Mr. Sam Anidjar reports
ENGHOUSE RELEASES THIRD QUARTER RESULTS
Enghouse Systems Ltd. has released 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.
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
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
We seek Safe Harbor.
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