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- Revenue: Increased 2.1% to $125.7 million in Q4 and 10.7% for the fiscal year to $502.5 million.
- Recurring Revenue: Grew 1.1% to $88.2 million in Q4, representing 70.2% of total revenue; increased 16.4% for the fiscal year to $346.6 million.
- Net Income: $22.6 million in Q4, down from $25.1 million; $81.3 million for the fiscal year, up from $72.2 million.
- Adjusted EBITDA: Decreased to $35.6 million in Q4 with a 28.3% margin; $143.8 million for the fiscal year, up 7.5%.
- Cash Flow from Operating Activities: $40.3 million in Q4; $151.8 million for the fiscal year.
- Cash and Cash Equivalents: Increased to $274.2 million as of October 31, 2024.
- Dividends: Returned $53.1 million to shareholders, an increase of 18.7% from the prior period.
- Acquisitions: Deployed $43.4 million on acquisitions, including media site and sea change.
- Quarterly Dividend: $0.26 per common share payable on February 28, 2025.
Release Date: December 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 10.7% for the fiscal year, reaching $502.5 million, marking a third consecutive year of growth.
- Recurring revenue, including SaaS and maintenance services, grew by 16.4% for the fiscal year, highlighting strong demand for SaaS solutions.
- Net income rose by 12.6% to $81.3 million, demonstrating a focus on profitability.
- Cash and cash equivalents reached a record level of $274.2 million, with no external debt, positioning the company well for future growth.
- The company returned $53.1 million to shareholders through dividends, an increase of 18.7% from the prior period.
Negative Points
- Results from operating activities decreased in the fourth quarter compared to the previous year.
- Adjusted EBITDA decreased to $35.6 million in the fourth quarter, with a margin of 28.3%, down from the previous year.
- Demand for on-premise, perpetual software licenses has declined as more customers opt for SaaS solutions.
- The transition to SaaS has not resulted in expected growth, with some segments experiencing flat or declining revenues.
- Margins have been impacted by a large project in the Nordics that has been losing money, affecting overall profitability.
Q & A Highlights Q: Can you explain why SaaS revenue appears flat despite the transition from on-premise licenses to cloud solutions?
A: Stephen Sadler, CEO, explained that SaaS revenue is recognized over time, unlike product revenue which is recognized all at once. The decline in SaaS revenue is partly due to the acquisition of Lifesize, which had declining revenue due to product issues. Despite this, the revenue is higher than expected, and the SaaS segment is improving overall.
Q: How does the rapid adoption of AI in contact centers affect Enghouse’s strategy?
A: Stephen Sadler, CEO, stated that while competitors promote high adoption rates of AI, the actual financial results do not always reflect this. Enghouse focuses on practical AI applications, such as monitoring call sentiment, rather than relying on large language models. The company does not see the uptake of AI as significant as some competitors claim.
Q: With margins down year-over-year, do you expect to return to 30% margins soon?
A: Stephen Sadler, CEO, noted that a large project in the Nordics, which was losing money, is transitioning to maintenance, which should improve margins. The company expects profitability to improve in the near future.
Q: Are you conducting an external search for a new President, or is the role no longer necessary?
A: Stephen Sadler, CEO, mentioned that while they are always open to hiring good candidates, there is no active search for a President at this time. The organization is stabilizing, and they are considering internal promotions and potential management from future acquisitions.
Q: Can you provide insights into customer churn and renewal rates, especially with the transition to SaaS?
A: Stephen Sadler, CEO, indicated that maintenance renewal rates are around 90%, with many customers still preferring on-prem solutions. The company offers both on-prem and cloud options, maintaining flexibility to meet customer preferences.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
