QADA - Earnings call transcript Q1 2019

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the QAD fiscal 2019 first quarter financial results. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. today's being reminder, a as conference recorded. is And the to Chief now like Officer, over turn to I'd Accounting conference Kara Bellamy. Please ahead. go

Kara Bellamy

Welcome call. afternoon's to everybody. Hello, this

Before subjects based on everybody expectations and ensure may need forward-looking forward-looking and certain we statements Such our are contain are that risks discussion that that statements analyses. begin, I to understands to reflect after or materially undertakes no QAD date that uncertainties update forward-looking call. those these from could circumstances actual results anticipated. events statements this of to to the to revise or differ obligation

measure which these For description the and by complete measure GAAP Please is to release, non-GAAP this A a refer Exchange non-GAAP financial will income, posted QAD's defined and and company's of non-GAAP this also on a with press risks Regulation of filings included to SEC we the uncertainties, during that, directly is measure the which discussing in today's call, XX-Q please note reconciliation financial Commission. XX-K most G. be Securities pretax is comparable as website.

Lopker, like Now, Karl over to Chief Executive the Officer. call would to turn I QAD's

Karl Lopker

Chief good President, Officer, thank afternoon. joining Lender, for to and our Well, first on Daniel results. Pam you discuss Lopker, the me are quarter joining us call. And Financial

to the the to results Our of categories standards results. for the and performance on the new revenue and profit. contributed transition guidance, Strong all effect both these quarter exceeded our revenue across accounting all

our positive technologies. also from We Explore annual on conference received held our new feedback we user our customers where very

activity. conversions on-premises. very there and a a in bookings new on came value lighter was We strong from after X cloud XX quarter, cloud quarter, as customers fourth expected, but the added bit Our in still significant overall

Daniel, bringing in Our precision cloud losing deals. customers It important two in you was my continue? looks voice. competitive I'm very particularly like can new division strong,

Daniel Lender

Karl. problem, No Sure.

our we to profitable and year. services do profitable in business remain As for we it expect the planned, turned the quarter

be, to requirements to and continues the and new implementations been, to has services conversions for customers' meet for focus Our our cloud.

last cloud last funnel, up at from from continue unless roll That Our was previous proposed course, of development sales. year. to year. sales in trade over was performed and increase funnel The expect of and we a manufacturing experienced we now all is headcount regional mainly to cloud the XX% The up up continues basis approaching Full-time the nicely X% hiccup. quarter, in tariffs a years. keep XX% economy similar to year employee year. and well along is to that X,XXX from pace last XX% On last is, cause for the regions up our

me look Pam at call activity Pam? over and to Explore closer a the for our conference. turn cloud our Let

Pamela Lopker

Daniel. thanks, And Karl, Thanks, too.

had which In representing all and we Sorry new about quarter, was XX particularly for XX another your customers. cloud good-looking verticals new and all cloud customers QX, deals, were of QX voice. X conversions, regions.

in our largest actually North quarter, customers. the innovation and to going quarter particularly life the the region highlight science to exciting me, This on sciences' life and vertical bookings. dollar had I'd industrial is electronics like the American

While most customers potential booking small are important. of is the in the relatively value, deals for these

companies through large This number of These sorts surgical technology, life all using including science robots, quarter, new we cloud. exciting. products, drug and joined the regenerative customers five QAD companies had innovative life delivery tissue pills. making of robotic science Very

a life enables is regulatory FDA we the science platform companies provide by qualified efficient an offering and cloud agencies. for compelling as Our other that audit

is of how Explore, Islands allowing a for QAD the suggest September It in their systems. of The the our couple I'd receivers them. they the as one cloud in such our that the for highlight be and navigation solution them they technologies industry-specific provides from precision science with company announced of replaced ERP these large of customers companies exponential the precision's fit of the back serve one we new Karl like under flexible with capability GPS division. advanced program cloud supports their next-generation, businesses. enterprise Industry traceability are customers and rapid response positive life general company functionality Channel future. also an for Our makes well as successfully XX% Islands run offering to a A both to conference manufacture. compliance for providing their X.X by also and of mentioned existing important other of to execution, would deploy both great compliance precision's will tomorrow. the saying response this competitors. focus customers is to Europe, built management, shipping adopted earlier manufacturers and the they I'd US use the banner mention system It you. global was and today logistics, and platform. with like management screening in solutions provides was conference Texas innovative Daniel, Channel for will facing trade and company and XXXX. that for overwhelmingly The change central attendees Leveraging trade as markets held for vendors, change trade At pace trade support month. centers to Dallas, exception to advanced our a they partners, compliance, of availability the our to customers uplifted attend Explore A as also transportation easily our distribution delivery for and evolve. customers. in on technology

Daniel Lender

Pam. Thanks,

revenue from standard was of forecast, benefit not economies additional subscription to the in revenue first which our of in of resulted to a which now $XX.X revenue guidance million, and to $X.X revenue quarter, recognition Our accounts of up of in We million Subscription of performed $XX XX%, Subscription margins achieve from XXXX. business. above scale XX% efficiencies. our margins on annual year categories half exceeded XX% All revenue about to remain the the we a from fiscal last total Subscription forecast. our XX% revenue our revenue target million, with for growing of from year. operational as quarter quarter growing in grew adopted well. ago year prior accounting XX% million. continue was We new $XX.X

However, grew increase for and than continue was our a XX% prior deal the total million. which decline quarterly additional three professional a to other We as convert total from fluctuations compared revenue be make primarily $XX.X percent XX% other conversions margin Maintenance Recurring investments cloud is ago. to revenue maintenance of $X to equals customers in due year, should was and decline down $XXX,XXX revenue the plus the quarter in cloud. last from revenue XX% existing and year's to cloud to was one deals revenue, basis, compared and by of the the first maintenance grew year million. $X.X License operations, to customer year The revenue, X% due which a to and rates. expected prior historical data is performance as revenue large closed quarter. $X.X Maintenance greater subscription expected. On million was services, we centers greater revenue attrition XX% to last year. million versus than our as and

$XX.X a customers customer are in majority continuing existing result new customer deal the users recent million This solution. would was competitive to would modules. not from the current, ASC new of been XX% were deal services the this only QAD the XXX. with the US, automotive as standard. on Professional million not quarter, environment, of to an last the generate consider was Services of they of related large but a million X% manufacturing have the a revenue and a the In adoption XX% revenue including an license we add on-premises to global This As up increase we on-premises with strong solution effect the was at signed quarter, new from of however, highly forecasted. as $XX.X this deal, amount accounting year. $X.X the time. margins for was

and cloud our New upgrade services. implementations continued to professional projects customer demand generate existing for

augmentation subcontractors we margins. customers, expect at some also to to revenue to one services augmentation related do In mainly minimal been professional services. of We have taper normal our services, cloud down providing through addition to mainly our personnel professional services

to For not small a we our we Currency did have results profit that services. in the fluctuations continue generate versus to be to able impact remainder of a significant the believe will our year, guidance.

XX%; revenue North of However, compared licenses, to maintenance, and beverage, to including compared revenue to EMEA, was high-tech by America, compared $XXX,XXX impact to XX%; This to Latin net positive consumer $X.X on impact but had positive life prior America, $XXX,XXX services. professional XX%; to $X $X.X positive And impact Overall, year, prior was to forecast. impact automotive subscription, to industrial, of million. quarter geography, and million positive a at by a impact the had Asia-Pacific, million, impact food by to sciences, for revenue negative first and was XX%; total positive Total vertical year, expenses currency XX%. impact and negligible currency a XX%. positive a million and and XX%; and XX%; products $X.X offset impact $XXX,XXX income,

headcount. of from due This of to organization. $X.X Sales Our $XX.X first higher margin or $XX.X sales of million we or year, revenue or XX% and year made resulted year's basis, to reduction performance sales with some total gross million of inside last creation a additional the million salespeople personnel an revenue million million, was revenue of $XX.X total expense, our XX% On ago. commission and XX% XX% expense quarter. force increased from revenue a marketing a in and of total total that or the changes resulting $XX.X sales totaled mainly compared compared marketing with

$XX $XX.X total XX% increased to and last due as with last million of year. $X.X million payroll stock revenue fiscal year. or as was related people, operating for R&D XXXX due increased increased reduction million million the $X resulted this million, for contractor by compared versus initiative. about a of a million expense to support and an year. of taxes $X.X to expense $XXX,XXX plan $XX.X basis, XX% quarter was XXXX R&D loss total total and group of $X.X XX% both our million $XX.X Channel G&A Operating with This primarily expenses revenue performance were a compared accounting basis, first total in to $X.X higher Stock last compensation million quarter brings last revenue million revenues sales performance well in XX% or year. to third-party combined personnel administrative expense size On R&D million by professional the activity. revenue additional General of year. XX% expenses for versus $X.X tax On of was Islands expense, of operating first commission $X.X or total XX%. was total and income fees million investment higher last or periods. driven While

pretax GAAP was last million Our a for of $X pretax versus year's million loss income quarter. $X.X first GAAP

Our ago. for totaled non-GAAP to to $X.X Similar pretax income breakeven year fiscal $X.X year. be the the in quarter Income tax the $XXX,XXX versus first million a prior-year. $XXX,XXX results for to year, versus expect we close last equaled million expense

each results. impact on based reform So, regulations. actual new taxes the we quarter are quarterly tax includes of expense the recording Tax

Although our $XXX expect on compared effect due million or in regulations of the do to the this with material expense XXXX. new not fiscal we will equivalents end QAD's million tax and quarter We with tax existing cash ended credits, $XXX the taxes year. at have cash a

was with ago. of end a the fiscal $XX.X and $XX.X million receivable XXXX accounts million $XX.X million compared year at Our

the method back the fiscal receivables count quality days the was of XX And using outstanding XXXX last the for year. first period XX days for remain quarter our of sales healthy. same days versus Our

and deferred revenue maintenance short-term deferred million was at $XX.X balance million April million versus million, a licenses $XXX,XXX. $XX.X includes of versus million versus subscription Our of ago, XX of year deferred $X.X versus fees it million, versus $XX.X $XX.X $X.X $XX.X million million, of professional and $XXX.X deferred deferred $XX,XXX

reminder, a and subscription or maintenance are annually As built annually can contracts built quarterly. be either contracts

commissions due the year, XXXX with of from a in for flow prior-year. first cash bookings payments primarily compared $X.X result million quarter operations to was last growth revenue bonuses strong $X.X Our and cloud of fiscal higher as the million and for

our to on moving Now, guidance.

of For of pretax we're fiscal million total million million revenue $XX.X and quarter, loss revenue, $XX income including million. pretax subscription XXXX $X.X million GAAP to million $XX of of second to expecting million, $X.X to $X approximately million non-GAAP $X $XX.X to

board guidance includes annual second expense. second stock of and normally We XXXX our issue quarter fiscal during compensation $X.X the our Our vest million grants; grants quarter.

million please pretax guidance our our to as maintaining to Operator, can GAAP of and of are will $XX instructions full-year continue non-GAAP you $XXX usual, income questions. $XX take expect for live. $XX to now subscription revenue, million. to and we million including total questions million $XXX pretax of We million breakeven revenue of $X million to $XX And give million, income

Operator

Instructions]. [Operator

question comes go ahead. with Please the line first Reback Our Stifel. of Brad from

Brad Reback

to uplift with them, Great. economics later have Thanks guys change very versus conversions, much. years few Maybe seen a the on going the any back in you these, Thanks. cloud adopters? ago call I'll the

Pamela Lopker

that, I do Shall take you Or to…? Daniel? want

Daniel Lender

Yes.

the take then next. I'll cover Pam, and part you the me the question, Let first of let

from I conversions, in that of maintenance conversion we're think Brad, our terms lift see still three rate. the seeing cloud, from a from– to about we times

change. So, from a that significant standpoint, not

bit but customers. know still don't want regarding if you Pam, I it's a make averaging our Sometimes sometimes XX higher, a number. comments it's lower, any to around And,

Pamela Lopker

Yeah.

that I that's true. think

person they that engineering to it out. they finance personnel the spend The think they the somewhat customers, system, guy, divide it's the have they'll They feel an already. smaller cost like because going some larger time. I customers, handling don't they're so have can't they'll easy save understand

it's to they're think cloud, particular work a then pay to to If cloud don't well, what they I oh, pay a it I go that's looking, and cloud, go us. always want going for they struggle for It's It's So, never I'll like no, for to works. want a customer. maintenance, holding. with to if

Brad Reback

very much. Thanks Great.

Daniel Lender

Thanks, Brad.

Operator

[Operator Instructions].

the Matthew go Galinko. next question from of comes ahead. line Our Please

Matthew Galinko

for Hey, you thanks. my Thank taking question.

you premise You went that on what tightly-contested the was – deal the deal. mentioned you win highly fairly talk a about there? auto got Can to that

Daniel Lender

sure. Yeah,

almost company Matt competing SAP were against a and their as changed a really – they And ERP XX we cycle we was long years, So, basically and of was IQMS. mentioned, has a US-based almost that this in not it year. company, sales

by that well automotive them research somebody an functionality of wanted give to from having solution was they they being amount the as went rely partner could they that that into got significant implementation. that it. successful a able they to So, a them And able all have in as needed to ensure

reputation add our think to want I don't in implementations to of key being So, that reputation there's to you in capabilities Pam, win. to our know else and that that. anything our I automotive, if both able successful, fast industry, were have

Pamela Lopker

Yeah.

company. to I think Daniel lot lot a they make that a are get conservative a very, a of took long very references. of mentioned, We It demos, as time, decision.

long choice wanted make we time. the and company conservative very a So, to right for a

Matthew Galinko

you fill customer a talk Insofar be this And consumption you. industry more is given XX-year about it, – Got the going, little if focused then, solution going I bit guess, the was seems you a can will? of software be in to on a about kind or implementation? premise so could as if to why where you

Pamela Lopker

a is private company. This

that? want they not it's Daniel, think I company. to very So, just are a you do public very, private. to add And

Daniel Lender

Yeah.

our It I take convert think to it's is mean just still to potentially not reason They an solution cloud time they convert compete be doesn't of that able deal we because long the the the will very – change. conservative, fact are or that this over company customers will to obviously. a to again, really ability the And on-premises we cloud. on the then reasons future. one why our have the on-premises to in one

Matthew Galinko

potential that's you. that. wins a those other you used or Appreciate that's but – a wins? logos, there. flesh you of you life growth sciences the phrasing think lot potential comes then, Got on of dollar little existing you maybe do bit see or And maybe where you just low and capture highlighted of value, out I sort from customer you'll the within think sort the wins, Can

Daniel Lender

that they the of sciences tend – of see of requirements a life of amount of So, lot number have a industry, a significant larger necessarily companies side, their their enterprises. greater given don't to on but have the you some size

particular, on more we smaller So, to size. companies that in the are life side, sciences of get tend

Outside of of us tend of smaller; do time. deals over those will becoming situations out number So, we grow, the a where bigger. companies companies that start potential have they entire their to enterprise across then life get roll sciences, as

potential we continued see additional existing has increase, cloud revenue from So, these companies. additional do overall base comes that in as our to customer and

Matthew Galinko

Got you. one on for me, just more sorry, And, XXX.

from XXX, there that I million commentary result from that that that your the correct? And revenue think weren't a was came in you what is I expecting came where that as about was of understood services $X of predominantly? was professional

Daniel Lender

services. the Yeah, million, that's unexpected. it was correct. And professional bulk from was bulk – from of The $X.X that, about came of

So, was not million $X.X all unexpected. unexpected. $X million About of was

Matthew Galinko

you. Got the color. appreciate all I right.

Daniel Lender

Sure, thanks.

Operator

Suri comes Bhavan from of next Please line ahead. question Our go with Blair. William the

Bhavan Suri

you Can me hear guys. okay? Hey,

Daniel Lender

Yes.

Pamela Lopker

problems, Bhavan. No

Bhavan Suri

taking as for to about I'm services – you've, thanks the that healthy. quickly guess, services And bit pieces, a one-time obviously, services then questions. piece jump the of a But little at was backlog will should and trying but services I second. you. I questions look when on guess, a my other obviously, couple I we of understand for Thank Great. still in touch I way ramping really pretty piece, leading subscription? cloud. talked in there's Is that the think the to sort indicator over still like indicator you and of cloud of the they the sort implement more that someone but subscription for dynamics for implement leading vis-à-vis it, then mean sorry, sort to I paying as indicator a – subscription, that Does the charge leading business it it? have before of buys upfront. a license on-premise subscription think about of they're of see services to a the you on-premise of

Daniel Lender

Yeah.

fall the of but it would of different there's of all under business because that some category, not services So, projects. types

case a There forward. additional leading customer, are services yes, – that number the implementations, in services example, on that of doing existing projects customers. as be going are business upgrades projects number implementations. some for that are rollout, cloud that for a doing have would of customers a particular of a And of We a for are we

that. necessarily one minimal I won't to as we're margins. personnel what my also tie And at providing augmentation we're calling, remarks, – those very So, customer, to mentioned to a during particular services

that really is normal So, unrelated of our type to business.

Bhavan Suri

modules That are Got a the here. products. one maybe obviously, I seeing some Daniel. just if of are it, CEBOS, then, six And about update you help doing? a core cloud got especially Pam the but adoption them, sort you the beyond the How is those or of future And Pam, of do on DynaSys, then, an that divisions how Thank I for helps. that's still We, business, hear limited? those you, lot think just sort sort you opportunity piece ERP Precision, division divisions, those verticals? guess, for And of doing? expand the of at look that it. core is

Pamela Lopker

in a they precision sold Well, the They've I'd a do of sell and say handful universities. of lot our of sector, actually banks outside verticals.

them And after, think And say people doing that of to for are the of outside each they going thinking we of want been so, the buy the I they're our that no, verticals now some go cloud. forward, well but is do business, vertical. quite which oh, of one I are don't business a thinking, in do of that this transition all cloud won't cloud. would in those because their particularly nature them, it has

Bhavan Suri

in lot start and sort And technologies. R&D focused to sort seen me. Channel Just you cases last Got play of you at learning leverage the and Are what saw modules think We about doing of thinking there. as are Islands AI some At The color Got where a about you from in out the machine look products the then, in on out conference, spend, you of one on there? you Alliance. it? sort guys sort value you've use you. you're can of And seeing Transport advanced one investments Blockchain you. of you manufacturing, and

efforts advanced Islands in of kind So, what given with you what see is sort development sort that Channel features maturing, space? there of of just of of some that of these you might – release some happening the are some sense

Pamela Lopker

our but always [indiscernible] ERP on has really focus customers we on adopt say learning been machine your in making a in system. machine so being is Right general, done called do broadcast, advance accurate, they schedule We've like In that actually able ordering the automotive adding some what's they and the be good think or they're they Can to and wrong. better? to our those way it's that meet address end learning capability make get of now, more going beginning. invasive we Sure. them to customers throughout forecasting, job so far, instead the can what to broadcasts what to

area the the benefit on But this really planning going forecasting, to planning certainly, the machine all So, of all learning. are parameters, important. is think capabilities I from

adding then, then to it or integrate machine inside maintenance to there's products, So, able their and service for the artificial that's invasive from can predictive different software. order to of they it's preventative in – repair our And a them that products, break with start where whether be to have intelligence, a consumables when connectivity actually they of the very learning, to their advance for of service going something. the customers to being just be components maintenance we're our is of fix different before is of going need machine to whether And to advance when pricing. exciting to actually going preventative be what's them raise able more, there's a or types predict needing or machine, need so them machine learning in and customers their that actually

able made being see going important of track we blockchain pervasive. the be to the area So, thing type that items, in track as do the very to components to all is of final being all able to The claim, when of a you was do warranty amount where smallest able it be and to was, able it, sourced the like it be of kind from, have who recall. where have components, things

and to the size blockchain was there and would there the to in capability a – have we Takata broad-based they right recall twin, able to was into would the instead recalls. of on need fraction doing their amount went what a huge take recalled, when that which opportunity actual airbags be digital airbags, somebody So, recall cars these that with of issue like recall have we you of actually actual that had this

and think all items. customer I market huge for a base our those our So, there's opportunity in

Bhavan Suri

Great. for That's helpful. questions. Thanks my taking very

Daniel Lender

Thanks, Bhavan.

Operator

And we no have in further questions queue.

Daniel Lender

very well. with for And and Okay, results. we Well, your thanks, update will again attendance second August everyone, Goodbye. you in our questions. quarter

Pamela Lopker

Thanks, everybody. Bye-bye.

Operator

conclude for and Teleconference. today's that Ladies participation gentlemen, your conference. Thank does Executive you and for using AT&T

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Qad (QADA) 31 May 182019 Q1 Earnings call transcript