Nuvo Network Management Inc.
TSX VENTURE : NVO

Nuvo Network Management Inc.

July 27, 2005 16:35 ET

NUVO Reports Third Quarter Results: $5.1 Million in Contracts Signed

OTTAWA, ONTARIO--(CCNMatthews - July 27, 2005) - NUVO Network Management Inc. (TSX VENTURE:NVO), a leading managed services provider of solutions that MAXimize IT® availability and performance, today announced results from operations for its third quarter ended June 30, 2005.



Highlights

- Revenue growth year-over-year of 28% to $4.16 million
- Net loss of $686,996 for the quarter
- Security & server managed services revenue growth year-over-year
of 78%
- $5.1 million in contracts signed, 66% of which constitutes new
revenue
- 18 new customers signed, increasing client base to more than 300


"Market interest in our managed services solution continues to be strong with another quarter of new contracts of more than $3 million" said Phil Weaver, President and CEO. "We completed the capacity expansion of our customer delivery and operations infrastructure. This will enable us to address client demand as existing contracts are rolled out and new contracts are signed. In view of our 28 percent revenue growth being outstripped by expense growth, the company is moving proactively to bring expenses in line with our rate of revenue growth, while retaining our expanded customer operations delivery capacity."

Q3 Financial Results

Third quarter revenue was $4,160,586 compared with revenue of $3,239,360 in the same period a year ago. Third quarter IT infrastructure management revenue was $3,442,604 compared to IT infrastructure management revenue of $2,762,181 in the third quarter of fiscal 2004. Maintenance, software, support and equipment revenue for the third quarter was $717,982 compared to $477,179 last year. Total revenue for the nine months ended June 30, 2005 and 2004 was $12,442,404 and $9,050,031 respectively.

Gross margins for the third quarter of fiscal 2005 were 36% compared with 50% in the third quarter of fiscal 2004. The year over year exchange rate impact of the Canadian Dollar was a 5% lower gross margin.

Operating expenses in the third quarter of fiscal 2005 were $2,141,625 compared to $1,563,553 in the third quarter of fiscal 2004. Operating expenses in the third quarter of fiscal 2005 included amortization of intangible assets of $214,605 and stock compensation expense of $36,000.

Net loss in the third quarter was $686,996 compared to net income of $43,316 in the third quarter of fiscal 2004. Net loss for the nine months ended June 30, 2005 was $1,361,802 compared to net income of $131,721 for the nine months ended June 30, 2004.

Adjusted net loss for the quarter was $436,391 compared to an adjusted net income $73,316 last year. Adjusted net loss for the nine months ended June 30, 2005 was $637,264 compared to adjusted net income of $161,721 for the nine months ended June 30, 2004.

Note

The Company uses the financial measure adjusted net income to supplement its consolidated financial statements, which are presented in accordance with Canadian GAAP. The presentation of adjusted net income is not meant to be a substitute for net income per share presented in accordance with GAAP, but rather should be evaluated in conjunction with such GAAP measure. Adjusted net income is calculated as net income, excluding the following amounts (a) the amortization of acquired intangible assets, and (b) stock compensation expense.

The term adjusted net income does not have a standardized meaning prescribed by GAAP, and therefore the Company's definition may not be comparable to similar measures presented by other companies. The Company's management believes that the presentation of adjusted net income provides useful information to investors in evaluating the Company's past financial performance or future prospects.



-------------------------------------------------------------
QQ3 FY0 Q3 FY04
-------------------------------------------------------------
Net income (loss) $(686,996) $43,316
-------------------------------------------------------------
Adjustments:
-------------------------------------------------------------
Amortization of intangibles 214,605 30,000
-------------------------------------------------------------
Stock compensation expense 36,000 -
-------------------------------------------------------------
Adjusted net income (loss) $(436,391) $73,316
-------------------------------------------------------------


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 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.

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.



NUVO NETWORK MANAGEMENT INC.
CONSOLIDATED BALANCE SHEET

As at As at
June 30, 2005 September 30, 2004
(Unaudited) (Audited)
--------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $2,308,650 $1,500,074
Accounts receivable 2,275,365 2,447,217
Tax credits receivable 364,004 266,756
Work in process 23,370 51,000
Prepaid expenses and other
assets 1,917,057 1,107,022
--------------------------------------------------------------------
6,888,446 5,372,069

Other assets 231,615 213,997
Capital assets 3,837,176 3,029,011
Purchased intangibles 1,735,996 2,379,810
Goodwill 9,707,308 9,269,218
--------------------------------------------------------------------
$22,400,541 $20,264,105
--------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and
accrued liabilities $1,583,360 $3,515,699
Deferred revenue 1,202,641 1,218,351
Current portion of
long-term obligations 1,761,176 845,005
--------------------------------------------------------------------
4,547,177 5,579,055

Long-term obligations 1,462,262 3,504,083
--------------------------------------------------------------------
6,009,439 9,083,138
--------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital 23,717,256 16,963,475
Deficit (7,326,154) (5,782,508)
--------------------------------------------------------------------
16,391,102 11,180,967
--------------------------------------------------------------------
$22,400,541 $20,264,105
--------------------------------------------------------------------
--------------------------------------------------------------------


NUVO NETWORK MANAGEMENT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Second Quarters Ended June 30, 2005 and 2004
(Unaudited)

Three Months Ended Nine months Ended
-----------------------------------------
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
--------------------------------------------------------------------
Revenues
IT Infrastructure
management $3,442,604 2,762,181 $10,237,923 $8,188,558
Maintenance, software,
support and equipment 717,982 477,179 2,204,481 861,473
--------------------------------------------------------------------
4,160,586 3,239,360 12,442,404 9,050,031
--------------------------------------------------------------------
Costs of revenues
IT Infrastructure
management 2,151,493 1,483,490 6,239,821 4,292,664
Maintenance, software,
support and equipment 506,801 143,861 1,494,150 491,246
--------------------------------------------------------------------
2,658,294 1,627,351 7,733,971 4,783,910
--------------------------------------------------------------------

Gross margin 1,502,292 1,612,009 4,708,433 4,266,121
--------------------------------------------------------------------

Selling and marketing 870,097 649,038 2,502,894 1,688,673

General and administration 547,025 494,628 1,520,331 1,511,475

Research and development 473,898 389,887 1,299,630 873,793

Stock-based compensation
expense 36,000 - 80,723 -
Amortization of purchased
intangibles 214,605 30,000 643,815 30,000
---------------------------------------------------------------------
2,141,625 1,563,553 6,047,393 4,103,941
---------------------------------------------------------------------
Operating income (loss) (639,333) 48,456 (1,338,960) 162,180
Interest and other income
(expense) (47,663) (5,140) (22,842) (30,459)
---------------------------------------------------------------------
Net income (loss) for the
period $(686,996) $43,316 (1,361,802) $131,721
---------------------------------------------------------------------
Basic earnings per common
share $(0.02) $0.00 $(0.05) $0.01
Diluted earnings per
common share $(0.02) $0.00 $(0.05) $0.01

Weighted average number of
common shares used in:
Basic earnings per common
share calculation 29,224,575 19,633,296 27,823,422 19,147,285
Diluted earnings per
common share
calculation 29,224,575 20,298,940 27,823,422 19,675,110



The TSX Venture Exchange has neither approved nor disapproved the content of this press release.

Contact Information

  • NUVO Network Management Inc.
    Carl Smith
    Chief Financial Officer
    (613) 726-5036
    www.nuvo.com