OnX</font will sell off its incubation and investment assets in a move to focus on its core business and restore profitability.
The Toronto-based company Thursday released fourth-quarter earnings and year-end financial results that showed an improved outlook following some difficult months. Revenues, for example, grew 17 per cent to $32.7 million over the same quarter last year. More importantly, OnX said its earnings before interest, taxes depreciation and amoritzation (EBITA) turned around from a negative 1.1 million last year to $0.5 million this year.
Sheldon Pollack, OnX’s CEO and co-chairman, said the company had engaged a third party to help it sell off the incubation and investment assets, a business unit called Momentum.com. Its portfolio includes Net Periscope, a maker of Web-based business intelligence software and Acceleron Inc., which makes software for managing travel expenses.
“We learned a ton of lessons,” he said. “The reason we got into incubation in the first place was our belief that you can get additional leverage by building intellectual property, if you like. One of the things that we recognized — and unfortunately recognized the hard way — was that running a professional services company and running a product company are very different.”
Though Pollack admitted that Momentum.com’s problems were compounded by the IT market slowdown and economic conditions, he said he had learned a public company like OnX did not belong in the incubation business.
“As a professional services company, I think the expectation in the capital markets is one of predictability,” he said, adding that OnX has been less than predictable itself. “We have wholly-owned subsidiaries that were going up and down both from a revenue line and profitability line.”
Besides professional services, Pollack said OnX would continue to concentrate on its traditional VAR infrastructure and its ASP Web hosting business. Over the last quarter the company’s hosting facility reached capacity and have since expanded, which resulted in marginal growth. Its VAR business, however, saw revenues climb 32 per cent to $30.3 million. This was thanks largely to a multi-year contract OnX signed with Daimler-Chrysler Canada for less than $10 million, its largest client win to date. This contract could potentially expand outside Canada and bring OnX new business in the U.S. marketplace, Pollack said.