TIBCO Software, Inc. (
TIBX)
Q2 2009 Earnings Call Transcript
June 25, 2009 4:30 p.m. ET
Executives
Vivek Ranadive – Chief Executive Officer
Sydney Carey – Executive VP & Chief Financial Officer
Murray Rode – Chief Operating Officer
Analysts
John DiFucci – JP Morgan
Derek Bingham - Goldman Sachs
Katherine Egbert - Jefferies & Co
Yun Kim - Broadpoint AmTech
Tim Klasell - Thomas Weisel Partners
Brian Schwartz for Mark Murphy – Piper Jaffray
Nabil Elsheshai - Pacific Crest Securities
Brent Williams - The Benchmark Company
Kash Rangan – Banc of America/Merrill Lynch
Presentation
Operator
Good afternoon ladies and gentlemen. I am David. Welcome to TIBCO’s second quarter 2009 conference call. (Operator Instructions) At this time all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session. You can also listen to the call via the Internet and www.tibco.com. Today’s call is being recorded and will be available for playback from TIBCO Software’s website at www.tibco.com. In addition, a replay will be available through Premier Global Services for one month following today’s call by dialing 888-203-1112 from the US or 719-457-0820 internationally. The confirmation code is 2404640.
The following conference call includes forward-looking statements, which represent TIBCO Software’s outlook and guidance only as of today and which are subject to risks and uncertainties. These forward-looking statements include, but are not limited to, forecasts of revenues, operating margins, operating expenses, outstanding shares, and earnings per share for future periods. Our actual results could differ materially from those projected in such forward-looking statements. Additional information regarding the factors that could cause actual results to differ materially are discussed in the risk factors section of TIBCO’s most recent reports on forms 10-K and 10-Q filed with the Securities and Exchange Commission. TIBCO assumes no obligation to update the forward-looking statements included in this call whether as a result of new developments or otherwise. This conference call also includes certain financial information that has not been prepared in accordance with generally accepted accounting principles, as we believe that such information is useful for understanding our financial condition and results of operations.
For a presentation of the most directly comparable financial measures calculated in accordance with GAAP and a reconciliation of the differences between the non-GAAP and GAAP financial information, please see our website at www.tibco.com. The participants on the call are Vivek Ranadive, TIBCO’s Chairman and CEO; Chief Operating Officer, Murray Rode; and Chief Financial Officer, Sydney Carey. I’d now like to turn the call over to Vivek.
Vivek Ranadive – Chief Executive Officer
Thanks David and thank you all for joining us today. Please forgive any delay in our remarks today as I am dialing in from Europe where I am meeting with customers while Murray and Sydney are joining us from our Paulo Alto offices. I will open with a few summary remarks on our performance and position in the market and then I will turn it over to Murray and Sydney to discuss further details. We produced solid earnings this quarter, well above expectations in what continued to be challenging times. Some highlights include total revenue for Q2 was $142.7 million, license revenue was $50.5 million, non-GAAP operating margin was 19% versus 12% a year ago, and fully taxed non-GAAP earnings per share for the quarter were $0.11 versus $0.07 a year ago. Year to date non-GAAP earnings per share were $0.20. This reflects growth in EPS of more than 40% from the same period last year. As we said we would, we are managing carefully through the storm and working to expand the leverage in our model.
At the same time we continue to invest in the business and we remain the innovation leader in this market. TIBCO spends over $100 million a year on focused R&D and our commitment to innovation today is stronger than ever. The result of these investments is a set of catalysts for growth and market differentiation. In the near-term catalysts include TIBCO BusinessEvents, the market share leader in Complex Event Processing that has powerful real world applications and is increasingly being considered the application server for events. TIBCO Collaborative Information Manager, which takes a unique and holistic approach to the complexity and size of the 21st century Master Data Management challenge and TIBCO iProcess, our leading BPM suite, which helps customers manage and optimize across functional silos, get more value from their ERP implementation, and squeeze hard dollars in the form of inefficiencies out of their business.
Long-term catalysts for growth include offerings such as TIBCO Silver, our brand new platform for application delivery on the cloud and TIBCO Active Spaces, our in-memory distributed cache. These new offerings will give our customers real vale from the cloud and expand the reach of our middleware platform as customers increasingly move from database-driven architectures to event-driven in-memory architectures that leverage the cloud. Our focus right now is on execution. We’re using this current environment to increase our overall productivity and constantly looking for ways to improve. The key to our success today and always is working closely together with our customers to make sure that they are a success.
With that I’ll turn it over to Murray. Murray?
Murray Rode -- Chief Operating Officer
Thanks Vivek. I’ll go over some of our key operating metrics for the quarter and our operating focus for the remainder of the year. On a year-over-year basis, revenue for Q2 declined by 5% but actually rose by about 1% on a constant currency basis versus the same period last year. Non-GAAP operating income increased by 56% versus last year, or about the same on a constant currency basis. Remember also that this is not a Q4 for us and given the environment our constant currency revenue performance is significant and we continue to show increased leverage in our model. In terms of deal activity, we had 11 deals over $1 million in license, versus seven a year ago and 88 deals over $100,000 in license versus 91 a year ago. New license customers numbered 50 in the quarter, generally consistent with both last quarter and Q2 of last year.
The average deal size per transactions over $100,000 in license was $504,000. While deal size has dropped some from last year, it is still within our historical range of $500,000 to $800,000 and our transaction numbers and new customer acquisition remains strong. In terms of geographic mix, total revenue broke down exactly as it did in Q1 and as follows: Americas 53%; Europe, Middle East, Africa 39%; and Asia Pacific 8%. From a vertical market perspective, total revenue was as follows: financial services 20%; telecommunications 13%; government 13%; energy 11%; life sciences 6%. No other vertical was 5% or greater although transportation and logistics, manufacturing, and retail were each close to 5%, so overall we had a diverse mix of business across verticals. From a product perspective, the breakdown of license revenue among our major product families was generally consistent with past quarters at SOA 58%, Business Optimization 30%, and BPM 12%.
At the half year point we look back and we see we made a variety of important and sometimes hard choices to ensure we’re focused and running efficiently. But we’ve done this while protecting our execution capacity in both sales and R&D. We believe this capacity will serve us well now and will help drive growth as the broader economic environment improves. That said we’re not simply waiting for the economy to get better. We have new product initiatives like Silver that Vivek mentioned, and we have ongoing investments in all three of our major product families. And we’re constantly assessing how best to target our sales and marketing resources for maximum return now and over the long run.
With that I’ll turn it over to Sydney for the full Q2 details.
