Halogen Announces Second Quarter 2013 Results

• Highlights include record recurring revenue and total revenue
• Company provides outlook for third quarter and full year of 2013

OTTAWA, Aug. 8, 2013 /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 six months ended June 30, 2013. All figures are stated in United States dollars unless otherwise noted.

Second Quarter 2013 Financial Highlights

• Recurring revenue increased 26% from Q2 2012 to $10.1 million representing 89% of total revenue in the quarter. Total revenue increased 23% to $11.4 million over Q2 2012.
• Revenue generated from outside Canada and the United States increased 68% over Q2 2012.
• Customer retention was greater than 90%¹; dollar retention was greater than 100%².
• Net loss was $2.7 million, or $0.16 per basic and diluted share, compared to net loss of $3.4 million, or $0.28 per basic and diluted share, in Q2 2012.
• Adjusted EBITDA³ was $(0.9) million in Q2 2013 and 2012; Adjusted EBITDA per share³ was $(0.05) per share in Q2 2013, versus $(0.07) per share in Q2 2012.
• Total cash, cash equivalents and investments was $58.5 million at June 30, 2013 compared to $8.9 million at December 31, 2012, with the increase principally the result of proceeds from the Company's successful initial public offering (IPO) completed in the second quarter of 2013.

"We're pleased with our strong progress in the second quarter," said Paul Loucks, Halogen's CEO. "We continued to deliver high growth rates in our recurring revenue thanks to a combination of attracting new customers and generating more revenue from our existing customers, who continued to renew with us at a rate greater than 90% reflecting the quality of our offering and our world class customer experience."

"During the quarter, we also completed our IPO, that strengthens our balance sheet and provides us with the capital to expand our total addressable market, grow our operations both internationally and domestically, and invest in product development," continued Mr. Loucks. "There is a large and untapped market for talent management software solutions among global mid-sized organizations, our target market. We intend to invest aggressively to capture much of this market while helping our customers build world class workforces. The future recurring revenue we can generate from these investments, combined with our relatively low customer churn, results in a high lifetime value of the customer."

Financial Review

Halogen's recurring revenue in the second quarter of 2013 was $10.1 million, a 26% increase over Q2 2012 and now represents 89% of total revenue.  Total revenue increased 23% in the second quarter of 2013, over Q2 2012, driven primarily by increases in recurring revenue and professional services revenue. In the second quarter of 2013, approximately 80% of revenue was generated from customers located in the United States (82% in Q2 2012), 12% in Canada (12% in Q2 2012) and 8% in international markets (6% in Q2 2012).

Gross margin was $8.6 million, or 75% of total revenue, in the second quarter of 2013, compared to $6.8 million, or 73% of total revenue, in Q2 2012.

The Company's operating loss was $2.4 million in the second quarter, a 19% increase over Q2 2012. The increase was primarily due to the increase in foreign exchange losses and IPO-related expenses.  Net loss was $2.7 million in the second quarter versus $3.4 million in Q2 2012.

	Three months ended		Six months ended
Adjusted EBITDA reconciliation	June 30,		June 30,
(US$000's except per share amounts)	2013	2012	2013	2012
Net income (loss)	(2,730)	(3,376)	(10,036)	(11,346)
Interest and other income (net)	(54)	(27)	(73)	(48)
Foreign exchange	902	584	1,304	(47)
Income tax expense	26	-	39	-
Depreciation and amortization	536	500	1,060	979
Share-based compensation	97	46	149	91
Loss related to change in fair market value of redeemable preferred shares	335	1,374	6,434	8,763
Adjusted EBITDA	(888)	(899)	(1,123)	(1,608)
Adjusted EBITDA per share	$(0.05)	$(0.07)	$(0.08)	$(0.13)

Cash and investments increased from $8.9 million at December 31, 2012 to $58.5 million at June 30, 2013 primarily due to the issuance of 5.1 million common shares as a result of the Company's IPO.

Deferred revenue was $24.3 million at June 30, 2013 compared to $19.9 million a year earlier. This 22% increase is primarily attributed to new business during the last 12 months from new and existing customers.

Third Quarter and Full Year 2013 Financial Guidance

For the third quarter of 2013, the Company is expecting:

• Recurring revenue in the range of $10.4 to $10.6 million
• Total revenue in the range of $11.8 to $12.0 million

For the full year 2013, the Company is expecting:

• Recurring revenue in the range of $41.5 to $41.9 million
• Total revenue in the range of $47.0 to $47.4 million

2013 Second Quarter Financial Statements and Management's Discussion and Analysis
Halogen's Management's Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 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 second quarter results today (Thursday, August 8, 2013) at 4:30 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: 24461818) ten minutes prior to the scheduled start of the call. A replay of the conference call will be available until 12:00 midnight (ET) Sunday, September 8, 2013 by calling 416-849-0833  or 1-855-859-2056, (Conference ID: 24461818). The conference call will be webcast live at http://bit.ly/13HTdNN.

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 1,750 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 six month periods ended June 30, 2013 and 2012
(in United States dollars, tabular amounts in thousands, except share and per share data)
(Unaudited)

	Three Months Ended June 30,			Six Months Ended June 30,
	2013	2012		2013	2012
Revenue
Recurring	$ 10,135	$ 8,072		$ 20,142	$ 15,616
Professional services	1,199	979		2,482	2,093
License	115	240		411	367
	11,449	9,291		23,035	18,076
Cost of revenue
Recurring	2,025	1,857		3,980	3,571
Professional services	820	662		1,596	1,441
License	9	4		13	7
	2,854	2,523		5,589	5,019
Gross margin	8,595	6,768		17,446	13,057
Expenses
Sales and marketing	5,529	4,803		10,891	8,884
Research and development	2,355	1,747		4,737	3,655
General and administrative	2,232	1,663		4,150	3,196
Foreign exchange (gain) loss	902	584		1,304	(47)
	11,018	8,797		21,082	15,688
Operating income (loss)	(2,423)	(2,029)		(3,636)	(2,631)
Loss related to change in fair value of redeemable preferred shares	(335)	(1,374)		(6,434)	(8,763)
Interest and other income	55	32		77	60
Interest expense	(1)	(5)		(4)	(12)
Income (loss) before income taxes	(2,704)	(3,376)		(9,997)	(11,346)
Income tax expense (recovery)	26	-		39	-
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)	$ (2,730)	$ (3,376)		$ (10,036)	$ (11,346)
Basic and diluted earnings (loss) per share	$ (0.16)	$ (0.28)		$ (0.69)	$ (0.94)
Weighted average number of basic and diluted common shares outstanding	16,647,693	12,147,825		14,447,371	12,116,600

HALOGEN SOFTWARE INC.
Condensed Consolidated Statements of Financial Position
As at June 30, 2013 and December 31, 2012
(in United States dollars, tabular amounts in thousands)
(Unaudited)

		June 30, 2013		December 31, 2012
ASSETS
Current assets
Cash and cash equivalents		$ 42,176		$ 3,683
Short-term investments		16,280		5,210
Trade and other receivables (net)		8,724		6,961
Investment tax credits receivable		1,995		1,206
Prepaid expenses		1,856		1,198
		71,031		18,258
Non-current assets
Property and equipment		2,828		3,091
Intangible assets		1,869		1,403
		$ 75,728		$ 22,752
LIABILITIES
Current liabilities
Trade payables and accrued liabilities		$ 7,055		$ 4,360
Derivative liabilities		565		8
Deferred revenue		24,297		22,931
Deferred leasehold inducement		177		180
Current portion of long-term debt		141		173
		32,235		27,652
Non-current liabilities
Deferred leasehold inducement		139		231
Redeemable preferred shares		-		40,996
Long-term debt		-		56
		32,374		68,935
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital		69,428		2,301
Share compensation reserve		550		418
Retained earnings (deficit)		(26,624)		(48,902)
		43,354		(46,183)
		$ 75,728		$ 22,752

HALOGEN SOFTWARE INC.
Condensed Consolidated Statements of Cash Flows
Three and six month periods ended June 30, 2013 and 2012
(in United States dollars, tabular amounts in thousands)
(Unaudited)

				Three Months Ended June 30,					Six Months Ended June 30,
				2013		2012			2013	2012
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss)				$ (2,730)		$ (3,376)			$ (10,036)	$ (11,346)
Items not affecting cash:
Depreciation and amortization				536		500			1,060	979
Loss related to change in fair value of redeemable preferred shares				335		1,374			6,434	8,763
Share-based compensation				97		46			149	91
Unrealized foreign exchange (gain) loss				1,087		129			1,463	192
Deferred leasehold inducement				(47)		(41)			(94)	(83)
Net changes in non-cash working capital items				(463)		1,563			(573)	1,851
				(1,185)		195			(1,597)	447
INVESTING ACTIVITIES
Purchase of property and equipment				(291)		(379)			(494)	(695)
Purchase of intangible assets				(107)		(49)			(173)	(246)
Maturity of investments				1,429		1,455			3,206	1,508
Purchase of investments				(14,535)		(1,507)			(14,552)	(2,185)
				(13,504)		(480)			(12,013)	(1,618)
FINANCING ACTIVITIES
Issuance of share capital				56,893		17			56,929	20
Issuance costs of share capital				(4,132)		-			(4,132)	-
Repayment of long-term debt				(41)		(186)			(88)	(347)
				52,720		(169)			52,709	(327)
Effect of exchange rate changes on cash and cash equivalents				(572)		2			(606)	4
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				37,459		(452)			38,493	(1,494)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				4,717		3,039			3,683	4,081
CASH AND CASH EQUIVALENTS,    END OF PERIOD				$ 42,176		$ 2,587			$ 42,176	$ 2,587

___________________________

Non-IFRS Measures:
^1	Calculated as the percentage of customers at the beginning of a 12-month period who remain as customers at the end of the period.
^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	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

Tim Foran
T: 1-416-815-0700 ext. 251 
Toll Free: 1-800-385-5451 ext. 251
E: [email protected]