AMERICAN SOFTWARE INC - Annual Report: 2020 (Form 10-K)

---

---

•	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.

---

---

---

---

---

•	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.

•	S&OP aligns financial, sales, production, procurement and marketing information into a single plan rooted in supply chain reality. Strategic, tactical and operational plans can be produced through a single platform.

---

•	Demand Sensing evaluates multiple data streams to 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 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.

•	Lifecycle Planning provides control to model each phase over a product’s entire lifecycle, including introduction, maturity, replacement, substitution and retirement. Using attribute-based modeling, this solution can improve the accuracy of new product introductions, lifecycles and phase-outs, resulting in reduced stock-outs and lower obsolescence costs.

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

•	Causal Forecasting uses artificial intelligence to correlate multiple external factors (i.e. weather, market trend, commodity prices, etc.) to enhance the demand forecast.

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

•	Inventory Planning allows enterprises to effectively measure the tradeoff between 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 Planning optimizes complex sourcing and production decisions to balance supply, manufacturing and distribution constraints based on corporate goals of maximizing profit or minimizing costs.

---

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

•

Manufacturing Planning and Scheduling optimizes constraint-based manufacturing schedules and evaluates multiple scenarios to determine the optimal trade-off between manufacturing efficiencies, inventory investments and greenhouse gas emissions, providing lower costs and increased product availability. These optimized schedules consider machine, personnel, tooling and inventory constraints to drive shorter lead times and reliable product availability.

•

Merchandise and Assortment Planning creates financial merchandise plans for a 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. 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-term unit sales and stock projections by store and facilitates automatic replenishment based on daily sales data. Capabilities also include pre-pack optimization to accelerate the receipt and shipment of inventory to specific store locations.

•	Quality Management & Audits identifies quality problems faster to reduce chargebacks and rework; enables inspections and audits to be performed at manufacturing facilities via tablets; requests in-line, final, measurement and packing accuracy audits during the production process and provides notification if audits fail; and aids in the analysis of sourcing and factory improvement decisions.

•	Regulatory Document Management reduces the risk of non-compliance and avoids costly litigation by enforcing control and accountability for all suppliers, vendors and other third parties involved in the design, manufacturing and delivery of products.

•	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.

---

•	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.

•	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 overall compliance and mitigate risks; tracks performance; and creates, issues and manages corrective action plans if needed.

•	CSR and GMP Audits manage the complexities of Corporate Social Responsibility ("CSR") and ensure products are consistently produced to the quality standards through Good Manufacturing Practices ("GMP") audits.

---

•	Compliance Packets maintain critical vendor information for transparency, accountability, responsible sourcing and worker non-retaliation. This solution also stores and manages all signed compliance documents and makes them accessible throughout the supply chain.

•	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.

---

---

---

---

•	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 components;

•	Vendors focusing on the supply chain application software market, including, but not limited to, Blue Yonder (formerly JDA), o9 Solutions, Kinaxis and OM Partners;

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

•	Internal development efforts by corporate information technology departments.

•	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 and product reputation; and

---

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

---

---

---

---

---

---

•	Internet (on demand) software vendors;

•	single-industry software vendors;

•	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.

---

•	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.

---

•	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;

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

•	economic, political and market conditions.

•	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;

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

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

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

•	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;

•	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.

---

•	demand for our products;

•	timing and extent of our investment in new technology;

•	timing and extent of our acquisition of other companies;

•	level and timing of revenue;

•	expenses of sales and marketing and new product development;

•	success and related expense of increasing our brand awareness;

•	cost of facilities to accommodate a growing workforce;

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

•	costs involved in maintaining and enforcing intellectual property rights.

---

•	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, 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 United Kingdom’s exit from the European Union (“Brexit”);

•	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.

---

•	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.

---

•	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.

---

•	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, satisfy increasingly sophisticated customer requirements and achieve market acceptance.

•	vendor hardware platforms;

•	operating systems and updated versions;

•	application software products and updated versions; and

•	database management system platforms and updated versions.

---

•	knowledge, ability and experience of our employees;

•	frequent software product enhancements;

•	customer education; and

•	timeliness and quality of support services.

---

---

---

---

---

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

•	if an agreement includes cloud services such as managing the application and hosting the server that are performed over the term of the contract, this 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 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 evaluation 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.

•	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 in 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.”

ITEM 2.	PROPERTIES

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 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

---

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

---

(a)	This series includes dividends paid over the disclosed period.

*	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.

---

---

---

ITEM 6.	SELECTED CONSOLIDATED FINANCIAL DATA

(a)	Diluted per share amounts for Class A shares are shown above. Diluted per share for Class B shares under the two-class method are $0.21, $0.22, $0.39, $0.49, and $0.35 for the years ended April 30, 2020, 2019, 2018, 2017, and 2016, respectively. See Note 1(s) to the Consolidated Financial Statements.

---

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

---

---

•	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.

---

---

---

---

---

*	Included in cost of license fees and cost of subscription fees.

---

*	Includes certain unallocated expenses.

---

---

---

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

---

ITEM 8.	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

---

•	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. 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.

---

---

---

---

(a)	Diluted per share amounts for Class A shares are shown above. Diluted per share for Class B shares under the two-class method are $0.22, $0.22 and $0.39 for the years ended April 30, 2020, 2019 and 2018, respectively. See Note 1 to the Consolidated Financial Statements.

---

---

---

•	The SCM segment consists of Logility, Inc. (see Note 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 and 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.

---

---

•	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).

---

•	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.

---

---

---

*	Goodwill related to Logility, Inc., New Generation Computing, Inc., Demand Management, Inc. and their acquisitions.

---

---

---

---

*	Amounts adjusted for rounding

---

•	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.

---

---

---

---

---

---

---

---

---

*	Table may contain rounding

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.	CONTROLS AND PROCEDURES

---

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

---

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES

---

(1)	Incorporated by reference herein. Filed by the Company as an exhibit to its quarterly report filed on Form 10-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 Form 10-Q for the quarter ended January 31, 2010.

(3)	Incorporated by reference herein. Filed by the Company as an exhibit to its Registration Statement No. 33-55214 filed on Form S-8 on December 1, 1992.

(4)	Incorporated by reference herein. Filed by the Company as an exhibit to its annual report filed on Form 10-K for the fiscal year ended April 30, 2002.

(5)	Incorporated by reference herein. Filed by the Company as an appendix to its Definitive Proxy Statement filed on July 27, 2017.

(6)	Incorporated by reference herein. Filed by the Company as exhibit 10.1 to its current report on Form 8-K filed on July 15, 2016.

---

(7)	Incorporated by reference herein. Filed by the Company as exhibit 10.2 to its current report on Form 8-K filed on July 15, 2016.

(8)	Incorporated by reference herein. Filed by the Company as exhibit 10.3 to its current report on Form 8-K filed on July 15, 2016.

(9)	Incorporated by reference herein. Filed by the Company as exhibit 10.4 to its current report on Form 8-K filed on July 15, 2016.

(10)	Incorporated by reference herein. Filed by the Company as exhibit 10.1 to its current report on Form 8-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.

(1)	Recovery of previously written-off amounts.

(2)	Write-off of uncollectible accounts.

ITEM 16.	FORM 10-K SUMMARY.

---