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
========= ========= ========= =========
Contact: Damon Wright Vice President Investor Relations Epicor
Software Corporation 949/585-4509 dswright@epicor.com
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