Exhibit 99.1
EPIQ Systems, Inc. Announces Second Quarter 2006 Results with 30%
Operating Revenue Growth
KANSAS CITY, Kan.--(BUSINESS WIRE)--July 25, 2006--EPIQ Systems,
Inc. (NASDAQ:EPIQ) today announced results of operations for the
second quarter of 2006 with operating revenue before reimbursed direct
costs of $34.0 million, a 30% increase compared to $26.2 million for
the year ago quarter. June 30, 2006 year-to-date operating revenue
before reimbursed direct costs of $73.0 million reflects a 40%
increase compared to $52.2 million last year.
Net income for the second quarter of 2006 was $0.5 million or
$0.03 per share compared to $2.9 million or $0.15 per share for the
year ago quarter. Included within net income for the second quarter of
2006 was after-tax interest expense, amortization of acquisition
related intangibles and share based compensation which totaled $4.1
million, compared with a total of $1.9 million for the year ago
quarter. June 30, 2006 year-to-date net income was $2.6 million or
$0.13 per share compared to $6.2 million or $0.32 per share for the
prior year. Included within June 30, 2006 year-to-date net income was
after-tax interest expense, amortization of acquisition related
intangibles and share based compensation which totaled $8.1 million,
compared with $3.3 million last year. The increases in interest
expense and amortization of intangibles were primarily attributable to
the November 15, 2005 acquisition of our electronic discovery
business.
Second quarter 2006 net cash provided by operating activities was
$12.7 million, a 47% increase compared to $8.6 million for the year
ago quarter. June 30, 2006 year-to-date net cash provided by operating
activities was $18.3 million, a 78% increase compared to $10.3 million
for the prior year. A condensed consolidated cash flow statement is
attached.
EPIQ Systems' management also evaluates the following non-GAAP
financial measures: (i) Non-GAAP Adjusted EBITDA (net income before
interest/financing, taxes, depreciation, amortization, share based
compensation, and acquisition related expenses) and (ii) Non-GAAP net
income (net income before 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 of tax). Reconciliation
statements for non-GAAP adjusted EBITDA, non-GAAP net income and
non-GAAP earnings per share are attached.
Non-GAAP Adjusted EBITDA was $10.4 million, a 4% increase for the
second quarter of 2006 compared to $10.0 million for the year ago
quarter. June 30, 2006 year-to-date non-GAAP Adjusted EBITDA was $22.8
million, a 15% increase compared to $19.8 million for the prior year.
Non-GAAP net income for the second quarter of 2006 was $3.1
million or $0.15 per share compared to $4.3 million or $0.22 per share
for the year ago quarter. June 30, 2006 year-to-date non-GAAP net
income was $7.6 million or $0.35 per share compared to $8.4 million or
$0.43 per share for the prior year. 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. Non-GAAP net income includes
interest expense, which increased $1.5 million in the second quarter
of 2006 and $4.0 million year-to-date compared to last year. The
increase in interest expense is primarily attributable to bank debt
utilized to finance the November 15, 2005 acquisition of our
electronic discovery business. As of July 25, 2006 we have reduced our
bank borrowings by $21.0 million since the electronic discovery
acquisition.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson,
president and COO of EPIQ Systems stated, "As planned, 2006 continues
to be an important investment year for the company as we bring
together resources that have previously been managed separately and
introduce an enhanced national identity as the leader in integrated
technology solutions for the legal industry. Electronic discovery
solutions represents a significant growth opportunity for EPIQ
Systems, and June was a record breaking month for electronic discovery
revenue. We have also noted that bankruptcy filings have increased
each month since the effective date of new bankruptcy legislation in
late 2005.
"We are now able to offer end-to-end technology solutions spanning
electronic discovery, legal notification, claims administration and
controlled disbursement for varying engagement types that include
commercial litigation, class action, government settlements, financial
transactions and bankruptcy of every size and configuration."
Recent key events include:
-- EPIQ Systems released TCMS(R) 11.5, the latest version of its
Chapter 7 bankruptcy case management software, further
establishing the Company's technology leadership in the legal
market.
-- 1.79 million bankruptcies were filed in the U.S. Court's
annual period ended March 31, 2006.
-- The Federal Reserve reported that both corporate debt and
consumer credit increased compared to the prior year, reaching
$5.5 trillion and $2.2 trillion, respectively, as of March 31,
2006.
-- Since June 2003, the Federal Open Market Committee has raised
the federal funds rate 17 times from its low of 1.0% to the
current 5.25%.
-- 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 877-715-5320 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 August 31, 2006 beginning approximately two hours
after the call ends. To access the replay, call 877-519-4471 and enter
pin #7627881.
Company Description
EPIQ Systems is a provider of technology-based solutions for the
legal and fiduciary services industries. 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 leading law firms, corporate legal
departments, bankruptcy trustees and other professional advisors 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.
For more information:
Mary Ellen Berthold, EPIQ Systems, Inc., telephone: 913-621-9500,
email: ir@epiqsystems.com
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------------------
2006 2005 2006 2005
----------------------------------------
REVENUE:
Case management services $25,106 $19,746 $51,130 $39,631
Document management services 8,929 6,441 21,904 12,522
----------------------------------------
Operating revenue before
reimbursed direct costs 34,035 26,187 73,034 52,153
Operating revenue from
reimbursed direct costs 6,376 5,448 12,033 10,944
----------------------------------------
Total Revenue 40,411 31,635 85,067 63,097
----------------------------------------
COSTS AND EXPENSES:
Direct costs 18,179 13,564 39,310 27,300
General and administrative 12,359 8,044 24,058 16,036
Depreciation and software
and leasehold amortization 2,494 1,775 4,791 3,549
Amortization of identifiable
intangible assets 2,878 1,427 5,645 3,050
Acquisition related 250 - 250 -
----------------------------------------
Total Operating Expenses 36,160 24,810 74,054 49,935
----------------------------------------
INCOME FROM OPERATIONS 4,251 6,825 11,013 13,162
----------------------------------------
EXPENSES RELATED TO FINANCING:
Interest income (42) (40) (88) (78)
Interest expense 3,382 1,884 6,692 2,685
----------------------------------------
Net Expenses Related to
Financing 3,340 1,844 6,604 2,607
----------------------------------------
INCOME BEFORE INCOME TAXES 911 4,981 4,409 10,555
PROVISION FOR INCOME TAXES 383 2,077 1,851 4,401
----------------------------------------
NET INCOME $528 $2,904 $2,558 $6,154
========================================
NET INCOME PER SHARE
INFORMATION:
Net income per share -
Diluted $0.03 $0.15 $0.13 $0.32
========================================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 20,147 21,289 20,302 21,187
========================================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2006 2005
--------------------------
ASSETS
ASSETS:
Cash and cash equivalents $6,813 $13,563
Trade receivables, net 32,155 33,504
Property and equipment, net 23,949 23,751
Goodwill 261,119 249,427
Other intangibles, net 49,825 53,399
Other 18,519 21,226
--------------------------
Total Assets $392,380 $394,870
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $5,701 $7,954
Indebtedness 167,628 173,548
Other liabilities 36,820 36,827
STOCKHOLDERS' EQUITY 182,231 176,541
--------------------------
Total Liabilities and Stockholders' Equity $392,380 $394,870
==========================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
--------------------------------
2006 2005 2006 2005
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $528 $2,904 $2,558 $6,154
Non-cash adjustments to net income:
Depreciation and amortization 5,372 3,202 10,436 6,599
Other, net 566 784 1,471 1,256
Changes in operating assets and
liabilities, net 6,204 1,717 3,861 (3,695)
--------------------------------
Net cash provided by operating
activities 12,670 8,607 18,326 10,314
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for business
combinations, net (3,503) - (3,653) -
Other (2,421) 3,052 (6,343) (1,406)
--------------------------------
Net cash provided by (used in)
investing activities (5,924) 3,052 (9,996) (1,406)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on indebtedness (7,008) (6,563)(16,720) (8,681)
Other 248 133 1,640 179
--------------------------------
Net cash used in financing
activities (6,760) (6,430)(15,080) (8,502)
--------------------------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS $(14) $5,229 $(6,750) $406
================================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO
NON-GAAP NET INCOME
(In thousands)
(Unaudited)
Three months Six months
ended ended
------------------------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
------------------------------------
NET INCOME $528 $2,904 $2,558 $6,154
Plus (net of tax):
Amortization of acquisition
intangibles 1,741 832 3,415 1,778
Share based compensation 367 - 717 -
Acquisition related expense 151 - 151 -
Loan fee amortization 220 161 441 327
Non-cash embedded option charges 110 409 273 188
------------------------------------
2,589 1,402 4,997 2,293
------------------------------------
NON-GAAP NET INCOME $3,117 $4,306 $7,555 $8,447
====================================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF EPS TO
NON-GAAP EPS
(Unaudited)
Three months Six months
ended ended
------------------------------------
June 30, June 30, June 30, June 30,
2006(a) 2005 2006(a) 2005
------------------------------------
EPS (on a diluted basis) $0.03 $0.15 $0.13 $0.32
Plus (net of tax):
Amortization of acquisition
intangibles 0.08 0.04 0.15 0.08
Share based compensation 0.02 - 0.03 -
Acquisition related expense 0.01 - 0.01 -
Loan fee amortization 0.01 0.01 0.02 0.02
Non-cash embedded option charges - 0.02 0.01 0.01
------------------------------------
0.12 0.07 0.22 0.11
------------------------------------
NON-GAAP EPS (on a diluted basis) $0.15 $0.22 $0.35 $0.43
====================================
(a) The EPS calculation excludes adjustments related to convertible
debt as such adjustments are antidilutive. The Non-GAAP EPS
calculations adjust net income and outstanding shares assuming the
convertible debt was converted as of January 1, 2006 as such
adjustments are dilutive.
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three months ended Six months ended
----------------------------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
----------------------------------------
NET INCOME $528 $2,904 $2,558 $6,154
Acquisition related expense 250 - 250 -
Depreciation and amortization 5,372 3,202 10,436 6,599
Share based compensation 562 - 1,092 -
Expenses related to financing 3,340 1,844 6,604 2,607
Provision for income taxes 383 2,077 1,851 4,401
----------------------------------------
9,907 7,123 20,233 13,607
----------------------------------------
NON-GAAP ADJUSTED EBITDA $10,435 $10,027 $22,791 $19,761
========================================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
EPS CALCULATION
(In thousands, except per share data)
(Unaudited)
Three months Six months
ended ended
------------------------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
------------------------------------
NET INCOME $528 $2,904 $2,558 $6,154
Interest expense adjustment for
convertible debt -(b) 291 -(b) 578
------------------------------------
ADJUSTED FOR DILUTED CALCULATION $528 $3,195 $2,558 $6,732
====================================
DILUTED WEIGHTED AVERAGE SHARES 19,388 17,904 19,337 17,896
Adjustment to reflect stock
options 759 528 965 434
Adjustment to reflect convertible
debt shares -(b) 2,857 -(b) 2,857
------------------------------------
ADJUSTED FOR DILUTED CALCULATION 20,147 21,289 20,302 21,187
====================================
NET INCOME PER SHARE - DILUTED $0.03 $0.15 $0.13 $0.32
====================================
(b) Convertible debt shares are antidilutive for the current year and
are excluded from EPS calculation.
CONTACT: EPIQ Systems, Inc.
Mary Ellen Berthold, 913-621-9500
ir@epiqsystems.com