MANA Manatron (MM)

Key Highlights: KALAMAZOO, Mich., Dec. 13 /PRNewswire-FirstCall/ -- Manatron, Inc. (NASDAQ:MANA) a leading provider of software products and services for State and local governments, including its Government Revenue Management(R) (GRM(R)) software announced its financial results for the second quarter of fiscal 2007, which ended on October 31, 2006. For the second fiscal quarter, the Company reported net revenues of $10.7 million, an 18.3 percent increase over net revenues of $9.0 million recognized for the second quarter of fiscal 2006. Operating income improved to $251,594 for the quarter, a positive swing of $1.4 million versus an operating loss of $1.15 million reported for last year's same period and a three-fold increase over the $60,079 of operating income posted for the preceding first quarter, which ended on July 31, 2006. Net income after taxes was $173,017 or $0.03 per diluted share for the second quarter compared to a net loss of $668,121 or $(0.15) per diluted share for the three months ended October 31, 2005. For further comparison purposes, net income was $51,541 or $0.01 per diluted share for the first quarter of the current fiscal year. For the first half of fiscal 2007, the Company reported net revenues of $21.4 million, a 16.3 percent increase over net revenues of $18.4 million posted for the six months ended October 31, 2005. Operating income improved to $311,673 for the six-month period, representing a positive swing of $2.7 million over the operating loss of $2.4 million reported for the first half of the prior fiscal year. Net income was $224,558 or $0.05 per diluted share for the six months ended October 31, 2006 versus a net loss of $1.4 million or $(0.33) per diluted share for the comparable prior year period. "Our financial performance continues to improve steadily, and I'm pleased to report our second consecutive profitable quarter," said Paul R. Sylvester, Manatron's Chief Executive Officer. "Largely as a result of our restructuring at the end of our last fiscal year, we are seeing better operating leverage in our business model. Our gross margins continue to increase as we execute our plan, increase revenues and experience favorable changes in our mix of revenues. Software license fees for the quarter, which typically generate substantially higher gross margins than our services revenue, increased by $521,000 to $1.8 million, representing a 42.3 percent increase over the $1.2 million of license fees we recognized during the second quarter of the prior fiscal year. This increase was driven by property tax and CAMA implementations in our core markets, as well as progress on our GRM implementations during the first six months of our current fiscal year." "We also have been reaping the expected benefits and synergies from our acquisitions last year, particularly with ASIX," Sylvester continued. "We are making solid progress against our strategic goal of positioning our GRM suite of software to penetrate the California market, which we have long considered a key to Manatron's future growth. Our company continues to gain experience and credibility in this market with the ongoing Property Tax implementation in the County of San Diego, where we have been providing 'subject matter expertise' to BearingPoint. More importantly, we have been jointly planning and speaking with a number of California counties that are in the process of evaluating new platforms." "Our GRM solution is gaining traction nationally as we continue to increase the number of referenceable accounts," said Bill McKinzie, Manatron's President and Chief Operating Officer. "We are currently live in three states and have implementations in process in six others, which will contribute to Manatron's future growth. Our next phase of growth will be fueled by the increase in our backlog, which is $20.4 million at October 31, 2006 versus $15.6 million at October 31, 2005. This improvement is due to sales progress in our key markets. For the first six months of this year, our signed contracts increased by more than $6 million versus the same period a year ago. We continue to see increased activity in the national marketplace and expect to report some strategic wins before our fiscal year ends." In addition to the growth in license fees, the increase in revenues was due to the acquisitions of ASIX, which occurred on February 1, 2006 and Plexis, completed November 1, 2005. As a result, the prior year second quarter and first half did not reflect any revenues related to ASIX or Plexis. Recurring software maintenance fees increased 29.8 percent to $4.4 million for the second quarter from $3.4 million in the comparable prior year quarter primarily due to acquisitions of Plexis and ASIX, which have contributed $700,000 of the increase. Software maintenance recently initiated on new clients and annual price increases approved in the prior year accounted for the remaining increase. Professional services revenues increased 2.9 percent to $4.2 million for the second quarter from $4.0 million in the prior year's comparable period. This increase was primarily driven by additional consulting services that the Company now provides as a result of the ASIX acquisition, partially offset by a $580,000 decrease in appraisal services revenue. Cost of revenues for the second quarter decreased by 5.5 percent to $5.6 million from $5.9 million for the comparable period in the prior fiscal year. Gross margin was 47.9 percent versus 34.7 percent for the prior year second quarter. These improvements were due to the Company's restructuring in April, which has led to lower system-wide personnel expenses, and the elimination of certain outsourced labor costs associated with the City of Baltimore project compared to the second quarter a year ago. Since the majority of the Company's costs are fixed, the increase in revenue for the quarter had a positive impact on gross margin. In addition, the Company experienced a favorable change in its revenue mix and, as noted, software license fees typically produce a higher gross margin than services revenue. Selling, general and administrative expenses increased to $4.9 million for the three months ended October 31, 2006 from $4.3 million for the second quarter in the prior fiscal year because of additional amortization expenses related to assets acquired from Plexis and ASIX. Increases in commission expense due to the higher volume of signed contracts in the current fiscal year, and salaries and benefits for new key sales, marketing and development personnel associated with the Plexis and ASIX acquisitions also contributed to the increase. These increases were partially offset by decreased costs attributable to the Company's fiscal 2006 restructuring. For the six months ended October 31, 2006, software license fees increased 51.3 percent to $2.9 million from $1.9 million for the first half of the prior fiscal year. Recurring software maintenance fees increased 29.4 percent to $8.8 million for the six months ended October 31, 2006 from $6.8 million in the prior year first half. Professional services revenues increased 2.5 percent to $9.2 million. Cost of revenues decreased 7.2 percent to $11.6 million for the current six-month period versus $12.5 million for the prior year's first half, resulting in an improvement of gross margin to 45.6 percent compared to 31.8 percent for the prior year period. Selling, general and administrative expenses increased by 14.1 percent to $9.4 million for the first half versus $8.3 million for the six months ended October 31, 2005. The Company's operating income improved by $2.7 million to $312,000 for the six months ended October 31, 2006 from an operating loss of $2.4 million in the comparable period last year. Net income was $225,000 or $0.05 per diluted share for the first six months of the current fiscal year versus a net loss of $1.4 million or ($0.33) per diluted share for the comparable prior year's period. Backlog at the end of the second quarter was $20.4 million, compared to $15.6 million at October 31, 2005. These backlog amounts are exclusive of the Company's $20.0 million of annualized recurring revenue from software maintenance, hardware maintenance, e-government subscriptions, and printing and processing contracts as of October 31, 2006. The backlog increase is due to a higher volume of new signed contracts during the current fiscal year -- approximately $9 million year-to-date versus $3 million for the same period last year, the majority of which is due to new name accounts, such as Clay County, Missouri; Clinton County, Pennsylvania; Vigo County, Indiana; four counties in Oregon; Oconee County, South Carolina; and a number of upgrades in the Company's core markets of Florida, Illinois, Indiana and Ohio. The Company finished the quarter with working capital of $5.4 million, $4.8 million in cash and no bank debt. Shareholders' equity was $23.6 million compared to $23.0 million as of April 30, 2006. Manatron also paid down $300,000 of seller-financed notes payable associated with the VisiCraft acquisition during the quarter and collected a $2 million tax receivable that was recorded last year. Stock Buyback Authorization On October 9, 2006, the Company announced a stock buyback program of $1 million over the next twelve months. This amount represents approximately three percent of the current market value of the Company's 5.1 million shares outstanding and replaces the previous repurchase plan announced on September 13, 2005, which had expired. During the second quarter, the Company repurchased 11,198 shares for $6.89 per share under this stock repurchase program. Teleconference Information Management will discuss the results in a conference call, scheduled for 4:15 p.m. Eastern Time, on Wednesday, December 13. Anyone interested in participating should call 888-603-6873 if calling within the United States or 973-582-2706 if calling internationally. There will be a replay available until December 20, 2006, by dialing 877-519-4471 if calling within the United States or 973-341-3080 if calling internationally. Please use pin number 818446 to access the replay. This call is being web cast by ViaVid Broadcasting and can be accessed at Manatron's website at http://www.manatron.com/. The web cast may also be accessed at ViaVid's website at http://www.viavid.net/. The web cast can be accessed until January 13, 2007 on either site. To access the web cast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp. About Manatron, Inc.: Manatron, Inc. designs, develops, markets and supports a family of web-based and client/server application software products for State and local governments. Manatron's products support the back-office processes for these government agencies and facilitate the broader business processes via eGovernment and Internet features, such as Internet payments and mortgage lender integration, targeted at the needs of taxpayers and industry professionals. Manatron also provides a variety of professional services, including mass appraisal services, which is the assessment of residential, commercial and other types of properties to ensure updated and equitable property valuations. Manatron is headquartered in Portage, Michigan and has offices in Florida, Georgia, Illinois, Indiana, Minnesota, Ohio, Tennessee and Washington. Manatron currently serves approximately 1,300 customers in 30 states and two Canadian territories. Information about Manatron, Inc. is available at the Company's site on the World Wide Web at http://www.manatron.com/. Safe Harbor Statement: The information provided in this news release may include forward-looking statements relating to future events, such as the development of new products, the commencement of production, or the future financial performance of the Company. Actual results may differ from such projections and are subject to certain risks including, without limitation, risks arising from: changes in the rate of growth of the local government market, increased competition in the industry, delays in developing and commercializing new products, adequacy of financing and other factors described in the Company's most recent annual report on Form 10-K filed with the Securities and Exchange Commission, which can be reviewed at http://www.sec.gov/. MANATRON, INC. CONDENSED CONSOLIDATED BALANCE SHEETS October 31, April 30, 2006 2006 (Unaudited) (Audited) ASSETS CURRENT ASSETS: Cash and equivalents $4,832,076 $4,209,831 Accounts receivable, net 5,128,261 7,556,313 Income tax receivable -- 2,182,248 Revenues earned in excess of billings on long-term contracts 5,135,108 6,151,346 Unbilled retainages on long term contracts 1,435,107 1,105,320 Notes receivable 448,871 450,565 Inventories 70,880 146,800 Deferred tax assets 1,153,651 1,153,651 Other current assets 450,276 485,525 Total current assets 18,654,230 23,441,599 NET PROPERTY AND EQUIPMENT 2,396,631 2,618,588 OTHER ASSETS: Notes receivable, less current portions 292,441 272,261 Computer software development costs, net of accumulated amortization 2,883,411 2,610,216 Goodwill 12,022,385 12,022,385 Intangible assets, net of accumulated amortization 2,721,849 3,202,935 Other, net 237,765 253,980 Total other assets 18,157,851 18,361,777 Total assets $39,208,712 $44,421,964 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $440,887 $898,301 Current portion of notes payable 2,200,000 2,700,000 Billings in excess of revenues earned on long-term contracts 1,589,354 3,373,271 Billings for future services 6,048,984 8,369,114 Accrued liabilities 2,947,790 3,419,286 Total current liabilities 13,227,015 18,759,972 DEFERRED INCOME TAXES 284,963 284,963 LONG-TERM PORTION OF NOTES PAYABLE 2,145,638 2,334,228 SHAREHOLDERS' EQUITY: Common stock 16,822,220 16,538,483 Retained earnings 6,728,876 6,504,318 Total shareholders' equity 23,551,096 23,042,801 Total liabilities and shareholders' equity $39,208,712 $44,421,964 MANATRON, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended October 31, October 31, 2006 2005 2006 2005 NET REVENUES $10,668,865 $9,017,210 $21,391,324 $18,390,362 COST OF REVENUES 5,560,384 5,883,804 11,640,587 12,540,041 Gross profit 5,108,481 3,133,406 9,750,737 5,850,321 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,856,887 4,286,874 9,439,064 8,270,626 Income (loss) from operations 251,594 (1,153,468) 311,673 (2,420,305) OTHER INCOME, NET 26,423 76,907 49,485 152,865 Income (loss) before provision (credit) for income taxes 278,017 (1,076,561) 361,158 (2,267,440) PROVISION (CREDIT) FOR INCOME TAXES 105,000 (408,440) 136,600 (861,440) NET INCOME (LOSS) $173,017 $(668,121) $224,558 $(1,406,000) BASIC EARNINGS (LOSS) PER SHARE $.04 $(.15) $.05 $(.33) DILUTED EARNINGS (LOSS) PER SHARE $.03 $(.15) $.05 $(.33) BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 4,900,400 4,310,724 4,891,809 4,284,834 DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 4,961,906 4,310,724 4,953,315 4,284,834 DATASOURCE: Manatron, Inc. CONTACT: Paul Sylvester, Co-Chairman and CEO of Manatron, Inc., +1-269-567-2900, ; or Cameron Donahue of Hayden Communications, Inc., +1-651-653-1854, , for Manatron, Inc. Web site: http://www.manatron.com/

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