/EINPresswire.com/ -- TORONTO, ONTARIO -- (Marketwired) -- 08/16/16 -- KGIC Inc. ("KGIC" or the "Company") (TSX VENTURE: LRN) today announced financial results for the three and six months ended June 30, 2016. The Company's financial statements and management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2016 are available on SEDAR (www.sedar.com). The MD&A discusses both reported EBITDA and adjusted EBITDA that is designed to report normalized EBITDA that gives the reader a better sense for what are sustainable earnings. Financial references are in Canadian dollars unless otherwise specified.

"The Company's turnaround strategy is to first streamline its revenue base, eliminate redundant operational expenses that would impact negatively on profitability and then expand and grow revenue in those lucrative markets. The reduction in adjusted negative EBITDA from school operations of 55% in the second quarter of 2016 compared to the same period in the prior year, demonstrates that the Company is on a rapid progressive path to near term profitability," said Alex MacGregor, President and Chief Executive Officer.

Financial Performance

The table below summarizes key metrics that compares three months results within the Company's school operations for June 30, 2016 and June 30, 2015:

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                                          June 30,       June 30,
Three months ended                            2016           2015   % Change
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Tuition revenue                      $   5,818,068  $   8,224,762       -29%
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Other income                             1,350,216      2,231,616       -39%
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Total revenue                            7,168,284     10,456,378       -31%
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Gross profit                               594,178        539,524        10%
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General and administrative expenses      3,421,414      6,371,150       -46%
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Loss from Continuing Operations
 before other items                     (3,610,163)   (17,098,174)       79%
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Adjusted EBITDA                      $  (2,448,842) $  (5,476,789)       55%
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The Company reported a net loss of $3.6 million for the second quarter of 2016, or a loss of $0.02 per share, compared to a net loss of $17.1 million, or a loss of $0.095 per share for the same period in 2015. Adjusted negative EBITDA was negative $2.4 million, or -$0.013 per share for the second quarter of 2016 compared to negative $5.5 million, or -$0.034 per share for the same period in 2015. In the second quarter of 2016, adjusted negative EBITDA was reduced by 55% over the same period last year in 2015.

Cash flow from operations was negative $1.9 million in the second quarter of 2016 compared to negative $5.1 million for the same period in 2015. The Company's direct costs were $6.6 million in the second quarter of 2016. Direct costs represented 92% of total revenue in the second quarter of 2016 as opposed to 95% for the same period in 2015 due to reduced commissions and other direct costs.

Selling, General and Administrative (SG&A) expenses were $3.4 million in the second quarter of 2016, or approximately 48% of total revenue, which was a decrease of 46% over the same period prior year. SG&A was lower this quarter due to the improved integration of common costs across all campuses, systematic reduction of redundant expenses and improved internal cost control measures. The Company expect this ratio to improve further for the remainder of 2016.

The decline in tuition revenues of 29% in the second quarter of 2016 ($5.8 million), when compared to the same period in the prior year 2015 ($8.2 million), is partially attributable to reduction in the number of schools and campus locations from twenty-eight campuses as of June 30, 2015 to twenty-two campuses as of June 30 2016, The six closed campuses collectively contributed approximately $0.9 million to the second quarter tuition revenue in 2015. Adjusting for the tuition revenues lost from closed schools, the adjusted decline in tuition revenue in the second quarter of 2016 compared to adjusted revenue in second quarter of 2015 is approximately 21%.

In addition, reduction in tuition revenue in the second quarter of 2016 is also attributable to the loss of students from the discontinued South Korean student recruitment agencies. New management believes that improved relationships with student recruitment agencies coupled with implementation of the new marketing plan that diversifies student recruitment to China, India and Brazil will improve revenues. These initiatives are well underway and expected to increase tuition revenues as well as improve profitability due to lower recruitment commission rates in these markets.

"In the latest quarter, new management has successfully stabilized the business, implemented better internal controls and delivered a solid quarter of recovery. This was achieved in an environment that saw significant challenges in the fourth quarter of 2015 and a seasonally low point for the company. New management is well along on its stated objective of delivering increased shareholder value."

"The last two consecutive fiscal quarters of strong recovery clearly demonstrates better financial discipline and definitive turnaround under the new management," stated Dr. Alex MacGregor, President and Chief Executive Officer.

About KGIC Inc.

KGIC Inc. is an educational organization that provides premium education services at its private English as a Second Language ("ESL") Schools, High School, Career Colleges and Community Colleges across Canada in Ontario and British Columbia. The Company owns and operates twenty-one (21) campuses in Ontario and British Columbia and enrolls approximately 20,000 students yearly in various English language and career training educational courses.

KGIC Inc. owns and operates private English as a Second Language (ESL) Schools, Career Colleges and Community Colleges in Toronto, Vancouver and Victoria.

Forward-Looking Information and Statements

This news release includes certain forward-looking information and statements within the meaning of Canadian securities laws. Such forward-looking information and statements are not representative of historical facts or information or current condition, but instead represent only the Company's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company's control. Generally, such forward-looking information or statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken, "will continue", "will occur" or "will be achieved". The forward-looking information contained herein includes information relating to the Company's operating results. By identifying such information and statements in this manner, the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.

Any number of important factors could cause actual results to differ materially from these forward-looking statements as well as future results including, but not limited to, risks relating to: the Company's ability to service its outstanding indebtedness and the impact of that indebtedness on the Company's ability to raise additional capital, fund and maintain operations or meet business objectives; the Company's ability to comply with the terms of the amended forbearance agreement with Bank of Montreal and the consequences of any breach or default thereunder; the Company's ability to successfully exit forbearance; the Company's ability to complete any proposed recapitalization or restructuring activities on terms acceptable to the Company or at all and the expected cost savings related thereto; the fact that new management of the Company, including the recently appointed Chief Executive Officer and Interim Chief Financial Officer, have had limited experience with the Company and its operations and have not had sufficient time to fully analyze all facets of the Company's business; the impact of negative or unfavourable rumours in the marketplace on the Company's brands and student enrollment; any of the Company's announced or proposed acquisitions failing to close or becoming delayed before closing; carrying on business and activities in international jurisdiction where Canadian laws do not apply; any loss of certain key personnel; levels of student enrolment; delays in rolling out online education programs; delays to the completion of any planned initiatives or the inability to complete those initiatives; competition in the educational services market; and currency fluctuations. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on any forward-looking information or statements contained in this press release.

The forward-looking information and statements contained in this press release is made as of the date hereof, and the Company does not undertake to update any forward-looking information and/or statement that is contained or referenced herein, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. All subsequent written and oral forward looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice.

Caution Regarding Non-IFRS Financial Measures - The Company references certain measures in this press release, which do not have a standardized meaning as prescribed by International Financial Reporting Standards ("IFRS") and are unlikely to be comparable to similar measures presented by other issuers. These non-IFRS measures have been presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company, but should not be considered in isolation or as a substitute for, or more meaningful than, measures prepared in accordance with IFRS, such as net income (loss) or cash flow from operating activities. Please refer to the Company's Management's Discussion and Analysis as at and for the three and nine months ended September 30, 2015 for a reconciliation of these non-IFRS measure to measures prescribed by IFRS.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contacts:
Alex MacGregor
Chief Executive Officer
KGIC Inc.
(416) 969-9800
amacgregor@loyalistgroup.com

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