QAD Inc. (NASDAQ:QADB) Q3 2019 Earnings Conference Call - Final Transcript

Nov 26, 2019 • 05:00 pm ET

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QAD Inc. (NASDAQ:QADB) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by and welcome to the QAD Fiscal 2020 Third Quarter Financial Results Call. At this time, all lines are in a listen-only mode and later we will conduct a question-and-answer session. (Operator Instructions) And as a reminder, today's call is being recorded. I would now like to turn the call over to our host, Chief Accounting Officer, Kara Bellamy. Please go ahead.

Executive
Kara Bellamy

Hello everyone and welcome to today's call. Before we begin, I'd like to ensure that everybody understands that our discussion may contain forward-looking statements that are based on certain expectations and analysis. 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 pre-tax income, which is a 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 company's website. Now I'll turn the call over to our CEO, Anton Chilton.

Executive
Anton Chilton

Thank you, Kara. Good afternoon and thank you for joining today's call to discuss QAD's fiscal '20 third quarter results. Joining me on today's call are Pam Lopker, our President; and Daniel Lender, Chief Financial Officer.

Total revenue was in line with guidance for the quarter with an expected decline over the same period last year, largely due to reductions in professional services and license sales. We closed a record number of cloud deals and momentum in competitive new cloud customer wins continues to be strong. Material improvements in both professional services and cloud margins have contributed to a stronger than forecast net income. I'll now turn it over to Daniel to discuss the financial results.

Executive
Daniel Lender

Thank you, Anton. Third quarter total revenue and subscription revenue were generally in line with our guidance while before tax profit, both GAAP and non-GAAP, exceeded our projections resulting from higher subscription and professional services margins. For the fiscal '20 third quarter, currency had a $1.2 million negative impact compared with last year and a $700,000 negative impact compared with fiscal '20 second quarter.

Our profit was negatively impacted by $242,000 compared with the prior year and $100,000 compared with the second quarter. Please note that my discussion today about growth rates are given on a constant currency basis, unless otherwise stated. Third quarter revenue was $77.8 million compared with $79.6 million last year primarily resulting from anticipated declines in professional services business and in license sales.

As previously discussed, last year's professional services revenue included a multi-site global project. Lower license revenue was due mainly to our transition to the cloud. Subscription revenue grew