Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

December 17, 2009 17:00 ET

Enghouse Releases Fourth Quarter Results and Announces Dividend

MARKHAM, ONTARIO--(Marketwire - Dec. 17, 2009) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited fourth quarter and year end financial results for the period ended October 31, 2009.

Fourth quarter revenue was $20.0 million compared to $14.6 million reported in the fourth quarter of last year, an increase of 37%. Operating income was $5.2 million compared to $3.2 million in the prior year's fourth quarter, an increase of 64%. Net income for the fourth quarter was $2.6 million or $0.10 per diluted share compared to $2.3 million or $0.09 per diluted share in the fourth quarter of fiscal 2008.

For the fiscal year, revenue was $78.4 million compared to $53.0 million in the prior year, an increase of 48%, while operating income was $15.6 million compared to $9.6 million in the prior year, an increase of 63%. Net income for the fiscal year was $6.7 million or $0.27 per diluted share compared to $6.0 million or $0.23 per diluted share in the prior year. The increase in revenue in the quarter and fiscal year is attributable to stronger license and maintenance revenue and contributions from acquired operations, Envox and Trio and the impact of foreign exchange. Also as a result of acquisitions, operating expenses increased to $36.8 million for the year compared to $23.7 million in the prior year.

The Company recorded non-cash amortization charges of $1.8 million in the quarter compared to $1.7 million in the prior year's fourth quarter. For the fiscal year, the Company reported amortization charges of $7.3 million compared to $6.2 million.

For the fiscal year, the Company generated operating cash flows of $15.8 million compared to $9.2 million in the prior fiscal year and closed the year with $93.2 million in cash and short-term investments. The Company remained active during the year in its normal course issuer buyback, repurchasing 949,562 common shares at a total cost of $4.6 million or $4.80 per share. Total cash spent on acquisitions, share buybacks and dividends to shareholders since October 31, 2008 was $14.7 million. Enghouse continues to have no long-term debt.

Stephen Sadler, Chairman and Chief Executive Officer said "We are pleased with our progress this year in a difficult environment. Enghouse remains strong financially and continues to investigate accretive acquisitions to increase shareholder value."

At its meeting held today, the Board of Directors authorized the payment of an eligible quarterly dividend of $0.03 per common share payable on February 26, 2010 to shareholders of record as at the close of business on February 12, 2010.

The Company was put on the list of reporting issuers in default by the Ontario Securities Commission on December 14, 2009. This was a result of technical deficiencies in its business acquisition report relating to its acquisition of Envox. Enghouse has been advised by the Ontario Securities Commission that Enghouse will be removed from the list of reporting issuers in default after the filing today of its audited financials for the year ended October 31, 2009 which consolidate the Envox results.

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)

October 31, October 31,
2009 2008
----------------------------------------------------------------------------
Assets
Current
Cash $ 39,276 $ 12,331
Short-term investments 53,876 82,099
Accounts receivable, net 17,017 17,515
Future income taxes 973 1,895
Prepaid expenses and other assets 2,434 2,947
----------- -----------

113,576 116,787
----------- -----------

Property and equipment, net 1,576 2,471
Acquired software and other intangibles, net 22,934 27,373
Goodwill 19,965 21,953
Future income taxes 3,183 3,228
----------- -----------

$ 161,234 $ 171,812
----------- -----------
----------- -----------

Liabilities
Current
Accounts payable and accrued liabilities $ 17,107 $ 16,490
Income taxes payable 1,473 4,958
Dividend payable 746 636
Deferred revenue 15,765 18,585
----------- -----------
35,091 40,669

Future income taxes 8,693 7,945
Long-term income taxes payable 1,043 1,321
Deferred revenue 197 686
----------- -----------

45,024 50,621
Shareholders' Equity
Share capital 49,780 50,568
Contributed surplus 2,047 1,827
Retained earnings 73,142 72,015
Accumulated other comprehensive loss (8,759) (3,219)
----------- -----------
116,210 121,191

$ 161,234 $ 171,812
----------- -----------
----------- -----------



Enghouse Systems Limited
Consolidated Statements of Operations and Retained Earnings
(in thousands of Canadian dollars except per share amounts)
(Unaudited)

Three months ended Twelve months ended
October 31 October 31
----------------------------------------------------------------------------
2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue
Software licenses $ 5,683 $ 3,166 $ 23,133 $ 10,985
Services 13,737 11,329 51,547 40,688
Hardware 583 153 3,738 1,336
-----------------------------------------

20,003 14,648 78,418 53,009
-----------------------------------------
Cost of sales
Software licenses 744 475 3,773 2,488
Services 4,512 4,469 19,263 16,112
Hardware 519 166 3,037 1,130
-----------------------------------------
5,775 5,110 26,073 19,730

Gross margin 14,228 9,538 52,345 33,279

Operating expenses
Selling, general and
administrative 5,903 4,191 23,552 14,921
Research and development 2,834 1,928 11,951 7,857
Amortization of property and
equipment 296 250 1,275 941
-----------------------------------------
9,033 6,369 36,778 23,719
-----------------------------------------

Income before the undernoted 5,195 3,169 15,567 9,560

Amortization of acquired
software and other
intangibles (1,826) (1,696) (7,331) (6,208)
Interest income, net 134 615 1,309 3,256
Other income 212 - 236 768
Foreign exchange gain 12 1,531 194 1,936
-----------------------------------------

Income before income taxes 3,727 3,619 9,975 9,312

Provision for income taxes
Current (317) (247) 1,102 2,161
Future 1,473 1,533 2,139 1,149
-----------------------------------------

Net income for the period $ 2,571 $ 2,333 $ 6,734 $ 6,002
-----------------------------------------
-----------------------------------------

Retained earnings, beginning
of period $ 71,375 $ 70,329 $ 72,015 $ 69,931

Dividends (746) (636) (2,861) (2,537)
Purchase and cancellation of
common shares (58) (11) (2,746) (1,381)
-----------------------------------------
Retained earnings, end of
period $ 73,142 $ 72,015 $ 73,142 $ 72,015
-----------------------------------------
-----------------------------------------

Earnings per share
Basic $ 0.10 $ 0.09 $ 0.27 $ 0.24
Diluted $ 0.10 $ 0.09 $ 0.27 $ 0.23
Weighted average shares
outstanding during period
(millions)
- basic 24.9 25.5 24.9 25.3
- diluted 25.2 25.8 25.1 25.7



Enghouse Systems Limited
Consolidated Statements of Comprehensive Income and Accumulated Other
Comprehensive Loss
(in thousands of Canadian dollars)
(Unaudited)

Three months ended Twelve months ended
October 31 October 31
----------------------------------------------------------------------------
2009 2008 2009 2008
----------------------------------------------------------------------------

Net income for the period $ 2,571 $ 2,333 $ 6,734 $ 6,002

Other comprehensive (loss)
income:
Unrealized (loss) gain on
translating financial
statements of self-sustaining
foreign operations (1,836) 6,292 (5,675) 9,871
Transfer to net income of
realized gains on available
for sale investments, net of
tax of ($72) (year to date -
($160)) (140) - (312) (209)
Unrealized gain (loss) on
available for sale investments,
net of tax of $629 (year to
date - $370) 1,225 (627) 720 (383)
Unrealized foreign currency
translation (loss) gain on
available for sale investments,
net of tax of ($516) (year to
date - ($140)) (1,004) 340 (273) 365
-----------------------------------------

Other comprehensive (loss)
income $ (1,755) $ 6,005 $ (5,540) $ 9,644
-----------------------------------------
-----------------------------------------

Comprehensive income $ 816 $ 8,338 $ 1,194 $ 15,646
-----------------------------------------
-----------------------------------------

Accumulated other comprehensive
loss, beginning of period $ (7,004) $ (9,224) $ (3,219) $(12,863)

Other comprehensive (loss)
income (1,755) 6,005 (5,540) 9,644
-----------------------------------------

Accumulated other comprehensive
loss, end of period $ (8,759) $ (3,219) $ (8,759) $ (3,219)
-----------------------------------------
-----------------------------------------



Enghouse Systems Limited
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)

For the three For the twelve
months ended months ended
October 31 October 31
----------------------------------------------------------------------------
2009 2008 2009 2008
----------------------------------------------------------------------------
Cash flows from operating
activities
Net income for the period $ 2,571 $ 2,333 $ 6,734 $ 6,002

Add (deduct) items not involving
cash
Amortization of property and
equipment 296 250 1,275 941
Amortization of acquired
software and other intangibles 1,826 1,696 7,331 6,208
Stock-based compensation expense 71 51 240 268
Gain on sale of short-term
investments (212) - (236) (327)
Gain on sale of patents - - - (441)
Future income taxes 1,473 1,533 2,139 1,149
-----------------------------------------
Cash flows before changes in
operating assets and liabilities 6,025 5,863 17,483 13,800

Changes in operating assets and
liabilities

(Increase) decrease in
accounts receivable, net (967) 65 2,159 1,205
Decrease (increase) in prepaid
expenses and other assets 464 214 733 (224)
(Decrease) increase in accounts
payable and accrued liabilities (142) 1,032 1,480 786
Decrease in current income
taxes payable (1,221) (679) (3,598) (2,659)
Decrease in deferred revenue (2,235) (1,505) (2,295) (1,234)
Unrealized foreign exchange
loss (gain) 28 (2,091) (116) (2,456)
-----------------------------------------
Cash flows from operating
activities 1,952 2,899 15,846 9,218
-----------------------------------------

Cash flows from investing
activities
Purchase of property and
equipment, net (20) (85) (374) (881)
Acquisitions, net of cash
acquired - (15,504) (6,935) (20,246)
Proceeds from sale of patents - - - 441
Proceeds from sale of
short-term investments 5,931 16,502 27,099 12,583
-----------------------------------------
5,911 913 19,790 (8,103)
-----------------------------------------

Cash flows from financing
activities
Issuance of share capital 51 - 1,006 2,285
Payment of cash dividend (746) (638) (2,751) (2,531)
Purchase and cancellation
of common shares (83) (21) (4,560) (1,980)
-----------------------------------------
(778) (659) (6,305) (2,226)
-----------------------------------------

Effect of foreign exchange
rate changes on cash (44) 1,278 (2,386) 2,121
-----------------------------------------

Net increase in cash during
the period 7,041 4,431 26,945 1,010
Cash - beginning of period 32,235 7,900 12,331 11,321
-----------------------------------------
Cash - end of period $ 39,276 $ 12,331 $ 39,276 $ 12,331
-----------------------------------------
-----------------------------------------

Supplementary cash flow
information:

Cash paid during the period
for income taxes $ - $ 143 $ 1,665 $ 3,628

Note: Cash excludes short-term investments



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

Three Months ended Twelve Months ended
----------------------------------------------------------------------------
October 31, October 31, October 31, October 31,
2009 2008 2009 2008
-----------------------------------------------
Revenue:
Asset Management Division $ 2,306 $ 2,769 $ 9,527 $ 9,816
Syntellect Division 17,697 11,879 68,891 43,193
-----------------------------------------------
Total $ 20,003 $ 14,648 $ 78,418 $ 53,009
-----------------------------------------------
-----------------------------------------------

Segment Profit (EBIT):
Asset Management Division $ 209 $ 502 $ (231) $ 89
Syntellect Division 3,798 1,536 10,929 5,440

Corporate (638) (565) (2,462) (2,177)
Foreign Exchange 12 1,531 194 1,936
Interest and other income 346 615 1,545 4,024
-----------------------------------------------
-----------------------------------------------
Total $ 3,727 $ 3,619 $ 9,975 $ 9,312
-----------------------------------------------
-----------------------------------------------


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