Serenic Reports Financial Results for First Quarter Ended May 31, 2011
Edmonton, Alberta, Canada (July 28, 2011) – Serenic Corporation (the “Company” or “Serenic”) (TSX-V:SER), an international software developer specializing in integrated financial management and human capital management solutions for Non-Profit organizations, government agencies, and Microsoft Dynamics NAV users, announces its financial results for the three months ended May 31,2011 (“Q1”).
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 quarter ended May 31, 2011 for more information.
- Following a very strong fourth quarter to end its fiscal 2011 year, revenue declined 17.4% in this quarter compared to the first quarter of 2010, due primarily to delayed buying decisions by new customers. The sales pipeline remains strong in management’s opinion and management believe that sales anticipated to complete in the quarter have only been delayed and not lost.
- Despite the sales decline of 17.4%, gross profit only declined 11.9%, from $2,035,753 or 65.2% of sales in Q1 last year to $1,793,053 or 69.5% of sales this quarter. A shift in the sales mix to the more profitable elements of client services and maintenance contracts partially offset the negative impact on profitability from the software license revenue decline.
- Expenses were marginally lower in the current quarter by 2.9%, declining from $2,030,750 to $1,971,181. Certain expenses associated with the strategic initiative to increase value for shareholders were incurred last year but not required to be repeated this year. As Serenic costs are relatively fixed in the short term, the reduced top line sales and gross profit created the net loss of $177,375 in the current quarter.
- Serenic continues to be negatively impacted by the declining foreign exchange rate, which decreased from an average of $1.0226 Cdn to U.S. in Q1 of 2011 to $0.9679 Cdn to U.S. in Q1 of 2012. Revenues are primarily billed in U.S. dollars while expenses are paid in both U.S. and Canadian dollars. The result of the declining U.S. dollar is that revenue is therefore affected more than expenses which also contributed to the net loss.
Q1 2012 Corporate Highlights
- Management continued to focus on two primary objectives during the quarter – to increase the value of the Company by strengthening its position as a global leader in its niche markets and to continue investigation of alternatives to maximize that value for all stakeholders of the Company.
- Serenic continued to progress from marketing and operational perspectives with Q1 having established solid momentum for the upcoming year. The Company announced the addition of the Habanero Consulting Group as a new reseller partner in Western Canada and the Advancement Group as a new distributor for South Africa. Several new customers were added during Q1 including the Human Rights Watch organization which conducts its operations to assist victims of human rights abuses in more than 90 countries.
- In Q1 the Company issued its first quarterly report in accordance with International Financial Reporting Standards(“IFRS”). Conversion from Canadian GAAP to IFRS convention has been a time consuming and expensive project over the past 3 years and this Q1 report represents the successful changeover as is required by all Canadian public companies as of January 1, 2011.
- Subsequent to the quarter end, the Company announced a Normal Course Issuer Bid program commencing June 23, 2011, wherein the Company may repurchase (for cancellation) up to 938,249 of its outstanding common shares. This program was instituted in support of management’s belief that the current share price does not adequately reflect the real value of the Company and that repurchase of common shares at current price levels is an appropriate use of corporate funds.
- On June 13, 2011 Serenic was again appointed to Microsoft’s Inner Circle and President’s Clubs for strong business growth and for outstanding dedication to customer service through the delivery of innovative business solutions.
Please refer to the latest financial statements and MD&A filed on www.sedar.com for full financial analysis and details.
Serenic’s management continues to believe the outlook remains positive. The strategy for Fiscal 2012 is to continue organic growth of core operations, to maintain EBITDA positive results as we grow our business and to continue to explore and pursues cenarios to maximize value for our shareholders beyond what organic growth would produce.
From an operational perspective, this will entail continued pursuit of new business through our traditional reseller and direct channel business models, accelerating activities that pertain to international markets and executing aggressive new campaigns to market our software as a service (“SaaS”) product, Navigator On-line. We have also enacted an internal initiative termed “The Year of the Customer”, which involves revamping current processes and systems throughout the Company in an effort to support and serve our customers and partners even better and to ensure their ongoing satisfaction and loyalty.
From a corporate development focus, we will continue exploration and pursuit of various strategic opportunities to maximize shareholder value, including but not limited to: a capital structure review, strategic partnerships, and/or merger and acquisition scenarios. Management strongly believes that the current market capitalization of the Company does not adequately reflect Serenic’s fair value and is determined to take judicious action that would best serve the interests of shareholders to rectify this situation, as soon as practical.
With $4 million of cash on hand at quarter-end and no long term debt, the Company is adequately financed to operate as anticipated. The management team is excited and committed to achieve the objectives as stated and we anticipate another fruitful year of advancement for the Company.