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Press release from Marketwire

Cyberplex Reports Fourth Quarter and 2010 Results

Positioning for the Future of Online Publishing and Advertising.

Tuesday, March 29, 2011

Cyberplex Reports Fourth Quarter and 2010 Results16:13 EDT Tuesday, March 29, 2011TORONTO, ONTARIO--(Marketwire - March 29, 2011) - Cyberplex Inc. (TSX:CX) a leader in online publishing and customer acquisition strategies today announced its financial results for the fiscal year and fourth quarter-ended December 31, 2010. Total revenue for the year was $106.9 million, a slight decrease from the $110.4 million recorded in 2009, and adjusted EBITDA for the year was $13.3 million. Total revenue for the fourth quarter was $31.6 million, with gross margin of 33% and adjusted EBITDA of $4.8 million.Fourth Quarter Operational HighlightsAcquired EQ Advertising, a demand side platform ("DSP") with real-time bidding capabilities to further augment distribution, and deliver targeted display advertising and performance marketing solutions; Launched four new web properties to increase online audience development in the finance and retail verticals and to enhance various lead generation activities; Integrated performance-based campaigns into 80% of the Company's publishing properties to continue diversifying revenue opportunities from these properties; Delivered on various strategic initiatives with leading brand advertisers including Jaguar Canada, and Quest Personals, while furthering mobile initiatives with industry leader Poynt Solutions. "During the fourth quarter of 2010, we continued to focus on our publishing and distribution capabilities and work with clients to target their customers in the most effective way. By combining our internal publishing capabilities with some of the best third-party publishers in the industry we continue to deliver excellent results for our advertisers using both pay per click and performance-based campaigns." said Geoffrey Rotstein, Chief Executive Officer. "The Company made significant investments during the quarter in technology and in its depth of operations as quality and customer satisfaction continued to be a main focus for all divisions of the organization."As reported by the Company on January 10, 2011, there was a set-back in operations due to the integration of the Yahoo! and Bing search platforms in mid- December, which caused significant disruption. Since that time the Company has been working diligently to transition its systems and algorithms to adapt to the newly integrated search marketplace and has been making steady progress. Following a difficult first two months of 2011, which included negative impacts from the aforesaid integration, restructuring charges and a strong Canadian dollar, the Company is performing better in March. Based on preliminary results which are not yet complete and remain subject to further review, adjusted EBITDA for the first quarter of 2011 is expected to be breakeven even after a very difficult start to the year.The Company is pleased with the assistance and support Yahoo! has provided to date and is very encouraged by the strength of its partnership with Yahoo!. The Company remains in discussions with its principal lender, American Capital, Ltd., to review its debt obligations. As of the date of this release, the Company is in compliance with its covenants under the terms of its credit agreement with American Capital, and based on preliminary financial results which remain incomplete and subject to further review, believes it has the ability to remain in compliance with the financial covenants and other obligations that arise under the terms of the credit agreement for the quarter ending March 31, 2011."The discussions with American Capital are now progressing at a quicker pace than at the outset. We believe that both American Capital and Cyberplex are motivated to find a reasonable compromise to the current situation," said Geoffrey Rotstein.Results for the Year Ended December 31, 2010The Company generated revenue of $106.9 million, a decrease of 3% compared to $110.4 million generated in 2009 Adjusted EBITDA for 2010 was $13.3 million compared to $15.1 million in 2009. Net loss for 2010 was $61.1 million compared to net income of $7.1 million in 2009. Acquisition of Tsavo Media, a leading online publisher on June 8, 2010, which furthered the Company's distribution capabilities by providing over 300 web properties and a leading proprietary search technology platform Acquisition of Surebaby.com, a content rich website providing helpful parenting information Acquisition of the EQ Advertising Group, an organization that brings a proprietary DSP with real-time bidding capabilities to the organization Delivered various mobile and video applications to clients as we continued to evolve our targeted search and customer acquisition platforms "We are very proud of our numerous accomplishments in 2010 and strongly believe that even with the challenges experienced during the later part of December, we are positioned to be successful" said Ted Hastings, President of Cyberplex. "As growth and interest in online advertising continues to gain momentum, we have established a solid foundation. As our industry continues to adapt and client demands continue to grow, the skills, expertise and technology platforms that we have developed will allow us to compete with anyone in today's market."Non-GAAP Financial MeasuresThis press release includes a discussion of "Adjusted EBITDA," which is a non-GAAP financial measure. The Company defines Adjusted EBITDA as net income before (a) interest income (expense); (b) income tax provision (recovery); (c) amortization of capital and intangible assets; (d) foreign exchange loss (gain); (e) stock-based compensation expense related to the Company's grant of stock options;(f) employee termination costs and (g) allowances for accounts in litigation and other doubtful accounts.Management uses Adjusted EBITDA as a measurement of the Company's operating performance because it provides information related to the Company's ability to provide cash flows for acquisitions, capital expenditures and working capital requirements. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in its industry. The Company has included allowance for accounts in litigation and other doubtful accounts in adjusted EBITDA, due to the unusual amount of allowances in the fourth quarter of 2010 which are not expected to recur at a similar amount in the future.The non-GAAP financial measure is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review the Company's consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. In addition, the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from the Company's non-GAAP measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring.The table below reconciles net income (loss) and Adjusted EBITDA for the periods presented:Three months endedTwelve months endedDecember 31December 312010200920102009Net Income (loss)$(59,767,497)$1,254,726$(61,074,414)$7,101,620Add:Amortization of capital and intangible assets4,381,942121,06110,594,042405,141Intangibles & Goodwill impairment50,289,984-50,289,984-Allowance for accounts in litigation and other doubtful accounts5,790,2051,513,0638,265,2053,347,288Special charges2,710,477-2,710,477-Interest expenses (income), net914,254(24,982)2,217,39026,848Foreign exchange (gain) loss(194,101)975,472(910,589)3,423,700Employee termination costs26,643-238,047-Stock based compensation121,304197,373454,262735,187Loss on disposal of assets21,295-21,295-Income tax expense (recovery)487,006(306,226)445,96278,231Adjusted EBITDA4,781,5123,730,48713,251,66115,118,015Conference Call DetailsIn conjunction with the release, Cyberplex will host a conference call on Tuesday, March 29, 2011 at 4:30 p.m. EST to discuss the financial results. To access the call, please dial 1-888-892-3255. Please call five minutes prior to the call. A replay of the conference call will be available as of 12:00 a.m. the next day, until midnight June 30, 2011. To access the replay dial 1-800-937-6305 followed by the pass code 173269.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 StatementsThis 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 CONSOLIDATED BALANCE SHEETSAS AT DECEMBER 31, 2010 and 200920102009AssetsCurrent Assets:Cash and cash equivalents $5,191,691 $ 10,222,001Restricted cash2,310,206-Short-term investments1,690,68611,540,642Accounts receivable, net of allowance for doubtful accounts of $3,540,733 (2009 - $2,270,977)13,879,5709,930,149Income taxes recoverable632,006-Prepaid expenses and other assets2,320,9633,303,81926,025,12234,996,611Restricted cash1,749,048-Property and equipment2,921,372921,716Intangible assets29,157,932798,093Goodwill1,466,97114,095,708Future income tax assets-582,740$61,320,445$51,394,868Liabilities and Shareholders' EquityCurrent Liabilities:Accounts payable and accrued liabilities $10,177,981$4,270,080Current portion of term loans9,402,402-Unearned revenue664,687668,255Income taxes payable1,729,226631,465Deferred lease inducements115,086106,61822,089,3825,676,418Long-term portion of term loans23,582,779-Future income tax liabilities1,100,000-Deferred lease inducements184,719156,119Shareholders' equity14,363,56545,562,331$61,320,445$51,394,868CYBERPLEX INC.Unaudited Consolidated Statements of OperationsThree Months Period EndedYears EndedDecember 31, 2010December 31, 2009December 31, 2010December 31, 2009Revenue$31,633,418$24,347,585$106,863,016$110,411,215Cost of revenue21,260,25617,512,80174,627,88978,070,64910,373,1626,834,78432,235,12732,340,566Expenses:Sales and marketing2,893,8212,313,82110,331,09412,907,348General and administrative8,635,9822,554,17117,610,2178,450,937Foreign exchange (gain) loss(194,101)975,472(910,589)3,423,70011,335,7025,843,46427,030,72224,781,985Income (loss) before the undernoted(962,540)991,3205,204,4057,558,581Depreciation of property and equipment148,131108,5611,290,085319,903Amortization of intangible assets4,233,81112,5009,303,95785,238Special charges2,710,477-2,710,477-Impairment of goodwill and intangible assets50,289,984-50,289,984-Loss on disposal of assets21,295-21,295-Income (loss) from operations(58,366,238)870,259(58,411,393)7,153,440Interest income22,16825,83474,69748,522Interest expense(936,421)(852)(2,292,087)(75,370)Gain on sale of investment-53,25933153,259(914,253)78,241(2,217,059)26,411Income (loss) before income taxes(59,280,491)948,500(60,628,452)7,179,851Income taxes (recovery)Current430,100276,5141,500,631660,971Future56,906(582,740)(1,054,669)(582,740)487,006(306,226)445,96278,231Net income (loss)(59,767,497)1,254,726(61,074,414)7,101,620Unrealized gain (loss) on available-for-sale securities, net of tax of nil(24,346)(135,974)(127,282)172,706Foreign currency translation adjustment(894,641)-(2,491,886)-Amount reclassified to income during the period-(53,259)-(53,259)Comprehensive income (loss)$(60,686,484)$1,065,493$(63,693,582)$7,221,067Income (loss) per share:Basic$(0.45)0.02$(0.62)$0.11Diluted(0.45)0.02(0.62)0.11Weighted average number of shares used in income (loss) per share :Basic133,536,96268,450,05498,979,15162,680,694Diluted133,536,96270,380,96498,979,15164,905,988CYBERPLEX INC.UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWSThree Months PeriodYears EndedEnded December 31December 312010200920102009Cash flows from (used in) operating activities:Net income (loss)$(59,767,497)$1,254,726$(61,074,414)$7,101,620Items not involving cash:Depreciation of property and equipment148,130108,5611,290,085319,903Amortization of intangible assets4,233,81112,5009,303,95785,238Stock-based compensation121,304197,373454,262735,187Amortization of deferred lease inducements(27,951)(33,562)(111,379)(89,466)Unrealized foreign exchange loss390,548265,131492,964666,992Interest accrued on long-term loans748,859-748,859-Future income taxes(1,310,275)(582,740)(1,054,669)(582,740)Impairment of intangible assets29,857,394-29,857,394-Impairment of goodwill20,432,590-20,432,590-Loss on disposal of assets21,295-21,295-Change in non-cash operating assets and liabilities7,921,243(364,904)6,899,907(1,014,859)2,769,451857,0857,260,8517,221,875Cash flows from (used in) financing activities:Decrease in bank indebtness---(3,535,264)Repayment of long-term loans(1,935,250)-(1,935,250)-Repayment of bridge loans--(9,217,719)-Proceeds from exercise of stock options105,30011,600142,300243,532Proceeds from exercise of warrants---216,667Proceeds from public offering, net of issuance costs22,661-30,795,25415,887,291(1,807,289)11,60019,784,58512,812,226Cash flows from (used in) investing activities:Sale (purchase) of short-term investments1,163,0362,813,7359,391,958(11,053,708)Purchase of restricted marketable securities(10,876)-(413,916)-Acquisition of TSAVO, net of cash acquired736,403)-(38,004,748)-Acquisition of EQ Advertising Group Ltd., net of cash acquired(882,829)-(882,829)-Acquisition of Incentaclick Media Group Inc., net of cash acquired-369,000-(2,031,000)Acquisition of Eidenai Innovations Inc., net of cash acquired-(110,890)-(202,220)Proceeds from disposal of property and equipment126,186-126,186-Additions to property and equipment(254,404)(2,236)(1,223,020)(462,963)Additions to intangible assets(55,926)(300,000)(576,413)(392,114)651,216)2,769,609(31,582,782)(14,142,005)Foreign exchange loss on cash held in foreign currency(390,548)(265,131)(492,964)(666,992)Increase (decrease) in cash and cash equivalents(79,602)3,373,163(5,030,310)5,225,104Cash and cash equivalents, beginning of period5,271,2936,848,83810,222,0014,996,897Cash and cash equivalents, end of period$5,191,691$10,222,001$5,191,691$10,222,001FOR FURTHER INFORMATION PLEASE CONTACT: David KatzCyberplex Inc.EVP Corporate Development416.597.8889416.597.2345 (FAX)press@cyberplex.comwww.cyberplex.com