Nightingale reports third quarter fiscal 2015 results

MARKHAM, ON, Feb. 24, 2015 /CNW/ - Nightingale Informatix Corporation ("Nightingale" or the "Company") (TSX-V: NGH), a cloud-based provider of electronic health record (EHR) software and related services, announces its financial results for the quarter ended December 31, 2014.

Highlights for the Quarter

  • Revenue was $3.3 million compared to $3.8 million in Q3 F2014, and $3.7 million in Q2 F2015. The variance from F2014 primarily reflects a decrease in non-recurring revenues which was partially offset by a 6% increase in recurring revenues from Q3 F2014 and an increase of 2% from Q2 F2015.
  • Recurring revenue from the core practice management and EHR business grew by 19% from Q3 F2014.
  • Gross profit was $3.0 million, or 89% of revenue, compared to $3.4 million, or 88% of revenue, in Q3 F2014 and $3.3 million, or 89% of revenue, in Q2 F2015.
  • Operating Expenses (excluding stock based compensation, depreciation and amortization costs) were $3.2 million compared to $3.2 million in Q3 F2014 and $3.0 million in Q2 F2015.
  • Adjusted EBITDA was negative $0.2 million, or negative 5% of revenue, a decrease from $0.1 million, or 4% of revenue, in Q3 F2014 and from $0.33 million, or 9% of revenue, in Q2 F2015.
  • Net loss was $0.9 million compared to a net loss of $1.4 million in Q3 F2014 and net loss of $0.3 million in Q2 F2015.
  • Total deferred revenue was $5.6 million up from $4.8 million at March 31, 2014.
  • In Q3, the Company added $0.2 million of new annualized core product recurring revenue to its backlog.
  • During the quarter, the Company announced the addition of David Toews as its Chief Financial Officer.
  • On February 20, 2015, the Company announced a $2.1 million private placement in the form of a convertible secured note that was purchased by a company controlled by one of Nightingale's directors.

"Our recurring revenue continues to grow, and we expect once our V10 product is commercially ready, that we will be able to accelerate this growth. Our recurring revenue from the core product practice management and EHR business has grown 19% year over year." said Sam Chebib, President and CEO. "We continue to invest heavily in the V10 platform and are excited about its potential.  It has taken longer than anticipated, but we have made significant progress.  We will begin migrating USA based practice management customers to the V10 platform starting in March 2015. We continue to develop the EHR functionality on the platform and we expect to start adding new customers on V10 this summer. "

Stock Option Grant
In February 2015, Nightingale's Board of Directors approved the grant of 2,200,000 options to certain employees and Officers of the Company pursuant to the Company's employee stock option plan (the "Plan"). Of the total options granted, 1,500,000 were granted to Officers of the Company. Each option under the Plan is exercisable to acquire one common share and the strike price will be equal to the greater of the closing price of the Company's common stock on February 26, 2015 and $0.10 per share.  The options granted have been approved by the Board of Directors and are due to expire on February 25, 2020.  The Plan has been approved by the Company's shareholders.

Subordinated Convertible Note
The Company also announced that the subordinated convertible secured note (the "Note") in the principal amount of $2.1 million ("Principal Amount") announced on February 20, 2015 had been completed.  The Note will be purchased by Optimum Marketing & Merchandising Services Ltd. (the "Lender"), a company controlled by a director of the Company. The proceeds of the Note are intended to be used by the Company for working capital and general corporate purposes.

The Note matures on December 31, 2016, and will bear interest at a fixed rate of 12% per annum.  The Note will be secured by all of the Company's present and subsequently acquired property and assets and shall be subordinated to certain defined senior indebtedness.  In connection with the Note, the Lender will also be issued 7,776,000 warrants to purchase Common Shares of the Company with an exercise price of $0.085 per Common Share ("Warrants").  The Warrants will expire on December 31, 2016.  The Note, the Warrants, and any common shares issued upon conversion of the Note or exercise of the Warrants shall be subject to a hold period until June 24, 2015.

The Note allows the Lender a one-time option to convert all or part of the Principal Amount into a standby commitment for a rights offering or participation in a similar equity offering by the Company, raising minimum aggregate gross proceeds of $4 million (the "Offering") that is undertaken by the Company within 150 days from the date of the advance (the "Offering Deadline"), at a conversion rate equal to the greater of: i) $0.085 per share; or ii) the price per share at which the equity offering is completed with arms length parties. If there is no Offering as described above, the Note shall thereafter become convertible by the Lender at its option, in whole or in part, at the conversion rate of $0.085 per share for the balance of the term.  In the event that the Lender does not participate in the Offering, the Note will thereafter be non-convertible. 

The issuance of the Note constitutes a "related party transaction" within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101") and Policy 5.9 of the TSXV Corporate Finance Manual, because the Lender is a company controlled by a director and significant shareholder of the Company ("Invested Director"). Accordingly, the Board of Directors of the Company, excluding the Invested Director, approved the issuance of the Note.  MI 61-101 requires a formal valuation and minority shareholder approval for a related party transaction unless an exemption is available. An exemption from the valuation requirement is available to the Company, as no securities of the Company are listed on a specified exchange.  An exemption from the minority shareholder approval is available to the Company, since, at the time the transaction was agreed to, neither the fair market value of the securities to be distributed in the transaction, nor the consideration to be received for those securities, exceeded $2,500,000. The Company expects to release a material change report including details with respect to the related party transaction less than 21 days prior to the issuance of the Note, which the Company deemed reasonable in the circumstances so as to be able to avail itself of the financing opportunity and complete the Note issuance in an expeditious manner.

The financial statements and MD&A will be available at www.nightingalemd.com and filed on www.sedar.com on February 24, 2015.  This press release should be read in conjunction with Nightingale's Consolidated Financial Statements and the accompanying Management Discussion and Analysis for the year ended March 31, 2014.

Non-IFRS Financial Measures
The Company internally measures its performance and results of initiatives through a number of measures that are not recognized under IFRS and may not be comparable to similar measures used by other companies. 

1. Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure that management believes is a useful measurement to evaluate the performance of the Company. Investors should be cautioned, however, that Adjusted EBITDA should not be construed as an alternative to net earnings as determined in accordance with IFRS. The Company's method of calculating Adjusted 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.

Adjusted EBITDA is defined as earnings before other loss (income), interest, income taxes, depreciation, amortization, stock-based compensation, and business acquisition, integration and other costs. 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 Adjusted EBITDA to Loss and Comprehensive Loss: 





 Three Months Ended 


 Nine Months Ended 





 Dec 31, 2014 


 Dec 31, 2013 


 Dec 31, 2014 


 Dec 31, 2013 





$


$


$


$












Loss and Comprehensive Loss

(943,485)


(1,403,797)


(1,348,506)


(2,428,903)

Adjustments for









Current Tax Expense

672


236


27,471


64,740


Other Income (Loss)

105,673


125,737


109,669


341,466


Interest

311,317


337,590


536,877


671,948


Depreciation and Amortization

380,436


366,964


1,149,918


1,128,918


Stock-Based Compensation

24,248


26,836


67,168


78,112


Other financing gain (loss)

(58,764)


686,607


(74,806)


681,140

Adjusted EBITDA

(179,903)


140,173


467,791


537,421












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 IFRS.  Recurring revenue is comprised of utilization fees, hosting, support and maintenance revenue, data management and transcription services and transactional fees.  Non-recurring revenue is comprised of revenues generated from sales of perpetual software and systems licenses and related training, data conversion and installation services. 

The following provides a reconciliation of recurring revenue and non-recurring revenue to total revenue:





 Three Months Ended 


 Nine Months Ended 





 Dec 31, 2014 


 Dec 31, 2013 


 Dec 31, 2014 


 Dec 31, 2013 





$


$


$


$












Non-Recurring Revenue

364,419


1,002,674


2,006,804


3,133,386

Recurring Revenue

2,972,844


2,797,823


8,728,788


8,195,055





3,337,263


3,800,497


10,735,592


11,328,441

 

About Nightingale
For more than a decade, Nightingale (TSX-V: NGH) has been delivering innovative cloud-based Electronic Health Record (EHR) and Practice Management solutions to healthcare organizations across the United States and Canada. Our goal is to uncomplicate the day-to-day challenges of healthcare providers. We achieve this by creating software that is truly intuitive—minimizing training and maximizing adoption. We believe so strongly in building easy-to-use software that we structured our entire product team around user-centric design. Our clients are benefiting from this focus through a well-supported and robust solution that presents a holistic view of a person's well-being in a simple, clean interface, so that the best health decisions can be made. Nightingale – One Patient. One Record. 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",  "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", "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 secure customer contracts and the timing of securing such contracts; the ability of Nightingale to complete and successfully integrate its acquisitions on an accretive basis, Nightingale's access to debt and capital facilities, including compliance with current debt arrangements; the existence of present and possible future government regulation; the significant competition that exists in the medical software industry; the early stage of Nightingale's business, and 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. Certain material factors or assumptions applied by management in making forward-looking statements, include without limitation, factors and assumptions regarding future trends in healthcare spending, economic conditions affecting Nightingale and North American economies; Nightingale's ability to continue to fund its business, rates of customer defaults, relationships with, and payments to lenders, 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.

SOURCE Nightingale Informatix Corporation

For further information: David Toews, CFO, Nightingale Informatix Corporation, Tel: 905-943-2600, dtoews@nightingalemd.com

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