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 October October October 31, 31, 31, 31, 2012 2011 2012 2011Total Revenue $ 38,952 $ 31,836 $ 136,368 $ 122,559Net income for the period $ 8,345 13,345 20,873 23,065Provision for income taxes (1,639) (5,884) 2,234 (2,575)Depreciation of property, plant and equipment 444 285 1,386 1,102Amortization of acquired software and customer relationships 3,204 2,687 10,974 10,291Finance income (289) (278) (987) (692)Finance expenses 86 49 269 201Other income 23 (629) (145) (956)Special charges 53 - 544 1,775 --------------------------------------------Adjusted EBITDA $ 10,227 $ 9,575 $ 35,148 $ 32,211Adjusted EBITDA margin 26% 30% 26% 26%Adjusted EBITDA per diluted share $ 0.39 $ 0.37 $ 1.35 $ 1.26Enghouse Systems LimitedConsolidated Statements of Financial Position(in thousands of Canadian dollars)(Unaudited) October 31, October 31, November 1, 2012 2011 2010 AssetsCurrent 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 ------------------------------------------ 118,873 126,076 106,718Non-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 ------------------------------------------ ------------------------------------------ LiabilitiesCurrent 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 47,162Non-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' EquityShare capital 55,751 52,134 50,705Contributed surplus 2,847 2,970 2,653Retained earnings 99,371 84,782 66,546Accumulated 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 LimitedConsolidated 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 2011Revenue 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 29,334Amortization of acquired software and customer relationships (3,204) (2,687) (10,974) (10,291)Finance income 289 278 987 692Finance expenses (86) (49) (269) (201)Other income (23) 629 145 956 ----------------------------------------------------Income before income taxes 6,706 7,461 23,107 20,490Provision 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) 2,112Unrealized 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 shareBasic $ 0.32 $ 0.53 $ 0.82 $ 0.91Diluted $ 0.32 $ 0.52 $ 0.80 $ 0.90----------------------------------------------------------------------------Enghouse Systems LimitedConsolidated Statements of Changes in Equity(in thousands of Canadian dollars)(Unaudited) Accum- ulated other Contri- compre- Share Share buted hensive Retained Capital capital surplus income earnings Total -number $ $ $ $ $Balance - November 1, 2011 25,337,262 52,134 2,970 1,035 84,782 140,921Net income - - - - 20,873 20,873Other 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) - - 2,873Purchase 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 66,546 120,206Net income - - - - 23,065 23,065Other 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 - 2,112Unrealized 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) - - 1,131Purchase 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 LimitedConsolidated Interim Statements of Cash Flows(in thousands of Canadian dollars)(Unaudited) Three months ended October 31 Year ended October 31 2012 2011 2012 2011Cash flows from operating activitiesNet income $ 8,345 $ 13,345 $ 20,873 $ 23,065Adjustments 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 31,753Changes in non-cash operating working capital (4,071) (843) (8,245) 11,061Income tax paid (1,304) (669) (4,492) (1,762)----------------------------------------------------------------------------Net cash flows from operating activities 5,207 8,473 23,475 41,052Cash flows from investing activitiesPurchase 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 activitiesIssuance of share capital 556 667 2,873 1,131Payment 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) 18,984Cash and cash equivalents- beginning of period 39,863 52,272 65,624 46,640Cash and cash equivalents - end of period $ 59,544 $ 65,624 $ 59,544 $ 65,624--------------------------------------------------------------------------------------------------------------------------------------------------------Enghouse Systems LimitedSelected Segment Reporting Information(in thousands of Canadian dollars)(Unaudited) For the three months For the year ended ended October 31 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 ------------------------------------------------ ------------------------------------------------
Contacts:
Enghouse Systems Limited
Stephen Sadler
Chief Executive Officer
(905) 946-3236
investor@enghouse.com
www.enghouse.com
