Q1 2012 Earnings Call Transcript
Transcript Call Date 03/29/2012

Operator: Good afternoon, ladies and gentlemen. I am Monserrat. Welcome to TIBCO's First Quarter 2012 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. You can also listen to this call via the Internet at www.tibco.com.

Today's call is being recorded and will be available for playback from TIBCO Software's website at www.tibco.com. In addition, replay will be available through InterCall for one month following today's call by dialing 1800-585-8367 or 404-537-3406 internationally. The confirmation code is 59620366.

The following conference call includes forward-looking statements, which represent TIBCO Software's outlook and guidance only as of today and which are subject to risks and uncertainties. These forward-looking statements include, but are not limited to, forecasts of revenues, operating margins, operating expenses, outstanding shares, and earnings per share for future periods.

Our actual results could differ materially from those projected in such forward-looking statements. Additional information regarding the factors that could cause actual results to differ materially are discussed in the Risk Factors section of TIBCO's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission. TIBCO assumes no obligation to update the forward-looking statements included in this call whether as a result of new developments or otherwise.

This conference call also includes certain financial information that has not been prepared in accordance with generally accepted accounting principles, as we believe that such information is useful for understanding our financial condition and results of operations. For a presentation of the most directly comparable financial measures calculated in accordance with GAAP and a reconciliation of the differences between the non-GAAP and GAAP financial information, please see our website at www.tibco.com.

The presenters on this call are Vivek Ranadive, TIBCO's Chairman and CEO; Murray Rode, Chief Operating Officer; and Sydney Carey, Chief Financial Officer.

I'd now like to turn the call over to Vivek.

Vivek Ranadive - Chairman and CEO: Hello (Molly) and thank you for joining us today. It's nice to be speaking to you again and discussing this first quarter of our new fiscal year. I'll begin the call with summary remarks on our Q1 performance and discuss the broader environment we are seeing, before turning it over to Murray and Sydney to discuss details.

We started the year right where we left off, and continued our record of strong execution. For the first quarter, total revenue came in at $226 million and grew by 22%. License revenue came in at $82 million and grew by over 17%. Non-GAAP operating profit grew by 17% and not get EBS came in $0.20, growing 25% over the same period a year ago.

For the third year in a row, we delivered accelerating revenue growth in Q1. This was the ninth consecutive quarter of growing EPS by more than 25% and this was the 15th consecutive quarter of beating consensus EPS estimates.

I've spoken before as to how our event driven software platform positions at the convergence of the most significant technology forces of our time. Big data, cloud, mobility, social networking, and the shift to real time. Through more than a decade of innovation, leadership and experience borne in the world's most demanding environments, we have methodically assembled a powerful set of products, that is truly a string of pearls. Most of these pearls of course were borne of our own sweat investment from inside these walls.

For example, our enterprise messaging, which moves more messages every minute than Twitter moves in an entire day. Our real-time rules engine, which detects relevant patterns in this stream of events. Our integration and automation chassis, the marketplace standard for 21st-century flexible applications. Our distributed peer-to-peer in memory data grid, which enables heterogeneous applications to share, exchange, and process data in real-time and tibbr, the universal desktop that marries all of your people systems and machines and instead of you searching for the information. Let's the information, come find you. These are just a few.

To this list we've selectively added some additional pearls and carefully woven them into our core for example, Spotfire our powerful and easy to use and deploy visualization offering for big data which continues to explore in demand and is fast becoming the spreadsheet of the 21st-century.

Netrics are in memory pattern matching product so key in multi-domain master data management. Nimbus our discovery tool for modeling, managing and operating all of your business processes or S-PLUS with which we bring the expanded power of statistical modeling to our analytical offerings.

We own the very language for statistical modeling with it. But even more impressive than any of these individual pearls is the various powerful ways in which you can string them together into what I call value packs.

The first such value pack is around what we referred to as trigger based marketing or an event driven approach to up selling and cross selling your existing customer base. Leveraging all of our pearls TIBCO can provide its customers the 2 second advantage or just the right amount of information just a little bit before hand and yet still with enough time to actually take advantage of it. It's what we are doing today for MGM resources. It's what we are doing today for retailers, grocers, banks health cos. This is incredibly powerful stuff. The fact is I am completely confident walking into the office of any CEO and saying to him or her that we can move the needle on their revenue by 10% to 20%. I am having these types of meetings. Customers are seeking us out. The value we can deliver and command for these implementations is massive.

Second value pack is around operational efficiency. Consider PJM, recently written up in Forbes magazine. PJM is the supervisor and operator of the largest regional energy transmission authority and manages 56,000 miles of high-power long-distance lines. In part by leveraging TIBCO Technology, PJM is saving an estimated $2 billion per year and has speed up the electric capacity of a Keystone Pipeline. This is over doing for PJM. It is what we're doing for insurance companies, life sciences, healthcare, logistics and more.

Third is managing risk and fraud. Such as what we're doing for the Department of Homeland Security or Con Ed and their smart grid. What good is it to detect an intrusion after the data is lost or to detect a power outage after it's already occurred? Using our event driven platform such problems can be a thing of the past.

In closing what I would submit to you is this. A lot of our customers are getting bombarded with buzzwords. The truth is technologies and concepts like Big Data and Software as a Service won't in or themselves increase your revenue. What matters is how you string these technologies and deployment models together to solve the tests and opportunities of the 21st century in a holistic way. Whether it's a grocery chain looking to sell more milk and eggs and airline looking to streamline its operations or a bank looking to manage fraud, TIBCO has the platform on which such application can be assembled and build. We are pursuing the largest opportunity in enterprise software. I couldn't be more encouraged by the prospects for our business line ahead.

Now, I will turn it over to Murray.

Murray Rode - COO: Thanks, Vivek. I'll cover some key operating metrics for the quarter and then turn it over to Sydney. I'll start with our license transaction numbers. During Q1 we had 20 deals over 1 million in license revenue, up from 14 a year ago. We had 102 deals over 100,000 in license revenue versus 108 a year ago. Our average deal size this quarter was $737,000, up from last quarter and about $150,000 larger than the average last Q1. Our top 10 customers comprised about 22% of our total revenue versus 21% a year ago.

Looking at the geographic mix, total revenue was as follows, Americas at 52%, Europe Middle East Africa at 39% and Asia Pacific and Japan at 9%. Europe was a standout performer this quarter growing 46% over the same period a year ago. This performance was driven by a variety of factors. Looking at just our top 10 deals, five were in Europe and they were spread across five different industries, manufacturing, retail, communications, finance and life sciences. The Americas and Asia Pacific grew more modestly at 10% and 12% respectively, but we still feel good about the mix and quality of the business we closed and feel confident in the momentum in those regions going into the rest of the year. In terms of our sales capacity, we grew quarter carrying headcount to 258, an increase of 24 over Q4.

We had a very strong mix of verticals with eight separate contributors of 5% or more of total revenue. For the quarter, financial services comprised 25% of total revenue, energy 10%, communications 9%, manufacturing 9%, retail 8%, life sciences 8%, government 6% and logistics at 5%. We saw dramatic growth in our retail and manufacturing verticals at 111% and 137% respectively. Our life sciences business grew by more than 50%, energy grew at 32%, and finance was up 20% over Q1 of last year.

From a products perspective, it was a quarter driven by core infrastructure. The breakdown of license revenue among our major product families was SOA 57%, business optimization 32%, and BPM 11%. This quarter there was a theme of core platform sales implicit in these splits. SOA grew 22%, driven by some of our core infrastructure products like messaging but also with a notable performance from our cloud infrastructure offering, Silver Fabric.

BPM grew 16%, driven mainly by continued ramp in demand for AMX BPM. Business optimization grew 11%. This number actually masks our Spotfire performance with more than doubled from a year ago with strong sales, both in the Americas and Europe. The other major product in this category, business events continues to be a key catalyst in many deals, with the particular combination of deals, products, and relative revenue allocations this quarter left business events with lower revenue. We see both Spotfire and business events as very important elements of our platform story and as core growth drivers for our business going forward.

Finally on tibbr, we closed 26 new deals in the quarter, including a 60,000 seat deployment which entailed a 20,000-seat charter replacement. It's also interesting to note that tibbr really provides access to a new segment of customer types as well as providing a different and complementary selling model. Overall, we continue to like the diversification of our business from both a product and vertical market perspective, and we see growing strength in our platform positioning for the TIBCO offerings.

With that, I'll turn it over to Sydney.

Sydney Carey - EVP and CFO: Thank you, Murray. First I'll provide additional details on our financial performance in Q1m and then I will provide comments on our financial outlook for Q2. I'll review our financials on both a GAAP and non-GAAP basis. A full reconciliation was included with our press release, along with an explanation of our non-GAAP measures.

Some key performance data on our first quarter results are as follows. Total revenue was $225.7 million, up 22% year-over-year or 23% on a constant currency basis. License revenue was $82.3 million, up 17% year-over-year or 19% on a constant currency basis. Services revenue was $143.4 million, up 24% from last year, or 26% on a constant currency basis. Our professional services business remained strong, with growth of 41% over last Q1.

Non-GAAP gross margin for Q1 was 73%, slightly down from last year due to the mix of revenue and continued investment in services. Non-GAAP operating income was $47.6 million, up $7 million or 17% from the same period a year ago. This resulted in operating margin of just over 21%. Non-GAAP EPS was $0.20 versus $0.16 a year ago. Q1 cash flow from operations totaled $41.1 million.

Moving down the balance sheet; deferred revenue, including both long and short-term components, totaled $245 million, up $38 million, or 18% from Q1 of last year, and up $20 million sequentially over Q4's ending balance. DSO for Q1 came in at 75 days compared to 74 days a year ago. Also during the quarter, we spent over $67 million in share repurchases, buying back approximately 2.8 million shares at an average price of $24.08. On this point, we are now seeing today that our Board has reauthorized its stock buyback program for up to $300 million.

Looking forward to Q2, we continue to see a big opportunity ahead of us and so remain committed to our plan of investing for growth. Our guidance for Q2 is as follows. We expect total revenue to be in the range of $240 million to $244 million. We expect license revenue to range between $91 million and $95 million. This assumes a 4% currency headwind over last year. The non-GAAP operating margin is expected to be 23% to 24%. Non-GAAP EPS for the quarter should range between $0.22 and $0.23. Note that this guidance assumes a 28% tax rate. However, this can vary depending on the mix of foreign versus domestic profit. GAAP EPS should range from $0.13 to $0.15, with an assumed tax rate of 25%.

With that, we'll be happy to take your questions.

Transcript Call Date 03/29/2012

Operator: John DiFucci, JPMorgan.

John DiFucci - JPMorgan: Just two quick questions. The first one is for Vivek and Murray and I just have a follow-up for Sydney. Financial services and Europe two areas that I think a lot of people, including us, are keeping a close eye on because we are hearing just some softness from the region in Europe and also hearing there is some pressure in budgets for financial services this year. But it sounds or you did put up good numbers for both, and I don't know if may be you can talk a little bit more about that? Is there something -- some reason why TIBCO might be able to avoid sort of the macro pressures in this important vertical and region, and I guess are you selling similar to how Vivek spoke right from the beginning, are financial services really starting to engage more with TIBCO beyond sort of the core messaging that they have always engaged in?

Vivek Ranadive - Chairman and CEO: Yeah John, you guys kept telling us that we were going to blow up in Europe and everyone was telling us that. So we put a lot of focus into Europe, and quite honestly, I have said all along that we're not going to make any excuses and we are seeing very-very strong demand for what we are doing and the catalysts are the same. How do you grow your revenue? How do you cut your costs and how do you manage risk? And one or more of those factored into banks and factored into Europe, and with banks it's gone well beyond messaging. Messaging is just a small fraction of the revenue now. So they are buying more and more of the stack. So we feel very good about it. We feel there was a lot of focus put into Europe, and I think the results show that and we will continue to put that kind of focus into Europe, and also into the Americas and Asia.

Operator: Brad Zelnick, Macquarie.

Brad Zelnick - Macquarie Securities: Specifically, the 60,000 seat deal that you did in the 20,000 seat Chatter replacement. Can you maybe just talk a little bit about the used cases?

Vivek Ranadive - Chairman and CEO: Brad, there was something wrong. So we didn't hear the first part of the question, can you just rephrase your question?

Brad Zelnick - Macquarie Securities: Can you hear me now Vivek?

Vivek Ranadive - Chairman and CEO: Yes, we can hear you now.

Brad Zelnick - Macquarie Securities: I was just speaking specifically to the comments that you made on tibbr, 26 new deals in the quarter, 60,000 seat deployment, 20,000 seat Chatter replacement deal. Can you maybe talk about some of the used cases? I think this segment for you is exceeding all expectations out there?

Vivek Ranadive - Chairman and CEO: Yeah, we are absolutely crushing Chatter and the other guys in the market right now, and what people want is, something that unlocks all the internal systems, and are we allowed to mention the name of this particular client, we can't, okay. But basically, wherever there are things like Chatter out there, they like the concept, but they want to be able to integrate into everything else, and only TIBCO can do that. Murray, what can we say about it, the 20,000 Chatter replacement?

Murray Rode - COO: Just that kind of flexibility for the enterprise. Tibbr has a platform that both brings in the social media metaphor to the enterprise as well as, bringing with it, the kind of enterprise ready integration and management security features that we offer with tibbr.

Vivek Ranadive - Chairman and CEO: This was a situation where they had, they were a big sales force customer, they had 20,000 charter seats, and when they did the technical evaluation it was a unanimous decision to replace it with tibbr. So we think this opportunity is huge and I'd say that I’d like to have. I believe in the next few years I'll have 10 million seats. I think that’s a small number, I'd like to see 100 million seats in the next few years.

Brad Zelnick - Macquarie Securities: That’s helpful color Vivek and its consistent with what we are hearing from the field there is lot of excitement around tibbr. If I could just follow-up with Sydney and Murray. As I think about your margin guidance for next quarter. And I look at the success in the services line. Obviously with the success that you are having on the professional services side. The gross margin on services is coming down. But can you maybe just talk about the model going forward. How much do you continue to invest there. And also as I think about margins and this is maybe more for Murray. If I look at your productivity in sales and marketing, whether I look at sales and marketing as a percentage of license revenue or even if I look at license revenue per rep, even trailing using rep count from two quarters ago assuming a productivity ramp. It looks like you are not seeing the same kind of improvements that you were seeing for example in the course of last year. Just curious I know you did away with license quarters a year or so back what is changing if anything in the go to market and how should we expect that to play out this year.

Sydney Carey - EVP and CFO: I'll start off on the first part of that question on the services side we are continuing to make investments in services both in personnel and facilities. We see a strong demand for our services and as I said before we like services revenue. We like be out as customer. And its profitable revenue for us. We do see a little bit of a hit to our gross margin due to mix of revenue. Professional services in the period was close to 37% of the total services number versus 33% a year ago. So we're seeing that impacted margins but we do like to be offering our customers and driving professional services revenue.

Murray Rode - COO: I think from a sales efficiency and quota head attainment, we're actually pretty pleased with the way sales people are ramping. We have had a lot in just the first quarter, kind of, exiting last year and into the first quarter of this year. So that will take a little bit of time to ramp those sales heads up. I think in the past, lot of the capacity had actually been added sometime back. So you saw the uptake happening on capacity that had been added earlier. So I think the trend is similar and we're good with the way that the new heads are starting to ramp.

Vivek Ranadive - Chairman and CEO: I think we're actually, very pleased with how that's working out for us. We were conservative in hiring sales people and we started ramping that up. So we have –if you look at aging of our sales population, it's newer people, it's more newer people as a percent than we've ever had in the past. But the attainment levels are also very high. We're kind of gearing the company up for the $2 billion mark and for that we need to hire people. We are very pleased with the attainment and we've also learned how to do the sales enablement, how to train people. We made the selling process a lot easier. So all the metrics are very, very positive from our perspective.

Operator: Derrick Wood, Susquehanna International.

Derrick Wood - Susquehanna International: Murray, you mentioned that the theme of the quarter was platform and we are hearing the FTL messaging products starting to see some new demand outside of -- kind of the core capital markets areas, so I was hoping you could talk about where you're seeing demand, what kind of projects this is getting pulled into and how people are thinking of the Service Bus as a platform for big data type projects?

Murray Rode - COO: I think we're seeing the platform idea manifest itself in a variety of ways. If you think about Vivek's comments right at the start of the call, those three areas generate more revenues, streamline operations or cut costs and manage risk and compliance, plays out across multiple industries, so we certainly see that in finance and an element of that can -- an element of that involves FTL, primarily if you think about generating more revenue and reducing cost, FTL has a role to play in both of those kinds of scenarios.

Vivek Ranadive - Chairman and CEO: So what we're seeing is that our customers are very, very responsive and we walk in and say, hey, we'll grow your revenue standard 20% and they look at how we can do it. We show them a demonstration and they absolutely blown away., So what we are doing is we're taking the platform and then we have these three value backs that we position and each of them is received a very, very positively. So it's not – we sell the pearl necklaces and we still also sell the individual pears, but you need these pieces. You need low latency if you want to have a response while you're on the website or while you're walking through the aisle of a store and so all of these things play together and they come together in a fashion that, it's just unbelievable, the value that's created and nobody can touch us.

Derrick Wood - Susquehanna International: It certainly seems like a compelling value proposition and it is a platform that partners, I imagine come and build practices upon. So could you just touch on what's going on in the partner channel and what efforts you have to drive growth there?

Murray Rode - COO: Sure. We saw again in the quarter good activity from partners. We had about 20% of license revenue related to either direct or sourced partner deals. So our activities in terms of ramping our personnel that deal with partners and our programs around partners continue to do well and I think exactly as you say, the platform story resonates particularly with the SI partners around the kinds of practices and even their own versions of the value packs that they can build around the platform.

Operator: Kash Rangan, Merrill Lynch.

Kash Rangan - Bank of America-Merrill Lynch: Maybe I'm misreading this, but the long-term deferred revenues were up very significantly. I've not seen a long-term deferred revenue increase of this magnitude for a Q1. I was hoping you could just fill us in on if there is any license component? Also, I think that you recognized a big slug off the big contract in your Q4, so if I ex that, what looks to be $8 million to $9 million, it looks like your Q1 seasonality was much better than what it has been in the past. So there's something changing about the shape of your business. It looks like your visibility and backlog ought to be better. So, I know it's a bunch of – a couple of different things, but I'm wondering if I could get some insight. Of course, I cannot leave without asking a question of Vivek. Vivek, you're right about big data, talk about it, I'm wondering if that comes up in the topic of your customer conversations. In one way, TIBCO is the longest-standing big data company because of your messaging legacy, but how is it resonating in terms of business flows for you guys? Is it just a buzzword that's out there, or is it actually driving business, and if so, which parts of your business are feeling the big data impact? That's it.

Vivek Ranadive - Chairman and CEO: Yeah. So, Kash, I'll answer your question and then I'll hand it over to Sydney to answer the earlier question you asked. Our customers are simply blown away because we don't really use buzzwords like big data. We just show them what we can do for them. So, we used the example of MGM Resorts which is a casino company, and we showed them what we could do, and it's really with big data, but when we're talking to the Board and the CEO, we just show them exactly what the user experience would be and how they'd be up-selling, cross-selling their millions of customers. Of course, in order to do that, we have to be able to analyze big data, we have to analyze it in real-time data and motion, side back to the data and address, and then make it actionable so you can actually do something with it. So, we're just seeing. The other thing that we done with this whole big data thing that nobody else has done is, we're also incorporating social data, and we're also doing this with my basketball team. So, somebody could tweet that they had cold pizza at the last game. We're going to factor that in into when and what we offer them. So, when we can show these kinds of things that's simply blown away. Of course, we have to solve – what we're doing is, solving and taking advantage of big data in order to be able to do all of this. But we're just positioning it as a simple trigger-based marketing value pack where we can up-sell, cross-sell customers to a very large extent. If you look at the companies that are doing this have done this; like Macy's, they did this with us, they've had huge success. But anyway, Sydney, I'll hand it over to you in terms of the deferred revenue question.

Sydney Carey - EVP and CFO: Sure. We did see an uptick in our deferred revenue in total, but in particular our long-term we saw several multi-year maintenance renewals as well as we saw multi-year hosted revenue come into that category, and that's primarily related to Loyalty Labs and tibbr. We're still seeing the bulk of the deferred being maintenance; we haven't seen much change in that, but as we're starting to see our hosted offerings, which we count as services revenue, not in license revenue, we're starting to see that they are taking a little bit bigger portion of the deferred as well.

Vivek Ranadive - Chairman and CEO: So basically, Kash, what you are saying is true, that some of that is because of what we're calling so this is really hosted license.

Operator: Brent Thill, UBS.

Brent Thill - UBS: The fact you've seen a really nice increase in deals over $1 million, I was curious if you could just give us your view in the pipeline, what's causing these deals counts jump up and I had a quick follow-up for Murray.

Vivek Ranadive - Chairman and CEO: Yeah, we've never seen such pricing power, so when we walk in and talk about these value packs and about the kinds of things we can do, nobody can do it, and so that's allowing us to get value for our software. Just simple things, like if wanted to – if you're in a store and you want to know if there's a medium blue shirt, how do you find that out? You can't go into a database and look for it. You need active spaces for that. So, we're just seeing that we are able to translate these technologies; these pearls, into pearl necklaces where it translates into clear value for them. So, by doing that we're able to command the value, and we still think that we could get a lot more. We're still, I think, at the low end of the value that we could be getting for this. So, we're pleased at the way that the numbers have come out.

Brent Thill - UBS: Just a quick follow-up for Murray. On the direct code of carrying reps, you are up 24 which is a good start. Is your goal still to get to kind of mid 270s by the end of Q2?

Murray Rode - COO: It is. That's still our goal.

Operator: Raimo Lenschow, Barclays.

Raimo Lenschow - Barclays Capital: Thanks for taking my question and congratulations on a good start to the year. Question I had was around the Spotfire. Obviously your optimization business had a very tough comps and you still managed to grow that. But Spotfire is really standing out here. Can you talk a little bit about the used cases that you see? Obviously the other guys in the field like Click etcetera also grow. But are you kind of running against them and can you try to help to differentiate the offerings to us a little bit?

Vivek Ranadive - Chairman and CEO: We are again – we are replacing Click at more and more places and so they are more of a departmental solution. They can't scale and they don't tie in the rest of the stack. So it is becoming kind of the 21st century spreadsheet, where it becomes kind of discovery to fall what you can -- what patterns you can see in a very visual fashion. This is arguably the next generation of BI, and it's probably the fastest growing segment of the enterprise software sector right now. But, Murray you probably want to add more on this.

Murray Rode - COO: I think that point about data discovery is really at the core of it. There is a couple of other things too we saw in the quarter. First, Spotfire did continue to do very well in its core verticals and kind of core deployment scenarios or used cases where you are looking at a lot of complex data. But we are also seeing it do much more or be used much more broadly for data discovery and other industries, like energy and manufacturing which were also very strong, in addition to lifesciences, very strong verticals for Spotfire in the quarter. So it's that combination of it being able to be used in very sophisticated scenarios to find patterns, as well as much broader adoption across a broader range of use cases, as a more generalized kind of data discovery tool.

Vivek Ranadive - Chairman and CEO: It's strong enough for a PhD cancer researcher to look for drug cures for cancer, on the one hand, and at the same time, I can have basically people with a high school education use it to find patterns, in terms of my team, who is buying merchandise, and who is buying tickets, and what area codes are they coming from and why can't I sell the guys buying merchandise tickets and vice-versa. It's an incredible tool, and I believe that everyone will be using this tool in the future.

Operator: Mark Murphy, Piper Jaffray.

Pinjalim Bora - Piper Jaffray: This is Pinjalim sitting in for Mark Murphy. Just wanted to ask you, that we hear from TIBCO's partners that TIBCO is doing good competitively, I heard this last quarter. But competition is getting furious, especially around the solar product line, and that we hear a lot about bundling tactics by the giant vendors like IBM and Oracle, where they give the middleware for free. Just wanted to know your thoughts on how TIBCO is competing in such circumstances?

Vivek Ranadive - Chairman and CEO: Our competitive posture has never been stronger. We are in a stronger competitive position than we have ever been as a company. IBM is still the main competitor for us. There are occasions where IBM will put pressure to bundling and board relationships and there was one instance I was involved with a Canadian bank and they went with IBM and then three months later it didn’t work out so they called us back in. and now they have standardized on us. So we feel that our value proposition is so compelling and we promise to get the first results in 90 days. That’s something that IBM and Oracle they can't even the demo in 90 days. And so we believe that while they are big and strong competitors we have the answer and we feel very comfortable with our competitive position.

Operator: Steve Koenig, Longbow Research.

Steve Koenig - Longbow Research: I'd like to ask about analytics here competition between SAP and Oracle seems to be heating up in this area. Whether its differentiation through these engineered systems or in memory technology. If you were to look at your comments and how does it affect TIBCO. Does it impact Spotfire could it help TIBCO and then I have one quick follow-up if you don’t mind?

Vivek Ranadive - Chairman and CEO: Basically two dinosaurs competing with 20 century technologies and so they end up. so we have instances where an Oracle customer has have to buy our analytics package of business optimization of Spotfire and BE and then we also have instances of SAP customers doing that. So there is still very much competing. Now we've also from our perspective we'll talk to in the case of Macy's we talked to Exadata and then the other cases where we will have Dr. Hanna. So we're neutral. We will work all these guys but we really are the icing on the cake and so without things like Spotfire and Business Events, there's – you're really looking at things after the fact and its of limited value.

Steve Koenig - Longbow Research: If I may, I'd like to ask about your strength in Europe. We had some (USi's) point to strength in telco deals there. I'm wondering bigger picture point you guys saw was obviously bigger visibility. What verticals were strong, what drove number deal – size of deals et cetera?

Murray Rode - COO: We saw strength across the board and so if you look at some of the deals, they were like the five big deals of five different markets and we have a very strong leadership team in Europe. They are executing well and the opportunity is huge for us. We have no – you're not going to hear us make any excuses about anything over there.

Operator: Karl Keirstead, BMO Capital Markets.

Karl Keirstead - BMO Capital Markets: I've got two questions. Vivek, wonder if you could comment on business events, obviously the year ago was very tough but the math suggests that the license he has for business events must've been down year-over-year. So anything else, going on, worth highlighting outside of the tough comp and then perhaps for Murray, I've got second unrelated question. If you look at the guidance, it suggest that the services revenues would be somewhere in the order of about $149 million for the May quarter that's more of a low double-digit revenue growth despite the investments are making, I'm wondering, if you could explain that for us?

Murray Rode - COO: We're seeing great strength in business events. It's a catalyst for just about everything we do. Yes, the comp was –it was a big number year ago but I think a lot of it is also, when we sell a pearl necklace, it's hard to decide what value you allocated to any pearl and it could be a situation where the client has bought something, some of the pearls and so when you're selling the necklace, you can't charge for those pearls, so I wouldn't put too much eight on that. We're seeing a shift where --we're even seeing actually people starting to look at business events as kind of the 21st century apps over where if you wanted to look at things in and out of databases, then you were looking at apps over for static data, so for moving data for events as we call them, you need an events and that's what business events is, so we're seeing very, very strong demand for that, but increasingly we're selling it in conjunction with the other piece as far as the pearl necklace. Sydney, I'll let you to comment about it.

Sydney Carey - EVP and CFO: I'll comment on the guidance on the services growth. We are seeing that going from quarter-to-quarter. We had good Q1 this year. We had some additional days in this quarter on a year-over-year basis and we had a very strong Q2 last year in services. Currency is also playing a role in the growth rate, we are seeing about 4% headwind on currency and services as well.

Operator: Yun Kim, ThinkEquity

Yun Kim - ThinkEquity: First, a quick question for Murray. ASP was up pretty meaningfully in the quarter. Was there a one or two large deals that skew the metrics or are you simply seeing bigger deals out there?

Murray Rode - COO: In terms of top 10 customers, it was pretty similar to past quarters. We did have a couple of deals, 5 million or greater and it was a little bit more of a just larger deals sizes across the board this quarter, but I think as Vivek was pointing out, it was more of an indication of pricing power and kind of recognition of value in the deal mix.

Yun Kim - ThinkEquity: Vivek, as you indicated, there is a lot of talk about big data and in-memory computing technology out there. Can you give us your thinking regarding how TIBCO's products fit specifically into the in-memory computing technology trend that's going on? How important is in-memory computing technology in terms of enabling your two-second advantage vision? Is it fair to say that the adoption of in-memory computing technology out there should help TIBCO?

Vivek Ranadive - Chairman and CEO: You know that I've been talking about this for many years both about big data and in-memory, so in a way we were way ahead of the game. But when our customers talk to us, they're not using those words necessarily. They want to know whether there's a blue shirt in a certain size available from any store. You can't do that with the old database, old model of doing things. So, active spaces in-memory computing is just a massive opportunity. I see that over time, things like Teradata will be under threat because people will increasingly move to in-memory. If you're on a website and you click on a play of David Lee, I want to sell you a shirt while you're there. So really there's no other way to respond to the market needs today. There's no other way to do the trigger-based marketing that we were talking about. The world is just going to shift rapidly over the next five years in-memory and we are in poll position. The other point I want to make is, the guys who try to do it in memory, if you just put the same database model in memory, you're just paving a cow path, so you still have a request/reply model. That's like pouring asphalt on a cow path. There's not much value. So, what we're doing is basically event-enabling it, which is completely different, much greater value. So we're very excited about this movement in memory and we will be the greatest beneficiaries from it.

Yun Kim - ThinkEquity: Then Sydney, real quick, the brand (indiscernible) professional services business, is that accelerating or just going at a steady rate? How should we think about the services margin going forward?

Sydney Carey - EVP and CFO: Well, we've been making investments in headcount. We'll continue to do that. So, I would look at our gross margins to be down from where they were last year, but then throughout the year start to come back as we get the productivity up for those new hires.

Operator: Rob Owens, Pacific Crest Securities.

Jesse Hulsing - Pacific Crest Securities: (Jesse Hulsing) in for Rob. You mentioned strength in silver fabric. Are you seeing a broader trend of private cloud deployments, and can you talk a little bit about the trends there?

Vivek Ranadive - Chairman and CEO: Yeah, what we're seeing is people are really wanting these hybrid clouds where I don't – I have yet to see a customer where they're just going to take everything and put it into a public cloud. I am not seeing that. We have 4,000 customers, and I have not seen a single customer. So, we're the enabler for that private – that hybrid cloud. There's really where the – we have the tools with which people can systematically cloudify. But I don't – Murray, do you want to add to that?

Murray Rode - COO: Only that this is the second quarter we saw good strength from silver fabric in Q4, and again saw a strong quarter this quarter with silver fabric either being core to what a customer was looking for or an important part of the overall value proposition for the customer.

Vivek Ranadive - Chairman and CEO: Okay. We'll now conclude this call. Thank you all for joining us, and have a good day.

Operator: Thank you for joining us. We now conclude TIBCO's Q1 2012 earnings call.