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American Software (AMSWA)

Participants
Allan Dow President, Chief Executive Officer & Director
Vincent Klinges Chief Financial Officer
Matt Pfau William Blair & Company
Zach Cummins B. Riley Securities
Matthew Galinko Sidoti & Company
Call transcript
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Operator

Good day, everyone. And welcome to today's American Software First Quarter Fiscal Year 2022 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 may be recorded [Operator Instructions] It is now my pleasure to turn the conference over to Chief Financial Officer of American Software; Vince Klinges. ahead. go Please

Vincent Klinges

factors actual and and expectations or to number contemplated developments a and those materially On forth set some are of risks in, results supply are and made from materially those Future responsibilities control. uncertainties, by beyond or statements statements. underlying predicted of retailers could that differ the which of There and forward-looking overall could differ are to factors this from our by our include call. for brands, Such on number chain a subject cause the results cannot quantified our actual producers. be anticipated

transformational and the from the of are around environmental resiliency of consumer ethical treatment of equally a materials more particular aligned The nature of to which to the As we're a the getting processes. the the impact transformation and leg project in minimizing involved includes supply in third more workers raw to business disruptions, chain world. result, of responsibility, of corporate projects delivery, traits

navigating of projects to ability manage due level transformational pandemic risk these have addressing social draw approval . enabling surprisingly, the sustainable concern a change and of chains is home simultaneously for share their and we're environmental economic, consume situation. economically starting such still scrutiny cycles in our supply and of while in to We longer mind now and enabling budget. while lot responsibility the Through higher experience work imperatives to significant the and the from these perceived decades customers, Not a

to number these should our predictable. our transformational ACV fiscal that to a the in making is by backlog. by deliver churn, in delivering less services pandemic and like lower and more of growing for the revenue build The off segment results the in of our to increase new our seasonally keen bringing implementation Chain start contribution we're focus projects continue the increasing . existing a that always year. months increased positive ultimately more summer backlog. team results, result to with remainder to have in somewhat financial slow while and but limiting serving of those they throughout sign little a a in are continued contracts on quarter adding return growth continues pipeline has evidenced the Supply Quarter stabilized, I'm projects on announce in slightly on is on stage a process the or We're new customer on solid The our contracts continue the summer our the which The setting performance approval RPO the pleased which Although their versus to on market contracts period, period, the customers, year. services pipeline, and was services resulted impacted commitments slow timing services plan but companies. over

cloud compared of more traditional last ACV, in expanding community. the the of virtual to the to and quarters subscription our more period Services see the and we revenues maintenance, return customer same virtually recurring leverage represents coming XX% a which partner network saw quarter We're the XX% Cloud the on-prem and total as . growth pleased continuing stream first backlog, and services growing compared in work contracts efficient continued of when stability With in cloud revenue our approximately of well. to now environment all

pace, and by activity the a we XX% focus margin a see services projects, total sales also transformational as see result, a on to pipeline. continuing the a and to is as our approach exceeding cloud disciplined as type strong expected the expect we're in our a very The gross With increase the of growth running percent first to quarter. revenue revenue in steady evidenced rise. revealing at continued is gains in subscription recurring We revenue efficiency in

solutions of of the in transactions the seen global subscription customers During seeing that fee first that allows emerge. adopt trend decision-making first summary, new work customers in presented thrive presence. investing by resurgence countries, our and see helping year, holistically reflecting we're achieve these X the quality and team to pleased the our same we're way. navigate them first challenges to resiliency to speed manage are new we've the customers with of and completed predicted transformational driven the to observations, supply our that pipeline In We're platform to is levels. in strong to needed a our agility of In by improve calendar to this of supply and quarter, projects we overall economically X chain results and higher sustainably as a quarter economy. license to performance customers in our planning Gartner pandemic. or spending broader welcomed These chain need footprint an resilient the drive half higher starting on in hand-in-hand projects this to with Based the our we trend

The financial first for we of a quarter of is improvements delivering to model. potential customers what our performance our strong and capable are reflection the of

managing over turn benefits and who our years time be the At details incremental are they most. the as customers paying revenue both capabilities to will and our we that when customers expansion to more and ahead profitability results. our off the we Vince making to innovative financial chains. supply after successful is time, on need of year it a delivering in grow in provide customer We're year call proud in for for sustainable can introduce this retention confident continue mission Our I'll

Vincent Klinges

Thanks, Alan.

all the And X% primarily that's first quarter due XX% to increased continued to year. the $X.X revenues were to million, while million, primarily last million fees, from that's the year-over-year by -- $X.X $XX.X $X.X to For subscription cloud-as-a-service. the compared were revenues fiscal last XXXX, which license same software of million million $XX.X period in transition year, total driven that's increase a

cloud million ACV to in includes $X.X excess million period. $XX.X deal Our new of We during levels $XX.X XX% which ACV remained added And increased $X was number XX% the million one quarter, net in our consistent a ACV ago our versus rate. rate customers. quarter, more at new from SaaS new churn to similar Over with million. net year of last our pre-COVID

work, Professional partially strong X% offset pipeline decreased other timing an growth to TPM, As increase our our and from our Alan X% XX% and and supply ACV revenues year by a that noted, to in services positioned ago. $X.X $X.X also us chain IT unit of consulting and in decline fiscal well leaving was a project This opportunities our business increased, in decrease beyond. 'XX million reflects deliver due year-over-year unit. to million

the of fall-off uptick we 'XX. significantly due during implementations million, in backlog services increase rate. year-over-year anticipate supply recent Maintenance quarters declined Our to $X.X of in -- the So in fiscal an chain revenues reflecting ACV a increased bookings normal quarters remaining the to X%

the Our subscription quarter, and fees last revenues represented total comprised in and first revenues from recurring XX% maintenance XX% of total up period of for that's year. same our the

year. was versus XX% margin gross period XX% last the current the period same in at for looking So

software fee period, increased that's margin the and subscription prior to and the due compared primarily of expense. XX% year revenue increased lower Our to to capitalized subscription in XX% amortization

gross $XXX,XXX the for exclude would software XX% expense was since first cap subscription year year have the of last of versus amortization noncash you margin in the our the cap If quarter, prior of amortization software been XX% $XXX,XXX period.

and that's year, margin XX% due expense, the to supply the margin and XX% mix primarily due from of revenue last lower commission same period increased in compared cap that's agent to XX% of Our cost last and software of expense. XX% our amortization of higher-margin chain from our to was unit. year, to lower license Service primarily amortization

to was Our and compared maintenance that's revenue. due primarily last XX% margin year, lower XX% to

and of XX% total year R&D period. gross Our prior current expenses for the both revenues were

reorganization functional and marketing marketing was some sales a current expenses this to increase the and G&A XX% of unit year from in periods. sales. the of variable Our increased period And XX% the to year-over-year revenues due compensation versus personnel to in -- role increase prior expenses, in compared business were

that in share quarter or period period due last XX% the earnings adjusted net year. the in operating $X.X total net personnel of year operating EBITDA same functional increased and period $X.X revenues our first same revenues XX% prior period GAAP year revenues $X.X Our share adjusted increased which income And compares the $X.X last to $X.XX $X.X earnings million income mentioned. and our $X.X compared were million to last for expense, the same to diluted International for a in in year. of earnings $X excludes XX% compares acquisition last to year. Net versus compensation On the were to to compared same $X.XX approximately the million income and adjusted that amortization million ago, last quarter, per the year. increased of million, $X.X of net period or XX% that basis, of XX% of to adjusted income $X.X to and million reorganization diluted share year. this million to increased expense to just million or XXX% $X.XX the income noncash intangible in million of XX% G&A related I million stock-based of basis, an Adjusted adjusted On diluted in income compared XX% or that's increased adjusted $X.XX, to to of compares current same $X.X the to and period. expenses that XX% a quarter,

in we longer-term The the excuse and $XXX year-over-year cloud of backlog performance that a exited XX%. million, RPO growth in strong continue bookings as the platform. reflects and increase quarter to increase -- quarters, with -- represents in our record of reflecting remaining obligation, agreements make Our commitments to duration an a XX me, customers our recent of

the investments year. compared Our quarter, with total the million of the strong remains approximately approximately position cash at and million $XXX.X and is same $XX.X of last period of increase an to this end financial

call July I'd during XXXX, the that compares period paid for improved And for due the turn in to period, quarter, sales to over in the time, same compared as also to XX outstanding $X.X dividends. we days to of current decrease Our year, XX primarily days this XX, and questions. last was million like and At days last this the year. collections

Operator

will [Operator take we Pfau. Instructions] first question from our And Matt

Matt Pfau

to impacted follow the wanted business of started some close to I so decision seeing purchasing or the in Has up Delta U.S. has variants or variants, past that all? as the in just month you're to at on business the ability over up what Alan, pick

Allan Dow

Yes, thanks First change. for all, a as emerge We've great Matt, that joining us. seen question. of not

were October X probably to September, back is the contributing the the the dates. coming factors think announced office anticipated I of this about had people time,

-- So while infection well, were they to has the climb. started rate the --

I think still happened is home. what's really are people working from

really the changed nothing prior over periods. So

So at that. then like is that year pattern haven't the into in we'll the can I change level economic did see and ago, question seen we anticipate answer this we to no, we shutdown don't a stay go a don't the we

I think to we'll everyone's learned virtually. how operate

good and vacation stronger period was growth pipeline we they our feeling to after exhausted the out to People, were they what we're in anticipated. was worn beach. really the the continued saw, a And and little pandemic, and we about summer So close. than Matt, I the went think just ability the

So beach folks are back -- the but to in work. they're school and and back from

momentum pick we're back So seeing up.

Matt Pfau

X to deals. questions Got then on the it. Great. ask transformational And wanted I

in terms chain in And it deals, those taking and current then the close regularity in all, closing more expected some are more are as get impacting how them. of of about first time your just So the would for deals? just Is comments you have then demand you to of more supply pipeline? transformational to need secondarily, issues it's the

Allan Dow

Yes. through questions. I'll those reverse

-- of coming close seeing with getting over so line more projects, we've discussions up are and rates exist this today scrutiny. years And the a projects before these on the Second get has just that challenges ability schedule you -- where of of to didn't get around of X seen initiated in the that news. had a close to question, always that huddle the do nature. We're definitely a One together get of The Matt, the are is project transformational could in first. consensus. the more many nature kind high in that's level the rates, hallway what maybe exist But exciting some people to first and

is we're have the And so those what predictable is tricky. nature a good of seeing They intentions. little

not cost little if time -- project have like might good us time. has more a hit That a We cycle to the extra time a off not or then month to talking And that, a X at hard something you're month a a takes particular or X they on Everybody just of get diligence -- due makes intentions. end and the period, it's but months, from weeks worked a and week kicked a or but but year, it difference quarter. process

Matt Pfau

Sure, update included your I sure. I on ask there? the X of an assume traceability that in some was wanted just Understood. would seeing about discussed corporate drivers responsibility and And solution Last you to be what you're the in that prepared remarks? on

Allan Dow

Yes, for sure.

we're the also in are area it traceability. where want with in stand-alone they given any and responsibility as that a that to criteria coming acceleration embedded an into period corporate projects consideration. an those that's seeing pipeline opportunities We're around take tackling important these are of transformational seeing seeing just are time But into We issue. handful

the lot in a and solving mix expectations. discussion some area more and in I to would discussion, like things we're they're particular what opportunities what of embedded -- of call is their tackling a be some it's there, a some in compliance building, legal talk process -- how interesting strategic a these to I business of opportunities pipeline I deliver a few up introductions lots What's lots the about lot their characterized showing of of on of So this of the department driving in guess, and before, going is levels. are traceability

never had around business So and we're and legal we spoke it things their that contract, department people nature the I to before. we guess comes to the spoken to introduced but getting before. of when not processes

we're to money and So spend, a see and accelerate now. really we've starting we're building, money seen lot momentum starting that see of to spent,

going to that get of up on instance, a to regulations do those think are it these get that. a the enforced need of regulations on interest is with We're kind U.S. arms top be that continue, needs the our be could perspective of area dialogue maturing change around spend Customs, soon need more are how to to that for money spend to a the address their there There's they and and going there investments. continue there and I how how to people just tighten marketplace. and and for sincere what step was across they to in continuing to they the

Operator

our take And next Zach we from Cummins question will

Zach Cummins

kind Alan, seems to last from know us of you're a seeing the making of a give to But in shift really a sense conversions I quarter. overall subscription you lift and were theme here big of new the type that still like the quarter. shifted over back I interest ACV of potentially that it customers mix customers of this mean solution?

Allan Dow

of We continuing sure. weren't we've a contracts done, some largest just trend. build the we the but for to They shift. seeing They to signed that Yes, that weren't had quarter, first shows continue with we're existing momentum. to customers X -- In ones

more forward. -- as particular and quarter, were So this go And those we're shift. lift of pure we X In those seeing

So no new functionality added.

in interesting quarters, it. another where were generally, to something as functionality, we to cloud that's new. were past seeing And some So those of then part projects tied the moving trend doing adding the

coming into seeing look at play. that and of more So an we When the we're pipeline more interesting forward, twist.

So Zach. to we'll accelerate, see that to continue

Zach Cummins

have place have professional here summer that Understood. vacation here, to That's coming services necessary capacity But the backlog with terms mean, little of lighter than strong obviously, project in load I side, in handle do a period the the in quarters? of mean kind helpful. I the right And the project I now, you anticipated. you mean,

Allan Dow

of so saw the chain do. Yes. It's all, year-over-year from We our we supply in growth First business.

we of was that of had -- that in were have we all those in we get it few we as people that the mentioned anticipated. impact had level guess fast summer had So ago. I growth, we some positive. an to related did those coming We get of but We to fourth it that know, the going thought projects as quarter. even minutes quite we higher the a just got vacation issue we an as to a blessing going it had but took time some And didn't end fourth as those a few that was off, of on I starts. They quarter. was signed the

we're So projects running up and those on now.

of We capacity SIs got we've added have importantly, partners. to they're working our We've added some into on additional with hired and more and go also capacity. the we've are team. that to and onboarded and certified done the ready training work But We've projects. through

to the able train been they've to folks. onboard So addition we've in on, put some that staff and

this the we hiring yet capacity we the process have So point there. continuing up anticipated to and and ample demand. capacity both given at haven't on additional onboarding SI fulfill And certification

Zach Cummins

Got might going sustainable pretty that it. a model the mean, I And we rate more for as of me, gross forward? should a at strong know subscription quarter. appears we think in I poised margin rate a But subscription this That's to events. helpful. subscription year? line? how growth in grow about strong And what in final leverage the margin I be see question can sort performance geared gross really towards this

Vincent Klinges

year, indicated we anticipate, see year, we pickup last would did Zach, as it. we on came this a we into

do after a and So or more. up coming of in start this anticipate amortization staying at it ticking quarter maybe a cap level, X software. bit at little roughly We XX% for then

half the to this So early year. -- and start approaching or at XX%, next of year. maybe back

Operator

next We'll Matthew Instructions] [Operator Galinko. to move

Matthew Galinko

you're chain place? and or what you're software little the curious It's X displacing of that had everything, Matthew. to you're about, and this a A supply Among infrastructure deals variety. bit the looks just for planning like looking displacing you. I'm talking I strategic what

One of

Vincent Klinges

of SAP -- things deliver. The probably most we were actually, it talking this in and piece earlier is today, continuing X the under about prominent falter to just

the find technically in there and what in users there's declared a we we're Excel. are reality, the SAP, questions, answering going but we're So using oftentimes is using

But which transformational would many I'm declare SAP, replacing Am Excel finding at not is X In I sure have the X those but So -- we're decision-making be of least could I'm their is these X not we replacing. ways. in the replacing in they perception projects, I or that across SAP the challenges can it's for that's that different X X use replacing or chain. companies that across the organization applications. particular, what supply of And seamless platform that

is get a that of latency So and are information are same trying -- today. not the what happens in of and They they that's decisions supply that some persist to lot disparate have challenges the make the working chain that from flow. teams causing are perspective

So then spreadsheets be of we X the replacing all breed ERP our in everything and in roll X some some may competitors any else, of applications up. cases best in and and

in a So not that are in transformational project applications they're being out projects. onto now. solution. platform not favor kind there or commonly aside ERP it's that these single a generally as platform need most a looked consolidating fulfilling of And in systems legacy But shoved just being and one-for-one replacement the of the cases, a best-of-breed are

Operator

this does time. questions And no it at there time. it appears And there [Operator at are Instructions] this questions no appear further are

Allan Dow

Zack much X that. and to would and you with afternoon. in you helping this questions appreciate everyone forward and participation a hosting with afternoon afternoon, great our and again thank look so Have for us call speaking Thank we Matthew months. Matt, the All this Clare, right. for all

Operator

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

at have You day. and wonderful any may disconnect time, a