KANSAS CITY, Kan., April 22, 2009 (GLOBE NEWSWIRE) -- Epiq Systems, Inc. (Nasdaq:EPIQ) today announced results of operations for the first quarter of 2009 with operating revenue (total revenue before operating revenue from reimbursed direct costs) of $52.6 million, up 20% compared to $43.9 million for the same period last year.
Net income for the first quarter of 2009 was $3.3 million, $0.09 per share, up 23% compared to $2.7 million, $0.07 per share, for the year ago quarter.
First quarter 2009 net cash provided by operating activities was $2.5 million compared to $7.8 million for the year ago quarter. The change is primarily attributable to an increase in accounts receivable. A condensed consolidated cash flow statement is attached.
Epiq Systems' management also evaluates the following non-GAAP financial measures: (i) non-GAAP net income (net income adjusted for amortization of acquisition intangibles, share-based compensation, realized cash gains on financial instruments, non-cash mark-to-market adjustments, acquisition expense, the effect of tax adjustments which are outside of the company's anticipated effective tax rate, and capitalized loan fee amortization, all net of tax), (ii) non-GAAP earnings per share, calculated as non-GAAP net income on a fully diluted per share basis, and (iii) non-GAAP adjusted EBITDA (net income adjusted for interest/financing, taxes, depreciation, amortization, share-based compensation, realized cash gains on financial instruments, non-cash mark-to-market adjustments, and acquisition expense). Reconciliation statements for non-GAAP financial measures are provided below.
Non-GAAP net income for the first quarter of 2009 was $6.3 million, $0.16 per share, up 18% compared to $5.4 million, $0.14 per share, for the year ago quarter.
First quarter 2009 non-GAAP adjusted EBITDA was $15.4 million, up 17% compared to $13.2 million for the year ago quarter.
Operating revenue for the Bankruptcy segment for the first quarter of 2009 was $17.3 million, up 30% compared to $13.4 million for the year ago quarter. Non-GAAP adjusted EBITDA was $8.4 million for the first quarter of 2009 compared to $10.8 million for the year ago quarter, which included a $3.5 million cash gain on interest rate floor options. Excluding the prior year one-time cash gain on interest rate floor options, first quarter 2009 non-GAAP adjusted EBITDA increased 15% compared to the year ago quarter. New client engagements for Chapter 11 corporate restructuring bankruptcies were very strong, and first quarter results reflect certain investment spending for increased facilities and staffing to accommodate growth in multi-year large cases. Revenue for Chapter 7 engagements continues to reflect the results of high aggregate deposit balances with influence from pricing formulas that reference short-term interest rates.
Operating revenue for the Electronic Discovery segment for the first quarter of 2009 increased to $14.0 million compared to $13.2 million for the year ago quarter. The company incurred investments in the first quarter including organic expansion into data collections and forensics, a new document review service, a new data center and office in Hong Kong, and a new office in Brussels. Including the effects of these investments, first quarter 2009 non-GAAP adjusted EBITDA for Electronic Discovery was $4.9 million compared to $6.4 million for the year ago quarter. These first quarter initiatives offer global full lifecycle eDiscovery solutions and further enhance our leadership position in the marketplace, particularly for large, complex litigation emanating from global economic conditions.
Operating revenue for the Settlement Administration segment for the first quarter of 2009 increased to $21.2 million compared to $17.3 million in the year ago quarter. Non-GAAP adjusted EBITDA was $6.8 million for the first quarter of 2009 compared to $0.7 million for the year ago quarter. The segment continues to benefit from a major contract that was launched in the first quarter of 2008, as well as new client engagements.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and COO of Epiq Systems, stated, "We are pleased to have achieved our corporate financial objectives for the first quarter and to reiterate our objectives for the year. Conditions in the bankruptcy segment are very strong, and major new retentions have included Lyondell Chemical Company, AbitibiBowater Inc., Nortel Networks and Smurfit-Stone Container Corporation, representing 4 of the 6 largest filings to date in 2009. We believe there will be continued increased bankruptcy filing activity in 2009 across all of Chapters 7, 11 and 13. Our global e-discovery business continues to achieve market leadership with both new service offerings and new international offices in Brussels and Hong Kong. Regulatory compliance, litigation and investigations in the fall-out from the credit crisis are expected to drive expanded requirements for each of our bankruptcy, e-discovery and settlements franchises."
Recent key events include:
* First quarter Chapter 11 corporate restructuring bankruptcy retentions were up 129% versus the year ago quarter and included clients such as the Lyondell Chemical Company, Nortel Networks Inc., Smurfit-Stone Container Corporation, Midway Games Inc., Muzak, LLC, and Young Broadcasting Inc. * As reported by the Administrative Office of the U.S. Courts, bankruptcy filings totaled 1,117,771 for the 12 month period ending December 31, 2008, up 31% versus the same period in 2007. During this period, Chapter 7 filings were up 43%, Chapter 11 filings were up 60%, and Chapter 13 filings were up 12%. * The Federal Reserve reported that both corporate debt and consumer credit increased compared to the prior year, reaching $7.1 trillion and $2.6 trillion, respectively, as of December 31, 2008. * New e-discovery offices in Hong Kong and Brussels were opened to expand our global presence and support clients more effectively in Asia and continental Europe. * E-discovery service offerings were expanded to include data collections, forensics and document review. These integrated services, delivered through our industry-leading DocuMatrix(tm) review platform, offer an optimized, full lifecycle e-discovery solution with significant bottom-line efficiencies for clients. * Major releases/upgrades were issued for DocuMatrix(tm) and eDataMatrix(tm), our leading e-discovery and data processing software, providing clients with enhancements to data analysis capabilities which results in improved attorney review throughput and reduced costs.
Conference Call
The company will host a conference call today at 3:30 p.m. central time to discuss these results. The internet broadcast of the call can be accessed at www.epiqsystems.com. To listen by phone, please call (877) 719-9789 before 3:30 p.m. central time. The archive of the internet broadcast will be available on the company's website until the next earnings update. A recording of the call will be available through May 22, 2009 beginning approximately two hours after the call ends. To access the recording, call (888) 203-1112 and enter passcode 8477859.
Company Description
Epiq Systems is a leading global provider of integrated technology solutions for the legal profession. Our solutions streamline the administration of bankruptcy, litigation, financial transactions and regulatory compliance matters. We offer innovative technology solutions for electronic discovery, document review, legal notification, claims administration and controlled disbursement of funds. Our clients include leading law firms, corporate legal departments, bankruptcy trustees and other professional advisors who require innovative technology, responsive service and deep subject-matter expertise.
The Epiq Systems, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5250
Forward-looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act, including those relating to the possible or assumed future results of our operations and financial condition. These forward-looking statements are based on our current expectations and may be identified by terms such as "believe," "expect," "anticipate," "should," "planned," "may," "estimated," "goal," "objective" and "potential." Because forward-looking statements involve future risks and uncertainties, listed below are a variety of factors that could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. These factors include (1) any material changes in our total number of client engagements and the volume associated with each engagement, (2) any material changes in our client's deposit portfolio or the services required or selected by our clients in engagements, (3) material changes in the number of bankruptcy filings, class action filings or mass tort actions each year, (4) risks associated with handling of confidential data and compliance with information privacy laws, (5) changes in or the effects of pricing structures and arrangements, (6) risks associated with the integration of acquisitions into our existing business operations, (7) risks associated with our indebtedness, (8) risks associated with foreign currency fluctuations, (9) risks associated with developing and providing software and internet-based technology solutions to our clients, and (10) other risks detailed from time to time in our SEC filings, including our annual report on Form 10-K. In addition, there may be other factors not included in our SEC filings that may cause actual results to differ materially from any forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements contained herein to reflect future events or developments.
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
---------------------
2009 2008
-------- --------
REVENUE:
Case management services $34,534 $28,796
Case management bundled products and services 3,327 5,291
Document management services 14,752 9,814
-------- --------
Operating revenue before reimbursed direct
costs 52,613 43,901
Operating revenue from reimbursed direct costs 8,215 5,109
-------- --------
Total Revenue 60,828 49,010
-------- --------
OPERATING EXPENSES:
Direct cost of services 19,670 18,827
Direct cost of services - bundled 855 947
Reimbursed direct costs 8,047 5,121
General and administrative 18,307 15,080
Depreciation and software and leasehold
amortization 4,514 3,710
Amortization of identifiable intangible assets 1,936 2,278
Other operating expense (income) 471 (2,371)
-------- --------
Total Operating Expenses 53,800 43,592
-------- --------
INCOME FROM OPERATIONS 7,028 5,418
-------- --------
INTEREST EXPENSE (INCOME):
Interest expense 373 490
Interest income (35) (143)
-------- --------
Net Interest Expense 338 347
-------- --------
INCOME BEFORE INCOME TAXES 6,690 5,071
PROVISION FOR INCOME TAXES 3,412 2,415
-------- --------
NET INCOME $ 3,278 $ 2,656
======== ========
NET INCOME PER SHARE INFORMATION:
Net income per share - Diluted $ 0.09 $ 0.07
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 41,936 41,375
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2009 2008
------------ ------------
(Unaudited)
ASSETS
ASSETS:
Cash and cash equivalents $ 14,298 $ 19,006
Trade accounts receivable, net 62,305 48,540
Property and equipment, net 39,915 39,951
Goodwill 263,758 263,871
Other intangibles, net 24,887 26,851
Other 19,761 20,727
------------ ------------
TOTAL ASSETS $ 424,924 $ 418,946
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 13,423 $ 12,781
Indebtedness 59,926 61,222
Other liabilities 45,877 44,448
STOCKHOLDERS' EQUITY 305,698 300,495
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 424,924 $ 418,946
============ ============
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
March 31,
------------------
2009 2008
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,278 $ 2,656
Non-cash adjustments to net income:
Depreciation and amortization 6,450 5,988
Other, net 1,602 1,225
Changes in operating assets and liabilities, net (8,830) (2,052)
--------- ---------
Net cash provided by operating activities 2,500 7,817
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment, software and other (6,951) (7,331)
--------- ---------
Net cash used in investing activities (6,951) (7,331)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on indebtedness (910) (606)
Other 664 488
--------- ---------
Net cash used in financing activities (246) (118)
--------- ---------
Effect of exchange rate changes on cash (11) --
--------- ---------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS $ (4,708) $ 368
========= =========
EPIQ SYSTEMS, INC.
RECONCILIATION OF NET INCOME TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
March 31,
------------------
2009 2008
-------- --------
NET INCOME $ 3,278 $ 2,656
Plus:
Depreciation and amortization 6,450 5,988
Share-based compensation 1,472 524
Acquisition expense 489 --
Expenses related to financing, net 338 347
Realized gain on interest rate floors -- 1,273
Provision for income taxes 3,412 2,415
-------- --------
12,161 10,547
-------- --------
NON-GAAP ADJUSTED EBITDA $ 15,439 $ 13,203
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EPIQ SYSTEMS, INC.
BANKRUPTCY SEGMENT
RECONCILIATION OF SEGMENT PERFORMANCE MEASURE TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended
March 31,
------------------
2009 2008
-------- --------
SEGMENT PERFORMANCE MEASURE $ 8,421 $ 7,299
Realized gain on interest rate floors -- 3,465
-------- --------
NON-GAAP ADJUSTED EBITDA $ 8,421 $ 10,764
======== ========
EPIQ SYSTEMS, INC.
RECONCILIATION OF NET INCOME TO
NON-GAAP NET INCOME
(In thousands)
(Unaudited)
Three Months Ended
March 31,
-------------------
2009 2008
--------- ---------
NET INCOME $ 3,278 $ 2,656
Plus (net of tax):
Amortization of acquisition intangibles 1,171 1,378
Share-based compensation 1,054 345
Acquisition expense 296 --
Effective tax rate 736 387
Loan fee amortization 52 80
Mark-to-market adjustments (244) (244)
Realized gain on interest rate floors -- 770
--------- ---------
3,065 2,716
--------- ---------
NON-GAAP NET INCOME $ 6,343 $ 5,372
========= =========
EPIQ SYSTEMS, INC.
RECONCILIATION OF EPS TO
NON-GAAP EPS
(Unaudited)
Three Months Ended
March 31,
-------------------
2009 2008
--------- ---------
EPS (on a diluted basis) $ 0.09 $ 0.07
Plus (net of tax):
Amortization of acquisition intangibles 0.03 0.04
Share-based compensation 0.02 0.01
Acquisition expense 0.01 --
Effective tax rate 0.02 0.01
Loan fee amortization -- --
Mark-to-market adjustments (0.01) (0.01)
Realized gain on interest rate floors -- 0.02
--------- ---------
0.07 0.07
--------- ---------
NON-GAAP EPS (on a diluted basis) $ 0.16 $ 0.14
========= =========
EPIQ SYSTEMS, INC.
EPS CALCULATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
-------------------
2009 2008
--------- ---------
NET INCOME $ 3,278 $ 2,656
Interest expense adjustment for convertible debt 298 301
Net income re-allocated to nonvested shares (10) --
--------- ---------
NET INCOME ADJUSTED FOR DILUTED CALCULATION $ 3,566 $ 2,957
========= =========
NON-GAAP NET INCOME $ 6,343 $ 5,372
Interest expense adjustment for convertible debt 298 301
--------- ---------
NON-GAAP NET INCOME ADJUSTED FOR DILUTED
CALCULATION $ 6,641 $ 5,673
========= =========
BASIC WEIGHTED AVERAGE SHARES 35,686 35,291
Adjustment to reflect share-based awards 1,964 1,798
Adjustment to reflect convertible debt shares 4,286 4,286
--------- ---------
DILUTED WEIGHTED AVERAGE SHARES 41,936 41,375
========= =========
NET INCOME PER SHARE - DILUTED $ 0.09 $ 0.07
========= =========
NON-GAAP NET INCOME PER SHARE - DILUTED $ 0.16 $ 0.14
========= =========