Enghouse Releases Second Quarter Results

MARKHAM, ON, June 10, 2024 /CNW/ - Enghouse Systems Limited (TSX: ENGH) announces second quarter (unaudited) financial results for the period ended April 30, 2024. All figures are denominated in Canadian dollars unless otherwise indicated.

Highlights for the Second Quarter ended April 30, 2024 compared to the same quarter in the prior year:

• Revenue increased 10.9% to $125.8 million.
• Recurring revenue, which includes SaaS and maintenance services, grew 18.6% to $85.0 million, and represents 67.5% of total revenue.
• Operating profits increased 30.5% to $33.5 million, while achieving a 28.4% EBITDA margin.

Financial results for the three and six months ended April 30, 2024, compared to the three and six months ended April 30, 2023, are as follows:

• Revenue increased to $125.8 and $246.3 million, respectively, compared to revenue of $113.5 and $219.9 million;
• Results from operating activities was $33.5 and $66.1 million, respectively, compared to $25.6 and $55.5 million;
• Net income was $20.0 and $38.1 million, respectively, compared to $12.5 and $29.6 million;
• Adjusted EBITDA was $35.7 and $70.4 million, respectively, compared to $30.2 and $62.5 million;
• Cash flow from operating activities, excluding changes in working capital, was $38.6 and $74.2 million, respectively, compared to $28.9 and $61.5 million resulting in record cash and cash equivalents of $263.8 million.

Our strong performance this quarter is demonstrated by double-digit growth in revenue, profitability and operating cash flows. Our proficiency in executing and integrating acquisitions continues to be a crucial profit growth driver. This quarter we completed the acquisition of Mediasite, which expanded our video technology into the education and event market and increased our presence in Japan.

Our business model continues to prioritize operational discipline as the demand for SaaS increases. Operational expenditures have shown improvement when compared to revenue both for the quarter and period to date, despite inflationary pressures and integrating acquisitions. Continued discipline in our business activities has increased our cash and cash equivalents to the record level of $263.8 million, with no external debt, while increasing our dividend, repurchasing shares, and completing and integrating the Mediasite acquisition in the quarter.

Subsequent to quarter-end on May 9, 2024, Enghouse completed its acquisition of substantially all of the assets of SeaChange International, Inc. ("SeaChange") related to its IPTV products and services business, for a net purchase price of approximately US$23 million. This acquisition increases the scale of our IPTV business, augments our product offering and furthers our expansion into the European market. SeaChange will be integrated within the Asset Management Group from the date of acquisition.

Quarterly dividends:          

Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.26 per common share payable on August 30, 2024 to shareholders of record at the close of business on August 16, 2024.

Enghouse Systems Limited

Financial Highlights
(unaudited, in thousands of Canadian dollars)

For the period ended April 30	Three months							Six months
		2024		2023	Var ($)	Var (%)			2024		2023	Var ($)	Var (%)
Revenue	$	125,813	$	113,461	12,352	10.9		$	246,302	$	219,896	26,406	12.0
Direct costs		43,201		38,106	5,095	13.4			84,783		72,914	11,869	16.3
Revenue, net of direct costs	$	82,612	$	75,355	7,257	9.6		$	161,519	$	146,982	14,537	9.9
As a % of revenue		65.7 %		66.4 %					65.6 %		66.8 %
Operating expenses		49,031		47,712	1,319	2.8			95,211		89,422	5,789	6.5
Special charges		106		2,001	(1,895)	(94.7)			197		2,029	(1,832)	(90.3)
Results from operating activities	$	33,475	$	25,642	7,833	30.5		$	66,111	$	55,531	10,580	19.1
As a % of revenue		26.6 %		22.6 %					26.8 %		25.3 %
Amortization of acquired software and customer relationships		(11,146)		(9,838)	(1,308)	(13.3)			(21,520)		(18,670)	(2,850)	(15.3)
Foreign exchange losses		(86)		(790)	704	89.1			(1,803)		(1,843)	40	2.2
Interest expense – lease obligations		(148)		(192)	44	22.9			(298)		(359)	61	17.0
Finance income		2,602		1,006	1,596	158.6			4,963		1,982	2,981	150.4
Finance expenses		(12)		(124)	112	90.3			(12)		(131)	119	90.8
Other income (expenses)		220		( 528)	748	141.7			106		(655)	761	116.2
Income before income taxes	$	24,905	$	15,176	9,729	64.1		$	47,547	$	35,855	11,692	32.6
Provision for income taxes		4,931		2,640	2,291	86.8			9,440		6,296	3,144	49.9
Net Income for the period	$	19,974	$	12,536	7,438	59.3		$	38,107	$	29,559	8,548	28.9
Basic earnings per share		0.36		0.23	0.13	56.5			0.69		0.53	0.16	30.2
Diluted earnings per share		0.36		0.23	0.13	56.5			0.69		0.53	0.16	30.2
Operating cash flows		40,256		18,698	21,558	115.3			60,155		47,960	12,195	25.4
Operating cash flows excluding changes    in working capital		38,613		28,875	9,738	33.7			74,170		61,507	12,663	20.6
Adjusted EBITDA
Results from operating activities		33,475		25,642	7,833	30.5			66,111		55,531	10,580	19.1
Depreciation		551		613	(62)	10.1			1,045		1,239	(194)	15.7
Depreciation of right-of-use assets		1,570		1,931	(361)	18.7			3,076		3,667	(591)	16.1
Special charges		106		2,001	(1,895)	94.7			197		2,029	(1,832)	90.3
Adjusted EBITDA	$	35,702	$	30,187	5,515	18.3		$	70,429	$	62,466	7,963	12.7
Adjusted EBITDA margin		28.4 %		26.6 %					28.6 %		28.4 %
Adjusted EBITDA per diluted share	$	0.64	$	0.54	0.10	18.5		$	1.27	$	1.13	0.14	12.4

Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars) (unaudited)		As at April 30, 2024		As at October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$	262,918	$	239,532
Short-term investments			854		827
Accounts receivable			110,965		93,383
Prepaid expenses and other assets			17,369		15,515
Income taxes recoverable			-		114
			392,106		349,371
Non-current assets:
Property and equipment			3,328		3,273
Right-of-use assets			9,966		12,242
Intangible assets			98,253		109,659
Goodwill			292,990		280,241
Deferred income tax assets			25,422		28,884
			429,959		434,299
		$	822,065	$	783,670
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	70,229	$	67,769
Income tax payable			1,500		-
Dividends payable			14,398		12,156
Provisions			1,420		2,238
Deferred revenue			130,273		109,019
Lease obligations			5,733		6,322
			223,553		197,504
Non-current liabilities:
Income taxes payable			-		1,333
Deferred income tax liabilities			11,897		13,340
Deferred revenue			7,752		8,170
Net employee defined-benefit obligation			1,922		1,912
Lease obligations			4,337		6,080
			25,908		30,835
			249,461		228,339
Shareholders' equity:
Share capital			113,237		107,701
Contributed surplus			10,252		10,404
Retained earnings			436,848		426,397
Accumulated other comprehensive income			12,267		10,829
			572,604		555,331
		$	822,065	$	783,670

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		2024	2023	2024	2023
Revenue      Software licenses		$  20,492	$  22,016	$  37,467	$  42,751
SaaS and maintenance services		84,984	71,634	169,571	138,137
Professional services		17,401	17,995	33,346	34,886
Hardware		2,936	1,816	5,918	4,122
		125,813	113,461	246,302	219,896
Direct costs
Software licenses		741	698	1,415	1,568
Services		40,951	36,793	80,482	69,218
Hardware		1,509	615	2,886	2,128
		43,201	38,106	84,783	72,914
Revenue, net of direct costs		82,612	75,355	161,519	146,982
Operating expenses
Selling, general and administrative		24,812	23,935	47,681	44,733
Research and development		22,098	21,233	43,409	39,783
Depreciation		551	613	1,045	1,239
Depreciation of right-of-use assets		1,570	1,931	3,076	3,667
Special charges		106	2,001	197	2,029
		49,137	49,713	95,408	91,451
Results from operating activities		33,475	25,642	66,111	55,531
Amortization of acquired software and customer relationships		(11,146)	(9,838)	(21,520)	(18,670)
Foreign exchange losses		(86)	(790)	(1,803)	(1,843)
Interest expense – lease obligations		(148)	(192)	(298)	(359)
Finance income		2,602	1,006	4,963	1,982
Finance expenses		(12)	(124)	(12)	(131)
Other income (expenses)		220	(528)	106	( 655)
Income before income taxes		24,905	15,176	47,547	35,855
Provision for income taxes		4,931	2,640	9,440	6,296
Net income for the period		19,974	12,536	38,107	29,559
Item that may be subsequently reclassified to income:
Cumulative translation adjustment		9,455	11,295	1,438	21,038
Other comprehensive income		9,455	11,295	1,438	21,038
Comprehensive income		$  29,429	$    23,831	$  39,545	$  50,597
Earnings per share
Basic		$      0.36	$      0.23	$      0.69	$      0.53
Diluted		$      0.36	$      0.23	$      0.69	$      0.53

Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)		Three months		Six months
Periods ended April 30		2024	2023	2024	2023
OPERATING ACTIVITIES
Net income for the period		$    19,974	$    12,536	$    38,107	$    29,559
Adjustments for non-cash items
Depreciation		551	613	1,045	1,239
Depreciation of right-of-use assets		1,570	1,931	3,076	3,667
Interest expense – lease obligations		148	192	298	359
Amortization of acquired software and customer relationships		11,146	9,838	21,520	18,670
Stock-based compensation expense		501	473	778	931
Provision for income taxes		4,931	2,640	9,440	6,296
Finance expenses and other (income) expenses		(208)	652	(94)	786
		38,613	28,875	74,170	61,507
Changes in non-cash operating working capital		6,651	(5,989)	(6,489)	(3,987)
Income taxes paid		(5,008)	(4,188)	(7,526)	(9,560)
Net cash provided by operating activities		40,256	18,698	60,155	47,960
INVESTING ACTIVITIES
Net purchase of property and equipment		(418)	(66)	(778)	(171)
Acquisitions, net of cash acquired*		(12,594)	(25,617)	(12,594)	(25,617)
Purchase consideration for prior-year acquisition		-	233	171	233
Purchase of short-term investments		-	-	-	(69)
Net cash used in investing activities		(13,012)	(25,450)	(13,201)	(25,624)
FINANCING ACTIVITIES
Issuance of share capital		373	-	4,683	604
Normal course issuer bid share repurchases		(1,147)	-	(1,147)
Repayment of lease obligations		(1,798)	(2,470)	(3,400)	(4,280)
Dividends paid		(12,188)	(10,225)	(24,344)	(20,446)
Net cash used in financing activities		(14,760)	(12,695)	(24,208)	(24,122)
Impact of foreign exchange on cash and cash equivalents		3,682	3,797	640	8,833
Increase (decrease) in cash and cash equivalents		16,166	(15,650)	23,386	7,047
Cash and cash equivalents - beginning of period		246,752	247,801	239,532	225,104
Cash and cash equivalents - end of period		$  262,918	$  232,151	$  262,918	$  232,151

* Acquisitions are net of cash acquired of $497 for the three and six months ended April 30, 2024 and $2,088 for the three and six months ended April 30, 2023, respectively. 

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

Three months ended April 30		2024							2023
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		80,530	$	45,283	$	125,813	$	64,578	$	48,883	$	113,461
Direct costs			(26,573)		(16,628)		(43,201)		(19,133)		(18,973)		(38,106)
Revenue, net of direct costs			53,957		28,655		82,612		45,445		29,910		75,355
Operating expenses excluding special charges			(23,483)		(11,751)		(35,234)		(23,034)		(12,596)		(35,630)
Depreciation			(392)		(159)		(551)		(544)		(69)		(613)
Depreciation of right-of-use assets			(997)		(573)		(1,570)		(941)		(990)		(1,931)
Segment profit	$		29,085	$	16,172	$	45,257	$	20,926	$	16,255	$	37,181
Special charges							(106)						(2,001)
Corporate and shared service expenses							(11,676)						(9,538)
Results from operating activities						$	33,475					$	25,642

Six months ended April 30		2024							2023
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		156,666	$	89,636	$	246,302	$	122,431	$	97,465	$	219,896
Direct costs			(51,979)		(32,804)		(84,783)		(35,564)		(37,350)		(72,914)
Revenue, net of direct costs			104,687		56,832		161,519		86,867		60,115		146,982
Operating expenses excluding special charges			(44,909)		(23,447)		(68,356)		(42,285)		(23,916)		(66,201)
Depreciation			(769)		(276)		(1,045)		(1,081)		(158)		(1,239)
Depreciation of right-of-use assets			(1,933)		(1,143)		(3,076)		(2,041)		(1,626)		(3,667)
Segment profit	$		57,076	$	31,966	$	89,042	$	41,460	$	34,415	$	75,875
Special charges							(197)						(2,029)
Corporate and shared service expenses							(22,734)						(18,315)
Results from operating activities						$	66,111					$	55,531

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 Tuesday, June 11, 2024 at 8:45 a.m. EST. To participate, please call
[phone] or North American Toll-Free [phone]. Confirmation code: 14684. 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]