IRVINE, CA, Oct 28, 2010 — Epicor Software Corporation (NASDAQ: EPIC), a leading provider of enterprise business software solutions for the midmarket and divisions of Global 1000 companies, today reported financial results for its third quarter ended September 30, 2010. All results should be considered preliminary pending the Company’s filing of its quarterly report on Form 10-Q.
Epicor chairman, president and CEO George Klaus commented, “This was the second highest third quarter in Epicor’s history in terms of total revenue, consulting revenue and maintenance revenue, and the fourth highest in terms of software revenue. It is clear that we are experiencing tremendous momentum on the back of what we believe are the best products in the market. We believe that the geographic reach and functional breadth and depth of our products have never been greater. Epicor is selling into more markets than ever before and our superior products are driving market share gains. As we look forward into Q4 and 2011,” Klaus continued, “our pipelines support continued momentum and currently support our belief that our 2010 fourth quarter will be one of the strongest software revenue quarters in Epicor’s history.”
Total revenue for the 2010 third quarter grew more than 16% to $114.6 million, when compared to 2009 third quarter revenue of $98.6 million. 2010 third quarter GAAP net loss was $9.4 million, or loss of $0.16 per diluted share, compared to GAAP net income of $0.4 million, or $0.01 per diluted share in the 2009 third quarter. 2010 third quarter GAAP net loss includes the impact of a $9.9 million, or $0.17 per diluted share, tax provision related to updated estimates of pre-tax GAAP income for the year and an approximate $0.02 benefit per diluted share related to cash received from the Province of Quebec, Canada in connection with a program designed to encourage development of IT businesses there. The 2010 third quarter benefit was related to the Company’s operations in 2008. This program extends through 2015, and Epicor is currently in the process of applying for a rebate related to its 2009 operations.
Non-GAAP(2) net income for the 2010 third quarter was up 34% to $10.5 million, or $0.18 per diluted share, which includes the $0.02 per diluted share Quebec benefit, compared to non-GAAP net income of $7.8 million, or $0.13 per diluted share in the 2009 third quarter.
2010 Third Quarter Revenue by Segment: 2010 third quarter license revenue was $20.2 million, up 47% when compared to 2009 third quarter license revenue of $13.7 million. Consulting revenue grew 15% to $36.5 million in the 2010 third quarter, versus 2009 third quarter consulting revenue of $31.7 million. 2010 third quarter maintenance revenue was up 1% to $48.5 million when compared to 2009 third quarter maintenance revenue of $48.2 million. Hardware and other revenue for the 2010 third quarter was $9.3 million, up 89% when compared to hardware and other revenue of $4.9 million in the prior year’s third quarter.
Balance Sheet Summary: The Company’s balance sheet at September 30, 2010, included cash and cash equivalents of $113.1 million. The balance sheet benefited from free cash flow of $15.6 million during the 2010 third quarter, which also enabled the Company to make a discretionary $5.0 million payment to reduce the outstanding balance on its credit facility during the 2010 third quarter. The Company’s total outstanding debt as of September 30, 2010, consists primarily of $230 million in aggregate principal amount of the Company’s 2.375% senior convertible notes (less a debt discount of $35.8 million) and $57.5 million in aggregate principal amount under the Company’s credit facility, currently bearing an interest rate of approximately 5 percent.
Following the close of the 2010 third quarter, the Company made an additional discretionary $10.0 million payment to reduce the outstanding balance on its credit facility.
At the end of the 2010 third quarter, net accounts receivable was approximately $95.3 million. The Company had cash collections of approximately $107.4 million during the 2010 third quarter. Days sales outstanding (DSOs) in the 2010 third quarter were 77, up when compared to 71 in the second quarter of 2010. Total deferred revenue at the end of the 2010 third quarter was $94.6 million.
Business Outlook: For Epicor’s 2010 fourth quarter, total revenue is expected to be $119 to $121 million, with non-GAAP earnings per diluted share(3) for the 2010 fourth quarter expected to be $0.19 to $0.21.
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.
What: Epicor 2010 Third Quarter Earnings Conference Call
When: Thursday, October 28, 2010
Time: 2:00 p.m. PT
Dial in: 1-800-437-2398
Conf ID: Epicor 2010 Third Quarter Earnings Call
On the call, chairman, president and CEO George Klaus and executive vice president and CFO Michael Pietrini will review 2010 third 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.
(1) Free cash flow is a non-GAAP measure. The Company calculates free cash flow as adjusted EBITDA (also a non-GAAP measure), plus stock-based compensation, less capital expenditures, cash paid for income taxes and net interest. Please refer to the reconciliation of adjusted EBITDA and free cash flow, as well as the information provided below under the heading “Non-GAAP Financial Measures.”
(2) Please see the reconciliations to GAAP measures provided at the end of this press release as well as the information provided below under the heading “Non-GAAP Financial Measures.”
(3) The Company’s 2010 fourth quarter non-GAAP earnings per diluted share guidance excludes current expectations for fourth quarter amortization of intangible assets of approximately $7.0 million, fourth quarter stock-based compensation expense of approximately $4.9 million and approximately $2.2 million in non-cash interest expense for the fourth quarter related to amortization of debt discount. 2010 fourth quarter non-GAAP earnings per share expectations assume a weighted average share count of 61.1 million shares.
About Epicor Software Corporation
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 takes pride in more than 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.