SOURCE: Determine, Inc.

Determine, Inc.

February 10, 2016 16:15 ET

Determine Announces 3rd Quarter Fiscal 2016 Financial Results

Company Delivers Strong Bookings Growth and Profitable Professional Services

SAN MATEO, CA--(Marketwired - Feb 10, 2016) - Determine, Inc. - (NASDAQ: DTRM), a leading global provider of SaaS enterprise contract lifecycle management, strategic sourcing, supplier management, and procure-to-pay solutions, announced its Q3 FY2016 financial results.

Q3 FY2016 GAAP Financial Highlights:

  • GAAP revenue for Q3 FY2016 was $7.1 million, compared to $6.0 million in Q3 FY2015, representing 19% year-over-year growth, and compared to $6.8 million in Q2 FY2016 GAAP revenue, representing a 5% quarter-over-quarter increase.

  • GAAP gross profit percentage was 52% in Q3 FY2016, compared to 48% in Q3 FY2015, and compared to 52% in Q2 FY2016.

  • GAAP net loss was ($3.1) million or ($0.28) per share in Q3 FY2016, compared to ($3.8) million or ($0.49) per share in Q3 FY2015, representing a $0.21 year-over-year improvement per share; in Q2 FY2016 the GAAP net loss was ($3.4) million or ($0.32) a $0.04 quarter-over-quarter improvement per share.

                                                 
(in thousands, except per share amounts)                                
GAAP Financial Measures   Q3     Q2     Q3     Change     Change     Nine Months    
    FY 2016     FY 2016     FY 2015     Q/Q     Y/Y     FY 2016     FY 2015     Change Y/Y  
Revenue - total   $ 7,100     $ 6,765     $ 5,984       4.9 %     18.7 %   $ 20,080     $ 14,949       34.3 %
Revenue - recurring   $ 5,354     $ 5,413     $ 4,664       (1.1 %)     14.8 %   $ 15,862     $ 11,396       39.2 %
Revenue - non-recurring   $ 1,746     $ 1,352     $ 1,320       29.1 %     32.3 %   $ 4,218     $ 3,553       18.7 %
Gross profit - total   $ 3,682     $ 3,505     $ 2,901       5.0 %     26.9 %   $ 10,494     $ 5,615       86.9 %
Gross profit - recurring   $ 3,538     $ 3,656     $ 3,372       (3.2 %)     4.9 %   $ 10,859     $ 7,660       41.8 %
Gross profit/(loss) - non-recurring   $ 144     $ (151 )   $ (471 )     nm       nm     $ (365 )   $ (2,045 )     (82.1 %)
Gross margin - total     51.9 %     51.8 %     48.5 %     0.1 pts       3.4 pts       52.3 %     37.6 %     14.7 pts  
Gross margin - recurring     66.1 %     67.5 %     72.3 %     (1.4 pts )     (6.2 pts )     68.5 %     67.2 %     1.3 pts  
Gross margin - non recurring     8.2 %     (11.2 %)     (35.7 %)     19.4 pts       43.9 pts       (8.7 %)     (57.6 %)     48.9 pts  
Net loss   $ (3,115 )   $ (3,425 )   $ (3,842 )     (9.1 %)     (18.9 %)   $ (9,483 )   $ (9,478 )     0.0 %
EPS   $ (0.28 )   $ (0.32 )   $ (0.49 )   $ 0.04     $ 0.21     $ (0.93 )   $ (1.35 )   $ 0.42  
                                                                 

Q3 FY2016 Non-GAAP Financial Highlights:

  • New ARR bookings were $1.44 million in Q3 FY2016, compared to $0.88 million in Q3 FY 2015, representing a 64% year-over-year increase, and compared to $1.04 million in Q2 FY 2016, representing a 39% quarter-over-quarter increase. 

  • Non-GAAP revenue was $7.2 million in Q3 FY2016, compared to $6.3 million in Q3 FY2015, representing a 14% year-over-year increase, and compared to $6.8 million in Q2 FY2016, representing a 5% quarter-over-quarter increase.

  • Non-GAAP gross profit percentage was 58% in Q3 FY2016, compared to 56% in Q3 FY2015, and compared to 58% in Q2 FY2016.

  • Non-GAAP net loss was ($1.56) million or ($0.14) per share in Q3 FY2016, compared to ($2.13) million or ($0.27) per share in Q3 FY2015, a $0.13 year-over year improvement per share, compared to ($1.56) million or ($0.15) per share in Q2 FY2016, representing a $0.01 quarter-over-quarter improvement per share.

                                                                 
(in thousands, except per share amounts)                                      
Non-GAAP Financial Measures   Q3     Q2     Q3     Change     Change     Nine Months    
FY 2016     FY 2016     FY 2015     Q/Q     Y/Y     FY 2016     FY 2015     Change Y/Y  
Revenue - total   $ 7,187     $ 6,843     $ 6,316       5.0 %     13.8 %   $ 20,309     $ 16,244       25.0 %
Revenue - recurring   $ 5,400     $ 5,463     $ 4,988       (1.1 %)     8.3 %   $ 16,022     $ 12,437       28.8 %
Revenue - non-recurring   $ 1,787     $ 1,380     $ 1,328       29.5 %     34.6 %   $ 4,287     $ 3,807       12.6 %
Gross profit - total   $ 4,135     $ 3,934     $ 3,514       5.1 %     17.7 %   $ 8,069     $ 7,630       5.7 %
Gross profit - recurring   $ 3,859     $ 3,963     $ 3,877       (2.6 %)     (0.5 %)   $ 7,822     $ 9,084       (13.9 %)
Gross profit/(loss) - non-recurring   $ 276     $ (29 )   $ (363 )     nm       nm     $ 247     $ (1,454 )     nm  
Gross margin - total     57.5 %     57.5 %     55.6 %     0.0 pts       1.9 pts       39.7 %     47.0 %     (7.3 pts )
Gross margin - recurring     71.5 %     72.5 %     77.7 %     (1.0 pts )     (6.2 pts )     48.8 %     73.0 %     (24.2 pts )
Gross margin - non recurring     15.5 %     (2.1 %)     (27.4 %)     17.6 pts       42.9 pts       5.8 %     (38.2 %)     44.0 pts  
Net loss   $ (1,559 )   $ (1,563 )   $ (2,130 )     (0.3 %)     (26.8 %)   $ (4,641 )   $ (7,736 )     (40.0 %)
EPS   $ (0.14 )   $ (0.15 )   $ (0.27 )   $ 0.01     $ 0.13     $ (0.45 )   $ (1.10 )   $ 0.65  
Billings   $ 7,800     $ 6,836     $ 7,209       14.1 %     8.2 %   $ 20,667     $ 17,335       19.2 %
                                                                 

"I'm pleased to report this quarter that our fully integrated sales force, working across our key geographies, US and Europe, have delivered $1.44 million in new ARR, our highest new ARR bookings quarter of the last two years. These results represent not only meaningful year-over-year ARR growth of more than 60%, but are also composed of a well balanced mix of Contract Management, Procure-to-Pay and Sourcing as well as 'suite' solutions." said Patrick Stakenas, President and CEO of Determine. "In addition to our strong new sales results, we hit another important business objective, delivering profitable results in our professional services business. Our forth coming new platform launch of the Determine Platform will serve us well to continue this trend -- as we align our all of our new service efforts under our one platform strategy."

Q3 FY2016 Business Highlights:

  • Non-Recurring Revenue Profitability: Through the continued significant efforts by the global Determine professional services delivery teams, this quarter, Non-Recurring Revenue was profitable for the first time in recent history. In the current quarter, the company reported a Non-GAAP gross profit on non-recurring revenue of a positive $276,000 and a 15.5% margin, as compared to a $363,000 gross loss and a (27.4%) margin on non-recurring revenue in Q3 FY2015. This compares to a $29,000 gross loss and a (2.1%) margin on non-recurring revenue in the prior quarter. The teams will continue to be vigilant and focused on constantly improving the quality and profitability of the company's service delivery sector. 

  • New Brand - "Determine": On October 19, 2015, the company launched a global rebrand effort online as well as on the floor at NASDAQ to formally combine the three legacy industry leaders and brands; Selectica, Iasta and b-pack under one new brand. Over the last three years, as the company has delivered on it's strategic plan, it has evolved significantly from a predominantly contract lifecycle management (CLM) solutions provider, to a leading 'source-to-pay' with enterprise contract lifecycle management suite -- a new brand was essential to encapsulate the new business vision. Determine integrated it's acclaimed "visionary' Gartner Magic Quadrant contract management, procurement and Procure-to-Pay solutions and four collective decades of business acumen onto one platform, one brand and one customer promise: Vision. Insight. Control.

  • New Customers Expansions: In Q3 FY2016, the company closed numerous new customer accounts in the US and Europe across its suite of 'source-to-pay' and enterprise contract lifecycle management solutions. New accounts included sales in key verticals including: financial services, consumer packaged goods, pharmaceutical, energy, real estate, medical imaging systems, and manufacturing. 

  • 20 Most Promising Enterprise Contract Management Solution Provider: In Q3 FY2016, Determine selected by CIOReview 20 Most Promising Enterprise Contract Management Solutions Provider in their latest rankings. The CIOReview selection process looked at a vendor's ability to provide cost-effective and flexible solutions that add value to the contract management services landscape.  

  • Thought Leadership: During Q3 FY2016, the company continued to support its customers and prospects by providing meaningful educational resources designed to help decision-makers make more money, save more money or reduce risk by leveraging source-to-pay with Enterprise Lifecycle Contract Management suite solutions. The company held a highly effective webinar addressing How General Counsel & Procurement Are Leading the Adoption of Contract Lifecycle Management with our customer, Dan O'Connor, Corporate Counsel at Kellogg Company, and Prashant Dubey of The Sumati Group. In addition, the company published a sponsored whitepaper with Spend Matter Research on Exploring 'Total Cost' as a Productivity KPI for the P2P Process.

February 10, 2016 Conference Call & Webcast
A conference call and webcast will be held today at 5:00 p.m. EST to review these results. Interested parties may participate via conference call and webcast:

Participant Conference Call Numbers:

Toll-Free: 1-877-407-0789
Toll/International: 1-201-689-8562
Participant Webcast Link: http://public.viavid.com/index.php?id=118163
Replay Dial-in Info:
Toll-Free:
1-877-870-5176
Toll/International: 1-858-384-5517
From: 02/10/16 @ 8:00 pm Eastern Time
To: 02/24/16 @ 11:59 pm Eastern Time

Replay Pin Number: 13629734
Related: http://www.determine.com/investors
Supporting Resources
Determine blog
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Determine guides & misc. resources

About Determine, Inc.

Determine (NASDAQ: DTRM) is a provider of leading enterprise cloud software solutions with over four decades of collective technical and process knowledge in the areas of strategic sourcing, enterprise contract lifecycle management, and procure-to-pay solutions. We provide the next generation of agile, enterprise cloud solutions for managing the needs of modern business. Using our intuitive applications, organizations can effectively manage the full scope of source-to-pay and enterprise contract lifecycle management requirements using the Determine platform.

The Determine platform is an open technology infrastructure based on smart process application models. The goal of our platform is to establish awareness of relevant data, manage business documents, embed analytical tools, create a means for collaboration, and provide advanced process management tools for fully integrating business processes through an open API infrastructure. Built on a unified and highly scalable platform, we deliver deep and innovative capabilities in strategic sourcing, supplier management, enterprise contract lifecycle management, e-procurement, invoicing, and other business operation areas.

In addition to our source-to-pay and enterprise contract lifecycle management solutions suite, we also provide a powerful, patented configuration engine solution, which Global 1000 companies use to increase revenue by facilitating the right combination of products, services, and price. For more information, please visit: www.determine.com.

Non-GAAP Financial Measures
To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures, including non-GAAP revenue, non-GAAP gross profit, non-GAAP net income, and non-GAAP earnings per share, which we believe are helpful in understanding our past financial performance and future results. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, "GAAP to Non-GAAP Reconciliations". Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. 

The difference between GAAP and non-GAAP revenue is due to the impact of revaluing the deferred revenue balances acquired from primarily b-pack as required by GAAP purchase accounting. 

The difference between GAAP and non-GAAP gross profit is the difference in GAAP versus non-GAAP revenues as well as the elimination of the amortization of acquisition related intangibles, stock based compensation and severance expense from the costs of revenue. Non-GAAP net loss excludes the non-GAAP gross profit items as well as acquisition related costs.
Our management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods; as such, we believe it is useful for investors to understand the effects of these items on our total operations. Further, please note that our non-GAAP revenue is intended to reflect the full amount of revenues that would have been otherwise recorded by the acquired entities of Iasta and b-pack, while our non-GAAP gross profit also excludes the amortization of intangibles that occurred due to the acquisition of the entities of Iasta and b-pack.

Bookings are an operating measure not derived from the Company's revenues or any other amounts presented in accordance with GAAP in the Company's statement of income, balance sheet or statement of cash flows or other equivalent statements.

Forward-looking Statements
Certain statements in this release and elsewhere by Determine are forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding business outlook, assessment of market conditions, anticipated financial and operating results, strategies, product and channel development, future plans, contingencies and contemplated transactions of the company. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors which may cause or contribute to actual results of company operations, or the performance or achievements of the company or industry results, to differ materially from those expressed, or implied by the forward-looking statements. In addition to any such risks, uncertainties and other factors discussed elsewhere herein, risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied for the forward-looking statements include, but are not limited to fluctuations in demand for Determine's products and services, risks of losing key personnel or customers, protection of the company's intellectual property and government policies and regulations, including, but not limited to those affecting the company's industry. Determine undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Additional risk factors concerning the company can be found in the company's most recent Form 10-K as filed by the company with the Securities and Exchange Commission.

   
Determine, Inc.  
Condensed Consolidated Statements of Operations  
(In thousands, except per share amounts)  
(Unaudited)  
   
    Three Months Ended     Nine Months Ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
                                 
Revenues:                                
  Recurring revenues   $ 5,354     $ 4,664     $ 15,862     $ 11,396  
  Non-recurring revenues     1,746       1,320       4,218       3,553  
    Total revenues     7,100       5,984       20,080       14,949  
                                 
Cost of revenues:                                
  Cost of recurring revenues     1,816       1,292       5,003       3,736  
  Cost of non-recurring revenues     1,602       1,791       4,583       5,598  
    Total cost of revenues     3,418       3,083       9,586       9,334  
                                 
Gross profit:                                
  Recurring gross profit     3,538       3,372       10,859       7,660  
  Non-recurring profit/(loss)     144       (471 )     (365 )     (2,045 )
    Total gross profit     3,682       2,901       10,494       5,615  
                                 
Operating expenses:                                
  Research and development     1,232       1,131       2,854       2,570  
  Sales and marketing     3,310       3,354       10,313       9,191  
  General and administrative     1,933       2,006       5,298       5,642  
  Acquisition related costs     138       320       912       682  
    Total operating expenses     6,613       6,811       19,377       18,084  
                                 
Loss from operations     (2,931 )     (3,910 )     (8,883 )     (12,469 )
                                 
Interest and other income (expense), net     (149 )     68       (548 )     41  
Net loss before Income Tax     (3,080 )     (3,842 )     (9,431 )     (12,428 )
                                 
Benefit (provision) for income taxes     (36 )     -       (56 )     2,950  
Net loss   $ (3,116 )   $ (3,842 )   $ (9,487 )   $ (9,478 )
                                 
Net income attributed to non-controlling interest     1       -       4       -  
Net loss attributed to Determine, Inc     (3,115 )     (3,842 )     (9,483 )     (9,478 )
                                 
Redeemable preferred stock accretion     -       -       1,000       2,645  
Net loss applicable to common stockholders   $ (3,115 )   $ (3,842 )   $ (10,483 )   $ (12,123 )
                                 
Basic and diluted net loss per share   $ (0.28 )   $ (0.49 )   $ (0.93 )   $ (1.35 )
GAAP to Non-GAAP Reconciliations:                                
                                 
Reconciliation of Total revenue:                                
  U.S. GAAP as reported   $ 7,100     $ 5,984     $ 20,080     $ 14,949  
  Adjustments:                                
  Deferred revenue adjustment     88       332       229       1,295  
Non-GAAP Revenue   $ 7,188     $ 6,316     $ 20,309     $ 16,244  
                                 
Reconciliation to non-GAAP net loss:                                
Net loss   $ (3,115 )   $ (3,842 )   $ (9,483 )   $ (9,478 )
Stock-based compensation expense     658       665       1,872       1,953  
Deferred revenue adjustment     88       332       229       1,295  
Acquisition related costs     138       320       912       682  
Amortization on Intangibles     543       349       1,374       698  
Benefit for income taxes     -       -       -       (2,950 )
Severance costs     129       46       455       64  
Non-GAAP net loss   $ (1,559 )   $ (2,130 )   $ (4,641 )   $ (7,736 )
                                 
Non-GAAP basic and diluted net loss per share   $ (0.14 )   $ (0.27 )   $ (0.45 )   $ (1.10 )
                                 
Weighted average shares outstanding for basic and diluted net loss per share     11,241       7,896       10,211       7,045  
                                 
                                 
 
Determine, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
 
    Three Months Ended     Nine Months Ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
                                 
Net loss   $ (3,115 )   $ (3,842 )   $ (9,483 )   $ (9,478 )
Other comprehensive income (loss):                                
  Foreign currency translation adjustments     (11 )     -       (68 )     -  
Other comprehensive income (loss)     (11 )     -       (68 )     0  
Comprehensive income (loss)   $ (3,126 )   $ (3,842 )   $ (9,551 )   $ (9,478 )
                                 
                                 
         
Determine, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
         
    December 31,   March 31,
    2015   2015
    (Unaudited)   (Audited)
ASSETS            
Current assets            
  Cash and cash equivalents   $ 9,840   $ 13,178
  Accounts receivable     6,728     5,203
  Restricted cash     34     34
  Prepaid expenses and other current assets     1,452     1,647
    Total current assets     18,054     20,062
             
Property and equipment, net     146     290
Capitalized software     2,974     2,258
Goodwill     14,628     7,702
Other intangibles, net     8,589     6,453
Other assets     965     521
    Total assets   $ 45,356   $ 37,286
             
             
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities            
  Credit facility   $ 7,996   $ 7,447
  Accounts payable     1,938     1,535
  Accrued payroll and related liabilities     2,219     910
  Other accrued liabilities     2,052     1,877
  Deferred revenue     8,870     8,410
  COFACE loan     426     -
  Deferred tax liability     1,186     -
    Total current liabilities     24,687     20,179
  Long-term deferred revenue     149     22
  Convertible note, net of debt discount     5,415     2,900
  Other long-term liabilities     153     167
    Total liabilities     30,404     23,268
             
Redeemable convertible preferred stock     -     4,895
Total Determine, Inc. stockholders' equity controlling interest     14,838     9,123
Non-controlling interest     114     -
Total stockholders' equity     14,952     14,018
    Total liabilities, redeemable convertible preferred stock and stockholders' equity   $ 45,356   $ 37,286
             
             
             
Determine, Inc.  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unudited)  
             
    Nine Months Ended  
    December 31,     December 31,  
    2015     2014  
                 
Operating activities                
Net loss   $ (9,487 )   $ (9,478 )
Adjustments to reconcile net loss to net cash used in                
operating activities:                
Depreciation and Amortization     1,868       1,039  
Loss on disposition of property and equipment     14       -  
Stock-based compensation expense     1,870       1,953  
Non-controlling interest     4       -  
Changes in assets and liabilities:                
  Accounts receivable (net)     149       919  
  Prepaid expenses and other current assets     300       (205 )
  Other assets     12       81  
  Accounts payable     113       152  
  Accrued payroll and related liabilities     278       (512 )
  Other accrued liabilities and long term liabilities     (543 )     604  
  Deferred tax liability     70       (2,989 )
  Deferred revenue     (281 )     353  
Net cash used in operating activities     (5,633 )     (8,083 )
                 
Investing activities                
  Purchase of property and equipment     (6 )     (52 )
  Capitalized Software     (1,077 )     (1,589 )
  Purchase of business, net of cash     (402 )     (5,103 )
Net cash used in investing activities     (1,485 )     (6,744 )
                 
Financing activities                
  Proceeds from sale of common stock, preferred stock and warrants, net of issuance costs     310       7,194  
  Employee taxes paid in exchange for restricted stock awards forefeited     263       -  
  Issuance of common stock under employee stock plan     87       93  
  Credit facility borrowing, net     538       40  
  Credit facility payment     -       (655 )
  Repayment of a loan     (25 )     (277 )
  Conversion of Preferred Stock to Common Stock     (17 )     -  
  Repayment of minority shareholder     (133 )     -  
  Issuance of debt, net of costs     2,743       -  
Net cash provided by financing activities     3,766       6,395  
                 
  Effect of exchange rate changes on cash     14       -  
                 
Net decrease in cash and cash equivalents     (3,338 )     (8,432 )
Cash and cash equivalents at beginning of the period     13,178       16,907  
Cash and cash equivalents at end of the period   $ 9,840     $ 8,475  
                 
                 
 
Determine, Inc.
Billings Reconciliation
(In thousands)
(Unaudited)
 
    Three Months Ended   Nine Months Ended
    December 31,   December 31,   December 31,   December 31,
    2015   2014   2015   2014
                         
Total revenues   $ 7,100   $ 5,984   $ 20,080   $ 14,949
Deferred revenue:                        
End of period     9,019     8,134     9,019     8,134
Beginning of period     8,319     6,909     8,432     5,748
Change in deferred revenue     700     1,225     587     2,386
Total billings (total revenues plus the change in deferred revenue)   $ 7,800   $ 7,209   $ 20,667   $ 17,335
                         
                         

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