Nightingale Reports Fiscal 2014 Third Quarter Results

MARKHAM, ON, Feb. 6, 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 and nine months ended December 31, 2013.

Q3 Fiscal 2014 Financial and Operational Summary

• Revenue was $3.8 million, down 25% compared to $5.1 million in Q3 F2013, primarily reflecting a decrease in software license revenues from enterprise contracts as well as a decrease in professional services revenues.
• Gross profit was $3.4 million, or 88% of revenue, compared to $4.3 million, or 85% of revenue, in Q3 F2013 and $3.3 million, or 87% of revenue, in Q2 F2014.
• Operating Expenses, excluding stock based compensation, depreciation and amortization costs were $3.2 million compared to $3.5 million in Q3 F2013 and $3.0 million in Q2 F2014.
• Adjusted EBITDA¹ was $0.1 million, 4% of revenue, down from $0.8 million, or 16% of revenue in Q3 F2013 and down from $0.3 million in Q2 F2014, or 7% of revenue.
• Net loss was $1.4 million compared to net income of $0.2 million in Q3 F2013 and net loss of $0.2 million in Q2 F2014.
• Cash used by operations was $0.6 million compared to cash used by operations of $0.6 million in Q3 F2013.
• Total deferred revenue was $5.2 million down from $5.9 million at March 31, 2013.
• On November 27, 2013, the Company completed a $2,500,000 private placement pursuant to which a convertible note payable was issued to a director of the Company. The Company's shareholders approved the conversion of this note into 10,000,000 shares of common stock at a meeting held on December 31, 2013.

Fiscal 2014 YTD Financial and Operational Summary

• Revenue was $11.3 million, down 28% compared to $15.7 million for the same period in F2013, primarily reflecting a decrease in software license revenues from enterprise contracts.
• Gross profit was $10.0 million, or 88% of revenue, compared to $13.9 million, or 88% of revenue for the same period in F2013.
• Operating Expenses, excluding stock based compensation, depreciation and amortization costs were $9.4 million compared to $11.1 million for the same period in F2013.
• Adjusted EBITDA¹ was $0.5 million, 5% of revenue, down from $2.7 million, or 17% of revenue for the same period in F2013.
• Net loss was $2.4 million compared to net income of $1.1 million for the same period in F2013.
• Cash used by operations was $0.6 million compared to cash used in operations of $0.9 million in the same period in F2013.

"During our third quarter, our focus continued to be on building out and launching our next generation EHR platform for the US and Canadian markets, we made material progress in our goal of driving profitability from recurring revenue," said Sam Chebib, President and CEO of Nightingale. "The initial feedback from our pilot sites has been very encouraging, and validates our strategy to offer the market a cutting edge, true cloud-based platform, deployed on a SaaS self-service model. We expect our SaaS-based revenue to start making a meaningful impact on our results in the next two to three fiscal quarters."

"While not reflected in this quarter's results, we made significant strides with our partners at Prompt Alert and NetSmart," continued Mr. Chebib. "The trial we ran with a select group of clients using Prompt Alert's patient communications platform, has validated the value proposition of this offering, which is ready for wider commercial release in our fourth quarter. The NetSmart sales force is now fully trained on our offerings, and we anticipate gains in this area next quarter as well. We are actively exploring other partnerships to leverage our install base and look forward to announcing additional success in the near future."

Fiscal 2014 Third Quarter and YTD 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 Q3 F2014 was $3.8 million, a decrease of $1.3 million from $5.1 million for Q3 F2013. YTD F2014 revenue was $11.3 million compared to $15.7 million for the same period in 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 Q3 F2014 was $2.8 million (74% of revenue), an increase of $0.2 million, or 7%, from $2.6 million (52% of revenue) in Q3 F2013.  Recurring revenue for YTD F2014 was $8.2 million (72% of revenue), an increase of $0.2 million, or 3% from $8.0 million (51% of revenue) for the same period in F2013.  The increase in Recurring Revenue in Q3 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 Q3 F2014, gross margin was 88% ($3.4 million gross profit) compared to 90% ($4.3 million gross profit) for Q3 F2013.  For YTD F2014, gross margin was 88% ($10.0 million) compared to 88% ($13.8 million) for the same period in F2013.

Operating expenses for Q3 F2014 decreased 8% to $3.2 million (85% of revenue), excluding charges for stock based compensation and depreciation and amortization, compared to operating expenses of $3.5 million (69% of revenue), excluding charges for stock based compensation and depreciation and amortization, for Q3 F2013. Operating expenses for YTD F2014 decreased 8% to $9.4 million (83% of revenue), excluding charges for stock based compensation and depreciation and amortization, compared to operating expenses of $11.2 million (71% of revenue), excluding charges for stock based compensation and depreciation and amortization, for the same period in F2013.

For Q3 F2014, Adjusted EBITDA was $0.1 million (4% of revenue), compared to $0.8 million (16% of revenue) in Q3 F2013. For YTD F2014, Adjusted EBITDA was $0.5 million (5% of revenue), compared to $2.7 million (17% of revenue) for the same period in F2013.

The impact of fluctuations in the rate of exchange between the US Dollar and Canadian Dollar on Q3 F2014 EBITDA were negligible.  The $0.2 million loss from foreign currency in the YTD F2013 period 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 Q3 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 Q3 F2014, net loss was $1.4 million compared to net income of $0.2 million in Q3 F2013. For the YTD F2014 period, net loss was $2.4 million compared to net income of $1.0 million for the same period in F2013.

Cash and cash equivalents on December 31, 2013 were $0.7 million, a decrease of $2.8 million, or 81%, 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 December 31, 2013, 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 February 6, 2014.  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 December 31, 2013.

Stock Option Grant
In February 2014, Nightingale granted 1,415,000 options to certain employees and Officers of the Company, pursuant to the Company's employee stock option plan (the "Plan"). Of the total options granted, 800,000 were granted to Officers of the Company.

Each option under the Plan is exercisable to acquire one common share at a price of $0.25 per share. The options granted have been approved by the Board of Directors and are due to expire on February 4, 2019. The Plan has been approved by the Company's shareholders.

Notice of Conference Call
Nightingale will host a conference call on Thursday, February 6, 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 to ensure participation. The conference call will be archived for replay until Thursday, February 13, 2014. To access the archived conference call, dial 416-849-0833 or 1-855-859-2056 and enter reference 54076703#. 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				Nine Months Ended
		Dec 31, 2013		Dec 31, 2012		Dec 31, 2013		Dec 31, 2012
		$		$		$		$
Income (Loss) and Comprehensive Income (Loss)		(1,403,797)		226,605		(2,428,903)		873,291
Adjustments for
	Current Tax Expense (Recovery)	236		1,621		64,740		(71,650)
	Other Income (Loss)	125,737		29,943		341,466		(24,704)
	Interest	337,590		128,616		671,948		176,903
	Depreciation and Amortization	366,964		413,333		1,128,918		771,895
	Stock-Based Compensation	26,836		27,855		78,112		101,803
	Other financing loss	686,607		-		681,140		-
	Acquisition, Integration and Other	-		-		-		49,971
Adjusted EBITDA		140,173		827,973		537,421		1,877,509

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				Six Months Ended
						Dec 31, 2013		Dec 31, 2012		Dec 31, 2013		Dec 31, 2012
						$		$		$		$
Non-Recurring Revenue						1,002,674		2,470,832		3,133,386		7,730,625
Recurring Revenue						2,797,823		2,625,335		8,195,055		7,994,942
						3,800,497		5,096,167		11,328,441		15,725,567

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 THREE AND NINE MONTHS ENDED DECEMBER 31, 2013
Unaudited (Canadian Dollars)

		Three Months Ended				Nine Months Ended
		Dec 31, 2013		Dec 31, 2012		Dec 31, 2013		Dec 31, 2012
		$		$		$		$
Revenue		3,800,497		5,096,167		11,328,441		15,725,567
Cost of sales		440,603		760,078		1,370,447		1,879,197
Gross profit		3,359,894		4,336,089		9,957,994		13,846,370
Expenses
	General and administration	775,359		875,968		2,404,615		2,594,069
	Sales and marketing	813,987		791,783		2,089,117		2,635,919
	Research and development	887,784		1,227,111		2,712,397		4,113,542
	Client services	1,136,391		1,054,442		3,421,474		3,112,244
	Business acquisition, integration and other	-		-		-		49,971
		3,613,521		3,949,304		10,627,603		12,505,745
Operating income (loss)		(253,627)		386,785		(669,609)		1,340,625
	Interest	337,590		128,616		671,948		305,519
	Other finance loss	686,607		-		681,140		-
	Foreign currency loss	125,737		29,943		341,466		5,239
Income (loss) before tax		(1,403,561)		228,226		(2,364,163)		1,029,867
Current tax expense (benefit)		236		1,621		64,740		(70,029)
Income (loss) and comprehensive income (loss)		(1,403,797)		226,605		(2,428,903)		1,099,896
Basic and diluted income (loss) per share
	Basic and diluted income (loss) per share	($0.02)		$0.00		($0.03)		$0.01
	Weighted number of common shares - basic	77,517,772		76,310,915		76,711,733		76,310,915
	Weighted number of common shares - diluted	77,517,772		90,085,652		76,711,733		90,092,882

 

CONDENSED CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 2013
Unaudited (Canadian Dollars)

			Dec 31, 2013		March 31, 2013
			$		$
ASSETS
Current assets
	Cash and cash equivalents		679,386		3,491,780
	Accounts receivable and unbilled accounts receivable		6,099,852		5,820,214
	Other receivables		9,183		196,127
	Prepaid expenses		496,949		415,958
			7,285,370		9,924,079
Long-term assets
	Unbilled accounts receivable		-		339,752
	Financial asset		127,554		808,694
	Property and equipment		990,987		857,270
	Intangible assets		10,512,471		7,974,606
	Goodwill		4,792,399		4,792,399
Total assets			23,708,781		24,696,800
LIABILITIES
Current liabilities
	Line of credit		1,000,000		1,000,000
	Accounts payable and accrued liabilities		4,038,531		4,271,996
	Current portion of deferred revenue		4,256,820		4,176,876
	Current portion of finance lease obligations		88,060		64,397
	Current portion of term loan		1,639,717		1,521,720
	Current portion of convertible debentures		-		1,064,428
			11,023,128		12,099,417
Long-term liabilities
	Term loan		1,668,869		2,686,704
	Convertible debentures		4,963,929		5,353,050
	Deferred revenue		975,731		1,713,326
	Finance lease obligations		42,003		36,739
Total liabilities			18,673,660		21,889,236
SHAREHOLDERS EQUITY
	Capital stock		34,177,890		29,629,683
	Contributed surplus		5,889,326		5,781,073
	Equity portion of convertible debentures		811,558		811,558
	Warrants		4,407		4,407
	Deficit		(35,848,060)		(33,419,157)
			5,035,121		2,807,564
Total liabilities and shareholders equity			23,708,781		24,696,800

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2013
Unaudited (Canadian Dollars)

			Three Months Ended				Nine Months Ended
			Dec 31, 2013		Dec 31, 2012		Dec 31, 2013		Dec 31, 2012
			$		$		$		$
Cash flow from operating activities
	Income (loss) from operations:		(1,403,797)		226,605		(2,428,903)		1,099,896
	Adjustments for:		-
		Depreciation and amortization	366,965		413,330		1,128,919		1,185,225
		Charge to bad debt expense	9,890		2,474		35,293		23,115
		Amortization of transaction costs related to debt financing	70,680		12,736		169,855		42,097
		Tax recovery on warrant expiry	-		-		-		(87,682)
		Stock based compensation	26,837		27,855		78,113		129,658
		Other financial gain	686,607		-		681,140		-
		Unrealized foreign exchange (gain) loss	100,616		39,677		235,811		(39,498)
		Interest accretion	152,430		51,648		274,991		95,092
			10,228		774,325		175,219		2,447,903
	Changes in non-cash working capital balances
		Accounts receivable and unbilled accounts receivable	(398,623)		(279,786)		(121,338)		(1,353,391)
		Prepaid expenses	143,680		99,645		(80,991)		144,658
		Other receivables	67,807		10,330		30,323		23,509
		Other assets	381,538		(151,280)		339,752		(588,511)
		Accounts payable and accrued liabilities	(547,268)		(381,354)		(280,558)		(219,890)
		Income taxes payable	-		8,057		-		(1,790)
		Deferred revenue	(240,365)		(691,522)		(657,651)		(1,395,225)
Cash flows used in operating activities			(583,003)		(611,585)		(595,244)		(942,737)
Cash flow from investing activities
	Purchase of property and equipment		(128,875)		(13,858)		(256,499)		(708,881)
	Capitalized development costs		(1,293,294)		(962,946)		(3,477,479)		(2,695,796)
Cash flows used in investing activities			(1,422,169)		(976,804)		(3,733,978)		(3,404,677)
Cash flow from financing activities
	Proceeds from issuance of common stock		2,436,207		-		2,436,207		-
	Repayment of capital lease obligations		(14,752)		(27,366)		(37,596)		(80,069)
	Proceeds of convertible debentures		(11,277)		-		1,428,628		2,689,967
	Proceeds from line of credit borrowing, net		-		239,000		-		129,000
	Proceeds from landlord inducement		-		-		-		120,000
	Repayment of convertible debentures		-		-		(1,141,000)		-
	Repayment of term loan		(382,383)		(222,709)		(1,172,057)		(665,246)
Cash flows provided by (used in) financing activities			2,027,795		(11,075)		1,514,182		2,193,652
Foreign exchange losses on cash in foreign currency			882		4,108		2,646		9,264
Net increase (decrease) in cash			23,505		(1,595,356)		(2,812,394)		(2,144,498)
Cash and cash equivalents
	Beginning of period		655,881		2,649,916		3,491,780		3,199,058
	End of period		679,386		1,054,560		679,386		1,054,560
	Interest Paid		357,223		132,790		872,363		249,188
	Taxes Paid (Refunded)		236		1,621		64,740		(70,029)

OVERALL PERFORMANCE, RESULTS OF OPERATIONS AND FINANCIAL CONDITION

		Quarter	Year					Year
In $000's		Ended	Ended	Quarter Ended				Ended	Quarter Ended
(except per		March 31,	March 31,	June 30,	Sept. 30,	Dec. 31,	March 31,	March 31,	June 30,	Sept. 30,	Dec. 31,
share data)		2012	2012	2012	2012	2012	2013	2013	2013	2013	2013
		$	$	$	$	$	$	$	$	$	$
Revenue
	Recurring	2,889	10,192	2,705	2,665	2,625	2,606	10,601	2,602	2,794	2,798
	Non-recurring	2,487	7,888	2,856	2,403	2,471	2,594	10,324	1,167	964	1,002
	Total	5,376	18,080	5,561	5,068	5,096	5,200	20,925	3,769	3,758	3,800
	Software
	Business	5,017	16,422	5,480	4,993	5,014	5,145	20,632	3,767	3,755	3,800
Gross Profit		4,509	15,029	4,940	4,570	4,336	4,736	18,582	3,338	3,259	3,360
Operating
	Expenses	4,804	15,898	4,516	4,040	3,949	4,784	17,289	3,618	2,993	3,614
Adjusted
	EBITDA	231	1,276	916	962	828	1,027	3,733	131	266	140
Operating
Income (Loss)		(295)	(867)	425	529	387	(48)	1,293	(279)	(136)	(254)
Income (Loss) and
Comprehesive
Income (Loss)		(285)	(1,218)	250	624	227	893	1,994	(780)	(245)	(1,404)
Per share
	Basic	$ -	$ (0.02)	$ -	$ 0.01	$ -	$ 0.01	$ 0.03	$ (0.01)	$ -	$ (0.01)
	Diluted	$ -	$ (0.02)	$ -	$ 0.01	$ -	$ 0.01	$ 0.03	$ (0.01)	$ -	$ (0.01)
Weighted Avg. #
of Common Shares
	Basic	76,311	76,311	76,311	76,311	76,311	76,311	76,311	76,311	76,311	77,518
	Diluted	76,311	76,311	82,360	90,086	90,083	92,870	92,882	76,311	76,311	77,518
Total Assets		17,204	17,204	17,962	19,761	19,059	24,697	24,697	22,787	23,493	23,709
Total Long-Term
	Liabilities	7,434	7,434	7,244	8,421	7,861	9,790	9,790	9,386	10,083	7,651
Total Deferred
	Revenue	7,309	7,309	7,479	6,605	5,913	5,890	5,890	5,837	5,473	5,233

 

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]