TD remains neutral on Enghouse Systems

TD Cowen analyst David Kwan says Enghouse Systems’ (Enghouse Systems Stock Quote, Chart, News, Analysts, Financials TSXV:ENGH) outlook remains pressured by macro weakness, competition and AI-related uncertainty ahead of its Q3 results.

As reported by The Globe and Mail, in a preview of the Sept. 10 results, Kwan maintained his “Hold” rating and $16.00 target on Enghouse. The average target is $17.00

“Our neutral view is primarily due to the continued elevated organic revenue declines in both its IMG and AMG businesses,” Kwan said.

The analyst said Enghouse continues to face pressure from macroeconomic and geopolitical headwinds affecting its small and medium-sized business customers, as well as competition and AI-related challenges in contact centre and customer experience software.

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Kwan expects Q3 revenue of $114.1-million, down 9% year-over-year, following an 8% decline in Q2.

His forecast assumes another double-digit organic revenue decline, with pressure likely to continue through the second half of fiscal 2026 and more moderate declines expected in fiscal 2027.

Kwan expects Adjusted EBITDA of $28.0-million, 5% below consensus. His forecast implies a 24.6% margin, down from 25.7% a year earlier, as cost reductions only partly offset weaker revenue.

He said Enghouse’s strong balance sheet could support additional share buybacks and M&A, but a slowdown in acquisitions has added to the company’s growth challenges.

Kwan said deal flow has been limited by high private-market valuations and fewer attractive public targets, while some larger potential acquisitions face greater AI disruption risk.

The analyst noted Enghouse has increased share buybacks with its stock and valuation at multi-year lows, and that activity could continue in the near to medium term.

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