Q2 2007 American Software Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Welcome to today's teleconference, entitled American Software second quarter fiscal year 2007. Later there will be an opportunity to ask for questions during our question and answer session. At this time, all participants are in a listen-only mode. Please note this call may be recorded. I will now turn the program over to Vincent Klinges. Please go ahead, sir.

VINCENT KLINGES, CFO, AMERICAN SOFTWARE: Good afternoon, and welcome to American Software's second quarter fiscal '07 conference call. To begin, I'd like to remind you that this conference call may contain forward-looking statements, including statements regarding, among other things, our business strategy and growth strategy. Any such forward-looking statements speak only as of this date. These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. There are a number of factors that could cause actual results to differ materially from those anticipated by statements made on this call. Such factors include, but are not limited to, changes in general economic conditions, growth rate of the market for our products and services, timely availability and market acceptance of these products and services, the effective competitive products and pricing, and the irregular pattern of revenues. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate.

At this time, I'd like to turn the call over to Mike Edenfield, Executive Vice President of American Software and CEO of Logility.

MIKE EDENFIELD, EVP, CEO OF LOGILITY, AMERICAN SOFTWARE: Thanks, Vince. Good afternoon, everyone, and thank you for participating on this call. We are pleased to report American Software's second quarter fiscal year 2007 results. The second quarter marked our 23rd consecutive quarter of profitability. For the tenth consecutive quarter, total revenues increased over those attained in the previous year's quarter. The increase for second quarter revenues was 6% year-over-year with maintenance revenue and services revenue growing 11% and 14%, respectively. License revenue was below our expectations but we have an opportunity to have a strong third quarter. From an operating unit perspective, New Generation Computing, Proven Method and Logility all contributed to revenue growth in the second quarter.

Factoring out stock option expense, operating earnings increased 10% over the same period last year. With strong interest in other income, net earnings rose substantially to approximately $1.8 million, an increase over last year of 122%. Adjusted net earnings which exclude acquisition-related expenses and stock option expenses were $2.1 million, a 99% increase over adjusted net earnings for the same period last year.

Notable new and existing customers placing orders in the second quarter include American Racing Equipment, Anvil International, BCBG, East African Breweries, Everlast, Evy of California, Ferrero Australia, Handgards, Home Depot Mexico, Kemira, Mizuno, Snyder's of Hanover, The Heat Group, Thomson Learning, Tyco Healthcare and Wet Seal, Inc., among many others. We added 35 new customers in the second quarter.

During the quarter, license agreements were signed with customers located in 12 different countries including Argentina, Australia, Belgium, Canada, China, Denmark, Germany, New Zealand, Mexico, South Africa, the United Kingdom and the United States. We continue to be encouraged by the number of new customers licensing our products. New customers are a source of future maintenance and implementation services revenue as well as being excellent prospects for additional product sales.

Some of our existing customers have received recognition from the marketplace for exemplary implementations of our systems. Logility customer Shaw Industries received a prestigious 2006 technology and business award for excellence in the consumer goods industry from Start-IT Magazine. The award honors manufacturers that have helped their businesses succeed by overcoming a challenge or solving critical business issues through the use of leading edge technology. Additionally, New Generation Computing's e-SPS solution for global sourcing and product life cycle management has helped Casual Male, which is the largest retailer of big and tall men's apparel, receive recognition from Retail Information Systems News with a 2006 fusion award in the supply chain category. We're very proud of the accomplishments of our customers in using our systems to help their businesses.

Additionally, Logility received outstanding customer satisfaction and loyalty ratings in a recent survey conducted by Porter Research. In overall customer satisfaction, Logility scored 100%. This is higher than Porter's benchmark satisfaction metric of 91%. Logility customers also rated the overall Logility relationship …