News Column

NexJ Systems Reports Fourth Quarter and Full Year Fiscal 2013 Results

February 27, 2014

TORONTO, Feb. 27, 2014 /CNW/ - NexJ Systems Inc., (TSX: NXJ), a provider of cloud-based software, delivering enterprise solutions for the financial services, insurance, and healthcare industries, today announced financial results for its fourth quarter and year ended December 31, 2013.

Financial Highlights for Q4 2013

• Fourth quarter revenue was $7.4 million, an 8% increase over the same period in the prior year • Adjusted EBITDA (as defined below) was a loss of $1.8 million or $0.09 per share (basic and diluted) for the quarter ended December 31, 2013 as compared to an adjusted EBITDA loss of $4.2 million or $0.21 per share (basic and diluted) for the same period in the prior year • Net loss was $3.1 million or $0.15 per share (basic and diluted) for the quarter ended December 31, 2013, as compared to a net loss of $4.2 million or $0.21 per share (basic and diluted) for the same period in the prior year


Financial Highlights Full Year 2013

• Annual revenue was $27.3 million, a 4% increase over prior year • Adjusted EBITDA (as defined below) was a loss of $16.4 million or $0.81 per share (basic and diluted) for the year ended December 31, 2013 as compared to an adjusted EBITDA loss of $14.8 million or $0.74 per share (basic and diluted) in the prior year • Net loss was $18.8 million or $0.92 per share (basic and diluted) for the year ended December 31, 2013, as compared to a net loss of $16.4 million or $0.83 per share (basic and diluted) in the prior year


"It was not a year without challenges, we are pleased with our revenue increase in the fourth quarter," said William M. Tatham, Chief Executive Officer of NexJ.  "Our expense restructuring of $9 million on an annualized basis is reflected in the lessening of our EBITDA losses quarter over quarter throughout the year. We remain committed to being cash flow positive in 2015."

Conference Call Information

NexJ will be hosting an earnings report conference call today at 5:00 p.m. ET. The call can be accessed via webcast or by phone by dialing 647-427-7450 (Toronto local or international) or 1-888-231-8191 (North America Toll Free).  Investors should dial in approximately 10 minutes before the teleconference is scheduled to begin.

A replay of the call will be available beginning today at 8:00 p.m. ET through 11:59 p.m. on March 3, 2014 and can be accessed by dialing 416-849-0833 (Toronto local) or toll free at 1-855-859-2056 and using password 29926948.

Non-IFRS Measures

This news release includes certain measures that have not been prepared in accordance with International Financial Reporting Standards ("IFRS") such as Adjusted EBITDA and Adjusted EBITDA margin which are used to evaluate the Company's operating performance as a complement to results provided in accordance with IFRS.  The Company believes that Adjusted EBITDA and Adjusted EBITDA margin are useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and the other items listed below.

The term "Adjusted EBITDA" refers to net income/loss before adjusting for share-based payment expense, earn-out expense (recovery), lease-exit charges, finance income, finance costs, foreign exchange gain/loss, depreciation and amortization and income taxes.  The lease-exit charges have been excluded from Adjusted EBITDA because these are charges that relate to the exit of a portion of our leased office space, which was as a result of a re-assessment of our business requirements and headcount reductions executed by the Company in the second half of 2013.  The Company believes that these charges are not representative of the operating performance of the business.  "Adjusted EBITDA margin" refers to the percentage that Adjusted EBITDA for any period represents as a portion of total revenue for that period.

The term Adjusted EBITDA and Adjusted EBITDA margin are not measures recognized by IFRS and do not have standardized meanings prescribed by IFRS.  Therefore, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similar measures presented by other issuers.  Investors are cautioned that Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an alternative to net income (loss) as determined in accordance with IFRS.

The following table reconciles Adjusted EBITDA to net income (loss):

  Three months ended

December 31,
  Year Ended

December 31,
2013   2012   2013   2012
  (in thousands of dollars, except

percentages)
  (in thousands of dollars, except

percentages)
               
Total revenue $7,379   $6,852   $27,314   $26,189
               
Net loss  (3,141)   (4,186)   (18,809)   (16,435)
Add back:              
Share-based payment expense  113   233   695   1,065
Depreciation and amortization  580   406   1,946   1,256
Lease-exit charges, net  1,008     1,008  
Earn-out expense (recovery)  (74)   384   (384)   384
Foreign exchange loss (gain)  (200)   (202)   (446)   213
Finance income  (82)   (161)   (418)   (612)
Finance costs    2     3
Income tax recovery   669     669
               
Adjusted EBITDA (1,796)   (4,193)   (16,408)   (14,795)
Adjusted EBITDA margin (24)%   (61)%   (60)%   (56)%



About NexJ Systems Inc.

NexJ is a provider of cloud-based software, delivering enterprise solutions for the financial services, insurance and healthcare industries. Our next-generation, people-centered software combines industry-specific functionality with information from multiple applications and data stores to provide comprehensive knowledge of the individual.

Based in Toronto, NexJ has clients throughout North America and in Europe. For more information about NexJ visit www.nexj.com, e-mail info@nexj.com, or call 416-222-5611. Join us on LinkedIn, follow us on Twitter, subscribe to our YouTube channel, like us on Facebook or hang out with us on Google+.

NexJ Forward-looking Statement

Certain statements in this press release, including statements about the financial conditions, and results of operations and earnings, may contain words such as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "plans", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on the Company's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Company operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. The Company's assumptions, although considered reasonable by the Company at the date of this press release, may provide to be inaccurate and consequently the Company's actual results could differ materially from the expectations set out herein.

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) the future performance, financial and otherwise, of NexJ; (ii) the ability of NexJ to protect, maintain and enforce its intellectual property rights; (iii) the acceptance by the Company's customers and the marketplace of new technologies and solutions; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the CRM market; (vi) the Company's competitive position in the CRM market and its ability to take advantage of future opportunities in this market; (vii) the Company's ability to attract new customers and develop and maintain existing customers; and (viii) the demand for the Company's product and the extent of deployment of the company's products in the CRM marketplace. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances.

The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) our dependence on a limited number of customers and large project size; (ii) fluctuation in our quarterly operating results; (iii) our dependence on key personnel and our compensation structure; (iv) risks associated with managing large and complex software implementation projects; (v) uncertainties and assumptions in our sales forecasts, including the extent to which sales proposals are converted into sales; (vi) risks associated with our ability to design, develop, test, market, license and support our software products on a timely basis; (vii) market acceptance of our products and services; (viii) commercial success of products resulting from our investment in research and development; (ix) our success in expanding sales into new international markets; * risks associated with expansion into healthcare and other new industry verticals; (xi) competition in our industry; (xii) failure to protect our intellectual property or infringement of intellectual property rights of third parties; (xiii) reliance upon a limited number of third-party software products to develop our products; (xiv) defects or disruptions in our products and services; (xv) currency exchange rate fluctuations; (xvi) lengthy sales cycles for our software; (xvii) global financial market conditions; (xviii) failure to manage our growth successfully; and (xix) failure to successfully manage and integrate acquisitions.

For additional information with respect to risks and other factors which could occur, see the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2012 dated March 6, 2013, and other securities filings with the Canadian securities regulators available on www.sedar.com.  Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


NexJ Systems Inc.      
Consolidated Statements of Financial Position      
(Expressed in thousands of Canadian dollars)      
(Unaudited)      
       
       
  December 31, 2013   December 31, 2012
       
Assets      
  $   $
Current assets:      
  Cash and cash equivalents 29,293   46,263
  Accounts receivable 7,246   9,513
  Income taxes receivable -   146
  Prepaid expenses and other assets  1,727   992
Total current assets 38,266   56,914
       
Non-current assets:      
  Property and equipment 3,014   3,869
  Intangible assets  1,643   2,400
  Goodwill  3,640   3,640
  Other assets  260   260
Total non-current assets 8,557   10,169
       
Total assets 46,823   67,083
       
Liabilities and Shareholders' Equity      
       
Current liabilities:      
  Accounts payable and accrued liabilities  4,677   7,318
  Deferred revenue 5,021   5,069
  Provisions 572   -
Total current liabilities 10,270   12,387
       
Non-current liabilities:      
  Accrued liabilities 596   801
  Provisions 742   428
  Deferred revenue 212   268
Total non-current liabilities 1,550   1,497
       
Total liabilities 11,820   13,884
       
Shareholders' equity:      
  Share capital  83,018   83,061
  Share purchase loans  (3,622)   (3,622)
  Contributed surplus  5,515   4,859
  Deficit (49,908)   (31,099)
Total shareholders' equity 35,003   53,199
       
       
Total liabilities and shareholders' equity 46,823   67,083


 


NexJ Systems Inc.          
Consolidated Statements of Comprehensive Loss          
(Expressed in thousands of Canadian dollars, except per share amounts)          
(Unaudited)          
           
  Three Months ended December   Fiscal year ended December
  2013 2012   2013 2012
           
Revenue: $ $   $ $
  License fees 1,232 877   2,090 4,102
  Net license reseller fees 96 219   199 219
  Professional services 4,502 4,434   19,016 16,770
  Maintenance and support 1,549 1,322   6,009 5,098
  7,379 6,852   27,314 26,189
           
Expenses*:          
  Professional service costs 3,230 3,772   15,123 11,523
  Research and development, net 2,691 3,789   13,448 14,900
  Sales and marketing 1,731 2,259   8,251 8,398
  General and administrative 3,150 2,248   10,165 8,868
   10,802   12,068   46,987 43,689
           
Loss from operations: (3,423) (5,216)   (19,673) (17,500)
           
  Foreign exchange gain (loss) 200 202   446 (213)
  Finance income  82 161   418 612
  Finance costs - (2)   - (3)
  282 361   864 396
           
Loss before income taxes (3,141) (4,855)   (18,809) (17,104)
           
  Income tax recovery - (669)   - (669)
           
Net Loss and comprehensive loss  (3,141) (4,186)   (18,809) (16,435)
           
Loss per share:          
  Basic and diluted (0.15) (0.21)   (0.92) (0.83)
           
           
Weighted average number of common shares          
outstanding:          
  Basic and diluted 20,374 20,181   20,377 19,880
           
           
*Share-based payment expense has been          
 included in expenses as follows:          
  Professional service costs 46 59   230 241
  Research and development, net 53 82   193 389
  Sales and marketing (16) 16   108 60
  General and administrative 30 76   164 375
           
  113 233   695 1,065


 


NexJ Systems Inc.      
Consolidated Statements of Cash Flows      
(Expressed in thousands of Canadian dollars)      
(Unaudited)      
       
Year ended December 31, 2013 and 2012      
       
  2013   2012
       
Cash flows from (used in) operating activities:  $     $ 
  Loss for the period: (18,809)   (16,435)
  Adjustments for:      
    Depreciation and amortization 1,946   1,256
    Share-based payment expense 695   1,065
    Finance income (418)   (612)
    Finance costs -   3
    Deferred tax recovery -   (669)
    Foreign exchange loss (gain) (333)   85
  Change in non-cash operating working capital:      
    Accounts receivable 2,267   (2,612)
    Prepaid expenses and other assets (735)   3,147
    Income tax receivable 146   -
    Accounts payable and accrued liabilities and provisions (1,962)   879
    Deferred revenue (104)   3,233
Net cash flows used in operating activities (17,307)   (10,660)
       
Cash flows from (used in) financing activities:      
    Obligations under capital leases -   (41)
    Exercise of employee stock options 25   70
    Exercise of agent stock options -   635
    Repayment of share purchase loans -   143
    Repayment of bank indebtness of Broadstreet Data Solutions Inc. -   (1,083)
    Repurchase of common shares (107)   -
    Interest paid -   (3)
Net cash flows used in financing activities (82)   (279)
       
Cash flows from (used in) investing activities:      
    Purchase of property and equipment (332)   (358)
    Acquisition of Broadstreet Data Solutions Inc., net of cash acquired -   (3,297)
    Redemption of short-term investments -   4,005
    Interest received 418   612
Net cash flows from investing activities 86   962
       
  Effects of exchange rates on cash and cash equivalents 333   22
       
    Decrease in cash and cash equivalents (16,970)   (9,955)
       
Cash and cash equivalents, beginning of year 46,263   56,218
       
Cash and cash equivalents, end of year 29,293   46,263
       
Supplemental cash flow information:      
    Acquisition of property and equipment not yet paid for 2   -



SOURCE NexJ Systems Inc.


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