American Software(AMSWA) - 2023 Q3 - Quarterly Report

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