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TMCNet:  Nightingale Reports Fiscal 2014 Third Quarter Results

[February 06, 2014]

Nightingale Reports Fiscal 2014 Third Quarter Results

(Canada Newswire Via Acquire Media NewsEdge) 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 (888) 231-8191 (or (647) 427-7450 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 StatementThis 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 LOSSFOR 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 FLOWSFOR 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

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