Epicor Building on Profit Turn
By ANDREW SIMONS
Epicor Software Corp.,a marquee technology stock?
The last four months certainly have been epic for the maker of customer relationship management software.
The Irvine-based company’s shares are up four-fold, from 1.55 to 6, since the middle of March, putting it among Orange County’s best performers.
Epicor’s market value stands at about $260 million at recent check,higher than that of Santa Ana-based MSC.Software Corp., OC’s biggest software maker by sales.
“There are a lot of different strengths there,” said Gideon Kory, an analyst with Newport Beach’s Roth Capital Partners LLC. Kory, the only analyst to cover the company, initiated coverage with a “buy” rating in April, though he now carries a “neutral” rating on the stock.
Epicor declined to comment for this story, citing the mandated “quiet period” prior to its second-quarter earnings release set for Wednesday.
The company is expected to post about $34 million in sales in the quarter, down 7.4% from last year.
Epicor’s obscure type of software culls data from manufacturing, distribution and accounting for use in sales, marketing and customer support. The software also links workers, distributors and suppliers.
Back in tech’s heyday, Epicor’s brand of software was hot and its market value reached $1.2 billion in 1998. But the market meltdown in 2000 saw Epicor’s market value fall as low as $34 million and its profits turn to losses.
Only recently has the company swung back to profitability. Epicor posted a $2.7 million operating profit in the first quarter, versus a loss of $3 million a year earlier. Sales fell about 5% to $34.3 million in the quarter. Epicor moved to improve its bottom line last fall when it cut 100 workers; it now has about 800.
The company recently wrapped up its $21 million buy of Minneapolis-based ROI Systems Inc., which makes enterprise software for medium-size manufacturers.
But ROI won’t be a drag on earnings: Epicor expects it to boost profits by the fourth quarter. The company cut some workers related to the acquisition.
Acquisitions were a subject of concern to Roth Capital’s Kory when he initiated coverage. While he noted that Epicor had a good balance sheet with $38 million in cash on hand at the time, he said his forecast “doesn’t account for acquisitions.”
“Such acquisitions may have a significant impact on the company’s cost structure, income or capital resources,” said Kory, who likes the ROI buy.
“That was the right use of cash,” he said.
