MARKHAM, ONTARIO--(Marketwired - Dec. 17, 2013) - Enghouse Systems Limited (TSX:ESL) today announced its fourth quarter (unaudited) and year-end financial results for the period ended October 31, 2013.
Revenue increased by 32% to $179.9 million for the fiscal year, compared to revenue of $136.4 million in the previous fiscal year, culminating in another record year as the Company continues to execute its acquisition strategy. Income from operating activities was $40.7 million compared to $33.2 million last year, an increase of 23%. Net income for the fiscal year was $24.3 million or $0.92 per diluted share compared to $20.9 million or $0.80 per diluted share in the prior year. Adjusted EBITDA for the fiscal year was $44.9 million or $1.69 per diluted share compared to $35.1 million or $1.35 per diluted share last year.
Revenue for the fourth quarter was $47.2 million, an increase of 21% over last year's fourth quarter revenue of $39.0 million. Income from operating activities for the quarter was $12.0 million compared to $9.7 million last year, an increase of 23%. Net income for the quarter was $9.7 million or $0.36 per diluted share compared to $8.3 million or $0.32 per diluted share last year. Adjusted EBITDA for the quarter was $12.4 million or $0.46 per diluted share compared to $10.2 million or $0.39 per diluted share last year.
Increased revenue in the quarter reflects incremental revenue from acquisitions including nominal contributions from recent acquisitions, Safeharbor Knowledge Solutions, acquired September 6, 2013 and Andtek GmbH, acquired October 7, 2013. Revenue also includes hosted and maintenance services revenue of $24.3 million in the quarter, an increase of 21% over last year's fourth quarter. In fiscal 2013, hosted and services revenue was $91.8 million compared to $71.6 million in fiscal 2012 and is attributable to contributions from recent acquisitions and an increase in organic hosted and maintenance services revenue. Software license revenue was $58.9 million compared to $45.1 million, an increase of 31% over fiscal 2012.
Operating expenses were $21.5 million for the quarter and $88.1 million for the fiscal year compared to $18.4 million and $66.5 million respectively last year as a result of the incremental cost of acquired operations. This also includes research and development costs of $7.9 million and $30.5 million in the quarter and year, respectively, consistent with the Company's continued investment in software development. Non-cash amortization charges for the year were $15.6 million compared to $11.0 million in the prior fiscal year and relate to incremental amortization charges for acquired software and customer relationship intangibles recorded on the current year's acquisitions.
The Company closed the year with $90.3 million in cash, cash equivalents and short-term investments, after the payment of approximately $25.0 million related to acquisitions and $7.5 million to dividends for the year. The Company generated operating cash flows before non-cash working capital items of $44.1 million in the year compared to $36.2 million in 2012. Enghouse continues to have no long-term debt.
As previously announced, on November 4, 2013 the Company acquired 100% of the issued and outstanding common shares of Information Access Technologies Inc. ("IAT"). IAT is a dynamic company specializing in innovative communication technology which enables companies to design, execute and measure customer communication campaigns for a variety of marketing, customer care and payment processing markets. IAT solutions add premise and hosted products and services for both outbound dialing and broadcast messaging and will be included in the Interactive Management Group results in fiscal 2014. The Company continues to seek further acquisitions to continue to grow its market share globally.
The Board of Directors also announced today an eligible quarterly dividend of $0.08 per common share, payable on February 28, 2014 to shareholders of record at the close of business on February 14, 2014.
A conference call to discuss the results will be held on Wednesday, December 18, 2013 at 8:45 a.m. EST. To participate, please call 416-216-4169 (PIN 8836 010#) or North American Toll-Free 1-866-229-4144 (PIN 8836 610#).
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 larger and more diverse software company through strategic acquisitions and managed growth. Enghouse shares are listed on the Toronto Stock Exchange under the symbol "ESL". Further information about Enghouse may be obtained from the Company's web site 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 measures of operating performance. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Adjusted EBITDA is calculated as income before income taxes adjusted for depreciation of property, plant and equipment, amortization of acquired software and customer relationships, finance income, finance expenses, other income, 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 income before income taxes:
| Three Months ended | Year ended | |||||||||||
| October 31, 2013 |
October 31, 2012 |
October 31, 2013 |
October 31, 2012 |
|||||||||
| Total Revenue | $ | 47,171 | $ | 38,952 | $ | 179,886 | $ | 136,368 | ||||
| Income before income taxes | $ | 8,441 | $ | 6,706 | $ | 27,047 | $ | 23,107 | ||||
| Depreciation of property, plant and equipment | 440 |
444 |
1,743 |
1,386 |
||||||||
| Amortization of acquired software and customer relationships | 4,083 |
3,204 |
15,568 |
10,974 |
||||||||
| Finance income | (124 | ) | (289 | ) | (641 | ) | (987 | ) | ||||
| Finance expenses | 55 | 86 | 313 | 269 | ||||||||
| Other income | (466 | ) | 23 | (1,582 | ) | (145 | ) | |||||
| Special charges | - | 53 | 2,491 | 544 | ||||||||
| Adjusted EBITDA | $ | 12,429 | $ | 10,227 | $ | 44,939 | $ | 35,148 | ||||
| Adjusted EBITDA margin | 26 | % | 26 | % | 25 | % | 26 | % | ||||
| Adjusted EBITDA per diluted share | $ | 0.46 | $ | 0.39 | $ | 1.69 | $ | 1.35 | ||||
| Enghouse Systems Limited |
| Consolidated Statements of Financial Position |
| (in thousands of Canadian dollars) |
| October 31, 2013 |
October 31, 2012 |
|||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 70,109 | $ | 59,544 | ||
| Short-term investments | 20,188 | 24,108 | ||||
| Accounts receivable, net | 36,444 | 31,368 | ||||
| Prepaid expenses and other assets | 5,839 | 3,853 | ||||
| 132,580 | 118,873 | |||||
| Non-current assets: | ||||||
| Property, plant and equipment | 3,599 | 3,365 | ||||
| Intangible assets | 132,358 | 106,995 | ||||
| Deferred income tax assets | 9,419 | 10,477 | ||||
| Total assets | $ | 277,956 | $ | 239,710 | ||
| Liabilities | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued liabilities | $ | 32,659 | $ | 26,053 | ||
| Income taxes payable | 1,555 | 2,008 | ||||
| Dividends payable | 2,083 | 1,676 | ||||
| Accrued provisions | 3,427 | 1,621 | ||||
| Deferred revenue | 39,325 | 35,935 | ||||
| 79,049 | 67,293 | |||||
| Non-current liabilities: | ||||||
| Deferred income tax liabilities | 14,482 | 13,241 | ||||
| Deferred revenue | 1,797 | 1,236 | ||||
| Total liabilities | 95,328 | 81,770 | ||||
| Shareholders' Equity | ||||||
| Share capital | 58,514 | 55,751 | ||||
| Contributed surplus | 3,175 | 2,847 | ||||
| Retained earnings | 115,800 | 99,371 | ||||
| Accumulated other comprehensive income (loss) | 5,139 | (29 | ) | |||
| Total equity | 182,628 | 157,940 | ||||
| Total liabilities and equity | $ | 277,956 | $ | 239,710 | ||
| Enghouse Systems Limited |
| Consolidated Interim Statements of Operations and Comprehensive Income |
| (in thousands of Canadian dollars, except per share amounts) |
| (Unaudited) | (Unaudited) | ||||||||||||
| Three months ended October 31 |
Year ended October 31 |
||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||
| Revenue | |||||||||||||
| Software licenses | $ | 15,010 | $ | 13,107 | $ | 58,887 | $ | 45,108 | |||||
| Hosted and maintenance services | 24,262 | 20,114 | 91,762 | 71,608 | |||||||||
| Professional services | 6,350 | 5,210 | 23,931 | 18,083 | |||||||||
| Hardware | 1,549 | 521 | 5,306 | 1,569 | |||||||||
| 47,171 | 38,952 | 179,886 | 136,368 | ||||||||||
| Direct costs | |||||||||||||
| Software licenses | 1,145 | 1,532 | 4,336 | 4,115 | |||||||||
| Services | 11,471 | 8,861 | 43,190 | 31,410 | |||||||||
| Hardware | 1,054 | 408 | 3,592 | 1,134 | |||||||||
| 13,670 | 10,801 | 51,118 | 36,659 | ||||||||||
| Revenue, net of direct costs | 33,501 | 28,151 | 128,768 | 99,709 | |||||||||
| Operating expenses | |||||||||||||
| Selling, general and administrative | 13,145 | 11,977 | 53,366 | 43,069 | |||||||||
| Research and development | 7,927 | 5,947 | 30,463 | 21,492 | |||||||||
| Depreciation of property, plant and equipment | 440 | 444 | 1,743 | 1,386 | |||||||||
| Special charges | - | 53 | 2,491 | 544 | |||||||||
| 21,512 | 18,421 | 88,063 | 66,491 | ||||||||||
| Results from operating activities | 11,989 | 9,730 | 40,705 | 33,218 | |||||||||
| Amortization of acquired software and customer relationships | (4,083 | ) | (3,204 | ) | (15,568 | ) | (10,974 | ) | |||||
| Finance income | 124 | 289 | 641 | 987 | |||||||||
| Finance expenses | (55 | ) | (86 | ) | (313 | ) | (269 | ) | |||||
| Other income | 466 | (23 | ) | 1,582 | 145 | ||||||||
| Income before income taxes | 8,441 | 6,706 | 27,047 | 23,107 | |||||||||
| (Recovery of) provision for income taxes | (1,271 | ) | (1,639 | ) | 2,700 | 2,234 | |||||||
| Net income for the period | $ | 9,712 | $ | 8,345 | $ | 24,347 | $ | 20,873 | |||||
| Items that are or may be reclassified subsequently to profit or loss: | |||||||||||||
| Foreign currency translation gain (loss) from foreign operations | 5,354 | 1,652 | 5,575 | (12 | ) | ||||||||
| Transfer to net income of realized gains on available for sale investments | (668 |
) | - |
(2,869 |
) | (156 |
) | ||||||
| Unrealized gain (loss) on available for sale investments | 126 | (42 | ) | 2,393 | (1,111 | ) | |||||||
| Deferred income tax recovery | 78 | 5 | 69 | 215 | |||||||||
| Other comprehensive income (loss) | 4,890 | 1,615 | 5,168 | (1,064 | ) | ||||||||
| Comprehensive income | $ | 14,602 | $ | 9,960 | $ | 29,515 | $ | 19,809 | |||||
| Earnings per share | |||||||||||||
| Basic | $ | 0.37 | $ | 0.32 | $ | 0.94 | $ | 0.82 | |||||
| Diluted | $ | 0.36 | $ | 0.32 | $ | 0.92 | $ | 0.80 | |||||
| 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, 2012 | 25,780,562 | 55,751 | 2,847 | (29 | ) | 99,371 | 157,940 | ||||||
| Net income | - | - | - | - | 24,347 | 24,347 | |||||||
| Other Comprehensive Income (net of tax): | |||||||||||||
| Cumulative Translation Adjustment | - | - | - | 5,575 | - | 5,575 | |||||||
| Transfer to net income of realized gains on available-for-sale investments | - |
- |
- |
(2,869 |
) | - |
(2,869 |
) | |||||
| Unrealized gain on available-for-sale investments | - | - | - | 2,393 | - | 2,393 | |||||||
| Deferred income tax recovery | - | - | - | 69 | - | 69 | |||||||
| Comprehensive income for the year | - | - | - | 5,168 | 24,347 | 29,515 | |||||||
| Employee share options: | |||||||||||||
| Value of services recognized | 1,016 | - | - | 1,016 | |||||||||
| Proceeds on issuing shares | 262,400 | 2,763 | (688 | ) | - | - | 2,075 | ||||||
| Dividends | - | - | - | - | (7,918 | ) | (7,918 | ) | |||||
| Balance - October 31, 2013 | 26,042,962 | 58,514 | 3,175 | 5,139 | 115,800 | 182,628 | |||||||
| Balance - November 1, 2011 | 25,337,262 | 52,134 | 2,970 | 1,035 | 84,782 | 140,921 | |||||||
| Net income | - | - | - | - | 20,873 | 20,873 | |||||||
| Other Comprehensive Income (net of tax): | |||||||||||||
| Cumulative Translation Adjustment | - | - | - | (12 | ) | - | (12 | ) | |||||
| Transfer to net income of realized gains on available-for-sale investments | - |
- |
- |
(156 |
) | - |
(156 |
) | |||||
| Unrealized loss on available-for-sale investments | - | - | - | (1,111 | ) | - | (1,111 | ) | |||||
| Deferred income tax recovery | - | - | - | 215 | - | 215 | |||||||
| Comprehensive (loss) income for the year | - | - | - | (1,064 | ) | 20,873 | 19,809 | ||||||
| Employee share options: | |||||||||||||
| Value of services recognized | - | - | 621 | - | - | 621 | |||||||
| Proceeds on issuing shares | 443,300 | 3,617 | (744 | ) | - | - | 2,873 | ||||||
| Dividends | - | - | - | - | (6,284 | ) | (6,284 | ) | |||||
| Balance - October 31, 2012 | 25,780,562 | 55,751 | 2,847 | (29 | ) | 99,371 | 157,940 | ||||||
| Enghouse Systems Limited |
| Consolidated Interim Statements of Cash Flows |
| (in thousands of Canadian dollars) |
| (Unaudited) | (Unaudited) | ||||||||||||
| Three months ended October 31 | Year ended October 31 |
||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||
| Cash flows from operating activities | |||||||||||||
| Net income | $ | 9,712 | $ | 8,345 | $ | 24,347 | $ | 20,873 | |||||
| Adjustments for: | |||||||||||||
| Depreciation of property, plant and equipment | 440 | 444 | 1,743 | 1,386 | |||||||||
| Amortization of acquired software and customer relationships | 4,083 | 3,204 | 15,568 | 10,974 | |||||||||
| Stock-based compensation expense | 312 | 119 | 1,016 | 621 | |||||||||
| Income tax (recovery) expense | (1,271 | ) | (1,639 | ) | 2,700 | 2,234 | |||||||
| Finance expenses and other income | (411 | ) | 109 | (1,269 | ) | 124 | |||||||
| 12,865 | 10,582 | 44,105 | 36,212 | ||||||||||
| Changes in non-cash operating working capital | (10,020 | ) | (4,769 | ) | (7,545 | ) | (8,245 | ) | |||||
| Income tax paid | (693 | ) | (1,304 | ) | (4,203 | ) | (4,492 | ) | |||||
| Net cash flows from operating activities | 2,152 | 4,509 | 32,357 | 23,475 | |||||||||
| Cash flows from investing activities | |||||||||||||
| Purchase of property, plant and equipment, net | (238 | ) | (402 | ) | (1,403 | ) | (2,295 | ) | |||||
| Acquisitions, net of cash acquired of $6,004 (2012 - $810) | (5,221 | ) | - | (22,433 | ) | (32,453 | ) | ||||||
| Purchase consideration for prior period acquisitions | - | - | (2,593 | ) | - | ||||||||
| Net proceeds from sale of short-term investments | 14,006 | 17,396 | 7,948 | 8,704 | |||||||||
| Net cash flows from (used in) investing activities | 8,547 | 16,994 | (18,481 | ) | (26,044 | ) | |||||||
| Cash flows from financing activities | |||||||||||||
| Issuance of share capital | 491 | 556 | 2,075 | 2,873 | |||||||||
| Payment of cash dividend | (2,079 | ) | (1,669 | ) | (7,511 | ) | (5,875 | ) | |||||
| Net cash flows used in financing activities | (1,588 | ) | (1,113 | ) | (5,436 | ) | (3,002 | ) | |||||
| Effect of currency translation adjustments on cash and cash equivalents | 2,206 | (709 | ) | 2,125 | (509 | ) | |||||||
| Net increase (decrease) in cash and cash equivalents during the period | 11,317 |
19,681 |
10,565 |
(6,080 |
) | ||||||||
| Cash and cash equivalents - beginning of period | 58,792 | 39,863 | 59,544 | 65,624 | |||||||||
| Cash and cash equivalents - end of period | $ | 70,109 | $ | 59,544 | $ | 70,109 | $ | 59,544 | |||||
| Enghouse Systems Limited |
| Selected Segment Reporting Information |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| For the three months ended October 31 |
For the year ended October 31 |
||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||
| Revenue: | |||||||||||||
| Asset Management Group | $ | 10,332 | $ | 5,789 | $ | 33,804 | $ | 17,308 | |||||
| Interactive Management Group | 36,839 | 33,163 | 146,082 | 119,060 | |||||||||
| Total | $ | 47,171 | $ | 38,952 | $ | 179,886 | $ | 136,368 | |||||
| Segment Profit | |||||||||||||
| Asset Management Group | $ | 2,082 | $ | 1,910 | $ | 5,039 | $ | 3,828 | |||||
| Interactive Management Group | 7,006 | 5,472 | 24,446 | 21,902 | |||||||||
| Corporate expenses | (1,182 | ) | (856 | ) | (4,348 | ) | (3,486 | ) | |||||
| Finance income | 124 | 289 | 641 | 987 | |||||||||
| Finance expenses | (55 | ) | (86 | ) | (313 | ) | (269 | ) | |||||
| Other income | 466 | (23 | ) | 1,582 | 145 | ||||||||
| Total | $ | 8,441 | $ | 6,706 | $ | 27,047 | $ | 23,107 | |||||
Contact Information:
Sam Anidjar
Vice President, Corporate Development
(905) 946-3200
investor@enghouse.com
www.enghouse.com