Q4 2020 Earnings Call
[music].
Ladies and gentlemen, thanks for standing by and welcome to the Q way D fiscal fourth quarter financial call at this time a lot.
Internal listen only mode and later, we will conduct a question and answer session with instructions given at that time, if you should require assistance during the call. Please press Star then zero and an operator lets us do offline and as a reminder, today's call is being recorded I would now like to turn the call over to our host Corabelle, Let me Chief Accounting Officer. Please go ahead.
Hello, everyone and welcome today's call before we begin I'd like to ensure that everybody understands that our discussion may contain forward looking statements that are based on certain expectations and analyses.
Such forward looking statements are subject to risks and uncertainty that could cause actual results could differ materially I know that's it.
To 80 undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances. After the date of this call for a complete description of these risks and uncertainties. Please refer to Q Lady <unk> and 10-Q filing with the Securities and Exchange Commission.
Please also note that during this call we will be discussing non-GAAP pre tax income, which is a non-GAAP financial measure as defined by SBC regulation G.
Conciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's press release.
Just posted on the company's website.
Now I'll turn the call over to our CEO and tonsil.
Good afternoon, everyone and thank you for joining todays call to discuss kuwaitis fiscal 24th quarter and full year results.
Joining me on the coal op hammacher out President and Daniel lender Chief Financial Officer.
We enjoyed a strong finish to the year in terms of cloud sales with bookings growing by 71% over the prior year.
Cloud subscription margins also grew to 64% for the year, continuing our incremental improvement in this area.
We maintained a positive margin in professional services on these factors combined together to help us achieve positive results in the quarter.
We met guidance for total revenue came in just under on subscription revenue as a result in a majority about deals closing like in the quarter.
Yeah, I'll competitive position drove continued momentum in our cloud business, we closed a record number of deals in the area with a healthy balance across new business to Q, Andy as well as the conversion of on premise customers.
With a solid close to fiscal 20, we see on investments in sales and marketing continue to pay off.
Notwithstanding the effects of the Kobe 19 pandemic business remains in good shape and well positioned to achieve our long term strategic targets.
I'll now turn it over to Daniel to discuss the financial results and provide some <unk> details around a long range plan and the associated targets.
Well, thank you on <unk>.
We ended fiscal Twentytwenty bidding pre tax income meeting total revenue guidance and were slightly below subscription guidance due to the timing of closing deals in the quarter.
Although the deals came later than planned we did hit a record number closing 35, new cloud deals in the quarter.
For the fourth quarter subscription or marketing again grew to an all time high of 67%, helping us achieve our year over year improvement to subscription margins.
There was no meaningful currency impact to the bottom line for the fiscal 24th quarter compared with last year's fourth quarter ended fiscal 23rd quarter.
Fourth quarter total revenue was 78.6 million compared with 82.7 million for last years fourth quarter.
Primarily resulting from anticipated declines in a professional services and maintenance businesses as well as in license sales.
Subscription revenue grew 19% and accounted for 36% our basis for the total fiscal 2024th quarter.
I'd now like to provide some annual cloud metrics to help you better understand her business some of which we have provided in the past summer new.
And your bookings growth was 71% for fiscal Twentytwenty.
New cloud deal for fiscal 20 were 99 split roughly half between conversions and your customers.
New cloud deals for the fourth quarter were 35.
Including 17 conversion and 18 new customers.
Subscription billings for the fiscal year grew by 23%.
With a three year CAGR of 29%.
Annual subscription revenue achieved the run rate of 120.5 million.
Net dollar revenue sorry, net dollar retention rate.
Which would calculate by comparing the revenue of each customer from a year ago to revenue of the same customers in the current year.
With 100, an 8% for fiscal 20.
Retention rate continues to be in excess of 90%.
Subscription backlog grew 31% to 150.4 million I. So January 31 2020.
Maintenance and other revenues totaled 28.7 million compared with 30.5 million last year, we did decline relating mainly to cloud conversions and our historical attrition rate.
Professional services revenue was 15.9 million compared with 19.1 million for last year's fourth quarter.
Services margins were 2% up from negative 1% last year.
But down from 6% for the fiscal 2003rd quarter, mainly as a result of lower than anticipated revenue from Asia Pacific.
We achieved our goal of reaching breakeven services margin for the full year.
License revenue for the fiscal 2004th quarter was 5.3 million compared with 9.1 million last year.
In fiscal 2000 superior there were two like this deals greater than 300000 versus seven in the prior year.
Our total revenue by vertical for the fourth quarter, what hi Tech on industrial 36% automotive 34%.
Tumor products on food and beverage, 15% in life Sciences, another 15%.
By geography total revenue was North America, 49%, EMEA, 31% Asia Pacific 14, Latin America, 6%.
Gross margin for the fourth quarter improved to 58% from 55% last year.
Principally driven by improvements in subscription margin.
Sales and marketing expenses was 21.3 million or 27% of total revenue versus 20.3 million or 25% of total revenue for last years fourth quarter.
The increase was due to higher personnel and severance cost versus last year.
R&D expense amounted to 13.2 million for the fiscal 24th quarter, compared with 13.3 million a year ago.
As a percentage of total revenue R&D expense was 17% this year and 16% last year.
DNA expense was 10 point fourmillion or 14% of total revenue versus 8.4 million or 10% of total revenue for last years fourth quarter.
The increase mainly resulted from the movement of certain personnel into DNA from other areas and higher stock compensation expense.
Supplementation expense totaled 3 million for fiscal 2004th quarter, and two and a half million last year.
This brings GAAP pre tax income to 764000, compared with 3.2 million for last year's fourth quarter. Our non-GAAP pretax income was 3.8 million versus 6 million last year.
We finished the year with up with approximately 137 million in cash and equivalents compared with approximately 139 million at the end of fiscal 19.
Cash flow from operations for fiscal 2020 was 16.8 million compared with 19 million for fiscal 2019.
Our accounts receivable was 81 million at January 31 versus 81.6 million a year ago.
And our day sales outstanding using the Countback method was 45 days for the fiscal 24th quarter compared with 48 days for the same period last year.
Our short term deferred revenue balance at January 31, what's a 118 point fourmillion versus a 115.3 million a year ago.
Including 45.7 million of the first subscription versus 34 million.
69.6 million of deferred maintenance versus 77 million.
$2.7 million up the for professional fees versus 2.1 million and 400000 of the Fertilise is another versus 2.2 million.
As a reminder, a maintenance contracts are billed annually, while subscriptions contracts can be built either annually or quarterly.
Given the current level of uncertainty related to covert 19, and its economic and social applications to our customers and our business.
We're not providing year or the guidance at this time.
For our quarterly guidance, given the travel and other restrictions currently in place in most countries professional services and our license revenues could vary significantly.
As a result for the quarter, we're not providing our normal guidance.
Only provide guidance for recurring revenue, which consists of subscription revenue and maintenance revenue.
We estimate recurring revenue will account for over 75% of our total revenues.
For fiscal 2021 first quarter Q, I'd expect subscription revenue of $31 million and maintenance revenue of 27 million.
In addition to the subscription metric that were providing we're also including our long term aspirational model in our corporate presentation that is available on our website.
We develop the long term model as part of five year strategic plan.
I will they timing is shifting as a result of the current terminal created by the Koby 19 endemic the underlying assumptions on our market positioning remained the same.
Our long term model calls for 25% to 30% growth to subscription revenues.
The improvement of our subscription margin from 64% to between 6900, 70% I.
An improvement of overall gross margin from 55% to between 60 and 61%.
And efficiency gains in sales and marketing from 26% of revenues to between 22 and 24%.
R&D from 18% of revenues to between 14 and 15%.
DNA from 13% of revenues to between eight and 9%.
Which would result in operating income between 12 and 17%.
We assume a long term tax rate of approximately 25%.
That concludes my remarks, Anton I'll turn the call back to you. Thank you Daniel.
So as discussed earlier, we were very happy with our performance in cloud sales in the and seeing deals at record levels.
I was pleased to see the conversion of customers to the cloud continue in line with our plans and we're also attracting increasing numbers of new customers to the Q I'd cloud and this affirms our competitive strengths.
Our adaptive ERP and low code Nokone enterprise platform will help keep that competitive momentum going.
And indeed, the enterprise platform was a key decision factor in our largest cloud going of the year impact will provide more color on that shortly.
We closed 35, new cloud deals in the fourth quarter and 99, new cloud deals for the year.
As we've discussed on prior calls we do expect that 50 50 deal mix between conversions and new customers to extend into the foreseeable future.
Improvements in our cloud margins are in line with our expectations and orders is out of an ongoing efforts to drive efficiency through automation and process improvements.
The Daniel highlighted we expect these improvements to continue over the medium term driving incremental efficiency gains of 1% to 2% per annum.
Looking at the quota geographically North America continue to perform well.
Maybe I had a really solid quarter, two and we feel that business has really turned the corner with all leadership and sales and marketing changes paying dividends that.
Hi, Good Pacific and Latin America also group cloud business over the prior year.
In our divisions businesses. We also saw cloud momentum continued to build and substantial growth in our subscriptions revenue year over year.
We also welcomed Corey roads, as our new president of precision the acuity global trade and transportation execution business.
During comes to Q I'd with over 25 years and enterprise software in transportation experience.
Prior to running acuity he led the sales and marketing efforts of each to open before going to open Hilight Amber roads, North American sales and marketing tripling. The revenue then helping them will lead them to a successful IPO in 2014.
With a strong finished the year demand for professional services projects had started to show signs of a pickup just before the outbreak of covered non team, but now as you might imagine with customers and Q I'd implementing working from home policies were already seeing a slowdown in projects and time frames extending beyond the original plans.
Speaking of the company 19 issues. We are pleased to see the design of our services delivery organization with a combination of diverse geographical spread and the ability for 100% about service delivery personnel to work remotely is allowing us to provide uninterrupted service for our cloud customers and two ongoing support for our global customer base.
From the outset, we designed our cloud operations to be resilience given the mission mission critical nature of the systems, we provide to our customers.
In fact, we fully tested the reliability of our operations in the past up to two major incidents.
A fire in our office complex and India close the office for number of months and the mudslides that we had back in Santa Barbara closed our headquarters for a few weeks in both cases services continued uninterrupted we remain prepared for any eventuality.
A few weeks ago, we established a cobot 90 management team that has been coordinating global activities and responses on a daily basis with our short term priority focus on two areas the health and wellbeing of our employees that families in the communities in which we operate and continuity and business operations, ensuring we provide ongoing support to our customers.
And helping them keep their business operations going.
At the same time, we continue to aggressively pursue all aspects of our business in sales and marketing, we're driving opportunities in developing our pipeline in line with our strategic goals on the solution side of the business. The next version of our adaptive ERP is being released this month with exciting developments across the product suite.
We're also taking the opportunity to divide divert some resources from our services organization to accelerate development in automating aspects of our implementation methodology. This will help a shortened project timelines and reduce customer effort.
At this point, we've not seen material effects on our current opportunities, but we do expect some negative impact to services revenues bookings and license sales in the short term.
However, with 75% of our business based on recurring revenue. We feel this provides a good platform of stability going forward.
That said, our overall cloud funnel is still strong sounds 20% higher than at the same time last year.
I'll now hand over to path to detail on our cloud bookings right. Thanks, Sam time.
This is an exciting quarter, an exciting year for cloud Q4, and all of slide 20 represented extremely strong bookings for acuity cloud and Q4, we had 35, new cloud customers, representing 18, Netnearu and 17 conversions. This compares with 23.
The quarter Q4 before.
All of that Slide 20, we had 99, new cloud customers, representing 50, net new and 49 conversions compared to 67, the previous year. That's amazing how we keep that kind of 50 50, but this quarter and this year well at times, we have one warrant.
No that conversion.
The cloud. So this was a record quarter and a record year for you.
Well, both in bookings as well as and number of customers.
All regions showed booking growth quarter over quarter and year over year with North America, leading in revenue and Europe, selling exceptional growth all verticals contributed the quarter with industry, leading the way and life science had an exceptional growth here.
You may be adaptive ERP built on our enterprise platform as being adopted by nearly every net new an upgrade today, we have 75 customers access with the adaptive ERP.
Is there an implementation stages.
Actually live.
Q I'd adaptive ERP provides a great in Santa to upgrade and moved to the cloud.
Because cloud when this year was a from headquartered industrial Global company, where two I'd adaptive ERP was the driver and selecting QHC cloud over S&P.
The company wanted to add industry for Plano capabilities, but with having difficulties due to their highly customized on premise systems and use that mainly of many third party products.
They also recognize that their business.
Team of experts were managing mundane tasks rather than driving their business.
Hey de identified 20 major existing customization that could be easily built as an extension into 80 enterprise platform. The company brought 43 people to our headquarters and on only one day converted all 20 customization said the platform as extensions.
Ill ask as true believers.
This call deal as replacing on premise implementations to a day as well as S&P and exact.
I also want to Manson, our life science vertical with caddick spectacular year with 140% increase in bookings year over year and 21, new cloud customers.
As you might know most of our life science companies startup start with US is very small companies or even zero revenue company and I'm delighted to say that 41% of this year's cloud revenue from life science lots from adding more users and more modules to support their growth.
A great example of this of gene therapy company that first purchase Q I'd cloud and 2017 for 100 K as they grow and they increased purchases every year since 2017, and an appetite 20 purchased 1.3 million of new users and modules.
To support a greenfield manufacturing side really amazing success for both our customer of course situated back to you and John Thank you Pat.
Looking forward, we feel we're in great shape to drive towards the long term goals of Donegal outlined.
Disruption in change of the new normal for global manufacturers and our next generation adaptive solutions ERP and the enterprise platform exactly what businesses need to support a real time on rapid response to those changes.
We believe were exceptionally well positioned against all major global competitors, and we'll continue to grow market share as more and more new customers are attracted to the acuity cloud and the trend of conversion continues.
Of course, the covet 19 pandemic has materially increased risk and uncertainty and will undoubtedly have an effect on our short term results.
However, our long range plan and the underlying fundamentals on which has been built remain sound the timeframe of which we achieved will extend as a result of the current situation.
In summary, Prudence is all watch would over the coming months as I said earlier were immediately focused on the priorities of health and wellbeing of all in addition to supporting our customers through this difficult time.
We have short term cost control measures in place to see through the next few months, but which may be increased if the current situation becomes protracted.
We have a strong balance sheet with good cash position, we main aggressively focused on driving our cloud business and we know once the situation passes we have substantial market opportunity in front of us.
Operator, we're ready to take questions from analysts.
Alright, Thank you ladies and gentlemen, if you wish to ask your question. Please press. One then zero on your telephone Keypad. You me withdraw your question at any time by repeating the one zero command. If you are using a speakerphone. Please pick up the handset before pressing the numbers once again, if you'd like to ask a question. Please press. One then zero at this time one moment please.
And our first question comes from Bob on Surrey from William Blair. Please go ahead Sir.
Hey, guys can you hear me okay, yes.
Great.
So.
I really appreciate the color in the clarity on net dollar retention rate of the matched right I think thats really helpful.
And obviously nice job there on the quarter and the cloud wins.
Yes, just first started at a high level.
As you think about us coming out none of us know when or how deep discos.
When you talk to your customers and talk about the conversations.
This is probably a leading question given the cloud wins, but I'd love to understand.
You know you had cases, where customer said, we're going to go to cloud and they went on premise we've had multiple license when there's other cloud, but given the situation now what people working remotely and the idea of coming into the office to ERP supply chain financials seems ridiculous I'd love to understand a little long term as you talk about just on the customers.
If the cloud much more palatable coming out of this maybe the deals don't happen right now.
We deal with the current situation, we think about 612 months out are they starting to get they understand the cloud as a better deployment solution for them or is that still early lumpiness and how they're thinking about the strategic nature of the cloud vis-a-vis on Prem.
Given what's happening today, and how you know your position in sort of providing a true cloud solution for whereas like guys. Like I don't know how is that play out in terms of like a long term potential opportunity accelerate that business.
Yes, I'll take that bovine.
Great question and.
To exactly your point.
We do see this is going to have an impact in the short term because.
Decision cycles are going to extended and people are obviously first alter immediately but it does absolutely underline the message I think in two ways from the so one is that.
Having your ERP in the cloud.
Gives us some protection so is as a customer you don't need people in an ITC center on office stronger.
Look after it.
Then as I said in the script, we deliberately designed our cloud operations and support model in a way that we've got centers of excellence.
Geographically dispersed around the world so that.
Gives us some protection although of course Colby my team how is an increasingly more countries. But then you you couple that geographic.
The disbursements with.
Our ability to have 100% of while people accessing those systems remotely to provide the control I think there's a second level of resilience that which is really powerful and yes with increasingly in conversations where.
Even before this this was becoming important to customers and more and more on recognized I think this will.
Drive that message home, even more significantly.
Yes, yes. It makes sense. It's just it's good to hear that customers actually thinking that Alan a little more tactical as you guys think about the pipeline today, obviously, it's done well, but you guys very complex product heavy lifting how accustomed to dealing with the interim right now which is that's still the fall out of Covanta Corona.
This is your ability to demo and then more broadly implement give us some color how thats playing out in conversation with customers what that might mean for delays could obviously you haven't given guidance you've given us some subscription color sort of help us think through what you're actually hearing on the ground for customers both in Asia, but also global.
Sure what we saw the immediate impacts in Asia to start within particularly China.
But now.
The timing for us it things changed on a global basis pretty quickly at the beginning of last week.
With more and more travel restrictions coming in place that within the U.S., Italy to already gone into Lockdown us on.
And we've seen in the last sort of five or six working days.
More and more customers responding likewise, so instituting working from home policies.
Some of them have let's say postpone some of the work that doing on projects many of them are.
Making do and we do have.
We've reached out to our customers were around active projects, making sure that they know we hear for them. We can support them remotely. So we're doing as much work as we can remotely we using.
Virtual conferencing facilities and video facilities to keep some of that going but of course, it is having an effect and that will slow projects down it will extend the some of the.
Deadlines.
It's okay to do some of the work remotely it's pretty hard to go live on a remote basis. For example, undue we'll try and you need to.
So I'd say on the services side of the business is seeing the immediate effect of this.
On the sale side, we're driving all sales cycles remotely so using video conferencing to do demos and things like that we're still driving ourselves hot so far the immediate opportunities about in the pipeline seem to be progressing, but we know that could change of already very rapidly.
The situation deteriorates or even just continues in the car cycle and so that's making it very difficult for us to forecast on that side of the of the business.
Thank you and now to line of Brad Reback from Stifel. Please go ahead Sir.
Great. Thanks, very much and Todd I think you guys are in somewhat of a unique position given your international exposure you have three offices I think in China.
Can you walk us through what's transpired there over the last three months.
How customer interaction has played through on where it stands today. Thanks.
Yes, absolutely.
I mean, the government were pretty much dictating.
What steps being taken.
To a certain extent I guess the.
The holiday around Chinese new year businesses were slowing down already.
But it also meant that some people have already travel to locations are they couldn't get back fall.
To the home locations.
We have cost like everyone else instituted a stay at home and don't travel policy.
We didn't follow the guidelines each province had its own recommendations in terms of when offices reopened our major office in Shanghai I'm not mistaken reopened mid February.
And we managed to get about a third of our workforce back in that.
Of course that are extraordinary situations that to.
Air Conditioners weren't running windows were being opened.
And people are maintaining the.
Recommended six feet social distance, so working conditions remained pretty challenging.
That said, we remain in regular contact with our customers of course, they were experiencing the same issues.
Our services projects that pretty much dried up.
Now, we're getting closer back to I wouldn't call it normality, but.
More normal working practices, all coming online on a daily and weekly basis.
And so we expect them.
Notwithstanding the risk of reemergence, if other cases breakout, but we think there ahead of of the rest of the world in terms of being ready to get back to normal business.
But it's still going to be slow for a while and.
It's still a difficult situation.
Hi, Thanks, so not trying to put words in your mouth, but.
From your sense, thus far it probably looks like a four to eight week restart aster, we began to get in all clear out there.
Yes, we'd hope that it will be something like that I mean, where we're in touch with our staff virtually every day.
The management team over there are very keen obviously to get back to normal business.
And we're already to do that so yes, we remain hopeful of that kind of timeframe seems likely.
Great. Thank you very much.
I would say that the timing DAVA, Matt I was actually quite accommodating as all of our developers.
So to speak all moved to their home environment.
They they allowed us to.
Again outside of the Chinese firewall may assist eskandarian.
They were also.
To work with the situation.
Alright, Thank you and now its line of Zach Cummins from B. Riley FBR. Please go ahead.
Hi, good afternoon, Thanks for taking my question.
I know during the script you talked about your approach to the spending in the near term, especially given the challenging environment.
Can you do a little bit more of a deep dive into potential changes if the operating environment remains challenging for for I guess the foreseeable future.
Yes, I think we remain.
The underlying fundamentals of the business given that we've got 75% recurring revenue.
So that puts us in a good position strong balance sheet good cash position.
Thats all helpful.
Our short term measures.
We would trial as of Sept Prudence is the way we're going.
We were restricting discretionary spend things like external spend on consulting and training and all those kinds of things.
We have an amount of variable compensation that gives us some buffer in that process to.
Of course, and travel is restricted from a health perspective, that's also going to have.
Impact on.
Cost containment in the short term.
We're also diverting some internal resources, where the off projects are on delayed projects to help accelerate some of the competitive advantage work that we're doing around those services methodology.
If things become protracted.
We have a number of different options that we can look at around flexible working scenarios.
And further restrictions on discretionary spend.
We're looking at open positions and delaying those as much as mixed practical sense.
Unless it's an absolutely essential position.
Postponing those hirings.
We will do more of that.
So there's a lot of creative thought going into this and of course, we did have the experience of navigating pretty successfully through.
Global financial crisis, and we've got some good experiences that for how we manage costs in.
Protracted.
Then or scenario, where things are really tight.
Got it that's helpful. And then just final question around the professional services work. It seems like you've definitely add some projects that have been delayed at this point I mean is there any potential that you could see some of these projects come back into the fold as soon as things get more towards a little bit call a normalized environment year, maybe in the.
Back after the year or how should we be thinking about the.
National services business, yes, absolutely Weve to this point, we've not had any projects to my knowledge that have been canceled outright. So some of slowed some postponed with activity stall.
But everybody is expecting those to pick back up and get back to normal.
I think the timing of that that's probably conservative to say the second half of the year, we'd expect to see activity picking up.
In some areas, we could see that go faster.
We know some geographies of.
Seem to have managed to containment phase of this better than others.
So you know activity may pick up faster than the other places.
Cost. This is all happening quickly as you know so we keep it on a daily basis.
But I'd say, certainly we expect business to be approaching back to normal in the second half of the.
Thank you and now to line of it Kevin Lu from Cailloux Company. Please go ahead.
Hi, good afternoon.
First question, just around kind of the subscription and maintenance guidance for the first quarter here, obviously kind of a nice uptick on the fast line a little bit of the drop off in maintenance is that mostly reflective of the conversion activity you saw in Q4, and then when general type question.
If you are kind of delayed in terms of going live on some of these projects on how does that impact your ability to recognize subscription revenues going through these next few quarters.
Yes sure Kevin.
So first of all regarding.
The the subscription and maintenance lines.
The uptick in subscription is mainly related to the strong activity around bookings that we talked about earlier in the call.
And the lower maintenance revenue is a reflection.
Both.
A the significant amount of customers that have converted from on premises to the cloud.
As well as we normally get.
Some attrition.
On the on that maintenance line and a lot of the contracts actually happened.
Okay renewals in Q4, and as a result of those.
As a result of that if you're going to see any drop in maintenance revenue will typically happen between Q4 and and Q1.
The relating relating to.
The revenue Rick recognition.
We wouldn't necessarily expect delays in.
In in those projects to cause a revenue recognition issue.
And as revenue starts to get to recognize typically around the time of when when the customer gains connectivity to their to their system and they started this are using which.
A lot of cases actually happens early on in the implementation because already utilizing a number a number of those systems.
What what we will have obviously an impact on.
Is relating to.
The timing in terms of Wendy would start.
Adding additional users or addition modules and so forth. So the add on business will will certainly be impacted from from a timing standpoint.
Understood. That's helpful. And then I appreciate you guys putting out the longer term targets here when I look at your subscription gross margin targets. Obviously, you came out of Q4 very strong and if you guys are able to improve that by about 100 at 200 basis points.
It seems like you should be in that range fairly early on in the plan. So could you speak a little bit to kind of the timing of some additional investments that might need to go into the cost lines are there or whether or not theres. Just a fair amount of conservatism built and then you can actually do much better than what you're targeting.
Yes, so with regards to margins.
Yes, Q4 was.
Very good.
Margin.
Number one its own.
However, we when we look at margins, we really tend to look at look at these on a.
Dave.
12 month basis, so forth for the year, we did achieve about a 1% improvement over prior year and as you pointed out it we've been talking about that 1% to 2% per year improvement.
So we believe we should we should continue to.
Be able to to achieve that want to 2% improvement per year.
With regard to how fast can we get to our targets I mean, obviously, we were going to do everything we can too.
To make that as.
Yes as quickly as as possible.
But.
I wouldn't I wouldn't.
I'm not expecting at this moment in the rate of improvement to have significant acceleration to what we've done over the past.
Got it and then just final question as you kind of look across the 26 different sub verticals you're in today a lot of them from the surface seem like they should bounce back fairly quickly when things get back to normal.
Curious as you guys kind of do you.
Whether there any particular areas that you think are going to be challenged and wouldn't be able to recover.
Once we get that's behind us.
No I don't think so Luckily, we don't have a lot of business in the.
So in travel hospitality industry, although some of our customers would supply to that.
But I think for the main if you look at our big segments of also.
That is.
It was a general slowdown in auto anyway, but we saw some bright spots in there in terms of electric vehicle manufacturers.
And new organizations coming in around software in connected vehicles and so on so we'd expect that to pick back up.
We may have some customers in industrial and so on and others that are affected by short term supply chain disruption.
But again I don't think we see that any of all segments that we serve or in.
Long term trouble so to speak and we see this more of a blip how long and extended it is of course depends on how quickly.
Countries can get to grips with a consignment.
But yes, we're not we're not worried about one specific or more verticals at the moment in terms of along so.
Alright, Thank you and our final question today comes from ish FOC fruit from Sidoti and company. Please go ahead.
Hi, Good afternoon, guys a couple of questions from me.
Based on.
So on the commentary you guys laid out it seems pretty obvious that there's going to be tapering off off.
Services revenue.
At least in the first half do you have a sense for like woods geographies, we'll get like particularly see lesser professional services implementations and so forth.
In the first half.
I think if you ask that question a month ago would have said obviously China.
I think with with how governments and now companies are reacting to the current situation.
Many companies last week instituted working from home policies and travel bans many more of doing that on a daily basis. So we really seeing that spread fairly evenly across all of the territories that we serve.
Okay, and Danny or maybe a little bit more on the long term model that was obviously very helpful.
In terms of.
Long term, so still shouldnt gross margin numbers.
[music].
You are you still said on the call does that you still expect 1% to 2%.
Gross margin expansion do you still feel the same way for fiscal 2000, or do you think that might be a little.
Haywire, considering the current situation thats going on.
Yes, so it's actually actual beef or fiscal 21.
Yes, sorry, yes, sure, but yes.
I think we are we continue to to target that improvement for this year I think we have entered the year with a with a strong footing in terms of the number of deals that we close throughout throughout the year. So I think from from data from that perspective.
I think were wearing and reasonably good shape.
And obviously any further investments that go into our data centers on operations et cetera, We'll we'll need to time those carefully.
As the year to year progress is to ensure that we can.
We can maintain that that's sort of improvement.
Alright, Thank you guys.
Thank you.
Okay. Thank you everybody. Thanks for your questions and for listening in and we look forward to announcing our first quarter results in the near future.
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