MARKHAM, ON, June 7, 2022 /CNW/ - Enghouse Systems Limited (TSX: ENGH) today announced its second quarter unaudited financial results for the period ended April 30, 2022. All the financial information is in Canadian dollars unless otherwise indicated.

Financial and operational highlights for the three and six months ended April 30, 2022 compared to the three and six months ended April 30, 2021 are as follows:

  • Revenue achieved was $106.3 and $217.4 million, respectively, compared to revenue of $117.3 and $236.4 million;
  • Results from operating activities was $31.1 and $66.8 million, respectively, compared to $36.9 and $77.6 million;
  • Net income was $17.9 and $39.5 million, respectively, compared to $20.7 and $41.4 million;
  • Adjusted EBITDA was $33.8 and $72.3 million, respectively, compared to $40.2 and $84.7 million;
  • Cash flows from operating activities excluding changes in working capital was $34.5 and $73.3 million, respectively, compared to $42.6 and $84.3 million.

Revenue for the second quarter of 2022 was $106.3 million with results from operating activities of $31.1 million and cash flows from operating activities excluding changes in working capital of $34.5 million. As a result, we closed the quarter with $231.2 million in cash, cash equivalents, and short-term investments with no external debt. We remain focused on operating a profitable, cash flow positive business that generates the necessary capital to fund our acquisition strategy without the need for financing.

Revenue for the second quarter of 2022 was down from $117.3 million in the same period of the prior year and was negatively impacted by $3.7 million as a result of unfavourable foreign exchange as European currencies have come under pressure with the recent conflict in Ukraine. Excluding the impact of foreign exchange, our Asset Management Group had comparable revenues to the second quarter of 2021. Our Interactive Management Group is experiencing increased competition from cloud solutions providers as the market shifts towards the cloud as more businesses adopt work from home operating models. While we differentiate ourselves from our competitors by providing customers choice between on-premise solutions, private cloud and multi-tenant cloud offerings we are augmenting our existing channel-partner model with additional focus on our direct go-to-market approach for our cloud solution that is still in the early stages of its global roll-out.

Net income for the quarter was $17.9 million or $0.32 per diluted share, compared to $20.7 million or $0.37 per diluted share last year. The decrease in net income is a result of higher revenue in the comparative period despite lower operating expenses in the current period. Adjusted EBITDA was $33.8 million or $0.61 per diluted share, compared to $40.2 million or $0.72 per diluted share in the second quarter of 2021.

Enghouse closed the quarter with $231.2 million in cash, cash equivalents and short-term investments, compared to $198.8 million as at October 31, 2021 with no external debt. The cash balance was achieved after making payments of $17.8 million for dividends in the first six months of 2022. Enghouse remains focused on its long-term growth strategy, investing in products while ensuring profitability and maximizing operating cashflows. As a result, Enghouse continues to replenish its acquisition capital while annually increasing its eligible quarterly dividend.

Quarterly dividends:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.185 per common share, payable on August 31, 2022 to shareholders of record at the close of business on August 17, 2022. This payment represents an increase of 16% compared to the prior year.

Enghouse Systems Limited

Financial Highlights
(unaudited, in thousands of Canadian dollars)

For the period ended April 30

Three months


Six months


2022


2021

Var ($)

Var (%)



2022


2021

Var ($)

Var (%)

Revenue

$

106,312

$

117,334

(11,022)

(9.4)


$

217,414

$

236,434

(19,020)

(8.0)















Direct costs


33,581


33,533

48

0.1



66,409


65,041

1,368

2.1

Revenue, net of direct costs

$

72,731

$

83,801

(11,070)

(13.2)


$

151,005

$

171,393

(20,388)

(11.9)

As a % of revenue


68.4%


71.4%





69.5%


72.5%

















Operating expenses


41,629


46,852

(5,223)

(11.1)



84,180


93,362

(9,182)

(9.8)

Special charges


46


57

(11)

(19.3)



64


440

(376)

(85.5)

Results from operating activities

$

31,056

$

36,892

(5,836)

(15.8)


$

66,761

$

77,591

(10,830)

(14.0)

As a % of revenue


29.2%


31.4%





30.7%


32.8%

















Amortization of acquired software and     
   customer relationships


(9,207)


(10,854)

1,647

15.2



(18,864)


(21,628)

2,764

12.8

Foreign exchange gains (losses)


314


1,587

(1,273)

(80.2)



(22)


(1,523)

1,501

98.6

Interest expense – lease obligations


(196)


(277)

81

29.2



(398)


(606)

208

34.3

Finance income


122


36

86

238.9



251


116

135

116.4

Finance expenses


(21)


17

(38)

(223.5)



(44)


(64)

20

31.3

Other income (expenses)


23


(1,122)

1,145

102.0



1,023


(1,446)

2,469

170.7

Income before income taxes

$

22,091

$

26,279

(4,188)

(15.9)


$

48,707

$

52,440

(3,733)

(7.1)

Provision for income taxes


4,220


5,540

(1,320)

(23.8)



9,239


11,059

(1,820)

(16.5)

Net Income for the period

$

17,871

$

20,739

(2,868)

(13.8)


$

39,468

$

41,381

(1,913)

(4.6)















Basic earnings per share


0.32


0.37

(0.05)

(13.5)



0.71


0.75

(0.04)

(5.3)

Diluted earnings per share


0.32


0.37

(0.05)

(13.5)



0.71


0.74

(0.03)

(4.1)















Operating cash flows


31,142


39,155

(8,013)

(20.5)



55,484


59,702

(4,218)

(7.1)

Operating cash flows excluding changes
in working capital


34,510


42,600

(8,090)

(19.0)



73,253


84,317

(11,064)

(13.1)















Adjusted EBITDA














Results from operating activities


31,056


36,892

(5,836)

(15.8)



66,761


77,591

(10,830)

(14.0)















Depreciation


705


758

(53)

7.0



1,425


1,493

(68)

4.6

Depreciation of right-of-use assets


1,969


2,492

(523)

21.0



4,081


5,195

(1,114)

21.4

Special charges


46


57

(11)

19.3



64


440

(376)

85.5

Adjusted EBITDA

$

33,776

$

40,199

(6,423)

(16.0)


$

72,331

$

84,719

(12,388)

(14.6)















Adjusted EBITDA margin


31.8%


34.3%





33.3%


35.8%

















Adjusted EBITDA per diluted share

$

0.61

$

0.72

(0.11)

(15.3)


$

1.30

$

1.52

(0.22)

(14.5)

 

Condensed Consolidated Interim Statements of Financial Position


(in thousands of Canadian dollars)
(unaudited)


As at April 30,
2022

As at October 31,
2021

ASSETS






Current assets:






   Cash and cash equivalents


$

227,377

$

195,890

   Short-term investments



3,841


2,944

   Accounts receivable



98,592


89,374

   Prepaid expenses and other assets



14,536


13,322

   Income taxes recoverable



-


2,130




344,346


303,660

Non-current assets:






   Property and equipment



4,766


6,246

   Right-of-use assets



22,741


25,943

   Intangible assets



82,462


101,822

   Goodwill



218,019


223,021

   Deferred income tax assets



16,548


13,932




344,536


370,964



$

688,882

$

674,624







LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






   Accounts payable and accrued liabilities


$

59,055

$

71,506

   Income taxes payable



1,957


-

   Dividends payable



10,285


8,889

   Provisions



3,389


5,588

   Deferred revenue



95,685


80,614

   Lease obligations



7,447


7,941




177,818


174,538

Non-current liabilities:






   Income taxes payable



2,414


2,949

   Deferred income tax liabilities



11,770


13,392

   Deferred revenue



8,032


9,111

   Net employee defined benefit obligation



2,518


2,663

   Lease obligations



15,069


17,660




39,803


45,775




217,621


220,313

 

Shareholders' equity






   Share capital



107,672


106,470

   Contributed surplus



7,931


7,406

   Retained earnings



375,314


355,019

   Accumulated other comprehensive loss



(19,656)


(14,584)




471,261


454,311



$

688,882

$

674,624

 

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


2022

2021

2022

2021







Revenue

     Software licenses


 

21,420

$  25,167

 

$  45,198

$  53,467

     Hosted and maintenance services


63,745

70,402

130,172

142,645

     Professional services


17,879

18,468

35,831

34,297

     Hardware


3,268

3,297

6,213

6,025



106,312

117,334

217,414

236,434

Direct costs






     Software licenses


1,286

1,485

2,613

2,686

     Services


30,560

30,143

60,154

58,615

     Hardware


1,735

1,905

3,642

3,740



33,581

33,533

66,409

65,041

Revenue, net of direct costs


72,731

83,801

151,005

171,393







Operating expenses






     Selling, general and administrative


19,897

22,208

42,304

45,159

     Research and development


19,058

21,394

36,370

41,515

     Depreciation


705

758

1,425

1,493

     Depreciation of right-of-use assets


1,969

2,492

4,081

5,195

     Special charges


46

57

64

440



41,675

46,909

84,244

93,802







Results from operating activities


31,056

36,892

66,761

77,591







Amortization of acquired software and customer relationships   


(9,207)

(10,854)

(18,864)

(21,628)

Foreign exchange gains (losses)


314

1,587

(22)

(1,523)

Interest expense – lease obligations


(196)

(277)

(398)

(606)

Finance income


122

36

251

116

Finance expenses


(21)

17

(44)

(64)

Other income (expenses)


23

(1,122)

1,023

(1,446)

Income before income taxes


22,091

26,279

48,707

52,440







Provision for income taxes


4,220

5,540

9,239

11,059






Net income for the period


$  17,871

$  20,739

$  39,468

$  41,381






Items that may be subsequently reclassified to income:





Cumulative translation adjustment


(9,198)

(18,274)

(5,072)

(23,142)







Other comprehensive loss


(9,198)

(18,274)

(5,072)

(23,142)







Comprehensive income


$    8,673

$    2,465

$  34,396

$  18,239

Earnings per share






Basic


$      0.32

$      0.37

$      0.71

$      0.75

Diluted


$      0.32

$      0.37

$      0.71

$      0.74

 

Condensed Consolidated Interim Statements of Cash Flows


(in thousands of Canadian dollars)

(unaudited)


 

Three months

 

Six months

Periods ended April 30


2022

2021

2022

2021







OPERATING ACTIVITIES






Net income for the period


$    17,871

$    20,739

$    39,468

$    41,381


Adjustments for non-cash items











   Depreciation


705

758

1,425

1,493

   Depreciation of right-of-use assets


1,969

2,492

4,081

5,195

   Interest expense – lease obligations


196

277

398

606

   Amortization of acquired software and customer relationships


9,207

10,854

18,864

21,628

   Stock-based compensation expense


344

835

757

1,445

   Provision for income taxes


4,220

5,540

9,239

11,059

   Finance and other (expenses) income


(2)

1,105

(979)

1,510



34,510

42,600

73,253

84,317







Changes in non-cash operating working capital


1,513

2,440

(9,689)

(8,915)

Income taxes paid


(4,881)

(5,885)

(8,080)

(15,700)

Net cash provided by operating activities


31,142

39,155

55,484

59,702







INVESTING ACTIVITIES






Net purchase of property and equipment


(593)

(666)

(358)

(1,344)

Acquisitions, net of cash acquired*


-

(3,810)

-

(32,300)

Purchase consideration for prior-year acquisition


(408)

444

(408)

1,105

(Purchase) sale of short-term investments


(60)

(932)

(60)

1,614

Net cash used in investing activities


(1,061)

(4,964)

(826)

(30,925)







FINANCING ACTIVITIES






Issuance of share capital


970

4,028

970

4,180

Repayment of lease obligations


(2,148)

(2,091)

(4,241)

(4,921)

Dividends paid


(8,889)

(90,502)

(17,778)

(97,974)

Net cash used in financing activities


(10,067)

(88,565)

(21,049)

(98,715)







Impact of foreign exchange on cash and cash equivalents


(3,536)

(5,937)

(2,122)

(9,188)







Increase (decrease) in cash and cash equivalents


16,478

(60,311)

31,487

(79,126)

Cash and cash equivalents - beginning of period


210,899

225,977

195,890

244,792

Cash and cash equivalents - end of period


$  227,377

$  165,666

$  227,377

$  165,666


* Acquisitions are net of cash acquired of nil for the three and six months ended April 30, 2022 and nil and $1,463 for the three and six months ended April 30, 2021, respectively.

 

Enghouse Systems Limited

Segment Reporting Information
(in thousands of Canadian dollars)

 Three months ended April 30, 2022

IMG

AMG

Total

Revenue

$

57,218

$

49,094

$

106,312

Direct costs


(15,313)


(18,268)


(33,581)

Revenue, net of direct costs


41,905


30,826


72,731

Operating expenses excluding special charges


(19,412)


(11,101)


(30,513)

Depreciation


(600)


(105)


(705)

Depreciation of right-of-use assets


(1,192)


(777)


(1,969)

Segment profit

$

20,701

$

18,843

$

39,544

Special charges






(46)

Corporate and shared service expenses






(8,442)

Results from operating activities





$

31,056

 

Three months ended April 30, 2021

IMG

AMG

Total

Revenue

$

65,879

$

51,455

$

117,334

Direct costs


(16,930)


(16,603)


(33,533)

Revenue, net of direct costs


48,949


34,852


83,801

Operating expenses excluding special charges


(24,074)


(12,214)


(36,288)

Depreciation


(624)


(134)


(758)

Depreciation of right-of-use assets


(1,666)


(826)


(2,492)

Segment profit

$

22,585

$

21,678

$

44,263

Special charges






(57)

Corporate and shared service expenses






(7,314)

Results from operating activities





$

36,892

 

 Six months ended April 30, 2022

IMG

AMG

Total

Revenue

$

119,089

$

98,325

$

217,414

Direct costs


(30,756)


(35,653)


(66,409)

Revenue, net of direct costs


88,333


62,672


151,005

Operating expenses excluding special charges


(38,963)


(22,273)


(61,236)

Depreciation


(1,196)


(229)


(1,425)

Depreciation of right-of-use assets


(2,519)


(1,562)


(4,081)

Segment profit

$

45,655

$

38,608

$

84,263

Special charges






(64)

Corporate and shared service expenses






(17,438)

Results from operating activities





$

66,761

 

 Six months ended April 30, 2021

IMG

AMG

Total

Revenue

$

136,182

$

100,252

$

236,434

Direct costs


(32,387)


(32,654)


(65,041)

Revenue, net of direct costs


103,795


67,598


171,393

Operating expenses excluding special charges


(46,737)


(24,339)


(71,076)

Depreciation


(1,295)


(198)


(1,493)

Depreciation of right-of-use assets


(3,484)


(1,711)


(5,195)

Segment profit

$

52,279

$

41,350

$

93,629

Special charges






(440)

Corporate and shared service expenses






(15,598)

Results from operating activities





$

77,591

 

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 ("IMG") and the Asset Management Group ("AMG"). 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 Wednesday, June 8, 2022 at 8:45 a.m. EST. To participate, please call +1-416-764-8658 or North American Toll-Free +1-888-886-7786. Confirmation code: 86805714. 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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