Groupworks Financial Corp.
TSX VENTURE : GWC

Groupworks Financial Corp.

July 27, 2011 09:00 ET

Groupworks Financial Corp. Announces Strong Third Quarter Results, a New Acquisition, and a $14.5 Million New Debt Financing Arrangement

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 27, 2011) - Groupworks Financial Corp. (TSX VENTURE:GWC) -

For the third quarter:
Revenue grew by $1,124,057 compared to prior year Q3 results (23% growth)
EBITDA grew by $64,227 compared to prior year Q3 results (16% growth)
EBITDA Margin before Corporate Costs decreased to 22% from 24% (comparative quarters)
EBITDA Per Share (Basic) of $0.014 for the Quarter (vs. $.012 for the comparative quarter)

For the year to date:
Revenue grew by $2,642,593 compared to prior year results (18% growth)
EBITDA grew by $904,296 compared to prior year results (79% growth)
EBITDA Margin before Corporate Costs grew to 25% from 22%
EBITDA Per Share (Basic) of $0.062 for the year to date (vs. $0.035 for the comparative year to date)

Summary Financial Results

Three Months Ended May 31, Nine Months Ended May 31,
2011 2010 2011 2010
Revenue $6,025,828 $4,901,771 $17,440,095 $14,797,502
EBITDA Before Corporate Costs $1,323,855 $1,193,487 $4,418,875 $3,291,972
Operating Income (EBITDA) $477,499 $413,272 $2,044,176 $1,139,880
Net Income (Loss) ($49,799) ($45,668) $538,365 ($1,876)
EBITDA per share (Basic) $0.014 $0.012 $0.062 $0.035

Groupworks Financial Corp. ("Groupworks" or the "Company") announces strong financial results for the third quarter and nine months ended May 31, 2011 which included growth in revenue to $6.0 million for the quarter and $17.4 million for the nine months. EBITDA grew to $477,499 for the quarter and $2,044,176 for the nine month period, substantially ahead of last year comparative results. These results illustrate revenue growth of 23% for the quarter and 18% for the nine month period as well as growth in EBITDA of $64,227 or 16% for the third quarter and $904,296 or 79% for the nine 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 third quarter and nine months ended May 31, 2011 was $6.0 million and $17.4 million respectively, up 23% and 18% from the $4.9 million and $14.8 million in the comparative periods of fiscal 2010. The increase in revenue for the third quarter and nine months ended May 31, 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 $64,227 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 offset by increased professional fees associated with employment agreements and acquisition related legal fees and increases in commissions which are directly tied to revenue growth.

While revenues for the nine month period grew by $2,642,593, operating costs increased by only $1,515,690, thereby causing Operating Income before Corporate Costs to increase over the period to $4,418,875 compared to $3,291,972 for the prior year, representing an increase in operating profits of 34%. Accordingly, EBITDA increased by 79% to $2,044,176 in the first nine months of fiscal 2011.

The Company had a Net Loss for the third quarter and Net Income for the nine months ended February 28, 2011 of ($49,799) and $538,365 respectively, compared to Net Losses of $45,668 and $1,876 in the same periods in the prior year. These increases equate to( $0.002) and $0.016 for the third quarter and nine months ended May 31, 2011 compared to ($0.001) and ($0.0001) in the prior year, respectively on a basic per share basis.

Cash balances were $697,885 as at May 31, 2011, a decrease of $965,672 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 $1,443,388 in long-term debt over the course of the first nine months of fiscal 2011.

The Financial Statements and Management Discussion and Analysis for the period ended May 31, 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 subsequent to the quarter end, it has finalized its previously announced financing arrangement with a Schedule I Canadian Bank that will provide for 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 Developments

Groupworks expanded its operation by acquiring Les Assurances W.B. Inc., a Quebec based group benefits and pension advisory company to expand the Company's presence in Quebec. The acquisition will allow the Company to implement its service focused operational methodology to its latest acquisition that will allow for rapid synergies while broadening its footprint in eastern Canada.

Groupworks continued its positive momentum during the third quarter ended May 31, 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; and (iv), continuing to grow and broaden our national service offerings by growth via acquistion.

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.

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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