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]

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%E2%80%94Financial%20Information) This section presents the unaudited financial information for American Software, Inc. for the quarter ended July 31, 2022 [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., including the balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes on accounting policies, revenue recognition, acquisitions, and other financial disclosures for the quarter ended July 31, 2022 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, including assets, liabilities, and equity | Metric | July 31, 2022 (in thousands) | April 30, 2022 (in thousands) | | :----- | :--------------------------- | :---------------------------- | | Total Assets | $187,599 | $192,835 | | Cash and cash equivalents | $97,878 | $110,690 | | Total Liabilities | $54,418 | $59,859 | | Total Shareholders' Equity | $133,181 | $132,976 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net earnings over the reporting period | Metric | Three Months Ended July 31, 2022 (in thousands) | Three Months Ended July 31, 2021 (in thousands) | % Change YoY | | :----- | :---------------------------------------------- | :---------------------------------------------- | :----------- | | Total Revenue | $31,296 | $29,271 | 7% | | Subscription fees | $12,062 | $9,788 | 23% | | Operating Income | $2,557 | $1,773 | 44% | | Net Earnings | $2,133 | $2,947 | (28)% | | Basic EPS | $0.06 | $0.09 | (33)% | | Diluted EPS | $0.06 | $0.09 | (33)% | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This statement outlines changes in the company's equity accounts over the reporting period | Metric | July 31, 2022 (in thousands) | April 30, 2022 (in thousands) | | :----- | :--------------------------- | :---------------------------- | | Total Shareholders' Equity | $133,181 | $132,976 | | Net earnings | $2,133 | N/A | | Dividends declared | $(3,705) | N/A | | Stock-based compensation | $1,306 | N/A | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities | Cash Flow Activity | Three Months Ended July 31, 2022 (in thousands) | Three Months Ended July 31, 2021 (in thousands) | | :----------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash (used in) provided by operating activities | $(1,518) | $3,034 | | Net cash used in investing activities | $(8,072) | $(302) | | Net cash (used in) provided by financing activities | $(3,222) | $464 | | Net change in cash and cash equivalents | $(12,812) | $3,196 | [Notes to Condensed Consolidated Financial Statements – Unaudited](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20Unaudited) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [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 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, relying on management estimates and assumptions[23](index=23&type=chunk)[24](index=24&type=chunk) - The company is evaluating the potential effects of ASU 2021-08, which requires recognizing and measuring contract assets and liabilities acquired in a business combination in accordance with Topic 606[26](index=26&type=chunk) [B. Revenue Recognition](index=9&type=section&id=B.%20Revenue%20Recognition) This note details the company's policies and methods for recognizing revenue from various sources - Revenue is recognized when control of promised goods or services is transferred to clients, following a five-step process, from software licenses, maintenance, professional services, and Software-as-a-Service (SaaS)[27](index=27&type=chunk)[29](index=29&type=chunk) - Subscription fees (SaaS) are recognized ratably over the arrangement term, while professional services revenue is recognized over time as performed[30](index=30&type=chunk)[32](index=32&type=chunk) | Metric | July 31, 2022 (in thousands) | April 30, 2022 (in thousands) | | :----- | :--------------------------- | :---------------------------- | | Deferred revenue, current | $38,299 | $41,953 | | Total deferred revenue | $38,299 | $41,953 | - Remaining performance obligations totaled approximately **$125 million** as of July 31, 2022, with **47%** expected to be recognized over the next 12 months[38](index=38&type=chunk) | Revenue by Geography | Three Months Ended July 31, 2022 (in thousands) | Three Months Ended July 31, 2021 (in thousands) | | :------------------- | :---------------------------------------------- | :---------------------------------------------- | | Domestic | $25,659 | $24,427 | | International | $5,637 | $4,844 | | Total Revenue | $31,296 | $29,271 | - Total deferred sales commissions were **$3.3 million** at July 31, 2022, down from **$3.4 million** at April 30, 2022, with amortization included in sales and marketing expense[42](index=42&type=chunk) [C. Declaration of Dividend Payable](index=12&type=section&id=C.%20Declaration%20of%20Dividend%20Payable) This note discloses the details of quarterly cash dividends declared by the Board of Directors - On May 25, 2022, the Board of Directors declared a quarterly cash dividend of **$0.11 per share** for Class A and Class B common stock, paid on August 26, 2022[43](index=43&type=chunk) [D. Earnings Per Common Share](index=12&type=section&id=D.%20Earnings%20Per%20Common%20Share) This note explains the calculation of basic and diluted earnings per share for common stock - The company uses the 'two-class' method for basic EPS and diluted Class B shares, and the 'if-converted' method for diluted Class A shares, due to its two classes of common stock with different dividend and convertibility rights[44](index=44&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) | EPS Type | Three Months Ended July 31, 2022 | Three Months Ended July 31, 2021 | | :------- | :------------------------------- | :------------------------------- | | Basic EPS (Class A & B) | $0.06 | $0.09 | | Diluted EPS (Class A) | $0.06 | $0.09 | | Diluted EPS (Class B) | $0.06 | $0.09 | - Options to purchase **3,227,891 Class A Common Shares** (2022) and **315,924 shares** (2021) were excluded from diluted EPS computation because their exercise prices exceeded the average market price[54](index=54&type=chunk) [E. Acquisitions](index=14&type=section&id=E.%20Acquisitions) This note provides details on recent business acquisitions, including purchase price and strategic rationale - Effective June 28, 2022, the company acquired certain assets of Starboard Solutions Corp., an innovator of supply chain network design software, for approximately **$6.5 million** in cash[56](index=56&type=chunk)[59](index=59&type=chunk) - The acquisition includes potential contingent earnout payments up to **$6.0 million** over a three-year period, based on subscription revenue targets[59](index=59&type=chunk) - The acquisition aims to integrate Starboard's unique supply chain visualization and optimization solution into the Logility Digital Supply Chain Platform, enhancing integrated business planning[57](index=57&type=chunk)[58](index=58&type=chunk) - A preliminary purchase price allocation assigned **$3.32 million** to goodwill, deductible for income tax purposes and assigned to the Supply Chain Management segment[59](index=59&type=chunk)[60](index=60&type=chunk) [F. Stock-Based Compensation](index=15&type=section&id=F.%20Stock-Based%20Compensation) This note describes the company's stock option plans and accounting treatment for stock-based compensation | Metric | Three Months Ended July 31, 2022 | Three Months Ended July 31, 2021 | | :----- | :------------------------------- | :------------------------------- | | Options granted (Class A shares) | 1,362,000 | 377,500 | | Stock option compensation cost | ~$1.3 million | ~$0.8 million | - Unrecognized compensation cost related to unvested stock option awards was approximately **$17.0 million** as of July 31, 2022, expected to be recognized over a weighted average period of **2.06 years**[63](index=63&type=chunk) [G. Fair Value of Financial Instruments](index=16&type=section&id=G.%20Fair%20Value%20of%20Financial%20Instruments) This note outlines the valuation methods and hierarchy used for the company's financial instruments - The company measures investments using a fair value hierarchy (Level 1, 2, 3), prioritizing market price observability[64](index=64&type=chunk) - Cash equivalents and marketable securities are primarily valued using Level 1 inputs (quoted prices in active markets)[66](index=66&type=chunk) | Asset | July 31, 2022 (in thousands) | April 30, 2022 (in thousands) | | :---- | :--------------------------- | :---------------------------- | | Cash equivalents | $91,848 | $98,459 | | Marketable securities | $16,954 | $16,826 | | Total | $108,802 | $115,285 | [H. Stock Repurchases](index=16&type=section&id=H.%20Stock%20Repurchases) This note details the company's stock repurchase programs and shares bought back - The Board of Directors authorized the repurchase of an additional **2.0 million shares** of Class A common stock on August 19, 2002[69](index=69&type=chunk) - As of July 31, 2022, a total of **4,588,632 shares** of common stock have been repurchased under all authorized plans at a cost of approximately **$25.6 million**[70](index=70&type=chunk) [I. Comprehensive Income](index=18&type=section&id=I.%20Comprehensive%20Income) This note clarifies the presentation of comprehensive income in relation to net earnings - Condensed consolidated statements of comprehensive income are not included as comprehensive income and net earnings are substantially the same[72](index=72&type=chunk) [J. Industry Segments](index=19&type=section&id=J.%20Industry%20Segments) This note provides financial information broken down by the company's operating segments - The company manages its business through three operating segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and Other (including legacy ERP and unallocated corporate expenses)[74](index=74&type=chunk)[75](index=75&type=chunk) | Segment | Revenue (2022, in thousands) | Revenue (2021, in thousands) | Operating Income (2022, in thousands) | Operating Income (2021, in thousands) | | :------ | :--------------------------- | :--------------------------- | :------------------------------------ | :------------------------------------ | | Supply Chain Management | $26,182 | $24,251 | $7,179 | $5,356 | | IT Consulting | $4,515 | $4,476 | $215 | $163 | | Other | $599 | $544 | $(4,837) | $(3,746) | [K. Major Clients](index=20&type=section&id=K.%20Major%20Clients) This note discloses information regarding client concentration and revenue dependency - No single client accounted for more than **10%** of total revenue for the three months ended July 31, 2022, or 2021[77](index=77&type=chunk) [L. Contingencies](index=21&type=section&id=L.%20Contingencies) This note addresses potential future obligations arising from past events, such as indemnifications - The company indemnifies clients against intellectual property infringement claims and warrants product functionality, but historically has not incurred material costs and expects none in the future[79](index=79&type=chunk)[80](index=80&type=chunk) [M. Subsequent Event](index=21&type=section&id=M.%20Subsequent%20Event) This note reports significant events that occurred after the balance sheet date but before financial statement issuance - On August 18, 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[81](index=81&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&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 performance, liquidity, and capital resources for the three months ended July 31, 2022. It discusses revenue and expense trends, segment performance, economic outlook, and critical accounting policies, highlighting a 7% increase in total revenue driven by subscription fees, but a 28% decrease in net earnings [FORWARD-LOOKING STATEMENTS](index=22&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions readers about statements regarding future events that are subject to risks and uncertainties - This report contains forward-looking statements regarding future financial performance, business strategy, and other events, which are subject to uncertainties and risks[84](index=84&type=chunk) - Actual results may differ materially from those anticipated, and the company undertakes no obligation to update these statements[85](index=85&type=chunk) [ECONOMIC OVERVIEW](index=22&type=section&id=ECONOMIC%20OVERVIEW) This section discusses the global economic environment and its potential impact on the company's operations and strategy - The company is cautious about the global economic recovery, noting that uncertain conditions and complex supply chain challenges may drive businesses to invest in solutions that improve operating margins and offer rapid return on investment, such as their supply chain solutions[86](index=86&type=chunk) - The IMF's July 2022 World Economic Outlook projects global growth to slow from **6.1%** in 2021 to **3.2%** in 2022 and **2.9%** in 2023, with global inflation anticipated to reach **6.6%** in advanced economies and **9.5%** in emerging markets this year[90](index=90&type=chunk) [COMPANY OVERVIEW](index=24&type=section&id=COMPANY%20OVERVIEW) This section provides a general description of the company's business, segments, products, and strategic focus - American Software operates through three segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and Other (legacy ERP and corporate overhead), with SCM being the core market[91](index=91&type=chunk) - The Logility Digital Supply Chain Platform leverages AI and machine learning to optimize supply chain processes, addressing challenges like consumer expectations and talent shortages[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - The company serves approximately **860 clients** in **80 countries**, with revenue derived from subscriptions, software licenses, maintenance, and services[96](index=96&type=chunk)[97](index=97&type=chunk) - Primary opportunities include selective acquisitions, while key risks involve dependence on capital spending, acquisition integration challenges, competitive technologies, and market competition[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) [COMPARISON OF RESULTS OF OPERATIONS](index=26&type=section&id=COMPARISON%20OF%20RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance by comparing key operational metrics over different periods | Metric | Three Months Ended July 31, 2022 | Three Months Ended July 31, 2021 | % Change YoY | | :----- | :------------------------------- | :------------------------------- | :----------- | | Total Revenue | $31,296k | $29,271k | 7% | | Gross Margin | 60% | 57% | +3 ppts | | Operating Income | $2,557k | $1,773k | 44% | | Net Earnings | $2,133k | $2,947k | (28)% | [REVENUE](index=26&type=section&id=REVENUE) This section analyzes the company's revenue streams and their year-over-year changes | Revenue Source | Three Months Ended July 31, 2022 (in thousands) | Three Months Ended July 31, 2021 (in thousands) | % Change YoY | | :------------- | :---------------------------------------------- | :---------------------------------------------- | :----------- | | Subscription fees | $12,062 | $9,788 | 23% | | License | $320 | $492 | (35)% | | Professional services and other | $10,009 | $9,529 | 5% | | Maintenance | $8,905 | $9,462 | (6)% | | Total Revenue | $31,296 | $29,271 | 7% | - International revenue increased to approximately **18%** of total revenue in the three months ended July 31, 2022, up from **17%** in the prior year[108](index=108&type=chunk) [Subscription Fees](index=27&type=section&id=Subscription%20Fees) This subsection details the growth and drivers of subscription fee revenue - Subscription fees revenue increased **23%** year-over-year, driven by an increase in contracts, including those with higher cloud services annual contract value (ACV), and multi-year contracts, reflecting a successful transition to the cloud subscription model[109](index=109&type=chunk) [License Revenue](index=27&type=section&id=License%20Revenue) This subsection examines trends and factors influencing software license revenue - License fee revenue decreased **35%** year-over-year, primarily attributable to the SCM segment, with the majority of current license revenue from existing on-premise clients expanding usage[110](index=110&type=chunk) - The direct sales channel accounted for approximately **100%** of license fee revenues in the three months ended July 31, 2022, with margins after commissions increasing to approximately **90%**[111](index=111&type=chunk) [Professional Services and Other Revenue](index=28&type=section&id=Professional%20Services%20and%20Other%20Revenue) This subsection discusses the performance of professional services and other revenue streams - Professional services and other revenue increased **5%** year-over-year, driven by growth across the Other segment (**+26%**), SCM segment (**+8%**), and IT Consulting segment (**+1%**), due to increased project work and higher implementation activity[113](index=113&type=chunk) [Maintenance Revenue](index=28&type=section&id=Maintenance%20Revenue) This subsection analyzes the changes in revenue generated from maintenance contracts - Maintenance revenue decreased **6%** year-over-year, primarily in the SCM segment, due to a normal client attrition rate[114](index=114&type=chunk) [GROSS MARGIN](index=29&type=section&id=GROSS%20MARGIN) This section analyzes the company's gross margin performance across different revenue categories - Total gross margin percentage increased by **3 percentage points** to **60%** year-over-year, driven by higher margins across subscription fees, license fees, maintenance, and professional services[117](index=117&type=chunk) [Gross Margin on Subscription Fees](index=29&type=section&id=Gross%20Margin%20on%20Subscription%20Fees) This subsection details the gross margin percentage for subscription fees revenue - Gross margin percentage on subscription fees revenue increased from **67%** to **70%** year-over-year, primarily due to increased subscription revenue and related cost efficiencies[117](index=117&type=chunk)[118](index=118&type=chunk) [Gross Margin on License Fees](index=29&type=section&id=Gross%20Margin%20on%20License%20Fees) This subsection examines the gross margin percentage for license fee revenue - License fee gross margin percentage increased by **4 percentage points** to **72%** year-over-year, influenced by the level of license fee revenue, fixed computer software amortization, and the sales mix between direct and indirect channels[117](index=117&type=chunk)[119](index=119&type=chunk) [Gross Margin on Professional Services and Other](index=29&type=section&id=Gross%20Margin%20on%20Professional%20Services%20and%20Other) This subsection discusses the gross margin percentage for professional services and other revenue - Gross margin percentage on professional services and other revenue increased to **27%** year-over-year, driven by higher revenues, improved utilization, and better billing rates, despite a slight decrease in IT Consulting segment margin[117](index=117&type=chunk)[120](index=120&type=chunk) [Gross Margin on Maintenance](index=29&type=section&id=Gross%20Margin%20on%20Maintenance) This subsection analyzes the gross margin percentage for maintenance revenue - Maintenance gross margin percentage increased from **79%** to **82%** year-over-year, primarily due to increased maintenance revenue and personnel cost management[117](index=117&type=chunk)[121](index=121&type=chunk) [EXPENSES](index=29&type=section&id=EXPENSES) This section provides an analysis of the company's operating expenses, including R&D, sales, and G&A | Expense Category | Three Months Ended July 31, 2022 (in thousands) | Three Months Ended July 31, 2021 (in thousands) | % Change YoY | | :--------------- | :---------------------------------------------- | :---------------------------------------------- | :----------- | | Research and development | $4,454 | $4,424 | 1% | | Sales and marketing | $5,912 | $6,120 | (3)% | | General and administrative | $5,765 | $4,534 | 27% | | Amortization of acquisition-related intangible assets | $24 | $53 | (55)% | [Research and Development](index=30&type=section&id=Research%20and%20Development) This subsection details changes in research and development costs and their drivers - Total product research and development costs increased by **1%** year-over-year, primarily due to an increase in the use of third-party contractors[126](index=126&type=chunk) - Amortization of capitalized software development costs decreased **49%** year-over-year as some projects were fully amortized[126](index=126&type=chunk) [Sales and Marketing](index=30&type=section&id=Sales%20and%20Marketing) This subsection analyzes trends in sales and marketing expenditures - Sales and marketing expenses decreased from **21%** to **19%** of revenue year-over-year, attributed to marketing cost containment[127](index=127&type=chunk) [General and Administrative](index=30&type=section&id=General%20and%20Administrative) This subsection discusses changes in general and administrative expenses - General and administrative expenses increased from **15%** to **18%** as a percentage of revenue year-over-year, primarily due to higher personnel costs, third-party contractors, and insurance[128](index=128&type=chunk) [Operating Income/(Loss)](index=30&type=section&id=Operating%20Income%2F(Loss)) This section analyzes the operating income or loss across the company's business segments | Segment | Three Months Ended July 31, 2022 (in thousands) | Three Months Ended July 31, 2021 (in thousands) | % Change YoY | | :------ | :---------------------------------------------- | :---------------------------------------------- | :----------- | | Supply Chain Management | $7,179 | $5,356 | 34% | | IT Consulting | $215 | $163 | 32% | | Other | $(4,837) | $(3,746) | 29% | | Total Operating Income | $2,557 | $1,773 | 44% | - SCM segment operating income increased by **34%** due to improved gross margins, while IT Consulting segment operating income grew by **32%** due to higher margin project work and decreased expenses[130](index=130&type=chunk)[131](index=131&type=chunk) - The Other segment's operating loss increased by **29%** primarily due to an increase in variable compensation and stock option expenses[131](index=131&type=chunk) [Other Income](index=31&type=section&id=Other%20Income) This section details non-operating income and expenses, including investment gains and losses - Other income decreased year-over-year, mainly due to lower unrealized gains from investments (**$285k**), higher exchange rate losses (**$134k**), and higher realized investment losses (**$30k**), partially offset by a gain on interest income of **$116k**[132](index=132&type=chunk) - Investments generated an annualized yield of approximately **1.55%** for the three months ended July 31, 2022, compared to approximately **1.65%** in the prior year[132](index=132&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) This section explains the company's income tax expense or benefit and effective tax rate - The company recorded an income tax expense of **$543,000** for the three months ended July 31, 2022, compared to an income tax benefit of **$737,000** in the prior year[134](index=134&type=chunk) - This shift was primarily due to lower discrete stock compensation benefits (**$34k** in 2022 vs **$1.2 million** in 2021) and a reduction in research and development credits (**4.0%** reduction in effective tax rate in 2022 vs **5.7%** in 2021)[134](index=134&type=chunk) [Operating Pattern](index=31&type=section&id=Operating%20Pattern) This section describes the typical quarterly fluctuations in the company's operating results - The company experiences an irregular pattern of quarterly operating results due to fluctuations in software license and subscription contract volumes and the timing of revenue recognition, a pattern expected to continue[135](index=135&type=chunk) [LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION](index=31&type=section&id=LIQUIDITY%2C%20CAPITAL%20RESOURCES%20AND%20FINANCIAL%20CONDITION) This section assesses the company's ability to meet its short-term and long-term financial obligations - The company primarily funds operations and capital expenditures with cash generated from operating activities and has no debt obligations or off-balance sheet financing arrangements[136](index=136&type=chunk) - Total cash and investments were **$114.8 million** as of July 31, 2022, with a current ratio of **2.7 to 1** and Days Sales Outstanding (DSO) of **68 days**[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - Management believes current liquidity and capital resources are sufficient to satisfy anticipated requirements for at least the next twelve months[143](index=143&type=chunk) [Sources and Uses of Cash](index=31&type=section&id=Sources%20and%20Uses%20of%20Cash) This subsection details the primary sources and applications of cash during the reporting period | Cash Flow Activity | Three Months Ended July 31, 2022 (in thousands) | Three Months Ended July 31, 2021 (in thousands) | | :----------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash (used in) provided by operating activities | $(1,518) | $3,034 | | Net cash used in investing activities | $(8,072) | $(302) | | Net cash (used in) provided by financing activities | $(3,222) | $464 | | Net change in cash and cash equivalents | $(12,812) | $3,196 | - The net decrease in cash from operating activities was primarily due to changes in deferred revenue, client accounts receivables, and lower net earnings[138](index=138&type=chunk) - Increased cash used in investing activities was mainly due to the acquisition of Starboard and increased purchases of property and equipment[139](index=139&type=chunk) - Increased cash used in financing activities was primarily due to higher dividends paid, partially offset by lower proceeds from stock option exercises[139](index=139&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=33&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section highlights accounting policies requiring significant management judgment and estimates - The preparation of financial statements requires significant management judgments and estimates, particularly in revenue recognition, which affects reported assets, liabilities, revenue, and expenses[146](index=146&type=chunk) [Revenue Recognition](index=33&type=section&id=Revenue%20Recognition) This subsection elaborates on the critical judgments involved in the company's revenue recognition policy - Critical judgments in applying ASC 606 relate to determining distinct performance obligations and evaluating the standalone selling price (SSP) for each, which can impact the timing of revenue recognition[147](index=147&type=chunk)[149](index=149&type=chunk) - For on-premise licenses, where SSP is not readily discernible, a residual approach is used to allocate the transaction price after other performance obligations are assigned their SSPs[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, including foreign currency, interest rates, and inflation. It notes foreign currency exchange rate losses from international sales, management of interest rate risk through a high-quality, short-maturity investment portfolio, and the impact of inflation on operational expenses [Foreign Currency](index=34&type=section&id=Foreign%20Currency) This section describes the company's exposure to foreign currency exchange rate fluctuations - Approximately **18%** of revenue is generated outside the United States, with sales denominated in various foreign currencies, leading to foreign currency exchange rate losses[152](index=152&type=chunk) - The company recorded an exchange rate loss of approximately **$0.2 million** for the three months ended July 31, 2022, and does not engage in hedging activities[152](index=152&type=chunk) [Interest Rates and Other Market Risks](index=34&type=section&id=Interest%20Rates%20and%20Other%20Market%20Risks) This section details the company's management of interest rate risk and other market-related exposures - The company has no debt and manages interest rate risk by maintaining an investment portfolio of high-credit-quality, short-average-maturity instruments, including money-market instruments and various debt obligations[153](index=153&type=chunk) - The fair market value of these investments was approximately **$108.8 million** as of July 31, 2022[153](index=153&type=chunk) - Risks include declining investment income if interest rates fall and potential principal losses if fixed-rate securities are sold prematurely due to rising interest rates[155](index=155&type=chunk) [Inflation](index=34&type=section&id=Inflation) This section discusses the impact of inflation on the company's costs and pricing strategies - Inflation has affected the company through increased costs of employee compensation and other operational expenses[156](index=156&type=chunk) - The company attempts to recover these increased costs by periodically increasing prices, to the extent permitted by the marketplace[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that management, including the principal executive and financial officers, evaluated the effectiveness of the company's disclosure controls and procedures as of July 31, 2022, and concluded they were effective. No material changes in internal control over financial reporting occurred during the quarter [Management's Report on Internal Control Over Financial Reporting](index=35&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) This section presents management's assessment of the effectiveness of the company's internal controls over financial reporting - The company's disclosure controls and procedures are designed to provide reasonable assurance that information required for SEC reports is recorded, processed, summarized, and reported timely[158](index=158&type=chunk) - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of July 31, 2022[159](index=159&type=chunk) [Changes in Internal Control over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports any material changes in the company's internal control over financial reporting - There have been no changes in internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[160](index=160&type=chunk) [PART II—OTHER INFORMATION](index=36&type=section&id=Part%20II%E2%80%94Other%20Information) This section provides additional information not covered in the financial statements, including legal, risk, and exhibit disclosures [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings that require disclosure under this item - The company is not currently involved in legal proceedings requiring disclosure[162](index=162&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report for fiscal 2022 - No material changes to the risk factors previously disclosed in the Annual Report for fiscal 2022[163](index=163&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None to report[163](index=163&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - Not applicable[163](index=163&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - Not applicable[163](index=163&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item for the reporting period - None to report[164](index=164&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents (Amended and Restated Articles of Incorporation, By-Laws), certifications (Rule 13a-14(a)/15d-14(a), Section 906), and XBRL taxonomy documents - Exhibits include Amended and Restated Articles of Incorporation, Amended and Restated By-Laws, Rule 13a-14(a)/15d-14(a) Certifications, Section 906 Certifications, and various XBRL documents[164](index=164&type=chunk)[165](index=165&type=chunk) [Signatures](index=37&type=section&id=Signatures) The report is officially signed by the company's principal executive officer (CEO and President), principal financial officer (CFO), and principal accounting officer (Controller), affirming its submission on September 2, 2022 - The report is signed by H. Allan Dow (Chief Executive Officer and President), Vincent C. Klinges (Chief Financial Officer), and Bryan L. Sell (Controller and Principal Accounting Officer)[169](index=169&type=chunk) - The signing date for the report is September 2, 2022[168](index=168&type=chunk)

American Software, Inc. (NASDAQ:AMSWA) Q1 2023 Earnings Conference Call August 24, 2022 5:00 PM ET Company Participants Vincent Klinges – CFO Allan Dow - President and CEO Conference Call Participants Matt Pfau - William Blair Matthew Galinko - Maxim Group Zachary Cummins - B. Riley Securities Anja Soderstrom - Sidoti Operator Good day, everyone, and welcome to today's First Quarter Fiscal Year '23 Preliminary Financial Results. At this time, all participants are in a listen-only mode. Later, you will have ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) American Software, Inc. operates through three segments: Supply Chain Management (SCM), IT Consulting, and Other, providing a cloud-architected SCM platform and related services [Company Overview](index=5&type=section&id=Company%20Overview) American Software, incorporated in 1970, provides software and services through three main operating segments: Supply Chain Management (SCM), IT Consulting, and an "Other" segment for legacy ERP clients - The company operates through three major segments: **Supply Chain Management (SCM)**, **IT Consulting**, and **Other (legacy ERP)**[11](index=11&type=chunk) - The core offering is the **Logility Digital Supply Chain Platform**, which uses AI and machine learning to automate business processes[12](index=12&type=chunk) - Revenue is derived from four sources: **subscriptions, software licenses, maintenance, and services**, with subscription and maintenance agreements typically lasting three to five years[15](index=15&type=chunk) [Market Opportunity and Strategy](index=6&type=section&id=Market%20Opportunity%20and%20Strategy) The company targets the growing supply chain management software market, focusing on creating sustainable supply chains, expanding partnerships, and pursuing complementary acquisitions - Gartner forecasts the Supply Chain Management software market to grow at a **14.6% CAGR**, reaching **$31 billion by 2025**[18](index=18&type=chunk) - Key company strategies include enabling client sustainability, expanding strategic partnerships, and acquiring complementary businesses and technologies[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) [Products and Services](index=8&type=section&id=Products%20and%20Services) The company offers a comprehensive, cloud-architected SCM platform covering seven key processes, alongside technology staffing and support for legacy ERP products - The SCM platform encompasses seven critical planning processes, including **Product Lifecycle Management, Demand Planning, Inventory Optimization, and Supply Planning**[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) - The company provides **24/7 support services**, which are included in subscriptions or offered via separate maintenance contracts for licensed products[28](index=28&type=chunk) - Professional services include **cloud hosting, managed services, and implementation and training**, which typically takes three to nine months[29](index=29&type=chunk)[30](index=30&type=chunk) [Competition](index=12&type=section&id=Competition) The company faces diverse competition from large ERP vendors and specialized SCM software providers, leveraging its comprehensive platform and domain expertise as key advantages - Competitors include large ERP vendors (**SAP, Oracle**), specialized SCM vendors (**Blue Yonder, o9 Solutions, Kinaxis**), and internal corporate IT departments[37](index=37&type=chunk) - Principal competitive advantages are cited as the **comprehensive solution platform, ability to generate quick business benefits, deep domain expertise, and rapid deployment**[39](index=39&type=chunk) [Human Capital, Data Privacy and Security](index=14&type=section&id=Human%20Capital%2C%20Data%20Privacy%20and%20Security) As of April 30, 2022, the company had 418 full-time employees and over 100 contractors, maintaining robust data privacy and security measures compliant with global regulations - As of April 30, 2022, the company employed **418 full-time employees** and **over 100 independent contractors**[48](index=48&type=chunk) - The company maintains compliance with data privacy laws such as **GDPR in the EU/UK and CCPA in the United States**[55](index=55&type=chunk)[56](index=56&type=chunk) - An independent third-party audit provides a **SOC 2 Type II report annually**, attesting to the effectiveness of the company's controls for security, availability, and confidentiality[59](index=59&type=chunk) - Client data in cloud solutions is hosted in a **Microsoft Azure environment**, which provides geo-redundant storage and other security measures[60](index=60&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks that could adversely affect its business, including economic disruptions, intense competition, industry dependence, and its "controlled company" status - Economic risks include disruptions from the **COVID-19 pandemic, the invasion of Ukraine**, and potential reductions in technology spending by clients[66](index=66&type=chunk)[76](index=76&type=chunk) - The company faces intense competition from large ERP vendors (**SAP, Oracle**) and specialized SCM vendors who have significantly greater resources[67](index=67&type=chunk)[85](index=85&type=chunk) - A significant portion of revenue is derived from the **retail industry**, making the company vulnerable to downturns in that sector[68](index=68&type=chunk)[92](index=92&type=chunk) - The company is a **"controlled company"** as one shareholder, James C. Edenfield, has the right to elect a majority of the Board of Directors, which exempts it from certain NASDAQ governance requirements[71](index=71&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) The company owns its corporate headquarters in Atlanta, Georgia, and leases additional sales and technology development offices both domestically and internationally - The company owns its **100,000 sq. ft. corporate headquarters in Atlanta, Georgia**[157](index=157&type=chunk) - Leased office spaces are maintained in the US and internationally to support sales and development[157](index=157&type=chunk) [Legal Proceedings](index=38&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings and believes any existing matters will not have a material adverse effect - As of the report date, the company is **not a party to any material legal proceedings**[159](index=159&type=chunk) [Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[161](index=161&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A Common Shares trade on NASDAQ, maintains a quarterly dividend of $0.11 per share, and has an ongoing share repurchase program - The company's Class A Common Shares are listed on the **NASDAQ Global Select Market** under the symbol **"AMSWA"**[164](index=164&type=chunk) - The quarterly dividend was increased to **$0.11 per share in May 2016** and is expected to continue at this level[167](index=167&type=chunk) Equity Compensation Plan Information (as of April 30, 2022) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 4,540,104 | $16.05 | 2,902,643 | - Under a 2002 board authorization, the company has authority to repurchase up to **2.0 million shares**; **946,321 shares remained available for repurchase** as of April 30, 2022[173](index=173&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=46&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal 2022, total revenue increased 14% to $127.6 million, driven by strong subscription and license fee growth, leading to significant increases in operating income and net earnings [Results of Operations](index=48&type=section&id=Results%20of%20Operations) For fiscal year 2022, total revenue increased by 14% to $127.6 million, driven by a 46% surge in subscription fees and an 80% rise in license fees Fiscal 2022 vs. 2021 Revenue Breakdown (in thousands) | Revenue Type | FY 2022 | FY 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Subscription fees | $42,066 | $28,877 | +46% | | License fees | $5,390 | $2,993 | +80% | | Professional services & other | $43,476 | $39,616 | +10% | | Maintenance | $36,621 | $39,922 | -8% | | **Total Revenue** | **$127,553** | **$111,408** | **+14%** | Fiscal 2022 vs. 2021 Profitability (in thousands) | Metric | FY 2022 | FY 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Gross Margin | $75,795 (59%) | $60,980 (54%) | +24% | | Operating Income | $13,156 | $4,361 | +202% | | Net Earnings | $12,782 | $8,089 | +58% | - The **SCM segment** was the primary growth driver, with revenue increasing **16%** and operating income increasing **54%** in fiscal 2022 compared to fiscal 2021[199](index=199&type=chunk)[228](index=228&type=chunk) - The increase in subscription revenue was driven by a **26% increase in Cloud Services Annual Contract Value (ACV)** to **$48.2 million**[205](index=205&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $127.5 million in cash and investments and no debt, primarily funding operations through robust cash flow from operating activities Cash Flow Summary (in thousands) | Cash Flow | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $29,020 | $17,756 | | Net cash used in investing activities | ($934) | ($1,298) | | Net cash used in financing activities | ($6,054) | ($7,614) | Cash and Investments Position (in thousands) | As of April 30, | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $110,690 | $88,658 | | Investments | $16,826 | $16,006 | | **Total cash and investments** | **$127,516** | **$104,664** | - **Days Sales Outstanding (DSO)** improved to **62 days** as of April 30, 2022, compared to 85 days at the end of the prior fiscal year[239](index=239&type=chunk) - The company has **no debt obligations** or off-balance sheet financing arrangements[232](index=232&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from foreign currency fluctuations and interest rate changes, with international revenue accounting for 16% of total revenue in fiscal 2022 - International revenue was **16% of total revenue in fiscal 2022**, creating exposure to foreign currency risk[242](index=242&type=chunk) - A **10% change in foreign currency exchange rates** would result in an estimated exchange gain or loss of approximately **$0.3 million** for fiscal 2022[242](index=242&type=chunk) - Interest rate risk is managed with an investment portfolio of **high-credit-quality, short-maturity instruments**, and the company does not expect a 10% rate fluctuation to have a material effect[243](index=243&type=chunk)[245](index=245&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=59&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year 2022, including management's assertion of effective internal controls and the auditor's unqualified opinion [Auditor's Report and Management's Assessment](index=60&type=section&id=Auditor%27s%20Report%20and%20Management%27s%20Assessment) Management concluded that the company's internal control over financial reporting was effective, and KPMG LLP issued an unqualified opinion, noting revenue testing as a critical audit matter - Management assessed internal controls over financial reporting as **effective as of April 30, 2022**, based on the COSO framework[252](index=252&type=chunk) - **KPMG LLP issued an unqualified opinion** on the consolidated financial statements and internal controls[255](index=255&type=chunk)[262](index=262&type=chunk) - A critical audit matter was identified concerning the **sufficiency of audit evidence for revenue recognition**, due to the high volume of transactions and reliance on IT systems[266](index=266&type=chunk)[267](index=267&type=chunk) [Consolidated Financial Statements](index=65&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for fiscal year 2022 show total assets of $192.8 million, total revenue of $127.6 million, and net earnings of $12.8 million, reflecting strong financial performance Consolidated Balance Sheet Highlights (in thousands) | As of April 30, | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $110,690 | $88,658 | | Total Assets | $192,835 | $177,157 | | Total Liabilities | $59,859 | $54,766 | | Total Shareholders' Equity | $132,976 | $122,391 | Consolidated Statement of Operations Highlights (in thousands) | For the Year Ended April 30, | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $127,553 | $111,408 | | Operating Income | $13,156 | $4,361 | | Net Earnings | $12,782 | $8,089 | | Diluted EPS | $0.37 | $0.24 | [Notes to Consolidated Financial Statements](index=69&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment performance, and a significant subsequent event: the acquisition of Starboard Solutions Corp. for approximately $6.5 million cash FY 2022 Segment Performance (in thousands) | Segment | Revenue | Operating Income | | :--- | :--- | :--- | | Supply Chain Management | $104,288 | $29,164 | | IT Consulting | $21,032 | $1,601 | | Other | $2,233 | ($17,609) | - As of April 30, 2022, the company had remaining performance obligations of approximately **$134.0 million**, with **47% expected to be recognized as revenue in the next 12 months**[300](index=300&type=chunk) - Subsequent to fiscal year-end, on June 28, 2022, the company acquired the assets of **Starboard Solutions Corp. for ~$6.5 million cash** plus a potential **$6.0 million earn-out over three years**[402](index=402&type=chunk)[403](index=403&type=chunk) - The effective income tax rate for fiscal 2022 was **7.6%**, down from 8.6% in 2021, primarily due to higher excess tax benefits from stock option deductions[367](index=367&type=chunk) [Controls and Procedures](index=90&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of April 30, 2022, with no material changes to internal controls during the last fiscal quarter - Management concluded that **disclosure controls and procedures were effective** as of April 30, 2022[407](index=407&type=chunk) - No material changes were made to internal controls over financial reporting during the last fiscal quarter[410](index=410&type=chunk) Part III Part III of the report, covering Items 10 through 14, incorporates information by reference from the company's Proxy Statement for the 2022 Annual Meeting of Shareholders [Directors, Executive Officers and Corporate Governance](index=92&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's Proxy Statement - Information regarding directors, executive officers, and corporate governance is **incorporated by reference from the Proxy Statement**[413](index=413&type=chunk) [Executive Compensation](index=92&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's Proxy Statement - Information regarding executive compensation is **incorporated by reference from the Proxy Statement**[414](index=414&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=92&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's Proxy Statement - Information regarding security ownership is **incorporated by reference from the Proxy Statement**[416](index=416&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=92&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's Proxy Statement - Information regarding related transactions and director independence is **incorporated by reference from the Proxy Statement**[418](index=418&type=chunk) [Principal Accountant Fees and Services](index=93&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's Proxy Statement - Information regarding principal accountant fees and services is **incorporated by reference from the Proxy Statement**[420](index=420&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=95&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K, including financial statements, Schedule II, and various required exhibits and certifications - Lists all financial statements, Schedule II, and exhibits filed with the report[423](index=423&type=chunk) [Form 10-K Summary](index=98&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is noted as "None," indicating no summary is provided under this section - None[432](index=432&type=chunk)

American Software, Inc. (NASDAQ:AMSWA) Q4 2022 Earnings Conference Call June 8, 2022 5:00 PM ET Company Participants Allan Dow - President & CEO Vincent Klinges - CFO Conference Call Participants Matthew Pfau - William Blair Matthew Galinko - Maxim Group Anja Soderstrom - Sidoti Zachary Cummins - B. Riley Securities Operator Good day, everyone, and welcome to today's Fourth Quarter and Fiscal Year '22 Financial Results. At this time, all participants are in a listen-only mode. Later, you have the opportunit ...

Part I—Financial Information [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the three and nine months ended January 31, 2022 and 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Jan 31, 2022 | Apr 30, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $98,355 | $88,658 | | Total current assets | $148,711 | $136,623 | | Total assets | $186,050 | $177,157 | | **Liabilities & Equity** | | | | Total current liabilities | $51,911 | $50,664 | | Total liabilities | $55,171 | $54,766 | | Total shareholders' equity | $130,879 | $122,391 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $32,422 | $27,683 | $92,904 | $82,842 | | Gross Margin | $18,950 | $15,261 | $54,240 | $44,319 | | Operating Income | $3,239 | $935 | $7,699 | $2,451 | | Net Earnings | $2,940 | $2,311 | $9,201 | $5,037 | | Diluted EPS | $0.09 | $0.07 | $0.27 | $0.15 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for the Nine Months Ended Jan 31 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $14,050 | $13,933 | | Net cash used in investing activities | ($801) | ($1,065) | | Net cash used in financing activities | ($3,552) | ($5,961) | | **Net change in cash and cash equivalents** | **$9,697** | **$6,907** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - As of January 31, 2022, the company had approximately **$129 million** in remaining performance obligations, with about **46%** expected to be recognized as revenue over the next 12 months[38](index=38&type=chunk) - The company's business is organized into three operating segments: Supply Chain Management (SCM), IT Consulting, and Other, with SCM being the largest contributor to both revenue and operating income[75](index=75&type=chunk)[76](index=76&type=chunk) Revenue and Operating Income by Segment - Nine Months Ended Jan 31, 2022 (in thousands) | Segment | Revenue | Operating Income | | :--- | :--- | :--- | | Supply Chain Management | $75,692 | $19,531 | | IT Consulting | $15,544 | $1,005 | | Other | $1,668 | ($12,837) | | **Total** | **$92,904** | **$7,699** | - No single customer accounted for more than **10%** of total revenue for the three and nine months ended January 31, 2022 and 2021[81](index=81&type=chunk) - On February 16, 2022, the Board of Directors declared a quarterly cash dividend of **$0.11 per share**, payable on May 20, 2022[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, including revenue growth, gross margin, liquidity, and critical accounting policies [Comparison of Results of Operations](index=24&type=section&id=Comparison%20of%20Results%20of%20Operations) Total Revenue Comparison (in thousands) | Period | FY 2022 | FY 2021 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended Jan 31 | $32,422 | $27,683 | 17% | | Nine Months Ended Jan 31 | $92,904 | $82,842 | 12% | - The increase in revenue was primarily driven by significant growth in subscription fees, which rose **45%** for the quarter and **49%** for the nine-month period, reflecting the successful transition to a cloud subscription model[109](index=109&type=chunk)[112](index=112&type=chunk) - Maintenance revenue decreased by **10%** for the quarter and **9%** for the nine-month period, mainly due to customer attrition in the SCM segment as clients transition from on-premise licenses to cloud subscriptions[118](index=118&type=chunk) Gross Margin Percentage Comparison | Revenue Stream | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Subscription fees | 68% | 59% | 68% | 58% | | License fees | 76% | 46% | 74% | 14% | | Professional services | 30% | 24% | 29% | 23% | | Maintenance | 80% | 81% | 80% | 82% | | **Total Gross Margin** | **57%** | **55%** | **58%** | **53%** | - Operating income for the SCM segment increased by **53%** for the nine months ended Jan 31, 2022, compared to the prior year, primarily due to improved gross margins[133](index=133&type=chunk)[136](index=136&type=chunk) [Liquidity, Capital Resources and Financial Condition](index=32&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Financial%20Condition) - The company has no debt obligations or off-balance sheet financing arrangements[140](index=140&type=chunk) - As of January 31, 2022, the company had **$114.8 million** in cash and investments and believes its liquidity is sufficient for at least the next twelve months[147](index=147&type=chunk) - Days Sales Outstanding (DSO) increased to **77 days** as of January 31, 2022, from **65 days** a year prior, due to the timing of billings and collections[146](index=146&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - A key area of judgment is determining the standalone selling price (SSP) for products and services, using a residual approach for on-premise licenses rarely sold alone[156](index=156&type=chunk)[157](index=157&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, primarily from foreign currency and interest rate fluctuations - Approximately **16%** of revenue was generated outside the United States, where a hypothetical **10%** movement in foreign currency rates could result in a gain or loss of up to **$0.4 million** for the quarter[159](index=159&type=chunk) - The company has no debt, and interest rate risk on its investment portfolio, valued at approximately **$105.7 million**, is managed by holding high-credit-quality, short-maturity instruments[160](index=160&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of January 31, 2022 - Based on an evaluation, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[166](index=166&type=chunk) - There were no changes in internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[167](index=167&type=chunk) Part II—Other Information [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently involved in any legal proceedings that would require disclosure under this item - The company is not currently involved in legal proceedings requiring disclosure[169](index=169&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the risk factors disclosed in the company's Annual Report for fiscal 2021, confirming that no material changes have occurred since that filing - There have been no material changes to the risk factors as previously disclosed in the company's Annual Report for fiscal 2021[170](index=170&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports that there were no unregistered sales of equity securities during the period - None reported for the period[170](index=170&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, which include corporate governance documents, certifications by the CEO and CFO, and XBRL data files - The report includes exhibits such as Amended and Restated Articles of Incorporation, By-Laws, Rule 13a-14(a)/15d-14(a) Certifications, Section 906 Certifications, and various XBRL documents[171](index=171&type=chunk)

American Software, Inc. (NASDAQ:AMSWA) Q3 2022 Earnings Conference Call February 23, 2022 5:00 PM ET Company Participants Allan Dow - President & CEO Vincent Klinges - CFO Conference Call Participants Matt Pfau - William Blair & Company Zach Cummins - B. Riley Securities Anja Soderstrom - Sidoti & Co Operator Good day, everyone and welcome to today's Third Quarter Fiscal Year 2022 Financial Results. At this time, all participants are in a listen-only mode. Later you'll have the opportunity to ask questions ...