Aided by strong maintenance and services revenues, supply chain software player Logility Inc. yesterday disclosed a healthy top-line gain in its recently completed fiscal second quarter, although the company said seasonal softness affected new license sales.
Total revenues in the quarter ended October 31 were $10 million, up 8% from the like period last year. Growth was driven by services and related revenues of $1.6 million, a 19% spike from the corresponding quarter last year, as the company's recent string of license revenue success translated into a slew of implementation projects, company officials said during a conference call this morning. At $5.1 million, maintenance revenue was up 17% from last year's second quarter -- another beneficiary of license fee growth during the prior year.
Although operating earnings were up 17% year over year to $1.5 million, Logility's net profit paled in comparison to the year-earlier period. GAAP net earnings were $1.1 million, or eight cents per fully diluted share. This compared with GAAP net earnings of $3.7 million, or 28 cents per fully diluted share, in the like period last year. The comparison was skewed by the quarter's higher tax rate of 41.5% and a $2.5 million tax benefit accrued in the comparable period last year, company officials said.
One trouble spot for Logility was new license revenue, which, at $3.3 million, was 7% lower than the figure posted in the second quarter of fiscal 2006. Logility President Michael Edenfield attributed the decline to typical first-half softness.
To reinforce the point, Edenfield told analysts that over the last three fiscal years the company has generated 60% of its license fees in the second half of the year. Similar performance is likely in the second half of fiscal 2007, he projected. "Based on our pipeline going into the third quarter we believe that sort of trend will continue," Edenfield noted, without quantifying the pipeline. "Of course, closure rates will be key," he added.
In response to an analyst question, Edenfield said the pipeline was filled with a mix of potential deals originating from its Demand Management business unit, whose indirect sales force targets smaller companies, and its Logility Voyager line, which is sold directly to larger customers. While he said he was pleased with the company's prospects, Edenfield declined to predict a year-end outcome. "We do have a number of larger prospects in the pipeline now, which is good, but also [these deals] are more competitive and [it is] sometimes harder to predict if you'll get them or when you'll get them," he noted.
Without disclosing any company identities, Edenfield said Logility is seeing strong activity in distribution-intensive businesses in which the vendor has been historically strong: consumer products and food and beverage.
During the recently concluded quarter, Logility signed software license agreements with customers located in 12 countries, including Argentina, Australia, Belgium, Canada, China, Denmark, Germany, Mexico, New Zealand, South Africa, the United Kingdom, and the United States. Among the 32 new customers added in the period were: American Racing Equipment; Anvil International, East African Breweries Ltd.; Everlast Worldwide; Ferrero Australia PTY; Handgards; Home Depot Mexico; Kemira OyJ; Mizuno USA; Snyders of Hanover; the Heat Group PTY; Thomson Learning; and Tyco Healthcare.
International business comprised 15% of Logility's total revenues in the period compared with 17% in the same quarter last year, Edenfield said.
Reiterating statements made at earlier analyst conference calls, Edenfield pointed to a resilient global economy and the continuing globalization movement, which has put more pressure on and created less operational transparency for the continued investment by manufacturers large and small in supply chain software. Mandates from major mass merchants for suppliers to accelerate fill rates, shrink replenishment lead times, and reduce product costs were also singled out by Edenfield.
The second quarter results brought first-half fiscal 2007 revenues to $19.6 million, a 14% increase from the comparable period last year. Software license fees in the six-month period were $6.6 million, up 10% over last year's first-half total, while services and maintenance revenues were $3 million and $10 million respectively, up 8% and 19% from the comparable period last year.
Operating earnings in the first half were approximately $2.7 million, up 34% from the same period last year. GAAP net earnings were a $2.0 million, or 15 cents per fully diluted share, compared to $4.6 million, or 34 cents per fully diluted share, in the corresponding period last year.
Although Logility didn't provide earnings and revenue guidance for the balance of fiscal 2007, Edenfield did say the company expects combined "double-digit" growth in both the maintenance and services portions of its business.
Meanwhile, Logility's balance sheet remains strong. The company reported cash and investments of approximately $29.8 million at the end of October. This represents a $1.3 million sequential increase from the July quarter and roughly a $4.8 million increase from the year-earlier period.
Logility is 88% owned by American Software, which also reported its second-quarter results yesterday.