Enghouse Releases Third Quarter Results
Enghouse Releases Third Quarter Results
Canada NewsWire
MARKHAM, ON, Sept. 7, 2023
MARKHAM, ON, Sept. 7, 2023 /CNW/ - Enghouse Systems Limited (TSX: ENGH) announces its financial performance for the third quarter and unaudited financial results for the period ended July 31, 2023. All figures are denominated in Canadian dollars unless otherwise indicated.
Highlights for the Third Quarter ended July 31, 2023:
- Revenue increased 8.7%, notably, while expanding our recurring revenue 13.8% to $72.3 million compared to the same period in the prior year.
- Operating profits improved, with a 30.1% EBITDA margin.
- Operating cash flows increased as a result of improved operating profits and cash collections.
Financial highlights for the three and nine months ended July 31, 2023 compared to the three and nine months ended July 31, 2022 are as follows:
- Revenue increased to $111.0 and $330.9 million, respectively, compared to revenue of $102.1 and $319.5 million;
- Results from operating activities were $30.9 and $86.4 million, respectively, compared to $29.8 and $96.5 million;
- Net income was $17.6 and $47.1 million, respectively, compared to $18.1 and $57.5 million;
- Adjusted EBITDA was $33.4 and $95.9 million, respectively, compared to $32.5 and $104.8 million;
- Cash flow from operating activities, excluding changes in working capital, was $35.5 and $97.0 million, respectively, compared to $34.1 and $107.3 million.
These achievements are largely attributable to the strategic investments channeled into various facets of the business. These include acquisitions, investing in product enhancements, bolstering our SaaS offering, refining our go-to-market capabilities, optimizing internal systems and growing our acquisition team.
Increased revenue, operating profits and cash flows ultimately culminated in our quarter-end holdings of cash, cash equivalents, and short-term investments of $249.7 million, representing a near return to the January 31, 2023 cash balance of $250.7 million even after disbursing $22.4 million in shareholder dividends and $29.0 million for acquisitions subsequent to January 31st.
Subsequent to quarter end, on August 1, 2023, Enghouse completed the acquisition of substantially all the assets of Lifesize Inc., a cloud communications company. The acquisition was completed for a purchase price of approximately USD $20.7 million, bringing our total capital deployed on acquisitions in the year to over $56.0 million as of August 1, 2023. The macroeconomic environment of increasing interest rates and a more difficult funding environment for technology companies continues to generate more acquisition opportunities for Enghouse that meet our financial and operational criteria.
Quarterly dividends:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.22 per common share, payable on November 30, 2023 to shareholders of record at the close of business on November 16, 2023.
Enghouse Systems Limited
Financial Highlights
(unaudited, in thousands of Canadian dollars)
For the period ended July 31 | Three months | Nine months | |||||||||||
2023 | 2022 | Var ($) | Var (%) | 2023 | 2022 | Var ($) | Var (%) | ||||||
Revenue | $ | 110,997 | $ | 102,111 | 8,886 | 8.7 | $ | 330,893 | $ | 319,525 | 11,368 | 3.6 | |
Direct costs | 35,872 | 31,348 | 4,524 | 14.4 | 108,786 | 97,757 | 11,029 | 11.3 | |||||
Revenue, net of direct costs | $ | 75,125 | $ | 70,763 | 4,362 | 6.2 | $ | 222,107 | $ | 221,768 | 339 | 0.2 | |
As a % of revenue | 67.7 % | 69.3 % | 67.1 % | 69.4 % | |||||||||
Operating expenses | 43,901 | 40,790 | 3,111 | 7.6 | 133,323 | 124,970 | 8,353 | 6.7 | |||||
Special charges | 331 | 216 | 115 | 53.2 | 2,360 | 280 | 2,080 | 742.9 | |||||
Results from operating activities | $ | 30,893 | $ | 29,757 | 1,136 | 3.8 | $ | 86,424 | $ | 96,518 | (10,094) | (10.5) | |
As a % of revenue | 27.8 % | 29.1 % | 26.1 % | 30.2 % | |||||||||
Amortization of acquired software and | (9,730) | (8,484) | (1,246) | (14.7) | (28,400) | (27,348) | (1,052) | (3.8) | |||||
Foreign exchange (losses) gains | 356 | 1,045 | (689) | (65.9) | (1,487) | 1,023 | (2,510) | (245.4) | |||||
Interest expense – lease obligations | (172) | (173) | 1 | 0.6 | (531) | (571) | 40 | 7.0 | |||||
Finance income | 1,701 | 290 | 1,411 | 486.6 | 3,683 | 541 | 3,142 | 580.8 | |||||
Finance expenses | (5) | (18) | 13 | 72.2 | (136) | (62) | (74) | (119.4) | |||||
Other (expenses) income | (1,312) | (9 3) | (1,219) | (1310.8) | (1,967) | 930 | (2,897) | (311.5) | |||||
Income before income taxes | $ | 21,731 | $ | 22,324 | (593) | (2.7) | $ | 57,586 | $ | 71,031 | (13,445) | (18.9) | |
Provision for income taxes | 4,164 | 4,243 | (79) | (1.9) | 10,460 | 13,482 | (3,022) | (22.4) | |||||
Net Income for the period | $ | 17,567 | $ | 18,081 | (514) | (2.8) | $ | 47,126 | $ | 57,549 | (10,423) | (18.1) | |
Basic earnings per share | 0.32 | 0.33 | (0.01) | (3.0) | 0.85 | 1.04 | (0.19) | (18.3) | |||||
Diluted earnings per share | 0.32 | 0.33 | (0.01) | (3.0) | 0.85 | 1.03 | (0.18) | (17.5) | |||||
Operating cash flows | 39,020 | 29,158 | 9,862 | 33.8 | 86,980 | 84,642 | 2,338 | 2.8 | |||||
Operating cash flows excluding changes | 35,481 | 34,081 | 1,400 | 4.1 | 96,988 | 107,334 | (10,346) | (9.6) | |||||
Adjusted EBITDA | |||||||||||||
Results from operating activities | 30,893 | 29,757 | 1,136 | 3.8 | 86,424 | 96,518 | (10,094) | (10.5) | |||||
Depreciation | 585 | 665 | (80) | 12.0 | 1,824 | 2,090 | (266) | 12.7 | |||||
Depreciation of right-of-use assets | 1,606 | 1,849 | (243) | 13.1 | 5,273 | 5,930 | (657) | 11.1 | |||||
Special charges | 331 | 216 | 115 | (53.2) | 2,360 | 280 | 2,080 | (742.9) | |||||
Adjusted EBITDA | $ | 33,415 | $ | 32,487 | 928 | 2.9 | $ | 95,881 | $ | 104,818 | (8,937) | (8.5) | |
Adjusted EBITDA margin | 30.1 % | 31.8 % | 29.0 % | 32.8 % | |||||||||
Adjusted EBITDA per diluted share | $ | 0.60 | $ | 0.59 | 0.01 | 1.7 | $ | 1.73 | $ | 1.88 | (0.15) | (8.0) | |
Condensed Consolidated Interim Statements of Financial Position | |||||
(in thousands of Canadian dollars) (unaudited) | As at July 31, | As at October 31, | |||
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 248,784 | $ | 225,104 | |
Short-term investments | 892 | 2,950 | |||
Accounts receivable | 91,724 | 93,104 | |||
Prepaid expenses and other assets | 14,590 | 12,848 | |||
Income taxes recoverable | - | 492 | |||
355,990 | 334,498 | ||||
Non-current assets: | |||||
Property and equipment | 3,384 | 4,186 | |||
Right-of-use assets | 13,408 | 20,063 | |||
Intangible assets | 89,644 | 85,902 | |||
Goodwill | 252,257 | 230,002 | |||
Deferred income tax assets | 31,290 | 30,347 | |||
389,983 | 370,500 | ||||
$ | 745,973 | $ | 704,998 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current liabilities: | |||||
Accounts payable and accrued liabilities | $ | 60,632 | $ | 60,525 | |
Income taxes payable | 1,893 | - | |||
Dividends payable | 12,159 | 10,221 | |||
Provisions | 1,999 | 3,183 | |||
Deferred revenue | 102,018 | 83,122 | |||
Lease obligations | 6,304 | 6,822 | |||
185,005 | 163,873 | ||||
Non-current liabilities: | |||||
Income taxes payable | 1,266 | 2,576 | |||
Deferred income tax liabilities | 15,560 | 12,038 | |||
Deferred revenue | 5,095 | 3,470 | |||
Net employee defined-benefit obligation | 1,972 | 1,821 | |||
Lease obligations | 7,047 | 13,055 | |||
30,940 | 32,960 | ||||
215,945 | 196,833 | ||||
Shareholders' equity: | |||||
Share capital | 107,728 | 107,007 | |||
Contributed surplus | 10,036 | 8,882 | |||
Retained earnings | 413,829 | 401,247 | |||
Accumulated other comprehensive loss | (1,565) | (8,971) | |||
530,028 | 508,165 | ||||
$ | 745,973 | $ | 704,998 | ||
Condensed Consolidated Interim Statements of Operations and Comprehensive Income | |||||
(in thousands of Canadian dollars, except per share amounts) | |||||
(unaudited) | Three months | Nine months | |||
Periods ended July 31 | 2023 | 2022 | 2023 | 2022 | |
Revenue Software licenses |
$ 19,836 | $ 19,816 |
$ 62,587 | $ 65,014 | |
SaaS and maintenance services | 72,302 | 63,530 | 210,439 | 193,702 | |
Professional services | 15,904 | 16,751 | 50,790 | 52,582 | |
Hardware | 2,955 | 2,014 | 7,077 | 8,227 | |
110,997 | 102,111 | 330,893 | 319,525 | ||
Direct costs | |||||
Software licenses | 720 | 1,023 | 2,288 | 3,636 | |
Services | 33,476 | 29,014 | 102,694 | 89,168 | |
Hardware | 1,676 | 1,311 | 3,804 | 4,953 | |
35,872 | 31,348 | 108,786 | 97,757 | ||
Revenue, net of direct costs | 75,125 | 70,763 | 222,107 | 221,768 | |
Operating expenses | |||||
Selling, general and administrative | 22,454 | 20,572 | 67,187 | 62,876 | |
Research and development | 19,256 | 17,704 | 59,039 | 54,074 | |
Depreciation | 585 | 665 | 1,824 | 2,090 | |
Depreciation of right-of-use assets | 1,606 | 1,849 | 5,273 | 5,930 | |
Special charges | 331 | 216 | 2,360 | 280 | |
44,232 | 41,006 | 135,683 | 125,250 | ||
Results from operating activities | 30,893 | 29,757 | 86,424 | 96,518 | |
Amortization of acquired software and customer relationships | (9,730) | (8,484) | (28,400) | (27,348) | |
Foreign exchange gains (losses) | 356 | 1,045 | (1,487) | 1,023 | |
Interest expense – lease obligations | (172) | (173) | (531) | (571) | |
Finance income | 1,701 | 290 | 3,683 | 541 | |
Finance expenses | (5) | (18) | (136) | (62) | |
Other (expenses) income | (1,312) | (93) | (1,967) | 930 | |
Income before income taxes | 21,731 | 22,324 | 57,586 | 71,031 | |
Provision for income taxes | 4,164 | 4,243 | 10,460 | 13,482 | |
Net income for the period | 17,567 | 18,081 | 47,126 | 57,549 | |
Item that may be subsequently reclassified to income: | |||||
Cumulative translation adjustment | (13,632) | (7,194) | 7,406 | (12,266) | |
Other comprehensive (loss) income | (13,632) | (7,194) | 7,406 | (12,266) | |
Comprehensive income | $ 3,935 | $ 10,887 | $ 54,532 | $ 45,283 | |
Earnings per share | |||||
Basic | $ 0.32 | $ 0.33 | $ 0.85 | $ 1.04 | |
Diluted | $ 0.32 | $ 0.33 | $ 0.85 | $ 1.03 | |
Condensed Consolidated Interim Statements of Cash Flows | |||||
(in thousands of Canadian dollars) (unaudited) |
Three months |
Nine months | |||
Periods ended July 31 | 2023 | 2022 | 2023 | 2022 | |
OPERATING ACTIVITIES | |||||
Net income for the period | $ 17,567 | $ 18,081 | $ 47,126 | $ 57,549 | |
| |||||
Depreciation | 585 | 665 | 1,824 | 2,090 | |
Depreciation of right-of-use assets | 1,606 | 1,849 | 5,273 | 5,930 | |
Interest expense – lease obligations | 172 | 173 | 531 | 571 | |
Amortization of acquired software and customer relationships | 9,730 | 8,484 | 28,400 | 27,348 | |
Stock-based compensation expense | 340 | 475 | 1,271 | 1,232 | |
Provision for income taxes | 4,164 | 4,243 | 10,460 | 13,482 | |
Finance and other expenses (income) | 1,317 | 111 | 2,103 | (868) | |
35,481 | 34,081 | 96,988 | 107,334 | ||
Changes in non-cash operating working capital | 4,367 | (1,983) | 380 | (11,672) | |
Income taxes paid | (828) | (2,940) | (10,388) | (11,020) | |
Net cash provided by operating activities | 39,020 | 29,158 | 86,980 | 84,642 | |
INVESTING ACTIVITIES | |||||
Net purchase of property and equipment | (436) | (240) | (607) | (598) | |
Acquisitions, net of cash acquired* | (2,361) | (6,092) | (27,978) | (6,092) | |
Purchase consideration for prior-year acquisition | (1,245) | - | (1,012) | (408) | |
Purchase of short-term investments | - | - | (69) | (60) | |
Net cash used in investing activities | (4,042) | (6,332) | (29,666) | (7,158) | |
FINANCING ACTIVITIES | |||||
Issuance of share capital | - | - | 604 | 970 | |
Normal course issuer bid repurchases | - | (8,950) | - | (8,950) | |
Repayment of lease obligations | (1,474) | (1,984) | (5,754) | (6,225) | |
Dividends paid | (12,160) | (10,284) | (32,606) | (28,062) | |
Net cash used in financing activities | (13,634) | (21,218) | (37,756) | (42,267) | |
Impact of foreign exchange on cash and cash equivalents | (4,711) | (3,039) | 4,122 |
(5,161) | |
Increase (decrease) in cash and cash equivalents | 16,633 | (1,431) | 23,680 | 30,056 | |
Cash and cash equivalents - beginning of period | 232,151 | 227,377 | 225,104 | 195,890 | |
Cash and cash equivalents - end of period | $ 248,784 | $ 225,946 | $ 248,784 | $ 225,946 | |
* Acquisitions are net of cash acquired of nil and $2,088 for the three and nine months ended July 31, 2023, respectively, and $3,647 for both the three and nine months ended July 31, 2022. |
Enghouse Systems Limited
Segment Reporting Information
(in thousands of Canadian dollars)
Three months ended July 31 | 2023 | 2022 | |||||||||||
IMG | AMG | Total | IMG | AMG | Total | ||||||||
Revenue | $ | 64,302 | $ | 46,695 | $ | 110,997 | $ | 55,077 | $ | 47,034 | $ | 102,111 | |
Direct costs | (18,884) | (16,988) | (35,872) | (15,508) | (15,840) | (31,348) | |||||||
Revenue, net of direct costs | 45,418 | 29,707 | 75,125 | 39,569 | 31,194 | 70,763 | |||||||
Operating expenses excluding special charges | (20,401) | (10,803) | (31,204) | (17,916) | (11,683) | (29,599) | |||||||
Depreciation | (403) | (182) | (585) | (557) | (108) | (665) | |||||||
Depreciation of right-of-use assets | (1,239) | (367) | (1,606) | (1,111) | (738) | (1,849) | |||||||
Segment profit | $ | 23,375 | $ | 18,355 | $ | 41,730 | $ | 19,985 | $ | 18,665 | $ | 38,650 | |
Special charges | ( 331) | (216) | |||||||||||
Corporate and shared service expenses | (10,506) | (8,677) | |||||||||||
Results from operating activities |
$ |
30,893 |
$ |
29,757 | |||||||||
Nine months ended July 31 | 2023 | 2022 | ||||||||||
IMG | AMG | Total | IMG | AMG | Total | |||||||
Revenue | $ | 186,733 | $ | 144,160 | $ | 330,893 | $ | 174,166 | $ | 145,359 | $ | 319,525 |
Direct costs | (54,451) | (54,335) | (108,786) | (46,264) | (51,493) | (97,757) | ||||||
Revenue, net of direct costs | 132,282 | 89,825 | 222,107 | 127,902 | 93,866 | 221,768 | ||||||
Operating expenses excluding special charges | (62,686) | (34,719) | (97,405) | (56,878) | (33,957) | (90,835) | ||||||
Depreciation | (1,484) | (340) | (1,824) | (1,753) | (337) | (2,090) | ||||||
Depreciation of right-of-use assets | (3,280) | (1,993) | (5,273) | (3,630) | (2,300) | (5,930) | ||||||
Segment profit | $ | 64,832 | $ | 52,773 | $ | 117,605 | $ | 65,641 | $ | 57,272 | $ | 122,913 |
Special charges | (2,360) | (280) | ||||||||||
Corporate and shared service expenses | (28,821) | (26,115) | ||||||||||
Results from operating activities |
$ |
86,424 |
$ |
96,518 | ||||||||
About Enghouse
Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides vertical enterprise software solutions focused on contact centers, video communications, healthcare, telecommunications networks, public safety and the transit market. The Company's two-pronged strategy to grow earnings focuses on internal growth and acquisitions, which, to date, have been funded through operating cash flows. The Company has no outstanding external debt financing 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, September 8, 2023 at 8:45 a.m. EST. To participate, please call +1-416-764-8646 or North American Toll-Free +1-888-396-8049. Confirmation code: 06869377. 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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