American Software(AMSWA) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q4 2024 were $25.4 million, a decrease of 5% from $26.8 million in the same period last year, primarily due to lower revenues from license fees and professional services [14] - Subscription fees increased by 8% year-over-year to $14.1 million compared to $13 million in the same period last year [14] - Net income was $2.2 million or earnings per diluted share of $0.07, compared to net income of $2.9 million or $0.09 per diluted share last year [18] - Gross margin was 66% for the current period, up from 65% in the same period last year [16] Business Line Data and Key Metrics Changes - Professional services and other revenues decreased by 23% to $3.7 million from $4.8 million a year ago, primarily due to lower bookings earlier in the year [15] - Maintenance revenues declined by 9% year-over-year to $7.4 million, reflecting a normal falloff rate and the divestiture of the Transportation group [15] - Total recurring revenues, comprised of subscription and maintenance fees, represented 85% of total revenue for Q4, up from 79% in the same period last year [15] Market Data and Key Metrics Changes - International revenues accounted for approximately 20% of total revenues compared to 19% last year [19] - Remaining performance obligations (RPO), or backlog, was $128 million, an 8% sequential increase and a 3% year-over-year increase [19] Company Strategy and Development Direction - The company transformed through divestitures, focusing on its core supply chain software business and planning to rename itself Logility [6] - The acquisition of Garvis and the introduction of DemandAI+ are part of the accelerated AI roadmap to enhance capabilities and client engagement [8] - The company plans to eliminate its dual-class structure, which is expected to create significant shareholder value [9] Management's Comments on Operating Environment and Future Outlook - The management noted that clients are engaged in transformational supply chain initiatives but have delayed approvals and commitments due to macroeconomic headwinds [9] - The initial guidance for fiscal 2025 includes total revenue of $104 million to $108 million, with conservative assumptions around client spending decisions [13][20] - Management expressed optimism about pipeline growth and the potential for accelerated subscription fee growth as clients convert to cloud solutions [12][20] Other Important Information - The company paid $3.7 million in dividends during the quarter and repurchased stock in the open market for the first time in many years [8] - The financial position remains strong with cash investments of $83.8 million at the end of the quarter [19] Q&A Session Summary Question: Current buying environment and project start times - Management noted that the economic environment has led to a stall in project approvals, with clients taking a conservative approach to investments [22][24] Question: Feedback on cloud conversion activity - Feedback has been mixed, with some clients receptive to moving to the cloud while others require more dialogue to address concerns [27][29] Question: Baseline assumptions for recurring revenue guidance - The company is taking a cautious approach to bookings, expecting more activity in the second half of the year [30][31] Question: Causes of prolonged approval cycles - The management indicated that client hesitance is influenced by economic conditions and inventory backlogs, rather than interest rates directly [34][36] Question: Differences in scrutiny between cloud conversions and new logos - Cloud conversions are generally easier to initiate compared to new logos, as they often involve offsetting investments [40][41] Question: Impact of bookings being back-end loaded on future revenue - Management confirmed that back-end loaded bookings would positively impact fiscal 2026 revenue [43][44] Question: Pipeline conversion rates and historical levels - The company is experiencing double-digit growth in its overall pipeline, but conversion rates remain below historical levels [46] Question: Rebranding motivations - The rebranding to Logility is aimed at aligning the company with its well-known brand in the industry [48][49] Question: Perception of eliminating dual-class stock - Management believes that eliminating the dual-class structure will broaden the investment community's interest in the company [51]