NexJ Systems Reports Third Quarter 2022 Results

TORONTO, Oct. 28, 2022 /CNW/ - NexJ Systems Inc. (TSX: NXJ), delivering intelligent customer management software to the financial services industry, today announced financial results for its third quarter ended September 30, 2022.

Third Quarter Summary

• The Company continued its planned transition from a perpetual license model to a more predictable subscription license model generating $1.47M in license and subscription revenue for the first three quarters of the year, an increase of 50% as compared to $977K in the first three quarters of the previous year
• $4.03M of revenue for the third quarter as compared to $4.04M in the third quarter of the previous year
• $840K in Adjusted EBITDA loss for the third quarter as compared to Adjusted EBITDA of $370K in the third quarter of the previous year
• $658K of net loss for the third quarter as compared to $180K of net income in the third quarter of the previous year
• $11.47M in revenue for the nine months as compared to $11.74M in the previous year
• $2.12M in Adjusted EBITDA loss for the nine months as compared to Adjusted EBITDA of $596K in the previous year
• $2.91M in net loss for the nine months as compared to $282K of net loss in the previous year
• For the first three quarters of the year, approximately $1.9M of expense contributing to the net loss for the same period related to the office lease payments and one time lease termination costs as the Company rationalized its real estate requirements during the second quarter and will realize costs savings in excess of $2.2M per year going forward

On August 29, 2022, the Company and N. Harris Computer Corporation ("Harris") announced the parties have entered into an arrangement agreement by way of a statutory plan of arrangement under the CBCA (the "Acquisition"). Under the terms of the Acquisition, Harris will acquire all of the outstanding common shares on a fully diluted basis of the Company for a cash consideration of $0.55 for each common share of the Company, with the transaction expected to close in November 2022 subject to customary regulatory and shareholder approvals

NexJ Systems Inc.
Third Quarter Financial Results
(Expressed in thousands of Canadian dollars)
(Unaudited)
		Quarter ended September 30,				Nine months ended September 30,
		2022		2021		2022		2021
Revenue		$		$		$		$
License and subscription fees		568		539		1,468		977
Professional services		1,529		1,502		4,256		4,560
Maintenance and support		1,933		1,997		5,743		6,203
		4,030		4,038		11,467		11,740
Cost of revenue		1,113		920		3,545		2,877
Gross profit		2,917		3,118		7,922		8,863
Operating Expenses
Research and development		1,803		1,329		5,148		4,210
Sales and marketing		547		572		1,623		1,654
General and administrative		1,407		847		3,269		2,403
		3,757		2,748		10,040		8,267
Adjusted EBITDA		(840)		370		(2,118)		596
Share-based payment expense		4		10		17		64
Depreciation and amortization		51		229		960		671
Lease termination costs		-		-		467		-
Income (loss from) operations		(895)		131		(3,562)		(139)
Foreign exchange loss (gain)		(233)		(66)		(353)		84
Finance income		(6)		(6)		(38)		(15)
Finance expense		2		23		(262)		74
Net income (loss) for the period		(658)		180		(2,909)		(282)

Non-IFRS Measures

This news release includes certain measures that have not been prepared in accordance with International Financial Reporting Standards ("IFRS") such as Adjusted EBITDA and Adjusted EBITDA margin which are used to evaluate the Company's operating performance as a complement to results provided in accordance with IFRS. The Company believes that Adjusted EBITDA and Adjusted EBITDA margin are useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and the other items listed below.

The term "Adjusted EBITDA" refers to net income (loss) before adjusting for share-based payment expense, depreciation and amortization, lease termination costs, deferred share unit expense, restructuring costs, foreign exchange loss (gain), finance income, finance costs, and income taxes. "Adjusted EBITDA margin" refers to the percentage that Adjusted EBITDA for any period represents as a portion of total revenue for that period.

The term Adjusted EBITDA and Adjusted EBITDA margin are not measures recognized by IFRS and do not have standardized meanings prescribed by IFRS. Therefore, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similar measures presented by other issuers. Investors are cautioned that Adjusted EBITDA and Adjusted

EBITDA margin should not be construed as an alternative to net income (loss) as determined in accordance with IFRS.

About NexJ Systems Inc.
NexJ Systems provides Intelligent Customer Management to the financial services industry. Our award-winning CRM is designed to help Wealth Management, Private Banking, Corporate and Commercial Banking, and Insurance firms revolutionize their business. Powered by artificial intelligence, our products help drive productivity, boost client engagement, and increase revenue. With users in over 60 countries, our customers benefit from our deep expertise across financial services verticals, strategic investment in innovation, and commitment to their success.

Based in Toronto, NexJ has clients throughout North America, Asia Pacific and in Europe. For more information about NexJ visit www.nexj.com, e-mail [email protected], or call 416-222-5611. Join us on LinkedIn, follow us on Twitter, subscribe to our YouTube channel, or like us on Facebook.

NexJ Forward-looking Statement
Certain statements in this press release, including statements about the financial conditions, and results of operations and earnings, may contain words such as "may", "will", "expect", "anticipate", "aim", "estimate", "intend", "plan", "seek", "believe", "potential", "continue", "is/are likely to", "could", "should", "target", "envision", and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on the Company's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Company operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. The Company's assumptions, although considered reasonable by the Company at the date of this press release, may provide to be inaccurate and consequently the Company's actual results could differ materially from the expectations set out herein.

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) the future performance, financial and otherwise, of NexJ; (ii) the ability of NexJ to protect, maintain and enforce its intellectual property rights; (iii) the acceptance by the Company's customers and the marketplace of new technologies and solutions; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the CRM market; (vi) the Company's competitive position in the market and its ability to take advantage of future opportunities in this market; (vii) the Company's ability to attract new customers and develop and maintain existing customers; and (viii) the demand for the Company's product and the extent of deployment of the company's products in the marketplace. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances.

The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) out ability to successful integrate and manage acquired businesses, offerings and people; (ii) our dependence on a limited number of customers and large project size; (iii) fluctuation in our quarterly operating results; (iv) our dependence on key personnel, and ability to attract and retain talent; (v) our compensation structure; (vi) risks associated with managing large and complex software implementation projects; (vii) uncertainties and assumptions in our sales forecasts, including the extent to which sales proposals are converted into sales; (viii) risks associated with our ability to design, develop, test, market, license and support our software products on a timely basis; (ix) market acceptance of our products and services; * commercial success of products resulting from our investment in research and development; (xi) our success in expanding sales into new international markets; (xii) competition in our industry; (xiii) failure to protect our intellectual property or infringement of intellectual property rights of third parties; (xiv) reliance upon a limited number of third-party software products to develop our products; (xv) defects or disruptions in our products and services; (xvi) currency exchange rate fluctuations; (xvii) lengthy sales cycles for our software; (xviii) general economic conditions; and (xviii) failure to manage our growth successfully.

For additional information with respect to risks and other factors which could occur, see the Company's most recently filed Annual Information Form for the year ended December 31, 2021 dated March 8, 2022, and other securities filings with the Canadian securities regulators available on www.sedar.com.  Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

NexJ Systems Inc.
Condensed Interim Statements of Financial Position
(Expressed in thousands of Canadian dollars)
(Unaudited)
	September 30, 2022		December 31, 2021
Assets
	$		$
Current assets:
Cash and cash equivalents	4,511		5,489
Accounts receivable	1,087		5,457
Prepaid expenses and other assets	852		1,334
Total current assets	6,450		12,280
Non-current assets:
Property and equipment	381		612
Right-of-use assets	245		951
Goodwill	1,753		1,753
Contract assets	33		88
Total non-current assets	2,412		3,404
Total assets	8,862		15,684
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	2,299		2,023
Deferred revenue	3,740		6,592
Lease liabilities	114		1,152
Total current liabilities	6,153		9,767
Non-current liabilities:
Accrued liabilities	68		62
Deferred revenue	5		328
Lease liabilities	84		83
Total non-current liabilities	157		473
Total liabilities	6,310		10,240
Shareholders' equity:
Share capital	83,485		83,485
Share purchase loans	(3,598)		(3,598)
Contributed surplus	8,752		8,735
Accumulated other comprehensive income	751		751
Deficit	(86,838)		(83,929)
Total shareholders' equity	2,552		5,444
Total liabilities and shareholders' equity	8,862		15,684

NexJ Systems Inc.
Condensed Interim Statements of Comprehensive Income (Loss)
(Expressed in thousands of Canadian dollars, except per share amounts)
(Unaudited)
	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenue	$		$		$		$
License and subscription fees	568		539		1,468		977
Professional services	1,529		1,502		4,256		4,560
Maintenance and support	1,933		1,997		5,743		6,203
	4,030		4,038		11,467		11,740
Cost of revenue	1,113		919		3,546		2,874
Gross profit	2,917		3,119		7,921		8,866
Expenses:
Research and development	1,803		1,328		5,149		4,223
Sales and marketing	547		573		1,623		1,657
General and administrative	1,462		1,087		4,244		3,125
Lease termination costs	-		-		467		-
	3,812		2,988		11,483		9,005
Income (loss) from operations	(895)		131		(3,562)		(139)
Foreign exchange gain (loss)	223		66		353		(84)
Finance income	6		6		38		15
Finance expense	(2)		(23)		262		(74)
	227		49		653		(143)
Net income (loss) for the period	(668)		180		(2,909)		(282)
Other comprehensive income (loss):
Items that will not be reclassified to profit or loss:
Unrealized income (loss) on equity securities	-		6		-		(1)
Income (loss) for the period and
comprehensive income (loss)	(668)		186		(2,909)		(283)
Earnings (loss) per share
Basic and diluted	(0.03)		0.01		(0.14)		(0.01)
Weighted average number of common shares
outstanding, in thousands
Basic	21,076		21,067		21,076		21,059
Diluted	21,076		21,105		21,076		21,059

NexJ Systems Inc.
Condensed Interim Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
(Unaudited)
	Nine month ended		Nine month ended
	September 30, 2022		September 30, 2021
Cash flows from (used in) operating activities:	$		$
Loss for the period	(2,909)		(282)
Adjustments for:
Depreciation and amortization of property and equipment	112		156
Depreciation of right-of-use assets	848		515
Changes in contract assets	55		(46)
Share-based payment expense	17		64
Loss on disposal of fixed assets	71		-
Finance income	(38)		(15)
Finance expense	(262)		74
Foreign exchange loss (gain)	(133)		22
Change in non-cash operating working capital:
Accounts receivable	4,370		2,112
Prepaid expenses and other assets	482		184
Accounts payable and accrued liabilities	282		171
Deferred revenue	(3,175)		(1,793)
Net cash flows from (used in) operating activities	(280)		1,162
Cash flows from (used in) financing activities:
Payment of lease liabilities	(910)		(839)
Interest paid	(7)		(4)
Proceeds from exercise of stock options	-		9
Net cash flows used in financing activities	(917)		(834)
Cash flows from (used in) investing activities:
Purchase of property and equipment	(5)		(32)
Proceeds from disposal of fixed assets	53		-
Interest received	38		15
Net cash flows from (used in) investing activities	86		(17)
Effects of exchange rates on cash and cash equivalents	133		(22)
Increase in cash and cash equivalents	(978)		289
Cash and cash equivalents, beginning of period	5,489		5,426
Cash and cash equivalents, end of period	4,511		5,715
Supplemental cash flow information:
Acquisition of property and equipment not yet paid	-		10

SOURCE NexJ Systems Inc.

Media Contact: Matthew Bogart, 416-227-3708, [email protected]