Pervasive Software Inc., (PSVW)

F4Q10 (Quarter End 6/30/2010) Earnings Call

July 27, 2010 5:00 pm ET

Executives

John Farr – President and Chief Executive Officer

Randy Jonkers – Chief Financial Officer

Analysts

Sarkis Tovetchian - B. Riley & Co.

Presentation

Operator

Compare to:
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Good afternoon, my name is Steve and I’ll be your conference operator today. At this time I would like to welcome everyone to the Pervasive Software Incorporated Fiscal Year Fourth 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. (Operator Instructions).

Thank you, Mr. Randy Jonkers, Chief Financial Officer, you may begin this conference.

Randy G. Jonkers

Thank you; good afternoon and thank you for joining us. I am Randy Jonkers, Chief Financial Officer, Pervasive Software. While we wait for others to join on I will go over the 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 Exchange Commission.

Pervasive does not undertake any obligation to update forward-looking statement 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 June 30

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, 2010 and 2009 exclude the amortization of purchase in tangibles 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 on-going operations and to assist the investor community in comparing for basis non-GAAP results from period to period as well as comparing our results with that 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 here at the Pervasive website; welcome to those listeners.

In this call we’ll cover two primary agenda items. First, I will recap the latest results for our fourth fiscal quarter then John will update you on our current operations that are planned looking forward into our next fiscal year.

Now for the financial results. Today we release the financial results for the fourth quarter of our fiscal year 2010. Revenue and earnings were at the top end of our updated guidance provided on July 6

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. Pervasive revenues totaled 11.7 million in Q4 which is an increase of approximately 600,000 as compared to Q4 of last fiscal year.

Our GAAP basis net income was approximately 800,000 in Q4 and diluted earnings per share was $0.05. Our effective tax expense rate in Q4 was 31% which is consistent with Q4 of last fiscal year.

Our non-GAAP net income in Q4 before amortization of purchase in tangibles and stock-based compensation expense and tax of 34% was 1.2 million and our non-GAAP earnings per share was $0.07.

We ended the quarter with approximately 40.4 million in cash in [markable] securities and had approximately 17.2 million shares issued in outstanding.

Also during the fourth quarter we repurchased approximately 461,000 Pervasive shares on the open market at a total cost of approximately 2.3 million or approximately $4.97 per share. We generated approximately 1.1 million and processed a positive cash flow from operations.

Our DSOs or Daily Sales Outstanding were 62 days, consistent with our prior fiscal quarter.

By geography our Q4 revenue was as follows: domestic revenue totaled approximately 8.5 million in Q4 up 14% from Q3 and up 28% from Q4 of last fiscal year. Our international revenue principally Europe and Spain totaled 3.2 million or 27% of our revenue in Q4.

At a product level our database products represented approximately 58% of our business while our integration products represented approximately 37% of our business respectively in Q4 while our Business Exchange, Data Solutions and Data Rush products accounted for the remainder.

Turning to operating expenses, our operating costs and expenses totaled 10.5 million in Q4 including stock-based compensation expense and amortization related to acquiring tangibles in the approximate amount of 600,000. For a non-GAAP expense of 9.9 million as compared to a non-GAAP expense of 9.4 million in Q4 of last fiscal year.

We had 229 employees at the end of Q4 which represents a decrease of nine employees at the end of the third quarter and an increase of 12 from Q4 of last fiscal year.

Now looking forward; we expect revenues in our fourth quarter of fiscal year 2010…in our first, excuse me, in our first quarter of fiscal year of 2011 to be in the range of 10.5 to 11.5 million compared to 12.2 million in Q1 of fiscal year 2010 which included compliance-related revenue in the amount of 2.4 million.

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