Enghouse Releases Third Quarter Results

MARKHAM, ON, Sept. 9, 2021 /CNW/ - Enghouse Systems Limited (TSX: ENGH) today announced its third quarter unaudited financial results for the period ended July 31, 2021. All the financial information is in Canadian dollars unless otherwise indicated.

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

• Revenue achieved was $117.6 and $354.1 million, respectively, compared to revenue of $131.3 and $382.9 million;
• Results from operating activities was $38.5 and $116.1 million, respectively, compared to $42.2 and $119.3 million;
• Net income was $21.2 and $62.6 million, respectively, compared to $26.0 and $69.2 million;
• Adjusted EBITDA was $41.7 and $126.4 million, respectively, compared to $45.6 and $130.2 million while Adjusted EBITDA margins increased from 34.0% to 35.7% for the current year to date period;
• Cash flows from operating activities excluding changes in working capital was $41.1 and $125.4 million, respectively compared to $45.3 and $130.5 million.

Revenue achieved for the quarter was $117.6 million, compared to revenue of $131.3 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. Similar to the second quarter of 2021, the comparatively higher revenue last year was driven primarily by the previous year's significant increase in our Vidyo business that has now returned to levels that are more consistent with pre-COVID volumes. Revenue for the quarter was also negatively impacted by $6.2 million as a result of foreign exchange as the Canadian dollar strengthened against the U.S. dollar and Euro.

During the quarter, Enghouse completed two tuck-in acquisitions, adding Nebu BV on June 3, 2021 and Momindum SAS on July 7, 2021. Nebu is an Amsterdam-based provider of market research and data analytics software solutions, which augments our existing market research and survey solutions. Momindum is an enterprise software provider of a secure, SaaS based platform for virtual events, recording, editing and sharing interactive video presentations. Momindum is complementary to our Vidyo offering and broadens our video collaboration solutions.

Enghouse closed the quarter with $187.8 million in cash, cash equivalents and short-term investments, compared to $251.8 million at October 31, 2020 and $169.6 million as of April 30, 2021. The cash balance was achieved after making payments of $36.3 million for acquisitions and $106.9 million for dividends this year. Enghouse continues to prioritize its long-term growth strategy over quarter-to-quarter results, investing in products while ensuring continued profitability and maximizing operating cashflows. As a result, Enghouse continues to replenish its acquisition capital, while returning $83.2 million in special dividends to shareholders and annually increasing its eligible quarterly dividend.

Quarterly dividends:                                                                                                      
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.16 per common share payable on November 30, 2021 to shareholders of record at the close of business on November 16, 2021.

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

For the period ended July 31	Three months							Nine months
		2021		2020	Var ($)	Var (%)			2021		2020	Var ($)	Var (%)
Revenue	$	117,644	$	131,324	(13,680)	(10.4)		$	354,078	$	382,880	(28,802)	(7.5)
Direct costs		33,437		39,740	(6,303)	(15.9)			98,478		111,916	(13,438)	(12.0)
Revenue, net of direct costs	$	84,207	$	91,584	(7,377)	(8.1)		$	255,600	$	270,964	(15,364)	(5.7)
As a % of revenue		71.6%		69.7%					72.2%		70.8%
Operating expenses		45,267		49,351	(4,084)	(8.3)			138,629		150,157	(11,528)	(7.7)
Special charges		433		35	398	1137.1			873		1,490	(617)	(41.4)
Results from operating activities	$	38,507	$	42,198	(3,691)	(8.7)		$	116,098	$	119,317	(3,219)	(2.7)
As a % of revenue		32.7%		32.1%					32.8%		31.2%
Amortization of acquired software and		(10,355)		(11,502)	1,147	10.0			(31,983)		(33,182)	1,199	3.6
customer relationships
Foreign exchange losses		(453)		(1,102)	649	58.9			(1,976)		(1,148)	(828)	(72.1)
Interest expense – lease obligations		(212)		(302)	90	29.8			(818)		(864)	46	5.3
Finance income		46		209	(163)	(78.0)			162		691	(529)	(76.6)
Finance expenses		(12)		(5)	(7)	(140.0)			(76)		(39)	(37)	(94.9)
Other (expenses) income		(516)		3,827	(4,343)	(113.5)			(1,962)		4,224	(6,186)	(146.4)
Income before income taxes	$	27,005	$	33,323	(6,318)	(19.0)		$	79,445	$	88,999	(9,554)	(10.7)
Provision for income taxes		5,778		7,330	(1,552)	(21.2)			16,837		19,781	(2,944)	(14.9)
Net Income for the period	$	21,227	$	25,993	(4,766)	(18.3)		$	62,608	$	69,218	(6,610)	(9.5)
Basic earnings per share		0.38		0.47	(0.09)	(19.1)			1.13		1.26	(0.13)	(10.3)
Diluted earnings per share		0.38		0.46	(0.08)	(17.4)			1.12		1.25	(0.13)	(10.4)
Operating cash flows		33,552		55,690	(22,138)	(39.8)			93,254		133,156	(39,902)	(30.0)
Operating cash flows excluding changes in		41,105		45,294	(4,189)	(9.2)			125,422		130,510	(5,088)	(3.9)
working capital
Adjusted EBITDA
Results from operating activities		38,507		42,198					116,098		119,317
Depreciation		719		801					2,212		2,446
Depreciation of right-of-use assets		2,006		2,534					7,201		6,925
Special charges		433		35					873		1,490
Adjusted EBITDA	$	41,665	$	45,568	(3,903)	(8.6)		$	126,384	$	130,178	(3,794)	(2.9)
Adjusted EBITDA margin		35.4%		34.7%					35.7%		34.0%
Adjusted EBITDA per diluted share	$	0.75	$	0.81	( 0.06)	(7.4)		$	2.26	$	2.35	( 0.09)	(3.8)

Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)		As at July 31, 2021		As at October 31, 2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	184,429	$	244,792
Short-term investments			3,368		6,999
Accounts receivable			94,266		90,789
Prepaid expenses and other assets			12,645		14,772
			294,708		357,352
Non-current assets:
Property and equipment			5,931		6,301
Right-of-use assets			29,957		42,832
Intangible assets			113,447		123,616
Goodwill			226,852		217,426
Deferred income tax assets			16,169		16,119
			392,356		406,294
		$	687,064	$	763,646
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	71,138	$	80,339
Income taxes payable			5,089		13,245
Dividends payable			8,883		7,472
Provisions			6,657		5,697
Deferred revenue			92,197		89,927
Lease obligations			8,387		9,914
			192,351		206,594
Non-current liabilities:
Income taxes payable			2,967		3,829
Deferred income tax liabilities			19,256		14,782
Deferred revenue			10,631		7,021
Net employee defined benefit obligation			2,739		2,855
Lease obligations			21,071		32,242
			56,664		60,729
			249,015		267,323
Shareholders' equity
Share capital			105,276		99,405
Contributed surplus			7,283		6,583
Retained earnings			333,722		379,378
Accumulated other comprehensive (loss) income			(8,232)		10,957
			438,049		496,323
		$	687,064	$	763,646

Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(unaudited)		Three months				Nine months
Periods ended July 31		2021		2020		2021		2020
Revenue
Software licenses		$	26,807	$	29,438	$	80,274	$	106,629
Hosted and maintenance services		68,419		77,356		211,064		213,733
Professional services		18,779		16,059		53,076		47,329
Hardware		3,639		8,471		9,664		15,189
		117,644		131,324		354,078		382,880
Direct costs
Software licenses		1,334		2,058		4,020		8,445
Services		29,633		30,417		88,248		91,843
Hardware		2,470		7,265		6,210		11,628
		33,437		39,740		98,478		111,916
Revenue, net of direct costs		84,207		91,584		255,600		270,964
Operating expenses
Selling, general and administrative		23,726		25,812		68,885		80,106
Research and development		18,816		20,204		60,331		60,680
Depreciation		719		801		2,212		2,446
Depreciation of right-of-use assets		2,006		2,534		7,201		6,925
Special charges		433		35		873		1,490
		45,700		49,386		139,502		151,647
Results from operating activities		38,507		42,198		116,098		119,317
Amortization of acquired software and customer relationships		(10,355)		(11,502)		(31,983)		(33,182)
Foreign exchange losses		(453)		(1,102)		(1,976)		(1,148)
Interest expense – lease obligations		(212)		(302)		(818)		(864)
Finance income		46		209		162		691
Finance expenses		(12)		(5)		(76)		(39)
Other (expenses) income		(516)		3,827		(1,962)		4,224
Income before income taxes		27,005		33,323		79,445		88,999
Provision for income taxes		5,778		7,330		16,837		19,781
Net income for the period		$	21,227	$	25,993	$	62,608	$	69,218
Items that may be subsequently reclassified to income:
Cumulative translation adjustment		3,953		2,868		(19,189)		15,319
Other comprehensive income (loss)		3,953		2,868		(19,189)		15,319
Comprehensive income		$	25,180	$	28,861	$	43,419	$	84,537
Earnings per share
Basic		$	0.38	$	0.47	$	1.13	$	1.26
Diluted		$	0.38	$	0.46	$	1.12	$	1.25

Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)	Three months				Nine months
(unaudited)
Periods ended July 31	2021		2020		2021		2020
OPERATING ACTIVITIES
Net income for the period	$	21,227	$	25,993	$	62,608	$	69,218
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation	719		801		2,212		2,446
Depreciation of right-of-use assets	2,006		2,534		7,201		6,925
Interest expense – lease obligations	212		302		818		864
Amortization of acquired software and customer relationships	10,355		11,502		31,983		33,182
Stock-based compensation expense	280		654		1,725		2,279
Provision for income taxes	5,778		7,330		16,837		19,781
Finance expenses and other expenses (income)	528		(3,822)		2,038		(4,185)
	41,105		45,294		125,422		130,510
Changes in non-cash operating working capital	(942)		17,614		(9,857)		18,150
Income taxes paid	(6,611)		(7,218)		(22,311)		(15,504)
Net cash provided by operating activities	33,552		55,690		93,254		133,156
INVESTING ACTIVITIES
Purchase of property and equipment	(505)		(458)		(1,849)		(1,902)
Acquisitions, net of cash acquired*	(3,837)		1,103		(36,137)		(46,561)
Purchase consideration for prior-year acquisitions	(1,263)		3,201		(158)		2,655
(Purchase) sale of short-term investments	(44)		233		1,570		(1,569)
Net cash (used in) provided by investing activities	(5,649)		4,079		(36,574)		(47,377)
FINANCING ACTIVITIES
Issuance of share capital	666		7,789		4,846		13,361
Repayment of loans	-		-		-		(62)
Repayment of lease obligations	(2,398)		(2,483)		(7,319)		(6,935)
Dividends paid	(8,879)		(7,427)		(106,853)		(19,496)
Net cash used in financing activities	(10,611)		(2,121)		(109,326)		(13,132)
Impact of foreign exchange on cash and cash equivalents	1,471		(555)		(7,717)		2,012
Increase (decrease) in cash and cash equivalents	18,763		57,093		(60,363)		74,659
Cash and cash equivalents - beginning of period	165,666		162,330		244,792		144,764
Cash and cash equivalents - end of period	$	184,429	$	219,423	$	184,429	$	219,423

* Acquisitions are net of cash acquired of $2,150 and $3,613 for the three and nine months ended July 31, 2021, respectively, and nil and $6,906 for the three and nine months ended July 31, 2020, respectively.

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

Three months ended July 31, 2021	IMG		AMG		Total
Revenue	$	65,556	$	52,088	$	117,644
Direct costs		(17,273)		(16,164)		(33,437)
Revenue, net of direct costs		48,283		35,924		84,207
Operating expenses excluding special charges		(21,822)		(11,718)		(33,540)
Depreciation of property and equipment		(607)		(112)		(719)
Depreciation of right-of-use assets		(1,203)		(803)		(2,006)
Segment profit	$	24,651	$	23,291	$	47,942
Special charges						(433)
Corporate and shared service expenses						(9,002)
Results from operating activities					$	38,507

Three months ended July 31, 2020	IMG		AMG		Total
Revenue	$	75,151	$	56,173	$	131,324
Direct costs		(18,152)		(21,588)		(39,740)
Revenue, net of direct costs		56,999		34,585		91,584
Operating expenses excluding special charges		(22,871)		(12,735)		(35,606)
Depreciation of property and equipment		(646)		(155)		(801)
Depreciation of right-of-use assets		(1,447)		(1,087)		(2,534)
Segment profit	$	32,035	$	20,608	$	52,643
Special charges						(35)
Corporate and shared service expenses						(10,410)
Results from operating activities					$	42,198

Nine months ended July 31, 2021	IMG		AMG		Total
Revenue	$	201,738	$	152,340	$	354,078
Direct costs		(49,660)		(48,818)		(98,478)
Revenue, net of direct costs		152,078		103,522		255,600
Operating expenses excluding special charges		(68,559)		(36,057)		(104,616)
Depreciation of property and equipment		(1,902)		(310)		(2,212)
Depreciation of right-of-use assets		(4,687)		(2,514)		(7,201)
Segment profit	$	76,930	$	64,641	$	141,571
Special charges						(873)
Corporate and shared service expenses						(24,600)
Results from operating activities					$	116,098

Nine months ended July 31, 2020	IMG		AMG		Total
Revenue	$	227,949	$	154,931	$	382,880
Direct costs		(54,240)		(57,676)		(111,916)
Revenue, net of direct costs		173,709		97,255		270,964
Operating expenses excluding special charges		(69,722)		(40,815)		(110,537)
Depreciation of property and equipment		(1,619)		(827)		(2,446)
Depreciation of right-of-use assets		(3,891)		(3,034)		(6,925)
Segment profit	$	98,477	$	52,579	$	151,056
Special charges						(1,490)
Corporate and shared service expenses						(30,249)
Results from operating activities					$	119,317

About Enghouse

Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides enterprise software solutions focusing on remote work, visual computing and communications for next-generation software-defined networks. 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 is well capitalized, has no long-term debt 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, September 10, 2021 at 8:45 a.m. EST. To participate, please call [phone] or North American Toll-Free [phone]. Confirmation code: 8499981. A webcast is also available at: https://www.enghouse.com/investors.php.

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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, Tel: [phone], Email: [email protected]

Related Links

http://www.enghouse.com