For Immediate Release
Contact: Damon Wright
Sr. Director, Investor Relations
Epicor Software Corporation
949/585-4509
dswright@epicor.com
Epicor® Reports 2007 First Quarter Earnings;
Raises Revenue and EPS Guidance for the 2007 Full-Year
Double Digit License and Services Growth Drives 20% Increase in Total Revenue Yearover-
Year: License Revenue up 14%, Consulting up 31%, Maintenance up 8%
IRVINE, Calif., April 25, 2007 -- Epicor Software Corporation (Nasdaq: EPIC), a leading
provider of enterprise business software solutions for the midmarket and divisions of the Global
1000, today reported financial results for its first quarter ended March 31, 2007. All results
should be considered preliminary pending the Company’s filing of its quarterly report on Form
10-Q for the quarter ended March 31, 2007.
“With strong revenue performance across all business lines, 2007 has started off even
better than our record breaking 2006, with total revenue increasing 20%, when compared to the
first quarter of 2006,” said George Klaus, Epicor Chairman and CEO.
“Net license revenue (NLR) was a first quarter record,” he said, “and, when combined
with record quarterly consulting and maintenance revenues, led to our second consecutive
$100 million-plus revenue quarter. Our commitment to delivering leading technologies and
innovative solutions focused on our target markets is continuing to drive double-digit revenue
growth rates that are solidly outpacing industry projections1.
“We exceeded the top end of our first quarter revenue guidance range by more than $6
million,” Klaus continued, “and we are increasing our 2007 full-year revenue guidance by $12
million to $432 to $437 million and our 2007 full-year non-GAAP EPS expectations by $0.02 to
$0.85 to $0.87. Our confidence in raising our guidance is based on our belief in the strength
and quality of our pipelines for software, maintenance and consulting.”
Klaus concluded, “We are seeing robust spending in our addressable markets and we
are very pleased with our financial execution.”
Total first quarter revenues increased 20% to a first quarter record of $101.3 million,
compared to $84.5 million in the 2006 first quarter. Strong NLR growth contributed to the
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record first quarter revenues, increasing by 14.1% to $22.0 million, compared to $19.3 million in
the 2006 first quarter. Driven by a growing professional services team, larger engagements
and expanded service offerings, consulting revenue was up significantly in the first quarter to a
record $32.7 million, an increase of 31.1% when compared to consulting revenues of $25.0
million in the 2006 first quarter. Maintenance revenue also experienced solid growth, with 94%
customer retention driving record maintenance revenues of $39.1 million, an 8% increase
compared to maintenance revenues of $36.2 million in the 2006 first quarter. Hardware and
other revenue for the first quarter was $7.5 million, up from $4.0 million in the prior year’s first
quarter.
First quarter GAAP net income was $4.4 million, or $0.08 per diluted share, compared to
$4.6 million, or $0.08 per diluted share in the 2006 first quarter. The 2007 first quarter tax rate
was 37.2%, benefiting from a larger mix of international revenue and profit. The Company’s
actual cash tax rate for the first quarter was approximately 11%. 2007 first quarter non-GAAP
earnings were $8.7 million, or $0.15 per diluted share, compared to non-GAAP earnings of $8.0
million, or $0.14 per diluted share, in the 2006 first quarter. In addition to excluding
amortization and stock-based compensation expense, non-GAAP earnings for the 2007 first
quarter also exclude a one time gain of approximately $1.0 million on the sale of a non-strategic
asset and restructuring charges of $0.1 million, all net of tax.
Balance Sheet Summary
The Company’s balance sheet at March 31, 2007 included cash and cash equivalents of
$75.5 million, which benefited from approximately $5.3 million in cash flow from operations
during the quarter. The Company’s total debt balance as of March 31, 2007 was $99.3 million.
At the end of the 2007 first quarter, net accounts receivable was $77.1 million. Days
sales outstanding (DSOs) was 68, down from 74 in the fourth quarter of 2006. Working capital
increased to $67.6 million at the end of the 2007 first quarter, up from $53.7 million at the end
of the 2006 fourth quarter. Deferred revenue was approximately $64 million.
2007 Second Quarter and Full-Year Guidance
The Company is raising its 2007 full-year total revenue and earnings per share guidance
last issued on January 30, 2007. Specifically, total revenue for the 2007 year is now expected
to be in the range of $432 to $437 million, an increase of $12 million above the Company’s
previous guidance for 2007 full-year revenue of $420 to $425 million. NLR for the 2007 year is
expected to be towards the higher end of the range of the 13 to 15% increase over 2006 NLR.
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2007 full-year GAAP net income is expected to increase approximately 25% over 2006 full-year
GAAP net income. Non-GAAP earnings per diluted share for the 2007 full-year are now
expected to be in the range of $0.85 to $0.87, compared to the Company’s earlier guidance of
$0.83 to $0.85. The Company’s full-year 2007 non-GAAP net income guidance excludes
current expectations for full-year amortization of intangible assets of approximately $10.6 million
and full-year stock based compensation expense of approximately $9.5 million, each net of tax.
2007 full-year non-GAAP earnings per share expectations assume a weighted average share
count of 58 million shares. Expected earnings results presume an effective tax rate of
approximately 37.2%, with a cash tax provision of approximately 10 to 11% for the 2007 year.
For the 2007 second quarter, the Company expects revenue in the range of $106 to
$109 million. Non-GAAP earnings are expected to be $0.21 to $0.22 per diluted share, with
GAAP earnings of approximately $0.11 to $0.12 per diluted share. The Company’s 2007
second quarter non-GAAP earnings guidance excludes current expectations for second quarter
amortization of intangible assets of approximately $2.7 million and stock based compensation
expense of approximately $2.4 million, each net of tax. 2007 second quarter earnings per
share expectations assume a weighted average share count of 57.8 million shares.
Conference Call Information
The Company will hold an investor and analyst conference call directly following the
release after the close of market at 2:00 p.m. PDT.
When: Wednesday, April 25, 2007
Time: 2:00 p.m. PT
Dial in: +1 (877) 502-9274 or outside the U.S. +1 (913) 981-5584
Conf ID: Epicor 2007 First Quarter Earnings Call
On the call, George Klaus, chairman and CEO, Mark Duffell, president and COO, and
Michael Piraino, executive vice president and CFO, will review first quarter earnings and the
Company’s outlook for the 2007 second quarter and full-year. 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 www.epicor.com/company/investor and will be archived for thirty days following the call
on the Company’s Web site.
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About Epicor Software Corporation
Epicor, named one of FORTUNE magazine’s 100 Fastest-Growing Companies in 2006,
is a global leader dedicated to providing integrated enterprise resource planning (ERP),
customer relationship management (CRM), supply chain management (SCM) and professional
services automation (PSA) software solutions to midmarket companies and divisions of the
Global 1000. Founded in 1984, Epicor serves over 20,000 customers in more than 140
countries, providing solutions in over 30 languages. Employing innovative service-oriented
architecture (SOA) and Web services technology, Epicor delivers end-to-end, industry-specific
solutions for manufacturing, distribution, retail, hospitality and services that enable companies
to drive increased efficiency, improve performance and build competitive advantage. Epicor
solutions provide the scalability and flexibility to meet today's business challenges, while
empowering enterprises for even greater success tomorrow. Epicor offers a comprehensive
range of services with its solutions, providing a single point of accountability to promote rapid
return on investment and low total cost of ownership. Epicor’s worldwide headquarters are
located in Irvine, California with offices and affiliates around the world. For more information,
visit www.epicor.com.
1AMR Research, The Enterprise Application Global Forecast, 2005 – 2010 (© AMR 2006)
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
Management of Epicor Software believes certain statements in this press release may 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, tax rates, sales
pipelines and opportunities, target market, customer renewal rates, technology lead, 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; 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 10K for the year ended December 31, 2006 at pages 21-
28. 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 and the related conference call contain 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 a non-GAAP earnings measure in its public statements.
Management believes this non-GAAP measure helps indicate the Company’s baseline performance before gains,
losses or charges that are considered by management to be outside on-going operating results. Accordingly,
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management uses this non-GAAP measure 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
this non-GAAP measure, 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 earnings measure for 2006 used by the Company is defined to exclude the following charges and
benefits: amortization of intangible assets and stock based compensation expense, each net of tax. The non-GAAP
earnings measure for the 2007 first quarter used by the Company is defined to exclude the following charges and
benefits: a gain from the sale of a non-strategic asset, restructuring charges, amortization of intangible assets and
stock based compensation expense, each net of tax. 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 that it is appropriate to exclude the gain related
to the sale of the Company’s Russia-based payroll bureau, because this additional income as a result of the asset
sale is not related to the Company’s ongoing business operations. Finally, management believes it is appropriate to
exclude the restructuring charges because these charges are not related to the Company’s ongoing business
operations.
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 -
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EPICOR SOFTWARE CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
March 31, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $ 75,502 $ 70,178
Accounts receivable, net 77,085 83,965
Deferred income taxes 17,929 17,909
Inventory, net 7,336 4,885
Prepaid expenses and other current assets 8,175 7,587
Total current assets 186,027 184,524
Property and equipment, net 12,043 12,251
Deferred income taxes 21,067 19,836
Intangible assets, net 51,869 56,209
Goodwill 162,778 163,360
Other assets 6,279 5,710
Total assets $ 440,063 $ 441,890
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 17,067 $ 14,298
Accrued expenses 36,768 50,919
Current portion of accrued restructuring costs 919 795
Current portion of long-term debt 1,098 1,102
Current portion of deferred revenue 62,616 63,726
Total current liabilities 118,468 130,840
Long-term debt, less current portion 98,153 98,273
Long-term portion of accrued restructuring costs 702 876
Long-term portion of deferred revenue 1,080 1,271
Long-term deferred income and other taxes 6,334 2,010
Total long-term liabilities 106,269 102,430
Stockholders’ equity:
Common stock 59 59
Additional paid-in capital 355,350 350,605
Less: treasury stock at cost (13,357) (10,895)
Accumulated other comprehensive loss (921) (954)
Accumulated deficit (125,805) (130,195)
Total stockholders’ equity 215,326 208,620
Total liabilities and stockholders’ equity $ 440,063 $ 441,890
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EPICOR SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2007 2006
Revenues:
License fees $ 22,032 $ 19,312
Consulting 32,723 24,958
Maintenance 39,053 36,170
Hardware and other 7,521 4,039
Total revenues 101,329 84,479
Cost of revenues 47,179 35,761
Amortization of intangible assets 4,181 4,246
Total cost of revenues 51,360 40,007
Gross profit 49,969 44,472
Operating expenses:
Sales and marketing 18,629 15,001
Software development 8,680 8,332
General and administrative 15,408 12,241
Restructuring charges 221 -
Total operating expenses 42,938 35,574
Income from operations 7,031 8,898
Gain on sale of a non-strategic asset 1,579 -
Interest expense (2,127) (1,884)
Other income, net 570 284
Income before income taxes 7,053 7,298
Provision for income taxes 2,620 2,737
Net income $ 4,433 $ 4,561
Net income per share:
Basic $ 0.08 $ 0.08
Diluted $ 0.08 $ 0.08
Weighted average common shares outstanding:
Basic 56,642 55,601
Diluted 57,703 56,639
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EPICOR SOFTWARE CORPORATION
NON-GAAP EARNINGS RECONCILIATION
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2007 2006
Net income $ 4,433 $ 4,561
Add back, net of tax:
Amortization of intangible assets 2,657 2,843
Stock-based compensation expense 2,467 592
Restructuring charges 139 -
Gain on sale of a non-strategic asset (992) -
Non-GAAP earnings $ 8,704 $ 7,996
Non-GAAP earnings per diluted share $ 0.15 $ 0.14
Weighted average common shares outstanding:
Diluted 57,703 56,639 |
