QAD Announces Fiscal 2010 Third Quarter Financial Results

Total revenue equaled $56.2 million for the fiscal 2010 third quarter,
compared with $67.8 million for the same period last year and $51.3
million for the fiscal 2010 second quarter. License revenue equaled $8.4
million, versus $13.1 million for the fiscal 2009 third quarter and $6.7
million for the fiscal 2010 second quarter. Maintenance and other
revenue totaled $33.8 million, compared with $32.7 million for the third
quarter of fiscal 2009 and $32.1 million for the second quarter of
fiscal 2010. Services revenue was $14.1 million, versus $22.0 million
for last year's fiscal third quarter and $12.5 million for the prior
sequential quarter.

Net income for the fiscal 2010 third quarter was $4.8 million, or $0.15
per fully diluted share, including stock compensation expense of $0.03
per fully diluted share net of tax. In the fiscal 2009 third quarter,
the company reported a net loss of $1.8 million, or $0.06 per share,
including stock compensation expense of $0.03 per fully diluted share
net of tax.

"We are successfully managing our business through this tough economic
environment," said Karl Lopker chief executive officer of QAD.
"Continued prudent expense management contributed to an increased cash
balance year-to-date, as well as meaningful profitability in the recent
quarter. While many global economic indicators are still mixed, some of
our customers are starting to show increased confidence. As signs of a
global recovery begin to emerge, we believe we are well positioned to
take advantage of improvements in the manufacturing sector, and look
forward to continuing to work closely with our customers as their
businesses grow."

Gross margin for the fiscal 2010 third quarter was 60 percent, compared
with 54 percent for the fiscal 2009 third quarter, mainly reflecting a
change in revenue mix.

Total operating expenses were $28.1 million, or 50 percent of total
revenue, for the fiscal 2010 third quarter, versus $37.1 million, or 55
percent of total revenue, for the third quarter of fiscal 2009.

Operating income for the fiscal 2010 third quarter totaled $5.6 million,
including $1.2 million in stock compensation expense, compared with an
operating loss of $533,000, including $1.3 million in stock compensation
expense, for the third quarter of the prior fiscal year.

For the first nine months of fiscal 2010, revenue totaled $162.5
million, versus $204.1 million for the first nine months of fiscal 2009.
Net income for the fiscal 2010 year-to-date period was $0.7 million, or
$0.02 per fully diluted share, including stock compensation expense of
$0.08 per fully diluted share net of tax. This compares with a net loss
of $4.0 million, or $0.13 per share, for the fiscal 2009 year-to-date
period including stock compensation expense of $0.10 per fully diluted
share net of tax.

QAD's cash and cash equivalents balance at October 31, 2009 grew to
$43.7 million, compared with $31.5 million at January 31, 2009. Cash
flow provided by operations was $3.3 million for the third quarter of
fiscal 2010, versus $2.5 million for the third quarter of fiscal 2009.
For the first nine months of fiscal 2010, cash flow provided by
operations was $15.6 million, compared with $9.6 million in the prior
year period.

Fiscal 2010 Third Quarter Highlights:

--
Received orders from 15 customers representing more than $500,000 each
in combined license, support and services billings, including six
orders in excess of $1.0 million;

--
Received license orders from companies across QAD's six vertical
markets including, among others: Coca-Cola Enterprises; Gemalto; GS
Yuasa Corporation; Groupe Danone; Halberg Emboutissage et Mecanisme;
Hubbell Inc.; International Paper; Invacare France Operations SAS,
SADAFCO; and Tower Automotive.

--
QAD Enterprise Applications 2009.1 is the latest release of QAD's
Enterprise Suite, featuring significant new functionality and
usability enhancements in the areas of Customer Relationship
Management, Visual Scheduling, Operational Metrics, User Interface,
Business Reporting and Forms Management and Enterprise Asset
Management.

Business Outlook

For the fiscal 2010 fourth quarter, the company currently expects total
revenue of approximately $57 million, and profit of about $0.13 per
fully diluted share. For the fiscal 2010 full year, the company
currently expects total revenue of approximately $220 million and profit
of about $0.15 per fully diluted share.

Investor Conference Call

QAD management will host an investor conference call today at 2:00 p.m.
PT (5:00 p.m. ET) to review the company's financial results and
operations for the fiscal 2010 third quarter. The conference call will
be webcast live and is accessible through the investor relations section
of QAD's Web site at www.qad.com,
where it will be available for approximately one year.

About QAD

QAD is a leading provider of enterprise applications for global
manufacturing companies specializing in automotive, consumer products,
electronics, food and beverage, industrial and life science products.
QAD applications provide critical functionality for managing
manufacturing resources and operations within and beyond the enterprise,
enabling global manufacturers to collaborate with their customers,
suppliers and partners to make and deliver the right product, at the
right cost and at the right time. For more information about QAD,
telephone +1 805-566-6000, or visit the QAD Web site at www.qad.com.

"QAD" is a registered trademark of QAD Inc. All other products
or company names herein may be trademarks of their respective owners.

Note to Investors: This press release contains certain forward-looking
statements made under the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. A number of risks and
uncertainties could cause actual results to differ materially from those
in the forward-looking statements. These risks include, but are not
limited to, evolving demand for the company's software products and
products that operate with the company's products; the company's ability
to sustain license and service demand; the company's ability to leverage
changes in technology; the company's ability to sustain customer renewal
rates at current levels; the publication of opinions by industry and
financial analysts about the company, its products and technology; the
reliability of estimates of transaction and integration costs and
benefits; the entry of new competitors or new offerings by existing
competitors and the associated announcement of new products and
technological advances by them; delays in localizing the company's
products for new or existing markets; the ability to recruit and retain
key personnel; delays in sales as a result of lengthy sales cycles;
changes in operating expenses, pricing, timing of new product releases,
the method of product distribution or product mix; timely and effective
integration of newly acquired businesses; general economic conditions;
exchange rate fluctuations; and, the global political environment. In
addition, revenue and earnings in the enterprise resource planning (ERP)
software industry are subject to fluctuations. Software license revenue,
in particular, is subject to variability with a significant proportion
of revenue earned in the last month of each quarter. Given the high
margins associated with license revenue, modest fluctuations can have a
substantial impact on net income. Investors should not use any one
quarter's results as a benchmark for future performance. For a more
detailed description of the risk factors associated with the company and
the industries in which it operates, please refer to the company's
Annual Report on Form 10-K for fiscal 2009 ended January 31, 2009.

QAD Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
                                                                     Three Months Ended          Nine Months Ended
                                                                     October 31,                 October 31,
                                                                     2009          2008          2009           2008
Revenue:
         License fees                                                $  8,409      $  13,055     $  21,318      $  36,448
         Maintenance and other                                          33,779        32,687        98,732         101,341
         Services                                                       14,052        22,025        42,498         66,329
                     Total revenue                                      56,240        67,767        162,548        204,118
Cost of revenue:
         Cost of license fees                                           1,813         2,689         5,351          7,474
         Cost of maintenance, service and other revenue                 20,719        28,548        65,179         86,200
                     Total cost of revenue                              22,532        31,237        70,530         93,674
Gross profit                                                            33,708        36,530        92,018         110,444
Operating expenses:
         Sales and marketing                                            12,168        17,825        38,731         55,938
         Research and development                                       8,678         10,794        28,349         33,165
         General and administrative                                     7,101         8,260         23,492         25,180
         Amortization of intangibles from acquisitions                  121           184           468            559
                     Total operating expenses                           28,068        37,063        91,040         114,842
Operating income (loss)                                                 5,640         (533   )      978            (4,398  )
Other (income) expense:
         Interest income                                                (132   )      (366   )      (440    )      (1,213  )
         Interest expense                                               321           309           948            948
         Other (income) expense, net                                    (511   )      20            (609    )      456
                     Total other (income) expense                       (322   )      (37    )      (101    )      191
Income (loss) before income taxes                                       5,962         (496   )      1,079          (4,589  )
         Income tax expense (benefit)                                   1,208         1,325         415            (605    )
Net income (loss)                                                    $  4,754      $  (1,821 )   $  664         $  (3,984  )
Basic net income (loss) per share                                    $  0.15       $  (0.06  )   $  0.02        $  (0.13   )
Diluted net income (loss) per share                                  $  0.15       $  (0.06  )   $  0.02        $  (0.13   )
Basic weighted shares                                                   31,120        30,671        30,925         30,656
Diluted weighted shares                                                 32,429        30,671        31,901         30,656

QAD Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
                                                         October 31,      January 31,
                                                         2009             2009
Assets
Current assets:
          Cash and equivalents                           $   43,727       $   31,467
          Accounts receivable, net                           40,225           70,954
          Other current assets                               18,780           19,164
                          Total current assets               102,732          121,585
Property and equipment, net                                  38,575           41,438
Capitalized software costs, net                              3,054            5,699
Goodwill                                                     6,338            6,237
Other assets, net                                            18,035           18,786
          Total assets                                   $   168,734      $   193,745
Liabilities and stockholders' equity
Current liabilities:
          Current portion of long-term debt              $   280          $   266
          Accounts payable and other current liabilities     30,964           43,575
          Deferred revenue                                   68,665           81,392
                          Total current liabilities          99,909           125,233
Long-term debt                                               16,511           16,717
Other liabilities                                            4,395            4,324
Stockholders' equity:
          Common stock                                       35               35
          Additional paid-in capital                         142,446          139,930
          Treasury stock                                     (33,031 )        (36,614 )
          Accumulated deficit                                (52,050 )        (49,103 )
          Accumulated other comprehensive loss               (9,481  )        (6,777  )
                          Total stockholders' equity         47,919           47,471
          Total liabilities and stockholders' equity     $   168,734      $   193,745

QAD Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
                                                                                Nine Months Ended
                                                                                October 31,
                                                                          2009            2008
Net cash provided by operating activities                                 $     15,604    $     9,606
Cash flows from investing activities:
                         Purchase of property and equipment                     (645   )        (4,810  )
                         Capitalized software costs                             (314   )        (821    )
                         Acquisitions of businesses, net of cash acquired       (14    )        (6,235  )
                         Proceeds from sale of marketable securities            -               275
                         Proceeds from sale of property and equipment           41              3
Net cash used in investing activities                                           (932   )        (11,588 )
Cash flows from financing activities:
                         Repayments of debt                                     (192   )        (221    )
                         Proceeds from issuance of common stock                 56              456
                         Changes in book overdraft                              (2,476 )        (1,015  )
                         Repurchase of common stock                             -               (2,219  )
                         Dividends paid                                         (1,227 )        (2,300  )
Net cash used in financing activities                                           (3,839 )        (5,299  )
Effect of exchange rates on cash and equivalents                                1,427           (2,104  )
                         Net increase (decrease) in cash and equivalents        12,260          (9,385  )
                         Cash and equivalents at beginning of period            31,467          45,613
                         Cash and equivalents at end of period            $     43,727    $     36,228

SOURCE: QAD Inc.

John Neale 
QAD Senior Vice President and Treasurer 
805.566.5117 
investor@qad.com 
or 
Laurie Berman/Rob Whetstone 
PondelWilkinson Inc. 
310.279.5980 
investor@pondel.com

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