MARKHAM, ONTARIO -- (Marketwired) -- 09/08/16 -- 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:
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Three Months ended Nine Months ended
July 31, July 31, July 31, July 31,
2016 2015 2016 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, October 31,
2016 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 Nine months ended
July 31 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
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76,350 71,264 229,257 202,984
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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
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Earnings per share
Basic $ 0.39 $ 0.31 $ 1.02 $ 0.69
Diluted $ 0.38 $ 0.30 $ 1.01 $ 0.67
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Enghouse Systems Limited
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)
Share Share Contributed
Capital capital surplus
-number $ $
Balance - November 1, 2015 26,587,262 64,203 4,029
Net income - - -
Other Comprehensive Income:
Cumulative Translation Adjustment - - -
Transfer to net income of realized
gains on available-for-sale
investments - - -
Unrealized loss on available-for-sale
investments - - -
Deferred income tax recovery - - -
---------------------------------------
Comprehensive income for the period - - -
---------------------------------------
---------------------------------------
Employee share options:
Value of services recognized - - 748
Proceeds on issuing shares 237,700 3,320 (638)
Dividends - - -
---------------------------------------
Balance - July 31, 2016 26,824,962 67,523 4,139
---------------------------------------
---------------------------------------
Balance - November 1, 2014 26,163,962 59,746 3,782
Net income - - -
Other Comprehensive Income:
Cumulative Translation Adjustment - - -
Transfer to net income of realized
gains on available-for-sale
investments - - -
Unrealized gain on available-for-sale
investments - - -
Deferred income tax expense - - -
---------------------------------------
Comprehensive income for the period - - -
---------------------------------------
---------------------------------------
Employee share options:
Value of services recognized - - 937
Proceeds on issuing shares 121,500 1,178 (240)
Dividends - - -
---------------------------------------
Balance - July 31, 2015 26,285,462 60,924 4,479
---------------------------------------
---------------------------------------
Accumulated
other
comprehensive Retained
income (loss) earnings Total
$ $ $
Balance - November 1, 2015 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
Proceeds on issuing shares - - 2,682
Dividends - (10,726) (10,726)
---------------------------------------
Balance - July 31, 2016 8,906 171,504 252,072
---------------------------------------
---------------------------------------
Balance - November 1, 2014 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
Proceeds on issuing shares - 938
Dividends (8,928) (8,928)
---------------------------------------
Balance - July 31, 2015 21,047 144,827 231,277
---------------------------------------
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Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
Three months ended Nine months ended
July 31 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
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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
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Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)
For the three months For the nine months
ended July 31 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
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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
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Contacts:
Enghouse Systems Limited
Sam Anidjar
Vice President, Corporate Development
(905) 946-3200
investor@enghouse.com
www.enghouse.com
