Logility Supply Chain Solutions Inc (LGTY) 2014 Q1 法說會逐字稿

Good day, everyone, and welcome to today's first-quarter fiscal year 2014 preliminary results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask a question during the question-and-answer session. (Operator Instructions) Please note this call may be recorded. I will be standing by, should you need any assistance.

It is now my pleasure to turn the call over to Mr. Vince Klinges. Go ahead.

Good afternoon. And 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 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 and uncertainty 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 other competitive pressures; and the irregular and unpredictable 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 Mike Edenfield, CEO of American Software.

Thanks, Vince. Good afternoon, everyone, and thank you for participating on the call. I have some comments on the first quarter. Vince will review the details on the financial results for the quarter, and then we'll take your questions.

American Software was profitable for the 50th consecutive quarter. First-quarter revenues were $23.3 million, which is a decline of 10% year-over-year. Both license and service fees declined 37% and 10%, respectively. Maintenance revenues, which are recurring, increased 6% in the quarter, and operating income for the quarter was $2.4 million.

We have a lot of customer news to share with you. We signed 11 new customers with license agreements in the first quarter. And customers from 11 different countries signed license agreements with us in the quarter. Those countries included Australia, Brazil, Canada, China, Colombia, Japan, New Zealand, Sweden, United Arab Emirates, United Kingdom, and the United States.

Some of the notable new and existing customers include AGC Glass Company, which is a new account from Japan; Ball Camp, BrightStar, Dolce Vita Footwear, Eveready Battery, Granger and Columbia, Excel Corporation, MEGlobal International based in Dubai, Reliable Automatic Sprinkler, and Rocky Brands. NG Software, a wholly-owned subsidiary of the company NGC Software, a wholly-owned subsidiary of the Company, announced during the quarter that Cary Francis Group, a merchandising, market and support, and fulfillment company, implemented NGC's extended PLM software as an integrated solution for product lifecycle management, total sourcing supply chain management, and CPSIA compliance.

Agility, a wholly-owned subsidiary of the Company, congratulated its customers Craft Brew Alliance, PartyLite, and Sunoco products on being named recipients of Manufacturing Executives 2013 Manufacturing Leadership 100 Award. Craft Brew Alliance and PartyLite's winning projects in the Global Value Chain category highlighted each company's successful programs to optimize their supply chains through the use of Logility Voyager solutions. Sunoco products was recognized in the Operational Excellent category for its use of Voyager solutions to improve its production, supply and demand, and S&OP processes to reduce cost and enhance agility.

Logility recognized 25 recipients of the Annual Gartner Supply Chain Top 25. In its ninth year, the 2013 Gartner Research Supply Chain Top 25 recognized nine Logility customers for their innovation, and ability to develop and execute advanced supply chain principles. In all, there are 40% of the top 25 rely on one or more of Logility's brands to power their supply chain success.

Regarding the Company and technology, Logility announced its ability to dramatically increase the speed and simplicity of supply chain through the ERP integration. Through its work with AdapChain, a partner of Logility, Logility has reduced the cost and complexity associated with integration of our best-of-breed supply chain management software with ERP systems. Logility's template-based approach allows high-performance integration to be completed in 30 to 60 days at lower risk and overall cost.

Logility Cloud Services, a comprehensive deployment portfolio, provides a flexible menu of services to accelerate the benefits of supply chain initiatives. Building on more than 10 years of cloud deployment experience, Logility's customers are able to tap into the industry-leading and award-winning capabilities of Logility Voyager solutions, either as a Software-as-a-Service, SaaS, or hosted or on-premise deployment.

Demand Management Inc., a wholly-owned subsidiary of Logility, announced the availability of demand solutions platform as a software and service offering. This cloud-based release includes all the same functionality as the on-premise demand solutions platform, but is hosted remotely and available on a subscription basis. Demand Management Inc. announced the availability of business intelligence functionality within its Demand Solutions DSX platform. The solution now incorporates a native BI interest data tables allowing users the ability to mine and share data efficiently across the supply chain.

During the first quarter, Demand Management launched the addition of sophisticated workflow technology through its Demand Solutions DSX supply chain planning suite. The new functionality enables customers to fully configure workflow by user and role. Demand management also added social supply chain, and social sales and operation planning capabilities, through its Demand Solutions DSX supply chain planning platform. This inventive use of social media technology is designed to help increasingly global manufacturers and distributors connect in real-time to reduce cycle times, and accelerate sales and operations planning.

The editors of Supply and Demand Chain Executive named three of the Company's subsidiaries, Logility, Demand Management, and New Generation Computing, to the 2013 Supply and Demand Chain Executive 100. The award highlights the 100 great supply chain projects of the past year, and mark the 11th year Logility has been honored, and fifth year Demand Management has been recognized for enabling extraordinary supply chain initiatives.

Logility, Demand Management, and New Generation Computer, NGC, were each recognized by Inbound Logistics as a top -- 2013 top 100 Logistic IT Provider. This marks the 16th consecutive year Logility has been recognized, and highlights each company's ability to enable logistics excellence through innovative supply chain management solutions.

I will now turn the call over to Vince for a review of the financial results of the first quarter.

Thanks, Mike. Comparing the first quarter of fiscal 2014 with the same period last year, as Mike indicated, total revenues for the quarter decreased 10% to $23.3 million compared to $25.9 million for the same quarter. This is primarily due to license fees, which decreased 37% to $3.2 million compared to $5.1 million for the same period last year.

Services and other revenues decreased 10% to $11.2 million for the current quarter compared to $12.5 million for the same period last year. The service revenue decrease was primarily due to our ERP business unit, which decreased 38%, and our -- 9% at our IT consulting unit, due to timing of project work. This was offset partially by a 4% increase at Logility.

Our maintenance revenues increased 6% to $8.9 million compared to $8.3 million, primarily due to improved retention. Looking at costs, our overall gross margin was 52% for the current quarter. And that compares to 54% the same period last year. Our license fee margin was 64% for the current period, compared to 73% the same period last year. And that's primarily due to lower license fees. Our services margins were 28% for the current quarter. And that compares to 31% for the prior year. Our maintenance margin was 78% for the current quarter. And that's up 1 percentage point from 77% in the same period last year.

Looking at operating expenses, our gross R&D expenses were 12% of total revenues for the current quarter compared to 11% in the prior-year period. As a percentage of revenues, sales and marketing expenses were 19% -- revenues for the current and prior-year period. G&A expenses were 14% of total revenues for the current quarter compared to 12% for the same quarter last year, primarily due to lower overall revenues.

Operating income was $2.4 million this quarter. And that compares to $3.7 million for the same quarter a year ago. Adjusted EBITDA, which excludes stock-based compensation, was $3.8 million for this quarter compared to $5.2 million for the same period last year. So our GAAP net income was $1.6 million or earnings to diluted share of $0.06, compared to net income of $2.4 million or $0.09 earning this diluted share in the same period last year.

Adjusted net income was $1.9 million or adjusted earnings to diluted share of $0.07 for the first quarter. And that compares to net income of $2.7 million or adjusted earnings per diluted share of $0.10 for the same period last year. And these adjusted numbers exclude the amortization of intangibles related to acquisitions and stock-based compensation expense. International revenues this quarter were approximately 18% of total revenues. And that's up from 12% in the same period last year.

Looking at the balance sheet, the Company's financial position remains strong, with cash and investments of approximately $70.6 million at the end of July 31, 2013, and no debt. The Company increased cash investments by approximately $4.3 million when compared to July 31, 2012. The Company has approximately 1.1 million shares available to repurchase under its stock buyback program also.

Some other aspects of the balance sheet -- our Accounts Receivable billeds was $10.6 million; unbilled was $2.6 million for a total of $13.3 million in Accounts Receivable. Deferred revenues are $19.6 million. And our shareholder equity is $85.7 million. Our current ratio increased to 3% as of July 31, 2013 compared to $2.7 million in the same period last year. And our days sales outstanding as of July 31, 2013 was approximately 52 days versus 67 days the same time last year.

At this time, I'd like to turn the call over to questions.

(Operator Instructions). Kevin Liu, B. Riley & Co.

First question -- just in terms of the license revenue performance, could you talk about to what extent you feel that's just being impacted by the broader macro environment, versus things on the execution side or things that you're seeing out of your competitors?

Well, I think it's on the macro side, more than execution. Obviously, you can always execute better. But I still think it's -- we have the same team, except they're more experienced, that blew away 2012. And the same leadership there. And deals seem to be a little more complicated now than they were. There's more different decisions they make on what they want to do, and they're just taking longer.

I guess along those lines, I mean, that's kind of a trend you've talked about over the past year. And it seems like licenses have fallen off a bit more so. There were some comments in the press release that you're engaging in some conversations on some larger deals. Maybe if you could add some more color around the complexity of these deals, why they're taking longer? Perhaps kind of the age of some of these deals that are in the pipeline and still supposed to be in the works?

Yes. Well, we think we're pretty close on a couple of them. We thought we were going to get them last quarter. We didn't. But we are definitely closer now than we were at the end of the quarter, and believe we'll get two or three nice-size deals, certainly by next month if not sooner.

Got it. The sales and marketing line, I was surprised to see that on an absolute basis down year-over-year. I was just wondering if that's purely around incentive comp? Or if you guys have actually started taking any heads out of the sales force?

No. We have not taken any heads out. As a matter of fact, we've added some.

Yes, Kevin, primarily, it's incentive comp. And also, last year at this time, we had a customer conference where we had those costs in that number, which aren't -- we didn't have that at the conference this year.

Okay. Is that conference going to be held at some point later in the year that we should be aware of?

Yes. It just got shifted, yes.

Okay. And then just, lastly, just with cash back up to about $70 million-plus, and your stock having come in of late, just curious as to whether you anticipate being a bit more aggressive with the buyback here?

That's a possibility.

All right. I'll get back in queue. Thanks.

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

Well, thank you for attending the call and we look forward to the next call.