American Software (AMSWA)

Vincent Klinges CFO
Allan Dow President and CEO
Matt Pfau William Blair
Zach Cummins B. Riley FBR
Call transcript
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Good day, everyone, and welcome to today's American Software Fourth Quarter and Fiscal Year 2020 Financial Results. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session [Operator Instructions]. Please note this call maybe 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 CFO of American Software, Vincent Klinges. ahead. go Please

Vincent Klinges

Good fourth Chloe. and to welcome Thank fiscal afternoon, XXXX Software's quarter earnings American you, everyone, conference call.

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

Allan Dow

thing Vince. to This and time. first who you, frontline to gratitude the support on these to healthy equal is Furthermore, our all an rights as hard us it in teammates extraordinary for all communities, have makes all Thank it worked right and our organization, diversity our of for and experience and company, the and do. an ecosystem and us embrace has better we I behalf express to times. responders around keep within our workers all because so the Personally spring want of been simply safe and

of all that awareness is held we know, social this the and And civil across around that protests end, for still the to the universally raise we not today. exists respect As globe. right the view country injustices to the

pleased that regards that mortar old community prepared we last the working event, challenges opportunities a we As year help we basic shift gained Customers that staggered the report excel. corporate under our transition, their to using and has gained of value multiple dramatic of did In and many span dynamic they how quarter to personal March. pivoted I every bottom protective weeks Within extraordinarily I early and following crisis have very successful. of In we anticipation efficiency members, months. the all closing the the few and fully members supporting from enhance operational, conditions. for bricks extraordinarily our fourth explosive in have global during We times our wide were then can time, from we open our in managed virtually, living XX supply to and funds members operating team The was which the went navigated for the our and needs area of transformation in the our results, team virtual. those is customers with they the stories the to remained were solutions shared most array disinfectants hours, reopening XXX% The normal as chains and about invest to and monetary needs to fiscal from matching home-based business. the am and products, and contributions of managing our to who retail. gear, growth line food that with team

engagement gaining service the clearly evidenced in increase subscription transitioned We by sales and accelerated, We're sell especially the projects using business implementation how fronts. project market, expertise year team the over transition operations year contract model, software to revenue fourth prospects XX% world, to implementation and and in this end growth have virtual for services, solid was XX% our annual to Our as approximately support was to our very building that all with our in maintenance now our cloud on contract learned and as considering in a prior value the which environment. customers the stream more successful XXX% period. effectively recurring and engaged happening customers virtual year many enable represents year XX% total of to quarter revenue services of a a momentum over We're all revenues. a more solid cloud and work

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

revenue year As we I accelerated basis. professional year a which professional services stated is XX% in our earlier, over reflected services and activities, growth on

have over to demand some the see services expanding of number where over we We be sets quarters, services had demand to few due expect the the realities growth year took available project our quarter bit a our nature past of We increasing. we the of start Based organization the and resources on pandemic the chain the and to see specific will in year performance for seasonal basis, of the bookings strong but the where areas quarter that show activities, in first services are to supply work we comparison a solid muddled ensure a skill was the as strong hold. on the fourth a backlog the continuing of middle backlog revenue

companies update the April deal new is results. to the of some to financial we While entering we reemerge into completed by and had was quarter exited of well transactions momentum for June, distress. the which our as fiscal We a XX countries in our as financial a growth quarter, or that one 'XX, Vince affected of the a carried lifestyle typically began during ACV which total and completed will seasonally was momentum fourth the on customers us the a of quarter during the for early six with fourth in new as few the in quarter, delays net that of detail products that in customers loss in contracts and closures, new subscription licensee current The number five brings us. slow May quarter. welcome late in period

We time year. are continue last grow of this we where were ahead to and see pipelines

rates ACV year. our over There's So confident fiscal growth to close some new the achieve regarding uncertainty the still ability we summer months. in in remain

has bode where go conditions having to the built of processes prescriptive have fiscal These awareness supply the that in norm. There's second resiliency, growth upward well fiscal risen What in. today's the capabilities in systems hand already half and that 'XX hand implementation for platform, are beyond. managing an seen agenda. This and market speed we've we well year. to is current However, comprehensive and our anticipate the in agility chain robust and insufficient speaks and trend executive an planning become our approach the for

to our digital allows which Chain new of customers. supply them to these transformational navigate Solutions analytics, an to chain enhance the and and quality of take global them dynamic optimized trade uptick improve of are processes uncertainty, dramatically speed the to decision resiliency. orchestrate today's for simulation for the help depth, machine environment, mitigate introduction Looking simultaneously risk products. economic capabilities our learning agility to forward, This Supply while we're leverage to accelerate the continuing and optimization seeking new approach In our customers making see of and advanced in projects, advantage platform looking

value put in gives for by us months for world. to autonomous supply that their transform to advantage where continuous ability within customers chain to competitive results our digital customers to strive planning and deliver today's journey six our we're tangible the as on our market. pleased a continued success exceptional we new journey this Our summary, in begins with In progress

grow customers innovative the both years We expand profitability services. we introduce details we time, our making can the customers ahead, in our for continue Vince, successful revenue relationships most. benefits incremental continue when over confident that call We're delivering to be need and more this a to on on look results. to turn they At new and it proud will to who are will and provide our as the focus in time to financial I'll

Vincent Klinges

fees, million in year. increased million same Thanks, to Allan. Total revenues lot fiscal to million XX% that the last same that quarter What $X.X was and fourth $XX.X $X.X the last subscription million a to period $XX.X the period Taking quarter last XX% for to in look 'XX of year. which of drove the increased period a at to the compared year. compares same

quarter million compared to for licensees current $X.X Software million. decreased XX% $X.X to the

contract quarter product the subscription customer annual for it increased experienced impacted as that in ACV termination and net that by Looking XX% last not COVID million at that this same suspension by an a also compares which $XXX,XXX. And services exception. company was We possible do significant but the the new challenges the will year. and the trend our that reduced be amid mentioned, or financial $XX.X period in by our and a approximately value, a resulted contract, lifestyle $XX.X outbreak, million, both the in rather our and the ACV anticipate ACV current reported cloud of ACV to of base negatively loss to Allan cumulative and

the to current chain year. in quarters. services work. to XX% of proven due we business, million That's at timing million management $XX.X increase also of increased result method And a compared due project that unit increase IT quarter recent consulting bookings as the in stronger to XX% for the supply last Looking quarter $X.X our to professional XX% in same in our had

compared Looking to million license which it than at $XX.X perpetual is stemming rate falloff revenues, the decreased from $XX.X million, revenues. normal historical maintenance and lower to X%

same in XX% to higher of cloud recurring current is last revenue revenue were revenue a Our to the combined believe of compares that cloud maintenance for the XX% in recurring year. trend model period transitioned total future. percentage this in we revenues to services and and we streams as And quarter, the

Looking at costs. other

excuse prior, the gross was of it margin prior me, the current overall quarter with year Our for and period. current was XX% XX% compared the

when software. been XX%, increased to and $X non-cash margin subscription of also, allocation license the amortization about period due of software due fee XX% revenue. of same Subscription which for that's year, same the was of year, period quarter XX% to to in margin the [XX%] million fourth the to ‘XX, in current of and cap the fees. that in you million license in fee $X.X lower compares cap margin amortization in exclude have Our increase to to quarter subscription same of that that's and gross compares compared XX% And the XX% period year, last about last included the primarily would last

same XX% to of management period, higher margin the compared revenue margin our for Our and coming higher increased from that's service a mix business due to chain supply unit. services professional to XX%

XX% same increased cost maintenance to primarily current XX% that's to in for our to of the period year. XX% and gross last compared containment expenses Our for period the the same the compares were period year, to that efforts. XX% total expenses, revenues Operating due current last quarter margin R&D in

expenses percentage a and primarily to costs, travel partially expenses were marketing salary offset headcount. quarter of an sales current period, As that's lower higher is for margin due of XX% year which by and revenues, and increased to from compared and revenues in the XX% prior the

current period. year prior Our revenues G&A of expenses for XX% and the were total

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

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

net these $X.XX adjusted diluted of of in same of And the adjusted income first numbers excluding quarter period. Our share for acquisitions expense. net the stock-based compensation related per compared per of and of diluted expenses income adjusted are amortization just to earnings million $X.X $X.X or or intangible the share $X.XX earnings million,

revenues, the million quarter compared for Taking year $X.X that revenues $XX months XX million year. XXXX to XX% the same million increase fees a Subscription XX% year. were were our period a for approximately $X.X same compared international full increase period XX, last year, million current the and prior X% compared to Our year to year $XXX.X total ended $XXX.X look last license same at compared last last to that's million year, and million $XX the of then fees X% to or were compares quarter. total the for XX% increased period the to while revenues the April

million million $XX.X X% staffing This year, management and year by for due to business. supply compared offset Our last in IT chain to services in is our unit. that's XX% to decrease XX% $XX.X revenue the our partially increased increase

maintenance $XX.X million million. year-to-date Our X% $XX.X decreased and revenues compares to that to

at gross year. last margin to for year, to for overall our the compared Looking year XX% XX% increased costs the

XX% to to to without margin this an amortization lower compared amortization XX% year. period decrease have that's The and million compared cost the VAR cost of the of the to intangibles in to allocation fees last XX% due year also to last 'XX, fiscal XX% and that's $X.X compared same year, commissions. same last gross decreased XX% increased of period for Also, allocation year also non-cash of to margin million $X.X subscription the XX% due and compared the Licensee license higher software and year, of year. due the increase lower software to software in margin license to in Our allocation for fees. cap last cap subscription gross would been year of to cap

last increase was margin services and supply revenue unit. year, XX% due higher our in to that's Our compared XX% to same services margin the business management from period chain in

to same Our maintenance XX% in compared period margin was XX% year for the last year. the

expenses, prior Looking XX% R&D of our expenses period. to compared total at year were operating for revenues gross XX% the

that for increased and expenses higher to, costs. of lesser As of the were legal current the period to compares prior expenses sales for percentage extent of and and that's same compensation year a and me, 'XX revenue, a marketing and and XX% last G&A were XX% variable XX% excuse period. revenues to from to higher fiscal year, due insurance

were compared or share operating share million for of million compared XX% to earnings increased in million So income per Adjusted year-to-date our million compared last income Adjusted income net increased $XX.X $X.X XX% XX% year same to our $X.X to income million of per or million $X.XX compared to earnings $X.X to $XX.X decreased period same And diluted revenues per to last full million year. or International net compared $XX.X GAAP $X year. last million earnings year-to-date or the X% diluted $X.X share. was revenues to period XX% EBITDA share. the the $X.XX to $X.XX net year. of in diluted earnings total $X.XX

Looking company's year. over compared and at end million XXXX, same balance strong April with remains to last the which position of XX, approximately financial million increased time at investments sheet, cash the the the $X of $XX.X

paid shareholder term million accounts of Other of million million and unbilled was $XXX.X our receivable $X.X current million and also aspects we During $X.X total quarter, million, balance for for AR, was sheet, equity were million. the a revenues our the stockholder, $XX.X deferred in $XX.X long $XX dividends. was

same XXXX and X.X compares year. to XX, period compares to that same outstanding as in sales to call turn year. the like days day XX was XXXX the last I'd days April and our XX time, last ratio of current of as the was And XX, this At questions. April X.X over Our to period that


Please Pfau. to Instructions] move go first [Operator Matt We ahead.

Matt Pfau

a the up mainly have pipeline? are pandemic with But into off and on start that of then kind you getting the know of softness you you first of we from a things in that And to the just us just then. that business. impact deals seeing bit lot at in going more. picked back laid deals that saw it dig or you're others? little out there a in know sort can quarter, certain maybe the of there or still the wanted the you it just end what's from delays these projects Allan, terms Is and types than sitting of impact more sense impacted the bit are give some Just of better

Allan Dow

And first joining the a It saw good view really Matt, the of was as we continue quarter on around sort going raised was people it question. and were and that thing. that level virtual, a on and people our and that virtual focused everyone was that our to that operating, you happened mid you of moving and pandemic connected and just chaos. and for thank of experience getting just all, they how us keep stall, know

relatively a caused projects out. it stall. So few had fall We

In period, a when were had you. a been for areas instance. And contracts it we one had if fact, back during all business, oil giving fill were quarter end were to of the and contract period surprising. and swimming very the look happy in some say, that would in away, oil for business gas they time pool have some can getting there that where just there they closing started in We at was that you up that signed we was and quite actually we the

space with to it at people know and had happened continued to and want here But got in the happened going. a a going stores we in we be, furloughed it company carried contract closed the April what of and going was May and into still they for into invest the we're a so looked we contracted we we're us. But of And haul, long was and what and June. It the And signed couple said, retail happened stable late. actually and don't know late they conditions that they be to the first future weeks outcome's that were surprising. where bit in

here on the like, We're my And this season on still strong. Most backlog of for like so, Again, those. we're a we're seeing pipeline home, and still working in approaching although, vacation, are like from the vacations. the it the is it projects we've us. summer people we're to of surprise, take feels starting working lot been some seems but seems to already now

just is ability attention So and backlog still into pipeline anticipating that's still as about we're we uplift to done. go the the strong. things and an But The get the concern with know capture is a year need chain focus opportunities really managing to need the make job and it. that Does an they a that on of here to Matt? help, investment, people supply do better there

Matt Pfau

it does. Yes,

So, it's reach is hard time of it main of I deals it's when terms to sounds year in customers. typically guess closing like concern the a

those convert across contact that right might And so those difficult them perhaps correct? deals and to to get got that pushed, Is be customer now. the it

Allan Dow

already go. couple of had some them of we think I Yes, a transacted, we those

anticipated, a they virtual and Normally, get But right trying rally now and vacation room people were people the they to and still engaging. get just could world the is take them we’d longer together So than you normally they delay a now help done that and that potentially in tough was or and part of our huddle and in to with that things navigate we're were to middle, final the whatnot. taking approvals see we it's nature.

It's through everybody. everybody It's right It's overly it's it. we're moving get happen. the seeing right. ahead, done, process for for a not until matter. they're strange But We're absolutely a to aren't know question going just concerned mark now really we about just, what you're stopped, is we're timing don't that So, we're you you over. sure environment certainly saying

Matt Pfau

can we long-term a potential on little the maybe And more bit focus impact.

with mean involved conversations as guess, And pandemic are seen you elevated? long-term at the not then more all supply some talk so I getting software change if of chain, or and of have you just of impacts coming that's about executives maybe what the guess And case can that this customers customers out planning to will I one, be? business the your see do you important

Allan Dow

very around escape taking gain what how different Yes, seeing a wanting aware their will executives always for a once be will business, sense is personal getting be now But the that's been move then new they understand that we and I taking personal interest to are it the that there's they can and what interest. place And what enough that new we're the of a large didn't projects to in mean, new were the a thing they're be other they projects, their forward, in so viewpoint. of get the can value place. is systems ready. world urgency interesting it

a ready conversations started comes there's We'll how for and going we them pandemic do we can valuable in we're the in today value, for to a anticipate. but instance, to on pivot otherwise let's and We in way getting And actually they're position speaks implement can volumes in be a getting that have be something back? the So where we put agile use may some case now, say, position the we then reassess fall way initially get as then direction, have new use can that different where very world and than to starting anticipated. what operate. where we pivot get go something continue a to then And you point a or together. go in agile next. change conditions in viable get environment you the or of we you if were happen The if we for can an can and the And and environment where real you in economic today, by instance. on it the benefits is fall see they a chance slightly methodology

nine year we months ago, of months were a So, change or a ago. in that's not ago, having discussions six that kind

Matt Pfau

customers any sort some seeing to of the has transformational can size? a thinking of of I in there in with trying versus what value they these smaller off there pieces terms are mix? deal I’m get to buy time been of projects. guess, change your so maybe Any you're terms And change faster

Allan Dow

project, seeing No, just we're where the off phase an phase they are they're want want still they whole that going efforts actually uplift to project. biting the don't on the necessarily on, to

take same for maybe the it and critical data segment they'll amount section. user elements the operational scope still or but So, a of that of in of community takes business the it or And get a maybe something many not nature. of as expansive as

So, we size upward. haven't downdraft in if seen a the contract, seeing trend a anything, the still of we're

Matt Pfau

me, terms and And any with plans just that long-term got wondering and sales and anticipating was maybe one last your learned sales as forward, then any change in experience you've you're sales hiring in to going this your of remote strategy? the strategy sales for in of sort changes

Allan Dow

in strategy change all. not No, any at seeing we're

in successfully the onto implemented team right We're continuous and anything haven't about now in. of been quarter. trend and of folks able onboarding been a right bring candidates We've couple a of people there. number being finding middle the to the new We a every that's

week, join they want We're looking of a more we couple and still for we're onboarding getting down kind And had still that. they this where of an do difficult lock us. But, it's process to It's So, because finding just recruiting, more some good folks to stay are. right people candidates. now. and

course same last correct economy We'll now, if necessary over making going as the out how continuing months. on the But we the anticipating pandemic and the stay we're we're to we're progress the how right six track. plays out. see plays So


to next We Cummins. will [Operator Instructions] go ahead. Zach move Please

Zach Cummins

a customers event? really sounds it are termination struggle to where verticals seeing with maybe really you're quarters? the specific you going raise in any contract brand concerns one-off during lifestyle there, can on the to And I the speaking so a you may for that that there continually mean, just more quarter. what's to some customer speak guess upcoming I of of just more like

Allan Dow

universal can that, tough. There where one that are trends no you is say

retail number segment retail new projects home that space said, space, in projects we Of we really some retail distress moved only is space as in in got the that went on that product contracted that projects. a the are And that folks the to have But are punished. course, space the work in that in wasn’t one this they but even lifestyle overall, into they continuing, a and space. continued of to start I one

So, that of the I of would would around really one, shutdown been distractions the any that. said that, have have in have Lots been mode. would if

know supply stores If out then your month shutting retail chain, and there, you trying later up and imagine and to going could is to it closing process back what and down be. your again Lots a two But, projects. or see opening it that restart figure distractions of but we for don't plays work their have anticipating we're don't to have to to where sure. out. yet. people continuing continuing to not cancellations. operate. one. on see We'll others We They're only continuing work. We We that the had They're that

don't one looks other have trend we but and it are had we'll So we can't it incident where yet. point we right others, at maybe put on know on this like a than they

Zach Cummins

in management the virtual remember the continued still a of see QX. to is like good services. supply growth progress, in especially And that there see to that and your environment. organization the to lot in pretty you've a strong backlog engagements mentioning chain moved here these you It continue for professional actually sounds I

that? uptick see these you change wondering, just for I and these in major implementations of model remote a was projects, do from margin So sort an around or any

Allan Dow

commuting is a managing learned where cameras surprise. by you a to people sequence always people, people, had prepare out what some whole virtual segment view. of into differently, we've those and the inefficiency Yes, of city and a head, video you and nail is the the taken engage we and short one city the anticipated from the that It's have face moving was using to take think meeting across of by breaks, getting share all you sorts around face And that to we the you airports busy techniques cities the areas necessary those around Zach. that But be of virtual that hit out differently we view but on it travel things.

are we schedule, is they're So with us, customers way decisions. be we making productive more The they're facilitate help so can that around focused, when very time faster. before normally efficient. the is process which very multiple spend we the same the People meetings. do with you on decision-making couldn't can put customers We they're and day, dynamic on

So be I out and people, is think will line improvement the that to dropped of of in an line we margin. utilization bottom efficiency and the would which higher see bottom

So see that. we

we Now the season. heading have into summer challenge we're that again, now is,

the going challenge a some But think this look we we if and in when we're getting periods are the both good against resources I and summer, good think a services little revenue, our compare thing. position. last last where our we in seasonal summer. shape vacation same take we're time to to on have doing to of basis, is looking But be we are So, break it year-over-year at more one those time customers

Zach Cummins

have maybe more cash that in opportunities than you the the competitors I the six you other valuations of to balance Are you here chain mean, more given that supply space, to seen just and current Allan, the the are maybe all would attractive consider M&A ago? nine months what maybe have And some with struggles with environment on sheet. finding

Allan Dow

good be a Well, some where was you but that. that But thoughts quick window you're, there's valuations, to tremendous in now brief there on event. the trigger have to on Zach there

our considering talked are for in gaps strategy we as we've where future before. the and fill We the

acquisition is, on some new reach are well. as and by how our extend bringing, capabilities the view do can in customers more holding our for have, that capabilities proving We we

So at are market that looking be hoping of we because fit, that suitable. valuation we're that we'll the find that and and would the current right the that conditions

be have be should same us. that some you for we opportunities would So mind the there beneficial there as out

Zach Cummins

gross subscription out are to the margin cap revenues And excluding next continue around for software as of expectations scale Subscription final gross of the QX. What then question. course XX% years? couple one was your you Vince, over just that in right those subscription margin,

Vincent Klinges

assuming, year go closer next XX%. that the by amortization, non-cash excluding think to or should it two the I Well, XX% to,


There this Instructions] questions are at [Operator further time. no

Allan Dow

Well, thank for us. you helping Chloe,

certainly a For everyone We that. with And again you to the you look today, forward your that in near future. Have time. for us thank speaking joined day. appreciate good


At does this program. your this for time, Thank conclude today's participation. you

time. at may You any disconnect