Enghouse Releases Fourth Quarter and Year End Results

MARKHAM, ON, Dec. 12, 2024 /CNW/ - Enghouse Systems Limited (TSX:ENGH) announces its fourth quarter (unaudited) and audited year-end financial results for the period ended October 31, 2024. All figures are denominated in Canadian dollars unless otherwise indicated.

Fourth Quarter and Annual Financial Highlights:

• Revenue increased 2.1% to $125.7 million from $123.1 million in the fourth quarter last year and 10.7% for the fiscal year to $502.5 million from $454.0 million last year;
• Recurring revenue, which includes SaaS and maintenance services, grew 1.1% to $88.2 million compared to $87.2 million in Q4 2023, and represents 70.2% of total revenue. For the fiscal year, recurring revenue increased to $346.6 million from $297.6 million in the prior year, an increase of 16.4%, as we continue to see increased demand for SaaS;
• Results from operating activities decreased to $33.4 million compared to $35.7 million in Q4 2023 and increased in the fiscal year to $133.8 million, from $122.1 million in the prior year;
• Net income was $22.6 million compared to $25.1 million in Q4 2023 and $81.3 million in the fiscal year compared to $72.2 million last year as we continue to grow our business with a focus on profitability;
• Adjusted EBITDA decreased to $35.6 million compared to $37.9 million, while achieving a 28.3% margin for the quarter. Annual adjusted EBITDA was $143.8 million compared to $133.8 million in the prior year, an increase of 7.5%;
• Cash flow from operating activities, excluding changes in working capital, was $40.3 million compared to $43.5 million in the prior year's fourth quarter and $151.8 million for the fiscal year compared to $140.5 million in the prior year. Cash and cash equivalents increased to record levels of $274.2 million as at October 31, 2024.

Fiscal 2024 yielded a third year of consecutive revenue growth following the COVID period, which saw an unprecedented spike in demand for our Vidyo applications. We achieved a significant milestone, with revenue for the fiscal year exceeding $500 million, representing double digit growth of 10.7%. During the year we deployed cash of $43.4 million on acquisitions and returned $53.1 million to our shareholders through dividends. At the same time, we increased our cash reserves to $274.2 million, with no external debt, which positions the Company well for further acquisition growth. We are also pleased to announce record annual SaaS and maintenance services revenue of $346.6 million, an increase of $49.0 million or 16.4% compared to the prior year. SaaS and maintenance services continue to be an important source of revenue characterized by their predictable and recurring nature. They now represent 69.0% of total revenues for the year compared to 65.6% in the prior year.

In addition to the SaaS and maintenance growth, our professional services and hardware revenue showed marked increases for the year. In the current business environment, demand for on-premise, perpetual software licenses has declined as more customers are choosing SaaS solutions that require less upfront capital investment. During this market transition, we continue to focus on maintaining profitability as demonstrated by the 12.6% increase in our net income to $81.3 million from $72.2 million in the prior year.

We closed the year with a double digit increase in revenue and net income, significant expansion of our recurring revenue, record cash reserves and no external debt, positioning us to pursue opportunities that meet our acquisition criteria while continuing to pay dividends to our shareholders. The growth in revenue was achieved through our ability to acquire and effectively integrate new acquisitions into our business model.

Quarterly dividends:                                            

Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.26 per common share payable on February 28, 2025 to shareholders of record at the close of business on February 14, 2025.

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

For the period ended October 31	Three months (Unaudited)							Twelve months
		2024		2023	Var ($)	Var (%)			2024		2023	Var ($)	Var (%)
Revenue	$	125,702	$	123,129	2,573	2.1		$	502,505	$	454,022	48,483	10.7
Direct costs		44,967		41,213	3,754	9.1			175,586		149,999	25,587	17.1
Revenue, net of direct costs	$	80,735	$	81,916	(1,181)	(1.4)		$	326,919	$	304,023	22,896	7.5
As a % of revenue		64.2 %		66.5 %					65.1 %		67.0 %
Operating expenses		47,133		46,115	1,018	2.2			191,464		179,438	12,026	6.7
Special charges		169		117	52	44.4			1,609		2,477	(868)	(35.0)
Results from operating activities	$	33,433	$	35,684	(2,251)	(6.3)		$	133,846	$	122,108	11,738	9.6
As a % of revenue		26.6 %		29.0 %					26.6 %		26.9 %
Amortization of acquired software and customer relationships		(9,322)		(11,205)	1,883	16.8			(40,505)		(39,605)	(900)	(2.3)
Foreign exchange gains (losses)		1,870		2,753	(883)	32.1			(1,680)		1,266	(2,946)	(232.7)
Interest expense – lease obligations		(126)		(164)	38	23.2			(556)		(695)	139	20.0
Finance income		2,825		2,581	244	9.5			10,121		6,264	3,857	61.6
Finance expenses		(8)		(27)	19	70.4			(49)		(163)	114	69.9
Other (expense) income		(424)		17	(441)	(2594.1)			89		(1,950)	2,039	104.6
Income before income taxes	$	28,248	$	29,639	(1,391)	(4.7)		$	101,266	$	87,225	14,041	16.1
Provision for income taxes		5,607		4,517	1,090	24.1			19,938		14,977	4,961	33.1
Net Income for the period	$	22,641	$	25,122	(2,481)	(9.9)		$	81,328	$	72,248	9,080	12.6
Basic earnings per share		0.41		0.45	(0.04)	(8.9)			1.47		1.31	0.16	12.2
Diluted earnings per share		0.41		0.45	(0.04)	(8.9)			1.47		1.31	0.16	12.2
Cash flows from operating activities		31,583		28,318	3,265	11.5			132,071		115,298	16,773	14.5
Cash flows from operating activities excluding changes in working capital		40,270		43,504	(3,234)	(7.4)			151,803		140,492	11,311	8.1
Adjusted EBITDA
Results from operating activities		33,433		35,684	(2,251)	(6.3)			133,846		122,108	11,738	9.6
Depreciation		655		627	28	4.5			2,347		2,451	(104)	(4.2)
Depreciation of right-of-use assets		1,375		1,491	(116)	(7.8)			5,981		6,764	(783)	(11.6)
Special charges		169		117	52	44.4			1,609		2,477	(868)	(35.0)
Adjusted EBITDA	$	35,632	$	37,919	(2,287)	(6.0)		$	143,783	$	133,800	9,983	7.5
Adjusted EBITDA margin		28.3 %		30.8 %					28.6 %		29.5 %
Adjusted EBITDA per diluted share	$	0.64	$	0.69	( 0.05)	(7.2)		$	2.60	$	2.42	0.18	7.4

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)		As at October 31, 2024		As at October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$	274,240	$	239,532
Short-term investments			487		827
Accounts receivable			92,348		93,383
Prepaid expenses and other assets			16,100		15,515
Income taxes recoverable			-		114
			383,175		349,371
Non-current assets:
Property and equipment			4,192		3,273
Right-of-use assets			11,473		12,242
Intangible assets			98,594		109,659
Goodwill			309,831		280,241
Deferred income tax assets			26,228		28,884
			450,318		434,299
		$	833,493	$	783,670
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	70,087	$	67,769
Income tax payable			5,525		-
Dividends payable			14,397		12,156
Provisions			1,834		2,238
Deferred revenue			114,080		109,019
Lease obligations			5,344		6,322
			211,267		197,504
Non-current liabilities:
Income taxes payable			-		1,333
Deferred income tax liabilities			10,500		13,340
Deferred revenue			8,094		8,170
Net employee defined benefit obligation			2,081		1,912
Lease obligations			5,744		6,080
			26,419		30,835
			237,686		228,339
Shareholders' equity
Share capital			118,217		107,701
Contributed surplus			9,764		10,404
Retained earnings			446,748		426,397
Accumulated other comprehensive income			21,078		10,829
			595,807		555,331
		$	833,493	$	783,670

Consolidated Statement of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
		Three months		Twelve months
Periods ended October 31		2024 (unaudited)	2023 (Unaudited)	2024	2023
Revenue
Software licenses		$  15,860	$  17,467	$  72,906	$  80,054
SaaS and maintenance services		88,196	87,196	346,579	297,635
Professional services		18,469	16,483	70,046	67,273
Hardware		3,177	1,983	12,974	9,060
		125,702	123,129	502,505	454,022
Direct costs
Software licenses		397	622	3,501	2,910
Services		43,043	39,108	165,221	141,802
Hardware		1,527	1,483	6,864	5,287
		44,967	41,213	175,586	149,999
Revenue, net of direct costs		80,735	81,916	326,919	304,023
Operating expenses
Selling, general and administrative		22,642	23,702	94,303	90,889
Research and development		22,461	20,295	88,833	79,334
Depreciation		655	627	2,347	2,451
Depreciation of right-of-use assets		1,375	1,491	5,981	6,764
Special charges		169	117	1,609	2,477
		47,302	46,232	193,073	181,915
Results from operating activities		33,433	35,684	133,846	122,108
Amortization of acquired software and customer relationships		(9,322)	(11,205)	(40,505)	(39,605)
Foreign exchange gains (losses)		1,870	2,753	(1,680)	1,266
Interest expense – lease obligations		(126)	(164)	(556)	(695)
Finance income		2,825	2,581	10,121	6,264
Finance expenses		(8)	(27)	(49)	(163)
Other (expense) income		(424)	17	89	(1,950)
Income before income taxes		28,248	29,639	101,266	87,225
Provision for income taxes		5,607	4,517	19,938	14,977
Net income for the period		$  22,641	$  25,122	$  81,328	$  72,248
Items that may be subsequently reclassified to income:
Cumulative translation adjustment		2,882	12,394	10,249	19,800
Other comprehensive income		2,882	12,394	10,249	19,800
Comprehensive income		$    25,523	$  37,516	$  91,577	$  92,048
Earnings per share
Basic		$        0.41	$      0.45	$      1.47	$      1.31
Diluted		$        0.41	$      0.45	$      1.47	$      1.31

Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)		Three months		Twelve months
Periods ended October 31		2024 (Unaudited)	2023 (Unaudited)	2024	2023
OPERATING ACTIVITIES
Net income for the period		$    22,641	$    25,122	$    81,328	$    72,248
Adjustments for non-cash items
Depreciation		655	627	2,347	2,451
Depreciation of right-of-use assets		1,375	1,491	5,981	6,764
Interest expense – lease obligations		126	164	556	695
Amortization of acquired software and customer relationships		9,322	11,205	40,505	39,605
Stock-based compensation expense		112	368	1,188	1,639
Provision for income taxes		5,607	4,517	19,938	14,977
Finance expenses and other (income) expense		432	10	(40)	2,113
		40,270	43,504	151,803	140,492
Changes in non-cash operating working capital		(7,674)	(11,624)	(7,920)	(11,244)
Income taxes paid		(1,013)	(3,562)	(11,812)	(13,950)
Net cash provided by operating activities		31,583	28,318	132,071	115,298
INVESTING ACTIVITIES
Purchase of property and equipment, net		(516)	(453)	(1,977)	(1,060)
Acquisitions, net of cash acquired*		-	(27,189)	(43,448)	(55,167)
Recovery (payment) of purchase consideration for prior-year acquisitions		-	13	171	(999)
Sale (purchase) of short-term investments		-	65	-	(4)
Net cash used in investing activities		( 516)	(27,564)	(45,254)	(57,230)
FINANCING ACTIVITIES
Issuance of share capital		2,990	-	9,085	604
Normal course issuer bid share repurchases		(3,088)	(425)	(5,994)	(425)
Repayment of lease obligations		(1,283)	(1,440)	(7,030)	(7,194)
Dividends paid		(14,397)	(12,159)	(53,139)	(44,765)
Net cash used in financing activities		(15,778)	(14,024)	(57,078)	(51,780)
Impact of foreign exchange on cash and cash equivalents		1,238	4,018	4,969	8,140
Increase (decrease) in cash and cash equivalents		16,527	(9,252)	34,708	14,428
Cash and cash equivalents - beginning of period		257,713	248,784	239,532	225,104
Cash and cash equivalents - end of period		$  274,240	$  239,532	$  274,240	$  239,532

* Acquisitions are net of cash acquired of nil and $742 for the quarter and year ended October 31, 2024, respectively and nil and $2,088 for the quarter and year ended October 31, 2023, respectively.

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

For the period ended October 31, 2024		Three months							Twelve months
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		74,731	$	50,971	$	125,702	$	308,920	$	193,585	$	502,505
Direct costs			(25,900)		(19,067)		(44,967)		(102,390)		(73,196)		(175,586)
Revenue, net of direct costs			48,831		31,904		80,735		206,530		120,389		326,919
Operating expenses excluding special charges			(21,235)		(13,071)		(34,306)		(90,871)		(47,238)		(138,109)
Depreciation			(416)		(239)		(655)		(1,574)		(773)		(2,347)
Depreciation of right-of-use assets			(940)		(435)		(1,375)		(3,870)		(2,111)		(5,981)
Segment profit	$		26,240	$	18,159	$	44,399	$	110,215	$	70,267	$	180,482
Special charges							(169)						(1,609)
Corporate and shared service expenses							(10,797)						(45,027)
Results from operating activities						$	33,433					$	133,846

For the period ended October 31, 2023		Three months							Twelve months
		IMG		AMG		Total			IMG	AMG		Total
Revenue	$		78,578	$	44,551	$	123,129	$	265,311	$	188,711	$	454,022
Direct costs			(24,337)		(16,876)		(41,213)		(78,788)		(71,211)		(149,999)
Revenue, net of direct costs			54,241		27,675		81,916		186,523		117,500		304,023
Operating expenses excluding special charges			(21,807)		(10,450)		(32,257)		(84,493)		(45,169)		(129,662)
Depreciation			(485)		(142)		(627)		(1,969)		(482)		(2,451)
Depreciation of right-of-use assets			(904)		(587)		(1,491)		(4,184)		(2,580)		(6,764)
Segment profit	$		31,045	$	16,496	$	47,541	$	95,877	$	69,269	$	165,146
Special charges							(117)						(2,477)
Corporate and shared service expenses							(11,740)						(40,561)
Results from operating activities						$	35,684					$	122,108

About-Enghouse
Enghouse Systems Limited 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, education, telecommunications, networks, IPTV, public safety and transit. The Company's two-pronged strategy to grow earnings focuses on both organic growth and acquisitions, which, to date, have been funded through cash flows from operating activities 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, December 13, 2024 at 8:45 a.m. EST. To participate, please call [phone] or North American Toll-Free [phone]. Confirmation code: 59402 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, Adjusted EBITDA margin and Adjusted EBITDA per diluted share as measures of operating performance. Therefore, these collective Adjusted EBITDA measures 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

For further information please contact: Sam Anidjar, Vice President, Corporate Development, Tel: [phone], Email: [email protected]