2015 Q2 Form 10-Q Financial Statement

#000116944515000012 Filed on August 07, 2015

View on sec.gov

Income Statement

Concept 2015 Q2 2014 Q2
Revenue $47.09M $53.05M
YoY Change -11.25% -0.39%
Cost Of Revenue $22.37M $27.87M
YoY Change -19.74% 0.32%
Gross Profit $24.72M $25.18M
YoY Change -1.84% -1.17%
Gross Profit Margin 52.49% 47.46%
Selling, General & Admin $12.76M $11.11M
YoY Change 14.85% -9.89%
% of Gross Profit 51.62% 44.12%
Research & Development $3.570M
YoY Change
% of Gross Profit 14.44%
Depreciation & Amortization $920.0K $930.0K
YoY Change -1.08% 6.9%
% of Gross Profit 3.72% 3.69%
Operating Expenses $16.33M $11.11M
YoY Change 46.98% -9.89%
Operating Profit $8.386M $14.07M
YoY Change -40.39% 7.0%
Interest Expense $0.00
YoY Change
% of Operating Profit 0.0%
Other Income/Expense, Net $115.0K $66.63K
YoY Change 72.59% -51.36%
Pretax Income $8.501M $14.14M
YoY Change -39.86% 6.4%
Income Tax $2.598M $5.029M
% Of Pretax Income 30.56% 35.58%
Net Earnings $5.903M $9.106M
YoY Change -35.17% 7.31%
Net Earnings / Revenue 12.54% 17.16%
Basic Earnings Per Share $0.52 $0.81
Diluted Earnings Per Share $0.52 $0.81
COMMON SHARES
Basic Shares Outstanding 11.08M shares 11.02M shares
Diluted Shares Outstanding 11.08M shares 11.02M shares

Balance Sheet

Concept 2015 Q2 2014 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $37.00M $24.00M
YoY Change 54.17% 95.12%
Cash & Equivalents $26.25M $13.29M
Short-Term Investments $10.80M $10.70M
Other Short-Term Assets $6.700M $4.500M
YoY Change 48.89% 7.14%
Inventory $1.353M $1.410M
Prepaid Expenses
Receivables $21.98M $24.87M
Other Receivables $13.00M $23.90M
Total Short-Term Assets $80.18M $78.77M
YoY Change 1.8% 21.03%
LONG-TERM ASSETS
Property, Plant & Equipment $15.66M $17.62M
YoY Change -11.14% -12.14%
Goodwill
YoY Change
Intangibles
YoY Change
Long-Term Investments
YoY Change
Other Assets $200.0K
YoY Change
Total Long-Term Assets $17.67M $18.04M
YoY Change -2.04% -14.63%
TOTAL ASSETS
Total Short-Term Assets $80.18M $78.77M
Total Long-Term Assets $17.67M $18.04M
Total Assets $97.85M $96.80M
YoY Change 1.08% 12.29%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $4.868M $3.012M
YoY Change 61.63% 5.88%
Accrued Expenses $7.900M $8.100M
YoY Change -2.47% -6.9%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due
YoY Change
Total Short-Term Liabilities $17.49M $20.44M
YoY Change -14.46% -7.18%
LONG-TERM LIABILITIES
Long-Term Debt $0.00 $0.00
YoY Change
Other Long-Term Liabilities
YoY Change
Total Long-Term Liabilities $0.00 $0.00
YoY Change
TOTAL LIABILITIES
Total Short-Term Liabilities $17.49M $20.44M
Total Long-Term Liabilities $0.00 $0.00
Total Liabilities $17.50M $21.80M
YoY Change -19.72% -9.92%
SHAREHOLDERS EQUITY
Retained Earnings $38.74M $38.49M
YoY Change 0.67% 35.3%
Common Stock $41.62M $36.49M
YoY Change 14.05% 8.8%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $80.37M $75.01M
YoY Change
Total Liabilities & Shareholders Equity $97.85M $96.80M
YoY Change 1.08% 12.29%

Cashflow Statement

Concept 2015 Q2 2014 Q2
OPERATING ACTIVITIES
Net Income $5.903M $9.106M
YoY Change -35.17% 7.31%
Depreciation, Depletion And Amortization $920.0K $930.0K
YoY Change -1.08% 6.9%
Cash From Operating Activities $3.780M $1.310M
YoY Change 188.55% 3.97%
INVESTING ACTIVITIES
Capital Expenditures -$130.0K -$180.0K
YoY Change -27.78% -76.32%
Acquisitions
YoY Change
Other Investing Activities -$80.00K -$50.00K
YoY Change 60.0% 150.0%
Cash From Investing Activities -$210.0K -$230.0K
YoY Change -8.7% -70.51%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -7.290M -6.340M
YoY Change 14.98% 11.42%
NET CHANGE
Cash From Operating Activities 3.780M 1.310M
Cash From Investing Activities -210.0K -230.0K
Cash From Financing Activities -7.290M -6.340M
Net Change In Cash -3.720M -5.260M
YoY Change -29.28% 0.96%
FREE CASH FLOW
Cash From Operating Activities $3.780M $1.310M
Capital Expenditures -$130.0K -$180.0K
Free Cash Flow $3.910M $1.490M
YoY Change 162.42% -26.24%

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us-gaap Revenue Recognition Multiple Element Arrangements
RevenueRecognitionMultipleElementArrangements
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-top:12px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">REVENUE RECOGNITION</font></div><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company recognizes revenue in accordance with accounting principles generally accepted in the United States of America, principally those required by the </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Software</font><font style="font-family:inherit;font-size:10pt;"> topic and </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Revenue Recognition</font><font style="font-family:inherit;font-size:10pt;"> subtopic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "Codification") and those prescribed by the SEC.</font></div><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company's revenue is generated from three sources:</font></div><table cellpadding="0" cellspacing="0" style="padding-top:12px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">System Sales</font><font style="font-family:inherit;font-size:10pt;"> - the sale of information systems, which includes perpetual software licenses, conversion, installation and training services, hardware and peripherals;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Support and Maintenance</font><font style="font-family:inherit;font-size:10pt;"> - the provision of system support services, which includes software application support, hardware maintenance, continuing education, "Software as a Service" (or "SaaS") services, and forms and supplies; and</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Business Management, Consulting and Managed IT Services</font><font style="font-family:inherit;font-size:10pt;"> - the provision of business management services, which includes electronic billing, statement processing, payroll processing, accounts receivable management, contract management and insurance services, as well as Internet service provider ("ISP") services and consulting and managed IT services (collectively, "other professional IT services").</font></div></td></tr></table><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">System Sales, Software Application Support and Hardware Maintenance</font></div><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company enters into contractual obligations to sell perpetual software licenses, conversion, installation and training services, hardware and software application support and hardware maintenance services. On average, the Company is able to complete a system installation in </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">three</font><font style="font-family:inherit;font-size:10pt;"> to </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">four</font><font style="font-family:inherit;font-size:10pt;"> weeks. The methods employed by the Company to recognize revenue, which are discussed by element below, achieve results materially consistent with the provisions of Accounting Standards Update ("ASU") 2009-13, </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Multiple-Deliverable Revenue Arrangements</font><font style="font-family:inherit;font-size:10pt;">, due to the relatively short period during which there are multiple undelivered elements, the relatively small amount of non-software related elements in the system sale arrangements, and the limited number of contracts in-process at the end of each reporting period. The Company recognizes revenue on the elements noted above as follows:</font></div><table cellpadding="0" cellspacing="0" style="padding-top:12px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Perpetual software licenses and conversion, installation and training services &#8211; The selling price of perpetual software licenses and conversion, installation and training services is based on management&#8217;s best estimate of selling price. In determining management&#8217;s best estimate of selling price, we consider the following: (1) competitor pricing, (2) supply and demand of installation staff, (3) overall economic conditions, and (4) our pricing practices as they relate to discounts. With the exception of certain arrangements with extended payment terms that were entered into in 2012 and that are not comparable to our historical or current arrangements (see Note 9), the method of recognizing revenue for the perpetual license of the associated modules included in the arrangement, and the related conversion, installation and training services over the term the services are performed, is on a module by module basis as the related perpetual licenses are delivered and the respective conversion, installation and training for each specific module is completed, as this is representative of the pattern of provision of these services.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Hardware &#8211; We recognize revenue for hardware upon shipment. The selling price of hardware is based on management&#8217;s best estimate of selling price, which consists of cost plus a targeted margin.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:72px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:48px;"><font style="font-family:inherit;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Software application support and hardware maintenance &#8211; We have established vendor-specific objective evidence ("VSOE") of the fair value of our software application support and hardware maintenance services by reference to the price our customers are required to pay for the services when sold separately via renewals. Support and maintenance revenue is recognized on a straight-line basis over the term of the maintenance contract, which is generally </font><font style="font-family:Times New Roman;font-size:10pt;color:#000000;font-weight:normal;text-decoration:none;">three</font><font style="font-family:inherit;font-size:10pt;"> to </font><font style="font-family:Times New Roman;font-size:10pt;color:#000000;font-weight:normal;text-decoration:none;">five</font><font style="font-family:inherit;font-size:10pt;"> years.</font></div></td></tr></table><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">SaaS, ISP and Other Professional IT Services</font></div><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company accounts for SaaS arrangements in accordance with the requirements of the </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Hosting Arrangement</font><font style="font-family:inherit;font-size:10pt;"> section under the </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Software</font><font style="font-family:inherit;font-size:10pt;"> topic and </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Revenue Recognition</font><font style="font-family:inherit;font-size:10pt;"> subtopic of the Codification. The Codification states that the software elements of SaaS services should not be accounted for as a hosting arrangement "if the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software." Each SaaS contract entered into by the Company includes a system purchase and buyout clause, and this clause specifies the total amount of the system buyout. In addition, a clause is included in the contract which states that should the system be bought out by the customer, the customer would be required to enter into a general support agreement (for post-contract support services) for the remainder of the original SaaS term. Accordingly, the Company has concluded that SaaS customers do not have the right to take possession of the system without significant penalty (i.e., the purchase price of the system), resulting in the determination that these contracts are service contracts for which revenue is recognized when the services are performed.</font></div><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company will occasionally provide ISP and other professional IT services. Depending on the nature of the services provided, these services may be considered software elements or non-software elements. The selling price of services considered to be software elements is based on VSOE of the fair value of the services by reference to the price our customers are required to pay for the services when sold separately. The selling price of services considered to be non-software elements is based on third-party evidence of selling price of similar services. Revenue from these elements is recognized as the services are performed.</font></div><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Business Management Services</font></div><div style="line-height:120%;padding-top:12px;padding-left:24px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Business management services consist of electronic billing, statement processing, payroll processing, accounts receivable management, contract management and insurance services. While business management service arrangements are contracts separate from the system sale and support and maintenance contracts, these contracts are often executed within a short time frame of each other. The amount of the total arrangement consideration allocated to these services is based on VSOE of fair value by reference to the rate at which our customers renew as well as the rate at which the services are sold to customers when the business management services agreement is not executed within a short time frame of the system sale and support and maintenance contracts. If VSOE of fair value does not exist for these services, we allocate arrangement consideration based on third-party evidence ("TPE") of selling price or, if neither VSOE nor TPE is available, estimated selling price. Because the pricing is transaction based (per unit pricing), customers are billed and revenue recognized as services are performed based on transaction levels.</font></div></div>

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