Q4 2021 Enghouse Systems Ltd Earnings Call
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Yeah.
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Speaker 2: ["Pomp and Circumstance"]
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Speaker 1: Good day and thank you for standing by. Welcome to the Eng House Q4 2021 Conference Call. At this time, all participants will be seated.
Good day, and thank you for standing by welcome to the edge, how SKU for 2021 conference call.
At this time, all participants are in listen only mode.
Speaker 1: After the speaker's presentation, there will be a question and answer session.
After the speaker's presentation, there will be a question and answer session.
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Speaker 1: I would now like to hand the conference over to your speaker today, Mr. Steven Sadler, Chairman and CEO . Please go ahead.
I would now like they had a conference over to your speaker today, Mr. Stephen Sadler Chairman and CEO. Please go ahead.
Good morning, everybody.
Speaker 3: I'm here today with Vince Masood, Doug Bryson, Todd May and Sam Anis.
I'm here today with Vince the third Doug Bryson, Todd made in San manager before we begin I'll have Todd read our forward disclaimer certain statements made may be forward looking by their nature such forward looking statements are subject to various risks and uncertainties, including those in <unk> continuous disclosure filings sessions.
Speaker 4: Before we begin, I will have Todd read our forward disclaimer. Certain statements made may be forward-looking by their nature. Such forward-looking statements are subject to various risks and uncertainties, including those in AMCHO's continuous disclosure filing, such as its AIF, which could cause the company's actual results and experience to differ materially from anticipated results earlier.
I asked which could cause the company's actual results and experiences to differ materially from anticipated results or expectations underway.
Speaker 4: Undue reliance should not be placed on forward-looking information and the company has no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
Undue reliance should not be placed on forward looking information and the company has no obligation to update or revise any forward looking information whether as a result of new information.
Future events or otherwise.
Speaker 3: Thanks, Todd. Doug will now give an overview of the financial results.
Thanks thought Doug will now give an overview of the financial results.
Thanks, Steve.
Speaker 5: Yesterday, NHS announced its fourth quarter unaudited and year-end financial results for the period ended October 31st, 2021. Financial and operational highlights for the three and twelve months periods ended October 31st, compared to the three and twelve month ended October 31st, 2021.
Yesterday, <unk> announced its fourth quarter unaudited and year end financial results for the period ended October 31, 2021 financial and operational highlights for the three and 12 months periods ended October 31, <unk> compared to the three and 12 months.
Ended October 31, 2020 are as follows.
Speaker 5: Revenue achieved was $113.1 million and $467.2 million, respectively, compared to revenue of $120.9 and $503.8 million last year.
Revenue achieved was $113 1 million and $467 2 million, respectively compared to revenue of 129, and $503 8 million last year.
Speaker 5: Results from operating activities was $39.1 million and $155.2 million respectively, compared to $42.7 and $162.0 million for last year.
Results from operating activities was $39 1 million and $155 2 million, respectively compared to $42 seven and 162.0 million for last year.
Speaker 5: Net income was $30.2 million and $92.8 million respectively compared to $29.4 and $98.6 million.
Net income was $30 2 million and $92 8 million, respectively, compared to $29, four and $98 6 million adjusted.
Speaker 5: Adjusted EBITDA was $42.1 and $168.5 million, respectively, compared to $46.6 and $176.8 million, while adjusted EBITDA margins increased from 35.1% to 36.1% for the year.
Adjusted EBITDA was $42, one and $168 5 million, respectively, compared to $46 six and $176 8 million, while adjusted EBITDA margins increased from 35, 1% to 36, 1% for the year.
Speaker 5: Cash flows from operating activities excluding changes in working capital was $42.4 and $167.8 million, respectively, compared to $48 and $175.5.
Cash flows from operating activities, excluding changes in working capital was $42, four and $167 8 million, respectively, compared to 48 and $175 5 million.
Speaker 5: Fiscal 2021 was another year of positive income and operating cash flows, improved adjusted EBITDA margins and record distributions to shareholders.
Fiscal 2021 was another year of positive income and operating cash flows improved adjusted EBITDA margins and record distributions to shareholders.
Speaker 5: Although record revenue was not achieved this year, we again demonstrated the benefit of maintaining our financial discipline during times of significant market fluctuations. For the year, Enschaus achieved adjusted EBITDA margins of 36.1% and cash flows from operations excluding changes in working capital of $167.8 million.
Although record revenue was not achieved this year, we again demonstrated the benefit of maintaining our financial discipline during times of significant market fluctuations for the year and shows achieved adjusted EBITDA margins of 36, 1% and cash flows from operations, excluding changes in working capital of $167 8 million.
Speaker 5: Revenue for the quarter was $113.1 million compared to revenue of $120.9 million in the same period in the prior year. The decrease reflects exceptional revenue in the comparative period as a result of COVID-19 related demand in addition to unfavorable foreign exchange.
Revenue for the quarter was $113 1 million compared to revenue of $120 9 million in the same period in the prior year. The decrease reflects exceptional revenue in the comparative period as a result of COVID-19 related demand in addition to unfavorable foreign exchange.
Speaker 5: Similar to the second and third quarters of 2021, the comparatively higher revenue last year was driven primarily by the previous year's significant increase in our video business that has returned to levels more consistent with free COVID volume.
Similar to the second and third quarters of 2021, but comparatively higher revenue last year was driven primarily by the previous year a significant increase in our video business that has returned to levels more consistent with pre COVID-19 volumes.
Speaker 5: Revenue for the quarter was negatively impacted by $4.4 million as a result of foreign exchange as the Canadian dollar strengthened against the U.S. dollar and euro.
Revenue for the quarter was negatively impacted by $4 4 million as a result of foreign exchange as the Canadian dollar strengthened against the U S dollar and euro.
Speaker 5: Enchos closed the year with $198.8 million in cash, cash equivalents and short-term investments compared to $251.8 million at October 31, 2020. The cash balance was achieved after making payments of $35.6 million for acquisitions and $115.7 million for dividends this year, inclusive of an $83.2 million special dividend.
And chose to close the year with $198 8 million in cash cash equivalents and short term investments compared to $251 8 million at October 31 2020.
The cash balance was achieved after making payments of $35 6 million for acquisitions and $115 7 million for dividends. This year inclusive of an $83 2 million.
All their dividend special dividends.
Speaker 5: Changes in the macroeconomic environment caused by COVID or other factors continue to impact our business. We closed three acquisitions during the year that met our return on investment criteria. However, acquisitions in the technology marketplace continue to be priced at prohibitively higher valuations that do not support our return on investment objectives. Going forward,
Changes in the macro economic environment caused by Covid or other factors continue to impact our business. We closed three acquisitions during the year that met our return on investment criteria. However, acquisitions in the technology marketplace continue to be priced at prohibitively higher valuations that do not support our return on investment objectives.
Going forward, we continue to seek.
Speaker 5: Earnings are creative acquisitions to grow our revenue and further expand both our product suite and geographic reach, while maintaining our commitment to profitable growth in accordance with our disciplined business model. We continue to operate our business consistent with our value for money philosophy that we believe provides shareholder value in the long term.
Earnings accretive acquisitions to grow our revenue and further expand both our product suite and geographic reach while maintaining our commitment to profitable growth in accordance with our disciplined business model.
We continue to operate our business consistent with our value for money philosophy that we believe provides shareholder value in the long term.
Speaker 5: Yesterday, the Board of Directors approved the company's eligible quarterly dividend of $0.16 per common share payable on February 28, 2022, to shareholders of record at The Close Fitness on February 14, 2022. I'll now
Yesterday, the board of directors approved the company's eligible quarterly dividend of <unk> 16 per common share payable on February 28, 2022 to shareholders of record at the close of business on February 14th 2022.
I'll now turn the call back to Mr. Sadler.
Speaker 3: Thanks, Doug. This will now give some operational highlights of the quarter.
Thanks, Doug bass will now give some operational highlights of the quarter.
Speaker 6: Thank you, Steve, and thank you to those who made the time to join our final call of fiscal 2021.
Thank you, Steve and thank you to those who need the time to join our final call of fiscal 2021.
Speaker 6: This quarter represents our 7th consecutive quarter of exceeding $40 million of adjusted EBITDA.
This quarter represents our seventh consecutive quarter of exceeding $40 million of adjusted EBITDA.
We achieved $42 1 million of adjusted EBITDA. This quarter 37, 2% of sales, which is one of our highest EBITDA percentage quarters.
Speaker 6: We achieved $42.1 million of adjusted EBITDA this quarter, 37.2% of sales, which is one of our highest EBITDA percentage quarters.
Speaker 6: We continue operating our business with significant financial discipline, generating positive cash flows from our operations that can be used for acquisitions and investments in the business without the need for debt financing or shareholder dilution.
We continue operating our business with significant financial discipline generating positive cash flows from our operations that can be used for acquisitions and investments in the business without the need for debt financing or shareholder dilution.
Speaker 6: Gross margins in the quarter were 72.5%, consistent with last year's Q4, and improved over Q3, which was 71.6%.
Gross margins in the quarter were 72.5% consistent with last year's Q4.
An improved over Q3, which was 71, 6%.
Speaker 6: We achieve these gross margins at a time when we are also investing and standing up our own cloud contact center solutions.
We achieved these gross gross margins at a time when we are also investing in standing up our own cloud contact Center solutions.
Speaker 6: tend to have lower gross margins until we ramp up the number of users.
Which tend to have lower gross margins until we ramp up the number of users.
Speaker 6: Revenue for our interactive group improved slightly this quarter compared to Q3 from 65.6 to 66.8.
Revenue for our interactive group improved slightly this quarter compared to Q3.
From 65.6 to 66.8.
There are a number of trends we are seeing in the contact center market communication and video business.
Speaker 6: There are a number of trends we are seeing in the contact center market, communication and video business.
Speaker 6: that are worth noting along with how we have and will continue to respond to these market shifts.
That are worth, noting along with how we have and will continue to respond to these market shifts.
Speaker 6: COVID has driven a more permanent shift to the cloud contact center technologies away from on-prem solutions.
Covid has driven a more permanent shift to the cloud contact center technologies away from on Prem solutions.
Speaker 6: There's growing interest for cloud contact centers, both private cloud and multi-tenant cloud, which depend on the objectives, the size, and the security requirements of the corporation.
There is growing interest for cloud contact centers, both private cloud and multi tenant cloud, which.
Which depend on the objectives the size and the security requirements of the corporations.
Speaker 6: In response, as we previously have mentioned, we stood up our own multi-tenant cloud contact center offering over a year ago and are offering software as a service to our customers through our direct sales team.
In response as we previously mentioned, we stood up our own multi tenant cloud contact center offering over a year ago, and our offering software as a service to our customers through our direct sales team.
Speaker 6: We expanded this offering by adding one additional node in Canada and plan to add another node in the Asia-Pac market in the next 60 days to address customers that have data residency needs and also for demands in these markets.
We expand into this offering by adding one additional note in Canada and plan to add another node in the Asia Pac market in the next 60 days to address customers that have data residency residency needs and also for demands in these markets.
Speaker 6: We also expanded our private cloud offering, investing engineering resources over the last year to ensure all of our on-prem contact center products are cloud ready, can be
We also expanded our private cloud offering investing engineering resources over the last year to ensure all of our on Prem contact center products.
Our cloud ready can be offered as a private cloud.
Speaker 6: Many companies want the option to select various cloud providers depending on their corporate direction, which include Microsoft, Azure, Google, AWS, IBM, and others. And Edge House is agnostic and can work with any cloud provider in the market.
Many companies want the option to select various cloud providers, depending on their corporate direction, which include Microsoft Azure, Google AWS IBM and others.
In Ngls is agnostic and can work with any cloud provider in the market.
Speaker 6: Another growing trend we're seeing in the communication space is a move towards cloud unified communication as a service, known as UCaaS, away from on-prem PBX communication platforms.
Another growing trend, we're seeing in the communication space is and move towards cloud unified communication as a service known as the Ucas away.
Away from on Prem PBX communication platforms.
Speaker 6: Our strategy is to integrate our contact center with multiple unified communication platforms, and this remains the same. We're agnostic to the platform.
Our strategy is to integrate our contact center with multiple unified communication platforms and this remains the same.
We're agnostic to the platform the customer wants.
Speaker 6: And due to the growth in UCAS and customers looking for a tight integration of UCAS and contact centers, we decided to develop our own UCAS offering, which we have been working on for over a year, and we just launched it in Q4.
And due to the growth in Ucas and customers looking for a tight integration of Ucas and contact centers, we decided to develop our own ucas offering.
Which we had been working on for over a year and we just launched it in Q4.
Speaker 6: And similar to our overall product strategy, we are offering In-House UCAS in a private cloud, multi-tenant cloud, and also allowing our partners to stand up their own UCAS platform, white label it as their own offering. We don't believe that there's other UCAS vendors.
And similar to our old raw product strategy. We are we are offering in Chelsea ucas in in a private cloud multi tenant cloud and also allowing our partners to stand up their own Ucas plant a form light label it as their own offering.
We don't believe that there's other ucas vendors with the same approach.
Speaker 6: The other growing trend is in the area of optimizing and augmenting the contact center agent by using artificial intelligence and natural language processing.
The other growing trend is in the area of optimizing and augmenting the contact center agent by using artificial intelligence and natural language processing.
Speaker 6: Ingenious has a growing suite of products in this area. We have products that are used to manage the quality of the agent, improve their time to productivity, augment and automate interactions, and even coach the agent in real time while they're interacting with the customer.
<unk> has a growing suite of products in this area. We have products that are used and manage the quality of the agent improve their time to productivity augment and automate interactions and even coach the agent in real time, while they're interacting with the customer.
Our business unit, our video business unit was down this quarter compared to last year, but has now stabilized and showed slight improvement over the last three quarters.
Speaker 6: Our video business unit was down this quarter compared to last year, but has now stabilized and shown slight improvement over the last three quarters.
Speaker 6: Video channels have become another customer interaction point for the contact center, and three of our large telecom partners have recently integrated video into their white-labeled EngHouse contact center solution and are now selling video as part of their offer.
Video channels have become another customer interaction point for the contact center and.
In three of our large telecom partners have recently integrated video.
Into their white label and Shell's contact center solution and are now selling video as part of their offering.
Speaker 6: On the healthcare side, we're seeing more interest from our customers to integrate video to their healthcare communication workflows and patient monitoring systems.
On the health care side, we're seeing more interest from our customers to integrate video to their health care.
Communication workflows and patient monitoring systems.
Speaker 6: And therefore, we continue to partner with healthcare tech companies as part of our go-to-market. And as an example, we signed one large new healthcare partner to our video product in Germany this
And therefore, we continue to partner with health care Tech companies as part of our go to market.
As an example, we signed one large new health care partner to our video product in Germany This quarter.
Speaker 6: Given the nature of our asset management division, revenue can fluctuate from quarter to quarter depending on the timing of large software and hardware orders and deliveries.
Given the nature of our asset management division revenue can fluctuate from quarter to quarter, depending on the timing of large software and hardware orders and deliveries.
In general we are not seeing a significant of the move to the cloud in the telecom and transportation sectors.
Speaker 6: In general, we are not seeing a significant of a move to the cloud in the telecom and transportation sectors as we as we are seeing in context.
As we as we are seeing in contact center. However.
Speaker 6: However, we invested and continue to invest in preparing our technologies for the cloud in anticipation of this shift occurring in the future.
However, we invested and continue to invest in preparing our technologies for the cloud in anticipation of this shift occurring in the future.
Speaker 6: The first two areas we've initially invested in cloud enabling our offering is in our business support systems area and IPTV. IPTV demand continues. We now have 10 customer orders for IPTV. Five just went live and five customers are expected to be live in the next 90 to 120 days.
The first two areas. We initially invested in cloud, enabling our offering is in our business support systems area and I P. T D.
I P. TV demand continues we now have 10 customer orders for I P. T D.
<unk> just went live and five customers are expected to be live in the next 90 to 120 days.
In the transit side, we did see some recent increase in ridership over the last 90 days, which are now at volumes that are approximately 30% lower than pre COVID-19 levels, but it's up from being 50% lower last quarter.
Speaker 6: In the transit side, we did see some recent increase in ridership over the last 90 days, which are now at volumes that are approximately 30% lower than pre-COVID levels, but it's up from being 50% lower last year.
There's also a recent increase in the request for proposals for transit expansions and more opportunities for automated fair collection product.
Speaker 6: There is also a recent increase in the request for proposals for transit expansions and more opportunities for automated fare collection products.
Speaker 6: The EuroPay MasterCard Visa offering known as EMV and a certification we received last quarter is starting to get rolled out across our existing customers in Europe and we started responding to RFPs in the American market.
The euro pay Mastercard visa offering known as ENB and.
Certification, we received last quarter is starting to get rolled out across our existing customers in Europe.
And we started responding to rfps in the American market.
Speaker 6: Just to provide a brief update on our large public safety projects, we've recorded a relatively small percentage of the total revenue of these multi-year projects so far, recognizing just under 12% of the project value, so we still are relatively early stages of these projects.
Just to provide a brief update on our large public safety projects. We've recorded a relatively small percentage of the total revenue of these multi year projects so far.
Recognizing just under 12% of the project value to <unk>.
We still are relatively early.
Stages of these projects on.
On a final note.
Speaker 6: Although we are always focused on improving profitability, continually looking for ways to operate more efficiently and save costs in areas like facilities and travel.
Although we are always focused on improving profitability continually looking for ways to operate more efficiently and save costs in areas like facilities and travel.
Speaker 6: We plan to continually invest in engineering and product development, driving exceptional values through our products to our customers.
We plan to continually invest in engineering and product development driving exceptional values through our products to our customers.
Let me turn the call over to Mr. Steve Sadler.
Speaker 3: Thanks, Vince. As Doug noted, our operations remain financially sound with good cash flow and a strong balance sheet. Acquisitions completed in the year include Altitude, which was December 2020, Naboo, June 3, 2021, and Momindum, July 7, 2021, and they are operating close to our normal and expected EBITDA margins in Q4.
Thanks Ted.
As Doug noted our operations remain financially sound with good cash flow and a strong balance sheet Act.
Acquisitions completed in the year and crude altitude, which was December 'twenty 'twenty Nabucco June 3rd 2021, and we'll mine them July 7th 2021, and they are operating close to a normal and expected EBITDA margins in Q4.
We continue to focus on capital deployment doing our due diligence remotely the acquisition pipeline is improving and company values seem to be declining into our financial arrange with lower impact from the public markets.
Speaker 3: We continue to focus on capital deployment, doing our due diligence remotely. The acquisition pipeline is improving, and company values seem to be declining into our financial range with lower impact from the public market.
Speaker 3: We believe as interest rates increase, as taxes rise, as cost inflation increases, and as stimulus declines in our business sectors, acquisition activity will improve.
We believe as interest rates increase as taxes rise as cost inflation increases and as the emulous declines in our business sectors acquisition activity will improve.
Speaker 3: We continue to maintain our financial discipline when reviewing acquisition opportunities.
We continue to maintain our financial discipline when reviewing acquisition opportunities.
Speaker 3: In the quarter, there was a report about our M&A potential activity. As a matter of company policy, we do not comment on our M&A activity or market rumors.
In the quarter there was a report about our M&A potential activity as a matter of company policy, we do not comment on our M&A activity or market rumors we remain committed to executing our historic strategic business model, which we believe will add substantial value for shareholders.
I would now like to open the call for comments or questions.
Thank you.
Speaker 1: As a reminder, to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press the pound key. Please stand by while we...
As a reminder to ask a question. Please press star one on your telephone keypad can enjoy a question press the pound key.
Please standby, while we compile the Q&A roster.
Speaker 1: Our first question comes from Paul Schreiber from RBC Capital Markets.
Our first question comes from Paul Treiber from RBC capital markets. Your line is open.
Speaker 7: On your last comment, I know you can't comment on market rumors or media articles out there in regards to M&A, but could you speak at a high level? What do you see as a longer-term either potential exit strategy for shareholders, or how do you think about long-term succession planning for the company here?
Alright, thanks, very much and good morning, just on your last comment.
I know you can't comment on market rumors or media articles out there and just in regards to M&A, but can you speak at a high level, what you see as a longer term either potential exit strategy for shareholders of how you think about your long term succession planning for the company here.
So long term.
<unk>.
Speaker 3: planning is basically doing what we're doing. We've got a good team. There's people in the team that can, as if people move or leave or retire, they can move up.
Planning is basically doing what we're doing we've got a good team.
There's people in the team that can as if people move or leave or retire they can move up.
Speaker 3: I think we're just going to continue with our plan. It's worked pretty well for 10 years. I'm pretty sure it can work pretty well for another 10 years.
I think we're just going to.
Continue with our plan, it's worked pretty well for 10 years I'm pretty sure. It can work pretty well for another 10 years.
And can you elaborate a bit more on on the team you know I think you added one or two M&A people. How do you think about the division of duties and the process around M&A and due diligence.
Speaker 7: Can you elaborate a bit more on the team? I think you added one or two M&A people. How do you think about the division of duties in the process around M&A and due diligence?
Yes, if you can just elaborate a bit more there please.
Speaker 3: So we've talked about this before, but we have a couple of people who look for opportunities. And that's different than it was two years ago where we didn't really have any of those people employed. We've hired a couple of analysts and put them under a long-term analyst who did a lot of the initial acquisitions with me.
So we've talked about this before but we have a couple of people.
Who look for opportunities.
That's different than it was two years ago, where we didn't really have any of those people.
We've hired a couple of analysts that put it them under a long term analysts who did a lot of the initial acquisitions with me stacked sands still project vantages the whole thing.
And as we get opportunities and get agreement to know why we evolved the operational staff to be involved in the due diligence. So when the deal closes they generally take on the responsibility for running under the plan that we had for the acquisition.
Speaker 3: So when the deal closes, they generally take on the responsibility for running under the plan that we had for the acquisition.
Speaker 3: Pretty simple model, done it for over 10 years, works, not too hard.
Pretty simple model done it for over 10 years works not too hard.
And just in regards to the M&A environment.
Speaker 7: In regards to the M&A environment, you made a comment in the press release about valuations being expensive, but then also at the end of prepared remarks you mentioned that valuations have come down. Is the comment in the press release more encapsulated in the year and your more recent comment is more relevant? How should we think about valuations where they stand right now?
The you made a comment in the press release about.
Violations being expensive, but then also at the in the prepared remarks, you mentioned that that valuations have come down how should we think about like the common in our press release more encapsulated in the year and in your more recent common is more more relevant like how should we think about.
Valuations, where they stand right now.
Speaker 3: Valuations, and this is just our view, in the year have been expensive for many reasons. Stimulus, one, you've got a lot of money floating around chasing things, but that seems to be changed lately. Stimulus has dropped. People are talking about
Valuations and this is just our view in the year have been expensive for many reasons stimulus.
One you've got a lot of money floating around chasing things.
But that seems to be a changed lately.
<unk> dropped people are talking about.
Speaker 3: interest rate increases. They're also looking at, you know, how do we pay this money back, which means taxes, you hear it all the time in the U.S., are going up, but every country's talking that way. You do have to pay for the money that was spent. So we believe that you put all those factors together, it makes the acquisition environment better, and we see that going into 2022 as a reasonable possibility of what will happen.
Interest rate increases.
They're also looking at how do we pay this money back which being taxes you hear it all the time in the U S are going up but every country's talking that way you do have to pay for the money that was spent so we believe that you put all those factors together it makes the acquisition environment, better and we see that going into two.
2022.
As a reasonable possibility of what will happen.
Okay. Thank you I'll pass the line.
Speaker 1: Our next question comes from Paul Steep from Scotia Capital.
Our next question comes from Paul steep from Scotia Capital. Your line is open.
Thanks, Steve Covid, maybe we talk a little bit about just capital and use of capital and maybe revisit from a year ago, you talked about keto willingness to use debt and we ended up because you Ted.
Speaker 8: Steve, can maybe we talk a little bit about just capital and use of capital and maybe revisit from a year ago, you talked about, you know, willingness to use debt and we ended up because you had
Speaker 8: larger outsized profits, let's say, and built cash, you return that to shareholders. If we look, you're sort of close and almost, you're about $20 million off on a net debt basis from where you would have been, I guess, 16 days before the payment would have been made for the special dividend.
Larger outsized profits lets say you know built kashi return that to shareholders, but if we look youre sort of closer to almost by $20 million off on a net debt basis from where you would have been I guess 16 days before the payment would have been made for the special dividend.
Speaker 8: Maybe just walk us through how you're thinking beyond M&A, how you might think about share repurchases or the regular dividend to special, anything like that in the context of where you're headed.
Maybe just walk us through how you're thinking beyond M&A you know how you might think about share repurchases or you know the regular dividend a special.
Anything like that and in the context of where you're headed today.
Speaker 3: OK, the special dividend, and I think we've said this before, we had an unusual event, as did the world, with the pandemic.
Okay. The special dividend and I think we've said this before we had an unusual event as did the world with the pandemic.
Speaker 3: In that process, we had a lot of orders come in and made a lot of money, profit and cash. So we decided that this was probably not an ongoing event forever, at least we would hope that's the case. And so we actually give a special dividend to give that money back to shareholders.
Isn't that process, we had a lot of orders come in and made a lot of money profit and cash. So we decided that this was probably not an ongoing event forever at least we would hope that's the case and so we actually do you have a special dividend to give that money back to shareholders. That's not normal we have never done it before.
Speaker 3: That's not normal. We have never done it before. And, you know, hopefully there's not another pandemic that we have to do it again. So that's where the special dividend comes in. Share buybacks, I mean, we look at it very easily. We say, is it better to buy our own shares or buy other companies that then can add to our business? And we find buying other companies to add to our business.
Sure and you know hopefully theres not another pandemic they've got to do it again, so that's where the special dividend comes in share buybacks. I mean, we look at it very easily we say is it better to buy our own shares or by other companies that then can add to our business and we find the buying other companies that.
To our business is a better route to go so share buybacks, we tend to not do but if the market crashes down we have a special.
Speaker 3: is a better route to go. So share buybacks, we tend to not do, but if the market crashes down, we have a special acquisition bid that's normal on the Toronto Stock Exchange, and we'd buy back our shares, but they have to be very attractive. And that day may come, but it isn't here yet, so, and I can't predict it.
Acquisition bid.
As normal on the Toronto stock exchange, and we buyback our shares but they have to be very attractive.
And that they may come but it isn't here, yet so I can't predict it.
Speaker 8: I guess the other part of that that I didn't maybe make clear, about a year ago, prior to that, you talked about willingness to maybe use what was inexpensive debt, I think is the best way to phrase it, and use that to do more acquisitions. Have we sort of gone back to the historic plan of holding more cash and avoiding debt? You never ultimately tapped the debt, but just that was part of it in there as well that I grabbed in.
And I guess, the other part of that that I didn't make it clear, but a year ago prior to that you talked about.
Willingness to maybe use what was it.
Inexpensive debt I think is the best way to phrase it and use that to do more acquisitions have we sort of gone back to the historic plan of holding more cash.
And avoiding that you'd never it ultimately tap the debt, but just that was part of it in there as well, but I'd wrapped in.
Speaker 3: The debt is a possibility if the acquisition is large enough that we need to get the debt as well as keep cash for working capital. So that's still possible, but we have a lot of cash and we don't have any significant acquisition that would cause us to go get debt.
The debt is a possibility if the acquisition is large enough that we need to get the data as well as keep cash for working capital. So that's still possible.
While we have a lot of cash and we don't have any significant acquisition that would cause us to go get that.
Speaker 3: A lot of the banks are anxious to give money, they're calling all the time, do we need money? And the answer is, we don't.
A lot of the banks are anxious to give money, they're calling all the time do we need money and the answer is we don't we think the environment could be that those who have money might have great opportunities and those who don't might find it more difficult in the future to borrow with higher interest rates and if maybe.
Speaker 3: We think the environment could be that those who have money might have great opportunities and those who don't might find it more difficult in the future to borrow with higher interest rates.
Speaker 3: and it may be a bit of a change in some of the other parameters we talked about. So it's still a possibility that we could borrow money, every opportunity to do so, but we're not going to borrow money just for the sake of giving banks
A bit of a change in some of the other parameters we've talked about so it's still a possibility that we could borrow money every opportunity to do so, but we're not going to borrow money just for the sake of giving banks. Some more income we're going to only borrow money when we have a good need for it and it always takes some time, but we can get.
Speaker 3: some more income. We're going to only borrow money when we have a good need for it. And it always takes some time, but we can get money in 30 to 60 days pretty easily based on our historic profitability, our cash flows, and just how we run the company.
Buddy in 30 to 60 days pretty easily based on our historic profitability, our cash flows and just how we run the company.
Speaker 3: So it's still there, Paul, but we've had no need for it yet. Maybe next year.
Oh, it's still there Paul but we've had no need for it yet.
Maybe next year, maybe not.
Speaker 8: Makes sense. And just maybe on video for a minute and then the cloud business, can you just remind us, whoever wants to take it, on the rough size of what remains around that hardware business? You called it out in the MD&A that there was sort of some runoff as you've seen people transition, obviously, from using video rooms, given the changes in our lives at this point. How much more of a runoff would there be in that as you sort of transition over the next year? I'll let Vince answer that.
Makes sense and just maybe on video for a minute and then the cloud business can you just remind us whoever wants to take it on the rough size of what remains around that hardware business you've called it out in the MD&A that there was sort of some runoff as U T seen people transition obviously from using video rooms given the.
<unk> in our lives at this point.
How much more of a run off would there be in that as you sort of transition over the next year.
I'll, let Vince answer that the seas.
Speaker 6: Last quarter of Q4 of 2020 was the last peak of the video, and as I mentioned, over the last three quarters, our video business unit has stabilized and started to increase. We don't see any pickup on hardware rooms. Our hardware revenue was down about $1 million from last year.
Right on top of it so yeah, I mean last quarter of Q4 of 2020 was sort of the last peak of the video and as I mentioned over the last three quarters of their video business unit has stabilized and started to increase we don't see any pickup on hardware rooms.
So our revenue our hardware revenue was down about $1 million from last year.
Speaker 6: If you notice, I think last year we were about a million, just over a million more, but I don't see any demand for hardware rooms.
If you noticed I think last year, we were about 1 million just over 1 million more but I don't see any any demand for hardware rooms at this moment.
Speaker 3: The only thing I'll add to it is right now we're in a video room. We took our boardroom and we've set it up to be a video room. One day we might use it.
The only thing I'll add to it.
Right now we're in a video groups, we took our boardroom, but we've set it up to be a video room, one day, we might use it.
Speaker 8: Got it. Just what's the rough size of the cloud business today in Contact Center? Just as we start to think about the transition you outlined in the trends, I know we're not yet at a point of you breaking that out into a separate line, but maybe you could give us a sense of where we are in terms of the journey. Are you talking the...
Got it.
What's the rough size of the cloud business today in contact center, just as we start to think about the transition you outlined in the trends I know, we're not we're not yet at a point of view breaking that out into a separate line, but maybe you could give us a sense of where we are in terms of the journey.
Are you talking the industry or us.
Speaker 8: you. I'm meaning specifically to you guys just because we had a large part of on-prem.
Hugh.
I'm meeting specifically to you guys just because we had a large part of on Prem.
We have a pretty good software and have for a long time in the cloud, but as you know we did it through the telcos. So they hosted it they either shared revenue or they bought the software from us and paid maintenance on it we found that wasn't aggressive enough in this environment. So as Vince said, we're starting to setup where old nodes we've already.
Speaker 3: We have a pretty good software and have for a long time in the cloud, but as you know, we did it through the telcos. So they hosted it. They either shared revenue or they bought the software from us and paid maintenance on it.
Speaker 3: We found that wasn't aggressive enough in this environment. So as Vince said, we're starting to set up our own nodes. We've already changed the sales force over the last two years to be a little bit more direct because there's not enough margin to go indirect. And if you looked at us, let's say five years ago, the channel, they would sell our software. Would they make their money on selling the PBXs and doing all the services?
He changed the sales force over the last two years.
To be a little bit more direct because theres not enough margin.
To go indirect and if you looked at US, let's say five years ago. The channel they would sell our software what they make their money on selling the PBX and doing all the services that revenue due.
Speaker 3: That revenue has declined a lot, so using the channel, we had to go to direct a
Declined a lot so using the channel we had to go to direct a lot more.
Speaker 3: I think it was a good idea. The pandemic came in, it makes it tougher to set that up. If you have it set up, you're okay. But now the direct salespeople are almost inside salespeople because they can't travel to go actually do the selling. And therefore the SaaS or in the cloud, actually companies have done better because of the pandemic because you can't go and install the system on their machines and all that kind of activity that might go.
I think it was a good idea of the pandemic came in it makes it tougher to set that up if you have it set up you are okay, but now the direct salespeople almost inside salespeople because they can't travel to go actually do the selling and therefore, the SaaS or in the cloud actually companies have done better because of the patent.
<unk> because you can't go and install the system on their machines and all that kind of <unk>.
Activity that might take place.
Speaker 3: The market is mostly still on prem.
The market is mostly still on Prem.
Speaker 3: but it's growing quickly in the cloud. So if I said it was 10% last year, it might be 20% getting the cloud now and the pandemic has brought that forward a little bit, which certainly has hurt us because just like it brought some of our video forward, it brought some of the cloud forward because you can't get on-prem to do the on-prem installs you need for that in many cases.
But it's growing quickly in the cloud. So if I said it was 10% last year it might be 20% getting the cloud now and the pandemic has brought that forward a little bit.
Which certainly has hurt us because just like it brought some of our video forward across some of the cloud forward because you can't get on Prem to do the on Prem installed you need for that in many cases so.
Speaker 3: So, you know, we watch the environment and we try and react to it, and I think that's what Vince went through, he's telling you how we're reacting to it.
We certainly watch the environment, and we try and react to it.
And I think that's what bids went through US is telling you how we are reacting to it.
Speaker 8: Fair enough, one last one for me and it'll ppass the line just.
Fair enough one last one for me and I'll pass the line just.
Speaker 8: Is there an opportunity, Steve or Vince, to do some of the same sales changes you've done in the interactive segment to asset management? Recognizing, obviously, that they're distinct businesses and markets, but it sounds like we're sort of through the process.
Is there an opportunity Steve or Vince to do some of the same sales changes you've done in the interactive segment asset management, recognizing obviously that they're distinct businesses and markets, but you know it sounds like we're sort of through the process and.
Speaker 8: solidly an implementation on interactive, what's the possibility on the other side of the house?
Solidly in implementation on interactive whats the possibility on the other side of the house.
Speaker 6: On the asset side, the good news there is we are already quite direct because the nature of the deals are usually bigger. We've always been more direct on the asset management side and we are more channeled on the interactive side. There is an opportunity in asset management to do some channels, but they're usually large companies like
Yes on the asset side. The good news. There is we are we're already direct quite direct.
Because of the nature of the deals are quite they are usually big bigger deals.
So we've always been more direct on the asset management side.
We were more channel on the interactive side.
There is an opportunity in asset management to do some channels, but they're easily large companies like.
Speaker 6: Ericsson, Nokia, Airbus, etc. We do have some channel business, but it's mostly direct.
Ericsson Nokia Airbus et cetera, So we do have some channel business, but it's mostly direct.
Speaker 3: And you also got to remember why we did channel on the interactive side is because the channels for PBXs and did services, there's no opportunity for that in going on the asset management side. So the channels, unless they're big because they're selling their own equipment with it, they're less interested as Vince pointed out.
And you also got to remember why we dig channel on the interactive side is because the channels a PBX as in did services.
That's not there's no opportunity for that are going on the asset management side. So the channels are our unless they're big because they are selling their own equipment with it right. There theyre less interested as Vince pointed out.
Speaker 8: Great. Happy holidays, guys. Talk in the New Year. Thanks.
Great Happy holidays, guys talk in the new year.
Yeah.
Again to ask a question. Please press star one on your telephone Keybanc.
Our next question comes from Stephanie price from CIBC.
Okay.
Good morning.
Okay morning, Stephanie.
Speaker 9: Good morning. I just wanted to follow up on Paul's question around the cloud contact center business. I mean, how many of these have you set up to date and how many more are you looking at adding and maybe how we should think about those in terms of...
Stephanie.
<unk>.
To follow up on Paul's question around the cloud contact Center business. I mean, these have you set up to date and how many more are you looking at adding and maybe how we should think about that.
These are investments.
Speaker 6: We've added three nodes to date. We've got one in the US, one in Europe and just recently did one in Canada in the last 90 days and we're adding another one in Asia Pac.
Yes, we've added.
Three months to date, so we've got one in the U S. One in Europe, and just recently did one in Canada in the last 90 days.
And we're adding another one in Asia Pac.
Speaker 6: We don't necessarily need to put them in every single country. We can leverage a node, for example, the one we have in Germany for other markets outside of Germany. We'll set up a node when we have a large customer that says we'd like to have the data resident and stay in country. That drives us to set up another node.
We don't necessarily need to put them in every single country.
What we are we can leverage and node for example, the one we have in Germany for other markets outside of Germany will set up a node when we have a large customer that says we'd like to have the data resident and stay in in country. That's data that drives us set up another node.
Stephanie another point so we are.
Speaker 3: Stephanie, another point so we aren't confusing anything is these nodes are with other suppliers. We're not capital expenditures in the financials.
Confusing anything is these nodes are with other suppliers were not capital expenditures in the financials.
Speaker 3: don't change is operating costs we have there's very like we're not setting up our own data.
Don't changes operating costs, we have theres very little like we're not setting up our own data centers.
That's helpful. Thanks.
Speaker 9: And then, maybe moving over to the networking division, can you talk a little bit about telco spending at this point and what you're seeing?
And then maybe moving over to the networking Division can you talk a little bit about telco spending Clinton and what Youre seeing there.
I can I can start so I mean, no real change there.
Speaker 6: I can start. No real change there. Like I said in my presentation, that business has some bigger deals, so it does vary from quarter to quarter, depending on when we get an order and when we ship it. You get a little bit of quarterly variability, but no real change there. The cloud hasn't impacted that business. It's still mostly on-prem.
Like I said in my presentation is that that business has some bigger deals. So it does vary from quarter to quarter, depending on when we get an order and when we ship. It so you get a little bit of quarterly variability, but no real.
Change there the cloud hasn't impacted that business, it's still mostly on prim we.
Speaker 6: The two areas we see some move to the cloud is for business support systems that help telco companies run their business and in the IPTV area which we started investing in about a year and a half ago or so. So those two areas are moving to the cloud a bit but everything else is pretty much the same on-prem.
The two areas, we see some move to the cloud is for business support systems that help.
Telco companies run their business and in the IP TV area, which we started investing in about a year and a half ago or so so those two areas are moving to the cloud a bit but everything else is pretty much the same on print.
Great. Thank you.
Speaker 10: All right, good morning. Vince, you talked about video now being able to be sold through some of your telco partners. Can you talk about how that's structured, whether that's being sold as an add-on package to the contact center software, or whether it's being sold as a standalone, and what's the upsell opportunity there? Thanks.
Hi, Good morning, Vince you talked about video now being able to be sold through some of your telco partners can you talk about how that structured whether that's being sold as.
Add on package to the contact center software, whether it's being sold as a stand alone and what's the upsell opportunity there. Thanks.
Speaker 6: Yes, it's being sold as an add-on to a contact center if they want a video channel for their customers and we get paid by usage. So as they get more usage of the video, as they use video, we get paid.
Yes, yes, it's being sold as an add on to our contact center. If they wanted channel for their customers and we get paid by usage. So as they get more usage of the video as they use video we get paid.
Speaker 6: So what we had to do first is integrate it closely with their white-labeled solution, and they're out marketing it as an add-on.
So what we had to do first is integrate integrated closely with their white label solution and they're marketing it as an add on.
Great. Thank you.
There is no further question at this time you may continue.
Speaker 3: Well, thank you, everyone, and shows continues to have a very strong financial position to execute our capital allocation and business strategy. We continue to build.
Well, thank you everyone.
<unk> continues to have a very strong financial position to execute our capital allocation and business strategy. We continue to build on our journey. Thank.
Speaker 3: Thank you for attending the call and your continued support and have a happy holiday season.
Thank you for attending the call and your continued support and have a happy holiday season.
This concludes today's conference call. Thank you all for joining you may now disconnect.
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