Enghouse Releases First Quarter Results

MARKHAM, ON, March 13, 2024 /CNW/ - Enghouse Systems Limited (TSX: ENGH) announces its first quarter (unaudited) financial results for the period ended January 31, 2024. All figures are denominated in Canadian dollars unless otherwise indicated.

Highlights for the First Quarter ended January 31, 2024 compared to the same period in the prior year:

• Revenue increased 13.2% to $120.5 million compared to revenue of $106.4 million.
• Recurring revenue, which includes SaaS and maintenance services, grew 27.2% to $84.6 million and now represents 70.2% of total revenue.
• Results from operating activities improved to $32.6 million from $29.9 million, while achieving a 28.8% EBITDA margin. Adjusted EBITDA was $34.7 million compared to $32.3 million.
• Cash flows from operating activities, excluding changes in working capital, were $35.6 million compared to $32.6 million.
• Net income was $18.1 million compared to $17.0 million.

As the software markets continues its transitions towards SaaS offerings, we are generating an increasing proportion of recurring revenue streams within our overall revenue model, which now represents 70.2% of our total revenue in the first quarter of 2024.

Our operational expenditure has declined as a percentage of revenue, consistent with our objective of generating operational efficiencies despite the inflationary pressure on operating costs. This focus on efficiency is part of our broader objective of maintaining a lean operational model that supports our growth ambitions without compromising the bottom line. Despite these challenges, our cash position has increased in the quarter, providing the resources necessary to continue to pursue new acquisition opportunities that we believe will enhance our market position and offer long-term shareholder value.

A key advantage Enghouse has in this high-interest-rate operating environment is our debt-free status and a closing cash, cash equivalents and short-term investments balance of $247.4 million, affording us the flexibility and agility to make investments without the burden of external financial constraints. This positions us uniquely in the market, enabling us to pursue acquisitions and invest in further expanding our product suite.

Subsequent to quarter end, on February 12, 2024, Enghouse completed the acquisition of Mediasite assets, which offer a suite of SaaS video solutions as well as expanding Enghouse's presence in the Japanese market. The acquisition was completed for a cash purchase price of US $15.5 million.

Quarterly dividends:
Today, the Board of Directors approved an increase in the Company's eligible quarterly dividend to $0.26 per common share, an increase of 18.2% over the prior dividend, payable on May 31, 2024 to shareholders of record at the close of business on May 17, 2024. This represents the 16th consecutive year in which the Company increased its dividend by over 10%.

Enghouse Systems Limited
Financial Highlights
(unaudited, in thousands of Canadian dollars)

For the periods ended January 31								Three months
									2024		2023	Var ($)	Var (%)
Revenue								$	120,489	$	106,435	14,054	13.2
Direct costs									41,582		34,808	6,774	19.5
Revenue, net of direct costs								$	78,907	$	71,627	7,280	10.2
As a % of revenue									65.5 %		67.3 %
Operating expenses									46,180		41,710	4,470	10.7
Special charges									91		28	63	225.0
Results from operating activities								$	32,636	$	29,889	2,747	9.2
As a % of revenue									27.1 %		28.1 %
Amortization of acquired software and customer relationships									(10,374)		(8,832)	(1,542)	(17.5)
Foreign exchange losses									(1,717)		(1,053)	(664)	(63.1)
Interest expense – lease obligations									(150)		(167)	17	10.2
Finance income									2,361		976	1,385	141.9
Finance expenses									-		(7)	7	100.0
Other expenses									(114)		(127)	13	10.2
Income before income taxes								$	22,642	$	20,679	1,963	9.5
Provision for income taxes									4,509		3,656	853	23.3
Net income for the period								$	18,133	$	17,023	1,110	6.5
Basic earnings per share									0.33		0.31	0.02	6.5
Diluted earnings per share									0.33		0.31	0.02	6.5
Operating cash flows									19,899		29,262	(9,363)	(32.0)
Operating cash flows excluding changes in working capital									35,557		32,632	2,925	9.0
Adjusted EBITDA
Results from operating activities									32,636		29,889	2,747	9.2
Depreciation									494		626	(132)	21.1
Depreciation of right-of-use assets									1,506		1,736	(230)	13.2
Special charges									91		28	63	(225.0)
Adjusted EBITDA								$	34,727	$	32,279	2,448	7.6
Adjusted EBITDA margin									28.8 %		30.3 %
Adjusted EBITDA per diluted share								$	0.63	$	0.58	0.05	8.6

Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars) (unaudited)		As at January 31, 2024		As at October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$	246,752	$	239,532
Short-term investments			671		827
Accounts receivable			121,391		93,383
Prepaid expenses and other assets			16,941		15,515
Income taxes recoverable			-		114
			385,755		349,371
Non-current assets:
Property and equipment			3,128		3,273
Right-of-use assets			10,686		12,242
Intangible assets			96,693		109,659
Goodwill			276,902		280,241
Deferred income tax assets			26,906		28,884
			414,315		434,299
		$	800,070	$	783,670
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	64,862	$	67,769
Income taxes payable			3,158		-
Dividends payable			12,188		12,156
Provisions			1,417		2,238
Deferred revenue			127,916		109,019
Lease obligations			5,548		6,322
			215,089		197,504
Non-current liabilities:
Income taxes payable			-		1,333
Deferred income tax liabilities			12,772		13,340
Deferred revenue			7,167		8,170
Net employee defined benefit obligation			1,878		1,912
Lease obligations			5,318		6,080
			27,135		30,835
			242,224		228,339
Shareholders' equity
Share capital			112,867		107,701
Contributed surplus			9,825		10,404
Retained earnings			432,342		426,397
Accumulated other comprehensive income			2,812		10,829
			557,846		555,331
		$	800,070	$	783,670

Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(unaudited)				Three months
Periods ended January 31				2024	2023
Revenue      Software licenses				$  16,975	$  20,735
SaaS and maintenance services				84,587	66,503
Professional services				15,945	16,891
Hardware				2,982	2,306
				120,489	106,435
Direct costs
Software licenses				674	870
Services				39,531	32,425
Hardware				1,377	1,513
				41,582	34,808
Revenue, net of direct costs				78,907	71,627
Operating expenses
Selling, general and administrative				22,869	20,798
Research and development				21,311	18,550
Depreciation				494	626
Depreciation of right-of-use assets				1,506	1,736
Special charges				91	28
				46,271	41,738
Results from operating activities				32,636	29,889
Amortization of acquired software and customer relationships				(10,374)	(8,832)
Foreign exchange losses				(1,717)	(1,053)
Interest expense – lease obligations				(150)	(167)
Finance income				2,361	976
Finance expenses				-	(7)
Other expenses				(114)	( 127)
Income before income taxes				22,642	20,679
Provision for income taxes				4,509	3,656
Net income for the period				$  18,133	$  17,023
Items that may be subsequently reclassified to income:
Cumulative translation adjustment				(8,017)	9,743
Other comprehensive (loss) income				(8,017)	9,743
Comprehensive income				$  10,116	$  26,766
Earnings per share
Basic				$      0.33	$      0.31
Diluted				$      0.33	$      0.31

Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)				Three months
Periods ended January 31				2024	2023
OPERATING ACTIVITIES
Net income for the period				$    18,133	$    17,023
Adjustments for non-cash items
Depreciation				494	626
Depreciation of right-of-use assets				1,506	1,736
Interest expense – lease obligations				150	167
Amortization of acquired software and customer relationships				10,374	8,832
Stock-based compensation expense				277	458
Provision for income taxes				4,509	3,656
Finance and other expenses				114	134
				35,557	32,632
Changes in non-cash operating working capital				(13,140)	2,002
Income taxes paid				(2,518)	(5,372)
Net cash provided by operating activities				19,899	29,262
INVESTING ACTIVITIES
Net purchase of property and equipment				(360)	(105)
Recovery of purchase consideration for prior-year acquisitions				171	-
Purchase of short-term investments				-	(69)
Net cash used in investing activities				(189)	( 174)
FINANCING ACTIVITIES
Issuance of share capital				4,310	604
Repayment of lease obligations				(1,602)	(1,810)
Dividends paid				(12,156)	(10,221)
Net cash used in financing activities				(9,448)	(11,427)
Impact of foreign exchange on cash and cash equivalents				(3,042)	5,036
Increase in cash and cash equivalents				7,220	22,697
Cash and cash equivalents ─ beginning of period				239,532	225,104
Cash and cash equivalents ─ end of period				$  246,752	$  247,801

Enghouse Systems Limited
Segment Reporting Information
(in thousands of Canadian dollars)

Three months ended January 31		2024							2023
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		76,137	$	44,352	$	120,489	$	57,852	$	48,583	$	106,435
Direct costs			(25,406)		(16,176)		(41,582)		(16,431)		(18,377)		(34,808)
Revenue, net of direct costs			50,731		28,176		78,907		41,421		30,206		71,627
Operating expenses excluding special charges			(21,425)		(11,697)		(33,122)		(19,250)		(11,321)		(30,571)
Depreciation			(377)		(117)		(494)		(537)		(89)		(626)
Depreciation of right-of-use assets			(936)		(570)		(1,506)		(1,100)		(636)		(1,736)
Segment profit	$		27,993	$	15,792	$	43,785	$	20,534	$	18,160	$	38,694
Special charges							(91)						(28)
Corporate and shared service expenses							(11,058)						(8,777)
Results from operating activities						$	32,636					$	29,889

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 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 Thursday, March 14, 2024 at 8:45 a.m. EST. To participate, please call Local
[phone] or North American Toll-Free 1-800-717-1738. Confirmation code: 74715. A webcast is also available at: https://www.enghouse.com/investors.php.

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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

Sam Anidjar, Vice President, Corporate Development, [phone], [email protected]