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Enghouse Posts Record Results

(December 14, 2011)

MARKHAM, ONTARIO -- (Marketwire) -- 12/14/11 -- Enghouse Systems Limited (TSX:ESL) today announced its fourth quarter (unaudited) and year end financial results for the period ended October 31, 2011, posting record revenue and net income on the year.

Revenue topped the $100 million mark for the first time in the Company's history at $122.6 million for the fiscal year. This is compared to $94.2 million in the prior year, an increase of 30%, as the Company continues to successfully implement its growth strategy. Net income for the fiscal year was $16.8 million or $0.66 per diluted share compared to $10.2 million or $0.40 per diluted share in the prior year, an increase of approximately 65%, representing a record year for the Company. Operating expenses increased to $57.0 million for the year compared to $45.6 million in the prior year as a result of incremental costs related to acquired operations. As has become the norm, revenue and operating costs were also impacted by the continued volatility of foreign exchange as outlined in the Company's Management's Discussion and Analysis as filed on SEDAR.

For the fourth quarter, revenue was $31.8 million, compared to $27.4 million reported in the same period last year. Net income for the fourth quarter was $5.9 million or $0.23 per diluted share compared to $3.4 million or $0.13 per diluted share in the fourth quarter of last year.

The Company recorded non-cash amortization charges of $2.7 million in the quarter compared to $2.5 million in the prior year's fourth quarter. For the fiscal year, the Company reported amortization charges of $10.3 million compared to $8.5 million in the prior fiscal year.


The Company generated cash flows from operating activities of $8.3 million in the quarter, compared to $2.4 million in the prior year's fourth quarter, an increase of 249%, and $41.1 million in the fiscal year compared to $18.6 million in the prior fiscal year, an increase of 120%. Enghouse closed the year with $99.6 million in cash and short-term investments after having spent $16.8 million in the fiscal year on acquisitions and $4.5 million on dividends.

Enghouse continues to have no long-term debt.

The Board of Directors today authorized an eligible quarterly dividend of $0.05 per common share, payable on February 29, 2012 to shareholders of record at the close of business on February 15, 2012. The Company remains committed to its strategy of seeking further acquisitions to continue 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.

Enghouse Systems Limited Consolidated Balance Sheets (in thousands of Canadian dollars) (Unaudited) October 31, October 31, 2011 2010 ---------------------------------------------------------------------------- Assets Current Cash $ 65,624 $ 46,640 Short-term investments 33,967 31,627 Accounts receivable, net 23,006 24,500 Income tax receivable - 591 Future income taxes 1,769 447 Prepaid expenses and other assets 3,479 3,360 ----------------------------- 127,845 107,165 ----------------------------- Property and equipment, net 1,791 1,844 Acquired software and other intangibles, net 28,531 34,330 Goodwill 38,287 35,137 Future income taxes 9,295 2,951 ----------------------------- $ 205,749 $ 181,427 ----------------------------- ----------------------------- Liabilities Current Accounts payable and accrued liabilities $ 25,128 $ 20,115 Income taxes payable 3,579 - Dividend payable 1,267 1,007 Deferred revenue 28,933 26,040 ----------------------------- 58,907 47,162 Future income taxes 10,283 12,571 Long-term income taxes payable 420 522 Deferred revenue 1,404 790 ----------------------------- 71,014 61,045 Shareholders' Equity Share capital 52,134 50,705 Contributed surplus 2,613 2,429 Retained earnings 91,613 79,606 Accumulated other comprehensive loss (11,625) (12,358) ----------------------------- 134,735 120,382 $ 205,749 $ 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 Twelve months ended October 31 October 31 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Revenue Software licenses $ 11,690 $ 8,794 $ 45,691 $ 30,198 Services 19,927 17,903 74,260 61,304 Hardware 219 681 2,608 2,706 ----------------------------------------------- 31,836 27,378 122,559 94,208 ----------------------------------------------- Cost of sales Software licenses 769 920 5,208 4,363 Services 6,871 6,492 26,634 22,429 Hardware 237 459 1,966 1,845 ----------------------------------------------- 7,877 7,871 33,808 28,637 Gross margin 23,959 19,507 88,751 65,571 Operating expenses Selling, general and administrative 11,062 9,442 40,244 31,807 Research and development 4,213 3,487 15,672 12,477 Amortization of property and equipment 287 356 1,110 1,331 ----------------------------------------------- 15,562 13,285 57,026 45,615 ----------------------------------------------- Income before the undernoted 8,397 6,222 31,725 19,956 Amortization of acquired software and other intangibles (2,687) (2,475) (10,291) (8,458) Interest income, net 274 92 667 387 Other income, net 631 203 800 1,145 Foreign exchange gain (loss) 853 90 (511) 238 ----------------------------------------------- Income before income taxes 7,468 4,132 22,390 13,268 Provision for (recovery of) income taxes Current (57) (1,504) 4,063 635 Future 1,605 2,210 1,491 2,395 ----------------------------------------------- Net income for the period $ 5,920 $ 3,426 $ 16,836 $ 10,238 ----------------------------------------------- Retained earnings, beginning of period $ 86,960 $ 77,186 $ 79,606 $ 73,142 Dividends (1,267) (1,006) (4,796) (3,774) Purchase and cancellation of common shares - - (33) - ----------------------------------------------- Retained earnings, end of period $ 91,613 $ 79,606 $ 91,613 $ 79,606 ----------------------------------------------- ----------------------------------------------- Earnings per share Basic $ 0.23 $ 0.14 $ 0.67 $ 0.41 Diluted $ 0.23 $ 0.13 $ 0.66 $ 0.40 Weighted average shares outstanding during period (millions) - basic 25.3 25.2 25.2 25.1 - diluted 25.6 25.4 25.5 25.3 Enghouse Systems Limited Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss (in thousands of Canadian dollars) (Unaudited) Three months ended Twelve months ended October 31 October 31 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Net income for the period $ 5,920 $ 3,426 $ 16,836 $ 10,238 ----------------------------------------------- Other comprehensive income (loss): Unrealized gain (loss) on translating financial statements of self- sustaining foreign operations 2,800 (1,171) (763) (4,044) Transfer to net income of realized gains on available for sale investments, net of tax of ($99) (year to date - ($126)) (532) (646) (674) (1,303) Unrealized gain on available for sale investments, net of tax of $257 (year to date - $395) 1,377 465 2,112 1,881 Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $24 (year to date - $11) 127 (22) 58 (133) ----------------------------------------------- Other comprehensive income (loss) $ 3,772 $ (1,374) $ 733 $ (3,599) ----------------------------------------------- Comprehensive income $ 9,692 $ 2,052 $ 17,569 $ 6,639 ----------------------------------------------- ----------------------------------------------- Accumulated other comprehensive loss, beginning of period $ (15,397) $ (10,984) $ (12,358) $ (8,759) Other comprehensive income (loss) 3,772 (1,374) 733 (3,599) ----------------------------------------------- Accumulated other comprehensive loss, end of period $ (11,625) $ (12,358) $ (11,625) $ (12,358) ----------------------------------------------- ----------------------------------------------- ---------------------------------------------------------------------------- Enghouse Systems Limited Consolidated Statements of Cash Flows (in thousands of Canadian dollars) (Unaudited) For the three months For the twelve months ended October 31 ended October 31 ---------------------------------------------------------------------------- 2011 2010 2011 2010 ---------------------------------------------------------------------------- Cash flows from operating activities Net income for the period $ 5,920 $ 3,426 $ 16,836 $ 10,238 Add (deduct) items not involving cash Amortization of property and equipment 287 356 1,110 1,331 Amortization of acquired software and other intangibles 2,687 2,475 10,291 8,458 Stock-based compensation expense 123 111 492 382 Gain on sale of short-term investments (631) (605) (800) (1,547) Future income taxes 1,605 2,210 1,491 2,395 ----------------------------------------------- Cash flows before changes in operating assets and liabilities 9,991 7,973 29,420 21,257 Changes in operating assets and liabilities Decrease (increase) in accounts receivable, net 1,449 (1,443) 6,466 151 Decrease in prepaid expenses and other assets 171 640 193 194 Increase (decrease) in accounts payable and accrued liabilities 974 (1,023) 1,430 (5,587) (Decrease) increase in current income taxes payable (44) (2,379) 2,223 (3,240) (Decrease) increase in deferred revenue (2,409) (2,350) 1,267 6,329 Unrealized foreign exchange (gain) loss (1,853) 954 53 (474) ----------------------------------------------- Cash flows from operating activities 8,279 2,372 41,052 18,630 ----------------------------------------------- Cash flows from investing activities Purchase of property and equipment, net (317) (278) (947) (887) Acquisitions, net of cash acquired - - (16,842) (30,131) Net proceeds (purchase) from sale of short-term investments 4,406 (1,623) 695 23,664 ----------------------------------------------- 4,089 (1,901) (17,094) (7,354) ----------------------------------------------- Cash flows from financing activities Issuance of share capital 667 20 1,131 925 Payment of cash dividends (1,262) (1,007) (4,536) (3,514) Purchase and cancellation of common shares - - (43) - ----------------------------------------------- (595) (987) (3,448) (2,589) ----------------------------------------------- Effect of foreign exchange rate changes on cash 1,579 (303) (1,526) (1,323) ----------------------------------------------- Net increase (decrease) in cash during the period 13,352 (819) 18,984 7,364 Cash - beginning of period 52,272 47,459 46,640 39,276 ----------------------------------------------- Cash - end of period $ 65,624 $ 46,640 $ 65,624 $ 46,640 ----------------------------------------------- ----------------------------------------------- Supplementary cash flow information: Cash paid during the period for income taxes $ 669 $ 91 $ 1,762 $ 2,509 Note: Cash excludes short-term investments Enghouse Systems Limited Selected Segment Reporting Information (in thousands of Canadian dollars) (Unaudited) Three Months ended Twelve Months ended ---------------------------------------------------------------------------- October 31, October 31, October 31, October 31, 2011 2010 2011 2010 --------------------------------------------------- Revenue: Asset Management Group $ 3,075 $ 3,499 $ 12,842 $ 13,503 Interactive Management Group 28,761 23,879 109,717 80,705 --------------------------------------------------- Total $ 31,836 $ 27,378 $ 122,559 $ 94,208 --------------------------------------------------- --------------------------------------------------- Segment Profit (EBIT): Asset Management Group $ 741 $ 843 $ 3,033 $ 2,910 Interactive Management Group 6,187 3,738 21,958 11,287 Corporate expenses (1,218) (834) (3,557) (2,699) Foreign exchange gain (loss) 853 90 (511) 238 Interest and other income, net 905 295 1,467 1,532 --------------------------------------------------- --------------------------------------------------- Total $ 7,468 $ 4,132 $ 22,390 $ 13,268 --------------------------------------------------- --------------------------------------------------- ----------------------------------------------------------------------------

Contacts:
Enghouse Systems Limited
Stephen Sadler
Chief Executive Officer
(905) 946-3200
investor@enghouse.com
www.enghouse.com


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