Synergex Corporation
TSX : SYX

Synergex Corporation

November 14, 2007 09:29 ET

Synergex Announces Third Quarter Results

MISSISSAUGA, ONTARIO--(Marketwire - Nov. 14, 2007) - Synergex Corporation (TSX:SYX) ("Synergex"), a leading provider of digital media entertainment products and diversified commercial services, today announced its financial results for the third quarter ended September 30, 2007.

Q3 2007 Highlights

- Consolidated gross profit in the quarter increased to $4.7 million

- Healthy increase in gross profit as a percentage of sales

- Strong liquidity: current ratio of 1.44 to 1

- Conservative leverage ratio of 1.55 to 1

- Equity exceeding $16 million

- Wind-down of the IT VAR business in Canada and evaluation of the business in Latin America

- Establishment of Credit Bureau operations in Bogota, Colombia as Operations Center for Spanish speaking Latin America

- Product development and sales in future-oriented digital media products coming to fruition as Synergex Digital Signage gains traction

- Fixed capital investment in establishing of Latin America operations nearly complete

"Our logistics operation was a strong margin earner in the quarter, while the video game industry continued its adaptation to new computing platforms. The stage is set for a strongly profitable fourth quarter," said David Aiello, President and CEO of Synergex. "Overall revenue and income fell in the quarter compared to the same period last year, however compared to the previous two quarters of 2007 we improved our net income income, EBITDA, and our gross margin percentage. As we enter the holiday season, the retail market will absorb further new releases of video game products, which we expect will result in sales and profitability for the company in Q4."

Financial Results

Consolidated sales for the three months ended September 30, 2007 were $32.0 million, a decrease from $37.0 million in the same period in 2006. Consolidated sales for the nine months ended September 30, 2007 were $86.0 million compared to $92.2 million in the same period in the prior year.

Despite price decreases for hardware and software, consolidated gross profit for the third quarter ended September 30, 2007 was $4.7 million, compared to $4.2 million for the same period last year. The gross profit percentage overall increased to 14.6% of sales compared to 10.8% of sales in the same quarter last year. This was due to excellent management of our product mix and a strong supply of logistics services, despite the devaluation of the US dollar, in which a significant percentage of our service revenue is denominated, relative to the Canadian dollar. This also performance points to a strong bottom line performance in Q4.

Consolidated gross profit for the nine months ended September 30, 2007 was $12.3 million, compared to $12.8 million for the same period last year. The decrease was due to the weakness in prior quarters, and was influenced by the decision of some suppliers to defer new releases of software to future periods.

Operating expenses for the three months ended September 30, 2007, including general and administrative expenses, sales expense, interest and bank charges, interest income, amortization of equipment, and amortization of a customer list was approximately $4.4 million in the third quarter of 2007, compared to approximately $3.5 million from the same period last year. Operating expenses for the nine months ended September 30, 2007, including general and administrative expenses, sales expense, interest and bank charges, interest income, amortization of equipment, and amortization of a customer list was $11.8 million, relative to the $9.8 million recorded in the same period in the prior year. The increase was primarily due to costs incurred to support expansion into international markets, product development in Synergex Technology, and increased ancillary costs to support the growth of the Canadian operations in the fourth quarter.

Net income for the third quarter of 2007 was approximately $214,000 compared to a net income of approximately $374,000 in the same quarter a year ago. Net income for the nine months ended September 30, 2007 was approximately $267,000 compared to a net income of approximately $1.9 million in the same period a year ago. The decrease in net income is the result of the delay of software releases in the first two quarters of 2007 as penetration of next generation hardware took hold, and the addition of further employees and costs to support the growth of the Canadian operations and the expansion of our international operations.

EBITDA(i) (earnings before interest expense, interest income, income taxes, depreciation and amortization) for the third quarter was approximately $660,000 compared to $800,000 million for the same period last year. EBITDA for the nine months ended September 30, 2007 was approximately $1.2 million compared to EBITDA of $3.4 million in the same period in the prior year.

We have followed both an entrepreneurial instinct and professional methods of planning and execution. We are basically done with our fixed investments and set-up period of operations, and this is now the moment we have been waiting for.

Financial statements with notes and MD&A for the third quarter ended September 30, 2007, and the Company's audited financial statements for the year ended December 31, 2006 are available online at www.syx.ca.

Conference Call and Webcast

To access the investor conference call, please dial 416-644-3433 or 1-800-588-4490. A live webcast of this call will be available in the Investor Relations section of the Company's website, www.syx.ca.

A recording of the conference call will be available as of 1 p.m. EST the same day, until midnight November 21, 2007. To access the recording, dial 416-640-1917 or 1-877-2898525, followed by the passcode 21252826#. An archived recording of the webcast will remain available on Synergex' website until the next quarterly financial results conference call.

About Synergex Corporation

Synergex Corporation is a leading provider of digital media entertainment products and diversified commercial services. Synergex applies its proven expertise in supply chain management and process automation to emerging opportunities with high growth potential. The Company has three workgroups: Synergex Commercial Gateway, Synergex Technology, and Synergex Business Information, which provide value added depth in the areas of video game logistics and distribution, digital signage, retail solutions at the point of sale, graphic design, translation services, Radio Frequency Identification, credit reporting and collection services.

Headquartered in Mississauga, Ontario, with operations across North, Central and South America, Synergex serves a broad base of customers that includes a number of multinational enterprises. Synergex is listed on the Toronto Stock Exchange and trades under the symbol SYX. For further information, please visit www.syx.ca.

Forward Looking Statements

Some statements contained in this news release are forward-looking statements relating to Synergex' current expectations regarding future events. These forward-looking statements are based on our current expectations. Synergex' management caution that all forward-looking information is inherently uncertain and actual results may differ materially from the assumptions, estimates or expectations reflected or contained in the forward-looking information, and that actual future performance will be affected by a number of factors, including economic conditions, technological change, regulatory change, and competitive factors, many of which are beyond our control. Therefore, future events and results may vary significantly from what we currently foresee. For more information on the Company's risks and uncertainties relating to these forward looking statements, please refer to the risk factors section of the Company's MD&A.

(i)Non-GAAP Measures

References in these materials to "EBITDA" are to earnings before interest expense, interest income, income taxes, depreciation, and amortization. EBITDA is not a recognized measure under Canadian GAAP. Investors are cautioned that EBITDA should not be construed as an alternative to net earnings or cash flows from operating activities (determined in accordance with GAAP) as a performance indicator, or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. Synergex' method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similar measures presented by other issuers. EBITDA performance is presented herein because management believes that, in addition to net income, EBITDA is a useful supplemental measure of Synergex' financial performance.

Contact Information

  • Synergex Corporation
    David Aiello
    President and CEO
    (905) 565-1212
    or
    Synergex Corporation
    Eric So
    Vice President
    (905) 740-3274
    Website: www.syx.ca