Synergex Corporation
TSX : SYX

Synergex Corporation

November 14, 2006 07:00 ET

Synergex Announces Third Quarter Results

Core business growth drives higher revenues

MISSISSAUGA, ONTARIO--(CCNMatthews - Nov. 14, 2006) - Synergex Corporation (TSX:SYX) ("Synergex"), a leading provider of business services, today announced its results for the third quarter ended September 30, 2006.

Q3 2006 Highlights

- Sales increased to approximately $37.0 million, or 24.3 percent above the $29.8 million in sales recorded in the same period from the prior year;

- Gross profit decreased to $4.2 million (11.3% of sales) from $4.4 million (14.9% of sales) or 5.6% below the same period in the prior year;

- Income before income taxes decreased to approximately $0.7 million from approximately $1.2 million in the same period in the prior year;

- Net income decreased to approximately $0.4 million from $0.7 million in the same period of the prior year;

- Net cash position of $7.4 million, an increase of $1.0 million from December 31, 2005 and unused credit facilities; and

- A strong working capital position at $11.3 million, an increase from $8.4 million from the same period in the prior year.

Results during the quarter were in line with managements' expectations for both sales and earnings. A significant amount of managements' time and the company's resources were dedicated to the consolidation of its three Mississauga facilities into one larger facility. Non-recurring investments spent in upgrading Synergex' IT and communications infrastructure will yield reductions in operational and maintenance costs over the long-term. "These investments will result in immediate benefits to protecting the integrity of our data and intellectual assets while optimizing support for future business growth and achieving greater operating efficiencies." said David Aiello, President and CEO of Synergex.

Investments were also made in retaining personnel and planning for the company's entry into the Mexican market. Through Synergex de Mexico S.A. de C.V., Synergex will offer computer entertainment publishers a turn-key solution for accessing the Mexican market, similar in scope to the company's Canadian retail solution. Synergex will provide customers with regional, knowledgeable, local personnel to act as territorial sales representatives and the company will provide local fulfillment and supply chain management through a domestic warehouse facility to retail partners. This facility would also provide a beachhead location from which Synergex can service and build upon its existing Latin American technology customers.

Financial Results

Consolidated sales for the three-month period ended September 30, 2006 totalled $37.0 million, an increase of $7.2 million or 24.3% from $29.8 million for the same period last year. Consolidated sales for the nine months ended September 30, 2006 totalled $92.2 million, a decrease of $1.9 million or 2.1% from $94.2 million from the same period last year.

Sales vary from quarter to quarter due to the increasing number of customers Synergex serves, seasonality, the timing of product introductions, and the pricing strategy of the company's suppliers and customers. Sales increased in the third quarter relative to the prior year primarily due to obtaining new customers, and providing them with a wider range of diversified products. Sales for the nine months ended September 30, 2006, decreased due to the timing of large launches of new products in the prior year offset by continued replenishment of the hardware and related software and peripherals in the current year.

In Q3 gross profit decreased to 11.3% of sales in 2006 compared to 14.9% of sales in the same period in 2005. For the nine months ended September 30, gross profit increased to 13.9% of sales in 2006 compared to 12.9% of sales in the same period in 2005. Consolidated gross profit for three months ended September 30, 2006 was $4.2 million or 11.3% of sales, a decrease of approximately $250 thousand or 5.6% compared to $4.4 million or 14.9% of sales in the same period last year. Consolidated gross profit for the nine months ended September 30, 2006 totalled $12.8 million or 13.9% of sales, an increase of approximately $700 thousand or 5.8% compared to $12.1 million or 12.9% of sales in the same period from the prior year. The percentage decrease in the third quarter was due primarily to the product mix sold, economies of scale achieved in transportation and labour costs, and the trend in the international currency exchange rates.

Operating expenses for the three months ended September 30, 2006, including general and administrative expenses, sales expense, interest and bank charges, interest income, amortization expenses, employee termination costs, and business combination costs totalled approximately $3.5 million, an increase of approximately $0.3 million, or 8.2%, from $3.3 million in the third quarter of last year. Operating expenses for the nine months ended September 30, 2006 totalled approximately $9.8 million, an increase of approximately $1.2 million, or 14.2%, from $8.6 million in the same period from the prior year.

The company's increase in costs pertains primarily to the addition of resources including: programmers, sales staff and ancillary costs in 2006 to assist with the implementation of new technology business platforms and the resources utilized on the consolidation of its three Mississauga facilities into one larger facility.

Net income after taxes for the third quarter of 2006 was approximately $400,000 or approximately $0.00 per share (basic and fully diluted) compared to approximately $700,000 thousand or approximately $0.01 per share (basic and fully diluted) in the same quarter a year ago. Year to date, net income after taxes for 2006 was $1.9 million or approximately $0.01 per share (basic and fully diluted) compared to $2.1 million or approximately $0.02 per share (basic and fully diluted) in the same period a year ago.

EBITDA- for the third quarter of 2006 was $800,000 compared to EBITDA of $1.4 million in the same period a year ago. Year to date EBITDA for the nine months ended September 30, 2006 was $3.4 million compared to EBITDA of $4.1 million in the same period a year ago.

As of September 30, 2006, Synergex had a net cash position of $7.4 million compared to $6.4 million as at December 31, 2005. Year to date, Synergex generated $3.5 million in cash from operations compared to $3.3 million in the same period in the prior year. Synergex' net cash position varies with income earned, the timing of cash receipts from customers, the timing of payments to suppliers, investment in fixed assets and other capital transactions. Working capital as at September 30, 2006 totalled $11.3 million compared to $8.4 million as at September 30, 2005.

Conference Call and Webcast

Management will host a conference call to discuss third quarter results on Tuesday November 14, 2006, at 11 a.m. EST. To access the call, please dial 416-915-5787 or 1-800-731-5319. The conference call will also be available via webcast at www.syx.ca in the Investor Relations section. A recording of the conference call will be available as of 12:00pm EST the same day, until midnight on November 21st. To access the recording, dial 416-640-1917 or 1-877-289-8525, followed by the passcode 21209592#.

About Synergex Corporation

Synergex Corporation is a leading provider of business solutions. Synergex applies its proven expertise in supply chain management and process automation to emerging opportunities with high growth potential. The Company has three workgroups: Synergex Commercial Gateway, Synergex Technology, and Synergex Business Information, which provide value added depth in the areas of video game logistics and distribution, digital signage, point of sale solutions, Radio Frequency Identification, credit reporting and collection services. Headquartered in Mississauga, Ontario, Synergex serves a broad base of customers that includes a number of multinational enterprises. Synergex is listed on the Toronto Stock Exchange and trades under the symbol SYX. For further information, please visit www.syx.ca.

Forward Looking Statements

Some statements contained in this news release are forward- looking statements relating to Synergex' current expectations regarding future events. These forward- looking statements are based on the Company's current expectations. Synergex cautions that all forward- looking information is inherently uncertain and actual results may differ materially from the assumptions, estimates or expectations reflected or contained in the forward- looking information, and that actual future performance will be affected by a number of factors, including economic conditions, technological change, regulatory change, and competitive factors, many of which are beyond the company's control. Therefore, future events and results may vary significantly from what the Company currently foresees. For more information on the Company's risks and uncertainties relating to these forward looking statements, please refer to the risk factors section of the Company's MD&A.

-Non-GAAP Measures

References in these materials to "EBITDA" are to net income before interest expense, interest income, income taxes, loss (gain) on sale of equipment, and depreciation and amortization. EBITDA is not a recognized measure under Canadian GAAP. Investors are cautioned that EBITDA should not be construed as an alternative to net earnings or cash flows from operating activities (determined in accordance with GAAP) as a performance indicator, or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. Synergex' method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similar measures presented by other issuers. EBITDA performance is presented herein because management believes that, in addition to net income, EBITDA is a useful supplemental measure of Synergex' financial performance.

Contact Information

  • Synergex Corporation
    David Aiello
    President and CEO
    (905) 565-1212
    or
    Synergex Corporation
    Eric So
    Vice President, Corporate Strategy
    (905) 740-3124
    Website: www.syx.ca