QAD Reports Fiscal 2019 Fourth Quarter and Full Year Financial Results
SANTA BARBARA, Calif., March 20, 2019 /PRNewswire/ -- QAD Inc. (Nasdaq: QADA) (Nasdaq: QADB), a leading provider of flexible, cloud-based enterprise software and services for global manufacturing companies, today reported financial results for the fiscal 2019 fourth quarter and full year ended January 31, 2019.
Fiscal 2019 Fourth Quarter Financial Highlights:
Total revenue for the fiscal 2019 fourth quarter improved to $82.7 million, from $80.8 million for the fiscal 2018 fourth quarter. Currency had a negative $2.1 million impact on total revenue. Subscription revenue grew 22 percent from the fiscal 2018 fourth quarter and was 29 percent of total revenue for the fourth quarter of fiscal 2019, a five-percentage point improvement over last year's fourth quarter.
Additional fiscal 2019 fourth quarter financial highlights, versus the same period last year, include:
-- Subscription revenue of $24 million, compared with $19.7 million.
Currency had a $424,000 negative impact.
-- Subscription gross margin of 63 percent, versus 60 percent.
-- License revenue of $9.1 million, compared with $7.2 million. Currency
had a $181,000 negative impact.
-- Professional services revenue of $19.1 million, versus $22.1 million.
Currency had a $715,000 negative impact.
-- Maintenance and other revenue of $30.5 million, compared with $31.9
million. Currency had a $737,000 negative impact.
-- GAAP pre-tax income of $3.2 million, versus a GAAP pre-tax loss of $3
million.
-- Non-GAAP pre-tax income of $6 million, compared with a non-GAAP pre-tax
loss of $927,000.
-- GAAP pre-tax income and non-GAAP pre-tax income were higher than the
company's guidance as a result of higher than expected license revenue.
-- GAAP net income of $4.9 million, or $0.24 per diluted Class A share and
$0.21 per diluted Class B share, versus a GAAP net loss of $5.2 million,
or $(0.28) per Class A share and $(0.23) per Class B share.
"During fiscal 2019 we continued to drive growth in our cloud business and delivered substantial improvement to subscription margins," said Anton Chilton, Chief Executive Officer of QAD. "Our focus on digital transformation brought several new solutions to the market with more to come in the near future. Additionally, our Channel Islands offering strengthens QAD's leadership position in adaptable cloud-based ERP and enhances our long-term growth prospects."
Fiscal 2019 Full Year Results:
Total revenue for fiscal 2019 reached a record $333 million, compared with $305 million for fiscal 2018. Currency had no meaningful impact on total revenue. Subscription revenue grew 32% to $91.9 million for fiscal 2019, compared with $69.6 million last year. GAAP pre-tax income was $11.9 million for fiscal 2019, compared with a GAAP pre-tax loss of $4.2 million for fiscal 2018. GAAP net income was $10.4 million, or $0.50 per diluted Class A share and $0.44 per diluted Class B share, for fiscal 2019, versus a GAAP net loss of $9.1 million, or $(0.49) per Class A share and $(0.41) per Class B share, for fiscal 2018. Non-GAAP pre-tax income for fiscal 2019 was $22.2 million, compared with $5.2 million last year.
QAD's cash and equivalents balance was $139.4 million at January 31, 2019, versus $147 million at January 31, 2018. Cash provided by operations was $19 million for fiscal 2019, compared with $10.4 million for fiscal 2018.
Fiscal 2019 Fourth Quarter Operational Highlights:
-- Received orders from 47 customers representing more than $500,000 each
in combined license, subscription, maintenance and professional services
billings, including 21 orders exceeding $1 million, five of which
exceeded $2 million;
-- Received license or cloud orders from companies across QAD's six
vertical markets, including: Amcor Ltd, Argon Medical Devices, Bundaberg
Brewed Drinks P/L, Caterpillar Inc., Hendrickson USA L.L.C., Japan Cash
Machine Co., LF Beauty Management Limited, Mayne Pharma Group Ltd.,
Omron Corporation, San Luis Rassini SA de CV, Solvay SA, Stryker
Corporation, Thermo Fisher Scientific, Valmont Industries, Inc., VIP
Petfoods, Visteon Corporation, W.L. Gore & Associates, Inc., WireCo
WorldGroup and Yanfeng Global Automotive;
-- Named to Food Logistics 2018 FL100+ Top Software and Technology
Providers. Food Logistics is the only publication exclusively dedicated
to covering the movement of product through the global food supply
chain; and
-- Opened registration for its Explore user conference being held May 6-9
in New Orleans, with special guest speaker, innovation expert, Bob
Moesta.
Business Outlook:
As previously disclosed, the company anticipates that the subscription revenue growth rate will slow at the beginning of fiscal 2020, and re-accelerate toward the end of the year. With an expected decline in professional services revenue, and the ongoing shift of the company's business from licenses to subscription, QAD expects relatively flat total revenue growth for fiscal 2020 despite continued growth of its cloud business.
For the fiscal 2020 first quarter, QAD expects:
-- Total revenue of $78 to $79 million, including $25 to $25.5 million of
subscription revenue.
-- GAAP pre-tax loss of $4 to $5 million.
-- Non-GAAP pre-tax loss of $1 to $2 million.
For the fiscal 2020 full year, QAD expects:
-- Total revenue of $330 to $335 million, including $110 to $112 million of
subscription revenue.
-- GAAP pre-tax income of breakeven.
-- Non-GAAP pre-tax income of $10 to $13 million.
The following is a forward-looking reconciliation of GAAP pre-tax income to non-GAAP pre-tax income for the fiscal 2020 first quarter and full year:
QAD Inc.
Reconciliation of GAAP to Non-GAAP Forward-Looking Guidance Measures
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
April 30, 2019 January 31, 2020
Low High Low High
Non-GAAP pre-tax (loss) income
reconciliation
GAAP (loss) income before income
taxes $
(4,000) $
(5,000) $
(1,000) $
1,000
Add back
Stock-based
compensation
expense 2,500 2,700 11,000 12,000
Amortization
of purchased
intangible
assets 75 75 300 300
Change in fair
value of
interest rate
swap -
Non-GAAP (loss) income before
income taxes $
(1,425) $
(2,225) $
10,300 $
13,300
Estimated income tax expense on GAAP
earnings $
650 $
750 $
2,600 $
3,000
Weighted average basic shares
outstanding
Class A 16,400 16,800 16,900 17,300
Class B 3,300 3,400 3,300 3,400
Weighted average diluted shares
outstanding
Class A 17,700 18,100 17,800 18,200
Class B 3,400 3,500 3,400 3,500
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 2019 Fourth Quarter and Full Year Financial Results Conference Call
When: Wednesday, March 20, 2019
Time: 2:00 p.m. PT (5:00 p.m. ET)
Phone: 800-230-1059 (domestic); 612-234-9959 (international)
Replay: Accessible through midnight March 27, 2019; 800-475-6701 (domestic); 320-365-3844 (international); passcode 462707
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, non-GAAP pre-tax income and estimated income tax expense on GAAP earnings in this press release for the fiscal 2019 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.
-- Estimated income tax expense on GAAP earnings - Defined as GAAP total
tax expense excluding changes in reserves for unrecognized tax benefits.
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, customer relationships, trade names and other intangible assets, 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 - The Effective Enterprise
QAD Inc. (Nasdaq: QADA) (Nasdaq: QADB) is a leading provider of flexible, cloud-based enterprise software and services for global manufacturing companies. QAD Cloud ERP for manufacturing supports operational requirements in the areas of financials, customer management, supply chain, manufacturing, service and support, analytics, business process management and integration. QAD's portfolio includes related solutions for quality management software, supply chain management software, transportation management software and B2B interoperability. Since 1979, QAD solutions have enabled customers in the automotive, consumer products, food and beverage, high tech, industrial manufacturing, and life sciences industries to better align operations with their strategic goals to become Effective Enterprises.
To learn more, visit www.qad.com or call +1 805-566-6000.
"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 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.
For More Information, Contact:
Kara Bellamy
Laurie Berman
Chief Accounting Officer
PondelWilkinson Inc.
805.566.6100
310.279.5980
investor@qad.com
lberman@pondel.com
(financial tables follow)
QAD Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
January 31, January 31,
2019 2018 2019 2018
Revenue:
Subscription $
24,048 $
19,662 $
91,861 $
69,615
License 9,110 7,171 25,568 25,807
Maintenance and
other 30,478 31,858 122,936 128,142
Professional
services 19,070 22,062 92,651 81,454
Total
revenue 82,706 80,753 333,016 305,018
Cost of revenue:
Subscription 8,880 7,810 34,128 30,563
License 942 743 2,714 2,946
Maintenance and
other 7,952 7,872 31,307 31,246
Professional
services 19,246 23,394 87,735 84,670
Total cost
of
revenue 37,020 39,819 155,884 149,425
Gross profit 45,686 40,934 177,132 155,593
Operating expenses:
Sales and
marketing 20,312 22,387 78,207 75,368
Research and
development 13,319 12,329 53,993 47,661
General and
administrative 8,425 8,849 35,248 35,222
Amortization of
intangibles from
acquisitions 66 57 111 416
Total
operating
expenses 42,122 43,622 167,559 158,667
Operating income (loss) 3,564 (2,688) 9,573 (3,074)
Other expense (income):
Interest income (687) (446) (2,600) (1,547)
Interest expense 155 161 643 669
Other (income)
expense, net 922 613 (387) 2,012
Total
other
expense
(income),
net 390 328 (2,344) 1,134
Income (loss) before income taxes 3,174 (3,016) 11,917 (4,208)
Income tax
(benefit)
expense (1,762) 2,156 1,489 4,857
Net income (loss) $
4,936 $
(5,172) $
10,428 $
(9,065)
Net income (loss) $
4,936 $
(5,172) $
10,428 $
(9,065)
Other
comprehensive
income, net of
tax:
Foreign currency
translation
adjustments 1,177 774 (833) 1,803
Total comprehensive income (loss) $
6,113 $
(4,398) $
9,595 $
(7,262)
Diluted income (loss) per share
Class A $
0.24 $
(0.28) $
0.50 $
(0.49)
Class B $
0.21 $
(0.23) $
0.44 $
(0.41)
Diluted Weighted Shares
Class A 17,675 16,029 17,852 15,942
Class B 3,398 3,217 3,422 3,213
QAD Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
January 31, January 31,
2019 2018
Assets
Current assets:
Cash and
equivalents $
139,413 $
147,023
Marketable
securities 1,200 -
Accounts
receivable, net 81,577 83,518
Other current
assets 22,150 15,856
Total current
assets 244,340 246,397
Property and equipment, net 29,621 30,408
Capitalized software costs, net 1,598 990
Goodwill 12,423 11,023
Long-term deferred tax assets, net 16,172 7,944
Other assets, net 13,020 3,055
Total assets $
317,174 $
299,817
Liabilities and stockholders' equity
Current liabilities:
Current portion of
long-term debt $
487 $
466
Accounts payable
and other current
liabilities 50,250 58,278
Deferred revenue 115,253 116,693
Total current
liabilities 165,990 175,437
Long-term debt 12,836 13,313
Other liabilities 5,101 5,439
Stockholders' equity:
Common stock 20 20
Additional paid-in
capital 196,723 200,456
Treasury
stock (7,350) (12,461)
Accumulated deficit (48,485) (75,559)
Accumulated other
comprehensive loss (7,661) (6,828)
Total
stockholders'
equity 133,247 105,628
Total liabilities
and stockholders'
equity $
317,174 $
299,817
QAD Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Twelve Months Ended
January 31,
2019 2018
Net cash provided by
operating activities $
19,007 $
10,418
---
Cash flows from investing
activities:
Purchase of property and
equipment (4,336) (3,650)
Purchase of marketable
securities (1,200)
Acquisition of businesses, net
of cash acquired (2,655)
Capitalized software costs (1,067) (1,019)
Net cash used in investing
activities (9,258) (4,669)
Cash flows from financing
activities:
Repayments of debt (468) (445)
Tax payments related to stock
awards (8,744) (3,353)
Cash dividends paid (5,479) (5,367)
Net cash used in financing
activities (14,691) (9,165)
Effect of exchange rates on cash
and equivalents (2,668) 5,357
Net (decrease) increase in cash
and equivalents (7,610) 1,941
Cash and equivalents at
beginning of period 147,023 145,082
Cash and equivalents at end of
period $
139,413 $
147,023
QAD Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
January 31, January 31,
2019 2018 2019 2018
Total revenue $
82,706 $
80,753 $
333,016 $
305,018
Net income (loss) 4,936 (5,172) 10,428 (9,065)
Add back:
Net interest
income (532) (285) (1,957) (878)
Depreciation 1,163 1,166 4,734 4,562
Amortization 251 202 772 1,199
Income tax
(benefit)
expense (1,762) 2,156 1,489 4,857
EBITDA $
4,056 $
(1,933) $
15,466 $
675
Add back:
Stock-based
compensation
expense 2,504 2,253 10,122 8,924
Change in fair
value of
interest rate
swap 249 (274) 51 (377)
Adjusted EBITDA $
6,809 $
46 $
25,639 $
9,222
Adjusted EBITDA margin 8% 0% 8% 3%
Non-GAAP pre-tax income reconciliation
Income (loss) before income taxes $
3,174 $
(3,016) $
11,917 $
(4,208)
Add back
Stock-based
compensation
expense 2,504 2,253 10,122 8,924
Amortization
of purchased
intangible
assets 73 110 125 842
Change in fair
value of
interest rate
swap 249 (274) 51 (377)
Non-GAAP income (loss) before income
taxes $
6,000 $
(927) $
22,215 $
5,181
Estimated income tax (benefit) expense
on GAAP earnings $
(52) $
71 $
3,270 $
2,812
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SOURCE QAD Inc.
