Q1 2020 Earnings Call
The idea.
First quarter 2020, <unk> earnings conference call.
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Good afternoon, and welcome to ideas Q1, 2020 earnings call I'm right SRAM, Chief operating officer at idea and joining me today is idea interim Chief financial Officer via truck and idea Chairman and Chief Executive Officer, Ted Murphy, Thanks for being with US This afternoon.
Earlier today, the company issued a press release with details pertaining to our first quarter performance for 2020.
If you had to review those details on our Investor information can be found on our Investor Relations website at <unk> Dot com forward slash investors.
Before we begin please take note of the Safe Harbor paragraph that appears at the end of the press release recovery in the Companys financial results and be advised that during the course in todays earnings call. Our management team will discuss ideas business outlook and make forward looking statements.
These statements are predictions based our teams expectations as of today that are subject to inherent risks and uncertainties and should not be unduly were relied upon.
Actual events or results or trends to differ materially from our forecast due to a number of factors, including those mentioned are most recently filed periodic reports with the FCC.
The company and our management team assumes no obligations to update any forward looking statements made in today's call.
In addition, our up into the <unk> for a certain non-GAAP financial measures, specifically gross billings and adjusted EBITDA.
A reconciliation of these measures to the most directly comparable GAAP measure is present in our earnings release with additional discussion of both of these measures available in our most recent form 10-K, and 10-Q available under SEC filings in the Investor section of idea Dot com.
With the appropriate disclosures are the way I'm pleased to introduce my colleague and ideas interim Chief Financial Officer, Leann Hitchcock Leann.
Thank you, Brian and good afternoon, everyone on March 11, 2020, the World Health organization declared the outbreak of the novel Corona virus also known as Cobot 19, as a global pandemic and recommend a containment and mitigation measures worldwide.
Friday March 13th we directed all of our stuff to work from home effective the next business day on Monday March 16th and they're continuing to do so for the foreseeable future.
All of our business operations and the ability to support our customers are fully functional while our employees are working from remote locations.
However, we have begun to see impacts on our operations due to changes in advertising decisions timing of spending priorities from our customers, which may result in a negative impact to our bookings and revenue in current and future quarters.
Well the destruction is currently expected to be temporary there's uncertainty around the duration and total economic impact.
Total revenue in our first quarter 2020 was flat year over year at 4.8 million with 4.1 million coming from our managed service business and 583000 coming from our South business.
We saw a 258000 or 7% increase in our Q1 2020 managed service revenue as a result of increased sales orders, which we called bookings in the second half of 2019.
This increase in bookings led to increased revenues in Q1 2020 as managed service bookings typically convert to future revenue over the next three to 12 month.
Revenue from self services decreased by 333000 in Q1 2020 as compared to Q1 2019, primarily as a result of lower spend levels from our south marketers and as a result of competitive pricing efforts, which reduced our margins on those spends and on our licensing fees.
Our soft market are also curtailed spending in March 2020, as a result of cobot 19.
For Q1 2020, our gross billings on these revenues decreased to 6.1 million compared to 7.8 million in Q1 2019.
This 22% declining gross billings was primarily due to lower marketplace span from the former cap influence and he byline platform customers as they transition to idea acts in Q1, 2020 and due to the churn during renewal of some of those customers throughout 2019.
Our cost of revenue exclusive of amortization held at 2.1 million in Q1 2020 compared to Q1 2019.
As a percentage of revenue our cost of revenues exclusive of amortization increased from 44% in Q1, 2019% to 45% in Q1 2020.
Our total cost and expenses were 10.9 million for Q1, 2020, compared with 6.5 million for Q1 2018.
In March 2020, the reduction in our projected revenue as a result of Copel 19, and the continuation of a market capitalization lower carrying value with uncertainty chances for recovery given the volatility of the capital markets surrounding cobot 19 caused a triggering event, which required us to perform an interim assessment of goodwill, which.
Resulted from our prior acquisition.
Based on this assessment, we recorded a 4.3 million impairment of goodwill in the three months ended March 31st 2020.
This increase in cost and expenses was reduced by loss of 191000 associated with our first quarter 2019th settlement on a portion of our crude acquisition costs, but did not recur in 2020.
Our net loss for Q1, 2020 was 6.2 million or 18 cents per share compared to a net loss of 1.8 million or 15 cents per share for Q1 2018.
Adjusted EBITDA in the first quarter 2020 was negative 1.2 million compared to negative 874000 in the first quarter 2019.
The increase in adjusted EBITDA loss was primarily due to $250000 less and capitalized expenses related to our internal software buildup idea X 3.0, and $73000, increasing advertising and marketing efforts in the first quarter 2020 compared to the same period in 2019.
On March 31st 2020, we had cash on hand of nearly $5.6 million inclusive of approximately 1.2 million in funds. We received from our line of credit using our qualified receivables as collateral.
In late April we received a lot of 1.9 million under the payroll protection program to help us retain our employees through the downturn in the market as a result of cobot 19.
As we disclosed in our quarterly report filed earlier today based on what we know today regarding our current plans and cost reduction we expect that with our cash on hand, coupled with bonds when the S.P.A. long and our line of credit on receivables, we will have sufficient capital to cover our operating needs for the next 12 months.
With that I'll turn the call back over to Ted.
Thank you again.
It's hard to believe but is now been two months since idea first directed our employees to stay at home and work remote we as a result of the Corona virus pandemic.
What is happening in that period of time.
Has been challenging emotional and humbling, but.
But most of all it has been inspiring to me is the leader of this organization filled with such wonderful and dedicated people.
At the end of September of last year I.
Hi delivered a speech to my fellow ideas.
About our need to move faster and adapt to the ever changing environment and industry that we work in.
In Q4 of last year, we began implementing those changes.
You mean shifts in marketing and product development.
Reduce the size of our leadership team.
And consolidated departments to allow them to operate more efficiently.
Heading into this year, our leadership team knew that we would continue to make adjustments as needed.
A little did we know what we would be facing in just a few short months.
In the weeks, leading up to the stay at home orders being issued across the country due to cobot 19.
Our team had really hit its stride on both sides of the business.
We were seeing strong bookings in managed services.
And had had record new customer starts Friday ex energy suite in Q1.
Prior to March 13th we were expecting strong year over year bookings and revenue growth for the managed services business.
And had visibility to an even higher number of new SaaS customers then the record we sat in Q1.
As we gain more insight into the near term implications of Kobe.
We made dramatic changes.
Some of the measures we took were.
Reduction of employee salaries by 19% to 21% at all levels of the organization.
Reduction of employee benefits.
New employee hiring freeze and furloughs, a part time employees.
Production or elimination of contractors and vendors.
A freeze on all travel and entertainment expenses.
Non renewal of our lease for our corporate headquarters in Florida.
Well as Nonrenewal of leases for flexible work space in California in Canada.
Oh part-time staff hours were reduced to zero.
I see as number of ft employees have been reduced by 21%.
We ended Q3 2019.
We are the leanest that we've been in over five years.
These are meaningful reductions in operating expenses designed to get us through a period of uncertainty.
We will continue to evaluate all of these measures.
In the longer term implications associated with these cost reductions as they relate to our performance.
As I mentioned earlier, we had been in MBOED cost optimization since last year.
But the bulk of these cost savings will likely not be seen until Q2.
For example, tapped influence was shut down in Q1.
But the hosting cost savings will not be seen until Q2.
Following the Cascade of stayed home orders across the country.
We began to see a rapid drop in customer commitments.
Our trajectory began to stall.
From what was a meaningful high for the year.
For the six weeks following March 13th.
We saw incremental declines in new business sales.
With the 14 day average run rate trend wise for managed services bookings bottoming out and beginning to curb up at the end of March.
Our run rate started to see an uptick in early April.
But we were still far below our previous averages and there was reason for concern.
What is followed since that time has been simply remarkable.
We began to see a dramatic resurgence of bookings on a much more consistent basis.
We have seen six figure incremental spends from customers who are less impacted by covert 19.
And we have also been awarded new campaigns from both new and existing customers, including one from a government entity, we had never worked with before.
I'm pleased to share that as of today.
The 14 day average bookings trend line from managed services and now above our 14 day Prieto bit 19 average run rate measured from January 1st to March 15th.
And we have been gaining momentum.
As of today, we believed that there is a line of sight.
At least match Q2, 2019 managed services bookings.
The timing of those bookings and revenue recognition from previously booked managed campaigns.
Is yet to be determined.
However in all cases.
Operating expenses will be lower in the second quarter due to our cost cutting efforts.
Our SaaS team is still digging out from the overall decline SAS licensing revenue related to tap endpoints customer churn.
However, our monthly recurring revenue from idea acts in a new all time high in March 2020.
And we also saw record new customer starts per unit he suite in Q1.
SaaS sales attributable to new customers post March 13th.
It's been slower to rebound in managed services.
Primarily due to a high concentration of retail customers.
We're in the pipeline prior to stayed home orders going into effect.
The majority of these customers will remain on hold until such time that stayed home orders are generally lifted.
We had been diligently rebuilding the SaaS pipeline.
Customers less impacted by Kobin 19.
In our 14 day average trend line for daily demos at an all time record high last week.
You will notice in our press release for this quarter.
We have provided the graph for our managed services bookings year to date.
We don't normally provide this level of detail bookings data, but the street.
And won't be doing so on the future.
But in this case, our leadership team decided it was important for our investors to understand the parabolic downturn.
And subsequent recovery.
Demonstrating the resilience of this company.
And our ability to adapt to the harshest of environments.
He'd and without a home to call our own.
I have never been prouder of this organization.
This truly was a case of all hands on the virtual deck.
Our team rallied and came together despite being geographically further apart.
What this team has done together only makes me more bullish about our future.
No doubt, we will emerge with even more tenacity grit and capability on the other side of this.
This is not a victory lap by any means.
We still have much work to do in order to continue this pace.
Recover from the setback delivered by Corona virus.
However.
In many ways I believe this company is in a much better place than we were two months ago.
We have significantly reduced our overhead through a variety of efforts.
Our output per engineers increased.
Our balance rates from Q way had decreased.
Which translates into better software delivered faster.
Our existing customer relationships have grown stronger.
And new customers are looking to us for thought leadership and guidance in a type of uncertainty.
In fact last month, we saw our raw inbound leads double in quantity from this time last year.
Despite a significant decrease in marketing spend.
If you had been following the consumer research that idea has published throughout the walk down period.
You will know that there is a great see of change occurring in consumer behavior.
In our last report.
We noted that 45% of consumers now say that they're shopping habits have permanently changed.
That they will be spending more money on line.
Well, none of us whatever hope for local businesses to be negatively impacted.
Must also realize that this macro change will likely benefit idea over time.
As its core customers tend to market their goods and services across state lines and in some cases over country borders.
As customer shopping habits change.
Advertisers marketing approach is changing with them.
Advertisers are pulling back from traditional media.
At an accelerating rate.
With the IB reporting a 44% decline in traditional media spend in their last report.
On Tuesday, the Wall Street Journal noted that General Motors, Pepsico and General Mills were all looking to cut back on television spend.
Our category and idea in particular have an opportunity to gain share of advertising spend as larger brands seek to reinvent their go to market strategy.
I believe that ideas products and services are well aligned for the current and future consumer environment.
And I'm cautiously optimistic that change in behavior will drive increased opportunity and prospects for profitable growth.
To our team members investors and partners.
I wish you safety and health.
Thank you all for your support.
I Hope you can join me next Monday.
For the bring BRAF streaming of that.
We built some pretty incredible technology there.
Got to see it for yourself.
I would now like to open the call for key went away.
Thank you.
I'll begin the question answer session.
If you ask a question you May proceed Star then one on your Touchtone phone.
If you're using a speakerphone please pick up your handset before pressing the key.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Clark Murphy with Craig Hallum. Please go ahead.
Hey, guys. Thanks, Thanks for taking my questions.
[music].
[laughter].
First just wanted to go over.
The goodwill impairment charge that you guys took.
Does this relate it to the top influence acquisition or if you could give any additional color there that helpful.
Sure I can jump on that.
Yes, it's not really related to any one acquisition, we do have goodwill from all three of the acquisitions that we've acquired over the years.
And we report everything as one operating unit. So it really is on the company has a whole not just any specific reporting unit.
Okay. That's helpful.
And then looking at yes, the financial share it looks like you guys had virtually no capex in the quarter.
I see no if you had any.
Insight into what Capex will look like for the rest of of a year.
Yes, I can think again as well.
With with the implementation of idea at three point O. last year, we are having a lot less in capex that was where the majority of our spend what's coming was developing that software and increasing we also completed more at the end of last year and although but in the first quarter of this year.
A complete overhaul of a equipment for ourselves. So we are anticipating.
Not a lot of spend for the remainder of figure.
Okay.
One more for me if you you guys.
We'll take it if just give any color into the.
Brad graph offering how that continues to perform and what you're seeing in terms of trends to a customer acquisition and then.
Got it looks in cross selling opportunities on the idea.
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Yes, Oh I'll speak to that.
Brain graph is really kind of in the same voters as idea acts in terms of the pipeline that we had generated four for that platform with a lot of those customers being in.
Retail segments that were dependent on physical locations. So we have had to rebuild a lot of that that pipeline one of those customers are.
On hold until their businesses.
Oh really open up an immaterial way I will say that.
In our previous sales cycles prior to covert 19. It was the fastest sales cycle that we had seen.
And we believe that as the stage start to open up and restrictions start to loosen a bit that we will.
Hopefully some of those customers back that were in the pipeline prior.
I've also been building a strong pipeline with new clients, who art as impacted as a as the previous clients due to cover 90.
Okay. Good thanks, guys.
Thank you.
Okay, and if you'd like to ask a question. Please press Star then one.
Our next question.
Come from Michael buying stock, but some are more please go ahead.
I'd actually to your question one I didn't know if you can give any color on repurchase program that had been in effect. If there if that was still ongoing or if that was.
Completed or put on hold or if you could give any color on that and the second is just a little bit of thoughts and perspective from your side with respect to the 1.9 million PPP I know, there's a lot of pushed back against publicly traded companies applying for the program many had giving back the PPP.
Like you guys are under the 2 million Safe Harbor ruling that seems to have just come out in the last few days. So I just wanted some perspective on that.
Yeah, Great I'm I'm happy to take those questions on the stock buyback there has not been any sort of stock buyback.
Obviously with.
And then of course that 19 and is taking a P.P. loan.
Yes that is not something that we would be doing it at this time.
In terms of the PPP loan itself.
We believe that that we're in a good position there.
You know, we feel comfortable and taking those funds.
And ER feel even better now that some of the new guidance has has come out because there's been a lot of questions and changing perspectives overt overtime.
Understood. Thank you.
This concludes our question and answer session.
I would like to turn the conference back over to Ryan Schram for any closing remarks.
Hi, thank everyone for joining us today.
All of our Investor information is available on our Investor Relations website, <unk> Dot com forward Flash investors, please stay safe and stay healthy. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.