QAD Announces Fiscal 2011 Fourth Quarter and Full-Year Financial Results

Published in Science and Technology on Thursday, March 10th 2011 at 13:12 GMT by Market Wire
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SANTA BARBARA, Calif.--([ BUSINESS WIRE ])--QAD Inc. (Nasdaq:QADA) (Nasdaq:QADB), a leading provider of enterprise software and services for global manufacturing companies, today reported financial results for the fiscal 2011 fourth quarter and year ended January 31, 2011.

"During the quarter we benefited from the result of ongoing engagement with our customers. We are well positioned for growth as our manufacturing customers continue to capitalize on improving economic conditions."

Total revenue grew 19% to $62.5 million for the fourth quarter of fiscal 2011, compared with $52.7 million for the fourth quarter of fiscal 2010. License revenue increased 79% to $12.7 million, versus $7.1 million for the prior year period. Maintenance and other revenue rose 5% to $33.9 million from $32.4 million for the fiscal 2010 fourth quarter. Services revenue grew 21% to $15.9 million, compared with $13.1 million for last yeara�s fiscal fourth quarter.

Net income for the fiscal 2011 fourth quarter grew to $3.1 million, or $0.20 per diluted Class A share and $0.16 per diluted Class B share, from $685,000, or the equivalent of $0.04 per diluted Class A share and $0.04 per diluted Class B share, for the fiscal 2010 fourth quarter.

aRevenue grew across all of our business lines, most notably in licenses. This strength in sales, coupled with an ongoing focus on cost management, resulted in a significant bottom line improvement and our most profitable quarter in more than a year,a said Karl Lopker, chief executive officer of QAD. aDuring the quarter we benefited from the result of ongoing engagement with our customers. We are well positioned for growth as our manufacturing customers continue to capitalize on improving economic conditions.a

Gross margin for the fiscal 2011 fourth quarter totaled 60 percent, equal to the fiscal 2010 fourth quarter, although the companya�s revenue mix changed slightly between periods.

Total operating expenses were $31.8 million, or 51 percent of total revenue, for the fiscal 2011 fourth quarter, compared with $29.7 million, or 56 percent of total revenue, for the same period last year.

Operating income for the fiscal 2011 fourth quarter equaled $5.5 million, which included $1.1 million in stock compensation expense, compared with $1.9 million, which included $925,000 in stock compensation expense, for the fourth quarter of the prior fiscal year.

For the full year ended January 31, 2011, total revenue was $220.0 million, compared with $215.2 million for fiscal 2010. Net income for fiscal 2011 was $3.9 million, or $0.25 per diluted Class A share and $0.21 per diluted Class B share, versus $1.3 million, or the equivalent of $0.09 per diluted Class A share and $0.07 per diluted Class B share, for fiscal 2010.

QADa�s cash and equivalents balance grew to $67.3 million at January 31, 2011 from $44.7 million at the same time last year. Cash provided by operations was $10.2 million for the fourth quarter of fiscal 2011, versus $2.1 million for the fourth quarter of fiscal 2010. Cash provided by operations for fiscal 2011 was $26.3 million, compared with $17.7 million last year.

Fiscal 2011 Fourth Quarter Highlights:

Received orders from 37 customers representing more than $500,000 each in combined license, support and services billings, including 14 orders in excess of $1.0 million;
Received license orders from companies across QADa�s six vertical markets, including, among others: Adium Pharma S.A., Argon Medical Devices, Dakota Growers Corporation, Eaton Corporation, Fujikura Electronics, General Mills India Pvt Ltd, Scotts International and Visteon Corporation;
Cited as a pioneer by Aberdeen Group in delivering a complete Enterprise Resource Planning solution in a Software as a Service (SaaS) delivery model;
Received recognition at the 2010 Automotive Industry Action Group Outstanding Achievement Awards for the companya�s senior director of automotive for contributions in helping advance global industry standards;
Opened registration for Explore 2011 Customer Conference in San Antonio, Texas; and
Completed recapitalization plan to increase financial flexibility for the company and its shareholders. As a result of the recapitalization, QAD reclassified each whole share of its common stock as one-tenth of a new share of Class B common stock (QADB), and each share of Class B common stock was paid a dividend of four shares of Class A common (QADA).As of January 31, 2011, we had 12,780,000 Class A shares and 3,182,000 Class B shares outstanding.

Calculation of Earnings Per Share

As a result of the recapitalization,beginning this quarter, our EPS is being reported based on the new share structure, and will include a calculation for both the Class A and Class B shares. Since Class A shares have rights to 120% of dividends paid on Class B shares, net income is now apportioned so that earnings per share attributable to a Class A share are 120% of earnings per share attributable to a Class B share. For comparison purposes, prior period earnings per share calculations have been effected so as to incorporate the new capital structure. Full details of the recapitalization can be found in the related documents we have filed with the SEC and on our website.

Business Outlook

For the first quarter of fiscal 2012, QAD expects total revenue of approximately $56 million and earnings per diluted share of approximately $0.08 per diluted Class A share and $0.07 per diluted Class B share.

Investor Conference Call

QAD management will host an investor conference call today at 2:00 p.m. PT (5:00 p.m. ET) to review the companya�s financial results and operations for the fiscal 2011 fourth quarter and year-end. The conference call will be webcast live and is accessible through the investor relations section of QADa�s Web site at [ www.qad.com ], where it will be available for approximately one year. Interested parties may participate in the call by dialing 800-553-0351. A replay of the call will be accessible through March 17 by dialing 800-475-6701, access code 188713.

About QAD

QAD is a leading provider of enterprise applications for global manufacturing companies specializing in automotive, consumer products, electronics, food and beverage, industrial and life science products. 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. For more information about QAD, telephone +1 805-566-6000, 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.

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 changes in technology; the company's ability to sustain customer renewal rates at current levels; the publication of opinions by industry and financial analysts about the company, its products and technology; the reliability of estimates of transaction and integration costs and benefits; the entry of new competitors or new offerings by existing competitors and the associated announcement of new products and technological advances by them; delays in localizing the company's products for new or existing markets; the ability to recruit and retain key personnel; 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; timely and effective integration of newly acquired businesses; general economic conditions; exchange rate fluctuations; and, the global political environment. In addition, revenue and earnings in the enterprise resource planning (ERP) software industry 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 performance. 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 2010 ended January 31, 2010.

QAD Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)


		Three Months Ended January 31,						Twelve Months Ended January 31,
		2011			2010			2011			2010
Revenue:
	License fees	$	12,727		$	7,134		$	32,446		$	28,452
	Maintenance and other		33,856			32,410			131,162			131,142
	Services		15,874			13,139			56,404			55,637
	Total revenue		62,457			52,683			220,012			215,231
Cost of revenue:
	Cost of license fees		1,747			1,590			5,699			6,941
	Cost of maintenance, service and other revenue		23,424			19,507			86,533			84,686
	Total cost of revenue		25,171			21,097			92,232			91,627
Gross profit			37,286			31,586			127,780			123,604
Operating expenses:
	Sales and marketing		15,493			13,248			54,206			51,979
	Research and development		8,295			8,954			34,575			37,303
	General and administrative		8,024			7,477			30,637			30,969
	Amortization of intangibles from acquisitions		14			14			55			482
	Total operating expenses		31,826			29,693			119,473			120,733
Operating income			5,460			1,893			8,307			2,871
Other (income) expense:
	Interest income		(131	)		(130	)		(515	)		(570	)
	Interest expense		324			325			1,248			1,273
	Other (income) expense, net		287			320			304			(289	)
	Total other (income) expense		480			515			1,037			414
Income before income taxes			4,980			1,378			7,270			2,457
	Income tax expense		1,854			693			3,376			1,108
Net income		$	3,126		$	685		$	3,894		$	1,349

Diluted Net Income per Share
	Class A	$	0.20		$	0.04		$	0.25		$	0.09
	Class B	$	0.16		$	0.04		$	0.21		$	0.07

Diluted Weighted Shares
	Class A		13,155			13,181			13,050			12,907
	Class B		3,286			3,295			3,262			3,227

QAD Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)


			January 31,			January 31,
			2011			2010
Assets
Current assets:
	Cash and equivalents		$	67,276		$	44,678
	Accounts receivable, net			65,620			61,089
	Deferred tax assets, net			3,954			3,548
	Other current assets			14,270			13,680
		Total current assets		151,120			122,995

Property and equipment, net				33,795			37,219
Capitalized software costs, net				841			2,446
Goodwill				6,457			6,348
Long-term deferred tax assets, net				19,869			19,411
Other assets, net				2,518			2,755

	Total assets		$	214,600		$	191,174


Liabilities and stockholders' equity
Current liabilities:
	Current portion of long-term debt		$	304		$	285
	Accounts payable and other current liabilities			41,217			32,787
	Deferred revenue			94,453			85,745
		Total current liabilities		135,974			118,817

Long-term debt				16,138			16,443
Other liabilities				5,214			6,363

Stockholders' equity:
	Common stock			18			18
	Additional paid-in capital			146,898			143,138
	Treasury stock			(28,070	)		(32,275	)
	Accumulated deficit			(53,255	)		(52,480	)
	Accumulated other comprehensive loss			(8,317	)		(8,850	)
		Total stockholders' equity		57,274			49,551

	Total liabilities and stockholders' equity		$	214,600		$	191,174

QAD Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)


			Twelve Months Ended
			January 31,
		2011			2010

Net cash provided by operating activities		$	26,260		$	17,696

Cash flows from investing activities:
	Purchase of property and equipment		(1,432	)		(963	)
	Capitalized software costs		(484	)		(426	)
	Other, net		(6	)		32
Net cash used in investing activities			(1,922	)		(1,357	)

Cash flows from financing activities:
	Repayments of debt		(286	)		(255	)
	Proceeds from issuance of common stock		439			272
	Tax payments related to net share settlements of restricted stock		(464	)		(175	)
	Excess tax benefits from share-based payment arrangements		26			-
	Changes in book overdraft		-			(2,476	)
	Dividends paid in cash		(2,204	)		(1,873	)
Net cash used in financing activities			(2,489	)		(4,507	)

Effect of exchange rates on cash and equivalents			749			1,379
	Net increase in cash and equivalents		22,598			13,211
	Cash and equivalents at beginning of period		44,678			31,467
	Cash and equivalents at end of period	$	67,276		$	44,678

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QAD Announces Fiscal 2011 Fourth Quarter and Full-Year Financial Results