Groupworks Financial Corp.
TSX VENTURE : GWC

Groupworks Financial Corp.

December 16, 2010 17:44 ET

Groupworks Announces Strong Year End and Fourth Quarter Results

TORONTO, ONTARIO--(Marketwire - Dec. 16, 2010) - GROUPWORKS FINANCIAL CORP. (TSX VENTURE:GWC) -

For the fourth quarter:

  • EBITDA grew by $405,349 compared to prior year Q4 results (103% growth)
     
  • EBITDA Margin before Corporate Costs grew to 27% from 13% (comparative quarters)

  • EBITDA Per Share (Basic) of $0.02 for the Quarter (vs. $0.01 for the comparative quarter)

For the Year Ended Aug 31, 2010:

  • Consolidated revenues increased 52% to $20.7 million
     
  • Added 65 new clients
     
  • EBITDA grew by 56% to $1.9 million
     
  • EBITDA Per Share (Basic) grew by 16% to $0.06 per Share
     
Summary Financial Results (000s Except Per Share Data)
  Three Months Ended August 31, Year Ended August 31,
  2010 2009 2010 2009
Revenue $ 5,890 $ 5,161 $ 20,687 $ 13,617
Operating Income Before Corporate Costs $ 1,582 $ 654 $ 4,874 $ 2,542
Operating Income (EBITDA) $ 797 $ 392 $ 1,937 $ 1,239
Net Income $ (130) $ 32 $ (132) $ 345
EBITDA per share (Basic) $ 0.02 $ 0.01 $ 0.06 $ 0.05

Groupworks Financial Corp. ("Groupworks" or the "Company") announces strong financial results for the fourth quarter and year ended August 31st, 2010 which included growth in revenue to $5.9 million for the quarter and $20.7 million for the year and EBITDA which grew to $797,335 for the quarter and $1.9 million for the year ended August 31, 2010 substantially ahead of last year comparative results. These results include quarterly revenue growth of 14% and quarterly growth in EBITDA of $405,349 or 103.4% for the fourth quarter on a year-over-year comparative basis.

"In the fourth quarter, we continued to achieve strong year-over year growth in both revenue and EBITDA. Our results are demonstrative of our success in expanding service offerings to existing customers and winning new business," said Laurie Goldberg, Chairman & CEO of Groupworks. "Our proprietary marketing programs continue to fuel strong organic growth in our core business. Evidence of our consultants having demonstrated exceptional service and value added to clients is inherent in the 65 new clients that have switched to Groupworks during the fiscal year across Canada."

Financial Results

Revenue for the fourth quarter and year ended August 31st, 2010 was $5.9 and $20.7 million respectively, up 14.1% and 51.9% from the $5.2 and $13.6 million in the comparative periods of fiscal 2009. The increase in revenue for the fiscal year ended August 31, 2010 is largely attributable to the mergers and acquisitions completed in 2009 and revenue growth from adding new clients in the Company's employee benefits consulting services and administrative services lines of business. 

Revenue for the three months ended August 31, 2010 is the second quarter of fully comparative results since the acquisitions of White Willow and People Corporation and is demonstrative of continued organic growth across the company.

Quarterly EBITDA grew by $405,349 as a result of increased revenues and cost management initiatives related to the Company's on-going integration activities and the implementation of its shared services division.

While revenues for the year grew by $7.1 million, operating costs increased by only $4.7 million thereby causing Operating Income before Corporate Costs to increase over the period to $4.9 million compared to $2.5 million for the prior year, representing an increase in operating profits of 91.7%. Accordingly, EBITDA increased by 56.3% to $1.9 million for 2010 fiscal year.

The increase in operating profits and EBITDA is representative of revenue growth in the underlying employee benefits business. Cost reduction efforts within the operations of the Company, shift in allocation of costs from operating entities to the Corporate Cost Center as further integration of services and supplies occurs and minor recoveries in fee revenue from Recruiting and HR Consulting services.

The Company had a Net Loss for the Quarter of $129,669 compared to Net Income of $32,112 in the same period of the prior year which equates to $(0.004) and $0.001 respectively on a basic per share basis. For the year ended August 31, 2010, the Net loss was $131,545 compared to net income of $344,452 for the prior year ended August 31, 2009 which equates to $(0.004) and $0.014 respectively on a per share basis (basic). The Net Losses for the fourth quarter and the year-end are in line with expectations of Management. These losses are largely the result of the growing pre-tax profitablility of the firm as well as the accelerated depreciation of intangible assets and certain accruals resulting from the M&A transactions over the last two years.

Cash balances were $1.67 million as at August 31, 2010, a decrease of $440,431 since August 31, 2009. The reduction in cash was in line with management's expectations and resulted from normal seasonal and cyclical cash impacts along with the repayment of $1.1 million in long-term debt over the course of the fiscal year.

The Financial Statements and Management Discussion and Analysis for the period ended August 31st, 2010, along with additional information about the Company and all of its public filings are available at www.sedar.com and the highlights are summarized below:

Corporate Developments

In the fiscal year and during the fourth quarter of 2010 the Company achieved a number of milestones, commenced and completed a number of strategic initiatives and realized on a number of acquisition synergies.

Strategically, as a result of mergers and acquisition activities, the Company added significant operating capabilities including an enhanced corporate management team, a third party administrative back office and broadened its product offerings to include Group Retirement and HR Services. In addition, management successfully expanded its employee benefits services into the Winnipeg and Montreal marketplaces.

For the fiscal year, the Company completed a detailed strategic review resulting in a strategic plan which included the identification of synergies from acquisitions, a corporate financial plan, development of specific value propositions to clients and to target companies including a new acquisition model. This strategic plan also led to the development of a corporate planning process and a system for decision making which, for example, led to management changes in certain divisions of the company during the last six months and has provided the platform for the alignment of the Company's vision and positioned the Company for both organic and acquisition growth.

In addition, the Company made significant improvements and invested in its proprietary inside sales system and processes to increase lead generation and future revenue generating opportunities (Business Development) which have assisted in improved quarterly results. The advancements in business development have led to improved sales momentum including the winning of larger national brand accounts and have set the stage for the implementation of this lead generation system company-wide. Improved sales have enhanced the company's operating cashflow and lead to improved EBITDA for the business.

During the fiscal year, as a result of the development of its strategic plan and improved operating results, the Company announced that it had entered into an agreement with a major Canadian financial institution to provide acquisition financing in the amount of $9 million and announced plans to close on an operating line of credit in the amount of $1 million from its commercial bank for total debt financing of $10 million. Subsequently, Groupworks completed its planned expansion of its operating Line of credit to $1 million with the TD Bank.

Another significant initiative that was completed during the year was the integration and consolidation of finance and accounting which included the selection and implementation of an enterprise accounting system and enhanced financial policies and controls.

Annual Meeting

Groupworks will host its Annual Shareholders Meeting which shall include a presentation on its fourth quarter and year-end financial results on Wednesday, February 23, 2011 at 3:00 p.m. Central Time at the Fairmont Hotel, 2 Lombard Place, Winnipeg, Manitoba.

About Groupworks Financial Corp.

Groupworks Financial Corp. is a leading employee benefits and pension consulting firm in Canada. With a growing national footprint and offices across six provinces, Groupworks is bringing together the leading advisors in the industry, offering innovative and customized HR, benefit and pension solutions to its clients. Additional corporate information is available at www.groupworkscorp.com.

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. Operating Income before Corporate Costs means EBITDA plus expenses incurred at the corporate office. The difference between EBITDA and Operating Income before Corporate Costs is equal to Corporate Costs which include expenses related to acquisitions. Analysis of these differences enables understanding of the operating leverage inherent in the financial results of an acquisitive company. Operating leverage is a term used to describe the quantum of acquired EBITDA that falls to EBITDA of a company following an acquisition and is useful to the understanding of the resulting incremental overheads and synergies. The Company believes that these Non-GAAP financial measures provide meaningful information on the Company's performance and operating results. Readers are cautioned that EBITDA or the Company's calculation of the Operating Income do not have standardized meanings as prescribed by GAAP and may not be comparable to similar measures presented by other companies. Further, readers are cautioned that EBITDA or Operating Income 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.

Contact Information