Enghouse Releases Fourth Quarter Results

Marketwired

MARKHAM, ONTARIO--(Marketwire - Dec 13, 2012) - Enghouse Systems Limited (ESL.TO) 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  
                         
Contact:
Enghouse Systems Limited
Stephen Sadler
Chief Executive Officer
(905) 946-3236
investor@enghouse.com
www.enghouse.com

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