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QAD Inc (QADA) Q3 2021 Earnings Call Transcript

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QADA earnings call for the period ending September 30, 2020.

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QAD Inc ( QADA )
Q3 2021 Earnings Call
Nov 24, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the QAD Financial Results for Third Quarter Fiscal Year 2021. [Operator Instructions] After today's presentation there will be an opportunity to ask question. [Operator Instructions].

I'd now like to turn the conference over to Kara Bellamy. Please go ahead, ma'am.

Kara Bellamy -- Chief Accounting Officer and Corporate Controller

Hello, everyone, and welcome to today's call. Before we begin, I would like to ensure that everybody understands that our discussion may contain forward-looking statements that are based on certain expectations and analyses. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. QAD undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this call. For a complete description of these risks and uncertainties, please refer to QAD's 10-K and 10-Q filings with the Securities and Exchange Commission.

Please also note that during this call, we will be discussing non-GAAP pre-tax income, which is a non-GAAP financial measure as defined by SEC Regulation G. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure is included in today's press release, which is posted on the company's website.

Now, I will turn the call over to our CEO, Anton Chilton.

Anton Chilton -- Chief Executive Officer

Thank you, Kara. And good afternoon, everyone and thank you for joining today's call to discuss QAD's fiscal '21 third quarter results. Joining me on the call are Pam Lopker, our President and Daniel Lender, Chief Financial Officer.

As we continue to march on our cloud transformation journey, I'm delighted to report a third quarter with good results across all of our strategic focus areas. This is especially pleasing in the context of the current business climate and the ongoing uncertainty related to the pandemic. Beating guidance across our current revenue lines, with 24% growth in subscription over the same quarter last year were particular highlights. And when combined with a marked improvement in earnings underpinned a solid performance across the board.

Our strong competitive position helped our sales team deliver another good bookings result, with sales up over 50% by deal value when compared to the prior year quarter. The investments made in sales and marketing continue to bear fruit, as does the focus on improving margins in both the professional services and cloud businesses. These initiatives, together with prudent expense management policies in this continued climate of uncertainty helped build on a solid bottom line performance we have seen so far through this year.

While the effects of the COVID-19 pandemic carry on driving uncertainty over the short to medium term future, our strategies have kept the business in good shape and we continue to make good progress toward our long-term strategic goals.

I will now turn it over to Daniel to discuss the details of the financial results.

Daniel Lender -- Chief Financial Officer

Well, thank you, Anton. We were very pleased with our strong third quarter results, especially in light of the pandemic. Subscription and maintenance revenue came in ahead of our expectations, even without the currency tailwinds we experienced, with the performance driven mainly by bookings early in the quarter.

Pre-tax profitability improved significantly from both the prior year and prior sequential quarter as subscription revenue grew and we remain focused on continued cost control. Subscription margins improved 3 percentage points from last year to 68%, while professional services margin remained positive at 7% driven mostly by our strategy of building and utilizing our partner network.

Currency had an approximate $700,000 positive effect on total revenue compared with last year's third quarter and a $1.4 million positive impact compared with the second quarter. The impact to profitability was negligible compared with the prior year, that was $300,000 favorable compared with the prior sequential quarter. We have seen significant fluctuation in currency so far this year. And while there was a positive impact this quarter, the year-to-date period reflects currency headwinds with a negative $2.7 million impact on total revenue, including $700,000 negative impact on subscription revenue.

Subscription revenue growth continued to accelerate this quarter. And as anticipated, total revenue was down as we continued to -- our model transition. Total revenue for the fiscal '21 third quarter was $76.7 million compared with $77.8 million last year, primarily as a result of lower professional services, maintenance and license revenue, partially offset by improvements in subscription revenue. Subscription revenue grew 24% to $33.8 million and accounted for 44% of our total business for the fiscal '21 third quarter, up 9 percentage points from last year's third quarter. Currency movements positively impacted subscription revenue by about $200,000 compared to prior year.

On a rolling 12-month basis, subscription billings grew by 22% with a three year CAGR of 23%. During the quarter, we signed 22 cloud deals, comprising 13 conversions and nine new customers versus last year's third quarter during which we signed 25 cloud deals, 11 of which were conversions and 14 new.

Subscription bookings for the quarter were 50% higher in value than in the third quarter last year, bringing our year-to-date performance ahead of the prior year. Compared to prior year quarter, our subscription bookings were significantly weighted toward the early part of the quarter, leading to higher than expected revenue inside of Q3. Compared to last year, the timing of our strong bookings performance will result in a comparable quarter-over-quarter revenue growth in subscription from Q3 to Q4 as some of that growth is already accounted for inside of Q3.

Maintenance revenue was $27 million for the fiscal '21 third quarter, a $3 million decline from last year, related primarily to cancellations and cloud conversions. Our retention rate for maintenance is still in excess of 90%, although some of our customers have been impacted by the pandemic and therefore we have seen some increase in maintenance cancellations or maintenance revenue reductions compared to the prior year. Professional services revenue totaled $14.2 million compared with $17.5 million for last year's third quarter and up slightly on a sequential basis. The lower revenue performance was expected and we continue to focus on building our partner network.

We are pleased with the stability of our services margins, which have ranged between 3% and 7% each quarter of fiscal 2021. License revenue for the fiscal '21 third quarter totaled $1.7 million versus $3.3 million in last year's third quarter. License revenue continues to be from existing customers purchasing new users or modules and the current year is impacted by the COVID-19 pandemic. As we continue to focus our sales efforts on the cloud, we expect license sales to remain low for the foreseeable future.

Total revenue by vertical for the fiscal '21 third quarter was high-tech and industrial 35%, automotive 33%, consumer products and food and beverage 16%, and life sciences and others 16%. And by geography, total revenue was North America 51%, EMEA 30%, Asia-Pacific 13%, and Latin America 6%. Gross margin for the third quarter of fiscal '21 improved to 60%, up from 57% last year, mainly driven by improved subscription margins and the change in revenue mix.

Sales and marketing expense was $17.4 million or 23% of total revenue versus $19.8 million or 25% of total revenue for last year's third quarter. The majority of the decline was due to reduced travel and severance expense.

R&D expense equals $14.2 million compared with $13.6 million for last year's third quarter. As a percentage of total revenue, R&D was 19% compared with 18% for last year's third quarter. The increase in R&D expense mostly related to higher personnel expense due to higher headcount.

G&A expense amounted to $10.3 million or 13% of total revenue for the third quarter of '21 compared with 9.2% or 12% of total revenue for the last year's third quarter. The increase in G&A expense primarily was due to higher stock compensation and professional fees. Stock compensation expense totaled $3.8 million for the fiscal '21 third quarter and $2.9 million last year. This brings income from operations to $4.1 million compared with $1.4 million last year. GAAP pre-tax income grew to $3.8 million versus $1.5 million a year ago and non-GAAP pre-tax income was $7.6 million compared with $4.6 million last year.

We ended the third quarter with approximately $143 million in cash and equivalents compared with $137 million at the end of fiscal '20. Cash flow from operations for the first nine months of fiscal '21 totaled $19.2 million compared with $7.9 million for the similar period last year. The increase in cash flow from operations is directly related to our improved profitability. While some of the cost measures we have put in place were precipitated by COVID-19, our focus on cost containment and improved profitability will continue as we transition past the pandemic.

Accounts receivable was $39.2 million on October 31, 2020 versus $39.7 million at the same time last year and day sales outstanding using the count back method was 44 days for the fiscal '21 October quarter versus 45 days for the prior year quarter.

Our short-term deferred revenue balance at October 31 was $85.8 million versus $81.9 million a year ago. Deferred revenue balances by category include $41.1 million of deferred subscription versus $32.8 million, an improvement of 25%, $42.3 million of deferred maintenance versus $47.1 million, $2.4 million of deferred professional services versus $1.7 million, and $100,000 of deferred licenses and other versus $200,000.

Our maintenance contracts are billed annually while subscription contracts can be built either annually or quarterly. And consistent with the guidance provided for the fiscal '21 third quarter, QAD is providing guidance for subscription and maintenance revenue for the fourth quarter as follows: subscription revenue of $35 million and maintenance revenue of $26 million.

Now, I will turn the call back to you, Anton.

Anton Chilton -- Chief Executive Officer

Thank you, Daniel. So with the ongoing challenges presented in the macro environment, a higher degree of uncertainty on some of our sales cycle remains. Nonetheless, we had a good sales quarter in terms of cloud bookings. You might remember on our last call, I said we were setup for a strong finish to the year and would focus on bringing forward deals into our third quarter and we certainly had some success in doing that. Indeed, those efforts helped us achieve that 50% increase over our fiscal '20 third quarter I mentioned in the opening remarks. We saw a good representation of most of our key vertical markets in the cloud sales mix and Pam will be providing some more color on that shortly.

At the headline level, our competitive strengths do continue to attract new customers to the QAD Cloud and that support the broadly 50:50 mix of new customers to conversions by deal count for the quarter, which remains consistent with what we have seen historically and we expect to carry on into the foreseeable future. It was also very pleasing to see our cloud margins improve again in line with our plans and with that margin up to 68%, we are closing in on our stated margin goal of 70%.

Looking at the quarter geographically, North America, again, came in with a really strong performance in its cloud business and we also saw good results from our EMEA region, which was especially pleasing in the context of the lockdowns that were implemented across many of the countries there in the last month of the quarter. Asia-Pacific and Latin America had quieter quarters and we continue to observe a slow pace to business activity in China. It remains unclear whether this is a result of COVID-19 or trade relations between the US and China or some combination of the two.

In the professional services side of the business, our focus on moving more work to our partner community and improving our bottom line have combined to help sustain the positive margin gains we have seen over the past few quarters. As discussed in prior calls, given the uncertain economic outlook, we have kept up a focus on management and control of general expenses across the entire business throughout the period of the pandemic. In doing so, we have not only been able to protect many of the investments we have made in our global workforce and help improve our profitability further, but we have also uncovered opportunities that will extend deficiencies in our business post the pandemic.

With the success of our remote working practices, for example, we do not anticipate a return to prior spend levels in travel. We are also in the process of a comprehensive review of facilities and office capacity and foresee opportunities to reduce expenses in those areas in the future too.

With multiple vaccines now on the horizon, we are increasingly optimistic about the medium to long-term prospects for the business, but that's tempered in the short-term by the increase in new cases in the US and Europe and a move back to stricter lockdowns in many places. From a vertical market perspective, we continue to observe a mixed picture in almost all segments, with some companies faring well and demonstrating a high degree of resilience and others more heavily impacted. Those customers experienced a more negative impact have increased pressure on maintenance renewals through the last quarter and while retention rates are still above 90%, we are keeping a close eye on developments in our renewal efforts.

Our sales pipeline though does continue to develop strongly. Our weighted pipeline at the midpoint in November was up 26% when compared to the same period last year, while our un-weighted pipeline value almost doubled, increasing a very healthy 96%. Both weighted and un-weighted pipelines are at new record levels, with the heavy growth in un-weighted suggesting a good number of early stage deals, indicating a healthy medium to long-term sales outlook as a result.

The numbers also provide demonstration that the investments we've made in lead generation continue to pay dividends. Given all of that, we remain cautiously optimistic about finish the year strongly and are becoming increasingly optimistic as we look beyond the middle of next year.

I will now hand over to Pam for a bit more detail and color on our cloud bookings.

Pamela Lopker -- President

Thanks, Anton. Q3, as you heard, was an excellent growth quarter for QAD Cloud, with 22 new cloud bookings, 13 from conversions and nine net new customers. While this quarter was more heavily weighted toward conversion, we believe we will continue to hold the 50:50 cut between conversions and net new bookings that we have seen historically.

From a cloud activity perspective, all regions contribute to this quarter's bookings, with North America and Europe performing exceptionally well. Industrial and consumer products, food and beverage verticals led in bookings with auto and life science not far behind, so really showing strong sales in all of our manufacturing sectors. An area that we like to watch is accounts and bookings and new modules and new users. These two areas provide a great metric to the success of our customers and how they are faring with our cloud offering.

This quarter, we continue to see strength in demand for additional modules and users, representing approximately a third of our activity. Looking at the modules that were sold this quarter to existing customers, EQMS, our enterprise quality management system and Precision, our trade management offering did particularly well. I gave you color on a couple of those deals.

A win this quarter for our EQMS quality management module was a global specialty chemical provider to transportation, industrial, oil and consumer markets. As sales spiked during COVID outbreak, the company realized they needed to implement a fully integrated quality management solution across their multiple divisions and geographies, including document management, supplier management and corrective action management. Their two main objectives were to decrease their cost of per quality and to improve the supply chain velocity.

Further deal, we ended up replacing a small competitor. The main reason that company chose QAD was because of the integration to the QAD ERP, as well as our cloud web-based capability for easy access from anywhere. Those were really the two deciding factor, but also integration between inventory and corrective actions was particularly appreciated by the customer. This quarter also included a sale of our trade management system to a large global organization working across many boundaries, delivering innovative technologies and pharmaceutical services through several well-known brands.

With the onset of Brexit and other recent geopolitical trade issues, they recognized the impact of increasing complexity and therefore the cost to their operations unless they automated their import process. The QAD Precision import solution manages ever-changing trade regulations and duty rates, adapting daily to geopolitical changes, including embargoes, tariff wars, new trade agreements and other changes in this dynamic trading environment, which has been very, very extreme as we all know in the last year, but really good for QAD helping our customers doing this and really making world sales more accessible.

With automation, the company would have to -- without automation, the company would have to dramatically increase headcount and their global trade teams and face a significant increase in broker fees and have increased risk to their import operations. In this situation, we competed against their incumbent, Thomas Reuters, which was formerly known as Integration Point, which was initially favored.

However, QAD Precision was selected based on our track record of successful deployments of global trade and transportation execution solutions and multiple other divisions of the company. We believe much of our success in the cloud has to do with our enterprise platform. Customers are interested in cloud as they want to do away with the cost and uncertainty of hosting their own ERP software. But at the same time, they need to be able to extend ERP to meet their individual competitive advantage. They need to do it in a way that allows them to take advantage of regular updates. That's it for me. Back to you, Anton.

Anton Chilton -- Chief Executive Officer

Alright. Thank you, Pam. Okay. So, looking to the future, we remain confident about our long-term goals. And indeed, we feel we took another good step toward them with our results, strong sales performance, the improvements in the bottom line driven by our strategic focus on cloud margins, professional services margins and the ongoing prudent management of operational expenses.

From a product and services perspective, we remain committed to delivering cloud solutions to global manufacturers that support their needs to deal with change, uncertainty and disruption on a continuous basis. And to that point, on September 22, we held our virtual fourth stream event called QAD Tomorrow in recognition of the challenges global manufacturers face in being prepared for and ready to deal with whatever it is tomorrow throws at them.

We are excited to have well over 2,000 registrations from customers and prospective customers alike. And during the event, we launched our diagnostic tool that helps manufacturing enterprises assess where they are on a maturity scale of readiness for adapting to change and on innovating for continued future success.

We have seen a significant number of attendees apply this online diagnostic to their own situations and this is leading to a growing number of conversations about how QAD and our solutions can help them on the journey to being what we call an adaptive manufacturing enterprise. With recent COVID-19 cases increasing and consequent lockdowns driving more short-term uncertainty from many of our customers, it remains difficult for us to predict the exact effect on our sales in professional services projects for the remainder of this year. However, as things stand right now, with our strong pipeline and with global manufacturing PMI climbing to 53 since our last call, we do feel we remain in good shape for driving a solid finish to the year.

In summary, we continue to monitor the key business trends in new business sales, cloud conversions and maintenance renewals with existing customers. With some encouraging news around vaccine availability brightening the outlook for the medium term, the continuing rise in COVID cases in many parts of the world sees our short-term priorities remain consistent. The health and well-being of all, supporting our customers and driving sales activity remain our top priorities. This prudent approach to managing the business has proven to be effective throughout this year and will remain in place to see us through our fourth quarter and at least the early part of next year. We are encouraged by this quarter's results and the progress we have made toward our long-term goals.

Operator, we are ready to take questions from analysts please.

Questions and Answers:

Operator

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] And our first question will come from Bhavan Suri with William Blair. Please go ahead.

Bhavan Suri -- William Blair -- Analysts

Hey, everybody. Congrats. Can you hear me OK?

Kara Bellamy -- Chief Accounting Officer and Corporate Controller

Yes.

Daniel Lender -- Chief Financial Officer

Yes.

Bhavan Suri -- William Blair -- Analysts

Great, great. Yeah. Really, really nice job both on the quarter and then on, obviously, the pipeline. I guess I want to start off on the pipeline. And I will leave this a little open ended, Anton, maybe for you and for Pam, sort of take it whatever direction you want. But the way the pipeline growth of whatever, 20% plus is great, the doubling of the overall pipeline is awesome. I guess, what's driving that more than doubling? Obviously, you have added sales resources, but I'd love to understand even things like S4/HANA end-of-life, like what are you seeing that's driving the funnel growing so much?

And then I would love to understand, like, are you comfortable with conversion rate? Do you think you should think about expanding or extending sort of conversion cycles? Or are you seeing a shrinkage of that potentially, given as people are now saying, OK, we have got light at the end of the tunnel. So, a couple of questions in there, but I'd just love to understand sort of how -- what's driving the pipeline and sort of how you think about the pipeline converting?

Anton Chilton -- Chief Executive Officer

Yeah, absolutely. And thanks for your comments, Bhavan. Yeah, so I would say it's a combination of things that are driving the increase in the funnel. As we called out over the last 18 months or so, we made some pretty significant investments in our marketing organization on our lead generation engine. And of course, the majority of that messaging is built around next generation ERP, the need that manufacturers have to be able to respond quickly, deploy quickly and then manage the system in a dynamic environment and be able to change and update it and update business models as their business changes throughout the lifecycle of the ERP.

And I think more and more people are hearing that message. I think that message is helped by the SAP situation we have discussed before, there's still the intent of end-of-life on ECC 6. There is no migration path to S4/HANA. To our knowledge, there is still no large global manufacturing company running on S4/HANA or across the board. And so, I think that's giving them strong headwinds. And then, of course, there was -- the most recent announcements around some of the challenges they have gotten, the headwinds they faced in terms of technology platforms and all the technology and getting those converted. So, I think that's added a bit more fuel to the fire.

Coming back to thoughts around conversions and sales cycles and lengthening or shortening. We were all fairly optimistic given the momentum we saw in Q3 and pulling some of those deals earlier, that could continue. And I think the fundamentals were there to support that, accept that, these latest cases spiking in Europe and in the US have the potential, I think, to dampen some of that enthusiasm with some of our customers and lead them to maybe delay.

So far be it from us to predict when the world is going to get back to normal, but we see that situation of uncertainty continuing at least till there is broad availability of vaccine, which is probably sometime middle of next year toward the end of next year. So -- but in the meantime, we will keep trying to push that, we will keep trying to push the message. What we do see is more and more customers not waiting for COVID to end, but saying, hey, we just got to work with this and around this right now. And so, that's helping some sales cycles, too. But for others, they are still showing some signs of caution.

Pamela Lopker -- President

I think our platform really plays well, the ability to have a full ERP system for manufacturers, but then flexibility to extend and extend it in a way that doesn't allows you to sell or receive updates and your extensions go with it. So extensions versus customization versus SAP, who really says, you have to adopt our standard processes and there can be no changes to that. I think I like our message and I think it plays well.

Bhavan Suri -- William Blair -- Analysts

Yeah. No, no, that's really helpful. And I think obviously the spike and the logic of what people might delay makes sense. I guess, the flipside a little bit is given the global presence and the manufacturing base, as you think about the US-China related tensions, it's really early, but obviously, we have now got potentially a transition happening, the election, potentially a lighter stamp on imported goods. Do you feel -- hey, are you seeing any impact that's so early, I don't know if you are, but I'd love to hear that. But do you feel it could have a change with manufacturers and how they view their growth trajectories, especially, in Asia are changing? And how that might sort of potentially impact timeline and reacceleration of subscription growth? I guess, are you seeing and then I guess even if you are not, do you think that could act like a tailwind late 2021 into 2022?

Anton Chilton -- Chief Executive Officer

Right. Thanks, Bhavan. It's a real difficult one to call it. I would say just our observation of the market is that, we are not seeing behaviors change significantly, but we are hearing more questions about US companies in China and the future of US-China relations. We would hope that, that outlook has brightened somewhat, but we observed that the Chinese government weren't the first in line to give Biden a call, right, to say congratulations. So, hopefully, it looks more optimistic.

I would say what drives even more optimism there for the medium term and talk about what that is in the minute is. I think it's in both countries' interest relations are solid, there is a lot of US interest in China. We know that through our customer base. And of course, there is a lot of interest from them from an economic perspective over here.

So, I think it's in everybody's interest to work that out and make the best of it. So hopefully more optimistic than we were. Timing, I say medium term. Yeah, I think it's going to take time to work through and we don't know what level of prioritization the next administration is going to give to that versus other things. So we will see how that goes.

Bhavan Suri -- William Blair -- Analysts

Yeah, it's a tough question. One quick follow-up here, just about the partners efforts that you have added sort of the new executives and the channel and help building that. I'd love to get a sense of this first 90 days, you touched on a little bit, but I would love to see if you have seen these channels start to drive any deal activity. So obviously, in these cases, you bring them into deals, you provide sort of the professional services, accessibility and deals to them. But have you seen any of the firms, the SI firms start to drive the initial deal stuff or is that still on the comp? Thank you.

Anton Chilton -- Chief Executive Officer

Thanks, Bhavan. Yeah. I would say on its first 90 days, so obviously had some involvement on our systems integration partner network, although, we have hadn't primarily focus on the plans for our sales agent and distribution channels around that, that comes oftentimes with services capability. So we cover both of those. So right now, what we have got is, his initial plans that are laid out in terms of growth he has been working with each of our regional heads to get that plan to a level of granularity through next year. And we are in that cycle right now of reviewing and evaluating each of those plans, but our intention is, of course, to drive a material improvement in sales return from the channel.

Back to your question on the systems integrators, we have had some spots where they've introduced us to deals and so on, but that is by far not the norm at this point of time. So that is an area that we will continue to focus on, especially, with some of the larger ones and we are in conversations with some potential partners right now, where I think that could be more the case that their model is leading us to business rather than we are offloading business to them, but that's something that we are working toward in the future.

Bhavan Suri -- William Blair -- Analysts

Got it. Super helpful. Thanks, guys and congratulations. That was a really solid quarter.

Anton Chilton -- Chief Executive Officer

Great. Thanks, Bhavan.

Operator

Our next question will come from Steven Chang with Stifel. Please go ahead.

Steven Chang -- Stifel -- Analyst

Hi. Thanks for taking my question and congrats, again, on the great quarter. I was just wondering like what degree will you see maybe a reinvestment of recent opex savings, especially, stemming from the current macro backdrop. I know you touched a bit on -- you said potential future opportunities that makes that extend efficiencies, but maybe perhaps you could expand on that? And then also in that vein, should we expect any of that potential shift -- spend shift to kind of remain for a longer term or take a more permanent change, especially if you said before the T&E levels will be lowered in the future? Thank you.

Anton Chilton -- Chief Executive Officer

Yes, sure. I will start and then I will ask Daniel to flesh that out a bit more. But yes, certainly, I think we have learned a lot through the pandemic about how we can operate the business more efficiently than we did in the past from in relation to things like travel expenditure, our use of virtual conferencing both externally and internally has, of course, like everyone else ramped up. And then we are also looking at use of offices and so on. So, Daniel, do you want to provide a bit more...

Daniel Lender -- Chief Financial Officer

Yes. I think, that the -- in the short-term, I think we will see as business and general activities go back to what we used to call normal, I think what's going to happen is, we will see some level of increase with regards to the travel, but travel is not going to return to the levels where we were things were before, I think, we as a company and our customers as well have, we have all learned how to be much more effective using a lot of the remote tools. So we have been able to drive sale cycles. We have been able to drive a number of services, projects and so forth without the need to do all that travel.

With regards to the facilities, that's another area that we think that over the long run, we will experience some savings as well. Those cannot be implemented and won't take effect right away, because you need -- those need to be timed with when leases come for expiration or the ability to reduce some space. We don't believe we are going to be in a situation where everybody operates remotely as you may have seen some companies talk about that. I think it's likely going to be a mix, where there will be some use of office space, but not to the degree that is being used today. So, I think there is a number -- there is also in terms of how do we reach customers? How much of that activity is happening via using web tools and so forth versus actual events?

One thing that I would add that is not directly related to expenses is that on the services side we have always been known to be able to deliver our solutions at much faster than the competition and get our customers to get value significantly faster. With some of the remote deployment, that actually increases the speed of deployment of the application, because now you are not wasting time with having consultants travel during the week, but you can actually have people being what we have been productive working on the engagement on a five days a week basis. So that will also help our overall ability to drive more cloud deployments in a faster fashion.

Steven Chang -- Stifel -- Analyst

Okay, great. That's very helpful. Thanks again.

Anton Chilton -- Chief Executive Officer

Sure.

Operator

And our last question will come from Kevin Liu with K. Liu & Company. Please go ahead.

Kevin Liu -- K. Liu & Company -- Analyst

Hi, good afternoon. First question here, just in terms of the 50% growth in the deal that you saw this quarter, I was wondering if you could talk a little bit more about just how much of that might have been pent up demand from earlier in the pandemic as folks paused versus as you guys mentioned being able to pull in more of the deals this quarter? And to that latter point just are there any specific levers that you guys are able to pull to drive those deals across the finish line or is it more so just kind of your customers moving along their own timelines?

Anton Chilton -- Chief Executive Officer

Right. Thanks, Kevin. Yeah, I'd say, it's a mixed picture. If you think about we have talked our Q2 bookings were at similar levels to last year's Q2, which was a good year or good quarter, I should say. We have focused on pulling deals out of Q4 into Q3 to help this year and we were successful in some regard with that. And yes, that was about really switching that messaging from while we are waiting for the pandemic to end to -- well, you could be waiting for a long time to let's go and drive some value now and some customers responded to that.

On the other side, balancing that, we did see some customers that actually as locked downs initiated in Europe and so on, delayed some of those decisions. And we hope to be able to pull them back into Q4 or early in Q1 next year, but it really is that mixed picture. So, I'd say it really depends on the company's specific circumstances, what they are making, who they are selling it to, what our supply chain looks like, as to whether they are willing to go faster, or they want to go a little bit slower, but it seems to have evened itself out at least during our third quarter.

Kevin Liu -- K. Liu & Company -- Analyst

Understood. And so we talked a little bit about some of the expansions within your install base doing pretty well this quarter, are there any specific kind of modules your customer side is gravitating toward us in response to what's going on in the broader macro or is it kind of across the board there?

Anton Chilton -- Chief Executive Officer

No, we are seeing a few spots. So, Pam mentioned in her commentary, our quality management system and we are seeing an increasing level of interest in that. And that's an area that we feel pretty optimistic about for the future in terms of good headroom for growth there. And then the other side of that, with all the activity we see in supply chains and that's both with individual suppliers and -- but also disruption in supply chains. Some of that was caused by COVID that was built on the back of some of the disruptions we saw around trade and tariffs and so on.

And so if people are acutely aware now of the need to be able to proactively manage that and deal with all of that and deal with almost real-time changes when it comes to tariffs and customs and so on. And so that's driving that increased level of interest we see in our global trade and transportation execution module as well as our demand and supply chain planning modules. So I would say those are probably the three highlights. Of course, we continue to push and sell the others, but those are three that contemporary times of putting in sharp relief for customers and prospects.

Kevin Liu -- K. Liu & Company -- Analyst

Great. And just to follow-up on some of the other questions on the operating expense side earlier, with some of the areas where you have identified savings that could perhaps be more permanent post-COVID. Do you feel like that's going to enable you to either reach your long-term target model goals in a faster timeframe or perhaps get some larger levels over and above what you guys put out earlier this year?

Daniel Lender -- Chief Financial Officer

Yeah. No, I mean, I think if anything it's -- we have accelerated a bit this year in terms of where we are in terms of our long-term goals. So, the baseline that we have this year is higher than what we had originally planned. Where I did point in time, we haven't gotten to the degree of reevaluating that local model that we published. So, those targets remain in place. Obviously, as you know, the situation develops we do see some additional operating efficiencies that we can implement we will for sure be updating that model.

Kevin Liu -- K. Liu & Company -- Analyst

Well, congrats from me as well and good luck as you close out your fiscal year.

Anton Chilton -- Chief Executive Officer

Great. Thanks, Kevin.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Anton Chilton for any closing remarks. Please go ahead, sir.

Anton Chilton -- Chief Executive Officer

Thank you very much and thank you to everybody for joining us today. We look forward to seeing you in the new year and hopefully it's a better year from many perspectives and we announce our fourth quarter and full year results then. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Kara Bellamy -- Chief Accounting Officer and Corporate Controller

Anton Chilton -- Chief Executive Officer

Daniel Lender -- Chief Financial Officer

Pamela Lopker -- President

Bhavan Suri -- William Blair -- Analysts

Steven Chang -- Stifel -- Analyst

Kevin Liu -- K. Liu & Company -- Analyst

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