Press release

Majesco Reports Growing Momentum of Cloud Subscription Revenue and Continued Sales Growth for Second Quarter Fiscal 2020

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Majesco (NASDAQ: MJCO), a global provider of cloud insurance platform software, today announced solid financial results for the fiscal 2020 second quarter that ended September 30, 2019.

“Our second quarter financial results reflect the continuing momentum of our cloud subscription product focus,” said Adam Elster, Majesco’s CEO. “The number of cloud customers continue to increase with accelerating project go-lives, as our customers are benefitting from dramatically reduced project implementation timelines. These trends clearly demonstrate Majesco’s ability to rapidly deliver time-to-value to our customers while providing a modern platform for insurers to innovate new products and business models. This is the foundation of our long-term growth as we acquire, adopt and expand customers.”

“Majesco is aggressively investing and delivering on our vision to help insurers, reinsurers, InsurTechs and MGAs build the future of their businesses – at speed and scale. The new version 11 of our P&C and L&A and Group Core Suites will help our customers and the industry meet the demands and expectations of tomorrow, today,” commented Manish Shah, President and Chief Product Officer at Majesco. “We are in a unique position working with all segments of the industry across all lines of business; allowing us to clearly drive a customer-centric view and leverage ideas and innovations across our solutions, delivered on a mature cloud environment with Majesco CloudInsurer™.

“Finally, as we continue to expand our partnership business, we are very excited that Majesco Cloud solutions are now available in the Microsoft Azure Marketplace. Our products were created to leverage Microsoft Azure’s cloud capabilities, offering a global infrastructure spanning more than 100 highly-secure facilities worldwide.”

Key Revenue Drivers

  • Revenue from cloud-based customers was $13.1 million (38.5% of total revenue) for the quarter ended September 30, 2019.
  • Total number of cloud customers is now 61, up 5% over the past three months, 13% year to date and 49% year-over-year.
  • Total recurring revenue was 37.7% of total revenue for the quarter ended September 30, 2019.
  • Majesco’s 12-month order backlog as of September 30, 2019 was $100.4 million.
  • Added 3 new cloud customers organically for the quarter ended September 30, 2019.

Second Quarter 2020 Financial Results

  • Revenue was $34.1 million, compared to $34.3 million for the same period last fiscal year.
  • Gross profit was $15.7 million (46.1% of revenue), compared to $17.3 million for the same period last fiscal year.
  • Research and development (R&D) expenses were $4.5 million (13.1% of revenue), compared to $4.7 million for the same period last fiscal year.
  • Selling, general and administrative (SG&A) expenses were $9.9 million (29.0% of revenue), compared to $9.9 million for the same period last fiscal year.
  • Adjusted EBITDA was $3.1 million (9.2% of revenue), compared to $4.3 million for the same period last fiscal year.
  • Net income was $0.9 million, or $0.02 per basic and diluted share.

EBITDA and Adjusted EBITDA are non-GAAP measures. Reconciliation tables of EBITDA and Adjusted EBITDA as used in this press release to GAAP are included in the financial section of this press release.

2020 Financial Results for the Six Months ended September 30, 2019

  • Revenue was $71.4 million, compared to $68.3 million for the same period last fiscal year.
  • Gross profit was $35.6 million (49.8% of revenue), compared to $33.2 million for the same period last fiscal year.
  • Research and development (R&D) expenses were $9.9 million (13.9% of revenue), compared to $9.5 million for the same period last fiscal year.
  • Selling, general and administrative (SG&A) expenses were $21.7 million (30.4% of revenue), compared to $19.2 million for the same period last fiscal year.
  • Adjusted EBITDA was $7.9 million (11.0% of revenue), compared to $7.8 million for the same period last fiscal year.
  • Net income was $2.2 million, or $0.05 per basic and diluted share.

EBITDA and Adjusted EBITDA are non-GAAP measures. Reconciliation tables of EBITDA and Adjusted EBITDA as used in this press release to GAAP are included in the financial section of this press release.

Balance Sheet Highlights

  • Majesco had no debt and cash equivalents (including short term investments) of $34.9 million at September 30, 2019, compared to net cash of $3.6 million for the same period last fiscal year.
  • Adoption of ASC 842 Leases, effective April 1, 2019 resulted in the reporting on our balance sheet a right of use asset valued at $4.6 million offset by total reported lease liability of $4.6 million as of September 30, 2019

Conference Call and Webcast Information

Majesco management will conduct a live teleconference to discuss Majesco’s fiscal 2020 second quarter at 5:00 pm. ET on Tuesday, November 5, 2019. Anyone interested in participating should call 855-327-6837 if calling from the U.S., or 631-891-4304 if dialing internationally. A replay will be available until November 19, 2019, which can be accessed by dialing 844-512-2921 within the U.S. and 412-317-6671 if dialing internationally. Please use passcode: 10007926 to access the replay. In addition, the call will be webcast and will be available on the Company’s website at www.majesco.com or by clicking here.

Use of Non-GAAP Financial Measures

In evaluating our business, we consider and use EBITDA as a supplemental measure of operating performance. We define EBITDA as earnings before interest, taxes, depreciation and amortization. We present EBITDA because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We define Adjusted EBITDA as EBITDA before stock-based compensation and reversal of accrual for contingent consideration liability.

The terms EBITDA and Adjusted EBITDA are not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and are not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and when assessing Majesco’s operating performance, investors should not consider EBITDA or Adjusted EBITDA in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, EBITDA and Adjusted EBITDA do not reflect our actual cash expenditures. Other companies may calculate similar measures differently than Majesco, limiting their usefulness as comparative tools. We compensate for these limitations by relying on U.S. GAAP results and using EBITDA and Adjusted EBITDA only as supplemental.

About Majesco

Majesco (NASDAQ: MJCO) provides technology, expertise, and leadership that helps insurers modernize, innovate and connect to build the future of their business – and the future of insurance – at speed and scale. Our platforms connect people and businesses to insurance in ways that are innovative, hyper-relevant, compelling and personal. Over 200 insurance companies worldwide in P&C, L&A and Group Benefits are transforming their businesses by modernizing, optimizing or creating new business models with Majesco. Our market-leading solutions include CloudInsurer® P&C Core Suite (Policy, Billing, Claims); CloudInsurer® L&A and Group Core Suite (Policy, Billing, Claims); Digital1st Insurance™ with Digital1st eConnect™, Digital1st EcoExchange™ and Digital1st Platform™ – a cloud-native, microservices and open API platform; Distribution Management, Data and Analytics and an Enterprise Data Warehouse. For more details on Majesco, please visit www.majesco.com.

Cautionary Language Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the “safe harbour” provisions of the Private Securities Litigation Reform Act. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of management, are not guarantees of performance and are subject to significant risks and uncertainty. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in Majesco’s reports that it files from time to time with the Securities and Exchange Commission (SEC) and which you should review, including those statements under “Item 1A – Risk Factors” in Majesco’s Annual Report on Form 10-K.

Important factors that could cause actual results to differ materially from those described in forward-looking statements contained in this press release include, but are not limited to: integration risks; changes in economic conditions, political conditions, trade protection measures, licensing requirements and tax matters; technology development risks; intellectual property rights risks; competition risks; additional scrutiny and increased expenses as a result of being a public company; the financial condition, financing requirements, prospects and cash flow of Majesco; loss of strategic relationships; changes in laws or regulations affecting the insurance industry in particular; restrictions on immigration; the ability and cost of retaining and recruiting key personnel; the ability to attract new clients and retain them and the risk of loss of large customers; continued compliance with evolving laws; customer data and cybersecurity risk; and Majesco’s ability to raise capital to fund future growth.

These forward-looking statements should not be relied upon as predictions of future events and Majesco cannot assure you that the events or circumstances discussed or reflected in these statements will be achieved or will occur. If such forward-looking statements prove to be inaccurate, the inaccuracy may be material. You should not regard these statements as a representation or warranty by Majesco or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Majesco disclaims any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law.

 

Majesco and Subsidiaries

 

Consolidated Statements of Operations (Unaudited)

(All amounts are in thousands of US Dollars except per share data and as stated otherwise)

 

 

 

Three Months

ended

September 30,

2019

 

 

Three Months

ended

September 30,

2018

 

 

Six Months

ended

September 30,

2019

 

 

Six Months

ended

September 30,

2018

 

Revenue

 

$

34,055

 

 

$

34,322

 

 

$

71,359

 

 

$

68,297

 

Cost of revenue

 

 

18,372

 

 

 

17,008

 

 

 

35,806

 

 

 

35,053

 

Gross profit

 

$

15,683

 

 

$

17,314

 

 

$

35,553

 

 

$

33,244

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

$

4,457

 

 

$

4,683

 

 

$

9,927

 

 

$

9,532

 

Selling, general and administrative expenses

 

 

9,876

 

 

 

9,869

 

 

 

21,702

 

 

 

19,174

 

Total operating expenses

 

$

14,333

 

 

$

14,552

 

 

$

31,629

 

 

$

28,706

 

Income from operations

 

$

1,350

 

 

$

2,762

 

 

$

3,924

 

 

$

4,538

 

Interest income

 

 

161

 

 

 

19

 

 

 

350

 

 

 

25

 

Interest expense

 

 

(102

)

 

 

(104

)

 

 

(191

)

 

 

(228

)

Other income (expenses), net

 

 

451

 

 

 

430

 

 

 

440

 

 

 

611

 

Gain on reversal of accrued contingent liability

 

 

 

 

 

835

 

 

 

 

 

 

835

 

Income before provision for income taxes

 

$

1,860

 

 

$

3,942

 

 

$

4,523

 

 

$

5,781

 

Provision for income taxes

 

 

952

 

 

 

1,265

 

 

 

2,333

 

 

 

2,060

 

Net Income

 

$

908

 

 

$

2,677

 

 

$

2,190

 

 

$

3,721

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

0.07

 

 

$

0.05

 

 

$

0.10

 

Diluted

 

$

0.02

 

 

$

0.07

 

 

$

0.05

 

 

$

0.10

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,962,524

 

 

 

36,634,019

 

 

 

42,937,888

 

 

 

36,617,505

 

Diluted

 

 

44,854,157

 

 

 

38,664,803

 

 

 

44,836,758

 

 

 

38,936,340

 

 

Majesco and Subsidiaries

Consolidated Balance Sheets

(All amounts are in thousands of U.S. Dollars except per share data and as stated otherwise)

 

 

 

September 30,

 

 

March 31,

 

 

 

2019

(Unaudited)

 

 

2019

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,691

 

 

$

11,329

 

Short term investments

 

 

15,244

 

 

 

28,108

 

Restricted cash

 

 

42

 

 

 

43

 

Accounts receivable, net

 

 

22,842

 

 

 

17,366

 

Unbilled accounts receivable

 

 

14,805

 

 

 

17,916

 

Prepaid expenses and other current assets

 

 

14,065

 

 

 

15,598

 

Total current assets

 

 

86,689

 

 

 

90,360

 

Property and equipment, net

 

 

2,569

 

 

 

3,026

 

Right-of-use asset, net

 

 

4,615

 

 

 

 

Intangible assets, net

 

 

11,124

 

 

 

12,969

 

Deferred income tax assets

 

 

6,680

 

 

 

7,816

 

Unbilled accounts receivable, net of current portion

 

 

2,767

 

 

 

543

 

Other assets

 

 

186

 

 

 

489

 

Goodwill

 

 

34,090

 

 

 

34,145

 

Total Assets

 

$

148,720

 

 

$

149,348

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Loan from bank-receivable financing and vehicle loan

 

$

55

 

 

$

442

 

Lease liability

 

 

2,339

 

 

 

 

Accounts payable

 

 

1,506

 

 

 

2,327

 

Accrued expenses and other current liabilities

 

 

26,305

 

 

 

34,871

 

Deferred revenue

 

 

12,457

 

 

 

10,988

 

Total current liabilities

 

 

42,662

 

 

 

48,628

 

Vehicle loan

 

 

65

 

 

 

109

 

Lease liability, net of current portion

 

 

2,302

 

 

 

 

Consideration payable for Exaxe acquisition

 

 

3,009

 

 

 

2,951

 

Other liabilities

 

 

1,289

 

 

 

1,089

 

Total Liabilities

 

 

49,327

 

 

 

52,777

 

Commitments and contingencies

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock, par value $0.002 per share – 50,000,000 shares authorized as of September 30, 2019 and March 31, 2019, no shares issued and outstanding as of September 30, 2019 and March 31, 2019

 

 

 

 

 

 

Common stock, par value $0.002 per share – 450,000,000 shares authorized as of September 30, 2019 and March 31, 2019; 43,000,968 shares issued and outstanding as of September 30, 2019 and 42,846,273 shares issued and outstanding as of March 31, 2019

 

 

86

 

 

 

86

 

Additional paid-in capital

 

 

124,538

 

 

 

122,163

 

Accumulated deficit

 

 

(23,875

)

 

 

(26,499

)

Accumulated other comprehensive loss

 

 

(1,356

)

 

 

(412

)

Total stockholders’ equity attributable to Majesco stockholders

 

 

99,393

 

 

 

95,338

 

Non controlling interests in consolidated subsidiaries

 

 

 

 

 

1,233

 

Total Stockholders’ Equity

 

 

99,393

 

 

 

96,571

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

148,720

 

 

$

149,348

 

 

Majesco and Subsidiaries

Reconciliation of U.S. GAAP Net Income to EBITDA and Adjusted EBITDA

(Unaudited)

 

 

 

Unaudited

 

 

 

Three Months ended

 

(U.S. dollars, in thousands):

 

September 30,

2019

 

 

September 30,

2018

 

Net Income

 

$

908

 

 

$

2,677

 

Add:

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

952

 

 

 

1,265

 

Depreciation and amortization

 

 

1,217

 

 

 

842

 

Interest expense

 

 

102

 

 

 

104

 

Less:

 

 

 

 

 

 

 

 

Interest income

 

 

(161

)

 

 

(19

)

Other income (expenses), net

 

 

(451

)

 

 

(430

)

EBITDA

 

$

2,567

 

 

$

4,439

 

Add:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

569

 

 

 

683

 

Less:

 

 

 

 

 

 

 

 

Reversal of accrual for contingent consideration liability

 

 

 

 

 

(835

)

Adjusted EBITDA

 

 

3,136

 

 

 

4,287

 

Revenue

 

 

34,055

 

 

 

34,322

 

Adjusted EBITDA as a % of Revenue

 

 

9.21

%

 

 

12.49

%

 

 

Unaudited

 

 

 

Six Months ended

 

(U.S. dollars, in thousands):

 

September 30,

2019

 

 

September 30,

2018

 

Net Income

 

$

2,190

 

 

$

3,721

 

Add:

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

2,333

 

 

 

2,060

 

Depreciation and amortization

 

 

2,443

 

 

 

1,889

 

Interest expense

 

 

191

 

 

 

228

 

Less:

 

 

 

 

 

 

 

 

Interest income

 

 

(350

)

 

 

(25

)

Other income (expenses), net

 

 

(440

)

 

 

(611

)

EBITDA

 

$

6,367

 

 

$

7,262

 

Add:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

1,498

 

 

 

1,358

 

Less:

 

 

 

 

 

 

 

 

Reversal of accrual for contingent consideration liability

 

 

 

 

 

(835

)

Adjusted EBITDA

 

 

7,865

 

 

 

7,785

 

Revenue

 

 

71,359

 

 

 

68,297

 

Adjusted EBITDA as a % of Revenue

 

 

11.02

%

 

 

11.40

%