Xenos Earns $0.04 in F2009 Second Quarter



    TORONTO, May 13 /CNW/ - Xenos Group Inc. (TSX:XNS) today reported
year-over-year increases in revenues and earnings for the fiscal 2009 second
quarter financial results.
    For the three months ended March 31, 2009, Xenos revenues increased to
$4,133,000 as compared to revenues of $3,805,000 for the same period in 2008.
The second quarter of fiscal 2009 represents eleven consecutive quarters of
year-over-year revenue growth.
    Gross margin in the quarter increased to 84% as compared to 76% in the
same quarter of fiscal 2008. Gross margins benefited from an increase in Xenos
licensed product revenues in the overall revenue mix.
    Operating expenses during the quarter increased to $3,126,000 as compared
to $2,870,000 for the same period one year ago. Sales and marketing expenses
increased 17% as a result of sales force expansion and increased marketing
expenses related to the launch of Xenos Enterprise Server(TM), while general
and administrative expenses decreased by 11% under expense management and
efficiency initiatives.
    Research and development expenses in the quarter increased 14%
year-over-year to $941,000 from $822,000 as the Company continued to build out
Xenos Enterprise Server functionality in response to market requirements.
    EBITDA for the period increased 124% to $571,000, as compared to $255,000
in the same period in 2008. The increase in EBITDA resulted from an increase
in both total revenues and gross margins.
    Xenos reported fiscal second quarter net income of $344,000 or $0.04 per
share, as compared to net income of $247,000 or $0.03 per share in the second
quarter of fiscal 2008.
    For the six months ended March 31, 2009, Xenos reported revenues of
$8,292,000, EBITDA of $1,020,000 and a net loss of $33,000 or $0.00 per share,
as compared to revenues of $7,954,000, EBITDA of $979,000 and net income of
$775,000 or $0.08 per share for the first six months of fiscal 2008
respectively.
    Comparative results and revenues for the first two quarters were impacted
by the fluctuation in the value of the Canadian dollar against major trading
currencies, particularly the US dollar. Revenue generated in US dollars
represented the majority of revenues earned in the first half of the year.
Xenos incurred a foreign exchange loss of $654,000 for the first six months of
the fiscal year compared to a gain of $212,000 in the same period last year.
The recent run-up in the value of the Canadian dollar against the US dollar,
if sustained to the end of June would result in a foreign exchange gain for
the quarter, as the company currently holds forward contracts to sell US $
4,500,000 at $1.137 CAD over the next three quarters.
    At March 31, 2009, Xenos held cash of $9,734,000 or $0.97 per common
share, and does not hold significant long-term debt. This compares to
$8,115,000, or $0.81 per common share, at September 30, 2008.
    During the quarter Xenos launched Xenos OnLine(TM), a portfolio of
Software-as-a-Service (SaaS) offerings that deliver Xenos' core technology and
solutions over the internet on demand. Under the banner of Xenos OnLine, Xenos
document transformation, data transformation and ePresentment technology is
available as a service. Xenos OnLine enables organizations of any size to
benefit from our enterprise-class technology without incurring the capital
costs associated with a licensed, in-house solution.
    Xenos also began marketing Xenos DSR(TM), a high-performance document
storage reduction solution for enterprise content management (ECM). Xenos DSR
can deliver up to 90% reduction in the amount of physical storage required to
archive content-rich, customer-facing electronic documents such as monthly
statements, bills and correspondence. In large organizations with many
customers, Xenos DSR can deliver savings that amount to millions of dollars a
year. As such, it offers a way for enterprises to adopt a measureable green
strategy while drastically reducing operational costs through the elimination
of duplication in the electronic archiving process.
    "Xenos Enterprise Server is a broad and important strategic product that
supports a large number of compelling go-to-market use-cases," stated Stuart
Butts, Chairman & CEO, Xenos Group Inc. "We will continue to roll these out
over the next number of quarters. Market uptake in this challenging
environment has been gratifying and encouraging."

    
    Financial Highlights - (complete statements are attached):

    -------------------------------------------------------------------------
                                              Three Months        Six Months
    -------------------------------------------------------------------------
    Period Ended March 31,                   2009     2008     2009     2008
    (in CDN$000s except
     per share amounts)

    Sales                                   4,113    3,805    8,292    7,954
    Gross profit                            3,486    2,893    6,787    6,180
    EBITDA                                    571      255    1,020      979
    Net income (loss)                         344      247      (33)     775
    Net income per share                     0.04     0.03     0.00     0.08
    Cash & cash equivalents                 9,734    8,248
    Cash per Share                          $0.97    $0.82
    Common Shares Outstanding              10,005   10,005
    -------------------------------------------------------------------------

    See discussion of non-GAAP financial measures below.

    Conference Call Notice
    

    A conference call for shareholders, analysts and other members of the
investment community has been scheduled for May 13 at 10:00am (Eastern Time).
Stuart Butts, Chairman, President & CEO, and George Kypreos, CFO, will discuss
the financial results and provide updates on operations. To participate,
please dial 416-644-3432, or 1-800-814-4890 approximately 10 minutes before
the conference call.
    The conference can also be heard over the Internet at www.xenos.com.
    A recording of the conference call will be available through May 20.
Please dial 416-640-1917 or 1-877-289-8525 and enter the reservation number
21305782 followed by the number sign to listen to the rebroadcast. The call
will also be archived for 30 days on the Xenos web site at www.xenos.com.

    About Xenos Group Inc.

    Xenos (TSX:XNS) is the market-leading provider of high-performance
software solutions that deliver a superior Return on Information(TM) by
Streamlining Enterprise Information Supply Chains(TM). The company's
solutions, based on the scalable Xenos Enterprise Server(TM) and its
components, process, extract, transform, repurpose and personalize high
volumes of data and documents for storage, real-time access, ePresentment,
printing and delivery in numerous formats across multiple channels. By readily
repurposing, integrating with and extending the business value of existing
technology, infrastructure and business applications, Xenos solutions empower
organizations to adapt to changing market demands. They also improve
operational efficiency, enhance business processes, reduce risk for compliance
management and increase employee productivity with lowered total cost of
ownership both for the enterprise and for its customers. Xenos supports Green
IT initiatives by empowering organizations to "Reduce Reuse Recycle"
information resources.
    Xenos customers are among the largest organizations worldwide, spanning
numerous industries including financial services and insurance. Xenos has
offices in Canada, the United States, the United Kingdom and France and a
global partner network. For more information, visit www.xenos.com.

    Certain statements made in this press release are forward-looking within
the meaning of certain securities laws. Such forward-looking statements are
based on a number of assumptions and involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or developments in the Company's business or
its industry to differ materially from the anticipated results, performance,
achievements or developments expressed or implied by such forward-looking
statements. The Company urges you not to place undue reliance on these
estimates, opinions and projections. The Company assumes no obligation to
update forward-looking statements if assumptions or these plans, estimates,
opinions or projections should change.
    The Company uses financial measures including, but not limited to,
"EBITDA" to supplement its consolidated financial statements, which are
presented in accordance with GAAP. EBITDA is not a recognized measure under
GAAP and should not be construed as an alternative to net income (loss).
Xenos' method of calculating EBITDA may differ from other companies and
accordingly may not be comparable to measures used by other companies.
    Cash per share is a non-GAAP measure and is calculated by dividing the
cash and cash equivalents by the number of common shares outstanding.

    (C)2009 All rights reserved. Xenos, the Xenos logo, Xenos Enterprise
Server, Xenos ES, Xenos Integrated Document Solution, Xenos IDS, Xenos Loader,
Xenos DSR, Xenos OnLine, Xenos d2e Vision, Xenos terminalONE, Streamlining
Enterprise Information Supply Chains, and Return on Information are either
registered Trademarks or Trademarks of Xenos Group Inc. All other trademarks
and trade names are the property of their respective owners.

    
    Xenos Group Inc.
    Consolidated Statements of Operations
    (Unaudited)

                        Three Months Ended             Six Months Ended
                             March 31                      March 31
                           2009           2008           2009           2008
                  ----------------------------- -----------------------------
    Sales         $   4,133,365  $   3,804,619  $   8,292,016  $   7,953,953
    Cost of sales       647,266        912,010      1,504,910      1,773,922
                  -------------- -------------- -------------- --------------
    Gross profit      3,486,099      2,892,609      6,787,106      6,180,031
                  -------------- -------------- -------------- --------------
    Expenses
      Sales and
       marketing      1,441,459      1,227,246      2,863,113      2,418,785
      Research and
       development      941,086        822,080      1,838,571      1,601,030
      Administration
       and general      505,968        566,187      1,011,659      1,138,999
      Amortization      200,997        221,709        420,329        493,120
      Stock based
       compensation      26,294         21,871         53,489         42,438
      Interest and
       bank charges      10,690         11,394         18,923         22,935
                  -------------- -------------- -------------- --------------
                      3,126,494      2,870,487      6,206,084      5,717,307
                  -------------- -------------- -------------- --------------

    Income before
     undernoted
     items              359,605         22,122        581,022        462,724

    Interest
     and other           26,146         68,173         72,163        141,613
    Foreign
     exchange
     (loss) gain        (30,116)       164,610       (653,662)       211,698
                  -------------- -------------- -------------- --------------
                         (3,970)       232,783       (581,499)       353,311
                  -------------- -------------- -------------- --------------

    Income (loss)
     before income
     taxes              355,635        254,905           (477)       816,035

    Provision for
     income taxes        11,742          7,909         32,431         41,207
                  -------------- -------------- -------------- --------------

    Net income
     (loss)       $     343,893  $     246,996  $     (32,908) $     774,828
                  -------------- -------------- -------------- --------------

    Net income
     (loss) per
     common share
      - Basic     $        0.04  $        0.03  $           -  $        0.08
      - Diluted   $        0.04  $        0.03  $           -  $        0.08

    Weighted
     average
     number
     of shares
      - Basic                                      10,005,444      9,985,992
      - Diluted                                    10,055,836     10,093,892

    -------------------------------------------------------------------------
    Deficit,
     beginning
     of year                                    $ (35,710,117) $ (37,206,488)

    Net (loss)
     income                                           (32,908)       774,828
                                                -------------- --------------

    Deficit, end
     of period                                    (35,743,025)   (36,431,660)
                                                -------------- --------------



    Xenos Group Inc.
    Consolidated Balance Sheets
    (Unaudited)

                                                           As at
                                                   March 31     September 30
                                                       2009             2008
                                             --------------------------------
    ASSETS
      CURRENT
        Cash and cash equivalents             $   9,734,386    $   8,115,259
        Trade receivables                         2,306,009        2,471,700
        Other receivables                            29,079           23,767
        Non-hedging financial derivatives                 -           82,524
        Prepaids                                    653,959          597,052
        Income taxes recoverable                     34,737           26,766
                                              --------------   --------------
                                                 12,758,170       11,317,068
      LONG TERM
        Future income taxes                       1,218,443        1,193,086
        Capital assets                            1,019,412          998,436
        Intangibles and other assets              2,083,888        1,999,370
                                              --------------   --------------
                                                  4,321,743        4,190,892
                                              --------------   --------------

    TOTAL ASSETS                              $  17,079,913    $  15,507,960
                                              --------------   --------------
    LIABILITIES
      CURRENT
        Payables and accruals                 $   1,709,257    $   2,259,583
        Income taxes payable                        103,601           97,921
        Deferred revenue                          4,697,555        3,099,644
        Non-hedging financial derivatives           545,411                -
        Current portion - capital lease              33,862           61,170
                                              --------------   --------------
                                                  7,089,686        5,518,318
      LONG TERM
        Capital lease obligations                         -            2,543
        Deferred revenue                              6,909           14,812
        Deferred lease inducements                  116,184          125,734
                                              --------------   --------------
                                                    123,093          143,089

    TOTAL LIABILITIES                             7,212,779        5,661,407

    SHAREHOLDERS' EQUITY
        Capital stock                            45,125,209       45,125,209
        Contributed surplus                         484,950          431,461
        Deficit                                 (35,743,025)     (35,710,117)

                                              --------------   --------------
    TOTAL SHAREHOLDERS' EQUITY                    9,867,134        9,846,553
                                              --------------   --------------

    TOTAL LIABILITIES & EQUITY                $  17,079,913    $  15,507,960
                                              --------------   --------------



    Xenos Group Inc.
    Consolidated Statements of Cash Flows
    (Unaudited)

                        Three Months Ended             Six Months Ended
                             March 31                      March 31
                           2009           2008           2009           2008
                  ----------------------------- -----------------------------

    Operating
     activities
      Net income
       (loss)     $     343,893  $     246,996  $     (32,908) $     774,828
      Amortization      200,997        221,709        420,329        493,120
      Unrealized
       foreign
       exchange
       (gain) loss     (138,063)       (92,535)      (194,390)       (64,744)
      Unrealized
       (gain) loss
       on non-hedging
       financial
       derivatives      (87,144)             -        627,935              -
      Future income
       taxes             (6,502)        (7,190)       (25,357)        (5,729)
      Stock based
       compensation      26,294         21,871         53,489         42,438
      Change in
       non-cash
       working
       capital        1,212,723        828,364      1,131,313         (9,539)
                  -------------- -------------- -------------- --------------
                      1,552,198      1,219,215      1,980,411      1,230,374
                  -------------- -------------- -------------- --------------
    Financing
     activities
      Capital lease
       payments         (15,104)       (23,486)       (29,851)       (46,427)
      Proceeds on
       issue of
       shares                 -         10,650              -         93,480
                  -------------- -------------- -------------- --------------
                        (15,104)       (12,836)       (29,851)        47,053
                  -------------- -------------- -------------- --------------
    Investing
     activities
      Purchase of
       capital
       assets          (111,324)      (166,426)      (175,708)      (180,984)
      Development
       costs
       incurred        (159,176)      (198,696)      (350,115)      (270,139)
                  -------------- -------------- -------------- --------------
                       (270,500)      (365,122)      (525,823)      (451,123)
                  -------------- -------------- -------------- --------------
    Effect of
     foreign
     exchange rate
     fluctuations
     on cash and
     cash
     equivalents        138,063         92,535        194,390         64,744
                  -------------- -------------- -------------- --------------

    Net increase
     in cash and
     cash
     equivalents      1,404,657        933,792      1,619,127        891,048

    Cash and cash
     equivalents
      Beginning
       of period      8,329,729      7,314,064      8,115,259      7,356,808
                  -------------- -------------- -------------- --------------
      End of
       period     $   9,734,386  $   8,247,856  $   9,734,386  $   8,247,856
                  -------------- -------------- -------------- --------------
    

    %SEDAR: 00012375E




For further information:

For further information: Editorial Contact: George Kypreos, Xenos Group
Inc., (905) 709-1020, gkypreos@xenos.com; Investor Relations Contact: Cory
Pala, Xenos Group Inc., (416) 657-2400, cpala@xenos.com

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XENOS GROUP INC.

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