Zacks_Analysts' Blog : Lawson Reports In Line - Analyst Blog

Lawson Software Inc. (LWSN) recently reported a fourfold jump in net income, which surged to $11.9 million in the second quarter of fiscal 2011. Net income came in at 7 cents per share compared with 2 cents in the year-ago quarter.



Lawson Software Inc. is a leading provider of enterprise resource planning (ERP) software solutions and professional services to mid-market enterprises in the health care, retail, public and professional service industries.

Excluding one-time charges but including stock-based compensation expenses, EPS came in at 10 cents, in line with the Zacks Consensus Estimate.



Revenues came in at $187.5 million, up 1.7% year over year and in line with management’s guidance of $184 million – $189 million and the Zacks Consensus Estimate of $189 million. Excluding adjustments related to purchase accounting, revenues came in at $188.9 million, up 2.4% year over year.

On a segment basis, license fees came in at $26.4 million, down 7% year over year. License revenues grew 25% year over year in S3 industries comprising customers in healthcare, public sector, and other services industries.

Revenues from Maintenance services came in at $97.5 million, up 14% year over year driven by positive contribution from Healthvision. Maintenance continues to be an area of strength for Lawson. Lawson acquired Healthvision in mid-January 2010 and Healthvision continues to be a strong contributor to the business and accounted for more than half of the year-over-year increase in Maintenance revenues. Excluding the impact of the Healthvision acquisition, organic maintenance revenues increased 7%.

Consulting revenues came in at $63.6 million, down 10% year over year. Lawson has been downsizing its consulting organization over the past two years as a part of its strategic plan to downsize this organization so as to contribute roughly over 30% of total revenues.

Lawson stated that healthcare and human capital management (HCM) continue to be strong in targeted markets. Products related to HCM were sold in 9 of the 11 largest deals in the quarter. This continues to be one of the company’s fastest growing businesses and Lawson believes that the acquisition of Enwisen in December has strengthened this solution.

Margins



Gross margin came in at 58%, up from 55% in the year-ago quarter. Operating margin (excluding one-time items and stock-based compensation expense) came in at 17% compared with 14% in the year-ago quarter driven by improved profitability in M3 business (including customers in manufacturing and distribution, equipment service management and rental, and consumer products).

During the quarter, Lawson used $49.7 million of cash from operations, compared with $31.6 million used in the year-ago quarter. Lawson ended the quarter with cash and equivalents of $288.3 million, down from $333.1 million at the end of the previous quarter.



Total deferred revenues at the end of the first quarter were $205 million, down from $273 million at the end of the first quarter, primarily driven by maintenance renewal cycle.

Guidance



Lawson projects revenues between $188 million and $193 million in the third quarter of fiscal 2011, in line with the Zacks Consensus Estimate. Including approximately $2 million of revenues impacted by purchase accounting adjustments, revenues are estimated between $190 million and $195 million. EPS is expected at 6 cents – 8 cents. Excluding one-time items and stock-based compensation expenses, Lawson projects EPS at 11 cents – 13 cents.

For fiscal 2011, Lawson projects revenues between $764 million and $774 million. Including approximately $6 million of revenues impacted by purchase accounting adjustments, revenues are estimated between $770 million and $780 million. EPS is expected at 28 cents – 30 cents. Excluding one-time items and stock-based compensation expenses, Lawson projects EPS at 48 cents – 50 cents.

Management stated although Lawson completed the acquisition of Enwisen at the end of December 2010, this acquisition is not expected to contribute to the top-line in the third quarter. Lawson expects Enwisen to contribute $28 million to $30 million in subscription and services revenue and approximately 2 cents to fiscal 2012 EPS.

Shares of Lawson were down 1.48% in regular trading to close at $9.32.