SOURCE: LECG Corporation

August 01, 2005 16:05 ET

LECG Corporation Reports Second Quarter 2005 Results

Expert and Professional Staff Revenues Grew 39%, EPS Was $0.24, Raises Fiscal Year 2005 Guidance

EMERYVILLE, CA -- (MARKET WIRE) -- August 1, 2005 -- LECG Corporation (NASDAQ: XPRT), a global expert services firm, today reported financial results for the second quarter ended June 30, 2005.

Second Quarter 2005 Financial Results

Revenues for the second quarter increased 35% to $72.5 million from $53.7 million for the second quarter of 2004. Expert and professional staff revenues increased 39%. Organic growth of expert and professional staff revenues was 32%. Performance based revenue was $302,000 this quarter compared to $1.5 million for the same period last year. EBITDA(1) was $10.4 million for the quarter, a 34% increase from $7.8 million in the second quarter of 2004.

Net income was $5.8 million in the second quarter of 2005, 43% higher than net income of $4.1 million reported in the second quarter of last year. Net income per diluted share was $0.24 this quarter compared to net income per diluted share of $0.17 in the same period a year ago. Diluted shares outstanding increased 5% to 24.4 million in the second quarter of 2005 from 23.3 million for the same period in 2004.

"LECG is pleased with our sustained growth for the first half of 2005, as reflected in our financial performance this quarter," said LECG chairman, Dr. David Teece. "We continue to deliver strong revenue and earnings growth as we build the foundation for continued excellence and future performance."

Six-Month Financial Results

Revenues for the six months ended June 30, 2005 increased 47% to $142.3 million from $96.8 million for the same period in 2004. Expert and professional staff revenues increased 49%. Performance based revenue was $479,000 for the first six months of 2005 and $1.8 million for the same period in 2004. EBITDA(1) was $20.5 million for the first six months of 2005, a 48% increase from $13.9 million for the same period in 2004.

Net income for the six months ended June 30, 2005 was $11.2 million, 53% higher than net income of $7.3 million in the first six months of 2004. Net income per diluted share was $0.46 for the first six months of 2005 compared to net income per diluted share of $0.32 in the same period in 2004. Diluted shares outstanding increased 4% to 24.2 million in 2005 from 23.2 million in 2004.

Operating Metrics

LECG ended the second quarter with 968 employees and exclusive independent contractors, an increase of 2% from 948 as of March 31, 2005. Expert headcount increased to 319 from 308 as of March 31, 2005, and professional staff headcount increased to 443 from 439. Professional staff utilization for the second quarter of 2005 was 80%, compared to 82% for the prior year period.

New Hires and Agreement to Acquire Expert Services Firm

LECG is pleased to announce 10 director-level additions to its expert talent pool, including three internal promotions. LECG also announced that it has signed a definitive agreement to acquire substantially all of the assets of Bates Private Capital Incorporated, a privately held expert services firm based in Portland, Oregon.

2005 Fiscal Year Outlook

For the full year 2005, LECG anticipates that revenues will now be in the range of $280 to $290 million, including performance based revenue of $5.0 to $6.0 million. Net income is expected to be in the range of $22.5 to $24.0 million, and earnings per diluted share will be in the range of $0.93 to $0.98. LECG does not plan to give quarterly guidance, and quarterly performance could fluctuate. Previously stated guidance for 2005 was $270 to $280 million in revenue, including performance based revenue of $6.0 to $7.0 million, $21.5 to $23.0 million in net income, and fully diluted earnings per share of $0.89 to $0.94.

David Kaplan, president of LECG, commented, "LECG is pleased with the ongoing additions to our talent pool, once again demonstrating our ability to attract top caliber experts to the firm and to cultivate internal advancement. Additionally, we are pleased to announce the signing of an agreement to acquire Bates Private Capital Incorporated, which will enhance our service offerings in securities litigation support."

Conference Call Webcast Information

To listen to a live audio webcast of LECG's second 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, August 1, 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 and Six Months Ended June 30, 2005 and 2004
            (in thousands, except per share data)

                              Quarter ended          Six months ended
                                 June 30,                June 30,
                             2005        2004        2005        2004
                           --------    --------    --------    --------
Revenues                   $ 72,541    $ 53,671    $142,262    $ 96,781
Cost of services            (48,777)    (35,722)    (94,853)    (64,048)
                           --------    --------    --------    --------
Gross profit                 23,764      17,949      47,409      32,733
Operating expenses:
  General and
   administrative
   expenses                 (13,437)    (10,109)    (26,987)    (18,780)
  Depreciation and
   amortization                (711)       (957)     (1,827)     (1,634)
                           --------    --------    --------    --------
Operating income              9,616       6,883      18,595      12,319
  Interest income               208          71         398         182
  Interest expense              (56)        (55)       (111)       (122)
  Other income
   (expense), net               107         (26)         81         (53)
                           --------    --------    --------    --------
Income before income tax      9,875       6,873      18,963      12,326
Income tax provision         (4,059)     (2,803)     (7,794)     (5,005)
                           --------    --------    --------    --------
Net income                 $  5,816    $  4,070    $ 11,169    $  7,321
                           ========    ========    ========    ========

Net income per share:
  Basic                    $   0.25    $   0.19    $   0.49    $   0.34
  Diluted                  $   0.24    $   0.17    $   0.46    $   0.32
Share amounts:
  Basic                      23,151      21,717      22,958      21,561
  Diluted                    24,392      23,324      24,197      23,241


                     LECG CORPORATION
           CONDENSED CONSOLIDATED BALANCE SHEETS
             June 30, 2005 and December 31, 2004
             (in thousands, except share data)

                                               June 30,      December 31,
                                                 2005            2004
                                               --------        --------
Assets
Current assets:
  Cash and cash equivalents                    $ 42,507        $ 42,082
  Accounts receivable, net of
   allowance of $554 and $433                    84,226          73,137
  Prepaid expenses                                3,950           3,456
  Deferred tax assets, net                          642           1,476
  Current portion of signing bonuses
   and other current assets                      11,660          10,162
                                               --------        --------
    Total current assets                        142,985         130,313
Property and equipment, net                       9,044           6,493
Goodwill                                         62,009          57,947
Other intangible assets, net                        108             478
Long-term portion of signing bonuses
 and other assets                                26,553          19,480
                                               --------        --------
Total assets                                   $240,699        $214,711
                                               ========        ========

Liabilities and stockholders' equity
Current liabilities:
  Accounts payable and other accrued
   liabilities                                 $  8,078        $  6,701
  Accrued compensation                           41,461          37,599
  Payable for business acquisitions -
   current                                        3,363           6,183
  Deferred revenue                                1,828           1,409
                                               --------        --------
    Total current liabilities                    54,730          51,892
Payable for business acquisitions -
 long-term                                        4,102           2,400
Deferred compensation plan                        4,678           3,203
Deferred tax liability                              386             386
Deferred rent and other long-term
 liabilities                                      4,276           2,443

Stockholders' equity:
Common stock, $.001 par value,
 200,000,000 shares authorized, 23,541,880
 and 22,813,471 shares issued and
 outstanding at June 30, 2005, and
 December 31, 2004, respectively                     23              23
Additional paid-in capital                      132,779         125,070
Deferred equity compensation                     (1,312)         (1,580)
Accumulated other comprehensive income              152           1,158
Retained earnings                                40,885          29,716
                                               --------        --------
    Total stockholders' equity                  172,527         154,387
                                               --------        --------
Total liabilities and stockholders' equity     $240,699        $214,711
                                               ========        ========


                       LECG CORPORATION
       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
       For the Six Months Ended June 30, 2005 and 2004
                        (in thousands)

                                                   Six months ended
                                                       June 30,
                                                 2005            2004
                                               --------        --------
Cash flows from operating activities
Net income                                     $ 11,169        $  7,321
  Adjustments to reconcile net income
   to net cash provided by (used in)
   operating activities:
  Bad debt expense                                   83             107
  Depreciation and amortization of
   property and equipment                         1,382           1,173
  Amortization of other intangibles                 445             461
  Amortization of signing bonuses                 3,470           1,522
  Equity-based compensation                         280            (224)
  Tax benefit from option exercises
   and equity compensation plans                  3,315           2,102
  Deferred rent                                     817             459
  Other                                            (171)             69
Changes in assets and liabilities:
    Accounts receivable                         (11,188)        (17,951)
    Prepaid and other current assets               (765)         (2,266)
    Accounts payable and other accrued
     liabilities                                  1,348           4,708
    Accrued compensation                         (1,716)            445
    Signing bonuses and other assets             (6,246)        (10,418)
    Other                                         3,136             908
                                               --------        --------
      Net cash provided by (used in)
       operating activities                       5,359         (11,584)
Cash flows from investing activities
  Business acquisitions, net of acquired cash    (4,997)        (19,141)
  Purchase of property and equipment             (3,888)         (2,063)
  Other                                              (4)            (34)
                                               --------        --------
      Net cash used in investing activities      (8,889)        (21,238)
Cash flows from financing activities
  Proceeds from secondary offering, net
   of offering costs                              1,325               -
  Proceeds from issuance of stock -
   employee stock plan                              925           1,109
  Exercise of stock options                       2,712           2,019
  Receivable from unitholders                                       295
  Distributions to common unit holders                           (4,235)
                                               --------        --------
    Net cash provided by (used in) financing
     activities                                   4,962            (812)
Effect of exchange rates on changes in cash      (1,007)             35
                                               --------        --------
Increase (decrease) in cash and cash
 equivalents                                        425         (33,599)
Cash and cash equivalents, beginning of year     42,082          67,177
                                               --------        --------
  Cash and cash equivalents, end of period     $ 42,507        $ 33,578
                                               ========        ========

Supplemental disclosure
  Cash paid for interest                       $     22        $    272
                                               ========        ========
  Cash paid for income taxes                   $  1,583        $    102
                                               ========        ========
Non cash investing and financing activities
  Fair value of common stock issued
   for acquisitions                            $    250        $  1,000
                                               ========        ========


                                 LECG CORPORATION
                                     EBITDA (1)
            For the Quarters and Six Months Ended June 30, 2005 and 2004
                                  (in thousands)

                            Quarter ended             Six months ended
                               June 30,                    June 30,
                          2005         2004           2005          2004
                        --------     --------       --------      --------

Net income              $  5,816     $  4,070       $ 11,169      $  7,321
Add back (subtract):
 Provision for income
  taxes                    4,059        2,803          7,794         5,005
 Interest, net              (152)         (16)          (287)          (60)
 Depreciation and
  amortization               711          957          1,827         1,634
                        --------     --------       --------      --------
    EBITDA              $ 10,434     $  7,814       $ 20,503      $ 13,900
                        ========     ========       ========      ========

(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