Enghouse Releases First Quarter Results

MARKHAM, ON, March 3, 2022 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its first quarter unaudited financial results for the period ended January 31, 2022.  All the financial information is in Canadian dollars unless otherwise indicated.

Financial and operational highlights for the three months ended January 31, 2022 compared to the three months ended January 31, 2021 are as follows:

• Revenue achieved was $111.1 million compared to revenue of $119.1 million;
• Results from operating activities was $35.7 million compared to $40.7 million;
• Net income increased to $21.6 million compared to $20.6 million;
• Adjusted EBITDA was $38.6 million compared to $44.5 million;
• Cash flows from operating activities excluding changes in working capital was $38.7 million compared to $41.7 million.

Revenue for the first quarter of 2022 was $111.1 million compared to revenue of $119.1 million in the prior year. While revenue for the first quarter of the comparative year had mostly returned to pre-COVID volumes it represents the tail-end of a period positively impacted by an influx of COVID related demand for our remote-work and visual computing solutions. Revenue for the quarter was also negatively impacted by $4.4 million as a result of foreign exchange compared to the prior year. We also continue to experience a shift towards cloud offerings, particularly in the contact center market.

Net income for the quarter was $21.6 million or $0.39 per diluted share, compared to $20.6 million or $0.37 per diluted share last year. The increase in Net income is a result of lower costs and higher other income despite lower revenues relative to the comparative period. Adjusted EBITDA was $38.6 million or $0.69 per diluted share, compared to $44.5 million or $0.80 per diluted share in the first quarter of 2021. 

Enghouse closed the quarter with $214.8 million in cash, cash equivalents and short-term investments, compared to $198.8 million at October 31, 2021 with no external debt. The cash balance was achieved after making payments of $8.9 million for dividends in the first quarter. Enghouse remains focused on its long-term growth strategy, investing in products while ensuring profitability and maximizing operating cashflows. As a result, Enghouse continues to replenish its acquisition capital while annually increasing its eligible quarterly dividend.

Quarterly dividends: 
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.185 per common share, an increase of 16% over the prior dividend, payable on May 31, 2022 to shareholders of record at the close of business on May 17, 2022. This represents the 14^th consecutive year in which the company increased its dividend by over 10%.

Enghouse Systems Limited
Financial Highlights
(unaudited, in thousands of Canadian dollars)

For the period ended January 31								Three months
									2022		2021	Var ($)	Var (%)
Revenue								$	111,102	$	119,100	(7,998)	(6.7)
Direct costs									32,828		31,508	1,320	4.2
Revenue, net of direct costs								$	78,274	$	87,592	(9,318)	(10.6)
As a % of revenue									70.5%		73.5%
Operating expenses									42,551		46,510	(3,959)	(8.5)
Special charges									18		383	(365)	(95.3)
Results from operating activities								$	35,705	$	40,699	(4,994)	(12.3)
As a % of revenue									32.1%		34.2%
Amortization of acquired software and customer relationships									(9,657)		(10,774)	1,117	10.4
Foreign exchange losses									(336)		(3,110)	2,774	89.2
Interest expense – lease obligations									(202)		(329)	127	38.6
Finance income									129		80	49	61.3
Finance expenses									(23)		(81)	58	71.6
Other income (expenses)									1,000		(324)	1,324	408.6
Income before income taxes								$	26,616	$	26,161	455	1.7
Provision for income taxes									5,019		5,519	(500)	(9.1)
Net Income for the period								$	21,597	$	20,642	955	4.6
Basic earnings per share									0.39		0.37	0.02	5.4
Diluted earnings per share									0.39		0.37	0.02	5.4
Operating cash flows									24,342		20,545	3,797	18.5
Operating cash flows excluding changes in working capital									38,743		41,715	(2,972)	(7.1)
Adjusted EBITDA
Results from operating activities									35,705		40,699	(4,994)	(12.3)
Depreciation									720		735	(15)	2.0
Depreciation of right-of-use assets									2,112		2,703	(591)	21.9
Special charges									18		383	(365)	95.3
Adjusted EBITDA								$	38,555	$	44,520	(5,965)	(13.4)
Adjusted EBITDA margin									34.7%		37.4%
Adjusted EBITDA per diluted share								$	0.69	$	0.80	( 0.11)	(13.8)

Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars) (unaudited)		As at January 31, 2021		As at October 31, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	210,899	$	195,890
Short-term investments			3,915		2,944
Accounts receivable			108,927		89,374
Prepaid expenses and other assets			13,669		13,322
Income taxes recoverable			-		2,130
			337,410		303,660
Non-current assets:
Property and equipment			5,090		6,246
Right-of-use assets			24,153		25,943
Intangible assets			93,038		101,822
Goodwill			223,194		223,021
Deferred income tax assets			16,399		13,932
			361,874		370,964
		$	699,284	$	674,624
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	61,690	$	71,506
Income taxes payable			1,373		-
Dividends payable			8,889		8,889
Provisions			3,933		5,588
Deferred revenue			100,222		80,614
Lease obligations			8,130		7,941
			184,237		174,538
Non-current liabilities:
Income taxes payable			2,325		2,949
Deferred income tax liabilities			14,046		13,392
Deferred revenue			8,574		9,111
Net employee defined benefit obligation			2,655		2,663
Lease obligations			15,889		17,660
			43,489		45,775
			227,726		220,313
Shareholders' equity
Share capital			106,470		106,470
Contributed surplus			7,819		7,406
Retained earnings			367,727		355,019
Accumulated other comprehensive loss			(10,458)		(14,584)
			471,558		454,311
		$	699,284	$	674,624

Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(unaudited)				Three months
Periods ended January 31				2022		2021
Revenue      Software licenses				$	23,778	$	28,300
Hosted and maintenance services				66,427		72,243
Professional services				17,952		15,829
Hardware				2,945		2,728
				111,102		119,100
Direct costs
Software licenses				1,327		1,201
Services				29,594		28,472
Hardware				1,907		1,835
				32,828		31,508
Revenue, net of direct costs				78,274		87,592
Operating expenses
Selling, general and administrative				22,407		22,951
Research and development				17,312		20,121
Depreciation				720		735
Depreciation of right-of-use assets				2,112		2,703
Special charges				18		383
				42,569		46,893
Results from operating activities				35,705		40,699
Amortization of acquired software and customer relationships				(9,657)		(10,774)
Foreign exchange losses				(336)		(3,110)
Interest expense – lease obligations				(202)		(329)
Finance income				129		80
Finance expenses				(23)		(81)
Other income (expenses)				1,000		( 324)
Income before income taxes				26,616		26,161
Provision for income taxes				5,019		5,519
Net income for the period				$	21,597	$	20,642
Items that may be subsequently reclassified to income:
Cumulative translation adjustment				4,126		(4,868)
Other comprehensive income (loss)				4,126		(4,868)
Comprehensive income				$	25,723	$	15,774
Earnings per share
Basic				$	0.39	$	0.37
Diluted				$	0.39	$	0.37

Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)				Three months
Periods ended January 31				2022		2021
OPERATING ACTIVITIES
Net income for the period				$	21,597	$	20,642
Adjustments for non-cash items
Depreciation				720		735
Depreciation of right-of-use assets				2,112		2,703
Interest expense – lease obligations				202		329
Amortization of acquired software and customer relationships				9,657		10,774
Stock-based compensation expense				413		608
Provision for income taxes				5,019		5,519
Finance and other (expenses) income				(977)		405
				38,743		41,715
Changes in non-cash operating working capital				(11,202)		(11,355)
Income taxes paid				(3,199)		(9,815)
Net cash provided by operating activities				24,342		20,545
INVESTING ACTIVITIES
Sale (purchase) of property and equipment				235		(678)
Acquisitions, net of cash acquired*				-		(27,829)
Sale of short-term investments				-		2,546
Net cash provided by (used in) investing activities				235		(25,961)
FINANCING ACTIVITIES
Issuance of share capital				-		154
Repayment of lease obligations				(2,093)		(2,830)
Dividends paid				(8,889)		(7,472)
Net cash used in financing activities				(10,982)		(10,148)
Impact of foreign exchange on cash and cash equivalents				1,414		(3,251)
Increase (decrease) in cash and cash equivalents				15,009		(18,815)
Cash and cash equivalents - beginning of period				195,890		244,792
Cash and cash equivalents - end of period				$	210,899	$	225,977

* Acquisitions are net of cash acquired of nil and $1,463 for the three months ended January 31, 2022 and 2021, respectively.

Enghouse Systems Limited
Segment Reporting Information
(in thousands of Canadian dollars)

Three months ended January 31, 2022	IMG		AMG		Total
Revenue	$	61,871	$	49,231	$	111,102
Direct costs		(15,444)		(17,384)		(32,828)
Revenue, net of direct costs		46,427		31,847			78,274
Operating expenses excluding special charges		(19,551)		(11,172)		(30,723)
Depreciation		(596)		(124)		(720)
Depreciation of right-of-use assets		(1,327)		(785)		(2,112)
Segment profit	$	24,953	$	19,766	$	44,719
Special charges						(18)
Corporate and shared service expenses						(8,996)
Results from operating activities					$	35,705

Three months ended January 31, 2021	IMG		AMG		Total
Revenue	$	70,303	$	48,797	$	119,100
Direct costs		(15,457)		(16,051)		(31,508)
Revenue, net of direct costs		54,846		32,746		87,592
Operating expenses excluding special charges		(22,663)		(12,125)		(34,788)
Depreciation		(671)		(64)		(735)
Depreciation of right-of-use assets		(1,818)		(885)		(2,703)
Segment profit	$	29,694	$	19,672	$	49,366
Special charges						(383)
Corporate and shared service expenses						(8,284)
Results from operating activities					$	40,699

About Enghouse

Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides enterprise software solutions focusing on telehealth, visual computing and communications networks. The Company's two-pronged strategy to grow earnings focuses on internal growth and acquisitions, which, to date, have been funded through operating cash flows. The Company is well capitalized, has no long-term debt and is organized around two business segments: the Interactive Management Group and the Asset Management Group. Further information about Enghouse may be obtained from the Company's website at www.enghouse.com. 

Conference Call and Webcast

A conference call to discuss the results will be held on Friday, March 4, 2022 at 8:45 a.m. EST. To participate, please call
[phone] or North American Toll-Free [phone]. Confirmation code: 8096823. A webcast is also available at: https://www.enghouse.com/investors.php.

The Company uses non-IFRS measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS 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 based on results from operating activities adjusted for depreciation of property and equipment and right-of-use assets, 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, foreign exchange gains and losses, other income and restructuring costs primarily related to acquisitions.

SOURCE Enghouse Systems Limited

Sam Anidjar, Vice President, Corporate Development, [phone], [email protected]