Xenos Reports Continuing Improvement in Fourth Quarter



    TORONTO, Dec. 6 /CNW/ - Xenos Group Inc. (TSX: XNS), today announced its
unaudited fourth quarter and fiscal 2007 year end financial results.
    For the fourth quarter ended September 30, 2007, Xenos reported total
revenues of $3,619,000, and a net profit of $69,000 compared with revenues of
$3,327,000 and a net loss of $1,559,000 before a goodwill write down in the
fourth quarter last year. EBITDA was positive $490,000 for the quarter
compared to negative EBITDA of $622,000 for the same period last year, an
improvement of $1,112,000.
    The fourth quarter of 2007 represents the fifth consecutive quarter of
revenue growth compared with the same quarter in the prior year, and the
fourth consecutive quarterly improvement in earnings before interest, taxes,
depreciation and amortization (EBITDA), both trends that management expects to
continue into fiscal 2008.
    For the year ended September 30, 2007, Xenos reported revenues of
$15,073,000 and a net loss of $633,000 compared with revenues of $13,841,000,
and a net loss before extraordinary items of $5,594,000 in the previous year.
EBITDA for 2007, (excluding reorganization charges of $191,000) was positive
$1,335,000 compared to negative EBITDA of $3,551,000 for fiscal 2006.
    The foreign exchange loss for the 2007 fiscal year was $750,000 as
compared to a foreign exchange gain of $101,000 in the previous year. "Despite
the significant negative impact of the rise of the Canadian dollar on both our
top and bottom line, we increased revenue by 9% in the year and returned to
profitability in the fourth quarter," said George Kypreos, Vice President and
CFO.
    "We restructured in early 2007 and renewed our market focus," said Stuart
Butts, Chairman and CEO. "In addition to revenue growth and profitability,
management's focus on improving revenue-per-employee resulted in an increase
of 34% to $172,000 per employee. Our new management team launched four major
initiatives in 2007, positioning the Company for significant organic growth
over the next several years."
    Xenos innovation with two industry-leading offerings, ECM Document
Archive Migration and the Xenos Integrated Document Solution(TM) contributed
to a 27% increase in professional services revenue for the year.
    In 2008, the Company's strategic alliances with IBM and Oracle and
broadened relationship with Document Sciences Corp. are expected to contribute
significantly to revenue growth. In addition, the Xenos channel partner
program, concentrating on specific, identifiable market segments such as
enterprise content management (ECM), high-volume printing, logistics and
ports, will extend the market reach of Xenos technologies, and make a positive
contribution to results.
    "The strategic direction of our software development is driven by key
requirements from our major customers and trends in the global market for
enterprise-level information management solutions. We plan to launch our
integrated product platform, the "Xenos Enterprise Information Server(TM)"
this fiscal year. We anticipate significant revenues from this innovative
offering in fiscal 2009 and beyond," added Mr. Butts.
    "The Information Management software market is a dynamic environment,"
explained Mr. Butts. "While committed to delivering superior results from
organic growth, we continue to review strategic alternatives for our
shareholders that would enhance shareholder value."
    At September 30, 2007, Xenos held $7,357,000 in cash and short term
deposits compared to $7,308,000 at the end of 2006.
    A full update on Xenos' activities together with Management Discussion
and Analysis of the results for fiscal 2007 will be provided with the audited
financial statements filed on www.SEDAR.com later in December.

    
    Financial Highlights - (complete statements are attached):

    -------------------------------------------------------------------------
                                              Three Months     Twelve Months
    -------------------------------------------------------------------------
    Period Ended September 30,               2007     2006     2007     2006
    (in CDN$000s except per share amounts)
    Sales                                   3,619    3,327   15,073   13,841
    Gross profit                            2,974    2,716   12,254   11,449
    EBITDA                                    490     (622)   1,335   (3,551)
    Net income (loss)                          69   (7,934)    (633) (11,969)
    Net income (loss) per share              0.01    (0.79)   (0.06)   (1.20)
    Cash & short-term investments           7,357    7,308
    Cash per Share                          $0.74    $0.74
    Common Shares Outstanding               9,949    9,937
    -------------------------------------------------------------------------
    See discussion of non-GAAP financial measures below.
    

    Conference Call

    A conference call for shareholders, analysts and other members of the
investment community has been scheduled for December 7 at 10 a.m. Eastern
Time. Stuart Butts, Chairman, President and Chief Executive Officer, and
George Kypreos, Chief Financial Officer, will discuss the financial results
and provide updates on operations. To participate, please dial 416-644-3417 or
1-800-732-9307 approximately 10 minutes before the conference call.
    The conference can also be heard over the Internet at the company's
website. www.xenos.com
    A recording of the conference call will be available through December 14.
Please dial 416-640-1917 or 1-877-289-8525 and enter the reservation number
21255962, followed by the number sign, to listen to the rebroadcast. The call
will also be archived for 30 days on the Xenos website.

    About Xenos

    Xenos (TSX:XNS) high-performance software solutions streamline enterprise
information supply chains. We enable our customers to process, transform,
repurpose, personalize and deliver their data and documents when they need it,
where they need it and how they need it. Xenos extends the value of existing
IT investments, enabling organizations to increase efficiency, agility and
accountability.
    By streamlining, standardizing and automating the handling of information
on demand, our customers reduce costs while increasing a powerful competitive
advantage-adaptability. Xenos has customers worldwide in financial services,
insurance, healthcare, telecommunications, manufacturing, logistics,
transportation, retail and government sectors. Xenos sells and supports its
solutions directly from offices in Canada, the United States, the United
Kingdom and France and through 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 short term investments by the number of common shares outstanding.
    For further information, visit www.xenos.com

    (C) 2007 Xenos Group Inc. All rights reserved.


    
                               Xenos Group Inc.
                    Consolidated Statements of Operations
                                 (Unaudited)

                            Three Months Ended          Twelve Months Ended
                               September 30                September 30
                            2007          2006          2007          2006
                      --------------------------- ---------------------------

    Sales             $  3,618,799  $  3,326,628  $ 15,072,561  $ 13,840,685
    Cost of sales          644,988       610,512     2,818,726     2,391,370
                      ------------- ------------- ------------- -------------
    Gross profit         2,973,811     2,716,116    12,253,835    11,449,315
                      ------------- ------------- ------------- -------------

      Sales and
       marketing         1,156,160     2,016,387     5,597,991     9,389,786
      Research and
       development         674,833       826,419     2,931,558     3,334,990
      Administration
       and general         629,789       461,682     2,284,754     2,152,026
      Reorganization
       costs               (15,199)      444,506       190,817       444,506
      Amortization         295,614       336,155     1,167,798     1,223,131
      Stock based
       compensation         23,323        33,623       104,979       123,415
      Interest and
       bank charges         11,799         8,934        53,169        46,107
                      ------------- ------------- ------------- -------------
                         2,776,319     4,127,706    12,331,066    16,713,961
                      ------------- ------------- ------------- -------------
    Income (loss)
     before undernoted
     items                 197,492    (1,411,590)      (77,231)   (5,264,646)

    Goodwill impairment
     charge                      -    (6,375,368)            -    (6,375,368)
    Interest and other      63,543        65,164       215,207       305,252
    Foreign exchange
     (loss) gain          (199,882)       25,701      (750,312)      101,261
                      ------------- ------------- ------------- -------------
                          (136,339)   (6,284,503)     (535,105)   (5,968,855)
                      ------------- ------------- ------------- -------------

    Income (loss)
     before income
     taxes                  61,153    (7,696,093)     (612,336)  (11,233,501)

    Provision for
     income taxes           (7,516)      238,215        20,964       735,746
                      ------------- ------------- ------------- -------------

    Net income (loss) $     68,669  $ (7,934,308) $   (633,300) $(11,969,247)
                      ------------- ------------- ------------- -------------

    Net income (loss)
     per common share
      - Basic         $       0.01  $      (0.79) $      (0.06) $      (1.20)
      - Fully diluted $       0.01  $      (0.79) $      (0.06) $      (1.20)

    Weighted average
     number of shares
      - Basic                                        9,938,665     9,935,629
      - Fully diluted                                9,938,665     9,935,629



                               Xenos Group Inc.
                         Consolidated Balance Sheets
                                 (Unaudited)

                                                       As at September 30
                                                        2007        2006
                                                  ---------------------------
    ASSETS
      CURRENT
        Cash & S.T. investments                   $  7,356,808  $  7,308,177
        Trade receivables                            1,727,224     2,103,212
        Other receivables                                5,823         3,085
        Prepaids                                       735,873       689,491
        Income taxes recoverable                           561         7,204
                                                  ------------- -------------
                                                     9,826,289    10,111,169
      LONG TERM
        Future income taxes                          1,157,857     1,164,566
        Capital assets                               1,133,965     1,346,041
        Intangibles and other assets                 1,869,673     2,470,274
                                                  ------------- -------------
                                                     4,161,495     4,980,881
                                                  ------------- -------------

    TOTAL ASSETS                                  $ 13,987,784  $ 15,092,050
                                                  ------------- -------------

    LIABILITIES
      CURRENT
        Bank indebtedness                         $          -  $    500,000
        Payables & accruals                          2,082,228     2,307,340
        Income taxes payable                            15,678         8,095
        Deferred revenue                             3,420,736     3,261,751
        Current portion - capital lease                 87,277        64,893
                                                  ------------- -------------
                                                     5,605,919     6,142,079
      LONG TERM
        Capital lease obligations                       63,713        95,252
        Deferred revenue                                10,284        13,371
        Deferred lease inducements                     147,994       173,448
                                                  ------------- -------------
                                                       221,991       282,071

    TOTAL LIABILITIES                                5,827,910     6,424,150

    SHAREHOLDERS' EQUITY
      Capital stock                                 44,997,009    44,969,035
      Contributed surplus                              369,353       272,053
      Deficit                                      (37,206,488)  (36,573,188)

                                                  ------------- -------------
    TOTAL SHAREHOLDERS' EQUITY                       8,159,874     8,667,900
                                                  ------------- -------------

    TOTAL LIABILITIES & EQUITY                    $ 13,987,784  $ 15,092,050
                                                  ------------- -------------



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

                            Three Months Ended          Twelve Months Ended
                               September 30                September 30
                            2007          2006          2007          2006
                      --------------------------- ---------------------------

    Operating
     activities
      Net income
       (loss)         $     68,669  $ (7,934,308) $   (633,300) $(11,969,247)
      Amortization         295,614       336,155     1,167,798     1,223,131
      Loss on sale of
       capital assets        1,914            98        69,989         3,423
      Future income
       taxes                  (500)      240,828         6,709       691,297
      Stock based
       compensation         23,323        33,623       104,979       123,415
      Goodwill
       impairment
       charge                    -     6,375,368             -     6,375,368
      Change in non-
       cash working
       capital             (39,548)     (455,023)      246,426      (265,196)
                      ------------- ------------- ------------- -------------
                           349,472    (1,403,259)      962,601    (3,817,809)
    Financing Activities
      Bank financing      (500,000)            -      (500,000)            -
      Capital lease
       payments            (22,411)      (10,123)      (84,890)      (39,341)
      Proceeds on
       issue of shares      20,295             -        20,295         4,950
                      ------------- ------------- ------------- -------------
                          (502,116)      (10,123)     (564,595)      (34,391)
    Investing activities
      Additional
       consideration
       paid on
       acquisitions              -        (1,150)            -       (73,186)
      Purchase of
       capital assets      (67,146)     (121,133)     (171,709)     (449,696)
      Proceeds on
       disposal of
       capital assets            -             -           873             -
      Development
       costs incurred      (17,278)      (53,460)     (178,539)     (350,482)
                      ------------- ------------- ------------- -------------
                           (84,424)     (175,743)     (349,375)     (873,364)

    Net (decrease)
     increase in cash
     and short term
     investments          (237,068)   (1,589,125)       48,631    (4,725,564)

    Cash and short
     term investments
      Beginning of
       period            7,593,876     8,897,302     7,308,177    12,033,741
                      ------------- ------------- ------------- -------------
      End of period   $  7,356,808  $  7,308,177  $  7,356,808  $  7,308,177
                      ------------- ------------- ------------- -------------
    





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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