MARKHAM, ONTARIO--(Marketwire - Sept. 1, 2011) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited third quarter financial results for the period ended July 31, 2011.
Third quarter revenue was $31.8 million, compared to $26.0 million reported in the same period last year, an increase of approximately 22%. Net income for the third quarter was $4.6 million or $0.18 per share on a diluted basis compared to the prior year's third quarter net income of $3.2 million or $0.13 per share. The increase in revenue was the result of increased license and services revenue attributable to recent acquisitions, including CosmoCom Inc. ("Cosmocom") acquired on April 1, 2011. On a year to date basis, revenue was $90.7 million compared to $66.8 million, while net income was $10.9 million or $0.43 per diluted share compared to $6.8 million or $0.27 per diluted share in the prior fiscal year. As has become the norm, revenue and operating costs are impacted by the continued volatility of foreign exchange as outlined in the MD&A.
Operating expenses increased to $15.1 million from $12.5 million in the prior year's third quarter and include incremental operating costs related to acquisitions and the positive impact of foreign exchange on U.S. dollar denominated operating expenses converted to Canadian dollars in the quarter. Non-cash amortization charges were $2.7 million compared to $2.4 million in the prior year's third quarter and include amortization charges for acquired software and other intangibles from recently acquired operations which added $0.3 million to amortization expense in the quarter.
The Company generated cash flows from operating activities of $13.0 million in the third quarter compared to $9.1 million in the prior year's third quarter. On a year to date basis the Company has generated $32.8 million in cash flows from operating activities compared to $16.3 million in the prior year. Enghouse closed the quarter with $88.0 million in cash and short-term investments compared to $78.3 million at October 31, 2010, which is after the net CosmoCom acquisition costs of approximately $14.4 million. The Company continues to have no long-term debt.
The Board of Directors today authorized an eligible quarterly dividend of $0.05 per common share, payable on November 30, 2011 to shareholders of record at the close of business on November 16, 2011. 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) |
| July 31, 2011 |
October 31, 2010 |
||||
| Assets | |||||
| Current | |||||
| Cash | $ 52,272 | $ 46,640 | |||
| Short-term investments | 35,683 | 31,627 | |||
| Accounts receivable, net | 23,800 | 24,500 | |||
| Income tax receivable | - | 591 | |||
| Future income taxes | 542 | 447 | |||
| Prepaid expenses and other assets | 3,519 | 3,360 | |||
| 115,816 | 107,165 | ||||
| Property and equipment, net | 1,702 | 1,844 | |||
| Acquired software and other intangibles, net | 31,870 | 34,330 | |||
| Goodwill | 43,309 | 35,137 | |||
| Future income taxes | 3,166 | 2,951 | |||
| $ 195,863 | $ 181,427 | ||||
| Liabilities | |||||
| Current | |||||
| Accounts payable and accrued liabilities | 23,370 | 20,115 | |||
| Income taxes payable | 1,609 | - | |||
| Dividends payable | 1,262 | 1,007 | |||
| Deferred revenue | 30,200 | 26,040 | |||
| 56,441 | 47,162 | ||||
| Future income taxes | 12,138 | 12,571 | |||
| Long-term income taxes payable | 574 | 522 | |||
| Deferred revenue | 1,190 | 790 | |||
| 70,343 | 61,045 | ||||
| Shareholders' Equity | |||||
| Share capital | 51,260 | 50,705 | |||
| Contributed surplus | 2,697 | 2,429 | |||
| Retained earnings | 86,960 | 79,606 | |||
| Accumulated other comprehensive loss | (15,397 | ) | (12,358 | ) | |
| 125,520 | 120,382 | ||||
| $ 195,863 | $ 181,427 | ||||
| Enghouse Systems Limited |
| Consolidated Statements of Operations and Retained Earnings |
| (in thousands of Canadian dollars except per share amounts) |
| (Unaudited) |
| Three months ended July 31 | Nine months ended July 31 | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Revenue | |||||||||||||||||
| Software licenses | $ | 11,732 | $ | 8,387 | $ | 34,001 | $ | 21,404 | |||||||||
| Services | 19,572 | 16,929 | 54,333 | 43,401 | |||||||||||||
| Hardware | 516 | 715 | 2,389 | 2,025 | |||||||||||||
| 31,820 | 26,031 | 90,723 | 66,830 | ||||||||||||||
| Cost of sales | |||||||||||||||||
| Software licenses | 909 | 1,272 | 4,439 | 3,443 | |||||||||||||
| Services | 6,684 | 5,992 | 19,763 | 15,937 | |||||||||||||
| Hardware | 317 | 542 | 1,729 | 1,386 | |||||||||||||
| 7,910 | 7,806 | 25,931 | 20,766 | ||||||||||||||
| Gross margin | 23,910 | 18,225 | 64,792 | 46,064 | |||||||||||||
| Operating expenses | |||||||||||||||||
| Selling, general and administrative | 11,094 | 9,173 | 29,182 | 22,365 | |||||||||||||
| Research and development | 3,725 | 2,922 | 11,459 | 8,990 | |||||||||||||
| Amortization of property and equipment | 264 | 369 | 823 | 975 | |||||||||||||
| 15,083 | 12,464 | 41,464 | 32,330 | ||||||||||||||
| Income before the undernoted | 8,827 | 5,761 | 23,328 | 13,734 | |||||||||||||
| Amortization of acquired software and other intangibles | (2,670 | ) | (2,417 | ) | (7,604 | ) | (5,983 | ) | |||||||||
| Foreign exchange (loss) gain | (146 | ) | 207 | (1,364 | ) | 148 | |||||||||||
| Interest income, net | 144 | 68 | 393 | 295 | |||||||||||||
| Other income | 61 | 378 | 169 | 942 | |||||||||||||
| Income before income taxes | 6,216 | 3,997 | 14,922 | 9,136 | |||||||||||||
| Provision for income taxes | |||||||||||||||||
| Current | 1,563 | 1,057 | 4,120 | 2,139 | |||||||||||||
| Future | 60 | (262 | ) | (114 | ) | 185 | |||||||||||
| Net income for the period | $ | 4,593 | $ | 3,202 | $ | 10,916 | $ | 6,812 | |||||||||
| Retained earnings, beginning of period | $ | 83,629 | $ | 74,991 | $ | 79,606 | $ | 73,142 | |||||||||
| Dividends | (1,262 | ) | (1,007 | ) | (3,529 | ) | (2,768 | ) | |||||||||
| Purchase and cancellation of common shares | - | - | (33 | ) | - | ||||||||||||
| Retained earnings, end of period | $ | 86,960 | $ | 77,186 | $ | 86,960 | $ | 77,186 | |||||||||
| Earnings per share | |||||||||||||||||
| Basic | $ | 0.18 | $ | 0.13 | $ | 0.43 | $ | 0.27 | |||||||||
| Diluted | $ | 0.18 | $ | 0.13 | $ | 0.43 | $ | 0.27 | |||||||||
| Weighted average shares outstanding during period (millions) - basic |
25.2 |
25.2 |
25.2 |
25.1 |
|||||||||||||
| - diluted | 25.6 | 25.4 | 25.5 | 25.3 | |||||||||||||
| Enghouse Systems Limited |
| Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| Three months ended July 31 | Nine months ended July 31 | ||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||
| Net income for the period | $ | 4,593 | $ | 3,202 | $ | 10,916 | $ | 6,812 | |||||
| Other comprehensive (loss) income: | |||||||||||||
| Unrealized (loss) gain on translating financial statements of self-sustaining foreign operations | (409 |
) | 1,747 |
(3,563 |
) | (2,873 |
) | ||||||
| Transfer to net income of realized gains on available for sale investments, net of tax of ($9) (nine months – ($26)) | (51 |
) | (263 |
) | (142 |
) | (657 |
) | |||||
| Unrealized gain on available for sale investments, net of tax of $48 (nine months – $137) | 254 |
451 |
735 |
1,416 |
|||||||||
| Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $1 (nine months – ($13)) | 4 |
41 |
(69 |
) | (111 |
) | |||||||
| Other comprehensive (loss) income | $ | (202 | ) | $ | 1,976 | $ | (3,039 | ) | $ | (2,225 | ) | ||
| Comprehensive income | $ | 4,391 | $ | 5,178 | $ | 7,877 | $ | 4,587 | |||||
| Accumulated other comprehensive loss, beginning of period | $ | (15,195 | ) | $ | (12,960 | ) | $ | (12,358 | ) | $ | (8,759 | ) | |
| Other comprehensive (loss) income | (202 | ) | 1,976 | (3,039 | ) | (2,225 | ) | ||||||
| Accumulated other comprehensive loss, end of period | $ | (15,397 | ) | $ | (10,984 | ) | $ | (15,397 | ) | $ | (10,984 | ) | |
| Enghouse Systems Limited |
| Consolidated Statements of Cash Flows |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| For the three months ended July 31 |
For the nine months ended July 31 |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Cash flows from operating activities | ||||||||||||||||
| Net income for the period | $ | 4,593 | $ | 3,202 | $ | 10,916 | $ | 6,812 | ||||||||
| Add (deduct) items not involving cash | ||||||||||||||||
| Amortization of property and equipment | 264 | 369 | 823 | 975 | ||||||||||||
| Amortization of acquired software and other intangibles | 2,670 | 2,417 | 7,604 | 5,983 | ||||||||||||
| Stock-based compensation expense | 151 | 111 | 369 | 271 | ||||||||||||
| Gain on sale of short-term investments | (61 | ) | (378 | ) | (169 | ) | (942 | ) | ||||||||
| Future income taxes | 60 | (262 | ) | (114 | ) | 185 | ||||||||||
| Cash flows before changes in operating assets and liabilities | 7,677 | 5,459 | 19,429 | 13,284 | ||||||||||||
| Changes in operating assets and liabilities | ||||||||||||||||
| Decrease in accounts receivable, net | 8,574 | 1,894 | 5,017 | 1,594 | ||||||||||||
| Decrease (increase) in prepaid expenses and other assets | 222 | 589 | 22 | (446 | ) | |||||||||||
| (Decrease) increase in accounts payable and accrued liabilities | (2,671 | ) | 1,281 | 456 | (4,564 | ) | ||||||||||
| Increase (decrease) in current income taxes payable | 530 | 537 | 2,267 | (861 | ) | |||||||||||
| (Decrease) increase in deferred revenue | (2,029 | ) | 1,041 | 3,676 | 8,679 | |||||||||||
| Unrealized foreign exchange loss (gain) | 746 | (1,691 | ) | 1,906 | (1,428 | ) | ||||||||||
| Cash flows from operating activities | 13,049 | 9,110 | 32,773 | 16,258 | ||||||||||||
| Cash flows from investing activities | ||||||||||||||||
| Purchase of property and equipment, net | (190 | ) | (51 | ) | (630 | ) | (609 | ) | ||||||||
| Acquisitions, net of cash acquired | - | (4,804 | ) | (16,842 | ) | (30,131 | ) | |||||||||
| Net (purchase) proceeds from sale of short-term investments | (14,363 | ) | 2,583 | (3,711 | ) | 25,287 | ||||||||||
| (14,553 | ) | (2,272 | ) | (21,183 | ) | (5,453 | ) | |||||||||
| Cash flows from financing activities | ||||||||||||||||
| Issuance of share capital | 324 | - | 464 | 905 | ||||||||||||
| Payment of cash dividend | (1,260 | ) | (1,007 | ) | (3,274 | ) | (2,507 | ) | ||||||||
| Purchase and cancellation of common shares | - | - | (43 | ) | - | |||||||||||
| (936 | ) | (1,007 | ) | (2,853 | ) | (1,602 | ) | |||||||||
| Effect of foreign exchange rate changes on cash | 206 | 602 | (3,105 | ) | (1,020 | ) | ||||||||||
| Net (decrease) increase in cash during the period | (2,234 | ) | 6,433 | 5,632 | 8,183 | |||||||||||
| Cash – beginning of period | 54,506 | 41,026 | 46,640 | 39,276 | ||||||||||||
| Cash – end of period | $ | 52,272 | $ | 47,459 | $ | 52,272 | $ | 47,459 | ||||||||
Supplementary cash flow information: |
||||||||||||||||
| Cash paid during the period for income taxes | $ | 150 | $ | 333 | $ | 1,093 | $ | 2,418 | ||||||||
| Note: Cash excludes short-term investments | ||||||||||||||||
| Enghouse Systems Limited |
| Selected Segment Reporting Information |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| Three Months ended | Nine Months ended | ||||||||||||||
| July 31, 2011 | July 31, 2010 | July 31, 2011 | July 31, 2010 | ||||||||||||
| Revenue: | |||||||||||||||
| Asset Management Group | $ | 3,178 | $ | 3,629 | $ | 9,767 | $ | 10,004 | |||||||
| Interaction Management Group | 28,642 | 22,402 | 80,956 | 56,826 | |||||||||||
| Total | $ | 31,820 | $ | 26,031 | $ | 90,723 | $ | 66,830 | |||||||
| Segment Profit (EBIT): | |||||||||||||||
| Asset Management Group | $ | 968 | $ | 1,268 | $ | 2,292 | $ | 2,067 | |||||||
| Interaction Management Group | 5,985 | 2,650 | 15,771 | 7,549 | |||||||||||
| Corporate | (796 | ) | (574 | ) | (2,339 | ) | (1,865 | ) | |||||||
| Foreign Exchange | (146 | ) | 207 | (1,364 | ) | 148 | |||||||||
| Interest and other income | 205 | 446 | 562 | 1,237 | |||||||||||
| Total | $ | 6,216 | $ | 3,997 | $ | 14,922 | $ | 9,136 | |||||||
Contact Information:
Stephen Sadler
Chief Executive Officer
(905) 946-3200
investor@enghouse.com
www.enghouse.com