Leveraging a new SAP Business One partnership, supply chain software purveyor Logility Inc. today detailed a fiscal third-quarter performance that suggests its turnaround plan is delivering the intended results.
The Atlanta company posted record revenues of $10.1 million in the period ended January 31, an increase of 41% over the like period in fiscal 2005. This comes follows a second-quarter turnaround, when the company reported $9.3 million in total revenues, which represented a 92% increase over the like period the previous year.
Operating earnings for the third quarter were a record $2.2 million, reversing a loss of $224,000 for the like period in fiscal 2005. Net earnings on a Generally Accepted Accounting Principles (GAAP) basis were $1.9 million, which compared to a net loss of $174,000 in last year's third quarter.
Logility showed reasonable sequential quarter revenue growth and strong year-over-year performance. For example, Q3 software license fees grew 65% from the like period last year to $4 million, compared with $3.6 million in the previous quarter. Service and maintenance revenues grew to $1.4 million and $4.7 million respectively, versus $1.3 million and $4.3 million recorded in the prior quarter. Services revenue was up 11% from the comparable quarter in fiscal 2005; maintenance revenue, meanwhile, increased 36% from the like quarter last year.
The company's fall 2004 acquisition of Demand Management Inc. makes for tough year-over-year earnings comparisons, said Karin Bursa, Logility's vice president of marketing, in an interview. But that $9.5 million cash investment is likely to pay off since the Demand Management acquisition added a product line to the Logility Voyager enterprise portfolio that reaches into the small and mid-size business (SMB) market.
As a result of this new product mix, Logility took on 23 new customers in the third quarter, including companies such as Herbalife International, Infantino, Klaussner Furniture Corp., Tyco Safety Products, Umbra Ltd., and VWR International.
More notably, Logility became a SAP Business One Partner, which means it can provide supply chain software to SAP's U.S.-based SMB customers. Logility can also tap into SAP's 140 value-added resellers, which should help expand its presence.
The strong third quarter brought the company's nine-month revenues to $27.2 million, a 57% increase over the comparable period last year. Software license fees in the period were $10 million, a 123% increase compared with the same period last year. Services and other revenues were $4.1 million, up 14% over the first nine months of fiscal 2005, and maintenance revenues were $13.1 million, a 41% increase compared with the same period last year.
Operating earnings in nine-month period reached a record $4.2 million, compared with an operating loss of $502,000 for the same period last year. GAAP net earnings were approximately $6.5 million, or 49 cents per fully diluted share, compared with a deficit of $325,000 that translated to a loss of two cents per share for the same period last year.
The 2005 nine-month results include only the months of October 2004 through January 2005 for revenue and expenses from Demand Management, the company pointed out.
Despite branding itself as a worldwide supplier, Logility still plays primarily in the U.S. market. Only 12% of the company's revenue in the third quarter was derived from international sales, said company officials during today's earnings webcast. And currently, the company ranks number 29 in an SCM market of 127 vendors, according to a recently released report from AMR Research entitled, "A CIOs Guide to Sales and Operations Planning Technologies."
Nevertheless, there's a huge opportunity, according to AMR research director Lora Cecere, who cited supply chain visibility and demand management as the top 2006 technology investments in a December interview with Managing Automation. Manufacturers implementing demand-driven supply networks (DDSN) -- which AMR defines as a system of technologies and processes that sense and react to real-time demand across a network of customers, suppliers, and employees -- experience 15% less inventory, 60% faster time-to-market, and 17% more perfect orders than traditional supply networks, according to Cecere.
While not providing specific guidance for next quarter, Logility president and CEO Michael Edenfield said pipeline activity looks better than at this time last year and as good as, if not better than, the past quarter.
There are a number of reasons for the rosier outlook, which pivot around the company's financial health, Bursa said. "We have no debt, which helps us invest our money into our products and customers. ... We are also organizationally stable. We have a proven executive leadership team in place who knows the customers and the products well."