MARKHAM, ON, Dec. 12, 2024 /CNW/ - Enghouse Systems Limited (TSX:ENGH) announces its fourth quarter (unaudited) and audited year-end financial results for the period ended October 31, 2024. All figures are denominated in Canadian dollars unless otherwise indicated.
Fourth Quarter and Annual Financial Highlights:
Revenue increased 2.1% to $125.7 million from $123.1 million in the fourth quarter last year and 10.7% for the fiscal year to $502.5 million from $454.0 million last year;
Recurring revenue, which includes SaaS and maintenance services, grew 1.1% to $88.2 million compared to $87.2 million in Q4 2023, and represents 70.2% of total revenue. For the fiscal year, recurring revenue increased to $346.6 million from $297.6 million in the prior year, an increase of 16.4%, as we continue to see increased demand for SaaS;
Results from operating activities decreased to $33.4 million compared to $35.7 million in Q4 2023 and increased in the fiscal year to $133.8 million, from $122.1 million in the prior year;
Net income was $22.6 million compared to $25.1 million in Q4 2023 and $81.3 million in the fiscal year compared to $72.2 million last year as we continue to grow our business with a focus on profitability;
Adjusted EBITDA decreased to $35.6 million compared to $37.9 million, while achieving a 28.3% margin for the quarter. Annual adjusted EBITDA was $143.8 million compared to $133.8 million in the prior year, an increase of 7.5%;
Cash flow from operating activities, excluding changes in working capital, was $40.3 million compared to $43.5 million in the prior year's fourth quarter and $151.8 million for the fiscal year compared to $140.5 million in the prior year. Cash and cash equivalents increased to record levels of $274.2 million as at October 31, 2024.
Fiscal 2024 yielded a third year of consecutive revenue growth following the COVID period, which saw an unprecedented spike in demand for our Vidyo applications. We achieved a significant milestone, with revenue for the fiscal year exceeding $500 million, representing double digit growth of 10.7%. During the year we deployed cash of $43.4 million on acquisitions and returned $53.1 million to our shareholders through dividends. At the same time, we increased our cash reserves to $274.2 million, with no external debt, which positions the Company well for further acquisition growth. We are also pleased to announce record annual SaaS and maintenance services revenue of $346.6 million, an increase of $49.0 million or 16.4% compared to the prior year. SaaS and maintenance services continue to be an important source of revenue characterized by their predictable and recurring nature. They now represent 69.0% of total revenues for the year compared to 65.6% in the prior year.
In addition to the SaaS and maintenance growth, our professional services and hardware revenue showed marked increases for the year. In the current business environment, demand for on-premise, perpetual software licenses has declined as more customers are choosing SaaS solutions that require less upfront capital investment. During this market transition, we continue to focus on maintaining profitability as demonstrated by the 12.6% increase in our net income to $81.3 million from $72.2 million in the prior year.
We closed the year with a double digit increase in revenue and net income, significant expansion of our recurring revenue, record cash reserves and no external debt, positioning us to pursue opportunities that meet our acquisition criteria while continuing to pay dividends to our shareholders. The growth in revenue was achieved through our ability to acquire and effectively integrate new acquisitions into our business model.
Quarterly dividends:
Today, the Board of Directors approved the Company's eligible quarterly dividend of $0.26 per common share payable on February 28, 2025 to shareholders of record at the close of business on February 14, 2025.
Enghouse Systems Limited Financial Highlights (unaudited, in thousands of Canadian dollars)
For the period ended October 31
Three months (Unaudited)
Twelve months
2024
2023
Var ($)
Var (%)
2024
2023
Var ($)
Var (%)
Revenue
$
125,702
$
123,129
2,573
2.1
$
502,505
$
454,022
48,483
10.7
Direct costs
44,967
41,213
3,754
9.1
175,586
149,999
25,587
17.1
Revenue, net of direct costs
$
80,735
$
81,916
(1,181)
(1.4)
$
326,919
$
304,023
22,896
7.5
As a % of revenue
64.2 %
66.5 %
65.1 %
67.0 %
Operating expenses
47,133
46,115
1,018
2.2
191,464
179,438
12,026
6.7
Special charges
169
117
52
44.4
1,609
2,477
(868)
(35.0)
Results from operating activities
$
33,433
$
35,684
(2,251)
(6.3)
$
133,846
$
122,108
11,738
9.6
As a % of revenue
26.6 %
29.0 %
26.6 %
26.9 %
Amortization of acquired software and customer relationships
(9,322)
(11,205)
1,883
16.8
(40,505)
(39,605)
(900)
(2.3)
Foreign exchange gains (losses)
1,870
2,753
(883)
32.1
(1,680)
1,266
(2,946)
(232.7)
Interest expense – lease obligations
(126)
(164)
38
23.2
(556)
(695)
139
20.0
Finance income
2,825
2,581
244
9.5
10,121
6,264
3,857
61.6
Finance expenses
(8)
(27)
19
70.4
(49)
(163)
114
69.9
Other (expense) income
(424)
17
(441)
(2594.1)
89
(1,950)
2,039
104.6
Income before income taxes
$
28,248
$
29,639
(1,391)
(4.7)
$
101,266
$
87,225
14,041
16.1
Provision for income taxes
5,607
4,517
1,090
24.1
19,938
14,977
4,961
33.1
Net Income for the period
$
22,641
$
25,122
(2,481)
(9.9)
$
81,328
$
72,248
9,080
12.6
Basic earnings per share
0.41
0.45
(0.04)
(8.9)
1.47
1.31
0.16
12.2
Diluted earnings per share
0.41
0.45
(0.04)
(8.9)
1.47
1.31
0.16
12.2
Cash flows from operating activities
31,583
28,318
3,265
11.5
132,071
115,298
16,773
14.5
Cash flows from operating activities excluding changes in working capital
40,270
43,504
(3,234)
(7.4)
151,803
140,492
11,311
8.1
Adjusted EBITDA
Results from operating activities
33,433
35,684
(2,251)
(6.3)
133,846
122,108
11,738
9.6
Depreciation
655
627
28
4.5
2,347
2,451
(104)
(4.2)
Depreciation of right-of-use assets
1,375
1,491
(116)
(7.8)
5,981
6,764
(783)
(11.6)
Special charges
169
117
52
44.4
1,609
2,477
(868)
(35.0)
Adjusted EBITDA
$
35,632
$
37,919
(2,287)
(6.0)
$
143,783
$
133,800
9,983
7.5
Adjusted EBITDA margin
28.3 %
30.8 %
28.6 %
29.5 %
Adjusted EBITDA per diluted share
$
0.64
$
0.69
( 0.05)
(7.2)
$
2.60
$
2.42
0.18
7.4
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
As at October 31, 2024
As at October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
274,240
$
239,532
Short-term investments
487
827
Accounts receivable
92,348
93,383
Prepaid expenses and other assets
16,100
15,515
Income taxes recoverable
-
114
383,175
349,371
Non-current assets:
Property and equipment
4,192
3,273
Right-of-use assets
11,473
12,242
Intangible assets
98,594
109,659
Goodwill
309,831
280,241
Deferred income tax assets
26,228
28,884
450,318
434,299
$
833,493
$
783,670
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
70,087
$
67,769
Income tax payable
5,525
-
Dividends payable
14,397
12,156
Provisions
1,834
2,238
Deferred revenue
114,080
109,019
Lease obligations
5,344
6,322
211,267
197,504
Non-current liabilities:
Income taxes payable
-
1,333
Deferred income tax liabilities
10,500
13,340
Deferred revenue
8,094
8,170
Net employee defined benefit obligation
2,081
1,912
Lease obligations
5,744
6,080
26,419
30,835
237,686
228,339
Shareholders' equity
Share capital
118,217
107,701
Contributed surplus
9,764
10,404
Retained earnings
446,748
426,397
Accumulated other comprehensive income
21,078
10,829
595,807
555,331
$
833,493
$
783,670
Consolidated Statement of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
Three months
Twelve months
Periods ended October 31
2024
(unaudited)
2023
(Unaudited)
2024
2023
Revenue
Software licenses
$ 15,860
$ 17,467
$ 72,906
$ 80,054
SaaS and maintenance services
88,196
87,196
346,579
297,635
Professional services
18,469
16,483
70,046
67,273
Hardware
3,177
1,983
12,974
9,060
125,702
123,129
502,505
454,022
Direct costs
Software licenses
397
622
3,501
2,910
Services
43,043
39,108
165,221
141,802
Hardware
1,527
1,483
6,864
5,287
44,967
41,213
175,586
149,999
Revenue, net of direct costs
80,735
81,916
326,919
304,023
Operating expenses
Selling, general and administrative
22,642
23,702
94,303
90,889
Research and development
22,461
20,295
88,833
79,334
Depreciation
655
627
2,347
2,451
Depreciation of right-of-use assets
1,375
1,491
5,981
6,764
Special charges
169
117
1,609
2,477
47,302
46,232
193,073
181,915
Results from operating activities
33,433
35,684
133,846
122,108
Amortization of acquired software and customer relationships
(9,322)
(11,205)
(40,505)
(39,605)
Foreign exchange gains (losses)
1,870
2,753
(1,680)
1,266
Interest expense – lease obligations
(126)
(164)
(556)
(695)
Finance income
2,825
2,581
10,121
6,264
Finance expenses
(8)
(27)
(49)
(163)
Other (expense) income
(424)
17
89
(1,950)
Income before income taxes
28,248
29,639
101,266
87,225
Provision for income taxes
5,607
4,517
19,938
14,977
Net income for the period
$ 22,641
$ 25,122
$ 81,328
$ 72,248
Items that may be subsequently reclassified to income:
Cumulative translation adjustment
2,882
12,394
10,249
19,800
Other comprehensive income
2,882
12,394
10,249
19,800
Comprehensive income
$ 25,523
$ 37,516
$ 91,577
$ 92,048
Earnings per share
Basic
$ 0.41
$ 0.45
$ 1.47
$ 1.31
Diluted
$ 0.41
$ 0.45
$ 1.47
$ 1.31
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Three months
Twelve months
Periods ended October 31
2024
(Unaudited)
2023
(Unaudited)
2024
2023
OPERATING ACTIVITIES
Net income for the period
$ 22,641
$ 25,122
$ 81,328
$ 72,248
Adjustments for non-cash items
Depreciation
655
627
2,347
2,451
Depreciation of right-of-use assets
1,375
1,491
5,981
6,764
Interest expense – lease obligations
126
164
556
695
Amortization of acquired software and customer relationships
9,322
11,205
40,505
39,605
Stock-based compensation expense
112
368
1,188
1,639
Provision for income taxes
5,607
4,517
19,938
14,977
Finance expenses and other (income) expense
432
10
(40)
2,113
40,270
43,504
151,803
140,492
Changes in non-cash operating working capital
(7,674)
(11,624)
(7,920)
(11,244)
Income taxes paid
(1,013)
(3,562)
(11,812)
(13,950)
Net cash provided by operating activities
31,583
28,318
132,071
115,298
INVESTING ACTIVITIES
Purchase of property and equipment, net
(516)
(453)
(1,977)
(1,060)
Acquisitions, net of cash acquired*
-
(27,189)
(43,448)
(55,167)
Recovery (payment) of purchase consideration for prior-year acquisitions
-
13
171
(999)
Sale (purchase) of short-term investments
-
65
-
(4)
Net cash used in investing activities
( 516)
(27,564)
(45,254)
(57,230)
FINANCING ACTIVITIES
Issuance of share capital
2,990
-
9,085
604
Normal course issuer bid share repurchases
(3,088)
(425)
(5,994)
(425)
Repayment of lease obligations
(1,283)
(1,440)
(7,030)
(7,194)
Dividends paid
(14,397)
(12,159)
(53,139)
(44,765)
Net cash used in financing activities
(15,778)
(14,024)
(57,078)
(51,780)
Impact of foreign exchange on cash and cash equivalents
1,238
4,018
4,969
8,140
Increase (decrease) in cash and cash equivalents
16,527
(9,252)
34,708
14,428
Cash and cash equivalents - beginning of period
257,713
248,784
239,532
225,104
Cash and cash equivalents - end of period
$ 274,240
$ 239,532
$ 274,240
$ 239,532
* Acquisitions are net of cash acquired of nil and $742 for the quarter and year ended October 31, 2024, respectively and nil and $2,088 for the quarter and year ended October 31, 2023, respectively.
Enghouse Systems Limited Segment Reporting Information (in thousands of Canadian dollars)
For the period ended October 31, 2024
Three months
Twelve months
IMG
AMG
Total
IMG
AMG
Total
Revenue
$
74,731
$
50,971
$
125,702
$
308,920
$
193,585
$
502,505
Direct costs
(25,900)
(19,067)
(44,967)
(102,390)
(73,196)
(175,586)
Revenue, net of direct costs
48,831
31,904
80,735
206,530
120,389
326,919
Operating expenses excluding special charges
(21,235)
(13,071)
(34,306)
(90,871)
(47,238)
(138,109)
Depreciation
(416)
(239)
(655)
(1,574)
(773)
(2,347)
Depreciation of right-of-use assets
(940)
(435)
(1,375)
(3,870)
(2,111)
(5,981)
Segment profit
$
26,240
$
18,159
$
44,399
$
110,215
$
70,267
$
180,482
Special charges
(169)
(1,609)
Corporate and shared service expenses
(10,797)
(45,027)
Results from operating activities
$
33,433
$
133,846
For the period ended October 31, 2023
Three months
Twelve months
IMG
AMG
Total
IMG
AMG
Total
Revenue
$
78,578
$
44,551
$
123,129
$
265,311
$
188,711
$
454,022
Direct costs
(24,337)
(16,876)
(41,213)
(78,788)
(71,211)
(149,999)
Revenue, net of direct costs
54,241
27,675
81,916
186,523
117,500
304,023
Operating expenses excluding special charges
(21,807)
(10,450)
(32,257)
(84,493)
(45,169)
(129,662)
Depreciation
(485)
(142)
(627)
(1,969)
(482)
(2,451)
Depreciation of right-of-use assets
(904)
(587)
(1,491)
(4,184)
(2,580)
(6,764)
Segment profit
$
31,045
$
16,496
$
47,541
$
95,877
$
69,269
$
165,146
Special charges
(117)
(2,477)
Corporate and shared service expenses
(11,740)
(40,561)
Results from operating activities
$
35,684
$
122,108
About-Enghouse Enghouse Systems Limited 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, education, telecommunications, networks, IPTV, public safety and transit. The Company's two-pronged strategy to grow earnings focuses on both organic growth and acquisitions, which, to date, have been funded through cash flows from operating activities 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 Friday, December 13, 2024 at 8:45 a.m. EST. To participate, please call +1-289-514-5100 or North American Toll-Free +1-800-717-1738. Confirmation code: 59402 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, Adjusted EBITDA margin and Adjusted EBITDA per diluted share as measures of operating performance. Therefore, these collective Adjusted EBITDA measures 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.
