GINSMS Inc. ("GINSMS" or the "Company") (TSX VENTURE:GOK) has announced its
financial results for the third quarter ended December 31, 2012.
PERFORMANCE HIGHLIGHTS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2012
-- The acquisition of Inphosoft Group Pte Ltd ("Inphosoft") was completed
on September 28, 2012. GINSMS's income statement for the quarter ended
December 31, 2012 includes the operating results of Inphosoft Group Pte
Ltd and its subsidiaries for the first time resulting in total revenue
of $477,240, compared to $164,028 for the corresponding quarter the
previous year.
-- Activities for the three-month period ended December 31, 2012 resulted
in a net loss of $343,627, including a non-realized exchange gain of
$48,313 and a non-cash charge to earnings of $346,910 representing
accretion on obligations relative to the convertible debentures and
promissory notes issued in connection with the acquisition of Inphosoft.
For the quarter ended December 31, 2011, the Company recorded a net loss
of $100,023. For the nine months to December 31, 2012, the net loss was
$816,810, compared to a loss of $126,465 for the same period the
previous year.
-- EBITDA turned positive for the first time in six quarters amounting to
$43,921 for the quarter ended December 31, 2012, a substantial
improvement from the deficit of $55,460 recorded during the same quarter
the previous year. This improvement reflects the favourable impact the
acquisition of Inphosoft had on the results of the Company including a
substantial increase in gross margin which increased to 77.2% compared
to 58.6% the same period the previous year. For the nine-month period,
EBITDA was a negative $377,732, compared to a negative $19,361 for the
same period the previous year. The lower EBITDA for the nine-month
period principally reflect much higher losses due to lower revenue
generated by the IOSMS platform and, principally but not exclusively,
substantially higher professional fees due to the acquisition of
Inphosoft.
-- Volume of inter-SMS traffic for the three-month period ended December
31, 2012 was down by 28.7% to 20,117,592 million from the same period
the previous year. When compared to the previous quarter ended September
30, 2012, traffic is down 17.5%. As explained before, GINSMS believes
that this downward trend in SMS traffic is partly caused by cellphone
users migrating to mobile instant messaging ("MIM") applications.
-- Liquidity improved considerably since year end, including cash on hand
of $682,365, up 24.3%. Net current assets as at December 31, 2012 were
$665,136, compared to $614,907 as at March 31, 2012.
SECTION 1.4: RESULTS OF OPERATIONS
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Three-month period Nine-month period
ended ended
December 31, December 31,
Financial Highlights (Unaudited) (Unaudited)
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2012 2012 2011 2011
Revenues $ 477,240 164,028 784,237 528,282
Cost of sales $ (108,731) (67,926) (246,671) (197,076)
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Gross profit $ 368,509 96,102 537,566 331,206
Gross margin % 77.2% 58.6% 68.5% 62.7%
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EBITDA (1) $ 43,921 (55,460) (377,732) (19,361)
EBITDA margin 9.2% (33.8)% (48.2)% (3.7)%
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Net earnings $ (343,627) (100,023) (816.818) (126,465)
Net earnings margin (72.0)% (104.2)% (106.4)% (23.9)%
Net earnings (loss) per
share $
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Basic (0.01) (.00) (.02) (.00)
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Diluted (0.01) (.00) (.02) (.00)
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(1) EBITDA is a non-GAAP measure related to cash earnings and is defined
for these purposes as earnings before income taxes, depreciation and
amortization (share-based compensation included). For comparative
purposes, for the three and nine months ended December 31, 2012, EBITDA
also includes the accretion on obligations of $346,910.
Financial Review for the Three- and Nine-Month Period ended December 31, 2012
Revenue for the third quarter ending December 31, 2012 was $477,240,
representing an increase of 191%, compared to $164,068 during the corresponding
quarter the previous year. 107.7% of the increase is due to the inclusion for
the first time of the revenue from Inphosoft in the consolidated statement of
income as revenue from the Company's IOSMS activities, taken separately,
declined by 7.1%. The decline in the revenue generated from the IOSMS platform
is due to a 28.7% drop in SMS traffic during the quarter ended December 31,
2012, compared to the corresponding quarter the previous year. Note that in
comparison with the immediately preceding quarter ending September 30, 2012,
revenue dropped by 6.6%.
For the nine-month period ended December 31, 2012 revenue increased by 48.5% to
$784,232, compared to the same period the previous year. 131.8% of the increase
in revenue came from Inphosoft as revenue from the IOSMS platform dropped by
15.4%. The drop manifested as SMS traffic during the nine-month period under
review dropped, as can be seen from the table below, by an average of about 28
million SMS or 29.1%.
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Comparisons of Traffic (Inter-SMS) for Past Eight Quarters
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Q4/FY11 Q1/FY12 Q2/FY12 Q3/FY12
Traffic 31,431,278 33,701,750 34,371,080 28,232,252
% variance -.96% 7.2% 1.9% -17.9%
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Comparisons of Traffic (Inter-SMS) for Past Eight Quarters
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Q4/FY12 Q1/FY13 Q2/FY13 Q3/FY13
Traffic 25,013,562 23,784,375 24,371,935 20,117,592
% variance -17.9% -4.9% 2.5% -17.5%
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As mentioned before, GINSMS believes that the lower trend in SMS traffic is
partly caused by cellphone users migrating to OTT (over-the-top) applications
such as Research in Motion's BBM, Apple's Imessage or other cross-platform
mobile messaging applications such as WhatsApp, IM+, Skype or Google Talk. As
the IOSMS platform continues to lose ground, the timing of the acquisition was
critical to allowing GINSMS to continue offering a service which could become
unprofitable on and by itself as the new contracts which become operational
March 31, 2013 no longer offer bundle fees, the core revenue stream of the IOSMS
platform. With the recent arrival of a new competitor, namely M800 Limited, in
GINSMS space, it became obvious that the Company could not retain the bundle
fees and hope to keep a relationship with the MNOs. In order to avoid a scenario
whereby we would lose our close collaborative affiliation with the MNOs,
management has decided to maintain the IOSMS platform operational even though it
could become, depending on the level of traffic it generates, a de facto loss
leader. In the meantime, measures were undertaken to reduce operating costs in
this area of activity including lower salaries and moving to new office space at
about half the cost of the previous rental arrangements.
Inphosoft is now GINSMS' main subsidiary. GINSMS' consolidated results for the
quarter ended December 31, 2012 comprise a full three months of operations from
Inphosoft. Revenue from Inphosoft during that period aggregated $337,227 and is
broken down as follow: Professional Services - $178,222 (52.8%), License fees -
$26,835 (8.0%), and Managed Services (M&S) -$132,171 (39.2%). Professional
Services essentially represent contract work provided customers for an array of
software services and solutions including software installation services,
software customization services, or the design and development of bespoke
software solutions for customers. Software License Fees are derived from
products developed by Inphosoft and which are then licensed for a fee based on a
right-to-use ("RTU") structure which depends on the amount of capacity
purchased. Managed Services comprise support and maintenance services provided
for the customers on a yearly basis. Managed services are typically in the form
of operating and maintaining software solutions for the customer in return for a
monthly fee and a setup fee, where applicable.
The net loss for the quarter ended December 31, 2012 amounted to $343,627,
compared to a loss of $100,023 during the same quarter the previous year. The
loss for the third quarter this fiscal year includes a charge of $346,310
representing accretion on obligations relative to the convertible debentures and
a note payable due later in the next fiscal year (see notes 7 and 8 to the
financial statements) and a net foreign exchange gain of $48,313. EBITDA for the
third quarter ended December 31, 2012 amounted to $43,921 and reflect a
substantial improvement over EBITDA for the corresponding period the previous
year which showed a deficit of $55,460. These results underline a much improved
gross profit picture with gross income increasing by 283.5% to $368,509, the
result of substantially higher gross profit margins at Inphosoft which, on a
fully consolidated basis, translate into a gross margin of 77.2%, compared to
58.6% during the corresponding quarter the previous year.
For the nine months ended December 31, the Company incurred a net loss of
$816,810, compared to a loss of $126,465 during the corresponding quarter the
previous year. Notwithstanding much lower revenue generated by the IOSMS
platform, this is due mainly to a 247.5% increase in professional fees which
amounted to $512,306 for the period, the bulk of it (83.5%) incurred by the
Company before the acquisition and which, in addition to the legal, accountancy
and audit fees, also includes fees for the retention of the services of an agent
together with the fees of a business valuation firm.
For the nine-month period ended on December 31, 2012, EBITDA was a negative
$377,732, compared to a negative $19,361 for the same period the previous year.
This is the result of the substantial losses recorded due to the acquisition of
Inphosoft reflecting the unusually high professional fees incurred in connection
with it. The prevalence of these fees was at its highest during the first six
months of this fiscal year as the acquisition closed just at the end of the
quarter ended September 30, 2012. As a result, the favourable impact on net
income resulting from the acquisition of Inphosoft during the single quarter
ended December 3, 2012 had a much lower incidence on results for the full
nine-month period and therefore EBITDA which, given the loss of $816,810 during
the nine-month period, deteriorated to a deficit of 377,732.
About GINSMS
GINSMS owns 100% of Global Edge Technology, a technology company focused on
providing inter-operator short messaging services to mobile telecom operators in
Hong Kong. Since September 28, 2012 with the acquisition of Inphosoft Group Pte
Ltd, a company whose activities consists in providing mobile data service and
solutions, GINSMS will be focusing more on enterprise messaging needs comprising
mainly of mobile marketing and machine-to-machine applications.
FOR FURTHER INFORMATION PLEASE CONTACT:
GINSMS Inc.
Raymond Richard
Corporate Secretary
450-466-2921
Ginsms (TSXV:GOK)
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