QADA - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the QAD Fiscal 2019 Third Quarter Financial Results Call. At this time, all participants are in a listen-only mode and later, we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions] As a reminder, the conference is being recorded. And I’ll now turn the meeting over to our host, Chief Accounting Officer, Kara Bellamy. ahead. go Please

Kara Bellamy

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

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

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

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

Daniel Lender

Lopker, discuss Good third thank us very joining Thank quarter on to call. joining is Well, you you results. for everyone. afternoon, me Kara. much, Pam the President QAD’s

Before manufacturers outstanding and we of to legacy co-founder we of Company He will of recently begin, QAD. global a great most I friend, that their that want an and colleague better to build continue operations. lost know, helping CEO, you acknowledge, as great Karl, our team helped manage a the

all you time. during will be and thoughts at here as for like and your back this sorely to is are heartfelt would we While business Karl usual to missed. of I thank sympathy QAD,

Let’s now our results. review

revenue compared profit revenue comments was slightly revenue, given Currency our growth expectations. million last on on a impact to line. unless a margins exceeded X%. approaching same revenue below our My performance a second year, about XX% Compared for quarter up grew While rose bottom increased by to revenue our XX% impact Subscription year, no total third our and quarter. now negative guidance XX%, to ago, to $X.X with basis, but the XX% Subscription business, had to from business. is noted. year subscription otherwise services the due revenue are XX% of quarter last and

year ‘XX. We cloud and and expect fiscal a reminder, quarter last full X.X% $XX.X margin to million conversions other grow goal points equal at related after the by about was is percentage continued our and of down primarily X Maintenance to to roughly revenues for XX% attrition. but margins X customer the about to just annually was to historical year-over-year,

to total car the X of percentage and points XX% conversions increase, from year Recurring last revenue revenue which is the decline. quarter, prior maintenance As maintenance from plus third for revenue grew revenue quarter. subscription XX% for accounted third equaled expected year’s up

Our positive revenue professional quarter. as last was remained third $XX.X quarter. Services margins in the same for million, year’s the services

of in paused discussed EMEA quarter. revenues, were once the our implementation the This fourth the is earnings our to third impacted live. resume lower services finishes we subcontractors. the activity. Year, sites to right customer temporality to to XX due management processes impact of will an our year after pause already multisite New utilization achieve During have month the we able profitability end quarter the The lower to order last and quarter, implementation and call, Despite global in activity and finalize revenue services on of also effective anticipated fourth their

million. $XXX,XXX License with $X.X two We business. million greater in professional than last deals anticipate services we million closed year, versus a For year. $X profit achieving our the than small $X.X revenue was none full greater

and North generate to was majority was industrial XX%, revenue beverage geography, automotive total license consumer margin and third fiscal Gross was and continued XX%, Latin EMEA for high-tech XX% X%. $XX.X XX%. by third for revenue products, the and margin By last from the XXXX and fiscal XX% and million Asia-Pacific our XX%, a period. XX%, the XXXX $XX.X with quarter million customers. XX% and existing gross vertical revenue food of was for America quarter, Total XX%, We America period XXXX year the compared for life-sciences

and versus we and XX.X increase total ‘XX versus the driven million with primarily million discussed of was and total The and or year lower or total last year. year. million was revenue $XX.X revenue sales of expense million additional costs marketing XX% $XX.X headcount with year. This due to year. third-party million total stock XX% revenue $X.X total was for XX% was as compared reduced headcount, last both fiscal quarter expense third periods. expense and The R&D Our XXXX attributable $XX.X third amounted to totaled revenue XX% the of $XX.X for compared and X.X for million last R&D $XX.X decrease personnel was last brings quarter year. by additional was for expense. million expenses ‘XX quarter third the last expense The increase to developers. General fiscal administrative to last operating revenue, XX% million of compensation

year. was million were As year. XX% of last Stock expenses versus in periods. was last quarter million third $X.X the operating $X.X expense compensation both a for million $X.X Operating XXXX income revenue, $XXX,XXX and total percentage fiscal

million year million pre-tax Non-GAAP was GAAP pre-tax the a million ago. for of was $X.X third Our income a quarter. income versus $X.X year’s $X.X million GAAP $X.X versus loss pre-tax last

per Class net Income $X of $XXX,XXX share B third loss quarter; effective per income annual approximately to tax rate GAAP A a per be year. $X.XX for share was net and our totaled share expected diluted comparing diluted the or expense million or and $XXX,XXX $X.XX GAAP is B Our last $X.XX A to XX%.

results. year-to-date our review briefly I’ll Now,

in revenue. Subscription to period. revenue total the to XX% million, primarily grew XX% $XXX grew subscription million, by $XXX services period, from $XX.X $XX million year-to-date the in million and up year revenue compared with For increases ago driven

the of revenue margin with fiscal compared period. prior for XX% fiscal in XX% subscription gross margin ‘XX ‘XX the the And for total period. was XX% totaled XX% Our and period nine-month

total of $XXX or total $XXX.X revenue operating million of Our came or XX% revenue versus expenses XX% million to year. total last

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

share and $X.X B $X.XX Our $XXX in in fiscal million with end the million of at $X.X $XXX class or A class diluted net a income $X.XX diluted $X.XX ended GAAP with million period per per net year. same A We of and XXXX. equivalents share compared was per $X.XX per B the versus loss last million cash and October or

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

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

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

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

cash the $X.X nine ‘XX subscription reflecting margin comparing of with from our million was guidance. finish up year, growth. million Our first revenue for last $XX.X months continued flow and fiscal operations review I’ll to financial

previous $XX for pretax revenue full tightened of $XX range guidance of to of million; and income GAAP previous and to the our pretax to have increased million million revenue previous non-GAAP our $XX guidance million income $XX.X million are of and XXX million million to guidance million $XX increased $X increased We $XX including $X of subscription total million. guidance approximately $X approximately revenue; approximately now expecting in to from the million approximately from year guidance to pretax

ahead a FYXX. Looking into bit

As quite early would the revenue in cloud strong enjoyed closed significant number this the that entered year, closed stages. have the FYXX, were we majority we’ve subscription of that year. deals of funnel half with end, where that This also we of a last we meant discussed in resulted but naturally deals during in first during year a

those We in subscription the revenue later our at first of that year, year. rates. subscription stronger it beginning funnel growth year FYXX revenue the anticipate of result to deals below closing will end in the Due weight of the the expected would the back growth be in the the half next and FYXX for we

However, we’re it than was is weighted pleased year. very cloud almost today XX% funnel last stronger that our

during our of We’ll currently So, second fiscal into half quarter subscription revenue more results the March. financial detailed the ‘XX for the we will accelerate we middle expect the scheduled and year of guidance for following. growth be providing the years call, fourth towards

cloud I’d area. Now, the our to call over to business at turn like and look for product Pam? Pam deeper

Pam Lopker

Great. Thanks, QX, using close furniture go due strongest XX with strongest, new science, XX references cloud. customer days. of continues new cycle short On we industrial already is and XX were able cloud closely conversions. in new basis, to customers followed net X by We They companies a to from décor the time Daniel. relatively North believe of again to cloud well this and interior the the regional under including was In verticals life with the similar a deals DynaSys. DynaSys once America had electronics this the quarter.

distributor of money for on growth of largest the and our a private handling To vending the release and made sense. deal lot equipment. release and by QAD. equity the cloud Q recently support was currently a They company conversion for very their to manufacturing old were planned of Our a moving bought the and were

the to Budapest In Platform for that application, Enterprise Over the to a extensions -- app an Conference no do in stayed the here as attendees [Ph] the worked XX the roughly employee great Annual which of we the current we Platform QAD packathon. cars cars. QAD course Developers QAD was Partner longer ranging a success community with early giving functionality was as employees but together from XX-hour teams that is with XX new a at Europe big U.S., business Enterprise what the developer as event concluded QAD November, a built far car on in QAD. functionality Platform. in task class actual in for update in be using deliver training Such applications entered Now apps or Enterprise assignment successfully the our call partner product. can of The company very built of company Teamwork.

that app apps of all -- tracking We partner. manufacturing it deployable user interface, were analytics teams also Platform a employee business packaged to creation external other web tracking was moved dynamic the a exploited Many to notifications, loan management done are by the app. and rich app Hungarian be by include the user that utilize training system quality and handle breadth interface, The of an record was email of features. This embedded for app of service winning issue systems, and had used QAD an and integration solutions most to platform into value a and features a environment. for can be offer Enterprise to could deemed was support companies, images,

hours While teams still XX next the projects. return and it apps to morning. their we expected show energized some the reputation, serve off worked the appeared their to next to were teams the And day to to X developer work through night and

business the Thanks was platform it on excited platform. the are minimal QAD value It a ability the our applications, see to We to to of to to related life it with believe and was to run -- translate was back real easy partners our you customers. and business. how for We develop Daniel. it and training will easily bring quickly developers this competitive leveraging a showcase new will advantage this

Daniel Lender

very That’s Well, about Pam. exciting the thanks platform. much, very

basis business for at regional Looking our a on quarter. the

Americas the as good both in affected of deals Pam DynaSys. and services portion cloud. DynaSys another I of with coming Pacific from while cloud quarters would expected EMEA highlighted professional and in performed Asia posted the their increasing add set particular. a Precision

And us questions as putting around quarter, weighted quarters. our a give the continues will X,XXX funnel strength. few full-time instructions? I headcount mentioned, position The we to XX% for from your in manufacturing good strong you prior now take please over year, similar economy up execution And as was Operator, almost usual, can employees. live. the Our next last employee is to show

Operator

William with [Operator ahead. come And question our Blair. the Suri Instructions] will from first Bhavan go Please line

Bhavan Suri

from of the macro I geopolitical manufacturing to guess, just any impact Daniel, issues, a just at the you sort at high core level seeing you any tariffs business Pam for level. maybe start for both, from a of and Are off on impact you sort have? base

Pam Lopker

at customers expect see another. is far that. and us talking country moved too. but really it, from always manufacturing end That’s don’t for as always Change are good there of about we slowdown no is so got purchasing, they’ve day, one for the here in Certainly, to you, the to good

Bhavan Suri

And Islands, Channel upgrades, Got upgrades the There to function one then, obviously it. of the just follow GA better variability is one nuances of modular nature on September. the piecemeal that, on in quick up cloud. of of

cloud over So, so as of pieces you those in the you cloud you growth years? some about Asia well are are particularly three was those next think of driving China, one those pieces, balancing slowdown right? especially any think and pieces, drive and seeing acceleration the how then, going business? sense then moving And just will of

Pam Lopker

that the technology think IT even pieces that to got some more Channel are have than but Islands, we first on-premise releasing that learn. cloud that in different do it’s would I

that makes lot without cloud take to So, to that sense advantage they’re that having of companies and hopefully cloud I to go those and And them for sooner going providing well sense it learn. well. hosting go general as really continues customers to believe go capabilities now, and our a most just knowledge, the might of as later, the to think the I or get so

Bhavan Suri

templatizing their that quo? last you one HANA and at in status templatize me, else, and more product, faster. advantage ability them of or it When look sort the had progress seeing is And now still one on quick than one implementation like so competitive standardizing database, you by any environment that for is are there, to with you’ve of specifically change from the pretty things standardized environment, on is much SAP anyone the

Pam Lopker

that to upgrade, give the and hoping are for even their this a providing complete customers everywhere, data and pause, going that no that’s certainly product. least HANA, stores certainly hoping S/X different, move looking other at We’re whole at reimplementation, they’re that’s

So, we’re us. feeling that for that’s thing a good

Daniel Lender

actually Bhavan, of implementation to to add few in times Pam said, just -- that a I this And mentioned They XX were of in something go-live for environment. to months, customer. months able a implement ERP have value it’s get using very, proven very about go, of ability our rapidly. just They about XX what XX and which unheard to in get application -- another and a showing paused but QAD to point for customer still the global is to it again, it’s implement the the

Pam Lopker

from, variety if we they And ours. them was systems many a older ERP what you installed, look were SAPs, some wide releases of converted were of at that it had

anybody able and XX-month So, that. period, that ERP kinds can’t all we we do could different were we systems, in take them of don’t believe to -- convert

Operator

go the from with Cummins is of FBR. ahead. Riley question next Our line Zach Please B.

Zach Cummins

what services could really multiple concern a anything temporary detail potential So, is any or on was multisite on this you hold first more be pause those really professional there around had along that Can or project on. there? going is that lines? And question for be project the provide put lost for quarters me little potentially just the you causing

Daniel Lender

this No. as I been The a world. all customer I facilities mean, XX is for different in has over project on already the while. live mentioned

all of the and January. plans catching to and their their them handle be to up project that now able happens So, about end them activity are it’s breadth, the early -- December to and then really start really between be more again for the year-end of

Pam Lopker

about only go. more And that XX, there’s XX to

the on stretch. home well we’re So,

Zach Cummins

of that in related those about just decelerating XX% timing and the provide can just this implied timing that that deceleration growth And or around to of being more close in the color deals down it’s of the year, along more Is lines, a the subscription in then, year-over-year. line or so little QX the to line? in terms of you anything

Daniel Lender

either middle it’s growth a at comparison revenue we revenue quarter will -- is or because like look right one year. at -- numbers, already. on in of quarter impact overall just have the one year we The sometime down to been any that basis, it to has When prior what guiding we up revenue the look quarter-over-quarter fourth for for the a that subscription

the look So, Again, on to number. anything particular it basis. there a we in more fourth-quarter isn’t at four-quarter

Zach Cummins

up And the in It hiring business? this then, question like you quarters the side services is as subscription the Do sounds me. of really slower for team scale coming bit here final on QX little than a your picking with expected. start expect to start to cloud really still in you

Daniel Lender

Yes.

have bit the we would been on on little maybe what subscription we but hiring -- have not we So, the side, planned, significantly. been side, than have slower a

We data most be And of on going do it’s and planning and the support up people open piece to to will to in marketing that center on anticipate for us, the new naturally. the obviously, in operations strength more are that hiring still you but funnel new given the a the I future the forth, cloud got But, that Asia. not-too-distant of sure enough to there’s make side. sales customers, come so

Operator

question last Stifel. Please Jeff from go Captain Our ahead. comes with

Jeff Captain

opening because quick trying this real I’m the year. the margin cloud up for mentioned, just subscription you raised center I’m to just guidance to follow-up year next basis you XX% Daniel, you ability data and the for that center your I guys per it data know, about? that to sounds curious, impacts on year, year XXX guess, one improve don’t I XXX like talking next by are half that early margins points if

Daniel Lender

Yes.

actual The will more margins over will change data a data in to driving range. there, will it of -- and is normal in the we be as revenue opening it actually acquire customers that -- detractor go back growth will for particular. of of in terms Pacific, initially of us opening the center more China for important So, Asia center the a

to is next another as there, to margin are year gaining we that comes through gain overall still to try aim efficiencies our it continues X% we are improve a business to of still Our that lot And the and automation -- X%. scale.

Operator

you. And remarks. Thank closing turn now over I’ll Lender Daniel back to the meeting for

Daniel Lender

thank for with look results you updating quarter And forward fourth very our full year and your all much. March. in questions. you much you to very Well, Thank we

Pam Lopker

everyone. Thanks,

Operator

Executive and you. Thank will teleconference gentlemen, Ladies for for participation you AT&T conclude today. and this our using for Thank Teleconference.

You may now disconnect.

Qad (QADA) 20 Nov 182019 Q3 Earnings call transcript