JDAS Jda Software Grp., Inc. (MM)

JDA® Software Group, Inc. (NASDAQ: JDAS), The Supply Chain Company®, today announced financial results for the first quarter ended March 31, 2010. JDA reported record total revenues of $131.6 million, a 58 percent increase from $83.3 million of revenue reported in first quarter 2009. Software license and subscription revenues increased 87 percent in the first quarter 2010 to $28.7 million from $15.3 million in first quarter 2009, and adjusted EBITDA increased 88 percent to $31.4 million in first quarter 2010 from $16.7 million in first quarter 2009.

JDA also reported adjusted non-GAAP earnings for first quarter 2010 of $0.38 per share, an increase of 46 percent from $0.26 per share in first quarter 2009. The GAAP loss applicable to common shareholders for first quarter 2010 was $4.3 million or ($0.11) per share, and includes acquisition-related costs, compared to GAAP net income of $2.6 million or $0.08 per share in first quarter 2009. Results for 2010 include the completion of the acquisition of i2 Technologies, Inc. (“i2”) as of January 28, 2010.

“I am pleased to report that we delivered solid results in a quarter that featured our largest acquisition to date,” said JDA president and chief executive officer Hamish Brewer. “In the 90 days since completing the i2 acquisition we have fully integrated teams across all regions and functional areas of the company and completed a new JDA product roadmap that demonstrates the breadth, depth and future direction of our powerful suite of planning, optimization and execution solutions.”

First Quarter 2010 Financial Summary

• Adjusted non-GAAP earnings per share for first quarter 2010 were $0.38 using 40.0 million fully diluted shares compared to $0.26 per share in first quarter 2009 using 35.1 million fully diluted shares. Adjusted non-GAAP earnings exclude amortization of acquired software technology and intangibles, restructuring charges, stock-based compensation and costs related to the acquisition and transition of i2.
• The GAAP net loss applicable to common shareholders for first quarter 2010 was $4.3 million or ($0.11) per share, compared to net income of $2.6 million or $0.08 per share in first quarter 2009.
• DSO increased to 74 days at the end of first quarter 2010 from 71 days at the end of first quarter 2009, primarily due to the receivables acquired from i2. JDA is applying its focused collection process to the new receivables as a part of the overall company integration process, with the goal of reducing the overall DSO.

• Cash flow from operations was $12.2 million in first quarter 2010 compared to cash flow from operations of $33.1 million in first quarter 2009. The change in operating cash flow in the current period was primarily driven by lower cash provided by working capital as compared to first quarter 2009. This is primarily due to the increase in the receivables from higher revenue in the current year, the payment of approximately $6.7 million of acquisition-related costs in first quarter 2010, as well as the collection of a significant receivable in the first quarter of 2009.
• Cash and cash equivalents, including restricted cash, were $167.5 million at March 31, 2010, compared to $363.8 million at December 31, 2009, which included net proceeds from the issuance of $275.0 million of Senior Notes that were used to complete the acquisition of i2 on January 28, 2010.

First Quarter 2010 Highlights

“Our strong sales performance this quarter demonstrates a vote of customer confidence in our strategy to build a world-class supply chain company through both organic and acquisition growth,” commented Brewer. “We saw little to no deal erosion as a result of the i2 acquisition, and in fact believe that companies now, more than ever, understand the value of solutions from a company that specializes in supply chain. As a result, JDA continues to be the technology provider of choice for companies around the world.”

The following presents a high-level summary of JDA’s regional sales performance:

• JDA reported $18.9 million in software license and subscription revenues in its Americas region during first quarter 2010, compared to $19.1 million in fourth quarter 2009 and $11.1 million in first quarter 2009. Customers that signed new software licenses included: Anna’s Linens Company, Cabela’s Incorporated, Compania Embotelladora Del Fuerte, The Forzani Group, Ltd., SABMiller Latin America and OM HealthCare LogisticsSM, a third-party logistics service of Owens & Minor, Inc.
• Software license and subscription revenues in the Europe, Middle East and Africa (EMEA) region were $5.4 million in first quarter 2010, compared to $6.4 million in fourth quarter 2009 and $3.2 million in first quarter 2009. New software deals in the EMEA region included: Casio France, Crai Secom SpA, La Gardenia Beauty SpA and SSAB.

• JDA’s Asia Pacific region posted software license and subscription revenues of $4.4 million in first quarter 2010, compared to $3.1 in fourth quarter 2009 and $1.1 million in first quarter 2009. Wins in this region included: LG Electronics Inc., Rustan Commercial Corporation and Suning Appliance Co., Ltd.

Conference Call Information

JDA Software Group, Inc. will host a conference call at 4:45 p.m. Eastern time today to discuss earnings results for its first quarter ended March 31, 2010. To participate in the call, dial 1-877-941-8416 (United States) or 1-480-629-9808 (International) and ask the operator for the “JDA Software Group, Inc. First Quarter 2010 Earnings Conference Call.” A live audio webcast of the conference call can be accessed by logging onto www.jda.com in the Investor Relations section.

A replay of the conference call will begin on April 27, 2010 at 8:00 p.m. Eastern time and will end on May 27, 2010. To hear a replay of the call over the Internet, access JDA’s website at www.jda.com.

About JDA Software Group, Inc.

JDA® Software Group, Inc. (NASDAQ: JDAS), The Supply Chain Company®, is a leading global provider of innovative supply chain management, merchandising and pricing excellence solutions. JDA empowers more than 6,000 companies of all sizes to make optimal decisions that improve profitability and achieve real results in the discrete and process manufacturing, wholesale distribution, transportation, retail and services industries. With an integrated solutions offering that spans the entire supply chain from materials to the consumer, JDA leverages the powerful heritage and knowledge capital of acquired market leaders including i2 Technologies®, Manugistics®, E3®, Intactix® and Arthur®. JDA’s multiple service options provide customers with flexible configurations, rapid time-to-value, lower total cost of ownership and 24/7 functional and technical support and expertise. To learn more, visit www.jda.com or e-mail info@jda.com.

JDA SOFTWARE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts, unaudited)

   

March 31,2010

December 31,2009

ASSETS Current Assets:

Cash and cash equivalents

$ 155,817 $ 75,974 Restricted cash 11,698 287,875

Accounts receivable, net

107,881

68,883

Income tax receivable 1,050

--

Deferred tax asset

57,828 19,142

Prepaid expenses and other current assets

  29,705     15,667  

Total current assets

  363,979     467,541     Non-Current Assets:

Property and equipment, net

43,296

40,842

Goodwill

201,316 135,275 Other Intangibles, net:

Customer-based intangibles

167,395 99,264

Technology-based intangibles

44,264 20,240

Marketing-based intangibles

13,960 157

Deferred tax asset

268,821 44,350

Other non-current assets

  17,154     13,997  

Total non-current assets

  756,206     354,125    

Total Assets

$ 1,120,185   $ 821,666     LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities:

Accounts payable

$ 11,063 $ 7,192

Accrued expenses and other liabilities

74,068 45,523 Income taxes payable

--

3,489

Deferred revenue

  127,905     65,665  

Total current liabilities

  213,036     121,869     Non-Current Liabilities: Long-term debt 272,333 272,250 Accrued exit and disposal obligations 6,458 7,341 Liability for uncertain tax positions 14,215 8,770 Deferred revenue   28,942  

--

Total non-current liabilities

  321,948     288,361    

Total Liabilities

  534,984     410,230     Stockholders' Equity:

Preferred stock, $.01 par value; authorized 2,000,000 shares; none issued or outstanding

--

--

Common stock, $.01 par value; authorized, 50,000,000 shares; issued 43,528,992 and 36,323,245 shares, respectively

435

363

Additional paid-in capital

553,705 361,362 Deferred compensation (15,906 ) (5,297 )

Retained earnings

69,746 74,014

Accumulated other comprehensive income

2,706 3,267 Less treasury stock, at cost, 1,901,490 and 1,785,715 shares, respectively   (25,485 )   (22,273 )

Total stockholders' equity

  585,201     411,436  

Total liabilities and stockholders' equity

$ 1,120,185   $ 821,666  

JDA SOFTWARE GROUP, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

  (in thousands, except earnings per share data, unaudited)

   

Three Months EndedMarch 31,

2010 2009 REVENUES: Software licenses $ 24,437 $ 14,357 Subscriptions and other recurring revenues 4,287 968

Maintenance services

  57,060     42,997  

Product revenues

  85,784     58,322    

Consulting services

43,002 23,034

Reimbursed expenses

  2,845     1,977  

Service revenues

  45,847     25,011  

Total revenues

  131,631     83,333     COST OF REVENUES: Cost of software licenses 1,008 602 Amortization of acquired software technology 1,576 1,008 Cost of maintenance services   12,033     10,549  

Cost of product revenues

  14,617     12,159    

Cost of consulting services

35,269 19,382

Reimbursed expenses

  2,845     1,977  

Cost of service revenues

  38,114     21,359  

Total cost of revenues

  52,731     33,518     GROSS PROFIT 78,900 49,815   OPERATING EXPENSES: Product development 17,277 12,573

Sales and marketing

21,112 14,252

General and administrative

17,697 11,026

Amortization of intangibles

8,566 6,076

Restructuring charges

7,758 1,430 Acquisition-related costs   6,743  

--

Total operating expenses

  79,153     45,357    

OPERATING INCOME (LOSS)

(253 ) 4,458   Interest expense and amortization of loan fees (6,086 ) (239 )

Interest income and other, net

  1,123     (243 )   INCOME (LOSS) BEFORE INCOME TAXES (5,216 ) 3,976

Income tax (provision) benefit

  948     1,332    

NET INCOME (LOSS)

$ (4,268 ) $ 2,644     BASIC EARNINGS (LOSS) PER SHARE $ (.11 ) $ .08   DILUTED EARNINGS (LOSS) PER SHARE $ (.11 ) $ .08     SHARES USED TO COMPUTE:

Basic earnings (loss) per share

  39,343     34,961  

Diluted earnings (loss) per share

  39,343     35,075  

 JDA SOFTWARE GROUP, INC.

 NON-GAAP MEASURES OF PERFORMANCE

(in thousands, except share data, unaudited)

   

Three Months EndedMarch 31,

2010   2009  

Reconciliation of GAAP Net Income (Loss) to EBITDA and Adjusted EBITDA

  Net Income (Loss) (GAAP BASIS) $ (4,268 ) $ 2,644 Income tax provision (benefit) (948 ) 1,332 Interest expense and amortization of loan fees 6,086 239 Amortization of acquired software technology 1,576 1,008 Amortization of intangibles 8,566 6,076 Depreciation   3,006     2,327   EBITDA (earnings before interest, tax, depreciation and amortization) 14,018 13,626 Restructuring charges 7,758 1,430 Stock-based compensation 3,277 1,410 Acquisition-related costs 6,743

--

Non-recurring transition costs to integrate acquisition 717

--

Interest income and other non-operating (income) expense, net   (1,123 )   243   Adjusted EBITDA $ 31,390   $ 16,709     EBITDA, as a percentage of revenue   11 %   16 %   Adjusted EBITDA, as a percentage of revenue   24 %   20 %    

NON-GAAP EARNINGS PER SHARE

  Income (loss) before income taxes (GAAP BASIS) $ (5,216 ) $ 3,976   Amortization of acquired software technology 1,576 1,008 Amortization of intangibles 8,566 6,076 Restructuring charges 7,758 1,430 Stock-based compensation 3,277 1,410 Acquisition-related costs 6,743

--

Non-recurring transition costs to integrate acquisition   717  

--

  Adjusted income before income taxes 23,421 13,900 Adjusted income tax expense   8,197     4,865   Adjusted net income $ 15,224   $ 9,035   Adjusted non-GAAP diluted earnings per share $ 0.38   $ 0.26   Shares used to compute non-GAAP diluted earnings per share   40,025     35,075    

Three Months EndedMarch 31,

2010   2009  

CASH FLOW INFORMATION

 

Net cash provided by (used in) operating activities

$ 12,195 $ 33,055   Net cash provided by (used in) investing activities: Change in restricted cash $ 276,177

$

--

Purchase of i2 Technologies, Inc. (213,427 )

 

--

Payment of direct costs related to acquisitions (850 ) (817 ) Purchase of other property and equipment (533 ) (1,003 ) Proceeds from disposal of property and equipment   17     16   $ 61,384   $ (1,804 )   Net cash provided by (used in) financing activities: Issuance of common stock under equity plans $ 10,904 $ 2,506 Purchase of treasury stock and other, net   (3,392 )   ( 3,219 ) $ 7,512   $ (713 )    

Acquisition of i2 Technologies, Inc. – Preliminary Allocation

  Identifiable assets acquired: Fair value of current assets acquired $ 300,097 Fair value of fixed assets acquired 3,116 Customer-based intangibles 76,200 Technology-based intangibles 25,600 Marketing-based intangibles 14,300 Long-term deferred tax assets acquired 218,322 Fair value of other non-current assets acquired   3,925   Total identifiable assets acquired 641,560 Goodwill   66,041   Total assets acquired   707,601     Liabilities assumed: Fair value of deferred revenue assumed (62,614 ) Fair value of other current liabilities assumed (41,128 ) Fair value of non-current liabilities assumed   (4,105 ) Total liabilities assumed   (107,847 )   Net assets acquired from i2 Technologies, Inc. $ 599,754     Total consideration transferred to acquire i2 Technologies, Inc.:   Fair value of JDA common stock issued as merger consideration 167,979 Cash acquired 218,348 Cash expended to acquire i2 Technologies, Inc.   213,427   Total consideration transferred to acquire i2 Technologies, Inc. $ 599,754   JDA Software Group, Inc. Supplemental Data (dollars in thousands)                       Software & Subscription Revenues by Geographic Region   Three Months Ended   3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009 Americas $ 18,917 $ 19,084 $ 12,624 $ 14,356 $ 11,105 EMEA 5,403 6,417 4,084 5,012 3,170 Asia/Pacific   4,404     3,125     542     8,216     1,050   Total $ 28,724   $ 28,626   $ 17,250   $ 27,584   $ 15,325     Business Segment Data   Three Months Ended 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009 Supply Chain Total Revenues $ 125,233 $ 99,410 $ 88,608 $ 88,161 $ 78,223 Operating Income 39,904 33,882 29,054 29,127 22,111 Operating Income Margin 32 % 34 % 33 % 33 % 28 %     Services Industry Total Revenues $ 6,398 $ 7,713 $ 7,251 $ 11,324 $ 5,110 Operating Income 607 986 1027 5744 879 Operating Income Margin 9 % 13 % 14 % 51 % 17 %   New vs Install-Base Sales   Three Months Ended 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009 New Sales $ 8,415 29 % $ 4,515 16 % $ 3,317 19 % $ 10,066 36 % $ 5,768 38 % Install-Base Sales   20,309   71 %   24,111   84 %   13,933   81 %   17,518   64 %   9,557   62 % Total $ 28,724   $ 28,626   $ 17,250   $ 27,584   $ 15,325     ASP, Multi-Product Deals & Large Deal Counts   Last Twelve Months Ended 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009 Average Sales Price (ASP) $ 618 $ 630 $ 733 $ 819 $ 697 Multiple-Product Deals 24 23 19 18 19 Large Deal Count (>= $1 million ) 24 19 16 19 17   Quota Carrying Sales Representatives 96 75 75 72 68   Summary of Revenue Contribution in First Quarter 2010         JDA i2 Combined   Software and Subscription Revenues $ 15,878 55 % $ 12,846 45 % $ 28,724 Maintenance Revenues   46,491 81 %   10,569 19 %   57,060 Product Revenues 62,369 73 % 23,415 27 % 85,784   Service Revenues   32,001 70 %   13,846 30 %   45,847   Total Revenues $ 94,370 72 % $ 37,261 28 % $ 131,631

“Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995

We do not believe this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Nevertheless, if remarks in this press release are considered to be ``forward-looking'' or to have forward-looking implications, such as Mr. Brewer’s comments regarding our accomplishments to date in integrating i2 and that JDA continues to be the technology provider of choice for companies around the world, we would remind our investors and prospective investors that future events may involve risks and uncertainties. Risks and uncertainties that may affect our business are detailed from time to time in the ``Risk Factors'' section and other sections of our filings with the Securities and Exchange Commission. As a result of these and other risks, actual results may differ materially from those predicted. We undertake no obligation to update information in this release, except as required by law.

Use of Non-GAAP Financial Information

This press release and the related conference call contain non-GAAP financial measures. In evaluating the Company’s performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP. Management’s presentation of non-GAAP financial measures is intended to be supplemental in nature and should not be considered in isolation or as a substitute for the most directly comparable GAAP measures.

Use and Economic Substance of Non-GAAP Financial Measures Used by JDA

The Company uses non-GAAP measures of performance, including adjusted net income, EBITDA (earnings before interest, taxes, depreciation and amortization) and earnings per share, in its public statements. Management uses, and chooses to disclose, these non-GAAP financial measures because (i) such measures provide an additional analytical tool to clarify the Company’s results from operations and help the Company to identify underlying trends in its results of operations; (ii) the Company uses non-GAAP earnings measures, including EBITDA, as a measure of profitability because such measures help the Company compare its performance on a consistent basis across time periods; and (iii) these non-GAAP measures are employed by the Company’s management in its own evaluation of performance and are utilized in financial and operational decision making processes, such as budget planning and forecasting. The Company also internally uses adjusted EBITDA measures for determining (a) compliance with certain financial covenants in its credit agreement and (b) executive and employee compensation. Set forth below are additional reasons why specific items are excluded from the Company’s non-GAAP financial measures:

• Amortization charges for acquired software technology are excluded because they result from prior acquisitions, rather than ongoing operations, and absent additional acquisitions, are expected to decline over time.
• Amortization charges for other intangibles are excluded because they are non-cash expenses, and while tangible and intangible assets support our business, we do not believe the related amortization costs are directly attributable to the operating performance of our business.
• Restructuring charges are significant non-routine expenses that cannot be predicted and typically relate to a change in our business model or to a change in our estimate of the costs to complete a plan to exit an activity of an acquired company. The exclusion of these charges promotes period-to-period comparisons and transparency. Such charges are primarily related to severance costs and/or the disposition of excess facilities driven by the changes to our business model.
• Stock-based compensation is not an expense that typically requires or will require cash settlement by the Company.
• Acquisition-related costs associated with the acquisition of i2 and the non-recurring transition costs to integrate the acquisition are significant non-routine expenses. Exclusion of these costs promotes period-to-period comparisons and transparency as we do not believe these costs are directly attributable to the operating performance of our business.

Material Limitations (and Compensation thereof) Associated with the Use of Non-GAAP Financial Measures

Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company’s GAAP results. In the future, the Company expects to continue reporting non-GAAP financial measures excluding items described above and the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above. Accordingly, exclusion of these and other similar items in our non-GAAP presentation should not be construed as an inference that these costs are unusual, infrequent or non-recurring.

Some of the limitations in relying on non-GAAP financial measures are:

• Amortization of acquired technology and intangibles, though not directly affecting our current cash position, represent the loss in value as the technology in our industry evolves, is advanced or is replaced over time. The expense associated with this loss in value is not included in the non-GAAP net income presentation and therefore does not reflect the full economic effect of the ongoing cost of maintaining our current technological position in our competitive industry which is addressed through our research and development program.
• The Company may engage in acquisition transactions in the future. In addition, we incur other restructuring charges from time to time when necessary to adjust our business model. Restructuring related charges may therefore continue to be incurred and should not be viewed as non-recurring.
• Stock-based compensation is an important component of our incentive compensation arrangements and will be reflected as expenses in our GAAP results for the foreseeable future.
• Other companies, including other companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure.

We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP financial measures only supplementally. We also provide reconciliations of each non-GAAP financial measure to our most directly comparable GAAP measure, and we encourage investors to review carefully those reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

The Company believes that the presentation of these non-GAAP financial measures is warranted for several reasons. First, such non-GAAP financial measures provide investors and management an additional analytical tool for understanding the Company’s financial performance by excluding the impact of items which may obscure trends in the core operating performance of the business. Second, since the Company has historically reported non-GAAP results to the investment community, the Company believes the inclusion of non-GAAP numbers provides consistency and enhances investors’ ability to compare the Company’s performance across financial reporting periods.