Datawatch Corp. ( DWCH)

F1Q11 (Qtr End 12/31/2010) Earnings Call

February 3, 2011 2:00 pm ET

Executives

Dan Incropera - VP and Controller

Ken Bero - President and CEO

John Kitchen - SVP and CMO

Murray Fish - VP of Finance and CFO

Analysts

Dan Zeff - Zeff Capital

Presentation

Operator

Greetings and welcome to the Datawatch first quarter 2011 conference call. (Operator Instructions)

It is now my pleasure to introduce your host, Mr. Dan Incropera, Corporate Controller of Datawatch.

Dan Incropera

Good afternoon, everyone. Thank you for joining us today for the Datawatch Corporation first quarter of fiscal year 2011 earnings conference call. I am Dan Incropera, Vice President and Controller of Datawatch. Joining me today is Ken Bero, our President and CEO; John Kitchen, Senior Vice President and Chief Marketing Officer; and Murray Fish, our Chief Financial Officer and Vice President of Finance.

You can obtain a copy of our earnings release which was distributed earlier today by e-mailing us at investor@datawatch.com. This release is also available on our website at www.datawatch.com.

Let me outline for you this afternoon's agenda. I will first review our Safe Harbor statement, followed by Ken who will provide some general comments and an update on the business. Murray will then present a summary of our first quarter of fiscal year 2011 financial results. Following our prepared remarks, we will open up the call for question-and-answer session.

The following is our Safe Harbor statement. While we do not share projections of our future performance, we do need to remind you that any statements we make that do not describe historical facts may constitute forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any such statements are based on our current expectations, but are subject to a number of risks and uncertainties that could cause actual results to differ materially from current expectations.

For more information, I refer you to the descriptions of these risk factors found in our earnings release as well as the company's Annual Report on Form 10-K for the year ended September 30, 2010, and other publicly available documents filed with the SEC. Any forward-looking statements should be considered in light of those factors.

I will now turn the call over to Ken for a discussion of business results.

Ken Bero

Thanks, Dan, and good afternoon everyone. I will share some comments about our Q1 fiscal year '11 performance. And following my remarks, Murray Fish, our CFO, will provide a more detailed information regarding our financials for the quarter. John Kitchen, our Chief Marketing Officer is in attendance for the call. Following Murray's remarks, we will open the meeting for questions.

The Q1 quarterly results were positive. As reported this morning, Datawatch was profitable for the quarter with net income being reported at $229,000. We've continued to effectively manage company expenses.

Revenues for the quarter were approximately $4.2 million, slightly below Q1 revenues of a year ago. Monarch revenues remained relatively stable in comparison to the last three quarters. We did have better than expected performance from both the European and the Australian operations.

While the enterprise revenues did not reflect it, this side of the business showed some encouraging signs. During the quarter, Datawatch began to reposition our messaging and our flagship enterprise solution, Monarch Enterprise Server, to more effectively address a core business problem. The fact that while all businesses rely heavily on reports for information and decision making, reports are difficult to use because the information they contain is static.

Users of reports face the issue of IT dependency for custom or new reports or performing manual processes to access the data they need. Datawatch uniquely resolves this problem through our ability to unlock the static report information without being dependant on IT and transform that data into formats and applications that can effectively be used for decision-making purposes. We call this process report activation. And best of all, our enterprise solution is able to utilize existing report infrastructure in reporting processes.

As part of our corporate messaging, Monarch Enterprise Server has been repositioned to provide a total end-to-end web-based report activation solution. It's able to store, index and manage the existing report information from internal and external sources that allow users independent of IT to securely extract and transform the required report information into desired formats that can used be for analytic purposes. Users can output the data into a variety of applications, including Excel, as well as visually view the information through Datawatch Dashboards.

We closed the significant Monarch Enterprise Server opportunity during the quarter in Australia. There were several components of the sale that we noted. First, the sale validated our repositioning message. In addition, the average sales price of the solution was higher than most of our enterprise product sales. And finally, the solution generated a substantial level of services and consulting work.

The customer within the retail space was encountering difficulty in getting timely information for their decision-making needs. Their former processes was taking three to as many as seven days to manually compile weekly and monthly closing reconciliations in order to have information that could be used for decision-making purposes.

To resolve their problems, the company did an exhaustive search of special vendors and solutions. Solutions involving traditional BI database solutions were too costly and burdensome from an ongoing IT infrastructure support perspective. Monarch Enterprise Server was a cost-effective solution providing them with new information in required formats and on a timely basis. And finally, the system was not going to overburden their IT processes and personnel.

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