Groupworks Financial Corp.
TSX VENTURE : GWC

Groupworks Financial Corp.

July 22, 2009 09:00 ET

Groupworks Announces Third Quarter Results for Fiscal 2009

TORONTO, ONTARIO--(Marketwire - July 22, 2009) - Groupworks Financial Corp. ("Groupworks" or the "Company") (TSX VENTURE:GWC) announces its financial results for the three and nine months ended May 31, 2009.

Overall financial highlights for the nine months included nine month revenue of $8,494,667 and EBITDA of $809,053, representing a 58.2% growth rate in revenue compared to the same period last year, primarily due to the acquisition of People Corporation and White Willow. Net Income increased to $312,340 for the nine months ended May 31, 2009 in comparison to $228,155 that was recorded in the prior year.

Financial highlights for the third quarter included three month revenue of $4,793,227 representing a growth rate over the prior year of 117%. While EBITDA was $809,053 for the nine months, EBITDA for the third quarter of $(273,322) was negatively impacted by $1,138,000 due to merger related costs of $343,000, a change in a client policy renewal date affecting the timing of earnings on the account from the third quarter to the fourth quarter of $370,000, the addition of two senior management positions costing $75,000, economic factors reducing earnings in the HR consulting division by $250,000, and an additional provision against client accounts of $100,000 due to general economic conditions. As a result, net income for the quarter ended May 31, 2009 was $(253,253) compared to $166,012 for the same period in fiscal 2008.

During the quarter, the Company also experienced a one-time gain of $288,986 on the settlement of a note payable to an acquisition vendor which resulted in an increase in net income for the nine months ended May 31, 2009.

"We are focussed on executing our plans to leverage the talent, expertise and resources of our acquired businesses in order to deliver best of breed solutions to our clients. Our recent business combinations with White Willow and People Corporation significantly strengthened our ability to execute the Groupworks business plan. More specifically, with increased scale, an experienced corporate management team with a demonstrated track record of success, increased cash balances, product line diversification in the areas of third party administration (TPA) services, group retirement solutions, administrative services only (ASO) expertise and HR consulting services, together with our geographic expansion across Canada, we now have the platform to grow into a national player," said Laurie Goldberg, CEO.

As a result of its activities and acquisitions during the quarter, the Company's cash balances increased to $2,429,589 from $38,354 in the comparative period last year providing additional cash to manage the affairs of the Company and strengthen Groupworks' financial position.

"We have been very active since closing the People Corporation transaction and this level of activity is consistent with our goal of working with our acquired businesses to achieve organic growth as well as continue our acquisition plans. Overall, our results are supportive of Groupworks' mission of attracting and enhancing the value of quality group benefits, pension advisory and HR practices for our partners and our clients," added Mr. Goldberg, "Although the Canadian economy has been impacted by the global economic downturn, Groupworks business results have faired relatively well. Our business plan going forward reflects an emphasis on adding new clients and providing more comprehensive benefit and HR solutions to our customers," commented Laurie Goldberg, CEO.

Operationally, the first nine months of fiscal 2009 were highlighted by the closing of two acquisitions (summarized below), the restructuring of the Company's vendor take-back debt and successfully securing additional debt financing.

On January 1, 2009, the Company acquired all the outstanding shares of White Willow, a Toronto, Ontario based group benefits and pension advisory firm in exchange for $1,165,000 plus $97,491 for excess working capital. The present value of the consideration given was $1,201,875 ($1,042,994 net of acquired cash of $158,881) and was settled as follows: $450,000 cash on closing; $97,491 cash for excess working capital; issuance of 1,140,000 common shares for a value of $285,000 ($0.25 per share); and a non-interest bearing vendor take-back loan of $430,000 discounted at 7% per annum to $369,384 due in three equal annual installments on the successive anniversary dates of closing.

On March 1, 2009, the Company closed the acquisition of People Corporation after receiving regulatory approval. The Company signed a Share Exchange Agreement on December 31, 2008 with the shareholders of People Corporation to acquire 100% of the outstanding common shares of People Corporation for $6,231,646. The present value of the consideration given was $5,807,983 ($3,118,691 net of acquired cash of $2,689,292). In exchange, the Company issued 15,831,930 common shares for a value of $3,957,983 ($0.25 per share) and a $2,273,663 non-interest bearing promissory note payable in 60 monthly installments beginning at the closing date. The discounted value of the promissory note is approximately $1,850,000.

The Company continues to pursue its strategy of aggregating small and medium sized group benefit, pension consulting, and HR businesses.

The Company's detailed financial statements and accompanying Management Discussion and Analysis are available on SEDAR.com.

About Groupworks Financial Corp.

Groupworks Financial Corp. is a leading consolidator of independent employee benefits and benefits administration, pension consulting and HR practices in Canada. The Company's objective is to become a national benefits and HR organization, building on the success of its acquisitions of Gallivan & Associates, Buffett Taylor, The Investment Guild and its more recent acquisitions of White Willow Benefits Consultants and People Corporation.

Forward-Looking Information

This news release contains "forward-looking information" within the meaning of applicable securities laws, such as information concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Use of words such as "may", "will", "expect", "believe", or other words of similar effect may indicate forward-looking information including the completion of the transaction, the impact of that transaction on our earnings and cash flow, and the anticipated benefits of the transaction. This information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in our publicly filed documents (which are available on SEDAR at www.sedar.com). Those risks and uncertainties include: our ability to maintain profitability and manage growth; strong competition from other advisors and changes in the current legislation could result in significant competition from the banking industry; failure of information systems and technology; dependence on key clients; seasonality of revenues and the resulting possible impairment on working capital; reliance on key professionals; additional financing may be required and may not be available under terms favourable to us; there can be no assurance that any suitable future acquisition will be available to us or that, if available, the terms of the acquisition will be favourable to us; and a change in general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking information made by us or on our behalf. Given these risks and uncertainties, investors should not place undue reliance on forward looking information as a prediction of actual results. All forward-looking information in this news release is qualified by these cautionary statements. This information is made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward looking information, whether as a result of new information, future events or otherwise. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its financial or operating results or its securities.

Non GAAP Financial Measures

EBITDA, which is defined as earnings (loss) before interest, taxes, dividends, depreciation and amortization, is not a financial measure recognized by Canadian generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by GAAP. The Company believes that this Non-GAAP financial measure provides meaningful information on the Company's performance and operating results. Readers are cautioned that EBITDA has no standardized meaning as prescribed by GAAP and may not be comparable to similar measures presented by other companies. Further, readers are cautioned that EBITDA should not replace net income or loss or cash flows from operating, investing and financing activities (as determined in accordance with GAAP), as an indicator of the Company's performance.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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