Company Raises Guidance for 2006 Full-Year Revenue and Non-GAAP EPS
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"I am very pleased with our second quarter results, which exceeded our expectations for total revenue, non-GAAP EPS and cash flow from operations," said George Klaus, chairman and CEO of Epicor. "This strong performance was driven by operating excellence throughout every market we address and across all of our product and services offerings. License revenue growth was strong, supported by continued robust customer migrations to Epicor Vantage 8.0 plus the addition of 179 new customers during the quarter. We are very excited about the market's overwhelming support and adoption of Epicor's Vantage Web services-based manufacturing suite and we are seeing the opportunity to drive additional revenues from migrations. In addition, the integration of CRS Retail Systems continues to exceed our expectations with solid revenue growth and the addition of several important new customers."
"We entered the second half of 2006 with a very healthy pipeline and we continue to see strong demand for our products and services from both new and existing customers in the Americas and abroad. This strong customer demand, supported by a growing pipeline and the operating momentum from our better-than-expected second quarter results, makes us confident in our ability to drive strong performance during the remainder of the year. As a result of our strong second quarter and the favorable customer climate we are experiencing, we are increasing our full year 2006 consolidated revenue guidance to $378 to $383 million, and increasing non-GAAP EPS guidance to $0.71 to $0.72 per diluted share."
Operating Summary
Total revenues for the second quarter grew 40.2% to a record $99.5 million, compared with $71.0 million in the prior year's quarter. Excluding stronger than expected total revenue contributions of $22.0 million from CRS Retail Systems Inc., which was acquired on December 6, 2005, total revenues increased 9.1% to $77.5 million. Second quarter license fees were up 30.6% to $24.0 million, compared to $18.4 million in the second quarter of 2005. Excluding contributions by CRS of $3.3 million, license fees increased 12.6% to $20.7 million. Consulting revenue for the second quarter of 2006 grew 48.5% to $27.3 million, compared with $18.4 million in the second quarter of 2005. Excluding CRS consulting revenues of $5.6 million, consulting revenue increased 18.2% to $21.7 million. Maintenance revenue for the second quarter of 2006 grew 12.1% to $37.5 million, compared with $33.5 million in the second quarter of 2005. Excluding contributions from CRS of $3.0 million, maintenance revenue grew 3.1% to $34.5 million. Hardware and other revenue for the second quarter of 2006 grew to $10.7 million from $0.8 million in the second quarter last year. Excluding contributions from CRS of $10.2 million, hardware and other revenue was $0.6 million.
For the second quarter, the Company reported GAAP net income of $7.1 million or $0.12 per diluted share, compared with $29.6 million, or $0.52 per diluted share, in the prior year's period, which included the positive impact of $0.35 per diluted share related to a non-cash income tax benefit due to the release of a deferred tax valuation allowance. In the second quarter of 2006 non-GAAP earnings were $11.2 million, or $0.20 per diluted share, compared with non-GAAP earnings of $12.9 million, or $0.23 per diluted share, in the same period last year. For comparative purposes, second quarter 2005 fully taxed non-GAAP EPS was $0.16 per diluted share. Non-GAAP earnings per share growth when fully taxed numbers are compared was 25%. Non-GAAP earnings exclude amortization of intangible assets and stock-based compensation expense, each net of tax and the non-cash income tax benefit.
Balance Sheet Summary
The Company's balance sheet at June 30, 2006 included cash and cash equivalents of $64.5 million, which was bolstered by approximately $19 million in cash flow from operations during the quarter. The Company's total debt balance as of June 30, 2006 was $117.0, which includes a $100 million term loan and $16.7 million drawn on its $100 million revolving credit facility. Subsequent to June 30, 2006, a $6.7 million payment was made, reducing the current outstanding balance to $110.3 million.
At quarter-end, net accounts receivable was $68.3 million. Days sales outstanding (DSOs) decreased to 62, down from 70 in the first quarter 2006, driven by strong collections. Working capital increased by $7.0 million to $36.9 million at the end of the second quarter of 2006 from $29.9 million at the end of the first quarter of 2006.
Third Quarter and Full-Year 2006 Guidance
The Company expects total revenues for the third quarter to be approximately $93 million. GAAP earnings per diluted share for the third quarter 2006 is expected to be $0.09 with non-GAAP earnings, as described above, of $0.17 per diluted share, in each case using a weighted average share count of approximately 57 million shares.
The Company is increasing its 2006 full-year guidance. Total revenues for the 2006 year are expected to be in the range of $378 to $383 million, an increase of approximately $6 million from prior full-year estimates. Non-GAAP earnings for 2006 are expected to be in the range of $41 to $42 million. Non-GAAP earnings per diluted share are expected to be in the range of $0.71 to $0.72, an increase from prior estimates of $0.69 to $0.70. 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 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, July 26, 2006
Time: 2:00 p.m. PDT
Dial in: +1 (800) 289-0529 or outside the U.S. +1 (913) 981-5523
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 second 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
Epicor is a global leader dedicated to providing integrated enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM) and professional services automation (PSA) software solutions to midmarket companies and divisions of the Global 1000. Founded in 1984, Epicor serves over 20,000 customers in more than 140 countries, providing solutions in over 30 languages. Employing innovative service-oriented architecture (SOA) and Web services technology, Epicor delivers end-to-end, industry-specific solutions for manufacturing, distribution, retail, hospitality and services that enable companies to drive increased efficiency, improve performance and build competitive advantage. Epicor solutions provide the scalability and flexibility to meet today's business challenges, while empowering enterprises for even greater success tomorrow. Epicor offers a comprehensive range of services with its solutions, 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 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.
