Hummingbird Q1 2004 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Scott Penner - TD Newcrest - Analyst : Oh, thank you. Just relative to your previous guidance of $46m to $48m for this quarter, I'm just wondering, did you see pipelines get stronger during the quarter? Were closure rates better than expected?

Question: Scott Penner - TD Newcrest - Analyst : And, I assume by your comments, Fred, that the pipeline exiting the quarter is at least as strong-?

Question: Scott Penner - TD Newcrest - Analyst :

Question: Scott Penner - TD Newcrest - Analyst : OK. Just lastly, Barry, maybe on the line of business solutions, on the vertical side of things, I guess, you mentioned in the press release some strength from verticals outside of legal and government. Could you just go into the investments you're making there?

Question: Scott Penner - TD Newcrest - Analyst : OK. I'll hand it over, thank you.

Question: Steven Lee - Raymond James - Analyst : Yes, thanks. I have just a few questions. Fred, can you update us on your outlook for Connectivity this year?

Question: Steven Lee - Raymond James - Analyst : Yeah, just your outlook for this year.

Question: Steven Lee - Raymond James - Analyst : Should we expect about $17m a quarter? Or, can it go back up-?

Question: Steven Lee - Raymond James - Analyst : OK, maybe a question for Barry. Were there any [Inaudible] deals that Valid won during the quarter?

Question: Steven Lee - Raymond James - Analyst : Any comments in terms of size of--?

Question: Steven Lee - Raymond James - Analyst : OK, thanks.

Question: Paul Steep - Orion Securities - Analyst : Hi, I guess I'll throw this one to Barry, since you did the product review. Maybe just talk a little bit about whether it's build out, or intentionally an acquisition, there are two areas that jumped out at me. One would be the area of archiving and storage, and I know you do have a storage product today. And I guess, on the other half of it, on the BPM side, if that becomes part of the strategy here Fred, with improved workflow? Where the thoughts sort of are, give us a peek at what we're going to expect at Summit?

Question: Paul Steep - Orion Securities - Analyst : OK, so we shouldn't expect to see you guys out there, fishing around in that market. Is that the bottom line?

Question: Paul Steep - Orion Securities - Analyst : OK, and then, I guess, maybe on the RM side, you could talk a little bit about, it's still early days, I guess, with some of the acquisitions but how its progress is being made in terms of rationalizing the Hummingbird, the traditional Hummingbird RM?

Question: Paul Steep - Orion Securities - Analyst : Great. And the last one, I might've missed it. Were there any major, like, sort of mega-deals, million-dollar-plus deals in the quarter that would've pushed the results around?

Question: Paul Steep - Orion Securities - Analyst : Great. Thanks, guys.

Question: Blair Abernathy - Paradigm Capital - Analyst : Thank you, nice quarter, guys. Inder, I wasn't sure if you touched on this or not. But on the enterprise side, did you give a breakout of license, service and maintenance from that side of the business?

Question: Blair Abernathy - Paradigm Capital - Analyst : OK. Can you give us some sense of where the license number was, in the quarter?

Question: Blair Abernathy - Paradigm Capital - Analyst : OK. That's great, thanks. Do you have a breakdown on the enterprise side, a percentage of revenue by vertical, just to give us a flavor for how, what financial and utilities are actually producing?

Question: Blair Abernathy - Paradigm Capital - Analyst : OK, so it was legal, did you say 25% or 35%

Question: Blair Abernathy - Paradigm Capital - Analyst : 25%, OK, thank you. And, just on the Four-X impact, do you know what the Four-X impact was, year-over-year, on the revenue?

Question: Blair Abernathy - Paradigm Capital - Analyst : OK, but you don't know what the breakdown is on your revenue line?

Question: Blair Abernathy - Paradigm Capital - Analyst : OK. And, two last things. Do you have, the number of reps, or the headcount by division? And also, what's your outlook on your tax rate, going forward?

Question: Blair Abernathy - Paradigm Capital - Analyst : Great, thanks guys.

Question: David Beck - RBC Capital Markets - Analyst : Good evening gentlemen. Inder, you made a comment about the connectivity revenues coming in at $16.9m, but billings to bookings were more like $18.5m. Could you elaborate?

Question: David Beck - RBC Capital Markets - Analyst : Oh, that's what the difference is.

Question: David Beck - RBC Capital Markets - Analyst : OK, I understand. So it's just a timing element. Some quarters the billings would be less than the actual revenue recognized?

Question: David Beck - RBC Capital Markets - Analyst : OK, I understand. Any thoughts--you talked about some of your e-mail archiving capabilities. This seems to be a pretty hot area. Comments as to what Open Text is doing with Ixos [ph] and how you're kind of lining up against that? Is there any thought on that? It seems to be a name that's obviously close to a lot of Canadian investors.

Question: David Beck - RBC Capital Markets - Analyst : OK, so it's not a direct comparable. Yours is actually built in, what they're talking about, even some of the print output, they are archiving that, as opposed to just e-mail archiving. That's a little bit of a different area all together. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: David Beck - RBC Capital Markets - Analyst : Right. There have been some comments, this is maybe a little bit too high a level of a question, but I'll throw it out anyway. There's been sort of a little bit of kickback as to what Sarbanes-Oxley and some of these initiatives are really contributing toward driving fundamental business. Some companies, like Hyperion, have suggested in fact that they're really not experiencing the same kind of pull through as they may have expected, with all the hype out there. Is Sarbanes-Oxley a real business driver with a lot of your records management work right now? And is there any way of kind of assessing to what degree it is? At what point people implement, comply with Sarbanes-Oxley; does this cease to become a factor?

Question: David Beck - RBC Capital Markets - Analyst : OK, fair enough. Thanks guys.

Question: Howard Lis - GMP Securities - Analyst : Good evening gentlemen. A number of my questions have been answered, but I just want to follow up on a few things. You mentioned there were 244 reps, Inder. Do I have my numbers right? Was that 267 last quarter?

Question: Howard Lis - GMP Securities - Analyst : 257, so you trimmed the force by about 13 folks.

Question: Howard Lis - GMP Securities - Analyst : And was that in the connectivity side, or was it spread across both businesses?

Question: Howard Lis - GMP Securities - Analyst : OK. Percentage of sales coming from new customers, as opposed to existing customers, do you have an estimate for that?

Question: Howard Lis - GMP Securities - Analyst : Right. Last quarter you did actually provide guidance for the entire year. I'm just wondering if you care to comment on that? You had said 213 to 215 and $1.35 to $1.40.

Question: Howard Lis - GMP Securities - Analyst : OK, just because you shaded the guidance in Q2, obviously, by curving on the bottom line.

Question: Howard Lis - GMP Securities - Analyst : OK, and just a final question on the DSOs. Do you have an estimate for what percentage of your receivables are greater than 120 days?

Question: Howard Lis - GMP Securities - Analyst : Sure, and total headcount as well, please.

Question: Howard Lis - GMP Securities - Analyst : Thanks very much, and good quarter guys.

Question: David Wright - BMO Nesbitt Burns - Analyst : Thanks. Good evening, and good quarter. Most of my questions have been answered, so I guess I'll just ask one question. Are there further milestones, in terms of the acquisitions that you did last year that we should be looking for in the coming year?

Question: David Wright - BMO Nesbitt Burns - Analyst : OK, fair enough. The ones that you've done, do you have them all where you want them now? Is there further cost cuttings and synergies that we should look for in the model? Or, are they all pretty much integrated the way you had hoped to get them?

Question: David Wright - BMO Nesbitt Burns - Analyst : Yes, like Legal Key and Key Automation.

Question: David Wright - BMO Nesbitt Burns - Analyst : OK, thanks.

Question: Ben Yakich - Desjardins Securities - Analyst : Good evening, this is Ben Yakich [ph] for David Chart. Just a few housekeeping questions. What was the average deal size in the quarter?

Question: Ben Yakich - Desjardins Securities - Analyst : OK. Inder, just a quick question. I think you mentioned this, the breakdown between services and the product, for revenue?

Question: Ben Yakich - Desjardins Securities - Analyst : OK. Just to get back to the sales reps, is there any plan for trimming the force further in 2004? Where do you see SG&A as a percentage of revenue? Is 41% a fair number?

Question: Ben Yakich - Desjardins Securities - Analyst : SG&A as a percentage of revenue in 2004, and where do you see the sales force? Are you planning to kind of keep it here at 244?

Question: Ben Yakich - Desjardins Securities - Analyst : Just circling back on acquisitions. If you can give a little bit of color on some of the criteria that you might use, in terms of geographic region or vertical? Are you looking at entering some new vertical or solidifying legal or something, where you're already strong?

Question: Ben Yakich - Desjardins Securities - Analyst : OK, thank you.

Question: Ben Yakich - Desjardins Securities - Analyst : Yes.

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : Good evening gentlemen. Just some quick questions on the government side. Have you seen a slowdown in the Canadian government, as we go through this transition with Paul Martin and that?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : Have projects been delayed at all? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : But that should pick up in the second half of the fiscal year?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : OK, and I don't know if you can give some rough estimates, what are the splits between Canadian government, U.S, and UK? Have you guys ever looked at that?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : Yes. Is it split similar to the geographic lines, Inder?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : OK, I'll follow up later. I guess for Barry, on the sales force, have you integrated the sales force to the point that they're cross-selling now? Or are the Valid guys just selling their sort of solutions and not really pushing some of your other products?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : Was this the first full quarter of that? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : Yes.

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : No.

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : OK. Then on the DSO side, Inder, what's your target for the end of fiscal '04? Do you see that coming under 90 days, and what are you doing to get there?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : What are you doing differently this quarter to get it down to 97? Do you have specific programs where guys aren't getting paid unless they collect cash?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : OK, thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : Hi, good evening. A couple of questions, one on the sales side. I guess in the enterprise content management area it is starting to become more strategic, and budgets are starting to come together nicely, at least in terms of how it's being categorized. I'm just wondering, in terms of your dealings with customers, are you still mostly dealing with the IT side, or has it elevated beyond that to more line of business people and more executive level people?

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : Do you expect that type of thinking to start to see deal sizes increase over time?

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : OK. The second part to the question, again, is on the sales front. Can you explain again why the number of your sales reps were down sequentially? And given that, it sounds like you guys are, you know, seeing better times ahead of you. Why is there a decrease in the sales reps?

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : OK, that's fair.

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : OK, and then going forward, in terms of the sales capacity, I guess, on the quarter, are you seeing more of your sales people hitting their quotas? And, how much more do you think you can go, in terms of sales capacity, before you have to add?

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : Yeah, what portion of your sales people--?

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : How many, like, what's the change, in terms of the proportion of sales people that have been hitting their quotas? And then, how much more do you think the organization can go, before you have to add sales people again?

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : Well I guess the bottom line is, the trend is positive.

Question: Jeffrey Fan - UBS Bunting Warburg - Analyst : OK, thank you.

Question: Steve Bothier - RBC Dominion Securities - Analyst : Could you just restate your guidance for the next quarter? I just missed it.

Question: Steve Bothier - RBC Dominion Securities - Analyst : 32 to 34?

Question: Steve Bothier - RBC Dominion Securities - Analyst : OK, thank you very much.