Continuing to struggle through what CEO Joe Cowan called a "tough, slow-growth market," Manugistics Group Inc. yesterday posted a $ 6.1 million fiscal second-quarter loss on $43.6 million in sales, down 15% from the second quarter a year ago.
Manugistics' software license revenue for the quarter ending Aug. 31 tumbled 54% to $5.1 million compared with the like quarter a year ago. Support and services revenue held essentially flat.
Despite continuing sluggishness in new license revenue, Cowan declared that Manugistics had made progress during the quarter. Thanks to a 23% decline in total operating expenses, the company's net loss for the quarter -- reported on a generally-accepted accounting principles (GAAP) basis -- was 64% lower than the $17.1 million deficit reported in the second quarter of last year.
Moreover, Manugistics managed to report adjusted operating income of $1.4 million for the quarter. (This non-GAAP figure excludes certain expense items such as amortization of intangible assets and acquired technology and charges from exit and disposal of assets.) Cowan had previously vowed that the company would report positive adjusted operating income by the end of this calendar year.
"Even in a tough market we are doing a good job and have delivered on the bottom line commitment," Cowan said, during a conference call with financial analysts.
Having achieved that goal, Cowan said the next phase of his turn-around plan for Manugistics is to begin to grow top-line revenue, beginning with software license revenue. "I believe we are close to stabilizing software license revenue," said Cowan.
Manugistics also plans to continue cost-cutting, in part by moving much of its software development operations to India.
During the quarter, Manugistics said it closed 13 significant software license transactions, each valued in excess of $100,000. The average value of those transactions was $264,000.
To grow software license revenue, Cowan said he is taking several steps, including solving problems in the company's Asia sales operations, improving Manugistics' transportation management systems (TMS) products, developing a line of price management applications and increasing the flexibility of the company's software licensing options. Specifically, Cowan said, the company is entering into more performance-based licensing deals in which customers pay only once they are satisfied with the performance of Manugistics' software.
"Customers are a lot more conservative now," Cowan told analysts. "They want to see the performance before they spend the money on the software."
During the quarter, Manugistics signed $1.6 million worth of software license business that it is not yet able to recognize because of the performance-based nature of the contracts, Cowan said.
Cowan also said he is not satisfied with Manugistics' performance in Asian markets. For the quarter, Asia accounted for just 9% of the company's software revenues compared to 47% for the Americas and 44% for Europe. As a result, said Cowan, he has hired Mark Weaser, a former executive at Manhattan Associates, to take over as president of Manugistics' Asian operations beginning October 1. He replaces Ken Wallett who is being reassigned to another position, according to a company spokesman.
Performance of Manugistics' TMS products also have been a disappointment, Cowan said. Sales of the company's TMS products have declined year-over-year, he noted. As a result, Cowan said he has "recommitted" the company's development organization to improving its TMS products. The company expects to release new TMS products early next year.
Cowan said he did not expect a major change in the transportation and logistics software market as a result of Oracle's recently-announced plan to purchase G-Log. "Nothing's changed," said Cowan. "G-Log has been a major competitor for a long time. But we had lost focus on the transportation market, so now we are trying to rebuild that organization."
Manugistics also is focusing more resources, Cowan said, on the market for pricing optimization software. The company is currently developing a suite of pricing solutions and plans to add sales people who will be dedicated to the pricing management products, he added.
Despite some positive signs reflected in Manugistics' second-quarter results, Cowan acknowledged that the company faces a November, 2007 deadline for paying off or restructuring its debt. As of the second quarter, the company reported $175 million in convertible debt and $133 million in cash, cash equivalents and marketable securities.
Raghavan Rajaji, Manugistics' CFO, told analysts the company hopes to have addressed its debt deadline by next August.
Asked if the company would consider selling assets to cover its debt responsibilities, Cowan said, "We're looking at all options ... If we have assets that don't contribute to overall performance, we're willing to sell those."