American Software, Inc.

Please stand by, your program is about to begin. Good day, everyone, and welcome to today's fourth quarter and fiscal year 2023 results for American Software. 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. You may register to ask a question at any time by pressing the star and one on your touchtone phone. You may withdraw yourself from the queue by pressing star two. Please note this call may be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Vince Klingas, CFO of American Software. Please go ahead.

Thank you, Reza. Good afternoon, everyone, and welcome to American Software's fourth quarter of fiscal 2023 earnings 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. 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, 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 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'd like to turn the call over to Alan for our opening remarks.

Thank you, Vince. Good afternoon, everyone, and thank you for joining us today. I'd like to begin by reviewing our fourth quarter results, providing an update on the current business environment, and sharing our initial outlook for the fiscal year 2024. After experiencing delays and deal closures over the past several quarters, we plead to report that we had a strong finish to the year. We had a strong closure rate, and our gross subscription bookings were at the highest level of any quarter this year. This was evidenced by our RPO expansion of 4% quarter over quarter, with progress in both short and long-term components. During the quarter, we had a bias towards new logo wins, which was not unusual considering prior quarters were heavily skewed towards existing clients as those transactions with new prospects faced greater scrutiny. We still anticipate that over the year, our new cloud bookings will be split evenly between new and existing clients. However, we could see a bias toward existing clients if the economic pressures accelerate because Existing client projects have easier and faster approval rates, given that they're typically smaller add-on projects. Although our new bookings performance was encouraging, the ongoing economic stress had a direct consequence on our fourth quarter revenue, most notably on our cloud revenue growth. Where we typically see only churn for small, non-strategic subscriptions and temporary projects, in the fourth quarter, we took some very unusual adjustments. Specifically, we were negatively impacted by a bankruptcy, and we put a few contracts into suspension due to delays on renewals and payments. We anticipate that a few of these may be recovered later this year, but we took a very conservative approach and removed all the revenue on those contracts from our fourth quarter results and from the RPO. The net result was a wash in the sequential gains we would otherwise have achieved in cloud revenue in fourth quarter. We expect to see an uplift in Q1 resulting from those Q4 bookings, but several of those projects started too late in the quarter to fully offset the cancellations. Vince will provide some additional commentary on the impact of these cancellations. However, we expect the year ahead to track along our normal turn rate. In the end, we were very pleased that our cloud revenue was up 18% year-over-year in the fourth quarter, and for the full fiscal year 2023, we were up 20% year-over-year. This is great progress from our primary objective of growing our recurring revenue, which again represented 71% of our total revenue this past quarter, exceeding the 70% threshold for the second quarter in a row. We also saw continued downward pressure on our services revenue. Specifically, the economically sensitive IT staffing business experienced significant decline and may continue to see volatility. However, we are focused on improving the margin within that business by adjusting staffing levels and by emphasizing higher margin contracts. Furthermore, in our supply chain business, the impact of our simplification initiative is reducing the overall effort from each project and we also continue to outsource incrementally more work for our service partners. These efforts will give us improvement, surge capacity, a broader market reach, and a continued emphasis on our more reliable recurring revenue streams. Although the economic uncertainty continues to persist, we are cautiously optimistic as we enter the fiscal year 2024. The remainder of this calendar year is the hardest to predict, given the headwinds from recent interest rate hikes, regional banking issues, and recession fears, but the longer-term trends all point to a strong market for supply chain planning solutions for years to come. Currently, the potential for a recession continues to create uncertainty in our core consumer goods markets. We have seen both existing clients and prospects carefully scrutinizing their costs, resulting in longer collection times and elongated sales cycles. The selection process is taking one or two months longer, but even more exaggerated is the approval cycle, which has gone from four to six weeks to two to three months, with a lot of pushback on the ROI justification and the time to value questions. This favors a prescriptive DNA brand, which consists of value-driven, agile implementations, prescriptive methodology tailored to each client's needs, and an off-the-shelf configurable solution. But it also creates more uncertainty into the timing of specific field closures. Our overall pipeline is still continuing to grow. It's up about 10% over this time last year, even with the accelerated closure rates at the end of the fourth quarter having offset some of the top of the funnel. Additionally, with the large install base, most of which is still on-prem. We have ample pipeline to support the accelerated lift and shift transition objectives that we set out for this fiscal year. Our goal is to significantly increase our conversions this year, potentially triple the historic trend of 10 or 12. First and foremost, these transitions give our clients the opportunity to take advantage of all the new features from newer releases. but also continues to build upon the recurring revenue stream, enhancing the strength and predictability of our financial model. One interesting transition is that the staffing pressure has been relieved due to recent layoffs in our sector, which will allow us now to continue to focus hires in critical areas of need and to backfill only those critical role vacancies as we see the need arise, as opposed to pre-hiring or having underutilized bench strength to hedge against the labor stresses. We will, of course, continue to control our costs and with a goal of maintaining a flat to slight reduction in overall cost this year in spite of some of the accelerating demand. On the acquisition front, first, we can continue to see positive momentum with our network design and optimization solution from the Starboard acquisition. We're still building that book of business with new wins from both standalone projects as well as part of an integrated transformational suite where it is used strategically to optimize the existing supply chain network utilization. Furthermore, we believe the recent layoffs at Coupa will result in accelerated defections from the Llamasoft community, creating even more market demand for the easy-to-use, sustainable model that we offer. We're making progress in our efforts to find new acquisitions that will be complementary to our current platform. We believe that it is likely that we will be able to meet our goal of ingesting one or more strategic fit companies this year, utilizing our on-hand cash for a stronger investor return while maintaining the quarterly dividend, which is covered by earnings from our operations. As we look forward to the fiscal year ahead, we remain bullish on the supply chain planning market and our ability to compete effectively. However, we're taking a conservative approach to our financial guidance due to the increasing economic uncertainty in North America, which is by far our largest market, and the continued pause in new projects in Europe, where some of the largest economies have already entered into a recession and facing continued weight of the ongoing war. Our guidance metrics remain unchanged from last year, but we would place greater emphasis on the guidance for recurring revenue and the adjusted EBITDA as these remain the most stable metrics. We anticipate that the professional services revenue streams may remain under a lot of pressure, particularly in the economically sensitive non-core IT services segment. For fiscal 2024, we're expecting recurring revenue to be between $88 million and $92 million. For adjusted EBITDA, which removes the acquisition costs and stock-based compensation, to be between $19 million and $21 million, and for total revenue to be between $120 million and $126 million. However, as noted earlier, the total revenue outcome will be highly dependent on the variations in the IT services business. In summary, we're pleased with the fourth quarter results in the supply chain segment during these uncertain times and expect to see further progress in the year ahead. We will remain disciplined with our investments in the short term but continue to see large growing market opportunity for our supply chain solutions. As we head into the new fiscal year, we're pleased to see continued growth in our pipeline, which will allow us to continue increasing our recurring revenue and provide the flexibility to achieve EBITDA growth by managing costs appropriately. At this time, I'll turn the call over to Vince, who will provide details on our financial results.