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Glowpoint Reports Record 2007 Revenues of $22.8 Million

Glowpoint, Inc. (OTC BB: GLOW), a premiere, IP-based managed video communications services provider, today announced financial results for the fourth quarter and year ended December 31, 2007.

Financial Highlights

• Realized the highest year-over-year growth in the Company’s core revenue at 20.6% for the 2007 year. Core revenue includes our base subscription fees and related services, bridging events and one time services, the foundation of our business. Core revenue excludes our low margin Nuvision business which declined as expected 5.8% for the 2007 year and 22.3% for the 4^th quarter of 2007. The two largest components of core revenue, are base monthly subscriptions which grew about 16.1% for the 2007 year and 20.3% for the 4^th quarter of 2007 and multi-point bridging which grew by 21.1% for the 2007 year and 24% for the 4^th quarter of 2007 as compared to the same period in 2006.
• Achieved highest single month multi-point bridging revenue of $325,000 in 4^th quarter of 2007.
• Revenue derived from channel partners increased to 14.2% of total revenue in the month December 2007 from 8.5% of total revenue in the month of December 2006.

Full-Year Financial Results

For the year ended December 31, 2007, revenue increased $3.3 million, or 16.8%, to $22.8 million from $19.5 million in the 2006 year. Cost of revenue for the 2007 year increased $1.6 million, or 12.0%, to $15.2 million from $13.6 million in the 2006 year. Gross profit for the 2007 year increased $1.7 million, or 27.9%, to $7.6 million from $5.9 million in the 2006 year. Gross margin as a percentage of sales was 33.3% for the 2007 year compared to 30.4% in the 2006 year, with the increase primarily due to continuing efforts to eliminate network costs and ongoing activity involving the renegotiation of rates and the migration of service to lower cost providers as well as a reduction in depreciation costs. Excluding the one-time integration services implementation, the Company’s gross margin percentage is 34.5% for the 2007 year.

Total operating expense for the 2007 year decreased to $12.2 million or 15.5% from $14.4 million in the 2006 year. The loss from operations improved 45.7%, to $4.6 million in the 2007 year from $8.5 million in the 2006 year.

Michael Brandofino, Glowpoint’s President and Chief Executive Officer, commented, “Our core subscription-based business and multi-point bridging solutions posted respectable year-over-year growth and we also saw profit margin expansion while simultaneously reducing our operating expenses. The effectiveness of our approach over the last two years is clearly demonstrated by the positive trends in several key financial metrics. We have successfully expanded both revenue and margins, while stabilizing the cost of goods and reducing operational expenses at a rapid and accelerating pace. Revenue has grown almost 30% to $22.8 million in the 2007 year from $17.7 million in the 2005 year while cost of revenues has been approximately stable at $15 million or just below during that time. During this timeframe, gross profit has increased approximately 176% to $7.6 million in the 2007 year from $2.8 million in the 2005 year while operating expenses have declined 37% to $12.2 million in the 2007 year from $19.4 million in the 2005 year. We are encouraged by these trends.”

Operational Highlights

• Received first Patent for Video Operator services.
• Signed a three-year agreement with Polycom, one of the world’s leading manufacturers of video communications equipment to use Glowpoint as an underlying provider for a branded, managed service offering tailored specifically for Telepresence rooms.
• Signed a two-year agreement with a leading publishing firm, listed as one of the “Forbes 400 Best Big Companies,” to provide managed video services at 15 of its locations around the world.
• Signed two-year agreement with NASCAR for HD video solution.
• Signed deal with Big TenTV for HD Broadcast solution to cover College sports.
• Participated in the Sports Video Group League Technology Summit by enabling panelists to participate remotely from a Glowpoint-connected NFL site using the “TeamCamHD™” solution that Glowpoint has deployed for a number of broadcasters, including Big Ten Network.
• Selected by the Tepper School of Business at Carnegie Mellon University to facilitate multi-point video classroom sessions for their FlexMode MBA Program to employees of some of the country’s leading corporations.
• Channel partners involved in approximately 40% of closed deals, up from 25% in 2006.

“We realized the highest year-over-year growth in our core subscription in the 4^th quarter of 2007 compared to the same period in 2006 and reported our sixth consecutive quarter of growth in our core subscription revenue, due in large part to the success of our channel partners,” continued Mr. Brandofino. “In 2007, Glowpoint partnered with three out of the four Tandberg Master Distributors in the United States and is focused on expanding our channel program further in 2008. With the growing adoption of telepresence and HD technologies, our services become even more critical to our partners as they deploy these solutions.”

Mr. Brandofino continued, “In 2008, we have added a new recurring revenue stream which, in part, is a result of our announcement that we had signed a three-year agreement with one of the world’s leading manufacturers of video communications equipment to use Glowpoint as an underlying provider for a branded, managed service offering tailored specifically for Telepresence rooms. The Video Network Operation Center (VNOC) solution is actually a suite of services that address the demand for a single point of contact to provide scheduling, support, and management of Telepresence rooms and the associated equipment. We anticipated seeing revenue from this service sometime in the second quarter of 2008, but have already realized revenue related to this new service offering and landed our first VNOC deal in March. We anticipate establishing additional relationships related to VNOC services early in 2008 and expect them to contribute to growth as we move through the year.”

Un-Audited Fourth Quarter Financial Results

For the 4^th quarter ended December 31, 2007, total revenue increased $0.5 million, or 10.5%, to $5.5 million in the 4^th quarter of 2007 from $5.0 million in the 4^th quarter of 2006. Subscription and related revenue increased $0.6 million, or 18.0%, to $3.9 million in the 4^th quarter of 2007 from $3.3 million in 4^th quarter of 2006. The increased subscription and related revenue is the result of increases in installed subscription circuits and revenue per circuit. In the 4^th quarter of 2007, non-subscription revenue consisting of bridging services, special events and other one-time fees increased $0.1 million, or 8.5%, to $0.9 million in the 4^th quarter of 2007 from $0.8 million in the 4^th quarter of 2006. The primary cause of the decrease was a $0.2 million reduction of low-margin ISDN resale services. This decrease was partially offset by a $0.1 million increase in Glowpoint’s higher margin bridging services in the 4^th quarter of 2007.

Mr. Brandofino continued, “Our stated goal throughout 2007 was to begin eliminating low margin revenue from a legacy ISDN reseller business we bought in 2003. In particular, we indicated during the third quarter of 2007 that we expected this ISDN resale revenue to decline in the fourth quarter. Our ability to offset this commoditized revenue with higher margin sales from recurring subscription and multipoint bridging services revenue demonstrates our focus on growing gross profit margins and building a sustainable, largely recurring base of revenue to support long-term success and shareholder value. As previously indicated, this will be further enhanced in 2008 with the new recurring revenue stream in the form of managed services for Telepresence rooms called VNOC services.”

Cost of revenue for the 4^th quarter of 2007 remained constant at $3.5 million as compared to the 4^th quarter of 2006. Gross profit increased $0.5 million, or 41.9%, to $2.0 million in the 4^th quarter of 2007 from $1.5 million in the 4^th quarter of 2006. Gross margin as a percentage of sales was 36.6% in the 4^th quarter of 2007 compared to 30.3% in the 4^th quarter of 2006.

Total SG&A increased to $3.3 million or 40.3% in the 4^th quarter of 2007 from $2.0 million in the 2006 quarter. In the 4^th quarter of 2006 the Company took various steps to eliminate non-essential spending and caused the cessation of some sales and marketing efforts and the hiring of needed employees in order to achieve positive operating income. This effort was successful with the Company being able to eliminate the exercisability of 6,180,000 of the Series B “penny” warrants which would have caused potentially significant dilution in the Company’s outstanding shares. In the 4^th quarter of 2007, Glowpoint’s expenses were normalized with the exception of professional fees related to the audits, registration statement and debt restructuring.

The loss from operations increased $0.8 million to $1.3 million in the 4^th quarter of 2007 from $0.5 million in the 4^th quarter of 2006. Net income attributable to common stockholders was $6.9 million or $0.15 per basic and diluted share in the 4^th quarter of 2007 compared to a loss of $1.3 million or $0.03 per basic and diluted share in the 4^th quarter of 2006. The primary components of the decrease in the net loss attributable to common stockholders was (i) a decrease in the Company’s common stock price to $0.48 per share at December 31, 2007 from $0.75 per share at September 30, 2007 which caused a $6.4 million decrease in the derivative liabilities and (ii) a reduction of $2.8 of the derivative liability related to the Convertible Notes as a result of the amendment of the related Registration Rights Agreement which eliminated the liability. In the 2006 quarter there was a nominal change in the derivative liability due to a $0.01 change in the common stock price from September 30, 2006 to December 31, 2006.

Mr. Brandofino concluded, “In the fourth quarter of 2006, our capital structure required that we run a lean organization, inhibiting our growth potential in 2007. However, in the second half of 2007 we improved our balance sheet and began recruiting and hiring sales and marketing personnel, attending trade shows, and traveling to demonstrate our solutions to customers. We have started to realize the benefit of these expenditures and expect 30% year-over-year core revenue growth for the full year of 2008.”