WellPoint Systems reports record 2009 first quarter revenue and EBITDA



    CALGARY, April 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
ended March 31, 2009. All monetary values are in Canadian dollars unless
otherwise indicated.

    
    First Quarter Financial Highlights

    -------------------------------------------------------------------------
                                                         $ Change   % Change
                                                             2008       2008
    In thousands (CDN$)                2009       2008     - 2009     - 2009
    -------------------          --------------------------------------------

    Revenue                          10,384      9,520        864       9.1%
    Gross Profit                      7,059      5,393      1,666      30.9%
    Adjusted EBITDA                   2,588       (436)     3,024     693.6%

    Cash on hand                      1,462        406      1,056     260.1%
    -------------------------------------------------------------------------

    First Quarter 2009 Highlights

    -   Increased total revenue by 9.1% to $10.4 million, compared with
        $9.5 million in 2008;

    -   Generated $2.6 million of Adjusted EBITDA compared to an Adjusted
        EBITDA loss of ($0.4) million in 2008;

    -   Delivered US$1.0 million of the previously announced license sale to
        WellPoint's new Middle Eastern channel partner, QMENA for WellPoint's
        Microsoft Dynamics AX solutions;

    -   Increased non-Canadian revenue by $0.9 million to $8.5 million from
        $7.6 million in 2008;

    -   Increased the Company's cash balance by $1.1 million and decreased
        working capital deficiency by $1.5 million;

    -   Increased customer base by eight customers;

    -   Added additional licenses to twenty-four current customers; and

    -   Released WellPoint Integrated Suite (WIS) 5.0, an oil and gas
        software application suite powered by Microsoft Dynamics AX 2009.
    

    "The improved results we achieved in the first quarter reflect early
progress against our long-term strategy to deliver sustained growth with
profitability," said Mr. Richard Slack, CEO and President of WellPoint
Systems. "Although the ongoing economic downturn has presented unique
challenges, we are confident that we have taken the necessary steps to build
sustainable growth and profitability going forward. Many of the initiatives
that we undertook in late 2008 and early 2009, designed to reduce costs and
drive efficiencies, are only now beginning to bear fruit. We managed to do
this while keeping much of our team intact and are particularly thankful to
our dedicated employees who have contributed greatly in delivering these
positive results."

    First Quarter Financial Review

    Overall revenues for the first quarter of 2009 increased by $0.9 million
as compared with the first quarter of 2008. License revenue increased to $3.4
million from $3.0 million in 2008. License revenue for 2009 includes $1.2
million of revenue from the Company's previously announced license sale to
QMENA. License revenue for 2008 includes $0.7 million of license revenue for
BOLO which was carried over from 2007 due to the application of certain GAAP
revenue recognition principals. If the effect of both the 2007 revenue
carryover to 2008 and the 2009 QMENA revenue are factored out, license revenue
for 2009 was relatively flat as compared to 2008. This is meaningful given the
current general economic climate. Maintenance revenue grew to $3.1 million in
2009 from $2.4 million in 2008, an increase of 32.1%, due to growth in the
Company's customer base. WellPoint now provides maintenance to 433 customers
worldwide and continues to achieve maintenance and support customer retention
rates of approximately 99%. Professional services revenue decreased by $0.4
million in the first quarter of 2009 as compared with the same period of the
prior year. Demand for professional services is significantly affected by the
Company's license sales. During the fourth quarter of 2008 the Company
experienced weak license sales which had a negative impact on the Company's
first quarter professional services revenue. In the first quarter of 2008, the
Company was working on a large implementation in South America. This
implementation was predominately complete in the third quarter of 2008 which
also contributed to the drop in the 2009 first quarter professional services
revenue. Further impacting the professional services revenue is the continued
instability in general economic climate with customers choosing to preserve
cash and defer implementations and software enhancements until conditions
improve.
    Revenue from outside of Canada increased to $8.5 million in the first
quarter of 2009 from $7.6 million in 2008. This was primarily due to the
completion of the $1.2 million license sale to QMENA.
    Gross profit was $7.1 million (68% of total revenue) compared with $5.4
million (56.7% of total revenue) for the first quarter of 2008. The $1.7
million (30.9%) increase in gross profit is attributed primarily to the
Company's revenue mix. During the first quarter of 2009 compared with the same
period of the prior year, the Company increased its sales of higher margin
license and maintenance revenue by $1.2 million and decreased its lower margin
professional services revenue by $0.3 million. This shift in revenue mix
resulted in an increase in both gross profit and gross margin.
    SG&A decreased to $2.6 million (25.4% of revenue) compared with $3.3
million (34.4% of revenue) in the first quarter of 2008. The decrease in SG&A
costs is a result of various cost reduction efforts implemented during the
latter half of 2008. Further, due to the negative general economic climate,
the Company took additional steps in 2009 to reduce SG&A expenses by rolling
back salaries at its North American operations by 10%. Further impacting the
comparison between the Company's 2008 and 2009 SG&A costs is the decision by
the Company to stop capitalizing research and development costs in 2009. In
2008 a portion of the Company's SG&A costs were allocated to research and
development and capitalized. Had these costs not been capitalized in 2008, the
comparative change in SG&A would have been even greater.
    Facilities expenses decreased to $0.38 million compared with $0.44
million in the first quarter of 2008. The decrease primarily relates to
consolidation of the Company's offices in Calgary.
    In 2009, the Company incurred research and development expenses of $1.5
million (14.2% of revenue) compared with $1.0 million (10.8% of revenue) for
the comparable period in 2008. The increase in current research and
development is related to a decision to stop capitalizing research and
development expenses as they no longer meet the criteria for capitalization.
When compared with development expenditures capitalized in the 2008, the
Company's investment in research and development appears to have decreased by
$0.7 million. However, this decrease is primarily attributable to various cost
reduction efforts implemented during the latter half of 2008. Further, due to
the negative general economic climate, the Company took additional steps in
2009 to reduce research and development expenses by rolling back salaries at
its North American operations by 10%. In 2008 a portion of the Company's SG&A
costs were allocated to research and development and capitalized. Had these
costs not been capitalized in 2008, the comparative change in research and
development costs would have been significantly smaller. For greater clarity,
the Company is continuing to invest in research and development projects with
the same vigor as in 2008, however the reduction in the current year
expenditure is related entirely to cost optimizations and a reallocation of
costs between research and development expenditures and SG&A (please see SG&A
section above).
    WellPoint Systems is committed to enhancing its position as a leading
provider of software and related solutions within the energy and natural
resources industries. The Company will increase its investment in the
development of new and innovative products utilizing the Microsoft AX Dynamics
architecture. This investment is a fundamental requirement as WellPoint
Systems continues to build products that meet the needs of its customers.
    Depreciation and amortization expenses decreased to $0.9 million compared
with $1.2 million for the first quarter of 2008. The decrease primarily
relates to the Company's decision to write-off a significant portion of its
deferred development costs in the third quarter of 2008. Since these costs
have been written off, there is no longer a requirement to amortize the
expenses.
    Interest expenses increased to $1.4 million as compared with $0.9 million
for the first quarter of 2008. The increase primarily stems from the new
financings in 2008. As at March 31, 2009, the Company had notes payable,
capital leases and convertible debt with a carrying value of approximately
$35.6 million with an effective annual interest rate of approximately 16.0%
    Most of the Company's businesses are organized geographically so that
many expenses are incurred in the same currency as the revenue generated,
which mitigates some exposure to currency fluctuations. Following the
acquisition of BOLO in 2007, the Company significantly increased its net
liabilities denominated in United States dollars in connection with notes
payable issued in connection with the acquisition along with US convertible
debentures needed to complete the acquisition. The Company has not entered
into any forward hedging contracts and therefore experiences gains and losses
relating to foreign exchange. The loss for the three months ended March 31,
2009 was $0.8 million (2007 - $0.5 million).
    For the first quarter of 2008 the tax recovery was $0.1 million compared
with a tax recovery of $0.4 million in the same period of the prior year. The
tax recovery is primarily as a result of the Company's operations in the US.
    Due to the factors discussed above, the net loss for the first quarter of
2009 was $0.5 million compared with a net loss of $2.3 million for the first
quarter of 2008. Basic and diluted net loss per share was ($0.01) compared
with a net loss per share of ($0.5) for the first quarter of 2008.
    Adjusted EBITDA was $2.6 million compared to an Adjusted EBITDA loss of
($0.5) million for the first quarter of 2008. The $3.1 million increase in
Adjusted EBITDA was the result of the $1.7 million increase in gross profit
and reduced operating costs as discussed above.

    Outlook

    During 2008, the Company has invested significant capital and management
resources to integrate the BOLO and iSoft acquisitions into WellPoint Systems.
In 2009, with the acquisitions now in place, the Company will focus on
increasing its net income and Adjusted EBITDA 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 2009, the
        Company particularly intends to focus its activities on increasing
        market share and driving revenue from opportunities primarily in the
        North American and Middle Eastern markets;

    -   Increasing sales and marketing of WellPoint Energy Broker in the
        North American and Middle Eastern markets and WellPoint EAM and
        WellPoint EFM solutions worldwide;

    -   Continuing development and marketing of BOLO and Ideas to increase
        market share;

    -   Continuing development of the WellPoint EAM, WellPoint EFM, and
        WellPoint Energy Broker solutions to expand functionality and better
        conform with best practices in the computer software industry; and

    -   Increasing operational efficiencies.
    

    In the first quarter of 2009, the Company recorded US$1.0 million in
revenue from the agreement the Company signed on December 24, 2008 with Quorum
MENA Limited ("QMENA"), for a license sale of US$2.0 million. The Company will
record the balance of the revenue in the second quarter of 2009.
    Although the Company anticipates it will continue to post net losses in
2009, the Company anticipates posting improved Adjusted EBITDA. The Company
will be in a net loss position primarily as a result of non-cash interest
accretion on its convertible debentures. As such, investors may choose to use
Adjusted EBITDA as an indicator of future earning potential and value.
    The information contained in this news release is in summary form and
should be read in conjunction with the Company's audited consolidated
financial statements and Management's Discussion and Analysis for the year
ended December 31, 2008 and quarter ended March 31, 2009. 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.
    Adjusted EBITDA is Standardized EBITDA(1), excluding foreign exchange
    gains primarily related to the US dollar denominated debt of the Company
    and can vary significantly depending on exchange rate fluctuations, which
    are beyond the control of the Company, and write downs of deferred
    development and intangible costs, goodwill impairment, financing costs,
    stock based compensation, fees and expenses on settlement of debt and
    losses on extinguishment of debt and after deducting the annual amount
    invested in respect of deferred development costs, which, with the
    implementation of International Financial Reporting Standards in the year
    ended December 31, 2011, will generally be required to be expensed on an
    annual basis.

    (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 provides premier software and related services for managing
critical operations within the energy industry. As a Microsoft Gold Certified
Partner since 2005, 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 also
provides software and services under the BOLO, IDEAS International and iSoft
brands.
    Founded in 1997, Calgary-based WellPoint Systems also has major
operations in Denver, CO, Houston, TX, Livingston, NJ, Tampa, FL, Tunis,
Tunisia and Pretoria, South Africa. 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 (Unaudited)
    -------------------------------------------------------------------------
                                                     March 31    December 31
                                                         2009           2008
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Cash                                       $  1,462,493   $    405,931
      Accounts receivable                           3,886,491      3,531,851
      Prepaid expenses                                965,276        745,862
      -----------------------------------------------------------------------
                                                    6,314,260      4,683,644
    Property and equipment                          1,113,239      1,106,449
    Deferred development costs                      2,084,922      2,118,586
    Intangible assets                              15,239,775     15,383,723
    Goodwill                                       25,310,992     24,442,074
    Future income taxes                               256,715        131,656
    -------------------------------------------------------------------------
                                                 $ 50,319,903   $ 47,866,132
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities   $  6,089,885   $  5,717,886
      Current income tax liability                          -        106,096
      Deferred revenue                              4,672,076      4,876,343
      Other deferred credits                           54,558         54,558
      Current portion of long term notes payable      102,079         98,574
      Current portion of capital lease obligations     48,601         45,791
      Convertible debentures                        1,414,627      1,358,019
     ------------------------------------------------------------------------
                                                   12,381,826     12,257,267
    Long term notes payable                         6,219,839      6,004,527
    Capital lease obligations                          47,281         57,829
    Other deferred credits                             63,652         77,292
    Convertible debentures                         27,798,982     26,476,034
    -------------------------------------------------------------------------
                                                   46,511,580     44,872,949
    Shareholders' equity:
      Share capital                                14,497,433     14,497,433
      Contributed surplus                           1,644,783      1,624,415
      Convertible debentures                        8,995,967      8,995,967

      Accumulated other comprehensive income        5,067,825      3,744,213
      Deficit                                     (26,397,685)   (25,868,845)
    -------------------------------------------------------------------------
                                                  (21,329,860)   (22,124,632)
    -------------------------------------------------------------------------
      Total shareholders' equity                    3,808,323      2,993,183

                                                 $ 50,319,903   $ 47,866,132
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    WELLPOINT SYSTEMS INC.
    Consolidated Statements of Operations and Deficit (unaudited)

    For the three months ended March 31

    -------------------------------------------------------------------------
                                                         2009           2008
    -------------------------------------------------------------------------

    Revenue:
      License                                    $  3,401,593   $  2,959,771
      Maintenance                                   3,120,850      2,363,293
      Professional services                         3,861,168      4,197,174
    -------------------------------------------------------------------------
                                                   10,383,611      9,520,238

    Direct costs                                    3,324,085      4,127,573
    -------------------------------------------------------------------------
    Gross margin                                    7,059,526      5,392,665

    Expenses:
      Sales, general and administrative             2,638,779      3,273,982
      Research and development                      1,476,487      1,024,527
      Interest                                      1,449,100        931,521
      Depreciation and amortization                   885,232      1,150,363
      Foreign exchange loss                           806,900        545,394
      Facilities                                      375,807        436,830
      Financing and amortization of debt and
       note payable issue costs                        81,120         93,061
      Fees and expenses on settlement of long term
       note payable                                         -        614,505
      -----------------------------------------------------------------------
                                                    7,713,425      8,070,183
    -------------------------------------------------------------------------
    Loss before income taxes                         (653,899)    (2,677,518)
    -------------------------------------------------------------------------

    Income taxes
      Future expense (reduction)                     (125,059)      (371,496)
    -------------------------------------------------------------------------
    Net loss                                         (528,840)    (2,306,022)

    Deficit, beginning of year                    (25,868,845)    (3,865,985)

    -------------------------------------------------------------------------
    Deficit, end of year                         $(26,397,685)  $ (6,172,007)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share, basic and diluted            $      (0.01)  $      (0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Richard Slack, President and Chief Executive
Officer, (303) 987-2238, rick.slack@wellpointsystems.com; Bharat Mahajan, CA,
Chief Financial Officer, (403) 444-3916, bharat.mahajan@wellpointsystems.com

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WELLPOINT SYSTEMS INC.

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