Axia Releases Results for Q1FY2010

    
    -   Increased revenues to $16.2 million for the first quarter of fiscal
        2010 compared to $15.8 million for the same period in fiscal 2009.
    -   Net income for the current quarter was $0.9 million or $0.01 per
        fully diluted share compared to $2.5 million for the same period in
        fiscal 2009 or $0.04 per fully diluted share.
    -   Bandwidth usage in France grew to 28.2 Gbps at the end of September
        2009 compared to 17.9 Gbps at the end of June 2009.
    -   Contract negotiations began in September with Government of
        Newfoundland and Labrador on its Government Broadband Initiative.
    

CALGARY, Nov. 9 /CNW/ - Axia NetMedia Corporation (Axia or the Corporation) today announced the results for the first quarter of fiscal 2010 for the period ended September 30, 2009.

Art Price, Chairman and CEO commented, "We begin the new fiscal year with operations in Canada, France and Singapore on plan. In Alberta, the Government of Alberta (GoA) implemented a new phase in the digital transformation of the Alberta libraries that is enabled by expanded use of Real Broadband(TM) services. In France, sales grew on both the national backbone and the regional segments. In Singapore, OpenNet began its nationwide rollout schedule in August of this year and is on plan."

Operational Highlights

Alberta

Axia's Alberta SuperNet business continues to generate stable revenues and cash flows. The Corporation is seeing demand for Axia's high availability Real Broadband(TM) services as its customers' needs evolve. The Alberta SuperNet's province-wide footprint enables Axia services to be offered in each community and form a foundation for its customers to make investments in assets and technology that enable end users to participate in the digital revolution.

As of September 30, 2009, Axia had 74 local access customers in 289 communities with an aggregate total of 747 active connections. Local access customer bandwidth usage decreased to 6 Gbps during the fourth quarter of fiscal 2009 due to an adjustment in Bell's usage related to its take or pay obligations. However, during the first quarter of 2010, usage by local access customers increased by 17 percent to 7 Gbps. Despite the challenges in the global economy, Axia continues to experience growth in demand for its Real Broadband(TM) services. Other service activities in Alberta were reduced in the first quarter of fiscal 2010 primarily as a result of the GoA budget review process. The Alberta SuperNet's value proposition of high performance for low cost is aligned with businesses that focus on productivity and cost efficiency.

During the quarter, the GoA increased funding to Alberta libraries to expand their functionality by becoming their communities' centre for digital connectivity. Many libraries can now offer videoconferencing, giving rural Albertans access to services previously inaccessible in their community. Albertans will be able to use their local libraries as a means for accessing videoconferencing, electronic databases, licensed materials, distance education, telehealth and online business opportunities. This digital transformation is enabled by increased use of Axia's Real Broadband(TM) services provided over the Alberta SuperNet. Axia continues to work with the GoA to further its e-government objectives through optimal use of the Alberta SuperNet.

France

Axia's France business continued to develop on plan. Covage's NGN is comprised of 15 network segments. Covage is on schedule to complete its national fibre backbone by the end of calendar year 2009. During the first quarter of fiscal 2010, Covage's increased demand for backbone services contributed to a significant growth in bandwidth usage. As at September 30, 2009, Covage had 51 retail service providers with 752 broadband connections that consist of 414 bandwidth connections and 338 dark fibre connections. Bandwidth usage grew to 28.2 Gbps at the end of September 2009 as compared to 17.9 Gbps at the end of June 2009. Covage's addressable market is approximately 34,000 sites as at September 30, 2009 with an estimated market penetration of slightly over 2 percent.

During the first quarter, Covage completed the planned disposition of 20 percent of its interest in the Sem@for77 network segment to the Caisse des Depôts (CDC). The CDC has been purchasing a 20 to 30 percent interest in most network segments owned by Covage as part of its mandate to support the long-term economic development of France.

Covage has two outstanding bids and decisions are expected by the end of calendar 2009. Covage continues to review all potential opportunities in light of current market conditions and the degree to which the opportunity complements Covage's existing assets.

Singapore

Axia owns a 30 percent equity investment in OpenNet which is responsible for providing passive fibre services to every premise in Singapore on Singapore's Next Generation National Broadband Network (NGNBN). During the summer of 2009, OpenNet began its Fibre to the Premise deployment throughout Singapore. OpenNet plans to pass or reach 15 percent of premises by the end of this year, 60 percent by the end of 2010 and 95 percent by June 30, 2012. OpenNet is expected to begin offering commercial services, as the grid is rolled out, with the first services being available by the first half of 2010. The majority of the costs being incurred by OpenNet to build and commission the fibre grid are being capitalized during this construction and commissioning phase.

The Corporation believes that the NGNBN will become the network of choice for fixed wireline connectivity by 2015. Axia's share of earnings depends on market penetration. As the market matures Axia forecasts its share of pre-tax earnings to be in the range of SGD$6 million to SGD$14 million per annum at that time.

Newfoundland and Labrador

On August 7, 2009, Axia announced that the Government of Newfoundland and Labrador (GNL) had selected Axia's proposal in response to the Government's 2008 Request for Proposal to build and manage distinct aspects of its Government Broadband Initiative (GBI). Contract negotiations have begun and will continue over the next few months. Successful contract negotiations would result in construction commencing around April 2010. When completed, the GBI would connect more than 1,000 government facilities that include healthcare institutions, libraries, schools, and other offices in communities spanning all regions of the province. It would also enhance the ability of retail service providers to offer similar services to local residential and business customers in Newfoundland and Labrador.

New Opportunities

Axia continues to evaluate potential opportunities in Asia, Australia, New Zealand and the United States.

Q1FY2010 Consolidated Financial Information

Consolidated revenue for the quarter was $16.2 million, a decrease of $1.0 million or 6 percent from $17.3 million for the prior quarter. Compared to the same quarter last year, consolidated revenue increased $0.4 million or 3 percent from $15.8 million. Consolidated gross profit for the quarter was $6.6 million or 41 percent of revenue which is an increase of $0.1 million or 1 percent as compared to $6.5 million or 38 percent of revenue for the prior quarter. As compared to the same quarter last year, gross profit decreased by $0.8 million or 11 percent from $7.4 million or 47 percent of revenue. Net income for the current quarter was $0.9 million ($0.01 per fully diluted share) as compared to $0.4 million ($0.01 per fully diluted share) for the previous quarter. The net income for the same quarter in the previous year was $2.5 million ($0.04 per fully diluted share).

As at September 30, 2009, Axia's working capital was $27.9 million as compared to $11.6 million at June 30, 2009. A large portion of the increase in working capital this quarter was the result of a planned disposition of a portion of the Corporation's interest in a private broadband network company to a financial institution in France. The Corporation continues to deploy both its available cash and the cash it generates from operating activities, in network construction in France and in funding the capital required by OpenNet in Singapore. As at September 30, 2009, Axia had $29.5 million in cash and unrestricted short-term investments.

Outlook

Axia's business is based on next generation networks that are increasingly seen as critical infrastructure to enable end users to improve their productivity and efficiency. Most of the digital based technology being developed depends on next generation network connectivity. These characteristics are becoming better understood by progressive governments and as a result, next generation network investments are being considered in some jurisdictions as economic stimulus initiatives.

Although the current economic climate appears to be stabilizing, it remains volatile and sectors of the global capital markets are unstable. Axia continues to review the level and timing of any future capital commitments for new next generation network opportunities and its ability to raise funds on favourable terms prior to making commitments. However, as a consequence of the instability in the capital markets, and the low price of its common stock at this time, it may decide not to pursue certain next generation network opportunities.

Axia will continue to invest business development funds to investigate and assess the best available global opportunities. Axia's management and the Board of Directors (Board) assesses the attractiveness of each new opportunity, including the value of momentum and market position, and considers the need for any additional capital required and the cost of such capital from all available sources. The Corporation intends to maintain its strong balance sheet approach.

Management and the Board will consider all these factors as it seeks the path that it believes will maximize longer-term shareholder value.

Conference Call Scheduled

A conference call for the investment community will be held Tuesday, November 10, 2009 at 3 p.m. (Eastern) and 1 p.m. (Mountain). Axia Chairman and CEO Art Price, Axia Canada President and Executive Vice-President Murray Sigler, and Chief Financial Officer Peter McKeown will participate.

To participate in the conference call, please dial (416) 644-3425 in Toronto and internationally. If you are connecting from other parts of Canada, dial 1-800-594-3790. Please call ten minutes prior to the start of the call.

A live webcast (listen only mode) of the conference call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2831400

A replay of the conference call will be available at (416) 640-1917 or 1-877-289-8525, passcode 4169796 followed by the number sign from 5 p.m. (ET) Tuesday, November 10, 2009 to midnight (ET) Tuesday, November 17, 2009, or through the webcast archives at http://www.newswire.ca.

About Axia

The unaudited Consolidated Financial Statements for the quarter ended September 30, 2009 and related Management's Discussion & Analysis have been reviewed and approved by the Corporation's Audit Committee and Board of Directors. These reports have been filed on SEDAR at www.sedar.com and also posted at www.axia.com.

Axia sells Real Broadband(TM) and passive services on Next Generation Networks that have implemented the Axia NGN Solution. The Axia NGN Solution has been implemented in Alberta, France and Singapore. Axia trades on the Toronto Stock Exchange under the symbol "AXX". For more information, visit its website at www.axia.com.

This News Release contains forward looking statements, including, without limitation, statements containing the words "should", "believe", "anticipate", "may", "plan", "will", "continue", "intend", "expect", "estimate" and other similar expressions which constitute "forward looking information" within the meaning of applicable Canadian securities laws. These statements are based on our current expectations, estimates, forecasts and assumptions about the operating environment, economies and markets in which we operate and are subject to important assumptions, risks and uncertainties that are difficult to predict. Examples of these statements would include those where Axia forecasts its success and timing in winning new NGN business, the timing of completion and estimated total costs of our networks, the revenues and operating costs associated with these networks over time, and Axia's ability to generate future cash flows and avail itself of other financing alternatives given current market conditions. The assumptions, risks and uncertainties that could cause actual results to differ materially from the forward looking information, include, but are not limited to, changes in customer markets, changes in demand for our services, our inability to deliver services in a timely and cost efficient manner, technological change, general economic conditions and other risks detailed from time to time in our ongoing filings with the Canadian securities regulatory authorities, including those in our Annual Information Form, which filings can be found at www.sedar.com. Given these assumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward looking statements. Unless otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward looking statements either as a result of new information, future events or otherwise.

    
    CONSOLIDATED BALANCE SHEETS

    (unaudited) (000s)                              September 30,    June 30,
                                                            2009        2009
    -------------------------------------------------------------------------
    Assets
    Current assets:
      Cash                                             $   8,417   $  10,040
      Short-term investments                              21,101      14,266
      Restricted short-term investments                    3,805       4,014
      Accounts receivable                                 25,539      28,083
      Prepaid expenses                                     2,157       2,038
    -------------------------------------------------------------------------
                                                          61,019      58,441

    Investment under equity accounting                     3,553       3,798
    Restricted long-term investments                       2,430       2,915
    Property and equipment                                60,863      69,041
    Intangible assets                                      7,993       8,459
    Goodwill                                               4,201       4,201
    Other assets                                           1,544       1,299
    Future income tax asset                                4,968       5,147
    -------------------------------------------------------------------------
                                                       $ 146,571   $ 153,301
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities         $  25,751   $  37,453
      Income taxes payable                                 4,705       4,479
      Current portion of deferred revenue                  1,702       4,962
      Current portion of long-term debt                    1,372           -
    -------------------------------------------------------------------------
                                                          33,530      46,894

    Deferred revenue                                       7,812       5,041
    Long-term debt                                         5,153           -

    Shareholders' equity:
      Share capital                                       48,231      48,111
      Contributed surplus                                  4,012       3,741

      Retained earnings                                   45,896      44,972
      Accumulated other comprehensive income
        Unrealized gain on short-term investments             99          76
        Unrealized gain on translation of foreign
         operations                                        1,838       4,466
    -------------------------------------------------------------------------
                                                          47,833      49,514
    -------------------------------------------------------------------------
                                                         100,076     101,366
    -------------------------------------------------------------------------
                                                       $ 146,571   $ 153,301
    -------------------------------------------------------------------------
    See accompanying selected notes to the consolidated financial statements



    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

    For the three months ended September 30, 2009 and 2008 (unaudited)

    (000s except per share amounts)                         2009        2008
    -------------------------------------------------------------------------
    Revenue                                            $  16,230   $  15,831
    Cost of products and services sold                     9,649       8,430
    -------------------------------------------------------------------------
    Gross profit                                           6,581       7,401
    Expenses
      Marketing                                              322         223
      Administration                                       1,422         830
      Business development                                   915       2,425
      Stock-based compensation                               316         184
      Net interest and financing charges (income)             12        (724)
      Depreciation and amortization                        2,468         982
    -------------------------------------------------------------------------
                                                           5,455       3,920
    -------------------------------------------------------------------------
    Income before the following                            1,126       3,481
      Share of loss of equity investment                     (47)          -
      Gain on disposal of investment                         533           -
    -------------------------------------------------------------------------
    Income before income tax                               1,612       3,481
      Current income tax                                     907       1,523
      Future income tax (reduction)                         (219)       (357)
    -------------------------------------------------------------------------
                                                             688       1,166
    -------------------------------------------------------------------------
    Net income before non-controlling interest               924       2,315
      Net loss attributable to non-controlling interest        -         149
    -------------------------------------------------------------------------
    Net income                                               924       2,464
    Retained earnings, beginning of period                44,972      38,986
    -------------------------------------------------------------------------
    Retained earnings, end of period                   $  45,896   $  41,450
    -------------------------------------------------------------------------

    Net income per share
      Basic                                            $    0.01   $    0.04
      Diluted                                          $    0.01   $    0.04
    -------------------------------------------------------------------------

    Weighted average shares outstanding
      Basic                                               63,695      63,593
      Diluted                                             64,675      64,031
    -------------------------------------------------------------------------




    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    For the three months ended September 30, 2009
    and 2008 (unaudited)
    (000s)                                                  2009        2008
    -------------------------------------------------------------------------
    Net income                                         $     924   $   2,464
    Other comprehensive income, net of income tax:
      Unrealized gains (losses) on short-term
       investments                                            (2)         25
      Transfer gains (losses) on sale of short-term
       investments                                           (21)       (205)
      Unrealized gains (losses) on translation of
       foreign operations                                  2,626      (4,160)
    -------------------------------------------------------------------------
    Other comprehensive income (loss)                      2,603      (4,340)
    -------------------------------------------------------------------------
    Comprehensive income (loss)                        $   3,527   $  (1,876)
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the three months ended September 30, 2009
    and 2008 (unaudited)
    (000s)                                                  2009        2008
    -------------------------------------------------------------------------
    Cash provided by (used in):
    Operating activities:
      Net income                                       $     924   $   2,315
      Items not involving cash
        Depreciation and amortization                      2,468         982
        Future income tax (reduction)                       (219)       (357)
        Share of loss of equity investment                    47           -
        Gain on disposal of investments                     (533)          -
        Cost of excess space                                 (14)        (11)
        Stock-based compensation                             316         184
    -------------------------------------------------------------------------
                                                           2,989       3,113

    Changes in non-cash working capital items              4,883      (3,697)
    -------------------------------------------------------------------------
                                                           7,872        (584)

    Financing activities:
      Decrease (increase) in restricted cash and
       investments                                           641       6,874
      Issue of common shares                                  75           -
      Repayment of lease obligation                          (74)        (69)
    -------------------------------------------------------------------------
                                                             642       6,805
    Investing activities:
      Short-term investments                              (7,335)      6,233
      Business combinations                                    -         (97)
      Reduction in advance to joint venture                    -       1,738
      Increase in bank loan                                6,527           -
      Purchase of property and equipment                  (3,930)     (8,750)
      Disposal of investment                                 786           -
      Changes in non-cash working capital                 (3,344)        853
    -------------------------------------------------------------------------
                                                          (7,296)        (23)
    -------------------------------------------------------------------------
    Effect of currency translation on cash balances       (2,841)     (4,121)
    -------------------------------------------------------------------------
    Increase in cash                                      (1,623)      2,077
    Cash, beginning of period                             10,040       2,210
    -------------------------------------------------------------------------
    Cash, end of period                                $   8,417  $    4,287
    -------------------------------------------------------------------------
    

%SEDAR: 00002394E

SOURCE Axia NetMedia Corporation

For further information: For further information: please visit Axia's website at www.axia.com, or contact: Dawn Tinling, VP, Investor Relations and Communications, Axia NetMedia Corporation, (403) 538-4074, dawn.tinling@axia.com

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