American Software(US:AMSWA)2023-08-25 09:12Financial Data and Key Metrics Changes - For Q1 2024, total revenues were $29.2 million, a decrease of 7% from $31.3 million in the same period last year [12] - Subscription fees increased by 14% year-over-year to $13.8 million, with some revenue recovery from previously suspended contracts [12] - Net income increased by 29% to $2.7 million, or earnings per diluted share of $0.08, compared to $2.1 million or $0.06 per share last year [18] - Adjusted EBITDA decreased by 17% to $3.9 million from $4.6 million in the first quarter of last year [18] Business Line Data and Key Metrics Changes - Professional services revenue decreased by 31% to $7 million from $10 million the same period last year, primarily due to a 33% decrease in the supply chain management unit [13] - Maintenance revenues declined by 8% year-over-year to $8.2 million, reflecting a normal falloff rate [14] - Services margin decreased to 19% from 27% last year due to lower revenues and utilization [16] Market Data and Key Metrics Changes - International revenues accounted for approximately 18% of total revenues for both the current and prior year [19] - Remaining performance obligation (RPO) was $111 million, down 11% from the prior year due to a higher burn rate and fewer deals [19] Company Strategy and Development Direction - The company is focusing on transitioning clients to subscription-based agreements and enhancing cloud capabilities [31] - Strategic actions include exploring the sale of the headquarters and potential acquisitions to enhance shareholder value [10][25] - The company is optimistic about the supply chain planning market and plans to initiate a share buyback after the current blackout period [11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding pipeline and close rates improving despite economic uncertainties [7] - The company anticipates a strong market for supply chain planning solutions in the long term, despite short-term headwinds from interest rate hikes [8] - Cost control efforts will continue, aiming for a flat to slight reduction in overall costs this fiscal year [9] Other Important Information - The company reaffirmed its guidance for fiscal 2024, expecting recurring revenue between $88 million and $92 million and total revenue between $120 million and $126 million [9] - Cash and investments totaled $115.3 million at the end of the quarter, with $3.7 million paid in dividends [20] Q&A Session Summary Question: Are you seeing any further elongation of sales and approval cycles? - Management noted stabilization in close and approval cycles compared to the previous quarter, with hopes for improvement as the summer period ends [22] Question: Can you provide more detail on the strategic actions mentioned? - The headquarters building is listed for sale, and the timeline for potential cash redeployment could take six to nine months [24] Question: Can you discuss opportunities to lift and shift existing customers to subscription agreements? - The company is proactively presenting cloud migration opportunities to clients, aiming to double the number of lift and shifts this fiscal year [31] Question: What is the approach regarding professional services and outsourcing? - The company is educating partners to take on more projects, transitioning to a model that allows for shared resources and independent implementations [33] Question: What gives confidence in improving gross margins in the coming quarters? - Management anticipates improvements due to restructuring cost reductions and an expected uplift in professional services [36] Question: Can you quantify the catch-up subscription payments? - The catch-up was approximately $200,000 to $300,000, viewed as a one-off recovery from delayed payments [39] Question: What are the plans for cash if the headquarters sale goes through? - Options include cash distribution, additional share buybacks, or acquisitions, but no definitive plans are in place due to the unpredictable timeline [41]