Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

March 11, 2009 17:30 ET

Enghouse Releases First Quarter Results and Announces 20% Increase in Its Dividend

MARKHAM, ONTARIO--(Marketwire - March 11, 2009) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited first quarter financial results for the period ended January 31, 2009.

First quarter revenue was $18.2 million, compared to $10.9 million reported in the same period last year, an increase of approximately 68%. Net income for the first quarter was $0.8 million or $0.03 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 and services revenue in the Company's Syntellect Division, including revenue from Envox, acquired on October 20, 2008.

Operating expenses increased to $8.6 million from $5.3 million in the prior year's first quarter and include incremental operating costs related to the Gamma, Fluency and Envox acquisitions. Non-cash amortization charges were $2.0 million compared to $1.5 million in the prior year's first quarter and include amortization charges for acquired software and other intangibles from the acquired operations including Envox.

The Company generated cash flows from operations of $2.0 million in the first quarter compared to $2.0 million in the prior year's first quarter, closing the quarter with $93.0 million in cash and short-term investments compared to $94.4 million at October 31, 2008. The Company continues to have no long-term debt. The Company remains active in its normal course issuer buyback, re-purchasing 590,224 shares in the quarter at an average cost of $4.55 per share for a total cost of $2.7 million.

The Board of Directors today authorized a 20% increase to the eligible quarterly dividend from $0.025 per share to $0.03 per share, payable on May 29, 2009 to shareholders of record at the close of business on May 15, 2009. 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)
January 31, October 31,
2009 2008
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Assets
Current
Cash $ 18,127 $ 12,331
Short-term investments 74,868 82,099
Accounts receivable, net 16,899 17,515
Future income taxes 1,771 1,895
Prepaid expenses and other assets 2,900 2,947
----------- -----------

114,565 116,787
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Property and equipment, net 2,409 2,471
Acquired software and other intangibles, net 25,543 27,373
Goodwill 21,644 21,953
Future income taxes 4,079 3,228
----------- -----------

$ 168,240 $ 171,812
----------- -----------
----------- -----------

Liabilities
Current
Accounts payable and accrued liabilities $ 13,243 $ 16,490
Income taxes payable 4,647 4,958
Dividend payable 621 636
Deferred revenue 21,548 18,585
----------- -----------
40,059 40,669

Future income taxes 8,332 7,945
Long-term income taxes payable 1,057 1,321
Deferred revenue 466 686
----------- -----------

49,914 50,621

Shareholders' Equity

Share capital 49,494 50,568
Contributed surplus 1,845 1,827
Retained earnings 70,628 72,015
Accumulated other comprehensive loss (3,641) (3,219)
----------- -----------
118,326 121,191


$ 168,240 $ 171,812
----------- -----------
----------- -----------



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)

---------------------------------------------------------------------------
2009 2008
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Revenue
Software licenses $ 5,106 $ 1,810
Services 12,044 8,696
Hardware 1,078 358
--------------------------

18,228 10,864
--------------------------
Cost of sales
Software licenses 1,024 521
Services 5,059 3,536
Hardware 951 288
--------------------------
7,034 4,345

Gross margin 11,194 6,519

Operating expenses
Selling, general and administrative 5,314 3,293
Research and development 2,964 1,766
Amortization of property and equipment 338 211
--------------------------
8,616 5,270
--------------------------

Income before the undernoted 2,578 1,249

Amortization of acquired software and
other intangibles (1,952) (1,460)
Foreign exchange gain 130 354
Interest income, net 443 1,053
--------------------------

Income before income taxes $ 1,199 $ 1,196

Provision for income taxes
Current 513 622
Future (108) (197)
--------------------------

Net income for the period $ 794 $ 771
--------------------------
--------------------------


Retained earnings, beginning of period 72,015 69,931

Dividends (621) (635)
Purchase and cancellation of common shares (1,560) (150)
--------------------------
--------------------------
Retained earnings, end of period $ 70,628 $ 69,917
--------------------------
--------------------------
Earnings per share
Basic $ 0.03 $ 0.03
Diluted $ 0.03 $ 0.03
Weighted average shares outstanding during
period (millions)
- basic 25.2 25.2
- diluted 25.4 26.0



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)

---------------------------------------------------------------------------
2009 2008
---------------------------------------------------------------------------

Net income for the period $ 794 $ 771

Other comprehensive income:
Unrealized (loss) gain on translating
financial statements of self-sustaining
foreign operations (307) 2,482
Unrealized (loss) gain on available for
sale investments, net of tax
of ($241) (Q1/08 - $164) (487) 291
Unrealized foreign currency translation gain
(loss) on available for sale investments,
net of tax of $184 (Q1/08 - $35) 372 (62)
--------------------------

Other comprehensive (loss) income $ (422) $ 2,711
--------------------------
--------------------------

Comprehensive income $ 372 $ 3,482
--------------------------
--------------------------

Accumulated other comprehensive loss,
beginning of period $ (3,219) $ (12,863)

Other comprehensive (loss) income (422) 2,711
--------------------------

Accumulated other comprehensive loss,
end of period $ (3,641) $ (10,152)
--------------------------
--------------------------

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

---------------------------------------------------------------------------
2009 2008
---------------------------------------------------------------------------
Cash flows from operating activities
Net income for the period $ 794 $ 771

Add (deduct) items not involving cash
Amortization of property and equipment 338 211
Amortization of acquired software and
other intangibles 1,952 1,460
Stock-based compensation expense 18 76
Future income taxes (108) (197)
--------------------------
Cash flows before changes in operating
assets and liabilities 2,994 2,321

Changes in operating assets and liabilities

Decrease in accounts receivable, net 825 1,739
Decrease (increase) in prepaid expenses
and other assets 84 (284)
Decrease in accounts payable and accrued
liabilities (2,884) (1,907)
Decrease in current income taxes payable (605) (2,091)
Increase in deferred revenue 2,479 1,744
Unrealized foreign exchange (loss) gain (911) 434
--------------------------
Cash flows from operating activities 1,982 1,956
--------------------------

Cash flows from investing activities
Purchase of property and equipment, net (126) (141)
Acquisitions, net of cash acquired (358) -
Proceeds (purchase) of short-term investments 7,455 (1,265)
--------------------------
6,971 (1,406)
--------------------------

Cash flows from financing activities
Issuance of share capital 53 1,175
Payment of cash dividend (636) (629)
Purchase and cancellation of common shares (2,687) (207)
--------------------------
(3,270) 339
--------------------------

Effect of foreign exchange rate changes on cash 113 621
--------------------------

Net increase in cash during the period 5,796 1,510
Cash - beginning of period 12,331 11,321
--------------------------
Cash - end of period $ 18,127 $ 12,831
--------------------------
--------------------------

Supplementary cash flow information:

Cash paid during the period for income taxes $ 514 $ 2,607

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
--------------------------
2009 2008
--------------------------

Revenue:
Asset Management Division $ 2,477 $ 1,963
Syntellect Division 15,751 8,901
--------------------------
Total $ 18,228 $ 10,864
--------------------------
--------------------------

Segment Profit (EBIT):
Asset Management Division $ (168) $ (347)
Syntellect Division 1,343 624

Corporate expenses (549) (488)
Foreign exchange 130 354
Interest and other income 443 1,053
--------------------------
--------------------------
Total $ 1,199 $ 1,196
--------------------------
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