UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~January~~October 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 0-12456

_________________

AMERICAN SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

_________________

Georgia

58-1098795

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification Number)

470 East Paces Ferry Road, N.E.

Atlanta

Georgia

30305

(Address of principal executive offices)

(Zip Code)

(404) 261-4381

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	AMSWA	NASDAQ Global Select Market

_________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, an emerging growth company or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “emerging growth company” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒☐

Accelerated Filer

☐☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Classes						Outstanding at ~~March 1,~~December 8, 2023
Class A Common Stock, $.10 par value						~~31,957,863~~32,344,863 Shares
Class B Common Stock, $.10 par value						1,821,587 Shares

Table of Contents

AMERICAN SOFTWARE, INC. AND SUBSIDIARIES

Form 10-Q

Quarter ended ~~January~~October 31, 2023

Index


Page No
Part I—Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~January~~October 31, 2023 and April 30, ~~2022~~2023	3

	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months ended ~~January~~October 31, 2023 and 2022	4

	Condensed Consolidated Statements of Shareholders' Equity for the Three ~~and~~ an ~~Nine~~d Six Months ended ~~January~~October 31, 2023 and 2022	5

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months ended ~~January~~October 31, 2023 and 2022	6

	Notes to Condensed Consolidated Financial Statements – Unaudited	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2224

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3537

Item 4.	Controls and Procedures	3638

Part II—Other Information

Item 1.	Legal Proceedings	3739

Item 1A.	Risk Factors	3739

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3739

Item 3.	Defaults Upon Senior Securities	3739

Item 4.	Mine Safety Disclosures	3739

Item 5.	Other Information	3739

Item 6.	Exhibits	3739

Signatures		3841

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

American Software, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)
January 31,
2023 April 30,
2022
ASSETS
Current assets:
Cash and cash equivalents $ 80,606 $ 110,690
Investments 23,847 16,826
Trade accounts receivable, less allowance for doubtful accounts of $380 at January 31, 2023 and $423 at April 30, 2022:
Billed 32,183 20,619
Unbilled 2,352 2,989
Prepaid expenses and other current assets 5,575 5,067
Total current assets 144,563 156,191
Investments—noncurrent 484 —
Property and equipment, net of accumulated depreciation of $32,047 at January 31, 2023 and $31,240 at April 30, 2022 6,502 3,654
Capitalized software, net of accumulated amortization of $42,988 at January 31, 2023 and $42,007 at April 30, 2022 605 1,586
Goodwill 29,558 25,888
Other intangibles, net of accumulated amortization of $13,829 at January 31, 2023 and $13,228 at April 30, 2022 2,376 147
Lease right of use assets 544 935
Deferred sales commissions—noncurrent 1,544 2,050
Other assets 3,888 2,384
Total assets $ 190,064 $ 192,835
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 4,007 $ 2,506
Accrued compensation and related costs 3,027 6,918
Dividends payable 3,716 3,700
Operating lease obligations 440 541
Other current liabilities 2,804 1,871
Deferred revenue 40,706 41,953
Total current liabilities 54,700 57,489
Deferred income taxes — 1,772
Long-term operating lease obligations 144 461
Other long-term liabilities 224 137
Total liabilities 55,068 59,859
Shareholders’ equity:
Common stock:
Class A, $.10 par value. Authorized 50,000,000 shares: 36,546,495 (31,957,863, net) shares issued and outstanding at January 31, 2023 and 36,405,695 (31,817,063, net) shares issued and outstanding at April 30, 2022 3,655 3,641
Class B, $.10 par value. Authorized 10,000,000 shares: 1,821,587 shares issued and outstanding at January 31, 2023 and April 30, 2022; convertible into Class A Common Shares on a one-for-one basis 182 182
Additional paid-in capital 177,532 171,948
Retained deficit (20,814) (17,236)
Class A treasury stock, 4,588,632 shares at January 31, 2023 and April 30, 2022, at cost (25,559) (25,559)
Total shareholders’ equity 134,996 132,976
Commitments and contingencies
Total liabilities and shareholders’ equity $ 190,064 $ 192,835


	October 31, 2023		April 30, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	62,971	$	90,059
Investments	20,917		23,451
Trade accounts receivable, less allowance for doubtful accounts of $254 at October 31, 2023 and $418 at April 30, 2023:
Billed	20,630		23,476
Unbilled	929		1,569
Prepaid expenses and other current assets	7,785		7,831
Current assets of discontinued operations	—		3,603
Total current assets	113,232		149,989
Investments—noncurrent	—		486
Property and equipment, net of accumulated depreciation of $33,005 at October 31, 2023 and $32,371 at April 30, 2023	6,228		6,444
Capitalized software, net of accumulated amortization of $43,445 at October 31, 2023 and $43,202 at April 30, 2023	149		391
Goodwill	46,417		29,558
Other intangibles, net of accumulated amortization of $15,092 at October 31, 2023 and $14,062 at April 30, 2023	11,915		2,143



Other assets	5,740		6,609

Total assets	$	183,681	$	195,620
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,080	$	2,131
Accrued compensation and related costs	2,845		4,077
Dividends payable	3,758		3,756

Other current liabilities	2,983		3,638
Deferred revenue	38,310		43,124
Current liabilities of discontinued operations	—		318
Total current liabilities	48,976		57,044


Other long-term liabilities	255		288

Total liabilities	49,231		57,332
Shareholders’ equity:
Common stock:
Class A, $.10 par value. Authorized 50,000,000 shares: 36,929,495 (31,910,287, net) shares issued and outstanding at October 31, 2023 and 36,907,242 (32,318,610, net) shares issued and outstanding at April 30, 2023	3,693		3,691
Class B, $.10 par value. Authorized 10,000,000 shares: 1,821,587 shares issued and outstanding at October 31, 2023 and April 30, 2023; convertible into Class A Common Shares on a one-for-one basis	182		182
Additional paid-in capital	186,100		182,722
Retained deficit	(25,152)		(22,748)
Class A treasury stock, 5,019,208 shares at October 31, 2023 and 4,588,632 shares at April 30, 2023, at cost	(30,373)		(25,559)
Total shareholders’ equity	134,450		138,288
Commitments and contingencies
Total liabilities and shareholders’ equity	$	183,681	$	195,620

See accompanying notes to condensed consolidated financial statements—unaudited.

Table of Contents

American Software, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)


		Three Months Ended January 31,				Nine Months Ended January 31,				Three Months Ended October 31,				Six Months Ended October 31,
		2023		2022		2023		2022				2023			2022		2023		2022
Revenue:
Revenues:											Revenues:
Subscription fees	Subscription fees	$	13,003	$	10,856	$	37,391	$	31,005		Subscription fees	$	13,358		$	12,326	$	27,121	$	24,388
License	License	1,017		992		2,025		2,289			License	229			688		518		1,008
Professional services and other	Professional services and other	8,342		11,443		27,945		31,751			Professional services and other	4,003			5,435		7,689		10,929
Maintenance	Maintenance	8,649		9,131		26,384		27,859			Maintenance	8,100			8,830		16,263		17,735
Total revenue		31,011		32,422		93,745		92,904
Cost of revenue:
Total revenues											Total revenues	25,690			27,279		51,591		54,060
Cost of revenues:											Cost of revenues:
Subscription fees	Subscription fees	4,005		3,431		11,682		10,059			Subscription fees	4,607			4,059		8,824		7,677
License	License	358		240		541		597			License	93			94		165		183
Professional services and other	Professional services and other	6,303		8,012		20,454		22,499			Professional services and other	2,856			3,490		5,916		7,184
Maintenance	Maintenance	1,607		1,789		4,757		5,509			Maintenance	1,733			1,577		3,428		3,150
Total cost of revenue		12,273		13,472		37,434		38,664
Total cost of revenues											Total cost of revenues	9,289			9,220		18,333		18,194
Gross margin	Gross margin	18,738		18,950		56,311		54,240			Gross margin	16,401			18,059		33,258		35,866
Research and development	Research and development	4,402		4,602		13,220		13,304			Research and development	4,269			4,364		8,518		8,818
Sales and marketing	Sales and marketing	5,325		5,222		16,934		17,234			Sales and marketing	5,313			5,229		11,044		10,633
General and administrative	General and administrative	6,030		5,834		17,796		15,844			General and administrative	5,461			5,884		10,922		11,467
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	25		53		81		159			Amortization of acquisition-related intangibles	129			32		153		56
Total operating expenses	Total operating expenses	15,782		15,711		48,031		46,541			Total operating expenses	15,172			15,509		30,637		30,974
Operating income	Operating income	2,956		3,239		8,280		7,699			Operating income	1,229			2,550		2,621		4,892
Other income (loss):	Other income (loss):										Other income (loss):
Interest income	Interest income	701		97		1,274		287			Interest income	1,073			364		2,161		573
Other, net	Other, net	633		(5)		34		1,172			Other, net	(1,650)			(509)		(852)		(599)
Earnings before income taxes	Earnings before income taxes	4,290		3,331		9,588		9,158			Earnings before income taxes	652			2,405		3,930		4,866
Income tax expense (benefit)		950		391		2,034		(43)
Income tax expense											Income tax expense	31			489		695		975
Net earnings from continuing operations											Net earnings from continuing operations	$	621		$	1,916	$	3,235	$	3,891
Discontinued operations (Note F)											Discontinued operations (Note F)
Earnings from operations of discontinued operations											Earnings from operations of discontinued operations	79			241		255		387
Gain on disposal of discontinued operations											Gain on disposal of discontinued operations	2,124			—		2,124		—
Income tax expense											Income tax expense	461			52		503		109
Earnings from discontinued operations, net of income taxes											Earnings from discontinued operations, net of income taxes	1,742			189		1,876		278
Net earnings	Net earnings	$	3,340	$	2,940	$	7,554	$	9,201		Net earnings	$	2,363		$	2,105	$	5,111	$	4,169
Earnings per common share (a):
Earnings per common share from continuing operations (a):											Earnings per common share from continuing operations (a):
Basic											Basic	$	0.02		$	0.06	$	0.10	$	0.11
Diluted											Diluted	$	0.02		$	0.06	$	0.10	$	0.11
Earnings per common share from discontinued operations (a):											Earnings per common share from discontinued operations (a):
Basic											Basic	$	0.05		$	—	$	0.05	$	0.01
Diluted											Diluted	$	0.05		$	—	$	0.05	$	0.01
Earnings per common share: (a)											Earnings per common share: (a)
Basic	Basic	$	0.10	$	0.09	$	0.22	$	0.28		Basic	$	0.07		$	0.06	$	0.15	$	0.12
Diluted	Diluted	$	0.10	$	0.09	$	0.22	$	0.27		Diluted	$	0.07		$	0.06	$	0.15	$	0.12
Cash dividends declared per common share	Cash dividends declared per common share	$	0.11	$	0.11	$	0.33	$	0.33		Cash dividends declared per common share	$	0.11		$	0.11	$	0.22	$	0.22
Shares used in the calculation of earnings per common share:	Shares used in the calculation of earnings per common share:										Shares used in the calculation of earnings per common share:
Basic	Basic	33,759		33,490		33,711		33,293			Basic	34,071			33,720		34,113		33,688
Diluted	Diluted	33,965		34,578		34,006		34,325			Diluted	34,094			34,072		34,127		34,040

______________

(a)Basic per share amounts are the same for Class A and Class B shares. Diluted per share amounts for Class A shares are shown above. Diluted earnings per share for Class B shares under the two-class method are ~~$0.10~~$0.07 and ~~$0.09~~$0.06 for the three months ended ~~January~~October 31, 2023 and 2022, and ~~$0.22~~$0.15 and ~~$0.28~~$0.12 for the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022. See Note D to the ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements—unaudited.

Table of Contents

American Software, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(in thousands, except share data)


		Common stock						Additional paid-in capital		Retained deficit		Treasury stock		Total shareholders’ equity			Common stock						Additional paid-in capital		Retained deficit		Treasury stock		Total shareholders’ equity
		Class A			Class B												Class A			Class B
For the Three Months Ended January 31, 2022		Shares	Amount		Shares	Amount
For the Three Months Ended October 31, 2022																For the Three Months Ended October 31, 2022	Shares	Amount		Shares	Amount		Additional paid-in capital		Retained deficit		Treasury stock		Total shareholders’ equity

Balance at October 31, 2021		36,174,808	$	3,617	1,821,587	$	182	$	166,969	$	(16,362)	$	(25,559)	$	128,847
Balance at July 31, 2022																Balance at July 31, 2022	36,448,695	$	3,645	1,821,587	$	182	$	173,721	$	(19,812)	$	(25,559)	$	132,177
Proceeds from stock options exercised	Proceeds from stock options exercised	132,887	13		—	—		1,678		—		—		1,691		Proceeds from stock options exercised	54,800	5		—	—		669		—		—		674
Stock-based compensation	Stock-based compensation	—	—		—	—		1,093		—		—		1,093		Stock-based compensation	—	—		—	—		1,343		—		—		1,343
Net earnings	Net earnings	—	—		—	—		—		2,940		—		2,940		Net earnings	—	—		—	—		—		2,105		—		2,105
Dividends declared*	Dividends declared*	—	—		—	—		—		(3,692)		—		(3,692)		Dividends declared*	—	—		—	—		—		(3,711)		—		(3,711)
Balance at January 31, 2022		36,307,695	$	3,630	1,821,587	$	182	$	169,740	$	(17,114)	$	(25,559)	$	130,879
For the Three Months Ended January 31, 2023
Balance at October 31, 2022	Balance at October 31, 2022	36,503,495	$	3,650	1,821,587	$	182	$	175,733	$	(20,438)	$	(25,559)	$	133,568	Balance at October 31, 2022	36,503,495	$	3,650	1,821,587	$	182	$	175,733	$	(21,418)	$	(25,559)	$	132,588
For the Three Months Ended October 31, 2023																For the Three Months Ended October 31, 2023
Balance at July 31, 2023																Balance at July 31, 2023	36,929,495	$	3,693	1,821,587	$	182	$	184,520	$	(23,757)	$	(25,559)	$	139,079

Stock-based compensation																Stock-based compensation	—	—		—	—		1,580		—		—		1,580
Purchases of common stock																Purchases of common stock	—	—		—	—		—		—		(4,814)		(4,814)
Net earnings																Net earnings	—	—		—	—		—		2,363		—		2,363
Dividends declared																Dividends declared	—	—		—	—		—		(3,758)		—		(3,758)
Balance at October 31, 2023																Balance at October 31, 2023	36,929,495	$	3,693	1,821,587	$	182	$	186,100	$	(25,152)	$	(30,373)	$	134,450
																	Common stock						Additional paid-in capital		Retained deficit		Treasury stock		Total shareholders’ equity
For the Six Months Ended October 31, 2022																For the Six Months Ended October 31, 2022	Class A			Class B
																	Shares	Amount		Shares	Amount
Balance at April 30, 2022																Balance at April 30, 2022	36,405,695	$	3,641	1,821,587	$	182	$	171,948	$	(18,171)	$	(25,559)	$	132,041
Proceeds from stock options exercised*	Proceeds from stock options exercised*	43,000	5		—	—		505		—		—		510		Proceeds from stock options exercised*	97,800	9		—	—		1,136		—		—		1,145
Stock-based compensation	Stock-based compensation	—	—		—	—		1,294		—		—		1,294		Stock-based compensation	—	—		—	—		2,649		—		—		2,649
Net earnings	Net earnings	—	—		—	—		—		3,340		—		3,340		Net earnings	—	—		—	—		—		4,169		—		4,169
Dividends declared*	Dividends declared*	—	—		—	—		—		(3,716)		—		(3,716)		Dividends declared*	—	—		—	—		—		(7,416)		—		(7,416)
Balance at January 31, 2023		36,546,495	$	3,655	1,821,587	$	182	$	177,532	$	(20,814)	$	(25,559)	$	134,996
Balance at October 31, 2022																Balance at October 31, 2022	36,503,495	$	3,650	1,821,587	$	182	$	175,733	$	(21,418)	$	(25,559)	$	132,588
For the Six Months Ended October 31, 2023																For the Six Months Ended October 31, 2023
Balance at April 30, 2023																Balance at April 30, 2023	36,907,242	$	3,691	1,821,587	$	182	$	182,722	$	(22,748)	$	(25,559)	$	138,288
Proceeds from stock options exercised*																Proceeds from stock options exercised*	22,253	2		—	—		244		—		—		246
Stock-based compensation																Stock-based compensation	—	—		—	—		3,134		—		—		3,134
Purchases of common stock																Purchases of common stock	—	—		—	—		—		—		(4,814)		(4,814)
Net earnings																Net earnings	—	—		—	—		—		5,111		—		5,111
Dividends declared*																Dividends declared*	—	—		—	—		—		(7,515)		—		(7,515)
Balance at October 31, 2023																Balance at October 31, 2023	36,929,495	$	3,693	1,821,587	$	182	$	186,100	$	(25,152)	$	(30,373)	$	134,450

*Amounts adjusted for rounding

Common stock Additional
paid-in
capital Retained deficit Treasury
stock Total
shareholders’
equity
Class A Class B
For the Nine Months Ended January 31, 2022 Shares Amount Shares Amount
Balance at April 30, 2021 35,629,566 3,563 1,821,587 182 159,492 (15,287) (25,559) 122,391
Proceeds from stock options exercised 678,129 67 — — 7,338 — — 7,405
Stock-based compensation — — — — 2,910 — — 2,910
Net earnings — — — — — 9,201 — 9,201
Dividends declared* — — — — — (11,028) — (11,028)
Balance at January 31, 2022 36,307,695 3,630 1,821,587 182 169,740 (17,114) (25,559) 130,879
For the Nine Months Ended January 31, 2023
Balance at April 30, 2022 36,405,695 3,641 1,821,587 182 171,948 (17,236) (25,559) 132,976
Proceeds from stock options exercised* 140,800 14 — — 1,640 — — 1,654
Stock-based compensation — — — — 3,944 — — 3,944
Net earnings — — — — — 7,554 — 7,554
Dividends declared* — — — — — (11,132) — (11,132)
Balance at January 31, 2023 36,546,495 3,655 1,821,587 182 177,532 (20,814) (25,559) 134,996

*Amounts adjusted for rounding

See accompanying notes to condensed consolidated financial ~~statements—unaudited.~~

statements

Table of Contents

American Software, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


		Nine Months Ended January 31,					Six Months Ended October 31,
		2023		2022			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	7,554	$	9,201	Net earnings	$	5,111	$	4,169
Earnings from discontinued operations, net of tax						Earnings from discontinued operations, net of tax	(1,876)		(278)
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:					Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	2,389		3,170		Depreciation and amortization	2,007		1,601
(Gain) on sale of fixed assets		—		(36)

Stock-based compensation expense	Stock-based compensation expense	3,944		2,910		Stock-based compensation expense	3,134		2,633
Net gain on investments		(92)		(1,073)
Net loss on investments						Net loss on investments	727		331
Deferred income taxes	Deferred income taxes	(3,377)		(167)		Deferred income taxes	1,023		(1,999)
Gain on sale of discontinued operations						Gain on sale of discontinued operations	(2,124)		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Purchases of trading securities	Purchases of trading securities	(8,284)		(215)		Purchases of trading securities	(3,958)		(7,094)
Proceeds from maturities and sales of trading securities	Proceeds from maturities and sales of trading securities	870		831		Proceeds from maturities and sales of trading securities	6,251		784
Accounts receivable, net	Accounts receivable, net	(10,926)		(780)		Accounts receivable, net	6,845		(3,757)

Prepaid expenses and other assets	Prepaid expenses and other assets	189		(653)		Prepaid expenses and other assets	(2,004)		112
Accounts payable and other liabilities	Accounts payable and other liabilities	(1,486)		(91)		Accounts payable and other liabilities	(3,822)		(2,379)
Deferred revenue	Deferred revenue	(1,247)		953		Deferred revenue	(4,878)		(5,945)
Net cash (used in) provided by operating activities		(10,466)		14,050
Net cash provided by (used in) operating activities of continuing operations						Net cash provided by (used in) operating activities of continuing operations	6,436		(11,822)
Net cash provided by operating activities of discontinued operations						Net cash provided by operating activities of discontinued operations	1,618		561
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	8,054		(11,261)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Purchases of property and equipment, net of disposals	Purchases of property and equipment, net of disposals	(3,655)		(801)		Purchases of property and equipment, net of disposals	(490)		(2,706)
Purchase of business		(6,500)		—
Net cash (used in) investing activities		(10,155)		(801)

Purchase of business, net of cash acquired						Purchase of business, net of cash acquired	(25,032)		(6,500)
Net cash used in investing activities of continuing operations						Net cash used in investing activities of continuing operations	(25,522)		(9,206)
Net cash provided by investing activities of discontinued operations						Net cash provided by investing activities of discontinued operations	1,825		—
Net cash used in investing activities						Net cash used in investing activities	(23,697)		(9,206)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from exercise of stock options	Proceeds from exercise of stock options	1,654		7,405		Proceeds from exercise of stock options	246		1,145
Purchases of common stock						Purchases of common stock	(4,814)		—
Dividends paid	Dividends paid	(11,117)		(10,957)		Dividends paid	(7,514)		(7,406)
Net cash (used in) financing activities		(9,463)		(3,552)
Net cash used in financing activities of continuing operations						Net cash used in financing activities of continuing operations	(12,082)		(6,261)

Net change in cash and cash equivalents	Net change in cash and cash equivalents	(30,084)		9,697		Net change in cash and cash equivalents	(27,725)		(26,728)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	110,690		88,658		Cash and cash equivalents at beginning of period	90,696		110,690
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	80,606	$	98,355	Cash and cash equivalents at end of period	$	62,971	$	83,962

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Income taxes, net of refunds	Income taxes, net of refunds	$	5,441	$	180	Income taxes, net of refunds	2,498		2,997
Supplemental disclosures of noncash operating, investing and financing activities:	Supplemental disclosures of noncash operating, investing and financing activities:					Supplemental disclosures of noncash operating, investing and financing activities:
Accrual of dividends payable	Accrual of dividends payable	$	3,716	$	3,689	Accrual of dividends payable	3,758		3,711

See accompanying notes to condensed consolidated financial statements—unaudited.

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AMERICAN SOFTWARE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—Unaudited

~~January~~October 31, 2023

A. Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements ("condensed consolidated financial statements") have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete consolidated financial statements. In the opinion of our management, these ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position at ~~January~~October 31, 2023, results of operations for the three and ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, consolidated statements of shareholders’ equity for the three and ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, and cash flows for the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022. The Company’s results for the three months ended ~~January~~October 31, 2023 are not necessarily indicative of the results expected for the full year. You should read these statements in conjunction with our audited consolidated financial statements and management’s discussion and analysis and results of operations included in our Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended April 30, ~~2022.~~2023. The terms “fiscal ~~2023”~~2024” and “fiscal ~~2022”~~2023” refer to our fiscal years ending April 30, ~~2023~~2024 and ~~2022,~~2023, respectively.

The preparation of these ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Note 1 in the Notes to the ~~Consolidated Financial Statements~~consolidated financial statements for fiscal ~~2022~~2023 contained in the Annual Report describes the significant accounting policies that we have used in preparing our ~~Consolidated Financial Statements.~~consolidated financial statements. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to revenue/reserves and allowances. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could differ materially from these estimates under different assumptions or conditions.

Principles of Consolidation

The accompanying ~~unaudited Condensed Consolidated Financial Statements~~condensed consolidated financial statements include the accounts of American Software, Inc. (“American Software”) and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

In September 2023, we disposed of our 100% equity interest in our information technology consulting firm, The Proven Method ("TPM") for approximately $2.1 million in cash. For further information regarding the transaction, see Note F to the accompanying consolidated financial statements.

Recent Accounting Pronouncements

Accounting Standards Update ("ASU") 2021-08 — In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606"), at fair value on the acquisition date. ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts, which should generally result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. This update also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. ~~Early adoption is permitted, including adoption in an interim period. Adoption during an interim period requires retrospective application~~The Company adopted this update prospectively on May 1, 2023 and it did not have a material impact to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application. We are evaluating the potential effects of ASU 2021-08 on our condensed consolidated financial statements.

B. Revenue Recognition

In accordance with ~~the~~ ASU ~~No.~~ 2014-09, Revenue from Contracts with Customers (Topic 606), we recognize revenue when we transfer control of the promised goods or services to our clients, in an amount that reflects the consideration we expect to

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receive, in exchange for those goods or services. We derive our revenue from software licenses, maintenance services,

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consulting, implementation and training services, and Software-as-a-Service (“SaaS”), which includes a subscription to our software, as well as support, hosting and managed services.

The Company recognizes revenue in accordance with the following steps:

Step 1 - Identification of the Contract with the Client

Step 2 - Identification of Promised Goods and Services and Evaluation of Whether the Promised Goods and Services are Distinct Performance Obligations

Step 3 - Determination of the Transaction Price

Step 4 - Allocation of the Transaction Price to Distinct Performance Obligations

Step 5 - Attribution of Revenue for Each Distinct Performance Obligation

Nature of Products and Services

Subscription. Subscription fees include SaaS revenue for the right to use the software for a limited period of time in an environment hosted by the Company or by a ~~third party.~~third-party. The client accesses and uses the software on an ~~as needed~~as-needed basis over the Internet or via a dedicated line; however, the client has no right to take delivery of the software. The underlying arrangements typically include a single fee for the service that is billed monthly, quarterly or annually. The Company’s SaaS solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the client. Revenue from a SaaS solution is generally recognized ratably over the term of the arrangement.

License. Our perpetual software licenses provide the client with a right to use the software as it exists at the time of purchase. We recognize revenue for distinct software licenses once the license period has begun and we have made the software available to the client. Our perpetual software licenses are sold with maintenance under which we provide clients with telephone consulting, product updates on a when available basis, and releases of new versions of products previously purchased by the client, as well as error reporting and correction services.

Professional Services and Other. Our services revenue consists of fees generated from consulting, implementation and training services, including reimbursements of out-pocket expenses in connection with our services. Services are typically optional to our clients, and are distinct from our software. Fees for our services are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. We believe the output method of hours worked provides the best depiction of the transfer of our services since the client is receiving the benefit from our services as the work is performed. The total amount of expense reimbursement included in professional services and other revenue was immaterial for the three and ~~nine~~six months ended ~~January~~October 31, 2023 and ~~January 31,~~ 2022.

Maintenance. Revenue is derived from maintenance under which we provide clients with telephone consulting, product updates and releases of new versions of products previously purchased by the client on a when ~~and if available~~and-if-available basis, as well as error reporting and correction services. Maintenance for perpetual licenses is renewable, generally on an annual basis, at the option of the client. Maintenance terms typically range from one to three years. Revenue related to maintenance is generally paid in advance and recognized ratably over the term of the agreement since the Company is standing ready to provide a series of maintenance services that are substantially the same each period over the term; therefore, time is the best measure of progress. Support services for subscriptions are included in the subscription fees and are recognized as a component of such fees.

Indirect Channel Revenue. We record revenue from sales made through the indirect sales channels on a gross basis, because we control the goods or services and act as the principal in the transaction. In reaching this determination, we evaluated sales through our indirect channel on a case-by-case basis and considered a number of factors including indicators of control such as the party having the primary responsibility to provide specified goods or services and the party having discretion in establishing prices.

Sales Taxes. We account for sales taxes collected from clients on a net basis.

Contract Balances. Timing of invoicing to clients may differ from timing of revenue recognition and these timing differences result in unbilled accounts receivables or contract liabilities (deferred revenue) on the Company’s Condensed Consolidated Balance Sheets. Fees for our software licenses are generally due within 30 days of contract execution. We have an established history of collecting under the terms of our software license contracts without providing refunds or concessions to our clients. SaaS solutions and maintenance are typically billed in advance on a monthly, quarterly, or annual basis. Services are typically billed as performed. In instances where the timing of revenue recognition differs from the timing of invoicing, we

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have determined that our contracts generally do not include significant financing component. The primary purpose of our

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invoicing terms is to provide clients with predictable ways to purchase our software and services, not to provide or receive financing. Additionally, we are applying the practical expedient to exclude any financing component from consideration for any contracts with payment terms of one year or less since we rarely offer terms extending beyond one year. The consideration in our client contracts is fixed.

We have an unconditional right to consideration for all goods and services transferred to our clients. That unconditional right to consideration is reflected in billed and unbilled accounts receivable in the accompanying Condensed Consolidated Balance Sheets in accordance with Topic 606.

Deferred revenue consists of amounts collected prior to having completed the performance of maintenance, SaaS, hosting, and managed services. We typically invoice clients for cloud subscription and support fees in advance on a monthly, quarterly or annual basis, with payment due at the start of the cloud subscription or support term. During the ~~three~~six months ended ~~January~~October 31, 2023, we recognized ~~$17.4 million of revenue that was included in the deferred revenue balance as of October 31, 2022. During the nine months ended January 31, 2023, we recognized $37.6~~$30.3 million of revenue that was included in the deferred revenue balance as of April 30, ~~2022.~~2023.

January 31,
2023 April 30,
2022
(in thousands)
Deferred revenue, current 40,706 41,953
Deferred revenue, long-term — —
Total deferred revenue $ 40,706 $ 41,953


	October 31, 2023		April 30, 2023
	(in thousands)




Deferred revenue	$	38,310	$	43,124

Remaining Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of account under Topic 606. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the client. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract. Remaining performance obligations represent the transaction price of orders for which products have not been delivered or services have not been performed. As of ~~January~~October 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately ~~$119~~$113.0 million. The Company expects to recognize revenue on approximately 53% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

Disaggregated Revenue. The Company disaggregates revenue from contracts with clients by geography, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The Company’s revenue by geography is as follows:


		Three Months Ended January 31,				Nine Months Ended January 31,					Three Months Ended October 31,				Six Months Ended October 31,
		2023		2022		2023		2022			2023		2022		2023		2022
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
Revenue:
Revenues:										Revenues:
Domestic	Domestic	$	24,662	$	27,334	$	75,891	$	77,958	Domestic	$	20,058	$	21,411	$	40,606	$	42,555
International	International	6,349		5,088		17,854		14,946		International	5,632		5,868		10,985		11,505
		$	31,011	$	32,422	$	93,745	$	92,904		$	25,690	$	27,279	$	51,591	$	54,060

Contract Costs. The Company capitalizes the incremental costs of obtaining a contract with a client if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a client that it would not have incurred if the contract had not been obtained (for example, a sales commission). The Company capitalizes the costs incurred to fulfill a contract only if those costs meet all of the following criteria:

•The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

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•The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

•The costs are expected to be recovered.

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Certain sales commissions incurred by the Company were determined to be incremental costs to obtain the related contracts, which are deferred and amortized ratably over the economic benefit period. These deferred commission costs are classified as current or non-current based on the timing of when the Company expects to recognize the expense. The current and non-current portions of deferred commissions are included in prepaid expenses and other current assets and ~~deferred sales commissions—noncurrent,~~other assets, respectively, in the Company’s Condensed Consolidated Balance Sheets. Total deferred commissions at ~~January~~October 31, 2023 and April 30, ~~2022~~2023 were $2.9 million and ~~$3.4~~$3.0 million, respectively. Amortization of sales commissions was $0.4 million and ~~$1.2~~$0.8 million for the three and ~~nine~~six months ended ~~January~~October 31, 2023 ~~respectively,~~ and ~~$0.5~~$0.4 million and ~~$1.5~~$0.8 million for the three and ~~nine~~six months ended ~~January~~October 31, 2022, ~~respectively,~~ which is included in "Sales and marketing" expense in the accompanying Condensed Consolidated Statements of Operations. No impairment losses were recognized during the periods.

C. Declaration of Dividend Payable

On ~~November 16, 2022,~~August 23, 2023, our Board of Directors declared a quarterly cash dividend of ~~$0.11~~$0.11 per share of our Class A and Class B common stock. The cash dividend was payable on ~~February 17,~~December 1, 2023 to Class A and Class B shareholders of record at the close of business on ~~February 3,~~November 11, 2023.

D. Earnings Per Common Share

The Company has two classes of common stock. Class B common shares are convertible into Class A common shares at any time, on a one-for-one basis. Under the Company’s Articles of Incorporation, if dividends are declared, holders of Class A common shares shall receive a $0.05 dividend per share prior to the Class B common shares receiving any dividend and holders of Class A common shares shall receive a dividend at least equal to Class B common shares dividends on a per share basis. As a result, the Company has computed the earnings per share in compliance with the Earnings Per Share Topic of the FASB ASC 260, Earnings Per Share, which requires companies that have multiple classes of equity securities to use the “two-class” method in computing earnings per share.

For the Company’s basic earnings per share calculation, the Company uses the “two-class” method. Basic earnings per share are calculated by dividing net earnings attributable to each class of common stock by the weighted average number of shares outstanding. All undistributed earnings are allocated evenly between Class A and B common shares in the earnings per share calculation to the extent that earnings equal or exceed $0.05 per share. This allocation is based on management’s judgment after considering the dividend rights of the two-classes of common stock, the control of the Class B shareholders and the convertibility rights of the Class B shares to Class A shares. If Class B shares convert to Class A shares during the period, the distributed net earnings for Class B shares is calculated using the weighted average common shares outstanding during the period.

Diluted earnings per share is calculated similarly to basic earnings per share, except that the calculation ~~includes the~~is adjusted to give effect to dilutive ~~effect of the assumed exercise of~~elements including stock options and restricted stock units ("RSUs") issuable under the ~~Company’s~~Company's stock incentive ~~plans.~~plans, to the extent these are dilutive. For the Company’s diluted earnings per share calculation for Class A shares, the Company uses the “if-converted” method. This calculation assumes that all Class B common shares are converted into Class A common shares and, as a result, assumes there are no holders of Class B common shares to participate in undistributed earnings.

For the Company’s diluted earnings per share calculation for Class B shares, the Company uses the “two-class” method. This calculation does not assume that all Class B common shares are converted into Class A common shares. In addition, this method assumes the dilutive effect of Class A stock options and RSUs were converted to Class A shares and the undistributed earnings are allocated evenly to both Class A and B shares including Class A shares issued pursuant to those converted stock options. This allocation is based on management’s judgment after considering the dividend rights of the two-classes of common stock, the control of the Class B shareholders and the convertibility rights of the Class B shares into Class A shares.

The following tables set forth the computation of basic earnings per common share and diluted earnings per common share (in thousands except for per share amounts):

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Basic earnings per common share:


		Three Months Ended January 31, 2023				Nine Months Ended January 31, 2023					Three Months Ended October 31, 2023				Six Months Ended October 31, 2023
		Class A Common Shares		Class B Common Shares		Class A Common Shares		Class B Common Shares			Class A Common Shares		Class B Common Shares		Class A Common Shares		Class B Common Shares
Distributed earnings	Distributed earnings	$	0.11	$	0.11	$	0.33	$	0.33	Distributed earnings	$	0.11	$	0.11	$	0.22	$	0.22
Undistributed losses	Undistributed losses	(0.01)		(0.01)		(0.11)		(0.11)		Undistributed losses	(0.04)		(0.04)		(0.07)		(0.07)
Total from continuing operations										Total from continuing operations	$	0.02	$	0.07	$	0.10	$	0.15
Total from discontinued operations										Total from discontinued operations	$	0.05	$	—	$	0.05	$	—
Total	Total	$	0.10	$	0.10	$	0.22	$	0.22	Total	$	0.07	$	0.07	$	0.15	$	0.15
Distributed earnings	Distributed earnings	$	3,515	$	201	$	10,532	$	601	Distributed earnings	$	3,556	$	201	$	7,114	$	401
Undistributed losses	Undistributed losses	(355)		(21)		(3,385)		(194)		Undistributed losses	(1,319)		(75)		(2,276)		(128)
Total from continuing operations										Total from continuing operations	$	495	$	126	$	2,962	$	273
Total from discontinued operations										Total from discontinued operations	$	1,742	$	—	$	1,876	$	—
Total	Total	$	3,160	$	180	$	7,147	$	407	Total	$	2,237	$	126	$	4,838	$	273
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	31,937		1,822		31,890		1,822		Basic weighted average common shares outstanding	32,249		1,822		32,291		1,822

											Three Months Ended October 31, 2022				Six Months Ended October 31, 2022
											Class A Common Shares		Class B Common Shares		Class A Common Shares		Class B Common Shares
Distributed earnings										Distributed earnings	$	0.11	$	0.11	$	0.22	$	0.22
Undistributed losses										Undistributed losses	(0.05)		(0.05)		(0.10)		(0.10)
Total from continuing operations										Total from continuing operations	$	0.06	$	0.06	$	0.11	$	0.12
Total from discontinued operations										Total from discontinued operations	$	—	$	—	$	0.01	$	—
Total										Total	$	0.06	$	0.06	$	0.12	$	0.12
Distributed earnings										Distributed earnings	$	3,511	$	200	$	7,017	$	400
Undistributed losses										Undistributed losses	(1,519)		(87)		(3,072)		(176)
Total from continuing operations										Total from continuing operations	$	1,803	$	113	$	3,667	$	224
Total from discontinued operations										Total from discontinued operations	$	189	$	—	$	278	$	—
Total										Total	$	1,992	$	113	$	3,945	$	224
Basic weighted average common shares outstanding										Basic weighted average common shares outstanding	31,898		1,822		31,866		1,822

Three Months Ended
January 31, 2022 Nine Months Ended
January 31, 2022
Class A
Common
Shares Class B
Common
Shares Class A
Common
Shares Class B
Common
Shares
Distributed earnings $ 0.11 $ 0.11 $ 0.33 $ 0.33
Undistributed losses (0.02) (0.02) (0.05) (0.05)
Total $ 0.09 $ 0.09 $ 0.28 $ 0.28
Distributed earnings $ 3,488 $ 201 $ 10,426 $ 602
Undistributed losses (708) (41) (1,727) (100)
Total $ 2,780 $ 160 $ 8,699 $ 502
Basic weighted average common shares outstanding 31,668 1,822 31,471 1,822

Diluted EPS for Class A Common Shares Using the If-Converted Method

Three Months Ended ~~January 31, 2023~~

Undistributed
& Distributed
Earnings
to Class A
Common
Shares Class A
Common
Shares EPS*
Per Basic $ 3,160 31,937 $ 0.10
Common Stock Equivalents 206
3,160 32,143 0.10
Class B Common Share Conversion* 180 1,822
Diluted EPS for Class A Common Shares $ 3,340 33,965 $ 0.10

~~Nine Months Ended January~~October 31, 2023

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		Undistributed & Distributed Earnings to Class A Common Shares		Class A Common Shares	EPS*			Undistributed & Distributed Earnings to Class A Common Shares		Class A Common Shares	EPS*
Per Basic*		$	7,147	31,890	$	0.22
Per Basic							Per Basic	$	2,237	32,249	$	0.07
Common Stock Equivalents	Common Stock Equivalents	—		294			Common Stock Equivalents	—		23	—
		7,147		32,184	0.22			2,237		32,272	0.07
Class B Common Share Conversion*	Class B Common Share Conversion*	407		1,822			Class B Common Share Conversion*	126		1,822	—
Diluted EPS for Class A Common Shares	Diluted EPS for Class A Common Shares	$	7,554	34,006	$	0.22	Diluted EPS for Class A Common Shares	$	2,363	34,094	$	0.07

Six Months Ended October 31, 2023


	Undistributed & Distributed Earnings to Class A Common Shares		Class A Common Shares	EPS*
Per Basic	$	4,838	32,291	$	0.15
Common Stock Equivalents	—		14	—
	4,838		32,305	0.15
Class B Common Share Conversion*	273		1,822	—
Diluted EPS for Class A Common Shares	$	5,111	34,127	$	0.15

Three Months Ended ~~January~~October 31, 2022


		Undistributed & Distributed Earnings to Class A Common Shares		Class A Common Shares	EPS*			Undistributed & Distributed Earnings to Class A Common Shares		Class A Common Shares	EPS*
Per Basic	Per Basic	$	2,780	31,668	$	0.09	Per Basic	$	1,992	31,898	$	0.06
Common Stock Equivalents	Common Stock Equivalents	—		1,088	—		Common Stock Equivalents	—		352	—
		2,780		32,756	0.09			1,992		32,250	0.06
Class B Common Share Conversion	Class B Common Share Conversion	160		1,822	—		Class B Common Share Conversion	113		1,822	—
Diluted EPS for Class A Common Shares	Diluted EPS for Class A Common Shares	$	2,940	34,578	$	0.09	Diluted EPS for Class A Common Shares	$	2,105	34,072	$	0.06

~~Nine~~Six Months Ended ~~January~~October 31, 2022

Undistributed
& Distributed
Earnings
to Class A
Common
Shares Class A
Common
Shares EPS*
Per Basic $ 8,699 31,471 $ 0.28
Common Stock Equivalents — 1,032 —
8,699 32,503 0.27
Class B Common Share Conversion 502 1,822 —
Diluted EPS for Class A Common Shares $ 9,201 34,325 $ 0.27

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	Undistributed & Distributed Earnings to Class A Common Shares		Class A Common Shares	EPS*
Per Basic	$	3,945	31,866	$	0.12
Common Stock Equivalents	—		352	—
	3,945		32,218	0.12
Class B Common Share Conversion*	224		1,822	—
Diluted EPS for Class A Common Shares	$	4,169	34,040	$	0.12

Diluted EPS for Class B Common Shares Using the Two-Class Method

Three Months Ended ~~January~~October 31, 2023

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		Undistributed & Distributed Earnings to Class B Common Shares		Class B Common Shares	EPS*			Undistributed & Distributed Earnings to Class B Common Shares		Class B Common Shares	EPS*
Per Basic	Per Basic	$	180	1,822	$	0.10	Per Basic	$	126	1,822	$	0.07
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares	Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares	1		—			Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares	1		—	—
Diluted EPS for Class B Common Shares	Diluted EPS for Class B Common Shares	$	181	1,822	$	0.10	Diluted EPS for Class B Common Shares	$	127	1,822	$	0.07

~~Nine~~

Six Months Ended ~~January~~October 31, 2023

Undistributed
& Distributed
Earnings
to Class B
Common
Shares Class B
Common
Shares EPS*
Per Basic* $ 407 1,822 $ 0.22
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares 2 —
Diluted EPS for Class B Common Shares* $ 409 1,822 $ 0.22


	Undistributed & Distributed Earnings to Class B Common Shares		Class B Common Shares		EPS*
Per Basic	$	273	$	1,822	$	0.15
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares	—		—		—
Diluted EPS for Class B Common Shares	$	273	1,822		$	0.15

Three Months Ended ~~January~~October 31, 2022

Undistributed
& Distributed
Earnings
to Class B
Common
Shares Class B
Common
Shares EPS*
Per Basic $ 160 $ 1,822 $ 0.09
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares 2 — —
Diluted EPS for Class B Common Shares $ 162 1,822 $ 0.09

~~Nine Months Ended January 31, 2022~~

Undistributed
& Distributed
Earnings
to Class B
Common
Shares Class B
Common
Shares EPS*
Per Basic $ 502 $ 1,822 $ 0.28
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares 4 — —
Diluted EPS for Class B Common Shares $ 506 1,822 $ 0.28

~~_______________~~

*Amounts adjusted for rounding

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	Undistributed & Distributed Earnings to Class B Common Shares		Class B Common Shares		EPS*
Per Basic	$	113	$	1,822	$	0.06
Reallocation of undistributed earnings/losses from Class A Common Shares to Class B Common Shares	1		—		—
Diluted EPS for Class B Common Shares	$	114	1,822		$	0.06

Six Months Ended October 31, 2022


	Undistributed & Distributed Earnings to Class B Common Shares		Class B Common Shares		EPS*
Per Basic	$	224	$	1,822	$	0.12
Reallocation of undistributed earnings from Class A Common Shares to Class B Common Shares	2		—		—
Diluted EPS for Class B Common Shares	$	226	$	1,822	$	0.12

____________

*Amounts adjusted for rounding

For the three and ~~nine~~six months ended ~~January~~October 31, 2023 we excluded options to purchase ~~4,445,248~~6,282,441 and ~~3,718,454~~6,041,068 Class A Common Shares, respectively, and for the three and ~~nine~~six months ended ~~January~~October 31, 2022 we excluded options to ~~purchase 890,783~~purchase 3,426,398 and ~~858,210~~3,286,253 Class A Common Shares, ~~respectively, from the computation of diluted earnings per Class A Common Shares.~~respectively. We excluded these option share amounts because the exercise prices of those options were greater than the average market price of the Class A Common Shares during the applicable period. As of ~~January~~October 31, 2023, we had a total of ~~5,677,804~~6,569,004 options outstanding and as of ~~January~~October 31, 2022, we had a total of ~~4,743,104~~5,728,204 options outstanding.

E. Acquisitions

We account for business combinations using the acquisition method of accounting and, accordingly, the identifiable assets acquired and liabilities assumed are recorded based upon management’s estimates of current fair values as of the acquisition date. The estimation process includes analyses based on income and market approaches. Goodwill represents the excess purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. The goodwill generated is due in part to the synergies that are not included in the fair value of identifiable intangible assets. Goodwill recorded in an acquisition is assigned to applicable reporting units based on expected revenues. Identifiable intangible assets with finite lives are amortized over their useful lives. Amortization of current technology is recorded in cost of revenue-subscription fees and amortization of all other intangible assets is recorded in amortization of acquisition-related intangibles. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in general and administrative expenses in the periods in which such costs are incurred. The results of operations of acquired businesses are included in the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements from the acquisition date.

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Effective September 5, 2023, the Company entered into a Stock Purchase Agreement (“Garvis Purchase Agreement”) with privately-held Garvis AI Limited, a private limited company organized and registered under the laws of England and Wales (“Garvis”). Pursuant to the Garvis Purchase Agreement, the Company acquired 100% of the total issued and outstanding shares of capital stock of Garvis, a visionary SaaS startup that combines large language models (ChatGPT) with AI-native demand forecasting.

Garvis designed from the ground up an AI-first forecasting solution now called DemandAI+. Fusing Generative AI with machine learning algorithms, DemandAI+ creates a modern, more inclusive, and intuitive planning paradigm that quickly digitizes supply chain relationships and exposes that data to any stakeholder across the organization. By simply asking questions planners, executives, and non-planners alike get answers to unanticipated queries in real-time, providing transparency for more informed decisions that saves precious planning time. Demand AI+, built for the cloud, will be embedded into the Logility Digital Supply Chain Platform. The combined solutions will enable a new supply chain planning paradigm with DemandAI+ that moves beyond conventional methods to plan demand and inventory at the speed of the market.

Under the terms of the Garvis Purchase Agreement, the Company acquired the capital stock for cash consideration paid net of cash acquired of approximately $25.0 million, subject to certain post-closing adjustments. The Company incurred acquisition costs of approximately $337,000 during the three and six months ended October 31, 2023. The operating results of Garvis are not material for proforma disclosure. The Company preliminarily allocated $16.9 million of the total purchase price to goodwill, which has been assigned to the Supply Chain Management segment and is not deductible for income tax purposes.

The following preliminary allocation of the total purchase price reflects the fair value of the assets acquired and liabilities assumed as of September 5, 2023 (in thousands):


			Useful Life
Cash	76
Accounts receivable, net	457
Current assets	205
Property and equipment, net	30
Goodwill	16,859
Non-compete	2,000		3 years
Current technology	8,800		3 years
Total assets acquired	28,427
Current liabilities	(611)
Long-term liabilities	(2,708)
Total liabilities assumed	$	(3,319)
Net assets acquired	$	25,108

Current technology and non-compete agreements are being amortized on a straight-line basis over the remaining estimated economic life of the assets, including the period being reported.

Effective June 28, 2022, the Company acquired certain assets of privately-held Starboard Solutions Corp., a Michigan based innovator of supply chain network design software (“Starboard”), pursuant to the terms of an asset purchase agreement, dated as of June 28, 2022 (the ~~“Purchase~~“Starboard Purchase Agreement”).

Starboard creates an interactive supply chain digital twin of the physical supply chain network and uses gaming technology to provide an intuitive user experience where users can easily explore answers to various "what if" questions. Starboard offers a unique supply chain visualization solution that can optimize for unknown locations, meaning users do not have to map their plans to a physical location. Applying Starboard’s rich set of reference costs with Logility’s lane rates and time data structures, users have the ability to quickly analyze options in regions for which they have no prior data and assess better locations for future plants, warehouses or ~~Third-party~~third-party logistic ~~locations ("3PL")~~ locations. The intuitive design and ease of configuration makes the Starboard network design solution stand out. The ~~solution~~Starboard software is built for ~~continuous~~recurring use, eliminating the need for a consulting project to model potential resolutions to unexpected supply chain disruptions. The integration of Starboard’s capabilities into the Logility Digital Supply Chain Platform will offer supply chain leaders enhanced integrated business planning outcomes. Users will be able to model a response to disruptions and update their operating plan within the Logility Digital Supply Chain Platform in minutes to enact the new operating paradigm.

Under the terms of the Starboard Purchase Agreement, the Company acquired the assets in exchange for a purchase price of approximately $6.5 million in cash, subject to certain post-closing adjustments, plus up to a maximum aggregate amount of ~~$6.0~~

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$6.0 million (the "Aggregate Maximum Earnout Payment") of contingent earnout payments upon satisfaction of certain subscription revenue targets over a three year earnout period (the "Earnout Period"). For each year of the Earnout Period (each, a "Calculation Period"), the Company will pay, as additional consideration, $2.0 million once subscription revenue (i.e., revenue contracted for and recorded as revenue in accordance with GAAP) for the applicable Calculation Period equals $1.5 million, plus one dollar of additional consideration for each dollar of subscription revenue in excess of $1.5 million, subject to the Aggregate Maximum Earnout Payment. If the subscription revenue for each Calculation Period is less than $1.5 million, no additional payment shall be due for such Calculation Period. The contingent earnout payments are subject to the recipient's continued service with the Company; therefore, any additional consideration will be accounted for as post-combination services and will be expensed in the period(s) payments are accruable. The cumulative earnout paid as of October 31, 2023 was $0. The Company incurred acquisition costs of approximately ~~$50,000~~$0, $0, $81,500 and ~~$186,000~~$136,000 during the three and ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, respectively. The operating results of Starboard are not material for proforma disclosure. We allocated $3.7 million of the total purchase price to goodwill, which has been assigned to the Supply Chain Management segment and is deductible for income tax purposes.

The following allocation of the total purchase price allocation herein is preliminary. The final purchase price allocation will be determined after completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed, but in no event later than one year following completion of the acquisition. Accordingly, the final acquisition accounting adjustments could differ materially from the pro forma adjustments presented herein. Any increase or decrease inreflects the fair value of the assets acquired and liabilities assumed as ~~compared to the information shown herein, could also change the portion~~ of ~~purchase price allocated to goodwill and could impact the operating results of the Company following the acquisition due to differences in purchase~~

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~~price allocation, depreciation and amortization related to some of these assets and liabilities. The acquisition-date fair value of the consideration transferred is as follows~~June 28, 2022 (in thousands):


			Useful Life
Other assets	90
Goodwill	3,670
Non-compete agreements	170		5 years
Current technology	2,500		3 years
Customer relationships	160		6 years
Total assets acquired	6,590

Long-term liabilities	(90)
Net assets acquired	$	6,500

Non-compete agreements, current technology and customer relationships are being amortized on a straight-line basis over the remaining estimated economic life of the assets, including the period being reported.

F. Discontinued Operations

On September 18, 2023, the Company disposed of its 100% equity interest in its information technology consulting firm, TPM to Marathon TS, Inc., an IT professional services firm for approximately $2.1 million in cash, of which $300,000 is held in escrow. The amounts held in escrow are limited to claims arising out of or relating to any pre-closing taxes. Any escrow amounts that are not subject to then outstanding indemnification claims shall be released to the Company in equal $100,000 increments on the 12, 24 and 36 month anniversary of the transaction closing date and are included in prepaid expenses and other current assets and other assets in the Condensed Consolidated Balance Sheet as of October 31, 2023. There have not been any submitted, or expected, indemnification claims against these escrowed funds. This transaction enables us to focus on our core supply chain planning business allowing Logility to continue to expand its AI-first supply chain management platform.

In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of TPM are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results in the accompanying Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows. TPM was previously reported in the former IT Consulting segment. During the second quarter of fiscal 2024, the Company identified an error, originating in 2017, resulting in an understatement of professional services and other cost of revenue and other current liabilities. The error was determined to be immaterial to all impacted periods and has been corrected in the previously issued condensed consolidated financial statements presented herein. Subsequent to presenting the results of TPM as discontinued operations, the amounts related to the error resulted in an adjustment to increase earnings from operations of discontinued operations by $24,000 in the three months ended October 31, 2022 and decrease earnings from operations of discontinued operations by $45,000 in the six months ended October 31, 2022. The error resulted in an increase to retained deficit and an increase to other current liabilities of approximately $1.0 million in prior periods presented.

The following is selected financial information included in Earnings from discontinued operations for TPM:

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	Three Months Ended October 31,				Six Months Ended October 31,
	2023		2022		2023		2022
Revenue	$	1,666	$	4,159	$	4,932	$	8,674
Cost of revenue	$	1,411	$	3,333	$	3,959	$	7,012
Total operating expenses	$	176	$	585	$	718	$	1,275
Gain on disposal of discontinued operations	$	2,124	$	—	$	2,124	$	—
Earnings before income taxes	$	2,203	$	241	$	2,379	$	387
Income tax expense	$	461	$	52	$	503	$	109
Earnings from discontinued operations, net of taxes	$	1,742	$	189	$	1,876	$	278

The following is selected financial information included in current assets and current liabilities from discontinued operations for TPM:


	October 31,		April 30,
	2023		2023
Cash and cash equivalents	$	—	$	637
Trade accounts receivable, less allowance for doubtful accounts	$	—	$	2,964
Prepaid expenses and other current assets	$	—	$	2
Current assets of discontinued operations	$	—	$	3,603

Current liabilities of discontinued operations	$	—	$	318

G. Stock-Based Compensation

~~During~~In the ~~nine months ended January 31, 2023~~first quarter of fiscal 2024, the Compensation Committee of our Board of Directors awarded RSUs to independent directors not employed by the Company that will vest, and ~~2022, we granted options for 1,519,000 and 1,438,500~~ shares of Class A common stock ~~respectively.~~ will be issued, on the first anniversary of the date of the grant. The RSU awards replace option grants for Class A common stock previously awarded to independent directors. In addition, stock option grants for employees and contractors for Class A common shares were issued, as follows:


	Six Months Ended October 31,
	2023	2022
Awards granted:
Options	1,460,000	1,424,000
RSUs	95,411	—
Total awards granted	1,555,411	1,424,000

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The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing ~~model.~~model and the fair value of each RSU award is estimated on the date of grant using the fair value method. The forfeiture rates are estimated using historical data. We recorded ~~stock option~~total compensation cost related to stock options and RSUs of approximately $1.6 million and $1.3 million of which, $0 and ~~$1.1 million~~$8,000 was included in discontinued operations, and income tax benefits of approximately ~~$4,000~~$0 and ~~$327,000~~$29,000 from option exercises during the three months ended ~~January~~October 31, 2023 and 2022, respectively. We recorded ~~stock option~~total compensation cost related to stock options and RSUs of approximately ~~$3.9~~$3.1 million and ~~$2.9~~$2.6 million, of which $0 and $16,000 was included in discontinued operations, and income tax benefits of approximately ~~$67,000~~$0 and ~~$1.9 million~~$63,000 from option exercises during the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, respectively. We record stock-based compensation expense on a straight-line basis over the vesting period directly to additional paid-in capital.

During the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, we issued ~~140,800~~22,253 and ~~678,129~~97,800 shares of Class A common stock, respectively, resulting from the exercise of stock options. The total intrinsic value of options exercised during the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022 based on market value at the exercise dates was approximately ~~$0.6 million~~$40,000 and ~~$9.1~~$0.5 million, respectively. As of ~~January~~October 31, 2023, unrecognized compensation cost related to unvested stock option and RSU awards approximated ~~$14.6~~$16.4 million, respectively, which we expect to recognize over a weighted average period of ~~1.88~~1.81 years.

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G.H. Fair Value of Financial Instruments

We measure our investments based on a fair value hierarchy disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. A number of factors affect market price observability, including the type of asset or liability and its characteristics. This hierarchy prioritizes the inputs into three broad levels as follows:

•Level 1—Quoted prices for identical instruments in active markets.

•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

•Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following is a general description of the valuation methodologies we use for financial assets and liabilities measured at fair value, including the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Cash Equivalents—Cash equivalents include investments in government obligation based money-market funds, other money market instruments and interest-bearing deposits with initial terms of three months or less. The fair value of cash equivalents approximates its carrying value due to the short-term nature of these instruments.

Marketable Securities—Marketable securities utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. government debt securities, as these securities all have quoted prices in active markets. Marketable securities utilizing Level 2 inputs include municipal bonds. We value these securities using market-corroborated pricing or other models that use observable inputs such as yield curves.

The following tables present our assets and liabilities that we measured at fair value on a recurring basis as of ~~January~~October 31, 2023 and April 30, ~~2022,~~2023, and indicate the fair value hierarchy of the valuation techniques we used to determine such fair value (in thousands):


		January 31, 2023									October 31, 2023
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Cash equivalents	Cash equivalents	$	74,032	$	—	$	—	$	74,032	Cash equivalents	$	58,544	$	—	$	—	$	58,544
U.S Treasury securities										U.S Treasury securities	5,096		—		—		5,096
Marketable securities	Marketable securities	24,331		—		—		24,331		Marketable securities	15,821		—		—		15,821
Total	Total	$	98,363	$	—	$	—	$	98,363	Total	$	79,461	$	—	$	—	$	79,461


		April 30, 2022					April 30, 2023
		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Cash equivalents	Cash equivalents	98,459	—	—	98,459	Cash equivalents	$	81,352	$	—	$	—	$	81,352
U.S Treasury securities						U.S Treasury securities	7,305		—		—		7,305
Marketable securities	Marketable securities	16,826	—	—	16,826	Marketable securities	16,632		—		—		16,632
Total	Total	115,285	—	—	115,285	Total	$	105,289	$	—	$	—	$	105,289

H.I. Stock Repurchases

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prices. The timing of any repurchase will depend upon market conditions, the market price of our Class A common stock and management’s assessment of our liquidity and cash flow needs. Under this repurchase plan, we have repurchased ~~1,053,679~~1,484,255 shares of Class A common stock at a cost of approximately ~~$6.2~~$11.0 million, which had noa $4.8 million impact on fiscal ~~2023.~~2024. As of ~~January~~October 31,

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2023, under all repurchase plans previously authorized, including this most recent plan, we have repurchased a total of ~~4,588,632~~5,019,208 shares of common stock at a cost of approximately ~~$25.6~~$30.4 million.

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I.J. Comprehensive Income

We have not included Condensed Consolidated Statements of Comprehensive Income in the accompanying unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements since comprehensive income and net earnings presented in the accompanying Condensed Consolidated Statements of Operations would be substantially the same.

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J.K. Industry Segments

FASB ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of a public entity about which separate financial information is available that is evaluated regularly by the chief operating decision makers (“CODMs”), or decision making group, in deciding how to allocate resources and in assessing performance. Our CODMs are our Chief Executive Officer and President and our Chief Financial Officer. While our CODMs are apprised of a variety of financial metrics and information, we manage our business primarily on a segment basis, with the CODMs evaluating performance based upon segment operating profit or loss that includes an allocation of common expenses, but excludes certain unallocated corporate expenses, which are included in the Other segment. Our CODMs review the operating results of our ~~three~~two segments, assess performance and allocate resources in a manner that is consistent with the changing market dynamics that we have experienced. The ~~three~~two operating segments are: (1) Supply Chain Management (“SCM”), and (2) ~~Information Technology Consulting (“IT Consulting”) and (3)~~ Other.

The SCM segment leverages a single platform spanning seven supply chain process areas, including product, demand, inventory, supply, deploy, integrated business planning and supply chain data management. ~~The IT Consulting segment consists of The Proven Method, Inc., an IT staffing and consulting services firm.~~ The Other segment consists of (i) American Software ERP, which provides purchasing and materials management, client order processing, financial, e-commerce and traditional manufacturing solutions, and (ii) unallocated corporate overhead expenses.

All of our revenue is derived from external clients. We do not have any inter-segment revenue. Our income taxes and dividends are paid at a consolidated level. Consequently, it is not practical to show these items by operating segment.

In the following table, we have broken down the intersegment transactions applicable to the three and ~~nine~~six months ended ~~January~~October 31, 2023 and 2022 (in thousands):

Three Months Ended January 31, Nine Months Ended January 31,
2023 2022 2023 2022
Revenue:
Supply Chain Management $ 26,952 $ 26,061 $ 79,886 $ 75,692
IT Consulting 3,584 5,842 12,258 15,544
Other 475 519 1,601 1,668
$ 31,011 $ 32,422 $ 93,745 $ 92,904
Operating income\(loss):
Supply Chain Management $ 7,763 $ 7,458 $ 22,587 $ 19,531
IT Consulting 211 506 643 1,005
Other (5,018) (4,725) (14,950) (12,837)
$ 2,956 $ 3,239 $ 8,280 $ 7,699
Capital expenditures:
Supply Chain Management $ 14 $ 57 $ 1,604 $ 672
IT Consulting — — — —
Other 935 165 2,051 165
$ 949 $ 222 $ 3,655 $ 837
Depreciation and amortization:
Supply Chain Management $ 675 $ 907 $ 2,042 $ 2,889
IT Consulting — — — —
Other 113 93 347 281
$ 788 $ 1,000 $ 2,389 $ 3,170
Earnings\(loss) before income taxes:
Supply Chain Management $ 8,094 $ 7,458 $ 22,695 $ 19,377
IT Consulting 211 506 643 1,005
Other (4,015) (4,633) (13,750) (11,224)
$ 4,290 $ 3,331 $ 9,588 $ 9,158


	Three Months Ended October 31,				Six Months Ended October 31,
	2023		2022		2023		2022
Revenue:
Supply Chain Management	$	25,188	$	26,752	$	50,549	$	52,934
Other	502		527		1,042		1,126
	$	25,690	$	27,279	$	51,591	$	54,060
Operating income\(loss):
Supply Chain Management	$	5,835	$	7,646	$	12,277	$	14,825
Other	(4,606)		(5,096)		(9,656)		(9,933)
	$	1,229	$	2,550	$	2,621	$	4,892










Capital expenditures:
Supply Chain Management	$	37	$	151	$	387	$	1,590
Other	19		983		134		1,116
	$	56	$	1,134	$	521	$	2,706





Depreciation and amortization:
Supply Chain Management	$	1,102	$	714	$	1,653	$	1,367
Other	175		119		354		234
	$	1,277	$	833	$	2,007	$	1,601
Earnings\(loss) before income taxes:
Supply Chain Management	$	5,855	$	7,572	$	12,543	$	14,601
Other	(5,203)		(5,167)		(8,613)		(9,735)
	$	652	$	2,405	$	3,930	$	4,866

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K.L. Major Clients

No single client accounted for more than 10% of total revenue for the three and ~~nine~~six months ended ~~January~~October 31, 2023 and 2022.

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L.M. Contingencies

The Company more often than not indemnifies its clients against damages and costs resulting from ~~third party~~third-party claims of intellectual property infringement associated with use of the Company’s products. The Company historically has not been required to make any payments under such indemnification obligations. However, the Company continues to monitor the circumstances that are subject to indemnification to identify whether it is probable that a loss has occurred, and would recognize any such losses under such indemnification obligations when they are estimable.

In addition, the Company warrants to clients that the Company’s products operate substantially in accordance with the software product’s specifications. Historically, no costs have been incurred related to software product warranties and none are expected in the future, and as such no accruals for software product warranty costs have been made. Additionally, the Company is involved in various claims arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the financial position or results of operations of the Company.

M.N. Subsequent Event

On ~~February 22,~~November 15 2023, we signed an asset purchase agreement for the sale of our Transportation Rating Solutions ("TRS") business which consists of on-premise freight shipping solutions for LTL, truckload and rail shipments within North America to FOG Software Group ("FOG") a division of Vela Software for approximately $1.1 million in cash, of which, $440,000 is subject to various holdback provisions, which will expire 120 days following the date of the agreement. The divesture of TRS will allow us to focus on our core supply chain planning business allowing Logility to continue to expand its AI-first supply chain management platform. The purchase price is subject to a working capital adjustment. TRS was previously reported in the SCM segment.

On November 20, 2023, our Board of Directors declared a quarterly cash dividend of $0.11 per share of our Class A and Class B common stock. The cash dividend is payable on ~~May 17, 2023~~February 16, 2024 to Class A and Class B shareholders of record at the close of business on ~~May 3, 2023.~~February 2, 2024.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements relating to our future financial performance, business strategy, financing plans and other future events that involve uncertainties and risks. You can identify these statements by forward-looking words such as “anticipate,” “intend,” “plan,” “continue,” “could,” “grow,” “may,” “potential,” “predict,” “strive” “will,” “seek,” “estimate,” “believe,” “expect,” and similar expressions that convey uncertainty of future events or outcomes. Any forward-looking statements we make herein are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning future:

•results of operations;

•liquidity, cash flow and capital expenditures;

•demand for and pricing of our products and services;

•viability and effectiveness of strategic alliances;

•industry conditions and market conditions;

•acquisition activities and the effect of completed acquisitions; and

•general economic conditions.

Although we believe that the goals, plans, expectations, and prospects that our forward-looking statements reflect are reasonable in view of the information currently available to us, those statements are not guarantees of performance. There are many factors that could cause our actual results to differ materially from those anticipated by forward-looking statements made herein. These factors include, but are not limited to, continuing U.S. and global economic uncertainty, the timing and degree of business recovery, unpredictability and the irregular pattern of future revenue, dependence on particular market segments or clients, competitive pressures, delays, product liability and warranty claims and other risks associated with new product development, undetected software errors, market acceptance of our products, technological complexity, the challenges and risks associated with integration of acquired product lines, companies and services, as well as a number of other risk factors that could affect our future performance. All forward-looking statements included in this Quarterly Report are based upon information available to us as of the filing date of this Quarterly Report. We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. We discuss certain factors in greater detail in “Business Overview” below.

ECONOMIC OVERVIEW

In ~~January~~October 2023, the International Monetary Fund (“IMF”) provided an update to the World Economic Outlook for 2023. The update noted that, “Global growth is ~~projected~~forecast to ~~fall~~slow from ~~an estimated 3.4~~3.5 percent in 2022 to ~~2.9~~3.0 percent in 2023 ~~then rise to 3.1~~and 2.9 percent in 2024. The ~~forecast for 2023 is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook (WEO) but~~projections remain below the historical (2000–19) average of 3.8 ~~percent. The rise in central bank rates~~percent, and the forecast for 2024 is down by 0.1 percentage point from the July 2023 Update to ~~fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. The rapid spread of COVID-19 in China dampened growth in 2022, but~~ the ~~recent reopening has paved~~World Economic Outlook. For advanced economies, the ~~way for a faster-than-expected recovery. Global inflation~~expected slowdown is ~~expected to fall~~ from ~~8.8~~2.6 percent in 2022 to ~~6.6~~1.5 percent in 2023 and ~~4.3~~1.4 percent in 2024, ~~still above pre-pandemic (2017–19) levels~~amid stronger-than-expected US momentum but weaker-than-expected growth in the euro area. Emerging market and developing economies are projected to have growth modestly decline, from 4.1 percent in 2022 to 4.0 percent in both 2023 and 2024, with a downward revision of ~~about 3.5 percent.~~0.1 percentage point in 2024, reflecting the property sector crisis in China. Forecasts for global growth over the medium term, at 3.1 percent, are at their lowest in decades, and prospects for countries to catch up to higher living standards are weak. Global inflation is forecast to decline steadily, from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024. But the forecasts for 2023 and 2024 are revised up by 0.1 percentage point and 0.6 percentage point, respectively, and inflation is not expected to return to target until 2025 in most cases.

Risks to the outlook are more balanced than they were six months ago, on account of the resolution of US debt ceiling tensions and Swiss and US authorities’ having acted decisively to contain financial turbulence. The likelihood of a hard landing has receded, but the balance of risks to global growth remains tilted to the ~~downside, but adverse risks~~downside. China’s property sector crisis could deepen, with global spillovers, particularly for commodity exporters. Elsewhere, as Chapter 2 explains, near-term inflation expectations have ~~moderated since the October 2022 WEO. On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in~~risen and could contribute—along with tight labor markets––to core inflation ~~are plausible. On the downside, severe health outcomes in China~~pressures persisting and requiring higher policy rates than expected. More climate and geopolitical shocks could ~~hold back the recovery, Russia’s war in Ukraine could escalate,~~cause additional food and ~~tighter global financing conditions could worsen debt distress. Financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical~~energy price spikes. As Chapter 3 explains, intensifying geoeconomic fragmentation could ~~hamper economic progress.~~constrain the flow of commodities across markets, causing additional price volatility and complicating the green transition. Amid rising debtservice costs, more than half of low-income developing countries are in or at high risk of debt distress."

In addition to the broader economic risks noted by the IMF, for 2023, we are also cautious about the global recovery from the COVID-19 pandemic. We believe uncertain economic conditions and increasingly complex supply chain challenges may be driving some businesses to focus on achieving more process and efficiency enhancements in their operations and to invest in solutions that improve operating margins, rather than make large infrastructure-type technology purchases. If this trend continues,For fiscal 2024, we believe it may tend to favor solutions such as our supply chain solutions, which are designed to provide a more rapid return on investment and are targeted at some of the largest profit drivers in a client’s business. While we do not expect that the ~~COVID-19 pandemic~~important nature of our software, combined with a challenging global macro economic environment from increased global disruptions on companies’ supply chains will ~~cause any material adverse changes on our business or financial results for fiscal 2023, we are unable~~require them to accurately predict the impact that the coronavirus will have due to various uncertainties, including the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and actions that may be taken by governmental authorities.improve

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productivity and profitability by upgrading their technology systems, which may result in an improved selling environment. Although this improvement could slow or regress at any time, due in part to the effects of a possible recession and trade conflicts on global capital markets, we believe that our organizational and financial structure will enable us to take advantage of any sustained economic rebound. That said, the current business climate within the United States and geographic regions in which we operate may affect clients’ and prospects' decisions regarding timing of strategic capital expenditures by taking longer periods to evaluate discretionary software purchases.

Corporate capital spending trends and commitments are the primary determinants of the size of the market for business software. Corporate capital spending is, in turn, a function of general economic conditions in the U.S. and abroad and in particular may be affected by conditions in U.S. and global credit markets. In recent years, the weakness in the overall global economy and the U.S. economy has resulted in reduced expenditures in the business software market.

COMPANY OVERVIEW

American Software was incorporated in Georgia in 1970. The Company is headquartered in Atlanta, Georgia with U.S. offices in Boston ~~Chicago, Miami~~ and ~~San Diego;~~Miami; and international offices in Belgium, the United Kingdom, India, Germany, New Zealand and Australia.

We provide our software and services solutions through ~~three~~two major operating segments: (1) Supply Chain Management ~~(2) Information Technology Consulting~~ and ~~(3)~~(2) Other. The SCM software business is our core market. We ~~also offer technology staffing and consulting services through our wholly-owned subsidiary, The Proven Method, Inc., in the IT Consulting segment, and we~~ continue to provide limited services to our legacy ERP clients included in the Other segment.

American Software through its operating entity Logility, delivers prescriptive demand, inventory, manufacturing, and supply planning tools – helping to provide executives the confidence and control to increase margins and service levels, while delivering sustainable supply chains. Designed for speed and agility, Logility’s (SaaS) cloud-based platform provides an innovative ~~technical platform that enables enterprises~~blend of artificial intelligence (AI), machine learning, and predictive analytics to accelerate their digital supply chain optimization from product concept to client availability via the Logility Digital Supply Chain Platform, a single platform spanning seven supply chain process areas, including product, demand, inventory, supply, deploy,help deliver integrated ~~business~~ planning and operations across the end-to-end supply ~~chain data management, and new offerings, such as Corporate Responsibility - Environmental, Social, and Governance ("ESG") and Network Design Optimization aligned~~chain. Our prescriptive approach drives team alignment for enterprises with ~~Integrated Business Planning.~~prioritized outcomes that assure demonstrable value.

Fueled by supply chain master data, allowing for the automation of critical business processes through the application of artificial intelligence and machine learning algorithms to a variety of internal and external data streams, the comprehensive Logility portfolio delivered in the cloud includes advanced analytics, supply chain visibility, demand, inventory and replenishment planning, Sales and Operations Planning, ~~(S&OP),~~ Integrated Business Planning, ~~(IBP),~~ supply and inventory optimization, manufacturing planning and scheduling, network design and optimization, ~~(NDO),~~ retail merchandise and assortment planning and allocation, product lifecycle management, ~~(PLM),~~ sourcing management, vendor quality and compliance, and product traceability.

We believe enterprises are facing unprecedented rates of change and disruption across their ~~operations. Increasing~~operations with a significant transformation in supply chain planning due to advancements in technology, generational shifts of planners, and the significant speed of market changes and disruptions. With increasing consumer expectations for convenience and personalization, fast and free delivery and product freshness ~~are~~ forcing enterprises to adapt or be left behind. Given constraints arising from a shortage of skilled supply chain talent and a desire to keep costs at a minimum, we expect enterprises to embrace digital transformation initiatives to meet these challenges. Our solution reduces the business cycle time required from product concept to client availability. Our platform allows our clients to create a digital model of their physical supply chain networks that improves the speed and agility of their operations by implementing automated planning processes. These processes regularly analyze business and market signals to better inform product design and development, increase forecast accuracy, optimize inventory across the supply chain, improve sourcing of sustainable and ethically produced products, and contribute to high client satisfaction.

Our platform is highly regarded by clients and industry analysts alike. ~~We, often through~~Logility, Inc ("Logility"), our wholly-owned subsidiary, ~~Logility, Inc., are~~is named a leader in multiple IDC MarketScape reports ~~including:~~including; the September 2022 report IDC MarketScape: Worldwide Holistic Supply Chain Planning 2022 Vendor Assessment; the September 2022 report IDC MarketScape: Worldwide Supply Chain Demand Planning 2022 Vendor Assessment; the September 2022 report IDC MarketScape: Worldwide Supply Chain Sales and Operations Planning 2022 Vendor Assessment; and the September 2022 report IDC MarketScape: Worldwide Supply Chain Inventory Optimization 2022 Vendor Assessment. ~~The organization~~ Logility, Inc. was also named as a Major Player in the September 2022 IDC MarketScape: Worldwide ~~Supply Chain~~Holistic Supply Planning 2022 Vendor Assessment.

~~We have~~Logility has been positioned in the Challenger quadrant in Gartner, Inc.’s ~~(“Gartner”)~~ May ~~17, 2022~~2, 2023 report, Magic Quadrant for Supply Chain Planning ~~Solutions.~~Solutions and positioned in the Leadership quadrant in the Peer Insights for the Gartner Voice of the Customer. We believe our platform is rated highly due to our flexible advanced analytics, underlying ~~SaaS~~Software as a Service (“SaaS”) architecture, ease of integration with third-party systems, lower total cost of ownership relative to competitors and the broad scope of supply chain planning functions supported.

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We serve approximately 860 clients located in approximately 80 countries, largely concentrated within key vertical markets including apparel and other soft goods, food and beverage, consumer packaged goods, consumer durable goods, wholesale distribution, specialty chemical and other process manufacturing. Our solutions are marketed and sold through a direct sales team as well as an indirect global value-added reseller (“VAR”) distribution network. Our solutions may be deployed in the cloud or with existing on-premise clients who may require additional components. We further support our clients with an array of consulting, implementation, operational and training services as well as technical support and hosting.

We derive revenue from four sources: subscriptions, software licenses, maintenance and services. We generally determine SaaS subscription and software license fees based on the breadth of functionality and number of users and/or

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divisions. Services and other revenues consist primarily of fees from software implementation, training, consulting services, hosting and managed services. We bill for consulting services primarily under time and materials arrangements and recognize revenue as we perform services. Subscription and maintenance agreements typically are for a three- to five-year term. We generally bill these fees annually in advance and then recognize the resulting revenue ratably over the term of the agreement. Deferred revenues represent advance payments or fees for subscriptions, software licenses, services and maintenance billed in advance of the time we recognize the related revenue.

We currently view the following factors as the primary opportunities and risks associated with our business:

•Acquisition Opportunities. There are opportunities for selective acquisitions or investments to expand our sales distribution channels and/or broaden our product offering by providing additional solutions for our target markets.

•Dependence on Capital Spending Patterns. There is risk associated with our dependence on the capital spending patterns of U.S. and international businesses, which in turn are functions of economic trends and conditions over which we have no control.

•Acquisition Risks. There are risks associated with acquisitions of complementary companies, products and technologies, including the risks that we will not achieve the financial and strategic goals that we contemplate at the time of the transaction. More specifically, in any acquisition, we will face risks and challenges associated with the uncertain value of the acquired business or assets, the difficulty of assimilating operations and personnel, integrating acquired technologies and products and maintaining the loyalty of the clients of the acquired business.

•Competitive Technologies. There is a risk that our competitors may develop technologies that are substantially equivalent or superior to our technology.

•Competition in General. There are risks inherent in the market for business application software and related services, which has been and continues to be intensely competitive; for example, some of our competitors may become more aggressive with their prices and/or payment terms, which may adversely affect our profit margins.

A discussion of a number of additional risk factors associated with our business is included in our Annual Report for fiscal ~~2022.~~2023. Additional information and other factors that could affect future financial results may be included, from time to time, in our filings with the Securities and Exchange Commission (“SEC”).

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our ~~Condensed Consolidated Financial Statements,~~condensed consolidated financial statements, if any, see Note A in the Notes to ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements included elsewhere in this Quarterly Report.

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COMPARISON OF RESULTS OF OPERATIONS

Three-Month Comparisons. The following table sets forth certain revenue and expense items as a percentage of total revenue and the percentage changes in dollars for such items for the three months ended ~~January~~October 31, 2023 and 2022:


		Three Months Ended January 31,							Three Months Ended October 31,
		Percentage of Total Revenue				Pct. Change in Dollars			Percentage of Total Revenue				Pct. Change in Dollars
		2023		2022		2023 vs. 2022			2023		2022		2023 vs. 2022
Revenue:	Revenue:							Revenue:
Subscription fees	Subscription fees	42	%	34	%	20	%	Subscription fees	52	%	45	%	8	%
License	License	3	%	3	%	3	%	License	1	%	3	%	(67)	%
Professional services and other	Professional services and other	27	%	35	%	(27)	%	Professional services and other	16	%	20	%	(26)	%
Maintenance	Maintenance	28	%	28	%	(5)	%	Maintenance	31	%	32	%	(8)	%
Total revenue	Total revenue	100	%	100	%	(4)	%	Total revenue	100	%	100	%	(6)	%
Cost of revenue:	Cost of revenue:							Cost of revenue:
Subscription fees	Subscription fees	13	%	11	%	17	%	Subscription fees	18	%	15	%	14	%
License	License	1	%	1	%	49	%	License	—	%	—	%	(1)	%
Professional services and other	Professional services and other	20	%	25	%	(21)	%	Professional services and other	11	%	13	%	(18)	%
Maintenance	Maintenance	5	%	5	%	(10)	%	Maintenance	7	%	6	%	10	%
Total cost of revenue	Total cost of revenue	39	%	42	%	(9)	%	Total cost of revenue	36	%	34	%	1	%
Gross margin	Gross margin	61	%	58	%	(1)	%	Gross margin	64	%	66	%	(9)	%
Research and development	Research and development	14	%	14	%	(4)	%	Research and development	17	%	16	%	(2)	%
Sales and marketing	Sales and marketing	17	%	16	%	2	%	Sales and marketing	21	%	19	%	2	%
General and administrative	General and administrative	19	%	18	%	3	%	General and administrative	21	%	22	%	(7)	%

Total operating expenses	Total operating expenses	50	%	48	%	—	%	Total operating expenses	59	%	57	%	(2)	%
Operating income	Operating income	11	%	10	%	(9)	%	Operating income	5	%	9	%	(52)	%
Other income:	Other income:							Other income:

Other, net	Other, net	4	%	—	%	nm		Other, net	(2)	%	(1)	%	nm
Earnings before income taxes	Earnings before income taxes	15	%	10	%	29	%	Earnings before income taxes	3	%	8	%	(73)	%
Income tax expense	Income tax expense	3	%	1	%	143	%	Income tax expense	—	%	2	%	(94)	%
Net earnings from continuing operations								Net earnings from continuing operations	3	%	6	%	(68)	%
Earnings from discontinuing operations, net of income taxes								Earnings from discontinuing operations, net of income taxes	7	%	1	%	822	%
Net earnings	Net earnings	12	%	9	%	14	%	Net earnings	10	%	7	%	12	%

nm - not meaningful

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~~Nine-Month~~Six-Month Comparisons. The following table sets forth certain revenue and expense items as a percentage of total revenue and the percentage changes in dollars for such items for the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022:


		Nine Months Ended January 31,							Six Months Ended October 31,
		Percentage of Total Revenue				Pct. Change in Dollars			Percentage of Total Revenue				Pct. Change in Dollars
		2023		2022		2023 vs. 2022			2023		2022		2023 vs. 2022
Revenue:	Revenue:							Revenue:
Subscription fees	Subscription fees	40	%	34	%	21	%	Subscription fees	53	%	45	%	11	%
License	License	2	%	2	%	(12)	%	License	1	%	2	%	(49)	%
Professional services and other	Professional services and other	30	%	34	%	(12)	%	Professional services and other	15	%	20	%	(30)	%
Maintenance	Maintenance	28	%	30	%	(5)	%	Maintenance	32	%	33	%	(8)	%
Total revenue	Total revenue	100	%	100	%	1	%	Total revenue	100	%	100	%	(5)	%
Cost of revenue:	Cost of revenue:							Cost of revenue:
Subscription fees	Subscription fees	12	%	11	%	16	%	Subscription fees	17	%	14	%	15	%
License	License	1	%	1	%	(9)	%	License	—	%	—	%	(10)	%
Professional services and other	Professional services and other	22	%	24	%	(9)	%	Professional services and other	11	%	13	%	(18)	%
Maintenance	Maintenance	5	%	6	%	(14)	%	Maintenance	7	%	6	%	9	%
Total cost of revenue	Total cost of revenue	40	%	42	%	(3)	%	Total cost of revenue	36	%	34	%	1	%
Gross margin	Gross margin	60	%	58	%	4	%	Gross margin	64	%	66	%	(7)	%
Research and development	Research and development	14	%	14	%	(1)	%	Research and development	17	%	16	%	(3)	%
Sales and marketing	Sales and marketing	18	%	19	%	(2)	%	Sales and marketing	21	%	20	%	4	%
General and administrative	General and administrative	19	%	17	%	12	%	General and administrative	21	%	21	%	(5)	%

Total operating expenses	Total operating expenses	51	%	50	%	3	%	Total operating expenses	59	%	57	%	(1)	%
Operating income	Operating income	9	%	8	%	8	%	Operating income	5	%	9	%	(46)	%
Other income:	Other income:							Other income:

Other, net	Other, net	1	%	1	%	(10)	%	Other, net	3	%	—	%	nm
Earnings before income taxes	Earnings before income taxes	10	%	9	%	5	%	Earnings before income taxes	8	%	9	%	(19)	%
Income tax expense (benefit)		2	%	—	%	nm
Income tax expense								Income tax expense	1	%	2	%	(29)	%
Net earnings from continuing operations								Net earnings from continuing operations	7	%	7	%	(17)	%
Earnings from discontinuing operations, net of income taxes								Earnings from discontinuing operations, net of income taxes	4	%	1	%	575	%
Net earnings	Net earnings	8	%	9	%	(18)	%	Net earnings	11	%	8	%	23	%

nm - not meaningful

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~JANUARY~~OCTOBER 31, 2023 AND 2022

REVENUE

Three Months Ended January 31,
% of Total Revenue
2023 2022 % Change 2023 2022
(in thousands)
Subscription fees $ 13,003 $ 10,856 20 % 42 % 34 %
License 1,017 992 3 % 3 % 3 %
Professional services and other 8,342 11,443 (27) % 27 % 35 %
Maintenance 8,649 9,131 (5) % 28 % 28 %
Total revenue $ 31,011 $ 32,422 (4) % 100 % 100 %


	Three Months Ended October 31,
							% of Total Revenue
	2023		2022		% Change		2023		2022
	(in thousands)
Subscription fees	$	13,358	$	12,326	8	%	52	%	45	%
License	229		688		(67)	%	1	%	3	%
Professional services and other	4,003		5,435		(26)	%	16	%	20	%
Maintenance	8,100		8,830		(8)	%	31	%	32	%
Total revenue	$	25,690	$	27,279	(6)	%	100	%	100	%

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Nine Months Ended January 31,
% of Total Revenue
2023 2022 % Change 2023 2022
(in thousands)
Subscription fees $ 37,391 $ 31,005 21 % 40 % 34 %
License 2,025 2,289 (12) % 2 % 2 %
Professional services and other 27,945 31,751 (12) % 30 % 34 %
Maintenance 26,384 27,859 (5) % 28 % 30 %
Total revenue $ 93,745 $ 92,904 1 % 100 % 100 %


	Six Months Ended October 31,
							% of Total Revenue
	2023		2022		% Change		2023		2022
	(in thousands)
Subscription fees	$	27,121	$	24,388	11	%	53	%	45	%
License	518		1,008		(49)	%	1	%	2	%
Professional services and other	7,689		10,929		(30)	%	15	%	20	%
Maintenance	16,263		17,735		(8)	%	32	%	33	%
Total revenue	$	51,591	$	54,060	(5)	%	100	%	100	%

For the three months ended ~~January~~October 31, 2023, revenue decreased by ~~4%,~~6% when compared to the same period last year, which was attributable primarily to a ~~27%~~67% decrease in license revenue, a 26% decrease in professional services and other revenue and an 8% decrease in maintenance revenue, partially offset by an 8% increase in subscription fees.

For the six months ended October 31, 2023, revenue decreased by 5% when compared to the same period last year, which was attributable primarily to a 5%49% decrease in license revenue, a 30% decrease in professional services and other revenue and an 8% decrease in maintenance revenue, partially offset by a ~~20%~~11% increase in subscription ~~fees and a 3% increase in license revenue, when compared to the same period last year.~~

For the nine months ended January 31, 2023 revenue increased by 1%, which was attributable primarily to a 21% increase in subscription fees, partially offset by a 12% decrease in license revenue, a 12% decrease in professional services and other revenue and a 5% decrease in maintenance revenue, when compared to the same period last year.fees.

Due to intense competition in our industry, we sometimes discount SaaS and license fees from our published list price. Numerous factors contribute to the amount of the discount provided, such as previous client purchases, the number of client sites utilizing the software, the number of modules purchased and the number of users, as well as the overall size of the contract. While all these factors may affect the discount amount of a particular contract, the overall percentage discount has not materially changed in the recent reported fiscal periods.

The change in our revenue from period to period is primarily due to the volume of products and related services sold in any period and the number of products or modules purchased with each sale.

International revenue represented approximately ~~20%~~22% and ~~19%~~21% of total revenue in the three and ~~nine~~six months ended ~~January~~October 31, 2023 ~~respectively,~~ compared to ~~16% for the same periods~~22% and 21% in the ~~prior year.~~three and six months ended October 31, 2022. Our revenue, particularly our international revenue, may fluctuate substantially from period to period, primarily because we derive most of our license and subscription fee revenue from a relatively small number of clients in a given period.

Subscription Fees


		Three Months Ended January 31,							Three Months Ended October 31,
		2023		2022		% Change			2023		2022		% Change
		(in thousands)							(in thousands)
Supply Chain Management	Supply Chain Management	$	13,003	$	10,856	20	%	Supply Chain Management	$	13,358	$	12,326	8	%
Total subscription fees revenue	Total subscription fees revenue	$	13,003	$	10,856	20	%	Total subscription fees revenue	$	13,358	$	12,326	8	%

									Six Months Ended October 31,
									2023		2022		% Change
									(in thousands)
Supply Chain Management								Supply Chain Management	$	27,121	$	24,388	11	%
Total subscription fees revenue								Total subscription fees revenue	$	27,121	$	24,388	11	%

Nine Months Ended January 31,
2023 2022 % Change
(in thousands)
Supply Chain Management $ 37,391 $ 31,005 21 %
Total subscription fees revenue $ 37,391 $ 31,005 21 %

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, subscription fees revenue increased ~~20%~~8% and ~~21%~~11%, respectively, when compared to the same ~~periods~~period in the prior year, primarily due to an increase in the number of contracts, including contracts with a higher cloud services annual contract value, as well as an increase in multi-year contracts. ~~This further evidences by our successful transition to the cloud subscription model.~~

~~License Revenue~~

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Three Months Ended January 31,
2023 2022 % Change
(in thousands)
Supply Chain Management $ 1,017 $ 992 3 %
Other — — — %
Total license revenue $ 1,017 $ 992 3 %

Nine Months Ended January 31,
2023 2022 % Change
(in thousands)
Supply Chain Management $ 2,009 $ 2,267 (11) %
Other 16 22 (27) %
Total license revenue $ 2,025 $ 2,289 (12) %
License Revenue


	Three Months Ended October 31,
	2023		2022		% Change
	(in thousands)
Supply Chain Management	$	229	$	687	(67)	%
Other	—		—		—	%
Total license revenue	$	229	$	687	(67)	%

	Six Months Ended October 31,
	2023		2022		% Change
	(in thousands)
Supply Chain Management	$	502	$	992	(49)	%
Other	16		16		—	%
Total license revenue	$	518	$	1,008	(49)	%

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, license fee revenue ~~increased 3%~~decreased 67% and ~~decreased 12%~~49%, respectively, when compared to the same ~~periods~~period in the prior year, which was primarily attributable to our SCM segment. The majority of our current license fee revenue is generated from additional users and expanded scope from our existing on-premise ~~clients.~~clients, as the market and we have moved away from on-premise licensed software. The decrease is due to the timing of purchases and the trend of on-premise clients moving to SaaS. For the three ~~and nine~~ months ended ~~January~~October 31, 2023 and 2022, our SCM segment constituted approximately 100%~~, 99%~~ and ~~100%, 99%~~97% of total license fee revenue, respectively. For the six months ended October 31, 2023 and 2022, our SCM segment constituted approximately 97% and 98% of total license fee revenue, respectively. Our Other segment ~~license fee~~ revenue remained flat for the three and six months ended ~~January 31, 2023 compared to the same period in the prior year. Our Other segment revenue decreased by 27% for the nine months ended January~~October 31, 2023 when compared to the same ~~period~~periods in the prior year primarily due to timing of sales to our existing ERP clients.

The direct sales channel provided ~~approximately 48% and 74%~~100% of license fee revenues for both the three and ~~nine~~six months ended ~~January~~October 31, 2023 ~~respectively, compared to approximately 94%~~ and ~~90% in the comparable periods last year~~2022, due to ~~larger customers obtained through our direct sales channel moving to the Cloud platform faster than those in the mid-sized market that are primarily served by our indirect sales channel.~~ expanding user licenses and products.

For the three ~~and nine~~ months ended ~~January~~October 31, 2023 and 2022 our margins after commissions on direct sales were approximately 93% and 91%, respectively. For the six months ended October 31, 2023 and 2022 our margins after commissions on direct sales were approximately 91% and 91%, ~~compared to 91% and 89% in the comparable periods last year.~~respectively. The slight increase in margins is due to the mix of sales commission rates based on each individual salesperson’s quotas and related achievement. For the three months ended ~~January~~October 31, 2023 and 2022, our margins after commissions on indirect sales were approximately ~~58%~~51% and ~~64%~~60%, respectively. For the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, our margins after commissions on indirect sales were approximately ~~59%~~54% and ~~66%~~59%, respectively. The indirect channel margins decreased for the three and ~~nine~~six months ended ~~January~~October 31, 2023 compared to the same periods in the prior year due to the mix of VAR commission rates. These margin calculations include only commission expense for comparative purposes and do not include other costs of license fees such as amortization of capitalized software.

Professional Services and Other Revenue

Three Months Ended January 31,
2023 2022 % Change
(in thousands)
Supply Chain Management $ 4,590 $ 5,396 (15) %
IT Consulting 3,584 5,842 (39) %
Other 168 205 (18) %
Total professional services and other revenue $ 8,342 $ 11,443 (27) %

Nine Months Ended January 31,
2023 2022 % Change
(in thousands)
Supply Chain Management $ 15,034 $ 15,496 (3) %
IT Consulting 12,258 15,544 (21) %
Other 653 711 (8) %
Total professional services and other revenue $ 27,945 $ 31,751 (12) %

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	Three Months Ended October 31,
	2023		2022		% Change
	(in thousands)
Supply Chain Management	$	3,820	$	5,224	(27)	%
Other	183		211		(13)	%
Total professional services and other revenue	$	4,003	$	5,435	(26)	%

	Six Months Ended October 31,
	2023		2022		% Change
	(in thousands)
Supply Chain Management	$	7,298	$	10,444	(30)	%
Other	391		485		(19)	%
Total professional services and other revenues	$	7,689	$	10,929	(30)	%

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, professional services and other revenue decreased by ~~27%~~26% and ~~12%~~30%, respectively, when compared to the same periods in the prior year primarily due to lower professional services and other revenue derived from our ~~IT Consulting,~~ Other and SCM segments. For the three and ~~nine~~six months ended ~~January 31, 2023, our Other segment’s revenue decreased 18% and 8%, respectively, due to the timing of project work with existing clients. For the three and nine months ended January~~October 31, 2023, our SCM segment’s revenue decreased ~~15%~~27% and ~~3%, respectively,~~30% when compared to the same periods the in prior year primarily due to lower bookings in recent quarters resulting in lower project work and the timing of implementation project work in recent periods. For the three and ~~nine~~six months ended ~~January~~October 31, 2023, our ~~IT Consulting~~Other segment’s revenue decreased ~~39%~~13% and ~~21%, respectively,~~19% when compared to the same ~~periods~~period in the prior year due to the ~~demand~~timing of project work ~~from~~with existing ~~clients during the applicable period.~~clients. We have observed that there is a tendency for services and other revenue ~~other than from IT Consulting,~~ to lag changes in license and subscription revenue by one to three quarters, as new licenses and subscriptions in one quarter often involve implementation and consulting services in subsequent quarters, for which we recognize revenue only as we perform those services.

Maintenance Revenue

Three Months Ended January 31,
2023 2022 % Change
(in thousands)
Supply Chain Management $ 8,341 $ 8,817 (5) %
Other 308 314 (2) %
Total maintenance revenue $ 8,649 $ 9,131 (5) %


		Nine Months Ended January 31,							Three Months Ended October 31,
		2023		2022		% Change			2023		2022		% Change
		(in thousands)							(in thousands)
Supply Chain Management	Supply Chain Management	$	25,451	$	26,924	(5)	%	Supply Chain Management	$	7,782	$	8,514	(9)	%
Other	Other	933		935		—	%	Other	318		316		1	%
Total maintenance revenue	Total maintenance revenue	$	26,384	$	27,859	(5)	%	Total maintenance revenue	$	8,100	$	8,830	(8)	%

									Six Months Ended October 31,
									2023		2022		% Change
									(in thousands)
Supply Chain Management								Supply Chain Management	$	15,628	$	17,110	(9)	%
Other								Other	635		625		2	%
Total maintenance revenue								Total maintenance revenue	$	16,263	$	17,735	(8)	%

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, maintenance revenue decreased 5%8% when compared to the same periods in the prior year primarily due to our SCM segment. Our SCM maintenance revenue decreased 5%9% for ~~both~~ the three and ~~nine~~six months ended ~~January~~October 31, 2023, when compared to the same periods last year due to a normal client ~~attrition rate.~~attrition. The SCM segment accounted for 96% of total maintenance revenue for the three and ~~nine~~six months ended ~~January~~October 31, 2023 and ~~97% for the same periods in the prior year.~~2022. Typically, our maintenance revenue has had a direct relationship to current and historic license fee revenue, since licenses are the source of maintenance clients.

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GROSS MARGIN

The following table provides both dollar amounts (in thousands) and percentage measures of gross margin:


		Three Months Ended January 31,								Nine Months Ended January 31,									Three Months Ended October 31,								Six Months Ended October 31,
		2023		%		2022		%		2023		%		2022		%			2023		%		2022		%		2023		%		2022		%
Gross margin on subscription fees	Gross margin on subscription fees	$	8,998	69	%	$	7,425	68	%	$	25,709	69	%	$	20,946	68	%	Gross margin on subscription fees	$	8,751	66	%	$	8,267	67	%	$	18,297	67	%	$	16,711	69	%
Gross margin on license fees	Gross margin on license fees	659		65	%	752		76	%	1,484		73	%	1,692		74	%	Gross margin on license fees	136		59	%	594		86	%	353		68	%	825		82	%
Gross margin on professional services and other	Gross margin on professional services and other	2,039		24	%	3,431		30	%	7,491		27	%	9,252		29	%	Gross margin on professional services and other	1,147		29	%	1,945		36	%	1,773		23	%	3,745		34	%
Gross margin on maintenance	Gross margin on maintenance	7,042		81	%	7,342		80	%	21,627		82	%	22,350		80	%	Gross margin on maintenance	6,367		79	%	7,253		82	%	12,835		79	%	14,585		82	%
Total gross margin	Total gross margin	$	18,738	61	%	$	18,950	57	%	$	56,311	60	%	$	54,240	58	%	Total gross margin	$	16,401	64	%	$	18,059	66	%	$	33,258	64	%	$	35,866	66	%

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, our total gross margin percentage ~~increased~~decreased by 4%2% and 2%, respectively, when compared to the same periods in the prior year, primarily due to ~~higher margins on subscription fees revenue, and maintenance revenue, partially offset by~~ lower margins on license fees, ~~and~~ professional services and other, ~~revenue.~~subscription fees and maintenance.

Gross Margin on Subscription Fees

For the three ~~and nine~~ months ended ~~January~~October 31, 2023, our gross margin percentage on subscription fees revenue ~~remained flat at 69% and remained flat at 68%~~decreased from 67% to 66%, when compared to the same ~~periods~~period in the prior year, primarily due to increased hosting costs, personnel costs and amortization of acquired software.

For the six months ended October 31, 2023, our gross margin percentage on subscription fees revenue decreased from 69% to 67%, when compared to the same period in the prior year, primarily due to increased ~~subscription revenue~~hosting costs and ~~related cost efficiencies.~~amortization of acquired software.

Gross Margin on License Fees

License fee gross margin percentage for the three and ~~nine~~six months ended ~~January~~October 31, 2023 decreased by ~~11%~~27% and 1%14%, respectively, when compared to the same periods in the prior year. License fee gross margin percentage tends to be directly related to the level of license fee revenue due to the ~~relatively fixed cost of computer software amortization expense, amortization of acquired software and the~~ sales mix between our direct and indirect channels.

Gross Margin on Professional Services and Other

Our gross margin percentage on professional services and other revenue decreased from ~~30%~~36% to ~~24%~~29% and ~~from 29%~~34% to ~~27%~~23%, respectively, for the three and ~~nine~~six months ended ~~January~~October 31, 2023 ~~respectively, when compared to the same periods in the prior year~~and 2022, primarily due to a decrease in revenues and utilization. Our gross margin percentage on professional services and other revenue in our SCM segment ~~services~~ decreased from ~~38%~~36% to ~~26%~~28% and ~~from 37%~~34% to ~~31%, respectively,~~22% for the three and ~~nine~~six months ended ~~January~~October 31, 2023 and ~~2022.~~2022, respectively. This is primarily the result of a decrease in professional services and other revenue, which is being driven by timing of projects and utilization. Our Other segment professional services gross margin remained flat at 43% for the three and ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, respectively, due to higher margin projects and cost containment year to date. Our IT Consulting segment professional services gross margins remained flat at 22% for the three months ended January 31, 2023, when compared to the same period last year due to the timing of project work. For the nine months ended January 31, 2023, our IT Consulting segment services gross margin decreased to 20% from 21% the same period in the prior year.2022. Professional services and other gross margin is directly related to the level of services and other revenue. The primary component of cost of services and other revenue is services staffing, which is relatively inelastic in the short term.

Gross Margin on Maintenance

Maintenance gross margin percentage ~~increased~~decreased from ~~80%~~82% to ~~81%~~79% for the three and six months ended ~~January~~October 31, 2023 when compared to the same period in the prior year. Maintenance gross margin percentage increased from 80% to 82% for the nine months ended January 31, 2023, when compared to the same period in the prior year.and 2022, respectively. The ~~increase~~decrease is primarily due to a decrease in ~~personnel costs and computer software expense,~~maintenance revenue when compared to the same ~~period~~periods in the prior year. The primary cost component is maintenance staffing, which is relatively inelastic in the short term.

EXPENSES

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		Three Months Ended January 31,								Nine Months Ended January 31,									Three Months Ended October 31,								Six Months Ended October 31,
		2023		2022		% of Revenue				2023		2022		% of Revenue					2023		2022		% of Revenue				2023		2022		% of Revenues
						2023		2022						2023		2022							2023		2022						2023		2022
		(in thousands)								(in thousands)									(in thousands)								(in thousands)
Research and development	Research and development	$	4,402	$	4,602	14	%	14	%	$	13,220	$	13,304	14	%	14	%	Research and development	$	4,269	$	4,364	17	%	16	%	$	8,518	$	8,818	17	%	16	%
Sales and marketing	Sales and marketing	$	5,325	$	5,222	17	%	16	%	$	16,934	$	17,234	18	%	19	%	Sales and marketing	$	5,313	$	5,229	21	%	19	%	$	11,044	$	10,633	21	%	20	%
General and administrative	General and administrative	$	6,030	$	5,834	19	%	18	%	$	17,796	$	15,844	19	%	17	%	General and administrative	$	5,461	$	5,884	21	%	22	%	$	10,922	$	11,467	21	%	21	%
Amortization of acquisition-related intangible assets	Amortization of acquisition-related intangible assets	$	25	$	53	—	%	—	%	$	81	$	159	—	%	—	%	Amortization of acquisition-related intangible assets	$	129	$	32	1	%	—	%	$	153	$	56	—	%	—	%
Other income, net		$	1,334	$	92	4	%	—	%	$	1,308	$	1,459	1	%	1	%
Income tax expense (benefit)		$	950	$	391	3	%	1	%	$	2,034	$	(43)	2	%	—	%
Other income (loss)																		Other income (loss)	$	(577)	$	(145)	(2)	%	(1)	%	$	1,309	$	(26)	3	%	—	%
Income tax expense																		Income tax expense	$	31	$	489	—	%	2	%	$	695	$	975	1	%	2	%

Research and Development

Research and development costs include personnel costs, third-party contractors, travel expense, rent, software expense and other non-capitalized software development costs. A breakdown of the research and development costs is as follows:

Three Months Ended January 31,
2023 2022 % Change
(in thousands)
Total research and development expense $ 4,402 $ 4,602 (4) %
Percentage of total revenue 14 % 14 %
Total amortization of capitalized computer software development costs * $ 262 $ 757 (65) %


		Nine Months Ended January 31,									Three Months Ended October 31,								Six Months Ended October 31,
		2023			2022			% Change			2023			2022			% Change			2023		2022			% Change
		(in thousands)									(in thousands)									(in thousands)

Total research and development expense	Total research and development expense	$	13,220		$	13,304		(1)	%	Total research and development expense	$	4,269		$	4,364		(2)	%		$	8,518	$	8,818		(3)	%
Percentage of total revenue	Percentage of total revenue	14		%	14		%			Percentage of total revenue	17		%	16		%				17%		16		%
Total amortization of capitalized computer software development costs *	Total amortization of capitalized computer software development costs *	$	981		$	2,467		(60)	%	Total amortization of capitalized computer software development costs *	$	104		$	262		(60)	%		$	242	$	719		(66)	%

*Included in cost of license fees and subscription fees.

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, total product research and development costs decreased by 4%2% and 1%3%, respectively, when compared to the same periods in the previous year, primarily due to a decrease in the use of third-party contractors. For the three and ~~nine~~six months ended ~~January~~October 31, 2023 and 2022, amortization of capitalized software development costs decreased ~~65%~~60% and ~~60%~~66%, ~~when compared to the same periods in the previous year,~~respectively, as some projects were fully amortized.

Sales and Marketing

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, sales and marketing expenses as a percentage of revenue increased from ~~16% to 17% and decreased from~~ 19% to ~~18%~~21% and 20% to 21%, respectively, when compared to the same periods last year. The increase in sales and marketing ~~costs for the three months ended January 31, 2023~~cost is primarily due to an increase in personnel costs and ~~dues and subscriptions, partially offset by a reduction in the use~~timing of ~~third-party contractors. The decrease sales and~~ marketing ~~costs year over year is primarily due to direct marketing cost containment.~~events.

General and Administrative

For the three and ~~nine~~six months ended ~~January~~October 31, 2023, general and administrative expenses ~~increased~~decreased from ~~18%~~22% to ~~19%~~21% and ~~from 17% to 19%~~remained flat at 21% as a percentage of revenue when compared to the same ~~periods~~period a year ago, primarily due to personnel costs, professional services and third-party contractors.

At ~~January~~October 31, 2023, the total number of full-time personnel was 423, which includes 339 employees ~~was 397~~and 84 third-party contractors, compared to ~~418~~563 full-time personnel, which includes 406 employees and 157 third-party contractors at ~~January~~October 31, 2022.

~~Operating Income/(Loss)~~

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Three Months Ended January 31, Nine Months Ended January 31,
2023 2022 % Change 2023 2022 % Change
(in thousands) (in thousands)
Supply Chain Management $ 7,763 $ 7,458 4 % $ 22,587 $ 19,531 16 %
IT Consulting 211 506 (58) % 643 1005 (36) %
Other* (5,018) (4,725) 6 % (14,950) (12,837) 16 %
Total Operating Income $ 2,956 $ 3,239 (9) % $ 8,280 $ 7,699 8 %

Operating Income/(Loss)


	Three Months Ended October 31,						Six Months Ended October 31,
	2023		2022		% Change		2023		2022		% Change
	(in thousands)						(in thousands)
Supply Chain Management	$	5,835	$	7,646	(24)	%	$	12,277	$	14,825	(17)	%
Other*	(4,606)		(5,096)		(10)	%	(9,656)		(9,933)		(3)	%
Total operating income	$	1,229	$	2,550	(52)	%	$	2,621	$	4,892	(46)	%

* Includes all corporate overhead and other common expenses.

Our SCM segment operating income ~~increased~~decreased by 4%24% and ~~16%~~17%, respectively, for the three and ~~nine~~six months ended ~~January~~October 31, 2023, compared to the same periods in the prior year primarily due to ~~improved gross margins.~~a reduction in professional services and other revenue.

Our ~~IT Consulting~~Other segment operating ~~income~~loss decreased by ~~58%~~10% and ~~36%~~3%, respectively, for the three and ~~nine~~six months ended ~~January 31, 2023, compared to same periods last year primarily due to the timing of project work and an increase in expenses related to sales and third-party contractors.~~

~~Our Other segment operating loss increased by 6% and 16%, respectively, for the three and nine months ended January~~October 31, 2023, when compared to the same periods in the prior year due primarily to ~~an increase~~a decrease in variable compensation, and ~~stock option expenses.~~third-party contractors.

Other Income (Loss)

Other income (loss) is comprised of net interest and dividend income, rental income, asset gains and losses, exchange rate gains and losses, and realized and unrealized gains and losses from investments. For the three months ended ~~January~~October 31, 2023, the increase in Other income (loss) is mainly due to increases in interest income and realized gains, partially offset by unrealized losses on investments when compared to the same period in the prior year. We recorded unrealized losses of approximately $1.6 million and realized gains of approximately $0.1 million for the three months ended October 31, 2023 from our trading securities portfolio.

For the six months ended October 31, 2023, the increase in Other income (loss) is mainly due to an increase in interest income, ~~unrealized~~realized gains on investments ~~an increase~~and a decrease in exchange rate ~~gains and lower realized gain~~losses, partially offset by higher unrealized losses on investments compared to the same period in the prior year. ~~This increase was partially offset by a decrease in sale of assets compared to the prior year.~~ We recorded unrealized losses of approximately $0.8 million and realized gains of approximately ~~$0.4~~$0.1 million ~~and realized losses of approximately $12,000~~ for the ~~three~~six months ended ~~January~~October 31, 2023 from our trading securities portfolio.

For the ~~nine~~six months ended January 31, 2023, the decrease in Other income is mainly due to higher losses on exchange rate compared to the same period in the prior year and lower unrealized gains on investments when compared to the same period last year. This decrease was offset by an increase in interest income compared to the prior year. We recorded unrealized gains of approximately $0.2 million and realized losses of approximately $0.1 million for the nine months ended January 31, 2023 from our trading securities portfolio.

~~For the nine months ended January~~October 31, 2023 and 2022, our investments generated an annualized yield of approximately ~~1.65%~~4.28% and ~~1.43%~~1.41%, respectively.

Income Taxes

We recognize deferred tax assets and liabilities based on the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. We measure deferred tax assets and liabilities using statutory tax rates in effect in the year in which we expect the differences to reverse. We establish a deferred tax asset for the expected future benefit of net operating losses, credit carry-forwards and nonqualified stock options. Under the Income Tax Topic of the FASB ASC 740, Income Taxes,, we cannot recognize a deferred tax asset for the future benefit of our net operating losses, tax credits and temporary differences unless we can establish that it is “more likely than not” that the deferred tax asset would be realized.

During the three and ~~nine~~six months ended ~~January~~October 31, 2023, we recorded an income tax expense from continuing operations of ~~$950,000~~$31,000 and ~~$2.0 million,~~$695,000, respectively. During the three and six months ended October 31, 2022, we recorded income tax expense from continuing operations of $489,000 and $975,000, respectively, ~~primarily due to~~which included discrete stock compensation benefits of ~~$4,000~~$29,000 and $67,000, respectively, net of normal income tax expense from operations. During the three and nine months ended January 31, 2022, we recorded an income tax expense of $391,000 and an income tax benefit of $43,000, respectively, primarily due to discrete stock compensation benefits of $327,000 and $1.9 million$63,000, respectively, net of normal income tax expense from operations. Before adjusting for these discrete tax benefits, our effective tax rate would have been ~~21.8%~~4.8% and ~~21.9%, respectively,~~17.7% in the three and ~~nine~~six months ended ~~January~~October 31, 2023, respectively, compared to our effective tax rate of ~~22.4%~~21.5% and ~~20.7%, respectively,~~21.3% in the three and ~~nine~~six months ended ~~January~~October 31, ~~2022.~~2022, respectively. In addition, research and development credits and various permanent differences reduced our effective tax rate by ~~4.1%~~5.0% and 3.7%, respectively, in the ~~nine~~six months ended ~~January~~October 31, 2023, compared to a reduction of ~~4.3%~~4.0% and 0.2%, respectively, in the ~~nine~~six months ended ~~January~~October 31, 2022.

~~Operating Pattern~~

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Operating Pattern

We experience an irregular pattern of quarterly operating results, caused primarily by fluctuations in both the number and size of software license and subscription contracts received and delivered from ~~quarter to quarter~~quarter-to-quarter and our ability to recognize revenue in that quarter in accordance with our revenue recognition policies. We expect this pattern to continue.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

Sources and Uses of Cash

Historically, we have funded, and we continue to fund, our operations and capital expenditures primarily with cash generated from operating activities. The changes in net cash that our operating activities provide generally reflect the changes in net earnings and non-cash operating items plus the effect of changes in operating assets and liabilities, such as investment trading securities, trade accounts receivable, trade accounts payable, accrued expenses and deferred revenue. We have no debt obligations or off-balance sheet financing arrangements, and, therefore, we used no cash for debt service purposes.

The following table shows information about our cash flows and liquidity positions during the ~~nine~~six months ended ~~January~~October 31, 2023 and 2022. You should read this table and the discussion that follows in conjunction with our Condensed Consolidated Statements of Cash Flows contained in Item 1 in Part I of this Quarterly Report and in our Annual Report for fiscal ~~2022.~~2023.

Nine Months Ended
January 31,
2023 2022
Net cash (used in) provided by operating activities $ (10,466) $ 14,050
Net cash (used in) investing activities (10,155) (801)
Net cash (used in) financing activities (9,463) (3,552)
Net change in cash and cash equivalents $ (30,084) $ 9,697


	Six Months Ended October 31,
	2023	2022
	(in thousands)
Net cash provided by (used in) operating activities of continuing operations	6,436	(11,822)
Net cash provided by operating activities of discontinued operations	1,618	561
Net cash provided by (used in) operating activities	8,054	(11,261)
Net cash used in investing activities of continuing operations	(25,522)	(9,206)
Net cash provided by investing activities of discontinued operations	1,825	—
Net cash used in investing activities	(23,697)	(9,206)
Net cash used in financing activities of continuing operations	(12,082)	(6,261)
Net change in cash and cash equivalents	(27,725)	(26,728)

For the ~~nine~~six months ended ~~January~~October 31, 2023, the net ~~decrease~~increase in cash provided by operating activities when compared to cash used in operating activities ~~when compared to~~in the same period last year was due primarily to the following: (1) a ~~relative higher increase~~decrease in client accounts receivables when compared to ~~a lower~~an increase in the same period last year due to the timing of closing client sales and related collections, (2) an increase in the proceeds from the maturity and sales of trading securities, (3) a decrease in the purchases of trading securities, ~~(3) an increase~~(4) a decrease in deferred tax ~~asset~~assets relative to ~~a lower~~an increase in the prior year, ~~(4)~~(5) a ~~relative~~lower decrease in deferred revenue when compared to ~~an increase in~~ the same period last year due to timing of revenue recognition, ~~(5)~~(6) an increase in net earnings, (7) an increase in stock-based compensation expense, (8) an increase in net loss on investments and (9) higher depreciation and amortization expense due to the Garvis acquisition.

This net increase in cash provided by operating activities was partially offset by: (1) an increase in prepaid expenses when compared to a decrease in ~~net earnings, (6)~~the same period last year due to the timing of purchases, (2) a gain on sale of discontinued operations and (3) a decrease in accounts payable and other liabilities compared to the same period last year due to timing of ~~payments and (7) a decrease in depreciation and amortization.~~

This net decrease in cash used in operating activities was partially offset by: (1) an increase in stock-based compensation expense, (2) a decrease in gains on investments compared to the same period in the prior year, (3) a relative decrease in prepaid expenses when compared to a increase in the same period last year due to the timing of purchases and (4) an increase in the proceeds from the maturity and sales of trading securities.payments.

The increase in cash used in investing activities when compared to the same period in the prior year was mainly due to the Garvis acquisition compared to the purchase of certain assets of Starboard ~~and an increase~~during the prior year, partially offset by a decrease in purchases of property and equipment. ~~For more information about our acquisition of Starboard, please see the discussion in Note E to the Condensed Consolidated Financial Statements.~~

The increase in cash used in financing activities when compared to the prior year was due primarily to repurchases of common stock, an increase in dividends paid and a decrease in proceeds from exercise of stock options.

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Discontinued Operations

Net cash provided by operating activities of discontinued operations was $1.6 million in the current year compared to $0.6 million in the prior year due primarily to the gain on the sale of discontinued operations, offset by a decrease in prepaid expenses and other assets and a lower decrease in accounts receivable.

In accordance with our policy to record the net cash received from the sale of a discontinued operation as a cash inflow from investing activities of discontinued operations, the increase in cash provided by investing activities of discontinued operations is the result of the disposal of discontinued operations.

The following table shows net changes in total cash, cash equivalents, and investments, which is one measure management uses to understand net total cash generated by our activities:

As of January 31,
(in thousands)
2023 2022
Cash and cash equivalents $ 80,606 $ 98,355
Short and long-term investments 24,331 16,463
Total cash and short and long-term investments 104,937 114,818
Net decrease/increase in total cash and investments during nine months ended January 31, $ (22,579) $ 10,154

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	As of October 31,
	2023		2022

Cash and cash equivalents	$	62,971	$	83,410
Short and long-term investments	20,917		22,805
Total cash and short and long-term investments	$	83,888	$	106,215
Net decrease in total cash and investments during the six months ended October 31,	$	(29,622)	$	(20,602)

Our total activities used more cash and investments during the ~~nine~~six months ended ~~January~~October 31, 2023, when compared to the prior year period, in the course of normal business operations.

Days Sales Outstanding in accounts receivable ~~were 101~~was 72 days as of ~~January~~October 31, 2023, compared to 7778 days as of ~~January~~October 31, 2022. This ~~increase~~decrease is primarily due to the timing of billings and cash collections. Our current ratio was ~~2.6~~2.4 to 1 on ~~January~~October 31, 2023 and 2.9 to 1 on ~~January~~October 31, 2022.

Our business in recent periods has generated substantial positive cash flow from operations, excluding purchases and proceeds of sale of trading securities. For this reason, and because we had ~~$104.9~~$83.9 million in cash and investments with no debt as of ~~January~~October 31, 2023, we believe that our sources of liquidity and capital resources will be sufficient to satisfy our presently anticipated requirements ~~during at least the next~~for continuing operations for a minimum of twelve months for working capital, capital expenditures and other corporate needs. However, at some future date, we may need to seek additional sources of capital to meet our requirements. If such need arises, we may be required to raise additional funds through equity or debt financing. We do not currently have a bank line of credit. We can provide no assurance that bank lines of credit or other financing will be available on terms acceptable to us. If available, such financing may result in dilution to our shareholders or higher interest expense.

On August 19, 2002, our Board of Directors approved a resolution authorizing the repurchase of up to an additional 2.0 million shares of our Class A common stock. We have made and will make these repurchases through open market purchases at prevailing market prices. The timing of any repurchase will depend upon market conditions, the market price of our common stock and management’s assessment of our liquidity and cash flow needs. Under this repurchase plan, through ~~January~~October 31, 2023, we have repurchased ~~1,053,679~~1,484,255 shares of common stock at a cost of approximately ~~$6.2~~$11.0 million. As of ~~January~~October 31, 2023, under all repurchase plans previously authorized, including this most recent plan, we have repurchased a total of ~~4,588,632~~5,019,208 shares of common stock at a cost of approximately ~~$25.6~~$30.4 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For the ~~nine~~three months ended ~~January~~October 31, 2023, there were no significant changes to our critical accounting policies and estimates from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on form 10-K for fiscal ~~2022.~~2023.

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Item 3 Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency. In the three and ~~nine~~six months ended ~~January~~October 31, 2023, we generated approximately ~~20%~~22% and ~~19%, respectively,~~21% of our revenue outside the United States. We typically make international sales through our VARs and employees located in foreign countries and denominate those sales in U.S. and New Zealand dollars, British pounds sterling or euros. However, expenses incurred in connection with these sales are typically denominated in the local currencies. We recorded an exchange rate ~~gain~~losses of approximately ~~$0.1~~$0.3 million for the three months ended ~~January~~October 31, 2023 compared to an exchange rate ~~gain~~losses of approximately ~~$8,000~~$0.2 million for the same ~~periods~~period in the prior year. We recorded an exchange rate loss of approximately $0.3 million for the ~~nine~~six months ended ~~January~~October 31, 2023 compared to an exchange rate loss of approximately ~~$0.2~~$0.4 million for the same ~~periods~~period in the prior year. We estimate that a 10% movement in foreign currency rates would have had the effect of creating up to a ~~$60,000~~$23,000 and ~~$51,000~~$20,000 exchange rate gain or loss for the three and ~~nine~~six months ended ~~January~~October 31, ~~2023, respectively.~~2023. We have not engaged in any hedging activities.

Interest Rates and Other Market Risks. We have no debt, and therefore limit our discussion of interest rate risk to risk associated with our investment profile. We manage our interest rate risk by maintaining an investment portfolio of trading investments with high credit quality and relatively short average maturities. These instruments include, but are not limited to, money-market instruments, bank time deposits, and taxable and tax-advantaged variable rate and fixed rate obligations of corporations, municipalities, and national, state, and local government agencies. These instruments are denominated in U.S. dollars. The fair market value of these instruments as of ~~January~~October 31, 2023 was approximately ~~$98.4~~$79.5 million compared to ~~$105.7~~$100.3 million as of ~~January~~October 31, 2022.

We also hold cash balances in accounts with commercial banks in the United States and foreign countries. These cash balances represent operating balances only and are invested in short-term time deposits of the local bank. Such operating cash balances held at banks outside the United States are denominated in the local currency and are minor.

Many of our investments carry a degree of interest rate risk. When interest rates fall, our income from investments in variable-rate securities declines. When interest rates rise, the fair market value of our investments in fixed-rate securities declines. In addition, our investments in equity securities are subject to stock market volatility. Due in part to these factors, our future investment income may fall short of expectations or we may suffer losses in principal if forced to sell securities, which have seen a decline in market value due to changes in interest rates. We attempt to mitigate risk by holding fixed-rate securities to maturity, but, if our liquidity needs force us to sell fixed-rate securities prior to maturity, we may experience a loss of principal.

Inflation. Although we cannot accurately determine the amounts attributable thereto, we have been affected by inflation through increased costs of employee compensation and other ~~operational~~operating expenses. To the extent permitted by the marketplace for our products and services, we attempt to recover increases in costs by periodically increasing prices.

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Item 4. Controls and Procedures

Management’s Report on Internal Control Over Financial Reporting

~~Our~~Management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures ~~(as~~as defined in ~~Rule~~Rules 13a-15(e) ofand 15d-15(e) under the Securities Exchange Act of 1934, ~~(“Exchange~~as amended (the “Exchange Act”)). Disclosure controls and procedures are designed to ~~provide reasonable assurance~~ensure that information required to be disclosed by a company in ~~our~~the reports ~~filed~~that it files or ~~submitted~~submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the ~~SEC~~SEC’s rules and forms. ~~Our disclosure~~Disclosure controls and procedures ~~are also~~include, without limitation, controls and procedures designed to ensure that ~~such~~ information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive ~~officer~~ and principal financial ~~officer,~~officers, as appropriate to allow timely decisions regarding required disclosure.

~~Our principal executive officer~~Based on that evaluation, our Chief Executive Officer and ~~principal financial officer, with the assistance of our Disclosure Committee, have conducted an evaluation of the effectiveness of our disclosure controls and procedures~~Chief Financial Officer concluded that as of the end of the period covered by this Quarterly Report. We perform this evaluation on a quarterly basis so that the conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Annual Report and Quarterly Reports. Based on this evaluation, our principal executive officer and principal financial officer have concluded thatOctober 31, 2023, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting described below.

Identified Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The Company identified that certain process-level controls over the reconciliation of cash, accounts payable, accrued compensation, and related costs and cost of revenues were not operated effectively. These ineffective controls were attributable to insufficient policies and procedures and training that impaired our ability to timely investigate and resolve reconciling items.

These control deficiencies resulted in immaterial misstatements in related accounts, some of which have been corrected. Furthermore, the control deficiencies described above created a reasonable possibility that a material misstatement to the condensed consolidated financial statements would not be prevented or detected on a timely basis. Therefore, we concluded that the deficiencies, in the aggregate, represent a material weakness in the Company’s internal control over financial reporting and our internal control over financial reporting was not effective as of ~~the end~~October 31, 2023.

In light of the ~~period covered by~~material weakness described above, management performed additional analyses and other procedures to ensure that our condensed consolidated financial statements were prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). Accordingly, management believes that the condensed consolidated financial statements included in this Quarterly ~~Report.~~Report fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP.

Management’s Plan to Remediate the Identified Material Weaknesses

With regard to the above-described material weakness, the Company will implement enhanced policies and procedures over reconciliations and related training, including a focus on expectations and procedures for investigating and resolving reconciling items on a timely basis.

We anticipate that the material weakness will be fully remediated before April 30, 2024, but the material weakness cannot be considered fully remediated until the updated policies and training have been in place and operated for a sufficient period of time to enable management and KPMG LLP to test and to conclude on the operating effectiveness of the controls.

Changes in Internal Control ~~over~~Over Financial Reporting

~~There~~Except as related to the identification of the material weakness described above, there have not been any changes in our internal control over financial reporting (as such term is defined in Rules ~~13a-15(f)~~13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently involved in legal proceedings requiring disclosure under this item.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,” of our Annual Report for fiscal ~~2022.~~2023. There have been no material changes to the risk factors as previously disclosed in such Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~Issuer Purchases of Equity Securities*

On August 19, 2002, our Board of Directors authorized the repurchase of up to an additional 2.0 million shares of our Class A common stock. We have made and will make these repurchases through open market purchases at prevailing market prices. The timing of any repurchase will depend upon market conditions, the market price of our Class A common stock and management’s assessment of our liquidity and cash flow needs. Under this repurchase plan, we have repurchased 1,484,255 shares of Class A common stock at a cost of approximately $11.0 million, which had a $4.8 million impact on fiscal 2024. As of October 31, 2023, under all repurchase plans previously authorized, including this most recent plan, we have repurchased a total of 5,019,208 shares of common stock at a cost of approximately $30.4 million.

The following table presents information related to repurchases of common stock the Company made during the quarter ended October 31, 2023:


Fiscal Period	Total Number of Shares Purchased, which were also Part of the Publicly Announced Plans or Programs	Average Price Paid per Share		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
August 1, 2023 through August 31, 2023	—	$	—	946.632
September 1, 2023 through September 30, 2023	14,807	$	11.47	931,825
October 1, 2023 through October 31, 2023	415,769	$	11.18	516,056
Total Fiscal 2024 Second Quarter	430,576

*Subject to applicable law, the Company may repurchase shares directly in the open market, in privately negotiated transactions or pursuant to derivative instruments and plans complying with Rule 10b5-1 under the Exchange Act, among other types of transactions and arrangements.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit 2.1						Stock Purchase Agreement, dated as of September 5, 2023, among Logility, Inc., each of the shareholders of Garvis AI Limited and Piet Buyck, as Shareholder Representative (1)

Exhibit 3.1						Amended and Restated Articles of Incorporation, and amendments thereto. ~~(1)~~(2) (P)

Exhibit 3.2						Amended and Restated By-Laws dated May 18, 2009. ~~(2)~~(3 )

Exhibits 31.1-31.2.						Rule 13a-14(a)/15d-14(a) Certifications

Exhibit 32.1.						Section 906 Certifications

Exhibit 101.INS						XBRL Instance Document.

Exhibit 101.SCH						XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 101.LAB						XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.

______________

(1)Incorporated by reference herein. Filed by the Company as Exhibit 2.1 of the Company’s Form 8-K (File No. 000-12456) as filed with the SEC on September 7, 2023.

(2)Incorporated by reference herein. Filed by the Company as an exhibit to its Quarterly Report filed on Form 10-Q for the quarter ended October 31, 1990. (P) Filed in paper format.

~~(2)~~(3)Incorporated by reference herein. Filed by the Company as Exhibit 3.1 to its Quarterly Report filed on Form 10-Q for the quarter ended January 31, 2010.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AMERICAN SOFTWARE, INC.

Date: ~~March 3,~~December 11, 2023	By:	/s/ H. Allan Dow
		H. Allan Dow Chief Executive Officer and President (Principal Executive Officer)

Date: ~~March 3,~~December 11, 2023	By:	/s/ Vincent C. Klinges
		Vincent C. Klinges Chief Financial Officer (Principal Financial Officer)

Date: ~~March 3,~~December 11, 2023	By:	/s/ Bryan L. Sell
		Bryan L. Sell Controller and Principal Accounting Officer

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	January 31, 2023		April 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	80,606	$	110,690
Investments	23,847		16,826
Trade accounts receivable, less allowance for doubtful accounts of $380 at January 31, 2023 and $423 at April 30, 2022:
Billed	32,183		20,619
Unbilled	2,352		2,989
Prepaid expenses and other current assets	5,575		5,067
Total current assets	144,563		156,191
Investments—noncurrent	484		—
Property and equipment, net of accumulated depreciation of $32,047 at January 31, 2023 and $31,240 at April 30, 2022	6,502		3,654
Capitalized software, net of accumulated amortization of $42,988 at January 31, 2023 and $42,007 at April 30, 2022	605		1,586
Goodwill	29,558		25,888
Other intangibles, net of accumulated amortization of $13,829 at January 31, 2023 and $13,228 at April 30, 2022	2,376		147
Lease right of use assets	544		935
Deferred sales commissions—noncurrent	1,544		2,050

Other assets	3,888		2,384
Total assets	$	190,064	$	192,835
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,007	$	2,506
Accrued compensation and related costs	3,027		6,918
Dividends payable	3,716		3,700
Operating lease obligations	440		541
Other current liabilities	2,804		1,871
Deferred revenue	40,706		41,953
Total current liabilities	54,700		57,489
Deferred income taxes	—		1,772
Long-term operating lease obligations	144		461
Other long-term liabilities	224		137
Total liabilities	55,068		59,859
Shareholders’ equity:
Common stock:
Class A, $.10 par value. Authorized 50,000,000 shares: 36,546,495 (31,957,863, net) shares issued and outstanding at January 31, 2023 and 36,405,695 (31,817,063, net) shares issued and outstanding at April 30, 2022	3,655		3,641
Class B, $.10 par value. Authorized 10,000,000 shares: 1,821,587 shares issued and outstanding at January 31, 2023 and April 30, 2022; convertible into Class A Common Shares on a one-for-one basis	182		182
Additional paid-in capital	177,532		171,948
Retained deficit	(20,814)		(17,236)
Class A treasury stock, 4,588,632 shares at January 31, 2023 and April 30, 2022, at cost	(25,559)		(25,559)
Total shareholders’ equity	134,996		132,976
Commitments and contingencies
Total liabilities and shareholders’ equity	$	190,064	$	192,835


	Three Months Ended January 31, 2022				Nine Months Ended January 31, 2022
	Class A Common Shares		Class B Common Shares		Class A Common Shares		Class B Common Shares
Distributed earnings	$	0.11	$	0.11	$	0.33	$	0.33
Undistributed losses	(0.02)		(0.02)		(0.05)		(0.05)
Total	$	0.09	$	0.09	$	0.28	$	0.28
Distributed earnings	$	3,488	$	201	$	10,426	$	602
Undistributed losses	(708)		(41)		(1,727)		(100)
Total	$	2,780	$	160	$	8,699	$	502
Basic weighted average common shares outstanding	31,668		1,822		31,471		1,822


	As of January 31, (in thousands)
	2023		2022
Cash and cash equivalents	$	80,606	$	98,355
Short and long-term investments	24,331		16,463
Total cash and short and long-term investments	104,937		114,818
Net decrease/increase in total cash and investments during nine months ended January 31,	$	(22,579)	$	10,154