NIGHTINGALE REPORTS FISCAL 2011 THIRD QUARTER RESULTS

- Fourth consecutive quarter of positive cash from operations -

MARKHAM, ON, Feb. 17 /CNW/ - Nightingale Informatix Corporation ("Nightingale" or the "Company") (TSX-V: NGH), an application service provider (ASP) of electronic medical record (EMR) software and related services announces its financial results for the three- and nine-month periods ended December 31, 2010. All results are reported in Canadian dollars unless otherwise stated. 

Q3 Fiscal 2011 Summary

  • Revenue was $4.4 million, up $0.05 million, or 1%, from Q3 F2010, reflecting an increase in software, predominantly EMR, and professional services revenue, which offset a $0.3 million decrease in transcription revenue and a negative $0.1 million foreign exchange impact:
    • Total revenues from the Company's software business (EMR and Practice Management) increased $0.5 million, or 15%, to $3.7 million in the quarter, from $3.2 million for the same quarter last year, predominantly as a result of growth in the Company's EMR customer base.
  • Gross profit margin was 81%, up from 76% in Q3 F2010, as a result of the Company's sales mix in the quarter. 
  • Q3 F2011 was the eighth consecutive quarter of positive EBITDA1.
  • EBITDA was $0.4 million, compared to $0.6 million in Q3 F2010, the result of the Company's investment in sales and marketing. 
  • Net loss was $0.3 million, an improvement of $0.08 million from Q3 F2010. 
  • Cash from operations increased to $0.6 million compared to a use of cash from operations of $(0.4) million in Q3 F2010.  The $1.0 million increase year-over-year is the result of an improvement in the Company's bottom line results as well as the timing of collection of cash on deferred revenue.
  • Total deferred revenue as at December 31, 2010, was $6.8 million compared to $5.2 million as at March 31, 2010, a sign of the Company's success in winning new customers to date in F2011.

  • Signed agreements with healthcare providers across Canada and the US to deploy 190 EMR seats compared to 28 seats in Q3 F2010.

"We continue to generate growth in our EMR business, with EMR comprising the majority of our revenue for the quarter, and new seat sales offsetting the expected decline in our legacy transcription business," said Sam Chebib, President and CEO of Nightingale. "Year-to-date, we have signed more than 600 new EMR seats in comparison to 66 for the same period last year. We expect the financial impact from these new EMR customer wins to be evident over the longer term in the form of recurring revenues."

Mr. Chebib continued: "The adoption of EMR is clearly gaining momentum, particularly in Ontario where approved physicians are eligible to receive up to $29,800 in subsidies over a three-year period for the use of our Nightingale On Demand system.  With the progress we have made in fiscal 2011 to date, we remain excited about our long-term growth prospects. To better position the Company to capitalize on the strengthening of the EMR market, we have increased our investment in sales and marketing and research and development. However, recognizing there is the potential for fluctuations in our seat sales as the EMR market unfolds further, we continue to carefully manage our expenses and cash."

Q3 and Year-to-date ("YTD") Fiscal 2011 Financial Review

Revenue was $4.4 million for Q3 F2011, compared to $4.4 million for Q3 F2010. The improvement is primarily the result of a $0.5 million increase in software license revenue as well as professional services revenue, which was partially offset by a $0.3 million decrease in the Company's lower-margin transcription business and a $0.1 million negative impact from foreign exchange, which predominantly affected the Company's recurring revenue (the Company generated 54% of Q3 F2011 revenue in the US). YTD revenue was $13.0 million, compared to $12.4 million for the first three quarters of F2010, which reflected a $2.1 million increase in software license revenue and a $1.2 million decrease in transcription revenue as well as a $0.5 million negative impact from foreign exchange (the Company generated 53% of revenue for the YTD period in the US).

Recurring Revenue2 was $2.7 million for Q3 F2011, compared to $3.3 million for Q3 F2010. The decrease is primarily the result of a reduction in transcription revenue as well as a negative foreign exchange impact.  YTD, Recurring Revenue was $8.2 million, compared to $10.2 million for the first three quarters of F2010. Recurring revenue generated by Nightingale's core business (which excludes the Company's transcription revenues and the impact of foreign exchange) was $2.7 million for Q3 fiscal 2011 and $8.5 million YTD, compared to $3.0 million and $8.9 million, respectively, for the same periods last year.

Non-Recurring Revenue2 increased to $1.7 million and $4.8 million for the Q3 and YTD F2011 periods, from $1.0 million and $2.2 million, respectively, for the same periods last year. This is primarily due to the increase in software licensing and professional services revenue driven by sales of the Company's Nightingale On Demand EMR product.

For Q3 and the YTD F2011 periods, gross profit margin was 81% and 80%, respectively.  This is compared to 76% and 73%, respectively, for the same periods last year, as the Company continues to increase its focus on generating a greater proportion of higher margin software sales in F2011.

Operating expenses (excluding stock based compensation and amortization) were $3.2 million in Q3 F2011, compared to $2.7 million in Q3 F2010. The increase in expenses reflects the Company's increased investment in sales and marketing activities as well as research and development, which was partially offset by a positive $0.05 million foreign exchange impact. In Q3 2011, the Company incurred approximately 35% of its operating expenses in the US, providing a natural hedge position that offsets some of the negative foreign exchange impact on the Company's revenue. For YTD F2011, operating expenses were $9.0 million, compared to $8.3 million for the same period in F2010. For YTD F2011, the Company incurred approximately 35% of its expenses in the US, resulting in a positive $0.2 million foreign exchange impact.

EBITDA was $0.4 million and $1.4 million for the Q3 and YTD F2011 periods, compared to $0.6 million and $0.8 million, respectively for the same periods in F2010.

Net loss was $0.3 million and $0.7 million for the Q3 and YTD F2011 periods, compared to losses of $0.3 million and $1.9 million, respectively, for the same periods in F2010.

Cash generated from operating activities was $0.6 million for Q3 F2011 and $1.8 million YTD F2011, compared to a use of cash of $(0.4) million and $(1.3) million, respectively for the same periods last year. The increase reflects both the improvement in the Company's bottom line results, as well as timing of the collection of cash on deferred revenue.

Cash and cash equivalents were $2.4 million at December 31, 2010, compared to $1.8 million at March 31, 2010.  At December 31, 2010, total common shares issued and outstanding were 76,310,915.

This press release should be read in conjunction with Nightingale's Consolidated Financial Statements for the quarter ended December 31, 2010, and the accompanying Management Discussion and Analysis. The financial statements and MD&A will be available at www.nightingalemd.com and filed on www.sedar.com on February 17, 2011. 

Notice of Conference Call

Nightingale will host a conference call on Thursday, February 17, 2011, at 8:30 a.m. Eastern Standard Time. To access the conference call by telephone, dial (888) 231-8191 (or (647) 427-7450 for international). Please connect approximately fifteen minutes prior to the call, and reference conference ID 43060761 prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Thursday, February 24, 2011. To access the archived conference call, dial 1-800-642-1687 and enter reference 43060761 #. To listen to the conference call replay on the internet please visit the Nightingale website shortly after the call at www.nightingalemd.com.

Non-GAAP Financial Measures

The Company internally measures its performance and results of initiatives through a number of measures that are not recognized under Canadian generally accepted accounting principles (GAAP) and may not be comparable to similar measures used by other companies. 

1. EBITDA

EBITDA is a non-GAAP measure that management believes is a useful measurement to evaluate the performance of the Company. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings as determined in accordance with GAAP. The Company's method of calculating EBITDA may differ from the methods used by other companies and, accordingly, it may not be comparable to similarly titled measures used by other companies.

EBITDA is defined as earnings before other loss (income), interest, income taxes, depreciation, amortization, and stock-based compensation. Management believes it is useful to exclude these items as they are either non-cash expenses, items that cannot be influenced by management in the short term, or items that do not impact core operating performance, and Management uses this information internally for forecasting and budgeting purposes.

The following provides a reconciliation of EBITDA to Loss and Comprehensive Loss:

         
  Fiscal Quarter Fiscal Quarter Nine Months Nine Months
Ended Ended Ended Ended
Definition December December December December
31, 2010 31, 2009 31, 2010 31, 2009
         
Loss and Comprehensive Loss $      (267)         $       (350) $      (744)      $     (1,920)
         
Adjustments for:        
Other Loss (Income)                         1                     28 (25) (50)
Interest                     139                     251                  564 820
Depreciation and Amortization                     474                     630                1,313 1,751
Stock-based Compensation                      57                      34                   297 195
         
EBITDA           $        404         $         593 $     1,405     $         796

2. Recurring and Non-Recurring Revenue

The Company has included recurring revenue and non-recurring revenue measurements since it believes that this information is useful to investors to evaluate its performance. Investors should be cautioned, however, that recurring revenue and non-recurring revenue should not be construed as an alternative to revenue as determined in accordance with GAAP.  Recurring Revenue is comprised of utilization fees, hosting, support and maintenance revenue, data management and transcription services, revenue cycle management services and transactional fees.  Non-Recurring Revenue is comprised of revenues generated from sales of software and systems and related training, data conversion and installation services.

The following provides a reconciliation of Recurring Revenue and Non-Recurring Revenue to Revenue:

         
  Fiscal Quarter Fiscal Quarter Nine Months Nine Months
Ended Ended Ended Ended
  December December December December
Definition 31, 2010 31, 2009 31, 2010 31, 2009
Non-Recurring Revenue $       1,744 $     1,010 $      4,794 $      2,163
         
Recurring Revenue   2,661   3,342 8,227 10,246
         
Revenue $       4,405 $     4,352 $    13,021 $    12,409 

About Nightingale

Nightingale is one of the fastest growing health care service and software companies in North America and is recognized as an industry leader in Web-based clinician and community based electronic medical records (EMR) serving the needs of small primary care practices, multi-physician outpatient clinics, and large scale regional health organizations and networks. Coupled with integrated practice management, transcription and revenue cycle management, Nightingale's comprehensive service offering allows customers to enhance patient care, increase revenue opportunities and optimize operations. Nightingale is continuously innovating and enhancing its services to meet the needs of its growing and diverse customer base. Nightingale - Healthcare connected. www.nightingalemd.com

Forward Looking Statement

This press release contains "forward-looking statements" respecting the issuance and cancellation of securities of the Company within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward- looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may" ,"could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Nightingale to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the speculative nature of the medical software industry, which is affected by numerous factors beyond Nightingale's control; the ability of Nightingale to successfully integrate its acquisitions and any liabilities arising as a result of such acquisitions, access to capital and agreements with its Lenders; the existence of present and possible future government regulation; access to debt or equity financing and agreements with its Lenders; the significant and increasing competition that exists in the medical software industry; the early stage of Nightingale's business; and therefore it is subject to the risks associated with early stage companies, including uncertainty of revenues, markets and profitability and the need to raise additional funding.  All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends. Although management believes the assumptions used to make such statements are reasonable at this time, our assumptions may not to be as anticipated, estimated or intended. Certain material factors or assumptions applied by management in making forward-looking statements, include without limitation, factors and assumptions regarding Nightingale's continued ability to fund its business, rates of customer defaults, relationships with, and payments to, lenders, demand for Nightingale's products, as well as Nightingale's operating cost structure.

Although Nightingale has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Nightingale does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws. Further information on Nightingale Informatix Corporation is available at www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
FOR THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2010

                 
  3 months   3 months     9 months   9 months
  ended   ended     ended   ended
  December   December     December   December
  31, 2010   31, 2009     31, 2010   31, 2009
                 
Revenue $   4,405,325   $   4,351,927     $   13,020,664   $   12,408,538
Cost of sales      839,788        1,038,402          2,594,510   3,339,944
                         
Gross profit      3,565,537        3,313,525          10,426,154   9,068,594
                 
Expenses                
General and administration 786,548   753,095       2,270,791     2,125,592
Sales and marketing        590,819          352,248     1,768,886   1,089,314
Research and development    850,925      699,226     2,284,275   2,126,699
Client services    933,524      916,169     2,696,295   2,930,479
Stock based compensation       56,784         33,862     297,407   195,344
Amortization       474,247   629,671     1,313,101      1,750,958
     3,692,847      3,384,271     10,630,755   10,218,386
                 
Operating loss        (127,310)   (70,746)     (204,601)   (1,149,792)
                 
Interest 139,004   250,802            564,288            820,484
Foreign currency loss (gain) 620   28,402     (25,093)   (50,054)
                 
Loss and comprehensive loss $    (266,934)   $    (349,950)     $  (743,796)   $  (1,920,222)
                 
Basic and diluted loss per common share $          (0.00)   $          (0.00)     $           (0.01)   $           (0.03)
                 
Weighted average number of common shares 76,310,915   70,534,542     75,870,836   69,931,693
                 

INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited)
AS AT DECEMBER 31, 2010 and MARCH 31, 2010

         
  As at     As at
  December  
March
  31, 2010     31, 2010
     
   
ASSETS    
   
       
Current assets    
    
  
Cash and cash equivalents $     2,413,751  
$      1,798,247
Accounts receivable 3,207,877  
2,626,757
Other receivables 46,333  
134,459
Inventory 21,487  
30,708
Prepaid expenses 470,348  
454,070

6,159,796  
5,044,241

      
 
Long-term assets    
 
Deferred costs 137,640  
83,385
Property and equipment 576,415  
821,243
Intangible assets 3,610,883  
4,010,143
Goodwill 4,692,399  
4,692,399

   
9,017,337  
9,607,170

     
   
Total assets $    15,177,133  
$    14,651,411

   
   
LIABILITIES    
  
      
 
Current liabilities    
 
Accounts payable and accrued liabilities $       2,362,347  
$        2,549,237
Income taxes payable 684,924  
          705,940
Current portion of deferred revenue 4,326,314  
       3,488,382
Current portion of capital lease obligations 200,987  
          296,649
Current portion of term loan 800,000
      -

8,374,572  
       7,040,208
        
 
Long term liabilities    
    
Term loan 954,710
     -
Convertible debentures 1,792,841
     -
Subordinated debt -  
       5,250,000
Deferred revenue 2,461,679  
       1,750,644
Capital lease obligations 127,738  
          211,578

5,336,968  
       7,212,222

     
 
Total liabilities 13,711,540
   
 
    14,252,430

      
   
SHAREHOLDERS' EQUITY    
   
Capital stock 29,629,683  
    28,348,960
Contributed surplus 4,760,832  
      4,501,027
Other contributed surplus 269,880     -
Warrants 701,452  
         701,452
Deficit (33,896,254)  
(33,152,458)

1,465,593  
          398,981

      
    
Total liabilities and shareholders' equity $    15,177,133
 
$   14,651,411
           

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
FOR THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2010

                 
  3 months   3 months     9 months   9 months
  ended   ended     ended   Ended
  December   December     December    December
  31, 2010   31, 2009     31, 2010   31, 2009
                 
Cash Flow from operating activities                
Loss and comprehensive loss $   (266,934)   $   (349,950)         $ (743,796)       $ (1,920,222)
                 
Adjustments for:                
Depreciation and amortization 474,247   629,671     1,313,102         1,750,958
Amortization of transaction costs related to debt financing 14,897   11,693     24,433              56,912
Foreign currency loss (gain) (40,766)   21,040     60,836              (57,415)
Stock based compensation 56,783   33,862     297,407            195,344
Interest accretion 23,121   59,709     72,737            216,714
  261,348   406,025     1,024,719            242,291
                 
Changes in non-cash working capital balances                
  Accounts receivable (567,533)   (498,756)     (631,755)   (236,017)
  Prepaid expenses 79,327          145,984     (16,278)               97,104
  Inventory 1,948              2,904     9,220               65,308
  Deferred costs (63,452)            11,467     (54,255)   -
  Other receivables 26,204   (54,497)     85,806   (69,517)
  Accounts payable and accrued liabilities 32,261   (312,816)     (176,607)   (1,066,766)
  Income taxes payable 25,824   (10,995)     53,051   (10,995)
  Deferred revenue 778,477   (105,005)     1,548,966   (304,636)
Cash flows used in operating activities 574,404     (415,689)     1,842,867   (1,283,228)
                 
Cash flow from investing activities                
Capitalized development costs (69,243)   -     (523,119)   -
Purchase of property and equipment (16,768)   (8,254)     (85,084)   (37,307)
Cash flows used in investing activities (86,011)   (8,254)     (608,203)   (37,307)
                 
Cash flow from financing activities                
Issuance of common shares (net of costs) -   -     1,243,119   -
Proceeds from term loan (net of costs) -   -     1,887,624   -
Proceeds from convertible debt financing (net of costs) -   -     2,017,373   -
Repayment of term loan (150,535)   -     (150,535)   -
Repayment of subordinated debt -   -     (5,284,202)   -
Repayment of line of credit (840,000)     -     -   -
Repayment of capital lease obligations (100,019)   (63,492)     (240,077)   (199,621)
Cash flows used in financing activities (1,090,554)   (63,492)     (526,698)   (199,621)
                 
Foreign exchange gains (losses) on
cash held in foreign currency
(11,643)           10,103     (92,462)   (113,446)
                 
Net increase (decrease) in cash during the period (613,804)   (477,332)     615,504   (1,633,602)
Cash and cash equivalents, beginning of period 3,027,555       2,357,786     1,798,247          3,514,056
                 
Cash and cash equivalents, end of period $  2,413,751   $  1,880,454     $  2,413,751   $  1,880,454
                 

OVERALL PERFORMANCE, RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Unaudited)

                       
  Fiscal
Year
Q4 Fiscal
Year
Q1 Q2 Q3 Q4 Fiscal
Year
Q1 Q2 Q3
In $ 000's  (Except per Share Amounts) Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
March
31
2008
March
31
2009
March 31
2009
June
30
2009
Sept
30
2009
Dec
31
2009
March
31
2010
March 31
2010
June
30
2010
Sept
30
2010
Dec
31
2010
                       
Recurring Revenue $  13,088 $    3,746 $  14,531 $    3,564 $    3,341 $    3,342 $    2,849 $  13,096 $   2,843 $    2,723 $    2,661
                       
Non-Recurring Revenue 5,788 971 3,934         566          585 1,010 1,324 3,485 1,559 1,491 1,744
                       
Revenue 18,876 4,717     18,465 4,130 3,926 4,352 4,173     16,581 4,401 4,214 4,405
                       
Gross Profit 13,706 3,305    13,410 2,937 2,818 3,314 3,169     12,238 3,533 3,327 3,565
                       
Expenses 19,957 3,962    16,820 3,508 3,327 3,384 3,474    13,693 3,360 3,578 3,693
                       
EBITDA Income (Loss) (3,526)             9 (719)           24          180         593 406      1,203 616 386 404
                       
Operating Gain / (Loss) for the Period (6,250) (656) (3,410) (570) (509) (70) (306) (1,455)       173 (251) (127)
                       
Loss and Comprehensive Loss (12,811) (1,004) (4,632) (843) (727) (350) (1,524) (3,444) (9) (468) (267)
                       
Loss and Comprehensive Loss per Common Share $   (0.19) $   (0.01) $   (0.07) $   (0.01) $   (0.01) $   (0.00) $   (0.02) $   (0.05) $   (0.00) $   (0.01) $   (0.00)
                       
Weighted Avg. # of Common Shares 66,228     67,845     67,845    69,322 70,535    70,535     70,535     70,232 72,809 76,311 76,311
                       
Total Assets $  23,992 $  17,906 $  17,906 $  16,413 $  15,170 $  14,714 $  14,651 $  14,651 $  16,867 $  15,718 $  15,177
                       
Total Long Term
Liabilities
$    6,948 $    6,517 $    6,517 $    6,309 $    5,751 $    6,285 $    7,212 $    7,212 $    7,229 $    5,185 $    5,337

SOURCE Nightingale Informatix Corporation

For further information:

Michael Ford, CFO 
Nightingale Informatix Corporation
Tel: 905-307-7870
mford@nightingalemd.com
Kristen Dickson, Account Executive
TMX | Equicom
Tel: 416-815-0700 ext. 273
kdickson@equicomgroup.com

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Nightingale Informatix Corporation

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