|
Enghouse Releases Third Quarter Results
MARKHAM, ON, Sept. 12, 2019 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its third quarter (unaudited) and financial results for the period ended July 31, 2019.
Third quarter revenue was $101.3 million, a 16.8% increase compared to revenue of $86.7 million in the third quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions. Results from operating activities were $27.0 million compared to $26.7 million in the prior year's third quarter, which reflects the impact of changes in product mix on gross margins and, as expected, lower operating margin contributions from acquisitions in their initial period after acquisition. Net income for the quarter was $14.7 million or $0.27 per diluted share with increased amortization and a foreign exchange loss.
Adjusted EBITDA for the third quarter was $28.1 million or $0.51 per diluted share, compared to $27.4 million or $0.50 per diluted share last year, with the increase being attributable to incremental revenue contributions from acquisitions.
On a year-to-date basis, revenue was $276.5 million, compared to revenue of $257.0 million in the prior year. Results from operating activities were $79.4 million compared to $75.9 million in the prior year-to-date, an increase of 4.7%. On a year-to-date basis Adjusted EBITDA was $81.6 million or $1.48 per diluted share compared to $78.1 million or $1.43 per diluted share last year.
Operating expenses before special charges related to restructuring of acquired operations were $42.0 million compared to $34.1 million in the prior year's third quarter and reflect incremental operating costs related to recent acquisitions. Non-cash amortization charges on acquired software and customer relationships from acquired operations were $8.5 million for the quarter compared to $7.2 million in the prior year's third quarter.
The Company generated cash flows from operating activities of $13.9 million compared to $29.3 million in the third quarter of fiscal 2018. On a year to date basis, cash flows from operating activities was $59.6 million. This relates to unfavorable working capital adjustments from new acquisitions which, when acquired, had severance obligations and significant payable balances that have since been settled. Enghouse closed the quarter with $141.3 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 $15.8 million for cash dividends and $94.2 million (net of cash acquired) for acquisitions concluded in the current fiscal year and $1.1 million for acquisitions closed in prior years.
During the quarter, Enghouse completed the acquisitions of Vidyo Inc. and Espial Group Inc. for an aggregate purchase price of $68.7 million, net of cash acquired. These acquisitions reported revenue consistent with expectations and were accretive to earnings in the quarter.
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.11 per common share, payable on November 29, 2019 to shareholders of record at the close of business on November 15, 2019.
A conference call to discuss the results will be held on Friday, September 13, 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: 7941353.
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, 2019
| July 31, 2018
| July 31, 2019
| July 31, 2018
|
|
|
|
|
| Total Revenue
| $
| 101,274
| $
| 86,743
| $
| 276,522
| $
| 257,023
|
|
|
|
|
| Results from operating activities
| 27,017
| 26,724
| 79,433
| 75,901
| Depreciation of property, plant and equipment
| 570
| 540
| 1,599
| 1,869
| Special charges
| 470
| 152
| 526
| 333
| Adjusted EBITDA
| $
| 28,057
| $
| 27,416
| $
| 81,558
| $
| 78,103
| Adjusted EBITDA margin
| 27.7%
| 31.6%
| 29.5%
| 30.4%
| Adjusted EBITDA per diluted share
| $
| 0.51
| $
| 0.50
| $
| 1.48
| $
| 1.43
|
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
| July 31
2019
| October 31
2018
|
|
| Assets
|
|
| Current assets:
|
|
| Cash and cash equivalents
| $
| 133,422
| $
| 187,551
| Short-term investments
| 7,912
| 6,386
| Accounts receivable, net
| 81,048
| 62,085
| Prepaid expenses and other assets
| 11,224
| 8,951
|
| 233,606
| 264,973
| Non-current assets:
|
|
| Property, plant and equipment, net
| 6,225
| 5,279
| Intangible assets, net
| 122,489
| 59,895
| Goodwill
| 203,562
| 155,419
| Deferred income tax assets
| 9,202
| 9,634
|
|
|
| Total assets
| $
| 575,084
| $
| 495,200
|
|
| Liabilities
|
|
| Current liabilities:
|
|
| Accounts payable and accrued liabilities
| $
| 53,588
| $
| 44,271
| Income taxes payable
| 9,740
| 4,904
| Dividends payable
| 6,016
| 4,912
| Provisions
| 6,617
| 268
| Deferred revenue
| 87,693
| 64,020
| Current portion of long-term loans
| -
| 122
|
| 163,654
| 118,497
| Non-current liabilities:
|
|
| Non-current portion of income taxes payable
| 5,079
| 7,466
| Deferred income tax liabilities
| 20,952
| 13,115
| Deferred revenue
| 2,270
| 2,169
| Net employee defined benefit obligation
| 2,354
| 2,354
| Long-term loans
| 738
| 1,475
|
|
|
| Total liabilities
| 195,047
| 145,076
|
|
|
| Shareholders' Equity
|
|
|
|
|
| Share capital
| 80,645
| 78,997
| Contributed surplus
| 6,289
| 4,866
| Retained earnings
| 290,533
| 260,506
| Accumulated other comprehensive income
| 2,570
| 5,755
| Total shareholders' equity
| 380,037
| 350,124
| Total liabilities and shareholders' equity
| $
| 575,084
| $
| 495,200
|
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
|
| 2019
| 2018
| 2019
| 2018
| Revenue
|
|
|
|
| Software licenses
| $
| 22,081
| $
| 22,410
| $
| 62,328
| $
| 65,422
| Hosted and maintenance services
| 58,416
| 48,586
| 158,699
| 142,621
| Professional services
| 15,281
| 14,123
| 43,927
| 42,972
| Hardware
| 5,496
| 1,624
| 11,568
| 6,008
|
| 101,274
| 86,743
| 276,522
| 257,023
| Direct costs
|
|
|
|
| Software licenses
| 1,327
| 1,740
| 4,058
| 5,467
| Services
| 26,399
| 22,990
| 74,125
| 69,335
| Hardware
| 4,023
| 1,058
| 8,238
| 3,727
|
| 31,749
| 25,788
| 86,421
| 78,529
|
|
|
|
|
| Revenue, net of direct costs
| 69,525
| 60,955
| 190,101
| 178,494
|
|
|
|
|
| Operating expenses
|
|
|
|
| Selling, general and administrative
| 24,890
| 21,884
| 66,786
| 64,432
| Research and development
| 16,578
| 11,655
| 41,757
| 35,959
| Depreciation of property, plant and equipment
| 570
| 540
| 1,599
| 1,869
| Special charges
| 470
| 152
| 526
| 333
|
| 42,508
| 34,231
| 110,668
| 102,593
|
|
|
|
|
| Results from operating activities
| 27,017
| 26,724
| 79,433
| 75,901
|
|
|
|
|
| Amortization of acquired software and customer relationships
| (8,453)
| (7,245)
| (22,453)
| (21,763)
| Foreign exchange (losses) and gains
| (131)
| 659
| 433
| (465)
| Finance income
| 469
| 90
| 1,474
| 278
| Finance expenses
| (11)
| (50)
| (66)
| (134)
| Other (expenses) income
| (64)
| 504
| 411
| 1,940
|
|
|
|
|
| Income before income taxes
| 18,827
| 20,682
| 59,232
| 55,757
|
|
|
|
|
| Provision for income taxes
| 4,166
| 4,620
| 13,070
| 17,564
|
|
|
|
|
| Net income for the period
| $
| 14,661
| $
| 16,062
| $
| 46,162
| $
| 38,193
|
|
|
|
|
| Items that are or may be reclassified subsequently to profit or loss:
|
|
|
|
| Foreign currency translation (loss) gain from foreign operations
| (9,947)
| (3,929)
| (3,966)
| 1,331
| Unrealized gain on investments in equity securities designated at
FVOCI
| -
| 625
| -
| 851
| Deferred income tax expense
| -
| (83)
| -
| (113)
|
|
|
|
|
| Other comprehensive (loss) income
| (9,947)
| (3,387)
| (3,966)
| 2,069
|
|
|
|
|
| Comprehensive income
| $
| 4,714
| $
| 12,675
| $
| 42,196
| $
| 40,262
| Earnings per share
|
|
|
|
| Basic
| $
| 0.27
| $
| 0.30
| $
| 0.84
| $
| 0.71
| Diluted
| $
| 0.27
| $
| 0.29
| $
| 0.84
| $
| 0.70
|
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity
(in thousands of Canadian dollars)
(Unaudited)
| Share
capital
# **
| Share
capital
$
| Contributed
surplus
$
| Accumulated
other
comprehensive
(loss) 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
| -
| -
| -
| -
| 46,162
| 46,162
| Other comprehensive income (net of tax):
|
|
|
|
|
|
| Cumulative translation adjustment
| -
| -
| -
| (3,966)
| -
| (3,966)
| Comprehensive income for the period
| -
| -
| -
| (3,966)
| 46,162
| 42,196
| Employee share options:
|
|
|
|
|
|
| Value of services recognized
| -
| -
| 1,723
| -
| -
| 1,723
| Proceeds on issuing shares
| 113,500
| 1,648
| (300)
| -
| -
| 1,348
| Dividends declared
| -
| -
| -
| -
| (16,944)
| (16,944)
| As at July 31, 2019
| 54,693,524
| 80,645
| 6,289
| 2,570
| 290,533
| 380,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at November 1, 2017
| 53,986,424
| 71,422
| 4,715
| 8,487
| 221,775
| 306,399
|
|
|
|
|
|
|
| Net income for the period
| -
| -
| -
| -
| 38,193
| 38,193
| Other comprehensive income (net of tax):
|
|
|
|
|
|
| Cumulative translation adjustment
| -
| -
| -
| 1,331
| -
| 1,331
| Unrealized gain on investments in equity
securities designated at FVOCI*
| -
| -
| -
| 851
| -
| 851
| Deferred income tax expense
| -
| -
| -
| (113)
| -
| (113)
| Comprehensive income for the period
| -
| -
| -
| 2,069
| 38,193
| 40,262
| Employee share options:
|
|
|
|
|
|
| Value of services recognized
| -
| -
| 1,171
| -
| -
| 1,171
| Proceeds on issuing shares
| 445,000
| 5,890
| (1,063)
| -
| -
| 4,827
| Dividends declared
| -
| -
| -
| -
| (14,102)
| (14,102)
| As at July 31, 2018
| 54,431,424
| 77,312
| 4,823
| 10,556
| 245,866
| 338,557
|
|
| * 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 July 31, 2019 and 2018.
|
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
| Three months ended
July 31
| Nine months ended
July 31
|
| 2019
| 2018
| 2019
| 2018
| Cash flows from operating activities
|
|
|
|
| Net income for the period
| $
| 14,661
| $
| 16,062
| $
| 46,162
| $
| 38,193
|
|
|
|
|
| Adjustments for:
|
|
|
|
| Depreciation of property, plant and equipment
| 570
| 540
| 1,599
| 1,869
| Amortization of acquired software and customer relationships
| 8,453
| 7,245
| 22,453
| 21,763
| Stock-based compensation expense
| 606
| 236
| 1,723
| 1,171
| Provision for income taxes
| 4,166
| 4,620
| 13,070
| 17,564
| Finance expenses and other expenses (income)
| 75
| (454)
| (345)
| (1,806)
|
| 28,531
| 28,249
| 84,662
| 78,754
|
|
|
|
|
| Changes in non-cash operating working capital
| (10,174)
| 6,041
| (10,801)
| 6,608
| Income taxes paid
| (4,495)
| (5,016)
| (14,215)
| (11,141)
| Net cash flows from operating activities
| 13,862
| 29,274
| 59,646
| 74,221
|
|
|
|
|
| Cash flows from investing activities
|
|
|
|
| Purchase of property, plant and equipment, net
| (559)
| (607)
| (1,340)
| (1,538)
| Acquisitions, net of cash acquired of $27,683 (Q3/18 - $Nil),
YTD 2019 - $33,965 (2018 - $1,235)
|
(68,667)
|
-
|
(94,233)
|
(9,675)
| Purchase consideration for prior period acquisitions
| -
| (1,866)
| (1,105)
| (6,945)
| Net sale (purchase) of short-term investments
| 743
| 1,754
| (1,110)
| 2,486
| Net cash flows used in investing activities
| (68,483)
| (719)
| (97,788)
| (15,672)
|
|
|
|
|
| Cash flows from financing activities
|
|
|
|
| Issuance of share capital
| 563
| 2,699
| 1,348
| 4,827
| Repayment of loans
| -
| (334)
| (957)
| (735)
| Payment of cash dividend
| (6,011)
| (4,880)
| (15,840)
| (13,523)
| Net cash flows used in financing activities
| (5,448)
| (2,515)
| (15,449)
| (9,431)
|
|
|
|
|
| Effect of currency translation adjustments on cash and cash
equivalents
| (3,393)
| (1,890)
| (538)
| 39
|
|
|
|
|
| Net (decrease) increase in cash and cash equivalents during
the period
| (63,462)
| 24,150
| (54,129)
| 49,157
| Cash and cash equivalents - beginning of period
| 196,884
| 145,615
| 187,551
| 120,608
|
|
|
|
|
| Cash and cash equivalents - end of period
| $
| 133,422
| $
| 169,765
| $
| 133,422
| $
| 169,765
|
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
|
| 2019
| 2018
| 2019
| 2018
|
|
|
|
|
| Revenue:
|
|
|
|
| Asset Management Group
| $
| 44,405
| $
| 39,194
| $
| 131,659
| $
| 113,525
| Interactive Management Group
| 56,869
| 47,549
| 144,863
| 143,498
| Total
| $
| 101,274
| $
| 86,743
| $
| 276,522
| $
| 257,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset Management Group:
|
|
|
|
| - Segment profit before special charges
| $
| 11,726
| $
| 14,114
| $
| 43,343
| $
| 38,670
| - Special charges
| (159)
| (152)
| (159)
| (333)
| Asset Management Group profit
| $
| 11,567
| $
| 13,962
| $
| 43,184
| $
| 38,337
|
|
|
|
|
| Interactive Management Group:
|
|
|
|
| - Segment profit before special charges
| $
| 18,727
| $
| 15,724
| $
| 45,026
| $
| 45,921
| - Special charges
| (311)
| -
| (367)
| -
| Interactive Management Group profit
| $
| 18,416
| $
| 15,724
| $
| 44,659
| $
| 45,921
|
|
|
|
|
| Corporate expenses
| (2,966)
| (2,962)
| (8,410)
| (8,357)
| Results from operating activities
| $
| 27,017
| $
| 26,724
| $
| 79,433
| $
| 84,258
|
|
|
|
|
| Amortization of acquired software and customer
relationships
| (8,453)
| (7,245)
| (22,453)
| (21,765)
| Foreign exchange (loss) gain
| (131)
| 659
| 433
| (465)
| Finance income
| 469
| 90
| 1,474
| 278
| Finance expenses
| (11)
| (50)
| (66)
| (134)
| Other (expenses) income
| (64)
| 504
| 411
| 1,940
|
|
|
|
|
|
|
|
|
| Income before income taxes
| $
| 18,827
| $
| 20,682
| $
| 59,232
| $
| 55,757
|
SOURCE Enghouse Systems Limited
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