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 [phone] or North American Toll-Free [phone]. 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

please contact: Sam Anidjar, Vice President, Corporate Development, Enghouse Systems Limited, Tel: [phone], Email: [email protected]