Amber Road, Inc. (AMBR) CEO James Preuninger on Q2 2016 Results - Earnings Call Transcript

| About: Amber Road, (AMBR)

Amber Road, Inc. (NYSE:AMBR)

Q2 2016 Earnings Call

August 4, 2016 5:00 PM ET

Executives

James Preuninger – Chief Executive Officer & Director

Thomas Conway – Chief Financial Officer

Analysts

Peter Levine – Needham & Co.

Tom Roderick – Stifel, Nicolaus & Co., Inc.

Terry Tillman – Raymond James & Associates, Inc.

Glenn Mattson – Ladenburg Thalmann & Co., Inc.

Trevor Upton – Pacific Crest Securities

David Hynes – Canaccord Genuity, Inc.

Operator

Good day. And welcome to the Amber Road Second Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Lisa Sheldon, Investor Relations. Please go ahead.

Unidentified Company Representative

Thank you, operator, and thank you for joining us on Amber Road's Second Quarter of 2016 Earnings Conference Call. As a reminder, today's conference call is being broadcast live via webcast. In addition, a replay will be available on our website following the call. By now, you should have received a copy of our press release that was distributed this afternoon. If you have not, it is available on the Investor Relations section of our website.

Before we begin, I would like to remind you that during today's call, we will be making forward-looking statements regarding future events and financial performance, including growth from our bookings and sales pipeline, client deployment, continued product demand, and our guidance for our third quarter and full fiscal year 2016. We caution you that such statements reflect our best judgment based on factors currently known to us and that the actual events or results could differ materially.

Please refer to the documents we file from time to time with the SEC, in particular, our Form 10-K, 10-Q and our Form 8-K filed today with our press release. These documents contain and identify important risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. We disclaim any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

During the call, we will also discuss our non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results is provided in today's press release. The projections that we provide today are also reconciled in today's press release.

With that, I will turn the call over to our CEO, Jim Preuninger.

James Preuninger

Thank you and good afternoon everyone. We delivered another strong quarter by meeting, and in many cases, exceeding our key performance measures and objectives. The momentum we have been building over the last four quarters continues to grow as the global trade landscape evolves and changes and we successfully execute against our plans and progress.

Political events like Brexit and the new and ever changing rules and regulations in China are adding to the relentless complexity our customers and prospective customers are facing. Companies are turning to Amber Road because of our comprehensive software suite as well as the valuable wealth of expertise our trade specialists and our global knowledge database provide. We help companies of all sizes effectively manage and automate their global trade functions to cope with these complexities.

For the second quarter, we delivered total revenue of $18.1 million, which is above the high end of our guidance range. Our underlying Subscription revenue growth rate was in the high teens year-over-year. As a reminder of this growth rate excludes revenue from an amortization schedule created by a large customer engagement dating back to 2012 that came to an end in January of this year.

We continue to see increased collaboration between decision-makers in procurement, compliance, logistics, transportation and supply chain areas of large companies as they look to automate their global trade functions across these various practices. Our full suite of offerings uniquely meet the needs of all of these areas. We help our customers improve supply chain agility, compress cycle times, optimize sourcing decisions, lower distribution costs, cement relationships with strategic suppliers and effectively deliver on customer demands.

As a result, demand for our solutions has never been stronger. For the third quarter in a row, bookings were very healthy and we closed a number of deals across varying sizes with both new and existing customers.

Let me elaborate on some more significant deals we signed during the quarter. Trek Bicycle Corporation, a major cycling product manufacturing distributor found that their manual processes for logistics and global trade consistently led to a high number of expedited shipments, unnecessary detention and demurrage costs, and higher transportation expenses and high brokerage fees.

After we educated them on the value proposition and demonstrated the return on investment potential with our solutions they subscribed to several of our products, including GL management, supply chain visibility, international transportation management, ISF filing, and our global product management module. These solutions will help them mitigate their challenges and automate their processes to support distribution of their products in over 100 countries and imports from 32 countries.

In another example, the H3C Group, a world-leading provider of a full range of servers, storage, networking, security products, and hyper-converged infrastructure and IT management systems has subscribed to our trade automation export software to support trade throughout Asia. The major functions they're implementing include restrictive party screening, global product master, transactional screening, and license determination, and license check, where they're trying a military rule.

By replacing a legacy system with a new technology from Amber Road, H3C expects to decrease manual work and more effectively meet both U.S. and China export control regulation. This was a great competitive win for us in China.

In another example, a $9.5 billion manufacturer of household products including home cleaning, home storage, air care, pest control and shoe care, found that they were missing potential duty savings due to the significant manual processing they had in place to support their growing international business. They subscribed to our free trade agreement automation for supplier solicitation, bill of material qualification and certificate generation for North America, EU and Asia trade agreements.

We were selected because we provide far better time to value or quicker time to value and a more effective solution in the cloud than any of the ERP software providers they also evaluated.

In another example one of the largest companies specializing in Internet-related services discovered that their manual assistants couldn't keep up with recent import and export growth. They subscribed to our import and export solutions, and said they selected us because the Amber Road is the one-stop shop providing the most robust system and global trade time in the industry.

Because, we were able to meet 100% of their business requirements out of the box with configurations, we were able to complete and close a large seven-figure annual subscription.

And as a final example a provider of consumer and enterprise cyber security solutions worldwide recognized the importance and associated challenges in staying compliant with export rules, particularly around software downloads and encryption. They had used another vendor's solution for several years, but after the company went through a rapid period of expansion, the incumbent solution just couldn't meet their needs and became too expensive to maintain. This was a large transaction for us, and also a great competitive win back for Amber Road.

I'm pleased that we closed a really good quarter in terms of new bookings, but what's more important than this is that the bookings momentum we are carrying into the second half of the year. Our sales pipeline continues to expand nicely and it's much larger than it was at this time last year. We're also encouraged by the scope of many of these opportunities, including a few landmark transactions.

Shifting gears, we've been getting a lot of questions about Brexit, and its impact on our business. As a member of the EU, United Kingdom benefited from the free trade agreements that the EU held with the rest of the world. Before the UK exits the EU, which we estimate won't be until sometime around 2018, they'll have to negotiate their own pre-trade agreements. So how does this impact Amber Road? Things like new free trade agreements and political developments such as Brexit increase the complexity and the pace of change associated with global trade. This change often results in companies scrambling to source and move goods effectively at the right cost.

In regards to Brexit, the one thing that we can be certain about is there will be a significant set of regulatory changes and businesses will need to adapt. They will need to adapt quickly to remain in compliance and remain competitive and that all drives demand for our software.

Companies are asking us to help them in a post-Brexit world. They're looking for our guidance, our comprehensive knowledge and leadership in the global trade arena. As a result, we've increased our efforts to work with and educate our customers on the complexity and changes that are soon to affect them. In fact, we have already conducted several marketing events to present what we believe are the potential issues and opportunities. Attendance and participation at these events is record-breaking and it's clear that customers and prospects alike recognize the value of our expertise in a very fluid political environment that directly impacts their ability to move goods across borders.

We're also lending our expertise to help customers adapt to changing laws and customs procedures in China, where a government body called the General Administration of Customs has started a pilot program for nationwide clearance reform in Shanghai. They have this pilot in Shanghai with a planned national implementation goal set for 2020. Once the new model is fully implemented, companies will be able to submit declarations to any customs district regardless of the port of entry for imports or departure for exports.

Customs will release the goods at the port after a safety and security risk analysis of the goods disclosed and then will collect tax and perform follow-up supervision after the clearance. This substantial change in procedures is expected to help companies accelerate the clearance of their goods and substantially reduce fleet time.

However, with the onsite clearance facilitation, customs will put far more emphasis on post-clearance audit. This will require companies to significantly enhance their compliance capability. We published a report to help businesses analyze this impact and the reform that their businesses will see with China trade management operations and to facilitate a plan to take advantage of this initiative as it progresses.

Companies gain considerable value from both our software and our global trade expertise that our team provides and we're well positioned to capitalize on this new regulation that we believe, over time, will be another demand driver for our China Trade Management solution.

In summary, we're generating healthy demand for our global trade offerings, our sales force is effectively executing against our significant market opportunity, and I remain confident that we are on the right path to return the company to its historical underlying Subscription growth rates in the high teens to low 20% range. We are also making meaningful steps to profitability in moving our company back towards cash flow breakeven, as we head back towards our historical norms. Our outlook for total cash burn for the year of approximately $2 million remains unchanged.

With that let me turn the call over to Tom.

Thomas Conway

Thanks, Jim. I'll start with a detailed overview of our second quarter 2016 financial performance and I'll provide some commentary on our third quarter and full-year 2016 outlook. Following my closing remarks, we will open up the call for questions.

Beginning with the statement of operations, on a GAAP basis, we generated revenue in the quarter of $18.1 million. Subscription revenue was $12.8 million, up 10% compared to the second quarter of 2015. As a reminder, January was the final month of the multi-year deferred revenue amortization schedule. Excluding this amortization in the second quarter of 2015, our underlying Subscription growth rate was 17%.

Professional Services revenue in the quarter was $5.3 million, compared to $5.7 million in the second quarter of 2015. This reduction was due mostly to our quick start program. Excluding the multi-year deferred revenue amortization schedule I just mentioned, our trailing 12 months recurring revenue retention rate this quarter was slightly better than 99%. We believe this demonstrates the long-term value of our customer relationships with regard to revenue and billings visibility.

On a GAAP-basis, our gross profit was $9.1 million, or 50% of total revenue, compared to $7.7 million or 44% of total revenue in the prior-year period. Subscription gross profit was $7.9 million or 61% of Subscription revenue, compared to $6.8 million or 58% of Subscription revenue in the second quarter of 2015.

Our gross profit on Professional Services was $1.2 million, or 23% of Professional Services revenue, compared to $900,000 million or 16% of Professional Services revenue in the same period last year. We are pleased with the meaningful improvements we've made in expanding our gross margins, and we expect our Professional Services gross margins to be in the 20% to 25% range going forward.

Turning the focus to operating expenses, we continue to execute on our strategy of making thoughtful and measured investments across our business, capitalizing on a significant and growing opportunity in front of us and positioning Amber Road as a transformational platform for global trade management. Research and development expenses in the quarter were $4.0 million, or 22% of revenue, compared to $4.0 million or 23% of revenue in the second quarter of 2015.

Sales and marketing expenses were $6.0 million or 33% of revenue compared to $6.5 million or 37% of revenue in the second quarter of 2015. We continue to believe that our sales and marketing expenses as a percentage of revenue will run in the low 30% range for the full year. We do expect some increased marketing spend in the fourth quarter in support of the kickoff of some marketing programs, as well as the timing of annual industry events.

General and administrative expenses in the quarter were $3.5 million compared to $5.1 million in the year-ago period. Of this improvement, approximately $600,000 came from lower foreign dividend tax expense, a benefit that will most likely not repeat in subsequent quarters.

For the second quarter, our GAAP operating loss was $4.4 million, compared to a GAAP operating loss of $7.8 million in the second quarter of last year. On a non-GAAP basis, our operating loss was $2.7 million, compared to an operating loss of $4.6 million in the year-ago period. Non-GAAP operating loss for the second quarter of 2016 excludes stock-based compensation, change in fair value of contingent liability and acquisition compensation cost.

GAAP net loss attributable to common stockholders was $4.7 million for the second quarter of 2016. This amount compares to a GAAP net loss attributable to common stockholders of $8.2 million in the prior-year period. GAAP net loss per share was $0.18 in the second quarter of 2016 compared to a net loss of $0.32 in the second quarter of 2015. This was based on 26.6 million and 26.1 million shares outstanding, respectively.

On a non-GAAP basis, our net loss was $3 million for the second quarter of 2016. This compares to a non-GAAP net loss of $5 million in the prior-year period. Non-GAAP net loss per share was $0.11 in the second quarter of 2016, compared to a loss of $0.19 in the prior-year period. This is based on 26.6 million and 26.1 million shares outstanding, respectively.

Our adjusted EBITDA for the quarter was $1.1 million, an improvement compared to a loss of $2.9 million in the same period last year. We are pleased with the progress we're making in managing expenses and moving the company on a path towards breakeven.

Turning our focus to the balance sheet, as of June 30, 2016, we had cash and cash equivalents of $16.1 million, compared to $17.9 million as of December 31, 2015, and $17.6 million as of the prior quarter.

Our deferred revenue was $34.1 million, up 17% year-over-year. While not an exact measure, growth in our deferred revenue was a good indicator of the momentum we are building in the business. If we were to exclude the multi-year deferred revenue amortization schedule I discussed, deferred revenue for the second quarter was up 23% year-over-year.

Cash use from operating activities in the second quarter was $2.4 million. For the first six months of 2016, we've generated $634,000 in cash from operations. We continue to expect our total cash burn for the year to be approximately $2 million.

Turning to guidance. Our expectation of non-GAAP loss from operation and non-GAAP loss per basic share for the third quarter and the full year excludes stock-based compensation, change in fair value contingent consideration liability, acquisition compensation costs, acquisition-related costs, and purchase accounting deferred revenue adjustment.

I'll start with our thoughts on the third quarter of 2016. Total revenue is expected to be in the range of $18.5 million to $19.1 million. Non-GAAP adjusted operating loss is expected to be in the range of $2.6 million to $3.2 million. Non-GAAP adjusted net loss per share is expected to be in the range of $0.11 to $0.13. These numbers assume 26.8 million basic shares outstanding.

From a 2016 full-year perspective, total non-GAAP revenue is expected to be in the range of $72.5 million to $72.4 million. Non-GAAP revenue for the full year includes the purchase accounting deferred revenue adjustment. Non-GAAP adjusted operating loss is now expected to be in the range of $11.9 million to $13.9 million. Non-GAAP adjusted net loss per share is now expected to be in the range of 49 bps to 56 bps. This assumes $26.8 million basic shares outstanding, and again our total cash burn for 2016 is expected to be approximately $2 million.

Our full year 2016 guidance reflects the health of our pipeline, and an expected strong back half of the year from a bookings perspective. We expect the underlying subscription revenue growth for the full year to be in the high teens, taking into consideration of timing of when some of the larger deals close, and the related subscription start date.

We also continue to expect services revenue to be flat to marginally up when compared with 2015. Our guidance also reaffirms our commitment to managing the business for both growth and minimal cash burn, while also a setting a path to non-GAAP profitability.

In summary, we have delivered another strong quarter, executing successfully against our stated objectives, and we remain excited about our large and growing market opportunity.

With that, we're happy to take your questions. Operator, you can open the line. Yeah.

Question-and-Answer Session

Operator

Yes, thank you. [Operator Instructions] And will take our first question from Scott Berg with Needham & Company.

Peter Levine

Hi, thank you. This is Peter Levine in for Scott Berg. In terms of new bookings in the quarter, can you provide some color on deal size, [indiscernible], changes in the attach rates for the broader suite of the products and how that's trended over the past couple of quarters as a follow-on, can you give us a breakdown of the percentage of new logos versus upsells in the quarter, if that's changed from that 70%-30% split in Q1?

James Preuninger

Yeah. Thanks Peter. So, it's a really good quarter for bookings, one of our best as a matter of fact. We have a number of large transactions. Most of them were multi-module and a few of them were driven with deals that included five or six different modules of our solutions. So, we're seeing, particularly in the large enterprise space, we're competing well, and we're competing well because more organizations are looking to automate the end-to-end process, and frankly we're one of the few, if not the only GTM vendors in the marketplace that has that breadth of solution. So, really good wins in North America, but we did well in China, we did well across several different verticals and really deals of all sizes. It was a fairly balanced performance and I think we need good balanced performance if we're going to drive these bigger numbers.

In terms of breakdown between existing logos and new, I don't have the exact ratios, but my guess, top of my head is that it was pretty consistent with what we saw in Q3 and if I take a look at our pipeline and some of the substantial transactions we're looking here in Q3 for, we're probably seeing a little bit of the shift maybe temporarily to existing logos coming back and buying some more stuff. But the pipeline for new engagements is growing as well. So, pretty healthy really.

Peter Levine

Okay. And then to talk about pipelines exiting the first half of 2016. I know we started the year [indiscernible] so can you quantify or give a comparable flavor to where those pipelines stand today, [indiscernible]?

James Preuninger

Yeah. So, Q1 was a good bookings quarter. For Amber Road and I think most application software providers Q1 is never your strongest or your biggest quarter, but we did well there and yet our pipeline grew. Q2, as I mentioned earlier was a really successful bookings quarter for us and I think our pipeline has remained relatively flattish, I mean, and that's a good sign. You have a big bookings quarter. Sometimes you see debt, and then you are trying to build backup. But we're heading in to now Q3 with a really good position better than the beginning of the year.

Peter Levine

Great. That's all I have. Thank you.

James Preuninger

Thank you, Peter.

Operator

We will take our next question from Tom Roderick with Stifel.

Tom Roderick

Hey, guys, good afternoon. Thanks for taking my questions. So, I want to touch the topic of Brexit here real quick and I obviously it's very fresh and a topical discussion. But relative to some of the things you are now talking about and the opportunities with your customer set. I'm curious how much of that sort of came about via your own efforts internally to organize around it and market around that versus what your customers were proactively coming to you and asking for you to solve already. And to the extent that there are some new challenges for you to tackle, does that necessarily mean that you have to get out there, create some new modules, some new products and perhaps ramp up the R&D or do you feel like you are staffed approximately to tackle that topic effectively?

James Preuninger

Yeah, thanks for the questions, Tom. I think Brexit caught everybody a little off-guard, I mean, we knew the vote was coming, the polls though I think early on had indicated that the Remain side was probably going to prevail. So in terms of people investing any serious efforts prior to Brexit vote into what they might do and say that just didn't really happen. Now, right after Brexit, we jumped all over it. And a lot of it was driven by customers asking us our opinions and a lot of it was driven by some enthusiasm, we had internally to look at this and see it as a challenge and an opportunity.

And I think it really is an opportunity for us. The UK participates in a wealth of free trade agreements that are negotiated by the EU; well, all of those free trade agreements they'll be exiting from, and they'll have to negotiate and form their own.

We have a free trade agreements software product and we sell free trade agreements as really a content plug-in. So, as those new UK agreements are negotiated and brought to life, we have an opportunity to collect that content to normalize it, provide it in an intelligent fashion for our software to use, and then go sell it to everybody that wants to business inside and outside of the UK. There will be a lot of demand for that.

Now, it ain't tomorrow unfortunately, but as we look for the separation to occur over the next two-year period, it's going to be a good windfall for us, I think.

Tom Roderick

Great. That's really helpful. Thank you. Jim, let me just follow up with one other quick question here relative to the pipeline and the opportunity you guys see out there. It sounds like you've got some potential for some pretty transformational deals in the pipe. I'm curious as you look into that opportunity set, historically China has been a very good kind of lead for you in some cases.

And, I'm wondering if the China Trade Management module has been in many cases as you look at some of those customers, you can go back to now, a nice lead opportunity and when you're going back, can you double, triple, quadruple the size and what you're doing there in China? I'm just very curious how that plays out relative to a CTM [indiscernible]? Thanks.

James Preuninger

Yeah. Thanks, Tom. Well, I think that's exactly right, when we're selling our China Trade Management module in China, it's predominantly being evaluated in and sold to large multi-national companies, many of them with headquarters in the United States or Europe, and in many cases this is our first relationship with those companies. We're highly differentiated in China, it's a great solution, it installs quickly, the time to value is fast and the value prop is significant.

So, we get a fast relationship up and going and with that success I think it opens stores for us to come back into the hometown markets Europe and the U.S. and start talking about our broader GTM platform and we've had a number of engagements that have grown just like that over the last couple of years and we're looking for a few more here in the close of this year. So, it's been a good – I don't know if it was necessarily our strategy when we entered China to think we're going to have a Trojan horse solution, but it's ended up being a real nice part of our strategy today.

Tom Roderick

Wonderful. Very helpful. Thank you, guys. Appreciated.

Operator

We will take our next question from Terry Tillman with Raymond James.

Terry Tillman

Hey, good afternoon, gentlemen. Can you hear me okay?

James Preuninger

Hear you fine.

Terry Tillman

Okay. Well, I'll give my obligatory nice job on the quarter. I guess, Jim, in terms of you're talking about maybe this year we have a little bit more of a mix to new business from existing customers, how much of that would relate to FTA or free trade agreement modules and all those just different plug-ins with that. And what kind of uplift do you see when you have that involved in a transaction?

James Preuninger

Yeah. Thanks for the question, Terry, and I know you were in to meet with some of our product folks here in the last month and got a demonstration of our free trade agreements module. So, you may be – maybe you are the expert on this subject right now.

Terry Tillman

Call me a czar.

James Preuninger

Call you a czar, all right. Yeah, and thanks for the question though. We're finding a lot of demand for free trade agreements. And if I look at the large enterprise deals we do, the vast majority of them include that module. And it's typical that a company will start with us wanting to subscribe to a handful of free trade agreements, but there is many of them around the world. We offer today more than 50. So, if we get started with someone they're buying six, soon after they're successful with that, they'll take a look at their business and come back and buy more. And they're pushing us as new free trade agreements are introduced that look like they're going to have high demand to grow that stable of products.

So, it's a nice product for us. It fits in well with the rest of the solution. It can be implemented standalone, but it works even better when you're also using our import and our export capabilities and it ties in real well with our logistics module. So, we really like selling FTA today.

Terry Tillman

Sounds good. I guess on the idea of landmark transactions, just an update in terms of the reliance you have on that transaction with, both hitting that negative $2 million of free cash flow, how much on those big deals is actually required? And/or as you talk about getting to high teens, low 20% growth, just remind us on the reliance on these landmark transactions?

James Preuninger

Yeah. There is no getting around it, we rely on big deals. I mean, in a quarter, we can close 50 transactions, five to six, seven, eight, nine of them are usually to the enterprise and one or two of them are going to be sizeable. And having that cadence for every quarter where we're able to do that, we could have one soft quarter a year, that's no problem. And we continue to make sure that we have the right kind of marketing focus, product focus, and whatnot to appeal to small customers. But we know that the large enterprises are important to us, so we're putting a lot of focus there. And frankly, those companies have great demand, it's a Greenfield, most of them have not automated their GTM processes yet.

The dollar opportunity for savings in a whole range of areas is very high. So, and I think we compete really well there. I mean the low end of the market we compete well also, but when someone is looking to buy five solutions or six solutions and we're the only guy, we're the only vendor around the world that has five solutions or six solutions. We are very differentiated in that regard and also very differentiated as well because we have the software and we also have this intelligent content that drives that software, so I don't know if that answers...

Terry Tillman

Okay, that's good. Yeah, that's great. And I guess just the last question is, just maybe a report card on the quick start program, what are the learnings, is there tweaks you would do that or would you just continue as-is and how has that been benefiting either the velocity on some of these sales cycles or just more sales activity? Thanks again.

James Preuninger

Quick starts worked out well, we piloted it exactly in Q3 of last year, we saw a lot of enthusiasm for it. We did it with just a handful of modules, two modules. We decided to make it really our core delivery mechanism, particularly for the small enterprise and midmarket customers that require it. For the really large transactions we still see customers wanting to sit down and be very thoughtful and go through a full implementation cycle considering all the opportunities and potentials. So, quick start doesn't apply to the very top of our customers. As we close some of those larger deals, we're going to see some increased demand on services. But, for everybody else, quick start has been very successful at helping us get customers up and running in a third of the time and a third of the cost.

And so as you look at our services revenues being kind of flattish in the last quarter and maybe marginally moving up in the back half of the year, I can tell you we have far, far more projects and far more customers going live with our software this year as compared to last year. So, I think we've gotten real efficient at doing this and we're expanding every quarter the quick start initiative to include all of our software. We didn't get started this year with every module being automated with the quick start program, but we're approaching more of that each quarter as we grow.

Terry Tillman

Okay. Thanks, guys.

James Preuninger

Thank you, Terry.

Operator

We'll take our next question from Glenn Mattson with Ladenburg Thalmann.

Glenn Mattson

Hi. Good afternoon, everybody. I am bouncing from two different calls, so I missed part of this discussion on the larger deals, but it sounds like you were saying they were going to book early in Q3. Just remind me what's the timeframe from when you sign deals to when you begin to recognize revenue.

James Preuninger

It's part of the negotiation. We like to write deals in the quarter with the subscription start date, maybe the first day of the quarter following, right. So, we'd get subscription accruing within a month or two. But there are certain customers that will sit down and evaluate their plans and will think about how quickly they can get a team together and kick off a project. And it's not completely uncommon that they might negotiate a deferred billing and a deferred start to the subscription. We generally wouldn't be more than four months of five months though.

Glenn Mattson

Right. So, I'm just wondering, if these yield would more likely set you up for a stronger 2017 than contribute to 2016's growth, is that fair to say?

James Preuninger

Well, so look, we're still guiding the full-year within a range and we're doing that for a reason. As Tom mentioned, there is still a little bit of an unknown on when everything closes and what those subscription start dates are going to look like. But certainly, we're feeling more and more confident about the kind of year we believe we can have in 2017.

Glenn Mattson

Right. And then, so the bottom – I don't know whether you said it or not, but the bottom of that range would almost assume that – most of these deals don't start producing revenue this year, is that a fair statement or not quite?

James Preuninger

Well, again, we'll find out. We'll give you guidance for Q4 when we get to the end of September. You know what, we'll have deals that will provide revenue in Q4 for sure. It's not a lot though, it's at most, what, one quarter's worth of revenue, but you never get all of your deals signed up and started on October 1. So, it will be a mix bag and we'll have better clarity on that certainly in the next couple of weeks.

Glenn Mattson

Okay. All right. Great, guys, and thanks for the update.

Thomas Conway

Thanks, Glenn.

Operator

We'll take our next question from Brendan Barnicle with Pacific Crest Securities

Trevor Upton

Hi, this is Trevor Upton on for Brendan. Thanks for taking my questions. Regarding Brexit, Jim, I understand there is a long-term opportunity, but in the near term is Brexit having a positive or negative impact on the pipeline or sales cycle?

James Preuninger

I think it's too early to tell, we write a lot of business in the UK, in Europe as a whole we probably do our – the most deals in Germany, other German-speaking nations, France has turned out to be a pretty good market for us, but UK has been in the top for sure every year. There are a few deals that I'm looking to get closed here in the back half of the year, the customers that we're talking to there seem unfazed by Brexit, but we'll find out. I think we're fortunate to have a large enough pipeline that I can sustain a few stalled deals in the UK and still hit our numbers though.

Trevor Upton

Okay. And then last quarter you talked of an expectation of closing a lot more business with ecVision. I'm just curious how cross-selling ecVision is maybe impacting your confidence in the second half for selling to existing customers?

James Preuninger

Yeah, I mean, there are a couple of larger deals in particular that we're going to sell to our customer base. And we have some great new logos right now in the fray too. It seems to be turned on right now in Europe, that's a marketplace that I think it's had good potential for these solutions, but ecVision is a very small company, never had really the wherewithal to engage in Europe, they had no office, no presence, no people, no marketing. Turned that around the back half of the last year and now see a pretty good pipeline.

Trevor Upton

Okay. Thank you. Then last question, again following up-on comments from last quarter about your improving analytics tools. Jim, you said you're incorporating machine learning or AI [indiscernible] is it mostly reporting?

James Preuninger

It's a lot of reporting. And the opportunity we have is really to get in and tap into the incredible amount of data that our systems collect. We look at how products move, every movement, the cost at every phase of development and movement of goods in and out, the types of costs that are incurred, we look at developing vendor scorecards, supplier scorecards – and particularly for companies with a lot of volume and a big network, they're doing business across 40 countries, 50 countries or more. You're talking about a mountain of information that you need to come in and try to make some sense of.

And I think when you do that, our customers start to uncover great opportunity to tweak those supply chains, to fine-tune the profile, the design, the vendors that are servicing them and get some pretty substantial saving. So that's really the focus that we have for analytics today.

Trevor Upton

Okay. That make sense. Thanks again for taking my questions.

James Preuninger

Thank you, Trevor. [Operator Instructions]

Operator

We'll take our next question from David Hynes with Canaccord.

David Hynes

Yeah. Hey, thanks guys. Two services-related questions. Jim, maybe an update, remind me where we are with the Siemens rollout in China, I can't remember if that is done by now. And then, Tom, maybe help with seasonality in the services business, I know Q2 seems to be seasonally strong. What drives that? And then any color to kind of ring fence what Q3 could look like?

James Preuninger

Okay. So, Jim speaking. I'll quick-handle the Siemens question. We closed that transaction in, I don't know whether it was October or in November last year. We had a pretty good team, worked real hard with the customer, they had a great team as well. And we were able to go live with that solution in the end of Q1. So, a pretty big implementation, they have a lot of factories. There are some follow-on things that's kind of a phase 2, but they're up and running, productive, getting benefits, and are pretty referenceable for us right now. So, that was a really good project.

Thomas Conway

Yeah, DJ, on the services seasonality question, so Q2, as we noted in the prepared comments, the margins on services were in the range of what we like to see, 20% to 25%, and perhaps we've got to those margins, that 23% a little quicker here in 2016 than we thought we were going to. Utilization was good, a lot of the deals that we signed in the fourth quarter and first quarter – fourth quarter of 2015, first quarter of 2016 – came online and we've got a good book of business and statements of work to go after.

We believe the back half of the year will be strong in services again. We typically would see, all other things equal, the Q4 kind of ratchet down a slight bit due to the holidays and less billings days. But again, in the prepared remarks, talking about some of these deals that we've got coming and the timing of when they land and when the subscriptions and start dates are, it could change in the fourth quarter. So, in any event, this back half looks very strong from a services utilization perspective.

David Hynes

Yeah. Got it. And then just to tie kind of billings to bookings, maybe my previous question was kind of getting at this. But can you help us – it sounds like you had a really strong bookings quarter, it's not quite flowing through the deferred revenue line. So, help us – when does that get invoice or cash come in and we start to see it show up in the balance sheet?

Thomas Conway

Yeah. So, some of the deals sign and can have a situation where we sign towards very end of the quarter and we don't actually get to bill until the beginning or sometime early on in the next quarter, and we experienced some of that here in the second quarter. And looking ex the large customer amortization issue, when we look at our deferred revenue year-over-year, that's an indicator and a strong indicator of where we are on the deferred revenue side and what the billings growth and therefore the bookings are. But if you look sequentially, you witnessed a little bit in that, it's not perfect that we've billed everything we book.

David Hynes

Yeah. But no change in billing terms, still annual and advance on these enterprise deals?

Thomas Conway

Absolutely, annual and advance.

David Hynes

Okay. Got it. Great. Thanks for the color, guys.

James Preuninger

Thank you, David.

Operator

And this will conclude today's question-and-answer session. I would now like to turn the call back over to Jim Preuninger for any additional or closing remarks.

James Preuninger

Thank you, operator. Well, again, I'm really pleased with what we've accomplished this past quarter. We have a really strong pipeline heading into the rest of 2016 that includes several large transactions, and I'm confident as ever in our ability to capitalize on that opportunity that's in front of us. We appreciate your support. We look forward to speaking to you again soon. Thanks, operator.

Operator

And this will conclude today's conference. Thank you for your participation and you may now disconnect.

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