2016
ANNUAL
REPORT
H2H =
HUMAN
TO HUMAN
CONSUMERS
MARKET PLACES
SUPPLY CHAIN
E-SOURCING
MEDIAGRIF IS A PROVIDER
OF INNOVATIVE AND EFFICIENT
E-COMMERCE SOLUTIONS
ABOUT
MEDIAGRIF
OUR MISSION
Our mission is to provide to our customers innovative
and efficient technological solutions. In doing so, we seek
to create value for our customers, our employees and
our shareholders.
WHO WE ARE
In business since 1996, Mediagrif is a Canadian leader
in information technology, owner of several recognized
web and mobile platforms including Jobboom, LesPAC,
Réseau Contact, MERX, InterTrade, Carrus, BidNet and ASC.
Our e-commerce solutions are used by millions
of consumers and businesses in North America
and around the world. Our qualified and experienced
team of 440 employees is spread across our offices
in Canada, the United States and China.
Our shares are traded in the Toronto Stock Exchange
under the symbol “MDF”. To learn more about us,
visit our website at www.mediagrif.com.
MESSAGE TO
SHAREHOLDERS
Dear Shareholders,
We are pleased to present our results for financial year ending March 31, 2016.
Our revenues grew to $73.0 million, an increase of 4% compared to 2015,
while our operating profit reached $23.0 million, up 10%.
ACHIEVEMENTS IN 2016
Our initiatives to stimulate organic growth have shown significant results, particularly
in our MERX, BidNet and InterTrade platforms, which posted more than 10% growth this year.
We revised the development and commercialization strategies of our consumer solutions
(LesPAC, Jobboom, Réseau Contact), which resulted in a positive impact on the traffic
and the revenues of these platforms.
Regarding our uses of funds, we repurchased more than 543,000 shares or 3.5%
of our share capital during financial year 2016, representing an amount of $9.1 million.
We therefore repurchased more than 818,000 shares during the last two years.
After reviewing several acquisition opportunities during the year, we concluded,
on May 31, 2016, the acquisition of Advance Software Concept (ASC) for a price
of $18.5 million. We are very pleased with this addition to our B2B platforms’ portfolio.
ASC, which operates in a high-growth market, has contract management functionalities
that will generate interesting synergies with our MERX and BidNet platforms.
Since the change of management that took place in 2009, our priority has been
to create value for our clients, our employees and our shareholders. We can now
see how this strategy enabled us to increase the revenues, the profits and the market
value of Mediagrif.
OBJECTIVES FOR 2017
We plan on continuing our progression by increasing our investments in the commercialization
and marketing of our solutions that offer the best long term growth potential.
We will also undertake a strategic review of our products and services portfolio to simplify
our diversified business model while continuing to offer our clients a wide range of products
relevant to their needs. We are confident that these initiatives will contribute to Mediagrif’s
further growth.
We wish to reiterate to the shareholders of Mediagrif our engagement to propel
the corporation to new heights and to keep the focus on creating long-term value.
CLAUDE ROY
President and Chief Executive Officer
FACTS AND NUMBERS
REVENUES
(IN MILLIONS OF CA$)
2016 73.0
2015 70.2
2014 65.4
2013 60.7
2012 53.8
EARNINGS PER SHARE
(IN MILLIONS OF CA$)
2016 1.05
2015 1.00
2014 0.80
2013 0.97
2012 0.69
OPERATING PROFIT
(IN MILLIONS OF CA$)
PROFIT FOR THE PERIOD
(IN MILLIONS OF CA$)
2016 23.0
2015 20.9
2014 17.1
2013 19.9
2012 13.2
2016 15.8
2015 15.6
2014 12.7
2013 14.0
2012 9.5
ADJUSTED EBITDA
(IN MILLIONS OF CA$)
ADJUSTED EBITDA MARGIN
(%)
2016 28.6
2015 27.5
2014 24.3
2013 25.2
2012 17.4
2016 39.2
2015 39.2
2014 37.2
2013 41.5
2012 32.3
MANAGEMENT’S DISCUSSION
AND ANALYSIS
FOR THE YEAR ENDED MARCH 31, 2016
The following Management’s Discussion and Analysis (“MD&A”),
which has been prepared as at June 7, 2016, of the financial position
and operating results of Mediagrif Interactive Technologies Inc.
(“Mediagrif” or the “Company”) should be read in conjunction with
the audited consolidated financial statements and accompanying
notes thereto for the year ended March 31, 2016. This discussion
and analysis compares performance for the fiscal years ended
March 31, 2016 and 2015 and for the quarters then ended.
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards (“IFRS”).
Unless indicated otherwise, all dollar amounts are expressed
in Canadian dollars. This MD&A was approved by the Board of
Directors of Mediagrif.
In addition to providing profit measures in accordance with IFRS,
the Company’s statement of income shows operating profit and
earnings before interest, taxes, depreciation, amortization, foreign
exchange gain (loss) and other revenues (expenses) (“Adjusted
EBITDA”) as supplementary earnings measures. Operating profit
and adjusted EBITDA are not intended to be measures that should
be regarded as an alternative to other financial operating
performance measures prepared in accordance with IFRS. Those
measures do not have a standardized meaning prescribed by IFRS
and may not be comparable to similar measures presented
by other companies. Operating profit and adjusted EBITDA are
provided to assist investors in determining the Company’s ability
to generate profitability from its operations and to evaluate its
financial performance.
8
COMPANY PROFILE
Mediagrif (TSX: MDF) is a Canadian leader in information technology, owner
of several recognized web and mobile platforms including Jobboom, LesPAC,
Réseau Contact, MERX, InterTrade, Carrus, and BidNet. Mediagrif’s e-commerce
solutions are used by millions of consumers and businesses in North America and
around the world. The Company has offices in Canada, the United States and China.
MISSION STATEMENT
Our mission is to provide to our customers innovative and efficient technological
solutions. In doing so, we seek to create value for our customers, our employees
and our shareholders.
FINANCIAL HIGHLIGHTS –
FISCAL YEAR ENDED MARCH 31, 2016
+ Revenues increased by 4% to total $73.0 million for fiscal year 2016
compared to $70.2 million for fiscal year 2015.
+ Adjusted EBITDA1 of $28.6 million or 39% of revenues for fiscal year 2016,
including non-recurring expenses of $0.5 million compared to $27.5 million
or 39% of revenues for fiscal year 2015.
+ Profit of $15.8 million ($1.05 per share) for fiscal year 2016 compared
to $15.6 million ($1.00 per share) for fiscal year 2015.
+ Repurchase, under the normal course issuer bid in place, of 3.5% of shares
outstanding (543,276 shares) during fiscal year 2016 for a consideration
of $9.1 million.
+ Renewal of the Credit Agreement, increasing the loan capacity
to $80.0 million ($60.0 million according to previous agreement).
SUBSEQUENT EVENT
On May 31, 2016, the Company acquired substantially all of the assets of Advanced
Software Concepts Inc. (“ASC”) for a $18,500,000 cash consideration subject
to certain adjustments. The acquisition was entirely financed by the Company’s
revolving credit facility.
ASC offers best-in-class contract lifecycle management (CLM) solutions to a
diversified clientele located primarily in North America.
1 See reconciliation of adjusted EBITDA and profit.
9
CONSOLIDATED STATEMENTS OF INCOME AND SELECTED FINANCIAL
INFORMATION
In thousands of Canadian dollars, except per share amounts.
Unaudited and not reviewed by the independent auditor.
2016
$
2015
$
2014
$
2013 (1)
$
2012
$
YEARS ENDED MARCH 31
REVENUES
GROSS MARGIN
OPERATING EXPENSES
General and administrative
Selling and marketing
Technology
73,020
70,247
65,376
60,711
53,824
58,652
56,275
51,520
48,450
42,972
9,323
15,389
10,905
8,475
14,637
12,303
8,571
14,110
11,748
7,896
10,377
10,313
10,398
9,567
9,778
TOTAL OPERATING EXPENSES
35,617
35,415
34,429
28,586
29,743
OPERATING PROFIT
23,035
20,860
17,091
19,864
13,229
Other (expenses) revenues, net amount
Financial expenses, net amount
Share of profit in a joint venture
Income tax expense
PROFIT FOR THE YEAR
ADJUSTED EBITDA (see reconciliation of adjusted EBITDA
and profit)
CASH FLOWS GENERATED BY OPERATING
ACTIVITIES
(400)
(815)
163
(6,151)
1,174
(1,075)
217
(5,543)
879
(1,194)
162
(4,227)
(19)
(911)
215
640
(480)
-
(5,176)
(3,884)
15,832
15,633
12,711
13,973
9,505
28,576
27,509
24,331
25,165
17,365
22,310
24,082
22,236
18,018
12,285
EARNINGS PER SHARE – BASIC AND DILUTED
Declared dividends per share
1.05
0.40
1.00
0.40
0.80
0.40
0.97
0.37
0.69
0.32
Weighted-average number of shares outstanding
(in thousands):
Basic
Diluted
Stock options outstanding (in thousands)
15,140
15,140
-
15,711
15,711
-
15,833
15,833
-
14,421
14,448
-
13,705
13,755
105
TOTAL ASSETS
194,129
191,155
196,165
132,731
129,357
LONG-TERM DEBT (including current portion)
26,311
26,100
36,920
57
38,483
(1) Certain figures for fiscal year 2013 have been restated following the adoption of IFRS 11 “Joint arrangements”. The financial
information for the fiscal year ended March 31, 2012 has not been restated.
10
RECONCILIATION OF ADJUSTED EBITDA AND PROFIT
YEARS ENDED MARCH 31
In thousands of Canadian dollars
(unaudited)
PROFIT FOR THE YEAR
Income tax expense
Depreciation of property, plant and equipment and amortization of
intangible assets
Amortization of acquired intangible assets
Amortization of deferred financing costs
Amortization of deferred lease inducement
Foreign exchange gain
Interest on long-term debt and interest related to a tax settlement
Gain on disposal of property, plant and equipment
Loss on disposal of intangible assets
2016
$
15,832
6,151
2,060
3,466
10
(148)
(115)
1,239
(4)
85
2015
$
15,633
5,543
1,586
4,971
120
(125)
(1,174)
955
-
-
ADJUSTED EBITDA
28,576
27,509
Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, foreign exchange
gain (loss) and other revenues (expenses) as historically calculated by the Company.
FISCAL YEAR ENDED MARCH 31, 2016 (“FISCAL YEAR 2016”) COMPARED TO
FISCAL YEAR ENDED MARCH 31, 2015 (“FISCAL YEAR 2015”)
Revenues
For fiscal year 2016, revenues totaled $73.0 million, an increase of 4% or $2.8 million compared to fiscal
year 2015. This revenue increase is mainly explained as follows:
+
+
Increase in revenues from MERX, InterTrade, LesPAC, Market Velocity, BidNet and Carrus for
an amount of $3.6 million.
Increase of $2.9 million in revenues attributable to changes in the Canadian dollar against the U.S.
dollar, combined with hedges in place.
+ Decrease in revenues from Jobboom, The Broker Forum and PowerSource OnLine.for a total
amount of $3.5 million.
+ Decrease in revenues from software development for an amount of $0.2 million.
During fiscal year 2016, revenues earned in Canadian dollars represented 62% of total revenues, compared
to 66% for fiscal year 2015.
11
Cost of revenues
Cost of revenues was $14.4 million during fiscal year 2016 compared to $14.0 million during fiscal
year 2015.
This increase is primarily due to a $0.4 million increase in licence fees related to the acquisition of new
software and to a $0.3 million increase in labor costs, mainly due to the conversion into Canadian dollars
of labor costs incurred by the U.S. subsidiaries.
These increases were partially offset by a $0.2 million decrease in printing costs and by a $0.1 million
favorable retroactive adjustment on professional fees related to an advertising agreement.
Gross margin
Based on the information above, gross margin for fiscal year 2016 was 80.3% compared to 80.1% during
fiscal year 2015.
Operating expenses
Operating expenses for fiscal year 2016 totaled $35.6 million, compared to $35.4 million for fiscal
year 2015. Changes in operating expenses are explained as follows:
+ General and administrative expenses totaled $9.3 million during fiscal year 2016 compared
to $8.5 million during fiscal year 2015, for an increase that is primarily due to $0.5 million in
non-recurring due diligence expenses for various potential business acquisitions, including the
ASC acquisition, and to the recording of a provision for a legislative contingency of $0.4 million.
These increases were partially offset by a $0.1 million decrease in labor costs.
+ Selling and marketing expenses totaled $15.4 million during fiscal year 2016 compared
to $14.6 million during fiscal year 2015. The increase in selling and marketing expenses is
mainly due to a $0.5 million increase in labor costs, mainly attributable to the conversion into
Canadian dollars of the labor costs incurred by the U.S. subsidiaries. The increase in selling
and marketing expenses is also due to $0.2 million increase in advertising and promotion costs
and to a $0.1 million increase in bad debt expense.
+ Technology expenses totaled $10.9 million during fiscal year 2016, compared to $12.3 million
during fiscal year 2015. This decrease is primarily due to the recording of $1.2 million in additional
tax credits, some of which relate to prior years, to a $1.0 million lower amortization expense and
to a $0.7 million increase in internally developed software. These items were partially offset
by a $1.4 million increase for the technology workforce and by a $0.1 million increase in licence
fees and equipment costs.
12
Operating profit
Based on the information above, operating profit reached $23.0 million during fiscal year 2016 compared
to $20.9 million during fiscal year 2015.
Other (expenses) revenues
For fiscal year 2016, other expenses totaled $0.4 million compared to other revenues of $1.2 million during
fiscal year 2015. This change is mainly due to the fact that, during fiscal year 2016, the Company realized
a $0.1 million foreign exchange gain on U.S.-dollar denominated assets compared to a $1.2 million gain
during fiscal year 2015, mainly explained by exchange rate fluctuations (CA$/US$) during fiscal years 2016
and 2015. In addition, interest for a tax settlement of $0.4 million was recorded during fiscal year 2016.
Financial expenses
Financial expenses totaled $0.8 million during fiscal year 2016 compared to $1.1 million for fiscal
year 2015. Financial expenses consist primarily of interest expenses and standby fees on long-term
debt and of the amortization of deferred financing costs.
The decrease in financial expenses is mainly due to lower interest on long term debt attributable to a
decrease in average long-term debt and to lower interest rates during fiscal year 2016 when compared
to fiscal year 2015.
Income tax expense
For fiscal year ended on March 31, 2016, income tax expense totaled $6.2 million, representing an effective
tax rate of 28.0% compared to the statutory rate of 26.9%. During fiscal year 2015, the effective tax rate
was at 26.2%.
For fiscal year 2016, the higher effective tax rate compared to the statutory tax rate is mainly due
to the recording of a current income taxes provision related to the provision for a legislative contingency.
Moreover, a portion of income is taxable in the United States, a jurisdiction where the statutory tax rate
is higher. Also, certain expenses recorded for accounting purposes are non-deductible for tax purposes,
thus increasing the effective tax rate compared to the statutory tax rate.
During fiscal year 2015, the lower effective tax rate compared to the statutory tax rate is mainly due
to the fact that certain foreign exchange gains realized by the Company are non-taxable. This decrease
was slightly offset by the fact that certain prior year adjustments were recorded during fiscal year 2015.
Profit
As a result of the above items, profit for fiscal year 2016 totaled $15.8 million ($1.05 per share) compared
to $15.6 million ($1.00 per share) during fiscal year 2015.
13
FOURTH QUARTER ENDED MARCH 31, 2016
(“FOURTH QUARTER OF FISCAL 2016”)
In thousands of Canadian dollars, except per share amounts
(unaudited)
REVENUES
GROSS MARGIN
OPERATING EXPENSES
General and administrative
Selling and marketing
Technology
TOTAL OPERATING EXPENSES
OPERATING PROFIT
Other (expenses) revenues, net amount
Financial expenses
Share of profit of a joint venture
Income tax expense
PROFIT
ADJUSTED EBITDA (see reconciliation of adjusted EBITDA and profit)
EARNINGS PER SHARE – BASIC AND DILUTED
Weighted average number of shares outstanding (in thousands)
Basic and diluted
THREE MONTHS ENDED MARCH 31
2016
$
18,817
14,886
2,687
4,057
2,960
9,704
5,182
(1,408)
(198)
22
(1,126)
2,472
6,556
0.16
2015
$
17,467
14,087
2,183
3,924
2,607
8,714
5,373
854
(195)
53
(1,502)
4,583
6,750
0.30
14,999
15,542
RECONCILIATION OF ADJUSTED EBITDA AND PROFIT
THREE MONTHS ENDED MARCH 31
In thousands of Canadian dollars
PROFIT
Income tax expense
Depreciation of property, plant and equipment and amortization
of intangible assets
Amortization of acquired intangible assets
Amortization of deferred financing costs
Amortization of deferred lease inducement
Foreign exchange loss (gain)
Interest on long-term debt and interest related to a fiscal settlement
Loss on disposal of intangible assets
ADJUSTED EBITDA
14
2016
$
2,472
1,126
571
816
10
(35)
950
622
24
6,556
2015
$
4,583
1,502
435
921
-
(32)
(854)
195
-
6,750
Revenues
For the fourth quarter of fiscal 2016, revenues totaled $18.8 million, up 8% or $1.4 million compared
to the fourth quarter of fiscal 2015. This revenue increase is mainly explained as follows:
+
+
Increase in revenues from LesPAC, MERX, InterTrade, BidNet, Réseau Contact and Carrus
for an amount of $1.9 million.
Increase of $0.7 million in revenues attributable to changes in the Canadian dollar against the U.S.
dollar, combined with hedges in place.
+ Decrease in revenues from Jobboom and The Broker Forum for a total amount of $1.2 million.
During the fourth quarter of fiscal 2016, revenues earned in Canadian dollars represented 62% of total
revenues, compared to 64% for the fourth quarter of fiscal 2015.
Cost of Revenues
Cost of revenues totaled $3.9 million during the fourth quarter of fiscal 2016 compared to $3.4 million
during the fourth quarter of fiscal 2015.
This increase is primarily due to a $0.3 million increase in sales commissions associated with higher
advertising revenues and to a $0.1 million increase in licence fees. The increase in cost of revenues is also
due to a $0.1 million increase in labor costs, mainly due to the conversion into Canadian dollars of labor
costs incurred by the U.S. subsidiaries.
Gross margin
Based on the information above, gross margin for the fourth quarter of fiscal 2016 reached 79.1% compared
to 80.6% in the fourth quarter of fiscal 2015.
Operating expenses
Operating expenses for the fourth quarter of fiscal 2016 totaled $9.7 million compared to $8.7 million
for the fourth quarter of fiscal 2015. The changes in operating expenses is explained as follows:
+ General and administrative expenses totaled $2.7 million during the fourth quarter of fiscal 2016
compared to $2.2 million for the corresponding period of fiscal 2015. This increase is primarily due
to the recording of a provision for a legislative contingency of $0.3 million and to due diligence
expenses related to the ASC acquisition.
+ Selling and marketing expenses totaled $4.1 million during the fourth quarter of fiscal 2016
compared to $3.9 million for the fourth quarter of fiscal 2015. This increase is mainly due to higher
advertising and promotion costs during the fourth quarter of fiscal 2016.
+ Technology expenses totaled $3.0 million during the fourth quarter of fiscal 2016 compared
to $2.6 million during the corresponding period of fiscal 2015. This increase was primarily due
to an increase in the technology workforce of $0.4 million.
Operating profit
Based on the information above, operating profit reached $5.2 million during the fourth quarter
of fiscal 2016 compared to $5.4 million during the fourth quarter of fiscal 2015.
15
Other (expenses) revenues
For the fourth quarter of fiscal year 2016, other expenses totaled $1.4 million compared to other revenues
of $0.9 million during the fourth quarter of fiscal 2015. During the fourth quarter of fiscal 2016, the Company
realized a $1.0 million foreign exchange loss on U.S.-dollar denominated assets compared to a foreign
exchange gain of $0.9 million during the fourth quarter of fiscal 2015. This decrease is explained by
the exchange rate fluctuations (CA$/US$) during these periods. In addition, interest for a tax settlement
of $0.4 million was recorded during the fourth quarter of fiscal year 2016.
Financial expenses
Financial expenses stood at $0.2 million for both the fourth quarters of fiscal years 2016 and 2015. Financial
expenses consist primarily of interest expenses and standby fees on long-term debt and of the amortization
of deferred financing costs.
Income tax expense
For the fourth quarter of fiscal 2016, income tax expense totaled $1.1 million, representing an effective tax
rate of 31.3% compared to the statutory rate of 26.9%.
During the fourth quarter of fiscal 2016, the increase in the effective tax rate compared to the statutory tax
rate is mainly due to the recording of a provision for current income taxes related to the provision
for a legislative contingency. Moreover, a portion of income is taxable in the United States, a jurisdiction
where the statutory tax rate is higher. Also, certain expenses recorded for accounting purposes are
non-deductible for tax purposes, thus increasing the effective tax rate compared to the statutory tax rate.
During the fourth quarter of fiscal 2015, the effective tax rate stood at 24.7% compared to the statutory rate
of 26.9%. The decrease in the effective tax rate compared to the statutory tax rate is mainly due to the fact
that certain foreign exchange gains realized by the Company are non-taxable.
Profit
As a result of the above items, profit for the fourth quarter of fiscal 2016 totaled $2.5 million ($0.16 per
share) compared to $4.6 million ($0.30 per share) during the fourth quarter of fiscal 2015.
QUARTERLY PERFORMANCE
Selected quarterly financial information for the eight most recently completed quarters on or before
March 31, 2016, is as follows:
MARCH 31,
2016
DEC. 31,
2015
SEPT. 30,
2015
JUNE 30,
2015
MARCH 31,
2015
DEC. 31,
2014
SEPT. 30,
2014
JUNE 30,
2014
Unaudited and not reviewed by
independent auditors
Revenues
Operating profit
Adjusted EBITDA
Profit
Basic and diluted earnings per
share
$
$
$
$
$
$
$
$
18,817
18,541
17,953
17,709
17,467
17,537
17,512
17,731
5,182
6,556
2,472
6,619
8,003
4,851
6,117
7,539
5,089
5,117
6,478
3,420
5,373
6,750
4,583
5,397
7,003
4,056
5,199
7,137
3,862
4,891
6,619
3,132
0.16
0.32
0.34
0.22
0.30
0.26
0.24
0.20
In thousands of Canadian dollars, except per share amounts.
16
2016 Quarters
+ Fourth quarter: Compared to the third quarter of fiscal 2016, the higher revenues is mainly due
to an increases in the revenues from MERX, LesPAC and InterTrade and to software development
revenues for a total amount of $0.7 million as well as to a favorable exchange rate impact
(CA$/US$) on revenues of $0.2 million. These increases were partially reduced by a decrease
in revenues from Jobboom and Market Velocity.
Still comparing to the third quarter, adjusted EBITDA and operating profit decreased, mainly
due to additional labor costs of $0.6 million, to a $0.2 million increase in advertising costs and
to a $0.3 million increase in sales commissions associated with higher advertising revenues.
In addition, during the fourth quarter, the Company posted a $0.4 million decrease in tax credits,
a $0.2 million increase in professional fees related primarily to the acquisition of ASC and
an additional amount of $0.1 million for a provision for a legislative contingency. These items were
partially offset by a $0.2 million increase in internally developed software.
Profit also decreased, mainly due to a $1.0 million foreign exchange loss during the fourth
quarter compared to a $0.5 million foreign exchange gain during the third quarter of fiscal 2016
as well as to interest for a tax settlement of $0.4 million recorded during the fourth quarter
of fiscal year 2016.
+ Third quarter: Compared to the second quarter of fiscal 2016, the increase in revenues is mainly
attributable to a $0.6 million increase in revenues from LesPAC, Jobboom and Réseau Contact
and to a $0.1 million favorable exchange rate impact (CA$/US$) on revenues. These increases were
partially offset by a decrease in revenues from Market Velocity.
Adjusted EBITDA and operating profit also increased, mainly due to a $0.3 million increase in tax
credits (including $0.2 million related to a prior year) recorded during the third quarter when
compared to the previous quarter and to a $0.2 million favorable retroactive adjustment on
an advertising agreement. These items were partially offset by additional labor costs
of $0.2 million, by a $0.2 million increase in advertising and promotion costs and by
the recording of a provision for a legislative contingency of $0.2 million.
Profit for the quarter ended December 31, 2015 decreased slightly, mainly due to a $0.4 million
lower foreign exchange gain during the third quarter compared to the second quarter of fiscal
year 2016.
+ Second quarter: Compared to the first quarter of fiscal 2016, the increase in revenues is mainly
attributable to higher revenues from InterTrade, Market Velocity and Réseau Contact as well as
to a favorable exchange rate impact (CA$/US$) on revenues. These increases were partially offset
by a decrease in revenues from Jobboom and by a decrease in revenues from LesPAC, some of
which is due to seasonal variation.
Adjusted EBITDA and operating profit also increased, mainly due to lower professional fees
(due diligence costs of $0.3 million incurred during the first quarter of fiscal 2016), lower
advertising and promotion costs as well as a decrease in salaries and benefits, for a total
amount of $0.5 million.
17
Profit in the quarter ended September 30, 2015 also increased due to a $0.8 million foreign
exchange gain on assets denominated in U.S. dollars compared to a foreign exchange loss
of $0.2 million in the quarter ended June 30, 2015.
+ First quarter: Compared to the fourth quarter of fiscal 2015, the increase in revenues is mainly due
to higher revenues from LesPAC, MERX and Carrus, partially offset by a decrease in revenues
from Jobboom.
Adjusted EBITDA and operating profit decreased mainly due to non-recurring due diligence costs
of $0.3 million, to higher commissions paid in connection with higher revenue and to lower tax
credits.
Profit in the quarter ended June 30, 2015 was also reduced by the recording of a foreign exchange
loss of $0.2 million while a foreign exchange gain of $0.9 million was recorded during the quarter
ended March 31, 2015.
2015 Quarters
+ Fourth quarter: Compared to the third quarter of fiscal 2015, the Company’s revenues and
operating profit remained stable.
Adjusted EBITDA decreased slightly, mainly due to $0.2 million in termination benefits. On the other
hand, operating profit remained stable due to a $0.2 million lower amortization expense.
Profit increased, primarily due to a $0.6 million higher foreign exchange gain and to lower financial
expenses during the fourth quarter compared to the preceding quarter.
+ Third quarter: Compared to the second quarter of fiscal 2015, revenues remained stable
at $17.5 million.
Adjusted EBITDA decreased slightly, mainly due to higher advertising and promotion costs during
the third quarter. The increase in operating profit is due to lower amortization expense related
to acquired intangible assets as well as to a decrease in the printing costs of certain publications.
The lower expenses were partially offset by higher advertising and promotion costs.
Profit increased due to lower financial expenses and lower income tax expense during the third
quarter.
+ Second quarter: Compared to the first quarter of fiscal 2015, the decrease in revenues during
the second quarter of fiscal 2015 was primarily attributable to LesPAC and Jobboom; this decrease
is partly explained by seasonal variations. The increase in revenues from MERX and InterTrade
during the quarter partially offset this decrease.
Moreover, the increase in operating profit and adjusted EBITDA is mainly attributable
to a $0.3 million seasonal decrease in advertising and promotion costs, to lower salary
and benefit costs and to additional tax credits.
Profit has also increased due to a foreign exchange gain of $0.4 million during the second quarter
compared to a foreign exchange loss of $0.3 million during the first quarter.
18
+ First quarter: Compared to the fourth quarter of fiscal 2014, the increase in revenues is primarily
attributable to higher revenues from LesPAC, partly offset by lower revenues from Jobboom.
Operating profit also increased due to additional revenues, lower amortization expense and
the recognition of internally developed software. Furthermore, operating profit and adjusted
EBITDA were affected by a seasonal decrease in advertising and promotion costs and by reduced
tax credits.
Profit decreased, mainly due to a foreign exchange loss of $0.3 million in the current quarter
compared to a foreign exchange gain of $0.4 million in the fourth quarter of fiscal 2014. In addition,
the income tax expense for the first quarter of fiscal 2015 was $0.3 million higher than that
of the fourth quarter of fiscal 2014 due to certain prior year adjustments recorded in the fourth
quarter of fiscal 2014.
LIQUIDITY AND FINANCIAL RESOURCES
In general, the Company finances its operations, capital expenditures, dividends, repurchases of common
shares, dividends and business acquisitions using funds generated by its operations and cash on hand.
When necessary, the Company may also use funds on the unused portion of its credit facility (see
the “Financing Activities – Credit Agreement” section) or issue new shares to fund its additional cash
requirements and business acquisitions.
As at March 31, 2016, the Company had cash and cash equivalents of $10.9 million and $53.5 million
available on its revolving facility of $80.0 million, subject to compliance with financial ratios.
OPERATING ACTIVITIES
In thousands of Canadian dollars
Cash flows related to operating activities before changes in non-cash working capital
items
Changes in non-cash working capital items
CASH FLOWS RELATED TO OPERATING ACTIVITIES
YEARS ENDED ON MARCH 31
2016
$
20,705
1,605
22,310
2015
$
21,948
2,134
24,082
For fiscal year 2016, cash flows generated by operating activities reached $22.3 million, compared
to $24.1 million for fiscal year 2015.
This decrease in generated cash flows is mainly due to changes in non-cash working capital items,
particularly accounts receivable and tax credits receivable, partially offset by a change in accounts payable
and accrued liabilities, and to higher tax payments.
19
INVESTING ACTIVITIES
In thousands of Canadian dollars
Acquisition of property, plant and equipment
Acquisition of intangible assets
Distribution from a joint venture
Proceeds on disposal of property, plant and equipment
CASH FLOWS RELATED TO INVESTING ACTIVITIES
YEARS ENDED ON MARCH 31
2016
$
(1,228)
(3,016)
500
5
(3,739)
2015
$
(766)
(1,718)
-
-
(2,484)
Cash flows used by investing activities amounted to $3.7 million for fiscal year 2016 compared
to $2.5 million in the previous fiscal year.
During fiscal year 2016, the Company acquired $1.2 million in property, plant and equipment compared
to $0.8 million during fiscal year 2015. This increase is partially explained by the acquisition of computer
equipment during fiscal year 2016.
Acquisitions of intangible assets during fiscal year 2016 include an amount of $1.9 million related
to internally-developed software compared to $1.2 million during fiscal year 2015. The Company also
acquired external software for $1.1 million during fiscal year 2016 compared to $0.5 million during fiscal
year 2015.
During fiscal year 2016, the Company received a $0.5 million capital distribution from a joint venture,
whereas there had been no distribution during fiscal year 2015.
FINANCING ACTIVITIES
In thousands of Canadian dollars
Increase of long-term debt
Repayment of long-term debt
Financing costs
Repurchase of common shares for cancellation
Lease inducement received
Cash dividends paid on common shares
CASH FLOWS RELATED TO FINANCING ACTIVITIES
YEARS ENDED ON MARCH 31
2016
$
9,112
(8,712)
(199)
(9,112)
-
(6,068)
(14,979)
2015
$
-
(10,940)
-
(4,957)
79
(6,302)
(22,120)
For fiscal 2016, cash flows used for financing activities amounted to $15.0 million compared to $22.1 million
used during fiscal year 2015.
During fiscal year 2016, the Company used $9.1 million on its revolving credit facility to repurchase, under
the normal course issuer bid in place, a total of 543,276 shares. Moreover, the Company repaid an amount
of $8.7 million on its revolving credit facility during fiscal year 2016.
20
Dividends paid by the Company amounted to $6.1 million during fiscal year 2016 compared to $6.3 million
during fiscal year 2015. The decrease in dividends paid is due to the repurchase of shares in fiscal
year 2016, as there was no change in the quarterly dividend rate of $0.10 per share during fiscal year 2015
and 2016.
CREDIT AGREEMENT
On December 18, 2015, the Company renewed its credit agreement, which had previously been concluded
on November 10, 2011 (the “Credit Agreement”) with three Canadian financial institutions and under which
the lenders made available to the Company an $80.0 million ($60.0 million as at March 31, 2015) secured
revolving five-year credit facility (the “Revolving Facility”) and an accordion loan of $40.0 million
($40.0 million as at March 31, 2015) subject to lenders’ acceptance.
The Revolving Facility expires on December 18, 2020, and any outstanding amounts are due in full
at maturity. Amounts under the Credit Agreement are repayable before maturity without penalty.
As at March 31, 2016, the Company had drawn $26.5 million on its Revolving Facility.
The Revolving Facility bears interest at a rate based either on Canadian prime rate, LIBOR or the bankers’
acceptance rate plus a margin in each case. This margin varies according to the ratio of total debt
to the EBITDA defined in the Credit Agreement. As at March 31, 2016, the actual rate was 0.88% and
the margin was 1.20%. In addition, the unused portion of the Revolving Facility bears interest at 0.24%
as standby fees.
All obligations under the Credit Agreement are secured by a first-rank security (hypothec) on substantially
all of the Company’s present and future tangible and intangible assets.
The Credit Agreement contains certain covenants and certain events of default customary for loans of
this nature, including some limitations to the levels of investments and acquisitions, capital expenditures
and distributions. The Credit Agreement is also subject to restrictive covenants requiring certain financial
ratios to be maintained. As at March 31, 2016, the Company was in compliance with the financial ratios
prescribed under these covenants.
21
FINANCIAL POSITION
As a whole, the Company has a sound financial position and is able to meet its financial obligations.
As at March 31, 2016, the Company had cash and cash equivalents of $10.9 million and $53.5 million
available on its $80.0 million credit facility. At that same date, the Company had total assets
of $193.4 million compared to $191.2 million as at March 31, 2015.
INFORMATION FROM THE STATEMENT OF FINANCIAL POSITION
YEARS ENDED ON MARCH 31
In thousands of Canadian dollars
Cash and cash equivalents
Cash held for the benefit of third parties
Accounts receivable
Tax credits receivable
Prepaid expenses and deposits
Intangible assets
Goodwill
Investment in a joint venture
Accounts payable and accrued liabilities
Other accounts payable
Deferred revenues
Derivative financial instruments
Long-term debt
Shareholders’ equity
2016
$
10,901
1,011
5,927
5,128
1,145
3,617
100,280
250
8,220
1,706
16,774
69
26,311
123,805
2015
$
7,546
666
5,691
3,947
1,986
1,719
100,280
587
6,861
1,229
16,473
1,431
26,100
122,103
The main changes in the Company’s statement of financial position between March 31, 2016 and 2015 are
explained as follows:
+ Accounts receivable reached $5.9 million as at March 31, 2016, an increase of $0.2 million
compared to March 31, 2015. This increase is mainly attributable to higher accounts receivable
from Market Velocity and LesPAC, given the increase in transactions from these platforms.
+ Tax credits receivable totaled $5.1 million as at March 31, 2016, an increase of $1.2 million
when compared to March 31, 2015. This increase is explained by the recording of additional tax
credits during fiscal year 2016, including some that relate to prior years.
Intangible assets totaled $3.6 million as at March 31, 2016, up $1.9 million from March 31, 2015.
This increase is explained by the acquisition of external software and also from the recognition
of internally developed software for a total amount of $3.0 million, partially offset by a decrease
in amortization expense of $1.0 million and a $0.1 million loss on disposal.
Investment in a joint venture stood at $0.3 million as at March 31, 2016, a decrease of $0.3 million
compared to March 31, 2015. This decrease is explained by a $0.5 million capital distribution
from its joint venture, Global Wine & Spirits, partially offset by the $0.2 million share of profit
for the period.
+
+
22
+ Accounts payable and accrued liabilities stood at $8.2 million as at March 31, 2016, a $1.4 million
increase compared to March 31, 2015. This increase is due to higher non-recurring expenses
as at March 31, 2016 compared to March 31, 2015, including a provision for a legislative
contingency and to due diligence expenses.
+ Other accounts payable totaled $1.7 million as at March 31, 2016 compared to $1.2 million
as at March 31, 2015. This increase is partly due to an increase in amounts held for the benefit
of third parties during the year resulting from a year-end increase in the trust activities and
to an increase in the conversion rate into Canadian dollars of these U.S. dollars amounts.
+ Derivative financial instruments totaled $0.1 million as at March 31, 2016, which represents
a $1.4 million decrease compared to March 31, 2015. The change is explained by the difference
between effective exchange rates on the foreign exchange contracts in effect and the market
exchange rates as at March 31, 2015 and 2016, respectively.
+ Long-term debt totaled $26.3 million as at March 31, 2016 compared to $26.1 million
as at March 31, 2015. This increase in long-term debt is due to a $9.1 million repurchase of shares,
less $8.7 million in repayments made and $0.2 million in financing costs paid at the time of
the Credit Agreement renewal.
+ Shareholders’ equity stood at $123.8 million as at March 31, 2016, compared to $122.1 million
as at March 31, 2015. The change in shareholders’ equity reflects the $16.8 million comprehensive
income earned by the Company during fiscal year 2016 less the $9.1 million repurchase of
common shares and $6.0 million in dividends.
CONTRACTUAL OBLIGATIONS
The principal repayments required on long-term debt and the commitments under operating leases for
the coming financial years are as follows:
In thousands of Canadian dollars
Long-term debt
Operating leases
Total contractual obligations
TOTAL
$
26,500
9,279
35,779
2017
$
-
1,675
1,675
2018
2019
$
-
3,225
3,225
2020
2021
$
26,500
2,220
28,720
2022 AND
HEREAFTER
$
-
2,159
2,159
DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company is exposed to certain financial risks. The Company does
not hold financial instruments for speculative purposes but only to reduce the volatility of its results from
its exposure to these risks. The nature and the extent of the risks arising from the financial instruments
and their related risk management are described in Note 23 to the Company’s audited consolidated financial
statements as at March 31, 2016.
23
The Company’s hedging program will yield an average (CA$/US$) exchange rate of 1.2920 on foreign
currency forward contracts of US $11.2 million held as at March 31, 2016, which will mature over fiscal
years 2017 and 2018. As at March 31, 2015, the Company had foreign currency forward contracts
of US$11.3 million held at an average rate of 1.1418.
During fiscal year ended March 31, 2016, there has been no significant change to the nature of the risks
arising from financial instruments, to the related risk management or to the classification of financial
instruments. Furthermore, there was no change in the methodology used in determining the fair value
of the financial instruments that are measured at fair value in the Company’s consolidated statement
of financial position.
RELATED PARTY TRANSACTIONS
The Company holds a 50% ownership interest in the joint venture Société d’investissement M-S S.E.C.
(a limited partnership), which operates under the brand Global Wine & Spirits (“GWS”), in which it shares
joint control with its co-venturers. GWS operates a virtual business-to-business electronic network offering
an integrated solution for the purchase and sale of wine and spirits.
During fiscal year 2016, the Company recorded revenues of $1.7 million from transactions with GWS
compared to $1.6 million during fiscal year 2015. In addition, the Company recharged $0.3 million
in operating expenses to GWS during fiscal years 2016 and 2015. As at March 31, 2016 and as at March 31,
2015, the Company’s accounts receivable from GWS stood at $0.1 million.
These transactions occurred in the normal course of business and were measured at the amount
of consideration agreed to by the parties.
RISKS AND UNCERTAINTIES
The Company is confident of its long-term prospects. However, in order to ensure that its strategy
and growth objectives are met, the Company seeks to diminish the risks and uncertainties created by
potentially unfavourable situations in its industry sector or its liquidity. The risks that the Company faces
are technological, operational or financial in nature or are inherent to its business activities or its
acquisition strategies.
Retention of customers
We depend on our customer base for a significant portion of our revenues. If our customers fail to renew
their contracts, or fail to purchase additional services, then our revenues could decrease and our operating
results could be adversely affected. Factors influencing such contract terminations could include changes
in the financial circumstances of our customers, dissatisfaction with our products or services, our
retirement or lack of support for our legacy products and services, our customers selecting or building
alternate technologies to replace us, changes in our customers’ business that may no longer necessitate
the use of our services, or other reasons. Furthermore, our customers could delay or terminate
implementations or use of our services or be reluctant to migrate to new services. Such customers will not
generate the revenues anticipated within the timelines anticipated, if at all, and may be less likely to invest
in additional services or products from us in the future.
24
Acquisitions
Our growth strategy includes making strategic acquisitions, principally in the information technology
industry. There is no assurance that we will find suitable companies in this industry to acquire or that
we will have enough resources to complete any acquisition. We could also consider making acquisitions
in other promising sectors of the economy, if such acquisitions are likely to increase our value. Acquisitions
involve a number of risks, including: diversion of management’s attention from current operations;
disruption of our ongoing business; lack of expertise of management in the sector of activity of the acquired
business; difficulties in integrating and retaining all or part of the acquired business, its customers and
its personnel; assumption of disclosed and undisclosed liabilities; dealing with unfamiliar laws, customs
and practices in foreign jurisdictions; and the effectiveness of the acquired company’s internal controls
and procedures. The individual or combined effect of these risks could have a material adverse effect on our
business. As well, in paying for an acquisition, we may deplete our cash resources. Furthermore, there is
the risk that our valuation assumptions, customer retention expectations and our models for an acquired
product or business may be erroneous or inappropriate due to foreseen or unforeseen circumstances and
thereby cause us to overvalue an acquisition target. There is also the risk that the contemplated benefits
of an acquisition may not materialize as planned or may not materialize within the time period or to
the extent anticipated.
Response to industry’s rapid pace of change
We operate in markets that are experiencing constant technological change, evolving industry standards,
changing customer needs, frequent new product and service introductions, and short product life cycles.
Our success will depend in large part on how well we can anticipate and respond to changes in industry
standards and introduce and upgrade new technologies, products and services and upgrade existing
products and services. We may face additional financial risks as we develop new products, services
and technologies and update them to stay competitive. Newer technologies, for example, may quickly
become obsolete or may need more capital than expected. Development could be delayed for reasons
beyond our control. Furthermore, substantial investment is usually required before new technologies
become commercially viable. There is no assurance that we will be successful in developing, implementing
and marketing new technologies, products, services or enhancements within a reasonable time, or
that there will be a market for them. New products or services that use new or evolving technologies could
make our existing ones unmarketable, or cause their prices to fall.
Competition
The e-business market is intensely competitive, and we have many competitors with substantial financial,
marketing, personnel and technological resources. New competitors may also appear as new technologies,
products and services are developed. For example, the market for online classified ads in which we operate
is a very competitive market. Some of our competitors have financial resources far superior than our own
and operate under a business model different from ours. These competitors could affect our pricing
strategies, and lower our revenues and net income. It could also affect our ability to retain existing
customers and attract new ones.
25
Defects in software or failures in processing of transactions
Defects in our owned or licensed software products, delays in delivery, as well as failures or mistakes in our
processing of electronic transactions could materially harm our business, including our customer
relationships and operating results. Our operations are dependent upon our ability to protect our computer
equipment and the information stored in our data centers against damage that may be caused by fire, power
loss, telecommunications failures, unauthorized intrusion, computer viruses and disabling devices,
and other similar events. Although we have redundant and back-up systems for some of our services
and products, these systems may be insufficient or may fail and result in a disruption of availability of our
products or services to our customers. Any disruption to our services could impair our reputation and cause
us to lose customers or revenues, or face litigation, necessitate customer service or repair work that would
involve substantial costs and distract management from operating our business.
Potential risks of using “open source” software
Like many other e-commerce companies, we use “open source” software in order to add functionality to our
products and services quickly and inexpensively. We face certain risks relating to our use of open source
code. Open source license terms may be ambiguous and may result in unanticipated or uncertain obligations
regarding our products and services. Our use of open source software could subject certain portions of our
proprietary technology to the requirements of such open source software. That may have an adverse impact
on our sale of the products or services incorporating the open source software. Other forms of open source
software licensing present license compliance risks for us. If we fail to comply with the license obligations,
we could be sued and/or lose the right to use the open source code. Our use of open source code could also
result in us developing and selling products that infringe third-party intellectual property rights. It may
be difficult for us to accurately determine the developers of the open source code and whether the code
incorporates proprietary software.
Infringing on the intellectual property rights of others
We cannot be sure that our services and products do not infringe on the intellectual property rights of third
parties, and we may have infringement claims asserted against us. These claims may be costly, harm our
reputation, and prevent us from providing some services and products. We enter into licensing agreements
with our clients for the right to use intellectual property that includes a commitment to indemnify
the licensee against liability and damages arising from any third-party claims of patent, copyright,
trademark or trade secret infringement. In some instances, the amount of these indemnity claims could
be greater than the revenues we receive from the client. Furthermore, our e-business networks are
platforms bringing together buyers and sellers to find, buy and sell different products and services. We have
no control over the quality of products and services that our members display on our platforms and there
may be incidents where these products or services infringe the intellectual property rights of third parties.
Although we contractually limit our responsibility as it pertains to the content posted on our networks by
users, it is possible that complaints alleging violation of intellectual property rights of third parties are made
against us. Any claims or litigation in this area, whether we ultimately win or lose, could be time-consuming
and costly, injure our reputation, or require us to enter into royalty or licensing arrangements. Any limitation
on our ability to sell or use products or services that incorporate challenged software or technologies could
cause us to lose revenue-generating opportunities or require us to incur additional expenses to modify
solutions for future projects.
26
Protecting our intellectual property rights
Our success depends, in part, on our ability to protect our proprietary methodologies, processes, know-how,
tools, techniques and other intellectual property that we use to provide our services. Our general practice is
to pursue patent, copyright, trademark, trade secret or other appropriate intellectual property protection
that is reasonable and necessary to protect and leverage our intellectual assets. We also assert trademark
rights in and to our name, product names, logos and other markings used to identify our goods and services
in the marketplace. We routinely file for and have been granted trademark registrations from trademark
offices worldwide. All of these actions taken allow us to enforce our intellectual property rights should
the need arise. However, the laws of some countries in which we conduct business may offer only limited
protection of our intellectual property rights; and despite our efforts, the steps taken to protect our
intellectual property may not be adequate to prevent or deter infringement or other misappropriation
of intellectual property, and we may not be able to detect unauthorized use of our intellectual property,
or take appropriate steps to enforce our intellectual property rights.
Retention of key personnel
Our performance is substantially dependent on the performance of our key technical and senior
management personnel. Our success is highly dependent on our continuing ability to identify, hire, train,
motivate, promote, and retain highly qualified management, directors, technical, and sales and marketing
personnel, including key technical and senior management personnel. Competition for such personnel
is always strong. Our inability to attract or retain the necessary management, directors, technical services,
sales and marketing personnel, or to attract such personnel on a timely basis, could have a material adverse
effect on our business, results of operations, financial condition and the price of our securities.
Regulation
The activities of the Company are subject to various types of regulations, particularly laws relating to
the protection of personal information, consumer protection and competition. For example, in Canada we are
subject to the Personal Information Protection and Electronic Documents Act (the “PIPEDA”). The PIPEDA
regulates how private sector companies collect, use or disclose personal information in the course of their
commercial activities. This regulatory framework may restrict our marketing activities and our capacity
to leverage our databases. In addition, we are subject to the Canadian Anti-Spam Law (“CASL”), which we are
subject to, prohibits the transmission of commercial electronic message to an email address without
consent and includes requirements relating to form and content. This regulatory framework also restricts
our marketing activities. Furthermore, failure to comply with CASL can result in financial penalties which
could affect the operating profit and financial position of the Company.
Failure to protect our databases and users personal information
The Company maintains databases on the members of its platforms. These databases contain information
on members, including personal information. Although we have established rigorous security procedures,
member information stored in the databases could be subject to unauthorized access, use or disclosure.
Any breach of security on our databases could harm our reputation, result in complaints and investigation
by the authorities responsible for the enforcement of the laws on the protection of personal information
or lead to legal claims from our customers or sanction measures from the authorities.
27
Doing business in emerging countries
We are doing business in emerging countries. Certain risks are associated with conducting our business
in emerging countries that could negatively impact our operating results, which include, but are not
limited to:
+ Language barriers, conflicting international business practices, and other difficulties related
to the management and administration of a global business.
+ Difficulties and costs of staffing and managing geographically disparate direct and indirect
operations.
+ Exchange rate fluctuations on the currencies.
+ Multiple, and possibly overlapping, tax structures and the burden of complying with a wide variety
of foreign laws.
+ Trade restrictions and custom rates.
+ The need to consider characteristics unique to technology systems used internationally.
+ Economic or political instability in some markets.
+ Other risk factors set out herein.
For instance, in the People’s Republic of China (the “PRC”), the Internet sector is strictly regulated in terms
of foreign ownership and content restrictions. While many aspects of these regulations remain unclear,
they purport to limit and require licensing of various aspects of the provision of Internet information
services. These regulations have created substantial uncertainties regarding the legality of foreign
investments and business operations in the PRC for companies who have consulting activities related to
the Internet. We have the license enabling us to operate an e-commerce network in the PRC. It is however
possible that we could cease to qualify as an authorized recipient of this license and that we could be unable
to renew the license at the expiration of its term.
In these emerging countries where we operate, changes in laws, regulations or governmental policy, or
the uncertainty associated with the interpretation of these laws and regulations affecting our business
activities, may increase our costs, restrict our ability to operate our business or may make it difficult for
us to enforce any rights we may have or to know if we are in compliance with all applicable laws, rules
and regulations. Political, economic, social or other developments in the countries where we operate may
cause us to change the way we conduct our business, suspend the launch of new or expanded services
or force us to discontinue our operations altogether.
Economic conditions
Adverse economic conditions could result in a decline in our revenues. During an economic downturn,
our customers and potential customers may cancel, postpone or delay their new commitments, which
would affect the performance of the Company.
28
Foreign exchange
Our revenues are affected by fluctuations in the exchange rate between the Canadian dollar and the U.S.
dollar. We generate approximately 38% of our revenues in U.S. dollars while approximately 16% of our
operating expenses and cost of revenues are in U.S. dollars. As a result, any decrease in the value of the U.S.
dollar relative to the Canadian dollar reduces the amount of Canadian dollar revenues we realize on sales,
without a corresponding decrease in expenses. Exchange rate fluctuations are beyond our control, and
the U.S. dollar may depreciate against the Canadian dollar in the future, which would result in lower
revenues and margins. In order to reduce the potential negative effect of a weakening U.S. dollar, we have
entered into agreements to hedge the value of a portion of our future U.S. dollar net cash inflows for periods
of up to 18 months.
Liquidity and financing risks
Our strategy aims to foster the organic growth of our operations and to make acquisitions. This strategy
requires investments, which may come from cash from our operations, loans from credit agreement and
issuance of securities from our capital stock. Our access to such funding sources may be limited by
the ability of financial markets to meet our needs and the volatility of our stock price. If we are not able
to obtain financing or if our cash flow does not allow us to repay our existing indebtedness according
to the targets that we have fixed for ourselves, we might not achieve our growth objectives. In addition,
rising interest rates could harm our ability to repay our debt, pay dividends and to execute our
strategy accordingly.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of consolidated financial statements in accordance with IFRS requires management
to make estimates and assumptions that affect the reported amounts of revenues and expenses during
the year and the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements. Management reviews its estimates regularly,
and revisions to accounting estimates are recognized in the period in which the estimate is revised, if
the revision affects only that period, or in the period of the revision and future periods if the revision affects
both the period being reviewed and future periods. Actual results may differ from these estimates.
Estimates
In preparing consolidated financial statements in accordance with IFRS, management must exercise
judgment when applying accounting policies and rely on assumptions and estimates that affect the amounts
of the assets, liabilities, revenues and expenses reported in these consolidated financial statements and on
the contingent liability and contingent asset information provided. The actual results of items subject
to assumptions and estimates may differ from these assumptions and estimates.
Explanations about the main assumptions and estimates are presented below:
Revenue recognition
As mentioned in Note 2 to the Company’s audited consolidated financial statements for the fiscal year
ended March 31, 2016, the Company uses assumptions to recognize some of the revenues from rights
of use, i.e., the sale of classified ad packages. Management reviews these assumptions on a regular basis.
Significant changes in these assumptions will have an impact on the Company’s profit.
29
Useful lives of property, plant and equipment and finite-life intangible assets
At the end of each reporting period, the Company reviews the estimated useful lives of its property, plant
and equipment and finite-life intangible assets. At the end of the fiscal year, management has determined
that the useful lives of property, plant and equipment and finite-life intangible assets were appropriate.
Measurements of assets
When applying the discounted future cash flows model to determine the fair value of groups of cash
generating units to which goodwill is allocated, certain parameters must be used, including estimates
of future cash flows, discount rates and other variables; a high degree of judgment must therefore be
exercised. Impairment tests on property, plant and equipment and indefinite-life intangible assets are also
based on similar assumptions. Any future deterioration of market conditions or poor operational
performance could translate into an inability to recover the current carrying amounts of property, plant
and equipment and intangible assets.
See Note 12 to the Company’s audited consolidated financial statements for the fiscal year ended
March 31, 2016 for more information on goodwill impairment testing and Note 11 for the test of
indefinite-life intangible assets.
Business combinations
For business combinations, the Company must make assumptions and estimates to determine the purchase
price allocation of the business being acquired. To do so, the Company must determine the acquisition-date
fair values of the identifiable assets acquired and liabilities assumed. Goodwill is measured as the excess
of the acquisition cost over the Company’s share in the fair value of all identified assets and liabilities.
These assumptions and estimates have an impact on the asset and liability amounts recorded in
the Consolidated Statement of Financial Position on the acquisition date. In addition, the estimated useful
lives of the acquired property, plant and equipment, the identification of other intangible assets and
the determination of the finite or indefinite useful lives of intangible assets acquired will have an impact
on the Company’s profit.
See Note 2 to the Company’s audited consolidated financial statements for the fiscal year ended
March 31, 2016 for more information on the assumptions and estimates used.
Deferred taxes
The Company is required to estimate the income taxes in each of the jurisdictions in which it operates.
This includes estimating a value for existing net operating losses based on the Company’s assessment
of its ability to utilize them against future taxable income before they expire. If the Company’s assessment
of its ability to use the net operating losses proves inaccurate, this would impact the income tax expense
and, consequently, affect the Company’s profit in the relevant year. The Company may be audited by the tax
authorities of different jurisdictions. Given that the determination of tax liabilities involves certain
uncertainties in interpreting complex tax regulations, the Company uses management’s best estimates
to determine potential tax liabilities. Differences between the estimates and the actual amount of taxes
are recorded in profit at the time they can be determined.
30
Judgments
The critical accounting policy judgments that have the greatest impact on amounts reported in
the consolidated financial statements include the following:
Definition of cash-generating units
The Company assesses whether there are any indicators of impairment for all non-financial assets at
the end of each financial reporting period. If such indication exists, the recoverable amount is estimated
in order to determine the extent of the impairment loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset, the Company estimates the recoverable amount of
the cash-generating unit to which the asset belongs. Determination of cash-generating units is based
on management’s best estimate of what constitutes the lowest level at which an asset or group of assets
is able to generate cash inflows. The Company must also determine whether goodwill can be attributed
to one or more cash-generating units.
See Note 12 to the Company’s audited consolidated financial statements for the fiscal year ended
March 31, 2016, for more information on attributions of goodwill to cash-generating units and Note 11
for the attribution of indefinite-life intangible assets to cash-generating units.
FUTURES CHANGES IN ACCOUNTING POLICIES
IFRS 9 Financial instruments
On July 24, 2014, the IASB issued the final version of IFRS 9 Financial Instruments, which replaces IAS 39
Financial Instruments: Recognition and Measurement. This final version of IFRS 9 represents the completion
of this project and includes requirements for recognition and measurement, impairment, derecognition
and general hedge accounting. IFRS 9 does not address the specific accounting for open portfolios or macro
hedging, as these items are part of a separate IASB project that is currently ongoing. This final standard
introduces a single, principles-based approach that amends both the categories and associated criteria
for the classification and measurement of financial assets, which is driven by the entity’s business model
for the portfolio in which the assets are held and the contractual cash flows of these financial assets. Certain
amendments have been made to the financial asset classification and measurement principles in prior
versions of IFRS 9. This standard introduces an amended hedging model that aligns hedge accounting more
closely with an entity’s risk management activities and also includes a new financial asset impairment
model that has an expanded scope, is based on expected credit losses rather than incurred credit losses
and generally will result in earlier recognition of losses. This new standard supersedes all prior versions
of IFRS 9. The Company has not yet examined the impacts of this new standard. IFRS 9 will apply
to the Company for the annual period beginning on April 1, 2018.
IFRS 15 Revenue from contracts with customers
IFRS 15 Revenue from Contracts with Customers establishes principles for reporting useful information
to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows
arising from an entity’s contracts with customers. The core principle of the new standard is for companies
to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect
the consideration to which the Company expects to be entitled in exchange for those goods or
services. The new standard will also result in enhanced disclosures about revenue, provide guidance
for transactions that were not previously addressed comprehensively (for example, service revenue
and contract modifications) and improve guidance for multiple-element arrangements. The Company
has not yet examined the impacts of this new standard. IFRS 15 will apply to the Company for the annual
period beginning on April 1, 2018.
31
IFRS 16 Leases
On January 13, 2016, the IASB issued IFRS 16, Leases, which provides a comprehensive model for
the identification of lease arrangements and their treatment in the financial statements of both lessees
and lessors. It supersedes IAS 17 Leases and its associated interpretive guidance. Significant changes
were made to lessee accounting with the distinction between operating and finance leases removed
and assets and liabilities recognized in respect of all leases (subject to limited exceptions for short-term
leases and leases of low value assets). In contrast, IFRS 16 does not include significant changes to
the requirements for lessors. IFRS 16 will be effective as of January 1, 2019 with earlier application
permitted for companies that have also adopted IFRS 15, Revenue from Contracts with Customers.
The Company has not yet examined the impacts of this new standard. IFRS 16 will apply to the Company
for the annual period beginning on April 1, 2019.
FORWARD-LOOKING STATEMENTS
This MD&A contains certain forward-looking statements with respect to the Company. These statements,
by their nature, necessarily involve risks and uncertainties that could cause actual results to differ
materially from those expressed by these forward-looking statements. The Company considers
the assumptions on which these forward-looking statements are based to be reasonable, but caution
the= reader that these assumptions regarding future events, many of which are beyond the control of
the Company, may ultimately prove to be incorrect since they are subject to the risks and uncertainties
that affect the Company. The Company disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise, except
as required by applicable securities legislation.
CONTROLS AND PROCEDURES
In accordance with the Canadian Securities Administrators’ Regulation 52-109 respecting Certification
of Disclosure in Issuers’ Annual and Interim Filings, certificates signed by the President and Chief Executive
Officer and the Chief Financial Officer have been filed. These documents confirm the adequacy of
the Company’s disclosure controls and procedures and the design and effectiveness of its internal controls
over financial reporting.
Disclosure controls and procedures
The disclosure controls and procedures of the Company have been designed in accordance with the rules
of the Canadian Securities Administrators in order to provide reasonable assurance that material
information related to the Company is made known to the Audit Committee and the Board of Directors
and information required to be disclosed in the Company’s filings is recorded, processed, summarized
and reported within the time period specified in securities legislation.
Under the supervision of the President and Chief Executive Officer and the Chief Financial Officer,
management has evaluated the effectiveness of the Company’s disclosure controls and procedures
in accordance with the rules of the Canadian Securities Administrators and has concluded that such
disclosure controls and procedures are effective for the fiscal year ended March 31, 2016.
32
Internal control over financial reporting
The internal control over financial reporting has been designed in order to provide reasonable assurance
that the financial information reported is reliable and that the financial statements were prepared
in accordance with the Company’s IFRS accounting policies.
Under the supervision of the President and Chief Executive Officer and the Chief Financial Officer,
management has evaluated the design and the effectiveness of the Company’s internal control over financial
reporting and has concluded that such controls were effective for the fiscal year ended March 31, 2016.
There were no changes to the Company’s internal control over financial reporting that had, or are
reasonably likely to have, a material impact on the Company's internal control over financial reporting.
ADDITIONAL INFORMATION
This report has been prepared as at June 7, 2016.
At that date, the number of common shares outstanding was 14,998,979.
Additional information relating to the Company, including the Annual Information Form, is available on
SEDAR at www.sedar.com.
33
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2016 AND MARCH 31, 2015
MANAGEMENT’S REPORT
TO THE SHAREHOLDERS OF
MEDIAGRIF INTERACTIVE TECHNOLOGIES INC./TECHNOLOGIES INTERACTIVES MEDIAGRIF INC.
The consolidated financial statements of Mediagrif Interactive Technologies Inc./Technologies Interactives
Mediagrif Inc. (the “Company”) as well as the information provided in the Management’s Discussion
and Analysis are the responsibility of management and are approved by the Board of Directors.
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS). In accordance with these standards, management makes estimates
and assumptions that are reflected in the consolidated financial statements and accompanying notes
to the consolidated financial statements.
To provide assurance that the consolidated financial statements are, in all material respects, accurate
and complete, management relies on an internal control system.
The internal control system includes management’s communication of the internal policies on ethical
business conduct to employees. In management’s opinion, the internal controls provide reasonable
assurance that its financial documents are reliable and form a sound basis for preparing consolidated
financial statements, and that its assets are properly accounted for and safeguarded.
The Board of Directors carries out its financial reporting responsibilities mainly through its Audit Committee,
which is made up solely of independent directors. The Audit Committee, management and external auditor
meet to review the consolidated financial statements and the internal controls over financial reporting.
The Audit Committee reviews the Company’s annual consolidated financial statements and makes
appropriate recommendations that the Board of Directors must consider when approving the consolidated
financial statements issued to the shareholders. The external auditor has free access to the Audit
Committee, with or without the presence of management.
Deloitte LLP, appointed by the shareholders as the Company’s independent auditor, has audited these
consolidated financial statements.
Claude Roy
President and Chief Executive Officer
Paul Bourque
Chief Financial Officer
June 7, 2016
34
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF
MEDIAGRIF INTERACTIVE TECHNOLOGIES INC./TECHNOLOGIES INTERACTIVES MEDIAGRIF INC.
We have audited the accompanying consolidated financial statements of Mediagrif Interactive
Technologies Inc., which comprise the consolidated statements of financial position as at March 31, 2016
and March 31, 2015, and the consolidated statements of income, the consolidated statements
of comprehensive income, the consolidated statements of changes in shareholders’ equity and
the consolidated statements of cash flows for the years ended March 31, 2016 and March 31, 2015, and
a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained during our audits is sufficient and appropriate
to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Mediagrif Interactive Technologies Inc. as at March 31, 2016 and March 31, 2015, and its financial
performance and its cash flows for the years ended March 31, 2016, and March 31, 2015, in accordance
with International Financial Reporting Standards.
June 7, 2016
____________________
1 CPA auditor, CA, public accountancy permit No. A118581
35
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 31, 2016 AND MARCH 31, 2015
In thousands of Canadian dollars, except per share amount
REVENUES (NOTE 6)
COST OF REVENUES
GROSS MARGIN
OPERATING EXPENSES
General and administrative
Selling and marketing
Technology (Note 16)
OPERATING PROFIT
Other (expenses) revenues, net amount (Note 21 b))
Financial expenses (Note 21 c))
Share of profit of a joint venture (Note 8)
PROFIT BEFORE INCOME TAXES
Income tax expense (Note 19)
PROFIT FOR THE YEAR
2016
$
73,020
14,368
58,652
9,323
15,389
10,905
35,617
23,035
(400)
(815)
163
21,983
6,151
15,832
2015
$
70,247
13,972
56,275
8,475
14,637
12,303
35,415
20,860
1,174
(1,075)
217
21,176
5,543
15,633
EARNINGS PER SHARE
Basic and diluted
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic and diluted
NUMBER OF SHARES OUTSTANDING AT END OF YEAR
1.05
1.00
15,140,377
15,711,474
14,998,979
15,542,255
36
Refer to the notes to the consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED MARCH 31, 2016 AND MARCH 31, 2015
In thousands of Canadian dollars
PROFIT FOR THE YEAR
Items that may be reclassified subsequently in profit or loss
Change in unrealized losses on foreign currency forward contracts designated as hedging items,
net of deferred taxes of $99 ($378 in 2015)
Reclassification of realized losses on foreign currency forward contracts, net of deferred taxes of
$464 ($173 in 2015)
2016
$
15,832
(269)
1,266
997
2015
$
15,633
(1,028)
471
(557)
COMPREHENSIVE INCOME FOR THE YEAR
16,829
15,076
Refer to the notes to the consolidated financial statements
37
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT MARCH 31, 2016 AND AS AT MARCH 31, 2015
In thousands of Canadian dollars
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Cash held for the benefit of third parties (Note 9)
Accounts receivable (Note 23)
Income taxes receivable
Tax credits receivable
Prepaid expenses and deposits
NON-CURRENT ASSETS
Property, plant and equipment (Note 10)
Intangible assets (Note 11)
Acquired intangible assets (Note 11)
Goodwill (Note 12)
Investment in a joint venture (Note 8)
Deferred taxes (Note 19)
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities
Other accounts payable (Note 9)
Income taxes payable
Deferred revenues
Derivative financial instruments
Current portion of deferred lease inducement
NON-CURRENT LIABILITIES
Long-term debt (Note 13)
Deferred lease inducement
Deferred taxes (Note 19)
SHAREHOLDERS’ EQUITY
SHARE CAPITAL (NOTE 14)
RESERVES
RETAINED EARNINGS
Approved by the Board of Directors,
AS AT
MARCH 31,
2016
$
AS AT
MARCH 31,
2015
$
10,901
1,011
5,927
996
5,128
1,145
25,108
2,545
3,617
57,238
100,280
250
5,091
7,546
666
5,691
-
3,947
1,986
19,836
2,084
1,719
60,704
100,280
587
5,945
194,129
191,155
8,220
1,706
716
16,774
69
143
27,628
26,311
781
15,604
70,324
78,840
3,164
41,801
123,805
194,129
6,861
1,229
1,084
16,473
1,431
150
27,228
26,100
661
15,063
69,052
81,695
2,167
38,241
122,103
191,155
Glles Laurin
Claude Roy
, director
, director
38
Refer to the notes to the consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
YEARS ENDED MARCH 31, 2016 AND MARCH 31, 2015
FOR THE YEAR ENDED MARCH 31, 2016
In thousands of Canadian dollars
Balance as at March 31, 2015
Profit for the year
Other comprehensive income for the year,
net of income tax
Comprehensive income for the year
Repurchase of common shares for
cancellation (Note 14)
Dividends declared on common shares
BALANCE AS AT MARCH 31, 2016
FOR THE YEAR ENDED MARCH 31, 2015
In thousands of Canadian dollars
Balance as at March 31, 2014
Profit for the year
Other comprehensive income for the year,
net of income tax
Comprehensive income for the year
Repurchase of common shares for
cancellation (Note 14)
Dividends declared on common shares
Balance as at March 31, 2015
RESERVES
Equity-
settled
employee
benefits
$
Cash flow
hedging
$
Total
$
Retained
earnings
$
Total
$
3,213
(1,046)
2,167
38,241
122,103
-
-
-
-
-
-
997
997
-
-
-
997
997
-
-
15,832
15,832
-
997
15,832
16,829
(6,257)
(6,015)
(9,112)
(6,015)
3,213
(49)
3,164
41,801
123,805
RESERVES
Equity-
settled
employee
benefits
$
Cash flow
hedging
$
Total
$
Retained
earnings
$
Total
$
3,213
(489)
2,724
32,393
118,258
-
-
-
-
-
-
-
15,633
15,633
(557)
(557)
(557)
(557)
-
(557)
15,633
15,076
-
-
-
-
(3,511)
(4,957)
(6,274)
(6,274)
3,213
(1,046)
2,167
38,241
122,103
Share
capital
$
81,695
-
-
-
(2,855)
-
78,840
Share
capital
$
83,141
-
-
-
(1,446)
-
81,695
Refer to the notes to the consolidated financial statements
39
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2016 AND MARCH 31, 2015
In thousands of Canadian dollars
CASH FLOWS RELATED TO
Operating activities
Profit for the year
Adjustments for the following items:
Amortization and depreciation (Note 17)
Amortization of deferred lease inducement
Amortization of deferred financing costs
Interest expense
Foreign exchange
Share of profit of a joint venture
Deferred taxes
Loss on disposal of intangible assets
Gain on disposal of property, plant and equipment
Income tax expense recognized in profit
Changes in non-cash working capital items (Note 21 a))
Interest paid
Income taxes paid
Investing activities
Acquisition of property, plant and equipment (Note 21 a))
Acquisition of intangible assets
Distribution from a joint venture
Proceeds on disposal of property, plant and equipment
Financing activities
Increase in long-term debt
Repayment of long-term debt
Financing costs
Repurchase of share capital for cancellation (Note 14)
Lease inducement received
Cash dividends paid on common shares
Net change in cash and cash equivalents for the year
Impact of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents consist of the following statement of financial position items:
Cash and cash equivalents
Cash held for the benefit of third parties
2016
$
2015
$
15,832
15,633
5,526
(148)
10
1,239
(189)
(163)
1,110
85
(4)
5,041
1,605
(1,229)
(6,405)
22,310
(1,228)
(3,016)
500
5
(3,739)
9,112
(8,712)
(199)
(9,112)
-
(6,068)
6,557
(125)
120
955
(1,432)
(217)
777
-
-
4,766
2,134
(922)
(4,164)
24,082
(766)
(1,718)
-
-
(2,484)
-
(10,940)
-
(4,957)
79
(6,302)
(14,979)
(22,120)
3,592
108
8,212
11,912
10,901
1,011
(522)
892
7,842
8,212
7,546
666
40
Refer to the notes to the consolidated financial statements
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2016 AND MARCH 31, 2015
1
INCORPORATION AND NATURE OF OPERATIONS
Mediagrif Interactive Technologies Inc. (the “Company”) provides e-business solutions to consumer
and businesses. It operates its activities through its wholly-owned subsidiaries. The Company also owns
interests in a joint venture (Note 8).
The Company, incorporated on February 16, 1996, under the Canada Business Corporations Act, is listed
on the Toronto Stock Exchange. Its head office is located at 1111 St-Charles West, East Tower, Suite 255,
Longueuil, Quebec, Canada.
The Board of Directors approved the consolidated financial statements on June 7, 2016. Amounts are
expressed in Canadian dollars, unless indicated otherwise.
2
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The significant accounting policies described below have been applied to all periods presented in
these consolidated financial statements. The accounting policies are consistent with International
Financial Reporting Standards (IFRS) and interpretations currently issued and outstanding, relating
to fiscal year ended March 31, 2016.
Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis except for certain
financial instruments that are measured at fair value, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for assets.
These consolidated financial statements have been prepared on a going-concern basis. The principal
accounting policies are set out below.
Scope and basis of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries.
Participation in a joint venture is recognized using the equity method.
Subsidiaries
All of the subsidiaries are wholly owned by the Company, directly or indirectly.
These consolidated financial statements include the financial statements of the Company and those
of the entities it controls (its subsidiaries).
41
Entities are included in the scope of consolidation from the date the Company acquires control and until
that control ceases. The total comprehensive income of the subsidiaries is attributed to the Company’s
owners.
All intra-group transactions, balances, revenues and expenses are fully eliminated upon consolidation.
Interest in a joint venture
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions about the relevant activities require unanimous
consent of the parties sharing control.
Joint venture arrangements that involve the creation of a separate entity in which each venturer has
an interest are referred to as jointly-controlled entities.
The Company accounts for its interests in a joint venture using the equity method, except when the interest
is classified as held for sale, in which case it is accounted for using IFRS 5 Non-Current Assets Held
for Sale and Discontinued Operations. The Company records its share of the result of the joint venture.
Any goodwill that comes from the Company’s acquisition of an interest in a jointly-controlled entity
is recognized using the accounting policy that the Company uses to recognize goodwill from a business
combination.
Transactions between the Company and its joint venture have been measured at the amount
of consideration agreed to by the parties.
Foreign currency translation
The Company’s functional and presentation currency is the Canadian dollar. The functional currency
of all the Company’s entities is also the Canadian dollar.
Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized
at the rates of exchange prevailing on the transaction dates.
Monetary items are translated at the rate in effect on the reporting date, and non-monetary items,
including the related amortization, are translated at their historical rate, whereas revenues and expenses
are translated at the average exchange rate for the year. Foreign exchange gains and losses are included
in Other (expenses) revenues.
Financial instruments
Financial assets and liabilities are recognized when a Company’s entity becomes party to the contractual
provisions of a financial instrument.
Financial assets and liabilities are initially measured at fair value. Transaction costs directly attributable
to the acquisition or issuance of financial assets and liabilities (other than financial assets and liabilities
measured at fair value through profit or loss) are either added to or deducted from, whichever the case,
the fair value of financial assets or liabilities upon initial recognition. Transaction costs directly attributable
to the acquisition of financial assets or liabilities measured at fair value through profit or loss are
immediately recognized in profit.
42
The Company derecognizes financial assets and liabilities if, and only if, its obligations have been settled,
cancelled or have expired. A financial asset is derecognized if the contractual rights on the related cash
flows are expiring, or if the asset is transferred and the transfer may be subject to derecognition.
Effective interest rate method
The effective interest rate method is a method of calculating the amortized cost of a financial asset or
liability and of allocating the interest income or interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash flows (including all commissions
that are an integral part of the effective interest rate, transaction costs and other premiums or discounts)
over the expected life of the financial asset or liability or, when appropriate, a shorter period.
Transaction costs consist primarily of legal, accounting, and underwriter fees and other costs directly
attributable to the issuance of the related financial instruments.
Deferred financing costs
Financing costs paid during the establishment of the Revolving Facility are recognized against the long-term
debt and amortized using the effective interest rate method over the expected term of the Revolving Facility.
When the Revolving Facility is paid in full, the deferred financing costs are presented as an asset because
they are attached to a revolving facility that still exists and is still available for use.
Impairment loss on financial assets
Financial assets, other than assets measured at fair value through profit or loss, are tested for impairment
at each reporting date. Financial assets are impaired if there is objective evidence of impairment as a result
of one or more events that occurred after the initial recognition of the financial asset on the estimated future
cash flows of the asset. For certain classes of financial assets, such as accounts receivable, those assets
that do not incur impairment losses individually are then collectively assessed for impairment.
For financial assets recognized at amortized cost, the impairment loss is measured as the difference
between the asset’s carrying value and the present value of estimated future cash flows discounted
at the financial asset’s original effective interest rate.
The carrying value of the asset is directly reduced by the impairment for all financial assets, with
the exception of accounts receivable, whose carrying value is reduced through the use of an allowance
account.
Aside from equity instruments and available-for-sale debt instruments, if, in a subsequent period,
the amount of the impairment loss decreases and the decrease can be objectively tied to an event occurring
after the impairment was recognized, the previously recognized impairment loss is reversed through
the income statement to the extent the carrying value of the asset at the date the impairment is reversed
does not exceed what the amortized cost would have been had the impairment not been recognized.
Classification and measurement
The Company classifies financial instruments into categories based on their nature and characteristics.
Management determines where to classify financial instruments when they are initially recognized, which
is usually the transaction date.
43
The Company has made the following classifications:
+ Cash and cash equivalents and accounts receivable are classified as loans and receivables
and are measured at amortized cost.
+ Derivative financial instruments that are not designated in hedge relationships are classified
as assets and liabilities at fair value through profit or loss and are measured at fair value.
Gains and losses from the periodic remeasurement are recognized in profit or loss and are
included in Other (expenses) revenues.
+ Accounts payable and accrued liabilities, other accounts payable and long-term debt are
classified as other financial liabilities and are measured at amortized cost.
Derivative financial instruments and hedge accounting
A portion of the Company’s revenues and operating expenses is denominated in U.S. dollars. The Company
uses foreign currency forward contracts to eliminate or reduce the risks of exchange rate fluctuations
that have an impact on a portion of these revenues. Management is responsible for setting acceptable levels
of risk and does not use derivative financial instruments for speculative purposes. More detailed information
on derivative financial instruments is provided in Note 23.
The fair value of instruments that qualify for cash flow hedging is reported on the Consolidated Statement
of Financial Position. The change in fair value related to the effective portion of the hedge of derivative
financial instruments denominated in U.S. dollars used as a cash flow hedge of anticipated revenues
denominated in U.S. dollars is recognized in other comprehensive income and recognized in profit or loss
when the hedged item affects profit or loss. The effectiveness of the hedging relationships is measured both
at the inception of the hedge and on an ongoing basis.
When a hedging relationship ceases to be effective, the corresponding gains and losses presented in
accumulated other comprehensive income are recognized in the profit or loss of the period during which
the hedging relationship ceases to be effective.
A derivative is presented as a non-current asset or a non-current liability if the remaining term to maturity
of the instrument is over 12 months and if it is not expected to be realized or settled within 12 months.
The other derivatives are presented as current assets or current liabilities.
Cash and cash equivalents
Cash and cash equivalents include cash, bank balances and liquid investments that are readily convertible
in the short-term and have a maturity date of less than three months from the date of acquisition, into
a known amount of cash and for which the risk of a variation in fair value is negligible.
Rebates and accounts receivable and payable arising from dispositions and from
escrow transactions
The Company’s services include administering a rebate program and running a used equipment trade-in
program for certain customers. As part of these services, the Company frequently receives cash
from customers (in the case of the rebate program) and from used equipment resellers. This cash,
minus related commissions earned by the Company, must be remitted to the other party to the transaction.
Financial statement amounts related to these transactions are described in Note 9.
44
The amount received up to the reporting date but not remitted to the other party is presented
on the Consolidated Statement of Financial Position as Cash held for the benefit of third parties.
The Company also offers an escrow service. As part of this service, the Company is named as an escrow
agent to receive, hold and transfer funds. The Company receives cash that is released, minus any related
fees, costs or charges, once the transaction between seller and buyer is finalized. The cash received is also
presented on the Consolidated Statement of Financial Position as Cash held for the benefit of third parties.
The corresponding amount is presented on the Consolidated Statement of Financial Position as Other
accounts payable.
Revenue recognition
Revenues derived from e-business industry are generated from the rights of use, transaction fees,
advertising, software development as well as from integration, maintenance and hosting services. In all
cases, revenues generated in the normal course of business are measured at the fair value of
th consideration received or receivable. Revenues are recognized only when there is persuasive evidence
that an arrangement exists, delivery has occurred or the service has been rendered, the price is fixed
or determinable, and collection of the related receivable is reasonably assured. Revenues arising from
an agreement to render services are recognized based on the stage of completion of the contract.
Where applicable, rebates and similar deductions are deducted from revenues.
In addition to these general revenue recognition policies, the following specific revenue recognition policies
are applied to the Company’s main sources of revenue:
+ Revenues from rights of use are recognized on a straight-line basis over the term
of the agreement or in some cases, when the service is used. Certain rights of use revenues
are generated from the sale of classified ad packages. These revenues are recognized
on a straight-line basis over the estimated life as of the date the ad is posted. The estimated
life is determined based on historical data for each type of ad. An estimate based
on the historical data is also used to determine ads that will never be posted, and
consequently are recognized as revenue upon receipt of payment.
+ Transaction fees are recognized when the transaction occurs.
+ Revenues from advertising are recognized on a straight-line basis over the term of
the campaign.
+ Software development revenues are recognized using the percentage-of-completion method.
The degree of completion is determined by dividing the cumulative costs incurred at the closing
date by the sum of incurred and estimated costs to complete the contract.
+ Revenues from integration, maintenance and hosting services are recognized on a straight-line
basis over the term of the agreement.
45
Property, plant and equipment
Property, plant and equipment are recognized at cost less accumulated depreciation and accumulated
impairment losses. Depreciation is recognized over the estimated useful lives of the related assets using
the following methods and periods:
Office furniture
Computer and other equipment
Leasehold improvements
METHOD
Straight-line
Straight-line
Straight-line
PERIOD
3 years
3 years
Lesser of term of the lease and useful life
The estimated useful lives, residual values and depreciation methods are reviewed at the end of each
financial reporting period, and the impact of any change in estimate is accounted for on a prospective basis.
Items of property, plant and equipment are derecognized upon disposal when no future economic benefits
are expected to arise from the continued use of the asset. A gain or loss arising on the disposal or
retirement of an item of property, plant and equipment is the difference between the sales proceeds
and the carrying amount of the asset and is recognized in profit or loss in Other (expenses) revenues.
Impairment of long-lived assets, excluding goodwill
At the end of each financial reporting period, the Company reviews the carrying amounts of its property,
plant and equipment and finite-life intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the amount of the impairment loss (if any). Where it is not possible
to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount
of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis
of allocation can be identified, corporate assets are also allocated to individual cash-generating units;
otherwise, they are allocated to the smallest group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
Intangible assets not yet available for use are tested for impairment at least once a year and whenever
there is an indication that the asset may be impaired.
Certain trademarks acquired in business combinations have been identified as having indefinite lives as they
are highly recognizable in the market and there is no foreseeable time limit to their ability to generate
revenues.
Cash-generating units to which indefinite-life trademarks have been allocated are tested for impairment
annually or more frequently when there is indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated
proportionately across the assets of the unit.
Recoverable amount is the higher of fair value less costs of disposal and value in use. To measure value
in use, estimated future cash flows are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
46
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount.
An impairment loss is immediately recognized in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its recoverable amount to extent that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
immediately recognized in profit or loss.
Intangible assets
Intangible assets comprise software and acquired intangible assets.
Software
Some softwares are purchased to meet the Company’s technology needs and are recognized at cost less
accumulated amortization and accumulated impairment losses. Intangible assets also include costs
to produce internally developed software and websites, including the portion of capitalized personnel costs
of the Company’s development group. These costs include all of the expenses incurred starting from
the date when all capitalization criteria is met. Where no internally generated intangible asset can
be recognized, development expenses are recognized in profit or loss in the period they are incurred.
After initial recognition, internally-generated intangible assets are recorded at cost less accumulated
amortization and accumulated impairment losses. These costs are amortized on a straight-line basis
over their estimated useful lives ranging from three to five years.
Acquired intangible assets
Acquired intangible assets consist of client bases, technologies, finite- and indefinite-life trademarks
and databases acquired from business acquisitions. They are recorded at cost (i.e., the acquisition-date fair
value), less accumulated impairment losses and amortization. Acquired intangible assets, except
for indefinite-life trademarks that are not amortized but are assessed for impairment annually, are
amortized on a straight-line basis over their respective estimated useful lives, using the following periods:
CATEGORY
Client bases
Technologies
Finite-life trademarks
Databases
PERIOD
3 to 10 years
3 to 5 years
10 years
5 years
The estimated useful lives and amortization methods of intangible assets are reviewed at the end of each
financial reporting period, and the impact of any change in estimates is accounted for on a prospective basis.
Intangible assets are derecognized upon disposal or when no future economic benefits are expected
from their use or disposal. Gains or losses arising from derecognition of an intangible asset, measured
as the difference between the net proceeds from the disposal of the asset and its carrying amount, are
recognized in profit or loss when the asset is derecognized.
47
Internally generated assets
Technology expenses are expensed as incurred, except for certain internally developed software
and website costs, in particular enhancements to the Company’s websites, which are capitalized
when the future economic benefit and cost measurement criteria are met. In such a case these costs are
amortized over a period ranging from three to five years. Amortization of internally developed software
and websites is included in technology expenses.
Business combinations
Business acquisitions are accounted for under the acquisition method. The consideration transferred
in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date
fair values of the assets transferred by the Company, liabilities incurred by the Company to the former
owners of the acquiree, and the equity interests issued by the Company in exchange for control
of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at
the acquisition-date fair value, except that:
+ Deferred tax assets or liabilities and liabilities or assets related to employee benefit
arrangements are recognized and measured in accordance with IAS 12 Income Taxes
and IAS 19 Employee Benefits, respectively.
+ Liabilities or equity instruments related to share-based payment arrangements of the acquiree
or share-based payment arrangements of the Company entered into to replace share-based
payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-Based
Payment at the acquisition date.
+ Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5
Non-Current Assets Held for Sale and Discontinued Operations are measured in accordance
with that standard.
Deferred revenues from business combinations are recognized at fair value. This corresponds to the future
costs to perform the services, the collection of which took place before the acquisition, plus a profit margin.
This profit margin is the average margin the Company realized for the delivery of the same kind of service.
The fair value of acquired intangible assets is determined as follows:
Trademarks are recognized at fair value according to the avoided royalties’ method. Acquired technology
is evaluated using the replacement cost method. It estimates the cost to rebuild a platform by adding
the estimated loss of profits during the reconstruction. The multiperiod excess earnings method is used
to calculate the value of customer relationships. The avoided royalties method, the replacement cost
method and the multi-period excess earnings method are all primarily based upon expected discounted
cash flows according to currently available information, such as historical and projected revenues,
the probability of renewal of each contract and certain other relevant assumptions.
48
Goodwill is measured as the excess of the total consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree
(if any) over the net balance of the acquisition-date amounts of the identifiable assets acquired and liabilities
assumed. If, after remeasurement, the net balance of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the total consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of the acquirer’s previously-held interest
in the acquiree (if any), the excess amount is recognized immediately in profit or loss as a bargain purchase
gain.
Goodwill
Goodwill arising from a business combination is recognized at cost as established at the date of acquisition
of the business (see Business Combinations) less accumulated impairment losses, if any.
For impairment testing purposes, goodwill is allocated to each of the Company’s cash-generating units
(or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-
generating unit is less than its carrying amount, the impairment loss is first allocated to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis
based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized
directly in profit or loss of the Consolidated Statement of Income. An impairment loss recognized
for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included
in the determination of the profit or loss on disposal.
The Company has selected March 31 as the date for performing its annual impairment test for goodwill.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result
of a past event, when it is probable that the Company will be required to settle the obligation, and when
a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the financial reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value of those cash flows.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
49
The Company as a lessee of an operating lease
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an
expense in the period in which they are incurred.
When lease incentives are received to enter into operating leases, such incentives are recognized as a
liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line
basis, except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed.
Deferred lease inducements
Deferred lease inducements refer to the reimbursement of leasehold improvement expenses and free
or preferential rent assumed by the landlord under leases for commercial premises. These inducements
are amortized on a straight-line basis over the terms of the leases falling due in May 2022, in October 2022
and in May 2026. Amortization is recorded as a reduction of the rent expense in the Consolidated Statement
of Income.
The Company as a lessee of a finance lease
Assets held under finance leases are initially recognized as Company assets at fair value starting from
the inception of the lease or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the Consolidated Statement of Financial Position
as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction
of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance expenses are recognized directly in profit or loss, unless they are directly attributable to qualifying
assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing
costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.
Income taxes
Income tax expense is the sum of current taxes and deferred taxes.
Current taxes
Current tax payable is based on taxable income for the year. Taxable income and income reported in
the Consolidated Statement of Income differ due to revenue or expense items that are taxable or deductible
in other years and items that are never taxable or deductible. The Company’s liability for current taxes
is calculated using tax rates that have been enacted or substantively enacted by the end of the financial
reporting period.
Deferred taxes
The Company recognizes income taxes using the asset-liability approach. Under this method, deferred tax
assets and liabilities are determined based on deductible or taxable temporary differences between
the carrying amounts and tax bases of assets and liabilities using enacted or substantively enacted tax rates
expected to be in effect in the year in which the differences are expected to reverse. Such deferred tax
assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects
neither the taxable income nor the accounting income.
50
The carrying amount of deferred tax assets is reviewed at the end of each financial reporting period and is
reduced when it is no longer probable that sufficient taxable income will be available to allow all or part
of the asset to be recovered.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Company expects, at the end of the financial reporting period, to recover
or settle the carrying amount of its assets and liabilities.
Current and deferred taxes for the year
Current and deferred taxes are recognized in profit or loss, except when they relate to items that have been
recognized in other comprehensive income or directly in equity, in which case the current and deferred
taxes are also recognized, respectively, in other comprehensive income or directly in equity. Where current
taxes or deferred taxes arise from the initial accounting for a business combination, the tax impact
is included in the accounting for the business combination.
Tax credits
Tax credits, including research and development tax credits, are not recognized until there is reasonable
assurance that the Company will meet the eligibility criteria of the credits and that they will be received.
Tax credits are recognized as a deduction to the related expenses in the year they are incurred.
Employee benefits
Salaries, employee benefits, paid leave, sick leave and bonuses are short-term benefits that are recognized
in the period in which the Company’s salaries have rendered the related services.
51
3
NEW AND REVISED IFRS, ISSUED BUT NOT YET EFFECTIVE
STANDARD AND
INTERPRETATION
EFFECTIVE DATE
FOR THE COMPANY
PRESENTATION AND IMPACT ON THE COMPANY
On July 24, 2014, the IASB issued the final version of IFRS 9
Financial Instruments, which replaces IAS 39 Financial
Instruments: Recognition and Measurement. This final version
of IFRS 9 represents the completion of this project and it
includes requirements for recognition and measurement,
impairment, derecognition and general hedge accounting.
IFRS 9 does not address the specific accounting for open
portfolios or macro hedging, as these items are part of a
separate IASB project that is currently ongoing. This final
standard introduces a single, principles-based approach that
amends both the categories and associated criteria for the
classification and measurement of financial assets, which is
driven by the entity’s business model for the portfolio in which
the assets are held and the contractual cash flows of these
financial assets. Certain amendments have been made to the
financial asset classification and measurement principles in
prior versions of IFRS 9. This standard introduces an amended
hedging model that aligns hedge accounting more closely with
an entity’s risk management activities and also includes a new
financial asset impairment model that has an expanded scope,
is based on expected credit losses rather than incurred credit
losses and generally will result in earlier recognition of losses.
This new standard supersedes all prior versions of IFRS 9.
The Company has not yet examined the impacts of this new
standard.
IFRS 15 Revenue from Contracts with Customers establishes
principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty
of revenue and cash flows arising from an entity’s contracts
with customers. The core principle of the new standard is
for companies to recognize revenue to depict the transfer
of goods or services to customers in amounts that reflect
the consideration to which the Company expects to be entitled
in exchange for those goods or services. The new standard will
also result in enhanced disclosures about revenue, provide
guidance for transactions that were not previously addressed
comprehensively (for example, service revenue and contract
modifications) and improve guidance for multiple-element
arrangements. The Company has not yet examined the impacts
of this new standard.
IFRS 9 Financial
Instruments
Annual period
beginning on
April 1, 2018
IFRS 15 Revenue from
Contracts with Customers
Annual period
beginning on
April 1, 2018
52
STANDARD AND
INTERPRETATION
EFFECTIVE DATE
FOR THE COMPANY
PRESENTATION AND IMPACT ON THE COMPANY
IFRS 16 Leases
Annual period
beginning on
April 1, 2019
On January 13, 2016, the IASB issued IFRS 16, Leases, which
provides a comprehensive model for the identification of lease
arrangements and their treatment in the financial statements
of both lessees and lessors. It supersedes IAS 17 Leases
and its associated interpretive guidance. Significant changes
were made to lessee accounting with the distinction between
operating and finance leases removed and assets and liabilities
recognized in respect of all leases (subject to limited exceptions
for short-term leases and leases of low value
assets). In contrast, IFRS 16 does not include significant
changes to the requirements for lessors. IFRS 16 will
be effective as of January 1, 2019 with earlier application
permitted for companies that have also adopted IFRS 15,
Revenue from Contracts with Customers. The Company has
not yet examined the impacts of this new standard.
53
4
MANAGEMENT’S ESTIMATES AND JUDGMENTS
The preparation of consolidated financial statements in accordance with IFRS requires management
to make estimates and assumptions that affect the reported amounts of revenues and expenses during
the year and the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements. Management reviews its estimates regularly,
and revisions to accounting estimates are recognized in the period in which the estimate is revised if
the revision affects only that period, or in the period of the revision and future periods if the revision affects
both the period being reviewed and future periods. Actual results may differ from these estimates.
Estimates
In preparing consolidated financial statements in accordance with IFRS, management must exercise
judgment when applying accounting policies and rely on assumptions and estimates that affect the amounts
of the assets, liabilities, revenues and expenses reported in these consolidated financial statements and
on the contingent liability and contingent asset information provided. The actual results of items subject
to assumptions and estimates may differ from these assumptions and estimates.
Explanations about the main assumptions and estimates are presented below:
Revenue recognition
As mentioned in Note 2, the Company uses assumptions to recognize some of the revenues from rights
of use i.e., the sale of classified ad packages. Management reviews these assumptions on a regular basis.
Significant changes in these assumptions would have an impact on the Company’s profit.
Useful lives of property, plant and equipment and finite-life intangible assets
At the end of each reporting period, the Company reviews the estimated useful lives of its property, plant
and equipment and finite-life intangible assets. At the end of the fiscal year, management has determined
that the useful lives of property, plant and equipment and finite-life intangible assets were appropriate.
Measurements of assets
When applying the discounted future cash flows model to determine the fair value of groups of cash-
generating units to which goodwill is allocated, certain parameters must be used, including estimates
of future cash flows, discount rates and other variables; a high degree of judgment must therefore be
exercised. Impairment tests on property, plant and equipment and intangible assets are also based
on similar assumptions. Any future deterioration of market conditions or poor operational performance
could translate into an inability to recover the current carrying amounts of property, plant and equipment
and intangible assets.
See Note 12 for more information on goodwill impairment testing and Note 11 for the test of indefinite-life
intangible assets.
54
Business combinations
For business combinations, the Company must make assumptions and estimates to determine the purchase
price allocation of the business being acquired. To do so, the Company must determine the acquisition-date
fair values of the identifiable assets acquired and liabilities assumed. Goodwill is measured as the excess
of the acquisition cost over the Company’s share in the fair value of all identified assets and liabilities.
These assumptions and estimates have an impact on the asset and liability amounts recorded in
the Consolidated Statement of Financial Position on the acquisition date. In addition, the estimated useful
lives of the acquired property, plant and equipment, the identification of other intangible assets and
the determination of the finite or indefinite useful lives of intangible assets acquired will have an impact
on the Company’s profit.
See Note 2 for more information on the assumptions and estimates used.
Deferred taxes
The Company is required to estimate the income taxes in each of the jurisdictions in which it operates.
This includes estimating a value for existing net operating losses based on the Company’s assessment
of its ability to utilize them against future taxable income before they expire. If the Company’s assessment
of its ability to use the net operating losses proves inaccurate, this would impact the income tax expense
and, consequently, affect the Company’s profit in the relevant year. The Company may be audited by the tax
authorities of different jurisdictions. Given that the determination of tax liabilities involves certain
uncertainties in interpreting complex tax regulations, the Company uses management’s best estimates
to determine potential tax liabilities. Differences between the estimates and the actual amount of taxes
are recorded in profit at the time they can be determined.
Judgments
The critical accounting policy judgments that have the greatest impact on amounts reported in
the consolidated financial statements include the following:
Definition of cash-generating units
The Company assesses whether there are any indicators of impairment for all non-financial assets at
the end of each financial reporting period. If such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). When it is not possible
to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount
of the cash-generating unit to which the asset belongs. Determination of cash-generating units is based
on management’s best estimate of what constitutes the lowest level at which an asset or group of assets
is able to generate cash inflows. The Company must also determine whether goodwill can be attributed
to one or more cash-generating units.
See Note 12 for more information on attributions of goodwill to cash-generating units and Note 11 for
the attribution of indefinite-life intangible assets to cash-generating units.
55
5
SEGMENT INFORMATION
The Company has only one reportable segment.
Geographical information is as follows:
In thousands of Canadian dollars
REVENUES
Canada
United States
Asia and other
Europe
In thousands of Canadian dollars
NON-CURRENT ASSETS
Canada
United States
Asia and other
2016
$
45,683
24,912
1,825
600
73,020
2015
$
46,105
21,349
2,115
678
70,247
AS AT
MARCH 31,
AS AT
MARCH 31,
2016
$
139,090
24,586
4
163,680
2015
$
140,100
24,681
6
164,787
Revenues are attributed to geographic areas based on the location of the customers.
Non-current assets include property, plant and equipment, intangible assets, acquired intangible assets
and goodwill.
6
REVENUES
Revenues are detailed as follows:
In thousands of Canadian dollars
Revenues from rights of use
Revenues from transaction fees
Revenues from advertising
Revenues from software development
Revenues from integration, maintenance and hosting
Other
56
2016
$
53,384
8,426
6,419
2,370
1,601
820
73,020
2015
$
52,048
6,728
6,663
2,627
1,312
869
70,247
7
SUBSIDIARIES
The table below provides details on the subsidiaries that the Company owned directly and indirectly as
at March 31, 2016.
Subsidiary name
Carrus Technologies Inc.
3808891 Canada Inc.
The Broker Forum Inc.
MERX Networks Inc.
InterTrade Systems Inc.
Country of
incorporation
or registration
and operation
Canada
Canada
Canada
Canada
Canada
InterTrade Technologies, Inc.
United States
4222661 Canada Inc.
TIM USA Inc.
Market Velocity, Inc.
Canada
United States
United States
Construction Bidboard Inc.
United States
Power Source On-Line, Inc.
United States
International Data Base Corp.
United States
Polygroup, Ltd.
LesPAC Network Inc.
Mediagrif Information Consulting
(Shenzhen) Co. Ltd.
Jobboom Inc.
Réseau Contact Inc.
United States
Canada
China
Canada
Canada
Ownership
interest
percentage
Percentage
of voting
rights
Industry sector serviced by the
electronic commerce solutions
of the Company
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Automotive aftermarket
Holding company
Electronic components
E-procurement
Supply chain collaboration
Supply chain collaboration
E-procurement
Holding company
Computer equipment, telecommunication
and consumer electronics
E-procurement
Computer equipment, telecommunication
and consumer electronics
E-procurement
Diamonds and jewelry
Classified ads
Electronic components
Employment and talent acquisition
Online dating
57
8
JOINT VENTURES
The Company has interests in a joint venture (the “joint venture”) in which it shares joint control with
its co-venturers. The Company’s interest in the joint venture and its operations is summarized as follows:
A 50% ownership in Société d’investissement M-S S.E.C. (a limited partnership), which operates under
the brand Global Wine & Spirits (GWS). GWS operates a virtual business-to-business electronic network
offering an integrated solution for the purchase and sale of wine and spirits.
During the year ended March 31, 2016 the Company recorded revenues of $1,694,070 ($1,618,860 in 2015)
from transactions with GWS. In addition, the Company recharged to GWS operating expenses in the amount
of $300,043 ($254,039 in 2015). These recharges were presented against operating expenses in
the Consolidated Statement of Income. As at March 31, 2016, GWS accounts receivable to the Company
are $143,816 ($120,980 as at March 31, 2015).
These transactions occurred in the normal course of business and were measured at the amount
of consideration agreed to by the parties.
9
REBATES AND ACCOUNTS RECEIVABLE AND PAYABLE ARISING FROM
DISPOSITIONS AND FROM ESCROW TRANSACTIONS
Cash received as at March 31, 2016, for the administration of a rebate program and used equipment trade-in
transactions, but not yet remitted to the counterparty, presented on the Consolidated Statement of Financial
Position as Cash held for the benefit of third parties, amounted to $212,095 (US$163,515) ($206,084 in 2015
(US$162,488)). As at March 31, 2016, the amount of accounts receivable related to rebate and disposition
transactions amounted to $695,150 (US$535,926) ($563,258 in 2015 (US$444,105)).
The amount received as at March 31, 2016, for escrow services presented on the Consolidated Statement
of Financial Position as Cash held for the benefit of third parties amounted to $798,704 (US$615,761)
($460,127 in 2015 (US$362,790)).
The total accounts payable for these transactions amounted to $1,705,949 (US$1,315,202) ($1,229,469
in 2015 (US$969,383)) and are presented in Other accounts payable in the Consolidated Statement
of Financial Position.
58
OFFICE
FURNITURE
$
COMPUTER
AND OTHER
EQUIPMENT
$
LEASEHOLD
IMPROVEMENTS
$
ASSETS
UNDER
FINANCE
LEASES
$
10
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
In thousands of Canadian dollars
COST
Balance as at March 31, 2014
Acquisitions
Disposals
Balance as at March 31, 2015
Acquisitions
Disposals
BALANCE AS AT MARCH 31, 2016
Accumulated depreciation
Balance as at March 31, 2014
Eliminations related to asset
disposals
Depreciation for the year
Balance as at March 31, 2015
Eliminations related to asset
disposals
Depreciation for the year
1,405
232
(1)
1,636
296
(51)
1,881
8,393
479
(13)
8,859
824
(31)
9,652
(1,007)
(7,245)
1
(239)
13
(660)
(1,245)
(7,892)
52
(215)
29
(674)
BALANCE AS AT MARCH 31, 2016
(1,408)
(8,537)
NET CARRYING AMOUNT
TOTAL
$
11,267
766
(212)
11,821
1,489
(82)
13,228
(8,911)
212
(1,038)
(9,737)
81
(1,027)
(10,683)
1,271
55
-
1,326
369
-
1,695
(461)
-
(139)
(600)
-
(138)
(738)
198
-
(198)
-
-
-
-
(198)
198
-
-
-
-
-
Balance as at March 31, 2015
BALANCE AS AT MARCH 31, 2016
391
473
967
1,115
726
957
-
-
2,084
2,545
59
11
INTANGIBLE ASSETS AND ACQUIRED INTANGIBLE ASSETS
Intangible assets consist of the following:
INTANGIBLE ASSETS
INTERNALLY
DEVELOPED
SOFTWARE
AND
WEBSITES
$
SOFTWARE
$
3,993
538
(487)
4,044
1,148
(61)
5,131
(3,444)
487
(497)
(3,454)
-
(583)
(4,037)
-
1,180
-
1,180
1,868
(34)
3,014
-
-
(51)
(51)
10
(450)
(491)
TOTAL
$
3,993
1,718
(487)
5,224
3,016
(95)
8,145
(3,444)
487
(548)
(3,505)
10
(1,033)
(4,528)
590
1,094
1,129
2,523
1,719
3,617
In thousands of Canadian dollars
COST
Balance as at March 31, 2014
Acquisitions
Disposals
Balance as at March 31, 2015
Acquisitions
Disposals
BALANCE AS AT MARCH 31, 2016
ACCUMULATED AMORTIZATION
Balance as at March 31, 2014
Eliminations related to asset
disposals
Amortization for the year
Balance as at March 31, 2015
Eliminations related to asset
disposals
Amortization for the year
BALANCE AS AT MARCH 31, 2016
NET CARRYING AMOUNT
Balance as at March 31, 2015
BALANCE AS AT MARCH 31, 2016
60
Acquired intangible assets comprise the following:
ACQUIRED INTANGIBLE ASSETS
CLIENT
BASES TECHNOLOGY
$
$
FINITE-LIFE
TRADEMARKS
$
INDEFINITE-
LIFE
TRADEMARKS
$
TOTAL
$
21,118
21,118
21,118
(11,599)
(1,538)
(13,137)
(1,497)
(14,634)
18,776
18,776
18,776
(9,125)
(3,428)
(12,553)
(1,969)
(14,522)
604
604
604
(599)
(5)
(604)
-
(604)
46,500
86,998
46,500
86,998
46,500
86,998
-
-
-
-
-
(21,323)
(4,971)
(26,294)
(3,466)
(29,760)
In thousands of Canadian dollars
COST
Balance as at March 31, 2014
Balance as at March 31, 2015
BALANCE AS AT MARCH 31, 2016
ACCUMULATED AMORTIZATION
Balance as at March 31, 2014
Amortization for the year
Balance as at March 31, 2015
Amortization for the year
BALANCE AS AT MARCH 31, 2016
NET CARRYING AMOUNT
Balance as at March 31, 2015
BALANCE AS AT MARCH 31, 2016
7,981
6,484
6,223
4,254
-
-
46,500
60,704
46,500
57,238
61
Impairment test of the trademark with an indefinite useful life
For the purpose of impairment testing, the indefinite-life trademark is tested at the level of its cash-
generating unit, since this is the lowest level at which the indefinite-life trademark with an indefinite useful
life is monitored for internal management purposes.
To determine the cash-generating units to which the indefinite-life trademark is attributed, management has
analyzed the cash flows related to the indefinite-life trademark and concluded that these entries were
largely independent from the cash flows from other assets or group of assets. The criterion used was
the nature of the revenue generated by such trademark. These revenues cannot be combined with any other
identifiable group of assets due to their distinctive features.
The Company performed an annual impairment test of the cash-generating unit in the fourth quarter of
the year ended March 31, 2016, in accordance with the methods described in Note 2. The recoverable
amount of the cash-generating unit associated with the indefinite-life trademark exceeded its carrying
amount. As a result, no loss in value was recorded on the trademark with an indefinite useful life during
the years ended March 31, 2016 and March 31, 2015.
As at March 31, 2016, the recoverable amount of the cash-generating unit was established by calculating
its value in use. This calculation is made using discounted cash flow projections that are based on five-year
financial budgets approved by the Board of Directors. The model used to determine discounted cash flows
employed a 13.0% discount rate and a 2.0% growth rate for both the future cash flows and the final value.
Based on observable market data such as the risk-free rate, risk premiums observed in the market, the beta
of companies operating in the same sector, the premium associated with the size of the Company, specific
risks associated with the cash-generating units and the statutory tax rate, the weighted-average cost
of capital was determined to a range between 12.0% and 14.0%. This reflects the overall risk of
the Company.
Each asset class (working capital, tangible and intangible assets and goodwill) has its own risk discount
rate. The Company has determined that the trademark is a risk that is similar to the overall risk of
the Company. Consequently, a discount rate of 13.0%, representing the first key assumption, has been
selected, which is in within the range mentioned above.
As a second key assumption, the Company believes that a growth rate of 2.0% is reasonable considering
the projected inflation rate and growth rate of consumer goods.
These are the two most sensitive assumptions. A change in other assumptions used would not have changed
the results significantly.
Reasonably possible changes to these two key assumptions would not cause the carrying amount of
the cash-generating unit to exceed its recoverable amount.
A 1.0% increase in the discount rate would not have reduced the recoverable amount of the cash generating
units below their carrying amount. A 1.0% decrease in the growth rate would not have reduced
the recoverable amount of the cash generating units below their carrying amount.
62
12
GOODWILL
As at March 31, 2016 and 2015, goodwill stood at $100,280,000.
For the purpose of impairment testing, goodwill is tested at the level of the Company as a whole since
management is of the opinion that the Company as a whole benefits from the synergies of business
combinations completed to date and since this is the lowest level at which goodwill is monitored for internal
management purposes.
The Company performed an annual impairment test of goodwill in the fourth quarter of the year ended
March 31, 2016, in accordance with the methods described in Note 2. The recoverable amount of
the Company as a whole exceeded its carrying amount. As a result, no loss in the value of goodwill was
recorded for the years ended March 31, 2016 and March 31, 2015.
As at March 31, 2016, the recoverable value of the Company was established by calculating its value in use.
This calculation is made using discounted cash flow projections based on five-year financial budgets
approved by the Board of Directors. The model used to determine discounted cash flows employed a 13.0%
discount rate and a 2.0% growth rate for both the future cash flows and the final value.
Based on observable market data such as the risk-free rate, risk premium observed in the market, the beta
of companies operating in the same sector, the premium associated with the size of the Company, specific
risks associated with the cash-generating unit and the statutory tax rate, the weighted-average cost of
capital was determined to a range between 12.0% and 14.0%. This reflects the overall risk of the Company.
Each asset class (working capital, tangible and intangible assets and goodwill) has its own risk discount
rate. The Company has determined that goodwill is similar to the overall risk of the Company. Consequently,
a discount rate of 13.0%, representing the first key assumption, has been selected, which is in inside
the range mentioned above.
As a second key assumption, the Company believes that a growth rate of 2.0% is reasonable considering
the projected inflation rate and growth rate of consumer goods.
These are the two most sensitive assumptions. A change in other assumptions would not have changed
the results significantly.
Reasonably possible changes to these two key assumptions would not cause the carrying amount of
the cash-generating unit to exceed its recoverable amount.
A 1.0% increase in the discount rate would not have reduced the recoverable amount of the Company below
its carrying amount. A 1.0% decrease in the growth rate would not have reduced the recoverable amount
of the Company below its carrying amount.
63
13
LONG-TERM DEBT
On December 18, 2015, the Company renewed its credit agreement, which was entered into on
November 10, 2011, (the “Credit Agreement”) with three Canadian financial institutions pursuant to which
lenders made available to the Company a $80,000,000 ($60,000,000 as at March 31, 2015) secured revolving
five-year credit facility (the “Revolving Facility”) and an accordion loan of $40,000,000 ($40,000,000 as
at March 31, 2015) subject to lenders’ acceptance.
The Revolving Facility expires on December 18, 2020, and any outstanding amounts are due in full
at maturity. Amounts under the Credit Agreement are repayable before maturity without penalty.
As at March 31, 2016, the Company’s Revolving Facility stood at $26,500,000 ($26,100,000
as at March 31, 2015) and the amount is due in full during the fiscal year ending March 31, 2021.
The Revolving Facility bears interest at a rate based either on Canadian prime rate, LIBOR or bankers’
acceptance rate plus a margin in each case. This margin varies according to the ratio of total debt to
earnings before interest, taxes, depreciation and amortization (“EBITDA”), as described below. As at
March 31, 2016, the actual rate was 0.88% (1.00% as at March 31, 2015) and the margin was 1.20% (1.50%
as at March 31, 2015). In addition, the unused portion of the Revolving Facility bears interest at 0.24% (0.30%
as at March 31, 2015) as standby fees.
All obligations under the Credit Agreement are secured by a first-rank security (hypothec) on substantially
all of the Company’s assets, tangible and intangible, present and future.
The Credit Agreement contains certain covenants and certain events of default customary for loans of this
nature, including some limitations to the levels of investments and acquisitions, capital expenditures and
distributions. The Credit Agreement is also subject to restrictive covenants requiring certain financial ratios
to be maintained. As at March 31, 2016 the Company was in compliance with the financial ratios prescribed
under these covenants:
1. a fixed charge coverage ratio of not less than 1.20:1.00 (1.20:1.00 as at March 31, 2015) at all times.
2. a total debt to EBITDA ratio of not more than 3.0 (2.5 as at March 31, 2015).
Fixed charge, total debt and EBITDA, which are used in the calculation of the covenants mentioned above,
are defined precisely in the Credit Agreement.
Financial ratios are calculated using the financial information of the twelve-month period ending on the date
the ratio is calculated.
The following table provides the long-term debt information:
In thousands of Canadian dollars
Revolving credit facility, bearing interest at the bankers’ acceptance rate, plus 1.20% (1.50% as
at March 31, 2015), maturing in December 2020
Deferred financing costs i)
i) The deferred financing costs are amortized using the effective interest rate method.
AS AT
MARCH 31,
2016
$
AS AT
MARCH 31,
2015
$
26,500
(189)
26,311
26,100
-
26,100
64
14
SHARE CAPITAL
a) Authorized and paid, unlimited number
• Common shares;
• Preferred shares, issuable in series with terms, conditions and dividends to be
determined by the Board of Directors upon issuance.
b) The following table summarizes common share activity for the last two fiscal years:
In thousands
BALANCE AT BEGINNING OF YEAR
Repurchased for cancellation i)
BALANCE AT END OF YEAR
2016
2015
SHARES
$
SHARES
15,542
(543)
14,999
81,695
(2,855)
78,840
15,817
(275)
15,542
$
83,141
(1,446)
81,695
i) During the year ended March 31, 2016, the Company repurchased 543,276 of its common shares (275,100 in 2015) for a cash
consideration of $9,112,261 ($4,957,141 in 2015) in connection with its Normal Course Issuer Bid. A total amount of $2,855,413
($1,446,003 in 2015) was recorded as a deduction from Share capital, corresponding to an average issue price of $5.26 ($5.26 in
2015) per share before repurchase, and the balance was charged to Retained earnings.
c) Dividends declared
Subsequent to the end of the year ended March 31, 2016, i.e., on June 7, 2016, the Company
announced the payment of a cash dividend of $0.10 per share, payable on July 15, 2016
to shareholders of record on July 4, 2016.
2016
On February 9, 2016, the Company announced the payment of a cash dividend of $0.10 per
share, payable on April 15, 2016, to shareholders of record on April 1, 2016.
On November 10, 2015, the Company announced the payment of a cash dividend of $0.10 per
share, payable on January 15, 2016, to shareholders of record on January 4, 2016.
On August 4, 2015, the Company announced the payment of a cash dividend of $0.10 per share,
payable on October 15, 2015, to shareholders of record on October 1, 2015.
On June 9, 2015, the Company announced the payment of a cash dividend of $0.10 per share,
payable on July 15, 2015, to shareholders of record on July 2, 2015.
2015
On February 10, 2015, the Company announced the payment of a cash dividend of $0.10 per
share, payable on April 15, 2015, to shareholders of record on April 1, 2015.
On November 11, 2014, the Company announced the payment of a cash dividend of $0.10 per
share, payable on January 15, 2015, to shareholders of record on January 2, 2015.
On August 5, 2014, the Company announced the payment of a cash dividend of $0.10 per share,
payable on October 15, 2014, to shareholders of record on October 1, 2014.
On June 10, 2014, the Company announced the payment of a cash dividend of $0.10 per share,
payable on July 15, 2014, to shareholders of record on July 2, 2014.
65
15
STOCK-BASED COMPENSATION
In July 2004, the Company established a stock purchase plan. Certain amendments to the plan have
subsequently been adopted and are in effect on the date hereof for all regular full-time and part-time
employees who are Canadian residents. Directors are not eligible to participate in this plan. Under
the terms of the plan, employees may elect to contribute, through payroll deductions, up to 10% of
their annual income up to a maximum of $20,000 annually to purchase common shares in the Company
on the open market. Under the plan, the Company matches employee contributions to the plan up to
a maximum contribution of $1,400 per employee ($1,300 in 2015). Employees must hold the portion
of shares purchased with the Company’s contribution for a period of 12 months. The purchase price
of shares under the plan is equal to the market price of the Company’s common shares on
the purchase date.
16
TECHNOLOGY
In thousands of Canadian dollars
Research and development costs incurred
Tax credits
Capitalized internally developed software and websites i)
Amortization of capitalized internally-developed software and websites
2016
$
15,395
(3,072)
12,323
(1,868)
10,455
450
2015
$
15,347
(1,915)
13,432
(1,180)
12,252
51
10,905
12,303
i) Capitalized internally-developed software and websites are shown net of tax credits of $958,547 ($529,168 in 2015). These tax
credits were capitalized because they are related to the internally developed software and websites.
66
17
EXPENSES BY TYPE
Operating profit includes the following items:
In thousands of Canadian dollars
Amortization and depreciation
Depreciation of property, plant and equipment
Amortization of intangible assets
Amortization of acquired intangible assets
Total
Employee benefits expense
Salaries and employee benefits
Termination benefits
Tax credits
Total
2016
$
1,027
1,033
3,466
5,526
30,647
285
30,932
(3,072)
2015
$
1,038
548
4,971
6,557
29,078
476
29,554
(1,915)
27,860
27,639
During the fiscal year ended March 31, 2016, the Company changed the comparative figures in expenses in
order to conform to the current year’s presentation of tax credits.
18
LEASES
The operating leases are for office spaces with terms of 1 to 10 years. Some of these leases feature renewal
options. The Company will not be able to acquire the leased assets at the end of the leases.
Payments recognized as expenses:
In thousands of Canadian dollars
Minimum lease payments
Obligations under non-cancellable operating leases:
In thousands of Canadian dollars
Less than 1 year
More than 1 year and less than 5 years
More than 5 years
2016
$
2015
$
1,656
1,558
2016
$
1,675
5,445
2,159
2015
$
1,402
4,449
1,304
9,279
7,155
67
19
INCOME TAXES
a) The income tax expense consists of the following:
In thousands of Canadian dollars
Current tax expense
Current taxes
Adjustments recognized during the year for current taxes of prior years
Deferred tax expense
Deferred tax expense relating to the origination and reversal of temporary differences
Adjustments recognized during the year for the deferred tax of prior years
Income tax expense
2016
$
2015
$
4,361
681
1,851
(741)
6,151
4,757
9
752
25
5,543
b) The income tax expense is calculated using an actual tax rate that differs from the statutory tax
rate for the following reasons:
Weighted-average statutory tax rate
Increase (decrease) arising from:
Geographic distribution of operating profits
Non-deductible expenses (non-taxable income) and other
Reserve
Prior-year tax adjustments and contributions
Actual tax rate
2016
%
2015
%
26.9
0.3
0.3
0.6
(0.1)
28.0
26.9
-
(0.8)
-
0.1
26.2
The tax rates used for the above-reconciled results for 2016 and 2015 are the tax rates applied to
the taxable income of Canadian companies under tax law in this jurisdiction.
68
The reconciliation of deferred tax assets (liabilities) by type of temporary differences recognized in the Consolidated Statement of Financial Position:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
P
M
E
N
T
I
I
I
N
T
A
N
G
B
L
E
A
S
S
E
T
S
I
M
P
A
C
T
O
N
F
O
R
E
G
N
I
I
F
O
R
E
G
N
E
X
C
H
A
N
G
E
D
E
F
E
R
R
E
D
R
E
N
T
I
N
S
T
R
U
M
E
N
T
S
P
R
O
V
S
O
N
I
I
I
S
U
B
S
D
A
R
Y
I
I
I
F
N
A
N
C
N
G
C
O
S
T
S
D
E
V
E
L
O
P
M
E
N
T
R
E
S
E
A
R
C
H
A
N
D
T
A
X
L
O
S
S
E
S
S
H
A
R
E
I
S
S
U
A
N
C
E
C
O
S
T
S
T
A
X
C
R
E
D
T
I
I
D
E
R
V
A
T
V
E
I
I
F
N
A
N
C
A
L
I
In thousands of Canadian dollars
$
$
$
$
$
$
$
$
$
$
$
T
O
T
A
L
$
Balance as at March 31, 2014
(Expense) deferred tax recovery for the year
recognized in profit
Foreign exchange impact from
remeasurement of deferred taxes
Deferred tax recovery for the year related to
other comprehensive income
Balance as at March 31, 2015
(Expense) deferred tax recovery for the year
recognized in profit
Foreign exchange impact from
remeasurement of deferred taxes
Deferred tax recovery for the year related to
other comprehensive income
496
(13,838)
(11)
(103)
231
180
29
1,060
3,855
(1,148)
164
(9,085)
(24)
(399)
33
321
(5)
-
-
-
-
-
-
-
-
-
-
472
(14,237)
22
218
226
314
(569)
(16)
181
(41)
-
-
-
-
-
-
-
-
-
-
204
384
-
-
(366)
3
-
-
29
(763)
82
(54)
(777)
-
-
540
-
-
-
-
-
540
204
32
1,089
3,632
(1,066)
110
(9,118)
(37)
(751)
177
(313)
(55)
(1,110)
-
-
-
-
81
-
-
-
-
-
81
(366)
Balance as at March 31, 2016
786
(14,806)
-
-
6
399
185
18
(5)
338
3,890
(1,379)
55
(10,513)
69
The following balances were recognized in the Consolidated Statements of Financial Position:
In thousands of Canadian dollars
Deferred tax assets
Deferred tax liabilities
MARCH 31,
2016
$
MARCH 31,
2015
$
5,091
(15,604)
5,945
(15,063)
(10,513)
(9,118)
Certain tax losses from Canadian and U.S. subsidiaries resulted in a deferred tax asset being recognized
in the Consolidated Statement of Financial Position, as management considers it probable that these tax
consequences will be used against future taxable income.
Tax risk
In the normal course of business, the Company is subject to reviews by the tax authorities in the jurisdictions
where the Company operates. These authorities may contest or refuse some of the positions taken
by management. The Company periodically examines the possibility of unfavorable outcomes from tax
audits and makes provisions for this purpose if the Company considers that an unfavorable outcome will
occur. As at March 31, 2016, an amount of $431,000 has been recorded as a provision for U.S. sales tax
while no provision was recorded as at March 31, 2015.
Deferred tax losses
As at March 31, 2016, the Company’s U.S. subsidiaries had accumulated net operating losses at the federal
level of approximately US$34,530,273 (CA$44,789,217). Some of these losses are limited to a maximum
annual amount and expire from 2017 through 2030. Therefore, an amount of US$26,392,628
(CA$34,233,878) losses can never be used against future taxable income. A deferred tax asset has been
recognized on a deferred tax loss amount of US$8,137,645 (CA$10,555,339).
In addition, the Company’s U.S. subsidiaries had accumulated net operating losses at the state level
of approximately US$11,333,450 (CA$14,700,618). These losses expire from 2019 through 2028. A valuation
allowance of approximately US$4,694,436 (CA$6,089,153) has been recorded for these losses. A deferred
tax asset has been recognized on a deferred tax loss amount of US$6,639,014 (CA$8,611,465).
As at March 31, 2016, the Company’s Canadian subsidiaries also have $518,977 in accumulated research
and development costs at the federal level and $2,188,021 at the provincial level, which may be carried
forward and used to reduce the taxable income of future years. These costs may be used for an indefinite
period. The tax consequences of these items were recognized as deferred tax assets.
70
20
RELATED PARTY TRANSACTIONS
Compensation of key management personnel
The following table presents the compensation of directors and the management team for the year:
In thousands of Canadian dollars
Directors – Directors’ fees
Management team
Short-term benefits
2016
$
2015
$
246
210
3,385
3,631
3,223
3,433
The management team’s compensation is set by a compensation committee and is based on individual
performance and market trends.
21
SUPPLEMENTARY STATEMENTS OF INCOME AND CASH FLOW INFORMATION
a) Changes in non-cash working capital items are as follows:
In thousands of Canadian dollars
Decrease (increase) in:
Accounts receivable
Tax credits receivable
Prepaid expenses and deposits
Increase (decrease) in:
Accounts payable and accrued liabilities
Other accounts payable
Deferred revenues
2016
$
(236)
(1,181)
831
1,413
477
301
1,605
During fiscal year ended March 31, 2016, the Company made non-cash acquisitions of property, plant and
equipment for an amount of $261,135.
b) Other revenues (expenses) consist of the following:
In thousands of Canadian dollars
Foreign exchange gain
Interest related to a tax settlement
Loss on disposal of intangible assets and property, plant and equipment
2016
$
115
(434)
(81)
(400)
2015
$
907
320
349
688
(428)
298
2,134
2015
$
1,174
-
-
1,174
71
c) Financial expenses consist of the following:
In thousands of Canadian dollars
Amortization of deferred financing costs
Interest on long-term debt
22
CAPITAL DISCLOSURES
2016
$
10
805
2015
$
120
955
815
1,075
The Company’s capital management objective is to ensure sufficient liquidity to pursue its strategy
of organic growth, to undertake selective acquisitions and to provide an appropriate return on investment
to its shareholders. The Company’s capital consists of long-term debt, shareholders’ equity and deferred
revenues, net of cash and cash equivalents and short-term investments.
The Company’s primary uses of capital are to finance non-cash working capital requirements, capital
expenditures, business acquisitions and payments of dividends.
The Company may, from time to time, repurchase shares, adjust its capital level by issuing shares or secure
bank debt to finance its operations or business acquisitions.
Other than the financial ratios described in Note 13 and required by a financial institution, the Company’s
capital is not subject to any externally imposed capital requirements, and the Company does not currently
use any quantitative measures to manage its capital.
23
FINANCIAL RISK MANAGEMENT
The Company’s financial assets and financial liabilities expose it to the following risks: market risk, including
foreign currency risk and interest rate risk, credit risk and liquidity risk. The Company’s main risk
management objective is to ensure that risks are properly defined and resolved to minimize potential
adverse effects on financial performance.
The finance department is responsible for risk management, which includes identifying and assessing risks,
in close cooperation with management. The finance department is responsible for creating adequate
controls and procedures to ensure that financial risks are mitigated.
Foreign currency risk
Foreign currency risk comes from transactions that the Company concludes in foreign currencies, primarily
the U.S. dollar. Foreign currency risk also comes from future sale and purchase transactions and from
financial assets and liabilities denominated in foreign currencies.
The Company’s main objective in managing foreign currency risk is to reduce its impact on performance.
In order to reduce the potentially adverse effects of a fluctuating Canadian dollar, the Company has entered
into foreign currency forward contracts to stabilize anticipated future revenues denominated in U.S. dollars.
Foreign currency forward contracts are used only for managing foreign currency risk and not for
speculative purposes.
72
The balances in foreign currencies are as follows:
In thousands of dollars
Cash and cash equivalents
Accounts receivable
Accounts payable and accrued liabilities
Total in foreign currencies
Total in Canadian dollars
2016
U.S.$
7,312
836
(651)
7,497
9,724
The following table details the arrangements used as hedging instruments. The currency of the purchase
agreements is the Canadian dollar while the currency of the sale is the U.S. dollar:
2015
U.S.$
5,027
825
(710)
5,142
6,522
2015
$
11,250
1.1418
2016
$
11,200
1.2920
2017-2018
2016-2017
In thousands of Canadian dollars
Notional amount US$
Weighted-average rate USD-CAD
Maturity (fiscal year)
Foreign currency forward contracts are contracts whereby the Company has the obligation to sell or buy
U.S. dollars in advance at a fixed rate.
Taking into account the foreign currency forward contracts and assuming that all other variables remain
constant, a 5.0% appreciation of the Canadian dollar against the U.S. dollar would have the following impact
on profit and other comprehensive income (in Canadian dollars):
In thousands of Canadian dollars
Profit
Other comprehensive income
2016
$
(157)
644
2015
$
(104)
398
A 5.0% depreciation of the Canadian dollar against the U.S. dollar would have had the opposite impact
on profit and other comprehensive income.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. Financial assets and financial liabilities with variable interest
rates expose the Company to cash flow risk. The Company’s cash and cash equivalents earn interest
at market rates.
As at March 31, 2016, the Company is exposed to interest rate risk on cash and cash equivalents whose
interest rates vary from 0% to 0.5%. If interest rates as at March 31, 2016, had been 0.5% higher or
0.5% lower, the impact on profit would have been insignificant.
Financial assets and liabilities that bear interest at fixed rates are subject to fair value interest rate risk.
The Company is not exposed to significant risk with respect to financial assets and financial liabilities due
to their short-term maturities.
73
With respect to floating-rate financial obligations, a negative impact on cash flows would occur if there were
an increase in reference rates such as LIBOR, the rate of bankers’ acceptances and the Canadian prime rate.
All other things being equal, a reasonably possible 1.0% increase in the interest rate applicable to the
daily balances of the Revolving Facility would have had an impact of $287,900 ($315,700 in 2015) on
the Company’s profit for the year ended March 31, 2016. A 1.0% decrease in the interest rate would have
had the opposite impact on the Company’s profit.
Credit risk
Credit risk is the risk of the Company incurring a financial loss because a customer or other counterparty
to a financial instrument fails to meet its contractual obligations. Financial instruments that expose
the Company to credit risk consist mainly of cash and cash equivalents, cash held for the benefit of third
parties and accounts receivable. Cash and cash equivalents and cash held for the benefit of third parties
are maintained at major financial institutions; therefore, the Company considers the risk of non-
performance on these instruments to be remote.
Based on its past experience, the Company believes that the credit risk associated with its accounts
receivable is low. The Company generally does not require collateral for its accounts receivable. Its trade
accounts receivable are not concentrated with any specific customers but rather with a broad range
of customers. The Company establishes an allowance for doubtful accounts for receivables deemed
uncollectible. The allowance for doubtful accounts amount is based on past experience of amounts
considered to have uncertain collectability.
The carrying value of the Company’s trade accounts receivable is presented net of the allowance
for doubtful accounts. Changes in the allowance for the year are as follows:
In thousands of Canadian dollars
Balance at beginning of year
Write-off
Expense for the year
Balance at end of year
As at March 31, the aging of trade accounts receivable is as follows:
In thousands of Canadian dollars
Current
Past due
1 - 30 days
31 - 60 days
61 - 90 days
Over 90 days
Total accounts receivable
2016
$
(142)
201
(207)
(148)
2015
$
(245)
199
(96)
(142)
2016
$
2015
$
2,402
2,192
2,834
554
101
36
5,927
2,204
1,057
130
108
5,691
There is no impairment or amount past due other than those related to accounts receivable.
74
Liquidity risk
Liquidity risk is the risk that a company will be unable to meet its obligations as they fall due. To manage
liquidity risk, the Company makes sure that it always has the cash it needs to meet its obligations when
they fall due. The Company’s financial liabilities, which consist of accounts payable and accrued liabilities
and other accounts payable, are due within 12 months or less. As at March 31, 2016, the Company had
a $80,000,000 credit facility, of which $53,500,000 was undrawn.
Fair value of financial instruments
Financial instruments recognized at fair value are classified using a hierarchy that reflects the significance
of the inputs used to measure the fair value.
The fair value hierarchy requires that observable market inputs be used whenever such inputs exist.
A financial instrument is classified in the lowest level of the hierarchy for which a significant input has been
used to measure fair value.
An entity’s own credit risk and the credit risk of the counterparty, in addition to the credit risk of the financial
instrument, were factored into the fair value determination of the financial assets and financial liabilities,
including derivative instruments. All financial instruments measured at fair value in the Consolidated
Statement of Financial Position were classified according to a three-level hierarchy:
+ Level 1: valuation based on quoted prices (unadjusted) observed in active markets for identical
assets or liabilities.
+ Level 2: valuation techniques based on inputs that are quoted prices of similar instruments
in active markets; quoted prices for identical or similar instruments in markets that are not
active; inputs other than quoted prices used in a valuation model that are observable for
the instrument being valued; and inputs that are derived mainly from or corroborated by
observable market data using correlation or other forms of relationship.
+ Level 3: valuation techniques based significantly on inputs that are not observable in
the market.
The Company’s policy is to recognize transfers made between different hierarchy levels at the date of
the event or change in circumstances that caused the transfer. During the years ended March 31, 2016
and 2015, no financial instruments were transferred between levels 1, 2 and 3.
The following table presents the instruments measured at fair value on a recurring basis, classified using
the hierarchy described above:
In thousands of Canadian dollars
Level 1
Level 2
Level 3
Total
2016
$
-
(69)
-
(69)
2015
$
-
(1,431)
-
(1,431)
75
The negative fair value of these derivative financial instruments of $68,601 (US$52,888) reflects
the estimated amounts that the Company would have to pay to settle the contracts as at March 31, 2016,
using relevant market rates. As at March 31, 2015, the fair value was negative at $1,431,349 (US$1,128,557).
The fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued
liabilities approximates their carrying amounts due to their short-term maturities.
The fair value of long-term debt is not significantly different from its carrying amount because
the contractual interest rate is close to the interest rate that the Company could have had on a similar
financial instrument.
24
SUBSEQUENT EVENT
On May 31, 2016, the Company acquired substantially all of the assets of Advanced Software Concepts, Inc.
(“ASC”) for a cash consideration of $18,500,000 and is subject to certain adjustments. The acquisition is
financed by the Company’s revolving credit facility.
ASC offers best-in-class contract lifecycle management solutions (CLM) to a diversified clientele, principally
in North America.
Due to the short period between the date of acquisition of the assets of ASC and the date of issuance of
these consolidated financial statements, the fair value of the tangible and intangible assets acquired has not
yet been determined. Consequently, the initial accounting of the transaction has not been completed.
76
ADDITIONAL INFORMATION
MARKET AND TICKER SYMBOL
The Company’s common shares trade on the Toronto Stock Exchange under the
ticker symbol “MDF”.
TRANSFER AGENT
Computershare Investor Services Inc.
1500 Robert-Bourassa Blvd., Suite 700, Montreal, Quebec, Canada H3A 3S8
Tel.: 514-982-7888 | Fax: 514-982-7580
AUDITOR
Deloitte LLP
1190 Avenue des Canadiens-de-Montréal, Montreal, Quebec, Canada H3B 0M7
Tel.: 514-393-7115 | Fax: 514-390-4100
SHAREHOLDER INQUIRIES
Inquiries regarding lost, stolen or destroyed certificates, change of address or
transfer requirements should be directed to the Company’s transfer agent :
Computershare Investor Services Inc.
1500 Robert-Bourassa Blvd., Suite 700, Montreal, Quebec, Canada H3A 3S8
Tél. : 1 800 564-6259 (toll-free in North America)
service@computershare.com
ANNUAL MEETING OF SHAREHOLDERS
The Company’s Annual Meeting of Shareholders will be held on Thursday,
September 15, 2016, at 10:00 am EDT in the room Havre and Quais of the 357C,
located at 357 de la Commune St. West, Montreal, Qc.
This annual report is also available on the web at www.mediagrif.com
Le rapport annuel 2016 de la Société est aussi publié en français.
77
BOARD OF DIRECTORS
AND EXECUTIVE
OFFICERS
DIRECTORS
CLAUDE ROY
Quebec, Canada
Chairman of the Board,
President and Chief Executive
Officer of the Corporation
ANDRÉ COURTEMANCHE
Quebec, Canada
President and Chief Executive Officer
Viavar Capital inc.
MICHEL DUBÉ
Quebec, Canada
Consultant
ANDRÉ GAUTHIER
Quebec, Canada
President
Holding André Gauthier inc.
GILLES LAPORTE
Quebec, Canada
Director of corporations
GILLES LAURIN
Quebec, Canada
CPA, CA
Director of corporations
CATHERINE ROY
Quebec, Canada
Senior Consultant, Executive Search
Décarie Recherche
JEAN-FRANÇOIS SABOURIN
Quebec, Canada
President and Chief Executive Officer
Finlogik inc.
President and Chief Executive Officer
Jitneytrade inc.
EXECUTIVE OFFICERS
CLAUDE ROY
President and Chief Executive Officer
MARK EIGENBAUER
Vice President, US Operations
STÉPHANE ANGLARET
Vice President, Technology
CAMIL ROUSSEAU
Vice President, Research & Development
RICHARD LAMPRON
Chief Operating Officer
PAUL BOURQUE
Chief Financial Officer
SUZANNE MOQUIN
Vice President, Consumers Solutions
HÉLÈNE HALLAK
Vice President and General Counsel
JEAN-MICHEL STAM
Vice President, e-Business networks
CAUSES
THAT MATTER
TO US
At Mediagrif, we are aware of our social responsibility
and are taking concrete actions to improve the quality
of life of our community. Our social commitment
is renewed and extended year after year.
Our support includes organizations working
in the health and wellness areas.
The Company supports hospital foundations,
clinical research institutes and hospitals.
+ Heart & Stroke Foundation
+ Fondation Père Sablon
+ Fondation institut de gériatrie de Montréal
+ Maison des soins Palliatifs de Laval
+ Alzheimer Society
The Company also provides support to organizations
whose mission is to ensure the well-being of the population,
especially among young people.
+ Fondation Portage
+ Fondation des Amis du Tennis
+ Fondation Orchestre Symphonique de Longueuil
+ The Enbridge Ride to Conquer Cancer
+ Marie-Vincent Foundation
+ Opération Père-Noël
+ Conseil des Arts de Montréal
Also, Mediagrif sponsors sports events such
as the Leblanc Cup and the golf Omnium of Père Marcel
Sablonnière. We also sponsor Quebec athlete
Karine Belleau-Béliveau.
MEDIAGRIF INTERACTIVE TECHNOLOGIES INC.
1111 St-Charles Street West, Suite 255
Longueuil, Québec
Canada J4K 5G4
Toll Free: 877 677-9088
Phone: 450 449-0102
Fax: 450 449-8725
www.mediagrif.com