Operator: Good day and welcome to the Ameri100 2018 Third Quarter Financial Results Conference Call. All participants will be in listen only mode [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sanjay Hurry, LHA Investor Relations. Please go ahead.
Sanjay Hurry: Thank you, Andrew. Good morning, everyone and welcome to Ameri100’s 2018 third quarter financial results conference call. The earnings press release referenced on this call is accessible on the Investor Relations page of the Ameri100 website and the SEC website. On the call today are Brent Kelton, Chief Executive Officer and Barry Kostiner, Chief Financial Officer. After their prepared remarks, management will hold a question-and-answer session. As a reminder, this conference call may contain certain forward looking statements that relate to the business and expected future events or future performance of Ameri100 and involve known and unknown risks, uncertainties and other factors that may cause its actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as but not limited to belief, expect, anticipate, estimate, intend, plan, targets, likely, will, would, could and similar expressions or phrases identify forward-looking statements. Forward-looking statements include, but are not limited to statements about Ameri100’s financial and growth projections as well as statements concerning the company’s plans, predictions, estimates, strategies, intentions, beliefs and other information concerning the business and the markets in which the company operates. The future performance of Ameri100 may be adversely affected by the following risks and uncertainties, the level of market demand for its services, the highly competitive nature for the types of services that it offers, market conditions that could cause its customers to reduce their spending for its services, the ability to create, acquire and build new businesses and to grow its existing businesses, its ability to attract and retain qualified personnel, currency fluctuations and market conditions around the world and other risks not specifically mentioned herein, but those that are common to the industry. For a more detailed discussion of these factors and risks, investors should review Ameri100’s reports on Form 10-K and other reports filed with the SEC which can be accessed through the SEC website. Forward-looking statements made on today’s conference call are based on management’s beliefs and opinions at the time the statements are made. All forward-looking statements are qualified in their entirety by this cautionary statement and Ameri100 undertakes no duty to update its information to reflect future events, information or circumstances. With that said, I would like to turn the call over to Brent Kelton, Chief Executive Officer of Ameri100. Good morning, Brent.
Brent Kelton: Good morning. Thank you, Sanjay and thank you everyone for joining us on our call. Before I review our performance for the quarter, I want to take a moment and comment on our recent capital markets transaction. In late July we entered into a private placement that raised net proceeds of approximately $6 million, these bonds were used to deleverage our balance sheet and give us greater operational and financial flexibility with which to pursue solutions sales growth. There are three components to the private placement. First, 3.25 million common shares, second 22.7 million Class A Warrants with an exercise price of $0.31 for an equal number of shares, these Class A warrants will generate cash of approximately $7 million to us when exercised. Third, 19.5 million Class B prefunded warrants for an equal number of shares. It is our understanding that the majority of the common shares and Class B warrants have been exercised and sold into the market over the past several weeks, creating intense pressure on our share price and a disconnect we strongly believe between the market valuation of Ameri100 and its intrinsic value. What’s not reflected in the current market valuation is the significant progress we have made since the start of the year to capitalize on the opportunities that comprise the $200 billion SAP services market and a $39 billion cloud service segment. As the only largely SAP solutions focus publicly traded IT services company in the US, we are focused on these addressable markets to deliver sustainable, profitable growth. Our third quarter results demonstrates the benefits of our differentiated strategy and a purposeful focus on both quality of revenue and adjusted EBITDA profitability. Turning to our third quarter results. Revenues for the quarter were $10.6 million versus $12.5 million in the year ago quarter reflecting a continued and deliberate mix shift in revenue to solution sales there are more profitable relative to lower margins staffing revenue. Let me turn our focus on higher margin solution sales into perspective. For the fourth quarter of 2017, as we started to consolidate and integrate our acquired businesses and began to put in place our solutions sales strategy solutions revenue were minimal at approximately 18% of total revenue. In the first quarter of this year, as we merged our acquired sales teams and empowered them to sell the company’s full set of capabilities solution sales were 19% of total revenue . In the second quarter with our solution sales strategy fully in place, solutions revenue was 20% of total revenue. In the third quarter, as our solutions sales focused begin to hit its stride, solution revenue was 24%. As you can see we have enabled a material improvement and solution sales as a percentage of total sales in only three quarters. We believe we are still in the very early stages of this shift to higher margin revenue. Effective execution of our sales -- solution sales strategy is reflected in gross margins for the quarter which increased approximately 172 basis points year-over-year on lower revenue. The third quarter also marks the third consecutive quarter of sequential gross margin improvement. I would note that while consolidated gross margin for the quarter was 22.2% solutions gross margin was 32.4% resulting in better quality of the revenue. Leveraging at service offerings portfolio spans the steady growth in our product market and high growth, high margin digital and cloud markets year-to-date, we have secured 27 solution wins. Notable new project awards in the third quarter include a robotic process automation solution with net data that also establishes a beachhead for us in the Greenfield healthcare market. With a proven reputation for developing and implementing successful digital transformation migration path across other business verticals, we are positioning ourselves in front of healthcare and project life met data that are just starting on their digital transformation journeys. We also secured a digital transformation win with a leading golf lifestyle apparel brand that those of you who golf are almost sure to have worn. It’s Callaway’s Travis Matthew Division, this win was not only our first for the implementation of SAP S/4HANA and SAP C/4HANA for fashion and ecommerce that also further underlines SAP's growing role in bringing solution opportunities to us. It is clear to us that with the formalization of our solution sales strategy, we are starting to generate momentum in solution sales. We are also very pleased to report a second consecutive quarter of adjusted EBITDA profitability and in line with our prior guidance that represents an approximate $400,000 turnaround year-over-year. This is directly attributable to our solution sales focus as well as to the cost efficient structure that we put in place earlier this year. Before moving to a detailed review of our financial results, I’d like to welcome Barry Kostiner to the Ameri100 team as our new Chief Financial Officer. Barry is growth focused and his demonstrated skills and experience in areas of corporate finance and strategic planning are valuable additions to the Ameri100 as we build on our platform. After Barry’s review of our financial results for the third quarter, I will come back with some thoughts on the balance of the year and a look ahead to 2019 before opening the call to questions. Barry?
Barry Kostiner: Thank you, Brent. Good morning everyone. Before reviewing our fiscal 2018 third quarter financial results, let me start off with just a few words about my background. As Brent noted, I recently joined the company with more than 20 years of finance, corporate strategy and leadership experience, this is an opportune time for me to join the Ameri100 given the work Brent and his team have put in to consolidate the company’s cash acquisitions and ship out cost that have put the company on a firm operating footing today and functioning as one platform with one sales force, a clean balance sheet and with the continued focused on higher margins solutions sales to generate organic revenue growth. My specific expertise is in corporate finance, M&A and strategic planning lends itself well to a initiative to further accelerate the company’s growth. Turning to the results for the third quarter, revenue was $10.6 million, a decrease of 15% from $12.5 million for the third quarter of 2017. The variance in revenue is due principally as Brent has addressed due to shift in our sales towards high margin solution sales with less emphasis on lower margin professional services revenue opportunity. We expect to see continued attrition into the fourth quarter though at a slower pace and is therefore a component to our revised revenue guidance of fiscal 2018 more in our guidance in a moment. Gross profit was $2.3 million compared to $2.6 million for a year ago period. Gross margin improved 172 basis points as a result of our solution sales focused on the quarter. SG&A expenses excluding non cash stock compensation charges decreased as a result of the restructuring and streamlining conducted year-to-date. Depreciation amortization expenses amount to $636,000 for the period ended September 31, 2018 representing a decline of $181,000 compared to the year ago period. As a reminder, the customer lists for each of our prior acquisitions are amortized over a period of 60 months. We reported positive adjusted EBITDA for the third quarter generating approximately $500,000 in profit compared to an adjusted EBITDA loss of $426,000 in the prior period. GAAP net income for the third quarter was $3.9 million or $0.16 loss per share compared to GAAP net loss of $4.6 million or $0.31 per share in the prior period mainly as a result of a onetime non cash gain of $7.3 million mainly as a result of change in estimate of Ameri100 consideration payable related to a prior acquisition. We had previously accounted for the total acquisition – consideration payable of $10.4 million which was reduced to $3.3 million as a result of two former members of the acquired company electing to receive approximately $2.5 million in cash and the issuance of equity valued at $0.8 million to the third former member of the acquired company who has not elected to receive cash. Turning to our results for the nine months ended September 30, 2018, revenues were $32.7 million a decrease of 12% from $37.1 million for the nine months ended September 30, 2017. Gross profit for the nine months of 2018 was $7.1 million compared to $8.2 million for the year ago period. Gross margin was relatively unchanged and reflects solid execution on our solution sales strategy. SG&A expenses excluding non cash stock compensation charges decreased approximately $1.2 million due to streamlining and restructuring activity. Depreciation amortization expenses amounted to $2.3 million for period of ended September 30, 2018 was flat compared to the year ago period. Adjusted EBITDA for the period and ended September 30, 2018 was approximately $35,000 compared to a loss of approximately $195,000 in the prior period. GAAP net income for the period ended September 30, 2018 was approximately $389,000 or $0.02 per share compared to GAAP net loss of $9.6 million or $0.66 per share in the prior period mainly due to the aforementioned change in estimate of our consideration payable. With our earnings and estimate today, we have updated our financial guidance for fiscal 2018 assuming a continued attrition of low margin professional services revenue in favor of high margin solution sales and historical pattern of a fewer number of billable days in the fourth quarter due to clients' holiday schedule we are revising revenue for fiscal 2018 to a range of $40 million to $42 million. At the same time, we are also reaffirming our expectations for adjusted EBITDA profitability for the full year. Turning to our balance sheet, we focused on further clean up and strengthening of our balance sheet during the quarter. As Brent noted, we raised $6.6 million from the institutional and credit investors to a private placement pursuant to the private placement, we issued an aggregate of 3.25 million shares of common stock to its investors at closing, along with pre-funded Series B warrants for the purchase of 19.5 million shares of common stock and Series A warrants for the purchase of 22.5 million shares of common stock. The Series A warrants have an exercise price of $0.31 per share which as Brent mentioned will generate cash to us of about $7 million upon exercise. Proceeds from the private placement were used for the repayment of certain indebtedness post acquisition obligations and general corporate purposes. We ended the quarter with cash and cash equivalents at a profit of approximately $2.1 million down from $4.9 million as of December 31, 2017. Given our cash balances revenue projections for the balance of the year and continued tight control over cost we have sufficient resources to fund working capital needs for the balance of the year. This concludes my prepared remarks, I will now turn the call back to Brent.
Brent Kelton: Thank you Barry. As we look to fiscal 2019 we believe that we have before us a path for higher revenue, reflecting very favorable market tailwinds from enterprises migrations to the cloud and sustainable if not growing profitability as we leverage our cost efficient infrastructure and continue to shift revenue mix towards solution sales. On today's call I want to provide some color around some of our solutions topline building activities and how initiatives to extend our capabilities are enhancing our competitive advantage in the marketplace to drive incremental topline opportunities. Beginning first with our solutions topline, we have started to see contributions from sales force training conducted earlier this year to retrain non-solution salespeople to sell solutions project. Our solutions topline is strong and representative of our key practice areas. SAP S/4HANA C/4HANA, which was called hybrids SAP success factors, IoT and supply chain are 60% of our consolidated topline today is comprised of solution opportunities. Complementing our current sales force, we expect to add two to three experienced solution salespeople strategically to headcount over the course of 2019 to further monitor our existing cloud base for new solutions project opportunities and add new clients. We are also seeing momentum in our deal pipeline around solutions project opportunities coming to us through partnerships. As an example, we have an artificial intelligence and machine learning partnership with Bayestree Intelligence. Existing clients are inquiring about this capability and prospective clients are contacting us, which in turn is generating new opportunities to expand our deal pipeline. We have completed several demos and look forward to positive outcomes from this partnership in 2019. Another technology partnership is with UIPAS robotic process automation solution or RPA. This is being implemented at new client met data. This project is progressing very well and we anticipate securing the expansion of the initial award in the next several months. We are simultaneously cultivating opportunities with met data's parent company a national health solutions provider for additional UIPAS RPA deployments. As a result of the UIPAS partnership the healthcare sector now represents a significant long-term opportunity for us as enterprises move to prioritize patient experiences through the deployment of new technologies that improve not only patient satisfaction levels, but also enterprises bottom lines. We are also deepening our partnership with SAP. For those of you new to Ameri100 SAP is increasingly a partner in the truest sense in the word. SAP recognizes the value we have in expanding its addressable market and we want a bigger piece of the cloud opportunity that is driving SAP's growth. SAPs contributions to our business development efforts are increasing. We are in the process of formalizing a partnership with SAP's Ariba division that will enhance our capabilities to help clients build digital supply chains that better address cross functional business decisions, collaborate with suppliers in real time and simplify compliance. At the time when enterprises are looking to turn their supply chains into a competitive growth driven differentiator as part of their journey towards a digital intelligent enterprise this partnership enables us to expand our SAP practice areas to include spend management. This gives us a presence across the majority of the fastest growing segments of the overall SAP ecosystem. On our second quarter conference call, I mentioned that we were in advance discussions to formalize our partnership with one of the top three cloud vendors in the world to support mutual class migration of their SAP environments to the cloud. I can now announce that that cloud vendor is Google. And we are pursuing a premier SAP cloud partnership with them. So, we’re very encouraged by this because Google is investing it’s very, very heavily in their overall SAP cloud platform, they have hired many people from SAP and some very, very high level people that we worked with it in the past from SAP and they are – they intend on being the cloud leader for hybrid and private cloud also insure SAP. We are well down this path with Google Cloud and although we have not yet completed the formal partnership process there are already contributing to our deal pipeline. As an example the Fortune 500 insurance company project that we secured last month was a result of Google Cloud’s direct involvement in bringing us that solutions opportunity. It is fair to say that our recent success such as risk, this Fortune 500 insurance company has elevated our profile in the market and is adding new targets to our sales topline. We are pursuing the necessary certification to secure our premier partnership and believe this puts us in a strong position with both Google Cloud and SAP in 2019 as further evidences our ability to develop sales channels to supplement our sales development efforts. We expect to have all certification secured in the first quarter of 2019. In summary, we are proud of our operating performance today. We are today operating as one platform with one sales force with a clean balance sheet and generating higher quality revenue that underpins the path to higher and sustainable growth and profitability. We are very much in the early stages of our growth strategy and we believe the best is yet to come. This concludes my prepared remarks. Operator, please open the call to questions.
Operator: We will now begin the question-and-answer session [Operator Instructions] The first question comes from Robert Brezza of Northland Capital Markets. Please go ahead.
Robert Brezza: Hi. Good morning. Thanks for taking my question. Brent, you talked in your prepared remarks about 60% of the pipeline being the solutions selling desire that you’re moving towards. How do we think about that moving into the revenue and the P&L because it seems like that obviously carries higher-margin obviously. And just wanted to understand that dynamic on how you think about the pipeline translating into the P&L?
Brent Kelton: Sure, good morning Rob, thanks a lot for the questions and joining the call. So first off I just want to mention the mix, the solutions is becoming a bigger part of the topline obviously, but we also still consider certain costs of staffing as very strategic to our business especially from the mature clients that run their own projects. But we have gotten out of obviously more and more of really lower margin portions of that business. And so when we look at the topline so a good I think indicator is Q3 when we mentioned the -- just in Q3 or really even in Q1 through Q3 at this point [indiscernible] solutions revenue if you look at it as a standalone in the P&L generated about 34% gross margin. So I guess that’s the best way to look at that as we translate into the P&L is just the impact that those deals will have on the gross margin which will just really fall out to the bottom line.
Robert Brezza: You mentioned healthcare as one of the standout vertical. I was curious just to get your insight as you are seeing the mix shift. What other verticals are I guess are you standing into or going after trying to really drive higher solutions sales.
Brent Kelton: Sure, what we've been seeing the most activity and for us is across a range of healthcare, technology, retail and fashion. It's been - the ones that have been the most opportunistic for us so far this year and that we still even see in the deal pipeline itself. With the up-and-coming when I think in financial services with the insurance one that we had. I think I mentioned that insurance company but I can mention it here that the opportunity is with Aflac.
Robert Brezza: Quack, quack. Last question from me. You mentioned hiring some additional salespeople as well. In terms of overall hiring how are you thinking about headcount from total perspective?
Brent Kelton: Well, other than the investments that we want to make and are planning to make on the sales side, most other headcount or almost all other headcount additions would be specifically, just on the billable headcount on the consulting headcount basically headcount that directly generates revenue and margins. So from the solutions delivery perspective and from the being able to chase solutions deals and complete complex proposals for solutions we have a strong team in place. We feel that we have a platform in place that we can scale quite a bit on the topline side without having the add much SG&A type headcount. So, the main additions would be really focused on sales.
Robert Brezza: Got you. Thank you very much.
Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Brent Kelton, CEO for any closing remarks.
Brent Kelton: Thank you, Andrew and thank you everyone for attending our call today. Barry and I look forward to speaking with you again when we report our 2018 fourth quarter and full year results. Thank you.
Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.