ROCKVILLE, Md--Dec. 21, 2004--Manugistics Group, Inc. (NASDAQ:MANU), a leading global provider of demand-driven supply chain management solutions, today reported results for its fiscal 2005 third quarter ended November 30, 2004.
For the third quarter, total revenue was $45.0 million, down 24.8 percent from $59.9 million in the prior year quarter. Software revenue was $6.7 million, down 61.0 percent from $17.1 million in the prior year quarter. Support revenue was $20.7 million compared to $22.2 million in the prior year quarter. Product revenue, which is composed of software and support revenue, was 60.7 percent of total revenue compared to 65.6 percent of total revenue in the prior year quarter. Services revenue was $16.2 million, down 11.9 percent from $18.3 million in the prior year quarter.
For the third quarter, the Company reported a GAAP net loss of $13.3 million, or $0.16 per basic and diluted share, compared to a GAAP net loss of $19.8 million, or $0.27 per basic and diluted share, in the prior year quarter. The net loss of the prior year quarter included a non-cash debt conversion expense of $16.4 million, or $0.23 per share, as a result of exchanging $22.5 million of convertible debt for 3,045,000 shares of the Company`s common stock in October of 2003. For the third quarter, the Company reported a GAAP operating loss of $11.5 million compared to a GAAP operating profit of $0.2 million in the prior year quarter. The GAAP net loss and the GAAP operating loss for the quarter ended November 30, 2004 include an exit and disposal charge of $2.9 million incurred by the Company for exit and disposal plans approved by August 19, 2004. This charge consists primarily of $2.6 million to be paid over multiple quarters for severance and other benefits related to headcount reductions and $0.3 million for lease abandonment and other charges associated with the exit and disposal plans.
For the third quarter, the Company reported adjusted operating loss of $3.3 million compared to adjusted operating income of $5.2 million in the prior year quarter. The Company reported adjusted net loss of $5.1 million, or $0.06 per basic and diluted share, for the third quarter, compared to adjusted net income of $1.6 million, or $0.02 per basic and diluted share, in the prior year quarter.
Adjusted operating income or loss, adjusted net income or loss and adjusted net income or loss per basic and diluted share referred to in this press release are non-GAAP measures and exclude the following items: amortization of intangibles and acquired technology, charges from exit and disposal activities, debt conversion expense and non-cash stock option compensation charges. A reconciliation of GAAP results to adjusted results has been provided in the financial statement tables following the text of this press release. For further information, please refer to the section of the press release titled, "Reasons for Presentation of Non-GAAP Financial Measures."
"Although during the third quarter the Company faced continued challenging market conditions," said Manugistics CEO Joe Cowan, "our clients and prospects remain actively engaged. I am confident that with Manugistics products and people the Company is well positioned for growth as market conditions improve."
"Some of our clients and prospects are asking for unique capabilities to give them a competitive edge in the marketplace," said Cowan. "That`s why we will be adding specialized functionality to our solutions to meet the needs of these clients. In these instances we anticipate license revenue being recognized on a contract accounting basis over the course of the delivery of the solution, rather than being recognized upon delivery and contract execution."
"We have spent the last three months addressing better ways to manage across the different organizations within the Company," said Cowan. "We made substantial reductions in our cost structure and will continue to further reduce costs. We will continue to work to further improve the Company`s operations and return to profitability."
"I am also pleased to announce that this month we commenced operations at our own product development center in Hyderabad, India," added Cowan. "This move will result in significant cost savings for the Company as we shift a substantial portion of our development to our new facility throughout calendar year 2005. Our core, high-level development will remain in Rockville, Maryland."
As previously mentioned last quarter, the Company anticipates headcount to be approximately 725 at the end of its fourth quarter fiscal 2005. Headcount at the end of our third quarter was 733 compared to 815 at the end of our second quarter. During the third quarter, we realized cost savings of approximately $3.5 million as a result of the second quarter exit and disposal plans. As previously disclosed, the Company anticipates quarterly cost savings of approximately $4.0 million to $5.0 million by the end of its fourth quarter fiscal 2005, as a result of the second quarter exit and disposal plans. In addition, as a result of opening its development center in India, the Company expects to realize additional cost savings of $2.0 million to $3.0 million per quarter by the end of fiscal 2006.
Business Metrics - Quarter Ended November 30, 2004
-- The Company closed 11 significant software license transactions - software license transactions of $100,000 or greater.
-- Included in the above was one significant software license transaction of $1 million or greater.
-- The average selling price for significant software transactions was approximately $491,500.
-- 4.3 percent of software revenue came from a significant transaction related to a new client.
-- 42.1 percent of software revenue came from international sales.
-- Cash flows from operations were a negative $5.6 million, which included the semi-annual coupon payment of $4.4 million for the convertible notes.
-- Cash, marketable securities and investments were approximately $132.2 million as of November 30, 2004, down from $137.9 million as of August 31, 2004.
-- Days Sales Outstanding (DSO) for receivables was 75 days in both the second and third quarters.
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