Key metrics are improving at Halogen Software, says Haywood

Halogen Software’s (Halogen Software Stock Quote, Chart, News: TSX:HGN) first quarter results showed improvement in areas that will be important to its future, says Haywood analyst Massimo Voci.

Yesterday, Halogen Software reported its Q1, 2015 results. The company lost (U.S.) $4.72-million on revenue of $15.9-million, an 18% increase over last year’s Q1.

“It was a strong start to 2015; we achieved a new quarterly record for recurring and total revenue,” said CEO Paul Loucks. “We continue to make investments to increase our global presence in the mid-market for talent management solutions. This translated into new customer wins, continued success in cross-selling within our existing client base, and industry recognition for product and customer service excellence in the quarter. We remain confident in our growth prospects for the remainder of the year, both domestic and international.”

Voci says key areas such as recurring revenue, dollar retention rate, and falling termination notifications were all positives in the quarter.

“As the Company remains in its growth stage it not yet cash flow breakeven as it is actively investing in both new customer acquisition and continued product development,” said Voci. “Given the large, greenfield nature of talent management in the mid-market, high gross margins, and high customer retention rates (>90%) we believe this period of investment focused on capturing market share is prudent. Over the long-term, we believe the business will scale, the investment in Sales & Marketing will decrease and profitability will improve considerably.”

In a research update to clients today, Voci maintained his “Buy” rating and $13.75 one year target on Halogen, implying a return of 42% at the time of publication.

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