American Software Reports Preliminary Third Quarter of Fiscal Year 2019 Results

Subscription Fees Increase 43% for the Quarter and Cloud Services
Annual Contract Value Increases 48%

ATLANTA–(BUSINESS WIRE)–American Software, Inc. (NASDAQ: AMSWA) today reported preliminary
financial results for the third quarter for fiscal year 2019.

Key Third quarter financial highlights:

  • Subscription fees were $3.7 million for the quarter ended January 31,
    2019, a 43% increase compared to $2.6 million for the same period last
    year, while software license revenues were $1.7 million, a 71%
    decrease compared to $6.0 million for the same period last year,
    reflecting our continued transition to the SaaS engagement model.
  • Cloud Services Annual Contract Value (ACV) increased approximately 48%
    to $16.1 million as of the quarter ended January 31, 2019 compared to
    $10.9 million as of the same period of the prior year.
  • Total revenues for the quarter ended January 31, 2019 were $27.0
    million, a decrease of 10% over the comparable period last year.
  • Recurring revenue streams for Maintenance and Cloud Services were 56%
    of total revenues in the quarter ended January 31, 2019 compared to
    46% in the same period of the prior year.
  • Maintenance revenues for the quarter ended January 31, 2019 increased
    2% to $11.4 million compared to $11.2 million for the same period last
    year.
  • Professional services and other revenues for the quarter ended January
    31, 2019 were $10.2 million compared to $10.3 million for the same
    period last year.
  • Operating earnings for the quarter ended January 31, 2019 decreased
    49% to $2.1 million compared to $4.2 million for the same period last
    year.
  • GAAP net earnings for the quarter ended January 31, 2019 decreased 58%
    to $2.3 million or $0.07 per fully diluted share compared to $5.6
    million or $0.18 per fully diluted share for the same period last year.
  • Adjusted net earnings for the quarter ended January 31, 2019, which
    excludes non-cash stock-based compensation expense, amortization of
    acquisition-related intangibles and a discrete tax benefit adjustment
    related to the Tax Cuts and Jobs Act of 2017 were $3.2 million or
    $0.10 per fully diluted share compared to $5.1 million or $0.16 per
    fully diluted share for the same period last year.
  • EBITDA decreased by 30% to $4.1 million for the quarter ended January
    31, 2019 compared to $5.8 million for the same period last year.
  • Adjusted EBITDA decreased by 26% to $4.6 million for the quarter ended
    January 31, 2019 compared to $6.1 million for the quarter ended
    January 31, 2018. Adjusted EBITDA represents GAAP net earnings
    adjusted for amortization of intangibles, depreciation, interest
    (expense)/income & other, net, income tax expense and non-cash
    stock-based compensation expense.

Key fiscal 2019 year to date financial highlights:

  • Subscription fees were $10.2 million for the nine months ended January
    31, 2019, a 63% increase compared to $6.2 million for the same period
    last year, while software license revenues were $5.4 million, a 56%
    decrease compared to $12.4 million for the same period last year,
    reflecting our continued transition to the SaaS engagement model.
  • Total revenues for the nine months ended January 31, 2019 decreased by
    1% to $82.4 million compared to $83.3 million for the same period last
    year.
  • Recurring revenue streams of Maintenance and Cloud Services were 54%
    of total revenues for the nine month period ended January 31, 2019
    compared to 47% in the same period of the prior year.
  • Maintenance revenues for the nine months ended January 31, 2019 were
    $34.6 million, a 5% increase compared to $32.9 million for the same
    period last year.
  • Professional services and other revenues for the nine months ended
    January 31, 2019 increased 1% to $32.2 million compared to $31.8
    million for the same period last year.
  • For the nine months ended January 31, 2019, the Company reported
    operating earnings of approximately $4.3 million compared to $11.1
    million for the same period last year, a 61% decrease.
  • GAAP net earnings were approximately $4.9 million or $0.16 per fully
    diluted share for the nine months ended January 31, 2019, a 54%
    decrease compared to $10.8 million or $0.36 per fully diluted share
    for the same period last year.
  • EBITDA decreased by 35% to $9.9 million for the nine months ended
    January 31, 2019 compared to $15.4 million for the same period last
    year.
  • Adjusted net earnings for the nine months ended January 31, 2019,
    which excludes stock-based compensation expense, amortization of
    acquisition-related intangibles and a discrete tax benefit adjustment
    related to the Tax Cuts and Jobs Act of 2017 decreased 31% to $7.8
    million or $0.25 per fully diluted share, compared to $11.3 million or
    $0.38 per fully diluted share for the same period last year.
  • Adjusted EBITDA decreased 32% to $11.2 million for the nine months
    ended January 31, 2019 compared to $16.5 million for the nine months
    ended January 31, 2018. Adjusted EBITDA represents GAAP net earnings
    adjusted for amortization of intangibles, depreciation, interest
    income & other, net, income tax expense and non-cash stock-based
    compensation.

The overall financial condition of the Company remains strong, with cash
and investments of approximately $84.2 million and no debt as of January
31, 2019. During the third quarter of fiscal 2019, the Company paid
shareholder dividends of approximately $3.4 million.

“We continued to execute on key strategic initiatives during the third
quarter of fiscal year 2019 in support of our continued momentum towards
Software-as-a-Service (SaaS) subscriptions as the preferred customer
engagement method,” said Allan Dow, president of American Software.
“This transition is highlighted by our 48% increase in Cloud Services
Annual Contract Value (ACV) and 43% increase in Subscription Revenue,
which has resulted in our recurring revenue rising to 56% of our total
revenue.”

“It’s an exciting time to be a leader in the supply chain solutions
marketplace. We can help our customers accelerate their traditional
planning cycles by as much as 50 percent while increasing both the
quality of data and the confidence in their digital supply chain plans,”
continued Dow. “We believe companies that successfully transform to an
autonomous digital supply chain will gain a competitive advantage in
their marketplaces. As a market leader in transformative digital supply
chain solutions, we are proud to see our customers take leading
positions in this transition to gain new insights and make better
decisions faster. When our customers automate decision-making and
breakdown the barriers that prevent the flow of information, they can
become more collaborative, leverage our deep optimization and advance
analytics solutions, and improve visibility to deliver better customer
service, mitigate risk and harness new opportunities.”

Additional highlights for the third quarter of fiscal 2019 include:

Customers & Channels

  • Notable new and existing customers placing orders with the Company in
    the third quarter include: Abbyson Living, California Manufacturing,
    Calox Panemena, CFS Brands, iNova Pharmaceuticals, Italcar, Jantzen
    Brands, Lutron Electronics, Madepa, Mediplast, Mother Parker’s Tea &
    Coffee, Niagara Bottling, OneLegacy, Rip Curl, Tencate Geosynthetics,
    and Winebow.
  • During the quarter, SaaS subscription and/or software license
    agreements were signed with customers located in the following 11
    countries: Australia, Belgium, Bolivia, Canada, Mexico, Panama,
    Commonwealth of Puerto Rico, Sweden, Tunisia, United Kingdom, and
    United States.
  • Logility, Inc., a wholly owned subsidiary of the Company, announced
    Rituals Cosmetics, a leading European home and body cosmetics brand,
    selected Logility Voyager Solutions™ to set the foundation for its
    sales and operations planning (S&OP) process, improve service levels
    and enhance visibility across its omni-channel operations.
  • During the quarter, Logility announced a live webcast featuring its
    customer CITIZEN WATCH AMERICA. The event, broadcasted on January 30,
    2019, highlighted how CITIZEN WATCH AMERICA harnesses an S&OP process
    powered by Logility Voyager Solutions to foster greater collaboration
    between management, sales, product development, merchandising and
    planning teams.

Company and Technology

  • At NRF 2019: Retail’s Big Show, Logility announced enhanced
    capabilities available within the Logility Voyager Solutions Retail
    Optimization platform. These innovations merge the art of
    merchandising with the science of optimized planning to accelerate
    time to market and ensure the right products and assortments are
    available at the right time across multiple channels.
  • Logility announced during the quarter how its platform helps
    accelerate the digital supply chain from product concept to customer
    delivery by breaking down business silos and delivering greater
    visibility and collaboration across multiple departments and global
    trading partners. By helping companies expand visibility from concept
    to customer, Logility is helping bring products to market by as much
    as 50 percent faster than traditional business processes.
  • Logility announced enhanced Demand Sensing and advanced analytics
    capabilities for retailers at NRF 2019. Companies that take advantage
    of these capabilities are able to sense and respond to changes in the
    market faster and with greater precision, helping retailers stay ahead
    of consumer behavior and preferences.
  • Logility and New Generation Computing, Inc. (NGC), a wholly-owned
    subsidiary of the Company, announced each company was recognized as
    Leaders across multiple categories of the 2019 RIS Software
    LeaderBoard. NGC was named a Leader in 19 categories and Logility was
    recognized in 13 categories. Both Logility and NGC were recognized for
    outstanding customer satisfaction, return on investment and business
    innovation.
  • Logility announced its continued support of The Empty Stocking Fund.
    Through Logility’s annual sponsor-a-child tradition, and employee and
    company contributions, Logility was able to fill the stockings of
    1,350 children this holiday season. Employees also volunteered at
    Santa’s Village to personally help select the perfect gifts for
    children living in poverty.
  • Logility and COU Consulting, a global management and information
    technology consulting firm, have teamed up to help drive supply chain
    transformation excellence. With COU Consulting, Logility expands its
    business alliances and global reach to support customer transformation
    strategies.

About American Software, Inc.

Atlanta-based American Software, Inc. (NASDAQ: AMSWA), named one
of the 100 Most Trustworthy Companies in America by Forbes Magazine,
delivers innovative demand-driven supply chain management and advanced
retail planning platforms backed by more than 45 years of industry
expertise. Logility, Inc., a wholly-owned subsidiary of American
Software, is a leading provider of collaborative supply chain
optimization and advanced retail planning solutions that help medium,
large and Fortune 500 companies transform their supply chain operations
to gain a competitive advantage. Recognized for its high-touch approach
to customer service, rapid implementations and industry-leading return
on investment (ROI), Logility customers include Big Lots, Husqvarna
Group, Parker Hannifin, Sonoco Products, Red Wing Shoe Company, Verizon
Wireless and VF Corporation. Demand Management, Inc., a
wholly-owned subsidiary of Logility, delivers affordable, easy-to-use
Software-as-a-Service (SaaS) supply chain planning solutions designed to
increase forecast accuracy, improve customer service and reduce
inventory to maximize profits and lower costs. Demand Management serves
customers such as Siemens Healthcare, AutomationDirect.com and
Newfoundland Labrador Liquor Corporation. Halo Business Intelligence,
a division of Logility, is an advanced analytics software provider
leveraging an innovative blend of artificial intelligence and machine
learning technology to drive greater supply chain performance. Halo
customers include Aaron’s, Leatherman Tool Group and SweetWater Brewing. New
Generation Computing, Inc.
, a wholly-owned subsidiary of American
Software, is a leading provider of cloud-based supply chain and product
lifecycle management solutions for brands, retailers and consumer
products companies. NGC customers include A|X Armani Exchange,
Billabong, Carter’s, Destination XL, Hugo Boss, Jos. A. Bank, Marchon
Eyewear, Spanx, and Swatfame. The comprehensive American Software supply
chain and retail planning portfolio includes advanced analytics, supply
chain visibility, demand, inventory and replenishment planning, Sales
and Operations Planning (S&OP), Integrated Business Planning (IBP),
supply and inventory optimization, manufacturing planning and
scheduling, retail merchandise and assortment planning and allocation,
product lifecycle management (PLM), and vendor quality and compliance.
For more information about American Software, please visit www.amsoftware.com,
call (800) 726-2946 or email: [email protected].

Operating and Non-GAAP Financial Measures

The Company includes operating measures (ACV) and other non-GAAP
financial measures (EBITDA, adjusted EBITDA, adjusted net earnings and
adjusted net earnings per share) in the summary financial information
provided with this press release as supplemental information relating to
its operating results. This financial information is not in accordance
with, or an alternative for, GAAP-compliant financial information and
may be different from the operating or non-GAAP financial information
used by other companies. The Company believes that this presentation of
ACV, EBITDA, adjusted EBITDA, adjusted net earnings and adjusted net
earnings per share provides useful information to investors regarding
certain additional financial and business trends relating to its
financial condition and results of operations. ACV is a forward-looking
operating measure used by management to better understand cloud services
(SaaS and other related cloud services) revenue trends within the
Company’s business, as it reflects the Company’s current estimate of
revenue to be generated under the existing client contracts in the
forward 12-month period. EBITDA represents GAAP net earnings adjusted
for amortization of intangibles, depreciation, interest (expense)/income
& other, net, and income tax (benefit)/expense. Adjusted EBITDA
represents GAAP net earnings adjusted for amortization of intangibles,
depreciation, interest (expense)/income & other, net, income tax
(benefit)/expense and non-cash stock-based compensation expense. A
reconciliation of these non-GAAP financial measures to their nearest
U.S. GAAP measures appears in the accompanying financial tables.

Forward Looking Statements

This press release contains forward-looking statements that are subject
to substantial risks and uncertainties. There are a number of factors
that could cause actual results to differ materially from those
anticipated by statements made herein. These factors include, but are
not limited to, changes in general economic conditions, technology and
the market for the Company’s products and services, including economic
conditions within the e-commerce markets; the timely availability and
market acceptance of these products and services; the Company’s ability
to satisfy in a timely manner all SEC required filings and the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the
rules and regulations adopted under that Section; the challenges and
risks associated with integration of acquired product lines and
companies; the effect of competitive products and pricing; the
uncertainty of the viability and effectiveness of strategic alliances;
and the irregular pattern of the Company’s revenues. For further
information about risks the Company could experience as well as other
information, please refer to the Company’s current Form 10-K and other
reports and documents subsequently filed with the Securities and
Exchange Commission. For more information, contact: Vincent C. Klinges,
Chief Financial Officer, American Software, Inc., (404) 264-5477, [email protected]
or Kevin Liu, Investor Relations, (626) 657-0013.

American Software® is a registered trademark
of American Software, Inc.
Logility® is
a registered trademark and Logility Voyager Solutions™ is a trademark of
Logility, Inc. Other products mentioned in this document are registered
marks, trademarks or service marks of their respective owners.

 
 
 
AMERICAN SOFTWARE, INC.
Consolidated Statements of Operations Information
(In thousands, except per share data, unaudited)
                             
Third Quarter Ended Nine Months Ended
January 31, January 31,
2019 2018 Pct Chg. 2019 2018 Pct Chg.
Revenues:
License fees $ 1,718 $ 5,955 (71 %) $ 5,432 $ 12,420 (56 %)
Subscription fees 3,687 2,584 43 % 10,196 6,244 63 %
Professional services & other 10,176 10,342 (2 %) 32,240 31,773 1 %
Maintenance   11,422     11,236   2 %   34,567     32,903   5 %
Total Revenues   27,003     30,117   (10 %)   82,435     83,340   (1 %)
 
Cost of Revenues:
License fees 1,831 1,727 6 % 5,305 4,692 13 %
Subscription services 1,389 1,028 35 % 3,746 2,779 35 %
Professional services & other 7,714 7,912 (3 %) 24,484 22,673 8 %
Maintenance   2,030     2,404   (16 %)   6,442     6,919   (7 %)
Total Cost of Revenues   12,964     13,071   (1 %)   39,977     37,063   8 %
Gross Margin   14,039     17,046   (18 %)   42,458     46,277   (8 %)
Operating expenses:
Research and development 4,884 4,134 18 % 13,980 11,902 17 %
Less: capitalized development (2,073 ) (1,035 ) 100 % (4,162 ) (3,652 ) 14 %
Sales and marketing 4,699 5,385 (13 %) 15,183 15,055 1 %
General and administrative 4,302 4,263 1 % 12,903 11,394 13 %
Provision for doubtful accounts 24 nm
Amortization of acquisition-related intangibles 97 95 2 % 291 486 (40 %)
             
Total Operating Expenses   11,909     12,842   (7 %)   38,195     35,209   8 %
Operating Earnings   2,130     4,204   (49 %)   4,263     11,068   (61 %)
Interest Income & Other, Net   527     1,574   (67 %)   1,090     2,849   (62 %)
Earnings Before Income Taxes 2,657 5,778 (54 %) 5,353 13,917 (62 %)
Income Tax Expense   356     198   80 %   424     3,132   (86 %)
Net Earnings $ 2,301   $ 5,580   (59 %) $ 4,929   $ 10,785   (54 %)
Earnings per common share: (1)
Basic $ 0.07   $ 0.18   (61 %) $ 0.16   $ 0.36   (56 %)
Diluted $ 0.07   $ 0.18   (61 %) $ 0.16   $ 0.36   (56 %)
 
Weighted average number of common shares outstanding:
Basic 31,009 30,244 30,887 29,940
Diluted 31,170 30,701 31,361 30,299
 
nm- not meaningful
 
 
 
AMERICAN SOFTWARE, INC.
NON-GAAP MEASURES OF PERFORMANCE
(In thousands, except per share data, unaudited)
                 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2019 2018 Pct Chg. 2019 2018 Pct Chg.
NON-GAAP Operating Income:
Operating Income (GAAP Basis) $ 2,130 $ 4,204 (49 %) $ 4,263 $ 11,068 (61 %)
Amortization of acquisition-related intangibles 597 514 16 % 1,791 1,218 47 %
Stock-based compensation   466     314   48 %   1,308     1,107   18 %
Non-GAAP Operating income   3,193     5,032   (37 %)   7,362     13,393   (45 %)
       
Non-GAAP Operating income, as a % of revenue   12 %   17 %   9 %   16 %
 
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2019 2018 Pct Chg. 2019 2018 Pct Chg.
NON-GAAP EBITDA:
Net Earnings (GAAP Basis) $ 2,301 $ 5,580 (59 %) $ 4,929 $ 10,785 (54 %)
Income Tax Expense 356 198 80 % 424 3,132 (86 %)
Interest Income & Other, Net (527 ) (1,574 ) (67 %) (1,090 ) (2,849 ) (62 %)
Amortization of intangibles 1,792 1,475 21 % 5,184 3,945 31 %
Depreciation   168     124   35 %   487     359   36 %
EBITDA (earnings before interest, taxes, depreciation and
amortization)
  4,090     5,803   (30 %)   9,934     15,372   (35 %)
 
Stock-based compensation   466     314   48 %   1,308     1,107   18 %
Adjusted EBITDA $ 4,556   $ 6,117   (26 %) $ 11,242   $ 16,479   (32 %)
       
EBITDA, as a percentage of revenues   15 %   19 %   12 %   18 %
       
Adjusted EBITDA, as a percentage of revenues   17 %   20 %   14 %   20 %
 
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2019 2018 Pct Chg. 2019 2018 Pct Chg.
NON-GAAP EARNINGS PER SHARE:
Net Earnings (GAAP Basis) $ 2,301 $ 5,580 (59 %) $ 4,929 $ 10,785 (54 %)
Tax Cuts and Jobs Act of 2017 Adjustment (3) (1,112 ) nm (1,112 ) nm
Amortization of acquisition-related intangibles (2) 519 398 30 % 1,649 855 93 %
Stock-based compensation (2)   405     243   67 %   1,204     777   55 %
Adjusted Net Earnings $ 3,225   $ 5,109   (37 %) $ 7,782   $ 11,305   (31 %)
 
Adjusted non-GAAP diluted earnings per share $ 0.10   $ 0.16   (38 %) $ 0.25   $ 0.38   (34 %)
 
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2019 2018 Pct Chg. 2019 2018 Pct Chg.
NON-GAAP Earnings Per Share
Net Earnings (GAAP Basis) $ 0.07 $ 0.18 (61 %) $ 0.16 $ 0.36 (56 %)
Tax Cuts and Jobs Act of 2017 Adjustment (3) (0.04 ) nm (0.04 ) nm
Amortization of acquisition-related intangibles (2) 0.02 0.01 100 % 0.05 0.03 67 %

Stock-based compensation (2)

  0.01     0.01   0 %   0.04     0.03   33 %
Adjusted Net Earnings $ 0.10   $ 0.16   (38 %) $ 0.25   $ 0.38   (34 %)
 
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2019 2018 Pct Chg. 2019 2018 Pct Chg.
Amortization of acquisition-related intangibles
Cost of license $ 500 $ 419 19 % $ 1,500 $ 732 105 %
Operating expenses   97     95   2 %   291     486   (40 %)
Total amortization of acquisition-related intangibles $ 597   $ 514   16 % $ 1,791   $ 1,218   47 %
 
Stock-based compensation
Cost of revenues $ 35 $ 38 (8 %) $ 96 $ 121 (21 %)
Research and development 35 16 119 % 98 74 32 %
Sales and marketing 71 50 42 % 189 160 18 %
General and administrative   325     210   55 %   925     752   23 %
Total stock-based compensation $ 466   $ 314   48 % $ 1,308   $ 1,107   18 %
 
 
(1) – Basic per share amounts are the same for Class A and Class B
shares. Diluted per share amounts for Class A shares are shown
above. Diluted per share for Class B shares under the two-class
method are $0.07 and $0.16 for the three and nine months ended
January 31, 2019, respectively. Diluted per share for Class B shares
under the two-class method are $0.18 and $0.36 for the three and
nine months ended January 31, 2018, respectively.
(2) – Tax affected using the effective tax rate for the three and
nine month periods ended January 31, 2019 and 2018.
(3) – Adjustment primarily due to the rate difference on our
Deferred Tax Liabilities from the Tax Cuts and Jobs Act of 2017.
 
nm- not meaningful
 
 
 
 
AMERICAN SOFTWARE, INC.
Consolidated Balance Sheet Information
(In thousands)
(Unaudited)
        January 31,     April 30,
2019 2018
 
Cash and Cash Equivalents $ 55,058 $ 52,794
Short-term Investments 28,106 26,121
Accounts Receivable:
Billed 20,298 18,643
Unbilled   2,992   3,375
Total Accounts Receivable, net 23,290 22,018
Prepaids & Other   6,184   6,592
Current Assets 112,638 107,525
 
Investments – Non-current 998 8,893
 
PP&E, net 3,561 3,034
Capitalized Software, net 10,497 9,728
Goodwill 25,888 25,888
Other Intangibles, net 3,329 5,120
Other Non-current Assets   3,910   2,777
Total Assets $ 160,821 $ 162,965
 
Accounts Payable $ 1,789 $ 1,974
Accrued Compensation and Related costs 2,909 6,310
Dividend Payable 3,417 3,367
Other Current Liabilities 1,279 1,246
Deferred Revenues – Current   32,947   33,226
Current Liabilities 42,341 46,123
 
Deferred Revenues – Non-current 147
Deferred Tax Liability – Non-current 3,027 2,615
Other Long-term Liabilities   1,097   1,496
Long-term Liabilities 4,124 4,258
   
Total Liabilities 46,465 50,381
 
Shareholders’ Equity 114,356 112,584
   
Total Liabilities & Shareholders’ Equity $ 160,821 $ 162,965
 
 
 
 
AMERICAN SOFTWARE, INC.
Condensed Consolidated Cashflow Information
(In thousands)
(Unaudited)
             
Nine Months Ended
January 31,
2019 2018
 
Net cash provided by operating activities $ 13,608 $ 5,351
 
Capitalized computer software development costs (4,162 ) (3,652 )
Purchases of property and equipment, net of disposals (1,014 ) (413 )
Purchase of business, net of cash acquired (9,253 )
   
Net cash used in investing activities (5,176 ) (13,318 )
 
Dividends paid (10,172 ) (9,841 )
Proceeds from exercise of stock options 4,004 6,719
   
Net cash used in financing activities (6,168 ) (3,122 )
 
Net change in cash and cash equivalents 2,264 (11,089 )
Cash and cash equivalents at beginning of period 52,794 66,001
   
Cash and cash equivalents at end of period $ 55,058   $ 54,912  
 
 
 

Contacts

Vincent C. Klinges
Chief Financial Officer
American Software,
Inc.
(404) 264-5477

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