MARKHAM, ONTARIO--(Marketwire - Sept. 6, 2012) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited third quarter financial results for the period ended July 31, 2012.
Third quarter revenue was $35.4 million, compared to $31.8 million in the corresponding quarter last year. Results from operating activities for the quarter were $8.3 million compared to $8.5 million in the prior year's third quarter. Net income for the third quarter was $4.3 million or $0.16 per diluted share compared to the prior year's third quarter net income of $4.6 million or $0.18 per diluted share. Adjusted EBITDA for the quarter was $9.2 million or $0.35 per diluted share compared to $8.8 million or $0.34 per diluted share last year. On a year to date basis Adjusted EBITDA was $24.9 million or $0.96 per diluted share compared to $22.6 million or $0.89 per diluted share last year.
The increase in revenue continues to reflect incremental revenue contributions from acquisitions, including recently acquired Zeacom Group Limited ("Zeacom"), which closed on June 1, 2012. Revenue also reflects improved hosted and maintenance services contributions of $19.4 million in the quarter, an increase of 28% over last year, largely as a result of incremental hosted revenue contributions from recently acquired CustomCall Data Systems Inc. ("CustomCall"). Hosted and maintenance revenue accounted for 55% of the Company's total revenue in the quarter. On a year to date basis, revenue was $97.4 million up from $90.7 million, while net income increased to $12.5 million or $0.48 per diluted share from $9.7 million or $0.38 per diluted share in the prior year.
Operating expenses increased to $17.5 million from $15.4 million in the prior year's third quarter and include operating and acquisition related restructuring charges of $0.5 million related to recently acquired Zeacom and a full quarter's operating costs related to CustomCall. Research and development costs increased to $5.3 million from $3.7 million in the prior year's third quarter as the Company increased its software investment. Non-cash amortization charges were $2.9 million compared to $2.7 million last year and include amortization of acquired software and customer relationships from acquisitions.
The Company closed the quarter with $79.7 million in cash, cash equivalents and short-term investments, which is after the payment of approximately $26.7 million related to the acquisitions. Enghouse continues to have no long-term debt and did not repurchase any shares in the quarter.
The Board of Directors also announced today an eligible quarterly dividend of $0.065 per common share, payable on November 30, 2012 to shareholders of record at the close of business on November 16, 2012.
The Company continues to seek further acquisitions to continue to grow its market share globally.
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 larger and more diverse software company through strategic acquisitions and managed growth. Enghouse shares are listed on the Toronto Stock Exchange under the symbol "ESL". Further information about Enghouse may be obtained from the Company's web site at www.enghouse.com.
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 results from operating activities and Adjusted EBITDA as a measure of operating performance. Therefore, results from operating activities and Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Results from operating activities are calculated as net income before amortization of acquired software and customer relationships, finance income, finance expenses, other income, and the provision for income taxes. Results from Adjusted EBITDA are calculated as net income before depreciation of property, plant and equipment, amortization of acquired software and customer relationships, finance income, finance expenses, other income, the provision of income tax and special charges for acquisition related restructuring and transaction costs. Management uses results from operating activities and Adjusted EBITDA to evaluate operating performance as they exclude 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.
The table below reconciles Adjusted EBITDA to net income:
Three Months ended | Nine Months ended | ||||||||||||||
July 31, 2012 | July 31, 2011 | July 31, 2012 | July 31, 2011 | ||||||||||||
Total Revenue | $ | 35,427 | $ | 31,820 | $ | 97,416 | $ | 90,723 | |||||||
Net income for the period | 4,288 | 4,577 | 12,528 | 9,720 | |||||||||||
Provision for income taxes | 1,244 | 1,625 | 3,873 | 3,309 | |||||||||||
Depreciation of property, plant and equipment | 377 | 261 | 942 | 817 | |||||||||||
Amortization of acquired software and customer relationships | 2,949 | 2,670 | 7,770 | 7,604 | |||||||||||
Finance income | (194 | ) | (150 | ) | (698 | ) | (414 | ) | |||||||
Finance expenses | 72 | 54 | 183 | 152 | |||||||||||
Other income | (13 | ) | (256 | ) | (168 | ) | (327 | ) | |||||||
Special charges | 491 | - | 491 | 1,775 | |||||||||||
Adjusted EBITDA | $ | 9,214 | $ | 8,781 | $ | 24,921 | $ | 22,636 | |||||||
Adjusted EBITDA margin | 26 | % | 27 | % | 26 | % | 25 | % | |||||||
Adjusted EBITDA per diluted share | $ | 0.35 | $ | 0.34 | $ | 0.96 | $ | 0.89 | |||||||
Enghouse Systems Limited | ||||||||||
Consolidated Interim Statements of Financial Position | ||||||||||
(in thousands of Canadian dollars) | ||||||||||
(Unaudited) | ||||||||||
July 31, 2012 |
October 31, 2011 |
November 1, 2010 |
||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 39,863 | $ | 65,624 | $ | 46,640 | ||||
Short-term investments | 39,837 | 33,967 | 31,627 | |||||||
Accounts receivable, net | 31,573 | 23,006 | 24,500 | |||||||
Income tax receivable | - | - | 591 | |||||||
Prepaid expenses and other assets | 4,111 | 3,479 | 3,360 | |||||||
115,384 | 126,076 | 106,718 | ||||||||
Non-current assets: | ||||||||||
Property, plant and equipment | 3,562 | 1,543 | 1,588 | |||||||
Acquired software and customer relationships | 45,654 | 29,709 | 34,330 | |||||||
Goodwill | 62,933 | 43,734 | 35,137 | |||||||
Deferred income taxes | 11,041 | 11,138 | 3,478 | |||||||
Total assets | $ | 238,574 | $ | 212,200 | $ | 181,251 | ||||
Liabilities | ||||||||||
Current liabilities: | ||||||||||
Trade payables | $ | 25,478 | $ | 22,686 | $ | 18,808 | ||||
Income taxes payable | 3,330 | 2,878 | - | |||||||
Dividends payable | 1,669 | 1,267 | 1,007 | |||||||
Accrued provisions | 1,887 | 2,442 | 1,307 | |||||||
Deferred revenue | 40,977 | 28,933 | 26,040 | |||||||
73,341 | 58,206 | 47,162 | ||||||||
Non-current liabilities: | ||||||||||
Deferred income tax liabilities | 14,476 | 10,743 | 12,571 | |||||||
Long-term income taxes payable | 56 | 420 | 522 | |||||||
Deferred revenue | 1,214 | 1,404 | 790 | |||||||
Total liabilities | 89,087 | 70,773 | 61,045 | |||||||
Shareholders' Equity | ||||||||||
Share capital | 55,085 | 52,134 | 50,705 | |||||||
Contributed surplus | 2,838 | 2,970 | 2,653 | |||||||
Retained earnings | 93,208 | 85,288 | 66,546 | |||||||
Accumulated other comprehensive (loss) gain | (1,644 | ) | 1,035 | 302 | ||||||
Total equity | 149,487 | 141,427 | 120,206 | |||||||
Total liabilities and equity | $ | 238,574 | $ | 212,200 | $ | 181,251 | ||||
Enghouse Systems Limited | ||||||||||||||||
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 | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenue | ||||||||||||||||
Software licenses | $ | 10,853 | $ | 11,842 | $ | 32,001 | $ | 34,305 | ||||||||
Hosted and maintenance services | 19,475 | 15,190 | 51,494 | 42,344 | ||||||||||||
Professional services | 4,727 | 4,272 | 12,873 | 11,685 | ||||||||||||
Hardware | 372 | 516 | 1,048 | 2,389 | ||||||||||||
35,427 | 31,820 | 97,416 | 90,723 | |||||||||||||
Direct costs | ||||||||||||||||
Software licenses | 808 | 909 | 2,583 | 4,439 | ||||||||||||
Services | 8,567 | 6,684 | 22,549 | 19,764 | ||||||||||||
Hardware | 242 | 317 | 726 | 1,729 | ||||||||||||
9,617 | 7,910 | 25,858 | 25,932 | |||||||||||||
Revenue, net of direct costs | 25,810 | 23,910 | 71,558 | 64,791 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling, general and administrative | 11,255 | 11,403 | 31,092 | 30,690 | ||||||||||||
Research and development | 5,341 | 3,726 | 15,545 | 11,465 | ||||||||||||
Depreciation of property, plant and equipment | 377 | 261 | 942 | 817 | ||||||||||||
Special charges | 491 | - | 491 | 1,775 | ||||||||||||
17,464 | 15,390 | 48,070 | 44,747 | |||||||||||||
Results from operating activities | 8,346 | 8,520 | 23,488 | 20,044 | ||||||||||||
Amortization of acquired software and customer relationships | (2,949 | ) | (2,670 | ) | (7,770 | ) | (7,604 | ) | ||||||||
Finance income | 194 | 150 | 698 | 414 | ||||||||||||
Finance expenses | (72 | ) | (54 | ) | (183 | ) | (152 | ) | ||||||||
Other income | 13 | 256 | 168 | 327 | ||||||||||||
Income before income taxes | 5,532 | 6,202 | 16,401 | 13,029 | ||||||||||||
Provision for income taxes | 1,244 | 1,625 | 3,873 | 3,309 | ||||||||||||
Net income for the period | $ | 4,288 | $ | 4,577 | $ | 12,528 | $ | 9,720 | ||||||||
Foreign currency translation differences from foreign operations | (373 | ) | (409 | ) | (1,664 | ) | (3,563 | ) | ||||||||
Transfer to net income of realized gains on available for sale investments, net of tax of ($nil); nine months - ($24) | - |
(51 |
) | (132 |
) | (142 |
) | |||||||||
Unrealized (loss) gain on available for sale investments, net of tax of ($54); nine months - ($166) | (291 |
) | 254 |
(891 |
) | 735 |
||||||||||
Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $nil; nine months - $1 | - |
4 |
8 |
(69 |
) | |||||||||||
Other comprehensive loss | (664 | ) | (202 | ) | (2,679 | ) | (3,039 | ) | ||||||||
Comprehensive income | $ | 3,624 | $ | 4,375 | $ | 9,849 | $ | 6,681 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.17 | $ | 0.18 | $ | 0.49 | $ | 0.39 | ||||||||
Diluted | $ | 0.16 | $ | 0.18 | $ | 0.48 | $ | 0.38 | ||||||||
Enghouse Systems Limited | |||||||||||||||||
Consolidated Interim Statements of Changes in Equity | |||||||||||||||||
(in thousands of Canadian dollars) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Share Capital -number |
Share capital $ |
Contributed surplus $ |
Accumulated other comprehensive income $ |
Retained earnings $ |
Total $ |
||||||||||||
Balance - November 1, 2011 | 25,337,262 | 52,134 | 2,970 | 1,035 | 85,288 | 141,427 | |||||||||||
Net income | - | - | - | - | 12,528 | 12,528 | |||||||||||
Other Comprehensive Income (net of tax): | |||||||||||||||||
Cumulative Translation Adjustment | - | - | - | (1,664 | ) | - | (1,664 | ) | |||||||||
Transfer to net income of realized gains on available-for-sale investments, net of tax | - |
- |
- |
(132 |
) | - |
(132 |
) | |||||||||
Unrealized gain (loss) on available-for-sale investments, net of tax | - |
- |
- |
(891 |
) | - |
(891 |
) | |||||||||
Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax | - |
- |
- |
8 |
- |
8 |
|||||||||||
Comprehensive income (loss) for the period | - | - | - | (2,679 | ) | 12,528 | 9,849 | ||||||||||
Employee share options: | |||||||||||||||||
Value of services recognized | - | - | 502 | - | - | 502 | |||||||||||
Proceeds on issuing shares | 332,300 | 2,951 | (634 | ) | - | - | 2,317 | ||||||||||
Purchase and cancellation of common shares | - | - | - | ||||||||||||||
Dividends | - | - | - | - | (4,608 | ) | (4,608 | ) | |||||||||
Balance - July 31, 2012 | 25,669,562 | 55,085 | 2,838 | (1,644 | ) | 93,208 | 149,487 | ||||||||||
Balance - November 1, 2010 | 25,171,662 | 50,705 | 2,653 | 302 | 66,546 | 120,206 | |||||||||||
Net income | - | - | - | - | 9,720 | 9,720 | |||||||||||
Other Comprehensive Income (net of tax): | |||||||||||||||||
Cumulative Translation Adjustment | - | - | - | (3,563 | ) | - | (3,563 | ) | |||||||||
Transfer to net income of realized gains on available-for-sale investments, net of tax | - |
- |
- |
(142 |
) | - |
(142 |
) | |||||||||
Unrealized gain (loss) on available-for-sale investments, net of tax | - |
- |
- |
735 |
- |
735 |
|||||||||||
Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax | - |
- |
- |
(69 |
) | - |
(69 |
) | |||||||||
Comprehensive income (loss) for the period | - | - | - | (3,039 | ) | 9,720 | 6,681 | ||||||||||
Employee share options: | |||||||||||||||||
Value of services recognized | - | - | 493 | - | - | 493 | |||||||||||
Proceeds on issuing shares | 75,400 | 565 | (101 | ) | - | - | 464 | ||||||||||
Purchase and cancellation of common shares | (4,800 | ) | (10 | ) | - | - | (33 | ) | (43 | ) | |||||||
Dividends | - | - | - | - | (3,529 | ) | (3,529 | ) | |||||||||
Balance - July 31, 2011 | 25,242,262 | 51,260 | 3,045 | (2,737 | ) | 72,704 | 124,272 |
Enghouse Systems Limited | |||||||||||||||
Consolidated Interim Statements of Cash Flows | |||||||||||||||
(in thousands of Canadian dollars) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three months ended July 31 | Nine months ended July 31 | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 4,288 | $ | 4,577 | $ | 12,528 | $ | 9,720 | |||||||
Adjustments for: | |||||||||||||||
Depreciation of property, plant and equipment | 377 | 261 | 942 | 817 | |||||||||||
Amortization of acquired software and customer relationships | 2,949 | 2,670 | 7,770 | 7,604 | |||||||||||
Stock-based compensation expense | 216 | 168 | 502 | 493 | |||||||||||
Deferred income tax expense | (1,128 | ) | 62 | (832 | ) | (110 | ) | ||||||||
Finance expenses and other income | 59 | (202 | ) | 15 | (175 | ) | |||||||||
Income tax paid | (1,360 | ) | (150 | ) | (3,188 | ) | (1,093 | ) | |||||||
5,401 | 7,386 | 17,737 | 17,256 | ||||||||||||
Changes in non-cash operating working capital | 3,362 | 5,813 | 1,229 | 15,737 | |||||||||||
Net cash flows from operating activities | 8,763 | 13,199 | 18,966 | 32,993 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Purchase of property, plant and equipment, net | (224 | ) | (190 | ) | (1,893 | ) | (630 | ) | |||||||
Finance income | (194 | ) | (150 | ) | (698 | ) | (414 | ) | |||||||
Acquisitions, net of cash acquired | (26,651 | ) | (32,453 | ) | (16,648 | ) | |||||||||
Net proceeds (purchase) from sale of short-term investments | 2,565 | (14,363 | ) | (7,994 | ) | (3,711 | ) | ||||||||
Net cash flows used in investing activities | (24,504 | ) | (14,703 | ) | (43,038 | ) | (21,403 | ) | |||||||
Cash flows from financing activities | |||||||||||||||
Issuance of share capital | 441 | 324 | 2,317 | 464 | |||||||||||
Payment of cash dividend | (1,664 | ) | (1,260 | ) | (4,206 | ) | (3,274 | ) | |||||||
Purchase and cancellation of common shares | - | - | - | (43 | ) | ||||||||||
Net cash flows used in financing activities | (1,223 | ) | (936 | ) | (1,889 | ) | (2,853 | ) | |||||||
Effect of currency translation adjustments on cash and cash equivalents | 440 |
206 |
200 |
(3,105 |
) | ||||||||||
Net (decrease) increase in cash and cash equivalents during the period | (16,524 |
) | (2,234 |
) | (25,761 |
) | 5,632 |
||||||||
Cash and cash equivalents- beginning of period | 56,387 | 54,506 | 65,624 | 46,640 | |||||||||||
Cash and cash equivalents - end of period | $ | 39,863 | $ | 52,272 | $ | 39,863 | $ | 52,272 | |||||||
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 | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
Revenue: | |||||||||||||||||
Asset Management Group | $ | 4,725 | $ | 3,178 | $ | 11,519 | $ | 9,767 | |||||||||
Interactive Management Group | 30,702 | 28,642 | 85,897 | 80,956 | |||||||||||||
Total | $ | 35,427 | $ | 31,820 | $ | 97,416 | $ | 90,723 | |||||||||
Segment Profit (EBIT): | |||||||||||||||||
Asset Management Group | $ | 1,016 | $ | 934 | $ | 1,918 | $ | 1,936 | |||||||||
Interactive Management Group | 5,383 | 5,685 | 16,430 | 12,900 | |||||||||||||
Corporate expenses | (1,002 | ) | (769 | ) | (2,630 | ) | (2,396 | ) | |||||||||
Finance income | 194 | 150 | 698 | 414 | |||||||||||||
Finance expenses | (72 | ) | (54 | ) | (183 | ) | (152 | ) | |||||||||
Other income | 13 | 256 | 168 | 327 | |||||||||||||
Total | $ | 5,532 | $ | 6,202 | $ | 16,401 | $ | 13,029 |
Contact Information:
Kevin Derbyshire
Chief Corporate Officer
(905) 946-3238
investor@enghouse.com
www.enghouse.com