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Xentel

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Press Release - April 29, 2002

Q1 Results 2002
(PDF: 452 KB /5 pages)

XENTEL REPORTS FIRST QUARTER 2002 RESULTS
-EARNINGS UP 133%, REVENUE UP 20% QUARTER OVER QUARTER-

For the Three Months Ended March 31
(‘000’s except per share amounts) 2002 2001

Revenue $ 28,920 $ 24,168

Gross margin 9,602 6,772

Net earnings 2,134 941

EBITDA 3,319 1,794

EPS, basic $ 0.11 $ 0.05

EPS, fully diluted $ 0.10 $ 0.05

EBITDA per share, basic $ 0.17 $ 0.09

EBITDA per share, fully diluted $ 0.16 $ 0.09

CALGARY, ALBERTA, April 29, 2002 - XENTEL DM Incorporated (CDNX:XDM) a North American specialty entertainment and relationship marketing company, today reported first quarter 2002 results.

Xentel has achieved record results and significant growth in revenues and earnings this quarter. US operations strengthen while the mature Canadian operations show solid earnings.

Business Highlights

Paid down a portion of the long term debt ahead of schedule by making additional payments to reduce the subordinated debt by $ 2 million to $3.3 million. The debt was incurred to acquire the United States operations. The debt reduction is being funded from US cash flow.

Opened a B2B call center in Ft. Lauderdale, Florida. The Canadian B2B business has been well established and represents 21% of Canadian revenues for 2001. The opening of the Florida call center is the first exclusively dedicated center in the Xentel network and represents a significant potential revenue opportunity for the Company in the United

Net earnings for 1Q2002 were $2.1 million or $0.10 per fully diluted share, compared to net earnings for 1Q2001 of $0.9 million or $0.05 per fully diluted share, an increase of $1.2 million or 133% quarter over quarter. Revenues for the three months ended March 31, 2002 were $28.9 million compared to $24.2 million for the same period 2001, an increase of $4.7 million or 20%. EBITDA was $3.3 million or $0.16 per fully diluted share for the first quarter 2002 compared to $1.8 million or $0.09 per fully diluted share for the same period in 2001.

Gross margin for the 1Q2002 was $9.6 million or 33% of revenues compared to 1Q2001 where gross margin was $6.8 million or 28%.

At March 31, 2002, the Company’s working capital was $9.5 million compared to $9.0 million at December 31, 2001 and $2.6 million at March 31, 2001. Beginning in late 2001 and in the first quarter of 2002, the Company made early long term debt retirement payments of $2.0 million.

Business Outlook

A Comparison of Canadian and US Operations

For the three months ended March 31, 2002, revenues from Canadian operations were $11.7 million and from US operations $17.2 million or 41% from Canada and 59% from the US. By comparison, for the same period in 2001, revenues from Canadian operations were $11.9 million and from US operations $12.2 million or 49% from Canada with 51% from the US. Future organic growth is expected to be generated substantially by the US operations.

Net earnings in Canada for the first quarter 2002 were $0.3 million and for the US operations $1.8 million. This compares to $0.1 million in the first quarter of 2001 for the Canadian operations and $0.8 million for the US operations.

Summary

The first quarter 2002 results were ahead of projections. The second quarter 2002 results are expected to be on target as the Company focuses on database development during that period. The overall 2002 fiscal year results are still anticipated to meet the plan.

Mike Platz, Chairman stated, “These results are on target and show that the Company has matured and developed into a major enterprise with stability and profitability. While we must not lose sight of cost containment and profit improvement, we will use this opportunity to seek out acquisitions that suit our growth model.”

“We are continuing to build and freshen our entertainment roster with a series of new mega events with law enforcement organizations across North America”, noted Geoff Pickering, Company President.

XENTEL DM Incorporated is one of North America’s leading relationship-marketing concerns and producers of cause related entertainment events. The Company’s success is attributable to proprietary sales tools including technologically advanced teleservices and sophisticated customer databases. XENTEL DM Incorporated has over 300 clients and 1,800 employees in 22 offices across North America, has been profitable 22 years of its 23 year history and is traded on the Canadian Venture Exchange under the symbol XDM.

The Canadian Venture Exchange has neither approved nor disapproved the contents of this announcement.

View Consolidated Balance Sheet
View Consolidated Statement of Operations and Retained Earnings
View Consolidated Statement of Cash Flows

Xentel DM Incorporated
10 Kodiak Crescent
Toronto, Ontario M3J 3G5
Fax: 416-633-4643

For further information, please contact:

Caren Holtby
Investor Relations
Tel: (866) 204-9861
carenh@xentel.com

Peter R. Pielsticker, CA
Vice President, Corporate Finance
Tel: (416) 633-4646 x 271
peterp@xentel.com

Consolidated Balance Sheet

March 31, 2002 March 31, 2001 December 31, 2001

('000s) (unaudited) (unaudited) (audited)

ASSETS

Current Assets

Cash and term deposits $ 2,508 $ - $ 2,291

Accounts receivable 8,643 7,046 7,598

Inventory 493 509 593

Work in progress 6,404 5,487 6,416

Due from related parties 80 26 80

Prepaid expenses 1,098 920 753

Future income taxes 1,708 - 1,707

Other current assets 32 56 32

20,966 14,044 19,470

Capital assets 4,820 4,821 4,829

Customer contracts 2,138 3,101 2,373

Trademarks 86 - 88

$ 28,010 $ 21,966 $ 26,760

LIABILITIES

Current liabilities

Bank indebtedness $ 456 $ 1,956 $ 817

Accounts payable and accrued liabilities 8,441 8,690 7,444

Income taxes payable 545 - 212

Current portion of long-term debt 355 380 341

Future income taxes 1,630 423 1,630

11,427 11,449 10,444

Long-term debt 3,353 5,237 5,228

Due to related parties 500 500 500

Future income taxes 155 45 154

15,435 17,231 16,326

SHAREHOLDERS' EQUITY

Share capital 4,114 3,925 4,107

Warrants 450 450 450

Retained earnings 8,011 360 5,877

12,575 4,735 10,434

$ 28,010 $ 21,966 $ 26,760

Consolidated Statement of Operations and Retained Earnings (Deficit)

For the Three Months Ended March 31
('000s, except per share amount) 2002 2001

Revenue
$ 28,920 $ 24,168

Cost of revenue 19,318 17,396

Gross margin 9,602 6,772

Corporate expenses

Branch overhead and corporate administration 6,253 4,978

Interest expense 288 240

Amortization 593 532

7,134 5,750

Earnings before income taxes 2,438 1,022

Income tax (recovery) expense

Current income tax expense 334 -

Future income tax expense 690 81

Future income tax recovery (690) -

334 81

Net earnings 2,134 941

(Deficit), beginning of period 5,877 (581)

Retained earnings, end of period $ 8,011 $ 360

Basic net earnings per share $ 0.11 $ 0.05

Fully diluted net earnings per share $ 0.10 $ 0.05

Basic weighted number of shares outstanding 19,234 19,022

Fully diluted weighted number of shares outstanding 21,083 19,022

Consolidated Statement of Cash Flows

For the Three Months Ended March 31
('000s)
2002
(unaudited)

2001
(unaudited)

Cash flows from (used in) operating activities

Net earnings for the year $ 2,134 $ 941

Non cash transactions reflected in net earnings

Amortization 593 532

Future income tax (recovery) expense - 81

Amortization of government assistance - (25)

Adjustment for debt accretion charges 80 23

2,807 1,552

Net change in non cash working capital items 52 (1,435)

2,859 117

Cash flows from (used in) financing activities

Bank indebtedness (360) 64

Long term debt assumed - -

Long term debt repaid (1,941) (66)

Issue of share capital 7 -

(2,294) (2)

Cash flow from (used in) investing activities

Investment in capital assets, net (346) (115)

(346) (115)

Effect of exchange rate fluctuations on cash balances (2) -

Net increase in cash and term deposits 217 -

Cash and term deposits, beginning of period 2,291

Cash and term deposits, end of period $ 2,508 $ -

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		March 31, 2002		March 31, 2001		December 31, 2001
('000s)		(unaudited)		(unaudited)		(audited)

ASSETS
Current Assets
Cash and term deposits	$	2,508	$	-	$	2,291
Accounts receivable		8,643		7,046		7,598
Inventory		493		509		593
Work in progress		6,404		5,487		6,416
Due from related parties		80		26		80
Prepaid expenses		1,098		920		753
Future income taxes		1,708		-		1,707
Other current assets		32		56		32

		20,966		14,044		19,470

Capital assets		4,820		4,821		4,829
Customer contracts		2,138		3,101		2,373
Trademarks		86		-		88

	$	28,010	$	21,966	$	26,760

LIABILITIES
Current liabilities
Bank indebtedness	$	456	$	1,956	$	817
Accounts payable and accrued liabilities		8,441		8,690		7,444
Income taxes payable		545		-		212
Current portion of long-term debt		355		380		341
Future income taxes		1,630		423		1,630

		11,427		11,449		10,444

Long-term debt		3,353		5,237		5,228
Due to related parties		500		500		500
Future income taxes		155		45		154

		15,435		17,231		16,326

SHAREHOLDERS' EQUITY
Share capital		4,114		3,925		4,107
Warrants		450		450		450
Retained earnings		8,011		360		5,877

		12,575		4,735		10,434

	$	28,010	$	21,966	$	26,760

For the Three Months Ended March 31 ('000s, except per share amount)		2002		2001


Revenue	$	28,920	$	24,168
Cost of revenue		19,318		17,396

Gross margin		9,602		6,772


Corporate expenses
Branch overhead and corporate administration		6,253		4,978
Interest expense		288		240
Amortization		593		532

		7,134		5,750

Earnings before income taxes		2,438		1,022

Income tax (recovery) expense
Current income tax expense		334		-
Future income tax expense		690		81
Future income tax recovery		(690)		-

		334		81

Net earnings		2,134		941
(Deficit), beginning of period		5,877		(581)

Retained earnings, end of period	$	8,011	$	360

Basic net earnings per share	$	0.11	$	0.05

Fully diluted net earnings per share	$	0.10	$	0.05

Basic weighted number of shares outstanding		19,234		19,022

Fully diluted weighted number of shares outstanding		21,083		19,022

For the Three Months Ended March 31 ('000s)		2002 (unaudited)		2001 (unaudited)

Cash flows from (used in) operating activities
Net earnings for the year	$	2,134	$	941

Non cash transactions reflected in net earnings
Amortization		593		532
Future income tax (recovery) expense		-		81
Amortization of government assistance		-		(25)
Adjustment for debt accretion charges		80		23

		2,807		1,552
Net change in non cash working capital items		52		(1,435)

		2,859		117

Cash flows from (used in) financing activities
Bank indebtedness		(360)		64
Long term debt assumed		-		-
Long term debt repaid		(1,941)		(66)
Issue of share capital		7		-

		(2,294)		(2)

Cash flow from (used in) investing activities
Investment in capital assets, net		(346)		(115)

		(346)		(115)

Effect of exchange rate fluctuations on cash balances		(2)		-

Net increase in cash and term deposits		217		-
Cash and term deposits, beginning of period		2,291

Cash and term deposits, end of period	$	2,508	$	-