Lumine Group Inc. Announces Results for the Three and Six Months Ended June 30, 2023

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Published Aug 03, 2023 • 13 minute read

TORONTO, Aug. 03, 2023 (GLOBE NEWSWIRE) — Lumine Group Inc. (“Lumine Group” or “the Company”) announces financial results for the three and six months ended June 30, 2023. All amounts referred to in this press release are in US dollars unless otherwise stated.

The following press release should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2023, management’s discussion and analysis (“MD&A”) for the three and six months ended June 30, 2023, the audited consolidated financial statements of Lumine Group (Holdings) Inc. (“Lumine Holdings”) for the year ended December 31, 2022, and the Company’s MD&A for the year ended December 31, 2022, all of which can be found on SEDAR at www.sedar.com. Additional information about Lumine Group is also available on SEDAR and on Lumine Group’s website www.luminegroup.com.

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Q2 2023 Headlines:

Revenue grew 112% to $129.9 million compared to $61.3 million in the same quarter prior year (including 1% organic growth after adjusting for foreign exchange impacts). The Company generated operating income of $36.4 million during the quarter, a 100% increase from $18.2 million in the same quarter prior year. An expense of $496.6 million was incurred in the quarter related primarily to the increase in fair value of the redeemable preferred and special securities, of which, $476.6 million is related to the convertible shares and $20 is related to the dividend payable. Fair value of the preferred and special securities is primarily dependent on the price movement of the Company’s subordinate voting shares. The Company generated a net loss of $489.6 million during the quarter, from net income of $8.8 million in the same quarter prior year. The net loss is primarily related to the redeemable preferred and special securities expense. Cash flows from operations (“CFO”) increased $14.3 million to $22.4 million compared to $8.1 million in Q2 2022, representing an increase of 176%. Free cash flow available to shareholders (“FCFA2S”) increased $10.0 million to $17.3 million compared to $7.3 million in Q2 2022, representing an increase of 136%.

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Year-to-Date Q2 2023 Headlines:

Revenue grew 86% to $225.3 million compared to $121.4 million in the same six-month period prior year (including 1% organic growth after adjusting for foreign exchange impacts). The Company generated operating income of $58.0 million in the six-month period ended June 30, 2023, an increase of 66% from $34.9 million in the same period prior year. An expense of $1,151.2 million was incurred in the six-month period ended June 30, 2023 related to the increase in fair value of the redeemable preferred and special securities, of which, $1,123.1 million is related to the convertible shares and $28 is related to the dividend payable. Fair value of the preferred and special securities is primarily dependent on the price movement of the Company’s subordinate voting shares. The Company generated a net loss of $1,141.2 million during the six-month period ended June 30, 2023, from net income of $16.7 million in the same period prior year. The net loss is primarily related to the redeemable preferred and special securities expense. CFO increased $24.4 million to $37.4 million compared to $12.9 million in the six-month period ended June 30, 2022, representing an increase of 189%. FCFA2S increased $17.7 million to $29.0 million compared to $11.3 million in the six-month period ended June 30, 2022, representing an increase of 156%.

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Total revenue for the three months ended June 30, 2023 was $129.9 million, an increase of 112%, or $68.6 million, compared to $61.3 million for the comparable period in 2022. For the six months ended June 30, 2023, total revenue was $225.3 million, an increase of 86%, or $103.8 million, compared to $121.4 million for the comparable period in 2022. The increase for the three and six month periods is primarily attributable to growth from acquisitions. The Company experienced organic growth of 0% and -4% for the three months and six months ended June 30, 2023, respectively, or +1% and +1%, respectively, after adjusting for foreign exchange impacts. For acquired companies, organic growth is calculated as the difference between actual revenues achieved by each business in the financial period following acquisition, compared to the estimated revenues they achieved in the corresponding financial period preceding the date of acquisition by the Company. Organic growth is not a standardized financial measure and might not be comparable to measures disclosed by other issuers.

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Operating income for the three months ended June 30, 2023 was $36.4 million, an increase of 100%, or $18.2 million, compared to $18.2 million for the same period in 2022. Operating income for the six months ended June 30, 2023 was $58.0 million, an increase of 66%, or $23.1 million, compared to $34.9 million for the same period in 2022. The increase for the three and six month periods is primarily attributable to growth from acquisitions. Operating income is not a standardized financial measure and might not be comparable to measures disclosed by other issuers. See “Non-IFRS Measures”.

Net loss for the three months ended June 30, 2023 was $489.6 million compared to net income of $8.8 million for the same period in 2022. Net loss for the six months ended June 30, 2023 was $1,141.2 million compared to net income of $16.7 million for the same period in 2022. The decrease in net income for the three and six month periods is primarily attributable to an expense of $496.6 million for the three months ended June 30, 2023 and $1,151.2 million for the six months ended June 30, 2023 related to fair value adjustments and accrued dividends on the redeemable preferred and special securities issued in relation to the acquisition of WideOrbit and public listing of Lumine Group.

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For the three months ended June 30, 2023, CFO increased $14.3 million to $22.4 million compared to $8.1 million for the same period in 2022 representing an increase of 176%. For the six months ended June 30, 2023, CFO increased $24.4 million to $37.4 million compared to $12.9 million for the same period in 2022 representing an increase of 189%. The primary reason for the increase is that CFO includes the impact of changes in non-cash operating assets and liabilities exclusive of effects of business combinations or, changes in non-cash operating working capital (“NCOWC”) which improved during the six months ended June 30, 2023 compared to the same period prior year.

For the three months ended June 30, 2023, FCFA2S increased $10.0 million, or 136%, to $17.3 million compared to $7.3 million for the same period in 2022. For the six months ended June 30, 2023, FCFA2S increased $17.7 million, or 156%, to $29.0 million compared to $11.3 million for the same period in 2022. The increase is primarily a result of higher CFO during the period. FCFA2S is not a standardized financial measure and might not be comparable to measures disclosed by other issuers. See “Non-IFRS Measures”.

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Non-IFRS Measures

Operating income (loss) refers to income (loss) before income taxes, amortization of intangible assets, redeemable Preferred and Special Share expense, and finance and other expenses (income). We believe that operating income is useful supplemental information as it provides an indication of the profitability of the Company related to its core operations. Operating income (loss) is not a recognized measure under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Accordingly, readers are cautioned that operating income (loss) should not be construed as an alternative to net income (loss).

The following table reconciles operating income to net income:

Three months ended
June 30, Six months ended
June 30, 2023 2022 2023 2022 Net income (loss) (489.6) 8.8 (1,141.2) 16.7 Adjusted for: Amortization of intangible assets 21.9 7.3 36.7 14.1 Redeemable preferred and special securities expense 496.6 – 1,151.2 – Finance and other expense (income) 4.3 (0.7) 6.3 (1.0) Income tax expense (recovery) 3.2 2.7 5.0 5.2 Operating income (loss) 36.4 18.2 58.0 34.9

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Free cash flow available to shareholders ‘‘FCFA2S’’ refers to net cash flows from operating activities less interest paid on lease obligations, interest paid on bank debt, transaction costs on bank debt, repayments of lease obligations, dividends paid to redeemable preferred and special securities holders, and property and equipment purchased. The Company believes that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if Lumine Group does not make any acquisitions, or investments, and does not repay any debts. While the Company could use the FCFA2S to pay dividends or repurchase shares, the Company’s objective is to invest all of its FCFA2S in acquisitions which meet the Company’s hurdle rate.

FCFA2S is not a recognized measure under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Accordingly, readers are cautioned that FCFA2S should not be construed as an alternative to net cash flows from operating activities.

The following table reconciles FCFA2S to net cash flows from operating activities:

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Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Net cash flows from operating activities: 22.4 8.1 37.4 12.9 Adjusted for: Interest paid on lease obligations (0.2) (0.0) (0.3) (0.1) Interest paid on other facilities (3.2) – (3.6) – Credit facility transaction costs – – (1.8) – Payment of lease obligations (1.5) (0.6) (2.4) (1.4) Dividends paid (0.0) – (0.0) – Property and equipment purchased (0.2) (0.2) (0.4) (0.2) Free cash flow available to shareholders 17.3 7.3 29.0 11.3

Forward Looking Statements

Certain statements herein may be “forward looking” statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Lumine Group or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward looking statements. These forward looking statements reflect current assumptions and expectations regarding future events and operating performance and are made as of the date hereof and Lumine Group assumes no obligation, except as required by law, to update any forward looking statements to reflect new events or circumstances.

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About Lumine Group Inc.

Lumine Group acquires, strengthens, and grows, vertical market software businesses in the communications and media industry. Learn more at www.luminegroup.com.

For further information:

David Nyland
Chief Executive Officer
Lumine Group
mailto:[email protected]

Condensed Consolidated Interim Statements of Financial Position
(In thousands of USD. Due to rounding, numbers presented may not foot.)

Unaudited

June 30, 2023 December 31, 2022 Adjusted Assets Current assets: Cash $ 155,903 $ 67,085 Accounts receivable 87,874 63,923 Unbilled revenue 30,875 9,419 Inventories 501 60 Other assets 29,400 23,050 304,553 163,537 Non-current assets: Property and equipment 4,761 3,115 Right of use assets 13,940 5,349 Deferred income taxes 3,371 2,931 Other assets 14,846 8,492 Intangible assets and goodwill 778,668 210,119 815,586 230,006 Total assets $ 1,120,139 $ 393,543 Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities $ 73,795 $ 64,762 Due to related parties, net 2,430 35,466 Current portion of bank debt 50,653 975 Deferred revenue 82,530 61,979 Provisions 1,390 22 Acquisition holdback payables 735 1,769 Lease obligations 5,825 2,069 Income taxes payable 15,996 12,217 Preferred and Special Securities 2,751,285 – 2,984,639 179,259 Non-current liabilities: Deferred income taxes 139,875 30,579 Bank debt 141,199 18,138 Lease obligations 9,444 4,719 Other liabilities 6,983 7,068 297,501 60,504 Total liabilities 3,282,140 239,763 Equity: Capital stock – – Contributed surplus (1,015,661) 162,692 Accumulated other comprehensive income (loss) (9,223) (8,912) Retained earnings (deficit) (1,137,117) – (2,162,001) 153,780 Subsequent events Total liabilities and equity $ 1,120,139 $ 393,543

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Condensed Consolidated Interim Statements of Income (Loss)
(In thousands of USD, except per share amounts. Due to rounding, numbers presented may not foot.)

Unaudited

Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Adjusted Adjusted Revenue License $ 11,094 $ 9,678 $ 21,743 $ 18,408 Professional services 23,440 12,313 40,267 24,822 Hardware and other 4,728 1,473 9,336 3,754 Maintenance and other recurring 90,623 37,803 153,920 74,449 129,885 61,267 225,266 121,433 Expenses Staff 71,285 31,146 119,904 63,021 Hardware 3,132 747 6,451 2,097 Third party license, maintenance and professional services 8,050 2,923 12,785 5,345 Occupancy 789 443 1,566 857 Travel, telecommunications, supplies, software and equipment 5,214 2,570 9,886 4,836 Professional fees 2,919 3,044 10,232 3,853 Other, net (94) 1,108 2,688 4,184 Depreciation 2,195 1,099 3,705 2,310 Amortization of intangible assets 21,873 7,339 36,709 14,063 115,363 50,419 203,926 100,566 Redeemable Preferred and Special Securities expense 496,588 – 1,151,203 – Finance and other expenses (income) 4,332 (654) 6,257 (1,034) 500,920 (654) 1,157,460 (1,034) Income (loss) before income taxes (486,398) 11,502 (1,136,120) 21,901 Current income tax expense (recovery) 10,649 7,296 18,162 11,703 Deferred income tax expense (recovery) (7,455) (4,641) (13,125) (6,515) Income tax expense (recovery) 3,194 2,655 5,037 5,188 Net income (loss) $ (489,592) $ 8,847 $ (1,141,157) $ 16,713 Weighted average shares outstanding: Basic 74,008,247 N/A 70,914,357 N/A Diluted 253,106,712 N/A 236,914,312 N/A Earnings per share: Basic and diluted $ (6.62) N/A $ (16.09) N/A

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Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(In thousands of USD. Due to rounding, numbers presented may not foot.)

Unaudited

Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Adjusted Adjusted Net income (loss) $ (489,592) $ 8,847 $ (1,141,157) $ 16,713 Items that are or may be reclassified subsequently to net income (loss): Foreign currency translation differences from foreign operations and other (900) (9,624) (311) (12,243) Other comprehensive (loss) income for the year, net of income tax (900) (9,624) (311) (12,243) Total comprehensive income (loss) for the year $ (490,492) $ (777) $ (1,141,468) $ 4,470

Condensed Consolidated Interim Statement of Changes in Equity
(In thousands of USD. Due to rounding, numbers presented may not foot.)

Unaudited

Six months ended June 30, 2023 Capital stock Contributed surplus Accumulated other comprehensive (loss) income Retained earnings (deficit) Total equity Balance at January 1, 2023 $ – $ 162,692 $ (8,912) $ – $ 153,780 Total comprehensive income (loss) for the year: Net income (loss) – – – (1,141,157) (1,141,157) Other comprehensive income (loss): Foreign currency translation differences from foreign operations and other – – (311) – (311) Total other comprehensive income (loss) for the year – – (311) (1,141,157) (1,141,468) Total comprehensive income (loss) for the year – – (311) (1,141,157) (1,141,468) Transaction with Parent, recorded directly in equity Capital contributions by Parent – 22,451 – – 22,451 Amalgamation with Lumine Group (Holdings) Inc. – (1,200,804) – – (1,200,804) Special Share conversion – – – 4,040 4,040 Balance at June 30, 2023 $ – $ (1,015,661) $ (9,223) $ (1,137,117) $ (2,162,001)

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Condensed Consolidated Interim Statement of Changes in Equity
(In thousands of USD. Due to rounding, numbers presented may not foot.)

Unaudited and adjusted Six months ended June 30, 2022 Capital stock Contributed surplus Accumulated other comprehensive (loss) income Retained earnings (deficit) Net parent investment Total equity Balance at January 1, 2022 $ – $ – $ 3,229 $ – $ 169,920 $ 173,149 Total comprehensive income (loss) for the year: Net income (loss) – – – – 16,713 16,713 Other comprehensive income (loss): Foreign currency translation differences from foreign operations and other – – (12,243) – – (12,243) Total other comprehensive income (loss) for the year – – (12,243) – 16,713 4,470 Total comprehensive income (loss) for the year – – (12,243) – 16,713 4,470 Transactions with Parent, recorded directly in equity Capital contributions – – – – 31,600 31,600 Dividends to Parent – – – – (44,781) (44,781) Balance at June 30, 2022 $ – $ – $ (9,014) $ – $ 173,452 $ 164,439

Condensed Consolidated Interim Statements of Cash Flows
(In thousands of USD. Due to rounding, numbers presented may not foot.)

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Unaudited Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Adjusted Adjusted Cash flows from (used in) operating activities: Net income (loss) $ (489,592) $ 8,847 $ (1,141,157) $ 16,713 Adjustments for: Depreciation 2,195 1,099 3,705 2,310 Amortization of intangible assets 21,873 7,339 36,709 14,063 Contingent consideration adjustments (3,149) 281 (2,478) 1,425 Preferred and Special Securities expense (income) 496,588 – 1,151,203 – Finance and other expenses (income) 4,332 (654) 6,257 (1,034) Income tax expense (recovery) 3,194 2,655 5,037 5,188 Change in non-cash operating assets and liabilities exclusive of effects of business combinations (6,357) (10,552) (10,388) (23,260) Income taxes (paid) received (6,679) (886) (11,512) (2,459) Net cash flows from (used in) operating activities 22,406 8,129 37,375 12,946 Cash flows from (used in) financing activities: Interest paid on lease obligations (167) (34) (259) (65) Interest paid on bank debt (3,249) – (3,591) – Cash transferred from (to) Parent (7,165) 66,935 (11,835) 70,127 Proceeds from issuance of bank debt – – 175,000 – Repayments of bank debt (410) – (654) – Transaction costs on bank debt – – (1,771) – Payments of lease obligations (1,525) (619) (2,365) (1,363) Issuance of Preferred Shares to Parent – – 181,484 – Dividends paid (12) – (12) – Net cash flows from (used in) in financing activities (12,528) 66,283 335,997 68,699 Cash flows from (used in) investing activities: Acquisition of businesses – (79,845) (314,760) (79,845) Cash obtained with acquired businesses (0) 2,871 33,965 2,871 Post-acquisition settlement payments, net of receipts (2,307) 84 (2,669) (2,964) Property and equipment purchased (180) (162) (421) (224) Other investing activities (657) – (657) – Net cash flows from (used in) investing activities (3,143) (77,053) (284,542) (80,163) Effect of foreign currency on cash and cash equivalents (314) (218) (12) (27) Increase (decrease) in cash 6,421 (2,859) 88,818 1,456 Cash, beginning of period 149,481 31,424 67,085 27,110 Cash, end of period $ 155,902 $ 28,566 $ 155,903 $ 28,566
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