Pervasive Software Inc. (PVSW)

F3Q12 Earnings Call

April 24, 2012 5:00 PM ET


Randy Jonkers – Chief Financial Officer

John Farr – President and Chief Executive Officer


Kevin Liu – B. Riley & Co.



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Good afternoon, my name is Steve, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Pervasive Software Fiscal Year 2012 Third 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.

I will now turn the call over to Randy Jonkers, Chief Financial Officer. Please go ahead.

Randy Jonkers

Thank you Steve. Good afternoon and thank you for joining us. I’m Randy Jonkers, Chief Financial Officer of Pervasive Software. While we wait for others to join, I’ll go over the standard disclaimer regarding remarks on this call. This conference call may contain forward-looking statements within the meaning of the Federal Securities Laws, including statements regarding the company’s or management’s intensions, hopes, beliefs, expectations and strategies for the future.

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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 could 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 reminder, our non-GAAP results for the three and nine month periods ending March 31, 2012 and 2011 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 provide some additional financial metrics from our third fiscal quarter to supplement those already provided with our press release today. Then John will update you on our current operations and plans.

Today, we released financial results for our third quarter of our fiscal year 2012. By geography, our Q3 revenue was as follows. Domestic revenue totaled approximately $8.5 million in Q3 or 66% of our revenue. Our international revenue, principally Europe and Japan, totaled $4.3 million or 34% of our revenue in Q3.

At a product level, our database products represented approximately 58% of our business and our integration products represented approximately 38% in Q3, and our Business Xchange, and Big Data products accounted for the remainder.

We had 259 employees at the end of Q3, which represents an increase of seven employees from the end of the second quarter. As expected, Q3 operating expenses were higher than Q2 and Q3 of last year. Due to a larger employee base, the effective payroll taxes and increase in commission expense, higher group medical claims, timing of marketing events and continued legal defense costs relating to our disclosed patent litigation.

Now looking forward and to supplement Q4 guidance provided in today's press release. We anticipate cash flows from operations to be between $1 million and $2 million for the fourth quarter of fiscal year 2012. We also anticipate that operating expenses will be consistent with Q3. As we expect while 70 elevated expense categories in Q3 may decrease in Q4, we also expect to add net headcount, and hold our [inaudible] in Q4.

We anticipate that our effective tax rate for our fourth fiscal quarter earnings will be approximately 19%. For EPS calculation purposes, we expect that our GAAP basis and non-GAAP fully diluted share accounts for the fourth quarter of fiscal year 2012 to be approximately 16.2 million and 16.8 million shares respectively. Note that this share count estimate excludes the impact of any future share repurchases.

Also, as in prior quarter we are not providing specific guidance beyond Q4. Now, let me turn the call over to John Farr, CEO of Pervasive Software.

John Farr

Thanks, Randy. Let me too lay some foundation once again for the benefit of our newer listeners. We believe software markets overall are going through a rapid and disruptive change. Through emergence and mainstreaming of Cloud-based infrastructure and applications is testament to the increasing demand for storability and rapid deployment provided by the SaaS delivery model.

Organizations increasingly demand software that provides ease of use, reusability, interoperability with widely adopted technologies and flexibility to be deployed on-premises or in the cloud, all in a cost effective manner. In this environment, delivering flexibility and performance with high return on investment becomes increasingly critical.

In addition, the rapid proliferation of commodity hardware along with the exploding data volumes, a.k.a, Big Data, provides opportunities for companies to leverage affordable multi-core servers and clusters of servers to extract value from large volumes of data. But only if they have software, they can effectively scale on new hardware.

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