Supply chain software vendor Logility Inc. finished its second quarter of fiscal 2006 with a whopping 447% increase in software license fees, which contributed to a doubling of total revenues in the period to $9.3 million.
Moreover, in the quarter ended October 31 , the Atlanta-based company generated net earnings of $1.3 million, reversing an operating loss of $544,000 in the like period last year.
The year-over-year comparison is skewed by a couple of factors. Chief among them: accounting requirements following the company's $9.5 million cash acquisition of the key assets of privately-held Demand Management Inc., a St. Louis-based supply chain planning systems provider, which contributed to its fiscal 2005 loss of $549,000.
Demand Management's software is making a meaningful contribution to this fiscal year's results, Logility CEO Michael Edenfield said yesterday during a conference call with financial analysts to discuss the company's quarterly results. Demand Management, he said, accounted for 20% of Logility's license growth in the quarter.
Also contributing to revenue growth was the addition of 40 new customers during the first half of fiscal 2006, including notable names like Wrigley Chewing Gum Co.(China) Ltd., St. Michelle Wine, and Hooker Furniture.
These customer wins are both organic and the result of adding the Demand Management solutions business into the mix, he said. The bottom line, Edenfield added, is that customers are buying SCM software.
Other Logility officials said they are seeing an up-tick in spending on SCM as a direct result of offshore manufacturing and global sourcing. "That puts additional pressure on the need to have strong demand planning, inventory optimization, and the capability to collaborate with suppliers in an effective, efficient manner," noted Karin Bursa, Logility's vice president of marketing, in an interview with Managing Automation.
Rising fuel costs are also forcing manufacturers to reevaluate how they manage product distribution, specifically their transportation expenses. This has helped Logility's Transportation Planning & Management solution gain traction in the market.
"Companies realize they need to get the best spend possible out of every transportation dollar," Bursa said.
These buying patterns are backed up by a recent report from ARC Advisory Group (Dedham, MA), which noted that the supply chain execution (SCE) market, composed of warehouse management, transportation management, and collaborative production management applications, is expected to grow at a compounded annual growth rate of 9.2% over the next five years -- from $4.2 billion today to almost $6.6 billion by 2010.
According to Edenfield, all of the company's revenue streams are growing at a healthy clip. For the quarter, software licenses generated revenues of $3.6 million, services accounted for $1.3 million, while maintenance contributed $4.3 million.