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Enghouse Releases Second Quarter Results

(June 06, 2012)

MARKHAM, ONTARIO -- (Marketwire) -- 06/06/12 -- Enghouse Systems Limited (TSX:ESL) today announced its unaudited second quarter financial results for the period ended April 30, 2012.

The Company posted solid second quarter results despite ongoing turbulence in global markets. Second quarter revenue was $31.5 million, compared to $30.3 million in the second quarter last year. Results from operating activities for the quarter were $7.6 million compared to $4.9 million in the prior year's second quarter, an increase of 53%. Net income for the second quarter increased by 100% to $4.2 million or $0.16 per share on a diluted basis compared to the prior year's second quarter net income of $2.1 million or $0.08 per share. The increase in revenue continues to reflect incremental revenue contributions from acquisitions. Revenue also reflects hosted and maintenance services contributions of $16.0 million in the quarter, an increase of 16% over last year, largely as a result of incremental hosted revenue contributions from recently acquired CustomCall Data Systems Inc. Hosted and maintenance revenue now accounts for over 50% of the Company's total revenue. On a year to date basis, revenue was $62.0 million up from $58.9 million, while net income increased from $5.1 million to $8.2 million or $0.32 per diluted share.

Operating expenses decreased to $15.7 million from $15.8 million in the prior year's second quarter, which included restructuring expenses related to the CosmoCom acquisition on April 1, 2011. The current quarter's operating expenses include incremental operating costs related to the acquisition of CustomCall on March 1, 2012 and a full quarter of CosmoCom's operating costs. Non-cash amortization charges were $2.4 million and reflect amortization of acquired software and customer relationships from acquisitions.

The Company closed the quarter with over $100 million in cash, cash equivalents and short-term investments, which is after the payment of approximately $6.6 million related to the acquisition of CustomCall and its office facility. Enghouse continues to have no long-term debt and did not repurchase any shares in the quarter.


The Board of Directors also announced today an eligible quarterly dividend of $0.065 per common share, payable on August 31, 2012 to shareholders of record at the close of business on August 17, 2012.

On June 1, 2012, Enghouse acquired Zeacom Group Ltd., a leading provider of multi-channel contact center communications solutions for a cash purchase price of approximately U.S. $30.6 million. Headquartered in Auckland, New Zealand, with offices in Australia, the UK and the US, Zeacom's leading edge contact center software and business process automation solutions have been installed in over 3,500 customer sites worldwide. The acquisition of Zeacom expands Enghouse's global market reach and product suite. 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 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) April 30, October 31, November 1, 2012 2011 2010 Assets Current assets: Cash and cash equivalents $ 56,387 $ 65,624 $ 46,640 Short-term investments 44,016 33,967 31,627 Accounts receivable, net 28,438 23,006 24,500 Income tax receivable - - 591 Prepaid expenses and other assets 3,964 3,479 3,360 ------------------------------------- 132,805 126,076 106,718 Non-current assets: Property, plant and equipment 2,773 1,543 1,588 Acquired software and customer relationships 28,710 29,709 34,330 Goodwill 47,213 43,734 35,137 Deferred income taxes 11,460 11,138 3,478 ------------------------------------- Total assets $ 222,961 $ 212,200 $ 181,251 ------------------------------------- ------------------------------------- Liabilities Current liabilities: Trade payables $ 18,542 $ 22,686 $ 18,808 Income taxes payable 3,397 2,878 - Dividends payable 1,664 1,267 1,007 Accrued provisions 1,921 2,442 1,307 Deferred revenue 36,360 28,933 26,040 ------------------------------------- 61,884 58,206 47,162 Non-current liabilities: Deferred income tax liabilities 12,741 10,743 12,571 Long-term income taxes payable 220 420 522 Deferred revenue 1,241 1,404 790 ------------------------------------- Total liabilities 76,086 70,773 61,045 ------------------------------------- Shareholders' Equity Share capital 54,532 52,134 50,705 Contributed surplus 2,734 2,970 2,653 Retained earnings 90,589 85,288 66,546 Accumulated other comprehensive (loss) gain (980) 1,035 302 ------------------------------------- Total equity 146,875 141,427 120,206 ------------------------------------- Total liabilities and equity $ 222,961 $ 212,200 $ 181,251 ------------------------------------- ------------------------------------- Enghouse Systems Limited Consolidated Interim Statements of Operations and Comprehensive Income (loss) (in thousands of Canadian dollars, except per share amounts) (Unaudited) Three months ended Six months ended April 30 April 30 2012 2011 2012 2011 Revenue Software licenses $ 10,630 $ 11,752 $ 21,148 $ 22,463 Hosted and maintenance services 16,040 13,862 32,019 27,154 Professional services 4,406 3,569 8,146 7,413 Hardware 380 1,151 676 1,873 ------------------------------------------------ 31,456 30,334 61,989 58,903 ------------------------------------------------ Direct costs Software licenses 866 1,973 1,775 3,530 Services 7,086 6,765 13,982 13,080 Hardware 278 852 484 1,412 ------------------------------------------------ 8,230 9,590 16,241 18,022 ------------------------------------------------ Revenue, net of direct costs 23,226 20,744 45,748 40,881 Operating expenses Selling, general and administrative 9,976 11,658 19,837 21,062 Research and development 5,401 3,873 10,204 7,739 Depreciation of property, plant and equipment 287 281 565 556 ------------------------------------------------ 15,664 15,812 30,606 29,357 ------------------------------------------------ Results from operating activities 7,562 4,932 15,142 11,524 Amortization of acquired software and customer relationships (2,383) (2,494) (4,821) (4,934) Finance income 261 126 504 264 Finance expenses (70) (45) (111) (98) Other income 157 76 155 71 ------------------------------------------------ Income before income taxes 5,527 2,595 10,869 6,827 Provision for income taxes 1,347 504 2,629 1,684 ------------------------------------------------ Net income for the period $ 4,180 $ 2,091 $ 8,240 $ 5,143 ------------------------------------------------ ------------------------------------------------ Foreign currency translation differences from foreign operations (709) (2,504) (1,291) (3,154) Transfer to net income of realized gains on available for sale investments, net of tax of ($24); six months - ($24) (132) (89) (132) (91) Unrealized gain (loss) on available for sale investments, net of tax of $3; six months - ($112) 14 461 (600) 481 Unrealized foreign currency translation (loss) gain on available for sale investments, net of tax of $nil; six months - $1 - (52) 8 (73) ------------------------------------------------ Other comprehensive loss (827) (2,184) (2,015) (2,837) ------------------------------------------------ Comprehensive income (loss) $ 3,353 $ (93) $ 6,225 $ 2,306 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Earnings per share Basic $ 0.16 $ 0.08 $ 0.32 $ 0.20 Diluted $ 0.16 $ 0.08 $ 0.32 $ 0.20 ---------------------------------------------------------------------------- Enghouse Systems Limited Consolidated Interim Statements of Changes in Equity (in thousands of Canadian dollars) (Unaudited) Share Contributed Capital Share 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 - - 286 Proceeds on issuing shares 268,300 2,398 (522) Purchase and cancellation of commons shares Dividends - - - ------------------------------------------------ Balance - April 30, 2012 25,605,562 54,532 2,734 ------------------------------------------------ ------------------------------------------------ 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 - - 325 Proceeds on issuing shares 28,000 140 - Purchase and cancellation of commons shares (4,800) (10) - Dividends - - - ------------------------------------------------ Balance - April 30, 2011 25,194,862 50,835 2,978 ------------------------------------------------ ------------------------------------------------ Accumulated other comprehensive Retained income earnings Total $ $ $ Balance - November 1, 2011 1,035 85,288 141,427 Net income - 8,240 8,240 Other Comprehensive Income (net of tax): Cumulative Translation Adjustment (1,291) - (1,291) Transfer to net income of realized gains on available-for-sale investments, net of tax (132) - (132) Unrealized gain (loss) on available-for-sale investments, net of tax (600) - (600) Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax 8 - 8 ------------------------------------------------ Comprehensive income (loss) for the period (2,015) 8,240 6,225 ------------------------------------------------ ------------------------------------------------ Employee share options: Value of services recognized - - 286 Proceeds on issuing shares - - 1,876 Purchase and cancellation of commons shares - - - Dividends - (2,939) (2,939) ------------------------------------------------ Balance - April 30, 2012 (980) 90,589 146,875 ------------------------------------------------ ------------------------------------------------ Balance - November 1, 2010 302 66,546 120,206 Net income - 5,143 5,143 Other Comprehensive Income (net of tax): Cumulative Translation Adjustment (3,154) - (3,154) Transfer to net income of realized gains on available-for-sale investments, net of tax (91) - (91) Unrealized gain (loss) on available-for-sale investments, net of tax 481 - 481 Unrealized foreign currency translation gain (loss) on available-for-sale investments, net of tax (73) - (73) ------------------------------------------------ Comprehensive income (loss) for the period (2,837) 5,143 2,306 ------------------------------------------------ ------------------------------------------------ Employee share options: Value of services recognized - - 325 Proceeds on issuing shares - - 140 Purchase and cancellation of commons shares - (33) (43) Dividends - (2,267) (2,267) ------------------------------------------------ Balance - April 30, 2011 (2,535) 69,389 120,667 ------------------------------------------------ ------------------------------------------------

Enghouse Systems Limited Consolidated Interim Statements of Cash Flows (in thousands of Canadian dollars) (Unaudited) Three months ended Six months ended April 30 April 30 2012 2011 2012 2011 Cash flows from operating activities Net income $ 4,180 $ 2,091 $ 8,240 $ 5,143 Adjustments for: Depreciation of property, plant and equipment 287 281 565 556 Amortization of acquired software and customer relationships 2,383 2,494 4,821 4,934 Stock-based compensation expense 120 154 286 325 Deferred income tax expense 93 (47) 296 (172) Finance expenses and other income (87) (31) (44) 27 Income tax paid (1,295) (617) (1,828) (943) ------------------------------------------------ 5,681 4,325 12,336 9,870 Changes in non-cash operating working capital 1,740 5,797 (2,133) 9,924 ---------------------------------------------------------------------------- Net cash flows from operating activities 7,421 10,122 10,203 19,794 Cash flows from investing activities Purchase of property, plant and equipment, net (1,178) (264) (1,669) (440) Finance income (261) (126) (504) (264) Acquisitions, net of cash acquired (5,802) (14,198) (5,802) (15,768) Net (purchase) proceeds from sale of short-term investments (9,583) (1,791) (10,559) 10,652 ---------------------------------------------------------------------------- Net cash flows from investing activities (16,824) (16,379) (18,534) (5,820) Cash flows from financing activities Issuance of share capital 749 140 1,876 140 Payment of cash dividend (1,275) (1,007) (2,542) (2,014) Purchase and cancellation of common shares - (43) - (43) ---------------------------------------------------------------------------- Net cash flows used in financing activities (526) (910) (666) (1,917) Effect of currency translation adjustments on cash and cash equivalents (655) (2,574) (240) (3,311) ---------------------------------------------------------------------------- Net increase in cash and cash equivalents during the period (10,584) (9,741) (9,237) 7,866 Cash and cash equivalents- beginning of period 66,971 64,247 65,624 46,640 Cash and cash equivalents - end of period $ 56,387 $ 54,506 $ 56,387 $ 54,506 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Enghouse Systems Limited Selected Segment Reporting Information (in thousands of Canadian dollars) (Unaudited) For the three months For the six months ended April 30 ended April 30 ----------------------- ------------------------ 2012 2011 2012 2011 ------------------------------------------------ Revenue: Asset Management Group $ 3,723 $ 3,520 $ 6,794 $ 6,589 Interactive Management Group 27,733 26,814 55,195 52,314 ------------------------------------------------ Total $ 31,456 $ 30,334 $ 61,989 $ 58,903 ------------------------------------------------ ------------------------------------------------ Segment Profit (EBIT): Asset Management Group $ 193 $ 420 $ 902 $ 1,002 Interactive Management Group 5,768 2,753 11,047 7,215 Corporate expenses (782) (735) (1,628) (1,627) Finance income 261 126 504 264 Finance expenses (70) (45) (111) (98) Other income (expense) 157 76 155 71 ------------------------------------------------ ------------------------------------------------ Total $ 5,527 $ 2,595 $ 10,869 $ 6,827 ------------------------------------------------ ------------------------------------------------

Contacts:
Enghouse Systems Limited
Kevin Derbyshire
Chief Corporate Officer
(905) 946-3238
investor@enghouse.com


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