Epicor Earnings Call Wrapup – 7/30/2010
Epicor reported quarterly earnings today. Total license revenue was up 9% and George Klaus the company CEO talked a LOT about ”new name license” theme.
He invoked the fact that Epicor 9 was doing well selling to new accounts – frequently.
I’m not entirely sure why – but the press didn’t follow up on this theme - instead mostly asking currency conversion and sales commission type questions.
Epicor didn’t have much to say about their retail software which apparently has undergone some management changes. At one point in the call they quickly mentioned a reorganization around retail.
They mostly mumbled through any discussion of the retail portions of the call. I had the impression that retail is definitely lagging. They also seem to sell hardware as there was discussion of ($8 million I think) or hardware sales. If I remember correctly the margin was fairly tiny.
They did talk quite a bit about on a 94% maintenance renewal rate — which somewhat puzzled me because the quarterly comparative maintenance revenue seemed pretty flat. One analyst asked about this (about the only good question asked) to which there was a very long Epicor pause. No real answer from Klaus or the panel on this (which I believe included CFO Michael Pietrini) .
They claim well over 100 Epicor 9 are out “on evaluation” but Klaus quips – “don’t quote” him (funny thing to say at an analyst press conference)….
Earnings report said over 140 Epicor 9 are ready to go live this year (as opposed to about 200 already installed).
Early on Epicor hit on three things that they thought were driving sales:
1. More prospects (I took this to mean people looking for niche software)
2. More industries served with Epicor 9
3. More localization – they apparently are able to utilize Epicor 9 in another 20 languages/locales (unsure on this number exactly as I was connecting via cell to the call and not near a computer)
The company made a clear point that sales to existing customers — upgrades, new modules — were relatively flat or down. This is another area they spent little time on – when questioned by an analyst of course the company expects to convert many of their install base to Epicor 9.
Unfortunately I didn’t get a chance to ask any questions as it seemed to be softball analyst day.
Here’s The Relevant Epicor Questions None Of The Analysts Thought To Ask
A. What percent of sales are channel versus direct (I hear it’s 85% direct with a goal of 60% – which sounds like being a little pregnant. Epicor has a mixed track record here so caveat emptor)
In the past several years Epicor has toyed with a channel, then not using a channel, then going back to using a channel.
My .02 is that companies start going through a channel when they feel they’ve pulled all the low hanging fruit. Channels are expensive because you not only have to cut them in on compensation but you need to manage them, create rules and ultimately deal with infighting that occurs when your market matures.
Epicor touted about 1,000 channel partners on the call. How many of these are castoffs onboarded in the last year? The ramp up for new partners is slow and tedious. Especially in niche markets with more complex products.
B. Who are your three biggest competitors (because I believe Epicor is probably benefiting from a market shift to niche software)
C. What effect will the new emphasis by Microsoft and Oracle on specialization for their channel have on Epicor’s sales into market niches. (My guess is not a lot immediately but probably in 2 years quite a bit).
That’s all I remember — I was connected by cell while out of the office so some of the specific numbers I’m stating from memory could be a little off but in general this was the tone of the call.
© 2010, Wayne Schulz. All rights reserved. Formed in 2005. the 90 Minds Consulting Group is a collaboration of 100 Sage partners who independently join together online in a 24 x 7 private communication network to solve difficult issues for their customers. The group is not affiliated with Sage and our collaboration provides for unparalleled member access to early warnings of bugs and other issues which members in turn are encouraged to use to provide an exceptional customer experience.
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