American Software, Inc. (NASDAQ:AMSWA) has undergone a strategic transformation in fiscal year 2024, positioning itself for long-term success in the supply chain software market. AMSWA divested non-core assets, including its IT staffing business and transportation rating solutions, to focus solely on its industry-leading Logility supply chain platform. This shift has enabled American Software to accelerate its artificial intelligence (AI) roadmap, highlighted by the acquisition of Garvis, a visionary SaaS startup that has integrated its DemandAI+ capabilities into the Logility platform.

Financials

American Software's annual revenue for fiscal year 2024 reached $102.5 million, with net income of $11.4 million and operating cash flow of $14.9 million. Free cash flow for the year was $14.3 million. In the fourth quarter, revenue was $25.4 million, with net income of $2.2 million and operating cash flow of $3.1 million.

American Software's transformation is evident in its financial performance. Subscription revenue, which now accounts for 55% of total revenue, grew 9% year-over-year in the fourth quarter and 10% for the full fiscal year. This growth was driven by an increase in the number of subscription contracts, including those with higher cloud services annual contract value, as well as an uptick in multi-year agreements.

Business Overview

American Software's business overview highlights its comprehensive supply chain planning platform, which leverages AI and machine learning to deliver integrated planning and operations across the end-to-end supply chain. The platform includes advanced analytics, supply chain visibility, demand and inventory planning, sales and operations planning, supply and inventory optimization, manufacturing planning, network design, and retail merchandise and assortment planning, among other capabilities.

AMSWA serves approximately 650 clients located in 80 countries, primarily concentrated within key verticals such as apparel, food and beverage, consumer packaged goods, consumer durable goods, wholesale distribution, specialty chemicals, and other process manufacturing. American Software's solutions are marketed and sold through a direct sales team as well as an indirect global value-added reseller (VAR) distribution network.

Recent Developments

The company's focus on the cloud and AI-powered supply chain solutions has been well-received by the market. Logility was recognized as a leader in multiple IDC MarketScape reports, including Worldwide Holistic Supply Chain Planning, Worldwide Supply Chain Demand Planning, Worldwide Supply Chain Sales and Operations Planning, and Worldwide Supply Chain Inventory Optimization. Additionally, Logility was positioned as a Major Player in the Worldwide Holistic Supply Planning report.

Liquidity

American Software's financial ratios demonstrate its strong liquidity position, with a current ratio of 2.3 and a quick ratio of 1.9 as of January 31, 2024. The debt-to-equity ratio is 0.0, indicating a debt-free balance sheet. American Software's return on assets and return on equity were 6.0% and 8.0%, respectively, for the fiscal year.

Outlook

Looking ahead, American Software provided guidance for fiscal year 2025, which includes total revenue of $104 million to $108 million, recurring revenue between $87 million and $89 million, and adjusted EBITDA of $15 million to $16.4 million. AMSWA expects to see an increase in existing client conversions to the cloud, which, combined with the sale of its Transportation Rating Solutions business, will result in a greater decline in maintenance revenue compared to previous years.

The company's pipeline growth has been in the double digits, but conversion rates remain below historical levels due to the challenging macroeconomic environment. American Software believes that if economic conditions improve, the pent-up demand in its pipeline could be quickly converted into revenue, as clients have already completed the evaluation process and are ready to move forward with projects.

Geographically, international revenue represented approximately 22% of total revenue in the fourth quarter and 21% for the full fiscal year 2024, compared to 23% and 22% in the respective prior-year periods. American Software continues to see strong demand for its solutions globally, with a presence in key markets such as the United States, Europe, and Asia-Pacific.

American Software's transformation has been further bolstered by the planned elimination of its dual-class share structure, which is expected to open the company up to a broader investment community and align the corporate structure with the Logility brand. This strategic move, along with the divestiture of non-core assets and the focus on AI-powered supply chain solutions, positions American Software for long-term growth and value creation for its shareholders.

Conclusion

Overall, American Software's fiscal year 2024 was a pivotal year, as AMSWA streamlined its operations, strengthened its technological capabilities, and laid the foundation for future success in the supply chain software market. With a strong financial position, industry-leading solutions, and a clear strategic vision, American Software is well-poised to capitalize on the growing demand for advanced supply chain planning and optimization tools.