Company Quick10K Filing
QAD
Price1.00 EPS11,423,000
Shares-0 P/E0
MCap-0 P/FCF-0
Net Debt-121 EBIT1
TEV-121 TEV/EBIT-108
TTM 2019-10-31, in MM, except price, ratios
10-Q 2020-07-31 Filed 2020-09-09
10-Q 2020-04-30 Filed 2020-06-08
10-K 2020-01-31 Filed 2020-04-14
10-Q 2019-10-31 Filed 2019-12-10
10-Q 2019-07-31 Filed 2019-09-09
10-Q 2019-04-30 Filed 2019-06-10
10-K 2019-01-31 Filed 2019-04-16
10-Q 2018-10-31 Filed 2018-12-10
10-Q 2018-07-31 Filed 2018-09-10
10-Q 2018-04-30 Filed 2018-06-11
10-K 2018-01-31 Filed 2018-04-16
10-Q 2017-10-31 Filed 2017-12-08
10-Q 2017-07-31 Filed 2017-09-08
10-Q 2017-04-30 Filed 2017-06-09
10-K 2017-01-31 Filed 2017-04-07
10-Q 2016-10-31 Filed 2016-12-09
10-Q 2016-07-31 Filed 2016-09-08
10-Q 2016-04-30 Filed 2016-06-07
10-K 2016-01-31 Filed 2016-04-15
10-Q 2015-10-31 Filed 2015-12-10
10-Q 2015-07-31 Filed 2015-09-04
10-Q 2015-04-30 Filed 2015-06-08
10-K 2015-01-31 Filed 2015-04-13
10-Q 2014-10-31 Filed 2014-12-04
10-Q 2014-07-31 Filed 2014-09-09
10-Q 2014-04-30 Filed 2014-06-06
10-K 2014-01-31 Filed 2014-04-14
10-Q 2013-10-31 Filed 2013-12-09
10-Q 2013-07-31 Filed 2013-09-09
10-Q 2013-04-30 Filed 2013-06-10
10-K 2013-01-31 Filed 2013-04-15
10-Q 2012-10-31 Filed 2012-12-10
10-Q 2012-07-31 Filed 2012-09-07
10-Q 2012-04-30 Filed 2012-06-08
10-K 2012-01-31 Filed 2012-04-05
10-Q 2011-10-31 Filed 2011-12-09
10-Q 2011-07-31 Filed 2011-09-09
10-Q 2011-04-30 Filed 2011-06-09
10-K 2011-01-31 Filed 2011-04-15
10-Q 2010-10-31 Filed 2010-12-09
10-Q 2010-07-31 Filed 2010-09-09
10-Q 2010-04-30 Filed 2010-06-10
10-K 2010-01-31 Filed 2010-04-15
8-K 2020-08-26 Earnings, Exhibits
8-K 2020-06-11
8-K 2020-05-27
8-K 2020-03-18
8-K 2019-11-27
8-K 2019-11-26
8-K 2019-08-21
8-K 2019-06-23
8-K 2019-05-29
8-K 2019-04-24
8-K 2019-03-20
8-K 2018-12-19
8-K 2018-11-20
8-K 2018-10-17
8-K 2018-08-17
8-K 2018-08-15
8-K 2018-06-11
8-K 2018-05-30
8-K 2018-03-21
8-K 2018-02-26
8-K 2018-02-02

QADA 10Q Quarterly Report

Part I
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
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
EX-31.1 ex_202337.htm
EX-31.2 ex_202338.htm
EX-32.1 ex_202339.htm

QAD Earnings 2020-07-31

Balance SheetIncome StatementCash Flow
3202561921286402012201420172020
Assets, Equity
906846242-202012201420172020
Rev, G Profit, Net Income
151050-5-102012201420172020
Ops, Inv, Fin

qada20200731_10q.htm
0001036188 QAD INC false --01-31 Q2 2021 4,026 2,940 41,371 38,861 0.001 0.001 5,000,000 5,000,000 0 0 0 0 0.001 0.001 71,000,000 71,000,000 17,364,966 17,108,846 0.001 0.001 4,000,000 4,000,000 3,537,380 3,537,380 207,062 216,378 0.144 0.12 0.144 0.12 12 5 1.4 5 5 0 0 0.1 0.1 0.1 2010 2013 2018 2018 2015 2016 2017 2018 2015 2016 2017 June 25, 2020 July 7, 2020 April 22, 2020 April 29, 2020 8,000 0.3 4 1 2 The number of SARs vested and exercisable at January 31, 2019 includes 877,500 Class A and 127,500 Class B shares previously held by Mr. Karl Lopker which will expire on August 25, 2019 if not exercised by his estate. Exercise prices for these SARs range from $10.50 to $31.65. Sales into Canada accounted for 2% of North America total revenue in the three and six months ended July 31, 2020 and for 2% and 3% of North America total revenue in the three and six months ended July 31, 2019, respectively. The number of RSUs released includes shares withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. 00010361882020-02-012020-07-31 0001036188us-gaap:CommonClassAMember2020-02-012020-07-31 0001036188us-gaap:CommonClassBMember2020-02-012020-07-31 xbrli:shares 0001036188us-gaap:CommonClassAMember2020-08-31 0001036188us-gaap:CommonClassBMember2020-08-31 thunderdome:item iso4217:USD 00010361882020-07-31 00010361882020-01-31 iso4217:USDxbrli:shares 0001036188us-gaap:CommonClassAMember2020-07-31 0001036188us-gaap:CommonClassAMember2020-01-31 0001036188us-gaap:CommonClassBMember2020-01-31 0001036188us-gaap:CommonClassBMember2020-07-31 0001036188us-gaap:SubscriptionAndCirculationMember2020-05-012020-07-31 0001036188us-gaap:SubscriptionAndCirculationMember2019-05-012019-07-31 0001036188us-gaap:SubscriptionAndCirculationMember2020-02-012020-07-31 0001036188us-gaap:SubscriptionAndCirculationMember2019-02-012019-07-31 0001036188us-gaap:LicenseMember2020-05-012020-07-31 0001036188us-gaap:LicenseMember2019-05-012019-07-31 0001036188us-gaap:LicenseMember2020-02-012020-07-31 0001036188us-gaap:LicenseMember2019-02-012019-07-31 0001036188us-gaap:MaintenanceMember2020-05-012020-07-31 0001036188us-gaap:MaintenanceMember2019-05-012019-07-31 0001036188us-gaap:MaintenanceMember2020-02-012020-07-31 0001036188us-gaap:MaintenanceMember2019-02-012019-07-31 0001036188qada:ProfessionalServicesMember2020-05-012020-07-31 0001036188qada:ProfessionalServicesMember2019-05-012019-07-31 0001036188qada:ProfessionalServicesMember2020-02-012020-07-31 0001036188qada:ProfessionalServicesMember2019-02-012019-07-31 00010361882020-05-012020-07-31 00010361882019-05-012019-07-31 00010361882019-02-012019-07-31 0001036188us-gaap:CommonClassAMember2020-05-012020-07-31 0001036188us-gaap:CommonClassAMember2019-05-012019-07-31 0001036188us-gaap:CommonClassAMember2019-02-012019-07-31 0001036188us-gaap:CommonClassBMember2020-05-012020-07-31 0001036188us-gaap:CommonClassBMember2019-05-012019-07-31 0001036188us-gaap:CommonClassBMember2019-02-012019-07-31 0001036188us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-01-31 0001036188us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-01-31 0001036188us-gaap:TreasuryStockMember2020-01-31 0001036188us-gaap:AdditionalPaidInCapitalMember2020-01-31 0001036188us-gaap:RetainedEarningsMember2020-01-31 0001036188us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-31 0001036188us-gaap:RetainedEarningsMember2020-02-012020-07-31 0001036188us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-02-012020-07-31 0001036188us-gaap:AdditionalPaidInCapitalMember2020-02-012020-07-31 0001036188us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-02-012020-07-31 0001036188us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-07-31 0001036188us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-07-31 0001036188us-gaap:TreasuryStockMember2020-07-31 0001036188us-gaap:AdditionalPaidInCapitalMember2020-07-31 0001036188us-gaap:RetainedEarningsMember2020-07-31 0001036188us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-31 0001036188us-gaap:CommonClassAMemberus-gaap:CommonStockMember2019-01-31 0001036188us-gaap:CommonClassBMemberus-gaap:CommonStockMember2019-01-31 0001036188us-gaap:TreasuryStockMember2019-01-31 0001036188us-gaap:AdditionalPaidInCapitalMember2019-01-31 0001036188us-gaap:RetainedEarningsMember2019-01-31 0001036188us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-31 00010361882019-01-31 0001036188us-gaap:RetainedEarningsMember2019-02-012019-07-31 0001036188us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-02-012019-07-31 0001036188us-gaap:TreasuryStockMember2019-02-012019-07-31 0001036188us-gaap:AdditionalPaidInCapitalMember2019-02-012019-07-31 0001036188srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2019-01-31 0001036188srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-01-31 0001036188us-gaap:CommonClassAMemberus-gaap:CommonStockMember2019-07-31 0001036188us-gaap:CommonClassBMemberus-gaap:CommonStockMember2019-07-31 0001036188us-gaap:TreasuryStockMember2019-07-31 0001036188us-gaap:AdditionalPaidInCapitalMember2019-07-31 0001036188us-gaap:RetainedEarningsMember2019-07-31 0001036188us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-31 00010361882019-07-31 0001036188srt:NorthAmericaMember2020-05-012020-07-31 0001036188srt:NorthAmericaMember2019-05-012019-07-31 0001036188srt:NorthAmericaMember2020-02-012020-07-31 0001036188srt:NorthAmericaMember2019-02-012019-07-31 0001036188us-gaap:EMEAMember2020-05-012020-07-31 0001036188us-gaap:EMEAMember2019-05-012019-07-31 0001036188us-gaap:EMEAMember2020-02-012020-07-31 0001036188us-gaap:EMEAMember2019-02-012019-07-31 0001036188srt:AsiaPacificMember2020-05-012020-07-31 0001036188srt:AsiaPacificMember2019-05-012019-07-31 0001036188srt:AsiaPacificMember2020-02-012020-07-31 0001036188srt:AsiaPacificMember2019-02-012019-07-31 0001036188srt:LatinAmericaMember2020-05-012020-07-31 0001036188srt:LatinAmericaMember2019-05-012019-07-31 0001036188srt:LatinAmericaMember2020-02-012020-07-31 0001036188srt:LatinAmericaMember2019-02-012019-07-31 0001036188qada:AutomotiveMember2020-05-012020-07-31 0001036188qada:AutomotiveMember2019-05-012019-07-31 0001036188qada:AutomotiveMember2020-02-012020-07-31 0001036188qada:AutomotiveMember2019-02-012019-07-31 0001036188qada:ConsumerProductsAndFoodAndBeverageMember2020-05-012020-07-31 0001036188qada:ConsumerProductsAndFoodAndBeverageMember2019-05-012019-07-31 0001036188qada:ConsumerProductsAndFoodAndBeverageMember2020-02-012020-07-31 0001036188qada:ConsumerProductsAndFoodAndBeverageMember2019-02-012019-07-31 0001036188qada:HighTechnologyAndIndustrialProductsMember2020-05-012020-07-31 0001036188qada:HighTechnologyAndIndustrialProductsMember2019-05-012019-07-31 0001036188qada:HighTechnologyAndIndustrialProductsMember2020-02-012020-07-31 0001036188qada:HighTechnologyAndIndustrialProductsMember2019-02-012019-07-31 0001036188qada:LifeSciencesMember2020-05-012020-07-31 0001036188qada:LifeSciencesMember2019-05-012019-07-31 0001036188qada:LifeSciencesMember2020-02-012020-07-31 0001036188qada:LifeSciencesMember2019-02-012019-07-31 00010361882020-08-012020-07-31 utr:M 0001036188us-gaap:MaintenanceMember2020-07-31 0001036188us-gaap:MaintenanceMember2020-01-31 0001036188us-gaap:SubscriptionAndCirculationMember2020-07-31 0001036188us-gaap:SubscriptionAndCirculationMember2020-01-31 0001036188qada:ProfessionalServicesMember2020-07-31 0001036188qada:ProfessionalServicesMember2020-01-31 0001036188qada:LicenseAndOtherMember2020-07-31 0001036188qada:LicenseAndOtherMember2020-01-31 utr:Y 0001036188qada:DirectCostsOfObtainingContractMember2020-07-31 0001036188qada:DirectCostsOfObtainingContractMember2020-01-31 0001036188qada:DirectCostsOfObtainingContractMemberus-gaap:SellingAndMarketingExpenseMember2020-05-012020-07-31 0001036188qada:DirectCostsOfObtainingContractMemberus-gaap:SellingAndMarketingExpenseMember2020-02-012020-07-31 0001036188qada:DirectCostsOfObtainingContractMemberus-gaap:SellingAndMarketingExpenseMember2019-05-012019-07-31 0001036188qada:DirectCostsOfObtainingContractMemberus-gaap:SellingAndMarketingExpenseMember2019-02-012019-07-31 0001036188qada:CostsToFulfillContractMember2020-07-31 0001036188qada:CostsToFulfillContractMember2020-01-31 0001036188qada:CostsToFulfillContractMemberus-gaap:CostOfSalesMember2020-05-012020-07-31 0001036188qada:CostsToFulfillContractMemberus-gaap:CostOfSalesMember2020-02-012020-07-31 0001036188qada:CostsToFulfillContractMemberus-gaap:CostOfSalesMember2019-05-012019-07-31 0001036188qada:CostsToFulfillContractMemberus-gaap:CostOfSalesMember2019-02-022019-07-31 0001036188us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-07-31 0001036188us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-07-31 0001036188us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-07-31 0001036188us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-01-31 0001036188us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-01-31 0001036188us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-01-31 0001036188us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-07-31 0001036188us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-01-31 0001036188us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-07-31 0001036188us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-01-31 0001036188us-gaap:InterestRateSwapMember2020-05-012020-07-31 0001036188us-gaap:InterestRateSwapMember2020-02-012020-07-31 0001036188us-gaap:InterestRateSwapMember2019-05-012019-07-31 0001036188us-gaap:InterestRateSwapMember2019-02-012019-07-31 0001036188qada:Mortgage2012Memberqada:QuadOrtegaHillLlcMemberqada:RabobankNaMember2012-05-30 xbrli:pure 0001036188qada:Mortgage2012Memberqada:QuadOrtegaHillLlcMemberqada:RabobankNaMemberus-gaap:LondonInterbankOfferedRateLIBORMember2012-05-302012-05-30 0001036188qada:Mortgage2012Memberqada:QuadOrtegaHillLlcMemberqada:RabobankNaMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-07-312020-07-31 0001036188qada:Mortgage2012Memberus-gaap:SwapMemberqada:QuadOrtegaHillLlcMemberqada:RabobankNaMember2012-05-30 0001036188qada:Mortgage2012Memberqada:QuadOrtegaHillLlcMemberqada:RabobankNaMember2012-05-302012-05-30 0001036188qada:Mortgage2012Memberqada:RabobankNaMember2020-07-31 0001036188us-gaap:AccumulatedTranslationAdjustmentMember2020-01-31 0001036188us-gaap:AccumulatedTranslationAdjustmentMember2020-02-012020-07-31 0001036188us-gaap:AccumulatedTranslationAdjustmentMember2020-07-31 0001036188qada:FederalAndStateTaxAuthorityMember2020-07-31 0001036188qada:FederalAndStateTaxAuthorityMember2020-01-31 0001036188us-gaap:ForeignCountryMemberus-gaap:RevenueCommissionersIrelandMember2020-07-31 0001036188us-gaap:ForeignCountryMemberus-gaap:RevenueCommissionersIrelandMember2020-01-31 0001036188us-gaap:ForeignCountryMemberus-gaap:SecretariatOfTheFederalRevenueBureauOfBrazilMember2020-07-31 0001036188us-gaap:ForeignCountryMemberus-gaap:SecretariatOfTheFederalRevenueBureauOfBrazilMember2020-01-31 0001036188us-gaap:ForeignCountryMemberus-gaap:FederalMinistryOfFinanceGermanyMember2020-07-31 0001036188us-gaap:ForeignCountryMemberus-gaap:FederalMinistryOfFinanceGermanyMember2020-01-31 0001036188us-gaap:ForeignCountryMemberus-gaap:InlandRevenueHongKongMember2020-07-31 0001036188us-gaap:ForeignCountryMemberus-gaap:InlandRevenueHongKongMember2020-01-31 0001036188us-gaap:ForeignCountryMemberqada:IncomeTaxAuthoritySouthAfricaMember2020-07-31 0001036188us-gaap:ForeignCountryMemberqada:IncomeTaxAuthoritySouthAfricaMember2020-01-31 0001036188us-gaap:ForeignCountryMemberus-gaap:MinistryOfFinanceIndiaMember2020-02-012020-07-31 0001036188us-gaap:ForeignCountryMemberqada:IncomeTaxAutorityThailandMember2020-02-012020-07-31 0001036188us-gaap:ForeignCountryMemberus-gaap:MexicanTaxAuthorityMember2020-02-012020-07-31 0001036188us-gaap:ForeignCountryMemberus-gaap:FederalMinistryOfFinanceGermanyMember2020-02-012020-07-31 00010361882020-06-112020-06-11 0001036188us-gaap:CommonClassAMember2020-06-11 0001036188us-gaap:CommonClassBMember2020-06-11 00010361882020-04-072020-04-07 0001036188us-gaap:CommonClassAMember2020-04-07 0001036188us-gaap:CommonClassBMember2020-04-07 0001036188qada:CostOfSubscriptionMember2020-05-012020-07-31 0001036188qada:CostOfSubscriptionMember2019-05-012019-07-31 0001036188qada:CostOfSubscriptionMember2020-02-012020-07-31 0001036188qada:CostOfSubscriptionMember2019-02-012019-07-31 0001036188qada:CostOfMaintenanceAndOtherRevenueMember2020-05-012020-07-31 0001036188qada:CostOfMaintenanceAndOtherRevenueMember2019-05-012019-07-31 0001036188qada:CostOfMaintenanceAndOtherRevenueMember2020-02-012020-07-31 0001036188qada:CostOfMaintenanceAndOtherRevenueMember2019-02-012019-07-31 0001036188qada:CostOfProfessionalServicesMember2020-05-012020-07-31 0001036188qada:CostOfProfessionalServicesMember2019-05-012019-07-31 0001036188qada:CostOfProfessionalServicesMember2020-02-012020-07-31 0001036188qada:CostOfProfessionalServicesMember2019-02-012019-07-31 0001036188us-gaap:SellingAndMarketingExpenseMember2020-05-012020-07-31 0001036188us-gaap:SellingAndMarketingExpenseMember2019-05-012019-07-31 0001036188us-gaap:SellingAndMarketingExpenseMember2020-02-012020-07-31 0001036188us-gaap:SellingAndMarketingExpenseMember2019-02-012019-07-31 0001036188us-gaap:ResearchAndDevelopmentExpenseMember2020-05-012020-07-31 0001036188us-gaap:ResearchAndDevelopmentExpenseMember2019-05-012019-07-31 0001036188us-gaap:ResearchAndDevelopmentExpenseMember2020-02-012020-07-31 0001036188us-gaap:ResearchAndDevelopmentExpenseMember2019-02-012019-07-31 0001036188us-gaap:GeneralAndAdministrativeExpenseMember2020-05-012020-07-31 0001036188us-gaap:GeneralAndAdministrativeExpenseMember2019-05-012019-07-31 0001036188us-gaap:GeneralAndAdministrativeExpenseMember2020-02-012020-07-31 0001036188us-gaap:GeneralAndAdministrativeExpenseMember2019-02-012019-07-31 0001036188us-gaap:RestrictedStockUnitsRSUMember2020-01-31 0001036188us-gaap:RestrictedStockUnitsRSUMember2020-02-012020-07-31 0001036188us-gaap:RestrictedStockUnitsRSUMember2020-07-31 0001036188us-gaap:RestrictedStockUnitsRSUMember2020-05-012020-07-31 0001036188us-gaap:PerformanceSharesMember2020-01-31 0001036188us-gaap:PerformanceSharesMember2020-02-012020-07-31 0001036188us-gaap:PerformanceSharesMember2020-07-31 0001036188us-gaap:PerformanceSharesMember2020-05-012020-07-31 0001036188us-gaap:StockAppreciationRightsSARSMember2020-01-31 0001036188us-gaap:StockAppreciationRightsSARSMember2020-02-012020-07-31 0001036188us-gaap:StockAppreciationRightsSARSMember2020-07-31 0001036188us-gaap:StockAppreciationRightsSARSMember2020-05-012020-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:NorthAmericaMember2020-05-012020-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:NorthAmericaMember2019-05-012019-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:NorthAmericaMember2020-02-012020-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:NorthAmericaMember2019-02-012019-07-31 0001036188srt:ReportableGeographicalComponentsMemberus-gaap:EMEAMember2020-05-012020-07-31 0001036188srt:ReportableGeographicalComponentsMemberus-gaap:EMEAMember2019-05-012019-07-31 0001036188srt:ReportableGeographicalComponentsMemberus-gaap:EMEAMember2020-02-012020-07-31 0001036188srt:ReportableGeographicalComponentsMemberus-gaap:EMEAMember2019-02-012019-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:AsiaPacificMember2020-05-012020-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:AsiaPacificMember2019-05-012019-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:AsiaPacificMember2020-02-012020-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:AsiaPacificMember2019-02-012019-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:LatinAmericaMember2020-05-012020-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:LatinAmericaMember2019-05-012019-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:LatinAmericaMember2020-02-012020-07-31 0001036188srt:ReportableGeographicalComponentsMembersrt:LatinAmericaMember2019-02-012019-07-31 0001036188qada:NorthAmericaRevenueMemberus-gaap:GeographicConcentrationRiskMembercountry:CA2020-05-012020-07-31 0001036188qada:NorthAmericaRevenueMemberus-gaap:GeographicConcentrationRiskMembercountry:CA2020-02-012020-07-31 0001036188qada:NorthAmericaRevenueMemberus-gaap:GeographicConcentrationRiskMembercountry:CA2019-05-012019-07-31 0001036188qada:NorthAmericaRevenueMemberus-gaap:GeographicConcentrationRiskMembercountry:CA2019-02-012019-07-31
 

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 July 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 0-22823

 

QAD Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware

77-0105228

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

100 Innovation Place, Santa Barbara, California 93108

(Address of principal executive offices)

 

(805) 566-6000

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.001 par value

QADA

NASDAQ Global Select Market 

Class B Common Stock, $0.001 par value

QADB

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 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, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check One):

 

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 ☑.

 

As of August 31, 2020, there were 17,365,386 shares of the Registrant’s Class A common stock outstanding and 3,330,318 shares of the Registrant’s Class B common stock outstanding.

 

 

 

 

QAD INC.

INDEX

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

ITEM 1.

Financial Statements (unaudited)

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of July 31, 2020 and January 31, 2020

1

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended July 31, 2020 and 2019

2

 

 

 

 

 

 

Condensed Consolidated Statement of Stockholders' Equity for the Six Months Ended July 31, 2020 and 2019

3

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2020 and 2019

4

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

5

 

 

 

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

32

 

 

 

 

 

ITEM 4.

Controls and Procedures

33

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

ITEM 1.

Legal Proceedings

33

 

 

 

 

 

ITEM 1A.

Risk Factors

34

 

 

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

 

 

 

 

 

ITEM 3.

Defaults Upon Senior Securities

34

 

 

 

 

 

ITEM 4.

Mine Safety Disclosure

34

 

 

 

 

 

ITEM 5.

Other Information

34

 

 

 

 

 

ITEM 6.

Exhibits

34

 

 

 

 

 

SIGNATURES

35

 

 

 

 

PART I

 

ITEM 1 – FINANCIAL STATEMENTS

 

QAD INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

 

  

July 31,

2020

  

January 31,

2020

 

Assets

        
         

Current assets:

        

Cash and equivalents

 $140,707  $136,717 

Accounts receivable, net of allowances of $4,026 and $2,940 at July 31, 2020 and January 31, 2020, respectively

  42,270   80,968 

Prepaid expenses and other current assets, net

  20,909   24,952 

Total current assets

  203,886   242,637 

Property and equipment, net of accumulated depreciation and amortization of $41,371 and $38,861 at July 31, 2020 and January 31, 2020, respectively

  29,085   28,687 

Lease right-of-use assets

  19,710   18,329 

Capitalized software costs, net

  1,974   1,922 

Goodwill

  12,351   12,388 

Deferred tax assets, net

  7,095   5,834 

Other assets, net

  11,887   13,007 

Total assets

 $285,988  $322,804 
         

Liabilities and Stockholders’ Equity

        

Current liabilities:

        

Current portion of long-term debt

 $516  $503 

Lease liabilities

  4,059   4,371 

Accounts payable

  5,996   9,840 

Deferred revenue

  95,049   118,413 

Other current liabilities

  31,776   39,900 

Total current liabilities

  137,396   173,027 

Long-term debt

  12,084   12,341 

Long-term lease liabilities

  16,640   14,612 

Other liabilities

  7,666   6,759 

Total liabilities

  173,786   206,739 

Commitments and contingencies (Note 12)

        

Stockholders’ equity:

        

Preferred stock, $0.001 par value. Authorized 5,000,000 shares; none issued or outstanding

  -   - 

Common stock:

        

Class A, $0.001 par value. Authorized 71,000,000 shares; issued 17,364,966 and 17,108,846 shares at July 31, 2020 and January 31, 2020, respectively

  17   17 

Class B, $0.001 par value. Authorized 4,000,000 shares; issued 3,537,380 shares at both July 31, 2020 and January 31, 2020

  4   4 

Additional paid-in capital

  198,085   197,824 

Treasury stock, at cost 207,062 and 216,378 Class B shares at July 31, 2020 and January 31, 2020, respectively

  (3,073

)

  (3,226

)

Accumulated deficit

  (73,438

)

  (70,209

)

Accumulated other comprehensive loss

  (9,393

)

  (8,345

)

Total stockholders’ equity

  112,202   116,065 

Total liabilities and stockholders’ equity

 $285,988  $322,804 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

1

 

QAD INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

 (in thousands, except per share data)

(unaudited)

 

 

   

Three Months Ended

   

Six Months Ended

 
   

July 31,

   

July 31,

 
   

2020

   

2019

   

2020

   

2019

 

Revenue:

                               

Subscription

  $ 31,066     $ 25,888     $ 61,837     $ 51,194  

License

    3,043       3,516       4,264       7,982  

Maintenance

    26,486       29,586       52,894       59,485  

Professional services

    13,486       17,388       29,233       35,752  

Total revenue

    74,081       76,378       148,228       154,413  
                                 

Costs of revenue:

                               

Subscription

    10,739       9,903       21,087       19,320  

License

    565       554       966       1,145  

Maintenance

    6,413       7,459       13,157       15,062  

Professional services

    13,106       18,116       28,038       37,439  

Total cost of revenue

    30,823       36,032       63,248       72,966  
                                 

Gross profit

    43,258       40,346       84,980       81,447  
                                 

Operating expenses:

                               

Sales and marketing

    17,420       20,191       35,977       41,082  

Research and development

    13,161       13,870       27,178       27,857  

General and administrative

    10,299       10,392       20,316       19,810  

Amortization of intangibles from acquisitions

    65       66       129       133  

Total operating expenses

    40,945       44,519       83,600       88,882  
                                 

Operating income (loss)

    2,313       (4,173

)

    1,380       (7,435

)

                                 

Other expense (income):

                               

Interest income

    (213

)

    (789

)

    (649

)

    (1,513

)

Interest expense

    155       148       305       301  

Other expense (income), net

    1,871       (154

)

    639       (326

)

Total other expense (income), net

    1,813       (795

)

    295       (1,538

)

                                 

Income (loss) before income taxes

    500       (3,378

)

    1,085       (5,897

)

Income tax expense

    440       9,872       1,435       10,587  
                                 

Net income (loss)

  $ 60     $ (13,250

)

  $ (350

)

  $ (16,484

)

                                 

Basic net income (loss) per share

                               

Class A

  $ 0.00     $ (0.69

)

  $ (0.02

)

  $ (0.86

)

Class B

  $ 0.00     $ (0.57

)

  $ (0.01

)

  $ (0.71

)

Diluted net income (loss) per share

                               

Class A

  $ 0.00     $ (0.69

)

  $ (0.02

)

  $ (0.86

)

Class B

  $ 0.00     $ (0.57

)

  $ (0.01

)

  $ (0.71

)

                                 

Net income (loss)

  $ 60     $ (13,250

)

  $ (350

)

  $ (16,484

)

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustment

    1,607       298       (1,048

)

    35  

Total comprehensive income (loss)

  $ 1,667     $ (12,952

)

  $ (1,398

)

  $ (16,449

)

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

2

 

QAD INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share data)

(unaudited)

 

 

  

Six Months Ended July 31, 2020

 
  

Number of Shares

  

Amount

  

Additional

Paid-in

  

Treasury

  

Accumulated

  

Accumulated

Other Comprehensive

  

Total

Stockholders’

 
  

Class A

  

Class B

  

Treasury

  

Class A

  

Class B

  

Capital

  

Stock

  

Deficit

  

Loss

  

Equity

 

Balance, January 31, 2020

  17,109   3,537   (216

)

 $17  $4  $197,824  $(3,226

)

 $(70,209

)

 $(8,345

)

 $116,065 

Net loss

                       (350

)

     (350

)

Foreign currency translation adjustments

                          (1,048

)

  (1,048

)

Stock award exercises

  73      9         (2,576

)

  153         (2,423

)

Stock compensation expense

                 6,356            6,356 

Dividends declared ($0.144 and $0.12 per Class A and Class B share, respectively)

                       (2,879

)

     (2,879

)

Restricted stock

  183               (3,519

)

           (3,519

)

Balance, July 31, 2020

  17,365   3,537   (207

)

 $17  $4  $198,085  $(3,073

)

 $(73,438

)

 $(9,393

)

 $112,202 

 

 

 

  

Six Months Ended July 31, 2019

 
  

Number of Shares

  

Amount

  

Additional

Paid-in

  

Treasury

  

Accumulated

  

Accumulated

Other Comprehensive

  

Total

Stockholders’

 
  

Class A

  

Class B

  

Treasury

  

Class A

  

Class B

  

Capital

  

Stock

  

Deficit

  

Loss

  

Equity

 

Balance, January 31, 2019

  16,605   3,537   (515

)

 $16  $4  $196,723  $(7,350

)

 $(48,485

)

 $(7,661

)

 $133,247 

Net loss

                       (16,484

)

     (16,484

)

Foreign currency translation adjustments

                          35   35 

Stock award exercises

        9         (357

)

  202         (155

)

Stock compensation expense

                 5,492            5,492 

Dividends declared ($0.144 and $0.12 per Class A and Class B share, respectively)

                       (2,761

)

     (2,761

)

Restricted stock

        174         (5,546

)

  2,205         (3,341

)

Adoption of ASU2016-02, Leases (Topic 842)

                       (173

)

     (173

)

Balance, July 31, 2019

  16,605   3,537   (332

)

 $16  $4  $196,312  $(4,943

)

 $(67,903

)

 $(7,626

)

 $115,860 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

3

 

QAD INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

   

Six Months Ended

July 31,

 
   

2020

   

2019

 

Cash flows from operating activities:

               

Net loss

  $ (350

)

  $ (16,484

)

Adjustments to reconcile net loss to net cash provided by operating activities:

               

Depreciation and amortization

    3,495       3,070  

Amortization of costs capitalized to obtain and fulfill contracts

    2,391       2,161  

Amortization of right-of-use assets

    2,910       2,965  

Net change in valuation allowance

    2,112       11,527  

Other deferred income taxes

    (2,004

)

    19  

Loss on disposal of equipment

    68       16  

Provision for doubtful accounts and sales adjustments

    1,212       127  

Stock compensation expense

    6,356       5,492  

Change in fair value of derivative instrument

    219       251  

Other, net

    12       69  

Changes in assets and liabilities:

               

Accounts receivable

    37,526       39,188  

Costs capitalized to obtain and fulfill contracts

    (2,246

)

    (2,158

)

Lease liabilities

    (2,721

)

    (3,095

)

Prepaid expenses and other assets

    2,616       (1,683

)

Accounts payable

    (4,071

)

    (1,910

)

Deferred revenue

    (23,840

)

    (18,707

)

Other liabilities

    (7,661

)

    (6,518

)

Net cash provided by operating activities

    16,024       14,330  

Cash flows from investing activities:

               

Purchase of property and equipment

    (1,325

)

    (3,707

)

Purchase of short-term investments

    -       (1,200

)

Proceeds from sale of short-term investments

    -       1,200  

Capitalized software costs

    (626

)

    (534

)

Net cash used in investing activities

    (1,951

)

    (4,241

)

Cash flows from financing activities:

               

Repayments of debt

    (306

)

    (253

)

Tax payments related to stock awards

    (5,942

)

    (3,496

)

Dividends paid

    (2,879

)

    (2,761

)

Net cash used in financing activities

    (9,127

)

    (6,510

)

                 

Effect of exchange rates on cash and equivalents

    (956

)

    (1,224

)

                 

Net increase in cash and equivalents

    3,990       2,355  
                 

Cash and equivalents at beginning of period

    136,717       139,413  
                 

Cash and equivalents at end of period

  $ 140,707     $ 141,768  
                 

Supplemental disclosure of cash flow information:

               

Cash paid during the period for:

               

Interest

  $ 293     $ 294  

Income taxes, net of refunds

  $ 2,203     $ 2,368  

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

  

4

 

QAD INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1.

BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

 

Basis of Presentation

 

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements fairly present the financial information contained therein. These statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  The financial statements and footnotes are unaudited.  In management’s opinion, all necessary adjustments, consisting of normal, recurring and non-recurring adjustments, have been included in the accompanying Condensed Consolidated Financial Statements to present fairly the financial position and operating results of QAD Inc. (QAD or the Company). The Condensed Consolidated Financial Statements do not include all disclosures required by GAAP annual financial statements and should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2020. The Condensed Consolidated Financial Statements include the results of the Company and its wholly-owned subsidiaries. Because of seasonal and other factors, results of operations for the three and six months ended July 31, 2020 are not necessarily indicative of the results to be expected for the year ending January 31, 2021.

 

The Company’s accounting policies are set forth in detail in Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended January 31, 2020 filed with the Securities and Exchange Commission. Such Annual Report also contains a discussion of the Company’s critical accounting policies and estimates. The Company believes that these accounting policies and estimates affect its more significant estimates and judgments used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s accounting policies except as described below upon adoption of ASU 2016-13, Financial Instruments-Credit Losses. 

 

Recent Accounting Pronouncements

 

Except as discussed below, there have been no recent changes in accounting pronouncements issued by the Financial Accounting Standards Board (FASB) or adopted by the Company during the six months ended  July 31, 2020, that are of significance, or potential significance, to the Company.

 

Recent Accounting Pronouncements Adopted

 

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, that eliminates “Step 2” from the goodwill impairment test. QAD adopted the new standard on February 1, 2020, the first day of fiscal 2021. The new standard did not have an impact on the Company’s condensed consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, which includes the Company's accounts receivables and contract assets. QAD adopted the new standard on February 1, 2020, the first day of fiscal 2021, using the modified retrospective approach. The adoption of this standard did not have a material impact on QAD’s condensed consolidated financial statements. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, consideration of current and anticipated future economic conditions and other relevant data.

 

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. The Company adopted the new standard on February 1, 2020, the first day of fiscal 2021. The adoption of this standard did not have a material impact on QAD’s condensed consolidated financial statements.

 

Recent Accounting Pronouncements Not Yet Adopted

  

In December 2019, the FASB issued new guidance which is intended to simplify various aspects to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 for recognizing deferred taxes for investments, performing an intraperiod allocation and calculating income taxes in interim periods. The amendment also clarifies and amends certain areas of existing guidance to reduce complexity and improve consistency in application of Topic 740. The new standard is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. Generally, the topics must be applied prospectively upon adoption, with the exception of certain topics which are required to be applied on a retrospective or modified retrospective basis. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements.

  

5

 
 

2.

REVENUE

 

QAD offers its software using the same underlying technology via two models: a traditional on-premises licensing model and a cloud-based subscription model. The on-premises model involves the license of software to customers who take possession of the software and install and maintain the software on their own hardware. Under the cloud-based subscription delivery model, QAD provides access to its software on a hosted basis as a service and customers generally do not have the contractual right to take possession of the software.

 

The Company generates revenue through sales of licenses and maintenance provided to its on-premises customers and through subscriptions of its cloud-based software. QAD offers professional services to both its on-premises and cloud customers to assist them with the design, testing and implementation of its software.

 

The Company determines revenue recognition through the following steps:

 

-

Identification of the contract, or contracts, with a customer;

 

-

Identification of the performance obligations in the contract;

 

-

Determination of the transaction price;

 

-

Allocation of the transaction price to the performance obligations in the contract; and

 

-

Recognition of revenue when, or as, the Company satisfies a performance obligation.

 

Revenue is presented net of sales, value-added and other taxes collected from customers and remitted to government authorities. 

 

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.

 

The Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscription or licenses and a professional services engagement.  License purchases generally have multiple performance obligations as customers purchase maintenance in addition to the licenses.  The Company’s single performance obligation arrangements are typically maintenance renewals, subscription renewals and services engagements. 

 

For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (SSP) for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance obligation using its best estimate for the SSP. SSP is assessed annually using a historical analysis of contracts with customers executed in the most recently completed fiscal year to determine the range of selling prices applicable to a distinct good or service.

 

Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directly observable because the Company does not sell the license, product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. In making these judgments, the Company analyzes various factors, including its pricing methodology and consistency, size of the arrangement, length of term, customer demographics and overall market and economic conditions. Based on these results, the estimated SSP is set for each distinct product or service delivered to customers. The Company rarely sells licenses on a stand-alone basis, as the majority of its license sales to customers include first year maintenance with the license purchase. The Company frequently sells subscription, maintenance and services on a stand-alone basis. 

 

Subscription

 

Subscription revenue is recognized ratably over the initial subscription period committed to by the customer commencing when the cloud environment is made available to the customer. The initial subscription period is typically 24 to 60 months. The Company generally invoices its customers in advance in quarterly or annual installments and typical payment terms provide that customers make payment within 30 days of invoice. In addition, a majority of customers renew their subscription contracts annually and typical payment terms provide that customers make payment within 30 days of invoice.

 

6

 

 Software Licenses

 

Transfer of control for software is considered to have occurred upon electronic delivery of the license key that provides immediate availability of the product to the customer. The Company’s typical payment terms tend to vary by region but its standard payment terms are within 30-90 days of invoice.

 

Maintenance

 

Revenue from support services and product updates, referred to as maintenance revenue, is recognized ratably over the term of the maintenance period, which in most instances is one year. Software license updates provide customers with rights to unspecified software product updates, maintenance releases and patches released during the term of the support period on a when-and-if available basis. Product support includes Internet access to technical content, as well as Internet and telephone access to technical support personnel. The Company’s customers purchase both product support and license updates via the Company’s maintenance offering when they acquire new software licenses. In addition, a majority of customers renew their maintenance contracts annually and typical payment terms provide that customers make payment within 30 days of invoice.

 

Professional Services

 

Revenue from professional services is typically comprised of implementation, development, training or other consulting services. Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from software installation to data conversion and building non-complex interfaces to allow the software to operate in integrated environments. The Company recognizes revenue for time-and-materials arrangements as the services are performed.  In fixed fee arrangements, revenue is recognized as services are performed as measured by costs incurred to date, compared to total estimated costs to complete the services project.  Management applies judgment when estimating project status and the costs necessary to complete the services projects.  A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances, and specification and testing requirement changes.  Services are generally invoiced upon milestones in the contract or upon consumption of the hourly resources and payments are typically due 30 days after invoice. 

 

Indirect Sales Channels

 

The Company executes arrangements through indirect sales channels via sales agents and distributors who are authorized to market its software products to end users. In arrangements with sales agents, QAD contracts directly with the customer and sales agents are compensated on a commission basis. Distributor arrangements are those in which the resellers are authorized to market and distribute the Company’s software products to end users in specified territories and the distributor bears the risk of collection from the end user customer. The Company recognizes revenue from transactions with distributors when the distributor submits a signed agreement and transfer of control has occurred to the distributor in accordance with the five revenue recognition steps noted above. Revenue from distributor transactions is recorded on a net basis (the amount actually received by the Company from the distributor). QAD does not offer rights of return, product rotation or price protection to any of its distributors.

 

Disaggregated Revenue

 

The Company disaggregates revenue from contracts with customers by geography and by the customers’ industry within manufacturing, 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

July 31,

  

Six Months Ended

July 31,

 
  

2020

  

2019

  

2020

  

2019

 
  

(in thousands)

  

(in thousands)

 

North America

 $38,998  $36,837  $76,000  $74,496 

EMEA

  21,379   22,118   43,947   44,627 

Asia Pacific

  9,571   11,751   19,213   23,637 

Latin America

  4,133   5,672   9,068   11,653 

Total revenue

 $74,081  $76,378  $148,228  $154,413 

 

7

 

The Company’s revenue by industry is as follows:

 

  

Three Months Ended

July 31,

  

Six Months Ended

July 31,

 
  

2020

  

2019

  

2020

  

2019

 
  

(in thousands)

  

(in thousands)

 

Automotive

 $22,275  $26,962  $46,412  $56,034 

Consumer products and food and beverage

  13,476   12,128   25,290   24,107 

High technology and industrial products

  26,644   26,389   53,468   51,937 

Life sciences and other

  11,686   10,899   23,058   22,335 

Total revenue

 $74,081  $76,378  $148,228  $154,413 

 

Management Judgments

 

Due to the complexity of certain contracts, the actual revenue recognition treatment required under Topic 606 for the Company’s arrangements may be dependent on contract-specific terms and may vary in some instances.

 

Revenue is recognized over time for the Company’s subscription, maintenance and fixed fee professional services that are separate performance obligations.  For the Company’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization, specification variances and testing requirement changes. 

 

If a group of agreements are entered at or near the same time and so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single arrangement. The Company’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.

 

Contract Balances  

 

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on the Company’s Condensed Consolidated Balance Sheets. QAD records a contract asset when the Company has transferred goods or services but does not yet have the right to consideration. QAD records deferred revenue when the Company has received or has the right to receive consideration but has not yet transferred goods or services to the customer. The Company presents the contract asset and liability balance on a net basis at the contract level.

 

The contract assets indicated below are presented as other current and non-current assets in the Condensed Consolidated Balance Sheets. These assets primarily relate to professional services and subscription and consist of the Company’s rights to consideration for goods or services transferred but not billed as of July 31, 2020 and January 31, 2020. The contract assets are transferred to receivables when the rights to consideration become unconditional, usually upon completion of a milestone.

 

The Company’s contract balances are as follows: 

 

  

July 31,

2020

  

January 31,

2020

 
  

(in thousands)

 

Contract assets, short-term (in “Prepaid expenses and other current assets, net”)

 $2,040  $1,595 

Contract assets, long-term (in “Other assets, net”)

  155   214 

Total contract assets

 $2,195  $1,809 

Deferred revenue, short-term

 $95,049  $118,413 

Deferred revenue, long-term (in “Other liabilities”)

  2,424   2,811 

Total deferred revenue

 $97,473  $121,224 

 

During the six months ended July 31, 2020, the Company recognized $83.7 million of revenue that was included in the gross deferred revenue balance at the beginning of the period. All other activity in deferred revenue is due to the timing of invoicing in relation to the timing of revenue recognition.

 

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted but unsatisfied performance obligations were approximately $282.3 million as of July 31, 2020, of which the Company expects to recognize approximately $165.9 million as revenue over the next twelve months and the remainder thereafter. In instances where the timing of revenue recognition differs from the timing of invoicing, QAD has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, and not to facilitate financing arrangements.

  

8

 

Deferred Revenue

 

The Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment due at the start of the subscription or support term. Unpaid invoice amounts for non-cancelable services starting in future periods are included in accounts receivable and deferred revenue. The portion of deferred revenue that QAD anticipates will be recognized after the succeeding twelve-month period is recorded as non-current deferred revenue, and the remaining portion is recorded as current deferred revenue.  

 

Deferred revenues consisted of the following:

 

  

July 31,

2020

  

January 31,

2020

 
  

(in thousands)

 

Deferred maintenance

 $51,768  $69,650 

Deferred subscription

  41,138   45,702 

Deferred professional services

  2,096   2,705 

Deferred license and other revenue

  47   356 

Deferred revenues, current

  95,049   118,413 

Deferred revenues, non-current (in “Other liabilities”)

  2,424   2,811 

Total deferred revenues

 $97,473  $121,224 

 

Practical Expedients and Exemptions

 

There are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s disclosures. Below is a list of the practical expedients applied by the Company:

 

 

The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.

 

 

The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one year or less. These costs are recorded within sales and marketing expense in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

  

 

The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).

 

Costs to Obtain and Fulfill a Contract

 

The Company’s incremental direct costs of obtaining a contract consist of sales commissions and sales agent fees which are deferred and amortized ratably over the term of economic benefit which the Company has determined to be five years. These deferred costs are classified as current or non-current based on the timing of when the Company expects to recognize the expense. Incremental costs related to renewals are expensed as incurred because the term of economic benefit is one year or less. The current and non-current portions of deferred commissions are included in “Prepaid expenses and other current assets, net” and “Other assets, net”, respectively, in the Company’s Condensed Consolidated Balance Sheets. At July 31, 2020 and January 31, 2020, the Company had $12.2 million and $12.3 million, respectively, of deferred commissions and sales agent fees. For the three and six months ended July 31, 2020, $1.1 million and $2.1 million, respectively, of amortization expense related to deferred commissions and sales agent fees was recorded in “Sales and marketing” expense in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).  For the three and six months ended July 31, 2019, $0.9 million and $1.9 million, respectively, of amortization expense related to deferred commissions and sales agent fees was recorded in “Sales and marketing” expense in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

 

9

 

Costs to fulfill a contract, which are incurred upon initiation of certain services contracts and are related to initial customer setup, are included in “Prepaid expenses and other current assets, net” and “Other assets, net” in the Company’s Condensed Consolidated Balance Sheets. At July 31, 2020 and January 31, 2020 the Company had deferred setup costs of $1.4 million. These costs are amortized over the term of economic benefit which the Company has determined to be five years. During the three and six months ended July 31, 2020, $0.2 million and $0.3 million, respectively, of amortization expense related to deferred setup costs was recorded in “Cost of subscription” in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).  During the three and six months ended July 31, 2019, $0.1 million and $0.3 million, respectively, of amortization expense related to deferred setup costs were recorded in “Cost of subscription” in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

 

Recoverability of these costs is subject to various business risks. Quarterly, the Company compares the carrying value of these assets with the undiscounted future cash flows expected to be generated by them to determine if there is impairment. If impaired, these assets are reduced to an estimated fair value on a discounted cash flow basis. No impairment losses were recognized during the six months ended July 31, 2020 and 2019.

 

 

3.

COMPUTATION OF NET INCOME (LOSS) PER SHARE

 

The following table sets forth the computation of basic and diluted net income (loss) per share:

 

   

Three Months Ended

   

Six Months Ended

 
   

July 31,

   

July 31,

 
   

2020

   

2019

   

2020

   

2019

 
   

(in thousands, except per share

data)

   

(in thousands, except per share

data)

 

Net income (loss)

  $ 60     $ (13,250

)

  $ (350

)

  $ (16,484

)

Less: Dividends declared

    (1,448

)

    (1,387

)

    (2,879

)

    (2,761

)

Undistributed net loss

  $ (1,388

)

  $ (14,637

)

  $ (3,229

)

  $ (19,245

)

                                 

Net income (loss) per share – Class A Common Stock

                               

Dividends declared

  $ 1,249     $ 1,191     $ 2,481     $ 2,370  

Allocation of undistributed net loss

    (1,197

)

    (12,570

)

    (2,782

)

    (16,522

)

Net income (loss) attributable to Class A common stock

  $ 52     $ (11,379

)

  $ (301

)

  $ (14,152

)

                                 

Weighted average shares of Class A common stock outstanding— basic

    17,245       16,465       17,179       16,417  

Weighted average potential shares of Class A common stock

    568                    

Weighted average shares of Class A common stock and potential common shares outstanding— diluted

    17,813       16,465       17,179       16,417  
                                 

Basic net income (loss) per Class A common share

  $ 0.00     $ (0.69

)

  $ (0.02

)

  $ (0.86

)

Diluted net income (loss) per Class A common share

  $ 0.00     $ (0.69

)

  $ (0.02

)

  $ (0.86

)

                                 

Net income (loss) per share – Class B Common Stock

                               

Dividends declared

  $ 199     $ 196     $ 398     $ 391  

Allocation of undistributed net loss

    (191

)

    (2,067

)

    (447

)

    (2,723

)

Net income (loss) attributable to Class B common stock

  $ 8     $ (1,871

)

  $ (49

)

  $ (2,332

)

                                 

Weighted average shares of Class B common stock outstanding— basic

    3,321       3,264       3,321       3,264  

Weighted average potential shares of Class B common stock

    68                    

Weighted average shares of Class B common stock and potential common shares outstanding— diluted

    3,389       3,264       3,321       3,264  
                                 

Basic net income (loss) per Class B common share

  $ 0.00     $ (0.57

)

  $ (0.01

)

  $ (0.71

)

Diluted net income (loss) per Class B common share

  $ 0.00     $ (0.57

)

  $ (0.01

)

  $ (0.71

)

  

Potential common shares consist of the shares issuable upon the release of restricted stock units (RSUs) and performance stock units (PSUs) and the exercise of stock appreciation rights (SARs). The Company’s unvested RSUs and PSUs, and unexercised SARs are not considered participating securities as they do not have rights to dividends or dividend equivalents prior to release or exercise.

 

10

 

The following table sets forth the number of potential common shares not included in the calculation of diluted earnings per share because their effects were anti-dilutive:

 

   

Three Months Ended

   

Six Months Ended

 
   

July 31,

   

July 31,

 
   

2020

   

2019

   

2020

   

2019

 
   

(in thousands)

   

(in thousands)

 

Class A

    340       2,897       1,822       2,898  

Class B

          278       150       278  

  

 

4.

FAIR VALUE MEASUREMENTS

 

When determining fair value, the Company uses a three-tier value hierarchy which prioritizes the inputs used in measuring fair value. Whenever possible, the Company uses observable market data. The Company relies on unobservable inputs only when observable market data is not available. Classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.