Serenic Corporation
TSX VENTURE : SER

Serenic Corporation

June 22, 2010 16:30 ET

Serenic Reports Fiscal 2010 Year End and Q4 Results

EDMONTON, ALBERTA--(Marketwire - June 22, 2010) - Serenic Corporation (the "Company" or "Serenic") (TSX VENTURE:SER), an international software developer specializing in integrated financial management and HCM solutions for Non-Profit organizations, government agencies, and Microsoft Dynamics NAV users, is pleased to announce its financial results for the three months ended February 28 2010 ("Q4") and year ended February 28, 2010 ("Fiscal 2010").

Financial results are summarized as follows:

Statement of OperationsInformation (Unaudited) Three months ended: Audited Year ended:
  Feb 28, 2010 Feb 28, 2009 Increase (decrease) % Feb 28, 2010 Feb 28, 2009 Increase (decrease) %
  $ $ $ $
Revenue 2,446,115 2,674,994 (8.6)% 10,738,909 9,325,524 15.2%
Income (loss) for the period (154,260) (174,996) 11.8% 297,684 (1,191,681) 125.0%
Basic and diluted income (loss) per share (0.01) (0.01) -% 0.02 (0.08) 125.0%
EBITDA (1) (41,373) (16,761) 146.7% 804,622 (577,374) 239.4%
EBITDA as a % of sales (1.7%) (0.6%) (1.1)% 7.5% (6.2)% 13.7%
Weighted average common shares outstanding 15,185,458 15,185,458   15,185,458 15,183,553  
  1. EBITDA represents earnings before interest, taxes, depreciation, amortization, and stock based compensation. Please review the Serenic Management Discussion and Analysis for the fiscal year ended February 28, 2010 for more information.

Fiscal 2010 Highlights
Serenic had a very strong year in Fiscal 2010. Revenues were $10,738,909, an all-time high for the Company, and 15.2% higher than recorded in the prior year. Net income increased significantly, from a $1.19 million loss in the prior year to $297,684 this year. EBITDA also increased by $1.4 million in Fiscal 2010 to $804,622, from an EBITDA loss of $577,374 recorded in the prior year.

  • License sales increased by 8.4% or $319,094 to $4,110,143 over the year prior. During Fiscal 2010 Serenic increased its international sales by 200% to $807,000 over the prior year, with new customer additions in Switzerland, Afghanistan and several countries in south and central Africa. New license sales in North America decreased by 6.4% from the prior year, primarily due to declining license sales of HCM products which were affected by the tepid economy.
  • Revenue from client services and consulting sales increased by 30.3% or $810,158 to $3,483,672. New license sales spurred demand for implementation services and the roll-out of new versions of Serenic Navigator in the latter part of Fiscal 2010 created demand for upgrade services. Serenic maintained desired productivity rates through the year and increased headcount of consulting staff towards the end of the year.
  • Software maintenance contracts and classroom training revenue increased by 10.3% to $3,140,098 over the prior year. Notwithstanding a 40% decline in training revenues from the prior year, maintenance revenue from new customers and a high software maintenance renewal rate with existing customers were responsible for the overall increase within this category.
  • Gross profits increased by 7.6% or $530,917 to $7,562,573. Gross profit did not increase commensurately with the revenue increase because the margin on license sales declined in Fiscal 2010 due to a royalty cost increase from Serenic's largest supplier which was not passed on to customers. Competitive product pricing pressures and lower margins on subcontracted client services revenue also served to mute the gross profit increase.
  • Expenses declined by 15.6% or $1,336,801 from the prior year, because of several factors. Serenic capitalized $455,537 of salary costs related to the new version of Serenic Navigator that was released to market in November, 2009. Reductions in headcount and selected employee benefits, offset partially by higher incentive and at-risk pay costs, contributed $161,717 to the expense decrease. Marketing costs were reduced by $525,841, general and administrative costs were reduced $78,743 and amortization decreased by $114,963 for a total expense reduction of $881,264. Expenses consumed 67.4% of revenue in Fiscal 2010, a significant reduction from Fiscal 2009 wherein expenses consumed 91.9% of revenue.
  • In Fiscal 2010, Serenic was affected by adverse foreign exchange rates wherein a foreign exchange loss of $209,510 was incurred. This was in sharp contrast to the prior year wherein a foreign exchange gain of $177,969 was recorded, which resulted in negative impact of $387,479 in Fiscal 2010.
  • Due to the increased revenues and gross profit, stringent control on expenses, and despite the foreign exchange loss, net income increased by $1,489,365 to $297,684, from the loss of $1,191,681 recorded last year. EBITDA also improved significantly, having increased by $1,381,906 to $804,622, from the EBITDA loss of $577,374 recorded last year.
  • Cash on hand reflected the improved EBITDA earnings, increasing to $3,427,441 at Fiscal 2010 year end, from $2,974,478 at the prior year end. The Company has virtually no debt.

Despite the economic challenges, Serenic continued to make significant progress as a major global provider of financial software applications to Not-for-Profit (NFP) and International Non Governmental Organizations (NGOs). A sample of new customers announced in Fiscal 2010 include Family and Children's Services of Guelph (Ontario), Nebraska-based Arbor Day Foundation, African Wildlife Foundation, Jewish Community Center of Chicago, and International Union for the Conservation of Nature (the oldest and largest global environmental network spanning 160 countries).

Serenic was again recognized during Fiscal 2010 for several outstanding corporate achievements:

  • In October 2009 Serenic was ranked 29th in Deloitte's Technology Fast 50, a list of Canada's fastest growing technology companies.
  • In October 2009 Serenic was also ranked 256th in Deloitte's 2009 Technology Fast 500 list of fastest growing technology companies in North America.
  • In June 2009 Microsoft named Serenic the Dynamics ISV Partner of the Year for USA.
  • In July 2009 Microsoft named Serenic to both the Inner Circle and President's Clubs, in recognition of Serenic's success in extending the Microsoft Dynamics platform to drive business advantages in companies worldwide. Inner Circle is an elite group comprised of the most outstanding partners whose sales achievement ranks them in the top 1% of the Microsoft global network of partners. President's Club is a prestigious club of worldwide partners who achieve a high level of sales and business performance while maintaining a constant dedication to customer satisfaction and innovation.

Fourth Quarter Highlights

  • Revenue in Q4 was $2,446,115, a decrease of 8.6% from Q4 in the prior year. Direct and partner software license sales totalled $869,172, a decrease of $271,424 or 23.8% from the prior Q4 period. Revenue from client services was $794,497, similar to last year's figure of $812,563. Revenue from maintenance and other sources was $782,446, 8.4% higher than revenue of $721,836 recorded in the same period last year.
  • Gross profit in Q4 decreased by 14.9% or $289,910 to $1,659,184 as compared to last year. Lower direct license sales and a low margin on subcontracted client services, partially offset by higher gross margin earned on maintenance contracts, were responsible for the difference.
  • Expenses declined by 13.0% $288,134 to $1,929,651 as compared to last year. Salary and benefits costs decreased by 11.4% or $183,488, sales and marketing expense decreased by $76,516, and general and administrative costs also decreased nominally.
  • Future tax recovery increased by $77,000 as the Company recognized non-capital losses of prior years on its balance sheet.
  • The decrease in expenses, a higher foreign exchange gain and the recovery of future income taxes offset the reduction in revenue and gross profit such that the net loss in Q4 declined by $20,736 to $154,260, from the loss of $174,996 recorded in Q4 last year.
  • EBITDA in Q4 was a loss of $41,373 versus a loss of $16,761 in Q4 last year. The non-cash add-backs of interest, depreciation and interest were less than last year, more than offsetting the decrease in the net loss.

Please refer to the full financial reports and Management Discussion and Analysis for the year ended February 28, 2010 filed at www.sedar.com for more detailed information.

Summary and Outlook

The outlook for Fiscal 2011 remains cautiously optimistic, although it will not be without its challenges as funding sources for non profits are anticipated to remain at decreased levels. Our expectation is to continue employing tight fiscal controls and execute organic growth strategies without any requirement to incur long term debt or conduct new equity financings in Fiscal 2011.

Management believes that the Company is well positioned to continue growth and leadership in its niche markets, primarily for two reasons:

  • The new version of Serenic Navigator, which was completed and unveiled in late Fiscal 2010, reinforces Serenic as a leading edge provider of solutions for NFPs and NGOs world-wide. Already considered by many customers and partners to be functionally superior, our new "role-tailored" interface greatly enhances user experience and productivity. Also, our enhanced web access, multi-language and multi-currency capabilities, together with seamless integration to other Microsoft solutions, create an end to end solution that management believes is uniquely competitive in certain segments of the marketplace.
  • Serenic continues to expand and capitalize upon its unique position as a key supplier within the Microsoft NAV global distribution network. The Company will work aggressively to broaden its reach within its target markets, both domestically and internationally, through expansion of both Company and partner resources.

The primary corporate objective for Fiscal 2011 is to increase shareholder value. To this end, Serenic engaged PricewaterhouseCoopers Corporate Finance in February 2010, to assist management and the Board of Directors with the investigation of strategic alternatives to maximize shareholder value. This exploration has wide scope and could include a capital structure review, invocation of new strategic partnerships, and/or merger and acquisition alternatives.

With $3.4 million of cash on hand at Fiscal 2010 year 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 necessary to advance the Company, and we anticipate another beneficial year for all stakeholders.

About Serenic Corporation

Serenic Corporation publishes mission-critical software products for not-for-profits (NFP), educational institutions and governments. The Company's products are based on leading application and technology platforms from Microsoft, including Dynamics NAV, SQL Server, and .NET, and are distributed in North America and internationally through value-added resellers and a direct sales organization. Serenic Corporation is the exclusive developer of human resource management and payroll products for Microsoft Dynamics NAV ERP users in North America. Serenic has offices in Edmonton, Alberta and Denver, Colorado and staff located throughout the USA.

ON BEHALF OF THE BOARD OF DIRECTORS  
By: "Dwayne Kushniruk"
Chairman 
SERENIC CORPORATION  

Forward Looking Statements

Certain statements contained in this press release, including statements which may contain words such as "could", "should", "expect", "anticipate", "believe", "will", and similar expressions and statements relating to matters that are not historical facts, are forward looking statements. Such forward looking statements involve known and unknown risks and uncertainties which may cause the actual results, performances or achievements of Serenic Corporation to be materially different from any future results, performances or achievements expressed or implied by such forward looking statements. Such factors include, but are not limited to, software industry risks, general business risks, foreign currency risks, economic dependence risks, and credit risks.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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