Exhibit 99.1
Epiq Systems, Inc. Announces First Quarter 2006 Results
with 50% Operating Revenue Growth
KANSAS CITY, Kan.--(BUSINESS WIRE)--April 26, 2006--EPIQ Systems, Inc.
(NASDAQ: EPIQ) today announced results of operations for the first quarter of
2006 with operating revenue (total revenue less reimbursed expenses) of $39.0
million, a 50% increase compared to $26.0 million for the year ago quarter.
First quarter 2006 net income was $2.0 million or $0.10 per share compared
to $3.3 million or $0.17 per share for the year ago quarter. Non-GAAP net income
for the first quarter of 2006 was $4.4 million or $0.20 per share compared to
$4.1 million or $0.21 per share for the year ago quarter. Non-GAAP net income
adjusts net income for amortization of acquisition related intangibles, share
based compensation, acquisition-related expenses, capitalized loan fee
amortization, and embedded option mark-to-market expense/convertible debt
accretion, all net after tax. A reconciliation statement is attached.
EPIQ Systems' management primarily analyzes financial results adjusted for
certain items that are non-operational and not necessarily ongoing in nature, as
well as cash flow generated from operations. Management evaluates the following
key metrics: (i) Non-GAAP Adjusted EBITDA (earnings before interest/ financing,
taxes, depreciation, amortization, share based compensation, and acquisition
related expenses) and (ii) net cash provided by operating activities.
Non-GAAP Adjusted EBITDA was $12.4 million for the first quarter of 2006, a
27% increase compared to $9.7 million for the year ago quarter. A reconciliation
statement is attached.
Net cash provided by operating activities was $5.7 million for the first
quarter of 2006 compared to $1.7 million for the year ago quarter. A condensed
consolidated cash flow statement is attached.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and
COO of EPIQ Systems stated, "We are very pleased with the first quarter
operating results of the company and the integration of nMatrix, our electronic
discovery business. By combining our capabilities in electronic discovery,
claims administration, controlled disbursement and legal notification, EPIQ
Systems today is a leading national provider of integrated technologies for the
legal market. nMatrix has strong momentum and is well positioned in the high
growth electronic data discovery market, which is projected to grow to $2.0
billion in revenue in 2007."
Recent key events include:
-- EPIQ Systems released TCMS(R) 11.0, the latest version of its Chapter
7 case management software, and DocuMatrix(TM) 11.0, the latest
version of its electronic discovery and document review platform. Both
releases further establish the Company's technology leadership in the
legal market.
-- A record 2.08 million bankruptcies were filed in the U.S. Court's
annual period ended December 31, 2005; up 30% from the 1.60 million
level reached in 2004.
-- The Federal Reserve reported that both corporate debt and consumer
credit increased compared to the prior year, approaching $5.5 trillion
and $2.2 trillion, respectively, as of December 31, 2005.
-- Since June 2003, the Federal Open Market Committee has raised the
federal funds rate 15 times from its low of 1.0% to the current 4.75%.
-- The electronic data discovery market has a 2-year projected 55% CAGR,
with 2005 revenue of $0.8 billion projected to reach $2.0 billion in
2007, according to an independent source.
Conference Call
The Company will host a conference call today at 3:30 p.m. central time to
discuss these results. The Internet broadcast of the call with corresponding
slides can be accessed at www.epiqsystems.com. To listen by phone, call
877-694-4769 before 3:30 p.m. central time. The archive of the Internet
broadcast will be available on the company's website until the next earnings
update. A recording of the call will be available through May 31, 2006 beginning
approximately two hours after the call ends. To access the replay, call
877-519-4471 and enter pin #7304385.
Company Description
EPIQ Systems is a national leader in the market for fiduciary management
and claims administration systems and provides an advanced offering of
integrated technology-based products and services. Our solutions enable clients
to optimize the administration of complex legal proceedings, including
electronic litigation discovery, bankruptcy administration, class action
administration, 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 an integrated 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 and Cautionary Statements
This press release and the referenced conference call 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 our operations and
financial condition. These forward-looking statements are based on our current
expectations and may be identified by terms such as "believe," "expect,"
"anticipate," "should," "planned," "may," "goal," "objective" and "potential."
Because forward-looking statements involve future risks and uncertainties,
listed below are a variety of factors that could cause actual results and
experience to differ materially from the anticipated results or other
expectations expressed in our forward-looking statements. These factors include
(1) any material changes in our total number of client engagements and the
volume associated with each engagement, (2) any material changes in our Chapter
7 deposit portfolio, the services required or selected by our electronic
discovery, Chapter 11, Chapter 13, class action or mass tort engagements, or the
number of cases processed by our Chapter 13 bankruptcy trustee clients, (3)
material changes in the number of bankruptcy filings, class action filings or
mass tort actions each year, (4) our reliance on our marketing and pricing
arrangements with Bank of America and other depository banks, (5) the impact of
recently enacted tort reform and bankruptcy reform legislation on the volume and
timing of disposition of client engagements, (6) risks associated with the
integration of acquisitions, particularly nMatrix, into our existing business
operations, (7) risks associated with our indebtedness, and (8) 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.
(Tables follow)
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended
March 31,
--------------------
2006 2005
--------------------
REVENUE:
Case management $26,024 $19,885
Document management 12,975 6,081
--------------------
Operating revenue 38,999 25,966
Reimbursed expenses 5,657 5,495
--------------------
Total Revenue 44,656 31,461
--------------------
COSTS AND EXPENSES:
Direct costs 21,131 13,736
General and administrative 11,699 7,992
Depreciation and software amortization 2,297 1,774
Amortization of identifiable intangible assets 2,767 1,623
--------------------
Total Operating Expenses 37,894 25,125
--------------------
INCOME FROM OPERATIONS 6,762 6,336
--------------------
EXPENSES RELATED TO FINANCING:
Interest income (46) (39)
Interest expense 3,310 801
--------------------
Net Expenses Related to Financing 3,264 762
--------------------
INCOME BEFORE INCOME TAXES 3,498 5,574
PROVISION FOR INCOME TAXES 1,468 2,324
--------------------
NET INCOME $2,030 $3,250
====================
NET INCOME PER SHARE INFORMATION:
Net income per share - Diluted $0.10 $0.17
====================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 23,325 21,112
====================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
2006 2005
--------------------------
ASSETS
ASSETS:
Cash and cash equivalents $6,827 $13,563
Trade receivables, net 35,765 33,504
Property and equipment, net 24,295 23,751
Goodwill 249,729 249,427
Other intangibles, net 50,302 53,399
Other 20,284 21,226
--------------------------
Total Assets $387,202 $394,870
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $7,684 $7,954
Indebtedness 164,141 173,548
Other liabilities 34,644 36,827
STOCKHOLDERS' EQUITY 180,733 176,541
--------------------------
Total Liabilities and Stockholders' Equity $387,202 $394,870
==========================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
March 31,
--------------------
2006 2005
--------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,030 $3,250
Non-cash adjustments to net income:
Depreciation and amortization 5,064 3,397
Other, net 905 470
Changes in operating assets and liabilities, net (2,343) (5,410)
--------------------
Net cash provided by operating activities 5,656 1,707
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for business combinations, net (150) -
Other (3,922) (4,458)
--------------------
Net cash used in investing activities (4,072) (4,458)
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on indebtedness (9,712) (2,118)
Other 1,392 46
--------------------
Net cash used in financing activities (8,320) (2,072)
--------------------
NET DECREASE IN CASH $(6,736) $(4,823)
====================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO
NON-GAAP NET INCOME
(In thousands)
(Unaudited)
Three months ended
------------------------
March 31, March 31,
2006 2005
------------------------
NET INCOME $2,030 $3,250
Plus (net of tax):
Amortization of acquisition intangibles 1,674 946
Share based compensation 350 -
Acquisition related expense - -
Loan fee amortization 221 166
Non-cash embedded option charges 164 (221)
------------------------
2,409 891
------------------------
NON-GAAP NET INCOME $4,439 $4,141
========================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF EPS TO
NON-GAAP EPS
(Unaudited)
Three months ended
------------------------
March 31, March 31,
2006 2005
------------------------
EPS (on a diluted basis) $0.10 $0.17
Plus (net of tax):
Amortization of acquisition intangibles 0.07 0.04
Share based compensation 0.01 -
Acquisition related expense - -
Loan fee amortization 0.01 0.01
Non-cash embedded option charges 0.01 (0.01)
------------------------
0.10 0.04
------------------------
NON-GAAP EPS (on a diluted basis) $0.20 $0.21
========================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three months ended
------------------------
March 31, March 31,
2006 2005
------------------------
NET INCOME $2,030 $3,250
Acquisition related expense - -
Depreciation and amortization 5,064 3,397
Share based compensation 530 -
Expenses related to financing 3,264 762
Provision for income taxes 1,468 2,324
------------------------
10,326 6,483
------------------------
NON-GAAP ADJUSTED EBITDA $12,356 $9,733
========================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
EPS CALCULATION
(In thousands, except per share data)
(Unaudited)
Three months ended
------------------------
March 31, March 31,
2006 2005
------------------------
NET INCOME $2,030 $3,250
Interest expense adjustment for
convertible debt 298 288
------------------------
ADJUSTED FOR DILUTED CALCULATION $2,328 $3,538
========================
DILUTED WEIGHTED AVERAGE SHARES 19,284 17,887
Adjustment to reflect stock options 1,184 368
Adjustment to reflect convertible
debt shares 2,857 2,857
------------------------
ADJUSTED FOR DILUTED CALCULATION 23,325 21,112
========================
INCOME PER SHARE - DILUTED $0.10 $0.17
========================
CONTACT: EPIQ Systems, Inc.
Mary Ellen Berthold, 913-621-9500
ir@epiqsystems.com