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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
_________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 000-12456
_________________
AMERICAN SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
_________________
Georgia 58-1098795
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer
Identification Number)
470 East Paces Ferry Road, N.E.AtlantaGeorgia 30305
(Address of principal executive offices) (Zip Code)
(404) 261-4381
(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
 
Title of each classTrading SymbolName of each exchange on which registered
Common Stock AMSWANASDAQ Global Select Market 




_________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, an emerging growth company or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “emerging growth company” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer   Accelerated Filer 
Non-accelerated filer   Smaller reporting company 
   Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Classes  Outstanding at February 28, 2024
Class A Common Stock, $.10 par value  
31,398,542 Shares
Class B Common Stock, $.10 par value  1,821,587 Shares



AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Form 10-Q
Quarter ended January 31, 2024
Index
Page No
2

PART I—FINANCIAL INFORMATION
Item 1.     Financial Statements
American Software, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
As ofAs of
January 31,
2024
April 30,
2023
ASSETS
Current assets:
Cash and cash equivalents$55,854 $90,059 
Investments22,454 23,451 
Trade accounts receivable, less allowance for doubtful accounts of $220 at January 31, 2024 and $418 at April 30, 2023:
Billed22,796 23,476 
Unbilled1,343 1,569 
Prepaid expenses and other current assets6,973 7,831 
Current assets of discontinued operations 3,603 
Total current assets109,420 149,989 
Investments—noncurrent 486 
Property and equipment, net of accumulated depreciation of $32,454 at January 31, 2024 and $32,371 at April 30, 2023
5,897 6,444 
Capitalized software, net of accumulated amortization of $43,534 at January 31, 2024 and $43,202 at April 30, 2023
59 391 
Goodwill46,393 29,558 
Other intangibles, net of accumulated amortization of $16,258 at January 31, 2024 and $14,062 at April 30, 2023
10,948 2,143 
Other assets6,311 6,609 
Total assets$179,028 $195,620 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,086 $2,131 
Accrued compensation and related costs2,516 4,077 
Dividends payable3,654 3,756 
Other current liabilities3,275 3,638 
Deferred revenue37,154 43,124 
Current liabilities of discontinued operations 318 
Total current liabilities47,685 57,044 
Other long-term liabilities249 288 
Total liabilities47,934 57,332 
Shareholders’ equity:
Common stock:
Class A, $.10 par value. Authorized 50,000,000 shares: 36,933,495 (31,398,542, net) shares issued and outstanding at January 31, 2024 and 36,907,242 (32,318,610, net) shares issued and outstanding at April 30, 2023
3,693 3,691 
Class B, $.10 par value. Authorized 10,000,000 shares: 1,821,587 shares issued and outstanding at January 31, 2024 and April 30, 2023; convertible into Class A Common Shares on a one-for-one basis
182 182 
Additional paid-in capital187,731 182,722 
Retained deficit(24,718)(22,748)
Class A treasury stock, 5,534,953 shares at January 31, 2024 and 4,588,632 shares at April 30, 2023, at cost
(35,794)(25,559)
Total shareholders’ equity131,094 138,288 
Commitments and contingencies
Total liabilities and shareholders’ equity$179,028 $195,620 
See accompanying notes to condensed consolidated financial statements—unaudited.
3

American Software, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
 Three Months Ended January 31,Nine Months Ended January 31,
2024202320242023
Revenues:
Subscription fees$14,114 $13,003 $41,235 $37,391 
License277 1,017 795 2,025 
Professional services and other3,418 4,758 11,107 15,687 
Maintenance7,727 8,649 23,990 26,384 
Total revenues25,536 27,427 77,127 81,487 
Cost of revenues:
Subscription fees4,944 4,005 13,768 11,682 
License3 358 168 541 
Professional services and other2,694 3,498 8,610 10,682 
Maintenance1,449 1,607 4,877 4,757 
Total cost of revenues9,090 9,468 27,423 27,662 
Gross margin16,446 17,959 49,704 53,825 
Research and development4,546 4,402 13,064 13,220 
Sales and marketing5,039 4,904 16,083 15,537 
General and administrative5,853 5,883 16,775 17,350 
Amortization of acquisition-related intangibles193 25 346 81 
Total operating expenses15,631 15,214 46,268 46,188 
Operating income815 2,745 3,436 7,637 
Other income:
Interest income777 701 2,938 1,274 
Other, net3,640 633 2,788 34 
Earnings before income taxes5,232 4,079 9,162 8,945 
Income tax expense1,080 907 1,775 1,882 
Net earnings from continuing operations$4,152 $3,172 $7,387 $7,063 
Discontinued operations (Note F)
Earnings from operations of discontinued operations 88 255 475 
Gain on disposal of discontinued operations  2,124  
Income tax expense64 43 567 152 
Earnings (loss) from discontinued operations, net of income taxes(64)45 1,812 323 
Net earnings$4,088 $3,217 $9,199 $7,386 
Earnings per common share from continuing operations (a):
Basic$0.12 $0.09 $0.22 $0.21 
Diluted$0.12 $0.09 $0.22 $0.21 
Earnings per common share from discontinued operations (a):
Basic$ $ $0.05 $0.01 
Diluted$ $ $0.05 $0.01 
Earnings per common share: (a)
Basic$0.12 $0.09 $0.27 $0.22 
Diluted$0.12 $0.09 $0.27 $0.22 
Cash dividends declared per common share$0.11 $0.11 $0.33 $0.33 
Shares used in the calculation of earnings per common share:
Basic33,292 33,759 33,842 33,711 
Diluted33,337 33,965 33,866 34,006 
______________
(a)Basic per share amounts are the same for Class A and Class B shares. Diluted per share amounts for Class A shares are shown above. Diluted earnings per share for Class B shares under the two-class method are $0.12 and $0.09 for the three months ended January 31, 2024 and 2023, and $0.27 and $0.22 for the nine months ended January 31, 2024 and 2023. See Note D to the condensed consolidated financial statements.
See accompanying notes to condensed consolidated financial statements—unaudited.
4

American Software, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(in thousands, except share data)
 Common stockAdditional
paid-in
capital
Retained deficitTreasury
stock
Total
shareholders’
equity
 Class AClass B
For the Three Months Ended January 31, 2023
SharesAmountSharesAmount
Balance at October 31, 202236,503,495 $3,650 1,821,587 $182 $175,733 $(21,418)$(25,559)$132,588 
Proceeds from stock options exercised43,000 5— — 505— — 510 
Stock-based compensation— — — — 1,294 — — 1,294 
Net earnings— — — — — 3,217 — 3,217 
Dividends declared*— — — — — (3,716)— (3,716)
Balance at January 31, 2023
36,546,495 $3,655 1,821,587 $182 $177,532 $(21,917)$(25,559)$133,893 
For the Three Months Ended January 31, 2024
Balance at October 31, 202336,929,495 $3,693 1,821,587 $182 $186,100 $(25,152)$(30,373)$134,450 
Proceeds from stock options exercised*4,000 — — — 45 — — 45 
Stock-based compensation— — — — 1,586 — — 1,586 
Purchases of common stock— — — — — — (5,421)(5,421)
Net earnings— — — — — 4,088 — 4,088 
Dividends declared— — — — — (3,654)— (3,654)
Balance at January 31, 2024
36,933,495 $3,693 1,821,587 $182 $187,731 $(24,718)$(35,794)$131,094 
Common stockAdditional
paid-in
capital
Retained deficitTreasury
stock
Total
shareholders’
equity
Nine Months Ended January 31, 2023Class AClass B
SharesAmountSharesAmount
Balance at April 30, 202236,405,695 $3,641 1,821,587 $182 $171,948 $(18,171)$(25,559)$132,041 
Proceeds from stock options exercised*140,800 14— — 1,640— — 1,654 
Stock-based compensation— — — — 3,944— — 3,944 
Net earnings— — — — — 7,386— 7,386 
Dividends declared*— — — — — (11,132)— (11,132)
Balance at January 31, 202336,546,495 $3,655 1,821,587 $182 $177,532 $(21,917)$(25,559)$133,893 
Nine Months Ended January 31, 2024
Balance at April 30, 202336,907,242 $3,691 1,821,587 $182 $182,722 $(22,748)$(25,559)$138,288 
Proceeds from stock options exercised*26,253 2— — 289— — 291 
Stock-based compensation— — — — 4,720— — 4,720 
Purchases of common stock— — — — — — (10,235)(10,235)
Net earnings— — — — — 9,199— 9,199 
Dividends declared*— — — — — (11,169)— (11,169)
Balance at January 31, 202436,933,495 $3,693 1,821,587 $182 $187,731 $(24,718)$(35,794)$131,094 
*Amounts adjusted for rounding

See accompanying notes to condensed consolidated financial statements
5

American Software, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 Nine Months Ended January 31,
 20242023
Cash flows from operating activities:
Net earnings$9,199 $7,386 
Earnings from discontinued operations, net of tax(1,812)(323)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization3,641 2,389 
Stock-based compensation expense4,720 3,919 
Net gain on investments(1,331)(92)
Deferred income taxes282 (3,377)
Gain on sale of business(1,438) 
Gain on sale of discontinued operations(2,124) 
Changes in operating assets and liabilities:
Purchases of trading securities(3,958)(8,284)
Proceeds from maturities and sales of trading securities6,772 870 
Accounts receivable, net4,267 (11,816)
Prepaid expenses and other assets(1,150)579 
Accounts payable and other liabilities(3,854)(1,578)
Deferred revenue(5,298)(1,247)
Net cash provided by (used in) operating activities of continuing operations7,916 (11,574)
Net cash provided by operating activities of discontinued operations1,554 1,108 
Net cash provided by (used in) operating activities9,470 (10,466)
Cash flows from investing activities:
Purchases of property and equipment, net of disposals(539)(3,655)
Purchase of business, net of cash acquired(25,041)(6,500)
Proceeds from sale of business660  
Net cash used in investing activities of continuing operations(24,920)(10,155)
Net cash provided by investing activities of discontinued operations1,825  
Net cash used in investing activities(23,095)(10,155)
Cash flows from financing activities:
Proceeds from exercise of stock options290 1,654 
Purchases of common stock(10,235) 
Dividends paid(11,272)(11,117)
Net cash used in financing activities of continuing operations(21,217)(9,463)
Net change in cash and cash equivalents(34,842)(30,084)
Cash and cash equivalents at beginning of period90,696 110,690 
Cash and cash equivalents at end of period$55,854 $80,606 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes, net of refunds$4,345 $5,441 
Supplemental disclosures of noncash operating, investing and financing activities:
Accrual of dividends payable$3,654 $3,716 

See accompanying notes to condensed consolidated financial statements—unaudited.
6

AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements—Unaudited
January 31, 2024
A. Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements ("condensed consolidated financial statements") have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete consolidated financial statements. In the opinion of our management, these condensed consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position at January 31, 2024, results of operations for the three and nine months ended January 31, 2024 and 2023, consolidated statements of shareholders’ equity for the three and nine months ended January 31, 2024 and 2023, and cash flows for the nine months ended January 31, 2024 and 2023. The Company’s results for the three months ended January 31, 2024 are not necessarily indicative of the results expected for the full year. You should read these statements in conjunction with our audited consolidated financial statements and management’s discussion and analysis and results of operations included in our Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended April 30, 2023. The terms “fiscal 2024” and “fiscal 2023” refer to our fiscal years ending April 30, 2024 and 2023, respectively.
The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Note 1 in the Notes to Consolidated Financial Statements contained in the Annual Report describes the significant accounting policies that we have used in preparing our consolidated financial statements. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to revenue reserves and allowances. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could differ materially from these estimates under different assumptions or conditions.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of American Software, Inc. (“American Software”) and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.
In September 2023, we disposed of our 100% equity interest in our information technology staffing firm, The Proven Method ("TPM") for approximately $2.1 million in cash. For further information regarding the transaction, see Note F to the accompanying condensed consolidated financial statements.
Recent Accounting Pronouncements
Accounting Standards Update ("ASU") 2021-08 In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606"), at fair value on the acquisition date. ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts, which should generally result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. This update also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company adopted this update prospectively on May 1, 2023 and it did not have a material impact to our condensed consolidated financial statements.
B. Revenue Recognition
    In accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), we recognize revenue when we transfer control of the promised goods or services to our clients, in an amount that reflects the consideration we expect to
7

receive, in exchange for those goods or services. We derive our revenue from software licenses, maintenance services, consulting, implementation and training services, and Software-as-a-Service (“SaaS”), which includes a subscription to our software, as well as support, hosting and managed services.
The Company recognizes revenue in accordance with the following steps:
Step 1 - Identification of the Contract with the Client
Step 2 - Identification of Promised Goods and Services and Evaluation of Whether the Promised Goods and Services are Distinct Performance Obligations
Step 3 - Determination of the Transaction Price
Step 4 - Allocation of the Transaction Price to Distinct Performance Obligations
Step 5 - Attribution of Revenue for Each Distinct Performance Obligation
Nature of Products and Services
    Subscription. Subscription fees include SaaS revenue for the right to use the software for a limited period of time in an environment hosted by the Company or by a third-party. The client accesses and uses the software on an as-needed basis over the Internet or via a dedicated line; however, the client has no right to take delivery of the software. The underlying arrangements typically include a single fee for the service that is billed monthly, quarterly or annually. The Company’s SaaS solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the client. Revenue from a SaaS solution is generally recognized ratably over the term of the arrangement.
    License. Our perpetual software licenses provide the client with a right to use the software as it exists at the time of purchase. We recognize revenue for distinct software licenses once the license period has begun and we have made the software available to the client. Our perpetual software licenses are sold with maintenance under which we provide clients with telephone consulting, product updates on a when available basis, and releases of new versions of products previously purchased by the client, as well as error reporting and correction services.
    Professional Services and Other. Our services revenue consists of fees generated from consulting, implementation and training services, including reimbursements of out-pocket expenses in connection with our services. Services are typically optional to our clients, and are distinct from our software. Fees for our services are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. We believe the output method of hours worked provides the best depiction of the transfer of our services since the client is receiving the benefit from our services as the work is performed. The total amount of expense reimbursement included in professional services and other revenue was immaterial for the three and nine months ended January 31, 2024 and 2023.
    Maintenance. Revenue is derived from maintenance under which we provide clients with telephone consulting, product updates and releases of new versions of products previously purchased by the client on a when and-if-available basis, as well as error reporting and correction services. Maintenance for perpetual licenses is renewable, generally on an annual basis, at the option of the client. Maintenance terms typically range from one to three years. Revenue related to maintenance is generally paid in advance and recognized ratably over the term of the agreement since the Company is standing ready to provide a series of maintenance services that are substantially the same each period over the term; therefore, time is the best measure of progress. Support services for subscriptions are included in the subscription fees and are recognized as a component of such fees.
    Indirect Channel Revenue. We record revenue from sales made through the indirect sales channels on a gross basis, because we control the goods or services and act as the principal in the transaction. In reaching this determination, we evaluated sales through our indirect channel on a case-by-case basis and considered a number of factors including indicators of control such as the party having the primary responsibility to provide specified goods or services and the party having discretion in establishing prices.
    Sales Taxes. We account for sales taxes collected from clients on a net basis.
Contract Balances. Timing of invoicing to clients may differ from timing of revenue recognition and these timing differences result in unbilled accounts receivables or contract liabilities (deferred revenue) on the Company’s Condensed Consolidated Balance Sheets. Fees for our software licenses are generally due within 30 days of contract execution. We have an established history of collecting under the terms of our software license contracts without providing refunds or concessions to our clients. SaaS solutions and maintenance are typically billed in advance on a monthly, quarterly, or annual basis. Services are typically billed as performed. In instances where the timing of revenue recognition differs from the timing of invoicing, we
8

have determined that our contracts generally do not include significant financing component. The primary purpose of our invoicing terms is to provide clients with predictable ways to purchase our software and services, not to provide or receive financing. Additionally, we are applying the practical expedient to exclude any financing component from consideration for any contracts with payment terms of one year or less since we rarely offer terms extending beyond one year. The consideration in our client contracts is fixed.
We have an unconditional right to consideration for all goods and services transferred to our clients. That unconditional right to consideration is reflected in billed and unbilled accounts receivable in the accompanying Condensed Consolidated Balance Sheets in accordance with Topic 606.
Deferred revenue consists of amounts collected prior to having completed the performance of maintenance, SaaS, hosting, and managed services. We typically invoice clients for cloud subscription and support fees in advance on a monthly, quarterly or annual basis, with payment due at the start of the cloud subscription or support term. During the nine months ended January 31, 2024, we recognized $38.1 million of revenue that was included in the deferred revenue balance as of April 30, 2023.
January 31,
2024
April 30,
2023
(in thousands)
Deferred revenue$37,154 $43,124 

    Remaining Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of account under Topic 606. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the client. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract. Remaining performance obligations represent the transaction price of orders for which products have not been delivered or services have not been performed. As of January 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $119.5 million. The Company expects to recognize revenue on approximately 51% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
    Disaggregated Revenue. The Company disaggregates revenue from contracts with clients by geography, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The Company’s revenue by geography is as follows:
    
 Three Months Ended
January 31,
Nine Months Ended
January 31,
2024202320242023
(in thousands)(in thousands)
Revenues:
Domestic$20,040 $21,078 $60,646 $63,633 
International5,496 6,349 16,481 17,854 
$25,536 $27,427 $77,127 $81,487 
    Contract Costs. The Company capitalizes the incremental costs of obtaining a contract with a client if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a client that it would not have incurred if the contract had not been obtained (for example, a sales commission). The Company capitalizes the costs incurred to fulfill a contract only if those costs meet all of the following criteria:
The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.
The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.
The costs are expected to be recovered.
9

    Certain sales commissions incurred by the Company were determined to be incremental costs to obtain the related contracts, which are deferred and amortized ratably over the economic benefit period. These deferred commission costs are classified as current or non-current based on the timing of when the Company expects to recognize the expense. The current and non-current portions of deferred commissions are included in prepaid expenses and other current assets and other assets, respectively, in the Company’s Condensed Consolidated Balance Sheets. Total deferred commissions at January 31, 2024 and April 30, 2023 were $2.6 million and $3.0 million, respectively. Amortization of sales commissions was $0.4 million and $1.2 million for the three and nine months ended January 31, 2024 and $0.4 million and $1.2 million for the three and nine months ended January 31, 2023, which is included in "Sales and marketing" expense in the accompanying Condensed Consolidated Statements of Operations. No impairment losses were recognized during the periods.
C. Declaration of Dividend Payable
On November 20, 2023, our Board of Directors declared a quarterly cash dividend of $0.11 per share of our Class A and Class B common stock. The cash dividend was payable on February 16, 2024 to Class A and Class B shareholders of record at the close of business on February 2, 2024.
D. Earnings Per Common Share
The Company has two classes of common stock. Class B common shares are convertible into Class A common shares at any time, on a one-for-one basis. Under the Company’s Articles of Incorporation, if dividends are declared, holders of Class A common shares shall receive a $0.05 dividend per share prior to the Class B common shares receiving any dividend and holders of Class A common shares shall receive a dividend at least equal to Class B common shares dividends on a per share basis. As a result, the Company has computed the earnings per share in compliance with the Earnings Per Share Topic of the FASB ASC 260, Earnings Per Share, which requires companies that have multiple classes of equity securities to use the “two-class” method in computing earnings per share.
For the Company’s basic earnings per share calculation, the Company uses the “two-class” method. Basic earnings per share are calculated by dividing net earnings attributable to each class of common stock by the weighted average number of shares outstanding. All undistributed earnings are allocated evenly between Class A and B common shares in the earnings per share calculation to the extent that earnings equal or exceed $0.05 per share. If Class B shares convert to Class A shares during the period, the distributed net earnings for Class B shares is calculated using the weighted average common shares outstanding during the period.
Diluted earnings per share is calculated similarly to basic earnings per share, except that the calculation is adjusted to give effect to dilutive elements including stock options and restricted stock units ("RSUs") issuable under the Company's stock incentive plans, to the extent these are dilutive. For the Company’s diluted earnings per share calculation for Class A shares, the Company uses the “if-converted” method. This calculation assumes that all Class B common shares are converted into Class A common shares and, as a result, assumes there are no holders of Class B common shares to participate in undistributed earnings.
For the Company’s diluted earnings per share calculation for Class B shares, the Company uses the “two-class” method. This calculation does not assume that all Class B common shares are converted into Class A common shares. In addition, this method assumes the dilutive effect of Class A stock options and RSUs were converted to Class A shares and the undistributed earnings are allocated evenly to both Class A and B shares including Class A shares issued pursuant to those converted stock options. This allocation is based on management’s judgment after considering the dividend rights of the two-classes of common stock, the control of the Class B shareholders and the convertibility rights of the Class B shares into Class A shares.
The following tables set forth the computation of basic earnings per common share and diluted earnings per common share (in thousands except for per share amounts):








10

Basic earnings per common share:
Three Months Ended January 31, 2024Nine Months Ended January 31, 2024
Class A
Common
Shares
Class B
Common
Shares
Class A
Common
Shares
Class B
Common
Shares
Distributed earnings$0.11 $0.11 $0.33 $0.33 
Undistributed losses0.01 0.01 (0.06)(0.06)
Total from continuing operations$0.12 $0.12 $0.22 $0.27 
Total from discontinued operations  0.05  
Total$0.12 $0.12 $0.27 $0.27 
Distributed earnings$3,454 $200 $10,568 $601 
Undistributed losses410 24 (1,864)(106)
Total from continuing operations$3,864 $224 $6,892 $495 
Total from discontinued operations  1,812  
Total$3,864 $224 $8,704 $495 
Basic weighted average common shares outstanding31,470 1,822 32,020 1,822 
Three Months Ended January 31, 2023Nine Months Ended January 31, 2023
Class A
Common
Shares
Class B
Common
Shares
Class A
Common
Shares
Class B
Common
Shares
Distributed earnings$0.11 $0.11 $0.33 $0.33 
Undistributed losses*(0.02)(0.02)(0.11)(0.11)
Total from continuing operations$0.09 $0.09 $0.21 $0.22 
Total from discontinued operations$ $ $0.01 $ 
Total$0.09 $0.09 $0.22 $0.22 
Distributed earnings$3,515 $201 $10,532 $601 
Undistributed losses(472)(27)(3,545)(202)
Total from continuing operations$2,998 $174 $6,664 $399 
Total from discontinued operations45  323  
Total$3,043 $174 $6,987 $399 
Basic weighted average common shares outstanding31,937 1,822 31,890 1,822 
`


Diluted EPS for Class A Common Shares Using the If-Converted Method
Three Months Ended January 31, 2024
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
Class A
Common
Shares
EPS*
Per Basic$3,864 31,470 $0.12 
Common Stock Equivalents— 44 — 
3,864 31,514 0.12 
Class B Common Share Conversion*224 1,822 — 
Diluted EPS for Class A Common Shares$4,088 33,336 $0.12 
11


Nine Months Ended January 31, 2024
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
Class A
Common
Shares
EPS*
Per Basic$8,704 32,020 $0.27 
Common Stock Equivalents— 24 — 
8,704 32,044 0.27 
Class B Common Share Conversion*495 1,822 — 
Diluted EPS for Class A Common Shares$9,199 33,866 $0.27 

Three Months Ended January 31, 2023
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
Class A
Common
Shares
EPS*
Per Basic$3,043 31,937 $0.09 
Common Stock Equivalents— 206 — 
3,043 32,143 0.09 
Class B Common Share Conversion174 1,822 — 
Diluted EPS for Class A Common Shares$3,217 33,965 $0.09 

Nine Months Ended January 31, 2023
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
Class A
Common
Shares
EPS*
Per Basic$6,987 31,890 $0.22 
Common Stock Equivalents— 294 — 
6,987 32,184 0.22 
Class B Common Share Conversion*399 1,822 — 
Diluted EPS for Class A Common Shares$7,386 34,006 $0.22 


Diluted EPS for Class B Common Shares Using the Two-Class Method
Three Months Ended January 31, 2024
12

Undistributed
& Distributed
Earnings
to Class B
Common
Shares
Class B
Common
Shares
EPS*
Per Basic$224 1,822 $0.12 
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares — — 
Diluted EPS for Class B Common Shares$224 1,822 $0.12 


Nine Months Ended January 31, 2024
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
Class B
Common
Shares
EPS*
Per Basic$495 1,822 $0.27 
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares — — 
Diluted EPS for Class B Common Shares$495 1,822 $0.27 

Three Months Ended January 31, 2023
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
Class B
Common
Shares
EPS*
Per Basic$174 1,822 $0.09 
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares1 — — 
Diluted EPS for Class B Common Shares$175 1,822 $0.09 

Nine Months Ended January 31, 2023
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
Class B
Common
Shares
EPS*
Per Basic$399 1,822 $0.22 
Reallocation of undistributed earnings from Class A Common Shares to Class B Common Shares2 — — 
Diluted EPS for Class B Common Shares$401 1,822 $0.22 
____________
13

*Amounts adjusted for rounding

For the three and nine months ended January 31, 2024 we excluded options to purchase 6,481,015 and 6,184,717 Class A Common Shares, respectively, and for the three and nine months ended January 31, 2023 we excluded options to purchase 4,445,248 and 3,718,454 Class A Common Shares, respectively. We excluded these option share amounts because the exercise prices of those options were greater than the average market price of the Class A Common Shares during the applicable period. As of January 31, 2024, we had a total of 6,522,415 options outstanding and as of January 31, 2023, we had a total of 5,677,804 options outstanding.
E. Acquisitions
We account for business combinations using the acquisition method of accounting and, accordingly, the identifiable assets acquired and liabilities assumed are recorded based upon management’s estimates of current fair values as of the acquisition date. The estimation process includes analyses based on income and market approaches. Goodwill represents the excess purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. The goodwill generated is due in part to the synergies that are not included in the fair value of identifiable intangible assets. Goodwill recorded in an acquisition is assigned to applicable reporting units based on expected revenues. Identifiable intangible assets with finite lives are amortized over their useful lives. Amortization of current technology is recorded in cost of revenue-subscription fees and amortization of all other intangible assets is recorded in amortization of acquisition-related intangibles. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in general and administrative expenses in the periods in which such costs are incurred. The results of operations of acquired businesses are included in the condensed consolidated financial statements from the acquisition date.
Effective September 5, 2023, the Company entered into a Stock Purchase Agreement (“Garvis Purchase Agreement”) with privately-held Garvis AI Limited, a private limited company organized and registered under the laws of England and Wales (“Garvis”). Pursuant to the Garvis Purchase Agreement, the Company acquired 100% of the total issued and outstanding shares of capital stock of Garvis, a visionary SaaS startup that can combine a large language model-based AI interface (e.g. ChatGPT) with AI-native demand forecasting.
Garvis designed from the ground up an AI-first forecasting solution now called DemandAI+. When combined with Generative AI, DemandAI+ creates a modern, more inclusive, and intuitive planning paradigm that quickly digitizes supply chain relationships and exposes that data to any stakeholder across the organization. By simply asking questions planners, executives, and non-planners alike get answers to unanticipated queries in real-time, providing transparency for more informed decisions that saves precious planning time. Demand AI+, built for the cloud, will be embedded into the Logility Digital Supply Chain Platform. The combined solutions will enable a new supply chain planning paradigm with DemandAI+ that moves beyond conventional methods to plan demand and inventory at the speed of the market.
Under the terms of the Garvis Purchase Agreement, the Company acquired the capital stock for cash consideration paid net of cash acquired of approximately $25.0 million, subject to certain post-closing adjustments. The Company incurred acquisition costs of approximately $167,000 and $504,000 during the three and nine months ended January 31, 2024. The operating results of Garvis are not material for proforma disclosure. The Company preliminarily allocated $16.8 million of the total purchase price to goodwill, which has been assigned to the Supply Chain Management segment and is not deductible for income tax purposes.
The following preliminary allocation of the total purchase price reflects the fair value of the assets acquired and liabilities assumed as of September 5, 2023 (in thousands):
14

Useful Life
Cash67 
Accounts receivable, net457 
Current assets47 
Property and equipment, net27 
Goodwill16,835 
Non-compete2,000 3 years
Current technology9,000 3 years
Total assets acquired28,433 
Current liabilities(617)
Long-term liabilities(2,708)
Total liabilities assumed$(3,325)
Net assets acquired$25,108 
Current technology and non-compete agreements are being amortized on a straight-line basis over the remaining estimated economic life of the assets, including the period being reported.
Effective June 28, 2022, the Company acquired certain assets of privately-held Starboard Solutions Corp., a Michigan based innovator of supply chain network design software (“Starboard”), pursuant to the terms of an asset purchase agreement, dated as of June 28, 2022 (the “Starboard Purchase Agreement”).
Starboard creates an interactive supply chain digital twin of the physical supply chain network and uses gaming technology to provide an intuitive user experience where users can easily explore answers to various "what if" questions. Starboard offers a unique supply chain visualization solution that can optimize for unknown locations, meaning users do not have to map their plans to a physical location. Applying Starboard’s rich set of reference costs with Logility’s lane rates and time data structures, users have the ability to quickly analyze options in regions for which they have no prior data and assess better locations for future plants, warehouses or third-party logistic locations. The intuitive design and ease of configuration makes the Starboard network design solution stand out. The Starboard software is built for recurring use, eliminating the need for a consulting project to model potential resolutions to unexpected supply chain disruptions. The integration of Starboard’s capabilities into the Logility Digital Supply Chain Platform will offer supply chain leaders enhanced integrated business planning outcomes. Users will be able to model a response to disruptions and update their operating plan within the Logility Digital Supply Chain Platform in minutes to enact the new operating paradigm.
Under the terms of the Starboard Purchase Agreement, the Company acquired the assets in exchange for a purchase price of approximately $6.5 million in cash, subject to certain post-closing adjustments, plus up to a maximum aggregate amount of $6.0 million (the "Aggregate Maximum Earnout Payment") of contingent earnout payments upon satisfaction of certain subscription revenue targets over a three year earnout period (the "Earnout Period"). For each year of the Earnout Period (each, a "Calculation Period"), the Company will pay, as additional consideration, $2.0 million once subscription revenue (i.e., revenue contracted for and recorded as revenue in accordance with GAAP) for the applicable Calculation Period equals $1.5 million, plus one dollar of additional consideration for each dollar of subscription revenue in excess of $1.5 million, subject to the Aggregate Maximum Earnout Payment. If the subscription revenue for each Calculation Period is less than $1.5 million, no additional payment shall be due for such Calculation Period. The contingent earnout payments are subject to the recipient's continued service with the Company; therefore, any additional consideration will be accounted for as post-combination services and will be expensed in the period(s) payments are accruable. The cumulative earnout paid as of January 31, 2024 was $0. The Company incurred acquisition costs of approximately $0, $0, $50,000 and $186,000 during the three and nine months ended January 31, 2024 and 2023, respectively. The operating results of Starboard are not material for proforma disclosure. We allocated $3.7 million of the total purchase price to goodwill, which has been assigned to the Supply Chain Management segment and is deductible for income tax purposes.
The following allocation of the total purchase price reflects the fair value of the assets acquired and liabilities assumed as of June 28, 2022 (in thousands):
15

Useful Life
Other assets90 
Goodwill3,670 
Non-compete agreements170 5 years
Current technology2,500 3 years
Customer relationships160 6 years
Total assets acquired6,590 
Long-term liabilities(90)
Net assets acquired$6,500 

Non-compete agreements, current technology and customer relationships are being amortized on a straight-line basis over the remaining estimated economic life of the assets, including the period being reported.
F. Divestitures
Discontinued Operations
On September 18, 2023, the Company disposed of its 100% equity interest in its information technology staffing firm, TPM to Marathon TS, Inc., an IT professional services firm for approximately $2.1 million in cash, of which $300,000 is held in escrow. The amounts held in escrow are limited to claims arising out of or relating to any pre-closing taxes. Any escrow amounts that are not subject to then outstanding indemnification claims shall be released to the Company in equal $100,000 increments on the 12, 24 and 36 month anniversary of the transaction closing date and are included in prepaid expenses and other current assets and other assets in the Condensed Consolidated Balance Sheet as of January 31, 2024. There have not been any submitted, or expected, indemnification claims against these escrowed funds. This transaction enables us to focus on our core supply chain planning business allowing Logility to continue to expand its AI-first supply chain management platform.
In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of TPM are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results in the accompanying Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Cash Flows and in the Notes to Condensed Consolidated Financial Statements. TPM was previously reported in the former IT Consulting segment. During the second quarter of fiscal 2024, the Company identified an error, originating in 2017, resulting in an understatement of professional services and other cost of revenue and other current liabilities. The error was determined to be immaterial to all impacted periods and has been corrected in the previously issued condensed consolidated financial statements presented herein. Subsequent to presenting the results of TPM as discontinued operations, the amounts related to the error resulted in an adjustment to decrease earnings from operations of discontinued operations by $123,000 and $168,000 in the three and nine months ended January 31, 2023, respectively. The error resulted in an increase to retained deficit and an increase to other current liabilities of approximately $1.0 million in prior periods presented.
The following is selected financial information included in Earnings from discontinued operations for TPM:

Three Months Ended
January 31,
Nine Months Ended
January 31,
2024202320242023
Revenue$ $3,584 $4,932 $12,258 
Cost of revenue 2,926 3,959 9,942 
Total operating expenses$ $570 $718 $1,841 
Gain on disposal of discontinued operations$ $ $2,124 $ 
Earnings before income taxes$ $88 $2,379 $475 
Income tax expense64 43 567 152 
Earnings (loss) from discontinued operations, net of taxes$(64)$45 $1,812 $323 
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The following is selected financial information included in current assets and current liabilities from discontinued operations for TPM:
January 31,April 30,
20242023
Cash and cash equivalents$ $637 
Trade accounts receivable, less allowance for doubtful accounts 2,964 
Prepaid expenses and other current assets 2 
Current assets of discontinued operations$ $3,603 
Current liabilities of discontinued operations$ $318 
Other Divestitures
On November 15 2023, we signed an asset purchase agreement for the sale of our Transportation Rating Solutions ("TRS") business which consists of on-premise freight shipping solutions for LTL, truckload and rail shipments within North America to FOG Software Group ("FOG") a division of Vela Software for approximately $1.1 million in cash, of which, $440,000 is subject to various holdback provisions, which will expire 120 days following the date of the agreement. The divestiture of TRS will allow us to focus on our core supply chain planning business allowing Logility to continue to expand its AI-first supply chain management platform. The purchase price is subject to a working capital adjustment. We recognized a pre-tax gain of approximately $1.4 million which is recorded within Other Income in the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended January 31, 2024. Earnings from the business were not material and the results of the business through the date of sale were reflected in continuing operations within the SCM segment.
G. Stock-Based Compensation
In the first quarter of fiscal 2024, the Compensation Committee of our Board of Directors awarded RSUs to independent directors not employed by the Company that will vest, and shares of Class A common stock will be issued, on the first anniversary of the date of the grant. The RSU awards replace option grants for Class A common stock previously awarded to independent directors. In addition, stock option grants for employees and contractors for Class A common shares were issued, as follows:

 Nine Months Ended January 31,
 20242023
Awards granted:
    Options1,485,000 1,519,000 
    RSUs95,411  
Total awards granted1,580,411 1,519,000 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model and the fair value of each RSU award is estimated on the date of grant using the fair value method. The forfeiture rates are estimated using historical data. We recorded total compensation cost related to stock options and RSUs of approximately $1.6 million and $1.3 million of which, $0 and $8,000 was included in discontinued operations, and income tax expense of approximately $69,000 from option expirations and income tax benefits of approximately $4,000 from option exercises during the three months ended January 31, 2024 and 2023, respectively. We recorded total compensation cost related to stock options and RSUs of approximately $4.7 million and $3.9 million, of which $0 and $16,000 was included in discontinued operations, and income tax expense of approximately $69,000 from option expirations and income tax benefits of approximately $67,000 from option exercises during the nine months ended January 31, 2024 and 2023, respectively. We record stock-based compensation expense on a straight-line basis over the vesting period directly to additional paid-in capital.
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During the nine months ended January 31, 2024 and 2023, we issued 26,253 and 140,800 shares of Class A common stock, respectively, resulting from the exercise of stock options. The total intrinsic value of options exercised during the nine months ended January 31, 2024 and 2023 based on market value at the exercise dates was approximately $40,000 and $589,000, respectively. As of January 31, 2024, unrecognized compensation cost related to unvested stock option and RSU awards approximated $14.6 million, respectively, which we expect to recognize over a weighted average period of 1.71 years.
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H. Fair Value of Financial Instruments
We measure our investments based on a fair value hierarchy disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. A number of factors affect market price observability, including the type of asset or liability and its characteristics. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1—Quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The following is a general description of the valuation methodologies we use for financial assets and liabilities measured at fair value, including the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Cash Equivalents—Cash equivalents include investments in government obligation based money-market funds, other money market instruments and interest-bearing deposits with initial terms of three months or less. The fair value of cash equivalents approximates its carrying value due to the short-term nature of these instruments.
Marketable Securities—Marketable securities utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. government debt securities, as these securities all have quoted prices in active markets. Marketable securities utilizing Level 2 inputs include municipal bonds. We value these securities using market-corroborated pricing or other models that use observable inputs such as yield curves.
The following tables present our assets and liabilities that we measured at fair value on a recurring basis as of January 31, 2024 and April 30, 2023, and indicate the fair value hierarchy of the valuation techniques we used to determine such fair value (in thousands):
 January 31, 2024
 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
Cash equivalents$51,464 $ $ $51,464 
U.S. Treasury securities4,625   4,625 
Marketable securities17,829   17,829 
Total$73,918 $ $ $73,918 
April 30, 2023
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance
Cash equivalents$81,352 $ $ $81,352 
U.S. Treasury securities7,305   7,305 
Marketable securities16,632   16,632 
Total$105,289 $ $ $105,289 

I. Stock Repurchases
On August 19, 2002, our Board of Directors authorized the repurchase of up to an additional 2.0 million shares of our Class A common stock. We have made and will make these repurchases through open market purchases at prevailing market
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prices. The timing of any repurchase will depend upon market conditions, the market price of our Class A common stock and management’s assessment of our liquidity and cash flow needs. Under this repurchase plan, we have repurchased 2,000,000 shares of Class A common stock at a cost of approximately $16.4 million, which had a $10.2 million impact on fiscal 2024. As of January 31, 2024, under all repurchase plans previously authorized, including this most recent plan, we have repurchased a total of 5,534,953 shares of common stock at a cost of approximately $35.8 million.
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J. Comprehensive Income
We have not included Condensed Consolidated Statements of Comprehensive Income in the accompanying unaudited condensed consolidated financial statements since comprehensive income and net earnings presented in the accompanying Condensed Consolidated Statements of Operations would be substantially the same.
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K. Industry Segments
FASB ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of a public entity about which separate financial information is available that is evaluated regularly by the chief operating decision makers (“CODMs”), or decision making group, in deciding how to allocate resources and in assessing performance. Our CODMs are our Chief Executive Officer and President and our Chief Financial Officer. While our CODMs are apprised of a variety of financial metrics and information, we manage our business primarily on a segment basis, with the CODMs evaluating performance based upon segment operating profit or loss that includes an allocation of common expenses, but excludes certain unallocated corporate expenses, which are included in the Other segment. Our CODMs review the operating results of our two segments, assess performance and allocate resources in a manner that is consistent with the changing market dynamics that we have experienced. The two operating segments are: (1) Supply Chain Management (“SCM”) and (2) Other.
The SCM segment leverages a single platform spanning seven supply chain process areas, including product, demand, inventory, supply, deploy, integrated business planning and supply chain data management. The Other segment consists of (i) American Software enterprise resource planning ("ERP"), which provides purchasing and materials management, client order processing, financial, e-commerce and traditional manufacturing solutions, and (ii) unallocated corporate overhead expenses.
All of our revenue is derived from external clients. We do not have any inter-segment revenue. Our income taxes and dividends are paid at a consolidated level. Consequently, it is not practical to show these items by operating segment.
In the following table, we have broken down the intersegment transactions applicable to the three and nine months ended January 31, 2024 and 2023 (in thousands):
 Three Months Ended January 31,Nine Months Ended January 31,
 2024202320242023
Revenue:
Supply Chain Management$25,009 $26,952 $75,558 $79,886 
Other527 475 1,569 1,601 
$25,536 $27,427 $77,127 $81,487 
Operating income\(loss):
Supply Chain Management$6,119 $7,763 $18,396 $22,587 
Other(5,304)(5,018)(14,960)(14,950)
$815 $2,745 $3,436 $7,637 
Capital expenditures:
Supply Chain Management$21 $14 $434 $1,604 
Other47 935 155 2,051 
$68 $949 $589 $3,655 
Depreciation and amortization:
Supply Chain Management$1,462 $675 $3,115 $2,042 
Other172 113 526 347 
$1,634 $788 $3,641 $2,389 
Earnings\(loss) before income taxes:
Supply Chain Management$7,810 $8,094 $20,353 $22,695 
Other(2,578)(4,015)(11,191)(13,750)
$5,232 $4,079 $9,162 $8,945 
L. Major Clients
No single client accounted for more than 10% of total revenue for the three and nine months ended January 31, 2024 and 2023.
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M. Contingencies
The Company more often than not indemnifies its clients against damages and costs resulting from third-party claims of intellectual property infringement associated with use of the Company’s products. The Company historically has not been required to make any payments under such indemnification obligations. However, the Company continues to monitor the circumstances that are subject to indemnification to identify whether it is probable that a loss has occurred, and would recognize any such losses under such indemnification obligations when they are estimable.
In addition, the Company warrants to clients that the Company’s products operate substantially in accordance with the software product’s specifications. Historically, no costs have been incurred related to software product warranties and none are expected in the future, and as such no accruals for software product warranty costs have been made. Additionally, the Company is involved in various claims arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the financial position or results of operations of the Company.
N. Subsequent Event
On February 21, 2024, our Board of Directors declared a quarterly cash dividend of $0.11 per share of our Class A and Class B common stock. The cash dividend is payable on May 17, 2024 to Class A and Class B shareholders of record at the close of business on May 3, 2024.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements relating to our future financial performance, business strategy, financing plans and other future events that involve uncertainties and risks. You can identify these statements by forward-looking words such as “anticipate,” “intend,” “plan,” “continue,” “could,” “grow,” “may,” “potential,” “predict,” “strive” “will,” “seek,” “estimate,” “believe,” “expect,” and similar expressions that convey uncertainty of future events or outcomes. Any forward-looking statements we make herein are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning future:
results of operations;
liquidity, cash flow and capital expenditures;
demand for and pricing of our products and services;
viability and effectiveness of strategic alliances;
industry conditions and market conditions;
acquisition activities and the effect of completed acquisitions; and
general economic conditions.
Although we believe that the goals, plans, expectations, and prospects that our forward-looking statements reflect are reasonable in view of the information currently available to us, those statements are not guarantees of performance. There are many factors that could cause our actual results to differ materially from those anticipated by forward-looking statements made herein. These factors include, but are not limited to, continuing U.S. and global economic uncertainty, the timing and degree of business recovery, unpredictability and the irregular pattern of future revenue, dependence on particular market segments or clients, competitive pressures, delays, product liability and warranty claims and other risks associated with new product development, undetected software errors, market acceptance of our products, technological complexity, the challenges and risks associated with integration of acquired product lines, companies and services, as well as a number of other risk factors that could affect our future performance. All forward-looking statements included in this Quarterly Report are based upon information available to us as of the filing date of this Quarterly Report. We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. We discuss certain factors in greater detail in “Business Overview” below.
ECONOMIC OVERVIEW
In January 2024, the International Monetary Fund (“IMF”) provided an update to the World Economic Outlook for 2024. The update noted that, “Global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with the 2024 forecast 0.2 percentage point higher than that in the October 2023 World Economic Outlook (WEO) on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China. The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth. Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast revised down.
With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced. On the upside, faster disinflation could lead to further easing of financial conditions. Looser fiscal policy than necessary and than assumed in the projections could imply temporarily higher growth, but at the risk of a more costly adjustment later on. Stronger structural reform momentum could bolster productivity with positive cross-border spillovers. On the downside, new commodity price spikes from geopolitical shocks––including continued attacks in the Red Sea––and supply disruptions or more persistent underlying inflation could prolong tight monetary conditions. Deepening property sector woes in China or, elsewhere, a disruptive turn to tax hikes and spending cuts could also cause growth disappointments."
For fiscal 2024, we believe that the important nature of our software, combined with a challenging global macro economic environment from increased global disruptions on companies’ supply chains will require them to improve productivity and profitability by upgrading their technology systems, which may result in an improved selling environment. Although this improvement could slow or regress at any time, due in part to the effects of a possible recession and trade conflicts on global capital markets, we believe that our organizational and financial structure will enable us to take advantage of any sustained economic rebound. That said, the current business climate within the U.S. and geographic regions in which we
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operate may affect clients’ and prospects' decisions regarding timing of strategic capital expenditures by taking longer periods to evaluate discretionary software purchases.
Corporate capital spending trends and commitments are the primary determinants of the size of the market for business software. Corporate capital spending is, in turn, a function of general economic conditions in the U.S. and abroad and in particular may be affected by conditions in U.S. and global credit markets. In recent years, the weakness in the overall global economy and the U.S. economy has resulted in reduced expenditures in the business software market.
COMPANY OVERVIEW
American Software was incorporated in Georgia in 1970. The Company is headquartered in Atlanta, Georgia with another U.S. office in Miami; and international offices in Belgium, the United Kingdom, India, Germany, New Zealand and Australia.
We provide our software and services solutions through two major operating segments: (1) Supply Chain Management and (2) Other. The SCM software business is our core market. We continue to provide limited services to our legacy ERP clients included in the Other segment.
American Software through its wholly-owned subsidiary and operating entity Logility, Inc ("Logility"), delivers prescriptive demand, inventory, manufacturing, and supply planning tools – helping to provide executives the confidence and control to increase margins and service levels, while delivering sustainable supply chains. Designed for speed and agility, Logility’s SaaS cloud-based platform provides an innovative blend of artificial intelligence (AI), machine learning, and predictive analytics to help deliver integrated planning and operations across the end-to-end supply chain. Our prescriptive approach drives team alignment for enterprises with prioritized outcomes that assure demonstrable value.
Fueled by supply chain master data, allowing for the automation of critical business processes through the application of artificial intelligence and machine learning algorithms to a variety of internal and external data streams, the comprehensive Logility portfolio delivered in the cloud includes advanced analytics, supply chain visibility, demand, inventory and replenishment planning, Sales and Operations Planning, Integrated Business Planning, supply and inventory optimization, manufacturing planning and scheduling, network design and optimization, retail merchandise and assortment planning and allocation, product lifecycle management, sourcing management, vendor quality and compliance, and product traceability.
We believe enterprises are facing unprecedented rates of change and disruption across their operations with a significant transformation in supply chain planning due to advancements in technology, generational shifts of planners, and the significant speed of market changes and disruptions. With increasing consumer expectations for convenience and personalization, fast and free delivery and product freshness forcing enterprises to adapt or be left behind. Given constraints arising from a shortage of skilled supply chain talent and a desire to keep costs at a minimum, we expect enterprises to embrace digital transformation initiatives to meet these challenges. Our solution reduces the business cycle time required from product concept to client availability. Our platform allows our clients to create a digital model of their physical supply chain networks that improves the speed and agility of their operations by implementing automated planning processes. These processes regularly analyze business and market signals to better inform product design and development, increase forecast accuracy, optimize inventory across the supply chain, improve sourcing of sustainable and ethically produced products, and contribute to high client satisfaction.
Our platform is highly regarded by clients and industry analysts alike. Logility, is named a leader in multiple IDC MarketScape reports including; the September 2022 report IDC MarketScape: Worldwide Holistic Supply Chain Planning 2022 Vendor Assessment; the September 2022 report IDC MarketScape: Worldwide Supply Chain Demand Planning 2022 Vendor Assessment; the September 2022 report IDC MarketScape: Worldwide Supply Chain Sales and Operations Planning 2022 Vendor Assessment; and the September 2022 report IDC MarketScape: Worldwide Supply Chain Inventory Optimization 2022 Vendor Assessment. Logility, Inc. was also named as a Major Player in the September 2022 IDC MarketScape: Worldwide Holistic Supply Planning 2022 Vendor Assessment.
Logility has been positioned in the Challenger quadrant in Gartner, Inc.’s May 2, 2023 report, Magic Quadrant for Supply Chain Planning Solutions and positioned in the Leadership quadrant in the Peer Insights for the Gartner Voice of the Customer. We believe our platform is rated highly due to our flexible advanced analytics, underlying SaaS architecture, ease of integration with third-party systems, lower total cost of ownership relative to competitors and the broad scope of supply chain planning functions supported.
We serve approximately 650 clients located in approximately 80 countries, largely concentrated within key vertical markets including apparel and other soft goods, food and beverage, consumer packaged goods, consumer durable goods, wholesale distribution, specialty chemical and other process manufacturing. Our solutions are marketed and sold through a direct sales team as well as an indirect global value-added reseller (“VAR”) distribution network. Our solutions may be
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deployed in the cloud or with existing on-premise clients who may require additional components. We further support our clients with an array of consulting, implementation, operational and training services as well as technical support and hosting.
We derive revenue from four sources: subscriptions, software licenses, maintenance and services. We generally determine SaaS subscription and software license fees based on the breadth of functionality and number of users and/or divisions. Services and other revenues consist primarily of fees from software implementation, training, consulting services, hosting and managed services. We bill for consulting services primarily under time and materials arrangements and recognize revenue as we perform services. Subscription and maintenance agreements typically are for a three- to five-year term. We generally bill these fees annually in advance and then recognize the resulting revenue ratably over the term of the agreement. Deferred revenues represent advance payments or fees for subscriptions, software licenses, services and maintenance billed in advance of the time we recognize the related revenue.
We currently view the following factors as the primary opportunities and risks associated with our business:
Acquisition Opportunities. There are opportunities for selective acquisitions or investments to expand our sales distribution channels and/or broaden our product offering by providing additional solutions for our target markets.
Dependence on Capital Spending Patterns. There is risk associated with our dependence on the capital spending patterns of U.S. and international businesses, which in turn are functions of economic trends and conditions over which we have no control.
Acquisition Risks. There are risks associated with acquisitions of complementary companies, products and technologies, including the risks that we will not achieve the financial and strategic goals that we contemplate at the time of the transaction. More specifically, in any acquisition, we will face risks and challenges associated with the uncertain value of the acquired business or assets, the difficulty of assimilating operations and personnel, integrating acquired technologies and products and maintaining the loyalty of the clients of the acquired business.
Competitive Technologies. There is a risk that our competitors may develop technologies that are substantially equivalent or superior to our technology.
Competition in General. There are risks inherent in the market for business application software and related services, which has been and continues to be intensely competitive; for example, some of our competitors may become more aggressive with their prices and/or payment terms, which may adversely affect our profit margins.
A discussion of a number of additional risk factors associated with our business is included in our Annual Report for fiscal 2023. Additional information and other factors that could affect future financial results may be included, from time to time, in our filings with the Securities and Exchange Commission (the “SEC”).
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our condensed consolidated financial statements, if any, see Note A in the Notes to condensed consolidated financial statements included elsewhere in this Quarterly Report.
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COMPARISON OF RESULTS OF OPERATIONS
Three-Month Comparisons. The following table sets forth certain revenue and expense items as a percentage of total revenue and the percentage changes in dollars for such items for the three months ended January 31, 2024 and 2023:
 Three Months Ended January 31,
 Percentage of Total
Revenue
Pct. Change in
Dollars
 20242023
2024 vs. 2023
Revenue:
Subscription fees55 %47 %%
License%%(73)%
Professional services and other13 %17 %(28)%
Maintenance31 %32 %(11)%
Total revenue100 %100 %(7)%
Cost of revenue:
Subscription fees19 %15 %23 %
License— %%(99)%
Professional services and other11 %13 %(23)%
Maintenance%%(10)%
Total cost of revenue36 %35 %(4)%
Gross margin64 %65 %(8)%
Research and development18 %16 %%
Sales and marketing20 %18 %%
General and administrative24 %22 %%
Total operating expenses62 %56 %%
Operating income%%(70)%
Other income:
Other, net17 %%231 %
Earnings before income taxes19 %14 %28 %
Income tax expense%%19 %
Net earnings from continuing operations15 %11 %31 %