Solium Releases 2016 Fourth Quarter and Year-end Financial Results

• Revenue increased by 7% year-over-year
• Adjusted EBITDA decreased by 3% year-over-year
• Cash position strong at $63.7 million

CALGARY, March 14, 2017 /CNW/ - Solium Capital Inc. (TSX: SUM) ("Solium" or the "Company") today announced its financial results for the fourth quarter and year ended December 31, 2016. All dollar figures are in U.S. dollars unless otherwise stated.

Financial and operating highlights for the fourth quarter and year ended December 31, 2016:

• In the fourth quarter, the Company entered into a license agreement with Morgan Stanley, whereby Solium's Shareworks platform will become the equity administration platform supporting Morgan Stanley's Global Stock Plan Services business;
  
  
• Revenue increased by 12% to $18.9 million for the fourth quarter of 2016 and by 7% to $77.2 million for the year ended December 31, 2016;
  
  
• Earnings from operations increased by 30% to $1.5 million for the fourth quarter of 2016 and decreased by 29% to $7.0 million for the year ended December 31, 2016;
  
  
• Adjusted EBITDA¹ increased by 25% to $2.6 million in the fourth quarter of 2016 and decreased by 3% to $13.4 million in the year ended December 31, 2016;
  
  
• Net earnings decreased by 38% to $0.8 million in the fourth quarter of 2016 and by 51% to $4.0 million in the year ended December 31, 2016; and
  
  
• Cash on hand as at December 31, 2016 totaled $63.7 million with no debt on the balance sheet.

Key factors affecting financial results for the year ended December 31, 2016:

• Organic growth in license revenue – The Company experienced increased license and subscription fees during 2016 as compared to 2015. Based on local currencies, the growth was 5% as compared to 2015. With the fluctuation in foreign exchange rates to convert CAD and international currencies to USD, license and subscription fee revenue increased by $1.8 million or 4% compared to 2015.
  
  
• Transaction activity – In addition to the recurring license revenue that Solium collects for the use of its Shareworks platform, the Company also collects re-occurring transaction based revenue. Transaction based revenue increased by $2.5 million or 13% compared to 2015. The per participant trading activity was 23% higher in 2016 compared to 2015 and 10% higher than the historical five-year rolling average.
  
  
• Global expansion – Operating expenses (excluding a change in estimate to SRED claims and sales tax adjustment) increased when compared to the same periods in 2015. Operating expenses increased by $4.4 million compared to 2015 as a result of the Company's continued buildout of its global platform and operations, including the opening of its Barcelona client service center in July 2016. The increase compared to 2015 is primarily driven by an increase in the number of full-time equivalent employees (FTEs) and other costs required to support the Company's international expansion. The Company had 520 FTEs at the end of 2016 compared to 468 FTEs at the end of 2015.
  
  
• Sales tax adjustment – During the preparation of the Consolidated Financial Statements for the year ended December 31, 2016, the Company identified an adjustment was required for historical sales tax that has not been charged on certain software-as-a-service (SaaS) revenues. As a result, a charge to operating expenses of $0.3 million was made in 2016, and $0.4 million to 2015.
  
  
• Scientific Research and Experimental Development Investment Tax Credits – During 2016, the Canada Revenue Agency completed its audit of the Company's 2013 claim for scientific research and experimental development ("SRED") credits and has denied the full amount of the claim. Accordingly, the Company decreased its accrual for estimated 2013 to 2015 SRED claims receivable to zero, resulting in a charge to operating expenses of $2.2 million for 2016. The Company will continue to actively pursue SRED tax credits.

Selected financial information for the fourth quarter and year ended December 31, 2016:
(Expressed in thousands of U.S. dollars except per share amounts)

		Fourth Quarter				Year Ended December 31,
		2016	2015	% Change		2016	2015	% Change
Revenue		$18,876	$16,906	12%		$77,219	$72,496	7%
Operating expenses		$17,366	$15,745	10%		$70,234	$62,710	12%
Earnings from operations		$1,510	$1,161	30%		$6,985	$9,786	(29%)
Adjusted EBITDA^1		$2,559	$2,050	25%		$13,363	$13,756	(3%)
Net earnings		$805	$1,295	(38%)		$3,974	$8,170	(51%)
Net earnings per share^2
	Basic	$0.016	$0.026	(38%)		$0.080	$0.169	(53%)
	Diluted	$0.016	$0.026	(38%)		$0.078	$0.163	(52%)
Issued and outstanding
	Common shares					50,245	49,178	2%
	Diluted^3					53,626	53,027	1%

Regional breakdown of results:
(Expressed in thousands of U.S. dollars)

	Three Months Ended December 31,
	Canada		U.S.		International		Consolidated
	2016	2015	2016	2015	2016	2015	2016	2015
Revenues	6,545	6,008	8,861	8,441	3,470	2,457	18,876	16,906
Adjusted EBITDA ^(1)	172	1,322	1,549	1,679	838	(951)	2,559	2,050
Adjusted EBITDA % ^(1)	3%	22%	17%	20%	24%	(39%)	14%	12%
Earnings (loss) from operations	(71)	1,139	866	1,080	715	(1,058)	1,510	1,161
	Year Ended December 31,
	Canada		U.S.		International		Consolidated
	2016	2015	2016	2015	2016	2015	2016	2015
Revenues	27,516	25,145	35,939	35,555	13,764	11,796	77,219	72,496
Adjusted EBITDA ^(1)	6,641	7,864	6,690	6,355	32	(463)	13,363	13,756
Adjusted EBITDA % ^(1)	24%	31%	19%	18%	1%	(4%)	17%	19%
Earnings (loss) from operations	3,478	7,089	3,940	3,593	(433)	(896)	6,985	9,786

Basic net earnings per share was $0.016 in the fourth quarter of 2016 (2015: $0.026) and $0.080 in the year ended December 31, 2016 (2015: $0.169).

During the year ended December 31, 2016, the Company had an overall net cash inflow of $11.0 million (2015: $8.7 million). Funds from operations were $12.2 million for the year ended December 31, 2016 (2015: $18.9 million), while total cash inflow from operations inclusive of working capital changes was $9.8 million for the year ended December 31, 2016 (2015: $10.4 million). Cash inflow from financing activities was $1.7 million in 2016 (2015: $2.2 million). Cash outflow from investing activities was $1.5 million in 2016 (2015: inflow of $4.3 million) mainly as a result of capital expenditures. The inflow from investing activities in 2015 was due to the maturity of short-term investments.

Working capital as at December 31, 2016 was $63.2 million (December 31, 2015: $52.5 million). Included in working capital was trade and other receivables of $16.4 million (December 31, 2015: $14.9 million), which increased as at December 31, 2016 compared to December 31, 2015 as a result of growth of license and subscription fees, and increased transactional based revenue as at December 31, 2016.

Outlook

Looking ahead to the 2017 fiscal year, Solium continues to identify additional opportunities globally that it believes it is well positioned to capture. To ensure the Company can successfully capitalize on these opportunities, Solium often invests in advance to ensure the right infrastructure and capabilities are in place. Management routinely reviews the markets and opportunities to ensure upfront investment in resources and organizational capacity are directed in a disciplined and effective manner. This near-term investment is a key element of Solium's overall strategy to drive growth. However, the Company can incur costs to ensure it can service plan participants ahead of recognizing revenue, with the expectation that it will generate meaningful returns over the mid-term. Recent examples include opening a Barcelona office, and securing a first major German customer.

In November 2016, Solium announced that it entered into a license agreement with Morgan Stanley. Under the agreement, Solium's industry leading stock plan administration platform will become the equity administration technology supporting Morgan Stanley's Global Stock Plan Services business. As a result of this partnership, Solium has added headcount and committed additional resources to support the successful implementation of this project, and the Company expects this to continue during 2017. Due to the size and scope of this partnership, Solium expects incremental investment, predominantly in product development, of between $10 and $15 million over a 24 month period. Once the client migrations are complete, the annual fee revenue run rate for Solium is currently estimated to be $18 million. In addition, the Company anticipates expenditures associated with client conversion and expansion of infrastructure. Solium received initial revenue from the agreement in March, 2017. Solium expects the profitability of this business, once migrated, to be consistent with the range of profitability of its business on all of its other segments.

Notes:

1.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA are non-IFRS financial measures which do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. EBITDA and Adjusted EBITDA provide useful information to users as they reflect the net earnings prior to the effect of non-operating expenses such as finance costs, income tax, amortization, foreign exchange gain or loss (on translation of working capital), gain on derecognition of liability, sales tax adjustment, and change in estimate of SRED investment tax credits. Management uses Adjusted EBITDA in measuring the financial performance of the Company. Management monitors Adjusted EBITDA against budget and past results on a regular basis. The measure is a component in determining the annual bonus pool for staff and management.

The following is a reconciliation of Adjusted EBITDA to net earnings:
	Fourth Quarter			Fiscal Year
	2016	2015		2016	2015
Adjusted EBITDA	2,559	2,050		13,363	13,756
Foreign exchange (loss) gain	(370)	1,265		(1,223)	2,475
Gain on derecognition of liability	-	-		445	-
Sales tax adjustment	(81)	(98)		(330)	(418)
SRED investment tax credits	-	-		(2,185)	-
EBITDA	2,108	3,217		10,070	15,813
Finance income	173	136		652	624
Amortization	(969)	(791)		(3,863)	(3,552)
Income tax	(507)	(1,267)		(2,885)	(4,715)
Net earnings	805	1,295		3,974	8,170

2.	Diluted net earnings per share is calculated using the treasury stock method.
3.	Diluted shares as presented equals issued and outstanding common shares plus outstanding stock options and restricted share units.

About Solium Capital Inc.

Solium Capital Inc. (TSX: SUM) provides cloud-enabled services for global equity administration, financial reporting and compliance.  From offices in the United States, Canada, the United Kingdom, Europe, Australia and Hong Kong, our innovative software-as-a-service (SaaS) technology powers share plan administration and equity transactions for more than 3,000 corporate clients with employee participants in more than 100 countries.  Follow us @Solium and visit us at solium.com.

Certain statements included or incorporated by reference in this press release constitute forward-looking statements or forward-looking information under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Specific forward-looking statements in this press release include statements with respect to continued investment in Shareworks, the growth of international operations and international markets, future business opportunities and market conditions, our estimate of the amount of the sales tax adjustment required, the continued pursuit of SRED tax credits, the quantum of the investment to be made in support of the partnership with Morgan Stanley, the estimated annual fee run expected to be realized as a results of the partnership and the timing of initial revenue from the Morgan Stanley Partnership. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect, including assumptions with respect to the ability of the Company to identify, hire, train, motivate and retain qualified personnel, the Company's ability to maintain or accurately forecast revenue from its products and services, the competitive environment in which the Company operates, and the Company's ability to realize the anticipated benefits from its investment in the partnership with Morgan Stanley. Although Solium believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements or information because Solium can give no assurance that such expectations will prove to be correct. The forward-looking statements and information are based on Solium's current expectations, estimates and projections, and are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including general business and economic conditions, actions of competitors and partners, the regulatory environment and product capability and acceptance. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.

The Management's Discussion and Analysis and the Consolidated Financial Statements for the year ended December 31, 2016 referred to herein will be available on SEDAR at www.sedar.com under Solium Capital Inc., or at www.solium.com.

SOURCE Solium Capital Inc.

Investor relations: Conrad Seguin, NATIONAL | Equicom, 416.586.1951, [email protected]