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Astea International Inc. (NASDAQ:ATEA)

Q3 2013 Earnings Conference Call

November 14, 2013 04:30 p.m. ET

Executives

Zack Bergreen – Chairman & CEO

Rick Etskovitz – CFO & Treasurer

John Tobin – President

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Astea International Incorporated Third Quarter 2013 Financial Results Conference Call. You are currently in listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. (Operator Instructions)

With us today, from Astea International Incorporated, are Zack Bergreen, Chairman and Chief Executive Officer, Rick Etskovitz, Chief Financial Officer and John Tobin, President.

I would like to remind you that this conference call may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.

All statements, other than statements of historical facts included in today’s conference call are forward-looking statements, including statements regarding the company’s business strategy, plans, objectives and statements of non-historical information.

Although the company believes the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions risks and uncertainties and these expectations may prove to be incorrect. Those factors are incorporated by reference from the press release issued earlier today as well as in the section entitled risk factors as outlined in the company’s filings with the Securities and Exchange Commission.

You should not place any undue reliance on these forward-looking statements which speak only as of today, November 14, 2013. All forward-looking statements attributable to the Company or persons acting on his behalf are expressly qualified in their entirety by these factors. Other than as required by Securities Laws, the company does not assume any duty to update these forward-looking statements.

With this statement concluded, I will turn the call over to Mr. Bergreen. Please go ahead. The floor is yours.

Zack Bergreen

Thank you very much. Good afternoon and thank you for joining us today to discuss our third quarter 2013 results. Following my overview, I will turn the call over to Rick Etskovitz, our Chief Financial Officer who will cover the details of financial results. We will then open the call for Q&A.

As we have stated in previous calls we are seeing an upward trend and the number of companies installing a cloud and the software that [Indiscernible] as fast deployment model that includes the traditional on-premise potential deployment.

In each part of the quarter received a demand for our cloud based offering consistently increasing. But this is good news the ongoing shifts to the cloud has been destructed to revenues and profits in the short term impacting both license revenues as well as our professional service revenues. We are awaiting strategic cloud based deals that has the potential with significant growth. This is a very encouraging as the new opportunities continue to grow our cloud install base as well as driving to more faster predictable in total revenue model. We are also having active discussion with some of our visiting customers they have expressed an interest in migrating to our cloud based process.

Even though the demand for our cloud offering strong, we still see a number of opportunities which stay on-premise deployment in fact stronger pipeline opportunities in which we are actively engaged. [Indiscernible] only in on-premise deployment. We continue to offer those options to the market and have no plans and chance to invest in the future as the abilities to one of our many differentiating.

We had reserves for many prospects that will allow to hand the ability to evaluate those deployments and pricing model and then ultimately decide which one of those best for the organization.

We are also encouraged by the number of existing customers interested in updating to our latest release as well as in additional licenses and modules to further expand deployment of our solution.

Professional services activity remain strong during the third quarter many of our customers went live with their deployment all of these [indiscernible] are already into discussion which is very encouraging to speak the level of their satisfaction and the benefits they realize with our solution.

I would like to briefly highlight for the customers that recently went live during the third quarter and their motivation for choosing this field and major food service refrigerator and cooker manufacture shows our cloud solution to [Indiscernible] reduced cost associated with [Indiscernible] to the level of proactive service.

[Indiscernible] mechanical contractor looking for single platform and support their entire set of management process handling complex project and integrating with the ERP solution and well known supermarket chains in inventory management provides the field source in the [Indiscernible] they need a solution as we support their services [Indiscernible] and provide solution.

And finally, HDFC company decided [Indiscernible] and our solutions feet. The robust solution that we support their growth initiative, optimizing one source for both the complex to this project and strong [Indiscernible] innovation, in the third quarter, we are [Indiscernible] the alliance conversation. We have achieved a new standard for deliver a powerful feature rich solution [Indiscernible] greater lease for use, unmatched configurability and unique way to deliver knowledge throughout the organization to ensure reasonable action and ultimately satisfy customers.

We held a customer facing event to showcase our [Indiscernible] positive feedback. We are already actively engaged in upgrading discussion with many of our customers in all region that we see the huge impact that [Mercedes] would have on their ongoing services application. Additionally, we showcased our latest product release, matured service [Indiscernible] and have public facing to highlight and promote some of the major features on a regular benefits to drive awareness and generate net new opportunities. We are also to report [Indiscernible] category 2013 field service for the fifth year in a row.

[Indiscernible] of the marketplace fully [Indiscernible] government analysis on how vendors can use criteria for that market thing. [Indiscernible] solution provider in the credit management market. We are very proud of our visionary discussion.

With that I will turn the call over to Rick to cover the financial review of our third quarter 2013 results and make some additional closing comment.

Rick Etskovitz

Thank you, Jack. For the quarter ended September 30, 2013 Astea revenues increased slightly to $5.34 million compared to $5.28 million in the quarter ended September 30, 2012. Net loss available to common stockholders for the third quarter of 2013 was $0.16 million or $0.04 per share. This compares to a net loss of $1.3 million or $0.36 per share in the third quarter of 2012. Software license revenues increased 107% to $818,000 compared to $395,000 for the same period in 2012.

Service and maintenance revenues were $4.5 million compared to $4.9 million in the same period in 2012. Revenues for the nine month ended September 30, 2013 decreased 23% to $15.3 million from $19.8 million in the same nine month period in 2012. Software license revenues decreased 26% to $2.2 million compared to $3 million in the same period in 2012. Service and maintenance revenues were $13.1 million, a 22% decrease for the revenues of $16.9 for the same nine months period in 2012.

Operating loss is $2 million compared to an operating loss of $853,000 in the same nine month period last year. Year-to-date net loss available to stockholders is $2.3 million or $0.63 per share compared to a net loss available to common stock holders of $1.1 million or $0.31 loss per share in the same period last year.

I will to take this time to reiterate what we stated in the earnings release regarding the short term impact to revenues. As we experienced a shift from traditional, perceptual, on premise deals to cloud based deals. For our perpetual license deals continue to comprise a significant portion of our closed business. We are seeing an increase in demand for cloud based solutions. This has negatively impacted 2013 revenues for two reasons.

First, instead of recognizing all the license revenues for the sale once an agreement is reached and all of the [Indiscernible] are met, as we do in our on premise perpetual license deal, revenues from staff bill is recognized a smaller increment over the life of the agreement.

Second, staff revenue and related professional services may not be recognized until the deployment goes live. Accordingly, our revenues become negatively impacted in two ways. In the long run, we expect that a growing stream of predictable recurring revenue will result in growing our overall revenue and generating sustainable profitability. This concludes our remarks and I will turn the call back to over to Zack.

Zack Bergreen

Thank you, Rick. Overall the market demand for our solution is strong and on premise and the cloud offering, mobility and a workflow softenization continue to be a cold driver for company today and every deal that we have closed [Indiscernible] able to offer a comprehensive solution to support and transform the entire service operation regionally and globally. Competition in that space is intense but we maintain one of the huge [Indiscernible] full range softer flow across the service management life sample. [Indiscernible] we have been able to maintain strong position in market and we are trying to capitalize on this to ensure ongoing success. With our recent deduction and our focus methods to work closely with larger [Indiscernible] we are a much stronger company in the market placed today and heading into the future. We are encouraged by the opportunities we’re actively facilitating on a global basis which positioned the company well for the rest of this year and then to 2014.

Thanks again for attending the call today and operator we’re now ready to open the call to questions.

Question-and-Answer

Operator

(Operator Instructions) It appears we have no questions at this time. Gentlemen, I will turn it back to you for any closing remarks.

Zack Bergreen

Thank you again for attending the call today and we will see you at the next time at our next scheduled call. Thanks again and goodbye.

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