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Subject: ERN

Enghouse Releases First Quarter Results


MARKHAM, ON, March 8, 2018 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its first quarter (unaudited) financial results for the period ended January 31, 2018.

First quarter revenue increased to $85.1 million, compared to revenue of $78.8 million in the first quarter of the prior year. Income from operating activities was $22.0 million, which includes a foreign exchange balance sheet loss of $2.5 million, compared to $22.4 million in prior year's first quarter, which had a foreign exchange gain of $0.2 million. Net income for the quarter was $6.8 million or $0.25 per diluted share compared to $11.7 million or $0.43 per diluted share in the prior year's first quarter, with the decrease being attributable to tax charges related to the enactment of the United States Tax Cuts and Jobs Act on December 22, 2017 and the foreign exchange balance sheet loss.

Adjusted EBITDA for the first quarter was $25.3 million or $0.93 per diluted share compared to $22.8 million or $0.84 per diluted share last year, with the increase being attributable to contributions from acquisitions and stronger license sales in certain regions. To normalize results for the significant volatility in foreign exchange rates over the past couple of years, the definition of Adjusted EBITDA has been revised this quarter to exclude foreign exchange balance sheet gains and losses. Both current quarter and prior period comparatives figures have been restated accordingly.

Operating expenses before special charges related to restructuring of acquired operations were $36.3 million compared to $31.0 million in the prior year's first quarter and reflect incremental operating costs related to acquisitions and foreign exchange losses on assets and liabilities including intercompany accounts. Non-cash amortization charges in the quarter were $7.2 million compared to $7.5 million in the prior year's first quarter, and include amortization charges for acquired software and customer relationships from acquired operations.

The Company generated strong cash flows from operating activities of $23.1 million compared to $10.7 million in the first quarter of 2017, an increase of 116%. As a result, Enghouse closed the quarter with $145.0 million in cash, cash equivalents and short-term investments, compared to $130.3 million at October 31, 2017. The cash balance was achieved after payment of $4.3 million in cash dividends and $4.9 million for acquisitions.

In January, Enghouse named Vince Mifsud as President with responsibility for the Company's worldwide sales, operating and finance units. Mr. Mifsud has established an impressive track record in the SaaS and enterprise software industry, helping grow technology companies in Canada.

Today, the Board of Directors approved an increase to the Company's eligible quarterly dividend to $0.18 per common share, payable on May 31, 2018 to shareholders of record at the close of business on May 17, 2018. Enghouse has now increased its dividend in each of the past ten years, by over 10% each year.

A conference call to discuss the results will be held on Friday, March 9, 2018 at 8:45 a.m. EST. To participate, please call +1-416-204-9269 or North American Toll-Free +1-800-499-4035. 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, foreign exchange gains and losses, 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.

Adjusted EBITDA:

The table below reconciles Adjusted EBITDA to the most directly comparable IFRS measure, Results from operating activities:

Three Months ended

January 31, 2018

January 31, 2017



Total Revenue

$

85,075

$

78,840



Results from operating activities

21,981

22,356

Depreciation of property, plant and equipment

670

614

Foreign exchange losses and (gains)

2,531

(242)

Special charges

129

98

Adjusted EBITDA

$

25,311

$

22,826

Adjusted EBITDA margin

29.8%

29.0%

Adjusted EBITDA per diluted share

$

0.93

$

0.84

 

Enghouse Systems Limited
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)

January 31,
2018

October 31,
2017


Assets



Current assets:




Cash and cash equivalents

$

135,936

$

120,608

Short-term investments

9,031

9,737

Accounts receivable, net

73,269

71,894

Prepaid expenses and other assets

9,853

8,528

228,089

210,767

Non-current assets:




Long-term deposits and accounts receivable, net

1,207

1,002

Property, plant and equipment

5,473

5,322

Intangible assets

75,457

79,714

Goodwill

151,393

150,687

Deferred income tax assets

10,065

14,345



Total assets

$

471,684

$

461,837

Liabilities



Current liabilities:




Accounts payable and accrued liabilities

$

51,471

$

54,656

Income taxes payable

6,253

6,018

Dividends payable

4,323

4,319

Provisions

924

1,521

Deferred revenue

65,889

59,104

Current portion of long-term loans

452

468

129,312

126,086

Non-current liabilities:




Non-current portion of income taxes payable

7,917

-

Deferred income tax liabilities

15,501

21,449

Deferred revenue

2,907

3,337

Net employee defined benefit obligation

2,377

2,328

Long-term loans


1,893

2,238



Total liabilities

159,907

155,438

Shareholders' Equity





Share capital

72,312

71,422

Contributed surplus


4,968

4,715

Retained earnings

224,265

221,775

Accumulated other comprehensive income

10,232

8,487

Total shareholders' equity                    


311,777

306,399

Total liabilities and shareholders' equity

$

471,684

$

461,837

 

Enghouse Systems Limited
Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)

Three months ended January 31,

2018

2017

Revenue





Software licenses

$

25,808

$

24,208

Hosted and maintenance services

42,596

39,166

Professional services

14,377

13,968

Hardware

2,294

1,498

85,075

78,840

Direct costs





Software licenses

2,035

2,109

Services

23,184

22,243

Hardware

1,425

1,001

26,644

25,353




Revenue, net of direct costs

58,431

53,487




Operating expenses





Selling, general and administrative

21,429

19,825

Research and development

11,691

10,836

Depreciation of property, plant and equipment

670

614

Foreign exchange losses and (gains)

2,531

(242)

Special charges

129

98

36,450

31,131




Results from operating activities

21,981

22,356





Amortization of acquired software and customer relationships

(7,162)

(7,457)

Finance income

122

39

Finance expenses

(60)

(15)

Other income

742

170




Income before income taxes

15,623

15,093




Provision for income taxes

8,810

3,360




Net income for the period

$

6,813

$

11,733

Items that are or may be reclassified subsequently to profit or loss:





Foreign currency translation gain (loss) from foreign operations

1,464

(6,689)

Unrealized gain (loss) on available for sale investments

324

(93)

Deferred income tax (expense) recovery

(43)

12




Other comprehensive income (loss)

1,745

(6,770)




Comprehensive income

$

8,558

$

4,963

Earnings per share




Basic

$

0.25

$

0.44

Diluted

$

0.25

$

0.43

                       

Enghouse Systems Limited 
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)

 

 

Share

Capital

-number

Share capital

$

Contributed surplus

$

Accumulated
other
comprehensive
income
(loss) 

$

Retained
earnings
$

Total

$





Balance ? November 1, 2017

26,993,212

71,422

4,715

8,487

221,775

306,399





Net income

-

-

-

-

6,813

6,813

Other Comprehensive Income (net of tax):





Cumulative Translation Adjustment

-

-

-

1,464

-

1,464

Unrealized loss on available-for-sale investments

-

-

-

324

-

324

Deferred income tax expense

-

-

-

(43)

-

(43)

Comprehensive income  for the period

-

-

-

1,745

6,813

8,558

Employee share options:






Value of services recognized

-

399

-

-

399

Proceeds on issuing shares

35,200

890

(146)

-

-

744

Dividends

-

-

-

-

(4,323)

(4,323)

Balance ? January 31, 2018

27,028,412

72,312

4,968

10,232

224,265

311,777












Balance ? November 1, 2016

26,906,962

69,555

3,875

7,469

187,649

268,548





Net income

-

-

-

-

11,733

11,733

Other Comprehensive Income (net of tax):





Cumulative Translation Adjustment

-

-

-

(6,689)

-

(6,689)

Unrealized loss on available-for-sale investments

-

-

-

(93)

-

(93)

Deferred income tax recovery

-

-

-

12

-

12

Comprehensive income  for the period

-

-

-

(6,770)

11,733

4,963

Employee share options:






Value of services recognized

-

188

-

-

188

Proceeds on issuing shares

29,500

458

(94)

-

-

364

Dividends

-

-

-

-

(3,771)

(3,771)

Balance ? January 31, 2017

26,936,462

70,013

3,969

699

195,611

270,292

 

Enghouse Systems Limited 
Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)

Three months ended January 31,

2018

2017

Cash flows from operating activities



Net income for the period

$

6,813

$

11,733



Adjustments for:




Depreciation of property, plant and equipment

670

614

Amortization of acquired software and customer relationships

7,162

7,457

Stock-based compensation expense

399

188

Provision for income tax

8,810

3,360

Finance expenses and other income

(682)

(155)

23,172

23,197



Changes in  non-cash operating working capital

2,913

(7,926)

Income tax paid

(2,980)

(4,596)

Net cash flows from operating activities

23,105

10,675



Cash flows from investing activities



Purchase of property, plant and equipment, net

(600)

(565)

Purchase of other software

-

(489)

Acquisitions, net of cash acquired $1,068 (2017-$Nil)

(2,991)

-

Purchase consideration for prior period acquisitions

(1,926)

(393)

Net purchase of short-term investments

985

(608)

Net cash flows used in investing activities

(4,532)

(2,055)



Cash flows from financing activities



Issuance of share capital

744

364

Repayment of loans

(368)

(1,667)

Payment of cash dividend

(4,319)

(3,767)

Net cash flows used in financing activities

(3,943)

(5,070)



Effect of currency translation adjustments on cash and cash equivalents

698

(1,342)



Net increase in cash and cash equivalents during the period

15,328

2,208

Cash and cash equivalents - beginning of period

120,608

78,436



Cash and cash equivalents - end of period

$

135,936

$

80,644

 

Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)

For the three months ended
January 31

2018

2017



Revenue:




Asset Management Group

$

36,680

$

31,286

Interactive Management Group

48,395

47,554

Total

$

85,075

$

78,840














Asset Management Group:







- Segment profit before special charges

$

10,414

$

8,433

- Special charges

(129)

96

Asset Management Group profit

$

10,285

$

8,529




Interactive Management Group:





- Segment profit before special charges

$

14,194

$

15,768

- Special charges

-

(194)

Interactive Management Group profit

$

14,194

$

15,574




Corporate expenses

(2,498)

(1,747)

Results from operating activities

$

21,981

$

22,356




Amortization of acquired software and customer relationships

(7,162)

(7,457)

Finance income

122

39

Finance expenses

(60)

(15)

Other income

742

170

Income before income taxes

$

15,623

$

15,093

 

SOURCE Enghouse Systems Limited


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