MARKHAM, ONTARIO–(Marketwired – Dec. 15, 2016) – Enghouse Systems Limited (TSX:ENGH) today announced its fourth quarter (unaudited) and year-end financial results for the period ended October 31, 2016.
Revenue increased by 10.3% to $308.0 million for the fiscal year, compared to revenue of $279.3 million in the previous fiscal year, resulting in another record year for the Company. Income from operating activities was $81.9 million compared to $67.3 million last year, an increase of 21.8%. Net income for the fiscal year was $47.3 million or $1.74 per diluted share compared to $31.4 million or $1.17 per diluted share in the prior year. Adjusted EBITDA for the fiscal year was $86.7 million or $3.19 per diluted share compared to $71.9 million or $2.69 per diluted share last year, an increase of 20.6%.
Operating expenses before special charges related to restructuring of acquired operations were $127.8 million for the fiscal year or 41.5% of revenue compared to $121.4 million (43.4%) in the prior fiscal year as a result of efficiency improvements realized and favourable foreign exchange gains recorded during the fiscal year.
Fourth quarter revenue was $78.7 million, an increase of 3.1% over revenue of $76.3 million in the fourth quarter last year. Revenue in the quarter reflects incremental revenue contributions from acquisitions as well as the unfavourable impact of foreign exchange, largely on the decline in the Pound Sterling post-Brexit. Adjusted EBITDA for the quarter was $26.7 million or $0.99 per diluted share compared to $21.1 million or $0.78 per diluted share in last year’s fourth quarter, an increase of 26.5%.
Operating expenses before special charges related to restructuring of acquired operations were $28.9 million compared to $32.9 million in the prior year’s fourth quarter and primarily include incremental operating costs related to acquisitions and the favourable impact of foreign exchange gains of $4.2 million booked in the quarter on translation of foreign currency denominated monetary assets and liabilities. Non-cash amortization charges in the quarter were $7.2 million compared to $6.1 million in the prior year’s fourth quarter and include amortization charges for acquired software and customer relationships from acquired operations.
Results from operating activities for the quarter were $25.4 million compared to $20.0 million in the prior year’s fourth quarter, an increase of 27.2% over the prior year. Net income for the quarter was $19.9 million or $0.73 per diluted share compared to the prior year’s fourth quarter net income of $13.2 million or $0.49 per diluted share.
Enghouse generated cash flows from operations of $15.8 million in the quarter compared to $11.3 million in the prior year’s fourth quarter. Cash flows generated from operations for the fiscal year were $59.7 million compared to $50.5 million in the prior fiscal year. Enghouse closed the year with $85.9 million in cash, cash equivalents and short-term investments, compared to $98.4 million at October 31, 2015. The cash balance was achieved after payment of $51.3 million for acquisitions (net of cash acquired), $4.5 million to finalize prior year acquisitions and dividends of $13.9 million.
Shortly before year end on October 28, 2016, Enghouse acquired Presence Technology, S.L. for a purchase price of $19.0 million, net of cash acquired. The Company inherited Presence’s pre-existing long-term debt but does not otherwise have any long-term debt. Only the opening balance sheet on acquisition was included in the results for fiscal 2016 as results between the acquisition date and October 31, 2016 were not material.
The Board of Directors has approved an eligible quarterly dividend of $0.14 per common share, payable on February 28, 2017 to shareholders of record at the close of business on February 14, 2017.
A conference call to discuss the results will be held on Friday December 16, 2016 at 8:45 a.m. EST. To participate, please call 416-640-5946 or North American Toll-Free 1-866-233-4585. 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, 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 | Year ended | |||
| October 31, 2016 | October 31, 2015 | October 31, 2016 | October 31, 2015 | |
| Total Revenue | $ 78,726 | $ 76,329 | $ 307,983 | $ 279,313 |
| Results from operating activities | 25,398 | 19,967 | 81,938 | 67,263 |
| Depreciation of property, plant and equipment | 991 | 767 | 3,438 | 2,688 |
| Special charges | 360 | 328 | 1,330 | 1,989 |
| Adjusted EBITDA | $ 26,749 | $ 21,062 | $ 86,706 | $ 71,940 |
| Adjusted EBITDA margin | 34.0% | 27.6% | 28.2% | 25.8% |
| Adjusted EBITDA per diluted share | $ 0.99 | $ 0.78 | $ 3.19 | $ 2.69 |
| Enghouse Systems Limited | |||
| Consolidated Statements of Financial Position | |||
| (in thousands of Canadian dollars) | |||
| As at October 31, 2016 | As at October 31, 2015 | ||
| Assets | |||
| Current assets | |||
| Cash and cash equivalents | $ 78,436 | $ 94,131 | |
| Short-term investments | 7,423 | 4,306 | |
| Accounts receivable, net | 73,588 | 60,765 | |
| Prepaid expenses and other assets | 9,720 | 8,330 | |
| 169,167 | 167,532 | ||
| Non-current assets | |||
| Long-term deposits and accounts receivable, net | 1,357 | – | |
| Property, plant and equipment | 5,696 | 5,039 | |
| Intangible assets | 86,632 | 68,976 | |
| Goodwill | 144,578 | 123,8686 | |
| Deferred income tax assets | 11,765 | 10,600 | |
| Total assets | $ 419,195 | $ 376,015 | |
| Liabilities | |||
| Current liabilities | |||
| Accounts payable and accrued liabilities | $ 55,440 | $ 51,284 | |
| Income taxes payable | 5,139 | 2,680 | |
| Dividends payable | 3,767 | 3,190 | |
| Provisions | 2,111 | 3,335 | |
| Deferred revenue | 54,300 | 48,694 | |
| 120,757 | 109,183 | ||
| Non-current liabilities | |||
| Deferred income tax liabilities | 21,053 | 20,022 | |
| Deferred revenue | 4,788 | 3,458 | |
| Long-term loans | 4,049 | – | |
| Total liabilities | 150,647 | 132,663 | |
| Shareholders’ Equity | |||
| Share capital | 69,555 | 64,203 | |
| Contributed surplus | 3,875 | 4,029 | |
| Retained earnings | 187,649 | 154,866 | |
| Accumulated other comprehensive income | 7,469 | 20,254 | |
| Total shareholders’ equity | 268,548 | 243,352 | |
| Total liabilities and shareholders’ equity | $ 419,195 | $ 376,015 | |
| Enghouse Systems Limited | |||||
| Consolidated Interim Statements of Operations and Comprehensive Income | |||||
| (in thousands of Canadian dollars, except per share amounts) | |||||
| (Unaudited) | (Unaudited) | ||||
| Three months ended October 31 | Year ended October 31 | ||||
| 2016 | 2015 | 2016 | 2015 | ||
| Revenue | |||||
| Software licenses | $ 24,261 | $ 23,771 | $ 93,411 | $ 86,311 | |
| Hosted and maintenance services | 38,383 | 36,071 | 152,368 | 135,768 | |
| Professional services | 15,415 | 15,278 | 57,842 | 50,104 | |
| Hardware | 667 | 1,209 | 4,362 | 7,130 | |
| 78,726 | 76,329 | 307,983 | 279,313 | ||
| Direct costs | |||||
| Software licenses | 1,399 | 1,383 | 5,477 | 6,984 | |
| Services | 21,813 | 20,712 | 88,210 | 76,707 | |
| Hardware | 847 | 1,007 | 3,180 | 5,013 | |
| 24,059 | 23,102 | 96,867 | 88,704 | ||
| Revenue, net of direct costs | 54,667 | 53,227 | 211,116 | 190,609 | |
| Operating expenses | |||||
| Selling, general and administrative | 17,504 | 21,509 | 79,693 | 77,628 | |
| Research and development | 10,414 | 10,656 | 44,717 | 41,041 | |
| Depreciation of property, plant and equipment | 991 | 767 | 3,438 | 2,688 | |
| Special charges | 360 | 328 | 1,330 | 1,989 | |
| 29,269 | 33,260 | 129,178 | 123,346 | ||
| Results from operating activities | 25,398 | 19,967 | 81,938 | 67,263 | |
| Amortization of acquired software and customer relationships | (7,185) | (6,086) | (28,042) | (22,869) | |
| Litigation settlements | – | – | – | (8,774) | |
| Finance income | 50 | 40 | 123 | 251 | |
| Finance expenses | (136) | 13 | (350) | (480) | |
| Other income | 733 | 26 | 797 | 112 | |
| Income before income taxes | 18,860 | 13,960 | 54,466 | 35,503 | |
| (Recovery of) provision for income taxes | |||||
| Current income tax expense | 5,088 | 6,506 | 14,033 | 8,275 | |
| Deferred income tax recovery | (6,140) | (5,775) | (6,843) | (4,202) | |
| (1,052) | 731 | 7,190 | 4,073 | ||
| Net income for the period | $ 19,912 | $ 13,229 | $ 47,276 | $ 31,430 | |
| Items that are or may be reclassified subsequently to profit or loss: | |||||
| Foreign currency translation differences from foreign operations | (2,102) | (779) | (12,737) | 10,863 | |
| Transfer to net income of realized gains on available for sale investments | – | – | (14) | (74) | |
| Unrealized gain (loss) on available for sale investments | 766 | (17) | (42) | 325 | |
| Deferred income tax (expense) recovery | (101) | 3 | 8 | (33) | |
| Other comprehensive (loss) income | (1,437) | (793) | (12,785) | 11,081 | |
| Comprehensive income | $ 18,475 | $ 12,436 | $ 34,491 | $ 42,511 | |
| Earnings per share | |||||
| Basic | $ 0.74 | $ 0.50 | $ 1.76 | $ 1.20 | |
| Diluted | $ 0.73 | $ 0.49 | $ 1.74 | $ 1.17 | |
| Enghouse Systems Limited | |||||||
| Consolidated Statements of Changes in Equity | |||||||
| (in thousands of Canadian dollars) | |||||||
|
Share |
Share capital |
Contributed surplus |
Accumulated other comprehensive income (loss) $ |
Retained earnings |
Total |
||
| Balance – November 1, 2015 | 26,587,262 | 64,203 | 4,029 | 20,254 | 154,866 | 243,352 | |
| Net income | – | – | – | – | 47,276 | 47,276 | |
| Other Comprehensive Income (net of tax): | |||||||
| Cumulative Translation Adjustment | – | – | – | (12,737) | – | (12,737) | |
| Transfer to net income of realized gains on available-for-sale investments | – | – | – | (14) | – | (14) | |
| Unrealized losses on available-for-sale investments | – | – | – | (42) | – | (42) | |
| Deferred income tax recovery | – | – | – | 8 | – | 8 | |
| Comprehensive income for the year | – | – | – | (12,785) | 47,276 | 34,491 | |
| Employee share options: | |||||||
| Value of services recognized | – | – | 892 | – | – | 892 | |
| Proceeds on issuing shares | 319,700 | 5,352 | (1,046) | – | – | 4,306 | |
| Dividends | – | – | – | – | (14,493) | (14,493) | |
| Balance – October 31, 2016 | 26,906,962 | 69,555 | 3,875 | 7,469 | 187,649 | 268,548 | |
| Balance – November 1, 2014 | 26,163,962 | 59,746 | 3,782 | 9,173 | 135,554 | 208,255 | |
| Net income | – | – | – | – | 31,430 | 31,430 | |
| Other Comprehensive Income (net of tax): | |||||||
| Cumulative Translation Adjustment | – | – | – | 10,863 | – | 10,863 | |
| Transfer to net income of realized gains on available-for-sale investments | – | – | – | (74) | – | (74) | |
| Unrealized gain on available-for-sale investments | – | – | – | 325 | – | 325 | |
| Deferred income tax expense | – | – | – | (33) | – | (33) | |
| Comprehensive income for the year | – | – | – | 11,081 | 31,430 | 42,511 | |
| Employee share options: | |||||||
| Value of services recognized | – | – | 1,187 | – | 1,187 | ||
| Proceeds on issuing shares | 423,300 | 4,457 | (940) | – | 3,517 | ||
| Dividends | – | – | – | (12,118) | (12,118) | ||
| Balance – October 31, 2015 | 26,587,262 | 64,203 | 4,029 | 20,254 | 154,866 | 243,352 | |
| Enghouse Systems Limited | |||||
| Consolidated Interim Statements of Cash Flows | |||||
| (in thousands of Canadian dollars) | |||||
| (Unaudited) | (Unaudited) | ||||
| Three months ended October 31 | Year ended October 31 | ||||
| 2016 | 2015 | 2016 | 2015 | ||
| Cash flows from operating activities | |||||
| Net income | $ 19,912 | $ 13,229 | $ 47,276 | $ 31,430 | |
| Adjustments for: | |||||
| Depreciation of property, plant and equipment | 991 | 767 | 3,438 | 2,688 | |
| Amortization of acquired software and customer relationships | 7,185 | 6,086 | 28,042 | 22,869 | |
| Stock-based compensation expense | 144 | 250 | 892 | 1,187 | |
| Income tax (recovery) expense | (1,052) | 731 | 7,190 | 4,073 | |
| Finance expenses and other income | (597) | (39) | (447) | 368 | |
| 26,583 | 21,024 | 86,391 | 62,615 | ||
| Changes in non-cash operating working capital | (6,751) | (8,632) | (16,508) | (6,631) | |
| Income tax paid | (4,047) | (1,091) | (10,148) | (5,495) | |
| Net cash flows from operating activities | 15,785 | 11,301 | 59,735 | 50,489 | |
| Cash flows from investing activities | |||||
| Purchase of property, plant and equipment, net | (769) | (805) | (3,372) | (2,902) | |
| Purchase of other software | (559) | (105) | (1,764) | (356) | |
| Acquisitions, net of cash acquired of $5,230 ($5,475 – 2015) | (15,083) | (2,402) | (51,264) | (27,562) | |
| Purchase consideration for prior period acquisitions | (387) | (264) | (4,476) | (2,403) | |
| Net proceeds from sale of short-term investments | (2,360) | 5,547 | (2,880) | 8,933 | |
| Net cash flows used in investing activities | (19,158) | 1,971 | (63,756) | (24,290) | |
| Cash flows from financing activities | |||||
| Issuance of share capital | 1,624 | 2,579 | 4,306 | 3,517 | |
| Payment of cash dividend | (3,755) | (3,154) | (13,917) | (11,545) | |
| Net cash flows used in financing activities | (2,131) | (575) | (9,611) | (8,028) | |
| Effect of currency translation adjustments on cash and cash equivalents | (1,574) | (30) | (2,063) | 3,180 | |
| Net (decrease) increase in cash and cash equivalents during the period | (7,078) | 12,667 | (15,695) | 21,351 | |
| Cash and cash equivalents- beginning of period | 85,514 | 81,464 | 94,131 | 72,780 | |
| Cash and cash equivalents – end of period | $ 78,436 | $ 94,131 | $ 78,436 | $ 94,131 | |
| Enghouse Systems Limited | ||||||
| Selected Segment Reporting Information | ||||||
| (In thousands of Canadian dollars) | ||||||
| (Unaudited) | ||||||
| For the three months ended October 31 |
Year ended October 31 | |||||
| 2016 | 2015 | 2016 | 2015 | |||
| Revenue: | ||||||
| Asset Management Group | $ 30,450 | $ 24,795 | $ 115,766 | $ 91,077 | ||
| Interactive Management Group | 48,276 | 51,534 | 192,217 | 188,236 | ||
| Total | $ 78,726 | $ 76,329 | $ 307,983 | $ 279,313 | ||
| Asset Management Group: | ||||||
| – Segment profit before special charges | $ 9,967 | $ 6,973 | $ 31,650 | $ 23,153 | ||
| – Special charges | (186) | (114) | (804) | (360) | ||
| Asset Management Group profit | $ 9,781 | $ 6,859 | $ 30,846 | $ 22,793 | ||
| Interactive Management Group: | ||||||
| – Segment profit before special charges | $ 18,718 | $ 15,794 | $ 60,895 | $ 53,391 | ||
| – Special charges | (174) | (214) | (526) | (1,629) | ||
| Interactive Management Group profit | $ 18,544 | $ 15,580 | $ 60,369 | $ 51,762 | ||
| Corporate expenses | (2,927) | (2,472) | (9,277) | (7,292) | ||
| Results from operating activities | $ 25,398 | $ 19,967 | $ 81,938 | $ 67,263 | ||
| Amortization of acquired software and customer relationships | (7,185) | (6,086) | (28,042) | (22,869) | ||
| Finance income | 50 | 40 | 123 | 251 | ||
| Finance expenses | (136) | 13 | (350) | (480) | ||
| Other income | 733 | 26 | 797 | 112 | ||
| Litigation settlements | – | – | – | (8,774) | ||
| Income before income taxes | $ 18,860 | $ 13,960 | $ 54,466 | $ 35,503 | ||
Vice President, Corporate Development
Enghouse Systems Limited
Tel: (905) 946-3200
Email: investor@enghouse.com