Press Release

Determine Announces 3rd Quarter Fiscal Year 2017 Financial Results, Exceeding Revenue and Earnings Expectations

CARMEL, IN -- (Marketwired) -- 02/09/17 -- Determine, Inc. (NASDAQ: DTRM), a leading global provider of SaaS enterprise Source to Pay and Enterprise Contract Lifecycle Management solutions, including cloud-based strategic sourcing, supplier management, contract management and procure-to-pay solutions, announced financial results for its third fiscal quarter ended December 31, 2016.

Q3 FY2017 GAAP Financial Highlights:

  • GAAP revenue was $6.9 million in Q3 FY2017, compared to $6.6 million in Q2 FY2017, representing a 4.1% increase quarter-over-quarter, and compared to $7.1 million in Q3 FY2016 GAAP revenue, representing a 3.5% decrease year-over-year.
  • GAAP gross profit percentage increased to 48.8% in Q3 FY2017, compared to 47.7% in Q2 FY2017, representing a quarter-over-quarter increase of 1.1 percentage points, and compared to 51.9% in Q3 FY2016, representing a 3.1 percentage points decrease year-over-year.
  • Deferred revenues increased 11.1% to $10.0 million in Q3 FY2017 from $9.0 million in Q3 FY2016.
  • GAAP net loss was $2.2 million or ($0.18) per share in Q3 FY2017, compared to $3.2 million or ($0.28) per share in Q2 FY2017, representing a $0.10 improvement per share quarter-over-quarter; in Q3 FY2016 the GAAP net loss was $2.8 million or ($0.25) per share.


(in thousands, except per share amounts)

GAAP Financial Measures Q3 Q2 Q3 Change Change Nine Months
FY 2017 FY 2017 FY 2016 Q/Q Y/Y FY 2017' FY 2016' Change Y/Y
Revenue - total $ 6,852 $ 6,584 $ 7,100 4.1 % (3.5 %) $ 19,928 $ 20,080 (0.8 %)
Revenue - recurring $ 5,054 $ 5,145 $ 5,354 (1.8 %) (5.6 %) $ 15,267 $ 15,862 (3.8 %)
Revenue - non-recurring $ 1,798 $ 1,439 $ 1,746 24.9 % 3.0 % $ 4,661 $ 4,218 10.5 %
Gross profit - total $ 3,341 $ 3,138 $ 3,682 6.5 % (9.3 %) $ 9,865 $ 10,494 (6.0 %)
Gross profit - recurring $ 3,277 $ 3,442 $ 3,538 (4.8 %) (7.4 %) $ 10,182 $ 10,859 (6.2 %)
Gross profit/ (loss) - non-recurring $ 64 $ (304 ) $ 144 121.0 % (55.6 %) $ (317 ) $ (365 ) 13.2 %
Gross margin - total 48.8 % 47.7 % 51.9 % 1.1 pts (3.1 pts ) 49.5 % 52.3 % (2.8 pts )
Gross margin - recurring 64.8 % 66.9 % 66.1 % (2.1 pts ) (1.3 pts ) 66.7 % 68.5 % (1.8 pts )
Gross margin - non recurring 3.5 % (21.1 %) 8.2 % 24.6 pts (4.7 pts ) (6.8 %) (8.7 %) 1.9 pts
Net loss $ (2,193 ) $ (3,207 ) $ (2,845 ) 31.6 % 22.9 % $ (7,743 ) $ (10,212 ) 24.2 %
EPS $ (0.18 ) $ (0.28 ) $ (0.25 ) $ 0.10 $ 0.07 $ (0.67 ) $ (0.90 ) $ 0.23

Q3 FY2017 Non-GAAP Financial Highlights:

  • Non-GAAP revenue was $6.9 million in Q3 FY2017, compared to $6.6 million in Q2 FY2017, representing a 4.1% quarter-over-quarter increase, and compared to $7.2 million in Q3 FY2016, representing a 4.7% decrease year-over-year.
  • Non-GAAP gross profit percentage was 54.4% in Q3 FY2017, compared to 52.5% in Q2 FY2017, representing a 1.9 percentage point increase, and compared to 57.5% in Q3 FY2016, representing a 3.1 percentage point decrease.
  • Non-GAAP net loss was $1.0 million or ($0.08) per share in Q3 FY2017, compared to $2.0 million or ($0.17) per share in Q2 FY2017, representing an improvement of $0.09 per share quarter-over-quarter, compared to $1.5 million or ($0.13) per share in Q3 FY2016, representing a $0.05 improvement per share year-over-year.
  • Billings decreased 3.3% to $7.5 million in Q3 FY2017 from $7.8 million in Q3 FY2016. Billings, a non-GAAP measure, are defined as revenue plus the change in deferred revenues.
  • Non-GAAP EBITDA was ($0.2) million in Q3 FY2017, and compared to ($1.4) million in Q3 FY2016, representing an improvement of $1.2 million year-over-year.

(in thousands, except per share amounts)

Non-GAAP Financial Measures Q3 Q2 Q3 Change Change Nine Months
FY 2017 FY 2017 FY 2016 Q/Q Y/Y FY 2017' FY 2016' Change Y/Y
Revenue - total $ 6,852 $ 6,584 $ 7,187 4.1 % (4.7 %) $ 19,936 $ 20,308 (1.8 %)
Revenue - recurring $ 5,054 $ 5,145 $ 5,400 (1.8 %) (6.4 %) $ 15,275 $ 16,021 (4.7 %)
Revenue - non-recurring $ 1,798 $ 1,439 $ 1,787 24.9 % 0.6 % $ 4,661 $ 4,287 8.7 %
Gross profit - total $ 3,726 $ 3,460 $ 4,135 7.7 % (9.9 %) $ 10,896 $ 11,677 (6.7 %)
Gross profit - recurring $ 3,591 $ 3,710 $ 3,859 (3.2 %) (7.0 %) $ 11,037 $ 11,736 (6.0 %)
Gross profit/( loss) - non-recurring $ 135 $ (250 ) $ 276 154.0 % (51.1 %) $ (141 ) $ (59 ) (139.0 %)
Gross margin - total 54.4 % 52.5 % 57.5 % 1.9 pts (3.1 pts ) 54.7 % 57.5 % (2.8 pts )
Gross margin - recurring 71.0 % 72.1 % 71.5 % (1.1 pts ) (0.5 pts ) 72.3 % 73.3 % (1.0 pts )
Gross margin - non recurring 7.5 % (17.4 %) 15.5 % 24.9 pts (8.0 pts ) (3.0 %) (1.4 %) (1.6 pts )
Net loss $ (1,010 ) $ (1,959 ) $ (1,503 ) 48.4 % 32.8 % $ (4,253 ) $ (4,585 ) 7.2 %
EPS $ (0.08 ) $ (0.17 ) $ (0.13 ) $ 0.09 $ 0.05 $ (0.37 ) $ (0.45 ) $ 0.08
Billings $ 7,545 $ 5,770 $ 7,800 30.8 % (3.3 %) $ 19,595 $ 20,667 (5.2 %)

"This quarter we are very pleased by our return to the million dollar range for new Annualized Bookings, with quarter-over-quarter new sales growing at a rate in excess of 30%. Driving the sales performance was our disruptive, new Determine Cloud Platform offering, with over 90% of our new customers opting for the platform for their Source-to-Pay or Enterprise Contract Lifecycle Management needs," said Patrick Stakenas, President and CEO of Determine. "Over the coming months, we look forward to continuing to focus on several key executional tasks including advancing the Determine Cloud Platform's capabilities -- to provide our customers with 'Platformance', continuing to optimize organizational efficiencies, and building upon our robust lead pipeline to deliver incremental and accelerated sales in the coming quarters."

Q3 FY2017 Business Highlights:

  • Annualized Bookings: The sales team delivered approximately $983,000 in Annualized Bookings for the quarter, with more than 90% of new customers selecting the new Determine Cloud Platform for their Source-to-Pay or Contract Lifecycle Management needs.

  • Determine Cloud Platform Empowers Companies in Source-to-Pay and Enterprise Contract Lifecycle Management: During Q3 FY2017, Determine introduced a range of additional benefits that empower customers to deliver results now, and as they grow. These include the following improvements to the Determine Cloud Platform: improved supplier certification and compliance through triggered automation based on answers provided during registration and supplier monitoring, side-by-side comparison of contract requests and attachments for enhanced version control and user authorization, time tracking for services procurement that requires calendar management, PO matching, and automatic receipt/invoice generation. In addition, the Determine Cloud Platform mobile application is now available on Google Play and the Apple Store.

  • Business Analyst Recognition across the Determine Cloud Platform: In Q3 FY2017, Determine achieved a number of important recognitions from leading industry analyst organizations:
  • New Leadership: In October 2016, Determine appointed Steve Potts as Chief Revenue Officer. Steve brings over thirty years of sales management, sales performance management, and sales training experience in the enterprise software and SaaS sectors. He most recently served as Chief Sales and Marketing Officer at AXIOM Sales Force Development, a leading cloud-based sales training and productivity improvement supplier.

  • New Customer Expansions: During Q3 FY2017, Determine engaged numerous new customer accounts in the US and Europe across its Determine Cloud Platform Source-to-Pay and Enterprise Contract Lifecycle Management solutions. Determine added new customers to its portfolio including companies in key verticals such as energy, financial, healthcare products, consumer goods, manufacturing, and retail.

  • Thought Leadership: In Q3 FY2017, Determine continued to provide meaningful educational resources to inform our customers and prospects on the ever-changing Source-to-Pay and Enterprise Contract Lifecycle Management landscape:

Conference Call and Webcast: Thursday, February 9, 2017 at 5:00 PM (Eastern Time)
Participant Conference Call Numbers:
Toll-Free: 1-877- 407-0789
Toll/International: 1-201- 689-8562
Participant Webcast Link: http://public.viavid.com/index.php?id=122692
Replay Dial-in Information:
Toll-Free: 1-844- 512-2921
Toll/International: 1-412- 317-6671
From: 02/09/17 @ 8:00 pm Eastern Time
To: 02/16/17 @ 11:59 pm Eastern Time
Replay Pin Number: 13653707
Related: http://investor.determine.com

Supporting Resources
Determine blog
Determine on LinkedIn
Determine on Twitter
Determine Resources

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, Inc. 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.com, Inc. and b-pack, Inc. while our non-GAAP gross profit also excludes the amortization of intangibles that occurred due to the acquisition of the entities of Iasta.com, Inc. and b-pack, Inc.

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, statement of cash flows or other equivalent statements.

"Annualized Bookings" means the annualized recurring contracted revenue from a new customer or a cross-sell or upsell to an existing customer.

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.

About Determine, Inc.

Determine, Inc. (NASDAQ: DTRM) is a leading global provider of SaaS Source-to-Pay and Enterprise Contract Lifecycle Management (ECLM) solutions. Our visionary technologies allow our customers to effectively manage the full scope of Source-to-Pay and Enterprise Contract Lifecycle Management using our Determine Cloud Platform. Our Source to Pay SaaS suite includes strategic sourcing, supplier management, contract management and procure-to-pay applications.

The Determine Cloud Platform gives procurement, finance and legal professionals the ability to deliver profound insights through analysis of their supplier relationships and contractual requirements. Our customers leverage the Determine Cloud Platform to discover previously unseen supplier and spend data; make more informed and smarter business decisions; drive new revenue; control costs; improve workflow efficiencies; and mitigate risk.

Our customers benefit from the Determine Cloud Platform's robust suite of integrated applications. Whether they start with a full-suite implementation or choose to implement just one application and build over time, each application allows for the automatic sharing of data in place on the Determine Cloud Platform.

For more information, please visit: www.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
2016 2015 2016 2015
Revenues:
Recurring revenues $ 5,054 5,354 $ 15,267 $ 15,862
Non-recurring revenues 1,798 1,746 4,661 4,218
Total revenues 6,852 7,100 19,928 20,080
Cost of revenues:
Cost of recurring revenues 1,777 1,816 5,085 5,003
Cost of non-recurring revenues 1,734 1,602 4,978 4,583
Total cost of revenues 3,511 3,418 10,063 9,586
Gross profit:
Recurring gross profit 3,277 3,538 10,182 10,859
Non-recurring profit (loss) 64 144 (317 ) (365 )
Total gross profit 3,341 3,682 9,865 10,494
Operating expenses:
Research and development 1,049 1,230 3,052 2,851
Sales and marketing 2,273 3,310 7,843 10,313
General and administrative 1,761 2,072 5,432 6,211
Impairment of software devlopment costs - - 947
Total operating expenses 5,083 6,612 16,327 19,375
Loss from operations (1,742 ) (2,930 ) (6,462 ) (8,881 )
Interest and other (expense), net (462 ) (149 ) (1,388 ) (549 )
Net loss before income tax (2,204 ) (3,079 ) (7,850 ) (9,430 )
Benefit from income taxes 35 233 143 213
Net loss (2,169 ) (2,846 ) (7,707 ) (9,217 )
Net income (loss) attributed to non-controlling interest (24 ) 1 (36 ) 5
Net loss attributable to Determine, Inc. (2,193 ) (2,845 ) (7,743 ) (9,212 )
Redeemable preferred stock accretion - - - 1,000
Net loss attributable to common stockholders $ (2,193 ) $ (2,845 ) $ (7,743 ) $ (10,212 )
Basic and diluted net loss per share $ (0.18 ) $ (0.25 ) $ (0.67 ) $ (0.90 )
Determine, Inc.
GAAP to Non-GAAP Reconciliations
(In thousands)
(Unaudited)
Reconciliation of total revenue:
U.S. GAAP as reported $ 6,852 $ 7,100 $ 19,928 $ 20,080
Adjustments:
Deferred revenue adjustment - 87 8 228
Non-GAAP revenue $ 6,852 $ 7,187 $ 19,936 $ 20,308
Reconciliation of gross profit:
U.S. GAAP as reported $ 3,341 $ 3,682 $ 9,865 $ 10,494
Adjustments:
Deferred revenue adjustment - 87 8 228
Amortizaton of acquision 250 250 758 630
Stock based compensation 111 92 240 218
Severance 24 24 25 107
Non-GAAP gross profit $ 3,726 $ 4,135 $ 10,896 $ 11,677
Reconciliation to non-GAAP net loss:
Net loss $ (2,193 ) $ (2,845 ) $ (7,743 ) $ (9,212 )
Stock-based compensation expense 630 658 1,867 1,871
Deferred revenue adjustment - 87 8 228
Acquisition related costs - 138 - 912
Amortization on intangibles 526 542 1,594 1,373
Benefit for income taxes - (213 ) (13 ) (213 )
Severance costs 27 130 34 456
Non-GAAP net loss $ (1,010 ) $ (1,503 ) $ (4,253 ) $ (4,585 )
Non-GAAP basic and diluted net loss per share $ (0.08 ) $ (0.13 ) $ (0.37 ) $ (0.45 )
Weighted average shares outstanding for basic
and diluted net loss per share 11,944 11,244 11,466 10,212
Determine, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
December 31 December 31
2016 2015 2016 2015
Net loss $ (2,169 ) $ (2,846 ) $ (7,707 ) $ (9,217 )
Other comprehensive income (loss) net:
Foreign currency translation adjustments 44 (11 ) 31 (68 )
Non-controlling interest (24 ) 1 (36 ) 5
Other comprehensive income (loss) 20 (10 ) (5 ) (63 )
Comprehensive loss $ (2,149 ) $ (2,856 ) $ (7,712 ) $ (9,280 )
Determine, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
December 31, March 31,
2016 2016
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $ 9,387 $ 9,418
Accounts receivable, net 6,759 7,031
Restricted cash 34 34
Prepaid expenses and other current assets 1,408 1,551
Total current assets 17,588 18,034
Property and equipment, net 94 136
Capitalized software, net 2,131 1,699
Goodwill 14,346 14,490
Other intangibles, net 6,346 8,011
Other assets 1,492 1,843
Total assets $ 41,997 $ 44,213
LIABILITIES AND EQUITY
Current liabilities
Credit facility $ 10,861 $ 9,000
Accounts payable 2,435 1,973
Accrued payroll and related liabilities 1,802 1,655
Other accrued liabilities 2,020 2,396
Deferred revenue 10,028 10,299
Income tax payable 78 14
COFACE loan 222 407
Accrued restructuring - 403
Total current liabilities 27,446 26,147
Long-term deferred revenue 5 67
Convertible note, net of debt discount 7,374 5,420
Other long-term liabilities 1,055 1,382
Deferred tax liability non current 81 290
Total liabilities 35,961 33,306
Total Determine, Inc. stockholders' equity controlling interest 5,887 10,794
Non-controlling interest 149 113
Total equity 6,036 10,907
Total liabilities and equity $ 41,997 $ 44,213
Determine, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unudited)
Nine Months Ended
December 31, December 31,
2016 2015
Operating activities
Net loss $ (7,707 ) $ (9,217 )
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,478 1,868
Loss on disposition of property and equipment - 14
Stock-based compensation expense 1,867 1,870
Deferred tax liability (209 ) 93
Changes in assets and liabilities:
Accounts receivable, net 272 149
Prepaid expenses and other current assets 143 300
Other assets 435 (380 )
Accounts payable 462 113
Accrued payroll and related liabilities 147 278
Accrued restructuring costs (403 ) -
Other accrued liabilities and other long-term liabilities (356 ) (13 )
Deferred revenue (333 ) (281 )
Net cash used in operating activities (3,204 ) (5,206 )
Investing activities
Purchase of property and equipment (39 ) (6 )
Capitalized software (1,267 ) (1,077 )
Purchase of business, net of cash - (826 )
Minority shareholder payment - (133 )
Net cash used in investing activities (1,306 ) (2,042 )
Financing activities
Proceeds from sale of common stock, preferred stock and warrants, net of issuance costs - 310
Employee taxes paid in exchange for restricted stock awards forefeited 78 263
Issuance of common stock under employee stock plan 80 87
Credit facility borrowing 3,000 885
Credit facility payment (1,139 ) (347 )
Repayment of loan (185 ) (25 )
Conversion of preferred stock to common stock - (17 )
Issuance of debt, net of costs 2,429 2,743
Net cash provided by financing activities 4,263 3,899
Effect of exchange rate changes on cash 216 11
Net decrease in cash and cash equivalents (31 ) (3,338 )
Cash and cash equivalents at beginning of the period 9,418 13,178
Cash and cash equivalents at end of the period $ 9,387 $ 9,840
Determine, Inc.
Billings Reconciliation
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
2016 2015 2016 2015
Total revenues $ 6,852 $ 7,100 $ 19,928 $ 20,080
Deferred revenue:
End of period 10,033 9,019 10,033 9,019
Beginning of period 9,340 8,319 10,366 8,432
Change in deferred revenue 693 700 (333 ) 587
Total billings (total revenues plus the change in deferred revenue) $ 7,545 $ 7,800 $ 19,595 $ 20,667
Determine, Inc.
Non-GAAP EBITDA Reconciliation
(In thousands)
(unaudited)
Three Months Ended Nine Months Ended
December 31 December 31
2016 2015 2016 2015
Reconciliation to non-GAAP EBITDA net loss:
Non-GAAP net loss $ (1,010 ) $ (1,503 ) $ (4,253 ) $ (4,585 )
Interest 461 131 1,299 372
Depreciation 348 161 916 498
Income Taxes and Minority Shareholder (11 ) (233 ) (107 ) (217 )
Non-GAAP EBITDA net loss $ (212 ) $ (1,444 ) $ (2,145 ) $ (3,932 )

Contact

Media Relations
Rose Lee
Determine, Inc.
+1.877.806.1932
+1.650.532.1590


pr@determine.com

Source: Determine, Inc.