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Edited Transcript of ATEA earnings conference call or presentation 13-Aug-19 8:30pm GMT

Q2 2019 Astea International Inc Earnings Call

Horsham Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Astea International Inc earnings conference call or presentation Tuesday, August 13, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Fredric Etskovitz

Astea International Inc. - CFO & Treasurer

* Zack B. Bergreen

Astea International Inc. - Founder, Chairman & CEO

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to the Astea International Inc. Second Quarter 2019 Financial Results Conference Call. (Operator Instructions)

With us today from Astea International are Zack Bergreen, Chairman and Chief Executive Officer; and Rick Etskovitz, Chief Financial Officer.

I would like to remind you that this conference call may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in today's conference call are forward-looking statements, including statements regarding the company's business strategy, plans, objectives and statements of nonhistorical information. Although the company believes the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Those factors are incorporated by reference from the section entitled Risk Factors outlined in the company's filings with the Securities and Exchange Commission. You should not place any undue reliance on these forward-looking statements, which speak only as of today, August 13, 2019. All forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required by securities laws, the company does not assume any duty to update these forward-looking statements.

With this statement concluded, I will turn the call over to Mr. Bergreen. Please go ahead. The floor is yours.

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Zack B. Bergreen, Astea International Inc. - Founder, Chairman & CEO [2]

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Thank you, Brie. Good afternoon, and thank you for joining us today to discuss our second quarter 2019 results. Following my overview, I'll turn the call over to Rick Etskovitz, Our Chief Financial Officer, who will cover the details of the financial results. We'll then open the call for Q&A.

We have just filed our 10-Q with the U.S. Securities and Exchange Commission this afternoon. It is available online via the Securities and Exchange site. And later today, we will make it available on our -- on the investors relationship section of our company website.

I'm pleased to start today's call by sharing that we have made considerable progress in growing our SaaS business or hosted business with the SaaS revenue increased -- increasing by more than 40% as compared to the second quarter last year. Growing our recurring SaaS revenue continues to be our main goal at the company, and we remain laser-focused on this asset with both new and existing customers.

We also had considerable add-on license expansion in our existing installed base during the quarter 2, with customers buying more licenses for additional users, thereby increasing their investment in our Alliance platform. These add-ons from existing customers are a further testament to the benefit and the value they derive from our product and does substantiate their ongoing commitment to Astea.

Although some of the new sales opportunities have moved into quarter 3, we are pleased with the customer expansion and growth of our SaaS business in the second quarter. In fact, some of the sales opportunities that have slipped into the third quarter already closed. We are pleased to have such a strong start to the third quarter, and I look forward to sharing more information on the new clients we signed in next time we meet.

Before switching topics, I would like to touch on our strategy -- our company-wide strategy and goals to convert our on-premise customers to SaaS over the next 3 to 5 years. I'm happy to report that this focused effort is well underway with accelerated interest from a number of our customers to make the switch as early as the end of this year. In fact, we have already started the conversion process with some clients.

Conversion to SaaS is compelling for several reasons. From a cost and efficiency perspective, it saves our customers significant capital and operational expenses by not having to host and manage their own IT infrastructure. And as trusted cloud providers, Astea manages all the hardware, the software upgrades, the patches, the data security and more. It also provides our [SaaS] customer with more flexibility and scalability as well as higher uptime so they have uninterrupted access to the service management platform.

I want to briefly touch on some of the opportunities that we have and are pursuing the third quarter. Our first initiative is to increase the focus on penetrating Central or South America region. We are actively pursuing opportunities that will increase our presence in these emerging markets. We're also on the verge of concluding an agreement with a reseller in South Africa who will help us increase our footprint in the Africa and Middle East region.

Additionally, we have some increased focus on our SMB market by adding dedicated sales resources for our field center platform. With the growing number of small and medium-size businesses in the field service industry, we made a strategic decision in the second quarter to increase our focus on the sales execution for that growing market segment.

Lastly, in the third quarter, we are planning to conclude a global expansion into multiple European countries from one of our key North American customers. This planned expansion is clearly confirmation of our global customer's company's ongoing commitment to Astea and demonstrated they're now realizing significant positive return on their business here in North America and thanking for our partnership.

While we are on the topic of sales and marketing, I will share that we have a healthy pipeline of new opportunities as well as expansion from many of our customers globally, thanks to our enhanced marketing programs. Our strategic expansion in new sales leadership, quota-carrying sales executives and marketing staff members reinforce our dedication to transform the company to a sales and marketing-driven culture. All this increases our sales and marketing activities to boost our optimistic expectations for the remaining of 2019 and through to 2020.

We have also increased our implementation partners network to keep pace with our expected sales growth. I previously shared that we have added PricewaterhouseCoopers as our new implementation partner in EMEA. The other new implementation partner is YASH Technologies. Similar to PWC, YASH is a leading technology integrator and outsourcing partner for large and fast-growing global clients. As a well-regarded global IT service provider, YASH is quickly coming up to speed in order to help us implement new clients starting in the third quarter.

Before I turn the call over to Rick, I would like to briefly mention the new partnership we announced today with Software AG, a global Internet of Things provider, and as a member of -- as the number of smart devices deployed in the field service industry increases, IoT is fast becoming the cornerstone of innovative and differentiated business solutions for service providers.

Our integrated field service management platform, which incorporates an IoT solution that we'll now offer will greatly help us attract new businesses. Adding an IoT component to our platform helps service organizations remain relevant in a highly competitive industry and, most importantly, meet the demand of end users for highly personalized service engagement. Software AG will join us -- our North American sales and marketing team at the Field Service Amelia Island Conference next week, formally promoting this new integrated solution to the market through a live product presentation and educational workshop.

With that, I'll turn our call over to Rick to make some additional -- and I will make some additional comments after he finishes his overview. Go ahead, Rick.

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Fredric Etskovitz, Astea International Inc. - CFO & Treasurer [3]

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Thank you, Zack. For the quarter ended June 30, 2019, Astea reported revenues of $6.4 million compared to revenues of $6.6 million for the same period in 2018. Net loss to shareholders for the quarter was $711,000 or $0.20 per share compared to net income to shareholders of $179,000 or $0.05 per share for the same period in 2018. For the 6 months ended June 30, 2019, total revenues were $13 million compared to $13.3 million for the same period in 2018. Net loss to shareholders was $781,000 or $0.22 per share compared to net income of $60,000 or $0.02 per share for 2018.

Subscription revenue was $1.2 million for the quarter ended June 30, 2019, an increase of 43% over the same quarter in 2018. Total recurring revenue, which consists of subscription revenue and maintenance revenue, was $3.8 million, which comprised 60% of total revenue for the quarter. This compares to total recurring revenue of $3.5 million in the second quarter of 2018, which comprised 53% of total revenues.

Our Q2 SaaS growth would have been higher had several customer go-lives not been delayed. As you know, we recognize revenue on our SaaS implementations when the customer does go live. Many of the delayed go-lives took place in the early part of Q3.

Subscription revenue for the 6 months ended June 30, 2019 was $2.5 million, 45% over the same period in 2018. Total recurring revenue to date was $7.6 million, which is 59% of total revenue. For the first 6 months of 2018, total recurring revenue was $7 million, which was 52% of total revenue. Adjusted EBITDA was $102,000 negative for the 6 months ended June 30, 2019 compared to $38,000 negative for the same period last year.

This concludes my remarks. I will turn the call back over to Zack.

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Zack B. Bergreen, Astea International Inc. - Founder, Chairman & CEO [4]

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Thank you, Rick. Before we conclude today's call, I would like to touch on the successful customer satisfaction survey that we recently conducted. The results from the survey were very favorable, validating the level of engagement and commitment from our customer base. We regularly survey our customers so we can continue to achieve better results and [are now aware] we should focus our attention. Additionally, I will reiterate that some of our existing -- exciting product development projects that are very well underway. We had a significant product release slated the latter half of this year, which will introduce new capabilities and further differentiate us from the competition.

This continued focus on technology innovation will bring us in closer alignment with our customers, many of whom provide valuable feedback and that enhances the creative ideas our own team bring to the table. Stay tuned for more details on our product road map in our next call.

And some of you who remain vigilant on our commitment to bring new clients and significant growth to the business. Our strong pipeline globally and strong start for the third quarter are a testament that our continued focus on -- is paying off. We are energized by our new sales leadership and growing sales marketing team, successful partnerships that we have formed and exciting opportunities that we are pursuing to break into emerging and new SMB market segments.

Thank you for your continued support and for your partners -- participation today. With that, I will open the call for Q&A.

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Operator [5]

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(Operator Instructions) And we appear to have no questions at this time, so I'll turn it back to Mr. Bergreen for closing remarks.

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Zack B. Bergreen, Astea International Inc. - Founder, Chairman & CEO [6]

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Thank you, Brie. I want to thank you all for attending today's call. I hope to meet all of you at our next call in November. Thanks and goodbye.

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Operator [7]

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This does conclude today's program. Thank you for your participation. You may now disconnect.