Company Quick10K Filing
⚲
American Software
Financials
Price15.02 EPS0
Shares32 P/E68
MCap485 P/FCF34
Net Debt-63 EBIT8
TEV423 TEV/EBIT54
TTM 2019-10-31, in MM, except price, ratios
Filings
10-Q 2020-01-31 Filed 2020-03-06
10-Q 2019-10-31 Filed 2019-12-06
10-Q 2019-07-31 Filed 2019-09-06
10-K 2019-04-30 Filed 2019-07-15
10-Q 2019-01-31 Filed 2019-03-07
10-Q 2018-10-31 Filed 2018-12-07
10-Q 2018-07-31 Filed 2018-09-10
10-K 2018-04-30 Filed 2018-07-13
10-Q 2018-01-31 Filed 2018-03-09
10-Q 2017-10-31 Filed 2017-12-08
10-Q 2017-07-31 Filed 2017-09-08
10-K 2017-04-30 Filed 2017-07-14
10-Q 2017-01-31 Filed 2017-03-02
10-Q 2016-10-31 Filed 2016-12-08
10-Q 2016-07-31 Filed 2016-09-08
10-K 2016-04-30 Filed 2016-07-14
10-Q 2016-01-31 Filed 2016-03-04
10-Q 2015-10-31 Filed 2015-12-07
10-Q 2015-07-31 Filed 2015-09-04
10-K 2015-04-30 Filed 2015-07-10
10-Q 2015-01-31 Filed 2015-03-06
10-Q 2014-10-31 Filed 2014-12-05
10-Q 2014-07-31 Filed 2014-09-05
10-K 2014-04-30 Filed 2014-07-14
10-Q 2014-01-31 Filed 2014-03-12
10-Q 2013-10-31 Filed 2013-12-06
10-Q 2013-07-31 Filed 2013-09-09
10-K 2013-04-30 Filed 2013-07-12
10-Q 2013-01-31 Filed 2013-03-06
10-Q 2012-10-31 Filed 2012-12-07
10-Q 2012-07-31 Filed 2012-09-07
10-K 2012-04-30 Filed 2012-07-12
10-Q 2012-01-31 Filed 2012-03-08
10-Q 2011-10-31 Filed 2011-12-09
10-Q 2011-07-31 Filed 2011-09-08
10-K 2011-04-30 Filed 2011-07-14
10-Q 2011-01-31 Filed 2011-03-10
10-Q 2010-10-31 Filed 2010-12-08
10-Q 2010-07-31 Filed 2010-09-08
10-K 2010-04-30 Filed 2010-07-14
10-Q 2010-01-31 Filed 2010-03-10
Reports
8-K 2020-06-18
8-K 2020-06-01
8-K 2020-05-26
8-K 2020-05-26
8-K 2020-02-20
8-K 2020-01-10
8-K 2019-11-21
8-K 2019-10-17
8-K 2019-08-28
8-K 2019-08-22
8-K 2019-06-19
8-K 2019-02-20
8-K 2019-01-01
8-K 2018-11-29
8-K 2018-09-04
8-K 2018-08-22
8-K 2018-06-21
8-K 2018-02-22

AMSWA 10Q Quarterly Report

Content
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Exhibits
EX-31.1 amswa-20200131ex311.htm
EX-31.2 amswa-20200131ex312.htm
EX-32.1 amswa-20200131ex321.htm

American Software Earnings 2020-01-31

Balance SheetIncome StatementCash Flow
170136102683402012201420172020
Assets, Equity
 35282114702012201420172020
Rev, G Profit, Net Income
 1593-3-9-152012201420172020
Ops, Inv, Fin
10-Q 1 amswa-20200131x10q.htm 10-Q Document

 
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, 2020
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: 0-12456
_________________
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., Atlanta, Georgia
 
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 class
Trading Symbol
Name of each exchange on which registered
Common Stock
 AMSWA
NASDAQ 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 March 3, 2020
Class A Common Stock, $.10 par value
  
30,368,467 Shares
Class B Common Stock, $.10 par value
  
1,821,587 Shares
 



AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Form 10-Q
Quarter ended January 31, 2020
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)
 
January 31,
2020
 
April 30,
2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
68,809

 
$
61,288

Investments
27,478

 
24,710

Trade accounts receivable, less allowance for doubtful accounts of $225 at January 31, 2020 and $153 at April 30, 2019:
 
 
 
Billed
21,202

 
18,819

Unbilled
2,436

 
1,475

Prepaid expenses and other current assets
6,576

 
6,210

Total current assets
126,501

 
112,502

Investments—noncurrent
—

 
2,484

Property and equipment, net of accumulated depreciation of $29,804 at January 31, 2020 and $29,327 at April 30, 2019
3,447

 
3,585

Capitalized software, net of accumulated amortization of $33,285 at January 31, 2020 and $28,740 at April 30, 2019
9,215

 
11,063

Goodwill
25,888

 
25,888

Other intangibles, net of accumulated amortization of $11,931 at January 31, 2020 and $10,643 at April 30, 2019
1,444

 
2,732

Lease right of use assets
2,228

 
—

Deferred sales commissions—noncurrent
2,231

 
1,546

Other assets
1,738

 
1,510

Total assets
$
172,692

 
$
161,310

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,772

 
$
2,448

Accrued compensation and related costs
6,006

 
2,561

Dividends payable
3,522

 
3,434

Operating lease obligations
770

 
—

Other current liabilities
1,520

 
1,375

Deferred revenue
34,419

 
33,283

Total current liabilities
48,009

 
43,101

Deferred income taxes
3,322

 
3,514

Long-term operating lease obligations
1,596

 
—

Other long-term liabilities
93

 
88

Total liabilities
53,020

 
46,703

Shareholders’ equity:
 
 
 
Common stock:
 
 
 
Class A, $.10 par value. Authorized 50,000,000 shares: 34,782,183 and 30,193,551 shares issued and outstanding respectively at January 31, 2020 and 33,979,739 and 29,391,107 shares issued and outstanding respectively at April 30, 2019
3,478

 
3,398

Class B, $.10 par value. Authorized 10,000,000 shares: 1,821,587 shares issued and outstanding at January 31, 2020 and April 30, 2019; convertible into Class A Common Shares on a one-for-one basis
182

 
182

Additional paid-in capital
147,582

 
138,315

Retained deficit
(6,011
)
 
(1,729
)
Class A treasury stock, 4,588,632 shares at January 31, 2020 and April 30, 2019, at cost
(25,559
)
 
(25,559
)
Total shareholders’ equity
119,672

 
114,607

Commitments and contingencies

 

Total liabilities and shareholders’ equity
$
172,692

 
$
161,310

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,
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
Subscription fees
$
5,802

 
$
3,687

 
$
15,752

 
$
10,196

License
3,695

 
1,718

 
6,519

 
5,432

Professional services and other
10,308

 
10,176

 
31,271

 
32,240

Maintenance
10,795

 
11,422

 
32,651

 
34,567

Total revenues
30,600

 
27,003

 
86,193

 
82,435

Cost of revenues:
 
 
 
 
 
 
 
Subscription fees
1,976

 
1,389

 
6,711

 
3,746

License
1,582

 
1,831

 
3,969

 
5,305

Professional services and other
7,764

 
7,714

 
22,712

 
24,484

Maintenance
1,836

 
2,030

 
5,551

 
6,442

Total cost of revenues
13,158

 
12,964

 
38,943

 
39,977

Gross margin
17,442

 
14,039

 
47,250

 
42,458

Research and development
3,853

 
2,811

 
11,390

 
9,818

Sales and marketing
5,519

 
4,699

 
16,246

 
15,183

General and administrative
5,194

 
4,302

 
14,923

 
12,903

Amortization of acquisition-related intangibles
57

 
97

 
232

 
291

Total operating expenses
14,623

 
11,909

 
42,791

 
38,195

Operating income
2,819

 
2,130

 
4,459

 
4,263

Other income:
 
 
 
 
 
 
 
Interest income
360

 
523

 
1,234

 
1,551

Other, net
618

 
4

 
981

 
(461
)
Earnings before income taxes
3,797

 
2,657

 
6,674

 
5,353

Income tax expense
511

 
356

 
477

 
424

Net earnings
$
3,286

 
$
2,301

 
$
6,197

 
$
4,929

Earnings per common share (a):
 
 
 
 
 
 
 
Basic
$
0.10

 
$
0.07

 
$
0.20

 
$
0.16

Diluted
$
0.10

 
$
0.07

 
$
0.19

 
$
0.16

Cash dividends declared per common share
$
0.11

 
$
0.11

 
$
0.33

 
$
0.33

Shares used in the calculation of earnings per common share:
 
 
 
 
 
 
 
Basic
31,955

 
31,010

 
31,611

 
30,887

Diluted
32,668

 
31,183

 
32,260

 
31,351

______________
(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 $0.10 and $0.07 for the three months ended January 31, 2020 and 2019, and $0.20 and $0.16 for the nine months ended January 31, 2020 and 2019 respectively. See Note E 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 stock
 
Additional
paid-in
capital
 
Retained
earnings/deficit
 
Treasury
stock
 
Total
shareholders’
equity
 
Class A
 
Class B
 
For the Three Months Ended January 31, 2019
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at October 31, 2018
33,721,076

 
$
3,372

 
1,821,587

 
$
182

 
$
135,150

 
$
943

 
$
(25,559
)
 
$
114,088

Proceeds from stock options exercised
112,600

 
11

 
—

 
—

 
906

 
—

 
—

 
917

Stock-based compensation
—

 
—

 
—

 
—

 
466

 
—

 
—

 
466

Net earnings
—

 
—

 
—

 
—

 
—

 
2,301

 
—

 
2,301

Dividends declared*
—

 
—

 
—

 
—

 
—

 
(3,416
)
 
—

 
(3,416
)
Balance at January 31, 2019
33,833,676

 
$
3,383

 
1,821,587

 
$
182

 
$
136,522

 
$
(172
)
 
$
(25,559
)
 
$
114,356

For the Three Months Ended January 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at October 31, 2019
34,630,682

 
$
3,463

 
1,821,587

 
$
182

 
$
145,554

 
$
(5,774
)
 
$
(25,559
)
 
$
117,866

Proceeds from stock options exercised
151,501

 
15

 
—

 
—

 
1,465

 
—

 
—

 
1,480

Stock-based compensation*
—

 
—

 
—

 
—

 
563

 
—

 
—

 
563

Net earnings
—

 
—

 
—

 
—

 
—

 
3,286

 
—

 
3,286

Dividends declared*
—

 
—

 
—

 
—

 
—

 
(3,523
)
 
—

 
(3,523
)
Balance at January 31, 2020
34,782,183

 
$
3,478

 
1,821,587

 
$
182

 
$
147,582

 
$
(6,011
)
 
$
(25,559
)
 
$
119,672

*Amounts adjusted for rounding

See accompanying notes to condensed consolidated financial statements—unaudited.



























5


American Software, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(in thousands, except share data)

 
Common stock
 
Additional
paid-in
capital
 
Retained
earnings/deficit
 
Treasury
stock
 
Total
shareholders’
equity
 
Class A
 
Class B
 
For the Nine Months Ended January 31, 2019
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at April 30, 2018
33,141,764

 
$
3,314

 
2,057,390

 
$
205

 
$
131,258

 
$
3,366

 
$
(25,559
)
 
$
112,584

Cumulative effect of the adoption of Topic 606
—

 
—

 
—

 
—

 
—

 
1,753

 
—

 
1,753

Proceeds from stock options exercised*
456,109

 
46

 
—

 
—

 
3,957

 
—

 
—

 
4,003

Conversion of Class B shares into Class A shares
235,803

 
23

 
(235,803
)
 
(23
)
 
—

 
—

 
—

 
—

Stock-based compensation*
—

 
—

 
—

 
—

 
1,307

 
—

 
—

 
1,307

Net earnings
—

 
—

 
—

 
—

 
—

 
4,929

 
—

 
4,929

Dividends declared*
—

 
—

 
—

 
—

 
—

 
(10,220
)
 
—

 
(10,220
)
Balance at January 31, 2019
33,833,676

 
$
3,383

 
1,821,587

 
$
182

 
$
136,522

 
$
(172
)
 
$
(25,559
)
 
$
114,356

For the Nine Months Ended January 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at April 30, 2019
33,979,739

 
$
3,398

 
1,821,587

 
$
182

 
$
138,315

 
$
(1,729
)
 
$
(25,559
)
 
$
114,607

Proceeds from stock options exercised
802,444

 
80

 
—

 
—

 
7,757

 
—

 
—

 
7,837

Stock-based compensation
—

 
—

 
—

 
—

 
1,510

 
—

 
—

 
1,510

Net earnings
—

 
—

 
—

 
—

 
—

 
6,197

 
—

 
6,197

Dividends declared*
—

 
—

 
—

 
—

 
—

 
(10,479
)
 
—

 
(10,479
)
Balance at January 31, 2020
34,782,183

 
$
3,478

 
1,821,587

 
$
182

 
$
147,582

 
$
(6,011
)
 
$
(25,559
)
 
$
119,672

*Amounts adjusted for rounding

See accompanying notes to condensed consolidated financial statements—unaudited.



6

American Software, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
Nine Months Ended January 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net earnings
$
6,197

 
$
4,929

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
6,310

 
5,671

Stock-based compensation expense
1,510

 
1,308

Net (gain)/loss on investments
(1,036
)
 
393

Deferred income taxes
(192
)
 
(166
)
Changes in operating assets and liabilities:
 
 
 
Purchases of trading securities
(21,934
)
 
(7,427
)
Proceeds from maturities and sales of trading securities
22,687

 
12,944

Accounts receivable, net
(3,344
)
 
(831
)
Prepaid expenses and other assets
(1,279
)
 
724

Accounts payable and other liabilities
3,058

 
(4,031
)
Deferred revenue
1,135

 
94

Net cash provided by operating activities
13,112

 
13,608

Cash flows from investing activities:
 
 
 
Capitalized computer software development costs
(2,697
)
 
(4,162
)
Purchases of property and equipment, net of disposals
(339
)
 
(1,014
)
Net cash used in investing activities
(3,036
)
 
(5,176
)
Cash flows from financing activities:
 
 
 
Proceeds from exercise of stock options
7,837

 
4,004

Dividends paid
(10,392
)
 
(10,172
)
Net cash used in financing activities
(2,555
)
 
(6,168
)
Net change in cash and cash equivalents
7,521

 
2,264

Cash and cash equivalents at beginning of period
61,288

 
52,794

Cash and cash equivalents at end of period
$
68,809

 
$
55,058

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Income taxes, net of refunds
$
504

 
$
505

Supplemental disclosures of noncash operating, investing and financing activities:
 
 
 
Accrual of dividends payable
$
3,523

 
$
3,416

See accompanying notes to condensed consolidated financial statements—unaudited.


7

AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements—Unaudited
January 31, 2020
A. Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited 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, 2020, results of operations for the three and nine months ended January 31, 2020 and 2019, consolidated statements of shareholders’ equity for the three and nine months ended January 31, 2020 and 2019 and cash flows for the nine months ended January 31, 2020 and 2019. The Company’s results for the three and nine months ended January 31, 2020 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, 2019. The terms “fiscal 2020” and “fiscal 2019” refer to our fiscal years ending April 30, 2020 and 2019, 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 revenues and expenses during the reporting period. Note 1 in the Notes to the Consolidated Financial Statements for fiscal 2019 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/collectability and income taxes. 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 unaudited 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.
Recent Accounting Pronouncements
Adoption of New Accounting Standard
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases, which established new FASB Accounting Standards Codification ("ASC") Topic 842 ("ASC 842"), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, a lessee is required to recognize assets and liabilities for leases with lease terms of more than 12 months.
Consistent with previous guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike previous guidance, which required only capital leases to be recognized on the balance sheet, the new standard requires both types of leases to be recognized on the balance sheet. ASC 842 also requires disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the Condensed Consolidated Financial Statements.
The new lease standard is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASC 842 on May 1, 2019, using the modified retrospective method and utilized the optional transition method under which the Company continues to apply the legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative period presented. Therefore, the adjustment to recognize the Company’s leases on the Condensed Consolidated Balance Sheet related to the adoption of the new standard was recorded as of the adoption date and prior periods were not restated.

8

As part of the adoption of ASC 842, the Company elected to adopt certain of the optional practical expedients, including the package of practical expedients which, among other things, gives us the option to not reassess: 1) whether expired or existing contracts are or contain leases; 2) the lease classification for expired or existing leases; and 3) initial direct costs for existing leases. The Company also elected the practical expedient to not record lease right-of-use (“ROU”) assets and lease obligations for leases with terms of 12 months or less. Finally, the Company also elected the practical expedient to not separate lease and non-lease components, which allows it to account for lease and non-lease components as a single lease component. The Company did not elect the hindsight practical expedient in its determination of the lease term for existing leases; therefore, the original lease terms, as determined under ASC 840, were used in the calculation of the Company’s initial ASC 842 lease liabilities.
Adoption of the new standard resulted in the recognition of operating lease ROU assets of approximately $2.7 million, current operating lease liabilities of approximately $0.7 million and long-term operating lease liabilities of approximately $2.1 million as of May 1, 2019.
The adoption had no impact on retained deficit, the Condensed Consolidated Statements of Operations, or the Condensed Consolidated Statements of Cash Flows. See Note C for further discussion of the Company’s leases.
B. Revenue Recognition
We recognize revenue when we transfer control of the promised goods or services to our customers, in an amount that reflects the consideration we expect to 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 maintenance, hosting and managed services.
The Company determines revenue recognition through the following steps:
Step 1 – Identification of the Contract with the Customer
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 Fees. Subscription fees include SaaS revenues 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 customer accesses and uses the software on an as-needed basis over the Internet or via a dedicated line; however, the customer has no right to take delivery of the software without incurring a significant penalty. 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 customer. Revenue from a SaaS solution is generally recognized ratably over the term of the arrangement.
Licenses. Our perpetual software licenses provide the customer 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 customer.
Our perpetual software licenses are sold with maintenance under which we provide customers with telephone consulting, product updates on a when and if available basis, and releases of new versions of products previously purchased by the customer, 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 customers, 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 customer 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 approximately $0.4 million and $1.3 million for the three and nine months ended January 31, 2020, respectively and approximately $0.3 million and $1.1 million for the three and nine months ended January 31, 2019, respectively.

9

Maintenance. Revenue is derived from maintenance under which we provide customers with telephone consulting, product updates on a when and if available basis, and releases of new versions of products previously purchased by the customer, as well as error reporting and correction services. Maintenance for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. 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.
Indirect Channel Revenue. We record revenues 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 customers on a net basis.
Significant Judgments. Our contracts with customers typically contain promises to transfer multiple products and services to a customer. Judgment is required to determine whether each product and service is considered to be a distinct performance obligation that should be accounted for separately under the contract. We allocate the transaction price to distinct performance obligations based on their relative standalone selling price (“SSP”). We estimate SSP primarily based on the prices charged to customers for products or services sold on a standalone basis, or by using information such as market conditions and other observable inputs. However, the selling prices of our software licenses are highly variable or uncertain. Therefore, we estimate SSP for software licenses using the residual approach, determined based on total transaction price less the SSP of other products and services promised in the contract. When performing relative selling price allocations, we use the contract price as the estimate of SSP if it falls within the Company’s range estimate of SSP, since any point within the range would be a valid price point on a standalone basis. If the contract price falls outside of the range of SSP, the Company will use the nearest point in the SSP range in its relative selling price allocation.
Contract Balances. Timing of invoicing to customers may differ from timing of revenue recognition and these timing differences result in receivables, contract assets (unbilled accounts receivable), 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 customers. 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 have determined that our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers 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 customer contracts is fixed.
We have an unconditional right to consideration for all goods and services transferred to our customers. That unconditional right to consideration is reflected in billed and unbilled accounts receivable in the accompanying Condensed Consolidated Balance Sheets in accordance with ASC Topic 606.
Deferred revenue consists of amounts collected prior to having completed the performance of maintenance, SaaS, hosting, and managed services. We typically invoice customers 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 three months ended January 31, 2020, we recognized $14.0 million of revenue that was included in the deferred revenue balance as of October 31, 2019. During the nine months ended January 31, 2020, we recognized $29.0 million of revenue that was included in the deferred revenue balance as of April 30, 2019.    
 
January 31,
2020
 
April 30,
2019
(in thousands)
Contract Balances:
 
 
 
Contract assets, current
$
2,436

 
$
1,475

Total contract assets
$
2,436

 
$
1,475

 
 
 
 
Deferred revenue, current
$
34,419

 
$
33,283

Total deferred revenue
$
34,419

 
$
33,283


10

Remaining Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer 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 customer. 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, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $80.0 million. The Company expects to recognize revenue on approximately two-thirds of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
Disaggregated Revenue. The Company disaggregates revenue from contracts with customers 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,
2020
 
2019
 
2020
 
2019
(in thousands)
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
Domestic
$
24,902

 
$
22,368

 
$
69,076

 
$
66,825

International
5,698

 
4,635

 
17,117

 
15,610

 
$
30,600

 
$
27,003

 
$
86,193

 
$
82,435


Contract Costs. The Company capitalizes the incremental costs of obtaining a contract with a customer 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 customer 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:
a.
The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.
b.
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.
c.
The costs are expected to be recovered.
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 deferred sales commissions—noncurrent, respectively, in the Company’s Condensed Consolidated Balance Sheets. Total deferred commissions at January 31, 2020 and April 30, 2019 were $3.5 million and $2.3 million, respectively. Amortization of sales commissions was $0.6 million and $1.4 million for the three and nine months ended January 31, 2020, respectively, 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. Leases

The Company’s operating leases are primarily related to facility leases for administration and sales. The operating leases have terms ranging from three to five years. While each of the leases includes renewal options, the Company has only included the base lease term in its calculation of lease assets and liabilities. The Company does not have any finance leases.





11

Balance sheet information related to operating leases is as follows (in thousands):
 
January 31,
2020
Assets
 
Right of use assets
$
2,228

 
 
Liabilities
 
Current lease liabilities
770

Long-term lease liabilities
1,596

Total liabilities
$
2,366

 
 

Lease cost information related to operating leases is as follows (in thousands):
 
Three Months Ended
January 31, 2020
Lease cost
 
Operating lease cost
$
193

Short-term lease cost
145

Variable lease cost
65

Total lease cost
$
403

 
Nine Months Ended
January 31, 2020
Lease cost
 
Operating lease cost
581

Short-term lease cost
439

Variable lease cost
176

Total lease cost
$
1,196

Lease costs are primarily included in "Sales and marketing" and "General and administrative" expenses in the Company’s Condensed Consolidated Statements of Operations.
The impact of the Company's leases on Condensed Consolidated Statement of Cash Flows is presented in the operating activities section, which mainly consisted of cash paid for operating lease liabilities of approximately $0.9 million during the nine months ended January 31, 2020. The Company did not modify any existing leases or execute any new leases during the three and nine months ended January 31, 2020.
Weighted average information associated with the measurement of the Company’s remaining operating lease obligations is as follows:
 
January 31,
2020
Weighted average remaining lease term
3.5 years

Weighted average discount rate
3.5
%




12


The following table summarizes the maturity of the Company’s operating lease liabilities as of January 31, 2020 (in thousands):
FY2020
$
198

FY2021
775

FY2022
702

FY2023
470

FY2024
346

Thereafter
20

Total operating lease payments
$
2,511

Less imputed interest
(145
)
Total operating lease liabilities
$
2,366

Future minimum lease payments under noncancelable operating leases (due to existence of renewal or escalation clauses) with initial or remaining lease terms in excess of one year as of April 30, 2019 are as follows (in thousands):
Years ended April 30:
 
2020
$
847

2021
790

2022
706

2023
433

2024
317

Thereafter
17

 
$
3,110


The Company leases to other tenants a portion of its headquarters building that it owns in Atlanta, Georgia. The leases expire at various dates through March 2022. Lease income is included in "Other, net" in the Company’s Condensed Consolidated Statements of Operations and totaled approximately $70,000 and $0.2 million for the three and nine months ended January 31, 2020. Lease payments to be received as of January 31, 2020 are as follows (in thousands):
FY2020
$
43

FY2021
105

FY2022
55

FY2023
—

FY2024
—

Thereafter
—

Total
$
203

Future minimum lease rentals receivable under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of April 30, 2019 are as follows (already included or prorated at the Company’s occupied building) (in thousands):
Years ended April 30:
 
2020
$
194

2021
105

2022
55

2023
—

2024
—

Thereafter
—

 
$
354



13

D. Declaration of Dividend Payable
On November 12, 2019, 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 February 21, 2020 to Class A and Class B shareholders of record at the close of business on February 7, 2020.

E. 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, 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. 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 to Class A shares. 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 includes the dilutive effect of the assumed exercise of options issuable under the Company’s stock incentive plans. 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 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):

Basic earnings per common share:
 
Three Months Ended
January 31, 2020
 
Nine Months Ended
January 31, 2020
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
(0.01
)
 
(0.01
)
 
(0.13
)
 
(0.13
)
Total
$
0.10

 
$
0.10

 
$
0.20

 
$
0.20

Distributed earnings
$
3,321

 
$
201

 
$
9,873

 
$
604

Undistributed losses
(223
)
 
(13
)
 
(4,033
)
 
(247
)
Total
$
3,098

 
$
188

 
$
5,840

 
$
357

Basic weighted average common shares outstanding
30,133

 
1,822

 
29,789

 
1,822


14

 
Three Months Ended
January 31, 2019
 
Nine Months Ended
January 31, 2019
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
(0.04
)
 
(0.04
)
 
(0.17
)
 
(0.17
)
Total
$
0.07

 
$
0.07

 
$
0.16

 
$
0.16

Distributed earnings
$
3,213

 
$
204

 
$
9,609

 
$
613

Undistributed losses
(1,047
)
 
(69
)
 
(4,974
)
 
(319
)
Total
$
2,166

 
$
135

 
$
4,635

 
$
294

Basic weighted average common shares outstanding
29,188

 
1,822

 
29,036

 
1,851

 
 
 
 
 
 
 
 
Diluted EPS for Class A Common Shares Using the If-Converted Method
Three Months Ended January 31, 2020
 
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
 
Class A
Common
Shares
 
EPS*
Per Basic
$
3,098

 
30,133

 
$
0.10

Common Stock Equivalents
—

 
713

 
—

 
3,098

 
30,846

 
0.10

Class B Common Share Conversion
188

 
1,822

 
—

Diluted EPS for Class A Common Shares
$
3,286

 
32,668

 
$
0.10

Nine Months Ended January 31, 2020
 
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
 
Class A
Common
Shares
 
EPS*
Per Basic
$
5,840

 
29,789

 
$
0.20

Common Stock Equivalents
—

 
649

 
—

 
5,840

 
30,438

 
0.19

Class B Common Share Conversion
357

 
1,822

 
—

Diluted EPS for Class A Common Shares
$
6,197

 
32,260

 
$
0.19

Three Months Ended January 31, 2019
 
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
 
Class A
Common
Shares
 
EPS*
Per Basic
$
2,166

 
29,188

 
$
0.07

Common Stock Equivalents
—

 
173

 
—

 
2,166

 
29,361

 
0.07

Class B Common Share Conversion
135

 
1,822

 
—

Diluted EPS for Class A Common Shares
$
2,301

 
31,183

 
$
0.07


15

Nine Months Ended January 31, 2019
 
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
 
Class A
Common
Shares
 
EPS*
Per Basic
$
4,635

 
29,036

 
$
0.16

Common Stock Equivalents
—

 
464

 
—

 
4,635

 
29,500

 
0.16

Class B Common Share Conversion
294

 
1,851

 
—

Diluted EPS for Class A Common Shares
$
4,929

 
31,351

 
$
0.16


Diluted EPS for Class B Common Shares Using the Two-Class Method
Three Months Ended January 31, 2020
 
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
 
Class B
Common
Shares
 
EPS*
Per Basic
$
188

 
1,822

 
$
0.10

Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares
—

 
—

 
—

Diluted EPS for Class B Common Shares
$
188

 
1,822

 
$
0.10

Nine Months Ended January 31, 2020
 
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
 
Class B
Common
Shares
 
EPS*
Per Basic
$
357

 
1,822

 
$
0.20

Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares
5

 
—

 
—

Diluted EPS for Class B Common Shares
$
362

 
1,822

 
$
0.20

Three Months Ended January 31, 2019
 
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
 
Class B
Common
Shares
 
EPS*
Per Basic
$
135

 
1,822

 
$
0.07

Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares
1

 
—

 
—

Diluted EPS for Class B Common Shares
$
136

 
1,822

 
$
0.07







16

Nine Months Ended January 31, 2019

 
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
 
Class B
Common
Shares
 
EPS*
Per Basic
$
294

 
1,851

 
$
0.16

Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares
1

 
—

 
—

Diluted EPS for Class B Common Shares
$
295

 
1,851

 
$
0.16

*Amounts adjusted for rounding
For the three and nine months ended January 31, 2020, we excluded options to purchase 26,000 and 278,116 Class A Common Shares, respectively, and for the three and nine months ended January 31, 2019, we excluded options to purchase 2,416,421 and 464,475 Class A Common Shares, respectively, from the computation of diluted earnings per Class A Common Shares. 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, 2020, we had a total of 3,998,128 options outstanding and as of January 31, 2019, we had a total of 4,017,123 options outstanding.
F. Stock-Based Compensation
During the nine months ended January 31, 2020 and 2019, we granted options for 1,093,000 and 1,201,000 shares of Class A common stock, respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The forfeiture rates are estimated using historical data. We recorded stock option compensation cost of approximately$0.6 million and $0.5 million and income tax benefits of approximately $141,000 and $26,000 from option exercises during the three months ended January 31, 2020 and 2019, respectively. We recorded stock option compensation cost of approximately $1.5 million and $1.3 million and income tax benefits of approximately $614,000 and $260,000 from option exercises during the nine months ended January 31, 2020 and 2019, respectively. We record stock-based compensation expense on a straight-line basis over the vesting period directly to additional paid-in capital.
During the nine months ended January 31, 2020 and 2019, we issued 802,444 and 456,113 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, 2020 and 2019 based on market value at the exercise dates was approximately $4.1 million and $2.1 million, respectively. As of January 31, 2020, unrecognized compensation cost related to unvested stock option awards approximated $6.1 million, which we expect to recognize over a weighted average period of 1.91 years.
G. 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.

17

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, 2020 and April 30, 2019, and indicate the fair value hierarchy of the valuation techniques we used to determine such fair value (in thousands):
 
January 31, 2020
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance
Cash equivalents
$
64,363

 
$
—

 
$
—

 
$
64,363

Marketable securities
13,339

 
14,139

 
—

 
27,478

Total
$
77,702

 
$
14,139

 
$
—

 
$
91,841

 
April 30, 2019
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance
Cash equivalents
$
56,645

 
$
—

 
$
—

 
$
56,645

Marketable securities
11,002

 
16,192

 
—

 
27,194

Total
$
67,647

 
$
16,192

 
$
—

 
$
83,839

H. 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 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 1,053,679 shares of Class A common stock at a cost of approximately $6.2 million, which had no impact on fiscal 2020. As of January 31, 2020, under all repurchase plans previously authorized, including this most recent plan, we have repurchased a total of 4,588,632 shares of common stock at a cost of approximately $25.6 million.
I. 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.
J. 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 Principal Executive Officer and our President. 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, with certain corporate and other common expenses included in the Other segment. Our CODMs review the operating results of our three segments, assess performance and allocate resources in a manner that is consistent with the changing market dynamics that we have experienced. We recently updated our operating segments to reflect the fact that we provide our software solutions through three major operating segments, which are further broken down

18

into a total of six major product and service groups. The three operating segments are (1) Supply Chain Management (“SCM”), (2) Information Technology (“IT”) Consulting and (3) Other.
Our primary operating units under our SCM segment include Logility, Inc., New Generation Computing, Inc. (“NGC”), Demand Management, Inc. (“DMI”), and Halo Business Intelligence (“Halo”). Logility and NGC are wholly-owned subsidiaries of American Software; DMI is a wholly-owned subsidiary of Logility; and Halo is a division of Logility. In addition to our core SCM software business, we also offer technology staffing and consulting services through our wholly-owned subsidiary, The Proven Method, Inc., in the IT Consulting segment. The Other segment consists of software and services provided to our legacy enterprise resource planning (“ERP”) customers, as well as corporate overhead and other common expenses.
All of our revenues are derived from external customers. We do not have any intersegment 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, 2020 and 2019 (in thousands):
 
Three Months Ended January 31,
 
Nine Months Ended January 31,
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
Supply Chain Management
$
25,578

 
$
21,494

 
$
71,411

 
$
65,066

IT Consulting
4,475

 
4,938

 
13,011

 
15,517

Other
547

 
571

 
1,771

 
1,852

 
$
30,600

 
$
27,003

 
$
86,193

 
$
82,435

Operating income (loss):
 
 
 
 
 
 
 
Supply Chain Management
$
6,693

 
$
4,981

 
$
14,904

 
$
12,021

IT Consulting
43

 
244

 
210

 
999

Other
(3,917
)
 
(3,095
)
 
(10,655
)
 
(8,757
)
 
$
2,819

 
$
2,130

 
$
4,459

 
$
4,263

Capital expenditures:
 
 
 
 
 
 
 
Supply Chain Management
$
43

 
$
21

 
$
117

 
$
145

IT Consulting
—

 
—

 
—

 
1

Other
58

 
99

 
222

 
868

 
$
101

 
$
120

 
$
339

 
$
1,014

Capitalized software:
 
 
 
 
 
 
 
Supply Chain Management
$
807

 
$
2,073

 
$
2,697

 
$
4,162

IT Consulting
—

 
—

 
—

 
—

Other
—

 
—

 
—

 
—

 
$
807

 
$
2,073

 
$
2,697

 
$
4,162

Depreciation and amortization:
 
 
 
 
 
 
 
Supply Chain Management
$
1,785

 
$
1,862

 
$
6,026

 
$
5,416

IT Consulting
2

 
2

 
4

 
6

Other
95

 
96

 
280

 
249

 
$
1,882

 
$
1,960

 
$
6,310

 
$
5,671

Earnings (loss) before income taxes:
 
 
 
 
 
 
 
Supply Chain Management
$
6,743

 
$
5,190

 
$
15,259

 
$
12,248

IT Consulting
43

 
244

 
209

 
999

Other
(2,989
)
 
(2,777
)
 
(8,794
)
 
(7,894
)
 
$
3,797

 
$
2,657

 
$
6,674

 
$
5,353



19


K. Major Customers
No single customer accounted for more than 10% of total revenues for the three and nine months ended January 31, 2020 and 2019.
L. Contingencies
We generally indemnify our customers against damages and costs resulting from third-party claims of patent, copyright or trademark infringement associated with use of our products. Historically, we have not been required to make any payments under such indemnifications. However, we continue to monitor the conditions that are subject to indemnification to identify whether it is probable that a loss has occurred, and would recognize any such losses when those losses are estimable. In addition, we warrant to our customers that our software products operate substantially in accordance with their specifications. Historically, we have incurred no costs related to software product warranties and we do not expect to incur such costs in the future, and as such we have made no accruals for software product warranty costs. Additionally, we are 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 our financial position or results of operations.
M. Subsequent Event
On February 12, 2020, 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 22, 2020 to Class A and Class B shareholders of record at the close of business on May 8, 2020.


20

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;
•
cloud services annual contract value (“ACV”);
•
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 revenues, dependence on particular market segments or customers, 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
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 global credit markets.
In January 2020, the International Monetary Fund (“IMF”) provided an update to the World Economic Outlook for 2020. The update noted that, “Global growth is projected to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021—a downward revision of 0.1 percentage point for 2019 and 2020 and 0.2 for 2021 compared to those in the October World Economic Outlook (WEO). The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years. In a few cases, this reassessment also reflects the impact of increased social unrest."
For fiscal 2021, we expect the global economy to improve modestly when compared to recent periods. We believe information technology spending will incrementally improve over the long term as increased global competition forces companies to improve productivity by upgrading their technology systems, which could result in an improved selling environment. Although this improvement could slow or regress at any time, due in part to concerns related to the spread of the global virus and trade conflicts on global capital markets and general economic conditions, we believe that our organizational and financial structure will enable us to take advantage of any sustained economic rebound. While we do not expect that the virus will have a material adverse effect on our business or financial results at this time, we are unable to accurately predict the impact that the coronavirus will have due to various uncertainties, including the ultimate geographic spread of the virus, the severity of the disease, the duration of the

21

outbreak, and actions that may be taken by governmental authorities. Customers continue to take long periods to evaluate discretionary software purchases.
We believe improved economic conditions and increasingly complex supply chain challenges may be driving some businesses to focus on achieving more process and efficiency enhancements in their operations and to invest in solutions that improve operating margins, rather than make large infrastructure-type technology purchases. If this trend continues, we believe it may tend to favor solutions such as our supply chain solutions, which are designed to provide a more rapid return on investment and are targeted at some of the largest profit drivers in a customer’s business.
BUSINESS OVERVIEW
American Software was incorporated as a Georgia corporation in 1970. We develop, market and support a portfolio of software and services that deliver enterprise management and collaborative supply chain solutions to the global marketplace. We have designed our software and services to bring business value to enterprises by supporting their operations over intranets, extranets, client/servers or the Internet. References to “the Company,” “our products,” “our software,” “our services” and similar references include the appropriate business segment actually providing the product or service.
The Company enables enterprises to accelerate their operations from product concept to customer availability. Our four brands - Logility, Demand Solutions, Halo and NGC Software - provide a single platform spanning eight supply chain process areas, including demand optimization, inventory optimization, supply optimization, retail optimization, quality and compliance, product lifecycle management, sourcing management and integrated business planning. Our platform includes advanced analytics and is 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.

Our primary operating units under our SCM segment include Logility, Inc., New Generation Computing, Inc. (“NGC”), Demand Management, Inc. (“DMI”), and Halo Business Intelligence (“Halo”). Logility and NGC are wholly-owned subsidiaries of American Software; DMI is a wholly-owned subsidiary of Logility; and Halo is a division of Logility. In addition to our core SCM software business, we also offer technology staffing and consulting services through our wholly-owned subsidiary, The Proven Method, Inc., in the IT Consulting segment. The Other segment consists of software and services provided to our legacy enterprise resource planning (“ERP”) customers, as well as corporate overhead and other common expenses.
We derive revenues primarily from four sources: software licenses, subscriptions, professional services and other, and maintenance. We generally determine software license and SaaS fees based on the depth of functionality, contractual term, number of production deployments, users and/or sites licensed and/or subscribed. Professional services and other revenues consist primarily of fees from software implementation, training, and consulting services. We bill primarily under time and materials arrangements and recognize revenues as we perform services. SaaS and maintenance agreements typically are for a one- to three-year term, commencing at the time of the initial contract. We generally bill these fees, monthly, quarterly and annually in advance under agreements with terms of one to three years, and then recognize the resulting revenues ratably over the term of the agreement. Deferred revenue represents payments or billings for subscriptions and services and maintenance in advance of the time we recognize the related revenues.
Our cost of revenue for licenses and subscriptions includes amortization of capitalized computer software development costs, amortization of acquired developed technology, royalties paid to third-party software vendors, and agent commission expenses related to revenues generated by the indirect channel, primarily from DMI. Costs for maintenance and services include the cost of personnel to conduct implementations and customer support, consulting, other personnel-related expenses, and agent commission expenses related to maintenance revenues generated by the indirect channel, primarily from DMI. We account for the development costs of software intended for sale in accordance with the Software topic of the FASB ASC. We monitor the net realizable value of our capitalized software on a quarterly basis based on an estimate of future product revenues. We currently expect to fully recover the value of the capitalized software asset recorded on our Condensed Consolidated Balance Sheets; however, if future product revenues are less than management’s current expectations, we may incur a write-down of capitalized software costs.
Our selling expenses mainly include the salary and commissions paid to our sales professionals, along with marketing, promotional, travel and associated costs. Our general and administrative expenses mainly include the salary and benefits paid to executive, corporate and support personnel, as well as facilities-related costs, utilities, communications expenses, and various professional fees.
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.

22

•
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 customers 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 2019. 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 (“SEC”).
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our consolidated financial statements, if any, see Note A in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

23

COMPARISON OF RESULTS OF OPERATIONS
Three-Month Comparisons. The following table sets forth certain revenue and expense items as a percentage of total revenues and the percentage changes in those items for the three months ended January 31, 2020 and 2019:
 
Three Months Ended January 31,
 
Percentage of Total
Revenues
 
Pct. Change in
Dollars
 
2020
 
2019
 
2020 vs. 2019
Revenues:
 
 
 
 
 
Subscription fees
19
%
 
14
%
 
57
 %
License
12
%
 
6
%
 
115
 %
Professional services and other
34
%
 
38
%
 
1
 %
Maintenance
35
%
 
42
%