MARKHAM, ONTARIO--(Marketwire - June 2, 2011) - Enghouse Systems Limited (TSX:ESL) today announced its unaudited second quarter financial results for the period ended April 30, 2011.
Second quarter revenue was $30.3 million, compared to $21.3 million reported in the same period last year, an increase of approximately 43%. Operating income for the quarter was $7.6 million compared to $4.2 million in the prior year's second quarter, an increase of 78%. Net income for the second quarter was $3.2 million or $0.13 per share on a diluted basis compared to the prior year's second quarter net income of $1.7 million or $0.07 per share. On a year to date basis, the Company reported revenue of $58.9 million compared to revenue of $40.8 million in the prior fiscal year. Net income for the year to date was $6.3 million compared to $3.6 million in the prior fiscal year. The increase in revenue was primarily a result of revenue from acquired operations in its Interaction Management Group. 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 $13.2 million from $10.3 million in the prior year's second quarter and include incremental operating costs related to acquisitions. This is mitigated by the impact of foreign exchange on U.S. dollar denominated operating expenses. On a year to date basis operating costs were $26.4 million compared to $19.9 million in the prior fiscal year as a result of acquisitions. Non-cash amortization charges were $2.5 million compared to $1.8 million in the prior year's second quarter and includes amortization charges for acquired software and other intangibles from acquisitions in the past year.
The Company continues to generate strong cash flows from operating activities, generating $10.2 million in cash in the second quarter compared to $5.1 million in the prior year's second quarter. On a year to date basis the Company has generated $19.7 million in cash flows from operating activities compared to $7.1 million in the prior year. During the quarter the Company completed the acquisition of CosmoCom, Inc. on April 1, 2011. Enghouse closed the quarter with $75.7 million in cash and short-term investments compared to $78.3 million at October 31, 2010, which is after payment of the CosmoCom acquisition costs of approximately US $20.2 million and includes US $3.0 million held in escrow but reflected as restricted cash of the Company at April 30, 2011. The Company continues to have no long-term debt.
The Board of Directors today authorized an eligible quarterly dividend of $0.05 per share, payable on August 31, 2011 to shareholders of record at the close of business on August 17, 2011. The Company continues to focus on its acquisition strategy 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) |
| April 30, 2011 | October 31, 2010 | |||||
| Assets | ||||||
| Current | ||||||
| Cash | $ | 54,506 | $ | 46,640 | ||
| Short-term investments | 21,156 | 31,627 | ||||
| Accounts receivable, net | 32,257 | 24,500 | ||||
| Income tax receivable | - | 591 | ||||
| Future income taxes | 415 | 447 | ||||
| Prepaid expenses and other assets | 3,722 | 3,360 | ||||
| 112,056 | 107,165 | |||||
| Property and equipment, net | 1,757 | 1,844 | ||||
| Acquired software and other intangibles, net | 34,688 | 34,330 | ||||
| Goodwill | 44,616 | 35,137 | ||||
| Future income taxes | 3,574 | 2,951 | ||||
| $ | 196,691 | $ | 181,427 | |||
| Liabilities | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | 26,304 | 20,115 | ||||
| Income taxes payable | 1,213 | - | ||||
| Dividends payable | 1,260 | 1,007 | ||||
| Deferred revenue | 32,621 | 26,040 | ||||
| 61,398 | 47,162 | |||||
| Future income taxes | 12,312 | 12,571 | ||||
| Long-term income taxes payable | 522 | 522 | ||||
| Deferred revenue | 543 | 790 | ||||
| 74,775 | 61,045 | |||||
| Shareholders' Equity | ||||||
| Share capital | 50,835 | 50,705 | ||||
| Contributed surplus | 2,647 | 2,429 | ||||
| Retained earnings | 83,629 | 79,606 | ||||
| Accumulated other comprehensive loss | (15,195 | ) | (12,358 | ) | ||
| 121,916 | 120,382 | |||||
| $ | 196,691 | $ | 181,427 | |||
| Enghouse Systems Limited |
| Consolidated Statements of Operations and Retained Earnings |
| (in thousands of Canadian dollars except per share amounts) |
| (Unaudited) |
| Three Months ended April 30 | Six Months ended April 30 | |||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||
| Revenue | ||||||||||||||
| Software licenses | $ | 11,646 | $ | 7,028 | $ | 22,269 | $ | 13,017 | ||||||
| Services | 17,537 | 13,694 | 34,761 | 26,472 | ||||||||||
| Hardware | 1,151 | 541 | 1,873 | 1,310 | ||||||||||
| 30,334 | 21,263 | 58,903 | 40,799 | |||||||||||
| Cost of sales | ||||||||||||||
| Software licenses | 1,973 | 1,235 | 3,530 | 2,171 | ||||||||||
| Services | 6,765 | 5,058 | 13,079 | 9,945 | ||||||||||
| Hardware | 852 | 378 | 1,412 | 844 | ||||||||||
| 9,590 | 6,671 | 18,021 | 12,960 | |||||||||||
| Gross margin | 20,744 | 14,592 | 40,882 | 27,839 | ||||||||||
| Operating expenses | ||||||||||||||
| Selling, general and administrative | 9,017 | 6,943 | 18,088 | 13,192 | ||||||||||
| Research and development | 3,871 | 3,099 | 7,734 | 6,068 | ||||||||||
| Amortization of property and equipment | 284 | 306 | 559 | 606 | ||||||||||
| 13,172 | 10,348 | 26,381 | 19,866 | |||||||||||
| Income before the undernoted | 7,572 | 4,244 | 14,501 | 7,973 | ||||||||||
| Amortization of acquired software and other intangibles | (2,494 | ) | (1,765 | ) | (4,934 | ) | (3,566 | ) | ||||||
| Foreign exchange loss | (889 | ) | (141 | ) | (1,218 | ) | (59 | ) | ||||||
| Interest income, net | 120 | 76 | 249 | 227 | ||||||||||
| Other income | 105 | - | 108 | 564 | ||||||||||
| Income before income taxes | 4,414 | 2,414 | 8,706 | 5,139 | ||||||||||
| Provision for income taxes | ||||||||||||||
| Current | 1,252 | 285 | 2,557 | 1,082 | ||||||||||
| Future | (49 | ) | 422 | (174 | ) | 447 | ||||||||
| Net income for the period | $ | 3,211 | $ | 1,707 | $ | 6,323 | $ | 3,610 | ||||||
| Retained earnings, beginning of period | $ | 81,711 | $ | 74,291 | $ | 79,606 | $ | 73,142 | ||||||
| Dividends | (1,260 | ) | (1,007 | ) | (2,267 | ) | (1,761 | ) | ||||||
| Purchase and cancellation of common shares | (33 | ) | - | (33 | ) | - | ||||||||
| Retained earnings, end of period | $ | 83,629 | $ | 74,991 | $ | 83,629 | $ | 74,991 | ||||||
| Earnings per share | ||||||||||||||
| Basic | $ | 0.13 | $ | 0.07 | $ | 0.25 | $ | 0.14 | ||||||
| Diluted | $ | 0.13 | $ | 0.07 | $ | 0.25 | $ | 0.14 | ||||||
| Weighted average shares outstanding during period (millions) | ||||||||||||||
| - basic | 25.2 | 25.1 | 25.2 | 25.0 | ||||||||||
| - diluted | 25.5 | 25.4 | 25.5 | 25.2 | ||||||||||
| Enghouse Systems Limited |
| Consolidated Statements of Comprehensive Income (loss) income and Accumulated Other Comprehensive Loss |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| Three months ended April 30 | Six months ended April 30 | |||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||
| Net income for the period | $ | 3,211 | $ | 1,707 | $ | 6,323 | $ | 3,610 | ||||
| Other comprehensive loss: | ||||||||||||
| Unrealized loss on translating financial statements of self-sustaining foreign operations | (2,504 | ) | (3,256 | ) | (3,154 | ) | (4,620 | ) | ||||
| Transfer to net income of realized gains on available for sale investments, net of tax of ($16) (six months - ($16)) | (89 | ) | - | (91 | ) | (394 | ) | |||||
| Unrealized gain on available for sale investments, net of tax of $86 (six months – $90) | 461 | 295 | 481 | 965 | ||||||||
| Unrealized foreign currency translation loss on available for sale investments, net of tax of ($10) (six months – ($14)) | (52 | ) | (103 | ) | (73 | ) | (152 | ) | ||||
| Other comprehensive loss | $ | (2,184 | ) | $ | (3,064 | ) | $ | (2,837 | ) | $ | (4,201 | ) |
| Comprehensive income (loss) | $ | 1,027 | $ | (1,357 | ) | $ | 3,486 | $ | (591 | ) | ||
| Accumulated other comprehensive loss, beginning of period | $ | (13,011 | ) | $ | (9,896 | ) | $ | (12,358 | ) | $ | (8,759 | ) |
| Other comprehensive loss | (2,184 | ) | (3,064 | ) | (2,837 | ) | (4,201 | ) | ||||
| Accumulated other comprehensive loss, end of period | $ | (15,195 | ) | $ | (12,960 | ) | $ | (15,195 | ) | $ | (12,960 | ) |
| Enghouse Systems Limited |
| Consolidated Statements of Cash Flows |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| For the three months ended April 30 | For the six months ended April 30 | ||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||
| Cash flows from operating activities | |||||||||||||
| Net income for the period | $ | 3,211 | $ | 1,707 | $ | 6,323 | $ | 3,610 | |||||
| Add (deduct) items not involving cash | |||||||||||||
| Amortization of property and equipment | 284 | 306 | 559 | 606 | |||||||||
| Amortization of acquired software and other intangibles | 2,494 | 1,765 | 4,934 | 3,566 | |||||||||
| Stock-based compensation expense | 107 | 110 | 218 | 160 | |||||||||
| Gain on sale of short-term investments | (105 | ) | - | (108 | ) | (564 | ) | ||||||
| Future income taxes | (49 | ) | 422 | (174 | ) | 447 | |||||||
| Cash flows before changes in operating assets and liabilities | 5,942 | 4,310 | 11,752 | 7,825 | |||||||||
| Changes in operating assets and liabilities | |||||||||||||
| Decrease (increase) in accounts receivable, net | 273 | 627 | (3,557 | ) | (300 | ) | |||||||
| Decrease (increase) in prepaid expenses and other assets | 17 | (729 | ) | (200 | ) | (1,035 | ) | ||||||
| Increase (decrease) in accounts payable and accrued liabilities | 2,339 | (2,133 | ) | 3,127 | (5,845 | ) | |||||||
| Increase (decrease) in current income taxes payable | 632 | (666 | ) | 1,737 | (1,398 | ) | |||||||
| (Decrease) increase in deferred revenue | (155 | ) | 3,473 | 5,705 | 7,638 | ||||||||
| Unrealized foreign exchange loss | 1,142 | 176 | 1,160 | 263 | |||||||||
| Cash flows from operating activities | 10,190 | 5,058 | 19,724 | 7,148 | |||||||||
| Cash flows from investing activities | |||||||||||||
| Purchase of property and equipment, net | (264 | ) | (334 | ) | (440 | ) | (558 | ) | |||||
| Acquisitions, net of cash acquired | (14,392 | ) | (19,798 | ) | (16,842 | ) | (25,327 | ) | |||||
| (Purchase) proceeds of short-term investments | (1,791 | ) | 23,718 | 10,652 | 22,704 | ||||||||
| (16,447 | ) | 3,586 | (6,630 | ) | (3,181 | ) | |||||||
| Cash flows from financing activities | |||||||||||||
| Issuance of share capital | 140 | 168 | 140 | 905 | |||||||||
| Payment of cash dividend | (1,007 | ) | (754 | ) | (2,014 | ) | (1,500 | ) | |||||
| Purchase and cancellation of common shares | (43 | ) | - | (43 | ) | - | |||||||
| (910 | ) | (586 | ) | (1,917 | ) | (595 | ) | ||||||
| Effect of foreign exchange rate changes on cash | (2,574 | ) | (1,325 | ) | (3,311 | ) | (1,622 | ) | |||||
| Net (decrease) increase in cash during the period | (9,741 | ) | 6,733 | 7,866 | 1,750 | ||||||||
| Cash – beginning of period | 64,247 | 34,293 | 46,640 | 39,276 | |||||||||
| Cash – end of period | $ | 54,506 | $ | 41,026 | $ | 54,506 | $ | 41,026 | |||||
| Supplementary cash flow information: | |||||||||||||
| Cash paid during the period for income taxes | $ | 617 | $ | 505 | $ | 943 | $ | 2,085 | |||||
| Note: Cash excludes short-term investments |
| Enghouse Systems Limited |
| Selected Segment Reporting Information |
| (in thousands of Canadian dollars) |
| (Unaudited) |
| Three Months ended | Six Months ended | ||||||||||||
| April 30, 2011 | April 30, 2010 | April 30, 2011 | April 30, 2010 | ||||||||||
| Revenue: | |||||||||||||
| Asset Management Group | $ | 3,520 | $ | 3,513 | $ | 6,589 | $ | 6,375 | |||||
| Interaction Management Group | 26,814 | 17,750 | 52,314 | 34,424 | |||||||||
| Total | $ | 30,334 | $ | 21,263 | $ | 58,903 | $ | 40,799 | |||||
| Segment Profit (EBIT): | |||||||||||||
| Asset Management Group | $ | 681 | $ | 773 | $ | 1,324 | $ | 799 | |||||
| Interaction Management Group | 5,090 | 2,458 | 9,786 | 4,899 | |||||||||
| Corporate | (693 | ) | (752 | ) | (1,543 | ) | (1,291 | ) | |||||
| Foreign Exchange | (889 | ) | (141 | ) | (1,218 | ) | (59 | ) | |||||
| Interest and other income | 225 | 76 | 357 | 791 | |||||||||
| Total | $ | 4,414 | $ | 2,414 | $ | 8,706 | $ | 5,139 | |||||
Contact Information:
Stephen Sadler
Chief Executive Officer
(905) 946-3200
investor@enghouse.com
www.enghouse.com