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 | (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 | 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, | As at October 31, | |||
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 | |
| |||||
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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