Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

March 06, 2012 17:00 ET

Enghouse Releases First Quarter Results and Announces 30% Increase in its Dividend

MARKHAM, ONTARIO--(Marketwire - March 6, 2012) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited first quarter financial results for the period ended January 31, 2012.

First quarter revenue was $30.5 million, compared to $28.6 million in the first quarter last year. Results from operating activities for the quarter were $7.6 million compared to $6.6 million in the prior year's first quarter, an increase of 15%. Net income for the first quarter increased by 33% to $4.1 million or $0.16 per share on a diluted basis compared to the prior year's first quarter net income of $3.1 million or $0.12 per share. The increase in revenue was primarily a result of incremental revenue contributions from acquisitions. Revenue reflects hosted and maintenance services contributions of $16.0 million in the quarter, an increase of 19% over last year.

Operating expenses increased to $14.9 million from $13.5 million in the prior year's first quarter and include incremental operating costs related to the acquisition of CosmoCom Inc. on April 1, 2011. Non-cash amortization charges were $2.4 million and include amortization charges for acquired software and customer relationships from acquired operations.

Enghouse closed the quarter with $101.5 million in cash, cash equivalents and short-term investments. The Company continues to have no long-term debt and did not repurchase any shares in the quarter. The Company's first quarter financial statements reflect the adoption of International Financial Reporting Standards.

The Board of Directors also announced today a 30% increase in its eligible quarterly dividend to $0.065 per common share, payable on May 31, 2012 to shareholders of record at the close of business on May 17, 2012. Enghouse has increased its dividend in each of the past four years.

On March 1, 2012, the Company acquired CustomCall Data Systems, Inc., a provider of billing, provisioning and workflow solutions to telecommunications service providers for a cash purchase price of approximately U.S. $7.3 million. CustomCall's solutions expand the end-to-end product suite provided to the telecommunications market by the Company's Networks division. The acquisition underscores Enghouse's commitment to diversify its revenue stream and accelerate its expansion into new markets. The Company continues to seek further acquisitions to grow its market share.

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.

Non-IFRS Measures

The Company uses non-IFRS measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Company uses results from operating activities as a measure of operating performance. Therefore, results from operating activities may not be comparable to similar measures presented by other issuers. Results from operating activities are calculated as net income before amortization of acquired software and customer relationships, finance income, finance expenses, other income, and the provision for income taxes. Management uses results from operating activities to evaluate operating performance as it excludes amortization of software and intangibles which is an accounting allocation of the cost of software and intangible assets arising on acquisition, and does not represent the allocation of the cost of an asset that must be replaced as is the case with depreciation of property and equipment.

Enghouse Systems Limited
Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
January
31, 2012
October
31, 2011
November
1, 2010
Assets
Current assets:
Cash and cash equivalents $ 66,971 $ 65,624 $ 46,640
Short-term investments 34,520 33,967 31,627
Accounts receivable, net 26,390 23,006 24,500
Income tax receivable - - 591
Prepaid expenses and other assets 3,454 3,479 3,360
131,335 126,076 106,718
Non-current assets:
Property and equipment 1,740 1,543 1,588
Acquired software and customer relationships 27,132 29,709 34,330
Goodwill 43,855 43,734 35,137
Deferred income taxes 11,735 11,138 3,478
Total assets $ 215,797 $ 212,200 $ 181,251
Liabilities
Current liabilities:
Trade payables $ 19,184 $ 22,686 $ 18,808
Income taxes payable 3,374 2,878 -
Dividends payable 1,275 1,267 1,007
Accrued provisions 2,278 2,442 1,307
Deferred revenue 32,558 28,933 26,040
58,669 58,206 47,162
Non-current liabilities:
Deferred income tax liabilities 11,355 10,743 12,571
Long-term income taxes payable 248 420 522
Deferred revenue 1,208 1,404 790
Total liabilities 71,480 70,773 61,045
Shareholders' Equity
Share capital 53,569 52,134 50,705
Contributed surplus 2,828 2,970 2,653
Retained earnings 88,073 85,288 66,546
Accumulated other comprehensive (loss) gain (153 ) 1,035 302
Total equity 144,317 141,427 120,206
Total liabilities and equity $ 215,797 $ 212,200 $ 181,251
Enghouse Systems Limited
Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(Unaudited)
Quarter ended January 31,
2012 2011
Revenue
Software licenses $ 10,518 $ 10,711
Hosted and maintenance services 15,979 13,380
Professional services 3,740 3,756
Hardware 296 722
30,533 28,569
Direct costs
Software licenses 909 1,557
Services 6,896 6,315
Hardware 206 560
8,011 8,432
Revenue, net of direct costs 22,522 20,137
Operating expenses
Selling, general and administrative 9,861 9,404
Research and development 4,803 3,866
Depreciation of property and equipment 278 275
14,942 13,545
Results from operating activities 7,580 6,592
Amortization of acquired software and customer relationships (2,438 ) (2,440 )
Finance income 243 138
Finance expenses (41 ) (53 )
Other income (expense) (2 ) (5 )
Income before income taxes 5,342 4,232
Provision for income taxes 1,282 1,180
Net income for the period $ 4,060 $ 3,052
Foreign currency translation differences from foreign operations (582 ) (650 )
Transfer to net income of realized gains on available for sale investments, net of tax of ($-); Q1/2011 - ($1)
-

(2
)
Unrealized (loss) gain on available for sale investments, net of tax of ($194); Q1/2011 - $4
(614
)
20
Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $3; Q1/2011 - ($4)
8

(21
)
Other comprehensive loss (1,188 ) (653 )
Comprehensive income $ 2,872 $ 2,399
Earnings per share
Basic $ 0.16 $ 0.12
Diluted $ 0.16 $ 0.12
Enghouse Systems Limited
Consolidated Interim Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)
Share
Capital
-number
Share
capital
$
Contributed
surplus
$
Accumulated
other
comprehensive
income
$
Retained
earnings
$
Total
$
Balance - November 1, 2011 25,337,262 52,134 2,970 1,035 85,288 141,427
Net income - - - - 4,060 4,060
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - (582 ) - (582 )
Transfer to net income of realized gains on available-for-sale investments, net of tax - - - - - -
Unrealized gain (loss) on available-for-sale investments, net of tax - - - (614 ) - (614 )
Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax - - - 8 - 8
Comprehensive income (loss) for the period - - - (1,188 ) 4,060 2,872
Employee share options:
Value of services recognized - - 166 - - 166
Proceeds on issuing shares 163,300 1,435 (308 ) - - 1,127
Purchase and cancellation of commons shares - - - - - -
Dividends - - - - (1,275 ) (1,275 )
Balance - January 31, 2012 25,500,562 53,569 2,828 (153 ) 88,073 144,317
Balance - November 1, 2010 25,171,662 50,705 2,653 302 66,546 120,206
Net income - - - - 3,052 3,052
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - (650 ) - (650 )
Transfer to net income of realized gains on available-for-sale investments, net of tax - - - (2 ) - (2 )
Unrealized gain (loss) on available-for-sale investments, net of tax - - - 20 - 20
Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax - - - (21 ) - (21 )
Comprehensive income (loss) for the period - - - (653 ) 3,052 2,399
Employee share options:
Value of services recognized - - 171 - - 171
Proceeds on issuing shares - - - - -
Purchase and cancellation of commons shares - - - - - -
Dividends - - - - (1,007 ) (1,007 )
Balance - January 31, 2011 25,171,662 50,705 2,824 (351 ) 68,591 121,769
Enghouse Systems Limited
Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
Quarter ended January 31
2012 2011
Cash flows from operating activities
Net income $ 4,060 $ 3,052
Adjustments for:
Depreciation of property and equipment 278 275
Amortization of acquired software and customer relationships 2,438 2,440
Stock-based compensation expense 166 171
Deferred income tax expense 203 (125 )
Finance expenses and other income 43 58
Income tax paid (533 ) (326 )
Changes in non-cash operating working capital (3,873 ) 4,127
Net cash flows from operating activities 2,782 9,672
Cash flows from investing activities
Purchase of property and equipment, net (491 ) (176 )
Finance income (243 ) (138 )
Acquisitions, net of cash acquired - (2,450 )
Net (purchase) proceeds from sale of short-term investments (976 ) 12,443
Net cash flows from investing activities (1,710 ) 9,679
Cash flows from financing activities
Issuance of share capital 1,127 -
Payment of cash dividend (1,267 ) (1,007 )
Net cash flows used in financing activities (140 ) (1,007 )
Effect of currency translation adjustments on cash and cash equivalents
415

(737
)
Net increase in cash and cash equivalents during the period 1,347 17,607
Cash and cash equivalents- beginning of period 65,624 46,640
Cash and cash equivalents - end of period $ 66,971 $ 64,247
Enghouse Systems Limited
Selected Segment Reporting Information
(in thousands of Canadian dollars)
(Unaudited)
For the three months ended
January 31
2012 2011
Revenue:
Asset Management Group $ 3,071 $ 3,069
Interactive Management Group 27,462 25,500
Total $ 30,533 $ 28,569
Segment Profit (EBIT):
Asset Management Group $ 709 $ 582
Interactive Management Group 5,279 4,462
Corporate expenses (846 ) (892 )
Finance income 243 138
Finance expenses (41 ) (53 )
Other income (expense) (2 ) (5 )
Total $ 5,342 $ 4,232

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