Halogen Announces Second Quarter 2014 Results

• Company delivers record recurring, total and international revenue

OTTAWA, ON, Aug. 7, 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 months ended June 30, 2014. All figures are stated in United States dollars unless otherwise noted.

Second Quarter 2014 Financial Highlights

• Recurring revenue increased 21% from Q2 2013 to a record $12.3 million, representing 90% of total revenue in the quarter.
• Revenue generated in international markets outside Canada and the United States increased 61% over Q2 2013.
• Strong new customer growth across a broad set of verticals and geographies, including names such as Advanced Digital Broadcast, Bank of Utah, BayCare Health System, Baylor University, Cherry Creek School District, Marshalltown Medical & Surgical Center, Qatar National Bank, and West Valley City.
• Dollar retention continued to be more than 100%¹ and customer retention approximately 90%².
• Adjusted EBITDA³ was $(2.4) million in Q2 2014 compared to $(0.9) million in Q2 2013; Adjusted EBITDA per share³ was $(0.11) per share in Q2 2014, compared to $(0.05) per share in Q2 2013.
• Total cash, cash equivalents and investments was $52.2 million at June 30, 2014 compared to $55.9 million at December 31, 2013.

"The second quarter was highlighted by record recurring and total revenue, reflecting the success we've had over the past year growing our customer base and up-selling to that base," said Paul Loucks, Halogen's President and CEO. "We continue to make substantial investments in sales and marketing and our service delivery capability - investments that we expect will drive new customer acquisition, recurring revenue growth, strong customer retention, and increased sales to existing customers. Our international operations continue to perform well, with a 61% year over year increase in sales in the second quarter. Encouraged by this early success, we recently expanded our sales force into the Netherlands and will continue to expand in regions that we feel will present us with an opportunity to capture early market share for talent management solutions."

Non-IFRS Measures:
^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.

Financial Review
Halogen's recurring revenue in the second quarter of 2014 was $12.3 million, a 21% increase over Q2 2013. Total revenue increased 19% over Q2 2013 to $13.6 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 second quarter of 2014, approximately 79% of revenue was generated from customers located in the United States (80% in Q2 2013), 11% in Canada (12% in Q2 2013) and 10% in international markets (8% in Q2 2013).

Gross margin was $9.8 million, or 72% of total revenue, in the second quarter of 2014, compared to $8.6 million, or 75% of total revenue, in Q2 2013.

Adjusted EBITDA was ($2.4) million in the second quarter of 2014, compared with ($0.9) million in Q2 2013. The lower Adjusted EBITDA is mainly due to higher headcount costs as the Company continues to make significant growth investments, particularly in sales and marketing, both domestically and internationally.

Net loss improved to $2.6 million in the second quarter of 2014 versus a loss of $2.7 million in Q2 2013.

Adjusted EBITDA reconciliation	3 months ended June 30,				6 months ended June 30,
($000's except per share amounts)	2014		2013		2014		2013
Net income (loss)	$	(2,571)	$	(2,730)	$	(5,527)	$	(10,036)
Interest (income) expense and other, net	(70)		(54)		(137)		(73)
Foreign exchange (gain) loss	(868)		902		201		1,304
Income tax expense	39		26		44		39
Depreciation and amortization	817		536		1,634		1,060
Share-based compensation	216		97		432		149
Loss related to change in fair market value of redeemable preferred shares	-		335		-		6,434
Adjusted EBITDA	$	(2,437)	$	(888)	$	(3,353)	$	(1,123)
Adjusted EBITDA per share	$	(0.11)	$	(0.05)	$	(0.15)	$	(0.08)

Cash and investments was $52.2 million at June 30, 2014 compared to $55.9 million at December 31, 2013. Deferred revenue was $28.4 million at quarter-end compared to $24.3 million a year earlier.

Third Quarter and Full Year 2014 Financial Guidance

For the third quarter of 2014, the Company is expecting:

• Recurring revenue in the range of $12.7 to $12.9 million
• Total revenue in the range of $14.4 to $14.6 million

For the full year 2014, the Company is expecting:

• Recurring revenue in the range of $50.5 to $50.9 million
• Total revenue in the range of $56.5 to $56.9 million

2014 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 months ended June 30, 2014 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 2014 second quarter results today (Thursday, August 7, 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: 30838258) 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, August 14, 2014 by calling 416-849-0833 or 1-855-859-2056). The conference call will be webcast live at http://www.newswire.ca/en/webcast/detail/1381967/1532971.

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 Interim Statements of Operations and Comprehensive Income (Loss) Three and six month periods ended June 30, 2014 and 2013 (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,
		2014		2013			2014		2013
Revenue
	Recurring	$	12,300	$	10,135		$	24,388	$	20,142
	Professional services	1,329		1,199			2,711		2,482
	License	-		115			60		411
		13,629		11,449			27,159		23,035
Cost of revenue
	Recurring	2,893		2,025			5,341		3,980
	Professional services	883		820			1,749		1,596
	License	4		9			9		13
		3,780		2,854			7,099		5,589
Gross margin		9,849		8,595			20,060		17,446
Expenses
	Sales and marketing	7,318		5,529			14,303		10,891
	Research and development	3,212		2,355			5,995		4,737
	General and administrative	2,789		2,232			5,181		4,150
	Foreign exchange (gain) loss	(868)		902			201		1,304
		12,451		11,018			25,680		21,082
Operating income (loss)		(2,602)		(2,423)			(5,620)		(3,636)
Loss related to change in fair value of
	redeemable preferred shares	-		(335)			-		(6,434)
Interest and other income		70		55			137		77
Interest expense		-		(1)			-		(4)
Income (loss) before income taxes		(2,532)		(2,704)			(5,483)		(9,997)
Income tax expense (recovery)		39		26			44		39
NET INCOME (LOSS) AND
	COMPREHENSIVE INCOME (LOSS)	$	(2,571)	$	(2,730)		$	(5,527)	$	(10,036)
Basic and diluted earnings (loss) per share		$	(0.12)	$	(0.16)		$	(0.25)	$	(0.69)
Weighted average number of basic and
	diluted common shares outstanding	21,792,247		16,647,693			21,745,338		14,447,371

HALOGEN SOFTWARE INC. Condensed Consolidated Interim Statements of Financial Position As at June 30, 2014 and December 31, 2013 (in United States dollars, tabular amounts in thousands) (Unaudited)
		June 30, 2014			December 31, 2013
ASSETS
Current assets
	Cash and cash equivalents	$	43,480		$	37,405
	Short-term investments	8,722			18,509
	Trade receivables (net)	8,568			9,408
	Investment tax credits receivable	127			127
	Prepaid expenses	2,710			1,834
		63,607			67,283
Non-current assets
	Property and equipment	7,997			5,783
	Intangible assets	2,250			1,847
	Other long-term assets	213			-
		$	74,067		$	74,913
LIABILITIES
Current liabilities
	Trade payables and accrued liabilities	$	9,063		$	6,345
	Derivative liabilities	11			16
	Deferred revenue	28,396			27,031
	Deferred leasehold inducement	222			158
	Current portion of long-term debt	-			52
		37,692			33,602
Non-current liabilities
	Deferred leasehold inducement	506			429
		38,198			34,031
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital		69,726			69,512
Share compensation reserve		1,078			778
Retained earnings (deficit)		(34,935)			(29,408)
		35,869			40,882
		$	74,067		$	74,913

HALOGEN SOFTWARE INC. Condensed Consolidated Interim Statements of Cash Flows Three and six month periods ended June 30, 2014 and 2013 (in United States dollars, tabular amounts in thousands) (Unaudited)
			Three Months Ended June 30,					Six Months Ended June 30,
			2014		2013			2014		2013
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss)			$	(2,571)	$	(2,730)		$	(5,527)	$	(10,036)
Items not affecting cash:
	Depreciation and amortization		817		536			1,564		1,060
	Loss related to change in fair value of
		redeemable preferred shares	-		335			-		6,434
	Share-based compensation		216		97			356		149
	Unrealized foreign exchange (gain) loss		(908)		1,087			125		1,463
	Deferred leasehold inducement		(56)		(47)			141		(94)
Net changes in non-cash working capital items			4,105		(463)			2,661		(573)
			1,603		(1,185)			(680)		(1,597)
INVESTING ACTIVITIES
Purchase of property and equipment			(1,607)		(291)			(2,000)		(494)
Purchase of intangible assets			(742)		(107)			(794)		(173)
Change in other long-term assets			(213)		-			(213)		-
Maturity of investments			4,579		1,429			9,515		3,206
Purchase of investments			(47)		(14,535)			(94)		(14,552)
			1,970		(13,504)			6,414		(12,013)
FINANCING ACTIVITIES
Issuance of share capital			118		56,893			158		56,929
Issuance costs of share capital			-		(4,132)			-		(4,132)
Repayment of long-term debt			(13)		(41)			(53)		(88)
			105		52,720			105		52,709
Effect of exchange rate changes on cash and
	cash equivalents		243		(572)			236		(606)
INCREASE (DECREASE) IN CASH AND CASH			3,921		37,459			6,075		38,493
	EQUIVALENTS
CASH AND CASH EQUIVALENTS,
	BEGINNING OF PERIOD		39,559		4,717			37,405		3,683
CASH AND CASH EQUIVALENTS,
	END OF PERIOD		$	43,480	$	42,176		$	43,480	$	42,176

 

 

SOURCE: Halogen Software

Craig Armitage
T: 1-416-815-0700 ext. 278
Toll Free: 1-800-385-5451 ext. 278
E: [email protected]