Epicor Software Corp., a provider of enterprise software for mid-sized companies, reported that revenue jumped 21% to $127.9 million (€81.3 million) in its second quarter, ended June 30, 2008, even as net income dropped 79% to $1.3 million (€0.83 million), from $6.2 million (€3.9 million) a year ago.
The impressive revenue growth was somewhat tempered by Epicor’s software license sales, which fell 3% to $24.3 million (€15.45 million), from $25.1 million (€15.9 million) in the year-ago quarter. However, sizable gains in consulting, where revenue was up 20% to $41 million (€26 million), from $34.1 million (€21.7 million) a year ago, and maintenance, where sales grew by 23% to $48.7 million (€31 million), from $39.7 million(€25.2 million), more than made up for the decline in license sales.
Company officials blamed the dropoff in income on an additional $4.5 million (€2.9 million) in amortization cost related to Epicor’s purchase of NSB Retail.
Tom Kelly, Epicor president and chief executive, said license revenue fell short in the quarter due to lower-than-expected retail sales caused by “macroeconomic conditions.”
“We believe, in part, that Q2 results were within our control and we have taken immediate actions to address them,” Kelly said during a conference call with financial analysts. He cited maintenance as a strong performer, saying the company had signed 177 returning customers to maintenance contracts and reached record quarterly revenue. “We are putting our focus on products with a much easier ROI proposition,” he added. “We see a shorter sales cycle and a greater demand, so we’ll put more emphasis on that in the second half of the year. This is shaping up to be a transitional year.”
The company also added about 150 new named customers in Q2.
Russ Clark, senior vice president and principal accounting officer of Epicor, added during the conference call, “We continue to focus on managing operating expenses. R&D was up, as expected, as we near the release of Epicor 9, and we will be increasing the investment to ensure a successful launch.”
As part of the Epicor 9 effort, software development expenses in the quarter grew to $14.3 million (€9.1 million), from $9.5 million (€6 million) in the same period of 2007. Operating expenses rose to $49.2 million (€31.3 million) in the quarter, from $42.8 million (€27.2 million) last year.
Looking ahead, Epicor said it expects third-quarter non-GAAP total revenue of $135 million to $140 million (€85.8 million to €89 million) and non-GAAP earnings per share to be in the range of $0.18 to $0.22 (€0.11 to €0.14).
And based on a “more cautious outlook” for its retail business and its expectation of additional expenses related to the launch of Epicor 9, the company lowered its full-year guidance to a range of $525 million to $535 million (€334 million to €340 million) in non-GAAP revenue, down from the original projection of $536 million to $544 million (€341 million to €346 million). The company now forecasts non-GAAP software license revenue in the range of $110 million to $120 million (€70 million to €76 million), down from the earlier forecast of $115 million to $125 million (€73 million to €76 million). Non-GAAP earnings per share are expected to be $0.75 to $0.85 (€0.48 to €0.54).