MARKHAM, Ontario, Sept. 07, 2017 (GLOBE NEWSWIRE) -- Enghouse Systems Limited (TSX:ENGH) today announced its third quarter (unaudited) financial results for the period ended July 31, 2017.

Third quarter revenue was $82.8 million, an increase of 8.4% over revenue of $76.4 million in the third quarter last year. On a year to date basis, revenue was $241.1 million compared to $229.3 million last year. The revenue increase primarily reflects incremental revenue contributions from acquisitions. On a year to date basis foreign exchange negatively impacted revenue by $8.2 million compared to last year. Hosted and maintenance services revenue was $43.4 million in the quarter, an increase of 14.6% over the same period last year.

Operating expenses before special charges related to restructuring of acquired operations were $35.7 million compared to $31.4 million in the prior year’s third quarter and include incremental operating costs related to acquired operations, net of the unfavourable impact of foreign exchange. Non-cash amortization charges in the quarter were $7.4 million compared to $7.0 million in the prior year’s third quarter and include amortization charges for acquired software and customer relationships from acquired operations. On a year to date basis operating expenses before special charges were $101.7 million compared to $98.9 million and include incremental operating costs related to acquired operations, net of the favourable impact of foreign exchange on operating costs compared to last year to date.

Net income for the quarter was $11.2 million ($0.41 per diluted share) compared to the prior year’s third quarter net income of $10.4 million ($0.38 per diluted share). Results from operating activities for the quarter were $21.9 million compared to $20.6 million in the prior year’s third quarter.

Enghouse generated strong cash flows from operations of $25.1 million in the quarter compared to $16.4 million last year, an increase of 53.6% and $54.1 million year to date compared to $43.9 million last year, an increase of 23.2%.  The Company closed the quarter with $103.8 million in cash, cash equivalents and short-term investments, compared to $85.9 million at October 31, 2016. The cash balance was achieved after year-to-date payments comprised of $16.2 million (net of cash acquired and holdbacks) for Tollgrade Communications Inc. (acquired April 12, 2017), $1.7 million to partially settle loans inherited from the Presence Technology, S.L. acquisition (completed October 28, 2016), $1.0 million for prior period acquisitions, and $11.9 million in dividends paid.

Adjusted EBITDA for the quarter was $22.6 million ($0.83 per diluted share) compared to $21.6 million ($0.79 per diluted share) in last year’s third quarter. Adjusted EBITDA for the year to date was $66.3 million ($2.43 per diluted share) compared to $60.0 million ($2.20 per diluted share) last year. This includes the net negative impact of $3.8 million related to foreign exchange on a year to date basis compared to last year, which would have resulted in a 16.9% increase compared to the prior year excluding the impact of foreign exchange.

The Board of Directors has approved an eligible quarterly dividend of $0.16 per common share, payable on November 30, 2017 to shareholders of record at the close of business on November 16, 2017.

Enghouse remains committed to its acquisition strategy and continues to seek accretive acquisitions.

A conference call to discuss the results will be held on Friday September 8, 2017 at 8:45 a.m. EST. To participate, please call +1-416-640-5946 or North American Toll-Free +1-866-233-4606. No PIN is required.

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.

Non-GAAP Measures

The Company uses non-GAAP measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than GAAP 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 as results from operating activities adjusted for depreciation of property, plant 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, other income and restructuring costs primarily related to acquisitions.

Adjusted EBITDA:

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

	Three Months ended								Nine Months ended
	July 31, 2017				July 31, 2016				July 31, 2017				July 31, 2016
Total Revenue	$	82,756			$	76,350			$	241,139			$	229,257
Results from operating activities		21,893				20,581				63,824				56,540
Depreciation of property, plant and equipment		619				830				1,828				2,447
Special charges		133				151				614				970
Adjusted EBITDA	$	22,645			$	21,562			$	66,266			$	59,957
Adjusted EBITDA margin		27.4	%			28.2	%			27.5	%			26.2	%
Adjusted EBITDA per diluted share	$	0.83			$	0.79			$	2.43			$	2.20

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
		July 31, 2017				October 31, 2016
Assets
Current assets
Cash and cash equivalents		$	97,238			$	78,436
Short-term investments			6,562				7,423
Accounts receivable, net			81,540				73,588
Prepaid expenses and other assets			9,239				9,720
			194,579				169,167
Non-current assets
Long-term deposits and accounts receivable, net			1,064				1,357
Property, plant and equipment			5,130				5,696
Intangible assets			82,511				86,632
Goodwill			148,423				144,578
Deferred income tax assets			9,418				11,765
Total assets		$	441,125			$	419,195
Liabilities
Current liabilities
Accounts payable and accrued liabilities		$	58,737			$	55,440
Income taxes payable			3,585				5,139
Dividends payable			4,314				3,767
Provisions			681				2,111
Deferred revenue			58,525				54,300
Current portion of long-term loans			391				-
			126,233				120,757
Non-current liabilities
Deferred income tax liabilities			21,582				21,053
Deferred revenue			5,045				4,788
Net employee defined benefit obligation			2,347				-
Long-term loans			2,439				4,049
Total liabilities			157,646				150,647
Shareholders’ Equity
Share capital			70,555				69,555
Contributed surplus			4,497				3,875
Retained earnings			207,194				187,649
Accumulated other comprehensive income			1,233				7,469
Total shareholders’ equity			283,479				268,548
Total liabilities and shareholders’ equity		$	441,125			$	419,195

                                                                  

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(Unaudited)
	Three months ended July 31						Nine months ended July 31
		2017			2016			2017			2016
Revenue
Software licenses	$	24,480		$	23,936		$	72,469		$	69,150
Hosted and maintenance services		43,411			37,879			122,487			113,985
Professional services		12,979			13,510			41,799			42,427
Hardware		1,886			1,025			4,384			3,695
		82,756			76,350			241,139			229,257
Direct costs
Software licenses		1,749			1,718			5,311			4,078
Services		22,211			21,909			67,060			66,397
Hardware		1,027			603			2,653			2,333
		24,987			24,230			75,024			72,808
Revenue, net of direct costs		57,769			52,120			166,115			156,449
Operating expenses
Selling, general and administrative		23,599			19,133			66,417			62,189
Research and development		11,525			11,425			33,432			34,303
Depreciation of property, plant and equipment		619			830			1,828			2,447
Special charges		133			151			614			970
		35,876			31,539			102,291			99,909
Results from operating activities		21,893			20,581			63,824			56,540
Amortization of acquired software and customer relationships		(7,397)			(7,009)			(22,365)			(20,857)
Finance income		32			19			131			73
Finance expenses		(142)			(46)			(391)			(214)
Other (expense) income		(50)			9			101			64
Income before income taxes		14,336			13,554			41,300			35,606
Provision for income taxes		3,154			3,171			9,358			8,242
Net income for the period	$	11,182		$	10,383		$	31,942		$	27,364
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences from foreign operations		(12,097)			(1,178)			(4,119)			(10,635)
Transfer to net income of realized gains on available for sale investments		-			-			-			(14)
Unrealized gain (loss) on available for sale investments		5			(609)			(2,440)			(808)
Deferred income tax (expense) recovery		(1)			81			323			109
Other comprehensive loss		(12,093)			(1,706)			(6,236)			(11,348)
Comprehensive (loss) income	$	(911)		$	8,677		$	25,706		$	16,016
Earnings per share
Basic	$	0.41		$	0.39		$	1.19		$	1.02
Diluted	$	0.41		$	0.38		$	1.17		$	1.01

Enghouse Systems Limited
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)
		Share Capital -number		Share capital $		Contributed surplus $		Accumulated other comprehensive income (loss)  $		Retained earnings $		Total $
Balance – November 1, 2016		26,906,962		69,555		3,875		7,469		187,649		268,548
Net income		-		-		-		-		31,942		31,942
Other Comprehensive Income:
Cumulative Translation Adjustment		-		-		-		(4,119)		-		(4,119)
Transfer to net income of realized gains on available for-sale investments		-		-		-		-		-		-
Unrealized loss on available-for-sale investments		-		-		-		(2,440)		-		(2,440)
Deferred income tax recovery		-		-		-		323		-		323
Comprehensive income for the period		-		-		-		(6,236)		31,942		25,706
Employee share options:
Value of services recognized						809		-		-		809
Proceeds on issuing shares		53,750		1,000		(187)		-		-		813
Dividends		-		-		-		-		(12,397)		(12,397)
Balance – July 31, 2017		26,960,712		70,555		4,497		1,233		207,194		283,479
Balance – November 1, 2015		26,587,262		64,203		4,029		20,254		154,866		243,352
Net income		-		-		-		-		27,364		27,364
Other Comprehensive Income:
Cumulative Translation Adjustment		-		-		-		(10,635)		-		(10,635)
Transfer to net income of realized gains on available-for-sale investments		-		-		-		(14)		-		(14)
Unrealized loss on available-for-sale investments		-		-		-		(808)		-		(808)
Deferred income tax recovery		-		-		-		109		-		109
Comprehensive income  for the period		-		-		-		(11,348)		27,364		16,016
Employee share options:
Value of services recognized		-		-		748		-		-		748
Proceeds on issuing shares		237,700		3,320		(638)		-		-		2,682
Dividends		-		-		-		-		(10,726)		(10,726)
Balance – July 31, 2016		26,824,962		67,523		4,139		8,906		171,504		252,072

Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
	Three months ended July 31						Nine months ended July 31
		2017			2016			2017			2016
Cash flows from operating activities
Net income	$	11,182		$	10,383		$	31,942		$	27,364
Adjustments for:
Depreciation of property, plant and equipment		619			830			1,828			2,447
Amortization of acquired software and customer relationships		7,397			7,009			22,365			20,857
Stock-based compensation expense		265			172			809			748
Provision for income taxes		3,154			3,171			9,358			8,242
Finance expenses and other expense/income		192			37			290			150
		22,809			21,602			66,592			59,808
Changes in non-cash operating working capital		4,518			(3,255)			(2,544)			(9,757)
Income taxes paid		(2,218)			(1,996)			(9,904)			(6,101)
Net cash flows from operating activities		25,109			16,351			54,144			43,950
Cash flows from investing activities
Purchase of property, plant and equipment, net		(106)			(284)			(1,025)			(2,603)
Purchase of other software		(255)			(586)			(1,475)			(1,205)
Acquisitions, net of cash acquired of $3,637 (2016 - $2,202)		-			(6,828)			(16,170)			(36,181)
Purchase consideration for prior period acquisitions		(579)			(646)			(1,023)			(4,089)
Net (purchase) sale of short-term investments		(196)			175			(1,526)			(520)
Net cash flows used in investing activities		(1,136)			(8,169)			(21,219)			(44,598)
Cash flows from financing activities
Issuance of share capital		244			174			813			2,682
Repayment of loans		-			-			(1,667)			-
Payment of cash dividend		(4,312)			(3,754)			(11,850)			(10,162)
Net cash flows used in financing activities		(4,068)			(3,580)			(12,704)			(7,480)
Effect of currency translation adjustments on cash and cash equivalents		(3,571)			784			(1,419)			(489)
Net increase (decrease) in cash and cash equivalents during the period		16,334			5,386			18,802			(8,617)
Cash and cash equivalents - beginning of period		80,904			80,128			78,436			94,131
Cash and cash equivalents - end of period	$	97,238		$	85,514		$	97,238		$	85,514

Enghouse Systems Limited
Selected Segment Reporting Information
(In thousands of Canadian dollars)
(Unaudited)
	For the three months ended July 31							For the nine months ended July 31
	2017			2016				2017			2016
Revenue:
Asset Management Group	$	35,949		$	29,709			$	99,701		$	85,316
Interactive Management Group		46,807			46,641				141,438			143,941
Total	$	82,756		$	76,350			$	241,139		$	229,257
Asset Management Group:
- Segment profit before special charges	$	10,708		$	8,455			$	27,993		$	21,683
- Special charges		(133	)		(105	)			(477	)		(618	)
Asset Management Group profit	$	10,575		$	8,350			$	27,516		$	21,065
Interactive Management Group:
- Segment profit before special charges	$	13,451		$	14,548			$	41,979		$	42,177
- Special charges		-			(46	)			(137	)		(352	)
Interactive Management Group profit	$	13,451		$	14,502			$	41,842		$	41,825
Corporate expenses		(2,133	)		(2,271	)			(5,534	)		(6,350	)
Results from operating activities	$	21,893		$	20,581			$	41,931		$	56,540
Amortization of acquired software and customer relationships		(7,397	)		(7,009	)			(22,365	)		(20,857	)
Finance income		32			19				131			73
Finance expenses		(142	)		(46	)			(391	)		(214	)
Other (expense) income		(50	)		9				101			64
Income before income taxes	$	14,336		$	13,554			$	41,300		$	35,606

For further information please contact:

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

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