QAD Continues Year-over-Year Revenue Growth and Profit for Fiscal 2004 Third Quarter
CARPINTERIA, Calif.--Nov. 2, 20035, 2003--| Company Posts $55.8 Million in Revenue and $3.6 Million in Net Income, Diluted EPS of $0.10 |
QAD Inc. today reported financial results for the fiscal 2004 third quarter and nine-month period ended October 31, 2003.
For the fiscal 2004 third quarter, revenue increased 15 percent to $55.8 million from $48.5 million in the same period last year. License revenue grew 11 percent to $15.5 million, compared with $14.0 million in the fiscal 2003 third quarter. Maintenance and other revenue increased 7 percent over the third quarter of fiscal 2003 to $28.6 million, reflecting the impact of new licenses in addition to strong maintenance renewals. Fiscal 2004 third quarter service revenue rose 53 percent over the comparable prior year period to $11.7 million, primarily due to the TRW ISCS acquisition that was completed in November 2002.
Net income for the fiscal 2004 third quarter was $3.6 million, or $0.10 per diluted share, including a benefit of $346,000, or $0.01 per diluted share, for an adjustment to a prior year restructuring charge. In the fiscal 2003 third quarter, the company's net income was $331,000, or $0.01 per diluted share, including a restructuring charge of $3.2 million, or $0.09 per diluted share.
QAD's cash and equivalents balance at October 31, 2003 was $47.8 million. For the fiscal 2004 third quarter, cash flow provided by operations was $3.2 million, continuing the momentum of positive annual cash flow.
"QAD's solid year-over-year revenue growth and profit this quarter demonstrate that our unwavering and passionate focus on manufacturing is continuing to gain traction with global manufacturers," said Karl Lopker, chief executive officer of QAD. "With a substantial multi-national customer base in six manufacturing verticals, we will continue developing and delivering enterprise software applications that give our users deep industry functionality."
For the nine-month period ended October 31, 2003, the company reported revenue of $168.1 million, a 22% increase over the $138.1 million in revenue reported for the comparable period in fiscal 2003. Net income for the nine-month period was $10.0 million, or $0.29 per diluted share, including a benefit of $346,000, or $0.01 per diluted share, for an adjustment to a prior year restructuring charge. In contrast, for the comparable period in fiscal 2003, the reported net loss was $9.3 million, or $0.27 loss per diluted share. The fiscal 2003 loss included a restructuring charge of $3.2 million, or $0.09 per diluted share, and a $1.1 million charge, or $0.03 per diluted share, for the cumulative effect of an accounting change related to goodwill.
Recent Highlights
-- During the third quarter, QAD received orders from 8 customers representing more than $500,000 each in combined license, support and services billings, with one of these exceeding $1 million.
-- Customer license transactions during the quarter represented sales to manufacturers across our industry verticals, including Alcatel, Alpharma, Areva, Bakkersland, Blackhawk Automotive Plastics, Condor D.C. Power Supplies, Dynax, General Chemical, Invacare, Johnson Controls, Kraft Foods International, National Foods, PPG Industries, Sagus International, Solvay, TI Automotive and Valeo.
-- QAD enhanced its Distributed Order Management solutions set with the launch of QAD Customer Self-Service, a set of three Web-based customer self-service modules that enable global manufacturers to offer customer service continuously via the Internet. The solutions have already been installed at more than 25 early adopter licensed sites, and were generally available as of November 1, 2003.
-- Earlier this month, QAD management presented the company's strategy to investors at the AeA Classic Financial Conference in San Diego, which showcased more than 200 companies and hosted more than 800 members of the investment community. The presentation is archived and will be available on QAD's web site, www.qad.com, and on AeA's web site, www.aeanet.org, through February 3, 2004.
Business Outlook
For the fiscal 2004 fourth quarter, QAD expects to generate revenue between $57 million and $61 million, subject to various risks, including corporate investment in IT and global economic factors. Depending on the level and mix of revenue, the company expects fourth quarter earnings per diluted share in the range of $0.11 to $0.21. With this guidance, QAD expects to post fiscal 2004 revenue of $225 million to $229 million, yielding earnings of between $0.40 and $0.50 per diluted share.
Investor Conference Call:
QAD management will host an investor conference call today, November 25, 2003 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to review the company's financial results and operations for the fiscal 2004 third quarter. The conference call will be webcast by CCBN and can be accessed on QAD's Web site at http://www.qad.com/company/ir/events.html. The audio webcast will be available for approximately one year through November 24, 2004.
About QAD
QAD enterprise applications leverage advances in Internet and enabling technologies to 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. To receive any of QAD's press releases via facsimile, contact +1 800 356 0747, or outside the U.S. contact +1 213 253 5647.
"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 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 2003 ended January 31, 2003.
QAD Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------------------------
2003 2002 2003 2002
-------- -------- --------- ---------
Revenue:
License fees $15,517 $14,041 $ 48,607 $ 37,194
Maintenance and other 28,617 26,844 85,358 78,534
Services 11,681 7,653 34,104 22,408
-------- -------- --------- ---------
Total revenue 55,815 48,538 168,069 138,136
Cost of revenue
Cost of license fees 2,140 2,451 7,400 6,171
Cost of maintenance, service
and other revenue 20,174 15,486 59,240 47,116
-------- -------- --------- ---------
Total cost of revenue 22,314 17,937 66,640 53,287
-------- -------- --------- ---------
Gross profit 33,501 30,601 101,429 84,849
Operating expenses:
Sales and marketing 14,114 13,471 44,402 45,808
Research and development 8,991 7,994 27,325 25,207
General and administrative 5,965 4,804 18,153 15,910
Amortization of intangibles
from acquisitions 279 263 826 840
Impairment loss - 151 - 151
Restructuring (346) 3,192 (346) 3,192
-------- -------- --------- ---------
Total operating expenses 29,003 29,875 90,360 91,108
-------- -------- --------- ---------
Operating income (loss) 4,498 726 11,069 (6,259)
Other (income) expense
Interest income (151) (183) (396) (599)
Interest expense 328 426 874 1,295
Other (income) expense, net (154) (148) (1,794) 416
-------- -------- --------- ---------
Total other (income)
expense 23 95 (1,316) 1,112
-------- -------- --------- ---------
Income (loss) before income taxes
and cumulative effect of accounting
change 4,475 631 12,385 (7,371)
Income tax expense 900 300 2,400 900
-------- -------- --------- ---------
Income (loss) before cumulative
effect of accounting change 3,575 331 9,985 (8,271)
Cumulative effect of
accounting change - - - 1,051
-------- -------- --------- ---------
Net income (loss) $ 3,575 $ 331 $ 9,985 $ (9,322)
======== ======== ========= =========
Basic net income (loss) per
share:
Before cumulative effect of
accounting change $ 0.11 $ 0.01 $ 0.30 $ (0.24)
Cumulative effect of
accounting change - - - 0.03
-------- -------- --------- ---------
Basic net income (loss) per
share $ 0.11 $ 0.01 $ 0.30 $ (0.27)
======== ======== ========= =========
Diluted net income (loss) per
share:
Before cumulative effect of
accounting change $ 0.10 $ 0.01 $ 0.29 $ (0.24)
Cumulative effect of
accounting change - - - 0.03
-------- -------- --------- ---------
Diluted net income (loss) per
share $ 0.10 $ 0.01 $ 0.29 $ (0.27)
======== ======== ========= =========
Basic weighted shares 32,892 34,502 32,996 34,403
Diluted weighted shares 34,674 34,526 34,631 34,403
QAD Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
October January
31, 31,
2003 2003
--------- ---------
Assets
Current assets:
Cash and equivalents $ 47,843 $ 50,188
Restricted cash - 1,016
Accounts receivable, net 46,700 57,340
Other current assets 11,145 15,340
--------- ---------
Total current assets 105,688 123,884
Property and equipment, net 29,994 21,543
Other assets, net 15,649 16,879
--------- ---------
Total assets $151,331 $162,306
========= =========
Liabilities & stockholders' equity
Current liabilities:
Current portion of long-term debt $ 9,249 $ 2,000
Accounts payable and other current
liabilities 43,415 49,207
Deferred revenue 52,499 65,860
--------- ---------
Total current liabilities 105,163 117,067
Long-term debt 8,000 9,125
Other long-term liabilities 757 371
Stockholders' equity:
Common stock 35 34
Additional paid-in capital 119,273 115,800
Treasury stock (11,147) -
Accumulated deficit (64,301) (73,244)
Accumulated other comprehensive loss (6,449) (6,847)
--------- ---------
Total stockholders' equity 37,411 35,743
--------- ---------
Total liabilities & stockholders' equity $151,331 $162,306
========= =========
QAD Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
October 31,
--------------------------
2003 2002
------------- ------------
Net cash provided by operating activities $ 8,072 $ 4,323
Cash flows from investing activities:
Purchase of property and equipment (12,400) (5,995)
Capitalized software development costs (478) (1,368)
Acquisitions of businesses (445) -
Proceeds from sale of property and
equipment 3,394 145
------------- ------------
Net cash used in investing activities (9,929) (7,218)
Cash flows from financing activities:
Proceeds from construction loan 7,749 -
Restricted cash under construction
loan 1,016 -
Repayments of long-term debt (1,625) (1,699)
Issuance of common stock for cash 6,524 678
Repurchase of common stock (15,239) -
------------- ------------
Net cash used in financing activities (1,575) (1,021)
Effect of exchange rates on cash and
equivalents 1,087 1,273
------------- ------------
Net decrease in cash and equivalents (2,345) (2,643)
Cash and equivalents at beginning of
period 50,188 50,782
------------- ------------
Cash and equivalents at end of period $ 47,843 $48,139
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