Jadeon
represented over $16 million in revenues (during 2007), our existing
relationship with Radiant Systems actually stifled our distribution
expansion efforts outside of California. And, from an economic basis,
the business Jadeon produced less than $4.5 million in gross margin
while at the same time requiring nearly all of our cash flow to
operate.
While the last eighteen months have indeed been challenging, the
company has at the same time made great strides in the following
areas:
-- We have brought in over $8 million in cash without further
diluting our existing shareholders
-- We retired $2 million of secured debt
-- We improved our current business model
Today, we believe Innuity is poised for growth. We have a renewed
focus on our core business and have initiated a series of programs
that we believe can systematically improve revenues. The following is
a brief review of our services, business model and growth plans for
2008/2009.
We continue to expand our service offerings both through internal
development and acquisitions. We are organized into two service
divisions: promotion and commerce. Our promotion services are designed
to deliver our customers prospects to their business location, website
or e-commerce store. Our commerce services enable our customers to
conduct business with their customers electronically. Our services
include:
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Promotion Division
Local Search Natural Search Sponsored Search Websites
LeadConnect Search Engine Pay-Per-Click Business sites
YP-Guides Optimization Management E-commerce sites
Domain services
Commerce Division
Wired Processing Check Processing Virtual Terminal
Merchant Account Electronic Check Wireless Credit/Debit Processing
Processing
Credit Card ACH Conversion of Ecommerce Processing
Physical Checks
Debit Card Pay-by-Phone Processing
Recurring Customer Billing
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Our business model has improved as a result of the Jadeon sale.
This is primarily driven by a dramatic improvement in our gross
margin. Our new business model is as follows:
-- Revenues - Over 80% of our revenues are of a recurring nature.
They are either subscription-based or transactional. We
anticipate that the percentage of recurring business will
continue to grow.
-- Gross Margin - Our gross margins are in excess of 60%. We
believe such percentage will continue to improve with scale.
-- G&A - We have stabilized our G&A spending and have our public
company costs under control.
-- Sales - Spending on sales will continue to increase as we grow
our revenues but we anticipate improving the sales expense to
revenue ratio.
-- R&D - Spending on R&D will increase with revenues but are
planned to remain at or better than the current R&D to revenue
ratio.
-- Adjusted EBITDA - We are projecting to return to positive
EBITDA, adjusted for non-cash stock payments and compensation,
in the second half of this year.
Moreover, we have designed three initiatives that we believe will
help catalyze revenue growth:
-- Strategic Partner Expansions - We currently have strategic
partnerships with SAM's Club and Sallie Mae. We are actively
working on adding new strategic partners.
-- Reseller Channel Development - We plan to launch a new
reseller channel in the hospitality market headed by industry
veteran Mark LeMay. Mark has over twenty years experience in
this industry and brings both product and marketing expertise
to this initiative.
-- Direct Channel Growth - We have successfully established three
direct sales teams in Phoenix, Seattle, and Los Angeles. Both
Seattle and Phoenix are producing good results and we expect
Los Angeles to follow shortly. We plan to add at least four
more major markets this year as our initiative continues to
prove itself.
In conclusion, please allow me to emphasize my belief that we have
the necessary assets in place to establish Innuity as an industry
leader. I look forward to the promise our new model holds for
improving our business and your shareholder value.
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My sincerest regards,
John Wall
Chairman & CEO
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The Investor Relations Group
Jordan Silverstein/Christine Berni, 212-825-3210
jsilverstein@investorrelationsgroup.com
or
Innuity, Inc.
Linden N. Barney, 801-705-5163
CFO
lindenb@innuity.com
Copyright Business Wire 2008
