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AS

AMERICAN SOFTWARE INC (AMSWA)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 revenue was $25.5M with Adjusted EPS of $0.19; GAAP Diluted EPS from continuing operations was $0.12. Adjusted EBITDA margin was 16% of revenue; subscription fees grew 9% YoY while total revenue declined 7% YoY due to services and maintenance softness .
  • The company maintained FY2024 guidance provided last quarter: total revenues $100–$104M, recurring revenues $85–$88M, adjusted EBITDA $14.5–$16.0M. Management cited a stronger pipeline and customer engagement as calendar 2024 began .
  • CFO and CEO highlighted backlog (RPO) of ~$119M, international revenue at ~22% of revenue, cash and investments of ~$78.2M, DSO improvement to 86 days; dividends of ~$3.8M and buybacks of ~516K shares for $5.4M in Q3 .
  • Street consensus via S&P Global could not be retrieved in our system for AMSWA; however, third-party sources noted a significant EPS beat (Adjusted EPS $0.19 vs expectations ~$0.06). Estimates need re-basing given recurring mix and services softness .

What Went Well and What Went Wrong

What Went Well

  • Subscription momentum: Subscription fees rose 9% YoY to $14.1M; recurring revenue (Maintenance + Cloud) reached 86% of total revenue, reflecting mix shift to more durable streams .
  • Profitability resilience: Adjusted net earnings from continuing ops were $6.3M ($0.19 diluted EPS); Adjusted EBITDA was $4.0M (16% margin). GAAP net earnings from continuing ops grew 31% YoY to $4.2M despite revenue decline .
  • Pipeline and engagement: “We delivered solid third quarter results and remain on track to achieve our guidance… we have seen an increase in activity… adopt our AI-first supply chain planning solutions… poised for a strong finish to fiscal 2024.” — Allan Dow, President & CEO .

What Went Wrong

  • Services and maintenance softness: Total revenue fell 7% YoY to $25.5M, driven by a 28% decline in professional services and 11% decline in maintenance (partly due to Transportation divestiture) .
  • Operating leverage pressure: Operating earnings from continuing ops decreased to $0.8M (from $2.7M); EBITDA fell to $2.4M vs $3.5M in the prior-year quarter given revenue mix and higher subscription services cost .
  • License revenue continued to compress: Software license revenue declined to $0.3M vs $1.0M last year, consistent with cloud-first strategy but dampening near-term revenue recognition .

Financial Results

Quarterly Financials vs Prior Quarters

MetricQ1 FY2024Q2 FY2024Q3 FY2024
Total Revenues ($USD Millions)$29.168 $25.690 $25.536
GAAP Diluted EPS (Continuing Ops)$0.08 $0.02 $0.12
Adjusted Diluted EPS (Continuing Ops)$0.12 $0.08 $0.19
EBITDA (Continuing Ops, $USD Millions)$2.298 $2.506 $2.449
Adjusted EBITDA (Continuing Ops, $USD Millions)$3.851 $4.086 $4.035
Adjusted EBITDA Margin (%)13% 16% 16%

YoY Comparison (Q3 FY2024 vs Q3 FY2023)

MetricQ3 FY2023Q3 FY2024YoY Change
Total Revenues ($USD Millions)$27.427 $25.536 -7%
GAAP Diluted EPS (Continuing Ops)$0.09 $0.12 +33%
Adjusted Diluted EPS (Continuing Ops)$0.13 $0.19 +46%
Adjusted EBITDA (Continuing Ops, $USD Millions)$4.826 $4.035 -16%
Recurring Revenue (% of Total)79% 86% +700 bps

Revenue Breakdown by Category

Category ($USD Millions)Q1 FY2024Q2 FY2024Q3 FY2024
Subscription Fees$13.764 $13.358 $14.114
License Fees$0.289 $0.229 $0.277
Professional Services & Other$6.952 $4.003 $3.418
Maintenance$8.163 $8.100 $7.727
Total Revenues$29.168 $25.690 $25.536

KPIs and Operational Metrics

KPIQ3 FY2024Source
Recurring Revenue (Maintenance + Cloud) as % of Total86%
RPO / Backlog~$119M
International Revenue Mix~22% of revenue
Cash & Investments~$78.2–$78.3M
DSO86 days (down from 101 YoY)
Dividends Paid (Quarter)~$3.8M
Share Repurchases (Quarter)~516K shares; ~$5.4M cost

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenuesFY2024$120–$126M (Q1 FY2024) $100–$104M (maintained in Q2 and Q3 FY2024) Lowered (Q2) then Maintained (Q3)
Recurring RevenuesFY2024$88–$92M (Q1 FY2024) $85–$88M (maintained in Q2 and Q3 FY2024) Lowered (Q2) then Maintained (Q3)
Adjusted EBITDAFY2024$19–$21M (Q1 FY2024) $14.5–$16.0M (maintained in Q2 and Q3 FY2024) Lowered (Q2) then Maintained (Q3)
Dividend PolicyQuarterlyOngoing; ~$3.7M paid in Q1 ~$3.8M paid in Q3 Maintained (cash returns)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1, Q2)Current Period (Q3)Trend
AI/Technology initiativesIntroduced ESG capabilities; completed SOC2 Type II audit (Q1) ; Acquired Garvis (Generative AI + demand forecasting); launched InventoryAI+ (Q2) Expanded Manufacturing Optimization with advanced scheduling; new AI/ML capabilities in inventory, manufacturing, ESG; vendor compliance enhancements (Nov–Jan) Accelerating AI-first platform execution; broader capabilities rollout
Demand environment & deal timingOngoing uncertainty; strategic actions planned (Q1) ; Transformation steps and guidance reset (Q2) “Clients and prospects reengaging… continue to experience delays in larger deals, demand environment appears to be improving” (prepared remarks) Improving engagement; larger deal cycles remain elongated
Recurring mix & servicesRecurring 75% (Q1) ; Recurring 84% (Q2) Recurring 86%; services outsourcing to systems integrators (Q3) Rising recurring mix; services revenue trending lower
Regional trendsNot highlightedInternational revenue ~22% (vs 20% last year) International mix modestly up
Backlog/RPO & DSONot highlightedRPO ~$119M; DSO 86 (down from 101) Backlog supports visibility; collections improving

Management Commentary

  • “We delivered solid third quarter results and remain on track to achieve our guidance for fiscal 2024, which is unchanged from the prior quarter… increase in activity… adopt our AI-first supply chain planning solutions… poised for a strong finish” — Allan Dow, CEO .
  • CFO remarks (call): reiterated FY2024 guidance ranges; highlighted strong balance sheet (cash & investments ~$78.2M), international mix ~22%, and backlog ~$119M .
  • Strategic focus: Continued AI-first capability expansion in manufacturing optimization, inventory planning, and ESG vendor compliance; engagement via Gartner Supply Chain Planning Summit sponsorship .

Q&A Highlights

  • Demand and deal cycles: Management noted improving engagement entering calendar 2024 but persistent delays in larger deals; confidence to achieve midpoint of FY2024 ranges .
  • Backlog and regional mix: RPO ~$119M provides visibility; international revenue ~22% of total, up from 20% YoY .
  • Working capital discipline: DSO improved to 86 days; continued capital returns via dividends and buybacks .
  • Guidance: Maintained FY2024 targets for revenue, recurring revenue, and adjusted EBITDA; management cited pipeline strength and customer engagement .

Estimates Context

  • S&P Global consensus was unavailable in our system for AMSWA; comparisons to Wall Street estimates could not be retrieved via S&P Global for Q3 FY2024.
  • Third-party sources indicated a significant EPS beat: Adjusted EPS $0.19 vs expectations of ~$0.06, suggesting material outperformance on profitability metrics despite revenue softness .
  • Given the rising recurring mix and lower services, Street models may need to shift towards subscription growth and margin trajectory driven by subscription services cost and non-GAAP adjustments (stock comp, amortization) .

Key Takeaways for Investors

  • Mix shift to recurring continues: Subscription growth (+9% YoY) and recurring share (86%) underpin durability; watch for continued services outsourcing and maintenance declines (transportation divestiture impact) .
  • Profitability steadied on non-GAAP basis: Adjusted EPS $0.19 and 16% Adjusted EBITDA margin offset lower revenue; near-term operating leverage will hinge on services activity normalization and subscription services cost control .
  • Outlook credibility improved: Maintained FY2024 guidance with backlog support (~$119M) and rising engagement; near-term catalysts include larger deal conversion and AI-first platform adoption .
  • Capital returns remain active: ~$3.8M dividend and $5.4M buybacks in Q3; strong cash/investments ($78M) provide flexibility for selective M&A and shareholder returns .
  • Monitoring points: Timing of larger deals, services demand recovery, international expansion pacing, and continued ESG/compliance platform uptake; any guidance adjustments should be parsed against recurring revenue traction .
  • Trading lens: Potential positive reaction to EPS beat and unchanged guidance, tempered by revenue decline; risk/reward hinges on deal timing and services rebound, with downside cushioned by high recurring mix and cash balance .
  • Medium-term thesis: AI-first supply chain planning platform, accretive generative AI (Garvis) integration, and expanding manufacturing optimization capabilities position AMSWA for multi-year subscription growth as enterprises modernize planning stacks .