Q2 2021 QAD Inc Earnings Call
Good day and welcome to the queue I'd be incorporated financial results for second quarter fiscal year 2021 conference call. All participants will be in listen only mode should you need assistance. Please signal corporate specialists by pressing the star Keith followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note that this event is.
Being recorded I wouldn't I want to turn the conference over to Kara Bellamy. Please go ahead ma'am.
Hello, everyone and welcome to today's call before we begin I'd like to ensure that everybody understands our discussion may contain forward looking statements that are based on certain expectations analyses.
Such forward looking statements are subject to risks and uncertainties that could cause actual results could differ materially from those anticipating.
Rady undertakes no obligation to revise or update before when looking statements to reflect how.
Stanford after the date of this call.
For a complete description of these risks and uncertainties. Please refer to kuwaitis okay.
Your filings with the Securities and Exchange Commission.
Please also note that during this call we will be discussing non-GAAP pretax income, which is a non-GAAP financial measure as defined by FTC regulation G.
Conciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's press release, which is posted on the company's website.
Now I'd like to turn the call over to our CEO and on children.
[music] great. Thank you Karen and good afternoon, everyone and thank you for joining todays call to discuss kuwaitis fiscal 21 second quarter results.
As usual joining me on the call a pan lockup, President and Daniel lender Chief Financial Officer.
Hi, I'm very pleased particularly in the current contacts to see a solid sales performance in our second quarter sales.
Sales team was able to match the performance at the same quarter last year, both in terms of value and number of deals.
Strong competitive position has maintained all momentum and sees all cloud transformation journey continue a pace as we hit guidance for the quota.
20% growth in subscription revenue over the prior year quarter, which when combined with makes sense revenue puts all recurring revenues approaching 80% about total.
[laughter] global pandemic continues to dominate headlines and we and our customers and prospects navigate through these challenging times now pay our priorities remain consistent.
Health and wellbeing truck community at large.
Complete continuity of service real customers detect any investments inoperable workforce or areas of focus and we continue to perform well in each of them.
With the current macro conditions, we have maintained a strong focus on prudent expense management and that's helped sustain a solid bottom line performance.
While the effects of the cobot 19 pandemic sustain the uncertainty over the medium term future al business remains in good shape, and we're still confident in achieving a long term strategic targets.
I'll now turn it over to Daniel could discuss the detail of the financial results.
Thank you I thought.
Our second quarter results were solid.
Description of making as revenue my guidance and we generated pretax profitability.
Subscription margins improved three percentage points from last year.
Professional services margins remain positive from last quarter a 3%.
We continue our strategy or building and utilizing our partner that work.
The increasing contribution from higher margins subscription revenue and the expense expense control actual we've implemented.
I'll try and improvement in our profitability compared with last year and last quarter.
Currency had a 1.4 million negative effect on total revenue compared with last years second quarter and.
In a negligible impact compared with last quarter.
Profitability was negatively impacted by 300000 compared with the prior year no impact compared with the prior sequential quarter.
Total revenue for the fiscal 21 second quarter, what 74.1 million compared with 76.4 million for the same quarter last year.
In addition to the impact from currency movements. The performance decrease of 900000 resulted from anticipated decline in professional services maintenance the license revenue.
Partially offset by gains in subscription revenue.
Subscription revenue grew 22% on a constant currency basis to 31.1 million and.
And accounted for 42% of our business for the fiscal 2001 second quarter.
Eight percentage points from last year second quarter.
Currency movement negatively impacted subscription revenue by 400000.
On a rolling 12 month basis subscription billings grew by 17% with a three year CAGR of 25%.
We signed 22 cloud deals in the quarter split evenly between conversions and new customers versus last year second quarter, well within 24 cloud deals.
Looking at the total annual contract value on the deal.
This quarter was almost identical to last years second quarter.
Maintenance revenue was 26 and a half million.
The 3.1 million declined from last year about half a million, what's the result of currency movement.
With the remaining 2.6 million decline related to cloud conversions, and our historical attrition rate, which remains less than 10%.
Professional services revenue totaled 13, and a half million compared with 17.4 million or for last year second quarter.
Half a million of the decrease was attributable to currency movement.
While the remaining 3.4 million declined it was attributed to attributable to the completion or extension of certain projects.
We also continued our strategy of expanding our apartment at work and further enhancing our ability to deliver services remotely.
Which resulted in services margins up 3% up from negative 4% and the same period last year.
Down slightly from fiscal 2021 first quarter.
License revenue for the fiscal 21 second quarter keep all 3 million up from 1.2 million last quarter due to expiring licenses I had one customer.
We expect license sale to remain at low levels for the foreseeable future and we'll continue to focus our sales efforts around the cloud.
Total revenue by vertical for the fiscal 21 second quarter wasn't hi, Tech and industrial, 36% automotive and 30% consumer products and food and beverage 18% in life Sciences another 16%.
By geography total revenue was North America, 53%, you gave me a 29% Asia Pacific 13, and Latin America, 5%.
Gross margin for the second quarter fiscal 21 was 68%.
5% improvement over the 53% last thier, principally driven by gains in subscription and professional services margin.
Sales and marketing expense was 17.4 million or 23% of total revenue versus 20.2 million or 26% of total revenue for last year second quarter.
The decrease mainly related to reduce traveling savings incurred as a result of the cancellation of our annual explore customer event.
R&D expense was 13.2 million compared with 13.9 million for last year second quarter.
R&D as a percentage of total revenue was 18% for both periods.
The reduction in R&D expense related to a onetime payroll tax credits received in Europe.
DNA expense amounted to 10.3 million or 14% of total revenue for the second quarter fiscal 2001.
Compared to 10.4 million also 14% of total revenue for the second quarter fiscal 20.
Stock compensation expense totaled 4 million for the fiscal 21 second quarter and 3.2 million last year, the increases related mainly to equity awards issued at higher stock prices.
This brings our income from operations to 2.3 million compared to a net loss from operations of 4.2 million last year.
Other expense of 1.8 million related primarily to foreign exchange losses in the quarter, mainly due to the effect on our cash balances from the appreciation of the euro.
Which brought our GAAP pre tax income to 500000, compared with our GAAP pre tax loss of 3.4 million last year.
Non-GAAP pretax income was four and a half million versus breakeven a year ago.
We ended the second quarter with approximately 841 million cash and equivalents compared with 137 million at the end of fiscal 20.
Cash from operations for the first half of 21 totaled 16 million compared with 4.3 million for the same period last year.
Accounts receivable was 42.3 million after like 31 2020 versus 41 they have failure.
At the same time last year.
Day sales outstanding is into Countback method was 49 days for the fiscal 21 July quarter, the same as the year before.
Our short term deferred revenue power at July 31 was 95 million versus 94.4 million a year ago.
Deferred revenue balances by category include 41.1 million of deferred subscription versus 32.8 million or a 25% increase.
51.8 million of deferred maintenance versus 59.6 million 2.1 million up the for professional services versus 1.8 million.
And 47000 up her licenses another versus 200000.
Our maintenance contracts are billed annually, while subscription contracts come to adult either annually or quarterly.
Our business our business outlook assumes current foreign exchange rates for the remainder of the quarter.
Consistent with the Guy has provided for the physical 21 second quarter acuity is providing guidance for subscription and maintenance revenue for the quarter ahead as follows.
Subscription revenue of 32, and a half million and maintenance revenue of 26 million.
Yeah, I'll turn the call back to your I pod.
Thank you Daniel.
So consistent with all first quarter the difficulties presented in the macro environment have seen some sales cycles extend and some prospects still show a little more caution in terms of closing deals.
But with that said, we did have a solid sales quarter.
Both in terms of the number of deals done and the value of those deals being on a par with our second quarter of last year.
We're really happy to report that we closed those 22 cloud deals that Daniel mentioned in the quarter with a good representation of all of our key vertical markets in that cloud sales mix.
[laughter] al competitive strengths continue to attract new customers and we were very pleased to welcome 11 of them to the acuity cloud, which gave ideal count a 50 50 mix in the quarter between new business and conversions.
We continue to make steady improvements you know cloud margins in line with all plans and we expect these improvements to continue over the medium term driving incremental efficiency gains of 1% to 2% per annum.
Looking at the quota geographically north.
North America came in with a really strong performance in our cloud business and EMEA well first of all reasonable results given the macro context.
However in Asia Pacific The picture is a little more mixed the Australian business performed well, but business activity is moving at a slower pace in other parts of that region.
China activity is picking up at a somewhat slower pace than we might have expected and it's hard to decide at this juncture, whether that's a result of covered 19 or trade relations between the U.S. and China or some combination of the too.
With the disruptive effects of both the pandemic and trade negotiations on the global supply chain, we've seen good activity and interests pickup in our global trade and transportation execution, and our demand and supply chain planning divisions. Both the divisions were able to add new customers to that portfolios in the quarter.
On the professional services side of the business. We're on track with the acceleration of our plan to move a larger percentage of work to upon a community.
To that and we were very happy to announce during the quarter the signing of a partnership agreement with the global IP consulting firm Infosys.
These changes together with our new proven ability to deliver services remotely and strong management around resource allocation have allowed us sustained positive margins in the services business as revenues continue to fluctuate.
On a related note we appointed during the quarter, a senior executive to help drive momentum and expanding our partner ecosystem.
With his experience a building global partner networks. He will support the expansion of our sales agent and distributor channels as well as supporting the continued expansion of our professional services ecosystem.
From an expense management perspective, given the current macro context, and the uncertainty around how long the situation will remain we continue to focus heavily on the management and controlled costs.
In doing so we've been able to protect many of the investments we made an all global workforce and sales and marketing capabilities.
With that protracted uncertainty, we do continue to see a more cautious approach with some customers and prospects and moving forward to sales opportunities.
From a vertical market perspective, it's interesting to see in almost all sectors and mixed picture with some companies faring, well and demonstrating a high degree of resilience, while others are more heavily impacted.
With all of that said a pipeline remains strong it continues to grow.
While our weighted pipeline at the end of August was up 27% compared to the same period last year, our unweighted pipeline value increased by 48% remains at record levels.
That does suggest the timing on those deals are extended but we're pleased with that amount of growth and it shows the investments we made in lead generation continue to yield good results.
Given all of that we remain cautiously optimistic about our medium term sales prospects, we know a competitive positioning remains strong and the need for our next generation solution is only reinforced by the current situation.
So I'll now hand, it over Japan for a bit more color on those cloud bookings.
Great. Thank you I'm talking [laughter] in Q2, we had 22 new teams 11, some conversion and 11 from that new customer holding a 50 50 between conversions in that new bookings, we have seen historically.
Hi, good activity perspective, all regions contributed to the corridor.
With North America, performing exceptionally well interestingly, our automotive vertical Levin bookings and represented approximately half of our cloud bookings this quarter.
Example of this is a sizable order we received from an 8 billion dollar global leader energy storage solution.
The power one third of the world vehicles, creating the most advanced battery technology for virtually every type of the call.
The company was spun off from its parent owner approximately one year ago I had an S&P direction.
Thank you I'd cloud purchase this corner represents a change in that direction and include purchases.
The cloud as well as conversion.
Existing.
On premise site to the cloud.
Being an automotive supplier has plenty of constant cost pressure from the OEM as change accelerates in the cost pressures increase big legacy ERP, I'm, making less than last that.
Combined with the accelerating trend towards E reduction and high end demand due to cold that and autonomous vehicles on the horizon. We believe the industry has seen a tipping point based blooded complex rigid legacy ERP system, well simply not be tolerated anymore.
We are waiting because we offer an alternative and adapted ERP system built from the realities of today on the uncertainties Tomorrow. You will find you may be used in 52% as a major ice automotive suppliers.
Boy, 6% of the major TB automotive supplier, resulting in 93 of the top 100 best selling cars in the world being made with park manufactured AMCU I'd.
Our wins in automotive this quarter further consolidate our position as the leading player in this highly dynamic every changing mark.
Thank you back to you and huh.
Hi, Thanks Pam.
Okay. So looking to the future we remain confident about meeting the long term goals published earlier in the year.
The need to deal with continuous disruption and change continues to grab the attention of global manufacturers and this ongoing a protracted situation is set to highlight the need to be able to respond in real time to sudden changes in demand in the supply base and its supply chains globally.
That's what Q I'd adapted to all piano solutions were designed to support a rapid response to change in near real time.
On that note I'm pleased to announce it on September 22nd we're very excited to be hosting a virtual thoughtstream event, we're calling Q I'd tomorrow.
This is in recognition of the challenges global manufacturer is facing being prepared and ready to deal with whatever it is tomorrow throws out.
We'll be talking about our observations on the characteristics exhibited by these enterprises, who are adapter proactively dealing with the uncertain on the emphasizing and how Q I'd and our adaptive European solutions can help customers react to change efficiently and effectively.
Well also be highlighting some of the customer success stories I mentioned in our last call I think change business models in real time to cope with the new reality and also to support that communities in the fight against a pandemic.
The protected situation with this pandemic continues to drive uncertainty and challenges for many of our customers.
This into that makes it difficult for us to predict the effect on our sales and professional services projects throughout the remainder of the year.
However, with our strong pipeline and the global manufacturing PMI now at just over 50, we feel we're in good shape for a strong finish to the.
Our immediate focus now is I'm pulling forward some of those deals forecast for later in the into the current quarter.
In summary, we continue to be vigilant around management costs going in monitoring the trends in our sales cycles.
Our priorities remain consistently focused on the health and wellbeing of all in addition to supporting our customers through this difficult time.
The prudent approach to managing the business has proven to be effective to this point and will remain in place to see is through the coming months, our balance sheet and cash position remains strong and we remain well positioned to get back on track and drive aggressive cloud growth once we emerge from the current situation.
Okay, operator, we're ready to take questions from analysts please.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys withdraw. Your question. Please press Star then to at this time, we'll pause momentarily to assemble roster.
Our first question will come from Kevin Lu with Cailloux and company. Please go ahead.
Hi, good afternoon, guys and congrats on the solid performance in this environment.
First question I mean, obviously on a sequential basis things started to pick up for you guys on the like insight and it sounds like on the cloud bookings side as well I was curious if as you kind of look forward in your pipeline.
How are your sales cycles are progressing well, whether you feel like the worst of kind of this pandemic impact is behind you theres still any sort of lingering concerns just in terms of your customers the ability to close business.
Sure. Thanks, Kevin, Yes, I'd say, yeah, you know good good performance by the sales team. This quarter you don't I'd say our pipeline is very strong, but if you. If you look at that difference between the unweighted infected Oh, sorry, the fact that will weighted pipeline and then the other way to pipeline.
Much bigger growth in the weighted which means that some of those deals or an earlier stages. So you're not talking there about having a strong finish to the and our focus now is pulling some of those deals into a third quarter. So yes, there's definitely still ineffective of the cobot 19 on you know caution on.
Moving forward at a slightly slower pace than in the past.
So we remain bullish about the medium to longer term, but still a note of caution in terms of you know the immediate future and of course, yeah. Nobody knows when this all is gonna be over and so you know that adds to that that notion out of a caution that too.
Got it and certainly there have been significant expense savings that's as far as you look into the back half of the you're are you guys think opportunities.
Either reallocate or redeploy some of those savings in various marketing events or do you feel like.
Can you do go out and as you had kind of the first half of fiscal 21, not keep kind of a tight rein on expenses.
Yeah, Yeah, we were obviously being very prudent, but yes, while we've made savings and you know Daniel alluded to in the commentary Yeah. We obviously didn't run off our global customer event explore this year in my and so instead, we've diverted some of the energy and effort that into this.
Thoughtstream event that we're going to be running on September 22nd obviously would be different and it'll be virtual and much shorter.
We're not going to run the virtual events.
Three days for example, but yes, it's things like that we continue to do a lot of webinars activities and so on so I think from that side.
We all diverting effort in energy.
Necessarily pushing more expenses up higher but you know, making good use of the time that we saved from putting in planning and executing on some of those events.
Understood and just lastly from me on a sequential basis services were down a bit I know that might be just normal seasonality.
Wondering could characterize how much of an impact was seasonality versus other factors and then as you look at the project backlog from here.
How we should expect that to trend.
Yes, there was not significant impact to seasonality on that on that and that Kevin. It actually came in you know it came in slightly lower than what we had originally anticipated about I had as I mentioned earlier, you know where there is a.
You know given given some of the efforts that we've done around.
Utility and utilization of our partners and also being able to.
Deliver services remotely that helps our utilization or ability to use people of.
Different locations and so forth, we still able to.
Generate out you know.
Profit, there, which is what the key goal for us this year.
We do experienced some seasonality in Q3.
Mainly as a result of the August being a heavy vacation month in Europe without a lot of customers in our employees themselves you know go or no.
Lengthy vacations are and I guess this time of the year that they are they're taking vacation maybe staying home.
But that's still a that's that's still an effect.
But going forward, we're really not.
Thinking that the revenue that revenue level or the terrorists decide is going to vary significantly from existing levels. Yes. It go up some quarters are down a bit and others.
Our main focus is really in ensuring that it's it's profitable Andy that were providing our customers with the right level of service.
Great appreciate responses and thanks for taking my question.
Of course, thanks, Thanks again.
Our next question will come from Zach Cummins with B. Riley. Please go ahead.
Hi, This is a exact associate sandy on for Zack Congrats on the quarter. So the.
Question on the transition to cloud I was wondering if you guys have seen an increase interest in making the transition to cloud within your existing base.
Yeah, absolutely Oh, it's yes.
You know what I think the current situation has kind of reinforced that level of interest.
You know I think as I've said on prior call on the protocol.
You know the Pandemics it definitely increased peoples.
Interest and desire to get to the cloud. It's one last thing they have to worry about in terms of managing the business in some situations like this.
That said you know if they want thinking of moving.
Yeah I'll pay originally then it's more a level of interest in thinking about planning for the future as opposed to you know a big rush to transition to the cloud right now.
But again with that said we were pleased with the level of conversions that we had this quarter is a good healthy number and so yeah. We we've always felt good about the value proposition. The current situation just to reinforce that and we do expect to see a you know what increased pipeline and part of the increased pipeline for the future. We think is attributable to to that.
Reinforcement of that value proposition in the current situation.
Got it thanks and.
So another question I had was just how we should think about the mix of conversions and a new cloud customers.
Moving forward.
Sure. So it it you know for US we continue to if you look at it by deal count.
You don't average with we're still expecting for the foreseeable future to see that mix of 50 50.
And so you know the the mix by value is a little bit different when we do the conversions that typically coming in and switching 100% to the cloud straight away when we acquire new customer would typically rolling out the solution. So that comes in in phases, and then catches up a little bit lighter, but yeah by by the okay.
Alan just given the while funnel mix is at the moment and how it's looking yeah. We should we see that that 50 50 split by count continuing.
Okay. Thanks for the color there and my last question I was just wondering what is the.
Spectating for a professional services in the coming quarters.
You guys provided a little color on.
Well actually working to push into the partner ecosystem or anything else. There, that's how we should be thinking about or.
And the any additional color there would be helpful. Thank you.
Yeah, no sure the main color as.
As I mentioned earlier is really around we have.
Very very keen focus on ensuring that that liner business remains profitable on an unknown on an ongoing basis.
And you know our we have quite a number of efforts right now as well.
You know with the ability to provide services remotely to be able to you know get utilization rates higher there.
You know I as as the economy or when the economy starts to recover.
A bit more we do expect.
To see some you know more services projects.
Start to come our way.
We do believe there is still going to be a very significant amount of customers that will want us to lead on those projects, even though we may be using some of the the partners in the ecosystem to provides.
Some of those going forward so.
We would expect I, you know I as the economy growth and the rest of the business drove we would expect <unk> longer term to see professional services.
Grow as well, but not quite keep pace with a with the rest of with the rest of the business, we would expect to see that.
That number I think percentage of the overall overall company revenue to remain where it is or potentially come down overtime.
Great. Thank you.
Great. Thank you. Thanks.
Again, if you have a question. Please press Star then one.
Our last question will come from Avant story with William Blair. Please go ahead.
Hey, guys. Thank you my question can you May hear me okay.
Yes.
Great.
Great. So.
Congrats body and feel that start up maybe on the partner side.
You know I'm I'm actually pleased and some of the shift is happening to partners. So a couple of questions. There sort of where you went to them that that transition the partner any color to that number consultants ramp things like that.
Then and then the second part of that and then I've a couple other question, but the second part that is.
When you look at the partners.
It's always interesting you give them leads so they sort of building practices around it.
They get consultants in the bench in the not you'd like they go find leads and do that with their clients or they project lines would lead to a de instead of say S&P or whatever like where we must trajectory. So first any color on a number comes up and then second well enough flywheel, but it's happened S&P, an oracle JD, a with et cetera, et cetera, but empty the big.
Hey consulting topic. So just some sense of how you think about where we are.
It's early but love to get some color on that and I got a couple more questions.
Sure absolutely, but so just yeah, just where are we on the let's say capacity journey, you know weve been for those partners upscale up that we signed in recent times like Tcs, It's only been continuing to work on certifications and helping them come up to speed with delighted.
Versions of the product and adaptive VLP.
Obviously with emphasis they have some capability, but we're now working with them in terms of rounding that out so I think.
Globally at scale, you know I think it would be fair to say, where you know around double the capacity. We had this time, maybe say 18 months ago, but our goal is to continue to to build that and that's I'm going to talk about that and then leading into your your second question about helping with the the sales efforts.
So a big reason that we brought in on you executive to help us manage upon the growth is someone who is experienced in growing sales channels on a global scale and also systems integration channels.
Has been on its been in since a you know relatively early in the quarter and you know plans are starting to come together now I just wonder if you wanted to share who it is and maybe a little bit about a background.
Well yeah.
We just show is his name is a mohammed <unk> he's from a ex off to so systems was up quite a while and help them build that global partner network system up for one of that they're larger divisions.
And his entire Korea.
As a pretty much been in that space in terms of building out systems integrations and sales agents sell distributor.
Relationships.
So you know the professional services initiative is if there's obviously some way ahead of the sales initiative, but we're looking for him to help us quickly catch that up we feel in a great position given you know that the adapt to be all pay the enterprise platform with it we're going to be extremely attractive to partners both its.
Scale and on a regional basis to and indeed, we're already in some conversations around flushing that out right now and and driving that so as you said early days, but you know we've got the onboard as plans are coming together, we're already in some of those conversations. So we'll keep you updated as we as we go down that journey.
Got it and then but let me talk about the pipeline. The bits. Obviously, you gave us the waited and waited a column the pipeline I guess when I I had a couple of questions there.
One.
When you look at that pipeline and and you try and.
Normalized maybe a question again, that's what normalized for what cold It has lengthened.
With that percentage. He can you give us any sense of assets if I take all the deal that should have called remove them from the pipeline. What does that look like you have <unk> I'm sure you have that sometime I wonder if you can share something that color with us.
The pipe and a lot bigger yielded just like you commented on that but I'm, saying, okay. So we try to normalize what would that look like.
Right.
The fun I I'd I'd say, it's not bigger because deals of lengthen necessarily that might have a very modest effect on that I think we've grown it I'm pretty substantially because you know.
If we go back 18 months, we we put that investment into our business development team and our marketing and our marketing tools.
And I think that has been payoff and paying dividends.
You know I do believe that that's growing at a slower rate than it would.
Had you know coded not come around and you know affected the worldwide that it has.
Struggling to give you a percentage number in terms of a flawed wow, what it would have been.
And I guess, we'll never know.
But anyway [laughter] it anyway [laughter], so yeah, it's but yeah certainly it it's not helped and we think it would have been you know significantly higher and that said we continue to put the efforts in our business development teams a a disease.
I've ever been and I think you're seeing a reflection of that where you know the weighted follow has grown almost to 50%. It was 48% of where it was this fine last year.
But the fact that the on weighted is growing by 27% of just said yeah. There's interest as deals that they just didnt earliest stages and they might otherwise be given the current situation.
Got it and then one last one from me for a time, maybe or for you I'm just as you look at the cloud wins on the new customers. The 11, one sort of who the competitors and you know usually every quarter, we have sort of one big.
Displacement from the three letter company out of Germany. So just wondering sort of any competitive sense of how those deals played out who et cetera.
Did you displace some something that would be really helpful. Thank you.
Yep.
Certainly happy I'll jump in and Pam if you want to add any color to that absolutely <unk>, yes. The German competitor remains the strongest the case that the Pam outline was a from a company that had an S&P strategy.
And you know is questioning that the value of that and well today we are in.
Quite a number of conversations with you know a large enterprises that really are.
Given caused to ask the question about what the alternatives are given that you know there is no migration path from.
PCC sexual privations two S. Four Hannah and the fact that that's a reimplementation and so that's causing them to question that and that's pulling us into yeah. Some conversations at scale around the world, We global manufacturers and I'd say they remain I'm biased stand out a largest competitor in our sweet spot, which is those global manufacturer.
Pammi anything you want to add to that.
Hey that yeah, we have certainly been concentrating on a safety right now because there is a attain spare and and change you know creates opportunities.
The other the other company that we you know it's kinda for up for grabs than we see a a lot of a replacement when again I guess would be the in force. We you know looking at.
Valves getting older and ready to replace him and taking competitive opportunity you know I guess the market is certainly a lot smaller and competitive than it used to be thanks.
Yeah, and I did there was my last question that you have one more so obviously you had the hey, you got to move to Honda by whatever date, they push that out I think it was 2020 to 2021, Jim maybe 2025 is there.
Have you seen any slowdown because of that because they extended the timeline to migrate because obviously that timeline targets on as a great driver for you, but given the night. They pushed out has that shouldn't make people say, let's sit back on our healed and wait I think this system is working.
I don't have to make a decision tech Muslims isn't a year or two years have you seen any of that.
No no not in the conversations we've been having because I think that the challenge remains the side and you know yeah. There were obviously on the pressure I think the dates from memory for Obama.
Excuse me 2025 was the original a push to 2027 I think from memory, Okay, Alright too.
Right, but you know I think that the challenge there is if they white that's still on the legacy system.
And you know with the pace of change in the right of changes happening in the world today in the requirement to respond really quickly to stuff like supply chain disruptions show on that's really hard with legacy ERP in so yeah. If you business is fairly static you know not changing much then maybe you can afford to.
Right, but the company's we're talking to we're already needing to do something to respond to change and so they've got a bit more comfort I suppose it that you know that they can be supported for longer but you know that business demands are still that pushing the urgency to to make that switch so no I'm not seeing any of those conversations.
As a result that if anything it would be related to kind of it and when's the right time to stop but not to the S&P tight switch.
Thank you guys.
Thanks, Sam I don't think it's on appreciate it.
Okay. Thanks Bye.
This concludes our question and answer session I would like to turn the conference back over to answer one Chilton for any closing remarks. Please go ahead.
Great well, thanks, everyone for joining the call Tonight, and we look forward to channel Q3 results in November banks and stay safe.
Hi, Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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