Lawson Software, Inc. (LWSN) reported revenues of $184.4 million in the second quarter of fiscal 2010, down 10.6% year over year. Excluding foreign currency fluctuations, revenues declined 12%.
Software revenues (comprising of license and maintenance revenues) declined by 6%. Consulting revenues of $71 million were down 18%. The company intends to resize its consulting business, and has already reduced the size of the consultant team by 30% in light of the current business environment. Maintenance revenues of $85 million were down 5%.
Net income declined to $15.6 million, compared to $16.7 million in the year-ago quarter. Earnings per share (EPS) came in at 9 cents, easily beating the Zacks Consensus Estimate by a penny.
Management stated that even as the economy remains challenging, the company continues to target certain vertical industries such as equipment service management, fashion, food & beverage, healthcare, manufacturing & distribution, public sector (U.S.) and service industries.
Operating margin improved to 15% from 12% a year ago as a result of efficiencies obtained on streamlining global operations. Firstly, the company earlier made huge investments in implementing Lawson Financial and Human Capital Management Systems on a global basis. This enabled management to standardize processes and centralize operations, which in turn eliminated cost redundancies across the company, leading to lower administrative costs. Secondly, the resizing of services department has enabled the services team to better leverage its partner network and adequately support the market demand for these services.
The company used $32 million of cash in operating activities, and Lawson ended the quarter with $361 million of cash and investments. At the end of the quarter, deferred revenue was $193 million, down $1 million sequentially.
Going forward, management expects revenues between $174 million and $178 million in the third quarter of fiscal 2010. Maintenance revenues are expected to be negatively impacted by $1 million on a year-over-year basis. EPS is expected between 7 cents and 9 cents. The guidance does not include any contribution from Healthvision. Currency fluctuations are estimated to negatively impact the bottom line by one cent.
The company also announced that it will acquire Healthvision Solutions, Inc. for $160 million. Based in Dallas, Healthvision is a privately-held company providing integration and application technology and related services to hospitals and large healthcare organizations. The transaction is expected to close in January 2010.
Lawson provides enterprise resource planning (ERP) software solutions and professional services to mid-market enterprises in the health care, retail, public and services industries. The company derives its revenue from software license fees, customer support and maintenance fees and consulting fees.
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