Axia Releases Results for Q3FY11

  • Consolidated revenue for the nine months increased 17% to $58.9 million, including Broadband Services revenue in Europe which increased by 48% to $16.2 million, both compared to the same period last year.

  • Consolidated net income for the nine month period was $4.4 million ($0.07 per fully diluted share) compared to $1.5 million ($0.02 per fully diluted share) for the same nine month period of the prior year.

  • Demand for services from Axia's French business unit Covage continues to grow albeit at a lower rate than experienced due to the surge in demand during the second quarter.  Third quarter consolidated revenue was $18.9 million, a decrease of $1.2 million (6%) from $20.1 million for the prior quarter.  This decrease in revenue was expected given the one-time component of revenue in the previous quarter.

  • Net income for the current quarter was $1.1 million ($0.02 per fully diluted share) as compared to $1.3 million ($0.02 per fully diluted share) for the prior quarter.

  • On February 25, 2011 Covage was selected to operate an enterprise network for a period of ten years for the city of Nîmes in southwestern France.

  • On February 28, 2011 Axia signed a ten year renewable agreement to be the Network Operator for the MassBroadband 123 fibre network.

  • Xarxa Oberta, Axia's Spanish business unit, is progressing according to plan with the integration of 1,200 km of existing network, the provisioning of 60 government sites and the establishment of a Network Operations Centre.

  • Network construction in Singapore has now been completed to over 68% of premises.

CALGARY, May 9 /CNW/ - Axia NetMedia Corporation (Axia) today announced the results for Q3FY11 for the period ended March 31, 2011.

Chairman and CEO Art Price commented, "We had a solid quarter that was according to plan.  As expected, our Broadband Services revenue from Europe was down compared to our exceptional Q2FY11 results that included a surge in connection access fees from new customers signing up for services prior to the end of calendar 2010."

Operational Highlights

North America

Alberta SuperNet

The Alberta SuperNet Next Generation Network (NGN) continues to perform on plan. Broadband Services revenue was $11.3 million for the third quarter, an increase of $0.1 million (1%) from $11.2 million from the prior quarter. Compared to the same nine month period last year, Broadband Services increased $0.3 million (1%) to $33.6 million.

Included in Broadband Services revenue is $1.25 million per quarter being generated from a contract with Bell which expires on June 30, 2011 as has been previously disclosed. Bell also purchases other Broadband Services which have been reducing as the minimum revenue threshold was approached.  Broadband Services revenue generated from the remaining enterprise sector grew at 9% over the previous quarter.

MassBroadband 123

On February 28, 2011 Axia announced it had signed a ten year renewable agreement to be the Network Operator for the MassBroadband 123 fibre network.  MassBroadband 123 will include 2,153 kms of fibre backhaul infrastructure and electronics connecting more than 120 communities and will initially connect approximately 1,400 government institutions while allowing for extensions to connect directly to premises and providing backhaul connectivity to a global gateway in Boston.  Axia's business on the MassBroadband 123 network will involve selling wholesale Real BroadbandTM and support services to Retail Service Providers (RSPs).  Axia will also be responsible for operating and maintaining the network.    The Massachusetts Technology Collaborative will own the MassBroadband 123 network and is responsible for its design and construction, which is expected to be completed by June 2013.

Europe

Covage

In France, the Covage NGN is in the early adoption phase and continues to develop according to its strategy and plan.  At the end of the third quarter, Covage's addressable market penetration was estimated at 4.8% which increased from 4.3% in the previous quarter.

Revenue from the European business segment was $4.7 million for the third quarter, a decrease of $2.2 million (32%) from $6.9 million for the previous quarter.  Compared to the same nine month period last year, revenue increased $4.5 million (38%), to $16.2 million.

Covage wholesale service rate structures can include a component that is paid at the time of connection and an ongoing charge for the term of service.  Therefore, after a surge in demand, such as Covage experienced in Q2, revenue can be reduced while the underlying demand continues to grow albeit at a lower rate.

Broadband Services revenue was $4.2 million for the third quarter, a decrease of $0.7 million (14%) from $4.9 million for the previous quarter. Second quarter Broadband Services revenue benefited from a strong increase in new customer access sales and the corresponding access fees were recognized during the quarter. Compared to the same nine month period last year, Broadband Services revenue increased $4.1 million (48%) to $12.8 million.

On February 25, 2011 Covage was selected to operate an enterprise network for a period of ten years for the city of Nîmes in southwestern France.  Deployment of the network began in March 2011 and Covage expects to begin offering wholesale bandwidth services by the end of 2011. The capital for the network will be funded by the city of Nîmes. Covage will be responsible for executing the business and commercial aspects of the network.

Xarxa Oberta

Axia and its partner, Imagina Media Audiovisual (Imagina), were awarded a 20 year contract in November 2010 by the regional government in Catalonia to carry out the Xarxa Oberta (Open Network) NGN.  Xarxa Oberta, a Spanish company jointly controlled by Axia and Imagina, will connect 696 government sites in the fields of health, education, justice and safety in 95 municipalities of Catalonia.

The project is progressing as planned with the integration of the existing network of 1,200 km completed, the provisioning of 60 government sites and the establishment of a Network Operations Centre this past April.

Asia Pacific

OpenNet

In Singapore, the OpenNet NGN has completed construction to enable the connection of over 68% of premises. While the network is being constructed, OpenNet has also begun selling its services on completed portions of the network.  Currently, six companies have signed an OpenNet Interconnection Offer agreement to purchase wholesale fibre services from OpenNet. These companies include Nucleus Connect, SingTel, M1 and StarHub.  These companies, in turn, may sell bandwidth services to RSPs.  The RSPs selling retail and commercial broadband, phone and video services on the OpenNet NGN include, among others, Singapore's fixed line and mobility carriers such as SingTel, StarHub, and M1.

Q3FY11 Consolidated Financial Information

Consolidated revenue for the third quarter was $18.9 million, a decrease of $1.2 million (6%) from $20.1 million for the prior quarter.  Compared to the same nine month period last year, consolidated revenue increased $8.7 million (17%) to $58.9 million.

Consolidated gross profit for the third quarter was $6.9 million or 36% of revenue, a decrease of $0.8 million (11%) from the prior quarter.  As compared to the nine month period last year, gross profit increased by $4.1 million (22%) to $22.5 million or 38% of revenue. Other Services gross profit for all NGNs can be expected to fluctuate significantly quarter over quarter due to its project nature.

Net income for the current quarter was $1.1 million ($0.02 per fully diluted share) as compared to $1.3 million ($0.02 per fully diluted share) for the prior quarter. The net income for the nine month period was $4.4 million ($0.07 per fully diluted share) compared to $1.5 million ($0.02 per fully diluted share) for the same nine month period of the prior year.

As at March 31, 2011, Axia's working capital was $27.6 million as compared to $21.8 million at June 30, 2010.  This increase of $5.8 million is primarily attributable to cash provided by operating activities.  As at March 31, 2011, Axia had $34.4 million in cash and unrestricted short-term investments.

Outlook

Axia's business is based on Next Generation Networks that are increasingly seen as critical infrastructure to enable end users to improve their productivity and efficiency.  Most of the digital based technology being developed depends on next generation network connectivity.  These characteristics are becoming better understood by progressive jurisdictions and as a result, the related public policy and telecom regulation is being reviewed and adjusted to enable deployment of this critical infrastructure. As well, consumers are demanding more and less expensive bandwidth that allows them to take advantage of the evolving products and services from the manufacturers of smart phones and web services from providers such as Google, Apple and Netflix.  This demand is driving the need for critical infrastructure that open access NGNs can provide.  Axia will continue to invest business development funds to investigate and assess the best available opportunities globally. 

Conference Call Scheduled

A conference call for the investment community will be held Monday, May 9, 2011 at 3 p.m. (Eastern) and 1 p.m. (Mountain). Axia Chairman and CEO Art Price, Axia North America President and Executive Vice-President Murray Sigler and Chief Financial Officer Alan Hartslief will participate.

To participate in the conference call, please dial (647) 427-7450 in Toronto and internationally. If you are connecting from other parts of Canada, dial 1-888-231-8191.  Please call ten minutes prior to the start of the call. A live webcast (listen only mode) of the conference call will be available at:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3487880

A replay of the conference call will be available at (416) 849-0833 or 1-800-642-1687, passcode 60696665 from 4 p.m. (ET) Monday, May 9, 2011 to midnight (ET) Monday, May 16, 2011, or through the webcast archives at http://www.newswire.ca.

About Axia

The unaudited Consolidated Financial Statements for the quarter ended March 31, 2011 and related Management's Discussion & Analysis have been reviewed and approved by Axia's Audit Committee and Board of Directors.  These reports have been filed on SEDAR at www.sedar.com and also posted at www.axia.com.

Axia sells Real Broadband™ and passive services on Next Generation Networks that have implemented the Axia NGN Solution. To date, the Axia NGN Solution has been implemented in Alberta, France, Singapore, Spain and Massachusetts. Axia trades on the Toronto Stock Exchange under the symbol "AXX".

This News Release contains forward-looking statements, including, without limitation, statements containing the words "should", "believe", "anticipate", "may", "plan", "will", "continue", "intend", "expect", "estimate" and other similar expressions which constitute "forward-looking information" within the meaning of applicable Canadian securities laws.  These statements are based on our current expectations, estimates, forecasts and assumptions about the operating environment, economies and markets in which we operate and are subject to important assumptions, risks and uncertainties that are difficult to predict.  Examples of these statements would include those where Axia forecasts its success and timing in winning new NGN business, the timing of completion and estimated total costs of our networks, the revenues and operating costs associated with these networks over time, and Axia's ability to generate future cash flows and avail itself of other financing alternatives given current market conditions.  The assumptions, risks and uncertainties that could cause actual results to differ materially from the forward-looking information, include, but are not limited to, changes in customer markets, changes in demand for our services, our inability to deliver services in a timely and cost efficient manner, technological change, general economic conditions and other risks detailed from time to time in our ongoing filings with the Canadian securities regulatory authorities, including those in our Annual Information Form, which filings can be found at www.sedar.com.  Given these assumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  Unless otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise.

SOURCE Axia NetMedia Corporation

For further information:

For further information, please visit Axia's website at www.axia.com, or contact:

Dawn Tinling
VP, Investor Relations and Communications
Axia NetMedia Corporation
(403) 538-4074
dawn.tinling@axia.com

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