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Epiq Systems, Inc. Announces First Quarter 2008 Results - Reporting 25% Operating Revenue Growth
Kansas City, KS (April 23, 2008) - Epiq Systems, Inc. (NASDAQ: EPIQ) today announced results of operations for the first quarter of 2008. Operating revenue (total revenue before operating revenue from reimbursed direct costs) of $43.9 million increased 25% compared to $35.1 million for the same period last year. An expanded discussion of operating revenue is provided below.
Net income for the first quarter of 2008 was $2.7 million or $0.07 per share compared to net income of $0.2 million or $0.00 per share for the year ago quarter.
First quarter 2008 net cash provided by operating activities was $7.8 million compared to $8.9 million for the year ago quarter. A condensed consolidated cash flow statement is attached.
Epiq Systems' management also evaluates the following non-GAAP financial measures: (i) non-GAAP adjusted EBITDA (net income before interest/ financing, taxes, depreciation, amortization, share-based compensation, non-cash mark-to-market adjustments, and acquisition-related expenses, and (ii) non-GAAP net income (net income before amortization of acquisition related intangibles, share-based compensation, realized cash gains on financial instruments, non-cash mark-to-market adjustments, acquisition-related expenses, the effect of tax adjustments which are outside of our anticipated effective tax rate, and capitalized loan fee amortization, all net of tax). Reconciliation statements for non-GAAP financial measures are provided below.
First quarter 2008 non-GAAP adjusted EBITDA of $13.2 million increased 17% compared to $11.3 million for the year ago quarter.
Non-GAAP net income for the first quarter of 2008 increased 54% to $5.4 million or $0.14 per share compared to $3.5 million or $0.11 per share for the year ago quarter.
Our operating segments effective the first quarter of 2008 are Electronic Discovery, Bankruptcy, and Settlement Administration. The Electronic Discovery segment remains consistent with prior reporting periods. The new Bankruptcy segment includes the bankruptcy trustee (Chapter 7 & 13) and corporate restructuring (Chapter 11) businesses. The new Settlement Administration segment includes activities related to class action and related business.
Operating revenue for Electronic Discovery for the first quarter of 2008 increased 31% to $13.2 million compared to $10.1 million for the year ago quarter. New client engagements combined with increased work for existing clients and expansion of the international business contributed to the increase in operating revenue compared to the same period last year. Non-GAAP adjusted EBITDA for Electronic Discovery was $6.4 million, a 23% increase compared to $5.2 million for the year ago quarter.
Bankruptcy operating revenue for the first quarter of 2008 was $13.4 million, compared to $15.0 million for the year ago quarter. Changes in revenue between the quarters are related to ordinary quarterly fluctuations in Chapter 7 bankruptcy deposits and caseloads across all clients and Chapter 7 pricing tied to short-term interest rates. Retention of existing clients remains extremely high and we closed a variety of new client engagements during the first quarter. Non-GAAP adjusted EBITDA for the Bankruptcy business for the first quarter of 2008 was $10.8 million, which includes a cash gain on interest rate floor options of $3.5 million, compared to $9.1 million for the year ago quarter. We purchased interest rate floor options during 2007 in anticipation of short-term interest rates declining during 2008. We locked in on a cash gain on the options during the first quarter of 2008.
Settlement Administration operating revenue for the first quarter of 2008 was $17.3 million compared to $9.9 million in the year ago quarter. Non-GAAP adjusted EBITDA for the Settlement Administration business was $0.7 million for the first quarter of 2008 compared to $1.6 million for the year ago quarter. A major contract was launched in the first quarter of 2008. The contract had significant start-up costs in the first quarter, minimizing profit during the quarter, however, the contract is on track with achieving targeted profit and margin levels, which are projected to increase during future quarters.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and COO of Epiq Systems stated, "We are pleased to report strong financial and strategic results for the quarter, particularly in our growing electronic discovery business which grew 31% compared to the prior year. We are continuing to expand our domestic and international e-discovery business. So far in 2008, we have introduced the international version of DocuMatrix that supports 60+ foreign languages, added a new production facility in the United Kingdom, and acquired London-based Pinpoint Global Ltd., an innovative technology startup with complementary technology and clients. We now have active relationships with all but 1 of the Magic Circle law firms in London.
Our bankruptcy business is also witnessing increased activity, most recently in the airline sector, which contributed several new recent engagements. Year to date, Epiq has been retained on more than 20 new corporate restructuring engagements compared with less than 10 new engagements for the same period last year. Industry reports suggest increased bankruptcy filings will continue going forward".
Recent key events include:
- Further expansion of our London office with the acquisition of Pinpoint Global, Ltd., an emerging provider of proprietary electronic disclosure solutions and augmented the service capabilities of our London office to include scanning and document coding capabilities which continue to play a key role in non-U.S. engagements.
- Effective February 4, 2008, the company certified to the U.S. Department of Commerce that its privacy policy meets the Safe Harbor framework that provides automatic approval to receive private data from European Union-based organizations. This certification strengthens the company's ability to serve a growing base of multinational clients.
- A major software release of DocuMatrix™, our eDiscovery software, which offers foreign language-enabled support for 60+ languages including Arabic, Chinese, German, Hebrew, Japanese and Russian.
- Total bankruptcy filings have increased for each of the past seven quarters.
- The Federal Reserve reported that both corporate debt and consumer credit increased compared to the prior year, reaching $6.3 trillion and $2.6 trillion, respectively, as of December 31, 2007.
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, call (888) 459-5609 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 30, 2008 beginning approximately two hours after the call ends. To access the replay, call (800) 642-1687 and enter pin #43971301.
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.
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," "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 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 the application of complex accounting rules to unique transactions, including the risk that good faith application of those rules and audits of those results may be later reversed by new interpretations of those rules or new views regarding the application of those rules, and (9) 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.
For more information
Mary Ellen Berthold, Epiq Systems, Inc., telephone: 913-621-9500, email: ir@epiqsystems.com