Halogen Announces Fourth Quarter and Full Year 2014 Results

 

OTTAWA, Feb. 19, 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 and 12 months ended December 31, 2014. All figures are stated in United States dollars unless otherwise noted.

Fourth Quarter 2014 Financial Highlights

  • Recurring revenue increased 21% from Q4 2013 to a record $13.6 million, representing 90% of total revenue in the quarter.
  • Total revenue increased 20% from Q4 2013 to a record $15.1 million.
  • Deferred revenue rose 21% (compared to 18% a year ago) to a record $32.8 million at quarter end.
  • Net customer adds reached an all time high and included a broad set of verticals and geographies, including names such as AMLAK Qatar Properties Holding Co., Carleton University, City of Columbus (Ohio), Nidec Motor Corporation, Orthopaedics-Indianapolis, Inc., Tiger Financial Management LLC, Shelf Drilling, Structural Group, Inc., and Woodbine Entertainment Group.
  • Dollar retention continued to be more than 100%1 and customer retention of approximately 90%2.

Full Year 2014 Financial Highlights

  • Recurring revenue increased 21% from 2013 to a record $50.8 million, representing 90% of total revenue in the year.
  • Total revenue increased 18% over 2013 to a record $56.7 million.
  • Revenue generated in international markets outside Canada and the United States increased 64% over 2013.

"In 2014, we invested aggressively in sales and marketing, both domestically and internationally, to grow our customer base and market share in the mid-market for Talent Management solutions," said Paul Loucks, Halogen's President and CEO. "Our 2014 results, in particular a very strong fourth quarter, show these investments are starting to pay off. Our year end deferred revenue rose 21% even with a currency headwind. Moreover, it was our best quarter ever in terms of net customer adds."

Mr. Loucks added, "It was an exciting year on the product front, as Halogen 1:1 Exchange won HR Product of the Year and we were again recognized by top industry analysts as a leader in the talent management space. We also introduced several new, high-value service offerings, which help our customers build world-class workforces, enhance our customers' success and increase our competitive differentiation, while supporting our objectives of increased dollar and customer retention. In addition, we're very pleased with our progress on our customer retention initiatives and with the impact of our cross-selling activities, which have driven gains in our dollar retention.

Looking ahead, we enter fiscal 2015 with excellent momentum and a growing pipeline. We expect continued strong organic growth and are focused on continuing to invest both in domestic and international markets."

Financial Review

Halogen's recurring revenue in the fourth quarter of 2014 was $13.6 million, a 21% increase over Q4 2013. Total revenue increased 20% over Q4 2013 to $15.1 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 fourth quarter of 2014, approximately 78% of revenue was generated from customers located in the United States (79% in Q4 2013), 10% in Canada (11% in Q4 2013) and 12% in international markets (10% in Q4 2013).

Gross margin was $10.7 million, or 71% of total revenue, in the fourth quarter of 2014, compared to $9.6 million, or 76% of total revenue, in Q4 2013.

Adjusted EBITDA3 was $(2.6) million in Q4 2014 compared to $(0.6) million in Q4 2013; Adjusted EBITDA per share was $(0.12) per share in Q4 2014, compared to $(0.03) per share in Q4 2013. The lower Adjusted EBITDA is mainly due to higher headcount as the Company continues to make significant growth investments, particularly in sales and marketing, both domestically and internationally.

Net loss was $4.9 million in the fourth quarter of 2014 as compared to a loss of $2.1 million in Q4 2013.

Adjusted EBITDA reconciliation
3 months ended Dec. 31, 12 months ended Dec. 31,
($000's except per share amounts) 2014 2013 2014 2013
Net income (loss) $ (4,871) $ (2,066) $ (15,384) $ (12,820)
Interest (income) expense and other, net (43) (72) (229) (210)
Foreign exchange (gain) loss 1,134 777 2,742 1,390
Income tax expense 36 35 113 74
Depreciation and amortization 959 629 3,314 2,281
Share-based compensation 178 118 739 398
Loss related to change in fair market value of redeemable preferred shares - - - 6,434
Adjusted EBITDA $ (2,607) $ (579) $ (8,705) $ (2,453)
Adjusted EBITDA per share $ (0.12) $ (0.03) $ (0.40) $ (0.14)

Cash and investments was $44.2 million at December 31, 2014 compared to $55.9 million at December 31, 2013. Deferred revenue was $32.8 million at quarter-end compared to $27.0 million a year earlier.

First Quarter and Full Year 2015 Financial Guidance

For the first quarter of 2015, the Company is expecting:

  • Recurring revenue in the range of $14.2 to $14.4 million
  • Total revenue in the range of $15.7 to $15.9 million

For the full year 2015, the Company is expecting:

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

2014 Financial Statements and Management's Discussion and Analysis
Halogen's Management's Discussion and Analysis and Consolidated Financial Statements for the year ended December 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 fourth quarter results today (Thursday, February 19, 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: 63155891) ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until 12:00 midnight (ET) February 26, 2015 by calling 416-849-0833 or 1-855-859-2056). The conference call will be webcast live at http://bit.ly/1wsR0Be.

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 approximately 2150 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.

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)
Three and twelve month periods ended December 31, 2014 and 2013
(in United States dollars, tabular amounts in thousands, except share and per share data)
(Unaudited)

Three Months Ended
December 31,
Twelve Months Ended
December 31,
2014 2013 2014 2013
Revenue
Recurring $ 13,592 $ 11,236 $ 50,771 $ 42,067
Professional services 1,498 1,255 5,828 5,245
License - 118 60 672
15,090 12,609 56,659 47,984
Cost of revenue
Recurring 3,145 2,264 11,544 8,342
Professional services 1,199 750 4,404 3,723
License - 5 14 23
4,344 3,019 15,962 12,088
Gross margin 10,746 9,590 40,697 35,896
Expenses
Sales and marketing 8,450 5,963 30,330 22,248
Research and development 3,034 2,486 12,191 9,955
General and administrative 3,006 2,467 10,934 8,825
Foreign exchange (gain) loss 1,134 777 2,742 1,390
15,624 11,693 56,197 42,418
Operating income (loss) (4,878) (2,103) (15,500) (6,522)
Loss related to change in fair value of redeemable preferred shares - - - (6,434)
Interest and other income 43 72 229 217
Interest expense - - - (7)
Income (loss) before income taxes (4,835) (2,031) (15,271) (12,746)
Income tax expense (recovery) 36 35 113 74
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) $ (4,871) $ (2,066) $ (15,384) $ (12,820)
Basic and diluted earnings (loss) per share $ (0.22) $ (0.10) $ (0.71) $ (0.71)
Weighted average number of basic and diluted common shares outstanding 21,897,707 21,636,960 21,799,313 18,064,447

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Financial Position
As at December 31, 2014 and December 31, 2013
(in United States dollars, tabular amounts in thousands)
(Unaudited)

December 31,
2014
December 31,
2013
ASSETS
Current assets
Cash and cash equivalents $ 44,247 $ 37,405
Short-term investments - 18,509
Trade receivables (net) 12,386 9,408
Investment tax credits receivable - 127
Prepaid expenses 2,234 1,834
58,867 67,283
Non-current assets
Property and equipment 7,995 5,783
Intangible assets 1,982 1,847
Other long-term assets 231 -
$ 69,075 $ 74,913
LIABILITIES
Current liabilities
Trade payables and accrued liabilities $ 7,793 $ 6,345
Derivative liabilities 1,025 16
Deferred revenue 32,836 27,031
Deferred leasehold inducement 341 158
Current portion of long-term debt - 52
41,995 33,602
Non-current liabilities
Deferred leasehold inducement 623 429
42,618 34,031
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital 69,806 69,512
Share compensation reserve 1,443 778
Retained earnings (deficit) (44,792) (29,408)
26,457 40,882
$ 69,075 $ 74,913

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Cash Flows
Three and twelve month periods ended December 31, 2014 and 2013
(in United States dollars, tabular amounts in thousands)
(Unaudited)

Three Months Ended
December 31,
Twelve Months Ended
December 31,
2014 2013 2014 2013
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss) $ (4,871) $ (2,066) $ (15,384) $ (12,820)
Items not affecting cash:
Depreciation and amortization 959 629 3,314 2,281
Loss related to change in fair value of redeemable preferred shares - - - 6,434
Share-based compensation 178 118 739 398
Unrealized foreign exchange (gain) loss 848 513 2,232 1,084
Deferred leasehold inducement 291 (12) 377 176
Net changes in non-cash working capital items 1,390 1,849 3,983 4,084
(1,205) 1,031 (4,739) 1,637
INVESTING ACTIVITIES
Purchase of property and equipment (998) (2,440) (4,753) (4,297)
Purchase of intangible assets (9) (181) (908) (1,120)
Change in other long-term assets 49 - (231) -
Maturity of investments 6,100 5,794 17,952 9,600
Purchase of investments (64) (5,814) (206) (23,444)
5,078 (2,641) 11,854 (19,261)
FINANCING ACTIVITIES
Issuance of share capital 6 50 220 56,992
Issuance costs of share capital - - - (4,935)
Repayment of long-term debt - (40) (53) (168)
6 10 167 51,889
Effect of exchange rate changes on cash and cash equivalents (396) (16) (440) (543)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,483 (1,616) 6,842 33,722
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
40,764 39,021 37,405 3,683
CASH AND CASH EQUIVALENTS,
END OF PERIOD
$ 44,247 $ 37,405 $ 44,247 $ 37,405

_________________________________________________________

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

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