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Press release from Marketwire

Enghouse Releases Second Quarter Results

Wednesday, June 02, 2010

Enghouse Releases Second Quarter Results18:04 EDT Wednesday, June 02, 2010MARKHAM, ONTARIO--(Marketwire - June 2, 2010) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited second quarter financial results for the period ended April 30, 2010. Second quarter revenue was $21.3 million, compared to $16.8 million reported in the same period last year, an increase of approximately 26%. Operating income for the quarter was $4.2 million compared to $2.7 million in the prior year's second quarter, an increase of 59%. Net income for the second quarter was $1.7 million or $0.07 per share on a diluted basis compared to the prior year's second quarter net income of $0.9 million or $0.04 per share. On a year to date basis, the Company reported revenue of $40.8 million compared to revenue of $35.1 million in the prior fiscal year. Net income for the year to date was $3.6 million compared to $1.7 million in the prior fiscal year. 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, Mettoni Ltd., acquired April 6, 2010 and Pulse Voice Inc., acquired on November 1, 2009. As has become the norm, revenue and operating costs are impacted by the continued volatility of foreign exchange.Operating expenses increased to $10.3 million from $8.5 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. On a year to date basis, operating costs were $19.9 million compared to $17.2 million in the prior fiscal year. Non-cash amortization charges were $1.8 million compared to $1.7 million in the prior year's second quarter and include amortization charges for acquired software and other intangibles from the acquired operations including, Mettoni and Pulse.The Company generated cash flows from operations of $5.1 million in the second quarter compared to $4.7 million in the prior year's second quarter. Enghouse closed the quarter with $72.6 million in cash and short-term investments compared to $93.2 million at October 31, 2009, which is after payment of the Mettoni acquisition costs of approximately $21.3 million. Since October 31, 2009, the Company has spent $26.8 million on acquisitions and $1.5 million on dividend payments. The Company continues to have no long-term debt.The Board of Directors today authorized an eligible quarterly dividend of $0.04 per share, payable on August 31, 2010 to shareholders of record at the close of business on August 17, 2010. The Company remains committed to its strategy of seeking further acquisitions to continue to diversify its revenue stream and expand its market presence.About EnghouseEnghouse 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, 2010 2009 ---------------------------------------------------------------------------- Assets Current Cash $ 41,026 $ 39,276 Short-term investments 31,593 53,876 Accounts receivable, net 24,856 17,017 Future income taxes 1,269 973 Prepaid expenses and other assets 4,567 2,434 ------------ ------------ 103,311 113,576 ------------ ------------ Property and equipment, net 2,199 1,576 Acquired software and other intangibles, net 33,125 22,934 Goodwill 37,508 19,965 Future income taxes 3,665 3,183 ------------ ------------ $ 179,808 $ 161,234 ------------ ------------ ------------ ------------ Liabilities Current Accounts payable and accrued liabilities 21,506 17,107 Income taxes payable 913 1,473 Dividend payable 1,007 746 Deferred revenue 27,487 15,765 ------------ ------------ 50,913 35,091 Future income taxes 12,662 8,693 Long-term income taxes payable 653 1,043 Deferred revenue 657 197 ------------ ------------ 64,885 45,024 Shareholders' Equity Share capital 50,685 49,780 Contributed surplus 2,207 2,047 Retained earnings 74,991 73,142 Accumulated other comprehensive loss (12,960) (8,759) ------------ ------------ 114,923 116,210 $ 179,808 $ 161,234 ------------ ------------ ------------ ------------ Enghouse Systems Limited Consolidated Statements of Operations and Retained Earnings (in thousands of Canadian dollars except per share amounts) (Unaudited) Three Months ended Six Months Ended April 30 April 30 ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- Revenue Software licenses $ 7,028 $ 4,455 $ 13,017 $ 9,561 Services 13,694 12,019 26,472 24,063 Hardware 541 360 1,310 1,438 ------------------------------------------- 21,263 16,834 40,799 35,062 ------------------------------------------- Cost of sales Software licenses 1,235 488 2,171 1,512 Services 5,058 4,809 9,945 9,868 Hardware 378 329 844 1,280 ------------------------------------------- 6,671 5,626 12,960 12,660 Gross margin 14,592 11,208 27,839 22,402 Operating expenses Selling, general and administrative 6,943 5,217 13,192 10,531 Research and development 3,099 3,001 6,068 5,965 Amortization of property and equipment 306 321 606 659 ------------------------------------------- 10,348 8,539 19,866 17,155 ------------------------------------------- Income before the undernoted 4,244 2,669 7,973 5,247 Amortization of acquired software and other intangibles (1,765) (1,713) (3,566) (3,665) Foreign exchange (loss) gain (141) (55) (59) 75 Interest income, net 76 504 227 947 Other income - - 564 - ------------------------------------------- Income before income taxes 2,414 1,405 5,139 2,604 Provision for income taxes Current 285 533 1,082 1,046 Future 422 (66) 447 (174) ------------------------------------------- Net income for the period $ 1,707 $ 938 $ 3,610 $ 1,732 ------------------------------------------- ------------------------------------------- Retained earnings, beginning of period $ 74,291 $ 70,628 $ 73,142 $ 72,015 Dividends (1,007) (748) (1,761) (1,369) Purchase and cancellation of common shares - (953) - (2,513) ------------------------------------------- Retained earnings, end of period $ 74,991 $ 69,865 $ 74,991 $ 69,865 ------------------------------------------- ------------------------------------------- Earnings per share Basic $ 0.07 $ 0.04 $ 0.14 $ 0.07 Diluted $ 0.07 $ 0.04 $ 0.14 $ 0.07 Weighted average shares outstanding during period (millions) - basic 25.1 24.8 25.0 25.0 - diluted 25.4 24.9 25.2 25.1 Enghouse Systems Limited Consolidated Statements of Comprehensive (Loss) income and Accumulated Other Comprehensive Loss (in thousands of Canadian dollars) (Unaudited) Three months ended Six months ended April April 30 30 ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- Net income for the period $ 1,707 $ 938 $ 3,610 $ 1,732 Other comprehensive loss: Unrealized loss on translating financial statements of self- sustaining foreign operations (3,256) (641) (4,620) (948) Transfer to net income of realized gains on available for sale investments, net of tax of ($170) - (156) (394) (156) Unrealized gain (loss) on available for sale investments, net of tax of $128 (six months - $418) 295 (75) 965 (222) Unrealized foreign currency translation loss on available for sale investments, net of tax of ($45) (six months - ($66)) (103) (84) (152) (52) ----------------------------------------------- Other comprehensive loss $ (3,064) $ (956) $ (4,201) $ (1,378) ----------------------------------------------- ----------------------------------------------- Comprehensive (loss) income $ (1,357) $ (18) $ (591) $ 354 ----------------------------------------------- ----------------------------------------------- Accumulated other comprehensive loss, beginning of period $ (9,896) $ (3,641) $ (8,759) $ (3,219) Other comprehensive loss (3,064) (956) (4,201) (1,378) ----------------------------------------------- Accumulated other comprehensive loss, end of period $ (12,960) $ (4,597) $ (12,960) $ (4,597) ----------------------------------------------- ----------------------------------------------- ---------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- Cash flows from operating activities Net income for the period $ 1,707 $ 938 $ 3,610 $ 1,732 Add (deduct) items not involving cash Amortization of property and equipment 306 321 606 659 Amortization of acquired software and other intangibles 1,765 1,713 3,566 3,665 Stock-based compensation expense 110 63 160 81 Gain on sale of short-term investments - - (564) - Future income taxes 422 (66) 447 (174) -------------------------------------------- Cash flows before changes in operating assets and liabilities 4,310 2,969 7,825 5,963 Changes in operating assets and liabilities Decrease (increase) in accounts receivable, net 627 3,445 (300) 4,270 Increase in prepaid expenses and other assets (729) (168) (1,035) (84) (Decrease) Increase in accounts payable and accrued liabilities (2,133) 403 (5,845) (2,481) Decrease in current income taxes payable (666) (1,905) (1,398) (2,510) Increase (decrease) in deferred revenue 3,473 (607) 7,638 1,872 Unrealized foreign exchange loss (gain) 176 603 263 (308) -------------------------------------------- Cash flows from operating activities 5,058 4,740 7,148 6,722 -------------------------------------------- Cash flows from investing activities Purchase of property and equipment, net (334) (130) (558) (256) Acquisitions, net of cash acquired (19,798) (6,502) (25,327) (6,860) Proceeds of short-term investments 23,718 12,825 22,704 20,280 -------------------------------------------- 3,586 6,193 (3,181) 13,164 -------------------------------------------- Cash flows from financing activities Issuance of share capital 168 897 905 950 Payment of cash dividend (754) (621) (1,500) (1,257) Purchase and cancellation of common shares - (1,531) - (4,218) -------------------------------------------- (586) (1,255) (595) (4,525) -------------------------------------------- Effect of foreign exchange rate changes on cash (1,325) (503) (1,622) (390) -------------------------------------------- Net increase (decrease) in cash during the period 6,733 9,175 1,750 14,971 Cash - beginning of period 34,293 18,127 39,276 12,331 -------------------------------------------- Cash - end of period $ 41,026 $ 27,302 $ 41,026 $ 27,302 -------------------------------------------- -------------------------------------------- Supplementary cash flow information: Cash paid during the period for income taxes $ 505 $ 862 $ 2,085 $ 1,376 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, April 30, April 30, April 30, 2010 2009 2010 2009 ----------------------------------------------- Revenue: Asset Management Division $ 3,513 $ 2,263 $ 6,375 $ 4,740 Syntellect Division 17,750 14,571 34,424 30,322 ----------------------------------------------- Total $ 21,263 $ 16,834 $ 40,799 $ 35,062 ----------------------------------------------- ----------------------------------------------- Segment Profit (EBIT): Asset Management Division $ 773 $ (183) $ 799 $ (351) Syntellect Division 2,458 1,718 4,899 3,061 Corporate (752) (579) (1,291) (1,128) Foreign Exchange (141) (55) (59) 75 Interest and other income 76 504 791 947 ----------------------------------------------- ----------------------------------------------- Total $ 2,414 $ 1,405 $ 5,139 $ 2,604 ----------------------------------------------- ----------------------------------------------- ---------------------------------------------------------------------------- FOR FURTHER INFORMATION PLEASE CONTACT: Enghouse Systems Limited Stephen Sadler Chief Executive Officer (905) 946-3200 investor@enghouse.com