INCENTRA SOLUTIONS REPORTS2008 THIRD QUARTER, NINE-MONTH RESULTS

Total Quarterly Revenue Up 52% Year-over-Year; Fifth Consecutive Quarter of Operating Profit Growth

November 4, 2008

Boulder, CO, November 4, 2008 – Incentra Solutions, Inc. (OTCBB: ICNS), a provider of complete IT services and solutions to enterprises and managed service providers in North America and Europe, today announced strong year-over-year growth in revenues and operating profit for its third quarter and first nine months ended September 30, 2008.

 
Driven by a 22 percent increase in Services revenue and a 58 percent increase in Product revenue, total revenue in the 2008 third quarter increased 52 percent to $55.1 million, up from $36.4 million in the 2007 third quarter.  Services revenue in this year’s third quarter was $7.4 million and Product revenue was $47.7 million, up from $6.1 million and $30.3 million, respectively, in the prior year quarter.  

 
For the first nine months of 2008, total revenue increased 77 percent to $162.6 million from $92.1 million in the year-earlier period.  Services revenue for the first nine months of 2008 increased 39 percent to $22.2 million and Product revenue grew 84.3 percent to $140.4 million, up from $16.0 million and $76.2 million, respectively, in the first nine months of 2007.  The 2008 third quarter and first nine months included revenue from the acquisitions of Helio Solutions (Helio) and Sales Strategies, Inc (SSI), which were both completed during August 2007.  

 
Chairman and CEO Thomas P. Sweeney said that Incentra reported its fifth consecutive quarter of operating profit in this year’s third quarter with strong year-over-year increases in both the third quarter and first nine months of 2008.  Operating profit in the 2008 third quarter was $1.2 million, up from an operating profit of $114,000 in last year’s third quarter.  For the first nine months of 2008, operating profit grew to $2.9 million compared to an operating loss of $1.1 million in the year-earlier period. 

 
“Even though the third quarter, which is typically the slowest quarter in our industry, was marked by a great deal of economic uncertainty, we reported solid year-over-year financial and operational results in the quarter,” Sweeney added.  “Our investments in our Consulting and Professional Services practices are beginning to pay dividends, as more customers are contracting with Incentra to provide a broader set of IT services before, during and after technology projects are implemented. We have also seen significant increases in the complexity and depth of the projects we are managing. These two trends are not only driving higher volumes of services revenues but are also increasing the volume of technology we are selling to customers as Incentra becomes the preferred provider of IT services and solutions. We believe this broader set of consulting, technology and outsourcing solutions will continue to drive additional spending from our existing customers and allow us to continue to take market share from our competitors.”

 

Chief Financial Officer Anthony DiPaolo said, “Our cost control efforts continue to result in declining SG&A costs as a percentage of revenue.  As the revenue producing capacity of our business has grown, our ability to manage costs has contributed significantly to achieving operating profit.  SG&A costs, excluding non-cash items, were 18 percent of revenue for both the third quarter and first nine months of 2008, down from 23 percent and 24 percent, respectively, in the year-earlier periods.”

 
Net loss applicable to common shareholders for the 2008 third quarter decreased to $2.1 million, or a loss per share of $0.08, from $2.5 million, or a loss per share of $0.15, for the 2007 third quarter.  For the first nine months of 2008, net loss applicable to common shareholders decreased to $7.1 million, or a loss per share of $0.27, from $8.8 million, or a loss per share of $0.61, for the prior year period. 

 
Basic and diluted weighted average shares outstanding for the 2008 third quarter and first nine months were 26,404,885 and 26,403,933, respectively, compared with 16,821,857 and 14,380,724 in the year-earlier periods.  The year-over-year increase in shares principally reflects the issuance of shares associated with the acquisitions of Helio and SSI, and issuance of shares in payment of fees related to the financing of those acquisitions. 

 
President and Chief Operating Officer Shawn O’Grady said, “The results for the third quarter demonstrate that we are seeing a return on our investment in growing market share and expanding our capabilities.  We have been investing all year to grow our capabilities in the areas that are on the forefront of everybody’s IT agenda at the moment:  Consolidation, Optimization, Virtualization and Business Continuity/Disaster Recovery across all of the technologies in the data center.  This is driving our services growth, and we are pleased by the increased size, complexity and value of our services engagements.  Furthermore, on the strength of our value proposition and marketing efforts, we have added 190 new customers since the beginning of the year.  These two forces, market share expansion and capability expansion, will continue to drive the growth of our business.”