WellPoint Systems Reports 2008 Second Quarter Results



    CALGARY, Aug. 27 /CNW/ - WellPoint Systems Inc., ("WellPoint" or the
"Company") (TSX-V:WPS), a leading provider of software and related solutions
to the energy industry, today announced its financial results for the quarter
and six months ended June 30, 2008. All monetary values are in Canadian
dollars unless otherwise indicated.

    
    Second Quarter Highlights

    -   Increased total revenue by 8.6% to $10.3 million compared with
        $9.5 million in the second quarter of 2007. Considering that 2007
        second quarter revenue included a multimillion dollar South American
        contract, the 2008 sales increase is an even more significant
        achievement;
    -   Increased non-Canadian revenue by $1.1 million to $7.9 million from,
        $6.8 million in the second quarter of 2007. This was primarily due to
        the Bolo acquisition in August 2007;
    -   Implemented several key management changes, including the promotion
        of Mr. Richard Slack, the former head of Bolo to the position of
        Chief Operating Officer of WellPoint. Mr. Slack brings a proven
        ability to operate a growing and profitable software company to his
        position;
    -   Brought to market its complete end to end business solution in Energy
        Broker. The product is currently being implemented at a key
        lighthouse customer;
    -   Finished the integration of two of WellPoint's major Microsoft AX
        products on a single platform; and
    -   Completed several major implementation projects for the Company's
        Microsoft Dynamics AX products and Bolo Products at key customer
        sites in Calgary and Houston.
    

    "We have in the last few months promoted from within, a new management
team focused on integrating the operations of our recent acquisitions and
delivering strong profitable growth," said Mr. Frank Stanford, Chief Executive
Officer of WellPoint. "The management team's new initiatives are designed to
manage costs, realize synergies with acquired businesses and drive
efficiencies. We anticipate seeing a significant improvement in our results
over the next two quarters."

    Financial Review

    Revenue increased by 8.6% to $10.3 million in the second quarter of 2008
compared with $9.5 million in the same quarter in 2007. Revenues increased by
37.6% to $19.8 million in the first half of 2008 as compared with
$14.4 million in the same period in 2007. The increase was primarily the
result of BOLO revenue of $5.8 million in the second quarter and $11.3 million
in the first half of 2008. Revenues in the quarter ended June 30, 2007
included a large license sale to a South American customer which accounted for
a significant portion of the second quarter 2007 revenue. The Company had
signed a contract for a large license sale with a key customer in South
America in the first half of 2008. The Company had anticipated collecting on
this contract and thus being able to record the revenue and associated EBITDA
earlier this year. This license sale would have significantly increased
revenue and EBITDA. However, due to customer payment delays, the Company has
been unable to recognize this revenue under Canadian GAAP. The Company
continues to work with its client and anticipates that it will be able to
collect and recognize this revenue.
    Revenue from outside of Canada increased to $7.9 million in the first
quarter of 2008 from $6.8 million in 2007. This was primarily due to growth in
US revenue following the 2007 acquisition of BOLO. Revenue from outside of
Canada increased to $15.5 million in the first half of 2008 from $8.8 million
in 2007. This increase would have been even more substantial if not for the
large license sale recognized in South America in the second quarter of 2007.
    License revenue in the second quarter decreased to $3.0 million from $5.9
 million in 2007. For the year to date period, license revenue decreased to
$5.9 million from $7.4 million in 2007. The decreases are due to the
substantial license revenue recognized in South America in the second quarter
of 2007, which did not recur this year. Partially offsetting this is the
$1.9 million of license revenue attributed to BOLO in the quarter (2007 - nil)
and $4.0 million for the first six months of 2008. Maintenance revenue
increased to $2.3 million in the second quarter of 2008 from $1.1 million in
2007, an increase of 104.6%, with $1.1 million of the increase attributed to
BOLO. For the year to date period, maintenance revenue increased to
$4.7 million in 2008 from $2.6 million in 2007, an increase of 77.5%, with
$2.1 million of the increase attributed to BOLO. WellPoint now provides
maintenance to 385 customers worldwide and continue to achieve maintenance and
support customer retention rates of approximately 98%. Revenue from
professional services increased to $4.9 million from $2.4 million in 2007, an
increase of 106.3%. This increase in professional services revenue is
attributed entirely to Bolo. For the year to date period, revenue from
professional services increased to $9.1 million from $4.4 million in 2007, an
increase of 108.9%, with $5.3 million of the increase attributed to BOLO.
    Gross profit was $6.1 million (58.9% of total revenue) in the second
quarter of 2008 compared with $7.9 million (83.7% of total revenue) for the
second quarter of 2007. The 23.5% decrease in gross profit dollars is
attributable to and consistent with the 49.2% decrease in license revenue and
due to having attained higher margins in 2007 as a result of the large South
American contract. Gross profit for the first six months of 2008 was
$11.4 million (57.8% of total revenue) compared with $11.1 million (77.5% of
total revenue) for 2007. The $0.3 million increase in gross profit dollars is
attributable to 2007 acquisitions. However, gross profit as a percentage of
sales, decreased 19.7%. This decrease in gross profit percentage is consistent
with the 19% decrease in license revenue and due to having attained higher
margins in 2007 as a result of the large South American contract.
    Sales, general and administrative expenses in the second quarter of 2008
decreased to 40.7% of revenue compared with 50.7% of revenue in the second
quarter of 2007. The decrease primarily relates to the lower commissions and
administrative costs which were included in 2007 due to the large South
American contract, offset by higher administrative costs associated with the
Bolo business. Sales, general and administrative expenses in the first half of
2008 decreased to 37.7% of revenue compared with 47.7% of revenue in the first
six months of 2007. The decrease is also due to the reasons outlined above.
    In the second quarter of 2008, the Company incurred research and
development expenses of $1.1 million (10.5% of revenue) compared with
$0.5 million (5.2% of revenue) for the comparable period in 2007. For the
first half of 2008, the Company incurred research and development expenses of
$2.1 million (10.6% of revenue) compared with $0.9 million (6.2% of revenue)
for the comparable period in 2007. The increases are primarily related to the
research in connection with ongoing projects undertaken by the companies
acquired in 2007. When combined with capitalized development expenditures, the
Company invested $2.0 million (19.8% of revenue) in the second quarter
compared with $1.1 million (11.9% of revenue) in the second quarter of 2007,
and $4.2 million (21.2% of revenue) in the first six months of 2008 compared
with $2.0 million (13.7% of revenue) in 2007. The $0.9 million increase for
the quarter and $2.2 million increase for the year to date period are
primarily attributable to investments in WellPoint Energy Broker including its
integration with the WellPoint Energy Financial Management system, enhanced
multicurrency functionality and additional investments made by the companies
acquired in 2007, including investments in WellPoint EAM.
    Depreciation and amortization expenses increased to $1.1 million in the
second quarter compared with $0.5 million for the second quarter of 2007, and
$2.3 million for the first half of 2008 compared with $0.9 million for the
comparable period in 2007. The increase primarily relates to the amortization
of intangibles purchased as part of the acquisitions completed in 2007 and the
commencement of amortization of deferred development costs in connection with
WellPoint Energy Broker introduced in 2007.
    Due to the factors discussed above, the net loss for the second quarter
of 2008 was $2.4 million compared with net income of $0.9 million for the
second quarter of 2007. Basic and diluted net loss per share was ($0.05)
compared with earnings per share of $0.02 for the second quarter of 2007. The
net loss for the first six months of 2008 was $4.7 million compared to net
income of $0.8 million for the same period in 2007. Basic and diluted net loss
per share was ($0.10) compared to earnings per share of $0.02 for the first
half of 2007.
    Adjusted EBITDA loss for the quarter was $0.6 million compared with
Adjusted EBITDA of $1.7 for the second quarter of 2007. Adjusted EBITDA loss
for the year to date period was ($1.1) million compared with Adjusted EBITDA
of $1.7 for 2007. The loss was the result of deferred development costs for
WellPoint Energy Broker as well as additional investments in development made
in the second quarter of 2008 by the companies acquired in 2007.
    At June 30, 2008, the Company had a working capital deficiency of
$4.0 million compared with a working capital deficiency of $23.3 million at
December 31, 2007.

    Outlook

    During 2007 and in the first half of 2008, the Company invested
significant capital and management resources to complete the BOLO and iSoft
acquisitions and integrate the acquisitions into WellPoint Systems. In 2008,
with the acquisitions now in place, the Company will focus on increasing its
net income, adjusted EBITDA, and free cash flow, and expects to advance on
many fronts, through the following initiatives:

    
    -   Establishing deeper partnerships across the globe, including expanded
        and new agent relationships in international markets. In 2008, the
        Company particularly intends to focus its activities on increasing
        market share and driving revenue from opportunities primarily in the
        US and South American markets;

    -   Increasing sales and marketing of WellPoint Energy Broker in the
        North and South American markets and WellPoint EAM and WellPoint MRO
        solutions worldwide;

    -   Reducing the cost structure of the Company to improve profitability;

    -   Cross-selling the broad range of WellPoint Systems solutions within
        the existing base of customers;

    -   Continuing development of the WellPoint EAM, WellPoint MRO, and
        WellPoint Energy Broker solutions to expand functionality as well as
        integration with best practices in the computer software industry;
        and

    -   Increasing operational efficiencies to improve net income, Adjusted
        EBITDA and free cash flow.

    The information contained in this news release is in summary form and
should be read in conjunction with the Company's unaudited consolidated
financial statements and Management's Discussion and Analysis for the periods
ended June 30, 2008 and December 31, 2007. Those documents are available
through the internet on the Canadian System for Electronic Document Analysis
and Retrieval (SEDAR) which can be accessed at www.sedar.com.

    Notes

    (1) "EBITDA" is a financial measure that does not have any standardized
    meaning prescribed by Canadian generally accepted accounting principles
    ("GAAP") and may not be comparable to similar measures presented by other
    companies. EBITDA is a measure of the Company's operating profitability.
    EBITDA provides an indication of the results generated by the Company's
    principal business activities prior to how these activities are financed,
    assets are amortized or how results are taxed in various jurisdictions.
    EBITDA is calculated for the Consolidated Statements of Earnings and
    Retained Earnings and is calculated as net earnings plus or minus
    interest expense, income taxes, depreciation and amortization, foreign
    exchange gains or losses, capitalized deferred development costs,
    amortization of debt financing costs and fees expenses on settlement of
    debt.

    (2) "Gross Profit" is a financial measure that does not have any
    standardized meaning prescribed by GAAP and may not be comparable to
    similar measures presented by other companies. Gross profit is provided
    to assist investors in determining WellPoint's ability to generate
    earnings from the sales of its products and services. Gross profit is
    calculated by subtracting direct expenses from revenue.
    

    About WellPoint Systems Inc.

    WellPoint Systems provides premier software and related services for
managing critical operations within the energy industry. Aligning tightly with
Microsoft Corporation, WellPoint is the only Independent Software Vendor (ISV)
and Microsoft Dynamics partner dedicated to the energy sector. It is breaking
new ground with the creation of a more comprehensive, integrated energy
software suite based on existing Microsoft ERP technology that utilizes
state- of-the-art Dynamics AX(R) and .NET architectures. WellPoint became a
Microsoft Gold Certified Partner in 2005. Founded in 1997, Calgary-based
WellPoint Systems also has major operations in Houston, TX, Denver, CO,
Bogota, Colombia and London, England. WellPoint is publicly traded on the TSX
Venture Exchange under the symbol WPS.

    This document contains forward-looking statements. Some forward looking
statements may be identified by words like "expects", "anticipates", "plans",
"intends", "indicates" or similar expressions. The statements are not a
guarantee of future performance and are inherently subject to risks and
uncertainties. The Company's actual results could differ materially from those
currently anticipated due to a number of factors, including, but not limited
to, successful integration of structural changes, including restructuring
plans, acquisitions, technical or manufacturing or distribution issues, the
competitive environment for the Company's products, the degree of market
penetration of the Company's products, and other factors set forth in reports
and other documents filed by the Company with Canadian securities regulatory
authorities from time to time.

    
    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.



    WELLPOINT SYSTEMS INC.
    Consolidated Balance Sheets
    -------------------------------------------------------------------------
                                                        June 30  December 31
                                                           2008         2007
                                                     (Unaudited)
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Accounts receivable                           $ 6,822,131  $ 7,584,610
      Prepaid expenses                                1,486,490      273,930
      Fair value of foreign exchange risk
       management contracts                                   -      176,000
      -----------------------------------------------------------------------
                                                      8,308,621    8,034,540

    Property and equipment                            1,106,293    1,038,175
    Deferred development costs                        5,942,397    4,753,447
    Intangible assets                                15,377,180   16,599,520
    Goodwill                                         21,086,094   19,916,094
    -------------------------------------------------------------------------
                                                    $51,820,585  $50,341,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Bank indebtedness                             $ 3,190,523  $ 1,204,188
      Accounts payable and accrued liabilities        6,121,653    4,841,221
      Current income tax liability                      420,473      419,231
      Deferred revenue                                2,333,494    2,144,633
      Other deferred credits                             54,558       54,558
      Current portion of long term notes payable         80,931   15,980,281
      Convertible debentures                                  -    6,605,733
      -----------------------------------------------------------------------
                                                     12,201,632   31,249,845

    Long term notes payable                           5,009,240    4,877,299
    Other deferred credits                              104,571      131,850
    Convertible debentures                           20,671,094      377,311
    Future income tax liability                         643,984      422,079
    -------------------------------------------------------------------------
                                                     38,630,521   37,058,384

    Shareholders' equity:
      Share capital                                  14,497,433   14,497,433
      Warrants/compensation options                     457,246    1,058,050
      Contributed surplus                             1,437,898      760,828
      Convertible debentures                          5,788,923    1,222,922

      Accumulated other comprehensive loss             (428,907)    (389,856)
      Deficit                                        (8,562,529)  (3,865,985)
    -------------------------------------------------------------------------
                                                     (8,991,436)  (4,255,841)
    -------------------------------------------------------------------------
                                                     13,190,064   13,283,392

    -------------------------------------------------------------------------
                                                    $51,820,585  $50,341,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    WELLPOINT SYSTEMS INC.
    Consolidated Statements of Operations and Retained Earnings (deficit)
    (unaudited)


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              Three months ended         Six months ended
                                   June 30                   June 30
                              2008         2007         2008         2007
    -------------------------------------------------------------------------

    Revenue
      License             $ 3,012,361  $ 5,933,135  $ 5,972,132  $ 7,371,474
      Maintenance           2,334,555    1,140,602    4,697,849    2,646,741
      Professional
       services             4,921,981    2,386,258    9,119,155    4,364,831
    -------------------------------------------------------------------------
                           10,268,897    9,459,995   19,789,136   14,383,046
    -------------------------------------------------------------------------

    Direct costs            4,215,447    1,545,294    8,343,020    3,242,099
    -------------------------------------------------------------------------
    Gross profit            6,053,450    7,914,701   11,446,116   11,140,947

    Expenses:
      Sales, general and
       administrative       4,185,519    4,791,620    7,459,502    6,864,465
      Facilities              461,559      292,503      898,389      567,927
      Research and
       development          1,081,060      494,725    2,105,586      894,502
      Depreciation and
       amortization         1,143,797      476,061    2,294,160      885,021
      Financing and
       amortization of debt
       and note payable
       issue costs            160,612       32,529      253,673       54,752
      Interest                930,633      222,919    1,862,154      366,471
      Foreign exchange loss
      (gain)                 (245,789)      22,678      299,606       15,538
      Fees and expenses on
       settlement of long
       term note payable            -            -      614,505            -
      -----------------------------------------------------------------------
                            7,717,391    6,333,035   15,787,575    9,648,676
    -------------------------------------------------------------------------
    Net income before
     income taxes          (1,663,941)   1,581,666   (4,341,459)   1,492,271

    Income taxes
      Current                 133,180      543,257      133,180      543,257
      Future                  593,401      122,047      221,905      122,047
    -------------------------------------------------------------------------
                              726,581      665,304      355,085      665,304
    -------------------------------------------------------------------------
    Net income (loss)      (2,390,522)     916,362   (4,696,544)     826,967

    Retained earnings
     (deficit), beginning
     of period             (6,172,007)    (281,562)  (3,865,985)    (192,167)

    -------------------------------------------------------------------------
    Retained earnings
     (deficit), end of
     period               $(8,562,529)  $  634,800  $(8,562,529)  $  634,800
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss)
     per share
      Basic and diluted   $     (0.05)  $     0.02  $     (0.10)  $     0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Frank Stanford, Chief Executive Officer, (403)
538-3604, frank.stanford@wellpointsystems.com; Bharat Mahajan, CA, Chief
Financial Officer, (403) 444-3916, bharat.mahajan@wellpointsystems.com

Organization Profile

WELLPOINT SYSTEMS INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890