Solium Releases 2018 Third Quarter Financial Results

Transcription

1 FOR IMMEDIATE RELEASE Financial figures expressed in U.S. dollars ( USD ) Solium Releases 2018 Third Quarter Financial Results Quarterly revenue increased by 38% to 28.3 million Cash position strong at 96.1 million Quarterly adjusted EBITDA increased from 2.1 million to 5.4 million Major projects on track CALGARY, November 6, 2018 Solium Capital Inc. (TSX: SUM) ( Solium or the Company ) today announced its financial results for the three and nine month periods ended Financial and operating highlights for the three and nine month periods ended 2018, compared to the same periods in 2017: Revenue increased by 38% to 28.3 million in the third quarter of 2018 and by 29% to 81.3 million for the nine month period ended 2018; Earnings from operations increased from 1.0 million to 2.6 million in the third quarter of 2018 and decreased from 6.3 million to 2.7 million for the nine month period ended 2018; Net earnings increased by 2.6 million to 2.3 million in the third quarter of 2018 and decreased by 0.8 million to 3.0 million for the nine month period ended 2018; Adjusted EBITDA 1 increased to 5.4 million in the third quarter of 2018 and to 11.1 million for the nine month period ended 2018; Cash on hand as at 2018 totaled 96.1 million. Key factors affecting the results in the three and nine month periods ended 2018: License revenue License and subscription fees increased by 5.4 million or 38% during the third quarter of 2018 and by 11.6 million or 28% for the nine months ended 2018, as compared to the same periods in Based on local currencies, the growth was 38% during the third quarter and 26% for the nine months ended Growth in license revenue is largely driven by organic growth from new sales in all regions, the U.S. white label agreements and revenue from the acquired Capshare and Advanced-HR businesses. Transaction activity In addition to the recurring license revenue that Solium collects for the use of its technology platforms, the Company also collects re-occurring transaction based revenue. Transaction based revenue increased by 1.6 million or 27% during the third quarter of 2018 and by 4.8 million or 24% for the nine months ended 2018, as compared to the same periods in The per-participant trading activity was 18% higher in the third quarter of 2018 compared to the same period in 2017 and 18% higher than the historical five-year Q3 average. Operating costs Operating expenses (excluding 2017 sales tax adjustment) increased by 5.2 million or 25% during the third quarter of 2018 and by 20.8 million or 36% for the nine months ended 2018, when compared to the same periods in The increases are primarily driven by planned hiring to support the U.S. white label agreements; costs from the new businesses of Capshare, Solium Analytics and Advanced-HR; and the resulting incremental systems and infrastructure costs. The Company also incurred costs in the first half of 2018 associated with an investment opportunity that did not materialize, further contributing to the nine month period increase over The Company had 769 full-time equivalent employees (FTEs) at the end of the third quarter of 2018 compared to 611 FTEs at the end of the third quarter of 2017.

2 Changes in significant accounting policies: The Company has adopted IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases effective January 1, IFRS 9 Financial Instruments is also effective from January 1, 2018 but does not have an impact on the Company s financial information. For more information, refer to note 3 of the Company s Condensed Consolidated Interim Financial Statements for the three and nine month periods ended Selected financial information for the three and nine month periods ended 2018: (Expressed in thousands of USD except share, per share amounts and percentages) Three Months Ended Nine Months Ended % Change % Change Revenue 28,257 20,542 38% 81,258 63,210 29% Operating expenses 25,660 19,566 31% 78,567 56,868 38% Adjusted EBITDA 1 5,419 2, % 11,118 10,721 4% Earnings (loss) from operations 2, % 2,691 6,342 (58%) Net earnings (loss) 2,310 (306) NM (3) 3,052 3,816 (20%) Net earnings (loss) per share 2 Basic (0.006) NM (3) (29%) Diluted (0.006) NM (3) (29%) Issued and outstanding (thousands) Common shares 56,577 50,984 11% Diluted 2 60,635 54,781 11% Regional breakdown of results: (Expressed in thousands of USD except percentages) Currently included in the International reportable segment are the results relating to the U.K., Europe, Australia, and Hong Kong operations. Three Months Ended Canada U.S. International Consolidated Revenues 8,113 7,122 15,783 10,166 4,361 3,254 28,257 20,542 Adjusted EBITDA 1 2,894 1,932 2,226 1, (936) 5,419 2,055 Adjusted EBITDA % 1 36% 27% 14% 10% 7% (29%) 19% 10% Earnings (loss) from operations 1, ,152 (134) (1,135) 2, Nine Months Ended Canada U.S. International Consolidated Revenues 25,543 21,944 42,366 30,424 13,349 10,842 81,258 63,210 Adjusted EBITDA 1 7,054 7,020 2,826 4,374 1,238 (673) 11,118 10,721 Adjusted EBITDA % 1 28% 32% 7% 14% 9% (6%) 14% 17% Earnings (loss) from operations 3,905 4,874 (1,108) 2,730 (106) (1,262) 2,691 6,342 (1) Adjusted EBITDA is a non-ifrs financial measure. See definition and reconciliation to net earnings (loss) in Note 1 on page 4. (2) Net earnings (loss) per share and diluted shares outstanding are discussed in further detail in Notes 2 and 3 on page 4, respectively. (3) NM denotes as not meaningful

3 During the three month period ended 2018 the Company had an overall increase in cash and cash equivalents of 5.6 million (2017: 3.3 million) and an overall decrease of cash and cash equivalents during the nine month period ended 2018 of 4.1 million (2017: increase 6.6 million). Total cash from operating activities was 4.7 million for the three month period ended 2018 (2017: 3.2 million) and 5.8 million for the nine month period ended 2018 (2017: 6.5 million). Cash from financing activities was 0.7 million for the three month period ended 2018 (2017: 0.6 million) and 1.8 million for the nine month period ended 2018 (2017: 1.7 million). Cash used in investing activities was 1.2 million for the three month period ended 2018 (2017: 3.0 million) and 9.6 million for the nine month period ended 2018 (2017: 5.6 million). The cash used in investing activities in 2018 is primarily as a result of the Advanced-HR acquisition. Working capital including cash and cash equivalents as at 2018 was 90.7 million (December 31, 2017: 93.8 million). Included in working capital was trade and other receivables of 20.9 million (December 31, 2017: 15.0 million) and trade payables and other accruals of 12.7 million (December 31, 2017: 12.2 million). Management change Kelly Schmitt, the Company s Chief Financial Officer who was on parental leave, resigned effective October 18, As part of its governance process the Company has begun the process to recruit a new Chief Financial Officer and during this transition, Sujeet Kini, who has been the Company s Interim Chief Financial Officer since April 2, 2018, will continue in the role of Interim Chief Financial Officer. Outlook In Q and Q2 2017, Solium entered into white label license agreements with U.S. partners Morgan Stanley and UBS Financial Services Inc., respectively. Solium added significant headcount and committed additional resources to ensure the success of these projects, and some hiring is anticipated to continue throughout The first customers for both partners were migrated to Shareworks in December 2017, and the Company is now actively migrating clients on a monthly basis. Solium remains on track to migrate all clients by the end of Solium continues to invest for future revenue growth, and expects this to continue through the course of 2018 and into 2019, resulting in further pressure on profitability in the near-term. The Company continues to invest in its capabilities and infrastructure ensuring best-in-class technology and service to drive long term investor returns

4 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 income, income taxes, depreciation of property and equipment, depreciation of right of use assets, amortization of intangible assets, amortization of contract costs, foreign exchange gain or loss (on translation of working capital), share-based payments, adjustment of earn-out payable, and sales tax adjustment. 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 (loss): Three months ended Nine months ended Adjusted EBITDA 5,419 2,055 11,118 10,721 Foreign exchange (loss) gain (652) (649) 175 (604) Share-based payments (872) (629) (2,518) (1,651) Adjustment of earn-out payable Sales tax adjustment included in operating expense EBITDA 4,821 1,718 9,701 9,407 Finance income Depreciation of property and equipment (523) (621) (1,635) (1,345) Depreciation of right of use assets (474) - (1,420) - Amortization of intangible assets (772) (618) (2,289) (1,889) Amortization of contract costs (181) (152) (565) (435) Income taxes (859) (856) (1,593) (2,528) Net earnings (loss) 2,310 (306) 3,052 3, Diluted net earnings (loss) per share is calculated using the treasury stock method. 3. Diluted shares as presented equals issued and outstanding common shares plus the effects of dilutive 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 and visit us at solium.com. Certain statements included 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 the projects with Morgan Stanley and UBS Financial Services Inc. including the financial impact of new hires and plans to hire additional employees, the anticipated timing of completing migrating the Morgan Stanley and UBS customers to Shareworks, the Company s investment strategy, including plans to continue to invest for future revenue growth, the Company s acquisition strategy and the Company s ability to compete in the private company market and planned hiring of a new Chief Financial Officer. 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 partnerships with Morgan Stanley and UBS Financial Services Inc. and its investments to accelerate its position in the private company market. 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 - 4 -

5 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. The foregoing is not exhaustive and other risks are detailed from time to time in other continuous disclosure documents of the Company, including the Company s annual information form for the year ended December 31, Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. The forward-looking statements and forward-looking information included in this press release are made as of the date of this press release. The Company does not intend to nor does it assume any obligation to update publicly or to revise any of the forward-looking statements or forward looking information, whether as a result of new information, subsequent events or otherwise, except as required by law. The Management s Discussion and Analysis and the Condensed Consolidated Interim Financial Statements for the quarter and period ended 2018 referred to herein will be available on SEDAR at under Solium Capital Inc., or at For further information: Investor relations Heidi Christensen Brown NATIONAL Capital Markets hchristensenbrown@national.ca - 5 -