MARKHAM, ONTARIO -- (Marketwired) -- 06/08/17 -- Enghouse Systems Limited (TSX: ENGH) today announced its second quarter (unaudited) financial results for the period ended April 30, 2017.
Second quarter revenue was $79.5 million, an increase of 1.3% over revenue of $78.5 million in the second quarter last year. On a year to date basis, revenue was $158.4 million compared to $152.9 million last year, an increase of 3.6%. The revenue increase primarily reflects incremental revenue contributions from acquisitions but is mitigated by the unfavorable impact of foreign exchange compared to last year which negatively impacted revenue by an estimated $3.3 million in the quarter and $8.0 million year to date. Hosted and maintenance services revenue was $39.9 million in the quarter, an increase of 4.2% over the same period last year and includes the estimated negative impact of foreign exchange of $1.65 million.
Adjusted EBITDA for the quarter was $20.5 million ($0.75 per diluted share) compared to $19.3 million ($0.71 per diluted share) in last year's second quarter and includes the net negative impact of $2.1 million related to foreign exchange losses compared to last year. Adjusted EBITDA for the year to date was $43.6 million ($1.60 per diluted share) compared to $38.4 million ($1.41 per diluted share) last year, an increase of 13.6%. This includes the net negative impact of $4.4 million related to foreign exchange losses on a year to date basis compared to last year, which would have resulted in a 26.7% increase compared to the prior year excluding foreign exchange losses.
Net income for the quarter was $9.0 million ($0.33 per diluted share) compared to the prior year's second quarter net income of $8.5 million ($0.31 per diluted share). Results from operating activities for the quarter were $19.5 million compared to $18.1 million in the prior year's second quarter, an increase of 7.5% over the prior year.
Operating expenses before special charges related to restructuring of acquired operations were $35.0 million compared to $35.2 million in the prior year's second quarter and include incremental operating costs related to acquired operations, net of the favourable impact of foreign exchange. Non-cash amortization charges in the quarter were $7.5 million compared to $7.0 million in the prior year's second quarter and include amortization charges for acquired software and customer relationships from acquired operations. On a year to date basis operating expenses before special charges were $65.9 million compared to $67.6 million and include incremental operating costs related to acquired operations, net of the favourable impact of foreign exchange compared to last year.
Enghouse generated cash flows from operations of $18.4 million in the quarter and closed the quarter with $87.6 million in cash, cash equivalents and short-term investments, compared to $85.9 million at October 31, 2016. The cash balance was achieved after year-to-date payments comprised of $16.2 million (net of cash acquired and holdbacks) for Tollgrade Communications Inc. (acquired April 12, 2017), $1.7 million to partially settle loans inherited from the Presence Technology, S.L. acquisition (completed October 28, 2016), $0.4 million for prior period acquisitions, and $7.5 million in dividends paid.
The Board of Directors has approved an eligible quarterly dividend of $0.16 per common share, payable on August 31, 2017 to shareholders of record at the close of business on August 17, 2017.
Enghouse remains committed to its acquisition strategy and continues to seek accretive acquisitions.
A conference call to discuss the results will be held on Friday June 9, 2017 at 8:45 a.m. EST. To participate, please call +1-416-640-5946 or North American Toll-Free +1-866-233-4606. No PIN is 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 Six Months ended
April 30, April 30, April 30, April 30,
2017 2016 2017 2016
----------------------------------------------------
Total Revenue $ 79,543 $ 78,537 $ 158,383 $ 152,907
Results from operating
activities 19,483 18,116 41,931 35,959
Depreciation of
property, plant and
equipment 595 791 1,209 1,617
Special charges 383 412 481 819
Adjusted EBITDA $ 20,461 $ 19,319 $ 43,621 $ 38,395
Adjusted EBITDA margin 25.7% 24.6% 27.5% 25.1%
Adjusted EBITDA per
diluted share $ 0.75 $ 0.71 $ 1.60 $ 1.41
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
April 30 October 31
2017 2016
Assets
Current assets:
Cash and cash equivalents $ 80,904 $ 78,436
Short-term investments 6,667 7,423
Accounts receivable, net 90,989 73,588
Prepaid expenses and other assets 10,485 9,720
--------------------------------
189,045 169,167
Non-current assets:
Long-term deposits and accounts 1,131 1,357
receivable, net
Property, plant and equipment 5,710 5,696
Intangible assets 92,058 86,632
Goodwill 156,265 144,578
Deferred income tax assets 9,881 11,765
--------------------------------
Total assets $ 454,090 $ 419,195
--------------------------------
--------------------------------
Liabilities
Current liabilities:
Accounts payable and accrued liabilities $ 59,350 $ 55,440
Income taxes payable 1,920 5,139
Dividends payable 4,312 3,767
Provisions 856 2,111
Deferred revenue 63,936 54,300
Current portion of long-term loans 395 -
--------------------------------
130,769 120,757
Non-current liabilities:
Deferred income tax liabilities 24,252 21,053
Deferred revenue 6,245 4,788
Net employee defined benefit obligation 2,357 -
Long-term loans 2,272 4,049
--------------------------------
Total liabilities 165,895 150,647
--------------------------------
Shareholders' Equity
Share capital 70,271 69,555
Contributed surplus 4,272 3,875
Retained earnings 200,326 187,649
Accumulated other comprehensive income 13,326 7,469
--------------------------------
Total shareholders' equity 288,195 268,548
--------------------------------
Total liabilities and shareholders' equity $ 454,090 $ 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 April 30 Six months ended April 30
2017 2016 2017 2016
Revenue
Software licenses $ 23,781 $ 24,444 $ 47,989 $ 45,214
Hosted and
maintenance
services 39,910 38,300 79,076 76,106
Professional
services 14,852 14,482 28,820 28,917
Hardware 1,000 1,311 2,498 2,670
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79,543 78,537 158,383 152,907
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Direct costs
Software licenses 1,453 1,203 3,562 2,360
Services 22,606 22,698 44,849 44,488
Hardware 625 925 1,626 1,730
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24,684 24,826 50,037 48,578
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Revenue, net of
direct costs 54,859 53,711 108,346 104,329
Operating expenses
Selling, general
and administrative 23,327 22,915 42,818 43,056
Research and
development 11,071 11,477 21,907 22,878
Depreciation of
property, plant
and equipment 595 791 1,209 1,617
Special charges 383 412 481 819
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35,376 35,595 66,415 68,370
-------------------------------------------------------
Results from
operating
activities 19,483 18,116 41,931 35,959
Amortization of
acquired software
and customer
relationships (7,511) (7,008) (14,968) (13,848)
Finance income 60 21 99 54
Finance expenses (142) (87) (249) (168)
Other (expense)
income (19) 22 151 55
-------------------------------------------------------
Income before income
taxes 11,871 11,064 26,964 22,052
Provision for income
taxes 2,844 2,544 6,204 5,071
-------------------------------------------------------
Net income for the
period $ 9,027 $ 8,520 $ 20,760 $ 16,981
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-------------------------------------------------------
Items that are or
may be reclassified
subsequently to
profit or loss:
Foreign currency
translation
differences from
foreign operations 14,667 (18,240) 7,978 (9,457)
Transfer to net
income of realized
gains on available
for sale
investments - - - (14)
Unrealized loss on
available for sale
investments (2,352) (60) (2,445) (199)
Deferred income tax
recovery 312 8 324 28
-------------------------------------------------------
Other comprehensive
income (loss) 12,627 (18,292) 5,857 (9,642)
-------------------------------------------------------
Comprehensive income
(loss) $ 21,654 $ (9,772) $ 26,617 $ 7,339
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Earnings per share
Basic $ 0.34 $ 0.32 $ 0.77 $ 0.63
Diluted $ 0.33 $ 0.31 $ 0.76 $ 0.62
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Enghouse Systems Limited
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)
Accumulated
other
Share Share Contributed comprehensive Retained
Capital capital surplus income (loss) earnings Total
-number $ $ $ $ $
Balance -
November 1,
2016 26,906,962 69,555 3,875 7,469 187,649 268,548
Net income - - - - 20,760 20,760
Other
Comprehensive
Income:
Cumulative
Translation
Adjustment - - - 7,978 - 7,978
Transfer to
net income
of realized
gains on
available
for-sale
investments - - - - - -
Unrealized
loss on
available-
for-sale
investments - - - (2,445) - (2,445)
Deferred
income tax
recovery - - - 324 - 324
-------------------------------------------------------------
Comprehensive
income for
the period - - - 5,857 20,760 26,617
-------------------------------------------------------------
-------------------------------------------------------------
Employee share
options:
Value of
services
recognized - - 544 - - 544
Proceeds on
issuing
shares 45,500 716 (147) - - 569
Dividends - - - - (8,083) (8,083)
-------------------------------------------------------------
Balance -
April 30,
2017 26,952,462 70,271 4,272 13,326 200,326 288,195
-------------------------------------------------------------
-------------------------------------------------------------
Balance -
November 1,
2015 26,587,262 64,203 4,029 20,254 154,866 243,352
Net income - - - - 16,981 16,981
Other
Comprehensive
Income:
Cumulative
Translation
Adjustment - - - (9,457) - (9,457)
Transfer to
net income
of realized
gains on
available-
for-sale
investments - - - (14) - (14)
Unrealized
loss on
available-
for-sale
investments - - - (199) - (199)
Deferred
income tax
recovery - - - 28 - 28
-------------------------------------------------------------
Comprehensive
income for
the period - - - (9,642) 16,981 7,339
-------------------------------------------------------------
-------------------------------------------------------------
Employee share
options:
Value of
services
recognized - - 576 - - 576
Proceeds on
issuing
shares 225,700 3,098 (590) - - 2,508
Dividends - - - - (6,971) (6,971)
-------------------------------------------------------------
Balance -
April 30,
2016 26,812,962 67,301 4,015 10,612 164,876 246,804
-------------------------------------------------------------
-------------------------------------------------------------
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
Three months ended April 30 Six months ended April 30
2017 2016 2017 2016
Cash flows from
operating
activities
Net income $ 9,027 $ 8,520 $ 20,760 $ 16,981
Adjustments for:
Depreciation of
property, plant
and equipment 595 791 1,209 1,617
Amortization of
acquired software
and customer
relationships 7,511 7,008 14,968 13,848
Stock-based
compensation
expense 356 251 544 576
Provision for
income taxes 2,844 2,544 6,204 5,071
Finance expenses
and other
expense/income 161 65 98 113
-------------------------------------------------------
20,494 19,179 43,783 38,206
Changes in non-cash
operating working
capital 956 4,122 (7,062) (6,502)
Income taxes paid (3,090) (2,608) (7,686) (4,105)
---------------------------------------------------------------------------
Net cash flows from
operating
activities 18,360 20,693 29,035 27,599
Cash flows from
investing
activities
Purchase of
property, plant and
equipment, net (354) (1,001) (919) (2,319)
Purchase of other
software (731) (485) (1,220) (619)
Acquisitions, net of
cash acquired of
$3,637 (2016 -
$2,202) (16,170) (3,334) (16,170) (29,353)
Purchase
consideration for
prior period
acquisitions (51) (2,753) (444) (3,443)
Net (purchase) sale
of short-term
investments (722) 350 (1,330) (695)
---------------------------------------------------------------------------
Net cash flows used
in investing
activities (18,028) (7,223) (20,083) (36,429)
Cash flows from
financing
activities
Issuance of share
capital 205 11 569 2,508
Repayment of loans - - (1,667) -
Payment of cash
dividend (3,771) (3,218) (7,538) (6,408)
---------------------------------------------------------------------------
Net cash flows used
in financing
activities (3,566) (3,207) (8,636) (3,900)
Effect of currency
translation
adjustments on cash
and cash
equivalents 3,494 (4,449) 2,152 (1,273)
---------------------------------------------------------------------------
Net increase
(decrease) in cash
and cash
equivalents during
the period 260 5,814 2,468 (14,003)
Cash and cash
equivalents -
beginning of period 80,644 74,314 78,436 94,131
Cash and cash
equivalents - end
of period $ 80,904 $ 80,128 $ 80,904 $ 80,128
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Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)
For the three months ended For the six months ended
April 30 April 30
-------------------------------------------------------
2017 2016 2017 2016
-------------------------------------------------------
Revenue:
Asset Management
Group $ 32,466 $ 29,849 $ 63,752 $ 55,607
Interactive
Management Group 47,077 48,688 94,631 97,300
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Total $ 79,543 $ 78,537 $ 158,383 $ 152,907
-------------------------------------------------------
-------------------------------------------------------
Asset Management
Group:
- Segment profit
before special
charges $ 8,760 $ 7,321 $ 17,285 $ 13,228
- Special charges (440) (288) (344) (513)
-------------------------------------------------------
Asset Management
Group profit $ 8,320 $ 7,033 $ 16,941 $ 12,715
-------------------------------------------------------
Interactive
Management Group:
- Segment profit
before special
charges $ 12,760 $ 12,906 $ 28,528 $ 27,629
- Special charges 57 (124) (137) (306)
-------------------------------------------------------
Interactive
Management Group
profit $ 12,817 $ 12,782 $ 28,391 $ 27,323
-------------------------------------------------------
Corporate expenses (1,654) (1,699) (3,401) (4,079)
-------------------------------------------------------
Results from
operating
activities $ 19,483 $ 18,116 $ 41,931 $ 35,959
-------------------------------------------------------
Amortization of
acquired software
and customer
relationships (7,511) (7,008) (14,968) (13,848)
Finance income 60 21 99 54
Finance expenses (142) (87) (249) (168)
Other (expense)
income (19) 22 151 55
-------------------------------------------------------
Income before income
taxes $ 11,871 $ 11,064 $ 26,964 $ 22,052
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Contacts:
Sam Anidjar
Vice President, Corporate Development
Enghouse Systems Limited
(905) 946-3200
investor@enghouse.com
