Geac announces fiscal year 2006 first quarter results

Note to readers: All references to dollars are to U.S. dollars unless otherwise noted.

MARKHAM, ON, and SOUTHBOROUGH, MA, Sept. 9 /PRNewswire-FirstCall/ - Geac Computer Corporation Limited (NASDAQ: GEAC), a global enterprise software company dedicated to addressing the needs of CFOs, today announced results for its first quarter of fiscal year (FY) 2006, which ended July 31, 2005.

    First Quarter and Other Financial Highlights

    -   Net cash provided from operating activities was $7.9 million for the
        first quarter ended July 31, 2005, compared to $2.2 million for the
        first quarter of the prior year.

    -   Software license revenue from internally developed new products
        increased to approximately 27% of total license revenue.

    -   Cash balance increased 65.5% to $192.1 million, up from
        $116.1 million a year ago.

    -   Following the quarter, August software license revenue increased
        61.9% compared to August of last year.

    -   Board of Directors commits to share repurchase program.



    -------------------------------------------------------------------------
    US$ thousands
    (except per share data)                         Q1 FY 2006    Q1 FY 2005
    -------------------------------------------------------------------------
    Software Revenue                                   $13,009       $15,495
    -------------------------------------------------------------------------
    Support & Services Revenue                         $86,931       $89,470
    -------------------------------------------------------------------------
    Hardware Revenue                                    $3,782        $1,903
    -------------------------------------------------------------------------
    Total Revenue                                     $103,722      $106,868
    -------------------------------------------------------------------------
    Net Earnings                                       $11,290       $13,512
    -------------------------------------------------------------------------
    Diluted Earnings Per Share                           $0.13         $0.15
    -------------------------------------------------------------------------

Geac reported revenue in the first quarter of FY 2006 that amounted to $103.7 million, a decrease of $3.1 million compared to $106.9 million in revenue in the first quarter of FY 2005. Software license revenue represented $13.0 million of the first quarter total, a 16.0% decrease over the same quarter last year when software license sales were $15.5 million. The Company's net earnings were $11.3 million during the first quarter of FY 2006, or $0.13 per diluted share, compared with $13.5 million, or $0.15 per diluted share in the first quarter of last year, a net earnings decrease of 16.4% and a diluted EPS decrease of 13.3%. The gross profit margin decreased to 61.6% of revenue from 64.9% in the first quarter of FY 2005.

Net cash provided by operating activities for the three months ended July 31, 2005 was $7.9 million compared to $2.2 million net cash provided by operating activities in the same period the previous year. Geac's cash position at the end of the first quarter of FY 2006 was $192.1 million, a 65.5% increase in the cash position of $116.1 million at the close of the first quarter of FY 2005. This substantial increase was the direct result of the Company's seven consecutive quarters of generating positive cash from operations.

Charles S. Jones, President and Chief Executive Officer of Geac said, "While our first quarter is traditionally a lower revenue quarter due to the seasonality of our business, license revenue was also adversely influenced by an apparent spillover into August. Traditionally our slowest month, August saw a material increase of 61.9% in new software license revenue compared to August of FY 2005, largely due to new license agreements of MPC, the Company's budgeting, financial planning and forecasting product suite. In addition we signed some significant contracts in August that will contribute revenue to be recognized in future periods. The most notable of these contracts were in our ISA business segment of which one contract was in excess of $1 million and another in excess of $2 million."

"Geac remains focused on building opportunity for license growth, and we are winning larger deals with new customers, but often in a sales cycle that lasts longer than anticipated," continued Mr. Jones. "Our average transaction size in the EAS division increased in the first quarter of FY 2006 over the same quarter a year ago. In the last few quarters approximately 11% of the number of these deals were from new customers, and in the first quarter of FY 2006, the number of new customers as a percentage of total contracts signed in the quarter increased to 14.6%. Contracted sales of internally developed new products accounted for approximately 27% of software license revenue in the first quarter of FY 2006. Clearly, our product innovation and our commitment to extending the financial value chain with performance-driven capabilities are achieving results. We are particularly pleased to announce today the immediate availability of Geac MPC 7, a major new release of our flagship integrated performance management software suite."

Operating expenses were $47.9 million in the first quarter of FY 2006, compared to $48.8 million the first quarter of FY 2005. Contributing significantly to the Company's lower general and administrative expenses in the quarter was a $4.0 million settlement with an insurance carrier. We incurred approximately $1.5 million in legal fees and associated costs in prior periods in the litigation with the insurance carrier, which commenced in 2001. In addition, the Company's non-cash, stock-based compensation expense increased by $1.8 million to $2.9 million in the first quarter of FY 2006, a 164% increase, from $1.1 million in the first quarter of last year. This increase resulted from the impact of the fully funded, non-dilutive, restricted share units (RSUs) that had been granted to the management team and to certain key employees in FY 2005. Also, in the first quarter of FY 2006, the costs associated with the Company's ongoing compliance with corporate governance requirements, including Sarbanes-Oxley Section 404, increased by approximately $500,000 over the first quarter of FY 2005. We expect these stock-based compensation and compliance expenses to continue throughout FY 2006.

"As we previously disclosed, in recent quarters we deliberately increased our sales and marketing expenditures to execute focused initiatives designed to accelerate license revenue growth in key product areas, including Geac Performance Management," said Donna de Winter, Chief Financial Officer. "As a percentage of total revenue, sales and marketing expenses increased from 17.3% in the first quarter of FY 2005 to 18.9% in the first quarter of FY 2006. The increase was primarily due to personnel costs relating to changes in our sales force, an increase in stock-based compensation expense related to the granting of RSUs to key sales management in the fourth quarter of FY 2005, and an increase in our investment in the training and education of sales and marketing personnel. The effect of these expenses on our margins is more pronounced this period as the first quarter is traditionally a lower revenue quarter. In addition, net earnings and diluted EPS were impacted by the expected increase in our effective tax rate of 36.5% in the first quarter ended July 31, 2005 compared to 33.1% in the first quarter ended July 31, 2004. We believe that under the current facts and circumstances that our effective tax rate for FY 2006 will be in the range of 22% to 27%."

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