Halogen Software turns first-ever quarterly profit

Ottawa-based Halogen Software is reporting quarterly profits for the first time.

“I’m pleased with our performance this quarter,” Halogen CEO Les Rechan told investors on a Thursday evening conference call to discuss the company’s second-quarter results.

“We’ve delivered on our commitment to profitable growth and continue to make moves here early in Q3 to improve our short-term efficiency and longer-term profitability.”

The company, which sells human resources software-as-a-service, reported net income of $283,000 during the three-month period that ended on June 30. That’s compared to a net loss of $2.3 million during the same period last year. Halogen reports in U.S. currency.

“Our net income performance in the quarter versus the same period one year ago primarily reflects our revenue growth, efficiencies we are generating in the business as well as a positive foreign exchange impact,” said Pete Low, the company’s CFO.

Revenue for the quarter was $18 million, up from $16.1 million last year.

Recurring revenue, a key metric for the company due to its subscription-based business model, was  $16.6 million during the quarter, an increase of 14 per cent from the $14.6 million it reported for the same period last year.

Halogen’s adjusted earnings were $1.91 million, compared with a $1.1-million loss during the same quarter in 2015.

Revenues from professional services, which Halogen generally sees when it adds new customers, were down slightly to $1.4 million from $1.5 million during the same period last year.

That was a result of “lower than expected new customer additions in the second half of 2015 and the first half of this year,” Mr. Low said.

That churn is a major concern for the company, he said.

“We’re not happy with it,” Mr. Low said, adding Halogen is focused on ensuring customers see results from its products quickly. “It’s one of those things we’ve really been concentrating on.”

International revenue, which the company considers to be any revenue generated outside of North America, totalled $1.9 million, a six per cent increase from the $1.8 million it reported at this time last year.

Revenue from Europe, the Middle East and Africa grew 12 per cent year-over-year, while revenue from the Asia-Pacific region dropped five per cent, “driven primarily by a lack of new customer growth,” Mr. Rechan said.

“Clearly the return on our international investments, and specifically the APAC region, is not meeting our expectations,” he said.

“We are making decisive changes in our business today. As we work through many of those changes, whether it is our go-to-market strategy, solution packaging and innovation, customer success delivery, or even market and industry dynamics, this is a long-term game for Halogen.”

The company has recently reduced its headcount in Australia and London. It will also be closing its office in Amsterdam and consolidating its European presence in London.

Those changes will initially cost the firm about $400,000, but Mr. Rechan said Halogen expects to see annual savings of between $2 million and $2.5 million as a result of the cuts.