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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Epicor Software Corp. (MM) | NASDAQ:EPIC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 12.50 | 0 | 01:00:00 |
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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