Sylogist Q2 Fiscal 2020 Results: Company achieves record Adjusted EBITDA, operating earnings and cash flow; Increased dividen...

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CALGARY, April 29, 2020 /CNW/ - Sylogist Ltd. (TSXV:SYZ) ("Sylogist" or the "Company"), a provider of enterprise information management solutions, is pleased to announce its unaudited financial results for the second quarter of the 2020 fiscal year, ended March 31, 2020.

Q2 2020 Summary (Comparisons are to Q2 2019, unless otherwise noted)

• Recurring revenues from subscriptions and maintenance grew by 9% to $7.2 million, compared to $6.6 million for the second quarter of 2019.
  
  
• Revenues were $9.4 million, compared to $9.5 million.
  
  
• Gross profit margins of 75%, compared to 73% in Q2 2019.
  
  
• Profit before income taxes of $3.9 million, compared to $3.2 million, an increase of 20%.
  
  
• Reported earnings were $2.8 million, compared to $2.4 million in Q2 2019, an increase of 19%.
  
  
• Earnings per fully diluted common share of $0.12 per share, an increase of 10% compared to Q2 2019.
  
  
• Adjusted EBITDA⁽¹⁾ was $5.6 million, or $0.24 per fully diluted common share, an increase of 34%.
  
  
• Adjusted EBITDA Margin⁽¹⁾ was 60%, compared to 44%.
  
  
• Cash flow from operations was $6M compared to $4.4M, an increase of 36%.
  
  
• The Company paid regular dividends to shareholders totalling $2.4 million during the quarter, compared to $2.1 million in the same period last year, an increase of 14%.
  
  
• Adjusted Working Capital⁽¹⁾ increased 35% to $47.3 million, or $1.99 per share.
  
  
• Combined tax pools at the end of the second quarter 2020 were approximately $18.6 million (CAD).
  
  
• Given the strong and growing cash generating ability of the Company, its Board of Directors has approved a 10% increase in its quarterly dividend to $0.11 per common share for shareholders of record as at May 29, 2020 to be paid on June 10, 2019, which is treated as an eligible dividend under the Income Tax Act (Canada).
  
  

First half of fiscal 2020 (Comparisons are to the first half of fiscal 2019, unless otherwise noted)

• Recurring revenues from subscriptions and maintenance were $14.1 million, an increase of 7% compared to $13.1 million for the first half of 2019.
  
  
• Revenues were $18.3 million, compared to $18.9 million.
  
  
• Gross profit margins were 76% of revenue, compared to 75% for the first half of fiscal 2019.
  
  
• Adjusted EBITDA⁽¹⁾ was $10.9 million ($0.46 per share), compared to $8.7 million ($0.40 per share).
  
  
• Adjusted EBITDA Margin ⁽¹⁾ was 59%, compared to 46%.
  
  
• The Company paid regular dividends to shareholders totalling $4.8 million during the first half of fiscal 2020, compared to $4.2 million in the same period in 2019.
  
  
• For the six months ended March 31, 2020, the Company repurchased 30,000 common shares at an average price of $7.97 for a total cost of $239 thousand.
  
  

Jim Wilson, President and Chief Executive Officer of Sylogist commented, "We continue to see growth in profitability and are pleased to announce record Adjusted EBITDA, operating earnings and cash flow. Our Adjusted EBITDA margin was 60%, up substantially from 44%, as a result of our continued discipline and focus on operating efficiencies. Due to the Company's work and client base, Sylogist is an essential industry in this time of the global COVID-19 pandemic.  For years we have operated remotely, part of our efficiency model, and remain fortunate that our operations have experienced only minor impacts from recent events. We did see understandable delays in some smaller upgrade projects for our not-for-profit and NGO clients involved in healthcare and community support. These delays reduced both revenue and Adjusted EBITDA in Q2 by an estimated 3%.

Towards the end of our last fiscal year we introduced our pay-per-use version of our NaviPayroll product.  Take-up was initially slow in Q4 of fiscal 2019, but then demonstrated very positive growth in Q1 of 2020.  In Q2 2020 we witnessed greater than 200% growth in NaviPayroll subscriptions over Q1, with a positive outlook for continuing the growth trend over the remainder of fiscal 2020.  With Microsoft's encouragement and funding, we are expanding our payroll application to Microsoft's AppSource marketplace, which will make NaviPayroll easily available to a broad base of Microsoft customers, providing further opportunities for organic growth. We anticipate NaviPayroll becoming available on AppSource later in Q3 2020.

On April 21, 2020, Sylogist was pleased to announce the acquisition of Information Strategies, Inc. ("InfoStrat), for total cash consideration of approximately $3.5M, including $740 thousand in working capital, subject to the settlement of customary holdbacks. InfoStrat, based in Washington, DC, is a long established, profitable business and a Microsoft Gold partner, catering to federal and state government and not-for-profit/NGO organizations throughout the United States. It provides software solutions and professional services based on its proprietary intellectual property that uses Microsoft Dynamics 365 CRM and Sharepoint at its core. The acquisition extends Sylogist's public sector footprint to US federal and state governments, strengthens our relationship with Microsoft and provides complementary IP and delivery capabilities to better serve our customers. InfoStrat's revenue in 2019 was approximately $5.5 million.

Given the Company's strong performance and opportunities for further growth, the Board of Directors has approved a 10% increase in Sylogist's quarterly dividend." concluded Mr. Wilson.

About Sylogist

Sylogist is a software company that, through strategic acquisitions, investments and operations management, provides comprehensive, mission-critical ERP and CRM solutions, including fund accounting, case management, grant management and payroll, to public service organizations.  Sylogist's public service customers include all levels of government, nonprofit organizations, non-governmental organizations, educational institutions as well as public compliance driven and funded companies. 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 strong and growing cash generating ability of the Company, the Company's work and client base meaning Sylogist is an essential industry in this time of the global COVID-19 pandemic, the Company remaining fortunate that its operations have experienced only minor impacts from recent events, the Company, in Q2 2020, having witnessed greater than 200% growth in NaviPayroll subscriptions over Q1, with a positive outlook for continuing the growth trend over the remainder of fiscal 2020 and expansion of the Company's payroll application to Microsoft's AppSource marketplace and the timing thereof. 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 period ended March 31, 2020, 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 continue generating cash flow, the Company remaining an essential industry and continuing to experience only minor impacts resulting from the COVID-19 pandemic. 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. For a reconciliation of these non-GAAP measures to their nearest Canadian GAAP measure, please see the Company's Management's Discussion and Analysis for the three and six months ended March 31, 2020 and 2019 that is available on SEDAR at www.sedar.com.

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.

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.

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