-- Fourth Quarter Subscription Revenue Growth
Accelerates to 24 Percent Year-Over-Year; Subscription Margin Ahead
of Plan at 70 Percent --
QAD Inc. (Nasdaq: QADA) (Nasdaq: QADB), a leading provider of
adaptive, cloud-based enterprise software and services for global
manufacturing companies, today reported financial results for the
fiscal 2021 fourth quarter and full year ended January 31,
2021.
Fiscal 2021 Fourth Quarter Financial Results:
Total revenue for the fiscal 2021 fourth quarter was $83.0
million, compared with $78.6 million for the fiscal 2020 fourth
quarter, resulting from an increase in subscription revenue
partially offset by anticipated reductions in license, professional
services and maintenance revenue. Currency had a $1.5 million
positive impact on total revenue compared with last year’s fourth
quarter and a negligible impact on net income. Fiscal 2021 fourth
quarter subscription revenue grew 24 percent from the same quarter
last year, and accounted for 43 percent of total revenue, a
seven-percentage point increase over last year’s fourth
quarter.
Additional fiscal 2021 fourth quarter financial results,
compared with the same period last year, include:
- Subscription revenue of $35.5 million, up from $28.6 million.
Currency had a $374,000 positive impact.
- Subscription gross margin of 70 percent, versus 67
percent.
- License revenue of $5.2 million, compared with $5.3 million.
Currency had a $180,000 positive impact.
- Professional services revenue of $15.1 million, compared with
$15.9 million. Currency had a $275,000 positive impact.
- Professional services gross margin of 11 percent, versus 2
percent.
- Maintenance revenue of $27.2 million, compared with $28.7
million. Currency had a $641,000 positive impact.
- GAAP pre-tax income of $5.9 million versus $764,000. Ongoing
subscription revenue growth and improving margins continued to
drive bottom-line improvements.
- Non-GAAP pre-tax income of $10.1 million, compared with $3.8
million.
- GAAP net income of $8.2 million, or $0.39 per diluted Class A
and $0.33 per diluted Class B share, versus $410,000, or $0.02 per
diluted Class A and Class B share.
“We were pleased to finish the year with solid financial
results, capping fiscal 2021 with strong fourth quarter growth in
subscription revenue, margins and profitability,” said Anton
Chilton, QAD’s Chief Executive Officer. “With our cloud funnel at a
record high, the manufacturing economy improving, and our easy to
deploy, adaptive, cloud-based ERP suite, we are optimistic about
fiscal 2022, and remain positioned for sustainable, long-term
growth.”
Fiscal 2021 Full Year Financial Results:
Total revenue for fiscal 2021 was $307.9 million, compared with
$310.8 million for fiscal 2020. Currency had a $1.2 million
negative impact on total revenue, a $337,000 negative impact on
subscription revenue and a $657,000 negative impact on net income.
Subscription revenue grew 22 percent to $131.1 million for fiscal
2021, compared with $107.2 million for fiscal 2020. GAAP pre-tax
income was $10.8 million for the fiscal year ended January 31,
2021, versus a GAAP pre-tax loss of $3.6 million for the same
period last year. GAAP net income was $11.1 million, or $0.53 per
diluted Class A share and $0.45 per diluted Class B share, for
fiscal 2021, versus a GAAP net loss of $15.9 million for the same
period last year, which included an additional valuation allowance
of $16.2 million placed on QAD’s deferred tax assets, or ($0.82)
per Class A share and ($0.69) per Class B share. Non-GAAP pre-tax
income was $25.5 million for fiscal 2021, compared with $8.4
million for fiscal 2020.
QAD's cash and equivalents balance at January 31, 2021 was
$142.5 million, versus $136.7 million a year earlier. Cash provided
by operations for fiscal 2021 was $32.9 million, compared with
$17.0 million last year.
Fiscal 2021 Fourth Quarter Operational Highlights:
- Received orders from 53 customers representing more than
$500,000 each in combined subscription, license, maintenance and
professional services billings, including 18 orders exceeding $1
million;
- Received cloud or license orders from companies across QAD’s
six vertical markets, including: Argon Medical Devices, Caterpillar
Inc., Clarios, LLC, Cooper-Standard Auto, Delifrance SA, Denso
Corporation, Grands Moulins de Paris S.A., InnoGenerics B.V.,
Johnson & Johnson, Labeyrie Fine Foods SAS, Laboratorios
Menarini S.A., Malvern Panalytical BV, Mark Anthony Group, Nexteer
Automotive, Novartis Gene Therapies, Panasonic Energy Belgium N.V.,
PepsiCo, Inc., PPG Industries, Inc., Raypak Inc., SteriPack Group
Ltd., and Thermo Fisher Scientific;
- Acquired Allocation Network GmbH, a best-in-class solution
provider for strategic sourcing and supplier management;
- QAD Adaptive ERP achieved Veracode Verified Standard status,
underpinning QAD’s ongoing commitment to creating secure software
subjected to continuous security testing; and
- Planned for QAD Tomorrow Thought Stream taking place on May 19,
2021, where manufacturers can learn about common supply chain
challenges, their root causes and best practices for overcoming
them.
Business Outlook:
For the fiscal 2022 first quarter, QAD is providing guidance as
follows:
- Subscription revenue of $36.5 million.
- Maintenance revenue of $26 million.
- Operating income of breakeven; including stock-based
compensation expense of $3.7 million.
For the fiscal 2022 year, QAD is providing guidance as
follows:
- Subscription revenue of $160 million.
- Maintenance revenue of $102 million.
- Operating income of $12 million; including stock-based
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 2021 Fourth Quarter Financial Results Conference
Call
When: Wednesday, March 24, 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 March
31, 2021; 877-344-7529 (domestic); 412-317-0088 (international);
replay access code 10151649 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 2021 fourth quarter and full 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 adaptive, cloud-based
enterprise software and services for global manufacturing
companies. 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 Income (Loss) (in thousands, except per
share data) (unaudited) Three Months
EndedJanuary 31, Twelve Months EndedJanuary 31,
2021
2020
2021
2020
Revenue: Subscription $
35,535
$
28,646
$
131,133
$
107,168
License
5,206
5,293
11,152
16,570
Maintenance
27,161
28,712
107,083
117,896
Professional services
15,075
15,901
58,497
69,138
Total revenue
82,977
78,552
307,865
310,772
Cost of revenue: Subscription
10,566
9,591
42,369
38,451
License
893
653
2,300
2,308
Maintenance
6,615
7,349
26,039
29,702
Professional services
13,395
15,633
54,664
69,448
Total cost of revenue
31,469
33,226
125,372
139,909
Gross profit
51,508
45,326
182,493
170,863
Operating expenses: Sales and marketing
18,387
21,262
71,779
82,115
Research and development
14,729
13,247
56,084
54,726
General and administrative
11,046
10,398
41,643
39,442
Amortization of intangible assets from acquisitions
95
68
289
268
Total operating expenses
44,257
44,975
169,795
176,551
Operating income (loss)
7,251
351
12,698
(5,688
)
Other (income) expense: Interest income
(166
)
(574
)
(923
)
(2,782
)
Interest expense
144
153
591
630
Other expense, net
1,376
8
2,209
68
Total other (income) expense, net
1,354
(413
)
1,877
(2,084
)
Income (loss) before income taxes
5,897
764
10,821
(3,604
)
Income tax (benefit) expense
(2,305
)
354
(244
)
12,345
Net income (loss) $
8,202
$
410
$
11,065
$
(15,949
)
Net income (loss) $
8,202
$
410
$
11,065
$
(15,949
)
Other comprehensive income (loss), net of tax: Foreign currency
translation adjustments
800
(406
)
157
(684
)
Total comprehensive income (loss) $
9,002
$
4
$
11,222
$
(16,633
)
Diluted income (loss) per share Class A $
0.39
$
0.02
$
0.53
$
(0.82
)
Class B $
0.33
$
0.02
$
0.45
$
(0.69
)
Diluted Weighted Shares Class A
18,105
17,937
18,022
16,709
Class B
3,402
3,405
3,393
3,289
QAD Inc. Condensed Consolidated Balance Sheets (in
thousands) (unaudited) January 31,
January 31,
2021
2020
Assets Current assets: Cash and equivalents
$
142,501
$
136,717
Accounts receivable, net
82,609
80,968
Prepaid expenses and other current assets, net
22,923
24,952
Total current assets
248,033
242,637
Property and equipment, net
25,598
28,687
Lease right-of-use assets, net
21,016
18,329
Capitalized software costs, net
7,980
1,922
Goodwill
25,336
12,388
Deferred tax assets, net
8,526
5,834
Other assets, net
14,298
13,007
Total assets $
350,787
$
322,804
Liabilities and stockholders'
equity Current liabilities: Current portion of
long-term debt $
527
$
503
Lease liabilities
4,904
4,371
Accounts payable and other current liabilities
48,329
49,740
Deferred revenue
125,724
118,413
Total current liabilities
179,484
173,027
Long-term debt
11,825
12,341
Long-term lease liabilities
17,510
14,612
Other liabilities
12,502
6,759
Stockholders' equity: Common stock
21
21
Additional paid-in capital
205,630
197,824
Treasury stock
(3,073
)
(3,226
)
Accumulated deficit
(64,924
)
(70,209
)
Accumulated other comprehensive loss
(8,188
)
(8,345
)
Total stockholders' equity
129,466
116,065
Total liabilities and stockholders' equity $
350,787
$
322,804
QAD Inc. Condensed Consolidated Statements of Cash
Flows (in thousands) (unaudited)
Twelve Months Ended
January 31,
2021
2020
Net cash provided by operating activities $
32,872
$
16,997
Cash flows from investing activities: Purchase
of property and equipment
(1,931
)
(5,669
)
Acquisition of businesses, net of cash acquired
(14,203
)
-
Purchase of short-term investments
-
(1,200
)
Proceeds from sale of short-term investments
-
2,400
Proceeds from sale of building
1,496
-
Capitalized software costs
(1,268
)
(1,243
)
Net cash used in investing activities
(15,906
)
(5,712
)
Cash flows from financing activities:
Repayments of debt
(624
)
(530
)
Tax payments related to stock awards
(6,233
)
(6,128
)
Dividends paid
(5,780
)
(5,617
)
Net cash used in financing activities
(12,637
)
(12,275
)
Effect of exchange rates on cash and equivalents
1,455
(1,706
)
Net increase (decrease) in cash and equivalents
5,784
(2,696
)
Cash and equivalents at beginning of period
136,717
139,413
Cash and equivalents at end of period $
142,501
$
136,717
QAD Inc. Reconciliation of GAAP to Non-GAAP Financial
Measures (in thousands) (unaudited)
Three Months EndedJanuary 31, Twelve Months EndedJanuary
31,
2021
2020
2021
2020
Total revenue $
82,977
$
78,552
$
307,865
$
310,772
Net income (loss)
8,202
410
11,065
(15,949
)
Add back: Net interest income
(22
)
(421
)
(332
)
(2,152
)
Depreciation
1,284
1,281
5,334
5,198
Amortization
404
382
1,485
1,316
Income tax (benefit) expense
(2,305
)
354
(244
)
12,345
EBITDA $
7,563
$
2,006
$
17,308
$
758
Add back: Stock-based compensation expense
4,066
2,958
14,192
11,354
Change in fair value of interest rate swap
(56
)
16
93
368
Adjusted EBITDA $
11,573
$
4,980
$
31,593
$
12,480
Adjusted EBITDA margin
14
%
6
%
10
%
4
%
Non-GAAP pre-tax income reconciliation
Income (loss) before income taxes $
5,897
$
764
$
10,821
$
(3,604
)
Add back Stock-based compensation expense
4,066
2,958
14,192
11,354
Amortization of purchased intangible assets
204
74
418
295
Change in fair value of interest rate swap
(56
)
16
93
368
Non-GAAP income before income taxes $
10,111
$
3,812
$
25,524
$
8,413
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210324005910/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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