Q1 2020 Earnings Call
Good day, ladies and gentlemen, and what kind of the progress software Corporation Q1, 2020 Investor Relations call at this time.
Right well again. Please go ahead Sir.
Becky.
Good afternoon, everyone. Thanks for joining us for progress Softwares fiscal first quarter 2020 earnings call.
Today, you'll get scooped up President and Chief Executive Officer, and Anthony Folger, Our Chief Financial Officer.
Before we get started I'd like to remind you that during this fall, we will discuss our outlook for future financial and operating performance.
Strategies product plan cost initiatives impacted the cold Bud light gene crisis on our business and other information that might be considered forward looking such forward looking information represents progress outdoors, Oh, what can darden's only now built today and is subject to risks and uncertainties. Please review our safe Harbor statement Bragar.
Yes information, which is available in today's earnings release as long as in the Investor Relations section of our website a progress that's all.
Hardware software assumes no obligation to update the forward looking statements included in this call whether as a result, but new developments or otherwise.
Additionally, on this call the revenue operating margin diluted earnings per share that adjusted free cash flow knowledge, we refer to non-GAAP basis, you can find a reconciliation of these non-GAAP financial measures because the most directly comparable GAAP numbers in our earnings release issued today.
Today, we published our financial press release on our website. This document contains the full details of our financial results for the fiscal first quarter 2020, and I recommend you referred to it for specific details.
These conference calls will be recorded in its entirety I will be available by a replay on our website in the Investor Relations section.
I'll now turn it over to go gosh.
Thank you Brian.
Hi, everyone and thank you for attending our fourth quarter earnings call.
Let me start off by saying a few words about the impact of the cold like being put on a virus.
Global spread of this virus has created a health crisis.
The softer the likes of William for people and what's more the situation continues to evolve.
And just off the this public health crisis, our priorities are clear.
Number one.
We have responsibility to people our employees healthy and safe.
But.
We must continue to provide the products and services.
Most importantly, you didn't reliable.
Last one lumpy, we must do apart in preventing the federal virus.
Where we live and work.
The macro economic impact to the wireless has been widely discussed what is still largely unknown.
For progress, we did not see any specific impacts on our business in Q1.
And the feedback from be sounds cost more important almost patient.
Leaves us cautiously optimistic that we are well positioned for where whether this potentially back in Q2 and beyond.
However, given the current level of global Unfortunately.
In short fiber to expect that were completely immune.
And this is reflected in our updated 2020 expectations for revenue.
Yes, and free cash flow.
Anthony will provide more details on these revised expectations, which also include a significant negative FX impact due to the lease and strengthening of the U.S. dollar.
That said I remain bullish on a long term strategies and prospects for delivering meaningful shareholder value.
Turning to walk you wanted to adults.
If you feel into sophomore specialties, we delivered a strong first quarter.
Year over year revenue growth of 27%.
And your over your booking earnings per share off more than 50%.
Oh I had a fight in talking about plan and above the high end of the guidance ranges.
Right.
These results were driven by strength in all business across the board in virtually all product lines.
Highlights included a six figure a new customer wins pockets switch move its product.
That's what is our largest sitefinity lobby ever which was 60 the subscription booked with a large university.
Our Q1 results reflect not only the successful days post acquisition.
All four efforts to standardize on coffee and improve operational execution across our business.
When you deal with its continued to drive improvements in execution, he's talking blackjack sales channels.
Both of you will follow the for some time no wonderful keeps them. So about 35 plus year history has been a channel partner relationships.
Including diocese that but yeah applications on top of Openedge.
The Oems that embedded DCR into their products and now the resellers and distributors that sell all groups which products.
You mean team and augment that strength, you something launched Barbara accelerate.
Program to provide channel partners with the tools they need to accelerate the growth and customer success.
This brand it broke them centralized has been expense all successful channel partner initiatives.
One offering.
I can cleaning and enablement.
A dedicated account manager.
Joint marketing planning and support.
And incentive programs.
We're already seeing.
Tangible benefits from these initiatives.
For example, you have improved exposed to sales execution by leveraging our common sales philosophies program and resources.
This is part of the reason why that you switch products have continued to perform but does not want is no business case.
And by providing a better experience for all of our channel partners, we make it easier for them to maximize the value of their relationships with progress.
This helps keep some competitive and black spectra retention and continued stability in our recurring revenue stream.
Along with continued product investments.
Programs like this that keep our businesses healthy.
Openedge that means maintaining our maintenance renewal rate, that's well over 90% and ensuring that our 1700, plus I see partners continue to win new customers and drill down south revenues.
What do you feel like me to meaning the undisputed leader in the Premiumbeat access market and the choice of nine of the top end Biya analytics vendors for their data connectivity with best in class security scalability and support.
And for that schools products that means continuing to help our 2 million plus developers bids that are more engaging web and mobile applications in last time.
Overall, our goal is to build and he's going to be stronger business.
And our success in Q1 reflect those ongoing effort.
Now I'd like to provide more color on the impact to our business overnight being virus.
Like many other companies we have taken aggressive steps in response to the incredible disruption caused by the spend data.
Somebody else.
Our management team has been meeting daily, let's ask the rapidly changing situation decide on of course of action and the like the most property information why employees and customers.
Substantially all of our workforce has been working for home for weeks now as we have leveraged or distribute it infrastructure and systems.
We've also eliminated all travel and at least imports on events in meetings with bushel gatherings, where possible using modern communication methods to maintain business continuity.
We are pleased with how our business has responded to this disruption and the flexibility and dedication demonstrated by our employees.
Our global teams already adept at what's your collaboration across our geography and assumption that most people like a high level to support that our customers and partners not accustomed.
I'll talk organization continues to work diligently on features and enhancements across all product portfolio and.
And I product Roadmaps and lease them are on schedule.
As I've said many times our business is resilient and we do not have significant exposure to the industry verticals are likely to be hardest hit by this crisis.
Furthermore, a high percentage of recurring revenue.
The end the mission critical nature of our core software offerings and the applications that the power.
My optimism that you will be able to deliver solid results. Despite the uncertainty.
We continue to monitor the macro economic environment and customer and partner ecosystem.
The situation unfolds and remain confident in the long term opportunity ahead of us.
You can love the long term opportunity that's small time.
Discussion of that.
As you know our strategic focus moving forward used to complement our stable businesses with accretive M&A in the infrastructure software space with a goal of doubling the size all business in five years.
Well our target is to complete one or two acquisitions for a year, we remain disciplined and all approach.
I'll get businesses that are not only be complementary slot business and themself product audience and growth profile.
But also meet all financial criteria, which include.
One high levels of recording revenue.
Operating margins after synergies consistent with our margin structure.
And most importantly, John greater return on investment that is above our weighted average cost of capital.
Hi, My name to space represents a huge market opportunity and one that Bob this is uniquely suited to address.
As one data point venture capital funds have invested more than $50 billion in over 10000 infrastructure software companies over the last Becky.
Of course, many of these never become viable businesses.
Those that would mean often too small to scale, but many have stable sticky customer bases and high levels of recording revenue, making them perfect candidate for our strategy.
Well, if I find breath perspective, we've been reviewing approximately 50 deals per quarter and Q1 was no exception.
Many of these companies I into 40 to 80 million dollar revenue range the ideal size for us.
But in many cases too small for other strategic or P. buyers of course the person.
The available cool off target is large enough to support our acquisition strategy for many years, making this the viable path for delivering long talked about.
The opportunity exists so let's not talk about how we are well positioned to take advantage of it.
When do you look at our revenue more than 70% of recurring in nature and as we've discussed previously our retention rates that consistently well above 90%.
Coupled with a efficient operating model this plastics and a very doable predictable topline.
Best in class operating margins tend to buy software and very efficient free cash flow conversion.
Net leverage off 0.6 X.
And one in $25 million available within our current credit facility, we have the financial capacity execute on our strategy.
Well also better position from an operational perspective.
Real expertise with recurring revenue model.
Customer retention husky, the long term success.
And we can leverage our own operational and back office infrastructure to achieve meaningful cost synergies.
Our success in sourcing executing and integrating its which is a testament to our ability to execute this strategy.
And before the supplementing our capabilities in this area by adding resources for both identifying and integrating.
M&A opportunities.
Not surprisingly macro economic conditions that impacting M&A globally, and while they may create a headwind for the timing equaled also create tailwinds.
For valuations.
And our strong liquidity and debt capacity positions us well in the coming months.
As always we remain disciplined in our approach.
Well in closing I'd business is healthy and we had a very strong Q1 sustaining the momentum we achieved during 2019.
We will continue to monitor the external environment and remain very confident that up businesses durable and diverse enough to provide a solid performance you wouldn't into speedier off market and so it can be.
But I don't see changes that Anthony will discuss other direct result of that uncertainty and do not reflect any leaving confidence in the health of our core business.
Lastly, we are well positioned both financially and operationally execute on our targeted M&A strategy driving real real shareholder value.
Do you get acquisitions in the infrastructure software.
As you know Anthony Folger joined Us as CFO in January and I'd like to turn the Pollo worked at him now to review, our Q1 performance and outlook for Q2 and full year off 2020.
Anthony.
Thank you yes.
Thanks, Brian.
Good afternoon, everyone and thanks for joining us.
I'd like to start by saying, but I'm thrilled to be joining the progress team at such an important on for the company.
Progress has embarked on an exciting evolution shifting focus to accretive M&A in order to drive growth and scale.
And I'm confident in this team's ability to successfully execute and capture the market opportunity that youngest described earlier.
I look forward you speak even progress investor community personal in coming quarters.
And I'm certain you'll share my level of excitement about the opportunity themselves.
Turning now to our first quarter results.
Total revenue was 113.8 million.
Well above the high end of the guidance ranges, we provided back in January.
This overperformance was driven by higher than anticipated revenue.
From our DC I knew that insights into new products.
We continue to be pleased with the performance against which the Q1 revenues from argued switch products slightly ahead of our expectations.
We also saw stability in our Openedge partner channel with another solid quarter of south related zones from our I asked fees, who have deployed their applications in the cloud.
In addition, maintenance renewal rates for both the I asked the partners and direct customers continue to be strong.
Coming in at levels and 90% again this quarter.
On a year over year basis, total revenue increased 27% grid and by the acquisition of that switch and the timing of BTI contract renewals with certain OEM partners.
Year over year in past, an exchange rates on our first quarter revenue.
Negative $700000 generally was about expectations.
I'd like to take a moment now to discuss how to Tony do you see I contract renewals certain OEM partners impacts our topline.
As we mentioned on previous calls and you'll see six so six generally requires immediate revenue recognition of our multi year term license agreements certain OEM partners.
In bed RBC I product into their solutions.
As a result, our revenues can fluctuate materially depending on when these contracts.
This time was a benefit for us in 2019 and again in the first quarter of 2020.
For the full year 2020 Hello.
We expect that you see on revenue will decrease when compared to 2000 and.
Written by fewer scheduled renewals during 2020.
This obviously makes year over year comparisons for you see on more challenging.
The reason why we believe annual contract value remains the most effective way to evaluate or do you see I goodness.
We continue to expect HCV, <unk> 32 million 32 million or 20 Twond.
Consistent with our actual performance in 2000 and Mike.
Turning now to expenses, our total comps in operating expenses for the quarter.
65.8 million up 11% compared to the prior year quarter.
Year over year increase is driven by the acquisition that would switch.
Partially offset by lower it stands in Washington loved business, where we continue to operate more efficiently.
Operating income was $41.
Up 17.71.
For 59%.
Q1 2019.
And our operating margin was 42% an increase of 800 basis points on year over year basis.
On the bottom line earnings per share 76 cents for the quarter represent growth of 52% year over year.
And it's five cents above the home about guidance range.
This over performance on the bottom line compared to guidance, that's driven by our topline performance, coupled with lower salary and benefit costs, resulting from slower than anticipated higher.
Moving on now to a few balance sheet and cash flow metrics.
We ended the quarter cash cash equivalents and short term investments of 177 million.
And that 295 million.
Yeah, so for the quarter was 49 days.
An improvement of seven days, both sequentially and when compared to Q1 of last year.
Deferred revenue was 181 woman.
This quarter.
The non when compared to Q1 2000 them.
Due primarily to the addition of its which deferred revenue balances.
Adjusted free cash flow was 32 month quarter.
Almost $9 million worth 37%.
From 24 million, we achieved in Q1 of last year.
This growth in free cash flow, that's driven by the acquisition that would switch.
Our lower DSL.
And the previously mentioned improvements to operating leverage in our business.
During the first quarter, we repurchased 425000 shares progress stock.
Total cost of $20 million.
And that the ended the quarter, we had $230 million remaining under our current share repurchase authorization.
I would now like to turn to our outlook for Q2 and the full year 2020.
First let me state that thus far we're not experiencing emerald disruption across our sales channels due to the coated men team crisis.
However.
Recognize the reality of a much more challenging economic environment in the coming weeks and months.
And felt it necessary.
To incorporate some of these potential challenges into our outlook despite the uncertainty.
When we assess our business and how it could be impacted by the slowdown in activity that's occurring globally.
It's important to highlight some of the characteristics that have made progress and business. So durable.
Specifically.
Our products power mission critical applications.
Across a variety of industries and the cost effort and time.
Required to replace our solutions would be prohibitive in most cases.
Over 70% of our revenues are occurring.
And our retention rates, a consistently done well over 90%.
Yeah, and all of our technical and professional services and be delivered remotely without disruption.
That's not to say ARQ, <unk>, two and global economic slowdown.
And in developing our current outlook.
We assumed that a meaningful slowdown in the demand environment will negatively impact our ability to acquire new customers.
And expand existing customer installations.
And the timing of certain maintenance contract renewals and customer collections.
Despite potential negative impacts we have maintained our prior outlook for operating margin.
Are you getting to the operating efficiencies realized in the first quarter.
And the changes in how we are conducting business during the cold at 19 crisis, which you have you actually previously mentioned.
It's also important to note that we transact in multiple currencies.
So in addition to the slowdown in economic activity, resulting from the covenants you prices.
We also expect our business to be negatively impacted by the recent significant moves in exchange rates.
With that.
For the second quarter 2020.
We expect.
Revenue between 95 and 101 more thing.
This contemplates a 3 million dollar reduction for the public banking crisis.
A 2.5 million dollar reduction for the anticipated negative impact from foreign exchange.
Widened quite typical quarterly guidance range to account for greater uncertainty.
Earnings per share of between 60 and 64 cents.
Which includes an anticipated negative impact from foreign exchange approximately two cents.
For the full year 2020, we expect revenue between 428 and 438 million.
This contemplates a 10 to 13 million dollar reduction for the cold at Nike crisis.
7 million dollar reduction for the anticipated negative impact from foreign exchange.
In a widening of our guidance range to account for greater uncertainty.
As I mentioned, we also expect operating margin to be approximately 39%.
Consistent with prior guidance.
Adjusted free cash flow between 125 and 135 million.
The reduction in our outlook being written by the cold at 19 prices and recent movements in exchange rates.
Earnings per share of between $2.73 and $2.80, which includes anticipated negative impacts of foreign exchange of approximately six cents.
Our annual EPS estimate contemplates a tax rate of 21%.
Proximately 45 million shares outstanding and the impact of 60 million of share repurchases targeting.
By the end of 2020.
To summarize we're very pleased with our Q1 results and the positive momentum in our business during the quarter.
However, we recognize the reality of the cobot banking crisis.
Its potential impact on economic activity and we've adjusted our outlook Accordingly.
In closing, we believe our high level of recurring revenue.
With consistent and strong retention rates positions us well to weather the economic challenges brought on by the called it banking crisis.
In addition, the strength of our balance sheet and consistency of our cash flows give us confidence to continue to execute against our strategy of scaling our business through accretive M&A.
With that I'd like to open the call for QNX.
And I'd ask you keep your remarks to your primary question and one follow up.
Thank you, ladies and gentlemen, if he would like ask a question on the phone to me do so by pressing star one on your telephone keypad using a speaker phone. Please make sure. Your main focus has turned out to about your signal to reach our equipment.
Again, Please press star one ask a question, we'll pause for a moment hello, everyone and opportunity to signal for questions.
Well take our first question from Steve Cohen with Wedbush. Please go ahead.
Hi, gentlemen, thanks for taking my question a welcome Anthony educate dot one.
Hey, that's a nice to a chat one do you.
Then a follow up for yoga.
So.
And then also housekeeping, but 60 million share repurchases does that include the Q1.
And then I want to ask you Anthony in terms of your guidance.
Here on told at 19 on that impact.
How do you guys, it's pretty uncertain. So so you know clearly difficult to to make adjustments and no certainty what they're going to do how did you go about.
Adjusting the timing of deals as well as you know kind of the seasonality in the year, how does how does that get impacted in your view and kind of what assumptions did you make to realize that the medallions.
Sure.
Thanks, Susan and good to a good chunk from my own this ball to answer your first question the share repurchase of $6 million.
Clues the repurchase activity from Q1, so all in that would be 60 million to media.
And then on the guidance question, Yeah, you're right I mean, it's a really uncertain environment right now.
You know we went through all the leading indicators that we had in the business and we're really not see much impact and so we basically when products by product and looked at the different revenue streams in terms of where.
The likely impact would show up.
I'm a meaningful slowdown in activity and we looked at new customer acquisition, we looked at expansion we looked at maintenance renewal, we took each of them down, but I would say that the priority order and the magnitude of one point.
You don't because of the size of the maintenance phase you know this probably maintenance number one and then extension and customer acquisition.
And it was going products by product.
Transaction types, we have to consider and you have to look out you know each of our products quarterly.
And just the existing forecasts that we had.
Now you know, there's there's more art than science Unfortunately to high work.
The outlook together right now just due to ongoing uncertainty but.
One thing that's for sure that the economic activity slowing down and so it's a global issue you know we expect our business to be impacted I think this is our best even into that right now.
Got it okay, well, great I'll leave that question, there and then move on to your gas.
You got any commentary on how does how does the current environment.
Impact your ability to getting deals done whether it availability of deals whether it's the their willingness to sell to you all those valuations.
And our ability to execute on the transaction how do those factors.
<unk> role as you're thinking about six just getting back on the right people got M&A on track plant.
[noise]. So so Steve. Thank thank you for the for the question.
So from a progress operational perspective, we're actually in a you know in good shape right. You know, we we do most of our marketing activity is is electronic and and and is the virtual.
Most all far conversations are virtual most of our new field, a new license sales in the business.
And with products like Sitefinity and its six products, which as you ought to where our lower then prices and therefore, a significant amounts of those happen in it you know a school a lot of online engagement Clark our ability on our site to execute transactions Ah I don't believe is being.
How important what do we do believe it's happening and what's the expected to happen is is that customers basically not being able to transact because business is not impacted Todd bad decision, making is delayed there that will it be to a you know collect.
And you know payoffs get to deferred those kind of things like so so so speed reading from our perspective, you know, we really see no direct impact from our internal.
Internal execution perspective, it really is the demand side and on the demand side again as I said it was more about delays with people. If they may decide to do not do something close to one three months six month I'm one of the challenge of Stephens themselves.
This this uncertainty also is the level of timing and and we're all hoping that this would be short in terms of the disruption but at the same time. We also know that it can be quite long. So so that is also a child and you're trying to figure out what but on an execution side, we are being comfortable.
With the fact that we can do the deals we can execute weaken weekend connect with our customers who can you know.
You know, we can basically make that happen.
And your guess I used the term deals public you loops and by the way that that's very helpful color on your execution I'm also wondering about your ability to to conduct M&A in this environment and the availability of targets to sell themselves to Oh, I see I see [laughter], Oh, sorry, Steve.
It's understood so.
That was good information Guy I'll, just pick whatever I do that.
Okay. Thank you know it's on the M&A side, you know again, you know, we don't really see challenges for us to be able to do deals you know from from again, our perspective, I mean execution side. You know we have a is strong team we have a the financial wherewithal and their ability to to execute those deal.
From from financial perspective, you know we have a.
Oh, both a is an untapped revolver and as well as an expansion facilities, all 100 million dollar untapped revolver evolve our class 825 million dollar.
Expansion or not cutting that itself plus you have you know you know we have a strong balance sheet to begin but you know a it.
Today, So I'm still financial perspective, we don't see real challenges it will make a some oh the due diligence work might might be a little more difficult since since you know, we can't travel and and then they can travel as much but but you know I think in today's DNA that a lot of because thats shed electronically anyway and really.
How many bluff spots to decide perspective, you know the valuations today are are different than they were four weeks at all [laughter]. It's kinda name nothing you know about and by the way. The idea you only doing I got it. So I don't you know I think however, no matter, where they end up I do believe that there's opportunity for fall.
Valuations to be less than what they love before and that creates opportunities as well I also think seeing that they'll be companies out there who you know otherwise, we're getting funded well or talk they could survive a bit longer than they will basically look a bit Sundays he gallons isn't that business and maybe there you know.
They were thinking they could go up 9% and do well, but in fill that they're going to come in flat this year or approximately lacking.
It'll make them again, a lot more likely to be a open to conversations with us. So I see that you know as there's really not an opportunity on the deal making high.
Got it great well thats either got stuck sensitive.
You're welcome thank Steve.
Well take our next question for Mark Schappel with benchmark.
Hi, Good evening. Thank you for taking my question, you're going to starting with your given the uncertainty in the marketplace share why not suspender gardens as a few or the other software vendors and Doug.
Hey, Mark but to speak with you as well and then she has a question. So you know we wanted to make sure that we provided it's been level of visibility we have today right. I mean, I you know I've been told me they pop spending.
Oh, I've always taken I thought that approach right and then you know that folks and so we want to share some level of knowledge. We have we know the significant FX impact already.
You know because of the way the dollar has moved against both the Euro and Oh Wow and at the same time you know we see that you know that early signs that deck, you know that some of the new business, but get delayed or or extended.
Beyond the time frames that we're talking about.
So so that's on that side on the other side, we have a very strong recurring revenue business and we have really strong customer retention and and so.
You can you think of it back away right. We felt that it was important to highlight the fact that you know we feel confident that that the range of impact even though there is uncertainty even though that is.
I know it's related to this that the range. If you like father limited a and again you know.
You know from me.
Backed off of this crisis perspective in terms of it impacting our our revenues.
Second back for the year that became denim $13 million, which is whatever right through and People's time to go far off our topline expectation. So so bad that back to losses, they actually want to foster instead, you know we haven't itself that is that is quite stable and and because of all if you simply be rotten what's still.
Able to you know reiterate that he will make 39% operating margin right, which is 100 basis points greater than last year, and 400 basis points greater than two years ago. So I think all those things worked hard stuff the rationale to share information with.
We had of looks like yourselves and all shareholders as do you know what can we see you know business.
Great. Thank you and then there's no question here could you just give us an idea of how your Oh, you see a professional services business holding up and how the other company or just plans to manage through those are awesome well last searches.
Yeah, Mark so it's actually interesting even before the one of Iris impacted the the way people do business [noise].
Vast majority of progress professional services was being delivered at a monkey.
We have as Robin limited set of people that used to go through on threat anyway, how for since this 100% effect as being delivered to them. Okay. We have seen no disruption in the project and as far as we are seeing we're not seeing delays and ongoing projects either so at least from you know I know that some other companies have seen.
Or different things in that business, but from our perspective and from our professional services business. We are not seeing a a project a impact at least today.
Thank you and then finally here on the M&A front with respect to the 50 or so companies that you see each quarter or what percentage of those would you say ours was marginally profitable or might have some cash issues.
Well I think its babies like I am I.
I think probably you know I would have to sort of go back and look but so so I believe that probably in the 20% to 30%, maybe even a bit more maybe even up to half, but but we do we see across the board I mean, we actually see companies that are extremely profitable [laughter] you know.
That being roughly wells to companies that are actually quite significantly burning cash if it if it's a fascinating more about that mark and I don't know whether this is changing economic environment will change a set of where.
You know how that shakes out, but whether companies were focused or something but we see across the board and I think I think a significant number of them that are actually you know really break even or negative.
Great guys here that's helpful. That's all for me.
Hey, Joe you're welcome Mark stay safe.
Well take our next question from Sanjay Soderstrom with Sidoti and company.
Hello, I'm now how're you.
[noise], Yeah news well thank you.
Yes.
[noise] [noise].
[noise] <unk>, sorry, I, I mean, I'm, having a very hard time hearing your question.
I I know talk about M&A and I know it was about some companies got seeing but I really am sorry could you. Please repeat.
[laughter] [noise].
[noise] [noise] [laughter].
Yes.
[noise] Oh, Okay, sorry, yeah, Okay, I thought it I think you let me make sure that I heard your question I think you've asked whether several companies that we walked away from because they were too expensive that now there.
Okay sounds like have come down and we could potentially participate in it.
ER and they they become more attractive now so the answer that question.
No I lost all along right and be philosophies that all companies, let me walk away from I do believe that the timing are still too early to see whether anything meaningful change in valuation. So I I don't think that this is something that you know into last TV, because somebody say Oh yamal valuation I thought last public company evaluation I felt.
No.
The company valuations as you can imagine I spoke to the sellers have to come to realize that candidates they need to be set data set expectations. We are expecting back you know anecdotally, we are seeing back but like I wouldn't we say that that our opportunities that we walk away from that now we can suddenly we engage all now now.
[laughter].
Yeah.
Hi.
Sure.
[noise] [noise] so.
Yeah, So I'm not regarding hiring in Q1, we had an aggressive plans, Ohio and and you know it has been difficult, Ohio, you know you for a big before this and so as you know when compared to get location says you know such as Boston and India and so on.
So so we were not able to get still are higher in top hiring targets. We are continuing to pursue higher when needed, but obviously, we're also looking at things they carefully as to as to where those real needs are so we are being prudent, but we must really changing or in any meaningful way.
How we operate like if it is but up cost savings from some things like no travel and then there's cost saving from less events and those kind of things, but but overall, we are continuing to run our business. We are delivering products on time, let's supporting our customers just as well as we were doing before.
Around the globe 24 by seven we are.
Focusing on custom customers income for professional services engagements, we are communicating with them from a sales and marketing perspective as much as we were doing before so I actually you know that's a works hasn't changed we focus on running the company well and we will continue to do so.
[noise], we'll take our next question from Matthew Galinko with National Securities.
[noise] Oh, hey, thanks for taking my questions are good afternoon.
Hmm.
I'm doing well hopefully I'll tell you.
I'm doing well. Thank you good good. So you know we're seeing some positives comments from companies that are able to amid a that or you know that have products that can enable secure remote work you know given this environment and so I'm curious if there's anything particularly if switches.
Portfolios that are maybe seeing a little bit more sell through or interest.
That might be a counter balance a little bit two and a headwind that you expect to see in this environment.
Well, Matt asked me as we've looked at each product as Anthony mentioned right, we analyze each product and we looked at and said you know are there some products that might get a little bit if a benefit dearly, you know I'd infrastructure availability and performance management becomes even more critical in it.
Matt and today's day in age and then in this environment. Then it was even a month ago. So you know obviously the walks up old product addresses that need and and.
But but overall you know and secure data files for a is potentially another area that can can benefit, but but but really the couple of challenges that I want to point out right that both products also have a you know a along with the devtools products like a new business back.
Mission and and the new business acquisition as we had we expect to see you know a significant impact from our you know from from what we are trying to do I guided they'd be expecting they had to slow down and an extension of of time frames.
We also have you know math to be honest way [laughter] $7 million off FX headwind on the topline I mean I didn't understand it in either.
It is dramatically different than it was four weeks ago, right and so and so when you look at it from that perspective.
You know, we actually have a a rather muted impact on our revenue number.
Ah, that's where we are contemplating ambac envisioning a at this point given given the uncertainty in the market.
Got it alright, Thank you and then maybe.
Follow up a bit with respect to your capital allocation I know you talked about your target.
Buyback allocation for physical twomey.
But just in light of the market volatility we've seen in some of the decline in your share price cuts you know fairly steep.
Do you think about you know just walk us back through how do you think about you know, leaving a little bit more heavily into the buyback first is on the day and sort of how you feel that opportunistically compared to you know opportunistic M&A.
Yes, so so a great question Mac you know.
You know obviously, you know where are you know strong and cash flow ER and as you know be the opportunity to <unk> you know allocate our capital in the most shareholder a friendly way is is what we focus on all the time, so and you know plus five.
Of course is I'd be begun right, we pay approximately 25% off off.
And with free cash flow to shareholders in the form of dividends, which as you know in September we increased by four cents and so ER and the board reviews that every quarter and for the dividend is of course number one b B second thing from my perspective really is now should we apply or that the capital towards buying.
Backs versus M&A and reality is even though you know share purchase. This provides a solid nordisk return accretive M&A that makes our disciplined criteria for like it much back overtime and so we looked at that from the perspective off what is best for our shareholders. You know what is the best place to.
A fly capital and so up and you know we of course or have the flexibility to increase always change.
Or you know suspended up buybacks, the based on whether or not we're able to do M&A and what we're doing felt from an M&A perspective. So.
Our board abuse that every quarter.
We make sure that back we.
Look at the tradeoff between possible M&A, a and buybacks and and again if you can find that like M&A deals. We believe that that is even at the current valuations that that brought this or that you know if we didn't does offer a much better over time for shareholders.
But all right. Thank you.
Youre welcome Matt.
Ladies and gentlemen, this will conclude todays question and answer session. At this time I try to conference back to Prime Flanagan for additional remarks.
Great. Thank you all for joining the call today.
As a reminder, we plan on everything financial results for our fiscal second quarter of 2020 on Thursday June 20 to 2020 after the financial markets close and holding the conference call. The same day at five PM Eastern time.
I'll now turn the call over to go cash for his closing remarks.
Hey, Thanks again, Brian.
You know given the time of uncertainty we as a business will always do what we've always done before we'd just to continue to provide great products and high levels of support longstanding customer and partner base.
The company is financially really strong unhealthy and why like 2020 yourself, maybe impacted by this crisis, we will need to be focused on the long term opportunity we have to create value through accretive M&A.
I want to tank all a few for joining us today and I look forward to speaking with you again getting them an export last conference call.
Stay safe everyone.
Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.
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