MARKHAM, ONTARIO–(Marketwired – Sept. 8, 2016) – Enghouse Systems Limited (TSX:ESL) today announced its third quarter (unaudited) financial results for the period ended July 31, 2016.
Third quarter revenue was $76.4 million, an increase of 7.1% over revenue of $71.3 million in the third quarter last year. On a year to date basis, revenue was $229.3 million compared to $203.0 million last year, an increase of 12.9%. The revenue increase primarily reflects incremental revenue contributions from acquisitions and the favorable impact of foreign exchange compared to last year. Hosted and maintenance services revenue was $37.9 million in the quarter, an increase of 12.2% over the same period last year.
Adjusted EBITDA for the quarter was $21.6 million ($0.79 per diluted share) compared to $18.5 million ($0.68 per diluted share) in last year’s third quarter. Adjusted EBITDA for the year to date was $60.0 million ($2.20 per diluted share) compared to $50.9 million ($1.88 per diluted share) last year, an increase of 17.8%.
Net income for the quarter was $10.4 million ($0.38 per diluted share) compared to the prior year’s third quarter net income of $8.1 million ($0.30 per diluted share). Results from operating activities for the quarter were $20.6 million compared to $16.2 million in the prior year’s third quarter, an increase of 26.9% over the prior year.
Operating expenses before special charges related to restructuring of acquired operations were $31.4 million compared to $29.8 million in the prior year’s third quarter and reflect incremental operating costs related to acquisitions and the impact of favourable foreign exchange gains. Non-cash amortization charges in the quarter were $7.0 million compared to $5.7 million in the prior year’s third quarter and include amortization charges for acquired software and customer relationships from acquired operations.
Enghouse generated cash flows from operations of $16.4 million in the quarter and closed the quarter with $90.7 million in cash, cash equivalents and short-term investments, compared to $98.4 million at October 31, 2015. The cash balance was achieved after year-to-date payments related to acquisitions comprised of $36.2 million (net of cash acquired and holdbacks) for CTI Group (Holdings) Inc. acquired on December 7, 2015, CellVision AS acquired on March 4, 2016 and NetBoss Technologies acquired May 27, 2016. The Company paid $4.1 million for prior period acquisition holdbacks and $10.2 million in dividends. The Company continues to have no debt.
The Board of Directors has approved an eligible quarterly dividend of $0.14 per common share, payable on November 30, 2016 to shareholders of record at the close of business on November 16, 2016. 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 September 9, 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 “ESL”. 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 | Nine Months ended | |||||||||||
| July 31, 2016 |
July 31, 2015 |
July 31, 2016 |
July 31, 2015 |
|||||||||
| Total Revenue | $ | 76,350 | $ | 71,264 | $ | 229,257 | $ | 202,984 | ||||
| Results from operating activities | 20,581 | 16,221 | 56,540 | 47,296 | ||||||||
| Depreciation of property, plant and equipment | 830 | 647 | 2,447 | 1,921 | ||||||||
| Special charges | 151 | 1,582 | 970 | 1,661 | ||||||||
| Adjusted EBITDA | $ | 21,562 | $ | 18,450 | $ | 59,957 | $ | 50,878 | ||||
| Adjusted EBITDA margin | 28.2 | % | 25.9 | % | 26.2 | % | 25.1 | % | ||||
| Adjusted EBITDA per diluted share | $ | 0.79 | $ | 0.68 | $ | 2.20 | $ | 1.88 | ||||
| Enghouse Systems Limited |
| Condensed Consolidated Interim Statements of Financial Position |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| July 31, 2016 |
October 31, 2015 |
||||
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | $ | 85,514 | $ | 94,131 | |
| Short-term investments | 5,155 | 4,306 | |||
| Accounts receivable, net | 67,708 | 60,765 | |||
| Prepaid expenses and other assets | 9,689 | 8,330 | |||
| 168,066 | 167,532 | ||||
| Non-current assets | |||||
| Property, plant and equipment | 5,727 | 5,039 | |||
| Intangible assets | 78,504 | 68,976 | |||
| Goodwill | 137,205 | 123,868 | |||
| Deferred income tax assets | 5,787 | 10,600 | |||
| Total assets | $ | 395,289 | $ | 376,015 | |
| Liabilities | |||||
| Current liabilities | |||||
| Accounts payable and accrued liabilities | $ | 49,497 | $ | 51,284 | |
| Income taxes payable | 4,289 | 2,680 | |||
| Dividends payable | 3,755 | 3,190 | |||
| Provisions | 4,074 | 3,335 | |||
| Deferred revenue | 56,065 | 48,694 | |||
| 117,680 | 109,183 | ||||
| Non-current liabilities | |||||
| Deferred income tax liabilities | 18,503 | 20,022 | |||
| Deferred revenue | 7,034 | 3,458 | |||
| Total liabilities | 143,217 | 132,663 | |||
| Shareholders’ Equity | |||||
| Share capital | 67,523 | 64,203 | |||
| Contributed surplus | 4,139 | 4,029 | |||
| Retained earnings | 171,504 | 154,866 | |||
| Accumulated other comprehensive income | 8,906 | 20,254 | |||
| Total shareholders’ equity | 252,072 | 243,352 | |||
| Total liabilities and shareholders’ equity | $ | 395,289 | $ | 376,015 | |
| 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 July 31 |
Nine months ended July 31 |
||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| Revenue | |||||||||||||
| Software licenses | $ | 23,936 | $ | 21,844 | $ | 69,150 | $ | 62,540 | |||||
| Hosted and maintenance services | 37,879 | 33,751 | 113,985 | 99,697 | |||||||||
| Professional services | 13,510 | 13,493 | 42,427 | 34,826 | |||||||||
| Hardware | 1,025 | 2,176 | 3,695 | 5,921 | |||||||||
| 76,350 | 71,264 | 229,257 | 202,984 | ||||||||||
| Direct costs | |||||||||||||
| Software licenses | 1,718 | 1,958 | 4,078 | 5,601 | |||||||||
| Services | 21,909 | 20,080 | 66,397 | 55,995 | |||||||||
| Hardware | 603 | 1,591 | 2,333 | 4,006 | |||||||||
| 24,230 | 23,629 | 72,808 | 65,602 | ||||||||||
| Revenue, net of direct costs | 52,120 | 47,635 | 156,449 | 137,382 | |||||||||
| Operating expenses | |||||||||||||
| Selling, general and administrative | 19,133 | 19,482 | 62,189 | 56,119 | |||||||||
| Research and development | 11,425 | 9,703 | 34,303 | 30,385 | |||||||||
| Depreciation of property, plant and equipment | 830 | 647 | 2,447 | 1,921 | |||||||||
| Special charges | 151 | 1,582 | 970 | 1,661 | |||||||||
| 31,539 | 31,414 | 99,909 | 90,086 | ||||||||||
| Results from operating activities | 20,581 | 16,221 | 56,540 | 47,296 | |||||||||
| Litigation settlements | – | – | – | (8,774 | ) | ||||||||
| Amortization of acquired software and customer relationships | (7,009 | ) | (5,695 | ) | (20,857 | ) | (16,783 | ) | |||||
| Finance income | 19 | 47 | 73 | 211 | |||||||||
| Finance expenses | (46 | ) | (206 | ) | (214 | ) | (493 | ) | |||||
| Other income | 9 | 11 | 64 | 86 | |||||||||
| Income before income taxes | 13,554 | 10,378 | 35,606 | 21,543 | |||||||||
| Provision for income taxes | 3,171 | 2,284 | 8,242 | 3,342 | |||||||||
| Net income for the period | $ | 10,383 | $ | 8,094 | $ | 27,364 | $ | 18,201 | |||||
| Items that are or may be reclassified subsequently to profit or loss: | |||||||||||||
| Foreign currency translation differences from foreign operations | (1,178 | ) | 11,737 | (10,635 | ) | 11,642 | |||||||
| Transfer to net income of realized gains on available for sale investments | – | – | (14 | ) | (74 | ) | |||||||
| Unrealized (loss) gain on available for sale investments | (609 | ) | 159 | (808 | ) | 342 | |||||||
| Deferred income tax recovery (expense) | 81 | (21 | ) | 109 | (36 | ) | |||||||
| Other comprehensive (loss) income | (1,706 | ) | 11,875 | (11,348 | ) | 11,874 | |||||||
| Comprehensive income | $ | 8,677 | $ | 19,969 | $ | 16,016 | $ | 30,075 | |||||
| Earnings per share | |||||||||||||
| Basic | $ | 0.39 | $ | 0.31 | $ | 1.02 | $ | 0.69 | |||||
| Diluted | $ | 0.38 | $ | 0.30 | $ | 1.01 | $ | 0.67 | |||||
| Enghouse Systems Limited |
| Consolidated Statements of Changes in Equity |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| Share Capital -number |
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 | – | – | – | – | 27,364 | 27,364 | |||||||
| Other Comprehensive Income: | |||||||||||||
| Cumulative Translation Adjustment | – | – | – | (10,635 | ) | – | (10,635 | ) | |||||
| Transfer to net income of realized gains on available-for-sale investments | – | – | – | (14 | ) | – | (14 | ) | |||||
| Unrealized loss on available-for-sale investments | – | – | – | (808 | ) | – | (808 | ) | |||||
| Deferred income tax recovery | – | – | – | 109 | – | 109 | |||||||
| Comprehensive income for the period | – | – | – | (11,348 | ) | 27,364 | 16,016 | ||||||
| Employee share options: | |||||||||||||
| Value of services recognized | – | – | 748 | – | – | 748 | |||||||
| Proceeds on issuing shares | 237,700 | 3,320 | (638 | ) | – | – | 2,682 | ||||||
| Dividends | – | – | – | – | (10,726 | ) | (10,726 | ) | |||||
| Balance – July 31, 2016 | 26,824,962 | 67,523 | 4,139 | 8,906 | 171,504 | 252,072 | |||||||
| Balance – November 1, 2014 | 26,163,962 | 59,746 | 3,782 | 9,173 | 135,554 | 208,255 | |||||||
| Net income | – | – | – | – | 18,201 | 18,201 | |||||||
| Other Comprehensive Income: | |||||||||||||
| Cumulative Translation Adjustment | – | – | – | 11,642 | – | 11,642 | |||||||
| Transfer to net income of realized gains on available-for-sale investments | – | – | – | (74 | ) | – | (74 | ) | |||||
| Unrealized gain on available-for-sale investments | – | – | – | 342 | – | 342 | |||||||
| Deferred income tax expense | – | – | – | (36 | ) | – | (36 | ) | |||||
| Comprehensive income for the period | – | – | – | 11,874 | 18,201 | 30,075 | |||||||
| Employee share options: | |||||||||||||
| Value of services recognized | – | – | 937 | – | 937 | ||||||||
| Proceeds on issuing shares | 121,500 | 1,178 | (240 | ) | – | 938 | |||||||
| Dividends | – | – | – | (8,928 | ) | (8,928 | ) | ||||||
| Balance – July 31, 2015 | 26,285,462 | 60,924 | 4,479 | 21,047 | 144,827 | 231,277 | |||||||
| Enghouse Systems Limited |
| Condensed Consolidated Interim Statements of Cash Flows |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| Three months ended July 31 |
Nine months ended July 31 |
||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| Cash flows from operating activities | |||||||||||||
| Net income | $ | 10,383 | $ | 8,094 | $ | 27,364 | $ | 18,201 | |||||
| Adjustments for: | |||||||||||||
| Depreciation of property, plant and equipment | 830 | 647 | 2,447 | 1,921 | |||||||||
| Amortization of acquired software and customer relationships | 7,009 | 5,695 | 20,857 | 16,783 | |||||||||
| Stock-based compensation expense | 172 | 315 | 748 | 937 | |||||||||
| Provision for income taxes | 3,171 | 2,284 | 8,242 | 3,342 | |||||||||
| Finance expenses and other income | 37 | 195 | 150 | 407 | |||||||||
| 21,602 | 17,230 | 59,808 | 41,591 | ||||||||||
| Changes in non-cash operating working capital | (3,255 | ) | (7,555 | ) | (9,757 | ) | 2,001 | ||||||
| Income tax paid | (1,996 | ) | (336 | ) | (6,101 | ) | (4,404 | ) | |||||
| Net cash flows from operating activities | 16,351 | 9,339 | 43,950 | 39,188 | |||||||||
| Cash flows from investing activities | |||||||||||||
| Purchase of property, plant and equipment, net | (284 | ) | (640 | ) | (2,603 | ) | (2,097 | ) | |||||
| Purchase of other software | (586 | ) | (251 | ) | (1,205 | ) | (251 | ) | |||||
| Acquisitions, net of cash acquired of $2,362 ($5,475 – 2015) | (6,828 | ) | (5,342 | ) | (36,181 | ) | (25,160 | ) | |||||
| Purchase consideration for prior period acquisitions | (646 | ) | (1,456 | ) | (4,089 | ) | (2,139 | ) | |||||
| Net sale of short-term investments | 175 | 1,039 | (520 | ) | 3,386 | ||||||||
| Net cash flows used in investing activities | (8,169 | ) | (6,650 | ) | (44,598 | ) | (26,261 | ) | |||||
| Cash flows from financing activities | |||||||||||||
| Issuance of share capital | 174 | – | 2,682 | 938 | |||||||||
| Payment of cash dividend | (3,754 | ) | (3,154 | ) | (10,162 | ) | (8,391 | ) | |||||
| Net cash flows used in financing activities | (3,580 | ) | (3,154 | ) | (7,480 | ) | (7,453 | ) | |||||
| Effect of currency translation adjustments on cash and cash equivalents | 784 | 3,466 | (489 | ) | 3,210 | ||||||||
| Net increase (decrease) in cash and cash equivalents during the period | 5,386 | 3,001 | (8,617 | ) | 8,684 | ||||||||
| Cash and cash equivalents – beginning of period | 80,128 | 78,463 | 94,131 | 72,780 | |||||||||
| Cash and cash equivalents – end of period | $ | 85,514 | $ | 81,464 | $ | 85,514 | $ | 81,464 | |||||
| Enghouse Systems Limited |
| Selected Segment Reporting Information |
| (In thousands of Canadian dollars) |
| (Unaudited) |
| For the three months ended July 31 |
For the nine months ended July 31 |
|||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||
| Revenue: | ||||||||||||||
| Asset Management Group | $ | 29,709 | $ | 23,195 | $ | 85,316 | $ | 66,282 | ||||||
| Interactive Management Group | 46,641 | 48,069 | 143,941 | 136,702 | ||||||||||
| Total | $ | 76,350 | $ | 71,264 | $ | 229,257 | $ | 202,984 | ||||||
| Asset Management Group: | ||||||||||||||
| – Segment profit before special charges | $ | 8,455 | $ | 5,653 | $ | 21,683 | $ | 16,180 | ||||||
| – Special charges | (105 | ) | (264 | ) | (618 | ) | (246 | ) | ||||||
| Asset Management Group profit | $ | 8,350 | $ | 5,389 | $ | 21,065 | $ | 15,934 | ||||||
| Interactive Management Group: | ||||||||||||||
| – Segment profit before special charges | $ | 14,548 | $ | 13,740 | $ | 42,177 | $ | 37,597 | ||||||
| – Special charges | (46 | ) | (1,318 | ) | (352 | ) | (1,415 | ) | ||||||
| Interactive Management Group profit | $ | 14,502 | $ | 12,422 | $ | 41,825 | $ | 36,182 | ||||||
| Corporate expenses | (2,271 | ) | (1,590 | ) | (6,350 | ) | (4,820 | ) | ||||||
| Results from operating activities | $ | 20,581 | $ | 16,221 | $ | 56,540 | $ | 47,296 | ||||||
| Litigation settlements | – | – | – | (8,774 | ) | |||||||||
| Amortization of acquired software and customer relationships | (7,009 | ) | (5,695 | ) | (20,857 | ) | (16,783 | ) | ||||||
| Finance income | 19 | 47 | 73 | 211 | ||||||||||
| Finance expenses | (46 | ) | (206 | ) | (214 | ) | (493 | ) | ||||||
| Other income | 9 | 11 | 64 | 86 | ||||||||||
| Income before income taxes | $ | 13,554 | $ | 10,378 | $ | 35,606 | $ | 21,543 | ||||||
Sam Anidjar
Vice President, Corporate Development
(905) 946-3200
investor@enghouse.com
www.enghouse.com