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Press release from Marketwire

Enghouse Releases First Quarter Results and Announces 25% Increase in Its Dividend

Wednesday, March 09, 2011

Enghouse Releases First Quarter Results and Announces 25% Increase in Its Dividend17:05 EST Wednesday, March 09, 2011MARKHAM, ONTARIO--(Marketwire - March 9, 2011) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited first quarter financial results for the period ended January 31, 2011.First quarter revenue was $28.6 million, compared to $19.5 million reported in the same period last year, an increase of 46%. Operating income for the quarter was $6.9 million compared to $3.7 million in the prior year's first quarter, an increase of 85%. Net income for the first quarter was $3.1 million or $0.12 per share on a diluted basis compared to the prior year's first quarter net income of $1.9 million or $0.08 per share. The increase in revenue was primarily a result of increased license sales in the quarter and contributions from acquisitions. As has become the norm, revenue and operating costs are impacted by the volatility of foreign exchange as outlined in the MD&A.Operating expenses increased to $13.2 million from $9.5 million in the prior year's first quarter and include incremental operating costs related to the Mettoni and Telrex acquisitions, not included in the prior year's first quarter results. Non-cash amortization charges were $2.4 million compared to $1.8 million in the prior year's first quarter and include amortization charges for acquired software and other intangibles from acquired operations, including Mettoni and Telrex. The Company generated cash flows from operations of $9.5 million in the first quarter compared to $2.1 million in the prior year's first quarter. Enghouse closed the quarter with $83.4 million in cash and short-term investments, after payment of approximately $2.5 million related to the final holdbacks on the Mettoni and Telrex acquisitions, compared to $78.3 million at October 31, 2010. The Company continues to have no long-term debt and did not repurchase any shares in the quarter. The Board of Directors today authorized a 25% increase to the eligible quarterly dividend to $0.05 per common share, payable on May 31, 2011 to shareholders of record at the close of business on May 17, 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. Operating 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)January 31, 2011October 31, 2010AssetsCurrentCash$64,247$46,640Short-term investments19,19631,627Accounts receivable, net27,95624,500Income tax receivable-591Future income taxes438447Prepaid expenses and other assets3,5313,360115,368107,165Property and equipment, net1,7401,844Acquired software and other intangibles, net31,63034,330Goodwill34,16835,137Future income taxes2,6802,951$185,586$181,427LiabilitiesCurrentAccounts payable and accrued liabilities17,42920,115Income taxes payable508-Dividend payable1,0071,007Deferred revenue31,59126,04050,53547,162Future income taxes11,91012,571Long-term income taxes payable522522Deferred revenue67479063,64161,045Shareholders' EquityShare capital50,70550,705Contributed surplus2,5402,429Retained earnings81,71179,606Accumulated other comprehensive loss(13,011)(12,358)121,945120,382$185,586$181,427Enghouse Systems LimitedConsolidated Statements of Operations and Retained EarningsFor the three months ended January 31(in thousands of Canadian dollars except per share amounts)(Unaudited)20112010RevenueSoftware licenses$10,623$5,989Services17,22412,778Hardware72276928,56919,536Cost of salesSoftware licenses1,557936Services6,3144,887Hardware5604668,4316,289Gross margin20,13813,247Operating expensesSelling, general and administrative9,0716,249Research and development3,8632,969Amortization of property and equipment27530013,2099,518Income before the undernoted6,9293,729Amortization of acquired software and other intangibles(2,440)(1,801)Foreign exchange (loss) gain(329)82Other income3564Interest income, net129151Income before income taxes$4,292$2,725Provision for income taxesCurrent1,305797Future(125)25Net income for the period$3,112$1,903Retained earnings, beginning of period79,60673,142Dividends(1,007)(754)Retained earnings, end of period$81,711$74,291Earnings per shareBasic$0.12$0.08Diluted$0.12$0.08Weighted average shares outstanding during period (millions)- basic25.224.9- diluted25.525.1Enghouse Systems LimitedConsolidated Statements of Comprehensive Income and Accumulated Other Comprehensive LossFor the three months ended January 31 (in thousands of Canadian dollars) (Unaudited)20112010Net income for the period$3,112$1,903Other comprehensive income:Unrealized loss on translating financial statements of self-sustaining foreign operations(650)(1,364)Transfer to net income of realized gains on available for sale investments, net of tax of ($1) (Q1/10 ($170))(2)(394)Unrealized gain on available for sale investments, net of tax of $4 (Q1/10 – $290)20670Unrealized foreign currency translation loss on available for sale investments, net of tax of ($4) (Q1/10 – ($21))(21)(49)Other comprehensive loss$(653)$(1,137)Comprehensive income$2,459$766Accumulated other comprehensive loss, beginning of period$(12,358)$(8,759)Other comprehensive loss(653)(1,137)Accumulated other comprehensive loss, end of period$(13,011)$(9,896)Enghouse Systems Limited Consolidated Statements of Cash Flows For the three months ended January 31 (in thousands of Canadian dollars) (Unaudited)20112010Cash flows from operating activitiesNet income for the period$3,112$1,903Add (deduct) items not involving cashAmortization of property and equipment275300Amortization of acquired software and other intangibles2,4401,801Gain on sale of short-term investments(3)(564)Stock-based compensation expense11150Future income taxes(125)25Cash flows before changes in operating assets and liabilities5,8103,515Changes in operating assets and liabilitiesIncrease in accounts receivable, net(3,830)(927)Increase in prepaid expenses and other assets(217)(306)Increase (decrease) in accounts payable and accrued liabilities788(3,712)Increase (decrease) in current income taxes payable1,105(732)Increase in deferred revenue5,8604,165Unrealized foreign exchange loss1887Cash flows from operating activities9,5342,090Cash flows from investing activitiesPurchase of property and equipment, net(176)(224)Acquisitions, net of cash acquired(2,450)(5,529)Proceeds from sale (purchase) of short-term investments12,443(1,014)9,817(6,767)Cash flows from financing activitiesIssuance of share capital-737Payment of cash dividend(1,007)(746)(1,007)(9)Effect of foreign exchange rate changes on cash(737)(297)Net increase (decrease) in cash during the period17,607(4,983)Cash – beginning of period46,64039,276Cash – end of period$64,247$34,293Supplementary cash flow information:Cash paid during the period for income taxes$326$1,580Note: Cash excludes short-term investments Enghouse Systems LimitedSelected Segment Reporting Information(in thousands of Canadian dollars)(Unaudited)For the three months ended January 3120112010Revenue:Asset Management Group$3,069$2,862Interaction Management Group25,50016,674Total$28,569$19,536Segment Profit (EBIT):Asset Management Group$643$26Interaction Management Group4,6962,441Corporate expenses(850)(539)Foreign exchange(329)82Interest and other income132715Total$4,292$2,725FOR FURTHER INFORMATION PLEASE CONTACT: Stephen SadlerEnghouse Systems LimitedChief Executive Officer(905) 946-3200investor@enghouse.com