American Software, Inc. (NASDAQ:AMSWA) Q4 2023 Earnings Call Transcript

American Software, Inc. (NASDAQ:AMSWA) Q4 2023 Earnings Call Transcript June 8, 2023

American Software, Inc. beats earnings expectations. Reported EPS is $0.12, expectations were $0.09.

Operator: 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. [Operator Instructions] 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 Klinges, CFO of American Software. Please go ahead.

Vince Klinges: Thank you, Reva. Good afternoon, everyone. And welcome to American Software’s fourth quarter of fiscal 2023 earnings call. On the call with me is Allan Dow, President and CEO of American Software. Allan 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 facts 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 and 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 Allan for our opening remarks.

Allan Dow: 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, ensuring our initial outlook for the fiscal year 2024. After experiencing delays in deal closures over the past several quarters, I am pleased 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 when considering the prior quarters were heavily skewed towards existing clients as those traction — transactions with new prospects face 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 are 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 the 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 churn rates. 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 they continue to see volatility. However, we are focused on improving the margin within that business by adjusting staffing levels and by emphasizing higher margin contract rates. 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 to our service partners.

These efforts will give us performance [ph] improvements, search 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.

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The selection process is taking one month or two months longer, but even more exaggerated is the approval cycle, which has gone from four weeks to six weeks to two months to three months with a lot of pushback on the ROI justification and the time to value questions. This favors our 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 deal 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 installed 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 you 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 the 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 continue to see positive momentum with our network design and optimization solution from the Starboard acquisition. We are 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 are 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 are 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 are 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 are 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 are 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 will turn the call over to Vince, who will provide details on our financial results.

Vince Klinges: Thanks, Allan. For the fourth quarter of fiscal 2023, total revenues were $29.9 million and that was a decrease of 14% from $34.6 million in the same period last year. Our subscription fees increased 18% year-over-year to $13 million, but it was flat on a sequential basis. And as Allan mentioned, our fourth quarter was our strongest quarter of gross subscription bookings for fiscal 2023, but that was masked by a couple of unusual circumstances, including one bankruptcy and several other customers that had — we have categorized as suspended due to delays in contract renewals and payments. Had this not occurred, our sequential year-over-year growth would have been more consistent with what we have experienced in recent quarters.

Our software license revenue was $0.7 million for the current quarter, compared to $3.1 million in the prior year period, which included a special $2 million license fee deal in the existing customers. Professional services and other revenues decreased 32% to $8 million. That’s compared to $11.7 million a year ago period. The year-over-year decrease reflects a 23% decrease in our Supply Chain management unit due to a slowdown in project activity, which we have experienced over the past few quarters and a 43% decrease in our IT Consulting business unit, the Proven Method, which continues to be impacted by macroeconomic conditions. Our maintenance revenues declined 7% year-over-year to $8.2 million, reflecting a normal falloff rate this quarter.

Total recurring revenues comprised of subscription and maintenance fees represented 71% of total revenues in fourth quarter and that compares to 57% in the same period last year. Our gross margin decreased to 60% from the current year period versus 62% in the same period last year. License — our subscription fee margin was 68% for the current year period, compared to 70% in the prior year period. Excluding the non-cash amortization of intangible expense of $398,000 in the fourth quarter, subscription gross margin would have been 71% versus 73% last year, which less amortization of cap software of $366,000 in the prior year period. The decline in our subscription gross margin reflected a loss of revenue associated with the client bankruptcy and suspensions discussed earlier, as well as a higher short-term cost at the end of the quarter for onboarding new customers we secured in the fourth quarter.

Our license fee margin was 77%, compared to 84% in the same period last year and that’s primarily due to lower license fees this quarter. Our services margin decreased to 25% from 33% last year due to lower revenues. With stronger bookkeeping in the fourth quarter, we expect to see seasonally adjusted improvements in utilization moving forward, but we will be closely monitoring our resources to ensure we maintain optimal levels of productivity throughout the year. Our maintenance margin was 80% for the current quarter and that compares to 83% in the prior year period. R&D expenses were 15% of total revenues for the current period and that’s compared to 12% in the prior year period. And our sales and marketing expenses were 18% of revenues for the current quarter and that’s compared to 16% in the prior year period.

G&A expenses were 20% of total revenues for the current quarter and that’s compared to 18% in the same period last year. So our operating income decreased 58% to $2.3 million this quarter, compared to $5.5 million in the same quarter last year, primarily due to a one-time license fee transaction in last year’s fourth quarter. Our net income decreased 20% to $2.9 million or earnings per diluted share of $0.08, compared to net income of $3.6 million or $0.10 per earnings per diluted share. On an adjusted basis, which excludes non-cash amortization of intangible expense related to acquisition and stock-based compensation expense, adjusted operating income decreased 43% to $3.7 million, compared to $6.6 million in the same period last year.

Our adjusted EBITDA decreased 43% to $4.3 million, compared to $7.5 million in the fourth quarter last year. Adjusted net income increased 6% to $4.1 million adjusted for earnings per diluted share of $0.12 in the fourth quarter and that compares to adjusted net income of $4.4 million or adjusted earnings per diluted share of $0.13 in the same period last year. Our international revenues this quarter were approximately 20% of total revenues. That compares to 16% in the same period last year. On the full year 12-month period ended April 30, 2023, total revenues decreased 3% year-over-year to $123.7 million. However, the Supply Chain segment grew 2%. Subscription fees increased 20% to $50.4 million and that compares to $42.1 million last year.

Our license fees were $2.8 million, our professional services declined by 17% to $35.9 million and maintenance revenues declined 6% to $34.6 million. Our adjusted operating income for the current fiscal year decreased 4% to $16.7 million, representing an operating margin of 13%, compared to $17.3 million or 14% margin for the same period last year. Our adjusted EBITDA decreased 11% to $18.9 million for this year and that compares to $21.2 million in the year ago period, representing an adjusted EBITDA margin of 15%, compared to 17% last year. Adjusted net income totaled $15.2 million or $0.45 per diluted share, compared to $16 million or $0.47 per diluted share in the same period last year. We exited the quarter with remaining performance obligation or RPO, which we refer to as backlog of $124 million.

Our total RPO was down 7% from the prior year period due to shorter contract durations from recent deals and we note that both our short- and long-term RPO increased 3% and 5%, sequentially. Looking at our balance sheet. Our financial position remains strong with cash investments of approximately $115.5 million at the end of the quarter, which increased $10.6 million sequentially. During the quarter, we paid $3.7 million in dividends. Our days sales outstanding as of the end of April 30, 2023 was 86 days for the current period and that compares to 62 days in the same period last year due to some delays in collections when compared to last year. However, that is down from 101 days in the prior sequential period, and we — we expect further improvements in the coming quarters.

We remain confident in our ability to collect our outstanding receivables due to the high quality nature of our customer base. As Allan mentioned, we are providing guidance for fiscal 2024. We anticipate revenues in the range of $120 million to $126 million, including recurring revenues of $88 million to $92 million and adjusted EBITDA we anticipate in the range of $19 million to $21 million for fiscal 2024. Although our pipeline continues to grow and our close rates improved in Q4, our revenue guidance assumes that bookings remain volatile in the near-term, given our ongoing economic uncertainty. To the extent our macro conditions improve, we will adjust our outlook as appropriate over the course of the year. In the interim, we will continue to prudently manage our headcount and cost structure, which we expect to remain relatively flat compared to last year.

Finally, we expect to incur about $2 million in expenses this year related to our first earn-out payment for Starboard, of which approximately $0.6 million will be recognized in the first quarter. As we do not consider this a normal operating cost, the related expense will be excluded from our adjusted EBITDA guidance as we — but the impact — this will impact our GAAP earnings for fiscal year 2024. At this time, I’d like to turn the call over to questions.

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Q&A Session

Operator: [Operator Instructions] And we will take our first question from Matt Pfau. Your line is open.

Matt Pfau: Great. Thanks for taking my questions. First I wanted to ask on the clients that you categorized as suspended, some more detail on what happened there would be helpful. Why haven’t these clients renewed or stop paying or what’s going on there?

Allan Dow: Hey, Matt. This is Allan. Good question. Thank you for joining us. There’s a mix of circumstances going on around them. There’s a couple of them that actually got caught up in the banking crisis and we are just on the cusp of getting that sorted out where they have kind of got their feedback under the sails and they are up and running again and we are in the process of putting contracts back in place, amendments back in place and we think we can onboard them here in the first quarter. Others hit some financial distress and just really are struggling, not — we had that one bankruptcy, one that was just flat out down and out, we may be able to recover that account if they don’t go through — end up through liquidation.

But the others are just struggling financially. So we — in some cases have agreed to put them into formal suspension with a renewal date, and in other cases, we are actively working with them, trying to get them back and get them back on board. Hopefully get their financial position in a place that they can continue to fund and pay us for the services that are provided. But we are doing the best we can with them to work and take into consideration the stress they are under and maybe be a little more flexible than in the past just to bring them back.

Matt Pfau: Got it. And then I just wanted to understand the comments a little bit more around sales cycles and approval cycles. It seems like you saw some improvement towards the end of this last quarter, but then you also sort of called out some of the timelines, the extended timelines you are seeing there. So are you still seeing longer-than-normal sales cycles and approval cycles or are those improving?

Allan Dow: No. Actually, that’s — thank you for that question. Good clarity point. We saw a good closure rate in the end of fourth quarter. There were just — these projects came to the point where they were ready to move and we were able to work through the contracts with them and get them into place, but we did not see an acceleration of sales cycle. We saw a better closure rate and success there in the April time period. But those deals that were going down, they went through a longer sales cycle. They have been out there maturing for some time and we worked hard to try to get them in that fiscal period and get them started before the summer season comes in and it’s really a mutual benefit. Projects slow down a little bit during the summer and they wanted to get started and we wanted them to get started as well.

So we were able to use that timing really to help us get that closure rate up. But no, we have not seen a shortening of the sales cycle yet. A lot of move afoot, as I mentioned, our brand, our approach, our — we are recognized in the marketplace for is really value driven projects with very good, very high ROI. And we are using that more effectively now recognizing the pushback on funding to make sure when they go in and ask for the approval to seek funding approval that they are well prepared, they are well versed, they understand how to defend their position. So we are more active in that effort with them. But to-date we are not seeing the sales cycle shorten up yet.

Matt Pfau: Got it. One last one for me. You mentioned that you are hoping to see an increase in conversions this next year. How — what’s driving that, how do you anticipate increasing the number of conversions that you are going to do over the next year?

Allan Dow: Yeah. We put a conservative effort into that initiative. We have a few folks working on it. We have partnered with Microsoft to get some benefits that we can share down the line with our clients to help move that forward. So we got a few incentives on the table to make that happen. We are also just seeing a migration right now where there’s an acceleration of companies realizing they should not be in the IT services business that we as a software supplier, subscription supplier are much better served at doping so. So we are seeing a natural demand lift on their side as well as their willingness to move forward. So it’s a combination of market momentum and some good hard work from our team and a few incentives we are putting on the table with our partners to try to accelerate that process.

Matt Pfau: Okay. Got it. Thanks for taking my questions. Appreciate it.

Allan Dow: You are welcome. Thank you for joining us, Matt.

Operator: [Operator Instructions] We will take our next question from Zach Cummins. Your line is open.

Zach Cummins: Great. Hi. Thanks. Allan and Vince, I appreciate you are taking my question. Allan, can you just talk about what sort of assumptions you are making for the recurring revenue side of the business going into this year, it still seems like a little bit of uncertainty around closing cycles. So just curious of how you are thinking about the guidance that was set and the assumptions that were made?

Allan Dow: Yeah. In particular, our greatest uncertainty is in the short-term and I think if you listen to the economics minds that are out there that probably know better than we do. We think the most pressure will be here in the shorter term, the remainder of this calendar year. I have been through enough of these cycles. This is my sixth one, Zachary, since I have been here and what we have learned over those time periods of thrashing through those time and time again is that the Supply Chain market is an early indicator of a slowdown and they are also an accelerator out of a slowdown. So I have a belief, we have a belief that things will stabilize and really probably just get back to normal as we get into or past the Christmas selling season this year and for us in the Supply Chain space.

That precedes us going out shopping for our presence. They are putting that product on the shelf. Our brand owners are putting those products on the shelf in the late fall and ahead of the Thanksgiving season. So we feel much better about the back end of the year than we do the front end. We haven’t given up on the front end. There are good active projects going on. There are many companies and a number of segments that realize that they are in an inflection point in their Supply Chain and recognizing the need for Supply Chain Planning capabilities more than ever because inflection points cause uncertainty in how they should staff their inventory, hold their inventory, move their inventory, what products to get, what’s going to sell. So they need all the help they can and they are moving forward on these projects.

So we are going to get business done in the next six months. But how fast and how quickly and the timing of it is tough. And then, of course, from a revenue standpoint, the later you get in the year, because we take that revenue monthly and report it quarterly, obviously, that impacts the year-over-year results, because the later you are in the year, you don’t have the accumulation effort from earlier months. So that’s why we are being pretty conservative. But we — there’s no question that there’s a lot of demand. Our pipeline is still growing. There is more and more need for Supply Chain capabilities and we have always seen it in the past that strong companies will come out of it even stronger by making these investments.

Zach Cummins: Understood. That’s helpful. And can you talk a little bit more about your strategy when it comes to Supply Chain Professional Services. It seems like there’s more of a concerted effort for you to ship some more of that project work over the system integrators?

Allan Dow: We are. And actually, we have had — there’s a couple of things that are under play there. I mentioned both of those. But, yes, we are getting more engagement, more participation from the third-party integrators those SI firms and through our distribution network, our value-added resellers. We continue to build their skill sets because they provide some valuable surge assets, as well as local presence. So we want both of those parties to play a stronger role going forward. Both have a broader reach than we have independently in the marketplace and that builds that ecosystem. But we are also seeing the impact now of our three-year long initiative to continue to improve the efficiency of enable and the timeline that have been able to get systems up.

That’s come through practice. It’s come through development efforts. It’s come through just attention to detail on making sure that we work projects diligently in our prescriptive approach. Don’t go in and just waiting for them to the client to decide what they want, we go in and tell them what’s best and then we debate with them a little bit on maybe the scope for that and the approach to it. But it’s just making for much more efficient projects and that’s a good thing. We are not a service company. We are not trying to be an SI firm. We are driving these projects based on client value and return on the investment they have made and a subscription provider of planning applications is really what we want to be known for, not a services company.

Zach Cummins: Understood. And final question for me, probably, geared towards Vince. But how should we be thinking about the progression of subscription gross margin as the subscription line continues to scale here in the coming fiscal year?

Vince Klinges: Yeah. We are anticipating — right now it’s 71% if you take the amortization of the cap software out. We are anticipating kind of towards the back end of this fiscal year 2024. We should be at or near 75%. And as we approach the next fiscal year, which towards the back end of fiscal 2025, we should be close to 80%. So that’s what we are targeting.

Zach Cummins: Understood. Well, thanks again for taking my questions and best of luck with the remainder of the quarter.

Vince Klinges: Thank you.

Allan Dow: Thank you, Zach. Thank you.

Operator: [Operator Instructions] We will take our next question from Anja Soderstrom. Your line is open.

Anja Soderstrom: Yeah. Thank you for taking my questions. So I just want to follow up on your commentary about the softness playing out here in the shorter term, which gives you confidence that will — that is just a short-term softness?

Allan Dow: Yeah. Anja, thanks for joining us. Yes. Good question. Definitely we are going to continue to see some volatility. It’s not about whether these projects are there. It’s really that approval cycle that’s out there. We have got active campaigns going well into the cycle. There’s a lot of potential for our Q1, a lot of potential for our Q2, and then, of course, we are into the new budget season for the new fiscal year, people are spending money at the wrap-up of the calendar year and new money at the kickoff of the new calendar year. So we got a couple of selling cycles that will help us here. But it seems like we get some good news. And then all of a sudden, we get some troubling news and people take a big deep breath and pause for a moment.

So we are doing our best to accelerate those to not allow those delays to give them confidence to move forward and seek approvals, but there’s limited impact we can have on getting that done. So we are doing the best we can. So we will see some volatility in the remainder of this year. We will see some ups and downs. But, overall, those ups and downs will be mixed in with the trend of growth, we are confident of that.

Anja Soderstrom: Okay. Thank you. And in terms of M&A, what do you see there in terms of the environment and valuations and what are you looking for specifically in terms of acquiring something?

Allan Dow: Yeah. Let’s — we will talk about our — what we are seeking for. We are going to stick to our knitting. We want applications that are complementary to what we have today in the Supply Chain planning space. Our strategy on that is driven by the fact that we have an installed base that knows us for Supply Chain planning to the extent that we can provide new and expansive opportunities for those clients we sell back in. We are looking for things that would allow us to incent people to do this lift in shift we were talking about. That would be helpful to find one of those in the mix. We want technology synergies. We want proven capabilities in the marketplace so that we can put them right to work. We don’t want to have to go be the test pad for new ideas.

We want to be — we want to find proven opportunities that have some revenue proof points behind them. So they have got subscription revenue going. So we have got a number of things in the works. We are very active in the dialogue. We anticipate that while we are all contemplating our summer breaks here and long before kids go back to school, if you have them, that we will have tucked in at least one of these potential opportunities that lie ahead and we are not going to pause there, we are going to keep going. We intentionally with the Starboard acquisition we did last summer, we put a conscious thought process into using that as a template for acquisitions and ingestion and how we would manage those acquisitions. So that one went so well and our template worked well and we learned a little bit from it that we have modified now that we have no reason to pause even if we pull in one, assumes we can find the second one, if it’s a month later or two months later or three months later, we will pull the trigger on that as well.

We know we can do acquisitions in parallel right now. So we are very comfortable for that. So we are or a full court press. Relative to valuations, much better than they were a year ago, much better than they were two years ago. The other thing that’s very interesting is, as we all know, the financial markets are pretty tight. So if companies are in growth mode, even though if they are not profitable, in particular, if they are not completely profitable right now and there’s always synergies for an acquisition, their ability to go to a bank and get funding right now is closed off, that’s not possible. So they are facing some sort of transaction and we are a comfortable place to go. Our strategy on acquisitions is that we buy the technology, but equally important is we bring the people in.

We want them to be part of the long-term. We did that with the Starboard acquisition, all of those folks are still here. We did it with all our prior acquisitions and those folks are predominantly still here and even some of them that were 10 years ago. So we have a home for them. We can let them fulfill their vision, still see their product and their strategy they put together play out, only we give them comfort, we give them the strength of a very viable company and we give the momentum and more presence than they have at their current operations. So we are a safe home when they have to go do a transaction or safe and comfortable home that they can still fulfill their vision. So we believe that gives us a bit of an advantage in this still relatively competitive market out there.

So we are finding pretty good stuff. So thank you for giving me a platform for getting a few of those points in, Anja.

Anja Soderstrom: Okay. Thank you and that was all for me.

Allan Dow: Thank you very much. Thank you for joining us.

Operator: And our next question comes from Matthew Galinko. Your line is open.

Matthew Galinko: Hey. Thanks for taking my question. Can you talk about how the pricing environment in effect is changing given some of the elongation of the sales cycle you mentioned, I think, for quest for justifying ROI from the deal? So is there any — how much pushback are you seeing on price, does that result in more competition or more competitive bidding on projects? Just what are you seeing?

Allan Dow: Pricing hasn’t changed much. It’s pretty much the same landscape. I think we are — we have all — this is a mature market, even though there’s new technologies out there it’s a mature market. The value proposition challenge, so really no change there. Our average discounts have been unchanged for several years now and we always get pressure. So as soon as you get to the procurement department, you are the highest bidder and you are the worst bunch of folks that are out there and we are trying to fleet some. But that’s the job of the procurement department. So we get pretty comfortable and have a good chuckle about that every time we hear it. But the pushback, Matt, good question, the pushback that is coming in isn’t so much that the price is too high.

And even the teams know they need to go in with a justification, but they don’t have a solid backing behind it. They don’t have the confidence and the backbone to show why they are going to get the return on investment and what’s the assurance behind getting that return on investment. And is the organization ready to make the investment of people and resources and can they really pivot and will the user community adopt it? Those are the kind of pushback the financial folks, the executives that are making the approvals on these projects. Once the confidence that the return will actually come and so it’s probably more of a debate about the confidence and risk of getting a return than it is about whether there’s a number on the table that justifies the funding that they are going to have, because they always — they know they need to have a multiple of return on investment, but it’s that confidence factor.

So hopefully that adds a little more insight to the kind of pushback and the challenge. When times get tight, they push on every lever. Do we have the people? Is there data ready? Is — are you sure we are going to get that return? Is our user community going to be able to adopt it? So they are looking for any inkling that maybe I can just keep that money in my pocket instead of putting it out there on the table on this project right now. Does that help, Matthew?

Matthew Galinko: It does. Thank you.

Allan Dow: Yeah.

Operator: [Operator Instructions]

Allan Dow: Okay. Thank you very much.

Operator: It appears we have no further questions.

Allan Dow: Okay. Well, thank you very much. Thank you everyone for joining us this afternoon. We certainly appreciate the time joining us late in the day and we encourage you to have a good evening and we will talk to you again soon.

Operator: This does conclude today’s program. Thank you for your participation and you may disconnect at any time.