Enghouse Systems Limited
TSX : ENGH

Enghouse Systems Limited

March 09, 2017 17:15 ET

Enghouse Releases First Quarter Results

MARKHAM, ONTARIO--(Marketwired - March 9, 2017) - Enghouse Systems Limited (TSX:ENGH) today announced its first quarter (unaudited) financial results for the period ended January 31, 2017.

First quarter revenue increased to $78.8 million, compared to revenue of $74.4 million in the first quarter of the prior year. Increased revenue in the quarter reflects incremental revenue from acquisitions net of the unfavourable impact of foreign exchange estimated at $5.2 million. Income from operating activities was $22.4 million compared to $17.8 million in prior year's first quarter, an increase of 25.8%. Net income for the quarter was $11.7 million or $0.43 per diluted share compared to $8.5 million or $0.31 per diluted share in the prior year's first quarter. Adjusted EBITDA for the first quarter was $23.2 million or $0.85 per diluted share compared to $19.1 million or $0.70 per diluted share last year, an increase of 21.4%.

Operating expenses before special charges related to restructuring of acquired operations were $30.9 million compared to $32.4 million in the prior year's first quarter and reflect incremental operating costs related to acquisitions and the positive impact of foreign exchange. Operating costs reflect continued efficiencies related to measures undertaken late in the last fiscal year to scale operating costs to revenues. Non-cash amortization charges in the quarter were $7.5 million compared to $6.8 million in the prior year's first quarter and include amortization charges for acquired software and customer relationships from acquired operations.

Enghouse closed the quarter with $88.3 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 $3.8 million in cash dividends and $1.7 million to partially settle loans inherited with the Presence Technology, S.L. acquisition, completed on October 28, 2016.

The Board of Directors also approved a 14% increase in its eligible quarterly dividend to $0.16 per common share, payable on May 31, 2017 to shareholders of record at the close of business on May 17, 2017. Enghouse has now increased its dividend in each of the past nine years.

A conference call to discuss the results will be held on Friday March 10, 2017 at 8:45 a.m. EST. To participate, please call 416-640-5946 or North American Toll-Free 1-866-233-4585. 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
January 31, 2017 January 31, 2016
Total Revenue $ 78,840 $ 74,370
Results from operating activities 22,448 17,843
Depreciation of property, plant and equipment 614 826
Special charges 98 407
Adjusted EBITDA $ 23,160 $ 19,076
Adjusted EBITDA margin 29.4% 25.7%
Adjusted EBITDA per diluted share $ 0.85 $ 0.70
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
January 31, 2017 October 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 80,644 $ 78,436
Short-term investments 7,609 7,423
Accounts receivable, net 83,489 73,588
Prepaid expenses and other assets 9,436 9,720
181,178 169,167
Non-current assets:
Long-term deposits and accounts receivable, net 1,179 1,357
Property, plant and equipment 5,476 5,696
Intangible assets 77,564 86,632
Goodwill 141,741 144,578
Deferred income tax assets 9,691 11,765
Total assets $ 416,829 $ 419,195
Liabilities
Current liabilities:
Accounts payable and accrued liabilities $ 49,176 $ 55,440
Income taxes payable 3,353 5,139
Dividends payable 3,771 3,767
Provisions 1,280 2,111
Deferred revenue 63,345 54,300
120,925 120,757
Non-current liabilities:
Deferred income tax liabilities 18,384 21,053
Deferred revenue 4,728 4,788
Long-term loans 2,500 4,049
Total liabilities 146,537 150,647
Shareholders' Equity
Share capital 70,013 69,555
Contributed surplus 3,969 3,875
Retained earnings 195,611 187,649
Accumulated other comprehensive income 699 7,469
Total shareholders' equity 270,292 268,548
Total liabilities and shareholders' equity $ 416,829 $ 419,195
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 January 31,
2017 2016
Revenue
Software licenses $ 24,208 $ 20,770
Hosted and maintenance services 39,166 37,806
Professional services 13,968 14,435
Hardware 1,498 1,359
78,840 74,370
Direct costs
Software licenses 2,109 1,157
Services 22,243 21,790
Hardware 1,001 805
25,353 23,752
Revenue, net of direct costs 53,487 50,618
Operating expenses
Selling, general and administrative 19,491 20,141
Research and development 10,836 11,401
Depreciation of property, plant and equipment 614 826
Special charges 98 407
31,039 32,775
Results from operating activities 22,448 17,843
Amortization of acquired software and customer relationships (7,457) (6,840)
Finance income 39 33
Finance expenses (107) (81)
Other income 170 33
Income before income taxes 15,093 10,988
Provision for income taxes 3,360 2,527
Net income for the period $ 11,733 $ 8,461
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation (loss) gain from foreign operations (6,689) 8,799
Transfer to net income of realized gains on available for sale investments - (14)
Unrealized loss on available for sale investments (93) (139)
Deferred income tax recovery 12 20
Other comprehensive (loss) income (6,770) 8,666
Comprehensive income $ 4,963 $ 17,127
Earnings per share
Basic $ 0.44 $ 0.32
Diluted $ 0.43 $ 0.31
Enghouse Systems Limited
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)



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 - - - - 11,733 11,733
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - (6,689) - (6,689)
Transfer to net income of realized gains on available for- sale investments
-

-

-

-

-

-
Unrealized loss on available-for-sale investments - - - (93) - (93)
Deferred income tax recovery - - - 12 - 12
Comprehensive income for the period - - - (6,770) 11,733 4,963
Employee share options:
Value of services recognized - 188 - - 188
Proceeds on issuing shares 29,500 458 (94) - - 364
Dividends - - - - (3,771) (3,771)
Balance - January 31, 2017 26,936,462 70,013 3,969 699 195,611 270,292
Balance - November 1, 2015 26,587,262 64,203 4,029 20,254 154,866 243,352
Net income - - - - 8,461 8,461
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - 8,799 - 8,799
Transfer to net income of realized gains on available for- sale investments
-

-

-

(14)

-

(14)
Unrealized loss on available-for-sale investments - - - (139) - (139)
Deferred income tax recovery - - - 20 - 20
Comprehensive income for the period - - - 8,666 8,461 17,127
Employee share options:
Value of services recognized - - 325 - - 325
Proceeds on issuing shares 224,200 3,083 (586) - - 2,497
Dividends - - - - (3,217) (3,217)
Balance - January 31, 2016 26,811,462 67,286 3,768 28,920 160,110 260,084
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
Three months ended January 31,
2017 2016
Cash flows from operating activities
Net income for the period $ 11,733 $ 8,461
Adjustments for:
Depreciation of property, plant and equipment 614 826
Amortization of acquired software and customer relationships 7,457 6,840
Stock-based compensation expense 188 325
Provision for income tax 3,360 2,527
Finance expenses and other income (63) 48
23,289 19,027
Changes in non-cash operating working capital (8,018) (10,623)
Income tax paid (4,596) (1,497)
Net cash flows from operating activities 10,675 6,907
Cash flows from investing activities
Purchase of property, plant and equipment, net (565) (1,318)
Purchase of other software (489) (134)
Acquisitions, net of cash acquired of nil (2016 $1,723) - (26,019)
Purchase consideration for prior period acquisitions (393) (690)
Net purchase of short-term investments (608) (1,045)
Net cash flows used in investing activities (2,055) (29,206)
Cash flows from financing activities
Issuance of share capital 364 2,497
Repayment of loans (1,667) -
Payment of cash dividend (3,767) (3,190)
Net cash flows used in financing activities (5,070) (693)
Effect of currency translation adjustments on cash and cash equivalents
(1,342)

3,175
Net increase (decrease) in cash and cash equivalents during the period 2,208 (19,817)
Cash and cash equivalents - beginning of period 78,436 94,131
Cash and cash equivalents - end of period $ 80,644 $ 74,314
Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)
For the three months ended
January 31

2017

2016
Revenue:
Asset Management Group $ 31,286 $ 25,758
Interactive Management Group 47,554 48,612
Total $ 78,840 $ 74,370
Asset Management Group:
- Segment profit before special charges $ 8,525 $ 5,889
- Special charges 96 (225)
Asset Management Group profit $ 8,621 $ 5,664
Interactive Management Group:
- Segment profit before special charges $ 15,768 $ 14,741
- Special charges (194) (182)
Interactive Management Group profit $ 15,574 $ 14,559
Corporate expenses (1,747) (2,380)
Results from operating activities $ 22,448 $ 17,843
Amortization of acquired software and customer relationships (7,457) (6,840)
Finance income 39 33
Finance expenses (107) (81)
Other income 170 33
Income before income taxes $ 15,093 $ 10,988

Contact Information

  • Sam Anidjar
    Vice President, Corporate Development
    Enghouse Systems Limited
    Tel: (905) 946-3200
    Email: investor@enghouse.com