EX-99.1 2 a04-13899_1ex99d1.htm EX-99.1

Exhibit 99.1

 

For More Information, Contact:

 

 

Aileen Osborn

 

Rosemary Moothart/Rob Whetstone

QAD Vice President Finance

 

PondelWilkinson Inc.

805.566.6077

 

310.279.5968

investor@qad.com

 

investor@pondel.com

 

QAD Announces Fiscal 2005 Third Quarter Financial Results

 

Carpinteria, Calif. — November 18, 2004 — QAD Inc. (NASDAQ:QADI) today reported financial results for the fiscal 2005 third quarter and nine-month period ended October 31, 2004.

 

For the fiscal 2005 third quarter, QAD posted revenue of $55.5 million, compared with $55.8 million in the same period last year.  License revenue was $13.9 million compared with $15.5 million in the fiscal 2004 third quarter.  For the fiscal 2005 third quarter, an additional $1.8 million of license revenue was deferred due to license deals that were executed but not recognized in the quarter.  These license deals have now met all revenue recognition criteria and will be reflected in the fiscal 2005 fourth quarter license revenue.  Maintenance and other revenue was $28.3 million, compared with $28.6 million in the third quarter last year.  Services revenue was $13.2 million compared with $11.7 million in the same period last year.

 

Net income for the fiscal 2005 third quarter was $3.1 million, or $0.09 per diluted share, compared with net income of $3.6 million, or $0.10 per diluted share, in the same period last year.

 

Total revenue was at the low end of the guided range of $56 million to $59 million primarily due to the unusual amount of license deferrals.  Earnings per diluted share were within the guided range of $0.05 to $0.10.  Fiscal third quarter results include $2.0 million in severance, as previously announced, and costs savings resulting from actions taken during the second and third quarters to more closely align the company’s cost structure with revenue expectations.

 

“Our third quarter results demonstrate our ongoing commitment to profitability and an organization-wide focus on execution,” said Karl Lopker, chief executive officer of QAD.  “The bottom line results also reflect our success in streamlining operations and better aligning costs with sales – actions that we announced in August.  QAD’s enterprise software and supply chain execution solutions address the needs of global manufacturers at a lower total cost of ownership, and we believe we are well positioned to continue to leverage our strengths on a global basis.”

 

(more)

 


 

For the fiscal 2005 third quarter, gross margin was 59.5% compared to 60.0% in the same prior year period.  Sequentially, gross margin improved from 57.9% in the second quarter of fiscal 2005, primarily due to the revenue mix.

 

Total operating expenses for the fiscal 2005 third quarter decreased to $27.8 million from $30.0 million in the previous quarter and $29.0 million in the third quarter last year, reflecting the company’s cost alignment efforts.  Contributing to the decrease from the prior quarter were lower sales and marketing expenses and research and development expenses, offset by higher general and administrative expense, including professional fees related to Sarbanes-Oxley compliance.

 

QAD’s cash and equivalents balance at October 31, 2004 was $57.5 million.  For the fiscal 2005 third quarter, cash flow provided by operations was $1.2 million.

 

For the fiscal 2005 nine-month period ended October 31, 2004, QAD reported revenue of $170.5 million and net income of $10.7 million, or $0.30 per diluted share.  These results include a fiscal 2005 first quarter $1.3 million tax benefit attributable to the reversal of a deferred tax asset valuation allowance, equal to $0.04 per diluted share.  In the comparable nine-month period last year, revenue was $168.1 million and net income was $10.0 million, or $0.29 per diluted share.  The prior year period results include a benefit of $346,000, or $0.01 per diluted share, for an adjustment to a prior year restructuring charge and a gain of $1.5 million, or $0.04 per diluted share, from the sale of a parcel of property located in Carpinteria, California.

 

Fiscal 2005 Third Quarter Highlights

 

•                  QAD received orders from 9 customers representing more than $500,000 each in combined license, support and services billings, including 2 orders of more than $1 million, one of which exceeded $2 million.

•                  QAD sold licenses to global manufacturers in its six vertical markets, including sales to ArvinMeritor, Atlantis Plastics, Biomet Japan, Frontera Tren Automotriz, General Electric, Hersheys de Mexico, Invensys, Johnson Controls, Kuriyama Beika, Lear, Nepon, PepsiCo, Sara Lee, TRW and Watts Water Technologies.

•                  As part of the company’s 25th anniversary milestone, QAD management opened the NASDAQ Stock Market on October 12th, celebrating its expansion to a leading enterprise

 

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software provider serving global manufacturers through 26 offices in manufacturing centers throughout the world.

•                  In June 2004 the board of directors authorized an open market repurchase program for one year to buy up to one million shares of QAD common stock.  QAD repurchased approximately 597,000 shares on the open market during the third quarter at an average price of $6.87 per share, including transaction costs.  This brings the total of shares repurchased under the previously announced stock repurchase program to approximately 742,000 shares.

•                  QAD announced its participation in the development and proof of the Automotive Industry Action Group (AIAG) Inventory Visibility & Interoperability (IV&I) standard.  QAD was recognized as one of the first software providers to demonstrate the exchange of automotive inventory data over public networks, using XML, and independent of originating applications.

•                  QAD achieved Help Desk Institute (HDI) Support Center Certification for support centers in the United Kingdom, the Netherlands, Mexico and Hong Kong, expanding the certification QAD received in May when it became the first company ever to achieve global certification from HDI.

 

Recently, QAD management presented an overview of the company to the investment community at the AeA Classic Financial Conference in Monterey, California, on November 8-9.  A webcast of the presentation is available on QAD’s Web site at www.qad.com/company/ir, where it will be available for approximately three months.

 

Business Outlook

 

For the fiscal 2005 fourth quarter, QAD expects to generate revenue between $61 million and $66 million, including the third quarter license deferral of $1.8 million.  Depending on the level and mix of revenue, the company expects fourth quarter earnings per diluted share in the range of $0.16 to $0.27.  This translates to revenue of $232 million to $237 million for the full 2005 fiscal year, or earnings per diluted share in the range of $0.47 to $0.58 for the year.  These projections are subject to various risks, including corporate investment in information technology and global economic factors.

 

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Investor Conference Call:

 

QAD management will host an investor conference call today at 2:00 p.m. PST (5:00 p.m. EST) to review the company’s financial results and operations for the fiscal 2005 third quarter.  The conference call will be webcast by CCBN and can be accessed on the investor relations section of QAD’s Web site, www.qad.com/company/ir, where it will be available for approximately one year.

 

About QAD

 

QAD is a leading provider of enterprise applications for global manufacturing companies.  QAD applications provide critical functionality for managing manufacturing resources and operations within and beyond the enterprise, enabling global manufacturers to collaborate with their customers, suppliers and partners to make and deliver the right product, at the right cost and at the right time.  Manufacturers of automotive, consumer products, electronics, food and beverage, industrial and medical products use QAD applications at approximately 5,200 licensed sites in more than 80 countries and in as many as 26 languages.  For more information about QAD, telephone +1 805 684 6614, or visit the QAD Web site at: www.qad.com.

 

“QAD” is a registered trademark of QAD Inc.  All other products or Company names herein may be trademarks of their respective owners.

 

Note to Investors: This press release contains certain forward-looking statements made under the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  A number of risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements.  These risks include, but are not limited to, evolving demand for the company’s software products and products that operate with the company’s products; the company’s ability to sustain strong licensing demand; the company’s ability to leverage improvements in the IT and economic environment; the company’s ability to sustain customer renewal rates at current levels; the publication of opinions by industry analysts about the company, its products and technology; the reliability of estimates of transaction and integration costs and benefits; the entry of new competitors and their technological advances; delays in localizing the company’s products for new markets; delays in sales as a result of lengthy sales cycles; changes in operating expenses, pricing, timing of new product releases, the method of product distribution or product mix; general economic conditions, exchange rate fluctuations and the global political environment.  In addition, revenue and earnings in the enterprise resource planning (ERP), e-business and distributed order management software industries are subject to fluctuations.  Software license revenue, in particular, is subject to variability with a significant proportion of revenue earned in the last month of each quarter.  Given the high margins associated with license revenue, modest fluctuations can have a substantial impact on net income.  Investors should not use any one quarter’s results as a benchmark for future growth.  For a more detailed description of the risk factors associated with the company and the industries in which it operates, please refer to the company’s Annual Report on Form 10-K for fiscal 2004 ended January 31, 2004.

 

# # #

 

FINANCIAL TABLES FOLLOW

 

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QAD Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

 

2004

 

2003

 

2004

 

2003

 

Revenue:

 

 

 

 

 

 

 

 

 

License fees

 

$

13,892

 

$

15,517

 

$

42,497

 

$

48,607

 

Maintenance and other

 

28,348

 

28,617

 

84,857

 

85,358

 

Services

 

13,213

 

11,681

 

43,126

 

34,104

 

Total revenue

 

55,453

 

55,815

 

170,480

 

168,069

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Cost of license fees

 

2,212

 

2,140

 

6,059

 

7,400

 

Cost of maintenance, service and other revenue

 

20,274

 

20,174

 

62,673

 

59,240

 

Total cost of revenue

 

22,486

 

22,314

 

68,732

 

66,640

 

Gross profit

 

32,967

 

33,501

 

101,748

 

101,429

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

12,879

 

14,114

 

42,973

 

44,402

 

Research and development

 

7,829

 

8,991

 

25,444

 

27,325

 

General and administrative

 

6,931

 

5,965

 

19,579

 

18,153

 

Amortization of intangibles from acquisitions

 

150

 

279

 

402

 

826

 

Restructuring

 

—

 

(346

)

—

 

(346

)

Total operating expenses

 

27,789

 

29,003

 

88,398

 

90,360

 

Operating income

 

5,178

 

4,498

 

13,350

 

11,069

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

Interest income

 

(193

)

(151

)

(518

)

(396

)

Interest expense

 

564

 

328

 

1,315

 

874

 

Other (income) expense, net

 

641

 

(154

)

453

 

(1,794

)

Total other (income) expense

 

1,012

 

23

 

1,250

 

(1,316

)

Income before income taxes

 

4,166

 

4,475

 

12,100

 

12,385

 

Income tax expense

 

1,050

 

900

 

1,425

 

2,400

 

Net income

 

$

3,116

 

$

3,575

 

$

10,675

 

$

9,985

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.09

 

$

0.11

 

$

0.31

 

$

0.30

 

Diluted net income per share

 

0.09

 

0.10

 

0.30

 

0.29

 

 

 

 

 

 

 

 

 

 

 

Basic weighted shares

 

33,975

 

32,892

 

34,054

 

32,996

 

Diluted weighted shares

 

34,881

 

34,674

 

35,350

 

34,631

 

 

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QAD Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

October 31,
2004

 

January 31,
2004

 

 

 

(unaudited)

 

(audited)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and equivalents

 

$

57,496

 

$

59,784

 

Accounts receivable, net

 

48,315

 

65,455

 

Other current assets

 

11,362

 

13,352

 

Total current assets

 

117,173

 

138,591

 

 

 

 

 

 

 

Property and equipment, net

 

39,271

 

34,485

 

Capitalized software costs, net

 

3,168

 

2,966

 

Goodwill

 

11,296

 

11,306

 

Other assets, net

 

2,438

 

2,480

 

 

 

 

 

 

 

Total assets

 

$

173,346

 

$

189,828

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

1,706

 

$

11,987

 

Accounts payable and other current liabilities

 

40,199

 

51,374

 

Deferred revenue

 

56,022

 

69,252

 

Total current liabilities

 

97,927

 

132,613

 

 

 

 

 

 

 

Long-term debt

 

24,344

 

7,720

 

Other liabilities

 

938

 

2,382

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

35

 

35

 

Additional paid-in capital

 

119,308

 

119,411

 

Treasury stock

 

(10,138

)

(8,100

)

Accumulated deficit

 

(52,967

)

(58,038

)

Unearned compensation - restricted stock

 

(440

)

—

 

Accumulated other comprehensive loss

 

(5,661

)

(6,195

)

Total stockholders’ equity

 

50,137

 

47,113

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

173,346

 

$

189,828

 

 

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QAD Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended
October 31,

 

 

 

2004

 

2003

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

9,043

 

$

8,072

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of property and equipment

 

(9,042

)

(12,400

)

Restricted cash under construction loan

 

—

 

1,016

 

Capitalized software costs

 

(787

)

(478

)

Acquisitions of businesses, net of cash acquired

 

(766

)

(445

)

Proceeds from sale of property and equipment

 

29

 

3,394

 

Net cash used in investing activities

 

(10,566

)

(8,913

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from construction loan

 

3,870

 

7,749

 

Proceeds from notes payable, net of fees

 

17,843

 

—

 

Repayments of long-term debt

 

(1,189

)

(1,625

)

Repayment of construction loan

 

(14,338

)

—

 

Proceeds from issuance of common stock

 

2,520

 

6,524

 

Repurchase of common stock

 

(5,581

)

(15,239

)

Dividends paid

 

(4,277

)

—

 

Net cash used in financing activities

 

(1,152

)

(2,591

)

 

 

 

 

 

 

Effect of exchange rates on cash and equivalents

 

387

 

1,087

 

Net decrease in cash and equivalents

 

(2,288

)

(2,345

)

Cash and equivalents at beginning of period

 

59,784

 

50,188

 

 

 

 

 

 

 

Cash and equivalents at end of period

 

$

57,496

 

$

47,843

 

 

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