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Xentel

Press Release - August 6, 2002

Q2 Results 2002
(PDF: 190 KB /5 pages)

XENTEL REPORTS SECOND QUARTER 2002 RESULTS
-EIGHTH CONSECUTIVE QUARTER OF PROFITABILITY-

Three months ended June 30 ($‘000’s except per share amounts)		2002		2001		2000
Revenue	$	26,862	$	23,775	$	22,085
Gross margin		8,385		7,624		3,216
Net earnings		1,526		1,276		(2,829)
EBITDA		3,392		2,597		(1,777)
EPS, fully diluted	$	0.07	$	0.07	$	(0.15)
EBITDA, fully diluted	$	0.18	$	0.14	$	(0.09)

Six months ended June 30 ($‘000’s except per share amounts)		2002		2001		2000
Revenue	$	55,782	$	47,943	$	47,242
Gross margin		17,987		14,396		10,232
Net earnings		3,660		2,217		(2,025)
EBITDA		6,741		4,391		(16)
EPS, fully diluted	$	0.17	$	0.12	$	(0.12)
EBITDA, fully diluted	$	0.35	$	0.23	$	(0.01)

CALGARY, ALBERTA, August 6, 2002 - XENTEL DM Incorporated (TSX Venture:XDM) a North American specialty entertainment and relationship marketing company, today reported its financial results for the three and six months periods ended June 30, 2002.

Xentel's business growth continued to produce increased revenues and earnings this quarter over the same quarter of 2001. Growth and profitability were driven primarily by the US operations.

Business Highlights

Increased the donor database files by increasing teleservices to new donors. This caused an increase to direct costs but will provide significant benefits in the future.
Business to Business (B2B) revenue in the US has increased by over 100%. Xentel has a successful B2B operation in Canada where small businesses across the country contribute to local cause related events.
Xentel New event related activities worth $1.5 million of annual revenues have been awarded to the Company in the US during the last quarter.
Signed a sponsorship alliance with the Hockey Hall of Fame. As an official sponsor, Xentel has been given instant access to the Hockey Hall of Fame's million plus annual on-line visitors. In addition, the agreement ensures the continuity of showcasing an ever increasing roster of Hockey Legends in the Company's highly entertaining tours, Oldtimers' Hockey Challenge and Battle of the Badges.
Our newest programmed event designed to enhance the profile of the Police Association of Calgary was the Cuff & Billy Rock ‘n Country Saloon at the Calgary Stampede. This new event succeeded in being one of the most popular entertainment events during the Stampede and attracted over 30,000 attendees.

Xentel increased revenues 14% in Q2-2002 versus Q2-2001, and 17% over the same six month time period year over year. Earnings growth continued quarter over same quarter and six months year over year, together with cash flows. The program for long term debt reduction continued during the second quarter.

At the Annual General Meeting held in Calgary on June 27, 2002 Mike Platz, Chairman and Geoff Pickering, President acknowledged how excited they were over the future prospects of the Company and the new opportunities in business growth and profitability.

Summary

The Company’s results continue to track forecasts, and overall growth in our US business is as has been expected, since launching the plan to purchase the US operation in 1999.

Xentel continues to build shareholder value from within and is aggressively reviewing acquisition candidates that will be accretive to the Company’s business program.

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 and has been profitable for 23 years of its 24 year history.

The TSX 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

(in thousands of Canadian dollars)

		June 30, 2002		June 30, 2001		December 31, 2001
		(unaudited)		(unaudited)		(audited)

ASSETS
Current Assets
Cash and term deposits	$	3,499	$	-	$	2,291
Accounts receivable		7,226		8,993		7,598
Inventory		518		475		593
Work in progress		6,468		4,720		6,416
Due from related parties		33		25		80
Prepaid expenses		1,686		875		753
Future income taxes		850		-		1,707
Other current assets		12		35		32

		20,292		15,123		19,470

Capital assets		5,312		4,630		4,829
Customer contracts		1,897		2,859		2,373
Trademarks		86		-		88

	$	27,587	$	22,612	$	26,760

LIABILITIES
Current liabilities
Bank indebtedness	$	111	$	1,506	$	817
Accounts payable and accrued liabilities		7,394		8,077		7,444
Income taxes payable		395		-		212
Current portion of long-term debt		302		342		341
Future income taxes		1,630		990		1,630

		9,832		10,915		10,444

Long-term debt		2,901		5,141		5,228
Due to related parties		500		500		500
Future income taxes		232		45		154

		13,465		16,601		16,326

SHAREHOLDERS' EQUITY
Share capital		4,135		3,925		4,107
Warrants		450		450		450
Retained earnings		9,537		1,636		5,877

		14,122		6,011		10,434

	$	27,587	$	22,612	$	26,760

Consolidated Statement of Operations and Retained Earnings (Deficit)

(unaudited)

(in thousands of Canadian dollars, except per share data)

Three Months
Ending June 30

Six Months
Ending June 30

2002

2001

2002

2001

Revenue

26,862

23,775

55,782

47,943

Cost of revenue

18,477

16,151

37,795

33,547

Gross margin

8,385

7,624

17,987

14,396

Corporate expenses

Foreign currency translation (gain) loss

375

372

(67)

Branch overhead and corporate administration

4,618

4,945

10,874

10,072

Interest expense

179

236

467

476

Amortization

522

517

1,115

1,050

5,694

5,780

12,828

11,531

Net earnings before income taxes

2,691

1,844

5,159

2,865

Income tax (recovery) expense

Current income tax expense

356

690

Future income tax expense

809

568

1,500

648

Future income tax recovery

(691)

1,165

568

1,499

648

Net earnings

1,526

1,276

3,660

2,217

Retained earnings (Deficit), beginning of period

8,011

360

5,877

(581)

Retained earnings, end of period

9,537

1,636

9,537

1,636

Basic net earnings per share

0.08

0.07

0.19

0.12

Fully diluted net earnings per share

0.07

0.12

Basic weighted average number of shares outstanding

19,243

19,022

19,243

19,022

Fully diluted weighted average number of shares outstanding

20,922

19,022

20,922

19,022

Consolidated Statement of Cash Flows

(unaudited)

(in thousands of Canadian dollars)

	Three Months Ending June 30				Six Months Ending June 30
For the Three Months Ended March 31		2002		2001		2002		2001

Cash flows from (used in) operating activities
Net earnings for the year	$	1,526	$	1,276	$	3,660	$	2,217

Non cash transactions reflected in net earnings
Foreign currency translation loss		375		-		372		-
Amortization		522		517		1,115		1,050
Future income tax expense		809		568		809		648
Amortization of government assistance		-		(16)		-		(41)
Adjustment for debt accretion charges		42		23		122		45

Cash flow from operations		3,274		2,368		6,078		3,919
Changes in non-cash working capital		(505)		(1,675)		(462)		(3,108)

		2,769		693		5,616		811

Cash flows from (used in) financing activities
Bank indebtedness		(346)		(451)		(706)		(387)
Long-term debt repaid		(512)		(157)		(2,454)		(224)
Issue of share capital		21		-		28		-

		(837)		(608)		(3,132)		(611)

Cash flow from (used in) investing activities
Investment in capital assets, net		(780)		(85)		(1,114)		(200)


Effect of exchange rate fluctuations on cash balances		(161)		-		(162)		-

Net increase in cash and term deposits		991		-		1,208		-
Cash and term deposits, beginning of period		2,508		-		2,291		-

Cash and term deposits, end of period	$	3,499	$	-	$	3,499	$	-

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