Halogen Software is looking for a new CEO after longtime chief executive Paul Loucks announced his resignation late Thursday.
“After meaningful reflection, I made the decision that I wanted to spend more time with my family and consider other interests over time,” Mr. Loucks said in a statement. “This was a very difficult decision considering how far Halogen has come over the past 15 years and the strong future the company has in front of it.”
Mr. Loucks, who had been president and CEO since 2000, said he was “grateful” for the opportunity to work with the Halogen team and was “confident” in the firm’s future.
“Our management team and market position have never been stronger,” he said, adding he will work with management through the transition process.
Halogen co-founder and executive chairman Michael Slaunwhite thanked Mr. Loucks for his contributions over the last 15 years.
“He played an important role in establishing Halogen as a leader in the large and underpenetrated talent management software market,” Mr. Slaunwhite said in a statement. “The company is well positioned to continue growing and expanding its global presence, which we believe will drive increased shareholder value over time.”
The Dakota Financial News reported Friday that Mr. Loucks sold 57,000 shares of Halogen stock in May in a transaction worth $570,000 Cdn.
The board of directors has hired an executive search firm to assist in finding Mr. Loucks’ replacement. In the meantime, board member Les Rechan, a former IBM general manager and chief operating officer at Cognos, has been appointed interim president and CEO.
The 2013 CEO of the Year at the Best Ottawa Business Awards, Mr. Loucks said at the time he had every intention of sticking around to build Halogen into Canada’s next billion-dollar software firm.
“I have no plans to retire. That’s not for me. I enjoy work,” he told OBJ before the awards.
Canaccord Genuity analyst Robert Young said Friday Mr. Loucks did a "good job," adding it's always a concern when an established CEO with a track record of success leaves a firm.
Still, he praised the appointment of Mr. Rechan, saying he will keep the company on the right path.
“He is fantastic," Mr. Young said. "He’s got an absolutely impeccable record of leadership roles in the software industry. Halogen is lucky to have him running the business in the interim.”
In the wake of Mr. Loucks’ resignation, Halogen (TSE: HGN) reiterated its second-quarter projections and updated its 2015 year-end guidances.
For the quarter, the company said it still expects recurring revenue of between $14.5 million and $14.7 million and total revenue of between $16 million and $16.2 million.
For the year, it is reducing recurring and total revenue projections, dropping recurring revenue projections from between $60 million and $60.8 million to between $59.3 million and $59.9 million. It has reduced total revenue projections for 2015 from between $66.9 million and $67.7 million to between $65.4 million and $66 million.
“While we have a very strong and growing pipeline of opportunities, we experienced longer than expected sales cycles during the second quarter,” chief financial officer Pete Low said in a statement. “After taking this into consideration, we believed it was prudent to make a modest adjustment to our growth expectations for the year.”
Mr. Low said the company, which now employs about 500 people and has launched a global expansion campaign that has seen it open offices in Britain, Australia and the Netherlands, still expects “solid organic year-over-year growth,” making progress toward profitability “beyond this year.”
Halogen has posed total losses of nearly $60 million US over the past four years.
Mr. Young said the balance sheet doesn't tell the whole story for a software-as-a-service enterprise such as Halogen that relies on recurring revenues.
The company currently spends about half its revenues on sales and marketing in an effort to attract medium-sized clients in a highly competitive space.
"You’re making an investment in the first year for a customer that may last for 10 years," Mr. Young said. "If you’re adding a lot of those customers at the beginning, it makes you look very unprofitable because the costs are all up front. At a certain point, you’d expect that they would be able to lower their sales expenses and see that profitability.”
Canaccord reduced its target price on Halogen stock from $14 to $13.50 in a research note released Friday morning. The agency currently has a buy rating on the stock.
In mid-afternoon trading Friday, Halogen's shares were down 3.47 per cent to $10.56 Cdn on the Toronto Stock Exchange. The company's stock has a 52-week low of $7.50 and a 52-week high of $11.15.