Cortex Business Solutions Inc.
TSX VENTURE : CBX

Cortex Business Solutions Inc.

March 29, 2011 09:01 ET

Cortex Announces Q2 2011 Financial Results

CALGARY, ALBERTA--(Marketwire - March 29, 2011) - Cortex Business Solutions Inc. (TSX VENTURE:CBX)

- Second Quarter 2011 Financial and Operational Highlights

Cortex continues to implement its accelerated growth plan while increasing the Network size and monthly recurring revenue. During the six month period ended January 31, 2011 the Company experienced a faster than anticipated adoption of services in the US and has been successful in signing 3 US based producers with an additional 3 to 5 anticipated to close by the end of our fiscal year. In addition, Cortex has been successful in expanding our Canadian customer base with the addition of 2 more mid-sized Canadian producers that are expected to go live on the Network in April 2011 and an additional 3-5 producers anticipated to close by July 31, 2011.

Due to this growth, Management has invested in further accelerating our US and Canadian expansion strategy and upgrading our core system to leverage Cloud computing capabilities and efficiencies. Our investment is paramount to both our international and industry expansion, providing the foundation for growth, while increasing efficiencies.

During the quarter, Cortex successfully connected Apache Canada and Bonavista Petroleum to the Cortex Trading Partner Network ("the Network") and began connecting their suppliers. During the upcoming three month period ended April 30, 2011 Cortex anticipates the completion of 3 additional buying organization projects, bringing the total number of buying organizations available on the Network to 7, compared to 3 during the three months ended April 30, 2010.

The total Network size continues to grow to over 3,200 suppliers at January 31, 2011 and more than 4,000 at March 25, 2011. Over the next several months, management expects to add over 2,000 US based suppliers to the Network while continuing to grow Canadian suppliers on the Network.

The Company continues to see strength in the access and usage fees revenue stream. This revenue stream has grown 14% from the first quarter of 2011 to the second quarter of 2011 and 34% in the second quarter of 2011 over the same second quarter of 2010.

The addition of Apache Canada and Bonavista Petroleum in November 2010 marked a sizeable increase in transaction volume on the Network in January 2011. This increase is consistent with management's expectations as suppliers' convert from paper to electronic invoicing through the Network.

As the Company completes the current six pilot projects with the associated on-boarding of suppliers onto the Network, the strength of the recurring access and usage fees revenue stream will continue to see growth.

Highlights of Q2 2011

The following table illustrates the growth in some key metrics:

Operational Highlights

      2011      
  Q2       Q1  
Number of Buyer integrations            
Completed 6       4  
In progress 6       4  
             
Number of Contracted Suppliers 3,252   17 % 2,775  
             
Total documents exchanged 1,095,762   18 % 931,603  
Supplier initiated documents 331,996   14 % 291,881  
             
  • The following are highlights about the projects and activities during the second quarter and beginning of the third quarter of 2011:
    • Total revenue for the quarter ended January 31, 2011 was $766k, an increase of 5% over the quarter ended October 31, 2010. At the end of January the Company had deferred revenue of $1,7M of which $393k will be recognized in the next 12 months.
    • Notable is the change in composition of our revenue streams, with a continuing shift from project management fees to set-up and access and usage fees.
    • In the current quarter access and usage fee revenue grew 14% over the quarter ended October 31, 2010 ("Q1-2011"). With the addition of multiple buying organizations to the Network during the second quarter of 2011, Cortex started to experience the Network effect on access and usage fees as our existing customers started transacting with multiple buying organizations. This resulted in an increase in recurring revenue for those customers transacting with multiple buyers.
    • The Company continues to see increasing interest in our integrated service. This quarter $128k was invoiced for set up fees for our integrated solution compared to $33k in the previous quarter. (This amount is deferred and is recognized over the term of their contract, once the customer starts using the service.) As the Network grows and transaction volumes increase, the demand for this service line has increased substantially. With a total of 10 buying organizations expected to be available on the Network by the end of Q3 2011, we expect further growth for this service line.
    • Loss for the quarter ended January 31, 2011 totaled $2,644k compared to $2,484k for the previous quarter. This is as a result of increased expenditure on expanding into the USA and upgrading our core technologies. During the quarter the Company incurred $936k in project related expenses, of which $422k has been capitalized. These levels of expenditure are expected to continue over the next two quarters.
    • Cash used in operations (excluding changes in working capital) increased to $2.1M from $1.9M in the previous quarter. The increase is due to the corporative growth and expansion initiatives currently underway. Cash on hand decreased by $2M to $6.7M at January 31, 2011.
    • During the second quarter of 2011, Apache Canada and Bonavista Petroleum went live on the Network with over 1,200 and 500 suppliers respectively, expected to be connected by the end of April 2011. Transaction growth to the new producers on the Network began to materialize in December 2010 with a significant increase in transaction volume experienced in January.
    • The Company continues to see transactional growth in the Network as companies utilize the service more. The number of documents flowing through the system has increased month over month, with a significant increase in January 2011. Network transactions between buyers and suppliers in December 2010 totaled 338k and 418k in January 2011, a 24% increase month over month.
    • Due to productivity improvements associated with our investments, Cortex is currently adding between 150 and 200 new customers to the Network each month. We expect that the number of additional customers will increase over the next 6 months due to the expansion project with Apache in the United States, with marginal increase to baseline expenses.
    • On January 4, 2011 Cortex, together with its US partner Full Circle Systems, signed Energen Resource Corporation ("Energen") onto the Network. Energen has signed a 5 year agreement to automate its supply chain through Cortex. With over 50 percent of its suppliers already on the Cortex Network, connecting Energen will significantly increase the value to our US customers using the Network.
    • In December, 2010, Cortex, together with its partner Powervision Software Inc. signed two new Canadian mid-sized oil and gas producers to the Network.
    • Cortex Business Solutions Inc. was named one of the TSX Venture Top 50 companies for 2011, an annual ranking of Canada's top 50 emerging publicly traded companies. The TSX Venture 50 includes the top 10 companies in 5 major industry sectors that have been identified as leaders in providing shareholder value on Canada's junior stock exchange. Cortex was ranked 3rd in the list of top 10 Technology and Life Sciences companies.
    • Cortex Business Solutions Inc. welcomed Mr. Hendrik Lombard to the Cortex management team as Vice President of Finance and Corporate Planning. Mr. Lombard has over 20 years of financial management experience and, previously, was CFO at Direct Cash Payments Inc. and Genoil Inc. He brings years of experience with startup and technology based companies and will be a valuable addition to the Cortex team. His responsibilities include business planning, corporate performance management and investor relations.
    • Cortex Business Solutions Inc. added Murray Smith, a member of the Energy Advisory Board of TD Securities and former Minister of Energy for Alberta, to the Cortex Advisory Committee ("the Committee"). The Committee has proven to be a critical part of helping management refine their strategy and provide guidance on the execution of growth opportunities.

The Company continues to implement its business plan which has resulted in the accelerated growth of the Company, revenue, Network and brand. Due to the acceleration of our US expansion, pipeline of opportunities and current signed contracts, Cortex will continue to invest in the manpower and resources needed to meet demand.

Outlook

During fiscal 2011, Cortex will continue expanding the Network, by adding additional buying organizations and supplier groups. The growth strategy includes a strong presence in the U.S. marketplace. Through current partnerships and potential new partnerships, Cortex will continue to grow the size of the Network, increasing access and usage fees. Cortex will continue to explore new revenue, industry and partnership opportunities in Canada and the US. In addition to growth from an ongoing strong relationship with Husky Energy, Cortex will begin to see increased revenue during the remaining two quarters of fiscal 2011 from increased transaction volumes with Apache Corporation, Bonavista, Murphy Petro-Hunt, Energen, 2 additional mid-sized Canadian producers and their suppliers which will begin transacting in the 3rd quarter of 2011. Organic Network growth in companies currently connected as well as transaction growth has provided a solid foundation. Strategic partnerships with Full Circle, Basware and Powervision are providing numerous opportunities to add buying organizations in both Canada and the US over the next 2 quarters.

Management began to invest in expansion projects to incorporate new technology in our core service, expanded sales efforts in both Canada and the US and expansion project into new industries. These projects are important for the accelerated growth of the Network and will provide significant opportunities for the Company in the future. The validation of Cortex Solutions in the marketplace together with a strong balance sheet at January 31, 2011, has increased the credibility and acceptance of the Cortex Solutions resulting in numerous opportunities to expand.

With the addition of multiple buying organizations to the Cortex Network, management expects the growth of access and usage fee revenue stream to accelerate. Our US expansion is contributing to significant increases in suppliers connected to the Network with over 2000 expected to be signed through our Apache US project by December 2011. Cortex is also starting to experience the viral effect of the Network with significant increases in monthly revenue per supplier from customers transacting with multiple buying organizations on the Network. Management expects to complete more partnerships, announce more buying organizations joining the Network in both Canada and the US and continue increasing recurring revenue towards break even.

About Cortex Business Solutions

Cortex Business Solutions is an enterprise eProcurement solutions company that improves efficiencies, reduces costs and streamlines procurement and supply chain processes for its customers.

The Cortex Trading Partner Network enhances the exchange of business critical documents, such as purchase orders, receipts and invoices, resulting in improved cash flow management and business controls while reducing days outstanding and administrative costs.

Cortex is a low cost, low risk cloud-based solution that can be implemented quickly by leveraging its customers' existing business environment.

For more information please visit our website at www.cortex.net.

Forward-Looking Statements

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" and elsewhere in the Company's periodic filings with Canadian securities regulators. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not assume the obligation to update any forward-looking statement.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the content of this news release.

Contact Information

  • Brisco Capital Partners
    Scott Koyich
    (403) 215-5979
    skoyich (at) briscocapital.com