Axia Releases Results for Q3FY10

    
    -   Broadband Services revenues increased 7% to $41.9 million for the
        first nine months of fiscal 2010 from $39.2 million for the same
        period of fiscal 2009.

    -   Consolidated revenue for the third quarter was $17.6 million, an
        increase of $1.1 million from $16.4 million for the prior quarter.

    -   Covage now has 1,089 broadband connections and its total bandwidth
        grew to 67.6 Gbps at the end of March 2010 as compared to 49.0 Gbps
        at the end of December 2009.

    -   OpenNet announced the commencement of commercial operations on
        April 28, 2010 with construction to 30% of premises completed.

    -   Axia is participating in Next Generation Network bid processes in New
        Zealand and Catalonia, Spain.
    

CALGARY, May 10 /CNW/ - Axia NetMedia Corporation (Axia or the Corporation) today announced the results for the third quarter of fiscal 2010 for the period ended March 31, 2010.

Art Price, Chairman and CEO commented, "During the third quarter of fiscal 2010 each business unit made progress. There was modest growth as we continue to connect new public and private customers to the Alberta SuperNet, France has over 1,000 customer connections and OpenNet is now commercial. We also submitted bids for new Next Generation Network opportunities in New Zealand and Catalonia, Spain."

Operational Highlights

Alberta

Axia continues to experience demand for its high availability Real Broadband(TM) services as its customers' needs evolve. The Alberta SuperNet's provincewide footprint enables Axia services to be offered in each community and forms a foundation for its customers to make investments in assets and technology that enable end users to participate in the digital revolution. Axia is working with the Government of Alberta (GoA) to leverage the Alberta SuperNet to enable the GoA to take advantage of Software as a Service and Cloud Computing services. This new approach increases ICT-based services and can be delivered for less cost.

Even though both the Alberta industry and GoA were generally reducing expenditures in the third quarter, Axia continues to experience modest growth in demand for its Real Broadband(TM) services. Other Services activities in Alberta were up in the third quarter of fiscal 2010 primarily due to new government customers being connected to the Alberta SuperNet. The Alberta SuperNet value proposition of high performance for low cost is aligned with businesses that focus on productivity and cost efficiency.

France

Covage's network deployment schedule and initial market adoption remain on track in France. Covage now has 1,089 broadband connections. Total bandwidth grew to 67.6 Gbps at the end of March 2010 as compared to 49.0 Gbps at the end of December 2009. Covage continues to activate customer connections on the national backbone and on newly operational segments like Sem@for77 and Hérault. Covage is finding that demand from enterprise customers is strong as its fibre networks enable multiple applications like hosting and data sharing, VoIP, videoconferencing and telecommuting that give end users a competitive advantage in their own businesses.

Covage's addressable market is approximately 34,000 sites as at March 31, 2010 with a market penetration estimated at 3.9% and during the third quarter, its Broadband Services revenue covered its operating costs. Its objective is to increase its addressable market share to 5% by the end of calendar 2010. At an addressable market share of 15% Covage is expected to earn approximately a 20% return before tax on its net capital investment. Axia believes that Covage has achieved the critical mass required to be successful in its markets. Axia also believes that Covage is strategically positioned to align with France's public policy in respect of additional fibre deployment in France.

Singapore

Axia owns a 30% equity investment in OpenNet which is responsible for providing passive fibre services to every premise in Singapore on Singapore's Next Generation National Broadband Network (NGNBN).

OpenNet is licensed by the Infocomm Development Authority of Singapore (IDA) to provide passive fibre-based services for an initial standard term of 25 years. Construction of the passive infrastructure of the NGNBN has been under way since the summer of 2009 and is on schedule. Completion is planned by mid 2012. Currently, construction to 30% of premises has been completed. On April 28, 2010 OpenNet announced the commencement of commercial operations and is now able to sell services to parties qualified by the IDA on the portion of the network that is complete. OpenNet owns the only Fibre to the Premise (FTTP) grid that is organized to provide passive fibre-based services to essentially every residential and commercial premise in Singapore. OpenNet's business is providing these passive services on an open access level playing field basis to retail service providers. OpenNet's prices and services are targeted at making OpenNet's fibre grid the preferred fixed wireline network in Singapore.

The Singapore solution is the first comprehensive metropolitan FTTP deployment in the world and will demonstrate that compelling prices, performance and choice can be achieved by employing the elements of Axia's NGN Solution. Singapore has set a new standard for digital infrastructure. Now, Axia has proven that its approach to implementing Next Generation Networks meets visionary public interest requirements and provides compelling value and performance in a modern metropolitan city.

New Opportunities

At the end of January 2010, Axia responded to the New Zealand Government's Ultra-Fast Broadband Initiative - Invitation to Participate in the Partner Selection Process (UFB Initiative). The new Crown-owned investment firm, Crown Fibre Holdings Ltd., which was created to manage the New Zealand Government's investment in the UFB Initiative, is currently in the process of short-listing the proposals it has received. On May 9, 2010 Axia announced it had formed an alliance with Vodafone New Zealand (Vodafone) to deliver the solution to the UFB Initiative. Axia's focus on NGN solutions is fully compatible with Vodafone's key strategies in mobility and retail services that will leverage Axia's fibre solution.

On February 16, 2010, the Government of Catalonia (GoC) in Spain issued a tender for the "Xarxa Oberta Project" (meaning the Open Network Project). The objective is to deploy fibre network infrastructure throughout Catalonia that interconnects all of the 946 municipalities of Catalonia. The municipalities have an estimated 5,843 government locations and approximately 7.0 million inhabitants. Axia has submitted its initial response and is currently engaged in the competitive dialogue process. The GoC has stated they intend to make a final decision in the summer of 2010.

Axia continues to evaluate potential opportunities in Asia, Europe and North America.

Q3FY10 Consolidated Financial Information

Consolidated revenue for the quarter was $17.6 million, an increase of $1.1 million or 7% from $16.4 million for the prior quarter. Compared to the same nine month period last year, consolidated revenue decreased $2.3 million or 4% from $52.6 million as a result of a decrease in Other Services revenue. Consolidated gross profit for the quarter was $6.2 million or 36% of revenue which is an increase of $0.6 million or 10% as compared to $5.6 million or 34% of revenue for the prior quarter. As compared to the same nine month period last year, gross profit decreased by $3.3 million or 15% to $18.5 million or 37% of revenue.

Net income for the current quarter was $0.4 million ($0.01 per fully diluted share) as compared to $0.1 million ($0.00 per fully diluted share) for the previous quarter. The net income for the nine month period was $1.5 million ($0.02 per fully diluted share) compared to $5.6 million ($0.08 per fully diluted share) for the same period of the prior year.

As at March 31, 2010, Axia's working capital was $19.3 million as compared to $11.5 million at June 30, 2009. This net increase of $7.8 million is the net result of the following: (i) an increase in working capital as a result of the planned dispositions of a portion of the Corporation's interests in private broadband network companies to an institution in France; (ii) a decrease in working capital as a result of continued network construction in France and in funding the capital requirements of OpenNet in Singapore; and (iii) cash provided by operating activities. As at March 31, 2010, Axia had $25.7 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 governments and as a result, the related public policy and telecom regulation is being reviewed and adjusted to enable deployment of this critical infrastructure. We will continue to invest business development funds to investigate and assess the best available opportunities globally. Axia's management and the Board of Directors (Board) assess the attractiveness of each new opportunity, including the value of momentum and market position, and consider the need for any additional capital required and the cost of such capital from all available sources.

Axia intends to maintain its strong balance sheet approach. Management and the Board will consider all of these factors as it seeks the path that it believes will maximize longer-term shareholder value.

Conference Call Scheduled

A conference call for the investment community will be held Tuesday, May 11, 2010 at 3 p.m. (Eastern) and 1 p.m. (Mountain). Axia Chairman and CEO Art Price, Axia Canada President and Executive Vice-President Murray Sigler, and Chief Financial Officer Peter McKeown 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=3059980

A replay of the conference call will be available at (416) 849-0833 or 1-800-642-1687, passcode 72394050 from 6 p.m. (ET) Tuesday, May 11, 2010 to midnight (ET) Tuesday, May 18, 2010, or through the webcast archives at http://www.newswire.ca.

About Axia

The unaudited Consolidated Financial Statements for the quarter ended March 31, 2010 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 also posted at www.axia.com.

Axia sells Real Broadband(TM) and passive services on Next Generation Networks that have implemented the Axia NGN Solution. The Axia NGN Solution has been implemented 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 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.

    
    CONSOLIDATED BALANCE SHEETS

    (unaudited)                                          March 31,   June 30,
    (000s)                                                   2010       2009
    -------------------------------------------------------------------------
    Assets
    Current assets:
      Cash                                              $  12,100  $  10,040
      Short-term investments                               13,582     14,266
      Restricted short-term investments                     4,547      4,014
      Accounts receivable                                  16,995     28,083
      Prepaid expenses                                      2,798      2,038
    -------------------------------------------------------------------------
                                                           50,022     58,441

    Investment under equity accounting                      4,963      3,798
    Restricted long-term investments                        2,862      2,915
    Property and equipment                                 63,604     69,041
    Intangible assets                                       6,365      8,459
    Goodwill                                                4,201      4,201
    Other assets                                            1,243      1,299
    Future income tax asset                                 5,610      5,147
    -------------------------------------------------------------------------
                                                        $ 138,870  $ 153,301
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities          $  27,222  $  37,453
      Income taxes payable                                    599      4,479
      Current portion of deferred revenue                   2,068      4,962
      Current portion of long-term debt                       793          -
    -------------------------------------------------------------------------
                                                           30,682     46,894

    Deferred revenue                                        7,203      5,041
    Long-term debt                                          7,910          -

    Shareholders' equity:
      Share capital                                        48,231     48,111
      Contributed surplus                                   4,581      3,741

      Retained earnings                                    46,428     44,972
      Accumulated other comprehensive income
        Unrealized gain on short-term investments              51         76
        Unrealized gain (loss) on translation
         of foreign operations                             (6,216)     4,466
    -------------------------------------------------------------------------
                                                           40,263     49,514
    -------------------------------------------------------------------------
                                                           93,075    101,366
    -------------------------------------------------------------------------
                                                        $ 138,870  $ 153,301
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

    For the three and nine months ended March 31, 2010 and 2009 (unaudited)

                                         Three Months          Nine Months
    (000s except per share amounts)    2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue                       $  17,555  $  17,846  $  50,230  $  52,570
    Cost of products and
     services sold                   11,319     11,466     31,764     30,801
    -------------------------------------------------------------------------
    Gross profit                      6,236      6,380     18,466     21,769
    Expenses
      Marketing                         292        333      1,001        928
      Administration                  1,397      1,214      4,164      3,421
      Business development            1,555      2,108      3,562      6,101
      Stock-based compensation          322        235        885        609
      Net interest and financing
       charges (income)                 102       (386)        62     (1,407)
      Depreciation and
       amortization                   2,028      1,751      6,893      4,099
    -------------------------------------------------------------------------
                                      5,696      5,255     16,567     13,751
    -------------------------------------------------------------------------
    Income before the following         540      1,125      1,899      8,018
      Share of income (loss) of
       equity investment                (17)       (84)      (127)      (320)
      Gain on disposal of
       investment                       143          3        676        374
    -------------------------------------------------------------------------
    Income before income tax            666      1,044      2,448      8,072
      Current income tax                645      1,063      2,460      3,680
      Future income tax (reduction)    (367)      (677)    (1,468)      (938)
    -------------------------------------------------------------------------
                                        278        386        992      2,742
    -------------------------------------------------------------------------
    Net income before
     non-controlling interest           388        658      1,456      5,330
      Net loss attributable to
       non-controlling interest           -          2          -        244
    -------------------------------------------------------------------------
    Net income                          388        660      1,456      5,574
    Retained earnings,
     beginning of period             46,040     43,900     44,972     38,986
    -------------------------------------------------------------------------
    Retained earnings,
     end of period                $  46,428  $  44,560  $  46,428  $  44,560
    -------------------------------------------------------------------------

    Net income per share
      Basic                       $    0.01  $    0.01  $    0.02  $    0.09
      Diluted                     $    0.01  $    0.01  $    0.02  $    0.08
    -------------------------------------------------------------------------

    Weighted average shares
     outstanding
      Basic                          63,758     63,593     63,740     63,593
      Diluted                        63,758     64,280     63,740     65,645
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    For the three and nine months ended March 31, 2010 and 2009 (unaudited)

    (000s)                             2010       2009       2010       2009
    -------------------------------------------------------------------------
    Net income                    $     388  $     660  $   1,456  $   5,574
    Other comprehensive income,
     net of income tax:
      Unrealized gain (loss) on
       short-term investments           (23)       (31)       (46)      (265)
      Transfer gain on sale of
       short-term investments             -          -         21        205
      Unrealized gain (loss) on
       translation of foreign
       operations                    (5,106)    (1,479)   (10,682)     3,289
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss)                   (5,129)    (1,510)   (10,707)     3,229
    -------------------------------------------------------------------------
    Comprehensive income (loss)   $  (4,741) $    (850) $  (9,251) $   8,803
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the three and nine months ended March 31, 2010 and 2009 (unaudited)

                                         Three Months          Nine Months
    (000s)                             2010       2009       2010       2009
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities:
      Net income                  $     388  $     660  $   1,456  $   5,574
      Items not involving cash
        Depreciation and
         amortization                 2,028      1,751      6,893      4,099
        Future income tax
         (reduction)                   (367)      (677)    (1,468)      (938)
        Share of loss of equity
         investment                      17         84        127        320
        Gain on disposal of
         investments                   (143)        (3)      (676)      (374)
        Non-controlling interest          -         (2)         -       (244)
        Stock-based compensation        322        235        885        609
    -------------------------------------------------------------------------
                                      2,245      2,048      7,217      9,046

    Changes in non-cash
     working capital items           (1,672)        96        766        803
    -------------------------------------------------------------------------
                                        573      2,144      7,983      9,849
    Financing activities:
      Issue of common shares              -         15         75         15
      Increase in bank loan           1,356          -      9,503          -
    -------------------------------------------------------------------------
                                      1,356         15      9,578         15
    Investing activities:
      Decrease (increase) in
       short-term investments         7,900     (6,129)    (1,042)     5,242
      Decrease (increase) in
       restricted investments          (819)     9,280       (722)     2,725
      Business combinations               -          -          -     (2,377)
      Reduction in advance to
       joint venture                      -          -          -      1,773
      Increase in equity
       investment                         -       (541)    (1,611)      (780)
      Purchase of property
       and equipment                 (5,709)   (10,796)   (19,831)   (18,435)
      Purchase of property and
       equipment included in
       accounts payable              (2,517)     6,047     (1,074)     3,512
      Disposal of investment          1,835          -      9,394      3,543
    -------------------------------------------------------------------------
                                        690     (2,139)   (14,886)    (4,797)
    -------------------------------------------------------------------------
    Effect of currency
     translation on cash balances      (328)      (111)      (615)       608
    -------------------------------------------------------------------------
    Increase in cash                  2,291        (91)     2,060      5,675
    Cash, beginning of period         9,809      7,976     10,040      2,210
    -------------------------------------------------------------------------
    Cash, end of period           $  12,100  $   7,885  $  12,100  $   7,885
    -------------------------------------------------------------------------
    

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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