Manugistics' Sales Slip, Stock Follows

Updated from 4:28 p.m. EST

Manugistics ( MANU) reported fourth-quarter results that fell short of expectations, with its top line declining 12% driven by a drop in lower service revenue.

After hours, shares of Manugistics were recently down 82 cents, or 12%, to $5.98. The stock climbed 47 cents, or 7.4%, to $6.80 in Wednesday's regular session in advance of the company's earnings.

Under generally accepted accounting principles, Rockville, Md.-based Manugistics reported a net loss of $56.6 million, or 73 cents a share, in the fourth quarter, which ended Feb. 29. That compared to a net loss of $114.4 million, or $1.59 per share, in the same period a year earlier. This year's quarterly results included a $43.4 million charge, or 56 cents a share, for converting debt to common stock; last year's results included a $96.3 million, or $1.38 a share, noncash goodwill impairment charge.

Excluding charges, the supply chain software maker earned pro forma net income of $273,000, or breakeven on a per-share basis, compared to a pro forma net loss of $7.6 million, or 11 cents a share, a year earlier.

Revenue dropped 12% to $57.8 million from $65.5 million a year earlier, driven largely by a decrease in low-margin service revenue. Service revenue fell 33% from a year ago to $15 million. Software license revenue edged up to $19 million from $18.2 million a year ago.

Wall Street analysts expected Manugistics to earn pro forma net income of 3 cents a share on $62 million in revenue in the fourth quarter, according to Thomson First Call.

Looking forward, Manugistics said in a press release it expects pro forma net income to improve sequentially on slightly higher total revenue. Analyst estimates were calling for revenue of $63.4 million and earnings of 3 cents a share in the first quarter.

"At this point I'm trying to be conservative in making sure we come in and exceed our license revenue numbers," CEO Greg Owens said in a notably direct answer to a question in a post-close conference call about the company's flattish guidance. "The pipeline is growing."

Owens has high hopes for the second half of its fiscal year, with double-digit operating margins and license revenue growth. "We will get back to stronger growth," he said.

In the fourth quarter, however, three services projects were delayed. They have started in the current quarter and should help services revenue increase by $1 million -- or 7% -- sequentially in the first quarter, while license and maintenance revenue should remain flat, management said.

In the fourth quarter, cash flow from operations reached $16.1 million, the highest level in three years, and free cash flow totaled $13.1 million, the best performance in six years. In addition, Manugistics reduced its convertible debt balance to $175.5 million on Feb. 29 from $227.5 million on Nov. 30.

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