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Press release from Marketwire

Enghouse Releases Fourth Quarter Results and Announces Dividend

Wednesday, December 15, 2010

Enghouse Releases Fourth Quarter Results and Announces Dividend17:00 EST Wednesday, December 15, 2010MARKHAM, ONTARIO--(Marketwire - Dec. 15, 2010) - Enghouse Systems Limited (TSX:ESL) today announced its fourth quarter (unaudited) and year end financial results for the period ended October 31, 2010.Fourth quarter revenue was $27.4 million compared to $20.0 million reported in the fourth quarter of last year, an increase of 37%. Operating income was $6.2 million compared to $5.2 million in the prior year's fourth quarter, an increase of 20%. Net income for the fourth quarter was $3.4 million or $0.13 per diluted share compared to $2.6 million or $0.10 per diluted share in the fourth quarter of fiscal 2009. For the fiscal year, revenue was $94.2 million compared to $78.4 million in the prior year, an increase of 20%, while operating income was $20.0 million compared to $15.6 million in the prior year, an increase of 28%. Net income for the fiscal year was $10.2 million or $0.40 per diluted share compared to $6.7 million or $0.27 per diluted share in the prior year. The increase in revenue in the quarter and fiscal year is attributable to stronger revenue and contributions from acquired operations, Telrex, Mettoni and Pulse Voice. Operating expenses increased to $45.6 million for the year compared to $36.8 million in the prior year as a result of incremental costs related to acquired operations. As has become the norm, revenue and operating costs were also impacted by the continued volatility of foreign exchange as outlined in the Management's Discussion and Analysis ("MD&A") as filed on SEDAR.The Company recorded non-cash amortization charges of $2.5 million in the quarter compared to $1.8 million in the prior year's fourth quarter. For the fiscal year, the Company reported amortization charges of $8.5 million compared to $7.3 million. The Company generated operating cash flows of $18.6 million in the fiscal year, compared to $15.8 million in the prior fiscal year and closed the year with $78.3 million in cash and short-term investments. The Company was not active during the year in its normal course issuer buyback. The Company has spent $30.1 million in the fiscal year on acquisitions and $3.5 million on dividends. Enghouse continues to have no long-term debt. Stephen Sadler, Chairman and Chief Executive Officer said "We are pleased with our progress in the year, expanding our presence in Europe, integrating and aligning our product offering and growing our revenue while remaining focused on generating strong operating cash flows."At its meeting held today, the Board of Directors authorized the payment of an eligible quarterly dividend of $0.04 per common share payable on February 28, 2011 to shareholders of record as at the close of business on February 14, 2011.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 income is not a measure recognized by generally accepted accounting principles ("GAAP") and does not have standardized meaning in accordance with such principles. Therefore, operating income may not be comparable to similar measures presented by other issuers. Operating income is calculated as net income before amortization of acquired software and other intangibles, net interest income, other income, foreign exchange gains and losses and the provision for income taxes. This is denoted as "Income before the undernoted" on the Consolidated Statements of Operations and Retained Earnings of the Company. Management uses operating income to evaluate performance as it excludes amortization of software and intangibles and foreign exchange gains and losses.Enghouse Systems LimitedConsolidated Balance Sheets(in thousands of Canadian dollars)(Unaudited)October 31, 2010October 31, 2009AssetsCurrentCash$46,640$39,276Short-term investments31,62753,876Accounts receivable, net24,50017,017Income tax receivable591-Future income taxes447973Prepaid expenses and other assets3,3602,434107,165113,576Property and equipment, net1,8441,576Acquired software and other intangibles, net34,33022,934Goodwill35,13719,965Future income taxes2,9513,183$181,427$161,234LiabilitiesCurrentAccounts payable and accrued liabilities$20,115$17,107Income taxes payable-1,473Dividend payable1,007746Deferred revenue26,04015,76547,16235,091Future income taxes12,5718,693Long-term income taxes payable5221,043Deferred revenue79019761,04545,024Shareholders' EquityShare capital50,70549,780Contributed surplus2,4292,047Retained earnings79,60673,142Accumulated other comprehensive loss(12,358)(8,759)120,382116,210$181,427$161,234Enghouse Systems LimitedConsolidated Statements of Operations and Retained Earnings(in thousands of Canadian dollars except per share amounts)(Unaudited)Three months ended October 31Twelve months ended October 312010200920102009RevenueSoftware licenses$8,794$5,683$30,198$23,133Services17,90313,73761,30451,547Hardware6815832,7063,73827,37820,00394,20878,418Cost of salesSoftware licenses9207444,3633,773Services6,4924,51222,42919,263Hardware4595191,8453,0377,8715,77528,63726,073Gross margin19,50714,22865,57152,345Operating expensesSelling, general and administrative9,4425,90331,80723,552Research and development3,4872,83412,47711,951Amortization of property and equipment3562961,3311,27513,2859,03345,61536,778Income before the undernoted6,2225,19519,95615,567Amortization of acquired software and other intangibles(2,475)(1,826)(8,458)(7,331)Interest income, net921343871,309Other income, net2032121,145236Foreign exchange gain9012238194Income before income taxes4,1323,72713,2689,975Provision for income taxesCurrent(1,504)(317)6351,102Future2,2101,4732,3952,139Net income for the period$3,426$2,571$10,238$6,734Retained earnings, beginning of period$77,186$71,375$73,142$72,015Dividends(1,006)(746)(3,774)(2,861)Purchase and cancellation of common shares-(58)-(2,746)Retained earnings, end of period$79,606$73,142$79.606$73,142Earnings per shareBasic$0.14$0.10$0.41$0.27Diluted$0.13$0.10$0.40$0.27Weighted average shares outstanding during period (millions)- basic25.224.925.124.9- diluted25.425.225.325.1Enghouse Systems LimitedConsolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss(in thousands of Canadian dollars)(Unaudited)Three months ended October 31Twelve months ended October 312010200920102009Net income for the period$3,426$2,571$10,238$6,734Other comprehensive loss:Unrealized (loss) gain on translating financial statements of self-sustaining foreign operations(1,171)(1,836)(4,044)(5,675)Transfer to net income of realized gains on available for sale investments, net of tax of ($121) (year to date – ($244))(646)(140)(1,303)(312)Unrealized gain on available for sale investments, net of tax of $87 (year to date – $352)4651,2251,881720Unrealized foreign currency translation loss on available for sale investments, net of tax of ($4) (year to date – ($25))(22)(1,004)(133)(273)Other comprehensive loss$(1,374)$(1,755)$(3,599)$(5,540)Comprehensive income$2,052$816$6,639$1,194Accumulated other comprehensive loss, beginning of period$(10,984)$(7,004)$(8,759)$( 3,219)Other comprehensive loss(1,374)(1,755)(3,599)(5,540)Accumulated other comprehensive loss, end of period$(12,358)$(8,759)$( 12,358)$( 8,759)Enghouse Systems LimitedConsolidated Statements of Cash Flows(in thousands of Canadian dollars)(Unaudited)For the three months ended October 31For the twelve months ended October 312010200920102009Cash flows from operating activitiesNet income for the period$3,426$2,571$10,238$6,734Add (deduct) items not involving cashAmortization of property and equipment3562961,3311,275Amortization of acquired software and other intangibles2,4751,8268,4587,331Stock-based compensation expense11171382240Gain on sale of short-term investments(605)(212)(1,547)(236)Future income taxes2,2101,4732,3952,139Cash flows before changes in operating assets and liabilities7,9736,02521,25717,483Changes in operating assets and liabilities(Increase) decrease in accounts receivable, net(1,443)(967)1512,159Decrease in prepaid expenses and other assets640464194733(Decrease) increase in accounts payable and accrued liabilities(1,023)(142)(5,587)1,480Decrease in current income taxes payable(2,379)(1,221)(3,240)(3,598)(Decrease) increase in deferred revenue(2,350)(2,235)6,329(2,295)Unrealized foreign exchange loss (gain)95428(474)(116)Cash flows from operating activities2,3721,95218,63015,846Cash flows from investing activitiesPurchase of property and equipment, net(278)(20)(887)(374)Acquisitions, net of cash acquired--(30,131)(6,935)Proceeds from sale of short-term investments(1,623)5,93123,66427,099(1,901)5,911(7,354)19,790Cash flows from financing activitiesIssuance of share capital20519251,006Payment of cash dividends(1,007)(746)(3,514)(2,751)Purchase and cancellation of common shares-(83)-(4,560)(987)(778)(2,589)(6,305)Effect of foreign exchange rate changes on cash(303)(44)(1,323)(2,386)Net (decrease) increase in cash during the period(819)7,0417,36426,945Cash – beginning of period47,45932,23539,27612,331Cash – end of period$46,640$39,276$46,640$39,276Supplementary cash flow information:Cash paid during the period for income taxes$91$-$2,509$1,665Note: Cash excludes short-term investments Enghouse Systems LimitedSelected Segment Reporting Information(in thousands of Canadian dollars)(Unaudited)Three Months endedTwelve Months endedOctober 31, 2010October 31, 2009October 31, 2010October 31, 2009Revenue:Asset Management Group$3,499$2,306$13,503$9,527Interaction Management Group23,87917,69780,70568,891Total$27,378$20,003$94,208$78,418Segment Profit (EBIT):Asset Management Group$843$209$2,910$(231)Interaction Management Group3,7383,79811,28710,929Corporate(834)(638)(2,699)(2,462)Foreign Exchange9012238194Interest and other income2953461,5321,545Total$4,132$3,727$13,268$9,975FOR FURTHER INFORMATION PLEASE CONTACT: Stephen SadlerEnghouse Systems LimitedChief Executive Officer(905)