Notes to Condensed Consolidated Financial Statements—Unaudited
July 31, 2021
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 July 31, 2021, results of operations for the three months ended July 31, 2021 and 2020, consolidated statements of shareholders’ equity for the three months ended July 31, 2021 and 2020 and cash flows for the three months ended July 31, 2021 and 2020. The Company’s results for the three months ended July 31, 2021 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, 2021. The terms “fiscal 2022” and “fiscal 2021” refer to our fiscal years ending April 30, 2022 and 2021, respectively.
The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Note 1 in the Notes to the Consolidated Financial Statements for fiscal 2021 contained in the Annual Report describes the significant accounting policies that we have used in preparing our consolidated financial statements. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to revenue/reserves and allowances. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could differ materially from these estimates under different assumptions or conditions.
Principles of Consolidation
The accompanying 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.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating taxes for each quarter and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and changes in tax laws or rates, as well as clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 was effective for the Company beginning May 1, 2021 and would require us to recognize a cumulative effect adjustment to the opening balance of reinvested earnings, if applicable. The adoption of ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements.
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 revenue for the right to use the software for a limited period of time in an environment hosted by the Company or by a third party. The 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 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 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 $29,000 and $4,000 for the three months ended July 31, 2021 and 2020, respectively.
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 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 revenue from sales made through the indirect sales channels on a gross basis, because we control the goods or services and act as the principal in the transaction. In reaching this determination, we evaluated sales through our indirect channel on a case-by-case basis and considered a number of factors including indicators of control such as the party having the primary responsibility to provide specified goods or services and the party having discretion in establishing prices.
Sales Taxes. We account for sales taxes collected from customers on a net basis.
Significant Judgments. Many of our contracts include multiple performance obligations. Our products and services generally do not require a significant amount of integration or interdependency; therefore, our products and services are generally not combined. We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (SSP) for each performance obligation within each contract.
We use judgment in determining the SSP for products and services. For substantially all performance obligations except on-premise licenses, we are able to establish SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. We typically establish an SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. Historically our on-premise licenses have not been sold on a standalone basis, as the vast majority of all customers elect to purchase on-premise license maintenance and support contracts at the time of an on-premise license purchase. We are unable to establish the SSP for our on-premise licenses based on observable prices, as the same products are sold for a broad range of prices (that is, the selling price is highly variable) and a
representative SSP is not discernible from past transactions or other observable evidence. As a result, the SSP for an on-premise license included in a contract with multiple performance obligations is determined by applying a residual approach whereby all other performance obligations within a contract are first allocated a portion of the transaction price based upon their respective SSPs, with any residual amount of transaction price allocated to on-premise license revenue. Maintenance and support contracts are generally priced as a percentage of the net fees paid by the customer to access the on-premise license.
Contract Balances. Timing of invoicing to customers may differ from timing of revenue recognition and these timing differences result in unbilled accounts receivables or contract liabilities (deferred revenue) on the Company’s condensed consolidated balance sheets. Fees for our software licenses are generally due within 30 days of contract execution. We have an established history of collecting under the terms of our software license contracts without providing refunds or concessions to our 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 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 July 31, 2021, we recognized $16.3 million of revenue that was included in the deferred revenue balance as of April 30, 2021.
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July 31,
2021
|
|
April 30,
2021
|
(in thousands)
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|
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|
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|
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|
|
|
|
Deferred revenue, current
|
36,921
|
|
|
37,142
|
|
Deferred revenue, long-term*
|
395
|
|
|
540
|
|
Total deferred revenue
|
$
|
37,316
|
|
|
$
|
37,682
|
|
*included in other long-term liabilities on the accompanying condensed consolidated balance sheet
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 July 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $122 million. The Company expects to recognize revenue on approximately 45% 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:
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Three Months Ended
July 31,
|
|
2021
|
|
2020
|
|
(in thousands)
|
|
Revenue:
|
|
|
|
|
Domestic
|
$
|
24,427
|
|
|
$
|
23,140
|
|
|
International
|
4,844
|
|
|
4,138
|
|
|
|
$
|
29,271
|
|
|
$
|
27,278
|
|
|
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 other current assets and deferred sales commissions—noncurrent, respectively, in the Company’s Condensed Consolidated Balance Sheets. Total deferred commissions at July 31, 2021 and April 30, 2021 were $3.7 million and $3.9 million, respectively. Amortization of sales commissions was $0.5 million and $0.4 million for the three months ended July 31, 2021 and 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. Declaration of Dividend Payable
On May 27, 2021, 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 August 27, 2021 to Class A and Class B shareholders of record at the close of business on August 13, 2021.
D. Earnings Per Common Share
The Company has two classes of common stock. Class B common shares are convertible into Class A common shares at any time, on a one-for-one basis. Under the Company’s Articles of Incorporation, if dividends are declared, holders of Class A common shares shall receive a $0.05 dividend per share prior to the Class B common shares receiving any dividend and holders of Class A common shares shall receive a dividend at least equal to Class B common shares dividends on a per share basis. As a result, the Company has computed the earnings per share in compliance with the Earnings Per Share Topic of the FASB ASC, 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:
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|
Three Months Ended
July 31, 2021
|
|
Three Months Ended
July 31, 2020
|
Class A
Common
Shares
|
|
Class B
Common
Shares
|
|
Class A
Common
Shares
|
|
Class B
Common
Shares
|
Distributed earnings
|
$
|
0.11
|
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
Undistributed losses
|
(0.02)
|
|
|
(0.02)
|
|
|
(0.05)
|
|
|
(0.05)
|
|
Total
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
Distributed earnings
|
$
|
3,457
|
|
|
$
|
202
|
|
|
$
|
3,370
|
|
|
$
|
201
|
|
Undistributed losses
|
(673)
|
|
|
(39)
|
|
|
(1,450)
|
|
|
(87)
|
|
Total
|
$
|
2,784
|
|
|
$
|
163
|
|
|
$
|
1,920
|
|
|
$
|
114
|
|
Basic weighted average common shares outstanding
|
31,231
|
|
|
1,822
|
|
|
30,517
|
|
|
1,822
|
|
Diluted EPS for Class A Common Shares Using the If-Converted Method
Three Months Ended July 31, 2021
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|
|
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|
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|
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|
|
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
|
|
Class A
Common
Shares
|
|
EPS*
|
Per Basic
|
$
|
2,784
|
|
|
31,231
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|
|
$
|
0.09
|
|
Common Stock Equivalents
|
—
|
|
|
893
|
|
|
—
|
|
|
2,784
|
|
|
32,124
|
|
|
0.09
|
|
Class B Common Share Conversion
|
163
|
|
|
1,822
|
|
|
—
|
|
Diluted EPS for Class A Common Shares
|
$
|
2,947
|
|
|
33,946
|
|
|
$
|
0.09
|
|
Three Months Ended July 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed
& Distributed
Earnings
to Class A
Common
Shares
|
|
Class A
Common
Shares
|
|
EPS*
|
Per Basic
|
$
|
1,920
|
|
|
30,517
|
|
|
$
|
0.06
|
|
Common Stock Equivalents
|
—
|
|
|
593
|
|
|
—
|
|
|
1,920
|
|
|
31,110
|
|
|
0.06
|
|
Class B Common Share Conversion
|
114
|
|
|
1,822
|
|
|
—
|
|
Diluted EPS for Class A Common Shares
|
$
|
2,034
|
|
|
32,932
|
|
|
$
|
0.06
|
|
Diluted EPS for Class B Common Shares Using the Two-Class Method
Three Months Ended July 31, 2021
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
|
|
Class B
Common
Shares
|
|
EPS*
|
Per Basic
|
$
|
163
|
|
|
1,822
|
|
|
$
|
0.09
|
|
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares
|
1
|
|
|
—
|
|
|
—
|
|
Diluted EPS for Class B Common Shares
|
$
|
164
|
|
|
1,822
|
|
|
$
|
0.09
|
|
Three Months Ended July 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed
& Distributed
Earnings
to Class B
Common
Shares
|
|
Class B
Common
Shares
|
|
EPS*
|
Per Basic
|
$
|
114
|
|
|
1,822
|
|
|
$
|
0.06
|
|
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares
|
2
|
|
|
—
|
|
|
—
|
|
Diluted EPS for Class B Common Shares
|
$
|
116
|
|
|
1,822
|
|
|
$
|
0.06
|
|
_______________
*Amounts adjusted for rounding
For the three months ended July 31, 2021 and 2020, we excluded options to purchase 315,924 and 647,935, respectively of Class A Common Shares 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 July 31, 2021, we had a total of 4,068,233 options outstanding and as of July 31, 2020, we had a total of 3,959,903 options outstanding.
E. Stock-Based Compensation
During the three months ended July 31, 2021 and 2020, we granted options for 377,500 and 535,000 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 $0.8 million and $0.5 million and income tax benefits of approximately $1,177,000 and $234,000 from option exercises during the three months ended July 31, 2021 and 2020, respectively. We record stock-based compensation expense on a straight-line basis over the vesting period directly to additional paid-in capital.
During the three months ended July 31, 2021 and 2020, we issued 399,000 and 230,747 shares of Class A common stock, respectively, resulting from the exercise of stock options. The total intrinsic value of options exercised during the three months ended July 31, 2021 and 2020 based on market value at the exercise dates was approximately $5.5 million and $1.4 million, respectively. As of July 31, 2021, unrecognized compensation cost related to unvested stock option awards approximated $8.4 million, which we expect to recognize over a weighted average period of 1.9 years.
F. Fair Value of Financial Instruments
We measure our investments based on a fair value hierarchy disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. A number of factors affect market price observability, including the type of asset or liability and its characteristics. This hierarchy prioritizes the inputs into three broad levels as follows:
•Level 1—Quoted prices for identical instruments in active markets.
•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
•Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The following is a general description of the valuation methodologies we use for financial assets and liabilities measured at fair value, including the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Cash Equivalents—Cash equivalents include investments in government obligation based money-market funds, other money market instruments and interest-bearing deposits with initial terms of three months or less. The fair value of cash equivalents approximates its carrying value due to the short-term nature of these instruments.
Marketable Securities—Marketable securities utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. government debt securities, as these securities all have quoted prices in active markets. Marketable securities utilizing Level 2 inputs include municipal bonds. We value these securities using market-corroborated pricing or other models that use observable inputs such as yield curves.
The following tables present our assets and liabilities that we measured at fair value on a recurring basis as of July 31, 2021 and April 30, 2021, and indicate the fair value hierarchy of the valuation techniques we used to determine such fair value (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2021
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance
|
Cash equivalents
|
$
|
85,058
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
85,058
|
|
Marketable securities
|
15,778
|
|
|
502
|
|
|
—
|
|
|
16,280
|
|
Total
|
$
|
100,836
|
|
|
$
|
502
|
|
|
$
|
—
|
|
|
$
|
101,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2021
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance
|
Cash equivalents
|
81,720
|
|
|
—
|
|
|
—
|
|
|
81,720
|
|
Marketable securities
|
15,332
|
|
|
674
|
|
|
—
|
|
|
16,006
|
|
Total
|
97,052
|
|
|
674
|
|
|
—
|
|
|
97,726
|
|
G. 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 2022. As of July 31, 2021, 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.
H. 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.
I. Industry Segments
FASB ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of a public entity about which separate financial information is available that is evaluated regularly by the chief operating decision makers (“CODMs”), or decision making group, in deciding how to allocate resources and in assessing performance. Our CODMs are our Chief Executive Officer and President and our Chief Financial Officer. While our CODMs are apprised of a variety of financial metrics and information, we manage our business primarily on a segment basis, with the CODMs evaluating performance based upon segment operating profit or loss that includes an allocation of common expenses, but excludes certain unallocated corporate expenses, which are included in the Other segment. Our CODMs review the operating results of our three segments, assess performance and allocate resources in a manner that is consistent with the changing market dynamics that we have experienced. The three operating segments are: (1) Supply Chain Management (“SCM”), (2) Information Technology Consulting (“IT Consulting”) and (3) Other.
The SCM segment consists of Logility and DMI. Both operating companies leverage a single platform spanning eight supply chain process areas, including demand optimization, inventory optimization, supply optimization, retail optimization, quality and compliance, PLM, sourcing management and integrated business planning. The IT Consulting segment consists of The Proven Method, Inc., an IT staffing and consulting services firm, which provide s support for our software products, such as software enhancements, documentation, updates, customer education, consulting, systems integration services, maintenance and support services. The Other segment consists of (i) American Software ERP, which provides purchasing and materials management, customer order processing, financial, e-commerce and traditional manufacturing solutions, and (ii) unallocated corporate overhead expenses.
All of our revenue is derived from external customers. We do not have any inter-segment revenue. Our income taxes and dividends are paid at a consolidated level. Consequently, it is not practical to show these items by operating segment.
In the following table, we have broken down the intersegment transactions applicable to the three months ended July 31, 2021 and 2020 (in thousands):
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Three Months Ended July 31,
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2021
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2020
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Revenue:
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Supply Chain Management
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$
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24,251
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$
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21,736
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IT Consulting
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4,476
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5,026
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Other
|
544
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516
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$
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29,271
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$
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27,278
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Operating income (loss):
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Supply Chain Management
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$
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5,356
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$
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4,105
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IT Consulting
|
163
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|
106
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Other
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(3,746)
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(3,326)
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$
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1,773
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$
|
885
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Capital expenditures:
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Supply Chain Management
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$
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302
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$
|
39
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IT Consulting
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—
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|
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—
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Other
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—
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|
79
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$
|
302
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$
|
118
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Capitalized software:
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Supply Chain Management
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$
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—
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$
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245
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IT Consulting
|
—
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|
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—
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Other
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—
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—
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$
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—
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$
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245
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Depreciation and amortization:
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Supply Chain Management
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$
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1,034
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$
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1,586
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IT Consulting
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—
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1
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Other
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97
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|
93
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$
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1,131
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$
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1,680
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Earnings (loss) before income taxes:
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Supply Chain Management
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$
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5,261
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$
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4,376
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IT Consulting
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163
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104
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Other
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(3,214)
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(2,263)
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$
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2,210
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$
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2,217
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J. Major Customers
No single customer accounted for more than 10% of total revenue for the three months ended July 31, 2021 and 2020.
K. 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 documentation. 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.
L. Subsequent Event
On August 19, 2021, 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 December 3, 2021 to Class A and Class B shareholders of record at the close of business on November 19, 2021.