Astea International Inc. has a market cap of $9.6 million; its shares were traded at around $2.7 with and P/S ratio of 0.48. ATEA is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Revenues increased $197,000 or 4%, to $4,988,000 for the three months ended September 30, 2010 from $4,791,000 for the three months ended September 30, 2009. Software license fee revenues increased $237,000, or 57%, from the same period last year. Services and maintenance fees for the three months ended September 30, 2010 amounted to $4,337,000, a 1% decrease from the same quarter in 2009.
Software license fee revenues increased 57% to $651,000 in the third quarter of 2010 from $414,000 in the third quarter of 2009. Astea Alliance license revenues increased $464,000 or 459%, to $565,000 in the third quarter of 2010 from $101,000 in the third quarter of 2009. The increase results from Astea license sales in all regions of the Company to both new and existing customers. Included in the increase is the partial recognition of license revenue from a sale that occurred in the first quarter of this year, but due to the nature of the transaction, had to be deferred. The remainder of the license revenue from this transaction is expected to be recognized in the last quarter of 2010. The Company sold $86,000 of software licenses from its FieldCentrix subsidiary compared to $313,000 in the third quarter of 2009. The decrease was the result of having only one new customer in the third quarter of 2010 compared to a greater distribution of sales to new and existing customers in the same period in 2009.
Services and maintenance revenues decreased to $4,337,000 from $4,377,000 in the third quarter of 2010, a decrease of 1%. Astea Alliance service and maintenance revenues increased by $195,000 or 6% compared to the third quarter of 2009. The increase resulted primarily from a contract that was signed in the first quarter of 2010 for which the related professional service revenue had to be deferred until certain events occurred. These events occurred this quarter and the Company was able to recognize a portion of the deferred revenue as service and maintenance revenue. The remainder of the deferred service revenue from this particular transaction is expected to be recognized in the fourth quarter of this year. Service and maintenance revenues generated by FieldCentrix, decreased by $223,000 or 17% from $1,276,000 to $1,053,000 in 2010 due to reduced demand from customers. In addition, DISPATCH-1 service and maintenance revenues decreased $12,000 to $64,000 from $76,000 in the prior year quarter. The decline in service and maintenance revenue for DISPATCH-1 is expected as the Company discontinued development of DISPATCH-1 at the end of 1999.
Amortization of capitalized software development costs was $443,000 for the quarter ended September 30, 2010 compared to $464,000 for the same quarter in 2009. The software license gross margin percentage was 29% in the third quarter of 2010 compared to (31%) in the third quarter of 2009. The improvement in license gross margin resulted primarily from the increase in license revenues and decreased amortization expense.
Cost of services and maintenance increased 3% to $2,796,000 in the third quarter of 2010 from $2,707,000 in the second quarter of 2009. The increase in cost of service and maintenance is due to an increase in headcount and restoration of salaries in 2010 compared to the same quarter in 2009. The services and maintenance gross margin percentage was 36% in the third quarter of 2010 compared to 38% in the third quarter of 2009. The decrease in services and maintenance gross margin was primarily due to changes in the geographic mix of customers to other regions of the world in which market conditions call for lower fees as well as some fixed price contracts that requires more time to complete than originally expected.
Product development expense increased 28% to $674,000 in the third quarter of 2010 from $526,000 in the third quarter of 2009. The increase resulted from salaries being restored in the beginning of 2010 and a reduction in capitalized product development costs in the third quarter of 2010 compared to the same period in 2009. The Company released version 10 of its Astea Alliance product in January 2010, at which time capitalization of development costs ceased. Fluctuations in product development expense from period to period can vary due to the amount of development expense which is capitalized. Development costs of $331,000 were capitalized in the third quarter of 2010 compared to $480,000 during the same period in 2009. Gross product development expense was $1,005,000 in the quarter ended September 30, 2010 which is comparable to the same quarter in 2009. Product development expense as a percentage of revenues increased to 14% in the third quarter of 2010 compared with 11% in the third quarter of 2009. The increase in costs relative to revenues is due to the increase in product development expense, partially offset by a slight increase in revenue.
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