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Enghouse Releases First Quarter Results

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MARKHAM, ONTARIO -- (Marketwire) -- 03/05/13 -- Enghouse Systems Limited (TSX: ESL) today announced its unaudited first quarter financial results for the period ended January 31, 2013.

First quarter revenue was $42.0 million, an increase of 37% over revenue of $30.5 million in the first quarter last year. The increase in revenue was primarily the result of incremental revenue contributions from acquisitions. Revenue reflects hosted and maintenance services contributions of $20.6 million in the quarter, an increase of 29% over last year. Adjusted EBITDA for the quarter was $9.6 million or $0.36 per diluted share compared to $7.9 million or $0.30 per diluted share in last year's first quarter. Results from operating activities for the quarter were $7.3 million compared to $7.6 million in the prior year's first quarter as a result of special charges booked on acquisitions of $1.8 million in the quarter. Excluding special charges related to restructuring of acquisitions, results from operating activities would be $9.1 million, an increase of 20% over the prior year. Net income for the first quarter was $3.4 million or $0.13 per diluted share compared to the prior year's first quarter net income of $4.1 million or $0.16 per share.

Operating expenses increased to $23.0 from $14.9 million in the prior year's first quarter and include incremental operating costs related to acquisitions as well as special charges related to restructuring of acquired operations. Non-cash amortization charges in the quarter were $3.6 million and include amortization charges for acquired software and customer relationships from acquired operations.

Enghouse closed the quarter with $80.1 million in cash, cash equivalents and short-term investments, compared to $83.7 million at October 31, 2012. This reflects cash paid of nearly $10.0 million for the acquisitions of Visionutveckling AB and Albatross Scandinavia AB completed in the quarter. It also reflects a cash dividend paid of $1.7 million. The Company continues to have no long-term debt.

On March 1, 2013 the Company completed the acquisition of Locus Holdings AS ("Locus") of Norway for a cash purchase price of approximately $14.0 million, subject to certain price adjustments. Locus is a leading supplier of fleet management solutions for the Public Safety and Transport & Logistics (including Security) sectors in the Scandinavian market and has a dominant position in the Norwegian Public Safety sector. Its products are installed in police cars, ambulances, rescue helicopters and fire brigades. Locus's transportation, logistics and M2M products are also well established in these markets.

The Board of Directors also has approved a 23% increase in its eligible quarterly dividend to $0.08 per common share, payable on May 31, 2013 to shareholders of record at the close of business on May 17, 2013. Enghouse has increased its dividend in each of the past five years.

Enghouse remains committed to diversifying its revenue stream and accelerating its expansion into new markets and continues to seek further acquisitions to grow its market share.

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 January 31, January 31, 2013 2012Total Revenue $ 41,957 $ 30,533Net income for the period 3,435 4,060Provision for income taxes 913 1,282Depreciation of property, plant and equipment 468 278Amortization of acquired software and 3,584 2,438 customer relationshipsFinance income (333) (243)Finance expenses 81 41Other (income) expense (361) 2Special charges 1,815 - -------------------------------Adjusted EBITDA $ 9,602 $ 7,860Adjusted EBITDA margin 23% 26%Adjusted EBITDA per diluted share $ 0.36 $ 0.30Enghouse Systems LimitedConsolidated Statements of Financial Position(in thousands of Canadian dollars)(Unaudited) January 31, October 31, 2013 2012 AssetsCurrent assets: Cash and cash equivalents $ 50,535 $ 59,544 Short-term investments 29,516 24,108 Accounts receivable, net 38,114 31,368 Income tax receivable 151 - Prepaid expenses and other assets 4,610 3,853 ----------------------------- 122,926 118,873Non-current assets:Property, plant and equipment 3,512 3,365Intangibles 117,073 106,995Deferred income taxes 8,318 10,477 -----------------------------Total assets $ 251,829 $ 239,710 ----------------------------- ----------------------------- LiabilitiesCurrent liabilities: Trade payables $ 29,419 $ 26,053 Income taxes payable - 2,008 Dividends payable 1,680 1,676 Accrued provisions 2,876 1,621 Deferred revenue 41,590 35,935 ----------------------------- 75,565 67,293Non-current liabilities:Deferred income tax liabilities 13,433 13,241Deferred revenue 1,303 1,236 -----------------------------Total liabilities 90,301 81,770 ----------------------------- Shareholders' EquityShare capital 56,460 55,751Contributed surplus 2,800 2,847Retained earnings 101,126 99,371Accumulated other comprehensive gain (loss) 1,142 (29) -----------------------------Total shareholders' equity 161,528 157,940 -----------------------------Total liabilities and shareholders' equity $ 251,829 $ 239,710 ----------------------------- -----------------------------Enghouse Systems LimitedConsolidated Interim Statements of Operations and Comprehensive Income(in thousands of Canadian dollars, except per share amounts)(Unaudited) Quarter ended January 31, 2013 2012Revenue Software licenses $ 15,064 $ 10,518 Hosted and maintenance services 20,563 15,979 Professional services 5,491 3,740 Hardware 839 296 -------------- ------------ 41,957 30,533 -------------- ------------Direct costs Software licenses 1,429 909 Services 9,584 6,896 Hardware 593 206 -------------- ------------ 11,606 8,011 -------------- ------------Revenue, net of direct costs 30,351 22,522Operating expenses Selling, general and administrative 13,406 9,861 Research and development 7,343 4,803 Depreciation of property, plant and equipment 468 278 Special charges 1,815 - -------------- ------------ 23,032 14,942 -------------- ------------Results from operating activities 7,319 7,580Amortization of acquired software and customer relationships (3,584) (2,438)Finance income 333 243Finance expenses (81) (41)Other income (expense) 361 (2) -------------- ------------Income before income taxes 4,348 5,342Provision for income taxes 913 1,282 -------------- ------------Net income for the period $ 3,435 $ 4,060 -------------- ------------ -------------- ------------Items that may be reclassified subsequently to profit or loss:Foreign currency translation differences from foreign operations 861 (582)Transfer to net income of realized gains on available for sale investments, net of tax of ($56); Q1/2012 - $- (369) -Unrealized gain (loss) on available for sale investments, net of tax of $103; Q1/2012 - ($194) 679 (614)Unrealized foreign currency translation gain on available for sale investments, net of tax of $-; Q1/2012 - $3 - 8Other comprehensive income (loss) 1,171 (1,188) -------------- ------------Comprehensive income $ 4,606 $ 2,872--------------------------------------------------------------------------------------------------------------------------------------------------------Earnings per shareBasic and diluted $ 0.13 $ 0.16----------------------------------------------------------------------------Enghouse Systems LimitedConsolidated Statements of Changes in Equity(in thousands of Canadian dollars)(Unaudited) Share Share Contributed Capital capital surplus -number $ $Balance - November 1, 2012 25,780,562 55,751 2,847Net income - - -Other Comprehensive Income (net of tax):Cumulative Translation Adjustment - - -Transfer to net income of realized gains on available-for-sale investments, net of tax - - -Unrealized gain (loss) on available-for-sale investments, net of tax - - - -----------------------------------------Comprehensive income (loss) for the period - - - ----------------------------------------- -----------------------------------------Employee share options: Value of services recognized - - 137 Proceeds on issuing shares 70,400 709 (184)Dividends - - - -----------------------------------------Balance - January 31, 2013 25,850,962 56,460 2,800 ----------------------------------------- -----------------------------------------Balance - November 1, 2011 25,337,262 52,134 2,970Net income - - -Other Comprehensive Income (net of tax):Cumulative Translation Adjustment - - -Unrealized gain (loss) on available-for-sale investments, net of tax - - -Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax - - - -----------------------------------------Comprehensive income (loss) for the period - - - ----------------------------------------- -----------------------------------------Employee share options: Value of services recognized - - 166 Proceeds on issuing shares 163,300 1,435 (308)Dividends - - - -----------------------------------------Balance - January 31, 2012 25,500,562 53,569 2,828 ----------------------------------------- -----------------------------------------Enghouse Systems LimitedConsolidated Statements of Changes in Equity(in thousands of Canadian dollars)(Unaudited) Accumulated other comprehensive Retained income (loss) earnings Total $ $ $Balance - November 1, 2012 (29) 99,371 157,940Net income - 3,435 3,435Other Comprehensive Income (net of tax):Cumulative Translation Adjustment 861 - 861Transfer to net income of realized gains on available-for-sale investments, net of tax (369) - (369)Unrealized gain (loss) on available-for-sale investments, net of tax 679 - 679 -----------------------------------------Comprehensive income (loss) for the period 1,171 3,435 4,606 ----------------------------------------- -----------------------------------------Employee share options: Value of services recognized - - 137 Proceeds on issuing shares - - 525Dividends - (1,680) (1,680) -----------------------------------------Balance - January 31, 2013 1,142 101,126 161,528 ----------------------------------------- -----------------------------------------Balance - November 1, 2011 1,035 84,782 140,921Net income - 4,060 4,060Other Comprehensive Income (net of tax):Cumulative Translation Adjustment (582) - (582)Unrealized gain (loss) on available-for-sale investments, net of tax (614) - (614)Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax 8 - 8 -----------------------------------------Comprehensive income (loss) for the period (1,188) 4,060 2,872 ----------------------------------------- -----------------------------------------Employee share options: Value of services recognized - - 166 Proceeds on issuing shares - - 1,127Dividends - (1,275) (1,275) -----------------------------------------Balance - January 31, 2012 (153) 87,657 143,811 ----------------------------------------- -----------------------------------------Enghouse Systems LimitedConsolidated Interim Statements of Cash Flows(in thousands of Canadian dollars)(Unaudited) Quarter ended January 31, 2013 2012Cash flows from operating activitiesNet income $ 3,435 $ 4,060Adjustments for: Depreciation of property, plant and equipment 468 278 Amortization of acquired software and customer relationships 3,584 2,438 Stock-based compensation expense 137 166 Income tax expense 913 1,282 Finance expenses and other income (280) 43 ---------------------- 8,257 8,267Changes in non-cash operating working capital 747 (4,952)Income tax paid (2,185) (533)----------------------------------------------------------------------------Net cash flows from operating activities 6,819 2,782Cash flows from investing activitiesPurchase of property, plant and equipment, net (294) (491)Acquisitions, net of cash acquired of $196 (9,985) (243)Net purchase of short-term investments (4,102) (976)----------------------------------------------------------------------------Net cash flows used in investing activities (14,381) (1,710)Cash flows from financing activitiesIssuance of share capital 525 1,127Payment of cash dividend (1,676) (1,267)----------------------------------------------------------------------------Net cash flows used in financing activities (1,151) (140)Effect of currency translation adjustments on cash and cash equivalents (296) 415----------------------------------------------------------------------------Net (decrease) increase in cash and cash equivalents during the period (9,009) 1,347Cash and cash equivalents- beginning of period 59,544 65,624Cash and cash equivalents - end of period $ 50,535 $ 66,971--------------------------------------------------------------------------------------------------------------------------------------------------------Enghouse Systems LimitedSelected Segment Reporting Information(in thousands of Canadian dollars)(Unaudited) For the three months ended January 31 ---------------------------- 2013 2012 ----------------------------Revenue: Asset Management Group $ 5,245 $ 3,071 Interactive Management Group 36,712 27,462 ----------------------------Total $ 41,957 $ 30,533 ---------------------------- ----------------------------Segment Profit (EBIT): Asset Management Group $ 803 $ 709 Interactive Management Group 3,798 5,279 Corporate expenses (866) (846) Finance income 333 243 Finance expenses (81) (41) Other income (expense) 361 (2) ---------------------------- ----------------------------Total $ 4,348 $ 5,342 ---------------------------- ----------------------------





Contacts:
Enghouse Systems Limited
Stephen Sadler
Chief Executive Officer
(905) 946-3236
investor@enghouse.com
www.enghouse.com