Enghouse Releases Fourth Quarter and Year End Results

MARKHAM, ON, Dec. 14, 2023 /CNW/ - Enghouse Systems Limited (TSX: ENGH) announces its fourth quarter (unaudited) and year-end financial results for the period ended October 31, 2023. All figures are denominated in Canadian dollars unless otherwise indicated.

Highlights for the Fourth Quarter ended October 31, 2023 compared to the same period in the prior year:

• Revenue increased 13.9% to $123.1 million.
• Recurring revenue, which includes SaaS and maintenance services, grew 35.0% to $87.2 million.
• Operating profits improved from $33.1 to $35.7 million, while achieving a 30.8% EBITDA margin.

Financial highlights for the three and twelve months ended October 31, 2023 compared to the three and twelve months ended October 31, 2022 are as follows:

• Revenue increased to $123.1 and $454.0 million, respectively, compared to revenue of $108.1 and $427.6 million;
• Results from operating activities were $35.7 and $122.1 million, respectively, compared to $33.1 and $129.7 million;
• Net income was $25.1 and $72.2 million, respectively, compared to $36.9 and $94.5 million;
• Adjusted EBITDA was $37.9 and $133.8 million, respectively, compared to $35.8 and $140.6 million;
• Cash flows from operating activities, excluding changes in working capital, was $43.5 and $140.5 million, respectively, compared to $37.7 and $145.1 million;

In fiscal 2023 we achieved a significant milestone by expanding our revenue, increasing our cash reserves and also deploying $55.2 million on acquisitions. We are pleased to announce record annual SaaS and Maintenance services revenue of $297.6 million, an increase of $39.4 million or 15.2% compared to the prior year. SaaS and maintenance services are an important strategic source of revenue characterized by their predictable and recurring nature. They now represent 65.6% of total revenues for the year compared to 60.4% in the prior year.

The growth in revenue was accomplished through the expansion of our recurring SaaS revenue base, bolstered by new revenues from Qumu, Navita and Lifesize, all of which were acquired and successfully integrated in Fiscal 2023, combined with positive impacts from foreign exchange rates in the year. This positive momentum was somewhat offset by declining software license revenue as we see increasing customer preference for SaaS solutions. Aligned with our commitment to provide our customers choice, we are actively broadening the global availability of our SaaS offerings, particularly in our customer experience and contact center technologies where demand for SaaS is growing. Despite the industry shift, we remain profitable, reporting results from operating activities of $122.1 million.

With cash reserves of $240.4 million and no external debt, we continue to actively pursue opportunities to strategically deploy our cash reserves on acquisitions and return cash to our shareholders in the form of dividends.

Quarterly dividends:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.22 per common share payable on February 29, 2024 to shareholders of record at the close of business on February 15, 2024.

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

For the period ended October 31	Three months							Twelve months
		2023		2022	Var ($)	Var (%)			2023		2022	Var ($)	Var (%)
Revenue	$	123,129	$	108,060	15,069	13.9		$	454,022	$	427,585	26,437	6.2
Direct costs		41,213		32,340	8,873	27.4			149,999		130,097	19,902	15.3
Revenue, net of direct costs	$	81,916	$	75,720	6,196	8.2		$	304,023	$	297,488	6,535	2.2
As a % of revenue		66.5 %		70.1 %					67.0 %		69.6 %
Operating expenses		46,115		42,448	3,667	8.6			179,438		167,418	12,020	7.2
Special charges		117		123	(6)	(4.9)			2,477		403	2,074	514.6
Results from operating activities	$	35,684	$	33,149	2,535	7.6		$	122,108	$	129,667	(7,559)	(5.8)
As a % of revenue		29.0 %		30.7 %					26.9 %		30.3 %
Amortization of acquired software and   customer relationships		(11,205)		(8,826)	(2,379)	(27.0)			(39,605)		(36,174)	(3,431)	(9.5)
Foreign exchange gains		2,753		931	1,822	n/a			1,266		1,954	(688)	(35.2)
Interest expense – lease obligations		(164)		(164)	-	0.0			(695)		(735)	40	5.4
Finance income		2,581		651	1,930	n/a			6,264		1,192	5,072	425.5
Finance expenses		(27)		(27)	-	0.0			(163)		(89)	(74)	(83.1)
Other (expense) income		17		(507)	524	103.4			(1,950)		423	(2,373)	(561.0)
Income before income taxes	$	29,639	$	25,207	4,432	17.6		$	87,225	$	96,238	(9,013)	(9.4)
Provision for (recovery of) income taxes		4,517		(11,742)	16,259	138.5			14,977		1,740	13,237	760.7
Net Income for the period	$	25,122	$	36,949	(11,827)	(32.0)		$	72,248	$	94,498	(22,250)	(23.5)
Basic earnings per share		0.45		0.67	(0.22)	(32.8)			1.31		1.70	(0.39)	(22.9)
Diluted earnings per share		0.45		0.67	(0.22)	(32.8)			1.31		1.70	(0.39)	(22.9)
Operating cash flows		28,318		18,539	9,779	52.7			115,298		103,181	12,117	11.7
Operating cash flows excluding changes in           working capital		43,504		37,740	5,764	15.3			140,492		145,074	(4,582)	(3.2)
Adjusted EBITDA
Results from operating activities		35,684		33,149	2,535	7.6			122,108		129,667	(7,559)	(5.8)
Depreciation		627		709	(82)	(11.6)			2,451		2,799	(348)	(12.4)
Depreciation of right-of-use assets		1,491		1,824	(333)	(18.3)			6,764		7,754	(990)	(12.8)
Special charges		117		123	(6)	(4.9)			2,477		403	2,074	514.6
Adjusted EBITDA	$	37,919	$	35,805	2,114	5.9		$	133,800	$	140,623	(6,823)	(4.9)
Adjusted EBITDA margin		30.8 %		33.1 %					29.5 %		32.9 %
Adjusted EBITDA per diluted share	$	0.69	$	0.65	0.04	6.2		$	2.42	$	2.53	( 0.11)	(4.3)

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)		As at October 31, 2023		As at October 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	239,532	$	225,104
Short-term investments			827		2,950
Accounts receivable			93,383		93,104
Prepaid expenses and other assets			15,515		12,848
Income taxes recoverable			114		492
			349,371		334,498
Non-current assets:
Property and equipment			3,273		4,186
Right-of-use assets			12,242		20,063
Intangible assets			109,659		85,902
Goodwill			280,241		230,002
Deferred income tax assets			28,884		30,347
			434,299		370,500
		$	783,670	$	704,998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	67,769	$	60,525
Dividends payable			12,156		10,221
Provisions			2,238		3,183
Deferred revenue			109,019		83,122
Lease obligations			6,322		6,822
			197,504		163,873
Non-current liabilities:
Income taxes payable			1,333		2,576
Deferred income tax liabilities			13,340		12,038
Deferred revenue			8,170		3,470
Net employee defined benefit obligation			1,912		1,821
Lease obligations			6,080		13,055
			30,835		32,960
			228,339		196,833
Shareholders' equity
Share capital			107,701		107,007
Contributed surplus			10,404		8,882
Retained earnings			426,397		401,247
Accumulated other comprehensive income (loss)			10,829		(8,971)
			555,331		508,165
		$	783,670	$	704,998

Consolidated Statement of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
		Three months		Twelve months
Periods ended October 31		2023 (unaudited)	2022 (Unaudited)	2023	2022
Revenue
Software licenses		$  17,467	$  25,588	$  80,054	$  90,602
SaaS and maintenance services		87,196	64,575	297,635	258,277
Professional services		16,483	16,066	67,273	68,648
Hardware		1,983	1,831	9,060	10,058
		123,129	108,060	454,022	427,585
Direct costs
Software licenses		622	704	2,910	4,340
Services		39,108	30,594	141,802	119,762
Hardware		1,483	1,042	5,287	5,995
		41,213	32,340	149,999	130,097
Revenue, net of direct costs		81,916	75,720	304,023	297,488
Operating expenses
Selling, general and administrative		23,702	21,727	90,889	84,603
Research and development		20,295	18,188	79,334	72,262
Depreciation		627	709	2,451	2,799
Depreciation of right-of-use assets		1,491	1,824	6,764	7,754
Special charges		117	123	2,477	403
		46,232	42,571	181,915	167,821
Results from operating activities		35,684	33,149	122,108	129,667
Amortization of acquired software and customer relationships		(11,205)	(8,826)	(39,605)	(36,174)
Foreign exchange gains		2,753	931	1,266	1,954
Interest expense – lease obligations		(164)	(164)	(695)	(735)
Finance income		2,581	651	6,264	1,192
Finance expenses		(27)	(27)	(163)	(89)
Other income (expense)		17	(507)	(1,950)	423
Income before income taxes		29,639	25,207	87,225	96,238
Provision for (recovery of) income taxes		4,517	(11,742)	14,977	1,740
Net income for the period		$  25,122	$  36,949	$  72,248	$  94,498
Items that may be subsequently reclassified to income:
Cumulative translation adjustment		12,394	17,883	19,800	5,613
Other comprehensive income		12,394	17,883	19,800	5,613
Comprehensive income		$    37,516	$  54,832	$  92,048	$  100,111
Earnings per share
Basic		$        0.45	$      0.67	$      1.31	$      1.70
Diluted		$        0.45	$      0.67	$      1.31	$      1.70

Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)		Three months		Twelve months
Periods ended October 31		2023 (Unaudited)	2022 (Unaudited)	2023	2022
OPERATING ACTIVITIES
Net income for the period		$    25,122	$    36,949	$    72,248	$    94,498
Adjustments for non-cash items
Depreciation		627	709	2,451	2,799
Depreciation of right-of-use assets		1,491	1,824	6,764	7,754
Interest expense – lease obligations		164	164	695	735
Amortization of acquired software and customer relationships		11,205	8,826	39,605	36,174
Stock-based compensation expense		368	476	1,639	1,708
Provision for (recovery of) income taxes		4,517	(11,742)	14,977	1,740
Finance expenses and other (expense) income		10	534	2,113	(334)
		43,504	37,740	140,492	145,074
Changes in non-cash operating working capital		(11,624)	(14,467)	(11,244)	(26,139)
Income taxes paid		(3,562)	(4,734)	(13,950)	(15,754)
Net cash provided by operating activities		28,318	18,539	115,298	103,181
INVESTING ACTIVITIES
Purchase of property and equipment, net		(453)	(321)	(1,060)	(919)
Acquisitions, net of cash acquired*		(27,189)	(14,139)	(55,167)	(20,231)
Recovery (payment) of purchase consideration for prior-year acquisitions		13	528	(999)	120
Sale (purchase) of short-term investments		65	-	(4)	(60)
Net cash used in investing activities		(27,564)	(13,932)	(57,230)	(21,090)
FINANCING ACTIVITIES
Issuance of share capital		-	-	604	971
Normal course issuer bid share repurchases		(425)	(367)	(425)	(9,318)
Repayment of lease obligations		(1,440)	(2,010)	(7,194)	(8,235)
Dividends paid		(12,159)	(10,224)	(44,765)	(38,286)
Net cash used in financing activities		(14,024)	(12,601)	(51,780)	(54,868)
Impact of foreign exchange on cash and cash equivalents		4,018	7,152	8,140	1,991
(Decrease) increase in cash and cash equivalents		(9,252)	(842)	14,428	29,214
Cash and cash equivalents - beginning of period		248,784	225,946	225,104	195,890
Cash and cash equivalents - end of period		$  239,532	$  225,104	$  239,532	$  225,104

* Acquisitions are net of cash acquired of nil and $2,088 for the quarter and year ended October 31, 2023, respectively and nil and $3,647 for the quarter and year ended October 31, 2022, respectively. 

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

For the period ended October 31, 2023		Three months							Twelve months
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		78,578	$	44,551	$	123,129	$	265,311	$	188,711	$	454,022
Direct costs			(24,337)		(16,876)		(41,213)		(78,788)		(71,211)		(149,999)
Revenue, net of direct costs			54,241		27,675		81,916		186,523		117,500		304,023
Operating expenses excluding special charges			(21,807)		(10,450)		(32,257)		(84,493)		(45,169)		(129,662)
Depreciation			(485)		(142)		(627)		(1,969)		(482)		(2,451)
Depreciation of right-of-use assets			(904)		(587)		(1,491)		(4,184)		(2,580)		(6,764)
Segment profit	$		31,045	$	16,496	$	47,541	$	95,877	$	69,269	$	165,146
Special charges							(117)						(2,477)
Corporate and shared service expenses							(11,740)						(40,561)
Results from operating activities						$	35,684					$	122,108

For the period ended October 31, 2022		Three months							Twelve months
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		61,759	$	46,301	$	108,060	$	235,925	$	191,660	$	427,585
Direct costs			(15,815)		(16,525)		(32,340)		(62,079)		(68,018)		(130,097)
Revenue, net of direct costs			45,944		29,776		75,720		173,846		123,642		297,488
Operating expenses excluding special charges			(18,394)		(11,859)		(30,253)		(75,272)		(45,816)		(121,088)
Depreciation			(583)		(126)		(709)		(2,336)		(463)		(2,799)
Depreciation of right-of-use assets			(1,112)		(712)		(1,824)		(4,742)		(3,012)		(7,754)
Segment profit	$		25,855	$	17,079	$	42,934	$	91,496	$	74,351	$	165,847
Special charges							(123)						(403)
Corporate and shared service expenses							(9,662)						(35,777)
Results from operating activities						$	33,149					$	129,667

About-Enghouse
Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides mission-critical vertically focused enterprise software solutions. Our core technologies are used for contact centers, video communications, virtual healthcare, telecommunications networks, public safety and the transit market. The Company's two-pronged growth strategy to grow earnings focuses on organic growth and acquisitions, which, to date, have been funded through operating cash flows as the Company has no outstanding external debt financing. The Company is organized around two business segments, the Interactive Management Group ("IMG") and the Asset Management Group ("AMG") due to their unique customer segments and technology offerings. 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, December 15, 2023 at 8:45 a.m. EST. To participate, please call [phone] or North American Toll-Free [phone]. Confirmation code: 44260758  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, Adjusted EBITDA margin and Adjusted EBITDA per diluted share as measures of operating performance. Therefore, these collective Adjusted EBITDA measures 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, Tel: [phone], Email: [email protected]