Exhibit 99
For Immediate Release
| Contact: | Michael A. Piraino |
EVP and Chief Financial Officer
Epicor Software Corporation
Irvine, CA, USA
949/585-4595
michael@epicor.com
Moira Conlon
Financial Relations Board
8687 Melrose Avenue 7th Floor
Los Angeles, CA, USA
310/854-8311
mconlon@financialrelationsboard.com
Epicor® Reports First Quarter 2006 Earnings
Company Reiterates Full-Year 2006 Revenue and Non-GAAP EPS Guidance
IRVINE, Calif., April 26, 2006 — Epicor Software Corporation (NASDAQ: EPIC), a leading provider of enterprise software solutions, today reported its financial results for the first quarter ended March 31, 2006. All results should be considered preliminary pending the Company’s filing of its quarterly report on Form 10-Q later next month.
Operating Summary
Total revenues for the first quarter were a record $84.5 million, compared with $66.8 million in the prior year’s quarter, representing growth of 26.5%. Excluding contributions from CRS Retail Systems Inc., which was acquired on December 6, 2005, total revenues were $69.5 million, representing growth of 4.0%. License fees were $19.3 million for the first quarter compared to $15.7 million in the first quarter of 2005, up 23.2%. Excluding contributions by CRS, license fees were $15.3 million, representing a 2.7% decline. Consulting revenue for the first quarter of 2006 was $25.0 million compared with $16.9 million in the first quarter of 2005, up 47.5%. Excluding CRS, consulting revenue increased $3.2 million, up 18.7%. Maintenance, hardware and other revenue for the first quarter of 2006 was $40.2 million compared with $34.2 million in the first quarter of 2005, up 17.6%. Excluding CRS, maintenance, hardware and other revenue decreased $0.1 million.
For the first quarter, the Company reported GAAP net income of $4.6 million or $0.08 per diluted share, compared with $5.7 million or $0.10 per diluted share in the prior year’s period. For the first quarter of 2006, non-GAAP earnings were $8.0 million or $0.14 per diluted share compared with non-GAAP earnings of $9.1 million or $0.16 per diluted share in the same period last year, down 12.5%. For comparative purposes, first quarter 2005 pro forma fully taxed non-GAAP EPS was $0.11 per diluted share. Non-GAAP earnings per share growth when fully taxed numbers are compared was 30.1%. Non-GAAP earnings exclude amortization of acquired intangible assets, stock-based compensation expense and restructuring charges, all net of tax.
“During the first quarter, we successfully concluded a number of important company initiatives including an accounting review of revenue recognition and related restatement and the completion of a $200 million senior secured bank facility. In addition, we also made significant progress in the integration of the recently acquired CRS Retail Systems business, which has proceeded better than expected,” said George Klaus, chairman and CEO of Epicor. “These initiatives required a significant amount of our management team’s attention and contributed in part to lower than expected organic revenue growth for the quarter. Despite first quarter seasonal weakness, we are pleased to note that we were able to keep operating expenses in-check, which enabled us to achieve our internal non-GAAP EPS projection of $0.14 per diluted share, in-line with Street consensus estimates.”
“Looking forward, we remain very optimistic on the Company’s outlook for 2006 and beyond. Strength in our core business, excellent results from the CRS acquisition and the financial flexibility from our strong balance sheet give us confidence in our ability to achieve our operating plan and growth objectives for 2006. As a result, we are re-affirming our full year 2006 consolidated revenue guidance of $372 to $377 million, with non-GAAP EPS of $0.69 to $0.70 per diluted share.”
Balance Sheet Summary
The Company’s balance sheet at March 31, 2006 included cash and cash equivalents of $51.4 million. In addition, on March 31, 2006, the Company announced the completion of a $200 million senior secured bank facility, consisting of a $100 million term loan and a $100 million revolving credit facility. The proceeds were used to refinance Epicor’s existing $125 million revolving credit line, which had principally been used to finance its recent acquisition of CRS Retail Systems, Inc. The Company’s total debt balance as of March 31, 2006 was $122.3
million. Subsequent to March 31, 2006, a $5.0 million payment was made, reducing the current outstanding balance to $117.3 million . As previously announced, in conjunction with this bank facility, the Company recently received credit ratings from both Standard & Poor’s and Moody’s. Standard & Poor’s assigned a ‘B+’ corporate credit rating with a ‘positive’ outlook while Moody’s assigned a ‘B1’ corporate family rating with a ‘stable’ outlook.
Commenting on the Company’s liquidity position, Michael Piraino, Executive Vice President and CFO of Epicor said, “We are delighted to have obtained the new term loan and revolving line of credit, which significantly enhances the Company’s financial flexibility. This, coupled with our strong cash flow from operations, positions Epicor to continue to capitalize on growth initiatives and expanding our position as a leading global provider of enterprise software solutions to the midmarket. “
At quarter-end, net accounts receivable was $65.7 million and deferred revenue was $62.5 million. Days sales outstanding (DSOs) were 70, up slightly from 68 in the fourth quarter 2005. Working capital increased to $29.7 million at the end of the first quarter of 2006 from $23.9 million at the end of 2005.
Second Quarter and Full Year 2006 Guidance
The Company expects total revenues for the second quarter to be approximately $94 million. GAAP earnings per diluted share for the second quarter 2006 is expected to be $0.10 with non-GAAP earnings, as described above, per diluted share of $0.18, in each case using a weighted average share count of approximately 57 million shares.
The Company continues to expect 2006 full-year revenues to be in the range of $372 to $377 million. The Company continues to expect fully taxed non-GAAP earnings for 2006 to be in the range of $40 to $41 million, with non-GAAP earnings per diluted share to be in the range of $0.69 to $0.70 per diluted share. 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 38.0%. As a benchmark, 2005 pro forma fully taxed non-GAAP earnings per diluted share were $0.57.
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.
| | | | |
| | Date: | | Wednesday, April 26, 2006 |
| | Time: | | 2:00 p.m. PDT |
| | Dial in: | | +1 (800) 565-5442 or outside the U.S. +1 (913) 312-1298 |
| | Conf ID: | | Epicor |
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 2006 earnings and the outlook for the remainder of 2006. 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 atwww.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 is a registered trademark of Epicor Software Corporation. CRS is a Trademark of CRS Retail Systems Inc. All other trademarks referenced are the property of their respective owners.
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, continued profitability and activities of Epicor. These forward-looking statements include statements regarding expected revenues, earnings and earnings per share, 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 and 10K/A for the year ended December 31, 2005 at pages 17-25. 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 acquired intangible assets, stock -based compensation expense, restructuring charges and other, all net of tax and the non-cash income tax benefit. 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)
| | | | | | | | |
| | | March 31,
2006 | | | December 31,
2005 | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 51,386 | | | $ | 49,768 | |
Short-term investments | | | — | | | | 3,271 | |
Accounts receivable, net | | | 65,697 | | | | 67,728 | |
Deferred income taxes | | | 20,719 | | | | 20,726 | |
Inventory | | | 5,083 | | | | 4,572 | |
Prepaid expenses and other current assets | | | 8,115 | | | | 6,759 | |
| | | | | | | | |
Total current assets | | | 151,000 | | | | 152,824 | |
Property and equipment, net | | | 10,775 | | | | 11,347 | |
Deferred income taxes | | | 22,449 | | | | 22,449 | |
Intangible assets, net | | | 68,998 | | | | 73,539 | |
Goodwill | | | 165,365 | | | | 164,451 | |
Other assets | | | 5,474 | | | | 4,341 | |
| | | | | | | | |
Total assets | | $ | 424,061 | | | $ | 428,951 | |
| | | | | | | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 17,392 | | | $ | 12,150 | |
Accrued expenses | | | 39,871 | | | | 56,709 | |
Current portion of accrued restructuring costs | | | 2,411 | | | | 2,812 | |
Current portion of long-term debt | | | 1,102 | | | | 100 | |
Deferred revenue | | | 60,523 | | | | 57,183 | |
| | | | | | | | |
Total current liabilities | | | 121,299 | | | | 128,954 | |
| | | | | | | | |
Long-term debt, less current portion | | | 121,174 | | | | 124,639 | |
Long-term portion of accrued restructuring costs | | | 1,400 | | | | 1,460 | |
Long-term portion of deferred revenue | | | 1,991 | | | | 2,284 | |
Long-term deferred income taxes | | | 1,164 | | | | 1,164 | |
| | | | | | | | |
Total long-term liabilities | | | 125,729 | | | | 129,547 | |
| | | | | | | | |
Stockholders’ equity: | | | | | | | | |
Common stock | | | 56 | | | | 56 | |
Additional paid-in capital | | | 340,385 | | | | 338,534 | |
Less: treasury stock at cost | | | (10,679 | ) | | | (10,679 | ) |
Less: unamortized stock compensation expense | | | (2,245 | ) | | | (2,395 | ) |
Accumulated other comprehensive loss | | | (1,032 | ) | | | (1,053 | ) |
Accumulated deficit | | | (149,452 | ) | | | (154,013 | ) |
| | | | | | | | |
Net stockholders’ equity | | | 177,033 | | | | 170,450 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 424,061 | | | $ | 428,951 | |
| | | | | | | | |
EPICOR SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| | | | | | | | |
| | | Three Months Ended
March 31, | |
| | | 2006 | | | 2005 | |
| | | | | | (as Restated) | |
Revenues: | | | | | | | | |
License fees | | $ | 19,312 | | | $ | 15,673 | |
Consulting | | | 24,958 | | | | 16,924 | |
Maintenance | | | 36,170 | | | | 33,246 | |
Hardware and other | | | 4,039 | | | | 941 | |
| | | | | | | | |
Total revenues | | | 84,479 | | | | 66,784 | |
Cost of revenues | | | 35,628 | | | | 24,714 | |
Amortization of intangible assets | | | 4,246 | | | | 2,783 | |
| | | | | | | | |
Total cost of revenues | | | 39,874 | | | | 27,497 | |
Gross profit | | | 44,605 | | | | 39,287 | |
| | |
Operating expenses: | | | | | | | | |
Sales and marketing | | | 14,748 | | | | 14,102 | |
Software development | | | 8,247 | | | | 7,391 | |
General and administrative | | | 11,477 | | | | 10,180 | |
Stock-based compensation | | | 855 | | | | 606 | |
Provision for doubtful accounts | | | 380 | | | | 368 | |
| | | | | | | | |
Total operating expenses | | | 35,707 | | | | 32,647 | |
| | | | | | | | |
Income from operations | | | 8,898 | | | | 6,640 | |
Interest expense | | | (1,884 | ) | | | (279 | ) |
Other income (expense), net | | | 284 | | | | (154 | ) |
| | | | | | | | |
Income before income taxes | | | 7,298 | | | | 6,207 | |
Minority interest in income of consolidated subsidiary | | | — | | | | 31 | |
Provision for income taxes | | | 2,737 | | | | 439 | |
| | | | | | | | |
Net income | | $ | 4,561 | | | $ | 5,737 | |
| | | | | | | | |
| | |
Net income per share: | | | | | | | | |
Basic | | $ | 0.08 | | | $ | 0.11 | |
Diluted | | $ | 0.08 | | | $ | 0.10 | |
| | |
Weighted average common shares outstanding: | | | | | | | | |
Basic | | | 55,601 | | | | 53,973 | |
Diluted | | | 56,639 | | | | 56,614 | |
EPICOR SOFTWARE CORPORATION
NON-GAAP EARNINGS RECONCILIATION
(in thousands, except per share amounts)
(Unaudited)
| | | | | | |
| | | Three Months Ended
March 31, |
| | | 2006 | | 2005 |
| | | | | (as Restated) |
Net income | | $ | 4,561 | | $ | 5,737 |
| | | | | | |
Add back, net of tax: | | | | | | |
Amortization of intangible assets | | | 2,843 | | | 2,718 |
Stock based compensation expense | | | 592 | | | 606 |
| | | | | | |
Adjusted earnings | | $ | 7,996 | | $ | 9,061 |
| | | | | | |
Adjusted earnings per diluted share | | $ | 0.14 | | $ | 0.16 |
| | | | | | |
Weighted average common shares outstanding: | | | | | | |
Diluted | | | 56,639 | | | 56,614 |
EPICOR SOFTWARE CORPORATION
2005 PRO FORMA FULLY TAXED NON-GAAP EARNINGS RECONCILIATION
(in thousands, except per share amounts)
(Unaudited)
| | | | | | |
| | | Three Months
Ended March 31,
2005 | | Twelve Months
Ended
December 31,
2005 |
| | | | | (as Restated) |
Income before income taxes | | | 6,207 | | | 33,934 |
Minority interest in income of consolidated subsidiary | | | 31 | | | 88 |
Provision for income taxes | | | 2,421 | | | 13,234 |
| | | | | | |
Net income | | $ | 3,755 | | $ | 20,612 |
| | | | | | |
Add back, net of tax: | | | | | | |
Amortization of intangible assets | | | 1,785 | | | 7,528 |
Stock based compensation expense | | | 606 | | | 2,625 |
Restructuring charges | | | — | | | 219 |
Write-off of in-process research and development | | | — | | | 1,220 |
| | | | | | |
Adjusted earnings | | $ | 6,146 | | $ | 32,204 |
| | | | | | |
Adjusted earnings per diluted share | | $ | 0.11 | | $ | 0.57 |
| | | | | | |
Weighted average common shares outstanding: | | | | | | |
Diluted | | | 56,614 | | | 56,574 |
