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JDA Software Group (JDAS)

Q1 2012 Earnings Call

May 07, 2012 4:45 pm ET


Mike Burnett - Group Vice President of Treasury & Investor Relations

Peter S. Hathaway - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Hamish N. J. Brewer - Chief Executive Officer, President and Director


Richard T. Williams - Cross Research LLC

Mark W. Schappel - The Benchmark Company, LLC, Research Division

Alan Weinfeld

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

Brian Murphy - Sidoti & Company, LLC

Unknown Analyst


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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the JDA Software Group, Inc. First Quarter 2012 Business Update. [Operator Instructions] At this time, I'd like to turn the conference over to Mike Burnett, Group Vice President and Investor Relations. Please go ahead, sir.

Mike Burnett

Great. Thank you, Vince. Good afternoon, and welcome to the JDA Software business update call for the first quarter 2012. On our call today, we will discuss current business conditions, trends and plans of JDA in order to keep you apprised of our progress. We are hosting this update call in an effort to provide transparency where appropriate, during a period in which we cannot report financial results due to the pending restatement surrounding revenue recognition, which was announced in April of this past year. Accordingly, with the exception of our cash balance, we will not be disclosing or providing any GAAP financial statement results for the first quarter or providing year-over-year analysis of our financial performance. We appreciate your understanding of the disclosure limitation that we have at this time.

We will begin the call with a brief update on the status of the restatement process by Pete Hathaway, our Chief Financial Officer; and then Hamish Brewer, our President and CEO, will continue with the business update before we open the call to questions.

Before we begin our review, let me remind you that our comments today will contain certain forward-looking statements that often involve risks, uncertainties and assumptions. In all statements, other than statements of historical fact, they are statements that could be deemed to be forward-looking and as such, are subject to risks that we have identified in our various SEC filings. Actual results may differ materially from those predicted.

With that, I will now turn the call over to Pete Hathaway.

Peter S. Hathaway

Thanks, Mike. First, we would like to give you a brief summary update about the ongoing investigation into our revenue recognition practices and also, indicate some decisions that we have made as a result of this experience. As we mentioned in our last press release on the subject, the company has decided to restate its financial statement for the fiscal years 2008 to 2010. The company is determining and quantifying the specific adjustments that need to be made to each of the periods affected. Based on the review to date, the company anticipates making adjustments relating to certain transactions linked to associated service agreement, and the related license revenue will generally be moved from the quarter originally recognized to the immediate subsequent quarter.

We are continuing to evaluate the 2 other previously disclosed areas relating to contract language around sunset clauses and VSOE for cloud services. The company continues to believe that the restatement will change the time period in which revenue is recognized, as opposed to the existence of the reported revenue, and our cash position is not expected to be impacted.

To reiterate, to date, the company has not identified any instances of intentional wrongdoing. The process is ongoing so there's not much that I can say about the financial performance of the company until we conclude the process. It should be noted that we do not expect to file our first quarter Form 10-Q by the May 10 deadline, and therefore, we expect to file a Form NT 10-Q with the SEC, as well as issue, later this week, a press release and 8-K acknowledging that we will continue to be noncompliant with NASDAQ listing rules.

We expect to be current with the SEC filings by the time that our second quarter 2012 10-Q is due in August. Though no material new facts have emerged since our update a couple of weeks ago, I want to emphasize to you that we are committed to addressing this matter in a timely manner, but first and foremost, we are focused on making sure we are thorough and accurate in completely resolving any and all issues. We have been and will continue to be committed to expending the necessary resources to resolve the issues and answering all questions raised by the SEC. We are further committed to making any necessary improvements in order to create a solid foundation from which we can move the company forward. This process has also strengthened our resolve to implement improvements to our business information and financial systems infrastructure.

In fact, prior to this investigation, we retained an outside consulting firm to help us perform an end-to-end review of our systems. The outcome of the review is a 3-year systems investment plan, which we originally planned to execute starting this year. Although delayed somewhat due to the investigation, we are beginning to move forward. The plan contains 4 major elements.

First, we are introducing a project optimize and systematize the end-to-end flow of opportunities through our business cycles for sales implementation, operations and support all the way through to cash collections. We call this opportunity to cash. Secondly, we are going to implement a new support and maintenance CRM solution that will enable us to enhance the management of our customer relationship systemically and provide new services that will be more tightly integrated between our various services offerings, including our new cloud services offerings.

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