MARKHAM, ON, March 13, 2024 /CNW/ - Enghouse Systems Limited (TSX: ENGH) announces its first quarter (unaudited) financial results for the period ended January 31, 2024. All figures are denominated in Canadian dollars unless otherwise indicated.
Highlights for the First Quarter ended January 31, 2024 compared to the same period in the prior year:
- Revenue increased 13.2% to $120.5 million compared to revenue of $106.4 million.
- Recurring revenue, which includes SaaS and maintenance services, grew 27.2% to $84.6 million and now represents 70.2% of total revenue.
- Results from operating activities improved to $32.6 million from $29.9 million, while achieving a 28.8% EBITDA margin. Adjusted EBITDA was $34.7 million compared to $32.3 million.
- Cash flows from operating activities, excluding changes in working capital, were $35.6 million compared to $32.6 million.
- Net income was $18.1 million compared to $17.0 million.
As the software markets continues its transitions towards SaaS offerings, we are generating an increasing proportion of recurring revenue streams within our overall revenue model, which now represents 70.2% of our total revenue in the first quarter of 2024.
Our operational expenditure has declined as a percentage of revenue, consistent with our objective of generating operational efficiencies despite the inflationary pressure on operating costs. This focus on efficiency is part of our broader objective of maintaining a lean operational model that supports our growth ambitions without compromising the bottom line. Despite these challenges, our cash position has increased in the quarter, providing the resources necessary to continue to pursue new acquisition opportunities that we believe will enhance our market position and offer long-term shareholder value.
A key advantage Enghouse has in this high-interest-rate operating environment is our debt-free status and a closing cash, cash equivalents and short-term investments balance of $247.4 million, affording us the flexibility and agility to make investments without the burden of external financial constraints. This positions us uniquely in the market, enabling us to pursue acquisitions and invest in further expanding our product suite.
Subsequent to quarter end, on February 12, 2024, Enghouse completed the acquisition of Mediasite assets, which offer a suite of SaaS video solutions as well as expanding Enghouse's presence in the Japanese market. The acquisition was completed for a cash purchase price of US $15.5 million.
Quarterly dividends:
Today, the Board of Directors approved an increase in the Company's eligible quarterly dividend to $0.26 per common share, an increase of 18.2% over the prior dividend, payable on May 31, 2024 to shareholders of record at the close of business on May 17, 2024. This represents the 16th consecutive year in which the Company increased its dividend by over 10%.
Enghouse Systems Limited
Financial Highlights
(unaudited, in thousands of Canadian dollars)
For the periods ended January 31 | Three months | ||||||||||||
2024 | 2023 | Var ($) | Var (%) | ||||||||||
Revenue | $ | 120,489 | $ | 106,435 | 14,054 | 13.2 | |||||||
Direct costs | 41,582 | 34,808 | 6,774 | 19.5 | |||||||||
Revenue, net of direct costs | $ | 78,907 | $ | 71,627 | 7,280 | 10.2 | |||||||
As a % of revenue | 65.5 % | 67.3 % | |||||||||||
Operating expenses | 46,180 | 41,710 | 4,470 | 10.7 | |||||||||
Special charges | 91 | 28 | 63 | 225.0 | |||||||||
Results from operating activities | $ | 32,636 | $ | 29,889 | 2,747 | 9.2 | |||||||
As a % of revenue | 27.1 % | 28.1 % | |||||||||||
Amortization of acquired software and customer relationships | (10,374) | (8,832) | (1,542) | (17.5) | |||||||||
Foreign exchange losses | (1,717) | (1,053) | (664) | (63.1) | |||||||||
Interest expense – lease obligations | (150) | (167) | 17 | 10.2 | |||||||||
Finance income | 2,361 | 976 | 1,385 | 141.9 | |||||||||
Finance expenses | - | (7) | 7 | 100.0 | |||||||||
Other expenses | (114) | (127) | 13 | 10.2 | |||||||||
Income before income taxes | $ | 22,642 | $ | 20,679 | 1,963 | 9.5 | |||||||
Provision for income taxes | 4,509 | 3,656 | 853 | 23.3 | |||||||||
Net income for the period | $ | 18,133 | $ | 17,023 | 1,110 | 6.5 | |||||||
Basic earnings per share | 0.33 | 0.31 | 0.02 | 6.5 | |||||||||
Diluted earnings per share | 0.33 | 0.31 | 0.02 | 6.5 | |||||||||
Operating cash flows | 19,899 | 29,262 | (9,363) | (32.0) | |||||||||
Operating cash flows excluding changes in working capital | 35,557 | 32,632 | 2,925 | 9.0 | |||||||||
Adjusted EBITDA | |||||||||||||
Results from operating activities | 32,636 | 29,889 | 2,747 | 9.2 | |||||||||
Depreciation | 494 | 626 | (132) | 21.1 | |||||||||
Depreciation of right-of-use assets | 1,506 | 1,736 | (230) | 13.2 | |||||||||
Special charges | 91 | 28 | 63 | (225.0) | |||||||||
Adjusted EBITDA | $ | 34,727 | $ | 32,279 | 2,448 | 7.6 | |||||||
Adjusted EBITDA margin | 28.8 % | 30.3 % | |||||||||||
Adjusted EBITDA per diluted share | $ | 0.63 | $ | 0.58 | 0.05 | 8.6 | |||||||
Condensed Consolidated Interim Statements of Financial Position | |||||
(in thousands of Canadian dollars) (unaudited) | As at January 31, | As at October 31, | |||
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 246,752 | $ | 239,532 | |
Short-term investments | 671 | 827 | |||
Accounts receivable | 121,391 | 93,383 | |||
Prepaid expenses and other assets | 16,941 | 15,515 | |||
Income taxes recoverable | - | 114 | |||
385,755 | 349,371 | ||||
Non-current assets: | |||||
Property and equipment | 3,128 | 3,273 | |||
Right-of-use assets | 10,686 | 12,242 | |||
Intangible assets | 96,693 | 109,659 | |||
Goodwill | 276,902 | 280,241 | |||
Deferred income tax assets | 26,906 | 28,884 | |||
414,315 | 434,299 | ||||
$ | 800,070 | $ | 783,670 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current liabilities: | |||||
Accounts payable and accrued liabilities | $ | 64,862 | $ | 67,769 | |
Income taxes payable | 3,158 | - | |||
Dividends payable | 12,188 | 12,156 | |||
Provisions | 1,417 | 2,238 | |||
Deferred revenue | 127,916 | 109,019 | |||
Lease obligations | 5,548 | 6,322 | |||
215,089 | 197,504 | ||||
Non-current liabilities: | |||||
Income taxes payable | - | 1,333 | |||
Deferred income tax liabilities | 12,772 | 13,340 | |||
Deferred revenue | 7,167 | 8,170 | |||
Net employee defined benefit obligation | 1,878 | 1,912 | |||
Lease obligations | 5,318 | 6,080 | |||
27,135 | 30,835 | ||||
242,224 | 228,339 | ||||
Shareholders' equity | |||||
Share capital | 112,867 | 107,701 | |||
Contributed surplus | 9,825 | 10,404 | |||
Retained earnings | 432,342 | 426,397 | |||
Accumulated other comprehensive income | 2,812 | 10,829 | |||
557,846 | 555,331 | ||||
$ | 800,070 | $ | 783,670 | ||
Condensed Consolidated Interim Statements of Operations and Comprehensive Income | |||||
(in thousands of Canadian dollars, except per share amounts) | |||||
(unaudited) | Three months | ||||
Periods ended January 31 | 2024 | 2023 | |||
Revenue Software licenses | $ 16,975 | $ 20,735 | |||
SaaS and maintenance services | 84,587 | 66,503 | |||
Professional services | 15,945 | 16,891 | |||
Hardware | 2,982 | 2,306 | |||
120,489 | 106,435 | ||||
Direct costs | |||||
Software licenses | 674 | 870 | |||
Services | 39,531 | 32,425 | |||
Hardware | 1,377 | 1,513 | |||
41,582 | 34,808 | ||||
Revenue, net of direct costs | 78,907 | 71,627 | |||
Operating expenses | |||||
Selling, general and administrative | 22,869 | 20,798 | |||
Research and development | 21,311 | 18,550 | |||
Depreciation | 494 | 626 | |||
Depreciation of right-of-use assets | 1,506 | 1,736 | |||
Special charges | 91 | 28 | |||
46,271 | 41,738 | ||||
Results from operating activities | 32,636 | 29,889 | |||
Amortization of acquired software and customer relationships | (10,374) | (8,832) | |||
Foreign exchange losses | (1,717) | (1,053) | |||
Interest expense – lease obligations | (150) | (167) | |||
Finance income | 2,361 | 976 | |||
Finance expenses | - | (7) | |||
Other expenses | (114) | ( 127) | |||
Income before income taxes | 22,642 | 20,679 | |||
Provision for income taxes | 4,509 | 3,656 | |||
Net income for the period | $ 18,133 | $ 17,023 | |||
Items that may be subsequently reclassified to income: | |||||
Cumulative translation adjustment | (8,017) | 9,743 | |||
Other comprehensive (loss) income | (8,017) | 9,743 | |||
Comprehensive income | $ 10,116 | $ 26,766 | |||
Earnings per share | |||||
Basic | $ 0.33 | $ 0.31 | |||
Diluted | $ 0.33 | $ 0.31 | |||
Condensed Consolidated Interim Statements of Cash Flows | |||||
(in thousands of Canadian dollars) (unaudited) | Three months | ||||
Periods ended January 31 | 2024 | 2023 | |||
OPERATING ACTIVITIES | |||||
Net income for the period | $ 18,133 | $ 17,023 | |||
| |||||
Depreciation | 494 | 626 | |||
Depreciation of right-of-use assets | 1,506 | 1,736 | |||
Interest expense – lease obligations | 150 | 167 | |||
Amortization of acquired software and customer relationships | 10,374 | 8,832 | |||
Stock-based compensation expense | 277 | 458 | |||
Provision for income taxes | 4,509 | 3,656 | |||
Finance and other expenses | 114 | 134 | |||
35,557 | 32,632 | ||||
Changes in non-cash operating working capital | (13,140) | 2,002 | |||
Income taxes paid | (2,518) | (5,372) | |||
Net cash provided by operating activities | 19,899 | 29,262 | |||
INVESTING ACTIVITIES | |||||
Net purchase of property and equipment | (360) | (105) | |||
Recovery of purchase consideration for prior-year acquisitions | 171 | - | |||
Purchase of short-term investments | - | (69) | |||
Net cash used in investing activities | (189) | ( 174) | |||
FINANCING ACTIVITIES | |||||
Issuance of share capital | 4,310 | 604 | |||
Repayment of lease obligations | (1,602) | (1,810) | |||
Dividends paid | (12,156) | (10,221) | |||
Net cash used in financing activities | (9,448) | (11,427) | |||
Impact of foreign exchange on cash and cash equivalents | (3,042) | 5,036 | |||
Increase in cash and cash equivalents | 7,220 | 22,697 | |||
Cash and cash equivalents ─ beginning of period | 239,532 | 225,104 | |||
Cash and cash equivalents ─ end of period | $ 246,752 | $ 247,801 | |||
Enghouse Systems Limited
Segment Reporting Information
(in thousands of Canadian dollars)
Three months ended January 31 | 2024 | 2023 | |||||||||||
IMG | AMG | Total | IMG | AMG | Total | ||||||||
Revenue | $ | 76,137 | $ | 44,352 | $ | 120,489 | $ | 57,852 | $ | 48,583 | $ | 106,435 | |
Direct costs | (25,406) | (16,176) | (41,582) | (16,431) | (18,377) | (34,808) | |||||||
Revenue, net of direct costs | 50,731 | 28,176 | 78,907 | 41,421 | 30,206 | 71,627 | |||||||
Operating expenses excluding special charges | (21,425) | (11,697) | (33,122) | (19,250) | (11,321) | (30,571) | |||||||
Depreciation | (377) | (117) | (494) | (537) | (89) | (626) | |||||||
Depreciation of right-of-use assets | (936) | (570) | (1,506) | (1,100) | (636) | (1,736) | |||||||
Segment profit | $ | 27,993 | $ | 15,792 | $ | 43,785 | $ | 20,534 | $ | 18,160 | $ | 38,694 | |
Special charges | (91) | (28) | |||||||||||
Corporate and shared service expenses | (11,058) | (8,777) | |||||||||||
Results from operating activities | $ | 32,636 | $ | 29,889 | |||||||||
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 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 Thursday, March 14, 2024 at 8:45 a.m. EST. To participate, please call Local
+1-289-514-5100 or North American Toll-Free 1-800-717-1738. Confirmation code: 74715. 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
View original content: http://www.newswire.ca/en/releases/archive/March2024/13/c4002.html
