Groupworks Financial Corp.
TSX VENTURE : GWC

Groupworks Financial Corp.

April 28, 2011 09:00 ET

Groupworks Financial Corp. Announces Strong Second Quarter Results, a $14.5 Million New Debt Financing Arrangement and Management Changes

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 28, 2011) - Groupworks Financial Corp. (TSX VENTURE:GWC) -

For the second quarter:

Revenue grew by $1,179,983 compared to prior year Q2 results (24% growth)

EBITDA grew by $505,097 compared to prior year Q2 results (134% growth)

EBITDA Margin before Corporate Costs grew to 29% from 21% (comparative quarters)

EBITDA Per Share (Basic) of $0.027 for the Quarter (vs. $0.01 for the comparative quarter)

For the year to date:

Revenue grew by $1,518,536 compared to prior year results (15% growth)

EBITDA grew by $840,069 compared to prior year results (116% growth)

EBITDA Margin before Corporate Costs grew to 27% from 21%

EBITDA Per Share (Basic) of $0.048 for the year to date (vs. $0.022 for the comparative year to date)

Summary Financial Results

Three Months Ended February 28,Six Months Ended February 28,
2011201020112010
Revenue$6,179,366$4,999,383$11,414,267$9,895,731
EBITDA Before Corporate Costs$1,768,608$1,062,612$3,095,020$2,098,484
Operating Income (EBITDA)$883,148$378,051$1,566,677$726,608
Net Income$357,867$61,992$588,164$43,792
EBITDA per share (Basic)$0.027$0.01$0.048$0.022

Groupworks Financial Corp. ("Groupworks" or the "Company") announces strong financial results for the second quarter and six months ended February 28, 2011 which included growth in revenue to $6.2 million for the quarter and $11.4 million for the six months. EBITDA grew to $883,148 for the quarter and $1,566,677 for the six month period, substantially ahead of last year comparative results. These results illustrate revenue growth of 24% for the quarter and 15% for the six month period as well as growth in EBITDA of $505,097 or 133.6% for the second quarter and $840,069 or 115.6% for the six month period on a quarter-over-quarter and year-over-year comparative basis.

"The Company continued to drive strong results due to revenue generating initiatives the Company started rolling out over the past few quarters. The Company continues to focus on shifting costs from non-revenue generating activities to revenue generating activities which encompasses the launch of the Integrated Solutions, Group Retirement Solutions and Business Development divisions," said Laurie Goldberg, Chairman and CEO of Groupworks. "The results are demonstrative of our ability to execute on our operational goal of driving organic revenue growth and improving operating margins from our existing operating units."

Financial Results

Revenue for the second quarter and six months ended February 28, 2011 was $6.2 million and $11.4 million respectively, up 23.6% and 15.3% from the $5.0 million and $9.9 million in the comparative periods of fiscal 2010. The increase in revenue for the second quarter and six months ended February 28, 2011 is largely attributable to organic revenue growth which resulted from the addition of new clients and from leads generated through the Company's proprietary inside sales system, new advisors and associate brokers, and from leads generated from the Business Development Group.

Quarterly EBITDA grew by $505,097 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 six month period grew by $1,518,536, operating costs increased by only $522,000 thereby causing Operating Income before Corporate Costs to increase over the period to $3.1 million compared to $2.1 million for the prior year, representing an increase in operating profits of 47.6%. Accordingly, EBITDA increased by 115.6% to $1,566,677 in the first six months of fiscal 2011.

The Company had Net Income for the second quarter and six months ended February 28, 2011 of $357,867 and $588,164 respectively, compared to Net Income of $61,992 and $43,792 in the same periods in the prior year. These increases equate to $0.011 and $0.018 for the second quarter and six months ended February 28, 2011 compared to $0.002 and $0.001 respectively on a basic per share basis.

Cash balances were $924,510 as at February 28, 2011, a decrease of $739,047 since August 31st, 2010. 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 $998,108 in long-term debt over the course of the first six months of fiscal 2011.

The Financial Statements and Management Discussion and Analysis for the period ended February 28, 2011, along with additional information about the Company and all of its public filings are available at www.sedar.com.

$14.5 Million Debt Financing Facility

The Company is pleased to announce that is has entered into a financing arrangement with a Schedule I Canadian Bank to provide a $10 million acquisition financing facility, a $2 million operating line of credit, and a $2.5 million installment loan facility to refinance the balance sheet and improve the overall working capital and cash flow position of the Company. These facilities will replace the previously announced facilities, and provide the Company with larger acquisition and operating facilities on better financial terms, positioning the Company to execute on its growth plans.

Under the terms of the acquisition facility, each advance used for an acquisition is a discrete event which will result in a separate installment loan with repayment terms up to 7 years. The operating line is tied to the lesser of $2 million or 75% of receivables and will be used to finance small investments, operating requirements and seasonal cash fluctuations. The installment loan of $2.5 million will be used to payout several existing loans tied to the previous acquisitions made by the Company. The loan is payable at the end of each quarter over a total period of 7 years. The installment loan facility allows for early repayment.

"The approval and closing of the new financing facility will provide the Company with significant financial capability to continue executing its operating plans, acquisition plans and growth strategy," said Laurie Goldberg, Chairman & CEO of Groupworks. "The Company has completed several significant milestones over the past several quarters which are starting to be reflected in our financial results. The financing facility is another important milestone that will enable us to continue expanding our national foot print and client service offerings."

Corporate Management Changes

Mr. Sean Cleary, serving in the capacity of Vice President of Corporate Development, will be leaving the Company and Mr. Glenn Pittman has been appointed to the position and will be assuming the responsibilities of Mr. Cleary. This change is effective June 1, 2011. Mr. Cleary was a co-founder and the original Chairman of Groupworks when it began in 2006, and has been an integral part of developing the Company from start-up to its current scale.

Mr. Pittman has held progressively responsible leadership positions within the financial services industry over the past 25 years. Immediately prior to joining Groupworks, Mr. Pittman was Senior Vice-President of Portland Investment Counsel. Prior to that Mr. Pittman held leadership positions with Manulife Securities/Berkshire Investment Group as Senior Vice-President, as a Partner with Connor, Clark & Lunn Capital Markets and also as Vice-President & National Sales Manager with AIC Limited. Mr. Pittman attended McGill University in Montreal and also earned a Bachelor of Commerce from Memorial University of Newfoundland.

Corporate Developments

Groupworks continued its positive momentum during the second quarter ended February 28, 2011 by focusing on going to market with a full suite of products that can be tailor made for our clients. With the ongoing development of the Shared Services Group and attracting and retaining amongst the best consultants in the country, the Company is putting its operating plans into action.

Overall corporate objectives included; (i) shifting expenses from non-revenue generating activities to revenue generating activities with a view of boosting organic growth; (ii) promoting and recruiting leadership to execute our organic growth plans; and (iii) building out three key revenue generating functions to enhance growth: Integrated Solutions, Group Retirement Solutions and Business Development with a view to building our value proposition for future recruits and acquisitions and our clients.

Results from the implementation of the above strategic initiatives, momentum from past initiatives and the overall improvement in revenue growth can be seen in the Company's financial performance. Quarter over quarter results are demonstrative of excellent operating leverage whereby increased revenue resulted in increased profitability.

Additional quarterly milestones included; (i) development of a new client service model; (ii) continued negotiations with a tenant to sublease certain office space through to the end of the lease in 2015; (iii) the continued roll out of the Groupworks Shared Services organization with a view to providing added value to our various service groups and operating brands; (iv) the continued establishment of the Integrated Solutions Group which provides services to help the Company's benefit consultants grow and enhance their client service offering by going to market on an integrated basis and offering existing clients the Company's full suite of products; and (v) recruitment of a senior position in our Corporate Development Group whose focus will be on the identification, cultivation and pursuit of acquisition targets and leading the strategic recruitment of consultants.

About Groupworks Financial Corp.

Groupworks Financial Corp. is a leading employee benefits and pension consulting firm in Canada. With a growing national footprint and eleven 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.

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