```markdown Part I—Financial Information [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited condensed consolidated financial statements for the quarter ended October 31, 2023, including balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $183.7 million as of October 31, 2023, from $195.6 million, driven by reduced cash, while total liabilities and shareholders' equity also saw slight decreases Condensed Consolidated Balance Sheets (in thousands) | Account | October 31, 2023 | April 30, 2023 | | :--- | :--- | :--- | | **Total current assets** | $113,232 | $149,989 | | Goodwill | $46,417 | $29,558 | | **Total assets** | **$183,681** | **$195,620** | | **Total current liabilities** | $48,976 | $57,044 | | **Total liabilities** | **$49,231** | **$57,332** | | **Total shareholders' equity** | **$134,450** | **$138,288** | | **Total liabilities and shareholders' equity** | **$183,681** | **$195,620** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 FY2024 revenues decreased 6% to $25.7 million, with operating income down 52% to $1.2 million, though net earnings rose to $2.4 million due to a gain on discontinued operations Financial Performance (in thousands, except per share data) | Metric | Q2 2023 (3-mo) | Q2 2022 (3-mo) | H1 2023 (6-mo) | H1 2022 (6-mo) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $25,690 | $27,279 | $51,591 | $54,060 | | Gross Margin | $16,401 | $18,059 | $33,258 | $35,866 | | Operating Income | $1,229 | $2,550 | $2,621 | $4,892 | | Net Earnings from Continuing Operations | $621 | $1,916 | $3,235 | $3,891 | | Earnings from Discontinued Operations | $1,742 | $189 | $1,876 | $278 | | **Net Earnings** | **$2,363** | **$2,105** | **$5,111** | **$4,169** | | Diluted EPS | $0.07 | $0.06 | $0.15 | $0.12 | [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity decreased to $134.5 million for the six months ended October 31, 2023, primarily due to dividends and stock repurchases, partially offset by net earnings and stock-based compensation Changes in Shareholders' Equity (Six Months Ended Oct 31, 2023, in thousands) | Description | Amount | | :--- | :--- | | Balance at April 30, 2023 | $138,288 | | Net earnings | $5,111 | | Stock-based compensation | $3,134 | | Purchases of common stock | ($4,814) | | Dividends declared | ($7,515) | | **Balance at October 31, 2023** | **$134,450** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations significantly improved to $8.1 million for the six months ended October 31, 2023, while investing activities used $23.7 million due to an acquisition, and financing used $12.1 million Cash Flow Summary (Six Months Ended, in thousands) | Activity | Oct 31, 2023 | Oct 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $8,054 | ($11,261) | | Net cash used in investing activities | ($23,697) | ($9,206) | | Net cash used in financing activities | ($12,082) | ($6,261) | | **Net change in cash and cash equivalents** | **($27,725)** | **($26,728)** | | Cash and cash equivalents at end of period | $62,971 | $83,962 | [Notes to Condensed Consolidated Financial Statements – Unaudited](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20Unaudited) Notes detail accounting policies and events, including the Garvis AI acquisition for **$25.0 million**, TPM disposal for **$2.1 million**, and TRS sale for **$1.1 million**, with SCM as the dominant segment and a $0.11 quarterly dividend - In September 2023, the company disposed of its IT consulting firm, The Proven Method (TPM), for approximately **$2.1 million** in cash[24](index=24&type=chunk)[69](index=69&type=chunk) - Effective September 5, 2023, the company acquired 100% of Garvis AI Limited, a SaaS startup specializing in AI-native demand forecasting, for approximately **$25.0 million** in cash[60](index=60&type=chunk)[61](index=61&type=chunk) - As of October 31, 2023, the company had remaining performance obligations of approximately **$113.0 million**, with **53%** expected to be recognized as revenue over the next 12 months[36](index=36&type=chunk) - Subsequent to the quarter end, on November 15, 2023, the company signed an agreement to sell its Transportation Rating Solutions (TRS) business for approximately **$1.1 million** in cash[95](index=95&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 FY2024 financial results, noting a 6% revenue decrease, significant operating income decline, strong liquidity, and strategic moves including the Garvis AI acquisition and non-core asset divestitures [Company Overview](index=30&type=section&id=COMPANY%20OVERVIEW) American Software, via Logility, offers a cloud-based, AI-driven supply chain management platform, recognized by analysts, serving approximately **860 clients** across **80 countries** in key verticals, with revenue from subscriptions, licenses, maintenance, and professional services - The company's core SCM business, Logility, is recognized as a leader in multiple 2022 IDC MarketScape reports and positioned in the Challenger quadrant in Gartner's May 2023 Magic Quadrant for Supply Chain Planning Solutions[108](index=108&type=chunk)[109](index=109&type=chunk) - The company serves approximately **860 clients** in about **80 countries**, with a focus on key vertical markets like apparel, food & beverage, and consumer packaged goods[110](index=110&type=chunk) [Comparison of Results of Operations](index=32&type=section&id=COMPARISON%20OF%20RESULTS%20OF%20OPERATIONS) Q2 FY2024 total revenue decreased 6% YoY, driven by declines in license and professional services, despite 8% subscription growth, leading to a 52% drop in operating income to $1.2 million Revenue Comparison (Three Months Ended Oct 31) | Revenue Type | 2023 (in thousands) | 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Subscription fees | $13,358 | $12,326 | 8% | | License | $229 | $688 | (67)% | | Professional services and other | $4,003 | $5,435 | (26)% | | Maintenance | $8,100 | $8,830 | (8)% | | **Total revenue** | **$25,690** | **$27,279** | **(6)%** | Operating Income by Segment (Three Months Ended Oct 31, in thousands) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Supply Chain Management | $5,835 | $7,646 | (24)% | | Other | ($4,606) | ($5,096) | (10)% | | **Total operating income** | **$1,229** | **$2,550** | **(52)%** | - The decrease in professional services revenue was attributed to lower bookings in recent quarters, resulting in less project work[133](index=133&type=chunk) [Liquidity, Capital Resources and Financial Condition](index=41&type=section&id=LIQUIDITY%2C%20CAPITAL%20RESOURCES%20AND%20FINANCIAL%20CONDITION) The company maintains strong liquidity with **$83.9 million** in cash and investments and no debt, generating $8.1 million from operations while using cash for the Garvis acquisition, dividends, and stock repurchases - As of October 31, 2023, the company had **$83.9 million** in cash and investments with no debt obligations[162](index=162&type=chunk) Key Cash Flow Activities (Six Months Ended Oct 31, 2023, in thousands) | Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $8,054 | | Purchase of business, net of cash acquired | ($25,032) | | Purchases of common stock | ($4,814) | | Dividends paid | ($7,514) | - Days Sales Outstanding (DSO) improved to **72 days** as of October 31, 2023, compared to **78 days** in the prior year, due to the timing of billings and collections[161](index=161&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations, interest rate changes on its investment portfolio, and inflation, with **21%** of revenue from international sources, managing interest rate risk through short-maturity instruments - In the first six months of fiscal 2024, approximately **21%** of revenue was generated outside the United States, exposing the company to foreign currency risk[166](index=166&type=chunk) - The company has no debt and manages interest rate risk on its **$79.5 million** investment portfolio by holding high-credit-quality, short-maturity instruments[167](index=167&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of October 31, 2023, due to a material weakness in process-level controls over account reconciliations, with a remediation plan underway for completion by April 30, 2024 - Management concluded that disclosure controls and procedures were not effective as of October 31, 2023[173](index=173&type=chunk) - A material weakness was identified due to certain process-level controls over the reconciliation of cash, accounts payable, accrued compensation, and cost of revenues not operating effectively[174](index=174&type=chunk) - Management is implementing a remediation plan with enhanced policies and training, which is anticipated to be fully remediated before April 30, 2024[177](index=177&type=chunk) Part II—Other Information [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no current legal proceedings requiring disclosure - The company reports no current legal proceedings requiring disclosure[179](index=179&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the fiscal 2023 Annual Report are reported - No material changes to risk factors from the fiscal 2023 Annual Report are reported[180](index=180&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 FY2024, the company repurchased **430,576 shares** of Class A common stock, with 516,056 shares remaining available for repurchase under the authorized plan Issuer Purchases of Equity Securities (Q2 FY2024) | Fiscal Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Aug 2023 | — | $— | | Sep 2023 | 14,807 | $11.47 | | Oct 2023 | 415,769 | $11.18 | | **Total** | **430,576** | | - As of October 31, 2023, the company has repurchased a total of **5,019,208 shares** at a cost of approximately **$30.4 million** under all authorized plans[181](index=181&type=chunk) [Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the Garvis AI Stock Purchase Agreement, CEO and CFO certifications, and XBRL data files ```

Financial Data and Key Metrics Changes - Total revenues for Q2 2024 were $25.7 million, a decrease of 6% compared to $27.3 million in the same period last year [12] - Subscription fees increased by 8% year-over-year to $13.4 million but declined slightly from the prior quarter [12] - Adjusted operating income decreased by 13% to $3.6 million compared to $4.2 million in the same period last year [16] - Net income was $0.6 million or earnings per diluted share of $0.02, down from $1.9 million or $0.06 in the same period last year [15] Business Line Data and Key Metrics Changes - License fee revenue was $0.2 million compared to $0.7 million in the prior year period [13] - Professional services and other revenues decreased by 26% to $4 million from $5.4 million in the year-ago period [13] - Maintenance revenue declined by 8% year-over-year to $8.1 million [13] - Total recurring revenues, comprising subscription and maintenance fees, represented 84% of total revenues in Q2, compared to 78% in the same period last year [13] Market Data and Key Metrics Changes - International revenues accounted for approximately 21% of total revenues compared to 19% last year [17] - Remaining performance obligation (RPO) was $113 million, down 8% from the prior year period due to a slowdown in bookings activity [17] Company Strategy and Development Direction - The acquisition of Garvis, a SaaS start-up, was completed, and the product has been rebranded as DemandAI+, expected to enhance supply chain planning capabilities [5][6] - The company divested its IT staffing and consulting services business, The Proven Method, and its transportation business to focus on being a pure-play supply chain software leader [7] - A share repurchase program was implemented, with approximately 431,000 shares repurchased for $4.8 million during Q2 [17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about clients adapting to economic headwinds and anticipated stronger performance in the second half of the fiscal year [8] - Revised guidance for fiscal 2024 includes total revenue expectations of $100 million to $104 million and recurring revenue of $85 million to $88 million [9][18] - Management noted that the acquisition of Garvis is expected to be accretive in the next 12 months despite its initial drag on margins [19] Other Important Information - The company is no longer pursuing a sale of its headquarters due to dampened commercial real estate market conditions [10] - The financial position remains strong with cash and investments of approximately $83.9 million at the end of the quarter [18] Q&A Session Summary Question: Can you add some color on the change to guidance and the impact from divestitures versus any macro expectations that may have changed? - Management indicated that the majority of the adjustment is related to divestitures, with a slight impact from macroeconomic conditions [20] Question: How are customers thinking about budgets for 2024? Did you see any worsening in sales cycles? - Management reported mixed results regarding customer budgets, with encouragement from budgeting activity but noted that actual spending may lag [22] Question: Can you provide more insight into the updated recurring revenue guidance? - Management explained that the guidance reflects a strong second quarter but was back-end loaded, with expectations for a positive impact in the third quarter [26] Question: What feedback have you received since acquiring Garvis? - Management reported strong client reception and significant improvements in forecast accuracy, translating to substantial savings for clients [28][29] Question: What is the right way to think about the gross margin profile for the remaining business? - Management anticipates incremental improvement in subscription fees and overall gross margin, projecting adjusted EBITDA margins to increase by the end of the year [32]

Table of Contents _________________ _________________ _________________ _________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 0-12456 AMERICAN SOFTW ...

Financial Data and Key Metrics Changes - For Q1 2024, total revenues were $29.2 million, a decrease of 7% from $31.3 million in the same period last year [12] - Subscription fees increased by 14% year-over-year to $13.8 million, with some revenue recovery from previously suspended contracts [12] - Net income increased by 29% to $2.7 million, or earnings per diluted share of $0.08, compared to $2.1 million or $0.06 per share last year [18] - Adjusted EBITDA decreased by 17% to $3.9 million from $4.6 million in the first quarter of last year [18] Business Line Data and Key Metrics Changes - Professional services revenue decreased by 31% to $7 million from $10 million the same period last year, primarily due to a 33% decrease in the supply chain management unit [13] - Maintenance revenues declined by 8% year-over-year to $8.2 million, reflecting a normal falloff rate [14] - Services margin decreased to 19% from 27% last year due to lower revenues and utilization [16] Market Data and Key Metrics Changes - International revenues accounted for approximately 18% of total revenues for both the current and prior year [19] - Remaining performance obligation (RPO) was $111 million, down 11% from the prior year due to a higher burn rate and fewer deals [19] Company Strategy and Development Direction - The company is focusing on transitioning clients to subscription-based agreements and enhancing cloud capabilities [31] - Strategic actions include exploring the sale of the headquarters and potential acquisitions to enhance shareholder value [10][25] - The company is optimistic about the supply chain planning market and plans to initiate a share buyback after the current blackout period [11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding pipeline and close rates improving despite economic uncertainties [7] - The company anticipates a strong market for supply chain planning solutions in the long term, despite short-term headwinds from interest rate hikes [8] - Cost control efforts will continue, aiming for a flat to slight reduction in overall costs this fiscal year [9] Other Important Information - The company reaffirmed its guidance for fiscal 2024, expecting recurring revenue between $88 million and $92 million and total revenue between $120 million and $126 million [9] - Cash and investments totaled $115.3 million at the end of the quarter, with $3.7 million paid in dividends [20] Q&A Session Summary Question: Are you seeing any further elongation of sales and approval cycles? - Management noted stabilization in close and approval cycles compared to the previous quarter, with hopes for improvement as the summer period ends [22] Question: Can you provide more detail on the strategic actions mentioned? - The headquarters building is listed for sale, and the timeline for potential cash redeployment could take six to nine months [24] Question: Can you discuss opportunities to lift and shift existing customers to subscription agreements? - The company is proactively presenting cloud migration opportunities to clients, aiming to double the number of lift and shifts this fiscal year [31] Question: What is the approach regarding professional services and outsourcing? - The company is educating partners to take on more projects, transitioning to a model that allows for shared resources and independent implementations [33] Question: What gives confidence in improving gross margins in the coming quarters? - Management anticipates improvements due to restructuring cost reductions and an expected uplift in professional services [36] Question: Can you quantify the catch-up subscription payments? - The catch-up was approximately $200,000 to $300,000, viewed as a one-off recovery from delayed payments [39] Question: What are the plans for cash if the headquarters sale goes through? - Options include cash distribution, additional share buybacks, or acquisitions, but no definitive plans are in place due to the unpredictable timeline [41]

[Business Overview](index=5&type=section&id=Item%201.%20BUSINESS) American Software, Inc. provides software and services through SCM, IT Consulting, and other divisions, leveraging its Logility platform for global customers [Company Overview](index=5&type=section&id=Company%20Overview) Founded in 1970, American Software, Inc. offers SCM, IT Consulting, and ERP services globally, with revenue from subscriptions, licenses, maintenance, and services - The company, founded in 1970 and headquartered in Atlanta, provides software and services through Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and traditional Enterprise Resource Planning (ERP) services as three main operating segments, with SCM as the core market[10](index=10&type=chunk) - The Logility digital supply chain platform leverages Artificial Intelligence (AI) and advanced analytics to automate key business processes and accelerate digital supply chain optimization[12](index=12&type=chunk) - The company serves approximately **805 customers** across about **80 countries**, primarily in vertical markets such as apparel, food and beverage, consumer packaged goods, and wholesale distribution[15](index=15&type=chunk) - Revenue is derived from subscription fees, software license fees, maintenance fees, and service fees, with subscription and maintenance agreements typically lasting three to five years, prepaid annually and recognized over time[16](index=16&type=chunk) [Market Opportunity](index=7&type=section&id=Market%20Opportunity) The global SCM software market is projected to grow to **$38 billion by 2027**, presenting significant opportunities for the company's supply chain planning focus - Businesses must enhance supply chain performance through automation, AI, and advanced analytics to meet consumer expectations and economic pressures[18](index=18&type=chunk) Global Supply Chain Management Software and Services Market Forecast | Indicator | 2023 | 2027 | | :--- | :--- | :--- | | Market Size | >$21 billion | $38 billion | | CAGR (2023-2027) | - | 15% | - The company primarily focuses on supply chain planning processes and some procurement functions, estimated to account for one-third of the Gartner-defined supply chain management software market[21](index=21&type=chunk) [Company Strategy](index=7&type=section&id=Company%20Strategy) The company's strategy focuses on delivering rapid customer value through sustainable supply chains, strategic partnerships, and selective acquisitions - The company aims to provide customers with the fastest time to value, building agile, resilient, and efficient sustainable supply chains[22](index=22&type=chunk) - Through shortening supply chains, reducing energy consumption, and increasing the use of recyclable materials, the company helps customers achieve more sustainable operations - Accelerate growth and more efficiently deliver products and services by establishing strategic partnerships with industry-leading consulting firms and other software service providers - Expand product lines, broaden geographical coverage, penetrate new vertical markets, and consolidate SCM market leadership through selective acquisitions or investments in complementary businesses, products, and technologies[23](index=23&type=chunk) [Products and Services](index=8&type=section&id=Products%20and%20Services) The company provides a comprehensive cloud-based SCM platform covering eight key planning processes, alongside technical staffing and consulting services - The company offers a comprehensive cloud-architecture supply chain management platform, covering eight key planning processes: product, demand, inventory, supply, network optimization, deployment, integrated business planning, and supply chain data management[24](index=24&type=chunk) - Platform components can be used independently or combined, supporting SaaS cloud deployment or on-premise deployment, enabling insights and automated planning through the supply chain MDM platform and advanced analytics capabilities[24](index=24&type=chunk)[25](index=25&type=chunk) - Technical staffing and consulting services are provided through its wholly-owned subsidiary, The Proven Method, Inc., and software, support, and services continue for traditional American Software ERP products[28](index=28&type=chunk) [Client Support and Maintenance](index=9&type=section&id=Client%20Support%20and%20Maintenance) Continuous product support is included in subscriptions, with licensed software customers receiving 24/7 support under annual contracts - Continuous product support services are included in subscription fees; licensed software customers enter into 1-3 year support/maintenance contracts, prepaid annually[29](index=29&type=chunk) - Support services include telephone consultation, product updates, new version releases, error reporting, and correction, offering 24/7 support[29](index=29&type=chunk) [Consulting Services](index=9&type=section&id=Consulting%20Services) Professional consulting services, including implementation, training, and cloud hosting, are offered to facilitate rapid software deployment and value realization - Professional consulting services are provided, including business and software implementation consulting, development configuration, system interfaces, training, and certification, typically billed on a time-and-materials basis[30](index=30&type=chunk) - Services cover cloud hosting and managed services, as well as implementation and training services, aimed at helping customers rapidly deploy software, with implementation cycles typically ranging from 3-9 months[30](index=30&type=chunk)[31](index=31&type=chunk) [Clients](index=11&type=section&id=Clients) Serving diverse industries, no single client exceeded **10% of revenue in FY2023**, with minor seasonal slowdowns in service revenue - The company's customers span various industries, including apparel, food and beverage, consumer packaged goods, durable goods, and process and chemical manufacturing[33](index=33&type=chunk) - In fiscal year 2023, no single customer accounted for more than **10% of total revenue**[36](index=36&type=chunk) - Service revenue typically experiences a slight seasonal slowdown during the winter holidays, and the company does not rely on government sector clients[36](index=36&type=chunk) [Competition](index=12&type=section&id=Competition) The company competes with major ERP and specialized SCM vendors, leveraging its comprehensive platform, domain expertise, and rapid value delivery as key advantages - Key competitors include large ERP application software vendors (e.g., SAP, Oracle, Infor), specialized supply chain application software market vendors (e.g., Blue Yonder, o9 Solutions, Kinaxis, OM Partners), and other business application software vendors and in-house development teams - Major competitive factors include product functionality and quality, domain expertise, integration technology, product suite integration, product breadth, and related services (e.g., customer support, training, and implementation)[37](index=37&type=chunk)[38](index=38&type=chunk) - The company's primary competitive advantages lie in its comprehensive end-to-end software platform, ability to quickly create business benefits for customers, significant investment in product development, deep domain expertise, ease of use of software products, customer support and professional consulting services, rapid deployment capabilities, and ability to deliver quick return on investment for customers[39](index=39&type=chunk) [Sales and Marketing](index=12&type=section&id=Sales%20and%20Marketing) Global sales are driven by direct teams and VARs across 80 countries, supported by modernized digital marketing efforts to enhance brand awareness - The company sells its products globally through a direct sales team and a worldwide network of value-added resellers (VARs)[40](index=40&type=chunk)[41](index=41&type=chunk) - The marketing department underwent modernization in the past year, increasing its focus on digital promotion and enhancing brand awareness through various marketing channels[42](index=42&type=chunk) [Research and Development](index=13&type=section&id=Research%20and%20Development) R&D focuses on AI, machine learning, and advanced analytics to meet evolving customer needs and technological changes, with **151 personnel** dedicated to product development - The company's success depends on its ability to identify and meet customer needs, anticipate technological changes, adapt to customer expectations, and keep pace with emerging industry standards[43](index=43&type=chunk) - R&D focuses on Artificial Intelligence, Machine Learning, advanced analytics platforms, in-memory computing, and alternative data management methods, as well as the application of emerging technologies like blockchain in supply chain use cases[44](index=44&type=chunk) - As of April 30, 2023, the company had **95 employees** and **56 contractors** (totaling **151 individuals**) engaged in product development and enhancement activities[44](index=44&type=chunk)[48](index=48&type=chunk) [Proprietary Rights](index=13&type=section&id=Proprietary%20Rights) Proprietary technology is protected through copyrights, trade secrets, and confidentiality, with employee expertise and continuous product development being key to leadership - The company protects its proprietary technology, including software source code and registered trademarks, through copyrights, trade secret laws, confidentiality obligations, and other contractual terms[45](index=45&type=chunk)[47](index=47&type=chunk) - The company believes that the knowledge, capabilities, and experience of its employees, new product development, frequent product enhancements, reliable maintenance, and timely, high-quality support services are crucial for establishing and maintaining technological leadership[45](index=45&type=chunk) [Human Capital Resources](index=14&type=section&id=Human%20Capital%20Resources) With **394 full-time employees** and **80+ contractors**, the company fosters an inclusive culture, supporting continuous learning and community engagement - As of April 30, 2023, the company had **394 full-time employees** and over **80 independent full-time contractors**[48](index=48&type=chunk) - The company's culture is based on core values of passion, accountability, curiosity, and teamwork, committed to providing an inclusive and diverse workplace[49](index=49&type=chunk)[50](index=50&type=chunk) - The company supports employees' continuous learning, training, and career development, and encourages participation in community volunteer services through its "Community Impact" initiative, offering paid time off[51](index=51&type=chunk)[52](index=52&type=chunk) [Data Privacy](index=15&type=section&id=Data%20Privacy) The company maintains robust data privacy policies, ensuring compliance with global regulations like GDPR and CCPA for all data processing activities - The company has established and continuously maintains data protection and privacy policies to comply with increasing global regulatory and legislative activities[54](index=54&type=chunk) - The company's privacy policies comply with the EU's GDPR and the US's CCPA and other existing state laws[55](index=55&type=chunk)[56](index=56&type=chunk) [Data Security](index=15&type=section&id=Data%20Security) A comprehensive security program, managed by an information security manager, ensures data protection through annual assessments, employee training, SOC 2 Type II reports, encryption, and 24/7 monitoring - The software security program is managed by an information security manager, conducting annual vendor and internal risk assessments, and maintaining a security incident response team[57](index=57&type=chunk) - The company annually obtains independent SOC 2 Type II reports to demonstrate the effectiveness of its controls in security, availability, processing integrity, and confidentiality[59](index=59&type=chunk) - Customer data is protected by web application firewalls and data encryption (in transit and at rest), with the SaaS environment secured by vulnerability management software and 24/7 security monitoring, and access controlled by two-factor authentication[60](index=60&type=chunk) [Sustainability in Data Operations](index=16&type=section&id=Sustainability%20in%20Data%20Operations) Sustainability is a key factor in hosting partnerships, with Microsoft Azure's carbon-negative and zero-waste commitments aligning with the company's data operations - The company considers sustainability a key factor when evaluating hosting partners and continues to expand its collaboration with Microsoft Azure[62](index=62&type=chunk) - Microsoft is committed to achieving carbon negativity by 2030 and eliminating all direct emissions since its founding by 2050 - Microsoft Azure focuses on four environmental impact areas: carbon, water, waste, and ecosystems, including achieving **100% renewable energy by 2025**, and water positivity and zero-waste certification by 2030[62](index=62&type=chunk) - The company performs data destruction and sanitization through environmentally friendly incineration or e-Stewards® certified recycling processes[63](index=63&type=chunk) [Available Information](index=16&type=section&id=Available%20Information) Annual, quarterly, and current reports are available free of charge on the company's website after SEC filing - The company provides its annual reports (Form 10-K), quarterly reports (Form 10-Q), current reports (Form 8-K), and all amendments free of charge on its official website http://www.amsoftware.com[64](index=64&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including macroeconomic uncertainties, intense competition, operational challenges, product development issues, personnel dependency, and corporate governance complexities [Risk Factors Related to the Economy](index=17&type=section&id=RISK%20FACTORS%20RELATED%20TO%20THE%20ECONOMY) Macroeconomic uncertainties, including market volatility, inflation, trade disputes, and geopolitical conflicts, pose risks to demand, customer solvency, and foreign exchange rates - Disruptions in financial and credit markets, government policies on interest and inflation rates, international trade disputes, pandemics (such as COVID-19), and external impacts like the Russia-Ukraine war may reduce demand for the company's software and related services, negatively affecting revenue and operating results - Weak economic conditions may lead to an increased number of customer bankruptcies, impacting the collectability of the company's accounts receivable - The company faces foreign exchange rate risk as international revenue and most international expenses are denominated in non-U.S. dollar currencies, and exchange rate fluctuations may affect operating results[66](index=66&type=chunk)[75](index=75&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) [Risk Factors Related to Competition](index=17&type=section&id=RISK%20FACTORS%20RELATED%20TO%20COMPETITION) Intense market competition, exacerbated by consolidation and larger rivals, may lead to price pressures, reduced margins, and market share loss - The company's market is highly competitive and it may not be able to compete effectively, with market consolidation potentially leading to price wars, reduced gross margins, and loss of market share - Many existing and potential competitors possess greater resources than the company, potentially placing it at a competitive disadvantage - Competition may force the company to alter its pricing strategies, which could adversely affect operating margins or customer order patterns[67](index=67&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[88](index=88&type=chunk) [Risk Factors Related to Our Operations](index=17&type=section&id=RISK%20FACTORS%20RELATED%20TO%20OUR%20OPERATIONS) Operational risks include reliance on sales channels and the retail industry, revenue volatility from large sales, lower service margins, and challenges in accounting, acquisitions, and international operations - The company's growth depends on the successful development of direct and indirect sales channels, and the establishment and maintenance of relationships with complementary suppliers - The company's revenue is highly dependent on the retail industry, and a portion of service revenue is concentrated among a few customers, with large non-recurring sales potentially causing quarterly revenue fluctuations - Sales cycles are long and unpredictable, service revenue gross margins are lower than license or subscription revenue, and failure to maintain implementation service margins and rates may adversely affect operating results - The company faces risks related to accounting interpretations, acquisition integration, changes in tax laws, needs for additional capital, business interruptions, international operations, rising liability insurance costs, management resource pressures, and internet regulation and disruptions[68](index=68&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) [Risk Factors Related to Our Products](index=17&type=section&id=RISK%20FACTORS%20RELATED%20TO%20OUR%20PRODUCTS) Product risks encompass customer migration reluctance, development delays, performance issues, open-source challenges, implementation complexities, IP infringement, data security, and reliance on third-party technologies - Customers may be unwilling to migrate to new product versions, leading to reduced service and maintenance revenue - The company may fail to timely develop new products or enhance existing ones to address technological changes and competition - Products failing to quickly deliver measurable value, or failing to maintain cross-platform and operating system performance, may harm the business - Software products and product development are complex, potentially leading to innovation difficulties, product errors, and high correction costs - The use of open-source software may introduce additional risks and harm intellectual property, with open-source community expansion potentially leading to reduced revenue - Product implementation is complex, time-consuming, and expensive, and customers may not successfully implement, potentially leading to warranty or product liability claims - Increased customized software sales may lead to extended revenue recognition cycles, and product launch delays may adversely affect the business - R&D investments may take several years to generate significant revenue - Intellectual property protection is limited, potential infringement of third-party intellectual property, and exposure to liability claims arising from product sales and service provision - Data privacy and security issues, including evolving government regulations, may adversely affect the business and operating results - Reliance on third-party technologies may lead to increased costs or delays in product production and improvement - Third-party service disruptions or delays, or failure to adequately plan for and manage service disruptions or infrastructure capacity needs, may harm service delivery and the business - Failure to provide high-quality customer support for cloud platforms may adversely affect customer relationships and financial performance[69](index=69&type=chunk)[70](index=70&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Risk Factors Related to Our Personnel](index=18&type=section&id=RISK%20FACTORS%20RELATED%20TO%20OUR%20PERSONNEL) High dependency on key personnel, risks from talent retention, workforce restructuring, and potential abuse of customer data access pose significant personnel-related challenges - The company is highly dependent on a few key senior management and technical personnel, and failure to attract and retain highly qualified talent may severely impact operations and business objectives - Workforce restructuring may lead to business disruptions and decreased productivity - Technical personnel have unique access to customer data, posing a risk of privilege abuse[71](index=71&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) [Risk Factors Related to Our Corporate Structure and Governance](index=18&type=section&id=RISK%20FACTORS%20RELATED%20TO%20OUR%20CORPORATE%20STRUCTURE%20AND%20GOVERNANCE) Governance risks include regulatory compliance costs, substantial control by a single shareholder, anti-takeover provisions, and exemptions as a "controlled company" under Nasdaq rules - The company's business is subject to evolving corporate governance and public disclosure regulations, leading to increased costs and non-compliance risks - A single shareholder (James C. Edenfield) owns a majority of the company's equity, exerting substantial control and potentially blocking acquisition offers favorable to other shareholders - The company's articles of incorporation, bylaws, and Georgia law may prevent its acquisition - As a "controlled company" under Nasdaq rules, the company may be exempt from certain corporate governance requirements[71](index=71&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Risk Factors Related to Our Stock Price](index=18&type=section&id=RISK%20FACTORS%20RELATED%20TO%20OUR%20STOCK%20PRICE) Quarterly operating result fluctuations, potential class-action lawsuits, changes in dividend policy, and future stock sales pose risks to the company's stock price - The company's quarterly operating results may fluctuate significantly, which could adversely affect its stock price - Stock price volatility may lead to the risk of securities class action lawsuits - The company's dividend policy may change - The future sale or anticipated sale of a large number of shares could cause the stock price to decline[72](index=72&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) [Unresolved Staff Comments](index=33&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This report contains no unresolved staff comments - There are no unresolved staff comments in this report[158](index=158&type=chunk) [Properties](index=34&type=section&id=Item%202.%20Properties) The company owns its Atlanta headquarters and leases offices globally, with current facilities deemed sufficient for operations - The company's headquarters is located in Atlanta, where it owns an office building of approximately **100,000 square feet**; additionally, the company leases sales and technical development offices in the U.S. and internationally (UK, Germany, India, New Zealand)[159](index=159&type=chunk) - The company believes its existing facilities are sufficient for current needs and that suitable additional or alternative space can be obtained on commercially reasonable terms[159](index=159&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) This report discloses no legal proceedings - There are no legal proceedings in this report[161](index=161&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Not applicable[162](index=162&type=chunk) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the trading market for the company's common stock, equity compensation plans, dividend policy, stock performance, and share repurchase activities [Trading Market](index=41&type=section&id=Trading%20Market) The company's Class A common stock trades on Nasdaq under "AMSWA," with **15,105 Class A holders** as of July 3, 2023 - The company's Class A common stock is listed on the Nasdaq Global Select Market under the ticker symbol "AMSWA"[165](index=165&type=chunk) - As of July 3, 2023, there were approximately **15,105 holders** of Class A common stock and **1 holder** of Class B common stock[165](index=165&type=chunk) [Equity Compensation Plans](index=41&type=section&id=Equity%20Compensation%20Plans) As of April 30, 2023, **5,273,057 equity awards** were outstanding with a **$16.59 weighted-average exercise price**, and **1,627,143 shares** were available for future issuance Equity Compensation Plan Overview (as of April 30, 2023) | Indicator | Quantity | | :--- | :--- | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | 5,273,057 | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | $16.59 | | Number of Securities Remaining Available for Future Issuance | 1,627,143 | [Dividend Policy](index=41&type=section&id=Dividend%20Policy) The company has paid a **quarterly dividend of $0.11 per share** since 2016, with future payments subject to Board discretion and financial performance - Since the third quarter of fiscal year 2013, the company's Board of Directors has declared a quarterly dividend of **$0.10 per share**, which was increased to **$0.11 per share** on May 11, 2016[168](index=168&type=chunk) - The company currently expects to declare and pay cash dividends quarterly at **$0.11 per share** in the future, but this policy may change at any time and is at the sole discretion of the Board based on factors such as profitability, financial condition, cash needs, and future prospects[168](index=168&type=chunk) [Stock Price Performance Graph](index=42&type=section&id=Stock%20Price%20Performance%20Graph) Over five years, the company's stock grew from **$100 to $107**, underperforming the Nasdaq Composite and Nasdaq Computer Indices Cumulative Shareholder Return (April 30, 2018 - April 30, 2023) | Indicator | FY2018 ($) | FY2019 ($) | FY2020 ($) | FY2021 ($) | FY2022 ($) | FY2023 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | American Software | 100 | 105 | 138 | 177 | 149 | 107 | | NASDAQ Composite | 100 | 115 | 126 | 198 | 175 | 173 | | NASDAQ Computer Index | 100 | 120 | 144 | 235 | 229 | 239 | [Purchases of Equity Securities by the Company](index=43&type=section&id=Purchases%20of%20Equity%20Securities%20by%20the%20Company) No shares were repurchased in Q4 FY2023, with **946,321 Class A shares** remaining available under the existing repurchase program Summary of Stock Repurchases for Q4 FY2023 | Fiscal Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | February 1 to February 28, 2023 | — | — | — | 946,321 | | March 1 to March 31, 2023 | — | — | — | 946,321 | | April 1 to April 30, 2023 | — | — | — | 946,321 | | Total for Q4 FY2023 | — | — | — | 946,321 | - As of April 30, 2023, the company had repurchased **4,588,632 shares** of common stock under all repurchase programs, at a total cost of approximately **$25.6 million**[240](index=240&type=chunk) [Transfer Agent](index=43&type=section&id=Transfer%20Agent) Broadridge Shareholder Services acts as the company's transfer agent, managing stock transfers and shareholder record changes - The company's transfer agent is Broadridge Shareholder Services, responsible for handling matters such as stock transfers, lost certificates, or address changes[175](index=175&type=chunk) [Market Makers](index=44&type=section&id=Market%20Makers) Multiple firms, including Alpaca Securities and J.P. Morgan Securities, provide market-making services for the company's Class A common stock - Several companies provide market-making services for American Software, Inc.'s Class A common stock, including Alpaca Securities LLC, Interactive Brokers LLC, J.P. Morgan Securities LLC, among others[177](index=177&type=chunk) [Reserved](index=42&type=section&id=Item%206.%20%5BReserved%5D) This item is intentionally reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition, operating results, key accounting policies, and significant trends impacting performance [Critical Accounting Policies and Estimates](index=47&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Revenue recognition under ASC 606 is a critical accounting policy, involving significant estimates for performance obligations and standalone selling prices - Revenue recognition (ASC 606) is one of the company's most critical accounting policies, involving the identification of distinct performance obligations and the assessment of standalone selling prices (SSPs) for each[183](index=183&type=chunk)[184](index=184&type=chunk) - Although changes in assumptions or judgments may affect reported revenue, these changes have historically not been significant due to the company's recurring revenue primarily consisting of subscription and support income[184](index=184&type=chunk) [Results of Operations](index=48&type=section&id=RESULTS%20OF%20OPERATIONS) Total revenue decreased by **3%** in FY2023, driven by a **49%** drop in license fees, despite a **20%** rise in subscriptions, leading to an **18%** decline in net income FY2023 Operating Performance Overview | Indicator | FY2023 (%) | FY2022 (%) | FY2021 (%) | 2023 vs 2022 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Subscription Fees Revenue | 41 | 33 | 26 | 20 | | License Fees Revenue | 2 | 4 | 3 | (49) | | Professional Services and Other Revenue | 29 | 34 | 35 | (17) | | Maintenance Revenue | 28 | 29 | 36 | (6) | | **Total Revenue** | **100** | **100** | **100** | **(3)** | | **Total Gross Margin** | **60** | **59** | **54** | **(2)** | | Operating Income | 9 | 10 | 4 | (20) | | Net Income | 9 | 9 | 7 | (18) | - Total revenue for fiscal year 2023 decreased by **3%** year-over-year, primarily due to a **49%** decline in license fee revenue, partially offset by a **20%** increase in subscription fee revenue[201](index=201&type=chunk) [Economic Overview and Significant Trends in Our Business](index=48&type=section&id=Economic%20Overview%20and%20Significant%20Trends%20in%20Our%20Business) Global economic trends and SCM market growth are key indicators, with **81% of FY2023 revenue from the US**, and an anticipated improved sales environment in FY2024 despite recession risks - In fiscal year 2023, approximately **81% of the company's total revenue** came from the United States, and **10%** from Europe, the Middle East, and Africa (EMEA)[188](index=188&type=chunk) - The International Monetary Fund (IMF) predicts global economic growth will decrease from **3.4%** in 2022 to **2.8%** in 2023[192](index=192&type=chunk) - The company expects the sales environment to improve in fiscal year 2024, as global supply chain disruptions prompt businesses to upgrade technology systems to enhance productivity and profitability, though recession and trade conflict risks persist[192](index=192&type=chunk) [Business Opportunities and Risks](index=49&type=section&id=Business%20Opportunities%20and%20Risks) Opportunities lie in expanding through acquisitions, while risks include reliance on capital expenditures, integration challenges, competitive threats, and pricing pressures - Opportunities: Expand sales distribution channels and/or broaden product lines through selective acquisitions or investments - Risks: Reliance on U.S. and international corporate capital expenditure patterns; challenges in acquisition integration; threats from competitors developing alternative technologies; increased market competition potentially leading to price pressure[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) [Recent Accounting Pronouncements](index=49&type=section&id=Recent%20Accounting%20Pronouncements) The company is assessing the impact of ASU 2021-08, which mandates ASC 606 recognition and measurement for customer contract assets and liabilities in business combinations - The company is evaluating the potential impact of ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers"[196](index=196&type=chunk)[329](index=329&type=chunk) - This standard requires contract assets and contract liabilities in a business combination to be recognized and measured in accordance with ASC 606, effective for fiscal years beginning after December 15, 2022[329](index=329&type=chunk) [Market Conditions by Operating Segment](index=49&type=section&id=Market%20Conditions%20by%20Operating%20Segment) In FY2023, SCM revenue grew **2%** (driven by subscriptions), IT Consulting revenue fell **27%** (due to client staffing fluctuations), and Other segment revenue decreased **5%** - SCM Segment: Fiscal year 2023 revenue grew by **2%**, primarily due to a **20%** increase in subscription fees, partially offset by a **49%** decrease in license fees, an **8%** decrease in professional services and other revenue, and a **6%** decrease in maintenance revenue - IT Consulting Segment: Fiscal year 2023 revenue decreased by **27%**, primarily due to fluctuations in IT staffing work for its largest customer, which accounted for **21%** of IT consulting revenue in fiscal year 2023 (compared to **31%** in fiscal year 2022) - Other Segment: Fiscal year 2023 revenue decreased by **5%**, primarily due to a **24%** decrease in license fees and a **10%** decrease in professional services and other revenue, while maintenance revenue remained flat[199](index=199&type=chunk)[200](index=200&type=chunk) [Revenue](index=50&type=section&id=REVENUE) Total revenue decreased **3%** to **$123.659 million** in FY2023, with **20% subscription growth** offset by a **49% decline in license fees** Revenue Composition (in thousands of USD) | Revenue Type | 2023 | 2022 | 2021 | 2023 vs 2022 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Subscription Fees | 50,412 | 42,066 | 28,877 | 20 | | License Fees | 2,752 | 5,390 | 2,993 | (49) | | Professional Services and Other | 35,938 | 43,476 | 39,616 | (17) | | Maintenance | 34,557 | 36,621 | 39,922 | (6) | | **Total Revenue** | **123,659** | **127,553** | **111,408** | **(3)** | - International revenue as a percentage of total revenue increased from **16%** in fiscal year 2022 to **19%** in fiscal year 2023[203](index=203&type=chunk) - Subscription fee revenue increased by **20%**, primarily due to increased cloud service bookings, including growth in contract volume, higher cloud service Annual Contract Value (ACV), and multi-year contract values - License fee revenue decreased by **49%**, mainly due to a reduction in existing customers opting for on-premise software deployment; the SCM segment accounted for **99%** of total license fee revenue in fiscal year 2023 - Professional services and other revenue decreased by **17%**, primarily due to lower utilization and activity in the Other and IT Consulting segments, as well as reduced project implementation work in the SCM segment - Maintenance revenue decreased by **6%**, mainly due to natural customer attrition and customers migrating from on-premise support to SaaS cloud platforms[205](index=205&type=chunk)[206](index=206&type=chunk)[210](index=210&type=chunk)[212](index=212&type=chunk) [Gross Margin](index=52&type=section&id=GROSS%20MARGIN) Total gross margin increased to **60%** in FY2023, driven by higher subscription margins, while professional services margins declined Gross Margin Composition (in thousands of USD) | Gross Margin Type | 2023 ($) | 2023 (%) | 2022 ($) | 2022 (%) | 2021 ($) | 2021 (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Subscription Fees Gross Margin | 34,581 | 69 | 28,683 | 68 | 16,993 | 59 | | License Fees Gross Margin | 2,047 | 74 | 4,286 | 80 | 1,072 | 36 | | Professional Services and Other Gross Margin | 9,515 | 26 | 13,170 | 30 | 10,523 | 27 | | Maintenance Gross Margin | 28,148 | 81 | 29,656 | 81 | 32,392 | 81 | | **Total Gross Margin** | **74,291** | **60** | **75,795** | **59** | **60,980** | **54** | - Subscription fee gross margin increased from **68%** in fiscal year 2022 to **69%** in fiscal year 2023, primarily due to increased subscription revenue and lower capitalized software amortization expenses[216](index=216&type=chunk) - License fee gross margin decreased, mainly due to reduced license fee revenue[217](index=217&type=chunk) - Professional services and other gross margin decreased from **30%** in fiscal year 2022 to **26%** in fiscal year 2023, primarily affected by lower gross margins in the SCM, IT Consulting, and Other segments[218](index=218&type=chunk)[219](index=219&type=chunk) - Maintenance gross margin remained at **81%** in both fiscal years 2023 and 2022, benefiting from cost controls[221](index=221&type=chunk) [Expenses](index=53&type=section&id=EXPENSES) R&D expenses were flat, sales and marketing decreased, while G&A increased due to stock-based compensation and IT costs, with **$0.8 million** in acquisition intangible amortization Expense Overview (in thousands of USD) | Expense Type | 2023 | 2022 | 2021 | 2023 vs 2022 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and Development | 17,767 | 17,600 | 16,964 | 1 | | Sales and Marketing | 22,184 | 22,867 | 20,304 | (3) | | General and Administrative | 23,684 | 21,960 | 19,139 | 8 | | Amortization of Acquisition-Related Intangible Assets | 106 | 212 | 212 | (50) | - Research and development expenses remained flat year-over-year with fiscal year 2022, primarily due to controlled third-party contractor costs, and capitalized software amortization expenses decreased by **62%**[225](index=225&type=chunk) - Sales and marketing expenses decreased, primarily due to reduced variable compensation and marketing expenditures[226](index=226&type=chunk) - General and administrative expenses increased, primarily affected by higher stock-based compensation and internal IT costs; total full-time personnel decreased from **625** in fiscal year 2022 to **545** in fiscal year 2023[227](index=227&type=chunk) - Amortization of acquisition-related intangible assets was **$0.8 million** (of which **$0.1 million** was recognized in operating expenses and **$0.7 million** in subscription fee costs)[228](index=228&type=chunk) [Operating Income/(Loss)](index=54&type=section&id=Operating%20Income%2F%28Loss%29) Total operating income decreased **20%** to **$10.55 million** in FY2023, with SCM growing **3%**, IT Consulting declining **59%**, and Other segment losses increasing **14%** Operating Income/(Loss) (in thousands of USD) | Segment | 2023 | 2022 | 2021 | 2023 vs 2022 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Supply Chain Management | 29,925 | 29,164 | 18,922 | 3 | | IT Consulting | 664 | 1,601 | 456 | (59) | | Other* | (20,039) | (17,609) | (15,017) | 14 | | **Total Operating Income** | **10,550** | **13,156** | **4,361** | **(20)** | - SCM segment operating income increased by **3%**, primarily due to revenue growth - IT Consulting segment operating income decreased by **59%**, primarily due to lower revenue and reduced billing rates for new customers - Other segment operating loss increased by **14%**, primarily affected by higher stock-based compensation and internal IT costs[230](index=230&type=chunk) [Other Income](index=55&type=section&id=Other%20Income) Other income significantly increased to **$2.3 million** in FY2023, driven by higher dividend and interest income from the investment portfolio - Other income for fiscal year 2023 was approximately **$2.3 million**, a significant increase from **$0.7 million** in fiscal year 2022[231](index=231&type=chunk) - The increase was primarily attributable to increased dividend income (**$1.2 million**) and interest income (**$1 million**)[231](index=231&type=chunk) - The company's investment portfolio generated annualized returns of approximately **2.1%** and **1.4%** in fiscal years 2023 and 2022, respectively[231](index=231&type=chunk) [Income Taxes](index=55&type=section&id=Income%20Taxes) Income tax expense rose to **$2.5 million** in FY2023, with the effective tax rate increasing to **19.1%** due to reduced stock-based compensation tax benefits - Income tax expense for fiscal year 2023 was **$2.5 million**, higher than **$1.1 million** in fiscal year 2022[232](index=232&type=chunk) - The effective income tax rate increased from **7.6%** in fiscal year 2022 to **19.1%** in fiscal year 2023, primarily due to a reduction in excess tax benefits from stock-based compensation deductions[232](index=232&type=chunk) [Operating Pattern](index=55&type=section&id=Operating%20Pattern) The company's operating results show an irregular pattern, influenced by software contract fluctuations and revenue recognition timing - The company's quarterly and annual operating results exhibit an irregular pattern, primarily influenced by fluctuations in the number and size of software contracts and the ability to recognize revenue, and this pattern is expected to continue[233](index=233&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Operating cash flow was negative **$0.38 million** in FY2023, impacted by increased receivables and reduced deferred revenue, while total cash and investments stood at **$114.633 million** Cash Flow Overview (in thousands of USD) | Cash Flow Type | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | (380) | 29,020 | 17,756 | | Net Cash from Investing Activities | (10,422) | (934) | (1,298) | | Net Cash from Financing Activities | (9,192) | (6,054) | (7,614) | | **Net Change in Cash and Cash Equivalents** | **(19,994)** | **22,032** | **8,844** | - Cash outflow from operating activities was primarily affected by increased accounts receivable, increased purchases of trading securities, decreased accounts payable and deferred revenue, and lower net income - Cash outflow from investing activities increased primarily due to the acquisition of Starboard and purchases of property and equipment - Cash outflow from financing activities increased primarily due to reduced proceeds from stock option exercises and increased dividend payments[236](index=236&type=chunk)[237](index=237&type=chunk) Total Cash and Investments (in thousands of USD) | Indicator | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 90,696 | 110,690 | | Investments | 23,937 | 16,826 | | **Total Cash and Investments** | **114,633** | **127,516** | - As of April 30, 2023, Days Sales Outstanding (DSO) was **86 days**, higher than **62 days** as of April 30, 2022; the current ratio was **2.7:1** for both periods[239](index=239&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section provides quantitative and qualitative disclosures regarding the company's exposure to market risks, specifically foreign currency and interest rate fluctuations [Foreign Currency](index=56&type=section&id=Foreign%20Currency) With **19% of FY2023 revenue from international sales**, the company faces foreign exchange risk, recording a **$0.2 million** gain in FY2023 - In fiscal year 2023, **19% of the company's revenue** came from outside the United States, with international sales typically denominated in USD, EUR, or GBP[242](index=242&type=chunk) - The company recorded a **$0.2 million** exchange rate gain in fiscal year 2023, compared to a **$0.5 million** exchange rate loss in fiscal year 2022[243](index=243&type=chunk) - An estimated **10% fluctuation** in foreign exchange rates could result in approximately **$0.5 million** in exchange gains or losses for fiscal year 2023[243](index=243&type=chunk) [Interest Rates and Other Market Risks](index=57&type=section&id=Interest%20Rates%20and%20Other%20Market%20Risks) The company manages interest rate risk through a high-quality, short-term investment portfolio, with cash and investments valued at **$105.3 million** in FY2023 - The company manages interest rate risk by holding a trading investment portfolio of high credit quality with relatively short average maturities[244](index=244&type=chunk) - As of fiscal year 2023, the fair market value of cash equivalents and investments decreased by **9%** to approximately **$105.3 million**[244](index=244&type=chunk) - The company faces risks from interest rate fluctuations and stock market volatility but believes a **10% fluctuation** in interest rates would not materially impact its financial condition or operating results[246](index=246&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, cash flows, and related notes [Management's Report on Internal Control Over Financial Reporting](index=59&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management concluded that internal control over financial reporting was effective as of April 30, 2023, with an unqualified attestation from KPMG LLP - The company's management (including the CEO and CFO) assessed the effectiveness of the company's internal control over financial reporting as of April 30, 2023, and concluded, based on the COSO framework, that internal control is effective[253](index=253&type=chunk) [Report of Independent Registered Public Accounting Firm](index=60&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued unqualified opinions on both internal controls and consolidated financial statements, identifying revenue testing as a critical audit matter - KPMG LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of April 30, 2023[256](index=256&type=chunk) - KPMG LLP issued an unqualified opinion on the company's consolidated balance sheets as of April 30, 2023, and April 30, 2022, and the consolidated statements of operations, shareholders' equity, and cash flows for the three years ended April 30, 2023[263](index=263&type=chunk) - "Revenue testing" was identified as a critical audit matter due to its extensive data and information technology (IT) application involvement[268](index=268&type=chunk) [Consolidated Balance Sheets as of April 30, 2023 and 2022](index=63&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20April%2030%2C%202023%20and%202022) Total assets increased to **$195.62 million** as of April 30, 2023, with a decrease in cash offset by an increase in investments and shareholders' equity Consolidated Balance Sheets Summary (in thousands of USD) | Item | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and Cash Equivalents | 90,696 | 110,690 | | Investments | 23,451 | 16,826 | | Trade Accounts Receivable, Net | 28,009 | 23,608 | | Prepaid Expenses and Other Current Assets | 7,833 | 5,067 | | **Total Current Assets** | **149,989** | **156,191** | | Investments - Noncurrent | 486 | — | | Property and Equipment, Net | 6,444 | 3,654 | | Capitalized Software, Net | 391 | 1,586 | | Goodwill | 29,558 | 25,888 | | Other Intangible Assets, Net | 2,143 | 147 | | Other Assets | 6,609 | 5,369 | | **Total Assets** | **195,620** | **192,835** | | **Liabilities and Shareholders' Equity** | | | | Accounts Payable | 2,142 | 2,506 | | Accrued Compensation and Related Costs | 4,268 | 6,918 | | Dividends Payable | 3,756 | 3,700 | | Other Current Liabilities | 2,708 | 2,412 | | Deferred Revenue | 43,124 | 41,953 | | **Total Current Liabilities** | **55,998** | **57,489** | | Deferred Income Taxes | — | 1,772 | | Other Long-Term Liabilities | 288 | 598 | | **Total Liabilities** | **56,286** | **59,859** | | **Shareholders' Equity** | **139,334** | **132,976** | | **Total Liabilities and Shareholders' Equity** | **195,620** | **192,835** | [Consolidated Statements of Operations for the Years ended April 30, 2023, 2022 and 2021](index=64&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20Years%20ended%20April%2030%2C%202023%2C%202022%20and%202021) Total revenue decreased **3%** to **$123.659 million** in FY2023, resulting in a **20%** drop in operating income and an **18%** decline in net income Consolidated Statements of Operations Summary (in thousands of USD) | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Revenue:** | | | | | Subscription Fees | 50,412 | 42,066 | 28,877 | | License Fees | 2,752 | 5,390 | 2,993 | | Professional Services and Other | 35,938 | 43,476 | 39,616 | | Maintenance | 34,557 | 36,621 | 39,922 | | **Total Revenue** | **123,659** | **127,553** | **111,408** | | **Cost of Revenue:** | | | | | Subscription Fees Cost | 15,831 | 13,383 | 11,884 | | License Fees Cost | 705 | 1,104 | 1,921 | | Professional Services and Other Cost | 26,423 | 30,306 | 29,093 | | Maintenance Cost | 6,409 | 6,965 | 7,530 | | **Total Cost of Revenue** | **49,368** | **51,758** | **50,428** | | **Gross Margin** | **74,291** | **75,795** | **60,980** | | Research and Development | 17,767 | 17,600 | 16,964 | | Sales and Marketing | 22,184 | 22,867 | 20,304 | | General and Administrative | 23,684 | 21,960 | 19,139 | | Amortization of Acquisition-Related Intangible Assets | 106 | 212 | 212 | | **Total Operating Expenses** | **63,741** | **62,639** | **56,619** | | **Operating Income** | **10,550** | **13,156** | **4,361** | | Other Income, Net | 2,336 | 681 | 4,487 | | Income Before Income Taxes | 12,886 | 13,837 | 8,848 | | Income Tax Expense | 2,465 | 1,055 | 759 | | **Net Income** | **10,421** | **12,782** | **8,089** | | **Earnings Per Share:** | | | | | Basic | 0.31 | 0.38 | 0.25 | | Diluted | 0.31 | 0.37 | 0.24 | [Consolidated Statements of Shareholders' Equity for the Years ended April 30, 2023, 2022 and 2021](index=65&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity%20for%20the%20Years%20ended%20April%2030%2C%202023%2C%202022%20and%202021) Shareholders' equity increased to **$139.334 million** as of April 30, 2023, driven by net income and stock-based compensation, partially offset by dividends Consolidated Statements of Shareholders' Equity Summary (in thousands of USD) | Item | April 30, 2021 | April 30, 2022 | April 30, 2023 | | :--- | :--- | :--- | :--- | | **Total Shareholders' Equity** | **122,391** | **132,976** | **139,334** | | Net Income | 8,089 | 12,782 | 10,421 | | Stock-Based Compensation | 2,546 | 3,956 | 5,183 | | Dividends Paid | (14,363) | (14,731) | (14,887) | | Proceeds from Stock Option Exercises | 6,697 | 8,578 | 5,641 | | Class A Common Stock Issued | 35,629,566 | 36,405,695 | 36,907,242 | | Class B Common Stock Issued | 1,821,587 | 1,821,587 | 1,821,587 | | Treasury Stock | (25,559) | (25,559) | (25,559) | [Consolidated Statements of Cash Flows for the Years ended April 30, 2023, 2022 and 2021](index=66&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Years%20ended%20April%2030%2C%202023%2C%202022%20and%202021) Operating cash flow was a **$0.38 million** outflow in FY2023, leading to a **$19.994 million** net decrease in cash and cash equivalents Consolidated Statements of Cash Flows Summary (in thousands of USD) | Cash Flow Type | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | (380) | 29,020 | 17,756 | | Net Cash from Investing Activities | (10,422) | (934) | (1,298) | | Net Cash from Financing Activities | (9,192) | (6,054) | (7,614) | | **Net Change in Cash and Cash Equivalents** | **(19,994)** | **22,032** | **8,844** | | Cash and Cash Equivalents at End of Period | 90,696 | 110,690 | 88,658 | | Income Taxes Paid | 8,511 | 300 | 518 | | Accrued Dividends Payable | 3,756 | 3,700 | 3,615 | [Notes to Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the basis of financial statement preparation, key accounting policies, and specific treatments for assets, liabilities, and income, including acquisitions and segment information [(1) Presentation and Summary of Significant Accounting Policies](index=67&type=section&id=%281%29%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note summarizes the basis of financial statement presentation and key accounting policies, including revenue recognition, asset valuation, and segment reporting - The company's business is divided into three main operating segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and traditional Enterprise Resource Planning (ERP) services and unallocated corporate expenses (Other)[286](index=286&type=chunk)[287](index=287&type=chunk) - Revenue recognition follows ASC 606, categorizing revenue into subscription fees, license fees, professional services and other, and maintenance fees, recognized based on the nature of performance obligations and the timing of control transfer[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) - As of April 30, 2023, total remaining performance obligations were approximately **$124 million**, with **52%** expected to be recognized as revenue within the next 12 months[298](index=298&type=chunk) - Capitalized software development costs are capitalized after technological feasibility is established and amortized based on estimated revenue or a three-year straight-line basis, whichever is greater; acquisition-related intangible assets are amortized over 1 to 8 years[312](index=312&type=chunk)[316](index=316&type=chunk) - Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually, with no impairment identified in fiscal years 2023 and 2022[320](index=320&type=chunk)[322](index=322&type=chunk) [(2) Investments](index=77&type=section&id=%282%29%20Investments) The investment portfolio, totaling **$23.937 million** in FY2023, includes U.S. Treasury and equity securities, generating both unrealized gains and realized losses Investment Portfolio Composition (in thousands of USD) | Investment Type | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | U.S. Treasury Securities | 7,305 | — | | Marketable Equity Securities | 16,632 | 16,826 | | **Total** | **23,937** | **16,826** | - In fiscal year 2023, marketable equity securities generated **$0.1 million** in unrealized holding gains, and U.S. Treasury securities generated **$0.1 million** in unrealized holding gains[353](index=353&type=chunk) - In fiscal year 2023, marketable equity securities generated **$0.1 million** in realized holding losses[354](index=354&type=chunk) [(3) Fair Value of Financial Instruments](index=78&type=section&id=%283%29%20Fair%20Value%20of%20Financial%20Instruments) Financial instruments are measured using a fair value hierarchy, with most assets, totaling **$105.289 million** in FY2023, utilizing Level 1 inputs - The company measures the fair value of financial instruments according to the fair value hierarchy framework (Level 1, Level 2, Level 3)[355](index=355&type=chunk) - Cash equivalents, U.S. Treasury securities, and marketable equity securities primarily use Level 1 inputs (quoted prices in active markets)[356](index=356&type=chunk) Assets Measured at Fair Value (in thousands of USD) | Item | April 30, 2023 (Level 1) | April 30, 2022 (Level 1) | | :--- | :--- | :--- | | Cash Equivalents | 81,352 | 98,459 | | U.S. Treasury Securities | 7,305 | — | | Marketable Securities | 16,632 | 16,826 | | **Total** | **105,289** | **115,285** | [(4) Property and Equipment](index=79&type=section&id=%284%29%20Property%20and%20Equipment) Net property and equipment increased to **$6.444 million** as of April 30, 2023, comprising buildings, computer equipment, and office furniture Property and Equipment Composition (in thousands of USD) | Item | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Buildings and Leasehold Improvements | 19,714 | 17,448 | | Computer Equipment and Purchased Software | 13,788 | 12,443 | | Office Furniture and Equipment | 5,312 | 5,003 | | **Total Cost** | **38,815** | **34,894** | | Accumulated Depreciation and Amortization | (32,371) | (31,240) | | **Net** | **6,444** | **3,654** | [(5) Acquisitions](index=79&type=section&id=%285%29%20Acquisitions) The company acquired Starboard Solutions Corp. for **$6.5 million** cash plus potential earn-outs, allocating **$3.7 million** to goodwill in FY2023 - On June 28, 2022, the company acquired certain assets of Starboard Solutions Corp., a private company innovating in supply chain network design software[362](index=362&type=chunk) - The acquisition price was approximately **$6.5 million** in cash, plus up to **$6 million** in contingent earn-out payments, dependent on subscription revenue targets over a three-year earn-out period[364](index=364&type=chunk) - The company allocated **$3.7 million** of the purchase price to goodwill, assigned to the Supply Chain Management segment, which is deductible for income tax purposes; acquisition costs of approximately **$0.186 million** were incurred in fiscal year 2023[364](index=364&type=chunk) [(6) Income Taxes](index=80&type=section&id=%286%29%20Income%20Taxes) Income tax expense increased to **$2.465 million** in FY2023, with an effective tax rate of **19.1%**, and net deferred tax assets of **$7.289 million** Income Tax Expense (in thousands of USD) | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Current Income Tax:** | | | | | Federal | 5,205 | 1,294 | 693 | | State | 1,352 | 615 | 386 | | **Subtotal** | **6,557** | **1,909** | **1,079** | | **Deferred Income Tax:** | | | | | Federal | (3,666) | (712) | (238) | | State | (426) | (142) | (82) | | **Subtotal** | **(4,092)** | **(854)** | **(320)** | | **Total Income Tax Expense** | **2,465** | **1,055** | **759** | - The effective income tax rate was **19.1%** in fiscal year 2023 and **7.6%** in fiscal year 2022[368](index=368&type=chunk) Deferred Tax Assets and Liabilities (in thousands of USD) | Item | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | **Total Deferred Tax Assets** | **10,150** | **7,292** | | Less: Valuation Allowance | (2,861) | (3,891) | | **Net Deferred Tax Assets** | **7,289** | **3,401** | | **Total Deferred Tax Liabilities** | **(4,969)** | **(5,173)** | | **Net Deferred Tax Assets (Liabilities)** | **2,320** | **(1,772)** | - As of April 30, 2023, the company had approximately **$0.4 million** in state net operating loss carryforwards and approximately **$12.6 million** in foreign net operating loss carryforwards[369](index=369&type=chunk) [(7) Shareholders' Equity](index=82&type=section&id=%287%29%20Shareholders%27%20Equity) Shareholders' equity details **5,273,057 outstanding stock options** and **$5.2 million** in FY2023 stock-based compensation, with no share repurchases - The company has two classes of common stock, Class A and Class B, with Class B convertible to Class A on a one-for-one basis, and Class B shareholders have the right to elect a majority of the directors[374](index=374&type=chunk) Outstanding Stock Options Overview (as of April 30, 2023) | Indicator | Quantity | Weighted-Average Exercise Price | | :--- | :--- | :--- | | Outstanding Options | 5,273,057 | $16.59 | | Exercisable Options | 1,818,957 | $15.47 | | Options Available for Grant | 1,627,143 | - | - Stock-based compensation expense for fiscal year 2023 was approximately **$5.2 million**; as of April 30, 2023, unrecognized stock-based compensation cost was approximately **$13.4 million**, expected to be recognized over a weighted-average period of **1.79 years**[332](index=332&type=chunk)[381](index=381&type=chunk) - The company did not repurchase any shares in fiscal year 2023; **946,321 shares** of Class A common stock remained available for repurchase under the plan approved in 2002[382](index=382&type=chunk)[174](index=174&type=chunk) [(8) Leases](index=83&type=section&id=%288%29%20Leases) Operating leases for facilities totaled **$1.44 million** in FY2023, with right-of-use assets at **$0.442 million** and a weighted-average remaining lease term of **1.2 years** Operating Lease Information (in thousands of USD) | Item | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Right-of-Use Assets | 442 | 93 | | Current Lease Liabilities | 411 | 54 | | Long-Term Lease Liabilities | 65 | 46 | | **Total Liabilities** | **476** | **100** | | Operating Lease Cost (FY2023) | 515 | - | | Short-Term Lease Cost (FY2023) | 703 | - | | Variable Lease Cost (FY2023) | 222 | - | | **Total Lease Cost (FY2023)** | **1,440** | **1,549** | | Weighted-Average Remaining Lease Term | 1.2 years | 1.9 years | | Weighted-Average Discount Rate | 3.1% | 3.2% | - The company leases a portion of its headquarters building to other tenants, generating approximately **$0.318 million** in lease income in fiscal year 2023[389](index=389&type=chunk) [(9) Commitments and Contingencies](index=85&type=section&id=%289%29%20Commitments%20and%20Contingencies) The company contributed **$0.465 million** to its 401(k) plan in FY2023 and provides customer indemnifications and product warranties, with no significant historical costs - The company offers a 401(k) profit-sharing plan to employees, with a company contribution of **$0.465 million** in fiscal year 2023[391](index=391&type=chunk) - The company typically indemnifies customers for intellectual property infringement, breaches of confidentiality agreements, and personal injury claims, and warrants software product performance[349](index=349&type=chunk)[350](index=350&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk) - Historically, the company has not incurred significant costs from such indemnifications or warranties, thus no related liabilities were recorded as of April 30, 2023[349](index=349&type=chunk)[350](index=350&type=chunk)[393](index=393&type=chunk) [(10) Segment Information](index=85&type=section&id=%2810%29%20Segment%20Information) Segment reporting shows SCM revenue of **$106.128 million** and operating income of **$29.925 million** in FY2023, with IT Consulting and Other segments also detailed - The company is divided into three reporting segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and traditional ERP and unallocated corporate expenses (Other)[394](index=394&type=chunk)[395](index=395&type=chunk)

American Software, Inc. (NASDAQ:AMSWA) Q4 2023 Earnings Conference Call June 8, 2023 5:00 PM ET Company Participants Vince Klinges - Chief Financial Officer Allan Dow - President and CEO Conference Call Participants Matt Pfau - William Blair Zach Cummins - B. Riley Securities Anja Soderstrom - Sidoti Matthew Galinko - Maxim Group Operator Good day, everyone. And welcome to today’s Fourth Quarter and Fiscal Year 2023 Results for American Software. At this time, all participants are in a listen-only mode. Lat ...

PART I—FINANCIAL INFORMATION This part covers the unaudited financial statements, management's discussion, market risks, and controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for American Software, Inc. and its subsidiaries, including balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes on significant accounting policies, revenue recognition, earnings per share, acquisitions, stock-based compensation, fair value measurements, industry segments, and contingencies for the periods ended January 31, 2023 and 2022 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and shareholders' equity at specific dates ASSETS (in thousands) | ASSETS (in thousands) | January 31, 2023 | April 30, 2022 | | :-------------------- | :--------------- | :------------- | | Cash and cash equivalents | $80,606 | $110,690 | | Total current assets | $144,563 | $156,191 | | Total assets | $190,064 | $192,835 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | | | | Total current liabilities | $54,700 | $57,489 | | Total liabilities | $55,068 | $59,859 | | Total shareholders' equity | $134,996 | $132,976 | - **Total assets** **decreased** from **$192,835** **thousand** at April 30, 2022, to **$190,064** **thousand** at January 31, 2023. **Cash and cash equivalents** **decreased** by **approximately $30 million**[10](index=10&type=chunk) - **Shareholders' equity** **increased** from **$132,976** **thousand** at April 30, 2022, to **$134,996** **thousand** at January 31, 2023[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net earnings over specific reporting periods (in thousands, except per share) | (in thousands, except per share) | Three Months Ended Jan 31, 2023 | Three Months Ended Jan 31, 2022 | Nine Months Ended Jan 31, 2023 | Nine Months Ended Jan 31, 2022 | | :------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $31,011 | $32,422 | $93,745 | $92,904 | | Gross margin | $18,738 | $18,950 | $56,311 | $54,240 | | Operating income | $2,956 | $3,239 | $8,280 | $7,699 | | Net earnings | $3,340 | $2,940 | $7,554 | $9,201 | | Basic EPS | $0.10 | $0.09 | $0.22 | $0.28 | | Diluted EPS | $0.10 | $0.09 | $0.22 | $0.27 | - For the three months ended January 31, 2023, **total revenue** **decreased** by **4%** year-over-year, while **net earnings** **increased** by **14%**[12](index=12&type=chunk) - For the nine months ended January 31, 2023, **total revenue** **increased** by **1%** year-over-year, but **net earnings** **decreased** by **18%**[12](index=12&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shows changes in shareholders' equity components, such as retained earnings and additional paid-in capital (in thousands) | (in thousands) | Balance at April 30, 2022 | Balance at January 31, 2023 | | :--------------- | :------------------------ | :-------------------------- | | Total shareholders' equity | $132,976 | $134,996 | | Retained deficit | $(17,236) | $(20,814) | | Additional paid-in capital | $171,948 | $177,532 | - **Total shareholders' equity** **increased** by **$2,020** **thousand** from April 30, 2022, to January 31, 2023, **primarily driven by an increase in additional paid-in capital** from stock option exercises and stock-based compensation, partially offset by **net earnings** and dividends declared[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports the cash inflows and outflows from operating, investing, and financing activities (in thousands) | (in thousands) | Nine Months Ended Jan 31, 2023 | Nine Months Ended Jan 31, 2022 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(10,466) | $14,050 | | Net cash (used in) investing activities | $(10,155) | $(801) | | Net cash (used in) financing activities | $(9,463) | $(3,552) | | Net change in cash and cash equivalents | $(30,084) | $9,697 | | Cash and cash equivalents at end of period | $80,606 | $98,355 | - The company experienced a **significant shift** in operating cash flow, moving from **$14,050** **thousand** provided in the nine months ended January 31, 2022, to **($10,466)** **thousand** used in the same period of 2023[18](index=18&type=chunk) - **Investing activities** used **substantially more cash**, **increased** from **($801)** **thousand** in 2022 to **($10,155)** **thousand** in 2023, **primarily due to the acquisition of Starboard Solutions Corp. for $6.5 million**[18](index=18&type=chunk)[63](index=63&type=chunk) [Notes to Condensed Consolidated Financial Statements – Unaudited](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20Unaudited) Provides detailed explanations and disclosures supporting the unaudited financial statements [A. Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=A.%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the basis of financial statement preparation and key accounting principles applied - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with **U.S. GAAP** for interim financial information and SEC rules, including all normal recurring adjustments. **Management's estimates and assumptions are crucial**, and **actual results may differ**[21](index=21&type=chunk)[22](index=22&type=chunk) - The Company is evaluating the potential effects of **ASU 2021-08**, 'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,' which **is effective** for fiscal years beginning after December 15, 2022[24](index=24&type=chunk) [B. Revenue Recognition](index=9&type=section&id=B.%20Revenue%20Recognition) Explains the company's policies for recognizing revenue from various sources and performance obligations - **Revenue is recognized when control of promised goods or services is transferred to clients**, **reflecting the expected consideration**. Revenue sources include software licenses, maintenance, consulting, implementation, training, and Software-as-a-Service (SaaS)[25](index=25&type=chunk)[27](index=27&type=chunk) - **Subscription fees for SaaS are recognized ratably over the arrangement term**. **Perpetual software license revenue is recognized once the license period begins and software is available**. **Professional services revenue is recognized over time as services are performed**[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) Deferred Revenue (in thousands) | Category | January 31, 2023 | April 30, 2022 | | :------- | :--------------- | :------------- | | Current | $40,706 | $41,953 | | Long-term | — | — | | Total | $40,706 | $41,953 | - As of January 31, 2023, remaining performance obligations totaled **approximately $119 million**, with **53%** **expected to be recognized over the next 12 months**[36](index=36&type=chunk) Revenue by Geography (in thousands) | Category | Three Months Ended Jan 31, 2023 | Three Months Ended Jan 31, 2022 | Nine Months Ended Jan 31, 2023 | Nine Months Ended Jan 31, 2022 | | :------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Domestic | $24,662 | $27

Financial Data and Key Metrics Changes - Total revenues for Q3 2023 were $31 million, a decrease of 4% compared to $32.4 million in the same period last year [11] - Subscription fees increased by 20% year-over-year to $13 million, while professional services and other revenues decreased by 27% to $8.4 million [11][12] - Adjusted EBITDA decreased by 6% to $5 million from $5.3 million last year, while adjusted net income increased by 18% to $4.5 million [16][18] Business Line Data and Key Metrics Changes - Subscription revenue growth was 20% year-over-year, contributing to 70% of total revenue, up from 62% in the same period last year [6][12] - Professional services revenue saw a significant decline, particularly in IT consulting, which decreased by 39% [12] - Maintenance revenues declined by 5% year-over-year to $8.6 million [12] Market Data and Key Metrics Changes - International revenues accounted for approximately 20% of total revenues, compared to 16% in the same period last year [16] - The backlog, referred to as remaining performance obligation, was $119 million, down 8% compared to the prior year due to shorter contract durations [18] Company Strategy and Development Direction - The company plans to leverage service delivery partners for ongoing and new projects to create a more profitable and flexible model [7] - Despite the economic uncertainty, the company sees a large growing market opportunity for its supply chain solutions [10] - The company is making adjustments to its fiscal year guidance, lowering revenue expectations due to reduced professional services [9][20] Management's Comments on Operating Environment and Future Outlook - Management noted that existing customers are scrutinizing costs, leading to longer collection times and elongated sales cycles [8] - There is confidence in customer relationships, with no uptick in churn observed so far [10] - Management expects project activity to recover, indicating that the worst period for professional services may be behind them [25] Other Important Information - The company maintained its prior adjusted EBITDA expectations of $18 million to $20 million despite the revenue outlook adjustment [10][20] - Cash and investments stood at approximately $105 million at the end of the quarter, with dividends of $3.7 million paid during the quarter [19] Q&A Session Summary Question: Insights on elongation of sales cycles - Management indicated that the selection process remains consistent, but final approvals are taking longer due to conservative spending by customers [22][23] Question: Expectations for professional services recovery - Management believes the worst is behind them, attributing the decline to seasonal factors and a focus on financial performance during the holiday period [25] Question: Update on M&A pipeline - The company is actively engaged in due diligence for potential M&A opportunities, with a number of prospects being considered [27] Question: Mechanics of maintaining EBITDA guidance despite revenue changes - Management explained that a higher mix of subscription revenue, which is a higher margin business, and conservative hiring practices contributed to maintaining EBITDA guidance [30][31] Question: Update on subscription margins and outlook - Management anticipates subscription margins to trend towards the mid-70s as the business scales up [33] Question: Hiring environment and talent acquisition - Management noted an improvement in the recruitment environment, with more candidates available, although labor costs have not significantly decreased [36] Question: Customer challenges in the current environment - Retailers are experiencing challenges, but overall, the company is not seeing outright cancellations or churn [38]

[General Information](index=1&type=section&id=General%20Information) [Form 10-Q Filing Details](index=1&type=section&id=Form%2010-Q%20Filing%20Details) This section provides the basic filing information for the Form 10-Q, including the company's name, jurisdiction, address, and stock exchange listing, confirming it is a quarterly report for the period ended October 31, 2022 - The filing is a **Quarterly Report on Form 10-Q** for the period ended **October 31, 2022**, for **AMERICAN SOFTWARE, INC.**, a Georgia corporation[2](index=2&type=chunk) Trading Information | Title of each class | Trading Symbol | Name of each exchange on which registered | | :------------------ | :------------- | :---------------------------------------- | | Common Stock | AMSWA | NASDAQ Global Select Market | [Filer Status and Shares Outstanding](index=2&type=section&id=Filer%20Status%20and%20Shares%20Outstanding) The company confirms compliance with SEC filing requirements and identifies itself as a Large Accelerated Filer. It also provides the number of outstanding shares for its Class A and Class B Common Stock as of December 1, 2022 - The registrant has filed **all required reports** and submitted **every Interactive Data File** during the preceding 12 months[3](index=3&type=chunk) - The registrant is classified as a **Large Accelerated Filer** and is not a shell company[4](index=4&type=chunk) Outstanding Shares as of December 1, 2022 | Classes | Outstanding at December 1, 2022 | | :------------------------------- | :------------------------------ | | Class A Common Stock, $.10 par value | 31,918,863 Shares | | Class B Common Stock, $.10 par value | 1,821,587 Shares | [Part I—Financial Information](index=4&type=section&id=Part%20I%E2%80%94Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes explaining the accounting policies, revenue recognition, acquisitions, and other financial disclosures for the periods ended October 31, 2022 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | ASSETS | October 31, 2022 | April 30, 2022 | | :----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :--------------- | :------------- | | Cash and cash equivalents | $ 83,962 | $ 110,690 | | Investments | 22,805 | 16,826 | | Trade accounts receivable, less allowance for doubtful accounts of $354 at October 31, 2022 and $423 at April 30, 2022: | | | | Billed | 24,127 | 20,619 | | Unbilled | 2,690 | 2,989 | | Prepaid expenses and other current assets | 5,384 | 5,067 | | **Total current assets** | **138,968** | **156,191** | | Property and equipment, net | 5,847 | 3,654 | | Capitalized software, net | 867 | 1,586 | | Goodwill | 29,558 | 25,888 | | Other intangibles, net | 2,609 | 147 | | Lease right of use assets | 646 | 935 | | Deferred sales commissions—noncurrent | 1,702 | 2,050 | | Deferred income taxes | 227 | — | | Other assets | 2,588 | 2,384 | | **Total assets** | **$ 183,012** | **$ 192,835** | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Current liabilities: | | | | Accounts payable | $ 2,485 | $ 2,506 | | Accrued compensation and related costs | 3,723 | 6,918 | | Dividends payable | 3,711 | 3,700 | | Operating lease obligations | 441 | 541 | | Other current liabilities | 2,361 | 1,871 | | Deferred revenue | 36,008 | 41,953 | | **Total current liabilities** | **48,729** | **57,489** | | Deferred income taxes | — | 1,772 | | Long-term operating lease obligations | 250 | 461 | | Other long-term liabilities | 465 | 137 | | **Total liabilities** | **49,444** | **59,859** | | Shareholders' equity: | | | | Common stock: Class A, $.10 par value. Authorized 50,000,000 shares: 36,503,495 (31,914,863, net) shares issued and outstanding at October 31, 2022 and 36,405,695 (31,817,063, net) shares issued and outstanding at April 30, 2022 | 3,650 | 3,641 | | Class B, $.10 par value. Authorized 10,000,000 shares: 1,821,587 shares issued and outstanding at October 31, 2022 and April 30, 2022; convertible into Class A Common Shares on a one-for-one basis | 182 | 182 | | Additional paid-in capital | 175,733 | 171,948 | | Retained deficit | (20,438) | (17,236) | | Class A treasury stock, 4,588,632 shares at October 31, 2022 and April 30, 2022, at cost | (25,559) | (25,559) | | **Total shareholders' equity** | **133,568** | **132,976** | | Commitments and contingencies | | | | **Total liabilities and shareholders' equity** | **$ 183,012** | **$ 192,835** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :----------------------------------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue: | | | | | | Subscription fees | $ 12,326 | $ 10,361 | $ 24,388 | $ 20,149 | | License | 688 | 805 | 1,008 | 1,297 | | Professional services and other | 9,594 | 10,779 | 19,603 | 20,308 | | Maintenance | 8,830 | 9,266 | 17,735 | 18,728 | | **Total revenue** | **31,438** | **31,211** | **62,734** | **60,482** | | Cost of revenue: | | | | | | Subscription fees | 4,059 | 3,404 | 7,677 | 6,628 | | License | 94 | 198 | 183 | 357 | | Professional services and other | 6,847 | 7,477 | 14,151 | 14,487 | | Maintenance | 1,577 | 1,746 | 3,150 | 3,720 | | **Total cost of revenue** | **12,577** | **12,825** | **25,161** | **25,192** | | **Gross margin** | **18,861** | **18,386** | **37,573** | **35,290** | | Research and development | 4,364 | 4,278 | 8,818 | 8,702 | | Sales and marketing | 5,697 | 5,892 | 11,609 | 12,012 | | General and administrative | 6,001 | 5,476 | 11,766 | 10,010 | | Amortization of acquisition-related intangibles | 32 | 53 | 56 | 106 | | **Total operating expenses** | **16,094** | **15,699** | **32,249** | **30,830** | | **Operating income** | **2,767** | **2,687** | **5,324** | **4,460** | | Other income (loss): | | | | |\n| Interest income | 364 | 97 | 573 | 190 |\n| Other, net | (509) | 833 | (599) | 1,177 |\n| **Earnings before income taxes** | **2,622** | **3,617** | **5,298** | **5,827** |\n| Income tax expense (benefit) | 541 | 303 | 1,084 | (434) |\n| **Net earnings** | **$ 2,081** | **$ 3,314** | **$ 4,214** | **$ 6,261** |\n| Earnings per common share (a) : | | | | |\n| Basic | $ 0.06 | $ 0.10 | $ 0.12 | $ 0.19 |\n| Diluted | $ 0.06 | $ 0.10 | $ 0.12 | $ 0.18 |\n| Cash dividends declared per common share | $ 0.11 | $ 0.11 | $ 0.22 | $ 0.22 |\n| Shares used in the calculation of earnings per common share: | | | | |\n| Basic | 33,720 | 33,337 | 33,688 | 33,195 |\n| Diluted | 34,071 | 34,685 | 34,040 | 34,448 | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Condensed Consolidated Statements of Shareholders' Equity (in thousands, except share data) | For the Three Months Ended October 31, 2022 | Class A Shares | Class A Amount | Class B Shares | Class B Amount | Additional paid-in capital | Retained deficit | Treasury stock | Total shareholders' equity | | :------------------------------------------ | :------------- | :------------- | :------------- | :------------- | :------------------------- | :--------------- | :------------- | :------------------------- | | Balance at July 31, 2022 | 36,448,695 | $ 3,645 | 1,821,587 | $ 182 | $ 173,721 | $ (18,808) | $ (25,559) | $ 133,181 | | Proceeds from stock options exercised* | 54,800 | 5 | — | — | 669 | — | — | 674,000 | | Stock-based compensation | — | — | — | — | 1,343 | — | — | 1,343 | | Net earnings | — | — | — | — | — | 2,081 | — | 2,081 | | Dividends declared | — | — | — | — | — | (3,711) | — | (3,711) | | Balance at October 31, 2022 | 36,503,495 | $ 3,650 | 1,821,587 | $ 182 | $ 175,733 | $ (20,438) | $ (25,559) | $ 133,568 | | For the Six Months Ended October 31, 2022 | Class A Shares | Class A Amount | Class B Shares | Class B Amount | Additional paid-in capital | Retained deficit | Treasury stock | Total shareholders' equity | | :---------------------------------------- | :------------- | :------------- | :------------- | :------------- | :------------------------- | :--------------- | :------------- | :------------------------- | | Balance at April 30, 2022 | 36,405,695 | 3,641 | 1,821,587 | 182 | 171,948 | (17,236) | (25,559) | 132,976 | | Proceeds from stock options exercised* | 97,800 | 9 | — | — | 1,136 | | — | 1,145 | | Stock-based compensation | — | — | — | — | 2,649 | | — | 2,649 | | Net earnings | — | — | — | — | — | 4,214 | — | 4,214 | | Dividends declared* | — | — | — | — | — | (7,416) | — | (7,416) | | Balance at October 31, 2022 | 36,503,495 | 3,650 | 1,821,587 | 182 | 175,733 | (20,438) | (25,559) | 133,568 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :------------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash flows from operating activities: | | | | Net earnings | $ 4,214 | $ 6,261 | | Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | Depreciation and amortization | 1,601 | 2,170 | | Stock-based compensation expense | 2,649 | 1,817 | | Net gain on investments | 331 | (1,193) | | Deferred income taxes | (1,999) | (99) | | Changes in operating assets and liabilities: | | | | Purchases of trading securities | (7,094) | (174) | | Proceeds from maturities and sales of trading securities | 784 | 210 | | Accounts receivable, net | (3,209) | 4,502 | | Prepaid expenses and other assets | (173) | (2,013) |\n| Accounts payable and other liabilities | (2,420) | (2,595) |\n| Deferred revenue | (5,945) | (1,174) |\n| **Net cash (used in) provided by operating activities** | **(11,261)** | **7,712** |\n| Cash flows from investing activities: | | |\n| Purchases of property and equipment, net of disposals | (2,706) | (615) |\n| Purchases of business | (6,500) | — |\n| **Net cash (used in) investing activities** | **(9,206)** | **(615)** |\n| Cash flows from financing activities: | | |\n| Proceeds from exercise of stock options | 1,145 | 5,714 |\n| Dividends paid | (7,406) | (7,268) |\n| **Net cash (used in) financing activities** | **(6,261)** | **(1,554)** |\n| **Net change in cash and cash equivalents** | **(26,728)** | **5,543** |\n| Cash and cash equivalents at beginning of period | 110,690 | 88,658 |\n| **Cash and cash equivalents at end of period** | **$ 83,962** | **$ 94,201** |\n| Supplemental disclosure of cash flow information: | | |\n| Cash paid during the period for: | | |\n| Income taxes, net of refunds | $ 2,997 | $ 176 | [Notes to Condensed Consolidated Financial Statements – Unaudited](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20Unaudited) [A. Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=A.%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for the unaudited interim financial statements, confirming adherence to U.S. GAAP and SEC regulations. It also details the principles of consolidation and the company's ongoing evaluation of recent accounting pronouncements, specifically ASU 2021-08 regarding business combinations - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with **U.S. GAAP** for interim financial information and **SEC instructions**, including all normal recurring adjustments[21](index=21&type=chunk) - The company is evaluating the potential effects of **ASU 2021-08**, '**Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers**,' which is effective for fiscal years beginning after December 15, 2022[24](index=24&type=chunk) [B. Revenue Recognition](index=9&type=section&id=B.%20Revenue%20Recognition) This note details the company's revenue recognition policies under ASC Topic 606, outlining the five-step process for identifying contracts, performance obligations, transaction price, allocation, and attribution. It describes revenue sources (subscriptions, licenses, professional services, maintenance) and how contract balances and remaining performance obligations are managed, including disaggregated revenue by geography - Revenue is recognized when control of promised goods or services is transferred to clients, reflecting the expected consideration, in accordance with **ASU No. 2014-09 (Topic 606)**[25](index=25&type=chunk) - **Subscription fees (SaaS) revenue** is generally recognized ratably over the term of the arrangement, as clients access and use software hosted by the company or a third party[28](index=28&type=chunk) - As of October 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately **$122.7 million**, with about **50% expected to be recognized over the next 12 months**[36](index=36&type=chunk) Revenue by Geography (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :------------ | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Domestic | $ 25,570 | $ 26,197 | $ 51,229 | $ 50,624 | | International | 5,868 | 5,014 | 11,505 | 9,858 | | **Total** | **$ 31,438** | **$ 31,211** | **$ 62,734** | **$ 60,482** | [C. Declaration of Dividend Payable](index=12&type=section&id=C.%20Declaration%20of%20Dividend%20Payable) This note reports the declaration of a quarterly cash dividend of $0.11 per share for both Class A and Class B common stock by the Board of Directors on August 17, 2022, with payment scheduled for December 2, 2022 - On August 17, 2022, the Board of Directors declared a quarterly cash dividend of **$0.11 per share** for Class A and Class B common stock, payable on December 2, 2022[41](index=41&type=chunk) [D. Earnings Per Common Share](index=12&type=section&id=D.%20Earnings%20Per%20Common%20Share) This note details the computation of basic and diluted earnings per common share, utilizing the 'two-class' method for both basic and Class B diluted EPS, and the 'if-converted' method for Class A diluted EPS, in compliance with FASB ASC 260. It also specifies the number of options excluded from diluted EPS calculations due to exercise prices exceeding market prices - The company uses the **'two-class' method** for basic EPS and Class B diluted EPS, and the **'if-converted' method** for Class A diluted EPS, due to its two classes of common stock with distinct dividend and convertibility rights[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) Basic Earnings Per Common Share (in thousands, except per share amounts) | | Three Months Ended October 31, 2022 | Six Months Ended October 31, 2022 | | :--------------------------------------------------------- | :---------------------------------- | :-------------------------------- | | Distributed earnings (Class A Common Shares) | $ 0.11 | $ 0.22 | | Undistributed losses (Class A Common Shares) | (0.05) | (0.10) | | Total (Class A Common Shares) | $ 0.06 | $ 0.12 | | Distributed earnings (Class B Common Shares) | $ 0.11 | $ 0.22 | | Undistributed losses (Class B Common Shares) | (0.05) | (0.10) | | Total (Class B Common Shares) | $ 0.06 | $ 0.12 | | Basic weighted average common shares outstanding (Class A) | 31,898 | 31,866 | | Basic weighted average common shares outstanding (Class B) | 1,822 | 1,822 | - For the three and six months ended October 31, 2022, options to purchase **3,426,398** and **3,286,253 Class A Common Shares**, respectively, were excluded from diluted EPS computation because their exercise prices exceeded the average market price[59](index=59&type=chunk) [E. Acquisitions](index=16&type=section&id=E.%20Acquisitions) This note details the company's accounting for business combinations using the acquisition method and specifically describes the acquisition of Starboard Solutions Corp. on June 28, 2022. The acquisition, valued at approximately $6.5 million in cash plus potential earnout payments, aims to integrate Starboard's supply chain network design software into the Logility Digital Supply Chain Platform - The company acquired certain assets of Starboard Solutions Corp. on June 28, 2022, for approximately **$6.5 million in cash**, plus up to **$6.0 million in contingent earnout payments** over a three-year period[61](index=61&type=chunk)[63](index=63&type=chunk) - Starboard's unique supply chain visualization solution, which uses gaming technology for 'what if' analysis and optimizes for unknown locations, will be integrated into the **Logility Digital Supply Chain Platform**[62](index=62&type=chunk) Acquisition-Date Fair Value of Consideration Transferred (in thousands) | Other assets | 340 | | :--------------------- | :-------- | | Goodwill | 3,670 | | Non-compete | 170 | | Current technology | 2,500 | | Customer relationships | 160 | | **Total assets acquired** | **6,840** | | Long-term liabilities | (340) | | **Net assets acquired** | **$ 6,500** | [F. Stock-Based Compensation](index=17&type=section&id=F.%20Stock-Based%20Compensation) This note provides details on stock option grants, compensation expenses, and the impact of stock option exercises on income tax benefits. It also reports the total intrinsic value of exercised options and the remaining unrecognized compensation cost - The company granted options for **1,424,000** and **1,308,500 shares** of Class A common stock during the six months ended October 31, 2022 and 2021, respectively[67](index=67&type=chunk) - Stock option compensation cost was approximately **$2.6 million** for the six months ended October 31, 2022, with an income tax benefit of approximately **$63,000** from option exercises[67](index=67&type=chunk) - As of October 31, 2022, unrecognized compensation cost related to unvested stock option awards was approximately **$15.7 million**, expected to be recognized over a weighted average period of **1.96 years**[68](index=68&type=chunk) [G. Fair Value of Financial Instruments](index=18&type=section&id=G.%20Fair%20Value%20of%20Financial%20Instruments) This note describes the company's fair value hierarchy for measuring financial instruments, categorizing inputs into Level 1, 2, and 3. It provides the fair value of cash equivalents and marketable securities as of October 31, 2022, and April 30, 2022, primarily using Level 1 inputs - The company measures investments using a fair value hierarchy: **Level 1** (quoted prices in active markets for identical instruments), **Level 2** (quoted prices for similar instruments or model-derived valuations with observable inputs), and **Level 3** (valuations with unobservable inputs)[70](index=70&type=chunk)[71](index=71&type=chunk) Fair Value of Financial Instruments (in thousands) as of October 31, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance | | :---------------------- | :----------------------------------------------------------- | :-------------------------------------------- | :---------------------------------------- | :-------- | | Cash equivalents | $ 77,498 | $ — | $ — | $ 77,498 | | Marketable securities | 22,805 | — | — | 22,805 | | **Total** | **$ 100,303** | **$ —** | **$ —** | **$ 100,303** | [H. Stock Repurchases](index=18&type=section&id=H.%20Stock%20Repurchases) This note details the company's stock repurchase program, including the Board of Directors' authorization to repurchase up to an additional 2.0 million shares of Class A common stock. As of October 31, 2022, the company had repurchased a total of 4,588,632 shares at a cost of approximately $25.6 million under all authorized plans - On August 19, 2002, the Board authorized the repurchase of up to an additional **2.0 million shares** of Class A common stock through open market purchases[75](index=75&type=chunk) - As of October 31, 2022, a total of **4,588,632 shares** of common stock have been repurchased at a cost of approximately **$25.6 million** under all authorized plans[76](index=76&type=chunk) [I. Comprehensive Income](index=20&type=section&id=I.%20Comprehensive%20Income) This note states that Condensed Consolidated Statements of Comprehensive Income are not included in the report because comprehensive income and net earnings would be substantially the same - Condensed Consolidated Statements of Comprehensive Income are not included as comprehensive income and net earnings would be substantially the same[78](index=78&type=chunk) [J. Industry Segments](index=21&type=section&id=J.%20Industry%20Segments) This note identifies the company's three operating segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and Other (including American Software ERP and unallocated corporate expenses). It provides a breakdown of revenue, operating income/loss, capital expenditures, and depreciation/amortization for each segment - The company manages its business through **three operating segments**: **Supply Chain Management (SCM)**, **Information Technology Consulting (IT Consulting)**, and **Other** (American Software ERP and unallocated corporate expenses)[80](index=80&type=chunk)[81](index=81&type=chunk) Segment Revenue and Operating Income (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :----------------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue: | | | | | | Supply Chain Management | $ 26,752 | $ 25,380 | $ 52,934 | $ 49,631 | | IT Consulting | 4,159 | 5,226 | 8,674 | 9,702 | | Other | 527 | 605 | 1,126 | 1,149 | | **Total Revenue** | **$ 31,438** | **$ 31,211** | **$ 62,734** | **$ 60,482** | | Operating income/(loss): | | | | | | Supply Chain Management | $ 7,646 | $ 6,718 | $ 14,825 | $ 12,073 | | IT Consulting | 217 | 336 | 432 | 499 | | Other | (5,096) | (4,367) | (9,933) | (8,112) | | **Total Operating Income** | **$ 2,767** | **$ 2,687** | **$ 5,324** | **$ 4,460** | [K. Major Clients](index=22&type=section&id=K.%20Major%20Clients) This note confirms that no single client accounted for a significant portion (more than 10%) of the company's total revenue during the three and six months ended October 31, 2022, and 2021 - No single client accounted for **more than 10% of total revenue** for the three and six months ended October 31, 2022 and 2021[83](index=83&type=chunk) [L. Contingencies](index=23&type=section&id=L.%20Contingencies) This note addresses the company's indemnification obligations for intellectual property infringement and software product warranties, noting no historical or expected future costs. It also states that the ultimate disposition of various claims arising in the ordinary course of business is not expected to have a material adverse effect on the company's financial position or results of operations - The company indemnifies clients against intellectual property infringement claims and warrants product operation, but historically has not incurred and does not expect future costs related to these obligations[85](index=85&type=chunk)[86](index=86&type=chunk) - Management believes that the ultimate disposition of various claims arising in the ordinary course of business will not have a material adverse effect on the company's financial position or results of operations[86](index=86&type=chunk) [M. Subsequent Event](index=23&type=section&id=M.%20Subsequent%20Event) This note reports a subsequent event where the Board of Directors declared another quarterly cash dividend of $0.11 per share on November 16, 2022, payable on February 17, 2023 - On November 16, 2022, the Board of Directors declared a quarterly cash dividend of **$0.11 per share** for Class A and Class B common stock, payable on February 17, 2023[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including forward-looking statements, an economic overview, company business details, and a detailed comparison of financial performance for the three and six months ended October 31, 2022, versus 2021. It also covers liquidity, capital resources, and critical accounting policies [FORWARD-LOOKING STATEMENTS](index=24&type=section&id=FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements regarding future financial performance, business strategy, and other events, identifiable by words like '**anticipate**,' '**intend**,' '**plan**,' and '**expect**'[90](index=90&type=chunk) - These statements are subject to uncertainties and risks, including economic uncertainty, market conditions, competitive pressures, and acquisition challenges, which could cause actual results to differ materially[91](index=91&type=chunk) [ECONOMIC OVERVIEW](index=24&type=section&id=ECONOMIC%20OVERVIEW) - The global economy faces turbulent challenges including high inflation, tightening financial conditions, geopolitical conflicts, and the lingering COVID-19 pandemic, leading to a forecast slowdown in global growth[92](index=92&type=chunk) - Uncertain economic conditions and complex supply chain challenges may drive businesses to invest in solutions that improve operating margins and provide rapid return on investment, potentially favoring the company's supply chain solutions[92](index=92&type=chunk) [COMPANY OVERVIEW](index=25&type=section&id=COMPANY%20OVERVIEW) - American Software, incorporated in Georgia in 1970, operates through **three segments**: **Supply Chain Management (SCM)**, **Information Technology Consulting**, and **Other**, with SCM being its core market[94](index=94&type=chunk) - The company delivers digital supply chain optimization via the **Logility Digital Supply Chain Platform**, leveraging AI and machine learning for integrated business planning, advanced analytics, and network design[95](index=95&type=chunk)[96](index=96&type=chunk) - The Logility platform is highly regarded, named a leader in multiple IDC MarketScape reports and positioned in Gartner's Challenger quadrant for Supply Chain Planning Solutions, serving approximately **860 clients in 80 countries**[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) [Recent Accounting Pronouncements](index=26&type=section&id=Recent%20Accounting%20Pronouncements) - For information regarding recent accounting pronouncements and their impact, refer to **Note A** in the Notes to Condensed Consolidated Financial Statements[105](index=105&type=chunk) [COMPARISON OF RESULTS OF OPERATIONS](index=27&type=section&id=COMPARISON%20OF%20RESULTS%20OF%20OPERATIONS) Three-Month Comparison: Revenue and Expense Items as Percentage of Total Revenue and Pct. Change (2022 vs. 2021) | | Three Months Ended October 31, 2022 (Percentage of Revenue) | Three Months Ended October 31, 2021 (Percentage of Revenue) | Pct. Change in Dollars 2022 vs. 2021 | | :------------------------------------ | :---------------------------------------------------------- | :---------------------------------------------------------- | :----------------------------------- | | Revenue: | | | | | Subscription fees | 39 % | 33 % | 19 % | | License | 2 % | 2 % | (15)% |\n| Professional services and other | 31 % | 35 % | (11)% |\n| Maintenance | 28 % | 30 % | (5)% |\n| **Total revenue** | **100 %** | **100 %** | **1 %** |\n| Cost of revenue: | | | |\n| Subscription fees | 13 % | 11 % | 19 % |\n| License | — % | 1 % | (53)% |\n| Professional services and other | 22 % | 24 % | (8)% |\n| Maintenance | 5 % | 6 % | (10)% |\n| **Total cost of revenue** | **40 %** | **42 %** | **(2)%** |\n| **Gross margin** | **60 %** | **58 %** | **3 %** |\n| Research and development | 14 % | 14 % | 2 % |\n| Sales and marketing | 18 % | 19 % | (3)% |\n| General and administrative | 19 % | 18 % | 10 % |\n| **Total operating expenses** | **51 %** | **51 %** | **3 %** |\n| **Operating income** | **9 %** | **7 %** | **3 %** |\n| Other income: | | | |\n| Other, net | — % | 3 % | nm |\n| **Earnings before income taxes** | **9 %** | **10 %** | **(28)%** |\n| Income tax expense | 2 % | 1 % | 79 % |\n| **Net earnings** | **7 %** | **9 %** | **(37)%** | Six-Month Comparison: Revenue and Expense Items as Percentage of Total Revenue and Pct. Change (2022 vs. 2021) | | Six Months Ended October 31, 2022 (Percentage of Revenue) | Six Months Ended October 31, 2021 (Percentage of Revenue) | Pct. Change in Dollars 2022 vs. 2021 | | :------------------------------------ | :-------------------------------------------------------- | :-------------------------------------------------------- | :----------------------------------- | | Revenue: | | | | | Subscription fees | 39 % | 33 % | 21 % | | License | 2 % | 2 % | (22)% | | Professional services and other | 31 % | 34 % | (3)% | | Maintenance | 28 % | 31 % | (5)% | | **Total revenue** | **100 %** | **100 %** | **4 %** |\n| Cost of revenue: | | | |\n| Subscription fees | 12 % | 11 % | 16 % |\n| License | — % | 1 % | (49)% |\n| Professional services and other | 23 % | 24 % | (2)% |\n| Maintenance | 5 % | 6 % | (15)% |\n| **Total cost of revenue** | **40 %** | **42 %** | **— %** |\n| **Gross margin** | **60 %** | **58 %** | **6 %** |\n| Research and development | 14 % | 14 % | 1 % |\n| Sales and marketing | 19 % | 20 % | (3)% |\n| General and administrative | 19 % | 17 % | 18 % |\n| **Total operating expenses** | **51 %** | **51 %** | **5 %** |\n| **Operating income** | **9 %** | **7 %** | **19 %** |\n| Other income: | | | |\n| Other, net | — % | 2 % | nm |\n| **Earnings before income taxes** | **9 %** | **9 %** | **(9)%** |\n| Income tax expense (benefit) | 2 % | (1)% | nm |\n| **Net earnings** | **7 %** | **10 %** | **(33)%** | [REVENUE](index=28&type=section&id=REVENUE) - Total revenue increased by **1%** for the three months and **4%** for the six months ended October 31, 2022, primarily driven by a significant increase in subscription fees[113](index=113&type=chunk)[114](index=114&type=chunk) - International revenue represented approximately **19%** and **18% of total revenue** for the three and six months ended October 31, 2022, respectively, up from **16%** in the prior year[115](index=115&type=chunk) [Subscription Fees](index=29&type=section&id=Subscription%20Fees) - Subscription fees revenue increased by **19%** for the three months and **21%** for the six months ended October 31, 2022, primarily due to an increase in contracts, higher cloud services annual contract value, and multi-year contracts[116](index=116&type=chunk) Subscription Fees Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :---------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 12,326 | $ 10,361 | 19 % | | **Total subscription fees revenue** | **$ 12,326** | **$ 10,361** | **19 %** | | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | % Change | | :---------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Supply Chain Management | $ 24,388 | $ 20,149 | 21 % | | **Total subscription fees revenue** | **$ 24,388** | **$ 20,149** | **21 %** | [License Revenue](index=29&type=section&id=License%20Revenue) - License fee revenue decreased by **15%** for the three months and **22%** for the six months ended October 31, 2022, primarily attributable to the SCM segment[118](index=118&type=chunk) - The direct sales channel accounted for approximately **100% of license fee revenues** for both periods in 2022, compared to **95%** and **86%** in the comparable periods last year, with direct sales margins increasing[119](index=119&type=chunk) License Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :-------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 688 | $ 800 | (14)% | | Other | — | 5 | — % | | **Total license revenue** | **$ 688** | **$ 805** | **(15)%**| | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Supply Chain Management | $ 992 | $ 1,276 | (22)% | | Other | 16 | 21 | (24)% | | **Total license revenue** | **$ 1,008** | **$ 1,297** | **(22)%**| [Professional Services and Other Revenue](index=30&type=section&id=Professional%20Services%20and%20Other%20Revenue) - Professional services and other revenue decreased by **11%** for the three months and **3%** for the six months ended October 31, 2022, mainly due to lower revenue from the Other and IT Consulting segments[120](index=120&type=chunk) - IT Consulting segment revenue decreased by **20%** and **11%** for the three and six months, respectively, due to demand for project work[121](index=121&type=chunk) Professional Services and Other Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :-------------------------------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 5,224 | $ 5,263 | (1)% | | IT Consulting | 4,159 | 5,226 | (20)% | | Other | 211 | 290 | (27)% | | **Total professional services and other revenue** | **$ 9,594** | **$ 10,779** | **(11)%**| | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | % Change | | :-------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Supply Chain Management | $ 10,444 | $ 10,099 | 3 % | | IT Consulting | 8,674 | 9,702 | (11)% | | Other | 485 | 507 | (4)% | | **Total professional services and other revenue** | **$ 19,603** | **$ 20,308** | **(3)%** | [Maintenance Revenue](index=31&type=section&id=Maintenance%20Revenue) - Maintenance revenue decreased by **5%** for both the three and six months ended October 31, 2022, primarily due to a normal client attrition rate in the SCM segment[123](index=123&type=chunk) - The SCM segment accounted for **96% of total maintenance revenue** for the three and six months ended October 31, 2022[123](index=123&type=chunk) Maintenance Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :---------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 8,514 | $ 8,956 | (5)% | | Other | 316

Financial Data and Key Metrics Changes - Total revenues for Q2 FY '23 were $31.4 million, a 1% increase from $31.2 million in the same period last year, primarily driven by a 19% year-over-year increase in subscription fees to $12.3 million [11] - Professional services revenue decreased by 11% to $9.6 million from $10.8 million in the same period a year ago, reflecting a 1% decrease in the supply chain unit and a 20% decrease in the IT consulting business [11] - Adjusted EBITDA increased by 4% to $4.9 million from $4.8 million last year, while adjusted net income decreased by 21% to $3.3 million [15] Business Line Data and Key Metrics Changes - Subscription revenue grew by 19% year-over-year, contributing to 67% of total revenue, up from 63% in the same period last year [6][12] - Maintenance revenues declined by 5% year-over-year to $8.8 million, reflecting a normal falloff rate [12] - Professional services revenue decline was attributed to a pullback in IT consulting, which is sensitive to macroeconomic conditions [7] Market Data and Key Metrics Changes - International revenues accounted for approximately 19% of total revenues, up from 16% in the same period last year [15] - The company noted a moderation in pipeline expansion and delays in project start dates due to macroeconomic uncertainties [9] Company Strategy and Development Direction - The company is focusing on expanding its footprint through acquisitions, with plans to pursue at least one more strategic acquisition before the end of the fiscal year [8] - The management expressed confidence in the long-term need for transformative supply chain solutions, despite current market challenges [10] Management's Comments on Operating Environment and Future Outlook - Management adjusted fiscal year revenue guidance to between $125.5 million and $127.5 million, primarily due to a reduction in expectations for professional services [9] - The company expects recurring revenue to approach the low end of original guidance, between $85.5 million and $87.5 million [9] - Management remains optimistic about the market opportunity and anticipates a reacceleration of growth in the new year [10] Other Important Information - The company exited the quarter with remaining performance obligations (RPO) of $123 million, with total RPO relatively flat from the prior year [17] - Cash and investments at the end of the quarter were approximately $106.8 million, and the company paid $3.7 million in dividends during the quarter [17] Q&A Session Summary Question: Expectations for project movement after the holiday season - Management indicated confidence that projects would resume in January as clients are pausing due to the holiday season, not due to cancellations [22] Question: Reception of the Starboard acquisition - The reception has been strong, with new contracts already underway and a tripled pipeline since the acquisition [24] Question: Client staffing challenges and project delays - Staffing challenges persist, but delays are primarily due to project timing related to the holiday season [28] Question: Subscription pipeline and deal cycles - The subscription pipeline is steady, with expectations for increased activity after the holidays as clients finalize budgets [35] Question: Decline in the Proven Method business - The decline was due to project turnover without replenishment, but efforts are being made to expand the client base [39] Question: Subscription gross margin impacts - Some short-term adjustments in subscription gross margin were due to investments in hosting services, with expectations for improvement in subsequent quarters [41]