MANUGISTICS ANNOUNCES SECOND QUARTER FISCAL 2005 RESULTS
Manugistics Group, Inc. (NASDAQ:MANU), a leading global provider of demand and supply chain management solutions, today reported results for its fiscal 2005 second quarter ended August 31, 2004.
For the second quarter, total revenue was $51.3 million, down 14 percent from $59.7 million in the prior year quarter. Software revenue was $11.1 million, down 38 percent from $17.8 million in the prior year quarter. Support revenue was $21.3 million compared to $21.1 million in the prior year quarter. Product revenue, which is composed of software and support revenue, was 63 percent of total revenue, compared to 65 percent of total revenue in the prior year quarter. Services revenue was $16.4 million, down 11 percent from $18.4 million in the prior year quarter.
For the second quarter, the Company reported a GAAP net loss of $17.1 million, or $.21 per basic and diluted share, compared to a GAAP net loss of $8.0 million, or $.11 per basic and diluted share, in the prior year quarter. The Company reported a GAAP operating loss of $15.0 million compared to a GAAP operating loss of $4.2 million in the prior year quarter. The GAAP net loss and the GAAP operating loss for the quarter ended August 31, 2004 include a restructuring charge of $6.2 million incurred by the Company for restructuring plans approved by August 19, 2004. This charge consists primarily of $2.0 million, to be paid over multiple quarters, for severance and other benefits related to headcount reductions and $4.2 million for lease abandonment and other charges associated with the restructuring plans, including cash expenditures of $3.5 million to be paid through 2007.
For the second quarter, the Company reported adjusted operating loss of $3.5 million, compared to adjusted operating income of $1.2 million in the prior year quarter. The Company reported adjusted net loss of $5.6 million, or $.07 per basic and diluted share, for the second quarter, compared to adjusted net loss of $2.6 million, or $.04 per basic and diluted share, in the prior year quarter.
Adjusted operating income or loss, adjusted net loss and adjusted net 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, restructuring and lease abandonment benefits and charges 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."
"Since I arrived, I`ve worked with our senior management team to assess Manugistics` products, markets and clients and have concluded that Manugistics has a strong foundation on which to grow," said Joe Cowan, the new chief executive officer. "I have added two experienced executives to my existing senior management team and am confident that together we can solidify Manugistics` leadership position. We have developed a more focused product strategy and are strategically restructuring the organization to align our operating expense levels at a baseline revenue run rate that will allow us to be profitable. We are taking these steps in response to decreased spending and prolonged sales cycles for application software. We intend to return to profitability as quickly as possible and to seek opportunities to make investments in focused areas for future growth."
As a result of the above restructuring plans, the Company expects to incur additional charges of approximately $8.0 million to $10.0 million in the second half of fiscal 2005, that will result in future cash expenditures consisting primarily of $6.0 million to $7.5 million for lease abandonment charges and $2.0 million to $2.5 million in severance and other benefits associated with further reductions in headcount. Employee headcount was 815 as of August 31, 2004, down from 865 as of May 31, 2004. The Company expects headcount to be approximately 725 at the end of its fourth quarter fiscal 2005. The Company anticipates quarterly cost savings of approximately $4.0 million to $5.0 million by its fourth quarter fiscal 2005, as a result of the second quarter restructuring plans.
Business Metrics - Quarter Ended August 31, 2004
-- The Company closed 18 significant software license
transactions - software license transactions of $100,000 or
greater.
-- The Company closed 3 software license transaction of $1
million or greater.
-- The average selling price for significant software
transactions was approximately $533,000.
-- 26 percent of software revenue came from new clients.
-- 43 percent of software revenue came from international sales.
-- Cash flows from operations were a negative $6.8 million.
-- Cash, marketable securities and investments were approximately
$137.9 million as of August 31, 2004, down from $148.7 million
as of May 31, 2004.
-- Days Sales Outstanding (DSO) for receivables were 75 days
compared to 81 days in the first quarter.
Going forward, Manugistics will not provide guidance on software revenue, total revenue, operating performance or net performance nor does the company intend to provide performance updates.
Other Highlights and Developments:
Second Quarter Global Client Wins: The Company signed significant software license transactions across key industries in the Americas, Europe and Asia, with second quarter global wins including, among others: Cingular Wireless, BAE SYSTEMS, Electrocomponents plc, The General Services Administration - Federal Supply Service, JCPenney, Marriott International, Inc., Princess Cruise Lines and Vodafone UK.
New Leadership: In July, Manugistics named Joe Cowan as CEO, and in August, he was appointed by the Board of Directors to serve as a Class III Director with a term expiring in 2007. Cowan recently announced his executive management team.
-- Jeffrey L. Holmes, Executive Vice President & President of
Worldwide Sales Operations, will lead all worldwide sales,
pre-sales and sales operations.
-- Raghavan Rajaji continues as Executive Vice President & Chief
Financial Officer.
-- Jeffrey L. Kissling, Senior Vice President & Chief Technology
Officer, joins Manugistics with more than 20 years experience
in managing and overseeing product development. Kissling is
responsible for the entire lifecycle of the Company`s software
products and services.
-- Ronald Kubera, Senior Vice President of Services & Support,
has global responsibility for all client service and support
activities. Previously he spent two years as Senior Vice
President for Manugistics` Northern Europe operations.
-- Lori Mitchell-Keller, Senior Vice President of Global
Marketing & Solution Management, is responsible for developing
and deploying the go-to-market strategies for the Company`s
products and solutions. Mitchell-Keller previously served as
the Senior Vice President of Product Development and Strategy.
-- Timothy T. Smith continues as Senior Vice President & General
Counsel.
-- Edward Daihl, Group Vice President of Revenue Management,
brings a proven track record for delivering world-class
solutions and launching innovative new products. Daihl will
oversee the Company`s revenue management solutions and
next-generation product plans.
enVISION Fall Summit Series: The Company unveiled its Fall enVISION Summit Series designed to bring together thought leaders from around the world. On September 14, the Manugistics Retailer/Supplier Collaboration Summit kicked off the first of four Summits and featured presentations from such leading retailers and suppliers as IBM, Georgia Pacific and H-E-B Grocery. The guest speakers discussed trends, debated issues and presented real-world strategies to address industry-specific challenges in implementing successful demand and supply chain management solutions.
The next three Summits are scheduled as follows:
-- Aerospace & Defense, October 4-5, 2004 in Baltimore, Maryland;
-- Transportation and Logistics - Beyond Daily Planning, November
4, 2004 in Chicago, Illinois; and
-- Demand and Revenue Management, November 10-11, 2004 at
Manugistics Headquarters in Rockville, Maryland.
Client Steering Committee: Manugistics will also host a Fall Client Steering Committee meeting on October 6-8 in Baltimore, Maryland. The event provides clients an opportunity to see the Company`s product development plans, influence product direction and network with other clients on all aspects of Manugistics` solutions.
Conference Call Information: Manugistics will conduct a simultaneous conference call and audio Web-cast on Thursday, September 23, 2004 at 5:00 PM ET to discuss the Company`s financial performance for its second quarter. Interested parties may listen to the Web-cast by going to www.manugistics.com/ir/.
A recording of the call will be available from 7:00 PM ET Thursday, September 23, 2004 through 7:00 PM ET on Monday, September 27, 2004. To listen to the recording, callers within North America may call 800-633-8284. Callers outside North America may call 402-977-9140. Callers to the recording will be required to enter the access number for this call, which is 21207944. In addition, a recording of the Web-cast will be archived for approximately three months on the Manugistics Web site at www.manugistics.com/ir/.
About Manugistics Group, Inc.
Manugistics is a leading global provider of demand and supply chain management solutions. Today, more than 1,200 clients trust Manugistics to help them drive profitable growth, unlock the value of their existing IT investments and ensure the security and integrity of their global supply chains. Its clients include industry leaders such as AT&T, BMW, Boeing, Brown & Williamson, Cingular, Circuit City, Coca-Cola Bottling, Continental Airlines, Diageo, DuPont, Fairchild Semiconductor, Harley-Davidson, John Deere, McCormick, Nestle, Nissan, RadioShack and Unilever. For more information, go to www.manugistics.com.
FOR ADDITIONAL INFORMATION REGARDING THIS ANNOUNCEMENT, CONTACT THE MANUGISTICS NEWSBUREAU HOTLINE AT 301-255-5330.
Reasons for Presentation of Non-GAAP Financial Measures The non-GAAP financial measures presented in the text of this press release and accompanying supplementary financial information (also referred to as "adjusted") represent the financial measures used by the Company`s management to evaluate the quarterly operating performance of the Company and to conduct its business operations. These non-GAAP financial measures are also used by management to evaluate return on investment, income contribution and future impact to operating results of potential mergers and acquisitions. In addition, these non-GAAP financial measures facilitate management`s internal comparisons to competitors` operating results and the software industry in general. This non-GAAP financial information is provided as additional information for investors and is not in accordance with, or an alternative to, GAAP. In addition, the non-GAAP financial information provided may be different than similar measures used by other companies. However, the Company`s management believes these non-GAAP measures provide useful information to investors, potential investors, securities analysts and others so each group can evaluate the Company`s current and future prospects in the same manner as management if they so choose. The Company believes its non-GAAP measures of operating performance better reflect the underlying economics of its business and better align with the cash flow performance of the Company as measured under GAAP than it does with operating results as presented under GAAP, which include or may include, from time to time, non-cash charges for amortization expense and purchased research and development related to acquisitions, impairment losses on long-lived assets, restructuring and lease abandonment charges and non-cash stock option compensation charges. A reconciliation of GAAP results to adjusted results has been provided in the financial statement tables that accompany this press release.
Forward-Looking Statements
Information in this release relating to Manugistics` prospects that are forward-looking statements involve risks and uncertainties that could cause actual results to differ materially, including, but not limited to, the following: (1) Manugistics has recently instituted restructuring and lease abandonment plans which include, among other things, a decrease in employee workforce and office closures. In addition, Manugistics has recently undergone significant changes in senior management. There can be no assurances as to the effectiveness of these plans on the Company`s overall financial performance and condition, that further similar initiatives will not be undertaken in the future, or that these plans will not have an adverse impact on Manugistics` ability to successfully operate its business; (2) Economic, political and other uncertainties continue to adversely affect purchasing decisions for enterprise application software and services throughout our markets, such as decisions to delay closing of software license transactions or to reduce the size of individual transactions, which have and may continue to result in quarterly revenues and income falling significantly short of anticipated levels; (3) Manugistics` management ability to accurately forecast revenue or to adjust the Company`s cost structure, most of which is fixed in the short-term, quickly enough to align it with revenue; (4) Manugistics` ability to maintain its competitive place in the markets for its products and services, to keep pace with the rapid technological advances or to introduce new products or product versions that satisfy customer demand, achieve market acceptance or meet competitive challenges.
Forward looking statements may be identified by the use of words such as "achieve," "address," "adjust," "align," "anticipate," "assume," "become," "believe," "change," "continue," "create," "demand," "determine," "develop," "enable," "excite," "expand," "expect," "focus," "forecast," "future," "gain," "go-forward," "grow," "guidance," "improve," "intend," "invest," "lead," "leverage," "looking forward," "maintain," "meet," "opportunities," "plan," "position," "potential," "predict," "provide," "reduce," "remain," "respond," "see," "should," "thrive," "utilize," or "will." More information about factors that potentially could affect Manugistics` financial results is included in Manugistics filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended February 29, 2004 and its Quarterly Report on Form 10-Q for the quarter ended May 31, 2004. Manugistics assumes no obligation to update the forward-looking information contained in this announcement.
Manugistics is a registered trademark, the Manugistics logo, and Manugistics NetWORKS are trademarks of Manugistics, Inc. All other product or company names mentioned are used for identification purposes only, and may be trademarks of their respective owners.
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