Gemcom Announces Fiscal 2008 Year-End Results

Total Revenue Up 51%; Net Income up 47% on a Year-Over-Year Basis

Vancouver, Canada – June 9, 2008 – Gemcom Software International Inc. (TSX:GCM), the largest global supplier of specialised mining productivity solutions, today announced its financial results for the three-month period and year ended March 31, 2008. All figures are quoted in Canadian dollars.

Fiscal 2008 Highlights:

  • Total revenue increased 51% to $54.2 million in fiscal 2008 from $35.8 million in 2007, approximately 30% of this is organic growth after taking into consideration the Surpac Minex acquisition in July 2006.
  • EBITDA(1) increased 67% to $12.2 million in fiscal 2008 from $7.3 million in 2007.
  • Income from operations increased to $10.4 million, or 19% of revenue, in fiscal 2008 from $5.4 million, or 15% of revenue, in 2007.
  • Net income increased by 47% to $6.7million, or 12% of revenue, from $4.5 million, or 13% of revenue in 2007.
  • Working capital increased 91% to $21.8 million at March 31, 2008 compared with $11.4 million at March 31, 2007.

“Gemcom continued to experience solid growth as each product, revenue stream and geographic region contributed to the improvement in fiscal 2008,” said Garth Albright, chief financial officer of Gemcom. “While part of the increase on a year-over-year basis was attributable to the acquisition of Surpac Minex, organic growth accounted for approximately 30% of the improvement, suggesting our solutions continue to find traction in markets worldwide. The relative strength of the Canadian dollar, coupled with weakness in the U.S. currency versus other global currencies had a significant impact on our results this year, as we posted a foreign exchange loss of more than $1 million.”

“Subsequent to year-end, and after an extensive review of both our standalone vision and multiple strategic alternatives, we announced that we have signed a definitive agreement to be acquired by a purchaser controlled by a group of private investment firms,” said Rick Moignard, president and CEO of Gemcom. “While proud of our track record of revenue and earnings growth over the last five years, we think that the mining industry must fundamentally change its use of software within their operations in the coming five years. We believe that this provides Gemcom with the opportunity to become the industry standard for mine management software. Reaching this next level, however, will require increased investment in our products and solutions in the short term in anticipation of the longer term gain. The proposed transaction not only represents a powerful endorsement of the business we have built, but a chance for shareholders to realise value in their investment today without the elevated risk and potential volatility associated with the execution of our evolving long-term growth strategy.”

Fourth Quarter 2008 Financial Review
Revenue for the three months ended March 31, 2008 was $15,074,083, as compared with $12,026,562 in the same three months last year. This revenue growth of $3,047,521, or 25%, comes in spite of the stronger Canadian dollar in the fourth quarter. The Company would have recorded revenue growth of 32% in the fourth quarter of this year as compared with Q4 of last year if the exchange rates of the Canadian dollar relative to other world currencies had remained at last year’s levels. License revenue was $8,554,998 in the quarter; Update Service and Technical Support (“USTS”) revenue was $4,213,093; professional fees revenue was $2,067,472 and other revenue was $238,520. Revenue grew across each geographical region but the greatest increases were observed in the Australia and Latin America regions at 62% and 44% respectively.

Research and development expenses for the fourth quarter of this year were $1,871,311, compared with $2,349,156 in the same quarter of the prior year, a decrease of $477,845, or 20%. The decrease is due to the Company having recorded investment tax credits this quarter of $829,572. Exclusive of these tax credits, research and development expenses as a percentage of revenue were 18% in the fourth quarter of 2008, versus 20% in the fourth quarter of 2007.

During the three months ended March 31, 2008, sales and marketing expenses were $5,367,621 compared with $4,191,688 for the same three months last year. This increase of $1,175,933, or 28%, is primarily due to higher personnel costs.

General and administration expenses were $1,304,208 for the three months ended March 31, 2008 compared with $560,960 in the same period last year. Higher depreciation expense and higher costs for personnel and professional services accounted for this year-over-year change.

EBITDA for the fourth quarter of this year was $3,848,191, or basic and fully diluted EBITDA per share of $0.07, compared with EBITDA of $2,411,832, or basic and fully diluted EBITDA per share of $0.05 in Q4 of the prior year.

Net income for the fourth quarter of this year was $2,049,383, or basic and fully diluted earnings per share of $0.04, compared with net earnings of $1,954,541 or basic and fully diluted earnings per share of $0.04 in the same quarter last year. The marginal increase in net income quarter over quarter reflects higher expenses the Company recorded as a result of: higher personnel costs, consistent with trends in the broader mining industry; costs resulting from the expansion of the Company’s professional services capabilities in support of InSite implementations; and higher depreciation costs associated with enhancing the Company’s information technology infrastructure.

Fiscal 2008 Financial Review
On July 19, 2006 the Company completed its acquisition of Surpac Minex Group Pty Ltd. (“Surpac Minex”). The financial results of Surpac Minex are consolidated since the date of acquisition, and accordingly, the financial results of the Company for the twelve month comparative period ended March 31, 2007 include those of Surpac Minex from that date.

Gemcom reported revenue of $54,245,350 as compared to revenue of $35,848,003 in the prior year. Taking into consideration that the acquisition of Surpac Minex in the second quarter of fiscal 2007 accounted for almost one-third of the year-over-year revenue increase, organic revenue growth was 30% in fiscal 2008 as compared with fiscal 2007. Revenue grew across each geographical region but the greatest annual increases were observed in the Asia Pacific and Australia regions at 91% and 82% respectively.

Revenue from license sales increased to $29,044,300 for fiscal 2008, an increase of $9,823,244 as compared to last year. Higher Surpac license revenue accounted for the majority of the increase, followed by higher Minex and GEMS license sales. USTS maintenance revenue for fiscal 2008 was $16,182,570 compared with $10,259,906 last year. Professional fee revenue for fiscal 2008 was $7,996,120 compared with $5,317,063 last year. The increase resulted primarily from professional services related to the InSite implementations. Other revenue was $1,022,360, as compared to $1,049,978 last year.

Research and development expenses for fiscal 2008 were $8,820,922 compared with $7,581,599 in the prior year, an increase of $1,239,323, or 16%. This increase is due to the bringing together of the two research and development teams upon the acquisition of Surpac Minex in the second quarter of fiscal 2007. This team grew again in the latter half of the last fiscal year when Gemcom introduced its product management group. Currently, Gemcom’s product development and product management team is comprised of 96 employees located in Canada, Australia and India. Research and development expenses, exclusive of investment tax credits relating to 2005 and 2006 of $1,544,446 recorded during fiscal 2008, were 19% of revenue. In fiscal 2007, research and development expenses, exclusive of deferred development costs of $255,850, were 22% of revenue.

Sales and marketing costs during fiscal 2008 were $19,032,991 compared with $12,700,282 in fiscal 2007. This increase of $6,332,709, or 50%, is primarily due to personnel costs on the expansion of Gemcom’s regional business units upon the acquisition of Surpac Minex in July 2006 and the addition of 70 employees in sales, support and services at that time.

EBITDA for fiscal 2008 was $12,157,583 or basic and fully diluted EBITDA per share of $0.23 and $0.22, respectively, compared with EBITDA of $7,285,814, or basic and fully diluted EBITDA per share of $0.17 last year.

Gemcom’s net earnings for fiscal 2008 were $6,668,581, an increase of $2,130,763, or 47%, compared with net earnings of $4,537,818 last year. Basic and diluted earnings per share were $0.13 and $0.12, respectively, this fiscal year, compared with basic and diluted earnings per share of $0.10 last year.

(1) EBITDA, defined as earnings, before interest, taxes, depreciation and amortisation, does not have any standardised meaning prescribed by GAAP. However, management believes it is a useful supplemental measure of operational performance.

3 0

More Asia News

Latest Stories

SIGN UP FOR OUR DAILY NEWSLETTER