Microforum Inc. (ticker: MCF.TO, exchange: Toronto Stock Exchange)
News Release - 22-Jan-2001
Microforum Announces Nine Month Results The Company refocuses operations and writes down goodwill
Toronto, Ontario, Canada January 22, 2001
Microforum Inc. (TSE:MCF) a leading software products and internet solutions company announced its results for the nine month period ended November 30, 2000.
During the period, Microforum's new management evaluated the Company's position in the marketplace given the dramatic shifts in the e-commerce sector. Management determined to focus the Company on its strongest performing e-business operations and products and discontinue non-core and non-performing operations. Consequently, the revenues and earnings of the Company are divided into continuing operations and discontinued operations.
Continuing Operations
The Company reported revenues of $24.26 million from its continuing operations, which comprise its e-business operations. This represents a 144 per cent increase in revenues for the Company's e-business operations from $9.96 million in the same period last year.
The Company reported an EBITDA loss from continuing operations during the period of $6.6 million ($0.16 per share) compared to the $0.41 million ($0.01 per share) EBITDA income reported one year earlier. The loss was increased by several non-recurring charges aggregating $5.34 million. These non-recurring items include a higher than usual provision for doubtful accounts related to the downturn in certain segments of the e-commerce sector as well as costs related to the refocusing of the business. Before these one-time charges, the loss was $1.26 million.
The Company believes it is prudent to take a significant write-down in goodwill at this time in recognition of the dramatic changes in outlook for companies in the technology sector and the capital market's view of technology stocks. Total amortization and impairment of goodwill for the period totaled $29.75 million.
The loss from continuing operations was $37.66 million ($0.93 per share), compared to a loss of $0.79 million ($0.03 per share) for the comparative period and includes: EBITDA loss/income; the amortization of capital assets and intellectual property; income taxes; and the amortization and impairment of goodwill.
The Company holds a net balance of $24.48 million in cash and marketable securities and has $0.75 million in long-term debt, as at November 30, 2000.
"Our top priorities are to complete the refocusing of the Company and to tighten and streamline credit, cost and administrative processes," said Owen Menzel, chief financial officer. "We now have a strong team in place that can help drive margins, costs and accelerate our return to profitability."
"Last quarter we began a careful analysis of our assets and market opportunities," said Rick Segal, president and chief executive officer. "Our analysis confirmed we are in a strong position with deep reservoirs of talent, intellectual property and capital. Throughout the quarter we continued to focus on our core operations to maximize these assets and shareholder value."
Discontinued Operations
The Company reported a loss from discontinued operations of $19.72 million ($0.49 per share) for the nine months ended November 30, 2000 compared to income for the comparative period of $0.54 million ($0.02 per share). The loss includes a $6.59 million write-off of related goodwill and a $2.60 million provision for the estimated loss from the strategic marketing division from November 30, 2000 to the expected disposal date.
"With the planned divestiture of non-core and non-performing divisions, a strengthening of our senior management team and the establishment of a products development team, we have achieved a sharper focus on operations. We are confident, that with another quarter of focusing the business, Microforum will be well positioned to maximize our business opportunities," said Segal.
Financial Highlights
| Nine Months to November 30 | |||
| 2000 | 1999 | ||
| Revenue* | $24,259,397 | $9,960,954 | |
| Gross profit* | $9,548,170 | $6,152,413 | |
| Gross margin (%)* | 39.4% | 61.8% | |
| EBITDA* (1) | ($6,603,424) | $412,944 | |
| Loss from continuing operations (before the under-noted) | ($7,903,240) | ($119,135) | |
| Amortization and impairment of goodwill | ($29,751,962) | ($671,996) | |
| Income (loss) from discontinued operations | ($19,723,886) | $541,699 | |
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| Net loss | ($57,379,138) | ($249,432) | |
| Basic EPS | ($1.42) | $0.01 | |
| Cash and Marketable Securities | $24,480,253 | $17,571,355 | |
| Common Shares issued and outstanding | 42,239,173 | 33,994,050 | |
* from continuing operations |
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| (1) EBITDA loss from continuing operations for the period ended November 30, 2000 includes provisions for doubtful accounts of $3,717,460, and severance and other costs of $1,624,641 | |||
Due to the fundamental changes in the nature of the Company's business, management advises that all existing research reports prepared by the investment community on the Company should not be relied upon for purposes of making an investment decision regarding buying or selling shares of Microforum. The descriptions of the business and financial projections contained in such research coverage do not properly reflect anticipated future results of the Company due to the fundamental change in the Company's operations.
Clients
During the quarter, Microforum provided e-business solutions to clients including:
Conference Call
The Company will be hosting a conference call regarding the results disclosed in this press release. The call has been scheduled for Tuesday, January 23 at 8:30 a.m. EST.
To listen to the call, dial 416-641-6653 at least 10 minutes prior to the conference time of 8:30 a.m. EST.
For those unable to attend the call, a replay will be available at 416-626-4100 (pass code 17686563) until January 29, 2001.
About Microforum Inc.
Microforum creates, sells and services exceptional software products and internet solutions. Toronto-based Microforum is listed on The Toronto Stock Exchange (TSE: MCF). For more information, please visit www.microforum.com.