Logility Supply Chain Solutions Inc (LGTY) 2004 Q3 法說會逐字稿

Good day. All sites are now on the conference line in a listen-only mode. I'd like to turn the program over to one of your hosts today, Mr. Vince Klinges.

Good morning. Welcome to American Software's third-quarter fiscal '04 conference call. To begin I would like to remind you that this conference call may contain forward-looking statements including statements regarding, among other things, our business strategy and growth strategy. Any such forward-looking statements speak only as of this date. These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, some of which can not be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.

There are a number of factors could cause actual results to differ materially from those anticipated by statements made on this call. Such factors include, but are not limited to, changes in general economic conditions, the growth rate of the market for our products and services, the timely availability and market acceptance of these products and services, the affect of competitive product pricing, and the regular pattern of revenue. In light of these risks and uncertainties there can be no assurance that the forward-looking information will prove to be accurate. At this time I'd like to turn the call over to Mike Edenfield, Executive Vice President of American Software and CEO of Logility.

Thank you, Vince, good morning, everyone. Also with us on the call today from American Software is Jeff Coombs. Jeff is the Executive Vice President and Chief Operating Officer of American Software USA.

Yesterday following the close of the market we reported our financial results for the third-quarter of fiscal year 2004 which ended on January 31st. We are very pleased that we have been able to report 12 consecutive positive (ph) quarters within a challenging operating environment. Hopefully the economic environment going forward will include increases in corporate capital expenditures commensurate with the growth of the overall economy. We believe that increases in our sales pipelines are confirming that this time view will be the case for American Software.

We currently have all the ingredients to be successful as the economy continues to gain momentum. These ingredients include -- a large and diversified customer base which we're satisfied will give us excellent references; a strong record of profitability during a down market, which lends the aura of continuity and stability, which are important to companies seeking a software partner; state-of-the-art products with comprehensive research and development that follows an achievable vision of the future; highly skilled and highly motivated employees; both Logility and New Generation are poised to grow. We are optimistic about the increases in the pipelines of both of those companies. We have a strong balance sheet with approximately $66.5 million in cash and investments and we have no debt.

During the quarter contracts we're paying from, among others, Aspen Pet Products, Caremark, Delco Remy International, Harley Davidson, Malt-O-Meal, Northwest Airlines, Reliable Sprinkler, Rich-Seapak, Saks Inc., Standard Motor Products, West Pharmaceutical, Williamson-Dickie Manufacturing, U.S. Can, as well as a well-known branded apparel company. This represented a healthy mix of new and existing customers.

Some details about a few of these customer orders -- Logility announced that Aspen Pet Products, a private manufacturer of high-quality pet care products, selected Logility Voyager Solutions to improve their inventory management, increase forecast accuracy and enable supply chain collaboration between sales and distribution.

Malt-O-Meal Company, who is the nation's fifth-largest cereal manufacturer and supplier of a full line of branded bag cereals and private-label cereals to the grocery industry, has extended its use of Logility Voyager Solutions to include transportation planning and management with Internet available carrier collaboration. The additional Logility software creates an opportunity to extend the supply chain down since Malt-O-Meal has already received from Logility's Voyager Demand inventory replenishment plan.

During the quarter New Generation Computing licensed its global sourcing suite, ESPF (ph), to a major furniture manufacturer. Furniture manufacturers are undergoing a major shift in production from U.S.-based production to global imports from South America and Asia. The furniture industry, like many industries, is struggling with speed to market and visibility into its shifting sources of production. This is our first penetration with this product line into the furniture industry, but we think we have an opportunity to sell many more companies in that market space.

The company announced that Reliable Automatic Sprinkler has licensed its logistics financial manufacturing systems to run Reliable's upgraded IBM e-server iSeries platform. Reliable has been a customer since 1992 operating the software on various IBM and (indiscernible) platforms.

The company announced that Caremark licensed its purchasing materials management, forecasting, inventory planning, Accounts Payable, capital projects and fixed asset systems from Caremark's upgraded IBM e-server zSeries mainframe platform.

U.S. Can Company licensed additional components of the company's e-application suite of Web-based products to enable U.S. Can to conduct business seamlessly over the Internet utilizing both the company's e-server iSeries from IBM based ERP solutions and its Web-based e-commerce applications.

These are just a few of the accounts that contributed to our license fee growth this quarter and we are definitely pleased with the license fees we generated this quarter and we're pleased that our pipelines are continuing to grow. We're prepared to facilitate that growth by adding sales and marketing personnel as appropriate. We closely monitor our pipelines by each individual sale and in order to determine when and how may additional salespeople to employ. Using this concept, we can readily take advantage of growth opportunities while maintaining tight cost controls. And if our pipelines continue to grow we do anticipate adding salespeople in the short term.

I'd now like to turn it back over to Vince Klinges to review the detailed financial results of the quarter.

Thanks, Mike. Taking a look at the third-quarter of fiscal '04 compared to the same period last year, total revenues for the quarter were 14.6 million compared to 14.9 million in the same quarter last year. License fees were up 9 percent to 3.8 million compared to 3.5 million last year. Services and other revenues were 6.3 million compared to 6.5 million, and our maintenance revenues were 4.5 million compared to 4.9 million. That was primarily lower due to the ERP maintenance renewal being lower.

Taking a look at the costs, our gross margin was 54 percent for the quarter compared to 51 percent the same quarter last year. Our license fee margin was 71 percent this quarter compared to 66 percent, and that was due to increase of software sales this quarter. Services margins were 28 percent this quarter compared to 26 percent due to cost containment efforts. And our maintenance margin this quarter was 75 percent compared to 73 percent, again due to cost containment efforts.

Looking at operating expenses, our gross R&D expenses were 13 percent of total revenue, primarily the same as last year. As a percentage of revenue, sales and marketing expenses were 20 percent of revenues or 2.9 million for the quarter compared to 19 percent same quarter last year. And G&A expenses were down 1 percent to 2.4 million this quarter compared to last year.

Operating income was up 46 percent to 1.5 million this quarter compared to operating income of 1 million in the same quarter a year ago. EBITDA was 2.9 million compared to 2.4 million in the same period last year. And net income from continuing operations was 2.1 million and our earnings per diluted share of 8 cents this quarter compared to net income from continuing operations of 1.1 million or earnings per share of 5 cents for the same period last year.

Our international revenues this quarter were 7 percent of total revenues compared to 17 percent the same quarter last year. Taking a look at the nine months ended January 31, 2004 to the same periods last year, our total revenues were 41.3 million compared to 44.3 million same period last year. And our license fees increased 3 percent to 9.4 million compared to 9.1 million same period last year.

Services revenues were 18.2 million compared to 20.2 million same period last year, and our maintenance revenues were 13.6 million compared to 15 million in the same period last year. Overall gross margin was 54 percent compared to 51 percent in the nine-month period last year, primarily due to an increase of services margins which were 32 percent compared to 30 percent same period last year, and our maintenance margin which was 74 percent compared to 71 percent during the same period last year. Both of these areas have improved due to cost containment efforts. Our license fee margin decreased slightly to 65 percent to 66 percent last year primarily due to higher software amortization costs this year.

Taking a look at operating expenses, our gross R&D expenses were 14 percent of total revenues, which were unchanged compared to the same period last year. As a percentage of total revenue, sales and marketing expenses were 20 percent compared to 19 percent same period last year, and our G&A expenses, including (indiscernible) reserves were 17 percent of revenues compared to 16 percent in the same period last year.

Operating income year-to-date increased 19 percent to 3.5 million compared to 2.9 million last year. Our EBITDA year-to-date is 7.7 million versus 6.9 million, and our net income from continuing operations was 5.5 million year-to-date or 22 cents earnings per share compared to net income from continuing operations of 3.7 or 16 cents earnings per share. Our international revenues year-to-date were approximately 7 percent of total revenues compared to 13 percent the same period last year.

Taking a look at the balance sheet, our financial position remains strong with cash and investments at approximately 66.5 million at the end of the third-quarter and no debt. Our cash increased 3.6 million sequentially from the end of the previous quarter at approximately 8.4 million compared to the same period last year. Also during the quarter we paid a quarterly dividend of 6 cents per share or approximately 1.4 million and we purchased approximately 60,000 American Software shares for a total cost of 377,000 under our authorized stock buyback program. And we have approximately 1.75 million shares remaining to purchase under that program.

Some other aspects of the balance sheet, our accounts receivable billed is 6.5 million, unbilled is 2.4 million for a total accounts achievable of 8.9 million. Our working capital is 59.8, our deferred revenues are 9.3, and stockholder equity is 76.9. Our current ratio is 4.7 and our Day Sales Outstanding is approximately 59 days and that compares to 72 days the same period last year. At this time I'd like to turn the call over to questions.

(OPERATOR INSTRUCTIONS) Patrick Flavin of Flavin, Blake & Co.

You referred in your text, Mike, to income from continuing operations. Are there non continuing operations?

Not this quarter. Vince, do you want to elaborate?

Yes, Pat. Last year at this time we had a gain on sale discontinuing segment that was related to our divestiture of AmQUEST, so that's why I'm referring to the continuing operations.

Okay, understood. And then finally, the increase in the fully diluted shares outstanding I assume are a function of the increased stock price, is that right?

That's right, Pat.

Okay. Thank you.

(OPERATOR INSTRUCTIONS) It appears we have no further questions.

Thank you very much for your time this morning and your interest in American Software. We're pleased with the progress we made this quarter and enthusiastic about continuing that progress this quarter and beyond.

Thank you. This does conclude today's teleconference. We thank you for participating and you may now disconnect your phone lines. Have a great day.