Logility Supply Chain Solutions Inc (LGTY) 2005 Q1 法說會逐字稿

Good day. All sites are currently online in a listen-only mode. (OPERATOR INSTRUCTIONS). At this time, I'd like to turn the program over to Mr. Vince Klinges, CFO of American Software. Please go ahead, sir.

Good morning. Welcome to American Software's first quarter '05 conference call. To begin, I’d 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 cannot 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 that 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; growth rate of the market for our products and services; the timely availability and a market acceptance of these products and services; the effect of competitive products and pricing; and the irregular pattern of revenues. 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 Jim Edenfield, CEO of American Software.

Good morning, ladies and gentlemen. We are pleased to report the results of the first quarter of fiscal '05 which ended on July 31st. The quarter marked our 14th consecutive quarter of profitability under GAAP. Results were generally in line with our expectations. We were pleased with an overall increase in revenues from the standpoint that the increase is the beginning of the beginning. We continue to believe that opportunities exist to have both license fee and total revenue increases during fiscal '05, with the result of profitability increase as well.

The economy continues to improve, although on a slower pace than everyone had wished. During the downturn, we positioned the company to take advantage of the upturn. A good indication of this effort is the initial market acceptance of two of our newer software products, Internet Product Development Manager and Red Horse. Internet Product Development Manager, when combined with our Global Internet Sourcing and production system enables companies involved with design and production to increase speed to market, reduce cost, manage by exception, globally source products, and enhance workflow.

Red Horse is a state-of-the-art ERP system with special emphasis on the apparel industry. Sales of these two products introduced only last quarter have been made with the implementation proceeding in a very smooth manner. All this bodes well for future sales of these two exciting new products.

I'd like to summarize a few significant highlights which occurred during the quarter. Customers placing orders with the Company included Alamex, Broyhill, Certified Grocers, Cytec, Dow Chemical, Draka Elevator, Gold Toe, Landau Uniformas, Newell Rubbermaid, Oakley, Polaris Industries, Rheem Air Conditioning, Robert Horne Paper, Rocky Shoes and Boots, Roca Apparel, Trelleborg Wheel Systems, Tyco Adhesives and VF Corp.

Carhart (ph) selected the Production Manager Shop Floor Control and manufacturing execution software. They have begun the implementation at their North American cutting, sewing, finishing and distribution facilities. There the software will automate the Company's production and payroll functions. The software will enable Carhart to better track employee performance, monitor work in progress, calculate gross pay, and develop multiple management reports.

A.O. Smith Water Products Company extended its deployment of Logility Voyager Systems to include collaborations with better internal and external communications and planning for optimizing inventory based on accurate forecasts and lead times.

Komatsu Europe International, a worldwide leader in the field of construction and mining equipment, implemented Logility Voyager Solutions to improve forecasting accuracy, centralize supply chain planning, and maintain consistent customer service levels across its distribution network. Logility is a key component in Komatsu's efforts to continuously improve supply chain efficiencies and has contributed to an inventory reduction of EUR4 million.

Rheem Manufacturing's air conditioning division, one of North America’s leading producers of premium heating and cooling equipment, selected Logility Voyager Solutions to gain improved visibility of demand and inventory, reduce costs, and increase customer service levels for service parts and finished goods.

As we said, we're very pleased that we have been able to report 14 consecutive profitable 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. This positive view seems to be the consensus among leading economists. We believe that increases in our sales pipelines are confirming that this positive view will be the case for American Software.

Currently we have all of the ingredients to experience solid profitable growth as economic growth gains momentum. These ingredients include a large and diversified customer base, which is satisfied and will give us excellent references; a record of profitability during a down market lends an aura of continuity and stability, which are important to companies seeking a software partner; our products are state-of-the-art and our comprehensive research and development follows an achievable vision of the future; our employees are both highly skilled and highly motivated; both Logility and New Generation, our subsidiaries, are poised to achieve rapid growth. We are optimistic about the increases in future order backlogs as compared to this time last year.

We have a strong balance sheet with approximately 67 million in cash and investments and no debt. We are prepared to facilitate growth by adding sales and marketing personnel as appropriate. We closely monitor pipelines by individual salesmen and use a capacity index to determine when and how many additional sales personnel to employ. Using this concept, we can rapidly take advantage of growth opportunities while maintaining tight cost controls. We anticipate further expansion of our sales force during each quarter this year.

I'd like to ask Vince to review the financial details, and then we'll take your questions.

Thanks, Jim. Comparing the first quarter of fiscal '05 with the same period last year, total revenues for the quarter increased 5 percent to 13.7 million compared to 13.1 million in the same quarter last year. License fees were 2.6 million for both the current and last year's fiscal quarter -- first quarter. Services and other revenues were 6.8 million compared to 5.8 million, due to increases in our ERP and IT staffing business. Maintenance revenues were 4.4 million compared to 4.6 million, primarily due to lower ERP maintenance renewal.

Taking a look at cost for the quarter, the gross margin was 51 percent for the quarter compared to 52 percent in the same quarter last year. License fee margin increased to 65 percent compared to 61 percent, the lower capitalized software amortization cost when compared to last year. Our services margins were 30 percent this quarter compared to 32 percent. Our maintenance margin this quarter was 73 percent for both the current and the same quarter last year.

Looking at operating expenses -- our gross R&D expenses were 13 percent of total revenues for the current quarter compared to 15 percent in the same quarter last year. As a percentage of revenue, sales and marketing expenses were 21 percent of revenues, or 2.9 million for the quarter compared to 23 percent for the same quarter last year. G&A expenses, including bad debt, were 2.3 million or 17 percent of total revenues, which is the same as last quarter last year.

Operating income increased 35 percent to 565,000 this quarter compared to 420,000 the same quarter a year ago. Our EBITDA was 1.7 million, compared to 1.8 million this same period last year. Net income was 1.2 million for earnings per diluted share of $0.05 per share in the first quarter this year. And that compares to 1.1 million or earnings per share of $0.05 the same period last year. Our international revenues this quarter were approximately 6 percent of total revenues compared to 7 percent in the same quarter last year.

Looking at our balance sheet, the Company's financial position remains strong with cash and short-term and long-term investments of approximately 67.1 million at the end of the first quarter and no debt. The cash investments increased approximately 4.4 million when compared to the end of July 31st, 2003. During the quarter, we paid a quarterly dividend of $0.06 per share, or a total of approximately 1.4 million. And also during the quarter, our 86-percent-owned subsidiary, Logility, purchased 37,000 Logility shares under its stock buyback program for a total cost of $167,000.

Other aspects of our balance sheet -- our billed accounts receivable is 5.5 million; our unbilled 3.1 for a total of 8.6. Our working capital is 59.4 million. Our deferred revenues are 9.9 million. Stockholder equity is 76.4 million. Our current ratio is 4.7 and our day sales outstanding is approximately 61 days when compared to 71 days last year.

At this time, I would like to turn the call over to questions. Tony?

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

Starting at the top, your license revenue was down marginally for the quarter versus a year ago. On the earnings release last night, Logility's license revenue was up for the quarter. That implies that non-Logility licenses were down. Can you help us out with some of the math on that?

I think that in the quarter that we were comparing to, was NGC's largest quarter last year. They had probably about three times their normal quarter last year, and so they weren't able to equal that in this particular quarter. But they did well and we anticipate they will continue to grow.

And on the services revenues, there was a very nice pickup there and you've indicated that you are up-staffing in that area. Jim, can you talk a little bit about that too?

Well, I think that's a reflection of the improvement in the economy. We see various customers are now increasing their budgets (indiscernible) help them improve their operations. So we anticipate that to increase also. And we were also fortunate that we did not have any longer-term service agreements terminate during the quarter. So, in balance; we are on balance; we are optimistic about the potential to grow services going forward.

And you made some favorable comments in terms of backlog and order potential, etc. And on the call last night, again, Logility indicated that there was a heightened level of activity in the marketplace. Are you seeing that in terms of your other product lines in addition to Logility as well?

We are seeing it more in Logility than in the other product lines. But we are also seeing it in those areas as well.

Okay. Thank you.

(OPERATOR INSTRUCTIONS). At this time, we have no further questions.

If we have no further questions, we would like to thank everyone for joining us on this conference call. We’ll go back to work and look forward to talking to you this time next quarter.

Thank you. This does conclude today’s teleconference. You may disconnect at any time. Have a great day.