Mosaic Achieves Record Third Quarter Results
TORONTO, ONTARIO-- November 8, 1999
- EARNINGS PER SHARE BEFORE GOODWILL UP 57% -
Mosaic Group Inc. (TSE:MGX), Canada's leading outsourced marketing
services company, today announced the best results in its history.
In the third quarter ended September 30, 1999, Mosaic had net
earnings before goodwill charges(1) of $7.54 million, an increase
of 71% over the $4.42 million earned in the third quarter of 1998.
On a fully diluted basis, earnings per share before goodwill
charges increased 57%, from $0.07 to $0.11. Year-to-date, fully
diluted EPS before goodwill charges was up 47%, from $0.15 to
$0.22.
"I am extremely pleased with our results, both in the third
quarter and for the first nine months of 1999," said Michael
Preston, Chairman and Chief Executive Officer of Mosaic. "On every
key measure, we are maintaining our impressive track record of
growth - cash flow, earnings, and revenue were all at record
levels in the third quarter. The numbers are also beginning to
show the effects of our efforts to increase our operating
efficiency through integration initiatives that have been
undertaken throughout 1999. In the third quarter, our revenues
were up 32% over the prior year. Our earnings before goodwill
charges were up by 71%, or 57% on a per share basis. These sorts
of results provide excellent validation of our ability to buy and
integrate companies as well as our ability to leverage our client
base through cross-selling initiatives.
E-Commerce Successes
"Mosaic's businesses in e-commerce, e-marketing and new media have
achieved some outstanding successes in the past few months. We
have closed the purchase of our 20% interest in Intelecom Systems
Inc., a software company specializing in transaction processing,
re-rating and convergent billing. Intelecom will work hand-in-hand
with our e-commerce subsidiary, eForce, to develop innovative
marketing approaches for clients in the telecom, utilities,
Internet and cable industries.
"With Intelecom's technology and Mosaic's marketing capabilities,
we can offer quick-to-market solutions that help our clients grow
their market share. It's proving to be a combination that's tough
to beat. Last week, we announced two significant contracts that
eForce will execute using Intelecom's technology. Our contract
with EastLink Telephone will generate revenues estimated at $15 to
$20 million over 5 years, with another $8 to $10 million expected
over 3 years from our contract with Homeservice Club. The next
steps will be to take this business proposition to industries
outside telecom, as well as to new geographic markets,
specifically the United States.
"After one year of operating transactional e-commerce programs
such as the Guaranteed Proof program for CIBC Visa cardholders,
eForce is profitable. This is unique for any start-up company, and
particularly unique for any company in the technology and
e-commerce sector. Intelecom is profitable as well, and in
partnership with eForce, the two companies are well positioned to
significantly expand their business operations. Current plans are
for the combined Intelecom and eForce business to generate
approximately $40 million in revenues in 2000.
Multimedia Training
"Our initiatives in e-commerce, e-marketing and new media are
developing in other areas," Preston continued. "Last week, we
announced the acquisition of Sales Performance Group (SPG). SPG
brings unique capabilities for developing training content,
partnering with clients to create training programs that
contribute to tangible results.
"SPG is a great complement to McGill Multimedia. Working together,
the two companies can offer clients a robust, vertically
integrated solution to their training needs. In addition, Mosaic
has recently struck a strategic alliance with Canadian Satellite
Communications Inc.'s unit, Cancom Learning Solutions, which
offers satellite-based distance learning programs. Now, Mosaic can
develop training programs and offer them by interactive satellite
broadcast, CD/DVD ROM programs, Inter/Extra-net web-based
solutions, or traditional facilitator-led training. Plus, SPG also
evaluates programs after they have been delivered, so as to
demonstrate return on training investment to their clients. We now
have the capability to design and deliver training programs, and
then show clients quick, relevant results.
Expansion of European Platform
"We have made a significant step in the expansion of our European
service platform with the purchase of BoosterGroup Services, a
French field marketing company. Booster's business is very similar
to our EMS Chiara companies, which all focus on offering contract
sales, merchandising and product demonstration services to the IT
and convergent technology sectors. With Booster, the EMS Chiara
group now covers 11 countries: France, the UK, Ireland, Spain,
Belgium, the Netherlands, Luxembourg, Sweden, Norway, Denmark and
Finland.
"Mosaic can offer a lot to help Booster management grow the
business. We offer resources - economic, human, and geographic -
which will allow Booster to pitch on and win larger pieces of
business with scope beyond the borders of France. We can offer a
list of established clients in other countries, to whom Booster
can sell programs in France. And we can offer our Focus 2000 data
collection and reporting technology, a leading edge application
for the collection and reporting of data by field marketing
companies.
"Looking ahead, we expect a strong end to the year as we benefit
from our clients' peak holiday spending period," Preston
concluded. "Our internal growth rate in revenues was 20% for the
third quarter, and 23% for the first nine months of 1999. By
maintaining this level of internal growth, we expect to achieve
full-year revenues of approximately $400 million. Looking out to
2000 we believe with recent contract wins, and before any
additional acquisitions, that we can generate over 25% internal
growth."
This press release contains forward-looking statements. By their
nature, forward-looking statements are subject to risks and
uncertainties that could result in actual performance being
materially different from anticipated results. The Company
cautions readers when making decisions to consider the risks and
uncertainties inherent in such forward-looking statements.
Mosaic Group Inc., with operations in the United States, Europe
and Canada, provides outsourced marketing services on an
integrated basis to leading corporations serving international
markets. Mosaic combines strategic thinking with leading edge
technologies to effectively deliver immediate and measurable
results for its clients. Marketing solutions include electronic
marketing, e-commerce, new media services, contract sales,
merchandising, field marketing, direct marketing, database
development and management, product promotion, corporate
communications and sales force training. Mosaic, which has
approximately 71 million shares outstanding, trades on the TSE
under the symbol MGX.
---------------------
(1) The Company, consistent with a new accounting disclosure
standard recently approved by the Canadian Institute of Chartered
Accountants, is reporting net earnings before goodwill charges in
addition to net earnings after goodwill charges. The new caption
'net earnings before goodwill charges' better allows financial
statement readers to compare the results of companies which use
purchase accounting for its acquisitions (resulting in a goodwill
charge to earnings) with those who use pooling of interest
accounting (which results in no goodwill charge to earnings).
Pooling of interest accounting is often employed in the United
States but is seldom permitted under existing Canadian accounting
standards.
/T/
MOSAIC GROUP INC.
Selected Financial Information
September 30, 1999
Three months ended Nine months ended
September 30, September 30,
(in thousands except (in thousands except
per share amounts) per share amounts)
1999 1998 % Change 1999 1998 % Change
Revenues $116,334 $88,070 32% $284,428 $169,583 68%
Gross profit 40,196 27,027 49% 97,536 55,634 75%
EBITDA (1) 13,170 9,171 44% 29,012 17,004 71%
Net earnings 6,254 3,519 78% 11,350 6,087 86%
Net earnings before
goodwill
charges (2) 7,542 4,417 71% 15,037 8,215 83%
Cash flow from
operations (3) 10,786 6,807 58% 22,562 12,714 77%
Per share amounts:
Earnings:
Basic $0.09 $0.06 50% $0.17 $0.12 42%
Fully
diluted $0.09 $0.06 50% $0.17 $0.12 42%
Earnings before
goodwill
charges (2):
Basic $0.11 $0.07 57% $0.23 $0.16 44%
Fully
diluted $0.11 $0.07 57% $0.22 $0.15 47%
Cash flow from
operations (3):
Basic $0.16 $0.11 45% $0.35 $0.25 40%
Fully
diluted $0.15 $0.10 50% $0.33 $0.22 50%
(1) Earnings before interest, tax, depreciation and amortization.
(2) Earnings before taxes but before goodwill amortization on a
net-of-tax basis.
(3) Cash flow from operations has been calculated using cash provided
from operations excluding net changes in non-cash operating working
capital.
MOSAIC GROUP INC.
Consolidated Statements of Operations
(Unaudited)
(In thousands of dollars, except per share amounts)
------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
------------------ ---------------------
1999 1998 1999 1998
------------------------------------------------------------------------
Revenues $116,334 $88,070 $284,428 $169,583
Direct costs 76,138 61,043 186,892 113,949
------------------------------------------------------------------------
Gross profit 40,196 27,027 97,536 55,634
Selling, general and
administrative 27,026 17,856 68,524 38,630
------------------------------------------------------------------------
Earnings before
depreciation and
amortization, interest
and income taxes
(EBITDA) 13,170 9,171 29,012 17,004
Depreciation and other
amortization 1,631 953 4,194 2,304
Interest, net 1,772 1,919 5,146 3,113
------------------------------------------------------------------------
Earnings before income
taxes and goodwill
charges 9,767 6,299 19,672 11,587
------------------------------------------------------------------------
Income taxes:
Current 975 537 1,834 1,647
Deferred 1,250 1,345 2,801 1,725
-----------------------------------------------------------------------
2,225 1,882 4,635 3,372
------------------------------------------------------------------------
Net earnings before
goodwill charges 7,542 4,417 15,037 8,215
Goodwill charges,
net of tax 1,288 898 3,687 2,128
------------------------------------------------------------------------
Net earnings $6,254 $3,519 $11,350 $6,087
------------------------------------------------------------------------
------------------------------------------------------------------------
Earnings per share:
Basic $0.09 $0.06 $0.17 $0.12
Fully diluted $0.09 $0.06 $0.17 $0.12
Earnings per share before
goodwill charges:
Basic $0.11 $0.07 $0.23 $0.16
Fully diluted $0.11 $0.07 $0.22 $0.15
Weighted average number
of shares outstanding
(in thousands):
Basic 69,178 59,454 65,008 50,074
Fully diluted 73,086 65,969 68,768 56,204
------------------------------------------------------------------------
MOSAIC GROUP INC.
Consolidated Balance Sheets
(September 30, 1999 - Unaudited)
(In thousands of dollars)
------------------------------------------------------------------------
September 30, December 31,
1999 1998
------------------------------------------------------------------------
Assets
Current assets:
Cash and short-term investments $ 4,945 $ 4,735
Accounts receivable 65,059 54,587
Work in progress and unbilled
revenue 15,870 10,408
Prepaid expenses 6,362 3,888
------------------------------------------------------------------------
92,236 73,618
Property and equipment 18,859 9,640
Goodwill, net of accumulated
amortization 197,946 184,510
Other assets 5,868 4,217
------------------------------------------------------------------------
$ 314,909 $ 271,985
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ 5,105 $ 1,590
Accounts payable and accrued
liabilities 55,270 40,785
Deferred revenue 28,050 27,247
Accrued acquisition liabilities 6,848 13,121
Income taxes payable 5,169 1,979
Current portion of long-term debt 343 1,471
------------------------------------------------------------------------
100,785 86,193
Long-term debt 41,967 66,075
Deferred income taxes 3,177 1,073
Shareholders' equity:
Share capital 145,486 98,415
Contributed surplus - 317
Foreign currency translation
adjustment (902) 6,866
Retained earnings 24,396 13,046
------------------------------------------------------------------------
168,980 118,644
------------------------------------------------------------------------
$ 314,909 $ 271,985
------------------------------------------------------------------------
------------------------------------------------------------------------
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Mosaic Group Inc.
Ben W. Kaak
EVP & CFO
(416) 813-4272
kaakb@mosaicgroupinc.com
or
Mosaic Group Inc.
Catherine Linley
Public Relations
(416) 813-4277
www.mosaicgroupinc.com |
