JDA Software Group Q1 2010 Earnings Call Transcript

JDA Software Group Q1 2010 Earnings Call Transcript
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JDA Software Group (JDAS)

Q1 2010 Earnings Call

April 27, 2010 4:45 pm ET

Executives

Peter Hathaway - Chief Financial Officer and Executive Vice President

Hamish Brewer - Chief Executive Officer, President and Director

Analysts

Franklin Jarman

Patrick Walravens - JMP Securities LLC

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC

Richard Williams - Cross Research

Presentation

Operator

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Previous Statements by JDAS
» JDA Software Group, Inc. Q3 2009 Earnings Call Transcript
» JDA Software Group, Inc. Q2 2009 Earnings Call Transcript
» JDA Software Group, Inc. Q1 2009 Earnings Call Transcript

Good afternoon, ladies and gentlemen, and thank you, for standing by. And welcome to the JDA Software Group Inc. First Quarter 2010 Earnings Conference Call. [Operator Instructions] At this time, I would now like to turn the conference over to our host, Hamish Brewer, who is the Chief Executive Officer. Please go ahead.

Hamish Brewer

Thanks, Craig, and good afternoon, and welcome to the earnings results call for the first quarter 2010. Following the close of the i2 acquisition on January 28, we delivered a record first quarter, with total revenues of over $131 million and $28.7 million of software and subscription revenues.

This impressive license sales performance was particularly notable because of the strong representation of inherited i2 pipeline in the mix, indicating a very smooth transition with our new i2 customers.

With me on the call today is Pete Hathaway, Chief Financial Officer of JDA; and Dave Alberty, JDA's Chief Accounting Officer. Pete will review the financial results for the quarter, and then I'll add some color to what I regard as an excellent start to the integration of i2 into the JDA business. Pete?

Peter Hathaway

Thanks, Hamish. Before I begin discussing the numbers, let me remind you that our comments today will contain certain forward-looking statements that often involve risks, uncertainties and assumptions. 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.

Our presentation also includes certain non-GAAP measures, which JDA uses internally in budgeting and performance monitoring activities to engage 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 each of these measures to the most directly comparable GAAP measure in our press release, which will be posted on our website at jda.com.

Also, I wanted to remind you that the first quarter results include the impact of the i2 acquisition for the two months since the transaction was completed on January 28, 2010. The tearsheet included with the press release shows the JDA and the i2 revenue reported in Q1 for each company.

This afternoon, JDA reported strong revenue earnings and cash flow results for the first quarter of 2010. Adjusted EBITDA increased to $31.4 million in the current quarter from $16.7 million in Q1 2009. Adjusted earnings per share increased to $0.38 compared to $0.26 for the first quarter of 2009. Adjusted EBITDA and adjusted EPS figures exclude the conventional items related to the amortization of identifiable intangible assets, stock-based compensation expense and for i2 acquisition transition and restructuring charges, which were also separately identified in the tearsheet.

GAAP EPS was a loss of $0.11 for Q1 2010 compared to income of $0.08 in the same period in 2009, due to approximately $15 million of acquisition transition and restructuring charges in the current quarter. At quarter end, we completed the bulk of the purchase accounting and valuation work for i2 but as is normal, the entire process won't be finalized until later in the year.

Total revenues increased to a record $131.6 million for the quarter, including software and subscription revenues of $28.7 million, as compared to total revenues of $83.3 million and software and subscription revenues of $15.3 million for the first quarter 2009. The software and subscription revenue increase included eight transactions of $1 million or more compared to three in the prior year's first quarter. As a data point for continued validation of the combination of JDA and i2, half of these large deals this quarter were i2 products.

We closed 51 new software deals in the quarter compared to 46 in the first quarter of 2009, and our average selling price for the trailing 12 months ended March 31, 2010 was $618,000 compared to $630,000 in the fourth quarter of 2009, representing the sixth consecutive quarter our trailing 12-month ASP has exceeded $600,000.

Maintenance revenue increased to $57.1 million compared to $43 million in the first quarter of 2009, and the maintenance gross margin increased to 79% from 75% in Q1 2009. The gross margin increase was driven by the continued strength in our software license sales over the last year that generated new maintenance streams. In addition and importantly, for the first quarter of this year, our retention rate improved to 98.3% as compared to 96.7% in Q1 of 2009. We also had a $1.6 million favorable impact in the current quarter from the year-over-year change in foreign currency rates.

The i2 maintenance renewals have lagged a bit during this get-acquainted period as we expected they would. Consequently, we suspended the recognition of revenue on a number of renewals until future period when the negotiations are complete. To be clear, we expect the vast majority of the i2 maintenance revenue to renew on schedule. For the small portion that become suspended, we think most of it should be resolved and recorded in 2010. In his remarks, Hamish will speak further to our successes in this area.

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