For the fiscal 2005 first quarter, QAD posted revenue of $58.2 million, compared with $56.3 million in the same period last year, in line with financial guidance provided at the end of fiscal 2004.
Licence revenue was $14.5 million compared with $17.3 million in the fiscal 2004 first quarter. Maintenance and other revenue increased to $28.9 million, from $27.9 million in the first quarter last year. The strongest growth during the quarter was seen in services revenue, which grew 34% to $14.8 million compared with $11.1 million in the same period last year.
Net income for the fiscal 2005 first quarter was $5.6 million, or $0.16 per diluted share. First quarter net income includes a $1.3 million tax benefit attributable to the reversal of a deferred tax asset valuation allowance, equal to $0.04 per diluted share. This compares with net income of $4.5 million, or $0.13 per diluted share, in the fiscal 2004 first quarter that included a gain of $0.04 per diluted share from the sale of a parcel of property.
"QAD`s results in the first quarter reflect our commitment to working with customers to deliver global manufacturing excellence with enterprise solutions, manufacturing expertise and world-class consulting, support and education services," said Karl Lopker, chief executive officer of QAD. "Our year-over-year increase in operating profit underscores our ongoing focus on profitability through sales execution and cost controls. We achieved these results while at the same time continuing to invest in R&D, and believe we are well positioned in the marketplace to leverage the improvement in the global IT and economic environment."
Gross margin increased to 62% in the fiscal 2005 first quarter compared with 61% in the same period last year primarily due to substantial improvement in the maintenance, services and other margin, partially offset by a shift in revenue mix from licence to services.
QAD`s cash and equivalents balance at 30 April 2004 was $64.9 million. For the fiscal 2005 first quarter, cash flow provided by operations was $6.4 million, continuing a track record of five consecutive years of positive annual operating cash flow.
Fiscal 2005 first quarter highlights
* QAD received orders from 15 customers representing more than $500 000 each in combined license, support and services billings, with four of these exceeding $1 million.
* Customer licence transactions included manufacturers across QAD`s six vertical markets and throughout the globe, including Friesland Coberco Dairy, GKN, Grant Prideco, Grupo Lamosa, Lear, Metrologic Instruments, Safety Components, Tecnofarma, Textron, Transitions Optical, TRW and Watermark Paddlesports.
* In the China Auto Suppliers Survey, QAD was reported as "easily the largest provider of ERP to automotive companies in China." The survey was conducted by The Economist Corporate Network for the AIAG (Automotive Industry Action Group) and IBM in February 2004. According to the survey, approximately 56% of the market that has deployed ERP systems uses QAD solutions.
* During the quarter, QAD management presented a business overview at two investment conferences: the Roth Capital Partners 16th Annual Growth Stock Conference on 17 February 2004 and the Lehman Brothers Global Software and IT Services Conference on 8 March 2004. Webcasts of the presentations are accessible on the investor relations section of QAD`s Web site.
Business outlook
For the fiscal 2005 second quarter, QAD expects to generate revenue between $58 million and $61 million. Depending on the level and mix of revenue, the company expects second quarter earnings per diluted share in the range of $0.10 to $0.15. QAD continues to expect full year fiscal 2005 revenue of $240 million to $255 million. QAD anticipates full year earnings per diluted share in the range of $0.56 to $0.71 versus the company`s previous guidance of $0.50 to $0.65 per diluted share, reflecting the benefit of the fiscal 2005 first quarter reversal of a deferred tax asset valuation allowance and a revised estimated effective tax rate for the year. These projections are subject to various risks, including corporate investment in information technology and global economic factors.
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