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Enghouse Releases Fourth Quarter and Year End Results, Completing Another Strong Year
[December 14, 2017]

Enghouse Releases Fourth Quarter and Year End Results, Completing Another Strong Year


MARKHAM, ON, Dec. 14, 2017 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its fourth quarter (unaudited) and year-end financial results for the period ended October 31, 2017.

Revenue increased to $325.4 million for the fiscal year, compared to revenue of $308.0 million in the previous fiscal year, resulting in another record year for the Company. Revenue includes $165.8 million from hosted and maintenance services, an increase of 7.4%. For the fiscal year, foreign exchange negatively impacted revenue by approximately $9.5 million compared to the prior year.

Operating expenses were $137.6 million for the fiscal year compared to $129.5 million in the prior fiscal year as a result of incremental costs related to acquired operations. Results from operating activities were $87.4 million compared to $81.7 million last year, an increase of 7.0%. The stronger Canadian dollar combined with the impact of revaluation of foreign currency denominated balance sheet positions negatively impacted results from operating activities by $15.7 million compared to the prior year.

Net income for the fiscal year was $50.8 million or $1.87 per diluted share compared to $47.3 million or $1.74 per diluted share in the prior year. Adjusted EBITDA for the fiscal year was $90.8 million or $3.33 per diluted share compared to $86.4 million or $3.18 per diluted share last year, an increase of 5.0%.

Fourth quarter revenue was $84.2 million, an increase of 7.0% over revenue of $78.7 million in the fourth quarter last year. Revenue in the quarter reflects incremental contributions from acquisitions, mitigated by the unfavourable impact of foreign exchange of approximately $1.3 million.

Operating expenses were $35.1 million compared to $29.4 million in the prior year's fourth quarter, and include incremental operating costs related to acquisitions. Non-cash amortization charges related to acquired software and customer relationships in the quarter were $7.0 million compared to $7.2 million in the prior year's fourth quarter. Results from operating activities for the quarter were $23.8 million compared to $25.3 million in the prior year's fourth quarter. On a net basis, foreign exchange for the current quarter, measured on the same basis as noted above, negatively impacted results from operating activities by $4.7 million compared to the prior year's fourth quarter.

Net income before tax for the quarter was $19.9 million compared to $18.9 million in the prior year's fourth quarter. Income tax expense was $1.0 million in the current quarter versus an income tax recovery of $1.1 million recorded in the comparative quarter last year. As a result, net income for the quarter was $18.9 million or $0.69 per diluted share, compared to the prior year's fourth quarter net income of $19.9 million, or $0.73 per diluted share. Adjusted EBITDA for the quarter was $24.8 million or $0.91 per diluted share compared to $26.6 million or $0.98 per diluted share in last year's fourth quarter.

Enghouse generated cash flows from operations of $29.1 million in the quarter compared to $15.8 million in the prior year's fourth quarter, which was attributable to operating results and strong cash collections. Cash flows generated from operations for the fiscal year were $83.2 million compared to $59.7 million in the prior fiscal year, an increase of 39.4%. Enghouse closed the year with a record $130.3 million in cash, cash equivalents and short-term investments, compared to $85.9 million at October 31, 2016. The cash balance was achieved after payment of $21.3 million for acquisitions (net of cash acquired), $16.2 million for dividends and includes $2.2 million received from the sale of an equity investment at year end.

Today, the Board of Directors approved an eligible quarterly dividend of $0.16 per common share, payable on February 28, 2018 to shareholders of record at the close of business on February 14, 2018.

A conference call to discuss the results will be held on Friday December 15, 2017 at 8:45 a.m. EST. To participate, please call 416-640-5946 or North American Toll-Free 1-866-233-4606. 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, 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, 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

Year ended


October 31,
2017

October 31,
2016

October 31,
2017

October 31,
2016










Total Revenue

$

84,229

$

78,726

$

325,368

$

307,983






Results from operating activities

$

23,803

$

25,284

$

87,373

$

81,666

Depreciation of property, plant and equipment

609

991

2,437

3,438

Special charges

370

360

984

1,330

Adjusted EBITDA

$

24,782

$

26,635

$

90,794

$

86,434

Adjusted EBITDA margin

29.4%

33.8%

27.9%

28.1%

Adjusted EBITDA per diluted share

$

0.91

$

0.98

$

3.33

$

3.18


 

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


As at
October 31, 
2017

As At
October  31, 
2016

Assets



Current assets:




Cash and cash equivalents

$

120,608

$

78,436


Short-term investments

9,737

7,423


Accounts receivable, net

71,894

73,588


Prepaid expenses and other assets

8,528

9,720


210,767

169,167

Non-current assets:




Long-term deposits and accounts receivable, net

1,002

1,357


Property, plant and equipment

5,322

5,696


Intangible assets

79,714

86,632


Goodwill

150,687

144,578


Deferred income tax assets

14,345

11,765




Total assets

$

461,837

$

419,195


Liabilities



Current liabilities:




Accounts payable and accrued liabilities

$

54,656

$

55,440


Income taxes payable

6,018

5,139


Dividends payable

4,319

3,767


Provisions

1,521

2,111


Deferred revenue

59,104

54,300


Current portion of long-term loans

468

-


126,086

120,757

Non-current liabilities:




Deferred income tax liabilities

21,449

21,053


Deferred revenue

3,337

4,788


Net employee defined benefit obligation

2,328

-


Long-term loans

2,238

4,049




Total liabilities

155,438

150,647

Shareholders' Equity




Share capital

71,422

69,555

Contributed surplus

4,715

3,875

Retained earnings

221,775

187,649

Accumulated other comprehensive income

8,487

7,469

Total shareholders' equity                    

306,399

268,548

Total liabilities and shareholders' equity

$

461,837

$

419,195

 

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


Three months ended
October 31

Year ended October  31


2017

(Unaudited)

2016

(Unaudited)

2017

2016

Revenue






Software licenses

$

24,746

$

24,261

$

97,215

$

93,411


Hosted and maintenance services

43,315

38,383

165,802

152,368


Professional services

14,193

15,415

55,992

57,842


Hardware

1,975

667

6,359

4,362


84,229

78,726

325,368

307,983

Direct costs






Software licenses

1,597

1,399

6,908

5,477


Services

22,458

21,813

89,518

88,210


Hardware

1,268

847

3,921

3,180


25,323

24,059

100,347

96,867






Revenue, net of direct costs

58,906

54,667

225,021

211,116






Operating expenses






Selling, general and administrative

22,991

17,618

89,662

79,965


Research and development

11,133

10,414

44,565

44,717


Depreciation of property, plant and equipment

609

991

2,437

3,438


Special charges

370

360

984

1,330


35,103

29,383

137,648

129,450






Results from operating activities

23,803

25,284

87,373

81,666






Amortization of acquired software and customer relationships

(7,040)

(7,185)

(29,405)

(28,042)

Finance income

121

50

252

123

Finance expenses

(48)

(22)

(185)

(78)

Other income

3,085

733

3,186

797






Income before income taxes

19,921

18,860

61,221

54,466






(Recovery of) provision for income taxes






Current income tax expense

7,630

5,088

16,809

14,033


Deferred income tax recovery

(6,609)

(6,140)

(6,430)

(6,843)


1,021

(1,052)

10,379

7,190






Net income for the period

$

18,900

$

19,912

$

50,842

$

47,276

 

Items that are or may be reclassified subsequently to profit or loss:





Foreign currency translation differences from foreign operations

5,464

(2,102)

1,345

(12,737)

Transfer to net income of realized gains on available for sale investments

-

-

-

(14)

Unrealized gain (loss) on available for sale investments

2,064

766

(376)

(42)

Deferred income tax (expense) recovery

(274)

(101)

49

8






Other comprehensive (loss) income

7,254

(1,437)

1,018

(12,785)






Comprehensive income

$

26,154

$

18,475

$

51,860

$

34,491

Earnings per share





Basic

$

0.70

$

0.74

$

1.89

$

1.76

Diluted

$

0.69

$

0.73

$

1.87

$

1.74

 

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


Share

Capital

-number

 

Share capital

$

 

Contributed surplus

$

Accumulated
other
comprehensive
income (loss)

$

 

Retained earnings
$

 

Total

$








Balance – November 1, 2016

26,906,962

69,555

3,875

7,469

187,649

268,548








Net income

-

-

-

-

50,842

50,842

Other Comprehensive Income (net of tax):






-

Cumulative Translation Adjustment

-

-

-

1,345

-

1,345

Transfer to net income of realized gains on available-for-sale investments

-

-

-

-

-

-

Unrealized losses on available-for-sale investments

-

-

-

(376)

-

(376)

Deferred income tax recovery

-

-

-

49

-

49

Comprehensive income for the year

-

-

-

8,487

238,491

320,408

Employee share options:








Value of services recognized



1,148

-

-

1,148


Proceeds on issuing shares

86,250

1,867

(308)

-

-

1,559

Dividends

-

-

-

-

(16,716)

(16,716)

Balance – October 31, 2017

26,993,212

71,422

4,715

8,487

221,775

306,399















Balance – November 1, 2015

26,587,262

64,203

4,029

20,254

154,866

243,352








Net income

-

-

-

-

47,276

47,276

Other Comprehensive Income (net of tax):







Cumulative Translation Adjustment

-

-

-

(12,737)

-

(12,737)

Transfer to net income of realized gains on available-for-sale investments

 

-

 

-

 

-

 

(14)

 

-

 

(14)

Unrealized losses on available-for-sale investments

-

-

-

(42)

-

(42)

Deferred income tax recovery

-

-

-

8

-

8

Comprehensive income for the year

-

-

-

(12,785)

47,276

34,491

Employee share options:








Value of services recognized

-

-

892

-

-

892


Proceeds on issuing shares

319,700

5,352

(1,046)

-

-

4,306

Dividends

-

-

-

-

(14,493)

(14,493)

Balance – October 31, 2016

26,906,962

69,555

3,875

7,469

187,649

268,548

 

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


 

Three months ended October 31

 

Year ended October 31


2017

(Unaudited)

2016

(Unaudited)

2017

2016

Cash flows from operating activities





Net income

$

18,900

$

19,912

$

50,842

$

47,276






Adjustments for:






Depreciation of property, plant and equipment

609

991

2,437

3,438


Amortization of acquired software and customer relationships

7,040

7,185

29,405

28,042


Stock-based compensation expense

339

144

1,148

892


Income tax expense (recovery)

1,021

(711)

10,379

7,190


Finance expenses and other income

(3,037)

(597)

(3,001)

(719)


24,872

26,469

91,210

86,119






Changes in  non-cash operating working capital

7,064

(6,638)

4,774

(16,237)

Income tax paid

(2,838)

(4,047)

(12,742)

(10,148)

Net cash flows from operating activities

29,098

15,785

83,242

59,735






Cash flows from investing activities





Purchase of property, plant and equipment, net

(664)

(769)

(1,689)

(3,372)

Purchase of other software

-

(559)

(1,475)

(1,764)

Acquisitions, net of cash acquired of $3,876 ($5,230 -  2016)

(2,520)

(15,083)

(18,690)

(51,264)

Purchase consideration for prior period acquisitions

(1,596)

(387)

(2,619)

(4,476)

Proceeds from sale of equity investment

2,188

-

2,188

-

Net proceeds from sale of short-term investments

(1,344)

(2,360)

(2,870)

(2,880)

Net cash flows used in investing activities

(3,936)

(19,158)

(25,155)

(63,756)






Cash flows from financing activities





Issuance of share capital

746

1,624

1,559

4,306

Repayment of loans

-

-

(1,667)

-

Payment of cash dividend

(4,314)

(3,755)

(16,164)

(13,917)

Net cash flows used in financing activities

(3,568)

(2,131)

(16,272)

(9,611)






Effect of currency translation adjustments on cash and cash equivalents

1,776

(1,574)

357

(2,063)






Net increase (decrease) in cash and cash equivalents during the period

23,370

(7,078)

42,172

(15,695)

Cash and cash equivalents - beginning of period

97,238

85,514

78,436

94,131






Cash and cash equivalents - end of period

$

120,608

$

78,436

$

120,608

$

78,436

  

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

 


For the three months ended

October 31

Year ended October 31


2017

2016

2017

2016



Revenue:



Asset Management Group

$

34,999

$

30,450

$

134,700

$

115,766


Interactive Management Group

49,230

48,276

190,668

192,217

Total

$

84,229

$

78,726

$

325,368

$

307,983





Asset Management Group:







- Segment profit before special charges

$

10,760

$

9,853

$

38,499

$

31,378



- Special charges

(336)

(186)

(813)

(804)


Asset Management Group profit

$

10,424

$

9,667

$

37,686

$

30,574



Interactive Management Group:







- Segment profit before special charges

$

16,593

$

18,718

$

58,572

$

60,895



- Special charges

(34)

(174)

(171)

(526)


Interactive Management Group profit

$

16,559

$

18,544

$

58,401

$

60,369



Corporate expenses

(3,180)

(2,927)

(8,714)

(9,277)

Results from operating activities

$

23,803

$

25,284

$

87,373

$

81,666



Amortization of acquired software and customer relationships

(7,040)

(7,185)

(29,405)

(28,042)


Finance income

121

50

252

123


Finance expenses

(48)

(22)

(185)

(78)


Other income

3,085

733

3,186

797

Income before income taxes

$

19,921

$

18,860

$

61,221

$

54,466

 

SOURCE Enghouse Systems Limited


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