Hummingbird Q1 2005 Earnings Conference Call Transcript

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

Question: Paul Steep - Scotia Capital - Analyst : Great. Barry, maybe you could talk a little bit about what the driver was this quarter in terms of the enterprise 2004 rollout strength and maybe how far you are in the install base, in terms of having the upgrades sort of take hold?

Question: Paul Steep - Scotia Capital - Analyst : And then a couple of financial questions. 1, just any plans for the cash? I didn't hear you mention in Inder's prepared remarks anything about a buyback in the quarter. I know you've been active. Did anything happen there? Any thoughts around a dividend?

Question: Paul Steep - Scotia Capital - Analyst : Okay. And then finally, I will make it short so you don't have to talk too much, on the restructuring front, if you could just let us know if that was all paid out primarily all in cash or if it has just been accrued for next quarter, and what the expected savings would be?

Question: Paul Steep - Scotia Capital - Analyst : So basically net neutral. No real gain?

Question: Paul Steep - Scotia Capital - Analyst : Okay. Thanks, guys.

Question: Scott Penner - TD Newcrest - Analyst : Thanks. Maybe just to tag on to Paul there, Inder, can I assume from what you just said that consistent with last quarter, your guidance would be, you know, for the year, 2.35 to 2.37 and EPS of 1.58 to 1.61?

Question: Scott Penner - TD Newcrest - Analyst : Okay. And any comments, Barry, or Inder, on the second quarter in particular? 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: Scott Penner - TD Newcrest - Analyst : Okay. Great. And then Barry, can you just give a little bit more of the components of the special charge, specifically the retirement and other payments?

Question: Scott Penner - TD Newcrest - Analyst : Okay. And the -- the other thing I wanted to ask is just on the vertical exposures, if you could kind of update, you're seeing some traction on the financial and manufacturing side, if you could update the exposures to the legal and the government market.

Question: Scott Penner - TD Newcrest - Analyst : Percentage of revenue.

Question: Scott Penner - TD Newcrest - Analyst : Okay. Great. And then just one other quick one for you, Inder, you sound like you're deteriorating on me, so --

Question: Scott Penner - TD Newcrest - Analyst : On the tax rate for the quarter, being 35 percent, you had kind of said it would be between 35 to 38 for the year. Is that comment still about -- could it still range from 35 to 38?

Question: Scott Penner - TD Newcrest - Analyst : Great. Thanks.

Question: Scott Penner - TD Newcrest - Analyst : Thank you.

Question: Howard Lis - GMB Securities - Analyst : Good afternoon. Not to belabor the point on the restructuring but if we could go through a little more detail. How hasn't employees were actually let go? I see the net reduction was 16 but how many were related to the reduction plan?

Question: Howard Lis - GMB Securities - Analyst : Okay. And was the full restructuring related to -- the 2.1 related to severance to those people?

Question: Howard Lis - GMB Securities - Analyst : And how much of the full 7.4 was paid in the quarter and how much has been accrued in terms of cash.

Question: Howard Lis - GMB Securities - Analyst : Okay. The rest is due in the next quarter or is it spread out over a further period?

Question: Howard Lis - GMB Securities - Analyst : Okay. Great. And then last quarter, actually for the last couple of quarters, you guys have commented on how competitive things are out there and that you're seeing pricing pressure in the enterprise market, and sort of competition on every deal. Can you provide some color on the environment right now? Thanks.

Question: Howard Lis - GMB Securities - Analyst : Okay. And just one final topic. Back the last few quarters when Fred was at the helm, he talked pretty openly about a desire to do a large acquisition. And I know you guys sort of said you have been looking quite aggressively. What is the thinking behind growing through acquisition, and what activities are you involved in? Thanks.

Question: Howard Lis - GMB Securities - Analyst : Would it be for product extension or for channel extension, market reach? 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: Howard Lis - GMB Securities - Analyst : Great. Thank you very much.

Question: David Shore - Desjardins Securities - Analyst : Yes, thanks. On the alert deals in the quarter, were there any $1 million or greater deals?

Question: David Shore - Desjardins Securities - Analyst : Sure.

Question: David Shore - Desjardins Securities - Analyst : There was one? Okay. Looks like you had a pretty good quarter in Europe. Can you comment, Barry, there about anything specifically going on? Or is it just increased penetration?

Question: David Shore - Desjardins Securities - Analyst : Okay. On the competitive front, Oracle putting out their new version the collaboration suite looks like it is going to be very aggressively priced and probably targeting to the lower end of the market. Have you seen them making any noise -- I know it's probably early, but have you seen anything in that regard?

Question: David Shore - Desjardins Securities - Analyst : Okay. Last question, can you tell us about the revenues on a new versus existing customer basis? You said that a lot of it is the upsell to customers.

Question: David Shore - Desjardins Securities - Analyst : Okay. Thanks a lot.

Question: Bob Ricci - Columbus Capital Management - Analyst : Good afternoon. Just a point of clarification. Did you say 25 to 30 percent of your revenue came from new customers for the quarter -- during the quarter?

Question: Bob Ricci - Columbus Capital Management - Analyst : Very good. And then what percentage of your revenue was from Europe, please? 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: Bob Ricci - Columbus Capital Management - Analyst : 43 percent from Europe. And what benefit, if any, was realized due to currency exchange?

Question: Bob Ricci - Columbus Capital Management - Analyst : I see. And just not to belabor this topic, I know in the past you've alluded to looking for ways of growing your business. Looking at large acquisition. I wonder if you can tell me if you're looking at brand new markets, or is it more of what you've done in past where for example you end up dominating the legal vertical and you contemplate maybe possibly extending your footprint to new verticals. I mean is that what you mean when you say we're not necessarily looking for technology, but more, you know, markets and customers?

Question: Bob Ricci - Columbus Capital Management - Analyst : I see. And do you feel just on a comment about continued pricing pressure, in the enterprise deals, do you feel that eventuality of what we have in front of us is further consolidation in the industry to sort of moderate some of these pricing pressures, where market is somewhat fragmented and maybe fewer players are going to be more rational with pricing?

Question: Bob Ricci - Columbus Capital Management - Analyst : I see. I see. So in some sense, maybe within each vertical, for example in legal, you may be a dominant player, and others may be in other verticals, I don't know, say for the sake of this conversation pharmaceutical, and in each case, it's more driven by ROI, than pricing pressure, and less about somehow the -- you know, each vertical being fragmented which in actuality it is not if you go down through each verticals.

Question: Bob Ricci - Columbus Capital Management - Analyst : I see. So domain expertise is pretty critical in order to convey your values to the customer.

Question: Bob Ricci - Columbus Capital Management - Analyst : I see. And with respect to, you know, you've talked about this acquisition for a couple of quarters and it would definitely redefine the business and take it to another level; is that something that you contemplate, you know, happening in sometime in the '05 time frame or are we talking about multi-year sort of -- since you floated the (AUDIO DIFFICULTIES)--

Question: Bob Ricci - Columbus Capital Management - Analyst : I see. So you're actively looking until you find the right combination.

Question: Bob Ricci - Columbus Capital Management - Analyst : I see. Thank you very much for the clarifications.

Question: David Wright - BMO Nesbitt Burns - Analyst : Thanks. Good evening.

Question: David Wright - BMO Nesbitt Burns - Analyst : Hi. Could you qualify further the success that you're having in the financial services area? Are there names or anything else you can kind of point to?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. Are they more North American, more European, spread out?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay, and could you quantify the number of, kind of, pilot projects you have going, is it 10, 20, 30? Is there a way to quantify? 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 Wright - BMO Nesbitt Burns - Analyst : Oh, I see.

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. And similar questions about the contract management field, you said that you're gaining traction, but how could we quantify our qualify that?

Question: David Wright - BMO Nesbitt Burns - Analyst : And your larger sized deals, are they showing up as either financial services or contract management or are they just larger sized deals in, you know, your core areas of legal and government?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. Government. And you're showing a nice trend on large size deals up to 83 for over 100,000. That is largely the enterprise business that's growing there or -- 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 Wright - BMO Nesbitt Burns - Analyst : Right. And the connectivity business is just kind of holding its own as well?

Question: David Wright - BMO Nesbitt Burns - Analyst : We're seeing some employment growth in the U.S., but I guess globally, employment growth is not driving the business?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. A couple of income statement or balance sheet questions. The clarification, Inder, I think you said, did currency have a negative revenue impact?

Question: David Wright - BMO Nesbitt Burns - Analyst : I see. Okay: So do you have a constant currency dollar revenue growth number for us, by chance?

Question: David Wright - BMO Nesbitt Burns - Analyst : Constant currency, how much did your revenues grow? 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 Wright - BMO Nesbitt Burns - Analyst : Okay. And then accounts receivable grew quarter to quarter. And so I was just wondering what was driving that. Usually I would have expected it to come down into Q1. So is that a currencies issue or is that because you had larger deals close late in the quarter?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. And lastly, just on the restructuring, and it seems like you've added some people as well as restructuring, is it safe to assume that the number of -- most of the people restructured were over in Europe where you had done your acquisition in the U.K. and are you adding people in North America or --?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. And generally, where are you adding people, Barry?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. Thank you very much.

Question: David Wright - BMO Nesbitt Burns - Analyst : Right. Okay. Thank you very much.

Question: David Wright - BMO Nesbitt Burns - Analyst : Get better.

Question: Blair Abernethy - Paradigm Capital - Analyst : Hi, guys. Nice quarter.

Question: Blair Abernethy - Paradigm Capital - Analyst : Just I wanted to drill into the connectivity side a bit more, following Dave's question. Just can you give us some sense right now with the product lines Exceed, the Host Explorer, Maestro, where are you generating, what is the leading product out of that, what are you generating the bulk of your new license sales?

Question: Blair Abernethy - Paradigm Capital - Analyst : Okay. 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: Blair Abernethy - Paradigm Capital - Analyst : Okay. And are you finding on that side of the business, is Linux providing a boost or a refresh at all to the business?

Question: Blair Abernethy - Paradigm Capital - Analyst : Okay. And just turning to the ECM side, can you -- Barry, can you talk a little bit about the e-mail management opportunity, where you guys are seeing your traction there, and who you are going up against, if you're going up against anybody?

Question: Blair Abernethy - Paradigm Capital - Analyst : And what -- just in terms of where you -- where you've sold into, is it just in your traditional, you know, government and legal for the most part, or are you seeing other opportunities, other verticals?

Question: Blair Abernethy - Paradigm Capital - Analyst : Okay. Great. Thanks. 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: Richard Tse - National Bank Financial - Analyst : Yeah, I just wanted to clarify, a quick question on the impetus for the restructuring charge. Can you clarify again, because to me, is it something to do with an operational issue here, because it seems like it's sort of coincident with what seems to be some trending lower margins.

Question: Richard Tse - National Bank Financial - Analyst : Yes. Yes. I know that part of it had to do with some of Fred's severance here. But the timing of this, you know, why now on that 2.1 versus in a prior quarter.

Question: Richard Tse - National Bank Financial - Analyst : Yes. But now I'm referring to like the 26 people that you let go.

Question: Richard Tse - National Bank Financial - Analyst : Right. So it has nothing to do with the fact that the margins have been kind of trending down. It's something operationally outside of --?

Question: Richard Tse - National Bank Financial - Analyst : Yes. This quarter it looked like it was down a little bit, but okay.

Question: Richard Tse - National Bank Financial - Analyst : Okay.

Question: Richard Tse - National Bank Financial - Analyst : All right. Okay. Thank you.

Question: Richard Tse - National Bank Financial - Analyst : Okay.

Question: Steven Li - Raymond James - Analyst : Inder, was there a small acquisition in Q1?

Question: Steven Li - Raymond James - Analyst : I'm just referring to the $1 million item on your statement of free cash flow for acquisitions.

Question: Steven Li - Raymond James - Analyst : Oh. Okay. Thank you.

Question: Martin Stitetto - UBS - Analyst : Good evening. Thank you. Just on demands and competitive trends in '05. On the demand side Sarbanes-Oxley, do you think that will be a better driver of demand for software companies like yourself in '05 than it was in '04?

Question: Martin Stitetto - UBS - Analyst : Sure.

Question: Martin Stitetto - UBS - Analyst : Okay. And just on the demand side then, you're talking a lot about the integration of Office. Where do you see Microsoft right now as a competitor and how do you see that changing in '05?

Question: Martin Stitetto - UBS - Analyst : Do you think that might change with Uconn, particularly on the repository side? Do you think they'll get a little bit more aggressive in content management?

Question: Martin Stitetto - UBS - Analyst : Okay. Thanks, Barry. Inder, I hope you get well soon.

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : Maybe I missed this, but did you provide guidance?

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : And do you have anything yet for fiscal '05?

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : Great. In terms of the e-mail archiving can you give us a little more color on where you are in that in terms of customer penetration? Are you winning deals against some of the guys that go open text? Just where are you guys in that market?

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : Okay. Did you mention how many sales reps you have currently?

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : 207. And on the DSO, I think I come up with 99 days.

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : 96?

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : Okay. And are we going to see that number start dropping down at some point?

Question: Damian Wojcichowsky - Credit Suisse First Boston - Analyst : Okay. Thank you gentlemen.

Question: Scott Penner - TD Newcrest - Analyst : Thanks. Inder, just one quick one, the product -- product revenue in particular has there been a change in the splits, product versus service in either of the -- particularly the content management business or can I use that, kind of, 3 percent growth year-over-year as a good proxy for that side?

Question: Scott Penner - TD Newcrest - Analyst : Okay. So versus, specifically versus Q1 last year there hasn't been much of a change?

Question: Scott Penner - TD Newcrest - Analyst : Okay. Great. Thank you.