KANSAS CITY, Kan., Feb. 24, 2009 (GLOBE NEWSWIRE) -- Epiq Systems, Inc. (Nasdaq:EPIQ) today announced results of operations for the fourth quarter and full year of 2008 with fourth quarter operating revenue (total revenue before operating revenue from reimbursed direct costs) of $55.2 million, up 41% compared to $39.2 million for the same period last year. 2008 operating revenue was $207.9 million, up 37% compared to $151.6 million for the prior year.
Net income for the fourth quarter of 2008 was $4.0 million, $0.10 per share, up 54% compared to $2.6 million, $0.07 per share, for the year ago quarter. 2008 net income was $13.8 million, $0.36 per share, up 100% compared to $6.9 million, $0.21 per share, for the prior year.
Fourth quarter 2008 net cash provided by operating activities was $16.2 million, up 27% compared to $12.8 million for the year ago quarter. 2008 net cash provided by operations was $34.2 million compared to $36.2 million for the prior year. 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-related intangibles, share-based compensation, realized cash gains on financial instruments, non-cash mark-to-market adjustments, acquisition expense and the gain or loss on the disposal of long-lived assets, 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 and the gain or loss on the disposal of long-lived assets). Reconciliation statements for non-GAAP financial measures are provided below.
Non-GAAP net income for the fourth quarter of 2008 was $6.4 million, $0.16 per share, up 25% compared to $5.1 million, $0.14 per share, for the year ago quarter. 2008 non-GAAP net income was $23.5 million, $0.60 per share, up 36% compared to $17.3 million, $0.50 per share, for the prior year.
Fourth quarter 2008 non-GAAP adjusted EBITDA was $15.7 million, up 27% compared to $12.4 million for the year ago quarter. 2008 non-GAAP adjusted EBITDA was $57.8 million, up 17% compared to $49.5 million for the prior year.
Operating revenue for the Bankruptcy segment for the fourth quarter of 2008 was $20.8 million, up 44% compared to $14.4 million for the year ago quarter. 2008 operating revenue was $59.8 million, compared to $60.3 million in the prior year. Non-GAAP adjusted EBITDA was $10.5 million for the fourth quarter of 2008, up 28% compared to $8.2 million for the year ago quarter. 2008 non-GAAP adjusted EBITDA was $34.1 million compared to $35.1 million in the prior year. During the fourth quarter of 2008, Epiq was retained on an all-time record number of Chapter 11 bankruptcy engagements for a single quarter. Revenue for the year was affected by lower Chapter 7 revenue primarily related to pricing formulas that reference short-term interest rates. Responding to increasing Chapter 11 business volumes, Epiq opened an additional corporate restructuring facility in Connecticut and added over a dozen seasoned bankruptcy professionals to its roster of subject matter experts.
Operating revenue for the Electronic Discovery segment for the fourth quarter of 2008 was $13.5 million compared to $13.7 million for the year ago quarter. 2008 operating revenue was $58.1 million, up 18% compared to $49.1 million in the prior year. Fourth quarter 2008 non-GAAP adjusted EBITDA for Electronic Discovery was $5.2 million compared to $6.6 million for the year ago quarter. 2008 non-GAAP adjusted EBITDA was $26.3 million compared to $24.4 million in the prior year. Fewer new e-discovery matters commenced in the fourth quarter, influenced by client budgets and timing preferences, though the pace of new business has accelerated since January 1.
Operating revenue for the Settlement Administration segment for the fourth quarter of 2008 was $20.9 million compared to $11.1 million in the year ago quarter. 2008 operating revenue was $89.9 million compared to $42.3 million in the prior year. Non-GAAP adjusted EBITDA was $6.4 million for the fourth quarter of 2008 compared to $1.6 million for the year ago quarter. 2008 non-GAAP adjusted EBITDA was $19.9 million, compared to $8.8 million in the prior year. The increases in both operating revenue and non-GAAP adjusted EBITDA were related to client engagements under contract.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and COO of Epiq Systems, stated, "We are very pleased to be among the very few companies to have achieved their operating objectives for the year. The year was highlighted by a high number of significant new bankruptcy retentions, and in the fourth quarter, we were retained on a record number of corporate restructuring engagements for a single three-month period. We believe there will be continued increased filing activity in 2009 across all of Chapters 7, 11 and 13. We achieved our financial goals in spite of Chapter 7 pricing formulas that reference short-term interest rates being at their floor levels during the latter portion of the year. Future increases in short-term interest rates will increase bankruptcy revenue and profit automatically."
The executives continued, "Our global e-discovery business continues to achieve market leadership with new offices opened in Brussels and Hong Kong in early 2009. 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."
Key events in 2008 included:
* Chapter 11 bankruptcy engagements for 2008 increased by more than
200% compared to 2007. In the fourth quarter, Epiq was retained
on an all-time record number of corporate restructuring
bankruptcy engagements for a single quarter.
* Epiq was retained for claims administration services for the
Lehman Brothers Holdings Inc. Chapter 11 filing, the largest
bankruptcy in U.S. history, as well as on the related matter of
the Securities Investor Protection Act (SIPA) proceedings
involving Lehman Brothers Inc. and the transfer of customer
assets to Barclays.
* Epiq opened an additional corporate restructuring office in
Connecticut and added over a dozen seasoned bankruptcy
professionals to its roster of subject matter experts to help
meet increased corporate restructuring business volumes.
* As reported by the Administrative Office of the U.S. Courts,
bankruptcy filings exceeded one million for the 12 month period
ending September 30, 2008, up more than 30% versus the same
period in 2007. During this period, Chapter 7 filings were up
40%, Chapter 11 filings were up 49%, and Chapter 13 filings were
up 14%.
* The Federal Reserve reported that both corporate debt and
consumer credit increased compared to the prior year, reaching
$7.0 trillion and $2.6 trillion, respectively, as of September
30, 2008.
* Epiq Systems ranked as a top five provider for both e-discovery
processing and e-discovery review solutions.
* A major software release of DocuMatrix(tm), our e-discovery software,
which offers foreign language-enabled support for over 80
languages including Arabic, Chinese, German, Hebrew, Japanese and
Russian.
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 (800) 967-7154 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 March 24, 2009 beginning approximately two hours after the call ends. To access the recording, call (888) 203-1112 and enter passcode 6441173.
Company Description
Epiq Systems is a leading 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. 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. For more information, visit us online at www.epiqsystems.com.
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 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 Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
REVENUE:
Case management services $ 30,031 $ 25,542 $128,331 $ 96,612
Case management bundled
products and services 3,532 6,285 17,774 26,424
Document management
services 21,622 7,359 61,751 28,601
-------- -------- -------- --------
Operating revenue before
reimbursed direct costs 55,185 39,186 207,856 151,637
Operating revenue from
reimbursed direct costs 8,198 5,046 28,262 22,776
-------- -------- -------- --------
Total Revenue 63,383 44,232 236,118 174,413
-------- -------- -------- --------
OPERATING EXPENSES:
Direct costs of services 19,093 11,369 81,884 41,470
Direct costs of services -
bundled 877 917 3,642 3,700
Reimbursed direct costs 8,146 4,993 28,134 22,618
General and administrative 19,948 18,162 71,113 62,546
Depreciation and software
and leasehold
amortization 4,466 3,696 16,302 12,766
Amortization of
identifiable intangible
assets 2,177 2,303 9,051 9,531
Other operating expense
(income) 1,682 (1,659) 171 (1,094)
-------- -------- -------- --------
Total Operating Expenses 56,389 39,781 210,297 151,537
-------- -------- -------- --------
INCOME FROM OPERATIONS 6,994 4,451 25,821 22,876
-------- -------- -------- --------
INTEREST EXPENSE (INCOME):
Interest expense 419 1,358 1,757 11,973
Interest income (60) (49) (279) (92)
-------- -------- -------- --------
Net Interest Expense 359 1,309 1,478 11,881
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 6,635 3,142 24,343 10,995
PROVISION FOR INCOME TAXES 2,603 581 10,507 4,066
-------- -------- -------- --------
NET INCOME $ 4,032 $ 2,561 $ 13,836 $ 6,929
======== ======== ======== ========
NET INCOME PER SHARE
INFORMATION:
Net income per share -
Diluted $ 0.10 $ 0.07 $ 0.36 $ 0.21
======== ======== ======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING -
DILUTED 41,553 39,052 41,425 32,564
======== ======== ======== ========
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Dec. 31, Dec. 31,
2008 2007
-------- --------
ASSETS
ASSETS:
Cash and cash equivalents $ 19,006 $ 13,415
Trade accounts receivable, net 48,540 33,925
Property and equipment, net 39,951 32,403
Goodwill 263,871 260,684
Other intangibles, net 26,851 34,310
Other 20,727 18,057
-------- --------
Total Assets $418,946 $392,794
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 12,781 $ 7,401
Indebtedness 61,222 61,592
Other liabilities 44,448 40,119
STOCKHOLDERS' EQUITY 300,495 283,682
-------- --------
Total Liabilities and Stockholders' Equity $418,946 $392,794
======== ========
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 4,032 $ 2,561 $ 13,836 $ 6,929
Non-cash adjustments to
net income:
Depreciation and
amortization 6,643 5,999 25,353 22,297
Other, net 2,534 1,256 5,114 4,853
Changes in operating assets
and liabilities, net 2,941 2,960 (10,085) 2,133
-------- -------- -------- --------
Net cash provided by
operating activities 16,150 12,776 34,218 36,212
-------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash paid for business
combinations -- -- (4,762) --
Property and equipment,
software, and other (3,595) (3,932) (21,063) (19,279)
-------- -------- -------- --------
Net cash used in
investing activities (3,595) (3,932) (25,825) (19,279)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net payments on
indebtedness (648) (77,540) (4,037) (97,374)
Net proceeds from issuance
of stock 796 79,268 2,525 87,999
Other (25) (11) (700) 583
-------- -------- -------- --------
Net cash provided by
(used in) financing
activities 123 1,717 (2,212) (8,792)
-------- -------- -------- --------
Effect of exchange rate
changes on cash (488) -- (590) --
-------- -------- -------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS $ 12,190 $ 10,561 $ 5,591 $ 8,141
======== ======== ======== ========
EPIQ SYSTEMS, INC.
RECONCILIATION OF NET INCOME TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
NET INCOME $ 4,032 $ 2,561 $ 13,836 $ 6,929
Acquisition
expense/disposal
of long-lived assets 1,682 -- 2,541 --
Depreciation and
amortization 6,643 5,999 25,353 22,297
Share-based compensation 390 3,793 2,831 5,602
Expenses related to
financing, net 359 1,309 1,478 11,881
Mark-to-market interest
rate floors -- (1,794) -- (1,273)
Realized gain on interest
rate floors -- -- 1,273 --
Provision for income taxes 2,603 581 10,507 4,066
-------- -------- -------- --------
11,677 9,888 43,983 42,573
-------- -------- -------- --------
NON-GAAP ADJUSTED EBITDA $ 15,709 $ 12,449 $ 57,819 $ 49,502
======== ======== ======== ========
EPIQ SYSTEMS, INC.
BANKRUPTCY SEGMENT
RECONCILIATION OF SEGMENT PERFORMANCE MEASURE TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
SEGMENT PERFORMANCE MEASURE $ 10,492 $ 8,175 $ 30,621 $ 35,103
Realized gain on interest
rate floors -- -- 3,465 --
-------- -------- -------- --------
NON-GAAP ADJUSTED EBITDA $ 10,492 $ 8,175 $ 34,086 $ 35,103
======== ======== ======== ========
EPIQ SYSTEMS, INC.
RECONCILIATION OF NET INCOME TO
NON-GAAP NET INCOME
(In thousands)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
NET INCOME $ 4,032 $ 2,561 $ 13,836 $ 6,929
Plus (net of tax):
Amortization of
acquisition intangibles 1,318 1,393 5,475 5,766
Share-based compensation 247 2,251 1,782 3,420
Acquisition
expense/disposal of
long-lived assets 1,017 -- 1,537 --
Effective tax rate (51) 154 770 286
Loan fee amortization 52 80 275 615
Mark-to-market adjustments (244) (1,329) (974) 312
Realized gain on interest
rate floors -- -- 770 --
-------- -------- -------- --------
2,339 2,549 9,635 10,399
-------- -------- -------- --------
NON-GAAP NET INCOME $ 6,371 $ 5,110 $ 23,471 $ 17,328
======== ======== ======== ========
EPIQ SYSTEMS, INC.
RECONCILIATION OF EPS TO
NON-GAAP EPS
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
EPS (on a diluted basis) $ 0.10 $ 0.07 $ 0.36 $ 0.21
Plus (net of tax):
Amortization of acquisition
intangibles 0.03 0.04 0.13 0.16
Share-based compensation 0.01 0.06 0.04 0.09
Acquisition
expense/disposal of
long-lived assets 0.03 -- 0.04 --
Effective tax rate -- 0.01 0.02 0.01
Loan fee amortization -- -- 0.01 0.02
Mark-to-market adjustments (0.01) (0.04) (0.02) 0.01
Realized gain on interest
rate floors -- -- 0.02 --
-------- -------- -------- --------
0.06 0.07 0.24 0.29
-------- -------- -------- --------
NON-GAAP EPS (on a diluted
basis $ 0.16 $ 0.14 $ 0.60 $ 0.50
======== ======== ======== ========
EPIQ SYSTEMS, INC.
OPERATING REVENUE
(In thousands)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Electronic Discovery $ 13,509 $ 13,723 $ 58,128 $ 49,062
Bankruptcy 20,785 14,374 59,828 60,289
Settlement Administration 20,891 11,089 89,900 42,286
-------- -------- -------- --------
OPERATING REVENUE BEFORE
REIMBURSED DIRECT COSTS $ 55,185 $ 39,186 $207,856 $151,637
======== ======== ======== ========
EPIQ SYSTEMS, INC.
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Electronic Discovery $ 5,184 $ 6,594 $ 26,324 $ 24,369
Bankruptcy 10,492 8,175 34,086 35,103
Settlement Administration 6,391 1,615 19,851 8,827
Unallocated (6,358) (3,935) (22,442) (18,797)
-------- -------- -------- --------
TOTAL NON-GAAP ADJUSTED
EBITDA $ 15,709 $ 12,449 $ 57,819 $ 49,502
======== ======== ======== ========
EPIQ SYSTEMS, INC.
EPS CALCULATION
(In thousands, except per share data)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2008 2007 2008 2007*
-------- -------- -------- --------
NET INCOME $ 4,032 $ 2,561 $ 13,836 $ 6,929
Interest expense adjustment
for convertible debt 305 305 1,212 --
-------- -------- -------- --------
NET INCOME ADJUSTED FOR
DILUTED CALCULATION $ 4,337 $ 2,866 $ 15,048 $ 6,929
======== ======== ======== ========
NON-GAAP NET INCOME $ 6,371 $ 5,110 $ 23,471 $ 17,328
Interest expense adjustment
for convertible debt 305 305 1,212 1,210
-------- -------- -------- --------
NON-GAAP NET INCOME ADJUSTED
FOR DILUTED CALCULATION $ 6,676 $ 5,415 $ 24,683 $ 18,538
======== ======== ======== ========
BASIC WEIGHTED AVERAGE
SHARES 35,606 32,364 35,459 30,424
Adjustment to reflect
stock options 1,661 2,402 1,680 2,140
Adjustment to reflect
convertible debt shares 4,286 4,286 4,286 --
-------- -------- -------- --------
ADJUSTED FOR DILUTED
CALCULATION 41,553 39,052 41,425 32,564
======== ======== ======== ========
NET INCOME PER SHARE -
DILUTED $ 0.10 $ 0.07 $ 0.36 $ 0.21
======== ======== ======== ========
NON-GAAP NET INCOME
PER SHARE - DILUTED $ 0.16 $ 0.14 $ 0.60 $ 0.50
======== ======== ======== ========
* Convertible debt is antidilutive for the Net Income Per Share
calculation, but dilutive for the Non-GAAP Net Income Per Share
calculation. Diluted weighted average shares for calculating
Non-GAAP Net Income Per Share equal 36,850 (includes adjustment
of 4,286 shares to reflect convertible debt shares).