Enghouse Releases Second Quarter Results

MARKHAM, ON, June 12, 2023 /CNW/ - Enghouse Systems Limited (TSX: ENGH) today announced its second quarter unaudited financial results for the period ended April 30, 2023.  All the financial information is in Canadian dollars unless otherwise indicated.

Financial and operational highlights for the three and six months ended April 30, 2023 compared to the three and six months ended April 30, 2022 are as follows:

• Revenue achieved was $113.5 and $219.9 million, respectively, compared to revenue of $106.3 and $217.4 million;
• Results from operating activities was $25.6 and $55.5 million, respectively, compared to $31.1 and $66.8 million;
• Net income was $12.5 and $29.6 million, respectively, compared to $17.9 and $39.5 million;
• Adjusted EBITDA was $30.2 and $62.5 million, respectively, compared to $33.8 and $72.3 million;
• Cash flow from operating activities excluding changes in working capital was $28.9 and $61.5 million, respectively, compared to $34.5 and $73.3 million.

Revenue for the second quarter reflects an increase of 6.7% compared to the same period in the prior year and was positively impacted by $3.6 million as a result of foreign exchange, which also adversely impacted cost of revenue and operating expenses by $2.2 million. Consistent with our strategy, revenue growth was largely driven by recent acquisitions.

Net income for the quarter was $0.23 per diluted share compared to $0.32 per diluted share last year. The decrease was primarily a result of incremental operating costs related to acquisitions as we integrate them into Enghouse combined with higher third-party costs and special charges related to acquisitions. Adjusted EBITDA was $0.54 per diluted share, compared to $0.61 per diluted share in the second quarter of 2022. 

Year-to-date revenue was positively impacted by foreign exchange, which also increased costs. Year-to-date results from operating activities reflect increased revenue and costs related to acquisitions as well as increased third-party costs of providing services. Year-to-date Adjusted EBITDA was $1.13 per diluted share compared to $1.30 per diluted share last year as a result of the initial margin compression related to increased acquisition activity as well as increased third-party costs of providing services.

As previously announced, Enghouse completed two acquisitions, purchasing Qumu Corporation ("Qumu") (Nasdaq:QUMU) on February 8, 2023 and Mobi All Technologies S.A ("Navita") on February 9, 2023. Qumu's video Engagement platform provides video creation, content management and highly scalable delivery solutions that complement Enghouse's enterprise video suite of products. Navita offers a comprehensive suite of products focused on managing and controlling critical mobile assets as well as telecom and IT expense management. The results from both acquisitions are included in the Interactive Management Group. The efforts to integrate and onboard these acquisitions were substantially completed in the quarter. 

Quarterly dividends: 
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.22 per common share, payable on August 31, 2023 to shareholders of record at the close of business on August 17, 2023.

Enghouse Systems Limited

Financial Highlights
(unaudited, in thousands of Canadian dollars)

For the period ended April 30	Three months							Six months
		2023		2022	Var ($)	Var (%)			2023		2022	Var ($)	Var (%)
Revenue	$	113,461	$	106,312	7,149	6.7		$	219,896	$	217,414	2,482	1.1
Direct costs		38,106		33,581	4,525	13.5			72,914		66,409	6,505	9.8
Revenue, net of direct costs	$	75,355	$	72,731	2,624	3.6		$	146,982	$	151,005	(4,023)	(2.7)
As a % of revenue		66.4 %		68.4 %					66.8 %		69.5 %
Operating expenses		47,712		41,629	6,083	14.6			89,422		84,180	5,242	6.2
Special charges		2,001		46	1,955	4250.0			2,029		64	1,965	3070.3
Results from operating activities	$	25,642	$	31,056	(5,414)	(17.4)		$	55,531	$	66,761	(11,230)	(16.8)
As a % of revenue		22.6 %		29.2 %					25.3 %		30.7 %
Amortization of acquired software and         customer relationships		(9,838)		(9,207)	(631)	(6.9)			(18,670)		(18,864)	194	1.0
Foreign exchange (losses) gains		(790)		314	(1,104)	(351.6)			(1,843)		(22)	(1,821)	(8277.3)
Interest expense – lease obligations		(192)		(196)	4	2.0			(359)		(398)	39	9.8
Finance income		1,006		122	884	724.6			1,982		251	1,731	689.6
Finance expenses		(124)		(21)	(103)	(490.5)			(131)		(44)	(87)	(197.7)
Other (expenses) income		(528)		23	(551)	(2395.7)			(655)		1,023	(1,678)	(164.0)
Income before income taxes	$	15,176	$	22,091	(6,915)	(31.3)		$	35,855	$	48,707	(12,852)	(26.4)
Provision for income taxes		2,640		4,220	(1,580)	(37.4)			6,296		9,239	(2,943)	(31.9)
Net Income for the period	$	12,536	$	17,871	(5,335)	(29.9)		$	29,559	$	39,468	(9,909)	(25.1)
Basic earnings per share		0.23		0.32	(0.09)	(28.1)			0.53		0.71	(0.18)	(25.4)
Diluted earnings per share		0.23		0.32	(0.09)	(28.1)			0.53		0.71	(0.18)	(25.4)
Operating cash flows		18,698		31,142	(12,444)	(40.0)			47,960		55,484	(7,524)	(13.6)
Operating cash flows excluding changes    in working capital		28,875		34,510	(5,635)	(16.3)			61,507		73,253	(11,746)	(16.0)
Adjusted EBITDA
Results from operating activities		25,642		31,056	(5,414)	(17.4)			55,531		66,761	(11,230)	(16.8)
Depreciation		613		705	(92)	13.0			1,239		1,425	(186)	13.1
Depreciation of right-of-use assets		1,931		1,969	(38)	1.9			3,667		4,081	(414)	10.1
Special charges		2,001		46	1,955	(4250.0)			2,029		64	1,965	(3070.3)
Adjusted EBITDA	$	30,187	$	33,776	(3,589)	(10.6)		$	62,466	$	72,331	(9,865)	(13.6)
Adjusted EBITDA margin		26.6 %		31.8 %					28.4 %		33.3 %
Adjusted EBITDA per diluted share	$	0.54	$	0.61	(0.07)	(11.5)		$	1.13	$	1.30	(0.17)	(13.1)

Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars) (unaudited)		As at April 30, 2023		As at October 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	232,151	$	225,104
Short-term investments			2,337		2,950
Accounts receivable			109,320		93,104
Prepaid expenses and other assets			16,267		12,848
Income taxes recoverable			739		492
			360,814		334,498
Non-current assets:
Property and equipment			3,658		4,186
Right-of-use assets			17,461		20,063
Intangible assets			101,804		85,902
Goodwill			258,992		230,002
Deferred income tax assets			32,820		30,347
			414,735		370,500
		$	775,549	$	704,998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	67,842	$	60,525
Dividends payable			12,159		10,221
Provisions			3,171		3,183
Deferred revenue			113,137		83,122
Lease obligations			7,314		6,822
			203,623		163,873
Non-current liabilities:
Income taxes payable			1,305		2,576
Deferred income tax liabilities			17,049		12,038
Deferred revenue			3,976		3,470
Net employee defined-benefit obligation			2,027		1,821
Lease obligations			9,655		13,055
			34,012		32,960
			237,635		196,833
Shareholders' equity:
Share capital			107,728		107,007
Contributed surplus			9,696		8,882
Retained earnings			408,423		401,247
Accumulated other comprehensive income (loss)			12,067		(8,971)
			537,914		508,165
		$	775,549	$	704,998

Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(unaudited)		Three months		Six months
Periods ended April 30		2023	2022	2023	2022
Revenue      Software licenses		$  22,016	$  21,420	$  42,751	$  45,198
SaaS and maintenance services		71,634	63,745	138,137	130,172
Professional services		17,995	17,879	34,886	35,831
Hardware		1,816	3,268	4,122	6,213
		113,461	106,312	219,896	217,414
Direct costs
Software licenses		698	1,286	1,568	2,613
Services		36,793	30,560	69,218	60,154
Hardware		615	1,735	2,128	3,642
		38,106	33,581	72,914	66,409
Revenue, net of direct costs		75,355	72,731	146,982	151,005
Operating expenses
Selling, general and administrative		23,935	19,897	44,733	42,304
Research and development		21,233	19,058	39,783	36,370
Depreciation		613	705	1,239	1,425
Depreciation of right-of-use assets		1,931	1,969	3,667	4,081
Special charges		2,001	46	2,029	64
		49,713	41,675	91,451	84,244
Results from operating activities		25,642	31,056	55,531	66,761
Amortization of acquired software and customer relationships		(9,838)	(9,207)	(18,670)	(18,864)
Foreign exchange (losses) gains		(790)	314	(1,843)	(22)
Interest expense – lease obligations		(192)	(196)	(359)	(398)
Finance income		1,006	122	1,982	251
Finance expenses		(124)	(21)	(131)	(44)
Other (expenses) income		(528)	23	( 655)	1,023
Income before income taxes		15,176	22,091	35,855	48,707
Provision for income taxes		2,640	4,220	6,296	9,239
Net income for the period		12,536	17,871	29,559	39,468
Item that may be subsequently reclassified to income:
Cumulative translation adjustment		11,295	(9,198)	21,038	(5,072)
Other comprehensive income (loss)		11,295	(9,198)	21,038	(5,072)
Comprehensive income		$    23,831	$    8,673	$  50,597	$  34,396
Earnings per share
Basic		$       0.23	$      0.32	$      0.53	$      0.71
Diluted		$       0.23	$      0.32	$      0.53	$      0.71

Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)		Three months		Six months
Periods ended April 30		2023	2022	2023	2022
OPERATING ACTIVITIES
Net income for the period		$    12,536	$    17,871	$    29,559	$    39,468
Adjustments for non-cash items
Depreciation		613	705	1,239	1,425
Depreciation of right-of-use assets		1,931	1,969	3,667	4,081
Interest expense – lease obligations		192	196	359	398
Amortization of acquired software and customer relationships		9,838	9,207	18,670	18,864
Stock-based compensation expense		473	344	931	757
Provision for income taxes		2,640	4,220	6,296	9,239
Finance and other expenses (income)		652	(2)	786	(979)
		28,875	34,510	61,507	73,253
Changes in non-cash operating working capital		(5,989)	1,513	(3,987)	(9,689)
Income taxes paid		(4,188)	(4,881)	(9,560)	(8,080)
Net cash provided by operating activities		18,698	31,142	47,960	55,484
INVESTING ACTIVITIES
Net purchase of property and equipment		(66)	(593)	(171)	(358)
Acquisitions, net of cash acquired*		(25,617)	-	(25,617)	-
Purchase consideration for prior-year acquisition		233	(408)	233	(408)
Purchase of short-term investments		-	(60)	(69)	(60)
Net cash used in investing activities		(25,450)	(1,061)	(25,624)	( 826)
FINANCING ACTIVITIES
Issuance of share capital		-	970	604	970
Repayment of lease obligations		(2,470)	(2,148)	(4,280)	(4,241)
Dividends paid		(10,225)	(8,889)	(20,446)	(17,778)
Net cash used in financing activities		(12,695)	(10,067)	(24,122)	(21,049)
Impact of foreign exchange on cash and cash equivalents		3,797	(3,536)	8,833	(2,122)
(Decrease) increase in cash and cash equivalents		(15,650)	16,478	7,047	31,487
Cash and cash equivalents - beginning of period		247,801	210,899	225,104	195,890
Cash and cash equivalents - end of period		$  232,151	$  227,377	$  232,151	$  227,377

* Acquisitions are net of cash acquired of $2,088 for the three and six months ended April 30, 2023 and $NIL for the three and six months ended April 30, 2022, respectively.

Enghouse Systems Limited

Segment Reporting Information
(in thousands of Canadian dollars)

Three months ended April 30		2023							2022
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		64,578	$	48,883	$	113,461	$	57,218	$	49,094	$	106,312
Direct costs			(19,133)		(18,973)		(38,106)		(15,313)		(18,268)		(33,581)
Revenue, net of direct costs			45,445		29,910		75,355		41,905		30,826		72,731
Operating expenses excluding special charges			(23,034)		(12,596)		(35,630)		(19,412)		(11,101)		(30,513)
Depreciation			(544)		(69)		(613)		(600)		(105)		(705)
Depreciation of right-of-use assets			(941)		(990)		(1,931)		(1,192)		(777)		(1,969)
Segment profit	$		20,926	$	16,255	$	37,181	$	20,701	$	18,843	$	39,544
Special charges							(2,001)						(46)
Corporate and shared service expenses							(9,538)						(8,442)
Results from operating activities						$	25,642					$	31,056

Six months ended April 30		2023							2022
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		122,431	$	97,465	$	219,896	$	119,089	$	98,325	$	217,414
Direct costs			(35,564)		(37,350)		(72,914)		(30,756)		(35,653)		(66,409)
Revenue, net of direct costs			86,867		60,115		146,982		88,333		62,672		151,005
Operating expenses excluding special charges			(42,285)		(23,916)		(66,201)		(38,963)		(22,273)		(61,236)
Depreciation			(1,081)		(158)		(1,239)		(1,196)		(229)		(1,425)
Depreciation of right-of-use assets			(2,041)		(1,626)		(3,667)		(2,519)		(1,562)		(4,081)
Segment profit	$		41,460	$	34,415	$	75,875	$	45,655	$	38,608	$	84,263
Special charges							(2,029)						(64)
Corporate and shared service expenses							(18,315)						(17,438)
Results from operating activities						$	55,531					$	66,761

About Enghouse

Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides vertical enterprise software solutions focused on contact centers, video communications, healthcare, telecommunications networks, public safety and the transit market. 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 has no external 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 Tuesday, June 13, 2023 at 8:45 a.m. EST. To participate, please call [phone] or North American Toll-Free [phone]. Confirmation code: 18752188. 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]