B.Riley maintains Buy on American Software

On Monday, B.Riley reiterated its Buy rating for American Software (NASDAQ:AMSWA), maintaining a $14.00 price target.

The firm's analysis anticipates the company's first quarter 2025 results, which are due to be reported after market close on Thursday, August 22, 2024. A quarterly earnings call is scheduled to follow at 5:00 p.m. ET on the same day.

The firm projects that American Software's revenue and adjusted EBITDA will be slightly below the consensus but expects the results to align closely with their estimates. The focus on driving recurring revenue growth, which accounts for over 85% of the company's total revenue in its core supply chain planning business, is noted as a continued strategy by management.

Despite acknowledging a generally healthy demand for supply chain solutions, the firm notes some areas of weakness in specific verticals and longer sales cycles with large enterprise customers.

Management is predicted to maintain cautious FY25 guidance, reflecting lighter booking activity and potential revenue challenges due to increased conversion from on-premises customers.

B.Riley highlights American Software's strong financial position, citing nearly $84 million in cash reserves and a lack of debt. The company's efforts to increase conversion activity and expand artificial intelligence capabilities on its Logility platform are seen as foundational steps for potential organic revenue growth and adjusted EBITDA margin expansion in the second half of 2025 and the 2026 fiscal year, which ends in April.

American Software has been the subject of revised projections by B.Riley, which lowered its price target from $16 to $14, despite maintaining a Buy rating. This followed the company's release of its fiscal year 2024 fourth-quarter results, where revenues exceeded analyst and consensus projections due to a rise in professional services revenue. Adjusted EBITDA, however, fell short due to one-time expenses related to Class B share conversion.

The company also announced a strategic shift towards its core supply chain software, planning to rebrand as Logility. This move was marked by the acquisition of Garvis and the launch of DemandAI+, significant steps in American Software's AI strategy. For fiscal year 2025, the company projects total revenue between $104 million and $108 million, and adjusted EBITDA ranging from $15 million to $16.4 million.

The recent developments also include a healthy demand for its services, as evident by a double-digit growth in its sales pipeline. Despite these challenges, B.Riley remains optimistic, citing the company's focus on transitioning legacy customers to cloud services and enhancing artificial intelligence features on its Logility platform.

InvestingPro Insights

As we anticipate American Software's Q1 2025 results, a peek into real-time data from InvestingPro offers a snapshot of the company's current financial position. With a market capitalization of $335.47 million and a P/E ratio standing at 30.03, investors can gauge the company's valuation in the context of its earnings. The P/E ratio has seen an increase in the last twelve months as of Q4 2024, reaching 46.32, indicating a higher price paid per dollar of earnings and suggesting investor confidence in future growth.

On the operational front, American Software has shown a commitment to shareholder value, as evidenced by its impressive track record of maintaining dividend payments for 22 consecutive years, a fact that may reassure investors looking for stability. This is complemented by a solid balance sheet, where cash reserves exceed debt, providing the company with financial flexibility.

InvestingPro Tips highlight that while the company is trading at a high earnings multiple, it also holds more cash than debt and has high shareholder yield. These factors, combined with the projection that American Software will remain profitable this year, could be key considerations for investors. For those seeking a deeper analysis, InvestingPro offers additional tips on American Software, available at https://www.investing.com/pro/AMSWA.

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