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Press release from Marketwire

Enghouse Releases Third Quarter Results

Thursday, September 01, 2011

Enghouse Releases Third Quarter Results17:00 EDT Thursday, September 01, 2011MARKHAM, 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 $0.05 per common share, payable on November 30, 2011 to shareholders of record at the close of business on November 16, 2011. The Company remains committed to its strategy of seeking further acquisitions to continue to diversify its revenue stream and expand its market presence.About Enghouse Enghouse Systems Limited is a leading global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a larger and more diverse software company through strategic acquisitions and managed growth. Enghouse shares are listed on the Toronto Stock Exchange under the symbol "ESL". Further information about Enghouse may be obtained from the Company's web site at Enghouse Systems LimitedConsolidated Balance Sheets(in thousands of Canadian dollars)(Unaudited)July 31, 2011October 31, 2010AssetsCurrentCash$ 52,272$ 46,640Short-term investments35,68331,627Accounts receivable, net23,80024,500Income tax receivable-591Future income taxes542447Prepaid expenses and other assets3,5193,360115,816107,165Property and equipment, net1,7021,844Acquired software and other intangibles, net31,87034,330Goodwill43,30935,137Future income taxes3,1662,951$ 195,863$ 181,427LiabilitiesCurrentAccounts payable and accrued liabilities23,37020,115Income taxes payable1,609-Dividends payable1,2621,007Deferred revenue30,20026,04056,44147,162Future income taxes12,13812,571Long-term income taxes payable574522Deferred revenue1,19079070,34361,045Shareholders' EquityShare capital51,26050,705Contributed surplus2,6972,429Retained earnings86,96079,606Accumulated other comprehensive loss(15,397)(12,358)125,520120,382$ 195,863$ 181,427Enghouse Systems LimitedConsolidated Statements of Operations and Retained Earnings(in thousands of Canadian dollars except per share amounts)(Unaudited)Three months ended July 31Nine months ended July 312011201020112010RevenueSoftware licenses$11,732$8,387$34,001$21,404Services19,57216,92954,33343,401Hardware5167152,3892,02531,82026,03190,72366,830Cost of salesSoftware licenses9091,2724,4393,443Services6,6845,99219,76315,937Hardware3175421,7291,3867,9107,80625,93120,766Gross margin23,91018,22564,79246,064Operating expensesSelling, general and administrative11,0949,17329,18222,365Research and development3,7252,92211,4598,990Amortization of property and equipment26436982397515,08312,46441,46432,330Income before the undernoted8,8275,76123,32813,734Amortization of acquired software and other intangibles(2,670)(2,417)(7,604)(5,983)Foreign exchange (loss) gain(146)207(1,364)148Interest income, net14468393295Other income61378169942Income before income taxes6,2163,99714,9229,136Provision for income taxesCurrent1,5631,0574,1202,139Future60(262)(114)185Net income for the period$4,593$3,202$10,916$6,812Retained earnings, beginning of period$83,629$74,991$79,606$73,142Dividends(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$77,186Earnings per shareBasic$0.18$0.13$0.43$0.27Diluted$0.18$0.13$0.43$0.27Weighted average shares outstanding during period (millions) - basic 25.2 25.2 25.2 25.1- diluted25.625.425.525.3Enghouse Systems LimitedConsolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss(in thousands of Canadian dollars)(Unaudited)Three months ended July 31Nine months ended July 312011201020112010Net income for the period$4,593$3,202$10,916$6,812Other 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 1,416Unrealized 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$4,587Accumulated other comprehensive loss, beginning of period$(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 LimitedConsolidated Statements of Cash Flows(in thousands of Canadian dollars)(Unaudited)For the three months ended July 31For the nine months ended July 312011201020112010Cash flows from operating activitiesNet income for the period$4,593$3,202$10,916$6,812Add (deduct) items not involving cashAmortization of property and equipment264369823975Amortization of acquired software and other intangibles2,6702,4177,6045,983Stock-based compensation expense151111369271Gain on sale of short-term investments(61)(378)(169)(942)Future income taxes60(262)(114)185Cash flows before changes in operating assets and liabilities7,6775,45919,42913,284Changes in operating assets and liabilitiesDecrease in accounts receivable, net8,5741,8945,0171,594Decrease (increase) in prepaid expenses and other assets22258922(446)(Decrease) increase in accounts payable and accrued liabilities(2,671)1,281456(4,564)Increase (decrease) in current income taxes payable5305372,267(861)(Decrease) increase in deferred revenue(2,029)1,0413,6768,679Unrealized foreign exchange loss (gain)746(1,691)1,906(1,428)Cash flows from operating activities13,0499,11032,77316,258Cash flows from investing activitiesPurchase 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 activitiesIssuance of share capital324-464905Payment 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 cash206602(3,105)(1,020)Net (decrease) increase in cash during the period(2,234)6,4335,6328,183Cash – beginning of period54,50641,02646,64039,276Cash – end of period$52,272$47,459$52,272$47,459Supplementary cash flow information:Cash paid during the period for income taxes$150$333$1,093$2,418Note: Cash excludes short-term investments Enghouse Systems LimitedSelected Segment Reporting Information(in thousands of Canadian dollars)(Unaudited)Three Months endedNine Months endedJuly 31, 2011July 31, 2010July 31, 2011July 31, 2010Revenue:Asset Management Group$3,178$3,629$9,767$10,004Interaction Management Group28,64222,40280,95656,826Total$31,820$26,031$90,723$66,830Segment Profit (EBIT):Asset Management Group$968$1,268$2,292$2,067Interaction Management Group5,9852,65015,7717,549Corporate(796)(574)(2,339)(1,865)Foreign Exchange(146)207(1,364)148Interest and other income2054465621,237Total$6,216$3,997$14,922$9,136FOR FURTHER INFORMATION PLEASE CONTACT: Stephen SadlerEnghouse Systems LimitedChief Executive Officer(905)