QAD Reports Fiscal 2022 Second Quarter and Year-to-Date Financial Results
QAD Inc. (Nasdaq: QADA, QADB) reported Q2 fiscal 2022 revenues of $84.8 million, up from $74.1 million year-on-year, primarily driven by a 24% increase in subscription revenue, which totaled $38.4 million. The company anticipates a net loss of $6.3 million, or ($0.31) per Class A share and ($0.26) per Class B share. QAD is set to be acquired by Thoma Bravo for $2 billion, at $87.50 per share, prompting the withdrawal of future financial guidance. Despite the operating loss of $5.8 million, excluding acquisition-related costs, operating income would have been $1.8 million.
- Q2 total revenue grew to $84.8 million, a 14% year-over-year increase.
- Subscription revenue increased 24% to $38.4 million, representing 45% of total revenue.
- Professional services revenue rose to $17.2 million, up from $13.5 million.
- Non-GAAP pre-tax income for the first half of fiscal 2022 reached $13.9 million, compared to $7.8 million in fiscal 2021.
- GAAP net loss of $6.3 million for Q2 2022, compared to a net income of $60,000 in Q2 2021.
- Operating loss of $5.8 million, inclusive of $7.6 million in acquisition-related transaction costs.
- General and administrative expenses surged to $20.9 million from $10.3 million.
On
Fiscal 2022 Second Quarter Financial Results:
Total revenue for the fiscal 2022 second quarter grew to
Additional fiscal 2022 second quarter financial results, compared with the same period last year, include:
-
Subscription revenue of
$38.4 million $31.1 million $1.1 million - Subscription gross margin of 69 percent, versus 65 percent.
-
License revenue of
$2.8 million $3 million $89,000 -
Professional services revenue of
$17.2 million $13.5 million $530,000 - Professional services gross margin of 13 percent, versus 3 percent.
-
Maintenance revenue of
$26.4 million $26.5 million $1.1 million -
General and administrative expense of
$20.9 million $10.3 million $7.6 million -
Operating loss of
$5.8 million $4.7 million $2.3 million $4 million $1.8 million -
GAAP pre-tax loss of
$5.4 million $500,000 -
Non-GAAP pre-tax income of
$8.7 million $4.5 million -
Income tax expense of
$967,000 $440,000 -
GAAP net loss of
$6.3 million $0.31 $0.26 $60,000
“During the second quarter, QAD continued to grow cloud revenue, while improving cloud and services margins.” said
Fiscal 2022 Second Quarter Revenue by Vertical and Geography:
By vertical, high-tech and industrial represented
By geography,
Fiscal 2022 Six-Month Financial Results:
Total revenue for the first half of fiscal 2022 was
QAD's cash and equivalents balance at
Fiscal 2022 Second Quarter Highlights:
-
Received orders from 32 customers representing more than
$500,000 $1 million -
Received cloud or license orders from companies across QAD’s six vertical markets, including:
Argon Medical Devices Inc. , Caterpillar Inc.,Daregal ,Geodis USA, LLC ,GKN Automotive Limited ,Green Bay Packaging Inc. , Huf Hülsbeck & FürstGmbH & Co. KG , Intersect ENT Inc.,Joysonquin Automotive Systems , La Brosse Et Dupont S.A.S., Lear Corporation, Longchamp,M&M Manufacturing Company ,Magna Automotive Mirrors ,Oticon A/S , RxSight, Inc.,Saint-Gobain PPL Corporation ,University of California, San Diego ,Volta Trucks Ltd. , Worldwide Innovations & Technologies,Xandor Automotive GmbH , and Yantai Shougang Magnetic Materials; -
Expanded QAD’s Global Partner Network to include
India -based JK Tech, TCC Technology inThailand , and Virtual Integrated Analytics Solutions (VIAS)Mexico ; - Selected four partners, from more than 100 in the QAD Global Partner Network, as winners of its Partner Program Awards for 2021. The annual awards recognize partners in the QAD community for their achievements in contributing to the success of QAD customers; and
- Maintained Veracode Verified Standard Status for QAD Adaptive ERP, a program that validates a company's secure software development processes.
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
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 second quarter and first six months of fiscal 2022. 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, transaction costs related to Thoma Bravo’s pending acquisition of QAD, the change in fair value of contingent consideration related to QAD’s acquisitions of
Allocation Network GmbH andFTZ Corp. 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, transaction costs related to Thoma Bravo’s pending acquisition of QAD, the change in fair value of contingent consideration related to QAD’s acquisitions of
Allocation Network GmbH andFTZ Corp. 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, customer relationships and trade name, 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
Transaction costs related to Thoma Bravo’s acquisition of QAD: The company has incurred transaction costs related to Thoma Bravo’s planned acquisition of QAD. The company has excluded these costs from its non-GAAP adjusted EBITDA and non-GAAP pre-tax income calculations as these costs are one time in nature and omitting them will provide more consistent internal comparisons to the company’s historical operating results. In addition, the company believes excluding the transaction costs provides a more useful comparison of its operating results to the operating results of its peers.
Change in fair value of contingent consideration: In conjunction with the acquisitions of
About QAD – Enabling the Adaptive Manufacturing Enterprise
Founded in 1979 and headquartered in
“QAD” is a registered trademark of
Important Information for Investors and Stockholders
In connection with the proposed transaction between
The Company and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies of the Company stockholders in connection with the proposed transaction under
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. All statements and assumptions in this communication that do not directly and exclusively relate to historical facts could be deemed “forward-looking statements.” Forward-looking statements are often identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “may,” “could,” “should,” “forecast,” “goal,” “intends,” “objective,” “plans,” “projects,” “strategy,” “target” and “will” and similar words and terms or variations of such. These statements represent current intentions, expectations, beliefs or projections, and no assurance can be given that the results described in such statements will be achieved. Forward-looking statements include, among other things, statements about the potential benefits of the proposed transaction; the prospective performance and outlook of the Company’s business, performance and opportunities; the ability of the parties to complete the proposed transaction and the expected timing of completion of the proposed transaction; as well as any assumptions underlying any of the foregoing. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of the Company’s control. Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to, (i) uncertainties as to the timing of the proposed transaction; (ii) the risk that the proposed transaction may not be completed in a timely manner or at all; (iii) the possibility that competing offers or acquisition proposals for the Company will be made; (iv) the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (v) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement, including in circumstances that would require the Company to pay a termination fee or other expenses; (vi) the effect of the pendency of the proposed transaction on the Company’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, its business generally or its stock price; (vii) risks related to diverting management’s attention from the Company’s ongoing business operations; (viii) various risks related to health epidemics, pandemics and similar outbreaks, such as the COVID-19 pandemic, which may have material adverse effects on the Company’s business, financial position, results of operations and/or cash flows; (ix) adverse economic, market or geo-political conditions that may disrupt the Company’s business and cloud service offerings, including defects and disruptions in the Company’s services, ability to properly manage cloud service offerings, reliance on third-party hosting and other service providers, and exposure to liability and loss from security breaches; (x) uncertainties as to demand for the Company’s products, including cloud service, licenses, services and maintenance; (xi) the possibility of pressure to make concessions on pricing and changes in the Company’s pricing models; (xii) risks related to the protection of the Company’s intellectual property; (xiii) changes in the Company’s dependence on third-party suppliers and other third-party relationships, including sales, services and marketing channels; (xiv) changes in the Company’s revenue, earnings, operating expenses and margins; (xv) the reliability of the Company’s financial forecasts and estimates of the costs and benefits of transactions; (xvi) the Company’s ability to leverage changes in technology; (xvii) risks related to defects in the Company’s software products and services; (xviii) changes in third-party opinions about the Company; (xix) changes in competition in the Company’s industry; (xx) delays in sales; (xxi) timely and effective integration of newly acquired businesses; (xxii) changes in economic conditions in the Company’s vertical markets and worldwide; (xxiii) fluctuations in exchange rates; and (xxiv) other factors as set forth from time to time in the Company’s filings with the
| Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income | |||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Three Months Ended |
Six Months Ended |
||||||||||||||||||
2021 |
|
2020 |
|
2021 |
|
2020 |
|
||||||||||||
| Revenue: | |||||||||||||||||||
| Subscription | $ | 38,426 |
|
$ | 31,066 |
|
$ | 75,112 |
|
$ | 61,837 |
|
|||||||
| License | 2,784 |
|
3,043 |
|
5,899 |
|
4,264 |
|
|||||||||||
| Maintenance | 26,440 |
|
26,486 |
|
53,003 |
|
52,894 |
|
|||||||||||
| Professional services | 17,189 |
|
13,486 |
|
33,796 |
|
29,233 |
|
|||||||||||
| Total revenue | 84,839 |
|
74,081 |
|
167,810 |
|
148,228 |
|
|||||||||||
| Cost of revenue: | |||||||||||||||||||
| Subscription | 12,072 |
|
10,739 |
|
24,234 |
|
21,087 |
|
|||||||||||
| License | 548 |
|
565 |
|
1,086 |
|
966 |
|
|||||||||||
| Maintenance | 6,682 |
|
6,413 |
|
13,237 |
|
13,157 |
|
|||||||||||
| Professional services | 14,987 |
|
13,106 |
|
29,921 |
|
28,038 |
|
|||||||||||
| Total cost of revenue | 34,289 |
|
30,823 |
|
68,478 |
|
63,248 |
|
|||||||||||
| Gross profit | 50,550 |
|
43,258 |
|
99,332 |
|
84,980 |
|
|||||||||||
| Operating expenses: | |||||||||||||||||||
| Sales and marketing | 19,494 |
|
17,420 |
|
39,061 |
|
35,977 |
|
|||||||||||
| Research and development | 15,527 |
|
13,161 |
|
31,165 |
|
27,178 |
|
|||||||||||
| General and administrative | 20,886 |
|
10,299 |
|
33,462 |
|
20,316 |
|
|||||||||||
| Amortization of intangibles from acquisitions | 399 |
|
65 |
|
639 |
|
129 |
|
|||||||||||
| Total operating expenses | 56,306 |
|
40,945 |
|
104,327 |
|
83,600 |
|
|||||||||||
| Operating (loss) income | (5,756 |
) |
2,313 |
|
(4,995 |
) |
1,380 |
|
|||||||||||
| Other (income) expense: | |||||||||||||||||||
| Interest income | (69 |
) |
(213 |
) |
(143 |
) |
(649 |
) |
|||||||||||
| Interest expense | 176 |
|
155 |
|
317 |
|
305 |
|
|||||||||||
| Other (income) expense, net | (508 |
) |
1,871 |
|
(270 |
) |
639 |
|
|||||||||||
| Total other (income) expense, net | (401 |
) |
1,813 |
|
(96 |
) |
295 |
|
|||||||||||
| (Loss) income before income taxes | (5,355 |
) |
500 |
|
(4,899 |
) |
1,085 |
|
|||||||||||
| Income tax expense (benefit) | 967 |
|
440 |
|
(409 |
) |
1,435 |
|
|||||||||||
| Net (loss) income | $ | (6,322 |
) |
$ | 60 |
|
$ | (4,490 |
) |
$ | (350 |
) |
|||||||
| Net (loss) income | $ | (6,322 |
) |
$ | 60 |
|
$ | (4,490 |
) |
$ | (350 |
) |
|||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||||||
| Foreign currency translation adjustments | (460 |
) |
1,607 |
|
(621 |
) |
(1,048 |
) |
|||||||||||
| Total comprehensive (loss) income | $ | (6,782 |
) |
$ | 1,667 |
|
$ | (5,111 |
) |
$ | (1,398 |
) |
|||||||
| Diluted (loss) income per share | |||||||||||||||||||
| Class A | $ | (0.31 |
) |
$ | - |
|
$ | (0.22 |
) |
$ | (0.02 |
) |
|||||||
| Class B | $ | (0.26 |
) |
$ | - |
|
$ | (0.18 |
) |
$ | (0.01 |
) |
|||||||
| Diluted Weighted Shares | |||||||||||||||||||
| Class A | 17,533 |
|
17,813 |
|
17,457 |
|
17,179 |
|
|||||||||||
| Class B | 3,339 |
|
3,389 |
|
3,335 |
|
3,321 |
|
|||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| (in thousands) | ||||||||||
| (unaudited) | ||||||||||
2021 |
|
2021 |
|
|||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and equivalents | $ | 136,489 |
|
$ | 142,501 |
|
||||
| Accounts receivable, net | 49,041 |
|
82,609 |
|
||||||
| Prepaid expenses and other current assets | 24,983 |
|
22,923 |
|
||||||
| Total current assets | 210,513 |
|
248,033 |
|
||||||
| Property and equipment, net | 23,653 |
|
25,598 |
|
||||||
| Lease right-of-use assets, net | 18,753 |
|
21,016 |
|
||||||
| Capitalized software costs, net | 10,227 |
|
7,980 |
|
||||||
32,198 |
|
25,336 |
|
|||||||
| Deferred tax assets, net | 8,763 |
|
8,526 |
|
||||||
| Other assets, net | 18,522 |
|
14,298 |
|
||||||
| Total assets | $ | 322,629 |
|
$ | 350,787 |
|
||||
| Liabilities and stockholders' equity | ||||||||||
| Current liabilities: | ||||||||||
| Current portion of debt | $ | 12,310 |
|
$ | 527 |
|
||||
| Lease liabilities | 4,763 |
|
4,904 |
|
||||||
| Accounts payable and other current liabilities | 49,492 |
|
48,329 |
|
||||||
| Deferred revenue | 110,394 |
|
125,724 |
|
||||||
| Total current liabilities | 176,959 |
|
179,484 |
|
||||||
| Long-term debt | - |
|
11,825 |
|
||||||
| Long-term lease liabilities | 15,292 |
|
17,510 |
|
||||||
| Other liabilities | 13,876 |
|
12,502 |
|
||||||
| Stockholders' equity: | ||||||||||
| Common stock | 21 |
|
21 |
|
||||||
| Additional paid-in capital | 200,461 |
|
205,630 |
|
||||||
(2,834 |
) |
(3,073 |
) |
|||||||
| Accumulated deficit | (72,337 |
) |
(64,924 |
) |
||||||
| Accumulated other comprehensive loss | (8,809 |
) |
(8,188 |
) |
||||||
| Total stockholders' equity | 116,502 |
|
129,466 |
|
||||||
| Total liabilities and stockholders' equity | $ | 322,629 |
|
$ | 350,787 |
|
||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Six Months Ended | ||||||||
2021 |
|
2020 |
|
|||||
| Net cash provided by operating activities | $ | 21,365 |
|
$ | 16,024 |
|
||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (442 |
) |
(1,325 |
) |
||||
| Capitalized software costs | (576 |
) |
(626 |
) |
||||
| Acquisition of businesses, net of cash acquired | (9,493 |
) |
- |
|
||||
| Proceeds from sale of property and equipment | 49 |
|
- |
|
||||
| Net cash used in investing activities | (10,462 |
) |
(1,951 |
) |
||||
| Cash flows from financing activities: | ||||||||
| Repayments of debt | (335 |
) |
(306 |
) |
||||
| Tax payments related to stock awards | (13,312 |
) |
(5,942 |
) |
||||
| Dividends paid | (2,923 |
) |
(2,879 |
) |
||||
| Net cash used in financing activities | (16,570 |
) |
(9,127 |
) |
||||
| Effect of exchange rates on cash and equivalents | (345 |
) |
(956 |
) |
||||
| Net (decrease) increase in cash and equivalents | (6,012 |
) |
3,990 |
|
||||
| Cash and equivalents at beginning of period | 142,501 |
|
136,717 |
|
||||
| Cash and equivalents at end of period | $ | 136,489 |
|
$ | 140,707 |
|
||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||||||
| (in thousands) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Three Months Ended |
Six Months Ended |
||||||||||||||||||
2021 |
|
2020 |
|
2021 |
|
2020 |
|
||||||||||||
| Total revenue | $ | 84,839 |
|
$ | 74,081 |
|
$ | 167,810 |
|
$ | 148,228 |
|
|||||||
| Net (loss) income | (6,322 |
) |
60 |
|
(4,490 |
) |
(350 |
) |
|||||||||||
| Add back: | |||||||||||||||||||
| Net interest expense (income) | 107 |
|
(58 |
) |
174 |
|
(344 |
) |
|||||||||||
| Depreciation | 1,103 |
|
1,474 |
|
2,349 |
|
2,770 |
|
|||||||||||
| Amortization | 1,166 |
|
366 |
|
2,063 |
|
720 |
|
|||||||||||
| Income tax expense (benefit) | 967 |
|
440 |
|
(409 |
) |
1,435 |
|
|||||||||||
| EBITDA | $ | (2,979 |
) |
$ | 2,282 |
|
$ | (313 |
) |
$ | 4,231 |
|
|||||||
| Add back: | |||||||||||||||||||
| Stock-based compensation expense | 4,745 |
|
3,951 |
|
8,382 |
|
6,356 |
|
|||||||||||
| Transaction costs related to |
7,570 |
|
- |
|
8,215 |
|
- |
|
|||||||||||
| Change in fair value of contingent consideration | 893 |
|
- |
|
893 |
|
- |
|
|||||||||||
| Change in fair value of interest rate swap | (54 |
) |
(32 |
) |
(118 |
) |
219 |
|
|||||||||||
| Adjusted EBITDA | $ | 10,175 |
|
$ | 6,201 |
|
$ | 17,059 |
|
$ | 10,806 |
|
|||||||
| Adjusted EBITDA margin | 12 |
% |
8 |
% |
10 |
% |
7 |
% |
|||||||||||
| Non-GAAP pre-tax income reconciliation | |||||||||||||||||||
| (Loss) income before income taxes | $ | (5,355 |
) |
$ | 500 |
|
$ | (4,899 |
) |
$ | 1,085 |
|
|||||||
| Add back: | |||||||||||||||||||
| Stock-based compensation expense | 4,745 |
|
3,951 |
|
8,382 |
|
6,356 |
|
|||||||||||
| Amortization of purchased intangible assets | 866 |
|
72 |
|
1,466 |
|
143 |
|
|||||||||||
| Transaction costs related to |
7,570 |
|
- |
|
8,215 |
|
- |
|
|||||||||||
| Change in fair value of contingent consideration | 893 |
|
- |
|
893 |
|
- |
|
|||||||||||
| Change in fair value of interest rate swap | (54 |
) |
(32 |
) |
(118 |
) |
219 |
|
|||||||||||
| Non-GAAP income before income taxes | $ | 8,665 |
|
$ | 4,491 |
|
$ | 13,939 |
|
$ | 7,803 |
|
|||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20210825005771/en/
Chief Accounting Officer
805.566.6100
investor@qad.com
310.279.5980
lberman@pondel.com
Source:
FAQ
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