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Enghouse Releases Fourth Quarter Results


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© Marketwire 2012
2012-12-13 10:07:13 -

MARKHAM, ONTARIO -- (Marketwire) -- 12/13/12 -- 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 ended        Year ended      
                                   October    October    October    October 
                                       31,        31,        31,        31, 
                                      2012       2011       2012       2011 
Total Revenue                    $  38,952  $  31,836  $ 136,368  $ 122,559 
                                                                            
Net income for the period        $   8,345     13,345     20,873     23,065 
Provision for income taxes          (1,639)    (5,884)     2,234     (2,575)
Depreciation of property, plant                                             
 and equipment                         444        285      1,386      1,102 
Amortization of acquired                                                    
 software and customer                                                      
 relationships                       3,204      2,687     10,974     10,291 
Finance income                        (289)      (278)      (987)      (692)
Finance expenses                        86         49        269        201 
Other income                            23       (629)      (145)      (956)
Special charges                         53          -        544      1,775 
                                --------------------------------------------
Adjusted EBITDA                  $  10,227  $   9,575  $  35,148  $  32,211 
Adjusted EBITDA margin                  26%        30%        26%        26%
Adjusted EBITDA per diluted                                                 
 share                           $    0.39  $    0.37  $    1.35  $    1.26 
                                                                            
                                                                            
Enghouse Systems Limited                                                    
Consolidated Statements of Financial Position                               
(in thousands of Canadian dollars)                                          
(Unaudited)                                                                 
                                                                            
                                   October 31,   October 31,   November 1,
                                          2012          2011          2010
                                                                          
             Assets                                                       
Current assets:                                                           
  Cash and cash equivalents       $     59,544  $     65,624  $     46,640
  Short-term investments                24,108        33,967        31,627
  Accounts receivable, net              31,368        23,006        24,500
  Income tax receivable                      -             -           591
  Prepaid expenses and other                                              
   assets                                3,853         3,479         3,360
                                ------------------------------------------
                                       118,873       126,076       106,718
                                                                          
Non-current assets:                                                       
  Property, plant and equipment          3,365         1,543         1,588
  Acquired software and customer                                          
   relationships                        42,637        29,709        34,330
  Goodwill                              64,358        44,242        35,137
  Deferred income taxes                 10,477         9,548         3,478
                                ------------------------------------------
                                                                          
Total assets                      $    239,710  $    211,118  $    181,251
                                ------------------------------------------
                                ------------------------------------------
                                                                          
           Liabilities                                                    
Current liabilities:                                                      
  Trade payables                  $     26,053  $     22,686  $     18,808
  Income taxes payable                   2,008         3,520             -
  Dividends payable                      1,676         1,267         1,007
  Accrued provisions                     1,621         2,442         1,307
  Deferred revenue                      35,935        28,933        26,040
                                ------------------------------------------
                                        67,293        58,848        47,162
Non-current liabilities:                                                  
  Deferred income tax                                                     
   liabilities                          13,241         9,525        12,571
  Long-term income taxes payable             -           420           522
  Deferred revenue                       1,236         1,404           790
                                ------------------------------------------
Total liabilities                       81,770        70,197        61,045
                                ------------------------------------------
      Shareholders' Equity                                                
                                                                          
Share capital                           55,751        52,134        50,705
Contributed surplus                      2,847         2,970         2,653
Retained earnings                       99,371        84,782        66,546
Accumulated other comprehensive                                           
 (loss) gain                              (29)         1,035           302
                                ------------------------------------------
Total equity                           157,940       140,921       120,206
                                ------------------------------------------
Total liabilities and equity      $    239,710  $    211,118  $    181,251
                                ------------------------------------------
                                ------------------------------------------
                                                                          
                                                                          
Enghouse Systems Limited                                                    
Consolidated Interim Statements of Operations and Comprehensive Income      
(in thousands of Canadian dollars, except per share amounts)                
(Unaudited)                                                                 
                                                                            
                               Three months ended                           
                                       October 31     Year ended October 31 
                                2012         2011         2012         2011 
Revenue                                                                     
    Software licenses    $    13,107  $    11,386  $    45,108  $    45,691 
    Hosted and                                                              
     maintenance                                                            
     services                 20,114       16,182       71,608       58,526 
    Professional                                                            
     services                  5,210        4,049       18,083       15,734 
    Hardware                     521          219        1,569        2,608 
                        ----------------------------------------------------
                              38,952       31,836      136,368      122,559 
                        ----------------------------------------------------
Direct costs                                                                
    Software licenses          1,532          769        4,115        5,208 
    Services                   8,861        6,871       31,410       26,635 
    Hardware                     408          237        1,134        1,966 
                        ----------------------------------------------------
                              10,801        7,877       36,659       33,809 
                        ----------------------------------------------------
                                                                            
Revenue, net of direct                                                      
 costs                        28,151       23,959       99,709       88,750 
                                                                            
  Operating expenses                                                        
    Selling, general and                                                    
     administrative           11,977       10,171       43,069       40,861 
    Research and                                                            
     development               5,947        4,213       21,492       15,678 
    Depreciation of                                                         
     property, plant and                                                    
     equipment                   444          285        1,386        1,102 
    Special charges               53            -          544        1,775 
                        ----------------------------------------------------
                              18,421       14,669       66,491       59,416 
                        ----------------------------------------------------
                                                                            
Results from operating                                                      
 activities                    9,730        9,290       33,218       29,334 
                                                                            
Amortization of acquired                                                    
 software and customer                                                      
 relationships                (3,204)      (2,687)     (10,974)     (10,291)
Finance income                   289          278          987          692 
Finance expenses                 (86)         (49)        (269)        (201)
Other income                     (23)         629          145          956 
                        ----------------------------------------------------
                                                                            
Income before income                                                        
 taxes                         6,706        7,461       23,107       20,490 
                                                                            
Provision for (recovery                                                     
 of) income taxes             (1,639)      (5,884)       2,234       (2,575)
                        ----------------------------------------------------
                                                                            
Net income for the                                                          
 period                  $     8,345  $    13,345  $    20,873  $    23,065 
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
Foreign 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)       2,112 
Unrealized foreign                                                          
 currency translation                                                       
 gain on available for                                                      
 sale investments, net                                                      
 of tax of $nil; 2012 -                                                     
 $1                                -          127            8           58 
                        ----------------------------------------------------
                                                                            
Other comprehensive                                                         
 income (loss)                   248        3,772       (2,431)         733 
                        ----------------------------------------------------
                                                                            
Comprehensive income     $     8,593  $    17,117  $    18,442  $    23,798 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share                                                          
Basic                    $      0.32  $      0.53  $      0.82  $      0.91 
Diluted                  $      0.32  $      0.52  $      0.80  $      0.90 
----------------------------------------------------------------------------
                                                                            
Enghouse Systems Limited                                                    
Consolidated Statements of Changes in Equity                                
(in thousands of Canadian dollars)                                          
(Unaudited)                                                                 
                                                                            
                                                 Accum-                     
                                                 ulated                     
                                                  other                     
                                       Contri-  compre-                     
                       Share    Share    buted  hensive  Retained           
                     Capital  capital  surplus   income  earnings     Total 
                     -number        $        $        $         $         $ 
                                                                            
Balance -                                                                   
 November 1, 2011 25,337,262   52,134    2,970    1,035    84,782   140,921 
                                                                            
Net income                 -        -        -        -    20,873    20,873 
Other                                                                       
 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         -         8 
                 -----------------------------------------------------------
Comprehensive                                                               
 income (loss)                                                              
 for the period            -        -        -   (1,064)   20,873    19,809 
                 -----------------------------------------------------------
                 -----------------------------------------------------------
Employee share                                                              
 options:                                                                   
  Value of                                                                  
   services                                                                 
   recognized              -        -      621        -         -       621 
  Proceeds on                                                               
   issuing shares    443,300    3,617     (744)       -         -     2,873 
Purchase and                                                                
 cancellation of                                                            
 common shares                                        -         -         - 
Dividends                  -        -        -        -    (6,284)   (6,284)
                 -----------------------------------------------------------
Balance - October                                                           
 31, 2012         25,780,562   55,751    2,847      (29)   99,371   157,940 
                 -----------------------------------------------------------
                 -----------------------------------------------------------
                                                                            
                                                                            
Balance -                                                                   
 November 1, 2010 25,171,662   50,705    2,653      302    66,546   120,206 
                                                                            
Net income                 -        -        -        -    23,065    23,065 
Other                                                                       
 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         -     2,112 
Unrealized                                                                  
 foreign currency                                                           
 translation gain                                                           
 on available-                                                              
 for-sale                                                                   
 investments, net                                                           
 of tax                    -        -        -       58         -        58 
                 -----------------------------------------------------------
Comprehensive                                                               
 income (loss)                                                              
 for the period            -        -        -      733    23,065    23,798 
                 -----------------------------------------------------------
                 -----------------------------------------------------------
Employee share                                                              
 options:                                                                   
  Value of                                                                  
   services                                                                 
   recognized              -        -      625        -         -       625 
  Proceeds on                                                               
   issuing shares    170,400    1,439     (308)       -         -     1,131 
Purchase and                                                                
 cancellation of                                                            
 common shares        (4,800)     (10)       -        -       (33)      (43)
Dividends                  -        -        -        -    (4,796)   (4,796)
                 -----------------------------------------------------------
Balance - October                                                           
 31, 2011         25,337,262   52,134    2,970    1,035    84,782   140,921 
                 -----------------------------------------------------------
                 -----------------------------------------------------------
                                                                            
Enghouse Systems Limited                                                    
Consolidated Interim Statements of Cash Flows                               
(in thousands of Canadian dollars)                                          
(Unaudited)                                                                 
                                                                            
                               Three months ended                           
                                       October 31     Year ended October 31 
                                2012         2011         2012         2011 
Cash flows from                                                             
 operating activities                                                       
Net income               $     8,345  $    13,345  $    20,873  $    23,065 
                                                                            
Adjustments for:                                                            
  Depreciation of                                                           
   property, plant and                                                      
   equipment                     444          285        1,386        1,102 
  Amortization of                                                           
   acquired software and                                                    
   customer                                                                 
   relationships               3,204        2,687       10,974       10,291 
  Stock-based                                                               
   compensation expense          119          132          621          625 
  Income tax (recovery)                                                     
   expense                    (1,639)      (5,884)       2,234       (2,575)
  Finance expenses and                                                      
   other income                  109         (580)         124         (755)
                        ----------------------------------------------------
                              10,582        9,985       36,212       31,753 
                                                                            
Changes in non-cash                                                         
 operating working                                                          
 capital                      (4,071)        (843)      (8,245)      11,061 
Income tax paid               (1,304)        (669)      (4,492)      (1,762)
----------------------------------------------------------------------------
Net cash flows from                                                         
 operating activities          5,207        8,473       23,475       41,052 
                                                                            
Cash flows from                                                             
 investing activities                                                       
Purchase 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                                                              
 investments                  16,698        4,406        8,704          695 
----------------------------------------------------------------------------
Net cash flows used in                                                      
 investing activities         16,296        3,895      (26,044)     (17,094)
                                                                            
Cash flows from                                                             
 financing activities                                                       
Issuance of share                                                           
 capital                         556          667        2,873        1,131 
Payment 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                                                     
 period                       19,681       13,352       (6,080)      18,984 
Cash and cash                                                               
 equivalents- beginning                                                     
 of period                    39,863       52,272       65,624       46,640 
                                                                            
Cash and cash                                                               
 equivalents - end of                                                       
 period                  $    59,544  $    65,624  $    59,544  $    65,624 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
Enghouse Systems Limited                                                    
Selected Segment Reporting Information                                      
(in thousands of Canadian dollars)                                          
(Unaudited)                                                                 
                                                                            
                                                                            
                               For the three months      For the year ended 
                                   ended October 31              October 31 
                            ------------------------------------------------
                                   2012        2011        2012        2011 
                            ------------------------------------------------
                                                                            
Revenue:                                                                    
  Asset Management Group    $     5,789 $     3,075 $    17,308 $    12,842 
  Interactive Management                                                    
   Group                         33,163      28,761     119,060     109,717 
                            ------------------------------------------------
Total                       $    38,952 $    31,836 $   136,368 $   122,559 
                            ------------------------------------------------
                            ------------------------------------------------
                                                                            
                                                                            
Segment Profit (EBIT):                                                      
  Asset Management Group    $     1,910 $       747 $     3,828 $     2,683 
  Interactive Management                                                    
   Group                          5,472       7,077      21,902      19,977 
  Corporate expenses               (856)     (1,221)     (3,486)     (3,617)
  Finance income                    289         278         987         692 
  Finance expenses                  (86)        (49)       (269)       (201)
  Other income                      (23)        629         145         956 
                            ------------------------------------------------
                            ------------------------------------------------
Total                       $     6,706 $     7,461 $    23,107 $    20,490 
                            ------------------------------------------------
                            ------------------------------------------------




Contacts:

Enghouse Systems Limited

Stephen Sadler

Chief Executive Officer

(905) 946-3236
investor@enghouse.com :

www.enghouse.com



Press Information:




Contact Person:


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