Exhibit 99.1
EPIQ Systems, Inc. Announces Third Quarter Results
KANSAS CITY, Kan.--(BUSINESS WIRE)--Oct. 26, 2004--EPIQ Systems,
Inc. (NASDAQ: EPIQ)
Note: A telephone conference call and web cast will be held at
3:30 p.m. central time today (October 26, 2004) to further discuss
this announcement. The toll-free dial in number for this call is
1-800-473-6123. This call can also be accessed on the company's
website at www.epiqsystems.com. A supplemental slide presentation is
available from the website. A digital replay of the call will be
available until November 23, 2004 by dialing 1-877-519-4471 (pass
code: 5293967). The archived web cast will be available on the
company's website.
EPIQ Systems, Inc. (NASDAQ: EPIQ) today reported results of
operations for the third quarter of 2004, with quarterly operating
revenue growth of 73% versus prior year. Net income from continuing
operations for the quarter of $2.2 million, $0.12 per diluted share,
includes the net after tax effect of acquisition related intangible
expenses totaling $1.2 million, amortization and write-off of
capitalized loan fees of $0.8 million and non-cash mark-to-market
expense/convertible debt accretion related to the convertible debt
embedded option of $0.2 million, which combined result in $0.12 per
diluted share. Non-GAAP net income and Non-GAAP Adjusted EBITDA, both
as defined below, were $4.3 million and $10.2 million respectively for
the quarter. Diluted weighted average shares outstanding were 18.3
million for both the quarter and the nine-month period ended September
30, 2004.
Financial highlights from continuing operations for the quarter
ended September 30, 2004, compared to the same period last year
include:
-- Operating revenue (total revenue less reimbursed expenses)
increased 73% to $28.7 million from $16.6 million. Case
management revenue increased 33% and document management
revenue increased 210%.
-- Operating income was $6.3 million compared to $6.9 million.
Operating income includes $2.0 million of acquisition
intangible amortization expense compared to $1.0 million last
year.
-- Net income from continuing operations was $2.2 million
compared to $4.2 million and net income from continuing
operations per diluted share was $0.12 versus $0.23. Net
income includes net after tax expenses of $1.2 million for
amortization of acquisition related intangibles compared to
$0.6 million last year and $1.5 million of expenses related to
financing, which include interest expense, amortization and
write-off of capitalized loan fees and embedded option
mark-to-market expense/convertible debt accretion, compared to
minimal financing related expense for the year ago quarter.
-- Non-GAAP net income (net income plus amortization of
acquisition related intangibles, acquisition related expense,
amortization and write-off of capitalized loan fees and
embedded option mark-to-market expense/convertible debt
accretion, all net after tax) was $4.3 million compared to
$4.8 million last year. Non-GAAP net income per share was
$0.24 versus $0.26. A reconciliation statement is attached.
-- Non-GAAP adjusted earnings before expenses related to
interest/financing, taxes, depreciation, amortization and
acquisition related expenses (Non-GAAP Adjusted EBITDA)
increased 13% to $10.2 million compared to $9.0 million for
the year ago quarter. A reconciliation statement is attached.
-- Net cash provided by operating activities increased 4% to $5.1
million compared to $4.9 million last year.
Financial highlights from continuing operations for the nine-month
period ended September 30, 2004, compared to the same period last year
include:
-- Operating revenue (total revenue less reimbursed expenses)
increased 78% to $81.2 million from $45.6 million. Case
management revenue increased 40% and document management
revenue increased 232%.
-- Operating income was $18.2 million compared to $17.9 million.
Operating income includes $5.7 million of acquisition
intangible amortization expense compared to $2.6 million last
year and $2.2 million of acquisition related expense versus
$1.5 million last year.
-- Net income from continuing operations was $7.1 million
compared to $10.8 million and net income from continuing
operations per diluted share was $0.39 versus $0.59. Net
income includes net after tax expenses of $3.4 million for
amortization of acquisition related intangibles compared to
$1.6 million last year, $1.3 million of acquisition related
expense compared to $0.9 million last year and $3.6 million of
expenses related to financing compared to minimal interest
income last year.
-- Non-GAAP net income (net income plus amortization of
acquisition related intangibles, acquisition related expense,
amortization and write-off of capitalized loan fees and
embedded option mark-to-market expense/convertible debt
accretion, all net after tax) was $13.7 million compared to
$13.2 million last year. Non-GAAP net income per share was
$0.75 versus $0.72. A reconciliation statement is attached.
-- Non-GAAP adjusted earnings before expenses related to
interest/financing, taxes, depreciation, amortization and
acquisition related expenses (Non-GAAP Adjusted EBITDA)
increased 22% to $30.9 million compared to $25.3 million last
year. A reconciliation statement is attached.
-- Net cash provided by operating activities increased 65% to
$20.4 million compared to $12.3 million last year.
Recent key events for the company include:
-- Forbes magazine ranked EPIQ Systems #37 on the 200 Best Small
Companies list. This marks the Company's fifth consecutive
appearance on this list.
-- In August, EPIQ Systems formed a new subsidiary, Financial
Balloting Group (FBG). Based in New York, FBG offers specialty
balloting and voting support services for Chapter 11
reorganization plans.
-- During July EPIQ Systems entered into a new $75 million
four-year senior credit facility replacing the former credit
facility which was repaid in full and terminated. The new
facility provides a more favorable amortization schedule and
interest rates and offers additional cash availability for
future business expansion.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson,
president and chief operating officer of EPIQ Systems, commented, "We
are very pleased to be included in the Forbes Best 200 Companies in
America list for the fifth consecutive year. During the third quarter,
we had particularly strong revenue performance from recurring Chapter
7 deposit fees, and we expanded the business organically into Chapter
11 balloting administration with the opening of our new subsidiary,
Financial Balloting Group. Rising interest rates and high debt levels
can be key factors in the growth of the market for bankruptcy
services."
EPIQ Systems provides an advanced offering of integrated
technology-based products and services for fiduciary management and
claims administration applications. Our solutions enable clients to
optimize the administration of large and complex bankruptcy, class
action, mass tort, and other similar legal proceedings. EPIQ Systems
clients include corporations, attorneys, trustees and administrative
professionals who require sophisticated case administration and
document management capabilities, extensive subject matter expertise
and a high service capacity. We provide clients a packaged offering of
both proprietary technology and value-added services that
comprehensively addresses their extensive business requirements. For
more information, visit us online at www.epiqsystems.com.
Forward-Looking Statement Disclaimer: This press release may
contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act, including those relating to the possible or assumed
future results of operations and financial condition of the Company.
These forward-looking statements are based on the Company's current
expectations and may be identified by terms such as "goal" and
"objective". Because those statements are subject to a number of
risks, actual results may differ materially from those expressed or
implied in this presentation. These risks include (1) any material
changes in our total number of bankruptcy trustees and cases, (2) any
material changes in our Chapter 7 deposits, the services required by
our Chapter 11, Chapter 13, class action or mass tort cases, or the
number of cases processed by our Chapter 13 bankruptcy trustee
customers, (3) material changes in the number of bankruptcy filings,
class action filings or mass tort actions each year, (4) our reliance
on and the previously-announced change in our marketing arrangement
and pricing arrangements with Bank of America for Chapter 7 revenue,
(5) future bankruptcy, class action, or mass tort legislation, (6)
risks associated with the integration of acquisitions into our
existing business operations, (7) risks associated with the
significant new indebtedness we incurred in 2004, (8) a decline in the
business of Poorman-Douglas Corporation, and (9) other risks detailed
from time to time in our SEC filings, including our annual report on
Form 10-K. In addition, there may be other factors not included in our
SEC filings that may cause actual results to differ materially from
any forward-looking statements. We undertake no obligations to update
any forward-looking statements contained herein to reflect future
events or developments.
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ------------------
2004 2003 2004 2003
---------- ---------- --------- --------
REVENUE:
Case management $16,980 $12,807 $51,278 $36,569
Document management 11,671 3,761 29,961 9,034
---------- ---------- --------- --------
Operating revenue 28,651 16,568 81,239 45,603
Reimbursed expenses 7,043 1,807 15,375 3,931
---------- ---------- --------- --------
Total Revenue 35,694 18,375 96,614 49,534
---------- ---------- --------- --------
OPERATING EXPENSES:
Direct costs 18,533 4,663 46,509 11,731
General and administrative 6,998 4,730 19,209 12,505
Depreciation and software
amortization 1,804 1,071 4,763 3,282
Amortization of
identifiable intangible
assets 2,032 976 5,744 2,634
Acquisition related 16 - 2,197 1,485
---------- ---------- --------- --------
Total Operating Expenses 29,383 11,440 78,422 31,637
---------- ---------- --------- --------
INCOME FROM OPERATIONS 6,311 6,935 18,192 17,897
EXPENSES RELATED TO FINANCING:
Interest expense, net of
interest income 1,621 3 5,084 (70)
Loan fee write-off 995 - 995 -
---------- ---------- --------- --------
Net Expenses Related to
Financing 2,616 3 6,079 (70)
---------- ---------- --------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 3,695 6,932 12,113 17,967
PROVISION FOR INCOME TAXES 1,534 2,727 4,968 7,210
---------- ---------- --------- --------
NET INCOME FROM CONTINUING
OPERATIONS 2,161 4,205 7,145 10,757
NET INCOME (LOSS) FROM
DISCONTINUED OPERATIONS (77) (279) 668 (911)
---------- ---------- --------- --------
NET INCOME $2,084 $3,926 $7,813 $9,846
========== ========== ========= ========
NET INCOME PER SHARE
INFORMATION:
Income per share -
Diluted
Income from continuing
operations $0.12 $0.23 $0.39 $0.59
Gain (loss) from
discontinued
operations (0.01) (0.02) 0.04 (0.05)
---------- ---------- --------- --------
NET INCOME PER SHARE -
DILUTED $0.11 $0.21 $0.43 $0.54
========== ========== ========= ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 18,278 18,391 18,251 18,262
========== ========== ========= ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2004
(In thousands)
(Unaudited)
September 30, 2004
----------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $10,526
Trade receivables, less allowance for
doubtful accounts of $893 22,071
Prepaid expenses 2,822
Deferred income taxes 5,663
Other current assets 1,927
----------------------
Total Current Assets 43,009
LONG-TERM ASSETS:
Property and equipment, net 21,001
Software development costs, net 5,835
Goodwill 148,215
Other intangibles, net of accumulated
amortization of $9,994 26,080
Other 2,234
----------------------
Total Long-term Assets 203,365
----------------------
Total Assets $246,374
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $4,197
Customer deposits 2,513
Other accrued expenses 2,346
Current maturities of long-term obligations 7,611
----------------------
Total Current Liabilities 16,667
LONG-TERM LIABILITIES:
Deferred income taxes 9,780
Long-term obligations (excluding current
maturities) 82,100
----------------------
Total Long-term Liabilities 91,880
STOCKHOLDERS' EQUITY 137,827
----------------------
Total Liabilities and Stockholders' Equity $246,374
======================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS
TO NON-GAAP NET INCOME FROM CONTINUING OPERATIONS
(In thousands)
(Unaudited)
THREE-MONTHS NINE-MONTHS
ENDED ENDED
September 30, September 30,
2004 2003 2004 2003
--------- ------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS $2,161 $4,205 $7,145 $10,757
Plus (net of tax):
Amortization of acquisition
intangibles 1,189 592 3,389 1,578
Acquisition related expense 9 - 1,296 890
Amortization/write-off -
capitalized loan fees 782 - 1,670 -
Non-cash embedded option
charges 194 - 194 -
--------- ------- -------- --------
2,174 592 6,549 2,468
--------- ------- -------- --------
NON-GAAP NET INCOME FROM
CONTINUING OPERATIONS $4,335 $4,797 $13,694 $13,225
========= ======= ======== ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME PER SHARE FROM CONTINUING OPERATIONS
TO NON-GAAP NET INCOME PER SHARE FROM CONTINUING OPERATIONS
(Unaudited)
THREE-MONTHS NINE-MONTHS
ENDED ENDED
September 30, September 30,
2004 2003 2004 2003
-------- ------ ------- -------
NET INCOME PER SHARE FROM CONTINUING
OPERATIONS (on a diluted basis) $0.12 $0.23 $0.39 $0.59
Plus (net of tax):
Amortization of acquisition
intangibles 0.07 0.03 0.19 0.08
Acquisition related expense - - 0.07 0.05
Amortization/write-off -
capitalized loan fees 0.04 - 0.09 -
Non-cash embedded option charges 0.01 - 0.01 -
-------- ------ ------- -------
0.12 0.03 0.36 0.13
-------- ------ ------- -------
NON-GAAP NET INCOME PER SHARE FROM
CONTINUING OPERATIONS (on a diluted
basis) $0.24 $0.26 $0.75 $0.72
======== ====== ======= =======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP ADJUSTED EBITDA FROM CONTINUING OPERATIONS
(In thousands)
(Unaudited)
THREE-MONTHS ENDED NINE-MONTHS ENDED
September 30, September 30,
2004 2003 2004 2003
--------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS $2,161 $4,205 $7,145 $10,757
Acquisition related expense 16 - 2,197 1,485
Depreciation and amortization 3,836 2,047 10,507 5,916
Expenses related to financing 2,616 3 6,079 (70)
Provision for income taxes 1,534 2,727 4,968 7,210
--------- -------- -------- --------
8,002 4,777 23,751 14,541
--------- -------- -------- --------
NON-GAAP ADJUSTED EBITDA FROM
CONTINUING OPERATIONS $10,163 $8,982 $30,896 $25,298
========= ======== ======== ========
CONTACT: EPIQ Systems, Inc.
For more information:
Peggy Leinen
913-621-9500
Website: www.epiqsystems.com