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QAD reports loss as $2B acquisition nears

By   /   Monday, August 30th, 2021  /   No Comments

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QAD headquarters in Santa Barbara

QAD, a Santa Barbara-based cloud software company for the manufacturing industry, saw its revenue and expenses rise in the second quarter of 2021 as the company prepares to be bought out by a San Francisco-based private equity firm.

QAD lost $6.3 million, or 31 cents per share, in the quarter ended July 31, the company announced on Aug. 25. In the same quarter of 2020, the company had earnings of $60,000, or break-even per share.

The loss was primarily caused by a rise in general administration costs, which more than doubled year-over-year, from $10.2 million in the second quarter of 2020 to $20.8 million in the second quarter of 2021.

QAD said the rise in costs can be mostly attributed to its pending acquisition by Thoma Bravo, which was responsible for about $7.3 million of the total costs.

The $2 billion all-cash transaction was announced June 28, during the second quarter.

The transaction is expected to close in the fourth quarter of 2021. Once it is complete, QAD will become a private company and will be delisted from the Nasdaq, where it has been traded publicly since 1997.

Under the terms of the agreement, QAD shareholders will receive $87.50 per share in cash.

QAD’s Class A stock, which is the type held by most investors, shot up about 20% on June 28, the day of the announcement, to $87 a share. It closed at $87.10 on August 30.

When the transaction is complete, QAD will remain headquartered in Santa Barbara, and CEO Anton Chilton will continue to lead the company. 

Chilton has been CEO since 2018 and has been with the company since 2004. Pamela Lopker, who founded QAD in 1979 and is the acting president, will also retain a significant ownership interest in the company and continue to serve on the board.

QAD was founded in Carpinteria in 1979 and employed more than 1,900 people in June 2019. ≈

Thoma Bravo is a private equity firm focused on the software and technology-enabled services sector with offices in San Francisco and Miami and headquarters in Chicago. The firm is no stranger to the Central Coast, as it already owns J.D. Power & Associates, the consumer products rating company based in Westlake Village, which it acquired late in 2019.

Given the pending acquisition, QAD has said it will not be issuing financial guidance for the remainder of the year.

QAD generated revenue of $84.8 million in the second quarter of 2021, up from $74.1 million during the same quarter a year earlier.

Total revenue for the first half of fiscal year 2021 was $167.8 million, compared with $148.2 million for the same period last year.

The uptick in revenue was primarily driven from increases in subscription and professional services, the company said in a news release.

Subscription revenue was at $38.4 million, up from $31.1 million a year earlierk while professional services revenue was at $17.2 million, up from $13.5 million.

But, the company could not deliver a positive net income, instead delivering a loss of $6.3 million, or a loss of 31 cents per diluted share.

The company had an operating loss of $5.8 million in the second quarter of 2021, a year after it reported operating income of $2.3 million.

This loss included a $4.7 million stock compensation expense. QAD said that excluding those transaction costs, operating income would have been $1.8 million.

North America accounted for 49% of the total revenue generated by QAD for the second quarter. Europe and the Middle East contributed 32% of the total revenue, Asia Pacific was 13%, and Latin America accounted for 6% of the company’s revenue.

QAD ended the second quarter with $136.5 million in cash and cash equivalents.

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