EX-99.1 2 a05-15122_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 2006 Second Quarter Financial Results

 

CARPINTERIA, Calif. – August 18, 2005 – QAD Inc. (NASDAQ:QADI) today reported financial results for the fiscal 2006 second quarter and six-month period ended July 31, 2005.

 

For the fiscal 2006 second quarter, QAD posted revenue of $58.0 million, compared with $56.8 million in the same period last year, and at the high end of the guided range of $55 million to $58 million the company provided in May.  License revenue was $16.3 million, compared with $14.1 million in the fiscal 2005 second quarter.  Maintenance and other revenue was $29.5 million, compared with $27.6 million in the second quarter last year.  Services revenue was $12.3 million versus $15.1 million last year.

 

Net income for the fiscal 2006 second quarter was $3.8 million, or $0.12 per diluted share, compared with $2.0 million, or $0.06 per diluted share, in the comparable period last year.  Diluted earnings per share for the most recent quarter were at the upper end of the guided range of $0.09 to $0.12 per share.

 

For the fiscal 2006 second quarter, gross margin was 62% compared with 58% in the same period last year, primarily reflecting a higher proportion of license revenues in the revenue mix.

 

Total operating expenses for the fiscal 2006 second quarter were $31.5 million, compared with $30.0 million in the fiscal second quarter last year.

 

“Overall, we continue to make solid progress capitalizing on our unique positioning in the mid-market sector and providing competitive enterprise software solutions to global manufacturers,” said Karl Lopker, chief executive officer.  “The Asia Pacific region showed continued strength and, in particular, QAD Japan experienced a considerable increase in revenue where we began working with a leading Japanese-based multinational automotive supplier.  Over time, we anticipate that this new relationship will help us gain further traction in Japan and we remain focused on building our customer base there.”

 

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QAD Inc.

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QAD’s cash and equivalents balance at July 31, 2005 was $50.3 million.  For the fiscal 2006 second quarter, cash flow provided by operations was $9.1 million.

 

For the fiscal 2006 six-month period ended July 31, 2005, QAD reported revenue of $114.0 million and net income of $6.4 million, or $0.19 per diluted share, compared with revenue of $115.0 million and net income of $7.6 million, or $0.21 per diluted share, for the first six months of fiscal 2005.  Results for the six-month periods include tax benefits attributable to the reversal of deferred tax valuation allowances of $0.4 million, or $0.01 per diluted share, for fiscal 2006 and $1.3 million, or $0.04 per diluted share, for fiscal 2005.  The fiscal 2006 six-month period also includes a one-time charge of $0.9 million related to facility exit costs that is reflected in cost of revenues and operating expenses, and equates to $0.03 per diluted share, net of tax.

 

Fiscal 2006 Second Quarter Highlights

 

•             In the fiscal 2006 second quarter, QAD received orders from 9 customers representing more than $500,000 each in combined license, support and services billings, including 3 orders of more than $1 million, 1 of which exceeded $5 million.

•             During the quarter, QAD sold licenses to global manufacturers in its vertical markets, including sales to Alexandria Moulding, Arthrex, Caterpillar, The Coca-Cola Company, Firmenich, GKN, Gyrus, Harris RF Communications, Ingersoll-Rand, PPG Industries and Watermark Paddlesports.

•             The July issue of Start Magazine recognized innovative manufacturing technology companies and named QAD one of the “Hottest Companies of 2005.”  This is the third consecutive year in which QAD has received this recognition.

•             In June, the company announced a global strategic partnership with Tata Consultancy Services, a leading global IT services firm, to combine their respective strengths to deliver world-class enterprise solutions and a robust IT infrastructure to global manufacturers.

•             In May, QAD hosted more than 1,000 participants at the highly successful 2005 Explore User Conference held in Washington D.C.

•             During the fiscal second quarter, QAD launched its Global Enterprise Edition (GXE), the latest version of the company’s flagship enterprise software MFG/PRO, which has an innovative, service-oriented technology architecture (SOA) and new global shared services capabilities.

 

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QAD Inc.

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•             The company also launched QAD JIT Sequencing (Just-In-Time), a solution that addresses the sequenced production requirements of the automotive industry thereby enabling suppliers working just-in-time to supply product to the original equipment manufacturer’s (OEM) production line.

•             During the quarter, QAD purchased 2 million shares of QAD common stock from Recovery Equity Investors II, L.P. (REI II) for $14.8 million in cash.

 

Business Outlook

 

For the fiscal 2006 third quarter, QAD expects to generate revenue between $55 million and $58 million.  The company expects third quarter earnings per diluted share in the range of $0.09 to $0.12, depending on the level and mix of revenue.  QAD anticipates posting full year fiscal 2006 revenue of $230 million to $240 million and earnings in the range of $0.45 to $0.57 per diluted share, assuming an effective tax rate of 23%.  The per share quarter and annual earnings estimates reflect the benefit of the 2 million shares purchased from REI II on May 26, 2005.  These projections are subject to various risks, including corporate investment in information technology and global economic factors.

 

Investor Conference Call

 

QAD management will host an investor conference call today at 2:00 p.m. PDT (5:00 p.m. EDT) to review the company’s financial results and operations for the fiscal 2006 second quarter.  The conference call will be webcast and accessible 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 5,300 licensed sites in more than 90 countries and in as many as 27 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

 

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QAD Inc.

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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 license and service 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 2005 ended January 31, 2005.

 

# # #

 

FINANCIAL TABLES FOLLOW

 


 

QAD Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended
July 31,

 

Six Months Ended
July 31,

 

 

 

2005

 

2004

 

2005

 

2004

 

Revenue:

 

 

 

 

 

 

 

 

 

License fees

 

$

16,288

 

$

14,088

 

$

30,167

 

$

28,605

 

Maintenance and other

 

29,493

 

27,625

 

58,103

 

56,509

 

Services

 

12,261

 

15,126

 

25,756

 

29,913

 

Total revenue

 

58,042

 

56,839

 

114,026

 

115,027

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Cost of license fees

 

2,179

 

1,895

 

4,248

 

3,847

 

Cost of maintenance, service and other revenue

 

20,135

 

21,999

 

40,668

 

42,399

 

Total cost of revenue

 

22,314

 

23,894

 

44,916

 

46,246

 

Gross profit

 

35,728

 

32,945

 

69,110

 

68,781

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

16,766

 

15,116

 

31,818

 

30,094

 

Research and development

 

8,082

 

8,423

 

16,342

 

17,615

 

General and administrative

 

6,547

 

6,300

 

13,258

 

12,648

 

Amortization of intangibles from acquisitions

 

92

 

197

 

186

 

252

 

Total operating expenses

 

31,487

 

30,036

 

61,604

 

60,609

 

Operating income

 

4,241

 

2,909

 

7,506

 

8,172

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

Interest income

 

(324

)

(175

)

(659

)

(325

)

Interest expense

 

354

 

441

 

904

 

751

 

Other (income) expense, net

 

(973

)

21

 

(995

)

(188

)

Total other (income) expense

 

(943

)

287

 

(750

)

238

 

Income before income taxes

 

5,184

 

2,622

 

8,256

 

7,934

 

Income tax expense

 

1,337

 

625

 

1,906

 

375

 

Net income

 

$

3,847

 

$

1,997

 

$

6,350

 

$

7,559

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.12

 

$

0.06

 

$

0.19

 

$

0.22

 

Diluted net income per share

 

$

0.12

 

$

0.06

 

$

0.19

 

$

0.21

 

 

 

 

 

 

 

 

 

 

 

Basic weighted shares

 

32,340

 

34,204

 

33,083

 

34,094

 

Diluted weighted shares

 

33,196

 

35,458

 

33,992

 

35,559

 

 


 

QAD Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

July 31,

 

January 31,

 

 

 

2005

 

2005

 

 

 

(unaudited)

 

(audited)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and equivalents

 

$

50,253

 

$

55,289

 

Marketable securities

 

—

 

13,000

 

Accounts receivable, net

 

44,704

 

63,145

 

Other current assets

 

11,578

 

13,785

 

Total current assets

 

106,535

 

145,219

 

 

 

 

 

 

 

Property and equipment, net

 

40,898

 

39,701

 

Capitalized software costs, net

 

5,643

 

2,791

 

Goodwill

 

10,610

 

11,552

 

Other assets, net

 

7,951

 

7,830

 

 

 

 

 

 

 

Total assets

 

$

171,637

 

$

207,093

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

220

 

$

1,725

 

Accounts payable and other current liabilities

 

41,246

 

45,130

 

Deferred revenue

 

57,331

 

70,805

 

Total current liabilities

 

98,797

 

117,660

 

 

 

 

 

 

 

Long-term debt

 

17,668

 

23,911

 

Other liabilities

 

1,459

 

1,485

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

35

 

35

 

Additional paid-in capital

 

119,561

 

119,533

 

Treasury stock

 

(22,936

)

(9,668

)

Accumulated deficit

 

(35,740

)

(40,154

)

Unearned compensation - restricted stock

 

(330

)

(440

)

Accumulated other comprehensive loss

 

(6,877

)

(5,269

)

Total stockholders’ equity

 

53,713

 

64,037

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

171,637

 

$

207,093

 

 


 

QAD Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

July 31,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

12,854

 

$

7,838

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of property and equipment

 

(4,477

)

(8,315

)

Capitalized software costs

 

(1,697

)

(672

)

Acquisitions of businesses, net of cash acquired

 

—

 

(766

)

Proceeds from sale of marketable securities

 

13,000

 

—

 

Proceeds from sale of property and equipment

 

39

 

25

 

Net cash provided by (used in) investing activities

 

6,865

 

(9,728

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from construction loan

 

—

 

3,870

 

Repayment of construction loan

 

—

 

(14,338

)

Repayments of long-term debt

 

(7,747

)

(764

)

Proceeds from issuance of common stock

 

1,226

 

1,938

 

Proceeds from notes payable, net of fees

 

—

 

17,843

 

Repurchase of common stock

 

(14,800

)

(1,478

)

Dividends paid

 

(1,646

)

—

 

Net cash (used in) provided by financing activities

 

(22,967

)

7,071

 

 

 

 

 

 

 

Effect of exchange rates on cash and equivalents

 

(1,788

)

(492

)

Net (decrease) increase in cash and equivalents

 

(5,036

)

4,689

 

Cash and equivalents at beginning of period

 

55,289

 

46,784

 

 

 

 

 

 

 

Cash and equivalents at end of period

 

$

50,253

 

$

51,473