NexJ Systems Reports Second Quarter Fiscal 2014 Results

TORONTO, July 31, 2014 /CNW/ - NexJ Systems Inc. (TSX: NXJ), a provider of cloud-based software, delivering enterprise solutions for the financial services, insurance, and healthcare industries, today announced financial results for its second quarter ended June 30, 2014.

Financial Highlights for Q2 2014

  • Second quarter revenue was $7 million, a 3% increase Y/Y
  • Adjusted EBITDA (as defined below) was a loss of $1.9 million or $0.09 per share (basic and diluted) for the quarter ended June 30, 2014 as compared to an adjusted EBITDA loss of $4.8 million or $0.24 per share (basic and diluted) for the comparative period in 2013
  • Net loss was $2.5 million or $0.12 per share (basic and diluted) for the quarter ended June 30, 2014, as compared to a net loss of $5.2 million or $0.26 per share (basic and diluted) for the comparative period in 2013

Financial Highlights Year-to-Date 2014

  • Six month revenue was $14.3 million, a 7% increase Y/Y
  • Adjusted EBITDA (as defined below) was a loss of $4.2 million or $0.21 per share (basic and diluted) for the six months ended June 30, 2014 as compared to an adjusted EBITDA loss of $10.7 million or $0.52 per share (basic and diluted) for the comparative period in 2013
  • Net loss was $4.4 million or $0.22 per share (basic and diluted) for the six months ended June 30, 2014, as compared to a net loss of $11.9 million or $0.58 per share (basic and diluted) for the comparative period in 2013

"We are pleased to show growth in the finance and insurance vertical and are making good progress with the ongoing commercialization efforts of our strategic healthcare initiatives," said William M. Tatham, Chief Executive Officer of NexJ.  "We remain committed to our path to profitability in 2015."

Conference Call Information
NexJ will be hosting an earnings report conference call today at 5:00 p.m. ET. The call can be accessed via webcast or by phone by dialing 647-427-7450 (Toronto local or international) or 1-888-231-8191 (North America Toll Free).  Investors should dial in approximately 10 minutes before the teleconference is scheduled to begin.

A replay of the call will be available beginning today at 8:00 p.m. ET through 11:59 p.m. on August 7, 2014 and can be accessed by dialing 416-849-0833 (Toronto local) or toll free at 1-855-859-2056 and using password 76095578.

Non-IFRS Measures
This news release includes certain measures that have not been prepared in accordance with International Financial Reporting Standards ("IFRS") such as Adjusted EBITDA and Adjusted EBITDA margin which are used to evaluate the Company's operating performance as a complement to results provided in accordance with IFRS.  The Company believes that Adjusted EBITDA and Adjusted EBITDA margin are useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and the other items listed below.

The term "Adjusted EBITDA" refers to net income/loss before adjusting for share-based payment expense, depreciation and amortization, lease-exit charges, net, earn-out expense (recovery), foreign exchange gain/loss, finance income, finance costs and income taxes.  "Adjusted EBITDA margin" refers to the percentage that Adjusted EBITDA for any period represents as a portion of total revenue for that period.

The term Adjusted EBITDA and Adjusted EBITDA margin are not measures recognized by IFRS and do not have standardized meanings prescribed by IFRS.  Therefore, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similar measures presented by other issuers.  Investors are cautioned that Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an alternative to net income (loss) as determined in accordance with IFRS.

The following table reconciles Adjusted EBITDA to net income (loss):


Three months ended
June 30,


Six months ended
June 30,

2014

2013


2014

2013


(in thousands of dollars, except

percentages)


(in thousands of dollars, except

percentages)







Total revenue

$6,975

$6,777


$14,280

13,312







Net loss

(2,526)

(5,213)


(4,412)

(11,887)

Add back:






Share-based payment expense

43

223


174

445

Depreciation and amortization

443

444


847

896

Lease-exit charges, net


(625)

Earn-out expense (recovery)

52


436

Foreign exchange loss (gain)

155

(216)


(57)

(328)

Finance income

(68)

(109)


(151)

(246)

Finance Cost

39


39







Adjusted EBITDA

(1,914)

(4,819)


(4,185)

(10,684)

Adjusted EBITDA margin

(27%)

(71%)


(29%)

(80%)

 

About NexJ Systems Inc
NexJ is a provider of cloud-based software, delivering enterprise solutions for the financial services, insurance and healthcare industries. Our next-generation, people-centered software combines industry-specific functionality with information from multiple applications and data stores to provide comprehensive knowledge of the individual.

Based in Toronto, NexJ has clients throughout North America and in Europe. For more information about NexJ visit www.nexj.com, e-mail info@nexj.com, or call 416-222-5611. Join us on LinkedIn, follow us on Twitter, subscribe to our YouTube channel, like us on Facebook or hang out with us on Google+.

NexJ Forward-looking Statement
Certain statements in this press release, including statements about the financial conditions, and results of operations and earnings, may contain words such as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "plans", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on the Company's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Company operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. The Company's assumptions, although considered reasonable by the Company at the date of this press release, may provide to be inaccurate and consequently the Company's actual results could differ materially from the expectations set out herein.

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) the future performance, financial and otherwise, of NexJ; (ii) the ability of NexJ to protect, maintain and enforce its intellectual property rights; (iii) the acceptance by the Company's customers and the marketplace of new technologies and solutions; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the CRM market; (vi) the Company's competitive position in the CRM market and its ability to take advantage of future opportunities in this market; (vii) the Company's ability to attract new customers and develop and maintain existing customers; and (viii) the demand for the Company's product and the extent of deployment of the company's products in the CRM marketplace. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances.

The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) our dependence on a limited number of customers and large project size; (ii) fluctuation in our quarterly operating results; (iii) our dependence on key personnel and our compensation structure; (iv) risks associated with managing large and complex software implementation projects; (v) uncertainties and assumptions in our sales forecasts, including the extent to which sales proposals are converted into sales; (vi) risks associated with our ability to design, develop, test, market, license and support our software products on a timely basis; (vii) market acceptance of our products and services; (viii) commercial success of products resulting from our investment in research and development; (ix) our success in expanding sales into new international markets; * risks associated with expansion into healthcare and other new industry verticals; (xi) competition in our industry; (xii) failure to protect our intellectual property or infringement of intellectual property rights of third parties; (xiii) reliance upon a limited number of third-party software products to develop our products; (xiv) defects or disruptions in our products and services; (xv) currency exchange rate fluctuations; (xvi) lengthy sales cycles for our software; (xvii) global financial market conditions; (xviii) failure to manage our growth successfully; and (xix) failure to successfully manage and integrate acquisitions.

For additional information with respect to risks and other factors which could occur, see the Company's most recently filed Annual Information Form for the year ended December 31, 2013 dated February 27, 2014, and other securities filings with the Canadian securities regulators available on www.sedar.com.  Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

NexJ Systems Inc.




Condensed Interim Consolidated Statements of Financial Position



(Expressed in thousands of Canadian dollars)




(Unaudited)













June 30, 2014


December 31, 2013





Assets





$


$

Current assets:





Cash and cash equivalents

22,588


29,293


Accounts receivable

6,231


7,246


Prepaid expenses and other assets

1,562


1,727

Total current assets

30,381


38,266





Non-current assets:





Property and equipment

2,848


3,014


Intangible assets

2,218


1,643


Goodwill

4,504


3,640


Other assets

260


260

Total non-current assets

9,830


8,557





Total assets

40,211


46,823





Liabilities and Shareholders' Equity








Current liabilities:





Accounts payable and accrued liabilities

4,312


4,677


Deferred revenue

3,347


5,021


Provisions

122


572


Contingent consideration

592


-

Total current liabilities

8,373


10,270





Non-current liabilities:





Accrued liabilities

482


596


Provisions

293


742


Deferred revenue

-


212


Deferred tax liability

16


-

Total non-current liabilities

791


1,550





Total liabilities

9,164


11,820





Shareholders' equity:





Share capital

83,300


83,018


Share purchase loans

(3,622)


(3,622)


Contributed surplus

5,689


5,515


Deficit

(54,320)


(49,908)

Total shareholders' equity

31,047


35,003









Total liabilities and shareholders' equity

40,211


46,823

 

NexJ Systems Inc.






Condensed Interim Consolidated Statements of Comprehensive Loss


(Expressed in thousands of Canadian dollars, except per share amounts)




(Unaudited)













Three Months ended June,


Six Months ended June,


2014

2013


2014

2013







Revenue:

$

$


$

$


License and subscription fees

1,277

192


1,568

625


Professional services

4,211

4,993


9,713

9,757


Maintenance and support

1,487

1,592


2,999

2,930


6,975

6,777


14,280

13,312







Expenses*:







Professional service costs

3,082

4,020


6,857

8,320


Research and development, net

2,469

3,559


5,144

7,430


Sales and marketing

1,731

2,445


3,291

5,107


General and administrative, net

2,093

2,291


3,569

4,916


9,375

12,315


18,861

25,773







Loss from operations:

(2,400)

(5,538)


(4,581)

(12,461)


Foreign exchange gain (loss)

(155)

216


57

328


Finance income

68

109


151

246


Finance costs

39

-


39

-


(126)

325


169

574







Loss before income taxes

(2,526)

(5,213)


(4,412)

(11,887)


Income taxes

-

-


-

-







Net Loss and comprehensive loss 

(2,526)

(5,213)


(4,412)

(11,887)







Loss per share:







Basic and diluted

(0.12)

(0.26)


(0.22)

(0.58)













Weighted average number of common shares

outstanding:







Basic and diluted

20,415

20,369


20,348

20,368













*Share-based payment expense has been

included in expenses as follows:







Professional service costs

36

68


81

126


Research and development, net

(33)

73


17

134


Sales and marketing

23

50


37

90


General and administrative, net

17

32


39

95








43

223


174

445

NexJ Systems Inc.




Condensed Interim Consolidated Statements of Cash Flows




(Expressed in thousands of Canadian dollars)




(Unaudited)








Six Months ended June 30, 2014 and 2013









2014


2013





Cash flows from (used in) operating activities:

$


$


Loss for the period:

(4,412)


(11,887)


Adjustments for:






Depreciation and amortization

847


896



Share-based payment expense

174


445



Finance income

(151)


(246)



Finance costs

39


-



Foreign exchange gain (loss)

11


(238)


Change in non-cash operating working capital:






Accounts receivable

1,058


2,882



Prepaid expenses and other assets

319


(621)



Accounts payable and accrued liabilities and provisions

(1,818)


(3,062)



Deferred revenue

(2,066)


(585)

Net cash flows used in operating activities

(5,999)


(12,416)





Cash flows from (used in) financing activities:






Repurchase of common shares

(218)


-



Repayment of bank indebtedness

(66)


-



Repayment of loan

(496)


-



Exercise of employee stock options

-


25



Interest paid

(3)


-

Net cash flows from financing activities

(783)


25





Cash flows from (used in) investing activities:






Purchase of property and equipment

(63)


(74)



Interest received

151


246

Net cash flows from (used in) investing activities

88


172






Effects of exchange rates on cash and cash equivalents

(11)


238



Decrease in cash and cash equivalents

(6,705)


(11,981)





Cash and cash equivalents, beginning of period

29,293


46,263





Cash and cash equivalents, end of period

22,588


34,282





Supplemental cash flow information:






Acquisition of property and equipment not yet paid for

193


247

 

SOURCE NexJ Systems Inc.

For further information: Media Contact: Matthew Bogart, 416-227-3708, matthew.bogart@nexj.com