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.