Enghouse Releases Third Quarter Results

MARKHAM, ON, Sept. 6, 2018 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its third quarter (unaudited) financial results for the period ended July 31, 2018.

Third quarter revenue increased to $86.7 million, compared to revenue of $82.8 million in the third quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions. Income from operating activities was $26.7 million compared to $22.6 million in the prior year's third quarter, an increase of 18.1%. Net income for the quarter was $16.1 million or $0.58 per diluted share compared to $11.2 million or $0.41 per diluted share in the prior year's third quarter, an increase of 43.6%.

Adjusted EBITDA for the third quarter was $27.4 million or $1.00 per diluted share, compared to $23.4 million or $0.86 per diluted share last year, with the increase being attributable to contributions from acquisitions and operating cost synergies.

On a year-to-date basis, revenue was $257.0 million compared to revenue of $241.1 million in the prior year, an increase of 6.6%. Income from operating activities was $75.9 million, compared to $66.6 million in the prior year-to-date, an increase of 14.0%. Adjusted EBITDA for the year to date increased 13.1% to $78.1 million or $2.86 per diluted share compared to $69.0 million or $2.53 per diluted share last year. Net income for the year to date was $38.2 million or $1.40 per diluted share compared to $31.9 million or $1.17 per diluted share last year.

Operating expenses before special charges related to restructuring of acquired operations were $34.1 million compared to $35.0 million in the prior year's third quarter and reflect operating cost savings, net of incremental operating costs related to acquisitions. Non-cash amortization charges on acquired software and customer relationships from acquired operations were $7.2 million for the quarter compared to $7.4 million in the prior year's third quarter. On a year-to-date basis, operating expenses before special charges were $102.3 million or 39.8% of revenue compared to $98.9 million or 41.0% of revenue last year.

The Company generated strong cash flows from operating activities of $29.3 million compared to $25.1 million in the third quarter of fiscal 2017. On a year-to-date basis, cash flows from operating activities were $74.2 million compared to $54.1 million in the prior year, an increase of 37.1%. As a result, Enghouse closed the quarter with a record $178.4 million in cash, cash equivalents and short-term investments, compared to $130.3 million at October 31, 2017. The cash balance was achieved after year-to-date payments of $13.5 million in cash dividends, $9.7 million (net of cash acquired) for acquisitions concluded in the current fiscal year and $6.9 million for acquisitions closed in prior periods.

Today, the Board of Directors approved the Company's quarterly dividend of $0.18 per common share, payable on November 30, 2018 to shareholders of record at the close of business on November 16, 2018.

A conference call to discuss the results will be held on Friday, September 7, 2018 at 8:45 a.m. EST. To participate, please call +1-416-204-1042 or North American Toll-Free +1-888-504-7961. No PIN 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, foreign exchange gains and losses, 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, property plant and equipment depreciation, foreign exchange gains and losses, 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, 2018

July 31, 2017

July 31, 2018

July 31, 2017






Total Revenue

$

86,743

$

82,756

$

257,023

$

241,139






Results from operating activities

26,724

22,622

75,901

66,597

Depreciation of property, plant and equipment

540

619

1,869

1,828

Special charges

152

133

333

614

Adjusted EBITDA

$

27,416

$

23,374

$

78,103

$

69,039

Adjusted EBITDA margin

31.6%

28.2%

30.4%

28.6%

Adjusted EBITDA per diluted share

$

1.00

$

0.86

$

2.86

$

2.53

 

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)


July 31
 2018

October 31
2017



Assets



Current assets:




Cash and cash equivalents

$

169,765

$

120,608


Short-term investments

8,674

9,737


Accounts receivable, net

66,829

71,894


Prepaid expenses and other assets

9,502

8,528


254,770

210,767

Non-current assets:




Long-term deposits and accounts receivable, net

1,295

1,002


Property, plant and equipment

5,178

5,322


Intangible assets

67,042

79,714


Goodwill

157,154

150,687


Deferred income tax assets

5,830

14,345




Total assets

$

491,269

$

461,837



Liabilities



Current liabilities:




Accounts payable and accrued liabilities

$

45,550

$

54,656


Income taxes payable

1,355

6,018


Dividends payable

4,899

4,319


Provisions

277

1,521


Deferred revenue

69,956

59,104


Current portion of long-term loans

202

468


122,239

126,086

Non-current liabilities:




Non-current portion of income taxes payable

9,218

-


Deferred income tax liabilities

14,651

21,449


Deferred revenue

2,421

3,337


Net employee defined benefit obligation

2,398

2,328


Long-term loans

1,785

2,238




Total liabilities

152,712

155,438

Shareholders' Equity




Share capital

77,312

71,422

Contributed surplus

4,823

4,715

Retained earnings

245,866

221,775

Accumulated other comprehensive income

10,556

8,487

Total shareholders' equity                    

338,557

306,399

Total liabilities and shareholders' equity

$

491,269

$

461,837

 

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


2018

2017

2018

2017

Revenue






Software licenses

$

26,213

$

24,480

$

76,724

$

72,469


Hosted and maintenance services

44,783

43,411

131,319

122,487


Professional services

14,123

12,979

42,972

41,799


Hardware

1,624

1,886

6,008

4,384


86,743

82,756

257,023

241,139

Direct costs






Software licenses

1,740

1,749

5,467

5,311


Services

22,990

22,211

69,335

67,060


Hardware

1,058

1,027

3,727

2,653


25,788

24,987

78,529

75,024






Revenue, net of direct costs

60,955

57,769

178,494

166,115






Operating expenses






Selling, general and administrative

21,884

22,870

64,432

63,644


Research and development

11,655

11,525

35,959

33,432


Depreciation of property, plant and equipment

540

619

1,869

1,828


Special charges

152

133

333

614


34,231

35,147

102,593

99,518






Results from operating activities

26,724

22,622

75,901

66,597






Amortization of acquired software and customer relationships

(7,245)

(7,397)

(21,763)

(22,365)

Foreign exchange gains (losses)

659

(806)

(465)

(3,027)

Finance income

90

32

278

131

Finance expenses

(50)

(65)

(134)

(137)

Other income (expense)

504

(50)

1,940

101






Income before income taxes

20,682

14,336

55,757

41,300






Provision for income taxes

4,620

3,154

17,564

9,358






Net income for the period

$

16,062

$

11,182

$

38,193

$

31,942






Items that are or may be reclassified subsequently to profit or loss:





Foreign currency translation (loss) gain from foreign operations

(3,929)

(12,097)

1,331

(4,119)

Unrealized gain (loss) on available for sale investments

625

5

851

(2,440)

Deferred income tax (expense) recovery

(83)

(1)

(113)

323






Other comprehensive (loss) income

(3,387)

(12,093)

2,069

(6,236)






Comprehensive income (loss)

$

12,675

$

(911)

$

40,262

$

25,706

Earnings per share





Basic

$

0.59

$

0.41

$

1.41

$

1.19

Diluted

$

0.58

$

0.41

$

1.40

$

1.17

 

Enghouse Systems Limited 
Condensed Consolidated Interim Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)


Share

Capital

-number

Share
capital

$

Contributed
surplus

$

Retained
earnings
$

Accumulated
other
comprehensive
income (loss) 

$

Total

$








Balance – November 1, 2017

26,993,212

71,422

4,715

221,775

8,487

306,399








Net income

-

-

-

38,193

-

38,193

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

-

1,331

1,331

Unrealized gain on available-for-sale investments

-

-

-

-

851

851

Deferred income tax expense

-

-

-

-

(113)

(113)

Comprehensive income  for the period

-

-

-

38,193

2,069

40,262

Employee share options:








Value of services recognized

-


1,171

-

-

1,171


Proceeds on issuing shares

222,500

5,890

(1,063)

-

-

4,827

Dividends

-

-

-

(14,102)

-

(14,102)

Balance – July 31, 2018

27,215,712

77,312

4,823

245,866

10,556

338,557















Balance – November 1, 2016

26,906,962

69,555

3,875

187,649

7,469

268,548








Net income

-

-

-

31,942

-

31,942

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

-

(4,119)

(4,119)

Unrealized loss on available-for-sale investments

-

-

-

-

(2,440)

(2,440)

Deferred income tax recovery

-

-

-

-

323

323

Comprehensive income  for the period

-

-

-

31,942

(6,236)

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

207,194

1,233

283,479

 

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


2018

2017

2018

2017

Cash flows from operating activities





Net income

$

16,062

$

11,182

$

38,193

$

31,942






Adjustments for:






Depreciation of property, plant and equipment

540

619

1,869

1,828


Amortization of acquired software and customer relationships

7,245

7,397

21,763

22,365


Stock-based compensation expense

236

265

1,171

809


Provision for income taxes

4,620

3,154

17,564

9,358


Finance expenses and other income

(454)

115

(1,806)

36


28,249

22,732

78,754

66,338






Changes in non-cash operating working capital

6,041

4,595

6,608

(2,290)

Income taxes paid

(5,016)

(2,218)

(11,141)

(9,904)

Net cash flows from operating activities

29,274

25,109

74,221

54,144






Cash flows from investing activities





Purchase of property, plant and equipment, net

(607)

(106)

(1,538)

(1,025)

Purchase of other software

-

(255)

-

(1,475)

Acquisitions, net of cash acquired of $1,235 (2017- $3,637)

-

-

(9,675)

(16,170)

Purchase consideration for prior period acquisitions

(1,866)

(579)

(6,945)

(1,023)

Net sale (purchase) of short-term investments

1,754

(196)

2,486

(1,526)

Net cash flows used in investing activities

(719)

(1,136)

(15,672)

(21,219)






Cash flows from financing activities





Issuance of share capital

2,699

244

4,827

813

Repayment of loans

(334)

-

(735)

(1,667)

Payment of cash dividend

(4,880)

(4,312)

(13,523)

(11,850)

Net cash flows used in financing activities

(2,515)

(4,068)

(9,431)

(12,704)






Effect of currency translation adjustments on cash and cash equivalents

(1,890)

(3,571)

39

(1,419)






Net increase in cash and cash equivalents during the period

24,150

16,334

49,157

18,802

Cash and cash equivalents - beginning of period

145,615

80,904

120,608

78,436






Cash and cash equivalents - end of period

$

169,765

$

97,238

$

169,765

$

97,238

 

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












2018


2017


2018


2017








Revenue:








Asset Management Group

$

39,194

$

35,949

$

113,525

$

99,701


Interactive Management Group


47,549


46,807


143,498


141,438

Total

$

86,743

$

82,756

$

257,023

$

241,139























Asset Management Group:











- Segment profit before special charges

$

14,114

$

10,962

$

38,670

$

28,978



- Special charges


(152)


(133)


(333)


(477)


Asset Management Group profit

$

13,962

$

10,829

$

38,337

$

28,501











Interactive Management Group:











- Segment profit before special charges

$

15,724

$

13,926

$

45,921

$

43,767



- Special charges


-


-


-


(137)


Interactive Management Group profit

$

15,724

$

13,926

$

45,921

$

43,630











Corporate expenses


(2,962)


(2,133)


(8,357)


(5,534)

Results from operating activities

$

26,724

$

22,622

$

75,901

$

66,597











Amortization of acquired software and customer relationships


(7,245)


(7,397)


(21,763)


(22,365)


Foreign exchange gains (losses)


659


(806)


(465)


(3,027)


Finance income


90


32


278


131


Finance expenses


(50)


(65)


(134)


(137)


Other income (expense)


504


(50)


1,940


101

Income before income taxes

$

20,682

$

14,336

$

55,757

$

41,300

 

SOURCE Enghouse Systems Limited

View original content: http://www.newswire.ca/en/releases/archive/September2018/06/c1768.html

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