SOURCE: LECG Corporation

May 03, 2005 16:05 ET

LECG Corporation Reports First Quarter 2005 Results

First Quarter Revenues Grew 62%, EPS Was $0.22, Raises Fiscal Year 2005 Guidance

EMERYVILLE, CA -- (MARKET WIRE) -- May 3, 2005 -- LECG Corporation (NASDAQ: XPRT), a global expert services firm, today reported financial results for the first quarter ended March 31, 2005.

First Quarter 2005 Financial Results

Revenues for the first quarter increased 62% to $69.7 million from $43.1 million for the first quarter of 2004. Expert and professional staff revenues also increased 62%. Organic growth of expert and professional staff revenues was 48%. Performance based revenue was $178,000 this quarter compared to $315,000 during the same period last year. EBITDA(1) was $10.1 million for the quarter, a 65% increase from $6.1 million in the first quarter of 2004.

Net income was $5.4 million in the first quarter of 2005, 65% higher than net income of $3.3 million reported in the first quarter of last year. Net income per diluted share was $0.22 this quarter compared to net income per diluted share of $0.14 in the same period a year ago. Diluted shares outstanding increased 3% to 24.0 million in the first quarter of 2005 from 23.3 million for the same period in 2004.

"LECG is pleased with our strong first quarter performance, reflecting significant growth in many of our practice areas," said LECG chairman, Dr. David Teece. "We are seeing the benefits from our investments last year in top talent and in new practice areas."

Operating Metrics

LECG ended the first quarter with 948 employees and exclusive independent contractors, an increase of 8% from 875 as of December 31, 2004. Expert headcount increased to 308 from 289 as of December 31, 2004, and professional staff headcount increased to 439 from 398. Professional staff utilization for the first quarter of 2005 was 83%, compared to 82% for the same period in 2004.

2005 Fiscal Year Outlook

For the full year 2005, LECG anticipates that revenues will now be in the range of $270 to $280 million, including performance based revenue of $6.0 to $7.0 million. Net income is expected to be in the range of $21.5 to $23.0 million, and earnings per diluted share will be in the range of $0.89 to $0.94. LECG does not plan to give quarterly guidance, and quarterly performance could fluctuate. Previously stated guidance for 2005 was $260 to $270 million in revenue, $20.5 to $22.0 million in net income, and fully diluted earnings per share of $0.87 to $0.92.

David Kaplan, president of LECG, commented, "In 2005, LECG has continued to add to our base of talent and expand our capabilities worldwide. During the first quarter, we acquired J. Philip Cook & Associates in Salt Lake City, and in April we announced 13 director-level additions, including two internal promotions, and the opening of an office in Milan, Italy. LECG will continue to invest in our talent base, which is the foundation for future growth, while focusing on improving our margins during the year."

Conference Call Webcast Information

To listen to a live audio webcast of LECG's first quarter 2005 financial results conference call, visit the company's website www.lecg.com. The conference call begins at 5:00 pm Eastern time today. A replay of the call will also be available on the company's website one hour after completion of the live broadcast.

About LECG

LECG, a global expert services firm, 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 around the world. 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 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 as of today, May 3, 2005. There may be events in the future that the Company is not able to accurately predict or control, and they may cause actual results to differ materially from expectations. Information contained in these forward-looking statements is inherently uncertain, and actual performance is subject to a number of risks, including but not limited to, among others, dependence on key personnel, acquisitions, risks inherent in international operations, management of professional staff, dependence on growth of the Company's service offerings, the ability of the Company to integrate successfully new experts into its practice, 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 cannot guarantee any future results, levels of activity, performance or achievement. 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 INCOME
             For the Quarters Ended March 31, 2005 and 2004
                  (in thousands, except per share data)

                                                      Quarter ended
                                                         March 31,
                                                    2005           2004
                                                 ----------     ----------

Revenues                                         $   69,721     $   43,110
Cost of services                                    (46,076)       (28,326)
                                                 ----------     ----------
Gross profit                                         23,645         14,784
Operating expenses:
  General and administrative expenses               (13,550)        (8,671)
  Depreciation and amortization                      (1,116)          (677)
                                                 ----------     ----------
Operating income                                      8,979          5,436
  Interest income                                       190            111
  Interest expense                                      (55)           (67)
  Other expense, net                                    (26)           (27)
                                                 ----------     ----------
Income before income tax                              9,088          5,453
Income tax provision                                 (3,735)        (2,202)
                                                 ----------     ----------
Net income                                       $    5,353     $    3,251
                                                 ==========     ==========

Net income per share:
  Basic                                          $     0.24     $     0.15
  Diluted                                        $     0.22     $     0.14
Share amounts:
  Basic                                              22,763         21,406
  Diluted                                            23,978         23,346


                           LECG CORPORATION
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                       March 31, 2005 and 2004
                   (in thousands, except share data)

                                                  March 31,    December 31,
                                                    2005           2004
                                                 ----------     ----------

Assets

Current assets:
  Cash and cash equivalents                       $  35,663     $   42,082
  Accounts receivable, net of allowance of
   $480 and $433                                     81,445         73,137
  Prepaid expenses                                    4,019          3,456
  Deferred tax assets, net                            1,326          1,476
  Current portion of signing bonuses
   and other current assets                          11,982         10,162
                                                 ----------     ----------
       Total current assets                         134,435        130,313
Property and equipment, net                           7,324          6,493
Goodwill                                             61,341         57,947
Other intangible assets, net                            129            478
Long-term portion of signing bonuses
 and other assets                                    25,271         19,480
                                                 ----------     ----------
Total assets                                     $  228,500     $  214,711
                                                 ==========     ==========

Liabilities and stockholders' equity

Current liabilities:
  Accounts payable and other accrued liabilities $    8,842     $    6,701
  Accrued compensation                               41,354         37,599
  Payable for business acquisitions - current         2,921          6,183
  Deferred revenue                                    1,685          1,409
                                                 ----------     ----------
       Total current liabilities                     54,802         51,892
Payable for business acquisitions - long-term         3,926          2,400
Deferred compensation plan                            3,787          3,203
Deferred tax liability                                  386            386
Deferred rent and other long-term liabilities         3,515          2,443

Stockholders' equity:

Common stock, $.001 par value, 200,000,000
 shares authorized, 23,014,712 shares issued
 and outstanding at March 31, 2005 and
 22,813,471 shares issued and outstanding at
 December 31, 2004                                       23             23
Additional paid-in capital                          127,462        125,070
Deferred equity compensation                         (1,446)        (1,580)
Accumulated other comprehensive income                  976          1,158
Retained earnings                                    35,069         29,716
                                                 ----------     ----------
       Total stockholders' equity                   162,084        154,387
                                                 ----------     ----------
Total liabilities and stockholders' equity       $  228,500     $  214,711
                                                 ==========     ==========


                            LECG CORPORATION
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Quarters Ended March 31, 2005 and 2004
                             (in thousands)

                                                      Quarter ended
                                                         March 31,
                                                    2005           2004
                                                 ----------     ----------

Cash flows from operating activities
Net income                                       $    5,353     $    3,251
  Adjustments to reconcile net income to net
   cash used by operating activities:
    Bad debt expense                                     50             55
    Depreciation and amortization of property
     and equipment                                      692            577
    Amortization of other intangibles                   424            100
    Amortization of signing bonuses                   1,802            428
    Equity-based compensation                           138           (171)
    Tax benefit from option exercises and
     equity compensation plans                          623              -
    Deferred rent                                       467             78
    Other                                               (11)             4
  Changes in assets and liabilities:
    Accounts receivable                              (8,343)        (5,120)
    Prepaid and other current assets                 (1,472)        (1,236)
    Accounts payable and other accrued liabilities    2,114         (1,138)
    Accrued compensation                               (900)        (2,944)
    Signing bonuses and other assets                 (3,240)        (5,505)
    Other                                               846             28
                                                 ----------     ----------
      Net cash used in operating activities          (1,457)       (11,593)

  Cash flows from investing activities
    Business acquisitions, net of acquired cash      (4,997)       (19,156)
    Purchase of property and equipment               (1,477)          (394)
    Other                                                 1            (85)
                                                 ----------     ----------
      Net cash used in investing activities          (6,473)       (19,635)
Cash flows from financing activities
  Proceeds from secondary offering,
   net of offering costs                              1,308              -
  Exercise of stock options                             385              1
                                                 ----------     ----------
    Net cash provided by financing activities         1,693              1
Effect of exchange rates on changes in cash            (182)           115
                                                 ----------     ----------
Decrease in cash and cash equivalents                (6,419)       (31,112)
Cash and cash equivalents, beginning of year         42,082         67,177
                                                 ----------     ----------
  Cash and cash equivalents, end of period       $   35,663     $   36,065
                                                 ==========     ==========
Supplemental disclosure
  Cash paid for interest                         $        7     $       11
                                                 ==========     ==========
  Cash paid for income taxes                     $      581     $       74
                                                 ==========     ==========
Non-cash investing and financing activities
  Fair value of common stock issued
   for acquisitions                              $      250     $    1,000
                                                 ==========     ==========


                           LECG CORPORATION
                               EBITDA (1)
              For the Quarters Ended March 31, 2005 and 2004
                            (in thousands)

                                                      Quarter ended
                                                         March 31,
                                                    2005           2004
                                                 ----------     ----------

Net income                                       $    5,353     $    3,251
Add back (subtract):
  Provision for income taxes                          3,735          2,202
  Interest, net                                        (135)           (44)
  Depreciation and amortization                       1,116            677
                                                 ----------     ----------
    EBITDA                                       $   10,069     $    6,086
                                                 ==========     ==========

(1) EBITDA is a non-GAAP financial measure defined by the Company as net
    income before provision for income taxes, interest, and depreciation
    and amortization. The Company believes that EBITDA is 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.

Contact Information

  • Contacts:
    Jack Burke
    Chief Financial Officer
    510-985-6700

    Erin Glenn
    Investor Relations
    510-985-6990
    investor@lecg.com