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Press release from Marketwire

Enghouse Releases Second Quarter Results

Wednesday, June 05, 2013

Enghouse Releases Second Quarter Results

17:00 EDT Wednesday, June 05, 2013

MARKHAM, ONTARIO--(Marketwired - June 5, 2013) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited second quarter financial results for the period ended April 30, 2013.

Second quarter revenue was $44.5 million, an increase of 41% over revenue of $31.5 million in the second quarter last year, with incremental revenue coming from acquisitions. Revenue includes hosted and maintenance services contributions of $23.4 million in the quarter, an increase of 46% over last year's revenue of $16.0 million. Adjusted EBITDA for the quarter was $10.7 million or $0.40 per diluted share compared to $7.8 million or $0.30 per diluted share in last year's second quarter. Results from operating activities for the quarter were $9.7 million compared to $7.6 million in the prior year's second quarter and include special charges booked on acquisitions of $0.6 million in the quarter. Excluding special charges related to restructuring of acquisitions, results from operating activities would be $10.3 million, an increase of 36% over the prior year. Net income for the second quarter was $4.9 million or $0.19 per diluted share compared to the prior year's second quarter net income of $4.2 million or $0.16 per share. On a year to date basis, revenue was $86.5 million compared to $62.0 million, an increase of 39%. Adjusted EBITDA for the year to date was $20.3 million or $0.77 per diluted share compared to $15.7 million or $0.60 per share.

Operating expenses increased to $22.3 million from $15.7 million in the prior year's second quarter and include incremental operating costs related to acquisitions as well as special charges related to restructuring of acquired operations. Non-cash amortization charges in the quarter were $3.9 million compared to $2.4 million in the prior year's second quarter and include amortization charges for acquired software and customer relationships including operations acquired in the current year.

On March 1, 2013 the Company completed the acquisition of Locus Holdings AS ("Locus") of Norway for a cash purchase price of approximately $12.7 million, subject to certain price adjustments. Locus is a leading supplier of fleet management solutions for the Public Safety and Transport & Logistics (including Security) sectors in the Scandinavian market and has a dominant position in the Norwegian Public Safety sector. Its products are installed in police cars, ambulances, rescue helicopters and fire brigades. Locus's transportation, logistics and M2M products are also well established in these markets.

Enghouse closed the quarter with $80.9 million in cash, cash equivalents and short-term investments, compared to $80.1 million at January 31, 2013 and $83.7 million at October 31, 2012. This reflects cash paid in the quarter of approximately $10.2 million on the acquisition of Locus. It also reflects a cash dividend of $1.7 million paid in March 2013. The Company continues to have no long-term debt.

The Board of Directors has approved an eligible quarterly dividend to $0.08 per common share, payable on August 31, 2013 to shareholders of record at the close of business on August 17, 2013.

Enghouse continues to seek further acquisitions to grow its market share.

A conference call to discuss the results will be held on Thursday, June 6, 2013 at 8:45 a.m. EST. To participate, please call 416-849-8296 (PIN 15953109#) in Toronto or North American Toll-Free 1-866-551-3680 (PIN 15953109#).

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 ended Six Months ended
April 30,
2013
April 30,
2012
April 30,
2013
April 30,
2012
Total Revenue $ 44,511 $ 31,456 $ 86,486 $ 61,989
Net income for the period 4,903 4,180 8,338 8,240
Provision for income taxes 1,335 1,347 2,248 2,629
Depreciation of property, plant and equipment 410 287 878 565
Amortization of acquired software and customer relationships 3,876 2,383 7,460 4,821
Finance income (94 ) (261 ) (427 ) (504 )
Finance expenses 96 70 177 111
Other income (448 ) (157 ) (809 ) (155 )
Special charges 599 - 2,414 -
Adjusted EBITDA $ 10,677 $ 7,849 $ 20,279 $ 15,707
Adjusted EBITDA margin 24 % 25 % 23 % 25 %
Adjusted EBITDA per diluted share $ 0.40 $ 0.30 $ 0.77 $ 0.60
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Financial Position
(in thousands of Canadian dollars)
(Unaudited)
April 30,
2013
October 31,
2012
Assets
Current assets:
Cash and cash equivalents $ 60,059 $ 59,544
Short-term investments 20,881 24,108
Accounts receivable, net 34,674 31,368
Income tax receivable 369 -
Prepaid expenses and other assets 5,785 3,853
121,768 118,873
Non-current assets:
Property, plant and equipment 4,007 3,365
Intangibles 126,488 106,995
Deferred income taxes 9,327 10,477
Total assets $ 261,590 $ 239,710
Liabilities
Current liabilities:
Trade payables $ 34,616 $ 26,053
Income taxes payable - 2,008
Dividends payable 2,076 1,676
Accrued provisions 2,531 1,621
Deferred revenue 41,331 35,935
80,554 67,293
Non-current liabilities:
Deferred income tax liabilities 14,876 13,241
Deferred revenue 1,350 1,236
Total liabilities 96,780 81,770
Shareholders' Equity
Share capital 57,615 55,751
Contributed surplus 2,781 2,847
Retained earnings 103,953 99,371
Accumulated other comprehensive gain (loss) 461 (29 )
Total shareholders' equity 164,810 157,940
Total liabilities and shareholders' equity $ 261,590 $ 239,710
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars, except per share amounts)
(Unaudited)
Three months ended
April 30
Six months ended
April 30
2013 2012 2013 2012
Revenue
Software licenses $ 13,624 $ 10,630 $ 28,688 $ 21,148
Hosted and maintenance services 23,394 16,040 43,957 32,019
Professional services 6,077 4,406 11,568 8,146
Hardware 1,416 380 2,255 676
44,511 31,456 86,468 61,989
Direct costs
Software licenses 649 866 2,078 1,775
Services 10,892 7,086 20,476 13,982
Hardware 1,004 278 1,597 484
12,545 8,230 24,151 16,241
Revenue, net of direct costs 31,966 23,226 62,317 45,748
Operating expenses
Selling, general and administrative 13,517 9,976 26,923 19,837
Research and development 7,772 5,401 15,115 10,204
Depreciation of property, plant and equipment 410 287 878 565
Special charges 599 - 2,414 -
22,298 15,664 45,330 30,606
Results from operating activities 9,668 7,562 16,987 15,142
Amortization of acquired software and customer relationships (3,876 ) (2,383 ) (7,460 ) (4,821 )
Finance income 94 261 427 504
Finance expenses (96 ) (70 ) (177 ) (111 )
Other income 448 157 809 155
Income before income taxes 6,238 5,527 10,586 10,869
Provision for income taxes 1,335 1,347 2,248 2,629
Net income for the period $ 4,903 $ 4,180 $ 8,338 $ 8,240
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences from foreign operations (478 ) (709 ) 383 (1,291 )
Transfer to net income of realized gains on available for sale investments, net of tax of ($58); six months - ($114)
(385
)
(132
)
(754
)
(132
)
Unrealized gain (loss) on available for sale investments, net of tax of $28; six months - $236
182

14

861

(592
)
Other comprehensive (loss) income (681 ) (827 ) 490 (2,015 )
Comprehensive income $ 4,222 $ 3,353 $ 8,828 $ 6,225
Earnings per share
Basic and diluted $ 0.19 $ 0.16 $ 0.32 $ 0.32
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Changes in Equity
(in thousands of Canadian dollars)
(Unaudited)



Share
Capital
-number



Share
capital
$



Contributed
surplus
$

Accumulated
other
comprehensive
income (loss)
$



Retained
earnings
$




Total
$
Balance - November 1, 2012 25,780,562 55,751 2,847 (29 ) 99,371 157,940
Net income - - - - 8,338 8,338
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - 383 - (383 )
Transfer to net income of realized gains on available-for-sale investments, net of tax - - - (754 ) - (754 )
Unrealized gain (loss) on available-for-sale investments, net of tax - - - 861 - 861
Comprehensive income (loss) for the period - - - 490 8,338 8,828
Employee share options:
Value of services recognized 423 - - 423
Proceeds on issuing shares 172,400 1,864 (489 ) - - 1,375
Dividends - (3,756 ) (3,756 )
Balance - April 30, 2013 25,952,962 57,615 2,781 461 103,953 164,810
Balance - November 1, 2011 25,337,262 52,134 2,970 1,035 84,782 140,921
Net income - - - - 8,240 8,240
Other Comprehensive Income (net of tax):
Cumulative Translation Adjustment - - - (1,291 ) - (1,291 )
Transfer to net income of realized gain on available-for-sale investments, net of tax
-

-

-

(132
)
-

(132
)
Unrealized gain (loss) on available-for-sale investments, net of tax
-

-

-

(592
)
-

(592
)
Comprehensive income (loss) for the period - - - (2,015 ) 8,240 6,225
Employee share options:
Value of services recognized - - 286 - - 286
Proceeds on issuing shares 268,300 2,398 (522 ) - - 1,876
Dividends - - - - (2,939 ) (2,939 )
Balance - April 30, 2012 25,605,562 54,532 2,734 (980 ) 90,083 146,369
Enghouse Systems Limited
Condensed Consolidated Interim Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
Three months ended
April 30
Six months ended
April 30
2013 2012 2013 2012
Cash flows from operating activities
Net income $ 4,903 $ 4,180 $ 8,338 $ 8,240
Adjustments for:
Depreciation of property, plant and equipment 410 287 878 565
Amortization of acquired software and customer relationships 3,876 2,383 7,460 4,821
Stock-based compensation expense 286 120 423 286
Income tax expense 1,335 1,347 2,248 2,629
Finance expenses and other income (352 ) (87 ) (632 ) (44 )
10,458 8,230 18,715 16,497
Changes in non-cash operating working capital (997 ) 225 (250 ) (4,970 )
Income tax paid (601 ) (1,295 ) (2,786 ) (1,828 )
Net cash flows from operating activities 8,860 7,160 15,679 9,699
Cash flows from investing activities
Purchase of property, plant and equipment, net (677 ) (1,178 ) (971 ) (1,669 )
Acquisitions, net of cash acquired of $3,617 (6,846 ) (5,802 ) (16,831 ) (5,802 )
Net sale (purchase) of short-term investments 8,817 (9,583 ) 4,715 (10,559 )
Net cash flows used in investing activities 1,294 (16,563 ) (13,087 ) (18,030 )
Cash flows from financing activities
Issuance of share capital 850 749 1,375 1,876
Payment of cash dividend (1,680 ) (1,275 ) (3,356 ) (2,542 )
Net cash flows used in financing activities (830 ) (526 ) (1,981 ) (666 )
Effect of currency translation adjustments on cash and cash equivalents 200 (655 ) (96 ) (240 )
Net increase (decrease) in cash and cash equivalents during the period 9,524 (10,584 ) 515 (9,237 )
Cash and cash equivalents- beginning of period 50,535 66,971 59,544 65,624
Cash and cash equivalents - end of period $ 60,059 $ 56,387 $ 60,059 $ 56,387
Enghouse Systems Limited
Selected Segment Reporting Information
(in thousands of Canadian dollars)
(Unaudited)
For the three months ended April 30 For the six months ended April 30
2013 2012 2013 2012
Revenue:
Asset Management Group $ 8,243 $ 3,723 $ 13,489 $ 6,794
Interactive Management Group 36,268 27,733 72,979 55,195
Total $ 44,511 $ 31,456 $ 86,468 $ 61,989
Segment Profit (EBIT):
Asset Management Group $ 151 $ 193 $ 955 $ 902
Interactive Management Group 6,683 5,768 10,480 11,047
Corporate expenses (1,042 ) (782 ) (1,908 ) (1,628 )
Finance income 94 261 427 504
Finance expenses (96 ) (70 ) (177 ) (111 )
Other income 448 157 809 155
Total $ 6,238 $ 5,527 $ 10,586 $ 10,869

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Enghouse Systems Limited
Stephen Sadler
Chief Executive Officer
(905) 946-3236
investor@enghouse.com
www.enghouse.com

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