Serenic Reports Results for the Three Months Ended May 31, 2012
Edmonton, Alberta, Canada (July 26, 2012) – Serenic Corporation (the “Company” or “Serenic”) (TSX-V:SER), an international software developer specializing in integrated financial management and human capital management (“HCM”) solutions for Non-Profit organizations, government agencies, and Microsoft Dynamics NAV users, announces its financial results for the three months ended May 31, 2012.
Financial results are summarized as follows:
(1) EBITDA represents earnings before interest, taxes, depreciation, amortization, and stock based compensation. Please review the Serenic Management Discussion and Analysis for the three months and year ended May 31, 2012 for more information
- The Company continued to execute on its central themes of increasing revenue through organic growth and investigating opportunities to maximize shareholder value. The Company announced the addition of new reseller partners in several geographic areas during the quarter. New Serenic Navigator reseller partners were added in the United Kingdom, in Africa and in Lebanon, and an active HCM reseller has also become a Serenic Navigator reseller partner. Additionally, three new Serenic Navigator partners in the USA and one in Canada were added to Serenic’s reseller channel. The Company also completed arrangements to transfer one on its senior client services consultants from the USA to the United Kingdom to support new and existing European and African clientele.
- The pipeline of prospective new clients and license sales expanded in the quarter as our marketing and sales activity has generated new leads. In May, the Company hosted its semi‐annual user conference in Denver with approximately 200 delegates, both current and prospective clients, attending the event from several differing geographic areas. Based on very positive post‐conference feedback, management considers the event a great success.
- Sales results were positive overall during the quarter compared to Q1 2012. Sales increased by 17.4% over the comparable quarter last year due to the continued addition of Serenic Navigator licenses by an African government, as well as increased license sales made by reseller partners in North America. However, direct Serenic Navigator sales and HCM license sales were lower than those recorded in Q1 last year. Nonetheless, the Company continued to grow both revenue and the customer base in Q1 year over year, which are amongst the most prominent factors that influence escalation of overall value of the Serenic business due to the increased recurring maintenance revenue and significance of widened market share that result from augmenting the customer base.
- Gross profit increased by 8.2% to $1,939,504 in Q1 2013 from $1,793,053 in Q1 2012; however, as a percent of sales, gross profit declined to 65.8% in Q1 2013 from 71.4% of sales in Q1 2012. Software license sale margins were reduced because of the higher percentage of sales made through the partner channel vs. Company personnel. Maintenance revenues continued to grow during the quarter, in part due to the contract renewals by several clients whose maintenance contracts had previously lapsed.
- Expenses were in line with expectations, and the Company recorded a net loss and negative EBITDA in the quarter due to the lower margins realized from software license sales. The net loss was virtually identical to the comparative period last year. EBITDA was a loss of $70,622, $9,662 higher than last year, as non‐cash expenses added back to the net loss were less this year than last.
- As previously noted, the Company held its semi‐annual user group conference in Denver. The cost of the conference was a factor driving expenses, which increased by 9.1% to $2,151,286 from $1,971,181. Salaries and employee benefits increased 11.3% in the current period due to a higher number of employees than last year and higher premiums for the Company employee benefit package. Lower general and administrative costs and depreciation and amortization expenses offset the increase and, in accordance with generally accepted accounting principles, the Company also capitalized $47,805 of software development costs as the Company continued its development of next‐generation products.
- Cash collections increased our cash resources by approximately $517,000, to total $4,452,646, or $0.30 per share, at period end.
- During the quarter, as previously announced, the Company re‐priced stock options outstanding to its employees to $0.20 from an average value of approximately $0.29. The Company did this to ensure that the stock options granted to employees would continue to create motivational and retentive inducements for our highly skilled employees.
- The Company continued its Normal Course Issuer Bid program, wherein 145,500 shares were repurchased in the quarter for cancellation. Subsequent to the quarter end, approval was obtained to continue the Normal Course Issuer Bid for another year.
- Management continued to pursue investigation of several corporate development alternatives, to achieve its stated goal of achieving optimal value for all stakeholders.
Please refer to the latest financial statements and MD&A filed on www.sedar.com for full financial analysis and details.
As was stated in the February 29, 2012 MD&A, Management continues to believe that the outlook for Serenic stakeholders remains positive. Our strategy for Fiscal 2013 continues to focus on organic growth of core operations through prudent reinvestment of our resources, to maintain EBITDA positive results on an annual basis as we grow our business, and to continue to pursue scenarios to maximize value for our shareholders beyond what organic growth would produce.
Software development projects that commenced in Fiscal 2012 continued in the first quarter and will be sustained for the balance of the year in order to ensure that our solutions and products remain at the forefront of technology and functionality, as required for success in our marketplace. These projects include adapting our software to function on Microsoft’s new Azure/Window’s 8 cloud platform to be released to market in Fall, 2012 and new applications using a Dynamics CRM platform in a SaaS environment. We will continue to build on the “The Year of the Customer” theme that was initiated in Fiscal 2012 in order to further enhance and solidify our clients’ experience and loyalties, and will continue to focus on the addition of new customers and partners world‐wide.
From a corporate development perspective, we will continue to pursue various strategic opportunities that have potential to enhance shareholder value, which may involve a capital structure review, strategic partnerships, and/or merger and acquisition scenarios. Management strongly believes that the current market capitalization of the Company as reflected in its share price does not adequately reflect Serenic’s fair value, especially given that it has cash resources at period end of almost $4.5 million that equates to $0.30 per share. Management continues with its resolve to take appropriate action that will best serve the interests of shareholders to rectify this situation.
We believe the Company is adequately financed to operate as anticipated. We remain excited about our future opportunities and remain confident in our belief that our intended course of action for Fiscal 2013 will result in the achievement of greater value for all of our stakeholders.
Grant of Stock Options to Directors and Officers.
The Company authorized on July 24, 2012, a grant of 20,000 stock options to each of Dwayne Kushniruk, Chairman, Randy Keith, President and Chief Executive Officer, Ronald Odynski and Doug Thomson, independent directors and a grant of 10,000 stock options to each of David Tam, Secretary, and Paul Johnston, Chief Financial Officer. These stock option grant represent a portion of the annual allotment due for serving as directors and officers of the Corporation. The options granted have an exercise price of $0.20, vest 1/3 annually on the anniversary date of the grant, expire in five years if unexercised, and comply with the Company’s compensation plan for Directors and Officers, the terms of the Corporation’s stock option plan and the appropriate policies of TSX Venture Exchange.