QAD Announces Fiscal 2010 Second Quarter Financial Results

QAD Inc. (Nasdaq: QADI), a global provider of enterprise software and services, today reported financial results for the fiscal 2010 second quarter ended July 31, 2009.

Total revenue was $51.3 million for the fiscal 2010 second quarter, compared with $69.5 million for the same period last year. License revenue equaled $6.7 million, versus $11.4 million for the fiscal 2009 second quarter. Maintenance and other revenue totaled $32.1 million, compared with $34.5 million for the second quarter of fiscal 2009. Services revenue was $12.5 million, versus $23.6 million for last year’s fiscal second quarter.

Net loss for the fiscal 2010 second quarter was $1.4 million, or $0.05 per share, including stock compensation expense of $0.03 per diluted share net of tax. Fiscal 2009 second quarter net loss was $1.4 million, or $0.05 per share, including stock compensation expense of $0.04 per diluted share net of tax.

"Our financial results this quarter benefited from the expense control programs we implemented earlier in the year, strong cash management and reduced capital expenditures, significantly improving cash flow and our balance sheet,” said Karl Lopker, chief executive officer of QAD. "During the second fiscal quarter we began to observe signs of stabilization among our customers with some industries beginning to return to positive growth. We believe we are well positioned to assist our customers who are now beginning to plan for increased demand in their businesses. Combining internal initiatives with a stronger economic outlook, we expect QAD will return to profitability in the second half of the year.”

Gross margin for the fiscal 2010 second quarter was 57 percent, compared with 53 percent for the fiscal 2009 second quarter. The change mainly reflects a decrease in services revenue in the company’s overall revenue mix.

Total operating expenses were $31.2 million, or 61 percent of total revenue, for the fiscal 2010 second quarter, versus $40.0 million, or 57 percent of total revenue, for the second quarter of fiscal 2009.

Operating loss for the fiscal 2010 second quarter was $2.1 million, including $1.3 million in stock compensation expense. This compares with an operating loss of $2.9 million, including $1.6 million in stock compensation expense, for the second quarter of the prior fiscal year.

For the first half of fiscal 2010, revenue totaled $106.3 million, versus $136.4 million for the first half of fiscal 2009. Net loss for the first six months of fiscal 2010 was $4.1 million, or $0.13 per share, including stock compensation expense of $0.06 per fully diluted share net of tax. This compares with a net loss for the first six months of fiscal 2009 of $2.2 million, or $0.07 per share, including stock compensation expense of $0.07 per fully diluted share net of tax.

QAD's cash and cash equivalents balance at July 31, 2009 was $40.6 million, compared with $31.5 million at January 31, 2009. Cash flow provided by operations was $5.0 million for the second quarter of fiscal 2010, versus cash used in operations of $0.7 million for the second quarter of fiscal 2009. For the first six months of fiscal 2010, cash flow provided by operations was $12.3 million, compared with $7.1 million in the prior year period.

Fiscal 2010 Second Quarter Highlights:

• Received orders from 10 customers representing more than $500,000 each in combined license, support and services billings, and three orders in excess of $1.0 million;

• Received license orders from companies across QAD’s six vertical markets including, among others: Deutsche Post AG, Drumet S.A., Genzyme, Lear Corporation, NHK Spring Co. Ltd., Qantas Catering Group, Ltd. and Scosche Industries, Inc.;
• After the close of the quarter, QAD successfully completed a one-time Stock Option and Stock Appreciation Right Exchange (SAR) Program that commenced on June 17, 2009. 85 percent of all eligible underwater stock options and SARs based on the eligible grants at the close of the exchange, were tendered and exchanged.

Business Outlook

For the third quarter of fiscal 2010, QAD currently expects total revenue of approximately $54.0 million and a small profit.

Investor Conference Call

QAD management will host an investor conference call today at 2:00 p.m. PT (5:00 p.m. ET) to review the company’s financial results and operations for the fiscal 2010 second quarter. The conference call will be webcast live and is accessible through the investor relations section of QAD’s Web site at www.qad.com, where it will be available for approximately one year.

About QAD

QAD is a leading provider of enterprise applications for global manufacturing companies. QAD applications provide critical functionality for managing manufacturing resources and operations within and beyond the enterprise, enabling global manufacturers to collaborate with their customers, suppliers and partners to make and deliver the right product, at the right cost and at the right time. Manufacturers of automotive, consumer products, electronics, food and beverage, industrial and life science products use QAD applications in more than 90 countries and in as many as 27 languages. For more information about QAD, telephone +1 805-566-6000, or visit the QAD Web site at www.qad.com.

"QAD" is a registered trademark of QAD Inc. All other products or company names herein may be trademarks of their respective owners.

Note to Investors: This press release contains certain forward-looking statements made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. A number of risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements. These risks include, but are not limited to, evolving demand for the company's software products and products that operate with the company's products; the company's ability to sustain license and service demand; the company's ability to leverage changes in technology; the company's ability to sustain customer renewal rates at current levels; the publication of opinions by industry and financial analysts about the company, its products and technology; the reliability of estimates of transaction and integration costs and benefits; the entry of new competitors or new offerings by existing competitors and the associated announcement of new products and technological advances by them; delays in localizing the company's products for new or existing markets; the ability to recruit and retain key personnel; delays in sales as a result of lengthy sales cycles; changes in operating expenses, pricing, timing of new product releases, the method of product distribution or product mix; timely and effective integration of newly acquired businesses; general economic conditions; exchange rate fluctuations; and, the global political environment. In addition, revenue and earnings in the enterprise resource planning (ERP) software industry are subject to fluctuations. Software license revenue, in particular, is subject to variability with a significant proportion of revenue earned in the last month of each quarter. Given the high margins associated with license revenue, modest fluctuations can have a substantial impact on net income. Investors should not use any one quarter's results as a benchmark for future performance. For a more detailed description of the risk factors associated with the company and the industries in which it operates, please refer to the company's Annual Report on Form 10-K for fiscal 2009 ended January 31, 2009.