Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

November 28, 2007 18:13 ET

Xentel Reports Third Quarter September 30, 2007 Results

CALGARY, ALBERTA--(Marketwire - Nov. 28, 2007) - Xentel DM Incorporated (TSX VENTURE:XDM)



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Period ended September 30 Three months Nine months
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2007 2006 2007 2006
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($ 000's, except per share amounts)
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Revenue $ 24,214 $ 26,564 $ 77,213 $ 85,279
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Gross Margin 5,536 6,544 16,740 20,949
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Net (loss) earnings 46 290 (427) 409
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EBITDA 1,073 1,624 2,428 4,790
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EPS, fully diluted $ 0.00 $ 0.01 $ (0.02) $ 0.02
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EBITDA, per share, fully diluted $ 0.04 $ 0.06 $ 0.09 $ 0.18
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- 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.
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Xentel DM Incorporated, a North American specialty entertainment and relationship marketing company, today reported its financial results for the three and nine months ended September 30, 2007.

The results for the third quarter 2007 were net earnings of $46 thousand compared to net earnings of $290 thousand for the third quarter 2006. Revenues amounted to $24,214 thousand compared to $26,564 thousand for the third quarters 2007 and 2006 respectively. EBITDA for the three months ended September 30, 2007 was $1,073 thousand compared to $1,624 thousand for the same period in 2006.

Year to date for the nine months ended September 30, revenues for 2007 and 2006 were $77,213 thousand and $85,279 thousand respectively. For the nine months ended September 30, 2007 the Company incurred a net loss of $427 thousand compared to net earnings of $409 thousand for the same period in 2006.

The Company has strategically focused on investing in new lead generation adversely impacting revenues due to lower response rates. This, combined with the negative effects from converting the US revenues to Canadian dollars with the strengthening Canadian dollar, are the primary contributors to the reduced revenues. The declining revenues are having comparative effects on net earnings given the fact that certain fixed costs are not immediately adjustable in proportion to the revenue base.

The Company has arranged with its lenders to reset certain lending covenants with the result that, effective September 30, 2007, the Company will be in compliance with its borrowing terms and conditions.

David Winograd, President US operations, noted, "The restructuring efforts by management earlier in the year are starting to show results as reflected in net earnings for the third quarter 2007 of $46 thousand compared to the net loss for the second quarter 2007 of $590 thousand."

Michael Platz, Chairman, further stated, "The Company believes that it is in their best interest for long term stability to invest in new lead generation regardless of the fact that in the short term this will put pressure on sustaining margins."

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 30, September 30, December 31,
2007 2006 2006
(unaudited) (unaudited) (audited)

Assets
Current assets

Cash and cash equivalents $ 10 $ 118 $ 795
Accounts receivable, net
of allowances 6,799 8,510 8,956
Inventory 614 492 628
Work in process 5,840 6,325 6,421
Prepaid expenses 1,093 1,480 1,106
Due from related party 1,293 - 1,514
Income taxes receivable 192 - -
Future income taxes 544 1,047 643

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

16,385 17,972 20,063

Deferred financing costs,
net of amortization - 258 210
Due from related party - 1,452 -
Equipment 2,973 3,316 3,622
Future income taxes 2,436 3,315 2,843
Other intangible assets 1,648 3,484 3,207
Goodwill 1,007 1,131 1,180

----------- ------------ ------------
$ 24,449 $ 30,928 $ 31,125
----------- ------------ ------------
----------- ------------ ------------

Liabilities
Current liabilities

Bank indebtedness $ 1,232 $ 1,608 $ 1,259
Accounts payable and
accrued liabilities 4,333 5,407 6,654
Income taxes payable - 321 365
Current portion of long
term liabilities 1,694 1,885 2,058
Future income taxes 1,016 1,061 1,016

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

8,275 10,282 11,352

Long term debt 41 1,953 1,542
Due to related parties 2,547 2,421 2,729
Future income taxes 1,390 2,838 1,628
Deferred tenant inducement 301 - 389

----------- ------------ ------------
12,554 17,494 17,640

Shareholders' equity

Share capital 9,280 9,294 9,280
Warrants 205 205 205
Contributed surplus 79 70 70
Accumulated other
comprehensive income (4,169) (3,311) (2,997)
Retained earnings 6,500 7,176 6,927

----------- ------------ ------------
11,895 13,434 13,485

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

$ 24,449 $ 30,928 $ 31,125
----------- ------------ ------------
----------- ------------ ------------


Xentel DM Incorporated
Consolidated Statements of Operations and Retained Earnings
($ '000s, except per share amount, unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006

Revenue $ 24,214 $ 26,564 $ 77,213 $ 85,279

Cost of revenue 18,678 20,020 60,473 64,330

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

Gross margin 5,536 6,544 16,740 20,949

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

Corporate expenses

Branch overhead and
corporate administration 4,463 4,920 14,312 16,159
Interest expense 181 302 635 877
Amortization of equipment 27 478 643 1,481
Amortization of
intangible assets 629 413 1,465 1,260

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

5,300 6,113 17,055 19,777

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

Earnings (loss) before
undernoted items 236 431 (315) 1,172

Loss on disposal of other
investments - - - (191)
Expenses related to 2003
privatization lawsuit (40) (12) (177) (239)

----------- ----------- ----------- -----------
Earnings (loss) before
income taxes 196 419 (492) 742

----------- ----------- ----------- -----------
Income tax expense
(recovery)
Current income tax
expense (recovery) 190 300 (123) 302
Future income tax expense
(recovery) (40) (171) 58 31

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

150 129 (65) 333

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

Net earnings (loss) 46 290 (427) 409

Retained earnings,
beginning of period 6,454 6,886 6,927 6,767

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

Retained earnings, end
of period $ 6,500 $ 7,176 $ 6,500 $ 7,176
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Basic and diluted net
earnings (loss)
per share $ 0.00 $ 0.01 $ ( 0.02) $ 0.02
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Basic and diluted
weighted average number
of shares outstanding 26,195 26,205 26,195 26,205
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


Xentel DM Incorporated
Consolidated Statements of Contributed Surplus
($ '000s, unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006

Balance, beginning of
period $ 70 $ 58 $ 70 $ 58

Stock based compensation
on vesting of options 9 15 9 15
Forfeited options on
termination - (3) - (3)

----------- ----------- ----------- -----------
Balance, end of period $ 79 $ 70 $ 79 $ 70
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


Xentel DM Incorporated
Consolidated Statements of Comprehensive Income
($ '000s, unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006

Net earnings (loss) for
the period $ 46 $ 290 $ (427) $ 409

Foreign currency
translation adjustment
from self sustaining
foreign operations (459) 4 (1,172) (316)

----------- ----------- ----------- -----------
Comprehensive income
(loss) $ (413) $ 294 $ (1,599) $ 93
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


Xentel DM Incorporated
Consolidated Statements of Accumulated Other Comprehensive Income
($ '000s, unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006

Transition adjustment -
January 1, 2006 $ - $ (2,995) $ - $ (2,995)

Foreign currency
translation adjustment
from self sustaining
foreign operations (459) 4 (1,172) (316)

Balance, beginning
of period (3,710) (320) (2,997) -

----------- ----------- ----------- -----------
Balance, end of period $ (4,169) $ (3,311) $ (4,169) $ (3,311)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


Xentel DM Incorporated
Consolidated Statements of Cash Flows
($ '000s, unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006

Cash flows from (used in)
operating activities

Net earnings (loss) for
the period $ 46 $ 290 $ (427) $ 409

Non cash transactions
reflected in net earnings
Amortization 656 891 2,108 2,741
Future income tax expense
(recovery) (40) (171) 58 31
Stock based compensation 9 15 9 15
Adjustment for non cash
interest 95 76 294 206

----------- ----------- ----------- -----------
766 1,101 2,042 3,402

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

Net change in non cash
working capital items

Accounts receivable (551) (704) 1,623 619
Inventory and work in
process (63) 314 35 (243)
Prepaid expenses (147) (330) (76) (1,002)
Other current assets - 1 - 179
Income taxes payable 31 272 (614) (406)
Accounts payable and
accrued liabilities (583) (88) (2,001) (1,345)

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

Net change in non cash
working capital items (1,313) (535) (1,033) (2,198)

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

(547) 566 1,009 1,204

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

Cash flows from (used in)
financing activities

Bank indebtedness 852 (89) 91 365
Long term debt (494) (519) (1,514) (1,322)

----------- ----------- ----------- -----------
358 (608) (1,423) (957)

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

Cash flow (used in)
investing activities

Investment in capital
assets, net (228) (51) (455) (613)

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

Effect of exchange rate
fluctuations on cash
balances 62 12 84 32

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

Net (decrease) in cash
and cash equivalents (355) (81) (785) (334)

Cash and cash
equivalents, beginning
of period 365 199 795 452

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

Cash and cash
equivalents, end
of period $ 10 $ 118 $ 10 $ 118
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

See accompanying notes to the financial statements.

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

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