American Software Reports Third Quarter of Fiscal Year 2023 Results

Rhea-AI Summary

American Software, Inc. (NASDAQ: AMSWA) reported preliminary financial results for the third quarter of fiscal 2023, with subscription fees reaching $13.0 million, a 20% increase year-over-year. Total revenues, however, saw a 4% decrease to $31.0 million, largely due to a decline in services revenue. Recurring revenues constituted 70% of total revenues. GAAP net earnings rose 14% to $3.3 million, while adjusted EBITDA decreased 12% to $3.7 million. The company maintains a strong financial position with approximately $105 million in cash and investments. Guidance for fiscal year 2023 has been slightly lowered for total and recurring revenues, but adjusted EBITDA expectations remain stable.

Positive

• Subscription fees increased by 20% year-over-year to $13.0 million.
• Recurring revenues reached 70% of total revenues.
• GAAP net earnings rose by 14% to $3.3 million.
• Adjusted EBITDA expectations remain stable despite revenue guidance being lowered.

Negative

• Total revenues decreased by 4% to $31.0 million due to a decline in services revenue.
• Maintenance revenues decreased by 5% to $8.6 million.
• Professional services and other revenues fell 27% to $8.3 million.

 Subscription Fee Growth of 20% and Adjusted EBITDA Margin of 16%

ATLANTA--(BUSINESS WIRE)-- American Software, Inc. (NASDAQ: AMSWA) today reported preliminary financial results for the third quarter of fiscal year 2023.

Key Third Quarter Financial Highlights:

• Subscription fees were $13.0 million for the quarter ended January 31, 2023, a 20% increase compared to $10.9 million for the same period last year, and software license revenues were $1.0 million for both the current and prior period last year.
• Total revenues for the quarter ended January 31, 2023 decreased 4% to $31.0 million, compared to $32.4 million for the same period of the prior year, principally due to a decline in services revenue.
• Recurring revenue streams for Maintenance and Cloud Subscriptions were $21.7 million or 70% of total revenues in the quarter ended January 31, 2023 compared to $20.0 million or 62% in the same period of the prior year.
• Maintenance revenues for the quarter ended January 31, 2023 decreased 5% to $8.6 million compared to $9.1 million for the same period last year reflecting the shift to cloud revenue as a client preference.
• Professional services and other revenues for the quarter ended January 31, 2023 decreased 27% to $8.3 million compared to $11.4 million for the same period last year. The decline was primarily driven by a 39% decrease in non-core project revenue in our IT Consulting business unit. For the Supply Chain business, professional services revenues for the quarter ended January 31, 2023 decreased by 15% to $4.6 million when compared to $5.4 million in the same period prior year due to an unusually slow holiday period.
• Operating earnings for the quarter ended January 31, 2023 were $3.0 million compared to $3.2 million for the same period last year.
• GAAP net earnings for the quarter ended January 31, 2023 increased 14% to $3.3 million or $0.10 per fully diluted share compared to $2.9 million or $0.09 per fully diluted share for the same period last year.
• Adjusted net earnings for the quarter ended January 31, 2023, which excludes non-cash stock-based compensation expense and amortization of acquisition-related intangibles, increased 18% to $4.5 million or $0.13 per fully diluted share compared to $3.8 million or $0.11 per fully diluted share for the same period last year.
• EBITDA decreased by 12% to $3.7 million for the quarter ended January 31, 2023 compared to $4.2 million for the same period last year.
• Adjusted EBITDA was $5.0 million for the quarter ended January 31, 2023 compared to $5.3 million for the same period last year. Adjusted EBITDA represents GAAP net earnings adjusted for amortization of intangibles, depreciation, interest income & other, net, income tax expense and non-cash stock-based compensation expense.

Key Fiscal 2023 Year to Date Financial Highlights:

• Subscription fees were $37.4 million for the nine months ended January 31, 2023, a 21% increase compared to $31.0 million for the same period last year, while Software license revenues were $2.0 million compared to $2.3 million for the same period last year.
• Total revenues for the nine months ended January 31, 2023 were $93.7 million compared to $92.9 million for the same period last year.
• Recurring revenue streams for Maintenance and Cloud Services were $63.8 million and $58.9 million or 68% and 63% of total revenues for the nine-month periods ended January 31, 2023 and 2021, respectively.
• Maintenance revenues for the nine months ended January 31, 2023 were $26.4 million, a 5% decrease compared to $27.9 million for the same period last year.
• Professional services and other revenues for the nine months ended January 31, 2023 decreased 12% to $27.9 million compared to $31.8 million for the same period last year.
• For the nine months ended January 31, 2023, the Company reported operating earnings of approximately $8.3 million compared to $7.7 million for the same period last year, an 8% increase.
• GAAP net earnings were approximately $7.6 million or $0.22 per fully diluted share for the nine months ended January 31, 2023, an 18% decrease compared to $9.2 million or $0.27 per fully diluted share for the same period last year.
• Adjusted net earnings for the nine months ended January 31, 2023, which exclude stock-based compensation expense and amortization of acquisition-related intangibles, decreased 4% to $11.1 million or $0.33 per fully diluted share, compared to $11.6 million or $0.34 per fully diluted share for the same period last year.
• EBITDA was $10.7 million for the nine months ended January 31, 2023 compared to $10.9 million for the same period last year.
• Adjusted EBITDA increased 6% to $14.6 million for the nine months ended January 31, 2023 compared to $13.8 million for the nine months ended January 31, 2022. Adjusted EBITDA represents GAAP net earnings adjusted for amortization of intangibles, depreciation, interest income & other, net, income tax expense/(benefit) and non-cash stock-based compensation.

Key Third Quarter of Fiscal Year 2023 highlights:

Clients & Channels

• Notable new and existing customers placing orders with the Company in the third quarter include: Holly Frontier Corporation, Indorama Ventures Oxides, LLC., Johnstone Supply, Inc., Mom Enterprises, LLC, Mustad Netherlands B.V., and Sandvik Mining & Construction Tools AB.
• During the quarter, SaaS subscription and software license agreements were signed with customers located in the following six countries: Australia, Mexico, the Netherlands, Sweden, the United Kingdom, and the United States.
• We signed new channel partnership agreements with Bisonaire (Germany) and Anamind (India) to bolster Logility’s presence in our regions.

Company & Technology

• Announced in November, sustainability-driven self-tanning brand Bondi Sands ramped up its recent implementation of Logility® Digital Supply Chain Platform.
• In December, Logility was named a 2022 Top Software and Technology Provider by Food Logistics for its work with Oregon dairy manufacturer Tillamook.
• In January, Logility was named in the top 20 on the 2023 RIS Software Leaderboard based on factors including return on investment, innovation, total cost of operation, service, and customer satisfaction.
• In January, Logility bolstered its leadership team with the appointment of Paul Greifenberger as EVP of America Sales and Lisa Henriott as SVP of Product Marketing.

The overall financial condition of the Company remains strong, with cash and investments of approximately $105 million. During the third quarter of fiscal year 2023, the Company paid shareholder dividends of approximately $3.7 million.

“We were pleased to see our subscription revenue growth return to 20% and recurring revenues reach 70% of our total revenues for the quarter,” said Allan Dow, CEO and President of American Software. “Considering the impact of economic uncertainty on our non-core services revenue and as we are continuing to see delays in new project starts, we are slightly lowering our guidance for total and recurring revenue. However, we are maintaining our adjusted EBITDA expectations to reflect the strong performance to date and prudent management of expenses.”

Fiscal Year 2023 Financial Outlook

• Total revenues of $123.5 million to $125.5 million, including total recurring revenues of $84.5 million to $85.5 million.
• Adjusted EBITDA of $18.0 million to $20.0 million.

About American Software, Inc.

Atlanta-based American Software, Inc. (NASDAQ: AMSWA), through its operating entity Logility delivers an innovative technical platform that enables enterprises to accelerate their digital supply chain transformation from product concept to client availability via the Logility® Digital Supply Chain Platform, a single platform spanning Product, Demand, Inventory, Supply, Sourcing, Deploy, Corporate Responsibility (ESG) and Network Optimization aligned with Integrated Business Planning.

Serving clients such as Big Lots, Carter’s, Destination XL, Hostess, Husqvarna Group, Jockey International, Johnson Controls, Parker Hannifin, Red Wing Shoe Company, Spanx, Dole Fresh Vegetables, Inc., and Fender Musical Instrument Co, our solutions are marketed and sold through a direct sales team as well as an indirect global value-added reseller (“VAR”) distribution network.

Fueled by supply chain master data, allowing for the automation of critical business processes through the application of artificial intelligence and machine learning algorithms to a variety of internal and external data streams, the comprehensive Logility portfolio delivered in the cloud 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, network design and optimization (NDO), retail merchandise and assortment planning and allocation, product lifecycle management (PLM), sourcing management, vendor quality and compliance, and product traceability. For more information about Logility, please visit www.logility.com. Logility is a wholly-owned subsidiary and operating entity for American Software, Inc. (NASDAQ: AMSWA). You can learn more about American Software at www.amsoftware.com, or by calling (404) 364-7615 or emailing kliu@amsoftware.com.

Operating and Non-GAAP Financial Measures

The Company includes 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 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. EBITDA represents GAAP net earnings adjusted for amortization of intangibles, depreciation, interest income & other, net, and income tax expense. Adjusted EBITDA represents GAAP net earnings adjusted for amortization of intangibles, depreciation, interest income & other, net, income tax expense/(benefit) and non-cash stock-based compensation expense.

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 or performance to differ materially from what is anticipated by statements made herein. These factors include, but are not limited to, continuing U.S. and global economic uncertainty and the timing and degree of business recovery; the irregular pattern of the Company’s revenues; dependence on particular market segments or customers; competitive pressures; market acceptance of the Company’s products and services; technological complexity; undetected software errors; potential product liability or warranty claims; risks associated with new product development; the challenges and risks associated with integration of acquired product lines, companies and services; uncertainty about the viability and effectiveness of strategic alliances; the Company’s ability to satisfy in a timely manner all Securities and Exchange Commission (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; as well as a number of other risk factors that could affect the Company’s future performance. 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 SEC. For more information, contact: Kevin Liu, American Software, Inc., (626) 657-0013 or email kliu@amsoftware.com.

Logility® is a registered trademark of Logility, Inc. Other products mentioned in this document are registered, trademarked or service marked by their respective owners.

AMERICAN SOFTWARE, INC.
Consolidated Statements of Operations Information
(In thousands, except per share data, unaudited)
			Third Quarter Ended									Nine Months Ended
			January 31,									January 31,
			2023			2022			Pct Chg.			2023			2022				Pct Chg.
Revenues:
	Subscription fees		$	13,003		$	10,856		20	%		$	37,391		$	31,005			21	%
	License fees			1,017			992		3	%			2,025			2,289			(12	%)
	Professional services & other			8,342			11,443		(27	%)			27,945			31,751			(12	%)
	Maintenance			8,649			9,131		(5	%)			26,384			27,859			(5	%)
		Total Revenues		31,011			32,422		(4	%)			93,745			92,904			1	%
Cost of Revenues:
	Subscription services			4,005			3,431		17	%			11,682			10,059			16	%
	License fees			358			240		49	%			541			597			(9	%)
	Professional services & other			6,303			8,012		(21	%)			20,454			22,499			(9	%)
	Maintenance			1,607			1,789		(10	%)			4,757			5,509			(14	%)
		Total Cost of Revenues		12,273			13,472		(9	%)			37,434			38,664			(3	%)
Gross Margin				18,738			18,950		(1	%)			56,311			54,240			4	%
Operating expenses:
	Research and development			4,402			4,602		(4	%)			13,220			13,304			(1	%)
	Sales and marketing			5,325			5,222		2	%			16,934			17,234			(2	%)
	General and administrative			6,030			5,834		3	%			17,796			15,844			12	%
	Amortization of acquisition-related intangibles			25			53		(53	%)			81			159			(49	%)
		Total Operating Expenses		15,782			15,711		0	%			48,031			46,541			3	%
Operating Earnings				2,956			3,239		(9	%)			8,280			7,699			8	%
	Interest Income & Other, Net			1,334			92		nm				1,308			1,459			(10	%)
Earnings Before Income Taxes				4,290			3,331		29	%			9,588			9,158			5	%
	Income Tax Expense/(Benefit)			950			391		143	%			2,034			(43	)		nm
Net Earnings			$	3,340		$	2,940		14	%		$	7,554		$	9,201			(18	%)
Earnings per common share: (1)
	Basic		$	0.10		$	0.09		11	%		$	0.22		$	0.28			(21	%)
	Diluted		$	0.10		$	0.09		11	%		$	0.22		$	0.27			(19	%)
Weighted average number of common shares outstanding:
		Basic		33,759			33,490						33,711			33,293
		Diluted		33,965			34,578						34,006			34,325
nm- not meaningful

AMERICAN SOFTWARE, INC.
NON-GAAP MEASURES OF PERFORMANCE
(In thousands, except per share data, unaudited)
			Third Quarter Ended											Nine Months Ended
			January 31,											January 31,
			2023				2022				Pct Chg.			2023				2022				Pct Chg.
NON-GAAP Operating Earnings:
Operating Earnings (GAAP Basis)			$	2,956			$	3,239			(9	%)		$	8,280			$	7,699			8	%
	Amortization of acquisition-related intangibles			233				53			340	%			601				159			278	%
	Stock-based compensation			1,294				1,093			18	%			3,943				2,910			35	%
NON-GAAP Operating Earnings:				4,483				4,385			2	%			12,824				10,768			19	%
Non-GAAP Operating Earnings, as a % of revenue				14	%			14	%						14	%			12	%
			Third Quarter Ended											Nine Months Ended
			January 31,											January 31,
			2023				2022				Pct Chg.			2023				2022				Pct Chg.
NON-GAAP EBITDA:
Net Earnings (GAAP Basis)			$	3,340			$	2,940			14	%		$	7,554			$	9,201			(18	%)
	Income Tax Expense/(Benefit)			950				391			143	%			2,034				(43	)		nm
	Interest Income & Other, Net			(1,334	)			(92	)		nm				(1,308	)			(1,459	)		(10	%)
	Amortization of intangibles			495				810			(39	%)			1,582				2,626			(40	%)
	Depreciation			292				191			53	%			805				544			48	%
EBITDA (earnings before interest, taxes, depreciation and amortization)				3,743				4,240			(12	%)			10,667				10,869			(2	%)
	Stock-based compensation			1,294				1,093			18	%			3,943				2,910			35	%
Adjusted EBITDA			$	5,037			$	5,333			(6	%)		$	14,610			$	13,779			6	%
EBITDA, as a percentage of revenues				12	%			13	%						11	%			12	%
Adjusted EBITDA, as a percentage of revenues				16	%			16	%						16	%			15	%
			Third Quarter Ended											Nine Months Ended
			January 31,											January 31,
			2023				2022				Pct Chg.			2023				2022				Pct Chg.
NON-GAAP EARNINGS PER SHARE:
Net Earnings (GAAP Basis)			$	3,340			$	2,940			14	%		$	7,554			$	9,201			(18	%)
	Amortization of acquisition-related intangibles (2)			182				41			344	%			470				126			273	%
	Stock-based compensation (2)			1,012				848			19	%			3,094				2,304			34	%
Adjusted Net Earnings			$	4,534			$	3,829			18	%		$	11,118			$	11,631			(4	%)
Adjusted non-GAAP diluted earnings per share			$	0.13			$	0.11			18	%		$	0.33			$	0.34			(3	%)
			Third Quarter Ended											Nine Months Ended
			January 31,											January 31,
			2023				2022				Pct Chg.			2023				2022				Pct Chg.
NON-GAAP Earnings Per Share
Net Earnings (GAAP Basis)			$	0.10			$	0.09			11	%		$	0.22			$	0.27			(19	%)
	Amortization of acquisition-related intangibles (2)			-				-			-			$	0.02				-			-
	Stock-based compensation (2)		$	0.03				0.02			50	%		$	0.09				0.07			29	%
Adjusted Net Earnings			$	0.13			$	0.11			18	%			0.33			$	0.34			(3	%)
			Third Quarter Ended											Nine Months Ended
			January 31,											January 31,
			2023				2022				Pct Chg.			2023				2022				Pct Chg.
Amortization of acquisition-related intangibles
	Cost of Subscription Services		$	208			$	-			-			$	521			$	-			-
	Operating expenses			25				53			(53	%)			81				159			(49	%)
Total amortization of acquisition-related intangibles			$	233			$	53			340	%		$	602			$	159			279	%
Stock-based compensation
	Cost of revenues		$	70			$	59			19	%		$	178			$	188			(5	%)
	Research and development			145				106			37	%			437				273			60	%
	Sales and marketing			152				145			5	%			568				462			23	%
	General and administrative			927				783			18	%			2,760				1,987			39	%
Total stock-based compensation			$	1,294			$	1,093			18	%		$	3,943			$	2,910			35	%
(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 $0.10 and $0.22 for the three and nine months ended January 31, 2023, respectively. Diluted per share for Class B shares under the two-class method are $0.09 and $0.28 for the three and nine months ended January 31, 2022, respectively.
(2) - Tax affected using the effective tax rate excluding a discrete item related to excess tax benefit for stock options for the three and nine month periods ended January 31, 2023 of 21.8% and 21.9% and 22.4% and 20.8% for the three and nine month periods ended January 31, 2022, respectively.
nm- not meaningful

AMERICAN SOFTWARE, INC.
Consolidated Balance Sheet Information
(In thousands)
(Unaudited)
			January 31,			April 30,
			2023			2022
Cash and Cash Equivalents			$	80,606		$	110,690
Short-term Investments				23,847			16,826
Accounts Receivable:
		Billed		32,183			20,619
		Unbilled		2,352			2,989
Total Accounts Receivable, net				34,535			23,608
Prepaids & Other				5,575			5,067
	Current Assets			144,563			156,191
Investments - Non-current				484			-
PP&E, net				6,502			3,654
Capitalized Software, net				605			1,586
Goodwill				29,558			25,888
Other Intangibles, net				2,376			147
Deferred Sales Commissions - Non-current				1,544			2,050
Lease Right of Use Assets				544			935
Other Non-current Assets				3,888			2,384
	Total Assets		$	190,064		$	192,835
Accounts Payable			$	4,007		$	2,506
Accrued Compensation and Related costs				3,027			6,918
Dividend Payable				3,715			3,700
Operating Lease Obligation - Current				440			541
Other Current Liabilities				2,805			1,871
Deferred Revenues - Current				40,706			41,953
	Current Liabilities			54,700			57,489
Operating Lease Obligation - Non-current				144			461
Deferred Tax Liability - Non-current				-			1,772
Other Long-term Liabilities				224			137
Long-term Liabilities				368			2,370
		Total Liabilities		55,068			59,859
Shareholders' Equity				134,996			132,976
Total Liabilities & Shareholders' Equity			$	190,064		$	192,835

AMERICAN SOFTWARE, INC.
Condensed Consolidated Cashflow Information
(In thousands)
(Unaudited)
			Nine Months Ended
			January 31,
			2023				2022
		Net cash provided by operating activities	$	(10,466	)		$	14,050
		Purchases of property and equipment, net of disposals		(3,655	)			(801	)
		Purchase of business, net of cash acquired		(6,500	)			-
		Net cash used in investing activities		(10,155	)			(801	)
		Dividends paid		(11,117	)			(10,957	)
		Proceeds from exercise of stock options		1,654				7,405
		Net cash used in financing activities		(9,463	)			(3,552	)
		Net change in cash and cash equivalents		(30,084	)			9,697
		Cash and cash equivalents at beginning of period		110,690				88,658
		Cash and cash equivalents at end of period	$	80,606			$	98,355

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230223005848/en/

Financial Information Press Contact:



Vincent C. Klinges

Chief Financial Officer

American Software, Inc.

(404) 264-5477

Source: American Software, Inc.

FAQ

What were the subscription fees for AMSWA in Q3 2023?

Subscription fees for AMSWA in Q3 2023 were $13.0 million, reflecting a 20% increase year-over-year.

What is AMSWA's guidance for fiscal 2023?

AMSWA's guidance for fiscal 2023 is total revenues of $123.5 million to $125.5 million and adjusted EBITDA of $18.0 million to $20.0 million.

How did AMSWA's GAAP net earnings change in Q3 2023?

AMSWA's GAAP net earnings increased by 14% to $3.3 million in Q3 2023.

What percentage of AMSWA's total revenues were recurring in Q3 2023?

Recurring revenues constituted 70% of AMSWA's total revenues in Q3 2023.

What caused the decline in AMSWA's total revenues?

The 4% decline in AMSWA's total revenues was primarily due to a decrease in services revenue.