Halogen Announces Fourth Quarter and Full Year 2016 Results

• Full Year 2016 total revenue growth of 10%, including 12% recurring revenue growth
• Fourth quarter 2016 total revenue growth of 9%, including 10% recurring revenue growth
• Net Income of $1,167,000 for FY 2016, and 146,000 for Q4 2016
• Adjusted EBITDA of $8.5 million for FY 2016, and $2.8 million in Q4 2016

OTTAWA, Feb. 23, 2017 /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, 2016. All figures are stated in United States dollars unless otherwise noted.

Under a separate press release, Halogen announced earlier today that it has entered into a definitive agreement to be acquired by Saba Software, Inc. ("Saba"). The previously scheduled analyst conference call for later today will not take place due to the definitive agreement between Halogen and Saba.

Fourth Quarter 2016 Financial and Operational Highlights:        

• Recurring revenue increased 10% from Q4 2015 to $17.2 million, representing 92% of total revenue in the quarter. Total revenue increased 9% from Q4 2015 to $18.7 million.
• Net Income of $0.1 million, or $0.01 per diluted share, compared to a Net Loss of $2.6 million in Q4 2015.
• Adjusted EBITDA¹ of $2.8 million compared with $(1.2) million in Q4 2015.
• 2016 cash flow provided from operating activities was $3.6 million compared to cash used in operating activities of $0.2 million in 2015.
• Halogen added key customers across all regions and verticals including: Harvard Business Publishing, Avery Products, Pabst Blue Ribbon, Varsity Brands, Hitachi Solutions  Europe and Hitachi Solutions America, Pentagon Federal Credit Union, Dearborn County Hospital, Nashville General Hospital and Sanne Fudiciary Services.
• The Company launched version 16.2 of the Halogen TalentSpace™ suite which further builds on Halogen's integration between Jobvite™ for recruiting and third party HRIS systems, including a series of product enhancements to learning, one on one meetings, talent search capabilities as well as user adoption enhancements via built-in walk through tips for HR administrators.  
• Halogen opened registration and released the agenda for TalentSpace Live, the company's 11^th annual conference for customers, taking place in May 2017,

Full Year 2016 Financial Highlights

• Recurring revenue increased 12% from 2015 to $66.7 million, representing 92% of total revenue in the year.
• Total revenue increased 10% over 2015 to $72.3 million.
• Net Income of $1.2 million, or $0.05 per diluted share, compared to a Net Loss of $13.5 million in 2015.
• Adjusted EBITDA of $8.5 million compared to ($8.9) million in 2015.
• Total cash and investments increased to $37.4 million at December 31, 2016.
• Under a Normal Course Issuer Bid, Halogen purchased and cancelled a total of 560,500 common shares for approximately $3.4 million in 2016.

Fourth Quarter Financial Review

Halogen's recurring revenue in the fourth quarter of 2016 was $17.2 million, a 10% increase over Q4 2015. Total revenue increased 9% over Q4 2015 to $18.7 million. In the fourth quarter of 2016, approximately 82% of revenue was generated from customers located in the United States (80% in Q4 2015), 8% in Canada (9% in Q4 2015) and 10% in international markets (11% in Q4 2015).

Gross margin was $14.4 million, or 77% of total revenue, in the fourth quarter of 2016, compared to $12.9 million, or 75% of total revenue, in Q4 2015.

Net income was $0.1 million in the fourth quarter of 2016 as compared to a loss of $2.6 million in Q4 2016. Adjusted EBITDA² was $2.8 million in Q4 2016 compared to $(1.2) million in Q4 2015; Adjusted EBITDA per share was $0.13 in Q4 2016, compared to $(0.06) per share in Q4 2015.  

Adjusted EBITDA reconciliation	3 months ended Dec. 31,				12 months ended Dec. 31,
($000's except per share amounts)		2016		2015		2016		2015
Net income (loss)	$	146	$	(2,632)	$	1,167	$	(13,475)
Interest (income) expense and other, net		(15)		(16)		(61)		(81)
Income tax expense		40		57		195		214
Deferred tax expense (recovery)		38		-		-		-
Depreciation and amortization		841		1,014		3,758		3,961
Share-based compensation		361		330		1,372		457
Corporate strategic evaluation		470		-		470		-
Restructuring charges		957		-		1,570		-
Adjusted EBITDA	$	2,838	$	(1,247)	$	8,471	$	(8,924)
Adjusted EBITDA per share	$	0.13	$	(0.06)	$	0.39	$	(0.41)

Total cash and investments was $37.4 million at December 31, 2016 compared to $36.1 million at December 31, 2015. Deferred revenue was $39.0 million at quarter-end, compared to $35.9 million at September 30, 2016 and $36.9 million at December 31, 2015.

2016 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, 2016 will be available on SEDAR (www.sedar.com) and on the Halogen website at http://ir.halogensoftware.com.

This press release does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval. This communication relates to Halogen's Fourth Quarter and Fiscal Year 2016 financial results.

Proposed Acquisition of Halogen by Saba Software, Inc.
On February 23, 2017, Halogen announced that it entered into a definitive agreement to be acquired by Saba Software, Inc. The agreement contemplates that a subsidiary of Saba's parent company, Vector Talent Holdings LLC, will acquire all of the issued and outstanding shares of Halogen, other than shares to be rolled over by Halogen Executive Chairman Michael Slaunwhite and parties related to him, for CAD$12.50 in cash per share and total consideration of approximately CAD$293 million. The transaction will be implemented by way of a statutory plan of arrangement under the Ontario Business Corporations Act and is subject to court approval and the approval of at least two-thirds of the votes cast by holders of Halogen's shares; and by a simple majority of the votes cast by all shareholders other than Michael Slaunwhite and parties related to him.

Additional Information and Where to Find It
Additional information regarding the transaction can be found in a press release on Halogen's website at http://ir.halogensoftware.com.  In connection with the transaction, Halogen intends to file relevant materials with the Canadian securities regulators that will be available on SEDAR at www.sedar.com. SHAREHOLDERS ARE URGED TO CAREFULLY READ THESE MATERIALS IN THEIR ENTIRETY (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT HALOGEN WILL FILE WITH SEDAR WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION.

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 a cloud-based talent management suite that puts ongoing, next-generation performance management principles at the center of all talent programs, including learning and development, succession planning, recruiting, and compensation. With over 2,100 customers worldwide, the company has been recognized as a market leader by major business analysts and has garnered the highest customer satisfaction ratings in the industry. Halogen's powerful, yet simple-to-use solutions, which also include industry-vertical editions, help organizations win with talent, by aligning their talent and business strategies to deliver exceptional outcomes. 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 and twelve month periods ended December 31, 2016 and 2015
(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,
		2016		2015		2016		2015
Revenue
	Recurring	$	17,171	$	15,650	$	66,658	$	59,529
	Professional services		1,502		1,504		5,603		6,163
	License		-		-		-		-
			18,673		17,154		72,261		65,692
Cost of revenue
	Recurring		3,222		3,073		12,662		12,339
	Professional services		1,085		1,186		4,519		4,873
	License		-		-		-		-
			4,307		4,259		17,181		17,212
Gross margin			14,366		12,895		55,080		48,480
Expenses
	Sales and marketing		7,061		8,604		29,389		33,086
	Research and development		3,139		3,232		12,152		12,750
	General and administrative		2,427		2,506		10,114		9,660
	Foreign exchange (gain) loss		103		1,144		84		6,326
	Corporate strategic evaluation		470		-		470		-
	Restructuring charges		957		-		1,570		-
			14,157		15,486		53,779		61,822
Operating income (loss)			209		(2,591)		1,301		(13,342)
Interest and other income			15		16		61		81
Income (loss) before income taxes			224		(2,575)		1,362		(13,261)
Income tax expense (recovery)			40		57		195		214
Deferred tax expense (recovery)			38		-		-		-
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)		$	146	$	(2,632)	$	1,167	$	(13,475)
Basic and diluted earnings (loss) per share		$	0.01	$	(0.12)	$	0.05	$	(0.61)
Weighted average number of basic common shares outstanding			21,412,430		22,027,299		21,589,108		22,002,999
Weighted average number of diluted common shares outstanding			21,721,628		22,027,299		21,804,118		22,002,999

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Financial Position
As at December 31, 2016 and December 31, 2015
(in United States dollars, tabular amounts in thousands)
(Unaudited)
			2016		2015
ASSETS
Current assets
	Cash and cash equivalents	$	37,369	$	36,133
	Trade receivables (net)		10,010		12,458
	Prepaid expenses		3,128		1,912
			50,507		50,503
Non-current assets
	Property and equipment		5,682		6,806
	Intangible assets		1,999		2,287
	Other long-term assets		744		329
		$	58,932	$	59,925
LIABILITIES
Current liabilities
	Trade payables and accrued liabilities	$	8,551	$	8,204
	Derivative liabilities		723		2,632
	Deferred revenue		38,972		36,922
	Deferred leasehold inducement		190		339
			48,436		48,097
Non-current liabilities
	Deferred leasehold inducement		489		289
			48,925		48,386
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital			68,008		69,663
Share compensation reserve			2,655		1,330
Cash flow hedging reserve			(716)		-
Retained earnings (deficit)			(59,940)		(59,454)
			10,007		11,539
		$	58,932	$	59,925

HALOGEN SOFTWARE INC.
Condensed Consolidated Interim Statements of Cash Flows
Three and twelve month periods ended December 31, 2016 and 2015
(in United States dollars, tabular amounts in thousands)
(Unaudited)
		Three Months Ended December 31,					Twelve Months Ended December 31,
		2016		2015			2016			2015
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss)		$	146	$	(2,632)		$	1,167		$	(13,475)
Items not affecting cash:
	Depreciation and amortization		841		1,014				3,758		3,961
	Disposal of fixed assets		-		-				104		-
	Share-based compensation		361		330				1,372		457
	Unrealized foreign exchange (gain) loss		(102)		(184)				(2,523)		2,655
	Deferred tax expense (recovery)		38		-				-		-
	Deferred leasehold inducement		95		(80)				52		(334)
Net changes in non-cash working capital items			2,182		1,350				3,623		4,719
			3,561		(202)				7,553		(2,017)
INVESTING ACTIVITIES
Purchase of property and equipment			(790)		(846)				(1,909)		(1,877)
Purchase of intangible assets			(66)		(711)				(541)		(1,200)
Change in other long-term assets			(31)		(204)				(415)		(99)
Maturity of investments			-		-				-		3
Purchase of investments			-		-				-		(3)
			(887)		(1,761)				(2,865)		(3,176)
FINANCING ACTIVITIES
Issuance of share capital			-		16				85		484
Repurchase of common shares			(628)		(1,525)				(3,441)		(2,384)
			(628)		(1,509)				(3,356)		(1,900)
Effect of exchange rate changes on cash and cash equivalents			(54)		(62)				(96)		(1,021)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			1,992		(3,534)				1,236		(8,114)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			35,377		39,667				36,133		44,247
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	37,369	$	36,133		$		37,369	$	36,133

____________________________
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 restructuring charges. 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 ur non-IFRS financial measures in conjunction with the most comparable IFRS financial measures.

² 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

Media and investor relations: Connie Costigan, T: 1-613-270-1011, ext. 4334, NA Toll Free: 1-866-566-7778, ext. 4334, E: [email protected]

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http://www.halogensoftware.com