JDA SOFTWARE GROUP INC
10-Q, 1997-05-15
COMPUTER PROGRAMMING SERVICES
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<PAGE>   1


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              Washington DC  20549

                                   FORM 10-Q

(Mark One)

          (X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 1997

                                       OR

         (  )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

  For the Transition Period from ____________________ to ____________________

                        Commission File Number: 0-27876

                            JDA SOFTWARE GROUP, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                             86-0787377

     (State or other jurisdiction of               (I.R.S. Employer
      incorporation or organization)              Identification No.)


                      11811 NORTH TATUM BLVD., SUITE 2000
                             PHOENIX, ARIZONA 85028
                                 (602) 404-5500

         (Address and telephone number of principal executive offices)


Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                          YES    X        NO
                              --------       --------

The number of shares outstanding of the Registrant's Common Stock, $0.01 par
value, was 13,027,781 as of April 30, 1997.





<PAGE>   2
                            JDA SOFTWARE GROUP, INC.

                                   FORM 10-Q

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                             PAGE NO.
                                                                             --------
<S>     <C>                                                                   <C>
PART I:  FINANCIAL INFORMATION

         Item 1:    Financial Statements

                    Condensed Consolidated Balance Sheets as of                3
                    March 31, 1997 and December 31, 1996

                    Condensed Consolidated Statements of Income                4
                    for the Three Months Ended March 31, 1997 and 1996

                    Condensed Consolidated Statements of Cash Flows for        5
                    the Three Months Ended March 31, 1997 and 1996

                    Notes to Condensed Consolidated Financial Statements       6


         Item 2:    Management's Discussion and Analysis of Financial          7
                    Condition and Results of Operations


PART II:  OTHER INFORMATION

         Item 1:    Legal Proceedings                                         18

         Item 6:    Exhibits and Reports on Form 8-K                          18

         Signature                                                            19
</TABLE>





                                       2
<PAGE>   3
PART I:  FINANCIAL INFORMATION
ITEM I:  FINANCIAL STATEMENTS


                            JDA SOFTWARE GROUP, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                      MARCH 31,             DECEMBER 31,
                                                                        1997                    1996
                                                                      ---------             ------------
                                                                     (UNAUDITED)
<S>                                                                    <C>                      <C>
                                                  ASSETS
CURRENT ASSETS:
         Cash and cash equivalents                                      $30,248                 $30,986
         Accounts receivable - net                                       18,094                  16,954
         Prepaid expenses and other current assets                        1,094                     881
         Deferred tax asset                                                 755                     786
                                                                        -------                 -------
         Total Current Assets                                            50,191                  49,607
                                                                        -------                 -------
         Property and equipment, net                                      8,672                   7,752
         Goodwill, net                                                    1,669                   1,697
                                                                        -------                 -------
                                                                        $60,532                 $59,056
                                                                        =======                 =======

                                   LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
         Accounts payable                                               $ 1,024                   1,886
         Income taxes payable                                             1,107                     639
         Accrued and other current liabilities                            4,925                   5,503
         Deferred revenue                                                 1,534                   1,747
                                                                        -------                 -------
         Total current liabilities                                        8,590                   9,775
         Other liabilities                                                  467                     620
                                                                        -------                 -------
         Total liabilities                                                9,057                  10,395
                                                                        -------                 -------
         Total stockholders' equity                                      51,475                  48,661
                                                                        -------                 -------
                                                                        $60,532                 $59,056
                                                                        =======                 =======
</TABLE>




           SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.





                                       3
<PAGE>   4
                            JDA SOFTWARE GROUP, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                (in thousands, except per share data; unaudited)


<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                            -----------------------------
                                                            March 31,           March 31,
                                                              1997                1996   
                                                            ---------           --------
 <S>                                                          <C>               <C>
 REVENUES:
   Software licenses                                          $ 7,866           $ 5,013
   Consulting, maintenance and other services                   8,978             4,391 
                                                              -------           --------
          Total revenues                                       16,844             9,404

 COST OF REVENUES:
   Software licenses                                              200                25
   Consulting, maintenance and other services                   6,704             2,958 
                                                              -------           --------
          Total cost of revenues                                6,904             2,983 
                                                              -------           --------
 GROSS PROFIT                                                   9,940             6,421 
                                                              -------           --------
 OPERATING EXPENSES:
   Product development                                          2,235             1,220
   Sales and marketing                                          2,517             1,628
   General and administrative                                   1,689             1,140 
                                                              -------           --------
          Total operating expenses                              6,441             3,988 
                                                              -------           --------
 INCOME FROM OPERATIONS                                         3,499             2,433
   Other income (expense)                                         356               (65)
                                                              -------           ------- 
 INCOME BEFORE INCOME TAXES                                     3,855             2,368
   Provision for income taxes                                   1,542               941 
                                                              -------           --------
 NET INCOME                                                   $ 2,313           $ 1,427
                                                              =======           =======

 NET INCOME PER SHARE                                         $  0.18           $  0.13
                                                              =======           =======

 SHARES USED IN PER SHARE CALCULATION:                         13,168            11,189
                                                              =======           =======
</TABLE>





           SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.





                                       4
<PAGE>   5
                            JDA SOFTWARE GROUP, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (in thousands, unaudited)

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                           -------------------------------
                                                                           March 31,            March 31,
                                                                             1997                 1996  
                                                                           ----------           ---------
<S>                                                                         <C>                 <C>
OPERATING ACTIVITIES:
  Net income                                                                $  2,313            $  1,427
  Adjustments to reconcile net income to net cash provided by
operating activities:
     Depreciation and amortization                                               369                 186
     Accounts receivable allowance                                                 7                 207
     Unrealized foreign translation adjustment                                  (221)
     Deferred income taxes and other                                            (105)                (80)

  Changes in assets and liabilities:
     Accounts receivable                                                      (1,147)               (794)
     Prepaid expenses and other current assets                                  (213)               (276)
     Accounts payable                                                           (862)                 (5)
     Accrued and other liabilities                                              (577)               (353)
     Income taxes payable                                                        468                 474
     Deferred revenue                                                           (213)              1,530
     Other                                                                                           198
                                                                            ---------           --------
        Net cash (used in) provided by operating activities                     (181)              2,514
                                                                            ---------            -------

INVESTING ACTIVITIES:
  Redemption of investments                                                       --               14,649
  Purchase of equipment and leasehold improvements                            (1,261)               (492)
                                                                            ---------            --------
        Net cash (used in) provided by investing activities                   (1,261)             14,157
                                                                            ---------           --------

FINANCING ACTIVITIES:
  Initial public offering transactions:
        Issuance of common stock                                                                  25,729
        Redemption of Series B preferred stock                                                    (7,500)
        Payments on notes to stockholders                                                         (5,264)
  Stockholder transactions:
        Payments on notes payable to stockholders                                                (14,649)
  Net payments on bank line of credit                                                               (575)
  Issuance of common stock - employee stock purchase plan                        739
  Capital lease payments and other                                               (35)                (35)
                                                                            ---------           ---------
        Net cash provided by (used in) financing activities                      704              (2,294)
                                                                            ---------           ---------

NET (DECREASE) INCREASE IN CASH                                                 (738)             14,377

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                30,986                 498
                                                                            --------            --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                     $30,248             $14,875
                                                                            ========            ========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for:
        Interest                                                                   7                 887
                                                                            ========            ========
        Income taxes                                                             955                 363
                                                                            ========            ========
  Conversion of Series A preferred stock                                                           7,500
                                                                                                ========
</TABLE>


           SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.





                                       5
<PAGE>   6
                            JDA SOFTWARE GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   UNAUDITED


1.  BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements.  In the opinion of management,
all adjustments and reclassifications considered necessary for a fair and
comparable presentation have been included and are of a normal recurring
nature.  Operating results for the three months ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.

2.  SUBSEQUENT EVENT - ACQUISITION OF LIOCS CORPORATION

         On April 21, 1997, the Company acquired all of the outstanding stock
of LIOCS Corporation ("LIOCS") for $2.3 million.  LIOCS is a leading provider
of advanced distribution and warehouse management solutions.  The Company paid
$1.4 million of the purchase price at closing, with the remaining balance to be
paid in four uneven installments over an 18 month period.  Certain of these
installments are contingent upon LIOCS' product offerings achieving specific
testing and performance milestones.  Failure to meet such milestones will
release the Company from the related payment obligations and reduce the
purchase price.  The results of LIOCS' operations will be combined with those
of the Company starting at the date of acquisition.

         The acquisition will be accounted for using the purchase method of
accounting.  Accordingly, a portion of the purchase price will be allocated to
the net assets acquired based on their estimated fair values.  The excess of
the purchase price over the fair value of the net assets acquired will be
recorded as goodwill and amortized on a straight-line basis over a 15 year
period.  Consolidated pro forma revenues, assuming the acquisition had taken
place at the beginning of the fiscal 1996, would have been $51.0 million for
fiscal 1996, and $17.6 million for the three months ended March 31, 1997.
Consolidated pro forma net income and net income per share would not have been
materially different than the reported amounts for these two periods.  The pro
forma amounts are not necessarily indicative of the actual results that would
have occurred had the acquisition been consummated at the beginning of fiscal
1996, or of the future operations of the combined companies.

3.  NET INCOME PER SHARE

         The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS No.  128") in
February 1997.  The Company is required to implement SFAS No. 128 for interim
and annual periods ending after December 15, 1997.  SFAS No. 128 prescribes a
presentation of basic net income per share, which is calculated utilizing only
weighted average common shares outstanding, and a net income per share -
assuming dilution.  After the effective date, all prior period earnings per
share data must be restated to conform with SFAS No. 128.  Basic net income per
share and net income per share - assuming dilution for the quarterly periods
ended March 31, 1997 and 1996 would have been $.18 and $.18, and $.13 and $.13,
respectively.





                                       6
<PAGE>   7
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         This section of the Report contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Discussion containing such forward-looking statements may be found in
Management's Discussion and Analysis of Financial Condition and Results of
Operations under the captions "Overview," "Three Months Ended March 31, 1997
and 1996," "Liquidity and Capital Resources," and "Risk Factors."  Actual
results for future periods could differ materially from those discussed in this
section as a result of the various risks and uncertainties discussed herein.  A
comprehensive summary of such risks and uncertainties can be found in the
Company's registration statement on Form S-1 (File No. 333-15659), which was
declared effective on November 21, 1996.

OVERVIEW

         JDA is an international provider of comprehensive enterprise-wide
software solutions that address the mission-critical business information
requirements of retailing organizations.

         In 1986 the Company introduced MMS, its first enterprise retail
information solution, based on the IBM AS/400 platform. The Company's
development efforts through 1993 were focused exclusively on enhancements,
revisions and upgrades to MMS, which is currently in its fourth generation
release. In 1994, the Company acquired DSS, an in-store system, from JDA
Software Services Ltd. ("JDA Canada"), a then-unaffiliated Canadian company.
Since 1994 the Company has significantly increased its product development
expenditures to develop products for emerging, open platforms. As a result of
these efforts, the Company commercially released ODBMS, an open, client/server
enterprise system, in September 1996, and Win/DSS, a Windows-based in-store
system, in January 1997.  On August 15, 1996 the Company acquired JDA Canada in
exchange for 143,926 shares of the Company's newly issued Common Stock. The
acquisition was accounted for as a purchase, and the Company recorded $1.7
million in goodwill which it is amortizing over 15 years.

         The Company has historically derived the substantial majority of its
revenues from software licenses and consulting, maintenance and other services
relating to MMS, and the Company expects that revenues related to MMS will
continue to comprise a substantial portion of the Company's total revenues for
the foreseeable future.  Nevertheless, the Company expects that revenues
related to MMS, which accounted for 95%, 91%, 80% and 67% of total revenues in
1994, 1995, 1996 and the three months ended March 31, 1997, respectively, will
continue to decline as a percentage of the Company's total revenues as market
acceptance of the Company's newer products, particularly ODBMS and Win/DSS,
increases. The Company further expects that revenues attributable to the
license of MMS and ODBMS enterprise systems will comprise the substantial
majority of software licenses revenues for the foreseeable future.

         Consulting, maintenance and other services revenues are derived from a
range of services, including system design and implementation and, to a lesser
extent, software maintenance and support, and training. Historically, the level
of consulting, maintenance and other services revenues has approximated on an
annual basis the level of software license revenues. Consulting, maintenance
and other services revenues were 49% of total revenues in each of 1994, 1995
and 1996, and 53% of the total revenues for the three months ended March 31,
1997. Gross margin on consulting, maintenance and other services has
historically been significantly lower than gross margin on software licenses
and the Company expects this relationship to continue. Consulting, maintenance
and other services in support of international licenses typically have lower
gross margins than those achieved domestically due to generally lower
prevailing billing rates in certain of the Company's international markets.
Therefore, any growth in the Company's international operations would likely
result in further declines in gross margin on consulting, maintenance and other
services.

         The Company is pursuing a strategy of addressing international markets
by developing localized versions of its products and establishing international
subsidiaries with direct sales and consulting capabilities. International
revenues, which include revenues from international subsidiaries





                                       7
<PAGE>   8
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


and export sales, comprised 28%, 39%, 43% and 51%, respectively, of total
revenues in each of 1994, 1995, 1996 and the three months ended March 31, 1997.
The Company has operations in the U.K., Singapore, Canada, Chile, Mexico and
Germany and plans to continue expansion of its international operations.
However, there can be no assurance that the Company's international expansion
will be successful. In addition, the opening of new offices by the Company
typically results in initial recruiting, training and other start-up expenses in
advance of anticipated revenues and reduced labor efficiencies associated with
the introduction of products to a new customer base.  Other risks inherent in
the Company's international business activities include changes in regulatory
requirements, tariffs and other trade barriers, costs and risks of localizing
products, longer accounts receivable payment cycles, potentially adverse tax
consequences, currency fluctuations, repatriation of earnings and burdens of
complying with a wide variety of local laws.

         To the extent the Company's international operations expand, the
Company expects that an increasing portion of its international license and
consulting, maintenance and other services revenues will be denominated in
foreign currencies, subjecting the Company to fluctuations in foreign currency
exchange rates. Historically, the Company has conducted a substantial majority
of its business in currencies which have been relatively stable, and exposure
to fluctuations in such currencies has been considered minimal. Accordingly,
the Company does not currently engage in foreign currency hedging transactions.
However, as the Company continues to expand its international operations,
exposures to gains and losses on foreign currency transactions may increase.
The Company may choose to limit such exposure by entering into forward foreign
exchange contracts or engaging in similar hedging strategies. There can be no
assurance that any currency exchange strategy would be successful in avoiding
exchange-related losses.

         The Company's revenues are derived primarily from non-refundable
license fees for its software products and from fees for services complementary
to its products, including software consulting, maintenance and training. The
Company recognizes revenues in accordance with the provisions of American
Institute of Certified Public Accountants Statement of Position No. 91-1,
Software Revenue Recognition. Accordingly, software license revenue is
recognized upon the shipment of a product to the customer if collection is
probable and the Company's remaining obligations under the license agreement
are insignificant. License revenues for licenses with remaining significant
obligations are deferred until the Company's related obligations become
insignificant. Consulting, maintenance and other services are performed and
billed under separate agreements related to the implementation of the Company's
software products, and such revenues generally are recorded when the services
are performed. Maintenance revenues from ongoing customer support and product
upgrades are billed on a monthly basis and are recorded as revenue in the
applicable month.

THREE MONTHS ENDED MARCH 31, 1997 AND 1996

         Revenues

                 Total revenues increased 79% from $9.4 million in the three
months ended March 31, 1996 to $16.8 million in the three months ended March
31, 1997.  International revenues comprised 35% and 51% of total revenues in
the three months ended March 31, 1996 and 1997, respectively.  The increase in
international revenues as a percentage of total revenues was primarily
attributable to expanded sales and marketing efforts in Europe, Asia, and Latin
America, plus the acquisition of JDA Canada on August 15, 1996.

                 Software Licenses.  Software licenses revenues increased by
57% from $5.0 million in the three months ended March 31, 1996 to $7.9 million
in the three months ended March 31, 1997.  The





                                       8
<PAGE>   9
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


increase was primarily due to a 113% increase in international software
licenses primarily attributable to expanded sales and marketing efforts in
Europe, Asia, and Latin America, plus the acquisition of JDA Canada, combined
with a 17% increase in domestic licenses.  Increased software licenses revenues
were also attributable to increased sales of the Company's new products, ODBMS
(enterprise) and Win/DSS (in-store).

                 Consulting, Maintenance and Other Services.  Consulting,
maintenance and other services revenues increased by 104% from $4.4 million in
the three months ended March 31, 1996 to $9.0 million in the three months ended
March 31, 1997.  The increase was primarily attributable to increased software
license revenues and associated implementations, both internationally and
domestically.

         Cost of Revenues

                 Cost of Consulting, Maintenance and Other Services.  Cost of
consulting, maintenance and other services consists primarily of consultant
salaries and other personnel related expenses incurred in system implementation
projects and software support services.  These costs increased by 127% from
$3.0 million in the three months ended March 31, 1996 to $6.7 million in the
three months ended March 31, 1997.  These costs represented 67% and 75%,
respectively, of consulting, maintenance and other services revenues in the
three months ended March 31, 1996 and 1997.  The increase from 1996 to 1997 was
primarily due to expenditures associated with the Company's domestic and
international growth and expansion.

         Gross Profit

                 Gross profit increased by 55% from $6.4 million in the three
months ended March 31, 1996 to $9.9 million in the three months ended March 31,
1997.  Gross profit as a percentage of total revenues decreased from 68% in the
three months ended 1996 to 59% in the three months ended March 31, 1997.  The
decrease was primarily attributable to both a lower mix of software license
revenues, which decreased as a percentage of total revenues from 53% in 1996 to
47% in 1997, and higher expenditures on consulting, maintenance and other
services associated with the Company's domestic and international growth and
expansion.

         Operating Expenses

                 Product Development.  Product development expenses increased
by 83%, from $1.2 million in the three months ended March 31, 1996 to $2.2
million in the three months ended March 31, 1997, representing 13% of total
revenues in both periods.  The increase in product development expenses was
primarily a result of an increase in the number of product development
personnel from 56 as of March 31, 1996 to 103 as of March 31, 1997.
Significant product development efforts in the three months ended March 31,
1997 included the continued development of ODBMS and Win/DSS and continued
enhancements to MMS.  The Company believes that a continued commitment to
product development will be required for the Company to remain competitive.
Accordingly, the Company intends to continue to allocate substantial resources
to product development.  Product development costs subsequent to the
achievement of technological feasibility have not been significant during these
periods and, accordingly, all such costs have been expensed as incurred.

                 Sales and Marketing.  Sales and marketing expenses increased
by 55%, from $1.6 million in the three months ended March 31, 1996 to $2.5
million in the three months ended March 31, 1997, representing 17% and 15% of
total revenues, respectively.  The increase in absolute dollars is due to





                                       9
<PAGE>   10
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


the addition of sales and marketing personnel and related expenses to implement
the Company's strategy to increase its presence in international and domestic
materials.

                 General and Administrative.  General and administrative
expenses increased by 48%, from $1.1 million in the three months ended March
31, 1996 to $1.7 million in the three months ended March 31, 1997, representing
12% and 10% of total revenues, respectively.  The increase in absolute dollars
is primarily due to the addition of administrative personnel to support the
Company's growth.  The Company anticipates that general and administrative
expenses may continue to increase in absolute dollars as the Company expands
its operations.

                 Provision for Income Taxes.  The income tax provisions include
tax provisions for U.S. federal income taxes and reflect effective tax rates of
40% in both years.  Such tax rates approximate statutory federal, state and
foreign tax rates after a reduction for U.S.  research and development expense
tax credits.

LIQUIDITY AND CAPITAL RESOURCES

         Since its inception, the Company has financed its operations primarily
through cash generated from operations, public sales of equity securities and,
to a lesser extent, from borrowings under its bank line of credit.  As of March
31, 1997, the Company had $30.2 million in cash and cash equivalents and $5.0
million available under its bank line of credit.

         The Company's operating activities provided cash of $2.5 million
during the three months ended March 31, 1996 and utilized cash of $181,000
during the three months ended March 31, 1997.  Cash from operating activities
results from the Company's profitable operations and has been utilized for
working capital purposes including increases in accounts receivable.

         The Company's investing activities provided cash of $14.2 million
during the three months ended March 31, 1996 and utilized cash of $1.3 million
during the three months ended March 31, 1997.  The 1996 activity includes the
redemption of $14.6 million in restricted short-term investments acquired
during 1995 and capital expenditures of $492,000.  The 1997 activity consists
of capital expenditures for property and equipment that will be used to support
the Company's growth.

         The Company's financing activities utilized cash of $2.3 million
during the three months ended March 31, 1996 and provided cash of $704,000
during the three months ended March 31, 1997.  The 1996 activity includes the
issuance of 2,182,866 shares of the Company's Common Stock in an initial public
offering on March 20, 1996, the net proceeds of which were offset by the
repayment of stockholder notes and the redemption of preferred stock.  The 1997
activity consists of proceeds from the issuance of Common Stock under the
Company's Employee Stock Purchase Plan and payments on capital lease
obligations.  At March 31, 1997, the Company had no outstanding borrowings
under its existing $5.0 million bank line of credit.  This line of credit
expires on July 1, 1998, and the Company intends to seek renewal at that time.

         The Company believes that its cash and cash equivalents, bank line of
credit and funds generated from operations will provide adequate liquidity to
meet the Company's planned capital and operating requirements during the next
twelve months.





                                       10
<PAGE>   11
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


RISK FACTORS


         Fluctuations in Quarterly Operating Results.  The Company's quarterly
operating results have varied and are expected to continue to vary in the
future. These fluctuations may be caused by many factors, including, among
others: the size and timing of individual orders; competitive pricing
pressures; customer order deferrals in anticipation of new products; variation
of consulting, maintenance and other services as a percentage of total
revenues; timing of introduction or enhancement of products by the Company or
its competitors; market acceptance of new products; technological changes in
platforms supporting the Company's products; changes in networking or
communication technology; changes in the Company's operating expenses;
personnel changes; foreign currency exchange rates; fluctuations in the level
of warranty claims; and general industry and economic conditions.

         The Company's business has experienced and is expected to continue to
experience some degree of seasonality due in large part to its retail
customers' buying cycles, with license revenues typically higher in the fourth
quarter and consulting revenues typically higher in the first quarter. Further,
software license gross margin is significantly greater than consulting,
maintenance and other services gross margin. As a result, overall gross margin
has fluctuated significantly based on revenue mix, and the Company expects this
trend to continue.

         Historically, a significant portion of the Company's quarterly
revenues have been derived from relatively large licenses to a limited number
of customers, and the Company currently anticipates that this trend will
continue. Any significant cancellation or deferral of customer orders could
have a material adverse effect on the Company's operating results in any
particular quarter.

         The Company's expense levels are based, in part, on its expectations
as to future revenues and to a large extent are fixed. Licenses of the
Company's products are typically accompanied by a significant amount of systems
implementation consulting. The Company's consulting resources must be managed
to meet future sales, and additional consulting personnel must be hired and
trained in advance of anticipated license revenues. The Company may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall and, accordingly, any significant shortfall of demand in relation to
the Company's expectations or any material delay of customer orders would have
an almost immediate adverse effect on the Company's operating results.

         As a result of the foregoing and other factors, the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. Fluctuations in operating results may also result in volatility in
the price of the shares of the Company's Common Stock.

         Dependence on Retail Industry.  The Company has derived substantially
all of its revenues to date from the license of software products and related
services to the retail industry, and its future growth is critically dependent
on increased sales to the retail industry. The success of the Company's
customers is intrinsically linked to economic conditions in the retail
industry, which in turn are subject to intense competitive pressures and are
affected by overall economic conditions. In addition, the Company believes the
license of its products is relatively discretionary and generally involves a
significant commitment of capital, because the Company's products are often
accompanied by large scale hardware purchases or commitments. As a result,
although the Company believes its products can assist retailers in a
competitive environment, demand for the Company's products and services could
be disproportionately affected by instability or downturns in the retail
industry which may cause customers to exit the industry or delay, cancel or
reduce any planned expenditures for





                                       11
<PAGE>   12
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


information management systems and software products. The Company also believes
that the retail industry is experiencing a period of increased consolidation,
which has in the past and may in the future affect the demand for the Company's
products. Recent results in the overall retail industry have been
disappointing, and the Company anticipates that existing or prospective
customers may be experiencing or may in the future experience severe financial
hardship. There can be no assurance that the Company will be able to continue
its revenue growth or sustain its profitability on a quarterly or annual basis
or that its results of operations will not be adversely affected by continuing
or future downturns in the retail industry. Any resulting decline in demand for
the Company's products and services would have a material adverse effect on the
Company's business, results of operations and financial condition.

         Management of Growth.  The growth in the size and complexity of the
Company's business and expansion of its product lines and its customer base
have placed and are expected to continue to place a significant strain on the
Company's management and operations. The Company anticipates that continued
growth, if any, will require it to recruit and hire a substantial number of new
employees, including consulting and product development personnel, both
domestically and abroad. In particular, the Company's ability to undertake new
projects and increase license revenues is substantially dependent on the
availability of the Company's consulting personnel to assist in the licensing
and implementation of the Company's solutions. The Company will not be able to
continue to increase its business at historical rates without adding
significant numbers of trained consulting personnel. Accordingly, the Company
is currently attempting to significantly increase consulting capacity in
anticipation of future revenues. In their first year of employment by the
Company, new consulting personnel typically spend between two to ten weeks in
training, during which period they do not generate revenues. To the extent
anticipated revenues fail to materialize following the hiring and training of
new personnel, the Company's operating results would be adversely affected.
There can be no assurance that qualified personnel will be located, retained or
trained in a timely manner. In the event the Company is unable to increase
sufficiently its consulting capacity, the Company may be required to forego
licensing opportunities or become increasingly dependent on systems integrators
and professional consulting firms to provide implementation services for its
products. The Company's ability to compete effectively and to manage future
growth, if any, also will depend on its ability to continue to implement and
improve operational, financial and management information systems on a timely
basis and to expand, train, motivate and manage its work force. Accordingly,
the Company's future operating results will depend on the ability of its
management and other key employees to continue to implement and improve its
systems for operations, financial control and information management, to
recruit, train and manage its employee base, in particular its direct sales
force and consulting services organization, and to deal effectively with
third-party systems integrators and consultants. There can be no assurance that
the Company will be able to manage or continue to manage its recent or any
future growth, and any failure to do so would have a material adverse effect on
the Company's business, operating results and financial condition.

         Ability to Attract and Retain Technical Personnel.  The Company is
heavily dependent upon its ability to attract, retain and motivate skilled
technical and managerial personnel, especially highly skilled engineers
involved in ongoing product development and consulting personnel who assist in
the license and implementation of the Company's solutions. In particular, the
Company's ability to install, maintain and enhance its enterprise products is
substantially dependent upon its ability to locate, hire and train qualified
software engineers. The market for such individuals is intensely competitive,
particularly in foreign markets. In this regard the Company, as part of its
strategy, plans to significantly increase the number of consulting personnel in
connection with the roll-out of its ODBMS and Win/DSS products and to support
continued development and implementation of its MMS product line. Given the
critical role of the Company's product development and consulting staffs, the
inability to recruit successfully or the loss of a significant part of its
product development or





                                       12
<PAGE>   13
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


consulting staffs would have a material adverse effect on the Company. The
software industry is characterized by a high level of employee mobility and
aggressive recruiting of skilled personnel. There can be no assurance that the
Company will be able to retain its current personnel, or that it will be able
to attract, assimilate or retain other highly qualified technical and
managerial personnel in the future.  The inability to attract, hire or retain
the necessary technical and managerial personnel could have a material adverse
effect upon the Company's business, operating results and financial condition.

         Uncertain Market for ODBMS and Win/DSS.  The Company has recently
released ODBMS and Win/DSS. Both products are open, client/server solutions.
The retail industry has only recently begun limited adoption of open,
client/server information systems. The Company believes that retailers in
general may be relatively cautious in adopting new technologies. In addition,
many retailers do not have the personnel or staff required to implement,
operate and maintain an open, client/server system, and the difficulties
associated with implementing new technology may slow or prevent adoption of the
Company's new products. Because the market for these products is new and
evolving, it is difficult to assess or predict with any assurance the growth
rate, if any, and size of this market. There also can be no assurance that the
market for ODBMS or Win/DSS will develop, or that either of these products or
related services will be adopted or utilized. If the market fails to develop,
develops more slowly than expected or becomes saturated with competitors, or if
the Company's products do not achieve market acceptance, the Company's
business, operating results and financial condition will be materially
adversely affected.

         The Company is directing a significant amount of its product
development expenditures to the ongoing development of ODBMS and Win/DSS and a
significant amount of its sales and marketing resources to the full commercial
introduction of ODBMS and Win/DSS. A significant effort is still required to
develop and release additional application modules for these products. The
Company has limited experience in developing and marketing products for open
system applications. As a result, there can be no assurance that ODBMS and
Win/DSS will not require substantial software enhancements or modifications to
satisfy performance requirements of customers or to fix design defects or
previously undetected errors. It is common for complex software programs such
as ODBMS and Win/DSS to contain undetected errors when first released, which
are discovered only after the product has been used over time with different
computer systems and in varying applications and environments. While the
Company is not aware of any significant technical problems with these products,
there can be no assurance that errors will not be discovered, or if discovered,
that they will be successfully corrected on a timely basis, if at all. The
Company's future business growth is substantially dependent on the continued
development, introduction and market acceptance of ODBMS and Win/DSS. If
customers experience significant problems with implementation of ODBMS and
Win/DSS or are otherwise dissatisfied with the functionality or performance of
ODBMS or Win/DSS, or if either of these products fails to achieve market
acceptance for any reason, the Company's business, operating results and
financial condition will be materially adversely affected.

         Product Concentration.  The Company has derived substantially all of
its revenues from the license of a limited number of information management
software applications for the retail industry and consulting and maintenance
services related to such applications. Software licenses and related
consulting, maintenance and other services revenues from the Company's MMS
product line represented over 90% of the Company's revenues in each of 1994 and
1995, 80% in 1996, and 67% in the three months ended March 31, 1997.  The
Company expects revenues related to this product will continue to account for a
substantial but reduced percentage of total revenues as market acceptance of
the Company's newer products increases. The life cycle of the MMS product line
is difficult to estimate due in large measure to the potential effect of new
products, applications and product enhancements, including those introduced by
the Company, changes in the retail industry and future competition. The Company
expects that revenues attributable to its MMS and ODBMS enterprise





                                       13
<PAGE>   14
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


products will comprise the substantial majority of software license revenues
for the foreseeable future. Any decline in MMS revenues, to the extent not
offset by increases in revenues from other products, would have a material
adverse effect on the Company's business, operating results and financial
condition.

         International Operations.  In 1994, 1995, 1996 and the three months
ended March 31, 1997, international revenues, which include revenues from
international subsidiaries and export sales, comprised 28%, 39%, 43% and 51%,
respectively, of the Company's revenues. The Company expects that international
revenues will continue to account for a significant percentage of the Company's
revenues for the foreseeable future, and the Company intends to continue
expansion of its international infrastructure. Although the Company maintains
operations in the U.K., Singapore, Canada, Chile, Mexico and Germany, and is
currently investing significant resources in its international operations,
there can be no assurance that the Company will be successful in expanding its
international operations. The Company anticipates that continued growth of its
international operations will require the Company to recruit and hire a number
of new consulting, sales and marketing and support personnel in the countries
in which the Company has established or will establish operations. In addition,
the Company has only limited experience in developing localized versions of its
products and in marketing and distributing its products internationally.
International rollout of the Company's products requires significant investment
by the Company in advance of anticipated future revenues. The opening of new
offices by the Company typically results in initial recruiting and training
expenses and reduced labor efficiencies associated with the introduction of
products to a new market. In particular, successful introduction of the
Company's product into new markets requires the Company to locate and hire
qualified local sales and consulting personnel and train them in the operation
of the Company's products. There can be no assurance that the countries in
which the Company operates will have a sufficient pool of qualified personnel
for the Company to hire from, or that the Company will be successful at hiring,
training or retaining such personnel. In addition, there can be no assurance
that the Company will be able to successfully localize, market, sell and
deliver its products internationally. The inability of the Company to
successfully expand its international operations in a timely manner could
materially adversely affect the Company's business, operating results and
financial condition.

         There are a number of other risks inherent in the Company's
international business activities, including unexpected changes in regulatory
requirements, tariffs and other trade barriers, costs and risks of localizing
products for foreign countries, longer accounts receivable payment cycles,
potentially adverse tax consequences, currency fluctuations, repatriation of
earnings and the burdens of complying with a wide variety of foreign laws. In
addition, consulting, maintenance and other services in support of
international licenses typically have lower gross margins than those achieved
domestically due to lower prevailing billing rates in certain of the Company's
international markets. Therefore, planned growth in the Company's continued
operations may result in further declines in gross margin on consulting,
maintenance and other services. To the extent the Company's international
operations expand, the Company expects that an increasing portion of its
international license and consulting, maintenance and other services revenues
will be denominated in foreign currencies, subjecting the Company to
fluctuations in foreign currency exchange rates. The Company does not currently
engage in foreign currency hedging transactions.  However, as the Company
continues to expand its international operations, exposures to gains and losses
on foreign currency transactions may increase. The Company may choose to limit
such exposure by entering into forward foreign exchange contracts or engaging
in similar hedging strategies. There can be no assurance that any currency
exchange strategy would be successful in avoiding exchange-related losses. In
addition, revenues of the Company earned in various countries where the Company
does business may be subject to taxation by more than one jurisdiction, thereby
adversely affecting the Company's earnings.





                                       14
<PAGE>   15
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


         Competition.  The market for retail information systems software is
intensely competitive. The Company believes the principal competitive factors
in such market are product quality, reliability, performance and price, vendor
and product reputation, financial stability, features and functions, ease of
use and quality of support. A number of companies offer competitive products
addressing certain of the Company's target markets. In the enterprise systems
market, the Company competes with in-house systems developed by the Company's
targeted customers and with third-party developers such as Intrepid, Island
Pacific, Radius PLC, Retek (a subsidiary of HNC Software, Inc.), STS Systems
and Richter Management Services, among others. In addition, the Company
believes that new market entrants may attempt to develop fully integrated
enterprise-level systems targeting the retail industry. In particular, SAP
Aktiengesellschaft announced in August 1996 its intention to release an
integrated client/server enterprise system competitive with the Company's
products. In January 1997, Intrepid announced the formation of a joint
development and marketing relationship with, and a minority equity investment
by, PeopleSoft, a provider of enterprise applications software. At that time,
the parties projected the availability of products expected to compete directly
with the Company's ODBMS enterprise product in the second half of 1997. In the
in-store systems market, which is more fragmented than the enterprise market,
the Company competes with major systems manufacturers such as AT&T/NCR, IBM and
ICL, as well as software companies such as Applied Intelligence Group, CRS
Business Computers, Inc., Post Software International, STS Systems, GERS Retail
Systems and Gateway Data Sciences Corporation, among others. In the market for
consulting services, the Company is pursuing a strategy of forming informal
working relationships with leading retail systems consulting groups such as
Andersen Consulting, Ernst & Young LLP, Price Waterhouse's Management Horizons
Division and other similar major systems integrators. However, these
integrators, as well as independent consulting firms such as the ISSC Division
of IBM, also represent potential competition to the Company's consulting
services group. Many of the Company's existing competitors, as well as a number
of potential new competitors, have significantly greater financial, technical
and marketing resources than the Company. There can be no assurance that the
Company will be able to compete successfully against its current or future
competitors or that competition will not have a material adverse effect on the
Company's business, operating results and financial condition.

         Technological Change; Market Acceptance of Evolving Standards.  The
computer software industry is subject to rapid technological change, changing
customer requirements, frequent new product introductions and evolving industry
standards that may render existing products and services obsolete. As a result,
the Company's position in its existing market or other markets that it may
enter could be eroded rapidly by technological advancements not embraced by the
Company. The life cycles of the Company's products are difficult to estimate.
The products must keep pace with technological developments, conform to
evolving industry standards and address increasingly sophisticated customer
needs. In particular, the Company believes that it must continue to respond
quickly to users' needs for broad functionality and multi-platform support and
to advances in hardware and operating systems. Introduction of new products
embodying new technologies and the emergence of new industry standards could
render the Company's products obsolete and unmarketable. There can be no
assurance that the Company will not experience future difficulties that could
delay or prevent the successful development, introduction and marketing of new
products, or that new products and product enhancements will meet the
requirements of the marketplace and achieve market acceptance. If the Company
is unable to develop and introduce products in a timely manner in response to
changing market conditions or customer requirements, the Company's business,
operating results and financial condition would be materially adversely
affected.

         In addition, the Company strives to achieve compatibility between the
Company's products and retailing systems platforms the Company believes are or
will become popular and widely adopted. The Company invests substantial
resources in development efforts aimed at achieving such





                                       15
<PAGE>   16
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


compatibility. Any failure by the Company to anticipate or respond adequately
to technology or market developments could result in a loss of competitiveness
or revenue.

         Dependence on Key Personnel.  The Company's performance is
substantially dependent on the performance of its executive officers and key
employees. In particular, the services of James D. Armstrong, the Company's
Chief Executive Officer, and Frederick M. Pakis, the Company's President,
would be difficult to replace. The Company does not have in place "key person"
life insurance policies on any of its employees. The loss of the services of
any of its executive officers or other key employees could have a material
adverse effect on the business, operating results and financial condition of
the Company.

         Dependence on Proprietary Technology.  The Company's success and
ability to compete is dependent in part upon its proprietary technology,
including its software source code. The Company relies on a combination of
trade secret, nondisclosure and copyright law, which may afford only limited
protection. In addition, effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries. The Company presently has
no patents or patent applications pending. There can be no assurance that
others will not develop technologies that are similar or superior to the
Company's technology. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties, including customers who receive listings of the
source code for the Company's products pursuant to the terms of their license
agreements with the Company, may attempt to reverse engineer or copy aspects of
the Company's products or to obtain and use information that the Company
regards as proprietary. As a result, there can be no assurance that
unauthorized use of the Company's technology may not occur.

         Certain technology used by the Company's products is licensed from
third parties, generally on a non-exclusive basis. The termination of any such
licenses, or the failure of the third-party licensors to adequately maintain or
update their products, could result in delay in the Company's ability to ship
certain of its products while it seeks to implement technology offered by
alternative sources, and any required replacement licenses could prove costly.
While it may be necessary or desirable in the future to obtain other licenses
relating to one or more of the Company's products or relating to current or
future technologies, there can be no assurance that the Company will be able to
do so on commercially reasonable terms or at all.

         In the future the Company may receive notices claiming that it is
infringing the proprietary rights of third parties, and there can be no
assurance that the Company will not become the subject of infringement claims
or legal proceedings by third parties with respect to current or future
products. In addition, the Company may initiate claims or litigation against
third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. Any such claim
could be time consuming, result in costly litigation, cause product shipment
delays or force the Company to enter into royalty or license agreements rather
than dispute the merits of such claims and could have a material adverse effect
on the Company's business, operating results and financial condition.

         Product Defects; Product Liability; Risk of Integration Difficulties.
The Company's software products are highly complex and sophisticated and could,
from time to time, contain design defects or software errors that could be
difficult to detect and correct. In addition, implementation of the Company's
products generally involves a significant amount of customer-specific
customization, and may involve integration with systems developed by third
parties. Despite extensive testing, the Company from time to time has
discovered defects or errors in its products or custom modifications only after
its systems have been used by many customers. The Company has also experienced
delays in shipment of products during the period required to correct such
errors. In addition, the Company or





                                       16
<PAGE>   17
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)


its customers may from time to time experience difficulties relating to the
integration of the Company's products with other hardware or software in the
customer's environment that are unrelated to defects in the Company's products.
There can be no assurance that such defects, errors or difficulties will not
cause future delays in product introductions and shipments, result in increased
costs and diversion of development resources, require design modifications or
impair customer satisfaction with the Company's products. Since the Company's
products may be used by its customers to perform mission-critical functions,
design defects, software errors, misuse of the Company's products, incorrect
data from external sources or other potential problems within or out of the
Company's control that may arise from the use of the Company's products could
result in financial or other damages to the Company's customers. Prior to 1997,
the Company did not maintain product liability insurance. Although the
Company's license agreements with its customers typically contain provisions
designed to limit the Company's exposure to potential claims as well as any
liabilities arising from such claims, such provisions may not effectively
protect the Company against such claims and the liability and costs associated
therewith. Accordingly, any such claim could have a material adverse effect
upon the Company's business, operating results and financial condition. The
Company provides warranties for its products for a period of time (usually 6 or
12 months) after the software is installed and, if applicable, accepted by the
licensee. The Company's license agreements generally do not permit product
returns by the customer.

         Possible Volatility.  Since the Company's initial public offering in
March 1996, the price of the Company's Common Stock has experienced large
fluctuations. Future announcements concerning the Company or its competitors,
quarterly variations in operating results, announcements of technological
innovations, the introduction of new products or changes in product pricing
policies by the Company or its competitors, proprietary rights or other
litigation (including without limitation the arbitration proceedings described
in "Legal Proceedings"), changes in earnings estimates by analysts or other
factors could cause the market price of the Common Stock to fluctuate
substantially. In addition, stock prices for many technology companies
fluctuate widely for reasons which may be unrelated to operating results. These
fluctuations, as well as general economic, market and political conditions such
as recessions or military conflicts, may materially and adversely affect the
market price of the Company's Common Stock.





                                       17
<PAGE>   18
PART II:  OTHER INFORMATION

Item 1:  Legal Proceedings:

         In May 1996, Niederhoffer and Niederhoffer, Inc. ("Niederhoffer")
filed a demand for arbitration asserting a claim against JDA Software Services,
Inc., a wholly owned subsidiary of the Company. Niederhoffer's claims are based
upon an agreement between it and JDA Software Services, Inc. dated April 6,
1990 (the "Finder's Agreement"). Niederhoffer alleges entitlement to a finder's
fee in connection with the purchase of convertible preferred stock in the
Company in March 1995 by six investment funds advised by TA Associates, Inc.
and its affiliates ("TA Investment"), and a claim for Common Stock arising from
the related establishment of the Company and reorganization of the Company's
wholly owned subsidiaries pursuant to which Company Common Stock was issued to
such subsidiaries' stockholders (the "Reorganization").  In the arbitration,
Niederhoffer claims damages of approximately $770,000 and asserts a right to
504,000 shares of the Company's Common Stock.

         Although the Company has contested vigorously, among other things,
Niederhoffer's damages claims, in the event the arbitration panel concludes
that the TA Investment and related Reorganization fell within the scope of the
Finder's Agreement, and further agrees with Niederhoffer's assessment of
damages, the Company could be required to make cash payments as well as issue
to Niederhoffer up to 504,000 shares of the Company's Common Stock or make an
additional cash payment to Niederhoffer based upon the arbitrators'
determination of the value of such shares.  The Company believes that an
arbitrators' decision to award up to 504,000 shares of Common Stock to
Niederhoffer based upon a determination that such shares are issuable as a
result of the TA Investment would be treated as a charge to additional paid-in
capital.  Such charge would reduce additional paid-in capital by the amount of
any cash paid plus the value of the Common Stock issued, valued as of the date
of the TA Investment. However, any cash awarded in lieu of shares in excess of
the value of such shares at the date of the TA Investment would be recorded as
litigation expense and could have an immediate and material adverse effect on
the Company's operating results. In addition, any cash awarded to Niederhoffer
would reduce the Company's available liquidity. Any shares of Common Stock
awarded to Niederhoffer would have a dilutive effect on the Company's earnings
per share.

         The Company and its counsel believe that the Company has meritorious
defenses to Niederhoffer's claims, and the Company is contesting both the
applicability of the Finder's Agreement to the TA Investment and the related
Reorganization, and the measurement of damages as claimed by Niederhoffer.
However, since the results of arbitration proceedings are inherently
unpredictable, the ultimate outcome cannot be determined.  The arbitration
hearing was concluded in March 1997, and the arbitrators' decision is still
pending as of the date of this Form 10-Q filing.

Item 6:  Exhibits and Reports on Form 8-K:

         (a)     Exhibits:

                 See Exhibit Index.

         (b)     Reports on Form 8-K:

                 None.





                                       18
<PAGE>   19
                            JDA SOFTWARE GROUP, INC.

                                   SIGNATURE


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                               JDA SOFTWARE GROUP, INC.


Dated:  May 14, 1997           By:  /s/ Thomas M. Proud
                                   ------------------------------------------
                                   Thomas M. Proud
                                   Vice President, Chief Financial Officer,
                                   Secretary and Treasurer
                                   (Principal Financial and Accounting Officer)






                                       19
<PAGE>   20
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                         DESCRIPTION
    ------                         -----------
        <S>     <C>
       3.1*     Second Restated Certificate of Incorporation of the Company.

       3.2*     Bylaws.

       4.1*     Stock Redemption Agreement by and among the Company, James D. 
                Armstrong and Frederick M. Pakis dated March 30, 1995.

      11.1      Statement regarding computation of net income per share.

      27.1      Financial Data Schedule.
</TABLE>

 *  Incorporated by reference to the Company's registration statement on Form
S-1 (No. 333-748), declared effective on March 14, 1996.





                                       20

<PAGE>   1
                                                                    EXHIBIT 11.1


                            JDA SOFTWARE GROUP, INC.
                SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
              (in thousands, except per share amounts; unaudited)


<TABLE>
<CAPTION>
                                                                                   Three Months Ended
                                                                                        March 31,
                                                                            -------------------------------
                                                                              1997                   1996
                                                                            --------               --------
 <S>                                                                        <C>                    <C>
 Net income                                                                  $ 2,313                $ 1,427
 Weighted average shares:
          Common shares outstanding                                           13,007                 11,182
          Common equivalent shares representing shares issuable upon
          exercise of stock options (1)                                          161                      7
                                                                             -------                -------
                   Total weighted average shares - primary                    13,168                 11,189

 Incremental common equivalent shares (calculated using the
          higher of end of period or average market value (2)                  --                     --   
                                                                             -------                -------
                   Total weighted average shares - fully diluted              13,168                 11,189
                                                                             -------                -------
 Primary net income per common and equivalent share                          $   .18                $   .13
                                                                             -------                -------
 Fully diluted net income per common and equivalent share (2)                $   .18                $   .13
                                                                             -------                -------
</TABLE>

- ------------
Notes:

(1)      Amount calculated using the treasury stock method and fair market
         values.

(2)      This calculation is submitted in accordance with Regulation S-K Item
         601(b)(11) although not required by footnote 2 to paragraph 14 of APB
         Opinion No. 15 because it results in dilution of less than 3%
         Incremental amounts are zero; calculation is shown for presentation
         purposes only.






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JDA SOFTWARE
GROUP, INC.'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               MAR-31-1997
<CASH>                                          30,248
<SECURITIES>                                         0
<RECEIVABLES>                                   19,225
<ALLOWANCES>                                    (1,131)
<INVENTORY>                                          0
<CURRENT-ASSETS>                                50,191
<PP&E>                                          12,665
<DEPRECIATION>                                  (3,993)
<TOTAL-ASSETS>                                  60,532
<CURRENT-LIABILITIES>                            8,590
<BONDS>                                              0
<COMMON>                                           130
                                0
                                          0
<OTHER-SE>                                      51,345      
<TOTAL-LIABILITY-AND-EQUITY>                    60,532      
<SALES>                                              0
<TOTAL-REVENUES>                                16,844      
<CGS>                                                0
<TOTAL-COSTS>                                    6,904
<OTHER-EXPENSES>                                 6,441
<LOSS-PROVISION>                                     7
<INTEREST-EXPENSE>                                 356
<INCOME-PRETAX>                                  3,855
<INCOME-TAX>                                     1,542
<INCOME-CONTINUING>                              2,313
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     2,313
<EPS-PRIMARY>                                      .18
<EPS-DILUTED>                                      .18
<FN>
<F1>JDA SOFTWARE GROUP, INC., CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
QUARTER ENDED 3-31-97
</FN>
        

</TABLE>


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