Toronto, ON / TheNewswire / November 29, 2016 - NTG Clarity Networks Inc. (TSX.V:NCI), a world leader in the telecommunications OSS/BSS market, today reported third quarter year to date 2016 revenues of $10,773,204, as compared to $11,660,121 in 2016, an 8% decrease (All amounts in Canadian dollars).

 

As previously reported, during the fourth quarter of 2015 and the first half of 2016, the Company significantly expanded its location and customer base with new customers in Saudi Arabia, Egypt, and Kuwait.  The increased costs from this expansion, coupled with the delay in new revenue due mainly to the oil price weakness, has posed significant challenges for the Corporation over the past months. This has resulted in lower than expected financial performance during 2016.  To address these challenges, management continued to reduce costs during the third quarter and is in the midst of several contract negotiations to boost revenues going forward.

 

For the three months ended September 30, 2016, revenues were $3,262,204; a decrease of 10% over the same period in 2015. This was due to the lower revenue in KSA as renewals with some customers have been delayed. Q3 2016 revenue was 90% professional services, 2% product related and 8% hardware and field services.

 

Gross margin for the three months was 36% (Q3 2015: 43%) as the Company rolled out several new software products and services. New projects are now up and running and resource/maintenance costs have levelled out. We expect gross margins to stabilize between 40-45% as the product revenue increases.

 

Selling expenses for the third quarter increased to $605,939 (Q3 2015: $342,754; Q2 2016: $897,278). This amount was higher compared to the same period in 2015 as we worked to obtain new customers/projects in Egypt, KSA and Kuwait. It has however improved compared to Q2 2016, as we work to control our selling costs, while continuing to expand our footprint with existing customers.

 

General and administration (G&A) decreased from Q2 levels to $1,072,884 (Q3 2015: $456,141, Q2 2016: $1,312,437). G&A expenses remain higher compared to the same period last year as we continue to retain highly skilled personnel in expectation of new projects.

 

For the nine months ended September 30, 2016, revenues were $10,773,204 compared to $11,660,121 during the same period in 2015, a decrease of 8%. The year to date decrease was a result of the slowing economy in the Middle East resulting from the lower oil prices.

 

Gross margin for the nine months was 40% (2015: 39%). The small increase in the gross margin comes as we work to optimize our expenses for ongoing projects and resources.

 

Selling expenses increased significantly to $2,008,689. This increase was due to travel, accommodation and marketing expenses for our sales force in Egypt, KSA, California and Kuwait, as we work to maintain our market share and acquire new customers. As of the end of Q2 2016, we no longer maintain an ongoing presence in California.

 

General and administration (G&A) increased to $3,850,572 for the first nine months of 2016 from $1,771,467 during the same period in 2015.  The significant increase was due mainly to higher salaries to retain our highly skilled personnel in expectation of new projects, higher consulting and occupancy costs for our new offices in Oman and Kuwait, and increased banking fees and insurance costs.

 

For Q3 2016, the Corporation recorded a net loss of ($881,497) compared to a net income of $254,260 for the same period in 2015. For the nine months ended September 30, 2016, the Corporation recorded a net loss of ($3,877,251) compared to a net income of $1,143,019 in 2015. NTG has been affected by the oil price reductions and the consequential slowing of the economy in the Middle East. We continue to work to reduce G&A costs, as contracts allow, and to optimize marketing and selling costs, based on our revenue. As a result, the loss in Q3 2016 was 13% smaller than Q2 2016 and 55% smaller than Q1 2016.

 

Income statement highlights for the three and nine months ended September 30, 2016 and 2015

	3 Months Ended				9 Months Ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
REVENUE	$	3,262,742	$	3,626,919	$	10,773,204	$	11,660,121
COST OF SALES		2,099,286		2,056,247		6,443,560		7,124,131
GROSS PROFIT	$	1,163,456	$	1,570,672	$	4,329,645	$	4,535,990
Expenses		1,979,723		1,205,977		6,920,644		3,843,645
Foreign exchange loss (gain)		32,772		148,878		848,898		(412,231)
Other comprehensive income - Exchange loss (gain) on translation		32,458		(38,443)		437,354		(38,443)
Net Income (Loss)	$	(881,497)	$	254,260	$	(3,877,251)	$	1,143,019
Per Share	$	(0.02)	$	0.01	$	(0.09)	$	0.03

Balance Sheet Highlights for the nine months ended September 30, 2016 and December 31, 2015

	September 30, 2016			Dec. 31, 2015
Current Assets	$	9,839,298		$	11,887,900
Current Liabilities	$	10,109,746		$	7,220,191
Long-Term Debt	$	0		$	0
Shareholder’s Equity	$	5,834,263		$	9,592,137

 

NTG Clarity continues to work on a number of prospective contracts as the Company widens its reach into new geographical regions while serving existing customers in established areas.  As revenues increase from the recent expansion, management expects to return the Company to profitability and lay the foundation for continued growth in the coming years.

  

About NTG Clarity Networks Inc.

NTG Clarity Networks’ vision is to be a global leader in providing networking solutions. As a Canadian company established in 1992, NTG Clarity has delivered networking, IT and network enabled application software solutions to network service providers and large enterprises. More than 400 network professionals provide design, engineering, implementation, software development and security expertise to the industry’s leading network service providers and enterprises.

 

Forward Looking Information

Certain statements in this release, other than statements of historical fact, are forward looking information that involves various risks and uncertainties. Such statements relating to, among other things, the prospects for the company to enhance operating results, are necessarily subject to risks and uncertainties, some of which are significant in scope and nature.

 

These uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These and all subsequent written and oral forward looking statements are based on the estimates and opinions of the management on the dates they are made and expressly qualified in their entirety by this notice. The Company assumes no obligation to update forward looking statements should circumstances or management's estimates or opinions change.

 

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

For Further Information:

Doren Quinton, President QIS Capital

Investor Relations

Ph: 250-377-1182

Fax: 250-377-1183

Email: info@smallcaps.ca

 

Kristine Lewis, President, NTG Clarity Networks Inc.

Ph: 905-305-1325

Fax: 905-752-0469

Email: klewis@ntgclarity.com