Financial: QAD Q2 Financial Results

Edge: Work-Group Computing Report, August 24, 1998

                            QAD INC.

               Consolidated Statements of Income

             (In thousands, except per share data)

                    Three Months Ended        Six Months Ended

                         July 31,                 July 31,

                    1998          1997       1998          1997

Revenues:

 License fees    $ 28,656      $ 24,959    $ 55,847      $ 44,108

 Maintenance &

  other            18,623        15,238      35,702        28,162

Total revenues     47,279        40,197      91,549        72,270

Costs and expenses:

 Cost of revenues  10,739         9,611      22,526        18,073

 Sales and marketin24,350        15,854      45,424        29,420

 Research and

  development      13,118         6,571      24,540        12,742

 General and

  administrative    6,699         5,455      11,743         9,012

Total costs and

 expenses          54,906        37,491     104,233        69,247

Operating income

 (loss)            (7,627)        2,706     (12,684)        3,023

Total other (income)

 expense             (481)            2      (1,849)         (414)

Income (loss) before

 income taxes      (7,146)        2,704     (10,835)        3,437

Income tax expense

 (benefit)         (2,715)        1,039      (4,117)        1,212

Net income (loss)$ (4,431)     $  1,665    $ (6,718)     $  2,225

Diluted EPS      $  (0.15)     $   0.07    $  (0.23)     $   0.10

Diluted weighted

 shares            29,234        22,991      29,179        22,892

Basic EPS        $  (0.15)     $   0.07    $  (0.23)     $   0.10

Basic weighted

 shares            29,234        22,505      29,179        22,406

                               QAD INC.

                      Consolidated Balance Sheets

                            (In thousands)

                                 July 31, 1998    Jan. 31, 1998

Assets

Current assets

 Cash and cash equivalents         $ 47,964          $ 70,082

 Receivables                         70,056            75,683

 Other current assets                18,499            10,442

Total current assets                136,519           156,207

Property and equipment, net          31,987            25,717

Other assets                         11,676             8,582

Total Assets                       $180,182         $ 190,506

Liabilities & Stockholders' Equity

Current liabilities

 Current Portion of Capital

  leases                           $    380         $     143

 Accounts payable and accrued

  expenses                           28,507            33,170

 Deferred revenue and deposits       43,678            43,636

Total current liabilities            72,565            76,949

Other deferred liabilities              899             1,182

Stockholders' equity

 Common stock                        97,632            97,238

 Retained earnings                   10,677            17,395

 Receivable from stockholders          (170)             (397)

 Unearned compensation --

  restricted stock                     (935)           (1,510)

 Cumulative other

  comprehensive loss                   (486)             (351)

Stockholders' equity                106,718           112,375

Total Liabilities &

 Stockholders' Equity              $180,182          $190,506

QAD Inc. (Nasdaq:QADI) Thursday reported financial results for its second quarter and six months ended July 31, 1998.

For the fiscal quarter ended July 31, 1998, total revenue increased 18 percent to $47.3 million, from $40.2 million (a) last year. Product revenue (composed of license and maintenance revenue) of $44.2 million, increased 21 percent from $36.6 million in the prior- year period.

QAD reported a net loss for the second fiscal quarter of $4.4 million, or $0.15 per share. This compares with net income of $1.7 million, or $0.07 diluted earnings per share, for the same period last year.

For the first half of the fiscal year, total revenue rose 27 percent to $91.5 million, up from $72.3 million (a) last year. Product revenue rose 29 percent to $85.7 million, versus $66.4 million in last year's first half. The net loss for the current six-month period amounted to $6.7 million, or $0.23 per share, versus net income of $2.2 million, or $0.10 diluted earnings per share, last year.

Total expenses rose 58 percent in the second quarter compared with the same quarter last year. While expense control initiatives were implemented early in the quarter, their benefit has not yet been fully realized. Importantly, the company's strategic investment in On/Q, QAD's supply-chain management software solution, approximated $6 million for the quarter and $10 million year to date.

"While expense levels were higher than we would have desired, we believe our continuing investments in both our flagship product MFG/PRO and in our cutting-edge supply-chain solution, On/Q, creates a solid foundation for future success," said Karl Lopker, QAD's chief executive officer.

"This quarter we launched our On/Q Advanced Planning and Scheduling (APS) products, Factory Optimizer and Supply Chain Optimizer, which are of high value to our customers.