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Enghouse Releases Fourth Quarter and Year-end Results

CNW Group - Thu Dec 12, 4:00PM CST

Enghouse Systems Limited (TSX:ENGH.TO) today announced its fourth quarter (unaudited) and year-end financial results for the period ended October 31, 2019. All of the financial information is in Canadian dollars unless otherwise indicated.

Revenue increased to $385.9 million for the fiscal year, compared to revenue of $342.8 million in the previous fiscal year, resulting in another record year for the Company. Revenue includes $219.6 million from hosted and maintenance services, an increase of 14.9%.

Operating expenses were $155.1 million for the year compared to $136.2 million in the prior year as the savings related to operating cost synergies were offset by the incremental costs related to acquired operations. Results from operating activities were $112.0 million compared to $103.2 million last year, a 13.9% increase. Operating expenses include special charges of $1.2 million compared to $0.4 million last year and reflect the costs related to acquisition restructuring.

Net income for the year was $70.8 million or $1.29 per diluted share compared to $57.7 million or $1.06 per diluted share in the prior year, an increase of 22.7%. Adjusted EBITDA for the year was $115.6 million or $2.10 per diluted share compared to $106.0 million or $1.94 per diluted share last year, an increase of 9.0%.

Fourth quarter revenue was $109.3 million, a 27.4% increase compared to revenue of $85.8 million in the fourth quarter of the prior year. The revenue increase primarily reflects contributions from acquisitions. Results from operating activities were $32.5 million compared to $27.3 million in the prior year's fourth quarter, which reflects the impact due to changes in product mix on gross margins and strong operating margin contributions from acquisitions. Net income for the quarter was $24.7 million or $0.45 per diluted share, an increase of 26.3% from $19.6 million or $0.36 per diluted share last year.

Adjusted EBITDA for the fourth quarter was $34.0 million or $0.62 per diluted share, compared to $27.9 million or $0.51 per diluted share last year, with the increase being primarily attributable to incremental revenue contributions from acquisitions.

Operating expenses before special charges related to restructuring of acquired operations were $43.7 million compared to $33.5 million in the prior year's fourth quarter and reflect incremental operating costs related to acquisitions. Non-cash amortization charges on acquired software and customer relationships from acquired operations were $9.2 million for the quarter compared to $6.4 million in the prior year's fourth quarter.

Enghouse generated cash flows from operating activities of $21.7 million compared to $24.0 million in the fourth quarter of the prior year and $81.4 million for the year compared to $98.3 million in the prior year. Cash flows from operating activities excluding changes in working capital was $33.9 million compared to $29.5 million in the fourth quarter of 2019, an increase of 14.9%. For the year, cash flows from operating activities excluding changes in working capital increased 9.5% to $118.5 million. Working capital adjustments reduced operating cash flows by $12.1 million in the quarter and $37.1 million annually largely as a result of settling liabilities assumed from acquisitions.

Enghouse closed the year with $150.3 million in cash, cash equivalents and short-term investments, compared to $193.9 million at October 31, 2018. The cash balance was achieved after payments of $21.9 million for cash dividends, an increase of 19% from the prior year, as the Company increased its dividend for the eleventh consecutive year. The cash balance is also after the completion of six acquisitions in the year at a cost of $101.2 million, net of cash acquired. These complementary acquisitions increased revenue while expanding Enghouse's product portfolio and local presence in new countries.

Late in the fourth quarter Enghouse completed the acquisition of Eptica S.A., which further expanded the Company's footprint in France and added customer engagement software solutions powered by AI to the Company's Interactive portfolio.

Quarterly Dividend

Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.11 per common share, payable on February 28, 2020 to shareholders of record at the close of business on February 14, 2020.

Conference Call

A conference call to discuss the results will be held on Friday, December 13, 2019 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: 9069095.

About Enghouse

Enghouse Systems Limited is a leading global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a diverse software company through strategic acquisitions targeting the Contact Center, Networks (OSS/BSS) and Transportation/Public Safety sectors. Enghouse shares are listed on the Toronto Stock Exchange under the symbol "ENGH". Further information about Enghouse may be obtained from the Company's website at www.enghouse.com.

Adjusted EBITDA

The table below reconciles Adjusted EBITDA to the most directly comparable IFRS measure, Results from operating activities:

For the periods ended October 31
       Three months
          Twelve months

    ---


       2019      2018
            Variance      2019        2018
       Variance


        $
           $
            $
          $
          $
         $

                                                          ---


       Total revenue                                           109,331  85,822       23,509    385,853     342,845                43,008





       Results from operating activities                        32,541  27,344        5,197    111,974     103,245                 8,729





       Depreciation                                                804     542          262      2,403       2,411                  ( 8)



       Special charges                                             677      57          620      1,203         390                   813

    ---



              Adjusted EBITDA                               34,022  27,943        6,079    115,580     106,046                 9,534

    ---





              Adjusted EBITDA margin                         31.1%  32.6%                 30.0%      30.9%






              Adjusted EBITDA per diluted share               0.62    0.51         0.11       2.10        1.94                  0.16

Non-IFRS Measures

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 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.

Enghouse Systems LimitedCondensed Consolidated Interim Statements of Financial Position(in thousands of Canadian dollars)

As at October 31,

     As at October 31,
                                                          2019                   2018




                              Assets


                   Current assets:


      Cash and cash
       equivalents                                    $144,764               $187,551


      Short-term
       investments                                       5,505                  6,386


      Accounts receivable                               84,982                 62,085


      Prepaid expenses
       and other assets                                 11,147                  8,951



                                                       246,398                264,973


                   Non-current
                    assets:


      Property and
       equipment                                         6,280                  5,279


      Intangible assets                                121,885                 59,895



     Goodwill                                         203,298                155,419


      Deferred income tax
       assets                                           12,739                  9,634





                   Total assets                       $590,600               $495,200





                            Liabilities


                   Current
                    liabilities:


      Accounts payable
       and accrued
       liabilities                                     $62,813                $44,271


      Income taxes
       payable                                           6,953                  4,904


      Dividends payable                                  6,021                  4,912


      Provisions                                         6,536                    268


      Deferred revenue                                  78,405                 64,020


      Current portion of
       long-term loans                                     249                    122



                                                       160,977                118,497


                   Non-current
                    liabilities:


      Non-current
       portion of income
       taxes payable                                     4,434                  7,466


      Deferred income tax
       liabilities                                      16,197                 13,115


      Deferred revenue                                   3,665                  2,169


      Net employee
       defined benefit
       obligation                                        2,380                  2,354


      Long-term loans                                      874                  1,475





                   Total liabilities                   188,527                145,076





                           Shareholders'
                               Equity




      Share capital                                     81,576                 78,997


      Contributed surplus                                6,677                  4,866


      Retained earnings                                309,198                260,506


      Accumulated other
       comprehensive
       income                                            4,622                  5,755



                   Total shareholders'
                    equity                             402,073                350,124


                   Total liabilities
                    and shareholders'
                    equity                            $590,600               $495,200

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

Three months ended  Year ended
                                                                                                   October 31  October 31


                                                                                                         2019         2018       2019        2018

                                                                                                  (Unaudited) (Unaudited)




                Revenue



       Software licenses                                                                             $26,765      $20,260    $89,093     $85,682



       Hosted and maintenance services                                                                60,931       48,459    219,630     191,080



       Professional services                                                                          16,962       15,294     60,889      58,266



       Hardware                                                                                        4,673        1,809     16,241       7,817



                                                                                                      109,331       85,822    385,853     342,845





                Direct costs



       Software licenses                                                                               1,403        1,396      5,461       6,863



       Services                                                                                       27,156       22,431    101,281      91,766



       Hardware                                                                                        3,823        1,066     12,061       4,793



                                                                                                       32,382       24,893    118,803     103,422







                Revenue, net of direct costs                                                      76,949       60,929    267,050     239,423






                Operating expenses



       Selling, general and administrative                                                            25,635       21,777     92,421      86,209



       Research and development                                                                       17,292       11,209     59,049      47,168



       Depreciation                                                                                      804          542      2,403       2,411



       Special charges                                                                                   677           57      1,203         390



                                                                                                       44,408       33,585    155,076     136,178







                Results from operating activities                                                 32,541       27,344    111,974     103,245





       Amortization of acquired software and customer relationships                                  (9,244)     (6,386)  (31,697)   (28,149)



       Foreign exchange (loss) gains                                                                   (367)       1,064         66         599



       Finance income                                                                                    331          198      1,805         476



       Finance expenses                                                                                 (10)        (79)      (76)      (213)



       Other income                                                                                    1,765          136      2,176       2,076







                Income before income taxes                                                        25,016       22,277     84,248      78,034






                Provision for income taxes                                                           329        2,725     13,399      20,289







                Net income for the period                                                        $24,687      $19,552    $70,849     $57,745







                Items that are or may be reclassified subsequently to profit or loss:

    ---


       Cumulative translation adjustment                                                               2,171      (3,350)   (1,795)    (2,019)



       Unrealized loss on investments in equity securities designated at FVOCI                                   (1,673)                (822)



       Deferred income tax (expense) recovery                                                          (119)         222      (119)        109







                Other comprehensive income (loss)                                                  2,052      (4,801)   (1,914)    (2,732)







                Comprehensive income                                                             $26,739      $14,751    $68,935     $55,013

    ===



                Earnings per share



       Basic                                                                                           $0.45        $0.36      $1.30       $1.06



       Diluted                                                                                         $0.45        $0.36      $1.29       $1.06

    ---

Enghouse Systems LimitedCondensed Consolidated Interim Statements of Changes in Shareholders' Equity (in thousands of Canadian dollars)

Share       Share      Contributed

       Accumulated        Retained            Total
                                                                                                         capital          surplus               other        earnings
                                                                                             capital                                    comprehensive

            $


           $

               $       (loss) income

            $


            # *                                                $






                As at November 1, 2018 as previously presented                       54,580,024       78,997             4,866                5,755          260,506           350,124



       IFRS 9 transition adjustment                                                                                                              781            (781)



       IFRS 15 transition adjustment                                                                                                                           1,590             1,590

    ---



                Adjusted balance as at November 1, 2018                              54,580,024       78,997             4,866                6,536          261,315           351,714





       Net income for the year                                                                                                                                70,849            70,849



       Cumulative translation adjustment                                                                                                     (1,795)                          (1,795)



       Deferred income tax expense                                                                                                            ( 119)                            ( 119)





                Comprehensive income for the year                                                                                        (1,914)          70,849            68,935




       Employee share options:



       Value of services recognized                                                                                        2,268                                                 2,268



       Proceeds on issuing shares                                                           157,400        2,579             (457)                                                2,122



       Dividends declared                                                                                                                                   (22,966)         (22,966)





                As at October 31, 2019                                               54,737,424       81,576             6,677                4,622          309,198           402,073








                As at November 1, 2017                                               53,986,424       71,422             4,715                8,487          221,775           306,399





       Net income for the year                                                                                                                                57,745            57,745



       Cumulative translation adjustment                                                                                                     (2,019)                          (2,019)



       Unrealized losses on investments in equity securities designated at FVOCI                                                               (822)                            (822)



       Deferred income tax recovery                                                                                                              109                               109




                Comprehensive income for the year                                                                                        (2,732)          57,745            55,013




       Employee share options:



       Value of services recognized                                                                                        1,545                                                 1,545



       Proceeds on issuing shares                                                           593,600        7,575           (1,394)                                                6,181



       Dividends declared                                                                                                                                   (19,014)         (19,014)





                As at October 31, 2018                                               54,580,024       78,997             4,866                5,755          260,506           350,124
* On January 25, 2019, the Company
        completed a share split whereby
        each issued and outstanding common
        share has been doubled.  All
        references to capital stock,
        options and per share data have
        been adjusted retrospectively to
        reflect the Company's two-for-one
        share split for the years ended
        October 31, 2019 and 2018.

Enghouse Systems LimitedCondensed Consolidated Interim Statements of Cash Flows(in thousands of Canadian dollars)

Three months ended  Year ended

                                                                                                    October 31  October 31


                                                                                                          2019         2018        2019        2018

                                                                                                   (Unaudited) (Unaudited)




                Cash flows from operating activities



       Net income for the period                                                                      $24,687      $19,552     $70,849     $57,745






                Adjustments for:



       Depreciation of property, plant and equipment                                                      804          542       2,403       2,411



       Amortization of acquired software and customer relationships                                     9,244        6,386      31,697      28,149



       Stock-based compensation expense                                                                   545          374       2,268       1,545



       Provision for income taxes                                                                         329        2,725      13,399      20,289



       Finance expenses and other income                                                              (1,755)        (57)    (2,100)    (1,863)


                                                                                                        33,854       29,522     118,516     108,276





       Changes in non-cash operating working capital                                                  (4,931)       (295)   (15,732)      6,313



       Income taxes paid                                                                              (7,194)     (5,193)   (21,409)   (16,334)





                Net cash flows from operating activities                                           21,729       24,034      81,375      98,255






                Cash flows from investing activities



       Purchase of property, plant and equipment                                                        (815)       (706)    (2,155)    (2,244)



       Acquisitions, net of cash acquired of $2,743 (Q4/18 - $Nil),                                                        (101,219)    (9,675)


       YTD 2019 - $36,708 (2018 - $1,235)                                                             (6,986)



       Purchase consideration for prior period acquisitions                                                         (192)    (1,105)    (7,137)



       Sale of short-term investments                                                                   2,819          711       1,709       3,197

    ---



                Net cash flows used in investing activities                                       (4,982)       (187)  (102,770)   (15,859)






                Cash flows from financing activities



       Issuance of share capital                                                                          774        1,354       2,122       6,181



       Repayment of loans                                                                               (495)       (437)    (1,452)    (1,172)



       Payment of cash dividend                                                                       (6,017)     (4,899)   (21,857)   (18,422)




                Net cash flows used in financing activities                                       (5,738)     (3,982)   (21,187)   (13,413)





       Effect of currency translation adjustments on cash and cash equivalents                            333      (2,079)      (205)    (2,040)

    ---





                Net increase (decrease) in cash and cash equivalents during the period             11,342       17,786    (42,787)     66,943



       Cash and cash equivalents - beginning of period                                                133,422      169,765     187,551     120,608

    ---





                Cash and cash equivalents - end of period                                        $144,764     $187,551    $144,764    $187,551

    ---

Enghouse Systems LimitedSelected Segment Reporting Information

(In thousands of Canadian dollars)

For the three months ended        For the year ended
                                                                   October 31                    October 31



                                                                                            2019                       2018       2019        2018

                                                                                     (Unaudited)               (Unaudited)







                Revenue:



     Asset Management Group                                                             $49,295                    $40,034   $180,954    $153,559



     Interactive Management Group                                                        60,036                     45,788    204,899     189,286





                Total                                                                $109,331                    $85,822   $385,853    $342,845








     Asset Management Group:



     - Segment profit before special charges                                            $16,985                    $15,831    $60,327     $54,501



     - Special charges                                                                    (452)                      (57)     (611)      (390)




     Asset Management Group profit                                                      $16,533                    $15,774    $59,716     $54,111






     Interactive Management Group:



     - Segment profit before special charges                                            $20,082                    $14,861    $65,109     $60,782



     - Special charges                                                                    (225)                               (592)




     Interactive Management Group profit                                                $19,857                    $14,861    $64,517     $60,782






     Corporate expenses                                                                 (3,849)                   (3,291)  (12,259)   (11,648)





                Results from operating activities                                     $32,541                    $27,344   $111,974    $103,245






     Amortization of acquired software and customer relationships                       (9,244)                   (6,386)  (31,697)   (28,149)



     Foreign exchange (loss) gain                                                         (367)                     1,064         66         599



     Finance income                                                                         331                        198      1,805         476



     Finance expenses                                                                      (10)                      (79)      (76)      (213)



     Other income                                                                         1,765                        136      2,176       2,076




                Income before income taxes                                            $25,016                    $22,277    $84,248     $78,034

SOURCE Enghouse Systems Limited

View original content: http://www.newswire.ca/en/releases/archive/December2019/12/c6812.html

SOURCE: Enghouse Systems Limited

Sam Anidjar, Vice President, Corporate Development, Enghouse Systems Limited, Tel:
(905) 946-3200, Email: investor@enghouse.com

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