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CALGARY, Oct. 15, 2019 /CNW/ - Sylogist Ltd.
(TSXV:SYZ) ("Sylogist" or the "Company") advises that its
Compensation Committee has continued to engage with executive
management following the Company's press release in late September,
and is pleased to confirm agreement on new management compensation
arrangements. The changes to executive management compensation are
effective immediately and have been approved by the independent
members of the Board of Directors.
Background
Over its several months' review of executive compensation, the
Compensation Committee and Sylogist's executive team came to
conclude that adopting a plan focusing on operational growth and
stock performance is now best suited for the Company. Based on
stakeholder discussions and feedback to the Company's September,
2019 press release, a consensus opinion emerged and the
Compensation Committee has determined to eliminate the Company's
current cash bonus structure altogether, understanding there is a
one-time cost to the Company in doing so.
Effective October 15, 2019, the
Company has agreed to the buy-out of the contractual bonus
compensation arrangements with the CEO and the Executive Vice
President on the terms described below. These executives will
remain in their respective positions, with current base salaries
and benefits continuing, along with a new bonus plan. The basis of
the new bonus plan is intended to reward both incremental growth
and operating performance improvements on a year over year basis as
determined by the Compensation Committee.
The CEO's and the Executive Vice President's historical
employment agreements entitled them, collectively, to 12% of the
Company's internally calculated operating cash flow and came into
effect when the Company had very little cash flow. Further, the
Company was then seeking to acquire companies, as it continues to
do today, with technology and customer advantages, which typically
would have little if any cash flow at the time of acquisition. It
was the stated intention of the Compensation Committee, that by
acquiring smartly and applying their management skills, Sylogist's
executive team would generate sustainable growth and
profitability.
From modest beginnings, Sylogist has grown substantially. At
June 30, 2019, the trailing 9 months'
period reported Adjusted EBITDA(1) was $13.2 million and cash flow from operations
(before non-cash working capital adjustments) was $10 million. The executives' collective cash
bonuses for that period was $2.26
million. Over the years, cash bonuses have risen with cash
flow performance. Given the magnitude of current cash flow and
potential for growth of cash flow, some shareholders have expressed
a preference of limiting cash bonuses so these funds can be
reinvested in the business.
Contractual Changes
The executives have agreed to relinquish their current cash
bonus entitlement for the one-time cash payment of $12 million. Doing so immediately adds, based on
annualizing fiscal 2019 nine month results, $2.2 million of after tax cash flow, results in a
17% improvement in operating cash flow (before non-cash working
capital adjustments) and improves after tax profitability by 21%.
The payment is non-dilutive to shareholders and, on an after-tax
basis, is less than 4 times the Company's annual trailing cash flow
associated with the bonus payments. In addition, a higher
percentage of cash flow growth will now accrue to shareholders.
This transaction will result in a one-time charge to earnings in Q1
of fiscal 2020.
Further, the Compensation Committee has heard concerns that,
like executive bonuses otherwise payable, the potential executive
payouts, in the event of a change of control, have grown and could
become, over time, significantly larger. In consideration of moving
forward under new arrangements, the executives have agreed to
reduce their change of control compensation, calculated as a
percentage of the Company's fully diluted market capitalization,
(i) by 50% and (ii) to a total collective limit of $15 million (such limit being achieved should the
market capitalization at the time of a change of control exceed
$500 million).
The Company currently has 2,370,174 stock options available for
issuance under its Stock Option Plan, of which 330,000 are
outstanding. The Board of Directors has approved the issuance of
1,825,000 stock options, at the market price of the Company's
shares at the time of issuance and subject to all applicable
regulatory trading restrictions, to directors and officers
consistent with its past practices. As previously advised, Sylogist
has had a consistent and growing dividend track record with low
stock price volatility, small daily trading volumes and a large
percentage of USA based revenue,
which characteristics make stock options the lowest cost, and a
non-cash cost, form of equity compensation.
About Sylogist
Sylogist is a software company that, through strategic
acquisitions, investments and operations management, provides
comprehensive, mission-critical ERP solutions, including fund
accounting, grant management and payroll, to public service
organizations. Sylogist's public service customers include local
governments, non-profit organizations, non-governmental
organizations, educational institutions and government agencies, as
well as public compliance driven and funded organizations. The
Company delivers highly scalable, multi-language, multi-currency
software solutions, which serve the needs of an international
clientele.
Full financial statements together with management's discussion
and analysis are available on SEDAR at www.sedar.com.
The Company's stock is traded on the TSX Venture Exchange under
the symbol SYZ. Information about Sylogist can be found at
http://www.sylogist.com.
Forward-looking Statements
Certain statements in this news release may be
forward-looking statements within the meaning of applicable
securities laws and regulations. These statements typically use
words such as expect, believe, estimate, project, anticipate, plan,
may, should, could and would, or the negative of these terms,
variations thereof or similar terminology. Forward-looking
information in this news release includes statements with respect
to the elimination of the current cash bonus structure for
certain executives for a one-time cash payment, a new cash bonus
structure being put in place, certain executives remaining in their
current roles, relinquishing their bonus entitlements for a
one-time cash payment, improvements in operating cash flow and
profitability, the executives agreeing to voluntarily reduce their
change of control compensation by 50% and the terms thereof and the
issuance of stock options to the Company's directors and
officers. By their very nature, forward-looking
statements are based on assumptions and involve inherent risks and
uncertainties, both general and specific in nature. It is therefore
possible that the beliefs and plans and other forward-looking
expectations expressed herein will not be achieved or will prove
inaccurate. Although Sylogist believes that the expectations
reflected in these forward-looking statements are reasonable, it
provides no assurance that these expectations will prove to have
been correct. Forward-looking information involves risks,
uncertainties and other factors that could cause actual events,
results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward-looking
information. Additional information regarding some of these risks,
uncertainties and other factors may be found under in the
management's discussion and analysis for the period ended
June 30, 2019, and other documents
available on the Company's profile at www.sedar.com. Although
Sylogist believes that the material assumptions and factors used in
preparing the forward-looking information in this news release are
reasonable, undue reliance should not be placed on such
information, which only applies as of the date of this news
release, and no assurance can be given that such events will occur.
Sylogist disclaims any intention or obligation to update or revise
any forward-looking information, whether as a result of new
information, future events or otherwise, other than as required by
law.
Certain information set out in this press release may be
considered as "financial outlook" within the meaning of applicable
securities laws. The purpose of this financial outlook is to
provide readers with disclosure regarding Sylogist's reasonable
expectations as to the anticipated results of its proposed business
activities for the periods indicated. Readers are cautioned that
the financial outlook may not be appropriate for other
purposes.
Non-GAAP Financial Measures
(1) Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted
Working Capital are non-GAAP financial measures: Adjusted EBITDA is
defined as: profit for the period before stock based compensation,
foreign exchange gains or losses, interest expense, bargain
purchase price on acquisition, income taxes, acquisition-related
costs, depreciation and amortization. Adjusted EBITDA Margin refers
to Adjusted EBITDA as a percentage of revenue. Adjusted Working
Capital is defined as current assets less current liabilities
adjusted for deferred revenue.
This news release makes reference to certain non-GAAP
measures. These measures are not recognized measures under Canadian
GAAP, do not have a standardized meaning prescribed by Canadian
GAAP and are therefore may not be comparable to similar measures
presented by other issuers. These measures are provided as
additional information to complement measures under GAAP by
providing further understanding of the Company's expected results
of operations from management's perspective. Accordingly, such
measures should not be considered in isolation nor as a substitute
for analysis of the Company's financial information reported under
Canadian GAAP.
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Working
Capital are provided to investors as alternative methods for
assessing the Company's operating results in a manner that is
focused on the Company's ongoing operations and to provide a more
consistent basis for comparison between periods. These measures
should not be construed as alternatives to net profit (loss) or
cash flow from operating activities determined in accordance with
GAAP as an indicator of the Company's performance. For further
information regarding non-GAAP measures used by the Company, please
refer to the management's discussion and analysis of the Company,
copies of which are available on Sylogist's SEDAR profile at
www.sedar.com.
- Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release-
SOURCE Sylogist Ltd.