Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

June 06, 2012 17:00 ET

Enghouse Releases Second Quarter Results

MARKHAM, ONTARIO--(Marketwire - June 6, 2012) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited second quarter financial results for the period ended April 30, 2012.

The Company posted solid second quarter results despite ongoing turbulence in global markets. Second quarter revenue was $31.5 million, compared to $30.3 million in the second quarter last year. Results from operating activities for the quarter were $7.6 million compared to $4.9 million in the prior year's second quarter, an increase of 53%. Net income for the second quarter increased by 100% to $4.2 million or $0.16 per share on a diluted basis compared to the prior year's second quarter net income of $2.1 million or $0.08 per share. The increase in revenue continues to reflect incremental revenue contributions from acquisitions. Revenue also reflects hosted and maintenance services contributions of $16.0 million in the quarter, an increase of 16% over last year, largely as a result of incremental hosted revenue contributions from recently acquired CustomCall Data Systems Inc. Hosted and maintenance revenue now accounts for over 50% of the Company's total revenue. On a year to date basis, revenue was $62.0 million up from $58.9 million, while net income increased from $5.1 million to $8.2 million or $0.32 per diluted share.

Operating expenses decreased to $15.7 million from $15.8 million in the prior year's second quarter, which included restructuring expenses related to the CosmoCom acquisition on April 1, 2011. The current quarter's operating expenses include incremental operating costs related to the acquisition of CustomCall on March 1, 2012 and a full quarter of CosmoCom's operating costs. Non-cash amortization charges were $2.4 million and reflect amortization of acquired software and customer relationships from acquisitions.

The Company closed the quarter with over $100 million in cash, cash equivalents and short-term investments, which is after the payment of approximately $6.6 million related to the acquisition of CustomCall and its office facility. Enghouse continues to have no long-term debt and did not repurchase any shares in the quarter.

The Board of Directors also announced today an eligible quarterly dividend of $0.065 per common share, payable on August 31, 2012 to shareholders of record at the close of business on August 17, 2012.

On June 1, 2012, Enghouse acquired Zeacom Group Ltd., a leading provider of multi-channel contact center communications solutions for a cash purchase price of approximately U.S. $30.6 million. Headquartered in Auckland, New Zealand, with offices in Australia, the UK and the US, Zeacom's leading edge contact center software and business process automation solutions have been installed in over 3,500 customer sites worldwide. The acquisition of Zeacom expands Enghouse's global market reach and product suite. The Company continues to seek further acquisitions to continue to grow its market share globally.

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)
April 30, 2012 October 31, 2011 November 1, 2010
Assets
Current assets:
Cash and cash equivalents $ 56,387 $ 65,624 $ 46,640
Short-term investments 44,016 33,967 31,627
Accounts receivable, net 28,438 23,006 24,500
Income tax receivable - - 591
Prepaid expenses and other assets 3,964 3,479 3,360
132,805 126,076 106,718
Non-current assets:
Property, plant and equipment 2,773 1,543 1,588
Acquired software and customer relationships 28,710 29,709 34,330
Goodwill 47,213 43,734 35,137
Deferred income taxes 11,460 11,138 3,478
Total assets $ 222,961 $ 212,200 $ 181,251
Liabilities
Current liabilities:
Trade payables $ 18,542 $ 22,686 $ 18,808
Income taxes payable 3,397 2,878 -
Dividends payable 1,664 1,267 1,007
Accrued provisions 1,921 2,442 1,307
Deferred revenue 36,360 28,933 26,040
61,884 58,206 47,162
Non-current liabilities:
Deferred income tax liabilities 12,741 10,743 12,571
Long-term income taxes payable 220 420 522
Deferred revenue 1,241 1,404 790
Total liabilities 76,086 70,773 61,045
Shareholders' Equity
Share capital 54,532 52,134 50,705
Contributed surplus 2,734 2,970 2,653
Retained earnings 90,589 85,288 66,546
Accumulated other comprehensive (loss) gain (980 ) 1,035 302
Total equity 146,875 141,427 120,206
Total liabilities and equity $ 222,961 $ 212,200 $ 181,251
Enghouse Systems Limited
Consolidated Interim Statements of Operations and Comprehensive Income (loss)
(in thousands of Canadian dollars, except per share amounts)
(Unaudited)
Three months ended April 30 Six months ended April 30
2012 2011 2012 2011
Revenue
Software licenses $ 10,630 $ 11,752 $ 21,148 $ 22,463
Hosted and maintenance services 16,040 13,862 32,019 27,154
Professional services 4,406 3,569 8,146 7,413
Hardware 380 1,151 676 1,873
31,456 30,334 61,989 58,903
Direct costs
Software licenses 866 1,973 1,775 3,530
Services 7,086 6,765 13,982 13,080
Hardware 278 852 484 1,412
8,230 9,590 16,241 18,022
Revenue, net of direct costs 23,226 20,744 45,748 40,881
Operating expenses
Selling, general and administrative 9,976 11,658 19,837 21,062
Research and development 5,401 3,873 10,204 7,739
Depreciation of property, plant and equipment 287 281 565 556
15,664 15,812 30,606 29,357
Results from operating activities 7,562 4,932 15,142 11,524
Amortization of acquired software and customer relationships (2,383 ) (2,494 ) (4,821 ) (4,934 )
Finance income 261 126 504 264
Finance expenses (70 ) (45 ) (111 ) (98 )
Other income 157 76 155 71
Income before income taxes 5,527 2,595 10,869 6,827
Provision for income taxes 1,347 504 2,629 1,684
Net income for the period $ 4,180 $ 2,091 $ 8,240 $ 5,143
Foreign currency translation differences from foreign operations (709 ) (2,504 ) (1,291 ) (3,154 )
Transfer to net income of realized gains on available for sale investments, net of tax of ($24); six months - ($24)
(132
)
(89
)
(132
)
(91
)
Unrealized gain (loss) on available for sale investments, net of tax of $3; six months - ($112)
14

461

(600
)
481
Unrealized foreign currency translation (loss) gain on available for sale investments, net of tax of $nil; six months - $1
-

(52
)
8

(73
)
Other comprehensive loss (827 ) (2,184 ) (2,015 ) (2,837 )
Comprehensive income (loss) $ 3,353 $ (93 ) $ 6,225 $ 2,306
Earnings per share
Basic $ 0.16 $ 0.08 $ 0.32 $ 0.20
Diluted $ 0.16 $ 0.08 $ 0.32 $ 0.20
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 - - - - 8,240 8,240
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - (1,291 ) - (1,291 )
Transfer to net income of realized gains on available-for-sale investments, net of tax
-

-

-

(132
)
-

(132
)
Unrealized gain (loss) on available-for-sale investments, net of tax
-

-

-

(600
)
-

(600
)
Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax
-

-

-

8

-

8
Comprehensive income (loss) for the period - - - (2,015 ) 8,240 6,225
Employee share options:
Value of services recognized - - 286 - - 286
Proceeds on issuing shares 268,300 2,398 (522 ) - - 1,876
Purchase and cancellation of commons shares - - -
Dividends - - - - (2,939 ) (2,939 )
Balance - April 30, 2012 25,605,562 54,532 2,734 (980 ) 90,589 146,875
Balance - November 1, 2010 25,171,662 50,705 2,653 302 66,546 120,206
Net income - - - - 5,143 5,143
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - (3,154 ) - (3,154 )
Transfer to net income of realized gains on available-for-sale investments, net of tax
-

-

-

(91
)
-

(91
)
Unrealized gain (loss) on available-for-sale investments, net of tax
-

-

-

481

-

481
Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax
-

-

-

(73
)
-

(73
)
Comprehensive income (loss) for the period - - - (2,837 ) 5,143 2,306
Employee share options:
Value of services recognized - - 325 - - 325
Proceeds on issuing shares 28,000 140 - - - 140
Purchase and cancellation of commons shares (4,800 ) (10 ) - - (33 ) (43 )
Dividends - - - - (2,267 ) (2,267 )
Balance - April 30, 2011 25,194,862 50,835 2,978 (2,535 ) 69,389 120,667
Enghouse Systems Limited
Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
Three months ended April 30 Six months ended April 30
2012 2011 2012 2011
Cash flows from operating activities
Net income $ 4,180 $ 2,091 $ 8,240 $ 5,143
Adjustments for:
Depreciation of property, plant and equipment 287 281 565 556
Amortization of acquired software and customer relationships 2,383 2,494 4,821 4,934
Stock-based compensation expense 120 154 286 325
Deferred income tax expense 93 (47 ) 296 (172 )
Finance expenses and other income (87 ) (31 ) (44 ) 27
Income tax paid (1,295 ) (617 ) (1,828 ) (943 )
5,681 4,325 12,336 9,870
Changes in non-cash operating working capital 1,740 5,797 (2,133 ) 9,924
Net cash flows from operating activities 7,421 10,122 10,203 19,794
Cash flows from investing activities
Purchase of property, plant and equipment, net (1,178 ) (264 ) (1,669 ) (440 )
Finance income (261 ) (126 ) (504 ) (264 )
Acquisitions, net of cash acquired (5,802 ) (14,198 ) (5,802 ) (15,768 )
Net (purchase) proceeds from sale of short-term investments (9,583 ) (1,791 ) (10,559 ) 10,652
Net cash flows from investing activities (16,824 ) (16,379 ) (18,534 ) (5,820 )
Cash flows from financing activities
Issuance of share capital 749 140 1,876 140
Payment of cash dividend (1,275 ) (1,007 ) (2,542 ) (2,014 )
Purchase and cancellation of common shares - (43 ) - (43 )
Net cash flows used in financing activities (526 ) (910 ) (666 ) (1,917 )
Effect of currency translation adjustments on cash and cash equivalents
(655
)
(2,574
)
(240
)
(3,311
)
Net increase in cash and cash equivalents during the period (10,584 ) (9,741 ) (9,237 ) 7,866
Cash and cash equivalents- beginning of period 66,971 64,247 65,624 46,640
Cash and cash equivalents - end of period $ 56,387 $ 54,506 $ 56,387 $ 54,506
Enghouse Systems Limited
Selected Segment Reporting Information
(in thousands of Canadian dollars)
(Unaudited)
For the three months ended April 30 For the six months ended April 30
2012 2011 2012 2011
Revenue:
Asset Management Group $ 3,723 $ 3,520 $ 6,794 $ 6,589
Interactive Management Group 27,733 26,814 55,195 52,314
Total $ 31,456 $ 30,334 $ 61,989 $ 58,903
Segment Profit (EBIT):
Asset Management Group $ 193 $ 420 $ 902 $ 1,002
Interactive Management Group 5,768 2,753 11,047 7,215
Corporate expenses (782 ) (735 ) (1,628 ) (1,627 )
Finance income 261 126 504 264
Finance expenses (70 ) (45 ) (111 ) (98 )
Other income (expense) 157 76 155 71
Total $ 5,527 $ 2,595 $ 10,869 $ 6,827

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