Logility Supply Chain Solutions Inc (LGTY) 2012 Q1 法說會逐字稿

Good day, everyone, and welcome to today's program. All participants are currently in a listen only mode. Please note this call will be recorded. And it is now my pleasure to turn the call over to Vince Klinges, Chief Financial Officer of American Software. Please go ahead.

Good afternoon, and welcome to our first quarter of fiscal 2012 earnings announcement. 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 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 could cause actual results to differ materially from those anticipated on statements -- 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 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 would like to turn the call over to Mike Edenfield, COO of American Software and CEO of Logility.

Thanks, Vince. Good afternoon, everyone, thank you for participating in the call. I have some comments on the fiscal 2012 first quarter results, Vince will review the details on the financial results for the quarter, and then we will take your questions. American Software had another outstanding quarter. We had strong growth and license fees, which were $6.7 million, an increase of 139% over last year's first quarter. Both of our Logility brands had outstanding results, together contributing $6.4 million of the $6.7 million the license fee revenue. That is the most Logility has ever done in a first quarter. Maintenance revenue growth was solid at 10%, and services revenue slightly increased. The first quarter last year was the last quarter of a large ERP service account.

We actually increased services and other subsidiaries, including a 47% increase in Logility services revenues to make up for that discontinued account. All together, revenue increased 24%, which drove a 78% increase in operating earnings compared to first quarter last year. 24 new customers signed license agreements in the first quarter compared to 20 new accounts first quarter last year. Customers from 15 different countries signed license agreements with the Company. Those countries include Australia, Belgium, Brazil, Cyprus, France, Germany, Iceland, Poland, the Netherlands, New Zealand, Singapore, South Africa, Sweden, the United Kingdom and the United States. Some notable new and existing customers include Actron Air, Advanced Energy Industries, BRT -- excuse me, BRK Brands, which is a subsidiary of Jarden, McWilliams Wine Group, Ossur Europe, which is an Iceland-based company. Sandvik, a Swedish-based company and Triboro Quilt Manufacturing. Continue to be encouraged by the number of new customers licensing our products as new customers are a source of future maintenance and implementation services revenue, as well is being great prospects for additional product sales.

As we look at the second quarter and remainder of fiscal 2012, our pipeline remains strong. There is robust interest from our customer base, as well as new potential customers. We have excellent activity in our inventory optimization products as well as our traditional supply chain solutions, and we have some large deals in the pipeline. Based on our pipeline, it is our belief that we will increase license fee revenues, total revenues, operating earnings and net income compared to the second quarter last year.

I would now like to turn the call over to Vince for a detailed review of financial results for the first quarter. Thank you.

Thanks, Mike. Comparing the first quarter of fiscal 2012 over the same period last year, as Mike indicated, our total revenues for the quarter increased 24% to $23.7 million, that compares to $19.1 million in the same quarter last year. That was driven primarily due to license fees, which increased 139% to $6.7 million compared to $2.8 million for the same period last year. Services and other revenues were $9.3 million for the current quarter compared to $9.2 million last year. Services revenues increased by 47% at Logility and 10% in our IT consulting unit, and this increase was offset by a decrease at our ERP unit from the discontinued services of a large customer in the second quarter of last year. Maintenance revenues increased 10% to $7.8 million compared to $7.1 million, primarily due to increased license fees and improved retention.

Looking at costs, the overall gross margin increased to 56% for the current quarter and that compares to 53% for the same quarter last year. Our license fees margin was 73% compared to 75% last year. This decrease was primarily due to the increase in software amortization expense from our Logility product release, Voyager 8, at the beginning of second quarter of last year. Our services margins decreased to 25% compared to 29% for the same period last year. This is due to increased service revenues coming from our IT consulting business unit, which has lower margins, and lower margins from our ERP unit from the discontinued services to a large customer in the second quarter of last year. Our maintenance margin was 77% for both the current and prior-year quarter.

Looking at operating expenses, our gross R&D expenses were 11% of total revenues for the current quarter, and that compares to 13% for the same period last year, and that's due to higher revenues. As a percentage of revenues, sales and marketing expenses were 18% of revenues for the quarter, and that compares to 17% for the same quarter last year. G&A expenses were 14% of total revenues, that's down from 15% for the same period last year. The decrease is primarily due to the increase in revenues compared to relatively fixed expenses and to a lesser extent, lower legal and audit expenses when compared to last year. Our operating income increased 178% to $3.6 million for this quarter, and that compares to $2 million same period last year.

Adjusted EBITDA, which excludes stock-based compensation, increased 77% to $5 million this quarter, and that compares to $2.8 million in the same period last year. Our GAAP net income increased 67% to $2.3 million, our earnings per diluted share of $0.09 for the quarter, and that compares to net income of $1.4 million, or $0.05 per earnings diluted share for the same period last year. Adjusted net income increased 56% to $2.5 million, and our adjusted earnings per diluted share was $0.10 for the first quarter, and that compares to net income of $1.6 million, or adjusted earnings per diluted share of $0.06 for the same period last year. And our adjusted numbers exclude the amortization of intangibles and related acquisitions and our stock-based compensation expense.

Looking at international revenues this quarter, they were approximately 18% of total revenues, and that is up from 10% in prior-year. Drilling down a little further on that number, Logility was 25% international revenues compared to 18% last year. Our balance sheet, the Company's financial position remains strong with cash and short-term and long-term investments at $52.8 million at the end of July 31, 2011 with no debt. Other aspects of our balance sheet, our billed accounts receivable is $14.5 million, unbilled is $5.5 million for a total roughly a $20 million of AR. Our deferred revenues are $16.1 million and our shareholder equity is $75.1 million. Our current ratio is up to 2.4 as of July 31, 2011, and that compares to 2.2 last year at the same time. Our day sales outstanding as of the end of July 31, 2011 was approximately 77 days, and that compares to 56 days the same time last year. This increase is primarily due to the increase in sales and the timing of closing of deals towards the end of the quarter. At this time, I'd like to turn the call over to questions.

(Operator Instructions) Our first questions comes from Brian Murphy, Sidoti and Company.

Hi, thanks for taking my questions. Mike, were you surprised at the strength of the license revenue this quarter?

A little bit maybe, but not too much. We knew we had a strong pipeline going into the quarter, and people were pulling the trigger like they did the prior quarter as well. The sales cycle, we justify the project and assign a contract.

How do you feel post-July quarter here? How does the pipeline look? Do you think you may have pulled forward any business?

I don't think we pulled forward any business, I think we can have another good quarter next quarter. We've got a good pipeline in the short-term, and I'm also especially pleased with our longer-term pipeline is at regular levels right now.

Okay. And your international business, I think more than doubled year-over-year, and I think you pointed out that some of that was Voyager, but can you help us understand what is driving the strength there on the Demand Solutions side? Are you guys continuing to add VARS? Is that what it is, just more distribution capacity outside the US?

We have more sales and distribution capacity outside of the US. Demand management has done well the last two quarters. But also, the Voyager brand of products has really stepped up internationally and had very strong quarters.

And staying with the indirect distribution for a minute, can you give us a sense for how important the relationship is with Microsoft and maybe what that means to your reach in distribution and maybe potential upside here?

So far, most of our work with Microsoft has been domestic, so it really hasn't helped us internationally. But we do track our pipeline and our deals close and our pipeline, if you look back 2 years, and Microsoft was virtually nonexistent, and now it's in the multiple millions of dollars, and we are closing deals, multiple deals out on it. But it's a continued process, and it has the potential to be much bigger. But it's a long row to hoe with those guys, especially when players change from time to time.

And just based on some of your comments, it looks like you probably closed one [Optient] deal in the quarter. Is that in line with your expectations? And can you talk a little bit about the pipeline there, and maybe sales cycles and how you feel about the competitive environment with Optient?

With our inventory optimization product, we closed more than 1, we closed 3 orders. And we think we can do better this quarter in terms of the total dollars from Optient, so that is definitely helping us. But we still are also doing very well with our traditional supply chain solutions as well.

Okay Mike, I thought on the Optient side, the deal size was quite a bit higher than -- I think what is implied there is about $100,000 deal size for these 3 Optient deals. Can you speak to that?

I don't know how you got that $100,000, but it's well over that. It's multiples of that.

Okay. All right, I thought you said in your comments that Voyager and Demand Solutions were $6.4 million of the license revenue.

Yes, the rest is American Software.

Oh, I see, my mistake

Optient, we don't even use the word Optient anymore, that is in Voyager.

Okay, got it. That's it for me. Thanks very much.

Thank you.

(Operator Instructions) It appears we have no further questions at this time.

Thank you, everyone, for participating on the call, and we look forward to having a great second quarter and discussing the results with you then. Thank you.

This concludes today's conference. You may now disconnect, and have a wonderful day.