WellPoint Systems Announces Second Quarter Results

WellPoint Systems reported results for the three and six-month periods ended June 30, 2007. All dollar amounts are in Canadian dollars unless otherwise stated.

"Our strong performance in this quarter reflects the conversion of international sales opportunities which helped generate solid organic growth," said Frank Stanford, CEO of WellPoint Systems. "The recent launch of WellPoint Energy Broker highlights our ongoing commitment to releasing new and innovative products to support the long-term growth of the Company. With our recent acquisition of Bolo Systems, Inc., we are well positioned to rapidly bring our products into the significant U.S. Market."

Financial Review

Revenues for the quarter ended June 30, 2007 totaled $9,459,995, up 156% from revenues of $3,699,643 for the quarter ended June 30, 2006. Revenues for the six months ended June 30, 2007 totaled $14,383,046, up 127%, from revenues of $6,335,854 for the six months ended June 30, 2006. License revenue and professional service fees all increased, reflecting the organic growth in WellPoint's products as the Company continues to add to its rapidly growing list of international clientele. U.S. and International revenues represented 62% of total revenue in the six month period ended June 30, 2007.

Direct costs consist of the costs relating to the use of outside contractors, costs arising from Microsoft Business Solutions license and maintenance sales, commissions and agency fees. Direct costs of $3,315,526 for the second quarter of 2007 represented 35% of total revenue as compared to $887,978 or 24% of total revenue for 2006. Direct costs of $4,627,328 for the first six months of 2007 represented 32% of total revenue as compared to $1,445,809, or 23% of total revenue, for the same period in 2006. The increase in the percentage of direct costs relative to revenues largely reflects agency fees associated with a significant sale to a South American Company.

Gross margin percentage decreased to 65% for the second quarter of 2007 compared with 76% for the comparable period of 2006; however, gross margin dollars increased 119% to $6,144,469 in the current quarter from $2,811,665 in the comparable quarter of 2006. Gross margin percentage decreased to 68% for the six months ended June 30, 2007 compared with 77% for the comparable period of 2006. Gross margin increased 100% to $9,755,718 from $4,890,045 in 2006.

General and administrative expenses increased to $3,841,145 for the quarter ended June 30, 2007 as compared with $2,327,260 for the comparable period of 2006; these expenses now represent 41% of revenues as compared to 63% in 2006. General and administrative expenses increased to $6,996,416 for the first six months of 2007 as compared with $3,908,821 for the comparable period of 2006, these expenses now represent 49% of revenues as compared with 62% in 2006. Salaries and benefits account for the largest portion of the general and administrative expense (71% in 2007 compared to 75% in 2006) with the increase attributable to the growth in staff as a result of increased business in 2007. Salaries and benefits accounted for 71 % of general and administrative expense in the first six months of 2007 compared with 75% in 2006.

EBITDA increased 358% in the quarter ended June 30, 2007 to $2,280,646 from the 2006 EBITDA of $498,197. EBITDA increased 174% for the first six months of 2007 to $2,743,764 from 2006 EBITDA of $1,001,638. The increase was largely due to significantly higher revenues in excess of related expenses.

Net income was $916,362 in the second quarter of 2007 compared with $34,119 in the second quarter of 2006. Net income was $826,967 for the first six months of 2007 compared to $163,069 in 2006.

Working capital totaled approximately $1.8 million at June 30, 2007, compared with $2.6 million on December 31, 2006.

Progress toward WellPoint's 2007 key strategy points:

  1. Exploit receptive U.S. & International markets.
  2. - U.S. and International revenue represented 62% of total revenue for the first six months of 2007.

  3. Pursue strategic acquisitions and partnerships that complement a focused corporate strategy.
  4. - Acquired essentially all the assets of Bolo Systems, Inc. on August 13, 2007.

    - WellPoint now owns the most valuable piece of mining intellectual property in the Microsoft application world with the first quarter 2007 acquisition of iSoft.

    - WellPoint continues to look for new acquisition opportunities.

  5. Leverage a differentiated relationship with Microsoft.
  6. - Named the 2007 Microsoft Dynamics(TM) Partner of the Year for Canada.

(1) Non-GAAP Financial Measure

In addition to providing earnings measures in accordance with Generally Accepted Accounting Principles (GAAP), WellPoint presents a non-GAAP earnings measure. This is earnings before interest, taxes, depreciation and amortization (EBITDA). This measure does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. EBITDA is provided to assist investors in determining the ability of WellPoint to generate cash from operations, to service the interest on indebtedness and to fund deferred development costs.

A reconciliation of EBITDA to a GAAP financial measure is shown below:


	                                Three months ended         Six months ended
	                                      30-Jun                    30-Jun
	                                 2007         2006         2007         2006
	                          ---------------------------------------------------
	    EBITDA                $ 2,280,646  $   498,197  $ 2,743,764  $ 1,001,638
	    Add (deduct):
	      Amortization           (476,061)    (320,753)    (885,021)    (549,359)
	      Interest               (222,919)    (143,325)    (366,472)    (289,210)
	      Income taxes           (665,304)           -     (665,304)           -
	                          ---------------------------------------------------
	      Net income (loss)
	       (GAAP financial
	       measure)           $   916,362  $    34,119  $   826,967  $   163,069
	                          ---------------------------------------------------
	                          ---------------------------------------------------
	    
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