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Enghouse Releases Second Quarter Results
[June 07, 2018]

Enghouse Releases Second Quarter Results


MARKHAM, ON, June 7, 2018 /CNW/ - Enghouse Systems Limited (TSX: ENGH) today announced its second quarter (unaudited) financial results for the period ended April 30, 2018.

Second quarter revenue increased to $85.2 million, compared to revenue of $79.5 million in the second quarter of the prior year. Income from operating activities was $24.7 million compared to $21.9 million in the prior year's second quarter, a 12.8% increase. Net income for the quarter was $15.3 million, or $0.56 per diluted share, compared to $9.0 million, or $0.33 per diluted share, in the prior year's second quarter, an increase of 70%.

Adjusted EBITDA for the second quarter was $25.4 million, or $0.93 per diluted share, compared to $22.8 million, or $0.84 per diluted share, last year, with the increase primarily being attributable to contributions from acquisitions.

On a year-to-date basis, revenue was $170.3 million, compared to revenue of $158.4 million in the prior year. Income from operating activities was $49.2 million compared to $44.0 million in the prior year-to-date, an increase of 11.8%.

Operating expenses before special charges related to restructuring of acquired operations were $34.4 million compared to $32.6 million in the prior year's second quarter and include incremental operating costs related to acquisitions. Non-cash amortization charges in the quarter were $7.4 million compared to $7.5 million in the prior year's second quarter and include amortization charges for acquired software and customer relationships from acquired operations. On a year-to-date basis, operating expenses before special charges were $68.2 million, or 40.0% of revenue, compared to $63.9 million, or 40.3% of revenue last year.

The Company generated strong cash flows from operating activities of $21.8 million compared to $18.4 million in the second quarter of 2017. On a year-to-date basis, cash flows from operating activities were $44.9 million compared to $29.0 million in the prior year, an increase of 54.8%. As a result, Enghouse closed the quarter with $155.3 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 $8.6 million in cash dividends, $9.7 million (net of cash acquired) for acquisitions concluded in the current fiscal year, and $5.1 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 August 31, 2018 to shareholders of record at the close of business on August 17, 2018.

A conference call to discuss the results will be held on Friday, June 8, 2018 at 8:45 a.m. EST. To participate, please call +1-416-640-5947 or North American Toll-Free +1-888-504-7961. 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, asset 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

Six Months ended


April 30, 2018

April 30, 2017

April 30, 2018

April 30, 2017






Total Revenue

$

85,205

$

79,543

$

170,280

$

158,383






Results from operating activities

24,665

21,861

49,177

43,975

Depreciation of property, plant and equipment

659

595

1,329

1,209

Special charges

52

383

181

481

Adjusted EBITDA

$

25,376

$

22,839

$

50,687

$

45,665

Adjusted EBITDA margin

29.8%

28.7%

29.8%

28.8%

Adjusted EBITDA per diluted share

$

0.93

$

0.84

$

1.86

$

1.68


 

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


April 30,
2018

October 31,
2017




Assets



Current assets:




Cash and cash equivalents

$

145,615

$

120,608


Short-term investments

9,704

9,737


Accounts receivable, net

78,009

71,894


Prepaid expenses and other assets

9,824

8,528


243,152

210,767

Non-current assets:




Long-term deposits and accounts receivable, net

1,249

1,002


Property, plant and equipment

5,175

5,322


Intangible assets

74,639

79,714


Goodwill

157,685

150,687


Deferred income tax assets

6,070

14,345




Total assets

$

487,970

$

461,837




Liabilities



Current liabilities:




Accounts payable and accrued liabilities

$

46,838

$

54,656


Income taxes payable

1,509

6,018


Dividends payable

4,880

4,319


Provisions

357

1,521


Deferred revenue

71,240

59,104


Current portion of long-term loans

533

468


125,357

126,086

Non-current liabilities:




Non-current portion of income taxes payable

9,026

-


Deferred income tax liabilities

16,306

21,449


Deferred revenue

5,189

3,337


Net employee defined benefit obligation

2,424

2,328


Long-term loans

1,822

2,238




Total liabilities

160,124

155,438




Shareholders' Equity



Share capital

74,009

71,422

Contributed surplus

5,191

4,715

Retained earnings

234,703

221,775

Accumulated other comprehensive income

13,943

8,487

Total shareholders' equity                    

327,846

306,399

Total liabilities and shareholders' equity

$

487,970

$

461,837

 

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


Three months ended
April 30

Six months ended
April 30


2018

2017

2018

2017

Revenue






Software licenses

$

24,703

$

23,781

$

50,511

$

47,989


Hosted and maintenance services

43,940

39,910

86,536

79,076


Professional services

14,472

14,852

28,849

28,820


Hardware

2,090

1,000

4,384

2,498


85,205

79,543

170,280

158,383

Direct costs






Software licenses

1,692

1,453

3,727

3,562


Services

23,161

22,606

46,345

44,849


Hardware

1,244

625

2,669

1,626


26,097

24,684

52,741

50,037






Revenue, net of direct costs

59,108

54,859

117,539

108,346






Operating expenses






Selling, general and administrative

21,119

20,949

42,548

40,774


Research and development

12,613

11,071

24,304

21,907


Depreciation of property, plant and equipment

659

595

1,329

1,209


Special charges

52

383

181

481


34,443

32,998

68,362

64,371






Results from operating activities

24,665

21,861

49,177

43,975






Amortization of acquired software and customer






relationships

(7,356)

(7,511)

(14,518)

(14,968)

Foreign exchange gains and (losses)

1,407

(2,463)

(1,124)

(2,221)

Finance income

66

60

188

99

Finance expenses

(24)

(57)

(84)

(72)

Other income (expense)

694

(19)

1,436

151






Income before income taxes

19,452

11,871

35,075

26,964






Provision for income taxes

4,134

2,844

12,944

6,204






Net income for the period

$

15,318

$

9,027

$

22,131

$

20,760






Items that are or may be reclassified subsequently to






profit or loss:





Foreign currency translation gain from foreign operations

4,052

14,667

5,516

7,978

Unrealized loss on available for sale investments

(393)

(2,352)

(69)

(2,445)

Deferred income tax recovery

52

312

9

324






Other comprehensive income

3,711

12,627

5,456

5,857






Comprehensive income

$

19,029

$

21,654

$

27,587

$

26,617

Earnings per share





Basic

$

0.57

$

0.34

$

0.82

$

0.77

Diluted

$

0.56

$

0.33

$

0.81

$

0.76

                       

Enghouse Systems Limited
Consolidated 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

-

-

-

22,131

-

22,131

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

-

5,516

5,516

Unrealized loss on available-for-sale investments

-

-

-

-

(69)

(69)

Deferred income tax recovery

-

-

-

-

9

9

Comprehensive income for the period

-

-

-

22,131

5,456

27,587

Employee share options:








Value of services recognized

-


935

-

-

935


Proceeds on issuing shares

117,400

2,587

(459)

-

-

2,128

Dividends

-

-

-

(9,203)

-

(9,203)

Balance – April 30, 2018

27,110,612

74,009

5,191

234,703

13,943

327,846















Balance – November 1, 2016

26,906,962

69,555

3,875

187,649

7,469

268,548








Net income

-

-

-

20,760

-

20,760

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

-

7,978

7,978

Unrealized loss on available-for-sale investments

-

-

-

-

(2,445)

(2,445)

Deferred income tax recovery

-

-

-

-

324

324

Comprehensive income for the period

-

-

-

20,760

5,857

26,617

Employee share options:








Value of services recognized

-

-

544

-

-

544


Proceeds on issuing shares

45,500

716

(147)

-

-

569

Dividends

-

-

-

(8,083)

-

(8,083)

Balance – April 30, 2017

26,952,462

70,271

4,272

200,326

13,326

288,195

 

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


Three months ended
April 30

Six months ended
April 30


2018

2017

2018

2017

Cash flows from operating activities





Net income

$

15,318

$

9,027

$

22,131

$

20,760






Adjustments for:






Depreciation of property, plant and equipment

659

595

1,329

1,209


Amortization of acquired software and customer relationships

7,356

7,511

14,518

14,968


Stock-based compensation expense

536

356

935

544


Provision for income taxes

4,134

2,844

12,944

6,204


Finance expenses and other income

(670)

76

(1,352)

(79)


27,333

20,409

50,505

43,606






Changes in non-cash operating working capital

(2,346)

1,041

567

(6,885)

Income taxes paid

(3,145)

(3,090)

(6,125)

(7,686)

Net cash flows from operating activities

21,842

18,360

44,947

29,035






Cash flows from investing activities





Purchase of property, plant and equipment, net

(331)

(354)

(931)

(919)

Purchase of other software

-

(731)

-

(1,220)

Acquisitions, net of cash acquired of $1,235 (2017 - $3,637)

(6,684)

(16,170)

(9,675)

(16,170)

Purchase consideration for prior period acquisitions

(3,153)

(51)

(5,079)

(444)

Net (purchase) sale of short-term investments

(253)

(722)

732

(1,330)

Net cash flows used in investing activities

(10,421)

(18,028)

(14,953)

(20,083)






Cash flows from financing activities





Issuance of share capital

1,384

205

2,128

569

Repayment of loans

(33)

-

(401)

(1,667)

Payment of cash dividend

(4,324)

(3,771)

(8,643)

(7,538)

Net cash flows used in financing activities

(2,973)

(3,566)

(6,916)

(8,636)






Effect of currency translation adjustments on cash and cash






equivalents

1,231

3,494

1,929

2,152






Net increase in cash and cash equivalents during the
period

9,679

260

25,007

2,468

Cash and cash equivalents - beginning of period

135,936

80,644

120,608

78,436






Cash and cash equivalents - end of period

$

145,615

$

80,904

$

145,615

$

80,904

 

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


For the three months
ended April 30

For the six months
ended April 30





2018

2017

2018

2017




Revenue:




Asset Management Group

$

37,651

$

32,466

$

74,331

$

63,752


Interactive Management Group

47,554

47,077

95,949

94,631

Total

$

85,205

$

79,543

$

170,280

$

158,383











Asset Management Group:





- Segment profit before special charges

$

13,015

$

9,680

$

24,557

$

18,016



- Special charges

(52)

(440)

(181)

(344)


Asset Management Group profit

$

12,963

$

9,240

$

24,376

$

17,672





Interactive Management Group:





- Segment profit before special charges

$

14,600

$

14,218

$

30,197

$

29,841



- Special charges

-

57

-

(137)


Interactive Management Group profit

$

14,600

$

14,275

$

30,197

$

29,704





Corporate expenses

(2,898)

(1,654)

(5,396)

(3,401)

Results from operating activities

$

24,665

$

21,861

$

49,177

$

43,975





Amortization of acquired software and customer relationships

(7,356)

(7,511)

(14,518)

(14,968)


Foreign exchange gains and (losses)

1,407

(2,463)

(1,124)

(2,221)


Finance income

66

60

188

99


Finance expenses

(24)

(57)

(84)

(72)


Other income (expense)

694

(19)

1,436

151




Income before income taxes

$

19,452

$

11,871

$

35,075

$

26,964

 

SOURCE Enghouse Systems Limited


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