Start Time: 16:45
End Time: 17:28
JDA Software Group, Inc (
Q3 2010 Earnings Call
October 26, 2010; 04:30 pm ET
Hamish Brewer – Chief Executive Office
Pete Hathaway - Chief Financial Officer
Mike Bennett - Group Vice President of Treasury & Investor Relations
David Rosen - S.A.C Capital
Richard Williams - Cross Research
Jeffrey Van Rhee - Craig-Hallum
Patrick Walravens - JMP Securities
Previous Statements by JDAS
» JDA Software Group Inc. Q2 2010 Earnings Call Transcript
» JDA Software Group Q1 2010 Earnings Call Transcript
» JDA Software Group, Inc. Q3 2009 Earnings Call Transcript
» JDA Software Group, Inc. Q2 2009 Earnings Call Transcript
Good day, ladies and gentlemen. Thank you for standing by. Welcome to JDA Software’s third quarter 2010 earnings conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions)
I’d now like to turn the conference over to our host and Chief Executive of JDA Software, Mr. Hamish Brewer. Please go ahead, sir.
Thanks, Jeremy. Good afternoon and welcome to the JDA Software earnings call for the third quarter 2010. Record revenues and strong earnings were the highlights of this quarter and I believe that these results are indicative of a broad range of positive indicators for the company.
On today’s call, we’ll walk you through these indicators and discuss the consequences for both full year revenues and earnings. With me on the call today is Pete Hathaway, our Chief Financial Officer and Mike Bennett our Group Vice President of Treasury and Investor Relations.
Pete will now walk you through the financial results, and then I will discuss the underlying trends in our business. Pete?
Thank you, Hamish. Before I begin discussing the numbers, I’d like to remind you that our comments today will contain certain forward-looking statements that often involve risks, uncertainties and assumption. All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These risks are described from time-to-time in our SEC reports including but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2009.
And our presentation also includes certain non-GAAP measures, which JDA uses internally in budgeting and performance monitoring activity to gauge our business performance. We believe these measures provide useful information to our investors in evaluating JDA’s ongoing business results. We prepared a reconciliation of these measures to the most directly comparable GAAP measures in our press release, which will be posted on our website at jda.com.
In addition, we have also posted on our website a slide deck with supplemental information to accompany our discussion of the results for the quarter. As Hamish mentioned in his opening remarks, Q3 was a period that has provided positive indicators for the business and validation of the progress we are making on the successful integration of i2. The integration of the business is taking place on schedule as evidenced by our strong i2 software sales, our solid Q4 pipeline, our robust consulting revenues and our significant maintenance revenue foundation with a higher than expected retention rate of almost 96%.
Additionally, we have achieved $16 million or 80% of our total synergy goal through the first three quarters of the year. These results are contributing to the strong operational performance of JDA. We now have enough visibility into year-to-date total revenue and software sales and then into the software pipeline for Q4 to believe that our original expectations for the year should be achieved at the higher end of the software revenue range of $125 million to $135 million. And at the total revenue range of $590 million to $625 million.
Looking at adjusted EBITDA, even with the $10 million of incremental litigation cost we expect to incur this year, we believe, we can achieve the lower end of our 2010 adjusted EBITDA outlook range of $160 million to $170 million, and for adjusted non-GAAP EPS, we believe we will be within the original outlook range of $1.85 to $2.00.
As for our operating cash flow, we expect 2010 to exceed $100 million after adjusting for specific one-time items related to the i2 acquisition. We think this is more reflective of ongoing cash flow from operations than what we will report for GAAP purposes in 2010.
Notably, these results are expected to be achieved despite the unanticipated legal costs in 2010 relating to the Dillard’s case and the Oracle patent infringement litigation, which has created a headwind in the achievement of our earnings expectations.
Turning to specific commentary on the results for the third quarter 2010, adjusted EBITDA increased 65% to $39.7 million from $24.1 million in Q3 2009. Adjusted EBITDA margin was comparable to the 25% achieved in the prior year despite incurring approximately $3.3 million in legal costs associated with the inherited i2 legal matters, which alone amounts to about 210 basis points.
Additionally, we are able to maintain our EBITDA margin despite a shift in revenue mix in the quarter that saw a lower percentage of high margin products revenue equal to 54% of total revenues as compared to 65% in the prior year’s period. On a sequential basis, adjusted EBIT margin declined slightly from 26% in Q2 again primarily due to the change in revenue mix.
Adjusted earnings per share increased to $0.47 from $0.40 in the third quarter 2009 primarily due to the profitable growth from the acquisition of i2. Adjusted EBITDA and adjusted EPS figures, excuse me, include the conventional items related to the amortization, stock-based compensation and the i2 acquisition transition and restructuring charges, all of which are separately identified in the tear sheet attached to the press release.