Epicor® Reports Record 2006 Fourth Quarter and Full-year Earnings
Quarterly Revenue Exceeds $100 Million for the First Time in Company History; Quarterly Software License Revenue Hits Record $32.3 Million Driven by 19% Year-over-Year Organic Growth
Click here for the entire release with the Balance Sheet, Statement of Operations and Earnings Reconciliations tables in pdf format.
IRVINE, Calif., January 30, 2007 — Epicor Software Corporation (Nasdaq: EPIC), a leading provider of enterprise business software solutions for the midmarket and divisions of the Global 1000, today reported financial results for its fourth quarter and full year ended December 31, 2006. All results should be considered preliminary pending the Company’s filing of its annual report on Form 10-K for the year ended December 31, 2006.
“Record sales in every key area of revenue contribution – software license, consulting, and maintenance – in the fourth quarter, highlighted an excellent 2006 year where we beat the revenue and earnings guidance previously provided on April 3, 2006,” said George Klaus, Epicor chairman and CEO. “Most importantly, we continued to experience excellent net license revenue (NLR) growth during the fourth quarter, with 26% total NLR growth and 19% organic NLR growth versus last year’s fourth quarter. This growth is being driven by our ability to consistently add new names to our base of more than 20,000 customers, with 228 new customer wins in the fourth quarter alone and 750 new customers for the year. New customers are the key to driving strong future growth in professional services and maintenance and support the excellent visibility we have in any given quarter where approximately 80% of our revenue is highly predictable since it is generated from our existing base of customers.
“We believe our solid double-digit growth in organic software license revenue sets us apart from the overall industry’s predicted organic growth rates of mid to high single digits,” Klaus said. “Worldwide, our average selling price (ASP) for direct new deals has risen over the past 12 months and our outlook for continued strong software license growth sets the stage for us to continue to outpace industry expectations. Our pipelines remain stronger than ever, and the quality of the pipeline is continuing to improve, providing even better visibility and increasing the already excellent opportunities we have across our sales organization.
“Our early adoption of Service Oriented Architecture (SOA) and the .NET technology platform, as well as our focused vertical strategy, differentiates Epicor in terms of our ability to deliver a complete, next-generation business solution to mid-market companies and divisions of the Global 1000 virtually anywhere they do business. We believe that Epicor has a significant competitive advantage, as illustrated by our strong software growth rates and new customer wins, in what is clearly a competitive marketplace. Superior product functionality, flexibility, ease of use, and the ability to easily integrate and customize are among the hallmarks of Epicor’s business solution offering and we are firmly committed to extending on what we believe is already a significant technology and product lead.”
Total fourth quarter revenues increased 27.8% to a record $104.4 million, compared to $81.7 million in the 2005 fourth quarter. This represents the first time the Company has exceeded $100 million in quarterly revenue. Fourth quarter GAAP net income was $6.7 million, or $0.12 per diluted share, compared to $7.9 million, or $0.14 per diluted share in the 2005 fourth quarter. 2005 fourth quarter GAAP earnings benefited from a non-cash income tax benefit of $1.6 million, or $0.03 per diluted share. The 2006 fourth quarter tax rate was 38.8%, compared to a tax rate of 15.3% in the year-earlier period. The Company’s actual annual cash tax rate for 2006 was approximately 10%.
2006 fourth quarter non-GAAP earnings were $12.3 million, or $0.21 per diluted share, compared to non-GAAP earnings of $12.1 million, or $0.21 per diluted share, in the 2005 fourth quarter, which also benefited from the lower 15.3% tax rate. For comparative purposes, fully taxed (39%) 2005 fourth quarter non-GAAP earnings would have been $0.16 per diluted share.
Excluding total revenue contributions of $14.1 million from CRS Retail Systems Inc. (CRS), which was acquired on December 6, 2005, total 2006 fourth quarter revenues increased 15.5% to $90.2 million, compared to $78.1 million in the year-earlier period, which excludes the partial 2005 fourth quarter revenue contribution from CRS of $3.5 million. NLR growth was strong, with fourth quarter NLR increasing 26.0% to $32.3 million, compared to $25.7 million in the 2005 fourth quarter. Excluding NLR contribution from CRS of $2.6 million in the 2006 fourth quarter and $0.7 million in the 2005 fourth quarter, NLR increased 19.0% to $29.7 million in the 2006 fourth quarter. Consulting revenue grew strongly in the 2006 fourth quarter to a record $29.3 million, an increase of 44.6% when compared to consulting revenues of $20.2 million in the 2005 fourth quarter. Excluding CRS consulting revenues of $5.1 million in the 2006 fourth quarter and $1.5 million in the 2005 fourth quarter, consulting revenue increased 28.7% to $24.1 million in the 2006 fourth quarter. Maintenance revenue for the 2006 fourth quarter also hit a record high of $38.3 million, growing 12.0% when compared to maintenance revenues of $34.2 million in the 2005 fourth quarter. Excluding contributions from CRS of $3.0 million in the 2006 fourth quarter and $0.8 million in the 2005 fourth quarter, maintenance revenue grew for the 12th consecutive quarter, increasing 5.6% to $35.3 million in the 2006 fourth quarter. Hardware and other revenue for the 2006 fourth quarter was $4.4 million, up from $1.5 million in the prior year’s fourth quarter. CRS contributed $3.4 million to 2006 fourth quarter hardware and other revenue.
2006 full-year revenues increased 32.7% to a record $384.1 million, compared to $289.4 million in 2005. 2006 full-year GAAP net income was $23.8 million, or $0.42 per diluted share, compared to $52.0 million, or $0.92 per diluted share, in the prior year’s period. The 2006 annual tax rate was 38.3%, compared to an annual tax rate of 9.7% in 2005. Additionally, 2005 GAAP net income benefited from a non-cash income tax benefit of $21.5 million, or $0.38 per diluted share.
2006 full-year non-GAAP earnings were $42.1 million, or $0.74 per diluted share, compared to non-GAAP earnings of $46.3 million, or $0.82 per diluted share, for the 2005 full-year, which also benefited from the lower 9.7% tax rate. For comparative purposes, fully taxed (39%) 2005 full-year non-GAAP earnings would have been $0.57 per diluted share.
Balance Sheet Summary
The Company’s balance sheet at December 31, 2006 included cash and cash equivalents of $70.2 million, which was bolstered by approximately $12 million in cash flow from operations during the quarter. The Company’s total debt balance as of December 31, 2006 was $99.4 million.
At 2006 fourth quarter-end, net accounts receivable was $84.0 million. Days sales outstanding (DSOs) was 74, up seasonally from 69 in the third quarter 2006. Working capital increased by $10.8 million to $55.5 million at the end of the 2006 fourth quarter, up from $44.8 million at the end of the 2006 third quarter.
Filed under: Epicor
