Openwave Systems Inc. (OPWV)
F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
April 28, 2009 5:00 pm ET
Mike Bishop – IR
Ken Denman – CEO
Anne Brennan – CFO
Charlie Anderson – Dougherty & Co.
Tom Roderick – Thomas Weisel Partners
Scott Sutherland – Wedbush Securities
Matt Hoffman – Cowen & Company
Scott Zeller – Needham & Company
Peter Wright – PAW Partners
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Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Openwave Systems third quarter 2010 earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions) This conference is being recorded today, Wednesday, April 28, 2010.
And at this time I would like to turn the conference over to Mike Bishop, Investor Relations. Please go ahead, sir.
Thank you. Good afternoon, everyone, and thank you for joining us today to discuss the results of Openwave Systems third quarter of fiscal year 2010. Joining me today from Redwood City are Ken Denman, Chief Executive Officer; and Anne Brennan, Chief Financial Officer.
Before we discuss the results of the quarter, I want to remind everybody that we are operating under the rules of Regulation FD. The third quarter financial results press release was distributed at the close of market today. If you've not yet seen a copy, you can find one at our Web site at openwave.com. For your convenience, this call is being recorded and will be available for playback from our Web site for three months.
Before we begin, I'd like to remind you that any remarks that maybe made on this call or in our earnings press release about future expectations, plans or prospects for the Company may constitute forward-looking statements for the purpose of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
The actual results may differ materially from those indicated by the forward-looking statements as a result of various important risk factors. These factors include the specific risk factors discussed in the Company's press release that was distributed today, and in the Company's filings with the SEC, including but not limited to, the fiscal 2009 financial results on Form 10-K and any other reports subsequently filed with the SEC.
We intend to make several forward-looking statements during the call that are based on management's current outlook as of today. We do not intend to update these business outlook statements until the release of Openwave's next quarterly earnings report and disclaim any obligation to do so prior to that time. We reserve the right to update the outlook for any reason during the quarter.
Now, I would like to turn the call over to Ken.
Thanks, Mike, and good afternoon, everyone. To begin, I’d like to welcome Anne Brennan, who assumed the role as Openwave’s Chief Financial Officer on April 1. I’m sure many of you are already familiar with Anne and she has been a key financial leader within Openwave for the past ten years. She brings more than 20 years of experience in corporate finance, serving more recently and by President of Finance and also as an interim CFO in early 2008.
Prior to joining Openwave she had a long career and held various financial positions with Racal Group. And brings a wealth of financial expertise to her new role and we look forward to her strong financial leadership. For those of you who don’t already know Anne, I look forward to making the introduction.
On today’s call, I will first discuss the financials and then cover the market and our products. In last quarter’s call, we suggested revenue would take a one quarter dip. Sitting here today I have to admit that revenue was even lower than we expected a quarter ago.
We closed the quarter with revenue of $40.1 million and bookings of $41.1 million. As we look ahead however we remain confident we expect revenue to bounce back so we expect Q4 revenue to remain below the level we saw in the first and second quarters of FY10. All along, we caution that in our business revenue and bookings can fluctuate quarter-to-quarter and this quarter is clearly evidence of that.
We continue to believe we will end the year with solid bookings growth for fiscal 2009 and as we said before we continue to expect revenue growth in 2011.
Openwave has been continuously improving since I was appointed as CEO in November of 2008. We have lowered expenses, improved R&D efficiency, and productivity and dramatically improved the sales pipeline.
We have also been working diligently to rearchitect our portfolio based on new market opportunities and working rapidly to bring new products to market.
The revenue this quarter is a product of bookings made in prior quarters and the lack of book ship business we typically experienced from our largest customers. This quarter we didn’t see the usual levels of book ship business and we continue to see the impact of the $155 million bookings level in fiscal year 2009.
In addition, the bookings and revenue results this quarter were shaped by a last minute delay in purchase from two of our more significant customers. Entering Q3, we had a view of the pipeline for the second half of the year that we felt comfortable with. And right through March 1
we continue to feel good about it. Unfortunately, in the last two weeks of the quarter despite all the right signal, checks, verifications and processes, some deals begin to move out of Q3.
As we look closely at this result and specifically at the customer concentration risks that drive the results there is evidence of improvement despite the overall bookings level. Thus highlight that we made considerable progress in diversifying our revenue stream.
Over the past ten quarters, our two largest customers represent on average 35% of bookings while this quarter they collectively represented less than 10%. What this means is that we’ve successfully expanded our customer base to offset much of the gap.
The concentration risk has always been an overhang and it’s finally caught up to us. It is unfortunate but we now must exploit the opportunity to grow from here with the possibility of better margins. We are currently scrubbing the pipeline processes and pushing for earlier completion of deals that pushed into Q4.