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EMERYVILLE, CA, Apr 27, 2009 (MARKET WIRE via COMTEX News Network) -- LECG Corporation (NASDAQ: XPRT), a global expert services firm, today reported financial results for the first quarter ended March 31, 2009.
"Our revenues this quarter continued to be affected by the weakness in the economy, as many litigation projects remained on hold and merger activity remained low," said Michael Jeffery, LECG's chief executive officer. "Despite the difficult environment, we experienced an upward trend in revenue at the end of the quarter and the increased level of activity has held into the second quarter. However, until we see clear indications that current levels of demand will be sustained, we remain cautious. We will continue to reduce our cost structure, streamline operations, and focus on practice areas where we have a competitive advantage and anticipate near- and long-term growth."
First Quarter 2009 Financial Results
First quarter 2009 revenues decreased 26.7 percent to $66.3 million compared with $90.5 million in the first quarter of 2008, and decreased 5.3 percent from fourth quarter 2008 revenues of $70.0 million. Net fee-based revenues were $63.9 million in the first quarter of 2009 and $87.2 million in the prior year period, a decrease of 26.7 percent year over year. Net fee-based revenues decreased 4.5 percent from $67.0 million in the fourth quarter of 2008.
First quarter 2009 net loss was $3.8 million or $0.15 per share, compared with net income of $4.0 million or $0.16 per diluted share in the first quarter of 2008, and net loss of $5.0 million or $0.20 per share in the fourth quarter of 2008, excluding one-time charges.
Adjusted EBITDA from continuing operations for the first quarter of 2009 was a loss of $4.8 million, compared to $8.6 million of income for the first quarter of 2008, and a loss of $6.8 million for the fourth quarter of 2008.
First Quarter 2009 Segment Results
Economics Services
LECG's economics services segment is composed of the company's global competition, securities, regulated industries, energy and environment, and labor sectors. Economics revenues were $28.9 million in the first quarter of 2009, representing 43.6 percent of total revenues versus 41.3 percent of total revenues in the fourth quarter of 2008. Net fee-based revenues for the segment were $28.1 million in the quarter, relatively unchanged from the fourth quarter of 2008 with notable strength in the energy and environment practice. Economics gross profit was $7.7 million, or 54.4 percent of total gross profit in the quarter. Direct profit margin was 27.7 percent, up from 25.1 percent in the fourth quarter of 2008. Professional staff utilization was 67.3 percent.
Finance and Accounting Services (FAS)
LECG's FAS segment is composed of the company's forensic accounting, intellectual property, healthcare, higher education, international FAS, financial services, and electronic discovery sectors. FAS revenues were $37.4 million in the first quarter of 2009, or 56.4 percent of total revenues versus 58.7 percent of total revenues in the fourth quarter of 2008. Net fee-based revenues for the segment were $35.8 million in the quarter, down $3.1 million from the fourth quarter of 2008 due to declines across most practice areas with the exception of forensic accounting, electronic discovery, and healthcare. FAS gross profit was $6.5 million, or 45.6 percent of total gross profit in the quarter. The direct profit margin decreased to 18.2 percent from 21.5 percent in the fourth quarter of 2008. Professional staff utilization was 67.0 percent.
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. Domestic callers may access this conference call by dialing 877-857-6149. International callers may access the call by dialing 719-325-4809. For a replay of this teleconference, please call 888-203-1112 or 719-457-0820, and enter the passcode 2598543. The replay will be available through May 1, 2009. 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 and consulting firm, with more than 750 experts and professionals in 31 offices around the world, provides independent expert testimony, financial advisory services, 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 regarding 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 and the related conference call concerning the future business, operating and financial condition of the company, including expectations regarding revenues and net income for future periods, 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 affect actual performance include the ongoing economic downturn and adverse economic conditions, 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 AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended
March 31,
------------------
2009 2008
-------- --------
Fee-based revenues, net $ 63,922 $ 87,171
Reimbursable revenues 2,383 3,331
-------- --------
Revenues 66,305 90,502
Direct costs 49,617 57,172
Reimbursable costs 2,540 3,311
-------- --------
Cost of services 52,157 60,483
Gross profit 14,148 30,019
Operating expenses:
General and administrative expenses 18,895 21,301
Depreciation and amortization 1,330 1,535
-------- --------
Operating (loss) income (6,077) 7,183
Interest income 48 143
Interest expense (315) (197)
Other expense, net (90) (420)
-------- --------
(Loss) income before income taxes (6,434) 6,709
Income tax (benefit) expense (2,638) 2,724
-------- --------
Net (loss) income $ (3,796) $ 3,985
======== ========
Earnings per share:
Basic $ (0.15) $ 0.16
Diluted $ (0.15) $ 0.16
Shares used in calculating earnings per share
Basic 25,386 25,299
Diluted 25,386 25,518
LECG CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
March 31, December 31,
Assets 2009 2008
------------ ------------
Current assets:
Cash and cash equivalents $ 8,861 $ 19,510
Accounts receivable, net of allowance of
$1,004 and $973 87,715 87,122
Prepaid expenses 6,346 5,996
Deferred tax assets, net - current portion 13,887 14,123
Signing, retention and performance bonuses -
current portion 16,078 15,282
Income taxes receivable 10,998 7,662
Other current assets 2,619 2,447
Note receivable - current portion 525 518
------------ ------------
Total current assets 147,029 152,660
Property and equipment, net 10,107 11,011
Other intangible assets, net 3,613 3,790
Signing, retention and performance bonuses 34,555 34,976
Deferred compensation plan assets 8,029 9,684
Note receivable 1,800 1,946
Deferred tax assets, net 36,952 36,952
Other long-term assets 6,416 5,188
------------ ------------
Total assets $ 248,501 $ 256,207
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accrued compensation $ 38,237 $ 49,313
Accounts payable and other accrued
liabilities 9,286 11,493
Payable for business acquisitions - current
portion - 3,846
Borrowings under line of credit 17,000 -
Deferred revenue 2,202 2,450
Liability associated with divestiture - 2,642
------------ ------------
Total current liabilities 66,725 69,744
Payable for business acquisitions 1,055 1,055
Deferred compensation plan obligations 8,459 9,632
Deferred rent 6,269 6,601
Other long-term liabilities 471 569
------------ ------------
Total liabilities 82,979 87,601
------------ ------------
Commitments and contingencies - -
Stockholders' equity
Common stock, $.001 par value, 200,000,000
shares authorized, 25,560,284 and 25,559,253
shares outstanding at March 31, 2009 and
December 31, 2008, respectively 26 26
Additional paid-in capital 173,533 172,005
Accumulated other comprehensive loss (2,223) (1,407)
Accumulated deficit (5,814) (2,018)
------------ ------------
Total stockholders' equity 165,522 168,606
------------ ------------
Total liabilities and stockholders' equity $ 248,501 $ 256,207
============ ============
LECG CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
March 31,
----------------------
2009 2008
---------- ----------
Cash flows from operating activities
Net (loss) income $ (3,796) $ 3,985
Adjustments to reconcile net (loss) income to net
cash used in operating activities:
Bad debt expense 33 33
Depreciation and amortization of property and
equipment 1,152 1,172
Amortization of intangible assets 178 363
Amortization of signing, retention and performance
bonuses 4,245 4,083
Equity-based compensation 1,731 1,373
Changes in assets and liabilities:
Accounts receivable (1,535) (13,207)
Signing, retention and performance bonuses paid (4,966) (6,287)
Prepaid and other current assets 336 (779)
Accounts payable and other accrued liabilities (2,193) (702)
Income taxes (3,235) 2,064
Accrued compensation (10,446) (4,360)
Deferred revenue (244) 53
Deferred compensation plan assets, net of
liabilities 482 (1,895)
Deferred rent (287) (199)
Other assets 109 (3,121)
Other liabilities (34) 4
---------- ----------
Net cash used in operating activities (18,470) (17,420)
---------- ----------
Cash flows from investing activities
Business acquisitions earn out payments (3,885) (2,264)
Divestiture payments (2,379) -
Purchase of property and equipment (247) (768)
Proceeds from note receivable 139 -
Proceeds from disposal of property and equipment - 54
Other (90) (14)
---------- ----------
Net cash used in investing activities (6,462) (2,992)
---------- ----------
Cash flows from financing activities
Borrowings under revolving credit facility 19,000 19,000
Repayments under revolving credit facility (2,000) (6,000)
Payment of loan fees (2,243) -
---------- ----------
Net cash provided by financing activities 14,757 13,000
---------- ----------
Effect of exchange rates on changes in cash (474) 405
---------- ----------
Decrease in cash and cash equivalents (10,649) (7,007)
Cash and cash equivalents, beginning of year 19,510 21,602
---------- ----------
Cash and cash equivalents, end of period $ 8,861 $ 14,595
========== ==========
Supplemental disclosure
Cash paid for interest $ 189 $ 129
========== ==========
Cash paid for income taxes $ 613 $ 3,290
========== ==========
LECG CORPORATION AND SUBSIDIARIES
SEGMENT OPERATING RESULTS
($ in thousands, except rate amounts)
(unaudited)
Three months ended March 31,
----------------------------------------------------------
2009 2008
------------------------------ --------------------------
Finance Finance
and and
Economics Accounting Total Economics Accounting Total
-------- --------- ------- -------- --------- -------
Fee-based
revenues,
net $ 28,079 $ 35,843 $63,922 $ 39,934 $ 47,237 $87,171
Reimbursable
revenues 827 1,556 2,383 1,032 2,299 3,331
-------- --------- ------- -------- --------- -------
Revenues $ 28,906 $ 37,399 $66,305 $ 40,966 $ 49,536 $90,502
Direct costs $ 20,293 $ 29,324 $49,617 26,547 $ 30,625 $57,172
Reimbursable
costs 919 1,621 2,540 1,017 2,294 3,311
-------- --------- ------- -------- --------- -------
Gross
profit $ 7,694 $ 6,454 $14,148 $ 13,402 $ 16,617 $30,019
Direct profit
margin (1) 27.7% 18.2% 22.4% 33.5% 35.2% 34.4%
Gross margin 26.6% 17.3% 21.3% 32.7% 33.5% 33.2%
Operating
statistics
Paid days 64 64 64 64 64 64
Billable
headcount,
period end 268 496 764 305 493 798
Billable
headcount,
period average 279 494 773 305 497 802
Billable FTEs,
period average
(2) 223 394 617 262 410 672
Average
billable rate $ 353 $ 281 $ 308 $ 366 $ 316 $ 337
Paid utilization
rate of billable
FTEs (3) 69.6% 63.4% 65.6% 81.1% 71.2% 75.1%
Expert headcount,
period end 113 219 332 120 196 316
Expert FTEs,
period average
(2) 65 139 204 77 113 190
Jr/SR staff paid
utilization
rate (3) 67.3% 67.0% 67.1% 77.5% 68.7% 72.1%
LECG CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
($ in thousands, except per share data)
Three months ended
March 31,
------------------------
2009 2008
----------- -----------
Fee-based revenues, net $ 63,922 $ 87,171
Direct costs 49,617 57,172
----------- -----------
Direct profit $ 14,305 $ 29,999
=========== ===========
Direct profit margin (1) 22.4% 34.4%
Three months ended
March 31,
------------------------
2009 2008
----------- -----------
Net (loss) income $ (3,796) $ 3,985
Adjustments to net (loss) income
Deferred compensation plan 62 303
Income tax benefit (4) (25) (122)
----------- -----------
Adjusted (loss) income from operations (5) $ (3,759) $ 4,166
=========== ===========
Adjusted (loss) income per diluted share (5)(7) $ (0.15) $ 0.16
Shares used in calculating earnings per share
Diluted 25,386 25,518
LECG CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)
($ in thousands, except per share data)
Three months ended
March 31,
------------------------
2009 2008
----------- -----------
Net (loss) income $ (3,796) $ 3,985
Income tax (benefit) expense (2,638) 2,724
Interest expense, net 267 54
Depreciation and amortization 1,330 1,535
----------- -----------
EBITDA from operations (6) (4,837) 8,298
Adjustments to EBITDA from operations
Deferred compensation plan 62 303
----------- -----------
Adjusted EBITDA from operations (6) $ (4,775) $ 8,601
=========== ===========
----------------------
(1) Fee-based revenues, net less direct costs as a percentage of fee-based
revenues, net.
(2) Full Time Equivalents (FTEs) are calculated by dividing actual total
paid hours in the period by the number of paid days in the period times
eight hours per day, assuming a forty-hour work week or 2,080 paid
hours per year.
(3) Paid utilization rate is calculated by dividing the actual number of
billed hours in the period by the actual number of paid hours in the
period, assuming a forty-hour work week or 2,080 paid hours per year.
(4) Assumes a marginal tax rate of 39.9% and 40.4% in the quarter ended
March 31, 2009 and 2008, respectively.
(5) Adjusted (loss) income from operations and adjusted (loss) income from
operations per diluted share are non-GAAP financial measures. Adjusted
(loss) income from operations excludes charges related to market
fluctuations in the value of deferred compensation plan investments.
Adjusted (loss) income from operations per diluted share is calculated
using adjusted (loss) income from operations divided by diluted shares.
The Company regards adjusted (loss) income from operations and adjusted
(loss) income from 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 (loss) income, cash flows, or other measures
of financial performance prepared in accordance with GAAP.
(6) EBITDA from operations and Adjusted EBITDA from operations are non-GAAP
financial measures. EBITDA from operations is defined as earnings from
operations before provision for income tax, interest, and depreciation
and amortization. Adjusted EBITDA from operations excludes charges
related to market fluctuations in the value of deferred compensation
plan investments. The Company regards EBITDA from operations and
Adjusted EBITDA from 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 (loss) income, cash flows, or other measures
of financial performance prepared in accordance with GAAP.
(7) For Q1 2009, diluted earnings per share and diluted shares are equal to
basic earnings per share and basic shares, respectively, as the effect
on net loss would be anti-dilutive if common stock equivalent shares
were included in the weighted average number of common shares
outstanding during the period.
Investor Contacts: Steven R. Fife Chief Financial Officer 510-985-6700 Brooke Deterline Investor Relations 415-775-1788 investor@lecg.com
SOURCE: LECG Corporation
mailto:investor@lecg.com
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