Nightingale second quarter revenue increases to $4.2 million

Mr. Chebib continued: "With the improvements in the overall EMR market environment, we remain optimistic about the long-term opportunities ahead of us. We are focusing our attention and investments on key areas of the business that best position us to acquire new customers and expand our market share, while remaining highly committed to carefully managing our expenses and cash. In the near-term, we expect there will be continued fluctuations in our quarterly results as the EMR market unfolds, with funding being rolled out to physicians at clinics of varying sizes and customers choosing either our up-front license or a monthly utilization payment option. However, we believe the combination of our existing EMR sales pipeline and the technology leadership of our product offering positions us to further strengthen our financial results over the longer term."

Q2 and Year-to-date (YTD) Fiscal 2011 Financial Review

Revenue was $4.2 million for Q2 F2011, compared to $3.9 million for Q2 F2010. The improvement is primarily the result of a $0.6 million increase in software license revenue, which was partially offset by a $0.4 million decrease in the Company's lower-margin transcription business, as well as a negative $0.1 million foreign exchange impact (the Company generated 52% of Q2 F2011 revenue in the US), which predominantly affected the Company's recurring revenue. YTD revenue was $8.6 million, compared to $8.1 million for the first half of F2010, which reflected a $1.6 million increase in software license revenue, a $0.9 million decrease in transcription revenue and a negative $0.4 million foreign exchange impact (the Company generated 52% of revenue in the US during the first half of F2011).

Recurring Revenue was $2.7 million for Q2 F2011, compared to $3.3 million for Q2 F2010. The decrease is primarily the result of a reduction in transcription revenue and the negative foreign exchange impact. For Q2 F2011, transcription revenue decreased to $0.07 million from $0.5 million for Q2 F2010. YTD, Recurring Revenue was $5.6 million, compared to $6.9 million for the first half of F2010. Recurring revenue generated by Nightingale's core business (which excludes the Company's transcription revenues and the impact of foreign exchange) was $2.8 million for Q2 fiscal 2011 and $5.8 million YTD, compared to $2.8 million and $5.9 million, respectively, for the same periods last year.

Non-Recurring Revenue increased to $1.5 million and $3.0 million for the Q2 and YTD F2011 periods, from $0.6 million and $1.2 million, respectively, for the same periods last year, primarily due to the increase in software licensing and professional services revenue driven by sales of the Company's Nightingale on Demand EMR product.

For Q2 and the YTD F2011 periods, gross profit margin was 79% and 80%, respectively, compared to 72% and 71%, respectively, for the same periods last year, as the Company continues to increase its focus on generating a greater proportion of higher margin software sales in F2011.

Operating expenses (excluding stock based compensation and amortization) were $2.9 million in Q2 F2011, compared to $2.6 million in Q2 F2010. The increase in expenses reflects the Company's increased investment in sales and marketing, which was partially offset by a positive $0.1 million foreign exchange impact. In Q2 2011, the Company incurred approximately 37% of its operating expenses in the US, providing a natural hedge position that offsets some of the negative foreign exchange impact on the Company's revenue. For YTD F2011, operating expenses were $5.9 million, compared to $5.6 million for the same period in F2010. For YTD F2011, the Company incurred approximately 35% of its expenses in the US, resulting in a positive $0.2 million foreign exchange impact.

EBITDA was $0.4 million and $1.0 million for the Q2 and YTD F2011 periods, compared to $0.2 million and $0.2 million, respectively for the same periods in F2010.

Net loss was $0.5 million and $0.5 million for the Q2 and YTD F2011 periods, compared to losses of $0.7 million and $1.6 million, respectively, for the same periods in F2010.

Cash generated from (used in) operating activities was $0.3 million and $1.3 million for the Q2 and YTD F2011 periods, compared to $0.02 million and ($0.9) million, respectively for the same periods last year. The increase reflects both the improvement in the Company's bottom line results, as well as timing of the collection of cash on deferred revenue.

Cash and cash equivalents were $3.0 million at September 30, 2010, compared to $1.8 million at March 31, 2010.  At September 30, 2010, total common shares issued and outstanding were 76,310,915.