Enghouse Releases Third Quarter Results

MARKHAM, ON, Sept. 6, 2018 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its third quarter (unaudited) financial results for the period ended July 31, 2018.

Third quarter revenue increased to $86.7 million, compared to revenue of $82.8 million in the third quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions. Income from operating activities was $26.7 million compared to $22.6 million in the prior year's third quarter, an increase of 18.1%. Net income for the quarter was $16.1 million or $0.58 per diluted share compared to $11.2 million or $0.41 per diluted share in the prior year's third quarter, an increase of 43.6%.

Adjusted EBITDA for the third quarter was $27.4 million or $1.00 per diluted share, compared to $23.4 million or $0.86 per diluted share last year, with the increase being attributable to contributions from acquisitions and operating cost synergies.

On a year-to-date basis, revenue was $257.0 million compared to revenue of $241.1 million in the prior year, an increase of 6.6%. Income from operating activities was $75.9 million, compared to $66.6 million in the prior year-to-date, an increase of 14.0%. Adjusted EBITDA for the year to date increased 13.1% to $78.1 million or $2.86 per diluted share compared to $69.0 million or $2.53 per diluted share last year. Net income for the year to date was $38.2 million or $1.40 per diluted share compared to $31.9 million or $1.17 per diluted share last year.

Operating expenses before special charges related to restructuring of acquired operations were $34.1 million compared to $35.0 million in the prior year's third quarter and reflect operating cost savings, net of incremental operating costs related to acquisitions. Non-cash amortization charges on acquired software and customer relationships from acquired operations were $7.2 million for the quarter compared to $7.4 million in the prior year's third quarter. On a year-to-date basis, operating expenses before special charges were $102.3 million or 39.8% of revenue compared to $98.9 million or 41.0% of revenue last year.

The Company generated strong cash flows from operating activities of $29.3 million compared to $25.1 million in the third quarter of fiscal 2017. On a year-to-date basis, cash flows from operating activities were $74.2 million compared to $54.1 million in the prior year, an increase of 37.1%. As a result, Enghouse closed the quarter with a record $178.4 million in cash, cash equivalents and short-term investments, compared to $130.3 million at October 31, 2017. The cash balance was achieved after year-to-date payments of $13.5 million in cash dividends, $9.7 million (net of cash acquired) for acquisitions concluded in the current fiscal year and $6.9 million for acquisitions closed in prior periods.

Today, the Board of Directors approved the Company's quarterly dividend of $0.18 per common share, payable on November 30, 2018 to shareholders of record at the close of business on November 16, 2018.

A conference call to discuss the results will be held on Friday, September 7, 2018 at 8:45 a.m. EST. To participate, please call [phone] or North American Toll-Free [phone]. No PIN required.

About Enghouse
Enghouse Systems Limited is a leading global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a diverse software company through strategic acquisitions targeting the Contact Center, Networks (OSS/BSS) and Transportation/Public Safety sectors. Enghouse shares are listed on the Toronto Stock Exchange under the symbol "ENGH". Further information about Enghouse may be obtained from the Company's website at www.enghouse.com.

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

Adjusted EBITDA:

The table below reconciles Adjusted EBITDA to the most directly comparable IFRS measure, Results from operating activities:

	Three Months ended				Nine Months ended
	July 31, 2018		July 31, 2017		July 31, 2018		July 31, 2017
Total Revenue	$	86,743	$	82,756	$	257,023	$	241,139
Results from operating activities	26,724		22,622		75,901		66,597
Depreciation of property, plant and equipment	540		619		1,869		1,828
Special charges	152		133		333		614
Adjusted EBITDA	$	27,416	$	23,374	$	78,103	$	69,039
Adjusted EBITDA margin	31.6%		28.2%		30.4%		28.6%
Adjusted EBITDA per diluted share	$	1.00	$	0.86	$	2.86	$	2.53

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)

			July 31  2018		October 31 2017
Assets
Current assets:
		Cash and cash equivalents	$	169,765	$	120,608
		Short-term investments	8,674		9,737
		Accounts receivable, net	66,829		71,894
		Prepaid expenses and other assets	9,502		8,528
			254,770		210,767
Non-current assets:
		Long-term deposits and accounts receivable, net	1,295		1,002
		Property, plant and equipment	5,178		5,322
		Intangible assets	67,042		79,714
		Goodwill	157,154		150,687
		Deferred income tax assets	5,830		14,345
Total assets			$	491,269	$	461,837
Liabilities
Current liabilities:
		Accounts payable and accrued liabilities	$	45,550	$	54,656
		Income taxes payable	1,355		6,018
		Dividends payable	4,899		4,319
		Provisions	277		1,521
		Deferred revenue	69,956		59,104
		Current portion of long-term loans	202		468
			122,239		126,086
Non-current liabilities:
		Non-current portion of income taxes payable	9,218		-
		Deferred income tax liabilities	14,651		21,449
		Deferred revenue	2,421		3,337
		Net employee defined benefit obligation	2,398		2,328
		Long-term loans	1,785		2,238
Total liabilities			152,712		155,438
Shareholders' Equity
Share capital			77,312		71,422
Contributed surplus			4,823		4,715
Retained earnings			245,866		221,775
Accumulated other comprehensive income			10,556		8,487
Total shareholders' equity			338,557		306,399
Total liabilities and shareholders' equity			$	491,269	$	461,837

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(Unaudited)

		Three months ended July 31				Nine months ended July 31
		2018		2017		2018		2017
Revenue
	Software licenses	$	26,213	$	24,480	$	76,724	$	72,469
	Hosted and maintenance services	44,783		43,411		131,319		122,487
	Professional services	14,123		12,979		42,972		41,799
	Hardware	1,624		1,886		6,008		4,384
		86,743		82,756		257,023		241,139
Direct costs
	Software licenses	1,740		1,749		5,467		5,311
	Services	22,990		22,211		69,335		67,060
	Hardware	1,058		1,027		3,727		2,653
		25,788		24,987		78,529		75,024
Revenue, net of direct costs		60,955		57,769		178,494		166,115
Operating expenses
	Selling, general and administrative	21,884		22,870		64,432		63,644
	Research and development	11,655		11,525		35,959		33,432
	Depreciation of property, plant and equipment	540		619		1,869		1,828
	Special charges	152		133		333		614
		34,231		35,147		102,593		99,518
Results from operating activities		26,724		22,622		75,901		66,597
Amortization of acquired software and customer relationships		(7,245)		(7,397)		(21,763)		(22,365)
Foreign exchange gains (losses)		659		(806)		(465)		(3,027)
Finance income		90		32		278		131
Finance expenses		(50)		(65)		(134)		(137)
Other income (expense)		504		(50)		1,940		101
Income before income taxes		20,682		14,336		55,757		41,300
Provision for income taxes		4,620		3,154		17,564		9,358
Net income for the period		$	16,062	$	11,182	$	38,193	$	31,942
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation (loss) gain from foreign operations		(3,929)		(12,097)		1,331		(4,119)
Unrealized gain (loss) on available for sale investments		625		5		851		(2,440)
Deferred income tax (expense) recovery		(83)		(1)		(113)		323
Other comprehensive (loss) income		(3,387)		(12,093)		2,069		(6,236)
Comprehensive income (loss)		$	12,675	$	(911)	$	40,262	$	25,706
Earnings per share
Basic		$	0.59	$	0.41	$	1.41	$	1.19
Diluted		$	0.58	$	0.41	$	1.40	$	1.17

Enghouse Systems Limited 
Condensed Consolidated Interim Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)

		Share Capital -number	Share capital $	Contributed surplus $	Retained earnings $	Accumulated other comprehensive income (loss)  $	Total $
Balance – November 1, 2017		26,993,212	71,422	4,715	221,775	8,487	306,399
Net income		-	-	-	38,193	-	38,193
Other comprehensive income (net of tax):
Cumulative translation adjustment		-	-	-	-	1,331	1,331
Unrealized gain on available-for-sale investments		-	-	-	-	851	851
Deferred income tax expense		-	-	-	-	(113)	(113)
Comprehensive income  for the period		-	-	-	38,193	2,069	40,262
Employee share options:
	Value of services recognized	-		1,171	-	-	1,171
	Proceeds on issuing shares	222,500	5,890	(1,063)	-	-	4,827
Dividends		-	-	-	(14,102)	-	(14,102)
Balance – July 31, 2018		27,215,712	77,312	4,823	245,866	10,556	338,557
Balance – November 1, 2016		26,906,962	69,555	3,875	187,649	7,469	268,548
Net income		-	-	-	31,942	-	31,942
Other comprehensive income (net of tax):
Cumulative translation adjustment		-	-	-	-	(4,119)	(4,119)
Unrealized loss on available-for-sale investments		-	-	-	-	(2,440)	(2,440)
Deferred income tax recovery		-	-	-	-	323	323
Comprehensive income  for the period		-	-	-	31,942	(6,236)	25,706
Employee share options:
	Value of services recognized	-	-	809	-	-	809
	Proceeds on issuing shares	53,750	1,000	(187)	-	-	813
Dividends		-	-	-	(12,397)	-	(12,397)
Balance – July 31, 2017		26,960,712	70,555	4,497	207,194	1,233	283,479

Enghouse Systems Limited 
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)

		Three months ended July 31				Nine months ended July 31
		2018		2017		2018		2017
Cash flows from operating activities
Net income		$	16,062	$	11,182	$	38,193	$	31,942
Adjustments for:
	Depreciation of property, plant and equipment	540		619		1,869		1,828
	Amortization of acquired software and customer relationships	7,245		7,397		21,763		22,365
	Stock-based compensation expense	236		265		1,171		809
	Provision for income taxes	4,620		3,154		17,564		9,358
	Finance expenses and other income	(454)		115		(1,806)		36
		28,249		22,732		78,754		66,338
Changes in non-cash operating working capital		6,041		4,595		6,608		(2,290)
Income taxes paid		(5,016)		(2,218)		(11,141)		(9,904)
Net cash flows from operating activities		29,274		25,109		74,221		54,144
Cash flows from investing activities
Purchase of property, plant and equipment, net		(607)		(106)		(1,538)		(1,025)
Purchase of other software		-		(255)		-		(1,475)
Acquisitions, net of cash acquired of $1,235 (2017- $3,637)		-		-		(9,675)		(16,170)
Purchase consideration for prior period acquisitions		(1,866)		(579)		(6,945)		(1,023)
Net sale (purchase) of short-term investments		1,754		(196)		2,486		(1,526)
Net cash flows used in investing activities		(719)		(1,136)		(15,672)		(21,219)
Cash flows from financing activities
Issuance of share capital		2,699		244		4,827		813
Repayment of loans		(334)		-		(735)		(1,667)
Payment of cash dividend		(4,880)		(4,312)		(13,523)		(11,850)
Net cash flows used in financing activities		(2,515)		(4,068)		(9,431)		(12,704)
Effect of currency translation adjustments on cash and cash equivalents		(1,890)		(3,571)		39		(1,419)
Net increase in cash and cash equivalents during the period		24,150		16,334		49,157		18,802
Cash and cash equivalents - beginning of period		145,615		80,904		120,608		78,436
Cash and cash equivalents - end of period		$	169,765	$	97,238	$	169,765	$	97,238

Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)

			For the three months ended July 31				For the nine months ended July 31
				2018		2017		2018		2017
Revenue:
	Asset Management Group		$	39,194	$	35,949	$	113,525	$	99,701
	Interactive Management Group			47,549		46,807		143,498		141,438
Total			$	86,743	$	82,756	$	257,023	$	241,139
	Asset Management Group:
		- Segment profit before special charges	$	14,114	$	10,962	$	38,670	$	28,978
		- Special charges		(152)		(133)		(333)		(477)
	Asset Management Group profit		$	13,962	$	10,829	$	38,337	$	28,501
	Interactive Management Group:
		- Segment profit before special charges	$	15,724	$	13,926	$	45,921	$	43,767
		- Special charges		-		-		-		(137)
	Interactive Management Group profit		$	15,724	$	13,926	$	45,921	$	43,630
	Corporate expenses			(2,962)		(2,133)		(8,357)		(5,534)
Results from operating activities			$	26,724	$	22,622	$	75,901	$	66,597
	Amortization of acquired software and customer relationships			(7,245)		(7,397)		(21,763)		(22,365)
	Foreign exchange gains (losses)			659		(806)		(465)		(3,027)
	Finance income			90		32		278		131
	Finance expenses			(50)		(65)		(134)		(137)
	Other income (expense)			504		(50)		1,940		101
Income before income taxes			$	20,682	$	14,336	$	55,757	$	41,300

SOURCE Enghouse Systems Limited

Sam Anidjar, Vice President, Corporate Development, Enghouse Systems Limited, Tel: [phone], Email: [email protected]

Related Links

http://www.enghouse.com