Astea International's (ATEA) CEO Zack Bergreen on Q1 2016 Results - Earnings Call Transcript

| About: Astea International, (ATEA)

Start Time: 16:30

End Time: 16:46

Astea International Inc. (NASDAQ:ATEA)

Q1 2016 Earnings Conference Call

May 20, 2016, 16:30 PM ET

Executives

Zack Bergreen - Chairman and CEO

Rick Etskovitz - CFO

Analysts

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Astea International Inc. First Quarter 2016 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 Inc. are Zack Bergreen, Chairman and Chief Executive Officer; and Rick Etskovitz, Chief Financial Officer.

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 on 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, May 20, 2016. All forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required by securities law, 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. Good afternoon and thank you for joining us today to discuss our first quarter 2016 results. Following my overview, I’ll turn the call over to Rick Etskovitz, our Chief Financial Officer who will cover our financial results. We will then open the call for a Q&A.

This has been well over one month from our quarter four and year-end 2015 earnings conference call. I thought I would take the time to focus more on significant events that have taken place since our last call.

As you may already be aware, as indicated in our annual release, we have had the late conference call due to my overseas trip to our Japan and Australia offices as well as customer visits. I spent a couple of weeks building our team and getting to just spend quality time with our customers.

It was an extremely positive trip given the level of sales activities that I’m filling in both our Japan and Australian office and our customer interaction as I was able to have while visiting. I gained an important insight by having an opportunity to meet with many strategic customers and hearing first-hand the benefits they had deriving from our solutions and their excitement to expanding this new footprint to other geographies.

One topic that was consistent among all of the companies with whom I met was their outlook on how strategic services become to their economic survival? The important service to a global economy has steadily grown over the years, so it comes as no surprise that companies are certainly seeking to provide better services whether they are in the field service business or they are manufacturing industries that also provide service.

As products become more commoditized, especially in mature industries, service has become the primary way of differentiating solution offering as well as offset declining product modules. Service is a concept that an enterprise has evolved over the past decade. What was once a strategic consumer [ph] to a call center necessary to maintain the customer relationship, customer service has evolved into an important revenue source in many industries.

Companies are increasingly recognizing the challenged service has smoothed the fluctuation in an unpredictable economy. They are embracing service as an important component in the company’s growth and competitive advantage. Service isn’t simply an expert value added; it has become the part companies now have to use services to differentiate themselves in a way that we’re [indiscernible] not necessary just in playing the current customer base.

This is where we, as a supplier, certainly in our service management solutions play such a mission-critical role. When it comes to our affairs and business development activity, we continue to see steady increase in activity around the globe. We are actively hiring in all our operating regions to support the increased level of activity. We are happy to report that we have added some significant new customers for which a major had been selected our cloud offers [ph].

Some of our notable new customers include a leading international industrial and specialty gas, and gas handling equipment manufacturer that selected our cloud solution to improve resource utilization and implement best practices to drive operational efficiencies; a premier service provider for refrigeration and air conditioning equipment in North America, will be leveraging our cloud solution to eliminate redundant and manual processes, optimize scheduling to reduce costs, improve first time resolution rates and ultimately elevate customer satisfaction levels; a leading IT services company in North America selected Astea’s cloud service suite to improve overall customer experience and increase technician productivity; and a major European IT services provider has chosen Astea’s cloud solution based on our differentiated ITIL or IT Infrastructure Library and Professional Services Automation capabilities to optimize and synchronize their service processes on a unified, end-to-end service management platform.

In addition to a strong level of sales activities that we are [indiscernible] just from a market perspective, we sponsored exhibits at four major industry continents; in the United States in New York and Australia. We have a high level of activity at all these events and have already added more to our existing pipeline, which should allow the management efforts and we had four activities that increased awareness, reinforces our leadership and generate interest in our solution suite.

This increased interest is translating into additional [indiscernible] in our global sales team. Our partner ecosystem growth initiative continues to drive more opportunities for us on a global basis. We are seeing an upward demand in a number of partner opportunities in our pipeline while we are very pleased with the current mix of partners. We continue to seek and uncover additional synergistic partnerships that will enhance and support our strategic direction.

When it comes to part of development, we remain committed to delivering advanced European [ph] and power organization allowing the globe to achieve a new level of service excellence. We are very excited about our recent partnership announcement with Cumulocity, a global leading provider of Internet-of-Things or IoT software and solutions.

With this integrated solution, enterprise service organizations will be able to take advantage of real-time information provided by assets in the field in ways that will improve service, reduce costs, and create new service revenue opportunities and differentiated offerings. We recently held a joint Webinar on this topic and had a fantastic response rate and strong interest from both existing customers’ base as well as new prospects.

With that, I will turn the call over to Rick to cover our financial review. I will make some additional closing comments after he finish his review. Go ahead, Rick.

Rick Etskovitz

Thank you, Zack. For the quarter ended March 31, 2016, Astea reported revenues 5.3 million compared to revenues of 5.9 million for the same period in 2015. Net loss for the quarter was 0.7 million or $0.23 per share compared to a net loss of 0.8 million or $0.26 per share for the same period in 2015.

Software license revenues were 0.8 million compared to 1.1 million for the same period in 2015. Subscription revenues were 0.5 million compared to 0.3 million for the same period in 2015. Service and maintenance revenues were 4 million compared to revenues of 4.5 million for the same period in 2015. Adjusted EBITDA was negative 0.4 million for the quarter ended March 31 compared to 0.5 million for the same period in 2015.

This concludes my remarks. I will turn the call back over to Zack.

Zack Bergreen

Thank you, Rick. The opportunities that comply with our pipelines are indicators of the trends the market is strong and growing. Astea remains a go-to vendor for companies looking for prudent and comprehensive field service management solutions.

We are committed to maximize closure rate on those new opportunities and have distinct competitive advantage offering that most complete solution on the market today having a strong global presence as well as the domain expertise that is required to effectively win and drive significant value for our customers.

Thanks for taking the time to attend today's conference. We will now open the call for a Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. We’ll take our first question from Allen Ginsberg [ph], a private investor. Please go ahead.

Unidentified Analyst

Hello. How are you?

Zack Bergreen

Hi, Allen.

Unidentified Analyst

I have a couple of questions. On your cash flow, I was looking at the quarterly report, it looks like it’s going up. Is that correct?

Rick Etskovitz

Cash flow has been – yes.

Unidentified Analyst

And do you expect that trend to continue?

Rick Etskovitz

Well, monitoring cash is always one of my primary responsibilities and my expectation is that it will continue to stay strong. You can also see we also paid down some of our outstanding debt as well.

Unidentified Analyst

Yes, that seems very positive to me. Just one other topic on the Cumulocity partnership. Do they have any other relationship with any other service management companies or is this at this point an exclusive relationship?

Zack Bergreen

Let me see if I can answer that one. To the best of our knowledge, they do not. I think we are unique in that regard. We do not have an exclusive relationship with them but we, as we said, in the future I suspect they may – I guess they may have other suppliers. But at the moment we are the company to go to when it comes to field service.

Unidentified Analyst

Okay.

Zack Bergreen

And by the way that has created a lot of excitement. We are now getting leads that are fed from [ph] companies who are reaching us in velocity [ph] and in fact are redirected back to us. That relationship has proven to be very, very effective.

Unidentified Analyst

Well, I wanted to ask more about that if you can embellish a little bit. Do you both get customers for each other or – how does that work? Are your products embedded in their solution or could you just embellish a little bit how that relationship works?

Zack Bergreen

Yes, so basically we have completed the full integration between the two products, so we can now have a flow of information or data can flow in both directions in essence. We will be very, very specific and very detailed on a conference call, which probably will bore a lot of people. The idea is that if you have machines in the field that have sensors, these sensors are being scanned on a predefined frequency and the data collected from the sensors are placed in the cloud what’s called a big data model. And we then perform certain functions on that big data to scan for unusual events and some patterns and based on that we can, if so required, if one of the data parameters is out of spec, for example, et cetera, we can actually [indiscernible] system, which will create a ticket, if you want to think of it that way, and which will initiate action by one of our service operators to launch an investigation and perform certain services on.

Unidentified Analyst

So Cumulocity and Astea both seek customers for this joint solution, is that correct?

Zack Bergreen

Yes, and we have seen already customers who seek out solution for providing Internet-of-Things or an IoT as we call it. And those customers are typically also companies that give equipment, extensive assets in the field that they would like to monitor and frankly respond to machine-to-machine things more effectively and that’s where our solution comes in place.

Unidentified Analyst

And you could do this all in real-time, right?

Zack Bergreen

Yes, absolutely.

Unidentified Analyst

Okay, it sounds very encouraging.

Zack Bergreen

Yes, that’s really the way of the future, a lot of companies would like to really not only react to service events but actually to be proactive and anticipate service events and deal with them before a catastrophic failure sometime occurs.

Unidentified Analyst

Okay. Well, thanks very much. This sounds very, very encouraging.

Zack Bergreen

Thank you.

Unidentified Analyst

And that’s all I have.

Zack Bergreen

Thank you.

Unidentified Analyst

You’re welcome.

Operator

Thank you. It does appear we have no further questions at this time. I’ll turn the call back to you, gentlemen, if you have any closing remarks.

Zack Bergreen

Thank you. I want to thank everybody for joining us today and hope to hear from all of you at the next scheduled event. Thank you again.

Operator

This concludes today’s program. You may now disconnect your lines and have a wonderful evening.

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