Serenic Reports Improved Results for Second Quarter Ended August 31, 2011
Edmonton, Alberta, Canada (October 27, 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 and six months ended August 31, 2011.
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 August 31, 2011 for more information.
- Revenue increased by 16.5% over the first quarter in this fiscal year and by 2.7% over the same period last year. In North America, sales were up due to increased license sales over the same quarter last year and higher recurring revenue from existing customers who purchased additional user licenses and functionality. International license sales were also higher, principally due to the sale of a license to a sub-Saharan African government for their initial user group. HCM sales were down this quarter over last year, as the sale of a large payroll system in Q2 of last year was not similarly matched in the current quarter. The increase in revenue in this quarter occurred despite the negative effect of lower foreign exchange rates of the Canadian to U.S. dollar compared to the same period last year.
- Serenic’s revenues continue to be negatively impacted by the declining foreign exchange rate, which decreased from an average of $1.0423 Cdn to U.S. in Q2 of Fiscal 2011 to $0.9723 Cdn to U.S. in Q2 of Fiscal 2012. Revenue is almost entirely U.S. dollar based while expenses are paid in both U.S. and Canadian dollars; therefore, both revenue and net income are negatively impacted by a decreasing value in the U.S. dollar.
- Gross profit increased over the previous quarter and the same period last year. Gross profit from client services increased as the Company utilized more internal personnel than more costly contractors for client services and the gross profit from software maintenance contracts improved commensurate with the increase in this revenue.
- Expenses were essentially the same in Q2, year over year. While an increased number of personnel, international recruitment costs and higher marketing expenses drove costs up, reduced consultant costs for IFRS conversion and corporate development projects coupled with the decline in the Canadian to U.S. dollar foreign exchange rate reduced expenses overall.
- In July, 2011, Microsoft again recognized Serenic for its commitment to its customers and outstanding level of sales by naming Serenic to Microsoft’s “Inner Circle” and “President’s Club”. President’s Club membership represents the highest achievement of sales and addition of new customers amongst partners, and Inner Circle membership, which is awarded to companies distinguished by Microsoft as one of the top 1% of their 10,000 Dynamics partners world-wide, has been granted to Serenic four out of the last five years and six times in the past nine years.
- The Company continued its development of new products and enhancements to its current products. Several key hires were completed in the quarter, including the addition of a new Germany-based staff member to augment our international sales team. Management continues to pursue its “Year of the Customer” initiative through pro-active measurement of customer support activities as well as a newly enhanced company website which, together, enable improved client interactions, communications and responsiveness.
- The Company’s U.S. subsidiary, Serenic Software Inc., was relocated to new premises in Lakewood, Colorado. The move was completed without disruption, and provides better office facilities at similar to historic costs.
Please refer to the latest financial statements and MD&A filed on www.sedar.com for full financial analysis and details.
Fiscal 2012 Six Month Financial Highlights
- Revenue decreased this fiscal period over last by $463,974 or 7.7%. While revenue from client services is essentially the same as last year, software maintenance revenue has increased and software license sales declined in the first quarter but resumed their more normal pace in Q2. The average foreign exchange rate fell from 1.0334 to 0.9703 and this unfavourable change caused revenue to decline by approximately $309,000 when expressed in Canadian dollars. Commensurate with the revenue decline in software license sales, gross profit declined by $174,921 or 4.4% year over year.
- Expenses are approximately the same as last year, having declined by $72,324 or 1.8%. The Company has more employees than at this time last year and has increased its marketing activities and related expenses; however, lower employee benefits, payroll burden and general and administrative costs offset those increases. The lower Canadian to U.S. dollar foreign exchange rate also served to decrease expenses overall.
- The Company’s year to date net loss of $120,360 versus net income of $1,690 in the comparative period was caused by the lower sales revenue which reduced gross profit. EBITDA remained positive.
Serenic continues to execute its business plan which is focused on two main objectives. Firstly, from an operational perspective, we continue to pursue organic revenue growth by advancing our products, expertise, credibility and market share within the niche markets in which we have historically excelled. Additionally, we plan to augment revenue growth through sales of our Navigator Online “cloud computing” offering (“NOL”). While still early in its roll-out stage we anticipate greater progress in the coming quarters, by addressing larger market segments than were possible in the past. NOL’s capabilities can accommodate a broad market segment whose users require varied functionality, which may be different than Serenic has historically delivered with its on-premise licensed applications.
Secondly, from a corporate development perspective, we continue to investigate and pursue potential alternatives to increase business value and subsequently accelerate the potential realization of higher shareholder value. This remains a key objective of the Company.
Serenic continues to serve niche markets that are vibrant and growing both within North America and internationally. However, many of our customers and prospects remain financially conservative and very cautious about committing to investments for new software infrastructure as a result of the enduring global economic uncertainties, a factor which continues to prolong sales cycles. We continue to carefully monitor expenses and prudently manage cash and other resources. Notwithstanding, we will continue to recruit for new personnel and otherwise expand operations where warranted and continue our new product development and current offering enhancement activities to retain our position of leadership within our niche markets.
Serenic continues to be well capitalized with more than $4 million cash on hand and no long term debt at quarter-end which allows it to fund initiatives required to carry out its business plan. Relationships with clients and vendors remain strong and we remain optimistic about the future prospects for all stakeholders of the Company.