Earnings call transcript Q3 2023

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Operator

Good day, everyone and welcome to today’s American Software Third Quarter Fiscal Year 2023 Preliminary Earnings Results. [Operator Instructions] Please note, today’s call may be recorded. It is now my pleasure to turn the conference over to your CFO of American Software, Vince Klinges. Please go ahead.

Vince Klinges

Thank you, Cloe and good afternoon everyone and welcome to American Software’s third quarter fiscal 2023 earnings conference call.

me Dow, with of and call Software. American the is President Allan CEO On some and opening review provide will Allan remarks the then numbers. will I

may only statements But forward-looking growth our strategy. our Safe forward-looking statement. this and conference first, statements such speak Harbor business strategy statements, of among regarding, call including Any other as things, This contain cannot quantified risks on subject to are are These date. and some control. expectations uncertainties, our forward-looking or statements are and be of our beyond which number and based of predicted largely a

anticipated availability rate the assurance could of changes can light acceptance be the Future actual the call. and this materially and and risks unpredictable conditions, a forth materially growth to, could for developments include, and these by products set our competitive of and factors There products results the of revenues. no the pattern economic there Such those market in statements. and contemplated results number of are uncertainty statements and underlying differ or made actual not from services, that general limited factors that differ and effect cause prove by pressures be products on those the in but of and information forward-looking will other uncertainties, these pricing competitive accurate. market irregular and of the are or In to timely forward-looking from services, to

Allan our At this turn time, opening remarks. over I call for will the to

Allan Dow

was by factors, few exception where professional minutes. expectations a to last revenue in we our revenue mostly and will in revenue EBITDA Similar third which delivered services were our quarter cloud strong you, address our with of results. few affected with in line We a I growth Vince. Thank the quarter, adjusted

first is recurring We our maintenance strong in subscription the that revenue. rate, This and XX% XX% maintained year-over-year range. solid services. of the up represents our our in growth total total into very revenue Supply in revenue recurring our segment time retention despite revenue delivering Reflecting achieved the growth was revenue our have slowdown retention, year-over-year a cloud and thus Chain revenue XX% broken has maintenance X.X%

decline to in was consulting sensitive in to pullback most which the conditions to last services, prominent is regard business, our decline year. professional the macroeconomic IT and started In late more

on saw also projects significant we paused as of period a Chain holiday However, attention during Supply business number clients focus the performance. their

into diligently recently to recovery the with projects activity that continue have trend leverage seen calendar ongoing shift in year. our model Chain Furthermore plan we we to where a easily. more demands market project flexible of the in are and a more new Supply profitable can delivery and We and new working resources just segment for partners service allow to

we year As head end, into we growth pipeline. fiscal see to are pleased a our renewed our in

potential consumer the a our recession create retail continues to for in However, goods and markets. uncertainty core

in and existing We customers cycles. elongated collection prospects both scrutinizing sales longer resulting our their costs, have seen times carefully and

have a ramp-up a will impact for the period. to delaying fiscal projects in diminished the services it revenue professional subscription year, the go expect of fourth the we Although on progress through and quarter, while recover revenue capture

reduction delivery, year lowering services, ‘XX. Given ramp fiscal we’re and professional primarily for we’re $XXX.X our current million. on adjustment year for Due fiscal to guidance between revenue $XXX.X guidance the time in million to the conditions revenue our the a market our and expectations making fall final to

times. the recognize our and conservatism some backlog to challenging we which $XX.X collection slightly projects land guidance the added revenue and of recurring between subscription revised of conditions delayed and when start million. our reducing $XX.X timing economic million reflects can both also The given impacts range are We our the revenues extended in

been have before the we and we strength relationships. customer clear, through confident be remain of these cycles our in To

not uptick considering want to during pandemic, churn experience on our ensure we any we guidance. the We far, seen our but thus financial in have can deliver

we of maintaining prior revenue $XX are adjusted our $XX Finally, EBITDA million. expectations to even with million lower our outlook,

are pleased with third we the progress Chain to in year expect times these results Supply uncertain during summary, see In the quarter further the calendar during and segment ahead.

We our term, large to market in the our solutions. will with continue remain disciplined chain near supply a growing investments but for opportunity see

details results. will the I call turn will on time, to the this financial who over Vince, At provide our

Vince Klinges

year. prior XX% in software Allan. year last million was the license you, third the $XX and of both period. were for million to current fees same revenues a Total that the million to $X quarter increased fees year-over-year $XX Thank were compared $XX.X while Subscription period decrease X% for million,

last the XX% to a chain Professional the also the the to this holidays. to million, XX% million recurring services in Proven year-over-year our the decrease a IT Maintenance our activity pause in other which of both comprised revenues revenues compared reflecting quarter. decreased quarter, declined reflects $X.X XX% and revenues tends business $XX.X Total Method, consulting around in XX% unit to to had X% of unit, our revenues supply we normal management maintenance year. decrease more year-over-year and same our subscription last conditions. year. period a same The And project sensitive $X.X in economic million in due revenues decrease XX% to third represented to period total be falloff compared in rate

prior increased in last to to period gross XX% quarter current to the margin the year for in for margin was period same XX% period. current Subscription compared fee XX% the year. XX% our the So compared

amortization versus non-cash XX% in year. last the subscription been quarter, XX% have would of gross the third margin Excluding $XXX,XXX of intangibles

last cap was $XXX,XXX. software So amortization year the of

XX% fee margin in compared the XX% to period last was License same year.

last due services compared decreased Our revenues. XX% to margin to XX% to lower year

XX% XX% the for period. prior was the margin quarter current to maintenance year Our compared in

same compared of last expenses year. for were Our current expenses and revenues XX% revenues and current period. the prior XX% were quarter of gross Sales R&D total in the XX% for period the year marketing to

expenses the were revenues total for year. to compared XX% the G&A last of XX% current quarter Our

$X.XX quarter So last compensation XX% earnings share in same per On on per decreased income last earnings the or X% $X.X a to million basis, our million last year. of share related $X.X million net million year. to $X.X $X $X.X amortization million increased of compared this or $X.X period to operating adjusted diluted of to non-cash to acquisitions expense million income an the compared year. stock-based in adjusted Net diluted increased $X.XX to income operating quarter GAAP intangible of and excludes basis, income which same to expense, compared X%

to last increased income adjusted million $X.X XX% per $X.XX year. Adjusted adjusted $X diluted that earnings third Adjusted to net of million EBITDA the from quarter, $X.X decreased compares net and for to X% or million share to $X.X total approximately period of $X.XX compares per revenues. earnings share That quarter XX% million period last in last income this the of the in adjusted revenues same of diluted year. year. were or XX% same International

representing year-over-year $XX.X XX% basis, $X fiscal total subscription year. XX% margin the to were $XX.X million period that’s XX% declined a XX% increased X% to the of million at million. excuse income the last $XX.X an X% declined compared – to period, million, million. million. year-to-date in same X-month $XX.X to look operating for to due and License fees by revenues or $XX.X Taking year-to-date services in maintenance XX% increased million revenues to margin ‘XX fees me, operating Adjusted Professional and to the $XX.X a increase

EBITDA to margin adjusted representing increased of to compared the adjusted EBITDA in X% million period XX%. Our $XX.X same million $XX.X last year,

the $X.XX same per million $X.XX $XX.X or net $XX.X diluted totaled last Adjusted period income year. or million compared share to diluted in share per

obligation backlog million. performance we was remaining Our to refer which as $XXX

Our due We shorter RPO durations note to was prior up actually that our recent X% the and deals. period the from total and last RPO compared that X% also was was sequentially. increased from contract down year same to year, short-term

with balance at the sheet, and investments remains the end position quarter. financial at our strong million at $XXX of approximately the Looking cash

we the dividends. $X.X in During paid quarter million

of in prior ability primarily base. of confident We the half XX compared Our timing second increase due was for annual current days period. in This due is of XXXX, January XXX and usually outstanding our outstanding as nature large receivables in collections our compared year billings last the our on days high-quality some remain year our to the customer delays period collect XX, SaaS to days year. the when of to on to fiscal to sales

customers in distress. end so guidance prior far revenue – any of indication to Allan assumes guidance our churn This we but we’ve of seen revised not due our our low indicated, on to of high We revenue As $XX.X that million. the million $XXX.X note $XX.X of our have revenue on the $XXX.X in an million but we includes recurring range in recurring to being the experience recessions, end. uptick million to

million For adjusted of prior EBITDA, our million. guidance we $XX $XX maintain to

time, to this to call the questions. like I’d at And turn over

Operator

first [Operator question Zach Cummins. Instructions] And from our we will take

Ethan Widell

the Hi, calling customers forward of Thanks this situation and insight to the us looking what’s with into driving for finalize To sales macro at you Cummins. elongation cycles, more can little And beginning is start, become that? Widell you for can a taking with Thanks. Ethan additional comfortable my Zach they in give do anticipate budgets? questions. decisions move as

Allan Dow

for same Yes. running precisely process now. Thank pace selection That the much Great that. right you the is at probably is question. so –

looking approval are reach seek phase out the seeing a much go that desk. revenues not I’m balance against who conservative expenditures We’re to and sort to that and and across to just their trying of thing. coming Vince, of in It’s timing final and CFO’s projects difference being are little there. where funding they that

turn. The seeing a getting pretty sales cycle. contract the delay we’re into those times on extended to – it’s a consistent. actually But running to process starting cycle, approvals. the that’s So is getting selection, But

and we word I many picked end think the recent have is these pause at number recessions. since the up recession New here here the that’s It’s We’ve out. been And the back good through seen the it and other before. in really of front when I the panic periods Year. Vince comes others a news happens the of and the again. see

that you like important keep got and then projects. going, things a they As get and will to people into business in cycle projects later chain those realize lean still the run back they supply

Ethan Widell

the Thank activity trough Great. starting quarter the to to is It project answers my past sounds I this be And expect services? up pick question. holidays. you for Do like that professional you. second since think

Allan Dow

Yes.

shut partly couple was it’s This period way I of an It year a pattern kind a nice Christmas week solid down. full is in always on fell, and off a calendar. due way think things in a unusual you the wanted the stop saw a of if of One break, week – the was and we was number take fall it It’s the New that factors. full a two Year’s projects holiday period. for between to light to to time lot days those as due anyway. a one

the So performance due results, really the financial business break on commented were and calendar the natural on fact as fell I made people focused that projects. in before that way a to delivering their their

behind behind is we a will the So The believe here. us that worst recovery period and us. from we do hardest is continued see

Ethan Widell

Thanks. you Then really provide That’s helpful. on any update question can That’s helpful. me, for last pipeline? really one M&A your

Allan Dow

this continued yet, A our that’s that have number active. into of to diligence of going imminent at that’s process. folks open are number the of on We’ve point. are the going table very Yes, that the the work in are now this engagements side the the We on there. reach don’t due to right expand anything other we discussion but have, prospects it,

So helped reach with time us their helpful firm to and be they well. a maybe probably long-term prospects a market as stature bit that in it a conditions be part more will behind where and for the it’s favor our of bigger have business realizing a more little there right little think I are it

move going things to we’re a months on few to I the in think ahead. So be able

Ethan Widell

Excellent. Thank you much. so

Operator

we next move And Matthew to Galinko.

open. line Your is

Matthew Galinko

consistent I’m Is despite good tweak. Thanks of given that mix for some additions changes my kind an macro of plans higher is taking of are guidance in headcount the revenue in yield keeping Hey, seeing you’re there any shift just strength question. EBITDA I about, mechanics margin curious margin the underlying afternoon. the pace or delays environment? lower in the or in dip of guess, and hiring the

Allan Dow

of a we Yes, coming of Matt, a higher higher is a nailed business. factor There is mix I mix dependence as higher from or revenue have you think, revenue subscriptions our our it. margin

line bottom in better. the to deliver to our conservative us allows that bit So We’ve been little hiring. a also

We’re up headcount. still in

on always We’re a going we’re and progress still our bringing being making is the on thought at not lead but pace in headcount, revenue running headcount There time we to. we were producing.

there a become you’re phase in those in producing. a before a initial of that when is hiring revenue folks So period, bit hit

side, in to side You a and with familiar our the on or services the up, think about processes sales them takes little get delivering even expectations. for ramp time it start

So EBITDA margin period – helped hiring the the hiring the also. bit in in process just on helped us has has slowdown the a

So feel where those we and really two factors good have the to weighed land we’re in going margin. on about

Matthew Galinko

a guess, evolution you’re on of outlook. up? how Got follow-up that on margins about it. Any And I update the and just that business revenue line and scaled then, thinking as subscription

Vince Klinges

Matt. Yes,

I think the But low we’ve we’re talked before. of about kind running XXs. this at

bookings the the into end mid-XXs cap kind we to once certainty on software have margins high the next you start above it’s But of If getting year, – gross XXs. XX%. maybe will then amortization perform the the the of of start know the good of to towards getting we for we and that, take we how be next out year should predicated But on year. XX some anticipate trending the end and going

Matthew Galinko

Great. Thank you.

Operator

We Instructions] move Anja Soderstrom. next [Operator will to

Your open. line is

Anja Soderstrom

Yes. taking questions. I for couple of Hi, follow-ups. you have my a thank

lot do for to hiring, easing noticed a they become hear how see expense? else. And environment We and and like seem people But it’s a talent it first you are leaving you doesn’t have that layoffs. you unemployment, somewhere it up better about find on So for the moving has maybe even at better that are now?

Allan Dow

true. part wonderful. would Better I of be wish the was last that expense

the inflation labor the rate, seen slowdown But certainly. we’ve in really We inflation rate, seen a haven’t pullback.

midst months are today X, the more the XX than pandemic, of X candidates We were in we to finding ago.

So we an pace make much candidates better. were or open and for trying the decision is recruiting Typically finding to one there. position a two

Now going And love folks them the from. for that, we’re that four we’d in to to in. a in we We still fill. number select positions we pull are process. five can we’re find We’ve got the range of as right hiring the of to

are not off. laying We

general in Although cutbacks. peers as is doing our we the and space in know technology the organization some all

So it’s enriched our environment for recruiting.

we So pretty that. about good feel

Anja Soderstrom

Okay, there also others that’s call that can is than more among maybe And any – bit a of thank customers, grouping or? out little you you. sort challenging your challenge

Allan Dow

are in of think the on the always general, are commented, Hate tough. about to their the they or some They That’s But tough. seeing and that. conditions all are at But economic are churn. outright pick we’re as of anyone, but naturally retailers a we’re model. frontline I Vince business what are experiencing they not point where cancellations

check like much before find their thing people’s commented just, They We’re same back earlier start looking the invoice on about round for on order opportunity queue every and the me doing another and are then of the purchase put to send scrutinizing to put an the authorizations will out. that I and in number projects. new this it. it XX on buy another days correct And have I’ll to I

what outright, conversations. in not to to generally going check we’re kind that’s So of we’re seeing send the opposed as

that We a think time, the of Year, third into not – DSO taking in though, as extended little a January cycle our falling in quarter. tremendous Vince our as Just had is the being came billing collections we said only reflective number New challenges. I

will cash we in our in an see collections, So position. an uptick uptick

a quite good at I quarter the next position. So of land in we will end think

Anja Soderstrom

me. Okay, all thank for you. That was

Allan Dow

Excellent. Thank you, Anja.

Operator

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

Allan Dow

call. Have few third the all a for who forward to good months assistance you the in our you talking getting and about us quarter thank afternoon back joined look your evening. with afternoon participants Cloe, fourth of a thank and for this this you quarter. We earnings on all

Logility Supply Chain Solutions (LGTY) 23 Feb 232023 Q3 Earnings call transcript