Pervasive Software Inc. CEO Discusses F1Q2011 Earnings - Call Transcript

Pervasive Software Inc. CEO Discusses F1Q2011 Earnings - Call Transcript
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Pervasive Software Inc. (

PVSW

)

F1Q2011 Earnings Call

October 19, 2010 05:00 pm ET

Executives

Randy Jonkers - CFO

John Farr - President & CEO

Analysts

Kevin Louve - B. Riley & Co.

James Lee - Potrero Capital

Presentation

Operator

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Good afternoon my name is Sarah and I will be your conference operator today. At this time I would like to welcome everyone to the Pervasive Software Inc. fiscal year 2011 first quarter financial results conference call. All lines have been placed on mute to prevent any background noise after the speakers remarks there will be a question-and-answer session (Operators Instructions)

Thank you, I would now like to turn the call over to Mr. Randy Jonkers, Chief Financial Officer. Sir you may begin.

Randy Jonkers

Good Afternoon and thank you for joining us, I am Randy Jonkers, Chief Financial Officer of Pervasive Software, while we wait for others to join I will go over to standard disclaimer regarding remarks on this call.

This conference call may contain forward-looking statements within the meanings of the Federal Securities Laws including statements regarding the company's or management's intentions, hopes, beliefs, expectations and strategies for the future. Forward-looking statements may include without limitation, statements regarding the following: future investments, sales, market growth and direction, competition, revenue growth, operating margins and profitability.

A detailed discussion of risks and uncertainties that can cause actual results and events to differ materially from such forward-looking statements is included in Pervasive's most recent filings with the Securities and Exchange Commission.

Pervasive does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this conference call. Also and as a reminder, our non-GAAP results for the quarters ending September 30, 2010 and 2009 exclude the amortization of purchased intangibles and stock-based compensation expense and present income taxes at a statutory rate of 34%.

We believe that the non-GAAP results described in today's press release and in this conference call are useful for an understanding of our ongoing operations and to assist the investor community in comparing Pervasive's non-GAAP results from period to period as well as comparing our results with those of similar companies.

We use these non-GAAP results to compare our performance to that of prior periods for analysis of trends, to evaluate the company's financial strengths, develop budgets, manage expenditures and develop a financial outlook.

Non-GAAP results are supplemental and are not intended as a substitute for GAAP results. Note that our call today is being broadcast simultaneously via the Pervasive website; welcome to those listeners.

In this call we will cover two primary agenda items. First, I will recap Pervasive's financial results for our first fiscal quarter then John will update you on our current operations.

Now for the financial results. Today we released financial results for the first quarter of our fiscal year 2011. Revenue was at the midpoint of our guidance provided on July 27th and earnings exceeded our guidance. Pervasive revenues totaled $11 million in Q1 compared to $12.2 million in Q1 of last fiscal year. A reminder, results from prior year first quarter included one relatively large transaction with a database customer representing approximately $2.4 million in revenue.

Our GAAP basis net income was approximately $500,000 in Q1 and diluted earnings per share was $0.03. Our effective tax expense rate in Q1 was 34.4%. Our non-GAAP net income in Q1 before amortization of purchased intangibles and stock-based compensation expense and tax of 34% was approximately $9.9 million, non-GAAP earnings per share was $0.05.

We ended the quarter with approximately $36 million in cash and marketable securities and had approximately $16 million shares issued outstanding. Also during the first quarter we repurchased approximately 1.2 million Pervasive shares on the open market at a total cost of approximately $6 million or approximately $4.85 per share. We generated approximately $1.5 million of positive cash flow from operations.

Our DSOs or Days Sales Outstanding were 67 days, which was an increase of five days from our prior quarter.

By geography our Q1 revenue was as follows: domestic revenue totaled approximately $7 million in Q1 or 63% of our revenue. Our international revenue principally Europe and Japan totaled $4 million or 37% of our revenue in Q1.

At a product level our database products represented approximately 59% of our business and our integration products represented approximately 37% in Q1. For our Business Xchange, DataSolutions and DataRush products accounted for the remainder.

Turning to operating expenses. Our operating costs and expenses totaled $10.2 million in Q1 including stock-based compensation expense and amortization of acquired intangibles in the approximate amount of $600,000 for a non-GAAP expenses of $9.7 million.

We had 228 employees at the end of Q1 which represents a decrease of one employee from the end of the fourth quarter and a decrease of 10 employees from Q1 of last fiscal year.

Now looking forward, we expect revenues in our second quarter of fiscal year 2011 to be in the range of $10.8 million to $11.8 million compared to $11.6 million in Q2 of fiscal year 2010.

We expect to increase sales and marketing headcount and marketing programs in advance in Q2 relative to the just completed first quarter. With that, expect GAAP basis diluted earnings of $0.00 to $0.03 per share. We anticipate that our effective tax rate for the second quarter will be approximately 34%.

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