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Enghouse Releases Second Quarter Results
[June 06, 2019]

Enghouse Releases Second Quarter Results


MARKHAM, ON, June 6, 2019 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its second quarter (unaudited) financial results for the period ended April 30, 2019.

Second quarter revenue increased to $89.2 million, compared to revenue of $85.2 million in the second quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions and incremental license revenue in both operating groups. Results from operating activities were $26.6 million compared to $24.7 million in the prior year's second quarter, an increase of 7.9%. Net income for the quarter was $16.5 million or $0.30 per diluted share compared to $15.3 million or $0.28 per diluted share in the prior year's second quarter. 

Adjusted EBITDA for the second quarter was $27.2 million or $0.49 per diluted share, compared to $25.4 million or $0.46 per diluted share last year, with the increase being attributable to incremental revenue contributions from acquisitions and operating cost synergies.

On a year-to-date basis, revenue was $175.2 million, compared to revenue of $170.3 million in the prior year.  Results from operating activities was $52.4 million compared to $49.2 million in the prior year-to-date, an increase of 6.6%. On a year-to-date basis Adjusted EBITDA was $53.5 million or $0.97 per diluted share compared to $50.7 million or $0.93 per diluted share last year.

Operating expenses before special charges related to restructuring of acquired operations were $35.1 million compared to $34.4 million in the prior year's second quarter and reflect incremental operating costs related to acquisitions, net of operating cost synergies. Non-cash amortization charges on acquired software and customer relationships from acquired operations were $6.9 million for the quarter compared to $7.4 million in the prior year's second quarter. 

The Company generated cash flows from operating activities of $21.6 million compared to $21.8 million in the second quarter of fiscal 2018. On a year to date basis, cash flows from operating activities was $45.8 million, an increase of 1.9% compared to the prior year. As a result, Enghouse closed the quarter with $205.5 million in cash, cash equivalents and short-term investments, compared to $193.9 million at October 31, 2018. The cash balance was achieved after payments of $9.8 million for cash dividends and $25.6 million (net of cash acquired) for acquisitions concluded in the current fiscal year and $1.1 million for acquisitions closed in prior years.

Subsequent to quarter end, Enghouse completed the acquisitions of Vidyo, Inc. and Espial Group Inc. The acquisitions extend the Company's product portfolio to include enterprise-class video software solutions to enable customers to more efficiently collaborate and interact, as well as a solution portfolio to help video service providers launch the next generation video offerings for cable, IPTV and App-based IP video services.

Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.11 per common share, payable on August 30, 2019 to shareholders of record at the close of business on August 16, 2019.

A conference call to discuss the results will be held on Friday, June 7, 2019 at 8:45 a.m. EST. To participate, please call +1-647-792-1278 or North American Toll-Free +1-888-504-7961. Confirmation code - 3100882.

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

Six Months ended


April 30, 2019

April 30, 2018

April 30, 2019

April 30, 2018






Total Revenue

$

89,203

$

85,205

$

175,248

$

170,280






Results from operating activities

26,621

24,665

52,416

49,177

Depreciation of property, plant and equipment

499

659

1,029

1,329

Special charges

56

52

56

181

Adjusted EBITDA

$

27,176

$

25,376

$

53,501

$

50,687

Adjusted EBITDA margin

30.5%

29.8%

30.5%

29.8%

Adjusted EBITDA per diluted share

$

0.49

$

0.46

$

0.97

$

0.93


 

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


April 30,
 2019

October 31,
2018





Assets



Current assets:



   Cash and cash equivalents

$  196,884

$ 187,551

   Short-term investments

8,635

6,386

   Accounts receivable, net

72,518

62,085

   Prepaid expenses and other assets

10,995

8,951


289,032

264,973

Non-current assets:



   Property, plant and equipment, net

5,158

5,279

   Intangible assets, net

67,048

59,895

   Goodwill

170,092

155,419

   Deferred income tax assets

9,021

9,634




Total assets

$  540,351

$ 495,200





Liabilities



Current liabilities:



   Accounts payable and accrued liabilities

$ 42,784

$   44,271

   Income taxes payable

7,388

4,904

   Dividends payable

6,011

4,912

   Provisions

60

268

   Deferred revenue

75,098

64,020

   Current portion of long-term loans

-

122


131,341

118,497

Non-current liabilities:



   Non-current portion of income taxes payable

6,962

7,466

   Deferred income tax liabilities

15,454

13,115

   Deferred revenue

3,255

2,169

   Net employee defined benefit obligation

2,409

2,354

   Long-term loans

760

1,475




Total liabilities

160,181

145,076

Shareholders' Equity







Share capital

79,934

78,997

Contributed surplus

5,831

4,866

Retained earnings

281,888

260,506

Accumulated other comprehensive income

12,517

5,755

Total shareholders' equity                    

380,170

350,124

Total liabilities and shareholders' equity

$  540,351

$  495,200

 

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
April 30,

Six months ended
April 30,


2019

2018

2019

2018

Revenue





     Software licenses

$

21,519

$

20,915

$

40,247

$

43,012

     Hosted and maintenance services

49,470

47,728

100,283

94,035

     Professional services

15,145

14,472

28,646

28,849

     Hardware

3,069

2,090

6,072

4,384


89,203

85,205

175,248

170,280

Direct costs





     Software licenses

1,370

1,692

2,731

3,727

     Services

24,181

23,161

47,726

46,345

     Hardware

1,909

1,244

4,215

2,669


27,460

26,097

54,672

52,741






Revenue, net of direct costs

61,743

59,108

120,576

117,539






 Operating expenses





     Selling, general and administrative

21,440

21,119

41,896

42,548

     Research and development

13,127

12,613

25,179

24,304

     Depreciation of property, plant and equipment

499

659

1,029

1,329

     Special charges

56

52

56

181


35,122

34,443

68,160

68,362






Results from operating activities

26,621

24,665

52,416

49,177






Amortization of acquired software and customer relationships

(6,884)

(7,356)

(14,000)

(14,518)

Foreign exchange gains and (losses)

674

1,407

564

(1,124)

Finance income

507

66

1,005

188

Finance expenses

(24)

(24)

(55)

(84)

Other income

447

694

475

1,436






Income before income taxes

21,341

19,452

40,405

35,075






Provision for income taxes

4,804

4,134

8,904

12,944






Net income for the period

$

16,537

$

15,318

$

31,501

$

22,131

 

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





Foreign currency translation gain from foreign operations

3,094

4,052

5,981

5,516

Unrealized loss on investments in equity securities designated at FVOCI

 

-

 

(393)

 

-

 

(69)

Deferred income tax recovery

-

52

-

9






Other comprehensive income

3,094

3,711

5,981

5,456






Comprehensive income

$

19,631

$

19,029

$

37,482

$

27,587

Earnings per share





Basic

$

0.30

$

0.28

$

0.58

$

0.41

Diluted

$

0.30

$

0.28

$

0.57

$

0.41

 

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


 

 

Share
capital

# **

 

 

Share
capital

$

 

 

Contributed
surplus
$

Accumulated
other
comprehensive
income
$

Retained
earnings

$

Total

$








As at November 1, 2018 as previously presented

 

54,580,024

 

78,997

 

4,866

 

5,755

 

260,506

 

350,124

IFRS 9 transition adjustment

-

-

-

781

(781)

-

IFRS 15 transition adjustment

-

-

-

-

1,590

1,590

Adjusted balance as at November 1, 2018

54,580,024

78,997

4,866

6,536

261,315

351,714








Net income for the period

-

-

-

-

31,501

31,501

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

5,981

-

5,981

Comprehensive income for the period

-

-

-

5,981

31,501

37,482

Employee share options:







   Value of services recognized

-

-

1,117

-

-

1,117

   Proceeds on issuing shares

68,000

937

(152)

-

-

785

Dividends declared

-

-

-

-

(10,928)

(10,928)

As at April 30, 2019

54,648,024

79,934

5,831

12,517

281,888

380,170















As at November 1, 2017

53,986,424

71,422

4,715

8,487

221,775

306,399








Net income for the period

-

-

-

-

22,131

22,131

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

5,516

-

5,516

Unrealized gain on investments in equity securities designated at FVOCI*

 

-

 

-

 

-

 

(69)

 

-

 

(69)

Deferred income tax expense

-

-

-

9

-

9

Comprehensive income for the period

-

-

-

5,456

22,131

27,587

Employee share options:







   Value of services recognized

-

-

935

-

-

935

   Proceeds on issuing shares

234,800

2,587

(459)

-

-

2,128

Dividends declared

-

-

-

-

(9,203)

(9,203)

As at April 30, 2018

54,221,224

74,009

5,191

13,943

234,703

327,846


* Unrealized loss on investments in equity securities designated at FVOCI was originally referred to as available-for-sale investments in the 2018 consolidated financial statements.


** On January 25, 2019, the Company completed a share split whereby each issued and outstanding common share has been effectively doubled.  All references to capital stock, options and per share data have been adjusted retrospectively to reflect the Company's two-for-one share split for the periods ended April 30, 2019 and 2018.

 

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


Three months ended

April 30,

Six months ended

April 30,


2019

2018

2019

2018

Cash flows from operating activities





Net income for the period

$   16,537

$   15,318

$   31,501

$   22,131






Adjustments for:





  Depreciation of property, plant and equipment

499

659

1,029

1,329

  Amortization of acquired software and customer relationships

6,884

7,356

14,000

14,518

  Stock-based compensation expense

709

536

1,117

935

  Provision for income taxes

4,804

4,134

8,904

12,944

  Finance expenses and other income

(423)

(670)

(420)

(1,352)


29,010

27,333

56,131

50,505






Changes in non-cash operating working capital

(2,050)

(2,346)

(627)

567

Income taxes paid

(5,330)

(3,145)

(9,720)

(6,125)

Net cash flows from operating activities

21,630

21,842

45,784

44,947






Cash flows from investing activities





Purchase of property, plant and equipment, net

(572)

(331)

(781)

(931)

Acquisitions, net of cash acquired of $143 (Q2/18 - $167),

2019 -  $6,282 (2018 - $1,235)

(3,170)

(6,684)

(25,566)

(9,675)

Purchase consideration for prior period acquisitions

-

(3,153)

(1,105)

(5,079)

Net sale (purchase) of short-term investments

4,255

(253)

(1,853)

732

Net cash flows from (used in) investing activities

513

(10,421)

(29,305)

(14,953)






Cash flows from financing activities





Issuance of share capital

66

1,384

785

2,128

Repayment of loans

-

(33)

(957)

(401)

Payment of cash dividend

(4,917)

(4,324)

(9,829)

(8,643)

Net cash flows used in financing activities

(4,851)

(2,973)

(10,001)

(6,916)






Effect of currency translation adjustments on cash and cash equivalents

1,591

1,231

2,855

1,929






Net increase in cash and cash equivalents during the period

18,883

9,679

9,333

25,007

Cash and cash equivalents - beginning of period

178,001

135,936

187,551

120,608






Cash and cash equivalents - end of period

$  196,884

$  145,615

$  196,884

$  145,615

 

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,


 

2019

 

2018

 

2019

 

2018






Revenue:





    Asset Management Group

$   44,673

$   37,651

$    87,254

$    74,331

    Interactive Management Group

44,530

47,554

87,994

95,949

Total

$   89,203

$   85,205

$  175,248

$  170,280
















    Asset Management Group:





                      - Segment profit before special charges

$   17,018

$   13,015

$   31,617

$   24,557

                      - Special charges

-

(52)

-

(181)

    Asset Management Group profit

$   17,018

$   12,963

$   31,617

$   24,376






    Interactive Management Group:





                      - Segment profit before special charges

$   12,854

$   14,600

$   26,299

$   30,197

                      - Special charges

(56)

-

(56)

-

   Interactive Management Group profit

$   12,798

$   14,600

$   26,243

$   30,197






    Corporate expenses

(3,195)

(2,898)

(5,444)

(5,396)

Results from operating activities

$   26,621

$   24,665

$   52,416

$   49,177






Amortization of acquired software and customer 





relationships

(6,884)

(7,356)

(14,000)

(14,518)

Foreign exchange gain/(loss)

674

1,407

564

(1,124)

Finance income

507

66

1,005

188

Finance expenses

(24)

(24)

(55)

(84)

Other income

447

694

475

1,436

Income before income taxes

$   21,341

$   19,452

$   40,405

$   35,075

 

SOURCE Enghouse Systems Limited


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