Epicor® Reports 2009 First Quarter Results
Epicor chairman, president and CEO George Klaus commented, "Epicor posted solid first quarter financial results in the face of a continued challenging economic environment. The bottom line benefited from our proactive efforts to align our costs with our anticipated revenues, resulting in non-GAAP earnings per share coming in at the high end of our previously announced guidance. Total revenues narrowly missed our guidance, coming in approximately 1% below the lower end of our expected range.
"We saw business improve as we progressed through the 2009 first quarter, and we had a relatively strong March," Klaus said. "Seasonality in purchasing decisions generally leads to the first quarter being our weakest in terms of revenues, and this year proved especially challenging, as deteriorating economic conditions led to a very slow January and February. We are continuing to see indications that customers may be more willing to move forward with projects, and we expect to see improvement in our top and bottom line results throughout the year. That said," Klaus continued, "economic uncertainty abounds and we will continue to take what we believe is a prudently cautious approach with our revenue and earnings expectations, while modifying our cost structure appropriately."
GAAP Results: GAAP revenue for the 2009 first quarter was $98.7 million, with a net loss of $1.6 million, or loss of $0.03 per diluted share. This compares to 2008 first quarter GAAP revenue of $102.2 million, and GAAP net loss of $8.0 million, or loss of $0.14 per diluted share.
Non-GAAP Results1: Non-GAAP revenue for the 2009 first quarter was $99.1 million, which excludes approximately $0.4 million in deferred revenue fair value adjustments from NSB purchase accounting, with non-GAAP net income of $4.7 million, or $0.08 per diluted share. This compares to non-GAAP revenue of $104.0 million, which excludes approximately $1.8 million in deferred revenue fair value adjustments from NSB purchase accounting and non-GAAP net income of $4.1 million, or $0.07 per diluted share, in the 2008 first quarter.
2009 First Quarter Revenue by Segment: 2009 first quarter non-GAAP license revenue was $13.2 million, compared to non-GAAP license revenue of $18.6 million in the 2008 first quarter. Non-GAAP consulting revenue was $31.5 million in the 2009 first quarter, compared to non-GAAP consulting revenue of $31.6 million in the 2008 first quarter. Non-GAAP maintenance revenue for the 2009 first quarter was $47.3 million, compared to non-GAAP maintenance revenue of $47.7 million in the same period in the prior year. GAAP hardware and other revenue for the 2009 first quarter was $7.2 million, compared to GAAP hardware and other revenue of $6.2 million in the prior year's first quarter.
Balance Sheet Summary: The Company's balance sheet at March 31, 2009, included cash and cash equivalents of $83.2 million. The balance sheet benefited from free cash flow2 of $7.2 million during the 2009 first quarter, which helped support approximately $8.5 million in pay downs on the Company's credit facility during the quarter. The Company's total debt balance as of March 31, 2009, consists primarily of the $230 million obligation to holders of the Company's 2.375% senior convertible notes (less the debt discount described below of $48.1 million) and $86.5 million of borrowings under the Company's credit facility, currently priced at LIBOR plus 2.25%.
At the end of the 2009 first quarter, net accounts receivable was approximately $79.1 million. The Company had solid cash collections of $112.9 million during the 2009 first quarter. Days sales outstanding (DSOs) in the 2009 first quarter were up to 72, compared to 68 in the fourth quarter of 2008. Deferred revenue at the end of the 2009 first quarter was $89.5 million.
Effective January 1, 2009, the Company adopted FSP APB 14-1, "Accounting for Convertible Debt", and retroactively applied this change to all periods presented herein. This standard requires the Company to change the previous accounting method for its $230 million convertible notes. Accordingly, the Company recorded a $61.8 million debt discount as Additional Paid in Capital, as of the notes' issuance date of May 15, 2007. At March 31, 2009, the debt discount was $48.1 million.
The Company is amortizing the debt discount through the date at which the Company can begin to redeem the notes, which is May 15, 2014. The Company recognized interest expense of $3.3 million and $3.2 million related to the convertible debt for the three months ended March 31, 2009 and 2008, respectively, of which $1.4 million is cash.
Due to the uncertainty and limited visibility in the global economy, IT spending and exchange rate fluctuations, the Company will continue to provide forward looking guidance one quarter at a time.
2009 second quarter total GAAP revenue is expected to be $100 to $105 million, with non-GAAP earnings per share for the 2009 second quarter expected to be $0.08 to $0.09.
The Company's 2009 second quarter non-GAAP earnings per share guidance excludes current expectations for second quarter amortization of intangible assets of approximately $8.2 million, second quarter stock-based compensation expense of approximately $1.9 million and approximately $2.0 million in non-cash interest expense for the second quarter related to Epicor's adoption of FSP APB 14-1. 2009 second quarter non-GAAP earnings per share expectations assume a weighted average share count of 59.9 million shares.
Earnings Conference Call
The Company will hold an investor and analyst conference call today at 5:00 p.m. Eastern Time/2:00 p.m. Pacific Time.
When: Monday, May 4, 2009 ,Time: 2:00 p.m. PT, Dial in: +1 (888) 819-8015 or outside the U.S. +1 (913) 312-1229, Conf ID: Epicor 2009 First Quarter Earnings Call, Webcast: http://ir.epicor.com
On the call, chairman, president and CEO George Klaus and executive vice president and CFO Michael Pietrini will review 2009 first quarter earnings. 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 http://ir.epicor.com and will be archived for thirty days following the call on the Company’s Web site.
1Please see the reconciliations to GAAP measures provided at the end of this press release.
2Free cash flow is a non-GAAP measure. The Company calculates free cash flow as adjusted EBITDA, plus stock-based compensation, less capital expenditures, cash paid for income taxes and net interest. Please refer to the table below for a complete reconciliation.
Epicor Software Deutschland GmbH
Epicor Software is a global leader delivering business software solutions to the manufacturing, distribution, retail, hospitality and services industries. With 20,000 customers in over 150 countries, Epicor provides integrated enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM) and enterprise retail software solutions that enable companies to drive increased efficiency and improve profitability. Founded in 1984, Epicor celebrates 25 years of technology innovation delivering business solutions that provide the scalability and flexibility businesses need to build competitive advantage. Epicor provides a comprehensive range of services with a single point of accountability that promotes rapid return on investment and low total cost of ownership, whether operating business on a local, regional or global scale. The Company's worldwide headquarters are located in Irvine, California with offices and affiliates around the world. For more information, visit www.epicor.com.
Epicor is a registered trademark of Epicor Software Corporation. Other trademarks referenced are the property of their respective owners. The product and service offerings depicted in this document are produced by Epicor Software Corporation.