Supply chain management software provider i2 Technologies Inc. today reported solid product license revenue growth that helped increase the company's overall revenues by 7% during the fiscal third quarter, ended September 30.
Higher-than-expected expenses -- including legal costs -- put a damper on i2's profits, however. The company reported net earnings for the quarter of $3.8 million, down 56% compared to the like period last year.
i2's total revenues for the quarter of $71.4 million were helped by significant increases in services and what the company calls software solutions revenues. Software solutions -- which includes software license revenue, recurring license revenue, and development revenue -- grew to $20.6 million during the quarter, a 14% increase over the year-earlier period. i2 also reported that software solutions bookings grew by 60% over the third quarter of last year.
In a prepared statement, i2 CEO Michael McGrath attributed increases in software license revenue during the quarter to growing demand for the company's next-generation products, which are built around the company's Agile Business Process service-oriented architecture platform.
"Our bookings performance so far this year indicates our customers' increasing acceptance of service-oriented architecture technology and our new-generation solutions in the supply chain management market," McGrath said.
Services revenues increased 16% year over year to $27 million. The company's maintenance revenue, however, continued to decline. At $23.7 million, maintenance revenues were down 2% compared with the year-earlier period. Since the fourth quarter of fiscal 2005, i2's combined quarterly maintenance and service revenues have dropped by 27.7%.
During the most recent quarter, 64% of i2's revenues came from the Americas. Customers in Europe, the Middle East, and Africa accounted for 19% of revenues, while 17% originated from customers in Asia.
i2's revenue gains were partially offset by higher expenses that drove down earnings. During the quarter, i2 reported $64.7 million in expenses, up 16% from last year's corresponding period. i2 said that $3.5 million of those expenses came from employee stock, and $4.3 million was attributable to legal expenses.
The company said the legal costs related to "proceedings against certain individuals." Some of i2's former executives are facing shareholder lawsuits. In addition, i2 last month filed a patent-infringement suit against competitor SAP AG.
The higher expenses and other costs resulted in negative cash flow from operations of $3.3 million during the quarter. Included in the negative cash flow was $8 million in employee bonus payments.
Still, the company said, its total cash on hand of $130.1 million exceeds its debt of $105.5 million.
i2's legal expenses are expected to continue through its fourth quarter, the company said. The company predicted that non-GAAP earnings per share for the full year 2006 will be in the range of 95 cents to $1.05. Ongoing legal expenses will reduce earnings per share for the year by 50 cents, i2 estimated.