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QAD
Inc. (QADA) (QADB), a leading provider of enterprise
software and services for global manufacturing companies, today
reported financial results for the fiscal 2013 second quarter ended July
31, 2012.
Total revenue was $61.0 million for the second quarter of fiscal 2013,
compared with $62.0 million for the second quarter of fiscal 2012. The
decrease was principally the result of lower license revenue driven
primarily by the slowdown in the global manufacturing economy, as well
as the impact of foreign exchange on maintenance and professional
services revenue.
License revenue was $6.9 million for the fiscal 2013 second quarter,
compared with $8.6 million for the same period last year. Maintenance
and other revenue totaled $33.9 million, compared with $35.4 million for
last year’s second fiscal quarter. Professional services revenue
increased to $16.4 million, from $15.7 million for the second quarter of
fiscal 2012. Subscription revenue, which includes QAD’s On Demand
deployment option, grew to $3.7 million, from $2.3 million for last
year’s fiscal second quarter.
Net income for the fiscal 2013 second quarter was $959,000, or $0.06 per
diluted Class A share and $0.05 per diluted Class B share. Net income
for the fiscal 2013 second quarter was negatively impacted by $588,000,
or $0.04 per diluted Class A share and $0.03 per diluted Class B share,
due to a mark-to-market adjustment for an interest rate swap related to
the refinancing of QAD’s mortgage on its Santa Barbara headquarters. Net
income for the fiscal 2012 second quarter was $3.1 million, or $0.19 per
diluted Class A share and $0.16 per diluted Class B share.
"While we saw good performance in some territories and in our Precision
division, overall performance was negatively impacted by the slowing
global manufacturing economy," said Karl Lopker, CEO of QAD Inc. "In
response, we have implemented cost containment initiatives to improve
our profitability. At the same time, we still see areas of opportunity
and are putting greater emphasis on initiatives that support our
customers in this uncertain climate."
Gross profit for the fiscal 2013 second quarter was $34.0 million, or 56
percent of total revenue, compared with $35.1 million, or 57 percent of
total revenue, for the fiscal 2012 second quarter.
Total operating expenses amounted to $32.4 million, or 53 percent of
total revenue, for the fiscal 2013 second quarter, versus $30.5 million,
or 49 percent of total revenue, for the same period last year.
Operating income for the fiscal 2013 second quarter was $1.6 million,
which included $1.4 million in stock compensation expense, compared with
$4.6 million, including $1.2 million in stock compensation expense, for
the second quarter of the last fiscal year.
For the first six months of fiscal 2013, total revenue rose to $124.7
million, from $121.4 million for the first six months of fiscal 2012.
Net income for the fiscal 2013 year-to-date period was $2.8 million, or
$0.18 per diluted Class A share and $0.15 per diluted Class B share. Net
income for the fiscal 2012 year-to-date period was $4.1 million, or
$0.26 per Class A share and $0.21 per Class B share.
QAD’s cash and equivalents balance was $73.8 million at July 31, 2012,
compared with $76.9 million at January 31, 2012. Cash provided by
operations was $6.4 million for the second quarter of fiscal 2013,
versus $7.8 million for the fiscal 2012 second quarter.
During the second quarter of fiscal 2013, QAD purchased 149,000 Class A
shares of its common stock at an average price of $13.12 per share, and
12,000 Class B shares at an average price of $12.82 per share, for a
total expenditure of approximately $2.1 million. Approximately 328,000
shares remain available under the previously authorized one million
share repurchase program.
During the second quarter of fiscal 2013, QAD paid quarterly dividends
totaling $1.1 million, of which $893,000 was paid in cash and the
remainder in common stock.
2013 Second Quarter Highlights:
--
Received orders from 11 customers representing more than $500,000 each
in combined license, maintenance, subscription and professional
services billings, including four orders in excess of $1.0 million;
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Received license or On Demand orders from companies across QAD’s six
vertical markets, including: Biomet Japan, ECE, FCI Automotive
Holdings, Gemalto, HeartWare, INOAC Exterior Products, Intertechnique,
Lear Automotive India, MedTech Group, Metalsa, Musculoskeletal
Transplant, NHK Spring (Thailand), Yamamoto FB Engineering, and
Yangfeng Visteon Automotive, among others;
--
Hosted Explore 2012 Global Customer Conference in Atlanta;
--
Named 2012 "Partner of the Year" by Progress Software in recognition
of the company’s collaboration in solving customer business
challenges; and
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Acquired DynaSys S.A., a leading provider of supply chain planning
software solutions.
Business Outlook
For the third quarter of fiscal 2013, QAD expects total revenue of
approximately $62 million and earnings of approximately $0.10 per
diluted Class A share and $0.08 per diluted Class B share.
Calculation of Earnings Per Share
EPS is reported based on the company’s dual-class share structure, and
includes a calculation for both Class A and Class B shares. Since Class
A shares have rights to 120% of dividends paid on Class B shares, net
income is apportioned so that earnings per share attributable to a Class
A share are 120% of earnings per share attributable to a Class B share.
Investor Conference Call
QAD management will host an investor conference call today at 2:00 p.m.
PT (5:00 p.m. ET) to review the company’s financial results and
operations for the fiscal 2013 second quarter. The conference call will
be webcast live and is accessible through the investor relations section
of QAD’s web site at www.qad.com,
where it will be available for approximately one year. Interested
parties may participate in the call by dialing 800-230-1059 (domestic)
or 612-234-9959 (international). A replay of the call will be accessible
through August 30, 2012 by dialing 800-475-6701 (domestic) or
320-365-3844 (international), passcode 250576.
About QAD
QAD is a leading provider of enterprise applications for global
manufacturing companies specializing in automotive, consumer,
electronics, food and beverage, industrial and life sciences products.
QAD applications provide critical functionality for managing
manufacturing resources and operations within and beyond the enterprise,
enabling global manufacturers to collaborate with their customers,
suppliers and partners to make and deliver the right product, at the
right cost and at the right time. For more information about QAD,
telephone +1 805-566-6000, or visit the QAD web site at www.qad.com.
"QAD" is a registered trademark of QAD Inc. All other products or
company names herein may be trademarks of their respective owners.
Note to Investors: This press release contains certain
forward-looking statements made under the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995, including, but not
limited to, statements relating to the company’s revenue outlook and
earnings per share outlook for the third quarter of fiscal 2013. Words
such as "expects," "believes," "anticipates," "could," "will likely
result," "estimates," "intends," "may," "projects," "should," and
variations of these words and similar expressions are intended to
identify these forward looking statements. Forward-looking
statements are based on the company’s current expectations and
assumptions regarding its business, the economy and future conditions.
A number of risks and uncertainties could cause actual results to
differ materially from those in the forward-looking statements. These
risks include, but are not limited to, evolving demand for the company’s
software products and products that operate with the company’s products;
the company’s ability to sustain license and service demand; the
company’s ability to leverage changes in technology; the company’s
ability to sustain customer renewal rates at current levels; the
publication of opinions by industry and financial analysts about the
company, its products and technology; the reliability of estimates of
transaction and integration costs and benefits; the entry of new
competitors or new offerings by existing competitors and the associated
announcement of new products and technological advances by them; delays
in localizing the company’s products for new or existing markets; the
ability to recruit and retain key personnel; delays in sales as a result
of lengthy sales cycles; changes in operating expenses, pricing, timing
of new product releases, the method of product distribution or product
mix; timely and effective integration of newly acquired businesses;
general economic conditions; exchange rate fluctuations; and, the global
political environment. In addition, revenue and earnings in the
enterprise resource planning (ERP) software industry are subject to
fluctuations. Software license revenue, in particular, is subject
to variability with a significant proportion of revenue earned in the
last month of each quarter. Given the high margins associated
with license revenue, modest fluctuations can have a substantial impact
on net income. Investors should not use any one quarter’s results
as a benchmark for future performance. For a more detailed
description of the risk factors associated with the company and the
industries in which it operates, please refer to the company’s Annual
Report on Form 10-K for fiscal 2012 ended January 31, 2012, and in
particular, the section entitled "Risk Factors" therein, and in other
periodic reports the company files with the Securities and Exchange
Commission.
QAD Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
-------------------- ----------------------
2012 2011 2012 2011
------------- ------------- -------------- --------------
Revenue:
License fees $ 6,906 $ 8,550 $ 14,771 $ 14,894
Maintenance and other 33,886 35,393 68,406 69,731
Subscription fees 3,745 2,322 6,968 4,530
Professional services 16,432 15,692 34,532 32,205
------ ------ ------- -------
Total revenue 60,969 61,957 124,677 121,360
Cost of revenue:
License 832 1,004 1,713 2,035
Maintenance, subscription and other 10,341 9,067 20,341 17,842
Professional services 15,846 16,741 31,584 33,029
------ ------ ------- -------
Total cost of revenue 27,019 26,812 53,638 52,906
------ ------ ------- -------
Gross profit 33,950 35,145 71,039 68,454
Operating expenses:
Sales and marketing 14,747 13,864 30,243 28,353
Research and development 9,210 9,237 18,744 17,720
General and administrative 8,435 7,397 16,540 15,110
------ ------ ------- -------
Total operating expenses 32,392 30,498 65,527 61,183
------ ------ ------- -------
Operating income 1,558 4,647 5,512 7,271
Other (income) expense:
Interest income (164 ) (146 ) (327 ) (282 )
Interest expense 330 287 616 557
Other (income) expense, net 92 (356 ) 538 462
------ ------ -- ------- -------
Total other (income) expense 258 (215 ) 827 737
------ ------ -- ------- -------
Income before income taxes 1,300 4,862 4,685 6,534
Income tax expense 341 1,792 1,882 2,444
------ ------ ------- -------
Net income $ 959 $ 3,070 $ 2,803 $ 4,090
== ====== == ====== == ======= == =======
Diluted Net Income per Share
Class A $ 0.06 $ 0.19 $ 0.18 $ 0.26
Class B $ 0.05 $ 0.16 $ 0.15 $ 0.21
Diluted Weighted Shares
Class A 13,082 13,297 13,144 13,242
Class B 3,264 3,294 3,274 3,288
QAD Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
July 31, January 31,
2012 2012
---------------- ----------------
Assets
Current assets:
Cash and equivalents $ 73,843 $ 76,927
Accounts receivable, net 36,343 64,757
Deferred tax assets, net 4,365 4,355
Other current assets 11,448 11,853
------- -------
Total current assets 125,999 157,892
Property and equipment, net 33,106 33,139
Capitalized software costs, net 2,334 583
Goodwill 8,739 6,412
Long-term deferred tax assets, net 17,427 17,285
Other assets, net 3,982 2,834
------- -------
Total assets $ 191,587 $ 218,145
=== ======= === =======
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt $ 388 $ 321
Accounts payable and other current liabilities 31,805 40,823
Deferred revenue 77,111 93,871
------- -------
Total current liabilities 109,304 135,015
Long-term debt 15,659 15,813
Other liabilities 6,095 5,302
Stockholders’ equity:
Common stock 18 18
Additional paid-in capital 148,601 148,993
Treasury stock (28,762 ) (27,968 )
Accumulated deficit (49,344 ) (48,974 )
Accumulated other comprehensive loss (9,984 ) (10,054 )
------- --- ------- ---
Total stockholders’ equity 60,529 62,015
------- -------
Total liabilities and stockholders’ equity $ 191,587 $ 218,145
=== ======= === =======
QAD Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Six Months Ended
July 31,
--------------------------------
2012 2011
--------------- ---------------
Net cash provided by operating activities $ 11,445 $ 13,307
Cash flows from investing activities:
Purchase of property and equipment (2,029 ) (1,969 )
Capitalized software costs (199 ) (117 )
Acquisition of businesses, net of cash acquired (4,713 ) (6 )
Other, net 2 19
------ ------
Net cash used in investing activities (6,939 ) (2,073 )
Cash flows from financing activities:
Repayments of debt (111 ) (172 )
Tax payments, net of proceeds, related to stock awards (786 ) (356 )
Excess tax benefits from share-based payment arrangements 51 11
Repurchase of stock (3,899 ) -
Dividends paid in cash (1,841 ) (645 )
------ --- ------ ---
Net cash used in financing activities (6,586 ) (1,162 )
Effect of exchange rates on cash and equivalents (1,004 ) 1,490
------ --- ------
Net (decrease) increase in cash and equivalents (3,084 ) 11,562
Cash and equivalents at beginning of period 76,927 67,276
------ ------
Cash and equivalents at end of period $ 73,843 $ 78,838
=== ====== === ======
SOURCE: QAD Inc.
QAD Inc.
John Neale
Senior Vice President and Treasurer
805.566.5117
investor@qad.com
or
PondelWilkinson Inc.
Laurie Berman/Matt Sheldon
310.279.5980
pwinvestor@pondel.com
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