Ms. Kristine Lewis reports

NTG CLARITY NETWORKS ANNOUNCES 2018 YEAR-END FINANCIAL RESULTS

NTG Clarity Networks Inc. has released its year-end results for the fiscal year ended Dec. 31, 2018.

Quarter-over-quarter revenues remained reasonably consistent for the first three quarters of 2018, however, the fourth quarter of 2018 had a significant decrease in revenue, resulting in an 18-per-cent reduction to $11,706,467, compared with $14,359,523 reported in the prior year. Lower sales in KSA (32 per cent) and Kuwait (27 per cent) were partially offset by an increase in Egypt revenue. The contribution of product-related revenue was higher in 2018, and the company anticipates this to continue going forward as the company works to make product sales a more balanced part of the company's revenue stream.

The gross margin for the year ended Dec. 31, 2018, was 44 per cent compared with 35 per cent in 2017. Margins were stronger during the year largely as a result of NTG's continuing efforts to optimize costs to its revenue. Realistic margins are anticipated to be between 35 to 40 per cent, based on product mix.

NTG Clarity's operating expenses were down 21 per cent to $4,211,666 in 2018, compared with $5,364,665 in the prior fiscal year. These cost savings were highlighted by lower marketing salary costs and a 32-per-cent decrease in selling and marketing activities that included fewer trade shows and significantly less travel for sales personnel. The company achieved a 17-per-cent decrease in general and administrative (G&A) costs as NTG continues to optimize staff, salaries and consultants in Canada and KSA. The corporation also recognized a foreign currency exchange gain of $260,104 in 2018, compared with a loss of $41,515 in the year ended 2017.

For the year ended Dec. 31, 2018, the corporation saw a significant progress toward profitability with a net loss of $(366,044), compared with a net loss of $(1,116,183) in 2017.

There was also a positive income from operations.

    INCOME STATEMENT HIGHLIGHTS FOR THE YEAR ENDED 
           DEC. 31, 2018, AND DEC. 31, 2017
 
                          Dec. 31, 2018    Dec. 31, 2017

Revenue                     $11,706,467      $14,359,523   
Cost of sales                 6,571,900        9,318,018    
Gross profit                 $5,134,567       $5,041,505    
Operating expenses            4,211,666        5,364,665    
Other expenses                1,276,374          743,951      
Net income (loss)             $(366,044)     $(1,116,183)  
Per share (basic)                $(0.01)          $(0.02)       
Per share (fully diluted)        $(0.01)          $(0.02)       

Egypt

Egypt continues to be a challenging place to do business with continuing restrictions on using foreign currency for business operations, and on moving funds out of the country. The inflation rate has continued to drop from a high of 17 per cent in July to 11.9 per cent at the end of 2018. Interest rates have remained steady for the last eight months at 16.75 per cent. Export Development Canada (EDC) continues to give Egypt a medium- to high-risk rating.

As many international companies are reluctant to do business in the local currency and are leaving the marketplace, the service gap has provided significant growth opportunities for NTG Clarity. Despite the continuing economic challenges in the region, NTG Egypt's revenue contribution continues to be strong. In 2018, Egypt contributed 24 per cent of the corporation's revenue (2017: 18 per cent).

Kingdom of Saudi Arabia (KSA)

NTG has been doing business in KSA for over 13 years, and continuing initiatives continue to show returns with 44 per cent of its professional service work and 36 per cent of its revenue being from KSA (2017: 55 per cent and 44 per cent, respectively). NTG has developed good brand recognition and a solid record over the years, which is an asset to the company's work in the region.

New KSA government policies implemented in 2018 increased the cost of doing business in the country. They include the introduction of a 5-per-cent value-added tax (VAT) on the majority of goods and services, new fees for companies with non-Saudi employees, and significantly higher costs for non-Saudi residency, all introduced in an effort to increase non-oil government revenue. The spending in the government sector was low in 2018, however, this seems to be improving in 2019, and the company looks forward to winning new projects accordingly.

Kuwait

In Kuwait, the company continues to pursue opportunities with existing and potential customers, however, its contract with its major customer will be completed at the end of Q1 2019. In May, 2018, the company signed a professional services frame agreement with another new customer and started billing in the third quarter of 2018.

Kuwait contributed 28 per cent to NTG's revenue in 2018 (2017: 31 per cent).

Oman

In 2018, the company continued work for its customer in Oman, which is using its NTS network inventory and project management modules. The company anticipates additional work into 2019 with change requests, continuing support and additional product licences, and request for new systems.

Oman contributed 11 per cent to NTG's revenue in 2018 (2017: 7 per cent). The product sales in the region have assisted with recurring revenues from maintenance and support, and extra licences.

Outlook

In 2018, management continued its work with optimizing costs to be in line with incoming revenue. Focused collection activities have resulted in a more balanced cash flow, though legacy debt remains a challenge. These activities, along with new customers in Canada and KSA, and expanded projects in Egypt, have resulted in improved results.

Looking toward the future, the company is on the road to returning to profitability in 2019. The company is focusing on capitalizing on the goodwill it has with its existing customers to expand its business and increase its margins. It will concentrate on marketing its products, NTS and StageEM, which are currently in demand and have higher margins.

As in the past, the company's ability to generate positive operating cash flows and report strong revenues and earnings are all critical to its success. The company is confident that it has the management team with the experience and resources to fulfill its vision of growth and profitability.

About NTG Clarity Networks Inc.

NTG Clarity Networks is a leader in Canada in delivering networking, IT (information technology) and network-enabled application software solutions to network service providers and large enterprises. More than 350 network professionals provide design, engineering, implementation, software development and security expertise to the industry's leading network service providers and enterprises.

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