Halogen Announces First Quarter 2016 Results

Total revenue growth of 11%, including 13% recurring revenue growth

Adjusted EBITDA of $0.9 million

OTTAWA, May 5, 2016 /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, 2016. All figures are stated in United States dollars unless otherwise noted.

First Quarter 2016 Financial and Operational Highlights:

• Recurring revenue increased 13% from Q1 2015 to $16.2 million, representing 92% of total revenue in the quarter.
• Total revenue increased 11% from Q1 2015 to $17.7 million.
• Deferred revenue rose 13% year-over-year to $36.8 million.
• Adjusted EBITDA of $0.9¹ million compared with $(3.6) million in Q1 2015.
• Dollar retention continued to be greater than 100%².
• Entered into a strategic talent acquisition partnership with Jobvite to integrate, market and resell the Jobvite Platform with the Halogen TalentSpace™ suite, branded Halogen Talent Acquisition™ Powered by Jobvite.
• Began selling Halogen TalentSpace Connect™, based on the Dell-Boomi platform partnership, to provide seamless data synchronization between Halogen solutions and customer HRIS systems.
• Released version 16.0 of the Halogen TalentSpace suite, including enhancements to its performance management, learning and job description solutions as well as product platform improvements to support ongoing partner integration.
• Named Category Leader for the Talent Management solutions market segment in the "2015/2016 Best in KLAS: Software & Services" report, published by leading healthcare research firm KLAS for the second consecutive year.
• Received corporate recognition as an employer of choice by Canada's Top 100 Employers program including Top Employer for Young People, a National Capital Region Top Employer, and one of Canada's Top 100 Small & Medium Employers for 2016.
• The addition of key customers across all regions and strategic verticals including healthcare organizations like Wakemed Health and Sanford Health in North America; financial services firms such as Mother Lode Holdings and Thinking Capital in North America; public sector organizations such as Arkansas State Highway and Transportation Department, The City of Vaughan in North America and National Fostering Agency in the UK; professional services firms like Wiggin LLP in the UK, Delta Partners in the UAE, and Bonadio in North America; educational institutions like EduCo International Group in Australia, and Ohio State University; and manufacturing firms like Mayne Pharma in Australia, Tatweer Petroleum in Bahrain and Infinite Energy in North America.
• Commenced a normal course issuer bid to purchase up to a maximum of 1,249,792 of Halogen common shares through March 13, 2017. In the first quarter of 2016, Halogen purchased and cancelled 244,700 shares for approximately $1.3 million under the current and previous normal course issuer bid, which expired on March 12, 2016.

"It was a solid start to the year, as we delivered total and recurring revenue above our guidance range as well as strong adjusted EBITDA", said Les Rechan, Halogen's CEO. "We saw good momentum in support of our strategic initiatives in Q1 including: increasing our product suite capabilities to enable next generation performance for our customers, good inroads on partner expansion with Dell Boomi and Jobvite, and a renewed focus on aligning our business to customer outcomes."

Financial Review

Halogen's recurring revenue in the first quarter of 2016 was $16.2 million, a 13% increase over Q1 2015. Total revenue increased 11% over Q1 2015 to $17.7 million, driven by new customer additions, and the expansion of seats and modules to existing customers. In the first quarter of 2016, approximately 81% of revenue was generated from customers located in the United States (79% in Q1 2015), 8% in Canada (10% in Q1 2015) and 11% in international markets (11% in Q1 2015).

Gross margin was $13.3 million, or 75% of total revenue, in the first quarter of 2016, compared to $11.8 million, or 74% of total revenue, in Q1 2015.

Net loss was $56,000 in the first quarter of 2016 compared to a loss of $4.7 million in Q1 2015. Adjusted EBITDA was $0.9 million in Q1 2016 compared to $(3.6) million in Q1 2015; Adjusted EBITDA per share was $0.04 in Q1 2016, compared to $(0.16) per share in Q1 2015.  

Adjusted EBITDA reconciliation^3	3 months ended Mar. 31,
($000's except per share amounts)	2016		2015
Net income (loss)	$	(56)	$	(4,725)
Interest (income) expense and other, net	(15)		(29)
Current tax expense (recovery)	56		26
Deferred tax expense (recovery)	(378)		-
Depreciation and amortization	999		971
Share-based compensation	321		157
Adjusted EBITDA	$	927	$	(3,600)
Adjusted EBITDA per share	$	0.04	$	(0.16)

Total cash and investments was $34.9 million at March 31, 2016 compared to $36.1 million at December 31, 2015. Deferred revenue was $36.8 million at quarter-end, compared to $36.9 million at December 31, 2015 and $32.5 million at March 31, 2015.

Second Quarter and Full Year 2016 Financial Guidance

For the second quarter of 2016, the Company is expecting:

• Recurring revenue in the range of $16.3 to $16.5 million
• Total revenue in the range of $17.8 to $18.0 million

For the full year 2016, the Company reiterates its expectation of:

• Recurring revenue in the range of $66.1 to $67.1 million
• Total revenue in the range of $72.6 to $73.6 million

For the full year 2016, the Company is increasing its expectation of:

• Adjusted EBITDA in the range of $1.5 to $2.0 million

First Quarter 2016 Financial Statements and Management's Discussion and Analysis
Halogen's Management's Discussion and Analysis and Consolidated Financial Statements for the three months ended March 31, 2016 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 first quarter 2016 results today (Thursday, May 5, 2016) at 5:00 p.m. (ET). The call will be hosted by Les Rechan, President and CEO, and Pete Low, CFO.  To participate in the call, please dial 647-427-7450 or 1-888-231-8191 (Conference ID: 86813875) ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until 11:59 p.m. (ET) on May 12, 2016 by calling 416-849-0833 or 1-855-859-2056. The conference call will be webcast live at http://bit.ly/1RWRtbD.

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, 2016 and 2015
(in United States dollars, tabular amounts in thousands, except share and per share data)
(Unaudited)

		Three Months Ended March 31,
		2016			2015
Revenue
	Recurring	$	16,177		$	14,372
	Professional services	1,484			1,536
		17,661			15,908
Cost of revenue
	Recurring	3,126			3,127
	Professional services	1,212			990
		4,338			4,117
Gross margin		13,323			11,791
Expenses
	Sales and marketing	8,085			7,447
	Research and development	3,159			3,195
	General and administrative	2,550			2,563
	Foreign exchange (gain) loss	(78)			3,314
		13,716			16,519
Operating income (loss)		(393)			(4,728)
Interest and other income		15			29
Income (loss) before income taxes		(378)			(4,699)
Current tax expense (recovery)		56			26
Deferred tax expense (recovery)		(378)			-
NET INCOME (LOSS)		$	(56)		$	(4,725)
Basic and diluted earnings (loss) per share		$	-		$	(0.22)
Weighted average number of basic and diluted common shares outstanding		21,813,860			21,904,742
		Three Months Ended March 31,
		2016			2015
NET INCOME (LOSS)		$	(56)		$	(4,725)
Deferred gain (loss) on cash flow hedges, net of deferred tax of $378 (2015 - $Nil)		1,050			-
COMPREHENSIVE INCOME (LOSS)		$	994		$	(4,725)

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Financial Position
As at March 31, 2016 and December 31, 2015
(in United States dollars, tabular amounts in thousands)
(Unaudited)

		March 31,  2016			December 31,  2015
ASSETS
Current assets
	Cash and cash equivalents	$	34,903		$	36,133
	Trade receivables (net)	10,358			12,458
	Prepaid expenses	2,170			1,912
		47,431			50,503
Non-current assets
	Property and equipment	6,232			6,806
	Intangible assets	2,171			2,287
	Other long-term assets	548			329
		$	56,382		$	59,925
LIABILITIES
Current liabilities
	Trade payables and accrued liabilities	$	7,220		$	8,204
	Derivative liabilities	214			2,632
	Deferred revenue	36,797			36,922
	Deferred leasehold inducement	329			339
		44,560			48,097
Non-current liabilities
	Deferred leasehold inducement	209			289
		44,769			48,386
SHAREHOLDERS' EQUITY
Share capital		68,954			69,663
Share compensation reserve		1,624			1,330
Cash flow hedge reserve		1,050			-
Retained earnings (deficit)		(60,015)			(59,454)
		11,613			11,539
		$	56,382		$	59,925

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Cash Flows
Three month periods ended March 31, 2016 and 2015
(in United States dollars, tabular amounts in thousands)
(Unaudited)

			Three Months Ended March 31,
			2016			2015
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss)			$	(56)		$	(4,725)
Items not affecting cash:
		Depreciation and amortization	999			971
		Share-based compensation	321			157
		Unrealized foreign exchange (gain) loss	(1,020)			2,646
		Deferred tax expense (recovery)	(378)			-
		Deferred leasehold inducement	(90)			(85)
Net changes in non-cash working capital items			762			978
			538			(58)
INVESTING ACTIVITIES
Purchase of property and equipment			(207)			(211)
Purchase of intangible assets			(100)			(100)
Change in other long-term assets			(218)			22
Purchase of investments			-			(3)
			(525)			(292)
FINANCING ACTIVITIES
Issuance of share capital			47			5
Repurchase of share capital			(1,288)			(92)
			(1,241)			(87)
Effect of exchange rate changes on cash and cash equivalents			(2)			(773)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(1,230)			(1,210)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			36,133			44,247
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	34,903		$	43,037

^{______________________________________________
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, 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.

² 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.

³ Note that we have changed the calculation of Adjusted EBITDA to no longer adjust for foreign exchange gains and losses.  Please refer to the "Adjusted EBITDA" section of Management's Discussion and Analysis for more information and the impact of this change.

SOURCE Halogen Software

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