American Software Reports Modest Revenue Growth, Improved Gross Margin, and Strategic Acquisitions in Q2 2024

American Software, Inc. reported its financial results for the three months ended July 31, 2024, showing a modest increase in total revenue to $26.2 million, up 1% from $25.9 million in the same period of 2023. Subscription fees, a significant revenue driver, rose 7% to $14.8 million, reflecting a growing demand for the company's Software-as-a-Service (SaaS) solutions. However, the company experienced declines in license and maintenance revenues, which fell by 17% and 11%, respectively, primarily due to client attrition and transitions to cloud-based services.

The gross margin improved to 67%, compared to 65% in the prior year, driven by higher subscription revenues. Operating income increased by 33% to $1.8 million, up from $1.4 million in the previous year, with the Supply Chain Management (SCM) segment contributing significantly to this growth, reporting an operating income of $6.6 million, a 7% increase from the prior year.

Despite these positive trends, net earnings from continuing operations decreased to $2.1 million, down from $2.6 million in the same period last year. This decline was attributed to increased operating expenses and a higher income tax expense. The company reported a net cash used in operating activities of $1.8 million, a stark contrast to the $7.2 million provided in the same period of 2023.

On the balance sheet, total assets decreased to $188.9 million from $192.4 million as of April 30, 2024. Total current assets also fell, while investments rose significantly to $38.0 million, up from $24.3 million. Total liabilities decreased to $58.5 million, down from $62.0 million, contributing to a slight decline in total shareholders’ equity to $130.5 million.

Strategically, American Software made notable moves, including the acquisition of Garvis AI Limited for approximately $25 million, aimed at enhancing its AI-driven supply chain management capabilities. Additionally, the company disposed of its equity interest in The Proven Method for $2.1 million, allowing it to focus on its core SCM business.

The company continues to navigate a challenging macroeconomic environment, with global growth projected at 3.2% for 2024. Management anticipates that the demand for technology upgrades will persist, despite longer evaluation periods for software purchases. The company remains debt-free and maintains a strong liquidity position, with $92 million in cash and investments as of July 31, 2024.