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Amber Road Inc (NYSE:AMBR)Q4 2018 Earnings Conference CallFeb. 11, 2019, 5:00 p.m. ET
Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:
Operator
Good day, and welcome to the Amber Road's Fourth Quarter and Full-Year Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Kevin Brogan, Investor Relations. Please go ahead.
Kevin Brogan -- Investor Relations
Thank you, operator, and thank you for joining us on Amber Road's Fourth Quarter 2018 Earnings Conference Call. As a reminder, today's conference call is being broadcast live 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 deployments, continued product demand and our guidance for our first quarter and full year fiscal 2019. We caution you that such statements reflect our best judgement 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 we will not provide any further guidance or updates on our performance during the quarter, unless we do so in a public forum.
I would also like to inform you that Amber Road, its Directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from our shareholders in connection with our 2019 Annual Meeting of Shareholders, which is scheduled for Tuesday May 7. We intend to file our proxy statement and related proxy materials with the SEC in connection with any solicitation of proxies from our shareholders in connection with the 2019 Annual Meeting.
Shareholders of Amber Road are strongly encouraged to read such proxy has being and all other related materials filed with the SEC carefully and in their entirety when they become available, as they will contain important information about the 2019 Annual Meeting. We will not comment on any proxy contest or take any questions regarding any proxy contest on this call.
During the call, we will also discuss our non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the GAAP and non-GAAP results provided in today's press release. The projections that we provide today exclude stock-based compensation, 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. Jim?
James Preuninger -- Chief Executive Officer
Thank you, Kevin. I'm very pleased with our results for 2018. When I look back our full year revenue for 2018 was in line with the original guidance given one year ago, and we beat our operating loss guidance by more than $5 million posting a non-GAAP operating profit for the year. We also performed very well against our quarterly guidance in 2018, as we came in at, or at the high end or exceeded our guidance range in each and every quarter. 2018 also marks the firm's transformation to generating consistent and meaningful levels of profit in cash flow, this journey begin at the end of 2015, but our shareholders talk to us about returning the company to profitability.
In that year, we had an adjusted EBITDA loss of $10.5 million and burned $13.2 million in cash from operations. In 2017, we improved to break even adjusted EBITDA with only a $670,000 cash burn. Today, I'm happy to report that we delivered adjusted EBITDA of $5.4 million, yielding a margin of 6.3% and we generated $3.3 million in cash flow from operations, our profit trend line has continued to improve. We've delivered on our profitability growth goals by creating a business that is financially strong with improving levels of profit and cash flow.
We believe in 2019 and beyond, we can continue to deliver against these key metrics by taking advantage of opportunities in global trade, bringing more focus to our sales and marketing efforts, driving expansion into new markets, and returning subscription revenue growth to the double-digit levels. Turning to our results for the fourth quarter, revenue and profit exceeded the high-end of our guidance driven by the strength in subscription revenue and improve subscription growth rates. Total revenue was $21.9 million, as subscription revenue increased 9% year-over-year to $16.3 million. Adjusted EBITDA for the quarter was $1.6 million. Bookings for the year-ended on a strong note, including improved performance from Europe.
Our sales pipeline is balanced across the geographies and products we sell and at a higher level than this time last year. These things combined to position us very nicely for 2019. We have reorganized Amber Road's staff and focused our go-to-market programs around several key strategic objectives, which will drive our business forward in 2019 and beyond. I'll review a few of these enhancements with you next. We are helping our customers manage the increasing complexity and velocity of changes in global trade, much of which is driven by the U.S. trade wars, Brexit and an acceleration on new free trade agreement.
Our end markets are healthy, and we believe we are more efficient and more effective -- there are more efficient and effective ways to add new customers and expand across our blue-chip customer base. To do this, we are increasing our focus on a few key areas related to sales and marketing. We've created a new sales account management team dedicated to customer success and expansion to drive upsells and cross-sells. Our account managers were sourced from our professional services team, so they already had deep domain expertise, strong product skills and a proven customer service history. They are productive out of the gate and are hitting the street running.
We believe this new team can nurture existing accounts to drive more sales. With this team, we will also free up time for our Sales Directors to focus on what they do best, new customer acquisition. We rolled out the new account manager program in the United States in Q4 of last year by transitioning this responsibility to manage installed accounts to account managers we are effectively doubling the capacity of Sales Directors to chase new logo business, and because the account managers carry a quota, we now have more feet on the street closing business.
A great expansion story in the recent quarter happened is Synopsys, a leading global provider of electronic design, automation tools and services. Synopsys has been export customer of ours since 2017, when we replace the competitor's solution to manage their U.S. trade operations. We've done very well on the U.S. side of this business, but since that time, Synopsys has continued to struggle with all of the compliance work internationally using only manual processes and a globally distributed team. They realize that without a standardized automated solution for export compliance on a global scale, they were needlessly using resources limiting their ability to scale and exposing themselves to compliance risk. Therefore in the fourth quarter, our customer expanded their subscription with Amber Road to include several new modules to centralize compliance data, formalized and automate its processes globally.
The changes I just outlined to our sales organization are being supported with new technologies and thinking applied to marketing. Over the past 12 months, we have implemented an approach called Account Based Marketing in Europe and we are very pleased with those results. In case you aren't familiar with Account Based Marketing, it is designed to complement more traditional lead generation efforts to engage a specific set of highly valued targeted enterprise accounts. Account Based Marketing is abbreviated ABM. ABM facilitates alignment between various Amber Road functions, including sales, marketing, business development and product management to create better message -- messaging and higher levels of sales engagement with senior executive.
ABM marketing programs are laser focused and performed very well for us in 2018 in Europe and helped us win new accounts, such as LEGO. LEGO Group selected Amber Road's free trade agreements solution in the recent quarter as part of a global program to redesign its supply chain operations and maximize tax and duty savings on cross border trade all around the globe.
Our software will be used to ensure that LEGO is compliant with the complex rules of origin for more than 20 free trade agreements that covers, South America, Asia, North America and Europe. Amber Road was chosen for this large project because we are the only vendor supporting a large library of free trade agreements and can implement them economically through our quick start program. We believe we can leverage our win with LEGO and our new Account Based Marketing approach across other opportunities with similar characteristics and will replicate this success. We're now rolling out ABM across the globe to our teams in the United States and China.
LEGO also touches on another key strategic driver, free trade agreements. FTAs, free trade agreements are an important part of our competitive advantage. We have a big lead in terms of the capabilities of our software and the number of FTAs we support as well as the market awareness we've generated in the success we're having at leading companies across many verticals. We've seen strong adoption and a growing pipeline. So we're confident our momentum will continue to accelerate.
In addition, we continue to believe that with the new NAFTA called USMCA and the pending impact of Brexit, there will be a large number of customers who will need our help in additional trade content to successfully make the transition in 2019 and then 2020. These events should offer us a nice revenue boost later this year and into the next. China is also an important long-term strategic driver for our business, we continue to see strong activity for our China Trade Management solution as China overhauls there customs processes. Our CTM module provides us a fantastic gateway to many large customers using a moderately priced product that delivers a quick win and then opens the door for other opportunities to sell these customers more of our Global Trade Management or GTM suite.
Several great examples of our success in China this quarter include AkzoNobel and Ingersoll Rand. AkzoNobel is a leading maker of paints and coatings is headquartered in the Netherlands and has multiple facilities all across China. They selected our solution to automate their China import and export operations provide corporate level visibility in response to recent China regulation reform measures and to automate AEO certification and national declaration integration initiatives. We are very excited to service this new customer in China.
In another China example, Ingersoll Rand selected our CTM module in the recent quarter. Ingersoll Rand is a diversified industrial manufacturer for climate and industrial equipment. They have multiple facilities all across China engaged in China bonded manufacturing using the China Customs handbook. They selected Amber Road's China Trade Management solution to automate their handbook which was previously in all manual process. Our solution will provide them with operational visibility on the corporate level, minimized compliance risk and dramatically cut costs by increasing the efficiency within their China operations.
We had our best booking year ever in China in 2018 and saw great demand from multiple industries, including automotive, chemical, pharmaceutical, industrial manufacturers, high-technology and retail. As an example of our effects in the retail vertical, we closed business in the fourth quarter in China, with Tiffany Company. Tiffany and company is one of the world's foremost luxury brand. They have subscribed to multiple modules, including our Global Product Master -- master and China Trade Management. With hundreds of thousands of products, it was critical that Tiffany need to be able to maintain accurate trade data, especially for product classification. They had a lean team of compliance experts and only manual processes that we're using spreadsheets and emails. So the team couldn't keep up with the higher volumes of foreign trade.
New regulations and trade complexity were leading to delays and errors. With the expansion plans on the horizon, the company recognized the need to improve productivity and responsiveness without increasing headcount now. Tiffany wanted a single global database to manage product classifications, trade data and to automate their cross border processes, because Amber Road pioneered this kind of automation. We remain unique in the marketplace and had a compelling proposition to offer Tiffany, as they compared us to less mature offerings both in China and here in the United States.
Our market in China has shifted. So while selling CTM is a good business for us in China, we are also seeing opportunities to expand our sales coverage and marketing efforts to encompass our full Global Trade Management platform with large Chinese national companies. There are many causes for this new demand. Many countries along with the United States are telling China to play by the rules. In response, China Central Government is now rigorously enforcing compliance of trade regulations to demonstrate to the rest of the world that they can be reliable trading partner. The result is that Chinese companies are starting to look toward ways in which they can automate their global trade to be in compliance.
We're taking advantage of this emerging trend by training all of our staff in Shanghai, Shenzhen and Hong Kong to recognize those opportunities and to sell our broader GTM platform. We're still early in this process, but we believe this is a sizable opportunity for us and one in which we are well positioned given our on ground presence, unique set of solutions, deep set of trade content that's integrated with those solutions and a long list of referencable customers in the region.
And finally, we've executed very well against our strategic objective to build a business that can deliver solid growth combined with increasing levels of adjusted EBITDA and cash flow to strengthen our financial position. We took important steps in 2018 across the business that position us well for 2019 and the longer term. As Tom will detail in a moment, our 2019 guidance calls for double-digit subscription growth rates exiting the year and full-year adjusted EBITDA margins that will continue to expand. Based on our 2019 guidance which represents good revenue performance and a continued strong profit trend, plus our growing pipeline of opportunities in the macro tailwinds related to global trade. We believe now is the right time to provide you with some additional insight into how we're building the business for the longer term. We've spent considerable time working on our miles this year and next. My comments about 2020 represent management's goals and our Board support for management, based on the strong fundamentals that they see. For 2020, we currently believe that Amber Road can sustain double digit subscription revenue growth and expand adjusted EBITDA margins into the double digits, while improving our cash flow. We believe the fundamentals are in place for great 2019 and an even better 2020.
With that let me turn it over to Tom.
Thomas E. Conway -- Chief Financial Officer
Thanks, Jim. I'll start with a detailed overview of our fourth quarter 2018 financial performance and then provide some commentary on our first quarter and full year 2019 outlook. Following my closing remarks, we'll open up the call for questions. As a reminder, we adopted ASC 606 on a modified retrospective basis in 2018.
Regarding the fourth quarter results. Beginning with the statement of operations, we generated GAAP revenue in the quarter of $21.9 million compared to $20.6 million in the fourth quarter of 2018. Subscription revenue was $16.3 million an increase of 96% compared to $14.9 million in the prior year period and represents accelerating growth from the prior quarter. Professional services revenue was $5.6 million in line with our expectations. This amount compared to $5.7 million in the same period a year ago.
Our trailing 12-months recurring revenue retention rate through December was 101%, reflecting the long-term value of our customer relationships. We have sustained high levels of recurring revenue for the past five years, giving us a high level of revenue and billings visibility in the forward quarters. On a GAAP basis, our gross profit was $12.6 million or 58% of total revenue compared to $11.4 million or 55% of total revenue in the prior year period. Subscription gross profit was $10.9 million or 67% of subscription revenue compared to $9.9 million or 66% of subscription revenue in the fourth quarter of 2017.
Our gross profit on professional services was $1.8 million or 31% of professional services revenue. This gross profit performance compares to $1.5 million or 26% of professional services revenue in the same period last year. On a GAAP basis, total operating expenses were $14.8 million compared to $13.2 million in the fourth quarter of 2017. Our fourth quarter GAAP operating loss was $2.1 million compared to a GAAP operating loss of $1.9 million in the fourth quarter of last year. On a non-GAAP basis, operating income was $392,000 an improvement compared to an operating loss of $85,000 in the year-ago period. This performance was well ahead of our guidance.
Non-GAAP operating income for the fourth quarter of 2018 excludes stock-based compensation. We are pleased with the leverage we are seeing in the business as we continue to drive both growth and profitability and we believe we have set the company on a path to deliver improved levels of profit and cash flow. As we do this, we will continue to make investments in sales, marketing and research and development to support the opportunities we see ahead for the business.
Our GAAP net loss was $2.6 million for the fourth quarter of 2018, compared to a GAAP net loss of $1.8 million in the prior year period. GAAP net loss per share was $0.09 in the fourth quarter of 2018 compared to a net loss per share of $0.07 in the fourth quarter of 2017. These amounts are based on $28.1 and $27.5 million shares outstanding respectively. On a non-GAAP basis, net loss was $87,000 in the fourth quarter of 2018 which compares to a non-GAAP net loss of $10,000 in the prior year period.
On a non-GAAP basis, we're break even per share in the fourth quarter of 2018 in line with the prior year period. These per share amounts are based on $28.1 million and $27.5 million shares outstanding respectively. We are very happy to report another great quarter of positive adjusted EBITDA. For the fourth quarter adjusted EBITDA was $1.6 million positive, an improvement compared to adjusted EBITDA of $1.3 million in the same period last year. Cash flow used in operations in the fourth quarter of 2018 was $1.6 million compared to $2.1 million generated in Q4 2017.
Now, I'll quickly recap our full year results. 2018 total GAAP revenue was $85.2 million, up 8% year-over-year. Subscription revenue was $62.6 million, increasing 7% over 2017. Professional services revenue was $22.5 million, increasing 9% over 2017. On a non-GAAP basis, operating income was $428,000 in 2018 compared to a loss of $5.3 million in 2017. Non-GAAP operating income for the full year 2018 excludes stock-based compensation.
On a non-GAAP basis our net loss was $1.3 million in 2018, this compared to a non-GAAP net loss of $6.9 million in 2017. Non-GAAP net loss per share was $0.05 in 2018 compared to a loss of $0.25 in the prior year. These per share amounts are based on $27.8 million and $27.4 million shares outstanding respectively. Adjusted EBITDA for 2018 was $5.4 million a meaningful improvement compared to an adjusted EBITDA of $87,000 in 2017. Turning the focus to our balance sheet, as of December 31 2018 we had cash and cash equivalents of $7.5 million compared to $10.1 million as of September 30, 2018.
Cash flow provided by active -- by operating activities in 2018 was $3.3 million compared to a usage of $670,000 in 2017. Before turning to guidance, I'm pleased to note that we have renegotiated the credit agreement that governs our term loan and revolver, extending the maturity date by two years from December 31, 2019 to December 31,2021 while preserving the favorable attributes of the agreement. We continue to believe that we have ample liquidity to effectively run the business and support the strategic initiatives of the company.
Turning to guidance. For full year 2019, our guidance calls for subscription growth to be the driver of our business. Based on the strength of our 2018 bookings, our pipelines and the strategic initiatives Jim outlined, we expect subscription revenue to show improving year-over-year growth rate as we move through the quarters and to exit double digit -- exit the year at double-digit year-over-year growth.
As we further utilize our Quick Start programs, we believe services will be approximately flat year-over-year in 2019 and beyond. Moving to the specifics, our 2019, full-year guidance is as follows. We expect total revenue to be in the range of $88.7 million to $91.7 million. We expect non-GAAP adjusted operating income to be in the range of break even to $3 million. On a per share basis, we are expecting a range of non-GAAP adjusted net loss per share of $0.06 to non-GAAP income per share of $0.04, these amounts assume $29 million basic shares outstanding to $32.4 million fully diluted shares outstanding.
We also expect to continue to generate positive cash flow from operations through 2019. Turning to the first quarter of 2019, we expect some seasonal sequential declines in professional services. Additionally, Q4 2018 benefited slightly from transaction revenue and traditionally we don't experience material transactional levels in Q1. Coupled with some deferred starts on Q4 2018 bookings. We expect these impact to subscription revenue to be more than offset beginning in Q2 and to see nice sequential subscription growth throughout 2019.
Our Q1 2019 guidance is as follows. Total revenue is expected to be in the range of $20.3 million to $20.9 million. Non-GAAP adjusted operating loss is expected to be in the range of $700,000 to $100,000. Non-GAAP adjusted net loss per share is expected to be in the range of $0.04 to $0.02 assuming $28.3 million basic shares outstanding. Our expectations of non-GAAP loss from operations and non-GAAP loss per basic share for the first quarter and full year of 2019 excludes stock-based compensation.
As Jim noted, we are building a business to drive long-term growth and profit, we've been very successful in delivering on our strategic objective to manage the business, to improving levels of profit and cash flow. As we look to 2020, we believe we can deliver both double digit subscription growth and adjusted EBITDA margins along with improving levels of cash flow. We believe this positions us well for long-term future success.
Operator, please open the line for questions.
Questions and Answers:
Operator
(Operator Instructions) And we'll take our first question today from Scott Berg with Needham & Company.
Scott Berg -- Needham & Company -- Analyst
Hi, Jim and Tom. Congrats on the good quarter. I got a couple of questions here for you. Tom, let's start with the guidance for the year, total revenue growth a little bit lower year-over-year. It sounds like some -- professional services are flat and subscription has a little bit of a delay in some fourth quarter bookings. How normal is that to have some of your subscription contracts have a -- maybe a one or two quarter delay before they get ramped up?
Thomas E. Conway -- Chief Financial Officer
Yeah, that's fairly common Scott. It's a phenomenon we've seen now, a number of years. It depends -- in certain quarters it maybe more amplified, but as you going into any given year. Our backlog of subscription revenue is pretty well known obviously, the existing deals, what we call the installed base is in the contract or an easy to model, and we feel very good about the size of our pipeline and our ability to execute for new revenue from subscriptions in 2019 as well.
Scott Berg -- Needham & Company -- Analyst
Got it, helpful. And then Jim you talked about bookings improving in Europe. How would you quantify the year overall on a bookings perspective. You sound pleased, but were bookings is actually up or I should say new bookings up year-over-year?
James Preuninger -- Chief Executive Officer
Yeah, new bookings are up year-over-year and we had a lot of strength, I think in Europe and China. I mentioned China was the best year-ever and as you might recall, we reorganized our sales leadership and asked one of our senior executives to accept the transfer to our Munich operation this time last year and so, it has impact there, it has been well dealt, introduction of Account Based Marketing in Europe, we reorganized the team, we recruited some new folks. A lot of the bigger transactions that I've talked about over the year attributed to the success that they've had -- this -- the LEGO deal in particular, that was a European initiatives.
So we're lucky, we're just executing well, but we are performing well and it's very balanced in that. So we have good deals in Europe, good deals in the mid-market, doing well in the rest of the U.S. and obviously in China and it's across the product spectrum. So as well free trade agreements in those a real hot module for us, in all other things are selling very well also. So it's a nice healthy position for us Scott.
Scott Berg -- Needham & Company -- Analyst
Wonderful. I guess last question for me then, Jim is, you talked about the new cross-sell sales team that you're putting together with the people. The individuals responsible from your professional services team and you've seen some early positive results. I guess the question is, how should we view the expectations for this type of team going forward to this next year because that can clearly provide some ups -- upside here in prior bookings trajectory? Thank you.
James Preuninger -- Chief Executive Officer
Well, I think, look at the good news is we took some fairly senior experienced people. They know our products, they know our policies, the people, how we do business. They were customer facing, they're very relax and comfortable with our customers and they can have a very deep level of conversation with them. Many of the folks that were recruited for this new environment in are -- are very familiar with the customers that they got assigned to them. So they roll very naturally from this role, because they have those relationships. And I think the typical inertia you have with hiring a new salesman is of virtually eliminated with this team and I think that the benefit here is -- these people get to spend more time, quality time, nurturing accounts, solving problems describing to them, our product roadmap, the things that we're seeing in the industry, new trends and experiences we're have -- we are having with other customers and I think it's just going to lead to far more upsells and cross sells.
Our our sales directors, which have traditionally sold new logos and then continue to manage those installed accounts frankly, weren't always as engaged in the latter activity. No, they were out hunting and I think they did a good job of that and so we said this is a good division here, this is a good opportunity, when we have such a large installed base to divide it up and to give each group of professionals, the opportunity to do what they do best. So it's really a plus point.
Scott Berg -- Needham & Company -- Analyst
Thanks for taking my questions. I'll jump in the queue.
James Preuninger -- Chief Executive Officer
Thank you, Scott.
Operator
Next we'll hear from Tom Roderick with Stifel.
Tom Roderick -- Stifel -- Analyst
Hey, gentlemen, good afternoon. Thanks for taking my questions. Kind of want to go back and piggyback on Scott's question there, thinking a little bit more about the guidance here for the coming year, and so the cadence of it. So, if I remember back to last year, the guidance and the goal for the end of this year was to kind of get to double-digit revenue growth by the end of this year, and got pretty darn close. Maybe not all the way there and then it seems like a little bit of a temporary step back before things reaccelerate.
So if we kind of put all that together, I guess the first part of the question would be number one, how should we think about the first quarter subscription sort of growth goal, is that something that pulls back-to-mid single digits temporarily is a lower than that. I guess, if I kind of parse it against your comments on professional services, those could be down 5% or 10%. So maybe just a little bit more clarity. So we're in the right ballpark and thinking about Q1 and then relative to the reacceleration for the end of 2019 and beyond. How are you feeling about sales capacity. I look at the kind of sales and marketing number and again it's been kind of flattish on a spend basis for a few years. Do you need to accelerate the spend there or is it just pipeline and conversion rates, you expect to go up this year? Thanks guys.
James Preuninger -- Chief Executive Officer
Yeah. So the first part of your question, Tom, on what we're expecting for the first quarter. So the subscription -- I think about subscription growth rate on a year-over-year basis that are going to be in the low to mid-single digits and accelerating throughout the year based on the timing of the deferred starts and the bookings that we -- in the pipeline that we think are going to contribute nicely to the year. And obviously we'll -- the model we have is improving quarter-over-quarter on the subscription line and exiting as we said in our script above double-digit. So setting us up nicely for 2020.
Thomas E. Conway -- Chief Financial Officer
Okay. We saw a similar cadence in 2018. So a little bit of a repeat but the models are really built with a lot of details to them and we do have good visibility into that installed base. So we feel good about that.
Tom Roderick -- Stifel -- Analyst
So I'm not sure which one you wants to tackle this part of the question, you mentioned it on the script, and Tom I appreciate you mentioning it again. So, it sounds like you've got a couple of deals and maybe there are significant deals that you booked in the fourth quarter that have some deferred start. Can you just kind of go into what the magnitude of those look like and what the timing of the deal starts to look like, that we already started. Are those things that have a specific timeline on them, are they meaningful?
James Preuninger -- Chief Executive Officer
Yeah, I mean this is Jim speaking. So, we saw it last year to where -- a lot of the deals we road in December, and when we get around to negotiating subscription start dates. There's a discussion about when the project will meaningfully kickoff and get rolling and that generally doesn't happen in January or February. So we have some contracts that has subscription starts in March, others that are early in mid of Q2. So -- and I think that -- that was the right answer for the customers, its the right answer for us too. So it is a -- we tend to negotiate those contracts and look at the long-term relationship and if I miss a couple months of subscription revenue, its not end of the world.
Tom Roderick -- Stifel -- Analyst
Got it, OK.
James Preuninger -- Chief Executive Officer
Your last question about sales capacity, it's -- Tom, I just wanted to get back. So with this account management team putting in place, it really pulls away a lot of burden, a lot of time that was spent by sales directors, working with those installed accounts and I mean -- even though, they may not have been equipped as well to deal with, and there was just always -- issues and communications and things that they needed to be responsible for. So, we've really freed up a lot of their time here in the United States, but we do intend to add to our sales ranks with new hires throughout the year. So, it's an area we want to invest in, we see good opportunities. There is some -- there are some nice markets that are untapped that we haven't been to yet, and so we're going to -- we're going to make those investments throughout the year.
Tom Roderick -- Stifel -- Analyst
And Jim, a quick follow-up on that question about sales capacity. I appreciate your comments there about the shifting nature of market demand in China, where the full GTM opportunity seems more in the scope now. Can you do that with the existing sales team over there effectively put the whole -- the whole suite and the existing reps bag over there or does that require additive capacity in a different go-to-market.
James Preuninger -- Chief Executive Officer
Yes, yes and yes. So we -- I think we have a great team there. They've been been with us a while, they've been real successful sell in China Trade Management. They know compliance code, they know the market very well. Now, there is some new products, Global Trade Management is a suite of solutions that they've not sold before or they sold maybe just on a very limited basis. So we spend a lot of time last fall, training, we had folks in education, the sales as well as product training and we're going to back them up. So, there's an engagement model that includes an awful lot of support from select folks on our staff in the U.S. and in Europe, who will be working with them to -- help them throughout the year. Come up to speed and certainly, if we have the bigger engagements, we are going to be all over that. We will support it ever -- anyway we can.
Tom Roderick -- Stifel -- Analyst
Great. Last quick one from me, as I think about your comments regarding EBITDA margins continuing to expand this year? Tom, where would you suggest we look for the majority of leverage in the model. Should that come again on the G&A and R&D side, should we look for it somewhere else? How do we think about where we get some of that margin expansion and can we see more of it on the gross margin side this year? Thanks.
Thomas E. Conway -- Chief Financial Officer
Yeah, thanks, Tom. We've been -- if you watch the subscription lines, subscription COGS we've been adding sequentially to the margin there. So the -- at the COGS level we are continuing to push on the levers that have helped us grow through '17 and '18 at that level. So we'll definitely get contribution at the gross margin level. We will see in the areas that offers -- as obvious, G&A will be one where we get leverage. R&D to some extent and sales and marketing, the least of the operating expenses, because as we said we are investing in that regard, maybe a little bit lower than we would in R&D as a percentage of revenue, but the most critical component for us on that, we're generating sequentially better margins at the gross margin level.
Tom Roderick -- Stifel -- Analyst
One-off. Thank you, gentlemen. I'll jump back in queue.
James Preuninger -- Chief Executive Officer
Thank you, Tom.
Operator
We now hear from Glenn Mattson with Ladenburg.
Glenn Mattson -- Ladenburg Thalmann Financial Services -- Analyst
Hi, thanks for taking my questions. So, maybe, I think it was to Jim, could you repeat some of the comments around 2020, I kind of missed that, you laid out kind of a framework for how to think about growth rates and margins as you look into that year?
James Preuninger -- Chief Executive Officer
Yeah. So specifically what I said is, we spent as we always do a lot of time looking at our models and doing scenario building for 2019, but our model usually goes out to current year plus one, and given some good metrics that we are seeing, some good momentum, I think better fundamentals a lot of -- a lot of demand in the marketplace. Now given those macro tailwinds we talked about, we thought -- we felt pretty good about 2020 as well. I mean, there's a lot of year left. We got to get through '19 for sure, but we looked at our 2020 model. We probably -- obviously have those discussions with our Board, we look out multiple years and everybody thought it -- now its probably a good time to share more of that with you folks. I mean that it's a question we often get asked how do you look longer-term. So rather than just (inaudible) on the call.
So I -- specifically in my comments were given the plan that we have in front of us for '19 exiting the year with double-digit subscription growth in Q4. We see that ability -- that trend continuing in the 2020. So we'll have double-digit subscription growth quarter-over-quarter, each quarter in 2020. We also believe that with improving, EBITDA margins will reach a point that in 2020 we will have double-digit EBITDA margins at that point as well.
Glenn Mattson -- Ladenburg Thalmann Financial Services -- Analyst
Okay, great, that's helpful, thanks. So, I guess you talked a little bit about your confidence in that number, but maybe some more about what's kind of backing it up. I mean, there is a lot of trade -- geopolitical stuff going on. So I guess it's partly that, but, has that driven the growth rate for the industry higher, to a point where you feel more comfortable about projecting better -- better results for that far period up?
Thomas E. Conway -- Chief Financial Officer
Well, I can't talk about growth rates for the industry, but I -- just --again, what we see with the deals that come to the table, the quality of the deals, the types of transactions that we're writing in the kinds that are in our pipeline. We're positioned really well to compete for these things, when people are trying to solve problems in China, we're -- we have really the best game in town. When they want to implement free trade agreements and we're becoming the best game in town. And when they want to solve a global trade problem on a global scale and that's just a small regional scale or just do something simple with exporter, something simple with -- visibility, but they really want to tackle this thing from end to end, with the best game in town. So I think that the problem is better defined. I think, we certainly see it almost daily in the news, it's not just a U.S. phenomenon its global. Right, so I think global trade is topical and we've made a big long hard investment to get to this position, and we're starting to see the opportunity develop in front of us in a nice way.
Glenn Mattson -- Ladenburg Thalmann Financial Services -- Analyst
Thanks for that. And last thing would be just as you look at the year and how it plays out with all the geopolitical events going on, something, as far as Brexit goes, not quite as planned or if maybe the USMCA is not signed by Congress or something like that, are those kind of things, the kind of items that could flare up suddenly and create a situation where you have to kind of readjust your outlook for the year or is that kind of thing or those kind of things you think you'll manage through regardless of which way they -- the chips fall and some of these issues that are still outstanding?
James Preuninger -- Chief Executive Officer
Well, look, I have to say that there are puts and takes in this and there could be -- those types of changes that we'd have to adjust for, but there is enough of them, right -- there is enough of a positive trend for us. I think overall, we have a lot of levers to pull. I mean, I will tell you, we have a -- the USMCA trade agreement largely done. It hasn't been ratified yet, but we have customers right now that are taking pre-orders for it.
Brexit threat around the corner, and we've been talking about it for a while, but that deadline is looming in any moving and its going to be -- a lot of companies, I think -- you're going to scrambled pretty quick '19 and 2020 to try to put some solutions in place to deal with them more effectively. So those are two initiatives what we talked about with China, the trade wars. I mean, all of these, these things can move a little right, move a little left but again on balance, I think it sets us up really well.
Glenn Mattson -- Ladenburg Thalmann Financial Services -- Analyst
Okay, great, thanks. I'll pass on to the next caller.
James Preuninger -- Chief Executive Officer
Thanks, Glenn.
Operator
(Operator Instructions) We'll hear from Jason Celino with KeyBanc Capital Market.
Jason Celino -- KeyBanc Capital Market -- Analyst
Hey guys, thanks for taking my question. I just had a couple of clarifying ones. So first of all, kind of high level question. We're entering the second/third year of an environment with increased trade agreement uncertainty, you mentioned trade wars, overall complexity in global trade, overall it's increasing. What continues to be the most difficult part of us, over the sale, given these kind of tailwinds. And then how, kind of those conversations changed over the last year -- two years?
James Preuninger -- Chief Executive Officer
Well, I think the problems becoming more immediate. So, we started to talk about Brexit in September, October of 2017, but the time frames that people had to be planning and thinking about this and actually what the plan for was, was really unknown. I mean, how the UK would breakaway and what type of systems we're going to be required, and what the regulations would look like completely unknown there right.
And so I think while we could run a seminar in London and get 600 people to attend it that -- to talk about how we might speculate or other experts that we might bring into might speculate about what would happen. There wasn't a clear direction to take yet on that one, and I think the thing its been true with NAFTA, until the USMCA came together and we had at least at a senior level everybody in agreement has been ratified yet, but the big negotiation is largely done. It hasn't been immediate or actionable for our customers. This is the year where these things become actionable.
Jason Celino -- KeyBanc Capital Market -- Analyst
Okay, thanks. That's actually very helpful. And then kind of last clarifying question, you talked about some of the member -- more senior members of your customer service organization moving into some cross sell roles. Are you going to be back filling the roles they had previously?
James Preuninger -- Chief Executive Officer
Oh, yeah, yeah, but it's a large team, our professional services staff, it wasn't customers for our -- professional services. Those are the people that helped new customers get trained and understand best practices and implement our solution so that staff as well over 100, I mean, we didn't pull up many over into sales, but it was a good team and our Head of Professional Services is already got plans on backfilling. So, we're in good shape.
Jason Celino -- KeyBanc Capital Market -- Analyst
Okay, thanks. That's all my questions.
James Preuninger -- Chief Executive Officer
Hey Jason, thank you.
Operator
That will conclude today's question-and-answer session. At this time, I'd like to turn the conference over to Mr. Preuninger for any additional or closing remarks.
James Preuninger -- Chief Executive Officer
So everybody -- thank you very much for dialing in and listening to the call. We appreciate your support and looking forward to speaking with you again soon. Thank you, operator.
Operator
Thank you. That does conclude today's conference call. Thank you for participation, you may now disconnect.
Duration: 50 minutes
Call participants:
Kevin Brogan -- Investor Relations
James Preuninger -- Chief Executive Officer
Thomas E. Conway -- Chief Financial Officer
Scott Berg -- Needham & Company -- Analyst
Tom Roderick -- Stifel -- Analyst
Glenn Mattson -- Ladenburg Thalmann Financial Services -- Analyst
Jason Celino -- KeyBanc Capital Market -- Analyst
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Read More First Published on Feb 15, 2019 03:40 pm
Victory Capital Management Inc. cut its holdings in Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) by 10.1% during the fourth quarter, according to its most recent Form 13F filing with the SEC. The fund owned 2,064,627 shares of the aerospace company’s stock after selling 232,451 shares during the period. Victory Capital Management Inc. owned 2.64% of Aerojet Rocketdyne worth $72,737,000 at the end of the most recent reporting period. 
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