EXHIBIT 99
For Immediate Release
| | VP, Investor Relations & Corporate Communications |
Epicor Reports Second Quarter 2004 Earnings
32% Year-over-Year Revenue Growth in the Second Quarter Drives Earnings Upside
IRVINE, Calif., July 21, 2004 – Epicor Software Corporation (NASDAQ: EPIC), a leading provider of integrated enterprise software solutions for the midmarket, today reported its financial results for the second quarter ended June 30, 2004. Total revenues for the second quarter were $48.6 million, compared with $36.7 million in the prior year’s quarter, up over 32%. Total revenues for the second quarter of 2004 included $3.0 million in total revenues for the 12 day contribution from Epicor’s recently acquired subsidiary Scala Business Solutions N.V. License revenues were $12.2 million compared to $9.5 million in the second quarter 2003, up over 28%. License revenues for the second quarter included $1.1 million for the 12 day contribution from Scala. Consulting and maintenance revenues for the second quarter were $35.6 million compared with $26.7 million in the second quarter of 2003, up over 33%. Included in consulting and maintenance revenues was $1.9 million from Scala’s contribution.
Total revenues for the six months ended June 30, 2004 were $92.0 million compared with the six-month period ended 2003 at $71.0 million. Software license revenues for the six-month period were $22.7 million compared with $17.3 million in the prior year period. Consulting and maintenance revenues for the six-month period were $68.1 million compared with $52.7 million for the same period 2003.
GAAP net income for the second quarter was $5.6 million or $0.11 per diluted share. This net income result compares with net income of $1.3 million or $0.03 per diluted share in the prior year’s period. For the second quarter of 2004, adjusted earnings were $8.0 million or $0.15 per diluted share compared with adjusted earnings of $4.9 million or $0.10 per diluted share in the same period last year. Adjusted earnings exclude amortization of capitalized software development costs and acquired intangible assets, stock-based compensation expense and restructuring charges and other.
GAAP net income for the six months ended June 30, 2004 was $9.1 million or $0.17 per diluted share compared to net income of $3.7 million or $0.08 per diluted share for the same period ended 2003. For the six-month period, adjusted earnings, as described above,
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were $14.3 million or $0.27 per diluted share, compared to adjusted earnings of $9.2 million or $0.20 per diluted share for the same period 2003.
At June 30, 2004, cash and cash equivalents were $45.3 million. Net accounts receivable was $34.1 million and deferred revenues were $55.3 million. Day sales outstanding was 63 with the impact from Scala’s revenues and accounts receivables, and 49 without Scala, compared to 56 in the first quarter 2004.
“We are delivering profitable growth and continue to differentiate our leadership in the midmarket, particularly in the manufacturing and distribution sectors,” said George Klaus, chairman, CEO and president of Epicor. “We continue to see strong momentum in our business as well as in our customer base, with increasing demand for our software and services in comparison to our peer group, as evidenced by the recent shortfalls announced amongst some of the Tier one software providers.” Klaus continued, “We have seen traction for our Enterprise Services suite built on .NET Web services continue, with a number of new customers deployed and now referenceable following the product’s first release last summer.
“We believe the midmarket remains underserved and we are aggressively executing a leadership position by delivering what the midmarket requires, a full suite of integrated solutions with a value proposition tailored for competitive total cost of ownership,” said Klaus.
The company provided an updated outlook for the fiscal year 2004. The company provided revised guidance of approximately $220 million in revenues compared with previous guidance of $210 to $215 million. The company expects GAAP earnings per diluted share of $0.44, compared with previous guidance of $0.40 to 0.42 per diluted share and adjusted earnings, as described above, of $0.65 compared with previous guidance of $0.62 to $.63 per diluted share, in each case using an estimated weighted average share count of 54 million shares. The company has completed extensive operational reviews of its Scala acquisition and put in place plans toward achieving its cost synergies and accretion goals.
The company also provided its guidance for the third and fourth quarters of 2004. Third quarter total revenues, including the contribution from Scala, are expected to be approximately $61 million. GAAP earnings per diluted share for the third quarter 2004 are expected to be $0.11 with adjusted earnings, as described above, per share of $0.17. Fourth quarter total revenues, including the contribution from Scala, are expected to be approximately $67 million. GAAP earnings per diluted share for the fourth quarter 2004 are expected in be $0.15 with adjusted earnings, as described above, per share of $0.21. In each case, annual EPS guidance is based on an estimated weighted average share count of 57 million shares.
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Epicore Announces Q2 2004 Earnings
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Second Quarter Highlights
| | • | Second quarter revenues grew over 32%, year-over-year |
| | • | Second quarter license revenues grew over 28%, year-over-year |
| | • | Second quarter GAAP EPS grew over 266%, year-over year |
| | • | Added over 110 new customers to Epicor’s base |
| | • | Released over 40 product upgrades to market across Epicor’s suite of solutions |
| | • | Named as 2004 Microsoft “Global ISV Partner of the Year” award finalist |
| | • | Named by Start Magazine as one of the “Hottest Companies of 2004” |
| | • | Completed the acquisition of Scala Business Solutions with over 98% of Scala shareholders tendered as of July 5, 2004, creating: |
Ø A substantial installed base of over 20,000 customers
Ø The largest exclusive midmarket provider with global diversified solutions in distribution, industrial, manufacturing, services and hospitality verticals
Ø An expanded global presence with scale and distribution capabilities with significant opportunity for operational synergies
The company will hold an investor and analyst conference call to review the second quarter and year’s results and highlights directly following the release after the close of market at 2:00 p.m. PDT.
| | |
When: | | Wednesday, July 21, 2004 |
Time: | | 2:00 p.m. PDT |
Dial in: | | +1 888-662-8850 or outside the U.S. +1 706-634-2243 |
| |
Replay: | | The conference call replay will be available by telephone |
From: | | July 21 at 4:00 p.m. PDT |
Through: | | July 23 at 4:00 p.m. PDT |
Dial: | | +1 800-642-1687 or outside the U.S. +1 706-645-9291 |
Conf ID: | | 877-1472 |
On the call George Klaus will discuss second quarter 2004 earnings and the outlook for second half of 2004. 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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Epicore Announces Q2 2004 Earnings
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About Epicor Software Corporation
For 20 years, Epicor has been a recognized leader dedicated to providing integrated enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM) software solutions to midmarket companies around the world. With the acquisition of Scala, Epicor is a global leader in the midmarket serving over 20,000 customers in over 140 countries. Epicor leverages innovative technologies like Web services in developing end-to-end, industry-specific solutions for manufacturing, distribution, enterprise service automation, and hospitality that enable companies to immediately drive efficiency throughout business operations and build competitive advantage. With the scalability and flexibility to support long-term growth, Epicor’s solutions are complemented by a full range of services, 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 the company’s Web site atwww.epicor.com.
# # #
Epicor and Scala are registered trademarks of Epicor Software Corporation and Scala Business Solutions N.V., respectively. All 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 with respect to the financial condition, results of operations and activities of Epicor. These forward looking statements include statements regarding expected revenues, earnings and earnings per share, the expected accretive nature of the acquisition, the expected synergies and benefits of the combination and growth of the combined entity, projected future cash flows and customers, opportunities for growth, 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. 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; Epicor’s ability to integrate operations of Scala, and realize the synergies and operating efficiencies anticipated from the acquisition of Scala and other acquisitions; Epicor’s ability to retain key personnel; changes in the financial condition of Epicor’s and Scala’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 Quarterly report on Form 10-Q for the period ended March 31, 2004 at pages 34 to 43. 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.
This press release includes certain non-GAAP financial measures, including adjusted net income and net income per diluted share amounts, which exclude the amortization of capitalized software development
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Epicore Announces Q2 2004 Earnings
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costs and acquired intangible assets, stock compensation expense and restructuring charges. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for measures of financial performance prepared in accordance with GAAP. The company’s management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of the company’s business operations. These measures also facilitate management’s internal comparisons to our historical operating results and to our competitors’ operating results, operational forecasting and budgeting. Investors and potential investors are encouraged to review the reconciliation of the non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results.
EPICOR SOFTWARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
| | | | | | | | |
| | | June 30,
2004
| | | December 31,
2003
| |
| ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 45,313 | | | $ | 38,881 | |
Restricted cash | | | 560 | | | | 501 | |
Accounts receivable, net | | | 34,079 | | | | 27,134 | |
Prepaid expenses and other current assets | | | 6,964 | | | | 5,268 | |
| | |
|
|
| |
|
|
|
Total current assets | | | 86,916 | | | | 71,784 | |
Property and equipment, net | | | 6,910 | | | | 3,040 | |
Intangible assets, net | | | 47,460 | | | | 12,847 | |
Goodwill | | | 78,077 | | | | 10,841 | |
Other assets | | | 4,052 | | | | 3,711 | |
| | |
|
|
| |
|
|
|
Total assets | | $ | 223,415 | | | $ | 102,223 | |
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|
| |
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 7,945 | | | $ | 5,958 | |
Accrued expenses | | | 44,553 | | | | 26,038 | |
Current portion of accrued restructuring costs | | | 765 | | | | 2,117 | |
Deferred revenue | | | 55,274 | | | | 37,345 | |
| | |
|
|
| |
|
|
|
Total current liabilities | | | 108,537 | | | | 71,458 | |
| | |
|
|
| |
|
|
|
Long-term debt | | | 30,014 | | | | — | |
Long-term portion of accrued restructuring costs | | | 2,060 | | | | 1,355 | |
| | |
|
|
| |
|
|
|
Total long-term liabilities | | | 32,074 | | | | 1,355 | |
| | |
|
|
| |
|
|
|
Stockholders’ equity: | | | | | | | | |
Preferred stock | | | 10,423 | | | | 10,423 | |
Common stock | | | 51 | | | | 46 | |
Additional paid-in capital | | | 297,237 | | | | 252,088 | |
Less: treasury stock at cost | | | (1,875 | ) | | | (322 | ) |
Less: unamortized stock compensation expense | | | (3,687 | ) | | | (5,002 | ) |
Accumulated other comprehensive loss | | | (333 | ) | | | 266 | |
Accumulated deficit | | | (219,012 | ) | | | (228,089 | ) |
| | |
|
|
| |
|
|
|
Net stockholders’ equity | | | 82,804 | | | | 29,410 | |
| | |
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|
|
|
Total liabilities and stockholders’ equity | | $ | 223,415 | | | $ | 102,223 | |
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Note: The balance sheet reflects preliminary purchase price allocation for Scala Business Solutions N.V.
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Epicore Announces Q2 2004 Earnings
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EPICOR SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30,
| | Six Months Ended
June 30,
| |
| | | 2004
| | | 2003
| | 2004
| | | 2003
| |
Revenues: | | | | | | | | | | | | | | | |
License fees | | $ | 12,247 | | | $ | 9,517 | | $ | 22,695 | | | $ | 17,322 | |
Consulting | | | 13,072 | | | | 8,736 | | | 25,024 | | | | 17,115 | |
Maintenance | | | 22,510 | | | | 17,958 | | | 43,067 | | | | 35,561 | |
Other | | | 791 | | | | 481 | | | 1,194 | | | | 1,025 | |
| | |
|
|
| |
|
| |
|
|
| |
|
|
|
Total revenues | | | 48,620 | | | | 36,692 | | | 91,980 | | | | 71,023 | |
Cost of revenues | | | 18,352 | | | | 13,730 | | | 34,594 | | | | 26,871 | |
| | |
|
|
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|
| |
|
|
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|
|
|
Amortization of intangible assets and
capitalized software development costs | | | 1,121 | | | | 1,517 | | | 2,000 | | | | 3,229 | |
| | |
|
|
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|
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|
|
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|
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|
Total cost of revenues | | | 19,473 | | | | 15,247 | | | 36,594 | | | | 30,100 | |
| | |
|
|
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|
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|
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|
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|
Gross profit | | | 29,147 | | | | 21,445 | | | 55,386 | | | | 40,923 | |
Operating expenses: | | | | | | | | | | | | | | | |
Sales and marketing | | | 9,896 | | | | 8,810 | | | 19,676 | | | | 16,968 | |
Software development | | | 5,058 | | | | 4,692 | | | 10,818 | | | | 9,460 | |
General and administrative | | | 7,207 | | | | 4,523 | | | 12,380 | | | | 9,197 | |
Stock-based compensation expense | | | 654 | | | | 815 | | | 1,309 | | | | 1,091 | |
Provision for doubtful accounts | | | 283 | | | | 191 | | | 499 | | | | (889 | ) |
Restructuring charges and other | | | 685 | | | | 1,230 | | | 1,901 | | | | 1,230 | |
Settlement of claim | | | (284 | ) | | | — | | | (284 | ) | | | — | |
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|
| |
|
|
| |
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|
Total operating expenses | | | 23,499 | | | | 20,261 | | | 46,299 | | | | 37,057 | |
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|
|
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|
| |
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|
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|
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|
Income from operations | | | 5,648 | | | | 1,184 | | | 9,087 | | | | 3,866 | |
Other income, net | | | 216 | | | | 197 | | | 440 | | | | 133 | |
Minority interest | | | (29 | ) | | | — | | | (29 | ) | | | — | |
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|
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|
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|
Income before income taxes | | | 5,835 | | | | 1,381 | | | 9,498 | | | | 3,999 | |
Provision for income taxes | | | 276 | | | | 90 | | | 421 | | | | 90 | |
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Net income | | $ | 5,559 | | | $ | 1,291 | | $ | 9,077 | | | $ | 3,909 | |
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Value of beneficial conversion related to | | | | | | | | | | | | | | | |
preferred stock | | | — | | | | — | | | — | | | | (241 | ) |
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Net income applicable to common | | | | | | | | | | | | | | | |
stockholders | | $ | 5,559 | | | $ | 1,291 | | $ | 9,077 | | | $ | 3,668 | |
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Net income per share applicable to | | | | | | | | | | | | | | | |
common stockholders: | | | | | | | | | | | | | | | |
Basic | | $ | 0.11 | | | $ | 0.03 | | $ | 0.19 | | | $ | 0.09 | |
Diluted | | $ | 0.11 | | | $ | 0.03 | | $ | 0.17 | | | $ | 0.08 | |
Weighted average common shares outstanding: | | | | | | | | | | | | |
Basic | | | 48,835 | | | | 42,522 | | | 48,321 | | | | 42,798 | |
Diluted | | | 52,564 | | | | 48,367 | | | 52,143 | | | | 46,882 | |
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Epicore Announces Q2 2004 Earnings
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EPICOR SOFTWARE CORPORATION
ADJUSTED EARNINGS RECONCILIATION
(in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended June 30,
| | Six Months Ended June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
Net income applicable to common stockholders | | $ | 5,559 | | $ | 1,291 | | $ | 9,077 | | $ | 3,668 |
| | |
|
| |
|
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|
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Add back: | | | | | | | | | | | | |
Amortization of intangible assets and capitalized
software development costs | | | 1,121 | | | 1,517 | | | 2,000 | | | 3,229 |
Stock based compensation expense | | | 654 | | | 815 | | | 1,309 | | | 1,091 |
Restructuring charges and other | | | 685 | | | 1,230 | | | 1,901 | | | 1,230 |
| | |
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| |
|
| |
|
| |
|
|
Adjusted earnings | | $ | 8,019 | | $ | 4,853 | | $ | 14,287 | | $ | 9,218 |
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Adjusted earnings per diluted share | | $ | 0.15 | | $ | 0.10 | | $ | 0.27 | | $ | 0.20 |
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Weighted average common shares outstanding: | | | | | | | | | | | | |
Diluted | | | 52,564 | | | 48,367 | | | 52,143 | | | 46,882 |
