Halogen Announces First Quarter 2015 Results

Company delivers record recurring, total and international revenue

OTTAWA, May 7, 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 March 31, 2015. All figures are stated in United States dollars unless otherwise noted.

First Quarter 2015 Financial and Operational Highlights

  • Recurring revenue increased 19% from Q1 2014 to a record $14.4 million, representing 90% of total revenue in the quarter.

  • Total revenue increased 18% from Q1 2014 to a record $15.9 million.

  • Revenue generated in international markets outside Canada and the United States increased 35% over Q1 2014.

  • Deferred revenue rose 21% year-over-year to $32.5 million at quarter end.

  • Net customer adds included a broad set of verticals and geographies, including names such as Hyundai Auto Canada, City of Auburn, South West Community Care Access Centre, Westchester University, Nexia Australia, Oman Oil, Rabobank International London.

  • Dollar retention continued to be more than 100%1 and customer retention of approximately 90%2.

  • Total cash and investments of $43.0 million at March 31, 2015 compared to $44.2 million at December 31, 2014.

  • Commenced a Normal Course Issuer Bid in March to purchase up to a maximum of 600,000 common shares. To date we have purchased and cancelled 67,743 shares for a total of $0.5 million.

  • Received corporate recognition as an employer of choice, for product excellence and for superior customer service delivery.
    • Named one of Canada's Top 100 Small & Medium Employers for 2015;
    • Subsequent to quarter end, recognized with a 2015 Leadership 500 Excellence Award for Company's leadership development program.

"It was a strong start to 2015; we achieved a new quarterly record for recurring and total revenue," said Paul Loucks, Halogen's CEO. "We continue to make investments to increase our global presence in the mid-market for Talent Management solutions. This translated into new customer wins, continued success in cross-selling within our existing client base and industry recognition for product and customer service excellence, in the quarter. We remain confident in our growth prospects for the remainder of the year, both domestic and international."

Financial Review

Halogen's recurring revenue in the first quarter of 2015 was $14.4 million, a 19% increase over Q1 2014. Total revenue increased 18% over Q1 2014 to $15.9 million, driven by growth in the Company's customer base, along with the sale of additional seats and modules to existing customers. In the first quarter of 2015, approximately 79% of revenue was generated from customers located in the United States (79% in Q1 2014), 10% in Canada (11% in Q1 2014) and 11% in international markets (10% in Q1 2014).

Gross margin was $11.8 million, or 74% of total revenue, in the first quarter of 2015, compared to $10.2 million, or 75% of total revenue, in Q1 2014.

Net loss was $4.7 million in the first quarter of 2015 as compared to a loss of $3.0 million in Q1 2014.

Adjusted EBITDA3 was $(0.3) million in Q1 2015 compared to $(1.1) million in Q1 2014; Adjusted EBITDA per share was $(0.01) per share in Q1 2015, compared to $(0.05) per share in Q1 2014. The improved Adjusted EBITDA is mainly due to a positive foreign exchange impact on the Company's Canadian dollar costs. 









Adjusted EBITDA reconciliation




3 months ended Mar. 31,

($000's except per share amounts)




2015


2014

Net income (loss)




$

(4,725)


$

(2,956)

Interest (income) expense and other, net





(29)



(67)

Foreign exchange (gain) loss





3,314



1,069

Income tax expense





26



5

Depreciation and amortization





971



747

Share-based compensation





157



140

Adjusted EBITDA




$

(286)


$

(1,062)

Adjusted EBITDA per share




$

(0.01)


$

(0.05)

Total cash and investments was $43.0 million at March 31, 2015 compared to $44.2 million at December 31, 2014. Deferred revenue was $32.5 million at quarter-end, compared to $26.9 million at March 31, 2014 and $32.8 million at December 31, 2014.

Second Quarter and Full Year 2015 Financial Guidance
For the second quarter of 2015, the Company is expecting:

  • Recurring revenue in the range of $14.5 to $14.7 million
  • Total revenue in the range of $16.0 to $16.2 million

For the full year 2015, the Company reiterates its expectation of:

  • Recurring revenue in the range of $60.0 to $60.8 million
  • Total revenue in the range of $66.9 to $67.7 million

First 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 months ended March 31, 2015 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 first quarter 2015 results today (Thursday, May 7, 2015) 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: 20676523) ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until 12:00 midnight (ET) May 14, 2015 by calling 416-849-0833 or 1-855-859-2056. The conference call will be webcast live at http://bit.ly/1Io2XPf.

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 month periods ended March 31, 2015 and 2014

(in United States dollars, tabular amounts in thousands, except share and per share data)

(Unaudited)










Three Months Ended March 31,





2015


2014










Revenue










Recurring




$

14,372


$

12,088


Professional services





1,536



1,382


License





-



60






15,908



13,530



















Cost of revenue










Recurring





3,127



2,448


Professional services





990



866


License





-



5






4,117



3,319










Gross margin





11,791



10,211










Expenses










Sales and marketing





7,447



6,985


Research and development





3,195



2,783


General and administrative





2,563



2,392


Foreign exchange (gain) loss





3,314



1,069















16,519



13,229










Operating income (loss)





(4,728)



(3,018)










Interest and other income





29



67










Income (loss) before income taxes





(4,699)



(2,951)










Income tax expense (recovery)





26



5










NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)




$

(4,725)


$

(2,956)










Basic and diluted earnings (loss) per share




$

(0.22)


$

(0.14)










Weighted average number of basic and diluted common shares
outstanding





 

21,904,742



 

21,697,907

 

HALOGEN SOFTWARE INC.

Condensed Consolidated Interim Statements of Financial Position

As at March 31, 2015 and December 31, 2014

(in United States dollars, tabular amounts in thousands)

(Unaudited)



















March 31,
2015


December 31,

2014

ASSETS












Current assets













Cash and cash equivalents






$


43,037


$

44,247


Trade receivables (net)








10,181



12,386


Prepaid expenses








2,430



2,234





















55,648



58,867

Non-current assets













Property and equipment








7,432



7,995


Intangible assets








1,884



1,982


Other long-term assets








209



231



















$


65,173


$

69,075













LIABILITIES












Current liabilities













Trade payables and accrued liabilities






$


7,172


$

7,793


Derivative liabilities








2,845



1,025


Deferred revenue








32,476



32,836


Deferred leasehold inducement








341



341





















42,834



41,995

Non-current liabilities













Deferred leasehold inducement








538



623





















43,372



42,618













SHAREHOLDERS' EQUITY
























Share capital








69,770



69,806

Share compensation reserve








1,598



1,443

Retained earnings (deficit)








(49,567)



(44,792)





















21,801



26,457



















$


65,173


$

69,075

























 

HALOGEN SOFTWARE INC.

Condensed Consolidated Interim Statements of Cash Flows

Three month periods ended March 31, 2015 and 2014

(in United States dollars, tabular amounts in thousands)

(Unaudited)










Three Months Ended March 31,





2015


2014










CASH PROVIDED BY (USED IN):


















OPERATING ACTIVITIES


















Net income (loss)




$

(4,725)


$

(2,956)

Items not affecting cash:










Depreciation and amortization





971



747


Share-based compensation





157



140


Unrealized foreign exchange (gain) loss





2,646



1,033


Deferred leasehold inducement





(85)



197

Net changes in non-cash working capital items





978



(1,444)















(58)



(2,283)



















INVESTING ACTIVITIES


















Purchase of property and equipment





(211)



(393)

Purchase of intangible assets





(100)



(52)

Change in other long-term assets





22



-

Maturity of investments





-



4,936

Purchase of investments





(3)



(47)






(292)



4,444










FINANCING ACTIVITIES


















Issuance of share capital





5



40

Repurchasing of share capital





(92)



-

Repayment of long-term debt





-



(40)















(87)



-










Effect of exchange rate changes on cash and cash equivalents





(773)



(7)










INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS





(1,210)



2,154










CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD





44,247



37,405










CASH AND CASH EQUIVALENTS, END OF PERIOD




$

43,037


$

39,559

_____________________________________________________________________

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.

 

SOURCE Halogen Software

Kristen Dickson, T: 1-416-815-0700 ext. 273, Toll Free: 1-800-385-5451 ext. 273, E: ir@halogensoftware.com