MARKHAM, Ontario and WALTHAM, Massachusetts - December 7, 2005 - Geac Computer Corporation Limited (TSX: GAC and NASDAQ: GEAC), a global enterprise software company dedicated to addressing the needs of CFOs, today announced its second quarter financial results for the quarter ended October 31, 2005.
Note to readers: As a result of the sale of the Interealty business on October 1, 2005, the results of the operations of Interealty have been reflected as discontinued operations and have not been included in Geac's results of continuing operations for the second quarter of fiscal year (FY) 2006 and comparative periods. Geac's net earnings for the second quarter of FY 2006, which include net earnings from discontinued operations, were $33.2 million, or $0.37 per diluted share. All references to dollars are to U.S. dollars unless otherwise noted.
Second Quarter Financial and Other Highlights
- Signed definitive agreement with Golden Gate Capital for the sale of the Company for approximately $1.0 billion, or $11.10 per share in cash.
- Software license revenue increased 26.1% over Q2 FY 2005, and a 46.2% improvement over Q1 FY 2006.
- 24.1% of software license revenue in Q2 FY 2006 came from the sale of new internally developed Geac products.
- Gross profit margin improved to 66.2% in Q2 FY 2006 from 62.4% in Q1 FY 2006 and from 65.2% in Q2 FY 2005.
- EPS of $0.37 per diluted share, a 117.6% increase over same quarter last year (including the gain on sale of and net earnings from the Interealty business).
- $226.5 million in cash on the balance sheet as of October 31, 2005.
- Number of contracts closed increased from 315 in Q1 FY 2006 to 340 in Q2 FY 2006 in the Enterprise Applications Systems (EAS) business segment.
- Increased average deal size of deals in excess of $150,000 to $294,000 from $284,000 in Q1 FY 2006 and from $266,000 in Q2 FY 2005.
- Sold Interealty business, a non-strategic business unit, for approximately $36.3 million in cash.
|US$ thousands||Q2 FY 2006||Q2 FY 2005|
|Software License Revenue||18,866||14,962|
|Support & Professional|
|Net Earnings per Diluted Share (not in thousands):|
|Continuing Operations||$ 0.12||$ 0.17|
|Discontinued Operations||$ 0.25||$ -|
|Total Diluted EPS||$ 0.37||$ 0.17|
Geac reported revenue in the second quarter of FY 2006 of $103.2 million, an increase of $2.7 million compared to $100.5 million in revenue in the second quarter of FY 2005. Software license revenue totaled $18.9 million in the second quarter, a 26.1% increase over the same quarter last year when software license revenue totaled $15.0 million, and a 46.2% increase over license revenue in the first quarter of FY 2006, when software license revenue was $13.0 million. The Company's net earnings from continuing and discontinued operations were $33.2 million during the second quarter of FY 2006, or $0.37 per diluted
share, compared with $15.2 million, or $0.17 per diluted share in the second quarter of FY 2005, a net earnings increase of 118.3% and a diluted EPS increase of 117.6%. This was comprised of $22.1 million, or $0.25 per diluted share, from discontinued operations (net of taxes), and $11.1 million, or $0.12 per diluted share, from continuing operations. In the second quarter of FY 2006, the gross profit margin increased to 66.2% of revenue from 65.2% in the second quarter of last year.
In the second quarter, Geac sold its Interealty business for $36.3 million, resulting in a $21.3 million after-tax gain in the second quarter of FY 2006. The sale of Interealty is an example of Geac's ability to turn around challenged businesses and achieve value for non-strategic assets.
Charles S. Jones, President and Chief Executive Officer said, "In the second quarter, we were most pleased to see particularly strong increases in our software license revenue with notable contributions from nearly all of our ERP and Performance Management product lines, which benefited not only from an increased number of deals, but also from an increase in the average size of contracts in excess of $150,000. New customers were responsible for approximately 24.2% of our software license sales in the quarter. Of equal importance, organic growth trends in some areas of our business continue, as internally developed new products designed to extend the value of existing solutions contributed 24% to our overall software license revenue in the second quarter. Among the larger contracts closed in the second quarter, we were able to finalize one transaction in excess of $1 million, representing some of the spillover to which we referred in the first quarter results discussion in September."
Mr. Jones continued, "Overall, our business continues to perform well in what has proven to be an increasingly competitive software market environment. We are extremely enthusiastic about the agreement we announced last month regarding the sale of Geac to Golden Gate Capital for approximately $1 billion pursuant to a plan of arrangement. This is expected to provide our many product families with the advantage of size and scale as our industry continues to consolidate. We believe Golden Gate's product integration strategy, commitment to support our existing product lines and available resources will provide a long-term future for our business and will benefit our customers and employees."
Operating expenses were $53.0 million in the second quarter of FY 2006, compared to $46.0 million the second quarter of FY 2005. Operating expenses were impacted most dramatically by an increase in net restructuring and other unusual items related to non-routine events in the second quarter. These included $2.5 million in proxy contest
expenses and $1.7 million in write-offs related to the termination of the Wells Fargo Foothill credit facility. In addition, general and administrative costs increased in the quarter as compared to last year due to increased expenses of an aggregate $3.1 million related to stock-based compensation, Sarbanes-Oxley compliance and the pursuit of acquisitions.
"Unusual items and G&A expenses in the second quarter had a demonstrable impact on net earnings. Without the costs associated with our recent acquisition activity of approximately $1.5 million, the proxy contest of approximately $2.5 million and certain write-offs with respect to our previous credit facility of approximately $1.7 million, Geac's earnings from continuing operations would have been $21.0 million, a notable 7.7% increase over the same quarter of our last fiscal year," said Donna de Winter, Chief Financial Officer. "We continue to build a very strong cash position. At the end of the second quarter of FY 2006 cash on
Geac's balance sheet was $226.5 million, an 86.0% increase in the cash position of $121.8 million at the close of the second quarter of FY 2005."
In the second quarter of FY 2006, Geac closed approximately 340 deals in the Enterprise Applications Systems (EAS) segment of the business. Thirty-six of these deals each exceeded $150,000, compared to 19 in excess of $150,000 in the first quarter of FY 2006, and the average deal size within this group was more than $294,000, up from the average deal size of $284,000 in first quarter of FY 2006. Contract metrics in the second quarter of FY 2006 were also strong compared to the same quarter last year, in which 21 deals exceeded $150,000 and the average deal size was approximately $266,000. Of the 340 contracts closed in the EAS segment in the second quarter of FY 2006, approximately 50 contracts were with net new customers, reflecting an increase in the number of new customers as a percentage of total contracts over the previous quarter.
Among the significant EAS deals entered into during the second quarter, Geac signed contracts with the following companies:
- CCH, a Wolters Kluwer business and a leading provider of tax and accounting information, software, and services; Fiserv, the largest provider of information management solutions to the U.S. financial industry and parent company of Geac partner IPS-Sendero; PTT Exploration and Production Public Company Limited, an energy company in Thailand; VF Corporation, whose principal brands include Wrangler(R), Lee(R), The North Face(R), Nautica(R), and Vanity Fair(R), and who is a leader in branded apparel; and Worldspan, a leader in travel technology services for travel suppliers, travel agencies, e-commerce sites, and corporations worldwide.
- Sandvik AB, the world's leading supplier of drilling, excavation, crushing and screening machinery, equipment, and tools for the mining and construction industries; Stearns Inc., the world's leading supplier of personal flotation devices; and Westcoast Ltd., distributor of computer products for consumers and professionals.
- Esprit, an international clothing designer and manufacturer; and WE Netherlands B.V., a fashion chain.
- Enterprise Server and Expense Management
- Gloucestershire NHS Health Community, provider of a comprehensive range of acute, mental health, and community services, along with primary care services to the population of Gloucestershire and parts of neighbouring counties; ICT Service Cooperatie Politie, Justitie en Veiligheid, the Dutch police; and Worldspan.
"I am grateful for the continuing efforts of our employees wordwide, the support of our loyal customers and the ongoing, steadfast commitment of our shareholders during the dynamic five-years that I have been with Geac as its Chairman and then President and Chief Executive Officer. In the past five years, our employees, customers and shareholders have all contributed immensely to the long-term success of this business, and we have the track record and metrics to show it. Validating the success of our many growth initiatives, Geac's share price, in US dollar terms, has increased by nearly 276.8% over the past five years. The transformation of Geac has resulted in increased opportunity for our employees and enhanced functionality and support for our customers, which in turn generated the opportunity for a particularly strong return for our shareholders with the prospect of the Golden Gate acquisition in the coming months. We continue to work with Golden Gate Capital toward closing the transaction on or before March 16, 2006. We have satisfied the condition precedent included in the debt financing commitment letters and referenced in the Arrangement Agreement relating to our adjusted EBITDA for the twelve-month period ended October 31, 2005. We expect to complete the submission of all required regulatory filings shortly, and to provide shareholders on or about December 16, 2005 with a Management Information Circular with respect to the Special Meeting of the shareholders to consider approval of the plan of arrangement scheduled to be held on January 19, 2006," concluded Mr. Jones.
For a more in-depth analysis of these financial results and other matters discussed in this Press Release, please see our Management Discussion and Analysis, which will be filed today with the Canadian Securities Administrators at www.sedar.com and the United States Securities and Exchange Commission at www.sec.gov. This document will be posted on our website at http://www.geac.com later today.
Charles S. Jones, President and CEO of Geac, will provide a brief overview of the results and respond to questions on a conference call scheduled for 9:00 a.m. Eastern Time on December 8, 2005. Listeners can access the conference call at 416.340.2216 / 866.898.9626, or via webcast at www.investors.geac.com. Attendees should consider logging in at least 15 minutes prior to the call. A replay of the conference call will be available from December 8, 2005 at 10:00 a.m. Eastern Time until January 8, 2006, at 11:59 p.m. Eastern Time. The replay can be accessed at 416.695.5800 or 1.800.408.3053. The pass code for the replay is 3169939#.
Geac (TSX: GAC, NASDAQ:GEAC) is a global enterprise software company that addresses the needs of the Chief Financial Officer. Geac's best-in-class technology products and services help organizations do more with less in an increasingly competitive environment, amidst growing regulatory pressure, and in response to other business issues confronting the CFO. Further information is available at www.geac.com or through e-mail at firstname.lastname@example.org.