QADA - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the QAD fiscal 2019 second quarter financial results call. At this time, all participants 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] And as a reminder, this conference is being recorded. turn over to Officer, Chief like Bellamy. Kara now the to conference Accounting I'd ahead. go Please

Kara Bellamy

and everybody, today's Hello, to welcome call.

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

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

Now, turn over QAD's Lender, Daniel the Financial I Officer. to to Chief call like would

Daniel Lender

results. thank me Lopker, Good you, thank quarter and for President us Well, to second our is afternoon joining joining call. on discuss the you Kara. Pam

results. guidance for the subscription, the quarter categories on Our our results profit, exceeded both performance revenue and to contributed across our strong revenue license services and

year margins quarter exceed client add XX% last XX% quarter grew Subscription for target from cost add services last We expected fiscal hiring in improved XX% of our grew Compared possibly group quarter than operations revenue annual for accounts of our Higher second achieve for and margin in the we and anticipate subscription we do cloud a year, up than On XX% data capacity to more operations slower our 'XX. remain the same quarter. side, increased and expectations. subscription now and XX% the XX% resources on increased exceeded revenue subscription to ago spending to and revenue and as margins centers. expected business. resulted than a and We as margin. our to

objective X which basis. a 'XX. down to historical Sequentially annually revenues by to and fiscal was points as was primarily after Maintenance cloud other was Our revenue flat million to related as performance performance conversions other rate. X% well increase to X on $XX.X continued basis is margins a percentage maintenance and attrition the relative on customer

X% to million $XX.X subscription year XX% second due increased, ago. revenue services last cloud generate should a continued to services revenue maintenance as maintenance from X%. demand. grew the a as to cloud Services the year plus new and implementations which percent As of increase revenue year-over-year. from and continue prior year XX% XX% was up was compared with remain revenue Professional equaled for conversions Recurring decline in the contributed quarter quarter the total $XX decline. revenue positive customer for The total revenue at to professional existing million projects margins upgrade

services one that professional conclusion. far relate services so minimal. also some an services been cloud been augmentation personnel and ongoing multi-site of to business, regular a we its ongoing are These to successful run through it's to mainly addition In global margins where customers implementation very on-time, have subcontractors our providing has approaching

subcontractor As costs. forecasted which quarter, the wind lower down a will in will will be offset third start by in we to lower expect revenue result that services result, services the

deals year. versus a greater XXX,XXX closed than $X.X the million We of to year, deals expect $X.X seven the greater our in profit a For License we revenue was continue small professional with business. million. last than remainder services no million

Total grow was they customers industrial compared prior with X%. generate as XX%, mainly fluctuations for when automotive on users to into EMEA current results, and the total Pacific the environment. by to did financial but negative revenue not the manufacturing hi-tech revenue America America beverage continue and QAD North year, and and quarter and life impact a XX%. existing XX%, second And quarter. from at have our vertical add consumer globally significant positive license and strong Asia prior was We as food did they XX% revenue sciences revenue Currency XX%, a by new have impact Latin geography, expense XX% products XX%,

for XX% compared gross million $XX.X was of million and expense, periods. $XX.X Our second revenue second last total gross the total $XX.X XX% additional million Sales increase for for revenue the both and to margin million marketing quarter fiscal with year, year year's was related last of was with $XX.X totaled XXXX and margin and XX% last quarter headcount. compared

XX% sales made to with a of total You'll quarter in second organization operating $X.X XX% loss the income $X.X income last of the last for and income of and increased million expense that traditional was Operating resulted million last second million fiscal reduction million last pre-tax salespeople revenue second remember stock of was million $X.X brings sales pre-tax quarter second $X.X that XXXX last force year year. and quarter net we inside the $XXX,XXX loss of $X.X creation total some $X.X changes versus year. GAAP for a B General which our plus size million to due million B commissioned an Non-GAAP million of $XX.X ago. million of by revenue GAAP $XX.X the for R&D group versus versus profits. was $XX.X year the totaled the about total total revenue or increase or or Class million third-party was fiscal driven fiscal additional increase was or year. net with XX% and last total year. per XXXX XX%. and by XX% year and million $X.XX GAAP $X.X The total million year. total A last million per XXXX higher revenue GAAP $X.X for compared revenue Class million headcount was income quarter. expense increase $X.X versus R&D was share Income with XX% developers. of of or of primarily year. million $XX.X for share price. and the $X.XX versus versus quarter primarily XX% quarter the the to second tax higher to second quarter for Stock expense year. The $X.XX due was was expense was This expense million for diluted compensation or A per $XXX,XXX $X.X $X.X pre-tax $X.X compared administrative expense last prior

For quarterly based expense prior quarter, incurred. year last was and the recorded tax tax on actual

on we higher of applying the is Given profit, rate an amount expect, estimated tax our being effective annual results. calculated tax based to expense now

I will review year-to-date Next, briefly our results.

expenses million percent was compared for with versus in Total up driven of the the million grew For Subscription $XX.X XX% by and subscription increases total to $XXX.X XX% with Gross to million in ago the revenue XX% $XX.X revenue XX% million period. the Subscription period margin prior year-to-date XX% $XXX.X and revenue period. in 'XX came year. six services margin fiscal $XX operating period, to from grew $XX.X year XX% total last million. revenue. month compared million was

compared revenue, last year-to-date As of with were year. XX% a XX% total operating for expenses percent total period the current

pre-tax was year Non-GAAP $X.X of Our loss year-to-date last $X.X million income XXXX pre-tax was year. million fiscal with for million a a ago. period pre-tax $X.X versus $XX.X compared million income the

compared $X.XX a Our per A and $X.XX Class A GAAP and B with diluted plus July was B end $X.X million $XX.X $X.XX million for net fiscal per cents compared or a share income $XXX at million with Accounts $X.X last of end or fiscal a ago. Class receivable $X.XX year and We in net was and year. million diluted cash ended plus with loss $XX.X compared million with $XXX.X at XXXX. the of million the million 'XX of equivalents $XX.X per

Our remains day was the days quarter XXXX XX using method same receivables the sales period of outstanding versus the our fiscal year healthy. days last quality for second and XX for comeback

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

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

Our from $X.X six with $X.X the flow first million last for up our cash was finish 'XX operations fiscal with million months guidance. compared I'll financial review year. of

million expecting we're of For revenue the $XX.X $XX $XX approximately third total $XX.X million quarter, million million approximately to subscription including to revenue. XXXX of fiscal

Our $X.X million GAAP approximately approximately non-GAAP and pre-tax of income $X.X million. to breakeven pre-tax income

million to million $XX non-GAAP of revenue to pre-tax our approximately approximately revenue. approximately income guidance $X million million of full $XX $XX subscription $XX income including year total We $XXX million are to million and raising of $X to approximately GAAP million million. $XXX of to pre-tax

Now, over product like the look to cloud for Pam? I'd a turn and closer area. Pam our to at call

Pam Lopker

Thanks was On standout. included Daniel. regional was which division X X new had new and deal, QX good a cloud was our America quarter. and another cloud North DynaSys the We XX cloud conversions. customers the basis, strongest

division. industrial as of One customer business multiple highlight model. the to Asia like of management, to to addition like conversion the and to cloud divisions' thus one cloud. value become involved our able I'd our QAD going actually from DynaSys demand share cloud franchise of we've conversion that beat of as transportation entails partners customers of We you cloud in sites conversions chain high all forward. our by an and one show part other it customers of on the automation the and in existing this unit the new of many They're supply management. with installed I'd of very upgrading our a standard out platform two was the from SAP solutions to now the

our environment. world one -- in in out tableware is my competition master defunctionality leader one the future first plan and compared to complex stood production planning The we a to favorite, due very and of

and deal demonstrate secured our be to first our goal this sales cycle, is globally After site and Our we will by initial the solution deployed. after five-year rapid to ROI. ability deploy site, XX-month this methodology of implementation a

master. The a the short manufacturing Oracle, future and watersport After other cycle, supported new signed equipment, to diving was ERP positive is and due of the and very calendar cloud for our a leader to our use DynaSys customer we go live competition competition year a month scuba relatively ability of five deal their and currently by design in global so five-year they a customer several cloud beat references. sales which with inside

on be our differentiator us. for and Our success set customer key product extends continues a to across focus

for moving be & ERP On the be award. The this QAD, the limited for edge will ERP September. over report. center availability has successfully to the industry. it our as code. general Thank Value Channel eliminating platform touching the the for decision platform Channel our and I [indiscernible] the this at on Frost a into releasing has customer. by enterprise following product solution particularly customization QAD strategically for the need XXXX accommodate automotive Award Daniel. with Channel & get on-premise recently QAD competitive Islands consuming you, traditional changes architectured statement Island received quite QAD has of reviews Sullivan's side, Islands positive been without their to QAD Cloud Enterprise we're to on secured costly, source recent customers time, time At availability was the excited to a Customer by Frost Feedback QAD liked Research, Sullivan we Leadership

Daniel Lender

thanks lot a Pam. Well,

our And to all also funnel for quarter, except for of employees, relatively the the PT about from that for material XX% a is customers about in last and versus now last The are with economies region all G&A. the we market impact and XX We're is strength on of On supporting directly with the the its strength we entered which Indonesia. our had have automotive half ended regions a last years XXXX year Instructions] the cloud of our up to that but our excited can ahead. we will we not the operating go flat employees still PT up presence. our showing and questions disclosing similar the which in X% Indonesia. a Today about not full was the a regional our one first fiscal in consultants the The previous usual, across increase announced QAD. a go do comprises Brad in second success partners, fastest have And XXXX Iris performed give to sales agreement take time year. questions. please terms now year. one manufacturing our team headcount the position work transaction, for good Reback The employee basis headquartered of our strategy a business instructions customers results. U.S. primarily executing we Please puts us specific year. solution well as basis that we will manufacturing this global expect in economy Although in strong to has we're and Operator, XX% growing question continue with Iris at to to you live. Jakarta, is assets Our to of definitive Asian into acquire of [Operator Stifel. is to Indonesian categories

Brad Reback

half second that? Great. guide, you Thanks FX much. us to can on color give the for Daniel as very any relates headwinds

Daniel Lender

Yes.

actually experience to I headwinds headwinds there We did some from mentioned So, QX as some is Brad. QX.

the mostly X% X% affected be to the particularly in range. expect to line maintenance We

Brad Reback

Great.

So would equal, X the points in headwinds a the been maintenance? higher, not things have being all few especially guide for FX by if percentage

Daniel Lender

Yes. benefit. Especially also on cost We get maintenance, the do get side. in do We some yes.

there profit is impact. operating the on basis minimal So a

Brad Reback

auto update you last Great. could for the going give install large the us signed on Pam, a is how that quick quarter? you And the maybe deal

Pam Lopker

-- quarter ago. of quarter, that's we the trying the services because year, year That decrease said Yes, have was revenue I last that just to that think of the you think last or of I start Daniel, that? one okay. would last am thinking to

Daniel Lender

Yes.

the Pam, auto the quarter was them. -- a OES had So, another signed call We signed one in did fact, indeed last you last just year. large with

Pam Lopker

well. here that's want six to you. Fair I go Thank scheduled about, within say live enough. Yes, going They are months. to

Daniel. So review to you. did just morning. on that with seems them Thanks be track. this a Thank I

Daniel Lender

welcome. You're

Brad Reback

Great. Thanks very much.

Daniel Lender

Thanks Brad.

Operator

go Blair. for to Please William we Bhavan next our ahead. go question And Suri with

Bhavan Suri

has on my Hey as had GA, on of one Thanks due -- guys. incremental it to sort piece, taking sorry for to cloud Channel Channel functionality get that maybe the have touch that functionality from cloud that Islands, it's that to would Pam, migration. available Islands idea I goes piece I'm but always not incentivize that And questions. customers on-premise in just modular on want approach Islands Channel existing to this migrate to would based you've

of deals it next it going and shifts we think that conversations of base, about when per number quarter, base think the you look do cloud you new you the think you the at is, or you existing mix about think customer years? As do relatively where tremendously the into existing think two the to the obviously, customer you stays ratio had favor now or about GA, year

Pam Lopker

to new of to go go great as I cloud technologies, makes to for Islands upgrade So, do them the new to and on-premise they capabilities in that they new think sense a being particularly releases it cloud. Channel one, was to customers the environment, to instead learn because having

many the at So customers really cloud. on-premise to are looking I moving our do of now believe seriously that

expect we on-premise to But ratios the the be would I customers. towards same keep new picking at cloud. conversions to still number up of going more time, So leaning the

I So kind it that more get half conversions, of that is keep but would on to thought and always we we half. proportionately seem perplexing.

Bhavan Suri

a sort but then sales guess relatively different guys. follow-up and motion, little something know and then I is it's you of I early, still Yes. inside shift on the a sales for the that

what early might be sort traction impact team? seeing or any that from Just or of you

Daniel Lender

disruption the changes in that is sales actually thing for would in thing to Yes. no force. the structure, Bhavan, significant the sure is That good think look sales sales that we with there making is I any -- main

there that significantly. over and a of should the additional the continuing force so indications overall implementing into any sales been our force forth are structure overall long-term we early hasn't And far being us think that the And number we are is and sales so techniques benefit effective. of the that of path

Bhavan Suri

the Got mix in that are deals sort is months from billing cloud bit a some of maybe, not Daniel annual, about you you and billings it. -- of and a One to But so is little explained for sort deals last fact of not strength one Xx the the -- at. bit. the given not I surprised a good in which X.Xx revenue in typically little revenue sort that of cloud just the subscription indicator look annual existing was X.Xx, growth a slowed me, recurring

of much or we something that it I So was XX% of about sort helpful. that just recurring but was I just that? that got layering slowed seasonally, to guidance, how fact revenue. these fairly we XX% existing healthy FX that range? but missed might they of have the think impact expect a be on quite sort given line would How going pick to sort above description back we've despite [indiscernible] mean I don't you've XX%, up should know wondering away, of bit it customers is annual

just So the you. takes. Thank puts through walk and

Daniel Lender

Yes.

last So, is on QX Bhavan XX, to comparing was QX basis year of growth the growth XX. the a year-to-date

back If particular was tick quarter. a you to there quarter. And year that very QX QX, one up last that subscription recognition affected significant revenue to there were that some go in onetime

does is the correct, from what look year-to-date and now that's the really business as highlighting So quarter-to-quarter from because you why is number more standpoint of that's where a we're at. are good a it indicative

Bhavan Suri

Got taking it. for my helpful. guys. It's Thanks question. Thanks Nice job.

Operator

comes Riley. Liu ahead. And from go Please B. our with question final Kevin

Kevin Liu

be impact trade just you're could of of in seeing Hey, some seeing a if the input good businesses? ongoing on sort kind touch high any might hoping of higher the afternoon. costs, of and cycles on the you negotiations from Was at level, just manufacturers their some sales

Pam Lopker

of right? has with PMI to tariffs, anticipation because that see do purchasing, can watching the that but getting in time it's like So of still with not much are more certainly people tariff and buying things are change effect. production all before material. getting the an on. you hard interesting the more the We the necessarily into global. they're customers part goes for our bet because raw with But But, making time selling I going most that and it's all I definitely seeing it actually as think

or they're initially. U.S. still for they're make in or something users now they're in they're users and us Asia, making whether add the to really stuff something because to France doesn't much making still having making difference So buy or

tariffs made necessarily So I the being on much And not another are we where but have thought being you how that? is change that made. things with in do think a could Daniel, have

Daniel Lender

agree I No. with your all Pam. Thanks. comments,

Kevin Liu

above Appreciate far. at color. just gross on then, are And forward if this slower touched hiring XXX you subscription want margin, to so where But, guys guys the are XXX be pace the And at even the on obviously, points levels you I assume basis we that. to you of Daniel, point. ahead now you know of going

you terms So continuing side? in steep of available. that to in and just roll curious it have ramp terms becomes What as beyond well on the and do as out you generally requirements of how this expect Islands a capacity of Channel half sort COGS you year ramp back during headcount current as associates up

Daniel Lender

Yes.

terms of we're like mentioned So hiring. with we would my regards terms behind bit in I to in a of headcount little in be to as where remarks,

opening So We're at I up center. do also data but do to so I potentially that looking go expect expect, another up.

towards decision the but happen yet, finalized end that could back year. haven't that the We of

additional cost. some So that would have

that think XX% will number been factors With But year. the of we will then. well. temporary of mentioned Islands, our the there's chance could as the that impact couple increase Channel are first has I cost have there half regards we a will that exceed in in how that to strong have do a of an good a think if particularly So I that specifically that goal

to think that right line of a it's the on now of sort may I sold cloud end. in on tell little goods see impact what exactly bit early the we cost

Kevin Liu

distributors. of for And other more one your then, And one to your the here, me, parties also are know buying international implement on focused relates sell partner just to you and your on as I'm then, of that so look up you that it then, guys, certifying lastly been kind externally. why I if other there certification process dynamic. talk you Okay. curious products. you've hand sense? How how strategy to this of it bring help would you in support or to could ramping guys distributors Are new And make did particular instance in is going? professionals is of in-house you about kind that terms

Daniel Lender

Yes.

distributor the you growing. mean do sector me fact first based in market Indonesian let particularly that quite be strong there particular the know And vertical. specifically will with automotive to one the touch local more the So that I and acquiring. as we're has on is a that robust that

of regards capabilities were the fine partners. -- some we're fact, some the they more area, already just us number right of being circumstances making to to extent that growing to greater in up to see support are larger So local but by forth support facilities not really customers production We had and a the partners. in can clients. decision level to putting and was of have so that led there order recently the a there. ensure that services the set we only utilized of customers our And our been With that global we for overall

strategy the that time our have we the are But add that that is, yet trained. ecosystem. So capacity to those to at same continue capacity well very more resources ensuring to

our or actually borders share That's to partners us our methodology our global basis. do with within consistent We an combination. services have implementation implementation need a by a to to organization QAD, across able a our whether are robust deliver we and regard being very by one on they because performed program training of customers be

Kevin Liu

taking for the question. nice quarter. A Thanks Okay.

Daniel Lender

much you Sure. Thank Kevin. very

Operator

Q&A to our we session turn back completed, With Lender. Daniel

Daniel Lender

your and Thanks very much. your you for hank questions. attendance Well, everybody

our now. you goodbye results. with update will again for in quarter And November We Thanks. third

Pam Lopker

Thank you. Bye-bye.

Operator

X:XX through after Ladies August and for be XX. today gentlemen, on this conference p.m. Wednesday, replay available Midnight will

X today. XXXX XXX XXXXXX. our access XXX XXXX for XXX the by does XXX dial Replay XXXX. Executive for XXXXXX. Thank AT&T XXXX the XXX you XXX International access access code again numbers conference Teleconference. and System for and That XXXX, dialing using and Those at AT&T may participation are your Code XXX entering participants anytime You conclude

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Qad (QADA) 22 Aug 182019 Q2 Earnings call transcript