MARKHAM, ONTARIO--(Marketwire - March 9, 2011) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited first quarter financial results for the period ended January 31, 2011.
First quarter revenue was $28.6 million, compared to $19.5 million reported in the same period last year, an increase of 46%. Operating income for the quarter was $6.9 million compared to $3.7 million in the prior year's first quarter, an increase of 85%. Net income for the first quarter was $3.1 million or $0.12 per share on a diluted basis compared to the prior year's first quarter net income of $1.9 million or $0.08 per share. The increase in revenue was primarily a result of increased license sales in the quarter and contributions from acquisitions. As has become the norm, revenue and operating costs are impacted by the volatility of foreign exchange as outlined in the MD&A.
Operating expenses increased to $13.2 million from $9.5 million in the prior year's first quarter and include incremental operating costs related to the Mettoni and Telrex acquisitions, not included in the prior year's first quarter results. Non-cash amortization charges were $2.4 million compared to $1.8 million in the prior year's first quarter and include amortization charges for acquired software and other intangibles from acquired operations, including Mettoni and Telrex.
The Company generated cash flows from operations of $9.5 million in the first quarter compared to $2.1 million in the prior year's first quarter. Enghouse closed the quarter with $83.4 million in cash and short-term investments, after payment of approximately $2.5 million related to the final holdbacks on the Mettoni and Telrex acquisitions, compared to $78.3 million at October 31, 2010. The Company continues to have no long-term debt and did not repurchase any shares in the quarter.
The Board of Directors today authorized a 25% increase to the eligible quarterly dividend to $0.05 per common share, payable on May 31, 2011 to shareholders of record at the close of business on May 17, 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.
Operating income is not a measure recognized by generally accepted accounting principles ("GAAP") and does not have standardized meaning in accordance with such principles. Therefore, operating income may not be comparable to similar measures presented by other issuers. Operating income is calculated as net income before amortization of acquired software and other intangibles, net interest income, other income, foreign exchange gains and losses and the provision for income taxes. This is denoted as "Income before the undernoted" on the Consolidated Statements of Operations and Retained Earnings of the Company. Management uses operating income to evaluate performance as it excludes amortization of software and intangibles and foreign exchange gains and losses.
Enghouse Systems Limited | |||||||
Consolidated Balance Sheets | |||||||
(in thousands of Canadian dollars) | |||||||
(Unaudited) | |||||||
January 31, 2011 |
October 31, 2010 |
||||||
Assets | |||||||
Current | |||||||
Cash | $ | 64,247 | $ | 46,640 | |||
Short-term investments | 19,196 | 31,627 | |||||
Accounts receivable, net | 27,956 | 24,500 | |||||
Income tax receivable | - | 591 | |||||
Future income taxes | 438 | 447 | |||||
Prepaid expenses and other assets | 3,531 | 3,360 | |||||
115,368 | 107,165 | ||||||
Property and equipment, net | 1,740 | 1,844 | |||||
Acquired software and other intangibles, net | 31,630 | 34,330 | |||||
Goodwill | 34,168 | 35,137 | |||||
Future income taxes | 2,680 | 2,951 | |||||
$ | 185,586 | $ | 181,427 | ||||
Liabilities | |||||||
Current | |||||||
Accounts payable and accrued liabilities | 17,429 | 20,115 | |||||
Income taxes payable | 508 | - | |||||
Dividend payable | 1,007 | 1,007 | |||||
Deferred revenue | 31,591 | 26,040 | |||||
50,535 | 47,162 | ||||||
Future income taxes | 11,910 | 12,571 | |||||
Long-term income taxes payable | 522 | 522 | |||||
Deferred revenue | 674 | 790 | |||||
63,641 | 61,045 | ||||||
Shareholders' Equity | |||||||
Share capital | 50,705 | 50,705 | |||||
Contributed surplus | 2,540 | 2,429 | |||||
Retained earnings | 81,711 | 79,606 | |||||
Accumulated other comprehensive loss | (13,011 | ) | (12,358 | ) | |||
121,945 | 120,382 | ||||||
$ | 185,586 | $ | 181,427 | ||||
Enghouse Systems Limited | |||||||||
Consolidated Statements of Operations and Retained Earnings | |||||||||
For the three months ended January 31 | |||||||||
(in thousands of Canadian dollars except per share amounts) | |||||||||
(Unaudited) | |||||||||
2011 | 2010 | ||||||||
Revenue | |||||||||
Software licenses | $ | 10,623 | $ | 5,989 | |||||
Services | 17,224 | 12,778 | |||||||
Hardware | 722 | 769 | |||||||
28,569 | 19,536 | ||||||||
Cost of sales | |||||||||
Software licenses | 1,557 | 936 | |||||||
Services | 6,314 | 4,887 | |||||||
Hardware | 560 | 466 | |||||||
8,431 | 6,289 | ||||||||
Gross margin | 20,138 | 13,247 | |||||||
Operating expenses | |||||||||
Selling, general and administrative | 9,071 | 6,249 | |||||||
Research and development | 3,863 | 2,969 | |||||||
Amortization of property and equipment | 275 | 300 | |||||||
13,209 | 9,518 | ||||||||
Income before the undernoted | 6,929 | 3,729 | |||||||
Amortization of acquired software and other intangibles | (2,440 | ) | (1,801 | ) | |||||
Foreign exchange (loss) gain | (329 | ) | 82 | ||||||
Other income | 3 | 564 | |||||||
Interest income, net | 129 | 151 | |||||||
Income before income taxes | $ | 4,292 | $ | 2,725 | |||||
Provision for income taxes | |||||||||
Current | 1,305 | 797 | |||||||
Future | (125 | ) | 25 | ||||||
Net income for the period | $ | 3,112 | $ | 1,903 | |||||
Retained earnings, beginning of period | 79,606 | 73,142 | |||||||
Dividends | (1,007 | ) | (754 | ) | |||||
Retained earnings, end of period | $ | 81,711 | $ | 74,291 | |||||
Earnings per share | |||||||||
Basic | $ | 0.12 | $ | 0.08 | |||||
Diluted | $ | 0.12 | $ | 0.08 | |||||
Weighted average shares outstanding during period (millions) | |||||||||
- basic | 25.2 | 24.9 | |||||||
- diluted | 25.5 | 25.1 |
Enghouse Systems Limited | |||||||
Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss | |||||||
For the three months ended January 31 | |||||||
(in thousands of Canadian dollars) | |||||||
(Unaudited) | |||||||
2011 | 2010 | ||||||
Net income for the period | $ | 3,112 | $ | 1,903 | |||
Other comprehensive income: | |||||||
Unrealized loss on translating financial statements of self-sustaining foreign operations | (650 | ) | (1,364 | ) | |||
Transfer to net income of realized gains on available for sale investments, net of tax of ($1) (Q1/10 ($170)) | (2 | ) | (394 | ) | |||
Unrealized gain on available for sale investments, net of tax of $4 (Q1/10 – $290) | 20 | 670 | |||||
Unrealized foreign currency translation loss on available for sale investments, net of tax of ($4) (Q1/10 – ($21)) | (21 | ) | (49 | ) | |||
Other comprehensive loss | $ | (653 | ) | $ | (1,137 | ) | |
Comprehensive income | $ | 2,459 | $ | 766 | |||
Accumulated other comprehensive loss, beginning of period | $ | (12,358 | ) | $ | (8,759 | ) | |
Other comprehensive loss | (653 | ) | (1,137 | ) | |||
Accumulated other comprehensive loss, end of period | $ | (13,011 | ) | $ | (9,896 | ) | |
Enghouse Systems Limited | |||||||||
Consolidated Statements of Cash Flows | |||||||||
For the three months ended January 31 | |||||||||
(in thousands of Canadian dollars) | |||||||||
(Unaudited) | |||||||||
2011 | 2010 | ||||||||
Cash flows from operating activities | |||||||||
Net income for the period | $ | 3,112 | $ | 1,903 | |||||
Add (deduct) items not involving cash | |||||||||
Amortization of property and equipment | 275 | 300 | |||||||
Amortization of acquired software and other intangibles | 2,440 | 1,801 | |||||||
Gain on sale of short-term investments | (3 | ) | (564 | ) | |||||
Stock-based compensation expense | 111 | 50 | |||||||
Future income taxes | (125 | ) | 25 | ||||||
Cash flows before changes in operating assets and liabilities | 5,810 | 3,515 | |||||||
Changes in operating assets and liabilities | |||||||||
Increase in accounts receivable, net | (3,830 | ) | (927 | ) | |||||
Increase in prepaid expenses and other assets | (217 | ) | (306 | ) | |||||
Increase (decrease) in accounts payable and accrued liabilities | 788 | (3,712 | ) | ||||||
Increase (decrease) in current income taxes payable | 1,105 | (732 | ) | ||||||
Increase in deferred revenue | 5,860 | 4,165 | |||||||
Unrealized foreign exchange loss | 18 | 87 | |||||||
Cash flows from operating activities | 9,534 | 2,090 | |||||||
Cash flows from investing activities | |||||||||
Purchase of property and equipment, net | (176 | ) | (224 | ) | |||||
Acquisitions, net of cash acquired | (2,450 | ) | (5,529 | ) | |||||
Proceeds from sale (purchase) of short-term investments | 12,443 | (1,014 | ) | ||||||
9,817 | (6,767 | ) | |||||||
Cash flows from financing activities | |||||||||
Issuance of share capital | - | 737 | |||||||
Payment of cash dividend | (1,007 | ) | (746 | ) | |||||
(1,007 | ) | (9 | ) | ||||||
Effect of foreign exchange rate changes on cash | (737 | ) | (297 | ) | |||||
Net increase (decrease) in cash during the period | 17,607 | (4,983 | ) | ||||||
Cash – beginning of period | 46,640 | 39,276 | |||||||
Cash – end of period | $ | 64,247 | $ | 34,293 | |||||
Supplementary cash flow information: |
|||||||||
Cash paid during the period for income taxes | $ | 326 | $ | 1,580 | |||||
Note: Cash excludes short-term investments |
Enghouse Systems Limited | ||||||||
Selected Segment Reporting Information | ||||||||
(in thousands of Canadian dollars) | ||||||||
(Unaudited) | ||||||||
For the three months ended January 31 | ||||||||
2011 | 2010 | |||||||
Revenue: | ||||||||
Asset Management Group | $ | 3,069 | $ | 2,862 | ||||
Interaction Management Group | 25,500 | 16,674 | ||||||
Total | $ | 28,569 | $ | 19,536 | ||||
Segment Profit (EBIT): | ||||||||
Asset Management Group | $ | 643 | $ | 26 | ||||
Interaction Management Group | 4,696 | 2,441 | ||||||
Corporate expenses | (850 | ) | (539 | ) | ||||
Foreign exchange | (329 | ) | 82 | |||||
Interest and other income | 132 | 715 | ||||||
Total | $ | 4,292 | $ | 2,725 | ||||
Contact Information: Enghouse Systems Limited
Stephen Sadler
Chief Executive Officer
(905) 946-3200
investor@enghouse.com