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Press release from Marketwire

Enghouse Releases Fourth Quarter Results

Thursday, December 13, 2012

Enghouse Releases Fourth Quarter Results04:04 EST Thursday, December 13, 2012MARKHAM, ONTARIO--(Marketwire - Dec. 13, 2012) - Enghouse Systems Limited (TSX:ESL) today announced its fourth quarter (unaudited) and year-end financial results for the period ended October 31, 2012.Revenue increased by 11% to $136.4 million for the fiscal year, compared to revenue of $122.6 million in the previous fiscal year, as the Company continues to execute against its acquisition strategy. Results from operating activities were $33.2 million compared to $29.3 million last year. Net income for the fiscal year was $20.9 million or $0.80 per diluted share compared to $23.1 million or $0.90 per diluted share in the prior year, which reflected tax credits of $7.9 million booked on transition to International Financial Reporting Standards. Adjusted EBITDA for the fiscal year was $35.1 million or $1.35 per diluted share compared to $32.2 million or $1.26 per diluted share last year.Revenue for the quarter was $39.0 million, an increase of 22% over last year's fourth quarter revenue of $31.8 million. Results from operating activities for the quarter were $9.7 million compared to $9.3 million last year. Net income for the quarter was $8.3 million or $0.32 per diluted share. Adjusted EBITDA for the quarter was $10.2 million or $0.39 per diluted share compared to $9.6 million or $0.37 per diluted share last year.Increased revenue in the quarter reflects incremental revenue from acquisitions including Zeacom and CustomCall acquired earlier in the fiscal year. Revenue also includes hosted and maintenance services revenue of $20.1 million in the quarter, an increase of 24% over last year's fourth quarter. In fiscal 2012, hosted and services revenue was $71.6 million reflecting an increase of $13.1 million over fiscal 2011 attributable to contributions from recent acquisitions and solid performance in organic hosted and maintenance services revenue.Operating expenses were $18.4 million for the quarter and $66.5 million for the fiscal year compared to $14.7 million and $59.4 million respectively last year. This includes research and development costs of $5.9 million and $21.5 million in the quarter and year, respectively, consistent with the Company's investment in software. Non-cash amortization charges for the year were $11.0 million compared to $10.3 million in the prior fiscal year and relate to amortization of acquired software and customer relationships.The Company closed the year with $83.7 million in cash, cash equivalents and short-term investments, which is after the payment of approximately $32.5 million related to the acquisitions and $5.9 million to dividends. The Company generated operating cash flows before non-cash working capital items of $36.2 million in the year compared to $31.8 million in 2011. Enghouse continues to have no long-term debt and did not repurchase any shares in the year. The Board of Directors also announced today an eligible quarterly dividend of $0.065 per common share, payable on February 28, 2013 to shareholders of record at the close of business on February 14, 2013. As previously announced, the Company completed two acquisitions subsequent to year end. On November 1, 2012 the Company acquired 100% of the issued and outstanding common shares of Visionutveckling AB and acquired 100% of the issued and outstanding common shares of Albatross Scandinavia AB on December 1, 2012. Both acquisitions expand the Company's presence in the Nordic region. 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 endedYear endedOctober 31, 2012October 31, 2011October 31, 2012October 31, 2011Total Revenue$38,952$31,836$136,368$122,559Net income for the period$8,34513,34520,87323,065Provision for income taxes(1,639)(5,884)2,234(2,575)Depreciation of property, plant and equipment 444 285 1,386 1,102Amortization of acquired software and customer relationships 3,204 2,687 10,974 10,291Finance income(289)(278)(987)(692)Finance expenses8649269201Other income23(629)(145)(956)Special charges53-5441,775Adjusted EBITDA$10,227$9,575$35,148$32,211Adjusted EBITDA margin26%30%26%26%Adjusted EBITDA per diluted share$ 0.39$ 0.37$1.35$ 1.26Enghouse Systems LimitedConsolidated Statements of Financial Position(in thousands of Canadian dollars)(Unaudited)October 31, 2012October 31, 2011November 1, 2010AssetsCurrent assets:Cash and cash equivalents$59,544$65,624$46,640Short-term investments24,10833,96731,627Accounts receivable, net31,36823,00624,500Income tax receivable--591Prepaid expenses and other assets3,8533,4793,360118,873126,076106,718Non-current assets:Property, plant and equipment3,3651,5431,588Acquired software and customer relationships42,63729,70934,330Goodwill64,35844,24235,137Deferred income taxes10,4779,5483,478Total assets$239,710$211,118$181,251LiabilitiesCurrent liabilities:Trade payables$26,053$22,686$18,808Income taxes payable2,0083,520-Dividends payable1,6761,2671,007Accrued provisions1,6212,4421,307Deferred revenue35,93528,93326,04067,29358,84847,162Non-current liabilities:Deferred income tax liabilities13,2419,52512,571Long-term income taxes payable-420522Deferred revenue1,2361,404790Total liabilities81,77070,19761,045Shareholders' EquityShare capital55,75152,13450,705Contributed surplus2,8472,9702,653Retained earnings99,37184,78266,546Accumulated other comprehensive (loss) gain(29)1,035302Total equity157,940140,921120,206Total liabilities and equity$239,710$211,118$181,251Enghouse Systems LimitedConsolidated Interim Statements of Operations and Comprehensive Income(in thousands of Canadian dollars, except per share amounts)(Unaudited)Three months ended October 31Year ended October 312012201120122011RevenueSoftware licenses$13,107$11,386$45,108$45,691Hosted and maintenance services20,11416,18271,60858,526Professional services5,2104,04918,08315,734Hardware5212191,5692,60838,95231,836136,368122,559Direct costsSoftware licenses1,5327694,1155,208Services8,8616,87131,41026,635Hardware4082371,1341,96610,8017,87736,65933,809Revenue, net of direct costs28,15123,95999,70988,750Operating expensesSelling, general and administrative11,97710,17143,06940,861Research and development5,9474,21321,49215,678Depreciation of property, plant and equipment4442851,3861,102Special charges53-5441,77518,42114,66966,49159,416Results from operating activities9,7309,29033,21829,334Amortization of acquired software and customer relationships(3,204)(2,687)(10,974)(10,291)Finance income289278987692Finance expenses(86)(49)(269)(201)Other income(23)629145956Income before income taxes6,7067,46123,10720,490Provision for (recovery of) income taxes(1,639)(5,884)2,234(2,575)Net income for the period$8,345$13,345$20,873$23,065Foreign currency translation differences from foreign operations 285 2,800 (1,379) (763)Transfer to net income of realized gains on available for sale investments, net of tax of ($nil); 2012 - ($24) - (532) (132) (674)Unrealized (loss) gain on available for sale investments, net of tax of ($7); 2012 - ($173) (37) 1,377 (928) 2,112Unrealized foreign currency translation gain on available for sale investments, net of tax of $nil; 2012 - $1 - 127 8 58Other comprehensive income (loss)2483,772(2,431)733Comprehensive income$8,593$17,117$18,442$23,798Earnings per shareBasic$0.32$0.53$0.82$0.91Diluted$0.32$0.52$0.80$0.90Enghouse Systems LimitedConsolidated Statements of Changes in Equity (in thousands of Canadian dollars)(Unaudited)Share Capital -numberShare capital $Contri-buted surplus $Accum- ulated other compre- hensive income $Retained earnings $Total $Balance - November 1, 201125,337,26252,1342,9701,03584,782140,921Net income----20,87320,873Other Comprehensive Income (net of tax):Cumulative Translation Adjustment---(12)-(12)Transfer to net income of realized gains on available-for-sale investments, net of tax - - - (132) - (132)Unrealized loss on available-for-sale investments, net of tax - - - (928) - (928)Unrealized foreign currency translation gain on available-for-sale investments, net of tax - - - 8 - 8Comprehensive income (loss) for the period---(1,064)20,87319,809Employee share options:Value of services recognized--621--621Proceeds on issuing shares443,3003,617(744)--2,873Purchase and cancellation of common shares---Dividends----(6,284)(6,284)Balance - October 31, 201225,780,56255,7512,847(29)99,371157,940Balance - November 1, 201025,171,66250,7052,65330266,546120,206Net income----23,06523,065Other Comprehensive Income (net of tax):Cumulative Translation Adjustment---(763)-(763)Transfer to net income of realized gains on available-for-sale investments, net of tax - - - (674) - (674)Unrealized gain on available-for-sale investments, net of tax - - - 2,112 - 2,112Unrealized foreign currency translation gain on available-for-sale investments, net of tax - - - 58 - 58Comprehensive income (loss) for the period---73323,06523,798Employee share options:Value of services recognized--625--625Proceeds on issuing shares170,4001,439(308)--1,131Purchase and cancellation of common shares(4,800)(10)--(33)(43)Dividends----(4,796)(4,796)Balance - October 31, 201125,337,26252,1342,9701,03584,782140,921Enghouse Systems LimitedConsolidated Interim Statements of Cash Flows(in thousands of Canadian dollars)(Unaudited)Three months ended October 31Year ended October 312012201120122011Cash flows from operating activitiesNet income$8,345$13,345$20,873$23,065Adjustments for:Depreciation of property, plant and equipment4442851,3861,102Amortization of acquired software and customer relationships3,2042,68710,97410,291Stock-based compensation expense119132621625Income tax (recovery) expense(1,639)(5,884)2,234(2,575)Finance expenses and other income109(580)124(755)10,5829,98536,21231,753Changes in non-cash operating working capital(4,071)(843)(8,245)11,061Income tax paid(1,304)(669)(4,492)(1,762)Net cash flows from operating activities5,2078,47323,47541,052Cash flows from investing activitiesPurchase of property, plant and equipment, net(402)(317)(2,295)(947)Acquisitions, net of cash acquired of $810 (2011 - $2,497)-(194)(32,453)(16,842)Net proceeds from sale of short-term investments16,6984,4068,704695Net cash flows used in investing activities16,2963,895(26,044)(17,094)Cash flows from financing activitiesIssuance of share capital5566672,8731,131Payment of cash dividend(1,669)(1,262)(5,875)(4,536)Purchase and cancellation of common shares---(43)Net cash flows used in financing activities(1,113)(595)(3,002)(3,448)Effect of currency translation adjustments on cash and cash equivalents (709) 1,579 (509) (1,526)Net increase (decrease) in cash and cash equivalents during the period19,68113,352(6,080)18,984Cash and cash equivalents- beginning of period39,86352,27265,62446,640Cash and cash equivalents - end of period$59,544$65,624$59,544$65,624Enghouse Systems LimitedSelected Segment Reporting Information(in thousands of Canadian dollars)(Unaudited)For the three months ended October 31For the year ended October 312012201120122011Revenue:Asset Management Group$5,789$3,075$17,308$12,842Interactive Management Group33,16328,761119,060109,717Total$38,952$31,836$136,368$122,559Segment Profit (EBIT):Asset Management Group$1,910$747$3,828$2,683Interactive Management Group5,4727,07721,90219,977Corporate expenses(856)(1,221)(3,486)(3,617)Finance income289278987692Finance expenses(86)(49)(269)(201)Other income(23)629145956Total$6,706$7,461$23,107$20,490FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Enghouse Systems LimitedStephen SadlerChief Executive Officer(905) 946-3236investor@enghouse.comwww.enghouse.com