Manufacturing ERP specialist QAD reported dismal first quarter results on Thursday, as gun-shy manufacturers bought fewer software licenses while awaiting an economic rebound.
Total revenue of $55.2 million in the first quarter, ended April 30, was 18% below the $66.8 million QAD reported in Q1 of fiscal 2009. The three lines of business that comprise that total — license, maintenance, and service revenue — all declined, with license sales plummeting 48% to $6.3 million. License revenue from the consumer product goods industry actually rose 20%, while automotive’s contribution fell 75%, officials said. All told, the poor performances contributed to a sharper net loss of $2.5 million, compared with a loss of $730,000 in the year-earlier period.
“Our first quarter results were generally in line with our expectations and reflect the restrained global economic environment and its direct impact on our customers,” said Karl Lopker, QAD’s CEO, in a statement. “While we cannot control the macro-issues affecting our business, we are taking decisive actions to ensure QAD’s long-term health and flexibility through initiatives that have resulted in a leaner cost base that is better aligned with current revenue levels.”
To his point, the company managed to contain costs in the period, cutting total operating expenses to $31.8 million from $37.8 million in the year-ago period. In particular, QAD excelled at shrinking its sales and marketing costs, which fell 24% to $13.9 million.
License sales have been QAD’s Achilles heel for the past few quarters. As early as the second quarter of fiscal 2009, which ended July 31, 2008, the company reported a 23% fall in license sales to $11.4 million. During that period, buoyant service and maintenance sales helped send total revenue higher year over year, but since then, QAD has seen a fairly steady deterioration in both those lines of business, even as software license sales have slipped badly. In the most recent quarter, maintenance and other revenue totaled $32.8 million, down just 4%, while services revenue fell 22% to $16.1 million.
In an effort to redress the flagging sales, QAD has instituted layoffs, including a 125-person cut during the fourth quarter of fiscal 2009. On a call with investors Thursday, officials announced a further reduction in force of 60 people. The company expects to maintain a workforce of 1,400 at the end of Q2. QAD also has instituted a novel approach to its dividend policy, announcing that shareholders may either take their dividend in cash or elect to receive shares of stock instead.
For the second quarter, QAD said it expects to hold revenue steady against its Q1 numbers, and anticipates reporting a “small net loss.” Officials did not provide guidance for the full year, except to say that the company “remained focused on returning to profitability.”
“We’re watching for signs of a bottom,” Lopker told investors, “but since employment and capital investment in manufacturing usually continues to decline even after a recession ends, we don’t expect a significant pick-up in activity until late in the year.”