QAD Announces Fiscal 2010 First Quarter Financial Results

QAD Inc. (Nasdaq: QADI), a global provider of enterprise software and services, today reported financial results for the fiscal 2010 first quarter ended April 30, 2009.

Total revenue was $55.2 million for the first quarter of fiscal 2010, versus $66.8 million for the first quarter of fiscal 2009. License revenue totaled $6.3 million, compared with $12.0 million for the fiscal 2009 first quarter. Maintenance and other revenue was $32.8 million, versus $34.2 million for the first quarter of fiscal 2009. Services revenue was $16.1 million, compared with $20.7 million for last fiscal year's first quarter.

Net loss for the fiscal 2010 first quarter was $2.5 million, or $0.08 per share, compared with a net loss of $730,000, or $0.02 per share, for the fiscal 2009 first quarter.

"Our first quarter results were generally in line with our expectations and reflect the restrained global economic environment and its direct impact on our customers,” said Karl Lopker, chief executive officer of QAD. "While we cannot control the macro-issues affecting our business, we are taking decisive actions to ensure QAD’s long-term health and flexibility through initiatives that have resulted in a leaner cost base that is better aligned with current revenue levels. As always, we are working in close cooperation with our customers during this critical time by providing them with the tools and services necessary to tackle current challenges and helping to position them for future success when economic growth returns.”

Gross margin for the first quarter of fiscal 2010 was 53 percent, compared with 55 percent for the first quarter of fiscal 2009. The change mainly reflects margin reduction in the company’s services business.

Total operating expenses were $31.8 million, or 58 percent of total revenue, for the fiscal 2010 first quarter, versus $37.8 million, or 57 percent of total revenue, for the first quarter of fiscal 2009.

Operating loss for the fiscal 2010 first quarter was $2.4 million, including $1.2 million in stock compensation expense. This compares with an operating loss of $963,000, including $1.6 million in stock compensation expense, for the first quarter of the prior fiscal year.

Cash flow provided by operations was $7.3 million for the first quarter of fiscal 2010, versus $7.8 million for the first quarter of fiscal 2009.

QAD's cash and cash equivalents balance at April 30, 2009 was $36.6 million, compared with $31.5 million at January 31, 2009.

Fiscal 2010 First Quarter Highlights:

• Launched QAD Enterprise Applications 2009 Enterprise Edition (QAD 2009 EE). This comprehensive, fully integrated end-to-end solution adds robust functionality in the areas of enterprise financials, enhanced efficiency and usability and corporate governance compliance;
• QAD’s Precision Software division announced the successful deployment of its PRECISION Global Trade Management solution by W.L. Gore & Associates (Gore), best known for its GORE-TEX^® fabric. Gore selected the PRECISION solution because it offers both the multi-modal transportation and global trade management capabilities the company needs to support its world class global supply chain and diverse product portfolio. The solution will allow Gore to meet upcoming mandatory German customs filing requirements well ahead of the July 1, 2009 compliance deadline;
• Received orders from 16 customers representing more than $500,000 each in combined license, support and services billings, including four orders in excess of $1.0 million and one order in excess of $2.0 million;
• Received license orders from companies across QAD’s six vertical markets including, among others: American Power Conversion, Arthrex, Black & Decker, Detmold Packaging Group, Kraft Foods, Mauser-Werke, Sanofi-Aventis and Vion.

Business Outlook

For the second quarter of fiscal 2010, QAD currently expects total revenue in line with first quarter fiscal 2010 and a small net loss.

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 first 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.