Nurun Inc.
TSX : NUR

Nurun Inc.

October 25, 2005 10:59 ET

Nurun Reports Strong Increase in Revenues and Net Income in Q3 2005

MONTREAL, QUEBEC--(CCNMatthews - Oct. 25, 2005) - Nurun Inc. (TSX:NUR), a subsidiary of Quebecor Media Inc., today released its financial results for the third quarter ended September 30, 2005. Unless otherwise indicated, all amounts are in Canadian dollars.



KEY THIRD QUARTER 2005 FINANCIAL RESULTS

- Revenues up 28% to $15.6 million.
- Operating income up 146% to $920,000, compared with $374,000 in the
third quarter of 2004. As a percentage of revenues, operating
income was 5.9%, compared with 3.1% last year.
- Net earnings of $14,000, compared with a net loss of $465,000, or
$0.01 per share, in the same period of 2004.


"The pronounced uptrend in Nurun's revenues, operating income and net income continued in the third quarter of 2005 and on a year-to-date basis, despite the seasonal business slowdown in the summer," commented Jacques-Herve Roubert, President and Chief Executive Officer of Nurun. "With the new customers we acquired in the retail, pharmaceutical and financial services industries, and the revenues generated by our interactive marketing and new media services, we are on track to meet our performance targets for 2005. We are positioned to continue our strategic development in North America and Europe, as well as in China with the acquisition of China Interactive, which we should conclude by the end of the year."

FINANCIAL RESULTS

The positive results reported since the fourth quarter of 2004 were maintained with a $3.3 million or 28% increase in Nurun's revenues from $12.3 million in the third quarter of 2004 to $15.6 million in the same quarter of 2005. The substantial revenue growth was driven by several factors, including the expansion of the Company's interactive marketing and media placement service offerings to existing customers; the favourable impact of the acquisition of new clients since the end of 2004, such as Louis Vuitton, Thales and Autotrader.com; and accelerated business development in conjunction with other Quebecor companies, leading to major new contracts with customers such as Home Depot. For the year to date, Nurun's revenues increased $11.6 million or 31% to $48.9 million, compared with $37.3 million during the same period of 2004.

Nurun's quarterly operating income increased by $546,000 or 146% to $920,000, compared with $374,000 in the same quarter of 2004. As a percentage of revenues, operating income was 5.9%, compared with 3.1% in the third quarter of 2004. The sizable increase was driven by revenue growth, which outstripped the rise in selling and administrative expenses, and by an improvement in gross margin in absolute terms. For the year to date, operating income more than doubled to $3.1 million, compared with $1.4 million in the same period of 2004, a $1.7 million increase. As a percentage of revenues, year-to-date operating income was 6.3%, compared with 3.9% in the first three quarters of 2004.

Nurun generated net income of $14,000 in the third quarter of 2005, compared with a net loss of $465,000, or $0.01 per share, in the same period of 2004. Nurun reported net income for the fourth consecutive quarter. The strong performance was again due to revenue growth and tight control over operating expenses. On a year-to-date basis, net income increased by $2.8 million from a net loss of $1.5 million or $0.04 per share in 2004 to net earnings of $1.3 million or $0.04 per share in 2005.

FLUCTUATION IN FOREIGN EXCHANGE RATES

The significant appreciation of the Canadian dollar against the euro and the US dollar led to a $327,000 foreign-exchange loss during the third quarter compared to $288,000 in the same quarter of 2004. The year-to-date foreign-exchange loss was $205,000, compared with a $26,000 foreign-exchange gain at the same point in 2004, a negative difference of $231,000.

IMMINENT EXPANSION IN ASIA

On September 28, 2005, Nurun announced the signing of a letter of intent to acquire China Interactive, one of China's leading interactive marketing firms. The acquisition will further expand Nurun's ability to deliver all its services to customers the world over, including the high-potential Asian market.

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 September 30, 2005, 377,600 shares were repurchased at an average price of $2.02, for a total of $764,000.

NEW TICKER SYMBOL

On September 1, the Company changed its ticker symbol from IFN to NUR. The new stock symbol better reflects Nurun's corporate name.
DEFINITION OF OPERATING INCOME

The Company defines operating income as income before interest, income taxes, foreign exchange gains (losses), depreciation and amortization, and discontinuation 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:NUR), a subsidiary of Quebecor Media Inc., is an international provider of communications services and interactive technologies. Nurun offers an integrated line of branding, Web application and new media design and development, technical platform implementation, data analysis, marketing and online customer relationship services. Nurun has been serving leading companies and organizations such as L'Oreal, 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 550 professionals in Canada, the U.S. and Europe. Further information concerning Nurun is available at www.nurun.com.



NURUN INC.
Consolidated Balance Sheets
September 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 $28,382 $28,312
Temporary investment 120 120
Accounts receivable 12,419 13,418
Income taxes and tax credits receivable 2,393 2,467
Work in process 11,351 6,040
Purchase price balance receivable - 3,425
Prepaid expenses 932 659
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55,597 54,441

Investment - 414
Intangible assets 424 646
Capital assets 2,970 3,051
Future tax assets 2,710 3,025
Goodwill 7,395 6,932
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$69,096 $68,509
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $12,473 $11,485
Income taxes payable 485 161
Deferred revenues 1,836 1,960
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14,794 13,606

Shareholders' equity:
Share capital 305,071 308,568
Contributed surplus 3,914 605
Deficit (250,286) (251,630)
Cumulative translation adjustment (4,397) (2,640)
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54,302 54,903

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$69,096 $68,509
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NURUN INC.
Consolidated Statements of Operations and Deficit
Three-month periods ended September 30, 2005 and 2004
(in thousands of dollars, except amounts per share) (unaudited)
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2005 2004
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Revenues $15,628 $12,255

Expenses:
Cost of revenues 9,632 7,427
Selling and administrative 5,076 4,454
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14,708 11,881
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Operating income 920 374

Interest income, net 183 104

Loss on foreign exchange (327) (288)

Depreciation and amortization (468) (521)
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Earnings (loss) before income taxes 308 (331)

Income taxes (294) (134)
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Net earnings (net loss) $14 $(465)

Deficit, beginning of period (250,300) (251,589)
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Deficit, end of period $(250,286) $(252,054)

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Net earnings (net loss) per share
- basic and diluted $0.00 $(0.01)
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Basic weighted average number
of shares outstanding (in thousands) 32,957 33,318

Diluted weighted average number
of shares outstanding (in thousands) 33,079 33,318
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NURUN INC.
Consolidated Statements of Operations and Deficit
Nine-month periods ended September 30, 2005 and 2004
(in thousands of dollars, except amounts per share) (unaudited)
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2005 2004
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Revenues $48,882 $37,267

Expenses:
Cost of revenues 29,691 22,275
Selling and administrative 16,116 13,548
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45,807 35,823
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Operating income 3,075 1,444

Interest income, net 660 377

Gain (loss) on foreign exchange (205) 26

Depreciation and amortization (1,299) (1,196)
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Earnings before income taxes 2,231 651

Income taxes (887) (228)
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Net earnings from continuing operations 1,344 423

Net loss from discontinued operations - (1,895)
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Net earnings (net loss) $1,344 $(1,472)
Deficit, beginning or period (251,630) (250,582)
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Deficit, end of period $(250,286) $(252,054)
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Net earnings per share
from continuing operations - basic and diluted $0.04 $0.01

Net loss per share from
discontinued operations - basic and diluted - (0.05)

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Net earnings (net loss) per share
- basic and diluted $0.04 $(0.04)
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Basic weighted average number
of shares outstanding (in thousands) 33,116 33,318

Diluted weighted average number
of shares outstanding (in thousands) 33,254 33,318
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NURUN INC.
Consolidated Statements of Cash Flows
Three-month periods ended September 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 earnings (net loss) $14 $(465)
Adjustments for:
Depreciation and amortization 468 521
Future income taxes 76 95
Stock-based compensation and other 176 365
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734 516
Net change in non-cash operating
working capital items:
Accounts receivable 898 2,600
Income taxes and tax credits receivable (372) (248)
Work in process (3,358) (631)
Accounts payable and accrued liabilities (1,393) (793)
Deferred revenues 182 (301)
Other 90 (153)
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(3,219) 990

Cash flows related to financing activities:
Decrease in bank indebtedness - (8)
Redemption of common shares (129) -
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(129) (8)

Cash flows related to investing activities:
Capital reduction from an investment - 1,042
Additions to capital assets (179) (332)
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(179) 710

Effect of exchange rate changes
on cash and cash equivalents (373) (9)
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Net decrease (increase)
in cash and cash equivalents (3,900) 1,683

Cash and cash equivalents, beginning of period 32,282 28,695

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Cash and cash equivalents, end of period $28,382 $30,378
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NURUN INC.
Consolidated Statements of Cash Flows
Nine-month periods ended September 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 earnings (net loss) $1,344 $(1,472)
Adjustments for:
Depreciation and amortization 1,299 1,196
Future income taxes 278 95
Net loss from discontinued operations - 1,895
Stock-based compensation and other 576 429
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3,497 2,143
Net change in non-cash operating
working capital items:
Accounts receivable 321 290
Income taxes and tax credits receivable 63 (1,083)
Work in process (5,738) (366)
Accounts payable and accrued liabilities 1,611 (2,192)
Deferred revenues 23 (420)
Other 14 147
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(209) (1,481)
Cash flows from discontinued
operations related to operating activities - (203)
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(209) (1,684)

Cash flows related to financing activities:
Decrease in bank indebtedness - (323)
Repayment of short-term debt - (23)
Issuance (redemption) of common shares (764) 1
Cash flows from discontinued operations
related to financing activities - (52)
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(764) (397)

Cash flows related to investing activities:
Net proceeds from disposal of a subsidiary,
net of disposed cash and cash equivalents 3,839 (8,845)
Capital reduction from an investment - 1,042
Business acquisition, net of acquired
cash and cash equivalents (1,257) (3,162)
Additions to capital assets (1,089) (884)
Cash flows from discontinued operations
related to investing activities - 11,285
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1,493 (564)

Effect of exchange rate changes
on cash and cash equivalents (450) (13)
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Net increase (net decrease)
in cash and cash equivalents 70 (2,658)

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

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Cash and cash equivalents, end of period $28,382 $30,378
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