Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

June 07, 2007 17:06 ET

Enghouse Releases Second Quarter Results and Announces Dividend

MARKHAM, ONTARIO--(Marketwire - June 7, 2007) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited second quarter financial results for the period ended April 30, 2007.

Second quarter revenue was $15.0 million, compared to $15.0 million reported in the same period last year. Net income for the second quarter was $2.29 million or $0.09 per diluted share compared to the prior year's second quarter net income of $2.45 million or $0.09 per diluted share. On a year to date basis, revenue was $28.5 million compared to $31.8 million in the prior year, while net income was $4.13 million compared to $5.52 million in the prior fiscal year. The decrease in revenue and net income on a year to date basis reflects the impact of a decreased number of licenses ordered by one customer.

Operating expenses increased to $8.4 million from $7.7 million in the prior year's second quarter as a result of the inclusion of foreign exchange losses of $0.6 million reported in the second quarter. Also included in the operating expenses are non-cash amortization charges of $1.5 million compared to $1.4 million in the prior year's second quarter related to the amortization of software and intangibles including those recorded as part of the Ontira acquisition completed on March 31, 2007. Both quarters include $0.1 million in non-cash compensation expense related to stock options.

The Company generated cash flows from operations of $4.5 million in the second quarter compared to $10.1 million in the prior year's second quarter, which included receipt of the final year's annual maintenance from one customer. On a year to date basis, the Company generated cash flows of $9.7 million compared to $13.4 million in the prior year, closing the quarter with $106.1 million in cash and short-term investments. The Company continues to have no long-term debt.

During the second quarter the Company completed the acquisition of Ontira Communications Inc., the results of which have been included from the date of acquisition, March 31, 2007. After the quarter, Enghouse paid an eligible cash dividend of $0.025 per share on May 31, 2007. At its meeting held today, the Board of Directors authorized the payment of an eligible quarterly dividend of $0.025 per share payable on August 31, 2007 to shareholders of record at the close of business on August 14, 2007.

Stephen Sadler, the Chairman of Enghouse said "The Company's quarterly dividend is intended to provide shareholders with an ongoing return on investment. The Company continues to focus on deploying its cash reserves on acquisitions that will further diversify its revenue stream and extend 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)
April 30, October 31,
2007 2006
---------------------------------------------------------------------------
Assets
Current Assets:
Cash $ 13,715 $ 5,602
Short-term investments 92,394 92,621
Accounts receivable, net 11,220 15,253
Future income taxes 3,256 3,480
Prepaid expenses and other assets 2,122 2,074
--------------- ------------

122,707 119,030
--------------- ------------

Property and equipment 1,603 1,667
Acquired software and other intangibles 19,426 21,370
Goodwill 15,287 13,929
Long-term future income taxes 3,463 3,761

--------------- ------------
$ 162,486 $ 159,757
--------------- ------------
--------------- ------------

Liabilities
Current Liabilities:
Accounts payable and accrued liabilities $ 11,943 $ 12,688
Income taxes payable 6,453 7,629
Deferred revenue 17,102 16,143
--------------- ------------
35,498 36,460


Future income taxes 9,600 10,227
Deferred revenue 679 64
--------------- ------------
$ 45,777 $ 46,751
Shareholders' Equity

Share capital 49,016 49,047
Contributed surplus 255 262
Retained earnings 73,679 69,549
Accumulated other comprehensive loss (6,241) (5,852)
--------------- ------------

116,709 113,006

$ 162,486 $ 159,757
--------------- ------------
--------------- ------------


Enghouse Systems Limited
Consolidated Statements of Operations and Retained Earnings
(in thousands of Canadian dollars except per share amounts)
(Unaudited)

Three months ended April 30 Six months ended April 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
Revenue
Software licenses $ 3,087 $ 3,575 $ 5,840 $ 9,863
Services 11,347 11,123 21,633 21,416
Hardware 602 323 991 506
------------------------------ --------------------------

15,036 15,021 28,464 31,785
------------------------------ --------------------------

Cost of Sales
Software licenses 698 335 1,167 1,141
Services 3,542 3,591 7,305 7,189
Hardware 516 295 789 421
------------------------------ --------------------------
4,756 4,221 9,261 8,751

Gross Margin 10,280 10,800 19,203 23,034

Operating expenses
Selling, general and
administrative 4,491 3,786 7,836 7,890
Research and
development 2,144 1,956 4,115 4,220
Stock based
compensation 103 124 220 243
Amortization of property
and equipment 200 360 432 670
Amortization of
acquired software
and other intangibles 1,470 1,449 2,947 2,748
------------------------------ --------------------------
8,408 7,675 15,550 15,771
------------------------------ --------------------------

Income before the
undernoted 1,872 3,125 3,653 7,263

Interest
income, net 1,007 737 1,978 1,360
Other income 678 - 810 -
------------------------------ --------------------------

Income before
income taxes 3,557 3,862 6,441 8,623

Provision for
income taxes 1,272 1,414 2,311 3,099
----------------------------- ---------------------------

Net income for
the period $ 2,285 $ 2,448 $ 4,130 $ 5,524
----------------------------- ---------------------------

Retained Earnings,
beginning of period $ 71,394 $ 61,622 $ 69,549 $ 58,546
----------------------------- ---------------------------

Retained Earnings,
end of period $ 73,679 $ 64,070 $ 73,679 $ 64,070
----------------------------- ---------------------------
----------------------------- ---------------------------

Earnings per share
Basic $ 0.09 $ 0.10 $ 0.16 $ 0.22
Diluted $ 0.09 $ 0.09 $ 0.16 $ 0.21
Weighted average
shares
outstanding
during
period
(millions) - basic 25.5 25.5 25.5 25.5
- diluted 26.4 26.6 26.4 26.5



Enghouse Systems Limited
Consolidated Statements of Comprehensive Income (Loss)
(in thousands of Canadian dollars)
(Unaudited)

Three months ended Six months ended
April 30 April 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------

Net income for the period $ 2,285 $ 2,448 $ 4,130 $ 5,524

Other comprehensive income (loss):

Unrealized loss on translating
financial statements of self
sustaining foreign operations (1,258) (1,136) (811) (1,394)
Transfer to net income of realized
gains on available for sale
investments, net of tax of
$244 (six months - $292) (434) - (518) -
Unrealized gain on available for
sale investments, net of
tax of $111 (six months - $526) 196 - 930 -
Unrealized foreign currency
translation (loss) gain on
available for sale investments, net
of tax of $17 (29) - 10 -
(six months - ($5))
-----------------------------------------

Other comprehensive loss $ (1,525) $ (1,136) $ (389) $ (1,394)
-----------------------------------------

Comprehensive income $ 760 $ 1,312 $ 3,741 $ 4,130
-----------------------------------------
-----------------------------------------

Accumulated other comprehensive
loss, beginning of period $ (4,716) $ (4,018) $ (5,852) $ (3,760)

Other comprehensive loss (1,525) (1,136) (389) (1,394)
-----------------------------------------

Accumulated other comprehensive
loss, end of period $ (6,241) $ (5,154) $ (6,241) $ (5,154)
-----------------------------------------
-----------------------------------------


Enghouse Systems Limited
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)

For the three months For the six months
ended April 30 ended April 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
Cash flows from operating
activities:
Net income for the period $ 2,285 $ 2,448 $ 4,130 $ 5,524
Add (deduct) items not
involving cash:
Amortization of property
and equipment 200 360 432 670
Amortization of acquired
software and other
intangibles 1,470 1,449 2,947 2,748
Stock-based compensation
expense 103 124 220 243
Gain on sale of short-term
investments (678) - (810) -
Future income taxes 25 729 4 1,799
----------------------- ---------------------
3,405 5,110 6,923 10,984

Changes in operating assets
and liabilities

Decrease (increase) in
accounts receivable, net 2,855 2,947 4,370 (1,958)
(Increase) decrease in prepaid
expenses and other assets (43) (92) (58) 183
Increase (decrease) in
accounts payable and
accrued liabilities 224 675 (1,805) 293
Increase (decrease) in current
income taxes payable 298 389 (1,254) 801
(Decrease) increase in
deferred revenue (2,174) 2,103 1,583 4,193
Unrealized foreign
exchange loss (35) (1,071) (99) (1,047)
----------------------- ---------------------
Cash flows from operating
activities 4,530 10,061 9,660 13,449
----------------------- ---------------------

Cash flows from investing
activities
Purchase of property and
equipment (143) (83) (273) (169)
Acquisitions, net of cash
acquired (2,210) - (2,210) (38,203)
Net sale (purchase) of
short-term investments 2,420 (11,394) 1,508 26,598
----------------------- ---------------------
67 (11,477) (975) (11,774)
----------------------- ---------------------

Cash flows from financing
activities
Issuance of share capital - 786 41 833
Purchase and cancellation
of common shares - - (301) (212)
----------------------- ---------------------
- 786 (260) 621

Effect of foreign exchange
rate changes on cash (612) (166) (312) (371)
----------------------- ---------------------

Net increase (decrease)
in cash during the period 3,985 (796) 8,113 1,925
Cash - Beginning of period 9,730 7,983 5,602 5,262
----------------------- ---------------------
Cash - End of period $ 13,715 $ 7,187 $13,715 $ 7,187
----------------------- ---------------------
----------------------- ---------------------

Supplementary Cash Flow
Information:
Cash paid during the year for
Interest $ - $ - $ - $ -
Income Taxes 1,164 289 3,886 437

Cash excludes short-term investments



Enghouse Systems Limited
Selected Segment Reporting Information
(in thousands of Canadian dollars)
(Unaudited)

Three Months ended Six Months ended
---------------------------------------------------------------------------
April 30, April 30, April 30, April 30,
2007 2006 2007 2006
---------------------------

Revenue:
Asset Management
Division $ 2,192 $ 3,820 $ 4,637 $ 9,297
Syntellect Division 12,844 11,201 23,827 22,488
-------------------------------------------------

Total $ 15,036 $ 15,021 $ 28,464 $ 31,785
-------------------------------------------------
-------------------------------------------------

Segment Profit (EBIT):
Asset Management
Division $ 98 $ 1,838 $ 521 $ 5,317
Syntellect Division 2,945 1,841 4,364 3,484
Corporate (575) (580) (1,135) (1,257)
Foreign Exchange (596) 26 (97) (281)
-------------------------------------------------
Total $ 1,872 $ 3,125 $ 3,653 $ 7,263


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