Halogen Announces First Quarter 2014 Results

Company delivers record recurring, total and international revenue

  • Company delivers record recurring, total and international revenue

OTTAWA , May 8, 2014 /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 March 31, 2014 . All figures are stated in United States dollars unless otherwise noted.

First Quarter 2014 Financial Highlights

  • Recurring revenue increased 21% from Q1 2013 to a record $12.1 million , representing 89% of total revenue in the quarter.
  • Revenue generated in international markets outside Canada and the United States increased 98% over Q1 2013.
  • Dollar retention continued to be more than 100%1 and customer retention approximately 90%2.
  • Adjusted EBITDA3 was $(1.1) million in Q1 2014 compared to $(0.2) million in Q1 2013; Adjusted EBITDA per share3 was $(0.05) per share in Q1 2014, compared to $(0.02) per share in Q1 2013.
  • Total cash, cash equivalents and investments was $52.5 million at March 31, 2014 compared to $55.9 million at December 31, 2013 .

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Non-IFRS Measures:
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 Calculated as the percentage of customers at the beginning of a 12-month period who remain as 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.

"It was a solid start to 2014, with record total and recurring revenue and a 98% increase in international sales," said Paul Loucks, Halogen's CEO. "In the first quarter, we increased our sales and marketing team by nearly 25% and we plan to expand both domestically and internationally this year to acquire new customers and fuel future recurring revenue growth. We are also expanding our account management team to maintain our strong customer retention and to increase sales back to customers. There is a significant untapped market for Talent Management solutions among global mid-sized organizations, and we are well positioned to capture this opportunity."

Financial Review

Halogen's recurring revenue in the first quarter of 2014 was $12.1 million , a 21% increase over Q1 2013. Total revenue increased 17% over Q1 2013 to $13.5 million , driven by the increase in the Company's customer base, along with the sale of additional seats and modules to existing customers. In the first quarter of 2014, approximately 79% of revenue was generated from customers located in the United States (82% in Q1 2013), 11% in Canada (12% in Q1 2013) and 10% in international markets (6% in Q1 2013).

Gross margin was $10.2 million , or 75% of total revenue, in the first quarter of 2014, compared to $8.9 million , or 76% of total revenue, in Q1 2013.

Net loss decreased to $3.0 million in the first quarter of 2014 versus a loss of $7.3 million in Q1 2013. The primary driver for the improvement was the elimination of the fair value adjustment to the Company's redeemable preferred shares, which was $nil in the first quarter of 2014 and $6.1 million in the same period of 2013.

Adjusted EBITDA reconciliation 3 months ended March 31,
($000's except per share amounts) 2014 2013
Net income (loss) $ (2,956) $ (7,306)
Interest (income) expense and other, net (67) (19)
Foreign exchange (gain) loss 1,069 402
Income tax expense 5 13
Depreciation and amortization 747 524
Share-based compensation 140 52
Loss related to change in fair market value of redeemable preferred shares - 6,099
Adjusted EBITDA $ (1,062) $ (235)
Adjusted EBITDA per share $ (0.05) $ (0.02)

Cash and investments was $52.5 million at March 31, 2014 compared to $55.9 million at December 31, 2013 . Deferred revenue was $26.9 million at quarter-end compared to $22.7 million a year earlier.

Second Quarter and Full Year 2014 Financial Guidance

For the second quarter of 2014, the Company is expecting:

  • Recurring revenue in the range of $12.2 to $12.4 million
  • Total revenue in the range of $13.6 to $13.8 million

For the full year 2014, the Company reiterated its guidance:

  • Recurring revenue in the range of $50.3 to $51.3 million
  • Total revenue in the range of $56.8 to $57.8 million

2014 First 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 months ended March 31, 2014 will be available on SEDAR (www.sedar.com) and on the Halogen website.

Conference Call and Webcast
Halogen will hold a conference call to discuss its fiscal 2014 first quarter results today ( Thursday, May 8, 2014 ) 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: 30838258) ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until 12:00 midnight (ET) Thursday, May 15, 2014 by calling 416-849-0833 or 1-855-859-2056). The conference call will be webcast live at http://www.newswire.ca/en/webcast/detail/1338959/1480125.

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 nearly 2,000 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 Interim Statements of Operations and Comprehensive Income (Loss)
Three month periods ended March 31, 2014 and 2013
(in United States dollars, tabular amounts in thousands, except share and per share data)
(Unaudited)
Three Months Ended March 31,
2014 2013
Revenue
Recurring $ 12,088 $ 10,007
Professional services 1,382 1,283
License 60 296
13,530 11,586
Cost of revenue
Recurring 2,448 1,955
Professional services 866 776
License 5 4
3,319 2,735
Gross margin 10,211 8,851
Expenses
Sales and marketing 6,985 5,362
Research and development 2,783 2,382
General and administrative 2,392 1,918
Foreign exchange (gain) loss 1,069 402
13,229 10,064
Operating income (loss) (3,018) (1,213)
Loss related to change in fair value of redeemable
preferred shares
- (6,099)
Interest and other income 67 22
Interest expense - (3)
Income (loss) before income taxes (2,951) (7,293)
Income tax expense (recovery) 5 13
NET INCOME (LOSS) AND COMPREHENSIVE
INCOME (LOSS)
$ (2,956) $ (7,306)
Basic and diluted earnings (loss) per share $ (0.14) $ (0.60)
Weighted average number of basic and diluted
common shares outstanding
21,697,907 12,222,602

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Financial Position
As at March 31, 2014 and December 31, 2013
(in United States dollars, tabular amounts in thousands)
(Unaudited)
March 31,
2014
December 31,
2013
ASSETS
Current assets
Cash and cash equivalents $ 39,559 $ 37,405
Short-term investments 12,909 18,509
Trade receivables (net) 8,686 9,408
Investment tax credits receivable 127 127
Prepaid expenses 2,187 1,834
63,468 67,283
Non-current assets
Property and equipment 5,652 5,783
Intangible assets 1,677 1,847
$ 70,797 $ 74,913
LIABILITIES
Current liabilities
Trade payables and accrued liabilities $ 4,651 $ 6,345
Derivative liabilities 336 16
Deferred revenue 26,907 27,031
Deferred leasehold inducement 222 158
Current portion of long-term debt 13 52
32,129 33,602
Non-current liabilities
Deferred leasehold inducement 562 429
32,691 34,031
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital 69,564 69,512
Share compensation reserve 906 778
Retained earnings (deficit) (32,364) (29,408)
38,106 40,882
$ 70,797 $ 74,913

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Cash Flows
Three month periods ended March 31, 2014 and 2013
(in United States dollars, tabular amounts in thousands)
(Unaudited)
Three Months Ended March 31,
2014 2013
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss) $ (2,956) $ (7,306)
Items not affecting cash:
Depreciation and amortization 747 524
Loss related to change in fair value of redeemable preferred shares - 6,099
Share-based compensation 140 52
Unrealized foreign exchange (gain) loss 1,033 376
Deferred leasehold inducement 197 (47)
Net changes in non-cash working capital items (1,444) (110)
(2,283) (412)
INVESTING ACTIVITIES
Purchase of property and equipment (393) (72)
Purchase of intangible assets (52) (197)
Maturity of investments 4,936 1,777
Purchase of investments (47) (17)
4,444 1,491
FINANCING ACTIVITIES
Issuance of share capital 40 36
Repayment of long-term debt (40) (47)
- (11)
Effect of exchange rate changes on cash and cash equivalents (7) (34)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,154 1,034
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 37,405 3,683
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 39,559 $ 4,717


SOURCE Halogen Software

Craig Armitage
T: 1-416-815-0700 ext. 278
Toll Free: 1-800-385-5451 ext. 278
E: ir@halogensoftware.com