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| SLTC > SEC Filings for SLTC > Form 10-Q/A on 10-Jul-2009 | All Recent SEC Filings |
10-Jul-2009
Quarterly Report
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 2008 2007
Customer A 26 % 45 % 23 % 28 %
Customer B 10 % * * 10 %
Customer C 13 % 11 % 11 % 10 %
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* Customer account was less than 10% of total revenues.
We have incurred significant losses since inception and, as of September 30,
2008, we had an accumulated deficit of approximately $246 million. We believe
our success depends on the growth of our customer base and the development of
the emerging configuration, pricing management, quoting solutions and the
contract management and compliance market.
In view of the rapidly changing nature of our business, we believe that
period-to-period comparisons of revenues and operating results are not
necessarily meaningful and should not be relied upon as indications of future
performance. Our operating history has been volatile and makes it difficult to
forecast future operating results. This was evidenced by the decline in revenue
in fiscal 2008 and 2007.
Because our services tend to be specific to each customer and how that
customer will use our products, and because each customer sets different
acceptance criteria, it is difficult for us to accurately forecast the amount of
revenue that will be recognized on any particular customer contract during any
quarter or fiscal year. As a result, we base our revenue estimates, and our
determination of associated expense levels, on our analysis of the likely
revenue recognition events under each contract during a particular period.
Although the value of customer contracts signed during any particular quarter or
fiscal year is not an accurate indicator of revenues that will be recognized
during any particular quarter or fiscal year, in general, if the value of
customer contracts signed in any particular quarter or fiscal year is lower than
expected, revenue recognized in future quarters and fiscal years will likely be
negatively effected.
Results of Operations:
Revenues
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 Change 2008 2007 Change
(in thousands, except percentages)
License $ 156 $ 1,091 $ (935 ) $ 912 $ 2,802 $ (1,890 )
Percentage of total revenues 5 % 27 % (86 %) 13 % 34 % (67 %)
Services $ 2,979 $ 2,891 $ 88 $ 5,990 $ 5,521 $ 469
Percentage of total revenues 95 % 73 % 3 % 87 % 66 % 8 %
Total revenues $ 3,135 $ 3,982 $ (847 ) $ 6,902 $ 8,323 $ (1,421 )
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License. For the three and six months ending September 30, 2008, license
revenues decreased by approximately $0.9 million and $1.9 million, respectively,
compared to the three and six months ending September 30, 2007. These declines
were due primarily to declines in license revenues from our sales configuration
business as we changed our focus to a more channel-driven model. We expect
license revenues to continue to fluctuate in future periods as a percentage of
total revenues and in absolute dollars depending on the number and size of new
license contracts.
Services. Services revenues are comprised of fees from consulting,
maintenance, training, subscription revenue and out-of pocket reimbursement.
During the three and six months ending September 30, 2008, services revenues
increased $0.1 million and $0.5 million, respectively, compared to the period
ending September 30, 2007. The increase primarily related to more subscription
revenues
provided by new subscription agreements in the CM business unit. Maintenance
revenues represented 45% and 62% of total services revenues for the three months
ended September 30, 2008, and 2007, respectively. Maintenance revenues
represented 46% and 63% of total services revenues for the six months ended
September 30, 2008 and 2007, respectively.
We expect services revenues to continue to fluctuate in future periods as a
percentage of total revenues and in absolute dollars. This will depend on the
number and size of new software implementations and follow-on services to our
existing customers. We expect maintenance revenue to fluctuate in absolute
dollars and as a percentage of services revenues with respect to the number of
maintenance renewals, and number and size of new contracts. In addition,
maintenance renewals are dependent upon customer satisfaction and the level of
need to make changes or upgrade versions of our software by our customers.
Fluctuations in services revenue are also due to timing of revenue recognition,
achievement of milestones, customer acceptance, changes in scope or renegotiated
terms, and additional services.
Cost of revenues
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 Change 2008 2007 Change
(in thousands, except percentages)
Cost of license revenues $ 51 $ 53 $ (2 ) $ 102 $ 112 $ (10 )
Percentage of license revenues 33 % 5 % (4 %) 11 % 4 % (9 %)
Cost of services revenues $ 1,159 $ 885 $ 274 $ 2,345 $ 1,903 $ 442
Percentage of services revenues 39 % 31 % 31 % 39 % 34 % 23 %
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Cost of License Revenues. Cost of license revenues consists of a fixed
allocation of our research and development costs, the costs of the product
media, duplication, packaging and delivery of our software products to our
customers, which may include documentation, shipping, and other data
transmission costs. We expect cost of license revenues to maintain a relatively
consistent level in absolute dollars in fiscal 2009.
Cost of Services Revenues. Cost of services revenues is comprised mainly of
salaries and related expenses of our services organization plus certain
allocated expenses. During the three and six months ended September 30, 2008,
these costs increased 31% and 23%, respectively, compared to the same periods in
2007 primarily due to an increase of approximately $0.3 million and $0.4
million, respectively, in the CM business unit due to the addition of headcount
and increased use of third-party consultants.
We expect cost of services revenues to fluctuate as a percentage of service
revenues and we plan to manage our investment in cost of services revenues in
absolute dollars over the next year as necessary to balance expense levels with
projected revenues.
Gross Margins
Gross margin percentages for services revenues and license revenues for the
respective periods are as follows:
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 2008 2007
License 67 % 95 % 89 % 96 %
Services 61 % 69 % 61 % 66 %
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Gross Margin - Licenses. Because we have certain license costs that are
fixed, margins will vary based on gross license revenue and product mix. We
experienced significantly lower license gross margins during the three and six
months ended September 30, 2008 compared to the three and six months ending
September 30, 2007 primarily due to lower license revenues and relatively flat
fixed license costs.
Gross Margin - Services. Gross margin decreased to 61% for both the three and
six months ended September 30, 2008, compared to 69% and 66% for the three and
six months ended September 30, 2007, respectively, primarily due to an increase
of approximately
$0.3 million and $0.4 million, respectively, in the CM business unit due to the
addition of headcount and increased use of third-party consultants.
We expect that our overall gross margins will continue to fluctuate due to
the timing of services and license revenue recognition and will continue to be
adversely affected by lower margins associated with services revenues. The
impact on our gross margin will depend on the mix of services we provide,
whether the services are performed by our in-house staff or third party
consultants, and the overall utilization rates of our professional services
organization.
Operating Expenses
Research and Development Expenses
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 Change 2008 2007 Change
(in thousands, except percentages)
Research and development $ 970 $ 1,139 $ (169 ) $ 2,117 $ 2,317 $ (200 )
Percentage of total revenues 31 % 28 % (15 %) 31 % 28 % (9 %)
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Research and development expenses consist primarily of salaries and related
costs of our engineering, quality assurance, technical publications efforts and
certain allocated expenses. Research and development expenses decreased slightly
during the three and six months ended September 30, 2008 compared to the three
and six months ended September 30, 2007 and were primarily attributable to
reductions in headcount and decreases in costs for facilities, overhead and
benefits.
Sales and Marketing
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 Change 2008 2007 Change
(in thousands, except percentages)
Sales and marketing $ 1,353 $ 1,136 $ 217 $ 3,114 $ 3,061 $ 53
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Sales and marketing expenses consist primarily of salaries and related costs
for our sales and marketing organization, sales commissions, expenses for travel
and entertainment, trade shows, public relations, collateral sales materials,
advertising and certain allocated expenses. For the three months ended
September 30, 2008, sales and marketing expenses increased compared to the same
period in 2007, largely due to increases in staff in our CM unit. For the six
months ended September 30, 2008, sales and marketing expenses were relatively
unchanged.
General and Administrative and Professional fees related to stock option
investigation
Three Months Ended Six Months Ended
September 30, September 30,
2008 2007 Change 2008 2007 Change
(in thousands, except percentages)
General and administrative $ 1,842 $ 1,360 $ 482 $ 2,974 $ 2,738 $ 236
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General and administrative expenses consist mainly of personnel and related
costs for general corporate functions, including finance, accounting, legal,
human resources, bad debt expense and certain allocated expenses. General and
administrative expenses increased significantly in the three and six months
ended September 30, 2008 compared to the same periods in 2007 primarily due to
higher utilization of outside services in the areas of accounting and legal.
Interest and Other Income (Expense), Net
Interest and other income (expense), net consists primarily of interest
earned on cash balances and short-term investments along with the impact of
currency fluctuations due to valuation adjustments, primarily in our Indian
subsidiary. During the three months ended September 30, 2008 and September 30,
2007, interest and other income (expense), net totaled approximately $(0.4)
million and $0.8 million, respectively. During the six months ended
September 30, 2008 and September 30, 2007, interest and other income (expense),
net totaled approximately $(0.6) million and $1.9 million, respectively. The
decreases were due primarily to lower cash balances, lower interest rates on our
cash and short-term investments balances and unfavorable foreign exchange rate
movements against the U.S. dollar.
Provision for Income Taxes
During the three months ended September 30, 2008 and 2007, we recorded income
tax provisions of approximately $19,000 and $38,000, respectively. During the
six months ended September 30, 2008 and 2007, we recorded income tax provisions
of approximately $37,000 and $244,000, respectively. These amounts related to
taxes due in foreign jurisdictions and nominal tax amounts for federal and
states taxes in the U.S.
Liquidity and Capital Resources
September 30, March 31,
2008 2008 Change
(in thousands)
Cash, cash equivalents and short-term investments $ 30,555 $ 35,213 $ (4,658 )
Working capital $ 25,043 $ 30,762 $ (5,719 )
Six Months Ended
September 30,
2008 2007
(in thousands)
Net cash used in operating activities $ (4,287 ) $ (6,576 )
Net cash provided by (used in) investing activities $ 6,251 $ (7,640 )
Net cash used in financing activities $ (400 ) -
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Net cash used in operating activities was $4.3 million for the six months
ended September 30, 2008, resulting primarily from our net loss of $5.1 million
and a $1.2 million increase in accounts receivable. These decreases in cash
flows from operating activities were partially offset by a $1.7 million increase
in deferred revenues.
Net cash used in operating activities was $6.6 million for the six months
ended September 30, 2007, resulting primarily from our net loss of $20.1 million
and a $0.8 million decrease in accounts payable. These decreases in cash flows
from operating activities were partially offset by a $14.3 million increase in
other accrued liabilities and long-term liabilities.
Net cash provided by investing activities was $6.3 million for the six months
ended September 30, 2008, which largely consisted of $6.4 million of net
proceeds of short-term investments. Net cash used in investing activities was
$7.6 million for the six months ended September 30, 2007, which largely
consisted of $8.6 million of net purchases of short-term investments, partially
offset by $1.0 million of proceeds of long-term investments.
As a result of current adverse financial market conditions, investments in
some financial instruments may pose risks arising from liquidity and credit
concerns. Although we believe our current investment portfolio has very little
risk of impairment, we cannot predict future market conditions or market
liquidity and can provide no assurance that our investment portfolio will remain
unimpaired.
Net cash used in financing activities was $0.4 million for the six months
ended September 30, 2008, which were principal payments on our note payable to
Versata. There were no financing activities for the six months ended
September 30, 2007.
Contractual Obligations
We had no significant commitments for capital expenditures as of
September 30, 2008. We expect to fund our future capital expenditures, liquidity
and strategic operating programs from a combination of available cash balances
and internally generated funds.
We have no outside debt and do not have any plans to enter into borrowing
arrangements. Our cash, cash equivalents, and short-term investment balances as
of September 30, 2008 are adequate to fund our operations through at least the
next twelve months.
We do not anticipate any significant capital expenditures, payments due on
long-term obligations, or other contractual obligations. However, management is
continuing to review our cost structure to minimize non-revenue generating
expenses and use of cash as we implement our planned business model changes.
This activity may result in additional restructuring charges or severance and
other benefits.
As of September 30, 2008, there were no other material changes to our
contractual obligations outside the ordinary course of business from those
disclosed in our Annual Report on Form 10-KSB for the year ended March 31, 2008.
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