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
customer relationships
|
|
(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
in working capital
|
|
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,
2023
|
As at October
31,
2022
|
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
|
Adjustments for non-cash items
|
|
|
|
|
|
|
|
|
|
|
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