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Astea International (NASDAQ:ATEA)

Q1 2009 Earnings Call

May 18, 2009 11:00 am EST

Executives

Zack Bergreen – Chairman and Chief Executive Officer

Rick Etskovitz – Chief Financial Officer

John Tobin – President

Analyst

Sam Lobasky - SPR Asset Management

Operator

Good morning. Welcome to Astea International’s Earnings Conference Call. You are currently in a listen-only mode. There will be a Question and Answer session following the introductory comments for Astea’s management. This conference call may contain statements that are forward looking within the means of the applicable Federal Securities Laws and are based on Astea’s current expectations and assumptions which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated that are detailed in the company’s Securities and Exchange Commission filing. With us today, from Astea International, are Zack Bergreen, Chairman and Chief Executive Officer, Rick Etskovitz, Chief Financial Officer and John Tobin., President. Go ahead Mr. Bergreen.

Zack Bergreen

Thank you. Good morning and thank you for joining us today to discuss first quarter 2009 earning results. Following our overview, I will turn the call over to Rick Etskovitz our Chief Financial Officer who will discuss our financial results. We will then open the call for Q and A.

As indicated in our press release, Friday, we have finished the quarter with $4.8million in revenue. We are clearly disappointed with these results. The current recession has impacted companies in almost every industry and prospects continue to delay making purchasing decisions as uncertainty in the economics has driven many companies to implement capital spending reductions.

Despite the business challenges we face due to the economic conditions, we still see many companies very interested in comprehensive field service solutions. One indication of this interest is evident in our active pipeline that is currently comprising many enterprises in our key companies. However given the state of the market, the timing of these deals has been less predictable than in the past. And we are confident of our ability to bring them to closure.

We are proud to announce that we have been advanced to the visionary section in the recent Gardner 2009 Field Services Quadrant. Gardner’s evaluation is based on the company’s completeness of vision and the ability to execute on that vision. In that report, Gardner stated that we have excellent focused knowledge over capital equipment and high tech industries for end to end service processes

It also mentions that we continue to develop and acquire components in line with our vision of enterprise status management space. It went on to state that Astea has a strong Microsoft .net architecture in integration with Microsoft dynamics. Such rankings – these forces are all as respected top leading solution providers in the field services management market. Also it is important to note that Gardner’s Survey of the field service market has indicated they believe that only 18% of the [additional] market has purchased Field Service Solutions. This clearly leaves Astea in a great position to capitalize on new opportunities as they arrive.

Now in the area of sales and business development; one of the major accomplishments for the quarter was the launch of our new subsidiary in Tokyo, Japan. With resources in Tokyo, we are now providing sales, professional services and customer support to the leading service organizations in Japan. This new subsidiary has already been very well received with our existing customers in Japan, and with the local presence we are already contributing to our success. We have been in accelerated level of field activity in Japan, and we are very optimistic about the growth opportunities that this new presence will provide.

Our professional services organization remain active with major enterprise deployment. We are pleased to see the level of professional services activity persist in all of our regions. Their combination of both new implementation and upgrades has kept our services professionals busy, those of which have had positive contributions from our financial perspective.

Additionally, we have been very proud to see as many of our large enterprise deployment encompassing our entire solutions suite, back office mobility, and scheduling optimization solution modules have gone live in multiple countries. This is the major accomplishment and we look forward to ongoing work with these customers.

I now would like to turn the call to Rick Etskovitz, our CFO, to read our financial results.

Rick Etskovitz

Thank you Zack, for the first quarter ended March 31, 2009, Astea reported revenues of $4.8 million compared to revenues of $7 million for the same period in 2008.  Net loss for the first quarter was $728,000 or $0.23 per share, compared to a net loss of $425,000 or $0.12 per share for the same period in 2008. License revenues were $510,000 compared to $1.4 million in 2008. Total service and maintenance revenues were $4.3 million compared to $5.6 million in 2008.  For purposes of comparison, it should be noted that the amounts reported for the first quarter of 2008 included restated revenue from activities in prior periods. References should be made to the relevant quarterly and annual filings for further detail.

Although our revenues were $2.2 million lower this quarter than this time last year, we were able to reduce our operating expenses by $2 million so that the negative impact of reduced revenue was dramatically minimized. Throughout our history, we have always focused on maintaining a sound financial position to support our growth strategy I’ll now turn things back over to Zack

Zack Bergreen

Thank you, Rick. Despite the state of global economy, we remain aggressive in pursuit of our new business opportunities. Our demand generation programs and the focus on increasing sales closure rate remain our primary objective. Astea is well positioned in the market, and as the economy begins to improve, we are confident we will be able to bring many of these active opportunities to closure. The solid product suite that we have today in conjunction with our improved infrastructure and the cost contingency initiative will assist us in aggressively moving forward to achieve revenue and profitability improvements in the future. I would now like to open the floor for Q&A.

Question and Answer

Operator

At this time the officers of the company would like to open the forum for any questions that you may have. [Operator Instructions]. Our first question comes from Sam Lobasky from SPR Asset Management

Sam Lobasky – SPR Asset Management:

Good Morning Zack and Rick. I have to apologize that I picked up another call, I missed part of the beginning of your call, but did you address what your pipeline is and what your expectations of closing transactions towards the end of the year?

Zack Bergreen

Sam, Good Morning. We clearly stated that we have a very active and robust pipeline and many of these opportunities are Enterprise Classified Opportunities encompassing large deployments and so on, but the timing of these opportunities they would be closed on a timely basis and the predictable basis is challenging. Clearly companies are holding back and prolonging their decision process and that’s not helpful in terms of getting things done on a timely basis they say.

Sam Lobasky – SPR Asset Management:

What is the normal time today to close the transaction, what would you say is the normal time frame?

John Tobin

Sam, this is John Tobin. I would say about 6 to 9 months, probably most difficult although I think sometimes they seek to extend towards 6 to 9 months might get past the project management level and then you are on an extended cycle trying to get corporate approval or the federal corporate approval

Sam Lobasky – SPR Asset Management:

So are you seeing the size of the contracts that you are putting proposals in? Are they larger now than before, or are they, you’ve obtained million dollar jobs previously, is that a realistic expectation?

Zack Bergreen

Yes Sam. I think what we are seeing perhaps for two reasons, one is we are – our product is getting very complete in many ways and it’s attracting some very, very significant prospects and therefore the typical size of the opportunities has increased. As a same token we also clearly have a low end solution with assets platform which allows us to invest at the low end of the market as such and I think basically the history of us being in the market and the years that we have been focusing at this industry brings us the prospects to really recognize us as the thought leaders and come back to us. So I think now all the opportunities have become larger and that the economic times may take a bit longer to get in close.

Sam Lobasky – SPR Asset Management:

And as far as domestic verses international do you see any difference in the picture?

Zack Bergreen

Well I think it depends and varies from region to region. Certainly places like Japan, the opportunities are solid and comprehensive, obviously Japan is a very large, probably the second largest IT market in the world. In other parts of Asia especially in countries such as Malaysia and Singapore, some of the opportunities are somewhat smaller. We are seeing clearly sizable opportunities in Europe, as well as in the United States

Sam Lobasky – SPR Asset Management:

So, and as far as you could, have you cut your expenses and cut everything as far as what your expectations are and or is there anything else you have to do as far as cutting expenses?

Zack Bergreen

We think we are very well positioned now, we are clearly focused on activities that will accomplish two things. Clearly develop a mode of relationship with existing customers as well as making sure that our product continues to evolve and be attractive and has a competitive edge compared to other players in the market. But these are the two areas that we maintain our focus on. Clearly sales and sales related activities such as marketing and so on, always been in the fore front. They are driving a new revenue to the company and so on, so – but I think we are well positioned now and clearly have done a solid job in bringing across the line, and we see now the economy is slowly recovering. I think we’re going to be very well positioned to complete, in fact address the opportunities as they come up.

Sam Lobasky – SPR Asset Management:

And would it be fair to say, based on – even though there was longer times to close the transaction – based on your visibility, you would expect to be profitable for the year. Is that a fair assumption?

Zack Bergreen

Well, you know, we do not provide guidance standards as you know, and therefore I would be trying to avoid that, trying to be that specific but clearly with the level of cuts in payment, cost reduction we’ve had in place. In addition to the number of activities we have in the pipeline, we believe we are very well positioned for this year. But like any management, we’re vigilant and we’re clearly focused on the objectives we have and clearly our intent is to achieve the results that we’ll all be proud of.

Sam Lobasky – SPR Asset Management:

And would you say you have at least 45% more or 50% more in the pipeline now than the end of the previous quarter? How would you relate, what your pipeline is relative to the previous quarter in the same time last year?

Zack Bergreen

Well, we certainly in the last couple of months have seen, especially the last month we’ve seen a clear increase in the number of lead generation and prospect activity and so on, things were somewhat slow in the January February time frame, I guess that’s the lowest period for us, and we’re cautiously optimistic regarding the future.

Sam Lobasky – SPR Asset Management:

Well, good luck and make everybody happy

Zack Bergreen

Thank you

Operator

Thank you. Okay once again of you do have a question press star 1 at this time.

At this time we appear to have no further questions. A replay of this conference will be available in one to two hours. To access the replay please dial 1-877-660-6853 Enter account number 286 and conference ID number 322 712. Ladies and gentlemen that concludes our conference for today. Thank you all for participating and have a nice day. All participants may disconnect now.

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