Q4 2020 Gty Technology Holdings Inc Earnings Call
I didn't answer session to ask the question during the session you will need the press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today John.
John Curran CFO. Thank you. Please go ahead.
Thank you.
Afternoon, everyone.
I'm, John Curran, <unk>, CFO and I'd like to welcome you to our fourth quarter and full year 2020 earnings conference call.
With me on today's call TJ, Paris, <unk> CEO will.
We will be presenting slides on todays call that encourage you to view the presentation found on our website at www Dot <unk> technology Dot com.
Please note that our earnings free relief is also available on the <unk> website. The release contains additional information about our financial results.
Any forward looking statements we made on the earnings release or any of that we may make during this call are based upon information that we believe to be true as of today.
Things often change however, and actual results may differ materially from those projected or anticipated.
Please refer to our cautionary statements in the earnings release under the heading forward looking statements.
You should also refer to our SEC filings, including our most recent form 10-K, and our subsequent SEC filings for a list of risk factors applicable the GTI.
Including risk factors associated with COVID-19.
As you will hear in our comments the pandemic is impacting our business today and for an undetermined time into the future.
During the call we may refer to non-GAAP financial measures. If we believe they are useful to investors or if we believe it will help investors better understand our results or business trends.
You can see a reconciliation of our non-GAAP financial measures to the nearest comparable GAAP financial measure in exhibit two of the earnings release.
With that I'll turn the call over to T J.
Thank you John.
Good afternoon, and thank you all for joining us.
We are pleased with our execution throughout the year and we ended 2020 on a high note of it.
Solid quarter.
Before we dig into this quarter's results I want to take a moment to remind everyone. <unk> mission is to modernize the government and make the more efficient true.
Best of breed cloud technologies.
The pandemic has highlighted the need for government to new market of more modern solutions.
Our focus is twofold to improve the modernized the citizens of experience with government on offices of every level.
And to bring modern solutions to government employees. So they are able to achieve optimal efficiency.
As John will discuss later on this call our fourth quarter GAAP revenue grew 14% year over year, the $3 $13 1 million.
<unk> grew 32% of $48 1 million from the full year.
From a non-GAAP perspective revenue decreased 10% from $13 2 million compared with Q4 2019 and grew 20%.
$48 8 million for the full year.
Most importantly annual recurring revenue on <unk> grew 25% year over year to $41 4 million.
Finally, we had a very strong year in new customer additions.
More than 100, new customers in the fourth quarter and over 350, new customers for the year.
<unk> provides our industry, leading cloud technology from six brands that cover the front and back offices of state and local government organization.
Let's start with our two front office solutions City based and open counter.
Over the counter enables any ordinary citizens to decipher the bond team needs of permits needed for projects or improvements.
The process of those permits online.
These permits can be as simple as the tree removal permit to as complex as helping someone sort of new business.
By walking them through the many permits that will be required.
While we encountered momentum demonstrated considerable strength all year and accelerated in Q4 with five new customer wins and.
And the 11 for all of 2020 of 30% gains in new customers year over year.
Non-GAAP revenue grew for the year by 23% in a difficult environment open.
Open counter and a lot of traction with new customers like the city of Omaha.
And most recently Miami, Florida.
We're excited to have announced of the city of Miami will be incorporating open counter to speak start initiatives.
He start empires ordinary citizens of entrepreneurs alike to begin the process of opening your own business in the city directly from their mobile device 365 days of year 24 hours a day.
As part of this of this one purpose of solution. He start allows the applicants the checker as the only online and creates transparency around cost.
Operating accurate real time visibility into fee estimates.
Opening counters, new special event portal continued to gain traction with existing customers. We are very pleased on Orlando Cincinnati in Salt Lake City.
Standard the engagements to include our special events portal.
Even though COVID-19 has impacted all aspects of the city operations forward looking comedians are planning for a return to in person events and the need to manage the galleys more efficiently.
Moving on the city base, our government and utility payments platform.
Sydney based on the often complex process of how you make payments to your local government by harmonizing and automating all segments of the full payment cycle.
By replacing static sprawling websites with a dynamic platform.
City based make cities and counties more efficient on increasing on time revenue collection and speeding up the time the settlement, while improving the overall citizen experience.
<unk> reported a tremendous fourth quarter and full year with our sales team signing up more than 23, new state and local governments.
<unk> 12 in the fourth quarter alone.
One of these new customers, who was the city of Austin to select the city based payments platform. The naval residents of business the ability to pay bills of municipal fees online.
Via mobile devices.
Another win was the expansion with the current cost of the customer the city and county of Denver.
This customer select the city base as the payment partner to modernize the unified point of sale Cashiering and online payments for its more than 716000 residents.
Moving on to new service, our grants management solution.
E services used to help governments manage and distribute grant funding and health organizations and government entities stay compliant with their use of funds.
With the global pandemic local governments are using E systems' products to help manage and distribute critical federal finance systems and.
Covid funding.
E sales finished the year with a solid momentum, adding 22, new customers in the fourth quarter, bringing the total for the year of the 61, new customers approximately of 100% increase over 2019.
Each of the showed solid growth in the state government market with the addition of the California Department of Forestry and fire protection.
Georgia Department of community Affairs and.
And expanded services in California Department of housing of community development. These agencies have all teams with each of US are on key community and economic development programs and manage the disaster recovery grants.
Moving on the bonfire sourcing platform.
On fire it helps governments overcome the challenges of dealing with and selecting multiple vendors complex RFP processes and ensuring compliance.
On fire had a terrific year, adding 35, new customers in the fourth quarter to bring the annual total to 137 for 2020, an increase of 40%.
To name some of these new customers, we signed on in Harris County, Barnstable County, and the Toronto Waterfront Revitalization Corporation.
Furthermore, bond buyer's premium bettering offering.
That was released in 2019 experienced significant growth in 2020 signaling.
Signaling the bonfire continues to be the one of the fastest growing platforms for both public procurement.
Teams as well as vendors seeking public sector of bidding opportunities.
And finally, our budgeting units question Sherpa quarter of leading providers of cloud based budget performance and transparency solutions from the public sector.
Combined our budgeting units added 41, new customers in the fourth quarter.
Having a yearend total of 123 new customers in 2020.
From the value of of our decision to provide coupled with exceptional customer service resulted in a customer retention rate of over 98%.
The notable customer wins this year highlight the scope of our budgeting solutions, which range from the middle market with budgets ranging from $10 million of $250 million to the enterprise market ranging from budget of $250 million to $1 15 billion.
Customers like Fort Worth housing authority in the city of Abilene, Texas and the middle market.
And the state of New Mexico, and the city of the Sydney County, San Francisco and enterprise market to name just a few.
In addition to the assistant wins I mentioned, our mid market team showed impressive growth this year.
And with that let me turn it over to John to review the financials John.
Thanks P. J the T. J highlighted earlier Q4 of the solid finish flow with otherwise the challenging year.
Our GAAP revenues were up 32% from 2020, and we remained cash flow positive for the second quarter on a road.
We saw strong demand for all of our product from Q4 as evidenced by the number of new logos. The T J discussed earlier.
I should also point out that our financial condition has improved significantly in the quarter as the way.
It's over $18 million of new capital.
Moving on to our financial results for the quarter.
Our GAAP revenue increased 14% of $13 1 million of Q4 of 2020.
Third with $11 $5 million of Q4 of 2019.
On the non-GAAP basis revenue.
He was $13 2 million from Q4 of 2020 compared with $12 million in Q4 of 2019, an increase of 10%.
A reconciliation between our GAAP and non-GAAP results is included in the exhibit two of our press release.
We will provide a more detailed explanation of the change in revenue on the subsequent slide.
Turning to operating expenses, we continued our cost control efforts.
The slight decrease sequentially and our total non-GAAP operating expenses.
The fourth quarter 2020 of GAAP operating loss was $11 1 million compared with $7 3 million in Q3 of 2020 and a loss of $42 6 million in Q4 of 2019.
Our fourth quarter non-GAAP operating loss decreased of $1 1 million compared with $1 4 million from Q3 of 2020.
Primarily by our quarter quarter over quarter of growth in revenue and the decrease in operating expenses.
For the full year 2020, our GAAP revenue increased 32% $48 1 million from $36 4 million in 2019.
And on a non-GAAP basis revenue increased 20% $48 8 million from $45 million in 2019.
For the full year 2020.
GAAP operating loss narrowed to $42 7 million compared with $105 5 million from 2019.
And our non-GAAP operating loss decreased to $11 1 million compared with $19 9 million of 2019.
Consistent with previous quarter, we wanted to provide a little more color on the change of non-GAAP revenue.
As you can see in this chart our recurring revenue grew by 15% on a quarter over quarter basis and grew by 25% on a year over year basis.
Q4 of the seasonal strong quarter for recurring revenue driven by payment volume within our city based business.
Recurring revenue for the full year grew by 27%.
Our service revenue can vary from quarter to quarter the.
Timing of large projects.
And we expect professional services the decline as a percentage of revenue as our base of recurring revenue continues to growth.
Other revenue includes sales of kiosks and software license sales that we also expect the decline as a percentage of revenue over time.
We expect to see recurring revenue growing in the mid to high 20% range for 2021, and expect our services and other revenue will grow by roughly the low single digits compared with 2020.
The recurring revenue growth will continue to be higher of percentage and dollar terms and service and other revenue as we continue to grow our base of subscription business.
Taking a look at our balance sheet.
The three areas I would like to discuss.
Is the change of our receivable.
And of that.
The balance this quarter driven by a continued strong collection.
The second area of the decrease of $900000.
Over on accruals in the quarter, primarily due to severance payments.
The third area is deferred revenue associated with our subscription billing which increased $600000.
This increase represents the amount or the invoice in excess of the amount of revenue we earned in the quarter.
From a cash perspective, we started the quarter with $6 2 million.
Ended with $22 8 million in cash.
From an outflow perspective, our operating burn was roughly $100000 this quarter down.
Down from $1 7 million on Q3.
We also paid out $600000.
200000 on Capex.
300000 of interest in the quarter.
From an income perspective higher than expected billings in the quarter and strong collections were the primary drivers behind our change in working capital of $1 4 million.
We also received of $200000 funding from the U S payroll tax of apparel.
Finally from the financing protected.
The net proceeds of $16 2 million, which includes raising of $11 three low on additional debt instead of one.
And the new equity.
Based on our current view of sales activities, our ability to implement on the low churn rates, we have experienced the date and our cost reduction efforts. We believe we have sufficient cash tariff at the 2022.
Turning to our outlook for the first quarter on full year of 2021.
For the first quarter of 2021, we expect total revenue to be in the range of 12 $5 million to $13 million or approximately 10% year over year growth.
For the full year 2021, we expect total revenue to be in the range of 57 to 60 million of approximately 20% year over year growth.
<unk> will grow faster than our overall revenue growth as we continue to build our base of recurring revenue.
We remain concerned of material reduction from the budgets of our customers.
Don't expect improvements in our business environment and the near term.
We expect to be cash flow positive from operations for the full year 2021, excluding interest in February.
However, the fees low distribution of our renewal invoicing is lower in the first half of the year from the second half, which will cover which would cause us to be cash flow negative in the first half year and positive in the second half.
With that let's turn things back to Jay.
Thank you John.
As we look towards 2021 I wanted to take a moment to reflect on 2020, which was a very challenging year for our customers.
As the pandemic took hold many of our customers scrambled as employees transitioned to working from home.
Our customers' revenues are supported by a variety of taxes.
Some of which are very stable like property tax on many.
The others are variable based on volume and activity such as sales tax.
The more variable tax base was significantly affected by the pandemic and created budget shortfalls from our customers.
Governments are force become more efficient because of lower revenues the decrease costs, all while continuing to provide core services to the constituents.
The primary focus of the efficiency has been on remote operations contactless government services and Covid support.
Prior to 2020, there was an increasing trend for governments to move the cloud technology.
The pandemic has certainly increased the importance of the change from our customers.
Part of solutions in general and <unk> solutions, specifically inherently designed to support from our operations in contact with government services.
As we turned the 'twenty 'twenty one we anticipate the economy will continue at its current pace until later in the year when the vaccine should be largely distributed the answer.
Dissipate that most of the 'twenty 'twenty, one will be about stabilizing the economy and the ready to return to normal in 2022.
There are factors like stimulus spending and higher than anticipated tax revenues that could favorably favourably impact the market opportunity.
While our 2002 of them forecast some of it currently anticipating these factors we are keeping a close eye on them.
We continue to be enthusiastic about the government trends of the cloud solutions and our core focus on 2021 will be and grow your company's organically.
Expanding our R&D efforts to reviewing opportunities for inorganic growth.
I wanted to take a minute the thank every one of the GT why for their efforts over the last year, it's been the big adjustment of Covid and our staff of risen to the challenge.
In summary, it was of great quarter, and solid year, we achieved top line double digit growth.
Demonstrates strong cost management.
Achieved high customer satisfaction and experience continued strength.
The government transition to the cloud.
GAAP revenues were up 14% in the quarter and 32% for the year and we achieved positive cash flow for the second quarter in a row.
With that thank you and I'd like to turn this over to the operator for questions.
As a reminder to ask the question you need to press Star one on your telephone to withdraw your question press the pound or Husky. Please standby, while we compile the Q&A investing.
On the first question comes from Scott Berg with Needham Your line is open.
Hi, T J and John Congrats on the good quarter and thanks for taking the questions I have true.
I guess, let's start off in the current environment T. J, you talked about not expecting much change here in the short term versus.
Maybe some more positive developments from the second half of the year.
How much of that is as customers just unwilling to spend because maybe the processes are maybe not the.
Internal processes to signing the dealer are moving along as they should versus maybe some of the budgetary concerns that I think we all hear about for state and local governments.
Alright. Thanks.
Thanks Scott.
So cut.
A couple of couple of handful of that if we were to.
The rewind back to early 2020, I would say roadblocks velocity was just getting ready and working from home. So processes were broken and they were getting back that matter of the past that.
A lot of the eyes are on the budget.
The work on both sides of the equation for us they are finding the need of cut back on staffing or anticipating that theyre looking for solutions to.
To help improve their processes of even turning to automation on cloud technology of the cars.
And then the other thing that we're keeping an eye on it but trying to get a bit of reporting back that some states of not.
The budget shortfalls that they were expecting and I was sort of keeping a close eye on that in a sense of how much the.
Withdraw back in anticipation of revenue declining and what actually happen. So as we start seeing the budget being close up this year and we're watching the organizing the kind of large budget business unit. They will see a lot of the sponge information will be keeping a close eye on that.
Got it helpful and then from a follow up perspective.
John you talk in the guidance.
The 10% revenue growth in the first quarter. Your press release, you talked about 57 of the $60 million share for the full year, which I believe is the more use round numbers $20 to 25% growth rate, which does merrier AOR growth in the fourth.
The quarter of 'twenty, but how should we think about kind of the shape and modeling of the year.
And maybe your confidence that that 10% growth rate is going to accelerate.
Through part of the balance here of the year.
Sure Yes, good question Scott.
So we have.
Little bit of.
The headwind coming out of Q4, so we did actually see.
The city of base.
Payment volume kick up in the fourth quarter as we would normally see from a seasonality perspective.
It's kind of decline from Q4 to Q1 again.
The normal cadence.
So we are anticipating for the year.
Our seasonal pattern.
Kind of come back so they would normally see.
The lower Q1, higher Q2, lower Q3 with the highest.
Period being Q4, so we're anticipating.
That pattern to reemerge in 2021.
The explains why well get a little bit of a headwind.
From Q4 to Q1 related to payment volume is dropping.
Great helpful. Thank you.
Sure.
Again, if you would like to ask a question press Star one on your telephone. Our next question comes from Jeff Van <unk> with Craig Hallum. Your line is open.
Great. Thanks for taking my questions I've got several John as it relates to the the.
Revenue splits on I think you shared.
What's your share of open counter I believe.
Do you have the numbers for the other key products.
Two.
So.
On.
Budgeting combined.
The 20%.
If COVID-19.
Yes.
The.
Just under 10%.
Thanks.
The 11%.
On the fire.
Around 55%.
Okay.
Helpful. And then the Q1 guide on what's implicit in there you commented to the professional services being a lumpy what's implicit in terms of the Q1 expectation around services.
We're expecting the theory that a little higher than Q4.
Yeah.
Okay.
<unk>.
And then I guess, maybe T J D.
As it relates to the to the bookings just curious I mean, obviously, we don't get a full bookings number and even if fuel leisure suit you added a lot of customers so sort of the seemingly very very good customer.
Capture I am curious about the bookings values signed in the quarter versus maybe your expectations.
Coming out of the.
September quarter.
So on a relative center.
Yes, just from Samsung.
How did it compare to your expectations coming into the quarter. I mean was this sort of in line with what you thought you'd post did you see any variation is the renewal of quarter progressed.
Right right. Yeah. Good question. So we were a little were a little ahead of what we expected.
In Q4.
Okay.
And then on the churn front.
Obviously as you said it depends on what the end customers' budget driver is right of use tax versus property tax versus other and how stable. The revenue flows are.
What.
From a churn standpoint did you see any very start there within the products did you see any variation in churn amongst the products in the quarter that was notable.
I was just actually looking over the churn numbers.
And the something we typically publish but I was comparing them relative to the 2019 to see both of the Covid effects were.
Churn stayed just about the savings 2019, a little bit higher with all of them more contraction.
Then churn.
Net churn.
Then we.
We saw in 2019, but overall.
Happy of the numbers.
Fair enough and then.
The.
Again kind of looking at it by product.
When you looked at the bookings.
It certainly looks like a very strong at least customer capture number of yearend there for the for the budgeting side.
But maybe what was the standout it maybe it was budgeting in terms of bookings of the quarter on maybe what was the one that was most challenged and that might give us a glimpse of the sort of the end customer or any of.
The end customer drivers, so kind of just within the product strength and where did you see the most momentum on where you see the most headwind in the quarter.
Well and this quarter, we saw I mean, you saw a bump out of the numbers are amazing this year, so I've seen the consistent growth.
Because one of the as opposed to what Youre seeing there is some of their mid market.
Movement of starting to pick up.
Some city basis on some great sales in the last quarter a lot of that as we've described in the past our requires the we onboard them and revenue flow and later on so.
<unk> had the significant.
And the kind of uptick on there.
And their sales.
Open counter I had a good pick up this quarter. There. They are the ones that have been because of the pandemic the area of permitting and a little bit down. This year. So there they are doing pretty good with the year has been light and are up from last year.
But hopefully it gives you a little bit of an idea.
And certainly on sort of you said that the grants of were up.
Quarter also.
Okay, Great and then just last one.
TJ as youre focusing on sales.
What's on your to do list in terms of maturing the sales org in 'twenty, one structurally just kind of what moves should we think about in terms of your goals for for structural change in 'twenty one.
Great question. So we've been really focused on the last year, making sure that the sales team that we hired in a lot of towards the last Q4 2019 matured there of mature teen now let's focus on the seats on these bookings increases.
The second thing is now to focus on once of the successful there and start to expand on that so the expansion of growth and growth of the teams within a lot of what I would call on cross pollination become internally the <unk> sales Ted talks about learning what works what doesn't work and making sure we're sharing those experiences across the different business units for 2021 of the larger.
We expect to keep the business units with their own sales teams and see how he focus because we see so much greenfield organic.
Growth from the teams that we want to make sure they stay focused on that.
Okay, great. Thanks for taking my questions I appreciate it.
Thanks, guys. Thank you.
Okay.
There are no further questions at this time I will turn the call back over to the company for closing remarks.
I just want to say, thank you, everyone and I look forward talking to you next quarter.
Okay.
Okay.
This concludes today's conference call you may now disconnect.
Okay.
Okay.
Okay.
On that.
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