MARKHAM, ON, Sept. 5, 2024 /CNW/ – Enghouse Systems Limited (TSX: ENGH) announces third quarter (unaudited) financial results for the period ended July 31, 2024. All figures are denominated in Canadian dollars unless otherwise indicated.
Third Quarter Financial Highlights:
Revenue increased 17.6% to $130.5 million from $111.0 million in Q3 2023 and 13.9% for the nine-month period to $376.8 million from $330.9 million last year;Recurring revenue, which includes SaaS and maintenance services, grew 22.8% to $88.8 million compared to $72.3 million in Q3 2023, and represents 68.1% of total revenue. For the nine-month period, recurring revenue increased to $258.4 million from $210.4 million in the prior period, an increase of 22.8%, as we continue to prioritize this revenue stream;Results from operating activities increased to $34.3 million compared to $30.9 million in Q3 2023 and increased for the nine-month period to $100.4 million, from $86.4 million in the prior period;Net income was $20.6 million compared to $17.6 million in Q3 2023 and $58.7 million year to date compared to $47.1 million last year, as we grow our business with a focus on profitability;Adjusted EBITDA increased to $37.7 million compared to $33.4 million, growing by 12.9%, while achieving a 28.9% margin. Year to date Adjusted EBITDA was $108.2 million compared to $95.9 million in the prior year, an increase of 12.8%;Cash flow from operating activities, excluding changes in working capital, was $37.4 million compared to $35.5 million in the prior quarter and $111.5 million year to date compared to $97.0 million in the comparable period. Cash, cash equivalents and short-term investments reached near record highs at $258.7 million as at July 31, 2024.
Our third quarter operating performance continued its upward trend with revenue, profitability and operating cash flow, all exhibiting positive growth. Our commitment to operational efficiency, alongside our capability in executing and integrating acquisitions continues to deliver positive results. This quarter we completed the acquisition of SeaChange, expanding our IPTV market presence, a growing sector for Enghouse. We have effectively integrated SeaChange into our Asset Management Group, achieving profitability in its first quarter, post-acquisition, although not yet at our standard levels.
Our strategic direction remains steadfast as we continue to expand our business profitably. Offering both SaaS and on-premise solutions positions us uniquely in the marketplace. Operational enhancements across our existing businesses and recent acquisitions are driving positive outcomes, enabling us to maintain robust cash reserves while simultaneously increasing annual dividends, repurchasing shares and pursuing acquisitions.
Quarterly dividends:
Today, the Board of Directors approved the Company’s eligible quarterly dividend of $0.26 per common share, payable on November 29, 2024 to shareholders of record at the close of business on November 15, 2024.
Enghouse Systems Limited
Financial Highlights
(unaudited, in thousands of Canadian dollars)
For the period ended July 31
Three months
Nine months
2024
2023
Var ($)
Var (%)
2024
2023
Var ($)
Var (%)
Revenue
$
130,501
$
110,997
19,504
17.6
$
376,803
$
330,893
45,910
13.9
Direct costs
45,836
35,872
9,964
27.8
130,619
108,786
21,833
20.1
Revenue, net of direct costs
$
84,665
$
75,125
9,540
12.7
$
246,184
$
222,107
24,077
10.8
As a % of revenue
64.9 %
67.7 %
65.3 %
67.1 %
Operating expenses
49,120
43,901
5,219
11.9
144,331
133,323
11,008
8.3
Special charges
1,243
331
912
275.5
1,440
2,360
(920)
(39.0)
Results from operating activities
$
34,302
$
30,893
3,409
11.0
$
100,413
$
86,424
13,989
16.2
As a % of revenue
26.3 %
27.8 %
26.6 %
26.1 %
Amortization of acquired software and
customer relationships
(9,663)
(9,730)
67
0.7
(31,183)
(28,400)
(2,783)
(9.8)
Foreign exchange (losses) gains
(1,747)
356
(2,103)
(590.7)
(3,550)
(1,487)
(2,063)
(138.7)
Interest expense – lease obligations
(132)
(172)
40
23.3
(430)
(531)
101
19.0
Finance income
2,333
1,701
632
37.2
7,296
3,683
3,613
98.1
Finance expenses
(29)
(5)
(24)
(480.0)
(41)
(136)
95
69.9
Other income (expenses)
407
(1,312)
1,719
131.0
513
(1,967)
2,480
126.1
Income before income taxes
$
25,471
$
21,731
3,740
17.2
$
73,018
$
57,586
15,432
26.8
Provision for income taxes
4,891
4,164
727
17.5
14,331
10,460
3,871
37.0
Net Income for the period
$
20,580
$
17,567
3,013
17.2
$
58,687
$
47,126
11,561
24.5
Basic earnings per share
0.37
0.32
0.05
15.6
1.06
0.85
0.21
24.7
Diluted earnings per share
0.37
0.32
0.05
15.6
1.06
0.85
0.21
24.7
Operating cash flows
40,333
39,020
1,313
3.4
100,488
86,980
13,508
15.5
Operating cash flows excluding changes
in working capital
37,363
35,481
1,882
5.3
111,533
96,988
14,545
15.0
Adjusted EBITDA
Results from operating activities
34,302
30,893
3,409
11.0
100,413
86,424
13,989
16.2
Depreciation
647
585
62
(10.6)
1,692
1,824
(132)
7.2
Depreciation of right-of-use assets
1,530
1,606
(76)
4.7
4,606
5,273
(667)
12.6
Special charges
1,243
331
912
(275.5)
1,440
2,360
(920)
39.0
Adjusted EBITDA
$
37,722
$
33,415
4,307
12.9
$
108,151
$
95,881
12,270
12.8
Adjusted EBITDA margin
28.9 %
30.1 %
28.7 %
29.0 %
Adjusted EBITDA per diluted share
$
0.68
$
0.60
0.08
13.3
$
1.95
$
1.73
0.22
12.7
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(unaudited)
As at July 31,
2024
As at October 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
257,713
$
239,532
Short-term investments
980
827
Accounts receivable
108,543
93,383
Prepaid expenses and other assets
16,445
15,515
Income taxes recoverable
–
114
383,681
349,371
Non-current assets:
Property and equipment
4,305
3,273
Right-of-use assets
13,963
12,242
Intangible assets
106,878
109,659
Goodwill
307,291
280,241
Deferred income tax assets
24,719
28,884
457,156
434,299
$
840,837
$
783,670
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
71,652
$
67,769
Income tax payable
2,645
–
Dividends payable
14,397
12,156
Provisions
1,974
2,238
Deferred revenue
131,405
109,019
Lease obligations
5,330
6,322
227,403
197,504
Non-current liabilities:
Income taxes payable
–
1,333
Deferred income tax liabilities
11,135
13,340
Deferred revenue
7,630
8,170
Net employee defined-benefit obligation
1,960
1,912
Lease obligations
8,042
6,080
28,767
30,835
256,170
228,339
Shareholders’ equity:
Share capital
114,812
107,701
Contributed surplus
10,268
10,404
Retained earnings
441,391
426,397
Accumulated other comprehensive income
18,196
10,829
584,667
555,331
$
840,837
$
783,670
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
2024
2023
2024
2023
Revenue
Software licenses
$ 19,579
$ 19,836
$ 57,046
$ 62,587
SaaS and maintenance services
88,812
72,302
258,383
210,439
Professional services
18,231
15,904
51,577
50,790
Hardware
3,879
2,955
9,797
7,077
130,501
110,997
376,803
330,893
Direct costs
Software licenses
1,689
720
3,104
2,288
Services
41,696
33,476
122,178
102,694
Hardware
2,451
1,676
5,337
3,804
45,836
35,872
130,619
108,786
Revenue, net of direct costs
84,665
75,125
246,184
222,107
Operating expenses
Selling, general and administrative
23,980
22,454
71,661
67,187
Research and development
22,963
19,256
66,372
59,039
Depreciation
647
585
1,692
1,824
Depreciation of right-of-use assets
1,530
1,606
4,606
5,273
Special charges
1,243
331
1,440
2,360
50,363
44,232
145,771
135,683
Results from operating activities
34,302
30,893
100,413
86,424
Amortization of acquired software and customer relationships
(9,663)
(9,730)
(31,183)
(28,400)
Foreign exchange (losses) gains
(1,747)
356
(3,550)
(1,487)
Interest expense – lease obligations
(132)
(172)
(430)
(531)
Finance income
2,333
1,701
7,296
3,683
Finance expenses
(29)
(5)
(41)
(136)
Other income (expenses)
407
(1,312)
513
(1,967)
Income before income taxes
25,471
21,731
73,018
57,586
Provision for income taxes
4,891
4,164
14,331
10,460
Net income for the period
20,580
17,567
58,687
47,126
Item that may be subsequently reclassified to income:
Cumulative translation adjustment
5,929
(13,632)
7,367
7,406
Other comprehensive income (loss)
5,929
(13,632)
7,367
7,406
Comprehensive income
$ 26,509
$ 3,935
$ 66,054
$ 54,532
Earnings per share
Basic
$ 0.37
$ 0.32
$ 1.06
$ 0.85
Diluted
$ 0.37
$ 0.32
$ 1.06
$ 0.85
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)
Three months
Nine months
Periods ended July 31
2024
2023
2024
2023
OPERATING ACTIVITIES
Net income for the period
$ 20,580
$ 17,567
$ 58,687
$ 47,126
Adjustments for non-cash items
Depreciation
647
585
1,692
1,824
Depreciation of right-of-use assets
1,530
1,606
4,606
5,273
Interest expense – lease obligations
132
172
430
531
Amortization of acquired software and customer relationships
9,663
9,730
31,183
28,400
Stock-based compensation expense
298
340
1,076
1,271
Provision for income taxes
4,891
4,164
14,331
10,460
Finance expenses and other (income) expenses
(378)
1,317
(472)
2,103
37,363
35,481
111,533
96,988
Changes in non-cash operating working capital
6,243
4,367
(246)
380
Income taxes paid
(3,273)
(828)
(10,799)
(10,388)
Net cash provided by operating activities
40,333
39,020
100,488
86,980
INVESTING ACTIVITIES
Net purchase of property and equipment
(683)
(436)
(1,461)
(607)
Acquisitions, net of cash acquired*
(30,854)
(2,361)
(43,448)
(27,978)
Purchase consideration for prior-year acquisition
–
(1,245)
171
(1,012)
Purchase of short-term investments
–
–
–
(69)
Net cash used in investing activities
(31,537)
(4,042)
(44,738)
(29,666)
FINANCING ACTIVITIES
Issuance of share capital
1,412
–
6,095
604
Normal course issuer bid share repurchases
(1,759)
–
(2,906)
Repayment of lease obligations
(2,347)
(1,474)
(5,747)
(5,754)
Dividends paid
(14,398)
(12,160)
(38,742)
(32,606)
Net cash used in financing activities
(17,092)
(13,634)
(41,300)
(37,756)
Impact of foreign exchange on cash and cash equivalents
3,091
(4,711)
3,731
4,122
(Decrease) increase in cash and cash equivalents
(5,205)
16,633
18,181
23,680
Cash and cash equivalents – beginning of period
262,918
232,151
239,532
225,104
Cash and cash equivalents – end of period
$ 257,713
$ 248,784
$ 257,713
$ 248,784
* Acquisitions are net of cash acquired of $245 and $742 for the three and nine months ended July 31, 2024, and nil and $2,088 for the three and nine months ended July 31, 2023, respectively.
Enghouse Systems Limited
Segment Reporting Information
(in thousands of Canadian dollars)
Three months ended July 31
2024
2023
IMG
AMG
Total
IMG
AMG
Total
Revenue
$
77,522
$
52,979
$
130,501
$
64,302
$
46,695
$
110,997
Direct costs
(27,981)
(17,855)
(45,836)
(18,884)
(16,988)
(35,872)
Revenue, net of direct costs
49,541
35,124
84,665
45,418
29,707
75,125
Operating expenses excluding special charges
(21,257)
(14,190)
(35,447)
(20,401)
(10,803)
(31,204)
Depreciation
(389)
(258)
(647)
(403)
(182)
(585)
Depreciation of right-of-use assets
(997)
(533)
(1,530)
(1,239)
(367)
(1,606)
Segment profit
$
26,898
$
20,143
$
47,041
$
23,375
$
18,355
$
41,730
Special charges
(1,243)
(331)
Corporate and shared service expenses
(11,496)
(10,506)
Results from operating activities
$
34,302
$
30,893
Nine months ended July 31
2024
2023
IMG
AMG
Total
IMG
AMG
Total
Revenue
$
234,189
$
142,614
$
376,803
$
186,733
$
144,160
$
330,893
Direct costs
(79,960)
(50,659)
(130,619)
(54,451)
(54,335)
(108,786)
Revenue, net of direct costs
154,229
91,955
246,184
132,282
89,825
222,107
Operating expenses excluding special charges
(66,166)
(37,637)
(103,803)
(62,686)
(34,719)
(97,405)
Depreciation
(1,158)
(534)
(1,692)
(1,484)
(340)
(1,824)
Depreciation of right-of-use assets
(2,930)
(1,676)
(4,606)
(3,280)
(1,993)
(5,273)
Segment profit
$
83,975
$
52,108
$
136,083
$
64,832
$
52,773
$
117,605
Special charges
(1,440)
(2,360)
Corporate and shared service expenses
(34,230)
(28,821)
Results from operating activities
$
100,413
$
86,424
About Enghouse
Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides mission critical vertically focused enterprise software solutions. Our core technologies are used for contact centers, video communications, virtual healthcare, telecommunications networks, public safety and the transit market. The Company’s two-pronged growth strategy to grow earnings focuses on organic growth and acquisitions, which, to date, have been funded only through operating cash flows as the Company has no outstanding external debt financing. The Company is organized around two business segments, the Interactive Management Group (“IMG”) and the Asset Management Group (“AMG”) due to their unique customer segments and technology offerings. 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 6, 2024 at 8:45 a.m. EST. To participate, please call +1-289-514-5100 or North American Toll-Free +1-800-717-1738. Confirmation code: 59337. 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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