Halogen Announces Third Quarter 2015 Results

  • Delivers total revenue growth of 15%, including 17% recurring revenue growth

OTTAWA, Nov. 5, 2015 /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 months ended September 30, 2015. All figures are stated in United States dollars unless otherwise noted.

Third Quarter 2015 Financial and Operational Highlights

  • Recurring revenue increased 17% from Q3 2014 to $14.9 million, representing 90% of total revenue in the quarter.
  • Total revenue increased 15% from Q3 2014 to a record $16.6 million.
  • Deferred revenue rose 17% year-over-year to $33.3 million.
  • Net customer adds included a broad set of verticals and geographies, including names such as LEAP Legal Software Pty. Limited, Piller's Fine Foods, FAMA Holdings Company Ltd., Emirates Post Group, World First UK Ltd, Florida Hospital Wesley Chapel, St. Clair, Hope Hospice, and Community Services Inc.
  • Dollar retention continued to be more than 100%1.
  • Total cash and investments of $39.7 million at September 30, 2015 compared to $44.2 million at December 31, 2014.
  • Continued a Normal Course Issuer Bid to purchase up to a maximum of 600,000 common shares. In the third quarter the Company purchased and cancelled 50,600 shares for approximately $0.4 million resulting in a total of 120,643 shares for approximately $0.9 million as of September 30, 2015.

"Our third quarter results were in line with our expectations, and reflect continued solid demand for our differentiated talent management solutions that are ideal for mid-enterprise customers", said Les Rechan, Halogen's CEO. "There is a tremendous market opportunity for SaaS-based talent management solutions, and we will continue to adjust our go-to-market strategies and respective investments to capitalize on this largely untapped market. Looking forward, we are making incremental progress, but we still have opportunities to increase our level of execution, productivity and growth. I am confident in our future success given our best-in-class portfolio of solutions and strong track-record of delivering value to our customers."

Financial Review

Halogen's recurring revenue in the third quarter of 2015 was $14.9 million, a 17% increase over Q3 2014. Total revenue increased 15% over Q3 2014 to $16.6 million, driven by growth in the Company's customer base, as well as the sale of additional seats and modules to existing customers. In the third quarter of 2015, approximately 79% of revenue was generated from customers located in the United States (79% in Q3 2014), 10% in Canada (10% in Q3 2014) and 11% in international markets (11% in Q3 2014).

Gross margin was $12.2 million, or 74% of total revenue, in the third quarter of 2015, compared to $9.9 million, or 69% of total revenue, in Q3 2014.

Net loss was $3.8 million in the third quarter of 2015 as compared to a loss of $5.0 million in Q3 2014. Adjusted EBITDA2 was $(0.6) million in Q3 2015 compared to $(2.6) million in Q3 2014; Adjusted EBITDA per share was $(0.03) per share in Q3 2015, compared to $(0.12) per share in Q3 2014.   

 

Adjusted EBITDA reconciliation

3 months ended Sept. 30,

9 months ended Sept. 30,

($000's except per share amounts)

2015

2014

2015

2014

Net income (loss)

$    (3,838)

$   (4,986)

$ (10,843)

$ (10,513)

Interest (income) expense and other, net

(16)

(49)

(65)

(186)

Foreign exchange (gain) loss

2,407

1,407

5,182

1,608

Income tax expense

41

33

157

77

Depreciation and amortization

982

791

2,947

2,355

Share-based compensation

(194)

205

127

561

Adjusted EBITDA

$       (618)

$   (2,599)

$   (2,495)

$   (6,098)

Adjusted EBITDA per share

$      (0.03)

$      (0.12)

$      (0.11)

$      (0.28)

 

Total cash and investments was $39.7 million at September 30, 2015 compared to $44.2 million at December 31, 2014. Deferred revenue was $33.3 million at quarter-end, compared to $28.5 million at September 30, 2014 and $32.8 million at December 31, 2014.

Fourth Quarter and Full Year 2015 Financial Guidance

For the fourth quarter of 2015, the Company is expecting:

  • Recurring revenue in the range of $15.4 to $15.6 million
  • Total revenue in the range of $16.9 to $17.1 million

For the full year 2015, the Company is expecting:

  • Recurring revenue in the range of $59.3 to $59.5 million
  • Total revenue in the range of $65.4 to $65.6 million

Third quarter 2015 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 month periods ended September 30, 2015 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 third quarter 2015 results today (Thursday, November 5, 2015) at 5:00 p.m. (ET). The call will be hosted by Les Rechan, President and CEO, and Pete Low, CFO.  To participate in the call, please dial 647-427-7450 or 1-888-231-8191 (Conference ID: 56538882) ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until 12:00 midnight (ET) November 12, 2015 by calling 416-849-0833 or 1-855-859-2056. The conference call will be webcast live at http://bit.ly/1j8e4VI.

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 2,100 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 TalentSpace blog: http://www.halogensoftware.com/blog/ or follow Halogen Software on Twitter: http://twitter.com/HalogenSoftware.

 


HALOGEN SOFTWARE INC.

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)

Three and nine month periods ended September 30, 2015 and 2014

(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,


2015

2014


2015

2014







Revenue







Recurring

$   14,915

$   12,791


$   43,879

$   37,179


Professional services

1,643

1,619


4,659

4,330


License

-

-


-

60


16,558

14,410


48,538

41,569







Cost of revenue







Recurring

2,899

3,058


9,266

8,399


Professional services

1,464

1,456


3,687

3,205


License

-

5


-

14


4,363

4,519


12,953

11,618







Gross margin

12,195

9,891


35,585

29,951







Expenses







Sales and marketing

8,384

7,577


24,482

21,880


Research and development

2,993

3,162


9,518

9,157


General and administrative

2,224

2,747


7,154

7,928


Foreign exchange (gain) loss

2,407

1,407


5,182

1,608








16,008

14,893


46,336

40,573







Operating income (loss)

(3,813)

(5,002)


(10,751)

(10,622)







Interest and other income

16

49


65

186







Income (loss) before income taxes

(3,797)

(4,953)


(10,686)

(10,436)







Income tax expense (recovery)

41

33


157

77







NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

$    (3,838)

$    (4,986)


$  (10,843)

$  (10,513)







Basic and diluted earnings (loss) per share

$      (0.17)

$     (0.23)


$      (0.49)

$     (0.48)







Weighted average number of basic and diluted common shares outstanding

 

22,115,055

 

21,873,418


21,994,810

 

21,788,500

 

HALOGEN SOFTWARE INC.

Condensed Consolidated Interim Statements of Financial Position

As at September 30, 2015 and December 31, 2014

(in United States dollars, tabular amounts in thousands)





(Unaudited)










September 30,
2015


December 31,
2014





ASSETS




Current assets





Cash and cash equivalents

$    39,667


$    44,247


Trade receivables (net)

8,679


12,386


Prepaid expenses

2,239


2,234


50,585


58,867

Non-current assets





Property and equipment

6,734


7,995


Intangible assets

1,816


1,982


Other long-term assets

125


231


$    59,260


$    69,075





LIABILITIES




Current liabilities





Trade payables and accrued liabilities

$      7,063


$      7,793


Derivative liabilities

2,878


1,025


Deferred revenue

33,260


32,836


Deferred leasehold inducement

340


341


43,541


41,995

Non-current liabilities





Deferred leasehold inducement

369


623


43,910


42,618





SHAREHOLDERS' EQUITY








Share capital

70,122


69,806

Share compensation reserve

1,339


1,443

Retained earnings (deficit)

(56,111)


(44,792)


15,350


26,457


$    59,260


$    69,075

 

HALOGEN SOFTWARE INC.

Condensed Consolidated Interim Statements of Cash Flows

Three and nine month periods ended September 30, 2015 and 2014

(in United States dollars, tabular amounts in thousands)





(Unaudited)










Three Months Ended
September 30,


Nine Months Ended
September 30,


2015

2014


2015

2014







CASH PROVIDED BY (USED IN):












OPERATING ACTIVITIES












Net income (loss)

$    (3,838)

$    (4,986)


$  (10,843)

$  (10,513)

Items not affecting cash:







Depreciation and amortization

982

791


2,947

2,355


Share-based compensation

(194)

205


127

561


Unrealized foreign exchange (gain) loss

1,266

1,259


2,839

1,384


Deferred leasehold inducement

(84)

(55)


(254)

86

Net changes in non-cash working capital items

2,112

(68)


3,369

2,593


244

(2,854)


(1,815)

(3,534)













INVESTING ACTIVITIES












Purchase of property and equipment

(465)

(1,755)


(1,031)

(3,755)

Purchase of intangible assets

(24)

(105)


(489)

(899)

Change in other long-term assets

42

(67)


105

(280)

Maturity of investments

-

2,337


3

11,852

Purchase of investments

-

(48)


(3)

(142)


(447)

362


(1,415)

6,776







FINANCING ACTIVITIES












Issuance of share capital

5

56


468

214

Repurchase of common shares

(354)

-


(859)

-

Repayment of long-term debt

-

-


-

(53)








(349)

56


(391)

161







Effect of exchange rate changes on cash and cash equivalents

(144)

 

(280)


(959)

 

(44)







INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(696)

 

(2,716)


(4,580)

 

3,359







CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

40,363

 

43,480


44,247

 

37,405







CASH AND CASH EQUIVALENTS, END OF PERIOD

$   39,667

$   40,764


$   39,667

$   40,764

 

____________________________________________________
1 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.

2 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.

 

SOURCE Halogen Software

For further information: Investor relations: William Maina, T: 1-613-270-1011, ext. 5904, NA Toll Free: 1-866-566-7778, ext. 5904, E: ir@halogensoftware.com; Media relations: Connie Costigan, T: 1-613-270-1011, ext. 4334, NA Toll Free: 1-866-566-7778, ext. 4334, E: ccostigan@halogensoftware.com

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