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Enghouse Releases Third Quarter Results

CNW Group - Thu Sep 12, 4:00PM CDT

Enghouse Systems Limited (TSX:ENGH.TO) today announced its third quarter (unaudited) and financial results for the period ended July 31, 2019.

Third quarter revenue was $101.3 million, a 16.8% increase compared to revenue of $86.7 million in the third quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions. Results from operating activities were $27.0 million compared to $26.7 million in the prior year's third quarter, which reflects the impact of changes in product mix on gross margins and, as expected, lower operating margin contributions from acquisitions in their initial period after acquisition. Net income for the quarter was $14.7 million or $0.27 per diluted share with increased amortization and a foreign exchange loss.

Adjusted EBITDA for the third quarter was $28.1 million or $0.51 per diluted share, compared to $27.4 million or $0.50 per diluted share last year, with the increase being attributable to incremental revenue contributions from acquisitions.

On a year-to-date basis, revenue was $276.5 million, compared to revenue of $257.0 million in the prior year. Results from operating activities were $79.4 million compared to $75.9 million in the prior year-to-date, an increase of 4.7%. On a year-to-date basis Adjusted EBITDA was $81.6 million or $1.48 per diluted share compared to $78.1 million or $1.43 per diluted share last year.

Operating expenses before special charges related to restructuring of acquired operations were $42.0 million compared to $34.1 million in the prior year's third quarter and reflect incremental operating costs related to recent acquisitions. Non-cash amortization charges on acquired software and customer relationships from acquired operations were $8.5 million for the quarter compared to $7.2 million in the prior year's third quarter.

The Company generated cash flows from operating activities of $13.9 million compared to $29.3 million in the third quarter of fiscal 2018. On a year to date basis, cash flows from operating activities was $59.6 million. This relates to unfavorable working capital adjustments from new acquisitions which, when acquired, had severance obligations and significant payable balances that have since been settled. Enghouse closed the quarter with $141.3 million in cash, cash equivalents and short-term investments, compared to $193.9 million at October 31, 2018. The cash balance was achieved after payments of $15.8 million for cash dividends and $94.2 million (net of cash acquired) for acquisitions concluded in the current fiscal year and $1.1 million for acquisitions closed in prior years.

During the quarter, Enghouse completed the acquisitions of Vidyo Inc. and Espial Group Inc. for an aggregate purchase price of $68.7 million, net of cash acquired. These acquisitions reported revenue consistent with expectations and were accretive to earnings in the quarter.

Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.11 per common share, payable on November 29, 2019 to shareholders of record at the close of business on November 15, 2019.

A conference call to discuss the results will be held on Friday, September 13, 2019 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: 7941353.

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 MeasuresThe 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, property plant and equipment 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                               Nine months ended


                                                    July 31, 2019                      July 31, 2018  July 31, 2019                     July 31, 2018







              Total Revenue                                          $

              101,274                         $

              86,743   $

        276,522 $

        257,023






              Results from operating activities         27,017                              26,724          79,433                             75,901



     Depreciation of property, plant and equipment           570                                 540           1,599                              1,869



     Special charges                                         470                                 152             526                                333




              Adjusted EBITDA                                         $

              28,057                         $

              27,416    $

        81,558  $

        78,103




              Adjusted EBITDA margin                     27.7%                              31.6%          29.5%                             30.4%




              Adjusted EBITDA per diluted share                         $

              0.51                           $

              0.50      $

        1.48    $

        1.43

Condensed Consolidated Interim Statements of Financial Position(in thousands of Canadian dollars)(Unaudited)

July 31         October 31
                                                                        2019                2018






                Assets




                Current assets:



     Cash and cash equivalents                                                  $
         133,422      $
      187,551



     Short-term investments                                           7,912               6,386



     Accounts receivable, net                                        81,048              62,085



     Prepaid expenses and other assets                               11,224               8,951



                                                                     233,606             264,973




                Non-current assets:



     Property, plant and equipment, net                               6,225               5,279



     Intangible assets, net                                         122,489              59,895



     Goodwill                                                       203,562             155,419



     Deferred income tax assets                                       9,202               9,634







                Total assets                                              $

           575,084  $

        495,200







                Liabilities




                Current liabilities:



     Accounts payable and accrued liabilities                                    $
         53,588       $
      44,271



     Income taxes payable                                             9,740               4,904



     Dividends payable                                                6,016               4,912



     Provisions                                                       6,617                 268



     Deferred revenue                                                87,693              64,020



     Current portion of long-term loans                                                    122



                                                                     163,654             118,497




                Non-current liabilities:



     Non-current portion of income taxes payable                      5,079               7,466



     Deferred income tax liabilities                                 20,952              13,115



     Deferred revenue                                                 2,270               2,169



     Net employee defined benefit obligation                          2,354               2,354



     Long-term loans                                                    738               1,475







                Total liabilities                                 195,047             145,076







                Shareholders' Equity





     Share capital                                                   80,645              78,997



     Contributed surplus                                              6,289               4,866



     Retained earnings                                              290,533             260,506



     Accumulated other comprehensive income                           2,570               5,755





                Total shareholders' equity                        380,037             350,124




                Total liabilities and shareholders' equity                $

           575,084  $

        495,200

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


                                                                                                2019                      2018       2019                        2018




                Revenue



         Software licenses                                                                                $
              22,081                    $
              22,410       $
       62,328     $
       65,422



         Hosted and maintenance services                                                     58,416                    48,586    158,699                     142,621



         Professional services                                                               15,281                    14,123     43,927                      42,972



         Hardware                                                                             5,496                     1,624     11,568                       6,008



                                                                                             101,274                    86,743    276,522                     257,023





                Direct costs



         Software licenses                                                                    1,327                     1,740      4,058                       5,467



         Services                                                                            26,399                    22,990     74,125                      69,335



         Hardware                                                                             4,023                     1,058      8,238                       3,727



                                                                                              31,749                    25,788     86,421                      78,529







                Revenue, net of direct costs                                           69,525                    60,955    190,101                     178,494






                Operating expenses



         Selling, general and administrative                                                 24,890                    21,884     66,786                      64,432



         Research and development                                                            16,578                    11,655     41,757                      35,959



         Depreciation of property, plant and equipment                                          570                       540      1,599                       1,869



         Special charges                                                                        470                       152        526                         333


                                                                                              42,508                    34,231    110,668                     102,593







                Results from operating activities                                      27,017                    26,724     79,433                      75,901





         Amortization of acquired software and customer relationships                       (8,453)                  (7,245)  (22,453)                   (21,763)



         Foreign exchange (losses) and gains                                                  (131)                      659        433                       (465)



         Finance income                                                                         469                        90      1,474                         278



         Finance expenses                                                                      (11)                     (50)      (66)                      (134)



         Other (expenses) income                                                               (64)                      504        411                       1,940






                Income before income taxes                                             18,827                    20,682     59,232                      55,757






                Provision for income taxes                                              4,166                     4,620     13,070                      17,564







                Net income for the period                                                     $

                14,661             $

                16,062   $

         46,162 $

         38,193







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

    ---


         Foreign currency translation (loss) gain from foreign operations                   (9,947)                  (3,929)   (3,966)                      1,331



         Unrealized gain on investments in equity securities designated at                                               625                                   851
    FVOCI



         Deferred income tax expense                                                                                    (83)                                (113)






                Other comprehensive (loss) income                                     (9,947)                  (3,387)   (3,966)                      2,069







                Comprehensive income                                                           $

                4,714             $

                12,675   $

         42,196 $

         40,262

    ===



                Earnings per share



         Basic                                                                                              $
              0.27                      $
              0.30         $
       0.84       $
       0.71



         Diluted                                                                                            $
              0.27                      $
              0.29         $
       0.84       $
       0.70

    ---

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity (in thousands of Canadian dollars)(Unaudited)

Share       Share      Contributed

       Accumulated        Retained
                                                                                         capital          surplus               other        earnings
                                                                             capital                                    comprehensive                            Total


           $

               $       (loss) income

            $


           # **                                                $

            $






                As at November 1, 2018 as previously          54,580,024       78,997             4,866                5,755          260,506           350,124
    presented



              IFRS 9 transition adjustment                                                                                       781            (781)



              IFRS 15 transition adjustment                                                                                                    1,590             1,590

    ---



                Adjusted balance as at November 1, 2018       54,580,024       78,997             4,866                6,536          261,315           351,714





              Net income for the period                                                                                                       46,162            46,162



              Other comprehensive income (net of tax):



              Cumulative translation adjustment                                                                              (3,966)                          (3,966)




                Comprehensive income for the period                                                               (3,966)          46,162            42,196




              Employee share options:



              Value of services recognized                                                                 1,723                                                 1,723



              Proceeds on issuing shares                                    113,500        1,648             (300)                                                1,348



              Dividends declared                                                                                                            (16,944)         (16,944)





                As at July 31, 2019                           54,693,524       80,645             6,289                2,570          290,533           380,037








                As at November 1, 2017                        53,986,424       71,422             4,715                8,487          221,775           306,399





              Net income for the period                                                                                                       38,193            38,193



              Other comprehensive income (net of tax):



              Cumulative translation adjustment                                                                                1,331                             1,331



              Unrealized gain on investments in equity                                                                           851                               851
    securities designated at FVOCI*



              Deferred income tax expense                                                                                      (113)                            (113)




                Comprehensive income for the period                                                                 2,069           38,193            40,262




              Employee share options:



              Value of services recognized                                                                 1,171                                                 1,171



              Proceeds on issuing shares                                    445,000        5,890           (1,063)                                                4,827



              Dividends declared                                                                                                            (14,102)         (14,102)





                As at July 31, 2018                           54,431,424       77,312             4,823               10,556          245,866           338,557
*
                Unrealized loss on
                             investments in equity securities
                             designated at FVOCI was originally
                             referred to as available-for-sale
                             investments in the 2018 consolidated
                             financial statements.




                            ** On January 25, 2019, the Company
                             completed a share split whereby each
                             issued and outstanding common share
                             has been effectively doubled.  All
                             references to capital stock, options
                             and per share data have been
                             adjusted retrospectively to reflect
                             the Company's two-for-one share
                             split for the periods ended July 31,
                             2019 and 2018.

Condensed Consolidated Interim Statements of Cash Flows(in thousands of Canadian dollars)(Unaudited)

Three months ended                  Nine months ended

                                                                                                               July 31                            July 31


                                                                                            2019                     2018       2019                        2018




                Cash flows from operating activities



              Net income for the period                                                              $
              14,661                    $
              16,062        $
      46,162      $
      38,193






                Adjustments for:



              Depreciation of property, plant and equipment                                 570                      540      1,599                       1,869



              Amortization of acquired software and customer relationships                8,453                    7,245     22,453                      21,763



              Stock-based compensation expense                                              606                      236      1,723                       1,171



              Provision for income taxes                                                  4,166                    4,620     13,070                      17,564



              Finance expenses and other expenses (income)                                   75                    (454)     (345)                    (1,806)


                                                                                          28,531                   28,249     84,662                      78,754





              Changes in non-cash operating working capital                            (10,174)                   6,041   (10,801)                      6,608



              Income taxes paid                                                         (4,495)                 (5,016)  (14,215)                   (11,141)





                Net cash flows from operating activities                      13,862                   29,274     59,646                      74,221






                Cash flows from investing activities



              Purchase of property, plant and equipment, net                              (559)                   (607)   (1,340)                    (1,538)



              Acquisitions, net of cash acquired of $27,683 (Q3/18 - $Nil),


              YTD 2019 - $33,965 (2018 - $1,235)                                       (68,667)                          (94,233)                    (9,675)



              Purchase consideration for prior period acquisitions                                              (1,866)   (1,105)                    (6,945)



              Net sale (purchase) of short-term investments                                 743                    1,754    (1,110)                      2,486

    ---



                Net cash flows used in investing activities                 (68,483)                   (719)  (97,788)                   (15,672)






                Cash flows from financing activities



              Issuance of share capital                                                     563                    2,699      1,348                       4,827



              Repayment of loans                                                                                  (334)     (957)                      (735)



              Payment of cash dividend                                                  (6,011)                 (4,880)  (15,840)                   (13,523)




                Net cash flows used in financing activities                  (5,448)                 (2,515)  (15,449)                    (9,431)





              Effect of currency translation adjustments on cash and cash               (3,393)                 (1,890)     (538)                         39
    equivalents

    ---





                Net (decrease) increase in cash and cash equivalents during (63,462)                  24,150   (54,129)                     49,157
    the period



              Cash and cash equivalents - beginning of period                           196,884                  145,615    187,551                     120,608

    ---





                Cash and cash equivalents - end of period                            $

                133,422             $

                169,765   $

        133,422 $

        169,765

    ===

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

For the three months ended                        For the nine months ended
                                                                          July 31                                      July 31



                                                                 2019                             2018          2019                            2018







                Revenue:



              Asset Management Group                                              $
              44,405                           $
              39,194               $
      131,659      $
      113,525



              Interactive Management Group                    56,869                           47,549       144,863                         143,498





                Total                                     $

                101,274                $

                86,743          $

        276,522 $

        257,023










              Asset Management Group:



              - Segment profit before special charges                             $
              11,726                           $
              14,114                $
      43,343       $
      38,670



              - Special charges                                (159)                           (152)        (159)                          (333)




              Asset Management Group profit                           $

                11,567                $

                13,962           $

        43,184  $

        38,337






              Interactive Management Group:



              - Segment profit before special charges                             $
              18,727                           $
              15,724                $
      45,026       $
      45,921



              - Special charges                                (311)                                        (367)




              Interactive Management Group profit                     $

                18,416                $

                15,724           $

        44,659  $

        45,921






              Corporate expenses                             (2,966)                         (2,962)      (8,410)                        (8,357)





                Results from operating activities          $

                27,017                $

                26,724           $

        79,433  $

        84,258






              Amortization of acquired software and customer (8,453)                         (7,245)     (22,453)                       (21,765)
    relationships



              Foreign exchange (loss) gain                     (131)                             659           433                           (465)



              Finance income                                     469                               90         1,474                             278



              Finance expenses                                  (11)                            (50)         (66)                          (134)



              Other (expenses) income                           (64)                             504           411                           1,940







                Income before income taxes                 $

                18,827                $

                20,682           $

        59,232  $

        55,757

SOURCE Enghouse Systems Limited

View original content: http://www.newswire.ca/en/releases/archive/September2019/12/c6782.html

SOURCE: Enghouse Systems Limited

Sam Anidjar, Vice President, Corporate Development, Enghouse Systems Limited, Tel:
(905) 946-3200, Email: investor@enghouse.com

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