Datawatch's CEO Discusses F3Q12 Results - Earnings Call Transcript

Datawatch Corporation (DWCH)

F3Q12 Earnings Call

July 26, 2012 4:30 pm ET

Executives

Dan Incropera – Vice President and Controller

Michael A. Morrison – President and Chief Executive Officer

Murray P. Fish – Chief Financial Officer, Vice President-Finance and Treasurer

Analysts

Noah Steinberg – G2 Investment Partners

Presentation

Operator

Greetings, and welcome to the Datawatch Corporation Third Quarter Fiscal 2012 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, Dan Incropera, Controller for Datawatch. Thank you, sir. You may now begin.

Dan Incropera

Good afternoon, everyone. Thank you for joining us today for the Datawatch Corporation third quarter fiscal year 2012 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 4:00 p.m. 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 for you this afternoon’s agenda. I will present our Safe Harbor statement, followed by Murray who will provide a summary of our third quarter fiscal year 2012 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 that 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, 2011, this quarterly reports on Form 10-Q for the quarters ended December 31, 2011, and March 31, 2012 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

Thank you, Dan. Good afternoon. For those of you who may have not seen our results released earlier today, our total revenues for the third quarter of fiscal year 2012 were $7.17 million as compared to $4.41 million for the third quarter of fiscal year 2011.

Revenue increased $2.76 million, or 62% quarter-over-quarter. For the third quarter of fiscal year 2012, revenues from licenses were $4.7 million as compared to $2.5 million for the third quarter of fiscal year 2011. For the third quarter of fiscal year 2012, revenues from maintenance were $2.11 million as compared to $1.53 million for the third quarter of fiscal year 2011.

For the third quarter of fiscal year 2012, revenues from services were 368,000 as compared to 486,000 for the third quarter of fiscal year 2011. The net income for the third quarter of fiscal year 2012 was 548,000 or $0.08 per diluted share as compared to net income of 213,000 or $0.03 per diluted share for the third quarter of fiscal year 2011.

Net income for the third quarter of fiscal year 2012 was negatively impacted by $170,000 severance expenses related to our continued re-building of the company on a worldwide basis. For the nine months, our total revenues for the nine months ended June 30, 2012, were $19.99 million as compared to $13.05 million for the nine months ended June 30, 2011. Revenue increased $6.94 million or 53% year-over-year.

For the nine months ended June 30, 2012, revenues from licenses were $13.18 million as compared to $7.06 million for the nine months ended June 30, 2011. For the nine months ended June 30, 2012, revenues from Maintenance were $5.68 million as compared to $4.57 million for the nine months ending June 30, 2011.

For the nine months ended June 30, 2012, revenues from Services were $1.13 million as compared to $1.42 million for the nine months ended June 30, 2011. The net income for the nine months ending June 30, 2012 was $1,311,000 or $0.20 per diluted share as compared to a net loss of $69,000 or negative $0.01 per diluted share for the nine months ended June 30, 2011.

Net income for the nine months ended June 30, 2012 was negatively impacted by $183,000 severance expenses. Net income for the nine months ended June 30, 2011 was negatively impacted by Q2 severance cost of $641,000 or $0.11 per diluted share related to the restructuring of sales and marketing operations.

As previously announced, Datawatch acquired the intellectual property for its flagship product Monarch from Math Strategies on March 30, 2012 for a cost of approximately $8.54 million. This amount will be amortized over five years consistent with industry’s practice. The amortization of the Monarch IP resulted in charge of approximately $431,000 in this quarter. The Monarch royalty payment for the quarter ended June 30, 2012 would have been $597,000.

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