Manugistics Acquisition Powers Growth for JDA in the Fourth Quarter
February 5, 2007 Timothy Prickett Morgan
JDA Software, which supplies software for retailers who run their applications on i5/OS or Windows platforms, announced its fourth quarter 2006 financial results, and thanks in part to the acquisition of supply chain specialist Manugistics, JDA was able to show pretty impressive growth.
JDA said that for the fourth quarter ended December 31, it had total revenues of $88.6 million, up 61 percent from the $55.1 million in sales for software, services, and maintenance that the company posted in the fourth quarter of 2005. Sales of products and services from the Manugistics line, which became part of JDA when Manugistics’ shareholders agreed to the $213 million all-cash takeover bid in July 2006, accounted for $39.6 million in overall sales, with $6.6 million of that being for software licenses. What this means, of course, is that the core JDA revenues actually declined in the quarter, dropping 11 percent to $49 million. JDA’s overall software license sales in the quarter (including JDA and Manugistics lines) came to $17.7 million, up 14 percent compared to the year ago period thanks to the Manugistics products, but if you extract the Manugustics software sales out, then the JDA product line saw only $11.1 million in sales during the fourth quarter, a drop of 29 percent from last year’s $15.6 million in sales.
JDA was obviously very excited to get ahold of Manugistics, so it could have two different products to sell into its retail base–store management and back office systems as well as supply chain management solutions. Companies who have one usually have to upgrade the other, and they don’t like to do them at the same time. So the combination should allow JDA to have a more balanced performance going forward. The retail sector is notoriously choppy when it comes to sales, mainly because retailers’ IT budgets are subject to the capriciousness of consumers to a certain extent. When we all spend less, they have less to invest in IT. JDA said that during the quarter it inked a big global agreement with furniture retailer Ikea and another big deal with office products retailer OfficeMax, and that it signed 58 new software deals in total.
The Manugistics acquisition did take its toll on profits during the quarter and for the full year, however. Thanks to a hefty maintenance services business from Manugistics, JDA reported total maintenance revenues of $43 million in the fourth quarter, nearly double those of JDA alone. Consulting services and reimbursed expenses accounted for another $27.9 million in sales. When you add it all up, JDA actually had a gross profit of $54.9 million in the quarter. After taking out operating expenses–including $2.2 million in restructuring charges and $3.5 million in amortization of intangibles–JDA had an operating profit of $3.7 million, but after investment, stock conversion expenses, and income taxes were taken into account, JDA booked a loss of $1.2 million.
For the full 2006 year, JDA had sales of $277.5 million, with $49 million in software license sales, $129.3 million in maintenance fees, and $99.2 million in services revenues. The company booked a loss of $10.7 million. JDA exited the quarter with $53.6 million in cash and equivalents.