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American Software (AMSWA)

Participants
Vincent Klinges Chief Financial Officer
Allan Dow President
Matthew Pfau William Blair
Zach Cummins B. Riley FBR
Call transcript
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Operator

Good day, everyone, and welcome to today’s American Software Third 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] I will be standing by if you should need audio assistance.

And it is now my pleasure to turn today’s conference over to Vincent Klinges, Chief Financial Officer of American Software. ahead. go Please

Vincent Klinges

and Software’s Rylin, everyone, welcome and Thank Quarter good Fiscal American Third Call. XXXX to you, afternoon, Earnings Conference

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

in, date. contain things, such would I and this our our based subject some as or and strategy. forward-looking Any may the expectations business a statements our actual are those and are remind contemplated to are statements. including speak statements forth differ and of which this conference you number strategy forward-looking But statements, control. predicted by that regarding, of forward-looking be or largely could risks only developments to and from call like statements results uncertainties, underlying forward-looking cannot Future beyond These among of other materially growth quantified on set

number materially uncertainty assurance include, of of effect light of these products services, acceptance of actual irregular risks the not the for market be other of economic Such market uncertainties, looking cause and that availability accurate. competitive factors and to, forward factors prove In to but could anticipated There products growth and and of the timely can services, these and the competitive pressures and information conditions, and on general pattern call. no our be pricing and revenues. the made will there unpredictable and changes those the are statements limited from products a this that differ in are to rate results by

same compared to that last last our our compares $X.X at year. software caused for to million current $XX.X look last current same increased increase to XXX% total last $XX the the license the revenues the What the also period $X.X $X.X and and in XXXX, to quarter same the period XX% same subscription the a revenues in year, to for in quarter million taking period with to to million that the year, million $X.X which million period increased compares million and third increased quarter for XX% the fees, So compared year. fiscal quarter,

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

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

million to So maintenance $XX.X to compared million. $XX.X X% revenues decreased

the recurring the a due cloud Our We this period Services transition compared total XX% decrease as of This revenues combined higher is in is the in year. same recurring revenue the last quarter trend streams of revenue a quarter. large current XX% the increase were in and to fees Maintenance to percentage to we model. in and to more the believe license revenue Cloud

the at Looking costs quarter. for

last the Our that current XX% year. was period the gross in to margin same for overall XX% quarter and compares

same quarter Our to year, compared fees. in XX% negative last higher license license and that’s was fee current period due the a margin X% to in the

year, primarily increase last increased XX% Our and the to compared revenue. the period subscription to for in fee subscription due same that’s margin to XX%

compared allocation to without year. third the would noncash XX% Also, cap one XXXX, thing our the be last same margin to note, of in quarter XX% software period in gross

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

the margin Maintenance the same XX% compares that to and period in increased last efforts. to for current cost quarter to containment XX% Our year due

R&D the in were the of our current expenses total XX% to So last revenues XX% for compared looking at period same expenses, year. operating gross period

As of an XX% sales from to the expenses increased headcount revenue, year. compared to primarily of additional year, XX% the a revenues percentage marketing variable in sales compensation and prior to that’s and last compared higher were due and

XX% year XX% variable compensation revenues primarily of for due total quarter, to insurance that to in expenses and current to legal and, a were prior and the period extent, fees. G&A higher compares increased the lesser

to XX% to expenses quarter that year. current increased last period and the in So the our $X.X same million compares for operating million $X.X

for adjusted EBITDA, X.X% million the Our to year. current same period stock-based $X.X in to increased quarter compared compensation, the XX% which last excludes

GAAP last XX% million year. net to compared a income the share per to Our net $X.X earnings $X.XX or share or million of $X.X earnings $X.XX increased quarter current diluted diluted for of income

per period amortization or share quarter, to And acquisitions to and related these the income $X.XX expense. expenses earnings income of year. net $X.XX million intangible or numbers last compares the diluted $X third in of adjusted that same was $X.X Adjusted stock-based for net and compensation adjusted of exclude

period approximately International revenues this compared to last of XX% year. quarter were in revenues same XX% the

a License in and year-to-date revenues $XX.X period million same $X.X excuse costs a $XX.X to $XX.X year. last increased year. period the compared in total same to Looking X% million, – XX% $X.X year-to- fees were last fees million last total the million It million in to increase that’s me, compared the same revenue the at million to cost compared Subscription XX% increase year. period $XX.X – date. or were

to supply decreased to Services a to TPM, from last by year. lower $XX.X this $XX.X partially last was our X% compared $XX.X revenues compared offset business. X% year revenues and XX.X% million increase million million year-to-date due XX% in to Maintenance revenues decreased to chain

for XX% period. period nine-month XX%. Looking current the costs increased to gross to Overall, the at margin for compared

last that’s in allocation software same decreased margin $XXX,XXX year-to-date cap year. same last amortization XX% compared period to due to year, the increase gross in costs compared of fee subscription about to to XX% in of $X.X million Our and the period

software exclude amortization So for would current same you year-to-date cap the and those XX% gross the both if year. margin period last be noncash

in to total from XX% R&D that XX% XX% our margin last XX%, Our margin same revenue higher-margin to license And Total our from XX% due Services XX% XX% services were year. compared for in and year up to was and was to business. fees. of the revenues in same nine-month to X% same year-to-date, Maintenance from last license period due last that’s the period increase margin compares increased higher in costs fee year, the period the

revenue, headcount. to increased XX%, the variable for of period total a and due sales and increased current and As primarily expenses marketing compensation higher percentage that’s to XX% to compared

XX% due compensation and revenues up a and extent, to year-to-date G&A XX% variable that’s of period, expenses lesser period compares for current and higher to – that in higher the the and, were year, and last legal same to costs. insurance

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

year. million $X.X share compared or million net increased last diluted or $X.X net diluted per earnings share to of income $X.XX GAAP XX% earnings per $X.XX income to

last of end the at revenues Taking share X.X%, investments million at the year-to-date or earnings by last $X.X cash period approximately since that year. that company’s of with the financial balance year-to-date and we $X.X sheet. period look in of $XX.X – adjusted same or million our EPS The International XXXX, XX% and compares net were XX, And $X.XX, position of $XX year. during million $X.XX diluted last quarter, dividends. earnings which net income currently, million compares XX% increased to strong remains the per January Our year. revenues was paid in approximately income same and of a to

X.X% accounts Some other balance million. are for billed sheet XX.X%, aspects is a of our receivable $XX.X is total of unbilled

were our Our shareholder equity approximately and is $XXX million. XX.X%, deferred revenues

Our last XX of as period days our current to in XX, in January the year. the as ratio period X.X sales period year. compared the the of was last and to outstanding current XX same January same compares XX, X.X during days at days And XXXX, was that XXXX, end

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

Allan Dow

we’re fiscal Overall, with company’s and are quarter the year-to-date and our achievements pleased – year very a XXXX. in Vince. you, Thank good performance team’s had

growth During continued Services Software-as-a-Service the by the rate, subscription third we prior revenue model, XX% quarter, the over evidenced as for close with saw Cloud a with the improvement and same in contract year growth marked increase value year-over-year our in in annual period. the engagement XX%

strong, I call, period, November stated the and very after fairly on As quarter strong. holiday the quiet finished started a

as capital those anomalies, expense closed overall few a sizable quarter, trend license referring still see a We the the these operating also cloud. in transactions customers shift an expense. to versus a the During we not with perpetual

countries. XX welcomed of momentum is subscription new with we or a and in license quarter, already quarter, to customers fee XX contracts completed This the fourth continue the new During into few expected a transactions for solid beyond. progress our ahead and a our fiscal and pipeline us. continuing to growth ACV XXXX We fourth in the in solid ability remain signed, achieve positive confident quarter, year

for due the holiday both fourth accelerating. internally close that supply and we demand seasonally the the will of when specific quarter, chain the where a the we higher ensure to of days rate the revenue resources, solid organization partners areas be to We see backlog services especially billable and skill services we available period. compared from service on are have the our in sets away expanding Based QX QX, moved number to with in as higher in number anticipate available

slight our of license approximately due of in the contribution and third compared Maintenance recurring period total But prior year. the the recent revenue said, revenues the streams a Vince is for represented to higher in where Cloud as the quarter, most During fee to XX% Services XX% quarter. drop same

end percentage contracts on trending for approaching XX% revenue in expect the preference the We subscription XXXX. year future higher the to with strong rate before continue of the the fiscal the recurring of based

in strategic growth company, greater profitability predictability visibility. on improves and shareholders financial and gives the investments, gives and make our where revenue clarity confidence The our us recurring of which the to

strategic cloud-based the During for an tactical to the arrangement, model, service the outputs introduced expert are Under leverage and talent as produce business this we well we resources our where providing planning provide new we with goals. as solution innovative and customer Planning-as-a-Service. third services optimized operate value-added a that will quarter,

will paradigm outputs to delivering accelerate progress insights transform and on ahead, the by help We’re even automate focused a to engagement the to especially us value is our decisions, allow from towards this continue better and tangible new which for us. model, traction learning outcomes. Planning-as-a-Service gain planning. customers, This The vision machine leveraging on with to this we new expect autonomous to achieve and results helping innovative our actions our achievements as in excited intelligence to operations model, this Planning-as-a-Service model for this gained operational in incremental artificial and years be our will customers for their higher driving service, more revenue customer

continuing of decision-making for the our advantage Looking chain dramatically the our customers. see capabilities in the transformational forward, simulation optimization and depth, our machine we’re an improve uptick digital speed learning solutions platform and optimized projects, supply which analytics, of take to of leverage and to advanced quality

economic today’s uncertainty, customers to of environment, while and navigate the higher introduction agility to them supply simultaneously the dynamic are chain to the risk. market brand awareness seeking looking new trade to products for gain mitigate In accelerate global help

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

effectiveness of Our a XX. customers our objective is chain their by improve supply to help factor

this summary, exceptional continued deliver to digital to pleased with new for the our value on progress world. our we In as strive execution, in success we’re customers go-to-market

to focus introduce as our to continue on we and new customers innovative successful will We more relationships look services. our making expand

are confident years can We customers. benefits profitability grow we incremental delivering and to the and both proud to in are revenue for be our that continue ahead

open at Rylin, we’d to this to questions. time, call the like any

Operator

go And Instructions] we Matt ahead. from William Please Blair. a will [Operator take question from

Matthew Pfau

some provide what and I that wanted quarter the thanks close you in out detail rates Great for drove quarter? questions. start Maybe on my you rates. can guys. close more to in just on the improvement the taking saw Hey,

Allan Dow

had the I nimble much going on these were agile, the economy a really past. more of quickly think putting prospects some nature we more a funding pressure on, projects. to couple the of forward customers Number today and one, little Matt. in our I and and moving is things be they’re They’re think than dynamic seen

I by of these being executive-level in on engagement think business. driven the it’s because the projects also nature impact their of

brand strategically serving market current share really around not awareness So, it’s operations, and customers an just out there. but and optimizing maintaining it’s the

degree. So number to I as iterations the it and an to some higher level of engagement has in of the the diminished is get improvement result, takes organizations, much think a

So on a good impact I think people move see to still forward. that’s willingness it. been an We for

their able So projects the march to and and were contracts we off, get which kicking towards meant executive lockstep getting with signing team going.

Matthew Pfau

Got supply chains. on anything it. impacts is of lot in seeing Any that you’re that? impact decisions different a there or coronavirus having obviously, the And people purchasing of delaying terms like

Allan Dow

XX%. that medical were expansion by up now, shipments chatter volume. little is an and out of Well, by seen do right around and a have And enough, only we’ve predominantly overwhelmed project be companies we client that the space. happen their have interestingly to in we won volume looking there. we’ve bit – been about with, It’s of They noise increased been to

us, we slight for chains And that, longer that So, order this at But be back measured should months year. it’s predictions positive get anticipate not supply or impact. a are overall, in term. will this maybe point in in but had delay, that the a weeks, later

So, it, disruptions, happening. this brings see and it’s the going But tragic this case, highlights it another I the one it want fact this and important. and to another of there agility part none is light be us think happens that of situation, There’s to to really that be are to a one. interesting just of real

engagement the a through to we disruptions seeing manage around see that just we’re as So, lot how forward. going of to can are become norm these

Matthew Pfau

more hit to of efforts sort on And just any Or the with Are partner maybe sense. on to are the how those I ecosystem. build progressing? out seeing also partners makes update interest wanted an there? you Yes, efforts

Allan Dow

Yes.

there. cautiously proceeding We’re

with to individuals for we even years. new as important worked the the of number of new for that make we’ve partners within a values is One partners with us sure engage and

obviously, consultants want be make that can that’s successful we been have can And successful. well. sure and We a our through they certification be to process and, that program, that their get so swimmingly going customers

had the because news getting to well. having that with of that We’ve we’ve like we’ve path more with certification with And some engaging internally use successful They our opened are the in is, and gaining new got program us, up partners it, from clients. they’re value we it, good the that down success partners interested there, we’re they’re they a those. program process and that enjoy much it, as

of think we’re we’re we the number only not the engaging in, have, those I the expanding relationship with but that depth So, expanding the marketplace. we’re that of relationships in

Matthew Pfau

and me, for pass it one Last on. Great. I’ll

Planning-as-a-Service type On sense with targeting more for you’re customer, either size makes offering? the any that that product, of or that vertical

Allan Dow

now. strategy, We engagement a the that It’s one is in much actually that engaged capabilities The higher-level we’re two some progressing optimization enterprise an right have models using opportunity. larger we’re platform. within

or one the where expertise client bandwidth today. And so the have as do we see that maybe to it well doesn’t the

insights and well talent to service. that leverage the as deliver we the of as our platform So automated the have can we capabilities

ability rather augmentation companies targeted area small-to-medium growing towards build had and are a other complete of that is to the an be that’s the see so haven’t an than organization, outsource that more to expanding, their an we’re operations. And planning services. The it’s likely where

an from that, our labor, technology, So, we’ve partner a their joint some of in where of operational labor engaged a our be some it effort, with will standpoint.

segments: off. don’t bandwidth have that, kind So the they talent where lower capacity, to advancing sophisticated and of the upper don’t likewise, do we’re it’s pull more where have end two or the it; the knowledge end, just that to they capabilities

Matthew Pfau

a for taking again. Got I and Thanks all questions guys my congrats it. lot, That’s had.

Allan Dow

you. very you thank chatting with much. Matt, Good

Operator

a Please Riley will Zach We FBR. from go B. question ahead. from Instructions] take [Operator

Zach Cummins

congrats afternoon, drove quarter? Hi, here the anything Was ACV for on any good and in context performance about Just starting you. Can quarter quarter? the my strong and there Allan thanks with strong QX? Allan, that just in the Vince, cloud deals taking in the around questions. outsized performance talk any notable the services you

Allan Dow

transaction unusual. volume a up There’s one that’s good nothing set It transactions. No, for overall. was no of that couple

there. growth continued seeing We’re

even in a pipeline forward, seeing towards look much stronger we subscription the model. we’re predominance As the

direction. good the in in three past were it’s quarter the that continued two did model generally, were driven or direction. I’ve opposite not this that So as financial – And perpetual by licenses just in traction a that it’s stated we past, the

So, operationally wasn’t and advantage opportunity. them towards trend take They are from wanted but it a capital – they it, they can seeing peak with internally. was cloud to where the services available the expense can performance of value they overall, and associated better, the But keep better mistrust at the is business, cloud much that them. than had around people a to the had we the

Zach Cummins

customers. That’s to these an you Got during type like with transformational continuing progress transformational helpful. to can the your you deals actually about one improve script. forward progress to deals? these in at types But landing And the with in you’re of make relationships uptick these quarters? It of see really starting how it. And sounds moving then talk coming your executives in C-suite mentioned to starting you’re of your

Allan Dow

Yes.

well. the certainly, by our the fact supply the been combination it’s improving probably our there But a chain as today. to the think at C-suite to I that ability paying C-suite, is elevated of but engage has engagement that’s attention

a to supply and in not loyalty manage that topic necessarily, for we attribute the important has It customer to our boardroom So become performance. the can’t service. how customer it very totally about chain

elevated, we’re and conversation much that’s So having. stronger it’s becoming that a

out. seeing to play are continue that We

turns. to application an X% those where get So, rethinking business. or performance and they improve they agile do way used transformational customer at projects, It’s how kind operation do the and They’re edges the or It’s going their is become the a serve on. really their it. a their more they are much this thus, XX% dialogue improvement better just of tweak of or or in the are tool supply way, how chain, not inventory in a looking out they the run

responsive. reliant have a number way how they structure rethink business, on their projects is a that how where collaborative clients and support configure more systems of and or dynamic, point become on operate going should their they industry should to have organizational the the on We view more new advice much they today, of much our

we’re insight, behind those So, that inspiration and for them of on the their helping They’re that, we’re drive that transformations are us kind leaning clients. on working with that.

continue the we gain have that as in continue the so, So marketplace to that will and accelerate proliferate of under that the for reputation engagements we to doing model. number can

Zach Cummins

one you of us question And towards Understood. trying as build the mix in a terms to guidance, revenue give of targets margin couple adjusted the you can move me. recurring final overall the just know targets you I That’s for revenue, continues years? just provide of formal the to of or helpful. growth don’t next but are sort what revenue EBITDA business over sense

Allan Dow

targets, got are that to nature accelerate we’re great There’s as that marketplace. And builds set revenue as in, false start we out don’t have know a we we rates now the these into recurring acceleration put all new will layer the so We’ve a just new But you to that coming stated, do that into fixed recurring the can projects we sustain you then customers. through certainly, pick of there. model, that that and – can we’re today the see see those area. in as the expectation as any see rate transition, those recurring just projects, don’t we you model in revenue don’t growth, retention model – up revenue we that that. that, we Well, to don’t we around much want uncertainty

So see an acceleration I of think growth. our you’ll

Zach Cummins

again, thanks remainder questions Well, for for the Understood. luck of my of year. taking and best the

Allan Dow

Zach. Thank with you very much. you, Good to speak

Operator

And we questions at do this not have any further time.

Allan Dow

We you the coming forward look appreciate and Well, in your this time Rylin. you afternoon, all again we joining quarter. for right, us. to All to speaking thank

Operator

This you participation. does conclude for program. your Thank today’s

You any may now disconnect at time.