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Press release from Marketwire

Cyberplex Reports Second Quarter Results

Thursday, August 12, 2010

Cyberplex Reports Second Quarter Results16:00 EDT Thursday, August 12, 2010TORONTO, ONTARIO--(Marketwire - Aug. 12, 2010) - Cyberplex Inc. (TSX:CX) a leader in online publishing and customer acquisition strategies today announced the financial results for the second quarter ended June 30, 2010."The second quarter was one of many significant milestones for the Company" said Geoffrey Rotstein, Chief Executive Officer of Cyberplex. "By completing the acquisition of Tsavo Media, we have added a robust publishing platform of over 300 websites and a sophisticated search technology platform to our existing network of advertisers and third party publishers that provides Cyberplex with a very differentiated and strategic value proposition" said Geoffrey Rotstein, Chief Executive Officer."Joining forces with Cyberplex enabled Tsavo to execute on an important part of our growth plans" added Ted Hastings, President of Cyberplex. "With Cyberplex, we are now in a position to apply our combined expertise in monetizing websites to our growing portfolio of web properties, while supporting hundreds of new advertisers in the CX network."With the acquisition of Tsavo closing on June 8, 2010, the second quarter financial results include only 23 days of operations for Tsavo. As a result, the financial information presented only takes this stub period into account. Overall, the quarter showed significant sequential growth resulting from the acquisition and increased profitability at an adjusted EBITDA level.2010 Second Quarter Highlights -- Completed the $75M USD acquisition of Tsavo Media, creating one of the largest digital media companies in Canada -- Closed a $33M bought deal financing to complete the transaction, which included the participation of 11 institutions and over $4.4M of investment from the leadership teams of Cyberplex and Tsavo -- Continued to expand vertical reach, with improved traction in lucrative consumer verticals including finance and dating -- Progressed with new sales initiatives and strategies to pave the way for additional and higher quality advertising partners Results for the Second Quarter of 2010Second quarter revenue of $18.2 million was a significant increase over the $12.3 million recorded in the first quarter of 2010 and a decrease from the $25.7 million generated during the same quarter last year. Gross margin for the quarter was 30% compared to 27% last quarter and income before amortization, interest, and income taxes for the quarter was $522,000. The net loss for the quarter of $728,000 was a direct result of additional amortization charges relating to the intangible assets acquired and additional interest expense partially offset by a future income tax recovery. In the future, the Company expects to have significant amortization resulting from these intangible assets and as result, the Company will use financial metrics excluding these amounts to evaluate its performance. All of these changes resulted primarily from the acquisition of Tsavo and the 23 day inclusion of their financial operating results.During the quarter, the CPA division (cost-per-action) continued to work through the challenges being experienced in the performance marketing industry, while continuing to focus on high quality campaigns and publishers as the standard for our network. Performance marketing is an essential part of online advertising and will play an even greater role in the future, and the changes that we continue to implement in our network are intended to promote quality revenues that are sustainable in the long term and that will make the Company more appealing to brand advertisers and the agencies that represent their online strategies. Brand protection, quality distribution and consumer messaging are all essential components of our platform and areas that have been a major focus over the first six months. With the acquisition of Tsavo and the introduction of owned publishing properties and the overall online reach that they bring, we have taken a huge step forward in addressing these areas and position ourselves much stronger for the future. However, the industry remains in transition and the environment for distributing performance advertising through third party publisher networks is expected to be challenging for the remainder of the year.Board of Director and Chief Financial Officer ChangesCyberplex and its Board of Directors are pleased to announce the appointment of John Fisher to the Board of Directors. Mr. Fisher will bring to the Board over 19 years of business and investment experience and will serve in the role of Chairman of the Audit Committee. Currently, Mr. Fisher serves as the President of Bridgeport Asset Management Inc., an independently owned investment counseling firm based in Toronto. Prior to Bridgeport, Mr. Fisher served as a Managing Director at Clairvest Group Inc., a Toronto-based private equity firm with approximately $600 million of capital under management. In connection with Mr. Fisher's appointment, the Board has also accepted the resignation of Douglas Steiner."We are very pleased to have John join our Board. John brings a wealth of business, investment and accounting experience to the Board, and his contributions will be of tremendous value to Cyberplex", said Vernon Lobo, Chairman of the Board. "We would also like to thank Doug for his service to the Company. Doug has made significant and valuable contributions to the Board and to Cyberplex while serving as a director, at a time when Doug's knowledge and experience helped guide the Company through this exciting and transformative period. The Board looks forward to continuing our relationship with him."Cyberplex is also pleased to announce that Richard Maisel will be joining Cyberplex in the role of Chief Financial Officer. Richard has served in various senior financial roles in both private and publicly traded technology companies in Canada for over 14 years. Most recently, Richard served as Chief Financial Officer of Belzberg Technologies Inc. Richard will fill the role previously served by Isaac Osiel. "We are excited to welcome Richard to our leadership team. Richard's knowledge and experience working with technology companies combined with his public markets experience makes him an extremely valuable addition to our leadership team" said Geoffrey Rotstein, Chief Executive Officer. "We also would like to take the opportunity to thank Isaac for his contribution to Cyberplex. He has been an important part of our growth and progression over the past few years and we are very appreciative for all that he has done for the Company."Conference Call DetailsIn conjunction with the release, Cyberplex will host a conference call on Thursday August 12, 2010 at 4:30 p.m. EST to discuss the financial results and walk through an investor presentation. To access the call, please dial 1-888-892-3255. Please call five minutes prior to the call and for access to the presentation please visit the investor relations section of the Company's website at www.cyberplex.com. A replay of the conference call will be available as of 12:00 a.m. August 13, 2010. To access the replay of the conference call dial the toll free number: 1-800-937-6305, followed by the playback pass-code: 563830.About CyberplexCyberplex Inc. (www.cyberplex.com) is a North American leader in online publishing and customer acquisition strategies. The Company, through its subsidiaries, leverages over 300 proprietary web properties and its vast publisher network to efficiently connect advertisers to their most relevant online customers and prospects. By combining high quality publishing initiatives with efficient technology solutions and online marketing expertise, the Company is able to deliver the optimal targeted audience to online advertisers. Cyberplex delivers measurable results that improve advertiser ROI, monetize the value of online properties, and build targeted, loyal online audiences.Forward-Looking Statements This news release may contain forward-looking statements that are based on management's current expectations and are subject to known and unknown uncertainties and risks, which could cause actual results to differ materially from those contemplated or implied by such forward-looking statements. Cyberplex is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or otherwise. CYBERPLEX INC. UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS AS at JUNE 30, 2010 as at as at June 30, 2010 December 31, 2009 -------------- ------------------ -------------- ------------------ ASSETS Current Assets: Cash $ 8,858,194 $ 10,222,001 Restricted marketable securities 3,899,573 - Short-term investment 206,555 11,540,642 Accounts receivable, net of allowance for doubtful accounts of $2,697,995 (2009 - $2,270,977) 27,787,795 9,930,149 Income tax recoverable 91,758 - Prepaid expenses and other assets 4,691,785 3,303,819 -------------- ------------------ 45,535,660 34,996,611 Capital assets 3,902,548 1,432,309 Intangible assets 65,067,029 287,500 Goodwill 36,478,412 14,095,708 Future tax assets 1,107,552 582,740 -------------- ------------------ $ 152,091,201 $ 51,394,868 -------------- ------------------ -------------- ------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities 14,136,005 4,270,080 Current portion of term and bridge loans 11,066,037 - Unearned revenue 634,683 668,255 Income tax payable - 631,465 Deferred lease inducements 110,420 106,618 Future income tax liabilities 4,652,870 - -------------- ------------------ 30,600,015 5,676,418 Long-term portion of term loans 30,004,754 - Long-term portion of future income tax liabilities 12,592,478 - Deferred lease inducements 246,214 156,119 Shareholders' equity 78,647,740 45,562,331 -------------- ------------------ $ 152,091,201 $ 51,394,868 -------------- ------------------ -------------- ------------------ CYBERPLEX INC. UNAUDITED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS Three months period ended Six months period ended June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009 -------------- -------------- -------------- -------------- Revenue $ 18,248,841 $ 25,723,174 $ 30,509,964 $ 57,864,712 Cost of revenue 12,802,576 17,932,852 21,809,372 40,220,325 -------------- -------------- -------------- -------------- 5,446,265 7,790,322 8,700,592 17,644,387 Expenses Sales and marketing 2,274,162 3,198,928 4,149,612 7,510,144 General and administrative 2,771,769 2,057,692 4,128,481 3,821,666 Foreign exchange (gain) loss (121,911) 1,285,175 (347,390) 812,591 Income before the undernoted 522,245 1,248,527 769,889 5,499,986 Amortization of capital assets 214,353 94,181 332,123 171,790 Amortization of intangible assets 1,040,708 - 1,079,041 - Income (loss) from operations (732,816) 1,154,346 (641,275) 5,328,196 Interest expense (325,834) (19,878) (328,770) (61,757) Interest income 16,605 4,518 44,112 5,656 Gain on sale of investment - - 331 - -------------- -------------- -------------- -------------- Income (loss) before income taxes (1,042,045) 1,138,986 (925,602) 5,272,095 Income tax expense (recovery) (313,766) 137,574 (106,866) 137,574 Net income (loss) (728,279) 1,001,412 (818,736) 5,134,521 Unrealized gain (loss) on available- for -sale-securities (20,845) 50,315 (61,246) 101,055 Foreign currency translation adjustment 2,363,928 - 1,177,320 - -------------- -------------- -------------- -------------- Comprehensive income $ 1,614,804 $ 1,051,727 $ 297,338 $ 5,235,576 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Income (loss) per share: Basic $ (0.01) $ 0.02 $ (0.01) $ 0.09 Diluted $ (0.01) $ 0.02 $ (0.01) $ 0.09 Weighted average number of common shares used in income (loss) per share: Basic 84,161,692 59,865,543 76,312,671 56,744,769 Diluted 84,161,692 62,521,484 76,312,671 59,648,272 FOR FURTHER INFORMATION PLEASE CONTACT: Cyberplex Inc. David Katz VP Corporate Development 416.597.8889 416.597.2345(FAX)