What happened

Shares of American Software (AMSWA -1.09%) were trading up by almost 24% as of 2 p.m. EDT Wednesday after the company reported fiscal fourth-quarter earnings that demonstrated its progress in transitioning toward a recurring-revenue model.

So what

For the period, which ended April 30, total revenue declined by 2% to $28.6 million, but that contraction was a function of how revenue gets recognized under a subscription model. American Software's subscription fees jumped by 28% to $8.1 million, and its cloud services annual contract value (ACV) increased by 45% to $38.3 million. Recurring revenue streams for maintenance and cloud subscriptions comprised 60% of total sales, up from 57% a year ago. That all resulted in adjusted net earnings jumping by 185% year over year to $3.6 million, or $0.11 per share.

Green stock chart going up

Image source: Getty Images.

"In the midst of the economic uncertainty resulting from the pandemic, we exited the year on a strong note with both net new Cloud Services ACV and total bookings more than doubling our prior highs for a quarter," CEO Allan Dow said in a statement. "Our performance reflects increasing adoption of cloud-based supply chain transformation solutions and our backlog as measured by our Remaining Performance Obligations (RPO) increased 51% to $116 million in the fourth quarter when compared to last year, which demonstrates the longer-term commitment of our customers to our platform and services."

Now what

The technology company does not provide formal guidance, but CFO Vince Klinges said on the conference call with analysts that American Software is generally targeting revenue growth in the low double-digit percentages, which should allow the company to achieve adjusted EBITDA margins of around 12% to 15%.