Good day, ladies and gentlemen and welcome to the second quarter 2010 NaviSite earnings conference call. My name is Geneira and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Jim Pluntze, Financial Officer. Please proceed.

Thank you. Thank you, good afternoon, welcome to NaviSite’s second quarter fiscal year 2010 earnings conference call. Arthur Becker, NaviSite’s CEO, is also with me today. We will be discussing our financial results and sharing some of the key business highlights from our second quarter, which ended January 31st, 2010. 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 risks 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's 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 EBITDA performance for the second quarter of fiscal year 2010. Please note that adjusted EBITDA is not a recognized measure for financial statement presentation under the United States Generally Accepted Accounting Principles, U.S GAAP. The company believes that the non-GAAP measure of 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 such items are considered to be non-operational in nature. Adjusted EBITDA does not have a 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 U.S. 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 second quarter of fiscal year 2010 financial results press release. Now, I would like to turn the call over to Arthur Becker, NaviSite’s Chief Executive Officer. Arthur?

Thank you, Jim, and good afternoon, everyone. We are pleased to report our results for second quarter of fiscal year 2010. I'll start with the financial results, discuss the operating results for the quarter, and then discuss some of the actions we have taken and are taking to position the company as the premier provider of complex hosting, application management, and managed cloud services for the enterprise market. As reported in our press release earlier today, total revenue for the second quarter of fiscal year 2010, which ended on January 31st, was $37.7 million. Revenue this quarter represents a decrease of 1% compared to the $38 million recorded in the same quarter in the last year – fiscal year 2009 and an increase of 2% compared with the $36.8 million recorded in the first quarter of this fiscal year. The decline in our year-over-year results is due to the planned reduction in our professional services practice and the non-renewal of our Los Angeles data center lease, as we have discussed in our previous quarterly calls. Recurring revenue from our hosting, application management, and cloud services business was $36.1 million for the second quarter, an increase of 2% compared to the $35.3 million for the second quarter of fiscal year 2009. Excluding the impact from the L.A. data center, which we did not renew, recurring revenue increased 4% year-over-year and 3% sequentially, mainly due to net new revenue growth from bookings, installations, and lower churn rates. Adjusted EBITDA for the second quarter was $9.1 million, representing a year-over-year increase of 4% and a 4% increase over the adjusted EBITDA of $8.8 million recorded in Q1 2010. Excluding the impact from the L.A. data center, EBITDA increased 8% year-over-year. Moving on to a discussion of some of our business metrics and operational…

Thanks, Arthur. As Arthur previously mentioned, revenue for the second quarter of fiscal year 2010 was $37.7 million, down slightly from the second quarter of fiscal year 2009 and up 2% from the $36.8 million recorded in the first quarter of fiscal year 2010. The year-over-year revenue decline, as Arthur discussed, is related to the expected and announced lower revenue from our professional services business, which we will be discussing throughout fiscal year 2009 and which is down 48% from the same quarter last year and the non-renewal of our Los Angeles data center in the third quarter of fiscal year 2009. Revenue this quarter includes approximately $545,000 from our AJE business, which is an increase of about 4% from the first quarter of fiscal year 2010 and up 52% from the same quarter in fiscal year 2009. Recurring revenue from our hosting, application management, and cloud services was $36.1 million for the second quarter and represented 96% of our revenue during the second quarter. Recurring revenue in the second quarter was $36.1 million, representing an increase of 2% over the same period in fiscal year 2009 or an increase of 5% excluding the $900,000 of revenue from our Los Angeles data center recorded in the prior quarter of the prior year. Recurring revenue increased sequentially by 3%. The increase in sequential recurring revenue was mainly due to the installation of net new revenue as a result of our lower churn rates over the last few quarters. NaviSite generated gross profit of $13 million or 34% of revenue for the second quarter of fiscal year 2010, an increase of 2 percentage points from the $12.2 million or 32% of revenue for the same fiscal quarter of 2009 and was flat with the $12.6 million or 34% of revenue recorded in…

Thank you, Jim. At this point, I would like to update our investors on some topics mentioned in prior calls and to update investors on our strategic initiatives. As mentioned by Jim, on Feb 22, we announced the sale of our Lawson and Kronos business unit, formerly known as netASPx, to Velocity, a leading application service provider and Lawson partner. As we have stated, a significant portion of the $56 million in funds from the sale will be used to reduce our debt, allowing us to and drive – to drive more focus on our enterprise customers and cloud computing offering. The netASPx business generated approximately $21 million of LTM revenue and $8.7 million of LTM margin contribution. The sales included the transfer of about 70 customers and about 70 employees, as well as the lease of the Minneapolis data center. NaviSite has retained a modestly sized colocation space in this data center for our managed hosting customers. The process of selling our non-core colocation-only data centers is continuing despite the delay caused by the process of the sales of netASPx. We anticipate that we will close on the sale of a number of these data centers before the end of our fiscal year. Turning towards our current business and market opportunities. We have been quite busy with the deployment of our cloud platform. I am pleased to announce that in our facility in Andover that we have deployed a NaviCloud platform, and we are in the process of bringing customers, as well as our internal systems onto this new utility. We are also in the final stages of the deployment of a parallel implementation in our San Jose data center and a plan on general availability – and we plan on a general availability in both locations on May…

(Operator Instructions) Your first question comes from the line of Shane Larkin with Thomas Weisel Partners. Please proceed. Shane Larkin – Thomas Weisel Partners: Hi guys, thanks for taking the question. Just a few here. One, I was wondering, on your cloud offering, if you could talk about if we will see any additional costs there from the launch, if you have any comments on what the margin profile might be there and if you think it might attract any verticals that you may not have attracted in the past.

So the offering – we have a trade show, so there will be some marginal marketing expenses this quarter, maybe somewhat over last quarter. But I don't think it’s critical to the EBITDA performance. Margin is a funny question – I mean, not a funny question, it's a good question, but I think we've designed the business to continue to generate both normal and incremental margins, consistent with our current managed hosting offering. It may require some CapEx to be in advance of customer revenue, but that's not significant to note. With respect to the verticals, for us, I think that there will be a concentration in the technology vertical. First of all, those are – we have a strong group of technology customers that we provide hosting for and in many ways, many of those customers are early adopters of this cloud computing capability, because it lowers or has the opportunity to lower their cost of goods sold, which in many ways, the technology component for a technology company is a higher component of their cost in some other enterprise businesses. Shane Larkin – Thomas Weisel Partners: Okay, great. Other question is to the extent you may be able to comment on it, for your last data center sale, is there any way we should look at that as a template for future deals or anything that maybe unique about that deal that we may not see in other deals?

Well, the sale of the netASPx business is really a sale of an application management set of customers that was based in Minneapolis. So that had its own sort of financial interest. Data centers have a more broad interest generally to both hosting companies and colocation providers, as well as enterprise users. So I think it's a tough one to make any kind of – draw any parallel with respect to pricing, if that's what you are – if that is what you are asking. Shane Larkin – Thomas Weisel Partners: Yes, somewhat. Okay. And then just my last question is in terms of your ability to pay down debt from these sales, is there any limit to that or is that just as you sell assets you can pay down as appropriate and then is there an appropriate amount leverage that you would like to see in the business?

Appropriate. That's a good question. We actually like leverage, because we think it generates higher returns on equity. So – but yes, by design the covenants for the senior loan are such that the sale – the proceeds from the sale of assets go to pay down debt. I think at some point, our lenders may like the loan so much that they will do something about that, but right now, our current intention is to just conform to the debt covenants and pay down the debt if we receive funds from a sale of assets. Shane Larkin – Thomas Weisel Partners: And is there an appropriate leverage multiple that you guys are shooting for?

I – I mean, we are already at a level we are comfortable, but I think part of our strategy here is not just debt paydown, but simplification of the business and concentration on the enterprise strategy that we have been articulating throughout the call here. So we – obviously, you can see by the sale we've made, that was the first step. These other non-core data centers that we've been talking about will be just further refinement of that strategy and added – the added benefit will be additional debt reduction. Shane Larkin – Thomas Weisel Partners: Okay. And lastly, I think you touched on this a little bit in the call, just from your new contracts, any particular strength in any industry vertical for those this quarter?

Well, last quarter, obviously we had some – we had a priority in the financial services industry, but I don't think that there is any – anything we can extrapolate from that. Shane Larkin – Thomas Weisel Partners: Okay. Thanks for taking the questions.

Thank you.

Thank you.

(Operator Instructions) Your next question comes from the line of Yevgeniy Sverdlik with DatacenterDynamics. Please proceed. Yevgeniy Sverdlik – DatacenterDynamics: Hi guys, thanks for taking the time to answer the questions today. So just two very quick questions for clarification. How many non-core data centers are there?

Well, that's a good question. I'd say five, maybe six. Yevgeniy Sverdlik – DatacenterDynamics: Okay. And is there a target amount of money that you are trying – that you are going for with the sale of these data centers?

Yes, but it's not something we are disclosing at this point. Yevgeniy Sverdlik – DatacenterDynamics: Okay. And last question, how come the lease in Los Angeles was not renewed?

Quite frankly, the – it’s one of those things where the landlord had – we bought the data center lease from a company that had gone bankrupt many years ago. The infrastructure became part of the owner's asset on the renewal because we had no right to renew automatically. And that landlord took it upon himself to price the lease as retail colo and that's just not a margin that we wanted to – we didn’t want to try to maintain our margins within that difficult environment. Yevgeniy Sverdlik – DatacenterDynamics: Okay, thank you.

Thank you.

At this time, there are no further questions. I would now like to turn the call back over to Arthur Becker for any closing remarks.

No, I don't have any. Thank you for your attendance this afternoon and I'm sure you can call us if you would like to ask questions going forward. Thank you very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.