Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

March 08, 2010 17:00 ET

Enghouse Releases First Quarter Results and Announces 33.3% Increase in Its Dividend

MARKHAM, ONTARIO--(Marketwire - March 8, 2010) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited first quarter financial results for the period ended January 31, 2010.

First quarter revenue was $19.5 million, compared to $18.2 million reported in the same period last year, Operating income for the quarter was $3.7 million compared to $2.6 million in the prior year's first quarter, an increase of 45%. Net income for the first quarter was $1.9 million or $0.08 per share on a diluted basis compared to the prior year's first quarter net income of $0.8 million or $0.03 per share. The increase in revenue was primarily a result of increased license sales in the quarter and contributions from acquisitions.

Operating expenses increased to $9.5 million from $8.6 million in the prior year's first quarter and include incremental operating costs related to the Trio and Pulse acquisitions, not included in the prior quarter's results. Non-cash amortization charges were $1.8 million compared to $2.0 million in the prior year's first quarter and include amortization charges for acquired software and other intangibles from the acquired operations including Trio and Pulse.

The Company generated cash flows from operations of $2.1 million in the first quarter compared to $2.0 million in the prior year's first quarter. Enghouse closed the quarter with $89.8 million in cash and short-term investments, after payment of $4.2 million related to the acquisition of Pulse and $1.3 million for the final holdback on the Envox acquisition, compared to $93.2 million at October 31, 2009. The Company continues to have no long-term debt and did not repurchase any shares in the quarter.

During the quarter the Company integrated the acquisition of Pulse Voice Inc., completed on November 1, 2009 into its Asset Management and Syntellect (IVR) divisions. The Board of Directors today authorized a 33.3% increase to the eligible quarterly dividend from $0.03 per common share to $0.04 per common share, payable on May 31, 2010 to shareholders of record at the close of business on May 17, 2010. The Company remains committed to its strategy of seeking further acquisitions to continue to diversify its revenue stream and expand its market presence.

About Enghouse

Enghouse Systems Limited is a leading global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a larger and more diverse software company through strategic acquisitions and managed growth. Enghouse shares are listed on the Toronto Stock Exchange under the symbol "ESL". Further information about Enghouse may be obtained from the Company's web site at www.enghouse.com.

Operating income is not a measure recognized by generally accepted accounting principles ("GAAP") and does not have standardized meaning in accordance with such principles. Therefore, operating income may not be comparable to similar measures presented by other issuers. Operating income is calculated as net income before amortization of acquired software and other intangibles, net interest income, other income, foreign exchange gains and losses and the provision for income taxes. This is denoted as "Income before the undernoted" on the Consolidated Statements of Operations and Retained Earnings of the Company. Management uses operating income to evaluate performance as it excludes amortization of software and intangibles and foreign exchange gains and losses.

Enghouse Systems Limited
Consolidated Balance Sheets
(in thousands of Canadian dollars)
(Unaudited)

  January 31, 2010     October 31, 2009  
Assets  
Current              
Cash $ 34,293     $ 39,276  
Short-term investments   55,526       53,876  
Accounts receivable, net   19,771       17,017  
Future income taxes   374       973  
Prepaid expenses and other assets   2,791       2,434  
               
    112,755       113,576  
               
Property and equipment, net   1,925       1,576  
Acquired software and other intangibles, net   22,158       22,934  
Goodwill   22,408       19,965  
Future income taxes   3,687       3,183  
               
  $ 162,933     $ 161,234  
               
Liabilities  
Current              
Accounts payable and accrued liabilities   14,221     $ 17,107  
Income taxes payable   1,031       1,473  
Dividend payable   754       746  
Deferred revenue   20,189       15,765  
    36,195       35,091  
               
Future income taxes   8,823       8,693  
Long-term income taxes payable   717       1,043  
Deferred revenue   189       197  
               
    45,924       45,024  
Shareholders' Equity  
               
Share capital   50,517       49,780  
Contributed surplus   2,097       2,047  
Retained earnings   74,291       73,142  
Accumulated other comprehensive loss   (9,896 )     (8,759 )
    117,009       116,210  
               
               
  $ 162,933     $ 161,234  

Enghouse Systems Limited
Consolidated Statements of Operations and Retained Earnings
For the three months ended January 31

(in thousands of Canadian dollars except per share amounts)
(Unaudited)
 

  2010     2009    
Revenue                
Software licenses $ 5,989     $ 5,106    
Services   12,778       12,044    
Hardware   769       1,078    
                 
    19,536       18,228    
Cost of sales                
Software licenses   936       1,024    
Services   4,887       5,059    
Hardware   466       951    
    6,289       7,034    
                 
Gross margin   13,247       11,194    
                 
Operating expenses                
Selling, general and administrative   6,249       5,314    
Research and development   2,969       2,964    
Amortization of property and equipment   300       338    
    9,518       8,616    
                 
Income before the undernoted   3,729       2,578    
                 
Amortization of acquired software and other intangibles   (1,801 )     (1,952 )  
Foreign exchange gain   82       130    
Other income   564       -    
Interest income, net   151       443    
                 
Income before income taxes $ 2,725     $ 1,199    
                 
Provision for income taxes                
    Current   797       513    
    Future   25       (108 )  
                 
Net income for the period $ 1,903     $ 794    
                 
Retained earnings, beginning of period   73,142       72,015    
                 
Dividends   (754 )     (621 )  
Purchase and cancellation of common shares   -       (1,560 )  
Retained earnings, end of period $ 74,291     $ 70,628    
                 
Earnings per share                
  Basic $ 0.08     $ 0.03    
  Diluted $ 0.08     $ 0.03    
  Weighted average shares outstanding during period (millions)                
      - basic   24.9       25.2    
      - diluted   25.1       25.4    

Enghouse Systems Limited
Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss
For the three months ended January 31
(in thousands of Canadian dollars)
(Unaudited)

  2010     2009  
           
Net income for the period $     1,903     $        794  
               
Other comprehensive income:              
Unrealized loss on translating financial statements of self-sustaining foreign operations   (1,364 )     (307 )
Transfer to net income of realized gains on available for sale investments, net of tax of ($170)   (394 )     -  
Unrealized gain (loss) on available for sale investments, net of tax of $290 (Q1/09 – ($76))   670       (147 )
Unrealized foreign currency translation (loss) gain on available for sale investments, net of tax of ($21) (Q1/09 - $16)   (49 )     32  
               
Other comprehensive loss $   (1,137 )   $      (422 )
               
Comprehensive income $        766     $        372  
               
Accumulated other comprehensive loss, beginning of period $   (8,759 )   $   (3,219 )
               
Other comprehensive loss   (1,137 )     (422 )
               
Accumulated other comprehensive loss, end of period $   (9,896 )   $   (3,641 )
               

Enghouse Systems Limited
Consolidated Statements of Cash Flows
For the three months ended January 31
(in thousands of Canadian dollars)
(Unaudited)

  2010     2009    
Cash flows from operating activities                
Net income for the period $   1,903     $      794    
                 
Add (deduct) items not involving cash                
  Amortization of property and equipment   300       338    
  Amortization of acquired software and other intangibles   1,801       1,952    
  Gain on sale of short-term investments   (564 )     -    
  Stock-based compensation expense   50       18    
  Future income taxes   25       (108 )  
Cash flows before changes in operating assets and liabilities   3,515       2,994    
                 
Changes in operating assets and liabilities                
                 
  (Increase) decrease in accounts receivable, net   (927 )     825    
  (Increase) decrease in prepaid expenses and other assets   (306 )     84    
  Decrease in accounts payable and accrued liabilities   (3,712 )     (2,884 )  
  Decrease in current income taxes payable   (732 )     (605 )  
  Increase in deferred revenue   4,165       2,479    
  Unrealized foreign exchange loss (gain)   87       (911 )  
Cash flows from operating activities   2,090       1,982    
                 
Cash flows from investing activities                
Purchase of property and equipment, net   (224 )     (126 )  
Acquisitions, net of cash acquired   (5,529 )     (358 )  
(Purchase) proceeds of short-term investments   (1,014 )     7,455    
    (6,767 )     6,971    
                 
Cash flows from financing activities                
Issuance of share capital   737       53    
Payment of cash dividend   (746 )     (636 )  
Purchase and cancellation of common shares   -       (2,687 )  
    (9 )     (3,270 )  
                 
Effect of foreign exchange rate changes on cash   (297 )     113    
                 
Net (decrease) increase in cash during the period   (4,983 )     5,796    
Cash – beginning of period   39,276       12,331    
Cash – end of period $   34,293     $ 18,127    
                 
Supplementary cash flow information:                
                 
    Cash paid during the period for income taxes $   1,580     $      514    

Note: Cash excludes short-term investments

Enghouse Systems Limited
Selected Segment Reporting Information
(in thousands of Canadian dollars)
(Unaudited)

  For the three months ended January 31  
  2010   2009  
             
Revenue:            
  Asset Management Division $     2,862   $     2,477  
  Syntellect Division   16,674     15,751  
Total $   19,536   $   18,228  
             
             
Segment Profit (EBIT):            
  Asset Management Division $          26   $ (168 )
  Syntellect Division   2,441     1,343  
               
  Corporate expenses   (539 )   (549 )
  Foreign exchange   82     130  
  Interest and other income   715     443  
Total $    2,725   $    1,199  

Contact Information