Nightingale Reports Fiscal 2014 Results

MARKHAM, ON, July 31, 2014 /CNW/ - Nightingale Informatix Corporation ("Nightingale" or the "Company") (TSX-V: NGH), an application service provider (ASP) of electronic health record (EHR) software and related services, announces its financial results for the three months and year ended March 31, 2014.

Q4 Fiscal 2014 Financial and Operational Summary

• Revenue was $4.0 million, down 24% compared to $5.2 million in Q4 F2013, and up 4% from $3.8M in Q3 F2014. The variance from F2013 primarily reflects a decrease in software license revenues from enterprise contracts as well as a decrease in professional services revenues.
• Gross profit was $3.6 million, or 90% of revenue, compared to $4.7 million, or 91% of revenue, in Q4 F2013 and $3.4 million, or 88% of revenue, in Q3 F2014.
• Operating Expenses, excluding stock based compensation, depreciation and amortization costs were $3.2 million compared to $4.3 million in Q4 F2013 and $3.2 million in Q3 F2014.
• Adjusted EBITDA¹ was $0.4 million, 10% of revenue, down from $1.0 million or 20% of revenue in Q4 F2013 and up from $0.1 million or 4% of revenue in Q3 F2014.
• Net loss was $0.6 million compared to net income of $0.9 million in Q4 F2013 and net loss of $1.4 million in Q3 F2014.
• Cash provided by operations was $1.5 million compared to cash used by operations of $0.7 million in Q4 F2013.
• Total deferred revenue was $4.8 million down from $5.9 million at March 31, 2013.

Fiscal 2014 Financial and Operational Summary

• Revenue was $15.3 million, down 27% compared to $20.9 million from F2013, primarily reflecting a decrease in software license revenues from enterprise contracts.
• Gross profit was $13.5 million, or 88% of revenue, compared to $18.6 million, or 89% of revenue for F2013.
• Operating Expenses, excluding stock based compensation, depreciation and amortization costs were $12.6 million compared to $15.5 million for F2013.
• Adjusted EBITDA¹ was $0.9 million, or 6% of revenue, down from $3.7 million, or 18% of revenue for F2013.
• Net loss was $3.0 million compared to net income of $2.0 million for F2013.
• Cash provided by operations was $0.9 million compared to cash used in operations of $1.7 million in F2013.

"This past fiscal year was effectively a transitional year for the Company, reflecting the large investment in our next generation product, the negative impact the product delays had on our perpetual licence revenues and the shift to a SaaS based sales model for the SMB space," said Sam Chebib, President and CEO. "We are at the tail end of this transition, and with the bulk of the investment in Nightingale EHR ("Nexia") behind us, we will be reducing our spending on research and development.  Nexia will be initially sold in the US and Ontario market, and in other Canadian provinces later in the year. Going forward we will be focusing our energy on sales and marketing as we are very optimistic about the impact Nexia will have on our market position and consequently, our ability to drive incremental recurring revenues and increase the predictability of our business model."

Fiscal 2014 Fourth Quarter and Annual 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 Q4 F2014 was $4.0 million, a decrease of $1.2 million from $5.2 million for Q4 F2013.  F2014 revenue was $15.3 million compared to $20.9 million for F2013.  These decreases are primarily associated with a decrease in software revenues from enterprise contracts (which can vary significantly from quarter to quarter) as well as a decrease in revenues from professional services.  These decreases were partially offset by an increase in recurring revenues from the Company's Nightingale On Demand EHR.

Recurring Revenue² for Q4 F2014 was $2.8 million (70% of revenue), an increase of $0.2 million, or 8%, from $2.6 million (50% of revenue) in Q4 F2013.  Recurring revenue for F2014 was $11.0 million (72% of revenue), an increase of $0.4 million, or 4% from $10.6 million (51% of revenue) for F2013.  The increase in Recurring Revenue in Q4 was primarily the result of an increase in revenues from the Company's Nightingale On Demand EHR product which was partially offset by a decrease in revenue from the Company's low-margin transcription business. In the YTD period, decreases in revenues from the Company's low-margin transcription business and a decrease in transaction based revenues on the Company's US based product lines offset the increase in recurring revenues from the Company's EHR product.

For Q4 F2014, gross margin was 90% ($3.6 million gross profit) compared to 91% ($4.7 million gross profit) for Q4 F2013.  For F2014, gross margin was 88% ($13.5 million) compared to 89% ($18.6 million) for F2013.

Operating expenses for Q4 F2014 decreased 26% to $3.2 million (79% of revenue), excluding charges for stock based compensation and depreciation and amortization, compared to operating expenses of $4.3 million (83% of revenue), excluding charges for stock based compensation and depreciation and amortization, for Q4 F2013. Operating expenses for F2014 decreased 19% to $12.6 million (82% of revenue), excluding charges for stock based compensation and depreciation and amortization, compared to operating expenses of $15.5 million (74% of revenue), excluding charges for stock based compensation and depreciation and amortization, for F2013.

For Q4 F2014, Adjusted EBITDA was $0.4 million (10% of revenue), compared to $1.0 million (20% of revenue) in Q4 F2013.  For F2014, Adjusted EBITDA was $0.9 million (6% of revenue), compared to $3.7 million (18% of revenue) for F2013.

The impact of fluctuations in the rate of exchange between the US Dollar and Canadian Dollar on Q4 F2014 EBITDA were negligible.  The $0.5 million loss from foreign currency in F2014 is predominantly the result of the re-measurement of the Company's term loans (denominated in US Dollars) into Canadian Dollars.

Included in net loss for F2014 is a financial loss of $0.7 million.  The financial loss is predominantly related to the write off of a portion of the financial derivative asset that is embedded in the Company's Series B convertible debentures.  The Company wrote off a significant portion of the financial asset in Q3 F2014 when a substantial number of debenture holders (85%) converted their investment to common shares or transferred their investment to the Company's Series C convertible debentures.

For Q4 F2014, net loss was $0.6 million compared to net income of $0.9 million in Q4 F2013. For F2014, net loss was $3.0 million compared to net income of $2.0 million for F2013.

Cash and cash equivalents on March 31, 2014 were $0.5 million, a decrease of $3.0 million, or 85%, from March 31, 2013, of which $3.5 million was for product development costs related to the Company's long-term strategic growth initiatives.

At March 31, 2014, total common shares issued and outstanding were 94,758,915.

The financial statements and MD&A will be available at www.nightingalemd.com and filed on www.sedar.com on July 31, 2014.  This press release should be read in conjunction with Nightingale's Consolidated Financial Statements and the accompanying Management Discussion and Analysis for the year ended March 31, 2014.

Notice of Conference Call
Nightingale will host a conference call on Friday, August 1, 2014 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, and reference conference ID 82566313 prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Friday, August 8, 2014. To access the archived conference call, dial [phone] or [phone] and enter reference 82566313#. 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				Year Ended
				Mar 31, 2014		Mar 31, 2013		Mar 31, 2014		Mar 31, 2013
				$		$		$		$
Income (Loss) and Comprehensive Income (Loss)				(560,353)		892,659		(2,989,256)		1,992,555
Adjustments for
	Current Tax Expense (Recovery)			30,655		(1,009,423)		95,405		(1,079,452)
	Other Income (Loss)			139,967		(28,268)		481,433		(23,029)
	Interest			355,245		232,079		1,027,193		537,598
	Depreciation and Amortization			395,190		439,861		1,524,108		1,625,089
	Stock-Based Compensation			50,185		10,135		128,297		139,793
	Other financing gain (loss)			(22,177)		(134,942)		658,963		(134,942)
	Acquisition, Integration and Other			-		625,833		-		675,804
Adjusted EBITDA				388,712		1,027,934		926,143		3,733,416

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 Ended				Year Ended
				Mar 31, 2014		Mar 31, 2013		Mar 31, 2014		Mar 31, 2013
				$		$		$		$
Non-Recurring Revenue				1,151,761		2,593,780		4,285,147		10,324,405
Recurring Revenue				2,816,806		2,605,505		11,011,861		10,600,447
				3,968,567		5,199,285		15,297,008		20,924,852

About Nightingale
For more than a decade, Nightingale (TSX-V: NGH) has been delivering innovative cloud-based Electronic Health Record (EHR) and Practice Management solutions to healthcare organizations across the United States and Canada. Our goal is to uncomplicate the day-to-day challenges of healthcare providers. We achieve this by creating software that is truly intuitive—minimizing training and maximizing adoption. We believe so strongly in building easy-to-use software that we structured our entire product team around user-centric design. Our clients are benefiting from this focus through a well-supported and robust solution that presents a holistic view of a person's well-being in a simple, clean interface, so that the best health decisions can be made. Nightingale – One Patient. One Record. 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 TWELVE MONTHS ENDED MARCH 31, 2014 AND MARCH 31, 2013
Unaudited (Canadian Dollars)

					Year Ended		Year Ended
					March 31, 2014		March 31, 2013
					$		$
Revenue					15,297,008		20,924,852
Cost of sales					1,762,503		2,342,467
Gross profit					13,534,505		18,582,385
Expenses
	General and administration				3,313,888		3,489,350
	Sales and marketing				2,808,039		3,366,065
	Research and development				3,523,188		5,500,278
	Client services				4,615,652		4,258,158
	Business acquisition, integration and other				-		675,804
					14,260,767		17,289,655
Operating income (loss)					(726,262)		1,292,730
	Interest				1,027,193		537,598
	Other finance loss				658,963		(134,942)
	Foreign currency loss				481,433		(23,029)
Income (loss) before tax					(2,893,851)		778,161
Current tax expense (benefit)					95,405		(1,079,452)
Income (loss) and comprehensive income (loss)					(2,989,256)		1,857,613
Basic and diluted income (loss) per share
	Basic and diluted income (loss) per share				$                (0.04)		$                  0.02
	Weighted number of common shares - basic				81,173,948		76,310,915
	Weighted number of common shares - diluted				81,173,948		92,882,264

CONDENSED CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 2014
Unaudited (Canadian Dollars)

					March 31, 2014		March 31, 2013
					$		$
ASSETS
Current assets
	Cash and cash equivalents				532,038		3,491,780
	Accounts receivable and unbilled accounts receivable				5,016,958		5,820,214
	Other receivables				82,958		196,127
	Prepaid expenses				289,379		415,958
					5,921,333		9,924,079
Long-term assets
	Unbilled accounts receivable				415,124		339,752
	Financial asset				149,731		808,694
	Property and equipment				1,225,676		857,270
	Intangible assets				11,153,240		7,974,606
	Goodwill				4,792,399		4,792,399
Total assets					23,657,503		24,696,800
LIABILITIES
Current liabilities
	Line of credit				1,000,000		1,000,000
	Accounts payable and accrued liabilities				5,122,303		4,271,996
	Current portion of deferred revenue				3,791,558		4,176,876
	Current portion of finance lease obligations				104,731		64,397
	Current portion of term loan				1,634,461		1,521,720
	Current portion of convertible debentures				-		1,064,428
					11,653,053		12,099,417
Long-term liabilities
	Term loan				1,403,557		2,686,704
	Convertible debentures				5,015,180		5,353,050
	Deferred revenue				978,015		1,713,326
	Finance lease obligations				82,745		36,739
Total liabilities					19,132,550		21,889,236
SHAREHOLDERS EQUITY
	Capital stock				34,177,890		29,629,683
	Contributed surplus				5,939,511		5,781,073
	Equity portion of convertible debentures				811,558		811,558
	Warrants				4,407		4,407
	Deficit				(36,408,413)		(33,419,157)
					4,524,953		2,807,564
Total liabilities and shareholders equity					23,657,503		24,696,800

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED MARCH 31, 2014 AND MARCH 31, 2013
Unaudited (Canadian Dollars)

						Year Ended		Year Ended
						Mar 31, 2014		Mar 31, 2013
						$		$
Cash flow from operating activities
	Income (loss) from operations:					(2,989,256)		1,992,555
	Adjustments for:
		Depreciation and amortization				1,524,108		1,625,089
		Charge to bad debt expense				55,847		63,115
		Amortization of transaction costs related to debt financing				230,791		65,310
		Tax recovery on warrant expiry				-		(399,229)
		Stock based compensation				128,297		139,793
		Other financial gain				658,963		(134,942)
		Unrealized foreign exchange (gain) loss				427,263		(53,507)
		Interest accretion				288,556		222,159
						324,569		3,520,343
	Changes in non-cash working capital balances
		Accounts receivable and unbilled accounts receivable				960,294		(3,598,762)
		Prepaid expenses				126,579		165,635
		Other receivables				(43,169)		(91,211)
		Other assets				(75,372)		(339,752)
		Accounts payable and accrued liabilities				754,718		767,762
		Income taxes payable				20,000		(686,921)
		Deferred revenue				(1,120,629)		(1,418,421)
Cash flows provided by (used in) operating activities						946,990		(1,681,327)
Cash flow from investing activities
	Purchase of property and equipment					(509,374)		(711,684)
	Capitalized development costs					(4,414,489)		(3,455,981)
Cash flows used in investing activities						(4,923,863)		(4,167,665)
Cash flow from financing activities
	Proceeds from issuance of common stock					2,436,207		-
	Repayment of capital lease obligations					(60,946)		(88,486)
	Proceeds of convertible debentures					1,428,628		4,705,723
	Proceeds from line of credit borrowing, net					-		330,000
	Proceeds from landlord inducement					-		120,000
	Repayment of convertible debentures					(1,141,000)		-
	Proceeds from term loan (net of costs)					(28,232)		1,946,850
	Repayment of term loan					(1,620,574)		(882,087)
Cash flows provided by (used in) financing activities						1,014,083		6,132,000
Foreign exchange losses on cash in foreign currency						3,048		9,714
Net increase (decrease) in cash						(2,959,742)		292,722
Cash and cash equivalents
	Beginning of period					3,491,780		3,199,058
	End of period					532,038		3,491,780
	Interest Paid					1,099,530		682,671
	Taxes Paid (Refunded)					75,405		11,689

OVERALL PERFORMANCE, RESULTS OF OPERATIONS AND FINANCIAL CONDITION

					Year	Quarter Ended				Year
In $000's	Quarter Ended				Ended					Ended
(except per	June 30,	Sept. 30,	Dec. 31,	March 31,	March 31,	June 30,	Sept. 30,	Dec. 31,	March 31,	March 31,
share data)	2012	2012	2012	2013	2013	2013	2013	2013	2014	2014
	$	$	$	$	$	$	$	$		$
Revenue
Recurring	2,705	2,665	2,625	2,606	10,601	2,602	2,794	2,798	2,817	11,012
Non-recurring	2,856	2,403	2,471	2,594	10,324	1,167	964	1,002	1,152	4,285
Total	5,561	5,068	5,096	5,200	20,925	3,769	3,758	3,800	3,969	15,297
Software
Business	5,480	4,993	5,014	5,145	20,632	3,767	3,755	3,800	3,967	15,288
Gross Profit	4,940	4,570	4,336	4,736	18,582	3,338	3,259	3,360	3,576	13,534
Operating
Expenses	4,516	4,040	3,949	4,784	17,289	3,618	3,396	3,614	3,633	14,261
Adjusted
EBITDA	916	962	828	1,027	3,733	131	266	140	389	926
Operating
Income (Loss)	425	529	387	(48)	1,293	(279)	(136)	(254)	(57)	(726)
Income (Loss) and
Comprehesive
Income (Loss)	250	624	227	893	1,994	(780)	(245)	(1,404)	(560)	(2,989)
Per share
Basic	$              -	$       0.01	$              -	$       0.01	$        0.03	$     (0.01)	$              -	$     (0.01)	$     (0.01)	$     (0.04)
Diluted	$              -	$       0.01	$              -	$       0.01	$        0.03	$     (0.01)	$              -	$     (0.01)	$     (0.01)	$     (0.04)
Weighted Avg. #
of Common Shares
Basic	76,311	76,311	76,311	76,311	76,311	76,311	76,311	77,518	94,759	81,174
Diluted	82,360	90,086	90,083	92,870	92,882	76,311	76,311	77,518	94,759	81,174
Total Assets	17,962	19,761	19,059	24,697	24,697	22,787	23,493	23,709	23,657	23,657
Total Long-Term
Liabilities	7,244	8,421	7,861	9,790	9,790	9,386	10,083	7,651	7,479	7,479
Total Deferred
Revenue	7,479	6,605	5,913	5,890	5,890	5,837	5,473	5,233	4,770	4,770

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]