Enghouse Systems Limited

Enghouse Systems Limited

March 03, 2005 17:00 ET

Enghouse Releases First Quarter Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: ENGHOUSE SYSTEMS LIMITED

TSX SYMBOL: ESL

MARCH 3, 2005 - 17:00 ET

Enghouse Releases First Quarter Results

MARKHAM, ONTARIO--(CCNMatthews - March 3, 2005) - Enghouse Systems
Limited (TSX:ESL) today announced its unaudited first quarter financial
results for the quarter ended January 31, 2005.

First quarter revenue was $11.8 million, compared to $12.9 million
reported in the same period last year. Net income for the first quarter
was $1.6 million or $0.06 per share on a diluted basis compared to the
prior year's first quarter net income of $2.3 million or $0.09 per share.

Operating expenses declined to $6.0 million from $6.3 million in the
prior year's first quarter. Both quarters include $1.2 million in
non-cash amortization charges as well as $0.1 million in non-cash
compensation expense related to stock options. Operating income for the
first quarter was $1.8 million, compared to $2.8 million in the prior
year's first quarter.

The Company generated cash flows from operations of $1.1 million in the
first quarter compared to $1.0 million in the prior year's first
quarter, closing the quarter with almost $92 million in cash and
short-term investments. The Company continues to have no long-term debt.

Stephen J. Sadler, Chairman and Chief Executive Officer said, "The
continuing weakness of the U.S. dollar measured against the Canadian
dollar negatively impacted the Company's revenue and profits in the
first quarter compared to the prior year's first quarter. However, we
are confident that the Company will continue to grow its revenue stream
through a combination of organic growth and acquisition."

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)
January 31, October 31,
2005 2004
---------------------------------------------------------------------
Assets
Current
Cash $ 6,953 $ 10,806
Short-term investments 84,988 79,810
Accounts receivable, net 11,084 9,827
Future income taxes 315 58
Prepaid expenses and other assets 1,772 1,404
-------- -------
105,112 101,905
-------- -------
Property, plant and equipment 2,251 2,319
Acquired software and other intangibles 15,149 16,005
Goodwill 9,434 9,434
Long-term future income taxes 3,252 3,856
-------- -------
$ 135,198 $ 133,519
-------- -------
-------- -------
Liabilities
Current
Accounts payable and accrued
liabilities $ 10,242 $ 11,339
Income taxes payable 5,122 4,409
Deferred revenue 13,281 12,706
-------- -------
28,645 28,454

Deferred income tax credit 272 678
Future income taxes 5,758 5,868
Deferred revenue 520 479
-------- -------
35,195 35,479

Shareholder's Equity

Share capital 48,201 48,201
Contributed surplus 559 452
Retained earnings 54,188 52,633
Cumulative translation adjustment (2,945) (3,246)
-------- -------
100,003 98,040

$ 135,198 $ 133,519
-------- -------
-------- -------


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)
---------------------------------------------------------------------
2005 2004
---------------------------------------------------------------------
Revenue
Software licenses $ 1,851 $ 3,517
Services 9,397 8,865
Hardware 595 507
-----------------------------
11,843 12,889
-----------------------------

Cost of Sales
Licenses 467 465
Services 3,054 3,018
Hardware 478 366
-----------------------------
3,999 3,849

Gross Margin 7,844 9,040

Operating expenses
Selling, general and administrative 3,339 3,414
Research and development 1,397 1,613
Stock-based compensation 107 72
Amortization of property, plant
and equipment 292 396
Amortization of acquired software and
other intangibles 869 772
-----------------------------
6,004 6,267
-----------------------------

Income before the undernoted 1,840 2,773

Interest income, net 461 579
Other income 98 62
-----------------------------
Net income before income taxes $ 2,399 $ 3,414

Provision for income taxes 844 1,153
-----------------------------

Net income for the period $ 1,555 $ 2,261
-----------------------------
-----------------------------


Retained Earnings, beginning of period $ 53,085 $ 41,434
Prior period adjustment for stock
compensation expense (452) (116)
-----------------------------
Retained Earnings as restated,
beginning of period $ 52,633 $ 41,318

Retained Earnings, end of period $ 54,188 $ 43,579
-----------------------------
-----------------------------
Earnings per share
Basic $ 0.06 $ 0.09
Diluted $ 0.06 $ 0.09
Weighted average shares
outstanding during period (millions)
- basic 25.4 25.2
- diluted 26.5 26.3


Enghouse Systems Limited
Consolidated Statements of Cash Flows
For the three months ended January 31
(in thousands of Canadian dollars)
(Unaudited)
---------------------------------------------------------------------
2005 2004
---------------------------------------------------------------------
Cash flows from operating activities:
Net income for the period $ 1,555 $ 2,261

Add (deduct) items not involving cash:
Amortization of property, plant
and equipment 292 396
Amortization of acquired software
and other intangibles 869 772
Stock-based compensation expense 107 72
Gain on sale of short-term investments (98) (62)
Future income taxes (169) 350
-----------------------------
Cash flows before changes in operating
assets and liabilities 2,556 3,789

Changes in operating assets and
liabilities

Increase in accounts receivable, net (1,140) (1,630)
Increase in prepaid expenses and
other assets (341) (154)
Decrease in accounts payable and
accrued liabilities (1,055) (2,330)
Increase in current income taxes
payable 761 278
Increase in deferred revenue 455 1,078
Unrealized foreign exchange gain (88) (18)
-----------------------------
Cash flows from operating activities 1,148 1,013
-----------------------------

Cash flows from investing activities
Net purchase of property, plant
and equipment (201) (84)
Acquisitions, net of cash acquired - (1,741)
Net (purchase) sale of short-term
investments (4,914) 2,987
-----------------------------
(5,115) 1,162
-----------------------------

Cash flows from financing activities
Issuance of share capital - 225
-----------------------------
- 225
-----------------------------

Effect of foreign exchange rate changes
on cash 114 60
-----------------------------

Net (decrease) increase in cash during
the period (3,853) 2,460
Cash - Beginning of period 10,806 6,690
-----------------------------
Cash - End of period 6,953 9,150
-----------------------------
-----------------------------
Supplementary Cash Flow Information:
Cash paid during the year for
Interest - -
Income Taxes 180 426

Note: Cash excludes short-term investments


Enghouse Systems Limited
Selected Segment Reporting Information
(in thousands of Canadian dollars)
(Unaudited)
Three Months ended
---------------------------------------------------------------------
January 31, 2005 January 31, 2004
--------------------------------------

Revenue:
Asset Management Division $ 3,218 $ 4,000
Syntellect Division 8,625 8,889
--------------------------------------
Total $ 11,843 $ 12,889
--------------------------------------
--------------------------------------

Segment Profit (EBIT):
Asset Management Division $ 1,500 $ 2,227
Syntellect Division 340 546
--------------------------------------
Total $ 1,840 $ 2,773
--------------------------------------
--------------------------------------



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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Enghouse Systems Limited
    Neil Shafran
    Executive Vice President
    (905) 946-3200
    investor@enghouse.com