EX-99 2 dex99.htm PRESS RELEASE Press Release

Exhibit 99

LOGO

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 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 at www.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