MAM Software Group's (MAMS) CEO Michael Jamieson on Q4 2016 Results - Earnings Call Transcript

| About: MAM Software (MAMS)

MAM Software Group, Inc. (NASDAQ:MAMS)

Q4 2016 Earnings Conference Call

September 28, 2016, 09:00 AM ET

Executives

James Carbonara - Regional Vice President, Hayden Investor Relations

Michael Jamieson - President and Chief Executive Officer

Brian Callahan - Executive Vice President and Chief Financial Officer

Analysts

Sarkis Sherbetchyan - B. Riley & Company

Mark Lanier - Pegasus Capital

John Rolfe - Argand Capital

Operator

Good day, and welcome to the MAM Software Fourth Quarter Fiscal 2016 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to James Carbonara. Please go ahead, sir.

James Carbonara

Thank you. Once again, good morning, and welcome to MAM Software's fiscal 2016 fourth quarter and full year earnings call. With me on the call are Michael Jamieson, President and Chief Executive Officer; and Brian Callahan, MAM Software’s Executive Vice President and Chief Financial Officer.

I'd like to begin the call by reading the Safe Harbor statement. All statements made on this call with the exception of historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Though the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can make no assurance that such expectations will prove to have been correct. Actual results may differ considerably from the Company's expectations due to changes in operating performance and other technical and economic factors.

During the course of this meeting and any question-and-answer period afterwards, representatives of the Company may make forward-looking statements regarding future events or the future financial performance of the Company, including statements about future events based on current expectations, potential product development efforts, near and long-term objectives, potential new business strategies, organization changes, changing markets, future business performance and outlook.

Such statements are predictions only and actual events and results may differ materially from those made in any forward-looking statements due to a number of risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements, depending on a variety of factors.

For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Risk Factors in the Company's reports on Forms 10-K and 10-Q, as well as other reports that the Company files from time-to-time with the Securities and Exchange Commission.

All forward-looking statements are qualified in their entirety by this cautionary statement and the Company undertakes no obligation to update publicly any forward-looking statements for any reason except as required by law, even as new information becomes available or other events occur in the future.

I would now like to introduce Michael Jamieson, President and Chief Executive Officer of MAM Software Group. Mike, please go ahead.

Michael Jamieson

Thank you. Good morning, and thank you for joining us on this earnings call. Fiscal 2016 was another year of transformation and strategic progress for MAM. Our key focus has been the successful execution of the major technology projects that we have underway. We believe that the major investments that we made in fiscal 2016 and that we need to make in fiscal 2017 will help prepare the business for future growth in the coming years.

We are pleased with the momentum we established for our business during fiscal 2016, and the foundation we have laid for fiscal 2017 and more importantly, 2018 and 2019. We delivered solid revenue growth on a constant currency basis while expanding our base of recurring revenue and executing well against our project development plans with key customers.

At the same time, we are achieving tangible results in the marketplace with recent contract awards from new customers adding to our base of business and identifying growth for fiscal 2017.

For fiscal 2016 we delivered solid revenue growth of 6% on a constant currency basis. We delivered adjusted EBITDA of $5 million in line with our guidance. We generated strong operating cash flow of $3.2 million and we returned $50 million in cash to shareholders through a share repurchase.

More importantly, we delivered these results simultaneous with transitioning to a cloud-based business model and successfully managing multiple large development projects. Given recent business trends, our backlog of unfulfilled orders, pipeline of new opportunities, and milestone achievements with our large development project, we believe fiscal 2017 is shaping up to be another solid year for MAM.

Our Software-as-a-Service business continues to trend in a positive direction as customers continue to transition to our cloud-based solutions. Year-over-year, SaaS revenues increased 43%, and our Data-as-a-Service business grew by 1%.

In addition, I am pleased to announce that we successfully converted three identified new business opportunities into bookings and contract awards over the last several months. The total upfront contract value for these 3 perpetual Autopart deals signed subsequent to the end of the fourth quarter totaled just over $1.1 million for the software licenses and professional services alone.

These contracts will also further increase recurring revenue when those customers go live, and we expect two of the three to be live in fiscal 2017. These recent successes when announced will further enhance our reputation as a supplier of business management and warehouse management software for the larger regional Autopart warehouse distributor.

The successful deployment of such projects will also help to add new opportunities to our pipeline. As we have discussed during previous earnings calls, the timing of awards for certain perpetual deals in our pipeline can be challenging to predict.

To-date, we have been able to publicly announce one of those deals and that was Big City Auto. All three of the recent contracts awards have been in our pipeline for quite some time.

However, we remained committed to these opportunities and in the end prevailed as the vendor of choice. Our large project development work with Goodyear continues to move forward in accordance with the revised project timelines that are set out during the second quarter earnings call back in February.

We remain on schedule to complete the initial development phase of the project by the end of this month and begin transitioning to use acceptance testing later this calendar year. In conjunction with the customer, we have agreed to increase our testing time, which will cause the pilot to move from late calendar 2016 to early 2017.

We are jointly committed to a successful pilot phase and believe additional testing time will be mutually beneficial. We are fast approaching the Annual Goodyear Dealer Conference by the end of January that presents us with the opportunity to showcase the VAST Online product to hundreds of Goodyear dealers in advance of rollout.

Working closer with Goodyear in partnership will continue to be a critical factor to the success of this massive project.

Our mutual commitment to the relationship, working together to resolve issues, and investing time upfront to develop quality product will put us in the best possible position to fully launch the product and begin booking new business.

Starting the rollout of VAST Online to the Goodyear network in fiscal 2017 will be a major achievement for MAM.

As with most large-scale and complex development projects, we’ve seen changes in scope that have resulted in timelines being revised, increasing our total investment and delaying the point at which we start to generate revenue.

That said, we remain thrilled with the opportunity that lies in front of us. The major investment that the company has made in VAST Online is an investment in the future of our business.

We are proud to have a global brand like Goodyear sponsor our technology vision and we believe that success with Goodyear, which will be significant in its own right, will put the company in a strong position to pursue incremental and brand new opportunities in North America and beyond.

In addition to Goodyear, our partnership with ALLDATA continues to be a top priority for our business, and we made solid progress in fiscal 2016. ALLDATA, a leading provider of manufacturers' repair times in North America with a subscriber base of some 80,000 customers.

Our Autowork Online solution is being sold under the ALLDATA Manage Online brand to their auto repair shop customers.

Whilst we contractually restricts us to what we can disclose about the progress that we made in fiscal 2016, I can tell you that monthly revenues generated from Manage Online have grown steadily throughout the year and contributed to the 17% year-over-year increase in recurring revenues that we saw in our US business.

The prospects for Manage Online and our relationship with ALLDATA remains solid and we are very excited about some of the potential opportunities that lie in front of us.

Turning briefly to our strategic objectives of growing our business by increasing brand awareness, expanding our presence in existing markets, and reaching new ones and developing leading-edge technology solutions to meet the demands of our customers.

We are aiming to grow our base of revenues derived from delivering SaaS. Each quarter, we continue to grow sequentially this portion of our business. During the fourth quarter, our SaaS revenues grew by 47% year-over-year and 17% sequentially.

The trends we saw in recent quarters continue with the UK most widely accepting and deploying our Autowork Online and Autopart Online Solutions and the US also adopting at a steady rate.

As of the end of the fourth fiscal quarter, our Autowork Online user base grew by 5% year-over-year to 2,865 subscribers. Subscribers of Autopart Online continued to increase each month and now total 3,191 end-users subscribing to the service, up 11% from last quarter.

In the UK, the Autopart Online user account grew by 69% year-over-year to 3009 end-users. Developments of the MAM brand across North America continues through ongoing execution of our sales and marketing strategies.

As and when we are able to announce business wins such as the recent autopart successes in North America, and the launch of VAST Online we would expect that this would help to elevate the MAM brand.

In July, we announced the Big City Automotive, an automotive warehouse with locations across New York and New Jersey selected our Autoparts Software Solution to manage its customer service inventor, purchasing and accounting processes for its 12 stores, three warehouses and office headquarters.

Autopart will help Big City reduce costs, simplify operations, improve customer service and more accurately manage inventory across the enterprise.

Moving on to – marketing initiatives, US website visitors accounted 33% of all traffic to our website increasing from 24% in the same period last year. Year-over-year individual page views grew by 18.6% indicating that our offerings are clearly generating interest in North America.

Our third area of strategic focus is the development of our information service Autocat+ for the North American market. Autocat+, our electronic autoparts catalog helps our wholesale and retail customers, as well as customers involved in the service and repair of vehicles to identify and sell autoparts.

Deeply integrated into our business management solutions and delivered as a service over the internet, Autocat has been part of our product portfolio and a strong contributor to our success in the UK for many years where we have approximately 10,300 end-users. The catalog data is also an integral part of our e-commerce initiatives.

As predicted, we were able to convert two important pipeline opportunities into live projects before the end of fiscal 2016 and we expect both customers to be live by March 2017.

Moving up, monitoring and assessing expansion into new vertical markets in the UK that share common issuers with the automotive market. Given current opportunities in the automotive markets and the resources required to ensure the successful developments and launch of several major projects exploring new vertical markets have been a lower strategic priority.

We believe our software could be a fit for those of the businesses involved in the distribution of construction materials and we continue to monitor the market and generate a reasonable amount of new interest in this area.

In the coming fiscal year, we expect this area of our business to more frequently enter our strategic discussions but at this time, we remain focused on executing on our presence in near-term project commitments.

And lastly, our continued investments in research and development has been vital to our business ensuring our competitive position in fiscal 2016. We expect investments to continue in fiscal 2017 as we begin to leverage the investments we have already made through product rollouts and the pursuit of new business opportunities.

Looking ahead to fiscal 2017, we expect adjusted EBITDA to be between $4.1 million and $4.6 million, a decrease from the $5 million we reported in fiscal 2016, primarily due to the additional investments in support staff and research and development related to the launch of VAST Online in fiscal year 2017 and the impact from foreign currency exchange rates.

2017 is a key year in the development of our presence in the North American market and the overall growth of MAM. We will be focused on key initiatives in 2017 including the launch of VAST Online, the beginning of the rollout of Goodyear, the expansion of our relationship with ALLDATA and the launch of our Autocat product.

We believe we will start realizing the benefits of our investments through double-digit growth in revenue and profitability starting in fiscal year 2018.

I’ll now turn the call over to Brian Callahan, our Chief Financial Officer for a detailed review of our financial results for the quarter and full year.

Brian Callahan

Thank you, Mike. Our detailed results are included in our press release and 10-K, so I am going to just discuss the financial highlights and some of the driving factors and trends. I am going to start by discussing recent events that impacted foreign currency.

In June 2016, majority of voters in the UK elected to withdraw from the European Union in a national referendum referred to as Brexit. Negotiations are expected to commence as determined to future terms in UK’s relationship with the EU and MAM UK represents a significant portion of our revenues and profitability.

In essence Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations that resulted in a strength in the US dollar against the British Pound. During the periods of strengthening dollar, our reported international revenues are reduced because the British pound translates into fewer US dollars.

The long-term effects of Brexit will depend on any agreements the UK makes to retain access to European markets either during in a transitional period or more prominently. May the potential effects of Brexit could have an unpredictable consequences for the credit markets and adversely affect our business results operations and financial performance.

The average exchange rates for the fourth quarter 2016 and fiscal year 2016 were 1.44 and 1.48 respectively as compared to 1.53 and 1.58 for the fourth quarter of 2015 and fiscal year 2015 respectively.

The decrease in exchange rate had a significant impact on our result of operations for 2016 and may have a significant impact on our future results of operations. The current exchange rate is approximately 1.30. Our guidance for 2017 and beyond are based on a current exchange rate and changes in future rates may have significant impacts on our projections.

I’ll now discuss the financial highlights for the quarter. For the fourth quarter of fiscal year 2016, consolidated revenues increased 6% to $8.4 million or a 11% increase on a constant currency basis.

MAM UK revenues were down 2% year-over-year as reported, but increased 4% on a constant currency basis as increased sales in Autowork Online and Autopart Online products from the transition to a Software as a Service or SaaS model were partially offset by perpetual software sales in the prior year.

MAM North America revenues increased due to overall growth in both SaaS and perpetual sales as well as professional services. We continue to make traction in North American market increasing our market share and continuing to realize the benefits from our key customer relationships including ALLDATA.

As a reminder, we did not recognized any revenue related to our VAST Online project or Goodyear during fiscal year 2016.

Total SaaS revenue for the fourth quarter was $2.1 million, an increase of 47% compared to the prior year and a 17% increase sequentially. SaaS revenue included Autowork Online revenue for the fourth quarter of $1.3 million, an increase of 42% year-over-year; and Autopart Online revenue for the fourth quarter was $751,000, 57% increase year-over-year.

Data-as-a-Service or DaaS revenue for the fourth quarter was $2.4 million, an increase of approximately 1%.

Gross profit increased year-over-year as a percentage of total revenue to 57% as compared to 53% for the same period last year. The increase in margin was primarily attributed to the higher revenues and higher margin customization projects during the quarter.

Total operating expenses increased by approximately 11% primarily as a result of higher general and administrative expenses principally due to cost associated with the expenses from margin, changes with the accounting finance organization and an increasing allowance for bad debt.

Other expenses for the quarter were $181,000 due to interest expense on borrowings used to fund a public tender offer completed in the second fiscal quarter of 2015 in comparison to 4000 for the same period last year.

Adjusted earnings before interest, taxes, depreciation and amortization adjusted to exclude non-cash stock-based compensation or adjusted EBITDA was $1.4 million for the fourth quarter of 2016 versus $1.1 million for the fourth quarter of fiscal 2015. A reconciliation of adjusted EBITDA to net income can be found at the end of the fourth quarter earnings press release.

Adjusted EBITDA is commonly used by management and investors as an indicator of operating performance and liquidity. Adjusted EBITDA is not considered a measure of financial performance under GAAP, and it should be not considered as an alternative to net income or other financial statement data presented in accordance with GAAP in our consolidated financial statements.

Now turning to the full year results. For the fiscal year ended June 30, 2016, we reported revenue of $32.2 million, an increase of 2% as reported compared to $31.6 million last year. On a constant currency basis, revenues were up 6%.

Recurring revenues for 2016 were $25.6 million, an increase of $1.9 million or 8% and represented 79% of total revenues versus $23.6 million or 75% of total revenues for last year.

Total SaaS revenue increased by $2.1 million or 43% to $7.1 million for 2016, and total Data as a Service revenues increased by 118,000 or 1% to $9.8 million for 2016.

Gross profit for 2016 was $17.6 million or 55% of total revenues, a decrease of $247,000 compared to $17.9 million or 56% of total revenues reported last year. The decrease in margin was primarily attributed to increases in professional services headcount to support growth that shifted business to SaaS model and certain higher margins special projects last year.

Total operating expenses were down approximately 1%, primarily due to lower sales and marketing from lower salaries and related expenses in the UK.

The lower marketing and communication expenses and lower internal software license expenses in the UK, partially offset by higher general and administrative expenses due to expenses for margin, cost associated with changes in the accounting and finance organization and an increase in the allowance for bad debt.

We expect to continue to invest in our sales and marketing, particularly in the US as we rollout VAST Online and participate in marketing events and programs to strengthen our market share.

Other expense for fiscal year 2016 of $59,000 was a result of the increased interest expense on borrowings used to fund the tender offer, partially offset by $217,000 gain quarter included $217,000 gain from the settlement of liabilities vendors as compared to $13,000 of interest expense for last year.

Adjusted EBITDA was $5 million for fiscal year 2016 and 2015. We ended the year with cash and cash equivalents of $491,000, a decrease of $6.3 million from $6.8 million at June 30, 2015. The company had outstanding debt of $9.8 million as of June 30, 2016 and we had $1.4 million available on our revolver.

The decrease in cash and increase in debt was due to the $15 million tender offer for 2 million shares in December of 2015. For fiscal year 2016, operating activities generated cash flows of $3.2 million and capital expenditures including capitalized software, development cost were $3 million.

The increase in capitalized software development cost reflects the investments in VAST Online and Goodyear projects.

With that, I’ll now turn the call back over to you, Mike.

Michael Jamieson

Thank you, Brian. In summary, fiscal 2016 was a year of investments to strengthen our offerings, steady progress on key development projects and the continuation of our transition to a cloud-based computing. We are excited about the path we are on and the opportunities before us. We are optimistic about fiscal 2017 as we begin to leverage our investments to grow our business by meeting marketplace demands with cost-efficient, value-added streamlined solutions.

This concludes our prepared remarks. Once again, thank you for participating in today’s conference call. Brian and I will now take any questions you may have. Operator, please open the lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we will take our first question from Sarkis Sherbetchyan with B. Riley & Company.

Sarkis Sherbetchyan

Yes, good morning guys and thanks for taking my questions here.

Brian Callahan

Good morning.

Michael Jamieson

Good morning.

Sarkis Sherbetchyan

So, first, you mentioned the multiple new North American Autopart contracts and I was wondering if you can maybe give us a little bit more on the ramp schedule. I think you mentioned a figure over $1 million?

Michael Jamieson

Yes. So, with these deals Sarkis, made up of software licenses and professional services fees. So we’ll recognize the professional services fees as the projects move along and the software licenses at the point at which the software is installed.

And one of these is still hot topic of the press just a couple of weeks ago and the other one occurred in July, and we actually booked Big City in fiscal 2016, but announced it in July. So, early stages for all of these projects, but yes we’ll be certainly recognizing the software element in the near-term and professional services over the term of the project.

Sarkis Sherbetchyan

Understood, and I think the press release mentioned that it leads to recurring revenues. Can you maybe help us understand how you converted into recurring?

Michael Jamieson

Well, with the perpetual deals, and these are certainly -- they are in the minority these days, but it’s a traditional approach based on the size of the organization and that is the number of licenses that the customer purchases from us.

We calculate a support and maintenance fee percentage based on that and then that is spread out over a 12-month period. So, yes, the recurring revenues on those three deals, we will – we won’t start enjoying those until those customers go live. But these are three sizable players and this will move our recurring revenues along for the Autopart product yet quite nicely.

Sarkis Sherbetchyan

Understood. Just so for my modeling purposes, I wouldn’t have included in the kind of as-a-service piece.

Michael Jamieson

Correct. Now these are – if you – we have – we still have a recurring revenue that is not software or Data as a Service, and so the customers that still run on-premise perpetual license deals from MAM, they’re the ones that we are looking to convert and they are converting, but until such time, we do categorize them as recurring revenue.

But sitting outside of the software and Data as a Service bucket, which now in financial year 2016 accounted for 52% of total revenues compared to 46% in financial year 2015. So it’s growing nicely and the remaining amount is the recurring revenues associated with those perpetual deals.

Sarkis Sherbetchyan

Understood. That’s very helpful. And I know that in the release again, you kind of provided top-line guidance, double-digit revenue growth in fiscal 2018. I was wondering if you can help us maybe frame up revenue growth maybe guidance or outlook for fiscal 2017 year, and now we have EBITDA, but just what are you thinking in terms of revenue growth for this year?

Michael Jamieson

Brian, do you want to take that one?

Brian Callahan

Sure, I mean, obviously, we expect to see some consistent trends with what the UK business and US business have started in 2015. So, we have a little bit of a range on EBITDA. So I think that will translate into high-single, low-double-digits revenue growth on an overall basis, assuming the currencies, constant currency basis.

Sarkis Sherbetchyan

Understood. And then, I suppose, even if you expect a high-single, kind of low double on the top-line growth rate then for fiscal 2018 we should expect at least a double-digit kind of top-line growth number?

Brian Callahan

Yes, we believe, by the initiatives we are putting in place in 2018, that will position us at the end of the year to be seeing growth, double-digits in revenue and in profitability on a percentage basis.

Sarkis Sherbetchyan

Okay, understood. And so from an absolute dollar perspective, inclusive of the foreign currency kind of situation, is that about $1 million in investment in the P&L?

Brian Callahan

I am sorry, what do you mean by investment?

Sarkis Sherbetchyan

So, from an operating expense angle, if you are going to grow the top-line, call it, mid-single digits, what’s the expense kind of associated in the P&L as you are kind of ramping in 2017 to get to the 2018 growth metrics?

Brian Callahan

There’s a few things going on in the expenses as we transition during 2017. There’s obviously investments we are making in the staff that we’re going to be doing in that rollout and the training for the VAST Online and Goodyear projects.

So we are investing and we are continuing to invest in R&D and as you are aware we’ve been capitalizing some of those expenses and as we start rolling the product out some of those expenses start going back or those investments start going back into R&D expense. So it’s quite a few moving targets and obviously in 2017 versus 2016 we lose some of the growth in the FX was an obviously meaningful impact.

Sarkis Sherbetchyan

Okay, understood. And then, when do you think the majority of the, kind of capital software development starts tapering off here in 2017? Is that towards the back half of the year?

Brian Callahan

Yes, it will definitely be, excuse me, in the back half of the year as we do the rollout.

Sarkis Sherbetchyan

Great. That’s all for me. I’ll hop in the queue.

Operator

And we will take our next question from Mark Lanier of Pegasus Capital.

Mark Lanier

My question has to do with Goodyear and I am wondering whether there has been evolution of your thoughts about the scope of that opportunity as you continue to develop a project and would you sort of outline what you think that scope is now from current view? Thank you

Michael Jamieson

So, hi, Mark, that’s a great question. I think, from the outset, we still – the opportunity to expand our presence in the Goodyear empire by executing successfully on this initial and significant project with Goodyear retail in North America.

And so, without getting into too much detail, the scope has expanded and we see other opportunities within the Goodyear empire both in North America and beyond and as this project is now – we’ve been developing for almost two years, but there have been changes in terms of requirements and other opportunities that presented themselves, but along the way.

So, things certainly haven’t stayed too constant for any period of time and we are always evaluating what the next opportunity looks like. So, I think the scope for opportunities has grown and what we are still – we have that leg of focus on getting this project completed generating revenues by deploying the software to the Goodyear retail side. Then, we are very mindful of what else could potentially come our way.

Mark Lanier

And what is the rough number now of Goodyear owned, versus Goodyear franchised and what portion of those are US versus non-US?

Michael Jamieson

And so, the Goodyear retail network consists of approximately 600 locations and they are – I believe they are pretty much old US based to one or two or three based in Canada. But it is –what we are talking about here, the numbers that we’ve put out on our investor presentations previously that has been the North American opportunity and the dealer locations, yes, that’s north of 600 as well.

So this is all – this is purely about the opportunity that lies in front of us. We are not – we don’t include any thoughts on potential incremental opportunities when we talk about Goodyear in our investor deck.

Mark Lanier

My other question has to do with the construction materials. I know that’s been less of a emphasis as we worked on these technology projects, but again, I am interested in your – sort of evolution of the view of that markets and when it is that you might begin to accelerate development opportunities there.

Michael Jamieson

So, we continue to generate a modest amount of interest through very low key marketing. We will continue to attend the relevant trade events in the UK. And we have – again we had a pretty small – on a small scale, we have grown the customer base and I would expect it without taking, without deviating any of our focus from the major projects and I would expect us to be turning our attention to review that term, that strategy during fiscal 2017 with a view to potentially ramping things up in 2018.

Mark Lanier

Thanks again. I wish you good luck.

Michael Jamieson

Thank you, Mark.

Operator

[Operator Instructions] And we will take a question from John Rolfe of Argand Capital.

John Rolfe

Good morning guys. Couple of questions for you. One, in the past, you’ve put some sort of longer-term operating model targets out there in some of your investor presentations, sort of giving some guidelines with what you think the business might look like from an operating margin standpoint at various revenue levels. I am just wondering, notwithstanding the fact that there is some additional investments going on in the coming year, whether broadly speaking I think those sort of targets are still realistic going forward?

Michael Jamieson

Yes, I mean, I think you are referring to something that I’ve seen there, there is some models in the deck to say at certain levels what our targets will be for operations…

John Rolfe

Yes, exactly.

Michael Jamieson

Profitability. So, we think those are still reasonable and in line with our expectations. Obviously, we continue to refine those and we’ll update them in our deck as we make adjustments. But we think, based on what we have in front of us, we think those are still sort of realistic objectives.

John Rolfe

Okay. Okay, great. And then, secondly, just reading through the K quickly last night, it looked to me like in the MD&A, you guys had sort of changed some of your historical disclosure with respect to – you used to provide sort of local currency comparisons for the UK business and the US business separately and it looks like, you’ve sort of decreased that level of a granularity.

And I am just wondering, particularly given the recent volatility in the Forex rates and how that’s going to sort of impact the consolidated presentation, why you made the decision to sort of decrease some of that disclosure with respect to the various geographic locations?

Brian Callahan

I am not so sure we decreased, we definitely would change the format if there is something missing I apologize. We did put stuff into tables, we break out UK and we show it. We thought it was again a little confusing showing the multiple currencies within the table, within the paragraphs, we’ve put in tabular format and we’ve disclosed what the currency rates are.

So the people can get to the information, I apologize it’s not right out there where it was, but I think, all the information there we have changed we’ve presented to be a little more with a little more easier for investors to read, so.

John Rolfe

Okay.

Brian Callahan

So we have been taking suggestions if there is an easier format.

John Rolfe

No, so I guess, the only piece I was missing then, yes, I did not see, and again I just look to it very quickly, I did not see where that disclosure was on the actual Forex rates that were being used for the translation to US dollars. But I’ll go back and take a look at that, that was the piece I was missing and obviously, I can obviously get to a constant currency, sort of number as a result of that.

But, yes, I would, certainly encourage you guys to continue making that sort of constant currency assessment as easy as possible, just because with what the pound has done recently, it’s going to be a very material headwind on a US dollar reported basis going forward. So, that would be my only comment for you, but the pieces there at all, I figure it out. So thank you.

Brian Callahan

Absolutely, give me a call if you have trouble. I also – in my script outlined what the exchange rates were and obviously we just have to be very conscious in the 10-Ks and disclosures, GAAP versus non-GAAP and reconciliations. So we are just trying to make sure we comply and present all the information as appropriately as possible.

John Rolfe

Okay, great. Thanks.

Operator

And we will take another question from Mark Lanier of Pegasus Capital.

Mark Lanier

Just a follow-up question on ALLDATA. You mentioned the figure of 80,000 subscribers. Is that all US base? And does that represent the scope of potential users for your ALLDATA MAM Software product?

Michael Jamieson

I believe they - that figure just relate to North American customers, Mark. Now there are certain portions of that set of customer base that probably wouldn’t be suited to the Manage Online product. I know that ALLDATA have a number of customers who are involved in crash repair and that is a different process. But, I haven’t seen any break out of that 80,000 figure.

So, I couldn’t say what portion is you would regard us been a target for Manage Online. But, it is significant and if you look at some of the other players in the marketplace and just – the number would say, so that they have out there and that would reflect our market opportunity. It is significant.

Mark Lanier

Thank you.

Operator

And we will take a question from Scott Nussbaum.

Unidentified Analyst

Good morning guys. So, I am putting in late, but apologize that the questions already been asked. But could you comment on priorities for free cash flow over the next 24 months and could you talk a little bit about the investment and where we stand in the other vertical markets?

Brian Callahan

From the investment, the free cash flow standpoint, I’ll take that, obviously, right now we are focusing on the continuing investment and our development product VAST Online in conjunction with the Goodyear project, as well as Mike talked about Autocat and even some of the development we are doing for the other vertical markets.

So, right now our focus on free cash flow is to support those additional investments we are going to make in the development of those products.

Unidentified Analyst

Okay.

Michael Jamieson

In terms of the other markets, Scott, then what we are saying amounted that we have to maintain that laser focus on the current automotive opportunities, but I do expect that at some point in fiscal 2017, we will turn our attention to the strategies for the other vertical markets and I would hope that we can reignite something in fiscal 2018.

Unidentified Analyst

Do you anticipating needing to make any material hires over the next 12 to 24 months, just start pursuing additional markets or development efforts?

Michael Jamieson

I don’t believe so. We hired in the UK. We hired in an industry expert two or three years ago. We’ve actually brought in and he is still – we are still generating a modest number of enquiries for – from these other markets and he is dealing with those as well as spending time working on automotive opportunities.

So, I think, from a product standpoint, we are using the same product from a sales and marketing standpoint, I think we are well equipped to step things up when we are able to just say if it is likely important that we remain focused on the automotive opportunities that are there directly in front of us.

Unidentified Analyst

Okay, with respect to the automotive opportunities and could you talk a little bit more about the catalog business that’s launching and how that you expect that to play out and how it will displace competitors and how that might help you leverage the other software business?

Michael Jamieson

Definitely. Pretty much every parts – autopart distributor, every retail shop, and we will use an electronic – parts catalog to identify parts for a particular vehicle. So, it’s been a key part of our success here in the UK for many years, strong contributor to the UK for many years and we’ve spent considerable amount of time preparing to replicate the success that we’ve had in the UK over North America.

Now, we have managed to get commitments from two of our customers to move forward with our catalog and without going into too much details, we expect both of those projects customers to be up and running in the next six months or so. We see this as a big deal.

And so, the growing number of autopart customers that we have, the growing number of shop customers that we have, they all present opportunities for us to go back and upsell our catalog solution. So, it’s important to our model and it is just another exciting opportunity that we expect to start bearing or creating some return for MAM in North America in 2017.

Unidentified Analyst

What is the value proposition of your catalog versus your competitors as you are positioning it to customers?

Michael Jamieson

So, we see this in the UK and we see a similar situation in North America. We believe that we can get supplier data out in front of the parts distributors and the repair shops quicker than our competition. Our competition traditionally have distributed media. Ours is an internet-based solution. So, and – that is the technology that really is grabbing the attention and the interest of the people that we are talking to. So that’s where we see the opportunity.

Unidentified Analyst

Are you priced at a premium to your competitors or at a discount?

Michael Jamieson

I am not going to get into too much detail there, but I think, obviously as a product that is new to market than we are looking to establish ourselves, I think, any deals that we got at this early stage won’t be representative of what we do in these 12, 18 months time hopefully.

Unidentified Analyst

Great. Thank you very much. I appreciate the extra information.

Michael Jamieson

Thanks Scott.

Operator

Ladies and gentlemen, that concludes today’s question and answer session. For closing remarks, I would like to turn the call back over to Mr. James Carbonara.

James Carbonara

This concludes the MAM Software's fiscal 2016 fourth quarter and full year earnings call. I would like to thank Mr. Jamieson and Mr. Callahan for making themselves available this morning, and on behalf of the management and Board of Directors of the company, we appreciate your support and look forward to speaking to you again soon. You may now disconnect.

Operator

And ladies and gentlemen, this does conclude today's conference. Thank you for your participation.

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