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QAD Ends Its Protracted Dry Season, Not Yet On an Easy Street

Written By: Predrag Jakovljevic
Published On: April 11 2000

QAD Ends Its Protracted Dry Season, Not Yet On an Easy Street
P.J. Jakovljevic - April 11th, 2000

Event Summary

In March, QAD Inc. reported $0.06 of diluted net income per share, or net income of $2.1 million, on record total revenue of $70.9 million for the fourth fiscal quarter ended January 31, 2000. This compares with $0.16 of diluted net loss per share or a net loss of $4.9 million on total revenue of $65.4 million in the fourth quarter of fiscal 1999. License revenue was $33.5 million for the fourth quarter-up 62% from the third quarter- compared with $33.0 million in the same period last year.

License revenue and development fees from QAD's e-business solutions exceeded $9 million in the fourth quarter. QAD e-business solutions include the QAD eQ suite of Business-to-Business (B2B) applications, with Sell-Side Replenishment and Fulfillment, Buy-Side Management, and Supply Chain Optimization. For the fiscal year ended January 31, 2000, QAD reported of diluted net loss per share of $0.54 on total revenue of $239.3 million and license revenue of $95.1 million. This compares with diluted net loss per share of $1.22 on total revenue of $193.3 million and license revenue of $105.9 million for the prior fiscal year.

Karl F. Lopker, QAD chief executive officer, stated: "We are very pleased with the fourth quarter results and with our establishment of QAD as a leader in the B2B space. The record revenue performance demonstrates both a recovery from the Y2K spending freeze and our aggressive move into the B2B space, with strong customer demand for new sites as well as for QAD e-business solutions. Customers are embracing QAD's e-business vision and our web-enabled solutions to drive their e-business B2B initiatives."

"In the quarter, the Company received the largest order in its history, for $22.4 million-including QAD's e-business solutions - from Framatome Connectors International," said Lopker. "Combined with a successful beta and live operation of QAD eQ at a large multinational customer, these actions demonstrate that QAD is aggressively competing for large global opportunities requiring breadth of products and services, with e-business solutions."

Market Impact

We believe that QAD finally stemmed its tide of losses, and this upbeat report is mainly of psychological importance for the wary market place rather than a display of an impressive performance (See Figures 1 & 2). In fact, the revenues were only slightly higher than year ago. Nevertheless, the Company has successfully curbed expenses while expediting the delivery of its eQ product, whose prolonged and exorbitantly expensive development has seriously affected the Company's financial performance during the last two years.

There are a number of reasons to expect a brighter future for QAD.

The first is the Company's well-established leading global position in Small-to-Medium Enterprises (SME) and lower-end top-tier segments of the ERP market, where QAD has a large loyal customer base and a dispersed global network of offices and indirect channel.

Second, QAD is very competitive in speed and ease of global multi-site implementation due to its global service and support capabilities.

Third, QAD has a very tight vertical and vertical sub-segment focus (e.g., with solutions for the after-market, OEMs, and suppliers segments within the automotive industry).

Finally, QAD was one of the first mid-market ERP vendors to incorporate concepts of e-Commerce, Supply Chain Management, Customer Relationship Management, and integration with other vendors' products, which provides QAD with a 'one-stop shop' capability and an opportunity for sustained future license and service and support revenue. Its products also run on a broad range of platforms and QAD was one of the first mid-market vendors to port its product to Linux.

User Recommendations

We recommend including QAD in a short list in any selection within the following industries: Automotive, Electronics, Food & Beverage, and Medical Devices. However, any organization evaluating QAD products should still exercise moderate caution and consider existing functionality only, until the Company regains consistently profitable financial performance. Overall, fiscal 2000 was a negative financial year for QAD, and it was not that long ago when the Company called on a venture capitalist to help it survive the downturn in the ERP market and its consequential hardships.

 

 
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