Sylogist Ltd T.SYZ

Solid Results/Dividend Raise/Progress on NCIB shares buyback

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Sylogist Q3 Fiscal 2020 Results: Adjusted EBITDA increases 27 to record level as Revenue in the quarter rises; Increased Dividend Declared

Q3 2020 Summary (Comparisons are to Q3 2019, unless otherwise noted)

• Recurring revenues from subscriptions and maintenance grew by 8% to $7.2 million, compared to $6.7 million for the third quarter of 2019.
   
• Professional services revenue grew by 47% to $2.6 million, up from $1.8 million. The increase was largely due to the acquisition of Information Strategies, Inc. part way through Q3 2020.
   
• Revenues were $10 million, compared to $9.8 million.
   
• Gross profit margins were 73% in the quarter, compared to 76% in Q3 2019.
   
• Profit before income taxes of $3.8 million, compared to $3.5 million, increased 8%.
   
• Reported earnings were $3.2 million, compared to $2.7 million in Q3 2019, an increase of 19%.
   
• Earnings per fully diluted common share of $0.13 per share, represent a 13% increase compared to Q3 2019.
   
• Adjusted EBITDA⁽¹⁾ was $5.7 million, or $0.24 per fully diluted common share, an increase of 27%.
   
• Adjusted EBITDA Margin⁽¹⁾ was 57%, compared to 46%.
   
• Cash flow from operations of $5.1 million in the quarter, compared to $1.8 million in Q3 2019, an increase of 185%.
   
• Combined tax pools at the end of the third quarter 2020 were approximately $10 million (CAD).

 

• The Company's Board of Directors has approved an increased quarterly dividend of $0.125 per common share for shareholders of record as at August 31, 2020 to be paid on September 10, 2020, which is to be treated as an eligible dividend under the Income Tax Act (Canada).

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• For the nine months ended June 30, 2020, the Company repurchased 30,000 common shares at an average price of $7.97 for a total cost of $239 thousand.

Jim Wilson, President and Chief Executive Officer of Sylogist commented, "We continue to see solid growth in our recurring revenue, while we drive historic levels of profitability and cash flows. Our Adjusted EBITDA margin was 57%, up substantially from 46%, resulting from our continued focus on operating efficiencies. We are also seeing increased professional services revenues as we start integrating our recent acquisition completed during the third quarter. The InfoStrat acquisition broadens our ERP platform to include CRM capabilities and expands our market to include state level governments. We did see an estimated 10% reduction to our quarterly revenue and Adjusted EBITDA targets as customer organizational demands due to the pandemic response placed heavy loads on some of our not-for-profit and NGO clients. These clients have temporarily postponed some of their projects and new license purchases until equilibrium in the COVID response in achieved.

We successfully launched our NaviPayroll product on Microsoft's AppSource in Q3 2020. This broadens our base of Microsoft customers and provides opportunities for organic growth. During fiscal 2020 we have progressed on a major foundational upgrade to our technology that will reduce support costs and facilitate data integration with point applications. This upgrade has broadened our opportunities in targeting acquisitions that will add value to our platform.

In addition, subsequent to the quarter end, the government of Alberta reduced the provincial corporate tax rate by 2% effective July 1, 2020. On July 16, the Company signed a commitment letter with a Canadian chartered bank for a $40 million credit facility at prime interest rates, primarily targeted as capital for acquisitions. The credit facility combined with our current cash position ($42.5 Million) and our strong cash flow, provides ample capital at very conservative leverage and cost to rapidly grow the business.