American Software(US:AMSWA)2023-11-17 00:02Financial Data and Key Metrics Changes - Total revenues for Q2 2024 were $25.7 million, a decrease of 6% compared to $27.3 million in the same period last year [12] - Subscription fees increased by 8% year-over-year to $13.4 million but declined slightly from the prior quarter [12] - Adjusted operating income decreased by 13% to $3.6 million compared to $4.2 million in the same period last year [16] - Net income was $0.6 million or earnings per diluted share of $0.02, down from $1.9 million or $0.06 in the same period last year [15] Business Line Data and Key Metrics Changes - License fee revenue was $0.2 million compared to $0.7 million in the prior year period [13] - Professional services and other revenues decreased by 26% to $4 million from $5.4 million in the year-ago period [13] - Maintenance revenue declined by 8% year-over-year to $8.1 million [13] - Total recurring revenues, comprising subscription and maintenance fees, represented 84% of total revenues in Q2, compared to 78% in the same period last year [13] Market Data and Key Metrics Changes - International revenues accounted for approximately 21% of total revenues compared to 19% last year [17] - Remaining performance obligation (RPO) was $113 million, down 8% from the prior year period due to a slowdown in bookings activity [17] Company Strategy and Development Direction - The acquisition of Garvis, a SaaS start-up, was completed, and the product has been rebranded as DemandAI+, expected to enhance supply chain planning capabilities [5][6] - The company divested its IT staffing and consulting services business, The Proven Method, and its transportation business to focus on being a pure-play supply chain software leader [7] - A share repurchase program was implemented, with approximately 431,000 shares repurchased for $4.8 million during Q2 [17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about clients adapting to economic headwinds and anticipated stronger performance in the second half of the fiscal year [8] - Revised guidance for fiscal 2024 includes total revenue expectations of $100 million to $104 million and recurring revenue of $85 million to $88 million [9][18] - Management noted that the acquisition of Garvis is expected to be accretive in the next 12 months despite its initial drag on margins [19] Other Important Information - The company is no longer pursuing a sale of its headquarters due to dampened commercial real estate market conditions [10] - The financial position remains strong with cash and investments of approximately $83.9 million at the end of the quarter [18] Q&A Session Summary Question: Can you add some color on the change to guidance and the impact from divestitures versus any macro expectations that may have changed? - Management indicated that the majority of the adjustment is related to divestitures, with a slight impact from macroeconomic conditions [20] Question: How are customers thinking about budgets for 2024? Did you see any worsening in sales cycles? - Management reported mixed results regarding customer budgets, with encouragement from budgeting activity but noted that actual spending may lag [22] Question: Can you provide more insight into the updated recurring revenue guidance? - Management explained that the guidance reflects a strong second quarter but was back-end loaded, with expectations for a positive impact in the third quarter [26] Question: What feedback have you received since acquiring Garvis? - Management reported strong client reception and significant improvements in forecast accuracy, translating to substantial savings for clients [28][29] Question: What is the right way to think about the gross margin profile for the remaining business? - Management anticipates incremental improvement in subscription fees and overall gross margin, projecting adjusted EBITDA margins to increase by the end of the year [32]