<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 July 31, 1998
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition from ____________________ to _________________________
Commission File Number __________________________________
QAD INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0462381
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6450 Via Real, Carpinteria, California 93013
(805) 681-6614
(address, including zip code and telephone number including area code, of
registrant's principal executive offices)
Indicate by check mark whether the 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 filing requirements
for the past 90 days. Yes X No .
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No .
--- ---
The number of shares outstanding of the issuer's common stock as of the close
of business on August 25, 1998: 29,378,193.
<PAGE>
QAD Inc.
Index
Part I
Financial Information Page
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 1998 and January 31, 1998 1
Condensed Consolidated Statements of Income for the
three and six months ended July 31, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows
for the six months ended July 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial
Statements 4
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II
Other Information
Item 1 Legal Proceedings 9
Item 2 Changes in Securities 9
Item 3 Defaults upon Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
<PAGE>
Part I - Financial Information
QAD Inc.
Condensed Consolidated Balance Sheets
As of July 31, 1998 (unaudited) and January 31, 1998
(In thousands, except for number of shares)
<TABLE>
<CAPTION>
Assets
July 31, January 31,
1998 1998
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 47,964 $ 70,082
Trade accounts receivable, net of allowances of $4,356 for
July 31, 1998 and $5,510 for January 31, 1998 70,056 75,683
Income taxes receivable 5,604 --
Other current assets 12,895 10,442
--------- ---------
Total current assets 136,519 156,207
Property and equipment, net 31,987 25,717
Capitalized software costs 4,920 2,416
Other assets, net 6,756 6,166
--------- ---------
$ 180,182 $ 190,506
--------- ---------
--------- ---------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 8,894 $ 12,921
Accrued expenses 19,993 20,392
Deferred revenue and deposits 43,678 43,636
--------- ---------
Total current liabilities 72,565 76,949
Other deferred liabilities 899 1,182
Stockholders' equity:
Preferred stock, no par value. Authorized 5,000,000 shares;
none issued and outstanding -- --
Common stock, no par value. Authorized 150,000,000 shares;
issued and outstanding 29,301,193 at July 31, 1998 and
29,096,269 at January 31, 1998 97,632 97,238
Retained earnings 10,677 17,395
Stockholders' receivable (170) (397)
Unearned compensation - restricted stock (935) (1,510)
Cumulative other comprehensive loss (486) (351)
--------- ---------
Total stockholders' equity 106,718 112,375
--------- ---------
$ 180,182 $ 190,506
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements
1
<PAGE>
QAD Inc.
Condensed Consolidated Statements of Income
For the three and six months ended July 31, 1998 and 1997
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
------------------------------ ------------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
License fees $ 28,656 $ 24,959 $ 55,847 $ 44,108
Maintenance and other 18,623 15,238 35,702 28,162
---------- ---------- ---------- ----------
Total revenues 47,279 40,197 91,549 72,270
Cost and expenses:
Cost of revenues 10,739 9,611 22,526 18,073
Sales and marketing 24,350 15,854 45,424 29,420
Research and development 13,118 6,571 24,540 12,742
General and administrative 6,699 5,455 11,743 9,012
---------- ---------- ---------- ----------
Total cost and expenses 54,906 37,491 104,233 69,247
---------- ---------- ---------- ----------
Operating income (loss) (7,627) 2,706 (12,684) 3,023
Other (income) expense (481) 2 (1,849) (414)
---------- ---------- ---------- ----------
Income (loss) before income taxes (7,146) 2,704 (10,835) 3,437
Income tax expense (benefit) (2,715) 1,039 (4,117) 1,212
---------- ---------- ---------- ----------
Net income (loss) $ (4,431) $ 1,665 $ (6,718) $ 2,225
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic and diluted
net income (loss) per share $ (0.15) $ 0.07 $ (0.23) $ 0.10
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted shares used in computation 29,234 22,991 29,179 22,892
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic shares used in computation 29,234 22,505 29,179 22,406
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
<PAGE>
QAD Inc.
Condensed Consolidated Statements of Cash Flows
For the six months ended July 31, 1998 and 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Net cash used in operating activities $ (13,224) $ (375)
------------- --------------
Investing activities:
Purchases of property and equipment (9,651) (5,925)
Proceeds from disposition of property and equipment 9 --
------------- --------------
Net cash used in investing activities (9,642) (5,925)
------------- --------------
Financing activities:
Proceeds from notes payable and long-term debt -- 9,172
Reduction of notes payable and long-term debt (119) (2,053)
Issuance of common stock for cash 851 215
Repurchase of common stock (76) --
Receivable from stockholders 227 (200)
------------- --------------
Net cash provided by financing activities 883 7,134
------------- --------------
Effect of exchange rate changes on cash and cash equivalents (135) (183)
------------- --------------
Net increase (decrease) in cash and cash equivalents (22,118) 651
Cash and cash equivalents at beginning of period 70,082 301
------------- --------------
Cash and cash equivalents at end of period $ 47,964 $ 952
------------- --------------
------------- --------------
</TABLE>
Supplemental disclosure of non-cash investing activities:
During the six months ended July 31, 1998 and 1997, the Company acquired
property and equipment under capital lease obligations aggregating $557,000 and
$202,000 respectively.
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
QAD Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The Condensed Consolidated Balance Sheets as of July 31, 1998 and January 31,
1998, the Condensed Consolidated Statements of Income for the three and six
months ended July 31, 1998 and 1997 and Condensed Consolidated Statements of
Cash Flows for the six months ended July 31, 1998 and 1997 have been prepared by
the Company and are unaudited. In the opinion of management, all adjustments
(which include reclassifications and normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
July 31, 1998 and 1997 have been made.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements are read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the year
ended January 31, 1998. The results of operations for the three and six months
ended July 31, 1998 are not necessarily indicative of the operating results for
the full year.
2. Comprehensive income
Comprehensive income includes changes in the balances of items that are reported
directly in a separate component of stockholders' equity on the Condensed
Consolidated Balance Sheets. A reconciliation of comprehensive income for the
three and six months ended July 31, 1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
----------------------------------------------------------------
1998 1997 1998 1997
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $(4,431) $ 1,665 $(6,718) $ 2,225
Foreign currency translation adjustments 49 307 (135) (183)
--------- --------- --------- --------
Comprehensive income (loss) $(4,382) $ 1,972 $(6,853) $ 2,042
--------- --------- --------- --------
--------- --------- --------- --------
</TABLE>
3. Per Share Information
Basic income per share is computed using the weighted average number of common
shares outstanding during the period. Diluted income per share is computed using
the weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of the shares
issuable upon the exercise of stock options (using the treasury stock method).
The following table sets forth the computation of basic and diluted income per
share:
4
<PAGE>
Net income (loss) per share has been computed using the weighted average number
of shares of common stock and common stock equivalents outstanding using the
treasury stock method summarized as follows (in thousands, except for per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
------------------------------- ------------------------------
1998 1997 1998 1997
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ (4,431) $ 1,665 $ (6,718) $ 2,225
------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
Weighted average shares
outstanding (basic) 29,234 22,505 29,179 22,406
Diluted effect of employee stock options -- 486 -- 486
------------ ------------ ----------- ----------
Weighted average diluted shares 29,234 22,991 29,179 22,892
outstanding ------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
Basic and diluted income
(loss) per share $ (0.15) $ 0.07 $ (0.23) $ 0.10
------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
</TABLE>
Shares of common stock equivalents issued using the treasury stock method of
approximately 508,000 and 488,000 for the three and six months ended July 31,
1998, respectively were not included in the diluted calculation because they
were anti-dilutive. Due to the net loss for the three and six months ended July
31, 1998, basic and diluted per share amounts are the same.
4. Revenue Recognition
In October 1997, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position 97-2: SOFTWARE REVENUE RECOGNITION, which is
effective for software transactions entered into in fiscal years beginning after
December 15, 1997. The Company believes its current revenue recognition policies
and practices are consistent with the SOP.
5. Repricing Options
In August 1998, the Company's Board agreed that in order to provide incentives
to its employees, repricing of outstanding options was needed to align the
option exercise price more closely with the fair market value of the underlying
Common Stock as determined by the marketplace. Therefore, the Company
implemented a program whereby option holders under the 1997 Stock Incentive
Program could exchange higher priced option shares for the same number of lower
priced option shares. The new options were issued on August 14, 1998 at $5.1875
per share. The repricing excluded QAD officers and directors and prohibits
employees from exercising these options for the next twelve months. Certain QAD
officers and directors were issued additional grants under the same plan.
6. Reclassification
Certain prior period amounts have been reclassified to conform to current period
presentation.
5
<PAGE>
QAD Inc.
Management's Discussion & Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the condensed
consolidated statements and notes thereto. This Quarterly Report on Form 10-Q
may be deemed to include forward looking statements with the meaning of
Section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
business environment and trend projections. Although QAD Inc. (the "Company")
believes that its expectations are based on reasonable assumptions it can
give no assurance that its goals will be achieved. The important factors that
could cause actual results to differ materially from those in the forward
looking statements herein include, without limitation, the historical
fluctuations in quarterly results and the potential future significant
fluctuations, seasonality of operating results, product concentration, the
dependence on Progress products, the rapid technological change, the supply
chain solutions under development and the underlying technology, dependence
upon development and maintenance of sales and marketing channels, the
competition, the reliance on and need to develop additional relationships
with third parties and other factors detailed in the Company's Annual Report
on Form 10-K for the year ended January 31, 1998.
This report contains forward-looking statements, which reflect the current
views of the Company with respect to future events that will have an effect
on its future financial performance. These statements include the words,
"expects," "believes" and similar expressions. These forward-looking
statements are subject to various risks and uncertainties, including those
referred elsewhere herein and contained in the Company's Form 10-K filed with
the Securities and Exchange Commission. These factors, among other things,
could cause actual results to differ materially from historical results or
those currently anticipated.
Results of Operations:
TOTAL REVENUES. Total revenues for the three months ended July 31, 1998
increased 18% to $47.3 million from $40.2 million in the same period in 1997.
Total revenues for the six months ended July 31, 1998 increased 27% to $91.5
million from $72.3 million in the same period in 1997. The increase in total
revenues was primarily due to continued growth in revenues generated from the
Company's targeted vertical markets. License fees continue to be the
Company's major revenue source, accounting for $28.7 and $55.8 million in
revenues, for the three months and six months ended July 31, 1998,
respectively, ahead of $25.0 and $44.1 million for the same periods, in the
prior year. For the three months ended July 31, 1998, maintenance and other
revenues as a percentage of total revenues increased to 39% as compared to
38% in the same period in 1997. Year to date, maintenance and other revenue
as a percentage of total revenues remained at 39% for the six months ended
July 31, 1998.
COST OF REVENUES. Cost of revenues consists primarily of charges incurred
from reselling third-party databases (and their associated maintenance
contracts) which are required to run MFG/PRO software, support costs
associated with MFG/PRO software maintenance contracts, costs associated with
the reproduction and delivery of the Company's software and with the
performance of service contracts. During the three months ended July 31,
1998, cost of revenues increased 12% to $10.7 million (23% of total revenues)
from $9.6 million (24% of total revenues) in the same period in 1997. Year to
date, cost of revenues increased 25% to $22.5 million (25% of total revenues)
in 1998 from $18.1 million (25% of total revenues) for the same period in the
prior year. The increase in absolute dollars was due to higher support costs
associated with MFG/PRO software maintenance contracts and higher costs
associated with reselling third-party databases.
SALES AND MARKETING. Sales and marketing expense consists primarily of
salaries, commissions and associated benefits, travel and entertainment
expenses and promotional and advertising costs. During the three months ended
July 31, 1998, sales and marketing expense increased 54% to $24.4 million
(52% of total revenues) from $15.9 million (39% of total revenues). Year to
date, sales and marketing expense increased 54% to $45.4 million (50% of
total revenues) in 1998 from $29.4 million (41% of total revenues) for the
same period in the prior year. The increase in absolute dollars and as a
percentage of total revenues was primarily due to the expansion of the
Company's global sales force, continued investment in our supply chain
solution, On/Q, and increased revenues through sales agents resulting in
increased commissions expense.
6
<PAGE>
RESEARCH AND DEVELOPMENT. Research and development expense consists
primarily of salaries and associated benefits, related overhead expenses and
amounts paid to consultants and third party developers to supplement the
product development efforts of the Company's in-house staff. During the three
months ended July 31, 1998, research and development expense increased 100%
to $13.1 million (28% of total revenues) from $6.6 million (16% of total
revenues) for the same period in the prior year. Year to date, research and
development expense increased 93% to $24.5 million (27% of total revenues) in
1998 from $12.7 million (18% of total revenues) for the same period in the
prior year. The increase in absolute dollars and as a percentage of total
revenues was due primarily to the continued investment in On/Q. Increased
expenses were partially offset by funds that the Company received from third
parties as a result of joint venture research and development projects.
In accordance with Statement of Financial Accounting Standards No. 86,
the Company expenses software development costs as they are incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers.
GENERAL AND ADMINISTRATIVE. During the three months ended July 31, 1998,
general and administrative expense increased 23% to $6.7 million (14% of
total revenues) from $5.5 million (14% of total revenues) in the same period
in 1997. Year to date, general and administrative expense increased 30% to
$11.7 million (13% of total revenues) in 1998 from $9.0 million (12% of total
revenues) from same period in the prior year. The increase in spending
resulted primarily from hiring of additional personnel and related
infrastructure to support the Company's growth.
OTHER (INCOME) EXPENSE. Total other (income) expense is composed
primarily of interest income and interest expense. During the three months
ended July 31, 1998, other (income) expense increased to $(481,000) from
$2,000. Year to date, other (income) expense increased to $(1.8) million in
1998 from $(414,000) for the same period in the prior year. The improvement
was due to significantly reduced interest expense as the IPO proceeds were
applied to the repayment and retirement of debt, and to interest income
accruing from investment of the remaining proceeds in short-term
investment-grade securities and money market instruments.
Liquidity and Capital Resources
As of July 31, 1998, the Company had approximately $48.0 million in cash
and cash equivalents. Cash flows used in operating activities were $13.2
million and $0.4 million for the six months ended July 31, 1998 and 1997,
respectively. Cash used in investing activities aggregated $9.6 million and
$5.9 million in the six months ended July 31, 1998 and 1997, respectively and
was primarily related to the purchase of computer equipment and office
furniture in both periods. Cash flows from financing activities totaled $0.9
million and $7.1 million for the six months ended July 31, 1998 and 1997,
respectively and were comprised of proceeds from borrowings and issuance of
common stock. At July 31, 1998, the Company had no material commitments for
capital expenditures.
As of July 31, 1998, the Company had working capital of $64.0 million.
Accounts receivable, net of allowance for doubtful accounts, decreased to
$70.1 million from $75.7 million at January 31, 1998. The Company's accounts
receivable days' sales outstanding ("DSO"), calculated on a quarterly basis
has demonstrated seasonal fluctuations. For the three months ended July 31,
1998, DSO was 133 which represents an increase from 125 days for the three
months ended January 31, 1998, but was a decrease from 138 days for the three
months ended April 30, 1998. The Company believes that the days' sales
outstanding are higher than desired and the Company is focusing on its order
processing, sales terms and collection processes to improve cash flows and
working capital. Total deferred revenue remained steady at $43.3 million at
July 31, 1998 from $43.5 million at January 31, 1998.
Subsequent to the initial public offering, the Company entered into a
revolving credit agreement with Bank of America National Trust and Savings
Association, which expires on August 4, 1999. The maximum available amount of
borrowings under the revolving credit agreement is equal to $20 million,
unless there is a voluntary termination or reduction of commitment by the
Company. The total amount of available borrowings under the revolving credit
agreement at July 31, 1998 was $20 million. Borrowings under the revolving
credit agreement bear interest at a rate per annum equal to the Offshore Rate
plus the Applicable Margin or the Base Rate plus the Applicable Margin. The
Applicable Margin means, with respect to Base Rate Loans, 0%, and with
respect to Offshore Rate Loans, 1.25% when 50% or less of the loan commitment
is utilized, and 1.50% when more than 50% of the loan commitment is utilized.
7
<PAGE>
The Company pays a commitment fee on the average unused portion of the
loan commitment to the bank, equal to one-half of one percent (.50%) per
annum. The Company did not meet one of the banks covenants but did obtain a
waiver from the bank.
The Company believes that the net proceeds from the offering, the
available borrowings under its new revolving credit agreement and cash
generated by operations, will satisfy the Company's working capital
requirements for at least the next 12 months.
Year 2000 Compliance
In 1997, the Company developed a plan to deal with the Year 2000 problem
and began analyzing its computer systems to confirm Year 2000 compliance or
where necessary to effect conversions of such systems. The plan provides for
the analysis and conversion efforts to be completed by the end of 1999. The
Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. The total cost of the
project has not been, and is not anticipated to be, material to the Company's
financial position, results of operations or liquidity. The costs of the
project have been and will continue to be funded through operating cash
flows. The company is expensing all costs associated with these systems
changes as the costs are incurred.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 131: DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 will affect the
disclosure requirements for the year ended January 31, 1999 annual financial
statements.
The AICPA issued SOP 98-1: ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE, which is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company
has adopted this SOP and there were no material impact on its financial
condition or results of operations.
The AICPA issued SOP 98-4: DEFERRAL OF THE EFFECTIVE DATE OF A PROVISION
OF SOP 97-2, "SOFTWARE REVENUES RECOGNITION," which is effective beginning
March 31, 1998. The Company has not determined the impact on its financial
condition or results of operations.
8
<PAGE>
Part II - Other Information
QAD Inc.
Item 1 - Legal Proceedings
Not applicable
Item 2 - Changes in Securities
Not applicable
Item 3 - Defaults upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on June 30,
1998 (the "Annual Meeting"). At the Annual Meeting, stockholders voted on two
matters: (1) to elect one director to hold office for a term of one year
until the Annual Meeting of Stockholders in the year 1999 (Class I Director),
two directors to hold office for a term of two years until the Annual Meeting
of Stockholders in the year 2000 (Class II Directors), and two directors to
hold office for a term of three years until the Annual Meeting of
Stockholders in the year 2001 (Class III Directors); (2) to ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors
for the Company's 1999 fiscal year. The stockholders elected management's
nominees as Class I, II and III Directors and ratified the appointment of the
independent accountants by the following votes, respectively:
(1) Election of Class I, II and III Directors for a term expiring in
1999, 2000 and 2001, respectively.
<TABLE>
<CAPTION>
Votes
--------
Votes For Withheld
---------- --------
<S> <C> <C>
Evan M. Bishop (Class I) 24,160,083 32,600
Karl F. Lopker (Class II) 24,164,556 28,127
Pamela M. Lopker (Class II) 24,165,856 26,827
Peter R. van Cuylenburg (Class III) 24,168,556 24,127
Koh Boon Hwee (Class III) 24,168,556 24,127
</TABLE>
(2) Ratification of Appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the Company's 1999 fiscal year.
Votes For Votes Against Abstentions
---------- ------------- -----------
24,131,894 10,293 50,496
Item 5 - Other Information
Not applicable
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
See Exhibit Index on page 11.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended July 31,
1998.
9
<PAGE>
Signatures
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.
QAD INC.
(Registrant)
Date: September 10, 1998 By
A.J. Moyer
Chief Financial Officer
(on behalf of the registrant and as
Principal Financial Officer)
10
<PAGE>
Exhibit Index
Exhibit
Number Exhibit Title
- ------ -------------
27 Financial Data Schedule
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 47,964
<SECURITIES> 0
<RECEIVABLES> 74,412
<ALLOWANCES> 4,356
<INVENTORY> 0
<CURRENT-ASSETS> 136,519
<PP&E> 52,597
<DEPRECIATION> 20,610
<TOTAL-ASSETS> 180,182
<CURRENT-LIABILITIES> 72,565
<BONDS> 0
0
0
<COMMON> 97,632
<OTHER-SE> 9,086
<TOTAL-LIABILITY-AND-EQUITY> 106,718
<SALES> 174
<TOTAL-REVENUES> 91,549
<CGS> 117
<TOTAL-COSTS> 22,526
<OTHER-EXPENSES> 81,707
<LOSS-PROVISION> 404
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> (10,835)
<INCOME-TAX> (4,117)
<INCOME-CONTINUING> (6,718)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,718)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
