Nurun Inc.
TSX : NUR

Nurun Inc.

July 26, 2005 11:10 ET

Nurun Reports Record Net Income and 33% Increase in Revenues in Second Quarter 2005

MONTREAL, QUEBEC--(CCNMatthews - July 26, 2005) - Nurun Inc.(TSX:IFN), a subsidiary of Quebecor Media Inc., today released its financial results for the second quarter ended June 30, 2005. Unless otherwise indicated, all amounts are in Canadian dollars.



KEY SECOND QUARTER 2005 FINANCIAL RESULTS

- Net income of $1.0 million or $0.03 per share, compared with a net
loss of $527,000 or $0.02 per share in the same period of 2004.

- Operating income of $1.4 million, compared with $589,000 in the
second quarter of 2004. Stated as a percentage of revenues,
operating income nearly doubled from 4.4% to 8.0%.

- Revenues up 33% to $17.8 million.


"Our revenues, operating income and net income were all up dramatically in the second quarter and first half of 2005," said Jacques-Herve Roubert, President and Chief Executive Officer of Nurun. "The results reflect the efforts we have been making for years to enhance our business development and production capabilities and to expand our e-advertising, relationship marketing and online media planning and placement services. We can support customers in all phases of their IT- and interactive media-based marketing and customer relationship efforts, from strategic planning to implementation. Those competencies helped us strengthen our relationships with many of our traditional customers, such as Pleasant Holidays, Club Med, Cingular Wireless, Equifax, the Government of Quebec, and the states of Oklahoma and Georgia in the U.S. We also continued building our customer portfolio in several of our focus industries, picking up the Matrix and Kerastase accounts in the U.S., and Nutella and Tic Tac in Europe. In the automotive industry, we landed contracts with Renault and Pirelli. In the manufacturing and pharmaceuticals industries, new accounts included Alcan Packaging and Roquette."

FINANCIAL RESULTS

The strong results reported since the fourth quarter of 2004 continued with a $4.4 million or 33% increase in Nurun's revenues from $13.4 million in the second quarter of 2004 to $17.8 million in the same quarter of 2005. The significant growth reflects the success of Nurun's business development efforts targeted at new and existing customers, the strategic acquisition in 2004 of Atlanta-based Ant Farm Interactive, which has now been fully integrated into the Company, and positive customer response to the expansion of Nurun's value proposition in the fields of e-marketing and online media placement. Nurun's year-to-date revenues were $33.3 million, an increase of $8.3 million or 33% from $25.0 million at the same point in 2004.

Operating income was $1.4 million in the second quarter of 2005, an $829,000 increase from the $589,000 figure recorded in the same quarter of 2004. Stated as a proportion of revenues, operating income nearly doubled to 8.0%, compared with 4.4% in the second quarter of 2005. The strong increase was driven by revenue growth, which outstripped the rise in selling and administrative expenses, and by an improvement in the gross margin due to a decrease in production costs, as a percentage of revenues. Year-to-date operating income doubled to $2.2 million, compared with $1.1 million at the same point in 2004, a $1.1 million increase. As a percentage of revenues, operating income was 6.5% in the first half of 2005, compared with 4.3% in the same period of 2004.

Nurun generated net income for the third consecutive quarter. Second quarter 2005 net income was $1.0 million or $0.03 per share, compared with a net loss of $527,000 dollars or $0.02 per share in the same quarter of 2004. The $1.5 million increase was due to the refocus on Nurun's core business following the sale of Mindready Solutions in 2004, as well as to stringent control of operating expenses, revenue growth and successful high-margin business development efforts. On a year-to-date basis, net income totalled $1.3 million or $0.04 per share, compared with a net loss of $1.0 million or $0.03 per share in 2004, a $2.3 million improvement.

NORMAL COURSE ISSUER BID

On February 24, 2005, the Company released a notice of intention to make a normal course issuer bid in order to repurchase on the open market, between March 1, 2005 and February 28, 2006, up to 1,665,883 Common Shares for cancellation (or approximately 5% of Nurun's issued and outstanding Common Shares). Between March 1 and June 30, 2005, 321,700 shares were repurchased at an average price of $1.98, for a total of $635,000.

SUCCESSFUL BUSINESS DEVELOPMENT STRATEGY

Nurun's business development efforts produced significant results in all of the Company's markets in the second quarter of 2005. Nurun deepened its relationship with L'Oreal, winning the U.S. contracts for two other L'Oreal brands, Matrix and Kerastase.

Nurun's e-government activities also grew with several major new Web and IT projects for Government of Quebec departments and agencies, as well as the States of Oklahoma and Georgia in the U.S.

Existing customers in the travel and leisure industry (Pleasant Holidays, Club Med), telecommunications (Cingular, Telecom Italia) and financial services (Equifax) assigned Nurun new projects. Nurun possesses recognized expertise in these industries and is equipped to provide these customers with a wide range of services, including relationship marketing and online media planning and placement.

Nurun also landed a number of important new international accounts, strengthening its positioning in the automotive segment (contracts with Renault and Pirelli) and manufacturing (Alcan Packaging and Roquette, a world leader in starch processing). As well, Nurun won the accounts for two very popular brands produced by the Italian group Ferrero, Nutella and Tic Tac.

OUTLOOK FOR THIRD QUARTER

Nurun's third quarter falls in the summer season, when there is generally a temporary slowdown in our business. Therefore, the Company's revenues are lowest in the third quarter. However, we anticipate that revenues will be higher than in the third quarter of 2004.

DEFINITION OF OPERATING INCOME

The Company defines operating income as earnings before interest, income taxes, foreign exchange gains (losses), depreciation and discontinued of operations.

Operating income, as defined above, is not a measure of results that is consistent with generally accepted accounting principles. It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. Operating income is used by the Company because management believes it is a meaningful measure of performance. Operating income (loss) is commonly used by the investment community to analyze and compare corporate performance. It also facilitates year-over-year comparison of results, since operating income (loss) excludes, among other things, unusual items that are not readily comparable from year to year. The Company's definition of operating income (loss) may not be identical to similarly titled measures reported by other companies.

FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, the statements in this document are forward-looking and involve significant risks, uncertainties and assumptions. Actual results and events may differ materially from those projected in the forward-looking statements. The forward-looking statements do not take into account the potential impact of any non-recurring event or any transfer, merger, acquisition, business combination or other arrangement that may be announced or may occur subsequent to this disclosure. Factors that may cause actual results or events to differ from current projections include changes in demand for the Company's services, changes in labour and equipment costs and availability, seasonal fluctuations in customer orders, pricing actions by competitors and general changes in the economic environment.

ABOUT NURUN INC.

Nurun Inc. (TSX:IFN), a subsidiary of Quebecor Media Inc., is a firm specializing in interactive communications through new technologies.

From strategy to execution, Nurun provides its clients with services which range from strategic planning and interface design to the implementation of technical platforms, online marketing programs and client relationships.

Nurun has been serving leading companies and organizations such as L'Oreal, the Groupe DANONE, Cingular Wireless, Club Med, Louis Vuitton, Pfizer, SkyTeam, Thales, Pleasant Holidays, Telecom Italia, Europcar, Canal +, the Government of Quebec and the state of Georgia since 1985. Nurun employs approximately 540 professionals in Canada, the U.S. and Europe. Further information concerning Nurun is available at www.nurun.com.



NURUN INC.
Consolidated Balance Sheets
June 30, 2005, with comparative figures as at December 31, 2004
(in thousands of dollars)
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2005 2004
(unaudited) (audited)
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Assets

Current assets:
Cash and cash equivalents $32,282 $28,312
Temporary investment 120 120
Accounts receivable 13,432 13,418
Income taxes and tax credits receivable 2,032 2,467
Work in process 8,295 6,040
Purchase price balance receivable - 3,425
Prepaid expenses 859 659
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57,020 54,441

Investment - 414
Intangible assets 517 646
Capital assets 3,226 3,051
Future tax assets 2,855 3,025
Goodwill 7,812 6,932
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$71,430 $68,509
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued
liabilities $14,369 $11,485
Income taxes payable 309 161
Deferred revenues 1,711 1,960
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16,389 13,606

Shareholders' equity:
Share capital 305,588 308,568
Contributed surplus 3,349 605
Deficit (250,300) (251,630)
Cumulative translation adjustment (3,596) (2,640)
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55,041 54,903

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$71,430 $68,509
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NURUN INC.
Consolidated Statements of Operations and Deficit
Three-month periods ended June 30, 2005 and 2004
(in thousands of dollars, except amounts per share) (unaudited)
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2005 2004
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Revenues $17,753 $13,353

Expenses:
Cost of revenues 10,443 8,043
Selling and administrative 5,892 4,721
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16,335 12,764
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Operating income before the undernoted items 1,418 589

Interest income, net 200 140

Gain on foreign exchange 155 288

Depreciation and amortization (416) (380)

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Income before income taxes 1,357 637

Income taxes (335) -
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Net income from continuing operations 1,022 637

Net loss from discontinued operations - (1,164)

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Net income (net loss) $1,022 $(527)
Deficit, beginning of period (251,322) (251,062)
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Deficit, end of period $(250,300) $(251,589)
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Net earnings per share from continuing
operations - basic and diluted $0.03 $0.02

Net loss per share from discontinued
operations - basic and diluted - (0.04)
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Net earnings (loss) per share - basic
and diluted $0.03 $(0.02)
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Basic weighted average number of shares
outstanding (in thousands) 33,099 33,318

Diluted weighted average number of shares
outstanding (in thousands) 33,168 33,318
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NURUN INC.
Consolidated Statements of Operations and Deficit
Six-month periods ended June 30, 2005 and 2004
(in thousands of dollars, except amounts per share) (unaudited)
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2005 2004
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Revenues $33,254 25,012

Expenses:
Cost of revenues 20,059 14,848
Selling and administrative 11,040 9,094
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31,099 23,942
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Operating income before the undernoted items 2,155 1,070

Interest income, net 477 273

Gain on foreign exchange 122 314

Depreciation and amortization (831) (675)

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Income before income taxes 1,923 982

Income taxes (593) (94)
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Net income from continuing operations 1,330 888

Net loss from discontinued operations - (1,895)

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Net income (net loss) $1,330 $(1,007)
Deficit, beginning or period (251,630) (250,582)
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Deficit, end of period $(250,300) $(251,589)
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Net earnings per share from continuing
operations - basic and diluted $0.04 $0.03

Net loss per share from discontinued
operations - basic and diluted - (0.06)

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Net earnings (loss) per share - basic
and diluted $0.04 $(0.03)
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Basic weighted average number of shares
outstanding (in thousands) 33,195 33,318

Diluted weighted average number of shares
outstanding (in thousands) 33,255 33,318
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NURUN INC.
Consolidated Statements of Cash Flows
Three-month periods ended June 30, 2005 and 2004
(in thousands of dollars) (unaudited)
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---------------------------------------------------------------------
2005 2004
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Cash flows related to operating activities:
Net income (net loss) $1,022 $(527)
Adjustments for:
Depreciation and amortization 416 380
Future income taxes 154 -
Net loss from discontinued operations - 1,164
Stock-based compensation and other 224 45
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1,816 1,062
Net change in non-cash operating working
capital items
Accounts receivable 1,582 (1,114)
Income taxes and tax credits receivable (384) (217)
Work in process (1,788) (671)
Accounts payable and accrued liabilities 549 (1,129)
Deferred revenues (1,000) 124
Other 233 175
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1,008 (1,770)
Cash flows from discontinued operations
related to operating activities - (581)
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1,008 (2,351)

Cash flows related to financing activities:
Decrease in bank indebtedness (5) (614)
Repayment of short-term debt - (17)
Redemption of common shares (403) -
Cash flows from discontinued operations
related to financing activities - (21)
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(408) (652)

Cash flows related to investing activities:
Net proceeds from disposal of a subsidiary,
net of disposed cash and cash equivalents - (8,845)
Business Acquisition, net of acquired cash
and cash equivalents (1,257) (3,162)
Additions to capital assets (368) (335)
Cash flows from discontinued operations
related to investing activities - 11,787
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(1,625) (555)

Effect of exchange rate changes on cash and
cash equivalents (115) 7
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Net decrease in cash and cash equivalents (1,140) (3,551)

Cash and cash equivalents, beginning of period 33,422 32,246

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Cash and cash equivalents, end of period $32,282 $28,695
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NURUN INC.
Consolidated Statements of Cash Flows
Six-month periods ended June 30, 2005 and 2004
(in thousands of dollars) (unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 2004
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Cash flows related to operating activities:
Net income (net loss) $1,330 $(1,007)
Adjustments for:
Depreciation and amortization 831 675
Future income taxes 202 -
Net loss from discontinued operations - 1,895
Stock-based compensation and other 400 64
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2,763 1,627
Net change in non-cash operating working
capital items
Accounts receivable (577) (2,310)
Income taxes and tax credits receivable 435 (835)
Work in process (2,380) 265
Accounts payable and accrued liabilities 3,004 (1,399)
Deferred revenues (159) (119)
Other (76) 300
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3,010 (2,471)
Cash flows from discontinued operations
related to operating activities - (203)
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3,010 (2,674)

Cash flows related to financing activities:
Increase in bank indebtedness - (315)
Repayment of short-term debt - (23)
Issuance of capital shares - 1
Redemption of common shares (635) -
Cash flows from discontinued operations
related to financing activities - (52)
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(635) (389)

Cash flows related to investing activities:
Net proceeds from disposal of a subsidiary
net of disposed cash and cash equivalents 3,839 (8,845)
Business Acquisition, net of acquired cash and
cash equivalents (1,257) (3,162)
Additions to capital assets (910) (552)
Cash flows from discontinued operations
related to investing activities - 11,285
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1,672 (1,274)


Effect of exchange rate changes on cash
and cash equivalents (77) (4)
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Net increase (net decrease) in cash and
cash equivalents 3,970 (4,341)

Cash and cash equivalents, beginning of period 28,312 33,036

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Cash and cash equivalents, end of period $32,282 $28,695
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