Q1 2022 QAD Inc Earnings Call
[music].
Good day and welcome to the QAD financial results for first quarter fiscal year 2022, all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask the question you May press. The Star then 1 please note.
This event is being recorded I would now like to turn the conference over the care of Bellamy Chief Accounting Officer. Please go ahead.
Hello, everyone and welcome to today's call before we begin I'd like to ensure that everybody understands the our discussion may contain forward looking statements that are based on certain expectations and analyses.
Such forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.
QAD undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances. After the date of this call for a complete description of these risks and uncertainties. Please refer to Qad's 10-K, and 10-Q filings with the Securities and Exchange Commission.
Please also note that during this call we will be discussing non-GAAP pretax income, which is the non-GAAP financial measure as defined by SEC regulation G. A reconciliation 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 Companys website now.
And I'll turn the call over to our CEO Anton Chilton.
Thank you Karen and good afternoon, everyone and thank you for joining today's call to discuss Qad's fiscal 'twenty to first quarter results.
Joining me on the call as usual are Pam <unk>, our president and Daniel lender Chief Financial Officer.
Our March towards the published long term goals continues with another set of solid results growth and subscription revenue of 19% when compared to the same quarter last year, but of slightly ahead of guidance for the quarter.
Similarly improvements and subscription and professional services margins over the last year's Q1 contributed to another good performance from a bottomline perspective, and put US ahead of our guided profitability number.
We're also pleased to have achieved our highest first quarter bookings ever with growth of over 50% from last year's numbers, giving us a good head start to our financial year.
We were also excited to welcome foreign trade zone, our latest acquisition to QAD and early April.
FTC is very well known for their expertise in the space, having the team and the solution integrated into our global trade and transportation execution portfolio will help customers simplify duty management and improve transportation execution and trade compliance at the same time.
In line with our strategy to grow our partner ecosystem, We signed 15, new channel partners in the quarter with.
And with those partners focused on cloud sales or supporting our professional services capability. This represents a significant step and our strategic vision and expand our ecosystem around the world.
In summary growth across all revenue lines improved profitability and a strong cloud bookings performance made for another good quarter I'll now turn it over to Daniel to discuss the details of the financial results. Thank you and we're very pleased with our first quarter results, which exceeded expectations and were strong across the board.
<unk> margins improved to 67% from 60% to 66% for the same quarter last year the and.
And <unk> would've been more meaningful except that in the quarter. We started expensing of the amortization relating to our recent acquisitions.
And there was an additional impact of 1% expense related to 1 time technology purchases.
Moving forward, we expect amortization of approximately 450000 per quarter and the subscription cost of revenue line.
Professional services and margin improved 5 percentage points to 10% due to our ongoing ability to deliver remote implementations and improved utilization and the ongoing strategy of building and using our partner network.
Currency had an approximate $2.8 million positive impact on total revenue compared with last years first quarter.
But negligible impact compared with the fourth quarter of fiscal 2020.1.
Our bottom line was positively impacted by about 700000 and versus the prior year quarter.
But also negligible on a sequential basis.
Total revenue for the fiscal 'twenty to first quarter of grew to $83 million from $74.1 million last year, primarily as a result of higher subscription license and services revenue.
Subscription revenue grew 19% to $36.7 million and now accounts of 44% of our total business up 3 percentage points from last fiscal years first quarter.
Currency movements possible impact of subscription revenue by about $950000 compared with the prior year of had almost no impact compared with the prior sequential quarter.
We have closed 33, new cloud deals for the fiscal 'twenty, 2 first quarter, including 23 from new customers and 10 from conversions.
And last year's first quarter, we closed 14, new cloud deals, including 9 from new customers and 5 from conversions.
And compared to the same quarter on a pre pandemic basis, 2 years ago, we closed over 50% more deals.
Subscription billings grew by 20% for the fiscal 'twenty to first quarter.
With the 3 year CAGR of 2%.
Our short term deferred revenue balance included $54.7 million of deferred subscription versus $46.8 million in the prior year and increase of 17%.
Maintenance revenue was $26.6 value for the fiscal 'twenty, 2 first quarter versus $26.4 million a year ago.
On a performance basis maintenance revenue declined 4% year over year.
Relating mainly to cloud conversions, our maintenance retention rates have returned to historical pre pandemic levels and remain in excess of 90%.
Professional services revenue totaled $16.6 million versus $15.7 million from last year's first quarter, and $15.1 million and a sequential basis.
As I mentioned earlier, our services margins grew to 10% for the first quarter and 500 basis point increase from last year.
License revenue for the fiscal 'twenty, 2 first quarter was $3.1 million versus $1.2 million and last year's first quarter with sales primarily coming from existing customers.
And the new seats or modules.
With our sales efforts continuing of the cloud, we do not expect meaningful changes in the year over year license revenue for the foreseeable future.
Total revenue by vertical for the fiscal 'twenty first quarter was high tech and industrial 36% automotive and 30% life Sciences, another 18% and consumer products and food and beverage 16%.
By geography, North America was 47%.
<unk> hundred, 35% Asia Pacific 12, and Latin America, 6%.
Gross margin for the first quarter of fiscal 'twenty, 2 improved to 59% up from 56% last year, primarily due to improved subscription and professional services margins.
Sales and marketing expenses totaled $19.6 million or 24% of total revenue versus $18.6 million of 25% of total revenue for last year's first quarter.
Currency accounted for 600000 of the increase and the remainder of related primarily to higher personnel costs.
R&D expense equal to $15.6 million compared with $14 million a year ago.
Currency accounted for 500000 of the increase with the remainder due to higher personnel expense related to higher head count.
As a percentage of total revenue R&D was 19% for both quarters.
G&A expense was $12.6 million for the fiscal 'twenty first quarter compared with $10 million for last year's first quarter. The increase in G&A expense was due primarily to higher personnel expense stock compensation.
Legal fees most of the related to IP infringement case that is now mostly concluded and.
And the transaction costs related to the acquisition.
As a percentage of total revenue G&A was 15% for the fiscal 'twenty, 2 first quarter compared with 13% last year.
Stock compensation expense totaled $3.6 million for the fiscal 'twenty, 2 first quarter and $2.4 million last year.
The increase as anticipated was related to higher PSU achievement.
This brings the operating income to about 750000 compared with net operating loss of about 950000 last year.
For the first quarter of fiscal 'twenty to GAAP pre tax income was about 450000 compared with about 600000 a year ago.
Our non-GAAP pre tax income was $4.6 million compared with $3.3 million last year.
We recognized the tax benefit of $1.4 million of for the current year first quarter compared with tax expense of $1 million of our last years first quarter with the swing related primarily to a change and valuation allowances.
Okay.
We ended the quarter with approximately $153 million and cash and equivalents compared with approximately $143 million at the end of fiscal 'twenty 1.
The growth and our cash balances is inclusive of a net $9.5 million paid to the FTC acquisition in Q1.
Cash flow from operations for the fiscal 'twenty, 2 first quarter total of $22.1 million compared with $10.9 million last year.
Accounts receivable was $44.9 million on April 32021 versus $46.6 million at the same time last year.
Our days sales outstanding using the count back method was 48 days for the fiscal 'twenty, 2 first quarter versus 56 days from the prior year quarter.
And our short term deferred revenue balance at April 30 was $116.9 million versus the $102.3 million a year ago.
And I'll finish up with our guidance for the second quarter of fiscal 'twenty..2 we expect subscription revenue of $38.5 million maintenance revenue of 26 million and operating income of $1 million, including stock based compensation expense of $5 million.
For the full fiscal 'twenty 2 year, we continue to expect subscription revenue of 160 million maintenance revenue of 102 million and operating income of $12 million, including stock based compensation expense of $17 million with that I'll turn the call back to you and Todd. Thank.
Thank you Daniel.
On the sales front, you might recall that we've talked in the past about our efforts to grow lead generation capability in the context of new customers and we've also discussed how these efforts have contributed to the growth of our sales pipeline over the past few quarters.
And I'm very happy to report and this quarter as Daniel said, we welcome 23, new customers to the acuity cloud demonstrating that our work in this area is paying off.
Alongside them with the tank conversions that Daniel mentioned of our on premises customers for 33 deals in the quarter, which is 135% increase of custom accounts with the same period last year and a record number of new cloud customers from our quarter.
Okay.
We continue to see a good representation of each of our key vertical markets in the cloud sales mix with industrial and electronics, leading the charge slightly ahead of the automotive sector.
That said, we know of good proportion of supplies and automotive of feeling the ongoing effects of the global Microchip shortage, we discussed and the last call.
With the pandemic lingering and some parts of the world and travel and entertainment and the very early stages of recovery. There are still a few sub segments and those vehicles that are having a tough time.
And with global manufacturing PMI at a 10 year high the vast majority have a positive outlook.
From a geographic perspective, North America, and our EMEA regions had another set of solid bookings numbers for the quarter.
So the picture is still a little mixed inside of Europe with countries and various states of lockdown and vaccine distribution.
And Asia Pacific were starting to see more activity in China, and Australia and that contributed to an improvement and cloud sales of of recent quarters, While Latin America had another quiet period.
All 3 of our divisions allocation dialysis and precision had strong quarters, reflecting the interest and demand for supply chain of supply and management solutions and the market.
The pandemic and recent events such as the grounding of the ever given ship and the Suez Canal and the global Microchip shortage underlying the need for visibility across supply chains globally, and the ability to make intelligent decisions about how to respond to what can often be unforeseen and unexpected events.
We believe demand will continue to be strong going forward as manufacturers look to add resilience into the supply networks.
And coming off the good momentum of last year, we maintained our focus on management of expenses across the entire business day.
This ongoing drive to improve profitability and yet again, we beat guidance and saw a significant improvement and operating profit compared to the same period last year.
While our cloud margins improved over the same quarter last year, we did see the effect of some onetime software purchases. In addition to the annotation of the acquisition expense down and referred to.
That said going forward, we do expect to continue margin improvements in line with our stated goals.
The professional services side of the business remains busy with implementation projects.
And with all of them.
Model now and nicely balanced between partners and our direct consulting workforce. The long run of positive margins was maintained and sort of a good improvement over the last year's Q1.
Following on from the acquisition of allocation network, and the World class supply and management capabilities, They bring which we discussed on the last call we announced in April the acquisition of foreign trade zone further enhancing our portfolio of solutions to help customers manage the intricacies of today's supply networks and navigate the complexities of judy's custom fees and taxes.
And effectively managing and reducing associated costs.
Recent events have really highlighted both the dependency on and the fragility of supply chains and networks with the recent additions of allocation network and FTC. We're excited about our prospects to accelerate business growth in this part of the portfolio.
And our competitive strength and manufacturing operations and supply chain management together with the growing momentum and global manufacturing markets have continued to attract to attract new customers to the QAD cloud.
And I'd like to highlight a couple of cloud deals from the quarter that also serve to illustrate the interest and supply chain planning and management solutions.
So the first is a global automotive supplier that selected our demand and supply chain planning solution moving them to a single unified platform globally for supply chain planning and which will support a global integrated business planning process as they move away from the current situation of a combination of disparate legacy applications.
And the life Sciences sector, a global leader and the supply of dental products and services to the global Dentistry marketplace chose our global trade and transportation execution solution with the primary objective to empower dental professionals to give quality of life back to their patients. It is critical for them to have a distribution network of global warehouses and carriers and ensure that they remain <unk>.
While meeting customer expectations.
And our GTT the application was seen as the best solution to address that global transport management vision, and all of that carry and needs across EMEA Asia Pacific and North America.
Our sales pipeline continues to develop strongly with our weighted pipeline at the present time up 21% when compared to the same time last year, while our unlike the pipeline value increased by 65%.
Both weighted and unweighted pipelines continue to be at new record levels and as the first quarter results demonstrated we're seeing that momentum and lead generation and new business translates into deals.
I'll now hand over to Pam for some detail on the allocation network acquisition and what it means from a supplier management capabilities.
Great. Thanks, and time and it's also a wonderful to see all of the new customers and Q1 today.
Today, I would like to talk about 2 acquisitions, we announced recently consistent with our acquisition philosophy of acquisition.
And requirements that customers are requesting and health of our competitive positioning.
QAD has a very strong supply chain execution and quality offering that was missing in the front end the area of sourcing allocation network provides a strong operating in this area, including generating RF queues.
All of hating supplier response to the sourcing events, including oxygen analyzing comparing and recommending the player of beds.
Regarding supplier contracts and supplier Onboarding with the acquisition of allocation network QAD is able to complete our supply side supply chain.
Providing the single play and the manufacturer and supplier.
Managed and collaboration and interaction, which now includes the player management sourcing options supplier quality demand and delivery is volatile and licensing.
Collocation network as the Munich, Germany based company with the.
Strong German customer base.
The inquiry and December 2020, we have already made for new sales and of course, all of the sales and the cloud.
Well, our most recent acquisition.
FTE, a recognized leader and foreign trade zone, and software consulting and contract operations FTC Corp is headquartered in mobile, Alabama and has been.
Implemented all implemented over a thousand trade zone project Titan.
Charlie and the United States.
FTC implementations enables companies to realize significant savings on customized custom duty fees and taxes, combining FTC with QAD precision global trade and transportation and execution division the portfolio of capabilities for instance, our competitive offer.
And provides the ability to expand the FTC globally.
And we see many synergies and the cross selling and installed basis and have been building, our funnel and the QAD precision FTC solution to the free trade zone around the world.
And there are solid and focus on manufacturing QAD and continuing to develop and deliver the needed capabilities to both large and smaller companies and of rapid and efficient manner and enables companies to accelerate.
Back to you and Tom Thanks.
Thank you Pat and thanks for that color.
Okay, so and looking to the future we remain confident about our long term goals and of again taken another solid step towards them with our first quarter results.
Our pipeline growth and new customer wins and the quarter continues to demonstrate the attractiveness of our anti of our entire cloud solution portfolio aimed at solving challenges faced in today's world by global manufacturers of company's operating complex supply and networks.
The following on from the success of our virtual full extreme event QAD Tomorrow last September.
We hosted the second edition of the event just last week focus specifically on the challenges of managing today's complex supply chain and supply and networks.
The event and had record registration and the attendance globally and has already generated significant interest and our supply chain offerings.
While COVID-19 continues to drive uncertainty and several countries around the world, we do see growth and manufacturing activity with that global PMI level at a 10 year high as reported earlier.
However, we remain vigilant and continue to keep a close eye on the key business trends and new business sales cloud conversions and renewals with existing customers.
But as things stand right now with the manufacturing economy buzzing and a strong pipeline, we feel increasingly positive about the year ahead and.
And as reported and on our last call. We remain in good shape to drive another year of progress towards our published goals.
Operator, we are ready to take questions from analysts.
And we will now begin the question and answer session.
I asked the question you May Press Star, then 1 and you touched and firm.
If youre using a speakerphone, please pick up your handset preferred pricing and the keys.
And so withdraw your question. Please press Star then 2.
And at this time, we will pause limited the simple growth share.
Our first question today will come from the voluntary with William Blair. Please go ahead.
Great. Thank you and thanks for taking my question.
And congrats on those new customer wins, I guess just to start there and John.
Thank you ma'am.
Are you seeing some of the events that we discussed and of the shortages the Suez Canal et cetera, driving those of where these kind of even earlier than that and then just sort of closed as you work them through the pipeline just like to understand sort of how are we seeing sales cycles kind of shortened because some of these effects from the things we've talked about sort of the need for transparency et cetera, playing out or is it still a little.
Early Steve those.
And the pipelines at the deal.
Yes, I would say both on the majority of those.
And.
Caused by those recent events, but I think those did serve as catalysts to sort of underpin the value the solutions bring and did help them get them closed for sure.
That said I do believe going forward.
We've seen our growth and our funnel of opportunities around autumn and supply chain planning forecasting and logistics solutions and so we do think that each time something like this happens it just adds more fuel to that fire in terms of the value of visibility and and using digital technologies to manage that visibility and responses to that too.
Gotcha Gotcha, and if you take the.
Unweighted pipeline for the second you've now had several quarters of that number of the year over year of growth has been pretty pretty spectacular and I understand stuff will fall out of the pipeline.
But if you look at the number of new customer wins and look at sales cycles, improving maybe demand environment is improving.
And you look at the guidance, which seems really conservative it doesn't feel like Youre accounting for a massive close rates just help me reconcile some of those things because I think youre being conservative guidance, but the loved and extensive of how youre thinking about the guy vis vis the.
The wins, the conversions, which obviously the bigger dollar amounts.
Why and growing 20% on a weighted basis. It can tell me present and radiation and just put that altogether from me a little clearer and maybe Daniel my much chime in here.
Sure.
No.
And as you recover volume we issued we issued our guidance for the year.
A little more over the months ago and.
So I think that the first quarter results give us.
The good confidence with regards to those numbers obviously.
As the year progresses, along we'll evaluate whether we need to.
We need to adjust that.
And maybe maybe after Q2 if needed.
Now.
It is.
We are coming off of Covid.
Which elongated a number of of.
Of sales cycles during that time so.
We are we are seeing.
1 of those now starting to to convert and to start to shorten again, but.
We're still being.
Cognizant of the fact that the world isn't yet back to normal and.
And we need to.
Take all of that.
Into account.
And we want to make sure that.
We can meet the expectations that we that we set out there.
Gotcha Gotcha.
The squeeze 1 last 1 and from me.
Before jumping back in Q and on the partners. So obviously of professional services was strong and we've seen the margins come back.
And I really like the move of adding partners.
Help us think through how that plays out again not opening of this year, but the over the next 24 months or how do you envision that playing out over the next 24 months versus and.
In terms of how much you're going to allocate the partners and what they're going to bring in and.
And how much you might sort of try and keep yourselves in terms of training implementation of education et cetera.
Yes sure.
So yes the.
And the medium to long term strategy for that is the.
Professional services and our ability to get implementation of that's done really quickly when compared to the large competition remains of critical differentiator for us. So we always want to make sure that we've got enough capacity directly to be able to properly influenced that and work in partnership with our partners to manage that as well.
So there will be that balance and so we think we've hit the good sort of critical mass point to be able to do that and hence why we're seeing sort of the expansion of partners around the world. We do expect to grow our direct consulting.
Capabilities over time, but at a much lower right and the rest of the company is growing and that's really just to maintain that competitive edge. So.
And short what you should expect to see us.
<unk> expansion of the use of partners as the of the role.
Professional services for QAD.
<unk> grows.
But a more modest growth around our direct.
For us for that.
As a part of his take on more of the lion's share of that work.
Fair enough fair enough. Thanks for taking my questions. Thanks for the.
And Andrew I appreciate it.
Thanks, Bob.
And once again, if you'd like to ask a question. Please press Star then 1.
Our next question will come from Kevin Liu with K, Lou and company. Please go ahead.
Hi, good afternoon, and nice start to the fiscal year here.
First question from me is just can you talk a little bit more about the with the pipeline of conversion opportunities looks like.
Seeing customers more interested and that is really a lot of the organizations focus more on driving as many new deals as possible.
So no I think over the longer term, we still see a lot of interest and conversions and from the the.
The on premise of space.
This quarter just happened to be a skew in that.
And then the new business value of it but I think we're still calling as we have been consistently of.
The last couple of years now that we expect the mix to be roughly 50.50 of of.
And new customers to converting customers into the cloud.
Of course that will tail off at some point as we've eroded into that maintenance base more but for now we're expecting to see that continue.
Of course.
For that ratio to hold the new business has to grow as well and so we do expect to see more and more new customers coming on board, but at the same time, we will see the conversions continue to grow to for the foreseeable future.
Understood and just as it relates to the competitive and land and obviously.
<unk> talked a lot about making a bigger push to get their customer base and and the cloud wondering how youre seeing that impact your sales cycles are you seeing more opportunities come into the funnel.
Or is it more and any sort of pricing pressure or anything of that nature.
And of out there.
Talking to folks.
Yes, I think.
Of our supply chain capabilities.
Obviously, attracting interest and that's good and the sense that those solutions can stand alone as well as the integrated with our core outpaced system.
That allows us to shorten up some of those sales cycles compared to an MLP.
And so we're seeing growing demand in that sector and.
That's good at the same time, though we are seeing and the competitive landscape.
Large global manufacturers that have.
Are all using.
And using in the past SAP for example, still face that that challenge of.
The question of and.
Other re implementation of SAP, <unk>, Hana or seek for and alternative that's perhaps you know of.
The faster rollout and more nimble and agile once its in and we represent that and so a good portion of our funnel is represented by that type of opportunity too.
And then I do think the both what's happened and the supply chain over the last sort of 12 months or so.
We will continue to add fuel to.
That side of the business as well as the pandemic underlying that having the solutions and the cloud your applications running in the cloud.
As a much safer bet and having to run the on premises and so that continues to sort of underscore the value of the cloud as well.
Great and just 1 last 1 from me regarding the acquisition of FTC wondering if you can help us out with any sort of incremental revenue and expenses that you didn't anticipate on a quarterly basis.
Yes, Kevin said that we would expect to have any material impact.
With the either the a and AA.
And acquisition of the FTC and we are really incorporating those into the fabric of.
And of the company.
And.
Obviously longer term, we certainly expect to see <unk>.
<unk> growth as we start to take those solutions into the rest of the.
QAD install base and.
And also of the I'd say no become more integral part of our overall offering and that puts the overall offering that much more competitive.
And that's really where most of the impact.
It's going to be felt.
Alright, thanks for taking the question.
Sure of course, thank you.
And our next question will come from Matthew <unk> with Sidoti. Please go ahead.
Hey, good afternoon, and thanks for taking my questions can you touch on how much of the pipeline.
And then factor of the factored by chip shortages and other.
Kind of unusual challenges.
Yes, the difficult 1 to answer I would say.
A small fraction of it is directly related to that.
I'd say, it's certainly in the automotive sector and making an impact for.
Short term sales opportunity and conversations as they wrestle with.
Those supply chain issues that they have.
But Conversely, it's also.
Another event.
And the demonstrates the fragility of Glu.
Global supply networks like the grounding of the of a given like the big freeze and Texas and that kind of stuff all affected that and so all of these things just sort of Mount together to drive customers to be more interested and those solutions how much of the directly impacted by any 1 of them is kind of very difficult for us to gauge zone.
Got it.
Alright, and then.
With respect to the acquisitions.
Do you have.
And I get the there a bias towards.
Driving.
And our conversions through any of these sort of smaller deals or are they primarily targeting the customer pipeline or do not think of it.
And that way.
So I think the opportunities in a couple of spots. So first of all of probably 3 so first of all of it does it's another offering that we have can we go we can go to existing both cloud and on premises customers and that might be if it's an on premise discussion of that might be the catalyst that gets them into the QAD cloud.
And then for existing QAD cloud customers is certainly an expansion opportunity for us there and then the <unk>.
Third area is as we get new customers on to 1 of those best of breed applications, that's a land and expand opportunity for us to go and continue to push the rest of the QAD portfolio. So we look at sort of all 3 of those areas is real good opportunity for us going forward.
Got it.
Maybe if you don't mind couple of them.
But in terms of TC acquisition, how long do you expect to take to get operationalized and and up and running.
To that cross sell opportunity and and bring it to your portfolio.
All of them of existing customers.
Sure I think it's very very quick.
We already worked with them in the past taken.
<unk> taken advantage of the capabilities it's not.
Its not something thats technically technically complex to integrate.
And so.
We are expecting to hit the ground running and.
Pretty much all capabilities are where they need to be today.
A little bit of work to do but but not much so pretty much and real time.
Got it and then last question from me is in terms of the new.
Partners that you discussed I think there were 15, you announced this quarter and how quickly does it take to get them up and running and and impact.
Yes, so if we split them out and just sort of those focused on selling and distribution versus professional services.
The professional services and <unk>.
A little bit longer to get them up to speed in terms of the.
Excuse me of kit configuration of the application so they know space they know.
The requirements if you like on the business model side, but and then learning too.
Configure those requirements and QAD is what takes the time and Thats typically sort of 3 to 9 months, depending on the size of the.
The partner.
And then the distributors and the sales agent side of it.
They can start selling much sooner than that and can be supported by the ecosystem of partners around them. So the sort of more and the 3 to 6 months to really get.
The momentum going.
Great. Thank you.
And welcome.
And this will conclude the question and answer session I would like to turn the conference back over to <unk> and.
And on tuition for any closing remarks.
Okay, well, thanks, everyone for joining us today that concludes the call.
And we look forward to updating you in August with the results of our fiscal 'twenty 2 second quarter.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Okay.
So and I'll come back on the.
[music].
Good day.
[music].
Okay.
[music].
[music].
[music].
[music].
Good day and welcome to the QAD financial results for first quarter fiscal year 2022, all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask a question you May press. The Star then 1 please note.
This event is being recorded and now I'd like to turn the conference over the care of Bellamy Chief Accounting Officer. Please go ahead.
Hello, everyone and welcome to today's call before we begin I'd like to ensure that everybody understands the our discussion may contain forward looking statements that are based on certain expectations and analyses.
Such forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.
QAD undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances. After the date of this call for a complete description of these risks and uncertainties. Please refer to Qad's 10-K, and 10-Q filings with the Securities and Exchange Commission.
Please also note that during this call we will be discussing non-GAAP pretax income, which is the non-GAAP financial measure as defined by SEC regulation G. A reconciliation of the 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.
And I'll turn the call over to our CEO and Ron Shelton.
Thank you Karen and good afternoon, everyone and thank you for joining today's call to discuss Qad's fiscal 'twenty 2 first quarter results.
Joining me on the call as usual Pam lock, our president and Daniel lender Chief Financial Officer.
Our March towards the published long term golf continues with another set of solid results growth and subscription revenue of 19% when compared to the same quarter last year, but of slightly ahead of guidance for the quarter.
Similarly improvements and subscription and professional services margins over the last year's Q1 contributed to another good performance from a bottom line perspective, and put US ahead of our guided profitability number.
We're also pleased to have achieved our highest first quarter bookings ever with growth of over 50% from last year's numbers, giving us a good head start to our financial year.
We were also excited to welcome foreign trade zone, our latest acquisition to QAD and early April.
FTC is very well known for their expertise in the space, having the team and the solution integrated into our global trade and transportation execution portfolio will help customers simplify duty management and improve transportation execution and trade compliance at the same time.
In line with our strategy to grow our partner ecosystem, We signed 15, new channel partners in the quarter the.
And with those partners focused on cloud sales or supporting our professional services capability. This represents a significant step and our strategic vision and expand our ecosystem around the world.
In summary growth across all revenue lines improved profitability and a strong cloud bookings performance made for another good quarter I'll now turn it over to Daniel to discuss the details of the financial results and thank you and we're very pleased with our first quarter results, which exceeded expectations and were strong across the board.
<unk> margins improved to 67% from 60, 66% for the same quarter last year the <unk>.
And <unk> would've been more meaningful except that in the quarter. We started expensing of the amortization relating to our recent acquisitions and.
And there was an additional impact of 1% expense related to 1 time technology purchases.
Moving forward, we expect the amortization of approximately 450000 per quarter and the subscription cost of revenue line.
Professional services and margin improved 5 percentage points to 10% due to our ongoing ability to deliver remote implementations and improved utilization and the ongoing strategy of building and using our partner network.
Currency had an approximate $2.8 million positive impact on total revenue compared with last years first quarter, but.
But negligible impact compared with the fourth quarter of fiscal 2020.1.
Our bottom line was positively impacted by about 700000 versus the prior year quarter.
But also negligible on a sequential basis.
Total revenue for the fiscal 'twenty to first quarter of grew to $83 million from $74.1 million last year, primarily as a result of higher subscription license and services revenue.
Subscription revenue grew 19% to $36.7 million and now accounts of 44% of our total business up 3 percentage points from last fiscal year's first quarter.
Currency movements possible impact of subscription revenue by about $950000 compared with the prior year of had almost no impact compared with the prior sequential quarter.
We closed 33, new cloud deals for the fiscal 'twenty, 2 first quarter, including 23 from new customers and 10 from conversions.
And last year's first quarter, we closed 14, new cloud deals, including 9 from new customers and 5 from conversions.
And compared to the same quarter on a pre pandemic basis, 2 years ago, we closed over 50% more deals.
Subscription billings grew by 20% for the fiscal 'twenty to first quarter.
With the 3 year CAGR of 22%.
Our short term deferred revenue balance included $54.7 million of deferred subscription versus $46.8 million and the prior year and increase of 17%.
Maintenance revenue was $26.6 value for the fiscal 'twenty, 2 first quarter versus $26.4 million a year ago.
On a performance basis maintenance revenue declined 4% year over year.
Relating mainly to client conversions, our maintenance retention rates have returned to historical pre pandemic levels and remained in excess of 90%.
Professional services revenue totaled $16.6 million versus $15.7 million from last year's first quarter, and $15.1 million and a sequential basis.
As I mentioned earlier, our services margins grew to 10% for the first quarter and 500 basis point increase from last year.
License revenue for the fiscal 'twenty, 2 first quarter was $3.1 million versus $1.2 million and last year's first quarter with sales primarily coming from existing customers.
And the new seat or modules.
With our sales efforts continuing of the cloud, we do not expect meaningful changes in the year over year license revenue for the foreseeable future.
Total revenue by vertical for the fiscal 'twenty first quarter was high tech and industrial 36% automotive and 30% life Sciences, another 18% and consumer products and food and beverage and 16%.
By geography, North America was 47%.
EMEA, 35% Asia Pacific 12, and Latin America, 6%.
Gross margin for the first quarter of fiscal 'twenty, 2 improved to 59% up from 56% last year, primarily due to improved subscription and professional services margins.
Sales and marketing expenses totaled $19.6 million or 24% of total revenue versus $18.6 million of 25% of total revenue for last year's first quarter.
Currency accounted for 600000 of the increase and the remainder of related primarily to higher personnel costs.
R&D expense equaled $15.6 million compared with $14 million a year ago.
Currency accounted for 500000 of the increase with the remainder due to higher personnel expense related to higher head count.
As a percentage of total revenue R&D was 19% for both quarters.
G&A expense was $12.6 million for the fiscal 'twenty first quarter compared with $10 million for last year's first quarter. The increase in G&A expense was due primarily to higher personnel expense stock compensation.
Legal fees, mostly related to an IP infringement case that is now mostly concluded.
And transaction costs related to the acquisition.
As a percentage of total revenue G&A was 15% for the fiscal 'twenty, 2 first quarter compared with 13% last year.
Stock compensation expense totaled $3.6 million for the fiscal 'twenty, 2 first quarter and $2.4 million last year.
The increase as anticipated was related to higher PSU achievement.
This brings the operating income to about 750000 compared with net operating loss of about 950000 last year.
For the first quarter of fiscal 'twenty to GAAP pre tax income was about 450000 compared with about 600000 a year ago.
Our non-GAAP pre tax income was $4.6 million compared with $3.3 million last year.
We recognized the tax benefit of $1.4 million for the current year of first quarter compared with tax expense of 1 million of our last years first quarter with the swing related primarily to a change and valuation allowances.
Okay.
We ended the quarter with approximately $153 million and cash and equivalents compared with approximately $143 million at the end of fiscal 'twenty 1.
The growth and our cash balances is inclusive of a net $9.5 million paid to the FTC acquisition in Q1.
Cash flow from operations for the fiscal 'twenty, 2 first quarter total to $22.1 million compared with $10.9 million last year.
Accounts receivable was $44.9 million on April 32021 versus $46.6 million at the same time last year.
Our days sales outstanding using the count back method was 48 days for the fiscal 'twenty, 2 first quarter versus 56 days from the prior year quarter.
And our short term deferred revenue balance at April 30 was $116.9 million from.
$102.3 million a year ago.
I'll finish up with our guidance for our second quarter of fiscal 'twenty..2 we expect subscription revenue of $38.5 million.
The maintenance revenue of 26 million and operating income of $1 million, including stock based compensation expense of $5 million.
For the full fiscal 'twenty 2 year, we continue to expect subscription revenue of 160 million maintenance revenue of 102 million and operating income of $12 million, including stock based compensation expense of $17 million with that I'll turn the call back to you and Todd. Thank.
Thank you Daniel.
On the sales from you might recall that we've talked in the past about our efforts to grow and lead generation capability and the context of new customers and we've also discussed how these efforts have contributed to the growth of our sales pipeline over the past few quarters.
I'm very happy to report and this quarter as Daniel said and we welcome 23, new customers to the QAD cloud demonstrating that our work in this area is paying off.
Alongside them with the tank conversions of the Daniel mentioned of our on premises customers for 33 deals in the quarter, which is 135% increase of customer count over the same period last year and a record number of new cloud customers from our quarter.
Okay.
We continue to see a good representation of each of our key vertical markets in the cloud sales mix with industrial and electronics, leading the charge slightly ahead of the automotive sector.
That said, we know of good proportion of supplies and automotive of feeling the ongoing effects of the global Microchip shortage, we discussed in the last call.
With the pandemic lingering and some parts of the world and travel and entertainment and the very early stages of recovery. There are still a few sub segments and those vehicles that are having a tough time.
And with global manufacturing PMI at a 10 year high and the vast majority have a positive outlook.
From a geographic perspective, North America, and our EMEA regions had another set of solid bookings numbers for the quarter.
All of the picture is still of <unk> inside of Europe with countries and various states of lockdown and vaccine distributions.
And Asia Pacific were starting to see more activity in China, and Australia and that contributed to an improvement and cloud sales of of recent quarters, While Latin America had another quiet period.
All 3 of our divisions allocation dinosaurs, and precision had strong quarters, reflecting the interest and demand for supply chain of supply and management solutions and the market.
The pandemic and recent events such as the grounding of the ever given ship and the Suez Canal and the global Microchip shortage underlying the need for visibility across supply chains globally, and the ability to make intelligent decisions about how to respond to what can often be unforeseen and unexpected events.
We believe demand will continue to be strong going forward as manufacturers look to add resilience into the supply networks.
Coming off the good momentum of last year, we maintained our focus on management of expenses across the entire business the.
This ongoing drive to improve profitability and yet again, we beat guidance and saw a significant improvement and operating profit compared to the same period last year.
While our cloud margins improved over the same quarter last year, we did see the effect of some onetime software purchases and addition to the amortization of acquisition expense that you referred to.
That said going forward, we do expect to continue margin improvement in line with our stated goals.
The professional services side of the business remains busy with implementation projects and with all of our model now nicely balanced between partners and our direct consulting workforce. The long run of positive margins was maintained and sort of a good improvement over last year's Q1.
Following on from the acquisition of allocation network, and the World class supply and management capabilities, They bring which we discussed on the last call we announced in April the acquisition of foreign trade zone further enhancing our portfolio of solutions to help customers manage the intricacies of today's supply networks and navigate the complexities of judy's custom fees and taxes.
While effectively managing and reducing associated costs.
Recent events of really highlighted both the dependency on and the fragility of supply chains and networks with the recent additions of allocation network and FTC. We're excited about our prospects to accelerate business growth in this part of the portfolio.
And our competitive strength and manufacturing operations and supply chain management together with the growing momentum and global manufacturing markets and continue to attract to attract new customers to the QAD cloud.
And I'd like to highlight a couple of cloud deals from the quarter that also serve to illustrate the interest and supply chain planning and management solutions.
So the first is a global automotive supplier the selected our demand and supply chain planning solution moving them to a single unified platform globally for supply chain planning and which will support a global integrated business planning process as they move away from the current situation of a combination of disparate legacy applications.
And the life Sciences sector, a global leader and the supply of dental products and services to the global Dentistry marketplace chose our global trade and transportation execution solution with the primary objective to empower dental professionals to give quality of life back to their patients. It is critical for them to have a distribution network of global warehouses and carriers and ensure that they remain compare.
While meeting customer expectations.
And our GTT the application was seen as the best solution to address the global transport management vision and all of that carry needs across EMEA Asia Pacific and North America.
Our sales pipeline continues to develop strongly with our weighted pipeline of the present time up 21% when compared to the same time last year, while our unlike the pipeline value increased by 65%.
Both weighted and unweighted pipelines continued to be at new record levels and as the first quarter results demonstrated we're seeing that momentum and lead generation and new business translates into deals.
I'll now hand over to Pam for some detail on that allocation network acquisition and what it means for our supply and management capabilities.
Great. Thanks, and time and it's also a wonderful to see all of the new customers and Q1 today and we'd like to talk about 2 acquisitions, we announced recently consist.
And with our acquisition philosophy acquisition and sale of help inspire requirements of customers are requesting and health of our competitive positioning of.
QAD has a very strong supply chain execution and quality offering that was missing the front and the area of sourcing allocation and network provides a strong operating in this area, including generating RFP and facilitating supplier response, the sourcing events, including <unk>.
Analyzing comparing and Rex mending supplier of bids.
Joining supplier contracts and some <unk>.
Player Onboarding with the acquisition of allocation network QAD is able to complete our supply side supply chain.
Finding the single play and the manufacturer and supplier.
And manage.
The collaboration and interaction, which now includes the player management sourcing options and supplier quality demand and delivery as well of invoicing.
Allocation network as the Munich, Germany based company with the <unk>.
Chairman of the customer base since enquiring and December 2020, we have already made for the new sales and of course, all of the sales and in the cloud.
Our most recent acquisition.
FTE, a recognized leader and foreign training centers and software consulting and contract operations.
T. C Corp is headquartered in mobile, Alabama and has implemented all implemented over a thousand trade zone projects.
Early in the United States.
FTC implementations enables companies to real line of significant savings and customized custom duty fees and.
And taxes.
Pining, FTC with QAD precision global trade and transportation and execution.
The portfolio of capabilities strengthens our competitive offering and provides the ability to expand the FTC globally.
We see many synergies and the cross selling and installed basis and have been building, our finance and expand the QAD precision FTC solution to the free trade zone around the world.
The focus on manufacturing QAD, and continuing to develop acquire and deliver the needed capabilities to both large and smaller companies and <unk>.
Rapid and efficient manner and enables companies to accelerate that growth.
Back to you and Tom Thanks.
Thank you Pam thanks for that color.
Okay, so and looking to the future we remain confident about our long term goals and of again taken another solid step towards them with our first quarter results.
Our pipeline growth and new customer wins and the quarter continued to demonstrate the attractiveness are and of our entire cloud solution portfolio aimed at solving challenges faced in today's world by global manufacturers of company's operating complex supply and networks.
And following on from the success of our virtual Thoughtstream event QAD Tomorrow last September.
We hosted the second edition of the event just last week focus specifically on the challenges of managing today's complex supply chain and supply and networks.
The event had record registration and the attendance globally and has already generated significant interest and our supply chain offerings.
While COVID-19 continues to drive uncertainty and several countries around the world, we do see growth and manufacturing activity with that global PMI level at a 10 year high as reported earlier.
However, we remain vigilant and continue to keep a close eye on the key business trends and new business sales cloud conversions and renewals with existing customers.
But as things stand right now with the manufacturing and Kazmi buzzing and a strong pipeline, we feel increasingly positive about the year ahead and.
And as reported and on our last call. We remain in good shape to drive another year of progress towards our published goals.
Operator, we are ready to take questions from analysts.
And we will now begin the question and answer session.
Ask the question you May Press Star, then 1 and you touched and firm.
If youre using a speakerphone please pick up your handset before pressing the keys.
So withdraw your question. Please press Star then 2.
And at this time, we will pause momentarily to assemble the roster.
The first question today will come from the bond theory with William Blair. Please go ahead.
Great. Thank you and thanks for taking my question.
And congrats on those new customer wins, I guess just to start there and John.
Ma'am.
Are you seeing some of the events that we discussed and of the shortages the Suez Canal et cetera, driving those of where these kind of even earlier than that and they just sort of closed as you work them through the pipeline I just like to understand sort of how are we seeing sales cycle kind of shortened because some of these effects. Some of the things we've talked about sort of the need for transparency chairman of playing out.
A little early to see those.
And the pipelines at the deal.
Yes, I'd say, but of on the majority of those.
And.
Caused by those recent events, but I think those did serve as catalysts and sort of underpin the value the solutions bring and did help when we got to get.
Get them closed for sure.
That said I do believe going forward.
And we've seen our growth and our funnel of opportunities around automat supply chain planning forecasting and logistics solutions and so we do think that each time something like this happens and it just adds more fuel to that fire in terms of the value of visibility and and use of using digital technologies to manage that visibility and responses to that too.
Gotcha Gotcha.
The unweighted pipeline from the second.
You've now had several quarters of that number of the year over year growth has been pretty pretty spectacular right and I understand stuff will fall out of the pipeline.
But if you look at the number of new customer wins and look at the sales cycles of improving maybe demand environment is improving.
And you look at the guidance, which seems really conservative it doesn't feel like Youre accounting for a massive close rate just help me reconcile some of those things because I think youre being conservative guidance, but the love to understand sort of how youre thinking about the guy.
The the wins, the conversions, which obviously a bigger dollar amount.
Why and growing 20% on a weighted basis of 60 something percent of hardware. The basin just put that altogether from me a little clearly and maybe Daniel might want to chime in here.
Sure.
So.
As you recall the volume we issued we issued our guidance for the year.
A little more of our months ago and.
So I think that the first quarter results give us.
Good confidence with regards to those numbers obviously.
As the year progresses, along we'll evaluate whether we need to.
We need to adjust that.
Maybe maybe after Q2 if needed.
Now.
It is.
Coming off of Covid.
Which elongated and a number of of.
Of sales cycles during that time so.
We are we are seeing.
<unk> of those now starting to to convert and to start to shorten again, but.
We're still being.
And cognizant of the fact that the world isn't yet back to normal and.
And we need to.
And take all of that.
Into account.
And we want to make sure that.
We can meet the expectations that we that we set out there.
Gotcha Gotcha I might squeeze 1 last 1 from me.
Before jumping back in Q and.
The partners. So obviously the professional services was strong and you've seen margins come back either.
I really like the move of adding partners.
Help us think through how that plays out not only this year, but over the next 24 months or how do you envision of playing out over the next 24 months versus.
In terms of how much you're going to allocate the partners and what they're going to bring in.
And how much you might sort of try and keep yourselves in terms of training implementation of education et cetera.
Yes, sure so yes.
And the medium to long term strategy for that is the.
Professional services and our ability to get implementation of has done really quickly when compared to the larger competition remains a critical differentiator for us. So we always want to make sure that we've got enough capacity.
<unk> to be able to properly influenced that and work in partnership with our partners to manage that as well.
And so there will be that balance and so we think we've hit the good sort of critical mass points of able to do that and hence why we're seeing the.
The expansion of partners around the World, we do expect to grow of direct consulting.
The capabilities over time, but at a much lower rate than the rest of the company is growing and that's really just to maintain that competitive edge. So.
And short what you should expect to see is continued expansion of the use of partners as the of the role.
Professional services for QAD demand grows.
But a more modest growth around our direct workforce for that.
And as a part of the type of more of the lion's share of that work.
Fair enough fair enough. Thanks for taking my question and thanks for the.
And I appreciate it.
Thanks, Bob.
And once again, if you'd like to ask a question. Please press Star then 1.
Our next question will come from Kevin Liu with K, Lou and company. Please go ahead.
Hi, good afternoon, and nice start to the fiscal year here.
Quick question from me is just can you talk a little bit more about what the pipeline of conversion opportunities looks like and are you.
Seeing customers need of more interested and that is really a lot of the organizations focus more on driving as many new deals as possible.
So no I think over the longer term, we still see a lot of interest and conversions and from the the.
And the on premise and space.
This quarter just happened to be skewing that.
And then the new business value of it but I think we're still calling as we have been consistently of.
The last couple of years now that we expect the mix to be roughly 50.50 of of new customers to converting customers into the cloud.
Of course that will tail off at some point as we've eroded into that maintenance base more but for now we're expecting to see that continue.
Of course.
And for that ratio to hold new business has to grow as well and so we do expect to see more and more new customers coming onboard but at the same time, we will see the conversions continue to grow to for the foreseeable future.
Understood and just as it relates to the competitiveness of the island, obviously <unk> talked a lot about pushing making a bigger push to get their customer base and of the cloud wondering how youre seeing that impact your sales cycles are you seeing more opportunities come into the funnel.
Or is there more let me sort of pricing pressure or anything of that nature.
Kind of out there.
Talking to folks.
Yes, I think.
Of our supply chain capabilities.
Obviously, attracting interest and that's good in the sense that those solutions can stand alone as well as the integrated with our core outpaced system.
And so that allows us to shorten up some of those sales cycles compared to any LP.
And so we're seeing growing demand in that sector and.
And that is good at the same time, though we are seeing and the competitive landscape.
Large global manufacturers.
<unk>.
Are all using.
We've been using and the past SAP for example, still face that that challenge of.
The question of and.
Another re implementation of SAP, <unk>, Hana or seek for and alternative that's perhaps you know of.
The faster rollout and more nimble and agile once its in and we represent that and so a good portion of our funnel is represented by that type of opportunity too.
And then I do think the both what's happened and the supply chain over the last sort of 12 months or so.
We will continue to add fuel to.
That side of the business as well as the pandemic underlying the hay.
Having the solutions in the cloud you applications running in the cloud.
As a much safer bet and having to run the on premises and so that continues to sort of underscore the value of the cloud as well.
Great and just 1 last 1 from me regarding the acquisition of FTC wondering if you can help us out with any sort of incremental revenue and expenses that you didn't anticipate on a quarterly basis.
Yes, Kevin said, we didn't expect to have any material impact.
Either the and.
And acquisition of the FTC and we are really incorporating those into the fabric of of the company.
And.
Obviously longer term, we certainly expect to see significant growth as we start to take those solutions into the rest of the.
QAD install base and and.
And also of the I'd say now become more integral part of our overall offering and that puts the overall offering that much more competitive.
And so that's really where most of the impact.
It's going to be felt.
Alright, thanks for taking the question.
Sure of course.
Thank you.
And our next question will come from Matthew <unk> with Sidoti. Please go ahead.
Yes.
Hey, good afternoon, and thanks for taking my questions can you touch on how much of the pipeline.
And then factor of the factored by chip shortages and other kind.
Of unusual challenges.
Yes, the difficult 1 to answer I would say.
Small fraction of it is directly related to that.
I'd say, it's certainly in the automotive sector and making an impact for.
Short term sales opportunity and conversations as they wrestle with.
The supply chain issues that they have.
But conversely, it is also.
The other event.
And the demonstrates the fragility of CIT.
Mobile supply networks like the grounding of the of a given like the big freeze and Texas and that kind of stuff all affected that and so all of these things just sort of Mount together to drive customers to be more interested and those solutions how much of the directly impacted by any 1 of them is kind of very difficult for us to gauge the zone.
Got it.
Alright, and then.
With respect to the acquisition.
Do you have a.
And I get the there of bias towards.
Driving.
Our conversions through any of the sort of smaller deals or are they primarily targeting customer pipeline or do you think of it.
And that way.
So I think the opportunities in a couple of spots.
So first of all probably 3 so first of all of it does it's another offering that we have that can we go we can go to existing both cloud and on premises customers and that might be if it's an on premise discuss some of that might be the catalyst that gets them into the QAD cloud.
And then for existing QAD cloud customers. It certainly an expansion opportunity for us there and then the.
And the third area is as we get new customers on to 1 of those best of breed applications Thats of land and expand opportunity for us to go and continue to push the rest of the QAD portfolio. So.
We look at sort of all 3 of those areas is real good opportunity for us going forward.
Got it.
Maybe if you remind me kind of cut.
A couple of more but in terms of the TC acquisition, how long do you expect it takes to get operationalized and up and running.
So that cross sell opportunity and and bring it to your portfolio of existing customers.
Sure I think it's very very quick.
We had already worked with them in the past.
Taken advantage of the capabilities it's not.
And it's not something that's technically technically complex to integrate.
And so.
We are expecting to hit the ground running and are.
Pretty much all capabilities are where they need to be today.
A little bit of work to do but not much so pretty much and real time.
Got it and then last question from me and in terms of the new <unk>.
Partners that you discussed I think there were 15, you announced this quarter and how quickly does it take to get them up and running and and impact.
Yes, so if we split them out and just sort of those focused on selling and distribution versus professional services.
The professional services and <unk>.
A little bit longer to get them up to speed in terms of the.
Excuse me of kit configuration of the application so they know space they know.
The requirements if you like on the business model side, but and then learning too.
Configure those requirements and QAD is what takes the time and Thats typically sort of 3 to 9 months, depending on the size of the partner.
And then the distributors and the sales agent side of it.
They can start selling much sooner than that and can be supported by the ecosystem of partners around them. So the sort of more and the 3 to 6 months to really get <unk>.
Momentum going.
Great. Thank you.
And welcome.
And this will conclude the question and answer session I would like to turn the conference back over to Andrew.
And on tuition for any closing remarks.
Okay, well, thanks, everyone for joining us today that concludes the call.
And we look forward to updating you in August with the results of our fiscal 'twenty 2 second quarter.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.