Determine Announces 3rd Quarter Fiscal Year 2018 Financial Results

February 8, 2018 4:15 PM

Business momentum driven by strong year-over-year subscription services growth contributes to robust quarterly financial performance

CARMEL, Ind., Feb. 08, 2018 (GLOBE NEWSWIRE) -- Determine, Inc. (NASDAQ: DTRM), a pioneering leader in global Source-to-Pay and Enterprise Contract Lifecycle Management (ECLM) Cloud Platform solutions, announced financial results for its third quarter ended December 31st, 2017.

Q3 FY18 GAAP Financial Highlights:

(in thousands, except per share amounts)
GAAPQ3Q2Q3ChangeChangeNine Months
Financial MeasuresFY 2018FY 2018FY 2017Q/QY/YFY 2018FY 2017Change
Y/Y
Revenue – total$ 7,467$ 6,888$ 6,8528.4%9.0%$ 21,343$ 19,9287.1%
Revenue – recurring$ 5,552$ 5,545$ 5,0540.1%9.9%$ 16,397$ 15,2677.4%
Revenue – non-recurring$ 1,915$ 1,343$ 1,79842.6%6.5%$ 4,946$ 4,6616.1%
Gross profit – total$ 4,160$ 3,432$ 3,34121.2%24.5%$ 11,277$ 9,86514.3%
Gross profit – recurring$ 3,649$ 3,371$ 3,2778.2%11.4%$ 10,534$ 10,1823.5%
Gross profit/(loss) – non-recurring$ 511$ 61$ 64737.7%(698.4%)$ 743$ (317)334.4%
Gross margin – total55.7%49.8%48.8%5.9 pts6.9 pts52.8%49.5%3.3 pts
Gross margin – recurring65.7%60.8%64.8%4.9 pts0.9 pts64.2%66.7%(2.5 pts)
Gross margin – non recurring26.7%4.5%3.6%22.2 pts23.1 pts15.0%(6.8%)21.8 pts
Net loss$ (2,346)$ (2,671)$ (2,193)(12.2%)7.0%$ (7,127)$ (7,743)(8.0%)
EPS$ (0.16)$ (0.18)$ (0.18)$ 0.02$ 0.02$ (0.51)$ (0.67)$ 0.16

Q3 FY18 Non-GAAP Financial Highlights:

(in thousands, except per share amounts)
Non-GAAPQ3Q2Q3ChangeChangeNine Months
Financial MeasuresFY 2018FY 2018FY 2017Q/QY/YFY 2018FY 2017Change
Y/Y
Revenue – total$ 7,467$ 6,888$ 6,8528.4%9.0%$ 21,343$ 19,9367.1%
Revenue – recurring$ 5,552$ 5,545$ 5,0540.1%9.9%$ 16,397$ 15,2757.3%
Revenue – non-recurring$ 1,915$ 1,343$ 1,79842.6%6.5%$ 4,946$ 4,6616.1%
Gross profit – total$ 4,484$ 3,784$ 3,72618.5%20.3%$ 12,271$ 10,89612.6%
Gross profit – recurring$ 3,916$ 3,675$ 3,5906.6%9.1%$ 11,405$ 11,0373.3%
Gross profit/(loss) – non-recurring$ 568$ 109$ 136421.1%317.6%$ 866$ (141)714.2%
Gross margin – total60.1%54.9%54.4%5.2 pts5.7 pts57.5%54.7%2.8 pts
Gross margin – recurring70.5%66.3%71.0%4.2 pts(0.5 pts)69.6%72.3%(2.7 pts)
Gross margin – non recurring29.7%8.1%7.6%21.6 pts22.1 pts17.5%(3.0%)20.5 pts
Net loss$ (1,303)$ (1,506)$ (1,010)(13.5%)29.0%$ (3,761)$ (4,253)(11.6%)
EPS$ (0.09)$ (0.10)$ (0.08)$ 0.01$ (0.01)$ (0.27)$ (0.37)$ 0.10
Billings$ 8,856$ 5,991$ 7,54547.8%17.4%$ 21,619$ 19,59510.3%

“Momentum is the key word for Determine now as we continue to build on our success quarter over quarter. Our financial performance in Q318 was strong as measured by key metrics - notably year over year recurring revenue, which grew at an impressive 10%. We continue to bolster and refine our management, product, and sales and marketing strategies, resulting in significant growth in SQL-grade lead generation and pipeline activity. The latest release of the Determine Cloud Platform breaks new ground again, providing unparalleled capabilities to our customers, and in the coming quarters our product roadmap will introduce new innovations in key areas including, blockchain, AI and machine learning as it continues to roll out. Significantly, this past quarter was notable for our numerous customer satisfaction initiatives, capped by the Determine User Conference in France which surpassed attendance estimates. At all levels of the company, we are renewing our commitment every day to ensuring 'Customer Experience' is the focus of everything we do. Our goal, as always, is to exceed customer expectations at every stage.”

— Patrick Stakenas, President and CEO, Determine, Inc.

Q3 FY18 Determine Business Highlights:

Conference Call and Webcast Thursday, February 8, 2018 at 5:00 PM (Eastern Time)

Participant Dial-In Numbers:

Toll-Free: 1-877-407-0789

Toll/International: 1-201-689-8562

Participant Webcast Link: http://public.viavid.com/index.php?id=128017

Replay Dial-In Numbers:

Toll-Free: 1-844-512-2921

Toll/International: 1-412-317-6671

From: 02/08/18 at 8:00 pm Eastern Time

To: 02/15/18 at 11:59 pm Eastern Time

Replay Pin Number: 13675586

Related: http://investor.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.

Annualized 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.

Inducement Grant

Determine also announced today that Kevin Turner, the Company’s recently appointed Senior Vice President – Customer Success, was granted a non-qualified stock option to purchase 100,000 shares of Determine’s Common Stock effective February 13, 2018. The non-qualified options will have an exercise price per share equal to the closing price of Determine’s common stock on NASDAQ on February 13, 2018. The options have a 10-year term and vest over a 48-month period, with 25 percent of the option shares vesting after completion of 12 months of continuous service to Determine, and the remaining option shares vesting in equal monthly installments over the following 36 months of continuous service to Determine. The grant was made as an inducement that was a material component of Mr. Turner’s compensation and subsequent acceptance of employment with the company and was granted as an employment inducement award pursuant to NASDAQ Listing Rule 5635(c)(4) approved by the members of the independent compensation committee of the board of directors of Determine.

Supporting Resources
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About Determine, Inc.
Determine, Inc. (NASDAQ: DTRM) is a leading global provider of SaaS Source-to-Pay and Enterprise Contract Lifecycle Management (ECLM) solutions. The Determine Cloud Platform provides procurement, legal and finance professionals analytics of their supplier, contract and financial performance. Our technologies empower customers to drive new revenue, identify savings, improve compliance and mitigate risk.

The Determine Cloud Platform seamlessly integrates with major ERP or third-party systems such as SAP, Oracle, Sage, QAD and Microsoft. Modular solutions can be configured to add more as needed to provide additional value beyond spend management. Our unified master database and business process approach empower users at every level to make more informed and smarter decisions.

For more information, please visit: www.determine.com.

Contact

Media Relations:
Mike Mitchell
Determine, Inc.
+1.650.532.1590
pr@determine.com

Determine, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
Revenues:
Recurring revenues$5,552 $5,054 $16,397 $15,267
Non-recurring revenues 1,915 1,798 4,946 4,661
Total revenues 7,467 6,852 21,343 19,928
Cost of revenues:
Cost of recurring revenues 1,903 1,777 5,863 5,085
Cost of non-recurring revenues 1,404 1,734 4,203 4,978
Total cost of revenues 3,307 3,511 10,066 10,063
Gross profit:
Recurring gross profit 3,649 3,277 10,534 10,182
Non-recurring profit (loss) 511 64 743 (317)
Total gross profit 4,160 3,341 11,277 9,865
Operating expenses:
Research and development 1,289 1,049 3,363 3,052
Sales and marketing 2,733 2,273 7,923 7,843
General and administrative 1,986 1,761 5,863 5,432
Total operating expenses 6,008 5,083 17,149 16,327
Loss from operations (1,848) (1,742) (5,872) (6,462)
Other expense, net (534) (462) (1,280) (1,388)
Net loss before income tax (2,382) (2,204) (7,152) (7,850)
Benefit from income taxes 36 35 25 143
Consolidated net loss (2,346) (2,169) (7,127) (7,707)
Net loss attributable to non-controlling interest - (24) - (36)
Net loss attributable to common stockholders$(2,346) $(2,193) $(7,127) $(7,743)
Basic and diluted net loss per share$(0.16) $(0.18) $(0.51) $(0.67)
Determine, Inc.
GAAP to Non-GAAP Reconciliations
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
Reconciliation of total revenue:
U.S. GAAP as reported$7,467 $6,852 $21,343 $19,928
Adjustments:
Deferred revenue adjustment - - - 8
Non-GAAP revenue$7,467 $6,852 $21,343 $19,936
Reconciliation of gross profit:
U.S. GAAP as reported$4,160 $3,341 $11,277 $9,865
Adjustments:
Deferred revenue adjustment - - - 8
Amortization of acquisition 257 250 768 758
Stock based compensation 23 111 144 241
Severance 44 24 82 24
Non-GAAP gross profit$4,484 $3,726 $12,271 $10,896
Reconciliation to non-GAAP net loss:
Net loss attributable to Determine, Inc.$(2,346) $(2,193) $(7,127) $(7,743)
Stock-based compensation expense 443 630 1,649 1,867
Deferred revenue adjustment - - - 8
Amortization on intangibles 540 526 1,614 1,594
Benefit for income taxes - - - (13)
Severance costs 60 27 103 34
Non-GAAP net loss$(1,303) $(1,010) $(3,761) $(4,253)
Non-GAAP basic and diluted net loss per share$(0.09) $(0.08) $(0.27) $(0.37)
Weighted average shares outstanding for basic and diluted net loss per share 14,953 11,944 14,068 11,466
Determine, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
Consolidated net loss$(2,346) $(2,169) $(7,127) $(7,707)
Foreign currency translation adjustments, net 257 (18) 1,028 (31)
Other comprehensive income (69) - (80) -
Comprehensive loss (2,158) (2,187) (6,179) (7,738)
Less: Net loss attributable to non-controlling interest - (24) - (36)
Comprehensive loss attributable to Determine, Inc.$(2,158) $(2,211) $(6,179) $(7,774)
Determine, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
December 31, March 31,
2017 2017
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents$10,077 $9,429
Accounts receivable, net 9,031 7,042
Restricted cash 27 34
Prepaid expenses and other current assets 1,243 1,553
Total current assets 20,378 18,058
Property and equipment, net 83 85
Capitalized software development costs, net 2,907 2,341
Goodwill 15,256 14,448
Other intangibles, net 4,452 5,860
Other assets 1,100 1,599
Total assets$44,176 $42,391
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Credit facility$11,821 $11,861
Accounts payable 2,279 2,478
Accrued payroll and related liabilities 1,985 1,729
Other accrued liabilities 2,408 2,042
Deferred revenue 10,179 10,070
Income tax payable 77 23
COFACE loan 20 174
Total current liabilities 28,769 28,377
Long-term deferred revenue 177 10
Convertible note, net of debt discount 7,260 7,599
Other long-term liabilities 1,306 1,306
Total liabilities 37,512 37,292
Total stockholders' equity 6,664 5,099
Total liabilities and stockholders' equity$44,176 $42,391
Determine, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
December 31, December 31,
2017 2016
Operating activities
Net loss$(7,127) $(7,707)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,910 2,478
Stock-based compensation expense 1,649 1,867
Interest expense paid in kind as convertible note debt 587 -
Income tax benefit (25) (143)
Loss on fixed asset disposal 2 -
Unrealized currency translation gains (43) -
Changes in assets and liabilities:
Accounts receivable, net (1,989) 272
Prepaid expenses and other current assets 308 143
Other assets 691 435
Accounts payable (199) 462
Accrued payroll and related liabilities 256 147
Accrued restructuring costs - (403)
Other accrued liabilities and other long-term liabilities 365 (422)
Deferred revenue 276 (333)
Net cash used in operating activities (2,339) (3,204)
Investing activities
Purchase of property and equipment (34) (39)
Capitalized software development costs, net (1,780) (1,267)
Net cash used in investing activities (1,814) (1,306)
Financing activities
Proceeds from issuance of stock, net of issuance costs 4,909 -
Credit facility borrowing 29,415 3,000
Credit facility payment (29,455) (1,139)
Net employee withholding taxes paid in connection to issuance of restricted stock (39) 78
Issuance of stock under employee stock purchase plan 73 80
Repayment of loan (154) (185)
Proceeds from exercise of stock options 6 -
Issuance of debt, net of costs - 2,429
Net cash provided by financing activities 4,755 4,263
Effect of exchange rate changes on cash 46 216
Net increase (decrease) in cash and cash equivalents 648 (31)
Cash and cash equivalents at beginning of the period 9,429 9,418
Cash and cash equivalents at end of the period$10,077 $9,387
Determine, Inc.
Billings Reconciliation
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
Total revenues$7,467 $6,852 $21,343 $19,928
Deferred revenue:
End of period 10,356 10,033 10,356 10,033
Beginning of period 8,967 9,340 10,080 10,366
Change in deferred revenue 1,389 693 276 (333)
Total billings (total revenues plus the change in deferred revenue)$8,856 $7,545 $21,619 $19,595
Determine, Inc.
Non-GAAP EBITDA Reconciliation
(In thousands)
(unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
Reconciliation to non-GAAP EBITDA net loss:
Non-GAAP net loss$(1,303) $(1,010) $(3,761) $(4,253)
Interest 409 461 1,301 1,299
Depreciation 473 348 1,244 916
Income taxes and minority shareholder (36) (11) (25) (107)
Non-GAAP EBITDA net loss$(457) $(212) $(1,241) $(2,145)

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