|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31,
|
|
|
|
|
|
|
|
% of Total Revenue
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
(in thousands)
|
|
|
|
|
|
|
Subscription fees
|
$
|
20,149
|
|
|
$
|
13,329
|
|
|
51
|
%
|
|
33
|
%
|
|
24
|
%
|
License
|
$
|
1,297
|
|
|
1,237
|
|
|
5
|
%
|
|
2
|
%
|
|
2
|
%
|
Professional services and other
|
20,308
|
|
|
20,056
|
|
|
1
|
%
|
|
34
|
%
|
|
36
|
%
|
Maintenance
|
18,728
|
|
|
20,537
|
|
|
(9)
|
%
|
|
31
|
%
|
|
38
|
%
|
Total revenue
|
$
|
60,482
|
|
|
$
|
55,159
|
|
|
10
|
%
|
|
100
|
%
|
|
100
|
%
|
For the three months ended October 31, 2021 compared to October 31, 2020 revenue increased by 12% attributable primarily to a 79% increase in license revenue, a 49% increase in subscription fees and a 5% increase in professional services and other revenue, partially offset by a 9% decrease in maintenance revenue when compared to the same period last year.
For the six months ended October 31, 2021 compared to October 31, 2020 revenue increased by 10% attributable primarily to a 51% increase in subscription fees, a 5% increase in license revenue and a 1% increase in professional services and other revenue, partially offset by a 9% decrease in maintenance revenue when compared to the same period last year.
Due to intense competition in our industry, we sometimes discount license fees from our published list price. Numerous factors contribute to the amount of the discount provided, such as previous customer purchases, the number of customer sites utilizing the software, the number of modules purchased and the number of users, as well as the overall size of the contract. While all these factors may affect the discount amount of a particular contract, the overall percentage discount has not materially changed in the recent reported fiscal periods.
The change in our revenue from period to period is primarily due to the volume of products and related services sold in any period and the number of products or modules purchased with each sale.
International revenue represented approximately 16% of total revenue in the three and six months ended October 31, 2021 compared to 15% for the same periods in the prior year. Our revenue, particularly our international revenue, may fluctuate substantially from period to period, primarily because we derive most of our license and subscription fee revenue from a relatively small number of customers in a given period.
Subscription Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
10,361
|
|
|
$
|
6,966
|
|
|
49
|
%
|
Total subscription fees revenue
|
$
|
10,361
|
|
|
$
|
6,966
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
20,149
|
|
|
$
|
13,329
|
|
|
51
|
%
|
Total subscription fees revenue
|
$
|
20,149
|
|
|
$
|
13,329
|
|
|
51
|
%
|
For the three and six months ended October 31, 2021, subscription fees revenue over the same periods last year increased 49% and 51%, respectively primarily due to an increase in the number of contracts, contracts with a higher cloud services ACV, as well as an increase in multi-year contracts. This is evidenced by our successful transition to the cloud subscription model.
License Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
800
|
|
|
$
|
434
|
|
|
84
|
%
|
Other
|
5
|
|
|
16
|
|
|
(69)
|
%
|
Total license revenue
|
$
|
805
|
|
|
$
|
450
|
|
|
79
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
1,276
|
|
|
$
|
1,221
|
|
|
5
|
%
|
Other
|
21
|
|
|
16
|
|
|
31
|
%
|
Total license revenue
|
$
|
1,297
|
|
|
$
|
1,237
|
|
|
5
|
%
|
For the three and six months ended October 31, 2021, license fee revenue increased 79% and 5%, respectively when compared to the same periods in the prior year. In the three months ended October 31, 2021, license fee revenue from our SCM segment increased 84%, partially offset by a decrease in our Other segment of 69% when compared to the corresponding period in the prior year. The majority of our current license fee revenue is generated from additional users and expanded scope from our existing on-premise customers. For the three and six months ended October 31, 2021 and 2020, our SCM segment constituted approximately 99%, 96%, 98% and 99% of total license fee revenue, respectively. Our Other segment license fee revenue increased by 31% for the six months ended October 31, 2021 when compared to the same period in the prior year primarily due to timing of sales to our existing ERP customers.
The direct sales channel provided approximately 98% and 96% of license fee revenues for the three and six months ended October 31, 2021, compared to approximately 65% and 77% in the comparable periods last year due to larger customers obtained through our direct sales channel moving to the Cloud platform faster than those in the mid-sized market that are primarily served by our indirect sales channel. For the three and six months ended October 31, 2021, our margins after commissions on direct sales were approximately 90% and 89%, compared to 83% and 84% in the comparable periods last year. The increase in margins is due to the mix of sales commission rates based on each individual salesperson’s quotas and related achievement. For the three months ended October 31, 2021 and 2020, our margins after commissions on indirect sales were approximately 67% and 57%, respectively. For the six months ended October 31, 2021 and 2020, our margins after commissions on indirect sales were approximately 65% and 55%, respectively. The indirect channel margins for the fiscal year increased compared to the same periods in the prior year due to the mix of value-added reseller (“VAR”) commission rates. These margin calculations include only commission expense for comparative purposes and do not include other costs of license fees such as amortization of capitalized software.
Professional Services and Other Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
5,263
|
|
|
$
|
4,981
|
|
|
6
|
%
|
IT Consulting
|
5,226
|
|
|
5,033
|
|
|
4
|
%
|
Other
|
290
|
|
|
228
|
|
|
27
|
%
|
Total professional services and other revenue
|
$
|
10,779
|
|
|
$
|
10,242
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
10,099
|
|
|
$
|
9,556
|
|
|
6
|
%
|
IT Consulting
|
9,702
|
|
|
10,059
|
|
|
(4)
|
%
|
Other
|
507
|
|
|
441
|
|
|
15
|
%
|
Total professional services and other revenue
|
$
|
20,308
|
|
|
$
|
20,056
|
|
|
1
|
%
|
For the three and six months ended October 31, 2021, professional services and other revenue increased by 5% and 1%, respectively due to the increased professional services and other revenue from our Other and SCM segments. For the three and six months ended October 31, 2021, our IT Consulting segment’s revenue increased 4% and decreased 4%, respectively when compared to the same period in the prior year due to the demand of project work from existing customers during the applicable period. This was partially offset by an increase in professional services and other revenue from our SCM and Other segments. For the three and six months ended October 31, 2021, our SCM segment’s revenue increased 6%, primarily due to a higher ramp up of implementation project work due to an increase in subscription fees revenue in recent periods. For the three and six months ended October 31, 2021, our Other segment’s revenue increased 27% and 15%, respectively due to the timing of project work with existing customers. We have observed that there is a tendency for services and other revenue, other than from IT Consulting, to lag changes in license and subscription revenue by one to three quarters, as new licenses and subscriptions in one quarter often involve implementation and consulting services in subsequent quarters, for which we recognize revenue only as we perform those services.
Maintenance Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
8,956
|
|
|
$
|
9,916
|
|
|
(10)
|
%
|
Other
|
310
|
|
|
307
|
|
|
1
|
%
|
Total maintenance revenue
|
$
|
9,266
|
|
|
$
|
10,223
|
|
|
(9)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
Supply Chain Management
|
$
|
18,107
|
|
|
$
|
19,927
|
|
|
(9)
|
%
|
Other
|
621
|
|
|
610
|
|
|
2
|
%
|
Total maintenance revenue
|
$
|
18,728
|
|
|
$
|
20,537
|
|
|
(9)
|
%
|
For the three and six months ended October 31, 2021, maintenance revenue decreased 9% when compared to the same period in the prior year. Our SCM maintenance revenue decreased 10% and 9% for the three and six months ended October 31, 2021, respectively when compared to the same period last year due to a normal customer attrition rate. The SCM segment accounted for 97% of total maintenance revenue for the three and six months ended October 31, 2021 and for the same periods in the prior year. Typically, our maintenance revenue have had a direct relationship to current and historic license fee revenue, since licenses are the source of maintenance customers.
GROSS MARGIN
The following table provides both dollar amounts (in thousands) and percentage measures of gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
Six Months Ended October 31,
|
|
2021
|
|
%
|
|
2020
|
|
%
|
|
2021
|
|
%
|
|
2020
|
|
%
|
Gross margin on subscription fees
|
$
|
6,957
|
|
|
67
|
%
|
|
$
|
4,020
|
|
|
58
|
%
|
|
$
|
13,521
|
|
|
67
|
%
|
|
$
|
7,624
|
|
|
57
|
%
|
Gross margin on license fees
|
607
|
|
|
75
|
%
|
|
(103)
|
|
|
(23)
|
%
|
|
940
|
|
|
72
|
%
|
|
9
|
|
|
1
|
%
|
Gross margin on professional services and other
|
3,302
|
|
|
31
|
%
|
|
2,618
|
|
|
26
|
%
|
|
5,821
|
|
|
29
|
%
|
|
4,602
|
|
|
23
|
%
|
Gross margin on maintenance
|
7,520
|
|
|
81
|
%
|
|
8,282
|
|
|
81
|
%
|
|
15,008
|
|
|
80
|
%
|
|
16,823
|
|
|
82
|
%
|
Total gross margin
|
$
|
18,386
|
|
|
58
|
%
|
|
$
|
14,817
|
|
|
53
|
%
|
|
$
|
35,290
|
|
|
58
|
%
|
|
$
|
29,058
|
|
|
53
|
%
|
For the three and six months ended October 31, 2021, our total gross margin percentage increased by 5% when compared to the same periods in the prior year primarily due to higher margins on subscription fees revenue, license fee and professional services and other revenue, partially offset by a decrease in maintenance revenue.
Gross Margin on Subscription Fees
For the three months ended October 31, 2021, our gross margin percentage on subscription fees revenue increased from 58% to 67% when compared to the same period in the prior year, primarily due to the increased subscription revenue and related cost efficiencies. For the six months ended October 31, 2021, our gross margin percentage on subscription fees revenue increased from 57% to 67% when compared to the same period in the prior year, primarily due to the portfolio shift from license fee to subscription revenue.
Gross Margin on License Fees
License fee gross margin percentage for the three and six months ended October 31, 2021 increased by 98% and 71%, respectively, when compared to the same period in the prior year. License fee gross margin percentage tends to be directly related to the level of license fee revenue due to the relatively fixed cost of computer software amortization expense, amortization of acquired software and the sales mix between our direct and indirect channels.
Gross Margin on Professional Services and Other
Our gross margin percentage on professional services and other revenue increased from 26% to 31% for the three months ended October 31, 2021 and October 31, 2020, primarily due to an increase in revenues, improved utilization and better billing rates. Our gross margins percentage in our SCM segment services increased to 40% from 35% for the three months ended October 31, 2021 and 2020, respectively. This is primarily the result of an increase in professional services and other revenue, which is being driven by an increase in billing rates and utilization. Our Other segment professional services gross margin increased to 42% from 39% for the three months ended October 31, 2021 and 2020, respectively, due to higher margin projects year to date. Our IT Consulting segment professional services gross margin increased to 21% of revenue when compared to 16% the same period last year due to higher margin project work. Professional services and other gross margin is directly related to the level of services and other revenue. The primary component of cost of services and other revenue is services staffing, which is relatively inelastic in the short term.
For the six months ended October 31, 2021 and October 31, 2020, our SCM segment gross margins decreased to 29% from 34%, respectively, due to lower billing utilization, an increase in vacations and customers delaying project start dates compared to the same period in the prior year. Our Other segment professional services gross margin increased to 43% from 41% for the six months ended October 31, 2021 and 2020, respectively, due to higher margin projects year to date. Our IT Consulting segment professional services gross margin increased to 21% from 16% for the six months ended October 31, 2021 and 2020, respectively, due to higher margin projects in the current quarter. Professional services and other gross margin is directly related to the level of services and other revenues.
Gross Margin on Maintenance
Maintenance gross margin percentage remained flat at 81% for the three months ended October 31, 2021 and October 31, 2020, and decreased from 82% to 80% for the six months ended October 31, 2021 and October 31, 2020, respectively. The decrease is primarily due to lower maintenance revenue and increase in personnel costs, compared to the same period in the prior year. The primary cost component is maintenance staffing, which is relatively inelastic in the short term.
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
Six Months Ended October 31,
|
|
2021
|
|
2020
|
|
% of Revenue
|
|
2021
|
|
2020
|
|
% of Revenue
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in thousands)
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Research and development
|
$
|
4,278
|
|
|
$
|
4,337
|
|
|
14
|
%
|
|
16
|
%
|
|
$
|
8,702
|
|
|
$
|
8,432
|
|
|
14
|
%
|
|
15
|
%
|
Sales and marketing
|
$
|
5,892
|
|
|
$
|
5,429
|
|
|
19
|
%
|
|
19
|
%
|
|
$
|
12,012
|
|
|
$
|
10,173
|
|
|
20
|
%
|
|
18
|
%
|
General and administrative
|
$
|
5,476
|
|
|
$
|
4,367
|
|
|
18
|
%
|
|
16
|
%
|
|
$
|
10,010
|
|
|
$
|
8,831
|
|
|
17
|
%
|
|
16
|
%
|
Amortization of acquisition-related intangible assets
|
$
|
53
|
|
|
$
|
53
|
|
|
—
|
%
|
|
—
|
%
|
|
$
|
106
|
|
|
$
|
106
|
|
|
—
|
%
|
|
—
|
%
|
Other income (expense), net
|
$
|
930
|
|
|
$
|
(42)
|
|
|
3
|
%
|
|
—
|
%
|
|
$
|
1,367
|
|
|
$
|
1,290
|
|
|
2
|
%
|
|
2
|
%
|
Income tax expense(benefit)
|
$
|
303
|
|
|
$
|
(103)
|
|
|
1
|
%
|
|
—
|
%
|
|
$
|
(434)
|
|
|
$
|
80
|
|
|
(1)
|
%
|
|
—
|
%
|
Research and Development
Gross product research and development costs include all non-capitalized and capitalized software development costs. A breakdown of the research and development costs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
|
|
Total capitalized computer software development costs
|
$
|
—
|
|
|
$
|
126
|
|
|
(100)
|
%
|
Percentage of gross product research and development costs
|
—
|
%
|
|
3
|
%
|
|
|
Total research and development expense
|
$
|
4,278
|
|
|
$
|
4,337
|
|
|
(1)
|
%
|
Percentage of total revenue
|
14
|
%
|
|
16
|
%
|
|
|
Total gross product research and development expense and capitalized computer software development costs
|
$
|
4,278
|
|
|
$
|
4,463
|
|
|
(4)
|
%
|
Percentage of total revenue
|
14
|
%
|
|
16
|
%
|
|
|
Total amortization of capitalized computer software development costs *
|
$
|
807
|
|
|
$
|
1,042
|
|
|
(23)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended October 31,
|
|
2021
|
|
2020
|
|
% Change
|
|
(in thousands)
|
|
|
|
|
Total capitalized computer software development costs
|
$
|
—
|
|
|
$
|
371
|
|
|
(100)
|
%
|
Percentage of gross product research and development costs
|
—
|
%
|
|
4
|
%
|
|
|
Total research and development expense
|
$
|
8,702
|
|
|
$
|
8,432
|
|
|
3
|
%
|
Percentage of total revenue
|
14
|
%
|
|
15
|
%
|
|
|
Total gross product research and development expense and capitalized computer software development costs
|
$
|
8,702
|
|
|
$
|
8,803
|
|
|
(1)
|
%
|
Percentage of total revenue
|
14
|
%
|
|
16
|
%
|
|
|
Total amortization of capitalized computer software development costs *
|
$
|
1,710
|
|
|
$
|
2,260
|
|
|
(24)
|
%
|
*Included in cost of license fees and subscription fees.
For the three and six months ended October 31, 2021, gross product research and development costs decreased 4% and 1%, respectively when compared to the same period in the previous year, primarily due to a decrease in the use of third-party contractors. Capitalized software development costs decreased in October 31, 2021 compared to the same period in the prior year, due to an increase in agile software programming that accelerates the software releases from months to weeks. We expect capitalized software costs to be zero in fiscal 2022. For the three and six months ended October 31, 2021, amortization of capitalized software development costs decreased 23% and 24%, respectively, when compared to fiscal 2021 as some projects were fully amortized. Costs included in gross product development are salaries of product development personnel, hardware lease expense, computer software expense, telephone expense and rent.
Sales and Marketing
For the three months ended October 31, 2021, sales and marketing expenses remained flat at 19% of revenue when compared to the same period last year due to marketing cost containment. For the six months ended October 31, 2021, sales and marketing expenses increased from 18% to 20% of revenue when compared to the same period last year due to increased marketing spend and variable compensation.
General and Administrative
For the three and six months ended October 31, 2021, general and administrative expenses increased by 2% and 1%, respectively, when compared to the same periods a year ago, primarily due to an increase in variable compensation, personnel costs and insurance.
At October 31, 2021, the total number of employees was 426 compared to 442 at October 31, 2020.
Operating Income/(Loss)
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|
|
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|
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|
|
|
|
|
|
|
|
|
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Three Months Ended October 31,
|
|
Six Months Ended October 31,
|
|
2021
|
|
2020
|
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% Change
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2021
|
|
2020
|
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% Change
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|
(in thousands)
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|
|
|
(in thousands)
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|
|
Supply Chain Management
|
$
|
6,718
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|
|
$
|
3,983
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|
|
69
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%
|
|
$
|
12,073
|
|
|
$
|
8,087
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|
|
49
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%
|
IT Consulting
|
336
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|
|
103
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|
|
226
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%
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|
499
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|
|
209
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|
|
139
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%
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Other*
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(4,367)
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|
|
(3,455)
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|
|
26
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%
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|
(8,112)
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|
|
(6,780)
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|
|
20
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%
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Total Operating Income
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$
|
2,687
|
|
|
$
|
631
|
|
|
326
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%
|
|
$
|
4,460
|
|
|
$
|
1,516
|
|
|
194
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%
|
* Includes all corporate overhead and other common expenses.
Our SCM segment operating income increased by 69% and 49%, respectively for the three and six months ended October 31, 2021, compared to the same periods in the prior year primarily due to improved gross margins.
Our IT Consulting segment operating income increased by 226% and 139%, respectively for the three and six months ended October 31, 2021, compared to same periods last year primarily due to a decrease in expenses related to sales and third-party contractors.
Our Other segment operating loss increased by 26% and 20%, respectively for the three and six months ended October 31, 2021, when compared to the same periods in the prior year due primarily to an increase in variable compensation and stock option expenses.
Other Income
Other income is comprised of net interest and dividend income, rental income, exchange rate gains and losses, and realized and unrealized gains and losses from investments. For the three months ended October 31, 2021, the increase in other income is mainly due to higher unrealized gains on investments when compared to the same period last year. We recorded unrealized gains of approximately $0.8 million and realized gains of approximately $0 for the three months ended October 31, 2021 from our trading securities portfolio.
The increase in other income for the six months ended October 31, 2021 is mainly due to an increase in unrealized gains of $1.2 million compared to $0.8 million for the same period last year. This increase was partially offset by higher exchange rate losses of approximately $0.2 million for the six months ended October 31, 2021 compared to $0 for the same period last year.
For the three and six months ended October 31, 2021, our investments generated an annualized yield of approximately 1.33% and 2.98%, respectively, compared to approximately 1.69% and 3.72% for the same periods in the prior year.
Income Taxes
We recognize deferred tax assets and liabilities based on the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. We measure deferred tax assets and liabilities using statutory tax rates in effect in the year in which we expect the differences to reverse. We establish a deferred tax asset for the expected future benefit of net operating losses, credit carry-forwards and nonqualified stock options. Under the Income Tax Topic of the FASB ASC, we cannot recognize a deferred tax asset for the future benefit of our net
operating losses, tax credits and temporary differences unless we can establish that it is “more likely than not” that the deferred tax asset would be realized.
During the three and six months ended October 31, 2021, we recorded an income tax expense of $303,000 and an income tax benefit of $433,000, respectively, primarily due to discrete stock compensation benefits of $439,000 and $1.6 million, respectively, net of normal income tax expense from operations. During the three and six months ended October 31, 2020, we recorded an income tax benefit of $103,000 and an income tax expense of $80,000, respectively, primarily due to discrete stock compensation benefits of $38,000 and $272,000 respectively, net of normal income tax expense from operations. Before adjusting for these discrete tax benefits, our effective tax rate would have been 19.8% in the both the three and six months ended October 31, 2021 compared to our effective tax rate of (11.2%) and 12.5%, respectively, in the three and six months ended October 31, 2020. In addition, research and development and foreign tax credits reduced our effective tax rate by 5.4% and 0% in the six months ended October 31, 2021, compared to reductions of 10.8% and 1.3% in the six months ended October 31, 2020.
Operating Pattern
We experience an irregular pattern of quarterly operating results, caused primarily by fluctuations in both the number and size of software license and subscription contracts received and delivered from quarter to quarter and our ability to recognize revenue in that quarter in accordance with our revenue recognition policies. We expect this pattern to continue.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Sources and Uses of Cash
Historically we have funded, and we continue to fund, our operations and capital expenditures primarily with cash generated from operating activities. The changes in net cash that our operating activities provide generally reflect the changes in net earnings and non-cash operating items plus the effect of changes in operating assets and liabilities, such as investment trading securities, trade accounts receivable, trade accounts payable, accrued expenses and deferred revenue. We have no debt obligations or off-balance sheet financing arrangements, and therefore, we used no cash for debt service purposes.
The following table shows information about our cash flows and liquidity positions during the six months ended October 31, 2021 and 2020. You should read this table and the discussion that follows in conjunction with our Condensed Consolidated Statements of Cash Flows contained in Item 1 in Part I of this Quarterly Report and in our Annual Report for fiscal 2021.
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Six Months Ended
October 31,
|
|
2021
|
|
2020
|
Net cash provided by operating activities
|
$
|
7,712
|
|
|
$
|
6,771
|
|
Net cash used in investing activities
|
(615)
|
|
|
(534)
|
|
Net cash used in financing activities
|
(1,554)
|
|
|
(4,265)
|
|
Net change in cash and cash equivalents
|
$
|
5,543
|
|
|
$
|
1,972
|
|
For the six months ended October 31, 2021, the net increase in cash provided by operating activities when compared to the same period last year was due primarily to the following: (1) an increase in net earnings, (2) a relative smaller decrease in deferred revenue due to timing of revenue recognition, (3) a relative smaller decrease in accounts payable and other accruals compared to the same period last year due to timing of payments, (4) an increase in stock-based compensation expense, (5) a relative larger decrease in customer accounts receivables caused by the timing of closing customer sales and related collections, (6) a decrease in deferred income taxes and (7) a decrease in purchases of trading securities.
This increase in cash provided by operating activities was partially offset by: (1) a relative increase in prepaid expenses when compared to a decrease in the same period last year due to the timing of purchases, (2) a decrease in the proceeds from the maturity and sales of trading securities, (3) a decrease in depreciation and amortization and (4) higher gains on investments than in prior year.
The increase in cash used in investing activities when compared to the same period in the prior year was mainly due to an increase in purchases of property and equipment, which was partially offset by a decrease in capitalized computer software development costs.
The decrease in cash used in financing activities compared to the prior year was due primarily to an increase in proceeds from exercise of stock options, which was partially offset by an increase in dividends paid.
The following table shows net changes in total cash, cash equivalents, and investments, which is one measure management uses to understand net total cash generated by our activities:
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|
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|
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As of October 31,
(in thousands)
|
|
2021
|
|
2020
|
Cash and cash equivalents
|
$
|
94,201
|
|
|
$
|
81,786
|
|
Short and long-term investments
|
17,163
|
|
|
12,829
|
|
Total cash and short and long-term investments
|
111,364
|
|
|
94,615
|
|
Net increase/(decrease) in total cash and investments (six months ended October 31)
|
$
|
6,700
|
|
|
$
|
(61)
|
|
Our total activities used less cash and investments during the months ended October 31, 2021, when compared to the prior year period, in the course of normal business operations.
Days Sales Outstanding in accounts receivable were 65 days as of October 31, 2021, compared to 69 days as of October 31, 2020. This decrease is primarily due to the timing of billings and cash collections. Our current ratio was 3.0 to 1 on October 31, 2021 and 2020.
Our business in recent periods has generated substantial positive cash flow from operations, excluding purchases and proceeds of sale of trading securities. For this reason, and because we had $111.4 million in cash and investments with no debt as of October 31, 2021, we believe that our sources of liquidity and capital resources will be sufficient to satisfy our presently anticipated requirements during at least the next twelve months for working capital, capital expenditures and other corporate needs. However, at some future date we may need to seek additional sources of capital to meet our requirements. If such need arises, we may be required to raise additional funds through equity or debt financing. We do not currently have a bank line of credit. We can provide no assurance that bank lines of credit or other financing will be available on terms acceptable to us. If available, such financing may result in dilution to our shareholders or higher interest expense.
On August 19, 2002, our Board of Directors approved a resolution authorizing the repurchase of up to an additional 2.0 million shares of our Class A common stock. We have made and will make these repurchases through open market purchases at prevailing market prices. The timing of any repurchase will depend upon market conditions, the market price of our common stock and management’s assessment of our liquidity and cash flow needs. Under this repurchase plan, through October 31, 2021, we have repurchased 1,053,679 shares of common stock at a cost of approximately $6.2 million. As of October 31, 2021, under all repurchase plans previously authorized, including this most recent plan, we have repurchased a total of 4,588,632 shares of common stock at a cost of approximately $25.6 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have based the following discussion and analysis of financial condition and results of operations on our condensed consolidated financial statements, which we have prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Note 1 to the Consolidated Financial Statements for the fiscal year ended in our Annual Report for fiscal 2021, describes the significant accounting policies that we have used in preparing our condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to revenue/collectability. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could differ materially from these estimates under different assumptions or conditions.
We believe the critical accounting policies listed below affect significant judgments and estimates used in the preparation of the financial statements.
Revenue Recognition.
Subscription. Subscription fees include Software-as-a-Service ("SaaS") revenue for the right to use the software for a limited period of time in an environment hosted by the Company or by a third party. The customer accesses and uses the software on an as needed basis over the Internet or via a dedicated line; however, the customer has no right to take delivery of the software. The underlying arrangements typically include a single fee for the service that is billed monthly, quarterly or annually. The Company’s SaaS solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue from a SaaS solution is generally recognized ratably over the term of the arrangement.
License. Our perpetual software licenses provide the customer with a right to use the software as it exists at the time of purchase. We recognize revenue for distinct software licenses once the license period has begun and we have made the software available to the customer.
Our perpetual software licenses are sold with maintenance under which we provide customers with telephone consulting, product updates on a when and if available basis, and releases of new versions of products previously purchased by the customer, as well as error reporting and correction services.
Professional Services and Other. Our professional services revenue consists of fees generated from consulting, implementation and training services, including reimbursements of out-pocket expenses in connection with our services. These services are typically optional to our customers, and are distinct from our software. Fees for our professional services are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. We believe the output method of hours worked provides the best depiction of the transfer of our services since the customer is receiving the benefit from our services as the work is performed. Reimbursements received from customers for out-of-pocket expenses were recorded in revenue and totaled approximately $12,000 and $40,000 for the three and six months ended October 31, 2021 and $12,000 and $16,000 for the three and six months ended October 31, 2020, respectively
Maintenance and Support. Revenue is derived from maintenance and support services, under which we provide customers with telephone consulting, product updates on a when and if available basis, and releases of new versions of products previously purchased by the customer, as well as error reporting and correction services. Maintenance for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Maintenance terms typically range from one to three years. Revenue related to maintenance is generally paid in advance and recognized ratably over the term of the agreement since the Company is standing ready to provide a series of maintenance services that are substantially the same each period over the term; therefore, time is the best measure of progress. Support services for subscriptions are included in the subscription fees and are recognized as a component of such fees.
Indirect Channel Revenue. We record revenue from sales made through the indirect sales channels on a gross basis, because we control the goods or services and act as the principal in the transaction. In reaching this determination, we evaluate sales through our indirect channel on a case-by-case basis and consider a number of factors including indicators of control such as the party having the primary responsibility to provide specified goods or services, and the party having discretion in establishing prices.
Sales Taxes. We account for sales taxes collected from customers on a net basis.
Significant Judgments. Many of our contracts include multiple performance obligations. Our products and services generally do not require a significant amount of integration or interdependency; therefore, our products and services are generally not combined. We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (SSP) for each performance obligation within each contract.
We use judgment in determining the SSP for products and services. For substantially all performance obligations, except on-premise licenses, we are able to establish SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. We typically establish an SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. Our on-premise licenses have not historically been sold on a standalone basis, as the vast majority of all customers elect to purchase on-premise license support contracts at the time of a on-premise license purchase. Support contracts are generally priced as a percentage of the net fees paid by the customer to access the on-premise license. We are unable to establish the SSP for our on-premise licenses based on observable prices given the same products are sold for a broad range of amounts (that is, the selling price is highly variable) and a representative SSP is not discernible from past transactions or other observable evidence. As a result, the SSP for a on-premise license included in a contract with multiple performance obligations is determined by applying a residual approach whereby all other performance obligations within a contract are first allocated a portion of the transaction price based upon their respective SSPs, with any
residual amount of transaction price allocated to on-premise license revenue. Maintenance and support contracts are generally priced as a percentage of the net fees paid by the customer to access the on-premise license.