Halogen Announces Fourth Quarter and Full Year 2013 Results

February 20, 2014
  • Highlights include record recurring, total and international revenue
  • Record number of new customer wins; customer count increased to nearly 2,000

OTTAWA, Feb. 20, 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 and twelve months ended December 31, 2013. All figures are stated in United States dollars unless otherwise noted.

Fourth Quarter 2013 Financial Highlights

  • Recurring revenue increased 28% from Q4 2012 to a record $11.2 million, representing 89% of total revenue in the quarter.
  • Total revenue increased 24% from Q4 2012 to a record $12.6 million.
  • Revenue generated in international markets outside Canada and the United States increased a record 99% over Q4 2012.
  • Adjusted EBITDA1 was $(0.6) million in Q4 2013 compared to $(1.2) million in Q4 2012; Adjusted EBITDA per share1 was $(0.03) per share in Q4 2013, compared to $(0.10) per share in Q4 2012.
  • Total cash, cash equivalents and investments was $55.9 million at December 31, 2013 compared to $8.9 million at December 31, 2012.

Full Year 2013 Financial and Operating Highlights

  • Recurring revenue increased 29% from 2012 to a record $42.1 million, representing 88% of total revenue in the year.
  • Total revenue increased 26% from 2012 to a record $48.0 million.
  • Revenue generated in international markets outside Canada and the United States increased 71% over 2012.
  • Adjusted EBITDA1 was $(2.5) million in fiscal 2013 versus $(3.5) million in fiscal 2012; Adjusted EBITDA per share1 was $(0.14) per share in fiscal 2013, versus $(0.29) per share in fiscal 2012.
1 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.

"Fiscal 2013 was a transformational year for our business," said Paul Loucks, Halogen's CEO. "We completed our highly successful IPO in May to strengthen our balance sheet and provide us with the resources to fund our growth plans. Throughout the year, we made good progress on a number of operational initiatives. We expanded our product offering with new modules and partnerships, and we continued our push into international markets with the expansion of our office in Australia. We grew recurring revenue as a share of total revenue. We had a record year in recurring and total revenue and record new customer wins. Q4 continued the new customer acquisition strength with record new customers selecting Halogen. Looking ahead to fiscal 2014, we are expecting continued strong organic growth. We are focused on investing in both domestic and international markets in order to grow our customer base and market share in the mid-market for Talent Management solutions."

Financial Review

Halogen's recurring revenue in the fourth quarter of 2013 was $11.2 million, a 28% increase over Q4 2012. Total revenue increased 24% over Q4 2012, driven by increases in recurring revenue and professional services revenue. In the fourth quarter of 2013, approximately 79% of revenue was generated from customers located in the United States (82% in Q4 2012), 11% in Canada (12% in Q4 2012) and 10% in international markets (6% in Q4 2012).

Gross margin was $9.6 million, or 76% of total revenue, in the fourth quarter of 2013, compared to $7.4 million, or 73% of total revenue, in Q4 2012.

Net loss was $2.1 million in the fourth quarter of 2013 versus a loss of $6.4 million in Q4 2012. The decreased loss was primarily due to a $4.6 million loss related to change in the fair value of the Company's redeemable preferred shares in Q4 2012 versus $nil in the fourth quarter of 2013. With the conversion of the preferred shares to common shares in the second quarter of 2013 the Company no longer incurs this expense.

Adjusted EBITDA reconciliation Three months ended
December 31,
Twelve months ended
December 31,
($000's except per share amounts) 2013 2012 2013 2012
Net income (loss)    $ (2,066)    $ (6,351)    $ (12,820)    $ (19,578)
Interest (income) expense and other, net (72) (25) (210) (100)
Foreign exchange (gain) loss 777 51 1,390 (380)
Income tax expense 35 - 74 5
Depreciation and amortization 629 524 2,281 2,007
Share-based compensation 118 52 398 189
Loss related to change in fair market value of
redeemable preferred shares
- 4,569 6,434 14,329
Adjusted EBITDA $ (579) $ (1,180) $ (2,453) $ (3,528)
Adjusted EBITDA per share $ (0.03) $ (0.10) $ (0.14) $ (0.29)

Cash and investments increased from $8.9 million at December 31, 2012 to $55.9 million at December 31, 2013, primarily due to proceeds from the issuance of 5.1 million common shares as part of the Company's initial public offering.

Deferred revenue was $27.0 million at December 31, 2013 compared to $22.9 million a year earlier. This 18% increase is primarily attributed to new business generated during the last 12 months from new and existing customers.

First Quarter and Full Year 2014 Financial Guidance
For the first quarter of 2014, the Company is expecting:

  • Recurring revenue in the range of $11.9 to $12.1 million
  • Total revenue in the range of $13.4 to $13.6 million

For the full year 2014, the Company is expecting:

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

2013 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, 2013 will be available on SEDAR (www.sedar.com) and on the Halogen website at http://ir.halogensoftware.com.

Conference Call and Webcast
Halogen will hold a conference call to discuss its fiscal 2013 fourth quarter results today (Thursday, February 20, 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: 51779217) 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, February 27, 2014 by calling 416-849-0833  or 1-855-859-2056, (Conference ID: 51779217). The conference call will be webcast live at http://bit.ly/1jYkEtw.

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 Statements of Operations and Comprehensive Income (Loss)
Three and twelve month periods ended December 31, 2013 and 2012
(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,
        2013         2012           2013           2012
                   
Revenue                  
  Recurring $ 11,236   $ 8,810     $ 42,067     $ 32,661
  Professional services             1,255               1,162           5,245           4,517
  License             118               219           672           825
              12,609               10,191           47,984           38,008
                   
Cost of revenue                  
  Recurring             2,264               1,893           8,342           7,199
  Professional services             750               813           3,723           3,404
  License             5               8           23           19
              3,019              2,714             12,088          10,622
Gross margin             9,590               7,477           35,896           27,381
                   
Expenses                  
  Sales and marketing             5,963               5,140           22,248           18,515
  Research and development             2,486               2,123           9,955           7,759
  General and administrative             2,467               1,970           8,825           6,831
  Foreign exchange (gain) loss             777               51           1,390           (380)
              11,693               9,284           42,418           32,725
Operating income (loss)             (2,103)              (1,807)           (6,522)           (5,344)
Loss related to change in fair value of
     redeemable preferred shares
            —               (4,569)           (6,434)           (14,329)
Interest income (expense)             72               25           210           100
Income (loss) before income taxes             (2,031)               (6,351)           (12,746)           (19,573)
Income tax expense (recovery)             35               —           74           5
                       
NET INCOME (LOSS) AND
     COMPREHENSIVE INCOME (LOSS)
$ (2,066)   $ (6,351)     $ (12,820)     $ (19,578)
Basic and diluted earnings (loss) per share $ (0.10)   $ (0.52)     $ (0.71)     $ (1.61)
                   
Weighted average number of basic and diluted
     common shares outstanding
      21,636,960        12,188,283          18,064,447           12,145,730


HALOGEN SOFTWARE INC.
Condensed Consolidated Statements of Financial Position
As at December 31, 2013 and 2012
(in United States dollars, tabular amounts in thousands)
(Unaudited)          
     
  December 31,
2013
December 31,
2012
           
ASSETS          
Current assets          
  Cash and cash equivalents $ 37,405       $ 3,683
  Short-term investments       18,509             5,210
  Trade receivables (net)       9,408             6,961
  Investment tax credits receivable       127             1,206
  Prepaid expenses       1,834             1,198
        67,283             18,258
           
Non-current assets          
  Property and equipment       5,783             3,091
  Intangible assets       1,847             1,403
  $ 74,913       $ 22,752
           
LIABILITIES          
Current liabilities          
  Trade payables and accrued liabilities $ 6,345       $ 4,360
  Derivative liabilities       16             8
  Deferred revenue       27,031             22,931
  Deferred leasehold inducement       158             180
  Current portion of long-term debt       52             173
        33,602             27,652
           
Non-current liabilities          
  Deferred leasehold inducement       429             231
  Redeemable preferred shares                    40,996
  Long-term debt                    56
        34,031             68,935
           
SHAREHOLDERS' EQUITY (DEFICIENCY)          
           
Share capital       69,512             2,301
Share compensation reserve       778             418
Retained earnings (deficit)       (29,408)             (48,902)
        40,882             (46,183)
  $ 74,913       $ 22,752


HALOGEN SOFTWARE INC.
Condensed Consolidated Statements of Cash Flows
Three and twelve month periods ended December 31, 2013 and 2012
(in United States dollars, tabular amounts in thousands)
(Unaudited)                              
                               
  Three Months Ended December 31, Twelve Months Ended December 31,
  2013 2012 2013 2012
                       
CASH PROVIDED BY (USED IN):                      
                       
OPERATING ACTIVITIES                      
Net income (loss) $ (2,066)     $ (6,352)   $   (12,820)     $ (19,578)
Items not affecting cash:                    
  Depreciation and amortization             629                 524                 2,281                 2,007
  Loss related to change in fair value of redeemable
   preferred shares
            —                 4,569                 6,434                14,329
  Share-based compensation             118                 52                 398                 189
  Unrealized foreign exchange (gain) loss             512                 (19)                 1,084                 (34)
  Deferred leasehold inducement             (11)                 (46)                 176                 (79)
Net changes in non-cash working capital items             1,848                 2,079                 4,084                 4,495
              1,031                 807                 1,637                1,329
                     
INVESTING ACTIVITIES                    
Purchase of property and equipment             (2,440)                 (407)                 (4,297)               (1,853)
Purchase of intangible assets             (181)                 (610)                 (1,120)               (905)
Maturity of investments             5,794                 4,173                 9,600                6,387
Purchase of investments             (5,814)                (2,254)                (23,444)               (4,933)
              (2,641)                 902                (19,261)               (1,304)
                     
FINANCING ACTIVITIES                    
Issuance of share capital             50                 9                56,992                29
Issuance costs of share capital             —                 —                (4,935)                 —
Repayment of long-term debt             (40)                 (56)                (168)               (460)
              (10)                 (47)                51,889               (431)
Effect of exchange rate changes on cash and cash
    equivalents
            (16)                 2                 (543)                 8
                     
INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS
            (1,616)                 1,664                 33,722                 (398)
CASH AND CASH EQUIVALENTS, BEGINNING OF
    PERIOD
            39,021                 2,019                3,683                 4,081
CASH AND CASH EQUIVALENTS,
    END OF PERIOD
$ 37,405     $ 3,683     $ 37,405     $ 3,683
                     

SOURCE Halogen Software


Aaron Kabucis, CFA
T: 1-416-815-0700 ext. 230
Toll Free: 1-800-385-5451 ext. 230
E: ir@halogensoftware.com

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