Gemcom Software International Inc.
TSX : GCM

Gemcom Software International Inc.

August 14, 2007 19:39 ET

Gemcom Announces First Quarter Fiscal 2008 Results

Total revenue up 193%; 40% of the increase comes from year-over-year organic growth

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 14, 2007) - Gemcom Software International Inc. (TSX:GCM), the largest global supplier of specialised mining productivity solutions, today announced its financial results for the three-month period ended June 30, 2007. Gemcom's consolidated results include Surpac Minex Group Pty Ltd. (Surpac Minex) which was acquired in July 2006, and are compared to pre-acquisition results of prior fiscal period as applicable. All figures are quoted in Canadian dollars.

Q1 Fiscal 2008 Highlights:

Financial

- Total revenue increased 193% to $12.6 million in Q1 2008 from $4.3 million in Q1 2007;

- EBITDA(1) increased 448% to $2.5 million in Q1 2008 from $0.5 million in Q1 2007;

- Income from operations increased to $2.2 million, or 18% of revenue, from $0.5 million, or 12% of revenue, in Q1 2007;

- Net income increased by 457% to $1.4 million, or 11% of revenue, from $0.2 million, or 6% of revenue in Q1 2007;

- Earnings per share increased to $0.03 in Q1 2008 from $0.01 in Q1 2007; and

- Working capital increased 29% to $14.6 million on June 30, 2007 as compared with $11.4 million on March 31, 2007.

Operational

- Gemcom released new, updated versions of its Surpac and Minex software, now branded under the Gemcom family. Gemcom Surpac 6.0 helps to address skills shortages in the mining industry by bringing enhanced usability into the system. Gemcom Minex 5.2 is a significant update to the software designed specifically to address the unique needs of stratified deposits like coal. Gemcom GEMS 6.1 was also released; marking the first time technology has been shared across Gemcom's combined product lines.

- Gemcom signed an agreement with the University of Sao Paulo to establish a centre of mining research excellence. As part of the agreement, Gemcom's software will be used by students preparing to enter the industry and to support research projects.

"We continue to realize significant benefits from the acquisition of Surpac Minex, beyond merely additive improvements to revenue, as we build critical mass and a leadership position in the industry," said Rick Moignard, president and CEO of Gemcom. "Gemcom is investing heavily in research and development and is leveraging the enhanced capabilities of our expanded and realigned product development team to support the integration of "best of breed" features into successive generations of both our products and services."

"Strong levels of organic growth, generated by expanded opportunities globally, saw us produce record revenue for the first quarter," said Garth Albright, CFO of Gemcom. "We've been able to support these levels of organic growth without a comparable increase in expenses, beyond the combination of the cost structures of the two organizations, and this has translated into solid improvements in our bottom line."

First Quarter 2008 Financial Review:

Total revenue increased to $12,654,740 for the three months ended June 30, 2007 compared with $4,317,345 for the same three month period in 2007, an increase of $8,337,395 or 193%. Higher license sales from an expanded software offering, resulting from the acquisition of Surpac Minex, was the primary reason for the increase. Higher sales of maintenance and professional services fees revenues also contributed to the improvement. As compared to Q1 of fiscal 2007, the acquisition of Surpac Minex accounted for 60% of the $8,377,395 increase in revenue, while organic growth accounted for 40% of the increase in revenue.

Research and development expenses for the first three months of this year were $2,466,293, as compared to $943,593 in Q1 of the prior year, an increase of $1,522,700, or 161%. This increase is due primarily to the bringing together of the two research and development teams upon the acquisition of Surpac Minex in the second quarter of fiscal 2007. Research and development expense as a percentage of revenue in the first quarter of fiscal 2008 was 20%, versus 22% in the comparative period a year ago.

During the three months ended June 30, 2007, sales and marketing expenses were $4,342,762 as compared to $1,704,982 for the same three months last year. This increase of $2,637,780, or 155%, is primarily due to personnel costs on the expansion of Gemcom's regional business units upon the acquisition of Surpac Minex in July 2006 and the addition of 70 employees in sales, support and services at that time.

EBITDA(1) increased to $2,540,126 for the three months ended June 30, 2007 compared with $463,141 for the same three month period in 2007, an increase of $2,076,984, or 448%.

Net income was $1,376,416, or $0.03 per share (basic and diluted), for the three months ended June 30, 2007 compared to $247,145, or $0.01 per share (basic and diluted), for the same three month period in 2007, an increase of $1,129,271, or 457%. Total shares issued and outstanding as at June 30, 2007 was 52,992,747.

(1) EBITDA, defined as earnings, before interest, taxes, depreciation and amortization, does not have any standardized meaning prescribed by GAAP. However, management believes it is a useful supplemental measure of operational performance.

Complete financial statements can be found via SEDAR (www.sedar.com), or on the Company's website (www.gemcomsoftware.com/investor_relations).

Conference Call

Gemcom will host a conference call to discuss these financial results on Wednesday, August 15, 2007 at 9:00 a.m. E.D.T. (6:00 a.m. P.D.T.) To access the conference call by telephone, dial +1 416-644-3429 or 1-800-590-1817. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Wednesday, August 22, 2007 at midnight. To access the archived conference call, dial +1 416-640-1917 or 1-877-289-8525 and enter the reservation number 21243540 followed by the number sign.

About Gemcom

When mining companies seek to increase mine productivity, they turn to Gemcom for technology and services. The Company is home to world-renowned mining solutions like GEMS, Surpac, Minex, Whittle, and InSite and to industry thought-leaders who are pushing the boundaries of what's possible in mining. Established in 1985, Gemcom has a global reach delivering comprehensive solutions in all major mining centres in more than 90 countries. Every major mining company, including BHP Billiton, Codelco, CVRD, De Beers and Newmont, is a Gemcom client. Through a combination of organic growth and strategic acquisitions, the Company has become the largest global supplier of specialised mining productivity solutions. For more information, please visit www.gemcomsoftware.com.

Gemcom, the Gemcom logo and combinations thereof, are trademarks of Gemcom Software International Inc. GEMS, Surpac, Minex, Whittle and Gemcom InSite are either registered trademarks or trademarks of Gemcom Software International Inc.

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