Enghouse Releases Fourth Quarter and Year End Results

MARKHAM, ON, Dec. 16, 2021 /CNW/ - Enghouse Systems Limited (TSX: ENGH) today announced its fourth quarter (unaudited) and year-end financial results for period ended October 31, 2021. All the financial information is in Canadian dollars unless otherwise indicated.

Financial and operational highlights for the three and twelve months ended October 31, 2021 compared to the three and twelve months ended October 31, 2020 are as follows:

• Revenue achieved was $113.1 and $467.2 million, respectively, compared to revenue of $120.9 and $503.8 million;
  
  
• Results from operating activities was $39.1 and $155.2 million, respectively, compared to $42.7 and $162.0 million;
  
  
• Net income was $30.2 and $92.8 million, respectively, compared to $29.4 and $98.6 million;
  
  
• Adjusted EBITDA was $42.1 and $168.5 million, respectively, compared to $46.6 and $176.8 million while Adjusted EBITDA margins increased from 35.1% to 36.1% for the year.
  
  
• Cash flows from operating activities excluding changes in working capital was $42.4 and $167.8 million, respectively compared to $48.0 and $178.5 million.

Fiscal 2021 was another year of positive income and operating cash flows, improved Adjusted EBITDA margins and record distributions to shareholders. Although record revenue was not achieved this year, we again demonstrated the benefit of maintaining our financial discipline during times of significant market fluctuations. For the year, Enghouse achieved adjusted EBITDA margins of 36.1% and cash flows from operations, excluding changes in working capital, of $167.8 million.

Revenue for the quarter was $113.1 million, compared to revenue of $120.9 million in the same period in the prior year. The decrease reflects exceptional revenue in the comparative period as a result of COVID-19 related demand in addition to unfavourable foreign exchange. Similar to the second and third quarters of 2021, the comparatively higher revenue last year was driven primarily by the previous year's significant increase in our Vidyo business that has returned to levels more consistent with pre-COVID volumes. Revenue for the quarter was negatively impacted by $4.4 million as a result of foreign exchange as the Canadian dollar strengthened against the U.S. dollar and Euro.

Enghouse closed the quarter with $198.8 million in cash, cash equivalents and short-term investments, compared to $251.8 million at October 31, 2020. The cash balance was achieved after making payments of $35.6 million for acquisitions and $115.7 million for dividends this year, inclusive of $83.2 million of special dividends.

Changes in the macroeconomic environment, caused by COVID or other factors, continue to impact our business. We closed three acquisitions during the year that met our return-on-investment criteria. However, acquisitions in the technology marketplace continue to be priced at prohibitively higher valuations that do not support our return-on-investment objective.

Going forward, we continue to seek earnings-accretive acquisitions to grow our revenue and further expand both our product suite and geographic reach, while maintaining our commitment to profitable growth in accordance with our disciplined business model. We continue to operate our business consistent with our value-for-money philosophy that we believe provides shareholder value in the long-term.

Quarterly dividends:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.16 per common share payable on February 28, 2022 to shareholders of record at the close of business on February 14, 2022.

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

For the period ended October 31	Three months							Twelve months
		2021		2020	Var ($)	Var (%)			2021		2020	Var ($)	Var (%)
Revenue	$	113,099	$	120,898	(7,799)	(6.5)		$	467,177	$	503,778	(36,601)	(7.3)
Direct costs		31,149		33,261	(2,112)	(6.3)			129,627		145,177	(15,550)	(10.7)
Revenue, net of direct costs	$	81,950	$	87,637	(5,687)	(6.5)		$	337,550	$	358,601	(21,051)	(5.9)
As a % of revenue		72.5%		72.5%					72.3%		71.2%
Operating expenses		42,784		44,952	(2,168)	(4.8)			181,413		195,109	(13,696)	(7.0)
Special charges		31		(12)	43	358.3			904		1,478	(574)	(38.8)
Results from operating activities	$	39,135	$	42,697	(3,562)	(8.3)		$	155,233	$	162,014	(6,781)	(4.2)
As a % of revenue		34.6%		35.3%					33.2%		32.2%
Amortization of acquired software and		(10,438)		(10,958)	520	4.7			(42,421)		(44,140)	1,719	3.9
customer relationships
Foreign exchange (losses) gains		(62)		850	(912)	(107.3)			(2,038)		(298)	(1,740)	(583.9)
Interest expense – lease obligations		(218)		(467)	249	53.3			(1,036)		(1,331)	295	22.2
Finance income		52		43	9	20.9			214		734	(520)	(70.8)
Finance expenses		(10)		(42)	32	76.2			(86)		(81)	( 5)	(6.2)
Other (expense) income		(486)		671	(1,157)	(172.4)			(2,448)		4,895	(7,343)	(150.0)
Income before income taxes	$	27,973	$	32,794	(4,821)	(14.7)		$	107,418	$	121,793	(14,375)	(11.8)
(Recovery of) provision for income taxes		(2,213)		3,422	(5,635)	(164.7)			14,624		23,203	(8,579)	(37.0)
Net Income for the period	$	30,186	$	29,372	814	2.8		$	92,794	$	98,590	(5,796)	(5.9)
Basic earnings per share		0.54		0.53	0.01	1.9			1.67		1.79	(0.12)	(6.7)
Diluted earnings per share		0.54		0.52	0.02	3.8			1.66		1.77	(0.11)	(6.2)
Operating cash flows		25,206		34,989	(9,783)	(28.0)			118,460		168,145	(49,685)	(29.5)
Operating cash flows excluding changes in		42,385		48,008	(5,623)	(11.7)			167,807		178,518	(10,711)	(6.0)
working capital
Adjusted EBITDA
Results from operating activities		39,135		42,697	(3,562)	(8.3)			155,233		162,014	(6,781)	(4.2)
Depreciation		791		795	(4)	(0.5)			3,003		3,241	(238)	(7.3)
Depreciation of right-of-use assets		2,168		3,158	(990)	(31.3)			9,369		10,083	(714)	(7.1)
Special charges		31		(12)	43	358.3			904		1,478	(574)	(38.8)
Adjusted EBITDA	$	42,125	$	46,638	(4,513)	(9.7)		$	168,509	$	176,816	(8,307)	(4.7)
Adjusted EBITDA margin		37.2%		38.6%					36.1%		35.1%
Adjusted EBITDA per diluted share	$	0.75	$	0.84	( 0.09)	(10.7)		$	3.02	$	3.18	( 0.16)	(5.0)

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)		As at October 31,2021		As at October 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	195,890	$	244,792
Short-term investments			2,944		6,999
Accounts receivable			89,374		90,789
Prepaid expenses and other assets			13,322		14,772
Income taxes recoverable			2,130		-
			303,660		357,352
Non-current assets:
Property and equipment			6,246		6,301
Right-of-use assets			25,943		42,832
Intangible assets			101,822		123,616
Goodwill			223,021		217,426
Deferred income tax assets			13,932		16,119
			370,964		406,294
		$	674,624	$	763,646
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	71,506	$	80,339
Income taxes payable			-		13,245
Dividends payable			8,889		7,472
Provisions			5,588		5,697
Deferred revenue			80,614		89,927
Lease obligations			7,941		9,914
			174,538		206,594
Non-current liabilities:
Income taxes payable			2,949		3,829
Deferred income tax liabilities			13,392		14,782
Deferred revenue			9,111		7,021
Net employee defined benefit obligation			2,663		2,855
Lease obligations			17,660		32,242
			45,775		60,729
			220,313		267,323
Shareholders' equity
Share capital			106,470		99,405
Contributed surplus			7,406		6,583
Retained earnings			355,019		379,378
Accumulated other comprehensive (loss) income			(14,584)		10,957
			454,311		496,323
		$	674,624	$	763,646

Consolidated Statement of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
			Three months				Twelve months
Periods ended October 31			2021 (unaudited)		2020 (Unaudited)		2021			2020
Revenue
Software licenses		$	24,798	$	27,658	$	105,072		$	134,287
Hosted and maintenance services			67,917		73,037		278,981			286,770
Professional services			18,121		16,906		71,197			64,235
Hardware			2,263		3,297		11,927			18,486
			113,099		120,898		467,177			503,778
Direct costs
Software licenses			535		1,649		4,555			10,094
Services			29,422		29,557		117,670			121,400
Hardware			1,192		2,055		7,402			13,683
			31,149		33,261		129,627			145,177
Revenue, net of direct costs			81,950		87,637		337,550			358,601
Operating expenses
Selling, general and administrative			22,959		21,922		91,844			102,028
Research and development			16,866		19,077		77,197			79,757
Depreciation			791		795		3,003			3,241
Depreciation of right-of-use assets			2,168		3,158		9,369			10,083
Special charges			31		(12)		904			1,478
			42,815		44,940		182,317			196,587
Results from operating activities			39,135		42,697		155,233			162,014
Amortization of acquired software and customer relationships			(10,438)		(10,958)		(42,421)			(44,140)
Foreign exchange (losses) gains			(62)		850		(2,038)			(298)
Interest expense – lease obligations			(218)		(467)		(1,036)			(1,331)
Finance income			52		43		214			734
Finance expenses			(10)		(42)		(86)			(81)
Other (expense) income			(486)		671		(2,448)			4,895
Income before income taxes			27,973		32,794		107,418			121,793
(Recovery of) provision for income taxes			(2,213)		3,422		14,624			23,203
Net income for the period		$	30,186	$	29,372	$	92,794		$	98,590
Items that may be subsequently reclassified to income:
Cumulative translation adjustment			(6,352)		(8,984)		(25,541)			6,335
Other comprehensive (loss) income			(6,352)		(8,984)		(25,541)			6,335
Comprehensive income		$	23,834	$	20,388	$	67,253		$	104,925
Earnings per share
Basic		$	0.54	$	0.53	$	1.67		$	1.79
Diluted		$	0.54	$	0.52	$	1.66		$	1.77

Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
			Three months				Twelve months
Periods ended October 31			2021 (Unaudited)		2020 (Unaudited)		2021		2020
OPERATING ACTIVITIES
Net income for the period		$	30,186	$	29,372	$	92,794	$	98,590
Adjustments for non-cash items
Depreciation			791		795		3,003		3,241
Depreciation of right-of-use assets			2,168		3,158		9,369		10,083
Interest expense – lease obligations			218		467		1,036		1,331
Amortization of acquired software and customer relationships			10,438		10,958		42,421		44,140
Stock-based compensation expense			301		465		2,026		2,744
Provision for income taxes			(2,213)		3,422		14,624		23,203
Finance expenses and other expense (income)			496		(629)		2,534		(4,814)
			42,385		48,008		167,807		178,518
Changes in non-cash operating working capital			(11,814)		(8,762)		(21,671)		9,388
Income taxes paid			(5,365)		(4,257)		(27,676)		(19,761)
Net cash provided by operating activities			25,206		34,989		118,460		168,145
INVESTING ACTIVITIES
Purchase of property and equipment			(1,484)		(638)		(3,333)		(2,540)
Acquisitions, net of cash acquired*			661		-		(35,476)		(43,454)
Purchase consideration for prior-year acquisitions			-		-		(158)		(452)
(Purchase) sale of short-term investments			(218)		2,948		1,352		1,379
Net cash (used in) provided by investing activities			(1,041)		2,310		(37,615)		(45,067)
FINANCING ACTIVITIES
Issuance of share capital			1,016		1,630		5,862		14,991
Repayment of loans			-		(66)		-		(128)
Repayment of lease obligations			(2,314)		(3,285)		(9,633)		(10,220)
Dividends paid			(8,883)		(7,463)		(115,736)		(26,959)
Net cash used in financing activities			(10,181)		(9,184)		(119,507)		(22,316)
Impact of foreign exchange on cash and cash equivalents			(2,523)		(2,746)		(10,240)		(734)
Increase (decrease) in cash and cash equivalents			11,461		25,369		(48,902)		100,028
Cash and cash equivalents - beginning of period			184,429		219,423		244,792		144,764
Cash and cash equivalents - end of period		$	195,890	$	244,792	$	195,890	$	244,792

* Acquisitions are net of cash acquired of nil and $3,613 for the quarter and year ended October 31, 2021, respectively, and nil and $6,906 for the quarter and year ended October 31, 2020, respectively.

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

For the period ended October 31, 2021		Three months							Twelve months
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		66,846	$	46,253	$	113,099	$	268,584	$	198,593	$	467,177
Direct costs			(15,281)		(15,868)		(31,149)		(64,941)		(64,686)		(129,627)
Revenue, net of direct costs			51,565		30,385		81,950		203,643		133,907		337,550
Operating expenses excluding special charges			(19,505)		(13,249)		(32,754)		(88,064)		(49,306)		(137,370)
Depreciation of property and equipment			(668)		(123)		(791)		(2,570)		(433)		(3,003)
Depreciation of right-of-use assets			(1,213)		(955)		(2,168)		(5,900)		(3,469)		(9,369)
Segment profit	$		30,179	$	16,058	$	46,237	$	107,109	$	80,699	$	187,808
Special charges							(31)						(904)
Corporate and shared service expenses							(7,071)						(31,671)
Results from operating activities						$	39,135					$	155,233

For the period ended October 31, 2020		Three months							Twelve months
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		70,927	$	49,971	$	120,898	$	298,876	$	204,902	$	503,778
Direct costs			(16,055)		(17,206)		(33,261)		(70,295)		(74,882)		(145,177)
Revenue, net of direct costs			54,872		32,765		87,637		228,581		130,020		358,601
Operating expenses excluding special charges			(24,153)		(11,105)		(35,258)		(93,875)		(51,920)		(145,795)
Depreciation of property and equipment			(678)		(117)		(795)		(2,297)		(944)		(3,241)
Depreciation of right-of-use assets			(2,732)		(426)		(3,158)		(6,623)		(3,460)		(10,083)
Segment profit	$		27,309	$	21,117	$	48,426	$	125,786	$	73,696	$	199,482
Special charges							12						(1,478)
Corporate and shared service expenses							(5,741)						(35,990)
Results from operating activities						$	42,697					$	162,014

About Enghouse
Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides enterprise software solutions focusing on contact centers, video communications, remote work, communications for next generation software defined networks, public safety and the transit market. The Company's two-pronged growth strategy focuses on internal growth and acquisitions, which, to date, have been funded through operating cash flows. The Company has no debt financing 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, December 17, 2021 at 8:45 a.m. EST. To participate, please call [phone] or North American Toll-Free [phone]. Confirmation code: 5379462. 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]