| Abstract: | The supply chain software purveyor logs a 22% fall in revenue and sees earnings shrink, but says new customer wins and strong cash flow gird it for future quarters. |
Fiscal 2009 began with a whimper for supply chain management software provider Logility, as first-quarter revenue declined 22% and license sales dropped 57% year over year.
For the quarter ended July 31, 2008, total revenue was $9.4 million, down from nearly $12 million in the year-earlier period. License revenue dropped precipitously to $2 million from $4.7 million in the first quarter of fiscal 2008.
The bottom line suffered a similar fate, as even a 3% reduction in expenses couldn’t save Logility from a shrunken income. GAAP net earnings totaled $694,000, down 67% from $1.85 million.
Amid the sagging metrics, Logility managed to log a 10% gain in maintenance revenue, boosting that intake to $5.8 million in the quarter. Maintenance remains the biggest earner for Logility, accounting for 62% of total sales in the first quarter.
Seeking to reassure investors and its customers, Logility said in a statement that although it was disappointed with the decrease in license fees in the quarter, “the overall financial condition of the company remains strong, with cash and investments of approximately $44.4 million as of July 31, 2008.”
The company also touted its success in winning 23 new and continuing customers during the period, among them Galderma Laboratories, Meyer Corp., RG Brands, Vaughan Foods, and Westcon Group North America.
But the overall dismal performance extended a losing streak for Logility that dates back to the third quarter of fiscal 2008.
In a terse conference call with analysts today, Logility officials spelled out the specifics of Logility’s weakness in the quarter. “Reduced license fees were the main culprit for the decline in revenue and operating earnings,” CEO Mike Edenfield said, “but maintenance revenues were a bright spot…
“We must increase our license fees to meet our earnings and growth objectives,” he said of the quarters to come. He added that the pipeline looks better now than it did at the outset of the first quarter, although he admitted that, ultimately, the company’s ability to close deals will determine the value of that pipeline in the next quarter.
Asked what factors, other than a slumping economy, might explain why customers were not signing license deals, Edenfield did not mince words. “I believe it’s the economy,” he told an analyst.
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