Enterprise software provider Epicor Software Corp. continues to rebound from a tough first quarter, reporting record revenues and strong license sales in its third fiscal quarter, which ended September 30.
Leveraging strong customer migration toward Vantage 8, its newest ERP software product, as well as healthy contributions from CRS Retail Systems Inc. -- which Epicor acquired at the end of last year -- the company reported $95.7 million in third-quarter revenues, up 36.8% compared to the like period last year. License revenue for the quarter, at $23.9 million, showed a 37.7% improvement on the year-earlier period.
Epicor's strong third-quarter revenue performance did not, however, translate into net earnings gains. The company reported $5.4 million in GAAP (generally accepted accounting practices) net earnings, down 38.3% compared with the corresponding period last year. The company blamed a significantly higher tax rate in part for the earnings slide. Epicor's cost of revenues grew by 63.1% during the quarter to $45.7 million, and its operating expenses, at $39.7 million, were up 22.4%.
Reported on a non-GAAP basis, Epicor's earnings were down 12.3% to $10.7 million. (Non-GAAP figures exclude amortization of intangible assets and stock-based compensation expenses.)
Still, based on Epicor's strong revenue growth, Chairman and CEO George Klaus expressed satisfaction with the quarter. In a statement, Klaus said, "As illustrated by our record third-quarter revenues, Epicor is doing an excellent job of capitalizing on what we are convinced is a strong IT spending environment."
Epicor's revenues from consulting grew by 43.4% during the quarter to $26 million, and maintenance revenues climbed 13.1% year over year to $38 million.
CRS contributed $18.5 million of Epicor's revenue during the quarter. Excluding CRS's contribution, Epicor's revenue grew by 10.3%, and its license revenue was up 19.6%. Excluding CRS's results, consulting revenue grew 14.1% and maintenance revenue was up 4.7%.
The strong quarter allowed Epicor to bolster its balance sheet. Cash and equivalents on hand grew by $12.1 million during the quarter to reach $70 million. The company also was able to pay off a $10 million revolving credit facility during the quarter, leaving it with $100 million in long-term debt on its $200 million credit facility.
The strong third quarter followed a similarly strong second quarter during which Epicor saw a 40% increase in revenues. The consecutive buoyant periods stand in contrast to the company's disappointing first quarter, when Epicor reported a 4% gain in revenues excluding contributions from CRS.
Klaus indicated that Epicor expects to see continued growth. "Our sales pipelines are deeper and wider than ever at this time, and we expect to continue to see robust IT spending in every market we serve," he said.
The strong results, in fact, prompted Epicor to upgrade its performance estimates for the balance of the year. Epicor now expects fourth-quarter revenues to be in the range of $101 million to $104 million and non-GAAP earnings per share of 20 cents or 21 cents. For the full year, Epicor expects to report revenues of between $381 million and $384 million and non-GAAP earnings of $42 million.
The company also issued a forecast for 2007, saying it expects revenues to increase between 9% and 11% over 2006 levels and GAAP earnings to increase by 25% over 2006 levels.