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Solium Releases 2018 Second Quarter Financial Results

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Solium Releases 2018 Second Quarter Financial Results

Canada NewsWire

 Financial figures expressed in U.S. dollars ("USD")

  • Quarterly revenue increased by 26% to $26.9 million
  • Quarterly adjusted EBITDA decreased from $3.7 million to $2.2 million
  • Cash position strong at $90.5 million
  • Major projects on track

CALGARY, Aug. 8, 2018 /CNW/ - Solium Capital Inc. (TSX:SUM) ("Solium" or the "Company") today announced its financial results for the three and six month periods ended June 30, 2018.

Financial and operating highlights for the three and six month periods ended June 30, 2018, compared to the same period in 2017:

  • Revenue increased by 26% to $26.9 million in the second quarter of 2018 and by 24% to $53.0 million for the six month period ended June 30, 2018;

  • Adjusted EBITDA1 decreased by 40% to $2.2 million in the second quarter of 2018 and decreased by 34% to $5.7 million for the six month period ended June 30, 2018;

  • Earnings from operations decreased from $2.0 million to a loss from operations of $0.7 million in the second quarter of 2018 and decreased from $5.4 million to $0.1 million for the six month period ended June 30, 2018;

  • Net earnings decreased from $1.6 million to a net loss of $0.5 million in the second quarter of 2018 and decreased by 82% to $0.7 million for the six month period ended June 30, 2018; and

  • Cash on hand as at June 30, 2018 totaled $90.5 million.

Key factors affecting the results in the three and six month periods ended June 30, 2018:

  • License revenue License and subscription fees increased by $2.8 million or 19% during the second quarter of 2018 and by $6.2 million or 23% for the six months ended June 30, 2018, as compared to the same periods in 2017. Based on local currencies, the growth was 17% during the second quarter and 19% for the six months ended June 30, 2018. Growth in license revenue is largely driven by organic growth from new sales in all regions, the U.S. white label agreements, revenue from the acquired Capshare, Inc. ("Capshare") and Advanced-HR, Inc. ("Advanced-HR") businesses and migration of customers from NASDAQ Private Market, LLC to Solium.

  • 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 $2.2 million or 35% during the second quarter and by $3.2 million or 23% for the six months ended June 30, 2018, as compared to the same periods in 2017. The per-participant trading activity was 26% higher in the second quarter of 2018 compared to the same period in 2017 and 21% higher than the historical five-year Q2 average.

  • Operating costs – Operating expenses increased by $8.1 million or 42% during the second quarter of 2018 and by $15.6 million or 42% for the six months ended June 30, 2018, when compared to the same periods in 2017. 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 costs associated with an investment opportunity that did not materialize. The Company had 719 full-time equivalent employees (FTEs) at the end of the second quarter of 2018 compared to 594 FTEs at the end of the second quarter of 2017.

Changes in significant accounting policies:

The Company has adopted IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases effective January 1, 2018. 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 six months periods ended June 30, 2018.

Selected financial information for the three and six month periods ended June 30, 2018:
(Expressed in thousands of USD except share, per share amounts and percentages)





Three Months Ended June 30,

Six Months Ended June 30,

2018

$

2017

$

%

Change

2018

$

2017

$

%

Change

Revenue

26,907

21,432

26%

53,001

42,668

24%

Operating expenses

27,591

19,450

42%

52,907

37,302

42%

Adjusted EBITDA1

2,223

3,712

(40%)

5,699

8,666

(34%)

(Loss) earnings from operations

(684)

1,982

NM(a)

94

5,366

(98%)

Net (loss) earnings

(536)

1,583

NM(a)

742

4,122

(82%)








Net (loss) earnings per share2








Basic

(0.010)

0.031

NM(a)

0.013

0.082

(84%)


Diluted

(0.010)

0.031

NM(a)

0.013

0.081

(85%)








Issued and outstanding (thousands)








Common shares




56,236

50,711

11%


Diluted3




59,541

53,665

11%









(a) NM denotes as not meaningful.

 

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 June 30,


Canada

U.S.

International

Consolidated


2018

2017

2018

2017

2018

2017

2018

2017

Revenues

8,854

6,835

13,451

10,632

4,602

3,965

26,907

21,432

Adjusted EBITDA1

1,728

2,712

(16)

891

511

109

2,223

3,712

Adjusted EBITDA %1

20%

40%

NM(a)

8%

11%

3%

8%

17%

Earnings (loss) from operations

654

2,072

(1,394)

10

56

(100)

(684)

1,982

 




Six Months Ended June 30,


Canada

U.S.

International

Consolidated


2018

2017

2018

2017

2018

2017

2018

2017

Revenues

17,430

14,822

26,583

20,258

8,988

7,588

53,001

42,668

Adjusted EBITDA1

4,161

5,088

601

3,315

937

263

5,699

8,666

Adjusted EBITDA %1

24%

34%

2%

16%

10%

3%

11%

20%

Earnings (loss) from operations

2,048

3,915

(1,982)

1,578

28

(127)

94

5,366










(a) NM denotes as not meaningful.

 

During the three month period ended June 30, 2018 the Company had an overall increase in cash and cash equivalents  of $3.5 million (2017: increase $2.2 million) and an overall decrease of cash and cash equivalents during the six month period ended June 30, 2018 of $9.7 million (2017: increase $3.3 million).

Total cash from operating activities was $4.7 million for the three month period ended June 30, 2018 (2017: $1.8 million) and $1.1 million for the six month period ended June 30, 2018 (2017: $3.3 million). Cash from financing activities was $1.1 million for the three month period ended June 30, 2018 (2017: $0.9 million) and $1.2 million for the six month period ended June 30, 2018 (2017: $1.1 million). Cash used in investing activities was $0.8 million for the three month period ended June 30, 2018 (2017: $1.4 million) and $8.4 million for the six month period ended June 30, 2018 (2017: $2.6 million) primarily as a result of the Advanced-HR acquisition.

Working capital including cash and cash equivalents as at June 30, 2018 was $84.9 million (December 31, 2017: $93.8 million). Included in working capital was trade and other receivables of $18.8 million (December 31, 2017: $15.0 million) and trade payables and other accruals of $11.1 million (December 31, 2017: $12.2 million).

Outlook

In Q4 2016 and Q2 2017, respectively, Solium entered into white label license agreements with U.S. partners Morgan Stanley and UBS Financial Services Inc. Solium added significant headcount and committed additional resources to ensure the success of these projects, and some hiring is anticipated to continue throughout 2018. 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 2019.

Solium has made three key investments recently to accelerate its position in the private company market. In October 2017, Solium announced the acquisition of Capshare Inc. The acquisition positions Solium to compete in the rapidly emerging early-stage angel and venture backed private company market. Shareworks is well positioned as the leading platform for late-stage private companies, including those seeking an Initial Public Offering. Capshare will allow Solium to provide a targeted solution that meets the unique requirements of earlier stage private companies. In Q3 2017, Solium also incorporated Solium Analytics LLC to provide 409A business valuation services to private companies. In February 2018, Solium announced the acquisition of Advanced-HR. Through the acquisition, Solium's private market clients will have the ability to access equity data and benchmarks to guide them in compensating their employees. Solium plans to commit additional resources to the Capshare, Analytics and Advanced-HR businesses.

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.

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) and share-based payments. 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 (loss) earnings:

 


Three months ended June 30,

Six months ended June 30,


2018

2017

2018

2017

Adjusted EBITDA

2,223

3,712

5,699

8,666

Foreign exchange (loss) gain

(149)

(352)

827

45

Share-based payments

(897)

(562)

(1,646)

(1,022)

EBITDA

1,177

2,798

4,880

7,689

Finance income

225

195

555

383

Depreciation of property and equipment

(538)

(381)

(1,112)

(724)

Depreciation of right of use assets

(497)

-

(946)

-

Amortization of intangible assets

(795)

(643)

(1,517)

(1,271)

Amortization of contract costs

(180)

(144)

(384)

(283)

Income taxes

72

(242)

(734)

(1,672)

Net (loss) earnings

(536)

1,583

742

4,122






 

2.

Diluted (loss) net earnings 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 us @Solium 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 commit additional resources to the Solium Analytics LLC, Capshare Inc. and Advanced-HR businesses, the Company's acquisition strategy and the Company's ability to compete in the private company market.  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 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, 2017. 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 June 30, 2018 referred to herein will be available on SEDAR at www.sedar.com under Solium Capital Inc., or at www.solium.com.

SOURCE Solium Capital Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2018/08/c7687.html

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