On August 22, 2024, American Software Inc (AMSWA, Financial) released its 8-K filing for the first quarter of fiscal year 2025. The company, which develops enterprise management and supply chain-related software and services, reported a 7% increase in subscription fees and an adjusted EBITDA margin of 18% for the quarter.
Company Overview
American Software Inc develops enterprise management and supply chain-related software and services. Its software and services bring business value to companies by supporting their operations over cloud-based Internet-architected solutions. The company's operating segments include Supply Chain Management (SCM) and Others. It generates maximum revenue from the Supply Chain Management segment, which provides collaborative supply chain solutions to streamline and optimize the production, distribution, and management of products between trading partners.
Performance and Challenges
American Software Inc's Q1 performance was consistent with internal expectations, reflecting disciplined cost management in a challenging selling environment. CEO Allan Dow noted, "As anticipated, sales cycles remained protracted due to continued economic uncertainty and the seasonality we typically experience at the start of our fiscal year." Despite these challenges, the company remains confident in achieving its original guidance for fiscal year 2025.
Financial Achievements
Key financial highlights for the quarter include:
- Subscription fees increased by 7% to $14.8 million.
- Total revenues increased by 1% to $26.2 million, surpassing the analyst estimate of $25.26 million.
- Recurring revenue streams for Maintenance and Subscriptions were $22.1 million, representing 84% of total revenues.
- Operating earnings increased by 32% to $1.8 million.
- GAAP net earnings from continuing operations were $2.1 million or $0.06 per fully diluted share.
- Adjusted net earnings from continuing operations were $4.1 million or $0.12 per fully diluted share.
- EBITDA from continuing operations was $3.0 million, while adjusted EBITDA increased by 26% to $4.6 million.
Income Statement Highlights
| Metric | Q1 FY2025 | Q1 FY2024 | Change |
|---|---|---|---|
| Subscription Fees | $14.8 million | $13.8 million | 7% |
| Total Revenues | $26.2 million | $25.9 million | 1% |
| Operating Earnings | $1.8 million | $1.4 million | 32% |
| GAAP Net Earnings | $2.1 million | $2.6 million | -21% |
| Adjusted Net Earnings | $4.1 million | $4.0 million | 1% |
| Adjusted EBITDA | $4.6 million | $3.7 million | 26% |
Balance Sheet and Cash Flow
The company's financial condition remains strong, with cash and investments totaling approximately $92.0 million. During the first quarter, American Software Inc paid shareholder dividends of approximately $3.7 million. However, net cash provided by operating activities of continuing operations was negative at $1.8 million, compared to $7.0 million in the same period last year.
Client and Technology Highlights
Notable new and existing customers include Bob’s Discount Furniture, Inc., Carl Zeiss AG, and Kingfisher Information Technology Services (UK) Ltd. Additionally, Logility, the operating subsidiary of American Software, launched new generative AI capabilities to enhance its supply chain platform.
Analysis
American Software Inc's performance in Q1 FY2025 demonstrates resilience in a challenging economic environment. The growth in subscription fees and the strong adjusted EBITDA margin are positive indicators of the company's ability to manage costs and drive recurring revenue. However, the decline in GAAP net earnings and the negative cash flow from operations highlight areas that require attention. Overall, the company's strategic focus on cloud services and AI-driven solutions positions it well for future growth.
Explore the complete 8-K earnings release (here) from American Software Inc for further details.
