Sylogist Q3 Fiscal 2021 Results: Sylogist Invests For Growth, Delivers Core Financial Performance, Dividend Declared

CALGARY, AB, Aug. 12, 2021 /CNW/ - Sylogist Ltd. (TSX: SYZ) ("Sylogist" or the "Company"), a provider of enterprise information management solutions, is pleased to announce its unaudited financial results for the third quarter of the 2021 fiscal year, ended June 30, 2021.

Bill Wood, President and CEO of Sylogist commented, "we are very pleased with our progress this quarter. We continued to make strategic investments to accelerate the Company's growth and build capacity to enable top-line expansion. Much of this is focused on go-to-market, earning customer advocacy, and innovation. We have strategically added talent companywide, reorganized the Company to align behind shared goals and value creation, and broken down divisional silos that have existed for some time. We also have now fully transitioned to an Agile product development methodology in which we release desired features and innovation on a faster, approximately monthly, cadence. These changes will help support accelerated growth in the coming quarters, strengthen customer connections, bolster our competitive position and improve operational excellence to support both organic and inorganic expansion going forward.

More specifically, we are investing in sales, marketing, and account management, with a view to enlisting and activating customer advocacy, driving high quality leads and expanding our thought leadership in the markets we serve. Happy customers and increased market awareness will drive word-of-mouth referrals and new bookings opportunities. We're beginning to see these investments translate into new wins, which is expected to drive top-line growth through the balance of this calendar year, and beyond.

Critical to these efforts is attracting, motivating, and retaining top talent in an increasingly competitive market. For that reason, the Board of Directors and its Compensation Committee have approved a new employee performance management framework. This includes individual and collective goal-setting, regular feedback, individualized professional development and a companywide performance bonus plan in which employees are eligible for bonuses depending on their individual performance and that of Sylogist as a whole; all aligned with value creation. The plan's recent approval has required us to book a retroactive, estimated $1.2 million bonus accrual in Q3 covering the first nine months of FY2021. This accrual results in a one-time, outsized impact to Adjusted EBITDA in Q3. We expect this commitment to our most valuable asset, our people, will further motivate and reward our already exceptionally strong team, while continuing to attract the best and brightest to Sylogist.

As I've said on prior calls, quite simply, strategic investment in the business and our people was overdue; and, will be our power source to take Sylogist to new heights going forward.

We also maintained strong financial performance in Q3. Although the above-mentioned investments compressed Adjusted EBITDA margins, core recurring revenue rose substantially in the wake of the MAS acquisition. This occurred despite material currency headwinds, to which we are heavily exposed, due to the vast majority of our revenue coming from the US. To illustrate the impact of FX on our Q3 numbers, total revenue would have been 9% higher under the same USD/CAD rates as Q3 2020. In total, year to date FY2021 revenue would have been $1.3 million higher, representing a 5% increase, on a YOY constant currency basis.

COVID-19 also continued to adversely affect bookings and professional services revenue, with many nonprofits delaying decisions and implementations. However, we are seeing this begin to shift, delayed deals are matriculating and we expect bookings and related project services to recover in the coming months.

Even with these investments in the Company and our employees, I'm confident in the Company's ability to maintain well above average free cash flows and a Rule of 40 posture going forward.

Lastly, I want to highlight that our M&A team has been further expanded and strategic deal discussions and activity is very encouraging.

Again, I am confident in the investments we're making, the progress we have made in executing against our strategy and growth plan, and I'm excited by the positive signals and new bookings activity we're seeing." concluded Mr. Wood.

Q3 2021 Summary (Comparisons are to Q3 2020, unless otherwise noted)

1. Revenues of approximately $9.5 million, compared to approximately $10.0 million in the third quarter of fiscal 2020, a decrease of 4%; on a year-over-year common currency basis, Q3 2021 revenue would have been approximately $10.4 million.
2. Recurring revenues from subscriptions and maintenance grew by 10% to $7.9 million, compared to $7.2 million for the third quarter of 2020.
3. Gross Profit of $6.7 million, compared to $7.2 million in the same period last fiscal year, a decrease of 7%.
4. Gross Profit Margin of 70%, compared to 73% in third quarter of 2020.
5. Loss before income tax of $0.2 million, compared to profit before income tax of $3.8 million in the third quarter last year.
6. Adjusted EBITDA⁽¹⁾ of $3.0 million, compared to $5.7 million for the same period last year; on a year-over-year constant currency basis, Q3 2021 Adjusted EBITDA would have been approximately $3.7 million.
7. Adjusted EBITDA Margin⁽¹⁾ of 32%, compared to 57% in Q3 2020; on a year-over-year constant currency basis, Q3 2021 Adjusted EBITDA Margin would have been approximately 35%.
8. Adjusted EBITDA per share⁽¹⁾ of $0.12 per share, compared to $0.24 per share in the third quarter of 2020; on a year-over-year constant currency basis, Q3 2021 Adjusted EBITDA per share would have been approximately $0.15.
9. Adjusted Working Capital⁽¹⁾ was $3.1 million as at June 30, 2021, compared to $45.2 million as at September 30, 2020.
10. Adjusted Working Capital⁽¹⁾ per share of $0.13 per share, compared to $1.84 per share in Q3 2020.
11. The Company paid regular dividends to shareholders of $3.0 million in the third quarter of 2021, compared to $2.6 million in the third quarter of 2020, an increase of 14%.
12. Cash and cash equivalents totaled $22.3 million compared to $42.8 million as at September 30, 2020.
13. Cash generated from operations totaled $3.8 million, compared to cash generated from operations of $5.1 million in the third quarter of fiscal 2020.
14. Combined tax pools at the end of the third quarter 2021 were approximately $12.2 million (CAD).
15. The Company's Board of Directors has approved a quarterly dividend to $0.125 per common share for shareholders of record as at August 31, 2021 to be paid on September 8, 2021, which is treated as an eligible dividend under the Income Tax Act (Canada).

First nine months of fiscal 2021 (Comparisons are to the first nine months of fiscal 2020, unless otherwise noted)

1. Revenues were $27.9 million, compared to $28.2 million; on a year-over-year common currency basis, YTD 2021 revenue would have been approximately $29.2 million.
2. Recurring revenues from subscriptions and maintenance were $21.9 million compared to $21.3 million for the first nine months of 2020, an increase of 3%.
3. Gross profit margins were 71% of revenue, compared to 75% for the same period in the prior year.
4. Adjusted EBITDA⁽¹⁾ was $12.4 million ($0.51 per share), compared to $16.5 million ($0.69 per share); on a year-over-year common currency basis, YTD 2021 Adjusted EBITDA would have been approximately $13.3 million ($0.55 per share).
5. Adjusted EBITDA Margin ⁽¹⁾ was 44%, compared to 59%; on a year-over-year common currency basis, YTD 2021 Adjusted EBITDA Margin would have been approximately 45%.
6. The Company paid regular dividends to shareholders totaling $8.9 million during the first nine months of fiscal 2021, compared to $7.4 million in the same period in 2020.
7. For the nine months ended June 30, 2021, the Company repurchased 118,400 common shares at an average price of $10.96 for a total cost of $1.3 million.

About Sylogist

Sylogist is a software company that, through strategic acquisitions, investments and operations management, provides comprehensive, mission-critical ERP and fund accounting, case management, grant management and payroll, to public service organizations. Sylogist's customers include all levels of government, nonprofit organizations, non-governmental organizations, K-12 educational institutions as well as public compliance driven and funded companies. The Company delivers highly scalable, multi-language, multi-currency software solutions which serve the needs of North American and 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 Toronto Stock Exchange under the symbol SYZ. Information about Sylogist can be found at www.sylogist.com.

This news release is not for distribution to United States Newswire Services or for dissemination in the United States.

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 Company's changes helping to support accelerated growth, to strengthen customer connections, and to strengthen the Company's competitive position; and the Company's investments in sales and marketing, enlisting and activating customer advocacy, driving high quality leads, and expanding its thought leadership; the recovery of bookings and related project services; and the Company maintaining above average free cash flows and a Rule of 40 posture. 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, including its inability to attract key employees in sales and marketing, to enlist customer support, continuing headwinds from COVID-19, and economic turmoil. Additional information regarding some of these risks, uncertainties and other factors may be found in the Company's Annual Information Form for the fiscal period ended September 30, 2020 and in the management's discussion and analysis for the three and nine months ended June 30, 2021, 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 attract and retain employees and customers and to realize on its investments, the ability to expand technology partner and customer relationships and the acceleration of organic and inorganic growth. 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, Adjusted EBITDA per share and Adjusted Working Capital, and Adjusted Working Capital per Share are non-GAAP financial measures: Adjusted EBITDA is defined as: profit for the period before stock-based compensation, share-based payments, 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 EBITDA per share refers to Adjusted EBITDA per basic weighted average number of shares outstanding. Adjusted Working Capital is defined as current assets less current liabilities adjusted for deferred revenue. Adjusted Working Capital per share refers to Adjusted Working Capital per basic weighted average number of shares outstanding.

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.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDA per share, Adjusted Working Capital, and Adjusted Working Capital per share 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. For further information regarding non-GAAP measures used by the Company, please refer to the management's discussion and analysis of the Company, copies of which are available on Sylogist's SEDAR profile at www.sedar.com.

SOURCE Sylogist Ltd.