Hummingbird Q3 2005 Earnings Conference Call Transcript

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

Question: Scott Penner - TD Newcrest - Analyst : Inder, could you just-- or Barry. Could you just give us when the RedDot acquisition closed?

Question: Scott Penner - TD Newcrest - Analyst : Okay, so it had a negligible, if any, impact on the income statement?

Question: Scott Penner - TD Newcrest - Analyst : And I notice on the cash flow statement, Inder, the amount for cash spent for acquisitions was up around 57 million. You mentioned the 47.9 million payment for RedDot. Can you just fill in the blanks there?

Question: Scott Penner - TD Newcrest - Analyst : Are those extra costs per se related to RedDot?

Question: Scott Penner - TD Newcrest - Analyst : Okay, and in the same section what is the other payable that's listed there?

Question: Scott Penner - TD Newcrest - Analyst : Okay, when does that flow out of the cash?

Question: Scott Penner - TD Newcrest - Analyst : Okay, great and, Barry, just looking at the large deal count in particular it looks like certainly the average-- if you will, the average dollar amount per large deal has certainly and has been trending up. Can you speak to that at all as far as were there any million dollar deals in the quarter and then is there anything to read into that as far as any traction regarding either the contract management or deal management where the deal sizes may be larger?

Question: Paul Steep - Scotia Capital - Analyst : Barry, just on the large enterprise deals obviously Asia Pacific was up fairly significantly. I'm assuming one of those large deals was the Queensland deal that you alluded to. Maybe you could just discuss how similar that is to RDIMs in Canada, i.e. are you getting a large up front license payment to develop sort of a template system and then do we get follow-on licenses as it rolls out into new departments over the years?

Question: Paul Steep - Scotia Capital - Analyst : No I didn't assume it was one time. I thought there might have been a one-time as well in this quarter too.

Question: Paul Steep - Scotia Capital - Analyst : Great and what was I guess, the deciding factor beyond I guess the large historic docs installed base in Australia? What else helped sort of push you guys over the win line because it looks like it was a 12-month cycle at least?

Question: Paul Steep - Scotia Capital - Analyst : And then I guess on the Connectivity side post Q2 there was some slippage there. How much of Connectivity pick up this quarter was sort of related to that, the slight slippage in some large deals that we talked about last quarter? 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: Paul Steep - Scotia Capital - Analyst : And you sort of see it now stabilized back to a much as normal as--?

Question: Paul Steep - Scotia Capital - Analyst : And then the last one for me would just be to either of you I guess. It looks like we've had about $7 million in severance restructuring costs year-to-date. Are you near the end of the process? Obviously there's some potential with RedDot but in terms of reviewing what you've got are we closer to the end than the beginning or where are we in that process?

Question: Paul Steep - Scotia Capital - Analyst : And most of it's been staffing so far, right? Is there-- what's the opportunity on the real estate side, Inder?

Question: David Wright - BMO Nesbitt Burns - Analyst : Congratulations on numbers. The timing of Enterprise 2005, is that-- that's due fairly soon is it?

Question: David Wright - BMO Nesbitt Burns - Analyst : So are those beta customers? Is that how you view them or what?

Question: David Wright - BMO Nesbitt Burns - Analyst : And some of the features that you were expecting to have-- or at least one of the features was where you were leveraging your Connectivity side of the business and access to linked spreadsheets that would allow them to open much quicker. Are you still expecting that feature to be--?

Question: David Wright - BMO Nesbitt Burns - Analyst : Yes.

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay, so you're expecting it to be there and the people are going to love what they see there? 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 : Good. Okay, Inder, on the 4 ex [ph] loss that you talked about a $3.6 million, I think you said-- is that mostly in the sales and marketing expense?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay and is that a one-time thing or is that-- you're just saying that that's the ongoing if you were to look at constant currencies, that would be the number that you'd pull out?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay, my question would be if you had the same number of revenues next quarter, does the sales and marketing number go down by $3.6 million?

Question: David Wright - BMO Nesbitt Burns - Analyst : Yes.

Question: David Wright - BMO Nesbitt Burns - Analyst : So more or less a one-time item here? Okay, very good and what-- do you have assessment of the contribution to revenues from currency fluctuations? 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 : Yes, I was just trying to calculate a constant currency revenue growth number.

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay, thank you and Barry, I think in your comments you mentioned that there was a significant deal where RedDot was the incumbent WCM provider. Could you mention who that is if possible?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay and it looks like a lot of what you've said about RedDot is you expect to make sales of RedDot into your customer base. Wouldn't most of your customers already have some kind of Web content management solution and--?

Question: David Wright - BMO Nesbitt Burns - Analyst : Yes.

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay, thanks and the employee count, I think, Inder, you said it was 1,525. Is that right? 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 : So you've got the severance. Are you replacing people or unless I have the employee count from last quarter, I don't see the number going down?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay, so you're adding people in other areas?

Question: David Wright - BMO Nesbitt Burns - Analyst : And how many people were in RedDot?

Question: David Wright - BMO Nesbitt Burns - Analyst : And last question, could you provide guidance? You usually do that. Are you going to?

Question: David Wright - BMO Nesbitt Burns - Analyst : Thank you, very much for your answers.

Question: Paul Lechem - CIBC World Markets - Analyst : Just wanted to actually follow up on a couple of the questions that have been asked. Inder, did you say there'd be bottom line impact from foreign exchange is immaterial or the revenue impact from foreign exchange is immaterial.

Question: Paul Lechem - CIBC World Markets - Analyst : Okay, so if you had a $3.6 million impact on your expenses, you had a similar impact on your revenues?

Question: Paul Lechem - CIBC World Markets - Analyst : Oh, I see.

Question: Paul Lechem - CIBC World Markets - Analyst : Okay, I've got you.

Question: Paul Lechem - CIBC World Markets - Analyst : With the new version of Connectivity 2006 shifting, would we expect to see a jump in that line of business in Q4 or would it be-- in this quarter it

Question: Paul Lechem - CIBC World Markets - Analyst : In the last Q4 there was a bit of tick up. Is that typical seasonality patterns or is it just happened to be in your fiscal Q4 or should we expect to see more up tick at the end of the year here?

Question: Paul Lechem - CIBC World Markets - Analyst : Yes.

Question: Paul Lechem - CIBC World Markets - Analyst : Okay. Last question-- the-- on the last conference call you seemed to be-- obviously, after you had a bit of a short fall but you are issuing a much more cautious tone for this quarter, for Q3, and things came out well ahead of expectations. Has anything changed versus your view of the end of the last quarter and on the conference calls in the market dynamics, have they picked up? Are you seeing anything different out there?

Question: Paul Lechem - CIBC World Markets - Analyst : So your view, your outlook at the end of last quarter was really just a more cautious tone you were taking given the circumstances around that quarter? 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: Paul Lechem - CIBC World Markets - Analyst : Okay, all right. Great, thank you very much.

Question: Blair Abernethy - Clarus Securities - Analyst : Just a couple of things. Barry, I wonder if you can give us a little more detail on where you're at with VERITAS in terms of-- just, I guess, in terms of timing? Are you out there in pilot stage yet with customers and are we going to start to see deals closing this year or next year?

Question: Blair Abernethy - Clarus Securities - Analyst : Okay, so they're-- have they paid? Like, are these deals closed at this point or is that what we're going to see, those first 10?

Question: Blair Abernethy - Clarus Securities - Analyst : Okay, great and just in terms of your solutions, can you just sort of highlight I guess the top-- in your mind sitting here today sort of what the top two opportunities or the top two areas on the solutions side that you really think have the most potential for you?

Question: Blair Abernethy - Clarus Securities - Analyst : Okay and just, Inder, with the acquisition in the quarter for part of the quarter, just wondering if you have a view on what your amortization number is going to be going forward? 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 - Clarus Securities - Analyst : Okay. Great, thanks guys.

Question: Ralph Garcea - CSFB - Analyst : Just a quick question on the Queensland deal, was there an IT partner or IT services partner there?

Question: Ralph Garcea - CSFB - Analyst : Logica?

Question: Ralph Garcea - CSFB - Analyst : And then on the RDIMs, can you give sort of a percentage on how much you've rolled out through the Canadian government side and what's sort of left to do on that?

Question: Ralph Garcea - CSFB - Analyst : On the Connectivity side, I guess for Barry, have you seen a change in the competitive environment with Attach Made and WRQ merging? Has that delayed deals at all or I mean or they attacking the market differently now that they've merged?

Question: Ralph Garcea - CSFB - Analyst : And then lastly, I guess for Inder or Barry, I mean you used to run the model sort of at a 17% to 18% EBITDA margin. We're down to sort of the 13% range now. As you integrate Red Dot, do you see yourself getting back into the mid to high teens by the end of the next fiscal year?

Question: Ralph Garcea - CSFB - Analyst : Okay.

Question: Ralph Garcea - CSFB - Analyst : Okay, thank you.

Question: Scott Penner - TD Newcrest - Analyst : Barry on your competitive slide in the presentation, the mid-market competitors, just wondering how you would within that taxonomy how would you characterize Microsoft or Oracle?

Question: Scott Penner - TD Newcrest - Analyst : And, Inder, do you have the vertical breakdown for the quarter?

Question: Scott Penner - TD Newcrest - Analyst : Okay, good and just one last thing, Barry or Inder, on the guidance for Q4 RedDot is now closed. They were doing about 15/16 million in trailing euro million. Should we assume that there's a prorata amount of that within the guidance?

Question: Scott Penner - TD Newcrest - Analyst : And that 20% is off a base of what? Is that the base of 15 million?

Question: Richard Tse - National Bank Financial - Analyst : Just a quick question on one of your slides here, the deals over 100K. It looks like it's sort of been trending down or a loss three quarters. Is this sort of a reflection on the market meaning that you're going to see bigger deals, but fewer of them, or is this--?

Question: Richard Tse - National Bank Financial - Analyst : Right, so it's not a trend or anything?

Question: Richard Tse - National Bank Financial - Analyst : Okay, fair enough and with respect to your vertical strategy here I know you gave the numbers but can you give us some color on the progress you're making sort of beyond getting-- I guess, getting beyond the government, the legal and financial market? I think at one point last year at your user conference or analyst day you mentioned that you're going to tackle sort of the manufacturing market and some of the other markets, but what's the progress like on that side?

Question: Robert Moses - RGM Capital - Analyst : Just a few quick questions-- Inder, just to follow up on the question of foreign exchange, the impact on revenue is not significant because a lot of your revenue is booked in U.S. dollars?

Question: Robert Moses - RGM Capital - Analyst : And the impact on the costs relate to the fact that you're perhaps paying those folks in euros as opposed to Canadian or U.S. dollars?

Question: Robert Moses - RGM Capital - Analyst : And so the overall impact is, if I just tax affected about $0.13 you're calling out for the most recent quarter? Does that sound about right? 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: Robert Moses - RGM Capital - Analyst : Yes, I'm just trying to tax affect that and take that into 17.5 million shares. I just wondered if that was the right way to look at it?

Question: Robert Moses - RGM Capital - Analyst : But that shows up largely in the sales and marketing line?

Question: Robert Moses - RGM Capital - Analyst : Okay. Just a bigger picture question, sales and marking even excluding the foreign exchange has ramped up pretty significantly, I think in recent conference calls, Barry, you may have mentioned that we'd be willing to pull that number back if we really thought the business was going to slow, not that one growth means you need to do that but are you feeling more confident with the levels of spending giving a bit of a bit of a snap back in revenue?

Question: Robert Moses - RGM Capital - Analyst : Understood and you'd mentioned, Inder, I think in response to another question, comments about margins going out to the next fiscal year just roughly. Were you speaking of EBITDA margins kind of moving back to more historical levels when you made that comment?

Question: Robert Moses - RGM Capital - Analyst : Thank you and just lastly, I think I saw in your cash flow statement some repurchase after a couple quarters of not buying stock. First, did I read that correctly and secondly, is that something of interest given valuation levels of today over the last few weeks?

Question: Robert Moses - RGM Capital - Analyst : In the most recent quarter?

Question: Robert Moses - RGM Capital - Analyst : Thank you very much.