Halogen Software Investor Presentation. May 2016

Transcription

1 Halogen Software Investor Presentation May 2016

2 Forward-looking statements This presentation contains "forward-looking information", which may include, but is not limited to, statements with respect to future events or the future financial and operating performance of Halogen Software Inc. and which reflect management's expectations regarding Halogen s growth, results of operations, performance, business prospects and opportunities and industry performance and trends. They reflect management s current internal projections, expectations or beliefs and are based on information currently available to management. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects'', "approximately", "budget", "estimates", "forecasts", "intends", "anticipates" or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. By the very nature of such information, forward-looking information involves numerous assumptions. A variety of factors, many of which are beyond Halogen s control, may cause actual results to differ materially from the expectations expressed in the forward-looking information. Such factors include, among others, general business, economic and competitive uncertainties; the actual results of our operations; actions of our competitors; and actual growth in the market for talent management solutions. Additional risk factors are discussed in the section entitled Risk Factors in Halogen s Annual Information Form, available at When relying on Halogen s forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Halogen does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of Halogen, except as required by law. 2

3 Our mission is to help our customers Win with Talent! 3

4 Halogen at a glance Leading SaaS Talent Management Mid-Enterprise Large, underpenetrated Growing Global Market Strong recurring revenue growth with high visibility Best-in-class customer success and satisfaction Ottawa-based Global operations ~475 employees 4

5 Halogen at a glance 2,000+ customers worldwide 55 countries 23 languages US$ 65.7 M 2015 Revenue Halogen Office 5

6 The need for talent management has never been greater 64% of employees don t understand their organization s goals. 1 CEOs see Talent as the #1 Constraint to Growth. 2 Dealing with multiple generations, cultures, Geographies. Voluntary turnover is on the rise especially high performers. 3 79% of executives say lack of frontline leadership capability negatively impacts company performance. 4 1 Corporate Executive Board 2 Gartner CEO and Senior Executive Survey PwC Saratoga 2012/13 US Human Capital Effectiveness Report 4 Harvard Business Review/Halogen Study: Frontline Managers,

7 The Transformation of Talent Management Halogen Product Evolution Pre-1990 s PAPER AUTOMATE INTEGRATE ENGAGE EMPOWER Annual Paper-based Reviews Appraisal, Compensation, 360 Reviews Automated Yearly Appraisal Process Targeted 360 Reviews Compensation Driven from Appraisal Talent Management Suite Goal setting Feedback Job Descriptions Talent Profiles Employee Learning Succession Planning Performance Led Talent Management Suite Link Strategy to Goals & Execution Development plans Continuous Feedback Ongoing Performance Job Competencies Recruiting and Applicant Tracking Next Generation Performance Engagement Insights Suggested Action Contextual Coaching & Learning Career Companion Employee Well Being 7

8 Winning Talent Management Solutions = Business Outcomes Effective performance management practices 20 X more likely to have strong employee and business outcomes Organizations with strong learning cultures 91% more likely to innovate Strong succession planning Reduced time to fill critical roles Lower turnover costs Higher high-potential development Improved competitive advantage Effective, transparent pay communication 50% increase in employee pay perception Improved intent to stay by 34% Boosting employee effort by 15% Strong onboarding programs 54% greater new hire productivity 50% greater new hire retention Sources: Bersin by Deloitte; Rothwell & Associates; Corporate Executive Board; Aberdeen Group 8

9 Key Opportunity: Next Generation Performance Annual Fixed Centralized Assumption based Backward looking Rating focused Remediation Future outlook Ongoing Agile Local Data driven Forward looking Development focused Continuous improvement Bersin by Deloitte,

10 Winning with talent starts with performance at the heart Next Generation Performance Aligned & engaged workforce 10

11 Helping our customers Win with Talent Easy to adopt suite Expert content and resources Unparalleled services Next Generation Performance Vibrant community 11

12 Strengthened by Strategic Partnerships Best-in-Class Content Seamless Connection to HRIS Systems Leading Talent Acquisition Capabilities Unparalleled Services 12

13 Talent Management: Huge, Growing, Under-Penetrated Market $15B Total Addressable Market 300,000 Mid-Market* Organizations Worldwide 2,150 Halogen customers >90% have no Talent Management software solution ^ *100-10,000 employees ^Company estimates based on various sources and management s calculations 13

14 Why Halogen Wins in the Mid-Enterprise Market Enterprise-focused Solutions Simple yet Powerful Affordable Customer Value at Every Step Outcomes-focused Implementation Complex Expensive Large Customer Priority Complicated Implementation Halogen s account care and implementation programs, focus on ease of use and, its pricing strategy continue to make it a leader in the midmarket. Gartner Magic Quadrant

15 Broad, Diversified Customer Base Healthcare Professional Services Hospitality Financial Services Manufacturing Education Public Sector 15

16 Ranked #1 in Customer Satisfaction Halogen ranked highest of all participating vendors in overall experience throughout the customer life cycle, as well as in overall product satisfaction. Gartner, Magic Quadrant for Talent Management Suites A clear leader in every customer satisfaction area measured product quality, implementation, service and business partnership. Talent Management Systems Customer Satisfaction Halogen garnered the highest scores in customer service and cost-effectiveness from its clients. MarketScape Worldwide Integrated Talent Management Vendor Analysis Halogen s customer service ratings are the highest of any vendor. The Forrester Wave Talent Management 16

17 Executive and Organizational Alignment to Customer Outcomes BUILD ENGAGE Karen Williams Products Marc Harrison Partnerships Donna Ronayne Marketing Rose Cain Sales Operations PARTNER ONBOARD - NURTURE ENABLE Sussane Bond North America East Rob Sutherland North America West Donal Murphy Europe Middle East Africa Marc Brule Asia-Pacific John Hawkins Customer Success Connie Costigan Communications Dominique Jones People Pete Low Finance Michael Stewart Legal Les Rechan CEO 17

18 2016 Winning Conditions Unified Glocal Weekly & Monthly Sprints Solutions Outcomes Partnerships Profitable Growth Siloed Regional Quarterly Products Experience Organic Revenue 18

19 Go-to-Market Alignment and Differentiation Focused on Customer Outcomes Cohesive outcomes framework that spans the value chain BUILD ENGAGE PARTNER ONBOARD NURTURE Product Manager Multi-touch marketing campaigns Account Executive Regional Sales Manager Customer Success Manager OUTCOMES Inside Sales Representatives Sales Support TalentSpace Consultant ENABLE 19

20 Customer Outcomes that Matter Our net operating margin increased from below 1% the year we implemented Halogen, to 9.6%, three years later. Our investment in talent management has been a big part of that. Holly Winn Vice President HR Black River Memorial 20

21 Multiple Vectors For Growth and Expansion Acquire new Customers Expand Existing Business Innovate & Enhance Suite of Solutions Expand Partnerships Selectively Pursue Strategic Acquisitions Continue to grow customer count Cross-sell and upsell within existing customer base Develop new products and solutions to expand offering Continue to partner with best-of-breed providers to offer new solutions to the market Execute acquisitions that strengthen solution suite and market position 21

22 Financial Highlights 22

23 Key Financial Highlights Highly Visible & Predictable Recurring Revenue Model Path to Profitability Clean Balance Sheet Subscription-based model Recurring revenue ~90% of total 90%+ of revenue is recognized from customers that were in place at beginning of quarter Dollar retention rate >100%¹ 2016E Adjusted EBITDA 2 of $1.5 M to $2.0 M, up from $(8.9) M in 2015 Positive cash flow from operations expected in 2016 March 31, 2016 cash and equivalents of $34.9 M No debt 1 Calculated by taking the annualized recurring revenue of customers at the beginning of a twelve-month period and dividing it into annualized recurring revenue for those same customers at the end of the period. 2 We have changed the calculation of Adjusted EBITDA to no longer adjust for foreign exchange gains and losses. Please refer to the Adjusted EBITDA section of the Company s Management s Discussion and Analysis for the three month periods ended March 31, 2016 and 2015 for more information and the impact of this change. 23

24 Revenue Profile (US$M) $73.1 $22.7 $18.2 Recurring Revenue 80% $31.0 $25.0 Recurring Revenue 81% $38.0 $32.7 Recurring Revenue 86% $48.0 $42.1 Recurring Revenue 90% $56.7 $50.8 Recurring Revenue 90% $59.5 $65.7 Recurring Revenue 91% $66.6 Recurring Revenue 91% Recurring Revenue Total Revenue Estimates 24

25 Highly Visible Recurring Revenue Model 90% + of quarterly revenue is recognized from customers that were in place at beginning of quarter Subscription-based model 2 year initial contract + automatic annual renewals Dollar retention rate >100%¹ Low customer concentration <2% Annualized Quarterly Recurring Revenue (US$M) $64.7 ¹ Calculated by taking the annualized recurring revenue of customers at the beginning of a twelve-month period and dividing it into annualized recurring revenue for those same customers at the end of the period 25

26 Focus on Profitable Growth Gross Margin % 72% 74% 74% 75% Q1-15 Q1-16 Adj. EBITDA 1 (US$M) $0.9 ($3.6) ($8.9) ($11.4) Q1-15 Q1-16 Cash Flow from Operations (US$M) ($2.0) ($0.1) $0.5 ($4.7) Q1-15 Q We have changed the calculation of Adjusted EBITDA to no longer adjust for foreign exchange gains and losses. Please refer to the Adjusted EBITDA section of the Company s Management s Discussion and Analysis for the three month periods ended March 31, 2016 and 2015 for more information and the impact of this change. 26

27 Investment Highlights Large, Underpenetrated Growing Global Market Leading SaaS Talent Management provider for the mid-enterprise market 2,150 Customers Strong recurring revenue growth with high visibility Recognized industry leader in customer satisfaction >100% Dollar Retention Rate¹ ¹ Calculated by taking the annualized recurring revenue of customers at the beginning of a twelve-month period and dividing it into annualized recurring revenue for those same customers at the end of the period 27

28 WINNING with TALENT Halogen has helped revolutionize our organization s culture to focus on performance and accountability. Tim Mulligan, San Diego Zoo Global 28

29 Appendix - Financials 29

30 Q Financial Highlights Revenue Recurring revenue +13% / 15%* Total revenue +11% / 13%* Intl. Revenue +5% $16.2 (US$M) $15.9 $17.7 Adjusted EBITDA 1 Adj. EBITDA of $0.9 million vs. $(3.6) million in Q $14.4 Cash Flow Cash flow from operations of $0.5 million vs. $(0.1) million in Q * Constant Currency Recurring Revenue Total Revenue 1 We have changed the calculation of Adjusted EBITDA to no longer adjust for foreign exchange gains and losses. Please refer to the Adjusted EBITDA section of the Company s Management s Discussion and Analysis for the three month periods ended March 31, 2016 and 2015 for more information and the impact of this change. *Calculated on a constant currency basis 30

31 2016 Financial Outlook (US$M) Q FY 2016 Total Revenue $17.8 to $18.0 M $72.6 to $73.6 M Recurring Revenue $16.3 to $16.5 M $66.1 to $67.1 M Adjusted EBITDA --- $1.5 to $2.0 M Operating Cash Flow --- Positive Recurring Revenue 80% 31

32 Non-GAAP Adjustments Adjusted EBITDA reconciliation ($000 s except per share amounts) Three months ended March 31, months ended December 31, Net income (loss) ($56) ($4,725) ($13,475) ($15,384) Interest (income) expense and other, net ($15) ($29) ($81) ($229) Income tax expense $(322) $26 $214 $113 Depreciation and amortization $999 $971 $3,961 $3,314 Share-based compensation $321 $157 $457 $739 Adjusted EBITDA 1 $927 ($3,600) ($8,924) ($11,447) 1 We have changed the calculation of Adjusted EBITDA to no longer adjust for foreign exchange gains and losses. Please refer to the Adjusted EBITDA section of the Company s Management s Discussion and Analysis for the three month periods ended March 31, 2016 and 2015 for more information and the impact of this change. 32

33 Additional Supporting Information 33

34 Complete Solutions Large Cross-Sell Upsell Opportunity Current penetration 2.3/10 modules 34

35 3 rd Party Providers Value-Add Content Services & Support Job Performance 1:1 Exchange 360 Multirater Description Myers-Briggs Builder Learning Compensation Succession Talent Acquisition Accelerator TalentSpace Connect Single Sign On Integration & APIs Outlook Plugin Mobile Support Built-in forms and development content TalentSpace Foundation 35

36 Halogen Global SaaS Scalability Global Delivery Accelerated by Akamai Security and compliance Global SaaS Team (Ottawa & London) Market leading availability ( % in 2015) 24x7x365 Operations More than 5 billion web transactions annually Built in Disaster Recovery 36