Hummingbird Q4 2005 Earnings Conference Call Transcript

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

Question: Scott Penner - TD Newcrest - Analyst : Barry, just for you, to begin, the vertical solutions, namely the deal management, for instance, are those -- I would imagine those deals are higher-value deals. I would like you just to comment on that -- and, if you could, just to whether it's because your customers are paying more per seat or whether there's a larger number of seats involved?

Question: Scott Penner - TD Newcrest - Analyst : Right. And are you saying these solutions are driving Hummingbird Enterprise, or is it Hummingbird Enterprise customers that are coming to you for these solutions?

Question: Scott Penner - TD Newcrest - Analyst : And I also wanted to ask you -- on the Content Drive, can you point to any specific deals or prospects in the pipeline where the Content Drive is really driving things?

Question: Scott Penner - TD Newcrest - Analyst : And Inder, I also wanted to ask you about the DSO. It seems to be a naggingly high number again this quarter. Is there anything specific to the quarter, perhaps the acquisition, that has caused it to move up?

Question: Scott Penner - TD Newcrest - Analyst : And can you, Inder, provide us as much detail as you're comfortable with on the RedDot contribution to revenue in the quarter, specifically on the product revenue?

Question: Paul Steep - Scotia Capital - Analyst : Maybe you could talk a little bit about the restructuring -- with that having taken place, I guess, over the past few quarters, what your future expectations are for EBITDA margins heading out into the next year here?

Question: Paul Steep - Scotia Capital - Analyst : So don't expect in the near-term to sort of pop back up to historical averages, is how I would read that (multiple speakers) --?

Question: Paul Steep - Scotia Capital - Analyst : And then just secondly, maybe, Barry, you can comment a little bit on the stability of Connectivity. Obviously, it has popped down a little bit as we'd have talked about before. Has anything really changed there, or is it just the standard sort of puts and takes?

Question: Paul Steep - Scotia Capital - Analyst : And then just the last quick clarification. I didn't hear you give the ASP's or number of $1 million deals. I might have just missed it.

Question: Paul Steep - Scotia Capital - Analyst : Yes.

Question: Paul Steep - Scotia Capital - Analyst : Sorry; deals over 100K.

Question: David Shore - Desjardins Securities - Analyst : Barry, the deals, the significant deals that you mentioned, would you term those as more than $1 million deals, or just significant for who they were?

Question: David Shore - Desjardins Securities - Analyst : No, no; the three significant deals that you highlighted.

Question: David Shore - Desjardins Securities - Analyst : Okay. What are you seeing as far as -- as you move into some of these larger deals, as far as the sales cycle on some of those deals? Is it significantly longer?

Question: David Shore - Desjardins Securities - Analyst : As far as the solutions business -- like contract management and things like that, should we be expecting to see new solutions coming out at the user conference in February?

Question: David Shore - Desjardins Securities - Analyst : Where does the sales headcount stand at?

Question: David Shore - Desjardins Securities - Analyst : No, sorry, Inder; the salespeople.

Question: David Shore - Desjardins Securities - Analyst : And the quota-carrying reps?

Question: David Shore - Desjardins Securities - Analyst : 444?

Question: David Shore - Desjardins Securities - Analyst : And 207 reps.

Question: David Wright - BMO Nesbitt Burns - Analyst : First of all, congrats on the numbers. And secondly, congrats on actually breaking out all these details that you're giving to us; it's very helpful. A follow-up on the quota reps. Could you split that Connectivity versus Enterprise? 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 looking at the solutions people, how would you say -- as far as productivity goes, what percentage would be full-steam productivity hoping to hit their quotas, and what percent would be still ramping and learning the solutions and recent hires or whatever?

Question: David Wright - BMO Nesbitt Burns - Analyst : So an adjunct to that is when you look at your growth, is it mainly an external issue that will drive your growth? Or is there still an internal issue of just -- you still need to add and train your sales reps and build them from there? Are you feeling that generally, the reps are well-trained?

Question: David Wright - BMO Nesbitt Burns - Analyst : Is the Content Drive feature for clients on maintenance? Is that an automatic upgrade, or is that something that they will have to pay for? 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; it's not an add-in feature. It is part of the product. Inder, questions for you -- what tax rate would you recommend us look at for the coming year?

Question: David Wright - BMO Nesbitt Burns - Analyst : High 30s?

Question: David Wright - BMO Nesbitt Burns - Analyst : And what would be the option count? So I realize that when you have a loss that -- from a fully diluted number, it's equal to your basic outstanding. But if you were in a profit position, what sort of additional shares should we be looking at?

Question: David Wright - BMO Nesbitt Burns - Analyst : And no major change with the recent acquisitions and that?

Question: David Wright - BMO Nesbitt Burns - Analyst : And realizing that restructuring is probably an ongoing thing, where you are always looking at that -- but would you feel that, essentially, you have done the restructuring that you wanted to do for now? 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 : And the magnitude? Is this sort of in the 1 million to $2 million range a quarter?

Question: David Wright - BMO Nesbitt Burns - Analyst : And what is driving this? Is that facilities, or reorganization of divisions, or --?

Question: David Wright - BMO Nesbitt Burns - Analyst : Okay. And a last question -- can you hold this expense level on R&D going forward, or should we expect further ramp-up?

Question: Richard Tse - National Bank Financial - Analyst : I'm not sure if you got this -- I sort of joined the call a little bit late. But did you guys provide any indication on guidance here going forward?

Question: Richard Tse - National Bank Financial - Analyst : And Inder, I think you said that the EBITDA margins -- we shouldn't expect them to sort of get back to where they were anytime soon. Is there are targeted level that you want to be in within a year from now?

Question: Richard Tse - National Bank Financial - Analyst : And Barry, the ECM market has been -- arguably, it's good and bad for some. But some of the companies -- so the average growth rates haven't been off the charts. What are you seeing in terms of resistance to buying some of the solutions? Is there anything that has changed over the last little while?

Question: Blair Abernethy - Clarus Securities - Analyst : Nice quarter, guys. Just a couple things. Barry, last question on the deal metrics -- how many deals over 1 million did you book in the quarter?

Question: Blair Abernethy - Clarus Securities - Analyst : And Inder, what was the ForEx impact in Q4?

Question: Blair Abernethy - Clarus Securities - Analyst : And what about the impact to revenue?

Question: Blair Abernethy - Clarus Securities - Analyst : Yes, I understand that. Do you have an impact on revenue?

Question: Blair Abernethy - Clarus Securities - Analyst : Great. And your amortization level in Q4 -- is that what we should expect -- you said, quarterly going forward in '06?

Question: Blair Abernethy - Clarus Securities - Analyst : And if you back out RedDot's contribution in Q4, do you have or will you provide us with an organic license growth number for Q4?

Question: Blair Abernethy - Clarus Securities - Analyst : And Barry, just one last thing. I wonder if you could give us some more detail or insight into how things are going with Veritas. You talked about one deal that you have signed or closed. What is the pipeline looking there, now that you guys have been working on this for a couple of quarters? And what's sort of your expectations for next year? 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 : Just a quick question on the database split between SQL, DB2 and Oracle -- you guys have never really given that out. But can you give rough numbers on --

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : And just on the one joint deal with Symantec Veritas on the archiving, that $1 million was to you. How was that split between license and services?

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : Close -- sorry; close to 1 million.

Question: Ralph Garcea - Credit Suisse First Boston - Analyst : And was there any services in that number or consulting on your end? 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 : And then just lastly, on guidance, any guidance on the full year number for '06?

Question: David Kwan - Raymond James - Analyst : I think I missed this, Inder, but usually the fourth quarter is one of your strongest for free cash flow, and this quarter wasn't too impressive. What was the reason behind that?

Question: David Kwan - Raymond James - Analyst : And then I guess, on the whole year, were there any other one-time items? Because in the last couple years, it's been greater than 30 million, and this year it was roughly in the 10 million range. So were there any other one-time items?

Question: David Kwan - Raymond James - Analyst : And then just on the deals over 100K, this is the second quarter where it has been flat year over year. Can you comment on this, or is it a tougher environment right now?

Question: David Kwan - Raymond James - Analyst : And then Inder, I guess, my last question -- do you ever break down by vertical?

Question: David Wright - BMO Nesbitt Burns - Analyst : Just wondered the timing of the 2005 Enterprise product launch?

Question: David Wright - BMO Nesbitt Burns - Analyst : So the sales reps are pushing it. And so a North American launch is -- when is that planned?

Question: Paul Lechem - CIBC World Markets - Analyst : Barry, I just wondered if you can give us some insight into the product/service mix. It's been asked a few times, but over the last few years the license component has come down from the 50-plus percent into the mid to low 40% range. What are the drivers behind that? And where do you see it going from here?

Question: Paul Lechem - CIBC World Markets - Analyst : So you don't see the license continuing to decline from here as a percentage of the revenues?

Question: Paul Lechem - CIBC World Markets - Analyst : Second question -- on the cash usage fund, are you going to be putting a share repurchase program back in place? Are you going to be active on it this year?

Question: Paul Lechem - CIBC World Markets - Analyst : And lastly, are there any more continuing payments on acquisitions outstanding from the various acquisitions you have made? Or is that it?

Question: Paul Lechem - CIBC World Markets - Analyst : And how much, approximately, is that?