Enghouse Releases Fourth Quarter Results

MARKHAM, ONTARIO--(Marketwire - Dec. 13, 2012) - 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 31, 2012			October 31, 2011			October 31, 2012			October 31, 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, 2012		October 31, 2011		November 1, 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)

		Share Capital -number		Share capital $		Contri-buted surplus $		Accum- ulated other compre- hensive income $		Retained earnings $		Total $
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 ended October 31						For the year ended 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