Scottsdale, Ariz. — October 20, 2008 — JDA® Software Group, Inc. (NASDAQ: JDAS) today announced financial results for the third quarter ended September 30, 2008. JDA reported total revenues of $98.4 million and software revenues of $23.0 million for third quarter 2008, compared to total revenues of $93.6 million and software revenues of $15.5 million for third quarter 2007. For the nine months ended September 30, 2008, JDA reported total revenues of $284.1 million and software revenues of $58.6 million, compared to total revenues of $275.1 million and software revenues of $51.2 million for the nine months ended September 30, 2007.
Third Quarter 2008 Financial Summary
• Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) was $27.0 million for the third quarter of 2008, compared to $25.3 million in the third quarter 2007.
• Adjusted non-GAAP earnings for third quarter 2008 was $0.42 per share as compared to $0.40 in the third quarter 2007, and exclude amortization of acquired software technology and intangibles, restructuring charges, stock-based compensation and “ticking fee” charges on the credit facility commitment for the pending acquisition of i2 Technologies, Inc.
• GAAP net income for third quarter 2008 was at $8.2 million or $0.23 per share, compared to GAAP net income of $8.3 million or $0.24 per share in third quarter 2007.
• DSOs were 58 days at the end of third quarter 2008, compared to 68 days at the end of second quarter 2008 and 68 days at the end of third quarter 2007.
• Cash flow from operations was $18.8 million in third quarter 2008, compared to $28.8 million in second quarter 2008 and $20.4 million in third quarter 2007.
• The Company had cash and cash equivalents of $130.8 million with $80.5 million of debt, or net cash of $50.3 million, at the end of third quarter 2008. This compares to $95.3 million in cash and cash equivalents and $99.6 million in debt at December 31, 2007, or net debt of $4.3 million. The Company paid off the total of its remaining debt of $80.5 million on October 1, 2008.
“Despite the current economic climate, we ended the third quarter with record software revenues and EBITDA. Furthermore, this was the second quarter in 2008 that we achieved record software license revenues, illustrating the strength of our value proposition and a healthy pipeline,” commented JDA CEO Hamish Brewer. “More than ever, leading companies are looking to JDA for innovative supply chain solutions that help them reduce their overall costs, increase efficiency and turn their supply chains into a source of competitive advantage.”
Third Quarter 2008 Highlights
• Significant Software Deals for the Quarter: JDA signed 58 new software deals in third quarter 2008, which included four contracts that exceeded $1.0 million and five deals that included multiple products.
• Regional Sales Activity:
• JDA’s Pending Acquisition of i2 Technologies: JDA announced on August 11, 2008, that it signed a definitive merger agreement to acquire i2 Technologies, Inc., a leading global provider of supply chain solutions. JDA believes the combination of the two companies will create a global leader in the supply chain planning and optimization market. The Company has received Hart-Scott-Rodino (HSR) antitrust clearance. The i2 shareholder vote is scheduled for November 6, 2008. JDA plans to close the acquisition on that same day.
Nine Month Results
• Adjusted EBITDA increased to $69.3 million for the nine months ended September 30, 2008, compared to $65.7 million for the nine months ended September 30, 2007.
• Adjusted non-GAAP earnings for the nine months ended September 30, 2008 was $1.04 per share, which excludes amortization of acquired software technology and intangibles, restructuring charges, stock-based compensation and “ticking fee” charges on the credit facility commitment for the pending acquisition of i2 Technologies, Inc., as compared to adjusted non-GAAP earnings per share of $0.99 for the nine months ended September 30, 2007, which excluded amortization of acquired software technology and intangibles, restructuring charges, stock-based compensation and a gain on the sale of an office facility.
• GAAP net income for the nine months ended September 30, 2008 was $16.7 million or $0.47 per share, as compared to GAAP net income of $18.5 million or $0.55 per share in the nine months ended September 30, 2007.
Conference Call Information
JDA Software Group, Inc. will host a conference call at 4:45 p.m. Eastern time today to discuss earnings results for its third quarter ended September 30, 2008. To participate in the call, dial 1-800-762-8779 (United States) or 1-480-248-5081 (International) and ask the operator for the "JDA Software Group, Inc. Third Quarter 2008 Earnings Conference Call." To participate in the webcast, visit the following web page at the time of the conference call: http://viavid.net/dce.aspx?sid=00005683
A replay of the conference call will begin Monday, October 20, 2008 at 7:45 p.m. (Eastern) and will end on Thursday, November 20, 2008 at 11:59 p.m. (Eastern). You can hear the replay by dialing 1-800-406-7325 (United States) or 1-303-590-3030 (International) using access 3923660.
About JDA Software Group, Inc.
JDA® Software Group, Inc. (NASDAQ: JDAS) is focused on helping companies realize real supply chain and revenue management results — fast. JDA Software delivers integrated merchandising as well as supply chain and revenue management planning, execution and optimization solutions for the consumer-driven supply chain and services industries. Through its industry leading solutions, leading manufacturers, distributors, retailers and services companies around the world are growing their businesses with greater predictability and more profitably. For more information on JDA Software, visit www.jda.com or contact us at firstname.lastname@example.org or call +1.800.479.7382.
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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: (i) Mr. Brewer’s statement regarding the strength of our value proposition and the healthy nature of our pipeline; and (ii) Mr. Brewer’s statement that “more than ever, companies are looking to JDA for innovative supply chain solutions. The occurrence of future events may involve a number of risks and uncertainties, including, but not limited to: (a) the possibility our sales pipeline may not result in the expected level of closed business, particularly given the current negative financial and economic environment; and (b) other risks detailed from time to time in the “Risk Factors” section of our filings with the Securities and Exchange Commission. Additional information relating to the uncertainty affecting our business is contained in our filings with the SEC. As a result of these and other risks, actual results may differ materially from those predicted. JDA is not under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
The forward-looking statements contained herein also include statements about the consummation of the pending merger of JDA Software Group, Inc. (“JDA”) and i2 Technologies, Inc. (“i2”). Additional information relating to the uncertainty affecting the proposed acquisition of i2 by JDA, uncertainty regarding the businesses of JDA and i2 as well as certain risks associated with the pending merger between JDA and i2 are contained in the respective company’s filings with the SEC, including the Proxy Statement referred to below. Neither JDA nor i2 is under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
In addition to the specific risks identified in the preceding paragraph, mergers involve a number of special risks, including diversion of management’s attention to the assimilation of the technology and personnel of acquired businesses, costs related to the merger, the integration of acquired products, technologies and employees into JDA’s business and product offerings, and the risk that the merger is not consummated. Achieving the anticipated benefits of the pending merger will depend, in part, upon whether the integration of the acquired products, technology, or employees is accomplished in an efficient and effective manner, and there can be no assurance that this will occur. The difficulties of such integration may be increased by the necessity of coordinating geographically disparate organizations, the complexity of the technologies being integrated, and the necessity of integrating personnel with disparate business backgrounds and combining different corporate cultures. The inability of management to successfully integrate the business of the two companies, and any related diversion of management’s attention, could have a material adverse effect on the combined company’s business, operating results and financial condition.
Caution Required by Certain SEC Rules
In connection with the proposed transaction, i2 on October 3, 2008 filed with the Securities and Exchange Commission (the “SEC”) a Definitive Proxy Statement soliciting approval for the proposed transaction. The Definitive Proxy Statement contains important information about the proposed transaction and related matters. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The Definitive Proxy Statement has been mailed to the stockholders of i2. Investors and security holders may obtain free copies of this document and other documents filed with the SEC at the SEC’s web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by going to i2’s Investor Relations page on its corporate website at www.i2.com/investor or by directing a request to i2 at One i2 Place, 11701 Luna Road, Dallas, Texas, 75234, Attention: Investor Relations (telephone: 469-357-1000).
i2, and its respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the stockholders of i2 in connection with the transaction described herein. Information regarding the special interests of i2’s directors and executive officers is included in the Definitive Proxy Statement described above. Additional information regarding these directors and executive officers is also set forth in i2’s proxy statement for its 2008 Annual Meeting of Stockholders, which was filed with the SEC on April 28, 2008 and Annual Report on Form 10-K filed with the SEC on March 17, 2008. These documents are available free of charge at the SEC’s web site at www.sec.gov. i2’s filings are available free of charge on i2’s corporate website at www.i2.com/investor on its investor relations page. JDA may be deemed to have participated in the solicitation of proxies from the stockholders of i2 in favor of the proposed transaction described herein. Information regarding JDA’s directors and executive officers is set forth in JDA’s proxy statement for its 2008 Annual Meeting of Stockholders, which was filed with the SEC on April 11, 2008 and Annual Report on Form 10-K filed with the SEC on March 14, 2008. These documents are available free of charge at the SEC’s web site at www.sec.gov. JDA’s filings are available free of charge on JDA’s corporate website at www.jda.com on its investor relations page.
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. Management’s presentation of non-GAAP financial measures is intended to be supplemental in nature and should not be considered in isolation or as a substitute for the most directly comparable GAAP measures.
Use and Economic Substance of Non-GAAP Financial Measures Used by JDA
The Company uses non-GAAP measures of performance, including adjusted operating income, EBITDA (earnings before interest, taxes, depreciation and amortization) and earnings per share, in its public statements. Management uses, and chooses to disclose, these non-GAAP financial measures because (i) such measures provide an additional analytical tool to clarify the Company’s results from operations and help the Company to identify underlying trends in its results of operations; (ii) the Company uses non-GAAP earnings measures, including EBITDA, as a measure of profitability because such measures help the Company 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 are utilized in financial and operational 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.
• We exclude amortization of intangibles 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 and adjustments to acquisition-related reserves 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 exist 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.
• The “ticking fee” is a significant non-routine expense to hold the commitment on the new credit facility from August 10, 2008 (the date of our acceptance of the commitment) through the closing date of our pending acquisition of i2 Technologies, Inc. Exclusion of this charge promotes period-to-period comparisons and transparency as we do not believe this cost is directly attributable to the operating performance of our business.
• Sales of office facilities are non-routine transactions, not directly related to our core business of selling software and related services and hardware.
Material Limitations (and Compensation thereof) 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 under SFAS 123R.
• 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.
We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP financial measures only supplementally. We also provide reconciliations of each non-GAAP financial measure to our most directly comparable GAAP measure, and we encourage investors to review carefully those reconciliations.
Usefulness of Non-GAAP Financial Measures to Investors
The Company believes that the presentation of these non-GAAP financial measures is warranted for several reasons. First, such non-GAAP financial measures provide investors and management an additional analytical tool for understanding the Company’s financial performance by excluding the impact of items which may obscure trends in the core operating performance of the business. Second, since the Company has historically reported non-GAAP results to the investment community, the Company believes the inclusion of non-GAAP numbers provides consistency and enhances investors’ ability to compare the Company’s performance across financial reporting periods.