Logility Supply Chain Solutions Inc (LGTY) 2015 Q4 法說會逐字稿

Good day everyone and welcome to the program.

(Operator Instructions)

It is now my pleasure to turn the conference over to Mr. Vince Klinges, CFO of American Software. Please go ahead, sir.

Good afternoon. And welcome to American Software's fourth-quarter fiscal 2015 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 timely availability and market acceptance of these products and services, the effect of competitive products and pricing and other competitive pressures, and the irregular b- 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 would like to turn the call over Mike Edenfield, CEO of American Software.

Thanks, Vince. Hello everyone and thank you for participating in this call. We're pleased with our performance for the fourth quarter and excited about our transition to the cloud.

Overall fourth-quarter revenues increased 6% and our EBITDA increased 26% when compared to the same period last year. While we are still closing the majority of our deals under the traditional perpetual software license model we're transitioning our business model to include SaaS and perpetual license deals that include cloud services. As a result of this transition, we're closing deals that require us to spread contracted perpetual license fee revenue over the life of a contract period.

As of April 30, 2015 our deferred license fee revenue increased 118% to $2.4 million compared to $0.9 million at the same time last year. Our cloud services annual contract value, ACV, increased 226% to $2.8 million compared to $0.9 million in the same period of the prior year.

We've added a number of quality customers in the fourth quarter. We added 21 new customers including three SaaS deals. For the year we added 59 new customers including five SaaS deals.

I'd like to turn it back over to Vince to go through the details.

Thank you, Mike. Comparing the fourth quarter of fiscal 2015 with same the period last year as Mike indicated revenues increased 6% to $27.6 million and that compares to $25.9 million in the same quarter last year.

License fees decreased 10% to $5 million compared to $5.6 million for the same period last year. At the end of the quarter we had an additional $2.4 million in deferred ratable license fees that included cloud services which required us to spread the license fee revenue over the life of these contracts.

In addition we also at the end of the quarter we increased our cloud services which included SaaS and managed services revenue to an annual contract value by 226% to $2.8 million compared to $0.9 million in the same time last year. Other aspects of our revenue services and other revenues increased 13% to $12.8 million for the quarter compared to the same period last year.

Our Proven Method increased 17% as a result of timing of project work. Logility also increased 10% due to increased implementation work from increased license fees in recent quarters and additional services revenue from our recent MID Retail acquisition.

Maintenance revenue increased 9% to $9.8 million compared to $9 million from the same period last year primarily due to additional license fees, improved customer retention and maintenance revenue from the MID Retail acquisition added $455,000 in the fourth quarter of 2015 and $1.2 million for the full year. Looking at other aspects of our cost overall gross margin was 51% for the current quarter. That compares to 59% for the same period last year.

License free margin decreased to 57% in the current period compared to 84% in the same period last year and that was due to higher software amortization expense of about $675,000 as a result of the realization of Voyager 8.5 project released at the end of the fourth quarter last year. Additional retailer commissions added $360,000 and also due to lower license fees were the reasons for the lower gross margins on license fees. Services gross margin decreased to 29% for the current period compared to 32% in the prior-year quarter and that's due to lower billing rates at our ERP business units and also at TPM.

Maintenance margin was 77% for the current and prior-year quarter. Looking at our other operating expenses, our gross R&D expenses were 13% of revenues for the current period when compared to 12% for the prior year. MID Retail added $370,000 to the cost in the fourth quarter.

As a percentage of revenue sales and marketing expenses were 18% of the revenues for the current period compared to 23% in the prior-year period and that's primarily due to lower sales commission. G&A expenses were 12% of total revenues for the current period and that compares to 13% for the prior-year quarter. Operating income increased 7% to $3.4 million this quarter compared to $3.2 million in the same period a year ago.

Adjusted EBITDA which excludes stock-based compensation increased 22% to $5.3 million this quarter and that compares to $4.3 million same period last year. So our GAAP net income was $2.6 million or earnings per diluted share of $0.09 and that compares to $2.6 million or $0.09 for the same period last year.

Looking at adjusted net income was $2.9 million or adjusted earnings per diluted share of $0.10 for the fourth quarter and that compares to $2.9 million or adjusted earnings per share of $0.10 from the same period last year. And these adjusted numbers exclude the amortization of intangible expense related to our acquisitions and stock-based compensation expense.

International revenues for this quarter were 15% of total revenues for the current period and that compares to 17% in the prior-year quarter. Taking a look at the full-year numbers for the year ended April 30, 2015 compared to last year, the prior year, total revenues increased 2% to $102.9 million and that compares to $100.6 million last year.

License fees year to date was $16.7 million compared to $20.0 million for the same period last year. And services revenues year to date were $47.2 million compared to 44.4% (sic - see press release, "$44.4 million"). Our maintenance revenues were up to $38.9 million compared to $36.2 million last year.

Looking at margins for the full year our overall gross margin was 51% compared to 57%. License fee margin decreased to 54% from 80% in the prior year primarily due to the amortization expense of cap Software. Services margin was 28% compared to 29% at the same period last year and for the year maintenance margin was 78% for both the current-year 2015 and also for fiscal 2014.

Looking at operating expenses our gross R&D expenses were 13% of total revenues compared to 12% in the same period last year. This is percentage is up slightly due to the MID Retail acquisition.

As a percentage of total revenue sales and marketing expenses were 18% both for the current period. That compares to 20% for the same period last year.

G&A expenses were 13% for the year compared to 12% in the prior year. Operating income year to date was $9.3 million compared to operating income of $14.5 million last year.

On an adjusted EBITDA basis we were down 10% to $16.7 million compared to $18.6 million for the same period last year. GAAP net income was $8.1 million or $0.28 earnings per diluted share and that compares to $10.3 million or $0.37 earnings per diluted share. On an adjusted net income base we reported $8.2 million or earnings per diluted share of $0.29 and that compares to an adjusted net income of $11.6 million or earnings per diluted share of $0.41 in the same period last year.

International revenues year to date for the full year was 16% and that's down a percentage point from 17% the prior year. Looking at the balance sheet the Company's cash and investments are strong with $75.4 million at the end of April 30, 2015.

Some other aspects of our balance sheet are billed receivables of $16 million, unbilled is $3.6 million for a total of $19.6 million accounts receivable. Our deferred revenues are up to $28.5 million and our shareholder equity is $92.9 million. Our current ratio is 2.2 as of the end of April 30, 2015 and that compares to 2.7 in the same last year and our days sales outstanding as of April 30, 2015 was 65 days and that compares to 67 days for the same period last year.

At this time I'd like to turn the call over to questions.

(Operator Instructions) Matthew Galinko, Sidoti & Company.

Hey guys, thanks for taking my question. So first one was I was wondering if you could share the average length of the cloud contracts you signed for the year?

It's probably about two years.

Got you. And any change in the fourth quarter or typically consistent?

About the same.

Got you. And then you did a pretty good job on the sales and marketing expense on what was flat of revenue but lower sales and marketing. So I was just curious where the efficiency came from and is that something you could expect going forward or how we should think about that line item?

Yes Matt, this is Vince. Primarily it's due to lower commissions from lower license fees and also when we closed some of these deals that are being deferred we also deferred the commission expense over the period to match when we take the license fees on those deferred license fees. So that's partly it.

Got you. That makes sense.

Then last quarter we talked about the sales cycle lengthening and some of your customers are evaluating both a premise option and a cloud option. I'm curious if now that it's been out there a little while longer if maybe the sales cycle shortens a little bit if there is a little less valuation period and if there's any difference between Voyager and maybe NGC?

Well NGC is they're smaller deals and they have shorter sales cycles. But it's really not any big trend one way or the other.

Got you. And then I guess one last one would be on how the pipeline looks today for retail deals.

It looks pretty good. We really came with no pipeline but we did close another big retail company SaaS deal and so we're still happy with the acquisition.

And I do think we don't have a long track record and brand image in retail so we've got some work to do to establish that. And it's nothing -b it's not brain surgery, it's just getting out in front of these customers with our story.

Got it. Is there any sort of outbound marketing you could do and branding efforts or is that really just getting salespeople working on it?

It's both, Matt.

Got you. All right, thank you.

(Operator Instructions) Kevin Liu, B. Riley & Company.

Hey, good afternoon. First question I just wanted to ask about the metrics you provided, would you happen to have those same metrics as of the end of Q3?

Yes, as far as the deferred revenue number it was roughly around $2 million at the end of the third quarter. And so what happened is we took some of that revenue in the fourth quarter and then we added a few more deals.

Yes, and what about the ACV number?

The ACV number, you know what, I don't have that handy. And I don't think I should guess. So I'll have to get back you, Kevin.

Yes, no problem. And then more generally obviously you guys sounded like you got off to a pretty good start in terms of closing these deals especially on the SaaS side early on when you talked to us last quarter. How did you sustain that momentum in terms of deal closers over the course of the quarter and were you able to close on many of the larger opportunities you saw within your pipeline?

Yes, we closed some of it but not all of it. And we have one lingering that we are still really excited about it. And there's another one that's lingering and it could be lingering for a long time but we still have some exciting opportunities.

Understood. And with a portion of your business starting to shift more in the direction of cloud I guess what sort of metrics will you guys internally be looking at to make sure your salesforce is productive and you're growing overall bookings the way you want to? Should we be looking at it as kind of the sum of the license revenues plus the change in ACV and any indication as to what sort of growth level we can expect in that combined metric?

Well that's a lot of questions (multiple speakers). Vince, do you want to start with them?

Yes, I think Kevin we're probably going to primarily look at it from a combination of growing license fees in the ACV. But what's happening is we're trying to accommodate the customer and making sure that we're doing the best for the deployment that they want.

So you have situations at the end of the quarter where you think it's going to be a perpetual deal but then it switches because they want hosting services and it switches to a SaaS model. So we're trying to make it as easy for our salespeople to make sure that they sell either methodology. But as far as metrics on growth I don't think we're prepared to give any kind of percentages but we are trying to grow it nicely.

Got it. And then just last question, as you are selling more of these cloud deals has there been any shift required in terms of the compensation structure or is it managed pretty well with the structure you guys had in place already?

We've worked through that and we have a different plan in place for if it's a SaaS deal. We tried to make it neutral because we don't -b we want to do with the customer wants.

If the salesman tries to steer them some way he might get a higher commission but the customer doesn't want it that's a loss for us. So I think we've done a pretty good job but we'll see.

Okay, sounds good. Good luck in the upcoming year.

At this time there are no other questions in the queue.

Thank you for being on the call. We look forward for a good call in about 90 days. Thank you.

This does conclude today's program. You may disconnect at any time and do have a wonderful day.