MARKHAM, ONTARIO -- (Marketwire) -- 09/01/11 -- 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 www.enghouse.com.
Enghouse Systems Limited
Consolidated Balance Sheets
(in thousands of Canadian dollars)
(Unaudited)
July 31, October 31,
2011 2010
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Assets
Current
Cash $ 52,272 $ 46,640
Short-term investments 35,683 31,627
Accounts receivable, net 23,800 24,500
Income tax receivable - 591
Future income taxes 542 447
Prepaid expenses and other assets 3,519 3,360
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115,816 107,165
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Property and equipment, net 1,702 1,844
Acquired software and other intangibles, net 31,870 34,330
Goodwill 43,309 35,137
Future income taxes 3,166 2,951
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$ 195,863 $ 181,427
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Liabilities
Current
Accounts payable and accrued liabilities 23,370 20,115
Income taxes payable 1,609 -
Dividends payable 1,262 1,007
Deferred revenue 30,200 26,040
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56,441 47,162
Future income taxes 12,138 12,571
Long-term income taxes payable 574 522
Deferred revenue 1,190 790
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70,343 61,045
Shareholders' Equity
Share capital 51,260 50,705
Contributed surplus 2,697 2,429
Retained earnings 86,960 79,606
Accumulated other comprehensive loss (15,397) (12,358)
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125,520 120,382
$ 195,863 $ 181,427
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Enghouse Systems Limited
Consolidated Statements of Operations and Retained Earnings
(in thousands of Canadian dollars except per share amounts)
(Unaudited)
Three months ended Nine months ended
July 31 July 31
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2011 2010 2011 2010
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Revenue
Software licenses $ 11,732 $ 8,387 $ 34,001 $ 21,404
Services 19,572 16,929 54,333 43,401
Hardware 516 715 2,389 2,025
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31,820 26,031 90,723 66,830
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Cost of sales
Software licenses 909 1,272 4,439 3,443
Services 6,684 5,992 19,763 15,937
Hardware 317 542 1,729 1,386
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7,910 7,806 25,931 20,766
Gross margin 23,910 18,225 64,792 46,064
Operating expenses
Selling, general and
administrative 11,094 9,173 29,182 22,365
Research and development 3,725 2,922 11,459 8,990
Amortization of property and
equipment 264 369 823 975
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15,083 12,464 41,464 32,330
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Income before the undernoted 8,827 5,761 23,328 13,734
Amortization of acquired software
and other intangibles (2,670) (2,417) (7,604) (5,983)
Foreign exchange (loss) gain (146) 207 (1,364) 148
Interest income, net 144 68 393 295
Other income 61 378 169 942
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Income before income taxes 6,216 3,997 14,922 9,136
Provision for income taxes
Current 1,563 1,057 4,120 2,139
Future 60 (262) (114) 185
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Net income for the period $ 4,593 $ 3,202 $ 10,916 $ 6,812
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Retained earnings, beginning of
period $ 83,629 $ 74,991 $ 79,606 $ 73,142
Dividends (1,262) (1,007) (3,529) (2,768)
Purchase and cancellation of
common shares - - (33) -
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Retained earnings, end of period $ 86,960 $ 77,186 $ 86,960 $ 77,186
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Earnings per share
Basic $ 0.18 $ 0.13 $ 0.43 $ 0.27
Diluted $ 0.18 $ 0.13 $ 0.43 $ 0.27
Weighted average shares
outstanding during
period (millions)
- basic 25.2 25.2 25.2 25.1
- diluted 25.6 25.4 25.5 25.3
Enghouse Systems Limited
Consolidated Statements of Comprehensive Income and Accumulated Other
Comprehensive Loss
(in thousands of Canadian dollars)
(Unaudited)
Three months ended Nine months ended
July 31 July 31
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2011 2010 2011 2010
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Net income for the period $ 4,593 $ 3,202 $ 10,916 $ 6,812
Other 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 1,416
Unrealized foreign currency
translation gain (loss) on
available for sale investments,
net of tax of $1 (nine months -
($13)) 4 41 (69) (111)
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Other comprehensive (loss) income$ (202)$ 1,976 $ (3,039)$ (2,225)
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Comprehensive income $ 4,391 $ 5,178 $ 7,877 $ 4,587
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Accumulated 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)
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Accumulated other comprehensive
loss, end of period $ (15,397)$ (10,984)$ (15,397)$ (10,984)
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Enghouse Systems Limited
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(Unaudited)
For the three months For the nine months
ended July 31 ended July 31
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2011 2010 2011 2010
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Cash flows from operating
activities
Net income for the period $ 4,593 $ 3,202 $ 10,916 $ 6,812
Add (deduct) items not involving
cash
Amortization of property and
equipment 264 369 823 975
Amortization of acquired
software and other
intangibles 2,670 2,417 7,604 5,983
Stock-based compensation
expense 151 111 369 271
Gain on sale of short-term
investments (61) (378) (169) (942)
Future income taxes 60 (262) (114) 185
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Cash flows before changes in
operating assets and
liabilities 7,677 5,459 19,429 13,284
Changes in operating assets and
liabilities
Decrease in accounts
receivable, net 8,574 1,894 5,017 1,594
Decrease (increase) in prepaid
expenses and other assets 222 589 22 (446)
(Decrease) increase in
accounts payable and accrued
liabilities (2,671) 1,281 456 (4,564)
Increase (decrease) in current
income taxes payable 530 537 2,267 (861)
(Decrease) increase in
deferred revenue (2,029) 1,041 3,676 8,679
Unrealized foreign exchange
loss (gain) 746 (1,691) 1,906 (1,428)
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Cash flows from operating
activities 13,049 9,110 32,773 16,258
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Cash flows from investing
activities
Purchase 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
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(14,553) (2,272) (21,183) (5,453)
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Cash flows from financing
activities
Issuance of share capital 324 - 464 905
Payment of cash dividend (1,260) (1,007) (3,274) (2,507)
Purchase and cancellation of
common shares - - (43) -
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(936) (1,007) (2,853) (1,602)
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Effect of foreign exchange rate
changes on cash 206 602 (3,105) (1,020)
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Net (decrease) increase in cash
during the period (2,234) 6,433 5,632 8,183
Cash - beginning of period 54,506 41,026 46,640 39,276
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Cash - end of period $ 52,272 $ 47,459 $ 52,272 $ 47,459
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Supplementary cash flow
information:
Cash paid during the period
for income taxes $ 150 $ 333 $ 1,093 $ 2,418
Note: Cash excludes short-term investments
Enghouse Systems Limited
Selected Segment Reporting Information
(in thousands of Canadian dollars)
(Unaudited)
Three Months ended Nine Months ended
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July 31, July 31, July 31, July 31,
2011 2010 2011 2010
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Revenue:
Asset Management Group $ 3,178 $ 3,629 $ 9,767 $ 10,004
Interaction Management
Group 28,642 22,402 80,956 56,826
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Total $ 31,820 $ 26,031 $ 90,723 $ 66,830
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Segment Profit (EBIT):
Asset Management Group $ 968 $ 1,268 $ 2,292 $ 2,067
Interaction Management
Group 5,985 2,650 15,771 7,549
Corporate (796) (574) (2,339) (1,865)
Foreign Exchange (146) 207 (1,364) 148
Interest and other
income 205 446 562 1,237
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Total $ 6,216 $ 3,997 $ 14,922 $ 9,136
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Contacts:
Enghouse Systems Limited
Stephen Sadler
Chief Executive Officer
(905) 946-3200
investor@enghouse.com
www.enghouse.com