American Software, Inc.

Good day, everyone, and welcome to today's American Software third quarter fiscal year 2023 preliminary earnings results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note, today's call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to your CFO of American Software, Vince Klingis. Please go ahead.

Thank you, Chloe. And good afternoon, everyone, and welcome to American Software's third quarter fiscal 2023 earnings conference call. On the call with me is Alan Dow, President and CEO of American Software. Alan will provide some opening remarks, and then I will review the numbers. But first, our safe harbor statement. This conference call may contain forward-looking statements, including statements regarding, among other things, our business strategy and growth strategy. Any such forward-looking statements speak only as of this date. These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in or contemplated by or underlying the forward-looking statements. There are a number of factors that could cause actual results to differ materially from those anticipated by statements made on this call. Such factors include but are not limited to changes in uncertainty in general economic conditions, the growth rate of the market for our products and services, the timely availability and a market acceptance of these products and services, the effect of competitive products and pricing and other competitive pressures, and the irregular and unpredictable pattern of revenues. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. At this time, I will turn the call over to Alan for our opening remarks. Thank you, Vince.

We delivered strong cloud revenue growth and adjusted EBITDA in our third quarter results. Similar to last quarter, our revenue was mostly in line with expectations, with the exception of our professional services revenue, where we were affected by a few factors, which I'll address in a few minutes. We achieved 20% year-over-year growth in our subscription revenue and have maintained a very solid maintenance retention rate, thus delivering recurring revenue that represents 70% of our total revenue. This is the first time our recurring revenue has broken into the 70% range. Reflecting our strong cloud revenue growth and maintenance retention, total revenue in our supply chain segment was up 3.5% year-over-year despite the slowdown in services. In regard to the decline in professional services, the pullback was most prominent in our IT consulting business, which is more sensitive to macroeconomic conditions and started to decline late last year. However, we also saw a significant number of supply chain projects pause during the holiday period as clients focused their attention on business performance. We have just recently seen a recovery of project activity in the supply chain segment and are working diligently to continue that trend into the new calendar year. Furthermore, we plan to leverage our service delivery partners in ongoing and new projects to allow for a more profitable and flexible model where we can shift resources with market demands more easily. As we head into our fiscal year end, we're pleased to see a renewed growth in our pipeline. However, the potential for a recession continues to create uncertainty in our core consumer goods and retail markets. We have seen both our existing customers and prospects carefully scrutinizing their costs, resulting in longer collection times, and elongated sales cycles. Although we expect to recover progress in the fourth quarter, it will have a diminished impact on the revenue for the fiscal year, delaying the capture of subscription revenue and professional services while projects go through a ramp-up period. Given the current market conditions and the ramp time on revenue delivery, we're making a final adjustment to our guidance for fiscal year 23. Due primarily to the reduction in our expectations for professional services, we're lowering our fiscal year revenue guidance to fall between $123.5 million and $125.5 million. We are also reducing our recurring revenue guidance slightly to land between $84.5 and $85.5 million. The revised range reflects both the delayed start of projects in our backlog which impacts the timing of when we can recognize subscription revenues and some added conservatism given the challenging economic conditions in our extended collection times. To be clear, we have been through these cycles before and we remain confident in the strength of our customer relationships. We have not seen any uptick in churn thus far, but considering our experience during the pandemic, we want to ensure we can deliver on our financial guidance. Finally, even with our lower revenue outlook, we're maintaining our prior adjusted EBITDA expectations of 18 to 20 million. In summary, we're pleased with the third quarter results in the supply chain segment during these uncertain times and expect to see further progress during the calendar year ahead. We will remain disciplined with our investments in the near term but continue to see a large growing market opportunity for our supply chain solutions. At this time, I'll turn the call over to Vince, who will provide the details on our financial results. Thank you, Alan.