Sydney Carey – Chief Financial Officer
Thank you, Murray. First I will provide additional details on our financial performance in Q2 and then I will provide comments on our financial outlook for Q3. I’ll review our financials on both a GAAP and a non-GAAP basis. A full reconciliation was included with our press release along with an explanation of our non-GAAP measures. Some key performance data on our second quarter results are as follows.
Total revenue was $142.7 million, down 5% year-over-year but slightly up about 1% on a constant currency basis. License revenue was $50.5 million, down 13% year-over-year or 5% on a constant currency basis. Services revenue was $92 million essentially flat with last year, or up 5% on a constant currency basis. We saw a sequential increase from Q1 in our professional services revenue as we saw budgets stabilize and projects get funded. Maintenance revenue remained strong in the period and we continue to see renewal rates in the range of 90% to 95%. Non-GAAP gross margin for Q2 was 75%, up from 73% last year. Non-GAAP operating income was $27.1 million, up $9.7 million or 56% from the same period a year ago. This resulted in an operating margin of 19% versus 12%. Q2 cash flow from operations totaled $42 million. Non-GAAP EPS was $0.11 versus $0.07 a year ago. On a constant currency basis earnings for Q2 were impacted by less than 1% as compared to the prior year period.
As these results show we continue to carefully manage our expenses and profitability again delivering earnings ahead of our guidance. EPS growth is a clear focus of mine and there are basically four levers at our disposal to deliver it; internal revenue growth, expense controls, acquisitions, and share repurchases. Over time we expect to use all of these levers to varying degrees depending on the specific opportunities and market dynamics. Now turning to our balance sheet, we ended the quarter with approximately $330 million in cash and short-term investments. Deferred revenue including both long and short-term components totaled $155 million. This is slightly up from Q2 of last year. Cash collections for the quarter were strong with DSOs at 62 days compared to 68 days in Q2 of last year. Also during the quarter we repurchased approximately 2.3 million shares at an average price of $6.41.
Now turning to our outlook for the business, visibility continued to remain limited and as a result we are only going to provide guidance for Q3. While customer budgets have stabilized since beginning of the year, we are providing a broader range for guidance this quarter largely to accommodate the variability of timing as to when deals get approved and closed. For Q3 2009 our outlook is as follows. We expect total revenue to be in the range of $140 to $147 million. This suggests a currency headwind of approximately 5% to 7%. We expect license revenue to range between $50 and $57 million. The non-GAAP operating margin is expected to be between 17% and 19%. Non-GAAP EPS for the quarter should range between $0.09 and $0.11 with an assumed tax rate of 32%. GAAP EPS should range from $0.04 to $0.06 with an assumed tax rate of 31% to 33%. We expect cash flow from operations to range from $10 to $20 million. And with that we’ll be happy to take your questions.
Question-and-Answer Session
Operator
(Operator Instructions) We’ll now begin the question-and-answer session. If you’d like to ask a question push the * key followed by the number 1 on your touchtone phone. If your question has been answered and you wish to be removed from the queue please press the tone sign. If you are using a speakerphone please pickup the handset before pressing the numbers. And once again if there are any questions please press “*1” on your touchtone phone. And we’ll take our first question comes from the John DiFucci with JP Morgan.
John DiFucci – JP Morgan
Thank you. Nice job here guys. Cash flow was really strong again this quarter, but deferred revenue was down a little bit sequentially. So, I just wondered if you could comment on it. I think your guidance was something like $17 to $20 million and as you just said, like $42 and I know part of that is coming in from the net income which is a nice way to see it come in there, and it’s a little surprising to see the negative contribution there from deferred revenue, so if you can comment on that a little bit.
Sydney Carey
Sure, our cash flow was little stronger than we had originally provided guidance on. We found that our DSO for the period was better than anticipated at 62 days. That coupled with the additional profit caused our cash flow to be $42 million. In regards to our deferred, what we see is our deferred revenue, our pattern of deferred is that in our Q2 and Q3 we see deferred decline and then it typically builds back in the Q4 timeframe. We expect to see a similar pattern. This quarter we had the timing of June 1st being in Q3 and that impacted some of the timing of the deferred revenue.
John DiFucci – JP Morgan
Okay thanks and if I could have a follow up, we’re seeing companies out there like Oracle continue to execute on its platform expansion strategy both on the application side and on the middleware side. So for a company like Oracle integration becomes more important to it and then with Sun I think if that were to close, they will get Cybion on there too. I’m just curious how do you think that affects TIBCO? Does that make TIBCO more important to the other application vendors out there especially the other leading vendor SAP, who seems to have had some issues with its own middleware strategy?
Vivek Ranadive
Well it does make TIBCO more important and there are a couple of things going on. The first thing is there is a backlash we’re starting to see from customers who don’t want to keep putting more and more eggs in the Oracle basket so that’s one factor. The second factor is that Oracle has multiple offerings, some of their own Cybion and so there’s uncertainty as to which horse they’re going to back even within their own company and so people start gravitating toward the neutral third party which is us. And as you mentioned others like SAP also see us as a bridge between these different worlds. So the general perception that we’re seeing with customers is that this is helping us in our positioning in the market.
John DiFucci – JP Morgan
Could we see any closer relationships with TIBCO and the likes of SAP going forward?
Vivek Ranadive
Well obviously we can’t comment on things that might happen in the future but we are constantly working on closer relationships.
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