Halogen Announces Third Quarter 2013 Results

  • Highlights include record recurring and total revenue
  • Company increases revenue guidance for the full year of 2013

OTTAWA, Nov. 7, 2013 /CNW/ - Halogen Software Inc. ("Halogen" or the "Company") (TSX: HGN), a leading provider of cloud based talent management solutions, today announced its financial results for the three and nine months ended September 30, 2013. All figures are stated in United States dollars unless otherwise noted.

Third Quarter 2013 Financial Highlights

  • Recurring revenue increased 30% from Q3 2012 to a record $10.7 million, representing 87% of total revenue in the quarter.
  • Total revenue increased 27% from Q3 2012 to a record $12.3 million.
  • Revenue generated in international markets outside Canada and the United States increased 66% over Q3 2012.
  • Strong new customer growth across a broad set of verticals and geographies including names such as the Bank of Queensland (AUS), Laird Technologies, Inc. (US), St. Joseph's Health System (US), Promega Corporation (US), Cleveland Indians Baseball Company (US), Bukhatir Group (UAE), BMJ Publishing Group (UK), and Lutheran Schools Association of South Australia (AUS).
  • Customer retention continued to be greater than 90%1 and dollar retention greater than 100%2.
  • Positive cash flow from operations of $2.2 million.
  • Net loss was $(718,000), or $(0.03) per basic and diluted share, compared to net loss of $(1.9) million, or $(0.15) per basic and diluted share, in Q3 2012.
  • Adjusted EBITDA3 was $(751,000) in Q3 2013 and $(740,000) in Q3 2012; Adjusted EBITDA per share3 was $(0.03) per share in Q3 2013, versus $(0.06) per share in Q3 2012.
  • Total cash, cash equivalents and investments was $58.1 million at September 30, 2013 compared to $8.9 million at December 31, 2012.

"The third quarter was extremely positive for Halogen, both from a financial and operational perspective," said Paul Loucks, Halogen's President and CEO. "The strong growth in our customer base over the past year contributed greatly to us generating record recurring revenue in the quarter. We also had a record number of new customer wins in our international markets, which are an important focus for us. As part of our growth strategy, we are continuing to increase our global presence, including the expansion of our sales office in Australia in the quarter.

"Additionally, at our 8th annual customer conference in September, we unveiled two new modules that we will be introducing to our suite of talent management software solutions, increasing our total addressable market. These modules will help customers improve leadership and coaching skills among managers and executives, and build and foster a culture of understanding, collaboration and respect throughout their organizations."

________________________________
Non-IFRS Measures:
1 Calculated as the percentage of customers at the beginning of a 12-month period who remain as customers at the end of the period.
2 Calculated by taking the annualized recurring revenue of customers at the beginning of a 12-month period and dividing it into annualized recurring revenue for those same customers at the end of the period.
3 Adjusted EBITDA is a non-IFRS measure defined by the Company as earnings before interest income or expense, other income, depreciation and amortization, share-based compensation, foreign exchange gains or losses and loss related to change in fair value of redeemable preferred shares. Adjusted EBITDA per share is calculated by dividing the Adjusted EBITDA by the weighted average number of shares outstanding in each period. Adjusted EBITDA and Adjusted EBITDA per share do not have a uniform definition. Our definition will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Thus, our non-IFRS measure of Adjusted EBITDA and Adjusted EBITDA per share should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with IFRS. There are inherent limitations with non-IFRS measures; we compensate for these limitations by reconciling Adjusted EBITDA to the most comparable IFRS financial measure. Management encourages investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view our non-IFRS financial measures in conjunction with the most comparable IFRS financial measures.

Financial Review

Halogen's recurring revenue in the third quarter of 2013 was $10.7 million, a 30% increase over Q3 2012. Total revenue increased 27% over Q3 2012, driven by increases in recurring revenue and professional services revenue. In the third quarter of 2013, approximately 81% of revenue was generated from customers located in the United States (82% in Q3 2012), 11% in Canada (13% in Q3 2012) and 8% in international markets (6% in Q3 2012).

Gross margin was $8.9 million, or 72% of total revenue, in the third quarter of 2013, compared to $6.8 million, or 70% of total revenue, in Q3 2012.

The Company's operating loss was $783,000 in the third quarter of 2013, a 14% decrease from Q3 2012. The decrease was primarily due to the increase in foreign exchange gains recorded in the quarter as compared to a year ago.

Net loss was $718,000 in the third quarter of 2013 versus a loss of $1.9 million in Q3 2012. The decreased loss was primarily due to a $1.0 million loss related to a change in the fair value of the Company's redeemable preferred shares in Q3 2012 versus $nil in the third quarter of 2013. With the conversion of the preferred shares to common shares in the second quarter of 2013, the Company no longer incurs this expense.

Adjusted EBITDA reconciliation Three months ended
September 30,
Nine months ended
September 30,
($000's except per share amounts) 2013 2012 2013 2012
Net income (loss) (718) (1,881) (10,754) (13,227)
Interest (income) expense and other, (net) (65) (27) (138) (75)
Foreign exchange (gain) loss (691) (384) 613 (431)
Income tax expense - 5 39 5
Depreciation and amortization 592 504 1,652 1,483
Share-based compensation 131 46 280 137
Loss related to change in fair market value of
redeemable preferred shares
- 997 6,434 9,760
Adjusted EBITDA (751) (740) (1,874) (2,348)
Adjusted EBITDA per share $(0.03) $(0.06) $(0.11) $(0.19)

Cash and investments increased from $8.9 million at December 31 2012 to $58.1 million at September 30, 2013 primarily due to proceeds from the issuance of 5.1 million common shares as part of the Company's initial public offering.

Deferred revenue was $24.1 million at September 30, 2013 compared to $20.5 million a year earlier. This 18% increase is primarily attributed to new business generated during the last 12 months from new and existing customers.  When normalized for the amount of prepayments by customers in advance of their renewal date, the year-over-year increase in deferred revenue would have been 20%.

Fourth Quarter and Full Year 2013 Financial Guidance

For fiscal 2013, the Company is expecting:

  • Recurring revenue in the range of $41.8 to $42.0 million, compared to its previously announced expected range of $41.5 to $41.9 million
  • Total revenue in the range of $47.6 to $47.8 million, compared to its previously announced expected range of $47.0 to $47.4 million

For the fourth quarter of 2013, the Company is therefore expecting:

  • Recurring revenue in the range of $11.0 to $11.2 million
  • Total revenue in the range of $12.2 to $12.4 million

2013 Third Quarter Financial Statements and Management's Discussion and Analysis

Halogen's Management's Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2013 will be available on SEDAR (www.sedar.com and on the Halogen website at http://ir.halogensoftware.com.

Conference Call and Webcast

Halogen will hold a conference call to discuss its fiscal 2013 second quarter results today (Thursday, November 7, 2013) at 5:00 p.m. (ET). The call will be hosted by Paul Loucks, President and CEO, and Pete Low, CFO.  To participate in the call, please dial 647-427-7450 or 1-888-231-8191 (Conference ID: 79705814) ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until 12:00 midnight (ET) Saturday, December 7, 2013 by calling 416-849-0833  or 1-855-859-2056, (Conference ID: 79705814). The conference call will be webcast live at http://bit.ly/GJkKH3.

Forward-looking Statements

Certain statements in this release, including those that express management's expectations or estimates of our future performance, are "forward-looking statements" which reflect the Company's current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. In some cases, these forward-looking statements can be identified by words or phrases such as "may", "might", "will", "expect", "anticipate", "estimate", "intend", "plan", "indicate", "seek", "believe", "estimates", "predicts" or "likely", or the negative of these terms, or other similar expressions intended to identify forward-looking statements.

The Company has based these forward-looking statements on its current expectations and projections at the time the statements were originally made or at the time the information was originally provided, about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and it cannot assure that actual results will be consistent with these forward-looking statements. Whether actual results, performance or achievements will conform to the Company's expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including without limitation, those risks and uncertainties discussed in the Company's Prospectus and other filings on SEDAR.

If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking statements prove incorrect, actual results might vary materially from those expressed or implied by the forward-looking statements contained herein. These factors should be considered carefully and prospective investors should not place undue reliance on these forward-looking statements. Although the forward-looking statements contained herein are based upon what the Company currently believes to be reasonable assumptions, the Company cannot assure prospective investors that actual results, performance or achievements will be consistent with these forward-looking statements. The Company does not intend, and the Company does not assume, any obligation to update or revise these forward-looking statements to reflect new events or circumstances.

About Halogen Software

Halogen Software (TSX: HGN) offers an organically built cloud-based talent management suite that reinforces and drives higher employee performance across all talent programs - whether that is recruiting, performance management, learning and development, succession planning or compensation. With over 1,750 customers worldwide, Halogen Software has been recognized as a market leader by major business analysts and has garnered the highest customer satisfaction ratings in the industry. Halogen Software's powerful, yet simple-to-use solutions, which also include industry-vertical editions, are used by organizations that want to build a world-class workforce that is aligned, inspired and focused on delivering exceptional results. For more information, visit: http://www.halogensoftware.com. Subscribe to Halogen Software's Exploring Talent Management blog: http://www.halogensoftware.com/blog/ or follow Halogen Software on Twitter: https://twitter.com/HalogenSoftware.

No securities regulatory authority has either approved or disapproved of the contents of this news release. This press release is for information purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

HALOGEN SOFTWARE INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Three and nine month periods ended September 30, 2013 and 2012
(in United States dollars, tabular amounts in thousands, except share and per share data)
(Unaudited)
                 
  Three Months Ended September 30, Nine Months Ended September 30,
          2013          2012          2013          2012 
                 
Revenue                
  Recurring $  10,689 $  8,235  $  30,831  $  23,851 
  Professional services         1,508          1,262          3,990          3,355 
  License         143          239          554          606  
          12,340          9,736          35,375          27,812 
                 
Cost of revenue                
  Recurring         2,098          1,735          6,078          5,306 
  Professional services         1,377          1,150          2,973          2,591 
  License                  4          18          11 
          3,480          2,889          9,069          7,908 
                 
Gross margin         8,860          6,847          26,306          19,904 
                 
Expenses                
  Sales and marketing         5,394          4,491          16,285          13,375 
  Research and development         2,732          1,981          7,469          5,636 
  General and administrative         2,208          1,665          6,358          4,861 
  Foreign exchange (gain) loss         (691)         (384)         613          (431)
          9,643          7,753          30,725          23,441 
Operating income (loss)         (783)         (906)         (4,419)         (3,537)
Loss related to change in fair value of                
  redeemable preferred shares         —         (997)         (6,434)         (9,760)
Interest and other income         67          31          144          92 
Interest expense         (2)         (4)         (6)         (17)
Income (loss) before income taxes         (718)         (1,876)         (10,715)         (13,222)
Income tax expense (recovery)         —          5          39          5 
                 
NET INCOME (LOSS) AND                
  COMPREHENSIVE INCOME (LOSS) $  (718) $  (1,881) $  (10,754) $  (13,227)
Basic and diluted earnings (loss) per share $  (0.03) $  (0.15) $  (0.64) $  (1.09)
                 
Weighted average number of basic and diluted                
  common shares outstanding         21,608,138         12,160,801          16,860,524         12,131,441 

HALOGEN SOFTWARE INC.
Condensed Consolidated Statements of Financial Position
As at September 30, 2013 and December 31, 2012
(in United States dollars, tabular amounts in thousands)
(Unaudited)
         
  September 30,
2013
December 31,
2012
         
ASSETS        
Current assets        
  Cash and cash equivalents $    39,021  $       3,683 
  Short-term investments         19,118          5,210 
  Trade and other receivables (net)         7,053          6,961 
  Investment tax credits receivable         524          1,206 
  Prepaid expenses         1,891          1,198 
          67,607          18,258 
         
Non-current assets        
  Property and equipment         3,786          3,091 
  Intangible assets         1,853          1,403 
  $    73,246  $    22,752 
         
LIABILITIES        
Current liabilities        
  Trade payables and accrued liabilities $       5,569  $       4,360 
  Derivative liabilities         148          8 
  Deferred revenue         24,050          22,931 
  Deferred leasehold inducement         149          180 
  Current portion of long-term debt         101          173 
          30,017          27,652 
         
Non-current liabilities        
  Deferred leasehold inducement         449          231 
  Redeemable preferred shares         —          40,996 
  Long-term debt         —          56 
          30,466          68,935 
         
SHAREHOLDERS' EQUITY (DEFICIENCY)        
         
Share capital         69,445          2,301 
Share compensation reserve         677          418 
Retained earnings (deficit)         (27,342)         (48,902)
          42,780          (46,183)
  $    73,246  $    22,752 

HALOGEN SOFTWARE INC.
Condensed Consolidated Statements of Cash Flows
Three and nine month periods ended September 30, 2013 and 2012
(in United States dollars, tabular amounts in thousands)
(Unaudited)
                 
  Three Months Ended September 30, Nine Months Ended September 30,
    2013   2012   2013   2012
                 
CASH PROVIDED BY (USED IN):                
                 
OPERATING ACTIVITIES                
Net income (loss) $  (718) $  (1,881) $  (10,754) $  (13,227)
Items not affecting cash:                
  Depreciation and amortization         592         504         1,652         1,483
  Loss related to change in fair value of redeemable                
    preferred shares         —          997         6,434          9,760
  Share-based compensation         131         46         280         137
  Unrealized foreign exchange (gain) loss         (892)         (207)         571         (15)
  Deferred leasehold inducement         281         50         188         (33)
Net changes in non-cash working capital items         2,809         566         2,235         2,417
          2,203         75         606         522
                 
INVESTING ACTIVITIES                
Purchase of property and equipment         (1,363)         (554)         (1,857)         (1,252)
Purchase of intangible assets         (766)         (246)         (939)         (489)
Maturity of investments         600         706         3,807         2,214
Purchase of investments         (3,078)         (494)         (17,630)         (2,679)
          (4,607)         (588)         (16,619)         (2,206)
                 
FINANCING ACTIVITIES                
Issuance of share capital         13         —          56,942         20
Issuance costs of share capital         (803)         —          (4,935)         —
Repayment of long-term debt         (40)         (57)         (128)         (404)
          (830)         (57)         51,879         (384)
Effect of exchange rate changes on cash and cash equivalents         79         2         (528)         6
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         (3,155)         (568)         35,338         (2,062)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         42,176         2,587         3,683         4,081
CASH AND CASH EQUIVALENTS,                
  END OF PERIOD $  39,021 $  2,019 $  39,021 $  2,019
                 
Cash and cash equivalents consist of:                
    Cash $  3,877 $  1,355        
    Cash equivalents         35,144         664        
    Total $     39,021 $  2,019        
           


 

SOURCE: Halogen Software

For further information:

Tim Foran
T: 1-416-815-0700 ext. 251
Toll Free: 1-800-385-5451 ext. 251
E: ir@halogensoftware.com

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