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| LECG Corporation Reports Fourth Quarter 2007 Results |
Fourth Quarter 2007 Financial Results Fourth quarter 2007 revenues were $88.2 million compared to $87.4 million in the fourth quarter of 2006. Reimbursable expenses were $5.0 million in the quarter and $4.4 million in the prior year period. These reported revenues exclude revenue of $2.7 million for the fourth quarter 2007 and $1.6 million for the fourth quarter 2006 due to the divestiture of the Silicon Valley Expert Witness Group Inc. (SVEWG) subsidiary on December 31, 2007. Expert and professional staff revenues were flat while organic expert and professional staff revenues declined two percent in the quarter. Fourth quarter 2007 net loss was $2.7 million or $0.11 per share, compared to net income of $3.5 million, or $0.14 per diluted share in the fourth quarter of 2006. Excluding restructuring charges of $0.16 per share and the loss on disposal of subsidiary of $0.09 per share, net income per diluted share was $0.14. As previously reported, during the quarter the company concluded its recovering value plan designed to right-size its cost structure as well as focus its geographic footprint and practice area offerings. As a result of actions taken, the company incurred a $6.7 million restructuring charge as well as a $2.2 million loss on the disposal of SVEWG. $5.2 million of the restructuring charge was non-cash expense. Restructuring charges for cost of services totaled $5.1 million consisting of:
-- $3.3 million associated with the Electronic Discovery practice for
write-offs of unearned signing bonuses and expert compensation advances;
and
-- $1.8 million of write-offs of unearned signing bonuses and expert
compensation advances from other terminated experts.
Restructuring charges for general and administrative expenses totaled $1.7 million consisting of:
-- $1.2 million in office closure and lease termination costs for three
locations; and
-- $460,000 of severance expense for corporate staff terminated during
the quarter.
EBITDA(3) from continuing operations for the fourth quarter of 2007 was $647,000, a 92 percent decrease from EBITDA from continuing operations of $7.9 million for the fourth quarter of 2006. EBITDA as adjusted to include SVEWG discontinued operations and exclude restructuring charges was $7.7 million for the fourth quarter of 2007 and $7.9 million for the same period in 2006. Michael Jeffery, LECG chief executive officer commented, "As previously reported, while we experienced strong revenue levels in the first half of Q4, we experienced a significant dip in billed hours in the last weeks of the year. In December, several of our larger engagements concluded, and Europe experienced a greater than anticipated slowdown over the holidays. An in-depth review of top experts' pipelines reinforces our confidence in the underlying demand for our services, and indeed in January, we have seen improvement from our December revenue levels." Operating Metrics As of December 31, 2007, LECG had 1,134 employees and exclusive independent contractors compared to 1,151 as of September 30, 2007 and 1,291 as of December 31, 2006. Expert headcount was 308, a decrease of three percent compared to 317 as of September 30, 2007. Professional staff headcount decreased four percent to 523 from 546 as of September 30, 2007. As of December 31, 2006, expert headcount was 376 and professional staff headcount was 634. As of December 31, 2007, days sales outstanding (DSO) were 107 compared to 114 days at September 31, 2007 and 110 at December 31, 2006. Full Year Financial Results Revenues for the year ended December 31, 2007 increased seven percent to $370.4 million from $345.3 million for the year ended 2006. Reimbursable expenses were $18.5 million in 2007 and $18.0 million in 2006. These reported figures exclude $11.0 million of discontinued SVEWG revenues in 2007 and $8.6 million in 2006. Expert and professional staff revenues increased eight percent while organic growth of expert and professional staff revenues was four percent. Net income for the year ended December 31, 2007 was $11.4 million or $0.45 per diluted share, compared to net income of $21.5 million, or $0.85 per diluted share for the year ended 2006. Excluding restructuring charges of $0.25 per share and the loss on disposal of subsidiary of $0.09 per share, income was $0.78 per diluted share. In 2007, the company recognized restructuring charges of $10.7 million, of which $7.6 million was non-cash. EBITDA(3) from continuing operations for the year ended December 31, 2007 was $28.7 million, compared to EBITDA from continuing operations of $41.8 million in 2006. EBITDA as adjusted to include results from SVEWG discontinued operations and exclude restructuring charges was $40.7 million for the full year 2007 compared to $42.8 million in 2006. Mr. Jeffery continued, "In 2007, LECG set in motion a 3-year plan to deliver results to our shareholders that match the high caliber and consistency of our client work. The first phase of this process, restructuring and value recovery, is now complete. We have created a practice leadership structure to drive professional development and accountability as well as revenue growth and profitability at the sector level. In addition, we have shut down underperforming offices and business lines to improve our cost base. As a result of these actions, we enter 2008 with a strong, vibrant platform poised to deliver sustainable organic growth and improve financial performance." 2008 Fiscal Year Outlook For the full year 2008 results, the company anticipates revenue growth from continuing operations will be in the mid to high single digits and that growth in net income per diluted share will exceed revenue growth. Longer-term, the company believes revenue growth will be in the 8-12% range and that net income per share growth will continue to exceed revenue growth. Mr. Jeffery concluded, "As a firm we are focused on a clear purpose: sustainable returns to all of our stakeholders. In 2008 we plan to continue building the culture, infrastructure, and processes that will promote our future success. We have begun new initiatives to invest in the training and development of our people. We are realigning our compensation models to improve efficiency and collaboration, and we are driving utilization and accountability for results through sector and office director leadership. Finally, we continue to strengthen our planning, forecasting, and analysis capabilities. We are building a firm for the long-term, and these initiatives will help us attract and retain high caliber professionals while driving profitable, organic growth and enhancing shareholder value." LECG Board Concludes Review of Dr. David Teece's U.S. Tax Court Cases Mr. Jeffery stated, "On a separate matter, our board of directors concluded its review of the actions filed by Dr. David Teece in U.S. Tax Court. The actions are private, civil matters, and in our board's view they have no bearing on his professional obligations or opportunities with LECG. We look forward to his ongoing commitment to the firm, its clients, and its long-term corporate development." Conference Call Webcast Information LECG Corporation will host a conference call and live webcast to discuss these results at 5:00 p.m. Eastern time today. The webcast will be accessible through the investor relations section of the company's website, www.lecg.com. A replay of the call will be available on the company's website two hours after completion of the live broadcast. About LECG LECG, a global expert services firm with more than 800 experts and professionals in 29 offices around the world, provides independent expert testimony, original authoritative studies, and strategic advisory services to clients including Fortune Global 500 corporations, major law firms, and local, state, and federal governments and agencies worldwide. LECG's highly credentialed experts and professional staff conduct economic and financial analyses to provide objective opinions and advice that help resolve complex disputes and inform legislative, judicial, regulatory, and business decision makers. LECG's experts are renowned academics, former senior government officials, experienced industry leaders, and seasoned consultants. NASDAQ: XPRT Statements in this press release concerning the future business, operating and financial condition of the company, including expectations regarding revenues and net income for 2008, and statements using the terms "believes," "expects," "will," "could," "plans," "anticipates," "estimates," "predicts," "intends," "potential," "continue," "should," "may," or the negative of these terms or similar expressions are "forward looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expectations. Risks that may effect actual performance include dependence on key personnel, the cost and contribution of acquisitions, risks inherent in international operations, management of professional staff, dependence on growth of the company's service offerings, the company's ability to integrate new experts successfully, intense competition, and potential professional liability. Further information on these and other potential risk factors that could affect the company's financial results is included in the company's filings with the Securities and Exchange Commission. The company undertakes no obligation to update any of its forward looking statements after the date of this press release.
LECG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarter and Full Year ended December 31, 2007 and 2006
(in thousands, except per share data)
(Unaudited)
Quarter ended Year ended
December 31, December 31,
-------------------- --------------------
2007 2006 2007 2006
--------- ---------- --------- ----------
Revenues $ 88,231 $ 87,352 $ 370,429 $ 345,285
Cost of services 64,667 59,173 254,780 229,883
--------- ---------- --------- ----------
Gross profit 23,564 28,179 115,649 115,402
Operating expenses:
General and administrative
expenses 22,800 20,084 86,436 73,164
Depreciation and
amortization 1,845 1,803 7,284 6,794
--------- ---------- --------- ----------
Operating income (loss) (1,081) 6,292 21,929 35,444
Interest and other expense
(income), net 14 255 375 211
--------- ---------- --------- ----------
Income (loss) from continuing
operations before income taxes (1,095) 6,037 21,554 35,233
Income tax provision (benefit) (488) 2,518 8,753 14,340
--------- ---------- --------- ----------
Income (loss) from continuing
operations (607) 3,519 12,801 20,893
--------- ---------- --------- ----------
Discontinued operations:
Income from operations of
discontinued subsidiary,
net of income taxes 160 - 778 574
Loss on disposal of
subsidiary, net of income
taxes (2,219) - (2,219) -
--------- ---------- --------- ----------
Income (loss) on discontinued
operations (2,059) - (1,441) 574
--------- ---------- --------- ----------
Net income (loss) ($ 2,666) $ 3,519 $ 11,360 $ 21,467
========= ========== ========= ==========
Net income (loss) per share:
Basic
Income (loss) from continuing
operations ($ 0.03) $ 0.14 $ 0.51 $ 0.86
Income (loss) from discontinued
operations ($ 0.08) - ($ 0.06) $ 0.02
--------- ---------- --------- ----------
Net income per share (loss) -
basic ($ 0.11) $ 0.14 $ 0.45 $ 0.88
========= ========== ========= ==========
Diluted
Income (loss) from continuing
operations ($ 0.03) $ 0.14 $ 0.51 $ 0.83
Income (loss) from discontinued
operations ($ 0.08) - ($ 0.06) $ 0.02
--------- ---------- --------- ----------
Net income per share (loss) -
diluted ($ 0.11) $ 0.14 $ 0.45 $ 0.85
========= ========== ========= ==========
Shares amounts:
Basic 25,287 24,601 25,117 24,345
Diluted 25,287 25,459 25,499 25,250
LECG CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
December, 31
---------------------
Assets 2007 2006
---------- ----------
Current assets:
Cash and cash equivalents $ 21,602 $ 26,489
Accounts receivable, net of allowance of $866 and
$906 103,444 106,372
Prepaid expenses 6,156 5,092
Deferred tax assets, net 12,921 3,877
Signing and performance bonuses - current portion 16,162 9,545
Income taxes receivable 2,054 5,481
Other current assets 2,310 2,494
Note receivable - current portion 490 -
Current assets of discontinued operations - 1,213
---------- ----------
Total current assets 165,139 160,563
Property and equipment, net 12,586 13,643
Goodwill 106,813 94,030
Other intangible assets, net 9,696 9,855
Signing and performance bonuses - long-term 45,523 28,265
Deferred compensation plan assets 15,599 10,925
Note receivable - long-term 2,510 -
Other long-term assets 1,453 1,871
Non-current assets of discontinued operations - 8,001
---------- ----------
Total assets $ 359,319 $ 327,153
========== ==========
Liabilities and stockholders' equity
Current liabilities:
Accrued compensation $ 64,577 $ 50,770
Accounts payable and other accrued liabilities 7,856 7,242
Payable for business acquisitions - current
portion 2,750 11,285
Deferred revenue 2,989 2,070
Current liabilities of discontinued operations - 1,355
---------- ----------
Total current liabilities 78,172 72,722
Payable for business acquisitions - long-term - 2,178
Deferred compensation plan obligations 15,133 11,550
Deferred tax liabilities 4,505 1,850
Other long-term liabilities 8,019 7,724
Non-current liabilities of discontinued operations - 15
Commitments and contingencies
Stockholders' equity
Common stock, $.001 par value, 200,000,000 shares
authorized, 25,444,678 and 24,907,072 shares
outstanding at December 31, 2007 and 2006,
respectively 25 25
Additional paid-in capital 166,325 156,900
Accumulated other comprehensive income 2,471 880
Retained earnings 84,669 73,309
---------- ----------
Total stockholders' equity 253,490 231,114
---------- ----------
Total liabilities and stockholders' equity $ 359,319 $ 327,153
========== ==========
LECG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period ended December 31, 2007 and 2006
(in thousands)
(Unaudited)
Year Ended
December 31,
--------------------
2007 2006
--------- ---------
Cash flows from operating activities
Net income $ 11,360 $ 21,467
Adjustments to reconcile net income to net cash
provided by operating activities:
Bad debt expense 174 266
Depreciation and amortization of equipment and
leaseholds 4,884 3,723
Amortization of intangible assets 2,415 3,100
Amortization of signing and performance bonuses 12,091 8,827
Tax benefit from option exercises and equity
compensation plans 736 378
Equity-based compensation 5,731 6,481
Non cash restructuring charges 7,639 -
Loss on disposal of subsidiary 2,219 -
Other (24) 7
Changes in assets and liabilities:
Accounts receivable 3,700 (13,552)
Signing and performance bonuses paid (38,428) (23,567)
Prepaid and other current assets (2,360) 2,779
Accounts payable and other accrued liabilities 725 2,216
Income taxes 3,411 (9,665)
Accrued compensation 10,650 7,646
Deferred revenue 359 29
Deferred compensation plan assets net of
liabilities (1,091) 412
Deferred rent (310) 158
Deferred taxes (7,119) (1,270)
Other assets 536 200
Other liabilities (148) 1,813
--------- ---------
Net cash provided by operating activities 17,150 11,448
Cash flows from investing activities
Business acquisitions and earnout payments, net of
acquired cash (23,771) (21,929)
Purchase of property and equipment (3,839) (6,291)
Proceeds from disposal of subsidiary, net of cash
transferred 1,029 -
Other 63 (58)
--------- ---------
Net cash used in investing activities (26,518) (28,278)
Cash flows from financing activities
Borrowings under revolving credit facility 13,000 25,000
Repayments under revolving credit facility (13,000) (25,000)
Exercise of stock options 2,097 4,183
Proceeds from issuance of stock- employee stock
plan 199 265
Tax benefit from option exercises and equity
compensation plans 1,282 2,574
Loan fees (16) (503)
Forfeiture of gain on stock option exercises 75 33
Other financing activities 2 -
--------- ---------
Net cash provided by financing activities 3,639 6,552
--------- ---------
Effect of exchange rates on changes in cash 842 1,045
--------- ---------
Decrease in cash and cash equivalents (4,887) (9,233)
Cash and cash equivalents, beginning of year 26,489 35,722
--------- ---------
Cash and cash equivalents, end of period $ 21,602 $ 26,489
========= =========
Supplemental disclosure
Cash paid for interest $ 259 $ 461
========= =========
Cash paid for income taxes $ 10,421 $ 22,566
========= =========
Non cash investing and financing activities
Fair value of common stock issued for acquisitions - $ 250
========= =========
LECG CORPORATION
Reconciliation of Non-GAAP Measures
For the Quarter ended December 31, 2007 and 2006
(in thousands, except per share data)
Quarter ended
December 31,
-------------------------------------------------------
2007 2006
------------------------------- -----------------------
Adjustments Adjustments
------------- -----------
Contin- Contin-
uing uing As
Operat- SVEWG Restru- As Operat- SVEWG Adjusted
ions (1) cturing Adjusted ions (1) (2)
------- ------ ------ ------- ------- ------ -------
Expert and
professional
staff revenues $83,226 $2,632 - $85,858 $82,952 $1,558 $84,510
Reimbursable
expenses 5,005 90 - 5,095 4,400 36 4,436
------- ------ ------ ------- ------- ------ -------
Revenues 88,231 2,722 - 90,953 87,352 1,594 88,946
Cost of services 64,667 1,958 (5,080) 61,545 59,173 1,088 60,261
------- ------ ------ ------- ------- ------ -------
Gross profit 23,564 764 5,080 29,408 28,179 506 28,685
General and
administrative
expenses 22,800 493 (1,663) 21,630 20,084 517 20,601
Depreciation and
amortization 1,845 1 - 1,846 1,803 7 1,810
------- ------ ------ ------- ------- ------ -------
Operating income
(loss) (1,081) 270 6,743 5,932 6,292 (18) 6,274
Interest and other
expense (income),
net 14 - - 14 255 (17) 238
------- ------ ------ ------- ------- ------ -------
Income (loss)
before income
taxes (1,095) 270 6,743 5,918 6,037 (1) 6,036
Income tax
provision
(benefit) (488) 110 2,781 2,403 2,518 (1) 2,517
------- ------ ------ ------- ------- ------ -------
Income (loss) ($ 607) $ 160 $3,962 $ 3,515 $ 3,519 - $ 3,519
======= ====== ====== ======= ======= ====== =======
Income (loss) per
share:
Basic ($ 0.03) $ 0.14 $ 0.14 $ 0.14
Diluted ($ 0.03) $ 0.14 $ 0.14 $ 0.14
Share amounts:
Basic 25,287 25,287 24,601 24,601
Diluted 25,287 25,577 25,459 25,459
EBITDA
Income (loss) ($ 607) $ 160 $3,962 $ 3,515 $ 3,519 - $ 3,519
Income tax
provision
(benefit) (488) 110 2,781 2,403 2,518 (1) 2,517
Interest expense
(income), net (103) - - (103) 101 (17) 84
Depreciation and
amortization 1,845 1 - 1,846 1,803 7 1,810
------- ------ ------ ------- ------- ------ -------
EBITDA (3) $ 647 $ 271 $6,743 $ 7,661 $ 7,941 ($ 11) $ 7,930
======= ====== ====== ======= ======= ====== =======
(1) Silicon Valley Expert Witness Group Inc. (SVEWG) was divested on
December 31, 2007 and is reported as discontinued operations.
(2) As reported in Form 10-K for the fiscal year ended December 31, 2006.
(3) EBITDA is a non-GAAP financial measure defined as net income before
provision for income tax, interest, and depreciation and amortization.
EBITDA as adjusted includes the financial results of SVEWG discontinued
operations and excludes restructuring charges relating to
implementation of the recovering value plan in 2007. The company
regards EBITDA as a useful measure of financial performance of the
business. Generally, a non-GAAP financial measure is a numerical
measure of a company's performance, financial position or cash flow
that either excludes or includes amounts that are not normally excluded
or included in the most directly comparable measure calculated and
presented in accordance with GAAP. This measure, however, should be
considered in addition to, and not as a substitute or superior to,
operating income, cash flows, or other measures of financial
performance prepared in accordance with GAAP.
LECG CORPORATION
Reconciliation of Non-GAAP Measures
For the Year ended December 31, 2007 and 2006
(in thousands, except per share data)
Year ended
December 31,
----------------------------------------------------------
2007 2006
--------------------------------- ------------------------
Adjustments Adjustments
------------- -----------
Continuing Continuing As
Opera- SVEWG Restru- As Opera- SVEWG Adjusted
tions (1) cturing Adjusted tions (1) (2)
-------- ------- ------- -------- -------- ------ --------
Expert and
professional
staff revenues $351,923 $10,644 - $362,567 $327,255 $8,375 $335,630
Reimbursable
expenses 18,506 314 - 18,820 18,030 190 18,220
-------- ------- ------- -------- -------- ------ --------
Revenues 370,429 10,958 - 381,387 345,285 8,565 353,850
Cost of services 254,780 7,658 (8,154) 254,284 229,883 5,840 235,723
-------- ------- ------- -------- -------- ------ --------
Gross profit 115,649 3,300 8,154 127,103 115,402 2,725 118,127
General and
administrative
expenses 86,436 1,972 (2,535) 85,873 73,164 1,745 74,909
Depreciation and
amortization 7,284 15 7,299 6,794 29 6,823
-------- ------- ------- -------- -------- ------ --------
Operating
income 21,929 1,313 10,689 33,931 35,444 951 36,395
Interest and
other expense
(income), net 375 - - 375 211 (17) 194
-------- ------- ------- -------- -------- ------ --------
Income before
income taxes 21,554 1,313 10,689 33,556 35,233 968 36,201
Income tax
provision 8,753 535 4,336 13,624 14,340 394 14,734
-------- ------- ------- -------- -------- ------ --------
Income $ 12,801 $ 778 $ 6,353 $ 19,932 $ 20,893 $ 574 $ 21,467
======== ======= ======= ======== ======== ====== ========
Income per share:
Basic $ 0.51 $ 0.79 $ 0.86 $ 0.88
Diluted $ 0.51 $ 0.78 $ 0.83 $ 0.85
Share amounts:
Basic 25,117 25,117 24,345 24,345
Diluted 25,499 25,499 25,250 25,250
EBITDA
Income $ 12,801 $ 778 $ 6,353 $ 19,932 $ 20,893 $ 574 $ 21,467
Income tax
provision 8,753 535 4,336 13,624 14,340 394 14,734
Interest expense
(income), net (127) - - (127) (191) (17) (208)
Depreciation and
amortization 7,284 15 - 7,299 6,794 29 6,823
-------- ------- ------- -------- -------- ------ --------
EBITDA (3) $ 28,711 $ 1,328 $10,689 $ 40,728 $ 41,836 $ 980 $ 42,816
======== ======= ======= ======== ======== ====== ========
(1) Silicon Valley Expert Witness Group Inc. (SVEWG) was divested on
December 31, 2007 and is reported as discontinued operations.
(2) As reported in Form 10-K for the fiscal year ended December 31, 2006.
(3) EBITDA is a non-GAAP financial measure defined as net income before
provision for income tax, interest, and depreciation and amortization.
EBITDA as adjusted includes the financial results of SVEWG discontinued
operations and excludes restructuring charges relating to
implementation of the recovering value plan in 2007. The company
regards EBITDA as a useful measure of financial performance of the
business. Generally, a non-GAAP financial measure is a numerical
measure of a company's performance, financial position or cash flow
that either excludes or includes amounts that are not normally
excluded or included in the most directly comparable measure calculated
and presented in accordance with GAAP. This measure, however, should be
considered in addition to, and not as a substitute or superior to,
operating income, cash flows, or other measures of financial
performance prepared in accordance with GAAP.
Investor Contacts Steven R. Fife Chief Financial Officer 510-985-6700 Erin Glenn Investor Relations 510-985-6990 Email Contact SOURCE: LECG Corporation http://www2.marketwire.com/mw/emailprcntct?id=D934F0AE583A9097 |
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