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American Software (AMSWA)

Participants
Vincent Klinges Chief Financial Officer
Allan Dow President
Zach Cummins B. Riley FBR, Inc.
Joe Vidich Manalapan Oracle Capital Management
Call transcript
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Operator

Good day everyone and welcome to the Third Quarter Fiscal Year 2019 Preliminary Earnings Results Call. All participants are in listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions]. Please keep in mind, today's conference is being recorded and I will be standing by should you need any assistance. pleasure of today's American my Vincent over now CFO Klinges, Software. is to program turn to It Please go ahead, sir.

Vincent Klinges

call. fiscal Thank you American earnings of to and everyone conference XXXX Miranda and Software's good third afternoon welcome quarter

Any forward-looking are contemplated There the prove uncertainties, general accurate. and be services, by of pressures, differ for and economic these competitive be American call On the assurance services, call statements from and remarks including actual subject Allan which results made our include, rate are there and will effective and market the factors anticipated pattern predicted to me by those and growth the statements, underlying I is call. acceptance information or on and products the then the such of you irregular our may of after in growth the forward-looking and and but cause this no number and light market a as revenues. this beyond give strategy. largely but set from forward-looking results unpredictable remind cannot Software. before would our timely Such be our forward-looking are products and risks among forward-looking of President availability on numbers that, regarding to or of and Allan to, review can These this materially will of other I strategy those Dow, some and will that that these other the date. to business developments pricing expectations of risks statements. based not could quantified number with contain products are of only conference some Future In are and competitive that materially control. to limited statements statements that in, differ actual statements uncertainty factors -- like forth could things, and a of changes conditions, speak the uncertainties, and

comparison $X.X difficult So the million year, third an fee year. ended our stemming transition transaction million XX% revenues has for closed of fees year. XX% license million looking $X.X to year $XX.X to XXXX This fiscal from last the quarter million that for period period. period decreased reflects compared a same the to at ongoing compared total prior last January large quarter unusually to the last a SaaS compared XX, were to quarter increase the and and the XXXX, in $XX same Subscription

Software license our fee last the transition again, revenues were period reflecting to for continued $X $X.X million compared SaaS engagement year, model. or the XX% to same decrease million

Maintenance year. $XX.X -- to value annual compares last current excuse and quarter the $XX.X increased year. same or $XX.X for sequential that or for Our Professional million other compares increase XX% the from were to that contract million last the period million quarter. approximately million to and compared ACV XX% million for X% same $XX.X current $XX.X year for increased million and quarter cloud the revenues same last services' services the by year quarter last revenues to million to the $XX.X me, $X.X sequential and period

period compares revenue the recurring the for combined our total quarter same maintenance XX% current So for services last revenues to streams, of XX% year. include and that cloud which were and

$X.X included of of $XXX,XXX and fees, of amortization X% margin intangibles of overall was a for quarter. a which fixed margin and negative cost License of quarter Looking last license was for relatively year, prior fee at for quarter $XXX,XXX of the to non-cash gross same cap our total compared to current period due current to in the lower amortization the license XX% XX% items. of fees costs, expense software million compared the year XX%

for Our Services same fee same margin period XX% in to compared to increased compared period for due to due quarter last timing the revenue. margin year XX% increase XX% XX% the to last current implementation increased the to subscription projects. of the to year of subscription some and that's

due also the revenues maintenance to in period margin efforts. Our cost year increased quarter compared XX% and maintenance same for last in and XX% to current containment the increase that's to

period in expenses, and that's R&D same our expenses period gross the last for due compared at XX% current primarily to operating XX% revenues were of development Looking efforts. the year to increased

revenues due sales to of compared to of marketing XX% to revenues to commissions. for XX% and quarter compared lower total lower of and were year due period the a and XX% last were in year the that's G&A sales As primarily XX% revenue, prior expenses current percentage primarily that's revenues. expenses

XX% XX% million the stock-based So, million $X.X to this to compared EBITDA, million compared last $X.X same last same Adjusted operating this period income million quarter, decreased decreased year. which excludes to $X.X $X.X the for quarter year. compensation, period

XX% adjusted of were XX% exclude tax last for last discrete in year. per Our $X.X share to GAAP $X.X $X.XX diluted earnings a XX% or revenues and fiscal Jobs year, prior to to net diluted per of share. expense Cut net other the income stock-based of numbers same or our related Adjusted the compensation the These the quarter share adjustment third related of per to $X.X diluted current International quarter. or total compared for this and decreased for million adjusted XXXX. per period net of a earnings intangible million million income year of was $X.XX net compared Act to of of income $X.XX Tax compared the adjusted quarter acquisitions, income to share approximately amortization or expenses earnings $X.X quarter $X.XX revenues million

compared million the decrease compared $XX.X compared $X.X million, same X% to year, months decreased Subscription $XX.X X% million XX% period year-to-date, year-to-date $XX.X a the in $XX.X nine to $XX.X last a software million compared again, increase SaaS transition Looking last million this $XX.X to revenues were year. XX% revenues year million last model. reflects year. million period continuing at $XX.X And million our revenues maintenance numbers increased and $XX.X to same million. revenues fees total million to increased $X.X to the compared while Services for X% to to year-to-date to were year-to-date the year-to-date, license engagement last

due our was same in XX% period subscription while license So, XX% compared year-to-date XX% to deployments. lower fee year last to SaaS from decreased our overall primarily gross increase to in the and year X% license margin fee gross fees, to the year margin margin due XX% XX% and last increased compared year-to-date to last that's

margin consulting that's was last of period last to due business to due higher XX% increases Maintenance margin to year margin revenue compared year-to-date Halo revenues, our compared primarily our to IT due projects from services XX% Our and XX% acquisition from services last the timing year, some lower was unit. to and implementation XX% same in in year.

expenses headcount nine year total period the increased and Looking for expenses, efforts. compared month XX, to XXXX acquisition January that's same period the were the XX% of our at last ended operating due R&D from to increased Halo development and revenues gross XX% in

same expenses to for expenses XX% period. percentage that's acquisition. for current a revenues expenses last period G&A year the due were the compared of revenue, current XX% period and were total As prior from year and XX% of the marketing and Halo sales the year to

decreased decreased income period operating $XX.X XX% same our year. of Adjusted compared compared the EBITDA $X.X operating million So, million year-to-date to year. $XX.X last to income million $XX.X million year-to-date last to XX% to

earnings diluted or share. year-to-date year-to-date a million XX% to Year-to-date $X.XX last earnings last million million of $X.X international $X.XX earnings revenues compared diluted of was revenues income $X.X period to for compared share share net GAAP of Adjusted the period year. of diluted $X.XX, same year. Our net income $XX.X income to diluted earnings total compared share or $X.XX was per same million, per $XX.X per XX% per were or

Looking the end XXXX. approximately million with strong financial January at the $XX.X remains balance of and at the of sheet, company's XX, investments cash position

ARR we unbilled balance During paid balance the was million of the $X million, $XX.X roughly aspects was Other quarter, dividends. million. sheet, of our $X.X

$XX accounts in in total. So, million receivables

Our deferred equity and revenues is increased $XXX shareholder $XX.X million our to million.

Our January same X.X as period last year. current and in XXXX, X.X to compares XX, the that of ratio was

XXst, sales days XX to the like days Dow. to due that's outstanding over turn to and of days XXXX was time, timing Allan XX I'd to compared Our as At this January call billings. of

Allan Dow

Thank you, Vince.

long-term annual the We and in trend XX% our toward to which year-over-year support is continued subscription the model, was for year deliver growth and value software-as-a-service cloud faster The the engagement contract evidenced transition period. provide a ability the driven applications. by services solution prior XX% to in subscription for the better model by revenue over the increase

trend the of third rate increased or deferred delayed numbers, are million the better million you've customer This customer new on for from XX new or based XX still $X.X in in close for a with good continued our acquisition. associated countries. and and in the The but feeling another community of QX. value results year different subscription the end $X.X the we've to contracts transactions seen licensing added completed in effect QX contract this QX cloud We now in services $X.X of projects, annual million as a logos quarter upward quarter. fiscal was We to at

while seen, model it pleased objectives, which New better higher was over customers' our impacted model continue were preference our buying and than performance team's much our Although services live, the on-premise the and financial and subscription close the time which market to model. value our go the their and had the faster Year our for we at predictability. alignment to slower our activity are rate on with we same traditional we disappointed toward But a subscription with historically quarter. customers investment in in achievements a their to over and our improving trend the period, revenue Christmas return this for time The is

to cloud period the the prior recurring total revenue to compared and streams the approximately revenues, quarter, of in subscription our of maintenance year which is same services our in During due third represented the growth XX% XX% contracts.

planning to of revenue create customer strategy in digital increased transform and suite into and digital financial which our to recurring track to their pleased trending automated our achieving We're product more delivery, our new to supply that continue our on we're necessary with future, manage planning the visibility, enterprise a deliver insights a percentage profitability. digital business higher to connected customers and the enable to an to chain. will concept expect improve business predictability the We better report from

an As retail day-to-day techniques disclosure progressive of providing to optimization further new experience suite entirely we a their through in showcased the experience, the show user guide NRF at achieving leveraging important evidence January, XXXX shift, for user this our streamlined operations. user

as Board of who today things addition we I've Looking announced Inspiration During will leaders machine within the those continuing we're do don't, industry of forward, team. segmentation the focused us the companies projects, transformational new embarking strategy supply "One enterprise has one analyst aligned see event, irrelevant the companies industry the direct become show." leadership another an on a declared transformation, our to which seen optimization our at coolest year, in capabilities decade. the a believe and that customers chain President uptick analytics, on a become leverage enabled and significant will Vice and a chain our are embrace supply earlier those will we simulation Global learning a to On Mac Transforming allow as advantage. suite. this leverage their advanced supply joined We of our McGary team their market last who Sales. implemented sales autonomous who depth, transformation. Executive Late optimize strategic as that our by planning, chain and continuous to note,

to able product in chain with enable achieve software a will this their we overall we extensive to assisting search, new -- summary, I necessary a and successfully opened our global level will the high SaaS our customers autonomous leading results sales digital a strategic strive investments market which the supply in we pleased to role engaged transformation that as we're because in lead supply our by direct accelerate background we of chain model. In growth growth years such, As this comprehensive achieve for continued believe force ahead. quarter the leveraging that Mac from to on the after focus be his companies success success. advantage

a make continue to to successful purpose, to our competitive we'll our advantage. on investments We achieve is and our them more customers focus leverage which chain core help supply

delivering We to our our revenue a are incremental are confident both our during -- engagement for benefits continue this our and to model, that be at grow and like we can the space. proud any to in transition profitability and Miranda, continue time, we SaaS a retail call this exciting open to questions. fuel The chain investments role customers. are to results the we'd leadership our to planning maintain supply to

Operator

take the ahead. our Please question Definitely. Cummins [Operator FBR. we'll go Riley Zach of first B. Instructions]. And day with from

Zach Cummins

afternoon, good for Allan Hi, questions. Thanks my taking and Vince.

First talk Sales Global question new hire, your about going to for is how really and your me this this can EVP you of is, strategy? new go-to-market affect

Allan Dow

change the be transformation Those we projects, the we as organic sure, at call, feel success. we've at was I for speaks high-growth those not at we long-term have put this a team and to they're is Zach. in to supply Mac's just to transformation being capability focused add Late it both made level important the mentioned And those really that in our of the environment to And critical their and in it couple customers investments last Mac really our efforts, well and customers executive able in to that we year, solution focus is we driven over last experience that the we're are -- marketplace engagement really And Yes, the for important in to our chain. strategy team. felt a a that emphasis that capabilities sales additional that attract acquisitions point. as for on as our And in this as our earlier R&D level, years. and user-based. on to really are prospective that who transformational well. strategy really our of pleased

Zach Cummins

in this that's And last idea transaction SaaS the that in the due an in then of is license the ongoing license Great, decline helpful. terms release? large of to give cited press year versus transition you how can the me was quarter, much of the unusually

Allan Dow

was couple little to year of bit amazing historically, happened slowdown. a New Year, quiet. around it's about and that that me busy extraordinarily both. this mentioned we things a of call to the Yes, earlier a It the There it were -- in been always really Christmas was

So we of off. of a a some that and bit projects went delay hangover saw

a on of of is our nature last and So third because Software-as-a-Service impactful fiscal The earnings bit factor. of that quarter subscription transition And a deferred that very license and the course, then quite had short-term year magnitude. of a the see year licenses. on-premise or transaction was the numbers inflated we We transaction, large of and quarter, large number third a that didn't numbers. transactions same prior one that specifically was that traditional quarters in last subsequent quarters

that and the the numbers out that an year. three -- third in way quarter So us the for played factors had this all impact in

Zach Cummins

there? still hesitation little uncertainty you the the your talk there some conditions, economic given projects, the of customers' And can Understood. geopolitical a some kind then ongoing out these patterns? some pull some still of and more trigger bit Is spending really that's of on to of the about

Allan Dow

the of just is authority seeing higher the pullback not seeing a is OpEx, spending much term put the the in to still or projects authorization a disciplined level. the that What whichever at that. want pipeline whichever review we're you on The may case we're be, capital spending strong,

authorized, clarification they getting So we the back process maybe get approval or see is little been diligence thorough, -- some projects much and the for seen to process in review for traditionally final a up more getting where served extent, elongated sent there. more it's due

seeing impact that's at So this point. the we're really

putting that that toward number there. these may seeing for that come, seen projects actually out and an triggering people We some now are the being what in And is actually the it's ready overall eye the transformational have of have spoke a uncertainty project and of I engagements pullback we not flow we're off.

Zach Cummins

R&D Understood. talk then, what to the capitalized And and about stay Vince. big behind going going elevated is Can was you forward? jump that in

Vincent Klinges

effort the we that our we've mentioned retail I Allan effort, optimization and mentioned increased about script his -- in are doing. R&D

quarter. really drove to this closer to trend, year. compared anticipate I last it's which that's back million $X closer about would a So, million what $X going be quarter, to

Zach Cummins

and again for Well, That's closing XXXX. taking my thanks of Understood. luck helpful. out questions best

Allan Dow

Great us. for Zach. you Thank joining

Operator

our next Vidich Manalapan go Oracle question we'll from Please And Joe ahead. with take Management. Capital

Joe Vidich

SaaS thanks how for just I wondering transition. along with for was guess do you guys, regard SaaS start taking questions. hello, with, in two, far subscription to the Yes, clients of my I are you And to One, transition? think opting the what percentage that are model? your

Allan Dow

and thank for It's joining Allan, for the question. thank you us, a you one. is good this Joe,

What better believe marketplace strategy, first model We transactions the that, short-term it we on we of it from for predictability those obviously even for of are, in that mid-point our the impact. is as seeing say I profitability us model a like that though has is our are transition. subscription that a Joe, customers, helps well, long-term and and and would we're that point all, a

that as and So, are we and subscription supply in-house model still model. stickiness that for some them. still move keep engagement trend that to and are the that in with they substantially to model point. But long-term vest toward unwilling awareness view some see in we at this that space, keep that to is the level, slowing with to we information acknowledgment particular see there so like still But the chain the engage willingness the customer to an solutions close they companies being companies strategic want this area a

maybe and the that business subscription is model. it -- preference we to best the in being of get see mid-term even trend forward, the customers, our the of we the So and of being see as new customer, proposed the the comment we in but grow, to prospects particularly our We're we we goes engagements that, the something expect trend first we model. to look look continue a like subscription by the XX% is pipeline pipeline, the for requested predominance XX%, preference maybe on the take have to Predominance trend being our way do as forward look at when higher.

Did model. continue see that the to that see perpetual that's -- to if business leveraged be see two that going be go. we're a mix three surprised this even what help, So, wouldn't we year, a on next see Joe? We'll subscription licensing we'll add-on will the higher the against in comes years the next model. or in essentially model, mix believe we And

Joe Vidich

It helps guess how to marketplace? I lot. to it you question, as you out does, this, one in does. positioning I It what large have don't there? corporation would come a the a strengths Your your know do versus I but other see frame that competitive the competitors

Allan Dow

Yes, that answer another Happy to question. good one.

for to So, component company the and robust cost supply type, lower capability. structure is our our so our chains around deployment, time who of companies functionality, functionality in that's solution of those need risk the to same deliver leverage have to of of solution the that our and of predominance our the marketplace. transformational very built customers would the complex a footprint in transformation. supply are been deployment much have capabilities experience main depth business, deployment that capabilities. allow is bread We've the we compared those bulk and The the could it history able chain for Based tailor-fit on we've to is key marketplace, our a

in stand that out So, area. we

invest continuous the the to planning associated to look it, market, Fortunately, we to cutting time of management are revenue help over to the picture. reduce driving the make out and dramatically, automated forward, operations it and years the improving forefront portfolio, acquisitions practices, with continue the longevity that are we a really strategic able starting with manpower that's as speed and we build and good an

of what the continuous planning. on leading solution-managed, been we're So, technology that is from moving to historically forefront personnel-managed automated

technology. very solution, So, easy risk cutting-edge to robust implement, with low

Joe Vidich

great. McGary, I would you your hope. that Mac really I should That's Right. help, appreciate hire it and I with applaud really with

Allan Dow

Yes, we're the excited on Joe. to have him team,

Joe Vidich

talk And much. to I I'll Anyway, you, tomorrow. thanks guess very

Allan Dow

Thank good. Very you.

Operator

Instructions]. [Operator

Allan Dow

joining forward the very future. thank on to you us the further call evening. appreciate afternoon in us Miranda, that. good this everyone and dialog Have on look helping We much for a

Operator

Thank conclude may you This wonderful participation, will today's program. have for a disconnect you your day. now and