QAD Inc. Corporate Update March 2015
Disclaimer Safe Harbor This presentation includes forward-looking statements about QAD and its business. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in QAD s SEC filings, including the company's Current Report on Form 8-K dated January 6, 2015 and the periodic reports the company files with the Securities and Exchange Commission thereafter. This presentation contains certain references to financial measures that have been adjusted to exclude certain expenses and other specified items. These financial measures differ from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ( GAAP ) in that they exclude unusual or non-recurring charges, losses, credits or gains. This presentation identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-gaap financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the Company s business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-gaap financial measures presented by other companies. QAD undertakes no obligation to update forward-looking statements. 2
About QAD Established 1979 QAD provides vertically-focused, mission-critical ERP software for global manufacturing companies Revenue $295m (TTM) Global Presence Offices in 19 Countries Employees 1,600+ Customers Employees Sites Users 4,000+ 300,000+ EMEA 33% AP 16% LA 6% EMEA 30% AP 28% Stock NASDAQ IPO 1997 QADA, QADB NA 45% NA 38% LA 5% 3
Investment Highlights 1 Established global provider of vertically-focused ERP software 2 Rapidly growing QAD Cloud ERP revenue 3 Focused on customer success 4 Solid financial model with increasing visibility 5 Experienced management team 4
QAD s Approach to ERP The Effective Enterprise Automotive Life Sciences High Technology Industrial Products Food & Beverage Consumer Products Metrics Best Practices Solutions We strive to help all of our customers to become an Effective Enterprise with every business process working at peak efficiency and perfectly aligned to their strategic goals. 5
QAD s Full Featured Software Suite Financials Financial Analysis Allocations Management Reporting General Ledger Multi-GAAP Accounts Receivables & Payables Budgeting Credit, Tax & Cash Management Governance, Risk & Compliance Cost Management Consolidations Logistics Customer Management Customer Relationship Management Sales Quotations Sales Orders Sales Analysis Pricing Configurator Customer Self Service Trade Management Manufacturing Product Data Management Lean Manufacturing Planning Manufacturing Execution Quality Management PRO/PLUS Advanced Planning & Scheduling Automated Data Collection Compliance Product Lifecycle Management Supply Chain Demand & Production Planning Procurement & Distribution Planning Sales & Operations Planning Warehousing & Release Management Transportation Management Consignment Inventory Purchasing Supplier Performance Product Line Planning Supply Chain Portal Analytics & Performance Operational Metrics Reporting Framework Workflow Alerts Business Intelligence Q-Xtend Integrated Customization Toolkit EDI ecommerce Document Management Performance Monitoring Framework Business Process Management Mobile Output Management Service & Support Field Service Scheduler Mobile Field Service Project Accounting Plant & Equipment Maintenance MRO Management Internationalization Local Regulations Local Business Local Bank Drivers Multi-Currency Multi-Language Multi-Entity Multi-GAAP Rapid Deployment 6
Strategic Product Acquisitions Transportation Management Demand and Supply Chain Management Software Quality Management Software Acquired : September 2006 Revenue (TTM) : ~$15m Growth (Last 2yrs) : ~21% Acquired : June 2012 Revenue (TTM) : ~$9m Growth (Last 2yrs) : ~20% Acquired : December 2012 Revenue (TTM) : ~$5m Growth (Last 2yrs) : ~12% 7
Scalable Go-to-Market Strategy Key Global Accounts Global Strategic Accounts Global & Regional Accounts Asia Pacific Latin America EMEA North America 270+ people in 19 countries SMB & Local Partners 45 countries 8
Global Customer Base Customer Ownership Profile Automotive Parts Consumer Products Food & Beverage High Technology Industrial Products Life Sciences Private Equity Private Public Vertical Breakout Life Sciences 14% Automotive 30% High Tech & Industrial 35% Consumer, Food & Bev. 21% Note: Data as of Q4 FY2015. 9
The QAD Cloud QAD Cloud Apps QAD Cloud Services QAD Cloud Portal 10
Adoption The Technology Adoption Cycle Today Era of Cloud ERP Cloud ERP On Premise ERP CRM Time 11
$ in millions $ in millions Our Market Opportunity: Large, Growing, Transforming Global Manufacturing ERP Global Cloud Manufacturing ERP $10,000 $8,000 $7,810 $2,000 $1,600 $1,714 $6,000 $5,652 22% $1,200 $4,000 13% $800 $762 $2,000 87% 78% $400 $0 2013 2018 $0 2013 2018 On-Premise Cloud Source: Estimated from Gartner data, $ in millions 12
ERP and the Cloud Why Cloud Now? Company Focus - Core Competency - Business Process - Rapid Access to New Features Globalization - Implementation Speed - Industry and Country Regulations - Customer and Supplier Collaboration Why Not Cloud Yet? Complexity - Integration - Highly Customized Country Adoption - Data Location Resistance to Change Reduce Risk - Cost Predictability - M&A Integration 13
The QAD Cloud Full Strength & Global ERP Flexibility Accessible Anywhere Scalable Cloud Deployment Blended Deployment On Premise Deployment TTM Subscription Revenue ($m) 25 Countries 30 26.1 28.2 10,000+ Users 25 20 15 15.7 16.4 17.7 19.4 21.6 23.5 10 Q1 FY14Q2 FY14Q3 FY14Q4 FY14Q1 FY15Q2 FY15Q3 FY15Q4 FY15 14
QAD s Cloud Opportunities Cloud Sites by Country Australia 5% China 7% Cloud Conversions Expected 3-4x uplift vs. annual maintenance revenue Lift and shift conversion Rest of World 25% France 3% Mexico 6% New Divisions Planned Rollouts Mergers & Acquisitions New locations United States 46% United Kingdom 8% Cloud Sites by Vertical New Customers Legacy ERP Divestitures Greenfield Life Sciences 23% Automotive Parts 30% High Tech & Industrial 33% Consumer, Food & Bev. 14% 15
Multiple Growth Opportunities New Divisions Cloud Conversions New Customers Continued Focus on Cloud ERP Grow Market Share Strategic Acquisitions 16
A Winning Strategy Focus on the Effective Enterprise Highly satisfied customer base evidenced by 90%+ retention rate Strong vertical focus Industry and regulation-specific functionality and knowledge Broad solution footprint Meeting global and local requirements Flexible deployment framework Cloud, On-Premise, Blended Global sales, services, support and development Rapid time to deployment 17
Experienced Leadership Team PAM LOPKER President & Founder DANIEL LENDER CFO CARTER LLOYDS Chief Marketing Officer KARL LOPKER CEO ED BOCLAIR North America JEAN-CLAUDE WALRAVENS EMEA Average QAD Tenure: More than 18 years Prior Experience: BILL KEESE Global R&D PAUL HENDERSON Asia Pacific CHRIS HAGEMAN Global Support EUGENIO RIVEROLL Latin America TONY WINTER Global Technology ANTON CHILTON Global Services 18
Financial Highlights - Sources of Revenue On Premise TTM Revenue at 1/31/2015 Cloud Licenses - Source New Customers New Divisions New Modules New Users Maintenance - High Retention License 14% Maintenance 48% Subscription 10% Services 29% Subscription - Source New Customers New Divisions Conversions New Users - Very sticky Services - New Implementations - Upgrades 19
Scale, Growth and Visibility 350 300 250 200 150 100 50 0 TTM Revenue ($m) 280.7 289.1 295.1 250.4 254.6 258.6 266.3 272.9 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Services License Maintenance Subscription TTM Revenue at 1/31/2015 * Non- Recurring 43% Recurring 57% 30 25 20 15 10 TTM Subscription Revenue ($m) 28.2 26.1 23.5 21.6 19.4 17.7 15.7 16.4 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 TTM Gross Margin Contribution at 1/31/2015 * Non - Recurring 27% Recurring 73% * Recurring includes Subscription and Maintenance revenues. Non-Recurring includes License and Services revenues. 20
Significant Cloud Conversion Opportunity $270k Annual Maint $900k Annual Cloud Customer Case Study Consumer Vertical Customer Since 2003 240 Users Lift and Shift Conversion 1,000 900 800 700 600 500 400 300 200 100 0 Lifetime License 3.2x Annual Uplift 2010 2011 2012 2013 2014 2015 20XX Catalysts 1. Hardware obsolescence 2. Internal resource constraints 3. Upgrade path 21
Target Model Future Expansion Opportunities FY2012 FY2013 FY2014 FY2015 Target Model Revenue 100% 100% 100% 100% 100% Gross Margin 57% 57% 56% 55% 60+% Expenses (% of Revenue) Research & Development Sales & Marketing General & Administrative Adjusted EBITDA Margin * 14% 15% 15% 14% 14% 24% 25% 25% 24% 25% 12% 12% 12% 12% 9-10% 11% 8% 8% 9% 15+% * Calculated as GAAP net income, excluding net interest expense, depreciation and amortization, stock-based compensation, gain/loss adjustments on the Company s interest rate swap and income tax expense, divided by total revenue. 22
Strong Balance Sheet Deferred Revenue ($m) 120 100 80 60 40 20 0 104.2 92.7 96.1 101.5 90.6 86.0 78.9 72.1 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Maintenance License Service Subscription Cash & Equivalents ($m) Solid Maintenance base Subscriptions Growth Foreign Exchange Effect 140 120 120.5 Billing Cycles 100 80 73.8 69.4 65.8 76.0 78.2 75.3 71.4 - Quarterly v Annually 60 40 Solid Cash Position 20 0 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 23
Equity Structure Economic Ownership Voting Ownership Share Classes Other Shareholders 53% Pam and Karl Lopker 47% Other Shareholders 44% Pam and Karl Lopker 56% QADB 3.193 (17.2%) QADA 15.336 (82.8%) QADB 1 Vote/Share 100% Dividends $0.06/share per quarter QADA 1/20 th Vote/Share 120% Dividends $0.072/share per quarter Basic Shares (M) Note : includes 450,000 QADA shares issued pursuant to exercise of Offering Underwriter s option on February 18, 2015 24
Investment Highlights 1 Established global provider of vertically-focused ERP software 2 Rapidly growing QAD Cloud ERP revenue 3 Focused on customer success 4 Solid financial model with increasing visibility 5 Experienced management team 25