Datawatch's Management Discusses F4Q11 And Year End 2011 - Earnings Call Transcript

Datawatch Corporation ( DWCH)

F4Q11 & Year End 2011 Earnings Call

November 15, 2011 4:30 pm ET

Executives

Daniel F. Incropera, CPA – Vice President & Corporate Controller

Michael A. Morrison – President, Chief Executive Officer & Director

Murray P. Fish, CPA – Chief Financial Officer, Vice President Finance, Treasurer & Secretary

Analysts

James Franda – Sidoti & Company

Presentation

Operator

Welcome to the Datawatch Corp., fourth quarter and fiscal year 2011 conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Dan Incropera, Vice President and Corporate Controller for Datawatch.

Daniel F. Incropera, CPA

Thank you for joining us today for the Datawatch Corporation four quarter and fiscal year 2011 earnings conference call. I am Dan Incropera, Vice President and Controller at Datawatch. Joining me today is Michael Morrison, our President and CEO and Murray Fish, our Chief Financial Officer and Vice President of Finance.

You can obtain a copy of our earnings release which was distributed at four o’clock pm Eastern Time today by emailing us at Investor@Datawatch.com. This release is also available on our website at www.Datawatch.com. Let me first outline to you this afternoon’s agenda. I will present our Safe Harbor statement followed by Murray who will provide a summary of our fourth quarter and fiscal year 2011 financial results. Michael will then provide an update on our business initiatives and operating results. Following our prepared remarks we will open up the call for a question and answer session.

Before we begin I’d like to review our Safe Harbor statement with you. 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 and are subject to a number of risks and uncertainties that could cause actual results to differ materially from current expectations.


For more information, I’d refer you to a description of these risks factors found in our earnings release as well as the company’s annual report on Form 10K for the year ended September 30, 2010, its quarterly report on Form 10Q for the quarters ended December 31, 2010, March 31, 2011, and June 30, 2011 and other publically 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 Murray for a discussion of our financial results.

Murray P. Fish, CPA

For those of you who may not have seen our results we released earlier today, our total revenues for the fourth quarter fiscal year 2011 were $4.84 million as compared to $4.28 million for the fourth quarter fiscal year 2010. Revenue increased $563,000 or 13% quarter-over-quarter. For the fourth quarter of fiscal year 2011 revenues from licenses were $2.8 million as compared to $2.34 million for the fourth quarter of fiscal year 2010. As a percentage of revenue, software license revenue accounted for 58% of revenue for the fourth quarter of 2011 as compared to 55% for the fourth quarter of fiscal year 2010.

For the fourth quarter of fiscal year 2011, revenues from maintenance were $1.65 million as compared to $1.55 million for the fourth quarter fiscal year 2010. As a percentage of revenue, maintenance accounted for 34% of revenues for the fourth quarter of 2011 as compared to 36% of revenues for the fourth quarter of fiscal year 2010. For the fourth quarter fiscal year 2011, revenues from services were $.39 million as compared to $.38 million for the fourth quarter of fiscal year 2010. As a percentage of revenue, services accounted for 8% of revenues for the fourth quarter of fiscal year 2011 as compared to 9% of revenues for the fourth quarter of fiscal year 2010.

Gross margins for software licenses was 79% for the fourth quarter of fiscal year 2011 as compared to 76% for the fourth quarter fiscal year 2010. Gross margins for maintenance and services was 71% for the fourth quarter fiscal year 2011 and 66% for the fourth quarter of fiscal year 2010. Overall, total gross margins were 76% for the fourth quarter of fiscal year 2011 as compared to 72% for the fourth quarter of fiscal year 2010.

Sales and marketing expenses increased by $767,000 or 60% in the fourth quarter of fiscal year 2011 as compared to the fourth quarter of fiscal year 2010. Sales and marketing expenses as a percentage of revenues were 42% for the fourth quarter of fiscal year 2011 as compared to 30% for the fourth quarter fiscal year 2010. This increase is primarily attributable to higher headcount and related costs such as commissions, benefits, and travel and increases in marketing programs, lead generation, and consulting costs.

Engineering and product development expenses increased by $6,000 or 1% in the fourth quarter of fiscal year 2011 as compared to fourth quarter of fiscal year 2010. Engineering and product development expenses as a percentage of revenues were 13% for the fourth quarter of fiscal year 2011 as compared to 14% for the fourth quarter fiscal year 2010. General and administrative expenses increased by $61,000 or 8% in the fourth quarter of fiscal year 2011 over the fourth quarter of fiscal year 2010.

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