Enghouse Releases Second Quarter Results
MARKHAM, ON, June 12, 2023 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its second quarter unaudited financial results for the period ended April 30, 2023. All the financial information is in Canadian dollars unless otherwise indicated.
Financial and operational highlights for the three and six months ended April 30, 2023 compared to the three and six months ended April 30, 2022 are as follows:
- Revenue achieved was $113.5 and $219.9 million, respectively, compared to revenue of $106.3 and $217.4 million;
- Results from operating activities was $25.6 and $55.5 million, respectively, compared to $31.1 and $66.8 million;
- Net income was $12.5 and $29.6 million, respectively, compared to $17.9 and $39.5 million;
- Adjusted EBITDA was $30.2 and $62.5 million, respectively, compared to $33.8 and $72.3 million;
- Cash flow from operating activities excluding changes in working capital was $28.9 and $61.5 million, respectively, compared to $34.5 and $73.3 million.
Revenue for the second quarter reflects an increase of 6.7% compared to the same period in the prior year and was positively impacted by $3.6 million as a result of foreign exchange, which also adversely impacted cost of revenue and operating expenses by $2.2 million. Consistent with our strategy, revenue growth was largely driven by recent acquisitions.
Net income for the quarter was $0.23 per diluted share compared to $0.32 per diluted share last year. The decrease was primarily a result of incremental operating costs related to acquisitions as we integrate them into Enghouse combined with higher third-party costs and special charges related to acquisitions. Adjusted EBITDA was $0.54 per diluted share, compared to $0.61 per diluted share in the second quarter of 2022.
Year-to-date revenue was positively impacted by foreign exchange, which also increased costs. Year-to-date results from operating activities reflect increased revenue and costs related to acquisitions as well as increased third-party costs of providing services. Year-to-date Adjusted EBITDA was $1.13 per diluted share compared to $1.30 per diluted share last year as a result of the initial margin compression related to increased acquisition activity as well as increased third-party costs of providing services.
As previously announced, Enghouse completed two acquisitions, purchasing Qumu Corporation ("Qumu") (NASDAQ:QUMU) on February 8, 2023 and Mobi All Technologies S.A ("Navita") on February 9, 2023. Qumu's video Engagement platform provides video creation, content management and highly scalable delivery solutions that complement Enghouse's enterprise video suite of products. Navita offers a comprehensive suite of products focused on managing and controlling critical mobile assets as well as telecom and IT expense management. The results from both acquisitions are included in the Interactive Management Group. The efforts to integrate and onboard these acquisitions were substantially completed in the quarter.
Quarterly dividends:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.22 per common share, payable on August 31, 2023 to shareholders of record at the close of business on August 17, 2023.
Enghouse Systems Limited
Financial Highlights
(unaudited, in thousands of Canadian dollars)
For the period ended April 30 | Three months | Six months | |||||||||||
2023 | 2022 | Var ($) | Var (%) | 2023 | 2022 | Var ($) | Var (%) | ||||||
Revenue | $ | 113,461 | $ | 106,312 | 7,149 | 6.7 | $ | 219,896 | $ | 217,414 | 2,482 | 1.1 | |
Direct costs | 38,106 | 33,581 | 4,525 | 13.5 | 72,914 | 66,409 | 6,505 | 9.8 | |||||
Revenue, net of direct costs | $ | 75,355 | $ | 72,731 | 2,624 | 3.6 | $ | 146,982 | $ | 151,005 | (4,023) | (2.7) | |
As a % of revenue | 66.4 % | 68.4 % | 66.8 % | 69.5 % | |||||||||
Operating expenses | 47,712 | 41,629 | 6,083 | 14.6 | 89,422 | 84,180 | 5,242 | 6.2 | |||||
Special charges | 2,001 | 46 | 1,955 | 4250.0 | 2,029 | 64 | 1,965 | 3070.3 | |||||
Results from operating activities | $ | 25,642 | $ | 31,056 | (5,414) | (17.4) | $ | 55,531 | $ | 66,761 | (11,230) | (16.8) | |
As a % of revenue | 22.6 % | 29.2 % | 25.3 % | 30.7 % | |||||||||
Amortization of acquired software and | (9,838) | (9,207) | (631) | (6.9) | (18,670) | (18,864) | 194 | 1.0 | |||||
Foreign exchange (losses) gains | (790) | 314 | (1,104) | (351.6) | (1,843) | (22) | (1,821) | (8277.3) | |||||
Interest expense – lease obligations | (192) | (196) | 4 | 2.0 | (359) | (398) | 39 | 9.8 | |||||
Finance income | 1,006 | 122 | 884 | 724.6 | 1,982 | 251 | 1,731 | 689.6 | |||||
Finance expenses | (124) | (21) | (103) | (490.5) | (131) | (44) | (87) | (197.7) | |||||
Other (expenses) income | (528) | 23 | (551) | (2395.7) | (655) | 1,023 | (1,678) | (164.0) | |||||
Income before income taxes | $ | 15,176 | $ | 22,091 | (6,915) | (31.3) | $ | 35,855 | $ | 48,707 | (12,852) | (26.4) | |
Provision for income taxes | 2,640 | 4,220 | (1,580) | (37.4) | 6,296 | 9,239 | (2,943) | (31.9) | |||||
Net Income for the period | $ | 12,536 | $ | 17,871 | (5,335) | (29.9) | $ | 29,559 | $ | 39,468 | (9,909) | (25.1) | |
Basic earnings per share | 0.23 | 0.32 | (0.09) | (28.1) | 0.53 | 0.71 | (0.18) | (25.4) | |||||
Diluted earnings per share | 0.23 | 0.32 | (0.09) | (28.1) | 0.53 | 0.71 | (0.18) | (25.4) | |||||
Operating cash flows | 18,698 | 31,142 | (12,444) | (40.0) | 47,960 | 55,484 | (7,524) | (13.6) | |||||
Operating cash flows excluding changes | 28,875 | 34,510 | (5,635) | (16.3) | 61,507 | 73,253 | (11,746) | (16.0) | |||||
Adjusted EBITDA | |||||||||||||
Results from operating activities | 25,642 | 31,056 | (5,414) | (17.4) | 55,531 | 66,761 | (11,230) | (16.8) | |||||
Depreciation | 613 | 705 | (92) | 13.0 | 1,239 | 1,425 | (186) | 13.1 | |||||
Depreciation of right-of-use assets | 1,931 | 1,969 | (38) | 1.9 | 3,667 | 4,081 | (414) | 10.1 | |||||
Special charges | 2,001 | 46 | 1,955 | (4250.0) | 2,029 | 64 | 1,965 | (3070.3) | |||||
Adjusted EBITDA | $ | 30,187 | $ | 33,776 | (3,589) | (10.6) | $ | 62,466 | $ | 72,331 | (9,865) | (13.6) | |
Adjusted EBITDA margin | 26.6 % | 31.8 % | 28.4 % | 33.3 % | |||||||||
Adjusted EBITDA per diluted share | $ | 0.54 | $ | 0.61 | (0.07) | (11.5) | $ | 1.13 | $ | 1.30 | (0.17) | (13.1) | |
Condensed Consolidated Interim Statements of Financial Position | |||||
(in thousands of Canadian dollars) (unaudited) | As at April 30, | As at October 31, | |||
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 232,151 | $ | 225,104 | |
Short-term investments | 2,337 | 2,950 | |||
Accounts receivable | 109,320 | 93,104 | |||
Prepaid expenses and other assets | 16,267 | 12,848 | |||
Income taxes recoverable | 739 | 492 | |||
360,814 | 334,498 | ||||
Non-current assets: | |||||
Property and equipment | 3,658 | 4,186 | |||
Right-of-use assets | 17,461 | 20,063 | |||
Intangible assets | 101,804 | 85,902 | |||
Goodwill | 258,992 | 230,002 | |||
Deferred income tax assets | 32,820 | 30,347 | |||
414,735 | 370,500 | ||||
$ | 775,549 | $ | 704,998 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current liabilities: | |||||
Accounts payable and accrued liabilities | $ | 67,842 | $ | 60,525 | |
Dividends payable | 12,159 | 10,221 | |||
Provisions | 3,171 | 3,183 | |||
Deferred revenue | 113,137 | 83,122 | |||
Lease obligations | 7,314 | 6,822 | |||
203,623 | 163,873 | ||||
Non-current liabilities: | |||||
Income taxes payable | 1,305 | 2,576 | |||
Deferred income tax liabilities | 17,049 | 12,038 | |||
Deferred revenue | 3,976 | 3,470 | |||
Net employee defined-benefit obligation | 2,027 | 1,821 | |||
Lease obligations | 9,655 | 13,055 | |||
34,012 | 32,960 | ||||
237,635 | 196,833 | ||||
Shareholders' equity: | |||||
Share capital | 107,728 | 107,007 | |||
Contributed surplus | 9,696 | 8,882 | |||
Retained earnings | 408,423 | 401,247 | |||
Accumulated other comprehensive income (loss) | 12,067 | (8,971) | |||
537,914 | 508,165 | ||||
$ | 775,549 | $ | 704,998 | ||
Condensed Consolidated Interim Statements of Operations and Comprehensive Income | |||||
(in thousands of Canadian dollars, except per share amounts) | |||||
(unaudited) | Three months | Six months | |||
Periods ended April 30 | 2023 | 2022 | 2023 | 2022 | |
Revenue Software licenses |
$ 22,016 | $ 21,420 |
$ 42,751 | $ 45,198 | |
SaaS and maintenance services | 71,634 | 63,745 | 138,137 | 130,172 | |
Professional services | 17,995 | 17,879 | 34,886 | 35,831 | |
Hardware | 1,816 | 3,268 | 4,122 | 6,213 | |
113,461 | 106,312 | 219,896 | 217,414 | ||
Direct costs | |||||
Software licenses | 698 | 1,286 | 1,568 | 2,613 | |
Services | 36,793 | 30,560 | 69,218 | 60,154 | |
Hardware | 615 | 1,735 | 2,128 | 3,642 | |
38,106 | 33,581 | 72,914 | 66,409 | ||
Revenue, net of direct costs | 75,355 | 72,731 | 146,982 | 151,005 | |
Operating expenses | |||||
Selling, general and administrative | 23,935 | 19,897 | 44,733 | 42,304 | |
Research and development | 21,233 | 19,058 | 39,783 | 36,370 | |
Depreciation | 613 | 705 | 1,239 | 1,425 | |
Depreciation of right-of-use assets | 1,931 | 1,969 | 3,667 | 4,081 | |
Special charges | 2,001 | 46 | 2,029 | 64 | |
49,713 | 41,675 | 91,451 | 84,244 | ||
Results from operating activities | 25,642 | 31,056 | 55,531 | 66,761 | |
Amortization of acquired software and customer relationships | (9,838) | (9,207) | (18,670) | (18,864) | |
Foreign exchange (losses) gains | (790) | 314 | (1,843) | (22) | |
Interest expense – lease obligations | (192) | (196) | (359) | (398) | |
Finance income | 1,006 | 122 | 1,982 | 251 | |
Finance expenses | (124) | (21) | (131) | (44) | |
Other (expenses) income | (528) | 23 | ( 655) | 1,023 | |
Income before income taxes | 15,176 | 22,091 | 35,855 | 48,707 | |
Provision for income taxes | 2,640 | 4,220 | 6,296 | 9,239 | |
Net income for the period | 12,536 | 17,871 | 29,559 | 39,468 | |
Item that may be subsequently reclassified to income: | |||||
Cumulative translation adjustment | 11,295 | (9,198) | 21,038 | (5,072) | |
Other comprehensive income (loss) | 11,295 | (9,198) | 21,038 | (5,072) | |
Comprehensive income | $ 23,831 | $ 8,673 | $ 50,597 | $ 34,396 | |
Earnings per share | |||||
Basic | $ 0.23 | $ 0.32 | $ 0.53 | $ 0.71 | |
Diluted | $ 0.23 | $ 0.32 | $ 0.53 | $ 0.71 | |
Condensed Consolidated Interim Statements of Cash Flows | |||||
(in thousands of Canadian dollars) (unaudited) |
Three months |
Six months | |||
Periods ended April 30 | 2023 | 2022 | 2023 | 2022 | |
OPERATING ACTIVITIES | |||||
Net income for the period | $ 12,536 | $ 17,871 | $ 29,559 | $ 39,468 | |
| |||||
Depreciation | 613 | 705 | 1,239 | 1,425 | |
Depreciation of right-of-use assets | 1,931 | 1,969 | 3,667 | 4,081 | |
Interest expense – lease obligations | 192 | 196 | 359 | 398 | |
Amortization of acquired software and customer relationships | 9,838 | 9,207 | 18,670 | 18,864 | |
Stock-based compensation expense | 473 | 344 | 931 | 757 | |
Provision for income taxes | 2,640 | 4,220 | 6,296 | 9,239 | |
Finance and other expenses (income) | 652 | (2) | 786 | (979) | |
28,875 | 34,510 | 61,507 | 73,253 | ||
Changes in non-cash operating working capital | (5,989) | 1,513 | (3,987) | (9,689) | |
Income taxes paid | (4,188) | (4,881) | (9,560) | (8,080) | |
Net cash provided by operating activities | 18,698 | 31,142 | 47,960 | 55,484 | |
INVESTING ACTIVITIES | |||||
Net purchase of property and equipment | (66) | (593) | (171) | (358) | |
Acquisitions, net of cash acquired* | (25,617) | - | (25,617) | - | |
Purchase consideration for prior-year acquisition | 233 | (408) | 233 | (408) | |
Purchase of short-term investments | - | (60) | (69) | (60) | |
Net cash used in investing activities | (25,450) | (1,061) | (25,624) | ( 826) | |
FINANCING ACTIVITIES | |||||
Issuance of share capital | - | 970 | 604 | 970 | |
Repayment of lease obligations | (2,470) | (2,148) | (4,280) | (4,241) | |
Dividends paid | (10,225) | (8,889) | (20,446) | (17,778) | |
Net cash used in financing activities | (12,695) | (10,067) | (24,122) | (21,049) | |
Impact of foreign exchange on cash and cash equivalents | 3,797 | (3,536) | 8,833 |
(2,122) | |
(Decrease) increase in cash and cash equivalents | (15,650) | 16,478 | 7,047 | 31,487 | |
Cash and cash equivalents - beginning of period | 247,801 | 210,899 | 225,104 | 195,890 | |
Cash and cash equivalents - end of period | $ 232,151 | $ 227,377 | $ 232,151 | $ 227,377 | |
* Acquisitions are net of cash acquired of $2,088 for the three and six months ended April 30, 2023 and $NIL for the three and six months ended April 30, 2022, respectively.
Enghouse Systems Limited
Segment Reporting Information
(in thousands of Canadian dollars)
Three months ended April 30 | 2023 | 2022 | |||||||||||
IMG | AMG | Total | IMG | AMG | Total | ||||||||
Revenue | $ | 64,578 | $ | 48,883 | $ | 113,461 | $ | 57,218 | $ | 49,094 | $ | 106,312 | |
Direct costs | (19,133) | (18,973) | (38,106) | (15,313) | (18,268) | (33,581) | |||||||
Revenue, net of direct costs | 45,445 | 29,910 | 75,355 | 41,905 | 30,826 | 72,731 | |||||||
Operating expenses excluding special charges | (23,034) | (12,596) | (35,630) | (19,412) | (11,101) | (30,513) | |||||||
Depreciation | (544) | (69) | (613) | (600) | (105) | (705) | |||||||
Depreciation of right-of-use assets | (941) | (990) | (1,931) | (1,192) | (777) | (1,969) | |||||||
Segment profit | $ | 20,926 | $ | 16,255 | $ | 37,181 | $ | 20,701 | $ | 18,843 | $ | 39,544 | |
Special charges | (2,001) | (46) | |||||||||||
Corporate and shared service expenses | (9,538) | (8,442) | |||||||||||
Results from operating activities |
$ |
25,642 |
$ |
31,056 | |||||||||
Six months ended April 30 | 2023 | 2022 | |||||||||||
IMG | AMG | Total | IMG | AMG | Total | ||||||||
Revenue | $ | 122,431 | $ | 97,465 | $ | 219,896 | $ | 119,089 | $ | 98,325 | $ | 217,414 | |
Direct costs | (35,564) | (37,350) | (72,914) | (30,756) | (35,653) | (66,409) | |||||||
Revenue, net of direct costs | 86,867 | 60,115 | 146,982 | 88,333 | 62,672 | 151,005 | |||||||
Operating expenses excluding special charges | (42,285) | (23,916) | (66,201) | (38,963) | (22,273) | (61,236) | |||||||
Depreciation | (1,081) | (158) | (1,239) | (1,196) | (229) | (1,425) | |||||||
Depreciation of right-of-use assets | (2,041) | (1,626) | (3,667) | (2,519) | (1,562) | (4,081) | |||||||
Segment profit | $ | 41,460 | $ | 34,415 | $ | 75,875 | $ | 45,655 | $ | 38,608 | $ | 84,263 | |
Special charges | (2,029) | (64) | |||||||||||
Corporate and shared service expenses | (18,315) | (17,438) | |||||||||||
Results from operating activities |
$ |
55,531 |
$ |
66,761 | |||||||||
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 Tuesday, June 13, 2023 at 8:45 a.m. EST. To participate, please call +1-416-764-8646 or North American Toll-Free +1-888-396-8049. Confirmation code: 18752188. 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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