Epiq reports disappointing earnings following shareholder scuffle

Brianne Pfannenstiel

Reporter- Kansas City Business Journal

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Kansas City, Kan., company Epiq Systems Inc. has released its third-quarter earnings report, showing revenue for the quarter was about 13 percent below analyst projections.

Epiq, which is a legal technology services provider, reported the lower-than-expected results after two activist shareholders began putting pressure on the company's board of directors to deliver better results and explore strategic alternatives.

Overall, operating revenue fell by 5 percent to $104 million, about $15 million below forecasts by Avondale Partners LLC. The company (Nasdaq: EPIQ) attributed the decline to its eDiscovery business, which faced pricing pressure and deferral of revenue from a large client.

The company also lowered its 2014 projections, reducing its expected operating revenue from $475 million to the $435 million to $445 million range.

Epiq's board announced in September it would begin exploring other strategic options for the company, including going private and acquisitions. It's a move that has analysts hopeful.

"Despite the disappointing results, we believe a win-win scenario has developed for shareholders with management under significant pressure to deliver better results near-term and convince investors that they finally have the pieces in place to deliver attractive returns," Avondale Partners wrote in an analysis. "If the Board conducts an incomplete review of strategic alternatives and/or rejects fully-financed offers at a material premium to recent stock prices, we suspect the majority of investors will support the competitive slate of independent directors next June."

As of about 1:40 p.m. CDT on Wednesday, the stock was trading for $16.07 a share, down 17.9 percent.

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Brianne covers legal affairs, health care, life sciences, animal health and biosciences.