Q3 2012 Earnings Call Transcript
Transcript Call Date 09/20/2012

Operator: Good afternoon, ladies and gentlemen. I am Dustin. Welcome to TIBCO's Third 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 800-585-8367 or 404-537-3406 internationally. The confirmation code is 28093687.

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 forecast of revenues, operating margin, 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 such information is useful for understanding our financial condition and results of operation. 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 the 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 Dustin and thank you all for joining us today. I'll begin with highlights of our Q3 performance and offer some remarks on the broader environment before turning it over to Murray and Sydney to discuss further details.

We delivered another quarter of strong growth in Q3 with total revenue increasing 18% and license revenue increasing 14% respectively on a constant currency basis.

As reported, total revenue came in at $255 million. License revenue was $99 million. Non-GAAP operating margins were 27% and our non-GAAP EPS was $0.27. This quarter's environment reflected some familiar themes as I've been discussing for some time.

First, we continue to see what I believe to be early signs of growing dollar commitments to our platform. While enterprise IT budgets are steady, many corporations are preserving the flexibility to pursue strategic initiatives if such projects can be proven to move the needle and deliver what I call extreme value.

Second, the trend towards marketing as a department of influence in CMOs, with growing budget authority continues. Every business is realizing that it has a social network and as a value of the business is X, the value of the same business that is able to leverage its social network is multiples of X. TIBCO is helping our customers capture, engage, expand and monetize that social network and turn customers into fans.

Fans are loyal. Fans (vandalize), and fans are committed to your success. By moving away from stale transactional approaches of the past such as CRM, enterprises today can capture every event and every interaction of a customer and help customers to averse the fact from sentiment to intent and from intent to action. Most companies are only now beginning to talk about sentiment and once again, we’re two steps ahead in helping the enterprise build a network of fans.

Third, the world continues to move in our favor. You guys call it bid data, but what is big data. There are some old companies down Highway 101 that would have you believe bigger databases equate to big data. There are lot management companies that say machine data is big data. There are social collaboration companies that they have big data, analytics companies that analyze big data and so on. The truth is, TIBCO has the complete platform that allows you to transport big data introspected, find patterns, create rules and take actions, and of course, there is our $1 billion backend. In order for big data to be useful and actionable, whether on the trading floor, the carrier's network or in the shopping aisle, it requires backend integration, integration of your people, your systems, your data. It requires you to marry data-at-rest to data-in-motion across mobile, social cloud and on-premise environments and it has to be in real time for it to be truly impactful. TIBCO has the complete stack.

Now, with certain (fan) or subset of this problem might appear simple and compelling enough and it might offer growth of very low numbers, but we've actually done the hard path. The fact is, our platform works, it's proven and we have the goods. Only TIBCO can process 1 million transactions per second and identify fraud in real-time for one of the world's largest smartphone manufacturers, in just more than 2 billion events a day for a major communications services provider.

Serve as the low latency standard for an exchange trading of quadrillion dollars in contracts annually. Help a global consumer products company analyze and discover new insights over 8,000 product categories, 100,000 product skews and across 175 markets every single day. At the same time, we're enabling a tiny 10% New York based startup to place exactly the right ad in the right place at the right time using business events, our in-memory context engine. We're helping a women's retailers and targeted promotion on a real time inventory and we're enabling The Oakland Raiders fans to get real-time offers for tickets and merchandise when they're near a Raider Image retail store, extending the fan experience beyond the game in the stadium. Every single company, big and small has three requirements. They need to find a way to grow revenue with existing customers, do more with less in their supply chain and manage risk. It turns out that all of these are big data problems and you need a complete platform to be able to solve them.

In closing, there has never been greater excitement around the Company. Amidst ups and downs in the global economy, difficult summer seasonality and currency headwinds, we continue to grow our business on a strong and steady basis. Next week, we kick-off what I'm confident will be our more successful user conference TUCON ever. Our paid customer attendees are up 40% over last year. We're seeing unprecedented commitment from our partner sponsors. We have a fantastic and exciting agenda in store. We hope to see you there.

Finally, in recent weeks there has been some rumor and innuendo, including that we're having a 10% risk. I just want to be clear and put this to bed once and for all. There is no 10% risk. In fact, our field personnel is up 10% sequentially. We have our biggest pipeline ever. We're not slowing down our investments. We're doubling down. After all, we believe our market represents the largest opportunity in enterprise software.

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. Note that when I speak of regional or product growth rates, I'm presenting them in an as reported basis and not adjusted for constant currency. I'll start with our license transaction numbers.

During Q3, we had 134 deals, over $100,000 in license revenue, up from 126 a year ago. We had 16 deals over 1 million in license revenue as compared to 21 a year ago. This count obscures the fact that our larger deals actually contributed more than normal to the quarter. So in general, we continue to see good large deal performance.

Our average deal size this quarter for deals over 100,000 rose to 676,000 versus 658,000 last Q3. Our top 10 customers comprised approximately 24% of our total revenue, versus 22% a year ago. Looking at the geographic mix, total revenue was as follows. Americas at 54%, Europe, Middle East and Africa at 35% and Asia Pacific and Japan at 11%. The Americas was the top performer this quarter, growing 19% over Q3 of last year. Asia Pacific, Japan grew 11% on the quarter and that understates some notable strength in Jan and in what we refer to as the broader Asia market, which for us means mostly Southeast Asia or countries outside of China and Japan.

In fact, year-to-date, this segment is up 49%. EMEA, this quarter was flat over last year without considering currency effects, but it's also important to bear in mind that our European business is the most susceptible to summer seasonality and had a very strong start to the year.

On a year-to-date basis EMEA is up 14%, again without considering currency effects, while Americas and APJ are up 15% and 22% respectively. In terms of our sale capacity, our quota hiring slowed a little given some season, but we still grew quota carrying headcount to 280 up 27% over last year.

Shifting to vertical markets, we had eight different industries deliver 5% or more of the total revenue as follows. Financial services comprised 23% of total revenue, communications 12%, life sciences 12%, energy 8%, manufacturing 8%, and government transportation and logistics and retail each between 5% and 6%. Life science has more than doubled this quarter, transportation and logistics grew by 64%, retail by 33%, and finance grew by 18%. Overall, on a year-to-date basis, we continue to see more mainstreaming in our business with good growth across both new and traditionally strong verticals.

The breakout of license revenue among our major product families was SOA 47%, business optimization 44%, and BPM 9%. Business optimization was the clear business driver, up 63% from last year, led by a strong quarter from Spotfire. The overall categories for SOA and BPM didn't expand in quarter, but within these categories we saw real strength from both core SOA products and from AMX BPM, denoting growth around core platform sales. For the last few quarter and this year, we‘ve also discussed how business events is becoming integral to more deals and we’ve seen just that as the number of deals that included business events has increased by 21% year-to-date.

Overall, on a year-to-date basis, SOA is up 3%, business optimization is up 26%, and BPM is up 26%. In general, our third quarter can have some challenges due to the impact of the summer months. Despite this, we feel we had a good mix of business and a strong showing from key products, as well as good geographic and vertical diversity. We also feel we are well-positioned for Q4 with a strong pipeline across the board.

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

Sydney Carey - EVP and CFO: Thank you, Murray. I will provide additional details on our financial performance in Q3 and then I will provide comments on our financial outlook for Q4. I will 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 third quarter results are as follows. Total revenue was $255 million, up 11% year-over-year on an actual basis, but up 18% on a constant currency basis. License revenue was $99.1 million, up 9% year-over-year on an actual basis, and up 14% on a constant currency basis. Services revenue was $155.9 million, up 13% year-over-year on an actuals basis, and up 21% on a constant currency basis.

Non-GAAP gross margin for Q3 was 74%, in line with last year. Non-GAAP operating income was $68.8 million, up $11 million or 19% from the same period a year ago. This resulted in an operating margin of 27%. Non-GAAP EPS was $0.27 versus $0.23 a year ago. We estimate the currency impact to earnings to be a negative $0.04.

Q3 cash flow from operations totaled $48.4 million and on a year-to-date basis totaled $165.3 million, which is an increase of 15% from the same period a year ago.

Moving down the balance sheet, deferred revenue including both long and short-term component totaled 280 million, up $49 million from Q3 of last year, for an increase of 21% or 28% on a constant currency basis. Sequentially, deferred revenue increased 27 million with the increase due to growth in deferred license, the majority of which will be recognized as license revenue over the next several quarters. DSOs for Q3 came in at 73 days versus 68 days a year ago. Also during the quarter, we spent 32 million in share repurchases buying back approximately 1.2 million shares.

As we look forward to Q4, we are seeing some pipeline across all geographies with a broad mix of opportunity. We continue to see a 3% to 4% currency headwind on revenue with a larger impact to earnings. Our guidance for Q4 is as follows. We expect total revenue to range from 310 million to 318 million. On a constant currency basis this represents growth of 11% to 14%. We expect license revenue to range from 148 million to 156 million. On a constant currency basis this represents growth of 13% to 19%. Note that our growth rate on services and therefore total revenue is being impacted by our quarterly calendar, which has five fewer days in Q4 2012 than Q4 of 2011.

The non-GAAP operating margin is expected to be 33% to 34%. Non-GAAP EPS for the quarter should range between $0.42 and $0.44, with an assumed tax rate of 27%. We're estimating the impact of currency on earnings to be a negative $0.03. GAAP EPS should range from $0.32 to $0.34 with an assumed tax rate of 20%. Our actual GAAP and non-GAAP tax rates can vary depending on the mix of foreign versus domestic profits.

For 2012, on a constant currency basis, we see total revenue growth at 17% to 18% and license revenue growth at 15% to 17%.

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

Transcript Call Date 09/20/2012

Operator: John Difucci, JPMorgan.

John Difucci - JPMorgan: Sydney, you said that – you pointed it out that there was a huge increase sequentially in deferred revenue and you pointed out that a part of that is deferred license revenue, that 27 million sequential increase. Can you tell us about how much of that, even roughly is deferred license?

Sydney Carey - EVP and CFO: Well, again the bulk of that category is going to remain deferred maintenance. We don't actually break out deferred license. The increase sequentially was all due to license. Historically our Q3, we see a little debt in the deferred due to our maintenance renewal cycle but we have several license deals that kind of come and go out of deferred each quarter and this quarter we had a good quarter where we saw some license deals come in.

Vivek Ranadive - Chairman and CEO: So the bulk of it is deferred license.

Sydney Carey - EVP and CFO: Yes, the sequential increase is deferred license.

John Difucci - JPMorgan: Then also, in line with the accounts receivables actually, jumped up, which sort of makes sense. Usually I think some of the larger deals will close, at the end of the quarter and some of it might be invoice, they may not have paid yet. Is it fair to say that that’s likely to have a positive impact in cash flow in the next quarter?

Sydney Carey - EVP and CFO: The increase in DSO and the increase in accounts receivables primarily due to the increase in deferred and we do expect to see that deferred to rollout and come into revenue over the next several quarters and it should have a positive impact on cash flow.

Operator: Brent Thill, UBS.

Brent Thill - UBS: This last question, you mentioned you were somewhat disappointed with the Americas region, I was curious if you could just update us on the trajectory of the Americas business and the things that you are doing there to get it back right where you’d like and I had a quick follow-up for Murray.

Vivek Ranadive - Chairman and CEO: Yes, we really have made a lot of progress and so both in the Americas and the rest of the world actually we are very pleased with where we are sitting. We have like the biggest pipeline that we’ve ever had in our history, it’s close to $0.5 billion right now and a lot of that is from the Americas and so we are very pleased with the progress we are making, it’s still a work in progress, so we’ve got a drill in place, we’ve very, very systematic on process and how we are doing things. We’ve also identified some possibilities for leadership and we have some good options that we (got), we are going to take our time in what we do there. So we are heading in the right direction, we got still work to be done, but we are very pleased with where things are. Murray, do you want to add anything?

Murray Rode - COO: There was a follow-up through.

Brent Thill - UBS: Yeah, Murray just on the sales hiring, you said it slowed a little. I think you have target for the year-end that’s 300 or 310, I’m curious if that’s still stands or you are going to back off that a little and I guess this is the follow-up, your license – so your software sales rep hiring is outpacing the license growth. So, is there going to be a point where you think we’ll get to kind of parity where you start to seeing those sales reps become productive and producing more, is it just taking a little bit longer to get those reps productive?

Murray Rode - COO: Sure, the target for the end of the year of roughly 300 to 310 is still in place. So, we do expect to keep hiring through the rest of the year and I think you do point out a good point which is we are ahead of the curve with hiring and that's you can see that as a leading indicator of our sense of the opportunity. So, obviously we do expect once those salespeople are fully enabled for that (reflects itself) on the business.

Vivek Ranadive - Chairman and CEO: But the metrics actually show that, Sydney, right that, if you look at the attainment average and all of that, that's well within where we've wanted to be.

Sydney Carey - EVP and CFO: Yeah, I mean if you consider a six months ramp and just look at average attainment, we're not far from where we've been in prior years as far as average attainment. So, we're getting them ramped and I think it's just again we're looking at the opportunity that's ahead of us.

Operator: Derrick Wood, Susquehanna International.

Derrick Wood - Susquehanna International: The revenue came in at kind of the lower end of your range, was there anything kind of at the back part of the year that caused a little weakness or would you attribute maybe a little bit more going into deferred than expected that maybe cause you to come in at the lower end?

Vivek Ranadive - Chairman and CEO: Yes. There was stuff that we put into deferred and so that is some of that, but if you actually look at our constant currency 18% growth rate, it's almost, it's actually exactly the same as it was a year ago. So, we see that. I think the currency headwind was there, but if you also look at what I call the slugging percent hedge which is kind of my term, but if you look at our license growth plus the change in deferred license I kind of look at this privately, but it was actually way ahead of where we were a year ago. So, we think that the demand is very, very strong. We just got to keep (indiscernible). Sydney, do you want add anything?

Sydney Carey - EVP and CFO: No, I think that's it.

Derrick Wood - Susquehanna International: Do you have the deferred license numbers?

Sydney Carey - EVP and CFO: We're not going to get specific on the deferred license number, but what I did state earlier is that the sequential increase from Q2 to Q3 was all license. We did have some license in Q2. So it's larger than the 27 million, but all of the increase was due to license.

Derrick Wood - Susquehanna International: At the midpoint of guidance for Q4 on a constant currency basis, you are guiding for license growth to accelerate and so I guess you see the end markets being fairly healthy and your big verticals like telco and financial services and you expect pretty good seasonality in Q4. Any concerns or you feel good about the spending conditions in your end markets?

Vivek Ranadive - Chairman and CEO: We feel good. As I said, we're sitting on almost $0.5 billion pipeline right now. We've never ever been anything close to that position and we're seeing small deals, mid-sized deals, large deals. We're seeing them across geographies. We're seeing them across the industries. So, we're aware that there is economic turbulence out there. So we're just being conscious and we're working hard and we feel good about where we're sitting right now.

Operator: Kasturi Rangan, Bank of America-Merrill Lynch.

Kash Rangan - Bank of America-Merrill Lynch: I think that's the first time my full name has been spoken on a conference call, thanks to my assistant. My question for you guys is, this phenomenon of putting more deferred license revenue, is a relatively new one, if I can recollect and I doubt if we had a similar magnitude of deferral on your balance sheet from Q2 to Q3, last year, so I just did the rough math, you have pretty stunning booking growth rate. It looks to be well north of 30%, 40%. What is going on? Can you talk to any broader underlying trend that is manifesting your business and what is the right way that Wall Street should be thinking about license growth versus license billings growth and what are some of the metrics that you're going to be sharing with us in a go-forward basis, if indeed this is not a (blip).

Vivek Ranadive - Chairman and CEO: So, Kash, what we're seeing and again I'll defer to the smarter people Sydney and Murray to talk about metrics and things like that, but what we're seeing is that if you have something that is a game changer that represents extreme value, people are willing to spend on it and so we're seeing people willing to put big bucks on the table to move the needle and so, we're working on a project right now for a very large technology company, mobile phone business and so on, and we're going to – the only company that can do this for them is us. It's a million transactions a second and just one application of that (indiscernible) would save them, $400 million or $500 million a year. Those are the kinds of value propositions that we're seeing and they translate into us being able to get big license number. So, Sydney, you’ll get back with metrics and so on, but we are seeing very, very strong demand. We are seeing people willing to put big money on the table to solve big problem and they are giving us the opportunity to do that.

Sydney Carey - EVP and CFO: I mean there is a variety of factors on why something goes into deferred. We have lot of transactions in deferred license and the majority of the increase was from a handful of transactions and we expect to see those rollout, and I’m sure in the future we’ll have reasons where other transactions will come into deferred.

Operator: Derek Bingham, Goldman Sachs.

Derek Bingham - Goldman Sachs: Two quick ones, this past quarter you guys highlighted as a strong performer this quarter, which is encouraging given the performance last quarter. So the question is, was last quarter just a blip from a strong Q1 and this quarter more of a trend and that’s kind of how you are seeing it going forward, that will be my first question. Then a separate question, you mentioned if I heard on the Q&A earlier about looking at leadership in regional U.S. from the sales perspective, what’s the timeframe on that and how should we think about you following that progression?

Murray Rode - COO: Yes, so for Spotfire, yes we expect to go from strength-to-strength, we feel very good about where we sit. Everyone needs that kind of visual analytics. If you happen to in Las Vegas next week at our User Conference, you are going to see what we are doing with Spotfire and basically every company that blocked sort of 20th century BI tools, every one of them needs Spotfire, so a huge demand for that. In terms of timing on leadership, we are going to do anything – we are going to take our time and it could be three to six months before we actually put – we're being very, very cautious and deliberate about it. So, that's kind of the timing on that.

Operator: Karl Keirstead, BMO Capital Markets.

Karl Keirstead - BMO Capital Markets: I had a question on the core SOA business. It looked like by business it was the unit that was down in the quarter, but then you mentioned in your prepared comments that the core SOA was strong. I'm wondering if you could add a little color, maybe describe the core that was good and then maybe some of the other non-core that might have slipped a little bit?

Murray Rode - COO: Sure. So, SOA has gotten to be a pretty big category for us. So, it also holds to the extent, you could call something legacy in our product stack. It also has all of those products. So, it has everything from mainframe to EDI, to adapters, to messaging, to the actual SOA products, which include ActiveMatrix and the related governance suite and our core integration technology et cetera. So, it was really the ActiveMatrix products that were strong within the category and kind of the other odds and ends that that weren't so much. So, we actually saw on terms of SOA sales in the quarter a real concentration around more pure SOA product.

Vivek Ranadive - Chairman and CEO: So, the newer products was strong, the perceptual products were less strong in that fair to say, Murray.

Murray Rode - COO: That's exactly, yeah.

Karl Keirstead - BMO Capital Markets: That's good color and then just a question on the fourth quarter revenue guide. It looks like your license guide is going to meet expectations, but the total revenue guide is a little bit light, that's clearly because of the services. I'm just wondering is there anything other than the fact that maybe the November quarter has a few fewer days. Anything else going on, on the services side that might help us?

Sydney Carey - EVP and CFO: No. We're seeing continued strong demand for services. We're hiring in services as fast as we can. It's the number of days again having five fewer days in the period as compared to last year, as well as we're seeing currency headwinds as well. So, if you kind of normalize both of those we see the services growth rate more in the 15% range than the 5%. So, we've seen great opportunity in the services line.

Operator: Aaron Schwartz, Jeffries.

Aaron Schwartz - Jeffries: I just had two quick questions, if I could. On the deferred license, I know you've spoken a lot about that. Is that mostly perpetual? Does that come out pretty quickly or are there term builds in there, that is recognized ratably over a term? Then the second question is you've talked a lot about sort of moving more to a platform or sort of customers looking more at platform type purchases. What's your expectation to ASPs longer term if that trend continues?

Sydney Carey - EVP and CFO: In regards to the deferred license, the increase is primarily perpetual type of licensing that within that overall broader category of deferred licensor is, they're a subscription-based business as well.

Vivek Ranadive - Chairman and CEO: Yeah. We are starting to see the ASPs creeping up because – you're 100% right, as people decide that they just want the platform and obviously that it's going to – the price tag on that is quite a bit higher, but we'll wait and see how that rolls out. We've been a little surprised that how people are jumping and just saying, look we just won the whole platform, but we're not going to make any commitments about how that plays out, but ASPs will creep up.

Operator: Steve Koenig, Wedbush.

Steve Koenig - Wedbush Securities: I want to dig a little bit more into execution in the quarter. Can you comment on linearity and then any color on how the macro-environment impacted you and aside from the macro are there any execution improvements you want to make at this point for example in the Americas, just spilling on John's earlier question. Then I do have one follow-up if I may.

Vivek Ranadive - Chairman and CEO: We are really focusing our attention on the Americas, because I wasn't satisfied with the way we executed and so we are putting laser like focus into that. We had the seasonality that we see in the summer and just how the weather plays out, and what we're trying to do is, we're kind of taking actions now, so that in the next year or two it'll be less – it'll be more spread out and so we have this process and this drill that we put in place and we're already starting to see dividends from that. Even in the fourth quarter. Even as early as this quarter. So, we're just really focused on – we're very pleased with the leadership we have in the other regions but right now our focus is on the Americas. Murray do you want to add anything to that?

Murray Rode - COO: I think that, that focus on drill and on the forecast still continues. I think for us, it's really a continuous improvement process to get better and better at managing our pipeline, scrubbing our pipeline and managing our forecast.

Vivek Ranadive - Chairman and CEO: Yeah, and also one of the other things we're focused on is just training. We've hired a lot of the foot soldiers and I think the metric show that actually we’re doing well with them, but then we also need to make sure that we’re growing the top end of the pyramid, kind of jungles, the field marshals and those are people that you can’t really just go hire from the outside, because you go to 20th century companies and they know how to sell databases and transactional systems and they are less comfortable selling event-driven big data type systems and so those people tend to be more homegrown and so we pay more attention to identifying those people, putting them in positions of leadership, giving them the coaching and the training that they need so that they can fill those roles. So there is just a lot of blocking and tackling we are investing right now.

Steve Koenig - Wedbush Securities: If I could shift gears for the follow-up. I was really struck earlier this week by listening to a large CRM company up the highway from you guys. How similar their vision now sounds like what you’ve been laying out, particular with Tiber and that has to do with the social network being able to comprise devices and machines and having a back end that can allow you to do that. I was really struck by the similarities there. I’m just wondering now that the visions actually sound somewhat similar, both companies are actually trying to – you guys are trying to evolve into having more front-end offerings for business users, I think they are trying to evolve into having more of a back-end, what differentiates your vision at this point, Vivek, what do you do next to stay one step ahead of the game here?

Vivek Ranadive - Chairman and CEO: So we are only ones who can really make the big data claim. So we actually can transport volumes of data unheard of, billions and billions of events, nobody can touch that, especially as you start incorporating making machines part of the social network. We also have the full stack and so with Spotfire you look for the patterns, with BusinessEvents you codify it into a set of rules, with ActiveSpaces you're able to get a level of performance that nobody else can give you. We are neutral, so we actually are the social bus. We integrate with every other platform, including the guys who – the other guys that’s not in California. So, if you want to tie together SAP and Oracle and sales force and your internal systems and some of the social networks, then we’re really the only company that can do that. At Schneider, we replaced 60,000 feeds of chatter with Tibo, but then what they want to do is they also want a loyalty program and now nobody else can do that. So when I talk about converting customers to fans, nobody else can even begin to talk about that. Then you talk about things like master data, how do you keep – how do have a clean list of customers? How are you going to do that? So the stack that we have, the back end, they don't have the back-end. We need the backend, it's a $1 billion backend. It will take billion and dollars to create that kind of a backend. So, this is not – if you're just looking at one type of data then perhaps you can go with one of those, but if you want to truly create a social network that incorporates both machines and people and then you want to be able to convert customers into fans and all the things I talked about. So, we're actually seeing less of them and we're not – it's not competition that's our biggest challenge today. It's just our own blocking and tackling, just being there, training people, getting the proof of concepts right. People are actually starting to even pay us for these proof of concepts. They're so convinced that we can move the needle for them.

Operator: Brad Zelnick, Macquarie.

Brad Zelnick - Macquarie Securities: I actually have two quick ones to sneak in. A lot of good things to see in the quarter here, especially the continued breadth across all the various verticals as well as the strong, large deal metrics, which leads to my first question for Murray or perhaps Sydney. On large deals is there any standout megadeal to speak of and if so can you maybe tell us a little bit about what drove that transaction? Then the second point for Vivek, I haven't heard tibbr mentioned once on the call. I'm very excited about it and I just want to make sure that everybody at TIBCO is still very excited and if you can just maybe give us a little bit of an update of what's happening with tibbr?

Vivek Ranadive - Chairman and CEO: So Murray do you want to go first and then I'll…

Murray Rode - COO: Yeah, sure. So, Brad that was – my comment in the prepared remarks about the deals over $1 million, we actually had a little higher concentration of larger deals. So there were several deals over $5 million, all of somewhat different characteristics. I would say though that we are seeing in larger deals Spotfire playing an increasingly large role. It's not just the domain of infrastructure products any more. Vivek on…?

Vivek Ranadive - Chairman and CEO: Tibbr has just become part of the fabric for us. Now we have some deals where they were brought in by tibbr. So something like SanDisk putting 6,000 of their engineers of their company on it. That came as a tibbr deal or something like Cathay Pacific. They're putting the airline on it, but then increasingly it's just becoming kind of like a social bus where it start of what we provide and what we did for the radar is just part of it and then we have the other parts of – I call it the pearl necklace, we have the loyalty systems and other things that go with it. So, it's just become mainstream and so the reason I talk less about it is, it's just like (BE) or loyalty or any of the other things, it's the social bus that gives everything together and often at times, we don't even make it as visible. So, to our customers it looks like their system and so, Nielsen thinks they've got, I don't know, tens of thousands of people on it and they think it's their system and CGI has, I don't know 100,000 people on it, but it looks like a CGI system, Cathay Pacific, same thing and so it's become part of our fabric and it kind of ties everything together for us.

Operator: Brad Reback, Stifel Nicolaus.

Brad Reback - Stifel Nicolaus: Just a quick question. Last week, you announced a deal with PerkinElmer. It looks like they're resell the Spotfire product. Just love to get a little bit of detail around that. How we should think about the financial terms and then longer term, are there other opportunities to get OEMs out there for Spotfire?

Murray Rode - COO: This is actually the culmination of an effort we've been working on for some time, that is building up the eco system of partners around Spotfire, and I think I would point to two big dimension Spotfire strategy. One is, how we're trying to take it much more broadly across industries and across deployments within companies, so beyond just the heavy-duty user of analytics to broad adoption throughout the enterprise. So it's a very mainstream thrust to the business and the PerkinElmer partnership complements that general strategy well because they excel in research markets and can focus on Spotfire and related applications in the research space. So it fits with our general strategy and their strengths very well. So, we're very optimistic about that. We also have several other important partnerships in the works. Some of those announcements are waiting for TUCON so we're not talking about them just yet on earnings, but they'll be out shortly as part of TUCON and it's something as I say we continue to believe is important opportunity for leverage in the Spotfire business.

Operator: Mark Murphy, Piper Jaffray.

Mark Murphy - Piper Jaffray: Murray do you agree with the earlier comment that license bookings grew more than 30% year-over-year?

Murray Rode - COO: I think so. I would probably want to double check the math carefully but I think that's about right.

Sydney Carey - EVP and CFO: It's about right, yes.

Mark Murphy - Piper Jaffray: Now how would you – I'm trying to understand how do we reconcile that and Vivek, your comment that you're looking at your biggest pipeline ever, but you're guiding below consensus for next quarter, I mean I guess as we think it through the other major variable really is close rate assumptions. So, I'm just trying to understand if, for some reason, if you're being a little extra conservative with the close rate assumptions?

Vivek Ranadive - Chairman and CEO: No, I think license were right in the…

Sydney Carey - EVP and CFO: Were right in the ballpark.

Vivek Ranadive - Chairman and CEO: Right in the ballpark. The services – does five fewer days in the quarter and that's quite significant because a lot of other business is time based maintenance and service.

Sydney Carey - EVP and CFO: It directly affects the service business and currency too just on a year-over-year basis.

Vivek Ranadive - Chairman and CEO: Yeah, there is (potential currency in that)…

Sydney Carey - EVP and CFO: We're feeling that as well. So, again I think that on the license side, we're right in the ballpark of our consensus with that and on the total revenue, the factor number of days, I'm not so sure that was originally factored into folks.

Vivek Ranadive - Chairman and CEO: So, if you have factor on the five day ramp the currency, (it does it really) right there.

Mark Murphy - Piper Jaffray: So, the calendar changed a little bit. I guess I'm looking at the currency and to me the currency impact is less negative next quarter. I'm just trying to make sure I understand that?

Sydney Carey - EVP and CFO: Well, we're looking at services headwind of about 5% and then the number of days changes about another 5% on services. So, we factored all in and you're getting pretty close to where folks were at.

Vivek Ranadive - Chairman and CEO: That’s probably like a – I don't know – a $15 million difference in total revenues in this event.

Mark Murphy - Piper Jaffray: Then Sydney, in terms of the license revenue that that flowed into deferred, was it clustered more in any one geography versus another?

Sydney Carey - EVP and CFO: It was pretty broad-based. It's just not clustered into a single geography.

Mark Murphy - Piper Jaffray: Then just to make sure that I’ve understood the dynamics of that, in terms of – to the extent that there was an unusual magnitude there, are you saying that's primarily based upon ratable subscription revenue recognition or are you saying that there is an element of that that's like tied to services milestones or something else?

Sydney Carey - EVP and CFO: No, I'd stated earlier, there can be many reasons that license will go into deferred and that the bulk of this is not related to subscription. It's related to other items.

Operator: Jesse Hulsing, Pacific Crest.

Jesse Hulsing - Pacific Crest: Sydney just to follow-up on Mark's question. So the license bookings would you say that it accelerated meaningfully in Q3? I'm trying to get down, whether there's been a change in your trend in the business with (indiscernible)?

Sydney Carey - EVP and CFO: Sure. So again, if you factor the change in deferred sequentially you would see good acceleration above 30% on a license bookings. So yes, if you look at it that way you would see the acceleration.

Jesse Hulsing - Pacific Crest: Your view on margin expansion I guess over the next few quarters, your hiring's in line or expected to be in line. Do you expect that they continue to take up as it has been stay where it is, what's your thinking on that?

Sydney Carey - EVP and CFO: We're looking at Q4, we're looking at operating margins as 33% to 34%, which is in line to where we were last year and kind of, if you factor that in on the year, it kind of puts us with just a little bit of expansion of where we were last year. We're about growth with leverage, but as we make these investments we continue to get the leverage better at a slower pace.

Jesse Hulsing - Pacific Crest: Last question I guess this should be for Vivek or Murray. When you talk about on these platform sales, do you have to make major changes with how you sell and who you sell to and because of that are you seeing sales cycles lengthen for some of your larger deals and how do you expect the trend moving forward?

Vivek Ranadive - Chairman and CEO: Ironically, there is no lengthening in the sales cycle. It's similar to what it is for the midsize deals. It's really – we are now targeting more on the business side. So, to that extent it changes. So maybe the marketing guy, maybe the CMO, maybe the head of the business unit. As I said, we just need to build out the full organization and so, it does mean that the slightly senior guys are more involved and those are people that we have, (good reason to have to) put them in positions of leadership. So, I think anything else Murray?

Murray Rode - COO: Only that when we talk about this notion of platform sales and Vivek talks about the top of the pyramid or kind of the leadership in sales, our best sales people have been selling a platform content for a while and I think really what's happening is our products and their ability to operate as a more comprehensive, integrated platform have to have caught, in a sense kind of caught up with some of those sales activates. So, it's not really leading to any kind of change in fundamental methodology.

Vivek Ranadive - Chairman and CEO: I think, I would say that the sales cycle is probably shorter for that kind of a sale.

Murray Rode - COO: As the products fulfill the…

Vivek Ranadive - Chairman and CEO: That you're able to walk in and…

Jesse Hulsing - Pacific Crest: The needle on your revenue?

Murray Rode - COO: Right.

Vivek Ranadive - Chairman and CEO: Then that becomes a shorter sales cycle.

Operator: At this time, I will turn it back to Vivek for closing remarks.

Vivek Ranadive - Chairman and CEO: Thank you, all for joining us and we hope to see many of you in Vegas next week because we'll now conclude this call. Thank you.

Operator: Thank you for joining us. We will now conclude TIBCO's Q3 2012 earnings call.