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TMCNet:  Enghouse Releases Fourth Quarter and Year End Results

[December 13, 2018]

Enghouse Releases Fourth Quarter and Year End Results

MARKHAM, ON, Dec. 13, 2018 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its fourth quarter (unaudited) and year-end financial results for the period ended October 31, 2018.

Revenue increased to $342.8 million for the fiscal year, compared to revenue of $325.4 million in the previous fiscal year, resulting in another record year for the Company. Revenue includes $176.4 million from hosted and maintenance services, an increase of 6.4%.

Operating expenses were $136.2 million for the fiscal year compared to $134.4 million in the prior fiscal year as savings related to operating cost synergies offset incremental costs related to acquired operations. Results from operating activities were $103.2 million compared to $90.6 million last year, a 14% increase.

Net income for the fiscal year was $57.7 million or $2.11 per diluted share compared to $50.8 million or $1.87 per diluted share in the prior year. Adjusted EBITDA for the fiscal year was $106.0 million or $3.88 per diluted share compared to $94.0 million or $3.45 per diluted share last year, an increase of 12.8%.

Fourth quarter revenue was $85.8 million, an increase of 1.9% over revenue of $84.2 million in the fourth quarter last year. Operating expenses were $33.6 million compared to $34.9 million in the prior year's fourth quarter, and include incremental operating costs related to acquisitions. Non-cash amortization charges related to acquired software and customer relationships in the quarter were $6.4 million compared to $7.0 million in the prior year's fourth quarter. Results from operating activities for the quarter were $27.3 million compared to $24.0 million in the prior year's fourth quarter, an increase of 14.0%.

Net income before tax for the quarter was $22.3 million compared to $19.9 million in the prior year's fourth quarter. Income tax expense was $2.7 million in the current quarter versus an income tax expense of $1.0 million recorded in the comparative quarter last year. As a result, net income for the quarter was $19.6 million or $0.71 per diluted share, compared to the prior year's fourth quarter net income of $18.9 million, or $0.69 per diluted share. Adjusted EBITDA for the quarter was $27.9 million or $1.02 per diluted share compared to $25.0 million or $0.92 per diluted share in last year's fourth quarter.

Enghouse generated cash flows from operations of $24.0 million in the quarter compared to $29.1 million in the prior year's fourth quarter. Cash flows generated from operations for the fiscal year were $98.3 million compared to $83.2 million in the prior fiscal year, an increase of 18.0%. Enghouse closed the year with a record $193.9 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 $16.8 million for acquisitions (net of cash acquired) and $18.4 million for dividends.

Shortly after year-end, Enghouse acquired Telexis Solutions B.V. and Telexis B.V. of the Netherlands and Capana Sweden AB. The acquisitions will expand the suite of solutions and geographic reach of the Company's Asset Management Group in the coming year.

Today, the Board of Directors approved an eligible quarterly dividend of $0.18 per common share, payable on February 28, 2019 to shareholders of record at the close of business on February 14, 2019.

A conference call to discuss the results will be held on Friday, December 14, 2018 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

Year ended




October 31,
2018

October 31,
2017

October 31,
2018

October 31,
2017






Total Revenue

$

85,822

$

84,229

$

342,845

$

325,368






Results from operating activities

27,344

23,981

103,245

90,578

Depreciation of property, plant and equipment

542

609

2,411

2,437

Special charges

57

370

390

984

Adjusted EBITDA

$

27,943

$

24,960

$

106,046

$

93,999

Adjusted EBITDA margin

32.6%

29.6%

30.9%

28.9%

Adjusted EBITDA per diluted share

$

1.02

$

0.92

$

3.88

$

3.45

 

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


October 31
 2018

October 31
2017




Assets



Current assets:



Cash and cash equivalents

$

187,551

$

120,608

Short-term investments

6,386

9,737

Accounts receivable, net

62,085

71,894

Prepaid expenses and other assets

8,951

8,528


264,973

210,767

Non-current assets:



Long-term deposits and accounts receivable, net

-

1,002

Property, plant and equipment

5,279

5,322

Intangible assets

59,895

79,714

Goodwill

155,419

150,687

Deferred income tax assets

9,634

14,345




Total assets

$

495,200

$

461,837




Liabilities



Current liabilities:



Accounts payable and accrued liabilities

$

44,271

$

54,656

Income taxes payable

4,904

6,018

Dividends payable

4,912

4,319

Provisions

268

1,521

Deferred revenue

64,020

59,104

Current portion of long-term loans

122

468


118,497

126,086

Non-current liabilities:



Non-current portion of income taxes payable

7,466

-

Deferred income tax liabilities

13,115

21,449

Deferred revenue

2,169

3,337

Net employee defined benefit obligation

2,354

2,328

Long-term loans

1,475

2,238




Total liabilities

145,076

155,438

Shareholders' Equity






Share capital

78,997

71,422

Contributed surplus

4,866

4,715

Retained earnings

260,506

221,775

Accumulated other comprehensive income

5,755

8,487

Total shareholders' equity                    

350,124

306,399

Total liabilities and shareholders' equity

$

495,200

$

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
October 31

Year ended
October 31


2018

(Unaudited)

2017

(Unaudited)

2018

2017

Revenue





Software licenses

$

23,665

$

24,746

$

100,389

$

97,215

Hosted and maintenance services

45,054

43,315

176,373

165,802

Professional services

15,294

14,193

58,266

55,992

Hardware

1,809

1,975

7,817

6,359


85,822

84,229

342,845

325,368

Direct costs





Software licenses

1,396

1,597

6,863

6,908

Services

22,431

22,458

91,766

89,518

Hardware

1,066

1,268

4,793

3,921


24,893

25,323

103,422

100,347






Revenue, net of direct costs

60,929

58,906

239,423

225,021






 Operating expenses





Selling, general and administrative

21,777

22,813

86,209

86,457

Research and development

11,209

11,133

47,168

44,565

Depreciation of property, plant and equipment

542

609

2,411

2,437

Special charges

57

370

390

984


33,585

34,925

136,178

134,443






Results from operating activities

27,344

23,981

103,245

90,578






Amortization of acquired software and customer relationships

(6,386)

(7,040)

(28,149)

(29,405)

Foreign exchange gains (losses)

1,064

(178)

599

(3,205)

Finance income

198

121

476

252

Finance expenses

(79)

(48)

(213)

(185)

Other income

136

3,085

2,076

3,186






Income before income taxes

22,277

19,921

78,034

61,221






Provision for income taxes

2,725

1,021

20,289

10,379






Net income for the period

$

19,552

$

18,900

$

57,745

$

50,842






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





Foreign currency translation (loss) gain from foreign operations

(3,350)

5,464

(2,019)

1,345

Unrealized (loss) gain on available-for-sale investments

(1,673)

2,064

(822)

(376)

Deferred income tax recovery (expense)

222

(274)

109

49






Other comprehensive (loss) income

(4,801)

7,254

(2,732)

1,018






Comprehensive income

$

14,751

$

26,154

$

55,013

$

51,860

Earnings per share





Basic

$

0.71

$

0.70

$

2.13

$

1.89

Diluted

$

0.71

$

0.69

$

2.11

$

1.87

 

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 (loss)

$

 

 

Retained
earnings
$

 

Total

$








Balance – November 1, 2017

26,993,212

71,422

4,715

8,487

221,775

306,399








Net income for the year

-

-

-

-

57,745

57,745

Other comprehensive income (net of tax):







Cumulative translation adjustment

-

-

-

(2,019)

-

(2,019)

Unrealized losses on available-for-sale investments

-

-

-

(822)

-

(822)

Deferred income tax recovery

-

-

-

109

-

109

Comprehensive loss for the year

-

-

-

(2,732)

57,745

55,013

Employee share options:







Value of services recognized

-

-

1,545

-

-

1,545

Proceeds on issuing shares

296,800

7,575

(1,394)

-

-

6,181

Dividends declared

-

-

-

-

(19,014)

(19,014)

Balance – October 31, 2018

27,290,012

78,997

4,866

5,755

260,506

350,124















Balance – November 1, 2016

26,906,962

69,555

3,875

7,469

187,649

268,548








Net income for the year

-

-

-

-

50,842

50,842

Other comprehensive income (net of tax):







  Cumulative translation adjustment

-

-

-

1,345

-

1,345

  Unrealized losses on available-for-sale investments

-

-

-

(376)

-

(376)

  Deferred income tax recovery

-

-

-

49

-

49

Comprehensive income for the year

-

-

-

1,018

50,842

51,860

Employee share options:







   Value of services recognized

-

-

1,148

-

-

1,148

   Proceeds on issuing shares

86,250

1,867

(308)

-

-

1,559

Dividends declared

-

-

-

-

(16,716)

(16,716)

Balance – October 31, 2017

26,993,212

71,422

4,715

8,487

221,775

306,399

 

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


Three months ended

October 31

Year ended

October 31


2018

(Unaudited)

2017

(Unaudited)

2018

2017

Cash flows from operating activities





Net income

$

19,552

$

18,900

$

57,745

$

50,842






Adjustments for:





Depreciation of property, plant and equipment

542

609

2,411

2,437

Amortization of acquired software and customer relationships

6,386

7,040

28,149

29,405

Stock-based compensation expense

374

339

1,545

1,148

Provision for income taxes

2,725

1,021

20,289

10,379

Finance expenses

79

48

213

185

Other income

(136)

(3,085)

(2,076)

(3,186)


29,522

24,872

108,276

91,210






Changes in non-cash operating working capital

(295)

7,064

6,313

4,774

Income taxes paid

(5,193)

(2,838)

(16,334)

(12,742)

Net cash flows from operating activities

24,034

29,098

98,255

83,242






Cash flows from investing activities





Purchase of property, plant and equipment, net

(706)

(664)

(2,244)

(1,689)

Purchase of other software

-

-

-

(1,475)

Acquisitions, net of cash acquired of $1,235 (2017- $3,876)

-

(2,520)

(9,675)

(18,690)

Purchase consideration for prior-period acquisitions

(192)

(1,596)

(7,137)

(2,619)

Proceeds of sale of equity investments

-

2,188

-

2,188

Net sale (purchase) of short-term investments

711

(1,344)

3,197

(2,870)

Net cash flows used in investing activities

(187)

(3,936)

(15,859)

(25,155)






Cash flows from financing activities





Issuance of share capital

1,354

746

6,181

1,559

Repayment of loans

(437)

-

(1,172)

(1,667)

Payment of cash dividend

(4,899)

(4,314)

(18,422)

(16,164)

Net cash flows used in financing activities

(3,982)

(3,568)

(13,413)

(16,272)






Effect of currency translation adjustments on cash and cash equivalents

(2,079)

1,776

(2,040)

357






Net increase in cash and cash equivalents during the period

17,786

23,370

66,943

42,172

Cash and cash equivalents - beginning of period

169,765

97,238

120,608

78,436






Cash and cash equivalents - end of period

$

187,551

$

120,608

$

187,551

$

120,608

 

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


 

2018

(Unaudited)

 

2017

(Unaudited)

2018

2017






Revenue:





Asset Management Group

$

40,034

$

34,999

$

153,559

$

134,700

Interactive Management Group

45,788

49,230

189,286

190,668

Total

$

85,822

$

84,229

$

342,845

$

325,368
















Asset Management Group:





- Segment profit before special charges

$

15,831

$

10,860

$

54,501

$

39,838

- Special charges

(57)

(336)

(390)

(813)

Asset Management Group profit

$

15,774

$

10,524

$

54,111

$

39,025






Interactive Management Group:





- Segment profit before special charges

$

14,861

$

16,671

$

60,782

$

60,438

- Special charges

-

(34)

-

(171)

Interactive Management Group profit

$

14,861

$

16,637

$

60,782

$

60,267






Corporate expenses

(3,291)

(3,180)

(11,648)

(8,714)

Results from operating activities

$

27,344

$

23,981

$

103,245

$

90,578






Amortization of acquired software and customer relationships

(6,386)

(7,040)

(28,149)

(29,405)

Foreign exchange gains (losses)

1,064

(178)

599

(3,205)

Finance income

198

121

476

252

Finance expenses

(79)

(48)

(213)

(185)

Other income

136

3,085

2,076

3,186

Income before income taxes

$

22,277

$

19,921

$

78,034

$

61,221

 

SOURCE Enghouse Systems Limited


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