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American Software Reports Preliminary First Quarter of Fiscal Year 2019 Results

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Cloud Services Annual Contract Value Increases 71%

American Software, Inc. (NASDAQ:AMSWA) today reported preliminary
financial results for the first quarter for fiscal year 2019.

Key First quarter financial highlights:

  • Cloud Services Annual Contract Value (ACV) increased approximately 71%
    to $13.2 million as of the quarter ended July 31, 2018 compared to
    $7.7 million as of the same period of the prior year. ACV consists of
    Software-as-a-Service (SaaS) of $10.4 million, a 93% increase when
    compared to approximately $5.4 million for the same period last year,
    and other cloud services of $2.8 million, a 20% increase when compared
    to $2.3 million for the same period last year.
  • Subscription fees were $3.2 million for the quarter ended July 31,
    2018, a 96% increase compared to $1.6 million for the same period last
    year, while Software license revenues were $1.7 million, a 58%
    decrease compared to $4.0 million for the same period last year,
    reflecting our continued transition to the SaaS engagement model.
  • Total revenues for the quarter ended July 31, 2018 were $27.4 million,
    an increase of 2% over the comparable period last year.
  • Recurring revenue streams of Maintenance and Cloud Services were 54%
    of total revenues in the quarter ended July 31, 2018 compared to 46%
    in the same period of the prior year.
  • Maintenance revenues for the quarter ended July 31, 2018 increased 6%
    to $11.5 million compared to $10.8 million for the same period last
    year.
  • Professional services and other revenues for the quarter ended July
    31, 2018 increased 6% to $11.0 million compared to $10.4 million for
    the same period last year.
  • Operating earnings for the quarter ended July 31, 2018 decreased 83%
    to $0.6 million compared to $3.6 million for the same period last year.
  • GAAP net earnings for the quarter ended July 31, 2018 decreased 49% to
    $1.4 million or $0.04 per fully diluted share compared to $2.7 million
    or $0.09 per fully diluted share for the same period last year.
  • Adjusted net earnings for the quarter ended July 31, 2018, which
    excludes non-cash stock-based compensation expense and amortization of
    acquisition-related intangibles, were $2.2 million or $0.07 per fully
    diluted share compared to $3.1 million or $0.10 per fully diluted
    share for the same period last year.
  • EBITDA decreased by 52% to $2.4 million for the quarter ended July 31,
    2018 compared to $5.0 million for the same period last year which was
    impacted by Subscription Services being preferred over a perpetual
    licensing model.
  • Adjusted EBITDA decreased by 47% to $2.8 million for the quarter ended
    July 31, 2018 compared to $5.3 million for the quarter ended July 31,
    2017. Adjusted EBITDA represents GAAP net earnings adjusted for
    amortization of intangibles, depreciation, interest income & other,
    net, income tax (benefit)/expense and non-cash stock-based
    compensation expense.

The overall financial condition of the Company remains strong, with cash
and investments of approximately $87.4 million and no debt as of July
31, 2018. During the first quarter of fiscal 2019, the Company paid
shareholder dividends of approximately $3.4 million.

"Our first quarter fiscal year 2019 results reinforce our continued
momentum towards Software-as-a-Service (SaaS) subscriptions as the
preferred customer engagement method which is highlighted by our 71%
increase in Cloud Services Annual Contract Value (ACV), fueled by a 93%
increase in SaaS subscriptions," said Allan Dow, president of American
Software. "Last week, both Logility and Demand Management were
recognized as Leaders in the 2018 Gartner Magic Quadrant for Supply
Chain Planning System of Record. We believe this recognition highlights
our long-standing leadership in developing innovative solutions that
help companies of all sizes mitigate risk, increase profitability and
optimize their digital supply chains."

"Our continuing investments in innovative software and services to power
the digital supply chain are helping our customers reach new levels of
productivity," continued Dow. "Digitization drives a new wave of supply
chain productivity which is more intelligent, responsive, scalable and
collaborative, helping our customers gain new insights and make better
decisions faster."

Additional highlights for the first quarter of fiscal 2019 include:

Customers & Channels

  • Notable new and existing customers placing orders with the Company in
    the first quarter include: Dragon Crowd Garment, Gerber Childrenswear,
    Husqvarna, International Vitamin, Lagardere Travel Retail Pacific,
    Mega Labs, Mix Limited, Robinson Manufacturing, Taylor Farms, and
    Thibiant.
  • During the quarter, SaaS subscription and/or software license
    agreements were signed with customers located in the following nine
    countries: Australia, Finland, Mexico, New Zealand, Panama, Sweden,
    United Kingdom, United States, and Uruguay.
  • Logility Inc., a wholly-owned subsidiary of the Company, announced
    Griffith Foods, a global provider of food ingredients, is expanding
    its use of Logility Voyager Solutions™ to more regions around the
    world. Since deploying Logility in North America, Griffith Foods has
    achieved significant benefits including improved forecast visibility
    across the organization, better inventory alignment and increased
    customer service levels.
  • New Generation Computing, Inc. (NGC), a wholly-owned subsidiary of the
    Company, announced Rhone, a
    premier men's active wear and lifestyle brand, selected NGC's
    Andromeda Cloud Platform® to help expand its line with greater
    efficiency and speed as the company continues its exponential growth.
  • Logility invited supply chain professionals to the webcast, "Visibility:
    A Key Result of Inventory Optimization
    ," which discussed how
    Sensient Colors leveraged Logility Voyager Solutions as the planning
    platform for its supply chain transformation and improved forecast
    accuracy, expanded inventory visibility and increased customer service
    levels.
  • Logility congratulated the 2018 members of The Gartner Supply Chain
    Top 25 and is proud to serve many of these leading supply chain
    organizations. The winners
    were announced
     at the Gartner Supply Chain Executive Conference on
    May 17, 2018.
  • Logility invited attendees of the 2018 Gartner Supply Chain Executive
    Conference to attend the session, "Husqvarna Group Goes
    Digital with Global Supply Chain Transformation"
    as well as the
    roundtable, "Multi-Echelon Inventory Optimization Meets Sales
    & Operations Planning
    ."
  • Logility invited attendees of ASCI 2018 to attend the session, "How
    Sales & Operations Planning Fits into the Ever-Changing Supply Chain," 
    led
    by Andrew Hill, head of supply planning, Brightstar Australia.
    The session, which took place in Sydney on May 24, 2018, highlighted
    how Brightstar Australia is able to transform diverse information from
    across the organization into a central resource to fuel supply chain
    improvements.
  • Logility invited attendees of the APICS Best of the Best S&OP
    Conference to attend the session, "Best-Laid Plans: Scenario
    Planning and Mitigating Risk within the S&OP Process,"
     led by
    Berry GlobalThe session shared recommendations on how to
    increase visibility, model multiple scenarios and evaluate the
    business impact based on both volumetric and financial measures.

Company and Technology

  • Logility shared the results of a survey of more than 1,000 supply
    chain leaders highlighting the priorities and challenges companies
    face as they embrace advanced analytics, Big Data and machine
    learning. Additional insights were discussed during the live APICS
    webcast, "Accelerate
    Supply Chain Performance Using Advanced Analytics
    ."
  • During the quarter, Demand Management, Inc., a wholly-owned subsidiary
    of Logility, and NGC announced they each had been named one of the Top
    100 Logistics IT Providers by Inbound Logistics Magazine. This is the
    seventh year Demand Management has received this award and the ninth
    year NGC has been recognized.
  • Demand Management and NGC were also named recipients of the Supply &
    Demand Chain Executive SDCE 100 Award. This is the tenth consecutive
    year Demand Management has received this award and the eighth
    consecutive year NGC has been recognized.

About American Software, Inc.

Atlanta-based American Software, Inc. (NASDAQ:AMSWA), named one
of the 100 Most Trustworthy Companies in America by Forbes Magazine,
delivers innovative demand-driven supply chain management and advanced
retail planning platforms backed by more than 45 years of industry
expertise. Logility®, Inc., a
wholly-owned subsidiary of American Software, is a leading provider of
collaborative supply chain optimization and advanced retail planning
solutions that help medium, large and Fortune 500 companies transform
their supply chain operations to gain a competitive advantage.
Recognized for its high-touch approach to customer service, rapid
implementations and industry-leading return on investment (ROI),
Logility customers include Big Lots, Husqvarna Group, Parker Hannifin,
Sonoco Products, Red Wing Shoe Company, Verizon Wireless and VF
Corporation. Demand Management, Inc., a wholly-owned subsidiary
of Logility, delivers affordable, easy-to-use Software-as-a-Service
(SaaS) supply chain planning solutions designed to increase forecast
accuracy, improve customer service and reduce inventory to maximize
profits and lower costs. Demand Management serves customers such as
Siemens Healthcare, AutomationDirect.com and Newfoundland Labrador
Liquor Corporation. Halo Business Intelligence, a division of
Logility, is an advanced analytics software provider leveraging an
innovative blend of artificial intelligence and machine learning
technology to drive greater supply chain performance. Halo customers
include Aaron's, Leatherman Tool Group and SweetWater Brewing. New
Generation Computing, Inc.
®, a wholly-owned
subsidiary of American Software, is a leading provider of cloud-based
supply chain and product lifecycle management solutions for brands,
retailers and consumer products companies. NGC customers include A|X
Armani Exchange, Billabong, Carter's, Destination XL, Hugo Boss, Jos. A.
Bank, Marchon Eyewear, Spanx, and Swatfame. The comprehensive American
Software supply chain and retail planning portfolio includes advanced
analytics, supply chain visibility, demand, inventory and replenishment
planning, Sales and Operations Planning (S&OP), Integrated Business
Planning (IBP), supply and inventory optimization, manufacturing
planning and scheduling, retail merchandise and assortment planning and
allocation, product lifecycle management (PLM), and vendor quality and
compliance. For more information about American Software, please visit www.amsoftware.com,
call (800) 726-2946 or email: ask@amsoftware.com.

Operating and Non-GAAP Financial Measures

The Company includes operating measures (ACV) and other non-GAAP
financial measures (EBITDA, adjusted EBITDA, adjusted net earnings and
adjusted net earnings per share) in the summary financial information
provided with this press release as supplemental information relating to
its operating results. This financial information is not in accordance
with, or an alternative for, GAAP-compliant financial information and
may be different from the operating or non-GAAP financial information
used by other companies. The Company believes that this presentation of
ACV, EBITDA, adjusted EBITDA, adjusted net earnings and adjusted net
earnings per share provides useful information to investors regarding
certain additional financial and business trends relating to its
financial condition and results of operations. ACV is a forward-looking
operating measure used by management to better understand cloud services
(SaaS and other related cloud services) revenue trends within the
Company's business as it reflects the Company's current estimate of
revenue to be generated under the existing client contracts in the
forward 12-month period. EBITDA represents GAAP net earnings adjusted
for amortization of intangibles, depreciation, interest income & other,
net, and income tax (benefit)/expense. Adjusted EBITDA represents GAAP
net earnings adjusted for amortization of intangibles, depreciation,
interest income & other, net, income tax (benefit)/expense and non-cash
stock-based compensation expense. A reconciliation of these non-GAAP
financial measures to their nearest U.S. GAAP measure appears in the
accompanying financial tables.

Forward Looking Statements

This press release contains forward-looking statements that are subject
to substantial risks and uncertainties. There are a number of factors
that could cause actual results to differ materially from those
anticipated by statements made herein. These factors include, but are
not limited to, changes in general economic conditions, technology and
the market for the Company's products and services, including economic
conditions within the e-commerce markets; the timely availability and
market acceptance of these products and services; the Company's ability
to satisfy in a timely manner all SEC required filings and the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the
rules and regulations adopted under that Section; the challenges and
risks associated with integration of acquired product lines and
companies; the effect of competitive products and pricing; the
uncertainty of the viability and effectiveness of strategic alliances;
and the irregular pattern of the Company's revenues. For further
information about risks the Company could experience as well as other
information, please refer to the Company's current Form 10-K and other
reports and documents subsequently filed with the Securities and
Exchange Commission. For more information, contact: Vincent C. Klinges,
Chief Financial Officer, American Software, Inc., (404) 264-5477 or fax:
(404) 264-5298.

American Software® is a registered trademark
of American Software, Inc.
Logility® is
a registered trademark and Logility Voyager Solutions™ is a trademark of
Logility; Demand Solutions
® is a registered
trademark of Demand Management, Inc.; and New Generation Computing
®
and Andromeda Cloud Platform
® are registered
trademarks of New Generation Computing, Inc. Other products mentioned in
this document are registered marks, trademarks or service marks of their
respective owners.

 
AMERICAN SOFTWARE, INC.
Consolidated Statements of Operations Information
(In thousands, except per share data, unaudited)
         
First Quarter Ended
July 31,
2018 2017 Pct Chg.
Revenues:
License fees $ 1,702 $ 4,015 (58 %)
Subscription fees 3,168 1,619 96 %
Professional services & other 11,008 10,424 6 %
Maintenance   11,521     10,828   6 %
Total Revenues   27,399     26,886   2 %
 
Cost of Revenues:
License fees 1,714 1,507 14 %
Subscription services 1,068 681 57 %
Professional services & other 8,667 7,246 20 %
Maintenance   2,198     2,227   (1 %)
Total Cost of Revenues   13,647     11,661   17 %
Gross Margin   13,752     15,225   (10 %)
Operating expenses:
Research and development 4,559 3,794 20 %
Less: capitalized development (884 ) (1,287 ) (31 %)
Sales and marketing 5,180 5,233 (1 %)
General and administrative 4,193 3,515 19 %
Provision for doubtful accounts - 24 nm
Amortization of acquisition-related intangibles 97 324 (70 %)
       
Total Operating Expenses   13,145     11,603   13 %
Operating Earnings   607     3,622   (83 %)
Interest Income & Other, Net   753     599   26 %
Earnings Before Income Taxes 1,360 4,221 (68 %)
Income Tax (Benefit)/Expense   (25 )   1,496   (102 %)
Net Earnings $ 1,385   $ 2,725   (49 %)
Earnings per common share: (1)
Basic $ 0.05   $ 0.09   (44 %)
Diluted $ 0.04   $ 0.09   (56 %)
 
Weighted average number of common shares outstanding:
Basic 30,725 29,671
Diluted 31,343 29,989
 
nm- not meaningful
 

 
AMERICAN SOFTWARE, INC.
NON-GAAP MEASURES OF PERFORMANCE
(In thousands, except per share data, unaudited)
 
      First Quarter Ended
July 31,
2018   2017   Pct Chg.
NON-GAAP EBITDA:
Net Earnings (GAAP Basis) $ 1,385 $ 2,725 (49 %)
Income Tax (Benefit)/ Expense (25 ) 1,496 nm
Interest Income & Other, Net (753 ) (599 ) 26 %
Amortization of intangibles 1,650 1,265 30 %
Depreciation   148     120   23 %
EBITDA (earnings before interest, taxes, depreciation and
amortization)
  2,405     5,007   (52 %)
 
Stock-based compensation   398     316   26 %
Adjusted EBITDA $ 2,803   $ 5,323   (47 %)
   
EBITDA, as a percentage of revenues   9 %   19 %
   
Adjusted EBITDA, as a percentage of revenues   10 %   20 %
 
 
First Quarter Ended
July 31,
2018 2017 Pct Chg.
NON-GAAP EARNINGS PER SHARE:
Net Earnings (GAAP Basis) $ 1,385 $ 2,725 (49 %)
Amortization of acquisition-related intangibles (2) 488 209 133 %
Stock-based compensation (2)   326     204   60 %
Adjusted Net Earnings $ 2,199   $ 3,138   (30 %)
 
Adjusted non-GAAP diluted earnings per share $ 0.07   $ 0.10   (30 %)
 
(1) - Basic per share amounts are the same for Class A and Class B
shares. Diluted per share amounts for Class A shares are shown
above. Diluted per share for Class B shares under the two-class
method are $0.05 and $0.09 for the three months ended July 31, 2018
and 2017, respectively.
 
(2) - Tax affected using the effective tax rate for the three month
periods ended July 31, 2018 and 2017.
 
nm- not meaningful
               
 

 
AMERICAN SOFTWARE, INC.
Consolidated Balance Sheet Information
(In thousands)
(Unaudited)
 
                  July 31,   April 30,
2018 2018
 
Cash and Cash Equivalents $ 54,855 $ 52,794
Short-term Investments 29,992 26,121
Accounts Receivable:
Billed 13,683 18,643
Unbilled   3,544   3,375
Total Accounts Receivable, net 17,227 22,018
Prepaids & Other   6,433   6,592
Current Assets 108,507 107,525
 
Investments - Non-current 2,509 8,893
 
PP&E, net 3,600 3,034
Capitalized Software, net 9,559 9,728
Goodwill 25,888 25,888
Other Intangibles, net 4,523 5,120
Other Non-current Assets   3,822   2,777
Total Assets $ 158,408 $ 162,965
 
Accounts Payable $ 2,166 $ 1,974
Accrued Compensation and Related costs 2,305 6,310
Dividend Payable 3,400 3,367
Other Current Liabilities 925 1,246
Deferred Revenues - Current   29,518   33,226
Current Liabilities 38,314 46,123
 
Deferred Revenues - Non-current - 147
Deferred Tax Liability - Non-current 3,222 2,615
Other Long-term Liabilities   1,485   1,496
Long-term Liabilities 4,707 4,258
   
Total Liabilities 43,021 50,381
 
Shareholders' Equity 115,387 112,584
   
Total Liabilities & Shareholders' Equity $ 158,408 $ 162,965
                     

 
AMERICAN SOFTWARE, INC.
Condensed Consolidated Cashflow Information
(In thousands)
(Unaudited)
           
Three Months Ended
July 31,
2018 2017
 
Net cash provided by operating activities $ 4,361 $ 4,015
 
Capitalized computer software development costs (884 ) (1,287 )
Purchases of property and equipment, net of disposals (714 ) (133 )
   
Net cash used in investing activities (1,598 ) (1,420 )
 
Dividends paid (3,368 ) (3,259 )
Proceeds from exercise of stock options 2,666 890
   
Net cash used in financing activities (702 ) (2,369 )
 
Net change in cash and cash equivalents 2,061 226
Cash and cash equivalents at beginning of period 52,794 66,001
   
Cash and cash equivalents at end of period $ 54,855   $ 66,227  

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