QAD (QADI) Announces Fiscal 2010 Third Quarter Financial Results

Nov. 24, 2009 (Business Wire) — QAD Inc. (Nasdaq:QADI), a global provider of enterprise software and services, today reported financial results for the fiscal 2010 third quarter ended October 31, 2009.

Total revenue equaled $56.2 million for the fiscal 2010 third quarter, compared with $67.8 million for the same period last year and $51.3 million for the fiscal 2010 second quarter. License revenue equaled $8.4 million, versus $13.1 million for the fiscal 2009 third quarter and $6.7 million for the fiscal 2010 second quarter. Maintenance and other revenue totaled $33.8 million, compared with $32.7 million for the third quarter of fiscal 2009 and $32.1 million for the second quarter of fiscal 2010. Services revenue was $14.1 million, versus $22.0 million for last year’s fiscal third quarter and $12.5 million for the prior sequential quarter.

Net income for the fiscal 2010 third quarter was $4.8 million, or $0.15 per fully diluted share, including stock compensation expense of $0.03 per fully diluted share net of tax. In the fiscal 2009 third quarter, the company reported a net loss of $1.8 million, or $0.06 per share, including stock compensation expense of $0.03 per fully diluted share net of tax.

“We are successfully managing our business through this tough economic environment,” said Karl Lopker chief executive officer of QAD. “Continued prudent expense management contributed to an increased cash balance year-to-date, as well as meaningful profitability in the recent quarter. While many global economic indicators are still mixed, some of our customers are starting to show increased confidence. As signs of a global recovery begin to emerge, we believe we are well positioned to take advantage of improvements in the manufacturing sector, and look forward to continuing to work closely with our customers as their businesses grow.”

Gross margin for the fiscal 2010 third quarter was 60 percent, compared with 54 percent for the fiscal 2009 third quarter, mainly reflecting a change in revenue mix.

Total operating expenses were $28.1 million, or 50 percent of total revenue, for the fiscal 2010 third quarter, versus $37.1 million, or 55 percent of total revenue, for the third quarter of fiscal 2009.

Operating income for the fiscal 2010 third quarter totaled $5.6 million, including $1.2 million in stock compensation expense, compared with an operating loss of $533,000, including $1.3 million in stock compensation expense, for the third quarter of the prior fiscal year.

For the first nine months of fiscal 2010, revenue totaled $162.5 million, versus $204.1 million for the first nine months of fiscal 2009. Net income for the fiscal 2010 year-to-date period was $0.7 million, or $0.02 per fully diluted share, including stock compensation expense of $0.08 per fully diluted share net of tax. This compares with a net loss of $4.0 million, or $0.13 per share, for the fiscal 2009 year-to-date period including stock compensation expense of $0.10 per fully diluted share net of tax.

QAD’s cash and cash equivalents balance at October 31, 2009 grew to $43.7 million, compared with $31.5 million at January 31, 2009. Cash flow provided by operations was $3.3 million for the third quarter of fiscal 2010, versus $2.5 million for the third quarter of fiscal 2009. For the first nine months of fiscal 2010, cash flow provided by operations was $15.6 million, compared with $9.6 million in the prior year period.

Fiscal 2010 Third Quarter Highlights:

• Received orders from 15 customers representing more than $500,000 each in combined license, support and services billings, including six orders in excess of $1.0 million;

• Received license orders from companies across QAD’s six vertical markets including, among others: Coca-Cola Enterprises; Gemalto; GS Yuasa Corporation; Groupe Danone; Halberg Emboutissage et Mécanisme; Hubbell Inc.; International Paper; Invacare France Operations SAS, SADAFCO; and Tower Automotive.
• QAD Enterprise Applications 2009.1 is the latest release of QAD’s Enterprise Suite, featuring significant new functionality and usability enhancements in the areas of Customer Relationship Management, Visual Scheduling, Operational Metrics, User Interface, Business Reporting and Forms Management and Enterprise Asset Management.

Business Outlook

For the fiscal 2010 fourth quarter, the company currently expects total revenue of approximately $57 million, and profit of about $0.13 per fully diluted share. For the fiscal 2010 full year, the company currently expects total revenue of approximately $220 million and profit of about $0.15 per fully diluted 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 company’s financial results and operations for the fiscal 2010 third quarter. The conference call will be webcast live and is accessible through the investor relations section of QAD’s Web site at www.qad.com, where it will be available for approximately one year.

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.

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 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 2009 ended January 31, 2009.

QAD Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
					Three Months EndedOctober 31,								Nine Months EndedOctober 31,
					2009				2008				2009				2008
Revenue:
	License fees				$	8,409			$	13,055			$	21,318			$	36,448
	Maintenance and other					33,779				32,687				98,732				101,341
	Services					14,052				22,025				42,498				66,329
		Total revenue				56,240				67,767				162,548				204,118
Cost of revenue:
	Cost of license fees					1,813				2,689				5,351				7,474
	Cost of maintenance, service and other revenue					20,719				28,548				65,179				86,200
		Total cost of revenue				22,532				31,237				70,530				93,674
Gross profit						33,708				36,530				92,018				110,444
Operating expenses:
	Sales and marketing					12,168				17,825				38,731				55,938
	Research and development					8,678				10,794				28,349				33,165
	General and administrative					7,101				8,260				23,492				25,180
	Amortization of intangibles from acquisitions					121				184				468				559
		Total operating expenses				28,068				37,063				91,040				114,842
Operating income (loss)						5,640				(533	)			978				(4,398	)
Other (income) expense:
	Interest income					(132	)			(366	)			(440	)			(1,213	)
	Interest expense					321				309				948				948
	Other (income) expense, net					(511	)			20				(609	)			456
		Total other (income) expense				(322	)			(37	)			(101	)			191
Income (loss) before income taxes						5,962				(496	)			1,079				(4,589	)
	Income tax expense (benefit)					1,208				1,325				415				(605	)
Net income (loss)					$	4,754			$	(1,821	)		$	664			$	(3,984	)
Basic net income (loss) per share					$	0.15			$	(0.06	)		$	0.02			$	(0.13	)
Diluted net income (loss) per share					$	0.15			$	(0.06	)		$	0.02			$	(0.13	)
Basic weighted shares						31,120				30,671				30,925				30,656
Diluted weighted shares						32,429				30,671				31,901				30,656

QAD Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
				October 31,				January 31,
				2009				2009
Assets
Current assets:
	Cash and equivalents			$	43,727			$	31,467
	Accounts receivable, net				40,225				70,954
	Other current assets				18,780				19,164
		Total current assets			102,732				121,585
Property and equipment, net					38,575				41,438
Capitalized software costs, net					3,054				5,699
Goodwill					6,338				6,237
Other assets, net					18,035				18,786
	Total assets			$	168,734			$	193,745
Liabilities and stockholders’ equity
Current liabilities:
	Current portion of long-term debt			$	280			$	266
	Accounts payable and other current liabilities				30,964				43,575
	Deferred revenue				68,665				81,392
		Total current liabilities			99,909				125,233
Long-term debt					16,511				16,717
Other liabilities					4,395				4,324
Stockholders’ equity:
	Common stock				35				35
	Additional paid-in capital				142,446				139,930
	Treasury stock				(33,031	)			(36,614	)
	Accumulated deficit				(52,050	)			(49,103	)
	Accumulated other comprehensive loss				(9,481	)			(6,777	)
		Total stockholders’ equity			47,919				47,471
	Total liabilities and stockholders’ equity			$	168,734			$	193,745

QAD Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
			Nine Months Ended
			October 31,
		2009				2008
Net cash provided by operating activities		$	15,604			$	9,606
Cash flows from investing activities:
	Purchase of property and equipment		(645	)			(4,810	)
	Capitalized software costs		(314	)			(821	)
	Acquisitions of businesses, net of cash acquired		(14	)			(6,235	)
	Proceeds from sale of marketable securities		–				275
	Proceeds from sale of property and equipment		41				3
Net cash used in investing activities			(932	)			(11,588	)
Cash flows from financing activities:
	Repayments of debt		(192	)			(221	)
	Proceeds from issuance of common stock		56				456
	Changes in book overdraft		(2,476	)			(1,015	)
	Repurchase of common stock		–				(2,219	)
	Dividends paid		(1,227	)			(2,300	)
Net cash used in financing activities			(3,839	)			(5,299	)
Effect of exchange rates on cash and equivalents			1,427				(2,104	)
	Net increase (decrease) in cash and equivalents		12,260				(9,385	)
	Cash and equivalents at beginning of period		31,467				45,613
	Cash and equivalents at end of period	$	43,727			$	36,228