Dec 3, 2015
Executives
Vince Klinges - Chief Financial Officer Michael Edenfield - President and Chief Executive Officer
Analysts
Kevin Liu - B. Riley & Company Matthew Galinko - Sidoti
Operator
Good day, everyone, and welcome to today's program. [Operator Instructions] It is now my pleasure to turn the program over to Mr.
Vince Klinges, Chief Financial Officer for American Software Incorporated. Please go ahead sir.
Vince Klinges
Good afternoon, and welcome to American Software's second quarter of fiscal 2016 earnings conference call. 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 and 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 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 effective 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.
At this time, I'd like to turn the call over to Mike Edenfield, CEO of American Software.
Michael Edenfield
Thanks, Vince. Well, we had a really good quarter again.
The company increased license fee revenue by 85% and total revenues by 18%, which fueled a 141% increase in operating earnings for the second quarter. Services and other revenues for the quarter increased 14% to $13.5 million compared to $11.8 million the same period last year.
Our maintenance revenues for the quarter increased 3% to $10 million compared to $9.8 million the same period last year. Year-to-date our total revenues for the six months ended October 31, 2015, were $57.9 million, a 17% increase over the comparable period last year.
Software license fees for the six month period were $10.4 million, a 41% increase compared to the same period last year. And then we had services and other revenues for the six months ended October 31, 2015, increased 20% to $27.3 million compared to $22.8 million the same period last year.
Maintenance revenues for the six months ended October 31, 2015, were $20.2 million, a 5% increase compared to $19.3 million the same period last year. For the six months ended October 31, 2015, the company reported operating earnings of approximately $7.1 million, a 102% increase over the same period last year.
We added some notable new customers, placing orders with the company in the second quarter. Those customers include, Accord Healthcare, AlphaBroder, Ameriwood Industries, Enzo Biochem, Haggar Clothing, Ingram Entertainment, Keeco, Pearson Education, Super Amart and TwinsSaver Group.
During the quarter, software license agreements were signed with customers located in the following 10 countries, Australia, Canada, Denmark, Finland, Mexico, Singapore, South Africa, Sweden, The United Kingdom and The United States. In May of 2015, we entered in an agreement with Sanofi.
They're a €34 billion global provider of therapeutic healthcare solutions. And they deployed Demand Solutions SaaS Integrated Business Planning to support business operations in 13 countries across seven regions of South and Latin America.
After an evaluation of 34 solution providers, Sanofi selected Demand Solutions from Demand Management, a subsidiary of the company, to leverage the solutions deep domain expertise, global support and advanced sales and operations planning capabilities. During the second quarter, Sanofi went live with Demand Solutions SaaS for Mexico and began the implementation for Colombia.
Additionally, Sanofi plans to begin the rollout of Demand Solutions SaaS for Brazil in January. So with that, I'll turn the call over to Vince.
Vince Klinges
Thanks, Mike. Taking a look at the second quarter of '16 with same period last year, our total revenues for the quarter increased 18% to $29.0 million compared to $24.6 million same quarter last year.
This increase was primarily due to license fees, which increased 85% to $5.6 million compared to $3 million in the same period last year. Also, at the end of the quarter, we increased our cloud services, which include SaaS and managed service revenue on an annual contract value basis.
We increased it a 174% to $3.1 million and that compares to $1.1 million in the same time last year. Our services and other revenues increased 14% to $13.5 million for the current quarter and that compares to same quarter last year.
Services revenue increased at our ERP unit 11%, due to higher license fees in the recent periods. Our TPM business, which is our IT staffing business, increased 10% this quarter, due to timing of project work.
And Logility also increased 21%, due to increased implementation product work from increased license fees in recent quarters and also cloud services. Maintenance revenues increased 3% to $10 million that compares to $9.8 million last year and that's primarily due to additional license fees.
Looking at our gross margin, it was 51% for the quarter compared to 49% in the same period last year. License fee margin was up to 64% for the current quarter and that compares to 41% in the same period last year.
Services margins were 26% for the current quarter compared to 28% and our maintenance margin was 78% for both the current and prior-year quarter. Looking at our operating expenses, our gross R&D expenses were 12% of total revenues for the current period, when compared to 14% for the prior-year quarter.
This was due to increased revenues and also increased capitalizable work during the quarter. As a percentage of revenues, our sales and marketing expenses were 19% of revenues for both the current and prior year.
G&A expenses were 12% of total revenues for the current period, when compared to 13% in the prior-year quarter. Our operating income increased 141% to $3.3 million for this quarter compared to $1.4 million the same quarter a year ago.
Our adjusted EBITDA, which excludes stock-based compensation, increased 60% to $5.1 million this quarter compared to $3.2 million the same period last year. Our GAAP net income was $2.2 million or earnings per diluted share of $0.07, when compared to $1.2 million or $0.04 earnings per diluted share last year.
And adjusted net income of $2.5 million or adjusted earnings per diluted share of $0.08 compared to $1.8 million or adjusted earnings per diluted share of $0.06 for the same period last year. And these adjusted numbers exclude the amortization of intangibles, expense related to acquisitions, stock-based compensation expense and for last year the loss related to our recent acquisition of MID Retail.
International revenues for this quarter were approximately 16% of total revenues for the current period and that compare to 17% the same period last year. Looking at the numbers comparing the six months ended October 31, 2015, to the same period last year, our total year-to-date revenues increased 17% to $57.9 million and that compares to $49.4 million.
License fees increased 41% year-to-date to $10.4 million compared to the $7.4 million the same period last year. Services revenues also increased.
They increased 20% to $27.3 million compared to $22.8 million. And our maintenance revenues increased 5% year-to-date to $20.2 million compared to $19.3 million last year.
Overall, the six month year-to-date period the gross margin was 52% compared to 51% last year. And our license fee margin increased to 62% compared to 53% last year.
Our services margin was up 1 percentage point to 29% compared to 28%, and that's due to increase in services work. Maintenance margin was 78% year-to-date for the current period and last year period.
On an operating expense basis, our gross R&D expenses were 12% of total revenues for the six months ended October 31, 2015 compared to 14% in the same period last year. As a percentage of total revenues, sales and marketing expenses were 18% for the current period compared to 19% in the same period last year.
G&A expenses were 12% of revenues year-to-date compared to 13% in the same period last year. So our operating income year-to-date is $7.1 million, and that compares to an operating income of $3.5 million last year.
Our adjusted EBITDA year-to-date is $10.8 million compared to $7.2 million in the same period last year. And our GAAP net income was $4.7 million year-to-date or $0.16 earnings per diluted shares compared to $2.7 million or $0.09 in the same period last year.
On an adjusted net income basis year-to-date was $3.5 (sic) [5.3] million or earnings per diluted share of $0.18 compared to net income of $3.8 million or earnings per diluted shares of $0.13 for the same period last year. International revenues year-to-date were 18% of total revenues compared to 17% in the same period last year.
Taking a look at our balance sheet. Our financial position remained strong with cash and investments of approximately $72.1 million at the end of October 31, 2015.
Other aspects of the balance sheet, our billed accounts receivables was $14.6 million and our unbilled was $3.7 million for a total of $18.3 million of accounts receivable. Deferred revenues current and long-term are $24.8 million and our shareholder equity is $93.3 million.
Current ratio was $2.4 million as of the end of October 31, 2015, which was the same as last year. Our days sales outstanding as of October 31, 2015 improved to 57 days versus 61 days the same period last year, that due to timing of sales and related collections.
At this time, I'd like to turn the call over to questions.
Operator
[Operator Instructions] And we'll go ahead and take our first question from Kevin Liu with B. Riley & Company.
Kevin Liu
I guess, looking back at the strong performance on the license side this quarter, was it more so driven by just a few large deals or did you see pretty broad-based strength across your business?
Michael Edenfield
Well, we did have some big deals, but we'd also had a good number of other deals. Demand Solutions did well.
And they do more midsize-to-small deals, generally.
Kevin Liu
And as you look forward, what does your pipeline look like both in terms of just overall transaction counts as you look forward those large deal opportunities?
Michael Edenfield
Well, we have a pretty good pipeline of large deals now. And in the past, we might have zero or one, and now we're having maybe be four or five that would be may a seven-figure deal and/or bigger.
And so the pipeline looks pretty good for third quarter. And of course, we have recurring revenue, a lot of recurring revenue that will fill in.
And we don't have - to be successful, we don't have to close in million-dollar deals, we can just get one and something like that and that would be a [quarter] [ph]. Of course, we want to get as many as we can.
Kevin Liu
And then just in terms of Sanofi deal, it sounds like it was a pretty significant citing for the Demand Management business earlier in the year. Are all of those arrangements already factored into the ACVs bookings and can you discuss at all how much of that has already flowed into the P&L as you started deploying?
Michael Edenfield
The only ones that are factored into the ACV are the ones we closed. We still have to go and sell each one of them.
Vince Klinges
So the ones that we closed are the Latin America deal, so there's potential future deals that we could close with that company, that's not factored into the ACV.
Kevin Liu
And then just lastly, any change in terms of the mix of cloud versus on-premise opportunity that you guys see in the pipeline?
Michael Edenfield
I'd still say it's more on-premise.
Operator
And we'll go ahead and take our next question from Matthew Galinko with Sidoti.
Matthew Galinko
First one just being, you noted I think two or three healthcare wins in the quarter or the half to date, curious if defining that end-market kind of broadly, is that rising at all in your mix or how are you feeling about that in particular?
Michael Edenfield
Well, we like it right now, particularly with the Sanofi. That's a huge opportunity for us.
It's SaaS, and over time it could be like an $80,000 a month subscription, if we got all of the targets we could get. So we're very excited about that, but I don't know, if it's just -- it's not necessarily related to healthcare, so they just prefer SaaS at this point in time.
Matthew Galinko
And in terms of that deal, can you talk a little bit more about sort of your position, I guess, competitively to win additional components or regions of the deal?
Michael Edenfield
Well, I think they want to have a common system, and just to get these South America deals, we had to go to France and meet with all the top people there in the supply chain. But that said, we're still -- I'm sure, competitors are going to try to get to business too.
But I think I'm much happier to be in our position and their position on this account.
Matthew Galinko
And could you just, I don't know if you -- how detailed you were in it earlier, but just what were the key takeaways of how you were selected for the Latin America business there?
Michael Edenfield
Well, they liked the functionality of the system and they liked our approach to SaaS.
Matthew Galinko
And then, I guess, in terms of competing against maybe players in the international market or sort of more localized competitors, how do you feel the strength of the U.S. dollar is impacting your ability to close internationally?
Michael Edenfield
Well, if that's an issue in winning the business, we get aggressive.
Operator
Yes, we have no questions at this time.
Michael Edenfield
Thank you. Well, thanks everybody.
Talk to you next quarter.
Operator
And that does conclude today's program. We'd like to thank for your participation.
Have a wonderful day. And you may disconnect at any time.