Aug 29, 2012
Operator
Good day, and welcome to today's conference call. It is now my pleasure to turn the conference over to Mr.
Vincent Klinges. Go ahead, please.
Vincent Klinges
Good afternoon, and welcome to American Software's First Quarter of Fiscal 2013 Earnings Conference Call.
Vincent Klinges
To begin, I'd like to remind you that this conference call may contain forward-looking statements, including statements regarding, among other things, our business strategy and growth strategy. Any such forward-looking statements speak only as of this date.
These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.
There are a number of factors that could cause actual results to differ materially from those anticipated by statements made on this call. Such factors include, but are not limited to, the changes and uncertainty in general economic conditions, the growth rate of the market for our products and services, the timely availability and market acceptance of these products and services, the effect of competitive products and pricing and other competitive pressures and the irregular and unpredictable pattern of revenues.
In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate.
Vincent Klinges
At this time, I'd like to turn the call over to Mike Edenfield, COO of American Software and CEO of Logility.
J. Edenfield
Thanks, Vince, and good afternoon, everyone. Thank you for participating on the call.
I have some comments on the fiscal 2013 first quarter results. Vince will review the details on the financial results for the quarter, and then we'll take your questions.
J. Edenfield
We're proud to announce that American Software was profitable for the 46th consecutive quarter. Revenues grew 9% over first quarter last year, led by a professional services revenue increase of 35%.
Maintenance revenues grew 8% and net earnings increased 6%. However, license fee revenues declined 24% compared to first quarter last year.
Europe was the primary culprit of the decline in license fees.
J. Edenfield
Also, we had a large deal that did not close in the quarter that has subsequently closed, and would have made a substantial difference in our earnings in first quarter. 16 new customers signed license agreements in the first quarter compared to 24 new accounts first quarter last year.
Customers from 10 different countries signed license agreements with the company in the quarter. Those countries include Australia, Belgium, Canada, China, France, Mexico, Sweden, the Republic of Trinidad and Tobago, the United Kingdom and the United States.
J. Edenfield
Some notable new and existing customers include Arbonne International, Brightstar Corporation, Kichler Lighting, Kimberly-Clark, Kraft Foods, Landau Uniforms, Nebraska Furniture Mart, Orchard Brands, Precision Dormer, Abbott Trading Company, which is Abbott Labs in Shanghai, VF Corporation and the XO Group.
J. Edenfield
We continue to be encouraged by the number of new customers licensing our products. These new customers are a source of future maintenance and implementation services revenue, as well as being excellent prospects for additional product sets.
J. Edenfield
So as we look at the second quarter and remainder of fiscal 2013, our pipeline remains strong. There is robust interest from our customer base, as well as new potential customers.
We have good activity in our inventory optimization products, as well as our traditional supply chain solutions. And we have some large deals in the pipeline.
Based on that pipeline, it is our belief we will increase license fee revenues, total revenues, operating earnings and net income compared to the second quarter last year.
J. Edenfield
I would now like to turn the call back over to Vince for a detailed review of the financial results for the first quarter.
Vincent Klinges
Thanks, Mike. Looking at the first quarter of fiscal '13 compared to the same period.
This last year, as Mike indicated, the revenues increased 9% to $25.9 million, compared to $23.7 million in the same quarter last year. License fees decreased 24% to $5.1 million compared to $6.7 million for the same period last year.
Services and other revenues increased 35% to $12.5 million for the current quarter, and that compares to $9.3 million the same period last year. That was primarily due to increases in our ERP unit, which increased 75%; our Logility business unit, which increased 56%; and our IT staffing unit, which increased 19% for the quarter.
Maintenance revenues also increased 8% to $8.3 million compared to $7.8 million, and that's primarily due to increases in license fees in prior quarters.
Vincent Klinges
Looking at the cost. Our overall gross margin was 54% for the current quarter, compared to 56% in the same period last year.
Our license fee margin was 73% for the current and prior year period. Services margins increased to 31% compared to 25% for the same period last year, and that's due to increases in service revenue, as well as improved billing utilization and per rate margins.
Our maintenance margins decreased slightly to 77% for the current quarter – or actually, correction, it was actually 77% for the current and same period last year.
Vincent Klinges
Looking at operating expenses. Our total gross R&D expenses were 11% of total revenues for the current and same period last year.
As a percentage of revenues, sales and marketing expenses were 19% of revenues for the current quarter, and that's up slightly from 18% last year. G&A expenses were 12% for the -- of total revenues for the current quarter, and that compares to 14% for the same period prior year, and that's primarily due to higher revenues.
Our operating income increased 4% to $3.7 million for this quarter, and that compares to $3.6 million the same quarter a year ago. Adjusted EBITDA, which excludes stock-based compensation, increased 4% to $5.2 million this quarter, compared to $5 million in the same quarter last year.
Our GAAP net income increased 6% to $2.4 million or earnings per diluted share of $0.09, and that compares to net income of $2.3 million or $0.09 earnings per diluted share for the same period last year. Adjusted net income increased 7% to $2.7 million or adjusted earnings per diluted of $0.10 for the first quarter of this year, and that compares to net income of $2.6 million or adjusted earnings per share of $0.10 for the same period last year.
These adjusted numbers exclude the amortization of intangible expenses related to acquisitions and stock-based compensation expense.
Vincent Klinges
International revenues this quarter were approximately 12% of total revenues, and that compares to 18% for the same period prior year.
Vincent Klinges
Looking at the balance sheet. The company's financial position remains strong with cash and investments of approximately $66.3 million at the end of July 31, 2012, with no debt.
Cash increased $13.5 million when compared to July 31 of 2011. Other aspects of our balance sheet are billed accounts receivable of $12.8 million, nonbilled, $6.1 million, for a total accounts receivable of $18.9 million; deferred revenues are $18.9 million; shareholder equity is $83.9 million; and our current ratio increased to 2.7% as of July 31, 2012, and that compares to 2.4% last year.
Our days sales outstanding as of July 31, 2012, was approximately 67 days, and that's down 10 days compared to 77 days for the same period last year. At this time, I'd like to turn the call over to questions.
Operator
[Operator Instructions] We'll take our first question from the site of Brian Murphy with Sidoti & Company.
Brian Murphy
Mike, you said there was some weakness in Europe. Was that more on the Demand Management side or on the Voyager side?
J. Edenfield
Both, but especially Voyager.
Brian Murphy
Now did you have a big deal in Europe in the July quarter of last year?
J. Edenfield
Yes, we did. And we had some other deals, too.
Brian Murphy
Okay. And can you give us any color on the large deal that slipped out of the quarter and subsequently closed?
J. Edenfield
Yes, it closed approximately 6 or 7 days after the quarter. It's -- it would have been the biggest deal last quarter.
And we're excited about it. The customer was actually here this week and started training today.
Brian Murphy
Okay, great. My guess is that that's probably an inventory optimization deal.
Just on that side, have you seen any changes in the competitive environment at all?
J. Edenfield
No, not in inventory optimization or just general supply chain. I don't think they're competitive.
If anything, the change is we're winning some more big deals than we used to.
Brian Murphy
Okay. And can you just give us an update on your sort of sales force expansion efforts, maybe where we stand with the quota-bearing reps?
And maybe, how the new guys are ramping up so far?
J. Edenfield
Well, we still have the same number we had as of the last conference call for Logility Voyager. That was 18.
And the plan is to be at 20 by the end of the year. The biggest deal we sold last quarter that’s in the numbers we're reviewing on this call, was by a new salesman.
He got a little lucky to find -- that we had this opportunity for him, but he worked it with the rest of the team and we had a big win.
Brian Murphy
And maybe just some general commentary around the pipeline, maybe where it stands versus this time last year.
J. Edenfield
Yes, it's up from this time last year. But I think the real -- we have really sort of 2 pipelines.
We have the long-term pipeline with everything that we think might happen over a number of quarters. And then we have the short-term pipeline, and the short-term pipeline is pretty good.
I'd say it's better than it was last quarter and -- but we have to go out and close the deals.
Operator
And we'll take our next questions from the site of Dan Cummins with ThinkEquity.
Daniel Cummins
I'd like to just continue that line of questioning around, I guess, the conditions to close out there for what you're doing and also, with respect to the competitive environment. It just seems like some of the competitors, who aren't -- haven't been very as focused or intense on optimization seem to be talking about it more.
I'm just curious if you've begun to see them in deals, but, yes, primarily some color around the environment to close.
J. Edenfield
Well, in terms of environment to close, I think our issue was on the one -- we got selected late in our quarter in the one that slipped but subsequently closed. And they thought they could expedite it through their process, but it was a substantial capital request and they found out -- they tried to expedite it, and everybody wanted to expedite it, except the CFO did not want to expedite it.
So when the CFO got involved, it slowed down, but we still got the deal. So it really closed in a fairly expeditious manner, just not as fast as we were pushing for it.
So…
Daniel Cummins
Okay. Well, and just given the level of horsepower you have on hand right now, I guess I'd ask is $7 million a quarter for license, is that doable in the near term?
Or is that kind of a level we're just going to have to wait and see if conditions improve? And then related to that, I recognized you had a deal slip and pressure in Europe, but the ratio of license to your sales and marketing line expense line, is quite small at this point.
Going back, it's been much more robust. And I'm curious if you're at all concerned.
You're going to be kind of 1:1 here in the near term in terms of license results and the sales and marketing spend.
J. Edenfield
Well, we would like to be -- have a better ratio than that -- than 1:1. Yes, we’ve ramped up recently.
We were -- this time last year, I think we were around 12 salespeople. And now, we're 8 teams.
So that's a decent increase. And of course, you – we’ve ramped up marketing a little bit as well to support lead generation efforts for those salesmen.
So we’ve made the investment and the market, I don't know if it's as good as it was last year. There's some signs of weakening a little bit, but it's our job to sell through that.
And so our objectives are certainly to do $7 million or more. But we're just going to do the best we can.
That's all we can do.
Daniel Cummins
Okay. And Vince, just the cash from ops that you reported in the Q, could you have that right now or…
Vincent Klinges
As far as the operating cash?
Jackson Spears
Yes.
Vincent Klinges
Yes, Dan. It's going to be around $4 million for the quarter.
Operator
[Operator Instructions] There are no more questions. I take it back.
Mr. Cummins, you have another question.
Daniel Cummins
I did want to ask a question. I thought I saw that JDA has said that they've got about 3% of their maintenance customers now using some elements of their managed service.
And I thought you guys have -- you've trialed that in a few cases, and I'm just curious if that's going to be kind of an unfolding story for you over the next couple of years. Or you still it's -- the market's really not ready for that so much with supply chain apps?
J. Edenfield
Well, managed services is something we have done with NGC. They have a -- one of their big accounts is on -- in that model of deployment.
And then DMI, which is the other supply chain brand we have, which sells to the small and medium companies. We are setting it up to where we can provide software as a service.
So we have not really seen that competitively yet with JDA. I listen to their conference calls and hear what they're saying and things.
I think they're doing that with customers they already have mostly, and I'm sure they're proposing it to new customers as well. But, yes, I think most of our sweet spot wants the software, and they want us to help them implement it, and they want to own it and get out.
Now some companies that maybe don't have the expertise would be more inclined to the managed services. But, of course, we can propose that if that's what they wanted.
But we're not really getting a lot of questions about that when we’re out in the market. And yet, all the Voyager deals, we usually had to beat JDA.
So and to my knowledge, they weren't proposing that until we beat them recently.
Daniel Cummins
Yes, I couldn't tell exactly what JDA was referring to, whether it's with the retail stuff or a supply chain, but…
J. Edenfield
Well, no. I think they're doing it in supply chain.
But, yes, either software as a service and then there's managed services. And managed services could be where they are actually making the supply chain decisions.
They are the users. So they've got a -- they're taking a very broad approach there.
Operator
[Operator Instructions] There are no more questions at this time.
J. Edenfield
Thank you very much for your time and interest, and we look forward to talking to you again soon. Thank you.
Operator
This concludes today's conference. You may disconnect at any time.