Q1 2021 Earnings Call
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Well it was up.
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Non-GAAP.
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Now I'll turn call over <unk> yeah.
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Thank you Carl good afternoon, and thank you for joining todays call discontinuity between 21.
As a result.
Joining me on the told all Pat Walker, our President and Daniel lender Chief Financial Officer.
[music] good momentum, which we finished last year, two or three acceleration while subscription growth. This quarter you didn't guide.
Currency basis.
20% compared to the same period last year.
This growth driven by strong competitive position. These recurring revenues now accounts for 77 cents multiple business.
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Okay dramatically is increasing numbers of coverage all delivered.
Sheltered by Oh, no doubt.
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At the same incredibly proud the way you're ready to respond.
Yeah priorities.
I saw the health and wellbeing more employees.
And their respective families and communities.
Secondly, we wanted to ensure complete continuity. So there's a lot cloud customers and those with implementation projects progress.
I'm pleased to say that we've achieved those goals.
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Well on automation and digital government <unk> also came.
Through this period as we take all operational exemplified by the adoption of upgraded methodology for me the most professional services with the customer.
Basically opportunity and gave experience great feedback.
This call. He was the project will combine the effects of improvement initiatives starting last year.
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That result.
Fine with it.
Increased focus on expense side going through this period of also helped to drive significant improvement in bottom line performance compared to last year's goes.
While the effects of the Kobe might be endemic in the short to medium to everybody else.
<unk> is in good shape and we're.
Well positioned to achieve a long term instituted by the.
I'll now turn it over to Scott.
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Good luck.
The currency basis, both Griffin related revenue made up but.
Subscription margin showed a three because it's going through over the prior year.
Even in challenging environment, our ability to deliver professional services business mostly.
Enabled us to support a couple of project both by between margin.
Like this but most affected by the current environment.
So it did pick up there probably was revenues.
You bet, it's been well actually implemented with the ability adult there was no go bottom line profitability compared with last year.
Currency had a 2 million negative impact total revenue.
That's the right your first quarter and what are they have never been negative impact compared with fourth quarter itself wasn't what.
If we use for forecasting purposes.
During the quarter and other adult.
Created by the overall, they end up but it wasn't material movement in both the changes that will not anticipated not incorporated into football.
Total revenue for the third or fourth quarter one.
4.1 million and compared with same quarter last year declined 2 million as a result currency movement.
And what they enrolled resulting from a good steady decline in professional services.
Maybe they'd like to revenue partially offset gains.
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The currency movements that we experienced mid quarter negatively affected subscription revenue by 500000.
What I will then go about basis.
They do they do but that.
With that we'd be are paid <unk>, 0.5%.
By 35 deals in the quarter.
Well, we will convert an eight of the.
Word.
Yes.
Compared to 15 deal.
Last year.
Maybe revenue.
4 million.
There were the same quarter last year declined 100000, other adult currency movement.
We didn't anticipate it could be deployed by relating they buy from vertical.
And our historical attrition rate, which remains consistent with prior period.
In addition, lower onboard built like that there are no longer offsetting attrition rate.
Professional services revenues totaled 15.7 dollars compared with 84 million provide <unk> first quarter.
We're pleased to be that revenue.
With a privately placed an order by the 400000, they didnt expect from currency movement.
Greetings and they did you book estimation, and then have been coming they feel pathology.
Already designed around the most delivery enable a business remains a good footing.
Services margin was.
The sped up Cooper said, if that's something.
Water and the negative five to seven for the year ago period.
Compared to this time last year.
It was 820% reduction.
Third if they're going to date.
Even video strategy of expanding our network and his group our ability to deliver thirdly the local.
License revenue for the fiscal first quarter people walk there's no. There was born after one year ago.
Given probably makes me most customers not I mean, there before we get back to license they'll get a border and we expect license sales to remain at low levels for the foreseeable future the beautiful the delta.
On the bottom.
Total revenue by vertical for the fiscal Q1, this quarter, what I get kind of industrial 36% automotive 33%.
We were brought up there, but it depends a lot by another 2%.
By geography.
Our revenue with North America up 50% beyond the 30%.
As disclosed in Latin America seven per se.
Our gross margin for the first quarter fiscal third one what they say over the.
Yes.
We believe driven by boosting subscription, especially if the margin.
Sales and marketing expense was 18.6 million.
5% total revenue.
Well the 9 billion, what we've done instead of total revenue for last years fourth quarter.
The decrease mainly related to the new scrabble lower diverse and lower bonus and commission.
R&D expenses, but even though they both periods.
Every couple of any R&D expenses may do custom for this quarter and 18% year.
DNA expense amounted Endo 13, but at a total revenue growth, but what's going on.
There was 9.4 million or both of them so revenue this quarter.
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The increase primarily resulted from higher accounts receivable reserve.
Related to the adoption of a new approaches Daniel I look quite good theaters in Korea, and forecasted economic environment.
Documentation expense totaled 2.4 million booked into one quarter and people who know the last year.
This brings a gap we've got 600000 compared to the GAAP pretax loss of two and a half million last year.
Non-GAAP pretax income we do know.
It's about maybe break even a year ago.
We ended the first quarter, we thought Emily I wouldn't ordinarily applicable comparatively to 137 million of yet but.
Capital from abrasive.
This quarter totaled 10.9 million compared with 14.2 million a year ago.
Our accounts receivable before that we deployed at April 30 versus 40, I know it a bit bye bye.
Our days sales outstanding you've been to combat that Didnt.
They are the fiscal put away April quarter.
By they bought a lot.
As a result appropriately.
From a bit Additionally monastery of accounts receivables.
They do have not experience and you get the impact credit quality or terms.
And our accounts receivable remain healthy.
It's difficult circumstances, and as we deemed appropriate.
They provide accommodating related believed by both all came in from certain customers in order to at this stage navigating through that.
Our total deferred revenue balance at April 30.
Two point email.
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Moving as we go to 1 million negative impact from currency.
Deferred revenue balances by category to 41 dealing with it.
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If you will note.
The format.
Two and a heavily.
But the 2 million and hundred thousand of deferred license and other people.
Our main thing about that adult annually, while subscription, but that they need to devote the annually or quarterly.
Our business outlook incorporates the effects of currency fluctuations experienced during the third fiscal quarter.
Foreign exchange rate for the remainder of the quarter.
Hi, good fits into the guidance provided to the difficult if you want it this quarter, we provided guidance.
From a net revenues for the quarter ahead of Paula.
Subscription revenues of 31 million.
We've been deployed for Perclot enjoy at approximately 30 basis same quarter last year.
And making it very afraid but.
With that I'll turn to go back to you I thought I. Thank you Daniel.
So with the difficulties presented in macro environment by the covered my team have done it we have seen sales cycles extend someone and a little more caution in terms of closing the hospital prospects.
With that said you disposed to see how do you have important demonstrating the sales activity is continuing.
In the quarter, representing about 70 cents last year.
I'll competitive strength continues to attract new customers and we were very pleased to open items security cloud.
I saw an increase in the ratio that you customers conversions in the overall cloud deal mix this quarter.
Continue to expect 50, 50 deal mix extensions and medium and long term.
The continued improvements in our cloud margins are in line with a plan on hours. The result of on ongoing efforts to drive efficiency automation process improvements.
Daniel highlighted we expect these improvements to continue over the medium term driving incremental efficiency gain wants to be down draft.
Looking at the quarter geographically sales activity was at reasonable levels in North America, EMEA Latin America, taking into account. So that is Oliver I tell that could be heavily impacted given the timing was effectively locked down through the first two months of the pool.
You know divisions businesses. We also sold cloud momentum continues to build a steady growth subscription revenue when compared to first quarter that Mike.
We do expect that as we emerged from the current situation a focus on reducing supply chain risk and increasing complexity of in crop will save a favorable effect on securities demand and supply chain funding and all global trading computation execution businesses.
As discussed on a lot around.
Around mid March we were starting to see some slowdown in professional services, but that timeframe.
Original plans.
However, as I mentioned in the opening pleasing to see some customers adopt the remote working methodology that we develop sometime ago. This kept momentum going across many projects and helped drive a healthy improvement.
This is Mike.
That said, we remain cautious about a short term investments, but certainly, especially as we look to the second half of the year.
I also mentioned on the last call you taking advantage of any white space in professional services to accelerate development and use of digital transformation to support the automation many aspects of our implementation methodology and this will help shortened project timeline and reduce customer happened in the near future.
The design of our service delivery organization that manages our cloud operations when its combination of the Gaza geographical spread and the ability for 100% personnel to work and mostly has allowed us to provide uninterrupted service broadcloud customers deliberate ongoing support global customer base.
We've seen no differences.
Quality throughout the entire period.
Cobot 19 response management team, who will make it a consistent and global response and help ensure the health well being of our employees customers they affected families and communities, which we operate.
We've also managed to our expense base with a close side and as a result, we delivered material improvements in bottom line performance over the same period last year.
I'll focus has also allowed us to maintain investments we've made and I'll go the workforce and particularly in areas of sales and marketing, where we are gaining good traction coming into this year.
Our focus will remain on continuing to protect that investment and redevelopment pipeline in line with our strategic goals.
With all the uncertainty and the current partner, we've seen a slightly more cautious approach customers, taking little more time to move forward with styled opportunities.
From a vertical market perspective, it's interesting to see one of those factors and mixed picture with some companies growing wealth and demonstrating a high degree of resilient, while others more impacted.
Our pipeline remains strong however, and indeed is at record levels and has grown over 26% when compared to the same prominent prior quarter.
With that backdrop, and the 70% to 77% while business now based on recurring revenue, we feel we remain in a solid position and reinforce the good pop in the stability I talked about last fall.
With that pipeline growth you feel cautiously optimistic about on medium term self prospects, we know our competitive position remained strong and the need for next generation solution is only reinforced by the current situation.
I'll now hand over the past the details I'll hop.
Hi.
Thank you on all the volatile.
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I'll be on.
Mhm.
Fine lines.
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And again on a mobile.
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Oh My God.
Locally.
Hi.
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So with comments on the government pay somebody else.
In the area.
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Well very Oh, there's nothing like.
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Okay.
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Hello.
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Well.
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For me a hobby.
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We believe these capability.
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Well my competitors and happened value proposition.
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Mhm.
We like to be according as well.
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Although below.
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Absolutely.
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Okay.
Thank you Dan.
So looking forward as stated earlier, we still feel confident about our ability to meet the long term goal Daniel out while you're not by a cool.
Disruption and change or the new normal for global manufacturers and the current situation that highlights the need to be able to respond in near real time to sudden changes in demand.
Why base and supply chain globally.
Indeed on that point I'd like to take a moment highlights. The fact that many of our customers are able to make rapid switches to business operations and mobile in all parts of the world.
More importantly, they were able to why the switch will supplement existing product line in a real time rapid response to the current situation to provide much needed critical supply to the frontline limited in the fight against covering 90.
These examples demonstrate.
We have a customer in the sterling industry in the Netherlands that rapidly adopted.
Hi, there, helping lessen the effects in the short supply there.
We have a customer in Australia, and I did a whole new production line brought in addition, with.
But it's a protective equipment within a matter of weeks into a very similar response from a custom UK.
Who responded to reflect the health and making a vital components in lifesaving face shields needed by the pay back out.
We've also seen many of over one another supplied producing masks and other faisel equipment.
We're very proud of what they've been able to achieve the rapid response to pandemic and close the real time, and how that reacted and adapted to help communities over in such a difficult time.
As we move there can be quite as we know the manufacturers who want to fly will have to be agile in your screen and ready to adapt and real time to change disruption in Turkey.
Our next generation adapt to solutions ERP in the enterprise platform are exactly what businesses need to support that real time rapid response to those changes.
We believe we remain exceptionally well positioned to get a major competitors and we'll continue to grow market share as more and more new customers are attracted to the queuing cloud and the trend of conversion continues.
The pandemic. However, there were increased risk and uncertainty for many of our customers and increased fluidity in their businesses.
This uncertainty is making it difficult to predict the effect on sales and service projects throughout this year.
However, as I said, a few times a long range plan the underlying fundamentals on which has been built right now for the timeframe of which we achieved likely extended the results of the current situation.
In summary, prudent remains I'll walk through it over the coming months, we've done well to this point, we're not relaxing on vigilant, we continue to focus on the priorities and health well being a rule in addition to supporting our customers due to difficult time.
The cost control measures, we put in place proven to be effective and will remain in place to seize through the coming months or the strong balance sheet cash position as we emerge from this crisis, we stand ready to aggressively focused on growing our cloud business.
Operator, we're ready to take questions from analysts.
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Telephone keypad.
If you know speakerphone, please pick up in hand.
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He will join the question.
Two.
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Rob.
First question comes from.
Oh William Blair. Please go ahead.
And guide to the interesting question, but.
We will see as well.
What are the first touch usually a question don't European while numbers, but you obviously had a solution pumps conservation Q1, you've guided to.
Well it on the subscription buying.
You too.
Well this year I know, you're not giving guidance, but is that sort of a trajectory we're expecting to see how you're feeling good.
Yielded a close out.
Don the layering in of the subscription revenue should drive that some people not to just gets unfolds and how you Doug. Thank you bye bye.
How about how the circling plays out in the Western Europe, given no you booked a lot about revenue early.
Again, adjusting new deals lumber.
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Yes data, but.
To answer your question with regards to Oh revenue recognition was relating to deal. So we.
We typically start recognizing revenue fairly quickly.
So the deal so we booked earlier both here the last year.
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But as you drive the digital growth.
On the coffee birth debate so what.
For for Q2, so really the rest of the year is highly dependent on me or the current environment and.
How well it how rapidly like close.
The.
The larger Apollo.
And Bob referred to so clearly we have a few of these therefore I too to continue.
Our growth, but the environment Pwc quite challenging.
When you close the deal.
More difficult.
So as I noted that you know we remain.
Caused the optimistic no over over the medium.
Well go to supplement and new brands on as you look at.
Your business domestically.
Because in Asia Pac largely due to China.
No the vertical by their multiple stand where you see the cloud adoption, but secondly blog age.
Absolutely and health care died while you're bicycle early adopt cloud and small budget I, probably one of these you don't time as well would all be up themselves.
Also had a few months or just more of the potential impact.
Whereas the appetite.
From a vertical perspective and is there any discussion of political thank you.
That's correct.
I'd say we've seen.
Factors that could be a mixed picture your profitability.
No. So take lifecycle for example.
If you're in the business. So the size for elective surgery that there was a southern right now.
Given that it provides PD or Oh, God, rather we are well and that kind of different mixes.
Hi.
The second sight, although you know automotive.
Putting a little bit more than.
The other from a cloud adoption perspective.
We see not across the board. So it continues to be attracted to life Sciences companies we've got.
To make it very easy for those companies again validating their environment a lot of certification around that.
But I could your current situation also highlights the robustness and we believe.
It seems to be ready files.
We've taken care of you not to worry about your staff, we've got right.
So I'd say.
Got it said about the timing of these deals on the continued to grow and it can really closely.
Equally across those different.
Got it.
One of the demonstrably.
Can you talk about partners.
Good partners.
How is that may not be will be taking brett slowed down the road environment.
Pardon me, but given the environment.
Hey, you know, we're seeing a slowdown in other words anybody in area. We started out into training, maybe starting conversations with customers maybe sudden given RFP.
No well just about development partner channel on the net investment right now thank you.
Yes, so quite a few right you've got to the people thought that humans. So we certainly in conversation with a number and they tend to new partners that will be coming on board over the coming up.
Okay. So she can continue on that.
His existing partners, we've been taking the opportunity to make.
Make sure that skilled up here.
Our adaptive VLP and the legacy version of that.
Turning to drive out certification to them now.
No that.
And so yes, it's about the best thing very similar in like we all year.
Okay.
Do you guys kind of falling down.
One uncertainty about second half the year, but there's still plenty of activity going on we are talking about stopped white space to some of those on training certification program.
Great. Thank you guys my question.
That's correct.
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B. Riley.
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Hi, good afternoon, thank for taking my question.
Great I was just curious if there's any particular concern.
[music] in terms of retaining customers and banking environment.
Good payback.
As far as Dave.
In both in anyway, but we see.
Our borders.
No I remain vigilant with what's happening across our customer base with about two hours.
Our approach.
So well be both absolutely.
But maybe we are a critical.
The dairy 50 days.
So generally speaking what do you have seen in this environment.
In prior embracing believe it did come.
No doubt.
The.
The attrition rate really going valley Dot bye.
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Understood. Okay. That's helpful and then in terms of your bye bye.
You see an uptick in the near term.
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The third.
[music] significant Dave I think the conversation.
Happening.
I think people focused on immediate stability.
But we've got more insight to that point.
We've been running a series of Webinars and it is hard to get out in front of customers right now.
We are like five years, so we've been running a whole series of Webinars globally, and we've seen record attendance or both.
And we got a lot of impressive follow up after that so we are expecting to see that comes up to now.
And this situation I think that will help.
The pipeline already gotten pretty well.
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Understood and includes a bit to do that.
I appreciate the deferred revenue outlook, but what can you give a sense of percentage that deferred revenue.
Total revenue or how you're.
Yes, I mean, it shouldn't be all that different from the spiritual though.
The one.
No I didn't guide.
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Our location.
You have to be quite a bit more but those will be about the many customers priorities are more rapidly than normal.
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And your licensing bookings are little bit of party.
Today's although we're not obviously, we don't expect those or Mike.
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And then a question.
This year.
So how should we think about your area.
Focusing on cost savings here a couple of quarters.
Yes, sorry.
Earlier this year.
As you know Hello.
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And you know we've already.
Like that.
We've seen that good pipeline growth indicated that that investment, which started I often say that's coming into this year.
Well focus on expense.
Really making sure that we protect that investment.
So it seems like travel is obviously being held by the fact that.
Probably can travel so that's a began taking other actions in other areas of the business that.
Correct Me standard.
That's allowing us to tap that.
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Understood.
Thanks again for taking my questions.
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Hey, good afternoon.
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Yes, so mvcs.
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We see I see that a good portion of our customers continue.
And actually gotten great feedback.
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A critical stage.
That said, we have seen a few to delight.
And I know the for different reasons.
The reason.
Okay.
We have established.
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Hello.
How to get back into the factory.
I wanted to do the project.
And so.
But at a mixed picture data, but our utilization metallic worldwide.
Got that.
That's good performance in margin.
Without intact.
The liquidity.
Right now and these things can change fairly rapidly. So we are cautious about second half year and.
People are very very close by what's happening.
So although Q1 goes away.
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Given that it should be within days.
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As we thought.
No I think.
This particular quarter, but get a 50 $50 coming up over the medium to long term.
Back to.
You got that balances in the big display.
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You know clearly a significant portion of a bottle going forward or new customers as well so.
I think overall that that 50 50 mix is what we kind of expected deliveries.
Hello.
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Good old Fortunately, we really didn't have to do any sort of a reduction in Florida.
Logo side, we were able to.
The man, it's a lot of these reductions.
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Level activity, both perspective as a result.
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There was mainly driven by those factors.
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We do think maintaining.
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Are they really important very expensive.
We'll go to without workforce is very good hire people and then having them trained and be affected afterwards.
So we believe we're in a very good position.
No obviously, you're a significantly we have options available to us to what we can do but at the moment.
Glances too.
Not making any short term.
That would.
Materially impact.
Bob.
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Subscription what we've got it.
Okay.
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So based on a relative to anything along the lines.
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Yes, so easily foreign exchange.
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500000 dollar that roughly.
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But that really impacted about.
After the quarter.
So we're expecting about.
Doubled.
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With regard to.
The industrial.
Revenue, we're not expecting.
In amount there.
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With customers.
[music] outflows. So you know in certain situations as I mentioned.
Slightly longer payment.
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As you may be delayed some of the.
Voting to multimedia eliminating all they seem to be done you know what are we.
And before so those are mainly the impact from that.
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Hi, Good afternoon, guys couple of questions for me and odd that indeed bundles.
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The customer.
You know you mentioned that you need extending terms you know to someone who customers will Mike.
These.
Issues, but do you expect maybe somewhat.
Yeah, good maybe.
Not be collectible that someone in the future or do you think that is not the issue that you guys.
You know up as I mentioned during during my prepared remarks, there will be you have instituted additional monitoring.
Two out of feasible.
So we are monitoring.
We've got lots of lots of different areas.
We have not seen a deterioration oh.
Credit quality before I'd say, there we have increased our reserve and that would change in accounting methodology.
No as the new standard requires us to look at economic outlook.
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So you know generally speaking you know.
We feel good about the overall health of our receivables.
[music] overall standpoint, as I missed our dsos were out.
No one day, but last year, so finding people.
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No, but obviously with the current environment.
He did a very very close eye on that.
Oh gosh.
Okay, and our switching over to the.
Verticals.
You touched on that life Sciences, and CPG or do they do.
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Regarding new geographies are doing well.
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Yes, maybe ill jump in there so.
You know how to positivity.
Further along the journey.
Any other cost. He will then certainly from our perspective, we're seeing activity starts to pick up there, but I think it's going to be you know the wild while we gather momentum there if you like and start to see.
Sales, increasing there again.
So we are out I know, a prudent travel and kind of what's going on where does it end customer.
Interestingly, we're seeing in other parts of the world now businesses start to ramp up so.
We mark or sort of transaction volumes across.
Some lucky cloud customers.
And certainly you know they they flag that they would reopening plants in North America for example.
A few weeks ago and.
Those transaction volumes discovery wrapping up to now for us to be back to.
Lets say pre coded levels within the next couple of months I would say.
So it's it's a mixed picture right now in terms of weather activity from a back it's not isolated to that controls over.
A lot of it depends on the actual business.
The customer itself is into.
Got it.
Hello.
Happy with verticals.
That said earlier I think we thought.
A mixed picture in many.
So we have you just take life Sciences, we've got some customers that have increased.
Volume growth.
And you know that said, they're doing well in the current circumstances, but we've got others that are serving sectors of life sciences that it might be more depressed right now because you know people I'm going to hospital unless they absolutely have to for example.
So if you if you'd supplying syringes analyst day.
Hello, good elective surgery elective treatment then those businesses itself.
And I'd say, it's similar when you look inside the vertical segments, we see some that are doing well.
Packaged goods for example, something not doing so well.
I would simply true on the industrial side.
One everywhere.
Right, So I would say over the automotive.
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So you're buying so you know that.
Only having effect.
Well thank you so much.
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The conference back.
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Thank you thanks for listening in every way to todays call and we look forward to updating you is off Q2 results.
Got it.
The conference.
Right.
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