SOURCE: LECG Corporation

April 29, 2008 16:04 ET

LECG Corporation Reports First Quarter 2008 Results

Fee-Based Revenues Increased $3.7 Million or 4.5% From Sequential Quarter; Fee-Based Margin Improved 40 Basis Points From Sequential Quarter

EMERYVILLE, CA--(Marketwire - April 29, 2008) - LECG Corporation (NASDAQ: XPRT), a global expert services firm, today reported financial results for the quarter end March 31, 2008. In a separate release issued today, LECG announced the leaders of its two business segments.

Michael Jeffery, LECG chief executive officer commented, "First quarter results reflect sequential progress in improving our productivity and profitability. Fee-based revenues, though from a lower base, increased four and a half percent over the fourth quarter. More importantly, earnings per share excluding fourth quarter restructuring charges increased three cents or 23% sequentially. Our core business remains strong, and on a same-expert basis, the contribution to fee-based revenues from our experts increased meaningfully year over year."

Mr. Jeffery continued, "Our 2008 objectives are to reinvigorate organic growth, create a common culture based on teamwork and collaboration, and continue to improve our financial results. We have implemented segment-based management with Bill Hamm leading Economics Services and Richard Boulton leading Finance and Accounting Services. Bill and Richard have outstanding expert credentials as well as strong leadership abilities and are accountable day-to-day for the growth, culture transformation and performance of their segments."

First Quarter 2008 Financial Results

First quarter 2008 revenues decreased two percent to $90.5 million compared to $92.7 million in the first quarter of 2007 and increased $2.3 million or three percent over the fourth quarter of 2007. Net fee-based revenues were $87.2 million in the latest quarter and $88.2 million in the prior year period. Net fee-based revenues decreased one percent year over year, while organic fee-based revenues decreased three percent. Net fee-based revenues increased $3.7 million or four and one half percent from $83.4 million in the fourth quarter 2007. Fee-based margin of 34.4% increased from 33.8% in the first quarter of 2007 and 34.0% in the fourth quarter of 2007.

First quarter 2008 net income was $4.0 million or $0.16 per diluted share, compared to net income of $3.3 million, or $0.13 per diluted share in the first quarter of 2007, and a loss of $2.7 million or $0.11 per share in the fourth quarter of 2007. As adjusted to exclude restructuring charges in prior periods, adjusted earnings from continuing operations per diluted share(2) was $0.16 in the first quarter of 2007 and $0.13 in the fourth quarter 2007.

Adjusted EBITDA from continuing operations(3) for the first quarter of 2008 was $8.3 million, a four percent decrease from $8.6 million for the first quarter 2007 and a 12 percent increase from $7.4 million in the fourth quarter 2007 (after adjustment to EBITDA from continuing operations in the prior period quarters to exclude restructuring charges).

Operating Metrics

As of March 31, 2008, LECG had 798 billable professionals compared to 831 as of December 31, 2007 and 973 as of March 31, 2007. As of March 31, 2008, days sales outstanding (DSO) were 125 compared to 107 days at December 31, 2007 and 115 at March 31, 2007.

Revised 2008 Fiscal Year Outlook

For the full year 2008, the company anticipates revenue growth from continuing operations in the mid-single digits and growth in net income per diluted share exceeding revenue growth. Longer-term, the company continues to expect that 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, "We are confident that as we execute against our 2008 objectives we will increasingly realize improved financial performance and cultural transformation making the firm the first choice for our clients, our employees, and our shareholders."

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
                  (in thousands, except per share data)
                                (Unaudited)

                                                      Quarter ended
                                              ----------------------------
                                                   March 31,      December
                                              --------- --------     31,
                                                2008      2007      2007
                                              --------- --------  --------
Fee-based revenues, net                       $  87,171 $ 88,177  $ 83,441
Reimbursable revenues                             3,331    4,567     4,790
                                              --------- --------  --------
      Revenues                                   90,502   92,744    88,231
Direct cost of services                          57,172   59,994    60,154
Reimbursable costs                                3,311    4,587     4,513
                                              --------- --------  --------
      Cost of services                           60,483   64,581    64,667
Gross profit                                     30,019   28,163    23,564
Operating expenses:
 General and administrative expenses             21,301   21,196    22,800
 Depreciation and amortization                    1,535    1,889     1,845
                                              --------- --------  --------
Operating income (loss)                           7,183    5,078    (1,081)
Interest and other expense (income), net            474     (154)       14
                                              --------- --------  --------
Income from continuing operations before
 income taxes                                     6,709    5,232    (1,095)
Income tax provision (benefit)                    2,724    2,119      (488)
                                              --------- --------  --------
Income (loss) from continuing operations          3,985    3,113      (607)
                                              --------- --------  --------
Income from operations of discontinued
  subsidiary, net of income taxes                     -      153       160
Loss on disposal of subsidiary, net of income
 taxes                                                -        -    (2,219)
                                              --------- --------  --------
Income (loss) on discontinued operations              -      153    (2,059)
                                              --------- --------  --------
Net income                                    $   3,985 $  3,266  $ (2,666)
                                              ========= ========  ========

Basic earnings per share:
 Income (loss) from continuing operations     $    0.16 $   0.12  $  (0.03)
 Income (loss) from discontinued operations           -     0.01     (0.08)
                                              --------- --------  --------
  Basic earnings per share                    $    0.16 $   0.13  $  (0.11)
                                              ========= ========  ========

Diluted earnings per share:
 Income (loss) from continuing operations     $    0.16 $   0.12  $  (0.03)
 Income (loss) from discontinued operations           -     0.01     (0.08)
                                              --------- --------  --------
  Diluted earnings per share                  $    0.16 $   0.13  $  (0.11)
                                              ========= ========  ========

Shares used in calculating net income per share
 Basic                                           25,299   24,860    25,287
 Diluted                                         25,518   25,413    25,287




                             LECG CORPORATION
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                     (in thousands, except share data)
                                (Unaudited)
                                                   March 31,   December 31,
 Assets                                               2008         2007
                                                  ------------ ------------
 Current assets:
  Cash and cash equivalents                       $     14,595 $     21,602
  Accounts receivable, net of allowance of $896
   and $866                                            117,289      103,444
  Prepaid expenses                                       6,467        6,156
  Deferred tax assets, net                              12,311       12,301
  Signing and performance bonuses - current
   portion                                              15,261       16,162
  Income taxes receivable                                  594        2,674
  Other current assets                                   3,354        2,310
  Note receivable- current portion                         359          490
                                                  ------------ ------------
   Total current assets                                170,230      165,139
 Property and equipment, net                            11,991       12,586
 Goodwill                                              106,834      106,813
 Other intangible assets, net                            9,333        9,696
 Signing and performance bonuses - long-term            45,398       45,523
 Deferred compensation plan assets                      14,604       15,599
 Note receivable - long-term                             2,510        2,510
 Other long-term assets                                  4,661        1,453
                                                  ------------ ------------
 Total assets                                     $    365,561 $    359,319
                                                  ============ ============

 Liabilities and stockholders’ equity
 Current liabilities:
  Accrued compensation                            $     57,737 $     64,577
  Accounts payable and other accrued liabilities         7,379        7,856
  Borrowings under line of credit                       13,000            -
  Payable for business acquisitions - current
   portion                                                 487        2,750
  Deferred revenue                                       3,010        2,989
                                                  ------------ ------------
   Total current liabilities                            81,613       78,172
 Deferred compensation plan obligations                 12,242       15,133
 Deferred tax liabilities                                4,505        4,505
 Deferred rent liabilities                               7,572        7,718
 Other long-term liabilities                               299          301
                                                  ------------ ------------
                                                       106,231      105,829

 Commitments and contingencies                               -            -

 Stockholders’ equity
 Common stock, $.001 par value, 200,000,000
  shares authorized,
   25,553,923  and 25,444,678 shares outstanding
    at March 31, 2008
  and December 31, 2007, respectively                       25           25
 Additional paid-in capital                            167,699      166,325
 Accumulated other comprehensive income                  2,952        2,471
 Retained earnings                                      88,654       84,669
                                                  ------------ ------------
   Total stockholders’ equity                          259,330      253,490
                                                  ------------ ------------
 Total liabilities and stockholders’ equity       $    365,561 $    359,319
                                                  ============ ============




                             LECG CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)
                                (Unaudited)

                                                    Quarter ended March 31,
                                                    ----------------------
                                                       2008        2007
                                                    ----------  ----------
Cash flows from operating activities
Net income                                          $    3,985  $    3,266
 Adjustments to reconcile net income to net cash
  provided by operating activities:
 Bad debt expense                                           33          75
 Depreciation and amortization of equipment and
  leaseholds                                             1,172       1,172
 Amortization of intangible assets                         363         723
 Amortization of signing, retention and performance
  bonuses                                                4,083       2,792
 Tax benefit from option exercises and equity
  compensation plans                                         -          34
 Equity-based compensation                               1,373       1,560
 Non cash restructuring charges                              -       1,380
 Other                                                     (10)        (72)
Changes in assets and liabilities:
 Accounts receivable                                   (13,207)     (7,752)
 Signing, retention and performance bonuses paid        (6,287)    (11,091)
 Prepaid and other current assets                         (779)       (639)
 Accounts payable and other accrued liabilities           (702)       (128)
 Income taxes                                            2,064         699
 Accrued compensation                                   (4,360)        719
 Deferred revenue                                           53         715
 Deferred compensation plan assets, net of liabilities  (1,895)         27
 Deferred rent                                            (199)        119
 Other assets                                           (3,248)        196
 Other liabilities                                           4          20
                                                    ----------  ----------
  Net cash used in operating activities                (17,557)     (6,185)
                                                    ----------  ----------
Cash flows from investing activities
Business acquisitions, net of acquired cash             (2,264)    (14,907)
Purchase of property and equipment                        (768)     (1,704)
Other                                                      177          (8)
                                                    ----------  ----------
  Net cash used in investing activities                 (2,855)    (16,619)
                                                    ----------  ----------
Cash flows from financing activities
Borrowings under revolving credit facility              19,000       5,000
Repayments under revolving credit facility              (6,000)          -
Proceeds from exercise of stock options                      -       1,656
Tax benefit from option exercises and equity
 compensation plans                                          -       1,052
Other                                                        -         (10)
                                                    ----------  ----------
  Net cash provided by financing activities             13,000       7,698
                                                    ----------  ----------
Effect of exchange rates on changes in cash                405          76
                                                    ----------  ----------
Decrease in cash and cash equivalents                   (7,007)    (15,030)
Cash and cash equivalents, beginning of year            21,602      26,489
                                                    ----------  ----------
Cash and cash equivalents, end of period            $   14,595  $   11,459
                                                    ==========  ==========
Supplemental disclosure
 Cash paid for interest                             $      129  $       31
                                                    ==========  ==========
 Cash paid for income taxes                         $    3,290  $      472
                                                    ==========  ==========



                             LECG CORPORATION
                    Reconciliation of Non-GAAP Measures
                   (in thousands, except per share data)


                                              Quarter ended
                               -------------------------------------------
                                        March 31,
                               ----------------------------  December 31,
                                   2008           2007           2007
                               -------------  -------------  -------------

Fee-based revenues, net        $      87,171  $      88,177  $      83,441

Direct cost of services               57,172         59,994         60,154

Adjustments to direct costs of
 services
 Restructuring charges                     -         (1,638)        (5,080)

Fee-based profit               $      29,999  $      29,821  $      28,367
                               =============  =============  =============
Fee-based margin                        34.4%          33.8%          34.0%


                                              Quarter ended
                               -------------------------------------------
                                        March 31,
                               ----------------------------  December 31,
                                   2008           2007           2007
                               -------------  -------------  -------------

Net income (loss)              $       3,985  $       3,266  $      (2,666)
Income from operations of
 discontinued subsidiary, net
 of income taxes                           -           (153)          (160)
Loss on disposal of
 subsidiary, net of income
 taxes                                     -              -          2,219
                               -------------  -------------  -------------
Income (loss) from continuing
 operations                    $       3,985  $       3,113  $        (607)
                               -------------  -------------  -------------

Adjustments to net income
 (loss)
 Restructuring charges                     -          1,638          6,743
 Income tax (provision)
  benefit (1)                              -           (663)        (2,781)
                               -------------  -------------  -------------

Adjusted income from
 continuing operations(2)      $       3,985  $       4,088  $       3,355
                               =============  =============  =============

Adjusted earnings from
 continuing operations per
 diluted share(2)              $        0.16  $        0.16  $        0.13

Shares used in calculating
 adjusted earnings per share
 Diluted                              25,518         25,413         25,577



                                              Quarter ended
                               -------------------------------------------
                                        March 31,
                               ----------------------------  December 31,
                                   2008           2007           2007
                               -------------  -------------  -------------

Net income (loss)              $       3,985  $       3,266  $      (2,666)
Income from operations of
 discontinued subsidiary, net
 of income taxes                           -           (153)          (160)
Loss on disposal of
 subsidiary, net of income
 taxes                                     -              -          2,219
                               -------------  -------------  -------------
Income (loss) from continuing
 operations                    $       3,985  $       3,113  $        (607)
                               -------------  -------------  -------------

Provision for income tax
 expense                               2,724          2,119           (488)
Interest expense (income), net            54           (129)          (103)
Depreciation and amortization
 expense                               1,535          1,889          1,845
                               -------------  -------------  -------------

EBITDA  from continuing
 operations (3)                        8,298          6,992            647
                               -------------  -------------  -------------

Adjustments to EBITDA from
 continuing operations
 Restructuring charges                     -          1,638          6,743
                               -------------  -------------  -------------

Adjusted EBITDA from
 continuing operations(3)      $       8,298  $       8,630  $       7,390
                               =============  =============  =============


(1) Adjusted net income and adjusted diluted earnings per share exclude
    restructuring charges incurred in the period and assume a 40.5% tax
    rate in the quarter ended March 31, 2007 and a 41.2% tax rate in the
    quarter ended December 31, 2007.
(2) Adjusted income from continuing operations and adjusted earnings
    from continuing operations per diluted share are non-GAAP financial
    measures.  Adjusted income from continuing operations excludes
    restructuring charges relating to the implementation of the recovering
    value plan in 2007.  Adjusted earnings from continuing operations per
    diluted share is calculated using adjusted income from continuing
    operations divided by diluted shares.  The Company regards adjusted
    income from continuing operations and adjusted earnings from
    continuing operations per diluted share as useful measures 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.
(3) EBITDA from continuing operations and Adjusted EBITDA from continuing
    operations are non-GAAP financial measures.  EBITDA from continuing
    operations is defined as income from continuing operations before
    provision for income tax, interest, and depreciation and amortization.
    Adjusted EBITDA from continuing operations excludes restructuring
    charges relating to implementation of the recovering value plan in
    2007. The Company regards EBITDA from continuing operations and
    Adjusted EBITDA from continuing operations as useful measures 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

  • Investor Contacts
    Steven R. Fife
    Chief Financial Officer
    510-985-6700

    Erin Glenn
    Investor Relations
    510-985-6990
    Email Contact