EXHIBIT 99
News Release
For immediate release
| | VP, IR and Corporate Communications |
Epicor Reports Fourth Quarter and Fiscal Year 2004 Earnings
Grows Revenues 64% Year-over-year and License Revenues 99% Year-over-year;
Exceeds Fourth Quarter Revenue and Earnings Targets;
Raises Guidance for 2005
IRVINE, Calif., January 26, 2005 – Epicor Software Corporation (NASDAQ: EPIC), a leading provider of enterprise software solutions, today reported its financial results for the fourth quarter and year ended December 31, 2004.
“We are very pleased to report significant profitable growth and cash flow for the eighth consecutive quarter,” said chairman, CEO and president, George Klaus. “We met or exceeded our targets across all of our major product groups and across both domestic and international geographies allowing us to achieve fourth quarter license revenue growth of 99% with organic license revenue growth of over 28%. Going forward, we expect the introduction of our Web services manufacturing suite, Vantage 8.0, to generate tremendous interest from our customer base in addition to delivering technology and functionality for a rebounding manufacturing sector and improved IT spending environment.”
“During the quarter, we closed a transaction for over $1 million in net license revenues with Hyatt International Corporation, endorsing our strategy to become the standard tiered solution provider to Fortune 1000 customers. Hyatt International added an additional 65 sites to its existing installation of 43 sites, and has mandated that all of its international operations standardize on the Epicor Scala back office suite by the end of 2006.
Klaus continued, “I am very excited about our new products, global infrastructure and market opportunity which will allow us to pursue significant growth initiatives in 2005.”
Revenue Summary
Total revenues for the fourth quarter were $72.1 million, compared with $44.1 million in the prior year’s quarter, up 64%. Revenues for the fourth quarter 2004 included $22.1 million for Scala Business Solutions. For the year ended December 31, 2004, revenues totaled $226.2 million compared with revenues of $155.4 million in the prior year, up 46%. Revenues for 2004 included the contribution from Scala of $42.7 million.
License revenues were $23.9 million for the fourth quarter compared to $12.0 million in the fourth quarter of 2003 up 99%. Licenses revenues for the fourth quarter 2004 included $8.4 million for Scala. License revenues for the year were $61.9 million compared with license revenues of $38.7 million for the year 2003, an increase of 60%. License revenues for the year 2004 included $14.3 million for Scala. Service revenues for the fourth quarter of 2004 were $46.8 million compared with $31.4 million in the fourth quarter of 2003, up 49%. Service revenues for the fourth quarter 2004 included $13.4 million for Scala. Service revenues for the year were $160.9 million compared with $114.5 million in 2003, up 41%. Service revenues for the year 2004 included $27.9 million for Scala.
Income Summary
For the fourth quarter, the company reported GAAP net income of $9.9 million or $0.18 per diluted share compared with $3.5 million or $0.07 per diluted share in the prior year’s period. For the fourth quarter of 2004, adjusted earnings were $13.7 million or $0.24 per diluted share compared with adjusted earnings of $6.5 million or $0.13 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.
For the year 2004, the company reported GAAP net income of $25.3 million or $0.47 per diluted share compared with a net income of $9.1 million or $0.18 per diluted share reported in the year 2003. For the year, adjusted earnings, as described above, were $37.6 million or $0.70 per diluted share, compared to adjusted earnings of $20.4 million or $0.41 per diluted share for the year 2003.
Balance Sheet Summary
The company’s balance sheet at December 31, 2004 showed cash and cash equivalents of $53.7 million. At year-end, net accounts receivable was $55.3 million and deferred revenues were $60.2 million. Day sales outstanding was 69, up from 53 in the third quarter 2004. The increase in DSO’s was directly attributable to Scala’s practice of billing annual maintenance for a significant number of customers at the end of the year as well as the
company experiencing an unusually high quarter end performance relative to license revenue, which included several large deals recorded at the end of December
2005 Outlook
The company provided its guidance for the first quarter 2005, with total revenues expected to be $67 million. GAAP earnings per diluted share for the first quarter 2005 is expected to be $0.12 with adjusted earnings, as described above, per share of $0.17.
The company also raised its revenue guidance for the year 2005 to $274 million from $273 million in revenues, GAAP earnings per diluted share of $0.65 and raised adjusted earnings guidance, as described above, to $0.84 per diluted share from $0.83 per diluted share, in each case using a weighted average share count of 57 million shares.
Fiscal Year 2004 Highlights
| | • | | Revenue growth of 46% year over year |
| | • | | License revenue growth of 60% year over year |
| | • | | Earnings growth of 180% year over year |
| | • | | Generated $28 million in cash from operations |
| | • | | Completed and successfully integrated the acquisition of Scala Business Solutions |
| | • | | Added 215 new customers in the fourth quarter and over 585 new customers in the year |
| | • | | Delivered over 130 products and releases in 2004 across our entire portfolio of product and solution suites |
| | • | | Introduced Vantage 8.0 the market’s leading service-oriented architected manufacturing suite |
| | • | | Received 22 awards and industry recognition including CEO of the Year—Software Council of Southern California; Outstanding Executive, Public Company—Orange County Council of AeA; Hottest Companies of 2004—Start magazine; 2004 “Global ISV of the Year” Finalist—Microsoft Partner Awards; Reader’s Choice Awards—Best Financial Application: Epicor Financials—WindowsIT Pro Magazine |
The company will hold an investor and analyst conference call to review the fourth quarter and year’s results and highlights directly following the release after the close of market at 2:00 p.m. PST.
| | When: | Wednesday, January 26, 2005 |
| | Dial in: | +1 (800) 289-0508 or outside the U.S. +1 (913) 981-5550 |
On the call, George Klaus, Epicor’s chairman, CEO and president will review fourth quarter and fiscal year 2004 earnings and the outlook for 2005. Investors and analysts are invited to participate on the call. Please dial in approximately ten minutes prior to start time. A live audio-only web cast 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.
# # #
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 became a global leader in the midmarket serving over 20,000 customers in 143 countries and supporting more than 30 languages. 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 drive efficiencies 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, 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; 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 Quarterly report on Form 10-Q for the period ended September 30, 2004 at pages 37-46. 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 organic revenue growth, which excludes the revenue contribution of Scala, and adjusted net income and net income per diluted share amounts, which exclude the amortization of capitalized software development 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)
| | | | | | | | |
| | | December 31,
2004
| | | December 31,
2003
| |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 53,651 | | | $ | 38,881 | |
Restricted cash | | | 60 | | | | 501 | |
Accounts receivable, net | | | 55,296 | | | | 27,134 | |
Prepaid expenses and other current assets | | | 6,719 | | | | 5,268 | |
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Total current assets | | | 115,726 | | | | 71,784 | |
Property and equipment, net | | | 7,045 | | | | 3,040 | |
Intangible assets, net | | | 44,975 | | | | 12,847 | |
Goodwill | | | 83,492 | | | | 10,841 | |
Other assets | | | 4,527 | | | | 3,711 | |
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Total assets | | $ | 255,765 | | | $ | 102,223 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 10,437 | | | $ | 5,958 | |
Accrued expenses | | | 47,792 | | | | 26,038 | |
Current portion of accrued restructuring costs | | | 3,287 | | | | 2,117 | |
Current portion of long-term debt | | | 289 | | | | — | |
Deferred revenue | | | 60,212 | | | | 37,345 | |
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Total current liabilities | | | 122,017 | | | | 71,458 | |
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Long-term debt | | | 30,327 | | | | — | |
Long-term portion of accrued restructuring costs | | | 2,462 | | | | 1,355 | |
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Total long-term liabilities | | | 32,789 | | | | 1,355 | |
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Stockholders’ equity: | | | | | | | | |
Preferred stock | | | 3,046 | | | | 10,423 | |
Common stock | | | 53 | | | | 46 | |
Additional paid-in capital | | | 308,264 | | | | 252,088 | |
Less: treasury stock at cost | | | (4,431 | ) | | | (322 | ) |
Less: unamortized stock compensation expense | | | (2,379 | ) | | | (5,002 | ) |
Accumulated other comprehensive loss | | | (818 | ) | | | 266 | |
Accumulated deficit | | | (202,776 | ) | | | (228,089 | ) |
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Net stockholders’ equity | | | 100,959 | | | | 29,410 | |
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Total liabilities and stockholders’equity | | $ | 255,765 | | | $ | 102,223 | |
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EPICOR SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31,
| | | Twelve Months Ended
December 31,
| |
| | | 2004
| | 2003
| | | 2004
| | | 2003
| |
Revenues: | | | | | | | | | | | | | | | |
License fees | | $ | 23,879 | | $ | 12,026 | | | $ | 61,869 | | | $ | 38,700 | |
Consulting | | | 16,053 | | | 11,069 | | | | 56,891 | | | | 38,821 | |
Maintenance | | | 30,796 | | | 20,323 | | | | 103,967 | | | | 75,681 | |
Other | | | 1,322 | | | 645 | | | | 3,483 | | | | 2,220 | |
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Total revenues | | | 72,050 | | | 44,063 | | | | 226,210 | | | | 155,422 | |
Cost of revenues | | | 23,317 | | | 15,410 | | | | 80,022 | | | | 57,630 | |
Amortization of intangible assets and capitalized software development costs | | | 2,672 | | | 1,882 | | | | 7,327 | | | | 7,097 | |
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Total cost of revenues | | | 25,989 | | | 17,292 | | | | 87,349 | | | | 64,727 | |
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Gross profit | | | 46,061 | | | 26,771 | | | | 138,861 | | | | 90,695 | |
Operating expenses: | | | | | | | | | | | | | | | |
Sales and marketing | | | 15,805 | | | 10,489 | | | | 47,975 | | | | 37,537 | |
Software development | | | 6,655 | | | 5,139 | | | | 24,736 | | | | 20,058 | |
General and administrative | | | 12,113 | | | 6,489 | | | | 35,043 | | | | 20,424 | |
Stock-based compensation expense | | | 654 | | | 1,120 | | | | 2,617 | | | | 3,336 | |
Provision for doubtful accounts | | | 871 | | | (181 | ) | | | 1,485 | | | | (1,022 | ) |
Restructuring charges and other | | | 480 | | | — | | | | 2,382 | | | | 937 | |
Settlement of claim | | | — | | | — | | | | (284 | ) | | | — | |
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Total operating expenses | | | 36,578 | | | 23,056 | | | | 113,954 | | | | 81,270 | |
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Income from operations | | | 9,483 | | | 3,715 | | | | 24,907 | | | | 9,425 | |
Other income, net | | | 1,039 | | | 23 | | | | 1,742 | | | | 268 | |
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Income before income taxes | | | 10,522 | | | 3,738 | | | | 26,649 | | | | 9,693 | |
Provision for income taxes | | | 581 | | | 191 | | | | 1,336 | | | | 399 | |
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Net income | | $ | 9,941 | | $ | 3,547 | | | $ | 25,313 | | | $ | 9,294 | |
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Value of beneficial conversion related to preferred stock | | | — | | | — | | | | — | | | | (241 | ) |
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Net income applicable to common stockholders | | $ | 9,941 | | $ | 3,547 | | | $ | 25,313 | | | $ | 9,053 | |
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Net income per share applicable to common stockholders: | | | | | | | | | | | | | | | |
Basic | | $ | 0.19 | | $ | 0.08 | | | $ | 0.50 | | | $ | 0.21 | |
Diluted | | $ | 0.18 | | $ | 0.07 | | | $ | 0.47 | | | $ | 0.18 | |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | |
Basic | | | 53,423 | | | 43,760 | | | | 50,753 | | | | 43,136 | |
Diluted | | | 56,577 | | | 51,613 | | | | 53,714 | | | | 49,509 | |
EPICOR SOFTWARE CORPORATION
ADJUSTED EARNINGS RECONCILIATION
(in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended December 31,
| | Twelve Months
Ended December 31,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
Net income applicable to common stockholders | | $ | 9,941 | | $ | 3,547 | | $ | 25,313 | | $ | 9,053 |
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Add back: | | | | | | | | | | | | |
Amortization of intangible assets and capitalized software development costs | | | 2,672 | | | 1,882 | | | 7,327 | | | 7,097 |
Stock-based compensation expense | | | 654 | | | 1,120 | | | 2,617 | | | 3,336 |
Restructuring charges | | | 480 | | | — | | | 2,382 | | | 937 |
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Adjusted earnings | | $ | 13,747 | | $ | 6,549 | | $ | 37,639 | | $ | 20,423 |
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Adjusted earnings per diluted share | | $ | 0.24 | | $ | 0.13 | | $ | 0.70 | | $ | 0.41 |
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Weighted average common shares outstanding: | | | | | | | | | | | | |
Diluted | | | 56,577 | | | 51,613 | | | 53,714 | | | 49,509 |
