Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


_________________________
FORM10-K

_________________________
(Mark One)

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

For the fiscal year ended April 30, 2018

2020

OR


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

For the transition period fromto

Commission FileNumber 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 No.)

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

None None

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

Class A Common Shares, $0.10 Par Value

(Title of class)

_________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.  ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, anon-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” inRule 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

At


As of October 31, 2017,2019, the last business day of the registrant’s most recently completed second fiscal quarter, 27,896,25430,042,050 Class A Common Shares and 2,256,5881,821,587 Class B Common Shares of the registrant were outstanding. The aggregate market value (based upon the closing price of Class A Common Shares as quoted on the NASDAQ National Market System aton October 31, 2017)2019) of the Class A Common Shares held bynon-affiliates on that date was approximately $373.8$516.5 million. AtAs of July 6, 2018, 29,020,3362, 2020, 30,620,541 Class A Common Shares and 1,885,9951,821,587 Class B Common Shares of the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE; LOCATION IN FORM10-K

Portions of the Company’s Proxy Statement for its 20182020 Annual Meeting of StockholdersShareholders are incorporated by reference into Part III.


American Software Inc.

ANNUAL REPORT ON FORM10-K

For the Fiscal Year Ended April 30, 2018

2020


TABLE OF CONTENTS


Item 1.

Business
1

Item 1A.

Risk Factors
19
18

Item 1B.

Unresolved Staff Comments
38
36

Item 2.

Properties
38
36

Item 3.

Legal Proceedings
38
36

Item 4.

Mine Safety Disclosures
38
37

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
39
38

Item 6.

Selected Consolidated Financial Data
42

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations
43

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk
55
54

Item 8.

Consolidated Financial Statements and Supplementary Data
57
55

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
85
83

Item 9A.

Controls and Procedures
85
83

Item 9B.

Other Information
85
84

Item 10.

Directors, Executive Officers and Corporate Governance
86
84

Item 11.

Executive Compensation
86
84

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
86
84

Item 13.

Certain Relationships and Related Transactions, and Director Independence
86
84

Item 14.

Principal Accounting Fees and Services
86
85

Item 15.

Exhibits, Financial Statement Schedules
87
85

Item 16.

Form 10-K Summary
Form10-K Summary87
89



PART I

ITEM

Item 1. BUSINESS

Special Cautionary Notice Regarding Forward-Looking Statements

We believe that it is important to communicate our future expectations to our shareholders and to the public. This report contains forward-looking statements, including, in particular, statements about our goals, plans, objectives, beliefs, expectations and prospects, under the headings “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. 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 herein are made pursuant to the safe harbor provisions 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.

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 reflected by our forward-looking statements 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 effects of the global pandemic, the timing and degree of business recovery, unpredictability and the irregular pattern of future revenues, dependence on particular market segments or customers, 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. Factors that could cause or contribute to such differences include, but are not limited to, those we discuss under the section captioned “Risk Factors” in Item 1A. of thisForm 10-K as well as the cautionary statements and other factors that we discuss in other sections of thisForm 10-K.


Company Overview


American Software, Inc. (“("American Software”Software" or the “Company”"Company") was incorporated as ain Georgia corporation in 1970. We develop, marketThe Company is headquartered in Atlanta, Georgia with U.S. offices in Boston, Chicago, Dallas, Indianapolis, New York, St. Louis, Miami, Pittsburgh and support a portfolio of softwareSan Diego; and services that deliver supply chaininternational offices in the United Kingdom, Sweden, Germany, India, New Zealand and advanced retail planning solutions, product lifecycle management, supply chain management, product sourcing, vendor compliance and enterprise management to the global marketplace. Our software and services are designed to bring business value to enterprises by supporting their operations over cloud-based Internet-architected solutions. References to “the Company,” “our products,” “our software,” “our services” and similar references include the appropriate business segment actually providing the product or service.

Australia.


We provide our software and services solutions through three major operating segments, which are further broken down into a total of six major product and service groups. The three operating segments aresegments; (1) Supply Chain Management (“SCM”), (2) Information Technology (“IT”Consulting ("IT Consulting") Consulting and (3) Other. Today,The SCM software business is our core market,

however 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 enterprise resource planning ("ERP") customers included in the Other segment.

Our primary operating units or brands under our SCM segment include Logility, Inc., New Generation Computing, Inc. ("NGC"), and Demand Management, Inc. ("DMI"). Logility and New Generation Computing are each a wholly-owned subsidiary of the Company, and Demand Management, Inc. is a wholly-owned subsidiary of Logility, Inc. Each operating unit focuses on a segment of the marketplace where their expertise lies.

American Software enables enterprises to accelerate their operations from product concept to customer baseavailability. Our three brands leverage a single platform spanning eight supply chain process areas, including demand optimization, inventory optimization, supply optimization, retail optimization, quality and compliance, product lifecycle management ("PLM"), sourcing management and integrated business planning. Our platform includes advanced analytics and is fueled by supply chain master data, allowing for the automation of critical business processes through the application of artificial intelligence ("AI") and machine learning algorithms to a variety of internal and external data streams.

We believe enterprises are facing unprecedented rates of change and disruption across their operations. 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 customer availability. Our platform provides to our customers a digital twin of their physical supply chain networks which improves the speed and agility of their operations by implementing automated planning processes that evaluate multiple business scenarios. These processes continuously analyze business and market signals to better inform product design and development, increase forecast accuracy, optimize inventory across the supply chain and in retail locations, and ensure high customer satisfaction.
Our platform is highly regarded by customers and industry analysts alike. We are named a leader in multiple IDC MarketScape reports including; the January 2020 report IDC MarketScape: Worldwide Supply Chain Demand Planning 2019 Vendor Assessment, the December 2019 report IDC MarketScape: Worldwide Supply Chain Inventory Optimization 2019 Vendor Assessment, andthe November 2019 report IDC MarketScape:Worldwide Supply Chain Sales and Operations Planning 2019 Vendor Assessment.
We have been positioned in the Leaders quadrant in Gartner, Inc.’s (“Gartner”) May 7, 2019 report, Magic Quadrant for Sales and Operations Planning Systems of Differentiation, and August 21, 2018 report, Magic Quadrant for Supply Chain Planning System of Record. We believe our platform is rated highly due to our flexible advanced analytics, underlying 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.
We serve approximately 1,350 companies1,100 customers located in more than 80 countries.

The SCM segment consists of (i) Logility, Inc. (“Logility”) which provides supply chain optimizationcountries and advance retail planning solutions, as an integrated suite of saleslargely concentrated within key vertical markets, including apparel and operations planning, demand optimization, inventory optimization, manufacturing planningother soft goods, food and scheduling, supply optimization, retail allocationbeverage, chemical and merchandise planning, as well as (ii) Demand Management, Inc. (“DMI” or “Demand Management”) , which provides Software as a Service (“SaaS”) architected supply chain planning solutions to streamline the forecasting, inventory, production, supply, allocation, distributionprocess, consumer packaged goods, durable goods, life sciences and management of products between trading partners, (iii) New Generation Computing (“NGC”), which provides cloud solutions for supply chain management, product lifecycle management, vendor quality, and vendor compliance and corporate social responsibility (“CSR”) for both brand retailers and manufacturers, and (iv) Halo, which provides advanced analytics and business intelligence solutions for the supply chain market. The SCMretail. Our solutions are marketed and sold through both a direct sales team as well as an indirect global VAR (value value-


added reseller)reseller ("VAR") distribution network.

The IT Consulting segment consists While our solutions may be deployed in the cloud or on-premise, customers are increasingly opting for our cloud-based SaaS deployments. We further support our customers with an array of The Proven Method, Inc., an IT staffingconsulting, implementation, operational and consultingtraining services firm, which providesas well as technical support for their customers products, such as software enhancements, documentation, updates, customer education, consulting, systems integration services, maintenance and support services. The Other segment consists of American Software ERP, which provides purchasing and materials management, customer order processing, financial,e-commerce and traditional manufacturing solutions, and unallocated corporate overhead expenses.

Previously, we maintained three operating segments: (1) SCM, (2) IT and (3) Enterprise Resource Planning (“ERP”). Following the organizational realignment during the third quarter fiscal 2018, NGC was repositioned out of the ERP segment and into the SCM segment due to the launch of the new Andromeda platform for Supply Chain Management. There were no changes to the IT segment. Certain prior year amounts have been recasted to conform to fiscal 2018 presentation. The change in reportable segments had no effect on our previously reported consolidated financial position or results of operations.

hosting.

We derive revenues primarily from four sources: subscriptions, software licenses, services,maintenance and maintenance.services. We generally determine SaaS subscription and software license and SaaS subscription fees based on the depthbreadth of functionality, number of software modules, users and/or sites licensed and/ordivisions subscribed. Services and other revenues consist primarily of fees from software implementation, training, consulting services, SaaS, hosting and managed services. We bill for services primarily under time and materials arrangements and recognize revenues as we perform services. Subscription and maintenance agreements typically are for aone- three- to three-yearfive-year term, commencing at the time of the initial contract.software delivery. We generally bill these fees annually in advance and then recognize the resulting revenues ratably over the term of the agreement. Deferred revenues represent advance payments or billingsfees for subscriptions, software licenses, services and maintenance billed in advance of the time we recognize the related revenues.

Our cost

Market Opportunity
Today’s manufacturers, distributors and retailers must respond to rising consumer expectations to buy anywhere, deliver anywhere and return anywhere, even as global economic conditions and competitive pressures force businesses to reduce costs, decrease order cycle times and improve operating efficiencies. To meet these demands, we believe businesses must dramatically improve the performance of revenues for licenses includes amortization of developed technologytheir supply chains, which can only be achieved through automation, artificial intelligence and capitalized computer software development costs, salariesadvanced analytics. We leverage artificial intelligence and benefits and value-added reseller (VAR) commissions. Costs for maintenance and services revenues include the cost of personnel to conduct implementations, customer support and consulting, and other personnel-related expenses as well as agent commission expenses related to maintenance revenues generated by the indirect channel.

Our sales and marketing expenses generally include the salaries and commissions we pay tomachine learning algorithms throughout our direct sales professionals, along with marketing, promotional, travel and associated costs. Our general and administrative expenses generally include the salaries and benefits we pay to executive, corporate and support personnel, as well as office rent, utilities, communications expenses, and various professional fees.

Industry Background

Companies that effectively communicate, collaborate and integrate with their trading partners (customers, suppliers, and carriers) within the extended enterprise or across global supply chain networks can realize significant competitive advantages inmanagement software platform, enabling enterprises to accelerate the form of lower costs, improvedcycle time from product concept to customer service, and increased revenue. availability.

Supply chain management refers to the process of managing the complex global network of relationships that organizations maintain with external trading partners (customers and suppliers) to design products, forecast demand, source supply, manufacture products, distribute and allocate inventory and deliver goods and services to their customers.the end customer. Supply chain management involves both the activities related to sourcing and supplying and merchandising products or services (source, make, move, buy, store, and deliver) as well as the sales and marketing activities that influence the demand for goods and services, such as new product introductions, promotions, pricing and forecasting. The extended enterprise includes sourcing materialsAdditional aspects of supply chain management include comprehensive sales and vendor compliance for those activities,operations planning ("S&OP") as well as product delivery to the customer’s customer.

Today, several market trends are driving organizations to expand collaboration with trading partners along the supply chain. Today’s leading manufacturers and distributors have become more responsive to retailers and consumers, often referred to as omni-channel and more recently as Unified Commerce, which has increased the demand for improved planning and business analytics capabilities to model more complexity and effectively position inventory. At the same time, global economic conditions and competitive pressures are forcing businesses to reduce costs, decrease order cycle times and improve operating efficiencies. As a result, manufacturers, distributors and retailers are under pressure to better manage the supply chain as they seek to improve manufacturing efficiency and logistics operations while maintaining flexibility and responsiveness to changing market conditions and specific customer demands. These pressures are compounded by the rate of product churn, increasing globalization and complexity of the interactions among suppliers, manufacturers, distributors, retailers and consumers.

To compete in global markets, businesses must improve the performance of their supply chains, as well as the key functions, processes and technologies that make up an integrated supply chain network. Supply chain planning software solutions create a competitive advantage by modeling the time-phased need for products at a specific location in the business network and enables reducing the cost of goods sold, improving customer service, building global brands and increasing global supply chain visibility as companies move product to the market quicker. Our customers’ goal is to provide the right product in the right place at the right time at a competitive price.

The supply chain planning process focuses on demand forecasting, supply and inventory optimization, global sourcing, distribution, transportation and manufacturing planning and scheduling, product lifecycle management (PLM)(“PLM”), product sourcing quality and vendor compliance. Planning software is designedcompliance, to increase revenues, improve forecast accuracy, optimize production scheduling, streamline global sourcing, reduce inventory costs, decrease order cycle times, reduce transportation costs, and improve customer service. The supply chain execution function addresses procuring, vendor compliance, manufacturing, warehousing, fulfilling orders and distributingensure the right products throughout the supply chain.

In orderare brought to effectively manage and coordinate supply chain activities, companies require integrated business planning (IBP), sales and operations planning (S&OP), supply chain planning, allocation, sourcing, supply chain execution, supply chain management and supply chain analytics software that provide enterprise systems for integrated communication, optimization and collaboration among the various constituents throughout the supply chain network. This enhanced collaboration synchronizes production plans with demand forecasts, thereby minimizing bottlenecks that lead to production delays, excess inventory and distribution network problems.

Business Segments

Segment 1—Supply Chain Management

Logility, Inc.

Logility, our wholly-owned subsidiary, was incorporated in 1996 and provides supply chain optimization and advanced retail planning solutions, as an integrated suite of sales and operations planning, demand optimization, inventory optimization, manufacturing planning and scheduling, supply optimization, merchandise and assortment planning and retail allocation. The Logility platform includes an industry leading integration layer to import/export data while leveraging artificial intelligence to validate and harmonize the data used in the applications (supply chain master data management).

Logility’s solutions enable enterprises to increase their market visibility to build competitive advantages and increase profitability by reducing costs, increasing revenues, improving operational efficiencies and collaborating with customers and suppliers to more effectively sense and respond to dynamic market conditions. Additionally, Logility’s solutions streamline and automate the sales and operations planning (S&OP) process to create and assess business plans that profitably match supply with demand while synchronizing supply chain operations with strategic corporate goals.

Logility offers a multi-brand strategy to address unique market needs: (1) theLogility Voyager Solutions™ suite, which is marketed to companies with distribution-intensive supply chains seeking an optimized planning configured to the unique customer business requirements to drive competitive advantage, (2) theDemand Solutions® product line, which is marketed as a cloud platform designed for speed of implementation and efficiency on aSoftware-as-a-Solution (SaaS) platform, (3) New Generation Computing (“NGC”)’sAndromeda Supply Chain Management (SCM) solution which provides cloud solutions for supply chain management, product lifecycle management, vendor quality vendor compliance and corporate social responsibility visibility for both retailers and manufacturers and, (4) Halo, which provides supply chain advanced analytics and business intelligence solutions.

Logility derives revenues primarily from four sources: subscriptions, software licenses, services, and maintenance. Logility generally determines software license and SaaS fees based on the depth of functionality, number of production deployments, users and/or sites licensed. Services and other revenues consist primarily of fees from software implementation, training, consulting services associated with the implementation and support of Logility products. Logility bills for these services primarily under time and materials arrangements and recognizes revenues as it performs services. SaaS, hosting, managed services and maintenance agreements typically are for aone- to three-year term, commencing at the time of the initial product license. Logility generally bills maintenance fees annually in advance under agreements with terms of one to three years, and then recognizes the resulting revenues ratably over the term of the maintenance agreement. Deferred revenues represent advance payments or billings for subscriptions, software licenses, services and maintenance billed in advance of the time Logility recognizes the related revenues.

Logility’s cost of revenues for licenses includes amortization of developed technology and capitalized computer software development costs, salaries and benefits along with VAR commissions. Costs for maintenance and services revenues include the cost of personnel to conduct implementations, customer support and consulting, and other personnel-related expenses as well as agent commission expenses related to maintenance revenues generated by the indirect sales channel.

Logility’s selling expenses generally include the salaries and commissions it pays to its direct sales professionals, along with marketing, promotion, travel and associated costs. Logility’s general and administrative expenses generally include the salaries and benefits it pays to executive, corporate and support personnel, as well as office rent, utilities, communications expenses, and various professional fees.

Demand Management, Inc., a wholly owned subsidiary of Logility, was incorporated in 1985. Demand Management is a leading global provider of supply chain planning software that is designed to be deployed in the cloud, however some customers may deploy on premise. These cloud-architected solutions for manufacturers and distributors are designed to increase forecast accuracy, improve customer service levels, and reduce overall inventory to maximize profits and lower costs. Completely reengineered to run on the latest cloud technology, theDemand Solutions® DSX supply chain planning solution offers functionality for demand planning, collaborative forecasting, inventory planning, advanced planning and scheduling (APS) and S&OP.

Demand Management has worked with supply chain professionals for over 30 years and has incorporated industry best practices and real-world business requirements into its software.

Demand Management markets and sells theDemand Solutions® DSXto brand owners, manufacturers and distributors seeking an efficient supply chain management system delivering a single platform designed for rapid deployment and a simplified operational experience.

Supply Chain and Retail Industry Background

In response to omni-channel and the new Unified Commerce reality (consumers expectations to buy anywhere, deliver anywhere and return anywhere), increasing global competition, volatile market demand, shorter product life cycles, reduced lead times, and the consumers expectations for responsibly sourced materials; companies are continually seeking new ways to enhance the productivity, profitability and compliance of their supply chain and retail operations.good condition. Companies that effectively communicate, collaborate and integrate with their trading partners withinacross the extended enterprisemulti-enterprise network or supply chain can realize significant competitive advantages in the form of lower costs, greater customer loyalty, reduced stock-outs, more efficient sourcing, reduced inventory levels, synchronized supply and demand and increased revenue.

Gartner’s April, 2020 report, Forecast: Enterprise Application Software, Worldwide, 2018-2024, 1Q20 Update, predicts spending on Supply Chain Management software solutions will exceed $14 billion in 2020 and reach $22 billion by 2024. This represents a compounded annual growth rate ("CAGR") of 9.25% through 2024. Within the Supply Chain Management software market, Gartner includes solutions for supply chain management refers to the process of managing the complex global network of relationships that organizations maintain with external trading partners (customers, suppliers, manufacturers, distributorsplanning, supply chain execution and retailers) to forecast, source, manufacture, store, allocate and deliver goods and services to the end customer. Supply chain management involves the activities related to merchandizing, sourcing, and supplying products or services (source, make, move, buy, store, and deliver) as well as the sales and marketing activities that influence the demand for goods and services, such as new product introductions, promotions, pricing and forecasting.

Today, several market trends are driving organizations to invest inprocurement. We focus primarily on supply chain and retail planning initiatives. Global economic conditionsprocesses and competitive pressures are forcing companies to focus on customer desires while reducing costs, decreasing order cycle times and improving operating efficiencies along with omni-channel and Unified Commerce initiatives that are driving the needcertain execution functions, which we estimate account for more flexibility and better leverage of inventory to meet the needs of customers which include wholesale, branded retail and direct to consumer channels. As a result, manufacturers, brand owners, distributors and retailers are under pressure to better manage the supply chain as they seek to reduce costs, improve manufacturing efficiency and accelerate logistics operations while maintaining flexibility and responsiveness to changing market conditions and specific customer demands. These pressures are compounded by the increasing complexity and globalizationapproximately one-third of the interactions among suppliers, manufacturers, distributors, retailers and consumers.

Companies are increasingly deploying supply chain optimization, supply chain management, sourcing and advanced retail planning applications to address their forecasting,Supply Chain Management software market as defined by Gartner. Our platform includes more than thirty components spanning eight key supply chain planning inventory optimization, allocationprocesses that customers may adopt independently or as a comprehensive solution platform. We believe our opportunity to cross-sell and distribution requirements. Supplyup-sell existing customers is significant given the potential for customers to adopt additional components over time.


Our supply chain optimization and retail planning functions involve the use of information and analysis to facilitate theon-time delivery of the right products to the correct locationright place at the right time and at the optimal total cost. The planning process focuses onincludes demand forecasting and demand management,sensing, inventory and supply optimization, distribution, manufacturing planning and scheduling, sales and operations planning, and retail financial planning, assortment and allocation. Supply chain management involves product life cycle management (PLM),allocation, PLM, global sourcing and compliance to get the right products that meets consumer expectations to market on time.vendor compliance. Planning software is designed to increase revenues, improve forecast accuracy, optimize manufacturing scheduling, better leverage inventory investments, decrease order cycle times, reduce transportation costs and improve customer service. Customers are showing increasing interest inincreasingly adopting planning, sourcing and optimization software that is implemented and accessed in the cloud, known as SaaS.

Thecloud.

Our supply chain execution functions also address sourcing, fulfilling orders,manufacturing, distributing products, and deliverydelivering products to customers throughout the global network. Within the supply chain execution function, organizations are increasing their focus on vendor compliance and sourcing linked with supply chain planning and other enterprise applications, in order to increase the efficient and effective fulfillment of customer orders in both thebusiness-to-business and thebusiness-to-consumer sectors. These multi-enterprise supply chains have heightened the need for robust supply chain master data management (MDM)("MDM") to provide an accurate digital twin of the supply chain network, allowing enterprise businessesenterprises to quickly plan strategically and quickly and accurately respond to dynamic market conditions to harnesstake advantage of business opportunities and mitigate risk.

The March 28, 2018 Gartner Inc. report,Forecast: Enterprise Application Software, Worldwide 2016-2022, 1Q18 Update, predicts spending on Supply Chain Management software solutions will exceed $15 billion by 2019 and $20 billion by 2022. This represents a CAGR of 9.7% through 2022.

In order to effectively manage and coordinate supply chain activities, companies require demandintegrated business planning, S&OP, supply chain planning, inventory optimization, globalallocation, sourcing, product lifecycle management, compliance, retail merchandise planningsupply chain execution, and allocation, master data management and advancedsupply chain analytics software that provides forenables integrated communication, optimization and collaboration among the various stakeholdersconstituents throughout the supply chain network. This enhanced collaboration optimizes supply chain operations and minimizes bottlenecksOur advanced cognitive platform helps ensure that leadeach stakeholder is aligned with the corporate strategy to production delays, excess inventory, storage constraints, distribution network problems and out of stock conditions.

We believe that traditional ERP systems alone do not provide the visibility, depth, flexibility or optimization techniques required to effectively meet the planning demands of today’s intensely competitive and increasingly dynamic global business environment. Organizations are demanding supply chain solutions that are both modular and scalable to extend ERP functionality, fit the dynamic needs of their businesses, deploy quicklyminimize costs, increase service levels and deliver rapidtime-to-benefit.

Additionally, business drivers for more sophisticatedexceptional customer service.

Company Strategy
Our cloud-based digital platform provides customers with decision support capabilities to achieve an agile, resilient and higher velocity supply chain solutions are finding their way downstream. Issues that multi-billion dollar companies faced ten years ago are impacting even the lower end of the under-served SME market today. Increasingly, Logility’s customers havechain. Our goal is to manage offshore sourcing and manufacturing requirements, which often extend lead times andtime-to-market. With new, increasingly complex data management needs to monitor global supply networks and deal with the retailers’ demand for accurate forecasts, greater supply visibility and higherin-stock performance, the SME market is outgrowing spreadsheets for supply chain planning and turning to proven supply and demand, inventory and replenishment management software, thus extending the addressable market for Logility’s software offerings.

Logility Products and Services

Leveraging more than 45 years of planning solutions expertise, Logility has been an innovator in developing and deploying supply chain optimization and advanced retail planning solutions, with its first Internet-based collaborative planning software application implemented in 1996. Logility continues to invest and expand its award-winning solutions, which support the global planning, optimization, collaboration, S&OP as well as merchandise and assortment planning and allocations for retailers.

Logility’s experience indicates that distribution-intensive industries face considerable competitive pressure, which is intensified by the high cost of inventory and distribution investments, dynamically changing consumer needs, and variability in overall supply chain performance. These companies need solutions that are capable of delivering significant financial benefits by quickly solving problems that arise in sourcing, manufacturing and distribution operations. Logility solutions are capable of helping these companies collaborate with their trading partners to improve customer service and optimize their sourcing, manufacturing, inventory, distribution and retail networks.

Logility isbecome a leading provider of collaborative supply chain optimization, and advanced retail planning and supply chain management solutions that help small,to enable midsize, large and Fortune 500 companies realize substantial bottom-line results. Logility provides twoto optimize their operations associated with the planning, sourcing, manufacturing, storage, distribution and allocation of products. Our strategy includes the following key elements:

Leverage Cloud Strategy. Our cloud computing capability accelerates customers’ deployment of our industry leading supply chain, advanced retail planning, PLM, product suites,Logility Voyager Solutions™sourcing andDemand Solutions®, marketed, sold vendor compliance solutions. Our cloud strategy includes SaaS subscriptions and distributed through bothlicensing and services designed to enable the optimization of our customers’ supply chains to reflect their global business needs.
Leverage and Expand Installed Base of Customers. We primarily target businesses in the consumer goods, food and beverage, retail, apparel and soft goods, durable and hard lines, life sciences, chemicals, and wholesale distribution industries. We intend to continue to leverage our installed base of approximately 1,100 customers to introduce additional functionality, product upgrades, and complementary components. In addition, we intend to expand sales to new customers in our existing vertical markets and to target additional vertical markets over time. We will continue our focus on offering a best-in-class cloud solution and expect the growth trends we have experienced in this area to continue because many new and existing customers are pursuing cloud strategies for their business applications.

Continue to Expand Sales and Marketing. We intend to continue to pursue an increased share of the market for supply chain software solutions by expanding our sales and marketing activities. We believe our competitive advantages include providing rapid implementation, easy-to-maintain configuration, and quick time-to-benefit across the full spectrum of customer operations. We intend to continue building a direct sales force that is focused on selected vertical markets, such as consumer goods, retail, life sciences, wholesale distribution and indirectmanufacturing supply chains.
Expand Indirect Channels to Increase Market Penetration. We believe that key relationships with VARs will increase sales channels. TheLogility Voyager Solutionssuite features advanced analytics capabilitiesand expand market penetration of our products and services. DMI will leverage network of global VARs to reach its markets. This experienced global VARs distribution network significantly expands the Company's reach and provides sales, implementation and support resources serving customers around the world.
Maintain Technology Leadership. We believe we are a technology leader in collaborative supply chain visibility; demand, inventoryoptimization solutions and replenishment planning; S&OP, integratedadvanced business planning (IBP), supplyanalytics and inventory optimization; manufacturing planningwe intend to continue to provide innovative, advanced solutions and scheduling; merchandise and assortment planning and allocation. TheDemand Solutions® DSXservices. We believe we were one of the earliest providers to introduce a collaborative supply chain planning solution offers functionalityto support multi-enterprise supply chain network planning. We intend to continue to keep pace with technological developments and emerging industry standards while developing and introducing new and enhanced products.
Invest Aggressively to Build Market Share. We intend to continue investing to expand our sales channels, research and development efforts, and consulting infrastructure, balanced with our goal of increasing profitability. We believe these investments are necessary to increase our market share and to capitalize on the growth opportunities in the market.
Acquire or Invest in Complementary Businesses, Products and Technologies. We believe that selective acquisitions or investments may offer opportunities to broaden our product offering to provide more advanced solutions for integratedour target markets. We will evaluate acquisitions or investments that will provide us with complementary products and technologies, expand our geographic presence and distribution channels, penetrate additional vertical markets with challenges and requirements similar to those we currently meet, and further solidify our leadership position within the SCM market. In fiscal 2015, we acquired MID Retail, Inc., to extend our reach into retail operations and expand our ability to help customers improve their omni-channel performance. In fiscal 2017, we acquired AdapChain to provide supply chain MDM and streamlined integration of our portfolio of planning and optimization solutions with third-party software applications. In fiscal 2018, we acquired certain assets of privately held Innovare Holding Co., Incorporated ("Halo BI") and its subsidiaries. Halo BI was a supplier of advanced analytics and business intelligence solutions for the supply chain market. These enriched analytics leverage interactive visualization, machine learning algorithms, and AI to transform both structured and unstructured data to accelerate business planning (IBP), salesperformance and operationsproactively identify new business opportunities or mitigate risks.
Focus on Integrated Supply Chain Planning and Supply Chain Execution Platform. We believe we are one of the few providers of truly innovative SCM platform solutions addressing demand, supply and advanced retail planning (S&OP), demand optimization, supply optimization, manufacturing optimization, collaboration, data visualization,as well as quality and workflow optimization for global enterprises with manufacturing, distributioncompliance, PLM and retail operations who desire a rapid deploymentsourcing management. We intend to continue focusing our development initiatives on enhancing our product concept to customer availability platform, expanding its embedded performance management architecture and simplified operations to meet their supply chain needs.

Logility has licensed one or more modulesintroducing additional capabilities that complement our integrated solution suite.

Increase Penetration ofLogility Voyager Solutionsor Demand Solutionsto companies worldwide, including Abercrombie & Fitch, Ann Taylor, Avery Dennison Corporation, Berry Global, Big Lots!, Continental Mills, Fastenal Company, Ferguson Wholesale, Gategroup, Johnstone Supply, Mizuno USA, Mondelez International New Belgium Brewing Company, Reckitt Benckiser, Siemens Medical Solutions Diagnostics, Trek Bicycle, Verizon Wireless, Urban Outfitters, Warnaco, and VF Corporation. Logility sells products and services through direct and indirect channels. Logility derived approximately 26% of its revenues inMarkets. In the fiscal year ended April 30, 20182020, we generated 19% of our total revenues from international sales.

Product Features:sales, resulting from marketing relationships with a number of international distributors. Logility Voyager Solutions

Logility Voyager Solutionsand its subsidiary DMI have over 23 VARs in the indirect channel, most of which are international. This experienced global distribution network expands our reach and provides sales, implementation and support resources, serving customers in more than 80 countries.


We intend to further expand our international presence by creating additional relationships with distributors in Africa, Asia, Australia, Europe, North America and South America.
Expand Strategic Relationships. We intend to develop strategic relationships with leading enterprise software and service providers and systems integrators to combine our software solutions with their services and products and create joint marketing opportunities. We have developed a network of international partners who assist in the sale and support of our solution platform. We intend to utilize these and future relationships with software and service organizations to enhance our sales and marketing position.
Continue to Focus on Providing High Quality Customer Service. Our mission is to help our customers become more successful. We intend to continue investing in technology and personnel to accommodate the needs of our growing customer base. We will continue to seek new ways to improve service to our customers.
Serve Large and Midsize Business Markets with Complex Supply Chains. Our broad product portfolio allows us to address the unique business needs and complexity of a wide range of enterprises with large and midsize global operations.
However, there can be no assurance that we will be successful in implementing the strategies outlined above.
Products and Services
We provide a comprehensive, cloud-architected planning software suite, which supports both SaaS subscription access as well ason-premise licensing options. It provides supply chain optimizationmanagement platform that helps customers manage eight critical planning processes, including collaborative planning, forecasting and replenishment, multi-echelondemand optimization, inventory optimization, optimized supply optimization, retail optimization, quality and compliance, PLM, sourcing production management merchandise and assortment planning, and allocation capabilitiesintegrated business planning. Within each of these process areas, we offer one or more components that are designed to increase revenues, reduce inventory, distribution and transportation costs, improve forecast accuracy, decrease order cycle times, manage global sourcing initiatives, optimize production planning and scheduling, streamline logistics operations and improve customer service.Logility Voyager Solutions incorporates advanced analytics to drive decision support for critical processes such as demand management, supply and inventory optimization, manufacturing planning and scheduling, retail planning and S&OP.

TheLogility Voyager Solutions suite is modular and scalable to meet the requirements of global organizations involving tens of thousands of products with complex manufacturing or distribution networks. In addition, theLogility Voyager Solutions suite interfaces with a broad range of existing enterprise applications deployed on a variety of technical platforms.

Logility’s customers can implement these modules individually,may leverage independently, in combinationscombination, or as a comprehensive solution suite. The following summarizes key features ofplatform, either in theLogility Voyager Solutions product suite:

LOGILITY VOYAGER SOLUTIONS FOR SUPPLY CHAIN OPTIMIZATION AND ADVANCED RETAIL PLANNING

These applications allow companies to plan, manage, optimize and measure their cloud or on-premise. Our supply chain operationsMDM platform and strategic trading partner relationships for direct material procurement,advanced analytics capabilities enable customers to derive new insights and automate planning processes that continuously analyze demand, production, logistics, retailsupply and customer order fulfillment.Logility Voyager Solutionsprovides a performance-based architecture that allows companiesdistribution signals to manageinform product design and development, increase forecast accuracy, optimize inventory across the global supply chain and in-store, and ensure high customer satisfaction.

Our platform encompasses the following planning processes on an exception basis. Companies can proactively monitor, alert, measure and resolve criticalassociated components:
Advanced Analytics leverage artificial intelligence, machine learning, algorithmic optimization, simulations, scenarios, and other forms of advanced analytics to provide new insights, automate planning and remove time, inventory and risk from the supply chain events both within their own companies and throughout the extended value chain.

SUPPLY CHAIN COLLABORATION

Logility Voyager Solutions accelerates S&OP, as well as strategic trading partner collaboration.Logility Voyager Solutions allows companies to accelerate and synchronize demand plans, sales input, direct material procurement, sourcing, fulfillment

Integrated Business Planning combines volumetric and financial goalsanalysis and collaborative workflow to increase profitability and improve service.Logility Voyager Solutionsenables companies to streamline and accelerate the entire S&OP process. Companies can more easily track key performance indicators, measureprocess and compare multiple plan performance, optimize sales plansprovide a guide for allocating business resources to meet revenue, profitability, and automate data gathering.

Logility Voyager customer service goals.


Integrated Business Planning™ visualizes, elevates and optimizes strategic and tactical plans for products, channels, resources and investment to achieve business goals, drive shareholder value and increase operational efficiencies.

Logility Voyager AdapLink™ delivers tailored


S&OP aligns financial, sales, production, procurement and marketing information into a single plan rooted in supply chain reality. Strategic, tactical and enterprise integration leveraging predefined templates and incorporating artificial intelligenceoperational plans can be produced through a single platform.


Demand Optimization focuses on improving forecast accuracy to validate and harmonize planning and relateddrive better downstream supply chain master data management with ERP systems such as SAP, Oracle, Microsoft and Infor.

DEMAND OPTIMIZATION

Logility Voyager Solutions provides the visibility to significantly improve forecasting accuracy by creating comprehensive overviews of market demand, new product introductions, product phase-outs, short life cycle products, promotions and inventory policies. As a result, enterprises can build plans that are more closely attunedboost profitability, satisfy customers and synchronize supply chain partners.


Demand Sensing evaluates multiple data streams to the market.

Voyager recognize complex patterns and identify actionable demand signals. It captures and analyzes demand signals from internal and external sources, including point of sale, demand signal repositories, and syndicated data, to identify near-term demand trends and enable fast, intelligent and cost effective market responses.


Demand Planning™Planning helps reconcile differences between high-level business planning and detailed product forecasting. Aligning inventory with customer demand, this solution makes it easier to boost service levels, shorten cycle times and reduce inventory obsolescence.

Voyager Life Cycle Planning™


Lifecycle Planning provides control to model each phase inover a product’ssunrise-to-sunset lifecycle— entire lifecycle, including introduction, maturity, replacement, substitution and retirement. Using attribute-based modeling, Logilitythis solution can improve the accuracy of new product introductions, short life cyclelifecycles and phase-outs, which resultresulting in reduced stock-outs and lower obsolescence costs.

Voyager Proportion


Proportional Profile Planning™Planning automates the process of detailedSKU-level forecasting using attributes likesuch as style, color and size for large numbers of SKUs.stock-keeping units (SKUs). Time-phased profiles meet the market goals for product categories while increasing forecast accuracy at the granular level.

INVENTORY OPTIMIZATION

Logility Voyager Solutionsenables enterprises


Causal Forecasting usesartificial intelligence to setcorrelate multiple external factors (i.e. weather, market trend, commodity prices, etc.) to enhance the demand forecast.

Inventory Optimization establishes optimal inventory targets at each node of a multi-echelon manufacturing, or distribution, networkand retail networks to match strategic inventory goals and service levels in accordance with your business plan.

Voyager levels.


Inventory Optimization™ optimizes strategic and tactical inventory investments across multi-echelon manufacturing, distribution, and distributionretail networks to meet business and service level objectives for complex supply chains with multiple stages of inventory.

Logility Voyager


Inventory Planning™ allows enterprises to effectively measure the tradeoff ofbetween finished goods inventory investments and desired customer service levels. This solution dynamically sets time-phased inventory targets based on specific safety stock and order quantity rules.

SUPPLY OPTIMIZATION

Logility Voyager Solutions optimizes material, inventory, production


Supply Optimization enables constraint-based continuous and distribution assets by synchronizing supply and demand. Optimized supply plansperiodic planning to identify orders that are generatedunprofitable or cannot be met based on manufacturing,current constraints and analyze the impact of changing factors in production, distribution and storage on costs and transportation constraints as well as various sourcing, production and distribution options.

Voyager customer service.


Supply Planning™ optimizes complex sourcing and production decisions to balance supply, manufacturing and distribution constraints based on corporate goals forof maximizing profit or minimizing costs.

Voyager


Replenishment Planning™ provides visibility ofinto future customer demand, corresponding product and material requirements, and the actions needed to satisfy those demands.

Voyager


Manufacturing Planning and Scheduling™ optimizes constraint-based manufacturing schedules and evaluates multiple scenarios to determine the optimaltrade-off between manufacturing efficiencies, inventory investments and greenhouse gas emissions, providing lower costs and increased product availability.

Voyager Advanced Planning and Scheduling™ creates These optimized schedules that consider machine, personnel, tooling and inventory constraints to drive shorter lead times and reliable product availability.

RETAIL OPTIMIZATION

Voyager


Retail Optimization synchronizes sourcing from manufacturing to store merchandising and supports the creation of plans to boost sales, increase margins and cut inventory costs.

Merchandise Planning™ and Voyager Assortment Planning ™ create creates financial merchandise plans for totala company and its individual store locations to increase visibility and maintain “open to buy” plans, margin planning and unit ladder plans at various levels in the merchandise hierarchy.

Voyager Allocation™ Our Innovative Inspiration Board features provide a Pinterest-like workspace where traditional text-based assortment plans become vibrant visual representations of collections, merging the art and science of buyer and planner roles to gain greater visibility throughout the planning process and ensure each store location is able to meet its plan.


Allocation optimizes short termshort-term unit sales and stock projections by store and facilitates the automatic replenishment based on daily sales data. Capabilities also includepre-pack optimization to accelerate the receipt and shipment of inventory to specific store locations.

Product Features: Demand Solutions

Demand Solutions’ proven, sophisticated

Quality & Compliance allows quality problems to be identified and remediated faster and ensures proper documentation for each participant in the supply chain software provides a smooth transition from spreadsheet management to robust supply chain planning, reporting, and tracking. It is simple to install and easy to use, yet able to support the entire Integrated Business Planning (IBP) process, which many supply chain experts endorse as a best practice for supply chain planning.

Demand Solutions offers SaaS andon-premises versions of its DSX product platform. Because both solutions are built on the same technology, customers have a clear migration path from one to the other as their needs change. Customers wishing to implement supply chain planning software without making a majorup-front investmentprevent disruptions in software licensing fees can get started on the SaaS version of Demand Solutions DSX by simply paying a monthly subscription fee. The cloud delivery model relieves these customers of the need to buy and maintain their own hardware—and the solution can easily scale to support their business growth. Once the solution goes live, stakeholders throughout their supply chain can simply log onto the software to access business data that is relevant to their role.

DSX was introduced in February 2010 and combines the DMI’s30-year history of supply chain experience with the latest technology to create a highly flexible supply chain planning solution. Built on a flexible architecture with configurability, scalability, performance, and security in mind, DSX is the culmination of more than two decades of customer-driven supply chain functionality. The DSX platform was architected to exploit and apply new technologies to providebest-in-class supply chain efficiencies.

Demand Solutions launched DSX SaaS in January 2014. This subscription version of the product platform is designed for manufacturers and distributors who want to streamline and enhance their supply chain planning processes without having to build and maintain their own IT infrastructure. It provides the full functionality of theon-premise version, but without requiring anup-front investment for software licenses and hardware. Rather than committing to a large purchase price, customers simply pay a predictable subscription fee.

Demand Solutions supports bothSoftware-as-a-Service andInfrastructure-as-a-Service. The Company also supports bothOn-Demand Self Service and Broad Network Access. Because ofDemand Solutions’ Web Services integration, customers can useDS-SaaS in conjunction with their system of record regardless of whether it is hosted, SaaS, oron-premise. All product platforms also incorporate social supply chain technology that enables supply chain partnersmoving products around the worldglobe.


Quality Management & Audits identifies quality problems faster to collaborate in real time using intuitive,“always-on” social media tools.

The Demand Solutionsapplication suite makes it easierreduce chargebacks and rework; enables inspections and audits to predict future demandbe performed at manufacturing facilities via tablets; requests in-line, final, measurement and make informed decisions to optimize inventory turns, improve customer service levels, and increase profitability.Demand Solutionsis a complete time-phased, multi-tiered demand planning and replenishment system and a proven platform for vendor-managed inventory.Demand Solutions helps manufacturers, wholesalers, and distributors exchange inventory information in real time, proactively manage demand rather than operate in reactive mode, and increase profitability.

Demand Solutions Forecast Managementprovides a powerful yeteasy-to-use demand planning solution that fits virtually any industry and deploys quickly. The system offers significant flexibility and allows the user to select from among 26 algorithms the forecasting formula that best addresses each item’s demand pattern to develop an accurate forecast of future demand.

Demand Solutions Requirements Planning incorporates collaborative planning capabilities to streamline supply activities frompacking accuracy audits during the production line through delivery. With instantprocess and provides notification if audits fail; and aids in the analysis of sourcing and factory improvement decisions.


Regulatory Document Management reduces the projected demand for unlimited items against current inventory,Demand Solutions Requirements Planning recommends the ideal inventory level for each shipping destination, providing valuable visibility uprisk of non-compliance and down the supply chain.

Demand Solutions Sales & Operations Planning automates and continually analyzes the monthly integrated business planning process, while also giving all supply chain stakeholders (internal and external to the organization) the social media tools to continue collaborating in between planning meetings. There are two annual business plans available for each of the sections of data (bookings, sales, production, inventory, backlog, and shipments): the Annual Plan and the Flexible Plan. Demand Solutions was one of the first S&OP tools on the market and the company has more than 17 years of S&OP implementation experience.

Demand Solutions Advanced Planning and Scheduling is a powerful andeasy-to-use production scheduling solution that supports the process and discrete enterprise environment, and quickly produces accurate schedules that take into account machines, personnel, tooling, and inventory constraints. TheDemand Solutions Advanced Planning and Scheduling software enables manufacturers to balance material, capacity, and shop floor schedules simultaneously to meet customer demand“on-time” at the lowest costs.

NGC is our wholly-owned subsidiary that provides software solutions for retailers and brand owners primarily in the fashion industries (i.e. apparel, footwear, sewn products and furniture). NGC provides functionality that allows customers to share information and quickly react to rapidly changing market trends, allowing them to accelerate lead times, reduce expenses, improve quality and maximize company revenue and profit.

NGC’s provides a comprehensive application suite for retailers and brand owners with the Andromeda cloud platform, including solutions for 1) Product Lifecycle Management (PLM), 2) Supply Chain Management (SCM), 3) Enterprise Resource Planning (ERP), 4) Global Quality Control, 5) Vendor Compliance and 6) Shop Floor Control. Products can be implemented as part of the integrated suite or as stand-alone applications. It is offered in a variety of infrastructures including a multi-tenant SaaS, private cloud or on premise solution.

Product Lifecycle Management. NGC’s Andromeda Cloud PLM system can be configured to the specific needs of retailers, fashion brands, and consumer products companies. NGC’s Andromeda PLM offers productivity improvements in every area of development. It provides companies with real-time visibility into product data and shares information with Planning, Merchandising, Design, Costing, Sourcing, Manufacturing, and Logistics. NGC’s Andromeda PLM allows companies to broadcast information throughout the enterprise to help optimize product lead-time and distribution, company revenue and profit. Andromeda PLM can be deployed as a stand-alone product development solution or an integrated application within the Andromeda cloud platform.

Using NGC Andromeda PLM, companies can:

Increase speed to marketavoids costly litigation by managing workflows in a global, collaborative environment.

Enhance efficiency by using product development calendars to monitoron-time schedules and performance.

Raise gross margins by reducing the cost of goods sold through line item price negotiations, raw material commitments and capacity planning.

Improve product adoption rates by making decisions earlier in the product development cycle.

Reduce sampling costs by establishing product viability prior to issuing sample requests.

Supply Chain Management. NGC’s Andromeda Supply Chain Management (SCM) solution enables the demand-driven, agile supply chain. Andromeda SCM helps companies meet the challenges of a rapidly changing manufacturing and distribution environment. With Andromeda SCM, production and logistics information is shared among all members of the extended global supply chain, including retailers, brands, vendors, manufacturers, suppliers, contractors, agents, brokers, carriers and freight forwarders.

Andromeda SCM and Global Sourcing platform allows companies to share information throughout the enterprise to optimize product lead-time and distribution, maximizing company revenue and profit. Andromeda SCM is user-configurable to meet customer requirements and integrates with all applications across the connected enterprise.

Andromeda SCM can be configured to meet customer requirements and integrates with all enterprise applications, allowing companies to:

Compress purchasing lead times by positioning raw materials for planned production cycles or series.

Improve order fulfillment rates by balancing production capacity and product demand.

Shrink markdowns and closeouts by applying “postponement” techniques to adjust WIP inventories.

Cut unanticipated airfreight expenses by ensuringon-time deliveries from global production facilities.

Reduce product defects by managingon-site quality audits and making corrections based upon the results

Vendor Compliance.NGC Andromeda Vendor Compliance solution provides a centralized system to help companies mitigate risk, enforce Corporate Social Responsibility (CSR) initiatives and ensure Good Manufacturing Practices. This cloud-based solution helps retailers and brand owners manage the ever-changing landscape of global Restricted Substances Lists (RSL) and enforceenforcing control and accountability for all suppliers, vendors and other third parties involved in the design, manufacturing and delivery of theirproducts.


Global Logistics Management creates barcode carton labels, inbound paperwork and autonomous system numbers (ASNs) using a web browser; produces a manifest, commercial invoice, bill of lading and packing list once barcoded cartons are placed on a shipment; and tracks each shipment while providing notification of any delays as they occur.

Product Lifecycle Management provides a common platform for planning, merchandising, design, costing, sampling, quality and sourcing, ensuring complete visibility from product concept to delivery.

Line Plans provide the roadmap for development and specify SKU counts by division, category and product, and are used to manage seasons, departments, collections and even specific styles to meet performance targets.

Tech Packs & Data Management replace spreadsheets and emails with a single source of product data; manage images, extended attributes and media copy for all distribution channels; and share product information with other systems.

Product Design leverages trend and competitive analysis when defining the direction of products and materials, supports the design and management of product concepts, ensures requirements and cost targets are met, and enables product developers to efficiently develop and re-use designs, materials and product specification data.

Costing allows for collaborative decision making with vendors to break down and compare costs by line item to optimize price points and margins, creates multiple cost sheets per product, and performs “what-if” scenarios to determine which items achieve financial targets.

Sample Management reduces sampling costs by establishing product viability prior to issuing sample requests, tracks the status and enters the results of requested samples, and automatically notifies responsible parties of any rejections. Additional sample requests with corrections also may be created.
Sourcing Management gathers all requisite information in one place to make optimal sourcing decisions, protecting brand equity and reducing risk while increasing product speed to market.

Strategic Sourcing identifies and compares global suppliers, issues request for quotes and evaluates quotes from each participant. Vendors are notified of new requests and have complete visibility into the quoting, sampling and final selection process.

Supply Base Management evaluates, manages, and reports on various factors, including social and regulatory compliance, manufacturing capabilities and capacity, to simplify the complexities of vendor management in one centralized system.

Supply Profiles and Score Cards creates comprehensive, searchable vendor profiles and utilizes digital asset management technology to store and share pictures, videos and other digital media files.

Vendor Onboarding optimizes the onboarding process to help organize, assess and manage vendors and factories to ensure compliance. By ensuringoverall compliance companies can avoid costly litigation, reduce downstream risks and costsmitigate risks; tracks performance; and creates, issues and manages corrective action plans if needed.

CSR and GMP Audits manage the complexities ofnon-compliance, Corporate Social Responsibility ("CSR") and win market share by building and maintaining a positive public image.

NGC Andromeda Vendor ensure products are consistently produced to the quality standards through Good Manufacturing Practices ("GMP") audits.



Compliance allows companies to:

CentralizePackets maintain critical vendor information to improve globalfor transparency, accountability, responsible sourcing and vendor management processes.worker non-retaliation. This solution also stores and manages all signed compliance documents and makes them accessible throughout the supply chain.

Evaluate vendor performanceSupply Chain Master Data Management provides seamless integration with third-party ERP systems, big data and other Internet of Things (IoT) sources without the cost and effort associated with custom development.

Our platform delivers tailored supply chain and enterprise integration, leveraging predefined templates and incorporating artificial intelligence to validate and harmonize planning and related supply chain MDM and transactional data with ERP systems from suppliers such as SAP, Oracle, Microsoft and Infor.
We also provide a Scorecard Index based uponon-time deliveries, completion ratesrange of cloud services, technical support and quality scores.

Manage vendor onboarding to streamline the process of adding new vendors.

Reduce the downstream risks and costs ofnon-compliance.

Avoid costly litigation while building and maintaining a positive public image.

Quality Control.NGC Andromeda Quality Control and mobile solution helps brand owners and retailers identify quality problems faster and reduce chargebacks. Using NGC Quality Control, companies streamline the quality process, schedule quality audits more efficiently, and report on audit results using NGC’s Interactive Quality Tablet, which is far more efficient that manual processes. NGC’s Quality Control includes multilingual and offline useprofessional services to support your global vendors. Companies can easily access the necessary productadoption, implementation and PO details needed to conduct the various audits from NGC’s Andromeda PLMoptimization of our supply chain management platform by customers. Our platform may be deployed as SaaS, a hosted solution or on-premise. Professional services include consulting, implementation, training and Andromeda Supply Chain solutions, or it can integrate with a company’s current solution(s).

NGC Andromeda Quality Control solution helps companies:

Reduce expensesother managed services related to quality by addressing quality problems on the factory floor, before products ship.our platform.

Increase QC auditor efficiency by scheduling audits based upon factory clusters and delivery schedules.

Access real-time analytics to identify problems sooner and reduce the risk of cancellations, chargebacks and returns.

Work online and/or offline to adapt to different factory environments.

Halo Products and Services

Halo’s advanced analytics will be embedded into the Logility Voyager Solutions advanced analytics platform. These enriched analytics will leverage interactive visualization, machine learning algorithms, and artificial intelligence (AI) to transform both structured and unstructured data to accelerate business planning performance and proactively identify new business opportunities or mitigate risks. Customers on the DMI and NGC platforms will be able to addpre-packaged Halo advanced analytics capabilities to their subscriptions to drive quick insights and appropriate actions for their businesses. In addition, Logility will continue to offer Halo advanced analytics embedded in Logility Voyager Solutions as well as standalone to complement other enterprise systems.

Segment 2—IT Consulting

The Proven Method, Inc.

Through our wholly-owned subsidiary, The Proven Method, Inc., our wholly-owned subsidiary, is a we provide technology staffing and services firm that specializes in assistingto a diverse customer base to solve business issues with realisticissues. These services include professional services, product management, and effective technology solutions. The Proven Method maintains a full-time staff of project management business consultantsoutsourcing; staff augmentation for cloud, collaboration, network and technical specialists possessing a wide range of technical skills,security; and business applicationssocial media and industry experience.

analytic marketing.


We believe a key differentiator of The Proven Method is its ability to offer flexible solutions to customers based on current economic conditions. We provide solutions based on how our customers are running their businesses, thereby meeting their specific needs. Customers today efficiently manage their technology investments by implementing lower cost technologiesalso continue to provide a directsoftware, support and immediate revenue benefit. The Proven Method helpsservices related to our customers drive revenue and targets customer satisfaction through their awareness of the best technologies available.

The solutions we provide can range from web and mobile applications on multiple platforms to complex Business Intelligence applications and solutions. Business Intelligence consists of the development and implementation of a reporting process for dealing with very large volumes of data and multiple business entities/components. Our customers are Internet savvy and knowledgeable in wireless solutions, social networking and channeling implementations, server and desktop virtualization, and deployment of interactive applications. They rely on The Proven Method to provide a fast return on investment, and our customers’ success in turn enhances brand awareness of The Proven Method among other customers and potential customers.

The cross-industry and multiple resource skills The Proven Method has acquired since 1995 enables us to provide services to customers of virtually any type or size. The Proven Method customers benefit from our services in several different ways:

Professional Services / Product Management / Project Management—Some rely on The Proven Method to serve in lieu of anin-house applications development group. The Proven Method provides these firms with the management, business and technical experience necessary to run an entire IT organization. Other companies will typically outsource complete application development projects to The Proven Method, particularly when their internal project management and technical personnel face a combination of critical timing and heavy backlog.

Staff Augmentation—Other customers call on The Proven Method to provide supplemental management and technical resources for a skill or technical discipline they may not currently possess or if they simply need more of a particular set of skills. The Proven Method enables its customers to leverage their employees who have multiple skills to cover more job functions with fewer resources. Recently, The Proven Method has recruited and staffed very specialized technical resources for its customers to support Big Data, Machine Learning /Artificial Intelligence and Cloud technologies.

CCNS Division—We specialize in the following resources in our CCNS Division. The acronym CCNS stands for Cloud, Collaboration, Network & Security.

Cloud—AWS/Azure Architects, App & Infrastructure Migration Specialists

Data Center—Server, Storage, Virtualization Specialists

Network—WAN, LAN, WLAN Router, Switch Engineers

Collaboration—Voice, Conferencing, Collab App, Video Specialists

Security—Private/Hybrid/Public Platform and Systems Architects

Project and Program Managers

Social Media and Analytic Marketing—Customers now have the opportunity to understand the analytical results of the activities associated with the social media channels, including the development of marketing plans and recommendations for optimization based on industry needs and best practices. Services can be provided to implement and manage social media programs as well as train prospective and present customers.

The Proven Method has worked with customers such as: Aon, Aarons Rents, IBM, UPS, Norfolk Southern, Xerox, SunTrust Bank, Coca-Cola, Dycom, Equifax, Kubota Manufacturing of North America, The Home Depot, AT&T, State of Georgia, CompuCom, Zep Inc,Chick-fil-A, Global Payments, Verizon, Catlin Group Ltd, Federal Home Loan Bank of Atlanta, Forsythe Technology, Fulton Paper, AutoTrader.com, Nalco Chemical, Georgia Tech Research Institute, NCR, Fidelity Bank, Barry Wehmiller, Manhattan Associates, Perspecta and numerous other customers throughout the United States.

Segment 3—Other

The Other segment consists of (i)legacy American Software ERP products, which provides purchasing include our e-Intelliprise solution and materials management, customer order processing, financial,e-commerce and traditional manufacturing solutions, and (ii) unallocated corporate overhead expenses.

American Software ERP

Our enterprise solutions are the culmination of more than four decades of customer-driven supply chain functionality providing comprehensive global solutions that link critical functions throughout an enterprise. All of our enterprise solutions support oure-business functions.

Thee-Intelliprise solution is aweb-based ERP system that a customer can run over the Internet, or on their intranet or extranet utilizing the IBM iSeries servers. This allows functions within the ERP system to be easily deployed over the Internet using a dynamic role-based web page capability. Customers can support multiplee-businesses and traditional businesses with fullfront-to-back office integration, which is critical to successful fulfillment and seamless processing and reporting throughout the enterprise. Thee-Intelliprise solution is a global system, capable of operating in multiple languages, financial and logistics organizations.e-Intelliprise was developed on a flexible enterprise architecture that enables centralized management of enterprise wide processes while allowing delegation of other business process decisions to other levels of the organization.

Oure-applications are solutions for conductingvarious integrated business on the Internet that canweb-enablefunctions. specific business functions through integration with existing ERP or legacy systems. Currently,e-applications are available for the following applications:e-procurement,e-store,e-expenses,e-forms, Purchase Order Tracking and Vendor Collaboration, Requisition Tracking, Shipment Tracking,e-process managementande-connect, a seamless,XML-enabled data exchange. We believe that these products represent a cost-effective solution for customers withe-business requirements or simply looking to improve efficiencies through updating and streamlining of business processes.

Our product line consists of software and services that operate on three strategic computer platforms: (1) IBM System z Mainframe or compatible, (2) IBM iSeries, and (3) Intel-based servers and clients that operate Windows.

See Note 98 to the Consolidated Financial Statements for further business segment information.


Customers

We primarily target businesses in the retail, apparel and footwear, consumer packaged goods, chemicals, oil and gas, life sciences, telecommunications, consumer electronics, industrial products and other manufacturing industries. A sample of companies that have purchased one or more of our products or services during the past two fiscal years is as follows:


Consumer GoodsTrident Seafoods CorporationCanada GooseStarbucksInterlock USA, Inc.
3M AustraliaVerizon WirelessConverse, IncStony ApparelIntertape Polymer Group
AdvancePierre FoodsWoolworth's Group LtdDelta ApparelSummit Resource InternationalIrish Breeze Unlimited Company
Antartico Comercializadora SA de CVZagg Inc.Dynasty ApparelTechstyleIt Works Marketing Inc.
Ashley Furniture Chemicals, Oil & Gas, Life SciencesElan InternationalThe Aldo GroupRetail & Apparel (cont.)Manufacturing and OthersJohnson Controls - UPG

3M Australia

Avery Dennison Corporation		Process & ChemicalFam BrandsThe Collected GroupJohnson Controls Hitachi AC Europe SAS
Bed Bath & Beyond Inc.AllnexFanatics Apparel, Inc.G & K ServicesThe Echo Design GroupActron AirKALE HAVACILIK Sanayi AS

AdvancePierre Foods

Blue BuffaloBERICAP Holding GMBHFashion Avenue KnitsGodiva ChocolatierThe Foschini Group PtyAmcor Rigid Plastics USA,Lifetech Resources, LLC

Antartico Comercializadora SA de CV

BodyBuilding.comBerry GlobalFinish LineGoodwill IndustriesThe Home DepotAmerican Bath GroupM&G DuraVent

Ashley Furniture

Boise Paper Holdings, LLC		Birchwood Laboratories LLCFollett CorporationTopson DownsMonin, Inc.
Bridgestone Australia LtdBP Singapore Pte. LimitedFoot Locker, Inc.GTM SportswearTown & Country LivingAncestry.com Inc.Nokia

Avery Dennison Corporation

Caribou Coffee CompanyBracco Imagining S.p.A.Godiva ChocolatierHunkemoller International BVTristan & AmericaHenley Enterprises, Inc.

Avent, Inc

Bed Bath & Beyond Inc.

Carrie FrancisChamberlain GroupGoodwill IndustriesT-Shirt International Uniform, Inc .Briggs & StrattonHilco

BodyBuilding.com

ClearGage, LLCCooperVisionGTM SportswearJanouras Custom Design, Ltd.Summit Resource InternationalBusch- Transou, L.C.Nuplex Industries

Boise Paper Holdings, LLC

Cott Beverages LimitedCroda Europe LimitedHansells Food AustraliaJaya Apparel,TechstyleOFS Fitel, LLCCintas Corporation

Caribou Coffee Company

Dometic Group ABDow Chemical CompanyDestination XLJenny Yoo CollectionsUnifirst CorpCorning Cable SystemsORBIS Corporation

Carrie Francis

Electrolux S.E.A. Pte LtdEGO Pharmaceuticals, PTY LTD Urban OutfittersParker Hannifin Corporation
FoodScience CorporationGenzyme DiagnosticsRetail & Apparel (cont.)Valley Apparel LLCPattonair Ltd.
Founders Brewing CompanyHollyFrontier CorporationHunkemoller International BVVesi SportswearQuality Steel Corporation
Freddy HirschInfineumHunter Boot LtdVF CorporationReady Pac Foods, Inc.
Glen Raven, Inc.Insmed IncorporatedHybrid PromotionsWatters DesignReliable Automatic Sprinkler
Griffith Laboratories WorldwideKremers Urban PharmaceuticalsINA InternationalWeissman Theatrical SuppliesRocky Mountain Cultures, Inc.
Hamilton BeachMillipore SigmaJanouras Custom Design, Ltd.Williamson-Dickie ManufacturingScott Specialties, Inc.
Hancocks Wine, Spirits and BeerNorbrook LaboratoriesJantzen Brands Corp.Winebow Inc.Smithfield Foods
Helzberg DiamondsNorgineJaya Apparel, LLCWohali OutdoorsSonoco Products
Hostess BrandsNovartis Pharma ServicesJenny Yoo CollectionsWolverine WorldwideSouthwire
HuhtamakiNutracom, LLCJerry Leigh EntertainmentXcel BrandsCycles Lambert, Inc.T.M. Cobb Company

ClearGage, LLC

J. R. Simplot Company		Genzyme DiagnosticsOmega Pharma International NVJockey International Dassault Falcon JetThe Ames Companies, Inc

Cliff Bar & Company

Jackson Family Wines		InfineumOPC Cultivation, LLC dba FirelandsJohn Paul RichardDurable and Discrete ManufacturingFicosota Ltd., Ital Food S.A.The Starco Group

Cott Beverages Limited

Jeneil Biotech, Inc.		Kremers Urban PharmaceuticalsSandozJoseph RibkoffA.O. SmithFollett CorporationThermos LLC

Dometic Group AB

Kelly Moore Paint Company, Inc		Norbrook LaboratoriesSmith & NephewJump Design Group, Inc.Actron AirGardner- White FurnitureTillamook

Electrolux S.E.A. Pte Ltd

Kingston Technology Company		Societe PhiladelphiaNorgineKontoor Brands, IncAmcor Rigid Plastics USA, LLCJust FabulousHenley Enterprises, Inc.Timken

Ergobaby

Le Creuset Group AG		Specialty Pharmaceutical/ CardinalNovartis Pharma ServicesLa La Land Creative Company LLCAmerican Bath GroupUniversal Fiber Systems
Leatherman Tool Group, Inc.Sunovion Pharmaceuticals, Inc.LacosteAncestry.com Inc.Walzcraft
LevolorThermo Fisher ScientificLacrosse FootwearAvent, IncHilco

Founders Brewing Company

Omega Pharma International NVMarlow Foods Ltd Land ‘n'n SeaBell International Labs, Inc.Husqvarna ABWholesale Distribution

Freddy Hirsch

Marquez Brothers International		OneMed HoldingsRetail & ApparelLandau UniformBerlin Packaging LLCHy- Ko ProductsAmerican Hotel Register Company

Glen Raven, Inc.

Mazoon Dairy Company SAOC		Sandoz5.11 TacticalLegendary WhitetailsBio-Medical Devices InternationalInterlock USA,Balkamp, Inc.

Griffith Laboratories Worldwide

Melissa and Doug		Scott Specialties, Inc .A+ School ApparelLiz ClaiborneBriggs & StrattonIntertape Polymer GroupChemPoint

Hamilton Beach

Mercy Health Care		Sigma- Aldrich CorporationAccent DécorLord Daniel SportswearBusch-Transou, L.C.It Works Marketing Inc.CHF Industries

Hancocks Wine, Spirits and Beer

MGA Entertainment		Smith & NephewAeropostaleLucky ZoneBWAY CorporationJohnson ControlsDealer Tire

Hostess Brands

Mizuno USA		Sunovion Pharmaceuticals, Inc .AGS Sports, Inc.Manhattan Beachwear, LLCCharter Manufacturing Company, IncKALE HAVACILIK Sanayi ASFastenal Company

Huhtamaki

Moen		Aktieselskabet AFThermo Fisher ScientificMen’sMen's WearhouseCintas CorporationM&G DuraVentFintyre S.p.A.

J.R. Simplot Company

Mondelez International		Alberto MakaliMix LimitedClariosNebraska Furniture MartMayville Engineering Company, IncGroupe Seb Holdings

Jackson Family Wines

Neatfreak		Retail & ApparelAmerican TextileNew Era Cap Co., Inc.Nexans

Kelly Moore Paint Company, Inc

5.11TacticalNicole MillerNuplex Industries

Kingston Technology Company

A+ School ApparelOrchard BrandsOFS Fitel, LLC

Le Creuset Group AG

Accent DécorOrvisORBIS Corporation

Levolor

AeropostalePeds LegwearParker Hannifin Corporation

Marquez Brothers International

AGS Sports, Inc.PVH Corp.Pattonair Ltd.

Melissa and Doug

Aktieselskabet AFRalph LaurenQuality Steel Corporation

Mercy Health Care

Alberto MakaliRawlings Sporting GoodsRanda Accessories

MGA Entertainment

American TextileRed Wing Shoe CompanyReliable Automatic Sprinkler

Mizuno USA

Ann TaylorRenfroRockler Companies, Inc.

Moen

AsicsRhone Apparel, Inc.Sandvik

Mondelez International

Barbeques Galore LimitedRocky BrandsSeagate Technology LLC

Neatfreak

BBC InternationalSiemens Medical Solutions DiagnosticsSonoco Products

Nestle

Bernard Cap Co., Inc.SPANXSouthwire

Online Drinks B.V.

Big Lots!Spartan SportswearTD Automotive Compressor Georgia

Peet’s Coffee, Inc .

Billabong International UnlimitedSport ObermeyerTimken

Polaris Industries

Bioworld MerchandisingStarbucksUniversal Fiber Systems

Procter & Gamble

BiscottiStony ApparelWalzcraft

Ranir, LLC

Blair CorporationSummit Resource InternationalWest Chester Protective Gear

Reckitt Benckisen

Bluestem, Inc.Super Amart Pty ltd

Reily Foods

Bobs Discount FurnitureSwatfameWholesale Distribution

Rockline Industries

Boots UK, Ltd.The Aldo GroupAmerican Hotel Register Company

Sargent and Greenleaf, Inc.

Broder BrothersThe Echo Design GroupAmerisource Bergen Specialty Group

Sazerac Company

Brooks Brothers Group, Inc.The Foschini Group PtyBalkamp, Inc.

Stanley Black & Decker

C&A MexicoThe Home DepotChemPoint

Sunny Delight Beverages Company

Canada GooseTopson DownsCHF Industries

SweetWater Brewing Company, LLC

Charles River ApparelTown & Country LivingDealer Tire

Taylor Fresh Foods

Color Image Apparel, Inc.Tristan & AmericaFastenal Company

The Oneida Group

Delta ApparelT- Shirt InternationalFintyre S.p.A.

Tillamook County Creamery Association

Destination XLUnifirst CorpGroupe Seb Holdings

Trident Seafoods Corporation

Dutch, LLCUpper Right MarketingConduit Del EcaudorJohnstone Supply

Weber- Stephen (EMEA) GmbH

Nestle		Americo Group, IncDynasty ApparelOrchard BrandsCooper Lighting, LLCUrban OutfittersRLS Shared Services, LLCMayoreo Ferreteria y Acabados S.A
Peet's Coffee, Inc.AsicsElan InternationalOrvisValley Apparel LLCCycles Lambert, Inc.Screwfix
TelecommunicationsPolaris IndustriesBBC InternationalEverlast WorldwidePatagoniaVesi SportswearDassault Falcon JetSouthern Eagle Distributing, LLC

Brightstar Corporation

Procter & Gamble		Bernard Cap Co., Inc.Evy of CaliforniaPeds LegwearVF CorporationDole Fresh Vegetables, Inc.Standard Motor Products

Ericsson

Ranir, LLC		Big Lots!Fam BrandsPVH Corp.WattersFicosota Ltd., Ital Food S.A.The Gem Group, Inc.

Nokia

Reckitt Benckisen		Billabong International UnlimitedFanatics Apparel, Inc.Quality WorldwideWilliamson- Dickie ManufacturingFillTech USATrelleborg Wheel Systems

Verizon Wireless

Rockline Industries		Bioworld MerchandisingFashion Avenue KnitsRanda AccessoriesWohali OutdoorsFreedom Foods Group LtdUS Autoforce
Sargent and Greenleaf, Inc.Bluestem, Inc.Rawlings Sporting GoodsGardner-White Furniture 
FGL GroupSazerac CompanyBobs Discount FurnitureRed Wing Shoe CompanyGroupo Herdez 
Wolverine WorldwideStanley Black & DeckerBoots UK, Ltd.RenfroHeli Biotech, LLC 

Finish LineXcel Brands
Sunny Delight Beverages CompanyBroder BrothersRhone Apparel, IncHooker Furniture
Taylor Fresh FoodsBrooks Brothers Group, Inc.Rocky BrandsHusqvarna AB
Tillamook County Creamery AssociationC&A MexicoSiemens Medical Solutions DiagnosticsHy-Ko Products
 Foot Locker, Inc. 


We do not have a customer who hasaccounted for more than 10% of fiscal 20182020 revenues. We typically experience a slight degree of seasonality, reflected in a slowing of services revenues during the annual winter holiday season, which occurs in the third quarter of our fiscal year. We are not reliant on government-sector customers.

Integrated System Design

While customers can use our software applications individually, we have designed them to be combined as integrated systems to meet unique customer requirements. The userCustomers may select virtually any combination of modulescomponents to form an integrated solution for a particular business problem. The license or subscription for such athis solution could range from one single module to a multi-module, multiple-user solution incorporating theour full range of our products.

Customers frequently require services beyond those provided by our standard support/maintenance agreement. To meet those customers’ needs, we established aour separate professional services division thatteam provides specialized business and software implementation consulting,on-site installation, development and configuration, system-to-system interfacing and extensive training.training and certification. We provideoffer these services, frequently referred to as “systems integration services,” for an additional fee, normally under a separate contract based upon time and materials utilized.

Sales and Marketing

We globally market our products globally through direct and indirect sales channels. We conduct our principal sales and marketing activities from our corporate headquarters in Atlanta, Georgia, and have North American sales and/or support offices in Boston, Chicago, Dallas, Indianapolis, New York, St. Louis, Miami, Pittsburgh and San Diego. We manage sales and/or support outside of North America from our international offices in the United Kingdom, Sweden, Germany, The Netherlands, India, New Zealand and Australia.

In addition to our employeedirect sales force, we have developed a network of Value Added Resellers (VAR)VARs who assist in selling our products globally. We intendwill continue to utilize these and future relationships with software and service organizations to enhance our sales and marketing position. These independent distributors and resellers,Currently located in North America, South America, Mexico, Europe, South Africa, and the Asia/Pacific region, these independent distributors and resellers distribute our product lines domestically and in foreign countries. These vendors typically sell their own consulting and systems integration services in conjunction with contracts for our products. Our global distribution channel consists of approximately 3623 organizations with sales, implementation and support resources serving customers in more than 80 countries.

We support our sales activities by conductingwith a variety of marketing programsefforts, including public relations, direct marketing, advertising, trade shows, product seminars, industry speakers, user group conferences and ongoing customer communication and industry analyst programs. We also participate in industry conferences such as those organized by the Association for OperationsSupply Chain Management, (APICS), the Council of Supply Chain Management Professionals, (CSCMP), formerly called the Council of Logistics Management (CLM), and the Institute for Supply Management (ISM).

We also engage in third-party software alliance programs with other software vendors. These programs generally provide some type of assistance for developing or marketing software products, which are compatible or complimentary with products of the other party. Under one such program, DMI was designated a Microsoft Gold Certified Partner to provide integrated supply chain products for Microsoft’s Dynamics GPBusiness Forecasting.


Subscriptions and NAV solutions.

Licenses and Subscriptions

Like many other business application software firms,companies, our software revenue consistshas consisted principally of fees generated from licensing our software products. In consideration ofexchange for the payment of license fees, we typically grantnon-exclusive, nontransferable, perpetual licenses, which typically are primarilyspecific to particular business segment-segments and user-specificusers and geographically restricted. However, a growing portion of our product revenue is now coming from SaaS subscription contracts. Our typical initial subscription is three to five years.
Our standard license agreement containsagreements contain provisions designed to prevent disclosure and unauthorized use of our software. In these agreements, we warrant that our products will function in accordance with the specifications set forth in our product documentation.

The prices for our products are typically functions ofbased on the depth of functionality, number of production deployments,business processes, users and sites for which the solution is deployed.

A growing segment of product revenue is coming from Software as a Service (SaaS) contracts where the SaaS subscription fees are based on the depth of functionality, number of production deployments, users and/or sites licensed.


Customer Service and Support

We provide the following services and support to our customers:

Cloud and Managed Services. We offer our customers the option to deploy Voyager, Demand Solutions and New Generation Solutionsour solutions in a SaaS, hosted oron-premise model. Our Cloud Services providesoffer companies a choice inof deployment methodology and services that best suit their individual needs and allowsallow them to evolve as their business changes;changes, moving between SaaS,on-premise, and managed services as their IT strategies transform. Managed Services leverage our resources to assist and augment the customer’s technical and operational needs on a day-to-day basis. Furthermore, we provide operations services to a subset of customers for which we operate the solution on a daily basis in support of their supply chain operations.
day-to-day basis.

Implementation Support.We offer our customers a professional and proven implementation program that facilitates rapid implementation of our software products. Our consultants help customers define the nature of their project and subsequently proceed through the implementation process. We provideoffer training for all users and managers involved.managers. We first establish measurable financial and logistical performance indicators and then evaluate them for conformance during and after implementation. Additional services beyond implementation canmay include post-implementation reviews and benchmarks to further enhance the benefits to customers.

Implementation:

Implementation; General Training Services.Services and Certification. We offer our customers post-delivery professional services consisting primarily of implementation and training services, for which we typically charge on a daily basis. Customers that purchaseinvest in implementation services receive assistance in integrating our solution with existing enterprise software applications and databases. Implementation of our products typically requires three to nine months, depending on factors such as the complexity of a customer’s existing systems, thebreadth of functionality, number of modules purchased,business units and the numberteam of end users.

Additional training and user certification services can help our customers gain even greater benefits from our robust planning platform.

Product Maintenance and Updates:Updates; Support Services. We provide our customers with ongoing product support services. Typically, these services are included in subscription fees. For licenses, we enter into support or maintenance contracts with customers for an initialone- to three-year term, billed annually in advance, at the time of the product license, with renewal for additional periods thereafter. Under these contracts, we provide telephone consulting, product updates and releases of new versions of products previously purchased by the customer, as well as error reporting and correction services. We provide ongoing support

and maintenance services on aseven-days-a-week,24-hours-a-day basis through telephone, electronic mailemail andweb-based support, using a call logging and tracking system for quality assurance.

Research and Development

Our future success depends in part upon our ability to continue to enhance existing products, respond to changing customer requirements, develop and introduce new or enhanced products, and keep pace with technological developments and emerging industry standards. We focus our development efforts on several areas, including, but not limited to, enhancing operability of our products across distributedenriching artificial intelligence, machine learning and changing heterogeneous hardwareadvance analytics platforms, operating systems and relational databases,in-memory computing, and adding functionality to existing products. These development efforts will continue to focus on deploying applications within a multi-tiered ERP andcomplex global supply chain environment, including the Internet.

Logility’s current release ofLogility Voyager Solutions is version 1704, released in January 2018.Version 1704 uses a cloud-based architecture for maximum scalability and messaging functionality that supports the increasingly distributed nature of supply chain planning, global sourcing, supply chain execution, collaborative commerce and advanced retail planning.Logility Voyager Solutions interfaces with software from leading ERP vendors such as SAP, Oracle and Infor through its industry leading supply chain MDM solution, Logility Voyager AdapLink™ which offers data validation, harmonized transformation simplified with standardized integration templates.

The current release of the traditionalDemand Solutionsproducts is DSX which was introduced in January 2014. These products are designed to work with a wide variety of MRP, ERP and legacy enterprise applications.

landscape. Our cloud-architected solutions designed for SaaS deployment with master data managementMDM built in will be increasingly important for our long-term growth. As of April 30, 2018,2020, we employed 98167 persons (employees and full-time contractors) in product research, development and enhancement activities.

Competition

Our competitors are diverse and offer a variety of solutions directedtargeted at various aspects of the supply chain, retail and general enterprise application market.markets. Our existing competitors include, but are not limited to:

Large ERP application software vendors such as SAP, Oracle and Infor, each of which offers sophisticated ERP solutions that currently, or may in the future, incorporate supply chain management, advanced planning and scheduling, warehouse management, transportation, collaboration or sales and operations planning software modules;components;

Vendors focusing on the supply chain application software market, including, but not limited to, vendors such as JDA Software, ToolsGroupBlue Yonder (formerly JDA), o9 Solutions, Kinaxis and Kinaxis;OM Partners;

Other business application software vendors that may broaden their product offerings by internally developing, or by acquiring or partnering with independent developers of supply chain management software; and

Internal development efforts by corporate information technology departments.

We also expect to face additional competition as other established and emerging companies enter the market for advanced retail planning and supply chain management software and/or introduce new products and technologies. In addition, current and potential competitors have made and may continue to make strategic acquisitions or establish cooperative relationships among themselves or with third parties, thereby increasing the ability of their products to address the needs of our prospective customers. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. Increased competition could result in fewer customer orders, reduced gross margins and loss of market share.

The principal competitive factors in the target markets in which we compete include product functionality and quality, domain expertise, integration technologies, product suite integration, breadth of products, and related services such as customer support, training and implementation services.implementation. Other factors important to customers and prospects include:

customer service and satisfaction;

ability to provide relevant customer references;

compliance with industry-specific requirements and standards;

flexibility to adapt to changing business requirements;

ability to generate business benefits;

rapid payback and measurable return on investment;

vendor financial stability and company as well asand product reputation; and


initial license price, cost to implement and long term total cost of ownership.

Many of our competitors and potential competitors have a broader worldwide presence, significantly greater financial, technical, marketing and other resources, greater name recognition, and a larger installed base of customers than we have. Some competitors have become more aggressive with their prices, payment terms and issuance of contractual implementation terms or guarantees. In order to be successful in the future, we must continue to develop innovative software solutions and respond promptly and effectively to technological change and competitors’ innovations. We also may also havebe forced to lower prices or offer other more favorable terms. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion and sale of their products.

We believe that our principal competitive advantages are our comprehensive singlesolution platform, solutions, our list of referenceable customers, the ability of our solutions to quickly generate business benefits for our customers, our substantial investment in product development, our deep domain expertise, the ease of use of our software products, our customer support and implementation services, our ability to deploy quickly, and our ability to deliver rapid return on investment for our customers.

Proprietary Rights and Licenses

Our success and ability to compete are dependent in part upon our proprietary technology. To protect ourthis proprietary technology, we rely on a combination of copyright and trade secret laws, confidentiality proceduresobligations and other contractual provisions, whichprovisions. However, these may afford only limited protection. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries. Although we rely ontake advantage of the limited protection afforded by such confidentialavailable through confidentiality and other contractual proceduresprovisions and intellectual property laws, we also believe that factors such as the knowledge, ability, and experience of our personnel, new product developments, frequent product enhancements, reliable maintenance and timeliness and quality of support services are essential to establishing and maintaining a technology leadership position. The source code for our proprietary software is protected as a trade secret and as a copyrighted work. Generally, copyrights on our products expire 95 years after the year of first publication of each product.publication. We enter into confidentiality or licensesimilar agreements with our employees, consultants and customers, and control access to and distribution of our software, documentation and other proprietary information, and deliver only object code (compiled source code) to our licensed customers. In addition, we have registered certaina number of trademarks in the U.S. and internationally and have registration applications pending for other trademarks.

We provide our software products to customers undernon-exclusive license agreements. others.


As is customary in the software industry, in order to protect our intellectual property rights, we do not sell or transfer title to our products to our customers. Although theour license and subscription agreements place restrictions on the customer’s use of our products, unauthorized use of our products nevertheless may occur.

Despite measures we have taken to protect our proprietary rights, unauthorized parties may attempt to reverse engineer or copy aspects of our products or obtain and use information that we regard as proprietary. PolicingMonitoring unauthorized use of our products is difficult and expensive. In addition, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results and financial condition.


In the future, we may increasingly be subject to claims of intellectual property infringement as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Although we are not aware that any of our products infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not claim infringement by us with respect to current or future products. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any such claims against us, with or without merit, as well as claims initiated by us against third parties, can be time consuming and expensive to defend, prosecute or resolve. Moreover, an adverse outcome in litigation or similar adversarial proceedings could subject us to significant liabilities to third parties, require the expenditure of significant resources to developnon-infringing technology, require a substantial amount of attention from management, require disputed rights to be licensed from others, require us to enter into royalty arrangements or require us to cease the marketing or use of certain products, any of which would have a material adverse effect on our business, operating results and financial condition. To the extent that we desire or are required to obtain licenses to patents or proprietary rights of others, there can be no assurance that any such licenses will be made available on terms acceptable to us, if at all.


We havere-licensed, and expect in the future tore-license, certain software from third parties for use in connection with our products. There can be no assurance that these third-party software vendors will not change their product offerings or that these software licenses will continue to be available to us on commercially reasonable terms, if at all. The termination of any such licenses or product offerings, or the failure of the third-party licensorslicensor's to adequately maintain or update their products, could result in delays in our ability to shipdeliver certain of our products while we seek to implement technology offered by alternative sources. Any required replacement licenses could prove costly. Further, any such delay, if it becomes extended, could result in a material adverse effect on our results of operations.

Company Strategy

Our objective is to become a leading provider of collaborative supply chain optimization, advanced retail planning and supply chain management solutions to enable small, midsize, large and Fortune 500 companies to optimize their operations associated with the planning, sourcing, manufacture, storage, distribution and allocation of products. Our strategy includes the following key elements:

Leverage and Expand Installed Base of Customers.We currently target businesses in the consumer goods, food and beverage, retail, apparel and sewn products, life sciences, chemicals, and wholesale distribution industries. We intend to continue to leverage our installed base of more than 1,250 customers to introduce additional functionality, product upgrades, and complementary modules. In addition, we intend to expand sales to new customers in our existing vertical markets and to target additional vertical markets over time. We will continue our focus on offering abest-in-class cloud solution and expect the growth trends we have experienced in this area to continue because many new and existing customers are pursuing cloud strategies for their business applications.

Continue to Expand Sales and Marketing. We intend to continue to pursue an increased share of the market for supply chain software solutions by expanding our sales and marketing activities. We believe our competitive advantages include providing rapid implementation,easy-to-maintain configuration, and quicktime-to-benefit across the full spectrum of customer operations. Logility intends to continue building a direct sales force that is focused on selected vertical markets, such as consumer goods, retail, life sciences, wholesale distribution and manufacturing supply chains. NGC Software intends to continue to focus on the fashion product industries such as apparel, footwear, sewn products, and furniture, adding sales and marketing resources when appropriate.

Expand Indirect Channels to Increase Market Penetration. We believe that key relationships with VARs will increase sales and expand market penetration of our products and services. This experienced global distribution network significantly expands Logility’s reach and provides sales, implementation and support resources serving customers in more than 80 countries.

Maintain Technology Leadership. We believe we are a technology leader in the field of collaborative supply chain optimization solutions and advanced business analytics. We intend to continue to provide innovative, advanced solutions and services to this market. We believe that Logility was one of the earliest providers of SCM software solutions on a client/server platform and on Windows, and the first to introduce a collaborative supply chain planning solution that operates over the Internet. We intend to continue developing and introducing new and enhanced products and keeping pace with technological developments and emerging industry standards.

Invest Aggressively to Build Market Share. We intend to continue investing to expand our sales force, research and development efforts, and consulting infrastructure, balanced with our goal of increasing profitability. We believe these investments are necessary to increase our market share and to capitalize on the growth opportunities in the market.

Acquire or Invest in Complementary Businesses, Products and Technologies. We believe that select acquisitions or investments may provide opportunities to broaden our product offering to provide more advanced solutions for our target markets. We will evaluate acquisitions or investments that will provide us with complementary products and technologies, expand our geographic presence and distribution channels, penetrate additional vertical markets with challenges and requirements similar to those we currently meet, and further solidify our leadership position within the SCM market. In fiscal 2015, we acquired MID Retail, Inc. (“MRI”), announced on May 30, 2014, to extend our reach into retail operations and expand our ability to help customers improve their Omni-Channel performance. On August 23, 2016 we announced the acquisition of AdapChain to provide supply chain Master Data Management and streamlined integration between our portfolio of planning and optimization solutions to third party software applications. In fiscal 2018, we acquired certain assets of privately held Innovare Holding Co., Incorporated, a Delaware corporation and its subsidiaries (collectively, “Halo”) effective November 21, 2017. Halo is a supplier of advanced analytics and business intelligence solutions, for the supply chain market. . These enriched analytics will leverage interactive visualization, machine learning algorithms, and artificial intelligence (AI) to transform both structured and unstructured data to accelerate business planning performance and proactively identify new business opportunities or mitigate risks.

Focus on Integrated Collaborative Planning and Supply Chain Execution Solution. We believe Logility is one of the few providers of truly integrated SCM software solutions addressing demand, supply and advanced retail planning as well as transportation logistics requirements.Logility Voyager Solutions provides a comprehensive suite for supply chain planning and transportation management with collaboration at its core, streamlining business processes between both internal and external trading partners. We intend to continue focusing Logility’s development initiatives on enhancing itsend-to-end solution, expanding its embedded performance management architecture and introducing additional capabilities that complement its integrated solution suite.

Increase Penetration of International Markets. In the fiscal year ended April 30, 2018, we generated 19% of our total revenues from international sales, resulting from marketing relationships with a number of international distributors. Logility, along with its subsidiary, DMI, has over 36 VARs in its indirect channel where the majority of the VARs are international. This experienced global distribution network expands Logility’s reach and provides sales, implementation and support resources, serving customers in more than 80 countries. We intend to further expand our international presence by creating additional relationships with distributors in Africa, Asia, Australia, Europe, North America and South America.

Expand Strategic Relationships. We intend to develop strategic relationships with leading enterprise software, systems integrators and service providers to integrate our software solutions into their services and products and to create joint marketing opportunities. In addition, Logility has developed a network of international agents who assist in the sale and support of its products. We intend to utilize these and future relationships with software and service organizations to enhance our sales and marketing position.

Continue to Focus on Providing High Quality Customer Service. Providing high quality customer service is a critical element of our strategy. We intend to continue investing in technology and personnel to accommodate the needs of our growing customer base. We will continue to seek new ways to improve service to our customers.

Leverage Cloud Strategy. Our cloud computing initiative accelerates customer’s deployment of our industry leading supply chain and advanced retail planning solutions. Our cloud strategy includes SaaS licensing and services designed to enable the optimization of the customer’s supply chain to reflect their global business needs.

Serve Small, Midsize and Large Business Markets. Our broad product portfolio allows us to address the unique business needs and complexity of a wide range of enterprises with small, midsize and large global operations.

There can be no assurance, however, that we will be successful in implementing the strategies outlined above.


Employees

As of April 30, 2018,2020, we had 462428 full-time employees, including 9897 in product research, development and enhancement, 4737 in customer support, 189164 in professional services, 8489 in marketing, sales and sales support, and 4441 in accounting, facilities and administration. We believe that our continued success will depend in part on our ability to continue to attract and retain highly skilled technical, marketing and management personnel, who may be in great demand. We believe our employee relations are good. We have never had a work stoppage and no employees are represented under collective bargaining arrangements.

We do not tolerate harassment or bullying of or discrimination against any of our employees by other employees (whether supervisors or colleagues) or non–employees. Any form of harassment or discrimination, including, but not limited to, that which is related to an individual’s race, color, religion, sex, gender identity, sexual orientation, national origin, genetics, citizenship status, pregnancy, age, disability, veteran status, or political opinions, and any form of bullying, is a violation of our policy and is treated as a disciplinary matter.

We support and encourage continuous learning and training for all employees. Employees are trained on job–specific requirements, as well as topics such as cybersecurity, data privacy, harassment and bullying.
Data Privacy
Regulatory and legislative activity in the areas of data protection and privacy continues to increase worldwide. We have established and continue to maintain policies to comply with applicable privacy and data protection laws. We also ensure that third parties processing personal data on our behalf are contractually obligated to follow or are otherwise compliant with such laws.

We are subject to certain privacy and data protection laws in other countries in which we operate, many of which are stricter than those in the United States. Some countries also have instituted laws requiring in–country data processing and/or in-country storage of data. Most notably, in the European Union (“EU”), the General Data Protection Regulation (“GDPR”) creates legal and compliance obligations for companies that process personal data of individuals in the EU, regardless of the geographical location of the company, and imposes significant fines for non-compliance. We process a limited amount of personal data (as defined under the GDPR) for our customers and act as a data controller with respect to the personal data of our employees and job applicants. Therefore, we have made changes to our privacy policies to comply with the GDPR. In addition, we have self-certified to the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks as the primary method for transferring personal data from Europe to the United States.
In the United States, the California Consumer Privacy Act (“CCPA”) now requires us to offer certain specific data privacy rights to California residents. Other states have adopted or are considering similar requirements that may be more stringent and/or expansive than federal requirements. Our privacy policies are compliant with the CCPA and other existing state laws.
Data Security
Information Security Management. Our Software Security Program is managed by our Cybersecurity Manager, who reports to the Chief Information Officer. We conduct vendor and internal risk assessments at least annually. Our Security Incident Response Team, consisting of personnel from Legal, Human Resources, Marketing, and IT across our business units, is responsible for implementing our Incident Response Policy and Procedure, which includes processes for detection, analysis, containment, eradication, and recovery, as well as an annual tabletop exercise.
Our employees are regularly trained on appropriate security measures. We provide security awareness training for new hires, and for all employees at least quarterly. We conduct user testing through “phishing” campaigns and require remedial training based on results. Our Cybersecurity Manager produces a monthly security awareness newsletter and periodic updates on recent malicious information security trends and scams.
The Service Organization Control (SOC) 2 Type II examination demonstrates that an independent accounting and auditing firm has reviewed and examined an organization’s control objectives and activities, and tested those controls to ensure that they are operating effectively. The Company obtains a SOC 2 Type II report annually from an independent third party audit. The third party examines the suitability of the design and operating effectiveness as of ASI's controls to provide reasonable assurance that ASI's service commitments and system requirements were achieved based on the applicable trust services criteria for security, availability, processing integrity and confidentiality.
Customer Data Security. We have web application firewalls and data encryption (both in transit and at rest) to ensure that our customer data is adequately protected. Our software applications undergo manual code reviews, static code analysis to test for vulnerabilities, and annual third-party penetration testing, with a formal change control process in place to correct any deficiencies. Our SaaS environments are safeguarded by vulnerability management software that detects OS and third-party application vulnerabilities; applies vulnerability patching on a monthly basis; and ensures emergency patching of critical vulnerabilities. Data security is monitored with fully-integrated SIEM (Security Information and Event Management) software, and we provide 24/7 security monitoring and alerting for all SaaS customer environments. Only approved users may access our SaaS environments, and such access is further controlled through two-factor authentication and quarterly access reviews.

Data in our cloud based solutions is hosted in a Microsoft Azure environment. Microsoft provides numerous security measures, including geo-redundant storage (GRS) with cross-regional replication for storage of backup data, and site recovery that replicates VMs in real-time to a different Azure region.
Business Continuity and Disaster Recovery.We have a documented Disaster Recovery Procedure and Business Continuity Plan. Key actions and responsibilities are handled by a designated Disaster Recovery Team and Emergency Management Team, respectively. The policies and procedures are reviewed, updated, and approved by executive management annually, and a Business Impact Analysis performed as part of our Business Continuity Plan.
Sustainability in Data Operations
We are continuing to expand our use of Microsoft Azure for hosting customer SaaS environments as well as some internal operations. Microsoft engaged WSP, a global consultancy with expertise in environmental and sustainability issues, to model the environmental impact of using Microsoft Cloud services instead of on-premise deployments. WSP found that Microsoft Cloud services are up to 93 percent more energy efficient and up to 98 percent more carbon efficient than traditional enterprise data centers.
Our Data Destruction & Sanitation Policy ensures proper disposal of media and data. Third parties perform secure destruction of media and we receive a certificate of secure destruction from such parties. Items for destruction or recycling are processed using an environmentally friendly waste-to-energy incineration process or e-Stewards® certified recycling process so that the information cannot be reconstructed.
Available Information

We make our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and all amendments to these reports available free of charge on or through our website, located athttp://www.amsoftware.com, as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission (“SEC”("SEC"). Reference to our website does not constitute incorporation by reference of the information contained on the site and should not be considered part of this document.


ITEM 1A.RISK FACTORS

ITEM 1A.    RISK FACTORS
A variety of factors may affect our future results and the market price of our stock.

We have included certain forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form10-K. We may also make oral and written forward-looking statements from time to time, in reports filed with the SEC and otherwise. We undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements based on circumstances or events which occur in the future, unless otherwise required by law. Actual results may differ materially from those projected in any such forward-looking statements due to a number of factors, including those set forth below and elsewhere in this Form10-K.

We operate in a dynamic and rapidly changing environment that involves numerous risks and uncertainties. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the potential impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those in any forward-looking statements. The following section lists some, but not all, of the risks and uncertainties that we believe may have a material adverse effect on our business, financial condition, cash flow or results of operations. In that case, the trading price of our securities could decline and you may lose all or part of your investment in our Company. This section should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in thisForm 10-K.


We cannot predict every event and circumstance that may affect our business, and therefore the risks and uncertainties discussed below may not be the only ones you should consider.

The risks and uncertainties discussed below are in addition to those that apply to most businesses generally. Furthermore, as we continue to operate our business, we may encounter risks of which we are not aware at this time. These additional risks may cause serious damage to our business in the future, the impact of which we cannot estimate at this time.

RISK FACTORS RELATED TO THE ECONOMY

The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
In December 2019, a novel coronavirus disease, or COVID-19, was reported and in January 2020, the World Health Organization (“WHO”), declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic. The COVID-19 pandemic, which has continued to spread, and the related adverse public health developments, including orders to shelter-in-place, travel restrictions, and mandated business closures, have adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility. It also has disrupted the normal operations of many businesses, including ours.
As a result of the COVID-19 pandemic, we have temporarily suspended all company-related travel unless absolutely necessary, and substantially all Company employees globally are encouraged to work from home for the foreseeable future. We have either canceled or changed employee, customer and industry events to dial-in experiences. We may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future. All of these changes may disrupt the way we operate our business.
Moreover, the conditions caused by the COVID-19 pandemic may affect the rate of spending on our products and services, and could adversely affect our customers’ ability or willingness to purchase our offerings or the timing of our current or prospective customers’ purchasing decisions; require pricing discounts or extended payment terms; or increase customer attrition rates, all of which could adversely affect our future sales, operating results and overall financial performance.
Our operations also have begun to be affected by a range of external factors related to the COVID-19 pandemic that are not within our control. For example, many cities, counties, states, and even countries have imposed or may impose a wide range of restrictions on the physical movement of our employees, partners and customers to limit the spread of COVID-19. If the COVID-19 pandemic starts to have a substantial impact on the productivity of our employees, and partners or a continued and substantial impact on the attendance of our employees, or a continued and substantial impact on the ability of our customers to purchase our products and services, our results of operations and overall financial performance may be harmed.
The duration and extent of the impact of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the disruption caused by such actions, and the impact of these and other factors on our employees, customers, partners, vendors and the global economy. If we are not able to effectively respond to and manage the impact of such events, our business will be harmed.
To the extent that the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Disruptions in the financial and credit markets, a slow economic recovery,international trade disputes, the COVID-19 pandemic and other external influences in the U.S. and global markets may reduce demand for our software and related services, which may negatively affect our revenues and operating results.

Our revenues and profitability depend on the overall demand for our software, professional services and maintenance services. Regional and global changes in the economy and financial markets, such as the severe global economic downturn in 2008, which was followed by a slow and relatively weak recovery, have resulted in companies generally reducing their spending for technology projects generally and therefore delaying or reconsidering potential purchases of our products and related services. Adverse conditions in credit markets, lagging consumer confidence and spending, the fluctuating cost of fuel and commodities and their effects on the U.S. and global economies and markets are examples of negative factors that have delayed or canceled certain potential customer purchases. Furthermore, the uncertainty posed by the long-term effects of conflicts in the Middle East, terrorist activities, the COVID-19 pandemic, related uncertainties and risks, and other geopolitical and trade issues may also adversely affect the purchasing decisions of current or potential customers. Weakness in European economies may adversely affect demand for our products and services, both directly and by adversely affecting business conditions that our customers face, as many of our U.S. customers that rely heavily on European sales. There can be no assurance that government responses to the disruptions in the financial markets, international

trade disputes, the COVID-19 pandemic or to weakened economies will sufficiently restore confidence, stabilize markets or increase liquidity and the availability of credit.

We are a technology company selling technology-based solutions with total pricing, including software and services, in many cases exceeding $500,000. Reductions in the capital budgets of our customers and prospective customers could have an adverse impact on our ability to sell our solutions. These economic, trade, public health and political conditions may reduce the willingness or ability of our customers and prospective customers to commit funds to purchase our products and services or to renew existing post-contract support agreements, or their ability to pay for our products and services after purchase. Future declines in demand for our products or services, or a broadening or protracted extension of these conditions, would have a significant negative impact on our revenues and operating results.

There may be an increase in customer bankruptcies due to weak economic conditions.

We have been in the past, and may be in the future, be affected by customer bankruptcies that occur in periods subsequent to the software license sale. During weak economic conditions there is an increased risk that some of our customers will file a petition for bankruptcy. When our customers file a petition for bankruptcy, we may be required to forego collection ofpre-petition amounts owed and to repay amounts remitted to us during the90-day preference period preceding the filing. Accounts receivable balances related topre-petition amounts may in some of these instances be large, due to extended payment terms for software license fees and significant billings for consulting and implementation services on large projects. The bankruptcy laws, as well as the specific circumstances of each bankruptcy, may severely limit our ability to collectpre-petition amounts, and may force us to disgorge payments made during the90-day preference period. We also face risk from international customers that file for bankruptcy protection in foreign jurisdictions, as the application of foreign bankruptcy laws may be more difficult to predict. Although we believe that we have sufficient reserves to cover anticipated customer bankruptcies, there can be no assurance that such reserves will be adequate, and if they are not adequate, our business, operating results and financial condition would be adversely affected.

We anticipate the COVID-19 pandemic will increase the likelihood of these risks.

Changes in the value of the U.S. dollar, as compared to the currencies of foreign countries where we transact business, could harm our operating results.

Our international revenues and the majority of our international expenses, including the wages of some of our employees, have beenare denominated primarily in currencies other than the U.S. dollar. Therefore, changes in the value of the U.S. dollar as compared to these other currencies may adversely affect our operating results. We do not hedge our exposure to currency fluctuations affecting future international revenues and expenses and other commitments. For the foregoing reasons, currency exchange rate fluctuations have caused, and likely will continue to cause, variability in our foreign currency denominated revenue streams and our cost to settle foreign currency denominated liabilities.

RISK FACTORS RELATED TO COMPETITION

Our markets are very competitive, and we may not be able to compete effectively.

The markets for our solutions are very competitive. The intensity of competition in our markets has significantly increased, in part as a result of the slow growth in investment in IT software as a result in slow overall GDP growth within the United States and other geographic regions in which we operate.software. We expect this intensity of competition to increase in the future. Our current and potential competitors have made and may continue to make acquisitions of other competitors and may establish cooperative relationships among themselves or with third parties. Any significant consolidation among ERP or supply chain software companies could adversely affect our competitive position. Increased competition has resulted and, in the future, could result in price reductions, lower gross margins, longer sales cycles and loss of market share. Each of these developments could have a material adverse effect on our operating performance and financial condition.

Many of our current and potential competitors have significantly greater resources than we do, and therefore we may be at a disadvantage in competing with them.

We directly compete with other supply chain software vendors, including SAP SE, Oracle Corporation, JDA Software Group,Blue Yonder, o9 Solutions, Kinaxis, Inc., Infor, Inc., Manhattan Associates and others. Some of our current and potential competitors have significantly greater financial, marketing, technical and other competitive resources than we do, as well as greater name recognition and a larger installed base of clients. The ERP software market has experienced significant consolidation. This consolidation, has includedincluding numerous mergers and acquisitions. It is difficult to estimate what long-term effect these acquisitions will have on our competitive environment. We have encountered competitive situations where we suspect that large competitors, in order to encourage customers to purchase licenses ofnon-retail specific applications and gain retail market share, also have also offered to license at no charge certain retail software applications that compete with our solutions. If competitors such as Oracle and SAP AGSE and other large private companies are willing

to license their retail and/or other applications at no charge, this may result in a more difficult competitive environment for our products. In addition, we could face competition from large, multi-industry technology companies that historically have historically not offered an enterprise solution set to the retail supply chain market. We cannot guarantee that we will be able to compete successfully for customers against our current or future competitors, or that such competition will not have a material adverse effect on our business, operating results and financial condition. Also, some prospective buyers are reluctant to purchase


applications that could have a short lifespan, as an acquisition could result in the application’s life being abruptly cut short. In addition, increased competition and consolidation in these markets is likely to result in price reductions, reduced operating margins and changes in market share, any one of which could adversely affect us. If customers or prospects want to reduce the number of theirfewer software vendors, they may elect to purchase competing products from a larger vendor than us since those larger vendors offer a wider range of products. Furthermore, some of these larger vendors, such as Oracle, may be capable of bundlingable to bundle their software with their database applications, which underlie a significant portion of our installed applications. When we compete with these larger vendors for new customers, we believe that these larger businesses often attempt to use their size as a competitive advantage against us.

Many of our competitors have well-established relationships with our current and potential clients and have extensive knowledge of our industry. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in client requirements or to devote greater resources to the development, promotion and sale of their products than we can. Some competitors have become more aggressive with their prices and payment terms and issuance of contractual implementation terms or guarantees. In addition, third parties may offer competing maintenance and implementation services to our customers and thereby reduce our opportunities to provide those services. We may be unable to continue to compete successfully with new and existing competitors without lowering prices or offering other favorable terms. Furthermore, potential customers may consider outsourcing options, including application service providers, data center outsourcing and service bureaus, as alternatives to licensing our software products. Any of these factors could materially impair our ability to compete and have a material adverse effect on our operating performance and financial condition.

We also face competition from the corporate IT departments of current or potential customers capable of internally developing solutions and we compete with a variety of more specialized software and services vendors, including:

Internet (on demand) software vendors;

single-industry software vendors;

merging enterprise resource optimization software vendors;

human resource management software vendors;

financial management software vendors;

merchandising software vendors;

services automation software vendors; and

outsourced services providers.

As a result, the market for enterprise software applications has been and continues to be intensely competitive. Some competitors are increasingly aggressive with their pricing, payment terms and/or issuance of contractual warranties, implementation terms or guarantees. Third-party service companies may offer competing maintenance and implementation services to our customers and thereby reduce our opportunities to provide those services. We may be unable to continue to compete successfully with new and existing competitors without lowering prices or offering other favorable terms to customers. We expect competition to persist and continue to intensify, which could negatively affect our operating results and market share.

Due to competition, we may change our pricing practices, which could adversely affect operating margins or customer ordering patterns.

The intensely competitive markets in which we compete can put pressure on us to reduce our prices. If our competitors offer deep discounts on certain products or services in an effort to recapture or gain market share or to sell other products or services, we may need to lower prices or offer other favorable terms in order to compete successfully. For these and other reasons, in the future we may choose to make changes to our pricing practices. For example, we may (1) offer additional discounts to customers, (2)customers; increase (or decrease) the use of pricing that involves periodic fees based on the number of users of a product,product; or (3) change maintenance pricing. Such changes could materially and adversely affect our margins, and our revenues may be negatively affected if our competitors are able to recapture or gain market share.

RISK FACTORS RELATED TO OUR OPERATIONS

Our growth is dependent upon the successful further development of our direct and indirect sales channels.

We believe that our future growth will depend on developing and maintaining successful strategic relationships with systems integrators and other technology companies. Our strategy is to continue to increase the proportion of customers served through these indirect channels. Wechannels, so we are currently investing, and plan to continue to invest, significant resources to develop these indirect channels.them. This investment could adversely affect our operating results if these efforts do not generate sufficient license, subscription and service revenue necessary to offset our investment. Also, our inability to partner with other technology companies and qualified systems integrators could adversely affect our results of operations. Because lower unit prices are typically charged on sales made through indirect channels, increased indirect sales could reduce our average selling prices and result in lower gross margins. In addition, sales of our products through indirect channels will likely reduce our consulting service revenues, as the third-party systems integrators generally provide these services. As indirect sales increase, our direct contact with our customer base will decrease, and we may have more difficulty accurately forecasting sales, evaluating customer satisfaction and recognizing emerging customer requirements. In addition, these systems integrators and third-party software providers may develop, acquire or market products competitive with our products. Our strategy of marketing our products directly to customers and indirectly

through systems integrators and other technology companies may result in distribution channel conflicts. Our direct sales efforts may compete with those of our indirect channels and, to the extent that different systems integrators target the same customers, systems integrators also may also come into conflict with each other. Any channel conflicts that develop may have a material adverse effect on our relationships with systems integrators or harm our ability to attract new systems integrators.

Increasingly we are required to defer recognition of license revenue for a significant period of time after entering into an agreement, which could negatively affect our results of operations.

We are required to delay recognizing license revenue for a significant period of time based on a variety of factors, including:

whether the license agreement includes cloud services such as managing the application and hosting the server that are performed over the term of the contract;

whether the license agreement relates to then-unavailable software products;

whether transactions include both currently deliverable software products and software products that are under development or other undeliverable elements;

whether the customer demands services that include significant modifications, customizations or complex interfaces that could delay product delivery or acceptance;

whether the transaction involves acceptance criteria that may preclude revenue recognition or if there are identified product-related issues, such as known defects; and

whether the transaction involves payment terms or fees that depend upon contingencies.

These factors and other specific accounting requirements under U.S. generally accepted accounting principles (GAAP) for software revenue recognition require that we have very precise terms in our license agreements to allow us to recognize revenue when we initially deliver software or perform services. Although we have a standard form of license agreement that we believe meets the criteria under GAAP for current revenue recognition on delivered elements, we negotiate and revise these terms and conditions in many transactions. Therefore, we may license our software or provide services with terms and conditions that do not permit revenue recognition at the time of delivery or even as work on the project is completed.

We are dependent upon the retail industry for a significant portion of our revenues.

Historically, we have derived a significant percentage of our revenues from the licensesale of software products and the sale of collaborative applications that address vertical market opportunities with manufacturers and wholesalers that supply retail customers. The success of our customers is directly linked to economic conditions in the retail industry, which in turn are subject to intense competitive pressures and are affected by overall economic conditions. In addition, we believe that the licensingacquisition of certain of our software products involves a large capital expenditure, which is often accompanied by large-scale hardware purchases or other capital commitments. As a result, demand for our products and services could decline in the event of instability or potential downturns in our customers’ industries.

We believe

Due to the COVID-19 pandemic, among other factors, we expect the retail industry remainsto remain relatively cautious in its level of investment in IT when compared to other industries. We remainare concerned about weak and uncertain economic conditions, consolidations and the disappointing results of retailers in certain markets, especially if such weak economic conditions persist for an extended period of time. Weak and uncertain economic conditions have negatively affected our revenues in the past and may do so in the future, negatively affect our revenues,particularly due to the impact of the COVID-19 pandemic, including potential deterioration of our maintenance revenue base as customers look to reduce their costs, elongation of our selling cycles, and reduction in the demand for our products. As a result, it is difficult in the current economic environment to predict exactly when specific software licensessales will close. In addition, weak and uncertain economic conditions could impair our customers’ ability to pay for our products or services. We also believe the retail business transformation from retail brick-and-mortar to technology-enabled omni-channel commerce models will be a multi-year trend. Consequently, we cannot predict when the disruption from the COVID-19 pandemic or the transformation to new commerce models may moderate or end. Any of these factors could adversely affect our business, our quarterly or annual operating results and our financial condition.

We have observed that as the retail industry consolidates it is experiencing increased competition in certain geographic regions that could negatively affect the industry and our customers’ ability to pay for our products and services. Such consolidation has negatively impacted our revenues in the past and may continue to do so in the future, negatively impact our revenues andwhich may reduce the demand for our products, and may adversely affect our business, operating results and financial condition.

We may derive a significant portion of our revenues in any quarter from a limited number of large,non-recurring license sales.

We

From time to time, we expect to continue to experience fromtime-to-timelarge, individual licensecustomer sales, which may cause significant variations in quarterly license fees. We also believe that purchasing our products is relatively discretionary and generally involves a significant commitment of a customer’s capital resources. Therefore, a downturn in any customer’s business, including due to the COVID-19 pandemic, could result in order cancellations that could have a significant adverse impact on our revenues and quarterly results. Additionally, our customers may request flexibility in payment terms as a result of the impact of COVID-19 on their businesses, which would also have a significant adverse impact on our revenues and quarterly results. Moreover, continued uncertainty about general economic conditions could precipitate significant reductions in corporate spending for IT, which could result in delays or cancellations of orders for our products.

Our lengthy sales cycle makes it difficult to predict quarterly revenue levels and operating results.

Because license and implementation fees for our software products are substantial and the decision to purchase our products typically involves members of our customers’ senior management, the sales process for our solutions is lengthy. Accordingly, the timing of our license revenues is difficult to predict, and the delay of an order could cause our quarterly revenues to fall substantially below our expectations and those of public market analysts and investors. Moreover, to the extent that we succeed in shifting customer purchases away from individual software products and toward more costly integrated suites of software and services, our sales cycle may lengthen further, which could increase the likelihood of delays and cause the effect of a delay to become more pronounced. Delays in sales could cause significant shortfalls in our revenues and operating results for any particular period. Also, it is difficult for us to forecast the timing and recognition of revenues from sales of our products because our existing and prospective customers often take significant time evaluating our products before licensingpurchasing them. The period between initial customer contact and a purchase by a customer may vary fromcould be nine months to more than one year.or longer. During the evaluation period, prospective customers may decide not to purchase or may scale down proposed orders of our products for various reasons, including:

reduced demand for enterprise software solutions;

introduction of products by our competitors;

lower prices offered by our competitors;

changes in budgets and purchasing priorities;

increased time to obtain purchasing approval; and

reduced need to upgrade existing systems.

Our

In addition, as a result of the COVID-19 pandemic, many local governments as well as our existing and prospective customers have limited travel, frozen discretionary spending and furloughed staff. As a result, the sales process is likely to become more lengthy and difficult.
Furthermore, our existing and prospective customers routinely require education regarding the use and benefits of our products. This may also lead to delays in receiving customers’ orders.

We derive a significant portion of our services revenues from a small number of customers. If these customers were to discontinue the usage of our services or delay their implementation our total revenues would be adversely affected.

We derive a significant portion of our services revenues, and total revenues from a small number of customers using our services for product enhancement and other optional services. If these customers were to discontinue or delay the usage of these services, or obtain these services from a competitor, our services revenues and total revenues would be adversely affected. Customers may delay

or terminate implementation of our services due to budgetary constraints related to economic uncertainty, dissatisfaction with product quality, the difficulty of prioritizing numerous IT projects, changes in business strategy, personnel or priorities, or for other reasons. Such customersCustomers may be less likely to invest in additional software in the future and toor continue to pay for software maintenance. Since our business relies to a large extent upon sales to existing customers and since maintenance and services revenues are key elements of our revenue base, any reduction in these sales or these maintenance and services payments could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Services revenues carry lower gross margins than license revenues and an overall increase in services revenues as a percentage of total revenues could have an adverse impact on our business.

Because our service revenues have lower gross margins than do our license or subscription revenues, an increase in the percentage of total revenues represented by service revenues or a change in the mix between services that are provided by our employees versus services provided by third-party consultants could have a detrimental impact on our overall gross margins and could adversely affect operating results.

If our customers elect not to renew maintenance contracts after the initial maintenance period and the loss of those customers is not offset by new maintenance customers, our maintenance revenues and total revenues would be adversely affected.

Upon the purchase of a software license, our customers typically enter into a maintenance contract with a term from approximately one to three years. If, after this initial maintenance period, customers elect not to renew their maintenance contracts and we do not offset the loss of those customers with new maintenance customers as a result of new license fees, our maintenance revenues and total revenues would be adversely affected.

If accounting interpretations relating to revenue recognition change or companies we acquire have applied such standards differently than we do or have not applied them at all, our reported revenues could decline or we could be forced to make changes in our business practices or we may incur the expense and risks associated with an audit or restatement of the acquired company’s financial statements.

There are several accounting standards and interpretations covering revenue recognition for the software industry. These standards address software revenue recognition matters primarily from a conceptual level and do not include specific implementation guidance. We believe that we currently comply with these standards.

The accounting profession and regulatory agencies continue to discuss various provisions of these pronouncements with the objective of providing additional guidance on their application and with respect to potential interpretations. These discussions and the issuance of new interpretations could lead to unanticipated changes in our current revenue accounting practices, which could change the timing of recognized revenue. They also could also drive significant adjustments to our business practices, which could result in increased administrative costs, lengthened sales cycles and other changes whichthat could adversely affect our reported revenues and results of operations. In addition, companies we acquire historically may have historically interpreted software revenue recognition rules differently than we do or may not have been subject to U.S. GAAP as a result of reporting under local GAAP in a foreign country. If we discover that companies we have acquired have interpreted and applied software revenue recognition rules differently than prescribed by U.S. GAAP, we could be required to devote significant management resources, and incur the expense associated with an audit, restatement or other examination of the acquired companies’ financial statements.

Our future growth depends upon our ability to develop and sustain relationships with complementary vendors to market and implement our software products, and a failure to develop and sustain these relationships could have a material adverse effect on our operating performance and financial condition.


We are developing, maintaining and enhancing significant working relationships with complementary vendors, such as software companies, consulting firms, resellers and others that we believe can play important roles in marketing our products and solutions. We are currently investing, and intend to continue to invest, significant resources to develop and enhance these relationships, which could adversely affect our operating margins. We may be unable to develop relationships with organizations that will be able to market our products effectively. Our arrangements with these organizations are not exclusive, and in many cases may be terminated by either party without cause. Many of the organizations with which we are developing or maintaining marketing relationships have commercial relationships with our competitors. There can be no assurance that any organization will continue its involvement with us and our products.us. The loss of relationships with such organizations could materially and adversely affect our operating performance and financial condition.

Failure to maintain our margins and service rates for implementation services could have a material adverse effect on our operating performance and financial condition.

A significant portion of our revenues is derived from implementation services. If we fail to scope our implementation projects correctly, our services margins may suffer. We bill for implementation services predominately on an hourly or daily basis (time and materials) and sometimes under fixed price contracts, and we generally recognize revenue from those services as we perform the work. If we are not able to maintain the current service rates for our time and materials implementation services withoutand cannot make corresponding cost reductions, or if the percentage of fixed price contracts increases and we underestimate the costs of our fixed price contracts, our operating performance may suffer. The rates we charge for our implementation services depend on a number of factors, including the following:

including:
perceptions of our ability to add value through our implementation services;

complexity of services performed;

competition;

pricing policies of our competitors and of systems integrators;

the use of globally sourced, lower-cost service delivery capabilities within our industry; and

economic, political and market conditions.

Our past and future acquisitions may not be successful and we may have difficulty integrating acquisitions.

We continually evaluate potential acquisitions of complementary businesses, products and technologies. We have in the past acquired and invested, and may continue to acquire or invest, in complementary companies, products and technologies, and enter into joint ventures and strategic alliances with other companies. Acquisitions, joint ventures, strategic alliances, and investments present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of any transaction. Risks commonly encountered in such transactions include:

the risk that an acquired company or assets may not further our business strategy or that we paid more than the company or assets were worth;

the difficulty of assimilating the operations and retaining and motivating personnel of an acquired company;

the risk that we may not be able to integrate acquired technologies or products with our current products and technologies;

the potential disruption of our ongoing business and the diversion of our management’s attention from other business concerns;

the inability of management to maximize our financial and strategic position through the successful integration of an acquired company;

adverse impact on our annual effective tax rate;

dilution of existing equity holders caused by capital stock issuance to the shareholders of an acquired company or stock option grants to retain employees of an acquired company;

difficulty in maintaining controls, procedures and policies;

potential adverse impact on our relationships with partner companies or third-party providers of technology or products;

the impairment of relationships with employees and customers;

potential assumption of liabilities of our acquisition targets;

significant exit or impairment charges if products acquired in business combinations are unsuccessful; and

issues with product quality, product architecture, legal contingencies, product development issues, or other significant issues that may not be detected through our due diligence process.

Accounting rules require the use of the purchase method of accounting in all new business acquisitions. Many acquisition candidates have significant intangible assets, andso an acquisition of these businesses would likely result in significant amounts of goodwill and other intangible assets. The purchase method of accounting for business combinations may require large write-offs of

anyin-process research and development costs related to companies being acquired, as well as ongoing amortization costs for other intangible assets valued in combinations of companies.assets. Goodwill and certain other intangible assets are not amortized to income, but are


subject to impairment reviews at least annual impairment reviews.annually. If the acquisitions do not perform as planned, future write-offs and charges to income arising from such impairment reviews could be significant. In addition, these acquisitions could involve acquisition-related charges, such asone-time acquired research and development charges. Such write-offs and ongoing amortization charges may have a significant negative impact on operating margins and net earnings in the quarter of the combination and for several subsequent years. We may not be successful in overcoming these risks or any other problems encountered in connection with such transactions.

Fully integrating an acquired company or business into our operations may take a significant amount of time. In addition, we may be able to conduct only limited due diligence on an acquired company’s operations. Following an acquisition, we may be subject to liabilities arising from an acquired company’s past or present operations, including liabilities related to data security, encryption and privacy of customer data, and these liabilities may not be covered by the warranty and indemnity provisions that we negotiate. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions. To the extent we do not successfully avoid or overcome the risks or problems related to any acquisitions, our results of operations and financial condition could be adversely affected. Future acquisitions also could impact our financial position and capital needs, and could cause substantial fluctuations in our quarterly and yearly results of operations.
Our business may require additional capital.

We may require additional capital to finance our growth or to fund acquisitions or investments in complementary businesses, technologies or product lines. Our capital requirements may be influenced by many factors, including:

the demand for our products;

the timing and extent of our investment in new technology;

the timing and extent of our acquisition of other companies;

the level and timing of revenue;

the expenses of sales and marketing and new product development;

the success and related expense of increasing our brand awareness;

the cost of facilities to accommodate a growing workforce;

the extent to which competitors are successful in developing new products and increasing their market shares; and

the costs involved in maintaining and enforcing intellectual property rights.

To the extent that our resources are insufficient to fund our future activities, we may need to raise additional funds through public or private financing. However, additional funding, if needed, may not be available on terms attractive to us, or at all. Our inability to raise capital when needed could have a material adverse effect on our business, operating results and financial condition. If additional funds are raised through the issuance of equity securities, the percentage ownership of our company by our current shareholders would be diluted.

Business disruptions could affect our operating results.

A significant portion of our research and development activities and certain other critical business operations are concentrated in a few geographic areas. We are a highly automated business and a disruption or failure of our systems could cause delays in completing sales and providing services. A major earthquake, firenatural disaster, public health crisis such as the COVID-19 pandemic, or other catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack that results in the destruction or disruption of any of our critical business or IT systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be materially and adversely affected.

To effectively mitigate this risk, we must continue to improve our operational, financial and management controls, and our reporting systems and procedures by, among other things, improving our key processes and IT infrastructure to support our business needs, and enhancing information and communication systems to ensure that our employees and offices around the world are well-connected, can effectively communicate with each other and our customers and employees can work remotely as appropriate.
Although we maintain crisis management and disaster response plans, in the event of a natural disaster, public health crisis or other catastrophic event, or if we fail to implement the improvements described above, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results.
Our international operations and sales subject us to risks associated with unexpected activities outside of the United States.

The global reach of our business could cause us to be subject to unexpected, uncontrollable and rapidly changing events and circumstances in addition to those experienced in locations within the United States. As we grow our international operations,

we may need to recruit and hire new consulting, product development, sales and marketing and support personnel in the countries in which we have or will establish offices.offices or otherwise have a significant presence. Entry into new international markets typically requires the establishment of new marketing and distribution channels, as well asand may involve the development and subsequent support of localized versions of our software. International introductions of our products often require a significant investment in advance of anticipated future revenues. In addition, the opening of a new office typically results in initial recruiting and training expenses and reduced labor efficiencies associated with the introduction of products to a new market. If we are less successful in a new market than we expect, we may not be able to realize an adequate return on our initial investment and our operating results could suffer. We cannot guarantee that the countries in which we operate will have a sufficient pool of qualified personnel from which to hire, that we will be successful at hiring, training or retaining such personnel or that we can expand or contract our international operations in a timely, cost-effective manner. If we have to downsize certain international operations, particularly in Europe, the costs to do so are typically much higher than downsizing costs in the United States. The following factors, among others, could have an adverse impact on our business and earnings:

failure to properly comply with foreign laws and regulations applicable to our foreign activities including, without limitation, software localization requirements;

failure to properly comply with U.S. laws and regulations relating to the export of our products and services;

compliance with multiple and potentially conflicting regulations in Europe, Asia and North America, including export requirements, tariffs, import duties and other trade barriers, as well as health and safety requirements;

difficulties in managing foreign operations and appropriate levels of staffing;

longer collection cycles;

tariffs and other trade barriers;barriers, including the economic burden and uncertainty placed on our customers by the imposition and threatened imposition of tariffs by the U.S., China and perhaps other countries;

seasonal reductions in business activities, particularly throughout Europe;

reduced protection for intellectual property rights in some countries;

proper compliance with local tax laws which can be complex and may result in unintended adverse tax consequences;

anti-American sentiment due to conflicts in the Middle East and other American policies that may be unpopular in certain countries;

localized spread of infection resulting from the COVID-19 pandemic, including any economic downturns and other adverse impacts.
increasing political instability, adverse economic conditions and the potential for war or other hostilities in many of these countries;

difficulties in enforcing agreements through foreign legal systems;

fluctuations in exchange rates that may affect product demand and may adversely affect the profitability in U.S. dollars of products and services provided by us in foreign markets where payment for our products and services is made in the local currency, including any fluctuations caused by uncertainties relating to the June 2016 referendum vote by the United Kingdom toKingdom’s exit from the European Union (“Brexit”);

changes in general economic and political conditions in countries where we operate;

the impact of Brexit on the United Kingdom’s access to the European Union Single Market, the related regulatory environment, the global economy and the resulting impact on our business, including the delay of execution of contracts by our customers;

changes in general economic, health and political conditions in countries where we operate;
potential labor strikes, lockouts, work slowdowns and work stoppages; and

restrictions on downsizing operations in Europe and expenses and delays associated with any such activities.

It may become increasingly expensive to obtain and maintain liability insurance.

Our products are often critical to the operations of our customers’ businesses and provide benefits that may be difficult to quantify. If our products fail to function as required, we may be subject to claims for substantial damages. Courts may not enforce provisions in our contracts that would limit our liability or otherwise protect us from liability for damages. Although we maintain general liability insurance coverage, including coverage for errors or omissions and cybersecurity risks, this coverage may not continue to be available on reasonable terms or in sufficient amounts to cover claims against us. In addition, our insurerinsurers may disclaim coverage as to any future claim. If claims exceeding the available insurance coverage are successfully asserted against us, or our insurer imposesinsurers impose premium increases, large deductibles orco-insurance requirements on us, our business and results of operations could be adversely affected.

We contract for insurance to cover a variety of potential risks and liabilities, including those relating to the unexpected failure of our products. In the current market, insurance coverage for all types of risk is becoming more restrictive, and when insurance coverage is offered, the deductibleamount for which we are responsible is larger. In light of these circumstances, it may become more difficult to maintain insurance coverage at historical levels or, if such coverage is available, the cost to obtain or maintain it may increase substantially. This may result in our being forced to bear the burden of an increased portion of risks for which we have traditionally been covered by insurance, which could negatively impact our results of operations.


Adverse litigation results could affect our business.

We may be subject to various legal proceedings and claims involving customer, shareholder, consumer, competitionemployee, competitor and other issues on a global basis.issues. Litigation or other dispute resolution can be lengthy, expensive and disruptive to our operations, and results cannot be predicted with certainty. An adverse decision could result in monetary damages or injunctive relief that could affect our business, operating results or financial condition.

Growth in our operations could increase demands on our managerial and operational resources.

If the scope of our operating and financial systems and the geographic distribution of our operations and customers increase dramatically, this may increase demands on our management and operations. Our officers and other key employees will need to implement and improve our operational, customer support and financial control systems and effectively expand, train and manage our employee base.

Further, we may be required to manage an increasing number of relationships with various customers and other third parties. We may not be able to manage future expansion successfully, and our inability to do so could harm our business, operating results and financial condition.

Changes

Unanticipated changes in U.S. tax laws and effective tax rates, or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition.
We are subject to income taxes in the U.S. and various foreign jurisdictions, and our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions. Changes to applicable tax laws (which may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many changes have been made to applicable tax laws and changes are likely to continue to occur in the future. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
changes in the valuation of our deferred tax assets and liabilities;
expected timing and amount of the release of tax valuation allowances;
expiration of, or detrimental changes in, research and development tax credit laws;
tax effects of stock-based compensation;
costs related to intercompany restructurings;
changes in tax laws, regulations, accounting principles or interpretations thereof; and
future earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated earnings in countries where we have higher statutory tax rates.
In addition, we may be subject to audits of our income and sales taxes by the Internal Revenue Service and foreign and state tax authorities. Outcomes from these audits could have a materialan adverse effect on our business, cash flow,operating results of operations orand financial condition.

The Tax Cuts and Jobs Act (the “U.S. Tax Act”), enacted on December 22, 2017, represents a significant overhaul to the U.S. federal tax code. This tax legislation lowers the U.S. statutory tax rate from 35% to 21%, but also includes a number of provisions that could impact our U.S. federal income tax position in a reporting period, including the limitation or elimination of certain deductions or credits, and U.S. taxes on foreign earnings. In addition, any further changes to tax laws could adversely affect our effective tax rates, cause us to change the way in which we structure our business or result in other costs.

RISK FACTORS RELATED TO OUR PRODUCTS

We may not be successful in convincing customers to migrate to current or future releases of our products, which may lead to reduced services and maintenance revenues and less future business from existing customers.

Our customers may not be willing to incur the costs or invest the resources necessary to complete upgrades to current or future releases of our products. This may lead to oura loss of services and maintenance revenues and future business from customers that continue to operate prior versions of our products or choose to no longer use our products.

We depend on third-party technology which if it should become unavailable or if it contains defects, could result in increased costs or delays in the production and improvement of our products.

products if it should become unavailable or if it contains defects.

We license critical third-party software products that we incorporate into our own software products. We are likely to incorporate and include additional third-party software into and within our products and solutions as we expand our product offerings. The operation of our products would be impaired if errors occur in the third-party software that we utilize. It may be more difficult for us to correct any defects in third-party software because the software is not within our control. Accordingly, our business could be adversely affected in the event of any errors in this software. There can be no assurance that these third parties will continue to make their software available to us on acceptable terms, invest the appropriate levels of resources in their products and services to maintain and enhance the capabilities of their software, or even remain in business. Further, due to the limited number of vendors of certain types of third-party software, it may be difficult for us to replace such third-party software if a vendor terminates our license of the software or our ability to license the software to customers. If our relations with any of these third-party software providers are impaired, and if we are unable to obtain or develop a replacement for the software, our business could be harmed. In addition, if the cost of licensing any of these third-party software products significantly increases, our gross margin levels could significantly decrease.

The use of open source software in our products may expose us to additional risks and harm our intellectual property.


Some of our products use or incorporate software that is subject to one or more open source licenses. Open source software is typically freely accessible, usable and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as a component of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open source software licenses require the user of such software to make any derivative works of the open source code available to others on unfavorable terms or at no cost. This can subject previously proprietary software to open source license terms.

While we monitor the use of all open source software in our products, processes and technology and try to ensure that no open source software is used in such a way as to require us to disclose the source code to the related product or solution, such use could inadvertently occur. Additionally, if a third-party software provider has incorporated certain types of open source software intoin software we license from such third party for our products and solutions, we could, under certain circumstances we could be required to disclose the source code to our products and solutions. This could harm our intellectual property position and have a material adverse effect on our business, results of operations, cash flow and financial condition.

We may be unable to retain or attract customers if we do not develop new products and enhance our current products in response to technological changes and competing products.

As a software company, we have been required to migrate our products and services from mainframe to customer server toweb-based environments. In addition, we have been required to adapt our products to emerging standards for operating systems, databases and other technologies. We will be unable to compete effectively if we are unable to:

maintain and enhance our technological capabilities to correspond to these emerging environments and standards;

develop and market products and services that meet changing customer needs; or

anticipate or respond to technological changes on a cost-effective and timely basis.

A substantial portion of our research and development resources is devoted to product upgrades that address regulatory and support requirements. Only the remainder of our limited research and development resources is available for new products. New products require significant development investment. That investment is further constrained because of the added costs of developing new products that work with multiple operating systems or databases. We face uncertainty when we develop or acquire new products because there is no assurance that a sufficient market will develop for those products. If we do not attract sufficient customer interest in those products, we will not realize a return on our investment and our operating results will be adversely affected.

Our core products face competition from new or modified technologies that may render our existing technology less competitive or obsolete, reducing the demand for our products. As a result, we must continually redesign our products to incorporate these new technologies and to adapt our software products to operate on, and comply with evolving industry standards for, hardware and software platforms. Maintaining and upgrading our products to operate on multiple hardware and database platforms reduces our resources for developing new products. Because of the increased costs of developing and supporting software products across multiple platforms, we may need to reduce the number of those platforms. In addition, conflicting new technologies present us with difficult choices of which new technologies to adopt. If we fail to anticipate the most popular platforms, fail to respond adequately to technological developments, or experience significant delays in product development or introduction, our business and operating results will be negatively impacted.

In addition, to the extent we determine that new technologies and equipment are required to remain competitive, the development, acquisition and implementation of such technologies may require us to make significant capital investments. We may not be able to obtainhave sufficient capital for these purposes and investments in new technologies may not result in commercially viable products. The loss of revenue and increased costs to us from such changing technologies would adversely affect our business and operating results.

If our products are not able to deliver quick, demonstrable value to our customers, our business could be seriously harmed.

Enterprises are requiring their application software vendors to provide faster returns on their technology investments. We must continue to improve our speed of implementation and the pace at which our products deliver value or our competitors may gain important strategic advantages over us. If we cannot successfully respond to these market demands, or if our competitors respond more successfully than we do, our business, results of operations and financial condition could be materially and adversely affected.

If we do not maintain software performance across accepted platforms and operating environments, our license, subscription and services revenue could be adversely affected.

The markets for our software products are characterized by rapid technological change, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements. We continuously evaluate new

technologies and implement advanced technology into our products. However, if in our product development efforts we fail to accurately address, in a timely manner, evolving industry standards, new technology advancements or important third-party interfaces or product architectures, sales of our products and services will suffer.

Market acceptance of new platforms and operating environments may require us to undergo the expense of developing and maintaining compatible product lines. We can license our software products for use with a variety of popular industry standard relational database management system platforms using different programming languages and underlying databases and architectures. There may be future or existing relational database platforms that achieve popularity in the marketplace and that may or may not be architecturally compatible with our software product design. In addition, the effort and expense of developing, testing, and maintaining software product lines will increase as more hardware platforms and operating systems achieve market acceptance within our target markets. Moreover, future or existing user interfaces that achieve popularity within the business application marketplace may or may not be architecturally compatible with our current software product design. If we do not achieve market acceptance of new user interfaces that we support, or adapt to popular new user interfaces that we do not support, our sales and revenue may be adversely affected. Developing and maintaining consistent software product performance characteristics across all of these combinations could place a significant strain on our resources and software product release schedules, which could adversely affect revenues and results of operations.

Our software products and product development are complex, which makemakes it increasingly difficult to innovate, extend our product offerings, and avoid costs related to correction of program errors.

The market for our software products is characterized by rapid technological change, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements. For instance, existing products can become obsolete and unmarketable when vendors introduce products utilizing new technologies or new industry standards emerge. As a result, it is difficult for us to estimate the life cycles of our software products. There can be no assurance that we will successfully identify new product opportunities or develop and bring new products to the market in a timely and cost-effective manner, or that products, capabilities or technologies developed by our competitors will not render our products obsolete. Our future success will depend in part upon our ability to:

continue to enhance and expand our core applications;

continue to sell our products;

continue to successfully integrate third-party products;

enter new markets and achieve market acceptance; and

develop and introduce new products that keep pace with technological developments, including developments related to the Internet, satisfy increasingly sophisticated customer requirements and achieve market acceptance.

Despite our testing, by us, our software programs, like all software programs generally, may contain a number of undetected errors or “bugs” when we first introduce them or as new versions are released. We do not discover some errors until we have installed the product and our customers have used it. Errors may result in the delay or loss of revenues, diversion of software engineering resources, materialnon-monetary concessions, negative media attention, or increased service or warranty costs as a result of performance or warranty claims that could lead to customer dissatisfaction, resulting in litigation, damage to our reputation, and impaired demand for our products. Correcting bugs may result in increased costs and reduced acceptance of our software products in the marketplace. Further, such errors could subject us to claims from our customers for significant damages, and we cannot assure you that courts would enforce the provisions in our customer agreements that limit our liability for damages. The effort and expense of developing, testing and maintaining software product lines will increase with the increasing number of possible combinations of:

vendor hardware platforms;

operating systems and updated versions;

application software products and updated versions; and

database management system platforms and updated versions.

Developing consistent software product performance characteristics across all of these combinations could place a significant strain on our development resources and software product release schedules.

If the open source community expands into enterprise application and supply chain software, our license fee revenues may decline.

The open source community is comprised of many different formal and informal groups of software developers and individuals who have created a wide variety of software and have made that software available for use, distribution and modification, often free of charge. Open source software, such as the Linux operating system, has been gaining in popularity among business users. If developers contribute enterprise and supply chain application software to the open source community, and that software has competitive features and scale to support business users in our markets, we will need to change our product pricing and distribution strategy to compete successfully.


Implementation of our products can be complex, time-consuming and expensive, customers may be unable to implement our products successfully, and we may become subject to warranty or product liability claims, which could be costly to resolve and result in negative publicity.

Our products must integrate with the many existing computer systems and software programs of our customers. This can be complex, time-consuming and expensive, and may cause delays in the deployment of our products. Our customers may be unable to implement our products successfully or otherwise achieve the benefits attributable to our products. Although we test each of our new products and product enhancement releases and evaluate and test the products we obtain through acquisitions before introducing them to the market, there may still be significant errors in existing or future releases of our software products, with the possible result that we may be required to expend significant resources in order to correct such errors or otherwise satisfy customer demands. In addition, defects in our products or difficulty integrating our products with our customers’ systems could result in delayed or lost revenues, warranty or other claims against us by customers or third parties, adverse customer reactions and negative publicity about us or our products and services or reduced acceptance of our products and services in the marketplace, any of which could have a material adverse effect on our reputation, business, results of operations and financial condition.

An increase in sales of software products that require customization would result in revenue being recognized over the term of the contract for those products and could have a material adverse effect on our operating performance and financial condition.

Historically, we generally have been able to recognize software license revenue upon delivery of our solutions and contract execution. Customers and prospects could ask for unique capabilities in addition to our core capabilities to give them a competitive edge in the market place. These instances could cause us to recognize more of our software license revenue on a contract accounting basis over the course of the delivery of the solution rather than upon delivery and contract execution. The period between the initial contract and the completion of the implementation of our products can be lengthy and is subject to a number of factors (over many of which we have little or no control) that may cause significant delays. These factors includedelays, including the size and complexity of the overall project. As a result, a shift toward a higher proportion of software license contracts requiring contract accounting would have a material adverse effect on our operating performance and financial condition and cause our operating results to vary significantly from quarter to quarter.

We sometimes experience delays in product releases, which can adversely affect our business.

Historically, we have issued significant new releases of our software products periodically, with minor interim releases issued more frequently. As a result of the complexities inherent in our software, major new product enhancements and new products often require long development and testing periods before they are released. On occasion, we have experienced delays in the scheduled release dates of new or enhanced products, and we cannot provide any assurance that we will achieve future scheduled release dates. The delay of product releases or enhancements, or the failure of such products or enhancements to achieve market acceptance, could materially affect our business and reputation.

We may not receive significant revenues from our current research and development efforts for several years.

Developing and localizing software is expensive, and the investment in product development may involve a long payback cycle. Our future plans include significant investments in software research and development and related product opportunities. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we do not expect to receive significant revenues from these investments for several years, if at all.

We have limited protection of our intellectual property and proprietary rights and may potentially infringe third-party intellectual property rights.

We consider certain aspects of our internal operations, software and documentation to be proprietary, and rely on a combination of copyright, trademark and trade secret laws; confidentiality agreements with employees and third parties; and protective contractual provisions (such as those contained in our license agreements with consultants, vendors, partners and customers) and other measures to protect this information. Existing copyright laws afford only limited protection. We believe that the rapid pace of technological change in the computer software industry has made trade secret and copyright protection less significant than factors such as:

knowledge, ability and experience of our employees;

frequent software product enhancements;

customer education; and

timeliness and quality of support services.

Our competitors may independently develop technologies that are substantially equivalent or superior to our technology. The laws of some countries in which our software products are or may be licensedsold do not protect our software products and intellectual property rights to the same extent as do the laws of the United States.


We generally enter into confidentiality or licensesimilar agreements with our employees, customers, consultants, and vendors. These agreements control access to and distribution of our software, documentation, and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our products, obtain and use information that we regard as proprietary, or develop similar technology through reverse engineering or other means. Preventing or detecting unauthorized use of our products is difficult. There can be no assurance that the steps we take will prevent misappropriation of our technology or that our licensesuch agreements will be enforceable. In addition, we may need to resort to litigation to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of others’ proprietary rights, or defend against claims of infringement or invalidity in the future. Such litigation could result in significant costs orand the diversion of resources. This could materially and adversely affect our business, operating results and financial condition.

Third parties may assert infringement claims against us. Although we do not believe that our products infringe on the proprietary rights of third parties, we cannot guarantee that third parties will not assert or prosecute infringement or invalidity claims against us. These assertions could distract management, require us to enter into royalty arrangements, and result in costly and time-consuming litigation, including damage awards. Such assertions or the defense of such claims may materially and adversely affect our business, operating results, or financial condition. In addition, such assertions could result in injunctions against us. Injunctions that prevent us from distributing our products would have a material adverse effect on our business, operating results, and financial condition. If third parties assert such claims against us, we may seek to obtain a license to use such intellectual property rights. There can be no assurance that such a license would be available on commercially reasonable terms.terms or at all. If a patent claim against us were successful and we could not obtain a license on acceptable terms or license a substitute technology or redesign to avoid infringement, we may be prevented from distributing our software or required to incur significant expense and delay in developingnon-infringing software.

We may experience liability claims arising out of the licensingsale of our software and provision of services.

Our agreements normally contain provisions designed to limit our exposure to potential liability claims and generally exclude consequential and other forms of extraordinary damages. However, these provisions could be rendered ineffective, invalid or unenforceable by unfavorable judicial decisions or by federal, state, local or foreign laws or ordinances. For example, we may not be able to avoid or limit liability for disputes relating to product performance or the provision of services. If a claim against us were to be successful, we may be required to incur significant expense and pay substantial damages, including consequential or punitive damages, which could have a material adverse effect on our business, operating results and financial condition. Even if we prevail in contesting such a claim, the accompanying publicity could adversely affect the demand for our products and services.

We also rely on certain technology that we license from third parties, including software that is integrated with our internally developed software. Although these third parties generally indemnify us against claims that their technology infringes on the proprietary rights of others, such indemnification is not always available for all types of intellectual property. Often such third-party indemnifiers are not well capitalized and may not be able to indemnify us in the event that their technology infringes on the proprietary rights of others. As a result, we may face substantial exposure if technology we license from a third party infringes on another party’s proprietary rights. Defending such infringement claims, regardless of their validity, could result in significant cost and diversion of resources.

Concerns that our products do not adequately protect the privacy of consumers could inhibit sales of our products.

One of the features of our software applications is the ability to develop and maintain profiles of customers for use by businesses. Typically, these products capture profile information when customers and employees visit an Internet web site and volunteer information in response to survey questions concerning their backgrounds, interests and preferences. Our products augment these profiles over time by collecting usage data. Although we have designed our products to operate with applications that protect user privacy, privacy concerns may nevertheless cause visitors to resist providing the personal data necessary to support this profiling capability. If we cannot adequately address customers’ privacy concerns, these concerns could materially and adversely harm our business, financial condition and operating results.

We face risks associated with the security of our products, and if our data protection or other security measures are compromised and as a result our data, our customers’ data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, our brand and reputation could be damaged, the IT services we provide to our customers could be disrupted, and customers may stop using our products and services, all of which could reduce our revenue and earnings, increase our expenses and expose us to legal claims and regulatory actions.

Maintaining the security of computers and computer networks is an issue of critical importance for our customers. Attempts by experienced computer programmers, or hackers, to penetrate client network security or the security of web sites to misappropriate confidential information have become an industry-wide phenomenon that affects computers and networks across all platforms. We have included security features in certain of our Internet browser-enabled products that are intended to protect the privacy and integrity of customer data. In addition, some of our software applications use encryption technology to provide the security necessary to affectpermit the secure exchange of valuable and confidential information. Despite these security

features, our products may be vulnerable tobreak-ins and similar problems caused by hackers, which could jeopardize the security of information stored in and transmitted through the computer systems of our customers. Actual or perceived security vulnerabilities in our products (or the Internet in general) could lead some customers to seek to reduce or delay future purchases or to purchase competitors’ products which are not Internet-based applications. Customers may also increase their spending to protect their computer networks from attack, which could delay adoption of new technologies. Any of these actions by customers and the cost of addressing such security problems may have a material adverse effect on our business.

Although our license agreements with our customers contain provisions designed to limit our exposure as a result of the situations listed above, such provisions may not be effective. Existing or future federal, state, or local laws or ordinances or unfavorable judicial decisions could affect their enforceability. To date, we have not experienced any such product liability claims, but there can be no assurance that this will not occur in the future. Because our products are used in essential business applications, a successful product liability claim could have a material adverse effect on our business, operating results, and financial condition. Additionally, defending such a suit, regardless of its merits, could entail substantial expense and require the time and attention of key management.

Any interruptions or delays in services from third parties, including data center hosting facilities and cloud computing platform providers, or our inability to adequately plan for and manage service interruptions or infrastructure capacity requirements, could impair the delivery of our services and harm our business.
We currently serve our customers from third-party data center hosting facilities and cloud computing platform providers located in the United States and other countries. Any damage to or failure of our systems generally, including the systems of our third-party platform providers, could result in interruptions in our services. From time to time we have experienced interruptions in our services and such interruptions may occur in the future. As we increase our reliance on these third-party systems, the risk of service interruptions may increase. Interruptions in our services may cause customers to make warranty or other claims against us or terminate their agreements and adversely affect our ability to attract new customers, all of which would reduce our revenues. Our business also would be harmed if customers and potential customers believe our services are unreliable.
These data and cloud computing platforms may not continue to be available at reasonable prices, on commercially reasonable terms or at all. Any loss of the right to use any of these cloud computing platforms could significantly increase our expenses and otherwise result in delays in providing our services until equivalent technology is either developed by us or, if available, is identified, purchased or licensed and integrated into our services.
If we do not accurately plan for our infrastructure capacity requirements and we experience significant strain on our data center capacity, our customers could experience performance degradation or service outages that may subject us to financial liability, result in customer losses and harm our business. As we add data centers and capacity and continue to move to a cloud computing platform, we may move or transfer our data and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our services, which may adversely impact our business.
Privacy and security concerns, including evolving government regulation in the area of consumer data privacy, could adversely affect our business and operating results.

Governments in some jurisdictions have enacted or are considering enacting consumer data privacy legislation, including laws and regulations applying to the solicitation, collection, processing and use of consumer data. For example, in 2016, the European Union adopted a new law governing data practices and privacy called the General Data Protection Regulation (“GDPR”), which became effective in May 2018. The law establishes new requirements regarding the handling of personal data.Non-compliance with the GDPR may result in monetary penalties of up to 4% of worldwide revenue. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions that we operate. In the U.S., California enacted the California Consumer Privacy Act of 2018 (“CCPA”), which took effect on January 1, 2020, and which broadly defines personal information, gives California residents expanded privacy rights and protections and provides for civil penalties for violations.
Additionally, public perception and standards related to the privacy of personal information can shift rapidly, in ways that may affect our reputation or influence regulators to enact regulations and laws that may limit our ability to provide certain products. U.S. federal, state, or foreign laws and regulations, including laws and regulations regulating privacy, data security, or consumer protection, or other policies, public perception, standards, self-regulatory requirements or legal obligations could reduce the demand for our software products if we fail to design or enhance our products to enable our customers to comply with the privacy and security measures requireddictated by these requirements. Moreover, we may be exposed to liability under existing or new consumer data privacy legislation. Even technical violations of these laws can result in penalties that are assessed for eachnon-compliant transaction. If we or our customers were found to be subject to and in violation of any of these laws or other data privacy laws or regulations, our business could suffer and we and/or our customers would likely have to change our business practices.


We might experience significant errors or security flaws in our software products and services.

Despite testing prior to their release, software products frequently contain errors or security flaws, especially when first introduced or when new versions are released. The detection and correction of any security flaws can be time-consuming and costly. Errors in our software products could affect the ability of our products to work with other hardware or software products, could delay the development or release of new products or new versions of products and could adversely affect market acceptance of our products. If we experience errors or delays in releasing new software products or new versions of software products, we could lose revenues. In addition, therewe could beencounter security issues with our products and networks and any security flaws, if exploited, could affect our ability to conduct internal business operations. End users who rely on our software products and services for applications that are critical to their businesses may have a greater sensitivity to product errors and security vulnerabilities than do customers for software products generally. Software product errors and security flaws in our products or services could expose us to product liability, performance and/or warranty claims, as well as harm our reputation, which could impact our future sales of products and services. In addition, we may be legally required to publicly report security breaches, which could adversely impact future business prospects for our products and services.

RISK FACTORS RELATED TO OUR PERSONNEL

We are dependent upon key personnel, and need to attract and retain highly qualified personnel in all areas.

Our future operating results depend significantly upon the continued service of a relatively small number of key senior management and technical personnel, including our Chief Executive Officer and President, H. Allan Dow. None of our key personnel are bound by long-term employment agreements. We do not have in place “key person” life insurance policies on any of our employees. If we fail to retain senior management or other key personnel, or fail to attract key personnel, our succession planning and operations could be materially and adversely affected and could jeopardize our ability to meet our business goals.

Our future success also depends on our continuing ability to attract, train, retain and motivate other highly qualified managerial and technical personnel. Competition for these personnel is intense, and at times we have at times experienced difficulty in recruiting and retaining qualified personnel, including sales and marketing representatives, qualified software engineers involved in ongoing product development, and personnel who assist in the implementation of our products and provide other services. The market for such individuals is competitive. For example, it has been particularly difficult to attract and retain product development personnel experienced in object oriented development technologies. Given the critical roles of our sales, product development and consulting staffs, our inability to recruit successfully or any significant loss of key personnel would adversely affect us. AThe software industry is characterized by a high level of employee mobility and aggressive recruiting of skilled personnel characterizes the software industry.personnel. It may be particularly difficult to retain or compete for skilled personnel against larger, better-known software companies. We cannot guarantee that we will be able to retain our current personnel, attract and retain other highly qualified technical and managerial personnel in the future, or assimilate the employees from any acquired businesses. We will continue to adjust the size and composition of our workforce to match the differentrelevant product and geographic demand cycles. If we are unable to attract and retain the necessary technical and managerial personnel, or assimilate the employees from any acquired businesses, our business, operating results and financial condition would be adversely affected.

The failure to attract, train, retain and effectively manage employees could negatively impact our development and sales efforts and cause a degradation of our customer service. In particular, the loss of sales personnel could lead to lost sales opportunities because it can take several months to hire and train replacement sales personnel. If our competitors increase their use ofnon-compete agreements, the pool of available sales and technical personnel may further narrow in certain areas,shrink, even if thenon-compete agreements ultimately prove to be unenforceable. We may grant large numbers of stock options to attract and retain personnel, which could be highly dilutive to our shareholders. The volatility or lack of positive performance of our stock price may adversely affect our ability to retain or attract employees. The loss of key management and technical personnel or the inability to attract and retain additional qualified personnel could have an adverse effect on us.

We periodically have restructured our sales force, which can be disruptive.

We continue to rely heavily on our direct sales force. Periodically, we have restructured or made other adjustments to our sales force in response to factors such as product changes, geographical coverage and other internal considerations. Change in the structures of the sales force and sales force management can cause us to terminate and then hire new sales personnel, and/or result in temporary lack of focus and reduced productivity, thatwhich may affect revenues in one or more quarters. Future restructuring of our sales force could occur, and if so we may again experience the adverse transition issues associated with such restructuring.

Our technical personnel have unique access to customer data, and may abuse that privilege.

Of necessity for the proper rendering of

In order to properly render the services we provide, our technical personnel have the ability to access data on the systems run by our customers or hosted by us for our customers. This would includecustomers, including data about the operations of our customers and even about the customers of our customers. Although we have never had such an occurrence in the entire history of our Company, it is conceivable that such access could be abused in order to improperly utilize that data to the detriment of such customers.


RISK FACTORS RELATED TO OUR CORPORATE STRUCTURE AND GOVERNANCE

Our business is subject to changing regulation of corporate governance and public disclosure that has increased both our costs and the risk of noncompliance.

non-compliance.

Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the Securities and Exchange CommissionSEC and NASDAQ, have issued new requirements and regulations and continue to develop additional regulations and requirements in response to laws enacted recently by Congress, most notably the Sarbanes-Oxley Act of 2002.Congress. Our efforts to comply with these new regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting and our independent public accounting firm’s audit of that assessment have required, and continue to require, the commitment of significant financial and managerial resources. Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. Over time, we have made significant changes in, and may consider making additional changes to, our internal controls, our disclosure controls and procedures, and our corporate governance policies and procedures. Any system of controls, however well designedwell-designed and operated,-operated, is based in part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Any failure of our controls, policies and procedures could have a material adverse effect on our business, results of operations, cash flow and financial condition.

If in the future we are unable to assert that our internal control over financial reporting is effective as of the end of the then current fiscal year (or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting), we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a negative market reaction.

One stockholdershareholder beneficially owns a substantial portion of our stock, and as a result exerts substantial control over us.

As of June 30, 2018,2020, James C. Edenfield, Executive Chairman, Treasurer and a Director of the Company, beneficially owned 1,821,587 shares, or 96.58%100%, of our Class B common stock, and 210,00078,000 shares, or 0.72%0.25%, of our Class A common stock. If all of Mr. Edenfield’s Class B shares were converted into Class A shares, Mr. Edenfield would beneficially own 2,031,5871,899,587 Class A shares, which would represent approximately 6.57%5.85% of all outstanding Class A shares after giving effect to such conversion. As a result of Mr. Edenfield’s ownership of Class B common stock, he has the right to elect a majority of our Board of Directors. Moreover, Mr. Edenfield and a member of his immediate family constitute two of the six members of the Board, and thus have significant influence in directing the actions of the Board of Directors. Such control and concentration of ownership may discourage a potential acquirer from making a purchase offer that other shareholders might find favorable, which in turn could adversely affect the market price of our common stock.

Our articles of incorporation and bylaws and Georgia law may inhibit a takeover of our company.

Our basic corporate documents and Georgia law contain provisions that might enable our management to resist a takeover. These provisions might discourage, delay or prevent a change in the control or a change in our management. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors and take other corporate actions. The existence of these provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

We are a “controlled company” within the meaning of NASDAQ rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements.

Because Mr. Edenfield has the ability to elect more than half of the members of our Board of Directors, we are a “controlled company” within the meaning of the rules governing companies with stock quoted on the NASDAQ Global Select Market. Under these rules, a “controlled company” is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. As a controlled company, we are exempt from certain corporate governance requirements, including requirements that: (1) a majority of the board of directors consist of independent directors; (2) compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee that is composed entirely of independent directors; and (3) director nominees be selected or recommended for selection by a majority of the independent directors or by a nominating committee composed solely of independent directors. Our Board of Directors does not have a majority of independent directors, and our compensation committee is not required to consist entirely of independent directors. We are not required to have, and have not chosen to establish, a nominating committee. Accordingly, our procedures for approving significant corporate decisions are not

subject to the same corporate governance requirements asnon-controlled companies with stock quoted on the NASDAQ Global Select Market.

RISK FACTORS RELATED TO OUR STOCK PRICE

We could experience fluctuations in quarterly operating results that could adversely affect our stock price.

We have difficulty predicting our actual quarterly operating results, which have varied widely in the past and which we expect to continue to vary in the future. We expect they will continue to vary significantly from quarter to quarter due to a number of factors, many of which are outside our control. We base our expense levels, operating costs and hiring plans on projections of future revenues, and it is difficult for us to rapidly adjust when actual results do not match our projections. If our quarterly revenue or operating results fall below the expectations of investors or public market analysts, the price of our common stock could fall substantially. License revenuesRevenues in any quarter depend substantially on the combined contractingsales activity of the American Software group of companies and our ability to recognize revenues in that quarter in accordance with our revenue recognition policies. Our contractingsales activity is difficult to forecast for a variety of reasons, including the following:

we complete a significant portion of our licensecustomer agreements within the last few weeks of each quarter;

whether the licenseif an agreement includes cloud services such as managing the application and hosting the server that are performed over the term of the contract, that then requirethis requires all the revenue to be spread over the term of the contract;

our sales cycle for products and services, including multiple levels of authorization required by some customers, is relatively long and variable because of the complex and mission-critical nature of our products;

the demand for our products and services can vary significantly;

the size of our license transactions can vary significantly;

the possibility of adverse global political or health conditions and economic downturns, both domestic and international, characterized by decreased product demand, price erosion, technological shifts, work slowdowns and layoffs, may substantially reduce customer demand and contracting activity;

customers may unexpectedly postpone or cancel anticipated system replacement or new system evaluation and implementation due to changes in their strategic priorities, project objectives, budgetary constraints, internal purchasing processes or company management;

customer evaluationsevaluation and purchasing processes vary from company to company, and a customer’s internal approval and expenditure authorization process can be difficult and time-consuming, even after selection of a vendor; and

the number, timing and significance of software product enhancements and new software product announcements by us and by our competitors may affect purchase decisions.

Variances or slowdowns in our licensingcontracting activity in prior quarters may affect current and future consulting, training and maintenance revenues, since these revenues typically follow license or subscription fee revenues. Our ability to maintain or increase services revenues primarily depends on our ability to increase the number and size of our licensingcustomer agreements. In addition, we base our budgeted operating costs and hiring plans primarily on our projections of future revenues. Because most of our expense levels are relatively fixed, including employee compensation and rent in the near term, if our actual revenues fall below projections in any

particular quarter, our business, operating results, and financial condition could be materially and adversely affected. In addition, our expense levels are based, in part, on our expectations regarding future revenue increases. As a result, any shortfall in revenue in relation to our expectations could cause significant changes in our operating results from quarter to quarter and could result in quarterly losses. As a result of these factors, we believe thatperiod-to-period comparisons of our revenue levels and operating results are not necessarily meaningful. As a result, predictions of our future performance should not be based solely on our historical quarterly revenue and operating results.

Our stock price is volatile and there is a risk of litigation.

The trading price of our common stock has been in the past and may in the future be subject to wide fluctuations in response to factors such as the following:

general market conditions;

revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community;

customer order deferrals resulting from the anticipation of new products, economic uncertainty, disappointing operating results by the customer, management changes, corporate reorganizations or otherwise;

reduced investor confidence in equity markets, due in part to corporate collapses in recent years;

speculation in the press or analyst community;

wide fluctuations in stock prices, particularly with respectin relation to the stock prices for other technology companies;

announcements of technological innovations by us or our competitors;

new products or the acquisition or loss of significant customers by us or our competitors;

developments with respect to our copyrights or other proprietary rights or those of our competitors;


changes in interest rates;

changes in investors’ beliefs as to the appropriate price-earnings ratios for us and our competitors;

changes in recommendations or financial estimates by securities analysts who track our common stock or the stock of other software companies;

changes in management;

sales of common stock by our controlling shareholders, directors and executive officers;

rumors or dissemination of false or misleading information, particularly through Internet chat rooms, instant messaging, and other rapid-dissemination methods;

conditions and trends in the software industry generally;

the announcement of acquisitions or other significant transactions by us or our competitors;

adoption of new accounting standards affecting the software industry;

domestic or international terrorism, public health crises including the COVID-19 pandemic and other factors; and

the other factors described in these “Risk Factors.”

Fluctuations in the price of our common stock may expose us to the risk of securities class action lawsuits. Although no such lawsuits are currently pending against us and we are not aware that any such lawsuit is threatened to be filed in the future, there is no assurance that we will not be sued based on fluctuations in the price of our common stock. Defending against such lawsuits could result in substantial cost and divert management’s attention and resources. In addition, any settlement or adverse determination of these lawsuits could subject us to significant liabilities.

Our dividend policy is subject to change.

On May 16, 2018,20, 2020, our Board of Directors declared quarterly dividends of $0.11 per share, payable to our Class A and Class B common stockholders.shareholders. We currently expect to declare and pay cash dividends at this level on a quarterly basis in the future. However, our dividend policy may be affected by, among other things, our views on business conditions, our financial position, earnings, earnings outlook, capital spending plans and other factors that our Board of Directors considers relevant at that time. Our dividend policy has changed in the past and may change from time to time, and we cannot provide assurance that we will continue to declare dividends at all or in any particular amounts.amounts or at all. A change in our dividend policy could have a negative effect on the market price of our common stock.

The price of our common stock may decline due to shares eligible for future sale or actual future sales of substantial amounts of our common stock.

Sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could cause the market price of our common stock to decline. As of June 30, 2018,2020, if all of our outstanding Class B common shares were converted into Class A common shares, our current directors and executive officers of the Company as a group would beneficially own approximately 10.95%9.32% of all outstanding Class A common shares after giving effect to such conversion. Sales of substantial amounts of our common stock in the public market by these persons, or the perception that such sales may occur, could cause the market price of our common stock to decline and could impair our ability to raise capital through the sale of additional equity securities.



ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

Our corporate headquarters are located in an approximately 100,000 square foot office building that we own at 470 East Paces Ferry Road, N.E., Atlanta, Georgia.

We have entered into leases for sales and technology development offices located in various cities in the United States and overseas. We believe our existing facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed on commercially reasonable terms.

Each of our three segments makes use of the property at 470 East Paces Ferry Road and our SCM segment occupies office space that we lease in the United Kingdom, Sweden, Germany, The Netherlands, India, New Zealand and Australia.

ITEM 3.LEGAL PROCEEDINGS


(a)Many of our installations involve products that are critical to the operations of our customers’ businesses. Any failure in our products could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although we attempt to contractually limit contractually our liability for damages arising from product failures or negligent acts or omissions, there can be no assurance that the limitations of liability contained in our contracts will be enforceable in all instances. We are not currently a party to any material legal proceedings that would require disclosure under this Item.

(b)None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.


PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Trading Market

Our Class A Common Shares are listed on the NASDAQ Global Select Market under the symbol “AMSWA”. As of July 6, 2018,2, 2020, there were 11,01312,432 holders of Class A shares who held their stock either individually or in nominee or “street” names through various brokerage firms, and two holdersone holder of Class B Common Shares.

Market Price Information

The table below presents the quarterly high and low sales prices for American Software, Inc. Class A common stock as reported by NASDAQ, for the Company’s last two fiscal years, as well as the amount of cash dividends declared in each quarter:

   High   Low   Cash
Dividends
Declared		 

Fiscal Year 2018

      

First Quarter

  $11.97   $9.69   $0.11 

Second Quarter

   12.41    9.13    0.11 

Third Quarter

   13.21    11.63    0.11 

Fourth Quarter

   13.35    11.38    0.11 

Fiscal Year 2017

      

First Quarter

  $11.13   $8.85   $0.11 

Second Quarter

   11.59    9.97    0.11 

Third Quarter

   11.50    9.91    0.11 

Fourth Quarter

   11.11    9.97    0.11 

Equity Compensation Plans

The following table discloses information regarding the Company’s equity compensation plans as of April 30, 2018:

Plan Category

  Number of Securities to be
issued upon exercise of
outstanding options,
warrants and rights		   Weighted-Average
exercise price of
outstanding options,
warrants and rights		   Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in the first column)		 

Equity compensation plans approved by security holders

   3,275,836   $9.90    1,396,543 

2020:

Plan Category
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
 
Weighted-average
exercise price of
outstanding options,
warrants and rights
 
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in the first column)
Equity compensation plans approved by security holders3,745,650
 12.21 1,848,786
Dividend Policy

Since the third quarter of fiscal 2013, our Board of Directors hashad declared quarterly dividends of $0.10 per share. On May 11, 2016, our Board of Directors increased the quarterly dividends to $0.11 per share, payable to our Class A and Class B common stockholders. We currently expect to declare and pay cash dividends at this level on a quarterly basis in the future. The continuation of this policy, and payment of future cash dividends, will be at the sole discretion of the Board of Directors. In exercising this discretion, the Board of Directors will consider our profitability, financial condition, cash requirements, future prospects and other relevant factors. Our dividend policy has changed in the past and may change from time to time, and we cannot provide assurance that we will continue to declare dividends at all or in any particular amounts.

amounts or at all.


Stock Price Performance Graph

The graph below reflects the cumulative stockholder return on the Company’s shares compared to the return of the NASDAQ Stock Market – US Companies ("NASDAQ Composite IndexIndex") and a peer group index on a quarterly basis. The graph reflects the investment of $100 on April 30, 20132015 in the Company’s stock, the NASDAQ StockMarket-US Companies (“NASDAQ Composite Index”)Index and in the NASDAQ Computer Index, a published industry peer group index. The NASDAQ Computer Index consists of approximately 316334 NASDAQ-listed companies, including computer hardware and software companies that furnish computer programming and data processing services and firms that produce computers, office equipment, and electronic component/accessories. The total cumulative dollar returns shown below represent the value that such investments would have had on April 30, 2018.

LOGO

   FY 2013   FY 2014   FY 2015   FY 2016   FY 2017   FY 2018 

American Software(a)

  $100   $118   $125   $124   $156   $192 

NASDAQ Composite

   100    124    148    143    182    212 

NASDAQ Computer Index

   100    128    156    152    210    256 

2020.

stockpricegraph.jpg

 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
American Software(a)$100
 $99
 $126
 $154
 $165
 $219
NASDAQ Composite100
 97
 123
 143
 163
 180
NASDAQ Computer Index100
 97
 136
 164
 196
 236
_______________
(a)This series includes dividends paid over the disclosed period.

Purchases of Equity Securities by the Company

The following table summarizes repurchases of our stock in the quarter ended April 30, 2018:

2020:

Fiscal Period

Total Number of
Shares Purchased
 
Average Price
Paid Per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
 Average Price
Paid Per Share		Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number of
Shares that May Yet
Be Purchased
Under the Plans
or Programs*

February 1, 20182020 through February 28, 2018

29, 2020—
 $—
 —
 946,321

March 1, 20182020 through March 31, 2018

2020—
 $—
 —
 946,321

April 1, 20182020 through April 30, 2018

2020—
 $—
 —
 946,321

Total Fiscal 20182020 Fourth Quarter

—
 $—
 —
 946,321
_____________

*The above share purchase authority was approved by the Board of Directors on August 19, 2002, when the Board approved a resolution authorizing the Company to repurchase up to 2.0 million shares of Class A common stock. This action was announced on August 22, 2002. The authorization has no expiration date.


Transfer Agent

American Stock Transfer & Trust Company LLC

6201 15th Ave.

Brooklyn, NY 11219

Toll free:(800) 937-5449

Local & international:(718) 921-8124

http://www.astfinancial.com

Inquiries regarding stock transfers, lost certificates or address changes should be directed to the above address.



Market Makers

The following firms make a market in the Class A common shares of American Software, Inc:

Inc.
Archipelago Stock Exchange Maxim Group,Latour Trading LLC
B. Riley FBR, Inc.INC. Merrill Lynch, Pierce, Fenner IncorporatedMaxim Group LLC
Barclays Capital Inc./LELe NasdaqMorgan Stanley & Co. LLC
Bofa Securities, Inc.NASDAQ Execution Services LLC.
BNY Mellon Capital Markets, LLCNasdaq OMX PHLX, LLC.
Canaccord Genuity Inc. Needham & Company,NASDAQ OMX PHLX LLC
Cantor, Fitzgerald & Co. New York Stock ExchangeNeedham & Company, LLC
CBOE Trading, Inc.TRADING, INC. Raymond, James & Associates
Chicago Stock ExchangeRBC Capital Markets, LLC
Citadel Derivatives Group LLC RBC Capital Markets,SG Americas Securities LLC
Citadel Securities LLC Stifel Nicolaus & CompanyCo.
Deutsche Banc Alex BrownSun Trading,Cowen and Company, LLC
Direct Edge ECN LCC SunTrust Capital Markets, Inc.
EG Market Technologies,Direct Edge ECN LLC Susquehanna Financial Group, LLP
G1 Execution Services, LLC Susquehanna Securities
Goldman Sachs & Co. LLC Two Sigma Securities, LLC
IEX Services,GTS Securities LLC UBS Securities LLC
ImcIMC Financial Markets VirtuVIRTU Americas LLC
Jefferies LLC Wall Street Investor ServicesWells Fargo Advisors, LLC
Latour Trading, LLCKeybanc Capital Markets, Inc.William Blair
 Wolverine Securities, LLC


ITEM 6.SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below as of and for the years ended April 30, 2020, 2019, 2018, 2017, 2016, 2015, and 20142016 is derived from our audited consolidated financial statements.

Consolidated Statements of Operations Data:

   Years Ended April 30, 
   2018   2017   2016   2015   2014 
   (In thousands, except per share data) 

Revenues:

          

License fees

  $15,344   $15,584   $22,043   $16,748   $20,011 

Services and other

   53,518    48,313    51,099    47,215    44,377 

Maintenance

   43,841    42,389    40,747    38,910    36,213 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   112,703    106,286    113,889    102,873    100,601 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

          

License fees

   7,077    7,563    7,688    7,675    4,043 

Services and other

   33,597    33,814    37,100    34,204    31,645 

Maintenance

   9,326    9,707    9,441    8,580    8,027 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

   50,000    51,084    54,229    50,459    43,715 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   62,703    55,202    59,660    52,414    56,886 

Operating expenses:

          

Research and development costs

   11,877    11,889    11,248    11,088    9,074 

Sales and marketing expense

   20,658    20,287    22,164    18,667    20,414 

General and administrative expenses

   16,057    14,219    12,449    12,923    12,401 

Amortization of acquisition-related intangibles

   580    1,041    272    394    472 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   49,172    47,436    46,133    43,072    42,361 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   13,531    7,766    13,527    9,342    14,525 

Other income, net

   2,184    13,849    1,173    1,060    1,372 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

   15,715    21,615    14,700    10,402    15,897 

Income tax expense

   3,662    6,994    4,458    2,274    5,566 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

  $12,053   $14,621   $10,242   $8,128   $10,331 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share(a):

          

Basic

  $0.40   $0.50   $0.36   $0.29   $0.37 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $0.40   $0.49   $0.35   $0.28   $0.37 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares—Basic

   30,080    29,232    28,727    28,283    27,636 

Diluted

   30,472    29,567    29,005    28,614    28,111 

Cash dividends declared

  $0.44   $0.44   $0.40   $0.40   $0.30 

Consolidated Balance Sheet Data:

          

Cash and cash equivalents

  $52,794   $66,001   $49,004   $44,655   $55,803 

Investments—short and long term

  $35,014   $23,787   $28,881   $30,740   $23,771 

Working capital

  $61,402   $66,789   $54,801   $46,340   $58,820 

Total assets

  $162,965   $148,774   $136,724   $134,266   $131,220 

American Software, Inc. shareholders’ equity

  $112,584   $103,750   $94,894   $92,926   $92,560 

 Years Ended April 30,
 2020 2019 2018 2017 2016
 (in thousands, except per share data)
Revenues:         
Subscription fees$22,033
 $14,026
 $8,855
 $4,381
 $3,273
License fees7,582
 7,126
 15,344
 15,584
 22,043
Professional services and other42,774
 42,154
 44,663
 43,932
 47,826
Maintenance43,077
 45,400
 43,841
 42,389
 40,747
Total revenues115,466
 108,706
 112,703
 106,286
 113,889
Cost of revenues:         
Subscription fees9,491
 5,759
 3,817
 3,290
 1,528
License fees4,798
 6,430
 6,261
 6,713
 7,552
Professional services and other30,695
 31,421
 30,596
 31,374
 35,708
Maintenance7,324
 8,356
 9,326
 9,707
 9,441
Total cost of revenues52,308
 51,966
 50,000
 51,084
 54,229
Gross margin63,158
 56,740
 62,703
 55,202
 59,660
Operating expenses:         
Research and development costs15,348
 13,078
 11,877
 11,889
 11,248
Sales and marketing expense21,958
 20,992
 20,658
 20,287
 22,164
General and administrative expenses19,519
 17,006
 16,057
 14,219
 12,449
Amortization of acquisition-related intangibles285
 388
 580
 1,041
 272
Total operating expenses57,110
 51,464
 49,172
 47,436
 46,133
Operating income6,048
 5,276
 13,531
 7,766
 13,527
Other income, net750
 2,365
 2,184
 13,849
 1,173
Earnings before income taxes6,798
 7,641
 15,715
 21,615
 14,700
Income tax expense56
 838
 3,662
 6,994
 4,458
Net earnings$6,742
 $6,803
 $12,053
 $14,621
 $10,242
Earnings per common share(a):         
Basic$0.21
 $0.22
 $0.40
 $0.50
 $0.36
Diluted$0.21
 $0.22
 $0.40
 $0.49
 $0.35
Weighted average common shares—Basic31,747
 30,950
 30,080
 29,232
 28,727
Diluted32,367
 31,378
 30,472
 29,567
 29,005
Cash dividends declared$0.44
 $0.44
 $0.44
 $0.44
 $0.40
Consolidated Balance Sheet Data:         
Cash and cash equivalents$79,814
 $61,288
 $52,794
 $66,001
 $49,004
Investments—short and long term$14,862
 $27,194
 $35,014
 $23,787
 $28,881
Working capital$78,208
 $69,401
 $61,402
 $66,789
 $54,801
Total assets$171,293
 $161,310
 $162,965
 $148,774
 $136,724
American Software, Inc. shareholders’ equity$119,422
 $114,607
 $112,584
 $103,750
 $94,894
_______________
(a)Diluted per share amounts for Class A shares are shown above. Diluted per share for Class B shares under thetwo-class method are $0.21, $0.22, $0.39, $0.49, $0.35, $0.29, and $0.37$0.35 for the years ended April 30, 2020, 2019, 2018, 2017, 2016, 2015, and 2014,2016, respectively. See Note 1(r)1(s) to the Consolidated Financial Statements.


ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Item 6. Selected Financial Data” and “Item 8. Financial Statements and Supplementary Data”. This discussion 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,” “estimate,” “believe,” “expect” and similar expressions that convey uncertainty of future events or outcomes. Any forward-looking statements herein are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from the results anticipated by these forward-looking statements as a result of many known and unknown factors that are beyond our ability to control or predict, including but not limited to those discussed above in “Risk Factors” and elsewhere in this report. See also “Special Cautionary Notice Regarding Forward-Looking Statements” at the beginning of “Item 1. Business.”

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have based the following discussion and analysis of financial condition and results of operations on our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles.GAAP. The preparation of these 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the Consolidated Financial Statements for the fiscal year ended April 30, 2018,2020, describes the significant accounting policies that we have used in preparing our consolidated financial statements. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to revenue/collectability, stock-based compensation, income taxes and business combination.collectability. 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.

We believe the critical accounting policies listed below affect significant judgments and estimates used in the preparation of the financial statements.

Revenue Recognition. We recognize The most critical judgements required in applying Topic 606 and our revenue predominantly in accordance withrecognition policy relate to the Software Revenue Recognition Topicevaluation of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification.standalone selling price (SSP) for each performance obligation.
We recognizeuse historical sales transaction data and judgments, among other factors, in determining the SSP for products and services. For substantially all performance obligations except on-premise licenses, we are able to establish the SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. We typically establish an SSP range for our products and services, which is reassessed on a periodic basis or when facts and circumstances change. SSP for our products and services can evolve over time due to changes in our pricing practices that are influenced by competition, changes in demand for our products and services, and economic factors, among others. Our on-premise licenses historically have not been sold on a standalone basis, as substantially all customers elect to purchase support contracts at the time of a on-premise license revenues in connection with license agreements for standard proprietary software upon deliverypurchase. Support contracts are generally priced as a percentage of the software, provided we deem collectionnet fees paid by the customer to be probable,access the feeon-premise license. We are unable to establish the SSP for our on-premise licenses based on observable prices given the same products are sold for a broad range of amounts (that is, fixedthe selling price is highly variable) and a representative SSP is not discernible from past transactions or determinable, thereother observable evidence. As a result, the SSP for a on-premise license included in a contract with multiple performance obligations is persuasive evidence of an arrangement, and vendor-specific objective evidence (VSOE) exists with respect to any undelivered elementsdetermined by applying a residual approach whereby all other performance obligations within a contract are first allocated a portion of the arrangement. We generally bill maintenance fees annually in advance and recognize the resulting revenues ratably over the term of the maintenance agreement. We derive revenues from services which primarily include consulting, implementation, training, Software as a Service (SaaS), hosting and managed services. We bill for these services primarily under time and materials arrangements and recognize fees as we perform the services. Deferred revenues represent advance payments or billings for software licenses, services, and maintenance billed in advance of the time we recognize revenues. We record revenues from sales of third-party products in accordance with Principal Agent Considerations within the Revenue Recognition Topic of the FASB Accounting Standards Codification.Furthermore, we evaluate sales through our indirect channel on acase-by-case basis to determine whether the transaction should be recorded gross or net, including but not limited to assessing whether or not we (1) act as principal in the transaction, (2) take title to the products, (3) have risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) act as an agent or broker with compensation on a commission or fee basis. Accordingly, our sales through the DMI channel are typically recorded on a gross basis.

Generally, our software products do not require significant modification or customization. Installation of the products is routine and is not essential to their functionality. Our sales frequently include maintenance contracts and professional services with the sale of our software licenses. We have established VSOE for our maintenance contracts and professional services. We determine fair valueprice based upon the prices we charge to customers when we sell these elements separately. We defer maintenance revenues, including those soldtheir respective SSPs, with the initial license fee, based on VSOE, and recognize the revenue ratably over the maintenance contract period. We recognize consulting and training service revenues, including those sold with license fees, as we perform the services based on their

established VSOE. We determine theany residual amount of revenue we allocatetransaction price allocated to the licenses sold with services or maintenance using the “residual method” of accounting. Under the residual method, we allocate the total value of the arrangement first to the undelivered elements based on their VSOE and allocate the remainder toon-premise license fees. SaaS revenues are recognized ratably over the subscription term as the customer has no ability to take delivery of the software, and the underlying arrangements typically include a single fee for the service that is billed monthly, quarterly or annually.

Stock-Based Compensation. We estimate the value of options granted on the date ofgrant using the Black-Scholes option pricing model. Management judgments and assumptions related to volatility, the expected term and the forfeiture rate are made in connection with the calculation of stock compensation expense. We periodically review all assumptions used in our stock option pricing model. Changes in these assumptions could have a significant impact on the amount of stock compensation expense.

Income Taxes. We provide for the effect of income taxes on our financial position and results of operations in accordance with the Income Tax Topic of the FASB Accounting Standards Codification. Under this accounting guidance, income tax expense is recognized for the amount of income taxes payable or refundable for the current year and for the change in net deferred tax assets or

liabilities resulting from events that are recorded for financial reporting purposes in a different reporting period than recorded in the tax return. Management must make significant assumptions, judgments and estimates to determine our current provision for income taxes and also our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax asset. Our judgments, assumptions and estimates relative to the current provision for income tax take into account current tax laws, our interpretation of current tax laws, allowable deductions, tax planning strategies, projected tax credits and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Changes in tax laws or our interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in our financial position and results of operations. Our assumptions, judgments and estimates relative to the value of our deferred tax asset take into account our expectations of the amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future years, which could significantly increase tax expense, could render inaccurate our current assumptions, judgments and estimates of recoverable net deferred taxes.

Business Combinations and Intangible Assets Including Goodwill. 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 there useful lives. Amortization of current technology is recorded in cost of revenues-license 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 the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.





RESULTS OF OPERATIONS

The following table sets forth certain revenue and expense items as a percentage of total revenues for the three years ended April 30, 2018, 2017,2020, 2019, and 20162018 and the percentage increases and decreases in those items for the years ended April 30, 20182020 and 2017:

   Percentage of Total Revenues  Pct. Change in
Dollars		  Pct. Change in
Dollars		 
   2018  2017  2016  2018 vs. 2017  2017 vs. 2016 

Revenues:

      

License

   14%   15%   19%   (2)%   (29)% 

Services and other

   47   45   45   11   (5) 

Maintenance

   39   40   36   3   4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

   100   100   100   6   (7) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cost of revenues:

      

License

   6   7   7   (6)   (2) 

Services and other

   30   32   33   (1)   (9) 

Maintenance

   8   9   8   (4)   3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total cost of revenues

   44   48   48   (2)   (6) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross margin

   56   52   52   14   (7) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Research and development

   11   11   10   —     6 

Sales and marketing

   18   19   19   2   (8) 

General and administrative

   14   13   11   13   14 

Amortization of acquisition-related intangibles

   1   1   —     (44)   nm 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   44   44   40   4   3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   12   7   12   74   (43) 

Other income:

      

Interest income

   1   1   1   25   (7) 

Other, net

   1   12   —     (95)   nm 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings before income taxes

   14   21   13   (27)   47 

Income tax expense

   3   7   4   (48)   57 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net earnings

   11%   14%   9%   (18)%   43% 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

nm—2019:

 Percentage of Total Revenues 
Pct. Change in
Dollars
 
Pct. Change in
Dollars
 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Revenues:         
Subscription fees19 % 13% 8% 57 % 58 %
License fees7
 6
 13
 6
 (54)
Professional services and other37
 39
 40
 1
 (6)
Maintenance37
 42
 39
 (5) 4
Total revenues100
 100
 100
 6
 (4)
Cost of revenues:         
Subscription fees8
 5
 3
 65
 34
License fees4
 6
 6
 (25) 13
Professional services and other27
 29
 27
 (2) 3
Maintenance6
 8
 8
 (12) (10)
Total cost of revenues45
 48
 44
 1
 4
Gross margin55
 52
 56
 11
 14
Research and development13
 12
 11
 17
 10
Sales and marketing19
 19
 18
 5
 2
General and administrative17
 16
 14
 15
 6
Amortization of acquisition-related intangibles—
 —
 1
 (27) (33)
Total operating expenses49
 47
 44
 11
 4
Operating income6
 5
 12
 15
 (61)
Other income:         
Interest income1
 2
 1
 (27) 33
Other, net(1) —
 1
 nm
 (55)
Earnings before income taxes6
 7
 14
 (11) (51)
Income tax expense—
 1
 3
 (93) (77)
Net earnings6 % 6% 11% (1)% (44)%
nm - not meaningful

Economic Overview and Significant Trends in Our Business

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 in particular has resulted in reduced expenditures in the business software market.

In April 2018,2020, the International Monetary Fund (“IMF”) provided an update to the World Economic Outlook (“WEO”) for the 20182020 and 20192021 world economic growth forecast. The update noted that, “The upswingAs a result of the pandemic, the global economy is projected to contract sharply by –3 percent in global investment and trade continued2020, much worse than during the 2008–09 financial crisis. In a baseline scenario, which assumes that the pandemic fades in the second half of 2017. At 3.8 percent,2020 and containment efforts can be gradually unwound, the global growth in 2017 was the fastest since 2011. With financial conditions still supportive, global growth is expected to tick up to a 3.9 percent rate in both 2018 and 2019. Advanced economies will grow faster than potential this year and next; euro area economies are set to narrow excess capacity with support from accommodative monetary policy, and expansionary fiscal policy will drive the US economy above full employment. Aggregate growth in emerging market and developing economies is projected to firm further, with continued stronggrow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.
There is extreme uncertainty around the global growth forecast. The economic fallout depends on factors that interact in emerging Asiaways that are hard to predict, including the pathway of the pandemic, the intensity and Europeefficacy of containment efforts, the extent of supply disruptions, the repercussions of the dramatic tightening in global financial market conditions, shifts in spending patterns, behavioralchanges (such as people avoiding shopping malls and a modest upswing inpublic transportation), confidence effects, and volatile commodity exporters after three years of weak performance.prices.”

For the fiscal 2019,2021, we expect the global economy to improve when compared tobe slow in the prior year, which could result in an improved selling environment. Overall information technology spending is improving as a resultfirst half of the current global economic environment.year and then pick up activity as the economy recovers from the coronavirus disease ("COVID-19"). We believe information technology spending will incrementally improve over

the long term as increased global competition forcesand disruptions in supply chains from COVID-19 force companies to improve productivity by upgrading their technology systems. Although this improvement could slow or regress at any time, due in part to concerns in global capital markets and general economic conditions, we believe that our organizational and financial structure will enable us to take advantage of any sustained economic rebound. Customers continue to take long periods to evaluate discretionary software purchases.

We

As the economy improves from the COVID-19 decline, we believe that the improvement in economic conditionsrecovery may be drivingdrive some businesses to invest in 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, we believe it may tend to favor solutions such as our Logility 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 customer’s business. While the recent low growthdifficult economic environment has had a particularly adverse impact on the weaker companies in our target markets, we believe a large percentage of our customers are seeking to make investments to strengthen their operations, and some are taking advantage of current economic conditions to gain market share.

We have taken steps to best ensure the health and safety of our employees globally. Our daily execution has evolved into a largely virtual model, and we continue to find innovative ways to engage with customers and prospects, ensuring that they are supported as they navigate through this unprecedented period.

Business opportunitiesOpportunities and risks

Risks

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

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

•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 customers 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.

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 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.
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 customers 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.
For more information, please see “Risk Factors” in Item 1A. above.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our consolidated financial statements, if any, see Note 11(n) of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Form 10-K.

Market Conditions by Operating Segment

We operate and manage our business in three segments based on software and services provided in three key product markets: (1) SCM, which provides collaborative supply chain solutions to streamline and optimize the production, distribution and management of products between trading partners; (2) IT Consulting, which consists of IT staffing and consulting servicesservices; and (3) Other, which consists of (i) American Software ERP, a provider of purchasing and materials management, customer order processing, financial, human resources, and manufacturing functions,solutions, and (ii) unallocated corporate overhead expenses. The SCM segment representsincludes the businessbusinesses of Logility, as well as DMI Halo and NGC.

Our SCM segment experienced a 9%10% increase in revenues during fiscal 20182020 when compared to fiscal 2017,2019, primarily due to a 22%57% increase in subscription fees, a 12% increase in professional services and other revenues and a 4%5% increase in maintenance revenuelicense fees partially offset by a 1%5% decrease in license fees.maintenance revenue. Our SCM segment experienced a 3%6% decrease in revenues during fiscal 2017

2019 when compared to fiscal 2016,2018, primarily due primarily to a 28%54% decrease in license fees that wasand a 16% decrease in professional services and other revenues partially offset by a 6%58% increase in servicessubscription fees and other revenues, anda 4% increase in maintenance revenue.

revenues.

Our IT Consulting segment experienced an approximately 6%10% decrease in revenues in fiscal 20182020 when compared to fiscal 20172019 and a decreasean increase in revenues of approximately 18%8% in fiscal 20172019 when compared to fiscal 2016,2018, due primarily to a fluctuations in IT staffing work at our largest customer and in fiscal year 2017 a decrease in customer project work.customer. As companies have moved to cut costs and limit IT budgets, they have utilized more outsourcing services, which tend to be more cost-effectivecost effective for them. In the past, this trend has resulted in increased business for this segment. However, there is a countervailing trend to outsourcingoutsource IT to international markets that historically have been more price competitive than domestic sources like ourselves.us. Our largest consulting customer comprised 45%33% of our IT Consulting revenues in fiscal 2018, 42%2020, 47% in fiscal 20172019 and 38%45% in fiscal 2016.2018. The loss of this customer would negatively and materially affect our IT Consulting business.

The Other segment revenues increased 1%2% in fiscal 20182020 when compared to fiscal 2017,2019, primarily due to a 15%70% increase in services and other revenues that was partially offset by a 12% decrease in license fees and a 4% increase in professional services and other revenues, partially offset by a 6% decrease in maintenance revenues. The Other segment revenues decreased 13%9% in fiscal 20172019 when compared to fiscal 2016,2018, primarily due to a 64%19% decrease in license fees and an 8%a 14% decrease in services and othermaintenance revenues, partially offset by a 2%3% increase in maintenanceprofessional services and other revenues.

REVENUES

   Years Ended April 30, 
   2018   2017   2016   % Change  % of Total Revenues 
         2018 to 2017  2017 to 2016  2018  2017  2016 
   (in thousands)                 

License

  $15,344   $15,584   $22,043    (2)%   (29)%   14%   15%   19% 

Services and other

   53,518    48,313    51,099    11%   (5)%   47%   45%   45% 

Maintenance

   43,841    42,389    40,747    3%   4%   39%   40%   36% 
  

 

 

   

 

 

   

 

 

     

 

 

  

 

 

  

 

 

 

Total revenues

  $112,703   $106,286   $113,889    6%   (7)%   100%   100%   100% 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


 Years Ended April 30,
 2020 2019 2018 % Change % of Total Revenues
 2020 to 2019 2019 to 2018 2020 2019 2018
 (in thousands)          
Subscription fees$22,033
 $14,026
 $8,855
 57 % 58 % 19% 13% 8%
License fees7,582
 7,126
 15,344
 6 % (54)% 7% 6% 13%
Professional service and other42,774
 42,154
 44,663
 1 % (6)% 37% 39% 40%
Maintenance43,077
 45,400
 43,841
 (5)% 4 % 37% 42% 39%
       Total revenues$115,466

$108,706
 $112,703
 6 % (4)% 100% 100% 100%
For the year ended April 30, 2018,2020, the 6% increase in total revenues was attributable primarily to a 11%57% increase in subscription fees revenues, a 6% increase in license revenues and a 1% increase in professional services and other revenue, a 3% increase in maintenance revenues, partially offset by a 2%5% decrease in licensemaintenance revenues.

For the year ended April 30, 2017,2019, the 7%4% decrease in total revenues was attributable primarily to a 29%54% decrease in license revenue,fees and a 5%6% decrease in professional services and other revenues, partially offset by a 58% increase in subscription fees revenues and a 4% increase in maintenance revenues.

Due to intensely competitive markets, we discount license fees from our published list price due to pricing pressure in our industry. Numerous factors contribute to the amount of the discounts provided, such as previous customer purchases, the number of customer sites utilizing the software, the number of modules purchased and the number of users, the type of platform deployment, as well as the overall size of the contract. While all these factors affect the discount amount of onea particular contract, the overall percentage discount has not materially changed in the recent reported fiscal periods.

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

International revenues represented approximately 19% of total revenues for the year ended April 30, 2018, 18%2020, 20% of total revenues for the year ended April 30, 2017,2019, and 17%19% for the year ended April 30, 2016.2018. Our international revenues may fluctuate substantially from period to period primarily because we derive these revenues from a relatively small number of customers in a given period.

License revenues

   Years Ended April 30, 
   2018   2017   2016   % Change 
         2018 to 2017  2017 to 2016 
   (in thousands)        

Supply Chain Management

  $15,177   $15,394   $21,508    (1)%   (28)% 

Other

   167    190    535    (12)%   (64)% 
  

 

 

   

 

 

      

Total license revenues

  $15,344   $15,584   $22,043    (2)%   (29)% 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

customers.


Subscription Fees Revenues
 Years Ended April 30,
 2020 2019 2018 % Change
 2020 to 2019 2019 to 2018
 (in thousands)    
Supply Chain Management$22,033
 $14,026
 $8,855
 57% 58%
Total subscription fees revenue$22,033
 $14,026
 $8,855
 57% 58%


For the year ended April 30, 2020, Cloud Services Annual Contract Value ("ACV") increased approximately 53% to $26.4 million compared to $17.3 million in the same period of the prior year due to an increase in the number of contracts, contracts with a higher cloud services ACV, as well as an increase in multi–year contracts (typically three to five years). This is evidence of our successful transition to the cloud subscription model. ACV is a forward-looking operating measure used by management to better understand Cloud Services (SaaS and other related cloud services) revenue trends within our business, as it reflects our current estimate of revenue to be generated under existing client contracts in the forward 12-month period.
License Fees Revenues
 Years Ended April 30,
 2020 2019 2018 % Change
 2020 to 2019 2019 to 2018
 (in thousands)    
Supply Chain Management$7,354
 $6,992
 $15,177
 5% (54)%
Other228
 134
 167
 70% (20)%
Total license fees revenues$7,582
 $7,126
 $15,344
 6% (54)%
For the year ended April 30, 2020, license fee revenues increased by 6% when compared to the previous year. Our Other business segment experienced a 70% increase in license fees for the year ended April 30, 2020 when compared to the same period in the prior year due to the timing of selling into the installed customer base. SCM experienced a 5% increase in license fees primarily due to a few new customers choosing to deploy our software on-premise this year. However, the majority of our current year license fee revenue is generated from additional users and expanded scope from our existing customers. SCM constituted 97%, 98% and 99% of our total license fee revenues for the years ended April 30, 2020, 2019 and 2018, respectively.
For the year ended April 30, 2019, license fee revenues decreased by 2%54% when compared to the previous year due primarily to lower overall business information technology spending. SCM experienced a 1%54% decrease in license fees primarily due to the increased sales of our products on our Cloud Services platform that require revenue to be deferred over the life of the contracted period, which is typically onethree to threefive years. Our Other business segment experienced a 12%20% decrease in license fees for the year ended April 30, 20182019 when compared to the same period in the prior year due to the timing of selling into the installed customer base. SCM constituted 99%, 99% and 98% of our total license fee revenues for the years ended April 30, 2018, 2017 and 2016, respectively.

For the year ended April 30, 2017, license fee revenues decreased by 29% when compared to the previous year due primarily to the economic uncertainty related to the Brexit vote in the United Kingdom, U.S. elections and lower overall business information technology spending. SCM experienced a 28% decrease in license fees partly due to the overall uncertainty in the direction of the global economy and increased sales of our products on our Cloud Services platform that require revenue to be deferred over the life of the contracted period, which is typically one to three years. Our Other business segment experienced a 64% decrease in license fees for the year ended April 30, 2017 when compared to the same period in the prior year due to the overall uncertainty in the direction of the global economy and to the timing of selling into the installed customer base.

The direct sales channel provided approximately 85%92% of license fee revenues for the year ended April 30, 2018,2020, compared to approximately 77%84% in fiscal 20172019 and 79%85% in fiscal 2016.2018. The increase in direct license fees from fiscal 20172019 to fiscal 20182020 was largely the result of higher overall business information technology spending, particularly atdue to our indirect channel selling proportionately more SaaS than license contracts compared to our direct channel which tends to be larger size transactions.channel. The decrease in directindirect license fees from fiscal 20162018 to fiscal 20172019 was largely the result of economic uncertainty relateddue to the Brexit vote in the United Kingdom, U.S. elections and lower overall business information technology spending, particularly atspending.
For the year ended April 30, 2020, our margins after commissions on direct channel which tends to be larger size transactions.

sales were approximately 88%, and our margins after commissions on indirect sales were approximately 53%. For the year ended April 30, 2019, our margins after commissions on direct sales were approximately 87%, and our margins after commissions on indirect sales were approximately 55%. For the year ended April 30, 2018, our margins after commissions on direct sales were approximately 84%, and our margins after commissions on indirect sales were approximately 36%. For the year ended April 30, 2017, our margins after commissions on direct sales were approximately 85%, and our margins after commissions on indirect sales were approximately 46%. For the year ended April 30, 2016, our margins after commissions on direct sales were approximately 85%, and our margins after commissions on indirect sales were approximately 48%. The margins after commissions for direct were relatively consistent asin a range of 84% to 85%88%, while the range for direct andindirect sales had a rangewider spread of 36% and 48% for indirect sales. to 55%.The indirect channel margins for the fiscal year ended April 30, 2020 decreased when compared to the same periods in the prior year due to the mix of value-added reseller (“VAR”) commission rates. DMI is the source of the bulk of our indirect sales and the commission percentage varies based on whether the sale is domestic or international.


Professional Services and other revenues

   Years Ended April 30, 
   2018   2017   2016   % Change 
         2018 to 2017  2017 to 2016 
   (in thousands)        

Supply Chain Management

  $34,127   $27,873   $26,310    22%   6% 

IT Consulting

   18,460    19,633    23,913    (6)%   (18)% 

Other

   931    807    876    15%   (8)% 
  

 

 

   

 

 

   

 

 

    

Total services and other revenues

  $53,518   $48,313   $51,099    11%   (5)% 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Other Revenues

 Years Ended April 30,
 2020 2019 2018 % Change
 2020 to 2019 2019 to 2018
 (in thousands)    
Supply Chain Management$23,782
 $21,190
 $25,272
 12 % (16)%
IT Consulting17,997
 20,007
 18,460
 (10)% 8 %
Other995
 957
 931
 4 % 3 %
Total professional services and other revenues$42,774
 $42,154
 $44,663
 1 % (6)%

The 11%1% increase in total professional services and other revenues for the year ended April 30, 2018 when compared to fiscal 20172020 was due primarily to a 12% increase from our SCM segment whichdue primarily due to a ramp up of implementation project work resulting from increased 22%subscription and license fee sales in recent periods, combined with a 4% increase in our Other segment due to utilization from project implementation services and services revenues. This increase was partially offset by an 10% decrease in our IT consulting segment due to the timing of project work.
The 6% decrease in total professional services and other revenues for the year ended April 30, 2018 when compared2019 was due to fiscal 2017 as a result of an increase16% decrease in services revenue related to our Cloud Services area and utilization from project implementation services. Our Other segment increased 15% inprofessional services and other revenues forfrom our SCM segment due primarily to the year ended April 30, 2018 when compared to fiscal 2017 as a result of timing of implementation project work. Partially offsetting theThis decrease was partially offset by an 8% increase wasin our IT Consultingconsulting segment which decreased 6%and a 3% increase in fiscal 2018 when compared to fiscal 2017 due to the completion in the first half of fiscal 2017 of an IT project from one of our larger customers.

The 5% decrease in services and other revenues for the year ended April 30, 2017 when compared to fiscal 2016 was due primarily to a 18% decrease at our IT ConsultingOther segment due to the completion in the first half of fiscal 2016 of an IT project from one of our larger customers. Our Other segment decreased 8% in services and other revenues for the year ended April 30, 2017 when compared to fiscal 2016 as a result of timing of implementation project work at NGC. Partially offsetting the decrease was our SCM segment which increased 6% in services and other revenues for the year ended April 30, 2017 when compared to fiscal 2016 as a result of an increase in utilization from project implementation services and services revenue related to our Logility Cloud Services area.

As of April 30, 2018, Cloud Services Annual Contract Value (“ACV”) was $12.7 million, an increase of approximately 108% compared to $6.1 million as of the same date for the prior year. ACV is comprised ofsoftware-as-a-service (“SaaS”) of $9.8 million compared to approximately $3.8 million as of the same date last year and other cloud services ACV of $2.9 million compared to $2.3 million as of the same date last year. ACV is a forward-looking operating measure used by management to better understand cloud services (SaaS and other related cloud services) revenue trends within our business, as it reflects our current estimate of revenue to be generated under existing client contracts in the forward12-month period.

revenues.

In our software segments, we have observed that there is a tendency for professional services and other revenues to lag changes in license revenues by one to three quarters, as new licenses in one quarter often involve implementation and consulting services in subsequent quarters, for which we recognize revenues only as we perform those services.

Maintenance revenues

   Years Ended April 30, 
   2018   2017   2016   % Change 
         2018 to 2017  2017 to 2016 
   (in thousands)        

Supply Chain Management

  $42,309   $40,790   $39,183    4%   4% 

Other

   1,532    1,599    1,564    (4)%   2% 
  

 

 

   

 

 

   

 

 

    

Total maintenance revenues

  $43,841   $42,389   $40,747    3%   4% 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Revenues


 Years Ended April 30,
 2020 2019 2018 % Change
 2020 to 2019 2019 to 2018
 (in thousands)    
Supply Chain Management$41,848
 $44,088
 $42,309
 (5)% 4 %
Other1,229
 1,312
 1,532
 (6)% (14)%
Total maintenance revenues$43,077
 $45,400
 $43,841
 (5)% 4 %
The 3%5% decrease in total maintenance revenues for the year ended April 30, 2020 was due to a 6% decrease in our Other segment due to fewer customer renewals and a 5% decrease in maintenance revenues from our SCM segment due to normal customer attrition.
The 4% increase in total maintenance revenues for the year ended April 30, 20182019 was due to a 4% increase in maintenance revenues from our SCM segment due to improved customer retention and increased revenue from additional license sales. This increase was partially offset by a 4%14% decrease in our Other segment due lowerto fewer customer renewals and lower software license sales.

The 4% increase in total maintenance revenues for the year ended April 30, 2017 was primarily due to a 4% increase in maintenance revenues from our SCM and Other segments as a result of an increase in maintenance revenue from recent software license sales.

The SCM segment’s maintenance revenues constituted 96%97% of total maintenance revenues for the years ended April 30, 2018, 20172020, 2019 and 2016.2018. Typically, our maintenance revenues have had a direct relationship to current and historic license fee revenues, since new licenses are the potential source of new maintenance customers.


GROSS MARGIN:

MARGIN

The following table provides both dollar amounts and percentage measures of gross margin:

   Years Ended April 30, 
   2018  2017  2016 
   (in thousands) 

Gross margin on license fees

  $8,267    54%  $8,021    51%  $14,355    65% 

Gross margin on services and other

   19,921    37%   14,499    30%   13,999    27% 

Gross margin on maintenance

   34,515    79%   32,682    77%   31,306    77% 
  

 

 

    

 

 

    

 

 

   

Total gross margin

  $62,703    56%  $55,202    52%  $59,660    52% 
  

 

 

    

 

 

    

 

 

   

 Years Ended April 30,
 2020 2019 2018
 (in thousands)
Gross margin on subscriptions fees$12,542
 57% $8,267
 59% $5,038
 57%
Gross margin on license fees2,784
 37% 696
 10% 9,083
 59%
Gross margin on professional services and other12,079
 28% 10,733
 25% 14,067
 31%
Gross margin on maintenance35,753
 83% 37,044
 82% 34,515
 79%
Total gross margin$63,158
 55% $56,740
 52% $62,703
 56%
The total gross margin percentage for the year ended April 30, 20182020 increased to 56% in fiscal 201855% when compared to 52%the same period in fiscal 2017the prior year due to the increaseincreases in gross margin percentage for license fees, margins,professional services and other gross margins and maintenance gross margin.margins, partially offset by a decrease in subscription fees margins. The total gross margin percentage for the year ended April 30, 2017 was primarily2019 decreased to 52% when compared to the same asperiod in the prior fiscal year, due to the increasedecrease in gross margin percentage onfor license fees and professional services and other gross margins. This wasmargins, partially offset by a decreasean increase in licensesubscription fees and maintenance gross margins.
Gross Margin on Subscription Fees
For the year ended April 30, 2020, our gross margin percentage on subscription fees decreased from 59% in fiscal 2019 to 57% primarily due to an increase in capitalized software amortization expense.
For the year ended April 30, 2019, our gross margin percentage on subscription fees increased from 57% in fiscal 2019 to 59% primarily due to higher gross margins when comparedin our SCM segment services gross margin primarily due to the prior year.

an increase in our subscription services revenue which has higher margins.

Gross Margin on License Fees

The increase in license fee gross margin percentage for the year ended April 30, 20182020 when compared to fiscal 20172019 was primarily due to lower capitalized softwareagent commission and amortization expense. We expect capitalized software amortizationof intangibles expense and to increase in fiscal 2019 when compared to fiscal 2018.

a lesser extent higher license fee revenue.

The decrease in license fee gross margin percentage for the year ended April 30, 20172019 when compared to fiscal 20162018 was primarily due to the 29% decrease inlower license fees in fiscal 2017 when compared to the prior year.

fee revenue and higher amortization of intangibles expense. This was partially offset by lower capitalized software amortization expense and agent commission expense.

License fee gross margin percentage tends to be directly related to the level of license fee revenues due to the relatively fixed cost of computer software amortization expense, amortization of acquired software and the sales mix between our direct and indirect channel.

channels.

Gross Margin on Professional Services and Other

For the year ended April 30, 2018,2020, our gross margin percentage on professional services and other revenues increased from 30%25% in fiscal 20172019 to 37% in fiscal 2018 primarily28% due to higherincreased gross margins in our SCM segment services gross margin which increased from 38%28% in fiscal 20172019 to 46%35% in fiscal 2018 primarily2020 due to an increase in our Cloud Service revenue which hasincreased revenues and higher margins.billing utilization. Our IT Consulting segment professional services and other revenue gross margin also increaseddecreased from 22% in fiscal 2019 to 18% in fiscal 20172020 due to a decrease in project related billing. Our other segment increased from 47% in fiscal 2019 to 53% in fiscal 2020 due to improved billing utilization rates.
For the year ended April 30, 2019, our gross margin percentage on professional services and other decreased from 31% in fiscal 2018 to 25% primarily due to lower gross margins in our SCM segment, which decreased from 39% in fiscal 2018 to 28% due to lower revenues and lower billing utilization. Our IT Consulting segment professional services and other revenue gross margin increased from 21% in fiscal 2018 to 22% in fiscal 2019 due to an increase in project related billing. Our Otherother segment increased from 33% in fiscal 2017 to 44% in fiscal 2018 to 47% in fiscal 2019 due to improved billing utilization rates.

For the year ended April 30, 2017, our gross margin percentage on services and other revenues increased from 27% in fiscal 2016 to 30% in fiscal 2017 due to higher gross margins in our Other segment, which increased from 20% in fiscal 2016 to 39% in fiscal 2017 due to improved billing utilization rates. Our SCM segment services gross margin was 38% and 39% in fiscal 2017 and fiscal 2016, respectively. Our IT Consulting segment services gross margin was 18% in fiscal 2017 and fiscal 2016.


As discussed above, our IT Consulting segment typically has lower margins when compared to the Other segments that have higher margin implementation service revenue, so a decrease in the percentage of services revenues from our IT Consulting segment tends to cause our overall services gross margin percentage to increase.revenue. The IT Consulting segment was 34%42%, 41%47% and 47%41% of the Company’s professional services and other revenues in fiscal 2018, 20172020, 2019 and 2016,2018, respectively. Our SCM segment was 64%56%, 57%50% and 51%57% of the Company’s professional services and other revenues in fiscal 2018, 20172020, 2019 and 2016,2018, respectively. Our Other segment was 2%, 2%3% and 2% of the Company’s professional services and other revenues in fiscal 2020, 2019 and 2018, 2017 and 2016, respectively.

Gross Margin on Maintenance

Maintenance gross margin percentage remainedincreased to 83% in fiscal 2020 from 82% in fiscal 2019 due to cost containment efforts. The primary cost component is maintenance staffing, which is relatively consistent for the years ended April 30, 2018, 2017 and 2016inelastic in the range of 77% to 79%.

short term.

EXPENSES

   Years Ended April 30, 
   2018   2017   2016   % of Revenues 
         2018  2017  2016 
   (in thousands)           

Research and development

  $11,877   $11,889   $11,248    11%   11%   10% 

Sales and marketing

   20,658    20,287    22,164    18%   19%   19% 

General and administrative

   16,057    14,219    12,449    14%   13%   11% 

Amortization of acquisition-related intangible assets

   580    1,041    272    1%   1%   —   

Other income, net

   2,184    13,849    1,173    2%   13%   1% 

Income tax expense

   3,662    6,994    4,458    3%   7%   4% 

 Years Ended April 30,
 2020 2019 2018 % of Revenues
 2020 2019 2018
 (in thousands)      
Research and development$15,348
 $13,078
 $11,877
 13% 12% 11%
Sales and marketing21,958
 20,992
 20,658
 19% 19% 18%
General and administrative19,519
 17,006
 16,057
 17% 16% 14%
Amortization of acquisition-related intangible assets285
 388
 580
 —% —% 1%
Other income, net750
 2,365
 2,184
 —% 2% 2%
Income tax expense56
 838
 3,662
 —% 1% 3%

Research and Development

Gross product research and development costs include allnon-capitalized and capitalized software development costs.
A breakdown of the research and development costs is as follows:

   Years Ended 
   April 30,
2018		  Percent
Change		  April 30,
2017		  Percent
Change		  April 30,
2016		 
   (in thousands) 

Total capitalized computer software development costs

  $4,804   29%  $3,724   15%  $3,246 

Percentage of gross product research and development costs

   29%    24%    22% 

Total research and development expense

   11,877   0%   11,889   6%   11,248 
  

 

 

   

 

 

   

 

 

 

Percentage of total revenues

   11%    11%    10% 

Total research and development expense and capitalized computer software development costs

  $16,681   7%  $15,613   8%  $14,494 
  

 

 

   

 

 

   

 

 

 

Percentage of total revenues

   15%    15%    13% 

Total amortization of capitalized computer software development costs*

  $3,690  (13)%  $4,250   8%  $3,921 

 Years Ended April 30,
 2020 
Percent
Change
 2019 
Percent
Change
 2018
          
Total capitalized computer software development costs$3,170
 (47)% $5,961
 24% $4,804
Percentage of gross product research and development costs17%   31%   29%
Total research and development expense15,348
 17 % 13,078
 10% 11,877
Percentage of total revenues13%   12%   11%
Total research and development expense and capitalized computer software development costs$18,518
 (3)% $19,039
 14% $16,681
Percentage of total revenues16%   18%   15%
Total amortization of capitalized computer software development costs*$5,871
 27 % $4,627
 25% $3,690
______________
*Included in cost of license fees and cost of subscription fees.

For the year ended April 30, 2018,2020, gross product research and development costs increasedand capitalized software development costs decreased by 7%3% primarily due to increaseda decrease in headcount from the Halo acquisition and additional hiring.third-party contractors compared to fiscal 2019. Capitalized software development costs increaseddecreased in fiscal 20182020 compared to fiscal 20172019 due to timing of project work. Amortization of capitalized software development decreased 13% in fiscal 2018 when compared to fiscal 2017 due to timing of project releases.

For the year ended April 30, 2017, gross product research and development costs increased by 8% primarily due to increased headcount from the AdapChain acquisition and additional hiring. Capitalized software development costs increased in fiscal 2017 compared to fiscal 2016 due to timing of project work. Amortization of capitalized software development increased 8%27% in fiscal 20172020 when compared to fiscal 20162019 due to the timing of project releases.

For the year ended April 30, 2019, gross product research and development costs and capitalized software development costs increased by 14% primarily due to increased headcount from third-party contractors and the Halo acquisition. Capitalized software development costs increased in fiscal 2019 compared to fiscal 2018 due to the timing of project work.

Amortization of capitalized software development increased 25% in fiscal 2019 when compared to fiscal 2018 due to the timing of project releases.


Sales and Marketing

In the year ended April 30, 2018,2020, the increase in sales and marketing expenses compared to fiscal 20172019 was due primarily to aan increase in headcount, higher headcount andvariable compensation, higher sales commissions.commissions, an increase in contractor costs and an increase in recruiting fees, which was partially offset by lower marketing spend and lower travel costs due to COVID-19. In the year ended April 30, 2017,2019, the decreaseslight uptick in sales and marketing expenses compared to fiscal 20162018 was due primarily to a lower headcountan increase in costs related to the Halo acquisition and an increase in marketing spend which was partially offset by lower sales commission as a result of lower direct license fees.

commissions.

General and Administrative

For the year ended April 30, 2018,2020, the increase in general and administrative expenses compared to fiscal 20172019 was primarily due to anhigher variable compensation and higher overhead costs and, to a lesser extent, higher legal, stock option and insurance costs.
For the year ended April 30, 2019, the increase in thegeneral and administrative expenses compared to fiscal 2018 was primarily due to overhead costs related to the Halo acquisition and an increase in depreciation from office improvements, partially offset by lower variable compensation expense.

compensation.

The total number of employees was 428 on April 30, 2020, 424 on April 30, 2019 and 462 on April 30, 2018.
Amortization of Acquisition-related Intangible Assets
For the year ended April 30, 2017, the increase in general and administrative expenses compared to fiscal 2016 was primarily due to recording a Research and Development State tax credit against withholding taxes of approximately $1.3 million in fiscal 2016 compared to $436,000 in fiscal 2017 and to a lesser extent an increase in the overhead costs related to the AdapChain acquisition and audit and tax fees. This was partially offset by a decrease in variable compensation expense.

The total number of employees was 462 on April 30, 2018, 372 on April 30, 2017 and 420 on April 30, 2016.

Amortization of Acquisition-related Intangible Assets

For the year ended April 30, 2018,2020, we recorded $1,849,000$1.6 million in intangible amortization expense, of which $580,000$0.3 million is included in operating expenses and $1,269,000$1.3 million is included in cost of license fees.

For the year ended April 30, 2017,2019, we recorded $1,659,000$2.4 million in intangible amortization expense, of which $1,041,000$0.4 million is included in operating expenses and $618,000$2.0 million is included in cost of license fees.


Operating Income/(Loss)

   Years Ended April 30, 
   

 

  

 

  

 

  % Change 
   2018  2017  2016  2018 to 2017  2017 to 2016 
   (in thousands)       

Supply Chain Management

  $19,580  $13,103  $17,793   49%   (26)% 

IT Consulting

   985   890   1,327   11%   (33)% 

Other*

   (7,034)   (6,227)   (5,593)   13%   11% 
  

 

 

  

 

 

  

 

 

   

Total Operating Income

  $13,531  $7,766  $13,527   74%   (43)% 
  

 

 

  

 

 

  

 

 

   


 Years Ended April 30,
       % Change
 2020 2019 2018 2020 to 2019 2019 to 2018
 (in thousands)    
Supply Chain Management$19,612
 $15,967
 $19,580
 23 % (18)%
IT Consulting332
 964
 985
 (66)% (2)%
Other*(13,896) (11,655) (7,034) 19 % 66 %
Total Operating Income$6,048
 $5,276
 $13,531
 15 % (61)%
______________
*Includes certain unallocated expenses.

Our SCM segment increased operating income increased by 49%23% in fiscal 20182020 compared to fiscal 20172019 primarily due to a 9%10% increase in revenues and an increase in gross margins related to an increase in Cloud services revenue. This was partially offset by the increased costs associated with the Halo acquisition.revenues. Our SCM segment decreased operating income decreased by 26%18% in fiscal 20172019 compared to fiscal 20162018 primarily due to a 2%6% decrease in revenues and the increased cost associated with the AdapChain acquisition.

Our IT Consulting segment operating income increased 11% in fiscal 2018 compared to fiscal 2017 primarily due to an increase in higher margin billable project services. revenues.

Our IT Consulting segment operating income decreased 33%66% in fiscal 20172020 compared to fiscal 20162019 primarily due to a 18% decrease in revenues.

revenues and lower gross margins due to the type of project billing. Our IT Consulting segment operating income decreased 2% in fiscal 2019 compared to fiscal 2018 primarily due to an increase in sales and marketing costs. 

The increase in the Other segment operating loss in fiscal 20182020 when compared to fiscal 20172019 was due primarily to an increase in corporate variable compensation.compensation and overhead costs, partially offset by a 2% increase in revenues in fiscal 2020. The increase in the Other segment operating loss in fiscal 20172019 when compared to fiscal 20162018 was due primarily to the 13%9% decrease in revenues in fiscal 2017 when compared to fiscal 2016.

2019.

Other Income

Other income is comprised of net interest and dividend income, rental income net of related depreciation expenses, exchange rate gains and losses, realized and unrealized gains and losses from investments and gains from the sales of real estate.investments. Other income was approximately $2.2$0.8 million in the year ended April 30, 20182020 compared to $13.8$2.4 million in fiscal 2017.2019. The decrease was primarily due to the saleunrealized losses of real estate for $11.8$0.1 million in the fourth quarter of fiscal 2017 and lower rental income from the leases on our Atlanta property of $357,000 in fiscal 20182020 compared to $774,000 in fiscal 2017. This decrease was partially offset by higherunrealized gains of $1.0 million for the same period last year, lower interest income of $1,575,000$1.5 million in

fiscal 2020 compared to $2.1 million in fiscal 2018 compared to $1,257,000 in fiscal 20172019 and lowerhigher exchange rate losses of approximately $16,000$605,000 compared to $285,000$486,000 for the same period last year.

Other income was approximately $13.8$2.4 million in the year ended April 30, 20172019 compared to $1.2$2.2 million in fiscal 2016.2018. The increase was primarily due to salehigher interest income of real estate for $11.8$1.8 million in the fourth quarter of fiscal 2017 and a higher unrealized gain on investments of2019 compared to $1.3 million compared to an unrealized loss of $110,000 forin fiscal 2016.2018. This increase was partially offset by lower rental income from the leases on our Atlanta property of $774,000 in fiscal 2017 compared to $1,031,000 in fiscal 2016, lower interest income of $1,257,000 in fiscal 2017 compared to $1,346,000 in fiscal 2016, higher exchange rate losses of approximately $285,000$486,000 compared to $239,000$16,000 for the same period last year and higher realized losses of $936,000 from investments in fiscal 2017 when compared to $878,000 in fiscal 2016.

year.

For the years ended April 30, 20182020 and 2017,2019, our investments generated an annualized yield of approximately 1.36%1.4% and 1.62%1.3%, respectively.

Income Taxes

During the year ended April 30, 2020, we recorded income tax expense of $56,000 compared to $838,000 in fiscal 2019 and $3.7 million in fiscal 2018. Our effective income tax rate takes into account the source of taxable income by state, and available income tax credits. Our effective tax rate was 1%, 11%, and 23% in fiscal 2020, 2019 and 2018, respectively. The effective tax rate for fiscal 2020 is lower compared to fiscal 2019 due to an increase in the amount of excess tax benefits from stock option deductions.
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The Act lowered our U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018. For fiscal year 2018, our blended U.S. federal statutory tax rate iswas 30.3%. This is the result of using the tax rate of 35% for the first eight months of fiscal year 2018 and the reduced tax rate of 21% for the final four months of fiscal year 2018. During the year ended April 30, 2018, we recorded a $1.2 million benefit from the impact of changes in the tax rate, primarily on deferred tax assets and liabilities, which was included in income tax expense on our consolidated statement of operations and deferred income taxes on our consolidated balance sheet. We remeasured our deferred taxes to reflect the reduced rate that will apply when these deferred taxes are settled or realized in future periods. To calculate the remeasurement of deferred taxes, we estimated when the existing deferred taxes will be settled or realized.


Operating Pattern

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

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

We have historically funded, and 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 andnon-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 oroff-balance sheet financing arrangements, and therefore we used no cash for debt service purposes.

The following tables showprovide information about our cash flows and liquidity positions as of and for the fiscal years ended April 30, 2018, 20172020, 2019 and 2016.2018. You should read these tables and the discussion that follows in conjunction with our consolidated statements of cash flows contained in Item 8 of this report.

   Years ended
April 30,		 
   2018   2017   2016 
   (in thousands) 

Net cash provided by operating activities

  $6,754   $19,780   $18,291 

Net cash (used in) provided by investing activities

   (15,382)    4,238    (3,901) 

Net cash used in financing activities

   (4,579)    (7,021)    (10,041) 
  

 

 

   

 

 

   

 

 

 

Net change in cash and cash equivalents

  $(13,207)   $16,997   $4,349 
  

 

 

   

 

 

   

 

 

 

 
Years ended
April 30,
 2020 2019 2018
 (in thousands)
Net cash provided by operating activities$25,982
 $23,930
 $6,754
Net cash used in investing activities(3,590) (7,213) (15,382)
Net cash used in financing activities(3,866) (8,223) (4,579)
Net change in cash and cash equivalents$18,526
 $8,494
 $(13,207)
The decreaseincrease in cash provided by operating activities in fiscal 20182020 compared to fiscal 20172019 was due primarily to:

(1) an increase in the net proceeds from sales and maturities of trading securities due to timing of purchases and maturity dates, (2) an increase in accounts payable and other liabilities in fiscal 2020 when compared to a decrease in fiscal 2019 due primarily to timing and the amount of sales commissions and bonuses, (3) unrealized losses on investments due to timing of sales of investments, (4) an increase in deferred revenues in fiscal 2020 when compared to fiscal 2019 primarily due to the timing of cloud and maintenance revenue recognition, (5) higher depreciation and amortization expense due to timing of closing capitalized software projects and office


renovations, (6) a higher stock-based compensation expense in fiscal 2020 due to an increase in options granted and (7) a lower gain on sale of fixed assets in fiscal 2020 when compared to fiscal 2019.
These factors were partially offset by: (1) an increase in the purchases of trading securities due to timing, (2) a decrease in accounts payable and other liabilities in fiscal 2018 when compared to an increase in fiscal 2017 due primarily to timing and the amount of sales commissions, bonuses and tax liabilities, (3) an increase in accounts receivable in fiscal 20182020 when compared to an decrease in fiscal 20172019 due to timing of sales and billing, (4) a decrease in net earnings, (5) a decrease in the net proceeds from sales and maturities of trading securities in fiscal 2018 compared to fiscal 2017 due to timing of purchases and maturity dates, (6)(3) an increase in prepaid expenses and other assets in fiscal 20182020 compared to the increasedecrease in fiscal 20172019 due to timing of purchases, and (7) lower depreciation and amortization expense due to timing of closing capitalized software projects and the sale of real estate in fiscal 2017 (8) higher gains on unrealized investments due to timing of sales of investments, and (9)(4) a decrease in deferred income taxes in fiscal 20182020 compared to fiscal 20172019 due to timing.

These factors were partially offset by: (1) gain on the sale of fixed assets from our sale of real estatetiming and (5) a decrease in fiscal 2017, (2) an increase in deferred revenues in fiscal 2018 when compared to a fiscal 2017 primarily due timing of cloud and maintenance revenue recognition, and (3) a higher stock-based compensation expense in fiscal 2018 compared to last year due to the more options granted.

net earnings.

The increasedecrease in cash used in investing activities in fiscal 20182020 compared to cash provided byused in investing activities in fiscal 20172019 was due (1) to proceeds from the sale of real estate in fiscal 2017, (2) an increase in the purchase of business in fiscal 2018 compared to fiscal 2017, (3) an increaseto: a decrease in capitalized software development costs due to the timing of R&D efforts and (4) higherlower purchases of equipment.

The decrease in cash used in financing activities in fiscal 20182020 when compared to fiscal 20172019 was due primarily to: (1) an increase in proceeds from exercise of stock options, (2) no payment for accrued acquisition consideration in fiscal 2018 compared to fiscal 2017. This was partially offset by an increase in cash dividends paid on common stock in fiscal 2018 when compared to fiscal 20172020 due to an increase in the shares outstanding.


The following table provides information regarding the changes in our total cash and investments position:

   As of April 30, 
   2018   2017 
   (in thousands) 

Cash and cash equivalents

  $52,794   $66,001 

Investments

   35,014    23,787 
  

 

 

   

 

 

 

Total cash and investments

  $87,808   $89,788 
  

 

 

   

 

 

 

Net (decrease) increase in total cash and investments

  $(1,980)   $11,903 

 As of April 30,
 2020 2019
 (in thousands)
Cash and cash equivalents$79,814
 $61,288
Investments14,862
 27,194
Total cash and investments$94,676
 $88,482
Net increase in total cash and investments$6,194
 $674
The following table provides information regarding our known contractual obligations as of April 30, 20182020 (in thousands): (See Notes to Consolidated Financial Statements—Note 8)

   Payments due by Period 

Contractual Obligations

  Total   1 year   1-3
years		   3-5
years		   More than
5 years		 

Operating Leases

  $2,207   $1,056   $765   $386   $—   

7)

  Payments due by Period
Contractual Obligations Total 1 year 
1-3
years
 
3-5
years
 
More than
5 years
Operating Leases $2,313
 $775
 $1,172
 $366
 $—
As a result of the positive cash flows from operations our business has generated in recent periods, and because as of April 30, 2018,2020, we had $87.8$94.7 million in cash and cash equivalents and investments with no debt, we believe that our sources of liquidity and capital resources will be sufficient to satisfy our presently anticipated requirements for working capital, capital expenditures and other corporate needs during at least the next twelve months. 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 currently do not 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.

Days Sales Outstanding (DSO)("DSO") in accounts receivable were 6878 and 6970 days as of April 30, 20182020 and April 30, 2017,2019, respectively. Our current ratio on April 30, 20182020 was 2.32.9 to 1, compared to 2.6 to 1 on April 30, 2017.2019. DSO can fluctuate significantly on a quarterly basis due to a number of factors including the percentage of total revenues that comes from software license sales (which typically have installment payment terms), seasonality, shifts in customer buying patterns, the timing of customer payments and annual SaaS and maintenance renewals, lengthened contractual payment terms in response to competitive pressures, the underlying mix of products and services, and the geographic concentration of revenues.

On August 19, 2002, our Board of Directors approved a resolution authorizing the repurchase of up to 2.0 million shares of our Class A common stock. These repurchases have been and will be made through open market purchases at prevailing market prices. The timing of any repurchases will depend upon market conditions, the market price of our common stock and management’s assessment of our liquidity and cash flow needs. For this repurchase plan, through April 30, 2018,2020, we have repurchased 1,053,679 shares of common stock at a cost of approximately $6.2 million. Under all repurchase plans as of April 30, 2018,2020, we have repurchased 4,588,632 shares of common stock at a cost of approximately $25.6 million.

Off-Balance Sheet Arrangements


We are not a party to anyoff-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

See Item 5 of this report, under the caption “Market“Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.Securities.”

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency. For the fiscal years ended April 30, 20182020 and 2017,2019, we generated 19% and 18%20%, respectively, of our revenues outside of the United States, respectively.States. We typically denominate our international sales in U.S. dollars, euros or British pounds sterling. Our consolidated financial statements are presented in U.S. dollars, which is also the functional currency for our foreign operations. Where transactions may be denominated in foreign currencies, we are subject to market risk with respect to fluctuations in the relative value

of currencies. We recorded exchange rate losses of approximately $16,000$605,000 and $285,000$486,000 in fiscal years 20182020 and 2017,2019, respectively. We estimate that a 10% movement in foreign currency rates would have the effect of creating an exchange gain or loss of approximately $402,000.

$652,000 for fiscal 2020.

Interest Rates and Other Market Risks. 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 andtax-advantaged variable rate and fixed rate obligations of corporations, municipalities, and national, state, and local government agencies, in accordance with an investment policy approved by our Board of Directors.agencies. These instruments are denominated in U.S. dollars. The fair market value of our cash equivalents and investments as of April 30, 2018 wasincreased 8% to approximately $82 million.

$90.1 million in fiscal 2020 from $83.8 million in the prior year.

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.

nominal.

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. We believe that a 10% fluctuation in interest rates would not have a material effect on our financial condition or results of operations.

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 expenses. To the extent permitted by the marketplace for our products and services, we attempt to recover increases in costs by periodically increasing prices.


ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 Page

Management’s Report on Internal Control Over Financial Reporting

58
56

Reports of Independent Registered Public Accounting Firm

59
57

Consolidated Balance Sheets as of April 30, 20182020 and 20172019

61
59

Consolidated Statements of Operations for the Years ended April  30, 2018, 20172020, 2019 and 20162018

62
60

Consolidated Statements of Shareholders’ Equity for the Years ended April 30, 2018, 20172020, 2019 and 20162018

63
61

Consolidated Statements of Cash Flows for the Years ended April  30, 2018, 20172020, 2019 and 20162018

64
62

Notes to Consolidated Financial Statements

65
63


(a) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for us.reporting. Internal control over financial reporting is a process designed by or under the supervision of our CEO and CFO, and effectivelyused by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principlesGAAP and includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles,GAAP, and that receipts and expenditures are being made only in accordance with authorizations from our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our Chief Executive Officer, and President, as our Principal Executive Officer (“PEO”) and President,, assessed the effectiveness of our internal control over financial reporting as of April 30, 2018.2020. In making this assessment, our management used the criteria set forth inInternal Control—Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management, including our PEO, and President, has concluded that our internal control over financial reporting was effective as of April 30, 2018.

2020.

KPMG LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting as of April 30, 2018,2020, and this attestation report follows immediately below.


(b) Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

American Software, Inc.:


Opinion on Internal Control Over Financial Reporting

We have audited American Software, Inc. and subsidiaries’ (“the Company”)subsidiaries (the Company) internal control over financial reporting as of April 30, 2018,2020, based on criteria established inInternal Control –- Integrated Framework (2013)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2018,2020, based on criteria established inInternal Control –- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the consolidated balance sheets of the Company as of April 30, 20182020 and 2017,2019, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2018,2020, and the related notes and financial statement scheduleII (collectively, the “consolidatedconsolidated financial statements”)statements), and our report dated July 13, 201810, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




/s/ KPMG LLP

Atlanta, Georgia

July 13, 2018

10, 2020



(c) Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

American Software, Inc.:


Opinion on the ConsolidatedFinancial Statements

We have audited the accompanying consolidated balance sheets of American Software, Inc. and subsidiaries (the “Company”)Company) as of April 30, 20182020 and 2017,2019, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in thethree-year three‑year period ended April 30, 2018,2020, and the related notes andfinancial statement scheduleII (collectively, the “consolidatedconsolidated financial statements”)statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 20182020 and 2017,2019, and the results of theirits operations and theirits cash flows for each of the years in thethree-year three‑year period ended April 30, 2018,2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the Company’s internal control over financial reporting as of April 30, 2018,2020, based on criteria established inInternal Control –- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated July 13, 201810, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle
As discussed in Note 1(n) to the consolidated financial statements, the Company has changed its method of accounting for revenue recognition in 2019 due to the adoption of ASU 2014-09, Revenue from Contracts with Customers and the related amendments.
As discussed in Note 1(n) to the consolidated financial statements, the Company has changed its method of accounting for leases in 2020 due to the adoption of ASU 2016-02, Leases and the related amendments.
Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ KPMG LLP

We have served as the Company’s auditor since 1982.

Atlanta, Georgia

July 13, 2018

10, 2020


American Software, Inc. and Subsidiaries

Consolidated Balance Sheets

April 30, 20182020 and 2017

2019

(in thousands, except share data)

   2018  2017 

ASSETS

   

Current assets:

   

Cash and cash equivalents

  $52,794  $66,001 

Investments

   26,121   19,332 

Trade accounts receivable, less allowance for doubtful accounts of $159 at April 30, 2018 and $171 at April 30, 2017:

   

Billed

   18,643   17,060 

Unbilled

   3,375   2,811 

Prepaid expenses and other current assets

   6,592   4,322 
  

 

 

  

 

 

 

Total current assets

   107,525   109,526 

Investments-noncurrent

   8,893   4,455 

Property and equipment, net

   3,034   2,055 

Capitalized software, net

   9,728   8,614 

Goodwill

   25,888   19,549 

Other intangibles, net

   5,120   3,399 

Other assets

   2,777   1,176 
  

 

 

  

 

 

 

Total assets

  $162,965  $148,774 
  

 

 

  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

Current liabilities:

   

Accounts payable

  $1,974  $1,541 

Accrued compensation and related costs

   6,310   3,329 

Dividends payable

   3,367   3,259 

Other current liabilities

   1,246   5,171 

Deferred revenue

   33,226   29,437 
  

 

 

  

 

 

 

Total current liabilities

   46,123   42,737 

Deferred income taxes

   2,615   1,994 

Long-term deferred revenue

   147   214 

Other long-term liabilities

   1,496   79 
  

 

 

  

 

 

 

Total liabilities

   50,381   45,024 

Shareholders’ equity:

   

Common stock:

   

Class A, $0.10 par value. Authorized 50,000,000 shares: Issued and outstanding 33,141,764 (28,553,132, net) shares at April 30, 2018 and 31,821,508 (27,232,876, net) shares at April 30, 2017

   3,314   3,182 

Class B, $0.10 par value. Authorized 10,000,000 shares: Issued and outstanding 2,057,390 shares at April 30, 2018 and 2,393,336 shares at April 30, 2017; convertible into Class A shares on aone-for-one basis

   205   239 

Additionalpaid-in capital

   131,258   121,280 

Retained earnings

   3,366   4,608 

Class A treasury stock, 4,588,632 shares at April 30, 2018 and 4,588,632 shares at April 30, 2017, at cost

   (25,559)   (25,559) 
  

 

 

  

 

 

 

Total shareholders’ equity

   112,584   103,750 
  

 

 

  

 

 

 

Commitments and contingencies

   

Total liabilities and shareholders’ equity

  $162,965  $148,774 
  

 

 

  

 

 

 

 2020 2019
ASSETS   
Current assets:   
Cash and cash equivalents$79,814
 $61,288
Investments14,161
 24,710
Trade accounts receivable, less allowance for doubtful accounts of $264 at April 30, 2020 and $153 at April 30, 2019:   
Billed22,582
 18,819
Unbilled2,425
 1,475
Prepaid expenses and other current assets6,684
 6,210
Total current assets125,666
 112,502
Investments-noncurrent701
 2,484
Property and equipment, net3,373
 3,585
Capitalized software, net8,362
 11,063
Goodwill25,888
 25,888
Other intangibles, net1,132
 2,732
Deferred sales commissions - non-current2,177
 1,546
Lease right of use assets2,053
 —
Other assets1,941
 1,510
Total assets$171,293
 $161,310
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$1,643
 $2,448
Accrued compensation and related costs6,635
 2,561
Dividends payable3,547
 3,434
Operating lease obligation763
 —
Other current liabilities643
 1,375
Deferred revenue34,227
 33,283
Total current liabilities47,458
 43,101
Deferred income taxes2,897
 3,514
Long-term operating lease obligations1,424
 —
Other long-term liabilities92
 88
Total liabilities51,871
 46,703
Shareholders’ equity:
 
Common stock:   
Class A, $0.10 par value. Authorized 50,000,000 shares: Issued and outstanding 35,000,649 (30,412,017, net) shares at April 30, 2020 and 33,979,739 (29,391,107, net) shares at April 30, 20193,500
 3,398
Class B, $0.10 par value. Authorized 10,000,000 shares: Issued and outstanding 1,821,587 shares at April 30, 2020 and 1,821,587 shares at April 30, 2019; convertible into Class A shares on a one-for-one basis182
 182
Additional paid-in capital150,312
 138,315
Retained deficit(9,013) (1,729)
Class A treasury stock, 4,588,632 shares at April 30, 2020 and 4,588,632 shares at April 30, 2019, at cost(25,559) (25,559)
Total shareholders’ equity119,422
 114,607
Commitments and contingencies
 
Total liabilities and shareholders’ equity$171,293
 $161,310
See accompanying notes to consolidated financial statements.


American Software, Inc. and Subsidiaries

Consolidated Statements of Operations

Years ended April 30, 2018, 2017,2020, 2019, and 2016

2018

(Inin thousands, except per share data)

   2018   2017   2016 

Revenues:

      

License

  $15,344   $15,584   $22,043 

Services and other

   53,518    48,313    51,099 

Maintenance

   43,841    42,389    40,747 
  

 

 

   

 

 

   

 

 

 

Total revenues

   112,703    106,286    113,889 
  

 

 

   

 

 

   

 

 

 

Cost of revenues:

      

License

   7,077    7,563    7,688 

Services and other

   33,597    33,814    37,100 

Maintenance

   9,326    9,707    9,441 
  

 

 

   

 

 

   

 

 

 

Total cost of revenues

   50,000    51,084    54,229 
  

 

 

   

 

 

   

 

 

 

Gross margin

   62,703    55,202    59,660 
  

 

 

   

 

 

   

 

 

 

Research and development

   11,877    11,889    11,248 

Sales and marketing

   20,658    20,287    22,164 

General and administrative

   16,057    14,219    12,449 

Amortization of acquisition-related intangibles

   580    1,041    272 
  

 

 

   

 

 

   

 

 

 

Total operating expenses

   49,172    47,436    46,133 
  

 

 

   

 

 

   

 

 

 

Operating income

   13,531    7,766    13,527 

Other income:

      

Interest income

   1,575    1,257    1,346 

Other, net

   609    12,592    (173) 
  

 

 

   

 

 

   

 

 

 

Earnings before income taxes

   15,715    21,615    14,700 

Income tax expense

   3,662    6,994    4,458 
  

 

 

   

 

 

   

 

 

 

Net earnings

  $12,053   $14,621   $10,242 
  

 

 

   

 

 

   

 

 

 

Earnings per common share:(a)

      

Basic

  $0.40   $0.50   $0.36 
  

 

 

   

 

 

   

 

 

 

Diluted

  $0.40   $0.49   $0.35 
  

 

 

   

 

 

   

 

 

 

Shares used in the calculation of earnings per common share:

      

Basic

   30,080    29,232    28,727 

Diluted

   30,472    29,567    29,005 

 2020 2019 2018
Revenues:     
Subscriptions fees$22,033
 $14,026
 $8,855
License7,582
 $7,126
 15,344
Professional services and other42,774
 42,154
 44,663
Maintenance43,077
 45,400
 43,841
Total revenues115,466
 108,706
 112,703
Cost of revenues:     
Subscriptions fees9,491
 5,759
 3,817
License4,798
 $6,430
 6,261
Professional services and other30,695
 31,421
 30,596
Maintenance7,324
 8,356
 9,326
Total cost of revenues52,308
 51,966
 50,000
Gross margin63,158
 56,740
 62,703
Research and development15,348
 13,078
 11,877
Sales and marketing21,958
 20,992
 20,658
General and administrative19,519
 17,006
 16,057
Amortization of acquisition-related intangibles285
 388
 580
Total operating expenses57,110
 51,464
 49,172
Operating income6,048
 5,276
 13,531
Other income:     
Interest income1,524
 2,092
 1,575
Other, net(774) 273
 609
Earnings before income taxes6,798
 7,641
 15,715
Income tax expense56
 838
 3,662
Net earnings$6,742
 $6,803
 $12,053
Earnings per common share:(a)     
Basic$0.21
 $0.22
 $0.40
Diluted$0.21
 $0.22
 $0.40
Shares used in the calculation of earnings per common share:     
Basic31,747
 30,950
 30,080
Diluted32,367
 31,378
 30,472
(a)Diluted per share amounts for Class A shares are shown above. Diluted per share for Class B shares under thetwo-class method are $0.39, $0.49$0.22, $0.22 and $0.35$0.39 for the years ended April 30, 2018, 20172020, 2019 and 2016,2018, respectively. See Note 1 to the Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.


American Software, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Years ended April 30, 2018, 2017,2020, 2019, and 2016

2018

(in thousands, except share data)

   Common stock  Additional
paid-in
capital		   Retained
earnings		  Treasury
stock		  Total
shareholders’
equity		 
   Class A   Class B      
   Shares   Amount   Shares  Amount      

Balance at April 30, 2015

   30,566,099   $3,057    2,587,086  $259  $110,829   $4,159  $(25,378)  $92,926 

Proceeds from stock options exercised

   306,848    30    —     —     1,788    —     —     1,818 

Conversion of Class B shares into Class A shares

   100,000    10    (100,000)   (10)   —      —     —     —   

Stock-based compensation

   —      —      —     —     1,593    —     —     1,593 

Net earnings

   —      —      —     —     —      10,242   —     10,242 

Dividends declared

   —      —      —     —     —      (11,504)   —     (11,504) 

Repurchase of common shares

   —      —      —     —     —      —     (181)   (181) 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at April 30, 2016

   30,972,947    3,097    2,487,086   249   114,210    2,897   (25,559)   94,894 

Proceeds from stock options exercised

   754,811    75    —     —     5,642    —     —     5,717 

Conversion of Class B shares into Class A shares

   93,750    10    (93,750)   (10)   —      —     —     —   

Stock-based compensation

   —      —      —     —     1,428    —     —     1,428 

Net earnings

   —      —      —     —     —      14,621   —     14,621 

Dividends declared

   —      —      —     —     —      (12,910)   —     (12,910) 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at April 30, 2017

   31,821,508    3,182    2,393,336   239   121,280    4,608   (25,559)   103,750 

Proceeds from stock options exercised

   984,310    98    —     —     8,511    —     —     8,609 

Conversion of Class B shares into Class A shares

   335,946    34    (335,946)   (34)   —      —     —     —   

Stock-based compensation

   —      —      —     —     1,467    —     —     1,467 

Net earnings

   —      —      —     —     —      12,053   —     12,053 

Dividends declared

   —      —      —     —     —      (13,295)   —     (13,295) 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at April 30, 2018

   33,141,764   $3,314    2,057,390  $205  $131,258   $3,366  $(25,559)  $112,584 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

 Common stock 
Additional
paid-in
capital
 
Retained
earnings/deficit
 
Treasury
stock
 
Total
shareholders’
equity
 Class A Class B 
 Shares Amount Shares Amount 
Balance at April 30, 201731,821,508
 $3,182
 2,393,336
 $239
 $121,280
 $4,608
 $(25,559) $103,750
Proceeds from stock options exercised984,310
 98
 —
 —
 8,511
 —
 —
 8,609
Conversion of Class B shares into Class A shares335,946
 34
 (335,946) (34) —
 —
 —
 —
Stock-based compensation—
 —
 —
 —
 1,467
 —
 —
 1,467
Net earnings—
 —
 —
 —
 —
 12,053
 —
 12,053
Dividends declared—
 —
 —
 —
 —
 (13,295) —
 (13,295)
Balance at April 30, 201833,141,764
 3,314
 2,057,390
 205
 131,258
 3,366
 (25,559) 112,584
Balance at Cumulative effect of the adoption of Topic 606—
 —
 —
 —
 —
 1,753
 —
 1,753
Proceeds from stock options exercised602,176
 61
 —
 —
 5,306
 —
 —
 5,367
Conversion of Class B shares into Class A shares235,799
 23
 (235,803) (23) —
 —
 —
 —
Stock-based compensation—
 —
 —
 —
 1,751
 —
 —
 1,751
Net earnings—
 —
 —
 —
 —
 6,803
 —
 6,803
Dividends declared—
 —
 —
 —
 —
 (13,651) —
 (13,651)
Balance at April 30, 201933,979,739
 3,398
 1,821,587
 182
 138,315
 (1,729) (25,559) 114,607
Proceeds from stock options exercised1,020,910
 102
 —
 —
 9,970
 —
 —
 10,072
Stock-based compensation—
 —
 —
 —
 2,027
 —
 —
 2,027
Net earnings—
 —
 —
 —
 —
 6,742
 —
 6,742
Dividends declared—
 —
 —
 —
 —
 (14,026) —
 (14,026)
Balance at April 30, 202035,000,649
 $3,500
 1,821,587
 $182
 $150,312
 $(9,013) $(25,559) $119,422
See accompanying notes to consolidated financial statements.



American Software, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years ended April 30, 2018, 2017,2020, 2019, and 2016

2018

(Inin thousands)

   2018  2017  2016 

Cash flows from operating activities:

    

Net earnings

  $12,053  $14,621  $10,242 

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation and amortization

   6,030   6,640   5,618 

Stock-based compensation expense

   1,467   1,428   1,593 

Accretion of liability from purchase of business

   —     —     11 

Net (gain)/loss on investments

   (254)   (146)   994 

Net (gain) on sale of fixed assets

   —     (11,776)   —   

Deferred income tax expense/(benefit)

   621   675   (312) 

Changes in operating assets and liabilities, net of effects of acquisition:

    

Purchases of trading securities

   (24,541)   (10,267)   (13,206) 

Proceeds from sales and maturities of trading securities

   13,568   15,507   14,071 

Accounts receivable, net

   (1,774)   1,187   (945) 

Prepaid expenses and other assets

   (1,983)   (284)   (740) 

Accounts payable and other liabilities

   (1,807)   1,185   1,155 

Deferred revenue

   3,374   1,010   (190) 
  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   6,754   19,780   18,291 
  

 

 

  

 

 

  

 

 

 

Cash flows from investing activities:

    

Capitalized computer software development costs

   (4,804)   (3,724)   (3,246) 

Purchases of property and equipment, net of disposals

   (1,428)   (731)   (655) 

Proceeds from sale of building

   —     13,134   —   

Purchase of business, net of cash acquired

   (9,150)   (4,441)   —   
  

 

 

  

 

 

  

 

 

 

Net cash (used in) provided by investing activities

   (15,382)   4,238   (3,901) 
  

 

 

  

 

 

  

 

 

 

Cash flows from financing activities:

    

Repurchase of common stock

   —     —     (181) 

Proceeds from exercise of stock options

   8,609   5,717   1,818 

Payment for accrued acquisition consideration

   —     (200)   (200) 

Dividends paid

   (13,188)   (12,538)   (11,478) 
  

 

 

  

 

 

  

 

 

 

Net cash used in financing activities

   (4,579)   (7,021)   (10,041) 
  

 

 

  

 

 

  

 

 

 

Net change in cash and cash equivalents

   (13,207)   16,997   4,349 

Cash and cash equivalents at beginning of year

   66,001   49,004   44,655 
  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of year

  $52,794  $66,001  $49,004 
  

 

 

  

 

 

  

 

 

 

Supplemental disclosures of cash paid during the year for:

    

Income taxes

  $7,892  $2,924  $4,800 

Supplemental disclosures of noncash operating, investing and financing activities:

    

Accrual of dividends payable

  $3,367  $3,259  $2,887 

 2020 2019 2018
Cash flows from operating activities:     
Net earnings$6,742
 $6,803
 $12,053
Adjustments to reconcile net earnings to net cash provided by operating activities:     
Depreciation and amortization8,103
 7,719
 6,030
Stock-based compensation expense2,027
 1,751
 1,467
Net loss (gain) on investments563
 (373) (254)
Net gain on sale of fixed assets—
 (4) —
Deferred income tax (benefit) expense(609) 320
 621
Changes in operating assets and liabilities, net of effects of acquisition:     
Purchases of trading securities(22,433) (10,254) (24,541)
Proceeds from sales and maturities of trading securities34,202
 18,447
 13,568
Accounts receivable, net(4,712) 2,165
 (1,774)
Prepaid expenses and other assets(1,537) 536
 (1,983)
Accounts payable and other liabilities2,692
 (3,611) (1,807)
Deferred revenue944
 431
 3,374
Net cash provided by operating activities25,982
 23,930
 6,754
Cash flows from investing activities:     
Capitalized computer software development costs(3,170) (5,961) (4,804)
Purchases of property and equipment, net of disposals(420) (1,252) (1,428)
Purchase of business, net of cash acquired—
 —
 (9,150)
Net cash used in provided by investing activities(3,590) (7,213) (15,382)
Cash flows from financing activities:     
Proceeds from exercise of stock options10,072
 5,367
 8,609
Dividends paid(13,938) (13,590) (13,188)
Net cash used in financing activities(3,866) (8,223) (4,579)
Net change in cash and cash equivalents18,526
 8,494
 (13,207)
Cash and cash equivalents at beginning of year61,288
 52,794
 66,001
Cash and cash equivalents at end of year$79,814
 $61,288
 $52,794
Supplemental disclosures of cash paid during the year for:     
Income taxes$544
 $516
 $7,892
Supplemental disclosures of noncash operating, investing and financing activities:     
Accrual of dividends payable$3,547
 $3,434
 $3,367
See accompanying notes to consolidated financial statements.


American Software, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

April 30, 2018, 2017,2020, 2019, and 2016

2018

(1) Presentation and Summary of Significant Accounting Policies

(a) Basis of Presentation

Founded in 1970 and headquartered in Atlanta, Georgia, American Software, Inc. and its subsidiaries (collectively, the “Company”) are engaged in the development, marketing, and support activities of a broad range of computer business application software products. The Company’s operations are principally in the computer software industry, and its products and services are used by customers within the United States and certain international markets. We provide our software solutions through three major business segments, which are further broken down into a total of six major product and service groups. The three operating segments areare: (1) Supply Chain Management (“SCM”), (2) Information Technology Consulting (“IT”IT Consulting”) Consulting and (3) Other.

The SCM segment consists of Logility, Inc. (see Note 9)8), which provides collaborative supply chain solutions to streamline and optimize the production, distribution and management of products between trading partners, as well as Demand Management, Inc. and New Generation Computing, Inc., wholly-owned subsidiaries of Logility DMI, NGC and Halo.American Software, Inc., respectively.

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, customer order processing, financial,e-commerce and traditional manufacturing solutions, and (ii) unallocated corporate overhead expenses.

Certain prior period amounts have been recasted to conform within these footnotes to current period presentation.

(b) Principles of Consolidation

The consolidated financial statements include the accounts of American Software, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

(c) Revenue Recognition and Deferred Revenue

The Company recognizes revenue predominately in accordance with the Software Revenue Recognition Topic of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC).

License.License revenue in connection with license agreements for standard proprietary software is recognized upon delivery of the software, provided collection is considered probable, the fee is fixed or determinable, there is persuasive evidence of an arrangement, and vendor-specific objective evidence (VSOE) exists with respect to any undelivered elements of the arrangement. For multiple-element arrangements, the Company recognizes revenue under the residual method, whereby (1) the total fair value of the undelivered elements, as indicated by VSOE, is deferred and subsequently recognized and (2) the difference between the total arrangement fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements. We record revenues from sales of third-party products in accordance with Principal Agent Considerations within the Revenue Recognition Topic of the FASB Accounting Standards Codification. Furthermore, we evaluate sales through our indirect channel on a


case-by-case basis to determine whether the transaction should be recorded gross or net, including but not limited to assessing whether or not the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) acts as an agent or broker with compensation on a commission or fee basis. Accordingly, in most cases we record our sales through the DMI channel on a gross basis.

Services and other.Revenue derived from services primarily includes consulting, implementation, and training. Fees are primarily billed under time and materials arrangements and are recognized as services are performed. In accordance with the other presentation matters within the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue Recognition Topicfrom Contracts with Customers (Topic 606), we recognize revenue when we transfer control of the FASB Accounting Standards Codification,promised goods or services to our customers, in an amount that reflects the Company recognizes amounts receivedconsideration we expect to receive in exchange for reimbursement of travelthose goods or services. We derive our revenue from software licenses, maintenance services, consulting, implementation and otherout-of-pocket expenses incurred as revenue in the consolidated statements of operations undertraining services, and other. Reimbursements received fromSoftware-as-a-Service (“SaaS”), which includes a subscription to our software as well as support, hosting and managed services.


The Company determines revenue recognition through the following steps:

Step 1 - Identification of the Contract with the Customer

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.
License. Our perpetual software licenses provide the customer 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 customer.


Our perpetual software licenses are sold with maintenance under which we provide customers forout-of-pocket expenses were recorded in revenueswith telephone consulting, product updates on a when and totaled approximately $1.9 million, $2.1 million,if available basis, and $2.4 million for 2018, 2017releases of new versions of products previously purchased by the customer, as well as error reporting and 2016, respectively.

correction services.

Software-as-a-ServiceSubscription. (SaaS) revenuesSubscription fees include feesSoftware-as-a-Service ("SaaS") revenues for the right to use the software for a limited period of time in aan environment hosted environment by the Company or by a third-party and thethird party. The customer accesses and uses the software on anas-needed as needed basis over the Internet or via a dedicated line; however, the customer has no abilityright 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 revenuessolutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue from a SaaS solution is generally recognized ratably over the subscription (whichterm of the arrangement.
Professional Services and Other. Our professional services revenue consists of fees generated from consulting, implementation and training services, including reimbursements of out-pocket expenses in connection with our services. These services are typically optional to our customers, and are distinct from our software. Fees for our professional services are separately priced and are generally billed on an hourly basis, and revenue is included in Services Revenue)recognized over the committed services period oncetime as the services commence.

Maintenance.are performed. We believe the output method of hours worked provides the best depiction of the transfer of our services since the customer is receiving the benefit from our services as the work is performed. Reimbursements received from customers for out-of-pocket expenses were recorded in revenues and totaled approximately $1.5 million, $1.4 million, and $1.9 million for 2020, 2019 and 2018, respectively.

Maintenance and Support.Revenue is derived from maintenance contracts primarily includesand support services, under which we provide customers with telephone consulting, product updates on a when and if available basis, and releases of new versions of products previously purchased by the customer, as well as error reporting and correction services. Maintenance contracts arefor perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Maintenance terms typically sold for a separate fee with initial contractual periods rangingrange from one to three years with renewal for additional periods thereafter. Maintenance fees areyears. Revenue related to maintenance is generally billed annuallypaid in advance. Maintenance revenue isadvance and recognized ratably over the term of the agreement since the Company is standing ready to provide a series of maintenance agreement. In situations where all orservices 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 portioncomponent of the maintenance fee is bundled with the license fee, revenue/VSOE for maintenance is determined based on prices when sold separately.

such fees.

Indirect Channel Revenue.We recognizerecord revenues forfrom sales made through the indirect sales channels principally whenon a gross basis, because we control the distributor makesgoods or services and act as the saleprincipal in the transaction. In reaching this determination, we evaluate sales through our indirect channel on a case-by-case basis and consider a number of factors including indicators of control such as the party having the primary responsibility to anend-user, when the license fee is fixedprovide specified goods or determinable, the license fee is nonrefundable,services, and the sale meets all other conditions for revenue recognition.

Deferred Revenue. Deferred revenue represents advance payments or billings for software licenses, services, and maintenance billedparty having discretion in advance of the time revenue is recognized.

establishing prices.

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


Significant Judgments. Many of our contracts include multiple performance obligations. Our products and services generally do not require a significant amount of integration or interdependency; therefore, our products and services are generally not combined. We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (SSP) for each performance obligation within each contract.

We use judgment in determining the SSP for products and services. For substantially all performance obligations except on-premise licenses, we are able to establish SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. We typically establish an SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. Our on-premise licenses have not historically been sold on a standalone basis, as the vast majority of all customers elect to purchase on-premise license support contracts at the time of a on-premise license purchase. Support contracts are generally priced as a percentage of the net fees paid by the customer to access the on-premise license. We are unable to establish the SSP for our on-premise licenses based on observable prices given the same products are sold for a broad range of amounts (that is, the selling price is highly variable) and a representative SSP is not discernible from past transactions or other observable evidence. As a result, the SSP for a on-premise license included in a contract with multiple performance obligations is determined by applying a residual approach whereby all other performance obligations within a contract are first allocated a portion of the transaction price based upon their respective SSPs, with any residual amount of transaction price allocated to on-premise license revenues

Contract Balances. Timing of invoicing to customers 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 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 customers. 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 have determined that our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers 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 customer contracts is fixed.
We have an unconditional right to consideration for all goods and services transferred to our customers. That unconditional right to consideration is reflected in billed and unbilled accounts receivable in the accompanying consolidated balance sheets in accordance with ASC Topic 606.

Deferred revenue consists of amounts collected prior to having completed the performance of maintenance, SaaS, hosting, and managed services. We typically invoice customers 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 twelve months ended April 30, 2020, the Company recognized $31.0 million of revenue that was included in the deferred revenue balance as of April 30, 2019.
 Years ended April 30,
 2020 2019
 in thousands
Deferred revenue, current$34,227
 $33,283
Deferred revenue, long-term—
 —
Total deferred revenue$34,227
 $33,283

Remaining Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer 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 customer. 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 April 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $77.0 million. The Company expects to recognize revenue on approximately 60% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

Disaggregated Revenue. The Company disaggregates revenue from contracts with customers 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:
 Years ended April 30,
 2020 2019
 in thousands
Revenues:   
Domestic$93,332
 $87,316
International22,134
 21,390
 $115,466
 $108,706

Practical Expedients and Exemptions. There are several practical expedients and exemptions allowed under Topic 606
that impact the timing of revenue recognition and the Company’s disclosures. Below is a list of practical expedients the Company applies in the application of Topic 606:

The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.

The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (this applies to time-and-material engagements).

Contract Costs. The Company capitalizes the incremental costs of obtaining a contract with a customer 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 customer 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.

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.

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 for license and term subscriptions. 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 in long-term assets, respectively, in the Company’s consolidated balance sheets. Total deferred commissions at April 30, 2020 and April 30, 2019 were $3.5 million and $2.3 million, respectively. Amortization of sales commissions was $2.1 million for year ended April 30, 2020, which is included in sales and marketing expense in the accompanying consolidated statements of operations. During the fiscal 2020 and 2019 impairment analyses, no losses were recognized.
Unbilled Accounts Receivable.The unbilled receivable balance consists of amounts generated from license fee and services revenues. At April 30, 20182020 and 2017,2019, unbilled license fees were approximately $0.8$1.3 million and $1.0$0.4 million, respectively, and unbilled services revenues were approximately $2.5$1.1 million and $1.8$1.1 million, respectively. Unbilled license fee accounts receivable represents revenue that has been recognized but under the terms of the license agreement,agreements, which include specified payment terms that are considered normal and customary, certain payments have not yet been invoiced to the customers. Unbilled services revenues primarily occur due to the timing of the respective billings, which occur subsequent to the end of each reporting period.

(d) Cost of Revenues

Cost of revenues for licenses includes amortization of developed technology and capitalized computer software development costs, salaries and benefits and value-added reseller (VAR)("VAR") commissions. Costs for maintenance and services revenues include the cost of personnel to conduct implementations, customer support and consulting, and other personnel-related expenses as well as agent commission expenses related to maintenance revenues generated by the indirect channel. Costs for subscriptions revenues include amortization of developed technology and capitalized computer software development costs, third–party hosting costs, salaries and benefits and value–added reseller ("VAR") commissions. Commission costs for maintenance are deferred and amortized over the related maintenance term.

Commission costs for subscriptions are deferred and amortized over the related subscription term.

(e) Cash Equivalents

Cash equivalents of $47.0$75.3 million and $62.6$56.6 million at April 30, 20182020 and 2017,2019, respectively, consist of overnight repurchase agreements and money market deposit accounts. The Company considers all such investments with original maturities of three months or less to be cash equivalents for purposes of the consolidated statements of cash flows.

(f) Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, short- and long-term investments and accounts receivable. The Company maintains cash and cash equivalents and short- and long-term investments with various financial institutions. The Company’s sales are primarily to companies located in North America and Europe. The Company performs periodic credit evaluations of its customers’ financial condition and does not require collateral. Accounts receivable are due principally from companies under stated contract terms.

(g) Returns and Allowances

The Company has not experienced significant returns or warranty claims to date and, as a result, the allowance for the cost of returns and product warranty claims at April 30, 2018 or 20172020 and 2019 is not significant.

material.


The Company records an allowance for doubtful accounts based on the historical experience of write-offs and a detailed assessment of accounts receivable. The total amounts of expense/(recovery)expense to operations were approximately $97,000, $0, and $24,000 $39,000,for fiscal 2020, 2019, and $0 for 2018, 2017, and 2016, respectively, which are included in general and administrative expenses in the accompanying consolidated statements of operations. In estimating the allowance for doubtful accounts, management considers the age of the accounts receivable, the Company’s historical write-offs, and the credit worthiness of the customer, among other factors. Should any of these factors change, the estimates made by management will also change accordingly, which could affect the level of the Company’s future provision for doubtful accounts. Uncollectible accounts are written off when it is determined that the specific balance is not collectible.

(h) Investments

Investments consist of commercial paper, corporate bonds, government securities, certificates of deposits and marketable equity securities. The Company accounts for its investments in accordance with the Investments—Investments – Debt Securities (Topic 320) and Investments—Equity Securities Topic of the FASB ASC.(Topic 321). The Company has classified its investment portfolio as “trading.” “Trading” securities are bought and held principally for the purpose of selling them in the near term and are recorded at fair value. Unrealized gains and losses on trading securities are included in the determination of net earnings. For the purposes of computing realized gains and losses, cost is identified on a specific identification basis. Investments with maturities less than one year as of the balance sheet date are classified as short-term investments and those that mature greater than one year are classified as long-term investments.

(i) Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation of buildings, computer equipment, purchased computer software, office furniture and equipment is calculated using the straight-line method based upon the estimated useful lives of the assets (three years for computer equipment and software, seven years for office furniture and equipment, fifteen years for building improvements and thirty years for buildings). Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the assets or the related lease term, whichever is shorter. Depreciation and amortization expense on buildings, furniture, equipment and purchased computer software was $492,000, $731,000,$0.6 million, $0.7 million, and $807,000$0.5 million in 2020, 2019, and 2018, 2017 and 2016, respectively.


(j) Capitalized Computer Software Development Costs

The Company capitalizes certain computer software development costs in accordance with the FASB ASC Costs of Software to be Sold, Leased or Marketed Topic.under ASC 985-20. Costs incurred internally to create a computer software product or to develop an enhancement to an existing product are charged to expense when incurred as research and development expense until technological feasibility for the respective product is established. Thereafter, software development costs are capitalized and reported at the lower of unamortized cost or net realizable value. Capitalization ceases when the product or enhancement is available for general release to customers. The Company makes ongoing evaluations of the recoverability of its capitalized software projects by comparing the net amount capitalized for each product to the estimated net realizable value of the product. If such evaluations indicate that the unamortized software development costs exceed the net realizable value, the Company writes off the amount by which the unamortized software development costs exceed net realizable value. Capitalized computer software development costs are amortized ratably based on the projected revenues associated with the related software or on a straight-line basis over three years, whichever method results in a higher level of amortization. Amortization of capitalized computer software development costs is included in the cost of license and subscription revenues in the consolidated statements of operations.

Total Expenditures and Amortization.Total expenditures for capitalized computer software development costs, total research and development expense, and total amortization of capitalized computer software development costs are as follows:

   Years ended April 30, 
   2018   2017   2016 
   (in thousands) 

Total capitalized computer software development costs

  $4,804   $3,724   $3,246 

Total research and development expense

   11,877    11,889    11,248 
  

 

 

   

 

 

   

 

 

 

Total research and development expense and capitalized computer software-development costs

  $16,681   $15,613   $14,494 
  

 

 

   

 

 

   

 

 

 

Total amortization of capitalized computer software development costs

  $3,690   $4,250   $3,921 

 Years ended April 30,
 2020 2019 2018
 (in thousands)
Total capitalized computer software development costs$3,170
 $5,961
 $4,804
Total research and development expense15,348
 13,078
 11,877
Total research and development expense and capitalized computer software-development costs$18,518
 $19,039
 $16,681
Total amortization of capitalized computer software development costs$5,871
 $4,627
 $3,690


Capitalized computer software development costs consist of the following at April 30, 20182020 and 20172019 (in thousands):

   2018   2017 

Capitalized computer software development costs

  $33,841   $29,037 

Accumulated amortization

   (24,113)    (20,423) 
  

 

 

   

 

 

 
  $9,728   $8,614 
  

 

 

   

 

 

 

 2020 2019
Capitalized computer software development costs$42,973
 $39,803
Accumulated amortization(34,611) (28,740)
 $8,362
 $11,063
Of the Company’s capitalized software projects that are currently completed and being amortized, the Company expects amortization expense for the next three years to be as follows (in thousands):

2019

  $3,820 

2020

   3,125 

2021

   469 
  

 

 

 
  $7,414 
  

 

 

 

2021$3,437
20222,222
2023197
 $5,856
(k) Acquisition-Related Intangible Assets (exclusive of Logility’s treasury stock repurchases)

Acquisition-related intangible assets are stated at historical cost and include acquired software and certain other intangible assets with definite lives. The intangibleIntangible assets are being amortized over a period ranging from one to eight years. For 2018,2020, total amortization expense related to acquisition-related intangible assets was approximately $1,849,000,$1.6 million, with $580,000$0.3 million included in operating expense and $1,269,000$1.3 million included in cost of license fees in the accompanying consolidated statements of operations. For 2017,2019, total amortization expense related to acquisition-related intangible assets was approximately $1,659,000,$2.4 million, with $1,041,000$0.4 million included in operating expense and $618,000$2.0 million included in cost of license fees in the accompanying consolidated statements of operations. For 2016,2018, total amortization expense related to acquisition-related intangible assets was approximately $890,000,$1.8 million, with $272,000$0.6 million included in operating expense and $618,000$1.2 million included in cost of license fees in the accompanying consolidated statements of operations.

Acquisition-Related Intangible Assets consist of the following at April 30, 20182020 and 20172019 (in thousands):

   Weighted
Average
Amortization
in Years		   2018   2017 

Current technology

   3   $6,000   $4,872 

Customer relationships

   8    1,700    1,400 

Non-compete

   3    100    390 

Trademarks

   3    340    200 
    

 

 

   

 

 

 
     8,140    6,862 

Accumulated amortization

     (3,020)    (3,463) 
    

 

 

   

 

 

 
    $5,120   $3,399 
    

 

 

   

 

 

 

 
Weighted
Average
Amortization
in Years
 2020 2019
Current technology3 $6,000
 $6,000
Customer relationships8 1,700
 1,700
Non-compete3 100
 100
Trademarks3 340
 340
   8,140
 8,140
Accumulated amortization  (7,008) (5,408)
   $1,132
 $2,732
The Company expects amortization expense for the next five years to be as follows based on intangible assets as of April 30, 20182020 (in thousands):

2019

  $2,388 

2020

   1,600 

2021

   772 

2022

   213 

2023

   52 

Thereafter

   95 
  

 

 

 
  $5,120 
  

 

 

 

2021$772
2022212
202352
202438
202538
Thereafter20
 $1,132


(l) Goodwill and Other Intangibles

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually in accordance with the FASB issued Accounting Standards Update (“ASU”) No.2017-04Intangibles-Goodwill and Other Topic of the FASB ASC.(Topic 350). The Company evaluates the carrying value of goodwill annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator.

When evaluating whether the goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to its carrying amount, including goodwill. The Company identifies the reporting unit on a basis that is similar to its method for identifying operating segments as defined by the Segment Reporting Topic of the FASB ASC. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. This evaluation is applied annually on each impairment testing date (April 30) unless there is a triggering event present during an interim period.

For the years ended April 30, 20182020 and 2017,2019, the Company performed a qualitative assessment based on economic, industry and company-specific factors as the initial step in the annual goodwill impairment test for all reporting units. Based on the results of the qualitative assessment, companies are only required to perform Step 1 of the annual impairment test for a reporting unit if the company concludes that it is more likely than not that the unit’s fair value is less than its carrying amount. To the extent the Company concludes it is more likely than not that a reporting unit’s estimated fair value is less than its carrying amount, thetwo-step approach is applied. The first step would require a comparison of each reporting unit’s fair value to the respective carrying value. If the carrying value exceeds the fair value, a second step is performed to measure the amount of impairment loss, if any. The Company did not identify any macroeconomic or industry conditions as of April 30, 2018,2020, that would indicate the fair value of the reporting units were more likely than not to be less than their respective carrying values. If circumstances change or events occur to indicate it is more likely than not that the fair value of any reporting units have fallen below their carrying value, the Company would test such reporting unit for impairment.

Intangible assets with estimable useful lives are required to be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with the (ASU) No. 2011-10, Property, Plant and Equipment Topic of the FASB ASC.

(Topic 360).

Goodwill consisted of the following by segment (in thousands):

   Supply Chain
Management*		   IT
Consulting		   Other   Total 

Balance at April 30, 2016

  $18,749   $—     $—     $18,749 

Goodwill related to the AdapChain Acquisition

   800    —      —      800 
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at April 30, 2017

   19,549    —      —      19,549 
  

 

 

   

 

 

   

 

 

   

 

 

 

Goodwill related to the Halo Acquisition

   6,339    —      —      6,339 
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at April 30, 2018

  $25,888   $—     $—     $25,888 
  

 

 

   

 

 

   

 

 

   

 

 

 

 
Supply Chain
Management*
 
IT
Consulting
 Other Total
Balance at April 30, 2018$25,888
 $—
 $—
 $25,888
Balance at April 30, 201925,888
 —
 —
 25,888
Balance at April 30, 2020$25,888
 $—
 $—
 $25,888
*Goodwill related to Logility, Inc., New Generation Computing, Inc., Demand Management, Inc. and their acquisitions.

Intangible Assets (including Acquisition-Related Intangible Assets) consisted of the following by segment (in thousands):

   Supply Chain
Management		  IT
Consulting		   Other   Total 

Balance at April 30, 2016

  $1,858  $—     $—     $1,858 

Intangibles related to the AdapChain Acquisition

   3,200   —      —      3,200 

Amortization expense

   (1,659)   —      —      (1,659) 
  

 

 

  

 

 

   

 

 

   

 

 

 

Balance at April 30, 2017

   3,399   —      —      3,399 
  

 

 

  

 

 

   

 

 

   

 

 

 

Intangibles related to the Halo Acquisition

   3,570   —      —      3,570 

Amortization expense

   (1,849)   —      —      (1,849) 
  

 

 

  

 

 

   

 

 

   

 

 

 

Balance at April 30, 2018

  $5,120  $—     $—     $5,120 
  

 

 

  

 

 

   

 

 

   

 

 

 

   
IT
Consulting
 Other Total
Balance at April 30, 2018$5,120
 $—
 $—
 $5,120
Amortization expense(2,388) —
 —
 (2,388)
Balance at April 30, 20192,732
 —
 —
 2,732
Amortization expense(1,600) —
 —
 (1,600)
Balance at April 30, 2020$1,132
 $—
 $—
 $1,132


(m) Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(n) Recent Accounting Pronouncements


In May 2014, the FASB issued Accounting Standards Update (ASU)ASU No. 2014-09,Revenue from Contracts with Customers(Topic (Topic 606), and the related amendments, which replacesreplaced the existingprevious revenue recognition guidance. The new standard requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires enhanced disclosures about revenue recognition. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The new revenue standard permits two methods of adoption: a full retrospective approach reflecting the application of the standard in each prior reporting period presented, or a modified retrospective approach with the cumulative effect of applying the standard recognized at the date of adoption.


The Company adopted the newthis revenue standard effective May 1, 2018 using the modified retrospective transition method. Under this method, the Company electselected to apply the cumulative effect method to contracts that are not complete as of the adoption date. The Company’s total revenue impact is expected to be approximatelywas $1.2 million, with approximately 70% impacting the fiscal year ending April 30, 2019, which is the result of upfront recognitionrecognizing revenue for the license component of revenue under the new standard forits term licenses and certain perpetual license contracts that were previously recognized over time due to the lack of VSOE forvendor-specific objective evidence (VSOE) of fair value at the undelivered element.point in time at which control of the software license is transferred to the customer. In addition, under the newthis standard, the Company will capitalize a portion of sales commission expenses and recognize them ratably over the associated period of economic benefit.benefit, which the Company has determined to be six years, which had an impact of $1.1 million. As a result, the cumulative impact due to the adoption of the new revenue standard on the opening consolidated balance sheet is expected to bewas an increase in opening retained earnings, with a corresponding increase to contract assetsin unbilled accounts receivable and a decrease in deferred revenue. We have not identified other significant differences related to the pattern of revenue recognition or presentation of revenue compared to our historical accounting. The Company is continuing to finalize the impact of adopting the new revenue standard on its financial position but has identified changes to its accounting policies and practices and controls to support the new revenue recognition standard.


In February 2016, the FASB issued ASUNo. 2016-02,Leases (Topic 842), and the related amendments, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASUUnder the new guidance, a lessee is effectiverequired to recognize assets and liabilities for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoptionleases with lease terms of the update is permitted.more than 12 months. The Company is evaluatingadopted ASU 2016-02 as of May 1, 2019 using the impactmodified retrospective approach, which allows the Company to apply Accounting Standards Codification (ASC) 840, Leases, in the comparative periods presented in the year of adoption. Accordingly, the comparative periods and disclosures have not been restated. The cumulative effect of adoption was recorded as an adjustment to the opening balance sheet in the period of adoption.
As part of the adoption of this updateASC 842, the Company elected to adopt certain of the optional practical expedients, including the package of practical expedients which, among other things, gives us the option to not reassess: 1) whether expired or existing contracts are or contain leases; 2) the lease classification for expired or existing leases; and 3) initial direct costs for existing leases. The Company also elected the practical expedient to not record lease right-of-use (“ROU”) assets and lease obligations for leases with terms of 12 months or less. Finally, the Company also elected the practical expedient to not separate lease and non-lease components, which allows it to account for lease and non-lease components as a single lease component. The Company did not elect the hindsight practical expedient in its determination of the lease term for existing leases; therefore, the original lease terms, as determined under ASC 840, were used in the calculation of the Company’s initial ASC 842 lease liabilities.

Adoption of the new standard resulted in the recognition of operating lease ROU assets of approximately $2.7 million, current operating lease liabilities of approximately $0.7 million and long-term operating lease liabilities of approximately $2.1 million as of May 1, 2019.

The adoption had no impact on ourretained deficit, the consolidated statements of operations, or the consolidated statements of cash flows. See Note 7 for further discussion of the Company’s leases.

Recent Accounting Pronouncements Not Yet Adopted

In January 2017, the FASB issued ASU 2017–04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill to eliminate Step 2 from the goodwill impairment test. In addition, it eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. ASU 2017–04 will be effective for the Company’s fiscal year beginning May 1, 2020. The new guidance is required to be applied on a prospective basis. The Company does not believe adoption of ASU 2017–04 will have a material impact on its consolidated financial statements and related disclosures.

statements.


(o) Use of Estimates

The preparation of these 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our

estimates, including, but not limited to, those related to revenue/collectability, income taxes, allocation of fair values in acquisitionsreserves and business combinations.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.

(p) Stock-Based Compensation

The Company has fourone stock-based employee compensation plansplan under which options to purchase common stock of the Company were outstanding as of April 30, 2018. Those plans are2020. This plan is described more fully in Note 7. In addition to two American Software plans, effective July 9, 2009, the Company adopted the Logility, Inc. 1997 Stock Plan and Logility, Inc. 2007 Stock Plan as equity plans of the Company in conjunction with the Company’s acquisition of the shares of Logility common stock it did not previously own.

6.

The Company recorded stock option compensation cost of approximately $1,467,000, $1,428,000$2.0 million, $1.8 million and $1,593,000$1.5 million and related income tax benefitsbenefit of approximately $547,000, $528,000$0.7 million, an income tax benefit of approximately $0.3 million, and $586,000an income tax shortfall of approximately $39,000 for the years ended April 30, 2018, 20172020, April 30, 2019 and 2016,2018, respectively. Stock-based compensation expense on current year grants is recorded on a straight-line basis over the vesting period for the entire award directly to additionalpaid-in capital.

The Company adopted ASUNo. 2016-09,Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting,in fiscal 2016. Under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies in additionalpaid-in capital. Instead, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement, and additionalpaid-in capital pools will be eliminated. The guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity.

(q) Comprehensive Income

The

Accounting Standards Update (ASU) 2018-02, Comprehensive Income Topic of the FASB ASC(Topic 220), establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements.

The Company did not have any other comprehensive income items for 2018, 2017,2020, 2019, or 2016.

2018.

(r) Impairment of Long-Lived Assets

The Company reviews long-lived assets, such as property, and equipment, and purchased intangibles subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.

(s) Earnings per Common Share

The Company has two classes of common stock of whichstock. Class B common shares are convertible into Class A common shares at any time, on aone-for-one basis. Under the Company’s Articles of Incorporation, if dividends are declared, holders of Class A common shares shall receive a $.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, which requires companies that have multiple classes of equity securities to use the“two-class” “two-class” method in computing earnings per share.

For the Company’s basic earnings per share calculation, the Company uses the“two-class” “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 $.05 per share. This allocation is based on management’s judgment after considering the dividend rights of thetwo-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 dilutive effect of the assumed exercise of options issuable under the Company’s stock incentive plans. For the Company’s diluted earnings per share calculation for Class A shares, the Company uses the“if-converted” “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” “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 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 thetwo-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), see. See Note 76 for total stock options outstanding and potentially dilutive:

potential dilution:


Basic earnings per common share:

   Year Ended
April 30, 2018		  Year Ended
April 30, 2017		   Year Ended
April 30, 2016		 
   Class A  Class B  Class A   Class B   Class A  Class B 

Distributed earnings per share

  $0.44  $0.43  $0.44   $0.44   $0.40  $0.40 

Undistributed earnings/(loss) per share

   (0.04)   (0.04)   0.06    0.06    (0.04)   (0.04) 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Total per share

  $0.40  $0.39  $0.50   $0.50   $0.36  $0.36 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Distributed earnings

  $12,321  $974  $11,845   $1,066   $10,479  $1,025 

Undistributed earnings/(loss)

   (1,151)   (91)   1,568    142    (1,148)   (114) 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $11,170  $883  $13,413   $1,208   $9,331  $911 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Basic weighted average common shares

   27,805   2,275   26,793    2,439    26,143   2,584 

 Year Ended
April 30, 2020		 Year Ended
April 30, 2019		 Year Ended
April 30, 2018
 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 per share$0.44
 $0.44
 $0.44
 $0.44
 $0.44
 $0.43
Undistributed earnings/(loss) per share(0.23) (0.23) (0.22) (0.22) (0.04) (0.04)
Total per share$0.21
 $0.21
 $0.22
 $0.22
 $0.40
 $0.39
Distributed earnings$13,219
 $805
 $12,837
 $819
 $12,321
 $974
Undistributed earnings/(loss)(6,864) (418) (6,441) (412) (1,151) (91)
Total$6,355
 $387
 $6,396
 $407
 $11,170
 $883
Basic weighted average common shares29,925
 1,822
 29,106
 1,844
 27,805
 2,275

Diluted EPS for Class A common shares using the If-Converted Method
If-ConvertedYear Ended April 30, 2020 Method

 
Undistributed and
distributed earnings
to Class A
Common Shares
 
Class A
Common
Shares
 EPS*
Per basic$6,355
 29,925
 $0.21
Common stock equivalents—
 620
  
 6,355
 30,545
 0.21
Class B Common Share Conversion387
 1,822
  
Diluted EPS for Class A Common Shares$6,742
 32,367
 $0.21
Year Ended April 30, 2019
 
Undistributed and
distributed earnings
to Class A
Common Shares
 
Class A
Common
Shares
 EPS*
Per basic$6,396
 29,106
 $0.22
Common stock equivalents—
 429
  
 6,396
 29,535
 0.22
Class B Common Share Conversion407
 1,844
  
Diluted EPS for Class A Common Shares$6,803
 $31,379
 $0.22

Year Ended April 30, 2018

   Undistributed and
distributed earnings
to Class A
Common		   Class A
Common
Shares		   EPS* 

Per basic

  $11,170    27,805   $0.40 

Common stock equivalents

   —      392   
  

 

 

   

 

 

   

 

 

 
   11,170    28,197    0.40 

Class B conversion

   883    2,275   
  

 

 

   

 

 

   

 

 

 

Diluted EPS for Class A

  $12,053    30,472   $0.40 
  

 

 

   

 

 

   

 

 

 

Year Ended April 30, 2017

   Undistributed and
distributed earnings
to Class A
Common		   Class A
Common
Shares		   EPS* 

Per basic

  $13,413    26,793   $0.50 

Common stock equivalents

   —      335   
  

 

 

   

 

 

   

 

 

 
   13,413    27,128    0.49 

Class B conversion

   1,208    2,439   
  

 

 

   

 

 

   

 

 

 

Diluted EPS for Class A

  $14,621    29,567   $0.49 
  

 

 

   

 

 

   

 

 

 

Year Ended April 30, 2016

   Undistributed and
distributed earnings
to Class A
Common		   Class A
Common
Shares		   EPS* 

Per basic

  $9,331    26,143   $0.36 

Common stock equivalents

   —      278   
  

 

 

   

 

 

   

 

 

 
   9,331    26,421    0.35 

Class B conversion

   911    2,584   
  

 

 

   

 

 

   

 

 

 

Diluted EPS for Class A

  $10,242    29,005   $0.35 
  

 

 

   

 

 

   

 

 

 

 
Undistributed and
distributed earnings
to Class A
Common Shares
 
Class A
Common
Shares
 EPS*
Per basic$11,170
 27,805
 $0.40
Common stock equivalents—
 392
  
 11,170
 28,197
 0.40
Class B Common Share Conversion883
 2,275
  
Diluted EPS for Class A Common Shares$12,053
 $30,472
 $0.40

Diluted EPS for Class B common shares using theTwo-Class Method

Year Ended April 30, 2020
 
Undistributed and
distributed earnings
to Class B
Common Shares
 
Class B
Common
Shares
 EPS*
Per basic$387
 1,822
 0.21
Reallocation of undistributed earnings from Class A Common Shares to
Class B Common Shares

5
 —
  
Diluted EPS for Class B Common Shares

$392
 1,822
 0.22
Year Ended April 30, 2019
 
Undistributed and
distributed earnings
to Class B
Common Shares
 
Class B
Common
Shares
 EPS*
Per basic$407
 1,844
 0.22
Reallocation of undistributed earnings from Class A Common Shares to
Class B Common Shares

2
 —
  
Diluted EPS for Class B Common Shares

$409
 1,844
 0.22
Year Ended April 30, 2018

   Undistributed and
distributed earnings
to Class B
Common		   Class B
Common
Shares		   EPS* 

Per basic

  $883    2,275   $0.39 

Reallocation of undistributed earnings from Class A shares to Class B shares

   —      —     
  

 

 

   

 

 

   

 

 

 

Diluted EPS for Class B

  $883    2,275   $0.39 
  

 

 

   

 

 

   

 

 

 

Year Ended April 30, 2017

   Undistributed and
distributed earnings
to Class B
Common		   Class B
Common
Shares		   EPS* 

Per basic

  $1,208    2,439   $0.50 

Reallocation of undistributed earnings from Class A shares to Class B shares

   (2)    —     
  

 

 

   

 

 

   

 

 

 

Diluted EPS for Class B

  $1,206    2,439   $0.49 
  

 

 

   

 

 

   

 

 

 

Year Ended April 30, 2016

   Undistributed and
distributed earnings
to Class B
Common		   Class B
Common
Shares		   EPS* 

Per basic

  $911    2,584   $0.35 

Reallocation of undistributed earnings from Class A shares to Class B shares

   2    —     
  

 

 

   

 

 

   

 

 

 

Diluted EPS for Class B

  $913    2,584   $0.35 
  

 

 

   

 

 

   

 

 

 

 
Undistributed and
distributed earnings
to Class B
Common Shares
 
Class B
Common
Shares
 EPS*
Per basic$883
 2,275
 0.39
Reallocation of undistributed earnings from Class A Common Shares to
Class B Common Shares

—
 —
  
Diluted EPS for Class B Common Shares

$883
 2,275
 0.39
_______________
*Amounts adjusted for rounding

(t) Advertising

All advertising costs are expensed as incurred. Advertising expenses, which are included within sales and marketing expenses, were $2.4$2.9 million, $2.3 million and $2.1$2.4 million in fiscal 2020, 2019 and 2018, 2017 and 2016, respectively.


(u) Guarantees and Indemnifications

The Company accounts for guarantees in accordance with the Guarantee Topic of the FASB ASC.The Company’s sales agreements with customers generally contain infringement indemnity provisions. Under these agreements, the Company agrees to indemnify, defend and hold harmless the customer in connection with patent, copyright or trade secretintellectual property infringement claims made by third-partiesthird parties with respect to the customer’s authorized use of the Company’s products and services. The indemnity provisions generally provide for the Company’s control of defense and settlement and cover costs and damages finally awarded against the customer, as well as the Company’s modification of the product so it is no longer infringing or, if it cannot be corrected, return of the product for a refund. The sales agreements with customers sometimes also contain indemnity provisions for death, personal injury or property damage caused by the Company’s personnel or contractors in the course of performing services to customers. Under these agreements, the Company agrees to indemnify, defend and hold harmless the customer in connection with death, personal injury and property damage claims made by third parties with respect to actions of the Company’s personnel or contractors. The indemnity

provisions generally provide for the Company’s control of defense and settlement and cover costs and damages finally awarded against the customer. The indemnity obligations contained in sales agreements generally have a limited life and monetary award. The Company has not previously incurred costs to settle claims or pay awards under these indemnification obligations. The Company accounts for these indemnity obligations in accordance with the Contingencies Topic of the FASB ASC, and records a liability for these obligations when a loss is probable and reasonably estimable. The Company has not recorded any liabilities for these agreements as of April 30, 20182020 or 2017.

2019.

The Company warrants to its customers that its software products will perform in all material respects in accordance with the standard published specifications, in effect at the time of delivery of the licensed products to the customer generally for 90 days after delivery of the licensed products and for the subscription term for SaaS products. Additionally, the Company warrants to its customers that services will be performed consistent with generally accepted industry standards or specific service levels through completion of the agreed upon services. If necessary, the Company will provide for the estimated cost of product and service warranties based on specific warranty claims and claim history. However, the Company has not incurred significant recurring expense under product or service warranties. Accordingly, the Company has no liabilities recorded for these agreements as of April 30, 20182020 or 2017.

2019.

(v) Industry Segments

The Company operates and manages its business in three reportable segments. See Note 98 of the Consolidated Financial Statements.

(2) Investments

Investments consist of the following (in thousands):

   April 30, 
   2018   2017 

Trading:

    

Debtsecurities—Tax-exempt state and municipal bonds

  $23,889   $14,803 

Marketable equity securities

   11,125    8,984 
  

 

 

   

 

 

 
  $35,014   $23,787 
  

 

 

   

 

 

 

 April 30,
 2020 2019
Trading:   
Debt securities—Tax-exempt state and municipal bonds$3,104
 $16,192
Marketable equity securities11,758
 11,002
 $14,862
 $27,194
The total carrying value of all investments on a consolidated basis was approximately $35,014,000$14.9 million and $23,787,000$27.2 million at April 30, 20182020 and 2017,2019, respectively. At April 30, 2018,2020, there were approximately $8,893,000$0.7 million in trading investments included in investments-noncurrent in the accompanying consolidated balance sheet. At April 30, 2017,2019, there were approximately $4,435,000$2.5 million in trading investments included in investments-noncurrent in the accompanying consolidated balance sheet.

The contractual maturities of debt securities classified as trading at April 30, 20182020 and 20172019 were as follows (in thousands):

   2018   2017 

Due within one year

  $14,996   $10,368 

Due within two years

   8,893    4,435 

Due within three years

   —      —   

Due after three years

   —      —   
  

 

 

   

 

 

 
  $23,889   $14,803 
  

 

 

   

 

 

 

 2020 2019
Due within one year$2,403
 $13,708
Due within two years701
 2,484
Due within three years—
 —
Due after three years—
 —
 $3,104
 $16,192
In 2018, 2017fiscal 2020, 2019 and 2016,2018, the Company’s investment portfolio of tradingmarketable equity securities experienced netunrealized holding gains of $0.7 million, unrealized holding losses of approximately $0.9 million and unrealized holding losses of approximately $1.0 million, respectively. In fiscal 2020, 2019 and 2018, the Company’s investment portfolio of debt securities experienced unrealized holding losses of approximately $0.6 million, unrealized holding losses of $0.1 million and unrealized holding gains of approximately $907,000,$0.1 million, respectively. In fiscal 2020, 2019 and $1.3 million and losses of $110,000, respectively, which have been included in other income, net in the accompanying consolidated statements of operations. In 2018, 2017 and 2016, the Company’s investment portfolio of tradingmarketable equity securities experienced net realized holding losses of approximately $653,000, $937,000$0.2 million, realized holding losses of $0.1 million and $878,000,realized holding losses of approximately $0 million, respectively.

In fiscal 2020, 2019 and 2018, the Company’s investment portfolio of debt securities experienced realized holding gains of approximately $0.7 million for all periods. Unrealized and realized gains and losses are included in "Other income, net" in the company’s condensed consolidated statements of operations.


(3) Fair Value of Financial Instruments

The Company measures its 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 in active markets for identical instruments.

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 used 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 or remaining 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. Governmentgovernment 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 table presents our assets that we measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value (in thousands):

   April 30, 2018   April 30, 2017 
   Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		   Total   Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		   Total 

Cash equivalents

  $46,972   $—     $—     $46,972   $62,647   $—     $—     $62,647 

Marketable securities

   11,125    23,889    —      35,014    8,984    14,803    —      23,787 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $58,097   $23,889   $—     $81,986   $71,631   $14,803   $—     $86,434 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 April 30, 2020 April 30, 2019
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Total 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Total
Cash equivalents$75,256
 $—
 $—
 $75,256
 $56,645
 $—
 $—
 $56,645
Marketable securities11,758
 3,104
 —
 14,862
 11,002
 16,192
 —
 27,194
Total$87,014
 $3,104
 $—
 $90,118
 $67,647
 $16,192
 $—
 $83,839
The carrying amounts of cash, trade accounts receivable and unbilled accounts receivable, accounts payable, accrued compensation and related costs, and other current liabilities approximate fair value because of their short-term maturities.

(4) Property and Equipment

Property and equipment consisted of the following at April 30, 20182020 and 20172019 (in thousands):

   2018   2017 

Buildings and leasehold improvements

  $15,325   $14,704 

Computer equipment and purchased software

   11,692    10,886 

Office furniture and equipment

   4,661    4,618 
  

 

 

   

 

 

 
   31,678    30,208 

Accumulated depreciation and amortization

   (28,644)    (28,153) 
  

 

 

   

 

 

 
  $3,034   $2,055 
  

 

 

   

 

 

 


 2020 2019
Buildings and leasehold improvements$16,881
 $16,724
Computer equipment and purchased software11,478
 11,235
Office furniture and equipment4,973
 4,953
 33,332
 32,912
Accumulated depreciation and amortization(29,959) (29,327)
 $3,373
 $3,585

(5) 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 revenues-license 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 from the acquisition date.

Effective November 21, 2017, the Company acquired certain assets of privately held Innovare Holding Co., Incorporated, a Delaware corporation and its subsidiaries (collectively, “Halo”) and a supplier of advanced analytics and business intelligence solutions, for the supply chain market, pursuant to the terms of an asset purchase agreement, dated as of November 21, 2017 (the “Purchase Agreement”).

Halo’s advanced analytics will be embedded into the Logility Voyager Solutions advanced analytics platform. These enriched analytics will leverage interactive visualization, machine learning algorithms, and artificial intelligence (AI) to transform both structured and unstructured data to accelerate business planning performance and proactively identify new business opportunities or mitigate risks. Customers on the DMI and NGC platforms will be able to addpre-packaged Halo advanced analytics capabilities to their subscriptions to drive quick insights and appropriate actions for their businesses. In addition, Logility will continue to offer Halo standalone to complement other enterprise systems.

Under the terms of the Purchase Agreement, the Company acquired the assets of Halo for cash consideration paid of approximately $9.25 million, which represents a purchase price of approximately $9.95 million net of a $700,000 negative working capital adjustment, subject to certain post-closing adjustments, which included an additional negative working capital adjustment of $100,000, thus resulting in an adjusted purchase price consolidation of $9.15 million. The Company incurred acquisition costs of approximately $149,000 during the year ended April 30, 2018. The operating results of Halo are not material for pro forma disclosure. We preliminarily allocated $6,339,000 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 preliminary allocation of the total purchase price reflects the fair value of the assets acquired and liabilities assumed as of November 21, 2017 (in thousands):

       Useful Life 

Accounts receivable, net

  $373   

Current assets

   188   

Property and equipment, net

   43   

Other assets

   1,700   

Goodwill

   6,339   

Non-compete

   30    2 years 

Trade name

   140    2 years 

Customer relationships

   300    8 years 

Current technology

   3,100    3 years 
  

 

 

   

Total assets acquired

   12,213   

Current liabilities

   (1,360)   

Long-term liabilities

   (1,703)   
  

 

 

   

Total liabilities assumed

   (3,063)   
  

 

 

   

Net assets acquired

  $9,150   
  

 

 

   

Non-compete agreements, trade name, customer relationships and current technology are being amortized on a straight-line basis over the remaining estimated economic life of the assets, including the period being reported. The fair value of deferred revenues in a business combination is considered to be an assumed liability (which must arise from a legal performance obligation) and,

accordingly, is estimated based on the direct cost of fulfilling the obligation plus a normal profit margin, which approximates fair

value. Also, in practice, the normal profit margin is limited to the profit margin on the costs to provide the product or service (that is, the fulfillment effort).

6) Income Taxes

Income tax expense (benefit) consisted of the following:

   Years ended April 30, 
   2018   2017   2016 
   (In thousands) 

Current:

      

Federal

  $2,298   $5,643   $4,105 

State

   743    676    665 
  

 

 

   

 

 

   

 

 

 
   3,041    6,319    4,770 
  

 

 

   

 

 

   

 

 

 

Deferred:

      

Federal

   321    558    (299) 

State

   300    117    (13) 
  

 

 

   

 

 

   

 

 

 
   621    675    (312) 
  

 

 

   

 

 

   

 

 

 
  $3,662   $6,994   $4,458 
  

 

 

   

 

 

   

 

 

 

 Years ended April 30,
 2020 2019 2018
 (in thousands)
Current:     
Federal$295
 $184
 $2,298
State370
 334
 743
 665
 518
 3,041
Deferred:     
Federal(513) 256
 321
State(96) 64
 300
 (609) 320
 621
 $56
 $838
 $3,662

The Company’s actual income tax expense differs from the “expected” income tax expense calculated by applying the Federal statutory rate of 21.0% for fiscal 2020 and 2019 and our blended U.S. Federal statutory tax rate of 30.3% for fiscal year 2018, and the Federal statutory rate of 35% for fiscal years 2017 and 2016, to earnings before income taxes as follows:

   Years ended April 30, 
   2018   2017   2016 
   (In thousands) 

Computed “expected” income tax expense

  $4,763   $7,565   $5,145 

Increase (decrease) in income taxes resulting from:

      

State income taxes, net of federal income tax effect

   891    592    435 

Research and development credits

   (493)    (520)    (694) 

Change in valuation allowance for deferred tax assets

   4    (293)    (2) 

Tax contingencies

   (13)    (42)    (13) 

NQ stock options granted

   102    106    26 

Rate change – tax reform

   (1,206)    —      —   

Other, net, including permanent items

   (386)    (414)    (439) 
  

 

 

   

 

 

   

 

 

 
  $3,662   $6,994   $4,458 
  

 

 

   

 

 

   

 

 

 

 Years ended April 30,
 2020 2019 2018
 (in thousands)
Computed “expected” income tax expense$1,428
 $1,605
 $4,763
Increase (decrease) in income taxes resulting from:     
State income taxes, net of federal income tax effect214
 339
 891
Research and development credits(703) (678) (493)
Excess tax benefits from stock option deductions(737) (251) (165)
Foreign tax credits(164) (112) (211)
Rate change – tax reform—
 —
 (1,206)
Other, net, including permanent items18
 (65) 83
 $56
 $838
 $3,662
Our effective income tax rates were 23%1%, 32%11% and 30%23% in 2018, 20172020, 2019 and 2016,2018, respectively. Our effective income tax rate takes into account the source of taxable income, by state, and available income tax credits. The provision for income taxes in 2018, 2017fiscal 2020, 2019 and 20162018 includes approximately $186,000, $253,000$878,000, $298,000 and $247,000,$186,000, respectively, in income tax benefits related to the tax benefits realized from stock option deductions.

The significant components of deferred income tax (benefit) expense attributable to income from continuing operations before income taxes for the years ended April 30, 2018, 2017,2020, 2019, and 20162018 are as follows:

   Years ended April 30, 
   2018   2017   2016 
   (In thousands) 

Deferred tax expense/(benefit)

  $1,823   $968   $(310) 

Deferred tax benefit related to tax reform

   (1,206)    —      —   

Increase (decrease) in the valuation allowance for deferred tax assets

   4    (293)    (2) 
  

 

 

   

 

 

   

 

 

 
  $621   $675   $(312) 
  

 

 

   

 

 

   

 

 

 

 Years ended April 30,
 2020 2019 2018
 (in thousands)
Deferred tax (benefit) expense$(639) $330
 $1,823
Deferred tax benefit related to tax reform—
 —
 (1,206)
Increase (decrease) in the valuation allowance for deferred tax assets30
 (10) 4
 $(609) $320
 $621



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at April 30, 20182020 and 20172019 are presented as follows:

   2018   2017 
   (In thousands) 

Deferred tax assets:

    

Accruals and expenses not deducted for tax purposes

  $339   $461 

State net operating loss carryforwards

   226    295 

Fixed asset basis differences

   883    1,384 

Nonqualified stock options

   762    1,679 

Deferred revenue

   53    234 
  

 

 

   

 

 

 

Total gross deferred tax assets

   2,263    4,053 

Less valuation allowance

   170    166 
  

 

 

   

 

 

 

Net deferred tax

   2,093    3,887 
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Capitalized computer software development costs

   (2,432)    (3,298) 
  

 

 

   

 

 

 

Net gains/losses on trading securities

   (938)    (1,019) 
  

 

 

   

 

 

 

Goodwill and intangible assets basis differences

   (601)    (939) 

Deferred agent commissions

   (737)    (625) 
  

 

 

   

 

 

 

Total gross deferred tax liabilities

   (4,708)    (5,881) 
  

 

 

   

 

 

 

Net deferred tax liabilities

  $(2,615)   $(1,994) 
  

 

 

   

 

 

 


 2020 2019
 (in thousands)
Deferred tax assets:   
Accruals and expenses not deducted for tax purposes$363
 $328
State net operating loss carryforwards226
 217
Fixed asset basis differences822
 831
Nonqualified stock options848
 858
Right of use liability547
 —
Tax credit carryforwards83
 —
Total gross deferred tax assets2,889
 2,234
Less valuation allowance(190) (160)
Net deferred tax2,699
 2,074
Deferred tax liabilities:   
Capitalized computer software development costs(2,090) (2,766)
Net gains/losses on trading securities(1,005) (1,183)
Goodwill and intangible assets basis differences(746) (639)
Right of use asset(513) —
Deferred agent commissions(1,242) (1,000)
Total gross deferred tax liabilities(5,596) (5,588)
Net deferred tax liabilities$(2,897) $(3,514)
At April 30, 2018,2020, the Company hashad approximately $5.7 million of various state net operating loss carryforwards which are available to offset future state taxable income, if any, through 2035.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon reversal of deferred tax liabilities and expected future profitability, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances, at April 30, 2018.

2020.

The Company applies the accounting provisions which require us to prescribe a recognition threshold and measurement attribution for the financial statement recognition and measurement of a tax position taken or expected to be taken within an income tax return.

As of April 30, 2020, 2019 and 2018, 2017 and 2016, we have recorded approximately $56,000, $57,000,$34,000, $43,000, and $101,000,$56,000, respectively, of unrecognized tax benefits, inclusive of interest and penalties, all of which would impact our effective tax rate if recognized. The liability for unrecognized tax benefits is recorded net of any federal tax benefit that would result from payment.

We recognize potential accrued interest and penalties related to unrecognized tax benefits within income tax expense. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision. As of April 30, 20182020 and 2017,2019, we had recorded a liability for potential penalties and interest of approximately $24,000$19,000 and $24,000,$22,000, respectively, related to uncertain tax positions.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows, excluding interest and penalties (in thousands):

   2018   2017 

Balance at beginning of the period

  $33   $54 

Decreases as a result of positions taken during prior periods

   (1)    (25) 

Increases as a result of positions taken during the current period

   —      4 
  

 

 

   

 

 

 

Balance at April 30,

  $32   $33 
  

 

 

   

 

 

 

 2020 2019
Balance at beginning of the period$21
 $32
Decreases as a result of positions taken during prior periods(6) (11)
Increases as a result of positions taken during the current period—
 —
Balance at April 30,$15
 $21

We conduct business globally and, as a result, file consolidated income tax returns in the United States Federalfederal jurisdiction and in many state and foreign jurisdictions. We are no longer subject to state and local, ornon-U.S. non–U.S. income tax examinations for years prior to 2001.2002. We are no longer subject to U.S. Federalfederal income tax examination for years prior to 2014.

2016.


During the years ended April 30, 20182020, 2019 and 2017,2018, we recorded research and development state tax credits against payroll taxes of approximately $290,000$427,000, $488,000, and $436,000,$290,000 respectively, which reduced general and administrative expenses by the same amount.

amounts.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The Act lowered our U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018. For fiscal year 2018, our blended U.S. federal statutory tax rate iswas 30.3%. This is the result of using the tax rate of 35% for the first eight months of fiscal year 2018 and the reduced tax rate of 21% for the final four months of fiscal year 2018. During the fiscal year ended April 30, 2018, we recorded a $1.2 million benefit from the impact of changes in the tax rate, primarily on deferred tax assets and liabilities, which was included in income tax expense on our consolidated statement of operations and deferred income taxes on our consolidated balance sheet. We remeasured our deferred taxes to reflect the reduced rate that will apply when these deferred taxes are settled or realized in future periods. To calculate the remeasurement of deferred taxes, we estimated when the existing deferred taxes will be settled or realized.

(7)

(6) Shareholders’ Equity

Except for the election or removal of Directorsdirectors and class votes as required by law or theour Articles of Incorporation, holders of both classes of common stock vote as a single class on all matters, with each Class A common share entitled to castone-tenth vote per share and each Class B common share entitled to cast one vote per share. Neither class has cumulative voting rights. Holders of Class A common shares, as a class, are entitled to elect 25% of the board of directors (rounded up to the nearest whole number of Directors)directors) if the number of outstanding Class A common shares is at least 10% of the number of outstanding shares of both classes of common stock. No cash or property dividend may be paid to holders of Class B common shares during any fiscal year of the Company unless a dividend of $0.05 per share has been paid in such year on each outstanding Class A common share. This $0.05 per share annual dividend preference is noncumulative. Dividends per Class B common share during any fiscal year may not exceed dividends paid per Class A common share during eachsuch year. Each Class B common share is convertible at any time into one Class A common share at the option of the shareholder.

Stock Option Plans

As of April 30, 2018,2020, the Company has outstanding stock options granted pursuant to four stock option plans. The 2001 Stock Option Plan (the “2001 Option Plan”) became effective on September 1, 2000. This Plan was terminated and replaced by the 2011 Equity Compensation Plan (the “2011 Option Plan”) effective May 17, 2010. Options outstanding under the 2001 Option Plan remain in effect, but no new options may be granted under the plan. Effective July 9, 2009, we adopted the Logility, Inc. 1997 Stock Plan and the Logility, Inc. 2007 Stock Plan as equity plans of American Software, although we will not grant any additional stock options under these plans.

On August 21, 2019, shareholders approved the Company’s 2020 Equity Compensation Plan (the "2020 Plan"). The 2020 Plan reserves for issuance 2,500,000 shares of Class A Common Stock plus the number of shares, if any, remaining available for issuance under the Company’s 2011 Plan.

Under the 2011 Option2020 Plan, options to purchase Class A common shares are granted in the form of both incentive stock options andnon-qualified stock options. The number of options granted under this plan is determined with each grant. By resolution of the Board of Directors,non-employee directors receive grants ofnon-qualified options to purchase 5,00010,000 shares upon election and 3,0004,000 shares at the end of each fiscal quarter. The price of such grants is equal to the closing market price of the shares on the date of grant. Options are exercisable based on the terms of such options, but no more than 6six years after the date of grant (or five years for incentive stock options granted to any person who owns 10% or more of the combined voting power of all classes of capital stock of the Company at the time of grant). A total of 7,000,0002,500,000 shares are authorized for issuance pursuant to options granted under this Plan. Incentive and nonqualified options exercisable at April 30, 2020, 2019 and 2018 2017totaled 900,610, 1,086,180, and 2016 totaled 965,416, 1,365,586, and 1,468,257, respectively. Options available for grant at April 30, 2018,2020, for the 2011 Option2020 Plan are 1,396,5431,529,143 shares.

At the 2017 Annual Meeting, the shareholders voted on increasing the shares authorized under the 2011 Option Plan from 6,000,000 to 7,000,000. When stock options are exercised, it is the Company’s policy to issue stock from authorized shares rather than treasury shares.


A summary of changes in outstanding options for the year ended April 30, 20182020 is as follows:

   Number of
Shares		   Weighted
Average
Exercise
Price		   Weighted
Average
Remaining
Contractual
Term
(years)		   Aggregate
Intrinsic
Value		 

Outstanding at May 1, 2017

   3,079,146   $9.00     

Granted

   1,208,000    11.24     

Exercised

   (984,310)    8.74     

Forfeited

   (27,000)    9.36     
  

 

 

   

 

 

     

Outstanding at April 30, 2018

   3,275,836   $9.90    3.7   $9,368,422 
  

 

 

   

 

 

   

 

 

   

 

 

 

Exercisable at April 30, 2018

   965,416   $9.07    2.4   $3,563,542 
  

 

 

   

 

 

   

 

 

   

 

 

 

 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
(years)
 
Aggregate
Intrinsic
Value
Outstanding at May 1, 20193,983,060
 $10.88
    
Granted1,113,000
 14.72
    
Exercised(1,020,910) 9.87
    
Forfeited(327,000) 12.02
    
Expired(2,500) 9.79
    
Outstanding at April 30, 20203,745,650
 $12.21
 3.8 $16,011,836
Exercisable at April 30, 2020900,610
 $10.69
 2.8 $5,214,907
The weighted-average grant date fair value of stock options granted during the years ended April 30, 2020, 2019, and 2018 2017,is $3.20, $2.58, and 2016 are $2.01 $1.96, and $1.60 per share, respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the years ended April 30, 2018, 2017,2020, 2019, and 2016:

   2018  2017  2016 

Dividend yield

   3.9%   4.0%   4.9% 

Expected volatility

   28.9%   32.7%   33.6% 

Risk-free interest rate

   1.9%   1.2%   1.5% 

Expected term

   5.0 years   5.0 years   5.0 years 

2018:

 2020 2019 2018
Dividend yield2.8% 3.6% 3.9%
Expected volatility30.9% 30.0% 28.9%
Risk-free interest rate1.6% 2.9% 1.9%
Expected term5 years
 5 years
 5 years
The expected volatility is based on the historical volatility and implied volatility. The Company uses historical data to estimate stock option exercise and forfeiture rates. The expected term represents the period over which the share-based awards are expected to be outstanding. Beginning after December 31, 2007, the expected term was estimated using historical data. The dividend yield is an estimate of the expected dividend yield on the Company’s stock. The risk-free rate is based on U.S. Treasury yields in effect at the time of the grant for the expected term of the stock options.

Options issued after May 1, 2007 with graded vesting are valued as a single award. The total value of the award is expensed on a straight-line basis over the vesting period with the amount of compensation cost recognized at any date at least equal to the portion of the grant date value of the award that is vested at that date. During the years ended April 30, 2018, 2017,2020, 2019, and 2016,2018, we issued 984,310, 754,8111,020,910, 602,176 and 306,848984,310 shares of common stock, respectively, resulting from the exercise of stock options. The total intrinsic value of options exercised during the years ended April 30, 2018, 20172020, 2019 and 20162018 based on market value at the exercise dates was $2,999,372, $2,280,650$5,569,882, $2,441,830 and $1,219,406$2,999,372 respectively. The fair value of grants vested during the years ended April 30, 2020, 2019 and 2018 2017was $1,786,342, $1,470,840 and 2016 was $1,287,222, $1,550,190 and $1,495,065, respectively. As of April 30, 2018,2020, unrecognized compensation cost related to unvested stock option awards approximated $3.3$3.4 million and is expected to be recognized over a weighted average period of 1.81.9 years.

Stock Repurchases

On August 19, 2002, our Board of Directors approved a resolution authorizing the repurchase of up to 2.0 million shares of our Class A common stock. These repurchases have been and will be made through open market purchases at prevailing market prices. The timing of any repurchases will depend upon market conditions, the market price of our common stock and management’s assessment of our liquidity and cash flow needs. For this repurchase plan, through April 30, 2018,2020, we have repurchased 1,053,679 shares of common stock at a cost of approximately $6.2 million. During fiscal 2020 we did not repurchase any shares. Under all repurchase plans as of April 30, 2018,2020, we have repurchased 4,588,632 shares of common stock at a cost of approximately $25.6 million.

(8) Commitments

(7) Leases
The Company’s operating leases are primarily related to facility leases for administration and Contingencies

(a) Leases

sales personnel. The operating leases have terms ranging from three to five years. While each of the leases includes renewal options, the Company has only included the base lease term in its calculation of lease assets and liabilities. The Company does not have any finance leases.


Balance sheet information related to operating leases office facilitiesis as follows (in thousands):
 April 30, 2020
Assets 
Right of use assets$2,053
  
Liabilities 
Current lease liabilities763
Long-term lease liabilities1,424
Total liabilities$2,187

Lease cost information related to operating leases is as follows (in thousands):
 Year ended April 30, 2020
Lease cost 
Operating lease cost$770
Short-term lease cost643
Variable lease cost225
Total lease cost$1,638
Lease costs are primarily included in "Sales and equipment under various operating leases. Rental expense for these leases approximated $1.2 million, $1.1 million,marketing" and $1.0 million for the years ended April 30, 2018, 2017,"General and 2016, respectively.

The Company leased several floors of its headquarters in Atlanta, GA under various operating leases. Rental income for these leases approximated $357,000, $538,000 and $723,000 for the years ended April 30, 2018, 2017 and 2016, respectively. In addition, the Company owned other properties leased under various operating leases. Rental income for these leases approximated $0, $236,000 and $309,000 for the years ended April 30, 2018, 2017, and 2016, respectively. On February 23, 2017, the Company divested the property to which these leases were associated. The rental income is included as a component of Other income, netadministrative" expenses in the accompanyingCompany’s consolidated statements of operations.

The impact of the Company's leases on consolidated statement of cash flows is presented in the operating activities section, which mainly consisted of cash paid for operating lease liabilities of approximately $1.3 million during fiscal 2020. The Company did not modify any existing leases or execute any new leases during fiscal 2020.

Weighted average information associated with the measurement of the Company’s remaining operating lease obligations is as follows:
April 30, 2020
Weighted average remaining lease term3.3 years
Weighted average discount rate3.5%

The following table summarizes the maturity of the Company’s operating lease liabilities as of April 30, 2020 (in thousands):

Years ended April 30: 
2021$775
2022702
2023470
2024346
202520
Thereafter—
Total operating lease payments

$2,313
Less imputed interest

(126)
Total operating lease liabilities

$2,187

Future minimum lease payments, as defined under the previous lease accounting guidance of ASC Topic 840, under noncancelable operating leases (due to existence of renewal or escalation clauses) with initial or remaining lease terms in excess of one year as of April 30, 2019 are as follows (in thousands):
Years ended April 30: 
2020$847
2021790
2022706
2023433
2024317
Thereafter17
 $3,110

The Company leases to other tenants a portion of its headquarters building that it owns in Atlanta, Georgia. The leases expire at various dates through March 2025. Lease income is included in "Other, net" in the Company’s consolidated statements of operations and totaled approximately $0.2 million for the year ending April 30, 2020. Lease payments to be received as of April 30, 2020 are as follows (in thousands):
Years ended April 30: 
2021$165
2022149
202396
202498
2025100
Thereafter50
 $658

Future minimum lease rentals receivable under noncancelable, as defined under the previous lease accounting guidance of ASC Topic 840, operating leases (with initial or remaining lease terms in excess of one year) as of April 30, 2018 are as follows (existence of renewal or escalation clauses) (in thousands):

Years ended April 30:

  

2019

  $1,056 

2020

   419 

2021

   346 

2022

   289 

2023

   97 

Thereafter

   —   
  

 

 

 
  $2,207 
  

 

 

 

Future minimum lease rentals receivable under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of April 30, 20182019 are as follows (already included or prorated at the Company’s occupied building) (in thousands):

Years ended April 30:

  

2019

  $301 

2020

   61 

2021

   30 

2022

   —   

2023

   —   

Thereafter

   —   
  

 

 

 
  $392 
  

 

 

 

(b)

Years ended April 30: 
2020$194
2021105
202255
2023—
2024—
Thereafter—
 $354

(8) Commitments and Contingencies
(a) 401(k) Profit Sharing Plan

Employees are offered the opportunity to participate in the Company’s 401(k) Profit Sharing Plan (the 401(k) Plan)"401(k) Plan"), which is intended to be atax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, employees are eligible to participate on the first day of the month following the date of hire. Eligible employees may contribute up to 60%$19,500 of their salary to the 401(k) Plan. Subject to certain limitations, the Company may make a discretionary profit sharing contribution at an amount determined by the board of directors of the Company. The Company’s profit sharing contribution was $451,000 for fiscal 2020, $429,000 for fiscal 2019 and $330,000 for 2018 and did not make any profit sharing contributions for 2017 or 2016.

(c)fiscal 2018.

(b) Contingencies

The Company more often than not indemnifies its customers against damages and costs resulting from claims of patent, copyright, or trademarkintellectual property infringement associated with use of the Company’s products. The Company historically has historically not been required to make any payments under such indemnifications. However, the Company continues to monitor the conditionscircumstances that are subject to the indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under the indemnifications when those losses are estimable.

In addition, the Company warrants to customers 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.


(9) Segment Information

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 PrincipalChief Executive Officer (“PEO”) and President.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 segments, assess performance and allocate resources in a manner that is consistent with the changing market dynamics that we have experienced. As a result, in the third quarter of fiscal 2018, we updated our operating segments to reflect the fact that we provide our software solutions through three major operating segments, which are further broken down into a total of six major product and service groups. The three operating segments areare: (1) Supply Chain Management (“SCM”), (2) Information Technology Consulting (“IT”IT Consulting”) Consulting and (3) Other.

The SCM segment consists of (i) Logility, which provides supply chain optimization and advance retail planning solutions, as an integrated suite of sales and operations planning, demand optimization, inventory optimization, manufacturing planning and scheduling, supply optimization, retail allocation and merchandise planning and transportation optimization, as well as (i)(ii) DMI, which provides collaborative supply chain solutions to streamline and optimize the forecasting, inventory, production, supply, allocation, distribution and management of products between trading partners, (ii) New Generation Computing (“NGC”),and (iii) NGC, which provides cloud solutions for supply chain management, product lifecycle management,PLM, quality control, vendor compliance and enterprise resource planning for both retailers and manufacturers in the apparel, sewn products and furniture industries, and (iii) Halo, which provides advanced analytics and business intelligence solutions for the supply chain market.industries. The IT Consulting segment consists of The Proven Method, Inc., an IT staffing and consulting services firm, which provides support for our software products, such as software enhancements, documentation, updates, customer education, consulting, systems integration services, maintenance and support services. The Other segment consists of (i) American Software ERP, which provides purchasing and materials management, customer order processing, financial,e-commerce and traditional manufacturing solutions, and (ii) unallocated corporate overhead expenses.

Previously, we maintained three operating segments: (1) SCM, (2) IT and (3) Enterprise Resource Planning (“ERP”). As a result of the organizational realignment during the third quarter fiscal 2018, NGC was repositioned out of the ERP segment and into the SCM segment. There were no changes to the IT segment. Certain prior year amounts have been recasted to conform to fiscal 2018 presentation. The change in reportable segments had no effect on our previously reported consolidated financial position or results of operations.

All of our revenues are derived from external customers. 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.


Following is information related to each segment as of and for the years ended April 30, 2020, 2019 and 2018, 2017 and 2016:

   2018   2017   2016 

Revenues:

      

Supply Chain Management

  $91,613   $84,058   $87,001 

IT Consulting

   18,460    19,633    23,913 

Other

   2,630    2,595    2,975 
  

 

 

   

 

 

   

 

 

 
  $112,703   $106,286   $113,889 
  

 

 

   

 

 

   

 

 

 

Operating income/(loss) before intersegment eliminations:

      

Supply Chain Management

  $19,580   $13,103   $17,793 

IT Consulting

   985    890    1,327 

Other

   (7,034)    (6,227)    (5,593) 
  

 

 

   

 

 

   

 

 

 
  $13,531   $7,766   $13,527 
  

 

 

   

 

 

   

 

 

 

Intersegment eliminations:

      

Supply Chain Management

  $3,566   $3,406   $2,910 

IT Consulting

   (31)    (34)    (11) 

Other

   (3,535)    (3,372)    (2,899) 
  

 

 

   

 

 

   

 

 

 
  $—     $—     $—   
  

 

 

   

 

 

   

 

 

 

   2018   2017   2016 

Operating income/(loss) after intersegment eliminations:

      

Supply Chain Management

  $23,146   $16,509   $20,703 

IT Consulting

   954    856    1,316 

Other

   (10,569)    (9,599)    (8,492) 
  

 

 

   

 

 

   

 

 

 
  $13,531   $7,766   $13,527 
  

 

 

   

 

 

   

 

 

 

Capital expenditures:

      

Supply Chain Management

  $263   $321   $232 

IT Consulting

   10    2    —   

Other

   1,155    408    423 
  

 

 

   

 

 

   

 

 

 
  $1,428   $731   $655 
  

 

 

   

 

 

   

 

 

 

Capitalized software:

      

Supply Chain Management

  $4,804   $3,724   $3,246 

IT Consulting

   —      —      —   

Other

   —      —      —   
  

 

 

   

 

 

   

 

 

 
  $4,804   $3,724   $3,246 
  

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

      

Supply Chain Management

  $5,827   $6,173   $5,054 

IT Consulting

   7    7    10 

Other

   196    460    554 
  

 

 

   

 

 

   

 

 

 
  $6,030   $6,640   $5,618 
  

 

 

   

 

 

   

 

 

 

Interest income:

      

Supply Chain Management

  $1,043   $817   $970 

IT Consulting

   —      —      —   

Other

   532    440    376 
  

 

 

   

 

 

   

 

 

 
  $1,575   $1,257   $1,346 
  

 

 

   

 

 

   

 

 

 

Earnings/(loss) before income taxes:

      

Supply Chain Management

  $20,026   $13,050   $17,642 

IT Consulting

   985    890    1,327 

Other

   (5,296)    7,675    (4,269) 
  

 

 

   

 

 

   

 

 

 
  $15,715   $21,615   $14,700 
  

 

 

   

 

 

   

 

 

 

   April 30,
2018		   April 30,
2017		 

Total Consolidated Assets:

    

Supply Chain Management

  $112,881   $99,557 

IT Consulting

   5,538    4,056 

Other

   44,546    45,161 
  

 

 

   

 

 

 
  $162,965   $148,774 
  

 

 

   

 

 

 

(in thousands):

 2020 2019 2018
Revenues:     
Supply Chain Management$95,018
 $86,296
 $91,613
IT Consulting17,997
 20,007
 18,460
Other2,451
 2,403
 2,630
 $115,466
 $108,706
 $112,703
Operating income/(loss):     
Supply Chain Management$19,612
 $15,967
 $19,580
IT Consulting332
 964
 985
Other(13,896) (11,655) (7,034)
 $6,048
 $5,276
 $13,531
      
Capital expenditures:     
Supply Chain Management$156
 $375
 $263
IT Consulting—
 1
 10
Other264
 876
 1,155
 $420
 $1,252
 $1,428
Capitalized software:     
Supply Chain Management$3,170
 $5,961
 $4,804
IT Consulting—
 —
 —
Other—
 —
 —
 $3,170
 $5,961
 $4,804
Depreciation and amortization:     
Supply Chain Management$7,727
 $7,372
 $5,827
IT Consulting5
 7
 7
Other371
 340
 196
 $8,103
 $7,719
 $6,030
Interest income:     
Supply Chain Management$829
 $1,408
 $1,043
IT Consulting—
 —
 —
Other695
 684
 532
 $1,524
 $2,092
 $1,575
Earnings/(loss) before income taxes:     
Supply Chain Management$19,855
 $16,335
 $20,026
IT Consulting332
 964
 985
Other(13,389) (9,658) (5,296)
 $6,798
 $7,641
 $15,715

 April 30,
2020		 April 30,
2019
 (in thousands)
Total Consolidated Assets:   
Supply Chain Management$117,135
 $112,604
IT Consulting5,200
 4,599
Other48,958
 44,107
 $171,293
 $161,310


International Revenue and Significant Customer

International revenues approximated $22.1 million or 19%, $21.4 million or 20%, and $21.8 million or 19%, $18.8 million or 18% and $19.8 million or 17%, of consolidated revenues for the years ended April 30, 2018, 2017,2020, 2019, and 2016,2018, respectively, and were derived primarily from customers in Canada and Europe. International revenue is based on the delivery of software and performance of services.

No onesingle customer accounted for more than 10% of total revenues for the years ended April 30, 2018, April 30, 20172020, 2019 and April 30, 2016.

2018.


(10) Financial Statements and Supplementary Data (Unaudited)

The following schedule presents results for each quarter in the years ended April 30, 20182020 and 20172019 (in thousands, except per share amounts):

   Total
revenues		   Gross
margin		   Operating
income		   Net
earnings		   Diluted
earnings
per share*		 

Quarter ended:

          

July 31, 2017

  $26,886   $15,225   $3,622   $2,725   $0.09 

October 31, 2017

   26,337    14,006    3,242    2,480    0.08 

January 31, 2018

   30,117    17,046    4,204    5,580    0.18 

April 30, 2018

   29,363    16,426    2,463    1,268    0.04 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Year ended April 30, 2018

  $112,703   $62,703   $13,531   $12,053   $0.40 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Quarter ended:

          

July 31, 2016

  $27,433   $13,796   $1,646   $1,688   $0.06 

October 31, 2016

   26,146    13,018    708    412    0.01 

January 31, 2017

   26,441    14,049    2,455    2,243    0.08 

April 30, 2017

   26,266    14,340    2,957    10,278    0.34 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Year ended April 30, 2017

  $106,286   $55,202   $7,766   $14,621   $0.49 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 
Total
revenues
 
Gross
margin
 
Operating
income
 
Net
earnings
 
Diluted
earnings
per share*
Quarter ended:         
July 31, 2019$27,383
 $14,622
 $797
 $1,152
 $0.04
October 31, 201928,210
 15,186
 843
 1,759
 0.05
January 31, 202030,600
 17,442
 2,819
 3,286
 0.10
April 30, 202029,273
 15,908
 1,589
 545
 0.02
Year ended April 30, 2020$115,466
 $63,158
 $6,048
 $6,742
 $0.21
Quarter ended:         
July 31, 2018$27,399
 $13,752
 $607
 $1,385
 $0.04
October 31, 201828,033
 14,667
 1,526
 1,243
 0.04
January 31, 201927,003
 14,039
 2,130
 2,301
 0.07
April 30, 201926,271
 14,282
 1,013
 1,874
 0.06
Year ended April 30, 2019$108,706
 $56,740
 $5,276
 $6,803
 $0.22
______________
*Table may contain rounding

(11) Subsequent Events

On May 11, 2018,20, 2020, 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 August 25, 201828, 2020 to Class A and Class B shareholders of record at the close of business on August 11, 2018.

14, 2020.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined inRule 13a-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this annual report onForm 10-K, is recorded, processed, summarized and reported within the time periods specified in the SECSEC's rules and forms. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our principal 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 as of April 30, 2018.2020. 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 onForm 10-K and quarterly reports onForm 10-Q. Based on this evaluation, our principal executive officer and principal

financial officer have concluded that our disclosure controls and procedures were effective to provide such reasonable assurance as of April 30, 2018.

2020.

We believe our consolidated financial statements fairly present in all material respects our financial position, results of operations and cash flows in our annual report onForm 10-K. The unqualified opinion of our independent registered public accounting firm on our consolidated financial statements as of April 30, 20182020 and 20172019 and for each of the years in the three-year period ended April 30, 20182020 is included in this annual report onForm 10-K.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined inRules 13a-15(f) and15d-15(f) under the Exchange Act) during the last fiscal quarter of fiscal 20182020 to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Reports on Internal Control Over Financial Reporting

Management’s report on internal control over financial reporting and the report of the independent registered public accounting firm on internal control over financial reporting are included under Item 8, “Financial Statements and Supplementary Data,” of this report.

ITEM 9B.OTHER INFORMATION

ITEM 9B.    OTHER INFORMATION
None.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference from the information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior toabout July 27, 201830, 2020 (the "Proxy Statement") under the captions “Election of Directors,” “Executive Compensation,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Business Conduct and Ethics,” and “Committees of the Board of Directors.”

ITEM 11.EXECUTIVE COMPENSATION

This information is set forth under the caption “Executive Compensation” in the Proxy Statement, which information is incorporated herein by reference.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding security ownership of management and others is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement, which information is incorporated herein by reference.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Policy Regarding Transactions with Related Persons

On December 8, 2003, our Board of Directors adopted a resolution directing the Audit Committee of the Board of Directors to establish and implement procedures for identifying and conducting an appropriate review of any proposed transaction that meets the definition of “related party transaction” within the meaning of Item 404 of SEC RegulationS-K. In January 2004, the Audit Committee adopted written procedures in accordance with such direction. Under those procedures, the Audit Committee reviews and evaluates any proposed related party transaction and determines whether the terms of such transaction, judged at the time of the determination, are fair to the Company. Our officers are instructed that when a related party transaction is proposed, they are to bring it to the attention of the Audit Committee, which then reviews the transaction and makes a determination of whether it meets the above standard. The Audit Committee is required to prepare a report of its deliberations, conclusions and recommendations, and furnish that report to the full Board of Directors.

Information regarding director independence is set forth under the captions “Director Independence” and “Committees of the Board of Directors” in the Proxy Statement, which information is incorporated herein by reference.


ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

This information is set forth under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement, which information is incorporated herein by reference.

PART IV

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)Documents filed as part of this report.

1.Financial statements; All financial statements of the Company as described in Item 8 of this report on Form 10-K.

2.Financial statement schedule included in Part IV of this Form:

 Page

Schedule  II—Consolidated Valuation Accounts—for the three years ended April 30, 2018

2020		8689

All other financial statements and schedules not listed above are omitted as the required information is not applicable or the information is presented in the financial statements or related notes.


3.Exhibits

The following exhibits are filed herewith or incorporated herein by reference:

3.1
    3.1
  The Company’s Amended and Restated Articles of Incorporation, and amendments thereto.(1)(P)
3.2
  
The Company’s Amended and RestatedBy-Laws dated May 18, 2009.(2)
 
10.1
  American Software, Inc. 401(k)/Profit Sharing Plan and Trust Agreement.(3)(P)
10.2
  
Amendment to American Software, Inc. 401(k)/Profit Sharing Plan and Trust Agreement.(4)
 
10.3
  The Logility, Inc. 1997 Stock Plan as Amended and Restated Effective July 9, 2009.(5)
  10.4The Logility, Inc. 2007 Stock Plan as Amended and Restated Effective July 9, 2009.(5)
  10.5The Company’s 2001 Stock Option Plan, as Amended and Restated Effective August 17, 2009.(6)
  10.6
The Company’s 2011 Equity Compensation Plan, as amended.(7)(5)
 10.7
10.4
  
Retention Agreement, dated as of July 11, 2016, by and between American Software, Inc. and James C. Edenfield.(8)(6)
 10.8
10.5
  
Retention Agreement, dated as of July 11, 2016, by and between American Software, Inc. and J. Michael Edenfield.(9)(7)
 10.9
10.6
  
Retention Agreement, dated as of July 11, 2016, by and between American Software, Inc. and Vincent C. Klinges.(10)(8)
 10.10
10.7
  
Retention Agreement, dated as of July 11, 2016, by and between American Software, Inc. and James R. McGuone.(11)(9)
 10.11
10.8
  
Retention Agreement, dated as of July 11, 2016, by and between American Software, Inc. and H. Allan Dow.(12)(10)
 21.1
10.9
 
The Company’s 2020 Equity Compensation Plan.(11)
21.1
List of Subsidiaries.
 
23.1
  
Consent of Independent Registered Public Accounting Firm.
 
31.1
  
Certification Pursuant toRule 13a-14(a)/15d-14(a).
 
31.2
  
Certification Pursuant toRule 13a-14(a)/15d-14(a).
 
32.1
  
Certifications Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
101.INS  XBRL Instance Document.
101.SCH  XBRL Taxonomy Extension Schema Document.
101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB  XBRL Taxonomy Extension Label Linkbase Document.
101.PRE  

XBRL Taxonomy Extension Presentation Linkbase Document.

______________
(1)Incorporated by reference herein. Filed by the Company as an exhibit to its quarterly report filed on Form10-Q for the quarter ended October 31, 1990.

(2)Incorporated by reference herein. Filed by the Company as an exhibit to its quarterly report filed on Form10-Q for the quarter ended January 31, 2010.
(3)Incorporated by reference herein. Filed by the Company as an exhibit to its Registration StatementNo. 33-55214 filed on FormS-8 on December 1, 1992.
(4)Incorporated by reference herein. Filed by the Company as an exhibit to its annual report filed on Form10-K for the fiscal year ended April 30, 2002.
(5)Incorporated by reference herein. Filed by the Company as an exhibit to its Registration StatementNo. 333-160559 filed on FormS-8 on July 13, 2009.
(6)Incorporated by reference herein. Filed by the Company as an exhibit to its Registration StatementNo. 333-161471 filed on FormS-8 on August 21, 2009.
(7)(5)Incorporated by reference herein. Filed by the Company as an appendix to its Definitive Proxy Statement filed on July 27, 2017.
(8)
(6)Incorporated by reference herein. Filed by the Company as exhibit 10.1 to its current report on Form8-K filed on July 15, 2016.


(9)
(7)Incorporated by reference herein. Filed by the Company as exhibit 10.2 to its current report on Form8-K filed on July 15, 2016.
(10)
(8)Incorporated by reference herein. Filed by the Company as exhibit 10.3 to its current report on Form8-K filed on July 15, 2016.
(11)
(9)Incorporated by reference herein. Filed by the Company as exhibit 10.4 to its current report on Form8-K filed on July 15, 2016.
(12)
(10)Incorporated by reference herein. Filed by the Company as exhibit 10.1 to its current report on Form8-K/A filed on July 13, 2017.

(11)Incorporated by reference herein. Filed as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on July 26, 2019.

SCHEDULE II

AMERICAN SOFTWARE, INC.

CONSOLIDATED VALUATION ACCOUNTS

Years ended April 30, 2020, 2019, 2018 2017, 2016

(In thousands)

Allowance for Doubtful Accounts

Year ended:

  Balance at
beginning
of year		   Amounts
charged to
expense		   Other
Additions
(1)		   Deductions
(2)		   Balance at
end of year		 

April 30, 2018

  $171    24    —      36    159 

April 30, 2017

  $178    39    —      46    171 

April 30, 2016

  $215    —      41    78    178 

Year ended: 
Balance at
beginning
of year
 
Amounts
charged to
expense
 
Other
Additions
(1)
 
Deductions
(2)
 
Balance at
end of year
April 30, 2020 $153
 97
 14
 —
 264
April 30, 2019 $159
 —
 —
 6
 153
April 30, 2018 $171
 24
 —
 36
 159
_______________
(1)Recovery of previouslywritten-off amounts.
(2)Write-off of uncollectible accounts.

Deferred Income Tax Valuation Allowance

The deferred tax valuation allowance roll-forward is included in Item 8 of this Report in the Notes to Consolidated Financial Statements—Note 6.

5.

See accompanying report of independent registered public accounting firm.

ITEM 16.FORM10-K SUMMARY.

None.


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


By:

 /s/ James C. EdenfieldH. Allan Dow
 James C. EdenfieldH. Allan Dow
 Chief Executive Chairman, TreasurerOfficer and Director
(PrincipalPresident (Principal Executive Officer)

Date: July 13, 2018

10, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures

  

Title

  

Date

/s/ James C. Edenfield

James C. Edenfield

 

Executive Chairman, Treasurer and Director (Principal Executive Officer)

 July 13, 201810, 2020

/s/ J. MichaelJames C. Edenfield

J. Michael Edenfield

  

/s/ H. Allan DowChief Executive Officer and President (Principal Executive Officer) and Director

 July 13, 201810, 2020
H. Allan Dow

/s/ W. Dennis Hogue

W. Dennis Hogue

 

Director

 July 13, 201810, 2020
W. Dennis Hogue

/s/ James B. Miller, Jr.

DirectorJuly 10, 2020
James B. Miller, Jr.

  

Director

  July 13, 2018

/s/ Thomas L. Newberry, V.

DirectorJuly 10, 2020
Thomas L. Newberry, V.

  

Director

  July 13, 2018

/s/ Matthew G. McKenna

Matthew G. McKenna

 

Director

 July 13, 201810, 2020
Matthew G. McKenna

/s/ Lizanne ThomasDirectorJuly 10, 2020
Lizanne Thomas
/s/ Vincent C. Klinges

Vincent C. Klinges

 

Chief Financial Officer (Principal Financial Officer)

 July 13, 201810, 2020
Vincent C. Klinges

/s/ Bryan L. Sell

Bryan L. Sell

 

Controller and Principal(Principal Accounting Officer

Officer)		 July 13, 201810, 2020
Bryan L. Sell

90


88