Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

November 22, 2006 19:33 ET

Xentel Reports Third Quarter 2006 Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 22, 2006) - Xentel DM Incorporated (TSX VENTURE:XDM), a North American specialty entertainment and relationship marketing company, today reported its third quarter financial results for the three and nine months ended September 30, 2006.



--------------------------------------------------------------------
Three months ended September 30 2006 2005
--------------------------------------------------------------------
($ 000's, except per share amounts)
--------------------------------------------------------------------
Revenue $ 26,564 $ 29,560
--------------------------------------------------------------------
Gross margin 6,544 7,568
--------------------------------------------------------------------
Net earnings 290 179
--------------------------------------------------------------------
EBITDA 1,612 1,422
--------------------------------------------------------------------
EPS, fully diluted $ 0.01 $ 0.01
--------------------------------------------------------------------
EBITDA, per share, fully diluted $ 0.06 $ 0.05
--------------------------------------------------------------------

--------------------------------------------------------------------
Nine months ended September 30 2006 2005
--------------------------------------------------------------------
($ 000's, except per share amounts)
--------------------------------------------------------------------
Revenue $ 85,279 $ 94,976
--------------------------------------------------------------------
Gross margin 20,949 24,710
--------------------------------------------------------------------
Net earnings 409 1,495
--------------------------------------------------------------------
EBITDA 4,551 6,265
--------------------------------------------------------------------
EPS, fully diluted $ 0.02 $ 0.06
--------------------------------------------------------------------
EBITDA, per share, fully diluted $ 0.17 $ 0.25
--------------------------------------------------------------------

EBITDA - Net Earnings before income taxes, interest, depreciation and
amortization. Since Gross Margin, EBITDA and diluted EBITDA per share
have no standardized GAAP meaning, the comparability of these amounts to
other enterprises may not be possible if the basis of calculation of
differs.


The results for the third quarter 2006 were net earnings of $290 thousand compared to net earnings of $179 thousand for the third quarter 2005. Revenues amounted to $26,564 thousand compared to $29,560 thousand for the same period 2005.

Year to date for the nine months ended September 30, 2006 net earnings were $409 thousand compared to $1,495 thousand for the same period in 2005.

EBITDA was $1,612 thousand for the three months ended September 30, 2006 and $4,551 thousand for the nine months ended September 30, 2006. For the comparable periods in 2005 EBITDA amounted to $1,422 thousand and $6,265 thousand respectively.

The Chairman, Michael Platz stated, "Management is encouraged by the improvement in profitability over the second quarter of 2006. This, and other indications, lead us to be cautiously optimistic for the balance of 2006."

David Winograd, President US operations added, "Our client relationships remain very strong and we have an extremely loyal customer base. We are expanding our business model into new types of not for profit organizations as part of an overall diversification program."

Xentel DM Incorporated is one of North America's leading relationship-marketing concerns and producers of cause related entertainment events. The Company's success is attributable to proprietary sales tools including technologically advanced teleservices and sophisticated customer databases. Xentel DM Incorporated has over 450 clients and 3,000 employees in over 30 offices across North America.

Certain statements in this press release may constitute "forward looking statements" and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any performance or achievement expressed or implied by such "forward looking statements".



Xentel DM Incorporated
Consolidated Balance Sheets
('000s)
September September December
30, 30, 31,
2006 2005 2005
(unaudited) (unaudited) (audited)
Assets
Current assets

Cash and cash equivalents $ 118 $ 12 $ 452
Accounts receivable, net of allowances 8,510 9,367 9,295
Inventory 492 572 461

Work in process 6,325 6,602 6,263
Prepaid expenses 1,480 991 497
Future income taxes 1,047 368 915
Other current assets - 176 203

-------- -------- --------

17,972 18,088 18,086

Deferred financing costs, net of
amortization 258 321 381
Due from related party 1,452 - 1,512
Equipment 3,316 4,056 4,151
Future income taxes 3,315 4,986 3,655
Other intangible assets 3,484 5,335 4,915
Goodwill 1,131 1,175 1,178

-------- -------- --------
$ 30,928 $ 33,961 $ 33,878
-------- -------- --------
-------- -------- --------
Liabilities
Current liabilities

Bank indebtedness $ 1,608 $ 1,124 $ 1,309
Accounts payable and accrued liabilities 5,407 6,499 6,868
Income taxes payable 321 839 999
Current portion of long term debt 1,885 4,111 1,885
Future income taxes 1,061 903 835

-------- -------- --------

10,282 13,476 11,896

Long term debt 1,953 64 3,337
Due to related party 2,421 4,907 2,416
Future income taxes 2,838 3,032 2,903

-------- -------- --------
17,494 21,479 20,552
Shareholders' equity

Share capital 9,294 8,728 9,291
Warrants 205 185 205
Contributed surplus 70 95 58
Cumulative translation adjustment (3,311) (3,252) (2,995)
Retained earnings 7,176 6,726 6,767

-------- -------- --------

13,434 12,482 13,326

-------- -------- --------

$ 30,928 $ 33,961 $ 33,878
-------- -------- --------
-------- -------- --------

Xentel DM Incorporated
Consolidated Statements of Operations and Retained Earnings
('000s, except per share amount, unaudited)
Three Months Ending Nine Months Ending
September 30 September 30
2006 2005 2006 2005

Revenue $ 26,564 $ 29,560 $ 85,279 $ 94,976

Cost of revenue 20,020 21,902 64,330 70,266

-------- -------- -------- --------

Gross margin 6,544 7,658 20,949 24,710

-------- -------- -------- --------
Corporate expenses

Branch overhead and corporate
administration 4,931 6,236 16,398 18,445
Interest expense 302 271 877 845
Amortization of equipment 478 515 1,481 1,535
Amortization of intangible
assets 413 338 1,260 1,353

-------- -------- -------- --------
6,124 7,360 20,016 22,178

-------- -------- -------- --------

Earnings from operations
before income taxes 420 298 933 2,532

(Loss) on disposal of other
investments - - (191) -

-------- -------- -------- --------
Net earnings before taxes 419 298 742 2,532

-------- -------- -------- --------
Income tax expense (recovery)
Current income tax expense 300 370 302 713
Future income tax expense
(recovery) (171) (251) 31 324

-------- -------- -------- --------

129 119 333 1,037

-------- -------- -------- --------

Net earnings 290 179 409 1,495

Retained earnings, beginning
of period 6,886 6,547 6,767 5,231

-------- -------- -------- --------

Retained earnings, end of
period $ 7,176 $ 6,726 $ 7,176 $ 6,726
-------- -------- -------- --------
-------- -------- -------- --------

Basic and diluted net
earnings (loss) per share $ 0.01 $ 0.01 $ 0.02 $ 0.06
-------- -------- -------- --------
-------- -------- -------- --------

Basic and diluted weighted
average number of shares
outstanding 26,205 24,814 26,205 24,814
-------- -------- -------- --------
-------- -------- -------- --------

Consolidated Statements of
Contributed Surplus

Balance, beginning of period $ 58 $ 22 $ 58 $ -

Stock based compensation on
vesting of options 15 73 15 95
Forfeited options on
termination (3) - (3) -

-------- -------- -------- --------

Balance, end of period $ 70 $ 95 $ 70 $ 95
-------- -------- -------- --------
-------- -------- -------- --------

Xentel DM Incorporated
Consolidated Statements of Cash Flows
('000s, unaudited)
Three Months Ending Nine Months Ending
September 30 September 30
2006 2005 2006 2005

Cash flows from operating
activities

Net earnings for the period $ 290 $ 179 $ 409 $ 1,495

Non cash transactions
reflected in net earnings

Amortization 891 853 2,741 2,888
Future income tax expense
(recovery) (171) (251) 31 324
Stock based compensation 15 73 15 95
Adjustment for non cash
interest 76 83 206 255

-------- -------- -------- --------
1,101 937 3,402 5,057

-------- -------- -------- --------

Net change in non cash
working capital items

Accounts Receivable (642) (1,330) 682 (940)
Inventory and work in process 314 214 (243) (102)
Prepaid expenses (330) (135) (1,002) (364)
Other current assets 1 (30) 179 (56)
Income taxes payable 272 381 (406) 556
Accounts payable and accrued
liabilities (88) 632 (1,345) (473)

-------- -------- -------- --------

Net change in non cash
working capital items (495) (268) (2,135) (1,379)

-------- -------- -------- --------

606 669 1,267 3,678
Cash flows from (used in)
financing activities

Bank indebtedness (89) 119 365 (1,614)
Long term debt (519) (667) (1,322) (1,538)

-------- -------- -------- --------
(608) (548) (957) (3,152)

-------- -------- -------- --------
Cash flow (used in) investing
activities

Investment in capital assets,
net (51) (314) (613) (422)

-------- -------- -------- --------

Effect of exchange rate
fluctuations on cash
balances 12 26 32 (372)

-------- -------- -------- --------

Net (decrease) in cash and
cash equivalents (81) (167) (334) (268)

Cash and cash equivalents,
beginning of period 199 179 452 280

-------- -------- -------- --------

Cash and cash equivalents,
end of period $ 118 $ 12 $ 118 $ 12
-------- -------- -------- --------
-------- -------- -------- --------



The TSX Venture Exchange has neither approved nor disapproved the contents of this announcement.

Contact Information