Incentra Solutions: Fiscal 4Q07 Financial Results

Incentra Solutions,
Inc. announced results for its fourth quarter and year ended
December 31, 2007. Total revenues from continuing operations for the 2007
fourth quarter increased 123 percent to $53.6 million, up from $24.1 million
for the 2006 fourth quarter. Total Product revenue for the fourth quarter of
2007 increased 130 percent from the prior year’s fourth quarter and total
Services revenue was up 85 percent. The 2007 fourth quarter included revenue
from the acquisitions of Helio Solutions and Sales Strategies, Inc (SSI),
which were completed late in the third quarter of 2007.

Chairman and CEO Thomas P. Sweeney said that for the second consecutive
quarter operating profit in the fourth quarter of 2007 was positive increasing
to $188,000, compared to an operating loss of $2.4 million in the 2006 fourth
quarter. He also said that SG&A expense as a percentage of revenue declined
substantially in 2007 with a significant year-to-year decrease in the fourth
quarter: "We believe that the cost structure, trends and product mix we saw
in the 2007 fourth quarter will be indicative of our business going forward."

Chief Financial Officer Anthony DiPaolo said: "The increase in operating
profit in the 2007 fourth quarter is encouraging, particularly when one
considers the non-recurring charges in the quarter associated with the
integration of the acquisitions and the higher commission costs we typically
incur at year end."

Total revenues from continuing operations for the year ended
December 31, 2007, rose 119 percent to $145.8 million, up from $66.6 million
for 2006 with year-over-year organic growth in Product revenue of 17 percent
and Services revenue of 52 percent. Compared to 2006, total Product revenue
in 2007 increased 130 percent and total Services revenue rose 73 percent.
Results from continuing operations for all periods exclude the operating
results of the Company’s former Front Porch Digital Broadcast and Media
business, which was sold in July 2006.

"The 2007 fourth quarter and year were periods of significant growth and
expansion for Incentra," Sweeney added. "Our success is a direct result of
our focus on strategic acquisitions and organically growing Services and
Product revenues in our acquired and in-place businesses. We are rapidly
becoming the preeminent complete solutions provider to the mid-tier IT market
in North America and will continue to focus on expanding our business and
geographic footprint."

"We are now positioned to exceed $200 million in revenue in 2008, with a
business that continues to generate increasing cash flow and strong gains in
Services revenue," Sweeney said. "Because of our focus on driving sales of
our higher margin services offerings, we were able to grow our base of
recurring services revenue in 2007 by 67 percent year-over-year, and we expect
to continue to see solid increases in recurring services revenue in 2008."
Recurring services revenue for all of 2007 increased to $15 million, up from
$9 million in 2006. This increase was driven by increasing sales of higher
margin First Call and Enhanced First Call maintenance programs, and Managed
Services offerings.

Net loss applicable to common shareholders for the 2007 fourth quarter
decreased to $3.1 million, or a loss per share of $0.12, from $4.5 million, or
a loss per share of $0.34 for the 2006 fourth quarter. The loss for the 2006
fourth quarter included $1.0 million of severance costs and other charges.
Net loss applicable to common shareholders for the full 2007 year was
$11.9 million, or a $0.63 loss per share, compared to $5.5 million, or a loss
per share of $0.40, for 2006. The net loss in 2006 included a $15.4 million
gain recognized on the sale of Front Porch Digital which was sold in
July 2006.

President and Chief Operating Officer Shawn O’Grady said: "The integration
of Helio and SSI is progressing as expected. We are focusing on expanding our
services and product offerings, streamlining processes and implementing
efficiencies across the entire organization. In 2008, we expect to see
additional synergies from our acquisitions, which will increase gross margins
for products and services and reduce operating costs."

Overall gross margin in the 2007 fourth quarter, which included the
effects of the Company’s acquisition of Helio and SSI, was 20 percent,
compared to 24 percent in the fourth quarter of 2006 and 21 percent in the
third quarter of 2007. Services gross margin in the fourth quarter of 2007
was 27 percent, compared to 30 percent in the prior year fourth quarter.
Product gross margin in the quarter was 19 percent compared to 23 percent in
the 2006 fourth quarter.

"The decreases in gross margin as a percentage of revenue were expected as
the gross margins of the acquired companies were lower than Incentra’s. As we
execute on our integration plan, we expect to see gross margins rise for the
acquired companies and the combined company to pre-acquisition levels,"
O’Grady added. Exclusive of the impact of the acquisitions of Helio and SSI,
Incentra’s overall gross margin for the 2007 fourth quarter was 22 percent.
Services gross margin for the 2007 fourth quarter, excluding the acquisitions,
was 27 percent, and Product gross margin was 21 percent.

Excluding stock-based compensation charges, SG&A expense as a percentage
of revenue in the 2007 fourth quarter was 21 percent. This is down from
37 percent in the 2006 fourth quarter and down sequentially from 24 percent in
the 2007 third quarter. SG&A expense, excluding stock-based compensation, as
a percentage of revenue for all of 2007 was 24 percent, down significantly
from 39 percent in 2006. Excluding incremental expenses of any companies
acquired in 2008, SG&A expenses are not expected to increase in 2008.

DiPaolo added: "During the fourth quarter, we increased our revolving line
of credit from $15 million to $20 million. The increased operating profit and
credit availability will provide us the liquidity to fund our anticipated
organic growth in 2008."

Outlook for 2008:
Exclusive of any acquisitions, Incentra expects 2008 revenue to be between
$200 million and $220 million, approximately 35 to 50 percent higher than
revenue in 2007, and the Company believes it will be cash positive for the
year. Excluding funds which may be required under a possible redemption
associated with the Company’s Series A Preferred Stock, Incentra believes its
combined operating and non-operating cash flows, cash on-hand and working
capital facilities are sufficient to support its business operations and
growth plans for 2008.

Incentra Solutions,
Inc.