Momentum Advanced Solutions Inc.
TSX : WWW

Momentum Advanced Solutions Inc.

March 11, 2008 17:49 ET

Momentum Announces Q3 Results

Continued Increase in Revenue and Profit

TORONTO, ONTARIO--(Marketwire - March 11, 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 third quarter of fiscal 2008 ended January 31, 2008.

Q3 FY'08 vs. Q3 FY'07 Highlights

- Total revenue of $4,605,642, highest in over five years

- Web Solutions and Services ("WSS") revenue increased 4% to $3,122,485 vs. $2,997,000

- Managed Services ("MS") revenue increased 16% to $1,483,157 vs. $1,283,000

- Total gross profit of $1,858,729, highest in over five years

- Selling and administrative expenses reduced by 13% to $1,561,493 from $1,804,000

- EBITDA(1) improved to $487,492 up $354,492 from $133,000

- Net income from continuing operations was $179,988 vs. a loss of $159,000

- Cash flow from operations of $738,914 vs. cash used in operations of $543,000

- Cash, cash equivalents and investments at the end of Q3 were $4,126,640 up $436,830 from $3,689,810 at the end of Q2

"With over $4 million in cash and investments, revenue that is increasing and recurring and annualized EBITDA now just under $2 million, we believe that Momentum's value as a company is improving", stated Sheldon Pollack, CEO of Momentum. "We also believe that our current share price represents good value and have backed up this belief with our continued repurchase of shares under our normal course issuer bid".

Q3 FY'08 vs. Q3 FY'07

Total revenue for the third quarter of fiscal 2008 increased by 8% or $325,642 to $4,605,642 from $4,280,000 recorded in the third quarter of fiscal 2007 representing the highest total revenue recorded by the Company from continuing operations in over five years. WSS and MS revenue increased by 4% and 16% respectively over the same quarter of the prior year.

Total gross profit for the third quarter of fiscal 2008 was $1,858,729 up 3% from $1,802,000 recorded in the third quarter of fiscal 2007 representing the highest total gross profit recorded by the Company from continuing operations in over five years. Gross profit increased at a lower rate than revenue as the Company incurred additional costs of sale relating to its new Toronto data centre. This facility was obtained to support continued growth in Managed Services and became available for use during the third quarter with costs exceeding revenue initially as new business ramps-up.

Selling and administrative expenses were $1,561,493 in the third quarter of fiscal 2008, a decrease of 13% or $242,507 compared with $1,804,000 recorded in the third quarter of fiscal 2007. Costs declined due to continued cost management and the recovery of facility lease and shared service costs from a sub-tenant. Selling costs are expected to increase in future quarters as the Company invests in internet based marketing to attract new business to its UltraHosting offering.

The above resulted in EBITDA of $487,492 for the third quarter of fiscal 2008 or $1,949,968 on an annualized basis. EBITDA for the quarter improved by $354,492 from $133,000 recorded in the same quarter of the prior year due to increasing revenue and decreasing SG&A costs.

Net income from continuing operations improved by $338,988 to $179,988 in the third quarter of fiscal 2008 compared with a loss of $159,000 recorded in the third quarter of fiscal 2007.

Net income after discontinued operations was $179,988 in the third quarter of fiscal 2008 compared with $3,689,000 recorded in the third quarter of fiscal 2007 when the $3,887,000 gain on sale of the company's value-added-reseller business was recorded.

Liquidity and Capital Resources

The Company ended the third quarter of fiscal 2008 with cash, cash equivalents and short-term investments of $4,126,640 and maintained a fully available credit facility of $2,000,000. In addition, the Company's balance sheet remained strong with a current ratio of 3.9:1 and shareholders equity of $11,041,797.

Normal Course Issuer Bid

On September 14, 2007, Momentum announced the commencement of a normal course issuer bid. As of March 11, 2007, the Company has repurchased 1,153,600 common shares at an average purchase price before commissions of $0.165. Common shares repurchased have been or will be cancelled.

EBITDA

1) EBITDA is defined as income (loss) from continuing operations, adding back amortization interest and other. 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 generally accepted accounting principles 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 Months Ended January 31 2008 2007
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Net income (loss) from continuing operations $ 179,988 $ (159,000)
Income tax recovery (18,152) -
Amortization of capital assets, net of amounts
charged to cost of sales 149,496 151,000
Amortization of capital assets included in Managed
Services cost of sales 190,256 135,000
Interest and other (14,096) 6,000
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EBITDA $ 487,492 $ 133,000
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Momentum Advanced Solutions Inc.
Consolidated Balance Sheets
As at January 31, 2008 and April 30, 2007

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January 31, 2008 April 30, 2007
(unaudited)
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Assets
Current assets:
Cash and cash equivalents $ 1,105,395 $ 2,758,000
Short-term investments 3,021,245 -
Accounts receivable 3,639,048 3,012,000
Proceeds receivable from sale of business - 2,300,000
Prepaid expenses and other assets 758,797 631,000
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8,524,485 8,701,000

Restricted cash - 250,000
Deferred costs 125,412 97,000
Capital assets 4,826,905 4,380,000
Goodwill 550,277 550,277

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$ 14,027,079 $ 13,978,277
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,433,940 $ 1,850,346
Deferred revenue 380,943 214,000
Current portion of obligations under
capital leases 350,812 207,000
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2,165,695 2,271,346

Obligations under capital leases 514,573 257,000
Long-term facility lease inducement
and other 305,014 144,000

Shareholders' equity 11,041,797 11,305,931

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$ 14,027,079 $ 13,978,277
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Momentum Advanced Solutions Inc.
Consolidated Statements of Operations and Retained Earnings (unaudited)
For the three and nine months ended January 31, 2008 and 2007

----------------------------------------------------------------------------
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Three months ended Nine months ended
January 31 January 31
2008 2007 2008 2007
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Sales
Web solutions and
services $ 3,122,485 $ 2,997,000 $ 8,243,699 $ 7,753,000
Managed services 1,483,157 1,283,000 4,350,345 3,434,000
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Sales 4,605,642 4,280,000 12,594,044 11,187,000

Cost of Sales
Web solutions and
services 1,865,251 1,828,000 5,133,095 4,997,000
Managed services 881,662 650,000 2,367,198 1,767,000
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Cost of Sales 2,746,913 2,478,000 7,500,293 6,764,000

Gross Profit
Web solutions and
services 1,257,234 1,169,000 3,110,604 2,756,000
Managed services 601,495 633,000 1,983,147 1,667,000
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Gross Profit 1,858,729 1,802,000 5,093,751 4,423,000

Expenses:
Selling 615,582 630,000 1,966,025 1,725,000
Administrative 945,911 1,174,000 2,842,245 3,659,000
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1,561,493 1,804,000 4,808,270 5,384,000

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Income (loss) before
the undernoted 297,236 (2,000) 285,481 (961,000)

Amortization of capital
assets, net of amounts
charged to cost of sales (149,496) (151,000) (426,048) (528,000)
Interest and other 14,096 (6,000) 20,619 (9,000)
Income tax recovery 18,152 - 18,152 -
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(117,248) (157,000) (387,277) (537,000)

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Net income (loss) from
continuing operations $ 179,988 $ (159,000) $ (101,796) $(1,498,000)
Net income (loss) from
discontinued operations - 3,848,000 (38,238) 5,358,000
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Net income (loss) and
comprehensive income
(loss) $ 179,988 $ 3,689,000 $ (140,034) $ 3,860,000
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Retained earnings,
beginning of period $ 3,822,451 $ 772,000 $ 4,156,501 $ 601,000
Repurchase of shares (59,847) - (73,875) -
Earnings (loss) for
the period 179,988 3,689,000 (140,034) 3,860,000
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Retained earnings,
end of period $ 3,942,592 $ 4,461,000 $ 3,942,592 $ 4,461,000
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Basic and diluted
earnings (loss) per
share
Continuing operations $ - $ - $ - $ (0.02)
Discontinued operations - 0.06 - 0.08
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Basic and diluted
earnings per share $ - $ 0.06 $ - $ 0.06
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Basic weighted average
common shares
outstanding 64,857,292 65,625,077 65,359,680 65,625,077
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Diluted weighted
average common shares
outstanding 64,966,154 65,761,558 65,584,146 65,717,118
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Momentum Advanced Solutions Inc.
Consolidated Statements of Cash Flows (unaudited)
For the three and nine months ended January 31, 2008, and 2007

----------------------------------------------------------------------------
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Three months ended Nine months ended
January 31 January 31
2008 2007 2008 2007
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Cash provided by (used in):
Operations:
Net earnings (loss) $ 179,988 $ 3,689,000 $ (140,034) $ 3,860,000
Items not involving cash:
Amortization of
capital assets 339,752 286,000 933,498 852,000
Amortization of
deferred costs 7,488 - 16,155 -
Gain on sale of
business - (3,887,000) - (3,887,000)
Amortization of
long-term facility
lease inducement and
other (25,595) - (27,744) -
Increase in long-term
facility lease
inducement and other 14,931 - 168,701 -
Unrealized gain on
short-term investments (31,973) - (71,245) -
Stock based
compensation 16,865 85,000 75,308 115,000
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501,456 173,000 954,639 940,000
Changes in non-cash
operating working
capital 237,458 (716,000) 1,295,692 (5,371,000)
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738,914 (543,000) 2,250,331 (4,431,000)
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Financing:
Increase in bank
indebtedness - (1,196,000) - -
Addition to obligation
under capital lease 307,578 - 608,318 332,000
Payments on obligations
under capital leases (78,307) (50,000) (206,933) (155,000)
Proceeds receivable
from sale of business - (2,300,000) - (2,300,000)
Repayment of long-term
debt and note payable - (23,000) - (68,000)
Repurchase of shares (174,678) - (199,408) -
Amortization of
long-term facility
lease inducement and
other (5,110) (16,000) (43,037) (49,000)
Increase in long-term
facility lease
inducement and other - - 20,000 -
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49,483 (3,585,000) 178,940 (2,240,000)
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Investments:
Purchase of capital
assets (600,084) (421,000) (1,598,420) (1,110,000)
Purchase of short-term
investments - - (3,300,000) -
Sale of short-term
investments - - 350,000 -
Proceeds from
disposition of assets 261,111 - 261,111 -
Proceeds from sale of
discontinued operations - 6,800,000 - 6,800,000
Additions to deferred
costs (44,567) - (44,567) -
Decrease (increase) in
restricted cash - (250,000) 250,000 (250,000)
Purchase of Indigo27
Inc. - - - (125,000)
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(383,540) 6,129,000 (4,081,876) 5,315,000
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Increase (decrease) in
cash 404,857 2,001,000 (1,652,605) (1,356,000)
Cash and cash equivalents
beginning of period 700,538 - 2,758,000 3,357,000
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Cash and cash equivalents
end of period $ 1,105,395 $ 2,001,000 $ 1,105,395 $ 2,001,000
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Forward Looking Statements

Readers should take note that certain statements in this press release are forward-looking and may not give full weight to all of the potential risks and uncertainties. These forward-looking statements include statements that are subject to risks and uncertainties as more particularly described in Management's Discussion and Analysis contained in Momentum's most recent Annual Report. Forward-looking statements are subject by their nature to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forward-looking statements. Any forward-looking statements speak only as of the date made. The company is not undertaking to update any information in the foregoing reports until the effective date of its future reports required by the securities laws.

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, and Toronto. Momentum Advanced Solutions is publicly traded on the Toronto Stock Exchange and trades under the symbol WWW.

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