Enghouse Releases First Quarter Results

MARKHAM, ON, March 9, 2023 /CNW/ - Enghouse Systems Limited (TSX: ENGH) today announced its first quarter unaudited financial results for the period ended January 31, 2023.  All the financial information is in Canadian dollars unless otherwise indicated.

Financial and operational highlights for the three months ended January 31, 2023 compared to the three months ended January 31, 2022 are as follows:

• Revenue achieved was $106.4 million compared to revenue of $111.1 million;
• Results from operating activities was $29.9 million compared to $35.7 million;
• Net income was $17.0 million compared to $21.6 million;
• Adjusted EBITDA was $32.3 million compared to $38.6 million;
• Cash flows from operating activities excluding changes in working capital were $32.6 million compared to $38.7 million.

Over the last four quarters, revenue in both the Asset and Interactive Management Groups has stabilized significantly, particularly in comparison to the revenue fluctuations that were driven by changing demands throughout the COVID-19 pandemic. Despite the ongoing shift to the cloud, inflation, rising interest rates, economic uncertainty and some competitors experiencing significant financial distress announcing restructuring and employee layoffs, Enghouse continues to operate consistently with positive income and operating cashflows. Enghouse remains well positioned to complete and fund future acquisitions. Subsequent to quarter end, we announced the acquisitions of Qumu and Navita with integrations progressing according to plan.

Net income for the quarter was $0.31 per diluted share, compared to $0.39 per diluted share in the same period last year. The decrease in net income is primarily a result of a reduction in software licenses alongside lower gross margins from professional services relating to our large public transportation projects. Adjusted EBITDA was $32.3 million or $0.58 per diluted share, compared to $38.6 million or $0.69 per diluted share in the first quarter of 2022.

Enghouse closed the quarter with $250.7 million in cash, cash equivalents and short-term investments, compared to $228.1 million at October 31, 2022 with no external debt financing. The cash balance was achieved after making payments of $10.2 million for dividends in the quarter. Enghouse remains focused on its long-term growth strategy, investing in products while ensuring profitability and maximizing operating cashflows. As a result, Enghouse continues to replenish its acquisition capital while annually increasing its eligible quarterly dividend.

Quarterly dividends:   
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.22 per common share, an increase of 18.9% over the prior dividend, payable on May 31, 2023 to shareholders of record at the close of business on May 17, 2023. This represents the 15th 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
									2023		2022	Var ($)	Var (%)
Revenue								$	106,435	$	111,102	(4,667)	(4.2)
Direct costs									34,808		32,828	1,980	6.0
Revenue, net of direct costs								$	71,627	$	78,274	(6,647)	(8.5)
As a % of revenue									67.3 %		70.5 %
Operating expenses									41,710		42,551	(841)	(2.0)
Special charges									28		18	10	55.6
Results from operating activities								$	29,889	$	35,705	(5,816)	(16.3)
As a % of revenue									28.1 %		32.1 %
Amortization of acquired software and customer relationships									(8,832)		(9,657)	825	8.5
Foreign exchange losses									(1,053)		(336)	(717)	(213.4)
Interest expense – lease obligations									(167)		(202)	35	17.3
Finance income									976		129	847	656.6
Finance expenses									(7)		(23)	16	69.6
Other (expenses) income									(127)		1,000	(1,127)	(112.7)
Income before income taxes								$	20,679	$	26,616	(5,937)	(22.3)
Provision for income taxes									3,656		5,019	(1,363)	(27.2)
Net income for the period								$	17,023	$	21,597	(4,574)	(21.2)
Basic earnings per share									0.31		0.39	(0.08)	(20.5)
Diluted earnings per share									0.31		0.39	(0.08)	(20.5)
Operating cash flows									29,262		24,342	4,920	20.2
Operating cash flows excluding changes in working capital									32,632		38,743	(6,111)	(15.8)
Adjusted EBITDA
Results from operating activities									29,889		35,705	(5,816)	(16.3)
Depreciation									626		720	(94)	13.1
Depreciation of right-of-use assets									1,736		2,112	(376)	17.8
Special charges									28		18	10	(55.6)
Adjusted EBITDA								$	32,279	$	38,555	(6,276)	(16.3)
Adjusted EBITDA margin									30.3 %		34.7 %
Adjusted EBITDA per diluted share								$	0.58	$	0.69	( 0.11)	(15.9)

Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars) (unaudited)		As at January 31, 2023		As at October 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	247,801	$	225,104
Short-term investments			2,863		2,950
Accounts receivable			106,461		93,104
Prepaid expenses and other assets			14,567		12,848
Income taxes recoverable			-		492
			371,692		334,498
Non-current assets:
Property and equipment			3,802		4,186
Right-of-use assets			18,469		20,063
Intangible assets			78,343		85,902
Goodwill			234,101		230,002
Deferred income tax assets			31,499		30,347
			366,214		370,500
		$	737,906	$	704,998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	57,906	$	60,525
Income taxes payable			32		-
Dividends payable			10,224		10,221
Provisions			2,640		3,183
Deferred revenue			103,535		83,122
Lease obligations			7,495		6,822
			181,832		163,873
Non-current liabilities:
Income taxes payable			1,283		2,576
Deferred income tax liabilities			12,672		12,038
Deferred revenue			3,717		3,470
Net employee defined benefit obligation			1,960		1,821
Lease obligations			10,673		13,055
			30,305		32,960
			212,137		196,833
Shareholders' equity
Share capital			107,728		107,007
Contributed surplus			9,223		8,882
Retained earnings			408,046		401,247
Accumulated other comprehensive income (loss)			772		(8,971)
			525,769		508,165
		$	737,906	$	704,998

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				2023	2022
Revenue      Software licenses				$ 20,735	$ 23,778
SaaS and maintenance services				66,503	66,427
Professional services				16,891	17,952
Hardware				2,306	2,945
				106,435	111,102
Direct costs
Software licenses				870	1,327
Services				32,425	29,594
Hardware				1,513	1,907
				34,808	32,828
Revenue, net of direct costs				71,627	78,274
Operating expenses
Selling, general and administrative				20,798	22,407
Research and development				18,550	17,312
Depreciation				626	720
Depreciation of right-of-use assets				1,736	2,112
Special charges				28	18
				41,738	42,569
Results from operating activities				29,889	35,705
Amortization of acquired software and customer relationships				(8,832)	(9,657)
Foreign exchange losses				(1,053)	(336)
Interest expense – lease obligations				(167)	(202)
Finance income				976	129
Finance expenses				(7)	(23)
Other (expenses) income				(127)	1,000
Income before income taxes				20,679	26,616
Provision for income taxes				3,656	5,019
Net income for the period				$  17,023	$  21,597
Items that may be subsequently reclassified to income:
Cumulative translation adjustment				9,743	4,126
Other comprehensive income				9,743	4,126
Comprehensive income				$  26,766	$  25,723
Earnings per share
Basic				$       0.31	$       0.39
Diluted				$       0.31	$      0.39

Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)				Three months
Periods ended January 31				2023	2022
OPERATING ACTIVITIES
Net income for the period				$     17,023	$     21,597
Adjustments for non-cash items
Depreciation				626	720
Depreciation of right-of-use assets				1,736	2,112
Interest expense – lease obligations				167	202
Amortization of acquired software and customer relationships				8,832	9,657
Stock-based compensation expense				458	413
Provision for income taxes				3,656	5,019
Finance and other expenses (income)				134	(977)
				32,632	38,743
Changes in non-cash operating working capital				2,002	(11,202)
Income taxes paid				(5,372)	(3,199)
Net cash provided by operating activities				29,262	24,342
INVESTING ACTIVITIES
Net (purchase) sale of property and equipment				(105)	235
Purchase of short-term investments				(69)	-
Net cash (used in) provided by investing activities				(174)	235
FINANCING ACTIVITIES
Issuance of share capital				604	-
Repayment of lease obligations				(1,810)	(2,093)
Dividends paid				(10,221)	(8,889)
Net cash used in financing activities				(11,427)	(10,982)
Impact of foreign exchange on cash and cash equivalents				5,036	1,414
Increase in cash and cash equivalents				22,697	15,009
Cash and cash equivalents ─ beginning of period				225,104	195,890
Cash and cash equivalents ─ end of period				$  247,801	$  210,899

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

Three months ended January 31		2023							2022
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		57,852	$	48,583	$	106,435	$	61,871	$	49,231	$	111,102
Direct costs			(16,431)		(18,377)		(34,808)		(15,444)		(17,384)		(32,828)
Revenue, net of direct costs			41,421		30,206		71,627		46,427		31,847		78,274
Operating expenses excluding special charges			(19,250)		(11,321)		(30,571)		(19,551)		(11,172)		(30,723)
Depreciation			(537)		(89)		(626)		(596)		(124)		(720)
Depreciation of right-of-use assets			(1,100)		(636)		(1,736)		(1,327)		(785)		(2,112)
Segment profit	$		20,534	$	18,160	$	38,694	$	24,953	$	19,766	$	44,719
Special charges							(28)						(18)
Corporate and shared service expenses							(8,777)						(8,996)
Results from operating activities						$	29,889					$	35,705

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 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, March 10, 2023 at 8:45 a.m. EST. To participate, please call
[phone] or North American Toll-Free 1-888-396-8049. Confirmation code: 09140113. 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]