U.S. Markets close in 2 hrs 32 mins

Edited Transcript of NXJ.TO earnings conference call or presentation 27-Apr-17 9:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Nexj Systems Inc Earnings Call

Toronto May 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Nexj Systems Inc earnings conference call or presentation Thursday, April 27, 2017 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Matthew Bogart

NexJ Systems Inc. - Senior Director of Marketing Communications

* William M. Tatham

NexJ Systems Inc. - Founder, CEO and Director

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good evening. My name is Krista, and I will be your conference operator today.

At this time, I would like to welcome everyone to the NexJ Systems Inc. First Quarter Results Conference Call. (Operator Instructions) Matt Bogart, Vice President of Marketing, you may begin your conference.

--------------------------------------------------------------------------------

Matthew Bogart, NexJ Systems Inc. - Senior Director of Marketing Communications [2]

--------------------------------------------------------------------------------

Thank you, Operator. I am Matt Bogart, responsible for Investor Relations. With us today is Bill Tatham, Chief Executive Officer; and Rick Broley, Chief Operating Officer. Welcome everyone to today's call.

Before we begin, let me caution you that certain statements in today's conference call are forward-looking statements and that actual results might differ materially from those projected. Forward-looking statements include, but are not limited to, estimates, expectations, objectives and plans, financial and otherwise. Please review the safe harbor statement included in the press release reporting our first quarter results for a discussion of a variety of factors that could cause actual results to differ from those projected.

I will now turn the call over to Bill.

--------------------------------------------------------------------------------

William M. Tatham, NexJ Systems Inc. - Founder, CEO and Director [3]

--------------------------------------------------------------------------------

Thank you, Matt. We're pleased to report first quarter results for NexJ Systems, Inc. which reflect both growing revenue and growing profitably. Q1 revenue of $8.8 million represents a 9% increase over the same period in the prior year. Adjusted EBITDA of $0.7 million for the quarter is a $0.4 million improvement over the adjusted EBITDA in the first quarter last year. Net income of $0.3 million for the quarter is a $2.3 million improvement over the net loss of $2 million in the prior year. We finished the quarter with $23.9 million in liquid working capital, which consists of $13.7 million in cash and $10.2 million in receivables net of payables.

Some metrics on revenue growth. 76% of our license revenue in Q1 came from our newest customer, and we expect to continue recognizing revenue from this initial contract throughout Q2. 61% of our revenue in Q1 came from reoccurring services and maintenance with existing customers. Approximately 25% of our Q1 revenue came from the new verticals of Corporate and Commercial Banking and Capital Markets.

20% of our Q1 revenue was derived from projects outside of North America. Selling customer relationship management solutions continues to be our primary revenue generator and we continue to see interest in our products across global markets.

In terms of driving further revenue growth, we recently completed a proof of concept with the wholesale banking division of a leading banking group in the Middle East. The bank was looking for enterprise CRM with deep wholesale banking capabilities that would serve as a leading CRM workbench for its relationship managers, and to begin digitizing their sales processes and enable a data-driven sales approach and increase sales efficiency and effectiveness.

The solution needed to provide robust capabilities to streamline and enhance customer information and insight, planning, preparation and pipeline management, relationship management processes, automating sales processes and sales support. The customer is completing due diligence and we're expecting the final decision imminently.

In addition, we recently successfully completed an extensive 6-week proof of concept with the global banking and markets group of a world-leading European-based bank. NexJ is down to the short list, evaluated against one other vendor to replace an existing Siebel solution as part of the bank's ongoing digital transformation.

The bank aims to deliver best-of-breed core CRM capabilities and workflow built specifically for Corporate Banking and Capital Markets on a robust platform capable of integrating seamlessly within the bank's existing technology ecosystem. The bank is in the final stages of its due diligence, post proof of concept and we expect a decision later in this quarter.

So 2 major pending deals we're quite excited about.

Profitability wise, Q1 represents our seventh consecutive quarter of positive adjusted EBITDA. It was a strong quarter for high-margin license revenue, while we reassign a number of our consultants to support POCs and sales initiatives that we executed this quarter. These people will return to billable work as we begin new projects, which should lead to increases in utilization rates and improvement in our professional services margins. So still some margin in improvement available to us. We have successfully transitioned into our new markets and are confident that we can maintain our appropriate adjusted EBITDA margins going ahead as we drive further profitable growth.

In summary, we are pleased with the growth in revenue and the growth in profitability in the past quarter. Again, liquid working capital at just under $24 million and just under $14 million in cash gives us the wherewithal to continue to aggressively execute our business plan. We have continued with our normal course issuer bid. In total, we have now bought back 498,704 shares and our total antidilutive impact for all NCIBs is now 2.3% to-date.

Strong reoccurring revenue gives us good forward visibility. The quality of our products and their differentiation from the competition give us confidence in our ability to continue winning new business. Given the nature of our large contracts with large clients and long sales cycles, we are still potentially susceptible to some quarterly volatility. However, we remain confident in a positive year-over-year outlook.

We continue to expect continued growth for the year and to further improve our adjusted EBITDA margins.

And with that, I'll turn the call back to the operator. Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) There are no questions at this time, sir. I'll turn the call back over to you.

--------------------------------------------------------------------------------

William M. Tatham, NexJ Systems Inc. - Founder, CEO and Director [2]

--------------------------------------------------------------------------------

Thank you very much. For the shareholders on the line, some information: we're hosting our annual and special meeting on May 24. You should receive a mail notification in due course. I would like also this time to take the opportunity to thank both our customers and our shareholders who continue to support the company. Much appreciated. And I'd also like to thank everyone at NexJ who continues to do an outstanding job in the pursuit of our mission for further value creation. Thank you. Have a good evening.

--------------------------------------------------------------------------------

Operator [3]

--------------------------------------------------------------------------------

And this concludes today's conference call. You may now disconnect.