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Brainhunter Announces Results For Third Quarter Ended June 30, 2004
15:18 EDT Thursday, August 12, 2004
TORONTO, ONTARIO--(CCNMatthews - Aug. 12, 2004) - THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION TO CANADIAN INVESTORS ONLY.
Brainhunter Inc. ("Brainhunter" or "the "Company") (TSX:BH), a leading provider of Recruiting and Staffing Solutions, is pleased to announce that the results for the third quarter ending June 30, 2004 continue to demonstrate strong performance for both revenues and profitability.
Corporate Highlights of the Quarter Ending June 30, 2004
- Name Change:
Effective May 20, 2004, the Company changed its name from TrekLogic Technologies Inc. to Brainhunter Inc., to better reflect the primary business activities of the Company of being a leading provider of Recruiting and Staffing Solutions and Services.
- Toronto Office Consolidation:
Brainhunter consolidated its four Toronto office locations to one more centrally located office that allows the Company to better manage its internal operations including sales and recruiting and better addresses growth requirements.
- InBusiness Acquisition Finalized:
The acquisition of 100% of the ownership of InBusiness Solutions Inc. in Ottawa was finalized.
Revenues Up $40,802,864 Nine Months Over Nine Months
Revenues compared quarter over quarter from the previous year were up $10,552,464 to $17,462,824 from $6,910,360 for the quarter ending June 30, 2003. Revenues for the nine month period ending June 30, 2004 were $52,316,977, up $40,802,864 from $11,514,113 for the same period the previous year.
The increase is due both to organic growth and the following acquisitions:
- InBusiness Solutions Inc. (May, 2003)
- IT business of ThinkPath Inc. (June, 2003)
- Advanced Solutions Group Inc. (July, 2003)
- Protec Employment Solutions Inc. (August, 2003)
- Prolink Consulting Inc. (October, 2003)
- Sirius Consulting Group Inc. (November, 2003)
The acquisitions have given the Company the critical mass to launch the second phase of its growth strategy, focused largely on organic initiatives divided into two categories; the first capitalizing on industry growth and the second, capturing market share.
Gross Margin Reflects Change in Business Mix
Gross Margin for the quarter was 23% of Revenue versus 31% for the same quarter the previous year. For the nine month period ending June 30 the comparisons are 24% versus 36%. The trend in gross margin as a % of Revenue is due to the dramatic shift in the mix of business to include a much larger component of contract staffing business. It's expected that gross margins will stabilize in the 20% to 23% range over time as contract staffing revenues normalize between 80% and 90% of consolidated revenues. This change in business mix to a large focus on contract staffing is a conscious strategic decision by Brainhunter to emphasize contract staffing initiatives.
Overhead Costs
Overhead costs, consisting of "Other Staffing Costs" and "General, Selling and Administrative" were 19% of Revenue for the quarter ending June 30, 2004, versus 21% of Revenues for the quarter ending June 30, 2003. For the nine months ending June 30, 2004, Overhead costs were 19% of Revenues versus 23% of Revenues for the nine months ending June 30, 2003. This decline reflects the benefit of cost cutting initiatives and taking advantage of capacity within the Brainhunter infrastructure.
Earnings before Interest, Amortization and Income Taxes (EBITDA)
EBITDA for the nine months ended June 30, 2004 was $3,057,753 an increase of $1,529,889 over the comparable amount of $1,527,864 for the nine months ended June 30, 2003.
Income Tax Expense
The Company, pursuant to GAAP requirements, has recorded an expense for income taxes normal for a company of this size and type of business. However, the Company has sufficient tax losses available, as a result of companies acquired in 2003 and in 2002, such that management believes there are sufficient tax loss carry forwards to offset the majority of any income tax liabilities for the fiscal year ending September 30, 2004.
Working Capital and Cash
Working capital at June 30, 2004 was $4,430,649 compared to $6,445,220 at March 31, 2004 and $4,096,100 at September 30, 2003.
At June 30 2004 the Company had cash of $1,477,214 with $4,290,000 drawn on its $7,000,000 in bank lines. The comparable numbers at March 31, 2004 were $2,785,463 of Cash and $3,369,197 drawn against bank lines. At September 30, 2003 the Company had $1,469,182 of Cash and $1,580,000 drawn against the bank lines.
The most significant uses of cash since September have been the acquisitions of Sirius Consulting Group Inc., Prolink Consulting Inc., the remaining publicly-held shares of InBusiness Solutions Inc., the purchase of 750,000 common shares of the Company for $943,750 through a Normal-course Issuer Bid and capital expenditures related to enhancements to the Brainhunter software and leasehold improvements at the Company's new office space, all offset by the equity financing of $10,000,000 closed February 2, 2004.
For the quarter ending June 30, 2004, the Company generated cash flow of $682,419 from operations, versus $555,226 the same period the previous year. The comparable amounts for the nine month periods ending June 30, 2004 and 2003 were $2,940,305 and $1,414,771 respectively.
BRAINHUNTER INC. (formerly TREKLOGIC TECHNOLOGIES INC.)
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED - PREPARED BY MANAGEMENT)
For the three months ended For the nine months ended
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June 30, June 30, June 30, June 30,
2004 2003 2004 2003
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Revenue $ 17,462,824 $ 6,910,360 $ 52,316,977 $ 11,514,113
Cost of revenues 13,403,943 4,787,636 39,760,350 7,395,446
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Gross margin 4,058,881 2,122,724 12,556,627 4,118,667
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Expenses
Other staffing
costs 2,512,117 1,146,747 6,502,547 1,912,885
General, selling,
and administrative 829,283 307,568 2,940,703 677,918
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3,341,400 1,454,315 9,443,250 2,590,803
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Earnings before
interest,
amortization,
and income taxes 717,481 668,409 3,113,377 1,527,864
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Interest expense, net 35,062 32,100 173,072 32,100
Amortization 226,273 164,674 656,045 194,508
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261,335 196,774 829,117 226,608
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Earnings before
income taxes 456,146 471,635 2,284,260 1,301,256
Income taxes 185,454 183,938 784,441 470,657
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Net income 270,692 287,697 1,499,819 830,599
Non-controlling
interest (note 10) - 80,993 - 80,993
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Earnings attributable
to shareholders 270,692 206,704 1,499,819 749,606
Retained earnings,
beginning of period 3,776,544 2,195,408 2,547,417 1,652,506
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Retained earnings,
end of period $ 4,047,236 $ 2,402,112 $ 4,047,236 $ 2,402,112
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Earnings per share
Basic $ 0.006 $ 0.010 $ 0.035 $ 0.026
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Diluted $ 0.005 $ 0.009 $ 0.030 $ 0.022
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Weighted average
number of shares
outstanding
Basic 45,065,947 20,911,398 42,260,785 32,327,008
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted 52,751,815 22,992,394 49,946,653 37,826,344
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BRAINHUNTER INC.
(formerly TREKLOGIC TECHNOLOGIES INC.)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED - PREPARED BY MANAGEMENT)
June 30, September 30,
As at 2004 2003
---------------------------------------------------------------------
ASSETS
Current assets
Cash $ 1,477,214 $ 1,469,182
Accounts receivable 13,313,951 8,851,358
Investment tax credits recoverable
(note 3) 692,670 785,296
Deposits and prepaid expenses 430,237 208,161
Future income tax asset (note 4) 1,000,000 1,000,000
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16,914,072 12,313,997
Capital assets (note 5) 4,062,790 3,178,864
Goodwill and other intangibles (note 6) 12,571,725 2,881,643
Notes due from related parties (note 7) 442,803 442,803
Future income tax asset (note 4) 3,391,012 3,391,012
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$ 37,382,402 $ 22,208,319
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 8) $ 4,290,000 $ 1,580,000
Accounts payable and accruals 7,098,061 4,826,076
Current portion of long-term debt
(note 9) 935,000 1,745,425
Deferred revenue 160,362 66,396
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12,483,423 8,217,897
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Long-term debt (note 9) 1,173,749 1,252,898
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Non-controlling interest (note 10) - 60,761
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Shareholders' equity
Capital stock (note 11) 19,677,994 10,129,346
Retained earnings 4,047,236 2,547,417
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23,725,230 12,676,763
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$ 37,382,402 $ 22,208,319
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BRAINHUNTER INC. (formerly TREKLOGIC TECHNOLOGIES INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - PREPARED BY MANAGEMENT)
For the three months ended For the nine months ended
---------------------------------------------------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
---------------------------------------------------------------------
Cash flows from (used in)
Operating activities
Net income $ 270,692 $ 206,704 $ 1,499,819 $ 749,606
Items not affecting
cash:
Income tax expense 185,454 183,898 784,441 470,657
Amortization 226,273 164,624 656,045 194,508
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682,419 555,226 2,940,305 1,414,771
Changes in non-cash
working capital items
(note 12) 567,032 (1,691,795) 1,141,683 (280,120)
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1,249,451 (1,136,569) 4,081,988 1,134,651
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Financing activities
Issuance of common
shares, net of costs (55,900) 3,490,005 10,492,398 3,631,830
Purchase of common
shares (943,750) (943,750)
Advances to related
parties - 12,801 - 14,332
Proceeds from long-term
debt - - 1,058,620 -
Repayment of long-term
debt (227,555) - (1,793,194) -
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(1,227,205) 3,502,806 8,814,074 3,646,162
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Investing activities
Additions to capital
assets (643,004) (34,727) (1,739,971) (80,015)
Business acquisitions,
net of cash acquired (660,491)(4,295,222) (11,148,059)(4,945,222)
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(1,303,495)(4,329,949) (12,888,030)(5,025,237)
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Net change in cash (1,281,249)(1,963,712) 8,032 (244,424)
Cash - beginning
of period 2,758,463 2,382,592 1,469,182 663,304
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Cash - end of
period $ 1,477,214 $ 418,880 $ 1,477,214 $ 418,880
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Outlook for the Quarter ending September 30, 2004
Brainhunter expects revenues for the quarter ending September 30, 2004 to increase quarter over quarter, and based on expected cost structures, the Company expects Earnings Before Interest Taxes and Depreciation to also improve. The Company has over $18.0 Million of tax loss carry-forwards which expect to be sufficient to offset the bulk of income tax liabilities for the fiscal year ending September 30, 2004.
Backlog and Pipeline
The Company currently has backlog of over $80 Million representing business that is currently in place and being billed. Of this amount, approximately $65 Million will be delivered within the next 12 months. In addition, there is over $100 Million of pipeline opportunities. The pipeline has two components, firm orders received and strategic transactions in process. Currently the company has over $40 Million of firm orders, which traditionally, the company targets a fill rate in the 25% to 35% range in 30 to 60 day time frame following the date a firm order is received.
New Business
The Company has identified a group of approximately 70 customers where being a preferred supplier should translate to in excess of $3 Million of revenues annually per customer. The Company's stated intent and a key driver in the Organic Growth Initiatives is to become a Preferred Supplier with each of these customers within the next 24 months.
In the most recent quarter ending June 30, 2004, Brainhunter's Ottawa division closed an annualized $12.9 million of new business. Over 70% of this business is multi-year contracts. Delivery was expected to begin on a large portion of this business early in the quarter, but was postponed until after the federal election. Additionally, a further annualized $4.7 million of large multi-year contracts has been already won post the June quarter.
In Toronto, Brainhunter has added a new strategic relationship expected to generate in excess of $10 million sales annually. This would be considered part of our strategic relationship pipeline. The existing day-to-day business in the IT sector has been growing steadily. A strategic decision was made in June 2004 to exit the industrial business representing approximately $3.5 million of annual revenues. Additionally, the Engineering Division has been substantially reorganized, accompanied by a number of personnel changes and the discontinuation of its $3.5 million division delivering lower-skilled labour personnel to manufacturing facilities. We expect this reorganization to result in a much stronger sales and recruiting team capable of taking advantage of the significant growth opportunities currently available to the division with a corresponding positive impact on profitability.
About Brainhunter Inc.
Brainhunter is a high value added technology company providing end-to-end recruiting and staffing solutions and services delivered on a scaleable, robust enabling technology platform. The services are provided on a national scale under the brand BRAINHUNTER to a wide variety of corporate and government clients and are divided into two categories:
1. Contract & Permanent Staffing Services ("Staffing Services") are the key focus of the Company. This is a high growth opportunity where revenue is driven from annuity contract and permanent staffing placements and administrative services. The Human Capital Management ("HCM") marketplace, in particular contract staffing solutions, represents over 10% of the North American GDP, including approximately $5.89 billion of contract Staffing Services in Canada alone. Brainhunter's HCM Technology Platform provides a significant competitive advantage allowing Brainhunter to create, develop and manage Strategic Staffing Services relationships with clients where the focus is on providing the client with an end-to-end recruiting and staffing solution with emphasis on becoming the dominant provider of annuity contract staffing and permanent staffing placements and administrative services in Canada. This division currently comprises approximately 90% of Brainhunter's consolidated revenues.
2. Solutions Delivery is comprised of approximately 75 highly specialized technical employees supporting a strong, core, highly profitable solutions business that is an enabler in managing the Brainhunter HCM Technology Platform which provides the engine driving Brainhunter's high growth Staffing Services strategy. Additionally, the solutions division manages the research and development initiatives and ASP infrastructure that drives an ever-increasing licensing and transactions fee revenue stream from Brainhunter HCM Solutions sales; fast growing posting revenues generated from over 55 internally-hosted specialized job boards and specialized project based revenue streams from outsourcing relationships. This division comprises approximately 10% of Brainhunter's consolidated revenues.
Brainhunter has primary offices in Ottawa and Toronto with regionally located sales personnel on a national scale, the most recent addition being in Alberta. Brainhunter has a history of strong profitability, a very strong balance sheet and a strong working capital position. Brainhunter has approximately 150 employees and over 500 staffing contractors.
FOR FURTHER INFORMATION PLEASE CONTACT:
Brainhunter Inc.
John McKimm
Chairman and CEO
(416) 203-1800, Ext 300
John.mckimm@Brainhunter.com
or
Brainhunter Inc.
Robert Prentice
CFO
(416) 225-9900, Ext 310
Robert.prentice@Brainhunter.com
or
The Howard Group Inc.
Grant Howard
(888) 221-0915
info@howardgroupinc.com
www.howardgroupinc.com
The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
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If youve got a CV already the site is fairly slow, if your constructing one as you go, well its pretty tedious. If you can string a good yarn together you should be inundated with employment offers. This is the test.
Fundamentally it just a web-site that brings people together, it could work in the long run, but what is the turnover of staff really like in the real private company world? Not high I would have thought. Staff who are any good, go before they are pushed and those left hanging are the dregs.
Good place to put your CV up I guess and hope it does not get noticed by your boss. Maybe that would get you that raise. I read the other week Canada has a skills shortage or brain drain.
But thats usually employers complaining they can't get cheap qualified staff.