Sylogist Fiscal 2019 and Q4 Results, Company achieves record Adjusted EBITDA

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CALGARY, Jan. 16, 2020 /CNW/ - Sylogist Ltd. (TSXV:SYZ) ("Sylogist" or the "Company"), a provider of enterprise information management solutions, is pleased to announce its audited financial results for the fiscal year ended September 30, 2019.

Fiscal 2019 Highlights (Comparisons are to fiscal 2018, unless otherwise noted)

• Revenues were $37.6 million, compared to $38.2 million, a decrease of 2%.
• Gross profit margins improved to 76% of revenue, compared to 73%.
• Reported earnings were $10 million ($0.44 per share) compared to $13.2 million ($0.59 per share).  Fiscal 2018 earnings were higher in part due to a one time, non-cash, bargain purchase price gain on acquisition of $2.7 million recorded in Q4 of that year.  Additionally, fiscal 2019 earnings yielded increased income taxes.
• Adjusted EBITDA⁽¹⁾ was $17.6 million ($0.78 per share), compared to $17 million ($0.76 per share), an increase of 4%.
• Adjusted EBITDA Margin ⁽¹⁾ was 47%, compared to 44%.
• Cash from operating activities (before non-cash changes in working capital) was $13.2 million ($0.58 per share), compared to $15.7 million ($0.70 per share).
• Cash as at September 30, 2019 totalled $53.1 million or $2.24 per share. Sylogist has no debt.
• Combined tax pools at the end of the fiscal year 2019 were approximately $13.7 million (CAD).
• The Company paid regular dividends to shareholders totalling $8.7 million in fiscal 2019, compared to $8.3 million (regular and special) in fiscal 2018.
• For the fiscal year ended September 30, 2019, the Company repurchased a total of 191,900 common shares at an average price of $12.81 for a total cost of $2.5 million.
• There are currently 23.8 million Sylogist shares outstanding.

Q4 2019 Summary (Comparisons are to Q4 2018, unless otherwise noted)

• Revenues were $8.9 million, compared to $9.1 million.
• Reported earnings were $2.3 million ($0.10 per share) compared to $4.5 million ($0.20 per share) in Q4 2018 (reflecting the gain from the bargain purchase associated with the K12 Enterprise and Sunpac Systems acquisition of $2.7 million and increased income taxes in Q4 2019).
• Adjusted EBITDA⁽¹⁾ was $4.4 million, an increase of 31%, or $0.19 per fully diluted common share, up 27%.
• Adjusted EBITDA Margin⁽¹⁾ was 49%, compared to 37%.
• Cash from operating activities (before non-cash changes in working capital) totalled $3.2 million ($0.14 per share), up from $3 million ($0.13 per share) in Q4 2018.
• The Company paid regular dividends to shareholders totalling $2.4 million during the quarter compared to $1.8 million.
• Adjusted Working Capital⁽¹⁾ was $53.5 million, or $2.26 per share, compared to $33.1 million, or $1.49 per share, in Q4 2018.
• During the quarter ended September 30, 2019, the Company did not repurchase any shares compared to 63,500 common shares repurchased in Q4 2018 at an average price of $12.69 for a total cost of $806 thousand.

Jim Wilson, President and CEO or Sylogist commented, "Fiscal 2019 was a year of significant efficiency gains and acquisition focus for the Company.  Sylogist reduced its employee base by 20%, while generating the same level of business activity with greater capacity available to assimilate future acquisitions and while simultaneously improving operating margins.

The Company's acquisition efforts did not yield results in fiscal 2019 despite making offers on several targeted opportunities.  The Company continues to be a prudent custodian of shareholder capital and has resisted engaging in a currently observed acquisition trend of buying revenue that has little prospect of generating cash flow in the medium term or at all without significant follow-on investment.  Growing revenue in the absence of tangible prospects of growing cash flow is not the Company's investment thesis. 

The M&A market continues to be target rich with increasing competitive pressures.  We have recognized that most acquisition targets are businesses with legacy technology or more modern technology with no established customer base or brand recognition. The available target base reinforces the value of our modern and well-established public sector platform with its Microsoft branded foundational technology.  We continue to be very active on the acquisition front and will be enhancing our reach by expanding our M&A team.  Additionally, we are extending our partner relationships in the United States. The US market size and dynamics have fostered a highly sophisticated and knowledgeable ecosystem of companies and technology resources, including investment banking capabilities, in our technology areas."

"Subsequent to its fiscal 2019 year end, Sylogist announced certain changes to its executive compensation arrangements effective October 15, 2019.  These new arrangements provide for annual incentive bonuses based solely on strategic value improvements in the Company going forward, including incremental improvements, if any, in consolidated revenue and Adjusted EBITDA for the current period or subsequent higher performance levels in ensuing fiscal years (high water mark), such bonuses not to exceed 150% of base salary in a given year.   

For fiscal 2019, the Company reported Adjusted EBITDA of $17.6 million, which included executive bonuses of $3 million.  With those bonuses eliminated, fiscal 2019 Adjusted EBITDA would have been approximately $3 million, or 17%, higher for total Adjusted EBITDA in that period of $20.6 million, or $0.91 per share, the new high water mark for executive bonus calculations going forward. 

These new arrangements are anticipated to effectively increase Adjusted EBITDA by a minimum of $3 million dollars annually as the Company's performance improves.  As previously announced, to facilitate this change and for the Company to realize significantly enhanced Adjusted EBITDA into the future, the Company paid executives a total of $12 million, or less than 4 times the total 2019 earned executive bonuses.  The Sylogist board views the new executive agreements as highly accretive to shareholder interests".

About Sylogist

Sylogist is a software company that, through strategic acquisitions, investments and operations management, provides comprehensive, mission-critical ERP solutions, including fund accounting, grant management and payroll, to public service organizations.  Sylogist's public service customers include local governments, nonprofit organizations, non-governmental organizations, educational institutions and government agencies, as well as public compliance driven and funded entities. Our Company delivers highly scalable, multi-language, multi-currency software solutions, which serve the needs of an international clientele.

Full financial statements together with Management's Discussion and Analysis are available on SEDAR at www.sedar.com.

The Company's stock is traded on the TSX Venture Exchange under the symbol SYZ. Information about Sylogist can be found at http://www.sylogist.com.

Forward-looking Statements

Certain statements in this news release may be forward-looking statements within the meaning of applicable securities laws and regulations. These statements typically use words such as expect, believe, estimate, project, anticipate, plan, may, should, could and would, or the negative of these terms, variations thereof or similar terminology. Forward-looking information in this news release includes statements with respect to the Company having greater capacity available to assimilate future acquisitions, the M&A market being target rich, the target base reinforcing the Company's view of the value of its modern technology and that going forward, contractual changes to executive contracts is anticipated to effectively increase Adjusted EBITDA by a minimum of $3 million dollars annually as the Company's performance improves.  By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the beliefs and plans and other forward-looking expectations expressed herein will not be achieved or will prove inaccurate. Although Sylogist believes that the expectations reflected in these forward-looking statements are reasonable, it provides no assurance that these expectations will prove to have been correct. Forward-looking information involves risks, uncertainties and other factors that could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Additional information regarding some of these risks, uncertainties and other factors may be found under in the management's discussion and analysis for the year ended September 30, 2019, and other documents available on the Company's profile at www.sedar.com.  Material assumptions and factors that could cause actual results to differ materially from such forward-looking information include Sylogist's ability to attract and retain customers and to realize on its investments. Although Sylogist believes that the material assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur. Sylogist disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.

Certain information set out herein may be considered as "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Sylogist's reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.

Non-GAAP Financial Measures

(1) Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Working Capital are non-GAAP financial measures: Adjusted EBITDA is defined as: profit for the period before stock based compensation, foreign exchange gains or losses, interest expense, bargain purchase price on acquisition, income taxes, acquisition-related costs, depreciation and amortization. Adjusted EBITDA Margin refers to Adjusted EBITDA as a percentage of revenue. Adjusted Working Capital is defined as current assets less current liabilities adjusted for deferred revenue. 

This news release makes reference to certain non-GAAP measures.  These measures are not recognized measures under Canadian GAAP, do not have a standardized meaning prescribed by Canadian GAAP and are therefore may not be comparable to similar measures presented by other issuers. These measures are provided as additional information to complement measures under GAAP by providing further understanding of the Company's expected results of operations from management's perspective. Accordingly, such measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under Canadian GAAP.

Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Working Capital are provided to investors as alternative methods for assessing the Company's operating results in a manner that is focused on the Company's ongoing operations and to provide a more consistent basis for comparison between periods. These measures should not be construed as alternatives to net profit (loss) or cash flow from operating activities determined in accordance with GAAP as an indicator of the Company's performance. For further information regarding non-GAAP measures used by the Company, please refer to the management's discussion and analysis of the Company, copies of which are available on Sylogist's SEDAR profile at www.sedar.com.

- Neither 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-

SOURCE Sylogist Ltd.

Jim Wilson, President and CEO, or Xavier Shorter, Vice President, Finance and CFO, Sylogist Ltd., [phone]