Nightingale Informatix reports $4.2 million revenue for fourth-quarter fiscal 2010

Nightingale Informatix Corporation ("Nightingale" or the "Company") (TSX-V: NGH), an application service provider (ASP) of electronic medical record (EMR) software and related services announces its financial results for the quarter and year ended March 31, 2010. All results are reported in Canadian dollars unless otherwise stated.

Q4 and Fiscal 2010 Year End Financial Summary --------------------------------------------- 

- Q4 revenue was $4.2 million, compared to $4.7 million in Q4 F2009, but essentially flat on a constant currency basis. These numbers reflect a $0.5 million decrease in transcription revenue and a negative foreign exchange impact of $0.6 million (the Company generated 71% of Q4 F2010 revenue in the US). Revenue for F2010 was $16.6 million, compared to $18.5 million in F2009, reflecting a $1.3 million decrease in transcription revenue, a negative foreign exchange impact of $0.4 million and softer EMR market conditions due to a delay in EMR buying decisions in anticipation of government funding announcements. - Gross profit margin for Q4 was 76%, up from 70% in Q4 F2009, and for F2010, gross profit margin increased to 74% from 73% in F2009 as a result of the Company's increased focus on generating high-margin software revenue. - Q4 expenses decreased to $3.5 million from $4.0 million in Q4 F2009, and F2010 expenses decreased to $13.7 million from $16.8 million in F2009, demonstrating the Company's success in reducing its overall cost base. - Q4 EBITDA increased to $0.4 million from $9,000 in Q4 F2009, and F2010 EBITDA increased to $1.2 million from $(0.7) million for F2009 as a result of increased cost efficiencies. - Q4 net loss was $1.5 million compared to $1.0 million for Q4 F2009. Q4 F2010 net loss was $0.8 million, excluding a one-time non-cash interest adjustment related to the write-up of the Company's debt to its face value. Net loss for F2010 was $3.4 million, an improvement from a loss of $4.6 million for F2009. F2010 net loss was $2.7 million, excluding the one-time interest adjustment. - Subsequent to year end, the Company completed a comprehensive debt restructuring that it expects will result in reduced interest expense, starting in Q2 F2011, and increased overall financial flexibility.

Q4 and Fiscal 2010 Year End Operational Highlights --------------------------------------------------

- Cross-sold Nightingale On Demand platform to existing New York state- based practice management customer, Center for Disability Services. The transaction is expected to contribute more than $1.2 million in revenue over a two-year period, $0.6 million of which the Company recognized in fiscal 2010. - Expanded customer base in Ontario with two sizable contracts, despite a delay in the release of EMR targeted government funding. The Company won a contract to provide EMR and Practice Management software to more than 30 physicians at a Southern Ontario-based clinic, and signed an agreement with a major sports medicine clinic that is affiliated with a leading Southern Ontario university. - Signed exclusive license and distribution agreement with Canadian Patient Access to launch an online patient portal to the Canadian market. The portal will provide patients with online access to their physician and clinic administrators to schedule appointments; access medical files and laboratory results; request prescription refills and eConsults; and receive medication and appointment reminders. - October 29, 2009, Ontario Medical Association (OMA) announced it secured $236 million in funding to facilitate the adoption of funding eligible EMRs among practice-based family physicians and specialists across Ontario. Nightingale offers one of three funding approved web- based EMR solutions.

"Heading into fiscal 2010, we recognized there would be some short-term delays in EMR buying decisions as physicians were awaiting government funding announcements," said Sam Chebib, President and CEO of Nightingale. "With that in mind, a major focus for the year was improving our operational efficiency. As we successfully reduced our overall cost base, we recorded our first year and fifth consecutive quarter of positive EBITDA. In addition, we completed a debt and private placement financing subsequent to year end that has enabled us to repay our subordinated debt, strengthening our balance sheet."

"We are seeing a significant increase in the adoption of EMR solutions now that government funding has become available to physicians," Mr. Chebib added. "In Ontario, we are already winning contracts with funding approved physicians, as evidenced by the signing of over 200 new EMR seats, which we announced earlier this month. We anticipate some near-term fluctuations in EMR adoption as funding is rolled out. However, over the long-term, we believe the technology leadership of our web-native EMR offering and our new online patient portal, positions us to continue to expand our customer base and drive further improvements in our financial results."

Financial Review ----------------

Revenue for fiscal 2010 was $16.6 million, compared to $18.5 million for fiscal 2009. The decline reflects a decrease in lower-margin transcription revenue, a decrease in one-time license revenues and foreign exchange headwinds, which predominantly affect the Company's recurring revenue results.

Recurring Revenue for fiscal 2010 was $13.1 million, compared to $14.5 million for fiscal 2009. The year-over-year decline is primarily a result of a reduction in transcription revenue and a negative impact due to foreign exchange. Transcription revenue decreased to $1.5 million from $2.8 million in fiscal 2009. Nightingale expects to realize further reductions in transcription revenue in fiscal 2011, which the Company believes will be offset by revenue generated from software sales over the longer term.

Absent transcription revenue and the negative foreign exchange impact, recurring revenue generated by Nightingale's core business was $12.0 million, up from $11.7 million in fiscal 2009.

Non-Recurring Revenue(2) for fiscal 2010 was $3.5 million, compared to $3.9 million for fiscal 2009. The decline in non-recurring revenue was primarily the result of a decrease in software license revenue, as Nightingale recorded $1.0 million in one-time license revenue related to a Canadian government agency contract in Q1 fiscal 2009.

In fiscal 2010, Nightingale generated 72% of its revenue from the US market. With the decrease in the value of the US dollar relative to the Canadian dollar, the Company estimates that fiscal 2010 revenue was negatively impacted by approximately 2%, or $0.4 million, compared to the previous fiscal year.

For fiscal 2010, gross profit margin was 74% of revenue, compared to 73% of revenue for the previous fiscal year, reflecting a greater proportion of higher margin sales in fiscal 2010.

Expenses for fiscal 2010 decreased 19% to $13.7 million from $16.8 million for fiscal 2009. This decrease in expenses was primarily a result of the Company's implementation of several cost reduction measures throughout fiscal 2010. The decrease in the value of the Canadian dollar compared to the US dollar also contributed to the decline in expenses. In fiscal 2010, approximately 44% of Nightingale's expenses were incurred in the US, providing the Company with a natural hedge position that offset some of the effects on revenue. The Company estimates that expenses were positively impacted by approximately 3% or $0.4 million over the year compared to the previous year.

Going forward, Nightingale is focused on prudent expense management. However, the Company expects to make select investments to support long-term revenue generating activities, particularly as the Company is seeing an increase in buying activity in the North American EMR market.

Reflecting Nightingale's success in reducing its overall cost base, EBITDA increased to $1.2 million, from $(0.7) million in fiscal 2009.

Interest expense for fiscal 2010 was $2.0 million, of which approximately $0.7 million was a one-time expense related to the adjustment of the Company's subordinated debt to its face value. Subsequent to year end, Nightingale completed a comprehensive senior debt, convertible debt and private placement financing, and used the proceeds to repay its subordinated debt. As a result, Nightingale has strengthened its balance sheet. In addition, given the more favourable terms of the new debt facilities, the Company expects to realize a decrease in its interest expense starting in Q2 F2011.

For fiscal 2010, net loss was $3.4 million. This is down from $4.6 million in fiscal 2009, primarily reflecting the numerous cost reduction initiatives the Company implemented throughout the year.

Cash and cash equivalents were $1.8 million at March 31, 2010, compared to $3.5 million at March 31, 2009. At March 31, 2010, total common shares issued and outstanding were 70,534,543.

Subsequent Event - Funding of Senior Loan Facility, Conversion of Subscription Receipts and Refinancing of Outstanding Third-Party Debt ---------------------------------------------------------------------

In April 2010, subsequent to year end, Nightingale announced that it had completed private placement financings (collectively, the "Private Placement") of common shares and subscription receipts, for aggregate gross proceeds of $3.3 million, and entered into a commitment with a third-party financial institution for additional aggregate gross proceeds of approximately $3.0 million in revolving and term debt (collectively, the "Senior Loan Facility"). On July 29, 2010, the Company used the proceeds of the Private Placement and the Senior Loan Facility for general corporate purposes and to refinance its outstanding subordinated debt on more favourable terms.

The Company completed the Private Placement on April 20, 2010, whereby it issued an aggregate of 5.7 million common shares of the Company at a price of $0.22 per Common Share for gross proceeds of $1.3 million and concurrently issued 2,074 subscription receipts ("Subscription Receipts") for gross proceeds of $2.1 million, all on a non-brokered private placement basis. The Subscription Receipts were all automatically converted on July 29, 2010 pursuant to their terms. On conversion, each Subscription Receipt entitled the holder to receive, without additional consideration, a convertible unsecured subordinated debenture in the aggregate principal amount of $1,000 (collectively, the "Debentures"). The Debentures bear interest at a rate of 12% per annum, payable monthly and are scheduled to mature in July 2013. Following the first year anniversary of the Debentures, the Company has the right to redeem the Debentures, in whole or in part, at a price equal to their principal amount plus accrued and unpaid interest. The Debentures are convertible at the holder's option into fully-paid Common Shares at any time prior to maturity or redemption at a conversion price of $0.35 per share. Upon the automatic conversion of the Subscription Receipts, an amount of escrowed funds equal to $2.1 million was released to the Company.

Concurrently, the Company completed the funding of the Senior Loan Facility. The proceeds of the Private Placement and the Senior Loan Facility were used for general corporate purposes and to refinance the Company's outstanding subordinated debt in the amount of $5.3 million.

The financial statements and MD&A will be available at www.nightingalemd.ca and filed on www.sedar.com on July 29, 2010. This press release should be read in conjunction with Nightingale's Consolidated Financial Statements for the year ended March 31, 2010 and the accompanying Management Discussion and Analysis.