Amber Road, Inc's (AMBR) CEO James Preuninger on Q4 2015 Results Earnings Call Transcript

| About: Amber Road, (AMBR)

Amber Road, Inc. (NYSE:AMBR)

Q4 2015 Results Earnings Conference Call

February 11, 2016, 05:00 PM ET


Sarah Rayner - Investor Relations

James Preuninger - Chief Executive Officer

Thomas Conway - Chief Financial Officer


Scott Berg - Needham and Company

Tom Roderick - Stifel

Brian Peterson - Raymond James

Brendan Barnicle - Pacific Crest Securities

David Hynes - Canaccord

Glenn Mattson - Ladenburg Thalmann.


Please stand by. Good day, everyone and welcome to the Amber Road Fourth Quarter 2015 Earnings Conference Call. Today's call is being recorded.

At this time, I would like to turn things over to Sarah Rayner [ph], Investor Relations. Please go ahead, Ma’am.

Sarah Rayner

Thank you, operator, and thank you for joining us on the Amber Road's fourth quarter and full year 2015 earnings conference call. As a reminder, today's conference call is being broadcast via webcast. In addition, a replay of the call 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 first 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 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 the 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 exclude stock-based compensation, puttable stock compensation and changes in fair value of contingent consideration liability, which cannot be determined at this time and are therefore not reconciled in today's press release.

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

James Preuninger

Thanks, Sarah, and thank you all for joining us today. We ended 2015 on a very strong note. For the fourth quarter, we delivered non-GAAP total revenue of $17.5 million, which is exactly in the middle of our guidance range.

GAAP subscription revenue in the quarter was $12.9 million. When adjusted for the loss of a large customer one year ago that we’ve spoken about in the past, our organic subscription revenue grew 20% year-over-year in the fourth quarter. We believe that highlights that the underlying fundamentals of our business are solid.

I’m also very happy to announce that the bookings momentum we built in the third quarter accelerated into the fourth quarter. In fact, our fourth quarter was the strongest bookings quarter in the company’s history by any measure including new annual subscription value.

Our performance in the second half of 2015 has established a very nice revenue backlog for us in the New Year. Even with the record breaking quarter, our sales pipeline has also expanded nicely. We entered 2016 with a sales pipeline that is roughly twice as large as it was this time last year. It is clear that organizations of all sizes are looking to our end and global trade management solutions they’ll [ph] address the intricacies and the complexities that arise when the conduct global trade.

We entered 2016 feeling confident about the positive drivers of our business, the strength and in particularly the breadth of our product portfolio and the increasing productivity and tenure of our sales force. We believe that in 2016 we can return the company to historical underlying subscription growth rate in the high teens to low 20% range.

We will meaningfully reduce our operating losses and move our company back towards cash flow breakeven leaving us in a solid financial position and making a very good progress towards our way to profitability.

Returning to our results. Demand for our solutions is strong and we delivered healthy growth in customer account across all of our market segment. We ended 2015 with 673 customers inclusive of the 17 customers added when we acquired ecVision. That compared to 552 customers at the end of 2014 or an increase of 22%.

The U.S. mid market segment was strong again this quarter and for the full year. This business segment continues to be a nice contributor to our overall growth as mid market companies are driving larger amounts of international trade volumes. We ended the year with 434 mid market customers compared to 359 at the end of 2014 or an increase of 21%.

As a reminder, the numbers I’ve just discussed in terms of custom accounts do not include the large number of customers signed in the fourth quarter as we don’t account a customer until they begin to generate revenue.

Due to increasing complexity regulations in growing cost and global trade, customers are looking to partner with Amber Road because of our highly differentiated offering and proven end to end solution. I’d like to share with you some examples of the customer wins we had in the fourth quarter to illustrate our value proposition.

Kicking this off, I am delighted to report that a major worldwide producer of Athletic footwear, apparel, equipment and accessories trusted Amber Road to improve their supply chain visibility and factory collaboration.

The selection process was complex and rigorous, but Amber Road was able to present a premium solution over some of the world’s largest software company. A key differentiator for us was the flexibility of our solution to model and then integrate with the company’s existing processes. By superior user interface, data quality management and reporting accuracy also contributed to our success.

This is a very significant deal in terms of its size and the strong reference we gain by automating one of the most respected organizations conducting global trade today.

Coca Cola also signed a multiyear agreement with Amber Road to use our trade automation solutions for restricted party screening and product classification.

As part of the agreement, Coca Cola will be leveraging Amber Road’s global knowledge trade content for 23 countries. Coke selected Amber Road because of our ability to augment, centralize and streamline current compliant process.

In another example, one of the largest American multinational telecommunication providers with significant overseas operations selected Amber Road to bring efficiency gains to their export business by eliminating manual export processes.

The deployment of Amber Road’s GTM Solution will fully automate this customers export operations while bringing an estimated 20% to 30% in efficiency gains in cost savings. The customer will also benefit from our global product master module that provides us single repository for all trade related data including product classification.

In the quarter we closed a large subscription with one of the leading aerospace and defense contractors in the United States. We were engaged to implement that transformative trade solution to replace and consolidate legacy systems with the goal of dramatically streamlining and automating cost border trade processes, improving data quality and data integrity and reducing their cost especially around import trade.

Further, we are now developing a plan we’ve discussed to more effectively manage an increase fair use of free trade agreement as an example NAFTA, with the goal of dramatically lowering the duties that they pay.

And as a final example of the many new customers that were signed in the quarter, a world class consumer products company with a diverse, consumer oriented product portfolio that includes more than 120 powerful brands on a global basis selected Amber Road to centralize global trade management for all of those brands and business units worldwide.

The company is currently rolling out a full suite of our GTM module. Our solutions will help drive efficiencies within their compliance teams and enforce centralized compliance processes across all of those businesses.

On the professional services side of our business, our quick-start programs had been very well received. As we discussed with you last quarter, this new programs allows a new customer to get up in running far more quickly and at a much lower cost.

By lowering the cost to deploy our solutions, we improve our competitive pasture and become a better partner with our customers therefore allowing them to keep our focus on the value we offer with our software.

During the fourth quarter, we streamlined our professional services organisation to better align our staff with our expected service needs going forward while still being able to provide the level of expertise and service we are known for delivering. You should expect to see our professional service gross margins improve in 2016.

For the year ecVision performed in line with our expectations. Last March, we said the primary objectives for acquiring this company were to expand our solutions footprint to meet e-customer demand and improve our competitive pasture to meet the needs of retailers and big brands.

We made good progress on those objectives during 2015 and were successful in building a solid pipeline of opportunities for 2016. We already have a number of deals on the table for the New Year, and I don’t think many of these deals we would have even been considered for without a combined solution.

We entered 2016 with a more tenured sales force. We ended the year with 37 [Indiscernible] sales people and we are seeing our prior investments result in meaningfully larger pipeline and more opportunity. We believe in 2016 we can realize more productivity gains and expect to add select sales headcount throughout the year in order to build in 2017.

Therefore we believe we are well positioned to capitalize on the demand drivers in our business including one that I’d like to spend a little bit time with you on now. Governments around the world are actively creating, amending and negotiating agreements and programs to promote international trade. Right now there are more than 500 free and preferential trade agreements around the globe including some hugely significant agreements ending over the next 12 to 18 months.

Each one of these agreements contains ever revolving complex rules and requirement which are nearly impossible to manage without automation. As an example, the Trans-Pacific Partnership or sometimes abbreviated as TPP, which was finalized in October and is expected to roll out later this year.

TPP is a 12 country treaty that links 40% of the world’s economy. It is the largest free trade agreement in history The Company is taking advantage of TPP and significantly reduced duties, trade, price advantages for international sale, improve access to foreign market and drive down the cost of purchasing raw materials across multiple global market.

For importers, this means less expense of procurement options across several countries and for manufacturers it allows for leaner, manufacturing options resulting in lower production cost.

Taking advantages of these kinds of agreements is vital for companies to maintain their competitive advantage. However complying with the complex and vast array of requirements mandated by these agreements without automation is -- can be extremely difficult if not impossible and this is a great opportunity for Amber Road.

With that in mind, we look forward to TPP rolling out later this year and see as a good demand driver for our business in the back half of this year and into 2017. We believe that our financial performance in 2015 was an anomaly for us, and that we will return to delivering subscription growth rates that you have consistently seen from us in the three years leading upto our IT as well as our first year as a public company.

Looking at 2016 we are very confident in the health of our demand drivers, our sales pipeline and our ability to execute. With that, let me turn the call over to Tom.

Thomas Conway

Thanks, Jim. I'll start with a detailed overview of our fourth quarter and full year 2015 financial performance and then provide some commentary on our first quarter and full-year 2016 outlook.

Following my remarks, we will open up the call to your questions. Starting with our fourth quarter results and beginning with the statement of operations. We generated GAAP revenue in the quarter of $17.2 million, compared to $17.6 million in the fourth quarter of 2014.

Subscription revenue was $12.9 million, compared to $12.6 million in the prior year period impacted by meaningfully lower seasonal transactional revenue due to the large customer loss we’ve discussed previously. That customer contributed roughly $2.6 million in revenue in the fourth quarter of 2014

When adjusted for the loss customer and removing the ecVision revenue, year-over-year organic subscription revenue increased by 20%. Professional Services revenue was $4.3 million, compared to $5.1 million in the same period a year ago.

Our Professional services revenue was impacted by the quick-start programs we’ve been discussing with you. Overall we believe these programs are great for our customers and the right move in the long term for Amber Road.

On a non-GAAP basis, total revenue was $17.5 million, which includes an adjustment of $310,000 related to the purchase accounting deferred revenue adjustment associated with our acquisition of ecVision.

Our trailing 12 months' recurring revenue retention rate for 2015 was 98%, reflecting the long term value of our customer relationships with regard to revenue and billing visibility. We achieved this 98% metric in spite of the loss of a 10% revenue customer at the end of 2014.

Our average revenue for enterprise customer in 2015 was $241,000 while the average revenue for mid market customer was $26,000.

On a GAAP basis, our gross profit was $7.7 million or 45% of total revenue compared to $10.4 million or 59% of total revenue in the prior-year period. Our subscription gross profit was $7.3 million or 57% of subscription revenue compared to $8.7 million or 70% of subscription revenue in the fourth quarter of 2014.

Our gross profit on professional services was $0.4 million or 10% of professional services revenue compared to $1.6 million or 32% of professional services revenue in the same period last year.

In December, we streamlined our services organization and incurred related expenses which impacted our professional services margin. Going forward, as results of these actions we believe we will start to see improved services margins in the first quarter of 2016.

Turning to operating expenses, as demand for GTM solutions continues to grow, we will continue to make thoughtful and measured investments across our business to capitalize on the significant and growing opportunity in front of us and to extend our leadership position.

Research and development expenses grew 69% year-over-year to $4.5 million, primarily driven by investments to further strengthen and enhance our solution as well as due to the addition of ecVision.

Sales and marketing expenses increased 12% year-over-year to $6 million or 35% of revenue, driven by investments in marketing programs to increase awareness and adoption of our solutions and the expansion of our sales force to address the ever expanding market opportunity. General and administrative expenses were $3.5 million compared to same $3.5 million in the year-ago period.

For the fourth quarter, GAAP operating loss was $6.4 million compared to a GAAP operating loss of $1.1 million in the fourth quarter of last year. On a non-GAAP basis, operating loss was $5.2 million compared to an operating income number of $134,000 in the year-ago period.

Non-GAAP operating income for the fourth quarter of 2015 excludes stock-based compensation, puttable stock compensation, changes in fair value of contingent liability, purchase accounting deferred revenue adjustment, acquisition compensation costs, and acquisition-related costs.

GAAP net loss attributable to common stockholders was $6.6 million for the fourth quarter of 2015. This compares to a GAAP net loss attributable to common stockholders of $1.3 million in the prior-year period.

GAAP net loss per share was $0.25 in the fourth quarter of 2015 compared to a net loss per share of $0.05 in the fourth quarter of 2014. These per share amounts are based on 26.3 million and 25.6 million shares outstanding respectively.

On a non-GAAP basis, the net loss was $5.5 million for the fourth quarter of 2015. This compares to a non-GAAP net loss of $76,000 in the prior-year period. Non-GAAP net loss per share was $0.21 in the fourth quarter of 2015 compared to a breakeven amount in the prior-year period. These per share amounts are based 26.3 million and 25.6 million shares outstanding respectively.

Adjusted EBITDA for the quarter was a loss of $2.7 million compared to adjusted EBITDA of $1.4 million in the same period last year. Now I will turn my attention to our full year results.

Our 2015 total revenue was $67.1 million, up 4% year-over-year. Subscription revenue was $47.1 million increasing 4% over 2014. Professional services revenue was $20 million, a 2% increase from the prior year.

On a non-GAAP basis, our total revenue was $68.6 million, which includes an adjustment of $1.5 million related to the purchase accounting deferred revenue adjustment associated with our acquisition of ecVision.

On a non-GAAP operating loss was $18.1 million in 2015 compared to $2.1 million in 2014. Non-GAAP operating loss for the full year 2015 excludes stock based compensation, puttable stock compensation, changes in fair value of contingent consideration liability, purchase accounting deferred revenue adjustment, acquisition compensation costs, and acquisition-related costs.

On a non-GAAP basis our net loss was $19.2 million in 2015. This compares to a non-GAAP net loss of $3 million in 2014. Non-GAAP net loss per share was $0.73 in 2015 compared to $0.12 in the prior period. This is based on 26.2 and 25.3 million shares outstanding respectively. Adjusted EBITDA for 2015 was a loss of $10.5 million compared to adjusted EBITDA of $2.8 million in 2014.

Turning our attention to our balance sheet, as of December 31, 2015, we had cash and cash equivalents of $17.9 million compared to $21.6 million as of September 30, 2015. Cash used for operating activities in the fourth quarter was $2.5 million which amounted inline with our guidance. Cash flow used for operating activities in 2015 full year was $13.2 million.

Now let’s turn to guidance. Our expectation for non-GAAP revenue for the first quarter and full year includes the purchase accounting deferred revenue adjustment. Our expectation of non-GAAP loss from operation and non-GAAP loss per basic share for the first quarter and full year excludes stock-based compensation, puttable stock compensation, changes in the fair value of contingent consideration liability, acquisition compensation costs, purchase accounting adjustment to deferred revenue, and acquisition-related costs.

I will start with our thoughts on the first quarter of 2016. Total non-GAAP revenue is expected to be in the range of $15.5 million to $17.1 million. Our non-GAAP adjusted operating loss is expected to be in the range of $4.2 million to $4.8 million. Our non-GAAP adjusted net loss per share is expected to be in the range of $0.17 to $0.19. These per share amount assume 26.5 million basic shares outstanding.

From a 2015 full year perspective, we expect total non-GAAP revenue to be in the range of $72 million to $75 million. Our non-GAAP adjusted operating loss is expected to be in the range of $11.9 million to $14.9 million. Our non-GAAP adjusted net loss per share is expected to be in the range of $0.49 to $0.61, assuming 26.6 million basic shares outstanding.

Our total cash burn is expected to be approximately $2 million for the year. Our full year 2016 guidance reaffirms our commitment to managing the business for both growth and minimal cash burn and setting up as non-GAAP profitability.

We believe that based on this guidance we have no need for additional capital to meet our growth goals. It is also important to note that our underline guidance for the year assume services revenue would be approximately flat to marginally up compared to 2015 as we further implement quick start program.

In addition, our underline subscription growth rate are expected to return to our historically performance of high teens to low 20% growth. You should note that our reported subscription growth subscription growth will partially de-massed [ph] by approximately $3 million headwind owing to the conclusion of a multiyear deferred revenues amortization schedule.

This amortization schedule was created by a large customer engagement dating back 2012. The end of the amortization we’ll low our reported GAAP subscription revenue growth rate to approximately the low teens in 2016 compared to our 2015 GAAP subscription revenue.

In addition this $3 million non-cash revenue headwind has a corresponding impact on the non-GAAP operating loss lines masking some of the fundamental improvements we’re making in the operating structure for 2016.

In summary, we have strong fourth quarter are confident about our ability to capitalized on the healthy demand trends that will drive sustainable long-term growth and we remain excited about our large in growing market opportunities.

With that we’re happy to take your questions. Operator, please open the line for questions.

Question-and-Answer Session


[Operator Instructions] At this time, we’ll hear first from Scott Berg with Needham and Company.

Scott Berg

Hey, Jim and Tom, congrats on nice bookings quarter. Couple of quick ones here from me. First of all, Jim you talk about pipeline common -- entering this year up to accidental year-over-year basis even though you are able to close a significant amount of transactions in the quarter.

Can you talk about the quality of that pipeline in terms of I guess, types of deals that customers are looking at that’s in the pipeline maybe size the deals, maybe mix between mid market enterprise, just trying to see if there is anything difference in the composition entering this year versus last year?

James Preuninger

Yes. Thanks Scott for that question. Mid market has been very consistent for us for a number of years, so it continues to expand in growth. Transaction sizes don’t change too much, I think the average revenue per customer that we just reported is about $26,000 was pretty close to what we had reported in prior periods and I don’t see that changing materially in 2016, so they do a nice job of signing up a number new customers every quarter, they fairly consistent in their performance and we benefit from that.

It’s a large enterprise space, last year it was a good year for us in China. And I expect to see that continue. I know, I often get questions about the slowdown in China and how people think that that might affect us. The fact is it’s such a huge opportunity and it’s new and it’s really untapped that we think we have great opportunities to continue expand and grow there. But it’s still small relative to our overall business, so it’s a nice growth opportunity.

Large enterprise space, its kind of get bifurcated in to really good size deals, kind of our bread and butter that we do all the time and have done for years. And then, some larger transaction and it’s not untypical for us to have a small handful of these, what sometime refers to as elephant deals in the pipeline. I think as we head into 2016 we are probably much large – more deals than we’ve ever experience before. So, we seem to have a number of customers both in Europe and in the U.S. coming to us looking at larger deployment, full suite of our GTM modules and they are looking to deploy globally., so it’s giving us a good opportunity to score big and if I look at that pipeline I see that it is pretty far down in the sales process, so we’re excited opportunities in the first half of the year and the second half of the year.

Scott Berg

Great. And I guess one follow-up from me. This will be for Tom, I guess, your deferred revenue accelerated nicely in the quarter, which certainly reflect the strength of your bookings. But given the growth in the deferred revenue relative to your revenue guidance for this year, just trying to think of the right way that that deferred revenue we should expected to fall and kind of hit the income statement over the next – maybe over the next 12l to 15 months, because 10% to 12% growth, growth levels for this year certainly doesn’t quite match up with the 18% growth in deferred revenues, would you kind of understand the delta there?

Thomas Conway

Yes. Thanks Scott. So, one thing to keep in mind as we talked about was that amortization, the deferred revenue amortization for that customer that we completed back in 2012 and have been taking to the P&L on a pretty healthy rate, little better than $900,000 a quarter. So that’s one of the elements to keep in mind. And also the revenue growth rates that we’ve got it, we said, we’re looking at the non-GAAP revenue growth rates, right. So….

Scott Berg

Great. That’s I have. I’ll jump back in the queue. Thank you.


Our next question comes from Tom Roderick with Stifel.

Tom Roderick

Hi, guys. Good afternoon. Thanks for taking my question. Jim, let me just follow-up on Scott’s question around some of the big deals and again congratulations on knocking some of those down. I know you’ve been working on this for long time. Can you give us a sense as to how these deals are likely to play into the P&L on the revenue line?

And maybe within the context to that, how frontloaded services component would be? I know some of the largest deals you had historically, you’ve had a very heavy upfront say first year services mix and then the mix trends more favorable towards description in the latter years. So, can you discuss how you sort of -- you see that impact in the model in the first few quarters and how we ought to think about the subscription versus services mix this year?

James Preuninger

Yes. I think, if I refer back to Tom’s comments, prepared comments here, we’re looking at professional services to be relatively flat in 2016 as compared to 2015. There are couple of projects that have the opportunity to do a lot more than we’re expecting, but I think it’s prudent right now to think about services being flat and really all of our revenue growth coming from this subscription line.

We’re working real hard as we talked before introduce and expand our use of quick start which makes our customers happy, lowers the risk, gets timed value a lot sooner, I think makes us a better partner. Let’s just come back and compete for another round of business, maybe do some up-selling and some of more modules within the shorter window. So, I think that’s kind of a short answer to your question. I don’t know -- maybe Tom could expand on anything for you.

Tom Roderick

No. That’s great guidance unless you got something that jump on top of it there, Tom.

Thomas Conway

No. No, he hid it.

Tom Roderick

Okay. Perfect. And then, in respect to the commentary on the pipeline, we certainly heard you talk about some very transformational type of deals that have been sort of lingering in the pipeline for quite a while. When you look at some of those biggest opportunities that you have out there, that have maybe taken a while to close longer than you expected, is there any sort of common denominator or any sort of things you look at it and say okay, we learned a lot in 2015, we understand what we need to do better to close those types of deals and we have that experience now with some of these big deals that close in Q4?

James Preuninger

Yes, I think, I mean, part of it is being able to more accurately describe the time and the investment require to get implemented, being able to share that projects and be a better partners with our customers, that’s help. I think success builds on success. We added some good customers in 2013 and 2014 and we just added a lot of great name, mean some very well respected companies, I’m not able in the public form to use all of their names, but these are organizations that have projects with us that will becoming or becoming known in the industry and I think that helps us out a lot, people look at that those decisions and they compare their own organizations and benchmark themselves to some of these leaders and maybe this is something we should consider more seriously, so, all of that helping us.

Tom Roderick

Wonderful. Good. Tom, last one your just for me here, the deferred as Scott mentioned had a real nice jump in the quarter, that also looks like AR had a big jump, so probably somewhat related a decent size spike in DSO. Is that just a reflection of some of the linearity, some of the bigger deals get close later in the quarter and then we’ll see that cash flow impact positively in the first quarter. Just what can you tell us about the collection associated with that AR and if you can provide any more guidance around how we should think about cash flows for this year that would be great?

Thomas Conway

Yes. So you’re almost got it all there, Tom. The large bookings quarter that we had, that we talked about in the comment certainly contributed for the AR and the deferred. It’s also historically just a big quarter for us for anniversary billings on some of the deals we sign over the last 10 years, so that contribute to it as well. That cash will in fact roll through in Q1, so Q1 is a big collection quarter for us. We do very well on a AR if you look at our files financials you’ll see the reserve is pretty low, we’re high quality AR due to the great organization that we do business with.

So strong -- we always had a strong fourth quarter in terms of billings this year. It was amplified by the wonderful bookings performance we had in the fourth quarter, but that cash will largely roll through here in the first quarter of 2016.

James Preuninger

One other thing, I’d point out in terms of deferred that Scott mentioned it and you as well Tom. I think, if you were to look at the change in deferred year-over-year and again make an adjustment for this customer that who amortization schedule is now finally running out, you were to take out 3 million from last year’s deferred and compare, I think you see that the change in deferred actually grew by better than 30%.

Tom Roderick

Good point. Okay. Great point. Thank you guys very much. Appreciate the help.

James Preuninger

Thank you, Tom.


Our next question comes from Terry Tillman with Raymond James.

Brian Peterson

Hi. This is Brian Peterson in for Terry. Just wanted to talk about your mid market in the U.S. per second, looks like you had a lot strength there. What penetration rates or where in the adoption curve are we in terms of the mid market and as I look at kind of that high teens or low 20% growth rate, you are guys are talking about over the long term, would we think about that mid market business being higher or about on par with that?

James Preuninger

I think it’s pretty consistent. And to answer the first part of your question, we’re in the starting blocks here. There are tens of thousands of mid market companies in the U.S. and equal number in Europe that could be, should be buying a mid market solution, and we have..

Thomas Conway


James Preuninger

434 of them so, I think we’re very still in the starting blocks for that one. We invest every year, we expanded with a pilot team in Germany last year. We’re working to do more this year. We’re taking I think a measured approach. To this it’s a big market, we got our time to get there though.

Brian Peterson

Okay, great. And last one from me. Just on the enterprise ASPs, obviously you need to take the one large customer out of 2014, but any help on what enterprise ASP did like for like 2015 versus 2014?

Thomas Conway

They were very similar and you’re right to take that large customer that obviously drove the number down. So, we like what we saw. We talked about the deal sizes that we’ve been signing getting bigger but we’ve also talk about our revenue retention rate being 98% with the loss customer, meaning we’re holding on to the customers who sign with this a long, long time ago, right. So those averages are big. There’s a big population in there, so it will take a while for these newer customers to really drive that number.

James Preuninger

Right now our ASPs in the enterprise are going up, I mean, it’s not maybe reflected when you do an average over our customer base that goes back as much as ten years now. Early adopters certainly got a much price than new customers coming to us today, so we think there is good opportunity over time to continue to see those deal sizes and those price points come up and it will be reflected I think in later years as we report those averages.

Brian Peterson

Understood. Thanks guys.

James Preuninger

Thank you, Brian.


And next we’ll go to Brendan Barnicle of Pacific Crest Securities.

Brendan Barnicle

Thanks so much. Jim, you mentioned the leverage that you’ll be able to get out of the professional services line. But overall margins are still looking better than we’d expected. Are there other areas, sort of other areas where we might see some leverage this year?

Thomas Conway

Tom speaking, Brendan, I think we’re just seeing the continued leverage that we’ve talked about in our operations around areas such as global knowledge and our hosting operation, it just more of the basic business model that we had, that we’re going to push on those leverage and as the revenue grows we’re seeing that as we walk into 2016.

Brendan Barnicle

So, just kind of spread evenly across the other line items than addition to the professional services?

Thomas Conway

Yes. I mean, it’s been our model; it’s our long range model. We know where we’re heading and we know where the levers are and those are two of the big one.

James Preuninger

You know there’s a lot of cost involved with collecting, managing and maintaining content for 145 countries and its so big, changes so much, there are 13 million done in a year, but we’re got our arms around that. We’ve build lot of automation. Our cost in that area is not going up, isn’t anywhere near the same rate as the revenue we get when we sell new customers that content. That’s a wonderful driver for us. And I think costs of the business were very discipline about the spending. You know as a private company we were generally positive cash flow and profitable that part of our DNA I think and we’re working real hard in 2016 to get back to those kinds of metric, so we’re been tough on our spend everywhere we look.

Brendan Barnicle

And Jim when you – you mentioned ecVision I know last quarter you were talking about a new product release, you were expecting to have out in the quarter, sounds like you made some progress that, was that product – was it out and did you see any direct impact from there?

James Preuninger

We’re having a nice time building a pipeline. When we bought that business again with small, 17 customers, now they were really great names, they had proven product, but they had a single salesman, they spend I think $200,000 in marketing in the prior year. So, they weren’t much for getting out into the marketplace, so we knew that last year it was going to be one where we had to educate our wholesales organization, quick marketing programs behind them, start to build the pipeline and start to see I think more deal flow in 2016 and 2017, and I’m pretty hopeful that that’s going to happen.

We did close the nice deal in the fourth quarter that was – that included their products. I think the first quarter we’ll hopefully have some more news to report to you, but it’s going to take first step before we get to the second step.

Brendan Barnicle

And then just lastly you mentioned briefly China and the opportunities there. As you look more broadly at the macro and the concerns investor have around macro uncertainty right now. Remind us how you’ve been impacted in other cycles?

James Preuninger

You know our focus in China is not the broad Chinese marketplace. We are primarily focused on selling to large multinationals. We’ve talked about some of our customers there GE, Siemens and Delphi, types of name. So they are companies that are headquartered in the U.S. Europe and they had expanded with manufacturing facilities in China. So they understand the use of technology how to evaluate an opportunity, make a decision and we see there’s a great opportunity that to win in China, because we’re very unique. We’re the only company today selling up an enterprise solution that automates the Chinese trade regime.

But then having that success, opening the door for us to go back to those organizations and talk to about a global deployment or global opportunity for the rest of our suite. So because I think we’re focused really a micro custom of the total Chinese market we’re maybe little bit insulated from some of the economic news that people are focusing on.

Brendan Barnicle

Sorry, Jim, I didn’t mean to ask about China specific. I was asking about macro impact to rest of the world and how that impact your business and what you guys that will happen to the business in 2008, 2009, last time we had kind of downturn, if we are going to have that kind of a downturn?

James Preuninger

Yes. Okay. I’m sorry, Brendan. So, look at our business grew in 2008 and 2009, we book more business each year. The top-line revenue grew, I mean, I can say I want to experience that again, but if we do you know, I think we are well situated because we come to the table with a good value proposition I mean don’t have to reach and work too hard to understand that. When they automate these processes they can really cut a lot of expense.

So, visit down market and people have tight budget. They’re still going to invest in things that can show them a good return particularly if it’s in an investment that’s going t get a return in the same year, right. So, I’d welcome a great economic environment, but we’re going to do well in one that’s more challenging.

Brendan Barnicle

Great. Thanks for the clarification.


And from Canaccord we’ll go next to David Hynes.

David Hynes

Hey, thanks. Jim, wondering if you’d be willing share 2015 bookings growth number, I mean, there are lot of moving parts in deferred revenues and I know you’ve laid out bookings growth target last quarter, so curious to just see how you’re executing against that?

James Preuninger

You know, we executed very well. We don’t disclose our exact bookings metric. I try to give people a sense for direction. As a proof point I wanted to point you to our change in deferred. I know that there are some moving, I didn’t say, but I think again when you did that adjustment for the amortization customers $3 million, it’s the pretty sizeable number, so we’re really happy with how the year ended. And I’m equally happy the thing that we didn’t drain the bank. That had happened in the past where we’ve this huge quarter and then I’m looking at the new quarter -- boy, we’ve got to start rebuilding, that’s not our situation thankfully. We get to head to 2016 with a pipeline that twice as big as it was last year and I think we’re going to have a good start to the year.

David Hynes

Okay. And then maybe one for Tom, I know you said cash not a concern, no need to access the capital markets, but any sense of you kind of expected cash burn before you guys reach profitability, how close will we get?

Thomas Conway

Yes. So in my prepared comment DJ [ph] I talked about $2 million cash burn, approximately $2 million cash burn for 2016, obviously that significantly decrease from where we were in 2015. We talked about the challenges we had in 2015, but with the actions we’ve taken along with the projections and the trajectory of the growth of the company and managing our expenses, we feel very comfortable about where we are.

David Hynes

Yes. That’s much improved. I didn’t get your number in the prepared remarks. So, thank you. And then, Jim, just for the high level, I think in the past we’ve talked about the opportunity to expand kind of what you guys are doing with China Trade Management and to some other Asian countries. Maybe just talk about what needs to be done to the product to enable that and is that a driver bookings in 2015, is there longer term vision, just how that could evolve?

James Preuninger

Well, it helped us in 2015.

David Hynes


James Preuninger

Customers will be impact for us 2016. We expanded trying to trade management module to Thailand, India, South Korea and I believe we just launched in Singapore. We don’t have a direct sales force in those markets, but you know a lot of those larger customer names that I mentioned before who used us in China or you know have relationships with us around the world that also do business in those markets now are really pushing us in those other areas.

So it’s a good way of establishing a [Indiscernible] head giving a reference space, learning about different trade regime having some success and I think you know once we build that base we can start to think about and growing and having a more direct presence in those markets.

David Hynes

Okay. Got it. Thanks for the color.


And our next question will come from Glenn Mattson of Ladenburg Thalmann.

Glenn Mattson

Hi, good afternoon. A lots been touched on already and I just -- I would echo the congrats on the big signs this quarter. I just -- my question would be, can you talk to any big renewals that are coming up this year? Are there any customers that have renewals and I even discussed with them already and how comfortable are you with that?

James Preuninger

You know we do that analysis when we write our business plan every year. We feel real comfortable though in ’16 where we are with every enterprise customer, certainly all the large ones with any meaningful numbers behind them. Many of them have gone through renewal cycles with us before. So -- and frankly this year is probably one of the smaller renewal years that we’ve ever had.

There is a lot that went on in ’14 and ’15. Many of those customers renewed for a multiyear cycle, so they had a five year or six year initial term and they came back and renewed for three year. And so it gives us a break and have those discussions every year and it keeps us focused in on talking to new customers.

Glenn Mattson

Okay. Great, thanks. I missed -- and you talked about service part is getting a little better. I mean, I guess last year you had a bit of an over capacity problem in the service department. And this year service revenue you expect to be kind of flattish, so and as you move to the quick-start program a little more, is there room to reign in the expense there a little further going forward?

James Preuninger

Well, we’ll keep an eye on it, but I think we are in a good place, Glen. We did some allocation and streamlining work in the fourth quarter to set us up properly for 2016 knowing that the quick-start program was taking hold in the market place, so we took that all into account as we closed out 2015 heading in to ’16.

Glenn Mattson

Okay, great.

James Preuninger

You should see a good increase improvement in our services gross margin as early as the first quarter.

Glenn Mattson

One last thing is there any delay starts to some of these signings? Is it versus what we are going to kick off in the first half say?

James Preuninger

Yes I mean there are always certain customers that will delay a couple of months, but I don’t think that’s anything out of the norm, really.

Glenn Mattson

Okay. Great, thanks guys.

James Preuninger

Yes, thank you Glenn.


And that will conclude our question and answer session for today. Mr. Preuninger, I’d like to turn the call back to you for any additional or closing remarks.

James Preuninger

Great. Thanks again Shaa. In closing, I’d like to express my thanks to our team for really a tremendous amount of work in 2015. It was a challenging year but where we had a real loyal hardworking group and while we had a rough start, we ended really nice and I think it’s because of their dedication. This management team I can tell you is unwavering in it’s positive long term outlook to build a large business around a global [Indiscernible] admission in great, you know substantial value for our shareholders. So, we appreciate your support and we look forward to speaking to you again soon. Thank you operator


Thank you. And again thank you all for joining us. That does conclude today’s conference. You may now disconnect.

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