Enghouse Systems Ltd reports 50.4% Net Income growth and 5.8 pp EBITDA Margin growth from 21.9% to 27.7%
15.12.2016 • About Enghouse Systems Ltd (
$ESL) • By InTwits
Enghouse Systems Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Enghouse Systems Ltd is a fast growth stock: FY2016 revenue growth was 10.3%, 5 year revenue CAGR was 20.2% at FY2016 ROIC 19.9%
- Enghouse Systems Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.0%. At the same time it's in pair with industry average of 7.1%.
- CAPEX is quite volatile: 3.4 in FY2016, 2.9 in FY2015, 1.3 in FY2014, 1.4 in FY2013, 2.3 in FY2012
- The company has highly profitable business model: ROIC is at 19.9%
- It operates with high leverage: Net Debt/EBITDA is -0.9x while industry average is -4.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Enghouse Systems Ltd ($ESL) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 136.4 | 179.9 | 220.0 | 279.3 | 308.0 | 10.3% |
| Gross Profit | 99.7 | 128.8 | 154.7 | 190.6 | 211.1 | 10.8% |
| SG&A | 43.1 | 53.4 | 61.0 | 77.6 | 79.7 | 2.7% |
| EBITDA | 34.6 | 42.4 | 54.4 | 61.2 | 85.4 | 39.6% |
| Net Income | 20.9 | 24.3 | 29.7 | 31.4 | 47.3 | 50.4% |
Balance Sheet
|
|---|
| Cash | 59.5 | 70.1 | 72.8 | 94.1 | 78.4 | -16.7% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 4.0 | |
Cash flow
|
|---|
| Capex | 2.3 | 1.4 | 1.3 | 2.9 | 3.4 | 16.2% |
Ratios
|
|---|
| Revenue growth | 11.3% | 31.9% | 22.3% | 27.0% | 10.3% | |
| EBITDA growth | 13.7% | 22.7% | 28.1% | 12.5% | 39.6% | |
| Gross Margin | 73.1% | 71.6% | 70.3% | 68.2% | 68.5% | 0.3% |
| EBITDA Margin | 25.4% | 23.6% | 24.7% | 21.9% | 27.7% | 5.8% |
| Net Income Margin | 15.3% | 13.5% | 13.5% | 11.3% | 15.4% | 4.1% |
| SG&A, % of revenue | 31.6% | 29.7% | 27.7% | 27.8% | 25.9% | -1.9% |
| CAPEX, % of revenue | 1.7% | 0.8% | 0.6% | 1.0% | 1.1% | 0.1% |
| ROIC | 14.5% | 14.3% | 16.8% | 15.0% | 19.9% | 4.9% |
| ROE | 14.0% | 14.3% | 15.2% | 13.9% | 18.5% | 4.6% |
| Net Debt/EBITDA | -1.7x | -1.7x | -1.3x | -1.5x | -0.9x | 0.7x |
Enghouse Systems Ltd ($ESL) key quoterly financial indicators
| mln. CAD | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 74 | 79 | 76 | 79 | 18.0% | 14.3% | 7.1% | 3.1% |
| EBITDA | 19 | 19 | 21 | 26 | 152.5% | 16.8% | 26.9% | 27.3% |
| Net Income | 8 | 9 | 10 | 20 | 233.2% | 12.6% | 28.3% | 50.5% |
Balance Sheet
|
|---|
| Cash | 74 | 80 | 86 | 78 | -14.5% | 2.1% | 5.0% | -16.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | |
| Long Term Debt | 0 | 0 | 0 | 4 | | | | |
Ratios
|
|---|
| Gross Margin | 68.1% | 68.4% | 68.3% | 69.4% | -0.5% | 0.7% | 1.4% | -0.3% |
| EBITDA Margin | 25.1% | 24.1% | 28.0% | 33.5% | 13.4% | 0.5% | 4.4% | 6.4% |
| Net Income Margin | 11.4% | 10.8% | 13.6% | 25.3% | 7.3% | -0.2% | 2.2% | 8.0% |
Revenue and profitability
The company's Revenue surged on 10.3%. Revenue growth showed slow down in FY16Q4 - it was 3.1% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 5.8 pp from 16.0% to 21.8% in 2016.
Gross Margin showed almost no change in FY2016. SG&A as a % of Revenue decreased slightly on 1.9 pp from 27.8% to 25.9% in FY2016.
Net Income marign increased on 4.1 pp from 11.3% to 15.4% in FY2016.
Capital expenditures (CAPEX) and working capital investments
Enghouse Systems Ltd's CAPEX/Revenue was 1.1% in FY2016. The company's CAPEX/Revenue showed almost no change from FY2013 to FY2016. Average CAPEX/Revenue for the last three years was 0.91%.
Return on investment
The company operates at good ROIC (19.87%) and ROE (18.47%). ROIC increased on 4.9 pp from 15.0% to 19.9% in FY2016. ROE increased on 4.6 pp from 13.9% to 18.5% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.9x and Debt / EBITDA is 0.0x. Net Debt / EBITDA surged on 0.7x from -1.5x to -0.9x in FY2016. Debt jumped while cash dropped on 16.7%.
Management team
Enghouse Systems Ltd's CEO is Stephen J Sadler. Stephen J Sadler is a founder and has 18 years tenure at the company.
Appendix 1: Peers in Technology
Below we provide Enghouse Systems Ltd benchmarking against other companies in Technology industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Intrinsyc Technologies Corp ($ITC) | | -21.7% | 70.8% | 24.5% | 39.2% |
| ProntoForms Corp ($PFM) | | 75.4% | 43.9% | 46.4% | 28.2% |
| Kinaxis Inc ($KXS) | | 30.3% | 15.2% | 30.3% | 27.0% |
| NexJ Systems Inc ($NXJ) | | 4.3% | -12.6% | 19.7% | 17.3% |
| Constellation Software Inc/Canada ($CSU) | | 35.9% | 37.9% | 10.1% | 15.6% |
| |
|---|
| Median (12 companies) | | 0.3% | 13.3% | 11.5% | 12.7% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Constellation Software Inc/Canada ($CSU) | 86.2% | 85.5% | 86.1% | 86.2% | 87.1% |
| ProntoForms Corp ($PFM) | 96.1% | 98.1% | 98.0% | 79.4% | |
| Espial Group Inc ($ESP) | 77.5% | 81.7% | 78.5% | 74.3% | 74.7% |
| Halogen Software Inc ($HGN) | 72.0% | 74.8% | 71.8% | 73.8% | 76.2% |
| Kinaxis Inc ($KXS) | 71.8% | 70.4% | 70.4% | 71.8% | 69.1% |
| |
|---|
| Median (12 companies) | 71.8% | 55.6% | 61.9% | 61.9% | 71.9% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Wi-LAN Inc ($WIN) | 40.9% | 12.2% | 56.2% | 53.2% | 57.8% |
| Kinaxis Inc ($KXS) | 18.7% | 23.0% | 19.2% | 28.0% | 17.6% |
| Constellation Software Inc/Canada ($CSU) | 20.9% | 20.1% | 21.8% | 25.2% | 26.0% |
| Intrinsyc Technologies Corp ($ITC) | -10.5% | -38.8% | 2.2% | 10.8% | |
| Mitel Networks Corp ($MNW) | 10.2% | 10.0% | 7.0% | 7.7% | |
| |
|---|
| Median (14 companies) | 0.9% | 3.9% | 4.4% | 0.1% | 7.1% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kinaxis Inc ($KXS) | 2.9% | 2.3% | 5.0% | 4.7% | 5.0% |
| Halogen Software Inc ($HGN) | 4.9% | 9.0% | 8.4% | 2.9% | 2.6% |
| Espial Group Inc ($ESP) | 1.6% | 0.2% | 1.9% | 2.1% | 1.5% |
| ProntoForms Corp ($PFM) | 1.1% | 0.8% | 3.6% | 1.9% | |
| Critical Control Energy Services Corp ($CCZ) | | 0.5% | 1.0% | 1.6% | |
| |
|---|
| Median (14 companies) | 1.1% | 1.1% | 1.2% | 1.2% | 1.0% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Constellation Software Inc/Canada ($CSU) | 45.9% | 22.4% | 24.7% | 38.5% | 40.5% |
| Kinaxis Inc ($KXS) | | 61.8% | 63.6% | 44.0% | 22.6% |
| Halogen Software Inc ($HGN) | | -28.4% | -45.9% | -40.5% | 12.6% |
| Wi-LAN Inc ($WIN) | 2.6% | -7.6% | 8.9% | 7.4% | 8.4% |
| NexJ Systems Inc ($NXJ) | | -44.6% | -19.8% | -13.9% | 4.5% |
| |
|---|
| Median (14 companies) | -7.5% | -17.5% | 0.5% | -1.2% | 8.4% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mitel Networks Corp ($MNW) | 3.7x | 3.8x | 2.6x | 6.2x | |
| Pivot Technology Solutions Inc ($PTG) | | -0.4x | 1.1x | 4.8x | |
| Constellation Software Inc/Canada ($CSU) | 0.0x | 1.6x | 0.6x | 0.4x | -0.0x |
| Wi-LAN Inc ($WIN) | -4.9x | -12.1x | -2.3x | -1.7x | -2.0x |
| Kinaxis Inc ($KXS) | 1.9x | 4.7x | -4.2x | -3.9x | -6.3x |
| |
|---|
| Median (7 companies) | 0.9x | 1.5x | -0.8x | -1.7x | -6.3x |
|---|
