Enghouse Systems Ltd (TSX:ESL)
Shares Issued 25,168,524
Last Close 6/2/2008 $6.40
Tuesday June 03 2008 - News Release

Mr. Stephen Sadler reports

ENGHOUSE RELEASES SECOND QUARTER RESULTS AND ANNOUNCES DIVIDEND

Enghouse Systems Ltd. is releasing its unaudited second quarter results for the period ended April 30, 2008.

Second quarter revenue was $12.8-million, compared with $15-million reported in the same period last year. Net income for the second quarter was $1.31-million or five cents per diluted share compared with the prior year's second quarter net income of $2.29-million or nine cents per diluted share. On a year-to-date basis, revenue was $23.7-million compared with $28.5-million in the prior fiscal year, while net income was $2.09-million compared with $4.13-million in the prior fiscal year.

Operating expenses decreased to $7.4-million from $8.4-million in the prior year's second quarter, which also included foreign exchange losses of $600,000 compared with $100,000 in the current year's second quarter. Also included in the operating expenses are non-cash amortization charges of $1.5-million compared with $1.5-million in the prior year's second quarter related to the amortization of software and intangibles, including those recorded as part of the acquisition of Gamma Projects Ltd., completed on March 31, 2008. The second quarter also includes $100,000 in non-cash compensation expense related to stock options.

The company generated cash flows from operations of $2.1-million in the second quarter compared with $4.5-million in the prior year's second quarter. On a year-to-date basis, the company generated cash flows of $4-million, closing the quarter with $102.4-million in cash and short-term investments. The company continues to have no long-term debt.

Enghouse paid an eligible cash dividend of 2.5 cents per share on May 30, 2008. At its meeting held today, the board of directors authorized the payment of an eligible quarterly dividend of 2.5 cents per share payable on Aug. 29, 2008, to shareholders of record at the close of business on Aug. 14, 2008. During the quarter Enghouse paid $1.5-million to repurchase 239,200 of its common shares at an average price of $6.32 per share.

During the second quarter the company completed the acquisition of Gamma Projects to expand its presence in the wireless sector of the asset-management market, the results of which have been included from the date of acquisition. The company continues to focus on deploying its cash reserves on acquisitions that will further diversify its revenue stream and extend its market presence.

      CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS         (in thousands of dollars, except per-share amounts)
                          Three months ended April 30,  Six months ended April 30,                                      2008       2007             2008       2007
RevenueSoftware licences                  $ 2,492    $ 3,087          $ 4,302    $ 5,840Services                             9,921     11,347           18,617     21,633Hardware                               391        602              749        991                                    ------     ------           ------     ------                                    12,804     15,036           23,668     28,464                                    ------     ------           ------     ------Cost of salesSoftware licences                      497        698            1,018      1,167Services                             3,737      3,542            7,273      7,305Hardware                               323        516              611        789                                    ------     ------           ------     ------                                     4,557      4,756            8,902      9,261
Gross margin                         8,247     10,280           14,766     19,203
Operating expenses
Selling, general and administrative  3,655      4,491            6,520      7,836
Research and development             1,970      2,144            3,734      4,115
Stock-based compensation                66        103              142        220
Amortization of propertyand equipment                          217        200              428        432
Amortization of acquired softwareand other intangibles                1,482      1,470            2,942      2,947                                    ------     ------           ------     ------                                     7,390      8,408           13,766     15,550                                    ------     ------           ------     ------Income before the undernoted           857      1,872            1,000      3,653
Interest income, net                   865      1,007            1,918      1,978Other income                           327        678              327        810                                    ------     ------           ------     ------Income before income taxes           2,049      3,557            3,245      6,441Provision for income taxes             735      1,272            1,160      2,311                                    ------     ------           ------     ------Net income for the period          $ 1,314    $ 2,285          $ 2,085    $ 4,130                                    ------     ------           ------     ------Retained earnings,beginning of period               $ 69,917   $ 71,394         $ 69,931   $ 69,549
Dividends (loss)                      (635)         -           (1,270)         -
Purchase and cancellationof common shares                    (1,054)      (637)          (1,204)      (637)                                    ------     ------           ------     ------Retained earnings,end of period                     $ 69,542   $ 73,042         $ 69,542   $ 73,042                                    ------     ------           ------     ------Earnings per shareBasic                               $ 0.05     $ 0.09           $ 0.08     $ 0.16Diluted                             $ 0.05     $ 0.09           $ 0.08     $ 0.16