-- Subscription Revenue Gains and Improving
Margins Drive Increased Profitability --
QAD Inc. (Nasdaq: QADA) (Nasdaq: QADB), a leading provider of
next generation manufacturing and supply chain solutions in the
cloud, today reported financial results for the fiscal 2022 first
quarter ended April 30, 2021.
Fiscal 2022 First Quarter Financial Results:
Total revenue for the fiscal 2022 first quarter grew to $83
million from $74.1 million for the fiscal 2021 first quarter,
resulting from increases in each of the company’s revenue lines.
Currency had a $2.8 million positive impact on total revenue
compared with last year’s first quarter, and a $708,000 positive
impact on net income. Fiscal 2022 first quarter subscription
revenue grew 19 percent from the year-ago quarter, and accounted
for 44 percent of total revenue, a three-percentage point increase
over last year’s first quarter.
Additional fiscal 2022 first quarter financial results, compared
with the same period last year, include:
- Subscription revenue of $36.7 million, up from $30.8 million.
Currency had a $967,000 positive impact.
- Subscription gross margin of 67 percent, versus 66
percent.
- License revenue of $3.1 million, compared with $1.2 million.
Currency had an $89,000 positive impact.
- Professional services revenue of $16.6 million, compared with
$15.7 million. Currency had a $644,000 positive impact.
- Professional services gross margin of 10 percent, versus 5
percent.
- Maintenance revenue of $26.6 million, compared with $26.4
million. Currency had a $1.1 million positive impact.
- Operating income of $761,000, including stock compensation
expense of $3.6 million, versus an operating loss of $933,000,
including stock compensation expense of $2.4 million.
- GAAP pre-tax income of $456,000, versus $585,000.
- Non-GAAP pre-tax income of $4.6 million, compared with $3.3
million.
- GAAP net income of $1.8 million, or $0.09 per diluted Class A
and $0.07 per diluted Class B share, versus a GAAP net loss of
$410,000, or $0.02 per Class A and Class B share.
“Continued improvement in performance drove growth in each of
our revenue lines, expanded margins and improved profitability over
the prior year. Results for the quarter demonstrated that we are on
track toward achieving our long-term objectives,” said Anton
Chilton, QAD’s Chief Executive Officer. “New customers continue to
be attracted to our solutions, which help them manage complexities
in the supply chain as the manufacturing economy returns to growth.
With global PMIs at a 10-year high, our outlook is increasingly
positive.”
QAD's cash and equivalents balance at April 30, 2021 was $153.1
million, compared with $142.5 million at January 31, 2021. Cash
provided by operations for the fiscal 2022 first quarter was $22.1
million, compared with $10.9 million for last year’s first
quarter.
Fiscal 2022 First Quarter Operational Highlights:
- Received orders from 21 customers representing more than
$500,000 each in combined subscription, license, maintenance and
professional services billings, including eight orders exceeding $1
million;
- Received cloud or license orders from companies across QAD’s
six vertical markets, including: Amphenol Corporation, Athenex,
Inc., Avon Products, Inc., Delta Dore SA, FAUN Environnement SA,
GKN Automotive Limited, Huf Hulsbeck & Furst GmbH, Invacare
France Ops SAS, Kromberg & Schubert Automotive GmbH, Lear
Corp., Louis Vuitton Moet Hennessy, Lush Manufacturing, Ltd.,
Medline International B.V., Mitek Industries Inc., Neaton Auto
Products Manufacturing, Inc., Saint-Gobain SA, Thyssen Krupp AG and
Tsubakimoto Automotive;
- Acquired Foreign-Trade Zone Corporation to support QAD’s
Connected Supply Chain by removing complexities and costs for
customers operating across national borders;
- Announced enhancements to QAD’s adaptive solutions portfolio
designed to help global manufacturing enterprises manage
disruption;
- Signed 15 new channel partners who are focused on cloud sales
or supporting our professional services strategy in locations
around the world, including in Brazil, China, India, Mexico, Spain
and the United States;
- QAD Precision chosen as a Top 100 Logistics IT Provider by
Inbound Logistics; and
- Subsequent to the end of the quarter, held QAD Tomorrow Thought
Stream, where more than 2,000 global registrants learned about
common supply chain challenges, their root causes and best
practices for overcoming them.
Business Outlook:
For the fiscal 2022 second quarter, QAD is providing guidance as
follows:
- Subscription revenue of $38.5 million.
- Maintenance revenue of $26 million.
- Operating income of $1 million; including stock compensation
expense of $5 million.
For the fiscal 2022 year, QAD is maintaining guidance as
follows:
- Subscription revenue of $160 million.
- Maintenance revenue of $102 million.
- Operating income of $12 million; including stock compensation
expense of $17 million.
Calculation of Earnings per Share (EPS)
EPS is reported based on the company’s dual-class share
structure, and includes a calculation for both Class A and Class B
shares. Since Class A shares have rights to 120% of dividends paid
on Class B shares, net income is apportioned so that earnings per
share attributable to a Class A share are 120% of earnings per
share attributable to a Class B share.
Fiscal 2022 First Quarter Financial Results Conference
Call
When: Wednesday, May 26, 2021 Time: 2:00 p.m. PT
(5:00 p.m. ET) Phone: 844-739-3990 (domestic); 412-317-5719
(international) Replay: Accessible through midnight June 9,
2021; 877-344-7529 (domestic); 412-317-0088 (international); replay
access code 10155429 Webcast: Accessible at www.qad.com;
archive available for approximately one year
Note about Non-GAAP Financial Measures
QAD has disclosed non-GAAP adjusted EBITDA, non-GAAP adjusted
EBITDA margins and non-GAAP pre-tax income in this press release
for the fiscal 2022 first quarter year. These are non-GAAP
financial measures as defined by SEC Regulation G. QAD defines the
non-GAAP measures as follows:
- Non-GAAP adjusted EBITDA - EBITDA is GAAP net income before net
interest expense, income tax expense, depreciation and
amortization. Non-GAAP adjusted EBITDA is EBITDA less stock-based
compensation expense and the change in the fair value of the
interest rate swap.
- Non-GAAP adjusted EBITDA margins - Calculated by dividing
non-GAAP adjusted EBITDA by total revenue.
- Non-GAAP pre-tax income - GAAP income before income taxes not
including the effects of stock-based compensation expense,
amortization of purchased intangible assets and the change in fair
value of the interest rate swap.
QAD’s management uses non-GAAP measures internally to evaluate
the business and believes that presenting non-GAAP measures
provides useful information to investors regarding the company’s
underlying business trends and performance of the company’s ongoing
operations as well as useful metrics for monitoring the company’s
performance and evaluating it against industry peers. The non-GAAP
financial measures presented should be used in addition to, and in
conjunction with, results presented in accordance with GAAP, and
should not be relied upon to the exclusion of GAAP financial
measures. Management strongly encourages investors to review the
company’s consolidated financial statements in their entirety and
to not rely on any single financial measure in evaluating the
company.
Tables providing a reconciliation of the non-GAAP measures to
their most comparable GAAP measures are included at the end of this
press release.
QAD non-GAAP measures reflect adjustments based on the following
items:
Stock-based compensation expense:
The company has excluded the effect of stock-based compensation
expense from its non-GAAP adjusted EBITDA and non-GAAP pre-tax
income calculations. Although stock-based compensation expense is
calculated in accordance with current GAAP and constitutes an
ongoing and recurring expense, such expense is excluded from
non-GAAP results because it is not an expense which generally
requires cash settlement by QAD, and therefore is not used by the
company to assess the profitability of its operations. The company
also believes the exclusion of stock-based compensation expense
provides a more useful comparison of its operating results to the
operating results of its peers.
Amortization of purchased intangible
assets: The company amortizes purchased intangible assets in
connection with its acquisitions. QAD has excluded the effect of
amortization of purchased intangible assets, which include
purchased technology and customer relationships, from its non-GAAP
pre-tax income calculation, because doing so makes internal
comparisons to the company’s historical operating results more
consistent. In addition, the company believes excluding
amortization of purchased intangible assets provides a more useful
comparison of its operating results to the operating results of its
peers.
Change in fair value of the interest rate
swap: The company entered into an interest rate swap to
mitigate its exposure to the variability of one-month LIBOR for its
floating rate debt related to the mortgage of its headquarters. QAD
has excluded the gain/loss adjustments to record the interest rate
swap at fair value from its non-GAAP adjusted EBITDA and non-GAAP
pre-tax income calculations. The company believes that these
fluctuations are not indicative of its operational costs or
meaningful in evaluating comparative period results because the
company currently has no intention of exiting the debt agreement
early; and therefore over the life of the debt the sum of the fair
value adjustments will be $0.
About QAD – Enabling the Adaptive Manufacturing
Enterprise
QAD Inc. is a leading provider of next generation manufacturing
and supply chain solutions in the cloud. Global manufacturers face
ever-increasing disruption caused by technology-driven innovation
and changing consumer preferences. In order to survive and thrive,
manufacturers must be able to innovate and change business models
at unprecedented rates of speed. QAD calls these companies Adaptive
Manufacturing Enterprises. QAD solutions help customers in the
automotive, life sciences, consumer products, food and beverage,
high tech and industrial manufacturing industries rapidly adapt to
change and innovate for competitive advantage.
Founded in 1979 and headquartered in Santa Barbara, California,
QAD has 30 offices globally. Over 2,000 manufacturing companies
have deployed QAD solutions including enterprise resource planning
(ERP), demand and supply chain planning (DSCP), global trade and
transportation execution (GTTE) and quality management system (QMS)
to become an Adaptive Manufacturing Enterprise. To learn more,
visit www.qad.com or call +1 805-566-6100. Find us on Twitter,
LinkedIn, Facebook, Instagram and Pinterest.
“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, including,
but not limited to, statements regarding projections of revenue,
income and loss, capital expenditures, plans and objectives of
management regarding the company's business, future economic
performance or any of the assumptions underlying or relating to any
of the foregoing. Forward-looking statements are based on the
company's current expectations. Words such as "expects,"
"believes," "anticipates," "could," "will likely result,"
"estimates," "intends," "may," "projects," "should," "would,"
"might," "plan" and variations of these words and similar
expressions are intended to identify these forward-looking
statements. 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: risks
associated with the COVID-19 (novel coronavirus) pandemic or other
catastrophic events that may harm our business; adverse economic,
market or geo-political conditions that may disrupt our business;
our cloud service offerings, such as defects and disruptions in our
services, our ability to properly manage our cloud service
offerings, our reliance on third-party hosting and other service
providers, and our exposure to liability and loss from security
breaches; demand for the company's products, including cloud
service, licenses, services and maintenance; pressure to make
concessions on our pricing and changes in our pricing models;
protection of our intellectual property; dependence on third-party
suppliers and other third-party relationships, such as sales,
services and marketing channels; changes in our revenue, earnings,
operating expenses and margins; the reliability of our financial
forecasts and estimates of the costs and benefits of transactions;
the ability to leverage changes in technology; defects in our
software products and services; third-party opinions about the
company; competition in our industry; the ability to recruit and
retain key personnel; delays in sales; timely and effective
integration of newly acquired businesses; economic conditions in
our vertical markets and worldwide; exchange rate fluctuations; and
the global political environment. For a more detailed description
of the risk factors associated with the company and factors that
may affect our forward-looking statements, please refer to the
company's latest Annual Report on Form 10-K and, in particular, the
section entitled "Risk Factors" therein, and in other periodic
reports the company files with the Securities and Exchange
Commission thereafter. Management does not undertake to update
these forward-looking statements except as required by law.
QAD Inc.
Condensed Consolidated
Statements of Operations and Comprehensive Loss
(in thousands, except per
share data)
(unaudited)
Three Months Ended April
30,
2021
2020
Revenue: Subscription $
36,686
$
30,771
License
3,115
1,221
Maintenance
26,563
26,408
Professional services
16,607
15,747
Total revenue
82,971
74,147
Cost of revenue: Subscription
12,162
10,348
License
538
401
Maintenance
6,555
6,744
Professional services
14,934
14,932
Total cost of revenue
34,189
32,425
Gross profit
48,782
41,722
Operating expenses: Sales and marketing
19,567
18,557
Research and development
15,638
14,017
General and administrative
12,576
10,017
Amortization of intangible assets from acquisitions
240
64
Total operating expenses
48,021
42,655
Operating income (loss)
761
(933
)
Other expense (income): Interest income
(74
)
(436
)
Interest expense
141
150
Other income, net
238
(1,232
)
Total other expense (income), net
305
(1,518
)
Income before income taxes
456
585
Income tax (benefit) expense
(1,376
)
995
Net income (loss) $
1,832
$
(410
)
Net income (loss) $
1,832
$
(410
)
Other comprehensive loss, net of tax: Foreign currency translation
adjustments
(161
)
(2,655
)
Total comprehensive income (loss) $
1,671
$
(3,065
)
Diluted income (loss) per share Class A $
0.09
$
(0.02
)
Class B $
0.07
$
(0.02
)
Diluted Weighted Shares Class A
18,446
17,112
Class B
3,409
3,321
QAD Inc. Condensed Consolidated Balance Sheets (in
thousands) (unaudited) April 30,
January 31,
2021
2021
Assets Current assets: Cash and equivalents $
153,127
$
142,501
Accounts receivable, net
44,887
82,609
Other current assets
26,688
22,923
Total current assets
224,702
248,033
Property and equipment, net
24,508
25,598
Lease right-of-use assets, net
19,997
21,016
Capitalized software costs, net
10,845
7,980
Goodwill
32,507
25,336
Long-term deferred tax assets, net
8,596
8,526
Other assets, net
18,896
14,298
Total assets $
340,051
$
350,787
Liabilities and stockholders' equity Current
liabilities: Current portion of long-term debt $
533
$
527
Lease liabilities
4,918
4,904
Accounts payable and other current liabilities
42,170
48,329
Deferred revenue
116,852
125,724
Total current liabilities
164,473
179,484
Long-term debt
11,691
11,825
Long-term lease liabilities
16,496
17,510
Other liabilities
14,254
12,502
Stockholders' equity: Common stock
21
21
Additional paid-in capital
209,084
205,630
Treasury stock
(3,073
)
(3,073
)
Accumulated deficit
(64,546
)
(64,924
)
Accumulated other comprehensive loss
(8,349
)
(8,188
)
Total stockholders' equity
133,137
129,466
Total liabilities and stockholders' equity $
340,051
$
350,787
QAD Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended April 30,
2021
2020
Net cash provided by operating activities $
22,140
$
10,912
Cash flows from investing activities: Purchase of property
and equipment
(191
)
(1,017
)
Capitalized software costs
(316
)
(272
)
Acquisition of businesses, net of cash acquired
(9,493
)
-
Net cash used in investing activities
(10,000
)
(1,289
)
Cash flows from financing activities: Repayments of debt
(164
)
(149
)
Tax payments related to stock awards
(183
)
(103
)
Cash dividends paid
(1,454
)
(1,431
)
Net cash used in financing activities
(1,801
)
(1,683
)
Effect of exchange rates on cash and equivalents
287
(4,503
)
Net increase in cash and equivalents
10,626
3,437
Cash and equivalents at beginning of period
142,501
136,717
Cash and equivalents at end of period $
153,127
$
140,154
QAD Inc.
Reconciliation of GAAP to
Non-GAAP Financial Measures
(in thousands)
(unaudited)
Three Months EndedApril 30,
2021
2020
Total revenue $
82,971
$
74,147
Net income (loss)
1,832
(410
)
Add back: Net interest expense (income)
67
(286
)
Depreciation
1,246
1,296
Amortization
897
354
Income tax (benefit) expense
(1,376
)
995
EBITDA $
2,666
$
1,949
Add back: Stock-based compensation expense
3,637
2,405
Change in fair value of interest rate swap
(64
)
251
Adjusted EBITDA $
6,239
$
4,605
Adjusted EBITDA margin
8
%
6
%
Non-GAAP pre-tax income reconciliation
Income before income taxes $
456
$
585
Add back Stock-based compensation expense
3,637
2,405
Amortization of purchased intangible assets
600
71
Change in fair value of interest rate swap
(64
)
251
Non-GAAP income before income taxes $
4,629
$
3,312
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210526006065/en/
Kara Bellamy Chief Accounting Officer 805.566.6100
investor@qad.com
Laurie Berman PondelWilkinson Inc. 310.279.5980
lberman@pondel.com
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