Momentum Advanced Solutions Inc.
TSX : WWW

Momentum Advanced Solutions Inc.

December 12, 2008 11:07 ET

Momentum Announces Q2 Results

Managed Services Revenue up 48% While Total Revenue Increases 22%

MARKHAM, ONTARIO--(Marketwire - Dec. 12, 2008) - Momentum Advanced Solutions Inc. (TSX:WWW), ("Momentum" or the "Company"), a leader in IT hosting and managed website services, today announced results for the second quarter of fiscal 2009 ended October 31, 2008.

Q2 FY 09 vs. Q2 FY 08 Highlights

- Total revenue increased 22% to $5,106,811 vs. $4,183,866

- Web Solutions and Services ("WSS") revenue increased 7% to $2,866,883 vs. $2,675,215

- Managed Services ("MS") revenue increased 48% to $2,239,928 vs. $1,508,651

- EBITDA(1) improved to $570,218 up $218,309 or 62% from $351,909

- Net income was $20,994 vs. $74,117

- Finished the quarter at approximately 750 servers provisioned for UltraHosting


"We are very pleased with the growth during the quarter given our revenue exceeded $5.0 million for the first time under the Momentum brand", stated Sheldon Pollack, CEO of Momentum. "As anticipated, our strategic marketing initiatives continue to generate new recurring revenues for the Company while our investments in data centre infrastructure have allowed us to support the resulting growth. In addition, our acquisition of the IT Hosting business of BroadSpire Inc. during the quarter accelerated our business plans and contributed favourably to our results."

Q2 FY 09 vs. Q2 FY 08

Total revenue for Q2 FY09 increased 22% or $922,945 to $5,106,811 compared with $4,183,866 recorded in Q2 FY08. Total gross profit was $1,966,535 an increase of 9% or $158,041 compared with the $1,808,494 recorded in Q2 FY08. Web Solutions and Services revenues increased by 7% and Managed Service revenues increased by 48% over the same quarter of the prior year. Gross profit increased at a lower rate than revenue due to investments made in infrastructure to support this growth.

Operating expenses were $1,879,678 in the second quarter of 2009, up from $1,767,810 recorded in the second quarter of the prior year. Operating expenses rose during the quarter primarily due to the continued execution of our FY09 marketing plan.

The Company had operating earnings of $86,857 for the second quarter of FY09, an increase of 113% compared with operating earnings of $40,684 recorded in the second quarter of FY08.

EBITDA(1) for the second quarter reached $570,218 an improvement of $218,309 or 62% from EBITDA of $351,909 recorded in the same quarter of the prior year.

Net interest expense was $65,863 in Q2 FY09, a change of $99,296 compared with net interest income of $33,433 in the same quarter of the prior year. This change was primarily due to the use of cash and establishment of a note payable relating to the acquisition of the IT Hosting division of BroadSpire Inc. and the increase in capital lease obligations during the previous 12 month period.

As a result, net income for the second quarter of FY09 was $20,994 compared with $74,117 in the second quarter of FY08.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $808,070 at October 31, 2008, down from $4,124,401 at July 31, 2008. The reduction in cash is primarily attributable to the acquisition of the BroadSpire Hosting Assets. The Company continues to have available a $2,000,000 demand operating facility from a major Canadian financial institution.

Normal Course Issuer Bid

On September 12, 2008, the Company announced the renewal of its normal course issuer bid allowing for the purchase of up to 2,500,000 common shares until September 16, 2009. During Q2 FY09, the Company made repurchases of 140,000 common shares at an average cost of $0.155 resulting in 64,105,577 common shares outstanding at October 31, 2008.

(1) EBITDA is defined as net income (loss) from continuing operations adding back amortization of managed services assets, amortization of other assets and net interest expense (income). The Company uses EBITDA amongst other measures to assess the operating performance of its ongoing business. The Company believes that EBITDA is useful supplemental information as it provides an indication of the results generated by the Company s continuing business activities prior to taking into consideration financing costs and capital asset amortization costs. Similarly, readers may find this non-GAAP financial measure useful although the term EBITDA does not have a recognized meaning under Canadian GAAP and therefore may not be comparable to similarly titled measures presented by other companies. EBITDA should not be construed as the equivalent to cash flow from operations. The most comparable GAAP measurement for EBITDA is net income (loss) from continuing operations. A reconciliation between net income (loss) from continuing operations and EBITDA is provided below.



----------------------------------------------------------------------------
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Three month period Six month period
ended October 31 ended October 31
2008 2007 2008 2007
----------------------------------------------------------------------------
Net Income (loss) from
continuing operations $ 20,994 $ 74,117 $ (202,187) $ (281,784)
Amortization of MS Assets 344,088 170,678 603,811 317,194
Other Amortization 139,273 140,547 256,517 276,552
Interest (Income) Expense, Net 65,863 (33,433) 77,117 (45,520)
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EBITDA $ 570,218 $ 351,909 $ 735,258 $ 266,442
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Momentum Advanced Solutions Inc.
Consolidated Balance Sheets
As at October 31 and April 30, 2008

----------------------------------------------------------------------------
----------------------------------------------------------------------------
October 31, 2008 April 30, 2008
Unaudited
----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 808,070 $ 1,075,754
Short-term investments - 3,052,523
Accounts receivable 4,818,595 3,879,258
Prepaid expenses and other assets 520,152 375,287
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6,146,817 8,382,822

Deferred costs and other assets 457,043 460,009
Capital assets 6,907,122 5,245,086
Goodwill and other intangible assets 4,281,964 550,277

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$ 17,792,946 $ 14,638,194
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 2,132,659 $ 1,480,581
Deferred revenue 487,206 186,990
Current portion of obligations under
capital leases 991,994 542,411
Current portion of note payable 363,934 -
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3,975,793 2,209,982

Obligations under capital leases 1,752,797 819,164
Note payable 717,851 -
Long-term facility lease inducement and other 285,371 314,191

Shareholders' equity 11,061,134 11,294,857

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$ 17,792,946 $ 14,638,194
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Momentum Advanced Solutions Inc.
Consolidated Statements of Operations,
Comprehensive Income and Retained Earnings (unaudited)
For the three and six months ended October 31, 2008 and 2007

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
October 31 October 31
2008 2007 2008 2007
----------------------------------------------------------------------------

Revenue
Web solutions and
services $ 2,866,883 $ 2,675,215 $ 5,605,143 $ 5,121,214
Managed services 2,239,928 1,508,651 4,018,972 2,867,188
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5,106,811 4,183,866 9,624,115 7,988,402

Cost of revenue
Web solutions and
services 1,709,967 1,613,772 3,560,434 3,267,844
Managed services 1,086,221 590,922 1,902,299 1,168,342
Amortization of
managed services
assets 344,088 170,678 603,811 317,194
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3,140,276 2,375,372 6,066,544 4,753,380

Gross Profit
Web solutions and
services 1,156,916 1,061,443 2,044,709 1,853,370
Managed services 809,619 747,051 1,512,862 1,381,652
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1,966,535 1,808,494 3,557,571 3,235,022

Expenses:
Selling 904,626 655,008 1,708,304 1,350,443
Administrative 835,779 972,255 1,717,820 1,935,331
Other amortization 139,273 140,547 256,517 276,552
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1,879,678 1,767,810 3,682,641 3,562,326

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Operating income
(loss) 86,857 40,684 (125,070) (327,304)

Interest income 9,818 47,483 42,776 78,194
Interest expense (75,681) (14,050) (119,893) (32,674)
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(65,863) 33,433 (77,117) 45,520

Net income (loss)
from continuing
operations $ 20,994 $ 74,117 $ (202,187) $ (281,784)
Net income (loss)
from discontinued
operations - - - (38,238)
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Net income (loss)
and comprehensive
income (loss) $ 20,994 $ 74,117 $ (202,187) $ (320,022)
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Retained earnings,
beginning of period $ 3,926,272 $ 3,762,362 $ 4,165,107 $ 4,156,501
Repurchase of shares (13,567) (14,028) (29,221) (14,028)
Earnings (loss) for
the period 20,994 74,117 (202,187) (320,022)
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Retained earnings,
end of period $ 3,933,699 $ 3,822,451 $ 3,933,699 $ 3,822,451
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Basic and diluted
earnings (loss) per
share
Continuing
operations $ - $ - $ - $ -
Discontinued
operations - - - -
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Basic and diluted
earnings per share $ - $ - $ - $ -
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Basic weighted
average common
shares outstanding 64,205,251 65,611,447 64,307,574 65,618,262
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Diluted weighted
average common
shares outstanding 64,647,805 65,900,306 64,590,954 65,815,513
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Momentum Advanced Solutions Inc.
Consolidated Statements of Cash Flows (unaudited)
For the three and six months ended October 31, 2008 and 2007

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
October 31 October 31
2008 2007 2008 2007
----------------------------------------------------------------------------
Cash provided by
(used in):
Operations:
Net earnings (loss) $ 20,994 $ 74,117 $ (202,187) $ (320,022)
Items not involving
cash:
Amortization of
capital assets 457,071 311,225 834,038 593,746
Amortization of
intangible assets 26,290 - 26,290 -
Amortization of
deferred costs 25,562 4,417 52,535 8,667
Amortization of
long-term facility
lease inducement
and other (6,545) (2,149) (8,932) (2,149)
Increase in
long-term facility
lease inducement
and other 2,327 153,770 4,655 153,770
Unrealized gain
on short-term
investments - (33,685) - (39,272)
Unrealized foreign
currency loss 76,089 - 76,089 -
Interest accretion
on note payable 18,228 - 18,228 -
Stock based
compensation 15,057 16,341 29,519 58,443
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635,073 524,036 830,235 453,183
Changes in non-cash
operating working
capital (909,573) (305,421) (673,143) 1,058,234
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Cash provided by
(used in) operations (274,500) 218,615 157,092 1,511,417
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Financing:
Addition to
obligation under
capital lease 394,193 300,740 1,773,008 300,740
Payments on
obligations under
capital leases (214,909) (77,730) (389,792) (128,626)
Repurchase of shares (26,714) (24,730) (61,055) (24,730)
Amortization of
long-term facility
lease inducement
and other (12,043) (23,764) (24,543) (37,927)
Increase in long-term
facility lease
inducement and other - 20,000 - 20,000
----------------------------------------------------------------------------
140,527 194,516 1,297,618 129,457
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Investments:
Purchase of capital
assets (735,631) (570,539) (2,321,010) (998,336)
Purchase of short-term
investments - - - (3,300,000)
Maturity of short-term
investments - 350,000 3,052,523 350,000
Additions to deferred
costs and other
assets (42,389) - (49,569) -
Decrease in
restricted cash - - - 250,000
Purchase of
intangible assets (650,836) - (650,836) -
Purchase of business (1,803,140) - (1,803,140) -
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(3,231,996) (220,539) (1,772,032) (3,698,336)
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Effect of exchange
rate changes on cash
and cash equivalents 49,638 - 49,638 -
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Increase (decrease)
in cash (3,316,331) 192,592 (267,684) (2,057,462)
Cash and cash
equivalents beginning
of period 4,124,401 507,946 1,075,754 2,758,000
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Cash and cash
equivalents end
of period $ 808,070 $ 700,538 $ 808,070 $ 700,538
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Forward Looking Statement

This news release contains forward-looking information that is based on management's best estimates and the current operating environment. Forward-looking information typically contains words such as "anticipate", "believe", "should", "may","expect", "intend", "plan" or similar words suggesting future outcomes. These statements are based upon certain material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information, including Momentum s perception of historical trends, current conditions and expected future developments as well as other factors management believes are appropriate in the circumstances.

Such forward-looking information is as of the date hereof and is subject to a number of known and unknown risks, uncertainties and other factors which could cause actual results or events to differ materially from future results or events expressed, anticipated or implied by such forward-looking information. Such factors may include but are not limited to, changes in markets and competition, technological and competitive developments and potential downturns in economic conditions generally. Therefore, actual outcomes and results may differ materially from those expressed in such forward-looking information. Readers are cautioned that such information may not be appropriate for other purposes. Other than as may be required by law, Momentum disclaims any intention or obligation to update or revise any such forward-looking information, whether as a result of new information, future events or otherwise.

About Momentum Advanced Solutions Inc.

Momentum is a leader in Web outsourcing services. Its solutions provide customers with the innovation, integration, and operational expertise needed to reduce costs and/or improve productivity by outsourcing their mission critical, web-based applications and infrastructure to Momentum. Headquartered in Markham, Ontario, Momentum has offices in Ottawa, Windsor, Calgary and Toronto. Momentum Advanced Solutions is publicly traded on the Toronto Stock Exchange and trades under the symbol WWW.

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