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American Software (AMSWA)

Participants
Vince Klinges CFO
Allan Dow President
Matt Pfau William Blair
Zach Cummins B. Riley FBR
Call transcript
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Operator

Good day, everyone, and welcome to the American Software Second Quarter Fiscal Year 2020 Preliminary Earnings Results Call. At this time, 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 note this call may be recorded, and I will be standing by if you should need any assistance.

It is now my pleasure to turn today's conference over to Vincent Klinges, Chief Financial Officer of American Software.

Vincent Klinges

good Fiscal and XXXX and Software's to David, Quarter Second Earnings you, afternoon, welcome everyone, American Thank Conference Call.

with will and call American some the me Dow, that. Allan On President remarks Software. after I Allan review then numbers the will give is of

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

million compared $XX million So current same while our same X% software in quarter for increased last to year a the for quarter fees year. total for to model. to $X.X Subscription same $X million the $XX.X second the to quarter the 'XX, increased period period XX% last the at fiscal revenue period compared continue look the for $X.X to transition the current as taking to quarter year, has the period, million prior the we license million decreased $X to compared SaaS revenues last engagement to year, XX%

Our same for and or services quarter, $XX.X ACV XX% by $XX.X to that year. value annual contract increased period approximately the to for million compares last cloud the

project to Method, same unit quarter, million Our million compared in supply professional in year, of recent a consulting for to bookings as decrease The current management a IT primarily was and in $XX.X due XX% X% $XX.X heading services for QX. decreased This to stronger the Proven chain timing work. and into our to unit, a revenues our the other backlog result quarter business last increase and by quarters, our offset partially solid of due remains that's

quarters. compared decreased to falloff with fees $XX.X combined license due revenues $XX.X recent retention normal to lower million, in X% Maintenance to million

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

to our XX% the margin period overall for current the compared costs, at gross Looking same year. was quarter in last XX%

the intangibles software relatively recent in amortization primarily the with X% and license fee due fee same of compared that's and lower last current costs was related to the in margin license Our from quarter acquisitions. cap year, to period to fixed XX% non-cash revenue

in that's in amortization Our more in due XX% total subscription the to $X.X primarily margins million which to million revenue the subscription compared last software, XX% period year, of cap increase or decreased increase allocation same gets subscription $X.X to fee to is the of for margins. revenue, of and to allocated costs. XX% Due

XX% without same The been margin 'XX allocation non-cash would to compared XX% quarter have gross period software the last in cap second year.

year, Our portion service XX% professional and revenue due of margin that's increased of same had same last in margins in higher compared coming to our supply last period XX% higher to business, XX% compared a to services margin to from the the a which year. XX% chain period

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

of gross in our R&D XX% revenues compared a at last current year. look same Taking XX% the for total expenses operating with expenses, were the period period

of year, were and marketing G&A quarter the revenue, from of primarily that's to XX% As sales marketing percentage current due XX% and related costs. compared for a to of revenues prior expenses total the of insurance for and and to legal period variable XX% fees. quarter, prior the due XX% current extent, to to from were compared increased expenses and revenues primarily that's the a compensation year lesser timing

year. earnings $X.X or of the current for share XX% compares net period in the which million of same EBITDA, net X% Adjusted So $X.XX to income and this compensation, to quarter, last increased year million to a or compared per compared our decreased $X.X quarter operating diluted million million GAAP income earnings excludes to -- same income quarter diluted $X.X million to $XXX,XXX XX% compared that decreased to $X.X $X.X $X.XX million to ago. share. for this stock-based quarter $X.X

of these Both that approximately was exercise the or of share adjusted and million related diluted for included benefit or quarter, for share exclude income stock-based numbers year, tax income discrete earnings this options. associated adjusted per net last amortization period $X.XX expense. the of earnings to stock diluted adjusted employee compares $X.X with $X.X and $XXX,XXX of expense of $X.XX net quarter, per Adjusted second of intangible net adjusted acquisitions income same and GAAP compensation the million and

approximately to the tax future period of this balance While were the in continue year, exercise quarter XX% last International of rate revenues the effective rate. revenues year. we this continue compared reported normal may XX% to approximately same to a of anticipate option total on affect tax XX%

the Maintenance X% year-to-date by that for at decreased to to current increase offset look year. partially to costs. compared million X% $X.X to and last business to XX% and XX% to revenue million, in year-to-date XX%. October $XX.X compared $XX amortization margin were to the million year-to-date our and lower $XX.X at to our to $XX.X fees at six-month compared or the the XX% at period XX% ended compared again the XX% in XX% the compared increase fee Proven that's a $XX.X our was period This costs, last to License look gross same compared $XX model. The were Subscription year-to-date, and last compared to million decrease margin a margin same Method. a decreased And year, due year, year, year-to-date decreased overall transition a unit. continued XXXX, for software revenues period numbers was year-to-date to due of $X.X compares last X% gross cap while at year license we reflecting XX, year-to-date increased fees year-to-date. last revenue software gross year-to-date, were X% period million supply same the $X.X million subscription chain in at Taking million engagement revenues million. allocation to to Services Taking SaaS increase million million $XX.X

chain Our last coming revenues period to unit. supply due margin year, increased from and XX% service higher that's XX% gross was same margins year-to-date our to management the compared

are XX% cost last year-to-date Our period same maintenance margins to XX% year, containment compared to due efforts.

expenses year. were year-to-date gross for compared R&D revenues same period Our total XX% last of the to XX%

XX% were XX% marketing percentage expenses XX% compared of and last revenue, year. revenues of period current same to and for expenses the last sales were total year-to-date same a G&A period for As current the both period year.

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

to XX% and Our diluted $X.XX GAAP earnings $X.X the compares last or period $X.XX per that year. net share, $X.X or million income million to same increased

Our share. and income year-to-date International of to per diluted or $X.XX, year. compared or that revenues last XX% revenues million period $X.XX of $X.X $X.X were earnings XX% million share earnings adjusted year-to-date same income diluted per to compares net net of total was

position investments the of million And since and end our a the company's $XX look approximately financial year. same period with increased Taking strong at XXXX. this balance $XX.X at cash million remains XX, October of the sheet, last

million During dividends. we $X.X paid in the current quarter,

for a aspects the million, $XX.X billed balance other sheet, a total million accounts in Some for $XX receivable was million our is over $X.X accounts receivable. little unbilled

$XXX.X million, our and and Our is equity both shareholder deferred are million. revenues, long-term, $XX.X current

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

last days year. XXXX Our day was XX days outstanding same October of compared the XX, period as to XX sales

to At turn this over call to Dow. like would the time, Allan I

Allan Dow

Vince. you, Thank

value over prior today, limited which revenue be strong year-over-year customer the a so saw of model smaller driven cloud we growth the evidenced was software's cloud cloud expansions going XX% by is XX% and engagement contract our the quarter, within The the service expect for annual in second licenses the subscription standard in year will services traditional forward, existing period. revenue, to that perpetual we During the model, in the incremental growth by community. our increase

the exceed strongest quarter. year million quarter the period annual off leverage new our to of from cloud year-end $XX.X million to to in different XX calendar with start associated the to of pleased good the the for ability is which with last new us contract We're the in both third This XX% new The last countries, for new customer rate as having added was spending QX a coming gotten customers value as the in the our are year we available. for increased level well funding us to fiscal good We which the quarter, across ACV year-to-date. logos growth acquisition. summer Furthermore, a authorizations traditionally $XX.X beginning brings XX in quarter. behind services quarter, consecutive XX see second contracts

we services performance beyond. 'XX the on in includes our robust we near opportunities, chain our close to a pipeline, to fiscal growth which XX% full in revenue. significant growth and remain ACV the in services evidenced rate date achieve QX organization capacity, several in our QX, in confident our supply now and at by are is supply which solid operating Based ability Given chain

are available, battling we we to compared the This QX Christmas Thanksgiving billable which revenue last services but holiday expect strong we growth hours to the of and be the as that and drag when is year, growth a progress do through on of period, continued show year. number will quarter,

During XX% total of level in the in as recurring of XX% thus mix second a with revenue revenues, cloud the the year, growth services represented approximately our prior expectations, for is compared prior same streams we're higher revenue period subscription our due recurring the and of on the can quarter, the in to maintenance confident strong we year financial of to revenue the before our trend track contracts. in incremental toward achieve This expansion our the higher end for it them the company, that of the the profitability belief improves this last fiscal predictability is of more customer and stated our the on a our customers' the value importantly, existing and community. business for but of model recurring within doors call. that growth drives Obviously, opens reflection I services XX%

had a we're very with our and we team's good Overall, pleased achievements. quarter

optimization chain optimized time are and chain products supply advanced shorter forward, of brand simulation machine the strive achieve their in digital capabilities are the greater of levels the for for platform. analytics, capabilities customer to agility which service supply the and they market advantage the higher an we new and continuing uptick take loyalty. solutions, leverage transformational dramatically our to retain and Customers as to looking Looking see learning our projects, depth, for

supply as help to to autonomous their Our them supply chain a continuous planning strategic advantage. our their ability to chain allows market transform customers and leverage

on the are our we're projects. execution In summary, in we progress making encouraged transformational go-to-market by these

to to continue expand as making customers successful we on look our focus existing will our customers more our and relationships with expand to We continue community. customer

the in achieve are We're customers. of we grow an both incremental confident ahead, continue and proud recurring revenue that acceleration our streams. for that mission, can benefits we see we year revenue will delivering and to be As profitability to

So we'd David, to open time, for at questions. any the this like call

Operator

Blair. Please [Operator our William we'll Instructions] ahead. from with And first take question go Pfau Matt

is line Your open.

Matt Pfau

job for my and questions taking the quarter. Thanks great on

become acceleration? ACV bit now Mac is row; on pretty seat growth looks ACV Just roughly year that has into to detail evident organization. this now of a some X/X that, that on made little And a the number. in acceleration of so. more starting in hoping details specifically been to for or in the I'm the Any Are the sales in sales good. quarters he changes to dig a related two driving what more

Allan Dow

seeing to bookings any things, the don't last Couple pace Mac we maintain quarters, having is all We're timing or projects couple faster able little his as of but impact. a we closed accelerate we increase. to being the the we contracts provide the the the are of contracts able of scope of ACV them and first rate forward, some growth of influence on starting an should those of and get sustain specific guidance, to as of over scope be that actually look

So deals we're seeing in as forward. some we larger pipeline the look

to influence P&L. an have our So certainly on he's starting

Matt Pfau

done you've I capacity, what Mac's? in terms that since sales guess And was trended of how

Allan Dow

of him, to period bit have a we offerings look couple so, Max will the we We had out over did of that I we and as on a are a up got see number We in attribute the we acceptances and of in little turnover turnover quarter headcount specifically forward. time board, don't our will there headcount. but that grow forward, some

effect this next you, can coming So increases time we additional even into that there. headcount with share we're quarter some able be when to talking

Matt Pfau

it. Got

comments mix it just that primarily of the over premise now you still seen the the that think business cloud versus on running we you have of the primarily the customers existing the given terms should of transition pipeline, sales is license and as made In products due cloud or driving ACP? are pipeline that

Allan Dow

in not of into seeing As just lifting look customers forward we we cloud. conversion the ship are a

there. not is footprint, expanding exciting seeing really that. news their is that existing are is they're So that a we are What customers doing that which

number the existing and they our those that move a have lift in the they to We that working of will those have, were process contracts already through capabilities cloud. the shift way will they where license

bringing conversions, looking they with lift forward lift be anticipate see will shift, but driven projects are there that we and some by and that expansion shift will primarily So some we are that it.

a will that. seeing flavor not of and be there were So in that mix just lift not a a bit but ship,

existing exceptional a the are think that got this the I We license exception they we're as stay is subscription are add the seeing they in point. just small incremental on, that that convert an substantially perpetual look if pipeline that all are said with license add-ons doing forward small the as we drive would seen be they that transaction probably not they even that model, than it for a but I not will purpose. at towards something Other that they're fee,

Matt Pfau

of the from, customer what's customers, one open your was for do the of Last cloud within how it. expansions one of Got catalyst scope last had with progressed comments for I that typically those you some are expansions cloud early and engagement guess to customers with incremental door their you. expand the the

Allan Dow

Some doing of were an on basis. the earlier ones incremental projects

of X second second anticipated implementation. where there phase that and actually market few as into is expanding the phase into there brought they area. actually well or of moving adding So the that a larger the we're we and whether a now that functionality cases, deployment new tier coming back scope In

So incremental areas. has that's for some been in us

other has actually One influences on to is of transformational are had of committing structured projects, Mac around it more actually the some are structure two projects the they upfront. deployments that

first built-in. a bite to they second then way the will taking few one. to that's bite up was of second may the a and one finished as they beginning until the But to have to longer they for our of those take wait phases for they then step of bit our true and subscription a move was the us So experience because X, play contrast the the where customer out contracts and a phase the they experience, at first the been

whole still that we're these and they I the those So project but looking seeing are projects, entirety how at in some transformational of do looking its at phases together.

Matt Pfau

me for it lot. guys. That's Thanks a

Allan Dow

thanks the questions. Matt, for

Operator

Cummings with next our from question go Riley will Please We FBR. take Instructions] Zach [Operator ahead. B.

is line open. Your now

Zach Cummings

and team for chain services a professional see, solid you afternoon capacity thanks the going service you there saw as forward How like it of have guess Alan supply rebound taking the a for kind questions. good headcount Vince, and was to sounds are number nice management my of in Hi, to feeling or we that backlog here? going the QX. into pretty backlog have that you about I you move have

Vince Klinges

A in couple play are there of there. things

areas. to help some areas solid help ecosystem, We some and also in on very actually that have additional also than because with is talent base. we redeployed there. backlog pull into of we them us expanded to backlog in build the maybe to been their They build in we been the We variety team nice able able demand a always in to mix that as other resources which in areas. third of well. bringing that actually us And a mix, leverage are some have create go us stronger as the knowledge for parties we've well the out We've turn and

So direction and this that we're will three look model point. and allows, and We servicing we resources to to customers need the sure that we're the team the projects servicing we're pace is running customer expand need really so the to flex combination being them, and were not of the build that to be level deployment for there, us leverage at our pull able constraining whatever on continue all third our do servicing revenue that opportunity at leverage parties that then. resources now to team, strings we make and at been model the positive of see we right influence in a capitalizing

Zach Cummings

coming these sounds about hires? little your new feeling you of And And ramp opportunities. of are have currently that's bit expected for sounds helpful. do people there's but turnover really the it door you team is up like a what in mean ability I some to sales the there. new Understood, of into terms and large like how time the service some pipeline expected of

Vince Klinges

What's marketplace; people that know we are exciting is an there commodity about showing, and making result known the understand a markets. are the industry us right is in uptick positive our that we for really now attractive

there is up yet closing are we're productivity transactions, now productive, pretty So few just a good for them months are the time Right ramp strategy. of executing seeing but not There they ago. out the efficient. people are they that sale started actives, working some transactions

add we We those good on made good really are we us about headcount folks the the the that So to were in that about join feel here coming weeks. board. feel anticipating that

So time is full this up with faster I even experienced the think the we years to resources that in going ramp be past.

Zach Cummings

Understood and compared spending macro to when customer are about How you final time feeling me, say thinking for question this months just environment. then ago? trends, XX the current

Vince Klinges

severe It out on months now. influence what's on we settles XX there, dramatically, reason a eye were macro think I still not were that some people that got seeing a going it the seeing said, ago watchful into right behaviors but out

one the as through we little today complicated we be can XX much which is deal just getting and contracted more we're face than better the were that size on grows but those transaction I months of a larger think a other challenges the approval getting ago. is overall sometimes those

Zach Cummings

Understood. of thanks luck for taking and the quarter. my with Well, upcoming questions best

Vince Klinges

joining for thanks Zach, Alright us.

Operator

on speakers. no further the time. questions will this I [Operator there our at the program to are And lines Instructions] turn

Vince Klinges

for and with again much. and very your three those us attention speaking months. you you afternoon, we this appreciate in forward all to And joined who thank look David, time

Operator

today's program. conclude now for may you your disconnect. and Thank you participation This does