Matrikon(TM) announces fourth quarter 2007 results



    
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    Highlights
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    -  Revenue of $18.44 million in Q4-07
    -  Net loss of $0.25 million; earnings per share of ($0.01) in Q4-07
    -  Fiscal year revenue of $73.50 million
    -  Fiscal year net loss of $0.22 million or $0.01 per share
    -  Gross margin of 51% for the fourth quarter and 55% for the fiscal year
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    EDMONTON, Nov. 8 /CNW/ - Matrikon Inc. (TSX: MTK), a leading provider of
solutions for industrial intelligence, today reported financial results for
the fourth quarter of the fiscal year ended August 31, 2007.
    Matrikon's president & CEO Nizar J. Somji commented on the quarter: "In
contrast to our historic track record of growth and profitability, fiscal year
2007 has been a disappointment. Our poor performance is inexcusable given the
continued strength of our resource industry end markets and given that our
technology is becoming a necessity in our clients' businesses.
    "We undertook a thorough evaluation of the structure of our business in
order to improve operations and profitability. We began the process of
rationalizing and refocusing our business in the last half of the fiscal year.
    "The outcome of this process is a new strategy and a fundamental change
in how we are organized: the separation of our Products and our Solutions
businesses. We started this transition in the fourth quarter of the fiscal
year and we have made significant progress. The senior management team has
been restructured to put the right people in the right place to achieve our
vision. We have defined expectations and accountability for each business
unit.
    "To ensure that our products maintain their technology leadership, we are
completing a technology assessment, developing a roadmap for future product
development priorities and increasing our investment in R&D. Two of our
industry applications, Mobile Equipment Monitor and Well Performance Manager,
are gaining traction. As they do, we are increasing our investment in sales
and marketing as well as technology development to increase our market
penetration.
    "We are beginning to see incremental improvements in our expenses as a
result of some of the early steps we took to bring our cost structure into
alignment with our revenue. Excluding one time costs, operating expenses have
trended down in the last half of the fiscal year.
    "Internally, there is a renewed energy and sense of excitement for the
future. We will continue to transition over the next few months and build our
business pipeline under our new Products/Solutions model.
    "We thank our investors for their patience and understanding as we
redefine Matrikon and build for a stronger future."

    
    Quarter Highlights:

    -  We began the process of separating the products and solutions
       businesses in the fourth quarter. This transition resulted in a
       decrease in product sales while sales personnel were being refocused
       or transitioned to new positions within the company.

    -  Support revenue was a record $1.92 million in the quarter and
       consulting revenue was the second highest in a quarter period,
       although the quarter had 14% fewer consulting staff than the record
       quarter (Q4-2006). Weak software license fees and equipment revenue
       contributed to an overall decrease in revenue compared to Q3-2007 and
       Q4-2006.

    -  Gross margin was 51%, with 91% gross margin on support revenue, 37% on
       consulting revenue, 93% on software license revenue and 12% on
       equipment revenue. Gross margin was reduced by 5% in the fourth
       quarter due to provisions for bad debt of $1.00 million.

    -  Deferred revenue was $9.58 million, which includes $4.24 million in
       deferred support revenue and $5.34 million in unearned software
       license and equipment revenue. Support revenue is recognized equally
       over the life of the support contract. Software license revenue on
       multi-element arrangements is recognized as contractual obligations
       are met.

    -  Overhead expenses (excluding stock-based compensation) were 50% of
       revenue in the fourth quarter compared to 58% in the third quarter of
       2007 and 44% in the fourth quarter of fiscal 2006. Fourth quarter
       expenses included $0.20 million for one-time severance charges ($1.50
       million in Q3-2006).

    -  Cash provided by operations was $0.31 million in Q4-2007 compared to
       $0.05 million in Q3-2007.
    

    Executive Changes

    Subsequent to the quarter, Dave Shook (Matrikon's chief technology
officer) announced that he plans to take a sabbatical from Matrikon to teach
at the University of Alberta, beginning in January.
    Dr. Shook will continue to be a resource to Matrikon on a part-time
basis. Prior to his departure, he will lead the technology assessment and
product roadmap development.

    Outlook

    We are committed to separating our products and solutions businesses.
While many aspects of separating these two business units have been completed,
it may take additional time and attention to complete the transition. Through
the first half of fiscal year 2008, we will continue to ramp up and build the
business pipeline.

    
    The objectives we will report on throughout the year are as follows:

    -  Improve profitability

    -  Increase sales via Reseller Partners

    -  Increase sales volume and value of off-the-shelf products (currently
       defined as Alarm Manager, Operational Insight and MatrikonOPC)

    -  Continue to sell and deploy Industry Applications (including Mobile
       Equipment Monitor and Well Performance Manager)

    -  Develop a product roadmap to plan next generation product development.

    -  Improve employee retention
    

    Annual Results

    Full annual materials will be mailed and posted on SEDAR on or about
November 27, 2007.

    Conference Call Wednesday, November 28 at 4:00 pm Eastern

    A conference call will be held on Wednesday, November 28 at 4:00 pm
Eastern time (2:00 pm Mountain time). To participate live, call 416-644-3414
in the Toronto area and 1-800-733-7571 for all other areas.
    A replay will be available until midnight on Wednesday, December 5, 2007.
To access the playback service, please dial 416-640-1917 in Toronto or
1-877-289-8525 elsewhere, reservation number 21253211 followed by the pound
sign.
    The conference call will also be webcast and podcast at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2091760

    Non-GAAP Measures

    In this announcement, we refer to terms that are not specifically defined
in the CICA Handbook and do not have any standardized meaning prescribed by
GAAP. These non-GAAP measures may not be comparable to similar measures
presented by other companies.
    We believe that these non-GAAP measures are useful in assisting investors
in understanding components of our financial results. The non-GAAP terms that
we refer to in this analysis are defined below.
    Gross margin is our total revenue minus the cost of sales, divided by the
total revenue and is expressed as a percentage. Gross margin is used to show
the relative efficiency with which we earn revenue.

    Matrikon is a trademark or registered trademark of Matrikon Inc.


    Forward-Looking Statements

    In order to provide our investors with an understanding of our current
results and future prospects, our communications often include written or oral
forward-looking statements. This news release contains statements that are
forward-looking. These statements are made pursuant to the "safe harbor"
provisions of applicable Canadian securities legislation. These statements
represent Matrikon's intentions, plans, expectations and beliefs and are based
on our experience and our assessment of historical and future trends and the
application of key assumptions relating to future events and circumstances.
These statements may include, but are not limited to, comments about: our
objectives and priorities for 2008 and beyond, our strategies, expectations
for our financial condition, the outlook for our operations, and external
factors that may impact results, including global economies and industry
trends.
    Forward-looking statements require assumptions and involve risks and
uncertainties related to our business and the general economic environment,
many beyond our control. There is significant risk that the predictions,
forecasts, conclusions or projections we make will not prove to be accurate
and that our actual results will be materially different from the targets,
expectations, estimates or intentions expressed in the forward-looking
statements. We caution readers of this announcement not to place undue
reliance on our forward-looking statements.

    The future outcomes that relate to forward-looking statements may be
influenced by many factors, including but not limited to:

    
    -  general economic conditions in the countries in which we operate;
    -  currency fluctuations;
    -  market demand for our products and services;
    -  our ability to execute projects and deliver solutions;
    -  our ability to execute our strategic plans and to complete and
       integrate acquisitions;
    -  the degree of competition in the geographic and business areas in
       which we operate;
    -  our ability to attract and retain qualified employees and contain
       payroll costs;
    -  our ability to contain expenses;
    -  technological changes and research and development;
    -  the length of the sales cycle required to close larger solution
       contracts;
    -  availability of financial resources to carry out our strategy;
    -  our ability to protect our intellectual and intangible properties;
    -  legal claims;
    -  critical accounting estimates;
    -  the possible effects on our business of war or terrorist activities;
    -  disease or illness that affects local, national or international
       economies;
    -  and disruptions to public infrastructure, such as transportation,
       communications, power or water supply.
    

    We caution that this list is not exhaustive of all possible factors.
    Other factors could adversely affect our results. For more information,
please see the discussion on the principal risks that could affect our results
in our most recent annual report.
    When relying on forward-looking statements to make decisions with respect
to Matrikon, investors should carefully consider these factors, as well as
other uncertainties and potential events, and the inherent uncertainty of
forward-looking statements. Unless required by law, we do not undertake to
update any forward-looking statement, whether written or oral, that may be
made from time to time by the company or on its behalf.



    
    Financial Highlights

    Stated in thousands of Canadian dollars except per share amounts.


                                          Unaudited              Audited
    Condensed Consolidated             3 months ended          Year ended
    Operational Data                      August 31             August 31
                                       2007       2006       2007       2006
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    Revenue
      Consulting fees              $ 12,671   $ 12,988   $ 48,146   $ 48,770
      Software license fees           2,821      3,663     13,369     13,247
      Equipment sales                 1,020      1,043      4,599      5,802
      Extended support                1,923      1,599      7,384      6,002
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    Total revenue                    18,435     19,293     73,498     73,821

    Cost of sales                     9,074      8,603     33,302     33,291
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                                      9,361     10,690     40,196     40,530
    Expenses
      Consulting general and
       administrative                 2,111      1,785      8,107      6,749
      Sales and marketing             2,084      2,277      9,416      9,270
      Research and development        1,743      1,259      6,770      5,292
      General and administrative      2,943      2,697     12,927      8,781
      Amortization                      368        405      1,528      1,543
      Stock-based compensation          256        327      1,409        839
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    Total expenses                    9,505      8,750     40,157     32,474

    Foreign currency translation
     loss                               261         34        701        886
    Other income (expense)              (50)       (99)       647        308

    Income tax expense (recovery)
      Current                         1,735        674      1,605      2,578
      Future                         (1,945)      (360)    (1,400)      (232)
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    Net income (loss)              $   (245)  $  1,493   $   (220)  $  5,132

    Earnings (loss) per share
     - basic                       $  (0.01)  $   0.05   $  (0.01)  $   0.17
    Earnings (loss) per share
     - diluted                     $  (0.01)  $   0.04   $  (0.01)  $   0.16
    Weighted average shares
     outstanding (000s):
      Basic                          30,308     31,246     30,364     31,020
      Diluted                        31,574     33,049     31,630     32,823



                                                                Audited
    Condensed Consolidated Balance Sheet                    As at August 31
                                                             2007       2006
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    Assets
      Cash & cash equivalents                            $ 12,923   $ 18,316
      Accounts receivable                                  19,991     20,640
      Other current assets                                  9,672      7,176
      Capital Assets                                        3,179      2,515
      Goodwill                                             16,212     13,919
      Non-current future taxes                              1,206      1,293
      Intangible assets                                     1,480        615
    -------------------------------------------------------------------------
                                                         $ 64,663   $ 64,474
    -------------------------------------------------------------------------
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    Liabilities & shareholders' equity
      Deferred revenue                                      9,578      7,565
      Other liabilities                                     9,378      8,950
      Shareholders' equity                                 45,707     47,959
    -------------------------------------------------------------------------
                                                         $ 64,663   $ 64,474
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                                          Unaudited              Audited
    Condensed Consolidated Statement   3 months ended          Year ended
    of Cash Flows                         August 31             August 31
                                       2007       2006       2007       2006
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    Cash and cash equivalents,
     beginning of period           $ 12,652   $ 16,664   $ 18,316   $ 10,546
    -------------------------------------------------------------------------
      Cash provided by operating
       activities                       311      2,446      3,432      7,771
      Cash provided by (used in)
       investing activities            (241)      (165)    (5,387)      (417)
      Cash provided by (used in)
       financing activities             145       (766)    (3,441)       782
      Effect of exchange rate
       changes on cash and cash
       equivalents                       56        137          3       (366)
    -------------------------------------------------------------------------
      Change in cash and equivalents    271      1,652     (5,393)     7,770
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                   12,923     18,316     12,923     18,316
    -------------------------------------------------------------------------
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    %SEDAR: 00016228E




For further information:

For further information: Nicole Sayler, Corporate Communications &
Investor Relations, (780) 945-4010, email: nicole.sayler@matrikon.com

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