SOURCE: LECG Corporation

August 01, 2006 16:05 ET

LECG Corporation Reports Second Quarter 2006 Results

Second Quarter 2006 Revenues Grew 23% and EPS Was $0.26

EMERYVILLE, CA -- (MARKET WIRE) -- August 1, 2006 -- LECG Corporation (NASDAQ: XPRT), a global expert services firm, today reported financial results for the second quarter and six months ended June 30, 2006.

Second Quarter Financial Results

Revenues for the second quarter 2006 increased 23% to $89,050,000 from $72,541,000 for the second quarter 2005. Expert and professional staff revenues increased 24%. Organic growth of expert and professional staff revenues was 11%.

Net income for the second quarter 2006 was $6,473,000, or $0.26 per diluted share, an increase of 11% over the second quarter 2005 net income of $5,816,000 or $0.24 per diluted share. Second quarter 2006 net income includes equity-based compensation of $1,648,000, or $0.04 per diluted share. Diluted shares outstanding increased 3% to 25,204,000 in the second quarter 2006 from 24,392,000 for the same period in 2005.

EBITDA(1) for the second quarter 2006 was $12,460,000, a 19% increase over the second quarter 2005 EBITDA of $10,434,000. Adjusted EBITDA(2) was $14,108,000 for the second quarter 2006, a 33% increase over second quarter 2005 Adjusted EBITDA of $10,575,000.

Six Month Financial Results

Revenues for the six months ended June 30, 2006 increased 22% to $173,514,000 from $142,262,000 for the same period in 2005. Expert and professional staff revenues increased 23%.

Net income for the six months ended June 30, 2006 was $11,993,000, or $0.48 per diluted share, an increase of 7% over the same period 2005 net income of $11,169,000, or $0.46 per diluted share. Net income for the six months ended June 30, 2006 includes equity-based compensation of $3,269,000, or $0.08 per diluted share, and expensed acquisition costs of $317,000, or $0.01 per diluted share. Diluted shares outstanding increased 4% to 25,124,000 in the six months ended June 30, 2006 from 24,197,000 for the same period in 2005.

EBITDA(1) for the six months ended June 30, 2006 was $23,091,000, a 13% increase over EBITDA of $20,503,000 for the same period last year. Adjusted EBITDA(2) was $26,677,000 for the six months ended June 30, 2006, an increase of 28% over the same period last year Adjusted EBITDA of $20,783,000.

"LECG's second quarter and six month results demonstrate excellent top and bottom line performance," said LECG chairman, Dr. David Teece. "We continue to experience strong client demand across practice areas and geographies, and our organic hires as well as acquisitions are contributing to our growth and profitability."

Operating Metrics

LECG ended the second quarter 2006 with 1,244 employees and exclusive independent contractors, an increase of 6% from 1,178 as of March 31, 2006, and an increase of 29% from 968 as of June 30, 2005. Expert headcount increased to 373 from 368 as of March 31, 2006, and professional staff headcount increased to 602 from 553. Professional staff utilization was 83% on an available hours basis and 76% on a paid hours basis in the second quarter 2006 compared to 80% on an available hours basis and 72% on a paid hours basis in the second quarter 2005.

2006 Fiscal Year Outlook

For 2006, LECG anticipates that revenues will be in the range of $342,000,000 to $350,000,000. Net income is expected to be in the range of $24,500,000 to $26,000,000, and net income per diluted share is expected to be in the range of $0.96 to $1.01, including equity-based compensation costs of $0.14 per diluted share and expensed acquisition costs of $0.01 per diluted share.

Conference Call Webcast Information

To listen to a live audio webcast of LECG's second quarter 2006 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, 2006. 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 Quarter and Six Months ended June 30, 2006 and 2005
                  (in thousands, except per share data)
                                (Unaudited)

                                   Quarter ended           Six months
                                      June 30,              June 30,
                                ---------  ---------  ---------  ---------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------

 Revenues                       $  89,050  $  72,541  $ 173,514  $ 142,262
 Cost of services                 (58,563)   (48,777)  (114,969)   (94,853)
                                ---------  ---------  ---------  ---------
 Gross profit                      30,487     23,764     58,545     47,409
 Operating expenses:
  General and administrative
   expenses                       (17,956)   (13,437)   (35,353)   (26,987)
  Depreciation and amortization    (1,726)      (711)    (3,189)    (1,827)
                                ---------  ---------  ---------  ---------
 Operating income                  10,805      9,616     20,003     18,595
  Interest income                     222        208        488        398
  Interest expense                   (108)       (56)      (234)      (111)
  Other income (expense), net         (71)       107       (101)        81
                                ---------  ---------  ---------  ---------
 Income before income tax          10,848      9,875     20,156     18,963
 Income tax provision              (4,375)    (4,059)    (8,163)    (7,794)
                                ---------  ---------  ---------  ---------
 Net income                     $   6,473  $   5,816  $  11,993  $  11,169
                                =========  =========  =========  =========

 Net income per share:
  Basic                         $    0.27  $    0.25  $    0.50  $    0.49
  Diluted                       $    0.26  $    0.24  $    0.48  $    0.46
 Share amounts:
  Basic                            24,276     23,151     24,206     22,958
  Diluted                          25,204     24,392     25,124     24,197



                              LECG CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share data)
                                (Unaudited)

                                                      June 30, December 31,
                                                         2006        2005
 Assets                                               ---------- ---------
 Current assets:
  Cash and cash equivalents                           $   16,986 $  35,722
  Accounts receivable, net of allowance of $785 and
   $666                                                  112,764    94,299
  Prepaid expenses                                         4,599     4,317
  Deferred tax assets, net                                 1,514     1,745
  Signing and performance bonuses - current portion        7,730     6,122
  Other current assets                                     4,277     4,775
                                                      ---------- ---------
   Total current assets                                  147,870   146,980
 Property and equipment, net                              11,137    10,791
 Goodwill                                                 94,165    77,133
 Other intangible assets, net                             11,446    10,865
 Signing and performance bonuses - long-term              21,619    19,035
 Deferred compensation plan assets                         8,269     6,403
 Other long-term assets                                    1,519     1,678
                                                      ---------- ---------
 Total assets                                         $  296,025 $ 272,885
                                                      ========== =========

 Liabilities and stockholders' equity
 Current liabilities:
  Accrued compensation                                $   46,909 $  43,924
  Accounts payable and other accrued liabilities           6,766     5,412
  Payable for business acquisitions - current portion      6,884     6,510
  Deferred revenue                                         2,655     2,427
  Income taxes payable                                         0     3,961
                                                      ---------- ---------
   Total current liabilities                              63,214    62,234
 Payable for business acquisitions - long-term             4,256     2,400
 Deferred compensation plan                                8,654     6,615
 Deferred tax liabilities                                    989       989
 Other long-term liabilities                               5,672     5,581

 Commitments and contingencies

 Stockholders' equity
 Common stock, $.001 par value, 200,000,000 shares
  authorized, 24,471,400 and 24,243,482 shares
  outstanding at June 30, 2006 and December 31, 2005,
  respectively                                                24        24
 Additional paid-in capital                              148,854   144,171
 Deferred equity compensation                                  -    (1,056)
 Accumulated other comprehensive income (loss)               277      (165)
 Retained earnings                                        64,085    52,092
                                                      ---------- ---------
   Total stockholders' equity                            213,240   195,066
                                                      ---------- ---------
 Total liabilities and stockholders' equity           $  296,025 $ 272,885
                                                      ========== =========



                              LECG CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
         For the Quarter and Six Months ended June 30, 2006 and 2005
                               (in thousands)
                                (Unaudited)

                                                         Six months ended
                                                              June 30,
                                                        --------  --------
                                                          2006      2005
                                                        --------  --------

Cash flows from operating activities
Net income                                              $ 11,993  $ 11,169
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
 Bad debt expense                                            139        83
 Depreciation and amortization of equipment and
  leaseholds                                               1,680     1,382
 Amortization of intangible assets                         1,509       445
 Signing and performance bonuses paid                     (8,967)   (4,827)
 Amortization of signing and performance bonuses           4,079     3,470
 Tax benefit from option exercises and equity
  compensation plans                                         277     3,315
 Equity based compensation                                 3,269       280
 Deferred rent                                               153       817
 Other                                                       (20)     (171)
  Changes in assets and liabilities:
   Accounts receivable                                   (18,605)  (11,188)
   Prepaid and other current assets                        1,882      (765)
   Accounts payable and other accrued liabilities         (4,487)    1,348
   Accrued compensation                                    3,520    (1,716)
   Deferred revenue                                          196       407
   Deferred compensation plan assets net of liabilities      173        36
   Other assets                                              118        20
   Other liabilities                                           -     1,254
                                                        --------  --------
   Net cash provided by (used in) operating activities    (3,091)    5,359
 Cash flows from investing activities
 Business acquisitions and earnout payments, net of
  acquired cash                                          (16,671)   (4,997)
 Purchase of property and equipment                       (1,670)   (3,888)
 Other                                                        35        (4)
                                                        --------  --------
   Net cash used in investing activities                 (18,306)   (8,889)
 Cash flows from financing activities
 Exercise of stock options                                 1,462     2,712
 Proceeds from secondary offering, net of offering
  costs                                                        -     1,325
 Proceeds from issuance of stock- employee stock plan        160       925
 Tax benefit from option exercises and equity
  compensation plans                                         598         -
                                                        --------  --------
  Net cash provided by financing activities                2,220     4,962
Effect of exchange rates on changes in cash                  441    (1,007)
                                                        --------  --------
Increase (decrease) in cash and cash equivalents         (18,736)      425
Cash and cash equivalents, beginning of year              35,722    42,082
                                                        --------  --------
 Cash and cash equivalents, end of period               $ 16,986  $ 42,507
                                                        ========  ========
Supplemental disclosure
 Cash paid for interest                                 $    117  $     22
                                                        ========  ========
 Cash paid for income taxes                             $ 12,302  $  1,583
                                                        ========  ========
Non cash investing and financing activities
   Fair value of common stock issued for acquisitions   $    250  $    250
                                                        ========  ========



                              LECG CORPORATION
                         EBITDA and Adjusted EBITDA
         For the Quarter and Six Months ended June 30, 2006 and 2005
                               (in thousands)

                                      Quarter ended      Six months ended
                                         June 30,            June 30,
                                      2006      2005      2006      2005
                                    --------  --------  --------  --------

Net income                          $  6,473  $  5,816  $ 11,993  $ 11,169

Add back (subtract):
 Provision for income tax              4,375     4,059     8,163     7,794
 Interest income, net                   (114)     (152)     (254)     (287)
 Depreciation and amortization         1,726       711     3,189     1,827
                                    --------  --------  --------  --------

   EBITDA (1)                       $ 12,460  $ 10,434  $ 23,091  $ 20,503
                                    --------  --------  --------  --------

Adjustments to EBITDA
 Equity-based compensation             1,648       141     3,269       280
 Expensed acquisition costs                -         -       317         -
                                    --------  --------  --------  --------

   Adjusted EBITDA (2)              $ 14,108  $ 10,575  $ 26,677  $ 20,783
                                    ========  ========  ========  ========

Contact Information

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

    Erin Glenn
    Investor Relations
    510-985-6990
    Email Contact