Enghouse Systems Limited
TSX : ESL

Enghouse Systems Limited

June 03, 2009 17:00 ET

Enghouse Releases Second Quarter Results

MARKHAM, ONTARIO--(Marketwire - June 3, 2009) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited second quarter financial results for the period ended April 30, 2009.

Second quarter revenue was $16.8 million, compared to $12.8 million reported in the same period last year, an increase of approximately 31%. Net income for the second quarter was $0.9 million or $0.04 per share on a diluted basis compared to the prior year's second quarter net income of $1.3 million or $0.05 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 recent acquisitions, Trio Enterprise AB ("Trio"), acquired April 1, 2009 and Envox, acquired on October 20, 2008, as well as the positive impact of translating U.S. dollar denominated revenue into Canadian dollars.

Operating expenses increased to $8.5 million from $5.9 million in the prior year's second quarter and include incremental operating costs related to acquisitions and the impact of foreign exchange on U.S. dollar denominated operating expenses. Non-cash amortization charges were $1.7 million compared to $1.5 million in the prior year's second quarter and include amortization charges for acquired software and other intangibles from the acquired operations including Envox and Trio.

The Company generated cash flows from operations of $4.7 million in the second quarter compared to $2.1 million in the prior year's second quarter, closing the quarter with $88.6 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. Since October 2008, the Company has spent $7.4 million on acquisitions and $1.3 million on dividend payments. In addition, the Company remains active in its normal course issuer buyback, re-purchasing 302,600 shares in the quarter at an average cost of $5.06 per share for a total cost of $1.5 million. On a year to date basis the Company has repurchased 892,824 shares for a total cost of $4.2 million. Total cash spent on acquisitions, share buybacks and dividends to shareholders since October 31, 2008 was $12.9 million.

The Board of Directors today authorized an eligible quarterly dividend of $0.03 per share, payable on August 28, 2009 to shareholders of record at the close of business on August 14, 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)
April 30, 2009 October 31, 2008
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Assets
Current
Cash $ 27,302 $ 12,331
Short-term investments 61,326 82,099
Accounts receivable, net 16,247 17,515
Future income taxes 1,427 1,895
Prepaid expenses and other assets 3,491 2,947
--------- ----------

109,793 116,787
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Property and equipment, net 2,224 2,471
Acquired software and other intangibles, net 27,344 27,373
Goodwill 22,527 21,953
Future income taxes 3,549 3,228
--------- ----------

$ 165,437 $ 171,812
--------- ----------
--------- ----------

Liabilities
Current
Accounts payable and accrued liabilities 14,594 $ 16,490
Income taxes payable 2,719 4,958
Dividend payable 748 636
Deferred revenue 21,430 18,585
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39,491 40,669

Future income taxes 7,575 7,945
Long-term income taxes payable 1,043 1,321
Deferred revenue 339 686
--------- ----------

48,448 50,621

Shareholders' Equity

Share capital 49,813 50,568
Contributed surplus 1,908 1,827
Retained earnings 69,865 72,015
Accumulated other comprehensive loss (4,597) (3,219)
--------- ----------
116,989 121,191

$ 165,437 $ 171,812
--------- ----------
--------- ----------



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
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2009 2008 2009 2008
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Revenue
Software licenses $ 4,455 $ 2,492 $ 9,561 $ 4,302
Services 12,019 9,921 24,063 18,617
Hardware 360 391 1,438 749
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16,834 12,804 35,062 23,668
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Cost of sales
Software licenses 488 497 1,512 1,018
Services 4,809 3,737 9,868 7,273
Hardware 329 323 1,280 611
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5,626 4,557 12,660 8,902

Gross margin 11,208 8,247 22,402 14,766

Operating expenses
Selling, general and
administrative 5,217 3,668 10,531 6,961
Research and
development 3,001 1,970 5,965 3,736
Amortization of
property and equipment 321 217 659 428
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8,539 5,855 17,155 11,125
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Income before the
undernoted 2,669 2,392 5,247 3,641

Amortization of
acquired software
and other intangibles (1,713) (1,482) (3,665) (2,942)
Foreign exchange
(loss) gain (55) (53) 75 301
Interest income, net 504 865 947 1,918
Other income - 327 - 327
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Income before income
taxes 1,405 2,049 2,604 3,245

Provision for income
taxes
Current 533 849 1,046 1,471
Future (66) (114) (174) (311)
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Net income for
the period $ 938 $ 1,314 $ 1,732 $ 2,085
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Retained earnings,
beginning of period $70,628 $69,917 $72,015 $69,931

Dividends (748) (635) (1,369) (1,270)
Purchase and
cancellation of
common shares (953) (1,054) (2,513) (1,204)
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Retained earnings,
end of period $69,865 $69,542 $69,865 $69,542
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Earnings per share
Basic $ 0.04 $ 0.05 $ 0.07 $ 0.08
Diluted $ 0.04 $ 0.05 $ 0.07 $ 0.08
Weighted average
shares outstanding
during period
(millions)
- basic 24.8 25.3 25.0 25.3
- diluted 24.9 25.9 25.1 25.9



Enghouse Systems Limited
Consolidated Statements of Comprehensive (Loss) income and Accumulated
Other Comprehensive Loss
(in thousands of Canadian dollars)
(Unaudited)
Three Months ended April 30 Six Months Ended April 30
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2009 2008 2009 2008
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Net income for the
period $ 938 $ 1,314 $ 1,732 $ 2,085

Other comprehensive
(loss) income:
Unrealized (loss) gain
on translating financial
statements of self-
sustaining foreign
operations (641) 142 (948) 2,624
Transfer to net
income of realized
gains on available
for sale investments,
net of tax of $80 (156) (209) (156) (209)
Unrealized (loss) gain
on available for sale
investments, net of
tax of ($230)
(six months - ($480)) (447) 75 (934) 366
Unrealized foreign
currency translation
gain (loss) on
available for sale
investments, net of
tax of $148
(six months - $339) 288 32 660 (30)
----------------------------------------------

Other comprehensive
(loss) income $ (956) $ 40 $(1,378) $ 2,751
----------------------------------------------
----------------------------------------------

Comprehensive
(loss) income $ (18) $ 1,354 $ 354 $ 4,836
----------------------------------------------
----------------------------------------------

Accumulated other
comprehensive loss,
beginning of period $(3,641) $(10,152) $(3,219) $(12,863)

Other comprehensive
(loss) income (956) 40 (1,378) 2,751
----------------------------------------------

Accumulated other
comprehensive loss,
end of period $(4,597) $(10,112) $(4,597) $(10,112)
----------------------------------------------
----------------------------------------------

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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
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2009 2008 2009 2008
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Cash flows from
operating activities
Net income for
the period $ 938 $ 1,314 $ 1,732 $ 2,085

Add (deduct) items not
involving cash
Amortization of
property and equipment 321 217 659 428
Amortization of
acquired software
and other intangibles 1,713 1,482 3,665 2,942
Stock-based
compensation expense 63 66 81 142
Gain on sale of
short-term investments - (327) - (327)
Future income taxes (66) (114) (174) (311)
----------------------------------------------
Cash flows before
changes in operating
assets and
liabilities 2,969 2,638 5,963 4,959

Changes in operating
assets and liabilities

Decrease (increase)
in accounts
receivable, net 3,445 (428) 4,270 1,311
Increase in prepaid
expenses and other
assets (168) (118) (84) (402)
Increase (decrease)
in accounts payable
and accrued
liabilities 403 1,306 (2,481) (601)
Decrease in current
income taxes payable (1,905) (362) (2,510) (2,637)
(Decrease) increase
in deferred revenue (607) (655) 1,872 1,089
Unrealized foreign
exchange loss (gain) 603 (329) (308) 289
----------------------------------------------
Cash flows from
operating activities 4,740 2,052 6,722 4,008
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Cash flows from
investing activities
Purchase of property
and equipment, net (130) (299) (256) (440)
Acquisitions, net of
cash acquired (6,502) (2,275) (6,860) (2,275)
Proceeds of
short-term investments 12,825 1,575 20,280 310
----------------------------------------------
6,193 (999) 13,164 (2,405)
----------------------------------------------

Cash flows from
financing activities
Issuance of share
capital 897 34 950 1,209
Payment of cash
dividend (621) (635) (1,257) (1,264)
Purchase and
cancellation of
common shares (1,531) (1,510) (4,218) (1,717)
----------------------------------------------
(1,255) (2,111) (4,525) (1,772)
----------------------------------------------

Effect of foreign
exchange rate
changes on cash (503) 81 (390) 702
----------------------------------------------

Net increase in
cash during the
period 9,175 (977) 14,971 533
Cash - beginning
of period 18,127 12,831 12,331 11,321
----------------------------------------------
Cash - end of
period $27,302 $11,854 $27,302 $11,854
----------------------------------------------
----------------------------------------------

Supplementary cash
flow information:

Cash paid during the
period for income
taxes $ 862 $ 683 $ 1,376 $ 3,290

Note: 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, 2009 April 30, 2008 April 30, 2009 April 30, 2008
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Revenue:
Asset Management
Division $ 2,263 $ 2,248 $ 4,740 $ 4,211
Syntellect
Division 14,571 10,556 30,322 19,457
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Total $ 16,834 $ 12,804 $ 35,062 $ 23,668
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Segment Profit
(EBIT):
Asset Management
Division $ (183) $ (202) $ (351) $ (549)
Syntellect
Division 1,718 1,719 3,061 2,343
Corporate (579) (607) (1,128) (1,095)
Foreign
Exchange (55) (53) 75 301
Interest and
other income 504 1,192 947 2,245
------------------------------------------------------------
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Total $ 1,405 $ 2,049 $ 2,604 $ 3,245
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