When a company posts a year-over-year increase in service revenue of 11% and counts that as its slowest growth area, all signs point to a good year.
Such was the case for supply chain planning vendor Logility Inc., which closed its fiscal fourth quarter and 2006 on April 30 and reported its results on a conference call Friday. Calling 2006 the company's best year so far, Logility CEO Michael Edenfield and CFO Vincent Klinges rattled off a mélange of positive performance numbers on the call.
The standout in 2006 and in the quarter was software license revenue, which spiked 107% to $13.9 million in fiscal 2006. In the quarter, license fees contributed $3.9 million in revenue, a 74% improvement over the year-prior quarter. Meanwhile, revenue for the year reached $37.3 million, up 50% from the prior year's total, and a record for the company.
On a GAAP basis, fourth-quarter net earnings for the Atlanta-based company were $1.6 million, compared to a loss of $281,000 in the same quarter a year ago. For the full year, net income totaled $8 million, up from a $606,000 loss in fiscal 2005.
The year-over-year comparison tells only half the story, however. In fiscal 2005, Logility posted a loss largely because of its $9.5 million acquisition of Demand Management, a fellow purveyor of supply chain planning software that extended Logility's reach into the small and mid-size business segment. With a full year under sail, Demand Management is proving to be a wise purchase for Logility, Edenfield said.
Although officials did not provide separate revenue numbers for the Demand Management products, Edenfield was bullish on its contribution. "We continue to experience tangible revenue synergies from the Demand Management acquisition," he said, noting that the marriage had provided valuable sales leads to both groups.
That assessment was echoed by Lora Cecere, research director at AMR Research (Boston). "They're ahead of their targets for Demand Management," Cecere said in an interview. "Their two goals [for Demand Management] were to help them to enter into mid-market and to grow the business in Europe. I think we're seeing strong performance on mid-market and progress on Europe."
That progress on European sales was augmented by strong worldwide interest in Logility products. A record 88 new customer contracts during the year kept the sales team busy and contributed heartily to the top line. According to Edenfield, 20 countries were represented among the ranks of new customers, among them Belgium, China, Ireland, Singapore, and South Africa.
The strong international demand for Logility's flagship Voyager collaborative supply chain products -- as well as the Demand Management products -- underscores Edenfield's assertion that much of the company's recent success derives from the continued globalization of the supply chain. As companies extend their operations to lower-cost countries, the logic goes, they must establish greater visibility into their supply chains to ensure that partner companies and contract manufacturers are in synch with the home base.
Other external factors in Logility's recent success, according to Edenfield, include an improved economy; a shift in sourcing to Asian countries, which calls for increased visibility into such operations; and the fact that many Logility customers sell to mass retailers like Wal-Mart, Home Depot, etc. -- which means they must work to create greater supply chain efficiency.
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