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Enghouse Releases First Quarter Results

MARKHAM, ON, March 7, 2019 /CNW/ - Enghouse Systems Limited (TSX:ENGH.TO - News) today announced its first quarter (unaudited) and financial results for the period ended January  31, 2019.

First quarter revenue increased to $86.0 million, compared to revenue of $85.1 million in the first quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions, which were offset by a decline in license revenue in the Interactive Management Group. Income from operating activities was $25.8 million compared to $24.5 million in the prior year's first quarter, an increase of 5.2%. Net income for the quarter was $15.0 million or $0.27 per diluted share compared to $6.8 million or $0.12 per diluted share in the prior year's first quarter.  Last year's first quarter included a one-time charge of U.S. $6.2 million to reflect the impact of United States Tax Reform.

Adjusted EBITDA for the first quarter was $26.3 million or $0.48 per diluted share, compared to $25.3 million or $0.46 per diluted share last year, with the increase being attributable to contributions from acquisitions and operating cost synergies.

Operating expenses before special charges related to restructuring of acquired operations were $33.0 million compared to $33.9 million in the prior year's first 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 $7.1 million for the quarter compared to $7.2 million in the prior year's first quarter. 

The Company generated cash flows from operating activities of $24.2 million compared to $23.1 million in the first quarter of fiscal 2018, a 4.5% increase. As a result, Enghouse closed the quarter with $190.5 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 $4.9 million for cash dividends and $22.4 million (net of cash acquired) for acquisitions concluded in the current fiscal year and $1.1 million for acquisitions closed in prior years.

On December 21, 2018, the Company declared a stock dividend payable on the basis of one common share for each common share held as at January 22, 2019, which was paid on January 25, 2019. This dividend doubled the number of shares outstanding to 54,638,024 as at January 31, 2019 and effectively achieved a two-for-one stock split. Today, the Board of Directors approved a 22% increase to the Company's eligible quarterly dividend from $0.09 per common share to $0.11 per common share, payable on May 31, 2019 to shareholders of record at the close of business on May 17, 2019. Enghouse has now increased its dividend in each of the past eleven years, by over 10% each year.

A conference call to discuss the results will be held on Friday, March 8, 2019 at 8:45 a.m. EST. To participate, please call +1-647-792-1278 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


January 31, 2019

January 31, 2018




Total Revenue

$

86,045

$

85,075




Results from operating activities

$

25,795

$

24,512

Depreciation of property, plant and equipment

530

670

Special charges

-

129

Adjusted EBITDA

$

26,325

$

25,311

Adjusted EBITDA margin

30.6%

29.8%

Adjusted EBITDA per diluted share

$

0.48

$

0.46






 

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


January 31
 2019

October 31
2018



Assets



Current assets:



   Cash and cash equivalents

$

178,001

$

187,551

   Short-term investments

12,536

6,386

   Accounts receivable, net

72,003

62,085

   Prepaid expenses and other assets

10,572

8,951


273,112

264,973

Non-current assets:



   Property, plant and equipment, net

5,032

5,279

   Intangible assets, net

71,361

59,895

   Goodwill

168,339

155,419

   Deferred income tax assets

8,598

9,634




Total assets

$

526,442

$

495,200



Liabilities



Current liabilities:



   Accounts payable and accrued liabilities

$

41,473

$

44,271

   Income taxes payable

5,634

4,904

   Dividends payable

4,917

4,912

   Provisions

141

268

   Deferred revenue

78,084

64,020

   Current portion of long-term loans

-

122


130,249

118,497

Non-current liabilities:



   Non-current portion of income taxes payable

6,818

7,466

   Deferred income tax liabilities

17,752

13,115

   Deferred revenue

2,691

2,169

   Net employee defined benefit obligation

2,397

2,354

   Long-term loans

760

1,475




Total liabilities

160,667

145,076

Shareholders' Equity





Share capital

79,852

78,997

Contributed surplus

5,138

4,866

Retained earnings

271,362

260,506

Accumulated other comprehensive income

9,423

5,755

Total shareholders' equity                    

365,775

350,124

Total liabilities and shareholders' equity

$

526,442

$

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 January 31


2019

2018

Revenue



     Software licenses

$

18,728

$

22,097

     Hosted and maintenance services

50,813

46,307

     Professional services

13,501

14,377

     Hardware

3,003

2,294


86,045

85,075

Direct costs



     Software licenses

1,361

2,035

     Services

23,545

23,184

     Hardware

2,306

1,425


27,212

26,644




Revenue, net of direct costs

58,833

58,431




 Operating expenses



     Selling, general and administrative

20,456

21,429

     Research and development

12,052

11,691

     Depreciation of property, plant and equipment

530

670

     Special charges

-

129


33,038

33,919




Results from operating activities

25,795

24,512




Amortization of acquired software and customer relationships

(7,116)

(7,162)

Foreign exchange losses

(110)

(2,531)

Finance income

498

122

Finance expenses

(31)

(60)

Other income

28

742




Income before income taxes

19,064

15,623




Provision for income taxes

4,100

8,810




Net income for the period

$

14,964

$

6,813

 

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



Foreign currency translation gain from foreign operations

2,887

1,464

Unrealized gain on investments in equity securities designated at FVOCI

-

324

Deferred income tax expense

-

(43)




Other comprehensive income

2,887

1,745




Comprehensive income

$

17,851

$

8,558

Earnings per share



Basic

$

0.27

$

0.13

Diluted

$

0.27

$

0.12

 

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

-

-

-

-

14,964

14,964

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

2,887

-

2,887

Comprehensive income for the period

-

-

-

2,887

14,964

17,851

Employee share options:







   Value of services recognized



408

-

-

408

   Proceeds on issuing shares

58,000

855

(136)

-

-

719

Dividends declared




-

(4,917)

(4,917)

As at January 31, 2019

54,638,024

79,852

5,138

9,423

271,362

365,775















As at November 1, 2017

53,986,424

71,422

4,715

8,487

221,775

306,399








Net income for the period

-

-

-

-

6,813

6,813

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

1,464

-

1,464

Unrealized gain on investments in equity
securities designated at FVOCI*

 

-

 

-

 

-

 

324

 

-

 

324

Deferred income tax expense

-

-

-

(43)

-

(43)

Comprehensive income for the period

-

-

-

1,745

6,813

8,558

Employee share options:







   Value of services recognized

-

-

399

-

-

399

   Proceeds on issuing shares

70,400

890

(146)

-

-

744

Dividends declared

-

-

-

-

(4,323)

(4,323)

As at January 31, 2018

54,056,824

72,312

4,968

10,232

224,265

311,777















* Unrealized gain on investments in equity securities designated at FVOCI were 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 January 31, 2019 and 2018.

 

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


Three months ended
January 31


2019

2018

Cash flows from operating activities



Net income

$

14,964

$

6,813




Adjustments for:



  Depreciation of property, plant and equipment

530

670

  Amortization of acquired software and customer relationships

7,116

7,162

  Stock-based compensation expense

408

399

  Provision for income taxes

4,100

8,810

  Finance expenses and other income

3

(682)


27,121

23,172




Changes in non-cash operating working capital

1,423

2,913

Income taxes paid

(4,390)

(2,980)

Net cash flows from operating activities

24,154

23,105




Cash flows from investing activities



Purchase of property, plant and equipment, net

(209)

(600)

Acquisitions, net of cash acquired of $6,139 (2018 - $1,068)

(22,396)

(2,991)

Purchase consideration for prior period acquisitions

(1,105)

(1,926)

Net (purchase) sale of short-term investments

(6,108)

985

Net cash flows used in investing activities

(29,818)

(4,532)




Cash flows from financing activities



Issuance of share capital

719

744

Repayment of loans

(957)

(368)

Payment of cash dividend

(4,912)

(4,319)

Net cash flows used in financing activities

(5,150)

(3,943)

 

Effect of currency translation adjustments on cash and cash equivalents

1,264

 

698




Net (decrease) increase in cash and cash equivalents during the period

(9,550)

15,328

Cash and cash equivalents - beginning of period

187,551

120,608




Cash and cash equivalents - end of period

$

178,001

$

135,936

 

Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)


For the three months ended
January 31


2019

2018




Revenue:



    Asset Management Group

$

42,581

$

36,680

    Interactive Management Group

43,464

48,395

Total

$

86,045

$

85,075










    Asset Management Group:



                      - Segment profit before special charges

$14,599

$11,542

                      - Special charges

-

(129)

    Asset Management Group profit

$

14,599

$

11,413




    Interactive Management Group:



                      - Segment profit before special charges

$

13,445

$

15,597

   Interactive Management Group profit

$

13,445

$

15,597




    Corporate expenses

(2,249)

(2,498)

Results from operating activities

$

25,795

$

24,512




Amortization of acquired software and customer relationships

 

(7,116)

 

(7,162)

Foreign exchange loss

(110)

(2,531)

Finance income

498

122

Finance expenses

(31)

(60)

Other income

28

742

Income before income taxes

$

19,064

$

15,623

 

SOURCE Enghouse Systems Limited


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