NexJ Systems Reports Third Quarter 2016 Results

22% revenue growth and improved profitability

TORONTO, Oct. 27, 2016 /CNW/ - NexJ Systems Inc. (TSX: NXJ), a provider of enterprise customer management solutions to the financial services industry, today announced financial results for its third quarter ended September 30, 2016.

Highlights

  • $8.9M of revenue for the third quarter represents 22% growth over the same period in the prior year
  • $1.7M in Adjusted EBITDA for the third quarter is a $1.5M improvement over the Adjusted EBITDA of $228K for the comparative period
  • $1.1M in net income for the third quarter is a $2.3M improvement over the net loss of $1.2M for the comparative period
  • $23.9M in revenue for the year-to-date represents 16% growth over the same period in the prior year
  • $2.1M in Adjusted EBITDA for the year-to-date is a $2.8M improvement over the Adjusted EBITDA loss of $683K for the comparative period
  • $1.6M in net loss for the year-to-date is a $3.6M improvement over the net loss of $5.2M for the comparative period
  • $13.7M cash balance at the end of the quarter
  • NexJ selected by the Wealth Management Americas division of a global financial services firm for their new advisor platform

"We are pleased to report another quarter of strong revenue growth and profitability," said William M. Tatham, Chief Executive Officer of NexJ Systems. "Our selection by the Wealth Management Americas division of a global financial services firm is an important step in continuing the trend of increased revenue and profit."

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 November 3, 2016 and can be accessed by dialing 416-849-0833 (Toronto local) or toll free at 1-855-859-2056 and using password 1398178.

NexJ Systems Inc.






Third Quarter Financial Results






(Expressed in thousands of Canadian dollars)





(Unaudited)







 Quarter ended September, 


 Nine Months ended September, 


2016

2015(1)


2016(1)

2015(1)







Revenue:

$



$



License fees

1,965

1,329


3,454

3,699


Professional services

4,944

4,626


14,853

13,169


Maintenance and support

1,948

1,330


5,638

3,821


8,857

7,285


23,945

20,689

Expenses:







Professional services

2,906

3,081


8,968

8,906


Research and development, net

1,779

1,589


5,661

5,009


Sales and marketing

1,185

1,125


3,344

3,627


General and administrative, net

1,242

1,262


3,831

3,830


7,112

7,057


21,804

21,372







Adjusted EBITDA

1,745

228


2,141

(683)








Loss from discontinued operation(1)

-

994


252

3,138


Impairment of loan receivable and shared services

466

-


1,460

-


Share-based payment expense

186

110


777

308


Depreciation and amortization

214

460


644

1,386


Lease-exit charges, net

-

-


-

351

Income (loss) from operations

879

(1,336)


(992)

(5,866)








Foreign exchange loss (gain)

(231)

(139)


674

(591)


Finance income

(15)

(23)


(50)

(92)

Net income (loss) for the period

1,125

(1,175)


(1,616)

(5,184)

 

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 loss from discontinued operation, share-based payment expense, depreciation and amortization, impairment charge on non-financial assets, impairment of loan receivable and shared services, 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.

About NexJ Systems Inc.
NexJ Systems provides enterprise customer management solutions to the financial services industry. Our solutions include industry-specific customer relationship management (CRM) for multi-channel engagement and collaboration; customer process management (CPM) for client onboarding and KYC; and customer data management (CDM) to deliver a holistic view of customers across line of business and regional data silos. Our solutions integrate information from multiple systems into a unified view to help firms better understand and share information about their customers to increase loyalty, drive cross-sell and improve the customer experience.

Based in Toronto, NexJ has clients throughout North America, Asia Pacific 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, 2015 dated February 18, 2016, 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)









September 30, 2016


December 31, 2015





Assets





$


$

Current assets:





Cash and cash equivalents

13,714


14,699


Accounts receivable

14,516


8,274


Prepaid expenses and other assets

1,061


968


Assets held for distribution

-


962

Total current assets

29,291


24,903





Non-current assets:





Property and equipment

2,085


2,102


Goodwill

1,753


1,753


Other assets

260


260

Total non-current assets

4,098


4,115





Total assets

33,389


29,018





Liabilities and Shareholders' Equity








Current liabilities:





Accounts payable and accrued liabilities

5,219


5,424


Deferred revenue

10,794


4,382


Provisions

167


223


Current portion of finance lease liability

148


-


Liabilites held for distribution

-


964

Total current liabilities

16,328


10,993





Non-current liabilities:





Accrued liabilities

941


658


Provisions

112


224


Finance lease liability

198


-


Deferred revenue

285


304

Total non-current liabilities

1,536


1,186





Total liabilities

17,864


12,179





Shareholders' equity:





Share capital

82,736


83,094


Share purchase loans

(3,622)


(3,622)


Contributed surplus

7,002


6,293


Deficit

(70,591)


(68,926)

Total shareholders' equity

15,525


16,839









Total liabilities and shareholders' equity

33,389


29,018

 

NexJ Systems Inc.

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

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

(Unaudited)














Quarter ended September,


Nine Months ended September,


2016

2015(1)


2016(1)

2015(1)



(Restated)



(Restated)







Revenue:

$

$


$

$


License fees

1,965

1,329


3,454

3,699


Professional services

4,944

4,626


14,853

13,169


Maintenance and support

1,948

1,330


5,638

3,821


8,857

7,285


23,945

20,689







Expenses*:







Professional services

2,955

3,116


9,185

8,993


Research and development, net

1,843

1,633


5,920

5,137


Sales and marketing

1,195

1,142


3,384

3,672


General and administrative, net

1,519

1,737


4,736

5,616


Impairment of loan receivable and shared services

466

-


1,460

-


7,978

7,628


24,685

23,418







Income (loss) from operations:

879

(343)


(740)

(2,729)








Foreign exchange gain (loss)

231

139


(674)

591


Finance income

15

23


50

92


246

162


(624)

683







Income (loss) from continuing operations:

1,125

(181)


(1,364)

(2,046)

Loss from discontinued operation:

-

(994)


(252)

(3,138)







Income (loss) for the period and 






comprehensive income (loss):

1,125

(1,175)


(1,616)

(5,184)







Earnings (loss) per share:







Basic from continuing operations

0.06

(0.01)


(0.07)

(0.10)


Diluted from continuing operations

0.06

(0.01)


(0.07)

(0.10)


Basic and diluted from discontinued operation

-

(0.05)


(0.01)

(0.15)


Basic

0.06

(0.06)


(0.08)

(0.25)


Diluted

0.06

(0.06)


(0.08)

(0.25)







Weighted average number of 






common shares outstanding, in thousands:







Basic

20,203

20,459


20,259

20,459


Diluted

20,393

20,459


20,259

20,459













*Share-based payment expense has 






been included in expenses as follows:







Professional services

49

36


217

88


Research and development, net

64

43


259

127


Sales and marketing

10

16


40

44


General and administrative, net

63

15


261

49








186

110


777

308

 

(1)As of January 25, 2016, the Healthcare business unit was spun-off as a new corporation; the net of revenue and expenses for Healthcare have been presented as part of the loss from discontinued operation for the quarter and nine months ended September 30, 2016 and 2015.

NexJ Systems Inc.

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in thousands of Canadian dollars)

(Unaudited)






Nine Months ended September 30,


2016(1)


2015(1)




(Restated)





Cash flows from (used in) operating activities:

$


$


Loss for the period:

(1,616)


(5,184)


Adjustments for:






Impairment of loan receivable and shared services

1,460


-



Depreciation and amortization

644


1,386



Share-based payment expense

777


308



Finance income

(50)


(92)



Foreign exchange gain

(59)


(426)



Loss from discontinued operation

252


3,138


Change in non-cash operating working capital:






Accounts receivable

(6,168)


(2,583)



Prepaid expenses and other assets

(97)


(352)



Accounts payable and accrued liabilities and provisions

(147)


1,057



Deferred revenue

6,372


(1,062)


1,368


(3,810)

Net cash flows used in discontinued operation

(270)


(3,420)

Net cash flows from (used in) operating activities

1,098


(7,230)





Cash flows from (used in) financing activities:






Repurchase of common shares

(571)


(2)



Proceeds from exercise of stock options

145


-



Payment of finance lease liability

(98)


-

Net cash flows used in financing activities

(524)


(2)





Cash flows from (used in) investing activities:






Purchase of property and equipment

(168)


(9)



Advances to NexJ Health Inc.

(1,460)


-



Distribution, net of cash

(40)


-



Interest received

50


92

Net cash flows from (used in) investing activities

(1,618)


83







Effects of exchange rates on cash and cash equivalents

59


426







Decrease in cash and cash equivalents

(985)


(6,723)





Cash and cash equivalents, beginning of period

14,699


18,298





Cash and cash equivalents, end of period

13,714


11,575





Supplemental cash flow information:






Acquisition of property and equipment not yet paid for

57


254



Acquisition of property and equipment under finance lease

444


-

 

(1)The nine months ended September 30, 2016 and 2015 figures have been presented for the classification of the Healthcare business as a discontinued operation.

 

SOURCE NexJ Systems Inc.

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

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