Nightingale reports fiscal 2014 first quarter results

MARKHAM, ON, Aug. 15, 2013 /CNW/ - Nightingale Informatix Corporation ("Nightingale" or the "Company") (TSX-V: NGH), an application service provider (ASP) of electronic medical record (EMR) software and related services, announces its financial results for the quarter ended June 30, 2013.

Q1 Fiscal 2014 Financial and Operational Summary

• Revenue was $3.8 million, compared to $5.6 million in Q1 F2013, primarily reflecting a decrease in software license revenues from enterprise contracts resulting from the impact of extended sales cycles due to the pending launch of Nexia and the transition to a SaaS (Software as a Service) model for the SMB market.
• Revenue related to the AOHC contract was $0.5 million compared to $1.6 million in Q1 F2013, as the rollout of the project shifts from the initial phase where the bulk of the license revenue was recognized to the implementation phase when the revenue is largely professional services and the recurring revenue commences
• Gross profit was $3.3 million, or 89% of revenue, compared to $4.9 million, or 89% of revenue, in Q1 F2013 and $4.7 million, or 91% of revenue, in Q4 F2013.
• Operating Expenses, excluding stock based compensation, depreciation, amortization and one-time business acquisition, integration and other one-time costs were $3.2 million compared to $4.0 million in Q1 F2013 and $3.7 million in Q4 F2013.
• Adjusted EBITDA¹ was $0.1 million, 3% of revenue, down from $0.9 million, or 16% of revenue in Q1 F2013 and $1.0 million in Q4 F2013, or 20% of revenue.
• Net income was a loss of $0.8 million compared to net income of $0.25 million in Q1 F2013 and net income of $0.9 million in Q4 F2013. Included in the quarter's loss is a $0.3 million unrealized exchange loss on the Company's US dollar debt.
• Cash provided by operations was $0.2 million compared to cash used of $0.5 million in Q1 F2013.
• Total deferred revenue was $5.8 million down from $5.9 million at March 31, 2013.

"When we started down the path of transitioning the Company to a SaaS model, our objective was to grow the recurring revenue to a point where we are profitable solely on our recurring revenue base. While not reflected in this quarter's results, we are making inroads to getting to this goal and remain focused on achieving it as quickly as possible. While we expect some volatility in the interim, we feel the end result of a highly predictable and profitable business model will be worth the short term pain," stated Sam Chebib, CEO of Nightingale.  "Nexia is currently being trialed by several customers and we will be launching it in the US over the next several months, and early in calendar 2014 in Canada. Until then we expect this transition to cause volatility, but it should lead to a business model that is largely recurring and predictable with high and sustainable operating margins. The team is very focused, excited and optimistic about our prospects for continued technology leadership in this growing sector."

Mr. Chebib concluded, "Although our results are obviously below where we would like them to be, this is for very positive reasons.  We remain confident in our ability to get through this transition and fund the business from existing working capital and through our continued fundraising activities. While we are in the transition period from the current to the next generation EMR platform, we will continue to focus on cost control; while at the same time preparing the Company for what we believe will be the exciting next stage in its growth and development."

Fiscal 2014 First Quarter Financial Review
The Company's results are prepared in accordance with International Financial Reporting Standards (IFRS) and in Canadian dollars unless otherwise stated.

Revenue for Q1 F2014 was $3.8 million, a decrease of $1.8 million from $5.6 million for Q1 F2013. The year-over-year decrease reflects a $1.1 million decrease in revenue related to the AOHC contract, as the rollout of the project shifts from the initial phase where the bulk of the license revenue was recognized to the implementation phase when the revenue is largely professional services and the recurring revenue commences.  Other factors impacting revenue development in the quarter were lengthening sales cycles due to the pending launch of Nexia, as well as the Company's transition to a SaaS revenue model for the SMB market.

Recurring Revenue² for Q1 F2014 was $2.6 million (69% of revenue), a decrease of $0.1 million, or 4%, from $2.7 million (49% of revenue) in Q1 F2013, predominantly as a result of the exit from the low-margin revenue cycle management business and a decrease in recurring revenue from the Company's legacy product lines.  This decline was offset partially by an increase in recurring revenue from the Company's web-based EMR product.

For Q1 F2014, gross margin was 89% ($3.3 million gross profit) compared to 89% ($4.9 million gross profit) for Q1 F2013.

Operating expenses for Q1 F2014 decreased 21% to $3.2 million (85% of revenue) excluding charges for stock based compensation and depreciation and amortization, or 20% to $3.2 million (85% of revenue) also excluding one-time business acquisition, integration and other one-time costs, compared to operating expenses of $4.1 million (73% of revenue) excluding charges for stock based compensation and depreciation and amortization for Q1 F2013. Sequentially, operating expenses were down 26% from $4.3 million in Q4 F2013.

For Q1 F2014, Adjusted EBITDA was $0.1 million (3% of revenue), compared to $0.9 million (16% of revenue) in Q1 F2013. The impact of fluctuations in the rate of exchange between the US Dollar and Canadian Dollar on Q1 F2014 EBITDA were negligible.

For Q1 F2014, net loss was $0.8 million compared to net income of $0.25 million in Q1 F2013.

Cash and cash equivalents were $1.1 million at June 30, 2013, down from $3.5 million at March 31, 2013, primarily as a result of $1.1 million used to settle the balance of the Series A convertible debentures, as well as the Company's increased investments in its long-term strategic growth initiatives.

At June 30, 2013, total common shares issued and outstanding were 76,310,915.

The financial statements and MD&A will be available at www.nightingalemd.com and filed on www.sedar.com on August 15, 2013.  This press release should be read in conjunction with Nightingale's Consolidated Financial Statements and the accompanying Management Discussion and Analysis for the quarter ended June 30, 2013.

Stock Option Grant
In July 2013, Nightingale granted 200,000 options to an Officer of the Company, pursuant to the Company's employee stock option plan (the "Plan").  Each option under the Plan is exercisable to acquire one common share at a price of $0.23 per share.  The options granted have been approved by the Board of Directors and are due to expire on July 25, 2018.  The Plan has been approved by the Company's shareholders.

Notice of Conference Call
Nightingale will host a conference call on Thursday, August 15, 2013, at 8:30 a.m. Eastern Standard Time. To access the conference call by telephone, dial [phone] (or [phone] for international). Please connect approximately fifteen minutes prior to the call to ensure participation. The conference call will be archived for replay until Thursday, August 22, 2013. To access the archived conference call, dial 416-764-8677 or 1-888-390-0541 and enter reference 443786#. To listen to the conference call replay on the internet please visit the Nightingale website shortly after the call at www.nightingalemd.com.

Non-IFRS Financial Measures
The Company internally measures its performance and results of initiatives through a number of measures that are not recognized under IFRS and may not be comparable to similar measures used by other companies.

1. Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure that management believes is a useful measurement to evaluate the performance of the Company. Investors should be cautioned, however, that Adjusted EBITDA should not be construed as an alternative to net earnings as determined in accordance with IFRS. The Company's method of calculating Adjusted EBITDA may differ from the methods used by other companies and, accordingly, it may not be comparable to similarly titled measures used by other companies.

Adjusted EBITDA is defined as earnings before other loss (income), interest, income taxes, depreciation, amortization, stock-based compensation, and business acquisition, integration and other costs. Management believes it is useful to exclude these items as they are either non-cash expenses, items that cannot be influenced by management in the short term, or items that do not impact core operating performance, and Management uses this information internally for forecasting and budgeting purposes.

The following provides a reconciliation of Adjusted EBITDA to Loss and Comprehensive Loss:

			Three Months Ended				Three Months Ended
Definition			June 30, 2013				June 30, 2012
Income (Loss) and Comprehensive Income (Loss)			$	(779,629)			$	249,637
Adjustments for:
Current Tax Expense				2,183				13,480
Other Loss				308,561				68,171
Interest				187,758				93,214
Depreciation and Amortization				380,886				374,877
Stock-Based Compensation				29,493				66,423
Other financing loss				1,633				-
Acquisition, Integration and Other				-				49,971
Adjusted EBITDA			$	130,885			$	915,773

2. Recurring and Non-Recurring Revenue
The Company has included recurring revenue and non-recurring revenue measurements since it believes that this information is useful to investors to evaluate its performance. Investors should be cautioned, however, that recurring revenue and non-recurring revenue should not be construed as an alternative to revenue as determined in accordance with IFRS.  Recurring Revenue is comprised of utilization fees, hosting, support and maintenance revenue, data management and transcription services and transactional fees.  Non-Recurring Revenue is comprised of revenues generated from sales of perpetual software and systems licenses and related training, data conversion and installation services.

The following provides a reconciliation of Recurring Revenue and Non-Recurring Revenue to Revenue:

		Three Months			Three Months
		Ended			Ended
Definition		June 30, 2013			June 30, 2012
Non-Recurring Revenue		$	1,166,784		$	2,856,388
Recurring Revenue			2,602,397			2,704,729
Revenue		$	3,769,181		$	5,561,117

About Nightingale
Nightingale is one of the fastest growing health care service and software companies in North America and is recognized as an industry leader in Web-based clinician and community based electronic medical records (EMR) serving the needs of small primary care practices, multi-physician outpatient clinics, and large scale regional health organizations and networks. Coupled with integrated practice management, transcription and revenue cycle management, Nightingale's comprehensive service offering allows customers to enhance patient care, increase revenue opportunities and optimize operations. Nightingale is continuously innovating and enhancing its services to meet the needs of its growing and diverse customer base. Nightingale - Healthcare connected. www.nightingalemd.com

Forward Looking Statement
This press release contains "forward-looking statements" respecting the issuance and cancellation of securities of the Company within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward- looking terminology such as "plans", "expects" or "does not expect",  "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may" ,"could", "would", "might", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Nightingale to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the speculative nature of the medical software industry, which is affected by numerous factors beyond Nightingale's control; the ability of Nightingale to successfully secure customer contracts and the timing of securing such contracts; the ability of Nightingale to complete and successfully integrate its acquisitions on an accretive basis, Nightingale's access to debt and capital facilities, including compliance with current debt arrangements; the existence of present and possible future government regulation; the significant competition that exists in the medical software industry; the early stage of Nightingale's business, and risks associated with early stage companies, including uncertainty of revenues, markets and profitability and the need to raise additional funding.  All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends. Certain material factors or assumptions applied by management in making forward-looking statements, include without limitation, factors and assumptions regarding future trends in healthcare spending, economic conditions affecting Nightingale and North American economies; Nightingale's ability to continue to fund its business, rates of customer defaults, relationships with, and payments to lenders, as well as Nightingale's operating cost structure.

Although Nightingale has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Nightingale does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws. Further information on Nightingale Informatix Corporation is available at www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME AND LOSS
FOR THE THREE MONTHS ENDED JUNE 30, 2013
Unaudited (Canadian Dollars)

				Three Months			Three Months
				Ended			Ended
				June 30, 2013			June 30, 2012
				$			$
Revenue				3,769,181			5,561,117
Cost of sales				430,820			620,671
Gross profit				3,338,361			4,940,446
Expenses
	General and administration			793,193			864,502
	Sales and marketing			658,037			1,056,375
	Research and development			1,045,510			1,522,606
	Client services			1,121,115			1,022,490
	Business acquisition, integration and other			-			49,971
				3,617,855			4,515,944
Operating income (loss)				(279,494)			424,502
	Interest			187,758			93,214
	Other finance loss			1,633			-
	Foreign currency (gain) loss			308,561			68,171
Income (loss) before tax				(777,446)			263,117
Current tax expense				2,183			13,480
Income (loss) and comprehensive income (loss)				(779,629)			249,637
Basic and diluted income (loss) per share
	Basic and diluted income (loss) per share		$	(0.01)		$	0.00
	Weighted number of common shares - basic			76,310,915			76,310,915
	Weighted number of common shares - diluted			76,310,915			82,360,358

 

CONDENSED CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 2013
Unaudited (Canadian Dollars)

				June 30, 2013			March 31, 2013
				$			$
ASSETS
Current assets
	Cash and cash equivalents			1,054,004			3,491,780
	Accounts receivable and unbilled accounts receivable			5,538,672			5,820,214
	Other receivables			12,962			196,127
	Prepaid expenses			696,526			415,958
				7,302,164			9,924,079
Long-term assets
	Unbilled accounts receivable			328,507			339,752
	Financial derivative asset			807,061			808,694
	Property and equipment			935,829			857,270
	Intangible assets			8,620,984			7,974,606
	Goodwill			4,792,399			4,792,399
Total assets				22,786,944			24,696,800
LIABILITIES
Current liabilities
	Line of credit			1,000,000			1,000,000
	Accounts payable and accrued liabilities			4,347,407			4,271,996
	Current portion of deferred revenue			4,302,730			4,176,876
	Current portion of finance lease obligations			71,400			64,397
	Current portion of term loan			1,621,525			1,521,720
	Current portion of convertible debentures			-			1,064,428
				11,343,062			12,099,417
Long-term liabilities
	Term loan			2,394,790			2,686,704
	Convertible debentures			5,409,432			5,353,050
	Deferred revenue			1,533,852			1,713,326
	Finance lease obligations			48,380			36,739
Total liabilities				20,729,516			21,889,236
SHAREHOLDERS EQUITY
	Capital stock			29,629,683			29,629,683
	Contributed surplus			5,810,566			5,781,073
	Equity portion of convertible debentures			811,558			811,558
	Warrants			4,407			4,407
	Deficit			(34,198,786)			(33,419,157)
				2,057,428			2,807,564
Total liabilities and shareholders equity				22,786,944			24,696,800

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2013
Unaudited (Canadian Dollars)

					Three Months		Three Months
					Ended		Ended
					June 30, 2013		June 30, 2012
					$		$
Cash flow from operating activities
	Income (loss) from operations:				(779,629)		249,637
	Adjustments for:
		Depreciation and amortization			380,886		374,876
		Charge to bad debt expense			-		15,326
		Amortization of transaction costs related to debt financing			52,378		11,595
		Stock based compensation			29,493		66,423
		Other financial (gain) loss			1,633		-
		Unrealized foreign exchange (gain) loss			215,017		116,559
		Interest accretion			95,329		23,121
					(4,893)		857,537
	Changes in non-cash working capital balances
		Accounts receivable and unbilled accounts receivable			458,383		(1,760,592)
		Prepaid expenses			(280,568)		(94,121)
		Other receivables			26,513		9,990
		Other assets			11,245		-
		Accounts payable and accrued liabilities			39,752		375,229
		Income taxes payable			-		14,186
		Deferred revenue			(53,620)		170,230
Cash flows provided by (used in) operating activities					196,812		(427,541)
Cash flow from investing activities
	Purchase pf property and equipment				(112,534)		(339,403)
	Capitalized development costs				(964,429)		(765,398)
Cash flows used in investing activities					(1,076,963)		(1,104,801)
Cash flow from financing activities
	Repayment of capital lease obligations				(10,216)		(27,230)
	Repayment of convertible debentures				(1,141,000)		-
	Costs associated with term loan				(21,874)		-
	Repayment of term loan				(385,417)		(217,749)
Cash flows used in financing activities					(1,558,507)		(244,979)
Foreign exchange losses on cash in foreign currency					882		1,393
Net increase (decrease) in cash					(2,437,776)		(1,775,928)
Cash and cash equivalents
	Beginning of period				3,491,780		3,199,058
	End of period				1,054,004		1,423,13

 

OVERALL PERFORMANCE, RESULTS OF OPERATIONS AND FINANCIAL CONDITION

		Year		Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year		Q1
In $ 000's  (Except per Share Amounts)		Ended		Ended		Ended		Ended		Ended		Ended		Ended		Ended		Ended		Ended		Ended		Ended
		March 31, 2011		June 30, 2011		Sept 30, 2011		Dec 31, 2011		March 31, 2012		March 31, 2012		June 30, 2012		Sept 30, 2012		Dec 31, 2012		Mar 31, 2013		March 31, 2013		Jun 30, 2013
Recurring Revenue		$10,679		$2,463		$2,367		$2,473		$2,889		$10,192		$ 2,705		$ 2,665		$ 2,625		$2,606		$10,600		$2,602
Non-Recurring Revenue		6,695		1,342		1,439		2,620		2,486		7,888		2,856		2,403		2,471		2,594		10,324		1,167
Revenue		17,374		3,805		3,807		5,093		5,376		18,080		5,561		5,068		5,096		5,200		20,925		3,769
Software business revenue		14,780		3,344		3,382		4,679		5,017		16,422		5,480		4,993		5,014		5,145		20,633		3,767
Gross Profit		14,047		3,175		2,961		4,384		4,509		15,030		4,940		4,570		4,336		4,736		18,582		3,338
Operating Expenses		14,466		3,500		3,225		4,369		4,804		15,897		4,516		4,040		3,949		4,784		17,290		3,618
Adjusted EBITDA  (non-IFRS measure)		1,736		35		93		917		231		1,275		916		962		828		1,028		3,733		131
Operating Income (Loss) for the Period		(419)		(325)		(263)		16		(295)		(868)		425		529		387		(48)		1,293		(279)
Income (Loss) and Comprehensive Income (Loss)		(989)		(425)		(353)		(155)		(285)		(1,218)		250		624		227		893		1,993		(780)
Income (Loss) and Comprehensive Income (Loss) per Common Share - Basic and Diluted		$(0.01)		$(0.00)		$(0.00)		$(0.00)		$(0.01)		$(0.02)		$0.00 / $0.01		$0.01 / $0.01		$0.00 / $0.00		$0.01 / $0.01		$0.03 / $0.03		$(0.01)
Weighted Avg. # of Common Shares - Basic		75,979		76,311		76,311		76,311		76,311		76,311		76,311		76,311		76,311		76,311		76,311		76,311
Weighted Avg. # of Common Shares - Diluted		75,979		76,311		76,311		76,311		76,311		76,311		82,360		90,086		90,083		92,870		92,882		76,311
Total Assets		$16,216		$15,334		$15,042		$17,794		$17,204		$17,204		$17,962		$19,761		$19,059		$24,697		$24,697		$22,787
Total Long-Term Liabilities		$6,115		$5,819		$5,972		$8,102		$7,434		$7,434		$7,244		$8,421		$7,861		$9,790		$9,790		$9,386

 

SOURCE: Nightingale Informatix Corporation

Peter Cauley, CFO
Nightingale Informatix Corporation
Tel: [phone]
[email protected] 

Marc Lakmaaker, Senior Account Executive
TMX Equicom
Tel: [phone] ext. 248
[email protected]