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08.03.2018 23:00:00
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Enghouse Releases First Quarter Results
MARKHAM, ON, March 8, 2018 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its first quarter (unaudited) financial results for the period ended January 31, 2018.
First quarter revenue increased to $85.1 million, compared to revenue of $78.8 million in the first quarter of the prior year. Income from operating activities was $22.0 million, which includes a foreign exchange balance sheet loss of $2.5 million, compared to $22.4 million in prior year's first quarter, which had a foreign exchange gain of $0.2 million. Net income for the quarter was $6.8 million or $0.25 per diluted share compared to $11.7 million or $0.43 per diluted share in the prior year's first quarter, with the decrease being attributable to tax charges related to the enactment of the United States Tax Cuts and Jobs Act on December 22, 2017 and the foreign exchange balance sheet loss.
Adjusted EBITDA for the first quarter was $25.3 million or $0.93 per diluted share compared to $22.8 million or $0.84 per diluted share last year, with the increase being attributable to contributions from acquisitions and stronger license sales in certain regions. To normalize results for the significant volatility in foreign exchange rates over the past couple of years, the definition of Adjusted EBITDA has been revised this quarter to exclude foreign exchange balance sheet gains and losses. Both current quarter and prior period comparatives figures have been restated accordingly.
Operating expenses before special charges related to restructuring of acquired operations were $36.3 million compared to $31.0 million in the prior year's first quarter and reflect incremental operating costs related to acquisitions and foreign exchange losses on assets and liabilities including intercompany accounts. Non-cash amortization charges in the quarter were $7.2 million compared to $7.5 million in the prior year's first quarter, and include amortization charges for acquired software and customer relationships from acquired operations.
The Company generated strong cash flows from operating activities of $23.1 million compared to $10.7 million in the first quarter of 2017, an increase of 116%. As a result, Enghouse closed the quarter with $145.0 million in cash, cash equivalents and short-term investments, compared to $130.3 million at October 31, 2017. The cash balance was achieved after payment of $4.3 million in cash dividends and $4.9 million for acquisitions.
In January, Enghouse named Vince Mifsud as President with responsibility for the Company's worldwide sales, operating and finance units. Mr. Mifsud has established an impressive track record in the SaaS and enterprise software industry, helping grow technology companies in Canada.
Today, the Board of Directors approved an increase to the Company's eligible quarterly dividend to $0.18 per common share, payable on May 31, 2018 to shareholders of record at the close of business on May 17, 2018. Enghouse has now increased its dividend in each of the past ten years, by over 10% each year.
A conference call to discuss the results will be held on Friday, March 9, 2018 at 8:45 a.m. EST. To participate, please call +1-416-204-9269 or North American Toll-Free +1-800-499-4035. 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, asset 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, 2018 | January 31, 2017 | |||
Total Revenue | $ | 85,075 | $ | 78,840 |
Results from operating activities | 21,981 | 22,356 | ||
Depreciation of property, plant and equipment | 670 | 614 | ||
Foreign exchange losses and (gains) | 2,531 | (242) | ||
Special charges | 129 | 98 | ||
Adjusted EBITDA | $ | 25,311 | $ | 22,826 |
Adjusted EBITDA margin | 29.8% | 29.0% | ||
Adjusted EBITDA per diluted share | $ | 0.93 | $ | 0.84 |
Enghouse Systems Limited
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
January 31, | October 31, | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 135,936 | $ | 120,608 | ||
Short-term investments | 9,031 | 9,737 | ||||
Accounts receivable, net | 73,269 | 71,894 | ||||
Prepaid expenses and other assets | 9,853 | 8,528 | ||||
228,089 | 210,767 | |||||
Non-current assets: | ||||||
Long-term deposits and accounts receivable, net | 1,207 | 1,002 | ||||
Property, plant and equipment | 5,473 | 5,322 | ||||
Intangible assets | 75,457 | 79,714 | ||||
Goodwill | 151,393 | 150,687 | ||||
Deferred income tax assets | 10,065 | 14,345 | ||||
Total assets | $ | 471,684 | $ | 461,837 | ||
Liabilities | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 51,471 | $ | 54,656 | ||
Income taxes payable | 6,253 | 6,018 | ||||
Dividends payable | 4,323 | 4,319 | ||||
Provisions | 924 | 1,521 | ||||
Deferred revenue | 65,889 | 59,104 | ||||
Current portion of long-term loans | 452 | 468 | ||||
129,312 | 126,086 | |||||
Non-current liabilities: | ||||||
Non-current portion of income taxes payable | 7,917 | - | ||||
Deferred income tax liabilities | 15,501 | 21,449 | ||||
Deferred revenue | 2,907 | 3,337 | ||||
Net employee defined benefit obligation | 2,377 | 2,328 | ||||
Long-term loans | 1,893 | 2,238 | ||||
Total liabilities | 159,907 | 155,438 | ||||
Shareholders' Equity | ||||||
Share capital | 72,312 | 71,422 | ||||
Contributed surplus | 4,968 | 4,715 | ||||
Retained earnings | 224,265 | 221,775 | ||||
Accumulated other comprehensive income | 10,232 | 8,487 | ||||
Total shareholders' equity | 311,777 | 306,399 | ||||
Total liabilities and shareholders' equity | $ | 471,684 | $ | 461,837 | ||
Enghouse Systems Limited
Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
Three months ended January 31, | ||||||
2018 | 2017 | |||||
Revenue | ||||||
Software licenses | $ | 25,808 | $ | 24,208 | ||
Hosted and maintenance services | 42,596 | 39,166 | ||||
Professional services | 14,377 | 13,968 | ||||
Hardware | 2,294 | 1,498 | ||||
85,075 | 78,840 | |||||
Direct costs | ||||||
Software licenses | 2,035 | 2,109 | ||||
Services | 23,184 | 22,243 | ||||
Hardware | 1,425 | 1,001 | ||||
26,644 | 25,353 | |||||
Revenue, net of direct costs | 58,431 | 53,487 | ||||
Operating expenses | ||||||
Selling, general and administrative | 21,429 | 19,825 | ||||
Research and development | 11,691 | 10,836 | ||||
Depreciation of property, plant and equipment | 670 | 614 | ||||
Foreign exchange losses and (gains) | 2,531 | (242) | ||||
Special charges | 129 | 98 | ||||
36,450 | 31,131 | |||||
Results from operating activities | 21,981 | 22,356 | ||||
Amortization of acquired software and customer relationships | (7,162) | (7,457) | ||||
Finance income | 122 | 39 | ||||
Finance expenses | (60) | (15) | ||||
Other income | 742 | 170 | ||||
Income before income taxes | 15,623 | 15,093 | ||||
Provision for income taxes | 8,810 | 3,360 | ||||
Net income for the period | $ | 6,813 | $ | 11,733 | ||
Items that are or may be reclassified subsequently to profit or loss: | ||||||
Foreign currency translation gain (loss) from foreign operations | 1,464 | (6,689) | ||||
Unrealized gain (loss) on available for sale investments | 324 | (93) | ||||
Deferred income tax (expense) recovery | (43) | 12 | ||||
Other comprehensive income (loss) | 1,745 | (6,770) | ||||
Comprehensive income | $ | 8,558 | $ | 4,963 | ||
Earnings per share | ||||||
Basic | $ | 0.25 | $ | 0.44 | ||
Diluted | $ | 0.25 | $ | 0.43 | ||
Enghouse Systems Limited
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
Share Capital -number | Share capital $ | Contributed surplus $ | Accumulated $ | Retained | Total $ | ||
Balance – November 1, 2017 | 26,993,212 | 71,422 | 4,715 | 8,487 | 221,775 | 306,399 | |
Net income | - | - | - | - | 6,813 | 6,813 | |
Other Comprehensive Income (net of tax): | |||||||
Cumulative Translation Adjustment | - | - | - | 1,464 | - | 1,464 | |
Unrealized loss on available-for-sale investments | - | - | - | 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 | 35,200 | 890 | (146) | - | - | 744 | |
Dividends | - | - | - | - | (4,323) | (4,323) | |
Balance – January 31, 2018 | 27,028,412 | 72,312 | 4,968 | 10,232 | 224,265 | 311,777 | |
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) | |
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 | |
Enghouse Systems Limited
Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
Three months ended January 31, | |||||
2018 | 2017 | ||||
Cash flows from operating activities | |||||
Net income for the period | $ | 6,813 | $ | 11,733 | |
Adjustments for: | |||||
Depreciation of property, plant and equipment | 670 | 614 | |||
Amortization of acquired software and customer relationships | 7,162 | 7,457 | |||
Stock-based compensation expense | 399 | 188 | |||
Provision for income tax | 8,810 | 3,360 | |||
Finance expenses and other income | (682) | (155) | |||
23,172 | 23,197 | ||||
Changes in non-cash operating working capital | 2,913 | (7,926) | |||
Income tax paid | (2,980) | (4,596) | |||
Net cash flows from operating activities | 23,105 | 10,675 | |||
Cash flows from investing activities | |||||
Purchase of property, plant and equipment, net | (600) | (565) | |||
Purchase of other software | - | (489) | |||
Acquisitions, net of cash acquired $1,068 (2017-$Nil) | (2,991) | - | |||
Purchase consideration for prior period acquisitions | (1,926) | (393) | |||
Net purchase of short-term investments | 985 | (608) | |||
Net cash flows used in investing activities | (4,532) | (2,055) | |||
Cash flows from financing activities | |||||
Issuance of share capital | 744 | 364 | |||
Repayment of loans | (368) | (1,667) | |||
Payment of cash dividend | (4,319) | (3,767) | |||
Net cash flows used in financing activities | (3,943) | (5,070) | |||
Effect of currency translation adjustments on cash and cash equivalents | 698 | (1,342) | |||
Net increase in cash and cash equivalents during the period | 15,328 | 2,208 | |||
Cash and cash equivalents - beginning of period | 120,608 | 78,436 | |||
Cash and cash equivalents - end of period | $ | 135,936 | $ | 80,644 | |
Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)
For the three months ended | ||||||
2018 | 2017 | |||||
Revenue: | ||||||
Asset Management Group | $ | 36,680 | $ | 31,286 | ||
Interactive Management Group | 48,395 | 47,554 | ||||
Total | $ | 85,075 | $ | 78,840 | ||
Asset Management Group: | ||||||
- Segment profit before special charges | $ | 10,414 | $ | 8,433 | ||
- Special charges | (129) | 96 | ||||
Asset Management Group profit | $ | 10,285 | $ | 8,529 | ||
Interactive Management Group: | ||||||
- Segment profit before special charges | $ | 14,194 | $ | 15,768 | ||
- Special charges | - | (194) | ||||
Interactive Management Group profit | $ | 14,194 | $ | 15,574 | ||
Corporate expenses | (2,498) | (1,747) | ||||
Results from operating activities | $ | 21,981 | $ | 22,356 | ||
Amortization of acquired software and customer relationships | (7,162) | (7,457) | ||||
Finance income | 122 | 39 | ||||
Finance expenses | (60) | (15) | ||||
Other income | 742 | 170 | ||||
Income before income taxes | $ | 15,623 | $ | 15,093 | ||
SOURCE Enghouse Systems Limited
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