CYBERPLEX INC.
TSX : CX

CYBERPLEX INC.

March 29, 2011 16:13 ET

Cyberplex Reports Fourth Quarter and 2010 Results

Positioning for the Future of Online Publishing and Advertising.

TORONTO, ONTARIO--(Marketwire - March 29, 2011) - Cyberplex Inc. (TSX:CX) a leader in online publishing and customer acquisition strategies today announced its financial results for the fiscal year and fourth quarter-ended December 31, 2010. Total revenue for the year was $106.9 million, a slight decrease from the $110.4 million recorded in 2009, and adjusted EBITDA for the year was $13.3 million. Total revenue for the fourth quarter was $31.6 million, with gross margin of 33% and adjusted EBITDA of $4.8 million.

Fourth Quarter Operational Highlights

  • Acquired EQ Advertising, a demand side platform ("DSP") with real-time bidding capabilities to further augment distribution, and deliver targeted display advertising and performance marketing solutions;
  • Launched four new web properties to increase online audience development in the finance and retail verticals and to enhance various lead generation activities;
  • Integrated performance-based campaigns into 80% of the Company's publishing properties to continue diversifying revenue opportunities from these properties;
  • Delivered on various strategic initiatives with leading brand advertisers including Jaguar Canada, and Quest Personals, while furthering mobile initiatives with industry leader Poynt Solutions.

"During the fourth quarter of 2010, we continued to focus on our publishing and distribution capabilities and work with clients to target their customers in the most effective way. By combining our internal publishing capabilities with some of the best third-party publishers in the industry we continue to deliver excellent results for our advertisers using both pay per click and performance-based campaigns." said Geoffrey Rotstein, Chief Executive Officer. "The Company made significant investments during the quarter in technology and in its depth of operations as quality and customer satisfaction continued to be a main focus for all divisions of the organization."

As reported by the Company on January 10, 2011, there was a set-back in operations due to the integration of the Yahoo! and Bing search platforms in mid- December, which caused significant disruption. Since that time the Company has been working diligently to transition its systems and algorithms to adapt to the newly integrated search marketplace and has been making steady progress. Following a difficult first two months of 2011, which included negative impacts from the aforesaid integration, restructuring charges and a strong Canadian dollar, the Company is performing better in March. Based on preliminary results which are not yet complete and remain subject to further review, adjusted EBITDA for the first quarter of 2011 is expected to be breakeven even after a very difficult start to the year.

The Company is pleased with the assistance and support Yahoo! has provided to date and is very encouraged by the strength of its partnership with Yahoo!. The Company remains in discussions with its principal lender, American Capital, Ltd., to review its debt obligations. As of the date of this release, the Company is in compliance with its covenants under the terms of its credit agreement with American Capital, and based on preliminary financial results which remain incomplete and subject to further review, believes it has the ability to remain in compliance with the financial covenants and other obligations that arise under the terms of the credit agreement for the quarter ending March 31, 2011.

"The discussions with American Capital are now progressing at a quicker pace than at the outset. We believe that both American Capital and Cyberplex are motivated to find a reasonable compromise to the current situation," said Geoffrey Rotstein.

Results for the Year Ended December 31, 2010

  • The Company generated revenue of $106.9 million, a decrease of 3% compared to $110.4 million generated in 2009
  • Adjusted EBITDA for 2010 was $13.3 million compared to $15.1 million in 2009. Net loss for 2010 was $61.1 million compared to net income of $7.1 million in 2009.
  • Acquisition of Tsavo Media, a leading online publisher on June 8, 2010, which furthered the Company's distribution capabilities by providing over 300 web properties and a leading proprietary search technology platform
  • Acquisition of Surebaby.com, a content rich website providing helpful parenting information
  • Acquisition of the EQ Advertising Group, an organization that brings a proprietary DSP with real-time bidding capabilities to the organization
  • Delivered various mobile and video applications to clients as we continued to evolve our targeted search and customer acquisition platforms

"We are very proud of our numerous accomplishments in 2010 and strongly believe that even with the challenges experienced during the later part of December, we are positioned to be successful" said Ted Hastings, President of Cyberplex. "As growth and interest in online advertising continues to gain momentum, we have established a solid foundation. As our industry continues to adapt and client demands continue to grow, the skills, expertise and technology platforms that we have developed will allow us to compete with anyone in today's market."

Non-GAAP Financial Measures

This press release includes a discussion of "Adjusted EBITDA," which is a non-GAAP financial measure. The Company defines Adjusted EBITDA as net income before (a) interest income (expense); (b) income tax provision (recovery); (c) amortization of capital and intangible assets; (d) foreign exchange loss (gain); (e) stock-based compensation expense related to the Company's grant of stock options;(f) employee termination costs and (g) allowances for accounts in litigation and other doubtful accounts.

Management uses Adjusted EBITDA as a measurement of the Company's operating performance because it provides information related to the Company's ability to provide cash flows for acquisitions, capital expenditures and working capital requirements. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in its industry. The Company has included allowance for accounts in litigation and other doubtful accounts in adjusted EBITDA, due to the unusual amount of allowances in the fourth quarter of 2010 which are not expected to recur at a similar amount in the future.

The non-GAAP financial measure is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review the Company's consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. In addition, the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from the Company's non-GAAP measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring.

The table below reconciles net income (loss) and Adjusted EBITDA for the periods presented:

  Three months ended   Twelve months ended
  December 31   December 31
    2010     2009     2010     2009
                       
Net Income (loss) $ (59,767,497 ) $ 1,254,726   $ (61,074,414 ) $ 7,101,620
Add:                      
Amortization of capital and intangible assets   4,381,942     121,061     10,594,042     405,141
Intangibles & Goodwill impairment   50,289,984     -     50,289,984     -
Allowance for accounts in litigation and other doubtful accounts   5,790,205     1,513,063     8,265,205     3,347,288
Special charges   2,710,477     -     2,710,477     -
Interest expenses (income), net   914,254     (24,982 )   2,217,390     26,848
Foreign exchange (gain) loss   (194,101 )   975,472     (910,589 )   3,423,700
Employee termination costs   26,643     -     238,047     -
Stock based compensation   121,304     197,373     454,262     735,187
Loss on disposal of assets   21,295     -     21,295     -
Income tax expense (recovery)   487,006     (306,226 )   445,962     78,231
Adjusted EBITDA   4,781,512     3,730,487     13,251,661     15,118,015

Conference Call Details

In conjunction with the release, Cyberplex will host a conference call on Tuesday, March 29, 2011 at 4:30 p.m. EST to discuss the financial results. To access the call, please dial 1-888-892-3255. Please call five minutes prior to the call. A replay of the conference call will be available as of 12:00 a.m. the next day, until midnight June 30, 2011. To access the replay dial 1-800-937-6305 followed by the pass code 173269.

About Cyberplex

Cyberplex Inc. (www.cyberplex.com) is a North American leader in online publishing and customer acquisition strategies. The Company, through its subsidiaries, leverages over 300 proprietary web properties and its vast publisher network to efficiently connect advertisers to their most relevant online customers and prospects. By combining high quality publishing initiatives with efficient technology solutions and online marketing expertise, the Company is able to deliver the optimal targeted audience to online advertisers. Cyberplex delivers measurable results that improve advertiser ROI, monetize the value of online properties, and build targeted, loyal online audiences.

Forward-Looking Statements

This news release may contain forward-looking statements that are based on management's current expectations and are subject to known and unknown uncertainties and risks, which could cause actual results to differ materially from those contemplated or implied by such forward-looking statements. Cyberplex is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or otherwise.

 
CYBERPLEX INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2010 and 2009
    2010     2009
Assets          
 
Current Assets:          
  Cash and cash equivalents  $ 5,191,691    $  10,222,001
  Restricted cash   2,310,206     -
  Short-term investments   1,690,686     11,540,642
  Accounts receivable, net of allowance for doubtful accounts of $3,540,733 (2009 - $2,270,977)   13,879,570     9,930,149
  Income taxes recoverable   632,006     -
  Prepaid expenses and other assets   2,320,963     3,303,819
    26,025,122     34,996,611
 
Restricted cash   1,749,048     -
Property and equipment   2,921,372     921,716
Intangible assets   29,157,932     798,093
Goodwill   1,466,971     14,095,708
Future income tax assets   -     582,740
  $ 61,320,445   $ 51,394,868
 
 
Liabilities and Shareholders' Equity          
 
Current Liabilities:          
  Accounts payable and accrued liabilities  $ 10,177,981   $ 4,270,080
  Current portion of term loans   9,402,402     -
  Unearned revenue   664,687     668,255
  Income taxes payable   1,729,226     631,465
  Deferred lease inducements   115,086     106,618
    22,089,382     5,676,418
 
Long-term portion of term loans   23,582,779     -
Future income tax liabilities   1,100,000     -
Deferred lease inducements   184,719     156,119
 
Shareholders' equity   14,363,565     45,562,331
           
 
  $ 61,320,445   $ 51,394,868
   
CYBERPLEX INC.  
Unaudited Consolidated Statements of Operations  
       
       
  Three Months Period Ended   Years Ended  
  December 31, 2010   December 31, 2009   December 31, 2010   December 31, 2009  
                         
                         
Revenue $ 31,633,418   $ 24,347,585   $ 106,863,016   $ 110,411,215  
Cost of revenue   21,260,256     17,512,801     74,627,889     78,070,649  
    10,373,162     6,834,784     32,235,127     32,340,566  
Expenses:                        
  Sales and marketing   2,893,821     2,313,821     10,331,094     12,907,348  
  General and administrative   8,635,982     2,554,171     17,610,217     8,450,937  
  Foreign exchange (gain) loss   (194,101 )   975,472     (910,589 )   3,423,700  
    11,335,702     5,843,464     27,030,722     24,781,985  
   
Income (loss) before the undernoted   (962,540 )   991,320     5,204,405     7,558,581  
   
Depreciation of property and equipment   148,131     108,561     1,290,085     319,903  
Amortization of intangible assets   4,233,811     12,500     9,303,957     85,238  
Special charges   2,710,477     -     2,710,477     -  
Impairment of goodwill and intangible assets   50,289,984     -     50,289,984     -  
Loss on disposal of assets   21,295     -     21,295     -  
                         
Income (loss) from operations   (58,366,238 )   870,259     (58,411,393 )   7,153,440  
   
Interest income   22,168     25,834     74,697     48,522  
Interest expense   (936,421 )   (852 )   (2,292,087 )   (75,370 )
Gain on sale of investment   -     53,259     331     53,259  
    (914,253 )   78,241     (2,217,059 )   26,411  
                         
Income (loss) before income taxes   (59,280,491 )   948,500     (60,628,452 )   7,179,851  
   
Income taxes (recovery)                        
  Current   430,100     276,514     1,500,631     660,971  
  Future   56,906     (582,740 )   (1,054,669 )   (582,740 )
    487,006     (306,226 )   445,962     78,231  
   
Net income (loss)   (59,767,497 )   1,254,726     (61,074,414 )   7,101,620  
   
Unrealized gain (loss) on available-for-sale securities, net of tax of nil   (24,346 )   (135,974 )   (127,282 )   172,706  
Foreign currency translation adjustment   (894,641 )   -     (2,491,886 )   -  
Amount reclassified to income during the period   -     (53,259 )   -     (53,259 )
Comprehensive income (loss) $ (60,686,484 ) $ 1,065,493   $ (63,693,582 ) $ 7,221,067  
   
Income (loss) per share:                        
  Basic $ (0.45 )   0.02   $ (0.62 ) $ 0.11  
  Diluted   (0.45 )   0.02     (0.62 )   0.11  
   
Weighted average number of shares used in income (loss) per share :                        
  Basic   133,536,962     68,450,054     98,979,151     62,680,694  
  Diluted   133,536,962     70,380,964     98,979,151     64,905,988  
                         
   
CYBERPLEX INC.  
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  
   
  Three Months Period   Years Ended  
  Ended December 31   December 31  
    2010     2009     2010     2009  
   
Cash flows from (used in) operating activities:                        
  Net income (loss) $ (59,767,497 ) $ 1,254,726   $ (61,074,414 ) $ 7,101,620  
Items not involving cash:                        
  Depreciation of property and equipment   148,130     108,561     1,290,085     319,903  
  Amortization of intangible assets   4,233,811     12,500     9,303,957     85,238  
  Stock-based compensation   121,304     197,373     454,262     735,187  
  Amortization of deferred lease inducements   (27,951 )   (33,562 )   (111,379 )   (89,466 )
  Unrealized foreign exchange loss   390,548     265,131     492,964     666,992  
  Interest accrued on long-term loans   748,859     -     748,859     -  
  Future income taxes   (1,310,275 )   (582,740 )   (1,054,669 )   (582,740 )
  Impairment of intangible assets   29,857,394     -     29,857,394     -  
  Impairment of goodwill   20,432,590     -     20,432,590     -  
  Loss on disposal of assets   21,295     -     21,295     -  
Change in non-cash operating assets and liabilities   7,921,243     (364,904 )   6,899,907     (1,014,859 )
    2,769,451     857,085     7,260,851     7,221,875  
   
   
Cash flows from (used in) financing activities:                        
  Decrease in bank indebtness   -     -     -     (3,535,264 )
  Repayment of long-term loans   (1,935,250 )   -     (1,935,250 )   -  
  Repayment of bridge loans   -     -     (9,217,719 )   -  
  Proceeds from exercise of stock options   105,300     11,600     142,300     243,532  
  Proceeds from exercise of warrants   -     -     -     216,667  
  Proceeds from public offering, net of issuance costs   22,661     -     30,795,254     15,887,291  
    (1,807,289 )   11,600     19,784,585     12,812,226  
   
   
Cash flows from (used in) investing activities:                        
  Sale (purchase) of short-term investments   1,163,036     2,813,735     9,391,958     (11,053,708 )
  Purchase of restricted marketable securities   (10,876 )   -     (413,916 )   -  
  Acquisition of TSAVO, net of cash acquired   736,403 )   -     (38,004,748 )   -  
  Acquisition of EQ Advertising Group Ltd., net of cash acquired   (882,829 )   -     (882,829 )   -  
  Acquisition of Incentaclick Media Group Inc., net of cash acquired   -     369,000     -     (2,031,000 )
  Acquisition of Eidenai Innovations Inc., net of cash acquired   -     (110,890 )   -     (202,220 )
  Proceeds from disposal of property and equipment   126,186     -     126,186     -  
  Additions to property and equipment   (254,404 )   (2,236 )   (1,223,020 )   (462,963 )
  Additions to intangible assets   (55,926 )   (300,000 )   (576,413 )   (392,114 )
    651,216 )   2,769,609     (31,582,782 )   (14,142,005 )
   
                         
Foreign exchange loss on cash held in foreign currency   (390,548 )   (265,131 )   (492,964 )   (666,992 )
   
Increase (decrease) in cash and cash equivalents   (79,602 )   3,373,163     (5,030,310 )   5,225,104  
   
Cash and cash equivalents, beginning of period   5,271,293     6,848,838     10,222,001     4,996,897  
   
Cash and cash equivalents, end of period $ 5,191,691   $ 10,222,001   $ 5,191,691   $ 10,222,001  

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