Logility, Inc. (LGTY) F2Q09 Earnings Call December 5, 2008 9:00 AM ET
Vincent C. Klinges – Chief Financial Officer
J. Michael Edenfield – President, Chief Executive Officer & Director
Welcome to today’s Logility second quarter 2009 fiscal results conference call. All lines are in a listen only mode and later you will have the opportunity to ask a question during our question and answer session. It is now my pleasure to turn the conference over to Logility’s Chief Financial Officer Vince Klinges.
Vincent C. Klinges
To begin I’d like to remind you that this conference call may contain forward-looking statements including statements regarding among other things, our business strategy and growth strategy. Any such forward-looking statements speak only as of this date. These forward-looking statements are based marginally on our expectations that are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control.
Future developments and actual results could differ materially from those set forth in and contemplated by or underlying the forward-looking statements. There are a number of factors that could cause actual results to differ materially from those anticipated by statements made on this call. Such factors include but are not limited to changes in general economic condition, the growth rate of the market for our products and services, the timely availability and market acceptance of these products and services, the effect of competitive products and pricing and the irregular pattern of revenues.
In light of these risks and uncertainties there can be no assurance that the forward-looking information will prove to be accurate. At this time I’d like to turn the call over to Mike Edenfield, CEO of Logility.
J. Michael Edenfield
Thank you for participating in this call. I have some comments on the second quarter results. Vince will review the details on the financial results for the quarter and year-to-date and then we’ll take your questions. For the second quarter revenue was $10.5 million which was a 6% decrease compared to second quarter last year but a 12% increase sequentially over first quarter of this year.
Operating earnings were approximately $2.2 million which was flat versus second quarter last year but was 122% increase sequentially. Reduced services revenues were the main culprit for the decline in revenues but we were able to manage our costs well so overall we feel like we had a pretty good quarter all things considered.
Logility signed 13 new customers in the second quarter. We signed customers from 12 different countries in the quarter. Those countries include Australia, Canada, China, India, Ireland, Italy, Kenya, the Netherlands, Poland, Sweden, the United Kingdom and the United States. Some of the notable new and existing customers included Arch Chemicals, Augusta Sportswear, Venus Manufacturing Company, Coaster Company of America, Haynes Furniture Company, Magneti Marelli in Italy, New Balance in Australia, [Rollins] Sporting Goods, SKF, Starbucks Shanghai and Therm-Tru Doors.
We continue to be encouraged by the number of new customers licensing our products. New customers are a source of future maintenance and implementation services revenue as well as being excellent prospects for additional product sales. As we look forward to the third quarter, our business model is still in excellent shape and the company continues to have a strong balance sheet with cash investments of $45.2 million which is an increase of $5.6 million from this time last year.
We have had some deals that slipped due to the economy however we are encouraged by our pipeline for the quarter, it’s about the same as where it was entering the second quarter and possibly even better than last quarter. While our pipeline is pretty good, close rates will still be the key and the quarter appears to be backend loaded as is difficult.
I’m going to turn it back over to Vince for a review of our financial results.
Vincent C. Klinges
I’d like to compare the second quarter fiscal ’09 with the same period last year. As Mike indicated total revenues decreased 6% to $10.5 million compared to $11.1 million the same quarter last year. License fees decreased 4% to $3.3 million compared to $3.4 million last year and services and other revenues decreased 32% to $1.4 million compared to $2 million the same period last year and that’s primarily due to decreased implementation project work from lower license fees in the prior quarters.
Maintenance revenues increased 2% to $5.8 million for the quarter compared to $5.7 million the same period last year. Taking a look at some of the costs our overall gross margin was 66% for both the current and last year quarter. Our license fee margin was 55% for both the current and last year quarter. Services margins decreased to 43%, that compares to 50% last year and that’s due to decreased implementation work. Our maintenance margin was 78% for both the current and prior year quarter.
Looking at our operating expenses our gross R&D expenses as a percentage of revenue were 17% for both the current quarter and prior year quarter. As a percentage of total revenues sales and marketing expenses were 21% or $2.2 million for the quarter compared to 22% or $2.4 million for the same quarter last year. G&A expenses as a percentage of revenues were down to 11% for the current quarter compared to 12% for the prior year quarter and that’s primarily due to lower variable compensation expenses and lower headcount.
Operating earnings were $2.2 for the current quarter and that compares to $2.2 for the same quarter last year. Our interest income was down to $29,000 that compares to $504,000 for the same quarter last year and that’s due to currency and exchange losses for the current quarter and lower yields from investments and bond amortization expenses. Our EBITDA was 2.9 million for the quarter and that compares to $3 million last year.
Our GAAP net income was $1.6 million or $0.12 per earnings diluted share for the quarter and the compares to net income of $1.7 million or $0.13 earnings per diluted share. On an adjusted net income basis which excludes the amortization of intangibles and stock option compensation expenses was $1.7 million or $0.13 and that compares to $1.8 million or $0.13 last year.
International revenues for the current quarter were approximately 15% of total revenues compared to 16% for the same quarter last year. Now, I’d like to look at the six months ended October 31, 2008 year-to-date numbers. Our total revenues year-to-date decreased 14% to $19.9 million and that compares to 423.1 million for the same period last year. License fees decreased 35% to $5.3 million compared to $8.1 for the same period last year.
Services revenues also decreased to $3 million or 27% decrease. Maintenance revenues increased 6% to $11.6 million and that compares to $11 million in the same period last year. Looking at the gross margin for the year-to-date period it was 65% compared to 67% in the prior six month period. Our license fee margin decrease to 48% from 61% as a result of lower license fees.
Services margins were 43% compared to 50% for the same period last year due to lower services revenue and our maintenance margin was 79% for both the current and prior year periods. Looking at operating expenses our gross R&D expenses were 18% of total revenues for the six months ended October 31, 2008 compared to 17% for the same period last year. As a percentage of total revenues, sales and marketing expenses were 24% this six month period compared to 21% last year.
G&A expenses were 12% compared to 11% of revenues last year. So, Logility had an operating income year-to-date of $3.2 million compared to operating income of $5.2 last year. Our EBITDA was $4.6 this year compared to $6.8 last year and our GAAP net income year-to-date is $2.2 million or earnings per diluted share of $0.17 and that compares to net income of $3.5 or earnings per diluted share of $0.26.
On an adjusted net income basis year-to-date it was $2.5 or $0.19 for the year-to-date period. That compares to $4 million or $0.30 for the same period last year. International revenues year-to-date were approximately 17% of total revenues and that compares to 16% for the same period last year. Looking at the balance sheet the company’s financial position remains strong with cash and investments both short and long term investments of approximately $45.2 million as of October 31, 2008 with no debt.
That’s a sequential increase of a little over $800,000 and then a year-over-year increase of $5.6 million. Other aspects of the balance sheet are billed accounts receivables, a little over $4 million, unbilled is $1.2 for a total of $5.3, deferred revenues were $11.1 and out stockholder equity is $48.7 million. Our current ratio increased to 3.25 and that compares to 3.12 last year. Our days sales outstanding is approximately 46 days as of the end of October 31, 2008 and that compares to 52 days the same period last year.
At this time I’d like to turn the call over to questions.
It appears as though we have no questions at this time.
J. Michael Edenfield
Thank you everyone for listening to this call and your interest in Logility and we look forward to our conference call next quarter.
Thank you for your participation in today’s call. This does conclude the presentation.
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