Solium Capital Inc.
TSX : SUM

Solium Capital Inc.

November 09, 2010 01:23 ET

Solium Capital Inc. Releases 2010 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2010) - Solium Capital Inc. ("Solium" or the "Company") (TSX:SUM) today announced its financial results for the third quarter and nine months ended September 30, 2010. 

Revenue and earnings (before significant one-time office relocation costs) for the third quarter and nine months ended September 30, 2010 increased over the comparable periods in the previous year. After the one-time office relocation costs, earnings for the third quarter were lower than in the third quarter of 2009, while earnings for the nine months ended September 30, 2010 were higher than in the corresponding period in 2009.

An increase in participant share trading activity was the largest contributor to the increase in revenue and earnings for the third quarter and nine months ended September 30, 2010 as compared to the same periods from 2009. Earnings for the third quarter and the nine months ended September 30, 2010 were adversely impacted by one-time costs totaling approximately $340,000 relating to the Company's U.S. head office relocation from Michigan to Arizona. 

The first nine months of 2010 was characterized by a moderate recovery of participant share trading and associated transaction activity as the share prices of many clients gained strength over the prior year. Along with the increase in transaction volumes, transaction based revenues increased compared to prior year periods. 

Financial results for the quarter and nine months ended September 30, 2010:

  Three Months Ended September 30     Nine Months Ended September 30  
2010   2009   % Change     2010   2009   % Change  
Revenue $ 5,785,541   $ 4,955,850   17 %   $ 17,249,952   $ 14,630,020   18 %
Expenses $ 5,036,659   $ 4,052,400   24 %   $ 14,497,442   $ 12,332,894   18 %
EBITDA1 $ 914,561   $ 1,078,928   (15 %)   $ 3,199,137   $ 2,890,691   11 %
Earnings from operations $ 791,762   $ 1,043,428   (24 %)   $ 2,798,470   $ 2,505,425   12 %
Earnings before taxes $ 748,882   $ 903,450   (17 %)   $ 2,752,510   $ 2,297,126   20 %
Net earnings $ 421,570   $ 544,271   (23 %)   $ 1,641,302   $ 1,335,916   23 %
                                   
Net earnings per share                                  
  Basic $ 0.014   $ 0.018   (22 %)   $ 0.053   $ 0.043   23 %
  Diluted2 $ 0.013   $ 0.018   (28 %)   $ 0.052   $ 0.043   23 %
                                   
Issued and outstanding                                  
  Common shares                     31,164,188     31,162,279   -  
  Diluted3                     34,766,880     33,899,723   3 %

Notes:

  1. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a non-GAAP financial measure which does not have any standardized meaning prescribed by Canadian GAAP (generally accepted accounting principles) and is therefore unlikely to be comparable to similar measures presented by other issuers. EBITDA provides useful information to users as it reflects the net earnings prior to the effect of non-operating expenses such as interest, tax, depreciation and amortization. Management uses EBITDA in measuring the financial performance of the Company as this measure reflects results that are controllable by management in day-to-day operations. Management monitors EBITDA against budget and past results on a regular basis. The measure is a key component in determining the annual bonus pool for staff and management. The following is a reconciliation of EBITDA to net earnings:
  Three months ended September 30   Nine months ended September 30  
  2010   2009   2010   2009  
EBITDA 914,561   1,078,928   3,199,137   2,890,691  
Interest expense (219 ) (11,339 ) (7,071 ) (45,341 )
Amortization expense (165,460 ) (164,139 ) (439,556 ) (548,224 )
Income tax expense (327,312 ) (359,179 ) (1,111,208 ) (961,210 )
Net earnings 421,570   544,271   1,641,302   1,335,916  
  1. Diluted earnings per share is calculated using the treasury stock method.
  1. Diluted shares as presented equals issued and outstanding common shares plus outstanding stock options and restricted share units.

HIGHLIGHTS OF FINANCIAL PERFORMANCE

  • Revenue from Canadian operations was $4,361,562 in the third quarter of 2010 (2009 - $3,627,381) and $12,832,780 in the nine months ended September 30, 2010 (2009 - $10,572,587), while revenue from US operations was $1,423,979 in the third quarter of 2010 (2009 - $1,328,469) and $4,417,172 in the nine month period ended September 30, 2010 (2009 - $4,057,433). 
  • Share trading activity in Canada relative to the number of direct sales participants in the third quarter of 2010 was 80% of the annual average for the previous 5 years (2009 – 64%), and in the nine months ended September 30, 2010 was 82% of the annual average for the previous 5 years (2009 – 53%).
  • Total expenses in the third quarter of 2010 were $5,036,659 (2009 - $4,052,400) and $14,497,442 in the nine month period ended September 30, 2010 (2009 - $12,332,894). One-time costs associated with the Company's relocation of its U.S. head office from Michigan to Arizona contributed approximately $340,000 of expenses to the third quarter and nine months ended September 30, 2010.
  • Cash on hand as at September 30, 2010 was $4.1 million (December 31, 2009 - $5.9 million). 
  • Cash decreased by $392,391 during the third quarter of 2010, while $1.8 million was used during the nine months ended September 30, 2010. 2009 performance bonuses and 2009 income taxes, both previously accrued for items, were paid out in the first quarter of 2010 contributing to the usage of cash in the first nine months of 2010. Cash generated from operations was $734,969 in the third quarter of 2010 (2009 - $882,900), and $2.6 million in the nine months ended September 30, 2010 (2009 - $2.2 million). 
  • Working capital as at September 30, 2010 was $6.2 million (December 31, 2009 - $4.5 million).
  • The final principal payment on long-term debt of $97,195 was made in the third quarter on July 19, 2010, thereby fully retiring the obligation. Long-term debt as at September 30, 2010 was $Nil (December 31, 2009 - $679,030). 
  • In 2009, the Company initiated a Normal Course Issuer Bid ("NCIB") program to purchase, for cancellation, up to 502,000 common shares. This NCIB expired on June 21, 2010. A cumulative total of 179,700 common shares were purchased through the NCIB at a total cost of $213,924 (average price of $1.19 per share).

BUSINESS DEVELOPMENT 

  • On November 7, 2010, the Company acquired the North American employee stock option and Transcentive businesses of Computershare Ltd. ("Computershare"). Under the terms of the agreement, substantially all of Computershare's property, assets and client contracts associated with this business were purchased in exchange for 7,775,000 common shares of Solium, and additional potential cash consideration of U.S.$3 million contingent on revenue generated by Solium from the acquired business in the third year after the acquisition. 
  • The Company entered into a transition services agreement under which Computershare will provide certain services and intellectual property for up to five years at a cost of $22 million over five years. At the end of this period, Solium will own all of the intellectual property associated with Computershare's product offerings in this business.

About Solium Capital Inc.

Solium Capital Inc. (TSX:SUM) specializes in the administration and execution of equity-based incentive and savings plans and is setting the industry standard for service excellence, industry knowledge and innovative technical leadership. Solium's technology platform, Shareworks, is a leading online solution that integrates the management of multiple equity plan types including stock options, share units, and employee share purchase plans on one comprehensive platform.

The Management's Discussion and Analysis and the interim consolidated financial statements for the three and nine months ended September 30, 2010 referred to herein will be available on SEDAR at www.sedar.com under Solium Capital Inc., or at www.solium.com.

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