SOURCE: Epicor Software Corporation
July 29, 2010 16:07 ET
Epicor® Reports 2010 Second Quarter Results
IRVINE, CA--(Marketwire - July 29, 2010) - Epicor Software Corporation (NASDAQ: EPIC), a
leading provider of enterprise business software solutions for the
midmarket and divisions of Global 1000 companies, today reported financial
results for its second quarter ended June 30, 2010. All results should be
considered preliminary pending the Company's filing of its quarterly report
on Form 10-Q.
Epicor chairman, president and CEO George Klaus commented, "The 2010 second
quarter was another solid quarter for Epicor with all revenue lines and
non-GAAP(1) net income growing over the 2009 second quarter. The momentum
we are seeing behind Epicor 9 continues and helped drive software license
revenue growth of more than 9% over the second quarter of 2009 and free
cash flow(2) of $11.2 million. Our consulting arm is doing an excellent job
with implementations and we now have more than 200 customers running their
businesses on Epicor 9, with more than 140 others scheduled to go live
throughout the balance of the year. Epicor's software solutions are making
a difference for our customers as evidenced by strong maintenance retention
rates, which were 94% for the fourth quarter in a row. We continue to
strengthen our competitive position, which we believe is enabling us to
take market share throughout the world, and our continued investment in
Epicor 9 is paying dividends in sales momentum and customer satisfaction."
Total revenue for the 2010 second quarter was up 9% to $109.2 million, when
compared to 2009 second quarter revenue of $100.4 million. The 2010 second
quarter GAAP net loss was $1.0 million, or loss of $0.02 per share,
compared to a GAAP net loss of $6.7 million, or loss of $0.11 per diluted
share in the 2009 second quarter.
Non-GAAP net income for the 2010 second quarter was up 14% to $7.7 million,
or $0.13 per diluted share, compared to non-GAAP net income of $6.7
million, or $0.11 per diluted share in the 2009 second quarter.
2010 Second Quarter Revenue by Segment: 2010 second quarter license
revenue was $19.2 million, up more than 9% when compared to 2009 second
quarter license revenue of $17.5 million. 2010 second quarter maintenance
revenue was up modestly to $47.5 million when compared to 2009 second
quarter maintenance revenue of $47.3 million. Consulting revenue grew 7%
to $34.3 million in the 2010 second quarter, versus 2009 second quarter
consulting revenue of $32.1 million. Hardware and other revenue for the
2010 second quarter was $8.2 million, up more than 130% when compared to
hardware and other revenue of $3.5 million in the prior year's second
quarter.
Balance Sheet Summary: The Company's balance sheet at June 30, 2010,
included cash and cash equivalents of $109.4 million. The balance sheet
benefited from free cash flow of $11.2 million during the 2010 second
quarter, which also enabled the Company to make a discretionary $5.0
million payment to reduce the outstanding balance on its credit facility
during the 2010 second quarter. The Company's total outstanding debt as of
June 30, 2010, consists primarily $230 million in aggregate principal
amount of the Company's 2.375% senior convertible notes (less a debt
discount of $38.0 million) and $62.5 million in aggregate principal amount
under the Company's credit facility, currently bearing an interest rate of
LIBOR plus 4.0%.
At the end of the 2010 second quarter, net accounts receivable was
approximately $85.4 million. The Company had solid cash collections of
approximately $117.0 million during the 2010 second quarter. Days sales
outstanding (DSOs) in the 2010 second quarter were 71, down when compared
to 76 in the first quarter of 2010. Total deferred revenue at the end of
the 2010 second quarter was $99.4 million.
Business Outlook: For Epicor's 2010 third quarter, total revenue is
expected to be $106 to $108 million, with non-GAAP earnings per diluted
share(3) for the 2010 third quarter expected to be $0.13 to $0.15.
Earnings Conference Call
The Company will hold an investor and analyst conference call today at 5:00
p.m. Eastern Time/2:00 p.m. Pacific Time.
What: Epicor 2010 Second Quarter Earnings Conference Call
When: Thursday, July 29, 2010
Time: 2:00 p.m. PT
Dial in: +1 (800) 357-9448; or outside the U.S. +1 (719) 867-0354
Conf ID: Epicor 2010 Second Quarter Earnings Call
Webcast: http://ir.epicor.com
On the call, chairman, president and CEO George Klaus and executive vice
president and CFO Michael Pietrini will review 2010 second quarter
earnings. Investors and analysts are invited to participate on the call.
Please dial in approximately ten minutes prior to start time. A live
audio-only webcast of the call will be made available to the public on the
Company's Web site at http://ir.epicor.com and will be archived for thirty
days following the call on the Company's Web site.
(1) Please see the reconciliations to GAAP measures provided at the end of
this press release as well as the information provided below under the
heading "Non-GAAP Financial Measures."
(2) Free cash flow is a non-GAAP measure. The Company calculates free cash
flow as adjusted EBITDA (also a non-GAAP measure), plus stock-based
compensation, less capital expenditures, cash paid for income taxes and net
interest. Please refer to the reconciliation of adjusted EBITDA and free
cash flow, as well as the information provided below under the heading
"Non-GAAP Financial Measures."
(3) The Company's 2010 third quarter non-GAAP earnings per diluted share
guidance excludes current expectations for third quarter amortization of
intangible assets of approximately $7.0 million, third quarter stock-based
compensation expense of approximately $3.6 million and approximately $2.1
million in non-cash interest expense for the third quarter related to
amortization of debt discount. 2010 third quarter non-GAAP earnings per
share expectations assume a weighted average share count of 60 million
shares.
About Epicor Software Corporation
Epicor Software is a global leader delivering business software solutions
to the manufacturing, distribution, retail, hospitality and services
industries. With 20,000 customers in over 150 countries, Epicor provides
integrated enterprise resource planning (ERP), customer relationship
management (CRM), supply chain management (SCM) and enterprise retail
software solutions that enable companies to drive increased efficiency and
improve profitability. Founded in 1984, Epicor takes pride in more than 25
years of technology innovation delivering business solutions that provide
the scalability and flexibility businesses need to build competitive
advantage. Epicor provides a comprehensive range of services with a single
point of accountability that promotes rapid return on investment and low
total cost of ownership, whether operating business on a local, regional or
global scale. The Company's worldwide headquarters are located in Irvine,
California with offices and affiliates around the world. For more
information, visit www.epicor.com.
Epicor is a registered trademark of Epicor Software Corporation. Other
trademarks referenced are the property of their respective owners. The
product and service offerings depicted in this document are produced by
Epicor Software Corporation.
Forward-Looking Statements
This press release contains certain statements which constitute
forward-looking statements under the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include statements regarding
expected revenues (including growth rates), earnings and earnings per share
(including on a non-GAAP basis), non-GAAP free cash flow, the Company's
products, market share, business model, sales pipelines and opportunities,
competitive advantage and other statements that are not historical fact.
These forward-looking statements are based on currently available
competitive, financial and economic data together with management's views
and assumptions regarding future events and business performance as of the
time the statements are made and are subject to risks and uncertainties.
Actual results may differ materially from those expressed or implied in the
forward-looking statements.
Such risks and uncertainties include, but are not limited to, changes in
the demand for enterprise resource planning products, particularly in light
of competitive offerings; the timely availability and market acceptance of
new products and upgrades, including Epicor 9; the impact of competitive
products and pricing; the discovery of undetected software errors; changes
in the financial condition of Epicor's major commercial customers and
Epicor's future ability to continue to develop and expand its product and
service offerings to address emerging business demand and technological
trends; and other factors discussed in Epicor's annual report on Form 10-K
for the year ended December 31, 2009 and other reports Epicor files with
the SEC. As a result of these factors the business or prospects expected by
the Company as part of this announcement may not occur. Epicor undertakes
no obligation to revise or update publicly any forward-looking statements.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. In evaluating the
Company's performance, management uses certain non-GAAP financial measures
to supplement consolidated financial statements prepared under GAAP.
Non-GAAP Earnings Measure. The Company uses non-GAAP earnings measures,
non-GAAP net income, adjusted EBITDA, EBITDA margins and free cash flow in
this press release. Management believes these non-GAAP measures help
indicate the Company's baseline performance before gains, losses or charges
that are considered by management to be outside on-going operating results.
Accordingly, management uses these non-GAAP measures to gain a better
understanding of the Company's comparative operating performance from
period-to-period and as a basis for planning and forecasting future
periods. Management believes these non-GAAP measures, when read in
conjunction with the Company's GAAP financials, provides useful information
to investors by offering:
-- the ability to make more meaningful period-to-period comparisons of the
Company's on-going operating results;
-- the ability to better identify trends in the Company's underlying
business and perform related trend analysis;
-- a better understanding of how management plans and measures the
Company's underlying business; and,
-- an easier way to compare the Company's most recent results of
operations against investor and analyst financial models.
The non-GAAP financial measures for 2009 and 2010 used by the Company are
defined to include deferred revenues from NSB that were adjusted to fair
value as required by purchase accounting in accordance with GAAP reporting,
and to exclude amortization of intangible assets, stock-based compensation
expense, amortization of long-term debt discount from the Company's May
2007 convertible note offering, the write-off of debt issuance fees, a
Venezuela currency devaluation, and restructuring and other, which include
costs associated with workforce reductions, and other charges. The non-GAAP
financial measures for 2009 and 2010 used by the Company are also defined
to reflect income taxes at a 38% tax rate.
Management believes that the expense associated with the amortization of
acquisition-related intangible assets is appropriate to be excluded because
a significant portion of the purchase price for acquisitions may be
allocated to intangible assets that have short lives and exclusion of the
amortization expense allows comparisons of operating results that are
consistent over time for both the Company's newly acquired and long-held
businesses. Management also believes that the exclusion of stock-based
compensation allows for more accurate comparisons of our operating results
to our peer companies because of varying available valuation methodologies,
subjective assumptions and the variety of award types which effect the
calculations of stock-based compensation. Management believes it is
appropriate to exclude the Venezuela currency devaluation charge, the
write-off of debt issuance fees, the amortization of long-term debt
discount from the Company's May 2007 convertible note offering, as well as
restructuring and other charges, which included costs associated with the
integration of NSB into Epicor and costs associated with workforce
reductions, because these charges are not related to the Company's ongoing
business operations and it allows for more accurate comparisons of our
operating results to our peer companies. Finally, management believes that
using a 38% tax rate is appropriate because it allows comparisons of our
operating results that are more consistent with prior periods presented, as
well as more accurate comparisons of our operating results to our peer
companies.
General. These non-GAAP measures have limitations, however, because they do
not include all items of income and expense that impact the Company's
operations. Management compensates for these limitations by also
considering the Company's GAAP results. The non-GAAP financial measures the
Company uses are not prepared in accordance with, and should not be
considered an alternative to, measurements required by GAAP, such as
operating income, net income and income per share, and should not be
considered measures of the Company's liquidity. The presentation of this
additional information is not meant to be considered in isolation or as a
substitute for the most directly comparable GAAP measures. In addition,
these non-GAAP financial measures may not be comparable to similar measures
reported by other companies.
- TABLES FOLLOW -
EPICOR SOFTWARE CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2010 2009
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 109,373 $ 106,861
Accounts receivable, net 85,357 90,011
Deferred income taxes 24,942 11,572
Inventory, net 3,033 1,819
Prepaid expenses and other current assets 18,161 13,976
------------ ------------
Total current assets 240,866 224,239
Property and equipment, net 26,878 28,511
Deferred income taxes 21,425 21,867
Intangible assets, net 69,690 84,107
Goodwill 367,826 368,336
Other assets 9,974 10,990
------------ ------------
Total assets $ 736,659 $ 738,050
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,504 $ 13,966
Accrued expenses 39,699 46,754
Current portion of long-term debt 214 202
Current portion of accrued restructuring
costs 1,631 1,694
Current portion of deferred revenue 99,079 96,040
------------ ------------
Total current liabilities 157,127 158,656
------------ ------------
Long-term debt, less current portion 254,607 255,535
Accrued restructuring costs 5,035 4,423
Deferred revenue 368 392
Deferred income taxes and other income taxes 14,594 15,172
Other long-term liabilities 3,131 3,785
------------ ------------
Total long-term liabilities 277,735 279,307
------------ ------------
Stockholders' equity:
Common stock 66 63
Additional paid-in capital 431,346 422,460
Less: treasury stock at cost (23,298) (20,670)
Accumulated other comprehensive loss (8,331) (4,825)
Accumulated deficit (97,986) (96,941)
------------ ------------
Total stockholders' equity 301,797 300,087
------------ ------------
Total liabilities and stockholders' equity $ 736,659 $ 738,050
============ ============
EPICOR SOFTWARE CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Revenues:
License fees $ 19,160 $ 17,533 $ 35,396 $ 30,710
Consulting 34,344 32,061 65,433 63,512
Maintenance 47,503 47,340 95,463 94,206
Hardware and other 8,158 3,513 12,154 10,711
-------- -------- -------- --------
Total revenues 109,165 100,447 208,446 199,139
-------- -------- -------- --------
Cost of revenues 51,638 44,009 96,422 90,192
Amortization of intangible assets 7,051 8,221 14,108 16,626
-------- -------- -------- --------
Total cost of revenues 58,689 52,230 110,530 106,818
-------- -------- -------- --------
Gross profit 50,476 48,217 97,916 92,321
-------- -------- -------- --------
Operating expenses:
Sales and marketing 20,595 18,151 41,729 36,241
Software development 13,656 12,432 27,535 24,838
General and administrative 11,940 14,033 24,155 28,224
Restructuring and other 2,626 (204) 2,671 1,207
-------- -------- -------- --------
Total operating expenses 48,817 44,412 96,090 90,510
-------- -------- -------- --------
Income from operations 1,659 3,805 1,826 1,811
Interest expense (5,003) (4,877) (9,960) (10,870)
Interest and other income
(expense), net 14 (65) (1,292) (231)
-------- -------- -------- --------
Loss before income taxes (3,330) (1,137) (9,426) (9,290)
Income tax provision (benefit) (2,318) 5,543 (8,382) (982)
-------- -------- -------- --------
Net loss $ (1,012) $ (6,680) $ (1,044) $ (8,308)
======== ======== ======== ========
Net loss per share:
Basic $ (0.02) $ (0.11) $ (0.02) $ (0.14)
Diluted $ (0.02) $ (0.11) $ (0.02) $ (0.14)
Weighted average common shares
outstanding:
Basic 58,990 59,486 58,813 59,237
Diluted 58,990 59,486 58,813 59,237
EPICOR SOFTWARE CORPORATION
PRELIMINARY NON-GAAP NET INCOME RECONCILIATION
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Loss before income taxes $ (3,330) $ (1,137) $ (9,426) $ (9,290)
Add back:
Amortization of intangible
assets 7,051 8,221 14,108 16,626
Stock-based compensation expense 3,461 1,644 7,740 4,062
Amortization of long-term debt
discount 2,105 1,959 4,172 3,882
Restructuring and other 2,626 (204) 2,671 1,207
Venezuela currency devaluation - - 1,315 -
Debt issuance fees write off - - - 924
Deferred revenue fair value
adjustment - - - 432
Other (138) - (138) -
-------- -------- -------- --------
Non-GAAP income before income taxes 11,775 10,483 20,442 17,843
Non-GAAP provision for income taxes
(1) (4,104) (3,769) (7,052) (6,460)
-------- -------- -------- --------
Non-GAAP net income $ 7,671 $ 6,714 $ 13,390 $ 11,383
======== ======== ======== ========
Non-GAAP net income per diluted
share $ 0.13 $ 0.11 $ 0.22 $ 0.19
======== ======== ======== ========
Weighted average common shares
outstanding:
Diluted 59,563 60,102 59,536 59,773
(1) The Company utilizes a 38% tax rate for the calculation of the non-GAAP
provision for income taxes for comparison purposes with other periods. The
non-GAAP effective income tax rates reflected above differ from 38% due to
certain non-deductible non-GAAP add backs.
EPICOR SOFTWARE CORPORATION
PRELIMINARY NET INCOME TO ADJUSTED EBITDA RECONCILIATION
(dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Total revenues $ 109,165 $ 100,447 $ 208,446 $ 199,139
========= ========= ========= =========
Net loss $ (1,012) $ (6,680) $ (1,044) $ (8,308)
Income tax provision
(benefit) (2,318) 5,543 (8,382) (982)
Interest expense 5,003 4,877 9,960 10,870
Amortization of intangible
assets 7,051 8,221 14,108 16,626
Depreciation 1,822 2,035 3,686 4,119
Restructuring and other 2,626 (204) 2,671 1,207
Venezuela currency
devaluation - - 1,315 -
Deferred revenue fair value
adjustment - - - 432
Interest and other (income)
expense, net (14) 65 (23) 231
--------- --------- --------- ---------
Adjusted EBITDA $ 13,158 $ 13,857 $ 22,291 $ 24,195
========= ========= ========= =========
Adjusted EBITDA percent of
total revenues 12.1% 13.8% 10.7% 12.1%
========= ========= ========= =========
EPICOR SOFTWARE CORPORATION
PRELIMINARY FREE CASH FLOW RECONCILIATION
(in thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Net loss $ (1,012) $ (6,680) $ (1,044) $ (8,308)
Income tax provision
(benefit) (2,318) 5,543 (8,382) (982)
Interest expense 5,003 4,877 9,960 10,870
Amortization of intangible
assets 7,051 8,221 14,108 16,626
Depreciation 1,822 2,035 3,686 4,119
Restructuring and other 2,626 (204) 2,671 1,207
Venezuela currency
devaluation - - 1,315 -
Deferred revenue fair value
adjustment - - - 432
Interest and other (income)
expense, net (14) 65 (23) 231
--------- --------- --------- ---------
Adjusted EBITDA $ 13,158 $ 13,857 $ 22,291 $ 24,195
========= ========= ========= =========
Adjusted EBITDA $ 13,158 $ 13,857 $ 22,291 $ 24,195
Non-cash stock-based
compensation 3,461 1,644 7,740 4,062
Capital expenditures (1,367) (1,258) (2,207) (2,039)
Cash paid for taxes (1,304) (973) (2,370) (1,912)
Net interest (2,764) (2,687) (5,490) (6,487)
--------- --------- --------- ---------
Free cash flow $ 11,184 $ 10,583 $ 19,964 $ 17,819
========= ========= ========= =========