Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

December 14, 2011 17:10 ET

Enghouse Posts Record Results

MARKHAM, ONTARIO--(Marketwire - Dec. 14, 2011) - Enghouse Systems Limited (TSX:ESL) today announced its fourth quarter (unaudited) and year end financial results for the period ended October 31, 2011, posting record revenue and net income on the year.

Revenue topped the $100 million mark for the first time in the Company's history at $122.6 million for the fiscal year. This is compared to $94.2 million in the prior year, an increase of 30%, as the Company continues to successfully implement its growth strategy. Net income for the fiscal year was $16.8 million or $0.66 per diluted share compared to $10.2 million or $0.40 per diluted share in the prior year, an increase of approximately 65%, representing a record year for the Company. Operating expenses increased to $57.0 million for the year compared to $45.6 million in the prior year as a result of incremental costs related to acquired operations. As has become the norm, revenue and operating costs were also impacted by the continued volatility of foreign exchange as outlined in the Company's Management's Discussion and Analysis as filed on SEDAR.

For the fourth quarter, revenue was $31.8 million, compared to $27.4 million reported in the same period last year. Net income for the fourth quarter was $5.9 million or $0.23 per diluted share compared to $3.4 million or $0.13 per diluted share in the fourth quarter of last year.

The Company recorded non-cash amortization charges of $2.7 million in the quarter compared to $2.5 million in the prior year's fourth quarter. For the fiscal year, the Company reported amortization charges of $10.3 million compared to $8.5 million in the prior fiscal year.

The Company generated cash flows from operating activities of $8.3 million in the quarter, compared to $2.4 million in the prior year's fourth quarter, an increase of 249%, and $41.1 million in the fiscal year compared to $18.6 million in the prior fiscal year, an increase of 120%. Enghouse closed the year with $99.6 million in cash and short-term investments after having spent $16.8 million in the fiscal year on acquisitions and $4.5 million on dividends.

Enghouse continues to have no long-term debt.

The Board of Directors today authorized an eligible quarterly dividend of $0.05 per common share, payable on February 29, 2012 to shareholders of record at the close of business on February 15, 2012. 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.

Enghouse Systems Limited
Consolidated Balance Sheets
(in thousands of Canadian dollars)
(Unaudited)
October 31, 2011 October 31, 2010
Assets
Current
Cash $ 65,624 $ 46,640
Short-term investments 33,967 31,627
Accounts receivable, net 23,006 24,500
Income tax receivable - 591
Future income taxes 1,769 447
Prepaid expenses and other assets 3,479 3,360
127,845 107,165
Property and equipment, net 1,791 1,844
Acquired software and other intangibles, net 28,531 34,330
Goodwill 38,287 35,137
Future income taxes 9,295 2,951
$ 205,749 $ 181,427
Liabilities
Current
Accounts payable and accrued liabilities $ 25,128 $ 20,115
Income taxes payable 3,579 -
Dividend payable 1,267 1,007
Deferred revenue 28,933 26,040
58,907 47,162
Future income taxes 10,283 12,571
Long-term income taxes payable 420 522
Deferred revenue 1,404 790
71,014 61,045
Shareholders' Equity
Share capital 52,134 50,705
Contributed surplus 2,613 2,429
Retained earnings 91,613 79,606
Accumulated other comprehensive loss (11,625 ) (12,358 )
134,735 120,382
$ 205,749 $ 181,427


Enghouse Systems Limited
Consolidated Statements of Operations and Retained Earnings
(in thousands of Canadian dollars except per share amounts)
(Unaudited)
Three months ended October 31 Twelve months ended October 31
2011 2010 2011 2010
Revenue
Software licenses $ 11,690 $ 8,794 $ 45,691 $ 30,198
Services 19,927 17,903 74,260 61,304
Hardware 219 681 2,608 2,706
31,836 27,378 122,559 94,208
Cost of sales
Software licenses 769 920 5,208 4,363
Services 6,871 6,492 26,634 22,429
Hardware 237 459 1,966 1,845
7,877 7,871 33,808 28,637
Gross margin 23,959 19,507 88,751 65,571
Operating expenses
Selling, general and administrative 11,062 9,442 40,244 31,807
Research and development 4,213 3,487 15,672 12,477
Amortization of property and equipment 287 356 1,110 1,331
15,562 13,285 57,026 45,615
Income before the undernoted 8,397 6,222 31,725 19,956
Amortization of acquired software and other intangibles (2,687 ) (2,475 ) (10,291 ) (8,458 )
Interest income, net 274 92 667 387
Other income, net 631 203 800 1,145
Foreign exchange gain (loss) 853 90 (511 ) 238
Income before income taxes 7,468 4,132 22,390 13,268
Provision for (recovery of) income taxes
Current (57 ) (1,504 ) 4,063 635
Future 1,605 2,210 1,491 2,395
Net income for the period $ 5,920 $ 3,426 $ 16,836 $ 10,238
Retained earnings, beginning of period $ 86,960 $ 77,186 $ 79,606 $ 73,142
Dividends (1,267 ) (1,006 ) (4,796 ) (3,774 )
Purchase and cancellation of common shares - - (33 ) -
Retained earnings, end of period $ 91,613 $ 79,606 $ 91,613 $ 79,606
Earnings per share
Basic $ 0.23 $ 0.14 $ 0.67 $ 0.41
Diluted $ 0.23 $ 0.13 $ 0.66 $ 0.40
Weighted average shares outstanding during period (millions)
- basic 25.3 25.2 25.2 25.1
- diluted 25.6 25.4 25.5 25.3


Enghouse Systems Limited
Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss
(in thousands of Canadian dollars)
(Unaudited)
Three months ended October 31 Twelve months ended October 31
2011 2010 2011 2010
Net income for the period $ 5,920 $ 3,426 $ 16,836 $ 10,238
Other comprehensive income (loss):
Unrealized gain (loss) on translating financial statements of self-sustaining foreign operations
2,800

(1,171
)
(763
)
(4,044
)
Transfer to net income of realized gains on available for sale investments, net of tax of ($99) (year to date - ($126))
(532
)
(646
)
(674
)
(1,303
)
Unrealized gain on available for sale investments, net of tax of $257 (year to date - $395)
1,377

465

2,112

1,881
Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $24 (year to date - $11)
127

(22
)
58

(133
)
Other comprehensive income (loss) $ 3,772 $ (1,374 ) $ 733 $ (3,599 )
Comprehensive income $ 9,692 $ 2,052 $ 17,569 $ 6,639
Accumulated other comprehensive loss, beginning of period $ (15,397 ) $ (10,984 ) $ (12,358 ) $ (8,759 )
Other comprehensive income (loss) 3,772 (1,374 ) 733 (3,599 )
Accumulated other comprehensive loss, end of period $ (11,625 ) $ (12,358 ) $ (11,625 ) $ (12,358 )


Enghouse Systems Limited
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
For the three months ended October 31 For the twelve months ended October 31
2011 2010 2011 2010
Cash flows from operating activities
Net income for the period $ 5,920 $ 3,426 $ 16,836 $ 10,238
Add (deduct) items not involving cash
Amortization of property and equipment 287 356 1,110 1,331
Amortization of acquired software and other intangibles 2,687 2,475 10,291 8,458
Stock-based compensation expense 123 111 492 382
Gain on sale of short-term investments (631 ) (605 ) (800 ) (1,547 )
Future income taxes 1,605 2,210 1,491 2,395
Cash flows before changes in operating assets and liabilities 9,991 7,973 29,420 21,257
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable, net 1,449 (1,443 ) 6,466 151
Decrease in prepaid expenses and other assets 171 640 193 194
Increase (decrease) in accounts payable and accrued liabilities 974 (1,023 ) 1,430 (5,587 )
(Decrease) increase in current income taxes payable (44 ) (2,379 ) 2,223 (3,240 )
(Decrease) increase in deferred revenue (2,409 ) (2,350 ) 1,267 6,329
Unrealized foreign exchange (gain) loss (1,853 ) 954 53 (474 )
Cash flows from operating activities 8,279 2,372 41,052 18,630
Cash flows from investing activities
Purchase of property and equipment, net (317 ) (278 ) (947 ) (887 )
Acquisitions, net of cash acquired - - (16,842 ) (30,131 )
Net proceeds (purchase) from sale of short-term investments 4,406 (1,623 ) 695 23,664
4,089 (1,901 ) (17,094 ) (7,354 )
Cash flows from financing activities
Issuance of share capital 667 20 1,131 925
Payment of cash dividends (1,262 ) (1,007 ) (4,536 ) (3,514 )
Purchase and cancellation of common shares - - (43 ) -
(595 ) (987 ) (3,448 ) (2,589 )
Effect of foreign exchange rate changes on cash 1,579 (303 ) (1,526 ) (1,323 )
Net increase (decrease) in cash during the period 13,352 (819 ) 18,984 7,364
Cash - beginning of period 52,272 47,459 46,640 39,276
Cash - end of period $ 65,624 $ 46,640 $ 65,624 $ 46,640
Supplementary cash flow information:
Cash paid during the period for income taxes $ 669 $ 91 $ 1,762 $ 2,509

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,
2011
October 31,
2010
October 31,
2011
October 31,
2010
Revenue:
Asset Management Group $ 3,075 $ 3,499 $ 12,842 $ 13,503
Interactive Management Group 28,761 23,879 109,717 80,705
Total $ 31,836 $ 27,378 $ 122,559 $ 94,208
Segment Profit (EBIT):
Asset Management Group $ 741 $ 843 $ 3,033 $ 2,910
Interactive Management Group 6,187 3,738 21,958 11,287
Corporate expenses (1,218 ) (834 ) (3,557 ) (2,699 )
Foreign exchange gain (loss) 853 90 (511 ) 238
Interest and other income, net 905 295 1,467 1,532
Total $ 7,468 $ 4,132 $ 22,390 $ 13,268

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