Enghouse Releases Third Quarter Results

| Source: Enghouse Systems Ltd Enghouse Systems Ltd

MARKHAM, Ontario, Sept. 07, 2017 (GLOBE NEWSWIRE) -- Enghouse Systems Limited (TSX:ENGH) today announced its third quarter (unaudited) financial results for the period ended July 31, 2017.

Third quarter revenue was $82.8 million, an increase of 8.4% over revenue of $76.4 million in the third quarter last year. On a year to date basis, revenue was $241.1 million compared to $229.3 million last year. The revenue increase primarily reflects incremental revenue contributions from acquisitions. On a year to date basis foreign exchange negatively impacted revenue by $8.2 million compared to last year. Hosted and maintenance services revenue was $43.4 million in the quarter, an increase of 14.6% over the same period last year.

Operating expenses before special charges related to restructuring of acquired operations were $35.7 million compared to $31.4 million in the prior year’s third quarter and include incremental operating costs related to acquired operations, net of the unfavourable impact of foreign exchange. Non-cash amortization charges in the quarter were $7.4 million compared to $7.0 million in the prior year’s third quarter and include amortization charges for acquired software and customer relationships from acquired operations. On a year to date basis operating expenses before special charges were $101.7 million compared to $98.9 million and include incremental operating costs related to acquired operations, net of the favourable impact of foreign exchange on operating costs compared to last year to date.

Net income for the quarter was $11.2 million ($0.41 per diluted share) compared to the prior year’s third quarter net income of $10.4 million ($0.38 per diluted share). Results from operating activities for the quarter were $21.9 million compared to $20.6 million in the prior year’s third quarter.

Enghouse generated strong cash flows from operations of $25.1 million in the quarter compared to $16.4 million last year, an increase of 53.6% and $54.1 million year to date compared to $43.9 million last year, an increase of 23.2%.  The Company closed the quarter with $103.8 million in cash, cash equivalents and short-term investments, compared to $85.9 million at October 31, 2016. The cash balance was achieved after year-to-date payments comprised of $16.2 million (net of cash acquired and holdbacks) for Tollgrade Communications Inc. (acquired April 12, 2017), $1.7 million to partially settle loans inherited from the Presence Technology, S.L. acquisition (completed October 28, 2016), $1.0 million for prior period acquisitions, and $11.9 million in dividends paid.

Adjusted EBITDA for the quarter was $22.6 million ($0.83 per diluted share) compared to $21.6 million ($0.79 per diluted share) in last year’s third quarter. Adjusted EBITDA for the year to date was $66.3 million ($2.43 per diluted share) compared to $60.0 million ($2.20 per diluted share) last year. This includes the net negative impact of $3.8 million related to foreign exchange on a year to date basis compared to last year, which would have resulted in a 16.9% increase compared to the prior year excluding the impact of foreign exchange.

The Board of Directors has approved an eligible quarterly dividend of $0.16 per common share, payable on November 30, 2017 to shareholders of record at the close of business on November 16, 2017.

Enghouse remains committed to its acquisition strategy and continues to seek accretive acquisitions.

A conference call to discuss the results will be held on Friday September 8, 2017 at 8:45 a.m. EST. To participate, please call +1-416-640-5946 or North American Toll-Free +1-866-233-4606. No PIN is required.

About Enghouse

Enghouse Systems Limited is a leading global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a diverse software company through strategic acquisitions targeting the Contact Center, Networks (OSS/BSS) and Transportation/Public Safety sectors. Enghouse shares are listed on the Toronto Stock Exchange under the symbol “ENGH”. Further information about Enghouse may be obtained from the Company’s website at www.enghouse.com.

Non-GAAP Measures

The Company uses non-GAAP measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than GAAP do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Company uses Adjusted EBITDA as a measure of operating performance. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Adjusted EBITDA is calculated as results from operating activities adjusted for depreciation of property, plant and equipment, and special charges for acquisition related restructuring costs. Management uses Adjusted EBITDA to evaluate operating performance as it excludes amortization of software and intangibles (which is an accounting allocation of the cost of software and intangible assets arising on acquisition), any impact of finance and tax related activities, asset depreciation, other income and restructuring costs primarily related to acquisitions.

Adjusted EBITDA:

The table below reconciles Adjusted EBITDA to the most directly comparable IFRS measure, Results from operating activities:

 Three Months ended Nine Months ended
 July 31, 2017 July 31, 2016
 July 31, 2017
 July 31, 2016
                
Total Revenue$  82,756  $ 76,350  $  241,139  $ 229,257 
     
Results from operating activities 21,893   20,581   63,824   56,540 
Depreciation of property, plant and equipment 619   830   1,828   2,447 
Special charges 133   151   614   970 
Adjusted EBITDA$  22,645  $ 21,562  $  66,266  $  59,957 
Adjusted EBITDA margin 27.4%  28.2%  27.5%  26.2%
Adjusted EBITDA per diluted share$  0.83  $  0.79  $  2.43  $  2.20 
                


Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
    
    July 31,
2017
 October 31,
2016
         
Assets        
Current assets        
Cash and cash equivalents $97,238 $78,436
Short-term investments  6,562  7,423
Accounts receivable, net  81,540  73,588
Prepaid expenses and other assets  9,239  9,720
    194,579  169,167
Non-current assets   
Long-term deposits and accounts receivable, net  1,064  1,357
Property, plant and equipment  5,130  5,696
Intangible assets  82,511  86,632
Goodwill  148,423  144,578
Deferred income tax assets  9,418  11,765
    
Total assets $ 441,125 $ 419,195 
    
Liabilities   
Current liabilities   
Accounts payable and accrued liabilities $58,737 $55,440
Income taxes payable  3,585  5,139
Dividends payable  4,314  3,767
Provisions  681  2,111
Deferred revenue  58,525  54,300
Current portion of long-term loans  391  -
    126,233  120,757
Non-current liabilities   
Deferred income tax liabilities  21,582  21,053
Deferred revenue  5,045  4,788
Net employee defined benefit obligation  2,347  -
Long-term loans  2,439  4,049
 

Total liabilities		  157,646   

150,647
Shareholders’ Equity   
    
Share capital  70,555  69,555
Contributed surplus  4,497  3,875
Retained earnings  207,194  187,649
Accumulated other comprehensive income  1,233  7,469
Total shareholders’ equity    283,479  268,548
Total liabilities and shareholders’ equity $ 441,125 $ 419,195 
     

                                                                  

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(Unaudited)
   
 Three months ended July 31 Nine months ended July 31
  2017  2016  2017  2016
Revenue    
Software licenses$24,480 $23,936 $72,469 $69,150
Hosted and maintenance services 43,411  37,879  122,487  113,985
Professional services 12,979  13,510  41,799  42,427
Hardware 1,886  1,025  4,384  3,695
  82,756  76,350  241,139  229,257
Direct costs    
Software licenses 1,749  1,718  5,311  4,078
Services 22,211  21,909  67,060  66,397
Hardware 1,027  603  2,653  2,333
  24,987  24,230  75,024  72,808
     
Revenue, net of direct costs 57,769  52,120  166,115  156,449
     
Operating expenses    
Selling, general and administrative 23,599  19,133  66,417  62,189
Research and development 11,525  11,425  33,432  34,303
Depreciation of property, plant and equipment 619  830  1,828  2,447
Special charges 133  151  614  970
  35,876  31,539  102,291  99,909
     
Results from operating activities 21,893  20,581  63,824  56,540
     
Amortization of acquired software and customer relationships (7,397)  (7,009)  (22,365)  (20,857)
Finance income 32  19  131  73
Finance expenses (142)  (46)  (391)  (214)
Other (expense) income (50)  9  101  64
     
Income before income taxes 14,336  13,554  41,300  35,606
     
Provision for income taxes 3,154  3,171  9,358  8,242
     
Net income for the period$  11,182 $  10,383 $  31,942 $  27,364
 

Items that are or may be reclassified subsequently to profit or loss:		    
Foreign currency translation differences from foreign operations (12,097)  (1,178)  (4,119)  (10,635)
Transfer to net income of realized gains on available for sale investments -  -  -  (14)
Unrealized gain (loss) on available for sale investments 5  (609)  (2,440)  (808)
Deferred income tax (expense) recovery (1)  81  323  109
     
Other comprehensive loss (12,093)  (1,706)  (6,236)  (11,348)
     
Comprehensive (loss) income$  (911) $ 8,677 $  25,706 $ 16,016
Earnings per share    
Basic$0.41 $0.39 $1.19 $1.02
Diluted$0.41 $0.38 $1.17 $1.01
            


Enghouse Systems Limited
Consolidated Statements of Changes in Equity 
(in thousands of Canadian dollars)
(Unaudited)
  
 Share
Capital
-number		 
 Share
capital
$		   
Contributed
surplus
$		 Accumulated
other
comprehensive
income (loss) 
$
 

 Retained
earnings
$		  

 
Total
$
             
Balance – November 1, 2016 26,906,962 69,555 3,875 7,469 187,649 268,548
          
Net income - - - - 31,942 31,942
Other Comprehensive Income:         
Cumulative Translation Adjustment - - - (4,119) - (4,119)
Transfer to net income of realized gains on available for-sale investments - - - - - -
Unrealized loss on available-for-sale investments - - - (2,440) - (2,440)
Deferred income tax recovery - - - 323 - 323
Comprehensive income for the period - - - (6,236) 31,942 25,706
Employee share options:         
Value of services recognized     809 - - 809
Proceeds on issuing shares 53,750 1,000 (187) - - 813
Dividends - - - - (12,397) (12,397)
Balance – July 31, 2017 26,960,712 70,555 4,497 1,233 207,194 283,479
          
          
Balance – November 1, 2015 26,587,262 64,203 4,029 20,254 154,866 243,352
          
Net income - - - - 27,364 27,364
Other Comprehensive Income:         
Cumulative Translation Adjustment - - - (10,635) - (10,635)
Transfer to net income of realized gains on available-for-sale investments 

-		 

-		 

-		 

(14)		 

-		 

(14)
Unrealized loss on available-for-sale investments - - - (808) - (808)
Deferred income tax recovery - - - 109 - 109
Comprehensive income  for the period - - - (11,348) 27,364 16,016
Employee share options:         
Value of services recognized - - 748 - - 748
Proceeds on issuing shares 237,700 3,320 (638) - - 2,682
Dividends - - - - (10,726) (10,726)
Balance – July 31, 2016 26,824,962 67,523 4,139 8,906 171,504 252,072
             


Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
 Three months ended July 31 Nine months ended July 31
  2017  2016  2017  2016
Cash flows from operating activities    
Net income$11,182 $10,383 $31,942 $27,364
     
Adjustments for:    
Depreciation of property, plant and equipment 619  830  1,828  2,447
Amortization of acquired software and customer relationships 7,397  7,009  22,365  20,857
Stock-based compensation expense 265  172  809  748
Provision for income taxes 3,154  3,171  9,358  8,242
Finance expenses and other expense/income 192  37  290  150
  22,809  21,602  66,592  59,808
     
Changes in non-cash operating working capital 4,518  (3,255)  (2,544)  (9,757)
Income taxes paid (2,218)  (1,996)  (9,904)  (6,101)
Net cash flows from operating activities 25,109  16,351  54,144  43,950
     
Cash flows from investing activities    
Purchase of property, plant and equipment, net (106)  (284)  (1,025)  (2,603)
Purchase of other software (255)  (586)  (1,475)  (1,205)
Acquisitions, net of cash acquired of $3,637 (2016 - $2,202) -  (6,828)  (16,170)  (36,181)
Purchase consideration for prior period acquisitions (579)  (646)  (1,023)  (4,089)
Net (purchase) sale of short-term investments (196)  175  (1,526)  (520)
Net cash flows used in investing activities (1,136)  (8,169)  (21,219)  (44,598)
     
Cash flows from financing activities    
Issuance of share capital 244  174  813  2,682
Repayment of loans -  -  (1,667)  -
Payment of cash dividend (4,312)  (3,754)  (11,850)  (10,162)
Net cash flows used in financing activities (4,068)  (3,580)  (12,704)  (7,480)
     
Effect of currency translation adjustments on cash and cash equivalents (3,571)  784  (1,419)  
(489)
     
Net increase (decrease) in cash and cash equivalents during the period 16,334  5,386  18,802  (8,617)
Cash and cash equivalents - beginning of period 80,904  80,128  78,436  94,131
     
Cash and cash equivalents - end of period$  97,238 $  85,514 $  97,238 $  85,514
            


Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)
   
 For the three months
ended July 31
 For the nine months
ended July 31
 2017 2016  2017  2016 
              
Revenue:             
Asset Management Group$35,949 $29,709  $99,701 $85,316 
Interactive Management Group 46,807  46,641   141,438  143,941 
Total$  82,756 $  76,350  $ 241,139 $  229,257 
     
     
     
Asset Management Group:    
- Segment profit before special charges$10,708 $8,455  $27,993 $21,683 
- Special charges (133) (105)  (477) (618)
Asset Management Group profit$  10,575 $  8,350  $  27,516 $  21,065 
     
Interactive Management Group:    
- Segment profit before special charges$13,451 $14,548  $41,979 $42,177 
- Special charges -  (46)  (137) (352)
Interactive Management Group profit$  13,451 $  14,502  $  41,842 $  41,825 
     
Corporate expenses (2,133) (2,271)  (5,534) (6,350)
Results from operating activities$  21,893 $  20,581  $  41,931 $  56,540 
     
Amortization of acquired software and customer relationships (7,397) (7,009)  (22,365) (20,857)
Finance income 32  19   131  73 
Finance expenses (142) (46)  (391) (214)
Other (expense) income (50) 9   101  64 
Income before income taxes$   14,336 $  13,554  $  41,300 $  35,606 
              

            











    

        

        
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