Logility Supply Chain Solutions Inc (LGTY) 2013 Q1 法說會逐字稿

Good day, and welcome to today's conference call. It is now my pleasure to turn the conference over to Mr. Vincent Klinges. Go ahead, please.

Good afternoon and welcome to American Software's first quarter of fiscal 2013 earnings conference call. To began 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 by statements made on this call. Such factors include, but are not limited to -- the changes in and uncertainty in general economic conditions; the growth rate of the market for our products and services; timely availability and market acceptance of these products and service; the effect of competitive products and pricing and other competitive pressures; and the irregular and unpredictable 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 would like to turn the call over to Mike Edenfield, COO of American Software and CEO of Logility.

Thanks, Vince, and good afternoon, everyone. Thank you for participating on the call. I have some comments on the fiscal 2013 first-quarter results; Vince will review the details on the financial results for the quarter and then we will take your questions.

We are proud to announce that American Software was profitable for the 46th consecutive quarter. Revenues grew 9% over first-quarter last year led by a professional services revenue increase of 35%. Maintenance revenues grew 8% and net earnings increased 6%. However, license fee revenues declined 24% compared to first quarter last year.

Europe was the primary culprit of the decline in license fees. Also we had a large deal that did not close in the quarter that has subsequently closed and would have made a substantial difference in our earnings in first quarter.

16 new customers signed license agreements in the first quarter compared to 24 new accounts first quarter last year. Customers from 10 different countries signed license agreements with the Company in the quarter. Those countries include Australia, Belgium, Canada, China, France, Mexico, Sweden, the Republic of Trinidad and Tobago, the United Kingdom and the United States.

Some notable new and existing customers include Arbonne International, Brightstar Corporation, Kichler Lighting, Kimberly-Clark, Kraft Foods, Landau Uniforms, Nebraska Furniture Mart, Orchard Brands, Precision Dormer, Abbott Trading Company which is Abbott Labs in Shanghai, VF Corporation and the XO Group.

We 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 as being excellent prospects for additional product sets.

So as we look at the second quarter and remainder of fiscal 2013 our pipeline remains strong, there is robust interest from our customer base as well as new potential customers, we have good 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 that pipeline it is our belief 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 back over to Vince for a detailed review of the financial results for the first quarter.

Thanks, Mike. Looking at the first quarter of fiscal 2013 compared to the same period of last year, as Mike indicated, the revenues increased 9% to $25.9 million compared to $23.7 million the same quarter last year. License fees decreased 24% to $5.1 million compared to $6.7 million for the same period last year.

Services and other revenues increased 35% to $12.5 million for the current quarter and that compares to $9.3 million in the same period last year. That was primarily due to increases in our ERP unit which increased 75%, our Logility business unit which increased 56% and our IT staffing unit which increased 19% for the quarter.

Maintenance revenues also increased 8% to $8.3 million compared to $7.8 million and that is primarily due to increases in license fees in prior quarters. Looking at the costs, our overall gross margin was 54% for the current quarter compared to 56% in the same period last year. Our license fee margin was 73% for the current and prior-year period.

Services margins increased to 31% compared to 25% for the same period last year, that is due to increases in service revenue as well as improved billing utilization and per rate margins. Our maintenance margins decreased slightly to 77% for the current quarter. Actually, correction -- that was actually 77% for the current and same period last year.

Looking at operating expenses, our total gross R&D expenses were 11% of total revenues for the current and same period last year. As a percentage of revenue, sales and marketing expenses were 19% of revenues for the current quarter and that is up slightly from 18% last year.

G&A expenses were 12% for the -- of total revenues for the current quarter and that compared with 14% for the same period prior year and that is primarily due to higher revenue. Our operating income increased 4% to $3.7 million for this quarter, that compares to $3.6 million the same quarter a year ago.

Adjusted EBITDA, which excludes stock-based compensation, increased 4% to $5.2 million this quarter compared to $5 million in the same quarter last year. Our GAAP net income increased 6% to $2.4 million, or earnings per diluted share of $0.09, and that compares to net income of $2.3 million or $0.09 earnings per diluted share for the same period last year.

Adjusted net income increased 7% to $2.7 million or adjusted earnings per diluted share of $0.10 for the first quarter this year and that compares to net income of $2.6 million or adjusted earnings per share of $0.10 for the same period last year. These adjusted numbers exclude the amortization of intangible expenses related to acquisitions and stock-based compensation expense.

International revenues this quarter were approximately 12% of total revenues and that compares to 18% for the same period prior year.

Looking at the balance sheet, the Company's financial position remains strong with cash and investments of approximately $66.3 million at the end of July 31, 2012 with no debt. Cash increased to $13.5 million when compared to July 31 of 2011.

Other aspects of our balance sheet, our billed accounts receivable is $12.8 million, unbilled $6.1 million for a total accounts receivable of $18.9 million. Deferred revenues are $18.9 million, shareholder equity is $83.9 million and our current ratio increased to 2.7% as of July 31, 2012 and that compares to 2.4% last year.

Our days sales outstanding as of July 31, 2012 was approximately 67 days and that is down 10 days when compared to 77 days in the same period last year. At this time I would like to turn the call over to questions.

(Operator Instructions). Brian Murphy, Sidoti & Company.

Mike, you said there was some weakness in Europe, was that more on the Demand Management side on or on the Voyager side?

Both, but especially Voyager.

Now did you have a big deal in Europe in the July quarter of last year?

Yes, we did. And we had some other deals too.

Okay. And can you give us any color on the large deal that slipped out of the quarter and subsequently closed?

It closed approximately six or seven days after the quarter. It would have been the biggest deal last quarter and we are excited about it, the customer is actually here this week starting training today.

My guess is that that is probably an inventory optimization deal. Just on that front, have you seen any changes in the competitive environment at all?

No, not in inventory optimization or just general supply chains, I don't think the competitive -- if anything, the changes -- we're winning more big deals than we used to.

And can you just give us an update on your sales force expansion efforts, maybe where do we stand with quota bearing reps? And maybe how the new guys are ramping up so far.

Well, we still have the same number we had as of the last conference call for Logility Voyager, that was 18 and the plan is to be at 20 by the end of the year. The biggest deal we sold last quarter that is in the numbers we are reviewing on this call was by a new salesman. He had -- he got a little lucky to find that we had this opportunity for him, but he worked it with the rest of the team and we had a big win.

And maybe just some general commentary around the pipeline, maybe where it stands versus this time last year?

It is up from this time last year, but I think the real -- we have really sort of two pipelines, we have the long-term pipeline with everything that we think might happen over a number of quarters and then we have the short-term pipeline. And the short-term pipeline is pretty good. I would say it's better than it was last quarter and -- but we have to go out and close the deals.

Got it. I will hop off. Thanks very much.

Dan Cummins, ThinkEquity.

I would like to just continue that line of questioning around I guess the conditions to close out there for what you are doing. And also with respect to the competitive environment, it just seems like some of the competitors who aren't -- haven't been very -- as focused or intense on optimization seem to be talking about it more. I am just curious if you have begun to see them in deals? But primarily some color around the environment to close? Thanks.

Well, in terms of the environment to close, I think our issue was on the one we got selected late in our quarter and -- the one that slipped but subsequently closed. And they thought they could expedite it through their process.

But it was a substantial capital request and they found out -- they tried to expedite it and everybody wanted to expedite it except the CFO did not want it expedited. So when the CFO got involved it slowed down, but we still got the deal. It really closed in a fairly expeditious manner, just not as fast as we were pushing for it.

Okay well, and just given the level of horsepower you have on hand right now, I guess I would ask you is $7 million a quarter for licenses, is that doable in the near term or is that kind of a level we are just going to have to wait and see if conditions improve?

And then related to that, I recognize you had a deal slip and pressure in Europe, but the ratio of license to your sales and marketing line -- expense line is quite small at this point. Going back it has been much more robust. And I am curious if you are at all concerned you are going to be one to one here in the near term in terms of license results and the sales and marketing spend? Thanks.

We would like to have a better ratio than 1 to 1. We have ramped up recently; we were -- this time last year I think we were around 12 salespeople and now we are 18, so that is a decent increase. And of course we ramped up marketing a little bit as well to support lead generation efforts for those salesmen.

So we made an investment and the market -- I don't know if it is as good as it was last year, there are some signs of weakening a little bit, but it is our job to sell through that. And so our objectives are certainly to do $7 million or more. But we are just going to do the best we can, that's all we can do.

Okay, and -- thank you for that. And, Vince, just the cash from ops that you report in the Q, could you have that right now or --?

Oh, as far as the operating cash?

Yes.

Yes, Dan, hang on a second. It is going to be around $4 million.

Okay, great. Thanks, guys.

(Operator Instructions). Dan Cummins.

I did want to ask a question. I saw thought I saw that JDA has said that they've got about 3% of their maintenance customers now using some elements of their managed service. And I thought you guys have -- you've trialed that in a few cases. And I am just curious if that is going to be an unfolding story for you over the next couple years as you still think it's -- the market is really not ready for that so much with supply-chain apps? Thank you.

Well, managed services is something we have done and -- with NGC, they have -- one of their big accounts is in that model of deployment. And DMI, which is the other supply-chain brand we have, which sells to the small and medium companies, we are setting that up to -- we can provide software as a service.

So, we have not really seen that competitively yet with JDA. I listen to their conference calls and hear what they are saying and things. I think they are doing that with customers they already have mostly and I am sure they are proposing it to new customers as well.

But I think most of our sweet spot wants the software and they want is to help them implement it and they want to own it and get out. Now some companies who maybe don't have expertise would be more inclined to the managed services, but of course we could propose that if that is what they wanted.

But we are not really getting a lot of questions about that when we are out in the market. And you know, all of the Voyager deals we usually have to beat JDA. So -- and to my knowledge they weren't proposing that until we beat them recently.

Yes, I couldn't tell exactly what JDA was referring to, whether it's with the retail stuff or supply chain but --.

Well, no, I think they are doing it in supply-chain, but either software as a service and then there is managed services. And managed services could be where they are actually making the supply-chain decisions, they are the users. So they have got to -- they are taking a very broad approach there.

Thank you, Mike.

Thank you, Dan.

(Operator Instructions). There are no more questions at this time.

Thank you very much for your time and interest and we look forward to talking to you again soon. Thank you.

This concludes today's conference. You may disconnect at any time.