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Scottsdale, Ariz. – Feb. 16, 2010 – JDA® Software Group, Inc. (NASDAQ: JDAS) today announced its outlook for the full year 2010 financial results. With the completion of the acquisition of i2 Technologies, Inc. (“i2”) on Jan. 28, 2010, JDA’s 2010 reported results will include i2 for 11 months of the year. The full year 2010 outlook includes the following ranges of expectations:
Software Revenue $125 million - $135 million
Total Revenue $590 million - $625 million
Adjusted EBITDA $160 million - $170 million
Adjusted Earnings per Share $1.85 - $2.00
Additionally, JDA provided the following outlook for full year cash flow expectations:
Cash Flow from Operations $100 million - $110 million
Less Capital Expenditures $20 million
Free Cash Flow $80 million - $90 million
“So far, I am delighted to be able to report that everything that we predicted for the i2 acquisition appears to be on track,” said JDA Chief Executive Officer Hamish Brewer. “Our integration plans are proceeding well, the early feedback from our customer outreach program is positive, we still expect to see gross profit compression in the first year and we are confident that this transaction is going to be immediately accretive for JDA, delivering substantial growth in earnings per share and resultant cash flow from operations.”
Conference Call Information
JDA Software Group, Inc. will host a conference call at 11:00 a.m. Eastern time today to discuss the 2010 outlook. To participate in the call, dial 1-877-941-4774 (United States) or 1-480-629-9760 (International) and ask the operator for the "JDA Software Group, Inc. 2010 Outlook Conference Call." A live audio webcast of the conference call can be accessed by logging onto www.jda.com in the Investor Relations section.
A replay of the conference call will begin on Feb. 16, 2010 at 8:00 p.m. Eastern time and will end on March 16, 2010. To hear a replay of the call over the Internet, access JDA’s Web site at www.jda.com.
About JDA Software Group, Inc.
JDA® Software Group, Inc. (NASDAQ: JDAS) is a leading global provider of innovative supply chain management, merchandising and pricing excellence solutions. JDA empowers more than 6,000 companies of all sizes to make optimal decisions that improve profitability and achieve real results in the discrete and process manufacturing, wholesale distribution, transportation, retail and services industries. With an integrated solutions offering that spans the entire supply chain from materials to the consumer, JDA leverages the powerful heritage and knowledge capital of acquired market leaders including i2 Technologies®, Manugistics®, E3®, Intactix® and Arthur®. JDA’s multiple service options provide customers with flexible configurations, rapid time-to-value, lower total cost of ownership and 24/7 functional and technical support and expertise. To learn more, visit www.jda.com or e-mail info@jda.com.
JDA Investor Relations Contacts:
Pete Hathaway, Executive Vice President/Chief Financial Officer
480-308-3000
Mike Burnett, GVP, Treasury and Investor Relations
mike.burnett@jda.com
480-308-3392
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“Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally accompanied by words such as “will,” and “expect” and other words with forward-looking connotations. In this press release, such forward-looking statements include, without limitation, the Company’s financial outlook for 2010, which includes software revenue, total revenue, Adjusted EBITDA, Adjusted earnings per share, cash flow from operations and free cash flow, and Mr. Brewer’s statement of our confidence that the i2 acquisition is going to be immediately accretive for us, and will deliver substantial growth in earnings per share and resultant cash flow from operations.
These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. These factors include but are not limited to: the unprecedented volatility in the global economy; the risk that the future business operations of i2 will not be successful; the risk that we will not realize all of the anticipated benefits from our acquisition of i2; the risk that customer retention and revenue expansion goals for the i2 transaction will not be met and that disruptions from the i2 transaction will harm relationships with customers, employees and suppliers; the risk that unexpected costs will be incurred; the outcome of litigation proceedings to which we may be a party; actions of competitors; changes and developments affecting our industry; quarterly or cyclical variations in financial results; development of new products and services; our ability to protect our intellectual property rights; our ability to maintain and improve cost efficiency of operations, including savings from restructuring actions; changes in foreign currency exchange rates; changes in economic conditions, political conditions, licensing requirements and tax matters in the foreign countries in which we do business; reliance on third parties for products and provision of services; and other factors that are set forth in the “Risk Factors” section and other sections of our 2008 Annual Report on Form 10-K and i2’s 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission, and quarterly reports on Form 10-Q, or current reports on Form 8-K subsequent thereto. JDA assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.
Use of Non-GAAP Financial Information
This press release and the related conference call contain non-GAAP financial measures. In evaluating the Company’s performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP. They should not be considered in isolation or as a substitute for the most directly comparable GAAP measures.
We define “EBITDA” as GAAP net income (loss) before interest expense, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is defined as EBITDA for the relevant period as adjusted by adding back additional amounts consisting of (i) restructuring charges, (ii) share-based compensation, (iii) acquisition-related costs, (iv) interest income and other non-operating income (expense), and (v) other significant non-routine operating income and expense items that may be incurred from time-to-time.
Earnings per share is net income divided by the weighted average shares outstanding during the period. Adjusted earnings per share excludes (i) amortization, (ii) restructuring charges, (iii) share-based compensation, (iv) acquisition-related costs and (v) other significant non-routine operating and non-operating income (expense) items that may be incurred from time-to-time.
We have not provided an outlook for 2010 GAAP Net Income or GAAP Earnings Per Share, nor a reconciliation between the non-GAAP measurements presented herein (i.e., Adjusted EBITDA and Adjusted earnings per share) and the most directly comparable GAAP measurements. In this connection, we recently acquired i2 Technologies, Inc. and are still in the process of establishing the fair value of, and allocated purchase price to, the acquired assets and assumed liabilities. This allocation is likely to result in increased depreciation which could affect the Adjusted earnings per share information set forth above. However, because Adjusted EBITDA is essentially determined without regard to depreciation or amortization, among other factors, we do not anticipate material changes to our estimate of Adjusted EBITDA based on the valuation and allocation of the i2 transaction. Of course, any estimate is subject to the limitation described herein, including the safe harbor statement above.
Use and Economic Substance of Non-GAAP Financial Measures Used by JDA
Management uses, and chooses to disclose, certain non-GAAP financial measures because (i) such measures provide an additional analytical tool to help the Company identify underlying trends in its results of operations; (ii) the Company uses non-GAAP earnings measures, including Adjusted EBITDA, to compare its performance on a consistent basis across time periods; and (iii) these non-GAAP measures are employed by the Company’s management in its own evaluation of performance and their decision making processes, such as budget planning and forecasting. The Company also internally uses Adjusted EBITDA measures for determining (a) compliance with certain financial covenants in its credit agreement and (b) executive and employee compensation. Set forth below are additional reasons why specific items are excluded from the Company’s non-GAAP financial measures:
- Amortization charges for acquired technology are excluded because they result from prior acquisitions, rather than ongoing operations, and absent additional acquisitions, are expected to decline over time.
- Amortization charges for other intangibles are excluded because they are non-cash expenses, and while tangible and intangible assets support our business, we do not believe the related amortization costs are directly attributable to the operating performance of our business.
- Restructuring charges are significant non-routine expenses that cannot be predicted and typically relate to a change in our business model or to a change in our estimate of the costs to complete a plan to exit an activity of an acquired company. The exclusion of these charges promotes period-to-period comparisons and transparency. Such charges are primarily related to severance costs and/or the disposition of excess facilities driven by the changes to our business model.
- Stock-based compensation is not an expense that typically requires or will require cash settlement by the Company.
- Acquisition-related costs represent the direct costs associated acquisitions that are significant non-routine expenses. Exclusion of these costs promotes period-to-period comparisons and transparency as we do not believe these costs are directly attributable to the operating performance of our business.
Material Limitations Associated with the Use of Non-GAAP Financial Measures
Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company’s GAAP results. In the future, the Company expects to continue reporting non-GAAP financial measures excluding items described above and the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above. Accordingly, exclusion of these and other similar items in our non-GAAP presentation should not be construed as an inference that these costs are unusual, infrequent or non-recurring.
Some of the limitations in relying on non-GAAP financial measures are:
- Amortization of acquired technology and intangibles, though not directly affecting our current cash position, represent the loss in value as the technology in our industry evolves, is advanced or is replaced over time. The expense associated with this loss in value is not included in the non-GAAP net income presentation and therefore does not reflect the full economic effect of the ongoing cost of maintaining our current technological position in our competitive industry which is addressed through our research and development program.
- The Company may engage in acquisition transactions in the future. In addition, we incur other restructuring charges from time to time when necessary to adjust our business model. Restructuring related charges may therefore continue to be incurred and should not be viewed as non-recurring.
- Stock-based compensation is an important component of our incentive compensation arrangements and will be reflected as expenses in our GAAP results for the foreseeable future.
- Other companies, including other companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure.
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