American Software, Inc.
Q1 2016 Earnings Call Transcript

Published: 27 Aug 2015

[Operator:]

Good day welcome to the first quarter fiscal year 2016 preliminary results conference call. All lines are currently in a listen-only mode. Later you will have the opportunity to ask questions during the question and answer session. And please note today's call is being recorded. It is now my pleasure to turn the conference over to Vince Klinges, CFO of American Software. Please go ahead sir.

[Vince Klinges:]

Good afternoon and welcome to American Software's first quarter fiscal 2016 earnings conference call. To begin, I'd like to remind you that this conference call may contain forward-looking statements, including statements regarding, among other things, our business strategy and growth strategy. Any such forward-looking statements speak only as of this date. These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth and contemplated by or underlying the forward-looking statements. There are a number of factors that could cause actual results to differ materially from those anticipated by statements made on this call. Such factors include but are not limited to changes and uncertainty in general economic conditions, the growth rate of the market for our products and services, the timing, availability and market acceptance of these products and services, the effective competitive products and pricing and other competitive pressures, and the irregular and unpredictable pattern of revenues. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. At this time I'd like to turn the call over to Mike Edenfield, CEO of American Software.

[Mike Edenfield:]

Thanks Vince and Good afternoon everyone and thank you for being on our call. We are very pleased with our first quarter results for fiscal 2016. Compared to first quarter last year, we increase revenues 16% and operating income 77% and we added 15 new customers in the first quarter. I’ll turn it back over to Vince for the details and we'll take your questions at the end of the call. Thank you.

[Vince Klinges:]

Thanks Mike. As Mike indicated revenues for the first quarter increased 16% to 28.9 million compared to 24.9 million. License fee increased 12% to 4.9 as compared to 4.4 in the same time last year. Services and other revenues increased 26% to 13.8 million for the current quarter compared to same period last year. Services revenues increase at all our business units. ERP which includes the New Generation Computing unit increased 47% as a result of higher license fees in recent periods. The transportation management group increased 14% as a result of increase project work and Logility increased 39% due to increased implementation project work and also some increased license fees in recent periods, and also additional service revenue from a customer acceptance of one large project this quarter that added roughly $800,000 to the quarter. Also our cloud service revenues increased to roughly about 736,000 for the current quarter and that compares to 256 the same quarter last year, which are included in our services revenues. Looking at maintenance revenues, they also increased 7% to 10.1 million compared to 9.5 million and that’s primary due to additional license fees and also improved retention this quarter. Looking at costs -- our overall gross margin was 53% for the current quarter, that compares to 54% in same period last year. Our license fee gross margin was 60% for both the current and prior year period. Our services margins increased to 32% for the current quarter, that compares to 29% in the same period last year. That’s due to the increased services revenue, higher billing rates and the catch-up revenue related to the customers self acceptance for a project. Our maintenance margin was 79% for the current and prior year quarter. Looking at operating expenses, our gross R&D expenses were 12% of total revenues for the current period and that compares to 14% in the same period last year. This percentage is lower due to increased revenue, as the percentage of revenue sales in marketing expenses were 18% of revenues for the current period, compared to 19% from the prior year period. G&A expenses were 12% of total revenues for the current period, when compared to 13% from prior year quarter. Our operating income increased 77% to 3.8 million for the current quarter compared to 2.2 million the same period last year. Adjusted EBITDA which excludes stock-based compensation increased 43% to 5.6 million for this quarter, compared to 3.9 million the same period last year. Our GAAP net income was 2.6 million, earnings per diluted share of $0.09 for the current quarter compared to net income of 1.5 or $0.05 earnings per diluted share same period last year. Adjusted net income was $2.9 or adjusted earnings per diluted share of $0.10 for the first quarter and that compares to 2 million or adjusted earnings per diluted share of $0.07 for the same period last year. These adjusted numbers exclude the amortization of intangibles related to other acquisitions or stock-based compensation expense. And for last year the loss related to the mid retail acquisition. Looking at international revenues for this quarter, they're approximately 21% of total revenues compared to 17% the prior year. Looking at the balance sheet -- our cash and short term and long term investments are 76.7 million at the end of July 31, 2015. Other aspects of the balance sheet are billed accounts receivable were 14.3 million, unbilled 3 million for a total of billed and unbilled of 17.3 million [Audio gap] 26.6 million and differed revenues long term of roughly about 400,000. Our shareholder equity is 93.3 million. Our current ratio was 2.3 million as of the end of July 31, 2015, that compares to 2.5 million the same period last year and our days sales outstanding as of July 31, 2015 was approximately 54 days compared to 62 days the same period last year. At this time, I'd like to turn the call over to questions.

[Operator:]

[Operator Instructions] We will take our first question from Kevin Liu, please go ahead.

[Kevin Liu:]

Hi, good afternoon. First question -- just when you take a look at your end markets, the vertical geography, can you talk about any transition emerging and in particular just curious if you're seeing any particular strength or weakness across any of these verticals or across of your international markets?

[Mike Edenfield:]

No, we haven't really seen a change.

[Kevin Liu:]

Got it. And then within Logility, it looks like you guys need some executive changes within the quarter, I'm just wondering if you expect this to result and in sort of changes in the organizational structure or the sales team in particular? And then also any sort of strategic shifts in terms of -- how you guys might either go to market or you think about investing in that business?

[Mike Edenfield:]

Well, Logility is our largest subsidiary and most profitable subsidiary, and the change was to get more focus on it, because for us to be successful Logility really needs to lead the way as it has been. So it's really to get more focus on our best subsidiary, our largest subsidiary I should say.

[Kevin Liu:]

And then just lastly from me, as you look at pipelines stake, is this talk about what you're seeing in terms of ASPs, that now your deal size is going up, are you seeing more demand for particular modules like in between optimization or is the retail offer?

[Mike Edenfield:]

No it's still kind of the way it's been spread over. We have a number of products and there is not one that's super hot at the expense of the others.

[Operator:]

[Operator Instructions] It appears we have no further questions at this time.

[Mike Edenfield:]

Thank you very much and we look forward to talking to you at the Q2 conference call. Thank you.

[Operator:]

This concludes today's program. You may now disconnect your lines and have a wonderful day.