Axia Releases Results for Q2FY09



    
    -  Increased revenues by 11 percent to $18.9 million for the second
       quarter of fiscal 2009 compared to $17.1 million in the same period
       for fiscal 2008.

    -  Net income of $2.5 million ($0.04 per fully diluted common share) for
       the second quarter of fiscal 2009 as compared to $2.5 million ($0.04
       per fully diluted common share) for the first quarter of fiscal 2009.

    -  Activated the Sem@for77 network in the metropolitan Paris area.

    -  Submitted two bids for national Open Access Next Generation Networks
       in Singapore and Australia.
    

    CALGARY, Feb. 11 /CNW/ - Axia NetMedia Corporation ("Axia" or the
"Corporation") today announced the results for the second quarter of fiscal
2009 for the period ended December 31, 2008.
    Art Price, Chairman and CEO commented, "The demand for our services is
growing as private and public organizations recognize the importance of Real
Broadband(TM) infrastructure to their future prosperity. Our networks in
Alberta and France are best-in-class proven examples of how to provide this
critical infrastructure in a cost effective manner."

    New NGN OANs

    During the second quarter of fiscal 2009, the Corporation submitted bids
for national Open Access Next Generation Network ("OAN NextGen") projects in
both Australia and Singapore. Both competitive bid processes are progressing
as each respective government is deliberating on the proposals they received.
Decisions on both bids are expected in the first half of calendar 2009.
    Additionally, at the end of calendar 2008, Covage had four outstanding
bids in France, one of which it won and two which were awarded to other
competitors. A decision is outstanding for the remaining bid submission. As of
today, Covage has submitted three new bids and decisions are expected within
calendar 2009. Covage continues to review all potential opportunities in light
of current market conditions and the degree that the opportunity complements
Covage's existing assets.

    Operational Highlights

    France

    During the second quarter of fiscal 2009, the Sem@for77 network was
activated and this quarter includes preliminary operating results from this
network. With the activation of Sem@for77, Covage's addressable market is
approximately 30,000 sites as at December 31, 2008. The Hérault Participation
network is on schedule to be activated during the summer of 2009.
    Broadband revenues for the second quarter increased to $2.1 million,
which was a 62 percent increase over the $1.3 million reported for the prior
quarter. This increase reflects the growing bandwidth use for our existing
networks and new networks as they become activated.
    Subsequent to the end of the quarter, Covage, Axia's 50 percent owned
French joint venture, announced that it had been awarded the network contract
for Dunkerque Grand Littoral Networks ("DGL Networks"). Dunkerque has a
population of 210,000 and its main industry activities include the third
largest seaport in France, steel, food processing, oil refining, ship building
and chemical industries. The network's addressable business market is 3,000
sites; it is close to Covage's existing network in Arras and will be managed
by the Arras operations and business team. The renewable service contract has
an initial term of 22 years. After receipt of government grants, the capital
investment by Covage is planned to be 10.0 million Euros. Funds for start-up
costs and contingencies are included. Covage plans to have 70 percent
ownership after a 30 percent investment in the network by a French
institution.
    Covage is creating competition which supports local access operators and
Retail Service Providers ("RSPs") as they deliver their IP services to
business and retail customers. As at December 31, 2008, Covage was providing
services to 34 RSPs with 234 bandwidth connections. Bandwidth sales have grown
to 15.9 Gbps at the end of December 2008 as compared to 10.3 Gbps at September
30, 2008.
    Covage is on schedule to complete its national fibre backbone network
that utilizes 2,900 kilometres of existing dark fibre infrastructure to create
a ringed network from Paris to Montpellier in the south of France. On
completion, this national backbone network will connect most of Covage's
existing networks to each other and to the main interconnect points in Paris
with an available bandwidth of 400 Gbps (expandable to 800 Gbps). Covage
expects to complete the project by mid-calendar year 2009. Covage is actively
seeking out new customers for the backbone and in the second quarter of fiscal
2009 connected a new customer for 5 Gbps.
    This national infrastructure network will improve Covage's service
offering to its current and prospective RSP customers by enabling customers to
connect directly to Paris, the global gateway for France, and enhance Covage's
competitive position with respect to new network prospects. Covage will also
be able to offer guaranteed levels of service differentiating itself in the
marketplace and attract and retain RSPs. From an operational perspective,
Covage will have quality and cost control of its backhaul to Paris.

    Alberta

    The Alberta SuperNet continued with steady growth despite the deepening
economic pressures associated with an extended period of low commodity prices
and increased cost pressures. The Alberta SuperNet value proposition of high
performance for low cost is aligned with businesses that focus on cost
efficiency and productivity. To date, the Corporation has not experienced a
slowdown in the growth in bandwidth and operating results of the Alberta
SuperNet. However, recent adverse economic conditions may cause a delay or
postponement of incremental network growth opportunities.
    The positive operational reputation of the Alberta SuperNet in the market
is evidenced by the retention and expansion of Axia's Alberta SuperNet RSP
community and the willingness of businesses to expand their reliance on the
Alberta SuperNet for the delivery of mission critical applications in all
sectors. Axia is seeing increasing opportunity for high availability network
services through the replacement or augmentation of its clients' existing
non-SuperNet services. This is driving greater consideration of the Alberta
SuperNet as a cost competitive and capable network alternative to support the
delivery of Axia's clients' significant investments in new and planned network
centric business and public safety systems.

    Q2FY09 Consolidated Financial Information

    Consolidated revenue for the quarter was $18.9 million, an increase of
$3.1 million or 20 percent from $15.8 million for the prior quarter. Revenues
for the first six months of fiscal 2009 were $34.7 million, a 10 percent
increase of $3.1 million from $31.6 million for the first six months of fiscal
2008. Consolidated gross profit for the quarter was $8.0 million or 42 percent
of revenue which is an increase of $0.6 million as compared to $7.4 million or
47 percent of revenue for the prior quarter. As compared to the first six
months of fiscal 2008, gross profit decreased by $0.2 million to $15.4 million
or 44 percent of revenue. During the quarter total expenses were $4.6 million,
an increase of $0.7 million from $3.9 million in the prior quarter.
    Net income for the current quarter was $2.5 million ($0.04 per common
share on a fully diluted basis) as compared to $2.5 million ($0.04 per common
share on a fully diluted basis) for the previous quarter and increased $1.0
million compared to the same six month period in 2008.
    As at December 31, 2008, the Corporation's working capital was $32.2
million as compared to $19.3 million for the prior quarter. This increase in
working capital is primarily attributable to its operations in France.
Compared to the end of the second quarter of fiscal 2008, working capital has
increased $3.5 million from $28.7 million. The major use of working capital is
the investment in network construction and acquisitions for Axia's expanding
operations in France and Singapore. As at December 31, 2008, Axia had $24.7
million in cash and short-term investments.

    Outlook

    Axia's business is based on next generation digital 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 governments and
as a consequence, next generation network investments are being considered in
some jurisdictions as economic stimulus initiatives.
    Axia will continue to invest business development funds to investigate
and assess the best available opportunities. Axia's management and Board
assesses the attractiveness of each new opportunity, including the value of
momentum and market position, against the dilution shareholders may face as a
consequence of Axia choosing to raise additional equity capital. The
Corporation intends to maintain its strong balance sheet approach. Management
and the Board will consider all these factors as it seeks the path that it
believes will maximize longer-term shareholder value.

    Conference Call Scheduled

    Axia will hold a conference call for the investment community on February
12, 2009 at 4 p.m. (Eastern) and 2 p.m. (Mountain). Axia Chairman and CEO Art
Price and Chief Financial Officer Peter McKeown will participate.
    To participate in the conference call from Toronto or internationally,
please dial (416) 644-3421. If you are connecting from other parts of Canada,
dial 1-800-732-0232. 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=2536380
    A replay of the conference call will be available at (416) 640-1917 or
1-877-289-8525, passcode 21296844 followed by the number sign from 8:00 p.m.
(ET) Thursday, February 12, 2009 to midnight (ET) Thursday, February 19, 2009,
or through the webcast archives at http://www.newswire.ca.

    About Axia

    The unaudited Consolidated Financial Statements for the second quarter of
fiscal 2009 ended December 31, 2008 and related Management's Discussion &
Analysis have been reviewed and approved by the Corporation's Audit Committee
and Board of Directors. These reports have been filed on SEDAR at
www.sedar.com and are also posted at www.axia.com.
    Axia provides Real Broadband(TM) IP services and solutions through
planning, designing and operating no conflict Open Access Next Generation
Networks. Axia has networks in Alberta, France and Singapore. 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 OAN NextGen contracts, the
timing of completion and estimated total costs of these 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.


    
    AXIA NETMEDIA CORPORATION
    CONSOLIDATED BALANCE SHEETS

    (unaudited)                                      December 31,    June 30,
    ($000s)                                                 2008        2008
    -------------------------------------------------------------------------
    Assets
    Current assets:
      Cash                                             $   7,976   $   2,210
      Short-term investments                              16,718      25,867
      Restricted short-term investments                   11,922       4,763
      Accounts receivable                                 26,895      25,222
      Prepaid expenses                                     2,313       1,326
      Future income tax asset                                 57          24
    -------------------------------------------------------------------------
                                                          65,881      59,412

    Property and equipment                                56,160      49,373
    Intangible assets                                      9,096       6,699
    Goodwill                                               4,201       4,201
    Advances to joint venture                                  -       1,785
    Other assets                                           1,608         816
    Equity investment                                          9           -
    Restricted long-term investments                       2,250       4,310
    Future income tax asset                                4,444       4,608
    -------------------------------------------------------------------------
                                                       $ 143,649   $ 131,204
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities         $  26,998   $  29,826
      Income taxes payable                                 5,098       5,306
      Current portion of deferred revenue                  1,347       1,061
      Current portion of lease obligation                    222         284
      Current portion of cost of excess space                 66          61
    -------------------------------------------------------------------------
                                                          33,731      36,538

    Deferred revenue                                       6,714       1,503
    Lease obligation                                           -          77
    Cost of excess space                                      85         115

    Shareholders' equity:
      Share capital                                       48,074      48,074
      Contributed surplus                                  3,266       2,893

      Retained earnings                                   43,900      38,986
      Accumulated other comprehensive income               7,879       3,018
    -------------------------------------------------------------------------
                                                          51,779      42,004
    -------------------------------------------------------------------------
                                                         103,119      92,971
    -------------------------------------------------------------------------
                                                       $ 143,649   $ 131,204
    -------------------------------------------------------------------------



    AXIA NETMEDIA CORPORATION
    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS


    For the three and six months ended December 31, 2008 and 2007 (unaudited)

                                        Three months           Six months
    ($000s except
     per share amounts)                2008       2007       2008       2007
    -------------------------------------------------------------------------
    Revenue                        $ 18,893   $ 17,130   $ 34,724   $ 31,586
    Cost of products and
     services sold                   10,905      8,821     19,335     16,037
    -------------------------------------------------------------------------
    Gross profit                      7,988      8,309     15,389     15,549
    Expenses
      Marketing                         372        208        595        480
      Administration                  1,377        688      2,207      1,506
      Business development            1,568      2,362      3,993      4,065
      Stock-based compensation          190      1,877        374      2,041
      Net interest and financing
       charges (income)                (297)    (1,193)    (1,021)    (1,582)
      Depreciation and
       amortization                   1,366      1,016      2,348      1,881
    -------------------------------------------------------------------------
                                      4,576      4,958      8,496      8,391
    -------------------------------------------------------------------------
    Income before income tax          3,412      3,351      6,893      7,158
      Current income tax             (1,094)    (1,464)    (2,617)    (3,126)
      Future income tax                 (96)      (788)       261       (460)
    -------------------------------------------------------------------------
                                     (1,190)    (2,252)    (2,356)    (3,586)
    -------------------------------------------------------------------------
    Net income before the
     following:                       2,222      1,099      4,537      3,572
      Loss on equity investment        (236)         -       (236)         -
      Gain on disposal                  371          -        371          -
      Minority interest                  93        (11)       242        (11)
    -------------------------------------------------------------------------
    Net income                        2,450      1,088      4,914      3,561
    Retained earnings, beginning
     of period                       41,450     33,358     38,986     30,885
    -------------------------------------------------------------------------
    Retained earnings, end of
     period                        $ 43,900   $ 34,446   $ 43,900   $ 34,446
    -------------------------------------------------------------------------

    Net income per share
      Basic                        $   0.04   $   0.02   $   0.08   $   0.06
      Diluted                      $   0.04   $   0.02   $   0.08   $   0.05
    -------------------------------------------------------------------------

    Weighted average shares
     outstanding
      Basic                          63,593     63,563     63,593     63,481
      Diluted                        64,154     65,163     64,843     64,761
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


    For the three and six months ended December 31, 2008 and 2007 (unaudited)

                                        Three months           Six months
    ($000s)                            2008       2007       2008       2007
    -------------------------------------------------------------------------
    Net income                     $  2,450   $  1,088   $  4,914   $  3,561
    Other comprehensive income,
     net of tax:
      Unrealized gains on
       short-term investments           209        (49)       234        (15)
      Unrealized losses on sale
       of short-term investments          -          -       (205)         -
      Unrealized losses on
       translation of self-
       sustaining operations           (730)       834     (4,890)       460
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss)                     (521)       785     (4,861)       445
    -------------------------------------------------------------------------
    Comprehensive income (loss)    $  1,929   $  1,873   $     53   $  4,006
    -------------------------------------------------------------------------



    AXIA NETMEDIA CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOWS


    For the three and six months ended December 31, 2008 and 2007 (unaudited)

                                        Three months           Six months
    ($000s)                            2008       2007       2008       2007
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities:
      Net income                   $  2,450   $  1,088   $  4,914   $  3,561
      Items not involving cash
        Depreciation and
         amortization                 1,366      1,016      2,348      1,881
        Future income tax                96        871       (261)       561
        Loss on equity investment       236          -        236          -
        Gain on disposal               (371)         -       (371)         -
        Minority interest               (93)        11       (242)        11
        Cost of excess space            (14)       (27)       (25)       (44)
        Stock-based compensation        190      1,877        374      2,041
    -------------------------------------------------------------------------
                                      3,860      4,836      6,973      8,011

    Changes in non-cash working
     capital items                    5,394     (9,918)    (5,446)   (15,760)
    -------------------------------------------------------------------------
                                      9,254     (5,082)     1,527     (7,749)
    Financing activities:
      Increase in restricted
       short and long-term
       investments                  (12,020)         -     (5,099)         -
      Issue of common shares              -        141          -        226
      Repayment of lease
       obligation                       (69)       (68)      (139)      (134)
    -------------------------------------------------------------------------
                                    (12,089)        73     (5,238)        92
    Investing activities:
      Short-term investments          2,576       (670)     9,149      6,804
      Acquisitions                   (2,273)    (1,107)    (2,370)    (1,107)
      Advance to joint venture            -     (1,298)     1,785     (3,822)
      Equity investment                (247)         -       (247)         -
      Purchase of property
       and equipment                 (1,091)    (1,418)    (3,170)    (3,272)
      Purchase of property and
       equipment included in
       accounts payable              (3,302)         -     (2,406)         -
    -------------------------------------------------------------------------
                                     (4,337)    (4,493)     2,741     (1,397)
    -------------------------------------------------------------------------
    Effect of currency
     translation on cash
     balances and cash flows         10,861        785      6,736        477
    -------------------------------------------------------------------------
    Increase in cash                  3,689     (8,717)     5,766     (8,577)
    Cash, beginning of period         4,287     11,002      2,210     10,862
    -------------------------------------------------------------------------
    Cash, end of period            $  7,976   $  2,285   $  7,976   $  2,285
    -------------------------------------------------------------------------
    

    %SEDAR: 00002394E




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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