SoftBrands Announces Second Quarter Fiscal 2008 Results

MINNEAPOLIS — May 8, 2008 — SoftBrands, Inc. (Amex: SBN), a global supplier of enterprise application software, today announced its financial results for the second quarter of fiscal 2008, ended March 31, 2008.
Revenues for second quarter fiscal 2008 increased 10.4 percent to $23.7 million, compared with $21.4 million in the prior year quarter. License revenue was 17.0% of total revenues in the current quarter, compared with 13.4% in second quarter fiscal 2007. Maintenance revenue was 57.1% of total revenues in the current quarter, compared with 62.9% of revenues in second quarter fiscal 2007.

SoftBrands reported an operating loss of $0.8 million in the second quarter of fiscal 2008, compared with an operating loss of $1.8 million in the fiscal 2007 quarter. The company reported a net loss available to common shareholders of $0.4 million, or a loss of $(0.01) per diluted share, compared with a net loss available to common shareholders of $3.3 million, or $(0.08) per diluted share, for second quarter fiscal 2007.

"We are pleased with our sales performance in the second quarter. We signed several large transactions in our hospitality business, including contracts with what will be the largest customer in our company’s history, Red Roof Inns," said Randy Tofteland, SoftBrands’ president and chief executive officer. “While our manufacturing business was slightly below its revenue plan for the quarter, we made progress with our SAP large enterprise strategy and we expect improved performance in manufacturing in the second half of the year based on the transactions we have closed since the end of the second quarter and the current pipeline of opportunities.”

SoftBrands today updated its prior guidance for fiscal 2008 of GAAP revenue in the range of $100 million to $105 million; operating income of 4% to 7% of revenues; net income to common shareholders of (1)% to 2% of revenues; and diluted earnings per share of $(0.02) to $0.04.

Highlights of the second quarter and other recent developments include:

-- SoftBrands announced it has entered into a multi-phase project with Red Roof Inns, Inc. to supply a full suite of hospitality technology products and services to the U.S.-based hotel brand. Red Roof Inns, headquartered in Columbus Ohio, has nearly 350 properties and is known for value, consistency and excellent service.

-- SoftBrands and SAP have extended their partnership to include a common strategy for small sites of large enterprises, pursuing the sale of SAP-centric solutions at the plant level for large enterprises that run SAP solutions. SoftBrands is one of the first partners to work with SAP on a joint market approach and strategy for this market segment.

-- SoftBrands signed an agreement with De Vere Venues in the United Kingdom to provide its Epitome and Core solutions. The contract represents the first significant group business in the U.K. for the Epitome and Core products. The contract is expected to generate approximately $2 million in license and service revenues over the next year.

In the company's manufacturing business, second quarter fiscal 2008 revenues were $11.9 million, compared with $12.1 million in second quarter fiscal 2007. Second quarter fiscal 2008 operating income in manufacturing was $1.7 million, compared with $0.8 million in the prior year's quarter.

“We are confident about our SAP strategy and its potential to deliver significant license revenue. The outlook for this business is strong given a new partnership we have with SAP that includes shared performance goals and commitments by both parties,” said Tofteland.

In the company's hospitality business, second quarter fiscal 2008 revenues were $11.7 million, compared with $9.3 million in the prior year's quarter. In second quarter fiscal 2008 SoftBrands' hospitality business posted an operating loss of $2.5 million, compared with an operating loss of $2.6 million in the prior year’s quarter.

“In our hospitality business we are increasing spending on research and development above our original plan to improve the scalability and stability of our products for larger, more complex customers. This investment affected our profitability in the current quarter, and will also have an affect in the last two quarters of fiscal 2008, but will help our future growth in the hotel group segment,” said Tofteland.

From a geographic perspective, 62% of revenues were generated in the Americas in the quarter; 24% in the EMEA region; and 14% in the Asia Pacific region. This compares to a respective mix of 60%, 26% and 14% in the prior year's quarter.

Six Month Results

SoftBrands revenues for the first half of fiscal 2008 were $45.9 million, compared with $46.4 million in the fiscal 2007 period. SoftBrands reported an operating loss of $2.0 million for the first six months of fiscal 2008, compared with an operating loss of $0.4 million for the first half of fiscal 2007. The company reported a net loss available to common shareholders in the fiscal 2008 period of $1.3 million, or a loss of $0.03 per diluted share, compared with a loss of $3.3 million, or a loss of $0.08 per diluted share in the fiscal 2007 period.

Cash and Liquidity

As of March 31, 2008, SoftBrands had $9.4 million in cash and cash equivalents, a decrease from $9.9 million at the end of the previous quarter. SoftBrands’ total current assets, which includes accounts receivable, increased to $39.0 million from $31.9 million at the end of the previous quarter. Deferred revenue was $29.9 million at the end of the second quarter, an increase from $21.4 million at Dec. 31, 2007. SoftBrands said the significant increase in accounts receivable is primarily the result of large transactions near the end of the quarter and slower payment by certain hospitality customers. The increase in deferred revenues was the result of adding large customers at the end of the quarter, which will be accounted for under the contract method of accounting, and also the result of a large portion of maintenance renewals occurring in the first part of the calendar year.

Conference Call

SoftBrands will hold its second quarter earnings conference call at 5:00 pm Eastern Time today, May 8, 2008. Interested parties may listen to the call by dialing 800-573-4754 or international 617-224-4325 (passcode: 18819470). A live webcast will also be available at SoftBrands' website at http://www.softbrands.com. A replay will be available approximately one hour after the conference call concludes and will remain available through May 15, 2008. The replay number is 888-286-8010 and international 617-801-6888 (passcode:52855458). The webcast will be archived on SoftBrands' website for approximately one year.

Forward-Looking Statements

All statements other than historical facts included in this release regarding future operations are subject to the risks inherent in predictions and "forward-looking statements." These statements are based on the beliefs and assumptions of management of SoftBrands and on information currently available to us. Nevertheless, these forward-looking statements should not be construed as guarantees of future performance. They involve risks, uncertainties, and assumptions identified in filings by SoftBrands with the SEC, including:
• Changes in the economy, natural disasters, disease or other events that affect the manufacturing and hospitality segments or the geographies we serve;
• Our increasing dependence upon our relationship with SAP;
• Our ability to continue to satisfy covenants with our lender;
• Our ability to timely complete and introduce, and the market acceptance of our new products;
• Our ability to properly document our sales consistent with the manner in which we recognize revenue;
• Our ability to manage international operations;
• Our ability to maintain and expand our base of clients on software maintenance programs;
• The effects of and our ability to rapidly adapt to changes in standards for operating systems, databases and other technologies; and
• Our ability to successfully upgrade our financial systems

About SoftBrands
SoftBrands, Inc. is a leader in providing software solutions for businesses in the manufacturing and hospitality industries worldwide. The company has established a global infrastructure for distribution, development and support of enterprise software, and has approximately 5,000 customers in more than 100 countries actively using its manufacturing and hospitality products. SoftBrands, which has approximately 775 employees, is headquartered in Minneapolis, Minn., with branch offices in Europe, India, Asia, Australia and Africa. Additional information can be found at http://www.softbrands.com.

Contact:

Gregg Waldon
Chief Financial Officer
gregg.waldon@softbrands.com
612-851-1805

Susan Eich
Vice President, Corporate Communications
susan.eich@softbrands.com
612-851-6205

2008/05/08, Minneapolis, MN USA