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Mediagrif Reports Q2 FY11 Financial Results

  • Net earnings of $1.9 million compared to $0.7 million for the second quarter of 2010;
  • Earnings from operations of $3.3 million compared to $2.8 million for the second quarter of 2010;
  • EBITDA of $3.9 million compared to $3.5 million for the second quarter of 2010;
  • Revenues of $11.4 million compared to $11.5 million for the second quarter of 2010;
  • Cash and cash equivalents reached $34.4 million on September 30, 2010 compared to $27.7 million on September 30, 2009 and $34.4 million on March 31, 2010;
  • Cash dividend of $0.14 per share, payable January 17, 2011 to shareholders of record at the close of business on January 4, 2011.

Longueuil, Canada – November 9, 2010: Mediagrif Interactive Technologies Inc. (TSX: MDF), a world-leading operator of e-commerce solutions, today announced its financial results for the second quarter of fiscal year 2011, ended September 30, 2010. Unless indicated otherwise, all amounts are in Canadian dollars.

The Company is pleased to announce the signing of an agreement worth approximately US$ 3.3 million over five years with one of its clients for the development, licensing, maintenance, technical support and hosting of an online commerce solution. The Company also renewed an agreement for a five-year term with the Société des alcools du Québec.

Furthermore, the Company moved its head office in October 2010 in new modern facilities more adapted to its needs, located at 1111 St-Charles Street West in Longueuil.

Dividend:

The Company declares today a cash dividend of $0.14 per share, payable January 17, 2011 to shareholders of record at the close of business on January 4, 2011.

Financial Highlights:

The Company reported a slight increase in the financial results of the second quarter of 2011. This enabled it to maintain its liquidity while paying a semi-annual cash dividend of $0.14 per share for a total of $1.9 million this quarter, and while purchasing for cancellation a block of 230,500 common shares for a cash consideration of $2.0 million.

Revenues in the second quarter of 2011 remained stable at $11.4 million, compared to $11.5 million for the second quarter of 2010.

Earnings from operations for the second quarter of 2011 increased by $0.5 million to reach $3.3 million compared to $2.8 million for the corresponding quarter of 2010. This increase is explained by a decrease in total operating expenses to $5.8 million, compared to $6.3 million for the corresponding quarter of 2010. This decrease is mainly due to the general headcount reduction throughout the Company, to a decrease in the allowance for doubtful accounts and to better cost control, despite the severance payments following the departure of two members of the management.

Other expenses amounted to $0.2 million for the second quarter of 2011, compared to $1.0 million for the second quarter of 2010. This decrease is mainly due to a foreign exchange loss on our US dollar assets of $0.2 million, compared to a foreign exchange loss of $0.9 million for the second quarter of 2010.

Net earnings and basic earnings per share for the second quarter of 2011 amounted to $1.9 million and to $0.14 respectively, compared to $0.7 million and $0.05 for the corresponding quarter of 2010.

Results Of The Second Quarter And First Six Months Of The Fiscal Year 2011:

Revenues in the second quarter of 2011 remained stable at $11.4 million, compared to $11.5 million in the second quarter of 2010. For the first six months of 2011, revenues decreased by $0.5 million, compared to the corresponding period of 2010, from $23.2 million to $22.7 million.

  • Our business networks MERX and Carrus maintain their organic growth while economic conditions of North American markets are turning around positively for The Broker Forum. Revenues from BidNet, GovernmentBids and Interactive Procurement Technologies networks remained stable, whereas revenues from Power Source On-Line, Market Velocity, Global Wine and Spirits and Polygon networks are still affected by the economic slowdown in their respective industries.
  • In original currencies, revenues increased by $0.2 million for the second quarter of 2011 compared to the second quarter of 2010. For the first six months of 2011, in original currencies, revenues decreased by $0.1 million, compared to the corresponding period of 2010.
  • Revenues earned in US dollars represent 56% of total revenues in the second quarter and first six months of 2011 compared to 59% in the corresponding periods of 2010. As a result, the variation in the value of the Canadian dollar compared to the US dollar combined with our hedge coverage generated a negative impact on revenues of $0.2 million and $0.4 million during the second quarter and first six months of 2011 respectively.

Gross margin for the second quarter and first six months of 2011 remained stable at 79% and 78% respectively, compared to the corresponding periods of 2010.

Operating expenses for the second quarter of 2011 decreased to $5.8 million, compared to $6.3 million for the second quarter of 2010. For the first six months of 2011, operating expenses decreased to $11.0 million, compared to $13.5 million for the corresponding period of 2010. The decrease in operating expenses is explained by the following items:

  • General and administrative expenses for the second quarter of 2011 decreased to $2.0 million, compared to $2.1 million for the second quarter of 2010. For the first six months of 2011, general and administrative expenses decreased to $3.6 million compared to $4.8 million for the corresponding period of 2010. This decrease is mainly due to the general headcount reduction throughout the Company and to better cost control, despite the severance payments following the departure of two members of the management as well as the reversal in the first quarter of 2011 of a penalty of $0.2 million related to a tax assessment that was recorded in the first quarter of 2010.
  • Sales and marketing expenses for the second quarter of 2011 decreased to $1.9 million, compared to $2.2 million for the second quarter of 2010. For the first six months of 2011, sales and marketing expenses decreased to $3.9 million compared to $4.5 million for the corresponding period of 2010 mainly due to the general headcount reduction throughout the Company and to a decrease in the allowance for doubtful accounts.
  • Technology expenses for the second quarter of 2011 decreased to $1.7 million compared to $1.8 million for the second quarter of 2010. For the first six months of 2011, technology expenses decreased to $3.5 million compared to $3.7 million for the corresponding period of 2010 also due to the general headcount reduction.
  • Amortization of acquired intangible assets remained stable at $173,000 compared to the second quarter of 2010 and at $345,000 compared to the first six months of 2010.
  • Stock-based compensation expense for the second quarter of 2011 decreased slightly to $13,000, compared to $59,000 for the second quarter of 2010. For the first six months of 2011, a stock-based compensation expense was reversed due to the cancellation of stock options in the first quarter and resulted in a credit of $347,000 compared to an expense of $126,000 for the corresponding period of 2010.

Earnings from operations reached $3.3 million during the second quarter of 2011, compared to $2.8 million for the second quarter of 2010. This increase is mainly due to the general headcount reduction throughout the Company and by better cost control. For the first six months of 2011, earnings from operations reached $6.8 million, compared to $4.6 million for the corresponding period of 2010. This increase is mainly due to the reversal of a penalty related to a tax assessment, to the reversal of a stock-based compensation expense, to the general headcount reduction throughout the Company and to better cost control.

The basic earnings per share amounted to $0.14 for the second quarter of 2011, compared to $0.05 for the second quarter of 2010. The weighted average number of common shares outstanding for the second quarters of 2011 and 2010 was 13.9 million and 14.0 million respectively. For the first six months of 2011, the basic earnings per share amounted to $0.33, compared to $0.04 for the corresponding period of 2010. The weighted average number of common shares outstanding for the first six months of 2011 and 2010 was 13.9 million and 14.0 million respectively.

As at September 30, 2010, our cash and cash equivalents remained stable at $34.4 million, compared to March 31, 2010 and increased compared to $27.7 million as at September 30, 2009.

Free cash flow, defined as cash flows from operating activities less the acquisition of premises and equipment and intangible assets and dividends paid, decreased to $1.4 million in the second quarter of 2011 compared to $3.3 million in the second quarter of 2010. This decrease is mainly due to a dividend payment of $1.9 million in the second quarter of 2011. For the first six months of 2011, free cash flow amounted to $1.7 million, compared to $0.8 million in the corresponding period of 2010. This increase is mainly due to higher net earnings in 2011, partially offset by the reversal of a stock-based compensation expense, by a higher negative variation in non-cash working capital items and by the dividend payment of $1.9 million.

On March 3, 2010, the Company announced the renewal of its normal course issuer bid whereby it is authorized to purchase for cancellation for the twelve-month period which started on March 5, 2010 up to 695,425 common shares. During the six-month period ended September 30, 2010, 247,352 common shares were purchased for cancellation.

About Mediagrif Interactive Technologies Inc.

Mediagrif Interactive Technologies Inc. (TSX: MDF) is a world-leading operator of e-business solutions. Mediagrif's e-business networks allow buyers and sellers within specific industries to source, purchase or sell products and to exchange documents more efficiently using the Internet. Mediagrif operates 15 networks, including industry leaders The Broker Forum external, Power Source On-Line external, Telecom Finders external, Global Wine & Spirits external and Polygon external. Mediagrif also owns MERX external, the exclusive provider of e-publishing services to the Government of Canada, and is a leading provider of government bid aggregation services and e-procurement services in the U.S. Headquartered in Longueuil, Mediagrif has several offices in North America and Asia. For more information, please visit us at www.mediagrif.com or call 1 877 677-9088.

In addition to providing an earnings measure in accordance with GAAP, the Company shows earnings from operations and earnings before interest, taxes, depreciation and amortization (“EBITDA”) as supplementary earnings measures. The Company sometimes refers to the free cash flow measure in its documents. Free cash flow is defined as cash flows from operating activities less the acquisition of premises and equipment and intangible assets presented in investing activities and less dividends paid presented in financing activities. Earnings from operations, EBITDA and free cash flow are not intended to be measures that should be regarded as an alternative to other financial operating performances prepared in accordance with Canadian GAAP. Those measures do not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies.

This press release contains certain forward-looking statements with respect to the Company. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. We consider the assumptions on which these forward-looking statements are based to be reasonable, but caution the reader that these assumptions regarding future events, many of which are beyond our control, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect us. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities legislation. All amounts are in Canadian dollars.

Unaudited interim financial statements, accompanying notes and MD&A are available on www.mediagrif.com and have been filed with SEDAR.

For further information:

Claude Roy
Chief Executive Officer
Tel.: (450) 449-0102 ext. 2004
Toll Free: 1 877 677-9088 ext. 2004
Email: croy@mediagrif.com
Suzanne Mercier
Chief Financial Officer
Tel.: (450) 449-0102 ext. 2135
Toll Free: 1 877 677-9088 ext. 2135
Email: smercier@mediagrif.com

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