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06.09.2018 23:00:00
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Enghouse Releases Third Quarter Results
MARKHAM, ON, Sept. 6, 2018 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its third quarter (unaudited) financial results for the period ended July 31, 2018.
Third quarter revenue increased to $86.7 million, compared to revenue of $82.8 million in the third quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions. Income from operating activities was $26.7 million compared to $22.6 million in the prior year's third quarter, an increase of 18.1%. Net income for the quarter was $16.1 million or $0.58 per diluted share compared to $11.2 million or $0.41 per diluted share in the prior year's third quarter, an increase of 43.6%.
Adjusted EBITDA for the third quarter was $27.4 million or $1.00 per diluted share, compared to $23.4 million or $0.86 per diluted share last year, with the increase being attributable to contributions from acquisitions and operating cost synergies.
On a year-to-date basis, revenue was $257.0 million compared to revenue of $241.1 million in the prior year, an increase of 6.6%. Income from operating activities was $75.9 million, compared to $66.6 million in the prior year-to-date, an increase of 14.0%. Adjusted EBITDA for the year to date increased 13.1% to $78.1 million or $2.86 per diluted share compared to $69.0 million or $2.53 per diluted share last year. Net income for the year to date was $38.2 million or $1.40 per diluted share compared to $31.9 million or $1.17 per diluted share last year.
Operating expenses before special charges related to restructuring of acquired operations were $34.1 million compared to $35.0 million in the prior year's third quarter and reflect operating cost savings, net of incremental operating costs related to acquisitions. Non-cash amortization charges on acquired software and customer relationships from acquired operations were $7.2 million for the quarter compared to $7.4 million in the prior year's third quarter. On a year-to-date basis, operating expenses before special charges were $102.3 million or 39.8% of revenue compared to $98.9 million or 41.0% of revenue last year.
The Company generated strong cash flows from operating activities of $29.3 million compared to $25.1 million in the third quarter of fiscal 2017. On a year-to-date basis, cash flows from operating activities were $74.2 million compared to $54.1 million in the prior year, an increase of 37.1%. As a result, Enghouse closed the quarter with a record $178.4 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 $13.5 million in cash dividends, $9.7 million (net of cash acquired) for acquisitions concluded in the current fiscal year and $6.9 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 November 30, 2018 to shareholders of record at the close of business on November 16, 2018.
A conference call to discuss the results will be held on Friday, September 7, 2018 at 8:45 a.m. EST. To participate, please call +1-416-204-1042 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, 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, 2018 | July 31, 2017 | July 31, 2018 | July 31, 2017 | |||||
Total Revenue | $ | 86,743 | $ | 82,756 | $ | 257,023 | $ | 241,139 |
Results from operating activities | 26,724 | 22,622 | 75,901 | 66,597 | ||||
Depreciation of property, plant and equipment | 540 | 619 | 1,869 | 1,828 | ||||
Special charges | 152 | 133 | 333 | 614 | ||||
Adjusted EBITDA | $ | 27,416 | $ | 23,374 | $ | 78,103 | $ | 69,039 |
Adjusted EBITDA margin | 31.6% | 28.2% | 30.4% | 28.6% | ||||
Adjusted EBITDA per diluted share | $ | 1.00 | $ | 0.86 | $ | 2.86 | $ | 2.53 |
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
July 31 | October 31 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 169,765 | $ | 120,608 | ||
Short-term investments | 8,674 | 9,737 | ||||
Accounts receivable, net | 66,829 | 71,894 | ||||
Prepaid expenses and other assets | 9,502 | 8,528 | ||||
254,770 | 210,767 | |||||
Non-current assets: | ||||||
Long-term deposits and accounts receivable, net | 1,295 | 1,002 | ||||
Property, plant and equipment | 5,178 | 5,322 | ||||
Intangible assets | 67,042 | 79,714 | ||||
Goodwill | 157,154 | 150,687 | ||||
Deferred income tax assets | 5,830 | 14,345 | ||||
Total assets | $ | 491,269 | $ | 461,837 | ||
Liabilities | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 45,550 | $ | 54,656 | ||
Income taxes payable | 1,355 | 6,018 | ||||
Dividends payable | 4,899 | 4,319 | ||||
Provisions | 277 | 1,521 | ||||
Deferred revenue | 69,956 | 59,104 | ||||
Current portion of long-term loans | 202 | 468 | ||||
122,239 | 126,086 | |||||
Non-current liabilities: | ||||||
Non-current portion of income taxes payable | 9,218 | - | ||||
Deferred income tax liabilities | 14,651 | 21,449 | ||||
Deferred revenue | 2,421 | 3,337 | ||||
Net employee defined benefit obligation | 2,398 | 2,328 | ||||
Long-term loans | 1,785 | 2,238 | ||||
Total liabilities | 152,712 | 155,438 | ||||
Shareholders' Equity | ||||||
Share capital | 77,312 | 71,422 | ||||
Contributed surplus | 4,823 | 4,715 | ||||
Retained earnings | 245,866 | 221,775 | ||||
Accumulated other comprehensive income | 10,556 | 8,487 | ||||
Total shareholders' equity | 338,557 | 306,399 | ||||
Total liabilities and shareholders' equity | $ | 491,269 | $ | 461,837 | ||
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 | Nine months ended | ||||||||
2018 | 2017 | 2018 | 2017 | ||||||
Revenue | |||||||||
Software licenses | $ | 26,213 | $ | 24,480 | $ | 76,724 | $ | 72,469 | |
Hosted and maintenance services | 44,783 | 43,411 | 131,319 | 122,487 | |||||
Professional services | 14,123 | 12,979 | 42,972 | 41,799 | |||||
Hardware | 1,624 | 1,886 | 6,008 | 4,384 | |||||
86,743 | 82,756 | 257,023 | 241,139 | ||||||
Direct costs | |||||||||
Software licenses | 1,740 | 1,749 | 5,467 | 5,311 | |||||
Services | 22,990 | 22,211 | 69,335 | 67,060 | |||||
Hardware | 1,058 | 1,027 | 3,727 | 2,653 | |||||
25,788 | 24,987 | 78,529 | 75,024 | ||||||
Revenue, net of direct costs | 60,955 | 57,769 | 178,494 | 166,115 | |||||
Operating expenses | |||||||||
Selling, general and administrative | 21,884 | 22,870 | 64,432 | 63,644 | |||||
Research and development | 11,655 | 11,525 | 35,959 | 33,432 | |||||
Depreciation of property, plant and equipment | 540 | 619 | 1,869 | 1,828 | |||||
Special charges | 152 | 133 | 333 | 614 | |||||
34,231 | 35,147 | 102,593 | 99,518 | ||||||
Results from operating activities | 26,724 | 22,622 | 75,901 | 66,597 | |||||
Amortization of acquired software and customer relationships | (7,245) | (7,397) | (21,763) | (22,365) | |||||
Foreign exchange gains (losses) | 659 | (806) | (465) | (3,027) | |||||
Finance income | 90 | 32 | 278 | 131 | |||||
Finance expenses | (50) | (65) | (134) | (137) | |||||
Other income (expense) | 504 | (50) | 1,940 | 101 | |||||
Income before income taxes | 20,682 | 14,336 | 55,757 | 41,300 | |||||
Provision for income taxes | 4,620 | 3,154 | 17,564 | 9,358 | |||||
Net income for the period | $ | 16,062 | $ | 11,182 | $ | 38,193 | $ | 31,942 | |
Items that are or may be reclassified subsequently to profit or loss: | |||||||||
Foreign currency translation (loss) gain from foreign operations | (3,929) | (12,097) | 1,331 | (4,119) | |||||
Unrealized gain (loss) on available for sale investments | 625 | 5 | 851 | (2,440) | |||||
Deferred income tax (expense) recovery | (83) | (1) | (113) | 323 | |||||
Other comprehensive (loss) income | (3,387) | (12,093) | 2,069 | (6,236) | |||||
Comprehensive income (loss) | $ | 12,675 | $ | (911) | $ | 40,262 | $ | 25,706 | |
Earnings per share | |||||||||
Basic | $ | 0.59 | $ | 0.41 | $ | 1.41 | $ | 1.19 | |
Diluted | $ | 0.58 | $ | 0.41 | $ | 1.40 | $ | 1.17 | |
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)
Share Capital -number | Share $ | Contributed $ | Retained | Accumulated $ | Total $ | ||
Balance – November 1, 2017 | 26,993,212 | 71,422 | 4,715 | 221,775 | 8,487 | 306,399 | |
Net income | - | - | - | 38,193 | - | 38,193 | |
Other comprehensive income (net of tax): | |||||||
Cumulative translation adjustment | - | - | - | - | 1,331 | 1,331 | |
Unrealized gain on available-for-sale investments | - | - | - | - | 851 | 851 | |
Deferred income tax expense | - | - | - | - | (113) | (113) | |
Comprehensive income for the period | - | - | - | 38,193 | 2,069 | 40,262 | |
Employee share options: | |||||||
Value of services recognized | - | 1,171 | - | - | 1,171 | ||
Proceeds on issuing shares | 222,500 | 5,890 | (1,063) | - | - | 4,827 | |
Dividends | - | - | - | (14,102) | - | (14,102) | |
Balance – July 31, 2018 | 27,215,712 | 77,312 | 4,823 | 245,866 | 10,556 | 338,557 | |
Balance – November 1, 2016 | 26,906,962 | 69,555 | 3,875 | 187,649 | 7,469 | 268,548 | |
Net income | - | - | - | 31,942 | - | 31,942 | |
Other comprehensive income (net of tax): | |||||||
Cumulative translation adjustment | - | - | - | - | (4,119) | (4,119) | |
Unrealized loss on available-for-sale investments | - | - | - | - | (2,440) | (2,440) | |
Deferred income tax recovery | - | - | - | - | 323 | 323 | |
Comprehensive income for the period | - | - | - | 31,942 | (6,236) | 25,706 | |
Employee share options: | |||||||
Value of services recognized | - | - | 809 | - | - | 809 | |
Proceeds on issuing shares | 53,750 | 1,000 | (187) | - | - | 813 | |
Dividends | - | - | - | (12,397) | - | (12,397) | |
Balance – July 31, 2017 | 26,960,712 | 70,555 | 4,497 | 207,194 | 1,233 | 283,479 | |
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
Three months ended July 31 |
Nine months ended July 31 | ||||||||
2018 | 2017 | 2018 | 2017 | ||||||
Cash flows from operating activities | |||||||||
Net income | $ | 16,062 | $ | 11,182 | $ | 38,193 | $ | 31,942 | |
Adjustments for: | |||||||||
Depreciation of property, plant and equipment | 540 | 619 | 1,869 | 1,828 | |||||
Amortization of acquired software and customer relationships | 7,245 | 7,397 | 21,763 | 22,365 | |||||
Stock-based compensation expense | 236 | 265 | 1,171 | 809 | |||||
Provision for income taxes | 4,620 | 3,154 | 17,564 | 9,358 | |||||
Finance expenses and other income | (454) | 115 | (1,806) | 36 | |||||
28,249 | 22,732 | 78,754 | 66,338 | ||||||
Changes in non-cash operating working capital | 6,041 | 4,595 | 6,608 | (2,290) | |||||
Income taxes paid | (5,016) | (2,218) | (11,141) | (9,904) | |||||
Net cash flows from operating activities | 29,274 | 25,109 | 74,221 | 54,144 | |||||
Cash flows from investing activities | |||||||||
Purchase of property, plant and equipment, net | (607) | (106) | (1,538) | (1,025) | |||||
Purchase of other software | - | (255) | - | (1,475) | |||||
Acquisitions, net of cash acquired of $1,235 (2017- $3,637) | - | - | (9,675) | (16,170) | |||||
Purchase consideration for prior period acquisitions | (1,866) | (579) | (6,945) | (1,023) | |||||
Net sale (purchase) of short-term investments | 1,754 | (196) | 2,486 | (1,526) | |||||
Net cash flows used in investing activities | (719) | (1,136) | (15,672) | (21,219) | |||||
Cash flows from financing activities | |||||||||
Issuance of share capital | 2,699 | 244 | 4,827 | 813 | |||||
Repayment of loans | (334) | - | (735) | (1,667) | |||||
Payment of cash dividend | (4,880) | (4,312) | (13,523) | (11,850) | |||||
Net cash flows used in financing activities | (2,515) | (4,068) | (9,431) | (12,704) | |||||
Effect of currency translation adjustments on cash and cash equivalents | (1,890) | (3,571) | 39 | (1,419) | |||||
Net increase in cash and cash equivalents during the period | 24,150 | 16,334 | 49,157 | 18,802 | |||||
Cash and cash equivalents - beginning of period | 145,615 | 80,904 | 120,608 | 78,436 | |||||
Cash and cash equivalents - end of period | $ | 169,765 | $ | 97,238 | $ | 169,765 | $ | 97,238 | |
Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)
For the three months | For the nine months | |||||||||
2018 | 2017 | 2018 | 2017 | |||||||
Revenue: | ||||||||||
Asset Management Group | $ | 39,194 | $ | 35,949 | $ | 113,525 | $ | 99,701 | ||
Interactive Management Group | 47,549 | 46,807 | 143,498 | 141,438 | ||||||
Total | $ | 86,743 | $ | 82,756 | $ | 257,023 | $ | 241,139 | ||
Asset Management Group: | ||||||||||
- Segment profit before special charges | $ | 14,114 | $ | 10,962 | $ | 38,670 | $ | 28,978 | ||
- Special charges | (152) | (133) | (333) | (477) | ||||||
Asset Management Group profit | $ | 13,962 | $ | 10,829 | $ | 38,337 | $ | 28,501 | ||
Interactive Management Group: | ||||||||||
- Segment profit before special charges | $ | 15,724 | $ | 13,926 | $ | 45,921 | $ | 43,767 | ||
- Special charges | - | - | - | (137) | ||||||
Interactive Management Group profit | $ | 15,724 | $ | 13,926 | $ | 45,921 | $ | 43,630 | ||
Corporate expenses | (2,962) | (2,133) | (8,357) | (5,534) | ||||||
Results from operating activities | $ | 26,724 | $ | 22,622 | $ | 75,901 | $ | 66,597 | ||
Amortization of acquired software and customer relationships | (7,245) | (7,397) | (21,763) | (22,365) | ||||||
Foreign exchange gains (losses) | 659 | (806) | (465) | (3,027) | ||||||
Finance income | 90 | 32 | 278 | 131 | ||||||
Finance expenses | (50) | (65) | (134) | (137) | ||||||
Other income (expense) | 504 | (50) | 1,940 | 101 | ||||||
Income before income taxes | $ | 20,682 | $ | 14,336 | $ | 55,757 | $ | 41,300 | ||
SOURCE Enghouse Systems Limited
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