Axia Releases Results for 1Q2009

CALGARY, Nov. 14, 2008 (Canada NewsWire via COMTEX) -- AXX | Quote | Chart | News | PowerRating -- << - Increased revenues by 9 percent to $15.8 million for the first quarter of fiscal 2009 compared to $14.5 million in the same period for fiscal 2008. - Net income of $2.5 million ($0.04 per fully diluted common share) for the first quarter of fiscal 2009 consistent with the same period in the prior year. - Axia's OpenNet consortium was named the successful passive fibre grid network company in Singapore. >>

Axia NetMedia Corporation ("Axia" or the "Corporation") today announced the results for the first quarter of fiscal 2009 for the period ended September 30, 2008.

Art Price, Chairman and CEO commented, "In the first quarter Axia experienced modest growth in demand for its services at a time when most businesses are faced with the dramatic negative effects of the unstable global economy. This modest growth is a result of Axia's services being increasingly necessary for private and public organizations to compete by delivering value through their products or services. Axia has no long-term debt and accordingly, does not face the potentially crippling challenge of renegotiating debt instruments in dysfunctional debt markets. Axia is well positioned financially to weather the continuing economic storm."

New NGN OANs:

On September 26, 2008 Axia announced that OpenNet had been selected by the Infocomm Development Authority of Singapore ("IDA") to provide passive fibre services to every premise in Singapore. Axia was the OpenNet Consortium lead through the procurement and contract award process and owns a 30 percent interest of OpenNet. The other owners and respective interests are: Singapore Telecommunications Limited - 30 percent, Singapore Press Holdings - 25 percent and SP Telecommunications Pte Ltd - 15 percent. As a result of IDA's open access regulation, parties were limited to 30 percent ownership.

The Singapore solution is the first comprehensive metropolitan fibre to the premise deployment and it has demonstrated that compelling prices, performance and choice can be achieved using the open access no conflict business approach. One fibre grid will connect all 1.5 million premises. The OpenNet solution is based on Axia's open access no-conflict business approach. Now, Axia has proven that its approach to implementing these new next generation networks meets visionary public interest requirements and provides compelling value and performance in a modern metropolitan city. Singapore has set a new standard for infrastructure in the knowledge economy.

Axia is qualified to respond to IDA's second Request for Proposal ("RFP") to provide active services utilizing the fibre grid. Submissions are due in early December 2008.

Axia's next generation network solutions are now comprised of low density rural solutions (Alberta), medium density regional solutions (France) and high density metropolitan solutions (Singapore).

In the second quarter Axia intends to respond to an RFP for a Next Generation Network initiative in Australia. Axia's solutions in Alberta, France and Singapore are directly applicable to the challenges that the Commonwealth faces in transitioning Australia to a modern telecom infrastructure. Any solution for Australia will depend upon utilizing functional capital markets.

Axia has four NGN proposals outstanding in France; decisions are expected by the end of calendar 2008.

<< Operational Highlights: France >>

Axia's European business unit is on plan. During the first quarter of fiscal 2009, the Solstice Grand Angoulême network was activated and it is expected that the Sem@for77 network will be activated by the end of calendar 2008 and the Hérault Participation network will be activated during the summer of 2009. As at September 30, 2008, the addressable market in France was approximately 15,000 sites out of a possible 31,000 sites when all 12 OAN NextGen networks are operational.

Covage, Axia's 50 percent owned French joint venture, is creating competition which supports local access operators and RSPs as they deliver their IP services to business and retail customers. As at September 30, 2008, Covage was providing services to 31 RSPs with 155 bandwidth connections. Bandwidth sales have grown to 10.3 Gbps at the end of September, 2008 as compared to 10 Gbps at June 30, 2008.

Covage is currently in the process of completing a national fibre backbone network with 2,900 kilometers of existing dark fibre infrastructure to create a ringed network from Paris to Montpellier in the south of France. On completion, this project will connect most of Covage's existing networks to each other and to the main interconnect points in Paris with an available bandwidth of 100 Gbps (expandable to 400 Gbps). Covage expects to complete the project by mid-year calendar 2009. This national infrastructure project will improve Covage's service offering to its current and prospective customers by enabling customers to connect directly to Paris, the global gateway for France, and enhance Covage's competitive position with respect to new network prospects. Covage believes that the national network will create an attractive value proposition for national operators and large corporate and government customers.

Alberta

Demand on the Alberta SuperNet continued to grow modestly while Alberta's economy began to adjust to swings in commodity prices and cost pressures. As Alberta's rural based businesses and institutions take an increasing interest in efficiency and productivity, interest in Axia services is growing. The Alberta business unit is organized to respond to these opportunities.

The Corporation continues to see strong support for Alberta SuperNet services from RSPs as they evolve their business strategies beyond traditional residential Internet services to a more comprehensive portfolio of new business services aimed at all segments of the market.

The positive operational reputation of the Alberta SuperNet in the market is evidenced by the retention and expansion of Axia's Alberta SuperNet RSP community and the willingness of businesses to expand their reliance on the SuperNet for the delivery of mission critical applications in all sectors. Axia is seeing increasing cost and reliability pressures in its clients existing non-SuperNet services that are driving greater consideration of the SuperNet as a cost competitive and capable network alternative to support our clients new network centric business system applications. The expansion of Alberta SuperNet based services by RSPs is driving modest growth in our traditional RSP services.

1Q2009 Consolidated Financial Information

Consolidated revenue for the quarter was $15.8 million, a decrease of $0.4 million from $16.2 million for the prior quarter. Compared to the same quarter last year, consolidated revenue increased $1.3 million or nine percent from $14.5 million. The first quarter of each fiscal year has historically been a period of lower revenues. Consolidated gross profit for the quarter was $7.4 million or 47 percent of revenue which is an increase of $0.5 million as compared to $6.9 million or 43 percent of revenue for the prior quarter. As compared to the same quarter last year, gross profit increased by $0.2 million or three percent from $7.2 million or 50 percent of revenue. During the quarter total expenses were $3.9 million, a decrease of $1.1 million or 22 percent from $5.0 million in the prior quarter.

Income before net income tax for the current quarter was $3.5 million ($0.05 per fully diluted share) as compared to $3.8 million ($0.06 per fully diluted share) for the same quarter last year. As compared to the prior quarter, net income before tax increased $1.6 million from $1.9 million ($0.03 per fully diluted share). Net income for the current quarter was $2.5 million ($0.04 per common share on a fully diluted basis) as compared to $1.5 million ($0.02 per common share on a fully diluted basis) for the previous quarter and consistent with the same quarter last year.

As at September 30, 2008 the Corporation's working capital was $19.3 million as compared to $22.9 million for the prior quarter. The major use of working capital is the investment in network construction and acquisitions for Axia's expanding operations in France and Singapore. As at September 30, 2008, Axia had $23.6 million in cash and short-term investments.

Outlook

Axia's business is based on next generation digital 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 consequence, next generation network investments are being considered in some jurisdictions as economic stimulus initiatives.

Axia will continue to invest business development funds to investigate and assess the best opportunities. Axia's management and Board assesses the attractiveness of each new opportunity, including the value of momentum and market position, against the dilution shareholders may face as a consequence of Axia choosing to raise additional equity capital. We also intend to maintain our strong balance sheet approach. Management and the Board will consider all these factors as we seek the path that we believe will maximize longer-term shareholder value.

Conference Call Scheduled

Axia will hold a conference call for the investment community on Monday, November 17, 2008 at 3 p.m. (Eastern) and 1 p.m. (Mountain). Axia Chairman and CEO Art Price and Chief Financial Officer Peter McKeown will participate.

To participate in the conference call from Toronto or internationally, please dial (416) 644-3414. If you are connecting from other parts of Canada, dial 1-800-732-9307. 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=2438040.

A replay of the conference call will be available at (416) 640-1917 or 1-877-289-8525, passcode 21285830 followed by the number sign from 5 p.m. (ET) Monday, November 17, 2008 to midnight (ET) Monday, November 24, 2008, or through the webcast archives at http://www.newswire.ca.

About Axia

The unaudited Consolidated Financial Statements for the first quarter of fiscal 2009 ended September 30, 2008 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 are also posted at www.axia.com.

Axia provides Real Broadband(TM) IP services and solutions through planning, designing and operating no conflict Open Access Next Generation Networks. Axia trades on the Toronto Stock Exchange under the symbol "AXX".

This Quarterly 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 OAN NextGen contracts, the timing of completion and estimated total costs of these 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.

<< AXIA NETMEDIA CORPORATION CONSOLIDATED BALANCE SHEETS September 30, June 30, (unaudited) ($000s) 2008 2008 ------------------------------------------------------------------------- Assets Current assets: Cash $ 4,287 $ 2,210 Short-term investments 19,294 25,867 Restricted short-term investments - 4,763 Accounts receivable 23,039 25,222 Prepaid expenses 1,751 1,326 Future income tax asset 60 24 ------------------------------------------------------------------------- 48,431 59,412 Property and equipment 54,894 49,373 Intangible assets 6,836 6,699 Goodwill 4,201 4,201 Advances to joint venture - 1,785 Other assets 1,175 816 Restricted long-term investments 2,152 4,310 Future income tax asset 4,598 4,608 ------------------------------------------------------------------------- $ 122,287 $ 131,204 ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 24,284 $ 29,826 Income taxes payable 3,930 5,306 Current portion of deferred revenue 589 1,061 Current portion of lease obligation 288 284 Current portion of cost of excess space 66 61 ------------------------------------------------------------------------- 29,157 36,538 Deferred revenue 1,774 1,503 Lease obligation 3 77 Cost of excess space 99 115 Shareholders' equity: Share capital 48,074 48,074 Contributed surplus 3,076 2,893 Retained earnings 41,450 38,986 Accumulated other comprehensive income (loss) (1,346) 3,018 ------------------------------------------------------------------------- 40,104 42,004 ------------------------------------------------------------------------- 91,254 92,971 ------------------------------------------------------------------------- $ 122,287 $ 131,204 ------------------------------------------------------------------------- ------------------------------------------------------------------------- AXIA NETMEDIA CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS For the three months ended September 30, 2008 and 2007 (unaudited) ($000s except per share amounts) 2008 2007 ------------------------------------------------------------------------- Revenue $ 15,831 $ 14,456 Cost of products and services sold 8,430 7,216 ------------------------------------------------------------------------- Gross profit 7,401 7,240 Expenses Marketing 223 272 Administration 830 818 Business development 2,425 1,703 Stock-based compensation 184 164 Net interest and financing charges (income) (724) (389) Depreciation and amortization 982 865 ------------------------------------------------------------------------- 3,920 3,433 ------------------------------------------------------------------------- Income before income tax 3,481 3,807 Current income tax (1,523) (1,662) Future income tax recovery 357 328 ------------------------------------------------------------------------- (1,166) (1,334) ------------------------------------------------------------------------- Net income before minority interest 2,315 2,473 Minority interest 149 - ------------------------------------------------------------------------- Net income 2,464 2,473 Retained earnings, beginning of period 38,986 30,885 ------------------------------------------------------------------------- Retained earnings, end of period $ 41,450 $ 33,358 ------------------------------------------------------------------------- Net income per share Basic $ 0.04 $ 0.04 Diluted $ 0.04 $ 0.04 ------------------------------------------------------------------------- Weighted average shares outstanding Basic 63,593 63,399 Diluted 64,031 63,404 ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS For the years ended September 30, 2008 and 2007 (unaudited) ($000s) 2008 2007 ------------------------------------------------------------------------- Net income $ 2,315 $ 2,473 Other comprehensive income, net of tax: Unrealized gains on short-term investments 25 34 Unrealized losses on sale of short-term investments (205) - Unrealized losses on translation of self sustaining operations (4,160) (374) ------------------------------------------------------------------------- Other comprehensive loss (4,340) (340) ------------------------------------------------------------------------- Comprehensive loss $ (2,025) $ 2,133 ------------------------------------------------------------------------- AXIA NETMEDIA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended September 30, 2008 and 2007 (unaudited) ($000s) 2008 2007 ------------------------------------------------------------------------- Cash provided by (used in): Operating activities: Net income $ 2,315 $ 2,473 Items not involving cash Depreciation and amortization 982 865 Future income tax (recovery) (357) (310) Cost of excess space (11) (17) Stock-based compensation 184 164 ------------------------------------------------------------------------- 3,113 3,175 Changes in non-cash working capital items (3,697) (5,842) ------------------------------------------------------------------------- (584) (2,667) Financing activities: Decrease in restricted cash and investments 6,874 - Issue of common shares - 85 Repayment of lease obligation (69) (66) ------------------------------------------------------------------------- 6,805 19 Investing activities: Short-term investments 6,233 7,474 Acquisitions (97) - Advance to joint venture 1,738 (2,524) Purchase of property and equipment (8,750) (1,854) Purchase of property and equipment included in accounts payable 853 - ------------------------------------------------------------------------- (23) 3,096 ------------------------------------------------------------------------- Effect of currency translation on cash balances and cash flows (4,121) (308) ------------------------------------------------------------------------- Increase in cash 2,077 140 Cash, beginning of period 2,210 10,862 ------------------------------------------------------------------------- Cash, end of period $ 4,287 $ 11,002 ------------------------------------------------------------------------- >>

%SEDAR: 00002394E

SOURCE: Axia NetMedia Corporation

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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