Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Moshe BenBassat – Chairman and Chief Executive Officer

Shmuel Arvatz – Chief Financial Officer

Analysts

Daniel Meron – RBC Capital Markets

Nathan Schneiderman – Roth Capital Partners

Nick Farwell – The Arbor Group

ClickSoftware Technologies Ltd. (CKSW) Q4 2012 Earnings Call February 4, 2013 9:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the ClickSoftware Technologies Limited Fourth Quarter and Year-End 2012 Financial Results Conference Call. All participants are present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded February 4, 2013. With us on line today are Dr. Moshe BenBassat, CEO and Chairman of the Board; and Mr. Shmuel Arvatz, CFO.

Before I turn the call over to Dr. BenBassat, I would like to remind you that during the course of this conference call, the company will be making express or implied forward-looking statements within the meaning of the Private Securities Litigation Act of 1995, and other U.S. federal securities laws.

These forward-looking statements include, but are not limited to, those statements regarding future results of operations, including our outlook for full year 2013 revenues, and non-GAAP earnings per share, visibility into future periods and pipeline, winning new business, expected growth in mobility solutions and cloud services and demand for those offerings, expected expansion into new territories and new markets, growth and future rates of growth and expectations of future cash flows and dividends, market demand, and the results of our increased investment to address such market demand, license revenues as a percentage of total revenues, cash flows, expected effective tax rates, and expectations regarding operating profit and margins, future closing of contracts, future product offerings, receipt of orders, and recognition of revenues and deferred revenues.

Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected. Achievements of these results by ClickSoftware may be affected by many factors including, but not limited to, risks and uncertainties regarding the general economic outlook, more attractive investments than dividends that may become available, the length of or changes in ClickSoftware’s sales cycle, ClickSoftware’s ability to close sales to potential customers in a timely manner and maintain or strengthen relationships with strategic partners, the timing of revenue recognition, foreign currency exchange rate fluctuations, and ClickSoftware’s ability to maintain or increase its sales pipeline.

The forward-looking statements discussed in this call are subject to other risks and uncertainties, including those discussed in the "Risk Factors" section and elsewhere in ClickSoftware’s annual report on Form 20-F for the year ended December 31st, 2011 and in subsequent filings with the Securities and Exchange Commission. Except as otherwise required by law, ClickSoftware is under no obligation to and expressly disclaims any such obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

Also I would like to remind you that ClickSoftware reported net income, and net earnings per share on both a GAAP basis and on in adjusted non-GAAP basis. Today’s press release includes a reconciliation of non-GAAP information to the most directly comparable GAAP information, and is posted in the Investor’s Section of the company’s website at www.clicksoftware.com.

Dr. BenBassat, would you like to begin?

Moshe BenBassat

Thank you, [Nessi]. Good morning everyone, and thank you for joining ClickSoftware’s earnings call for the fourth quarter of the year-end and year-end of 2012. Today, I like to focus my comments on a high level strategic overview of the business, and a brief coverage of operational results for the fourth quarter.

Shmuel Arvatz our CFO will then proceed with details regarding the fourth quarter and full year 2012 financial results, and provide an outlook for 2013. I will then return for a closing statement, and open the call up for questions.

2012 was a monumental year for ClickSoftware, and we are very pleased with our results and accomplishments. The goal of crossing the $100 million revenue mark in 2012 was set a few years ago, and reaching this milestone was a result of strong execution of our plans. Our eyes are now set on the future with a plan to ensure continued profitable growth.

Leveraging the investments made in 2012, the strategic plan calls for accelerated growth in 2013 and beyond that exceeds 20% annual growth rate. This strategy is focused on three major initiatives: new territories, enterprise mobility, and cloud-based offerings. Let me describe each of these in some more details.

Regarding new territories, while building local presence in Latin America and Eastern Europe to support acceleration of sales in this territory, and are increasing brand awareness. This initiative capitalizes on early successes in this emerging market and the company’s global leadership position in the utility, telecommunications, and oil and gas industry, all of which are experiencing rapid growth in these markets.

Winning Oi in Brazil and Sberbank in Russia are two examples of early successes in these territories. Oi is one of Brazil’s largest telecommunication companies, and Sberbank is one of Russia’s biggest banks.

Regarding enterprise mobility, we have embarked on new initiative to accelerate sales to prospects who prefer to start with mobility solutions as opposed to our traditional optimization solutions. This will significantly expand ClickSoftware’s addressable market for the following reason. While in today’s world, just about every service company equips its field-force with mobile devices. Presently however, the use of these devices is fairly limited to voice communication or SMS or basic apps.

Our business mobility product for the mobile [world here] increases considerably the use of end-benefits of mobile devices leading to improved productivity and customer care. This initiative will leverage our leadership position in deploying large-scale enterprise mobility solutions to some of the most demanding organizations in the world, as well as our rich ClickAppStore for business mobility solutions.

For example, in 2012, 80% of our new customers also purchased our mobile solutions. Additionally, we are broadening awareness of our patent-pending ClickButler technology for quickly developing and deploying context-aware intelligent personal assistance in business applications.

Let me also note that once a customer starts using ClickSoftware as a mobility product, it dramatically increases the potential to upsell our schedule optimization and decision-making product.

As for the competitive landscape, we believe that our ClickAppStore together with its Click Studio for developing new apps put us in a unique leadership position among companies that offer enterprise mobility apps, ready-to-use, out-of-the-box. Most other players either offer development tools that the client or others can use to develop custom-made one of a kind apps or offer infrastructure products for synchronization, security, device management and the like.

And as I said earlier, our proven record in this space for giants such as Halliburton, Portugal Telecom, Sempra and others will certainly help. Let me just reiterate, I’m talking about product-oriented mobility companies, and without the off-the-shelf product.

Cloud services as previously reported, we established a separate division fully dedicated to selling cloud-based solutions of all our products including a cloud-based ClickExpress product for the mid-market and its built-in mobility component. With this offering, we now have one of the best solutions for the field service mid-market where cloud-based solutions are gaining popularity.

In 2012, we have added 10 new cloud-based customers. We are seeing more and more interest from large prospects exploring the option of buying our core large scale product in the cloud. The momentum is there; our pipeline for cloud-based solutions is now measured in tens of millions.

In summary, let me say, that we are confident that our achievements in 2012, and the momentum we have built in our pipeline have set the stage for significant growth in 2013 and beyond. We expect our global expansion reinforced by our enhanced product portfolio to drive significant top line growth of more than 20% year-over-year in 2013 and beyond.

Clearly this requires investments which will continue to impact profitability in the short term. But we believe that in the second half of 2013, you will start seeing improvements in our profitability margins. Let me now proceed to provide key operational highlights of the fourth quarter which I hope will contribute to substantiating our comments on our gross momentum. In terms of customer acquisition and sales, Q4 was a very productive quarter with a large and healthy mix of new contracts and repeat business from existing clients.

Example of new customers include SCANA, a multi-utility company serving the Carolinas and Georgia will be using our scheduling and mobility products, and as merchandisers that provide utilities, sorry, that provide services for the retail industry.

TRANE which operates in the business of comfort systems for ventilating, air conditioning, and building management, by the way, train is an example of a large company electing to go with our cloud-based solution. PRASA in South Africa, the newly formed passenger rail agency of South Africa will be using our ClickRoster product for shift scheduling and optimization of the staff in rail operations. Gestamp Automoción, another major ClickRoster win was signed in Spain.

The next one is Nurse Maude a New Zealand based company providing nursing and home support services selected Click’s mobility and scheduling solutions to better manage its service force, and provide better customer care.

Repeat orders from existing customers include orders from Direct Energy, a customer for more than 10 years, [Sharp] Corporation the issuance company, Cable&Wireless, and Belron a U.K. based company that provides automobile windshield replacement to business and consumers.

Let me conclude this list with EDF Energy, a long time customer in the U.K. that expanded its use of our products for its smart metering project. This is one more example of a company using our product to manage smart metering installation, an initiative which is being mandated by governments across the world. By reviewing this list of selected wins in the fourth quarter, I hope I succeeded in communicating our market reach in terms of geographies and industry verticals as well as illustrating a stable stream of repeat orders that come from existing customers.

With that, let me transfer the call to Shmuel. Shmuel?

Shmuel Arvatz

Thank you Moshe. 2012 was a very productive year in which we reached the $100 million mark in revenue and continued to make progress towards achieving our strategic goal. While the year started a bit slower than we would have liked, we ultimately delivered on our annual guidance that we projected at the beginning of 2012.

In addition to delivering on our revenue guidance, we also generated strong cash flow from operations and paid $0.32 as cash dividend in four quarterly payments. We continue to invest heavily in research and development, sales and marketing which impacted our profitability in the short-term.

However, we are confident that these investments and those we will make in 2013 will enable us to rapidly accelerate growth in 2013 and further penetrate the underserved workforce management and service optimization industry around the world.

Before I begin reviewing both the quarter and the annual financial results, I would like to remind everyone that in this call, I would refer to non-GAAP figures, which exclude share-based compensation, impairment of goodwill, amortization of intangible assets, and changes in deferred tax.

I will start with the review of the quarterly results. Revenues for the quarter were $28.4 million, a new record for us, up 19% year-over-year, and 4% from the prior quarter.

Book-to-revenue ratio in the fourth quarter was below 1, which is in line with our normal quarterly fluctuations. During the fourth quarter, we did not book any license deals worth higher than $1 million. The split of revenues is $10.8 million from software licenses, which is up 18% year-over-year and represents 38% of total revenues. Service revenues were $17.6 million or 62% of total revenues, up 19% year-over-year.

The geographical breakdown was as follows: $17.4 million from the Americas, or 61% of revenues, $9.1 million from EMEA or 32% of revenues, and $1.9 million from Asia-Pacific or 7% of revenues. While the Americas territory was our largest territory again this quarter, it is notable that revenues in EMEA grew 43% sequentially, despite the slowdown in the region.

Moving on, gross profit was $18.7 million, representing a gross margin of 66%. This is up 2% year-over-year, and 1% compared to the third quarter. The improvement in gross margin was mostly due to better margins generated by our service activities.

Operating expenses for the quarter were $14.3 million, up 39% year-over-year. During the quarter, we continue to scale up our expenses in line with our plans for growing our revenues both in terms of research and development, and sales and marketing which went up 49% and 42% respectively year-over-year. The increased level of expenses is in line with our internal forecast, and are expected to drive future growth.

We expect to increase the level of investments further, mostly for our research and development efforts and sales and marketing activities in order to accelerate our top line growth. As of the end of the year, we had 509 employees, up by 104 employees from the end of 2011. Above half of the employees growth throughout the year was dedicated to research and development and in sales and marketing.

Operating income for the quarter was $4.4 million compared with $4.9 million in the same quarter last year a decrease of 11%. This represents an operating margin of 15% for the quarter.

Currency impact on our operating results was about $200,000 positive this quarter. This calculation is made in constant currencies has prevailed in the fourth quarter of 2011. Net income for the quarter was $4.2 million or $0.13 per diluted share compared to $4.9 million or $0.13 per diluted share in the same quarter last year.

Now, I will turn to the full year results. Total revenues for 2012, grew 15% to $100 million a milestone we set for ourselves at the beginning of the year and of which we are very proud of. This reflected record sales across the board for licenses and services. During the year, we booked five license deals worth higher than $1 million.

License revenues for the year were $34.5 million up 10% year-over-year representing 35% of total revenues. Service revenues for the year were $65.5 million or 65% of total revenue. We continue to scale up our professional services capabilities as the key to securing large deals in key territories. As we have been doing over the past years for our year-end report, let me also give you a further breakdown of the services line.

Revenues from maintenance and support contracts for the year amounted to $26.6 million, which is up 22% compared to 2011. Revenues from professional services were $38.9 million, up 15% compared to 2011. So the total revenue breakdown for the year was about 35% licenses, 26% maintenance and support contract, and 39% professional services.

Geographically in absolute terms, we grew in the Americas, but decreased in EMEA, and in Asia-Pacific. Our largest market was in the Americas, which accounted for sales of $60.1 million, up 50% year-over-year representing 60% of our total revenues. EMEA decreased by 17% compared to last year with sales of $32.9 million, representing 33% of our total revenues. Asia-Pacific contributed $7 million or 7% of total revenues and decrease of 7% compared to 2011.

In 2012 due to the macroeconomic slowdown in Europe, we focus more of our sales efforts on growth opportunities in the Americas. As a result, sales in the region have reached a new record level and we anticipate continued growth here as we increased our investment to derive top line revenues. The growth in the Americas is more than offset the softness we continue to see in some of our European markets, which are still being impacted by challenging economic conditions.

Operating expenses for the year were $51.6 million up 35% year-over-year. This reflects our significant investment in expanding our R&D in certain marketing organizations as per our strategy. Operating income was $10.5 million, down 42% year-over-year, or 11% of revenue. This is compared to $18.2 million, or 21% in 2011.

Currency impact on our operating results for the year was about $1.7 million positive. This calculation is made in constant currencies as prevailed in the fourth quarter of 2011. Tax expenses amounted to $709,000 in 2012, representing a 7% effective tax rate on pre-tax income. Going forward, we expect our effective tax rate to increase due to the utilization of tax losses carry forward in most countries, as well as our move to a less favorable tax bracket in Israel.

Net income for the year was $10.2 million or $0.31 per share. This is about 40% lower than the non-GAAP net income we reported in 2011.

Our book-to-revenue ratio was above 1 for the year. As a result, our short-term backlog as of the end of the year was $33.2 million, up $3.6 million from the end of 2011.

Turning to the balance sheet, our cash reserves comprise of cash, cash equivalents and investments, at the end of the year totaled $59.4 million. This is up 8% compared to $55 million at the end of 2011.

During the fourth quarter, we generated $10.7 million from operating activities. For the full year, cash flow from operations was $16.2 million. During the calendar year of 2012, we paid out $10.1 million in cash dividends.

Earlier this week, our board of directors approved a cash dividend of $0.8 per share. The payment will be made on March 4th to shareholders of record as of February 18th. As we do at the end of each quarter we will review our dividend policy and work with the board to evaluate ways to maximize shareholder value. DSOs as of the end of the year were 69 days downs from 89 days at the end of September in line with our target model.

In terms of guidance, looking forward into 2013, we expect top line growth of 20% to 25% with revenues in the $120 million to $125 million range. We also expect non-GAAP fully diluted earning per share to be between $0.24 to $0.30. This figure takes into account higher level of operating expenses, as well as higher tax rate. While the higher level of operational expenses will impact our profitability in the first half of 2013, we expect to see our investments payoff with gradual improvement in profitability starting in the second half of 2013.

In summary, 2012 was an excellent year during which we reached the $100 million revenue mark and continue to build our infrastructure for the year ahead. We remain confident in our growth prospects and we are working to achieve our full potentials.

I would like to turn the call back to Moshe for closing statement.

Moshe BenBassat

Thank you, Shmuel. To summarize, at the beginning of the year, we announced we would cross the $100 million mark and we delivered. Our strategy going forward build on the groundwork we laid in 2012 to expand our addressable market, put in place the marketing tools to generate the lead, and build the sales force to generate the revenues. Our strong partnerships are also helping us to expand our global footprint and open new and exciting opportunities. We are ready and it comes at the great time.

Demand for our mobility solutions keeps growing as the smartphone and tablet adoption raises and similarly for cloud-based solutions. And at a time when service experience is critical for customer acquisition and retention, our product and services help clients to offer the best service at minimal cost. Let me use this opportunity to thank our talented, and devoted employees, and our business partners for all their hard work and support in 2012. Also many thanks to our shareholders for their trust they put in ClickSoftware.

We shall now proceed to questions and answers. [Nessi]

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question is from Daniel Meron of RBC Capital Markets. Please go ahead.

Daniel Meron – RBC Capital Markets

Thank you. Hi, Moshe and Shmuel, congrats on the fourth quarter performance and reaching annual target. Can you Moshe, once you guys reach the targets for 2013 maybe in the second half we’ll start seeing some of that benefits, can you provide us with a little bit more color on how the company could look like as far as the financial performance both from the top line growth as well as the operating margins once seeing this ones mature?

Moshe BenBassat

Yes, if you look into the EPS guidance that we gave, it represents roughly 10% operating margins in the ballpark of 10% operating margins. This means that annual average will be sometimes below to 10% and later in the year will be higher than 10%. So, what you will be seeing in starting of Q3 and onward, it would be a gradual increase above the 10% level and hopefully we will have higher number at the top line, and keeping in mind that most of the expenses will incur in the first half of the year, this gives us a good chance to us as we go into 2014 to start getting into higher and higher profit margins.

Daniel Meron – RBC Capital Markets

Okay, thank you. And can you provide a recap on the competitive landscape right now as you look further into the various territories that you expand into either software-as-a-service or mobility and the combination or the edge that the ClickSoftware has? Thank you.

Shmuel Arvatz

Yeah, in terms of the competitive landscape, you really have three groups. One is in our core service optimization, where we continue to enjoy; I would say a very nice lead over all competition in terms of the richness of the products, the proven record, the location on the Gartner’s Magic Quadrant, and so forth.

In terms of mobility, if you look into the enterprise mobility vendors and please everybody do not compare us to consumer level up vendors, we are in the business mobility business. So if you look into software companies in the enterprise mobility or business mobility. You will find three groups; one is the group that offer infrastructure products, synchronization, security, device management and the like. We do not play in this space we have our own infrastructure we also can adapt to infrastructure by SAP or IBM and others. But we do not sell infrastructure products. The second group of companies are company that offer development tools for mobile apps. These are companies that sell services not out of the box ready to use products.

We, on the other hand, we are in the third group of companies that offer software products, software apps, as it is known in the mobile industry and in this group you’ll find very few companies. I believe that we are one of the largest; it must be largest and in terms of the richness of the ClickAppStore, in terms of the proven record. In terms of our ability to configure these products quickly to the needs of a customer I believe that we are in an excellent position in this competitive market.

Daniel Meron - RBC Capital Markets

Okay, thank you. I’ll leave the floor.

Shmuel Arvatz

I welcome, thank you.

Operator

The next question is from Nathan Schneiderman of Roth Capital. Please go ahead.

Nathan Schneiderman – Roth Capital Partners

Hi, Moshe and Shmuel. Thanks a lot in advance for taking my questions. I was curious. It looks like part of the reason the EPS guidance is so low, maybe, a new expectation for tax rate. So, I was just hoping you could clarify what kind of GAAP and non-GAAP tax rate are you expecting for 2013. And if you have a view on how that may evolve for 2014 if you could share that as well?

Moshe BenBassat

The 2013, the non-GAAP number we take above 20%. And the reason for the higher tax rate is one, we’ve exhausted and utilized all the – most of the carry-forward their losses. Also, in Israel we utilized a full tax exemption period, and now, we are moving to start to pay tax in Israel. And also, in part also the low profitability basically impacted the tax rate to the high-end due to some circumstances.

Now, in going forward, I believe that we will see – I mean 2014 and on, maybe slightly higher than that, in Israel we pay below 20%, and we believe it will continue like that and in other territories it’s at 30% to 40%, overall 20% or slightly higher than that. This would be the figure.

Nathan Schneiderman – Roth Capital Partners

Got it. And, I was curious when you issued your preliminary view for 2013 in early January, if I recall right, you were talking about seeing a revenue-skew that was more second-half loaded. And, I assume that’s still the case, but I was hoping you could clarify if you look at the revenue mix that you expect first-half versus second-half, what are you thinking in general in terms of the split, would it be 40-60, 45-55, just what kind of mix are you in general expecting first-half, second-half for revenue?

Moshe BenBassat

If you look historically at ClickSoftware and overall in the software industry, typically the first-half is in the ballpark of let’s say 42% to 47% and the second half gives you the 53% to 55%.

Nathan Schneiderman – Roth Capital Partners

Okay, you feel comfortable with that kind of mix.

Shmuel Arvatz

Yeah, that’s typically what typically happens.

Nathan Schneiderman – Roth Capital Partners

One other things I’m puzzled about that I was hoping you could explain is that. If I look at Q4 bookings is the growth that I calculate is around 12%, if I look at the year, it’s a little less than 14% for 2012 and you are guiding to 20% to 25% growth. So I just didn’t see in your bookings result, growth that was necessarily consistent with the guidance. So is there something that I’m missing here or why would you expect the revenue growth to be so much greater than the bookings that you’ve actually achieved in 2012.

Shmuel Arvatz

Yeah, Nathan, the way we estimate the revenues for any given year is a very detailed systematic process that of course starts with the bookings from earlier years, the backlog and deferred and so forth, and then proceed with the sales processes that are already in this kind of either signature negotiation stage, then we go into the pipeline and the reason that we are so confident in stating that the growth rates for 2013 would be about 20% is based on what we see in the pipeline.

Now the pipeline itself again, is recorded in a very – which I think is a disciplined way, I mean we track this in a very careful manner, try to set each opportunity which stage it is and then calculate, the likelihood and the averages and the like so, all in all, we are very pleased with the very healthy pipeline that we have going into 2013. Generally speaking, I would also say that we have put in place over the past year, year and a half, quite sophisticated tools for online marketing and this also pay a quite a nice dividend. I did not go into all the details I normally go, simply because of shortage of time. But, it’s very nice to see how the number of leads evolve over time. So all of this give us good basis to state that we are going to grow above the 20% level in 2013.

Nathan Schneiderman – Roth Capital Partners

Okay, thanks very much.

Operator

The next question is from Nick Farwell of Arbor Group. Please go ahead.

Nick Farwell – The Arbor Group

Gentlemen, good morning. Just a couple of follow-on question from Nathan. One of them is I had down in my notes which may not be accurate that your bookings and deferred backlog at the end of the third quarter was $32.2 million. So if I read the press release at $33.2 million that would suggest an incremental $1 million, did I miss something in my…

Moshe BenBassat

Not a bit. You probably ask how come as I said that booking was flat well till the backlog went up. The answer for that is that this was the shifting between long-term and short-term. So some of the long-term moved to short-term, increased the level of a short-term backlog, but till book-to-revenue was below 1.

Nick Farwell – The Arbor Group

So that means your actual bookings in the quarter were less than $28.4 million?

Moshe BenBassat

That’s correct. That’s correct.

Nick Farwell – The Arbor Group

Okay.

Moshe BenBassat

But still with a short-term backlog for 12 months ahead, it was up because of the long-term that we don’t report move to short-term.

Nick Farwell – The Arbor Group

Right. That’s a little surprising in the sense that if you look over the last number of years, typically you have a stronger, historically, the fourth quarter has been stronger both bookings and revenue quarter given it’s sort of a budget flush time and so traditionally in the enterprise software business that’s a relatively stronger seasonal period. What is that a reflection or manifestation of, why didn’t you experience a stronger quarter, both although my revenue estimates were roughly in line. But it’s certainly in bookings. Is there something else going on – is it a manifestation of the environment is it Europe, although the European numbers were pretty good.

Moshe BenBassat

Not really, Nick, is just timing fluctuations as to when a silicon contract will be signed or not, we’re very pleased. In fact, if you notice that Shmuel made a point to indicate that we did not sign any deal more than a $1 million, kind of signifying, we do not depend on any large deal to make our quarter. All-in-all, I mean there are fairly large deals in the making; we are still competing for some of them. And if some of them would have closed earlier, possibly the backlog and deferred would have been higher. But as I said before, the outlook for 2013 in terms of what we have in the pipeline, at which stage they are, and how much revenue each of them can bring, we have fairly good confidence in what we have been projecting.

Nick Farwell – The Arbor Group

If you look at the sort of historically, if you or maybe (inaudible) when you guys put your plan together for 2013, to what degree do you expect to end 2013. In other words a year from now with a higher backlog, notably higher backlog than you’re currently carrying?

Moshe BenBassat

Nick, you are approaching it as an engineering model and you know it’s not quite like that. But, I kept saying during my presentation 2013 and beyond and I do mean it. What I mean is, that we expect to see this 20 – more than 20% growth not only in 2013, but also in 2014 and hopefully in 2015 and beyond. The reason for it is that so far we have been selling primarily the optimization solutions. All of that in 2012, I believe that the mobility solutions were more than 20% and it keeps growing.

The pipeline for mobility is a huge number. I don’t have it in front of me. This pipeline did not exist when we were selling primarily the optimization solution and I mean companies that elect to start with the mobility solution. Normally they say look I understand the value of the optimization solution, but right now I have given my technicians the mobile devices, I’d like them just to be able to download jobs, report delays and the like and not in voice or SMS messages, but rather into a more structured enterprise software, so that we can make sense of it, similarly, I say that the cloud-based offerings the pipeline already today is measured in tens of millions, so all of this gives us a very good comfort that it’s going to be about 20%.

Nick Farwell – The Arbor Group

Okay, can you give us some feel for the mix between direct and partner sales for the full year and whether that is skewed in any notable way, perhaps because there are no major orders greater than a $1 million?

Moshe BenBassat

With the partners continue to play a very nice synergistic role in our life and in fact as we go into new territories it takes different angles and but there is no major shift from what we have been reporting in the past.

Nick Farwell – The Arbor Group

Is the emphasis on mobility and cloud in particular likely to shift that mix between slightly less than 50% partners versus direct in your opinion?

Moshe BenBassat

I do not have a kind of very strong opinion one way or another, I mean when we have a partner he can sell many of our product and considering that our mobility solutions today in the market are probably the most advanced solution. I gave before the example of the large players that we sold to and deployed successfully. I’m not sure that there are many other enterprise mobility companies, who can claim that they have a customer with 10,000 users using the iPhone in the field and this is got nothing to do with optimization.

Nick Farwell – The Arbor Group

Right.

Moshe BenBassat

Just using it with your timesheets and other things. Or if you look into Sempra, very complex utility company, managing quite complex jobs, or if you look into Portugal Telecom that even issues, periodically issues videos to the devices of the technicians to train them on the job rather than coming to centers. These are all very, I would say very advanced solutions in the enterprise market, and I repeat again please do not compare us to the $1.99 on iTunes.

Nick Farwell – The Arbor Group

Okay. Just one other follow-up, Shmuel. You mentioned that, or you pointed out that gross profit margins in the maintenance were 50%. Is this a sustainable number? Are you now past the ramp-up of headcount et cetera in the learning curve issues, or is this largely a reflection of year-end positive adjustments?

Shmuel Arvatz

I would say there is nothing to do with the adjustment. There is purely – the professional services were more profitable. And I believe that in 2013, let’s say that we saw the dip in 2012, this is what I hope in terms of appears for profitability.

Nick Farwell – The Arbor Group

So, is it likely that the gross margins for M&S are likely to stay roughly 50% for the balance of that we – 13?

Unidentified Company Representative

I would refer to the gross margin, I would say…

Nick Farwell – The Arbor Group

That’s what I’m taking about. I apologize.

Shmuel Arvatz

Yeah, the gross margin in 2013, it is likely to be about the same as in 2012.

Nick Farwell – The Arbor Group

Okay, that the aggregate year-end number?

Shmuel Arvatz

Year-end number, that’s right.

Nick Farwell – The Arbor Group

Yeah, okay.

Shmuel Arvatz

Now, to that in the gross margin we also take the operational expenses of the cloud operation which also put some pressure on the margin before we ramp up the top line as well.

Nick Farwell – The Arbor Group

Okay. And that’s P&L’ed in some – in large measure field maintenance and service, the implementation of cloud.

Shmuel Arvatz

The implementation of cloud is that, including in the cost of licenses, not implementation. I mean the operation, the infrastructure, the third party costs; it goes to the license, and cost of licenses.

Nick Farwell – The Arbor Group

Okay.

Moshe BenBassat

Nick, this is Moshe. Let me kind of maybe provide more details about it. When you deploy a cloud-based solution for a large enterprise, on the one hand you have the stand-out operational costs just to keep things in the cloud. So, if you use Amazon you have to pay Amazon for what you use.

Nick Farwell – Arbor Group

Yeah.

Moshe BenBassat

On the other hand, if it’s a large scale customer you still have to interface to its CRM, possibly do some configuration, some training, and all of these are a standard professional services that we will do in the same way that we do today, and it will be placed in the professional services revenues.

One last comment in this, at present the revenues from cloud-based solutions are still not very significant, but as the year continues I believe they will grow more and more, and then we will have to see how to report the income statement of the company so as to reflect this.

Nick Farwell – Arbor Group

Right. One last quick question if I may. You increased employees by little over a hundred. How much of that went into your maintenance and service, P.S. in maintenance and service, roughly? Was that the other 50, roughly the other 50?

Shmuel Arvatz

I’ll give you the exact [on the last] numbers. One moment, okay, so overall for the year professional services grew by about 46 people.

Nick Farwell – Arbor Group

Okay.

Shmuel Arvatz

The R&D about 22, sales and marketing about 27, and remaining is general and administration.

Nick Farwell – Arbor Group

Okay, thank you.

Moshe BenBassat

One last comment, Shmuel also said that, percentage of maintenance and support revenues is roughly 26.5%. And this is a nice increase that keeps climbing up every year, and these are kind of recurring revenues that we receive for the maintenance and support for those who purchased our perpetual licenses all of the years. Next question.

Operator

(Operator Instructions) There are no further questions at this time. Before I ask Dr. BenBassat to go ahead with his closing statement I would like to remind participants that a replay of this call will be available two hours after the conference ends. In the U.S. please dial 1-888-326-9310. In Israel, please dial 03-925-5901 and internationally please dial 972-3925-5901. Dr. BenBassat, would you like to make your closing statement?

Moshe BenBassat

Thank you all for participating. And let’s go have a great year. Thank you.

Operator

Thank you. This concludes the ClickSoftware Technologies’ fourth and year-end 2012 financial results conference call. Thank you for your participation. You may go ahead and disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: ClickSoftware Technologies' CEO Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts