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Press release from Marketwire

Enghouse Releases Third Quarter Results

Thursday, September 06, 2012

Enghouse Releases Third Quarter Results17:00 EDT Thursday, September 06, 2012MARKHAM, ONTARIO--(Marketwire - Sept. 6, 2012) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited third quarter financial results for the period ended July 31, 2012.Third quarter revenue was $35.4 million, compared to $31.8 million in the corresponding quarter last year. Results from operating activities for the quarter were $8.3 million compared to $8.5 million in the prior year's third quarter. Net income for the third quarter was $4.3 million or $0.16 per diluted share compared to the prior year's third quarter net income of $4.6 million or $0.18 per diluted share. Adjusted EBITDA for the quarter was $9.2 million or $0.35 per diluted share compared to $8.8 million or $0.34 per diluted share last year. On a year to date basis Adjusted EBITDA was $24.9 million or $0.96 per diluted share compared to $22.6 million or $0.89 per diluted share last year.The increase in revenue continues to reflect incremental revenue contributions from acquisitions, including recently acquired Zeacom Group Limited ("Zeacom"), which closed on June 1, 2012. Revenue also reflects improved hosted and maintenance services contributions of $19.4 million in the quarter, an increase of 28% over last year, largely as a result of incremental hosted revenue contributions from recently acquired CustomCall Data Systems Inc. ("CustomCall"). Hosted and maintenance revenue accounted for 55% of the Company's total revenue in the quarter. On a year to date basis, revenue was $97.4 million up from $90.7 million, while net income increased to $12.5 million or $0.48 per diluted share from $9.7 million or $0.38 per diluted share in the prior year. Operating expenses increased to $17.5 million from $15.4 million in the prior year's third quarter and include operating and acquisition related restructuring charges of $0.5 million related to recently acquired Zeacom and a full quarter's operating costs related to CustomCall. Research and development costs increased to $5.3 million from $3.7 million in the prior year's third quarter as the Company increased its software investment. Non-cash amortization charges were $2.9 million compared to $2.7 million last year and include amortization of acquired software and customer relationships from acquisitions. The Company closed the quarter with $79.7 million in cash, cash equivalents and short-term investments, which is after the payment of approximately $26.7 million related to the acquisitions. Enghouse continues to have no long-term debt and did not repurchase any shares in the quarter. The Board of Directors also announced today an eligible quarterly dividend of $0.065 per common share, payable on November 30, 2012 to shareholders of record at the close of business on November 16, 2012. The Company continues to seek further acquisitions to continue to grow its market share globally.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. Non-IFRS Measures The Company uses non-IFRS measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Company uses results from operating activities and Adjusted EBITDA as a measure of operating performance. Therefore, results from operating activities and Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Results from operating activities are calculated as net income before amortization of acquired software and customer relationships, finance income, finance expenses, other income, and the provision for income taxes. Results from Adjusted EBITDA are calculated as net income before depreciation of property, plant and equipment, amortization of acquired software and customer relationships, finance income, finance expenses, other income, the provision of income tax and special charges for acquisition related restructuring and transaction costs. Management uses results from operating activities and Adjusted EBITDA to evaluate operating performance as they exclude amortization of software and intangibles (which is an accounting allocation of the cost of software and intangible assets arising on acquisition), any impact of finance and tax related activities, asset depreciation, other income and restructuring costs primarily related to acquisitions.The table below reconciles Adjusted EBITDA to net income:Three Months endedNine Months endedJuly 31, 2012July 31, 2011July 31, 2012July 31, 2011Total Revenue$35,427$31,820$97,416$90,723Net income for the period4,2884,57712,5289,720Provision for income taxes1,2441,6253,8733,309Depreciation of property, plant and equipment377261942817Amortization of acquired software and customer relationships2,9492,6707,7707,604Finance income(194)(150)(698)(414)Finance expenses7254183152Other income(13)(256)(168)(327)Special charges491-4911,775Adjusted EBITDA$9,214$8,781$24,921$22,636Adjusted EBITDA margin26%27%26%25%Adjusted EBITDA per diluted share$0.35$0.34$0.96$0.89Enghouse Systems LimitedConsolidated Interim Statements of Financial Position(in thousands of Canadian dollars)(Unaudited)July 31, 2012October 31, 2011November 1, 2010AssetsCurrent assets:Cash and cash equivalents$39,863$65,624$46,640Short-term investments39,83733,96731,627Accounts receivable, net31,57323,00624,500Income tax receivable--591Prepaid expenses and other assets4,1113,4793,360115,384126,076106,718Non-current assets:Property, plant and equipment3,5621,5431,588Acquired software and customer relationships45,65429,70934,330Goodwill62,93343,73435,137Deferred income taxes11,04111,1383,478Total assets$238,574$212,200$181,251LiabilitiesCurrent liabilities:Trade payables$25,478$22,686$18,808Income taxes payable3,3302,878-Dividends payable1,6691,2671,007Accrued provisions1,8872,4421,307Deferred revenue40,97728,93326,04073,34158,20647,162Non-current liabilities:Deferred income tax liabilities14,47610,74312,571Long-term income taxes payable56420522Deferred revenue1,2141,404790Total liabilities89,08770,77361,045Shareholders' EquityShare capital55,08552,13450,705Contributed surplus2,8382,9702,653Retained earnings93,20885,28866,546Accumulated other comprehensive (loss) gain(1,644)1,035302Total equity149,487141,427120,206Total liabilities and equity$238,574$212,200$181,251Enghouse Systems LimitedConsolidated Interim Statements of Operations and Comprehensive Income(in thousands of Canadian dollars, except per share amounts)(Unaudited)Three months ended July 31Nine months ended July 312012201120122011RevenueSoftware licenses$10,853$11,842$32,001$34,305Hosted and maintenance services19,47515,19051,49442,344Professional services4,7274,27212,87311,685Hardware3725161,0482,38935,42731,82097,41690,723Direct costsSoftware licenses8089092,5834,439Services8,5676,68422,54919,764Hardware2423177261,7299,6177,91025,85825,932Revenue, net of direct costs25,81023,91071,55864,791Operating expensesSelling, general and administrative11,25511,40331,09230,690Research and development5,3413,72615,54511,465Depreciation of property, plant and equipment377261942817Special charges491-4911,77517,46415,39048,07044,747Results from operating activities8,3468,52023,48820,044Amortization of acquired software and customer relationships(2,949)(2,670)(7,770)(7,604)Finance income194150698414Finance expenses(72)(54)(183)(152)Other income13256168327Income before income taxes5,5326,20216,40113,029Provision for income taxes1,2441,6253,8733,309Net income for the period$4,288$4,577$12,528$9,720Foreign currency translation differences from foreign operations(373)(409)(1,664)(3,563)Transfer to net income of realized gains on available for sale investments, net of tax of ($nil); nine months - ($24) - (51) (132) (142)Unrealized (loss) gain on available for sale investments, net of tax of ($54); nine months - ($166) (291) 254 (891) 735Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $nil; nine months - $1 - 4 8 (69)Other comprehensive loss(664)(202)(2,679)(3,039)Comprehensive income$3,624$4,375$9,849$6,681Earnings per shareBasic$0.17$0.18$0.49$0.39Diluted$0.16$0.18$0.48$0.38Enghouse Systems LimitedConsolidated Interim Statements of Changes in Equity(in thousands of Canadian dollars)(Unaudited)Share Capital -numberShare capital $Contributed surplus $Accumulated other comprehensive income $Retained earnings $Total $Balance - November 1, 201125,337,26252,1342,9701,03585,288141,427Net income----12,52812,528Other Comprehensive Income (net of tax):Cumulative Translation Adjustment---(1,664)-(1,664)Transfer to net income of realized gains on available-for-sale investments, net of tax - - - (132) - (132)Unrealized gain (loss) on available-for-sale investments, net of tax - - - (891) - (891)Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax - - - 8 - 8Comprehensive income (loss) for the period---(2,679)12,5289,849Employee share options:Value of services recognized--502--502Proceeds on issuing shares332,3002,951(634)--2,317Purchase and cancellation of common shares---Dividends----(4,608)(4,608)Balance - July 31, 201225,669,56255,0852,838(1,644)93,208149,487Balance - November 1, 201025,171,66250,7052,65330266,546120,206Net income----9,7209,720Other Comprehensive Income (net of tax):Cumulative Translation Adjustment---(3,563)-(3,563)Transfer to net income of realized gains on available-for-sale investments, net of tax - - - (142) - (142)Unrealized gain (loss) on available-for-sale investments, net of tax - - - 735 - 735Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax - - - (69) - (69)Comprehensive income (loss) for the period---(3,039)9,7206,681Employee share options:Value of services recognized--493--493Proceeds on issuing shares75,400565(101)--464Purchase and cancellation of common shares(4,800)(10)--(33)(43)Dividends----(3,529)(3,529)Balance - July 31, 201125,242,26251,2603,045(2,737)72,704124,272Enghouse Systems LimitedConsolidated Interim Statements of Cash Flows(in thousands of Canadian dollars)(Unaudited)Three months ended July 31Nine months ended July 312012201120122011Cash flows from operating activitiesNet income$4,288$4,577$12,528$9,720Adjustments for:Depreciation of property, plant and equipment377261942817Amortization of acquired software and customer relationships2,9492,6707,7707,604Stock-based compensation expense216168502493Deferred income tax expense(1,128)62(832)(110)Finance expenses and other income59(202)15(175)Income tax paid(1,360)(150)(3,188)(1,093)5,4017,38617,73717,256Changes in non-cash operating working capital3,3625,8131,22915,737Net cash flows from operating activities8,76313,19918,96632,993Cash flows from investing activitiesPurchase of property, plant and equipment, net(224)(190)(1,893)(630)Finance income(194)(150)(698)(414)Acquisitions, net of cash acquired(26,651)(32,453)(16,648)Net proceeds (purchase) from sale of short-term investments2,565(14,363)(7,994)(3,711)Net cash flows used in investing activities(24,504)(14,703)(43,038)(21,403)Cash flows from financing activitiesIssuance of share capital4413242,317464Payment of cash dividend(1,664)(1,260)(4,206)(3,274)Purchase and cancellation of common shares- --(43)Net cash flows used in financing activities(1,223)(936)(1,889)(2,853)Effect of currency translation adjustments on cash and cash equivalents 440 206 200 (3,105)Net (decrease) increase in cash and cash equivalents during the period(16,524)(2,234)(25,761)5,632Cash and cash equivalents- beginning of period56,38754,50665,62446,640Cash and cash equivalents - end of period$39,863$52,272$39,863$52,272Enghouse Systems LimitedSelected Segment Reporting Information(in thousands of Canadian dollars)(Unaudited)For the three months ended July 31For the nine months ended July 312012201120122011Revenue:Asset Management Group$4,725$3,178$11,519$9,767Interactive Management Group30,70228,64285,89780,956Total$35,427$31,820$97,416$90,723Segment Profit (EBIT):Asset Management Group$1,016$934$1,918$1,936Interactive Management Group5,3835,68516,43012,900Corporate expenses(1,002)(769)(2,630)(2,396)Finance income194150698414Finance expenses(72)(54)(183)(152)Other income13256168327Total$5,532$6,202$16,401$13,029FOR FURTHER INFORMATION PLEASE CONTACT: Kevin DerbyshireEnghouse Systems LimitedChief Corporate Officer(905) 946-3238investor@enghouse.comwww.enghouse.com