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Enghouse Releases First Quarter Results and Announces 30% Increase in its Dividend

(March 06, 2012)

MARKHAM, ONTARIO -- (Marketwire) -- 03/06/12 -- Enghouse Systems Limited (TSX:ESL) today announced its unaudited first quarter financial results for the period ended January 31, 2012.

First quarter revenue was $30.5 million, compared to $28.6 million in the first quarter last year. Results from operating activities for the quarter were $7.6 million compared to $6.6 million in the prior year's first quarter, an increase of 15%. Net income for the first quarter increased by 33% to $4.1 million or $0.16 per share on a diluted basis compared to the prior year's first quarter net income of $3.1 million or $0.12 per share. The increase in revenue was primarily a result of incremental revenue contributions from acquisitions. Revenue reflects hosted and maintenance services contributions of $16.0 million in the quarter, an increase of 19% over last year.

Operating expenses increased to $14.9 million from $13.5 million in the prior year's first quarter and include incremental operating costs related to the acquisition of CosmoCom Inc. on April 1, 2011. Non-cash amortization charges were $2.4 million and include amortization charges for acquired software and customer relationships from acquired operations.

Enghouse closed the quarter with $101.5 million in cash, cash equivalents and short-term investments. The Company continues to have no long-term debt and did not repurchase any shares in the quarter. The Company's first quarter financial statements reflect the adoption of International Financial Reporting Standards.


The Board of Directors also announced today a 30% increase in its eligible quarterly dividend to $0.065 per common share, payable on May 31, 2012 to shareholders of record at the close of business on May 17, 2012. Enghouse has increased its dividend in each of the past four years.

On March 1, 2012, the Company acquired CustomCall Data Systems, Inc., a provider of billing, provisioning and workflow solutions to telecommunications service providers for a cash purchase price of approximately U.S. $7.3 million. CustomCall's solutions expand the end-to-end product suite provided to the telecommunications market by the Company's Networks division. The acquisition underscores Enghouse's commitment to diversify its revenue stream and accelerate its expansion into new markets. The Company 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 as a measure of operating performance. Therefore, results from operating activities 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. Management uses results from operating activities to evaluate operating performance as it excludes amortization of software and intangibles which is an accounting allocation of the cost of software and intangible assets arising on acquisition, and does not represent the allocation of the cost of an asset that must be replaced as is the case with depreciation of property and equipment.

Enghouse Systems Limited Consolidated Interim Statements of Financial Position (in thousands of Canadian dollars) (Unaudited) January October November 31, 2012 31, 2011 1, 2010 Assets Current assets: Cash and cash equivalents $ 66,971 $ 65,624 $ 46,640 Short-term investments 34,520 33,967 31,627 Accounts receivable, net 26,390 23,006 24,500 Income tax receivable - - 591 Prepaid expenses and other assets 3,454 3,479 3,360 ----------------------------------------- 131,335 126,076 106,718 Non-current assets: Property and equipment 1,740 1,543 1,588 Acquired software and customer relationships 27,132 29,709 34,330 Goodwill 43,855 43,734 35,137 Deferred income taxes 11,735 11,138 3,478 ----------------------------------------- Total assets $ 215,797 $ 212,200 $ 181,251 ----------------------------------------- ----------------------------------------- Liabilities Current liabilities: Trade payables $ 19,184 $ 22,686 $ 18,808 Income taxes payable 3,374 2,878 - Dividends payable 1,275 1,267 1,007 Accrued provisions 2,278 2,442 1,307 Deferred revenue 32,558 28,933 26,040 ----------------------------------------- 58,669 58,206 47,162 Non-current liabilities: Deferred income tax liabilities 11,355 10,743 12,571 Long-term income taxes payable 248 420 522 Deferred revenue 1,208 1,404 790 ----------------------------------------- Total liabilities 71,480 70,773 61,045 ----------------------------------------- Shareholders' Equity Share capital 53,569 52,134 50,705 Contributed surplus 2,828 2,970 2,653 Retained earnings 88,073 85,288 66,546 Accumulated other comprehensive (loss) gain (153) 1,035 302 ----------------------------------------- Total equity 144,317 141,427 120,206 ----------------------------------------- Total liabilities and equity $ 215,797 $ 212,200 $ 181,251 ----------------------------------------- ----------------------------------------- Enghouse Systems Limited Consolidated Interim Statements of Operations and Comprehensive Income (in thousands of Canadian dollars, except per share amounts) (Unaudited) Quarter ended January 31, 2012 2011 Revenue Software licenses $ 10,518 $ 10,711 Hosted and maintenance services 15,979 13,380 Professional services 3,740 3,756 Hardware 296 722 ----------------- ----------------- 30,533 28,569 ----------------- ----------------- Direct costs Software licenses 909 1,557 Services 6,896 6,315 Hardware 206 560 ----------------- ----------------- 8,011 8,432 ----------------- ----------------- Revenue, net of direct costs 22,522 20,137 Operating expenses Selling, general and administrative 9,861 9,404 Research and development 4,803 3,866 Depreciation of property and equipment 278 275 ----------------- ----------------- 14,942 13,545 ----------------- ----------------- Results from operating activities 7,580 6,592 Amortization of acquired software and customer relationships (2,438) (2,440) Finance income 243 138 Finance expenses (41) (53) Other income (expense) (2) (5) ----------------- ----------------- Income before income taxes 5,342 4,232 Provision for income taxes 1,282 1,180 ----------------- ----------------- Net income for the period $ 4,060 $ 3,052 ----------------- ----------------- ----------------- ----------------- Foreign currency translation differences from foreign operations (582) (650) Transfer to net income of realized gains on available for sale investments, net of tax of ($-); Q1/2011 - ($1) - (2) Unrealized (loss) gain on available for sale investments, net of tax of ($194); Q1/2011 - $4 (614) 20 Unrealized foreign currency translation gain (loss) on available for sale investments, net of tax of $3; Q1/2011 - ($4) 8 (21) Other comprehensive loss (1,188) (653) ----------------- ----------------- Comprehensive income $ 2,872 $ 2,399 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Earnings per share Basic $ 0.16 $ 0.12 Diluted $ 0.16 $ 0.12 ---------------------------------------------------------------------------- Enghouse Systems Limited Consolidated Interim Statements of Changes in Equity (in thousands of Canadian dollars) (Unaudited) Share Share Contributed Capital capital surplus -number $ $ Balance - November 1, 2011 25,337,262 52,134 2,970 Net 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 - - - 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) Purchase and cancellation of commons shares - - - Dividends - - - ------------------------------------------- Balance - January 31, 2012 25,500,562 53,569 2,828 ------------------------------------------- Balance - November 1, 2010 25,171,662 50,705 2,653 Net 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 - - - 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 - - 171 Proceeds on issuing shares - - Purchase and cancellation of commons shares - - - Dividends - - - ------------------------------------------- Balance - January 31, 2011 25,171,662 50,705 2,824 ------------------------------------------- ------------------------------------------- Enghouse Systems Limited Consolidated Interim Statements of Changes in Equity (in thousands of Canadian dollars) (Unaudited) Accumulated other comprehensive Retained income earnings Total $ $ $ Balance - November 1, 2011 1,035 85,288 141,427 Net income - 4,060 4,060 Other Comprehensive Income (net of tax): Cumulative Translation Adjustment (582) - (582) 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 (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 - - 1,127 Purchase and cancellation of commons shares - - - Dividends - (1,275) (1,275) ----------------------------------------- Balance - January 31, 2012 (153) 88,073 144,317 ----------------------------------------- Balance - November 1, 2010 302 66,546 120,206 Net income - 3,052 3,052 Other Comprehensive Income (net of tax): Cumulative Translation Adjustment (650) - (650) Transfer to net income of realized gains on available-for- sale investments, net of tax (2) - (2) Unrealized gain (loss) on available-for-sale investments, net of tax 20 - 20 Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax (21) - (21) ----------------------------------------- Comprehensive income (loss) for the period (653) 3,052 2,399 ----------------------------------------- ----------------------------------------- Employee share options: Value of services recognized - - 171 Proceeds on issuing shares - - - Purchase and cancellation of commons shares - - - Dividends - (1,007) (1,007) ----------------------------------------- Balance - January 31, 2011 (351) 68,591 121,769 ----------------------------------------- ----------------------------------------- Enghouse Systems Limited Consolidated Interim Statements of Cash Flows (in thousands of Canadian dollars) (Unaudited) Quarter ended January 31 2012 2011 Cash flows from operating activities Net income $ 4,060 $ 3,052 Adjustments for: Depreciation of property and equipment 278 275 Amortization of acquired software and customer relationships 2,438 2,440 Stock-based compensation expense 166 171 Deferred income tax expense 203 (125) Finance expenses and other income 43 58 Income tax paid (533) (326) Changes in non-cash operating working capital (3,873) 4,127 --------------------------------------------------------------------------- Net cash flows from operating activities 2,782 9,672 Cash flows from investing activities Purchase of property and equipment, net (491) (176) Finance income (243) (138) Acquisitions, net of cash acquired - (2,450) Net (purchase) proceeds from sale of short-term investments (976) 12,443 --------------------------------------------------------------------------- Net cash flows from investing activities (1,710) 9,679 Cash flows from financing activities Issuance of share capital 1,127 - Payment of cash dividend (1,267) (1,007) --------------------------------------------------------------------------- Net cash flows used in financing activities (140) (1,007) Effect of currency translation adjustments on cash and cash equivalents 415 (737) --------------------------------------------------------------------------- Net increase in cash and cash equivalents during the period 1,347 17,607 Cash and cash equivalents- beginning of period 65,624 46,640 Cash and cash equivalents - end of period $ 66,971 $ 64,247 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Enghouse Systems Limited Selected Segment Reporting Information (in thousands of Canadian dollars) (Unaudited) For the three months ended January 31 ---------------------------------- 2012 2011 ---------------------------------- Revenue: Asset Management Group $ 3,071 $ 3,069 Interactive Management Group 27,462 25,500 ---------------------------------- Total $ 30,533 $ 28,569 ---------------------------------- ---------------------------------- Segment Profit (EBIT): Asset Management Group $ 709 $ 582 Interactive Management Group 5,279 4,462 Corporate expenses (846) (892) Finance income 243 138 Finance expenses (41) (53) Other income (expense) (2) (5) ---------------------------------- ---------------------------------- Total $ 5,342 $ 4,232 ---------------------------------- ----------------------------------

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


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