Pervasive Software, Inc. ( PVSW)

F1Q2012 Earnings Conference Call

October 25, 2011, 17:00 p.m. ET

Executives

Randy Jonkers - CFO

John Farr - President and CEO

Analysts

Kevin Louve - B. Riley & Co.

James Gilman - Capstone Investments

Presentation

Operator

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 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. (Operator Instructions) Thank you.

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

Randy Jonkers

Thank you. 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 intension, hopes, beliefs, expectations and strategies for the future. Forward-looking statements may include without limitations 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’ 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 as a reminder our non-GAAP results for the quarter that is in September 30, 2011 and 2010 exclude the amortization of purchase intangibles and stock based compensation expense and present income taxes that are statutory rate of 34%. We believe that 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 non-GAAP results from period-to-period as well as comparing our results with those of similar companies.

We use these non-GAAP results compare our performance to that in prior periods for analysis of trends to evaluate the company’s financial strength, develop budgets, manage expenditures and develop our 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 first fiscal quarter to supplement those already provided with our press release today. And John will update you on our current operations and plans.

Today we released financial results for our first quarter of our fiscal year 2012. Results were consistent with our previously issued guidance. By geography our Q1 revenue was as follows; domestic revenue totaled approximately 6.5 million in Q1 or 56% of our revenue. Our international revenue principally Europe and Japan totaled 5.2 million or 44% of our revenue in Q1. At a product level, our database products represented approximately 60% of our business and our integration products represented approximately 35% in Q1 while our Business Xchange, DataSolutions and DataRush products accounted for the remainder.

Our G&A spend in Q1 increased approximately 500,000 over Q1 at fiscal year 2011. The increase was due to the timing of our external audit work related to our recently filed 10-K and what we believe to be a temporary increase in our patent litigation defense cost.

We had 247 employees at the end of Q1 which represents a decrease of 5 employees in the end of the fourth quarter.

Now looking forward and to supplement Q2 guidance is provided in today’s press release. We anticipate cash flows from operations to be between 1 and $2 million for the second quarter of fiscal year 2012. Our EPS calculation purposes, we expect our GAAP basis and non-GAAP fully diluted share count for the second quarter of fiscal year 2012 to be approximately 16.1 million and 16.6 million shares, respectively. Note that this share count estimate excludes the impact of any future share repurchases. Also as in prior quarters we are not providing specific guidance beyond Q2.

Now let me turn the call over to John Farr, our CEO of Pervasive.

John Farr

Thanks Randy. The Pervasive team delivered another solid quarter in September. Both our integration and our database core product teams grew revenue over the September quarter of last year representing revenue growth of 7% and contributing to our 43rd consecutive quarter of profitability. And we continue to leverage our profitability to make strategic investments for the future. Why? Because we believe the software market as a whole are going through rapid and disruptive change. The emerging a mainstreaming of cloud based infrastructure and applications it's estimate to the increasing demand for scalability 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 the 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 exploding data volumes, aka, Big Data, provides opportunities for companies to leverage affordable multi-core servers and clusters of servers to extract value from large volumes of data. Why, only if they have software that can effectively scale on new hardware. As these disruptive market trends continue, we believe infrastructure software will be a key ingredient for all businesses as they seek to integrate and streamline their backend systems and eliminate delays in the management and execution of critical business processes, and seek to gain business insight and value from their vast data assets being generated in today’s increasingly digital business world.

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