GTY Technology Holdings Inc.
Q1 2021 Earnings Call Transcript
Published:
- Operator:
- Good day. Thank you for standing by, and welcome to the GTY Q1 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now turn the conference call to Mr. John Curran, GTY CFO.
- John Curran:
- Thank you, and good afternoon, everyone. I'm John Curran, GTY CFO, and I'd like to welcome you to our First Quarter 2021 Earnings Conference Call. With me on today's call is TJ Parass, GTY's CEO. We will be presenting slides on today's call and encourage you to view the presentation found on our website at www.gtytechnologies.com. Please note that our earnings release is also available on the GTY website and contains additional information about our financial results.
- TJ Parass:
- Thank you, John. Good afternoon and thank you all for joining us. For those that are new to GTY, GTY provides cloud-based platforms that help government organizations transform the way they engage citizens and manage their operations. While the common perception that government likes behind private sector, GTY was formed based on the founder's vision that governments were starting to accelerate the digital transformation. Even before the pandemic, governments are moving away from heavy, monolithic on-prem solutions to modern cloud and SaaS applications. And this trend has gotten even stronger in the wake of last year. State, local governments modernization represents a massive opportunity for native cloud and SaaS based platforms. Here's how we're going about it. We're providing our best of breed cloud technologies through five product suites that cover the front and back offices of state and local governments. Included in our primary target sectors are municipalities and county, colleges and universities, K-12 school districts, public health care agencies, public utility like water and power, transportation and transit, state governments, and federal agencies. Today, we have what I'd call it good start 1,800 clients and over 360 employees across our business units, with both of these numbers increasing weekly, as we start leaning into growth. To add some colors, the size of our opportunity in 2021 state local government in the U.S. is expected to spend just under $120 billion to 2019, that 7% higher than 2020, a healthy, underlying growth rate.
- John Curran:
- Thank you, TJ. As TJ highlighted earlier, Q1 was a strong start to the year, and we are excited to have exceeded our revenue guidance for the quarter.
- TJ Parass:
- In summary, it was a great quarter with GAAP revenues up 18% in the quarter and ARR growing 27% year-over-year. As we look forward, we believe GTY is well-positioned to capitalize on the recovery trend and execute on our growth initiatives. Thank you. Operator, please open the line for questions.
- Operator:
- And our first question comes from Joshua Reilly with Needham.
- Joshua Reilly:
- Hey, guys. Congrats on the strong quarter. I wanted to start off asking about Salesforce productivity. So, how are you thinking about it versus pre-COVID versus today? How did things trend in the quarter? And then secondly, what do you expect to go-to-market, so look like in terms of a hybrid versus an in-person model as we kind of exit COVID?
- TJ Parass:
- Hi, Josh. TJ here. Thanks for the question. So, we -- a year ago, we -- when we reduced staff, we've kept our staff generally at the same size, keeping an eye on our quotas and as are our sales teams are starting to increase their pipelines and quarter's earnings get closer, we're starting now looking at increasing our overall sales and marketing spend, which is inclusive of expanding our teams. So, we're working -- watching that closely. Anything we're working on now is in anticipation of six to 12 months down the road from now. We feel we're well-positioned the team we have to execute in the year. In terms of -- sorry -- I missed -- the second part of the question, Josh, sorry.
- Joshua Reilly:
- The second part is, if you look at kind of the post-COVID world that we're entering now, like pre-COVID, obviously you guys were heavy in-person sale, lots of trade shows, et cetera. What do you think the model is going to look like now in terms of hybrid or bigger mix of virtual sales or how are you thinking about that?
- TJ Parass:
- Yeah. I think, 2021 is going to be a lot like 2020. We will continue a lot of our virtual selling. No one believes conferences are coming back, a little bit back to traveling. But the virtual side will continue. Our business has really two halves. One half has always been virtual. And that was generally speaking, the deals we sell below the RFP values, and for those that are tend to be more what we sometimes term as enterprise deals, as soon as travel comes back, we'll get back on the road again, but we still pretty effective being remote.
- Joshua Reilly:
- Got it. Okay. What are you seeing in terms of priorities for spending with customers now that they have better visibility into the funds that they're going to be getting from the CARES Act? And then what segments of your business do you expect to kind of maybe benefit the most given those priorities?
- TJ Parass:
- Well, there's a number of factors there, Josh, that I think are important. One of them is the -- in the news quite a bit now is cyber security. I think our customers are spending a lot of time around that. Where that peels off, when it comes to GTY is the movement towards cloud technologies that are secure, and better than they run on premise. The second tailwind that, is becoming pretty prevalent right now is that there a belief that the government workforce won't return back to the officers fully in and it will be continued to be a hybrid and remote environment. This means to us that some of the band aids that government put on their operations in the last year to continue running their legacy applications through virtual technologies, virtual desktops, they're going to need to start making now longer term commitments forced technology, the cloud based. So, those are the two big factors that we see are pushing things. And then in terms of our products, there's no question to me. Payments, permitting are going to be big on the citizen front end. Budgeting and procurement remain steady and strong. And grants, it's a big year with grants this year because of all the grant money that's flowing. And a lot of that grant money is focused on modernizing too.
- Joshua Reilly:
- Okay. Got it. Perfect. And then maybe just one more for me. If you look at your updated guidance, it's kind of in line with our prior estimate. Is this indicative of what you're seeing in the macro with customers willing to spend at this point, or kind of what are the puts and takes around your kind of updated guidance here in the quarter?
- John Curran:
- So, I'll take that Josh. It's John here. So, we do -- we are seeing kind of the early stages. As TJ mentioned, it's a number of tailwinds and we're starting to see the first green shoots, if you will. But we're not anticipating that that's going to have a tremendous impact on this current year. It's really going to be putting resources in place this year to drive a benefit in 2022. If we do see things accelerate, we'll certainly update our guidance as we go through the year. But at this point, we're not anticipating seeing much benefit in 2021.
- Joshua Reilly:
- All right. Great. Thanks guys. Congrats.
- John Curran:
- Thanks Josh.
- TJ Parass:
- Thanks Josh.
- Operator:
- And our next question comes from Jeff Van Rhee with Craig-Hallum Capital.
- Jeffrey Van Rhee:
- Great. Thanks guys. Thanks for taking my questions. A couple for me. On the bail out or the rescue plan, I guess the $350 billion for state local bill $1.09 trillion I mean, some serious money coming. Just can you put a little finer point on when based on your understanding of the act, that gets in the hands of the buyers and then how long procurement cycles take before that shows up in bookings.
- TJ Parass:
- Yeah. We expect that the funds will start to flow as early as this month, with the bulk of it happening in the second half and June and onwards. And we -- as we was of the CARES Act, we expect that our customers will be looking to modernize their technology and we'll be working with them as best as we can with that.
- Jeffrey Van Rhee:
- Is there anything different about this than the CARES Act in terms of their flexibility and the focus of the spend being more or less aimed at your solutions or more flexibility to spend on your kind of solutions?
- TJ Parass:
- Jeff, I don't have a specific answer for that. I will tell you that with the CARES Act what we found was over time, it got better and better understood, and we got to understand it better with our customers. I think it's going to go through the same evolution here. It's not like 100% clear to us right now, although is it in our opinion, better suited toward modernization even the CARES Act was, and we're able to work with our customers with the CARES money when it came out.
- Jeffrey Van Rhee:
- Okay. On the spending front, obviously good to hear the conviction around -- putting some more money to work on the sales side. Just talk a bit about the sales org, the evolution, but maybe from the specific context of where is this extra cash going, how many reps is this more focused on lead gen marketing, sort of -- just give a little more insight into the evolution of the sales maturation and some numbers around what this is going to be spent on?
- John Curran:
- The question …
- TJ Parass:
- Yeah, go ahead, John. Sorry.
- John Curran:
- Yeah. So the -- Jeff, it'll be kind of across sales and marketing. As we've described our go-to-market motion, we do have a decent investment in marketing and BDRs for our transaction-based business and then a bit more investment in sales. The mix of sales to marketing more focused on sales than our enterprise motion. We would anticipate like through the year adding probably 20, 25, heads in sales and marketing, and then really the bulk of where we'd be spending our money at this point in 2021.
- Jeffrey Van Rhee:
- Okay. That's helpful. And then, just as it relates to bookings, you mentioned it was one of the stronger quarters, again maybe I'll push you up a little bit to get a little more specific about that. Was it up sequentially? Was it up year-over-year? Can you put any numbers around it, so we can just get a sense of kind of how we're bouncing off the bottom, or how aggressively we're coming out here?
- John Curran:
- Yeah. So, it would be -- probably historically -- usually one top three or four quarters, and definitely up year-on-year, decent growth Q1 versus Q1,. a bit higher than Q4, but significant year-on-year growth with a decent quarter-on-quarter growth.
- Jeffrey Van Rhee:
- Got it. Okay. I'll leave it there. Nice quarter, guys. Thanks.
- John Curran:
- Thanks, Jeff.
- TJ Parass:
- Thank you, Jeff.
- Operator:
- There are no further questions at this time. Did you have any final remarks?
- TJ Parass:
- I just want to say thank you everyone for joining us today, and we'll look forward talking to you next quarter.
- Operator:
- This concludes today's conference call. Thank you for your participation. You may now disconnect.