Incentra Solutions Announces 2005 Third Quarter and Record Nine-Month Results

Nine-Month Pro Forma Revenues Increase 12% Year-Over-Year

November 15, 2005

Boulder, CO, November 15, 2005 – Incentra Solutions, Inc. (OTCBB: ICNS), a provider of complete IT and storage management solutions to enterprises, broadcasters and managed service providers worldwide, today announced results for its third quarter and nine months ended September 30, 2005. 
 
Pro forma revenue for the 2005 third quarter was $12.4 million, compared to pro forma revenue of $13.3 million in the prior year period.  Revenues during the third quarter 2005 were impacted by the summer slowdown in deliveries to broadcast customers in Europe and North America and a change in the revenue model where maintenance revenues were classified as deferred revenue following the successful launch of the Company’s First Call and Enhanced First Call Service support programs. Pro forma revenue for the first nine months of this year was $46.5 million, up approximately 12 percent from pro forma revenue of $41.4 million in last year’s first nine months, as a result of strong year-over-year growth in professional services, managed services and deliveries of IT hardware and software.
 
Chairman and CEO Thomas P. Sweeney said that this year’s third quarter was an important turning point for the Company as it implemented a strategic change in its revenue model with the successful launch of First Call and Enhanced First Call Services.  Mr. Sweeney noted that, as indicated following this year’s second quarter, overall revenue for the quarter was expected to decline.  
 
“These new services increased our competitive advantages and changed our revenue model to one that includes a growing and predictable base of higher margin, recurring services revenue,” Sweeney added.  “Enhanced First Call offers a one-of-a-kind, real-time remote monitoring service of customers’ IT assets regardless of the manufacturer and provides them with rapid trouble isolation and resolution.  Orders for both First Call and Enhanced First Call services have been robust with more than $1 million in contracts signed since release in August.  Enhanced First Call increases our margins on maintenance contracts as we now receive larger discounts from the manufacturers.
 
“We are also encouraged by the large number of contracts we signed in the 2005 third quarter for both managed services and complete solutions to enterprises and managed service providers,” Sweeney said. “The Company renewed two large multi-year contracts with long-time customers for the continued delivery of outsourced data protection solutions.  I am pleased by the progress we are making on all fronts.  We believe our sales funnel is strong, our integration efforts are behind us and we are seeing increased volumes of sales of our professional services, managed services and complete solutions.”
 
Sweeney said that for the full year 2005, the Company expects pro forma revenues to be between $62.5 and $65 million with positive cash flow for the fourth quarter and the full year 2005.
 
Chief Financial Officer Paul McKnight said that after the completion of the integration of this year’s acquisitions, the Company was able to reduce total year-over-year pro forma operating expenses through the elimination of the prior owner’s costs and the fact that there were $1.4 million of acquisition-related expenses recorded in the third quarter 2004. “Pro forma operating expenses for this year’s third quarter and nine months were $5.7 million and $18.4 million, respectively, compared to pro forma operating expenses in the respective, prior year periods of $7.8 million and $20.5 million,” McKnight added.  Pro forma 2005 EBITDA1 as adjusted, for the quarter and nine months, was a loss $0.8 million and a loss of $0.07 million, respectively. 
 
McKnight said, “The transition in our maintenance contract offerings from recognizing revenue at the time of sale to deferring the revenue and recognizing it over the contract term reduces revenue at the onset of the contract.  The impact of the reduced revenue in the immediate period, however, is outweighed by a number of important benefits, including higher gross margins and the development of a longer-term recurring revenue stream and more stability in earnings from this line of business.”
 
Pro forma results of operations include 100 percent of the operating results of all of the Company’s acquisitions in 2004 and 2005 for all periods presented. 
 
Conference Call Information
As previously announced, management will host a conference call to be broadcast live on the Internet on Tuesday, November 15, 2005 at 11:30 a.m. (Eastern time).  The dial-in number for the call is 1-800-370-0898, or you may access the live webcast on the Investors section of the Company’s website, www.incentrasolutions.com.  Additionally, an archive of the conference call will be available on this site.
 
About Incentra Solutions, Inc.
Incentra Solutions, Inc. (www.incentrasolutions.com, OTCBB:ICNS) is a provider of complete IT & storage management solutions to broadcasters, enterprises and managed service providers worldwide.  Incentra’s complete solution includes professional services, hardware & software products with first call support, IT outsourcing solutions and financing options.  To the broadcast market, Incentra delivers complete digital archive management and transcoding solutions built on its IT and storage expertise and offerings.  

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Contacts:
Allen & Caron, Inc.
Jill Bertotti (investors)
jill@allencaron.com

Len Hall (financial media)
len@allencaron.com
949-474-4300 

Incentra Solutions, Inc.
Paul McKnight, Chief Financial Officer
pmcknight@incentrasolutions.com
303-449-8279