Nuvo Network Management Inc.
TSX VENTURE : NVO

Nuvo Network Management Inc.

April 26, 2007 16:15 ET

NUVO Reports Second Quarter Results: 6th Consecutive Quarter of Positive EBITDA

OTTAWA, ONTARIO--(CCNMatthews - April 26, 2007) - NUVO Network Management Inc., (TSX VENTURE:NVO), a leading software and managed services provider of solutions that MAXimize IT® availability and performance, today announced results from operations for its second quarter ended March 31, 2007.

Highlights

- Our new On-Demand Network Management Software functionality, MAXadvantage, was expanded to add an active Topology network map, IT asset inventory, problem ticketing, change management and customizable notification

- Revenues increased to $4.302 million from $4.061 million last year

- Gross margins improved to 42% from 38% last year

- Earnings before interest, taxes, depreciation and amortization (EBITDA) was $522,361 compared to $507,313 last year

- Net income was $112,659 compared to net income of $61,208 last year

- Six consecutive quarters of positive EBITDA

- Signed $4.6 million of new contracts and renewals

"We are pleased with our second quarter results", said Phil Weaver, NUVO's President and CEO. "We increased our net income by 84% to $112,659, recorded record revenues of $4,302,423 and strengthened our gross margin to 42%. We continued to have strong bookings this quarter, with new orders and renewals totaling $4.6 million."

"During the quarter we launched our new web site designed to reflect our new software product, MAXadvantage. We also launched our first web-based marketing campaign. We will build on this campaign to accelerate product adoption and revenue results. In addition, we are adding the ability to receive and process orders on-line to our website. This feature will make it easier for our customer's to order our software, expanding our reach to include the SMB market in addition to our current strength in large and mid-sized enterprises. We believe our ability to service large, medium and small enterprises with a solutions ranging from fully managed network, server, security and IPT services to our hosted MAXadvantage software sets us apart from most software and managed services companies."

Q2 Financial Results

Second quarter revenues were $4,302,423 compared with revenues of $4,061,621 in the same period a year ago. Second quarter IT infrastructure management revenues were $3,748,207 compared to IT infrastructure management revenues of $3,470,240 in the second quarter of fiscal 2006. Maintenance, support and equipment revenues for the second quarter were $554,216 compared to $591,381 last year. Total revenue for the six months ended March 31, 2007 and 2006 were $8,456,264 and $8,012,332, respectively.

Gross margins for the second quarter of fiscal 2007 were 42% compared with 38% in the second quarter of fiscal 2006. For the six months ended March 31, 2007 and 2006, gross margins were 42% and 37%, respectively.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter of fiscal 2007 was $522,361 compared to EBITDA of $507,313 in the same period a year ago. EBITDA for the six months ended March 31, 2007 was $1,001,356 compared to EBITDA of $727,394 for the six months ended March 31, 2006.

Net income in the second quarter was $112,659 compared to net income of $61,208 in the second quarter of fiscal 2006. Net income for the six months ended March 31, 2007 was $232,417 compared to net loss of $209,423 for the six months ended March 31, 2006.

About NUVO

NUVO provides remote management and protection of IT infrastructures for businesses worldwide to maximize the availability of their computing infrastructure. NUVO enables our customers to excel by delivering fully integrated, proactive management software, services and business data. This provides the critical information needed for effective analysis and decision-making to maximize performance and control costs. NUVO achieves this through certified experts, best-of-class technology, deep integration, highly automated processes, and best practices in a 24x7, resilient infrastructure. www.nuvo.com.

Forward Looking Statements

Certain statements included in this press release are forward-looking and are subject to certain risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors that may cause results or events to differ from current expectations include, but are not limited to, those set out on NUVO's website at http://www.nuvo.com/news/fls.html.



Second Quarters Ended March 31, 2007 and 2006
(Unaudited)

Three Months Ended Six Months Ended
---------------------------------------------------------------------
March 31, March 31, March 31, March 31,
2007 2006 2007 2006
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Revenues
IT Infrastructure
management $3,748,207 $3,470,240 $7,351,866 $6,771,812
Maintenance,
support and
equipment 554,216 591,381 1,104,398 1,240,520
---------------------------------------------------------------------
4,302,423 4,061,621 8,456,264 8,012,332
---------------------------------------------------------------------
Costs of revenues
IT Infrastructure
management 2,167,190 2,120,644 4,263,471 4,233,717
Maintenance,
support and
equipment 331,476 387,562 677,822 807,906
---------------------------------------------------------------------
2,498,666 2,508,206 4,941,293 5,041,623
---------------------------------------------------------------------

Gross margin 1,803,757 1,553,415 3,514,971 2,970,709
---------------------------------------------------------------------

Selling and
marketing 645,061 585,353 1,229,376 1,239,889
General and
administration 596,241 500,998 1,176,563 995,697
Research and
development 274,156 196,173 552,786 474,724
Stock-based
compensation
expense 29,749 25,000 56,749 43,000
Amortization of
purchased
intangibles 106,317 148,225 212,634 341,080
---------------------------------------------------------------------
1,651,524 1,455,749 3,228,108 3,094,390
---------------------------------------------------------------------

Operating income
(loss) 152,233 97,666 286,863 (123,681)
Interest and other
income (expense) (39,574) (36,458) (54,446) (85,742)
---------------------------------------------------------------------
Net income (loss)
for the period $112,659 $61,208 $232,417 $(209,423)
---------------------------------------------------------------------
---------------------------------------------------------------------

Basic earnings
per common share $0.00 $0.00 $0.01 $(0.01)
Diluted earnings
per common share $0.00 $0.00 $0.01 $(0.01)

Weighted average
number of common
shares used in:
Basic earnings
per common share
calculation 30,970,439 29,843,120 30,970,439 29,843,120
Diluted earnings
per common share
calculation 31,101,406 29,915,019 31,140,795 29,870,898



CONSOLIDATED BALANCE SHEETS


As at As at
March 31, September 30,
2007 2006
(Unaudited) (Audited)
---------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $1,866,013 $1,760,919
Accounts receivable 2,444,477 2,179,970
Tax credits receivable 306,087 406,085
Work in process 67,738 443,884
Prepaid expenses and other assets 901,105 880,233
---------------------------------------------------------------------
5,585,420 5,671,091

Other assets (note 6) 233,593 265,591
Capital assets 3,025,289 2,989,783
Purchased intangibles 1,223,677 1,436,311
Goodwill 9,917,938 9,917,938
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$19,985,917 $20,280,714
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---------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued
liabilities $2,042,484 $2,627,313
Deferred revenue 1,252,073 1,028,936
Current portion of long-term
obligations 793,481 851,603
---------------------------------------------------------------------
4,088,038 4,507,852

Long-term obligations 309,480 473,629
---------------------------------------------------------------------
4,397,518 4,981,481
---------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital 24,454,705 24,397,956
Deficit (8,866,306) (9,098,723)
---------------------------------------------------------------------
15,588,399 15,299,233
---------------------------------------------------------------------
$19,985,917 $20,280,714
---------------------------------------------------------------------
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