Welcome to the fourth quarter and fiscal year 2009 NaviSite earnings conference call. My name is Keisha and I will be your operator for today. At this time all participants are in listen only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Jim Pluntze, CFO.

Welcome to NaviSite’s fourth quarter and fiscal year 2009 earnings conference call. Arthur Becker NaviSite’s CEO is also with me today. We will be discussing our financial results and sharing key business highlights from our fourth quarter and full fiscal year which ended July 31, 2009. Before we get started, please be aware that the information we are about to discuss includes forward-looking statements for the purposes of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements involve risk and uncertainties. The company’s actual results could differ materially from those discussed in this call. Factors that could contribute to such differences include but are not limited to those items noted and included in the company’s SEC filings. The forward-looking information that is provided by the company in this call represents the company’s outlook as of today and we do not undertake any obligation to update forward-looking statements made by us. Subsequent events and other developments may cause the company’s outlook to change from that which is discussed today. We will also discuss NaviSite’s adjusted EBITA performance for the fourth quarter and full year of fiscal 2009. Please note that adjusted EBITDA is not a recognized measure for financial statement presentation under the United State’s generally accepted accounting principles. The company believes that the non-GAAP measures of adjusted EBITDA provides investors with a useful supplemental measure of the company’s actual and expected operating and financial performance by excluding the impact of interests, taxes, depreciation and amortization. The company also excludes impairment costs, stock based compensation, severance and other non-operational charges as these items are considered to be non-operational in nature. Adjusted EBITDA does not have any standard definition and therefore may not be comparable to similar measures presented by other reporting companies. Management uses adjusted EBITDA to assist in evaluating the company’s actual and expected operating and financial performance. These non-GAAP results should not be evaluated in isolation from or as a substitute for the company’s financial results prepared in accordance with US GAAP. A table reconciling the company’s net loss as reported to adjusted EBTIDA is included in the condensed consolidated financial statements in NaviSite’s fourth quarter and fiscal year 2009 financial results press release. Now, I’d like to turn the call back over to Arthur Becker, NaviSite’s Chief Executive Officer.

We are pleased to report our results for the fourth quarter and for full fiscal year 2009. I’d like to start with the financial result, discuss the operating results for the quarter and discuss some of the actions we have taken and are taken to position the company in the enterprise space. As reported in our press release earlier today, revenue for the fourth quarter of fiscal 2009 which ended on July 31, 2009 was $36.9 million which is at the upper end of our guidance range of $36 to $37 million for the quarter. Revenue this quarter represents a decrease of 9% compared to $40.4 million recorded in the same quarter last year and is down 1% from the $37.6 million recorded in the third quarter of fiscal year 2009. For the full fiscal year 2009 revenue was $152.7 million representing a 1% decrease over the $154.9 million recorded in fiscal year 2008. The decline in both year-over-year and sequential revenue continues to be related to the planned lower professional services revenue as we have discussed in our previous quarterly calls. Recurring revenue from our enterprise hosting and application management business was $34.5 million for the fourth quarter and was flat year-over-year and a sequential decline of 2% reflecting the lost revenue of $900,000 from our Las Angeles data center who’s lease we did not renew in the fourth quarter. Excluding the impact from the LA datacenter recurring revenue was flat sequentially. The flat sequential revenue was mainly the result of higher churn this quarter and modestly slower installations as some of our more complex enterprise hosting customers from the first half of the fiscal year. Recurring hosting revenue was $140.5 million for the year representing a growth of 7% over the $131.3 million recorded in fiscal year 2008.…

As Arthur previously mentioned, revenue for the fourth quarter of fiscal year 2009 was $36.9 million, down 1% from the third quarter of fiscal year 2009, down 9% over the fourth quarter of fiscal year 2009 but within our guidance range. For the full fiscal year 2009, revenue was $152.7 million representing a 1% decrease over the $154.9 million recorded in fiscal year 2008. This revenue decline as we have discussed is related to the expected and announced lower revenue from our professional services business throughout fiscal year 2009 which is down 58% from the same quarter last year and down slightly from the prior quarter. Recurring revenue from our hosting application management and cloud services was $34.5 million for the fourth quarter and $140.5 million for the year representing a full year increase of 7% and flat from the fourth quarter of fiscal year 2008. Hosting revenue was also in our guidance range of $34.4 to $35.4 million for the quarter. Revenue this quarter includes approximately $500,000 from our AJE business. As we mentioned NaviSite chose not to dispose of this asset as had been originally planned and disclosed and made the determination that NaviSite could not be certain of an AJE sale within the next 12 months. Therefore, as a result of this decision we will now include the results of AJE in our consolidated results from continuing operations. NaviSite generated gross profit of $12.9 million or 35% of revenue for the fourth quarter of fiscal 2009 as compared to $12.7 million or 31% of revenue for the same fiscal quarter of 2008 and $12.5 million or 33% of revenue for the third quarter of fiscal year 2009. For the full fiscal year NaviSite generated gross profit of $58.2 million or 33% of revenue as compared to gross…

At this point I’d like to update our investors on some topics mentioned on prior calls and to update investors on our strategic technology initiatives. A quick update on the status of our previously mentioned asset sales; as we have stated we’ve retained investment bankers to solicit interest in certain of our non-strategic co-location datacenters in the US. This process is progressing and we are currently negotiating the documentation for the sale of certain of these datacenter assets in the co-location customers within these datacenters. We anticipate that we will close some or all of these transactions before the end of this year. As part of our strategy to focus on our core enterprise hosting and application management business, we have decided also not to exercise our option to lease the co-location space in London at the [Wilkin] datacenter. I’d like to take just a minute to discuss the status of our America’s Job Exchange. While as stated, this is not a core asset and yes, it is a small business our efforts to solicit a buyer at an acceptable valuation were not successful during the past year in part because of the declining unemployment market and in part because of the economic condition broadly. AJE has however achieved steady growth throughout fiscal year 2009. Revenue in the fourth quarter of fiscal year 2009 reached approximately $500,000 compared to $200,000 in the same period a year ago and for the full fiscal year AJE revenue was $1.5 million compared to $300,000. Throughout this period AJE was modestly EBTIDA positive for fiscal year 2009 and we’ll continue to run it modestly EBITDA positive. According to independent studies the AJE website consistently ranked among the top 12 career website in the US in terms of traffic. Monthly visitors to the site averaged…

(Operator Instructions) Your first question comes from Analyst for James Breen – Thomas Weisel Partners. Analyst for James Breen – Thomas Weisel Partners: I just had a couple of quick questions, one was I was wondering if you could talk a little bit more about the trends in gross margin and kind of how we should see those going forward and whether or not this level is kind of sustainable and if there’s any more room for improvement there? Also, if you could talk a little bit about churn, if you think we’re going to see a little bit of an elevated level because of the economy and such or if you expect maybe that it will kind of go back down a little bit more to your historical rate?

Jim, why don’t you tackle gross margins.

If you look at gross margins we obviously seen a reasonable improvement over the fiscal year and really sequentially quarter-by-quarter. I think that mainly reflects as we said the fact that our professional service practice has declined as a percentage of our revenue so along with the revenue many of the costs are variable and we’ve been able to reduce those costs in line with revenue. It’s been a relatively low margin business so I think that’s fundamentally a significant portion of the margin increase. So, in a sense our hosting margins have been understated because of our professional services business. So, as we become more of a hosting company our gross margin has increased. I think going forward we certainly have margin room. I think as we’ve talked about before as our hosting revenue grows, it’s fairly significantly accretive to margins, it’s incrementally EBITDA positive, that sort of 45% level and can be gross margin positive at even the sort of 75% to 80% level. So, as we grow our hosting revenue we certainly feel like we can expand our gross margins.

With respect to churn Jim?

Churn was increased as we said to 1.7% during the quarter and if you looked at our range over the last say five quarters we’ve been in the 1% to 1.3% range and as I mentioned, the cause of us sort of getting out of that range were mainly the result of a couple of accounts that went under this quarter. We did see a few, and I mentioned on the call, a few customers in that sort of other group that sort of went out of business because of the economy. I certainly believe that with the effort we’ve undertaken in our account management group to reduce churn and other efforts that we’ve undertaken that we can get back to that 1% level. I wouldn’t shock me if churn was a little higher but we certainly aren’t planning for churn it’s just one of those things. We plan for maintaining our services with all of our customers and the economy is improving so my view is that along with an improving economy we’ll see improving churn. Analyst for James Breen – Thomas Weisel Partners: So the churn sounds like it spiked up this quarter?

I look at it as a spike, I don’t see it as a trend. Analyst for James Breen – Thomas Weisel Partners: But gross margin providing the professional services businesses maintaining that same level this could be an elevated level for gross margin going forward?

This should be more of the normal level going forward. If you look at our pro services revenue over the past three quarters it’s been in the sort of $1.6 to sort of $2 million. But, before that in the prior fiscal year we’d been doing sort of $5 to $6 million per quarter so it’s come down significantly. It’s been relatively stable the last couple of quarters and so we certainly won’t see the same year-over-year changes but we can certainly improve as our hosting revenue grows. Analyst for James Breen – Thomas Weisel Partners: Then just a housekeeping questions, what was cap ex for the quarter?

It was $1.1 million.

Your next question comes from Analyst for James Breen – Thomas Weisel Partners. Analyst for James Breen – Thomas Weisel Partners: My question is what services are new customers demanding that’s causing new bookings ARPU to be over twice the existing customer base?

It’s not a specific service that’s being requested it’s a collection of services by larger companies. So, as we’ve been talking about for the past three or four quarters we’ve tried to focus our sales force and our marketing and lead generation efforts on attracting larger customers as opposed to the more dedicated hosting customers that some of our other vendors in this space approach. We’ve had some success with that and that’s evidenced by both the number of the larger transactions that we closed during the quarter which was five. It’s also evidenced by the fact that the total bookings from those five customers was $270,000 which is an average of over $55,000 a month per each of those customers and that’s a good trend for us. I don’t know if we’ll manage to continue that exactly that trend but I think we were very pleased to see that we had some success in that area. Analyst for James Breen – Thomas Weisel Partners: Are these new high end customers, are they trending towards using managed hosting services versus your software as a service/email hosting application hosting type services?

I would say there’s no definitive answer. One or two of those customers was an application management customer and the other customers were more involved with complex managed hosting. Analyst for James Breen – Thomas Weisel Partners: I have a follow up on the last question regarding churn. What would revenue churn have been including the $90,000 in lost revenue from the Los Angeles datacenter?

Well you’d just have to divide the $900,000 by the $35.4 million or so of revenue, whatever the revenue is and you’d have a percentage number. Analyst for James Breen – Thomas Weisel Partners: What total monthly recurring revenue is the Los Angeles datacenter responsible for?

It’s around $300,000 a month. Analyst for James Breen – Thomas Weisel Partners: So since you guys are investigating churning off additional datacenters do you not foresee that this churning off would result in any higher revenue churn from customers not wanting to switch datacenters.

Just to clarify, LA we didn’t renew the lease which you can call it a churn yes, but churn is usually just related to revenue. In this case we not only terminated the customers that were doing business with us but also terminated our operating expense associated with it. In the discussion of the sale of co-location assets, what we’re selling there is both the datacenter leases, the infrastructures as well as the customer revenue. So, you could constitute it as a sale but it’s not a shutting off it’s a sale. So, we’ll see hopefully a dollar transaction that will be generated that will reduce revenue but it will also reduce expense. Analyst for James Breen – Thomas Weisel Partners: So you’re not trying to transfer the customers?

No, we’re not doing any switching or transferring. What we did in LA is it just happened to be anecdotal to a lease situation where the landlord wanted to squeeze us out and take over the infrastructure and what we’re doing in the sale of our co-location datacenters is the sale of those datacenters that are specifically providing co-location services which we consider not to be the best value add for NaviSite comfort.

Your next question comes from Colby Synesael – Kaufman Brothers. Colby Synesael – Kaufman Brothers: I have a few question and I guess they’re all tied together. I’m just curious as you start to talk about assets that are important to the company going forward and which ones are not, I wanted to get your thoughts on net aspect as it relates to the loss of Kronos software which you’re currently supporting. Also, I’m curious what your thoughts are on Jupiter and Alabanza all companies I think you acquired about two years ago, how important are those to the company going forward and are those being thought of in a strategic fashion in terms of potentially getting rid of? Also, I was hoping you could talk a little bit about some of the management changes you’ve made over the last year, the guys you’ve brought in and just talking about kind of how you see them benefiting the company. It seems like you’re kind of taking the company in a different direction now as it relates to some of the employees you brought on.

Let me just take it from middle to back and then front. The Jupiter and Alabanza acquisitions are fully integrated in to what we call our SMB practice which is headed up by Sumeet Sabharwal and that’s really a business unit that’s focused on selling to smaller and medium sized businesses obviously and generating revenue from those customers as well as managing those accounts a little differently than we have in the past. The enterprise focus which is the bulk of the revenue of the company and where we think our truest value add and best differentiator is compared to the vendors in this country that provides those kinds of services, is the other part of our focus. So the answer to Jupiter and Alabanza is that it’s firmly integrated within the SMB portfolio. With respect to net aspects, the loss of Kronos practice is an interesting one for us because it is an application management practice which we value as the highest value of some of the services we provide. It is towards a slightly smaller customer base but it’s clearly something that’s very important to us. The third question you asked about management. You know Brooks Borcherding has come on, he’s been on since April. I think he had his six month semi anniversary the other day. He’s been instrumental in helping us to focus on the enterprise space and to change and reorient and reengineer the way we go to market with respect to our sales organization. I think that’s been a very big contribution and it’s yet to realize itself yet, these things do take time as you can imagine but he’s also been able to attract a number of other real veterans to the space. Roger Schwanhausser who runs our service delivery was over 30 years at IBM and is now taking over the reins of running all service deliver with us and we’ve hired a couple of general managers too that are running regions, sales organizations from large IT companies as well. I see a real shift in the leadership of the business at the operating level yet I’d have to say it’s just a little early to see the results from that.

There are no further questions in queue. I would like to thank everyone for your participation in today’s NaviSite fourth quarter and fiscal year 2009 conference call. This concludes the presentation. You may now disconnect your lines and have a great day.