Solium Capital Inc. Releases 2012 First Quarter Results
CALGARY, May 7, 2012 — Solium Capital Inc. (“Solium” or the “Company”) today announced its financial results for the first quarter ended March 31, 2012.
The Company experienced a strong quarter in the first three months ended March 31, 2012, with revenue of $12.7 million, adjusted EBITDA of $4.1 million, net earnings of $2.0 million, and earnings per share of $0.047.
The key factors affecting the results in the three months ended March 31, 2012 are:
- Trading activity – The Company experienced strong participant share trading activity and corresponding transaction based revenue in the three months ended March 31, 2012. This contributed to an increase in revenue of 17% when compared to the fourth quarter of 2011. Participant share trading activity in the first quarter of 2012 did not reach the exceptionally high level experienced in the first quarter of 2011. As a result, revenue displayed a decrease of 3% when compared to the first quarter of 2011.
- SRED ITC’s – The Company incurred expenditures during the first quarter of 2012 in establishing its new operations in the UK. No such expenditures were incurred in the first quarter of 2011.
- Decreased expenses in the U.S. – Certain costs incurred in the first quarter of 2011 associated with the transition of the Computershare business, which was acquired in 2010, did not re-occur in the three months ended March 31, 2012 as a result of the successful integration of the Computershare business during 2011.
- UK expenditures – The Company incurred expenditures during the first quarter of 2012 in establishing its new operations in the UK. No such expenditures were incurred in the first quarter of 2011.
- Hedge accounting – On January 1, 2012, the Company designated the U.S. denominated Due to Computershare as a hedge against the Company’s net investment in its U.S. operations. This designation has the effect of mitigating volatility on net earnings by offsetting foreign exchange gains and losses on the liability with foreign exchange gains and losses on its net investment in U.S. operations that are presented in other comprehensive income. As a result of the hedge accounting, a foreign exchange gain of $0.4 million which was reported in net earnings in the first quarter of 2011 was not applicable in the first quarter of 2012. An unrealized foreign exchange gain of $0.3 million relating to the Due to Computershare balance that would previously have been reflected in net earnings has been reflected in other comprehensive income in the first quarter of 2012.
Financial results for the quarter ended March 31, 2012:
Three Months Ended March 31
|Expenses before income taxes4||$10,051,595||$10,141,440||(1%)|
|Earnings from operations4||$2,934,420||$2,901,138||1%|
|Earnings before income taxes4||$2,601,077||$2,915,439||(11%)|
|Net earnings per share|
|Issued and outstanding|
- 1. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is a non-IFRS financial measure which does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. Adjusted EBITDA provides useful information to users as it reflects the net earnings prior to the effect of non-operating expenses such as interest, tax, amortization, and foreign exchange gain or loss. Management uses Adjusted EBITDA in measuring the financial performance of the Company. Management monitors Adjusted EBITDA against budget and past results on a regular basis. The measure is a key component in determining the annual bonus pool for staff and management.
The following is a reconciliation of Adjusted EBITDA to net earnings:
Three months ended March 31
Foreign exchange (loss) gain
Income tax expense
- Diluted earnings per share is calculated using the treasury stock method.
- Diluted shares as presented equals issued and outstanding common shares plus outstanding stock options and restricted share units.
- 4. Comparability of quarterly adjusted EBITDA and net earnings is affected by factors such as SRED ITC credits and hedge accounting of the Due to Computershare liability.
HIGHLIGHTS OF FINANCIAL PERFORMANCE
- Revenue from Canadian operations was $6.7 million in the first quarter of 2012 (2011: $6.6 million), while revenue from U.S. operations was $6.0 million in the first quarter of 2012 (2011: $6.5 million).
- Adjusted EBITDA from Canadian operations was $2.5 million in the first quarter of 2012 (2011: $2.5 million), while Adjusted EBITDA from U.S. operations was $1.7 million in the first quarter of 2012 (2011: $1.5 million). Canadian operations include the expenditures relating to the establishment of operations in the U.K.
- Net earnings from Canadian operations were $1.6 million in the first quarter of 2012 (2011: $2.0 million), while net earnings from U.S. operations were $0.3 million in the first quarter of 2012 (2011: $0.2 million). The amortization of intangible assets is predominantly attributable to the U.S. operations.
- Net earnings per share was $0.047 in the first quarter of 2012 (2011: $0.054).
- During the first quarter of 2012, the Company had a net cash outflow of $0.4 million (2011: $1.0 million). Cash generated from operations and working capital changes was $1.0 million during the first quarter of 2012 (2011: $1.5 million). Payments totaling $1.3 million were made to Computershare in the first quarter of 2012 (2011: $1.1 million).
- Working capital as at March 31, 2012 was $11.9 million (December 31, 2011: $9.6 million).
- On April 3, 2012, the Company received notice from Computershare of its decision to retain the stock options and restricted stock administration business that it acquired on December 31, 2011 from a third party. The Asset Purchase Agreement dated November 7, 2010 between Solium and Computershare in which Solium acquired the assets that Computershare then held relating to the Employee Equity Options Administration business in North America (the “Business”) provides that Computershare must not re-enter the Business, or alternatively if Computershare does so, certain payment obligations owed by Solium to Computershare under the Transition Services Agreement would no longer be owing and cease to be a liability of Solium. Under the Transition Services Agreement, Solium was required to pay Computershare U.S. $22 million over a five year period from the acquisition date. As a result of Computershare electing to re-enter the Business on a direct basis, the outstanding obligation has been extinguished and Solium no longer owes to Computershare the $16.0 million of payments outstanding on March 31, 2012, and the U.S. $1.3 million of Processing Fees paid to Computershare in the first quarter of 2012 was refunded in April 2012. The extinguishment of the Processing Fees will result in a gain of approximately U.S. $15.8 million to be recognized in the second quarter of 2012, and U.S. $1.5 million of finance costs that would have been recorded through November 2015 will no longer be applicable. The aggregate impact of the extinguishment equates to $0.41 per share (on a basic basis using the number of shares outstanding as at March 31, 2012).
– ENDS –
About Solium Capital Inc.
Solium (TSX: SUM) provides cloud-enabled services for global equity administration, financial reporting and compliance. From our operation centers in the United States, Canada, the UK and Australia, our innovative SaaS technology powers share plan administration and equity transactions for more than 2,800 clients with employees in 80 countries. Follow us @Solium and visit us online at www.solium.com.
For more information, please contact
CEO and Managing Director
Aaron Kabucis, CFA
TMX | Equicom
416.815.0700 x 230
Certain statements included or incorporated by reference in this press release constitute forward-looking statements or forward-looking information under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, or similar words suggesting future outcomes or statements regarding an outlook. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Although Solium believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements or information because Solium can give no assurance that such expectations will prove to be correct. The forward-looking statements and information are based on Solium’s current expectations, estimates and projections, and are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.
The Management’s Discussion and Analysis and the condensed consolidated interim financial statements for the three and six month periods ended June 30, 2012 referred to herein will be available on SEDAR at www.sedar.com under Solium Capital Inc., or at www.solium.com.