Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

March 05, 2008 17:37 ET

Enghouse Releases First Quarter Results and Announces Dividend

MARKHAM, ONTARIO--(Marketwire - March 5, 2008) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited first quarter results for the period ended January 31, 2008.

First quarter revenue was $10.9 million, compared to $13.4 million reported in the same period last year. 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 $1.8 million or $0.07 per share. The decline in revenue and profit was primarily a result of the impact of foreign exchange on translated revenue as well as decreased license and services revenue in the Company's Syntellect Division.

Operating expenses decreased to $6.4 million from $7.1 million in the prior year's first quarter. Included in the operating expenses are non-cash amortization charges of $1.5 million consistent with the prior year's first quarter charges and relate to the amortization of software and other intangibles. The Company reported $0.1 million in non-cash compensation expense related to stock options, marginally down from the expense reported in the prior year's first quarter as stock options become fully amortized.

The Company generated cash flows from operations of $2.0 million in the first quarter compared to $5.1 million in the prior year's first quarter, closing the quarter with $104.5 million in cash and short-term investments compared to $100.5 million at October 31, 2007. The Company continues to have no long-term debt.

At its meeting held today, the Board of Directors authorized the payment of an eligible quarterly dividend of $0.025 per share, payable on May 30, 2008 to shareholders of record at the close of business on May 14, 2008. 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,
2008 2007
----------------------------------------------------------------------
Assets
Current
Cash $ 12,831 $ 11,321
Short-term investments 91,700 89,184
Accounts receivable, net 9,068 10,376
Future income taxes 1,431 1,359
Prepaid expenses and other assets 1,846 1,488
-----------------------

116,876 113,728
-----------------------

Property and equipment, net 1,873 1,930
Acquired software and other intangibles, net 14,586 15,819
Goodwill 11,100 10,652
Future income taxes 4,673 4,128
-----------------------

$ 149,108 $ 146,257
-----------------------
-----------------------

Liabilities
Current
Accounts payable and accrued liabilities $ 7,722 $ 9,258
Income taxes payable 5,378 7,342
Dividend payable 635 629
Deferred revenue 15,056 12,602
-----------------------
28,791 29,831

Future income taxes 8,030 7,964
Deferred revenue 889 953
-----------------------

37,710 38,748
Shareholders' Equity

Share capital 49,788 48,670
Contributed surplus 1,845 1,771
Retained earnings 69,917 69,931
Accumulated other comprehensive loss (10,152) (12,863)
-----------------------
111,398 107,509


$ 149,108 $ 146,257
-----------------------
-----------------------



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)

----------------------------------------------------------------------------
2008 2007
----------------------------------------------------------------------------
Revenue
Software licenses $ 1,810 $ 2,753
Services 8,696 10,286
Hardware 358 389
-------------------

10,864 13,428
-------------------
Cost of sales
Software licenses 521 469
Services 3,536 3,763
Hardware 288 273
-------------------
4,345 4,505

Gross margin 6,519 8,923

Operating expenses
Selling, general and administrative 2,865 3,345
Research and development 1,764 1,971
Stock-based compensation 76 117
Amortization of property and equipment 211 232
Amortization of acquired software and other intangibles 1,460 1,477
-------------------
6,376 7,142
-------------------

Income before the undernoted 143 1,781

Interest income, net 1,053 971
Other income - 132
-------------------

Income before income taxes $ 1,196 $ 2,884

Provision for income taxes 425 1,039
-------------------

Net income for the period $ 771 $ 1,845
-------------------
-------------------

Retained earnings, beginning of period 69,931 68,367

Dividends (635) -
Purchase and cancellation of common shares (150) (227)
-------------------
-------------------
Retained earnings, end of period $ 69,917 $ 69,985
-------------------
-------------------

Earnings per share
Basic $ 0.03 $ 0.07
Diluted $ 0.03 $ 0.07
Weighted average shares outstanding during period
(millions)
- basic 25.2 25.5
- diluted 26.0 26.4

The accompanying notes form an integral part of these consolidated interim
financial statements.



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)

----------------------------------------------------------------------------
2008 2007
----------------------------------------------------------------------------

Net income for the period $ 771 $ 1,845

Other comprehensive income:
Unrealized gain on translating financial statements of
self-sustaining foreign operations 2,482 447
Transfer to net income of realized gains on available
for sale investments, net of tax of nil, (Q1/07 - $48) - (84)
Unrealized gain on available for sale investments, net
of tax of $164 (Q1/07 - $413) 291 734
Unrealized foreign currency translation (loss) gain on
available for sale investments, net of tax of $35
(Q1/07 - $22) (62) 39
--------------------

Other comprehensive income $ 2,711 $ 1,136
--------------------
--------------------

Comprehensive income $ 3,482 $ 2,981
--------------------
--------------------

Accumulated other comprehensive loss, beginning of
period $ (12,863) $ (5,852)

Other comprehensive income 2,711 1,136
--------------------

Accumulated other comprehensive loss, end of period $ (10,152) $ (4,716)
--------------------
--------------------

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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)

----------------------------------------------------------------------------
2008 2007
----------------------------------------------------------------------------
Cash flows from operating activities
Net income for the period $ 771 $ 1,845

Add (deduct) items not involving cash
Amortization of property and equipment 211 232
Amortization of acquired software and other intangibles 1,460 1,477
Stock-based compensation expense 76 117
Gain on sale of short-term investments - (132)
Future income taxes (381) (21)
------------------
Cash flows before changes in operating assets and
liabilities 2,137 3,518

Changes in operating assets and liabilities

Decrease in accounts receivable, net 1,739 1,515
Increase in prepaid expenses and other assets (284) (15)
Decrease in accounts payable and accrued liabilities (1,907) (2,029)
Decrease in current income taxes payable (2,091) (1,552)
Increase in deferred revenue 1,744 3,757
Unrealized foreign exchange gain (loss) 618 (64)
------------------
Cash flows from operating activities 1,956 5,130
------------------

Cash flows from investing activities
Purchase of property and equipment, net (141) (130)
Purchase of short-term investments, net (1,265) (912)
------------------
(1,406) (1,042)
------------------

Cash flows from financing activities
Issuance of share capital 1,175 41
Payment of cash dividend (629) -
Purchase and cancellation of common shares (207) (301)
------------------
339 (260)
------------------

Effect of foreign exchange rate changes on cash 621 300
------------------

Net increase in cash during the period 1,510 4,128
Cash - beginning of period 11,321 5,602
------------------
Cash - end of period $ 12,831 $ 9,730
------------------
------------------

Supplementary cash flow information:

Cash paid during the period for income taxes $ 2,607 $ 2,722

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
---------------------------
2008 2007
---------------------------

Revenue:
Asset Management Division $ 1,963 $ 2,445
Syntellect Division 8,901 10,983
---------------------------
Total $ 10,864 $ 13,428
---------------------------
---------------------------

Segment Profit (EBIT):
Asset Management Division $ (347) $ 423
Syntellect Division 624 1,419

Corporate (488) (560)
Foreign Exchange 354 499
---------------------------
Total $ 143 $ 1,781
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