Optiva Inc. Reports Third Quarter 2018 Financial Results

 - Turnaround on track with industry-changing product innovation -

TORONTO, Aug. 8, 2018 /CNW/ - Optiva Inc. (TSX: OPT), an innovative software company that delivers mission-critical monetization and subscriber management solutions to leading communication service providers (CSPs) globally, reported results for its fiscal third quarter ended June 30, 2018. (All figures are in U.S. dollars unless otherwise stated.)

Third Quarter 2018 Financial Highlights

(Comparisons made between fiscal Q3FY2018 and fiscal Q3FY2017 results, unless otherwise noted)

• Revenue totaled $32.0 million compared to $32.6 million;
• Gross profit was $22.4 million (70% gross margin) compared to $18.6 million (57% gross margin);
• Recurring revenue was 71% of revenue, compared to 67%;
• Net loss was $3.5 million, or $0.68 loss per share compared to a net loss of $26.7 million, or $12.33 loss per share.

"In Q3, we continued our focus on the execution of our Strategic Plan," said Danielle Royston, CEO of Optiva. "The Customer Success program is progressing, with several, key project milestones delivered to customers. We have strengthened our focus on R&D, and we are delivering on our $100 million investment promise to revitalize our products. Most notably, we announced the availability of Optiva Charging Engine™ on KubernetesⓇ and Google CloudⓇ Spanner. While we have more challenges ahead of us, we are excited about the opportunity of bringing cloud to telcos and being regarded as the disruptive, innovative up-and-comer."

Business Highlights

• Tier 1 APAC CSP awards Optiva a multi-year, multi-million dollar managed services extension to support rapidly growing, critical data platform;
• Strengthened the leadership team with the appointment of Ken Taylor as Chief Financial Officer;
• Made significant progress on our cloud-focused roadmap for our carrier-grade charging engine, Optiva Charging Engine (OCE), including announcing the availability of OCE on Google Cloud Spanner and Kubernetes-enabled data centers;
• Transitioned out of two colocation data centres to Google Cloud Platform, creating a more scalable, secure and cost-efficient cloud environment to support our customers; and
• Supported our effort to become a simpler, more efficient company via closure of two offices and four entities.

Please refer to the section regarding Forward-Looking Statements below, which form an integral part of this release. These results, along with the annual audited consolidated financial statements and the Company's MD&A, are available on the Company's website at www.optiva.com and on SEDAR at www.sedar.com.

Conference Call

The Company will host a conference call tomorrow, August 9, 2018, to discuss its Q3 2018 results. CEO Danielle Royston and Interim CFO Anin Basu will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management's discussion.

Date: Thursday, August 9, 2018
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Dial-In Number: 1 [phone]
International: 1 [phone]
Conference ID#: 1878136

The webcast will be available for replay via Optiva's investor relations website (www.optiva.com) or https://bit.ly/2LnNp6l.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

A replay of the call will be available until 12:00 midnight (EST) Thursday, August 16, 2018.

Toll-Free Replay Number: 1 [phone]
International Replay Number: 1 [phone]
Replay PIN: 1878136

Media Inquiries: [email protected]

About Optiva Inc.

Optiva Inc. monetizes today's digital world for communications service providers. Our portfolio of subscriber management software enables real-time billing, charging, policy management and user experience functionality that is mission-critical for our customers' growth and innovation. Available on-premise or in the cloud, Optiva™ solutions are designed to deliver the most impact for the best value. Our deep market knowledge and powerful analytical insights coupled with the Customer Success program ensure our customers have what they need to achieve their strategic business goals. Established in 1999, Optiva Inc. can be found on the Toronto Stock Exchange (TSX: OPT). For more information, please go to www.optiva.com.

Non-IFRS Measures

The Company reports "Recurring revenue," which is not a financial measure calculated and presented in accordance with International Financial Reporting Standards (IFRS), should not be considered in isolation or as a substitute to revenue. Recurring revenue includes revenue from support and maintenance agreements, long term service agreements, and term-based product licenses and software subscription.

Other companies (including competitors) may define recurring revenue differently. The Company presents recurring revenue because management believes this to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in Optiva's industry. Management uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Optiva nor is it intended to be predictive of potential future results.

Forward-Looking Statements 

Certain statements in this document may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this document, such statements use such words as "may," "will," "expect," "continue," "believe," "plan," "intend," "would," "could," "should," "anticipate" and other similar terminology. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Persons reading this news release are cautioned that such information may not be appropriate for other purposes. Such forward-looking statements include statements respecting revenue visibility for the Fiscal 2018; the impact of the challenging macro environment on the Company's revenue; the impact of our restructuring initiatives and ongoing cost management efforts on our results in  next year; as well as statements regarding Optiva's future plans, objectives or performance for the current period and subsequent periods and regarding the markets for our products. These statements reflect current assumptions and expectations regarding future events and operating performance and speak only as of the date of this document. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to, assumptions respecting : (i) the conversion of sales pipeline into orders and orders into revenue based on the extent and timing of historical conversion; (ii)  the anticipated mix of the sale of products and services of the Company and associated margin being consistent with that realized in the past; (iii) the ability of Optiva to bring new products and services to market and to increase sales; (iv) the strength of the Company's product development pipeline; (v) the estimated size and growth prospects of the markets Optiva seeks to address; (vi) the Company's competitive position in those markets and its ability to take advantage of future opportunities in those markets; (vii) the benefits of the Company's products and services to be realized by its customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services; (ix) the Company's financial condition and capital requirements; * the stability of general economic and market conditions; (xi) currency exchange rates and interest rates; (xii) capital markets continuing to provide the Company with access to capital. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: the failure of demand for Optiva's products to develop as anticipated, the failure to obtain customer orders or meet customer requirements, the inability of Optiva's products to perform as expected, the inability of Optiva to achieve anticipated cost savings in the time frames and to the extent anticipated, unanticipated negative impacts on customer service or product development as a result of costs savings implemented, a material adverse change in the affairs of Optiva, and the factors discussed under the "Risk Factors" section of Optiva's most recently filed AIF which is available on SEDAR at www.sedar.com and on Optiva's web-site at www.optiva.com. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Optiva does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

OPTIVA INC.
Condensed Consolidated Interim Statements of Financial Position
(Expressed in U.S. dollars)
(Unaudited)
			June 30,		September 30,
			2018		2017
Assets
Current assets:
	Cash and cash equivalents	$	54,614,838	$	110,891,744
	Trade accounts and other receivables		21,231,568		26,329,505
	Unbilled revenue		15,613,837		17,928,405
	Prepaid expenses		1,876,281		2,205,887
	Income taxes receivable		5,573,290		4,329,580
	Other assets		394,030		–
	Inventories		1,095,363		1,101,929
	Total current assets		100,399,207		162,787,050
Restricted cash			3,578,134		4,553,623
Property and equipment			728,948		3,457,611
Deferred income taxes			2,215,686		2,328,129
Investment tax credits			355,274		374,387
Other assets			–		1,353,968
Intangible assets			19,389,379		25,505,620
Goodwill			32,271,078		32,271,078
Total assets		$	158,937,706	$	232,631,466
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
	Trade payables	$	13,010,838	$	11,229,091
	Accrued liabilities		22,868,028		16,853,190
	Provisions		24,179,144		18,653,817
	Income taxes payable		195,677		322,403
	Deferred revenue		18,236,192		15,572,620
	Total current liabilities		78,489,879		62,631,121
Deferred revenue			1,041,922		894,409
Other liabilities			1,290,155		807,390
Pension and other long-term employment benefit plans			17,285,292		17,886,630
Provisions			581,131		824,626
Preferred shares			57,433,340		59,670,913
Series A Warrant			19,439,944		29,622,772
Deferred income taxes			120,000		120,000
Total liabilities			175,681,663		172,457,861
Shareholders' equity (deficit):
	Share capital		248,680,325		248,680,325
	Standby Warrant		997,500		997,500
	Treasury stock		(141,917)		(141,917)
	Contributed surplus		13,131,426		11,826,454
	Deficit		(270,949,868)		(192,727,334)
	Accumulated other comprehensive loss		(8,461,423)		(8,461,423)
	Total shareholders' equity (deficit)		(16,743,957)		60,173,605
Total liabilities and shareholders' equity		$	158,937,706	$	232,631,466

OPTIVA INC.
Condensed Consolidated Interim Statements of Comprehensive Loss
(Expressed in U.S. dollars, except per share and share amounts)
(Unaudited)
			Three months ended				Nine months ended
			June 30,				June 30,
			2018		2017		2018		2017
Revenue:
		Software, services and other	$	10,358,089	$	12,387,266	$	29,376,407	$	39,855,491
		Support and subscription		21,676,078		20,189,307		64,952,705		64,295,923
				32,034,167		32,576,573		94,329,112		104,151,414
Cost of revenue				9,676,473		13,964,206		41,833,923		44,295,030
Gross profit				22,357,694		18,612,367		52,495,189		59,856,384
Operating expenses:
		Sales and marketing		3,116,201		4,384,291		8,957,567		13,947,590
		General and administrative		5,928,544		10,742,398		24,552,985		27,084,194
		Research and development		17,344,922		10,622,543		47,410,763		29,110,061
		Restructuring costs		1,552,824		14,278,115		50,783,369		18,358,589
				27,942,491		40,027,347		131,704,684		88,500,434
Loss from operations				(5,584,797)		(21,414,980)		(79,209,495)		(28,644,050)
Foreign exchange gain (loss)				2,518,468		(2,449,022)		1,656,895		(3,114,891)
Other expense				–		–		–		(1,450,928)
Finance income				116,665		–		270,867		230,205
Finance recovery (cost)				1,149,825		(1,530,806)		2,352,921		(10,912,651)
Loss before income taxes				(1,799,839)		(25,394,808)		(74,928,812)		(43,892,315)
Income tax expense (recovery):
		Current		1,726,038		1,463,390		3,302,783		4,862,036
		Deferred		14,234		(109,199)		(9,061)		(387,604)
				1,740,272		1,354,191		3,293,722		4,474,432
Net Loss and comprehensive loss			$	(3,540,111)	$	(26,748,999)	$	(78,222,534)	$	(48,366,747)
Loss per subordinate voting share*:
		Basic	$	(0.68)	$	(12.32)	$	(14.95)	$	(22.32)
		Diluted		(0.68)		(12.32)		(14.95)		(22.32)
Weighted average number of
	subordinate voting shares*:
		Basic		5,233,047		2,170,338		5,233,047		2,167,422
		Diluted		5,233,047		2,170,338		5,233,047		2,167,422
* Note – During the quarter ended June 30, 2018 the Company completed the Share Consolidation. All share and per share numbers, options, restricted and performance share units and deferred share units, including comparatives, have been adjusted to reflect the effect of the Share Consolidation.

OPTIVA INC.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
				Three months ended				Nine months ended
				June 30,				June 30,
					2018		2017		2018		2017
Cash provided by (used in):
Operating activities:
	Loss for the period			$	(3,540,111)	$	(26,748,999)	$	(78,222,534)	$	(48,366,747)
	Adjustments for:
		Depreciation of property and equipment			24,344		658,921		2,328,849		2,240,675
		Amortization of intangible assets			1,526,153		2,221,673		6,156,475		6,656,214
		Finance income			(116,665)		–		(270,867)		(230,205)
		Finance costs			(1,149,825)		1,530,806		(2,352,921)		10,912,651
		Pension			(940,537)		1,497,408		(601,338)		1,454,736
		Income tax expense			1,740,272		1,354,191		3,293,722		4,474,432
		Unrealized foreign exchange loss (gain)			630,967		(875,970)		698,880		520,641
		Share-based compensation			304,332		666,937		2,293,159		(71,990)
		Change in provisions			(21,209,638)		9,268,033		5,281,832		(2,386,841)
		Loss on disposal of property and equipment			306,163		–		416,795		–
		Change in non-cash operating working capital			7,413,024		13,517,929		18,959,888		12,987,877
					(15,011,521)		3,090,929		(42,018,060)		(11,808,557)
		Interest paid			(31,940)		(42,745)		(108,760)		(209,247)
		Interest received			61,071		48,718		218,361		260,915
		Income taxes paid			(2,169,941)		(2,138,455)		(4,947,171)		(6,382,229)
					(17,152,331)		958,447		(46,855,630)		(18,139,118)
Financing activities:
		Proceeds from exercise of stock options			–		846		–		202,536
		Interest paid on loans and borrowings			–		–		–		(2,330,904)
		Repayment of loans and borrowings			–		–		–		(52,750,000)
		Payment of dividends			(2,000,000)		–		(9,640,670)		–
		Issue of preferred shares and
			warrant net of transaction costs		–		–		–		79,861,542
					(2,000,000)		846		(9,640,670)		24,983,174
Investing activities:
		Purchase of property and equipment			–		–		(5,538)		(309,154)
		Purchase of intangible assets			–		–		(9,985)		–
		Decrease in restricted cash			88,817		(793,969)		975,489		261,790
					88,817		(793,969)		959,966		(47,364)
Effect of foreign exchange rate changes on
	cash and cash equivalents				(876,230)		1,242,266		(740,572)		798,338
Increase (decrease) in cash and cash
	equivalents				(19,939,744)		1,407,590		(56,276,906)		7,595,030
Cash and cash equivalents,
	beginning of period				74,554,582		43,267,950		110,891,744		37,080,510
Cash and cash equivalents,
	end of period			$	54,614,838	$	44,675,540	$	54,614,838	$	44,675,540

SOURCE Optiva Inc.

Media Inquiries: Kristin Donelson, T: 905-625-2190, [email protected]; Investor Relations: Lana Pisarenko, NATIONAL | Equicom, T: 416-586-1947, [email protected]