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Press release from Marketwire

Enghouse Releases Third Quarter Results

Thursday, September 02, 2010

Enghouse Releases Third Quarter Results17:00 EDT Thursday, September 02, 2010MARKHAM, ONTARIO--(Marketwire - Sept. 2, 2010) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited third quarter financial results for the period ended July 31, 2010.Third quarter revenue was $26.0 million, compared to $23.4 million reported in the same period last year, an increase of approximately 11%. Net income for the third quarter was $3.2 million or $0.13 per share on a diluted basis compared to the prior year's third quarter net income of $2.4 million or $0.10 per share. The increase in revenue was the result of increased license and services revenue attributable to recent acquisitions Pulse Voice Inc. ("Pulse") acquired November 1, 2009, Mettoni Ltd. ("Mettoni") acquired April 6, 2010 and Telrex LLC ("Telrex") acquired June 1, 2010. 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 $12.5 million from $10.6 million in the prior year's third quarter and include incremental operating costs related to acquisitions and the impact of foreign exchange on U.S. dollar denominated operating expenses converted to Canadian dollars. Non-cash amortization charges were $2.4 million compared to $1.8 million in the prior year's third quarter and include amortization charges for acquired software and other intangibles from recently acquired operations which added $0.8 million to amortization expense in the quarter.The Company generated cash flows from operations of $9.1 million in the third quarter compared to $7.2 million in the prior year's third quarter, closing the quarter with $77.1 million in cash and short-term investments compared to $93.2 million at October 31, 2009, which is after payment of Mettoni acquisition costs of approximately $22.3 million, $4.6 million for Pulse and $3.5 million for the Telrex acquisition. The Company continues to have no long-term debt. The Board of Directors today authorized an eligible quarterly dividend of $0.04 per common share, payable on November 30, 2010 to shareholders of record at the close of business on November 16, 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 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, October 31, 2010 2009 ---------------------------------------------------------------------------- Assets Current Cash $ 47,459 $ 39,276 Short-term investments 29,681 53,876 Accounts receivable, net 23,293 17,017 Future income taxes 1,245 973 Prepaid expenses and other assets 4,022 2,434 ------------------------- 105,700 113,576 ------------------------- Property and equipment, net 2,006 1,576 Acquired software and other intangibles, net 36,550 22,934 Goodwill 36,051 19,965 Future income taxes 3,725 3,183 ------------------------- $ 184,032 $ 161,234 ------------------------- ------------------------- Liabilities Current Accounts payable and accrued liabilities 19,777 17,107 Income taxes payable 1,540 1,473 Dividends payable 1,007 746 Deferred revenue 28,771 15,765 ------------------------- 51,095 35,091 Future income taxes 12,528 8,693 Long-term income taxes payable 588 1,043 Deferred revenue 616 197 ------------------------- 64,827 45,024 Shareholders' Equity Share capital 50,685 49,780 Contributed surplus 2,318 2,047 Retained earnings 77,186 73,142 Accumulated other comprehensive loss (10,984) (8,759) ------------------------- 119,205 116,210 $ 184,032 $ 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 Nine months ended July 31 July 31 ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- Revenue Software licenses $ 8,387 $ 7,889 $ 21,404 $ 17,450 Services 16,929 13,747 43,401 37,810 Hardware 715 1,717 2,025 3,155 ---------------------------------------- 26,031 23,353 66,830 58,415 ---------------------------------------- Cost of sales Software licenses 1,272 1,517 3,443 3,029 Services 5,992 4,883 15,937 14,751 Hardware 542 1,238 1,386 2,518 ---------------------------------------- 7,806 7,638 20,766 20,298 Gross margin 18,225 15,715 46,064 38,117 Operating expenses Selling, general and administrative 9,173 7,118 22,365 17,649 Research and development 2,922 3,152 8,990 9,117 Amortization of property and equipment 369 320 975 979 ---------------------------------------- 12,464 10,590 32,330 27,745 ---------------------------------------- Income before the undernoted 5,761 5,125 13,734 10,372 Amortization of acquired software and other intangibles (2,417) (1,840) (5,983) (5,505) Foreign exchange gain 207 107 148 182 Interest income, net 68 228 295 1,175 Other income 378 24 942 24 ---------------------------------------- Income before income taxes 3,997 3,644 9,136 6,248 Provision for income taxes Current 1,057 373 2,139 1,419 Future (262) 840 185 666 ---------------------------------------- Net income for the period $ 3,202 $ 2,431 $ 6,812 $ 4,163 ---------------------------------------- ---------------------------------------- Retained earnings, beginning of period $ 74,991 $ 69,865 $ 73,142 $ 72,015 Dividends (1,007) (746) (2,768) (2,115) Purchase and cancellation of common shares - (175) - (2,688) ---------------------------------------- Retained earnings, end of period $ 77,186 $ 71,375 $ 77,186 $ 71,375 ---------------------------------------- ---------------------------------------- Earnings per share Basic $ 0.13 $ 0.10 $ 0.27 $ 0.17 Diluted $ 0.13 $ 0.10 $ 0.27 $ 0.17 Weighted average shares outstanding during period (millions) - basic 25.2 24.9 25.1 25.0 - diluted 25.4 25.2 25.3 25.1 Enghouse Systems Limited Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss (in thousands of Canadian dollars) (Unaudited) Three months ended Nine months ended July 31 July 31 ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- Net income for the period $ 3,202 $ 2,431 $ 6,812 $ 4,163 Other comprehensive income (loss): Unrealized gain (loss) on translating financial statements of self-sustaining foreign operations 1,747 (2,891) (2,873) (3,839) Transfer to net income of realized gains on available for sale investments, net of tax of ($114) (nine months - ($284)) (263) (16) (657) (172) Unrealized gain (loss) on available for sale investments, net of tax of $195 (nine months - $613) 451 429 1,416 (505) Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $18 (nine months - ($48)) 41 71 (111) 731 ---------------------------------------- Other comprehensive income (loss) $ 1,976 $ (2,407) $ (2,225) $ (3,785) ---------------------------------------- ---------------------------------------- Comprehensive income $ 5,178 $ 24 $ 4,587 $ 378 ---------------------------------------- ---------------------------------------- Accumulated other comprehensive loss, beginning of period $(12,960) $ (4,597) $ (8,759) $ (3,219) Other comprehensive income (loss) 1,976 (2,407) (2,225) (3,785) ---------------------------------------- Accumulated other comprehensive loss, end of period $(10,984) $ (7,004) $(10,984) $ (7,004) ---------------------------------------- ---------------------------------------- ---------------------------------------------------------------------------- Enghouse Systems Limited Consolidated Statements of Cash Flows (in thousands of Canadian dollars) (Unaudited) For the three months For the nine months ended July 31 ended July 31 ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- Cash flows from operating activities Net income for the period $ 3,202 $ 2,431 $ 6,812 $ 4,163 Add (deduct) items not involving cash Amortization of property and equipment 369 320 975 979 Amortization of acquired software and other intangibles 2,417 1,840 5,983 5,505 Stock-based compensation expense 111 88 271 169 Gain on sale of short-term investments (378) (24) (942) (24) Future income taxes (262) 840 185 666 ----------------------------------------- Cash flows before changes in operating assets and liabilities 5,459 5,495 13,284 11,458 Changes in operating assets and liabilities Decrease (increase) in accounts receivable, net 1,894 (1,144) 1,594 3,126 Decrease (increase) in prepaid expenses and other assets 589 353 (446) 269 Increase (decrease) in accounts payable and accrued liabilities 1,281 4,103 (4,564) 1,622 Increase (decrease) in current income taxes payable 537 133 (861) (2,377) Increase (decrease) in deferred revenue 1,041 (1,932) 8,679 (60) Unrealized foreign exchange (gain) loss (1,691) 164 (1,428) (144) ----------------------------------------- Cash flows from operating activities 9,110 7,172 16,258 13,894 ----------------------------------------- Cash flows from investing activities Purchase of property and equipment, net (51) (98) (609) (354) Acquisitions, net of cash acquired (4,804) (75) (30,131) (6,935) Proceeds from sale of short-term investments 2,583 888 25,287 21,168 ----------------------------------------- (2,272) 715 (5,453) 13,879 ----------------------------------------- Cash flows from financing activities Issuance of share capital - 5 905 955 Payment of cash dividend (1,007) (748) (2,507) (2,005) Purchase and cancellation of common shares - (259) - (4,477) ----------------------------------------- (1,007) (1,002) (1,602) (5,527) ----------------------------------------- Effect of foreign exchange rate changes on cash 602 (1,952) (1,020) (2,342) ----------------------------------------- Net increase in cash during the period 6,433 4,933 8,183 19,904 Cash - beginning of period 41,026 27,302 39,276 12,331 ----------------------------------------- Cash - end of period $ 47,459 $ 32,235 $ 47,459 $ 32,235 ----------------------------------------- ----------------------------------------- Supplementary cash flow information: Cash paid during the period for income taxes $ 333 $ 289 $ 2,418 $ 1,665 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, July 31, July 31, July 31, 2010 2009 2010 2009 ---------------------------------------- Revenue: Asset Management Division $ 3,629 $ 2,481 $ 10,004 $ 7,221 Syntellect Division 22,402 20,872 56,826 51,194 ---------------------------------------- Total $ 26,031 $ 23,353 $ 66,830 $ 58,415 ---------------------------------------- ---------------------------------------- Segment Profit (EBIT): Asset Management Division $ 1,268 $ (89) $ 2,067 $ (440) Syntellect Division 2,650 4,070 7,549 7,131 Corporate (574) (696) (1,865) (1,824) Foreign Exchange 207 107 148 182 Interest and other income 446 252 1,237 1,199 ---------------------------------------- ---------------------------------------- Total $ 3,997 $ 3,644 $ 9,136 $ 6,248 ---------------------------------------- ---------------------------------------- ---------------------------------------------------------------------------- FOR FURTHER INFORMATION PLEASE CONTACT: Enghouse Systems Limited Stephen Sadler Chief Executive Officer (905) 946-3200 investor@enghouse.com