Enghouse Releases Second Quarter Results Highlighting Significant Internal Revenue Growth
Enghouse Releases Second Quarter Results Highlighting Significant Internal Revenue Growth
Canada NewsWire
MARKHAM, ON, June 4, 2020
MARKHAM, ON, June 4, 2020 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its second quarter (unaudited) financial results for the period ended April 30, 2020. All of the financial information is in Canadian dollars unless otherwise indicated.
Key financial and operational highlights for the three months ended April 30, 2020 (compared to the three months ended April 30, 2019) are as follows:
- Revenue grew 58.0% to $140.9 million;
- Results from operating activities increased 73.8% to $46.3 million;
- Net income increased 63.8% to $27.1 million or $0.49 per diluted share;
- Adjusted EBITDA increased 81.3% to $49.3 million;
- Cash flows from operating activities excluding changes in working capital increased 72.5% to $50.0 million;
- Cash, cash equivalents and short-term investments were $168.1 million, an increase from $150.3 million at October 31, 2019 despite making payments of $12.1 million for dividends and $48.2 million for acquisitions;
- The Company has no long-term debt other than a nominal amount that is non-interest bearing;
In the quarter, the Company experienced growth from both internal sources and from the acquisitions of Vidyo and Espial (both acquired in Q3/2019) and Dialogic (acquired in Q1/2020). Internal growth includes the expansion of the acquired businesses, particularly Vidyo and Dialogic, since acquisition.
To date, COVID-19 has had an overall positive financial impact on Enghouse as sales of solutions that support remote work, including working from home, increased to meet heightened demand. Sales of Vidyo, our remote conferencing and telehealth/financial services video platform, and our remote computing solutions were particularly strong this quarter. Although the overall impact to revenues so far has been positive, sales of hardware, professional services and certain business units have been tempered as a result of procurement delays, deferral of on-site installations and customers postponing upgrades and implementations.
While the pandemic continues to have a significant impact on the economy, our team has reacted quickly and successfully transitioned to a remote work environment. We are pleased that our team has remained safe, productive and is continuing to deliver high quality results. Critical to this success has been our previous investment in upgrading our financial systems combined with the internal deployment of Enghouse products such as Vidyo that support remote work.
During the quarter we substantially completed the integration of Dialogic, which was EBITDA positive as expected following acquisition on December 31, 2019. Dialogic was accretive to both earnings and margins due to a significant perpetual license deal recognized in the quarter, which allowed the customer to respond to increased demand resulting from COVID-19.
Quarterly Dividend:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.135 per common share, payable on August 31, 2020 to shareholders of record at the close of business on August 17, 2020.
Financial Highlights
For the period ended April 30 | Three months | Six months | |||||||
2020 $ | 2019 $ | Variance | 2020 $ | 2019 $ | Variance | ||||
$ | % | $ | % | ||||||
Revenue | 140,900 | 89,203 | 51,697 | 58.0 | 251,556 | 175,248 | 76,308 | 43.5 | |
Direct costs | 39,699 | 27,460 | 12,239 | 44.6 | 72,176 | 54,672 | 17,504 | 32.0 | |
Revenue, net of direct costs | 101,201 | 61,743 | 39,458 | 63.9 | 179,380 | 120,576 | 58,804 | 48.8 | |
As a % of revenue | 71.8% | 69.2% | 71.3% | 68.8% | |||||
Operating expenses | 55,046 | 35,066 | 19,980 | 57.0 | 100,806 | 68,104 | 32,702 | 48.0 | |
Special charges | (121) | 56 | (177) | (316.1) | 1,455 | 56 | 1,399 | n/a | |
Results from operating activities | 46,276 | 26,621 | 19,655 | 73.8 | 77,119 | 52,416 | 24,703 | 47.1 | |
As a % of revenue | 32.8% | 29.8% | 30.7% | 29.9% | |||||
Amortization of acquired software | (11,600) | (6,884) | (4,716) | (68.5) | (21,680) | (14,000) | (7,680) | (54.9) | |
Foreign exchange (losses) gains | (393) | 674 | (1,067) | (158.3) | (46) | 564 | (610) | (108.2) | |
Interest expense – lease obligations | (300) | - | (300) | - | (562) | - | (562) | - | |
Finance income | 131 | 507 | (376) | (74.2) | 482 | 1,005 | (523) | (52.0) | |
Finance expenses | (16) | (24) | 8 | 33.3 | (34) | (55) | 21 | 38.2 | |
Other income | 811 | 447 | 364 | 81.4 | 397 | 475 | (78) | (16.4) | |
Income before income taxes | 34,909 | 21,341 | 13,568 | 63.6 | 55,676 | 40,405 | 15,271 | 37.8 | |
Provision for income taxes | 7,820 | 4,804 | 3,016 | 62.8 | 12,451 | 8,904 | 3,547 | 39.8 | |
Net Income for the period | 27,089 | 16,537 | 10,552 | 63.8 | 43,225 | 31,501 | 11,724 | 37.2 | |
Basic earnings per share | 0.49 | 0.30 | 0.19 | 63.3 | 0.79 | 0.58 | 0.21 | 36.2 | |
Diluted earnings per share | 0.49 | 0.30 | 0.19 | 63.3 | 0.78 | 0.57 | 0.21 | 36.8 | |
Operating cash flows | 57,533 | 21,630 | 35,903 | 166.0 | 77,466 | 45,784 | 31,682 | 69.2 | |
Operating cash flows excluding | 50,033 | 29,010 | 21,023 | 72.5 | 85,216 | 56,131 | 29,085 | 51.8 | |
Adjusted EBITDA | |||||||||
Results from operating activities | 46,276 | 26,621 | 19,655 | 73.8 | 77,119 | 52,416 | 24,703 | 47.1 | |
Depreciation | 758 | 499 | 259 | 51.9 | 1,645 | 1,029 | 616 | 59.9 | |
Depreciation – right-of-use asset | 2,368 | - | 2,368 | - | 4,391 | - | 4,391 | - | |
Special charges | (121) | 56 | (177) | (316.1) | 1,455 | 56 | 1,399 | n/a | |
Adjusted EBITDA | 49,281 | 27,176 | 22,105 | 81.3 | 84,610 | 53,501 | 31,109 | 58.1 | |
Adjusted EBITDA margin | 35.0% | 30.5% | 33.6% | 30.5% | |||||
Adjusted EBITDA per diluted share | 0.89 | 0.49 | 0.40 | 81.6 | 1.53 | 0.97 | 0.56 | 57.7 | |
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(Unaudited, in thousands of Canadian dollars)
As at April 30, | As at October 31, | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 162,330 | $ | 144,764 | ||
Short-term investments | 5,759 | 5,505 | ||||
Accounts receivable | 125,071 | 84,982 | ||||
Prepaid expenses and other assets | 16,768 | 11,147 | ||||
309,928 | 246,398 | |||||
Non-current assets: | ||||||
Property and equipment | 6,930 | 6,280 | ||||
Right-of-use assets | 39,080 | - | ||||
Intangible assets | 148,322 | 121,885 | ||||
Goodwill | 223,140 | 203,298 | ||||
Deferred income tax assets | 15,681 | 12,739 | ||||
Total assets | $ | 743,081 | $ | 590,600 | ||
Liabilities and Shareholder's Equity | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 73,327 | $ | 62,813 | ||
Income taxes payable | 13,393 | 6,953 | ||||
Dividends payable | 7,427 | 6,021 | ||||
Provisions | 6,941 | 6,536 | ||||
Deferred revenue | 119,978 | 78,405 | ||||
Lease obligations | 8,208 | - | ||||
Current portion of long-term loans | 258 | 249 | ||||
229,532 | 160,977 | |||||
Non-current liabilities: | ||||||
Non-current portion of income taxes payable | 3,999 | 4,434 | ||||
Deferred income tax liabilities | 18,356 | 16,197 | ||||
Deferred revenue | 6,614 | 3,665 | ||||
Net employee defined benefit obligation | 2,764 | 2,380 | ||||
Lease obligations | 29,496 | - | ||||
Long-term loans | 839 | 874 | ||||
Total liabilities | 291,600 | 188,527 | ||||
Shareholders' Equity | ||||||
Share capital | 88,201 | 81,576 | ||||
Contributed surplus | 7,249 | 6,677 | ||||
Retained earnings | 338,949 | 309,198 | ||||
Accumulated other comprehensive income | 17,082 | 4,622 | ||||
Total shareholders' equity | 451,481 | 402,073 | ||||
Total liabilities and shareholders' equity | $ | 743,081 | $ | 590,600 | ||
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(Unaudited, in thousands of Canadian dollars, except per share amounts)
Three months ended | Six months ended | |||||||
2020 | 2019 | 2020 | 2019 | |||||
Revenue | ||||||||
Software licenses | $ | 48,791 | $ | 21,519 | $ | 77,191 | $ | 40,247 |
Hosted and maintenance services | 72,024 | 49,470 | 136,377 | 100,283 | ||||
Professional services | 16,087 | 15,145 | 31,270 | 28,646 | ||||
Hardware | 3,998 | 3,069 | 6,718 | 6,072 | ||||
140,900 | 89,203 | 251,556 | 175,248 | |||||
Direct costs | ||||||||
Software licenses | 3,937 | 1,370 | 6,387 | 2,731 | ||||
Services | 33,080 | 24,181 | 61,426 | 47,726 | ||||
Hardware | 2,682 | 1,909 | 4,363 | 4,215 | ||||
39,699 | 27,460 | 72,176 | 54,672 | |||||
Revenue, net of direct costs | 101,201 | 61,743 | 179,380 | 120,576 | ||||
Operating expenses | ||||||||
Selling, general and administrative | 29,612 | 21,440 | 54,294 | 41,896 | ||||
Research and development | 22,308 | 13,127 | 40,476 | 25,179 | ||||
Depreciation | 758 | 499 | 1,645 | 1,029 | ||||
Depreciation of right-of-use assets | 2,368 | - | 4,391 | - | ||||
Special charges | (121) | 56 | 1,455 | 56 | ||||
54,925 | 35,122 | 102,261 | 68,160 | |||||
Results from operating activities | 46,276 | 26,621 | 77,119 | 52,416 | ||||
Amortization of acquired software and customer |
(11,600) |
(6,884) |
(21,680) |
(14,000) | ||||
relationships | ||||||||
Foreign exchange (losses) gains | (393) | 674 | (46) | 564 | ||||
Interest expense – lease obligations | (300) | - | (562) | - | ||||
Finance income | 131 | 507 | 482 | 1,005 | ||||
Finance expenses | (16) | (24) | (34) | (55) | ||||
Other income | 811 | 447 | 397 | 475 | ||||
Income before income taxes | 34,909 | 21,341 | 55,676 | 40,405 | ||||
Provision for income taxes | 7,820 | 4,804 | 12,451 | 8,904 | ||||
Net income for the period | $ | 27,089 | $ | 16,537 | $ | 43,225 | $ | 31,501 |
Items that are or may be reclassified subsequently | ||||||||
Cumulative translation adjustment | 10,140 | 3,094 | 12,460 | 5,981 | ||||
Other comprehensive income | 10,140 | 3,094 | 12,460 | 5,981 | ||||
Comprehensive income | $ | 37,229 | $ | 19,631 | $ | 55,685 | $ | 37,482 |
Earnings per share | ||||||||
Basic | $ | 0.49 | $ | 0.30 | $ | 0.79 | $ | 0.58 |
Diluted | $ | 0.49 | $ | 0.30 | $ | 0.78 | $ | 0.57 |
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, in thousands of Canadian dollars)
Three months ended | Six months ended April 30, | |||||||
2020 | 2019 | 2020 | 2019 | |||||
Cash flows from operating activities | ||||||||
Net income for the period | $ | 27,089 | $ | 16,537 | $ | 43,225 | $ | 31,501 |
Adjustments for: | ||||||||
Depreciation | 758 | 499 | 1,645 | 1,029 | ||||
Depreciation of right-of-use assets | 2,368 | - | 4,391 | - | ||||
Interest expense – lease obligations | 300 | - | 562 | - | ||||
Amortization of acquired software and customer |
11,600 |
6,884 |
21,680 |
14,000 | ||||
relationships | ||||||||
Stock-based compensation expense | 893 | 709 | 1,625 | 1,117 | ||||
Provision for income taxes | 7,820 | 4,804 | 12,451 | 8,904 | ||||
Finance expense and other income | (795) | (423) | (363) | (420) | ||||
50,033 | 29,010 | 85,216 | 56,131 | |||||
Changes in non-cash operating working capital | 10,836 | (2,050) | 536 | (627) | ||||
Income taxes paid | (3,336) | (5,330) | (8,286) | (9,720) | ||||
Net cash flows from operating activities | 57,533 | 21,630 | 77,466 | 45,784 | ||||
Cash flows from (used in) investing activities | ||||||||
Purchase of property and equipment | (1,005) | (572) | (1,444) | (781) | ||||
Acquisitions, net of cash acquired* | 1,235 | (3,170) | (47,664) | (25,566) | ||||
Purchase consideration for prior year acquisitions | - | - | (546) | (1,105) | ||||
Purchase of short-term investments | (1,795) | 4,255 | (1,802) | (1,853) | ||||
Net cash flows from (used in) investing activities | (1,565) | 513 | (51,456) | (29,305) | ||||
Cash flows from (used in) financing activities | ||||||||
Interest paid on lease obligations | (300) | - | (562) | - | ||||
Issuance of share capital | 788 | 66 | 5,572 | 785 | ||||
Repayment of loans | - | - | (62) | (957) | ||||
Repayment of lease obligations | (1,286) | - | (3,890) | - | ||||
Dividends paid | (6,048) | (4,917) | (12,069) | (9,829) | ||||
Net cash flows used in financing activities | (6,846) | (4,851) | (11,011) | (10,001) | ||||
Effect of currency translation adjustments on cash and | 1,757 | 1,591 | 2,567 | 2,855 | ||||
Net increase in cash and cash equivalents during | 50,879 | 18,883 | 17,566 | 9,333 | ||||
Cash and cash equivalents - beginning of period | 111,451 | 178,001 | 144,764 | 187,551 | ||||
Cash and cash equivalents - end of period | $ | 162,330 | $ | 196,884 | $ | 162,330 | $ | 196,884 |
* Acquisitions are net of cash acquired of nil and $6,906 for the three and six months ended April 30, 2020, respectively, and $143 and $6,282 for the three and six months ended April 30, 2019, respectively. |
Enghouse Systems Limited
Segment Reporting Information
(Unaudited, in thousands of Canadian dollars)
Three months ended April 30, 2020 | IMG | AMG | Total | |||
Revenue | $ | 89,925 | $ | 50,975 | $ | 140,900 |
Direct costs | (20,874) | (18,825) | (39,699) | |||
Revenue, net of direct costs | 69,051 | 32,150 | 101,201 | |||
Operating expenses excluding special charges | (25,632) | (15,412) | (41,044) | |||
Depreciation of property and equipment | (518) | (240) | (758) | |||
Depreciation of right-of-use assets | (1,386) | (982) | (2,368) | |||
Segment profit | $ | 41,515 | $ | 15,516 | $ | 57,031 |
Special charges | 121 | |||||
Corporate and shared service expenses | (10,876) | |||||
Results from operating activities | $ | 46,276 | ||||
Three months ended April 30, 2019 | IMG | AMG | Total | |||
Revenue | $ | 44,530 | $ | 44,673 | $ | 89,203 |
Direct costs | (11,764) | (15,696) | (27,460) | |||
Revenue, net of direct costs | 32,766 | 28,977 | 61,743 | |||
Operating expenses excluding special charges | (16,417) | (11,028) | (27,445) | |||
Depreciation of property and equipment | (377) | (122) | (499) | |||
Segment profit | $ | 15,972 | $ | 17,827 | $ | 33,799 |
Special charges | (56) | |||||
Corporate and shared service expenses | (7,122) | |||||
Results from operating activities | $ | 26,621 | ||||
Six months ended April 30, 2020 | IMG | AMG | Total | |||
Revenue | $ | 152,798 | $ | 98,758 | $ | 251,556 |
Direct costs | (36,088) | (36,088) | (72,176) | |||
Revenue, net of direct costs | 116,710 | 62,670 | 179,380 | |||
Operating expenses excluding special charges | (46,851) | (28,080) | (74,931) | |||
Depreciation of property and equipment | (973) | (672) | (1,645) | |||
Depreciation of right-of-use assets | (2,444) | (1,947) | (4,391) | |||
Segment profit | $ | 66,442 | $ | 31,971 | $ | 98,413 |
Special charges | (1,455) | |||||
Corporate and shared service expenses | (19,839) | |||||
Results from operating activities | $ | 77,119 | ||||
Six months ended April 30, 2019 | IMG | AMG | Total | |||
Revenue | $ | 87,994 | $ | 87,254 | $ | 175,248 |
Direct costs | (23,039) | (31,633) | (54,672) | |||
Revenue, net of direct costs | 64,955 | 55,621 | 120,576 | |||
Operating expenses excluding special charges | (31,479) | (21,857) | (53,336) | |||
Depreciation of property and equipment | (780) | (249) | (1,029) | |||
Segment profit | $ | 32,696 | $ | 33,515 | $ | 66,211 |
Special charges | (56) | |||||
Corporate and shared service expenses | (13,739) | |||||
Results from operating activities | $ | 52,416 | ||||
About Enghouse
Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides enterprise software solutions focusing on remote work, visual computing and communications for next generation software defined networks. The Company's two-pronged growth strategy focuses on internal growth and acquisitions, which, to date, have been funded through operating cash flows. The Company is well capitalized, has nominal long-term debt and is organized around two business segments: the Interactive Management Group and the Asset Management Group. Further information about Enghouse may be obtained from the Company's website at www.enghouse.com.
Conference Call and Webcast
A conference call to discuss the results will be held on Friday, June 5, 2020 at 8:45 a.m. EST. To participate, please call +1-647-792-1278 or North American Toll-Free +1-888-504-7961. Confirmation code: 7403087. A webcast is also available at: https://www.enghouse.com/investors.php
The Company uses non-IFRS measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS 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 based on results from operating activities adjusted for depreciation of property and equipment and right-of-use assets, 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.
SOURCE Enghouse Systems Limited
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