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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Enghouse Systems Limited    ENGH   CA2929491041

ENGHOUSE SYSTEMS LIMITED

(ENGH)
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Enghouse : Releases Second Quarter Results Highlighting Significant Internal Revenue Growth

06/04/2020 | 05:01pm EST

MARKHAM, ON, June 4, 2020 /CNW/ - Enghouse Systems Limited (TSX:ENGH) today announced its second quarter (unaudited) financial results for the period ended April 30, 2020.  All of the financial information is in Canadian dollars unless otherwise indicated.

Key financial and operational highlights for the three months ended April 30, 2020 (compared to the three months ended April 30, 2019) are as follows:

  • Revenue grew 58.0% to $140.9 million;

  • Results from operating activities increased 73.8% to $46.3 million;

  • Net income increased 63.8% to $27.1 million or $0.49 per diluted share;

  • Adjusted EBITDA increased 81.3% to $49.3 million;

  • Cash flows from operating activities excluding changes in working capital increased 72.5% to $50.0 million;

  • Cash, cash equivalents and short-term investments were $168.1 million, an increase from $150.3 million at October 31, 2019 despite making payments of $12.1 million for dividends and $48.2 million for acquisitions;

  • The Company has no long-term debt other than a nominal amount that is non-interest bearing;

In the quarter, the Company experienced growth from both internal sources and from the acquisitions of Vidyo and Espial (both acquired in Q3/2019) and Dialogic (acquired in Q1/2020). Internal growth includes the expansion of the acquired businesses, particularly Vidyo and Dialogic, since acquisition.

To date, COVID-19 has had an overall positive financial impact on Enghouse as sales of solutions that support remote work, including working from home, increased to meet heightened demand. Sales of Vidyo, our remote conferencing and telehealth/financial services video platform, and our remote computing solutions were particularly strong this quarter. Although the overall impact to revenues so far has been positive, sales of hardware, professional services and certain business units have been tempered as a result of procurement delays, deferral of on-site installations and customers postponing upgrades and implementations.

While the pandemic continues to have a significant impact on the economy, our team has reacted quickly and successfully transitioned to a remote work environment. We are pleased that our team has remained safe, productive and is continuing to deliver high quality results. Critical to this success has been our previous investment in upgrading our financial systems combined with the internal deployment of Enghouse products such as Vidyo that support remote work.

During the quarter we substantially completed the integration of Dialogic, which was EBITDA positive as expected following acquisition on December 31, 2019. Dialogic was accretive to both earnings and margins  due to a significant perpetual license deal recognized in the quarter, which allowed the customer to respond to increased demand resulting from COVID-19.

Quarterly Dividend:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.135 per common share, payable on August 31, 2020 to shareholders of record at the close of business on August 17, 2020.

Financial Highlights

For the period ended April 30

Three months

Six months

2020

$

2019

$

 Variance

2020

$

2019

$

       Variance

$

%

$

%

Revenue

140,900

89,203

51,697

58.0

251,556

175,248

76,308

43.5










Direct costs

39,699

27,460

12,239

44.6

72,176

54,672

17,504

32.0

Revenue, net of direct costs

101,201

61,743

39,458

63.9

179,380

120,576

58,804

48.8

As a % of revenue

71.8%

69.2%



71.3%

68.8%












Operating expenses

55,046

35,066

19,980

57.0

100,806

68,104

32,702

48.0

Special charges

(121)

56

(177)

(316.1)

1,455

56

1,399

n/a

Results from operating activities

46,276

26,621

19,655

73.8

77,119

52,416

24,703

47.1

As a % of revenue

32.8%

29.8%



30.7%

29.9%












Amortization of acquired software
and customer relationships

(11,600)

(6,884)

(4,716)

(68.5)

(21,680)

(14,000)

(7,680)

(54.9)

Foreign exchange (losses) gains

(393)

674

(1,067)

(158.3)

(46)

564

(610)

(108.2)

Interest expense – lease obligations

(300)

-

(300)

-

(562)

-

(562)

-

Finance income

131

507

(376)

(74.2)

482

1,005

(523)

(52.0)

Finance expenses

(16)

(24)

8

33.3

(34)

(55)

21

38.2

Other income

811

447

364

81.4

397

475

(78)

(16.4)

Income before income taxes

34,909

21,341

13,568

63.6

55,676

40,405

15,271

37.8

Provision for income taxes

7,820

4,804

3,016

62.8

12,451

8,904

3,547

39.8

Net Income for the period

27,089

16,537

10,552

63.8

43,225

31,501

11,724

37.2










Basic earnings per share

0.49

0.30

0.19

63.3

0.79

0.58

0.21

36.2

Diluted earnings per share

0.49

0.30

0.19

63.3

0.78

0.57

0.21

36.8










Operating cash flows

57,533

21,630

35,903

166.0

77,466

45,784

31,682

69.2

Operating cash flows excluding
changes in working capital

50,033

29,010

21,023

72.5

85,216

56,131

29,085

51.8










Adjusted EBITDA


















Results from operating activities

46,276

26,621

19,655

73.8

77,119

52,416

24,703

47.1










Depreciation

758

499

259

51.9

1,645

1,029

616

59.9

Depreciation – right-of-use asset

2,368

-

2,368

-

4,391

-

4,391

-

Special charges

(121)

56

(177)

(316.1)

1,455

56

1,399

n/a

Adjusted EBITDA

49,281

27,176

22,105

81.3

84,610

53,501

31,109

58.1










Adjusted EBITDA margin

35.0%

30.5%



33.6%

30.5%












Adjusted EBITDA per diluted share

0.89

0.49

0.40

81.6

1.53

0.97

0.56

57.7

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(Unaudited, in thousands of Canadian dollars)


As at April 30,
2020

As at October 31
2019


Assets



Current assets:



Cash and cash equivalents

$

162,330

$

144,764

Short-term investments

5,759

5,505

Accounts receivable

125,071

84,982

Prepaid expenses and other assets

16,768

11,147


309,928

246,398

Non-current assets:



Property and equipment

6,930

6,280

Right-of-use assets

39,080

-

Intangible assets

148,322

121,885

Goodwill

223,140

203,298

Deferred income tax assets

15,681

12,739




Total assets

$

743,081

$

590,600


Liabilities and Shareholder's Equity



Current liabilities:



Accounts payable and accrued liabilities

$

73,327

$

62,813

Income taxes payable

13,393

6,953

Dividends payable

7,427

6,021

Provisions

6,941

6,536

Deferred revenue

119,978

78,405

Lease obligations

8,208

-

Current portion of long-term loans

258

249


229,532

160,977

Non-current liabilities:



Non-current portion of income taxes payable

3,999

4,434

Deferred income tax liabilities

18,356

16,197

Deferred revenue

6,614

3,665

Net employee defined benefit obligation

2,764

2,380

Lease obligations

29,496

-

Long-term loans

839

874




Total liabilities

291,600

188,527

 

Shareholders' Equity



Share capital

88,201

81,576

Contributed surplus

7,249

6,677

Retained earnings

338,949

309,198

Accumulated other comprehensive income

17,082

4,622

Total shareholders' equity                    

451,481

402,073

Total liabilities and shareholders' equity

$

743,081

$

590,600


Enghouse Systems Limited
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(Unaudited, in thousands of Canadian dollars, except per share amounts)    


 Three months ended 
April 30,

 Six months ended 
April 30,


2020

2019

2020

2019

Revenue





Software licenses

$

48,791

$

21,519

$

77,191

$

40,247

Hosted and maintenance services

72,024

49,470

136,377

100,283

Professional services

16,087

15,145

31,270

28,646

Hardware

3,998

3,069

6,718

6,072


140,900

89,203

251,556

175,248

Direct costs





Software licenses

3,937

1,370

6,387

2,731

Services

33,080

24,181

61,426

47,726

Hardware

2,682

1,909

4,363

4,215


39,699

27,460

72,176

54,672






Revenue, net of direct costs

101,201

61,743

179,380

120,576






Operating expenses





Selling, general and administrative

29,612

21,440

54,294

41,896

Research and development

22,308

13,127

40,476

25,179

Depreciation

758

499

1,645

1,029

Depreciation of right-of-use assets

2,368

-

4,391

-

Special charges

(121)

56

1,455

56


54,925

35,122

102,261

68,160






Results from operating activities

46,276

26,621

77,119

52,416






Amortization of acquired software and customer

 

(11,600)

 

(6,884)

 

(21,680)

 

(14,000)

relationships

Foreign exchange (losses) gains

(393)

674

(46)

564

Interest expense – lease obligations

(300)

-

(562)

-

Finance income

131

507

482

1,005

Finance expenses

(16)

(24)

(34)

(55)

Other income

811

447

397

475






Income before income taxes

34,909

21,341

55,676

40,405






Provision for income taxes

7,820

4,804

12,451

8,904







Net income for the period

$

27,089

$

16,537

$

43,225

$

31,501

 

Items that are or may be reclassified subsequently
to net income:





Cumulative translation adjustment

10,140

3,094

12,460

5,981






Other comprehensive income

10,140

3,094

12,460

5,981






Comprehensive income

$

37,229

$

19,631

$

55,685

$

37,482

Earnings per share





Basic

$

0.49

$

0.30

$

0.79

$

0.58

Diluted

$

0.49

$

0.30

$

0.78

$

0.57


Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, in thousands of Canadian dollars)


Three months ended
April 30,

Six months ended

April 30,


2020

2019

2020

2019

Cash flows from operating activities





Net income for the period

$

27,089

$

16,537

$

43,225

$

31,501






Adjustments for:





Depreciation

758

499

1,645

1,029

Depreciation of right-of-use assets

2,368

-

4,391

-

Interest expense – lease obligations

300

-

562

-

Amortization of acquired software and customer

 

11,600

 

6,884

 

21,680

 

14,000

relationships

Stock-based compensation expense

893

709

1,625

1,117

Provision for income taxes

7,820

4,804

12,451

8,904

Finance expense and other income

(795)

(423)

(363)

(420)


50,033

29,010

85,216

56,131






Changes in non-cash operating working capital

10,836

(2,050)

536

(627)

Income taxes paid

(3,336)

(5,330)

(8,286)

(9,720)

Net cash flows from operating activities

57,533

21,630

77,466

45,784






Cash flows from (used in) investing activities





Purchase of property and equipment

(1,005)

(572)

(1,444)

(781)

Acquisitions, net of cash acquired*

1,235

(3,170)

(47,664)

(25,566)

Purchase consideration for prior year acquisitions

-

-

(546)

(1,105)

Purchase of short-term investments

(1,795)

4,255

(1,802)

(1,853)

Net cash flows from (used in) investing activities

(1,565)

513

(51,456)

(29,305)






Cash flows from (used in) financing activities





Interest paid on lease obligations

(300)

-

(562)

-

Issuance of share capital

788

66

5,572

785

Repayment of loans

-

-

(62)

(957)

Repayment of lease obligations

(1,286)

-

(3,890)

-

Dividends paid

(6,048)

(4,917)

(12,069)

(9,829)

Net cash flows used in financing activities

(6,846)

(4,851)

(11,011)

(10,001)

Effect of currency translation adjustments on cash and
cash equivalents

1,757

1,591

2,567

2,855






Net increase in cash and cash equivalents during
the period

50,879

18,883

17,566

9,333

Cash and cash equivalents - beginning of period

111,451

178,001

144,764

187,551






Cash and cash equivalents - end of period

$

162,330

$

196,884

$

162,330

$

196,884

* Acquisitions are net of cash acquired of nil and $6,906 for the three and six months ended April 30, 2020, respectively, and $143 and $6,282 for the three and six months ended April 30, 2019, respectively.

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





Three months ended April 30, 2020

IMG

AMG

Total








Revenue

$

89,925

$

50,975

$

140,900

Direct costs


(20,874)


(18,825)


(39,699)

Revenue, net of direct costs


69,051


32,150

101,201

Operating expenses excluding special charges


(25,632)


(15,412)


(41,044)

Depreciation of property and equipment


(518)


(240)


(758)

Depreciation of right-of-use assets


(1,386)


(982)


(2,368)

Segment profit

$

41,515

$

15,516

$

57,031

Special charges






121

Corporate and shared service expenses






(10,876)

Results from operating activities





$

46,276


 

Three months ended April 30, 2019

IMG

AMG

Total








Revenue

$

44,530

$

44,673

$

89,203

Direct costs


(11,764)


(15,696)


(27,460)

Revenue, net of direct costs


32,766


28,977


61,743

Operating expenses excluding special charges


(16,417)


(11,028)


(27,445)

Depreciation of property and equipment


(377)


(122)


(499)

Segment profit

$

15,972

$

17,827

$

33,799

Special charges






(56)

Corporate and shared service expenses






(7,122)

Results from operating activities





$

26,621

 

Six months ended April 30, 2020

IMG

AMG

Total








Revenue

$

152,798

$

98,758

$

251,556

Direct costs


(36,088)


(36,088)


(72,176)

Revenue, net of direct costs


116,710


62,670


179,380

Operating expenses excluding special charges


(46,851)


(28,080)


(74,931)

Depreciation of property and equipment


(973)


(672)


(1,645)

Depreciation of right-of-use assets


(2,444)


(1,947)


(4,391)

Segment profit

$

66,442

$

31,971

$

98,413

Special charges






(1,455)

Corporate and shared service expenses






(19,839)

Results from operating activities





$

77,119

 

Six months ended April 30, 2019

IMG

AMG

Total








Revenue

$

87,994

$

87,254

$

175,248

Direct costs


(23,039)


(31,633)


(54,672)

Revenue, net of direct costs


64,955


55,621


120,576

Operating expenses excluding special charges


(31,479)


(21,857)


(53,336)

Depreciation of property and equipment


(780)


(249)


(1,029)

Segment profit

$

32,696

$

33,515

$

66,211

Special charges






(56)

Corporate and shared service expenses






(13,739)

Results from operating activities





$

52,416

About Enghouse

Enghouse is a Canadian publicly traded company (TSX:ENGH) that provides enterprise software solutions focusing on remote work, visual computing and communications for next generation software defined networks. The Company's two-pronged growth strategy focuses on internal growth and acquisitions, which, to date, have been funded through operating cash flows. The Company is well capitalized, has nominal long-term debt 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, June 5, 2020 at 8:45 a.m. EST. To participate, please call +1-647-792-1278 or North American Toll-Free +1-888-504-7961. Confirmation code: 7403087. 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

© Canada Newswire, source Canada Newswire English

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Financials
Sales 2020 517 M 399 M 399 M
Net income 2020 94,8 M 73,0 M 73,0 M
Net cash 2020 196 M 151 M 151 M
P/E ratio 2020 39,3x
Yield 2020 0,75%
Capitalization 3 684 M 2 836 M 2 840 M
EV / Sales 2020 6,75x
EV / Sales 2021 5,91x
Nbr of Employees 1 680
Free-Float 73,8%
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Mean consensus OUTPERFORM
Number of Analysts 5
Average target price 84,60 CAD
Last Close Price 66,99 CAD
Spread / Highest target 46,3%
Spread / Average Target 26,3%
Spread / Lowest Target 10,5%
EPS Revisions
Managers
NameTitle
Stephen J. Sadler Chairman & Chief Executive Officer
Vincent D. Mifsud President
Douglas C. Bryson Secretary, VP-Finance & Administration
Geoff Bartle Vice President- Information Systems
Eric A. Demirian Independent Director
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